<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: JUNE 30, 1999.
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. 121,390,478 SHARES AT
JULY 26, 1999.
Exhibit index is at Item 6(a) on page 14.
<PAGE> 2
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
T. ROWE PRICE ASSOCIATES, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
12/31/98 06/30/99
________ ________
ASSETS
Cash and cash equivalents $283,838 $361,584
Accounts receivable 100,702 108,530
Investments in sponsored mutual funds 192,914 208,290
Other investments 26,597 33,016
Property and equipment 166,612 186,710
Other assets 26,121 22,899
________ ________
$796,784 $921,029
________ ________
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 45,737 $ 32,835
Accrued compensation and related costs 56,757 65,318
Income taxes payable 15,308 18,327
Dividends payable 12,012 12,130
Debt -- 15,014
Minority interests in consolidated subsidiaries 52,666 63,581
________ ________
Total liabilities 182,480 207,205
________ ________
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, undesignated, $.20 par value -
authorized and unissued 20,000,000 shares -- --
Common stock, $.20 par value - authorized
500,000,000 shares; issued 120,183,266 shares in
1998 and 121,353,820 shares in 1999 24,037 24,271
Capital in excess of par value 41,073 48,273
Retained earnings 517,631 600,516
Accumulated other comprehensive income 31,563 40,764
________ ________
Total stockholders' equity 614,304 713,824
________ ________
$796,784 $921,029
________ ________
________ ________
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 Six months
ended ended
_________________ _________________
06/30/98 06/30/99 06/30/98 06/30/99
________ ________ ________ ________
Revenues
Investment advisory fees $176,750 $191,545 $340,467 $382,423
Administrative fees 43,361 48,379 85,525 97,596
Investment and other income 2,198 5,847 6,751 11,578
________ ________ ________ ________
222,309 245,771 432,743 491,597
________ ________ ________ ________
Expenses
Compensation and related costs 75,906 82,932 146,306 164,395
Advertising and promotion 16,983 16,268 37,055 36,493
Occupancy and equipment 20,071 21,402 38,956 42,349
International investment
research fees 12,553 12,581 25,113 24,725
Other operating expenses 15,042 17,115 27,963 32,925
________ ________ ________ ________
140,555 150,298 275,393 300,887
________ ________ ________ ________
Income before income taxes and
minority interests 81,754 95,473 157,350 190,710
Provision for income taxes 31,602 36,657 60,529 72,945
________ ________ ________ ________
Income from consolidated companies 50,152 58,816 96,821 117,765
Minority interests in consolidated
subsidiaries 5,283 5,126 10,662 10,662
________ ________ ________ ________
Net income $ 44,869 $ 53,690 $ 86,159 $107,103
________ ________ ________ ________
________ ________ ________ ________
Basic earnings per share $ .38 $ .44 $ .72 $ .89
________ ________ ________ ________
________ ________ ________ ________
Diluted earnings per share $ .34 $ .41 $ .66 $ .82
________ ________ ________ ________
________ ________ ________ ________
Dividends declared per share $ .085 $ .10 $ .17 $ .20
________ ________ ________ ________
________ ________ ________ ________
Weighted average shares outstanding 119,209 121,152 118,854 120,834
________ ________ ________ ________
________ ________ ________ ________
Weighted average shares outstanding-
assuming dilution 130,598 130,062 130,267 129,827
________ ________ ________ ________
________ ________ ________ ________
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
__________________
06/30/98 06/30/99
________ ________
Cash flows from operating activities
Net income $ 86,159 $107,103
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property
and equipment 15,900 15,421
Minority interests in consolidated subsidiaries 10,662 10,662
Other changes in assets and liabilities 613 (1,545)
________ ________
Net cash provided by operating activities 113,334 131,641
________ ________
Cash flows from investing activities
Investments in sponsored mutual funds (13,330) (1,018)
Proceeds from disposition of sponsored mutual funds 3,957 --
Other investments (579) (23,792)
Distributions from other investments 2,116 10,002
Additions to property and equipment (24,874) (31,500)
________ ________
Net cash used in investing activities (32,710) (46,308)
________ ________
Cash flows from financing activities
Purchases of stock -- (3,669)
Receipts relating to stock issuances 4,855 5,186
Proceeds of bank borrowing -- 15,019
Dividends paid to stockholders (20,127) (24,100)
Distributions to minority interests (17,030) (23)
________ ________
Net cash used in financing activities (32,302) (7,587)
________ ________
Cash and cash equivalents
Net increase during period 48,322 77,746
At beginning of year 200,409 283,838
________ ________
At end of period $248,731 $361,584
________ ________
________ ________
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, 1998,
120,183,266 common shares $24,037 $41,073 $517,631 $31,563 $614,304
Comprehensive income
Net income 107,103
Change in unrealized
security holding gains 9,201
Total comprehensive income 116,304
1,284,054 common shares
issued under stock-based
compensation plans 257 10,847 11,104
113,500 common shares
repurchased (23) (3,647) (3,670)
Dividends declared (24,218) (24,218)
_______ _______ ________ _______ ________
Balance at June 30, 1999,
121,353,820 common shares $24,271 $48,273 $600,516 $40,764 $713,824
_______ _______ ________ _______ ________
_______ _______ ________ _______ ________
See the accompanying notes to the condensed consolidated financial
statements.
