<PAGE>
Annual Report
SMALL-CAP
STOCK FUND
-----------------
DECEMBER 31, 1997
-----------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
------------------------------------------------------------------------------
Small-Cap Stock Fund
. The fund's excellent 15.63% six-month and 28.81% 12-month results
significantly outpaced its major benchmarks.
. Large-cap stocks continued to outperform smaller stocks in 1997, particularly
in the wake of a Southeast Asian currency crisis.
. The fund benefited from its investments in financials, consumer non-durables,
and utilities, as well as from a number of major corporate mergers.
. We bought several well-managed small-cap firms in the last six months,
including A.O. Smith and Sola.
. Small-company earnings and their stock valuations now compare favorably with
large companies'-- positive trends we think will help lead a small-cap revival
in 1998.
<PAGE>
FELLOW SHAREHOLDERS
For the year ended December 31, 1997, your fund posted excellent gains and
significantly outpaced its major benchmarks. Strong stock selection and a focus
on reasonable valuation also made this fund competitive with the large-cap
Standard & Poor's 500 Stock Index, especially during the past six months, even
though large-cap stocks were very popular with investors most of the year.
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
- --------------------------------------------
Small-Cap Stock Fund 15.63% 28.81%
............................................
Russell 2000 Index 11.04 22.36
............................................
Lipper Small Cap Fund Index 8.50 15.05
............................................
S&P 500 10.58 33.36
............................................
Your fund's 28.81% return for the year bested the unmanaged Russell
2000 Index of small stocks by more than six percentage points and
nearly doubled the return of the Lipper Small Cap Fund Index. The
vast majority of this success came during the last six months.
Although a spring and summer small-cap revival sputtered out in the
fourth quarter, the fund still made solid progress, especially in
October and November when a Southeast Asian currency crisis led
investors to favor more-stable blue chip issues. The fund's durable
blend of growth- and value-oriented stocks fared well through a
sharp small-cap correction.
For the second year in a row, small-cap value funds significantly
outperformed portfolios of small growth stocks. Because our core
philosophy includes both value stocks and growth stocks selling for
reasonable prices, your fund did especially well during the very
volatile fourth quarter, when poor results from high-flying
technology firms sharply depressed returns for small growth stocks
in general.
As we move into 1998 we remain hopeful that a rising dollar, slower
economic growth overseas, and attractive relative earnings growth
will help small-caps to resume leadership. More on this in our
Outlook section.
1
<PAGE>
YEAR-END DISTRIBUTIONS
Your fund's Directors declared a year-end dividend of $0.04 per
share, a short-term capital gain distribution of $0.16 per share,
and a long-term capital gain distribution of $0.85 per share. These
distributions were paid on December 30 to shareholders of record on
December 26. In early January we mailed your check or statement
reflecting these distributions, and Form 1099-DIV, reporting them
for tax purposes, was sent late in the month.
INVESTMENT REVIEW
For the second year in a row, the financial sector was the Russell
2000's best performer, returning in excess of 46%. Strong returns
also came from the consumer nondurables sector -- up 38% -- and
utilities, which rose 34%. Fortunately, your portfolio entered 1997
with an overweighted position in financials, compared with the
benchmark. As the year progressed and our holdings enjoyed excellent
returns, we began to lose our enthusiasm and reduced our weighting
accordingly. In particular, we trimmed our holdings in insurance
after a great year, as the shares we held no longer represented
attractive values.
The fund was also well represented in the consumer nondurables area
and benefited accordingly. While we had increased the weighting in
utility stocks during the first half -- most notably by adding
telephone and cellular shares -- in general the fund remained
underweighted.
Comparatively weak performance for the year was concentrated in two
traditional bastions of emerging growth investing: health care and
technology, which rose 9.8% and 1.0%, respectively. During 1997, our
portfolio remained underweighted in these segments. However, we are
now seeking investment opportunities in both areas, especially
technology, where poor fourth quarter performance has created some
interesting values.
The top three performers in the fund were Cowles Media, Aliant
Communications, and Carson Pirie Scott. Combined, these stocks added
over $15 million in value to the portfolio in the second half alone.
Cowles Media and Carson Pirie Scott were each the subject of tender
offers this fall. During September, the Cowles family trust
announced its intention to auction Cowles Media -- whose principal
asset is the Minneapolis Star Tribune -- to maximize shareholder
value. In November, the firm announced that an agreement had been
reached
2
<PAGE>
to sell the firm to McClatchy Newspapers for an eye-opening $1.4
billion, a very happy ending for our long-held position in Cowles
shares. Carson Pirie Scott received an attractive offer by Proffits
Inc., another mid-size department store chain, netting the fund over
$3.5 million during the half.
OUR NEWLY PURCHASED POSITION IN ALIANT COMMUNICATIONS... WAS THE PORTFOLIO'S TOP
MONEYMAKER FOR ALL OF 1997.
