<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended: MARCH 31, 1998.
Commission file number: 000-14282.
Exact name of registrant as specified in its charter:
T. ROWE PRICE ASSOCIATES, INC.
State of incorporation: MARYLAND.
I.R.S. Employer Identification No.: 52-0556948.
Address and Zip Code of principal executive offices: 100 EAST PRATT STREET,
BALTIMORE, MARYLAND 21202.
Registrant's telephone number, including area code: (410) 345-2000.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
Indicate the number of shares outstanding of the issuer's common stock ($.20
par value), as of the latest practicable date. 118,875,354 SHARES AT APRIL
15, 1998, RESTATED FOR THE TWO-FOR-ONE STOCK SPLIT TO BE EFFECTED AT APRIL
30, 1998.
Exhibit index is at Item 6(a) on page 11.
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
T. ROWE PRICE ASSOCIATES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
12/31/97 03/31/98
________ ________
ASSETS
Cash and cash equivalents $200,409 $215,793
Accounts receivable 86,795 94,255
Investments in sponsored mutual funds 173,729 200,604
Partnership and other investments 19,030 18,781
Property and equipment (Note 2) 142,497 142,737
Other assets 23,607 16,771
________ ________
$646,067 $688,941
________ ________
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 30,722 $ 31,062
Accrued compensation and retirement costs 49,694 33,598
Income taxes payable 19,102 42,640
Dividends payable 10,039 10,088
Minority interests in consolidated subsidiaries 49,837 38,332
________ ________
Total liabilities 159,394 155,720
________ ________
Commitments and contingent liabilities (Note 2)
Stockholders' equity
Preferred stock, undesignated, $.20 par value -
authorized and unissued 20,000,000 shares -- --
Common stock, $.20 par value - authorized
200,000,000 shares in 1997 and 500,000,000 shares
in 1998, including 300,000,000 shares authorized on
on April 16, 1998; issued 59,097,705 shares in
1997 and 118,705,104 shares in 1998, including
59,352,552 shares to be issued in the two-for-one
stock split at April 30, 1998 (Note 3) 11,819 23,741
Capital in excess of par value 30,707 23,330
Retained earnings 415,279 446,480
Accumulated other comprehensive income 28,868 39,670
________ ________
Total stockholders' equity 486,673 533,221
________ ________
$646,067 $688,941
________ ________
________ ________
See the accompanying notes to the condensed consolidated financial
statements.
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T. ROWE PRICE ASSOCIATES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)
Three months ended
___________________
03/31/97 03/31/98
________ ________
Revenues
Investment advisory fees $129,297 $163,717
Administrative fees 35,135 42,164
Investment and other income 3,527 4,553
________ ________
167,959 210,434
________ ________
Expenses
Compensation and related costs 59,182 70,400
Advertising and promotion 17,457 20,072
Occupancy and equipment 13,756 18,885
International investment research fees 10,957 12,560
Other operating expenses 12,266 12,921
________ ________
113,618 134,838
________ ________
Income before income taxes and minority interests 54,341 75,596
Provision for income taxes 21,124 28,927
________ ________
Income from consolidated companies 33,217 46,669
Minority interests in consolidated subsidiaries 4,670 5,379
________ ________
Net income $ 28,547 $ 41,290
________ ________
________ ________
Basic earnings per share $ .25 $ .35
________ ________
________ ________
Diluted earnings per share $ .22 $ .32
________ ________
________ ________
Dividends declared per share $ .065 $ .085
________ ________
________ ________
Weighted average shares outstanding 115,554 118,495
________ ________
________ ________
Weighted average shares outstanding -
assuming dilution 127,082 129,933
________ ________
________ ________
See the accompanying notes to the condensed consolidated financial
statements.
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T. ROWE PRICE ASSOCIATES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended
__________________
03/31/97 03/31/98
________ ________
Cash flows from operating activities
Net income $ 28,547 $ 41,290
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property
and equipment 5,071 7,928
Minority interests in consolidated subsidiaries 4,670 5,379
Increase in accounts receivable (2,009) (7,460)
Change in accounts payable and accrued liabilities (4,858) (6,174)
Increase in accrued income taxes payable 15,031 19,632
Other changes in assets and liabilities (954) 314
_________ ________
Net cash provided by operating activities 45,498 60,909
________ ________
Cash flows from investing activities
Investments in sponsored mutual funds (2,292) (9,813)
Additions to property and equipment (14,247) (11,130)
________ ________
Net cash used in investing activities (16,539) (20,943)
________ ________
Cash flows from financing activities
Purchases of stock (6,465) --
Receipts relating to stock issuances 3,701 2,471
Dividends paid to stockholders (7,484) (10,039)
Distributions to minority interests -- (17,014)
________ ________
Net cash used in financing activities (10,248) (24,582)
________ ________
Cash and cash equivalents
Net increase during period 18,711 15,384
At beginning of period 114,551 200,409
________ ________
At end of period $133,262 $215,793
________ ________
________ ________
See the accompanying notes to the condensed consolidated financial
statements.