<PAGE> 6
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 and net income primarily from investment
advisory services provided to individual and institutional investors in the
Company's sponsored mutual funds and private account investment portfolios.
The Company also provides investment advisory clients with related
administrative services, including mutual fund transfer agent, defined
contribution retirement plan recordkeeping, discount brokerage, and trust
services. The Company's clients are primarily domiciled in the United States
of America.
Investment advisory revenues are largely dependent on the total value and
composition of assets under management; accordingly, fluctuations in
financial markets and in the composition of assets under management impact
revenues and results of operations.
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 1998 Annual Report.
NOTE 2 - CHANGE IN ACCOUNTING PRINCIPLE.
On January 1, 1999, the Company prospectively adopted a new accounting
principle requiring the capitalization and subsequent amortization of certain
costs of computer software developed or obtained for internal use. This
change is not material to the Company's 1999 results of operations.
NOTE 3 - OTHER INVESTMENTS.
On April 5, 1999, the Company acquired a 10% interest in Daiwa SB Investments
Ltd., a Japan-based investment management venture with Sumitomo Bank and
Daiwa Securities. The Company accounts for this $15,019,000 investment using
the cost method.
NOTE 4 - DEBT.
On April 2, 1999, the Company borrowed 1,809,500,000 yen ($15,019,000) from a
bank under a five-year promissory note due in installments of 180,950,000 yen
in each of 2002 and 2003 and the balance of 1,447,600,000 yen in 2004.
Interest is due quarterly at LIBOR for yen-denominated transactions plus .95%
and is fixed for the first two years of the borrowing at 1.42%. Foreign
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currency transaction gains or losses related to this borrowing are included
in investment and other income.
NOTE 5 - INFORMATION ABOUT REVENUES AND SERVICES.
The Company's revenues (in thousands) from advisory services provided under
agreements with its sponsored mutual funds and other investment clients
during the first six months include:
1998 1999
________ ________
Sponsored mutual funds
Stock and balanced
Domestic $148,392 $167,659
International 59,476 57,199
Bond and money market 44,383 48,855
________ ________
252,251 273,713
Other portfolios 88,216 108,710
________ ________
Total investment advisory fees $340,467 $382,423
________ ________
________ ________
The following table summarizes the various investment portfolios and assets
under management (in billions) on which the Company earns its advisory fees.
Average during
first 6 months
_______________
1998 1999 12/31/98 06/30/99
______ ______ ________ ________
Sponsored mutual funds
Stock and balanced
Domestic $ 51.2 $ 58.4 $ 55.9 $ 63.9
International 16.8 16.3 16.4 16.6
Bond and money market 20.1 22.3 22.1 22.1
______ ______ ______ ______
88.1 97.0 94.4 102.6
Other portfolios 47.7 54.4 53.4 56.6
______ ______ ______ ______
$135.8 $151.4 $147.8 $159.2
______ ______ ______ ______
______ ______ ______ ______
Fees for advisory-related administrative services provided to the funds were
$63,403,000 and $72,137,000 in the first six months of 1998 and 1999,
respectively. Accounts receivable from the funds aggregate $59,700,000 at
June 30, 1999.