Instant gratification is rare for utility investors. However, our
newly purchased position in Aliant Communications -- highlighted in
last June's semiannual report -- was the portfolio's second-best
contributor for the six-month period and the portfolio's top
moneymaker for all of 1997. When investors shifted to utility stocks
this fall, seeking stability in the midst of October's volatile
markets, Aliant's modest valuation proved highly attractive. These
shares added over $5.6 million to the fund's return in the second
half.
Mercifully, we were blessed that we had few major losers in 1997.
Only two stocks detracted as much as $2 million in value during the
second half. Southern Electronics shares dropped 38% as investors
feared (correctly) that the Asian currency crisis might spread to
Latin America, where Southern pulls over 40% of its revenues. To
date the company has not been affected by the crisis, though we
continue to monitor the situation closely. The fund's second biggest
loser was Zonagen, which fell 43%. Investors worried that its
principal drug, Vasomax, might not be as effective as thought.
However, as Schering Plough's recent major investment in the drug
might suggest, we still think Vasomax can be a significant drug for
male erectile dysfunction. Finally, we lost just under $2 million in
value on Cambior, a metals mining concern. Cambior declined, as did
most gold shares, when plunging demand from Southeast Asia and the
world's central banks sent the price of gold reeling. We continue to
believe gold has a place with both investors and bankers, and we are
actively "mining the area" for new ideas.
PORTFOLIO HIGHLIGHTS
In each report we like to highlight recent major purchases to give
you a better feel for our current investment thinking. We've often
written in this space that we seek soundly managed companies with
strong, shareholder-oriented management and an equally strong
business niche. A recent purchase which fills this bill nicely is
A.O. Smith.
3
<PAGE>
We've known A.O. Smith for many years and last made a major investment in it
during the 1990-91 recession. At that time, A.O. Smith was primarily an
automotive parts company and was selling at excessively depressed prices --
typical among cyclical stocks at a market bottom. We sold the shares at a nice
profit in the ensuing economic recovery but continued to consider it a back-
burner investment idea.
- ----------------------
SECTOR DIVERSIFICATION
- -----------------------------------------------
[PIE CHART APPEARS HERE]
Consumer Nondurables 13%
Energy, Utilities, and Misc. 5%
Financial 13%
Consumer Services and Cyclicals 21%
Reserves 10%
Business Services and Transportation 23%
Technology 8%
Capital Equipment, Process Industries,
and Basic Materials 7%
Based on net assets as of 12/31/97.
This past summer, the company announced a deal to exit the automotive business,
realizing over $700 million by selling its division to Tower Automotive. A.O.
Smith has now become an attractive niche electric equipment company. In this
role, the firm boasts the number-one position in hot water heaters (if you check
your basement heater, odds are it's an A.O. Smith unit), and a strong number-two
standing as a supplier of small hermetic motors for HVAC and home spa markets.
Priced at time of purchase at 1.6 times book value and 14 times forward
earnings, and sporting a 1.7% yield, the shares appeared to be a great value.
Over time, the company will migrate from being the domain of auto parts analysts
to that of electric equipment analysts. Once properly categorized, the shares
will likely look cheap compared with other electric equipment stocks -- many of
which carry market price/earnings multiples and sell at four to five times book
value.
Another major purchase in the second half was Sola. Sola designs, manufactures,
and markets eyeglass lenses, focusing primarily on the faster-growing plastic
lens segment. Sola again has strong market position, ranking either first or
second in many markets. Its 25% global market share, low-cost production, and
successful new product introductions (like Percepta, a fast-selling progressive
lens) should enable the company to maintain earnings growth in the 20% range.
Sola is also well positioned to benefit from the aging baby boom population, as
90% of us over 40 require some form of corrective lenses. The stock
4
<PAGE>
is attractively priced at 14 times projected March 1999 earnings and, we
believe, an excellent value.
Finally, we also began building a major new position in New England Business
Service, or NEBS. The company markets business forms, business-related printed
products, and packaging and shipping supplies to small businesses. Historically
a high-return business, the firm had fallen on hard times prior to the entry of
CEO Bob Murray. Murray, a former senior executive at Gillette, led an impressive
turnaround at NEBS in 1996 and 1997. NEBS's recent purchase of the Rapid Forms
division of CSS Industries -- another Small-Cap Stock holding -- should enable
the company's earnings recovery to continue. Priced at 16 times 1997 calendar
year earnings and carrying a 2.5% dividend yield, the shares look inexpensive
compared with the company's near-term growth potential.
On the sell side, three of our top-10 sales in the half year were the result of
cash tender offers. Greenfield Industries was acquired in November by
Kennametal; Medic Computer Systems was the target of an attractive tender offer
by MISYS that same month. In addition, SMT Health Services received an all-cash
offer in August and was acquired by the Three Rivers Group. Our sales of Mentor
and LaSalle Re Holdings reflected our opinion that their valuations looked full.
OUTLOOK
Small-caps once again failed to outperform the S&P 500 in 1997. As we noted in
our last letter, the 12 months ended April 30, 1997, were the worst 12 months of
relative small-cap performance versus the S&P going back to the late 1930s.
