ANNUAL REPORT
----------------------
Science & Technology Fund
----------------------
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 distribution only to shareholders and to
others who have received a copy of the prospectus of the T. Rowe Price
Science & Technology Fund.
<PAGE>
================================================================================
Fellow Shareholders
- ---------------------------------------
The Science & Technology Fund had an outstanding year in 1995, generating
positive returns every quarter and rising 55% for the year. While our
competitors on average showed a loss in the fourth quarter as the technology
rally faded, your fund squeezed out a small gain. Over the last six months, the
fund outperformed the unmanaged Standard & Poor's 500 Stock Index and
significantly outpaced its peer group average; for the year ended December 31,
the fund exceeded both benchmarks.
- --------------------------------------------------------------------------------
Performance Comparison
================================================================================
Periods Ended 12/31/95
6 Months 12 Months
------------------------
Science & Technology Fund 18.4% 55.5%
S&P 500 14.5 37.6
Lipper Science & Technology
Funds Index 7.9 36.8
================================================================================
The fund's assets grew significantly last year and we want to welcome our
new shareholders. To all our shareholders, we reiterate our commitment to
building value over the long term, as evidenced by the fund's cumulative return
of 325% over the last five years. For the fourth consecutive year, your fund's
performance ranked among the top 25 equity funds in the country, according to
Lipper Analytical Services. (Lipper ranked the fund #22 out of 3,130 equity
funds based on its total return for the 12 months ended 12/31/95.) We will work
diligently to extend this record on your behalf.
CAPITAL GAIN DISTRIBUTION
- ---------------------------------------
Your Board of Directors declared a total capital gain distribution of $4.54
per share for 1995. This distribution, which was payable December 28 to
shareholders of record on December 26, reflected a short-term capital gain of
$2.48 and a long-term capital gain of $2.06. Your check or statement confirming
the distribution was mailed in early January, and Form 1099-DIV, with complete
tax information, was mailed toward the end of the month.
<PAGE>
MARKET ENVIRONMENT
- ---------------------------------------
The past year was exhilarating for investors. As 1995 dawned, expectations
called for robust economic growth and rising inflationary pressures. The Federal
Reserve responded last February by raising the key federal funds target to 6%,
its seventh hike in 12 months. However, as the year progressed, the prolonged
Fed tightening cooled the overheated economy and inflation remained moderate,
causing interest rates to fall sharply. These factors, combined with strong
gains in corporate earnings, lifted stock prices to new highs, with the S&P 500
rising nearly 38% for the year. The broad equity market suffered no serious
correction all year long. The bond market, buoyed by falling interest rates and
two cuts in the federal funds rate in the last six months, had one of its best
years ever. The benchmark 30-year Treasury bond generated a return of 34%,
rivaling the performance of many equity categories.
Science and technology stocks led the market rally for most of the year.
They benefited from strong demand, constraints on supply that supported industry
pricing and margins, a favorable currency situation that kept foreign
competitors at a disadvantage, and strong money flows into aggressive growth
mutual funds. In the first half of the year, electronic technology companies
prospered from surging demand for personal computers and wireless
communications, and in the second half they rode the wave of Internet mania.
Life sciences companies experienced steady unit growth, reduced pricing
pressures, an abundance of clinical successes, and the beneficial impact of a
weakening dollar.
The technology juggernaut finally slowed in the fourth quarter as near-term
demand slackened across several key segments of the computer and communications
industries. A growing number of electronic technology companies warned of
disappointing fourth quarter financial results and more subdued growth and
profit prospects in the first half of 1996. Consequently, stocks of most
computer and communications-related companies suffered, and sector volatility
increased.
Science and technology stocks could remain turbulent in coming months due
to several factors: valuations remain above historical norms, many broad-based
mutual funds still have significant positions in these stocks, and investor
psychology has become a bit fragile. However, these stocks remain among the
purest of all growth stocks, and U.S. companies continue to dominate key
technologies such as microprocessors, communications, software, biotechnology,
and environmental remediation. In addition, the inherent volatility of the
sector perpetually provides cycles of attractive buying opportunities followed
by periods of surging returns. Consequently, as the world navigates through the
information age and mankind continues its quest to extend human life, the
long-term prospects for these stocks remain bright.
<PAGE>
PORTFOLIO REVIEW
- ---------------------------------------
During 1995, your fund's broad charter and our efforts to diversify across
the sector helped keep us ahead of our peers. Our strategy remained focused on a
wide selection of science and technology stocks. On December 31, the portfolio
held less than 60 companies spread among several rapidly growing industries.
