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Previous: PRICE T ROWE SPECTRUM FUND INC, N-30D, 1995-02-02 |
Next: SHELTER COMPONENTS CORP, 8-K, 1995-02-02 |
Annual Report
<PAGE>
[Logo]
Science and
Technology Fund
December 31, 1994
FOR YIELD, PRICE, LAST TRANSACTION, AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
FOR ASSISTANCE WITH YOUR EXISTING FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. ROWE PRICE
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distri-bution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Science and
Technology Fund.
[Logo]
STF
<PAGE>
Fellow Shareholders
The Science & Technology Fund enjoyed another year of strong performance.
Following a difficult first half, during which the sector experienced its
first quarterly declines since the second quarter of 1992, your Fund generated
superior returns in the second half. The results were consistent with our
longer-term operating objective of staying close to the averages in difficult
markets while providing strong returns in more favorable environments. For the
fourth quarter and the year, your Fund significantly outperformed both the
unmanaged Standard & Poor's 500 Stock Index and the Lipper Index of similar
funds.
Performance Comparison
Periods Ended
12/31/94
3 Months 12 Months
--------- ---------
Science & Technology Fund 8.8% 15.8%
S&P 500 0.0 1.3
Lipper Science & Technology
Fund Index 5.3 10.3
- ---------------------------------------------------
Our commitment to building value over the long term is evidenced by the
Fund's cumulative return of 170% for the five-year period ended December 31,
1994. For the third consecutive year, your Fund's five-year performance has
ranked among the top 25 equity funds in the country1. We will work diligently
to extend this record.
/1/According to Lipper Analytical Services, the Fund's ranking based on total
return since inception (9/30/87) and for five- and one-year periods ending
12/31/94 was 4 out of 784, 10 out of 1,028, and 26 out of 2,366, respectively.
See page 4 for the Fund's average annual compound total return. Past
performance cannot guarantee future results.
CAPITAL GAIN DISTRIBUTION
Your Board of Directors declared a capital gain distribution of $0.30 per
share for 1994. This distribution, payable December 29 to shareholders of
record on December 27, reflected a short-term capital gain of $0.10 and a
long-term capital gain of $0.20. Given the potential for a capital gains tax
cut in 1995, we are pleased that our 1994 distribution was modest relative to
the Fund's return. Your check or statement reflecting the distribution was
mailed in early January, and Form 1099-DIV, with additional tax information,
was mailed toward month-end.
MARKET ENVIRONMENT
Nineteen ninety-four was a difficult year for both the bond and stock markets.
Factors pressuring the financial markets included rising interest rates,
slowing inflows into mutual funds, investor nervousness over the misuse of
derivative securities, political unrest in Eastern Europe and the Mideast, the
bankruptcy of Orange County, California, and the year-end financial crisis in
Mexico. Science and technology stocks in particular were affected by the
Clinton administration's failure to pass key health care reform and
telecommunications legislation.
During the year, the Federal Reserve raised the federal funds rates in six
steps from 3.0% to 5.5% and the discount rate three times from 3.0% to 4.75%.
Not only did these interest rate increases result in one of the worst bond
markets in modern memory, but stocks of interest rate-sensitive sectors such
as utilities and financial services also suffered appreciably. While
traditionally conservative investment categories were hit hardest, few asset
classes were spared, and most groups provided disappointing returns. As
interest rates rose, money flows into mutual funds weakened, removing a key
driver of stock market gains-liquidity. The combination of rising rates and
slowing demand from mutual funds put downward pressure on stock valuations.
Entering 1994, science and technology investors anxiously anticipated
reform legislation in both health care and telecommunications. Unfortunately,
Congress-like major league baseball-could not reach an agreement, and no
legislation was passed in either area. Although the failure of health care
reform was probably a positive for that sector, the failure of
telecommunications legislation lowered the speed limit on the information
superhighway and left standing the roadblocks faced by all participants.
<PAGE>
The irony of 1994 was that normally conservative investments experienced
the worst losses while the aggressive science and technology sector had an
outstanding year. Investors with large holdings in bonds and utility stocks
suffered a slow bleed in asset value, but science and technology stocks
recovered sharply from their June lows to post excellent returns. The table
below summarizes the relative performance of the various Dow Jones Industry
Groups, highlighting the strong performance of the science and technology
sector during 1994.