While the sector performed quite well in the second half -- and your fund
actually surpassed the S&P for a brief period in October -- those results
weren't enough to offset the damage inflicted during the first four months of
the year.
PERHAPS SMALL- AND MID-CAP U.S. SHARES WILL BE THE PRIMARY BENEFICIARIES OF THE
"ASIAN FLU."
Looking forward we see some reasons for optimism. Since the first quarter of
1997, small-cap earnings have returned to the historical norm of growing faster
than large-cap earnings. It appears that the rising dollar and slowing growth
overseas, most notably in Asia, might bite into large-cap earnings growth.
Typically when small-cap earnings outperform, the shares soon follow. In
addition, the turmoil and stock declines experienced overseas this fall may
inspire
5
<PAGE>
more aggressive investors to shift money to high-growth opportunities in the
U.S. Perhaps small- and mid-cap U.S. shares will be the primary beneficiaries of
the "Asian Flu." Finally, our valuation work continues to suggest that small-cap
shares remain very attractively priced versus large-caps on a price/earnings
basis. Valuations look particularly interesting for smaller, emerging growth
shares in our current market. After two years of poor performance for small
growth stocks, perhaps the pendulum is ready to swing back. Consequently we are
optimistic that in a constructive economic environment, small-caps will have the
opportunity to show improved performance.
Thank you again for your continued support during 1997. Here's to a happy and
successful 1998!
Respectfully submitted,
/s/ Greg A. McCrickard
Greg A. McCrickard
President and Chairman of the Investment Advisory Committee
January 20, 1998
6
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- -------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- -------------------------------------------------------------------------------
JP Foodservice 2.0%
...............................................................................
Aliant Communications 1.8
...............................................................................
Analogic 1.6
...............................................................................
PartnerRe Holdings 1.5
...............................................................................
Summit Bancorp 1.4
- -------------------------------------------------------------------------------
Carson Pirie Scott 1.3
...............................................................................
A.O. Smith 1.3
...............................................................................
Coinmach Laundry 1.3
...............................................................................
Harleysville Group 1.2
...............................................................................
Richfood Holdings 1.2
- -------------------------------------------------------------------------------
Cowles Media 1.2
...............................................................................
Matthews International 1.1
...............................................................................
Electro Rent 1.1
...............................................................................
Holophane 1.1
...............................................................................
Outback Steakhouse 1.1
- -------------------------------------------------------------------------------
Glacier Bancorp 1.1
...............................................................................
Sola 1.0
...............................................................................
Shorewood Packaging 1.0
...............................................................................
Caseys General Stores 1.0
...............................................................................
UICI 1.0
- -------------------------------------------------------------------------------
Source Services 0.9
...............................................................................
New England Business Service 0.9
...............................................................................
Poe & Brown 0.9
...............................................................................
Coach USA 0.9
...............................................................................
W. R. Berkley 0.9
- -------------------------------------------------------------------------------
Total 29.8%
7
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
(Listed in descending order of size)
6 Months Ended 12/31/97
Ten Largest Purchases Ten Largest Sales
- ----------------------------------------------------------------------------
A.O. Smith * Analysts International
..................................... ...................................
Sola Greenfield Industries **
..................................... ...................................
New England Business Service * Mentor **
..................................... ...................................
Layne Christensen * Medic Computer Systems **
..................................... ...................................
Southern Electronics * LaSalle Re Holdings **
..................................... ...................................
Parkway Properties * Harleysville Group
..................................... ...................................
Delta Financial SMT Health Services **
..................................... ...................................
Zonagen * Billing Information Concepts
..................................... ...................................
Dan River * Selective Insurance
..................................... ...................................
Watsco * Specialty Care Network **
..................................... ...................................
* Position added
** Position eliminated
8
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
LINE GRAPH APPEARS HERE]
Russell Lipper Small Cap Small-Cap
Date 2000 Index Fund Index Stock Fund
---- ---------- ---------- ----------
12/31/87 10,000 10,000 10,000
Dec-88 12,502 11,938 12,715
Dec-89 14,535 14,894 15,148
Dec-90 11,704 13,299 12,047
Dec-91 17,093 20,286 16,697
Dec-92 20,240 22,778 19,019
Dec-93 24,061 26,666 22,519
Dec-94 23,622 26,734 22,537
Dec-95 30,343 35,752 30,166
Dec-96 35,347 41,410 36,517
Dec-97 43,252 48,885 47,038
- ------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Periods Ended 12/31/97 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Small-Cap Stock Fund 28.81% 27.80% 19.85% 16.75%
...............................................................................
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 18.07 $ 16.32 $ 13.80 $ 15.39 $ 14.37
....................................................................
Investment activities
Net investment income 0.05 0.09 0.12 0.04 -
Net realized and
unrealized gain (loss) 5.13 3.33 4.53 (0.04) 2.60
....................................................................
Total from
investment activities 5.18 3.42 4.65 0.00 2.60
....................................................................