Collectively, electronic technology was our largest exposure, accounting for 70%
of fund assets (represented in the chart by blue-shaded sections). Media, data
services, and life sciences/health care accounted for most of the balance. As
the year ended, our top 10 positions (shown in the table following this letter)
composed approximately 38% of fund assets.
[Sector Diversification - a pie chart showing assets as of 12/31/95:
Business Software 22%, Semiconductor-Related 21%, Networking 13%, Consumer
Software 9%, Reserves and Other 9%, Data Services 9%, Media 8%,
Hardware/Peripherals 5%, Life Sciences/Health Care 4%.]
We are pursuing investment opportunities by tracking the following trends:
the increasing use of the personal computer as a communications tool, the
continuing shift away from mainframes toward client-server computing in the
workplace, the popularity of remote/on-line communications, growing consumer
demand for wireless communications, and the increasing scarcity value of
biotechnology.
The personal computer is evolving from a computational device to a
multimedia communications tool. Instead of speedier number crunching, computer
users now want to get connected -- to databases, information sources, and each
other. This evolution should continue to benefit networking vendor ASCEND
COMMUNICATIONS, semiconductor vendors XILINX and MAXIM INTEGRATED PRODUCTS, and
computer service provider AMERICA ONLINE, four of the fund's top contributors in
1995.
The industry's 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 minicomputers toward networks of desktop workstations.
Beneficiaries include software vendors BMC SOFTWARE and SYBASE, and networking
equipment manufacturers 3COM and BAY NETWORKS, all of which remain significant
holdings.
As the technological evolution expands from the office to the home -- and
from mundane data services to communications, entertainment, and electronic
commerce -- entirely new technologies will be required to keep far-flung 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 DATA, and remote communications
equipment vendor SHIVA -- all of which were significant contributors during
1995.
Cellular telephone and paging services are growing rapidly around the
world, driven by improving global economies, tiered pricing structures,
declining handset prices, expanding distribution channels, digital technologies,
and intensified marketing. Wireless communications, like personal computers, are
increasingly penetrating the consumer market. We are concentrating on stocks of
service and equipment providers with a strong presence overseas and exciting new
technologies. Foreign cellular operator VODAFONE and wireless messaging
provider MOBILE TELECOMMUNICATION TECHNOLOGIES are two key investments in this
area, even though the latter had a disappointing year.
<PAGE>
As the pharmaceutical industry consolidates, the need for broad technical
expertise and a deep product pipeline will favor companies with
biopharmaceutical know-how and a stable of promising drugs. Furthermore, as many
of the small biotechnology companies that went public in the early 1990s deplete
their financial resources and face extinction, their larger competitors will be
able to acquire some promising technologies at bargain prices. Therefore, we
believe there is scarcity value among established, technology-rich, well-
capitalized biotechnology companies, including AMGEN, ALZA, AND CEPHALON.
OUTLOOK
- ---------------------------------------
We are taking a guarded approach toward the early part of 1996. The stock
market is at record levels, but earnings growth is moderating and interest rates
could rise in the months ahead. Growth in the personal computer and wireless
communications industries appears to be slowing from the torrid pace of the past
few years, and both electronic technology and life sciences companies will have
to perform admirably to exceed last year's results. Moreover, earnings
disappointments and price declines within the sector have become more prevalent.
Some stocks have fallen substantially from last year's highs.
However, we remain bullish on the science and technology sector over the
next 12 to 18 months. During this period, the personal computer industry should
experience accelerated growth, with Intel and Microsoft in the midst of
significant product rollouts. In addition, the nagging uncertainty over
potential telecommunications reform will likely disappear, while exciting
digital wireless technologies should hit the market. Finally, the consumer
electronics industry could experience renewed growth as next- generation video
game and display platforms become available in meaningful volumes. We are quite
encouraged by the sector's longer-term prospects and remain committed to seizing
these wealth-building opportunities on behalf of our shareholders. Given this
sector's volatility, we remind all shareholders that the fund is not appropriate
for short-term goals.
Respectfully submitted,
[signature]
Charles A. Morris
President and Chairman of the
Investment Advisory Committee
January 17, 1996
================================================================================
<PAGE>
A Word on Market Corrections
- --------------------------------------------------------------------------------
After the stock market's spectacular run
in 1995, concerns about a "correction" have
intensified. Most market observers consider a
correction to be a short and sometimes steep
decline following a period of rising prices.