<PAGE> 8
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 June 30, 1999 and for the
three- and six-month periods ended June 30, 1998 and 1999, appearing on pages
two through seven 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 previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, 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, 1999 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,
1998, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
July 23, 1999
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.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL.
The Company derives its revenue and net income primarily from investment
advisory services provided to individual and institutional investors in the
Company's sponsored mutual funds and private account investment portfolios.
The Company also provides investment advisory clients with related
administrative services, including mutual fund transfer agent, defined
contribution retirement plan recordkeeping, discount brokerage, and trust
services. The Company's clients are primarily domiciled in the United
States.
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. Investment
advisory revenues are largely dependent on the total value and composition of
assets under management; accordingly, fluctuations in financial markets and
in the composition of assets under management impact revenues and results of
operations. At June 30, 1999, assets under management totaled $159.2
billion, including $102.6 billion in the mutual funds. Equity investments
comprise 74% of all assets under management at the end of June 1999.
This management's discussion and analysis should be read in conjunction with
that contained in the 1998 Annual Report.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1999 VERSUS 1998.
Net income increased $8.8 million or 20% to $53.7 million, or diluted
earnings per share of $0.41, from $44.9 million or diluted earnings per share
of $0.34. Total revenues increased almost 11% from $222 million to nearly
$246 million, led by an increase of nearly $15 million in investment advisory
fees.
Investment advisory revenues earned from the mutual fund investment
portfolios increased $10.0 million as average mutual fund assets under
management were $99.5 billion, up $8.4 billion from the 1998 period. Fund
assets rose $7.1 billion during the second quarter and totaled more than
$102.6 billion at June 30, 1999, including $80.5 billion in stock and
balanced funds. Net cash inflows to the funds during the quarter totaled
$324 million, including net inflows of $799 million into domestic stock funds
offset in part by net outflows of $219 million from bond and money market
funds and $256 million from international stock funds. The balance of the
increase in mutual fund assets was due to appreciation and reinvested income.
Fees earned from other investment portfolios, including subadvised variable
annuity funds, contributed the balance of the advisory revenue gains. Assets
under management in other investment portfolios rose to $56.6 billion at June
30, 1999, up $2.9 billion since March 31, 1999. Total assets under
management closed the quarter at $159.2 billion, up from $149.2 billion at
<PAGE> 10
March 31, 1999. International assets under management by the Company's 50%
owned consolidated subsidiary, Rowe Price-Fleming International, were up
modestly to end the quarter at $33.3 billion, including $17.7 billion in the
mutual funds.
Administrative fees from advisory-related services to the funds and their
shareholders rose $5 million to $48.4 million. These increases were
primarily attributable to defined contribution retirement plan recordkeeping
services; however, increased operating expenses, including preparations for
Year 2000 processing, offset these gains. Commissions earned on greater
trading volume in discount brokerage contributed $1.7 million of the
administrative revenues increase.
Investment and other income was up $3.7 million, including $1.5 million of
additional income from the Company's greater money market mutual fund
investments. Losses recognized in 1998 from the decline in value of
investment portfolios held by certain partnerships in which the Company
invests did not recur in 1999.
Operating expenses increased 7% to $150.3 million. Greater compensation and
related costs, which were up $7.0 million, were attributable to increases in
rates of compensation, including performance-related bonuses, and an increase
in staff size primarily to support the Company's growing investment-related
administrative services and technology support operations. At June 30, 1999,
the Company employed nearly 3,600 associates. Occupancy and equipment
expense was up due to the expansion of operating facilities and equipment
acquisitions, primarily investments in technology. Other expenses increased
largely in support of the Company's growing operations.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1999 VERSUS 1998.
Net income increased $20.9 million or 24% to $107.1 million, or diluted
earnings per share of $0.82, from $86.2 million or diluted earnings per share
of $0.66. Total revenues increased about 14% from $433 million to nearly
$492 million, led by an increase of $42 million in investment advisory fees.
Investment advisory revenues earned from the mutual fund investment
portfolios increased $21.5 million as average mutual fund assets under
management were $97.0 billion, $8.9 billion more than during the 1998 period.