Distributions
Net investment income (0.04) (0.09) (0.12) (0.03) -
Net realized gain (1.01) (1.58) (2.01) (1.56) (1.58)
....................................................................
Total distributions (1.05) (1.67) (2.13) (1.59) (1.58)
....................................................................
NET ASSET VALUE
End of period $ 22.20 $ 18.07 $ 16.32 $ 13.80 $ 15.39
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
<S> <C> <C> <C> <C> <C>
Total return 28.81% 21.05% 33.85% 0.08% 18.40%
.......................................................................................................
Ratio of expenses to
average net assets 1.02% 1.07% 1.11% 1.11% 1.20%
.......................................................................................................
Ratio of net investment
income to average
net assets 0.33% 0.56% 0.74% 0.24% (0.01)
.......................................................................................................
Portfolio turnover rate 22.9% 31.1% 57.8% 41.9% 40.8%
.......................................................................................................
Average commission
rate paid $ 0.0352 $ 0.0305 - - -
.......................................................................................................
Net assets, end of period
(in thousands) $816,374 $415,604 $278,613 $196,726 $204,609
.......................................................................................................
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
December 31, 1997
- -----------------------
STATEMENT OF NET ASSETS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS AND WARRANTS 89.5%
FINANCIAL 12.6%
Bank and Trust 5.7%
Albank Financial 85,500 $ 4,387
................................................................................
First Bell Bancorp 100,000 1,919
................................................................................
First Mariner Bancorp * + 170,000 2,805
................................................................................
First Security 112,500 4,718
................................................................................
Frankfort First 75,000 1,313
................................................................................
Glacier Bancorp + 352,700 8,663
................................................................................
Marshall & Ilsley 30,000 1,865
................................................................................
Mercantile Bancorporation 92,250 5,673
................................................................................
Security First Network Bank * 60,000 443
................................................................................
Summit Bancorp 214,800 11,438
................................................................................
WestAmerica 30,000 3,101
................................................................................
46,325
.............
Insurance 6.3%
Harleysville Group 420,000 10,159
................................................................................
PartnerRe Holdings 259,600 12,039
................................................................................
Poe & Brown 170,000 7,586
................................................................................
Selective Insurance 240,000 6,525
................................................................................
UICI * 223,500 7,837
................................................................................
W. R. Berkley 165,000 7,332
................................................................................
51,478
.............
Financial Services 0.6%
Delta Financial * 300,000 4,012
................................................................................
ITLA Capital * 70,000 1,330
................................................................................
5,342
.............
Total Financial 103,145
.............
UTILITIES 2.7%
Telephone Services 2.7%
Aerial Communications * 232,500 1,664
................................................................................
Aliant Communications 475,000 15,051
................................................................................
Rural Cellular (Class A) * 230,100 3,006
................................................................................
Western Wireless * 155,000 2,703
................................................................................
Total Utilities 22,424
.............
11
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
CONSUMER NONDURABLES 12.8%
Food Processing 1.3%
American Italian Pasta (Class A) * 102,200 $ 2,555
................................................................................
CTB International * 225,000 3,248
................................................................................
Makepeace * 164 1,968
................................................................................
Seneca Foods (Class A) * 91,700 1,565
................................................................................
Seneca Foods (Class B) * 74,700 1,261
................................................................................
10,597
............
Hospital Supplies/Hospital Management 2.3%
Allied Healthcare Products * 150,000 1,177
................................................................................
American Oncology Resources * 250,000 4,016
................................................................................
Medical Alliance * 100,000 409
................................................................................
Quorum Health Group * 232,500 6,103
................................................................................
Renal Care Group * 187,500 6,023
................................................................................
St. Jude Medical * 40,000 1,220
................................................................................
18,948
............
Pharmaceuticals 0.8%
Alkermes * 6,800 132
................................................................................
COR Therapeutics * 100,000 2,256
................................................................................
Coulter Pharmaceutical * 64,800 1,320
................................................................................
Perrigo * 200,000 2,688
................................................................................
6,396
............
Biotechnology 0.6%
Cell Genesys * 250,000 2,117
................................................................................
Zonagen * 155,000 2,824
................................................................................
4,941
............
Health Care Services 3.0%
AmeriPath * 225,000 3,839
................................................................................
Apria Healthcare * 100,000 1,344
................................................................................
Coast Dental Services * 100,000 2,387
................................................................................
Concentra Managed Care * 150,000 5,053
................................................................................
NeoPath * 125,000 1,633
................................................................................
Northfield Laboratories * 220,000 2,008
................................................................................
Orthodontic Centers of America * 250,000 4,156
................................................................................
Raytel Medical * 310,000 3,584
................................................................................
24,004
............
12
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Miscellaneous Consumer Products 4.8%
Boston Acoustics 107,200 $ 2,834
................................................................................
Coinmach Laundry * 415,300 10,227
................................................................................
Cone Mills * 275,000 2,131
................................................................................
Crown City Plating + 34,500 358
................................................................................
Culp 150,000 3,000
................................................................................