Index 1994 Return
- ------------------------------- -----------
Technology: Electronics/
Medical-Technology 12.5%
Consumer Non-Cyclical 8.1
Basic Materials 3.0
Energy -1.3
Conglomerates -2.7
Financial -6.6
Industrial -7.6
Consumer Cyclical -10.7
Utilities -13.7
Several factors drove science and technology stocks to record levels in
1994. Most important, business remained strong throughout the year: demand was
good, pricing firm, and competition rational. Commodity segments of electronic
technology such as standard semiconductors, semiconductor capital equipment,
and hardware systems were particularly robust, as were communications and
medical technology. A number of science and technology issues-from the
competing treatments for multiple sclerosis to the flaw in Intel's Pentium
processor-made the headlines, increasing investor awareness of the entire
sector. Also, industry consolidation and the potential for merger-related
windfalls became significant influences, as cellular giant McCaw
Communications, software vendors Intuit and Powersoft, and biotechnology
leader Chiron became party to major transactions. All these factors created an
environment that could be described as the monetary sequel to "Revenge of the
Nerds."
Although investing in the science and technology sector remains a
challenging endeavor, many attributes continue to make it attractive.
Technology is among the purest of growth sectors. As world economies navigate
through the information age, technology will become increasingly pervasive,
and U.S. companies dominate key technologies such as microprocessors,
communications, software, biotechnology, and environmental remediation. As the
technological evolution expands from the office to the home and from data to
communications and entertainment, the underlying growth dynamics for science
and technology companies should be sustained.
PORTFOLIO REVIEW
During 1994, your Fund's broad charter and our efforts to diversify the Fund's
exposure across segments unrelated to the computer industry had mixed results.
Our holdings of wireless and biotechnology stocks generated strong returns,
but investments in stocks of data services and media services companies were a
drag on performance. Once again, returns were highest within electronic
technology, the Fund's largest investment segment.
We remain comfortable with our strategy of running a diversified, but
concentrated, portfolio. At year-end, your Fund held fewer than 50 individual
stocks spread among six rapidly growing segments of the science and technology
sector, each representing between 10% and 20% of portfolio assets. The top 10
positions composed approximately 43% of Fund assets.
Strategically, we are pursuing opportunities along the following secular
(long-term) investment themes: client-server computing, remote/on-line
communications, digital pervasiveness, the widening appeal of wireless, and
the scarcity value of biotechnology.
<PAGE>
The industry's continuing transition to open, networked client-server
computing platforms is the most significant trend in the commercial computing
marketplace. This trend is driving application development away from
centralized mainframes and proprietary minicomputer networks to distributed,
desktop workstations. Beneficiaries of this shift include software vendors
SYBASE, ORACLE, and SAP and networking equipment manufacturers 3COM and
CASCADE COMMUNICATIONS, all of which contributed materially to 1994 returns.
As the technological evolution expands from the office to include the home
and from data to include communications, entertainment, and electronic
commerce, entirely new technologies will be needed to keep remote workers and
consumers informed and entertained in real time. Companies positioned to
benefit from this evolution include software vendors ADOBE SYSTEMS and INTUIT,
electronic transaction processor FIRST FINANCIAL MANAGEMENT, and remote
communications equipment vendor SHIVA CORPORATION.
Digital pervasiveness reflects the industry's mandate to make higher
performance products both smaller and cheaper through the use of semiconductor
technologies. Within this arena, programmable logic vendor XILINX and analog
semiconductor manufacturer MAXIM INTEGRATED PRODUCTS were strong contributors
to 1994 Fund performance.
Improving worldwide economies, tiered pricing structures, declining
handset prices, expanding distribution channels, digital technologies, and
intensified marketing have converged to accelerate the growth of cellular and
paging services around the world. These dynamics, by making wireless services
more affordable and accessible, are increasing consumer demand for wireless
communications. We are concentrating in stocks of service and equipment
providers with strong growth dynamics, proven business models, and established
worldwide franchises. Cellular operator VODAFONE and infrastructure
manufacturer NOKIA are two key investments in this area.
