<PAGE>1
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 New Horizons Fund, Inc.
_________________________________________________________________
(Name of Registrant as Specified in its Charter)
T. Rowe Price New Horizons Fund, 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
filing by registration statement number, or the form or schedule
and the date of its filing,
<PAGE>2
1) Amount previously paid:
_________________________________________________________
2) Form, schedule, or Registration Statement no.:
_________________________________________________________
3) Filing party:
_________________________________________________________
4) Date filed:
_________________________________________________________
<PAGE>3
Proxy for the T. Rowe Price New Horizons Fund, Inc. should be
inserted here.
PAGE 1
PRELIMINARY PROXY
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
separate card. You should vote and sign each one, then return
all of them to us in the enclosed postage-paid envelope.
<PAGE>2
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#779562107/fund#042
CUSIP#779559103/fund#041
<PAGE>3
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
Notice of Meeting of Shareholders
April 20, 1994
The Annual Meeting of Shareholders of the T. Rowe Price New
Horizons Fund, Inc. ("New Horizons Fund") and T. Rowe Price New
Era Fund, Inc. ("New Era Fund") (each a "Fund" and collectively
the "Funds"), each a Maryland corporation, will be held on
Wednesday, April 20, 1994, at the offices of the Funds, 100 East
Pratt Street, Baltimore, Maryland 21202. The times for the
Annual Meeting are 8:00 o'clock a.m., Eastern time, for the New
Horizons Fund and 9:30 o'clock a.m., Eastern time, for the New
Era Fund. 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 and
Articles of Incorporation to increase its ability
to engage in borrowing transactions;
B. To amend each Fund's fundamental policies and
Articles of Incorporation on investing in
commodities and futures contracts to permit greater
flexibility in futures trading;
C. To amend each Fund's Articles of Incorporation and
to change the policy on investing in other
investment companies from a fundamental to an
operating policy;
D. To amend each Fund's Articles of Incorporation and
to change the policy on purchasing securities on
margin from a fundamental to an operating policy;
E. To amend each Fund's Articles of Incorporation and
to change the policy on pledging assets from a
fundamental to an operating policy;
F. To amend each Fund's fundamental policies and
Articles of Incorporation concerning real estate;
CUSIP#779562107/fund#042
<PAGE>4
G. To amend each Fund's Articles of Incorporation and
to change the policy on short sales from a
fundamental to an operating policy;
H. To amend each Fund's fundamental policies and
Articles of Incorporation regarding the
underwriting of securities;
I. To change from a fundamental to an operating policy
each Fund's policy on ownership of portfolio
securities by officers and directors;
J. To amend each Fund's fundamental policies on the
issuance of senior securities;
K. To amend each Fund's fundamental policies to
increase its ability to engage in lending
transactions;
For the shareholders of New Horizons Fund only:
L. To change from a fundamental to an operating policy
the policy on control of portfolio companies;
For the shareholders of New Era Fund only:
M. To eliminate the Fund's fundamental policy
regarding certain portfolio transactions;
N. To amend the Fund's Articles of Incorporation and
fundamental policies to delete the provision on
joint transactions;
O. To amend the Fund's fundamental policies and
Articles of Incorporation to increase the
percentage of Fund assets which may be invested in
the securities of any single issuer;
P. To amend the Fund's fundamental policies and
Articles of Incorporation to permit the Fund to
purchase more than 10% of an issuer's voting
securities;
Q. To change from a fundamental to an operating policy
the policy on purchasing illiquid securities;
R. To amend the Fund's Articles of Incorporation and
to change the policy on unseasoned issuers from a
fundamental to an operating policy;
<PAGE>5
3. A. For the shareholders of both Funds: To amend each
Fund's Articles of Incorporation to delete the policy
on pricing securities;
B. For the shareholders of New Era Fund only: To
amend the Fund's Articles of Incorporation to allow the
involuntary redemption of small accounts;
4. For the shareholders of both Funds: To ratify or
reject the selection of the firms of Coopers & Lybrand
as the independent accountants for the New Horizons
Fund and Price Waterhouse as the independent
accountants for the New Era Fund for the fiscal year
1994; and
5. To transact such other business as may properly come
before the meeting and any adjournments thereof.
LENORA V. HORNUNG
Secretary
March 2, 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.
_________________________________________________________________
<PAGE>6
T. ROWE PRICE NEW HORIZONS FUND, INC.
T. ROWE PRICE NEW ERA FUND, INC.
Meeting of Shareholders--April 20, 1994
PROXY STATEMENT
This statement is furnished in connection with the
solicitation of proxies by the T. Rowe Price New Horizons Fund,
Inc. (the "New Horizons Fund") and the T. Rowe Price New Era
Fund, Inc. (the "New Era 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.
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.
<PAGE>7
The individuals named as proxies (or their substitutes) in
the enclosed proxy card (or cards if you own shares of more than
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 4 FOR EACH FUND.
APPROVAL OF PROPOSALS 2A THROUGH 2H AND 3A REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF EACH FUND'S
OUTSTANDING SHARES. IN ADDITION, APPROVAL OF PROPOSALS 2N, 2O,
2P, 2R AND 3B REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE NEW ERA FUND'S OUTSTANDING SHARES. 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 Articles of
Incorporation and 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 Articles of Incorporation
or fundamental investment policies are not approved, they will
remain unchanged.
<PAGE>8
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
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 2, 1994.
<PAGE>9
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/her successor is duly elected and qualified. With the
exception of Mrs. Merriman and Messrs. Bailey, Dick, Lanier and
Testa, each of the nominees is a member of the present Board of
Directors of the New Horizons Fund and has served in that
capacity since originally elected. With the exception of Mrs.
Merriman and Messrs. Dick, Lanier, Riepe and Wythes, each of the
nominees is a member of the present Board of Directors of the New
Era 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 each Fund's 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 may recommend.
There are no family relationships among these nominees.
The membership of the 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>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
_________________________________________________________________
Leo C. Bailey Retired; Director of New Horizons
3396 S. Placita the following T. Rowe Fund:
Fabula Price Funds: Growth Stock, New Era Fund:
Green Valley, AZ Science & Technology,
85614 Index Trust (since inception),
3/3/24 Balanced (since inception),
0New Horizons Mid-Cap Growth (since
Fund: Initial inception), OTC (since
election inception), Dividend
0New Era Fund: Growth (since inception),
Director since Blue Chip Growth (since
1984 inception), International,
and Institutional
International (since inception)
<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
_________________________________________________________________
*George J. President, Managing New Era Fund:
Collins Director, and Chief
100 East Pratt Executive Officer, T.
Street Rowe Price Associates,
Baltimore, MD Inc.; Director, Rowe Price-
21202 Fleming International, Inc.,
7/31/40 T. Rowe Price Trust Company,
0New Era Fund: and T. Rowe Price Retirement
Director and Plan Services, Inc.; Chairman
member of of the Board of the following
Executive T. Rowe Price Funds/Trusts:
Committee since Capital Appreciation, New
1986 Income, Short-Term Bond,
High Yield, GNMA, Tax-Free
Income, Tax-Exempt Money,
Tax-Free Short-Intermediate,
Tax-Free High Yield, State
Tax-Free Income, California
Tax-Free Income, and Summit
Municipal (since inception);
President and Director of the
following T. Rowe Price Funds:
U.S. Treasury and Summit
(since inception); Vice President
and Director, T. Rowe Price
Prime Reserve Fund, Inc.;
Director, T. Rowe Price
Tax-Free Insured
Intermediate Bond Fund, Inc.
(since inception)
<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
_________________________________________________________________
Donald W. Dick, Partner, Overseas New Horizons
Jr. Partners, Inc., a Fund:
375 Park Avenue financial investment New Era Fund:
Suite 3505 firm; (formerly 6/65-
New York, NY 3/89) Director and
10152 Vice President-Consumer
1/27/43 Products Division,
0New Horizons McCormick & Company, Inc.,
Fund: Initial international food
election processors; Director,
0New Era Fund: Waverly Press,
Initial election Inc. and the following
T. Rowe Price Funds/Trusts:
Growth Stock, Growth & Income,
New America Growth,
Capital Appreciation,
Balanced (since inception),
Mid-Cap Growth (since
inception), OTC (since
inception), Dividend Growth,
(since inception), Blue Chip
Growth (since inception),
International, and Institutional
International, (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
_________________________________________________________________
David K. Fagin Chairman, Chief New Horizons
One Norwest Executive Officer Fund:
Center and Director, Golden New Era Fund:
1700 Lincoln Star Resources, Ltd.;
Street formerly (1986-7/91)
Suite 1950 President, Chief
Denver, CO Operating Officer
80203 and Director,
4/9/38 Homestake Mining
0New Horizons Company; Director/
Fund: Director Trustee of the following
since 1988 T. Rowe Price Fund/Trusts:
0New Era Fund: Equity Income, Capital
Director since Appreciation, Balanced
1988 Fund (since inception),
Mid-Cap Growth (since inception),
OTC (since inception),
Dividend Growth (since
inception), and Blue Chip Growth
(since inception)
*Carter O. Managing Director, T. Rowe New Era
Hoffman Price Associates, Inc.; Fund:
100 East Pratt Chairman of the Board,
Street T. Rowe Price Prime
Baltimore, MD Reserve Fund, Inc.;
21202 Vice President and
9/3/27 Director, T. Rowe Price
0New Era Fund: New Income Fund, Inc.