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T. ROWE PRICE ASSOCIATES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(dollars in thousands)
Accumu-
Capital lated
Common in other Total
stock excess compre- stock-
- par of par Retained hensive holders'
value value earnings income equity
_______ _______ ________ ________ ________
Balance at December 31, 1997,
59,097,705 common shares $11,819 $30,707 $415,279 $28,868 $486,673
Comprehensive income
Net income 41,290
Unrealized security
holding gains 10,802
Total comprehensive income 52,092
254,847 common shares
issued under stock-based
compensation plans 51 4,493 4,544
Dividends declared (10,088) (10,088)
59,352,552 shares issued in
2-for-1 split of common
stock at April 30, 1998 11,871 (11,870) (1) --
_______ _______ ________ _______ ________
Balance at March 31, 1998,
118,705,104 common shares $23,741 $23,330 $446,480 $39,670 $533,221
_______ _______ ________ _______ ________
_______ _______ ________ _______ ________
See the accompanying notes to the condensed consolidated financial
statements.
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T. ROWE PRICE ASSOCIATES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND BASIS OF PREPARATION.
T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the
Company) derives its revenue primarily from investment advisory and
administrative services provided to sponsored mutual funds and investment
portfolios and to private accounts of other institutional and individual
investors, primarily domiciled in the United States of America. Company
revenues are largely dependent on the total value and composition of assets
under management, which include domestic and international equity and debt
securities; accordingly, fluctuations in financial markets and in the
composition of assets under management impact revenues and results of
operations. Assets under management at March 31, 1998 total $139.3 billion,
including $90.6 billion in the sponsored T. Rowe Price mutual funds.
The unaudited condensed consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. All such
adjustments are of a normal recurring nature.
The unaudited interim financial information contained in the condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements contained in the 1997 Annual Report to
Stockholders.
NOTE 2 - COMMITMENTS AND CONTINGENT LIABILITIES.
On February 11, 1998, the Company entered into an agreement to construct two
office buildings having a combined 360,000 square feet of floor space and two
parking garages for an aggregate price of $70.8 million. The facilities will
be erected on land owned in Owings Mills, Maryland.
NOTE 3 - SUBSEQUENT EVENT - COMMON STOCK.
On April 16, 1998, the Company's stockholders approved an amendment of the
Company's charter which increased the Company's authorized shares from
200,000,000 to 500,000,000 and split the outstanding common shares two-for-
one. Additional common shares ($.20 par value) resulting from the split will
be issued at the close of business on April 30, 1998. All per share and
share data in the accompanying unaudited condensed consolidated financial
statements have been adjusted to give retroactive effect to the stock split.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
T. Rowe Price Associates, Inc.
We have reviewed the condensed consolidated financial statements of T. Rowe
Price Associates, Inc. and its subsidiaries as of March 31, 1998, and for the
three-month periods ended March 31, 1997 and 1998, appearing on pages two
through six of this Form 10-Q Quarterly Report. These financial statements
are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1997, and the
related consolidated statements of income, of cash flows, and of stock-
holders' equity for the year then ended (not presented herein), and in our
report dated January 26, 1998 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1997, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ PRICE WATERHOUSE LLP
Baltimore, Maryland
April 22, 1998
THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF
THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS' LIABILITY
PROVISIONS OF SECTION 11 OF THE ACT DO NOT APPLY.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL.
T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the
Company) derives its revenue primarily from investment advisory and
administrative services provided to the sponsored Price Mutual Funds (the
Funds), other sponsored investment portfolios, and private accounts of other
institutional and individual investors. Investment advisory fees are
generally based on the net assets of the portfolios managed. The majority of
administrative revenues are derived from services provided to the Funds.
The Company's base of assets under management consists of a broad range of
domestic and international stock, bond, and money market mutual funds and
other investment portfolios which meet the varied needs and objectives of its
individual and institutional investment advisory clients. At March 31, 1998,
total assets under management are $139.3 billion, including $90.6 billion in
the Funds. Equity investments comprise 74% of total assets under management.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 VERSUS 1997.
Net income increased $12.7 million or 45% to $41.3 million or diluted
earnings per share of $0.32 from $28.5 million or diluted earnings per share
of $0.22. Earnings per share have been retroactively restated for the two-
for-one stock split to be effected at the end of April 1998. Total revenues
increased 25% from $168 million to more than $210 million, led by an increase
of $34.4 million in investment advisory fees.