The consolidation of the pharmaceutical industry will create increasing
demand for companies with biopharmaceutical know-how and a library of
promising compounds. As the myriad of small biotechnology companies that came
public in the early 1990s burn their financial resources and face extinction,
larger companies will have the opportunity to cheaply acquire promising
technologies. Accordingly, we believe there is scarcity value among
established, technology-rich, well-capitalized biotech companies such as AMGEN
and CHIRON.
OUTLOOK
We are taking a watchful approach to the first half of 1995. The Federal
Reserve appears intent on slowing the domestic economy by continuing to raise
interest rates, and turmoil persists in foreign markets. Additionally, with
the personal computer industry in transition during the first two quarters of
the year, we expect the rate of growth in the electronic technology segment to
moderate temporarily. While a broad restructuring is no longer an issue,
health care companies will have to adjust to evolving market dynamics.
Business within the science and technology sector is good almost across
the board, but these stocks have had a nice run over the past six months and
valuations are not cheap. Still, we continue to be excited about the
longer-term prospects for science and technology stocks and remain committed
to capitalizing on these opportunities for our shareholders.
Respectfully submitted,
[SIG]
Charles A. Morris
President and Chairman of the
Investment Advisory Committee
January 19, 1995
<PAGE>
Contributions to the Change in Net Asset Value Per Share
Three Months Ended December 31, 1994
- ------------------------------------------------------
TEN BEST CONTRIBUTORS
Intuit 25 [cents]
Xilinx 23
Autodesk 22
Chiron 17
Silicon Valley Group 16
Nokia 10
DSC Communications 10
StrataCom** 9
First Financial Management 9
Sun Microsystems 8
- ------------------------------------------------------
Total 149 [cents]
TEN WORST CONTRIBUTORS
Biogen -13 [cents]
Adobe Systems* 5
Zilog** 5
Centocor** 4
SEI 4
Advanced Micro Devices** 3
Mobile Telecommunication Technologies 3
Synopsys 3
First Data** 2
QUALCOMM 2
- ------------------------------------------------------
Total -44 [cents]
- ------------------------------------------------------
*Position added
**Position eliminated
***Formerly Wellfleet Communications; position eliminated.
Twelve Months Ended December 31, 1994
- ------------------------------------------------------
TEN BEST CONTRIBUTORS
Autodesk 50 [cents]
Xilinx 40
Intuit 30
Oracle Systems 28
Chiron* 27
SAP* 23
Sybase 21
Glenayre Technologies 21
Silicon Valley Group* 19
Microchip Technology 19
- ------------------------------------------------------
Total 278 [cents]
TEN WORST CONTRIBUTORS
Novell** -20 [cents]
AST Research** 17
Bay Networks*** 16
Advanced Micro Devices** 13
BroadBand Technologies** 13
Spectravision Class B** 12
Envirotest Systems** 12
Parametric Technology** 10
Texas Instruments** 10
SEI 8
- ------------------------------------------------------
Total -131 [cents]
- ------------------------------------------------------
Fiscal-Year Performance
Periods Ended December 31, 1994
1 Year 5 Years* Since Inception 9/30/87*
- ------ --------- ------------------------
15.79% 21.98% 18.71%
- -----------------------------------------
* Average Annual Compound Total Return
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Twenty-Five Largest Holdings
December 31, 1994
Percent of
Company Net Assets
- ------------------------------- ----------
Xilinx 6.5%
First Financial Management 5.7
Nokia 4.9
Vodafone 4.8
Chiron 4.4
Autodesk 4.3
Amgen 3.5
Synopsys 3.3
Sybase 2.8
Biogen 2.7
AirTouch Communications 2.5
Adobe Systems 2.4
Sun Microsystems 2.4
Silicon Graphics 2.0
Oracle Systems 1.9
Maxim Integrated Products 1.9
Intuit 1.8
LM Ericsson 1.8
Silicon Valley Group 1.8
DSC Communications 1.6
CUC International 1.5
SunGard Data Systems 1.4
United International Holdings 1.3
QUALCOMM 1.3
Motorola 1.3
- ------------------------------------------
Total 69.8%
- ------------------------------------------
Fiscal-Year Performance Comparison
[chart]
Fiscal-Year Performance Comparison: A two-line chart comparing the growth in
an initial $10,000 investment in the Fund with the same investment in the
Upper Science & Technology Index starting on 9/30/87 and ending on 12/31/94.