Equity Corp International * 225,000 5,203
................................................................................
QuikSilver * 44,600 1,285
................................................................................
Sola * 260,000 8,450
................................................................................
WestPoint Stevens * 120,000 5,708
................................................................................
39,196
.............
Total Consumer Nondurables 104,082
.............
CONSUMER SERVICES 12.9%
Restaurants 1.2%
Outback Steakhouse * 300,000 8,681
................................................................................
PJ America * 55,000 818
................................................................................
9,499
.............
General Merchandisers 2.3%
Carson Pirie Scott * 215,000 10,777
................................................................................
Caseys General Stores 308,400 7,883
................................................................................
18,660
.............
Specialty Merchandisers 3.2%
CompuCom Systems * 375,000 3,141
................................................................................
CSS Industries * 88,200 2,811
................................................................................
Dan River * 325,000 5,342
................................................................................
GT Bicycles * 22,900 135
................................................................................
Ingles Markets (Class A) 300,000 4,312
................................................................................
Performance Food Group * 130,000 3,047
................................................................................
Urban Outfitters * 192,300 3,534
................................................................................
Wild Oats Markets * 110,000 3,984
................................................................................
26,306
.............
Entertainment and Leisure 1.3%
FelCor Suites Hotels 55,000 1,953
................................................................................
Logans Roadhouse 13,900 212
................................................................................
North Face * 260,000 5,728
................................................................................
Seattle Filmworks * 250,000 2,797
................................................................................
10,690
.............
13
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Media and Communications 4.9%
American Radio Systems (Class A) * 60,000 $ 3,199
................................................................................
Centennial Cellular (Class A) * 150,000 3,047
................................................................................
CMP Media * 125,000 2,156
................................................................................
Commnet Cellular * 100,000 3,569
................................................................................
Cowles Media 110,578 9,399
................................................................................
Jacor Communications * 90,000 4,787
................................................................................
Pegasus Communications * 89,400 1,838
................................................................................
Scholastic * 75,000 2,827
................................................................................
Sinclair Broadcast Group (Class A) 110,000 5,094
................................................................................
Vanguard Cellular (Class A) * 85,000 1,086
................................................................................
Young Broadcasting (Class A) * 85,000 3,331
................................................................................
40,333
.............
Total Consumer Services 105,488
.............
CONSUMER CYCLICALS 7.5%
Automobiles and Related 2.3%
A.O. Smith (Class B) 255,000 10,774
................................................................................
Adrian Steel 7,756 2,013
................................................................................
Littelfuse * 150,000 3,689
................................................................................
TBC * 255,000 2,446
................................................................................
18,922
.............
Building and Real Estate 4.3%
Apartment Investment & Management, REIT 140,000 5,145
................................................................................
Arden Realty, REIT 90,000 2,767
................................................................................
EastGroup Properties, REIT 203,000 4,390
................................................................................
First Washington Realty Trust, REIT 150,000 4,125
................................................................................
Glenborough Realty Trust, REIT 125,000 3,703
................................................................................
Parkway Properties 175,000 6,005
................................................................................
Starwood Lodging, REIT 111,500 6,453
................................................................................
Tower Realty Trust, REIT 100,000 2,463
................................................................................
35,051
.............
Miscellaneous Consumer Durables 0.9%
Craftmatic Contour, Warrants, 12/31/02 * 20,970 0
................................................................................
Ellett Brothers 200,000 1,140
................................................................................
14
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Harman International 4,000 $ 170
................................................................................
York Group 250,000 6,172
................................................................................
7,482
............
Total Consumer Cyclicals 61,455
............
TECHNOLOGY 8.1%
Electronic Components 4.1%
American Superconductor * 25,000 211
................................................................................
Analogic 350,000 13,212
................................................................................
Burr Brown * 100,000 3,219
................................................................................
Electronics for Imaging * 100,000 1,659
................................................................................
Linear Technology 35,000 2,015
................................................................................
Maxim Integrated Products * 120,000 4,147
................................................................................
Optek Technology * + 246,400 5,013
................................................................................
Planar Systems * 260,000 2,681
................................................................................
PMC-Sierra * 35,000 1,092
................................................................................
33,249
............
Electronic Systems 1.4%
Electromagnetic Sciences * 175,000 3,544
................................................................................
ITI Technologies * 50,000 1,103
................................................................................
Lifeline Systems * 155,000 3,865
................................................................................
Lo-Jack * 225,000 3,333
................................................................................
11,845
............
Telecommunications Equipment 1.1%
California Microwave * 200,000 3,912
................................................................................
CORECOMM * 10,000 104
................................................................................
Glenayre Technologies * 100,000 994
................................................................................
SITEL * 250,000 2,281
................................................................................
TriQuint Semiconductor * 20,000 408
................................................................................
West TeleServices * 109,500 1,317
................................................................................
9,016
............
Aerospace and Defense 1.5%
Tracor * 222,000 6,813
................................................................................
Woodward Governor 160,000 5,230
................................................................................
12,043
............
