<PAGE>
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 ask shareholders to elect 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.
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>
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 each Fund: 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 each Fund:
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;
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:
L. To change from a fundamental to an operating policy the policy on control
of portfolio companies;
CUSIP#779562107/fund#042
CUSIP#779559103/fund#041
<PAGE>
FOR THE SHAREHOLDERS OF NEW ERA FUND:
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;
3. A. FOR THE SHAREHOLDERS OF EACH FUND: To amend each Fund's Articles of
Incorporation to delete the policy on pricing securities;
B. FOR THE SHAREHOLDERS OF NEW ERA FUND: To amend the Fund's Articles of
Incorporation to allow the involuntary redemption of small accounts;
4. FOR THE SHAREHOLDERS OF EACH FUND: 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>
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 vote only on matters which concern the Fund or Funds in
which they hold shares. Shareholders are entitled to one vote for each full
share, and a proportionate vote for each fractional share, of the Fund held as
of the record date. Under Maryland law, shares owned by two or more persons
(whether as joint tenants, co-fiduciaries, or otherwise) will be voted as
follows, unless a written instrument or court order providing to the contrary
has been filed with the Fund: (1) if only one votes, that vote will bind all;
(2) if more than one votes, the vote of the majority will bind all; and (3) if
more than one votes and the vote is evenly divided, the vote will be cast
proportionately.
In order to hold the meeting, a majority of each Fund's shares entitled to
be voted must have been received by proxy or be present at the meeting. In the
event that a quorum is present but sufficient votes in favor of one or more of
the Proposals are not received by the time scheduled for the meeting, the
persons named as proxies may propose one or more adjournments of the meeting
to permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of the shares present in person or by proxy
at the session of the meeting adjourned. The persons named as proxies will
vote in favor of such adjournment if they determine that such adjournment and
additional solicitation is reasonable and in the interests of each Fund's
shareholders. The shareholders of each Fund vote separately with respect to
each Proposal.
The individuals named as proxies (or their substitutes) in the enclosed
proxy card (or cards if you own shares of more than 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.
<PAGE>
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 BY EACH FUND
IS SUFFICIENT TO APPROVE PROPOSAL 1 FOR EACH FUND. A MAJORITY OF THE SHARES OF
EACH FUND 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 a proposed amendment to either of the Fund's Articles of
Incorporation or fundamental investment policies is not approved, the Articles
of Incorporation or policy will remain unchanged.
Each Fund will pay a portion of the costs of the meeting, including the
solicitation of proxies, allocated on the basis of the number of shareholder
accounts of each Fund. Persons holding shares as nominees will be reimbursed,
upon request, for their reasonable expenses in sending solicitation materials
to the principals of the accounts. In addition to the solicitation of proxies
by mail, directors, officers, and/or employees of each 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.
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 Ms. 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 Ms. 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.
<PAGE>
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.
Fund
Shares All Other Price
Beneficially Funds'
Owned, Directly Shares
Name, Address, or Beneficially
Date of Indirectly, as Owned
Birth of Nominee and Principal of Directly as of
Position with 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 New Era Fund:
Green Valley, AZ Stock, Science & 636
85614 Technology, Index Trust 177,032
3/3/24 (since inception),
New Horizons Fund: Balanced (since
Initial election inception), Mid-Cap
New Era Fund: Growth (since
Director since 1984 inception), OTC (since
inception), Dividend
Growth (since
inception), Blue Chip
Growth (since
inception),
International, and
Institutional
International (since
inception)
*George J. Collins President, Managing New Era Fund: 360,259
100 East Pratt StreetDirector, and Chief 6,718
Baltimore, MD 21202 Executive Officer, T.
7/31/40 Rowe Price Associates,
New Era Fund: Inc.; Director, Rowe
Director and member Price-Fleming
of Executive International, Inc., T.
Committee since 1986 Rowe Price Trust
Company, and T. Rowe
Price Retirement Plan
Services, Inc.;
Chairman of the Board
of the following T.
Rowe Price
Funds/Trusts: Capital
Appreciation, New
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>
Donald W. Dick, Jr. Principal, Overseas New Horizons 172,099
375 Park Avenue Partners, Inc., a Fund: --
New York, NY 10152 financial investment New Era Fund: --
1/27/43 firm; (formerly
New Horizons Fund: 6/65-3/89) Director and
Initial election Vice President-Consumer
New Era Fund: Products Division,
Initial election McCormick & Company,
Inc., international
food processors;
Director/Trustee,
Waverly Press, 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)
David K. Fagin Chairman, Chief New Horizons 19,239
One Norwest Center Executive Officer and Fund: 388
1700 Lincoln Street Director, Golden Star New Era Fund:
Suite 1950 Resources, Ltd.; 235
Denver, CO 80203 formerly (1986-7/91)
4/9/38 President, Chief
New Horizons Fund: Operating Officer and
Director since 1988 Director, Homestake
New Era Fund: Mining Company;
Director since 1988 Director/Trustee of the
following T. Rowe Price
Funds/Trusts: Equity
Income, Capital
Appreciation, Balanced
(since inception),
Mid-Cap Growth (since
inception), OTC (since
inception), Dividend
Growth (since
inception), and Blue
Chip Growth (since
inception)
*Carter O. Hoffman Managing Director, T. New Era Fund: 244,061
100 East Pratt StreetRowe Price Associates, 1,655
Baltimore, MD 21202 Inc.; Chairman of the
9/3/27 Board, T. Rowe Price
New Era Fund: Prime Reserve Fund,
Director and member Inc.; Vice President
of Executive and Director, T. Rowe
Committee since 1982 Price New Income Fund,
Inc.