Moderate corrections of around 10% have been
quite common, occurring on average about once
every two years over the last half-century,
according to Ned Davis Research.
The market as measured by the Dow Jones
Industrial Average has not experienced a
moderate correction since early 1994.
Furthermore, the Dow last hit a bear market
bottom -- defined as a drop of at least 20%
-- in October 1990. Therefore, it would not
be surpr ising to see a modest pullback in
1996, on the order of 5% to 10%. In fact, as
we write, the market has gotten off to a
rocky start.
Corrections are not only common,but can
be beneficial for long-term investors,
especially those who invest in regular
amounts through dollar cost averaging. In a
correction, overall stock prices decline,
often leading to more attractive valuations
and good buying opportunities. History has
shown that investors who continue to buy
through a downturn fare quite well. In fact,
the Dow has proven resilient in the aftermath
of past corrections of around 10%, taking an
average of just six months to recover its
losses, according to Ned Davis. (To realize
the benefits of dollar cost averaging, you
should be prepared to continuously purchase
securities over a period of time, in up and
down markets. This approach does not assure a
gain nor protect you from a loss in declining
markets.)
We raise the issue of a market
correction not as a prediction, but as a
reminder that stock prices do not move in
only one direction. If you are satisfied that
your investments are appropriate for your
various objectives, we recommend that you
stay the course when a correction eventually
occurs.
<PAGE>
================================================================================
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
December 31, 1995
Percent of
Company Net Assets
- ---------------------------------------- ------------
BMC Software 5.6%
Maxim Integrated Products 4.8
Vodafone 4.6
Xilinx 4.3
Adobe Systems 4.1
Intuit 3.4
Altera 3.0
First Data 2.9
Ascend Communications 2.7
Broderbund Software 2.7
Cirrus Logic 2.6
3Com 2.3
Cadence Design Systems 2.2
Synopsys 2.1
Electronic Arts 2.0
Bay Networks 1.9
Mobile Telecom. Technologies 1.9
CUC International 1.9
Hewlett-Packard 1.8
America Online 1.6
ALZA 1.6
Informix 1.6
SunGard Data Systems 1.5
Nokia 1.5
Silicon Graphics 1.5
-----------
Total 66.1%
================================================================================
<PAGE>
Contributions to the Change in Net Asset Value Per Share
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
Six Months Ended December 31, 1995
TEN BEST CONTRIBUTORS
Ascend Communications 86 cents
Intuit 71
America Online 42
Maxim Integrated Products 39
Cascade Communications 29
Cephalon 29
Macromedia* 25
Bay Networks 24
Cadence Design Systems 23
Conner Peripherals 23
-------
Total 391 cents
TEN WORST CONTRIBUTORS
Hedging Position** -43 cents
Electronic Arts 21
Mobile Telecom. Technologies 21
Silicon Graphics 18
Silicon Valley Group 11
KLA Instruments 11
Symantec** 8
Motorola** 7
SoftKey International** 7
Vodafone 7
--------
Total -154 cents
================================================================================
<PAGE>
Twelve Months Ended December 31, 1995
TEN BEST CONTRIBUTORS
Ascend Communications 121 cents
Intuit 84
Xilinx 73
Adobe Systems 72
America Online* 70
Cirrus Logic* 63
First Data 59
Maxim Integrated Products 58
Nokia 49
Cephalon 47
-------
Total 696 cents
TEN WORST CONTRIBUTORS
Hedging Position** -96 cents
Sybase 54
Electronic Arts 21
Silicon Graphics 13
AirTouch Communications** 10
KLA Instruments 10
DSC Communications** 9
Mobile Telecom. Technologies 8
SoftKey International** 7
Motorola** 7
--------
Total -235 cents
- --------------------------------------------------------------------------------
*Position added
**Position eliminated
================================================================================
[Performance comparison line graph for Science and Technology Fund annual report
December 31, 1995)]
================================================================================
Average Annual Compound Total Return
Periods Ended December 31, 1995
- --------------------------------------------------------------------------------
Since
Inception
1 Year 5 Years 9/30/87
------- ------- ------------
55.53% 33.60% 22.66%
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
================================================================================
<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 12/31/95. 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.