Investment advisory fees from the Funds increased $23.9 million as the Fund's
average assets under management during the first quarter rose $18.0 billion
to $85.0 billion. Fund assets totaled $90.6 billion at March 31, 1998, up
$9.5 billion from December 31, 1997. Stock funds, which totaled $70.5
billion at March 31, 1998, accounted for most of the increase. Net cash
inflows to the Funds during first quarter of 1998 were nearly $1.9 billion
with the balance of Fund asset growth coming from market gains. Advisory
fees from private accounts and other sponsored investment portfolios
contributed the balance of the investment advisory revenue gains. These
assets under management rose to $48.7 billion at March 31, 1998, up $5.5
billion from December 31, 1997 and $12.4 billion from March 31, 1997. Total
assets under management closed the first quarter at $139.3 billion, up from
$124.3 billion at December 31, 1997 and $102.9 billion at March 31, 1997.
Administrative fees from services to the Funds and their shareholders grew
$7.0 million to $42.2 million. Revenue gains were primarily attributable to
the Company's defined contribution retirement plan recordkeeping services and
mutual fund transfer agent; however, increases in related operating expenses
offset these gains.
Investment and other income rose $1.0 million due to greater income from the
Company's larger money market fund holdings.
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Operating expenses increased 19% to $134.8 million. Greater compensation and
related costs, which were up $11.2 million, were attributable to a 20%
increase in the number of associates as well as the greater use of temporary
employees, primarily to support the Company's growing technology support and
administrative services operations. At the end of the first quarter, the
Company employed nearly 3,200 associates.
Advertising and promotion expenditures increased 15% to $20.1 million as the
Company endeavored to take advantage of favorable marketing conditions
including opportunities presented by the new Roth IRA. These expenditures
will vary over time as market conditions and cash flows to the Funds warrant.
Occupancy and equipment expense was up due to the expansion of operating
facilities and equipment acquisitions, primarily investments in technology.
International investment research fees increased 15% or $1.6 million as
international assets under management rose to $33.6 billion, including $18.3
billion in the Funds.
Higher net income reported on a separate company basis by the Company's 50%-
owned subsidiary, Rowe Price-Fleming International, Inc. (RPFI), resulted in
the increase in income attributable to minority interests.
FORWARD-LOOKING INFORMATION.
Information or statements provided by or on behalf of the Company from time
to time, including those within this Form 10-Q Quarterly Report, may contain
certain "forward-looking information," including information relating to
anticipated growth in revenues or earnings per share, anticipated changes in
the amount and composition of assets under management, anticipated expense
levels, and expectations regarding financial market conditions. The Company
cautions readers that any forward-looking information provided by or on
behalf of the Company is not a guarantee of future performance. Actual
results may differ materially from those in forward-looking information as a
result of various factors, including but not limited to those discussed
below. Further, such forward-looking statements speak only as of the date on
which such statements are made, and the Company undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events.
The Company's future revenues may fluctuate due to factors such as: the
total value and composition of assets under management and related cash
inflows or outflows in mutual funds and private accounts; fluctuations in the
worldwide financial markets, including those in emerging countries, resulting
in appreciation or depreciation of assets under management; the relative
investment performance of the Company's sponsored investment portfolios and
private accounts as compared to competing offerings and market indices; the
extent to which performance-based investment advisory fees are earned from
private accounts; the expense ratios of the Company's sponsored investment
portfolios; investor sentiment and investor confidence in mutual funds; the
ability of the Company to maintain investment management fees at current
levels; competitive conditions in the mutual funds industry; the introduction
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of new mutual funds and investment portfolios; the ability of the Company to
contract with the Funds for payment for administrative services offered to
the Funds and their shareholders; the continuation of trends in the
retirement plan marketplace favoring defined contribution plans and
participant-directed investments; and the amount and timing of income
recognized on the Company's investment portfolio.
The Company's future operating results are also dependent upon the level of
operating expenses, which are subject to fluctuation for the following or
other reasons: changes in the level of advertising expenses in response to
market conditions or other factors; variations in the level of compensation
expense incurred by the Company, including performance-based compensation
based on the Company's financial results, as well as changes in response to
the size of the total employee population, competitive factors, or other
reasons; changes in the manner in which the Company provides international
investment services; expenses and capital costs, including depreciation,
amortization and other non-cash charges, incurred by the Company to maintain
its administrative and service infrastructure, including costs incurred with
respect to readiness for Year 2000 processing; unanticipated costs that may
be incurred by the Company from time to time to protect investor accounts and
client goodwill; and third-party noncompliance in Year 2000 processing.
The Company's revenues are substantially dependent on revenues from the
Funds, which could be adversely affected if the independent directors of one
or more of the Funds determined to terminate or significantly alter the terms
of one or more investment management agreements.