Addison Lanier Financial management; New Horizons 26,523
441 Vine Street, President and Director, Fund: --
#2310 Thomas Emery's Sons, New Era Fund: --
Cincinnati, OH Inc. and Emery Group,
45202-2913 Inc.; Director/Trustee,
1/12/24 Scinet Development and
New Horizons Fund: Holdings, Inc. and the
Initial election following T. Rowe Price
New Era Fund: Funds/Trusts: New
Initial election America Growth, Equity
Income, Small-Cap
Value, 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>
*John H. Laporte Managing Director, T. 593,754
100 East Pratt StreetRowe Price Associates,
Baltimore, MD 21202 Inc.; Chairman of the
7/26/45 Board of the following
New Horizons Fund: T. Rowe Price Funds:
President and member Science & Technology,
of Executive Small-Cap Value and OTC
Committee since 1988 (since inception);
President and Trustee,
T. Rowe Price New
America Growth Fund
New Horizons
Fund: 28,823
John K. Major Chairman of the Board New Horizons 65,636
126 E. 26 Place and President, KCMA Fund: 3,577
Tulsa, OK 74114-2422 Incorporated, Tulsa, New Era Fund:
8/3/24 Oklahoma; 768
New Horizons Fund: Director/Trustee of the
Director since 1970 following T. Rowe Price
New Era Fund: Funds/Trusts: Growth
Director since 1988 Stock, Growth & Income,
Capital Appreciation,
Science & Technology,
Balanced (since
inception), Mid-Cap
Growth (since
inception), OTC (since
inception), Dividend
Growth (since
inception), and Blue
Chip Growth (since
inception)
Hanne M. Merriman Retail business New Horizons 2,029
655 15th Street consultant; formerly, Fund: --
Suite 300 President and Chief New Era Fund: --
Washington, D.C. Operating Officer
20005 (1991-92), Nan Duskin,
11/16/41 Inc., a women's
New Horizons Fund: specialty store,
Initial election Director (1984-90) and
New Era Fund: Chairman (1989-90)
Initial election Federal Reserve Bank of
Richmond, and President
and Chief Executive
Officer (1988-89),
Honeybee, Inc., a
division of Spiegel,
Inc.; Director,
AnnTaylor Stores
Corporation, Central
Illinois Public Service
Company, CIPSCO
Incorporated, The Rouse
Company, State Farm
Mutual Automobile
Insurance Company and
USAir Group, Inc.;
Member, National
Women's Forum; Trustee,
American-Scandinavian
Foundation
*James S. Riepe Managing Director, T. New Horizons 567,147
100 East Pratt Street Rowe Price Associates, Fund: 15,311
Baltimore, MD 21202 Inc.; President and New Era Fund:
6/25/43 Director, T. Rowe Price 1,202
New Horizons Fund: Investment Services,
Vice President and Inc.; Chairman of the
member of Executive Board, T. Rowe Price
Committee since 1983 Services, Inc., T. Rowe
New Era Fund: Price Trust Company, T.
Initial Rowe Price Retirement
election--Vice Plan Services, Inc. and
President since 1982 the following T. Rowe
Price Funds: Growth &
Income, Spectrum (since
inception), Balanced
(since inception), and
Mid-Cap Growth (since
inception); Vice
President of the
following T. Rowe Price
Funds/Trusts: New Era,
New America Growth,
Prime Reserve,
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.
<PAGE>
*George A. Roche Managing Director and New Era Fund: 2,229,373
100 East Pratt Street Chief Financial 25,403
Baltimore, MD 21202 Officer, T. Rowe Price
7/6/41 Associates, Inc.; Vice
New Era Fund: President and Director,
President and member Rowe Price-Fleming
of Executive International, Inc.