Director and
member of
Executive
Committee
since 1982
<PAGE>14
_________________________________________________________________
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
_________________________________________________________________
Addison Lanier Financial management; New Horizons
441 Vine Street, President and Director, Fund:
#2310 Thomas Emery's Sons, Inc. New Era Fund:
Cincinnati, OH and Emery Group, Inc.;
45202-2913 Director/Trustee, Scinet
1/12/24 Development and Holdings,
0New Horizons Inc. and the following
Fund: Initial T. Rowe Price Funds/Trusts:
election New America Growth, Equity
0New Era Fund: Income, Small-Cap Value,
Initial election Balanced (since inception),
Mid-Cap Growth (since inception),
OTC (since inception), Dividend
Growth (since inception), Blue
Chip Growth (since inception),
International and Institutional
International (since inception)
*John H. Laporte Managing Director, T. Rowe New Horizons
100 East Pratt Price Associates, Inc.; Fund:
Street Chairman of the Board of
Baltimore, MD the following T. Rowe Price
21202 Funds: Science & Technology,
7/26/45 Small-Cap Value and OTC (since
0New Horizons inception); President and Trustee,
Fund: President T. Rowe Price New America
and member of Growth Fund
Executive
Committee since
1988
<PAGE>15
_________________________________________________________________
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 New Horizons
126 E. 26 Place and President, KCMA Fund:
Tulsa, OK Incorporated, Tulsa New Era Fund:
74114-2422 Oklahoma; Director/Trustee
8/3/24 of the following T. Rowe
0New Horizons Price Funds/Trusts:
Fund: Director Growth Stock, Growth & Income,
since 1970 Capital Appreciation,
0New Era Fund: Science & Technology,
Director since Balanced (since inception),
1988 Mid-Cap Growth (since
inception), OTC (since
inception), Dividend
Growth (since inception),
and Blue Chip Growth
(since inception)
Hanne M. Retail business consultant; New Horizons
Merriman formerly, President and Fund:
655 15th Street Chief Operating Officer New Era Fund:
Suite 300 (1991-92), Nan Duskin,
Washington, Inc., a women's specialty
D.C. 20005 store, Director (1984-90)
11/16/41 and Chairman (1989-90)
New Horizons Federal Reserve Bank
Fund: Initial of Richmond, and President
election and Chief Executive Officer
New Era Fund: (1988-89), Honeybee, Inc.,
Initial election a division of Spiegel, Inc.;
Director, AnnTaylor Stores
Corporation, Central Illinois
Public Service Company, CIPSCO
Incorporated, State Farm Mutual
Automobile Insurance Company and
USAir Group, Inc.; Member, National
Women's Forum; Trustee, American-
Scandinavian Foundation
<PAGE>16
_________________________________________________________________
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 New Horizons
100 East Pratt Price Associates, Inc.; Fund:
Street President and Director, New Era Fund:
Baltimore, MD T. Rowe Price Investment
21202 Services, Inc.; Chairman
6/25/43 of the Board, T. Rowe
0New Horizons Price Services, Inc., T.
Fund: Vice Rowe Price Trust Company,
President and T. Rowe Price Retirement
member of Plan Services, Inc., and
Executive the following T. Rowe Price
Committee since Funds: Growth & Income,
1983 Spectrum (since inception),
0New Era Fund: Balanced (since inception),
Initial election and Mid-Cap Growth (since
- --Vice inception); Vice President
President since of the following T. Rowe
1982 Price Funds/Trusts: New America
Growth Prime Reserve Fund,
International, and Institutional
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.
*George A. Roche Managing Director and Chief New Era
100 East Pratt Financial Officer, T. Rowe Fund:
Street Price Associates, Inc.;
Baltimore, MD Vice President and Director,
21202 Rowe Price-Fleming International,
7/6/41 Inc.
0New Era Fund:
President and
member of
Executive
Committee since
1979
<PAGE>17
_________________________________________________________________
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 New Horizons
100 East Pratt Price Associates, Inc.; Fund:
Street Chairman of the Board,
Baltimore, MD Rowe Price-Fleming
21202 International, Inc. and the
4/22/44 following T. Rowe Price Funds:
0New Horizons Growth Stock, International,
Fund: Initial and Institutional
election International (since inception);
Vice President and Director,
T. Rowe Price Trust Company
and T. Rowe Price Balanced
Fund, Inc. (since inception);
Director of the following T.
Rowe Price Funds: Dividend Growth
(since inception) and
Blue Chip Growth (since
inception); Vice President,
T. Rowe Price Spectrum
Fund, Inc. (since inception)
Hubert D. Vos President, Stonington New Horizons
1231 State Capital Corporation, a Fund:
Street private investment company; New Era Fund:
Suite 210 Director/Trustee of the
Santa Barbara following T. Rowe Price
CA 93190-0409 Fund/Trusts: Equity Income,
8/2/33 Capital Appreciation, Science &
0New Horizons Technology, Small-Cap Value,
Fund: Director Balanced (since inception),
since 1983 Mid-Cap Growth (since
0New Era Fund: inception), OTC (since
Director since inception), Dividend Growth
1979 (since inception), and Blue Chip
Growth (since inception)
<PAGE>18
_________________________________________________________________
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, New Horizons
755 Page Mill Sutter Hill Ventures, a Fund:
Road venture capital limited New Era Fund:
Suite A200 partnership providing equity
Palo Alto, CA capital to young high
94304 technology companies
6/23/33 throughout the United States;
0New Horizons Director/Trustee, Teltone
Fund: Director Corporation, Interventional
since 1981 Technologies, Inc., Stuart
0New Era Fund: Medical, Inc. and the
Initial election following T. Rowe Price Funds/
Trusts: Growth & Income,
New America Growth, Science &
Technology, Small-Cap Value,
Index Trust (since inception),
Balanced (since inception),
Mid-Cap Growth (since inception),
OTC (since inception), Dividend
Growth (since inception), and
Blue Chip Growth (since inception)
* Nominees considered "interested persons" of T. Rowe Price.
(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. Laporte, Riepe and Testa
in _____ shares of the New Horizons Fund and Messrs.
Collins, Hoffman, Riepe and Roche in _____ shares of the New
Era Fund which are owned by a wholly-owned subsidiary of the
Funds' investment manager, T. Rowe Price, and their
interests in _______ and _____ shares, respectively, owned
by the T. Rowe Price Associates, Inc. Profit Sharing Trust.
<PAGE>19
Mr. W. Ernest Issel, a director of the New Horizons Fund
from 1968 to 1983, has been named by the Board of Directors as a
director emeritus. The position of director emeritus is honorary
only and does not confer any responsibility or voting authority.
Messrs. W. Ernest Issel and Robert M. Reininger, directors
of the New Era Fund from 1968 to 1983, and 1980 to 1988,
respectively, have been named by the Board of Directors as
directors emeriti. The position of director emeritus is honorary
only and does not confer any responsibility or voting authority.
The directors of each Fund who are officers or employees of
T. Rowe Price receive no remuneration from the Fund. For the
year ended December 31, 1993, Messrs. Fagin, Major, Vos, and
Wythes, received from the New Horizons Fund directors' fees
aggregating $_______________, including expenses. For the same
period, Messrs. Bailey, Fagin, Major and Vos, received from the
New Era 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. 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. Fagin, Major, Vos and Wythes are the
independent directors of the New Horizons Fund and Messrs.
Bailey, Fagin, Major and Vos are the independent directors of the
New Era Fund.
The Price Funds have established a Joint Audit Committee,
which is comprised of at least one independent director
representing each of the Funds. Mr. Vos, who is a director of
both Funds, and Mr. Bailey, who is a director of the New Era
Fund, are members of the Committee. The other members are
Anthony W. Deering and Donald W. Dick, Jr. These directors also
receive 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
<PAGE>20
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 each 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.
The Board of Directors of each Fund has a Nominating
Committee, which is comprised of all the Price Funds' 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 Fund's 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.
Each Fund's Board of Directors held seven meetings during
the last full fiscal year. With the exception of Messrs. Mathias
and Major for the New Horizons Fund and Messrs. Hoffman and Major
for the New Era Fund, the directors of each Fund 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.
<PAGE>21
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
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
AND ARTICLES OF INCORPORATION TO INCREASE ITS ABILITY TO
ENGAGE IN BORROWING TRANSACTIONS
Because the Fund may occasionally need to borrow money to
meet substantial shareholder redemption or exchange requests when
available cash is not sufficient to satisfy these needs, the
Board of Directors has proposed an amendment to the Fund's
fundamental policy and Articles of Incorporation 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 larger amounts of money; (2) borrow from other Price Funds
or persons to the extent permitted by applicable law; and (3)
<PAGE>22
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
proposals be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of
borrowing is as follows:
New Horizons Fund
"[As a matter of fundamental policy, the Fund may not:]
Borrow money, except the Fund may borrow from banks as a
temporary measure for extraordinary or emergency purposes,
and then only from banks in amounts not exceeding 15% 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];"
New Era Fund
"[As a matter of fundamental policy, the Fund may not:]
Borrow money, except the Fund may borrow from banks as a
temporary measure for extraordinary or emergency purposes,
and then only from banks in amounts not exceeding 15% of its
total assets valued at market. The Fund will not borrow in
order to increase income (leveraging), but only to meet
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:
<PAGE>23
"[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."
The provisions of the Fund's Articles of Incorporation in
the area of borrowing are as follows:
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(a) Borrow money, except that the Fund may: (i) borrow from
banks as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding
15 percent of its total assets valued at market, and (ii)
enter into futures contracts."
The Board of Directors recommends that these provisions of
the Articles of Incorporation be deleted and that the Fund's
policies on borrowing be described only in the Fund's fundamental
policies.
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 15%; (2) borrow from persons
other than banks including 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
investments consistent with the Fund's investment objective and
program.
<PAGE>24
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.
Borrowing From Other Price Funds
Current law prohibits the Fund from borrowing from other
Price Funds. However, if the proposed amendments to the Fund's
fundamental investment policy on borrowing are approved by
shareholders, the Fund may apply to the SEC for an exemption from
this prohibition. There is, of course, no assurance that the SEC
would act favorably on such a request. If the SEC did grant such
an order, the Fund could be allowed to borrow from other Price
Funds. T. Rowe Price believes that the ability to engage in
borrowing transactions with the participating Price Funds as part
of a program, referred to as the "interfund lending program," may
allow the Fund to obtain lower interest rates on money borrowed
for temporary or emergency purposes. Any existing Price Fund
participating in the interfund lending program would only do so
upon approval of its shareholders.
As noted above, when the Fund is required to borrow money,
it currently may do so only from banks. When the Fund borrows
money from banks, it typically pays interest on those borrowings
at a rate that is higher than rates available contemporaneously
from investments in repurchase agreements. If the proposed
amendment is approved, eligible Price Funds would be permitted to
participate in an interfund lending program to allow various of
the Price Funds, through a master loan agreement, to lend
available cash to and borrow from other Price Funds. Each
lending fund could lend available cash to another Price Fund only
when the interfund rate was higher than repurchase agreement
rates or rates on other comparable short-term investments. Each
borrowing fund could borrow through the interfund lending program
only when the interfund loan rate was lower than available bank
loan rates.