The Company's business is also subject to substantial governmental
regulation, and changes in legal, regulatory, accounting, tax, and compliance
requirements may have a substantial effect on the Company's business and
results of operations, including but not limited to effects on the level of
costs incurred by the Company and effects on investor interest in mutual
funds in general or in particular classes of mutual funds.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Because the Company's market capitalization on January 28, 1997 was less than
$2.5 billion, this item is not applicable until the filing of the 1998 Form
10-K Annual Report.
PART II. OTHER INFORMATION.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1998 annual meeting of the Company's stockholders was held on April 16,
1998. The Company's proxy statement and solicitation pertaining to this
meeting were previously filed with the Commission. Shares eligible to vote
were 59,254,226 as of the record date of February 13, 1998.
Management's 14 nominees for the Board of Directors were elected to hold
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office until the next annual meeting of stockholders and until their
respective successors are elected and have qualified. The tabulation of
votes was:
Nominee For Withheld
________________ __________ _________
J.E. Halbkat, Jr. 51,122,088 650,059
H.H. Hopkins 51,105,120 707,027
J.A.C. Kennedy 51,014,787 797,360
J.H. Laporte 51,023,078 789,069
R.L. Menschel 51,102,802 709,345
W.T. Reynolds 51,095,336 716,812
J.S. Riepe 50,999,104 813,043
G.A. Roche 51,104,023 708,125
B.C. Rogers 51,123,144 689,004
J.W. Rosenblum 51,121,293 690,854
R.L. Strickland 51,104,458 707,689
M.D. Testa 51,121,771 690,376
P.C. Walsh 51,118,644 693,503
A.M. Whittemore 51,121,578 690,569
The charter amendment to effect a two-for-one stock split and to increase the
Company's authorized common shares to 500,000,000 was approved by a vote of
41,930,290 for; 9,757,992 against; and 45,089 abstentions. Broker non-votes
were 78,776.
The 1998 Director Stock Option Plan was approved by a vote of: 39,206,784
for; 12,256,330 against; and 349,032 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits required to be filed by Item 601 of Regulation S-K
are filed herewith and incorporated by reference herein:
3.(i) - Composite Restated Charter of T. Rowe Price Associates, Inc. as
of April 16, 1998.
15 - Letter from Price Waterhouse LLP, independent accountants, re
unaudited interim financial information.
27 - Financial Data Schedule.
All other items in Part II are omitted because they are not applicable or the
answers are none.
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SIGNATURES.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on April 23, 1998.
T. Rowe Price Associates, Inc.
/s/ Alvin M. Younger, Jr., Chief Financial & Accounting Officer
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EXHIBIT 3.(i)
T. ROWE PRICE ASSOCIATES, INC.
COMPOSITE RESTATED CHARTER
(restated as of April 16, 1998)
FIRST: That we, the subscribers, T. ROWE PRICE, WALTER H. KIDD and
CHARLES W. SHAEFFER, the post-office address of each of whom is 10
Light Street, Baltimore 2, Maryland, all being of full legal age,
do under and by virtue of the General Laws of the State of
Maryland, authorizing the formation of corporation, associate
ourselves with the intention of forming a corporation,
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
T. ROWE PRICE ASSOCIATES, INC.
THIRD: The purposes for which and any of which the Corporation is formed
and the business and objects to be carried on and promoted by it
are:
(1) To advise and confer with clients in respect of their
investments, changes in investments, and reinvestments and
anything relating thereto; to act as agent for clients in making
and implementing investment decisions and recommendations on a
discretionary basis; to conduct investigations and examinations of
businesses and enterprises of every kind and description with the
aim of securing information and particulars for the investment and
employment of capital; and to undertake and transact all kinds of
business relating to financial counseling and investments.
(2) To acquire by purchase, subscription, or otherwise, and to
receive, hold, own, guarantee, sell, assign, exchange, transfer,
mortgage, pledge, or otherwise dispose of or deal in and with any
and all securities, as such term is hereinafter defined, issued or
created by any corporation, firm, or other entity, public or
private, whether formed under the laws of the United States of
America or of any state, commonwealth, territory, dependency, or
possession thereof, or of any foreign country or of any state,
commonwealth, territory, dependency, possession, or other
political subdivision thereof, or issued or created by the United
States of America or any state or commonwealth thereof, or by any
foreign country, or by any agency, subdivision, territory,
dependency, possession, municipality, or other political
subdivision of any of the foregoing, and as owner thereof to
possess and exercise all the rights, powers, and privileges of
ownership including the right to exercise consents and vote
thereon, and to do any and all acts and things necessary or
advisable for the preservation, protection, improvement, and
enhancement in value thereof.