<TABLE>
Per Share Data
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
With Capital Gains and Income Dividends Annual
Taken in Cash Reinvested in Additional Shares Total Return
Year Net Capital Capital on Investment
Ended Asset Gain Income Gain Income Value of % Change
12/31 Value Distributions(1) Dividends Distributions Dividends Investment Fund S&P 500
------- -------- ----------------- ------------ --------------- ---------- ---------- ------ ---------
1987(2) $ 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
1995 29.12 4.54 -- 7.28 -- 53.93 55.5 37.6
Total $11.02 $0.26 $ 15.52 $ 0.28
- --------------------------------------------------------------------------------
<FN>
(1)Includes short-term capital gains of $0.38 in 1988, $1.23 in 1989, $0.06 in
1990, $1.51 in 1993, $0.10 in 1994; and $2.48 in 1995.
(2)From inception 9/30/87 to 12/31/87.
</FN>
</TABLE>
================================================================================
<PAGE>
Portfolio of Investments
T. Rowe Price Science & Technology Fund / December 31, 1995
(VALUES IN THOUSANDS)
- --------------------------------------------------------------------------------
Value
--------
Common Stocks & Warrants-- 91.5%
ELECTRONIC TECHNOLOGY -- 66.2%
BUSINESS SOFTWARE -- 21.1%
1,500,000 shs Adobe Systems................ $ 93,187
270,000 * Baan Company................. 12,218
3,000,000 * BMC Software................. 127,875
1,200,000 * Cadence Design Systems....... 50,400
1,200,000 * Informix..................... 36,075
400,000 * Oracle Systems............... 16,950
400,000 * PeopleSoft................... 17,050
1,500,000 * PLATINUM technology.......... 27,656
950,800 * Sybase....................... 34,110
1,250,000 * Synopsys..................... 47,656
545,900 * Tivoli Systems............... 18,322
481,499
CONSUMER SOFTWARE -- 9.0%
1,000,000 * Broderbund Software.......... 60,875
1,750,000 * Electronic Arts.............. 45,828
992,300 * Intuit....................... 77,523
400,000 * Macromedia................... 20,825
205,051
SEMICONDUCTOR -- 15.6%
750,000 * Actel........................ 8,109
1,400,000 * Altera....................... 69,562
3,000,000 * Cirrus Logic................. 59,438
2,850,000 * Maxim Integrated Products.... 109,725
300,000 * Microchip Technology......... 10,988
3,250,000 * Xilinx....................... 98,719
356,541
SEMICONDUCTOR EQUIPMENT -- 2.3%
750,000 * KLA Instruments.............. 19,594
1,350,000 * Silicon Valley Group......... 34,172
53,766
<PAGE>
NETWORKING -- 13.2%
1,125,000 * 3Com......................... 52,523
375,000 * ALANTEC...................... 21,844
750,000 * Ascend Communications........ 60,891
1,050,000 * Bay Networks................. 43,116
400,000 * Cascade Communications....... 34,050
425,000 * Cisco Systems................ 31,742
900,000 Nokia ADR.................... 34,987
325,000 * Shiva........................ 23,725
302,878
HARDWARE/PERIPHERALS -- 5.0%
1,000,000 * Conner Peripherals........... 21,000
500,000 Hewlett-Packard.............. 41,875
191,500 * Komag........................ 8,785
300,000 * Pinnacle..................... 7,538
1,250,000 * Silicon Graphics............. 34,375
113,573
TOTAL ELECTRONIC TECHNOLOGY 1,513,308
LIFE SCIENCES AND HEALTH CARE -- 3.7%
PHARMACEUTICALS -- 3.7%
1,500,000 * ALZA (Class A)............... 37,125
400,000 * Amgen........................ 23,725
600,000 * Cephalon..................... 24,488
TOTAL LIFE SCIENCES AND HEALTH CARE 85,338
INFORMATION SERVICES -- 9.3%
DATA SERVICES -- 9.3%
1,000,000 * America Online.............. 37,313
144,000 wts *#Bachman Information
Systems, $3.28, 11/22/97.. 724
1,250,000 shs * CUC International........... 42,656
1,000,000 First Data.................. 66,875
1,000,000 * ITG......................... 9,500
1,250,000 * SunGard Data Systems........ 35,156
1,318,000 * Tech Data................... 19,852
TOTAL INFORMATION SERVICES 212,076
MEDIA/TELECOMMUNICATIONS SERVICES -- 7.7%
TELECOMMUNICATIONS SERVICES -- 7.7%
2,000,000 * Mobile Telecommunication
Technologies.............. 42,750
1,250,000 * PanAmSat.................... 27,656
3,000,000 Vodafone ADR................ 105,750
TOTAL MEDIA/TELECOMMUNICATIONS SERVICES 176,156
<PAGE>
ENVIRONMENTAL SERVICES -- 0.1%
PROCESS SERVICES -- 0.1%
1,000,000 * Canarc Resources (CAD)...... 1,025
TOTAL ENVIRONMENTAL SERVICES 1,025
- --------------------------------------------------------------------------------
MISCELLANEOUS COMMON STOCKS -- 4.5% 102,434
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS & WARRANTS
(COST $1,642,477) 2,090,337
- --------------------------------------------------------------------------------
Preferred Stocks -- 0.2%
720 shs *# Bachman Information
Systems, Series A............. 5,508
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $2,362) 5,508
- --------------------------------------------------------------------------------
Short-Term Investments -- 6.7%
$25,000,000 Federal Home Loan Bank
Discount Notes,
5.45%, 1/22/96.............. 24,879
Federal Home Loan Mortgage
Discount Notes,
40,000,000 5.47%, 1/22 - 1/25/96......... 39,801
14,827,000 5.50%, 1/2/96................. 14,818
United States Treasury Bills,
25,000,000 5.325%, 2/1/96................ 24,663
25,000,000 5.34%, 2/22/96................ 24,666
25,000,000 5.035%, 6/27/96............... 24,364
TOTAL SHORT-TERM INVESTMENTS (COST $153,191) 153,191
================================================================================
TOTAL INVESTMENTS IN SECURITIES -- 98.4% OF