<PAGE>25
In determining to recommend the proposed amendment to
shareholders for approval, T. Rowe Price and the Directors
considered the possible risks to the Fund from participation in
the interfund lending program. T. Rowe Price does not view the
difference in rates available on bank borrowings and repurchase
agreements or other short-term investments as reflecting a
material difference in the quality of the risk of the
transactions, but rather as an indication of the ability of banks
to earn a higher rate of interest on loans than they pay on
repurchase agreements or other short-term investments. There is
a risk that a lending fund could experience a delay in obtaining
prompt repayment of a loan and, unlike repurchase agreements, the
lending fund would not necessarily have received collateral for
its loan, although it could require that collateral be provided
as a condition for making a loan. A delay in obtaining prompt
payment could cause a lending fund to miss an investment
opportunity or to incur costs to borrow money to replace the
delayed payment. There is also a risk that a borrowing fund
could have a loan recalled on one day's notice. In these
circumstances, the borrowing fund might have to borrow from a
bank at a higher interest cost if money to lend were not
available from another Price Fund. The Directors consider that
the benefits to the Fund of participating in the program outweigh
the possible risks to the Fund from such participation.
In order to permit the Fund to engage in interfund lending
transactions, regulatory approval of the SEC is required because,
among other reasons, the transactions may be considered to be
among affiliated parties. If the proposed amendment is approved
by shareholders, the proposed interfund lending program would be
implemented only to the extent permitted by rule or by order of
the SEC and to the extent that the transactions were otherwise
consistent with the investment objectives and limitations of each
participating Price Fund. If exemptive relief from the SEC is
not granted, the Fund, as previously noted, will not be able to
engage in the interfund lending program even though shareholders
have approved the proposal. As noted, no prediction can be made
as to whether the SEC would grant such relief.
Shareholders are being asked to approve an amendment to the
Fund's fundamental policy on borrowing in this proposal.
Shareholders are also being asked to vote separately on an
amendment to the Fund's fundamental policy on lending (see page
___). If both amendments are adopted, the Fund, subject to its
investment objective and policies, will be able to participate in
the interfund lending program as both a lender and a borrower.
If only one of the two proposals is adopted, then the Fund's
participation in the interfund lending program will be confined
to either lending or borrowing, depending on which amendment is
approved.
<PAGE>26
The Directors believe the proposed amendment may benefit the
Fund by facilitating its flexibility to explore cost-effective
alternatives to satisfy its borrowing requirements and by
borrowing money from other Price Funds. Implementation of
interfund borrowing would be accomplished consistent with
applicable regulatory requirements, including the provisions of
any order the SEC might issue to the Fund and to other Price
Funds.
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 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 Act and the rules and
regulations thereunder as well as various state securities laws.
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
<PAGE>27
B. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICIES AND
ARTICLES OF INCORPORATION ON INVESTING IN COMMODITIES AND
FUTURES CONTRACTS TO PROVIDE GREATER FLEXIBILITY IN FUTURES
TRADING
The Board of Directors has proposed amendments to the
Fundamental Investment Policies and Articles of Incorporation of
the Fund to provide the Fund with greater flexibility in buying
and selling futures. The provisions of the Fund's current
fundamental investment policies and Articles of Incorporation in
this area are not required by applicable law and the Directors
believe the Fund's investment manager, T. Rowe Price, should have
greater flexibility to enter into futures contracts consistent
with the Fund's investment objective and program and as market
and regulatory developments require and permit without the
necessity of seeking further shareholder approval. The new
restriction would also conform the Fund's policy on commodities
and futures 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 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, subject to [its
fundamental policy on futures];"
Futures Contracts
New Horizons Fund
"[As a matter of fundamental policy, the Fund may not:]
Enter into a futures contract or options thereon if, as a
result thereof, (i) the then current aggregate futures
market prices of securities required to be delivered under
option futures contract sales plus the then current
aggregate purchase prices of securities required to be
purchased under open futures contract purchases would exceed
30% of the Fund's total assets (taken at market value at the
time of entering into the contract) or (ii) more than 5% of
<PAGE>28
the Fund's total assets (taken at market value at the time
of entering into the contract) would be committed to margin
on such futures contracts or premiums on options; provided,
however, that in the case of an option which is in-the-money
at the time of purchase, the in-the-money amount as defined
under certain CFTC regulations may be excluded in computing
such 5%;"
New Era Fund
"[As a matter of fundamental policy, the Fund may not:]
Enter into a futures contract or options thereon if, as a
result thereof, (i) the then current aggregate futures
market prices of securities required to be delivered under
option futures contract sales plus the then current
aggregate purchase prices of securities required to be
purchased under open futures contract purchases would exceed
30% of the Fund's total assets (taken at market at the time
of entering into the contract) or (ii) more than 5% of the
Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to margin on
such futures contracts or premiums on options; provided,
however, that in the case of an option which is in-the-money
at the time of purchase, the in-the-money amount as defined
under certain CFTC regulations may be excluded in computing
such 5%;"
As amended, the Fund's fundamental policy 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
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")."
The provisions of the Fund's Articles of Incorporation in
the area of investing in commodities and futures are as follows:
<PAGE>29
Both Funds
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(g) Purchase or sell . . . commodities or commodity
contracts; except that the Corporation may enter into
futures contracts;"
The Board of Directors recommends that these provisions of
the Articles of Incorporation be deleted and that the Fund's
policies on investing in commodities and futures be described
only in the Fund's fundamental and operating policies.
If approved, the primary effects of the amendments would be
to: (i) eliminate the restriction that the Fund may not enter
into a futures contract if, as a result, more than 30% of the
Fund's total assets would be represented by such contracts (the
"30% Limitation"); and (ii) replace the restriction that the Fund
may not commit more than 5% of its total assets to initial margin
on futures contracts or premiums on options (the "5% Limitation")
with the New Operating Policy. Although not specifically
described in the amended restriction, the Fund would have the
ability to invest in forward foreign currency contracts and
instruments which have the characteristics of futures and
securities or whose value is determined, in whole or in part, by
reference to commodity prices. Although it has no current
intention of doing so, the new policy would also permit the Fund
to enter into any type of futures contract, not just those
described in its current prospectus. The risks of such futures
could differ from the risks of the Fund's currently permitted
futures activity.
The 30% Limitation
The SEC formerly required mutual funds trading in futures to
have no more than 30% of their assets represented by futures
contracts. The SEC no longer imposes this percentage limitation.
Although the Fund has no current intention of engaging in
substantial trading in futures, this situation could change, and
the Directors believe the best interest of the Fund would be
served by removing this requirement from the Fund's fundamental
policy on futures. Removal of the 30% Limitation could allow the
Fund, subject to applicable margin requirements, to hedge 100% of
the value of its portfolio and to enter into futures contracts
<PAGE>30
and options thereon to a greater degree than is currently
permitted. All trading in futures by the Fund would be subject
to applicable SEC and Commodity Futures Trading Commission
("CFTC") rules and applicable state law.
The 5% Limitation
The 5% Limitation was previously required by rules of the
CFTC in order for the Fund to be excluded from status as a
commodity pool operator under applicable CFTC regulations, even
if the Fund used futures for hedging purposes only. The CFTC no
longer applies the 5% test to bona fide hedging activities, which
is generally the type of futures activity in which the Fund
engages. Although applicable state law may still require
compliance with similar limitations, the Board of Directors
believes the best interest of the Fund would be served by
replacing the 5% Limitation with the New Operating Policy. This
would provide the Fund with the flexibility to adapt to changes
in CFTC regulations and any state laws without seeking further
shareholder approval.
New Era Fund Only
The Fund's policy on futures does not specify or limit the
types of futures contracts which the Fund may purchase or sell.
Because the Fund invests significantly in natural resource
companies which own or develop energy resources (such as oil) and
precious metals (such as gold), it is possible the Fund may use
oil, gold or other similar futures for hedging and non-hedging
purposes in connection with the Fund's investment in natural
resource companies. The use of such futures would be subject to
substantially the same risks as financial futures (such as stock
index futures). Thus, such futures could be expected to be
volatile in price and there is no guarantee the Fund's use of
them will be successful.
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
<PAGE>31
C. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL POLICY, AND A
PROVISION OF THE FUND'S ARTICLES OF INCORPORATION, ON
INVESTING IN THE SECURITIES OF OTHER INVESTMENT COMPANIES
The Board of Directors has proposed that the Fund's
Fundamental Investment Policy on investing in the securities of
other investment companies 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 vote of the Board of Directors without shareholder
approval. The current policy of the Fund is not required by
applicable law to be fundamental. Concurrent with this proposal,
the Board of Directors also recommend that a provision in the
Fund's Articles of Incorporation on investing in other investment
companies be eliminated. The purpose of the proposed changes is
to provide the Fund greater flexibility in pursuing its
investment objective and in responding to regulatory and market
developments. Although the Fund does not typically invest in the
securities of other open-end investment companies and would only,
on occasion, purchase securities of closed-end investment
companies, the proposed change would permit the Fund to invest in
the securities of other investment companies to the maximum
extent permitted under the 1940 Act and applicable state law, as
described below, without further shareholder approval. The Board
has directed that such change be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of
investing in the securities of other investment companies is as
follows:
New Horizons Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase the securities of any investment company, except in
the open market where no profit to a sponsor or dealer other
than customary brokerage commissions results from such
purchases; provided, that as a matter of operating policy,
the Fund will not purchase the securities of open-end
investment companies. Duplicate fees may result from such
purchases;"
<PAGE>32
New Era Fund
"[As a matter of fundamental policy, the Fund may not:]
Acquire the securities of any investment company, except
securities purchased in the open market where no profit to a
sponsor or dealer other than customary brokerage commissions
results from such purchase, and securities acquired pursuant
to a plan of merger or consolidation; provided, that as a
matter of operating policy, the Fund will not purchase the
securities of open-end investment companies. Duplicate fees
may result from such purchases."