<PAGE> 2
(3) To engage in any one or more businesses or transactions, or
to acquire all or any portion of any entity engaged in any one or
more businesses or transactions which the Board of Directors may
from time to time authorize or approve, whether or not related to
the business described elsewhere in this Article or to any other
business at the time or theretofore engaged in by the Corporation.
The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the
terms of any other clause of this or any other Article of the
charter of the Corporation, and each shall be regarded as
independent; and they are intended to be and shall be construed as
powers as well as purposes and objects of the Corporation and
shall be in addition to and not in limitation of the general
powers of corporations under the General Laws of the State of
Maryland.
FOURTH: The present address of the principal office of the Corporation in
this State is 100 East Pratt Street, Baltimore, Maryland 21202.
FIFTH: The name and address of the resident agent of the Corporation in
this State are Alvin M. Younger, Jr., 100 East Pratt Street,
Baltimore, Maryland 21202. Said resident agent is a citizen of the
State of Maryland who resides there.
SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 520,000,000 shares of
capital stock (par value $.20 per share) amounting in aggregate
par value to $104,000,000, of which 500,000,000 shares (par value
$.20 per share) amounting in aggregate par value to $100,000,000
are classified as "Common Stock" and 20,000,000 shares (par value
$.20 per share) amounting in aggregate par value to $4,000,000 are
classified as "Preferred Stock."
(b) The following is a description of the preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption
of the Common Stock and the Preferred Stock of the Corporation:
COMMON STOCK
(1) The Common Stock shall not be subject to classification or
reclassification by the Board of Directors, and shall have the
rights and terms hereinafter specified, subject to the terms of
any other stock provided in the charter pursuant to
classification or reclassification by the Board of Directors or
otherwise in accordance with law.
(2) Subject to the provisions of Article EIGHTH, Section (3)
of the charter of the Corporation, each share of Common Stock
shall have one vote, and, except as otherwise provided in
<PAGE> 3
respect of any Preferred Stock, the exclusive voting power for
all purposes shall be vested in the holders of the Common
Stock.
(3) Subject to the provisions of law and any preferences of
any Preferred Stock, dividends, including dividends payable in
shares of another class of the Corporation's stock, may be paid
on the Common Stock of the Corporation at such time and in such
amounts as the Board of Directors may deem advisable.
(4) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the
holders of the Common Stock shall be entitled, after payment or
provision for payment of the debts and other liabilities of the
Corporation and the amount to which the holders of any
Preferred Stock shall be entitled, to share ratably in the
remaining net assets of the Corporation.
PREFERRED STOCK
(5) The Board of Directors shall have authority to classify
and reclassify any unissued shares of Preferred Stock by fixing
or altering in any one or more respects from time to time
before issuance the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such
shares of stock; provided, that the Board of Directors shall
not classify or reclassify any of such shares into shares of
the Common Stock, or into any class or series of stock (i)
which is not prior to the Common Stock either as to dividends
or upon liquidation and (ii) which is not limited in some
respect either as to dividends or upon liquidation. Subject to
the foregoing, the power of the Board of Directors to classify
and reclassify any of the shares of Preferred Stock shall
include, without limitation, subject to the provisions of the
charter, authority to classify or reclassify any unissued
shares of such stock into a class or classes of preferred
stock, preference stock, special stock or other stock, and to
divide and classify shares of any class into one or more series
of such class, by determining, fixing, or altering one or more
of the following:
(a) The distinctive designation of such class or series and
the number of shares to constitute such class or series;
provided that, unless otherwise prohibited by the terms of
such or any other class or series, the number of shares of
any class or series may be decreased by the Board of
Directors in connection with any classification or
reclassification of unissued shares and the number of shares
of such class or series may be increased by the Board of
Directors in connection with any such classification or
<PAGE> 4
reclassification, and any shares of any class or series which
have been redeemed, purchased, otherwise acquired or
converted into shares of Common Stock or any other class or
series shall become part of the authorized capital stock and
be subject to classification and reclassification as provided
in this Section.
(b) Whether or not and, if so, the rates, amounts and times
at which, and the conditions under which, dividends shall be
payable on shares of such class or series, whether any such
dividends shall rank senior or junior to or on a parity with
the dividends payable on any other class or series of
Preferred Stock, and the status of any such dividends as
cumulative, cumulative to a limited extent or non-cumulative
and as participating or non-participating.
(c) Whether or not shares of such class or series shall have
voting rights, in addition to any voting rights provided by
law and, if so, the terms of such voting rights.
(d) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and
conditions thereof, including provision for adjustment of the
conversion or exchange rate in such events or at such times
as the Board of Directors shall determine.
(e) Whether or not shares of such class or series shall be
subject to redemption and, if so, the terms and conditions of
such redemption, including the date or dates upon or after
which they shall be redeemable and the amount per share
payable in case of redemption, which amount may vary under
different conditions and at different redemption dates; and
whether or not there shall be any sinking fund or purchase
account in respect thereof, and if so, the terms thereof.