NET ASSETS (COST $1,798,030) 2,249,036
================================================================================
OTHER ASSETS LESS LIABILITIES.................. 36,227
NET ASSETS..................................... $2,285,263
============
* Non-income producing
Affiliated company
# Securities contain some restrictions as to public
resale -- total of such securities at year-end
amounts to 0.27% of net assets.
CAD Canadian dollar
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Statement of Assets and Liabilities
T. Rowe Price Science & Technology Fund / Year Ended December 31, 1995
(IN THOUSANDS)
ASSETS
Investments in securities, at value
Affiliated companies (cost $125,351)......................... $ 137,375
Other companies (cost $1,672,679)............................ 2,111,661
-----------
Total investments in securities.............................. 2,249,036
Other assets................................................... 77,511
-----------
Total assets................................................... 2,326,547
-----------
LIABILITIES.................................................... 41,284
-----------
NET ASSETS..................................................... $ 2,285,263
===========
NET ASSETS CONSIST OF:
Accumulated net realized gain/loss - net of distributions...... $ 105,773
Net unrealized gain (loss)..................................... 451,006
Paid-in-capital applicable to 78,484,473
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized................. 1,728,484
-----------
NET ASSETS..................................................... $ 2,285,263
===========
NET ASSET VALUE PER SHARE...................................... $ 29.12
===========
- --------------------------------------------------------------------------------
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, 1995
(IN THOUSANDS)
INVESTMENT INCOME
Income
Interest..................................................... $ 10,171
Dividend (net of foreign taxes of $423)...................... 4,122
-----------
Total income................................................. 14,293
-----------
Expenses
Investment management........................................ 11,393
Shareholder servicing........................................ 4,466
Registration................................................. 368
Prospectus and shareholder reports........................... 303
Custody and accounting....................................... 192
Directors.................................................... 32
Legal and audit.............................................. 23
Miscellaneous................................................ 47
-----------
Total expenses............................................... 16,824
-----------
Net investment income.......................................... (2,531)
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities................................................... 446,056
Options...................................................... (56,501)
Foreign currency transactions................................ 89
-----------
Net realized gain (loss)..................................... 389,644
-----------
Change in net unrealized gain or loss on:
Securities................................................... 293,586
-----------
Net realized and unrealized gain (loss)........................ 683,230
-----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.............. $ 680,699
===========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Statement of Changes in Net Assets
T. Rowe Price Science & Technology Fund
(IN THOUSANDS)
Year Ended December 31,
1995 1994
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income .......................... $ (2,531) $ (3,741)
Net realized gain (loss)........................ 389,644 29,701
Change in net unrealized gain or loss........... 293,586 84,769
----------- -----------
Increase (decrease) in net assets from
operations................................... 680,699 110,729
----------- -----------
Distributions to shareholders
Net realized gain............................... (308,443) (12,349)
----------- -----------
Capital share transactions*
Shares sold..................................... 1,486,892 582,569
Distributions reinvested........................ 300,634 11,887
Shares redeemed................................. (789,571) (279,238)
----------- -----------
Increase (decrease) in net assets from capital
share transactions........................... 997,955 315,218
----------- -----------
Increase (decrease) in net assets................. 1,370,211 413,598
NET ASSETS
Beginning of period............................... 915,052 501,454
----------- -----------
End of period..................................... $2,285,263 $ 915,052
=========== ===========
*Share information
Shares sold..................................... 53,440 29,623
Distributions reinvested........................ 10,317 552
Shares redeemed................................. (27,563) (14,354)
----------- -----------
Increase (decrease) in shares outstanding....... 36,194 15,821
=========== ===========
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Notes To Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Science & Technology Fund / December 31, 1995
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 are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed by
the Board of Directors, or by persons delegated by the Board, best to reflect
fair value.