Committee since 1979
*M. David Testa Managing Director, T. New Horizons 452,024
100 East Pratt Street Rowe Price Associates, Fund: 10,194
Baltimore, MD 21202 Inc.; Chairman of the
4/22/44 Board, Rowe
New Horizons Fund: Price-Fleming
Initial election International, Inc. and
the following T. Rowe
Price Funds: Growth
Stock, International,
and Institutional
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 9,520
1231 State Street Capital Corporation, a Fund: 837
Suite 210 private investment New Era Fund:
Santa Barbara, CA company; 447
93190-0409 Director/Trustee of the
8/2/33 following T. Rowe Price
New Horizons Fund: Funds/Trusts: Equity
Director since 1983 Income, Capital
New Era Fund: Appreciation, Science &
Director since 1979 Technology, Small-Cap
Value, Balanced (since
inception), Mid-Cap
Growth (since
inception), OTC (since
inception), Dividend
Growth (since
inception), and Blue
Chip Growth (since
inception)
Paul M. Wythes Founding General New Horizons 47,374
755 Page Mill Road Partner, Sutter Hill Fund: 1,934
Suite A200 Ventures, a venture New Era Fund: --
Palo Alto, CA 94304 capital limited
6/23/33 partnership providing
New Horizons Fund: equity capital to young
Director since 1981 high technology
New Era Fund: companies throughout
Initial election the United States;
Director/Trustee,
Teltone Corporation,
Interventional
Technologies, Inc.,
Stuart Medical, Inc.
and the 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)
<PAGE>
* 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 7,517 shares of the New Horizons Fund and
Messrs. Collins, Hoffman, Riepe and Roche in 6,480 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 20,966 and 27,558 shares,
respectively, owned by the T. Rowe Price Associates, Inc. Profit Sharing
Trust.
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 $35,349, including expenses. For the same period,
Messrs. Bailey, Fagin, Major and Vos, received from the New Era Fund
directors' fees aggregating $23,526, 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 current independent directors of the New Horizons Fund and
Messrs. Bailey, Fagin, Major and Vos are the current 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 accounting questions relating to particular
areas of the Price Funds' operations or the operations of parties dealing with
the Price Funds, as circumstances indicate.
<PAGE>
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 Mr. Major for the New Horizons Fund and
Messrs. Hoffman and Major for the New Era Fund, the directors of each Fund
standing for reelection attended 75% or more of the aggregate of (i) the total
number of meetings of the Board of Directors (held during the period for which
he was a director) and (ii) the total number of meetings held by all
committees of the Board on which he served.
2. APPROVAL OR DISAPPROVAL OF CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT
POLICIES
The Investment Company Act of 1940 (the "1940 Act") requires investment
companies such as the Funds to adopt certain specific investment policies that
can be changed only by shareholder vote. An investment company may also elect
to designate other policies that may be changed only by shareholder vote. Both
types of policies are often referred to as "fundamental policies." Certain of
the Funds' fundamental policies have been adopted in the past to reflect
regulatory, business or industry conditions that are no longer in effect.
Accordingly, each Fund's Board of Directors has approved, and has authorized
the submission to each Fund's shareholders for their approval, the amendment
and/or reclassification of certain of the fundamental policies applicable to
each Fund.
The proposed amendments would (i) conform the fundamental policies of each
Fund to ones which are expected to become standard for all T. Rowe Price
Funds, (ii) simplify and modernize the limitations that are required to be
fundamental by the 1940 Act and (iii) eliminate as fundamental any limitations
that are not required to be fundamental by that Act. The Board believes that
standardized policies will assist the Funds and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the T. Rowe Price
Funds are subject. 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. Finally, 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.
<PAGE>
EACH FUND
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 Fundamental Investment Policies and Articles of Incorporation
of the Fund 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) 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 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 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:
EACH 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. Interest paid on any such borrowings will reduce net
investment income. The Fund may enter into futures contracts as set forth
in [its fundamental policy on futures];"
As amended, the Fund's fundamental policy on borrowing would be as
follows:
"[As a matter of fundamental policy, the Fund may not:] Borrow money
except that the Fund may (i) borrow for non-leveraging, temporary or
emergency purposes and (ii) engage in reverse repurchase agreements and
make other investments or engage in other transactions, which may involve
a borrowing, in a manner consistent with the Fund's investment objective
and program, provided that the combination of (i) and (ii) shall not
exceed 331\Z03% 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;"
<PAGE>
The provisions of the Fund's Articles of Incorporation in the area of
borrowing are as follows:
EACH 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:
(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 331\Z\Z3% (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 in addition to banks and other mutual funds advised by T. Rowe Price
or Rowe Price-Fleming International, Inc. ("Price Funds"); and (3) enter into
reverse repurchase agreements and other investments consistent with the Fund's
investment objective and program.
33 1/3% LIMITATION
The increase in the amount of money which the Fund could borrow is
primarily 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
Securities and Exchange Commission ("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.
<PAGE>
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 (and an SEC exemptive order were
granted), 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.