The operating policy on investing in the securities of other
investment companies, to be adopted by the Fund, would be as
follows:
"[As a matter of operating policy, the Fund may not:]
Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company
Act of 1940 and applicable state law. Duplicate fees may
result from such purchases;"
The provision in the Fund's Articles of Incorporation in the
area of investing in the securities of other investment companies
is as follows:
New Horizons Fund
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(j) Invest any of its assets in the securities of any
investment trust or of any other investment company
except by the purchase thereof in the open market where
to the best information of the corporation no
commission or profit to a sponsor or dealer results
from such purchase other than the customary broker's
commission."
New Era Fund
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
<PAGE>33
(k) Invest any of its assets in the securities of any
investment trust or of any other investment company
except by purchase thereof in the open market where to
the best information of the Corporation no commission
or profit to any sponsor or dealer results from such
purchase other than the customary broker's commission,
or except when such investment results from a merger,
consolidation, reorganization or purchase of assets
approved by the stockholders of the Corporation."
The Board of Directors recommends that the provision of the
Articles of Incorporation be deleted and that the Fund's policy
on investing in the securities of other investment companies be
described only in the Fund's operating policies.
Under the 1940 Act, the Fund is subject to various
restrictions in purchasing the securities of closed-end and open-
end investment companies. The 1940 Act limits the Fund,
immediately after a purchase, (1) to investing no more than 10%
of its total assets in the securities of other investment
companies; (2) to owning no more than 3% of the total outstanding
voting stock of any other investment company; and (3) to having
no more than 5% of its total assets invested in securities of
another investment company. Additionally, in the case of a
closed-end investment company, the Fund, and all other mutual
funds having T. Rowe Price as an investment manager, are limited
to owning no more than 10% of the total outstanding voting stock
of any closed-end company.
The 1940 Act provides an alternative set of restrictions if
the Fund were to exceed certain of these percentage limitations.
Under the alternative, the Fund could invest any or all of its
assets in other investment companies, provided the Fund and all
of its affiliates, immediately after a purchase, did not own more
than 3% of the total outstanding stock of the other investment
company. Under this alternative restriction, the rate at which
the Fund could redeem its investment in the other investment
companies in which it invests might be restricted which could
result in a situation where the Fund would not be able to redeem
a portfolio security when it appears to T. Rowe Price to be in
the best interest of the Fund to do so. T. Rowe Price would
consider the effect on the Fund's liquidity and the Fund's
ability to timely dispose of securities, before purchasing the
securities of another investment company.
<PAGE>34
Certain states impose further limitations on the purchase by
the Fund of the securities of other investment companies. At the
present time, these restrictions could prohibit the Fund, with
certain exceptions, from: (i) purchasing or retaining the
securities of any open-end investment company; (ii) purchasing
the securities of any closed-end investment company except
through a purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission or when the purchase is
part of a plan of merger, consolidation, reorganization or
acquisition; and (iii) investing more than 10% of its assets in
one or more investment companies.
It is possible the requirements of the 1940 Act or the
states regarding the Fund's investment in the securities of
closed-end and open-end investment companies could change, or
that the Fund could obtain a waiver of their application. The
Board of Directors believes the Fund should have the ability to
respond to potential changes in these areas without the necessity
of holding a further meeting of shareholders.
The Board of Directors recommends that shareholders vote FOR
the proposals to change the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed elimination of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
D. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY AND PROVISION IN ITS ARTICLES OF INCORPORATION 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. Concurrent with the proposal to
change the fundamental policy on margin to an operating policy,
the Board of Directors also recommends that the provisions in the
Fund's Articles of Incorporation relating to purchases on margin
be eliminated. The purpose of the proposals is to allow the Fund
greater flexibility in responding to market and regulatory
developments by providing the Board of Directors with the
<PAGE>35
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 amendments 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:
New Horizons Fund
"[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 for margin deposits made in connection
with futures contracts, subject to [its fundamental policy
on futures];"
New Era Fund
"[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, and except for margin deposits made 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;"
The provisions in the Fund's Articles of Incorporation in
the area of making purchases on margin are as follows:
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
<PAGE>36
New Horizons Fund
(b) Purchase securities on margin; except that the
Corporation may make margin deposits in connection with
futures contracts."
New Era Fund
(b) Purchase securities on margin; provided, however, that
nothing herein contained shall be construed to prevent the
Corporation from obtaining such short-term credits as may be
necessary for the clearance of transactions in securities;
except that the Corporation may make margin deposits in
connection with futures contracts.
The Board of Directors recommends that the provision of the
Articles of Incorporation be deleted and that the Fund's policy
on purchasing securities on margin be described only in the
Fund's operating policies.
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 may be necessary for
clearance of purchases of portfolio securities. The proposed
operating policy would acknowledge that the Fund is 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 proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment to the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
<PAGE>37
E. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY AND A PROVISION OF THE FUND'S ARTICLES OF
INCORPORATION ON PLEDGING ITS ASSETS
The Board of Directors has proposed that the Fund's
Fundamental Investment Restriction on pledging its assets be
eliminated and replaced with an operating policy. Fundamental
policies may be changed by shareholder vote, while operating
policies may be changed by vote of the Board of Directors without
shareholder approval. Applicable law does not require the
current percentage limitation set forth in the policy and does
not require such policy to be fundamental. The new operating
policy would allow the Fund to pledge, in connection with Fund
indebtedness 33 1/3% of its total assets (an increase from the
current restriction) and allow the Fund to pledge assets in
connection with permissible investments. The Board of Directors
believes it is advisable to provide the Fund with greater
flexibility in pursuing its investment objective and program and
responding to regulatory and market developments. The new
restriction would also conform the Fund's policy on pledging it
assets 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 proposals be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of
pledging its assets is as follows:
New Horizons Fund
"[As a matter of fundamental policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any other manner,
transfer as security for indebtedness any security owned by
the Fund, except (i) as may be necessary in connection with
permissible borrowings, in which event such mortgaging,
pledging, or hypothecating may not exceed 15% of the Fund's
assets, valued at cost, provided, however, that as a matter
of operating policy, the Fund will limit any such
mortgaging, pledging, or hypothecating to 10% of its net
assets, valued at market, in order to comply with certain
state investment restrictions; and (ii) it may enter into
futures contracts;"
<PAGE>38
New Era Fund
"[As a matter of fundamental policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any manner, transfer as
security for indebtedness any security owned by the Fund,
except (i) as may be necessary in connection with
permissible borrowings, in which event such mortgaging,
pledging, or hypothecating may not exceed 15% of the Fund's
assets, valued at cost, provided, however, that as a matter
of operating policy, the Fund will limit any such
mortgaging, pledging, or hypothecating to 10% of its net
assets, valued at market, in order to comply with certain
state investment restrictions; and (ii) it may enter into
futures contracts;"
The operating policy on pledging of assets, to be adopted by
the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any manner, transfer
any security owned by the Fund as security for indebtedness
except as may be necessary in connection with permissible
borrowings or investments and then such mortgaging, pledging
or hypothecating may not exceed 33 1/3% of the Fund's total
assets at the time of the borrowing or investment;"
The provision in the Fund's Articles of Incorporation in the
area of pledging its assets is as follows:
Both Funds
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(e) Mortgage, pledge or hypothecate securities in any
manner whatsoever other than in connection with a
borrowing of the type referred to in subparagraph (a)
of this Section 8, except that the Corporation may
enter into futures contracts;"
The Board of Directors recommends that these provisions of
the Articles of Incorporation be deleted and that the Fund's
policy on pledging its assets be described only in the Fund's
operating policies.
<PAGE>39
The operating policy would allow the Fund to pledge 33 1/3%
of its total assets instead of the current 15% as set forth in
the Fund's fundamental policy (and 10% as set forth in the Fund's
current operating policy). The new policy, in addition to
allowing pledging in connection with indebtedness would clarify
the Fund's ability to pledge its assets in connection with
permissible investments. Such pledging could arise, for example,
when the Fund engages in futures or options transactions or
purchases securities on a when-issued or forward basis. As an
operating policy, the Board of Directors could modify the
proposed policy on pledging in the future as the need arose,
without seeking further shareholder approval.
Pledging assets to other parties is not without risk.
Because assets that have been pledged to other parties may not be
readily available to the Fund, the Fund may have less flexibility
in liquidating such assets if needed. Therefore, the new policy,
by allowing the Fund to pledge a greater portion of its assets,
could, to a greater extent than the current policy, impair the
Fund's ability to meet current obligations, or impede portfolio
management. On the other hand, these potential risks should be
considered together with the potential benefits, such as
increased flexibility to borrow and the increased ability of the
Fund to pursue its investment program.
The Board of Directors recommends that shareholders
vote FOR the proposals to amend the Fund's fundamental policies
and Articles of Incorporation. Approval of the proposed
amendment to the Fund's Articles of Incorporation requires the
affirmative vote of the holders of a majority of the aggregate
number of votes entitled to be cast. The voting requirements for
approval of the proposed elimination of the Fund's fundamental
policy are set forth elsewhere in this proxy statement.
F. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICIES
AND ARTICLES OF INCORPORATION CONCERNING REAL ESTATE
The Board of Directors has proposed amendments to the
Fundamental Investment Policies of the Fund to clarify the types
of securities in which the Fund is authorized to invest and to
conform the Fund's fundamental policy on investing in real estate
to a policy that is expected to become standard for all Price
Funds. Concurrent with this proposal, the Board of Directors
also recommends that a provision in the Fund's Articles of
Incorporation on investing in real estate be eliminated. The
proposed amendments are not expected to affect the investment
program of the Fund or instruments in which the Fund invests.
<PAGE>40
The Fund will not purchase or sell real estate. In addition, the
proposed amendments would clarify that the Fund may purchase
securities secured by real estate or interests therein. The
Board has directed that such amendments be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
investing in real estate is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate, although it may invest in the
securities of companies whose business involves the purchase
or sale of real estate;"
As amended, the Fund's fundamental policy on investing in
real estate would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall
not prevent the Fund from investing in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business);"
The provisions of the Fund's Articles of Incorporation in
the area of investing in real estate are as follows:
Both Funds
"Article THIRD:
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the
contrary notwithstanding, the Corporation may not and
shall not:
(g) Purchase or sell real estate. . . ."