Net cash inflows to the funds during the first half totaled $571 million,
including inflows of $1.2 billion into domestic stock funds and nearly $200
million into money market funds, offset in part by outflows of $750 million
from international funds. The balance of the increase in mutual fund assets
was due to appreciation and reinvested income. Fees earned from other
investment portfolios, including subadvised variable annuity funds,
contributed the balance of the advisory revenue gains, including $7.1 million
of increased performance-based advisory fees earned primarily on assets
managed in sponsored partnerships. Total assets under management closed the
quarter at $159.2 billion, up from $147.8 billion at the end of 1998.
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Administrative fees from advisory-related services to the funds and their
shareholders rose $12.1 million to $97.6 million. These increases were
primarily attributable to defined contribution retirement plan recordkeeping
services; however, increased operating expenses, including preparations for
Year 2000 processing, offset these gains. Commissions earned on greater
trading volume in discount brokerage contributed $3.7 million of the revenue
increase.
Investment and other income rose $4.8 million, largely from greater income on
the Company's larger money market mutual fund investments and gains
recognized by certain sponsored partnerships in which the Company invests.
Operating expenses increased 9% to $300.9 million. Greater compensation and
related costs, which were up $18.1 million, were attributable to increases in
rates of compensation, including performance-related bonuses, and the
increase in staff size. Occupancy and equipment expense was up due to the
expansion of operating facilities and equipment acquisitions, primarily
investments in technology. Other expenses increased $5.0 million in support
of the Company's growing operations.
CAPITAL RESOURCES AND LIQUIDITY.
See Notes 3 and 4 on page 6 of this Quarterly Report for a discussion
concerning borrowings and investments made in April 1999.
YEAR 2000 PROCESSING ISSUE UPDATE.
In April 1999, the Company completed its participation in the street-wide
testing conducted by the Securities Industry Association (SIA) and securities
industry firms, and experienced no Year 2000-related errors in its testing.
The SIA's report on the testing noted that "industry-wide testing results are
encouraging and support the conclusion that the U.S. securities industry as a
whole is well positioned to achieve Year 2000 compliance."
At June 30, 1999, the Company's mission critical systems efforts were
complete. The Company expects that non-mission critical systems efforts will
be completed during the third quarter of 1999.
The Company periodically reviews its contingency plan for mission critical
systems and external dependencies and, from time-to-time, updates it as
necessary. However, in an operation as complex as providing global
investment advisory services, there are limited alternatives to certain
mission critical systems and third-party providers, including electrical
power and communications services. If these services or mission critical
systems such as the mutual fund transfer agent system fail for an extended
period of time, there would likely be a material adverse effect on the
Company's business, results of operations and financial condition. Although
the Company is investigating alternative solutions, it is unlikely that any
adequate contingency plan can be developed for any prolonged failure of these
mission critical services and systems.
<PAGE> 12
Additionally, the investment portfolios from which the Company derives the
majority of its revenues could be subject to increased credit, market and
liquidity risk arising from the impact of Year 2000 issues on the issuers of
individual securities. The Company's investment staff are assessing the Year
2000 risks in the investment portfolios with particular attention to the more
significant holdings. Their findings are included in the information used in
making investment decisions. This process applies to actively managed
portfolios, but not to the index-based investment portfolios where
investments are generally determined by the composition of a third-party
index. Additionally, governments and financial markets around the world
could be affected by Year 2000 issues. To the extent that the market prices
of securities are negatively impacted by these or other Year 2000 issues, the
Company's investment advisory revenues, results of operations and financial
condition could be materially adversely affected.
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.