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 pages 28--32). 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>
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. In a repurchase agreement, the Fund would
purchase securities from a bank or broker-dealer (Counterparty) with the
agreement that the Counterparty would repurchase the securities at a later
date. Reverse repurchase agreements are ordinary repurchase agreements in
which a fund is a seller of, rather than the purchaser of, 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. As noted above, the Fund will not use
its increased flexibility to borrow to engage in transactions which could
result in leveraging the Fund. 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 outstanding
shares. The voting requirements for approval of the proposed amendment of the
Fund's fundamental policy are set forth elsewhere in this proxy statement.
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 contracts. 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 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 Funds are subject. The
Board has directed that such amendments be submitted to shareholders for
approval or disapproval.
<PAGE>
The Fund's current fundamental policies in the area of investing in
commodities and futures are as follows:
EACH FUND
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];"
EACH FUND
FUTURES CONTRACTS
"[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 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 options would exceed 5% of the Fund's
net asset value (the "New Operating Policy")."
<PAGE>
The provisions of the Fund's Articles of Incorporation in the area of
investing in commodities and futures are as follows:
EACH 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:
(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
In response to a prior position of the SEC, the Fund has limited trading in
futures to having no more than 30% of its assets represented by futures
contracts. The SEC no longer takes this position. 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 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.
<PAGE>
NEW ERA FUND
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 (non-financial) 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 outstanding
shares. The voting requirements for approval of the proposed amendment of the
Fund's fundamental policy are set forth elsewhere in this proxy statement.
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>
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:
(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.
<PAGE>
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 to: (1) investing no
more than 10% of its total assets in the securities of other investment
companies; (2) owning no more than 3% of the total outstanding voting stock of
any other investment company; and (3) 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.
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 outstanding
shares. 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
<PAGE>
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
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:
EACH 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];"
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 provision in the Fund's Articles of Incorporation in the area of
making purchases on margin are as follows:
EACH 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:
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.
<PAGE>
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 outstanding
shares. The voting requirements for approval of the proposed amendment to the
Fund's fundamental policy are set forth elsewhere in this proxy statement.
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
Policy 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 its assets to one which is expected to become standard for all T.
Rowe Price 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 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:
<PAGE>
EACH 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;"
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 331\Z\Z3% 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:
EACH 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:
(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.
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.
<PAGE>
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 outstanding
shares. 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 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 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. 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:
EACH FUND
"[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 in 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:
EACH 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:
(g) Purchase or sell real estate. . . ."
<PAGE>
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 outstanding
shares. The voting requirements for approval of the proposed amendment of the
Fund's fundamental policy are set forth elsewhere in this proxy statement.
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
Investment 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:
EACH FUND
"[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:
EACH 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:
(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>
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 outstanding
shares. 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:
EACH FUND
"[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:
<PAGE>
EACH 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:
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
(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 outstanding
shares. 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
Investment 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.
The Fund's current fundamental policy in the area of ownership of
portfolio securities is as follows:
<PAGE>
EACH FUND
"[As a matter of fundamental policy, the Fund may not:] Purchase or retain
the securities of any issuer if those officers and directors of the Fund,
or of its investment adviser, who each owns beneficially more than .5% of
the outstanding securities of such issuer, together own beneficially more
than 5% of such securities;"
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 Investment Policy on issuing senior securities which would allow
the Fund to issue senior securities to the extent permitted under the 1940
Act. 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:
EACH FUND
"[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;"
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.
<PAGE>
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 "T. Rowe 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
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 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, (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 T. Rowe 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.
<PAGE>
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 T. Rowe
Price 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 12. 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 T. Rowe 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
T. Rowe Price Funds. The Fund has not yet applied for such an order and
there is no guarantee any such order would be granted, even if applied
for.
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., a corporate loan held by a bank for example which might not be
considered a debt security. The amended policy would allow the purchase of
this kind of debt. Because the purchase of straight debt could be viewed
as a loan by the Fund to the issuer of the debt, the Board of Directors
has determined to clarify this matter by including the purchase of debt as
an exception to the Fund's general prohibition against making loans. The
purchase of debt might be subject to greater risks of illiquidity 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 T. Rowe 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 this restriction, 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.
Because such transactions by the Fund could be viewed as a loan by the
Fund to the maker of the note, the Board of Directors has determined to
clarify this matter by including these transactions as an exception to the
Fund's general prohibition against making loans.
<PAGE>
The Board of Directors recommends that shareholders vote FOR the
proposal.
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 "T. Rowe 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 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 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;"
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 T. Rowe 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 T. Rowe Price 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 12. 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>
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 T. Rowe
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 T. Rowe Price Funds.
The Fund has not yet applied for such an order and there is no guarantee any
such order would be granted, even if applied for.
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., a corporate loan held by a bank for example which might not be
considered a debt security. The amended policy would allow the purchase of
this kind of debt. Because the purchase of straight debt could be viewed as a
loan by the Fund to the issuer of the debt, the Board of Directors has
determined to clarify this matter by including the purchase of debt as an
exception to the Fund's general prohibition against making loans. The purchase
of debt might be subject to greater risks of illiquidity 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 T. Rowe 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.