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 translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
<PAGE>
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 the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend date.
Income and capital gain distributions are determined in accordance with federal
income tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
- -------------------------------------------------
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
A) Options - Call and put options on securities give the holder the right
to purchase or sell, respectively, a security at a specified price until a
certain date. Stock index call or put options give the holder the right to
receive cash, based on market movement, equal to the difference between the
exercise settlement value of the index and the exercise price of the option.
Risks arise from possible illiquidity of the options market and from movements
in security values. Transactions in options written and related premiums
received during the year ended December 31, 1995, were as follows:
- --------------------------------------------------------------------------------
Number of
Option Contracts Premiums
----------------- ----------
Options Outstanding at
Beginning of Period -- --
Options Written 8,000 $ 2,543,000
Options Exercised -- --
Options Expired (5,000) (935,000)
Options Closed (3,000) (1,608,000)
----------- ---------------
Options Outstanding at
End of Period -- $ --
----------------- ----------
================================================================================
B) Other - Purchases and sales of portfolio securities, other than
short-term securities, aggregated $2,485,315,000 and $1,936,654,000,
respectively, for the year ended December 31, 1995.
<PAGE>
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, $2,531,000 of
undistributed net investment income was reclassified as a decrease to
undistributed net realized gains during the year ended December 31, 1995. The
results of operations and net assets were not affected by the reclassifications.
At December 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,798,030,000 and net unrealized gain
aggregated $451,006,000, of which $518,683,000 related to appreciated
investments and $67,677,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
- -------------------------------------------------
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management fee,
of which $1,313,000 was payable at December 31, 1995. 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, 1995, 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.
In addition, the fund has entered into agreements with the Manager and two
wholly owned subsidiaries of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc., is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $3,691,000 for the year ended
December 31, 1995, of which $397,000 was payable at period-end.
================================================================================
<PAGE>
<TABLE>
Financial Highlights
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
T. Rowe Price Science & Technology Fund
For a share outstanding throughout each period
Year Ended December 31,
1995 1994 1993 1992 1991
------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $21.64 $18.95 $17.33 $15.57 $10.05
------ ------ ------ ------ ------
Investment activities
Net investment income (0.03) (0.09) (0.05)* (0.10)* (0.01)*
Net realized and unrealized gain(loss) 12.05 3.08 4.18 2.98 6.01
------ ------ ------ ------ ------
Total from investment activities 12.02 2.99 4.13 2.88 6.00
------ ------ ------ ------ ------
Distributions
Net investment income -- -- -- -- --
Net realized gain (4.54) (0.30) (2.51) (1.12) (0.48)
------ ------ ------ ------ ------
Total distributions (4.54) (0.30) (2.51) (1.12) (0.48)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD. $29.12 $21.64 $18.95 $17.33 $15.57
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Total return 55.5% 15.8% 24.2%* 18.8%* 60.2%*
Ratio of expenses to average net assets 1.01% 1.11% 1.25%* 1.25%* 1.25%*
Ratio of net investment income to
average net assets (0.15)% (0.58)% (0.68)%* (0.81)%* (0.07)%*
Portfolio turnover rate 130.3% 113.3% 163.4% 144.3% 148.2%
Net assets,end of period(in thousands) $2,285,263 $915,052 $501,454 $281,045 $166,048
- --------------------------------------------------------------------------------
<FN>
* Excludes expenses in excess of a 1.25% voluntary expense limitation in effect
through December 31, 1993.
</FN>
</TABLE>
================================================================================
<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 assets and liabilities of T.
Rowe Price Science & Technology Fund, Inc., including the portfolio of
investments, as of December 31, 1995, 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, 1995, by correspondence with the custodia n 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, 1995, 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 18, 1996