Total Technology 66,153
............
15
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
CAPITAL EQUIPMENT 1.8%
<S> <C> <C>
Electrical Equipment 1.2%
ANADIGICS * 35,000 $ 1,067
................................................................................
Holophane * 350,000 8,794
................................................................................
9,861
............
Machinery 0.3%
Laser Alignment * 16,450 99
................................................................................
Toolex Alpha * 275,000 2,698
................................................................................
2,797
............
Miscellaneous Capital Equipment 0.3%
OmniQuip International 100,000 2,003
................................................................................
2,003
............
Total Capital Equipment 14,661
............
BUSINESS SERVICES AND
TRANSPORTATION 23.3%
Computer Service and Software 3.1%
Analysts International 150,000 5,213
................................................................................
Concord Communications * + 62,600 1,287
................................................................................
Electronic Arts * 50,000 1,892
................................................................................
HCIA * 150,000 1,819
................................................................................
Network Associates * 41,670 2,200
................................................................................
Remedy * 50,000 1,053
................................................................................
Summit Design * 100,000 1,031
................................................................................
SunGard Data Systems * 60,000 1,860
................................................................................
Synopsys * 50,000 1,784
................................................................................
VERITAS Software * 66,330 3,375
................................................................................
Visio * 100,000 3,856
................................................................................
25,370
............
Distribution Services 5.0%
JP Foodservice * 436,250 16,114
................................................................................
MSC * 115,000 4,873
................................................................................
Primesource 189,000 1,866
................................................................................
Richfood Holdings 345,000 9,746
................................................................................
Southern Electronics * 325,000 3,687
................................................................................
</TABLE>
16
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Watsco (Class A) 190,000 $ 4,691
................................................................................
40,977
............
Environmental 0.9%
TRC * 200,000 850
................................................................................
Waterlink * 367,000 6,055
................................................................................
6,905
............
Transportation Services 2.6%
Coach USA * 225,000 7,537
................................................................................
Expeditors International of Washington 120,000 4,673
................................................................................
Frozen Food Express 150,000 1,359
................................................................................
Heartland Express * 80,827 2,208
................................................................................
International Shipholding 141,562 2,442
................................................................................
M.S. Carriers * 70,000 1,724
................................................................................
Midwest Express Holdings * 30,000 1,164
................................................................................
21,107
............
Miscellaneous Business Services 11.5%
Alternative Resources * 189,600 4,384
................................................................................
Billing Information Concepts * 100,000 4,819
................................................................................
BISYS Group * 100,000 3,338
................................................................................
Copart * 135,000 2,388
................................................................................
COREStaff * 120,000 3,195
................................................................................
Electro Rent * 240,000 8,820
................................................................................
Insituform Technologies (Class A) * 500,000 3,875
................................................................................
Maximus * 25,000 605
................................................................................
McGrath RentCorp 300,000 7,275
................................................................................
New England Business Service 225,000 7,594
................................................................................
Nobel Education Dynamics * 30,000 155
................................................................................
Paging Network * 225,000 2,426
................................................................................
Paxar * 240,000 3,555
................................................................................
ProMedCo * 370,000 3,723
................................................................................
Shorewood Packaging * 300,000 8,062
................................................................................
Source Services * 355,800 7,627
................................................................................
Strayer Education 187,500 6,328
................................................................................
Tetra Tech * 309,250 6,262
................................................................................
The Peterson Companies (Class A) * 177,400 4,080
................................................................................
Unitog 210,000 4,712
................................................................................
Walsh International * 80,000 860
................................................................................
94,083
............
</TABLE>
17
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Railroads 0.2%
North Carolina Railroad 24,900 $ 1,578
................................................................................
1,578
............
Total Business Services and Transportation 190,020
............
ENERGY 2.2%
Energy Services 1.1%
Carbo Ceramics 117,000 3,803
................................................................................
Cooper Cameron * 60,000 3,660
................................................................................
Smith International * 30,000 1,841
................................................................................
9,304
............
Exploration and Production 1.1%
Rutherford-Moran Oil * 194,500 3,501
................................................................................
Weatherford Enterra * 124,000 5,425
................................................................................
8,926
............
Total Energy 18,230
............
PROCESS INDUSTRIES 2.4%
Specialty Chemicals 1.5%
A. Schulman 110,000 2,777
................................................................................
CFC International * + 210,000 2,507
................................................................................
Furon 54,600 1,140
................................................................................
Hauser * 360,000 2,093
................................................................................
Sybron Chemical * 100,000 3,350
................................................................................
11,867
............
Paper and Paper Products 0.4%
Jefferson Smurfit * 220,000 3,135
................................................................................
3,135
............
Building and Construction 0.5%
Layne Christensen * 335,000 4,376
................................................................................
4,376
............
Total Process Industries 19,378
............
BASIC MATERIALS 2.8%
Metals 1.8%
Cambior 400,000 2,350
................................................................................
Free State Consolidated Gold Mines ADR 350,000 1,542
................................................................................