<PAGE>
Investment Record
T. Rowe Price Science & Technology Fund
The table below shows the investment record of one share of the T. Rowe Price
Science & Technology Fund, purchased at the initial price of $10.00, for the
period 9/30/87 through 12/31/94. Over this time, stock prices in general have
risen. The results shown should not be considered as a representation of the
income or capital gain or loss which may be realized from an investment made
in the Fund today.
Per-Share Data
<TABLE>
With Capital Gains and Income Dividends Annual
Taken in Cash Reinvested in Additional Shares Total Return
--------------------------------- ---------------------------------- On Investment
Year Capital Capital % Change
Ended Asset Gains Income Gains Income Value of ---------------
12/31 Value Distributions/2/ Dividends Distributions Dividends Investment Fund S&P 500
- ------- ------ ---------------- --------- ------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1987/1/ $8.02 - $0.04 - $0.04 $8.06 -19.4% -22.5%
1988 8.57 $0.44 0.07 $0.44 0.07 9.13 13.3 16.5
1989 10.53 1.39 0.06 1.48 0.06 12.84 40.7 31.6
1990 10.05 0.24 0.09 0.29 0.11 12.67 -1.3 -3.1
1991 15.57 0.48 - 0.61 - 20.30 60.2 30.3
1992 17.33 1.12 - 1.46 - 24.10 18.8 7.6
1993 18.95 2.51 - 3.49 - 29.95 24.2 10.1
1994 21.64 0.30 - 0.47 - 34.68 15.8 1.3
- --------------------------------------------------------------------------------------------
Total $6.48 $0.26 $8.24 $0.28
- --------------------------------------------------------------------------------------------
<FN>
1. From inception 9/30/87 to 12/31/87
2. Includes short-term capital gains of $0.38 in 1988, $1.23 in 1989, $0.06 in
1990, $1.51 in 1993, and $0.10 in 1994.
</TABLE>
<PAGE>
Statement of Net Assets (Value in thousands)
T. Rowe Price Science & Technology Fund / December 31, 1994
Common Stocks --83.1%
ELECTRONIC TECHNOLOGY --48.8%
Value
--------
COMPUTER SOFTWARE --18.0%
750,000shs. Adobe Systems......................... $22,312
1,000,000 Autodesk.............................. 39,625
150,000 *EPIC.................................. 3,375
250,000 *Intuit................................ 16,688
400,000 *Oracle Systems........................ 17,650
15,000 SAP (DEM)............................. 8,499
500,000 *Sybase................................ 26,000
700,000 *Synopsys.............................. 30,625
164,774
SEMICONDUCTOR RELATED--13.6%
170,000 Linear Technology..................... 8,415
500,000 *Maxim Integrated Products............. 17,500
400,000 *Microchip Technology.................. 11,000
200,000 Motorola.............................. 11,575
800,000 *Silicon Valley Group.................. 16,500
1,000,000 *Xilinx................................ 59,250
124,240
NETWORKING &
TELECOMMUNICATIONS--10.3%
200,000 *3Com.................................. 10,312
250,000 *Ascend Communications................. 10,188
150,000 *Cascade Communications................ 9,263
400,000 *DSC Communications.................... 14,350
200,000 *Glenayre Technologies................. 11,550
300,000 LM Ericsson (Class B) ADR............. 16,537
500,000 *QUALCOMM.............................. 12,000
250,000 *Shiva................................. 9,969
94,169
COMPUTER HARDWARE SYSTEMS--5.8%
225,000 Apple Computer........................ 8,775
240,700* Pinnacle Systems...................... 3,611
600,000 *Silicon Graphics...................... 18,525
625,000 *Sun Microsystems...................... 22,187
53,098
PERIPHERALS--1.1%
400,000 *Cognex................................ 10,300
TOTAL ELECTRONIC TECHNOLOGY 446,581
LIFE SCIENCES & HEALTH CARE--10.7%
PHARMACEUTICALS--10.7%
550,000shs.*Amgen................................. $32,450
600,000 *Biogen................................ 25,050
500,000 *Chiron................................ 40,187