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.
<PAGE>
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.
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 this restriction, 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. Because such
transactions by the Fund could be viewed as a loan by the Fund to the maker of
the note, the Board of Directors has determined to clarify this matter by
including these transactions as an exception to the Fund's general prohibition
against making loans.
The Board of Directors recommends that shareholders vote FOR the proposal.
NEW HORIZONS FUND
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.
The Fund's current fundamental policy in the area of investing for control
of portfolio companies is as follows:
"[As a matter of fundamental policy, the Fund may not:] Invest in
companies for the purpose of exercising management or control;"
<PAGE>
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.
PROPOSALS M--R PERTAIN TO NEW ERA FUND
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 SEC 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
"affiliated persons" of the Fund, as such term is defined in the 1940 Act,
unless certain conditions are met. The provisions of these sections are
intended to protect the Fund against abuse or overreaching by, among others,
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.
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.
<PAGE>
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 the 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.
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 outstanding
shares. 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 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.
<PAGE>
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:
"[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 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.
<PAGE>
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 outstanding
shares. 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
Policies 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. It should be noted, however, that
the Fund has no current intention of investing in any portfolio company for
the purpose of exercising management or control. 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:
"[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);"
<PAGE>
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.
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 outstanding
shares. 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,
except the T. Rowe Price money market 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>
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 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.
<PAGE>
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. In accordance with
the Fund's policy prohibiting the Fund from acting as an underwriter, the Fund
will not purchase restricted securities for the purpose of subsequent
distribution in a manner which would cause the Fund to be deemed an
underwriter.
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
up to 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.
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 Investment
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 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 Funds are subject.
The Board has directed that such change be submitted to shareholders for
approval or disapproval.
<PAGE>
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."
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>
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 outstanding
shares. The voting requirements for approval of the proposed elimination of
the Fund's fundamental policy are set forth elsewhere in this proxy statement.
EACH FUND
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 Fund'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:
(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.
<PAGE>
(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
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 provide for such 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, 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 and
the shareholder would be given the opportunity to increase the account balance
to the required minimum.
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:
<PAGE>
"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.
(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.
EACH FUND
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 fiscal 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 fiscal 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 firms 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>
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 Mr. Collins, who together
with Messrs. Hoffman, Riepe, Roche, Thomas H. Broadus, Jr., James E.
Halbkat, Jr., Henry H. Hopkins, 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:
Position Position with
Officer with Fund Manager
Preston G. Athey\SD\ Vice
President Vice President
Brian W.H. Berghuis\SD\ Vice
President Vice President
Vice
Stephen W. Boesel* President Vice President
Vice
Brent W. Clum\SD\ President Vice President
Gregory V. Donovan\SD\ Vice
President Vice President
Vice
Hugh M. Evans, III* President Employee
Vice Assistant Vice
Marcy L. Fisher\SD\ President President
Vice
Jill L. Hauser\SD\ President Vice President
Vice
Henry H. Hopkins President Managing Director
Vice
Richard P. Howard* President Vice President
Vice
Denise Jevne\SD\ President Vice President
James A.C. Kennedy, Vice
III* President Managing Director
Joseph Klein, III\SD\ Vice
President Vice President
Charles A. Morris\SD\ Vice
President Vice President
Vice
Charles M. Ober* President Vice President
Vice
David L. Rea* President Vice President
Brian D. Stansky\SD\ Vice
President Vice President
Vice
Alan R. Stuart* President Vice President
Vice
John F. Wakeman\SD\ President Vice President
Vice
David J. Wallack* President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
Assistant
Vice
Roger L Fiery President Employee
Assistant Assistant Vice
Francies W. Hawks\SD\ Vice President
President
Assistant
Vice
Edward T. Schneider President Employee
Assistant
Ingrid I. Vice
Vordemberge President Employee
\SD\Mmes. Fisher, Hauser and Jevne and Messrs. Athey, Berghuis, Clum,
Donovan, Klein, Morris, Stansky and Wakeman are Vice Presidents of the New
Horizons Fund only. Ms. Hawks is an Assistant Vice President of the New
Horizons Fund only.
*Messrs. Boesel, Evans, Howard, Kennedy, Ober, Rea, Stuart and Wallack are
Vice Presidents of the New Era Fund only.
<PAGE>
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
Funds, is a Vice President and Director of both Investment Services and
Price Services and a Vice President of Retirement Services. Edward T.
Schneider, an Assistant Vice President of the Funds, is a Vice President
of Price Services. Certain officers of the Funds own shares of the common
stock of T. Rowe Price, its only class of securities.
The following information pertains to transactions involving common
stock of T. Rowe Price, par value $.20 per share ("Stock"), during the
period January 1, 1993 through December 31, 1993. There were no
transactions during the period by any director or officer of the Funds, 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
Funds.
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>
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.