</TABLE>
18
<PAGE>
PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Gibraltar Steel * 110,000 $ 2,145
................................................................................
Matthews International (Class A) 200,000 8,925
................................................................................
14,962
............
Mining 0.7%
Coal Creek + 9,295 1,004
................................................................................
Prime Resources Group 250,000 1,703
................................................................................
Rochester & Pittsburgh 15,728 684
................................................................................
TVX Gold * 550,000 1,856
................................................................................
5,247
............
Miscellaneous Materials 0.3%
Rock of Ages * 155,000 2,403
................................................................................
2,403
............
Total Basic Materials 22,612
............
MISCELLANEOUS COMMON STOCKS 0.4%
Western Water * 40,000 425
................................................................................
Other Miscellaneous Common Stocks 584,000 2,844
................................................................................
Total Miscellaneous Common Stocks 3,269
............
Total Common Stocks and Warrants (Cost $525,213) 730,917
............
PREFERRED STOCKS 0.1%
Prime Retail, Cum., 10.50%, (Series A) 30,000 825
...............................................................................
Total Preferred Stocks (Cost $570) 825
............
CONVERTIBLE PREFERRED STOCKS 0.1%
Prime Retail, 8.50%, (Series B) 25,000 600
................................................................................
Total Convertible Preferred Stocks (Cost $471) 600
............
CONVERTIBLE BONDS 0.4%
Arch Communications, (144a) 6.75%, 12/1/03 $ 1,000,000 760
................................................................................
Offshore Logistics, Sub. Notes,
(144a) 6.00%, 12/15/03 2,000,000 2,315
................................................................................
Total Convertible Bonds (Cost $3,107) 3,075
............
</TABLE>
19
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
SHORT-TERM INVESTMENTS 10.0%
<S> <C> <C>
Money Market Funds 10.0%
Reserve Investment Fund, 5.84% # $ 81,458,254 $ 81,458
................................................................................
Total Short-Term Investments (Cost $81,458) 81,458
............
Total Investments in Securities
100.1% of Net Assets (Cost $610,819) $ 816,875
Other Assets Less Liabilities (501)
............
NET ASSETS $ 816,374
------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 536
Accumulated net realized gain/loss - net of distributions 6,962
Net unrealized gain (loss) 206,056
Paid-in-capital applicable to 36,771,355 shares of $0.50 par
value capital stock outstanding; 200,000,000 shares authorized 602,820
............
NET ASSETS $ 816,374
------------
NET ASSET VALUE PER SHARE $ 22.20
------------
</TABLE>
+ Affiliated company
* Non-income producing
# Seven-day yield
ADR American Depository Receipt
REIT Real Estate Investment Trust
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers -- total of such securities at year-end amounts to
0.38% of net assets.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
Investment Income
Income
Dividend $ 4,274
Interest 3,462
............
Total income 7,736
............
Expenses
Investment management 4,405
Shareholder servicing 989
Registration 151
Custody and accounting 145
Prospectus and shareholder reports 110
Legal and audit 15
Directors 9
Miscellaneous 11
............
Total expenses 5,835
............
Net investment income 1,901
............
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 32,376
Change in net unrealized gain or loss on securities 111,242
............
Net realized and unrealized gain (loss) 143,618
............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 145,519
------------
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,901 $ 1,871
Net realized gain (loss) 32,376 36,943
Change in net unrealized gain or loss 111,242 23,595
..........................
Increase (decrease) in net assets from operations 145,519 62,409
..........................
Distributions to shareholders
Net investment income (1,388) (1,898)
Net realized gain (35,062) (33,112)
..........................
Decrease in net assets from distributions (36,450) (35,010)
..........................
Capital share transactions *
Shares sold 491,109 175,932
Distributions reinvested 34,624 33,047
Shares redeemed (234,032) (99,387)
..........................
Increase (decrease) in net assets from capital
share transactions 291,701 109,592
..........................
Net Assets
Increase (decrease) during period 400,770 136,991
Beginning of period 415,604 278,613
..........................
End of period $ 816,374 $ 415,604
--------------------------
* Share information
Shares sold 23,580 9,548
Distributions reinvested 1,598 1,846
Shares redeemed (11,410) (5,466)
..........................
Increase (decrease) in shares outstanding 13,768 5,928
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
December 31, 1997
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Small-Cap Stock Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company and commenced operations on June 1, 1956. Prior to May
1, 1997, the name of the fund was the T. Rowe Price OTC Fund, Inc.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the
outstanding voting securities.
23
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Currency Translation Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated
into U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of
such gains and losses.