TOTAL LIFE SCIENCES & HEALTH CARE.................... 97,687
DATA SERVICES--9.2%
COMPUTER SERVICES--7.7%
850,000 First Financial Management............ 52,381
342,800 SEI................................... 5,913
325,000 *SunGard Data Systems.................. 12,513
70,807
CONSUMER INFORMATION SERVICES--1.5%
400,000 *CUC International..................... 13,400
TOTAL DATA SERVICES 84,207
MEDIA/TELECOMMUNICATION SERVICES--9.7%
MEDIA--1.3%
700,000 *United International Holdings
(Class A)............................. 12,250
TELECOMMUNICATION SERVICES--8.4%
800,000 *AirTouch Communications............... 23,300
500,000 *Mobile Telecommunication
Technologies........................ 9,750
1,300,000 Vodafone ADR.......................... 43,712
76,762
TOTAL MEDIA/TELECOMMUNICATION SERVICES............... 89,012
ENVIRONMENTAL SERVICES--0.3%
PROCESS SERVICES--0.3%
1,000,000 *Canarc Resources (CAD)................ 2,495
TOTAL ENVIRONMENTAL SERVICES 2,495
TOTAL MISCELLANEOUS COMMON STOCKS-4.4% 40,401
TOTAL COMMON STOCKS (COST $608,789) 760,383
<PAGE>
PREFERRED STOCKS--5.2%
600,000shs. Nokia ADR $45,000
TOTAL MISCELLANEOUS PREFERRED-0.3% 2,376
TOTAL PREFERRED STOCKS (COST $41,550) 47,376
Short-Term Investments--11.7%
COMMERCIAL PAPER--11.2%
$5,000,000 Abbey National North America,
5.50%, 2/2/95....................... 4,930
5,000,000 American Express Company
4(2), 6.05%, 1/17/95................ 4,972
5,000,000 Asset Securitization
Cooperative, 4(2),
5.45%, 1/18/95...................... 4,935
5,000,000 B.A.T. Capital, 6.03%, 1/6/95......... 4,986
5,000,000 Banc One, 4(2), 6.00%,
1/11/95............................. 4,972
5,000,000 Caisse des Depots et
Consignations, 4(2),
6.02%, 1/19/95...................... 4,965
5,000,000 Chubb Capital,
6.05%, 1/13/95...................... 4,975
5,000,000 Compagnie Bancaire,
6.10%, 2/22/95...................... 4,931
5,000,000 Countrywide Funding,
6.30%, 1/5/95....................... 4,993
5,000,000 Dover, 4(2), 6.08%, 1/9/95............ 4,979
5,000,000 General Electric Capital,
6.00%, 1/12/95...................... 4,981
5,000,000 Hanson Finance (U.K.),
5.40%, 1/25/95...................... 4,926
17,000,000 John Hancock Capital, 4(2),
6.00%, 1/5/95....................... 16,983
5,000,000 Preferred Receivables
Funding, 6.00%, 2/2/95.............. 4,947
1,108,000 President & Fellows Harvard
College, 6.00%, 1/3/95.............. 1,107
5,000,000 Reed Elsevier, 6.05%, 1/19/95......... 4,963
5,000,000 Total Compagnie Francaise
des Petroles, 6.00%, 1/9/95......... 4,973
$5,000,000 Toyota Motor Credit
Company, 6.07%, 2/6/95 $4,944
5,000,000 US West Communications,
4(2), 6.05%, 1/12/95................ 4,976
102,438
CERTIFICATES OF DEPOSIT--0.5%
5,000,000 Societe Generale,
5.80%, 3/1/95....................... 5,001
TOTAL SHORT-TERM INVESTMENTS
(COST $107,439) 107,439
- --------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES--100.0%
(COST $757,778)...................................... 915,198
- --------------------------------------------------------------
Other Assets Less Liabilities (146)
NET ASSETS CONSISTING OF:
Accumulated realized gains/losses--
net of distributions $27,103
Net unrealized gain................... 157,420
Paid-in-capital applicable to
42,290,439 shares of $0.01 par value
capital stock outstanding;
1,000,000,000 shares authorized..... 730,529
--------
NET ASSETS .................................... $915,052
--------
--------
NET ASSETS VALUE PER SHARE..................... $21.64
--------
--------
- --------------------------------------------------------
* Non-income producing
[dagger] Affiliated company
4(2) Commercial Paper sold within terms of a
private placement memorandum, exempt from
registration under section 4.2 of the
Securities Act of 1933, as amended, and
may be sold only to dealers in that
program or other "accredited investors."