(f) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of the
affairs of, or upon any distribution of the assets of, the
Corporation, which rights may vary depending upon whether
such liquidation, dissolution or winding up is voluntary or
involuntary and, if voluntary, may vary at different dates,
and whether such rights shall rank senior or junior to or on
a parity with such rights of any other class or series of
stock.
(g) Whether or not there shall be any limitations
applicable, while shares of such class or series are
outstanding, upon the payment of dividends or making of
distributions on, or the acquisition of, or the use of moneys
for purchase or redemption of, any stock of the Corporation,
or upon any other action of the Corporation, including action
<PAGE> 5
under this Section, and, if so, the terms and conditions
thereof.
(h) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares
of such class or series, not inconsistent with law and the
charter of the Corporation.
(6) For the purposes hereof and of any articles supplementary
to the charter providing for the classification or
reclassification of any shares of Preferred Stock or of any
other charter document of the Corporation (unless otherwise
provided in any such articles or document), any class or series
of stock of the Corporation shall be deemed to rank:
(a) prior to another class or series either as to dividends
or upon liquidation, if the holders of such class or series
shall be entitled to the receipt of dividends or of amounts
distributable on liquidation, dissolution or winding up, as
the case may be, in preference or priority to holders of such
other class or series;
(b) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend
rates, dividend payment dates or redemption or liquidation
price per share thereof be different from those of such
others, if the holders of such class or series of stock shall
be entitled to receipt of dividends or amounts distributable
upon liquidation, dissolution or winding up, as the case may
be, in proportion to their respective dividend rates or
redemption or liquidation prices, without preference or
priority over the holders of such other class or series; and
(c) junior to another class or series either as to dividends
or upon liquidation, if the rights of the holders of such
class or series shall be subject or subordinate to the rights
of the holders of such other class or series in respect of
the receipt of dividends or the amounts distributable upon
liquidation, dissolution or winding up, as the case may be.
SEVENTH: The number of directors of the Corporation shall be 14, which
number may be increased or decreased pursuant to the By-Laws of
the Corporation, but shall never be less than the minimum number
permitted by the General Laws of the State of Maryland now or
hereafter in force. The names of the directors who will serve
until the next annual meeting and until their successors are
elected and qualify are as follows:
<PAGE> 6
James E. Halbkat, Jr.
Henry H. Hopkins
James A.C. Kennedy
John H. Laporte
Richard L. Menschel
William T. Reynolds
James S. Riepe
George A. Roche
Brian C. Rogers
John W. Rosenblum
Robert L. Strickland
M. David Testa
Philip C. Walsh
Anne Marie Whittemore
EIGHTH: The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation
and of the directors and stockholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, or securities convertible
into shares of its stock of any class or classes, whether now or
hereafter authorized, for such consideration as may be deemed
advisable by the Board of Directors and without any action by the
stockholders.
(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any
preemptive right to subscribe for or purchase any stock or any
other securities of the Corporation other than such, if any, as
the Board of Directors, in its sole discretion, may determine and
at such price or prices and upon such other terms as the Board of
Directors, in its sole discretion, may fix; and any stock or other
securities which the Board of Directors may determine to offer for
subscription may, as the Board of Directors in its sole discretion
shall determine, be offered to the holders of any class, series or
type of stock or other securities at the time outstanding to the
exclusion of the holders of any or all other classes, series, or
types of stock or other securities at the time outstanding.
(3)(a) For purposes of this Paragraph (3), the following words
have the meanings indicated:
(i) "Affiliate", including the term "affiliated person", means
a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
(ii) "Associate", when used to indicate a relationship with
any person, means:
<PAGE> 7
(A) Any corporation or organization, other than the
Corporation or a subsidiary of the Corporation, of which such
person is an officer, director, or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class
of equity securities;
(B) Any trust or other estate in which such person has a
substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity;
(C) Any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person; and
(D) Any relative or spouse of such person, or any relative
of such spouse who is a director or officer of the
Corporation or any of its affiliates.
(iii) "Beneficial Owner", when used with respect to any Voting
Stock, means a person:
(A) That is the beneficial owner of Voting Stock, directly
or indirectly;
(B) The Affiliate or Associate of which is the beneficial
owner of Voting Stock, directly or indirectly;
(C) That has, or whose Affiliate or Associate has,
(I) The right to acquire Voting Stock (whether such right
is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement, or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise; or
(II) The right to vote Voting Stock pursuant to any
agreement, arrangement, or understanding; or
(III) Any agreement, arrangement, or understanding for
the purpose of acquiring, holding, voting, or disposing of
Voting Stock with any other person that beneficially owns,
or whose Affiliates or Associates beneficially own,
directly or indirectly, such shares of Voting Stock;
provided, that directors, officers, and employees of the
Corporation shall not be deemed to have any such
agreement, arrangement, or understanding on the basis of
their status, or actions taken in their capacities, as
directors, officers, or employees of the Corporation or
any subsidiaries of the Corporation or as general or
limited partners of partnerships formed to make
investments or on the basis of their voting Voting Stock
with respect to management proposals.