Premiums and Discounts Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with federal income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $327,707,000 and $117,591,000, respectively, for the
year ended December 31, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $610,819,000, and net unrealized
gain aggregated $206,056,000, of which $239,669,000 related to appreciated
investments and $33,613,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
24
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
fee, of which $515,000 was payable at December 31, 1997. The fee is
computed daily and paid monthly, and consists of an individual fund fee
equal to 0.45% of average daily net assets and a group fee. The group fee
is based on the combined assets of certain mutual funds sponsored by the
manager or Rowe Price-Fleming International, Inc. (the group). The group
fee rate ranges from 0.48% for the first $1 billion of assets to 0.30% for
assets in excess of $80 billion. The effective annual group fee rate was
0.32% at December 31, 1997, and 0.33% for the year then ended. The fund
pays a pro-rata share of the group fee based on the ratio of its net assets
to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund
receives certain other services. The manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services,
Inc., is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc., provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $872,000 for the year ended December 31, 1997, of which
$95,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the year ended
December 31, 1997, totaled $1,326,000 and are reflected as interest income
in the accompanying Statement of Operations.
25
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
T. Rowe Price Small-Cap Stock Fund, Inc.
We have audited the accompanying statement of net assets of T. Rowe Price Small-
Cap Stock Fund, Inc. (formerly T. Rowe Price OTC Fund, Inc.) as of December 31,
1997, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of T.
Rowe Price Small-Cap Stock Fund, Inc. as of December 31, 1997, the results of
its operations, the changes in its net assets and financial highlights for each
of the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 21, 1998
26
<PAGE>
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial statement reporting requirements.
The fund's distributions to shareholders included:
. $5,554,000 from short-term capital gains, and
. $29,508,000 from long-term capital gains; of which $8,298,000 was subject to
the 20% rategains category.
For corporate shareholders, 38% of the fund's distributed income and short-term
capital gains qualified for the dividends-received deduction.
- --------------------------------------------------------------------------------
27
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m.
ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and T. Rowe Price OnLine.
DISCOUNT BROKERAGE*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
INVESTMENT INFORMATION
Combined Statement Overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
28
<PAGE>
T. ROWE PRICE MUTUAL FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STOCK FUNDS BOND FUNDS
............................. ................................. ......................................
<S> <C> <C>
Domestic Domestic Taxable International/Global
Blue Chip Growth Corporate Income Emerging Markets Bond
Capital Appreciation GNMA Global Government Bond
Capital Opportunity High Yield International Bond
Diversified Small-Cap Growth New Income
Dividend Growth Short-Term Bond MONEY MARKET FUNDS
Equity Income Short-Term U.S. Government ......................................
Equity Index 500 Spectrum Income Taxable
Extended Equity Market Index Summit GNMA Prime Reserve
Financial Services Summit Limited-Term Bond Summit Cash Reserves
Growth & Income U.S. Treasury Intermediate U.S. Treasury Money
Growth Stock U.S. Treasury Long-Term
Health Sciences Tax-Free
Media & Telecommunications* Domestic Tax-Free California Tax-Free Money
Mid-Cap Growth California Tax-Free Bond New York Tax-Free Money
Mid-Cap Value Florida Insured Summit Municipal
New America Growth Intermediate Tax-Free Money Market
New Era Georgia Tax-Free Bond Tax-Exempt Money
New Horizons** Maryland Short-Term Tax-Free Bond
Real Estate Maryland Tax-Free Bond BLENDED ASSET FUNDS
Science & Technology New Jersey Tax-Free Bond ......................................
Small-Cap Stock New York Tax-Free Bond Balanced
Small-Cap Value** Summit Municipal Income Personal Strategy Balanced
Spectrum Growth Summit Municipal Personal Strategy Growth
Total Equity Market Index Intermediate Personal Strategy Income
Value Tax-Free High Yield Tax-Efficient Balanced
Tax-Free Income
International/Global Tax-Free Insured T. ROWE PRICE NO-LOAD
Emerging Markets Stock Intermediate Bond VARIABLE ANNUITY
European Stock Tax-Free Short-Intermediate ......................................
Global Stock Virginia Short-Term Tax-Free Bond Equity Income Portfolio
International Discovery Virginia Tax-Free Bond International Stock Portfolio
International Stock Limited-Term Bond Portfolio
Japan Mid-Cap Growth Portfolio
Latin America New America Growth Portfolio
New Asia Personal Strategy Balanced Portfolio
Spectrum International Prime Reserve Portfolio
</TABLE>
* Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
** Closed to new investors.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
29
<PAGE>
For yield, price, last transaction, Investor Centers:
current balance, or to conduct 101 East Lombard St.
transactions, 24 hours, 7 days Baltimore, MD 21202
a week, call Tele*Access(R):
1-800-638-2587 toll free T. Rowe Price
Financial Center
For assistance 10090 Red Run Blvd.
with your existing Owings Mills, MD 21117
fund account, call:
Shareholder Service Center Farragut Square
1-800-225-5132 toll free 900 17th Street, N.W.
410-625-6500 Baltimore area Washington, D.C. 20006
To open a Discount Brokerage ARCO Tower
account or obtain information, 31st Floor
call: 1-800-638-5660 toll free 515 South Flower St.
Los Angeles, CA 90071
Internet address:
www.troweprice.com 4200 West Cypress St.
10th Floor
T. Rowe Price Associates Tampa, FL 33607
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Small-Cap Stock Fund.
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor.