The Board of Directors recommends that these provisions be
deleted and that the Fund's policies concerning investing in real
estate be described only in the Fund's fundamental policies.
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
<PAGE>41
G. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY, AND A PROVISION IN THE FUND'S ARTICLES OF
INCORPORATION, 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 Board also has proposed that a
corresponding restriction in the Fund's Articles of Incorporation
be eliminated. 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 proposals 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:
"[As a matter of operating policy, the Fund may not:]
Effect short sales of securities;"
The provision of the Fund's Articles of Incorporation in the
area of effecting short sales of securities is as follows:
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(c) Effect short sales of securities."
The Board of Directors recommends that this provision of the
Articles of Incorporation be deleted and that the Fund's policy
on effecting short sales of securities be described only in the
Fund's operating policies.
<PAGE>42
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 proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed elimination of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
H. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICY AND ARTICLES
OF INCORPORATION REGARDING UNDERWRITING
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund on underwriting to
conform such policy to one which is expected to become standard
for all T. Rowe Price Funds. Concurrent with this proposal, the
Board of Directors also recommends that a provision in the Fund's
Articles of Incorporation on underwriting be eliminated. The
proposed changes, if adopted, are not expected to lead to any
changes in the manner in which the Fund conducts its business.
The Board of Directors has directed that such amendments be
submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
underwriting is as follows:
<PAGE>43
Both Funds
"[As a matter of fundamental policy, the Fund may not:] Act
as an underwriter of securities, except insofar as it might
technically be deemed to be an underwriter for purposes of
the Securities Act of 1933 upon the disposition of certain
securities."
As amended, the Fund's fundamental policy on underwriting
would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Underwrite securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 in
connection with the purchase and sale of its portfolio
securities in the ordinary course of pursuing its investment
program."
The provision of the Fund's Articles of Incorporation in the
area of underwriting is as follows:
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
New Horizons Fund
(f) Underwrite the sale of, or participate in any
underwriting or selling group in connection with the public
distribution of, any securities (other than the capital
stock of the corporation); provided however, that this
provision shall not be construed to prevent or limit in any
manner the power of the corporation to purchase securities
for investment as hereinbefore provided.
New Era Fund
<PAGE>44
(f) Underwrite the sale of, or participate in any
underwriting or selling group in connection with the public
distribution of, any securities (other than the capital
stock of the Corporation), except to the extent that the
Corporation may technically be deemed to be an underwriter
under any applicable law or regulation by virtue of the
disposition of any particular block of securities; provided,
however, that nothing herein contained shall be construed to
prevent or limit in any manner the power of the Corporation
to purchase securities for investment as hereinbefore
provided."
The Board of Directors recommends that this provision of the
Articles of Incorporation be deleted and that the Fund's policies
on underwriting be described only in the Fund's fundamental
policies.
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed elimination of the Fund's fundamental policy are
set forth elsewhere in this proxy statement. The voting
requirements for approval of the proposed amendment to the Fund's
fundamental policy are set forth elsewhere in this proxy
statement.
I. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND
DIRECTORS
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on the ownership of portfolio securities by
officers and directors of the Fund and T. Rowe Price 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 vote of the
Board of Directors without shareholder approval. The current
policy of the Fund is not required by applicable law to be
fundamental. The current fundamental policy was formerly
required by certain states. This is no longer the case. The
Board has directed that the proposal be submitted to shareholders
for approval or disapproval.
<PAGE>45
As changed, the Fund's operating policy in the area of
ownership of portfolio securities by officers and directors would
be as follows:
"[As a matter of operating policy, the Fund may not:]
Purchase or retain the securities of any issuer if, to the
knowledge of the Fund's management, those officers and
directors of the Fund, and of its investment manager, who
each own beneficially more than .5% of the outstanding
securities of such issuer, together own beneficially more
than 5% of such securities."
The Board of Directors recommends that shareholders vote FOR
the proposal.
J. 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:
Both Funds
"[As a matter of fundamental policy, the Fund may not:]
Issue any class of securities senior to any other class of
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;"
<PAGE>46
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
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.
K. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING THE MAKING OF LOANS
New Horizons Fund
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; (ii) authorize the Fund to participate as a
lender in an interfund lending program involving the funds
advised by T. Rowe Price or Rowe Price-Fleming International,
Inc. (the "Price Funds"); and (iii) 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.
<PAGE>47
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, except that it may (i) acquire publicly distributed
bonds, debentures, notes, and other debt securities, (ii)
enter into repurchase agreements, and (iii) lend portfolio
securities 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-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.
Interfund Lending Program
The proposed amendments to the Fund's fundamental policy
would allow the Fund to participate in an interfund lending
program with other Price mutual funds. The nature of this
program and the risks associated with the Fund's participation
are set forth under "Borrowing from Other Price Funds" beginning
on page ____. Shareholders are being asked to consider, and vote
separately, on the Fund's participation in the interfund lending
program as a borrower and as a lender.
<PAGE>48
The Directors believe that the interfund lending program:
(i) may benefit the Fund by providing it with greater flexibility
to engage in lending transactions; and (ii) would facilitate the
Fund's ability to earn a higher return on short-term investments
by allowing it to lend cash to other Price Funds. Implementation
of interfund lending would be accomplished consistent with
applicable regulatory requirements, including the provisions of
any order the SEC might issue to the Fund and to other Price
Funds.
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 Changes
The proposed new policy on lending would specifically refer
to the Fund's ability to purchase money market securities and
purchase privately-placed debt securities. These are investments
which the Fund is permitted to make already and these changes to
the Fund's fundamental policy are intended to be clarifying only.
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>49
New Era Fund
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; (ii) authorize the Fund to participate as a
lender in an interfund lending program involving the funds
advised by T. Rowe Price or Rowe Price-Fleming International,
Inc. (the "Price Funds"); and (iii) 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, except that it may (i) acquire publicly distributed
bonds, debentures, notes, and other debt securities, and
(ii) lend portfolio securities 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-distributed or privately-placed debt
securities and purchase debt;"
<PAGE>50
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.
Interfund Lending Program
The proposed amendments to the Fund's fundamental policy
would allow the Fund to participate in an interfund lending
program with other Price mutual funds. The nature of this
program and the risks associated with the Fund's participation
are set forth under "Borrowing from Other Price Funds" beginning
on page ____. Shareholders are being asked to consider, and vote
separately, on the Fund's participation in the interfund lending
program as a borrower and as a lender.
The Directors believe that the interfund lending program:
(i) may benefit the Fund by providing it with greater flexibility
to engage in lending transactions; and (ii) would facilitate the
Fund's ability to earn a higher return on short-term investments
by allowing it to lend cash to other Price Funds. Implementation
of interfund lending would be accomplished consistent with
applicable regulatory requirements, including the provisions of
any order the SEC might issue to the Fund and to other Price
Funds.
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
<PAGE>51
that increased standardization will help promote operational
efficiencies and facilitate monitoring of compliance with the
Fund's investment restrictions.
Repurchase Agreements
The Fund currently purchases money market securities of
various types in connection with the management of its cash
reserves. As stated in the Fund's current prospectus, "the
Fund's reserves will be invested in domestic and foreign money
market instruments rated within the top two credit categories by
a national rating organization or, if unrated, the T. Rowe Price
equivalent."
One type of money market instrument commonly used by mutual
funds is the repurchase agreement. Because investment by the
Fund in repurchase agreements could be construed as a loan by the
Fund to the other party to the repurchase agreement (although the
Fund does not concede that such is the case) and the Fund's
policy on loans does not specifically permit repurchase
agreements, the Fund has not invested in repurchase agreements.
The ability to invest in repurchase agreements would provide the
Fund with greater flexibility in investing its cash reserves in
an efficient and prudent manner. Therefore, the Directors have
determined to seek a change in the investment restriction on
loans to allow this practice.
In a repurchase agreement, the Fund would purchase a
security (known as the "underlying security") from a well-
established securities dealer or a bank that is a member of the
Federal Reserve System. At that time, the bank or securities
dealer agrees to repurchase the underlying security at the same
price, plus specified interest. Repurchase agreements are
generally for a short period of time, often less than a week.
Generally, the Fund will only enter into repurchase agreements
where (i) the underlying securities are of the type (excluding
maturity limitations) which the Fund's investment guidelines
would allow it to purchase directly, (ii) the market value of the
underlying security, including interest accrued, will be at all
times equal to or exceed the value of the repurchase agreement,
and (iii) payment for the underlying security is made only upon
physical delivery or evidence of book-entry transfer to the
account of the custodian or a bank acting as agent. In the event
of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating
the underlying securities and losses, including: (a) possible
decline in the value of the underlying security during the period
while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during
this period; and (c) expenses of enforcing its rights.
<PAGE>52
Other Changes
The proposed new policy on lending would specifically refer
to the Fund's ability to purchase money market securities and
purchase privately-placed debt securities. These are investments
which the Fund is permitted to make already and these changes to
the Fund's fundamental policy are intended to be clarifying only.
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 proposals.
NEW HORIZONS FUND ONLY
L. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL
POLICY ON INVESTING FOR CONTROL OF PORTFOLIO COMPANIES
The Fund's Board of Directors has proposed that the Fund's
Fundamental Investment Policy on investing for control of
portfolio companies be changed from a fundamental policy to an
identical operating policy. Fundamental policies may only be
changed with shareholder approval, while operating policies may
be changed by vote of the Board of Directors without shareholder
approval. While the Fund has no current intention of investing
in companies for the purpose of obtaining or exercising control,
the proposed change would allow the Fund to do so if the Board of
Directors determined to change the new operating policy. No
additional shareholder vote would be necessary. The Board
believes that the proposed amendment will provide the Fund with
greater flexibility to respond to market and regulatory
developments and has directed that such change be submitted to
shareholders for approval or disapproval.
As changed, the Fund's operating policy on investing for
control of portfolio companies would be as follows:
"[As a matter of operating policy, the Fund may not:]
Invest in companies for the purpose of exercising management
or control;"
The Board of Directors recommends that shareholders vote FOR
the proposal.