In addition to those factors discussed above with respect to the Year 2000
processing issue, the Company's future revenues may fluctuate due to other
factors such as: the total value and composition of assets under management
and related cash inflows or outflows in mutual funds and private account
investment portfolios; 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 mutual funds and other investment portfolios as
compared to competing offerings and market indices; the extent to which
performance-based investment advisory fees are earned from private account
investment portfolios; the expense ratios of the Company's sponsored mutual
funds; investor sentiment and investor confidence; the ability of the Company
to maintain investment management and administrative fees at appropriate
levels; competitive conditions in the mutual funds industry; the introduction
of new mutual funds and investment portfolios; the ability of the Company to
contract with the funds for payment for investment advisory-related
administrative services provided to the funds and their shareholders; the
continuation of trends in the retirement plan marketplace favoring defined
<PAGE> 13
contribution plans and participant-directed investments; and the amount and
timing of income recognized on the Company's investment portfolio. The
Company's revenues are substantially dependent on fees earned under contracts
with the funds and 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 and/or related administrative
services agreements.
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 services 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 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 and investing in general or in particular classes of mutual funds or
other investments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Since December 31, 1998, there has been no material change in the information
provided in Item 7A of the 1998 Form 10-K Annual Report.
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
On July 6, 1998, RPFI, the T. Rowe Price International Stock Fund (the
International Stock Fund) and its five directors were named as defendants in
an action, Migdal v. Rowe Price-Fleming International, Inc., et al., filed in
the United States District Court for the District of Maryland. The Complaint
sought to invalidate the advisory agreement between RPFI and the
International Stock Fund, and sought recovery of an unspecified amount of
advisory fees paid by the International Stock Fund to RPFI. This action was
based on an allegation that the International Stock Fund does not have a
sufficient number of independent directors, as required by the Investment
Company Act of 1940, as amended, because its independent directors serve on
<PAGE> 14
multiple boards of directors within the T. Rowe Price mutual fund complex and
receive substantial compensation in the form of director fees. On October
12, 1998, the plaintiffs filed an Amended Complaint adding as a plaintiff
Linda B. Rohrbaugh, a shareholder in the T. Rowe Price Growth Stock Fund.
The Amended Complaint also added as defendants T. Rowe Price Growth Stock
Fund, T. Rowe Price Associates, and three of the Company's wholly-owned
subsidiaries (T. Rowe Price Investment Services, T. Rowe Price Services and
T. Rowe Price Retirement Plan Services) which provide services to the Funds,
as well as five directors of the T. Rowe Price Growth Stock Fund. On January
21, 1999, the Amended Complaint was dismissed with leave for plaintiffs to
re-file. On February 16, 1999, the plaintiffs filed a Second Amended
Complaint, though the fund directors were excluded as defendants. The Second
Amended Complaint alleges a claim under Section 36(b) of the Investment
Company Act of 1940. The Complaint seeks to invalidate the advisory and
service agreements negotiated between the corporate defendants and certain T.
Rowe Price funds based on a claim that (i) the fees paid to the corporate
defendants were excessive and (ii) the advisory agreements were not
negotiated at arms length because each of the board of directors of the Price
funds are not independent as required under the Investment Company Act of
1940.
On March 19, 1999, T. Rowe Price and the other defendants filed a Motion to
Dismiss Second Amended Complaint with prejudice. On April 19, 1999, the
plaintiffs filed a Memorandum in Opposition and, on May 4, 1999, T. Rowe
Price and the other defendants filed a Reply.
The Company continues to believe that the factual and legal basis on which
the complaint is based is wholly unfounded, and the Company and the other
defendants intend to defend the case vigorously. Accordingly, the Company
does not believe that the ultimate resolution of this matter will have a
material adverse effect on the financial condition or results of operations
of the Company.
From time to time, the Company is a party to various claims arising in the
ordinary course of business, including employment-related claims. In the
opinion of management, after consultation with counsel, it is unlikely that
any adverse determination in one or more pending claims would have a material
adverse effect on the Company's financial position or results of operations.
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. Exhibits 10.07
through 10.13 are compensatory plan arrangements.
3.(i) Composite Restated Charter of T. Rowe Price Associates, Inc.
as of April 16, 1998. (Incorporated by reference from Form
10-Q Report for the quarterly period ended March 31, 1998;
Accession No. 0000080255-98-000361.)
<PAGE> 15
3.(ii) Amended and Restated By-Laws of T. Rowe Price Associates,
Inc. as of April 17, 1997. (Incorporated by reference from
Form 10-Q Report for the quarterly period ended June 30,
1997; Accession No. 0000080255-97-000369.)