<PAGE> 8
(D) For purposes of subparagraph (a) (iii) of this Paragraph
(3), (I) the solicitation of revocable proxies and the voting
thereof by proxy holders in connection with annual or special
meetings of stockholders prior to the time the Corporation is
subject to the proxy rules under the Securities Exchange Act
of 1934 or thereafter in accordance with such proxy rules,
and (II) statements of recommendations on matters to be
submitted for stockholder approval or intentions to vote
Voting Stock of which such persons are the Beneficial Owners
prior to the time the Corporation is subject to the proxy
rules under the Securities Exchange Act of 1934 or thereafter
in accordance with such proxy rules shall not constitute
agreements, arrangements, or understandings for the purpose
of acquiring, holding, voting, or disposing of Voting Stock.
(iv) "Control", including the terms "controlling", "controlled
by", and "under common control with", means the possession,
directly or indirectly, of the power to vote or cause the
direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise, and the beneficial ownership of 10% or more of the
votes entitled to be cast by a corporation's voting stock
creates a presumption of control.
(v) "Group", when used to indicate those additional persons
whose Voting Stock is Beneficially Owned by a person, shall
include:
(A) the person,
(B) the Affiliates and Associates of the person; and
(C) any additional person whose stock is Beneficially Owned
by the person or an Affiliate or Associate of the person;
and shall include all persons that jointly file a statement of
beneficial ownership pursuant to Section 13(d) of the
Securities Exchange Act of 1934, irrespective of any
disclaimers of beneficial ownership.
(vi) "Voting Stock" means shares of capital stock of the
Corporation entitled to vote generally in the election of
directors.
(b) A person or Group that is the Beneficial Owner of more than
15% of any class of Voting Stock shall have the right to vote not
more than 15% of the shares of such class, and the remaining
shares Beneficially Owned by such person or Group shall be
deducted from the total number of shares of Voting Stock of such
class for purposes of determining the proportion of Voting Stock
required to approve a matter submitted for stockholder approval.
<PAGE> 9
In the case of a Group, the votes of individual members of a Group
shall be reduced on a pro rata basis for purposes of determining
which shares of such class of Voting Stock shall be voted so that
the Group shall have in the aggregate the right to vote not more
than 15% of the shares of such class of Voting Stock. A person
that is a member of more than one Group shall vote the least
number of shares of a class of voting stock that he may vote as a
member of any such Group.
(c) The operation of this Paragraph (3) shall not create any
presumptions of control for purposes of the Investment Company Act
of 1940.
(4) The Board of Directors shall have power from time to time and
in its sole discretion to determine in accordance with sound
accounting practice, what constitutes annual or other net profits,
earnings, surplus, or net assets in excess of capital; to fix and
vary from time to time the amount to be reserved as working
capital, or determine that retained earnings or surplus shall
remain in the hands of the Corporation; to set apart out of any
funds of the Corporation such reserve or reserves in such amount
or amounts and for such proper purpose or purposes as it shall
determine and to abolish any such reserve or any part thereof; to
distribute and pay distributions or dividends in stock, cash or
other securities or property, out of surplus or any other funds or
amounts legally available therefor, at such times and to the
stockholders of record on such dates as it may, from time to time,
determine; and to determine whether and to what extent and at what
times and places and under what conditions and regulations the
books, accounts and documents of the Corporation, or any of them,
shall be open to the inspection of stockholders, except as
otherwise provided by statute or by the By-Laws, and, except as so
provided, no stockholder shall have any right to inspect any book,
account, or document of the Corporation unless authorized so to do
by resolution of the Board of Directors.
(5) Notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a
majority of the total number of shares of all classes of capital
stock, such action shall be valid and effective if authorized by
the affirmative vote of the holders of a majority of the total
number of shares of all classes outstanding and entitled to vote
thereon, except that the affirmative vote of the holders of
two-thirds of the total number of shares of all classes
outstanding and entitled to vote thereon shall be required to
amend, repeal, or adopt any provision inconsistent with Article
EIGHTH, Section (3).