<PAGE>53
NEW ERA FUND ONLY
M. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICIES
TO DELETE PROVISIONS REGARDING CERTAIN PORTFOLIO
TRANSACTIONS
Investment restriction number (1) in the Fund's current
Statement of Additional Information provides that the Fund may
not deal with any of its officers or directors, or with any firm
of which any of the Fund's officers or directors is an officer,
director, or member, as principal in the purchase or sale of
portfolio securities, or effect portfolio transactions through
any such officer, director, or firm as agent or broker, unless
the Fund pays no more than customary brokerage charges of such
services.
The above investment restriction imposes on the Fund
restrictions that are substantially similar to limitations
imposed by Sections 17(a), 17(e), and 10(f) of the 1940 Act and
the rules adopted by the Commission under these sections. These
provisions of the 1940 Act generally preclude the Fund from
engaging in principal portfolio transactions with, purchasing
securities in underwritings from, or effecting portfolio
transactions through persons or entities that are "affiliates" of
the Fund or its officers or directors, as such term is defined in
the 1940 Act, unless certain conditions are met. These
conditions protect the Fund against abuse or overreaching by an
affiliated broker or dealer.
The Board of Directors believes that the restrictions
imposed by the 1940 Act provide the Fund with sufficient
protection against the abuse which the foregoing investment
restriction is intended to prevent, especially when coupled with
the periodic review of portfolio transactions conducted by the
Board in the exercise of its supervisory responsibilities.
The Board of Directors recommends that investment
restriction (1), which is a fundamental policy of the Fund, be
deleted.
The Board of Directors recommends that shareholders vote FOR
the proposal to delete investment restriction (1) as a
fundamental policy of the Fund.
<PAGE>54
N. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY, AND A PROVISION OF THE FUND'S ARTICLES OF
INCORPORATION, ON JOINT TRANSACTIONS
The Board of Directors has proposed that the Fund's
Fundamental Investment Policy and a corresponding provision of
the Fund's Articles of Incorporation on joint transactions be
eliminated. The current policy is not required by applicable
law. The purpose of the proposals is to provide the Fund with
greater flexibility in pursuing its investment objective and
program. The Board has directed that such proposal be submitted
to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of joint
transactions is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Participate on a joint or a joint and several basis in any
securities trading account;"
The provisions of the Fund's Articles of Incorporation in
the area of joint transactions is as follows:
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(l) Participate on a joint or joint and several basis in any
securities trading account."
Elimination of the fundamental policy and provision in the
Fund's Articles of Incorporation will not lessen the protections
afforded the Fund. However, these policies have prevented the
Fund from participating in a pooled investment account
established for all other T. Rowe Price Funds. This pooled
account was established in 1991 after receipt of an exemptive
order from the SEC. It allows the T. Rowe Price Funds to pool
their reserves for overnight investment in order to make a
single, larger investment than any one fund could otherwise make.
The purpose of the pooled account is to utilize the economies of
scale applicable to all of the T. Rowe Price Funds by reducing
the number of transactions and costs necessary to invest
overnight reserves. The program has proven very successful and
elimination of the Fund's restrictions on joint accounts would
allow the Fund to participate in it.
<PAGE>55
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
O. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICY AND ARTICLES
OF INCORPORATION TO INCREASE THE PERCENTAGE OF FUND ASSETS
WHICH MAY BE INVESTED IN ANY ONE ISSUER
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies and Articles of Incorporation of
the Fund to conform such policies to Section 5(b)(1) of the
Investment Company Act of 1940 (the "1940 Act") and to permit the
Fund greater flexibility to invest in securities considered by T.
Rowe Price to present attractive investment opportunities. Under
the amended policy, the Fund would be limited, with respect to
75% of its total assets, to investing no more than 5% of its
total assets in the securities of any one issuer. However, no
such limitation would apply with respect to the remaining 25% of
the Fund's assets. It should be understood that the proposed
amendment, by permitting the Fund to invest a greater percentage
of its assets with a single issuer, could increase the risk to
the Fund in the event of adverse developments affecting the
securities of such issuer. The current policy would also be
amended in a manner which would subject the Fund's investments in
bank certificates of deposit to the restrictions applicable to
the Fund's other investments. 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
investing in the securities of a single issuer is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase any securities which would cause more than 5% of
its total assets at the time of such purchase to be invested
in the securities of any issuer, but this limitation does
not apply to obligations issued or guaranteed by the U.S.
government, or to bank certificates of deposit;"
As amended, the Fund's fundamental policy of investing in
the securities of a single issuer would be as follows:
<PAGE>56
"[As a matter of fundamental policy, the Fund may not:]
Purchase a security if, as a result, with respect to 75% of
the value of its total assets, more than 5% of the value of
the Fund's total assets would be invested in the securities
of a single issuer, except securities issued or guaranteed
by the U.S. government, or any of its agencies or
instrumentalities;"
The provision of the Articles of Incorporation in the area
of investing in the securities of a single issuer is as follows:
"Article THIRD
8.Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(h)Invest in any security of any one issuer if immediately
after and wholly or partially as a result of such investment
the market value of the securities of such issuer owned by
the Corporation shall exceed 5 per cent of the market value
of the total assets of the Corporation, . . . provided,
however, that the limitation[s] set forth above shall not
apply to investments and obligations of the United States of
America or any bonds, bills or notes guaranteed as to both
principal and interest by the United States of America, or
limit or restrict the amount which the Corporation may at
any time deposit in any bank or trust company, whether or
not the same be represented by certificates of deposit."
The Board of Directors recommends that this provision of the
Articles of Incorporation be deleted and that the Fund's policy
of investing in the securities of a single issuer be described
only in the Fund's fundamental policies.
The proposed amendments will not affect the status of the
Fund as a diversified investment company under the 1940 Act.
However, the proposed amendments would allow the Fund to invest a
significantly larger portion of its assets in the securities of a
single issuer. Thus, for example, the Fund could invest 25% of
its total assets in the securities of a single issuer, or 10% of
its total assets in securities of one issuer and 15% of its total
assets in securities of another issuer. This would cause the
Fund's net asset value per share to be more affected by changes
in the value of, and market, credit and business developments
with respect to, the securities of such issuer(s). In addition,
if the Fund were to have a substantial portion of its assets
invested in the securities of a single issuer, the liquidity of
<PAGE>57
the Fund's investment in that issuer could be reduced. However,
the Fund's Board of Directors believes the Fund should have the
increased flexibility to pursue its investment program which the
proposed amendment would allow.
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment to the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
P. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICY AND ARTICLES
OF INCORPORATION REGARDING PURCHASING MORE THAN 10% OF AN
ISSUER'S VOTING SECURITIES
The Board of Directors has proposed an amendment to the
Fundamental Investment Restrictions and Articles of Incorporation
of the Fund to conform such policies to Section 5(b)(1) of the
1940 Act and to provide the Fund with greater flexibility to
invest its assets in the outstanding voting securities of various
companies. Under the amended policy, the Fund would be
restricted from owning more than 10% of an issuer's outstanding
voting securities only with respect to 75% of the value of its
total assets, as opposed to 100% under the current policy. In
addition, whereas the current policy prohibits the Fund from
owning more than 10% of the outstanding securities of any class
of any issuer, the new policy only prohibits ownership of more
than 10% of the outstanding voting securities of any issuer. By
applying the restriction only to voting securities and by
permitting the Fund to own more than 10% of the outstanding
voting securities of an issuer, the proposed amendment, if
adopted, could increase the risk to the Fund with respect to
adverse developments concerning such securities. The Board of
Directors, however, believes the Fund should have the increased
flexibility which the amendment would provide. The current
policy would also be amended in a manner which would subject the
Fund's investments in bank certificates of deposit to the
restrictions applicable to the Fund's other investments. The
Board has directed that such change be submitted to shareholders
for approval or disapproval.
The Fund's current fundamental policy in the area of
purchasing more than 10% of an issuer's voting securities is as
follows:
<PAGE>58
"[As a matter of fundamental policy, the Fund may not:]
Purchase any securities which would cause the Fund at the
time of such purchase to own more than 10% of the
outstanding securities of any class of any issuer, but this
limitation does not apply to obligations issued or
guaranteed by the U.S. government, or to bank certificates
of deposit;"
As amended, the Fund's fundamental policy in the area of
purchasing more than 10% of an issuer's voting securities would
be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase a security if, as a result, with respect to 75% of
the value of the Fund's total assets, more than 10% of the
outstanding voting securities of any issuer would be held by
the Fund (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities);"
The provision in the Fund's Articles of Incorporation in the
area of purchasing more than 10% of an issuer's voting securities
is as follows:
"Article THIRD
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding, the Corporation may not and shall not:
(h) Invest in any security of any one issuer if immediately
after and wholly or partially as a result of such
investment . . ., or the Corporation shall own more than
10 per cent of any class of outstanding securities of
such issuer; provided, however, that the limitation[s]
set forth above shall not apply to investments and
obligations of the United States of America or any
bonds, bills or notes guaranteed as to both principal
and interest by the United States of America, or limit
or restrict the amount which the Corporation may at any
time deposit in any bank or trust company, whether or
not the same be represented by certificates of deposit."
The Board of Directors recommends that these provisions of
the Articles of Incorporation be deleted and that the Fund's
policy on purchasing more than 10% of an issuer's voting
securities be described only in the Fund's fundamental policies.
<PAGE>59
The proposed amendments will not affect the status of the
Fund as a diversified investment company under the 1940 Act.
However, the proposed amendments would permit the Fund, with
respect to 25% of its assets, to take a larger position in the
voting and other securities of companies than under the current
investment limitation. Thus, for example, the Fund could
purchase 100% of the voting securities of one or more companies.
This would cause the Fund's net asset value per share to be more
affected by changes in the value of, and market, credit and
business developments with respect to, the securities of such
companies. In addition, if the Fund were to own a substantial
percentage of an issuer's voting or other securities, there is a
risk that the liquidity of those securities would be reduced.
However, the Fund's Board of Directors believes the Fund should
have the increased flexibility to pursue its investment program
which the proposed amendment would allow.