10.01 Form of Investment Management Agreement with each of the T.
Rowe Price Funds. (Incorporated by reference from Form N-1A;
Accession No. 0000775688-99-000003.)
10.02 Transfer Agency and Service Agreement dated as of January 1,
1999 between each of the T. Rowe Price Funds and T. Rowe
Price Services, Inc. (Incorporated by reference from Form N-
1A; Accession No. 0000775688-99-000003.)
10.03 Agreement dated January 1, 1999 between T. Rowe Price
Retirement Plan Services, Inc. and each of the T. Rowe Price
Taxable Funds. (Incorporated by reference from Form N-1A;
Accession No. 0000775688-99-000003.)
10.04 Form of Underwriting Agreement between each of the T. Rowe
Price Funds and T. Rowe Price Investment Services, Inc.
(Incorporated by reference from Form N-1A; Accession No.
0000775688-99-000003.)
10.05 Agreement dated February 11, 1998 between TRP Suburban
Second, Inc. and Riparius Construction, Inc. as Construction
Manager and Constructor (Incorporated by reference from the
paper filing of March 26, 1998, pursuant to a continuing
hardship exemption, on Form SE to the 1997 Form 10-K
[Accession No. 0000080255-98-00358].)
10.06 Amended, Restated, and Consolidated Office Lease dated as of
May 22, 1997 between 100 East Pratt Street Limited
Partnership and T. Rowe Price Associates, Inc. (Incorporated
by reference from Form 10-K for 1997; Accession No.
0000080255-98-000358.)
10.07 1986 Employee Stock Purchase Plan of T. Rowe Price
Associates, Inc. as Amended to April 5, 1990. (Incorporated
by reference from Exhibit A to the Definitive Proxy Statement
for the 1990 Annual Meeting of Stockholders which is included
in the 1989 Annual Report on Form 10-K [File No. 0-14282].)
10.08 T. Rowe Price Associates, Inc. 1986 Stock Incentive Plan.
(Incorporated by reference from Form S-1 Registration
Statement [File No. 33-3398].)
10.09 T. Rowe Price Associates, Inc. 1990 Stock Incentive Plan.
(Incorporated by reference from Form S-8 Registration
Statement [File No. 33-37573].)
<PAGE> 16
10.10 T. Rowe Price Associates, Inc. 1993 Stock Incentive Plan.
(Incorporated by reference from Form S-8 Registration
Statement [File No. 33-72568].)
10.11 T. Rowe Price Associates, Inc. 1995 Director Stock Option
Plan. (Incorporated by reference from Form DEF 14A;
Accession No. 000933259-95-000009; CIK 0000080255.)
10.12 T. Rowe Price Associates, Inc. 1996 Stock Incentive Plan
(Incorporated by reference from Form DEF 14A; Accession No.
0001006199-96-000031; CIK 0000080255.)
10.13 T. Rowe Price Associates, Inc. 1998 Director Stock Option
Plan. (Incorporated by reference from Form DEF 14A;
Accession No. 00080255-98-000355.)
15 Letter from PricewaterhouseCoopers LLP, independent
accountants, re unaudited interim financial information.
27 Financial Data Schedule.
(b) Reports on Form 8-K: None were filed during the second quarter of 1999.
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 July 27, 1999.
T. Rowe Price Associates, Inc.
/s/ Alvin M. Younger, Jr., Managing Director, Chief Financial & Accounting
Officer, Treasurer and Secretary
EXHIBIT 15
July 23, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that our report dated July 23, 1999 (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/ PricewaterhouseCoopers 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 June 30, 1999 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 361,584,000
<SECURITIES> 208,290,000
<RECEIVABLES> 108,530,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 186,710,000<F2>
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 921,029,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 24,271,000
<OTHER-SE> 689,553,000
<TOTAL-LIABILITY-AND-EQUITY> 921,029,000
<SALES> 0
<TOTAL-REVENUES> 491,597,000
<CGS> 0
<TOTAL-COSTS> 300,887,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 190,710,000
<INCOME-TAX> 72,945,000
<INCOME-CONTINUING> 107,103,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,103,000
<EPS-BASIC> .89<F4>
<EPS-DILUTED> .82
<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.
</FN>
</TABLE>