(6) A contract or other transaction between the Corporation and
any of its directors or between the Corporation and any other
Corporation, firm or other entity in which any of its directors is
<PAGE> 10
a director or has a material financial interest is not void or
voidable solely because of any one or more of the following: the
common directorship or interest; the presence of the director at
the meeting of the Board of Directors which authorizes, approves,
or ratifies the contract or transaction; or the counting of the
vote of the director for the authorization, approval, or
ratification of the contract or transaction. This Section applies
if:
(a) the fact of the common directorship or interest is
disclosed or known to: the Board of Directors and the Board
authorizes, approves, or ratifies the contract or transaction
by the affirmative vote of a majority of disinterested
directors, even if the disinterested directors constitute less
than a quorum; or the stockholders entitled to vote, and the
contract or transaction is authorized, approved, or ratified by
a majority of the votes cast by the stockholders entitled to
vote other than the votes of shares owned of record or
beneficially by the interested director or Corporation, firm,
or other entity; or
(b) the contract or transaction is fair and reasonable to the
Corporation.
Common or interested directors or the stock owned by them or by an
interested corporation, firm, or other entity may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or at a meeting of the stockholders, as the case may be,
at which the contract or transaction is authorized, approved, or
ratified. If a contract or transaction is not authorized,
approved, or ratified in one of the ways provided for in clause
(a) of the second sentence of this Section, the person asserting
the validity of the contract or transaction bears the burden of
proving that the contract or transaction was fair and reasonable
to the Corporation at the time it was authorized, approved, or
ratified. The procedures in this Section do not apply to the
fixing by the Board of Directors of reasonable compensation for a
director, whether as a director or in any other capacity.
(7) The Corporation shall indemnify (a) its directors to the full
extent provided by the general laws of the State of Maryland now
or hereafter in force, including the advance of expenses under the
procedures provided by such laws; (b) its officers to the same
extent it shall indemnify its directors; and (c) its officers who
are not directors to such further extent as shall be authorized by
the Board of Directors and be consistent with law. The foregoing
shall not limit the authority of the Corporation to indemnify
other employees and agents consistent with law.
(8) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer
<PAGE> 11
of this Corporation shall be personally liable to the Corporation
or its stockholders for money damages. No amendment or repeal of
any of its provisions shall limit or eliminate the benefits
provided to directors and officers under this provision with
respect to any act or omission which occurred prior to such
amendment or repeal.
(9) The Corporation reserves the right from time to time to make
any amendments of its charter which may now or hereafter be
authorized by law, including any amendments changing the terms or
contract rights, as expressly set forth in its charter, of any of
its outstanding stock by classification, reclassification, or
otherwise, but no such amendment which changes such terms or
contract rights of any of its outstanding stock shall be valid
unless such amendment shall have been authorized by not less than
a majority of the aggregate number of the votes entitled to be
cast thereon, by a vote at a meeting or in writing with or without
a meeting.
The enumeration and definition of particular powers of the Board
of Directors included in the foregoing shall in no way be limited
or restricted by reference to or inference from the terms of any
other clause of this or any other Article of the charter of the
Corporation, or construed as or deemed by inference or otherwise
in any manner to exclude or limit any powers conferred upon the
Board of Directors under the General Laws of the State of Maryland
now or hereafter in force.
NINTH: The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, we have signed this certificate of incorporation on
December 31, 1946.
/s/ T. Rowe Price
/s/ Walter H. Kidd
/s/ Charles W. Shaeffer
EXHIBIT 15
April 22, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that our report dated April 22, 1998 (issued pursuant to the
provisions of Statement on Auditing Standards No. 71) is incorporated by
reference in the Prospectuses constituting parts of T. Rowe Price Associates,
Inc.'s Registration Statements on Form S-8 (No. 033-07012, No. 033-08672, No.
033-37573, No. 033-72568, No. 033-58749 and No. 333-20333). We are also
aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed consolidated financial statements of T. Rowe Price
Associates, Inc. included in Part I, Item 1 of the accompanying Form 10-Q
Quarterly Report for the period ended March 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000080255
<NAME> T. ROWE PRICE ASSOCIATES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 215,793,000
<SECURITIES> 200,604,000
<RECEIVABLES> 94,255,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 142,737,000<F2>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 688,941,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 23,741,000<F5>
<OTHER-SE> 509,480,000<F5>
<TOTAL-LIABILITY-AND-EQUITY> 688,941,000
<SALES> 0
<TOTAL-REVENUES> 210,434,000
<CGS> 0
<TOTAL-COSTS> 134,838,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75,596,000
<INCOME-TAX> 28,927,000
<INCOME-CONTINUING> 41,290,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,290,000
<EPS-PRIMARY> .35<F4><F5>
<EPS-DILUTED> .32<F5>
<FN>
<F1>Item is not contained in registrant's unclassified balance sheet.
<F2>Item is reported net of accumulated depreciation at interim.
<F3>Not reported at interim.
<F4>Basic earnings per share.
<F5>Restated for April 30, 1998 two-for-one stock split.
</FN>
</TABLE>