CAD Canadian dollar
DEM German deutschemark
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of Operations
T. Rowe Price Science & Technology Fund / Year Ended December 31, 1994
(Amounts in
thousands)
INVESTMENT INCOME
Income
Interest........................................... $2,144
Dividends........................................ 1,257
-----------
Total income..................................... 3,401
-----------
Expenses
Investment management............................ 4,467
Shareholder servicing............................ 2,074
Registrations.................................... 180
Custody and accounting........................... 155
Prospectus and shareholder reports............... 133
Proxy and annual meeting......................... 70
Legal and auditing .............................. 27
Directors........................................ 19
Miscellaneous.................................... 17
-----------
Total expenses................................... 7,142
-----------
Net investment loss................................ (3,741)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities ...................................... 29,821
Foreign currency transactions.................... (120)
-----------
Net realized gain................................ 29,701
-----------
Change in net unrealized gain or loss on:
Securities....................................... 84,768
Other assets and liabilities denominated in
foreign currencies............................. 1
-----------
Change in net unrealized gain or loss............ 84,769
-----------
Net realized and unrealized gain................... 114,470
-----------
INCREASE IN NET ASSETS FROM OPERATIONS............. $110,729
-----------
-----------
- ---------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of Changes in Net Assets
T. Rowe Price Science & Technology Fund
Year Ended December 31
-------------------------
1994 1993
------------ ------------
(Amounts in thousands)
Net investment loss.................... $(3,741) $(2,541)
Net realized gain ..................... 29,701 70,829
Change in net unrealized gain or loss.. 84,769 12,088
------------ ------------
Increase in net assets from operations. 110,729 80,376
------------ ------------
Distributions to shareholders
Net realized gain...................... (12,349) (57,955)
------------ ------------
Decrease in net assets from (12,349) (57,955)
distributions............................
------------ ------------
Capital share transactions/1/
Shares sold............................ 582,569 377,713
Distributions reinvested............... 11,887 55,908
Shares redeemed........................ (279,238) (235,633)
------------ ------------
Increase in net assets from
capital share transactions............. 315,218 197,988
------------ ------------
Increase in net assets................... 413,598 220,409
NET ASSETS
Beginning of year...................... 501,454 281,045
End of year............................ $915,052 $501,454
------------ ------------
------------ ------------
- -------------------------------------------------------------------
/1/Capital share transactions (number of shares)
Shares sold............................ 29,623 20,118
Distributions reinvested............... 552 3,035
Shares redeemed........................ (14,354) (12,901)
------------ ------------
Increase in capital share outstanding.. 15,821 10,252
------------ ------------
------------ ------------
- -------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Science & Technology Fund / December 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Science & Technology Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange (including Nasdaq) 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. Other equity securities and those listed
securities that are not traded on a particular day 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.
<PAGE>
Short-term debt securities are valued at their cost which, when combined
with accrued interest, approximates fair value.
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.
B) Affiliated Companies - Investments in companies 5% or more of whose
outstanding voting securities are held by the Fund are defined as "Affiliated
Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
C) Currency translation - Assets and liabilities are converted 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 or losses is reflected as a component of such gains
or losses.
D) 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 an 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 and U.S.
Government securities, aggregated $76,241,000 and $53,392,000, respectively,
for the year ended December 31, 1994.
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.
In order for the Fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, $3,741,000 of
undistributed net investment income and $297,000 of undistributed net realized
gains were reclassified as a decrease to paid-in-
capital during the year ended December 31, 1994. The results of operations and
net assets were not affected by the reclassifications.
At December 31, 1994, the aggregate cost of investments for federal income
tax and financial reporting purposes was $757,778,000 and net unrealized gain
aggregated $157,420,000, of which $167,894,000 related to appreciated
investments and $10,474,000 to depreciated investments.