1993 1992 1991
------------ ------------ ------------
New Horizons Fund 0.93% 0.93% 0.92%
New Era Fund 0.80% 0.81% 0.85%
<PAGE>
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 0.60% 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.
Management
Net Assets Fee
------------ ------------
$1,627,722,0
New Horizons Fund 00 $10,368,000
New Era Fund $752,532,000 $4,366,000
PORTFOLIO TRANSACTIONS
In the following discussion "the Fund" is intended to refer to each
Fund.
INVESTMENT OR BROKERAGE DISCRETION
Decisions with respect to the purchase and sale of portfolio
securities on behalf of the Fund are made by T. Rowe Price. T. Rowe Price
is also responsible for implementing these decisions, including the
negotiation of commissions and the allocation of portfolio brokerage and
principal business.
HOW BROKERS AND DEALERS ARE SELECTED
EQUITY SECURITIES
In purchasing and selling the Fund's portfolio securities, it is T.
Rowe Price's policy to obtain quality execution at the most favorable
prices through responsible brokers and dealers and, in the case of agency
transactions, at competitive commission rates. However, under certain
conditions, the Fund may pay higher brokerage commissions in return for
brokerage and research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among market-makers,
T. Rowe Price generally seeks to select those it believes to be actively
and effectively trading the security being purchased or sold. In selecting
broker-dealers to execute the Fund's portfolio transactions, consideration
is given to such factors as the price of the security, the rate of the
commission, the size and difficulty of the order, the reliability,
integrity, financial condition, general execution and operational
capabilities of competing brokers and dealers, and brokerage and research
services provided by them. It is not the policy of T. Rowe Price to seek
the lowest available commission rate where it is believed that a broker or
dealer charging a higher commission rate would offer greater reliability
or provide better price or execution.
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.
<PAGE>
With respect to equity and fixed income securities, T. Rowe Price may
effect principal transactions on behalf of the Fund with a broker or
dealer who furnishes brokerage and/or research services, designate any
such broker or dealer to receive selling concessions, discounts or other
allowances, or otherwise deal with any such broker or dealer in connection
with the acquisition of securities in underwritings.
HOW EVALUATIONS ARE MADE OF THE OVERALL REASONABLENESS OF BROKERAGE
COMMISSIONS PAID
On a continuing basis, T. Rowe Price seeks to determine what levels of
commission rates are reasonable in the marketplace for transactions
executed on behalf of the Fund. In evaluating the reasonableness of
commission rates, T. Rowe Price considers: (a) historical commission
rates, both before and since rates have been fully negotiable; (b) rates
which other institutional investors are paying, based on available public
information; (c) rates quoted by brokers and dealers; (d) the size of a
particular transaction, in terms of the number of shares, dollar amount,
and number of clients involved; (e) the complexity of a particular
transaction in terms of both execution and settlement; (f) the level and
type of business done with a particular firm over a period of time; and
(g) the extent to which the broker or dealer has capital at risk in the
transaction.
DESCRIPTION OF RESEARCH SERVICES RECEIVED FROM BROKERS AND DEALERS
T. Rowe Price receives a wide range of research services from brokers and
dealers. These services include information on the economy, industries,
groups of securities, individual companies, statistical information,
accounting and tax law interpretations, political developments, legal
developments affecting portfolio securities, technical market action,
pricing and appraisal services, credit analysis, risk measurement
analysis, performance analysis and analysis of corporate responsibility
issues. These services provide both domestic and international
perspective. Research services are received primarily in the form of
written reports, computer generated services, telephone contacts and
personal meetings with security analysts. In addition, such services may
be provided in the form of meetings arranged with corporate and industry
spokespersons, economists, academicians and government representatives. In
some cases, research services are generated by third parties but are
provided to T. Rowe Price by or through broker-dealers.
Research services received from brokers and dealers are supplemental
to T. Rowe Price's own research effort and, when utilized, are subject to
internal analysis before being incorporated by T. Rowe Price into its
investment process. As a practical matter, it would not be possible for T.
Rowe Price's Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays cash for
certain research services received from external sources. T. Rowe Price
also allocates brokerage for research services which are available for
cash. While receipt of research services from brokerage firms has not
reduced T. Rowe Price's normal research activities, the expenses of T.
Rowe Price could be materially increased if it attempted to generate such
additional information through its own staff. To the extent that research
services of value are provided by brokers or dealers, T. Rowe Price may be
relieved of expenses which it might otherwise bear.
<PAGE>
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.
INTERNAL ALLOCATION PROCEDURES
T. Rowe Price has a policy of not precommitting a specific amount of
business to any broker or dealer over any specific time period.
Historically, the majority of brokerage placement has been determined by
the needs of a specific transaction such as market-making, availability of
a buyer or seller of a particular security, or specialized execution
skills. However, T. Rowe Price does have an internal brokerage allocation
procedure for that portion of its discretionary client brokerage business
where special needs do not exist, or where the business may be allocated
among several brokers which are able to meet the needs of the transaction.