The Board of Directors recommends that shareholders vote FOR
the proposals to amend the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed amendment to the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
Q. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY REGARDING THE PURCHASE OF ILLIQUID
SECURITIES
The Board of Directors has proposed that the Fund's
Fundamental Investment Policy on purchasing unmarketable
securities be changed from a fundamental policy to an operating
policy. Fundamental policies may be changed only by shareholder
vote, while operating polices may be changed by the Board of
Directors without shareholder approval. If the proposed change
is approved by shareholders, the Board of Directors of the Fund
intends to adopt an operating policy which would (1) allow the
Fund to invest up to 15% of its net assets in illiquid securities
and (2) conform the Fund's operating policy in this area to one
which is expected to become standard for all T. Rowe Price Funds.
The Fund's current fundamental policy in this area is not
required by applicable law and the proposed change should provide
the Fund with greater flexibility in responding to market and
regulatory developments. The Board has directed that such change
be submitted to shareholders for approval or disapproval.
<PAGE>60
The Fund's current fundamental policy in the area of
purchasing illiquid securities is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase a security if, as a result, more than 10% of the
value of the Fund's total assets would be invested in: (a)
securities with legal or contractual restrictions on resale
and (b) other securities that are not readily marketable;"
As changed, the operating policy on investing in illiquid
securities, to be adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:]
Purchase illiquid securities and securities of unseasoned
issuers if, as a result, more than 15% of its net assets
would be invested in such securities, provided that the Fund
will not invest more than 5% of its total assets in
restricted securities and not more than 5% in securities of
unseasoned issuers. Securities eligible for resale under
Rule 144A of the Securities Act of 1933 are not included in
the 5% limitation but are subject to the 15% limitation;"
Illiquid Securities
As an open-end investment company, the Fund may not hold a
significant amount of illiquid securities because such securities
may present problems of accurate valuation and it is possible the
Fund could have difficulty satisfying redemptions within seven
days as required under the 1940 Act. In general, the SEC defines
an illiquid security as one which can not be sold in the ordinary
course of business within seven days at approximately the value
at which the Fund has valued the security. Illiquid securities
have included those enumerated in the Fund's fundamental
restriction on restricted securities -- securities with legal or
contractual restrictions on resale ("restricted securities").
The securities markets, however, are evolving and new types
of instruments have developed. In light of these developments,
the Fund's fundamental investment restriction, by essentially
assuming restricted securities are unmarketable, may be overbroad
and unnecessarily restrictive. For example, the markets for
various types of securities -- repurchase agreements, commercial
paper, and some corporate bonds and notes -- are almost
exclusively institutional. These instruments are often either
exempt from registration or sold in transactions not requiring
registration. Although these securities may be legally
classified as "restricted," institutional investors will often
justifiably rely either on the issuer's ability to honor a demand
<PAGE>61
for repayment in less than seven days or on an efficient
institutional market in which the unregistered security can be
readily resold. The fact that the securities may be restricted
because of legal or contractual restrictions on resale to the
general public will, therefore, not be dispositive of the
liquidity of such investments.
In recognition of the increased size and liquidity of the
institutional markets for unregistered securities and the
importance of institutional investors in the capital formation
process, the SEC has adopted rules, including Rule 144A under the
Securities Act of 1933, designed to further facilitate efficient
trading among institutional investors. These rules permit a
broader institutional trading market for securities subject to
restriction on resale to the general public. If institutional
markets develop which trade in these securities, the Fund could
be constrained by its current investment restrictions.
Accordingly, T. Rowe Price recommends that the Fund eliminate its
fundamental limitations in this area so that restricted
securities that are nonetheless liquid may be purchased without
regard to the Fund's limit on investing in illiquid securities.
Of course, the Fund would modify its operating policy to comply
with future regulatory and market developments.
If this proposal is approved by shareholders, the specific
types of securities that may be deemed to be illiquid will be
determined from time to time by T. Rowe Price under the
supervision of the Directors, with reference to legal, regulatory
and market developments. By making the Fund's policy on illiquid
securities non-fundamental, the Fund will be able to respond more
quickly to such developments because no shareholder vote will be
required to redefine what types of securities may be deemed
illiquid.
Percentage Limitations
The Fund's fundamental policy limits it to investing no more
than 10% of the value of its total assets in restricted and
unmarketable securities. The new operating policy to be adopted
by the Board of Directors, if shareholders approve elimination of
the fundamental policy, would allow the Fund to invest 15% of its
net assets in illiquid securities. The 15% limitation represents
a higher percentage than the Fund was previously allowed to
invest in illiquid securities and is the result of a 1992
liberalization by the SEC in this area. If the fundamental
policy is changed to an operating policy, the Fund will, without
the necessity of any further shareholder vote, be able to take
advantage of any future changes in SEC policy in this area.
<PAGE>62
Notwithstanding the 15% limitation, in conformity with
various state laws, the Fund's new operating policy would limit
the Fund to investing no more than 5% of its assets in restricted
securities (other than Rule 144A securities) and no more than 5%
of its assets in the securities of unseasoned issuers (as
defined). Shareholders are being asked separately to eliminate
the Fund's fundamental policy on investing in unseasoned issuers.
If that action is approved, the Directors intend to incorporate
the Fund's policy on investing in unseasoned issuers with the
Fund's policy on investing in illiquid securities.
The Board of Directors recommends that shareholders vote FOR
the proposal.
R. PROPOSAL TO CHANGE THE DESIGNATION OF THE FUND'S FUNDAMENTAL
INVESTMENT POLICY, AND A PROVISION IN THE FUND'S ARTICLES OF
INCORPORATION ON INVESTING IN UNSEASONED ISSUERS
The Board of Directors has proposed that the Fund's
fundamental policy, and a similar provision in the Fund's
Articles of Incorporation on investing in the securities of
unseasoned issuers, be eliminated and replaced by a substantially
similar operating policy. Fundamental policies may only be
changed with shareholder approval, while operating policies may
be changed by vote of the Board of Directors without shareholder
approval. The proposed change will provide the Fund with greater
flexibility in responding to market and regulatory developments
without the necessity of seeking further shareholder approval.
The new restriction would also conform the Fund's policy on
investing in unseasoned issuers 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 change be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
investing in unseasoned issuers is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase any securities which would cause more than 5% of
its total assets, valued at cost, at the time of such
purchase to be invested in the securities of issuers engaged
in continuous operation for less than three years."
<PAGE>63
The operating policy on investing in unseasoned issuers, to
be adopted by the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:]
Purchase a security (other than obligations issued or
guaranteed by the U.S., any foreign, state or local
government, their agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets
would be invested in the securities of issuers which at the
time of purchase had been in operation for less than three
years (for this purpose, the period of operation of any
issuer shall include the period of operation of any
predecessor or unconditional guarantor of such issuer).
This restriction does not apply to securities of pooled
investment vehicles or mortgage or asset-backed securities;"
The new operating policy would add securities issued or
guaranteed by the U.S., or any foreign, state or local
government, as well as securities of pooled investment vehicles
and mortgage and asset-backed securities, to the list of those
which are excluded from the percentage restriction on investing
in unseasoned issuers. In addition, the new operating policy
clarifies that the period of operation of any predecessor or
unconditional guarantor of an issuer would be included in
determining whether the issuer is unseasoned (i.e., whether the
issuer has been operating for less than three years).
The provision of the Fund's Articles of Incorporation in the
area of investing in unseasoned issuers is as follows:
"Article THIRD:
8. Anything in this Article THIRD or elsewhere in the
Articles of Incorporation of the Corporation to the contrary
notwithstanding the Corporation may not and shall not:
(i) Invest in the securities of any issuer which shall
have a record of less than three (3) years of
continuous operation (including the operation of
any predecessor) if immediately after and wholly or
partially as a result of such investment more than
5 per cent of the total assets of the Corporation
taken at cost shall be invested in the securities
of such issuers."
The Board of Directors recommends that the provision of the
Articles of Incorporation be deleted and that the Fund's policy
on investing in unseasoned issuers be described only in the
Fund's operating policies.
<PAGE>64
The Board of Directors recommends that shareholders vote FOR
the proposals to change the Fund's fundamental policies and
Articles of Incorporation. Approval of the proposed amendment to
the Fund's Articles of Incorporation requires the affirmative
vote of the holders of a majority of the aggregate number of
votes entitled to be cast. The voting requirements for approval
of the proposed elimination of the Fund's fundamental policy are
set forth elsewhere in this proxy statement.
BOTH FUNDS
3A. PROPOSAL TO AMEND THE FUND'S ARTICLES OF INCORPORATION TO
ELIMINATE THE POLICY ON PRICING SECURITIES
The Board of Directors has proposed that the Fund amend its
Articles of Incorporation by deleting subparagraphs (a), (b), (c)
and (d) of Paragraph 3 of Article FIFTH regarding the policy on
pricing securities in its portfolio. The manner in which the
Fund prices its securities is currently set forth in the Fund's
Statement of Additional Information and the Fund's policy on
pricing securities is not required to be included in its Articles
of Incorporation. The purpose of the proposed amendment is to
provide the Fund with greater flexibility to respond to
regulatory and market developments in pricing its securities,
should the need arise. Although there is no current intention to
change the manner in which the Fund's portfolio securities are
priced, the proposal, if adopted, would allow the Fund's Board of
Directors to make changes in the Fund's policy on pricing, in a
manner consistent with applicable law, without seeking further
shareholder approval. The Board has directed that the proposal
be submitted to shareholders for approval or disapproval.
The Funds's policy on pricing securities as stated in the
Articles of Incorporation is as follows:
"Article FIFTH
3. The net asset value of a share of capital stock of the
Corporation shall be determined by such persons and at such
time or times as shall from time to time be specified by the
Board of Directors of the Corporation. Each such
determination shall be made by subtracting from the value of
the assets of the Corporation the amount of its liabilities,
dividing the remainder by the number of shares of capital
stock issued and outstanding, and adjusting the results to
the nearest full cent per share. For purposes of such
determination:
<PAGE>65
(a) Securities listed or commonly dealt in on the New York
Stock Exchange or the American Stock Exchange shall be
valued at the latest sale prices on such exchanges. If
there be no sale of any particular security on any day, such
security shall be valued on that day at the price, within
the limits of the latest bid and asked prices, which shall
be deemed by the persons making such determination best to
reflect the fair value thereof.
(b) Other securities, to the extent that market quotations
are readily available, shall be valued in the same manner as
securities listed or commonly dealt in on the New York or
American Stock Exchanges.