For Federal income tax purposes the Fund paid distributions from net
long-term capital gains of $8,544,000. This amount may differ from that cited
elsewhere in this report due to differences in the calculation for financial
reporting and Federal income tax purposes.
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
fee, of which $504,000 was payable at December 31, 1994. The fee is computed
daily and paid monthly, and consists of an Individual Fund Fee equal to 0.35%
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 0.31% for assets in excess of $34
billion. At December 31, 1994, and for the year then ended, the effective
annual Group Fee rate was 0.34%. The Fund pays a pro rata share of the Group
Fee based on the ratio of its net assets to those of the Group.
<PAGE>
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.
(TRPS) 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 $1,760,000
for the year ended December 31, 1994, of which $172,000 was payable at
year-end.
Financial Highlights
T. Rowe Price Science & Technology Fund
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For a share outstanding throughout each
----------------------------------------------
Year Ended December 31,
----------------------------------------------
1994 1993 1992 1991 1990
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
BEGINNING OF YEAR ..................... $18.95 $17.33 $15.57 $10.05 $10.53
-------- -------- --------- --------- --------
Investment Activities
Net investment income (loss)........... (0.09) (0.05)* (0.10)* (0.01)* 0.09*
Net realized and unrealized
gain (loss).......................... 3.08 4.18 2.98 6.01 (0.24)
-------- -------- --------- --------- --------
Total from Investment Activities......... 2.99 4.13 2.88 6.00 (0.15)
-------- -------- --------- --------- --------
Distributions
Net investment income.................. - - - - (0.09)
Net realized gain...................... (0.30) (2.51) (1.12) (0.48) (0.24)
-------- -------- --------- --------- --------
Total Distributions...................... (0.30) (2.51) (1.12) (0.48) (0.33)
-------- -------- --------- --------- --------
Net Asset Value, End of YEAR............. $21.64 $18.95 $17.33 $15.57 $10.05
-------- -------- --------- --------- --------
-------- -------- --------- --------- --------
- ----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return............................. 15.8% 24.2% 18.8%* 60.2%* (1.3)%*
Ratio of Expenses to Average
Net Assets............................. 1.11% 1.25% 1.25%* 1.25%* 1.25%*
Ratio of Net Investment Income
to Average Net Assets.................. (0.58)% (0.68)% (0.81)%* (0.07)%* 0.91%*
Portfolio Turnover Rate.................. 113.3% 163.4% 144.3% 148.2% 182.5%
Net Assets, End of Year
(in thousands)......................... $915,052 $501,454 $281,045 $166,048 $61,535
- ----------------------------------------------------------------------------------------
* Excludes expenses in excess of a 1.25% voluntary expense limitation in
effect through December 31, 1993.
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors of
T. Rowe Price Science & Technology Fund, Inc.
We have audited the accompanying statement of net assets of T. Rowe Price
Science & Technology Fund, Inc., as of December 31, 1994, 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, 1994, 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 Science & Technology Fund, Inc. as of December 31,
1994, 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 23 , 1995
<PAGE>
Shareholder Services
To help shareholders monitor their current investments and make decisions that
accu-rately reflect their financial goals, T. Rowe
Price offers a wide variety of information and services-at no extra cost.
KNOWLEDGEABLE SERVICE
REPRESENTATIVES
BY PHONE-Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., ET.
Call 1-800-225-5132 to speak directly with a representative who will be able
to assist you with your accounts.
IN PERSON-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access[registered trademark] (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Additionally, you have the abil-
ity to request prospectuses, statements, account and tax forms; reorder
checks; and initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access provides the same information as Tele*Access, but on a personal
computer via dial-up modem.
ACCOUNT SERVICES
Checking-Write checks for $500 or more on any money market and bond fund
accounts (except the High Yield Fund and Emerging Markets Bond Fund).
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started
Automatic Withdrawal-If you need money from your fund account on a regular
basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions or take them in cash. We give you maximum flexibility and
convenience.
INVESTMENT INFORMATION
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance of
the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights-A library of information that includes reports on mutual fund tax
issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
DISCOUNT BROKERAGE
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
<PAGE>
T. Rowe Price No-Load Mutual Funds
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate Tax-Free
Maryland Short-Term Tax-Free Bond
Summit Municipal Intermediate
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price Fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
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