Each year, T. Rowe Price assesses the contribution of the brokerage
and research services provided by brokers, and attempts to allocate a
portion of its brokerage business in response to these assessments.
Research analysts, counselors, various investment committees, and the
Trading Department each seek to evaluate the brokerage and research
services they receive from brokers and make judgments as to the level of
business which would recognize such services. In addition, brokers
sometimes suggest a level of business they would like to receive in return
for the various brokerage and research services they provide. Actual
brokerage received by any firm may be less than the suggested allocations
but can, and often does, exceed the suggestions, because the total
brokerage business is allocated on the basis of all the considerations
described above. In no case is a broker excluded from receiving business
from T. Rowe Price because it has not been identified as providing
research services.
<PAGE>
MISCELLANEOUS
T. Rowe Price's brokerage allocation policy is consistently applied to
all its fully discretionary accounts, which represent a substantial
majority of all assets under management. Research services furnished by
brokers through which T. Rowe Price effects securities transactions may be
used in servicing all accounts (including non-Fund accounts) managed by T.
Rowe Price. Conversely, research services received from brokers which
execute transactions for the Fund are not necessarily used by T. Rowe
Price exclusively in connection with the management of the Fund.
From time to time, orders for clients may be placed through a
computerized transaction network.
The Fund does not allocate business to any broker-dealer on the basis
of its sales of the Fund's shares. However, this does not mean that
broker-dealers who purchase Fund shares for their clients will not receive
business from the Fund.
Some of T. Rowe Price's other clients have investment objectives and
programs similar to those of the Fund. T. Rowe Price may occasionally make
recommendations to other clients which result in their purchasing or
selling securities simultaneously with the Fund. As a result, the demand
for securities being purchased or the supply of securities being sold may
increase, and this could have an adverse effect on the price of those
securities. It is T. Rowe Price's policy not to favor one client over
another in making recommendations or in placing orders. T. Rowe Price
frequently follows the practice of grouping orders of various clients for
execution which generally results in lower commission rates being
attained. In certain cases, where the aggregate order is executed in a
series of transactions at various prices on a given day, each
participating client's proportionate share of such order reflects the
average price paid or received with respect to the total order. T. Rowe
Price has established a general investment policy that it will ordinarily
not make additional purchases of a common stock of a company for its
clients (including the Price Funds) if, as a result of such purchases, 10%
or more of the outstanding common stock of such company would be held by
its clients in the aggregate.
To the extent possible, T. Rowe Price intends to recapture
solicitation fees paid in connection with tender offers through T. Rowe
Price Investment Services, Inc., the Fund's distributor. 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.
TRANSACTIONS WITH RELATED BROKERS AND DEALERS
As provided in the Investment Management Agreement between the Fund
and T. Rowe Price, T. Rowe Price is responsible not only for making
decisions with respect to the purchase and sale of the Fund's portfolio
securities, but also for implementing these decisions, including the
negotiation of commissions and the allocation of portfolio brokerage and
principal business. It is expected that T. Rowe Price may place orders for
the Fund's portfolio transactions with broker-dealers through the same
trading desk T. Rowe Price uses for portfolio transactions in domestic
securities. The trading desk accesses brokers and dealers in various
markets in which the Fund's foreign securities are located. These brokers
and dealers may include certain affiliates of Robert Fleming Holdings
Limited ("Robert Fleming Holdings") and Jardine Fleming Group Limited
("JFG"), persons indirectly related to T. Rowe Price. Robert Fleming
Holdings, through Copthall Overseas Limited, a wholly-owned subsidiary,
owns 25% of the common stock of Rowe Price-Fleming International, Inc.
("RPFI"), an investment adviser registered under the Investment Advisers
Act of 1940. Fifty percent of the common stock of RPFI is owned by TRP
Finance, Inc., a wholly-owned subsidiary of T. Rowe Price, and the
remaining 25% is owned by Jardine Fleming Holdings Limited, a subsidiary
of JFG. JFG is 50% owned by Robert Fleming Holdings and 50% owned by
Jardine Matheson Holdings Limited. Orders for the Fund's portfolio
transactions placed with affiliates of Robert Fleming Holdings and JFG
will result in commissions being received by such affiliates.
<PAGE>
The Board of Directors of the Fund has authorized T. Rowe Price to
utilize certain affiliates of Robert Fleming Holdings 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 1940 Act, 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.
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 $1,766,000 $ 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%
<PAGE>
OTHER BUSINESS
The management of each Fund knows of no other business which may come
before the meeting. However, if any additional matters are properly
presented at the meeting, it is intended that the persons named in the
enclosed proxy, or their substitutes, will vote such proxy in accordance
with their judgment on such matters.