(c) All other securities and assets (other than good will,
which shall not be taken into account) shall be valued on
the basis of such information as shall be available and in
such manner as shall from time to time be deemed by the
persons making such determination best to reflect the fair
value thereof.
(d) All quotations, sale prices, bid and asked prices and
other information shall be obtained from such sources as the
persons making such determination believe to be reliable;
and any determination of net asset value based thereon shall
be conclusive."
The Board of Directors recommends that these provisions of
the Articles of Incorporation be deleted and that the Fund's
policy on pricing securities be described only in the Fund's
Statement of Additional Information.
The Board of Directors recommends that shareholders vote FOR
the proposal.
NEW ERA FUND ONLY
3B. PROPOSAL TO AMEND THE FUND'S ARTICLES OF INCORPORATION TO
PERMIT INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS
Maryland law permits a Fund, if authorized by its Board of
Directors, to redeem shares from any shareholder if the Fund's
Articles of Incorporation expressly provides for the redemption
of shares. The Fund's current Articles of Incorporation do not
so provide. The Board of Directors has proposed an amendment to
the Fund's Articles of Incorporation which would authorize the
Fund to make an involuntary redemption of a shareholder's
account, at the net asset value at the time of the redemption,
<PAGE>66
where the value of shares held by the shareholder is less than
$1,000, or such other amount as determined by the Directors. The
amendment is intended to save the Fund the expense of servicing
small accounts.
The Board of Directors has currently decided to permit an
involuntary redemption only with respect to shareholders who hold
shares in the Fund with a value of less than $1,000. Disclosure
of this practice would be made in the Fund's May 1, 1994
prospectus. Any change by the Board of Directors in the dollar
level at which the Fund could exercise this redemption right
would be subject to the Fund giving notice in its prospectus or
by other appropriate means, but would not require a shareholder
vote. Prior to redeeming a shareholder's account, appropriate
notice to the shareholder would be made.
The purpose of the proposed amendment is to save the Fund
the costs of servicing small accounts. Currently, the Fund has a
significant number of shareholder accounts with balances of less
than $1,000. All Fund accounts, regardless of their size,
require certain services, including the preparation, printing and
delivery of account statements, proxy statements, annual, semi-
annual and other periodic reports, other shareholder
communications and transfer agent charges. These expenses are
disproportionately large for small accounts and are borne by all
the Fund's shareholders. Most modern charters of mutual funds
permit small account redemptions.
As amended, the Fund's Articles of Incorporation would add
two new paragraphs as follows:
"Article FIFTH
Paragraph 5(a)
(i) Small Account. The Corporation shall have the right at
any time and without prior notice to the shareholder to
redeem for their then-current net asset value per share all
shares that are held by a shareholder whose shares of the
Corporation or of any and all series have an aggregate net
asset value of less than $1,000, or such other amount as the
Board of Directors may from time to time determine.
<PAGE>67
(ii) Notice. The right of redemption provided by the
foregoing subsection of Section II of this Article SEVENTH
shall be subject to such terms and conditions as the Board
of Directors may from time to time approve, and subject to
the Corporation's giving general notice of its intention to
avail itself of such right, either by publication in the
Corporation's prospectus or by such means as the Board of
Directors shall determine.
The Board of Directors recommends that shareholders vote FOR
the proposal to amend the Fund's Articles of Incorporation.
<PAGE>68
4. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT
ACCOUNTANTS
The selection by the Board of Directors of the New Horizons
Fund of the firm of Coopers & Lybrand as the independent
accountants for the Fund for the year 1994 is to be submitted for
ratification or rejection by the shareholders of the New Horizons
Fund at the Shareholders Meeting. The firm of Coopers & Lybrand
has served the New Horizons Fund as independent accountants since
1986. The selection by the Board of Directors of the New Era
Fund of the firm of Price Waterhouse as the independent
accountants for the Fund for the year 1994 is to be submitted for
ratification or rejection by the shareholders of the New Era Fund
at the Shareholders Meeting. The firm of Price Waterhouse has
served the New Era Fund as independent accountants since its
inception.
Each Fund has been advised by its independent accountants
that they have no direct or material indirect financial interest
in the Fund. Representatives of the firm of Coopers & Lybrand
and Price Waterhouse are expected to be present at the
Shareholders 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.
<PAGE>69
INVESTMENT MANAGER
The Funds' 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.
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:
<PAGE>70
New Horizons Fund
Position Position with
Officer with Fund Manager
Preston G. Athey Vice President Vice President
Brian W.H. Berghuis Vice President Vice President
Brent Clum Vice President Vice President
Gregory V. Donovan Vice President Vice President
Marcy L. Fisher Vice President Assistant Vice
President
Jill L. Hauser Vice President Vice President
Henry H. Hopkins Vice President Managing Director
Denise Jevne Vice President Vice President
Joseph Klein, III Vice President Vice President
Charles A. Morris Vice President Vice President
Brian D. Stansky Vice President Vice President
John F. Wakeman 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 Employee
President
Francies W. Hawks Assistant Vice Assistant Vice
President President
Edward T. Schnieder Assistant Vice Employee
President
Ingrid I. Vordemberge Assistant Vice Employee
President
<PAGE>71
New Era Fund
Stephen W. Boesel Vice President Vice President
Hugh M. Evans, III Vice President Employee
Richard P. Howard Vice President Vice President
Henry H. Hopkins Vice President Managing Director
James A.C. Kennedy, III Vice President Managing Director
Charles M. Ober Vice President Vice President
David L. Rea Vice President Vice President
James S. Riepe Vice President Managing Director
Alan R. Stuart Vice President Vice President
David J. Wallack 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 Employee
President
Edward T. Schneider Assistant Vice Employee
President
Ingrid I. Vordemberge Assistant Vice Employee
President
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, a Vice President and Director of the Funds, 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 Fund, 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
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.
<PAGE>72
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 AGREEMENTS
T. Rowe Price serves as investment manager to the Funds
pursuant to their respective Investment Management Agreements
(each the "Management Agreement" and collectively the "Management
Agreements"). New Horizons Fund's Management Agreement, dated
May 1, 1991, was approved by the shareholders of the Fund on
April 18, 1991. New Era Fund's Management Agreement, dated May
1, 1987, was approved by the shareholders of the Fund on April
21, 1987. 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 1, 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 party
without penalty on 60 days' written notice to the other and will
terminate automatically in the event of assignment.
<PAGE>73
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 securities
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 a 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.
The following chart shows the ratio of operating expenses to
average net assets of each Fund for the last three years ended
December 31.
<PAGE>74
1993 1992 1991
____ ____ ____
New Horizons Fund 0.93% 0.93% 0.92%
New Era Fund 0.80% 0.81% 0.85%
For its services to each 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. Each 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, each Fund pays a flat Individual Fund
Fee of 0.35% for the New Horizons Fund and 0.25% for the New Era
Fund, 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 0.70% and 0.69% of
net assets of the New Horizons and New Era Funds, respectively.
The following chart shows the net assets and the management fees,
paid by each Fund to T. Rowe Price, at December 31, 1993.
Net Assets Management Fee
__________ ______________
New Horizons Fund $1,627,722,442 $10,367,727
New Era Fund $ 752,531,718 $ 4,365,990
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.
<PAGE>75
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.
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.
<PAGE>76
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
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
<PAGE>77
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
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.
<PAGE>78
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.
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.
<PAGE>79
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.
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.
<PAGE>80
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 International 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
Robert Fleming, Inc. (a New York brokerage firm). Other
affiliates of Robert Fleming Holdings 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.
<PAGE>81
Other
Shown below are the approximate total brokerage
commissions, including the discounts received by securities
dealers in connection with underwritings, paid by the New
Horizons and New Era Funds for the last three years:
1993 1992 1991
____ ____ ____
New Horizons Fund $7,337,000 $4,810,000 $4,239,000
New Era Fund $1,758,000 $299,000 $451,000
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.
1993 1992 1991
____ ____ ____
New Horizons Fund 8% 13% 14%
New Era Fund 28% 95% 63%
The portfolio turnover rate for each Fund for each of the
last three years has been as follows:
1993 1992 1991
____ ____ ____
New Horizons Fund 49.4% 49.6% 32.5%
New Era Fund 24.7% 16.9% 9.0%
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.
<PAGE>82
GENERAL INFORMATION
As of December 31, 1993, there were 100,694,273 and
36,972,169 shares of the capital stock of the New Horizons and
New Era Funds, respectively, outstanding, each with a par value
of $1.00. 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 New Horizons and New Era Funds,
representing approximately ___.___% and _______%, respectively,
of the 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 98,287 and 52,276 shares of the New Horizons and New Era
Funds, respectively, representing approximately 0.10% and 0.14%,
respectively, of the outstanding stock.
As of December 31, 1993, the officers and directors of
the New Horizons 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.
<PAGE>83
As of December 31, 1993, the officers and directors of
the New Era 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.
Shareholders should refer to the Annual Report for a Fund's
performance record.
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
of directors. The Board of Directors of each 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 4, 1994.
<PAGE>84
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 New Horizons Fund, Inc. or T. Rowe
Price New Era Fund, Inc. which are set forth in the respective
Annual Reports for each Fund.
<PAGE>85
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>86
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
________
________
The accompanying notes are an integral part of the consolidated
balance sheet.
<PAGE>87
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.
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>88
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>89
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.
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>90
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.
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."
<PAGE>91
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
$.32 per share to the Company at the earlier of the sale of such
stock or termination of employment.
<PAGE>92
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.
<PAGE>93
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
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
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>94
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.
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>95
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.
<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 NEW HORIZONS FUND, INC.
MEETING: 8:00 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John H. Laporte and James S.
Riepe, 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#779562107/fund#042
(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 H. Laporte 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 G H I J K L
3A. Amend Articles of Incorporation to delete policy on pricing
securities. FOR / / AGAINST / / ABSTAIN / / 3A.
4. Ratify the selection of Coopers & Lybrand as independent
accountants. FOR / / AGAINST / / ABSTAIN / / 4.
5. I authorize the Proxies, in their discretion, to vote upon
such other business as may properly come before the meeting.
CUSIP#779562107/fund#042
(BACK)