GENERAL INFORMATION
As of December 31, 1993, there were 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 the outstanding shares of
the New Horizons and New Era Funds, approximately 23,696,863 and
9,547,101, respectively, representing 23.5% and 25.8%, respectively, 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 2,159,242 and 20,393 shares of
the outstanding stock of the New Horizons and New Era Funds, respectively,
representing approximately 2.1% and 0.06%, respectively, 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 outstanding stock of
the New Horizons and New Era Funds, respectively, representing
approximately 0.10% and 0.14%, respectively.
As of December 31, 1993, the officers and directors of the New
Horizons and New Era Funds, as a group, beneficially owned, directly or
indirectly, 164,619 and 44,947 shares, respectively, representing
approximately 0.16% and 0.12%, respectively, of each Fund's outstanding
stock. The ownership of the officers and directors reflects their
proportionate interests, if any, in 7,517 and 6,480 shares of the New
Horizons and New Era Funds, respectively, which are owned by a
wholly-owned subsidiary of the Funds' investment manager, T. Rowe Price,
and their interests in 113,843 and 31,928 shares, respectively, 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
meetings.
<PAGE>
ANNUAL MEETINGS
Under Maryland General Corporation Law, any corporation registered
under the 1940 Act is not required to hold an annual meeting in any year
in which the 1940 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 1940 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.
FINANCIAL STATEMENT OF INVESTMENT MANAGER
The audited consolidated balance sheet of T. Rowe Price which follows
is required by the 1940 Act, 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>
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>
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
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>
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>
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) includes:
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>
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."
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.
<PAGE>
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.
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.
Unexer- Options Unexer- Options
cixed Options Granted cised Exercisable
Year Options at Exer- (Can- Options at at
December cised celed) December December
of 31, During During 31, 31, Exercise
Grant 1992 1993 1993 1993 1993 Price
- -------------------------------------------------------------------------
1983-4 53,000 (30,600) -- 22,400 22,400 $.67 & $.75
$5.38 &
1987 309,410 (68,064) -- 241,346 241,346 $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
$7.19 &
1990 681,500 (83,387) (11,800) 586,313 141,313 $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>
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.
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.
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>
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>
REPORT OF INDEPENDENT ACCOUNTANTS
36
PAGE 37
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>
T. Rowe Price 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 ERA FUND, INC. MEETING: 9:30 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George J. Collins and George A. Roche, 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 2, 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#779559103/fund#041
<PAGE>
T. Rowe Price 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 directors FOR all nominees WITHHOLD AUTHORITY 1.
listed below (except to vote for all nominees
as marked to the contrary) listed below
(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 George J. Collins Donald W. Dick, Jr. David K. Fagin Carter
O. Hoffman
Addison Lanier John K. Major Hanne M. Merriman James S. Riepe George A.
Roche Hubert D. Vos Paul M. Wythes
2. Approve changes to the Fund's fundamental FOR each policy ABSTAIN 2.
policies.
LISTED BELOW (except
as marked to the contrary)
If you do NOT wish to approve a policy change, please check the appropriate
box below:
(A) Borrowing (F) Real Estate (J) Senior (O) Single
Securities Issuer
(B) Commodities (G) Short Sales (K) Lending (P) Voting
& Futures Securities
(C) Investment (H) Underwriting (M) Portfolio (Q) Illiquid
Companies Securities Transactions Securities
(D) Purchasing (I) Ownership of (N) Joint (R) Unseasoned
on Margin Securities Transactions Issuers
(E) Pledging
Assets
3. Amend Articles of Incorporation to:
A. delete policy on FOR AGAINST ABSTAIN 3A.
pricing securities
B. allow involuntary FOR AGAINST ABSTAIN 3B.
redemption of small
accounts.
4. Ratify the FOR AGAINST ABSTAIN 4.
selection of Price
Waterhouse as
independent
accountants.
5. I authorize the Proxies, in their discretion, to vote upon such other
business as may properly come before the meeting.
CUSIP#779559103/fund#041
<PAGE>
T. Rowe Price 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 2, 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)
-------------------------------------------
----------------------------------------------------------
<PAGE>
T. Rowe Price 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 directors FOR all nominees WITHHOLD AUTHORITY 1.
listed below (except to vote for all nominees
as marked to the contrary) listed below
(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 FOR EACH POLICY ABSTAIN 2.
policies. LISTED BELOW
(except as marked
to the contrary
If you do NOT wish to approve a policy change, please check the appropriate
box below:
(A) Borrowing (D) Purchasing (G) Short Sales (J) Senior
on Margin Securities
(B) Commodities (E) Pledging (H) Underwriting (K) Lendin
& Futures Assets Securities
(C) Investment (F) Real Estate (I) Ownership of (L) Contro
Companies Securities
3A. Amend Articles ofFOR AGAINST ABSTAIN 3A.
Incorporation to
delete policy on
pricing securities.
4. Ratify the FOR AGAINST ABSTAIN 4.
selection of Coopers
& Lybrand as
independent
accountants.
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
