<PAGE>
Annual Report
Science &
Technology
Fund
-----------------
December 31, 1997
-----------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
SCIENCE & TECHNOLOGY FUND
. Technology stocks trailed the broad market as the S&P 500 registered its
third consecutive year of more than 20% gains.
. Your fund returned 1.71% for the year and -0.83% for the second half,
behind the broad market and the Lipper Science & Technology Fund Index,
largely due to weak communications equipment stocks.
. The recent sharp correction in science and technology stocks resulted in
more reasonable valuation levels. Accordingly, after a challenging start to
the year, we believe science and technology stocks are positioned for a
steady recovery as 1998 progresses.
. We will continue to manage a diversified portfolio of stocks and keep
modest levels of cash to take advantage of developing investment
opportunities.
<PAGE>
FELLOW SHAREHOLDERS
Technology stocks continued to trail the broader market as illustrated by the
wide gap between the returns provided by the unmanaged Standard & Poor's 500
Stock Index and the Lipper index of similar funds during both the 6- and 12-
month periods. While the S&P 500 was bounding to its third consecutive year of
gains over 20% and capping off its best-ever 10-year period, technology stocks
limped home, gasping and wheezing.
- -----------------------
PERFORMANCE COMMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/97 6 Months 12 Months
- --------------------------------------------------
<S> <C> <C>
Science & Technology Fund - 0.83% 1.71%
..................................................
S&P 500 10.58 33.36
..................................................
Lipper Science &
Technology Fund Index 0.84 7.75
..................................................
</TABLE>
The Science & Technology Fund struggled through a challenging year, generating a
modest return of 1.71% and lagging the 7.75% return of the Lipper Science &
Technology Fund Index, as shown in the table. Fund results suffered from
exposure to the weak communications equipment segment.
CAPITAL GAIN DISTRIBUTION
Your fund's Board of Directors declared a long-term capital gain distribution of
$2.87 per share for 1997, paid December 30, 1997, to shareholders of record on
December 26. Your check or statement confirming the distribution was mailed in
early January, and Form 1099-DIV, with complete tax information, was mailed
toward month-end.
MARKET ENVIRONMENT
Nineteen ninety-seven was a record-setting year for the domestic equity market.
However, during the later stages of 1997, the market's near-utopian environment
was shattered by the economic and currency crises in Southeast Asia. Looking
out toward 1998, investors began to question the rate of worldwide economic
expansion, the sustainability
1
<PAGE>
of domestic corporate earnings growth, and whether modest inflation and benign
levels of interest rates would soon yield to deflation and the erosion in asset
values. In short, for the first time in a while, investors were given a good
reason to worry, and this concern was manifested in the heightened volatility of
the broader market and the swooning science and technology sectors as 1997 came
to an end.
The current environment for science and technology companies is particularly
challenging for several reasons, including slowing growth in key segments of the
science and technology sector, increasing pricing pressure across most segments
of the industry, intensified competition in select markets, and the crisis in
Southeast Asia.
THE CURRENT
ENVIRONMENT...
IS PARTICULARLY
CHALLENGING...
Growth in the personal computer and wireless communications industries -- the
two primary drivers of sector expansion over the past several years -- is
slowing. Lower prices and the absence of breakthrough software applications are
depressing growth in the personal computer industry, while service providers'
efforts to optimize cash flow are limiting growth in the wireless communications
market. In addition, many segments of the consumer electronics industry are
bogged down by standards battles, while expenditures for year 2000 compliance
seem poised to cannibalize, or at least delay, some element of corporate
information technology spending.
Pricing pressure has intensified across most segments of the technology sector,
with the situation being particularly acute for personal computer components,
commodity semiconductors, and select pockets of communications equipment.
Whereas pricing typically declines in line with costs at 20%-30% per annum,
price declines in these three segments have approximated 40%-80% over the past
year. The lack of significant new product cycles, increasing competition,
inventory reduction initiatives, and excess supply are all at work here. While
unit demand across these segments is fine, the tough pricing environment is
making it challenging to sustain historical levels of revenue growth and
profitability.
Although competition among science and technology companies is routinely
intense, the sector is beginning to experience "convergent" competition.
Convergent competition describes direct competition between companies that
historically had operated in distinct markets or provided complementary
technologies. The data networking industry dealt with
2
<PAGE>
convergent competition in 1997; the telecommunications equipment and
semiconductor industries may grapple with it as 1998 unfolds.
The economic crisis in Southeast Asia is likely to exacerbate the current growth
and pricing dynamics. This region accounts for approximately 15%-20% of
worldwide technology consumption, including 20%-25% of personal computer
purchases and 25%-30% of wireless subscriber growth. In addition, Southeast Asia
is a majority source of several commodity semiconductor memory products. While
it is difficult to quantify the precise impact on the technology sector from the
current economic and currency crises in Southeast Asia, turmoil in this region
will obviously reduce the growth rate of worldwide technology spending and
complicate the sector's fragile pricing environment.
SEVERAL SIGNIFICANT INDUSTRY PRODUCT CYCLES SHOULD BEGIN TO HAVE A POSITIVE
EFFECT ON THE SECTOR IN THE LATTER STAGES OF 1998 AND INTO 1999.
Notwithstanding the difficult environment for science and technology companies
these forces have created, perspective is important. Several significant
industry product cycles should begin to have a positive effect on the sector in
the latter stages of 1998 and into 1999. These product cycles include lower
cost, higher performance microprocessors from Intel, new computer operating
systems from Microsoft, digital cellular network deployments, a variety of
broadband communications technologies, and critical mass in electronic commerce.
In addition, the sharp correction in this sector since late October has resulted
in more reasonable valuation levels and subdued investor sentiment --
characteristics that usually accompany substantive recoveries in the stock
prices of science and technology companies. Moreover, we remind our shareholders
that the science and technology sector encounters these transitional periods
every several years, the most recent of which occurred during the early 1990s --
the starting point of many years of superior performance by the sector. Finally,
because stock prices usually anticipate improvements in revenue growth and
profitability, investment returns could improve well before the sector's
fundamentals. Accordingly, after a difficult start to the year, we look forward
to a sustained and steady recovery as 1998 progresses.
3
<PAGE>
Portfolio Review
At year-end, your fund consisted of 56 holdings diversified among several
rapidly growing segments within the science and technology sector. Electronic
technology remains the largest area of exposure, accounting for 71% of assets.
During the year, we broadened our holdings in the information services area to
18% of net assets. Media and telecommunications services, together with life
sciences and health care, compose less than 4% of portfolio assets. The top 10
positions constituted approximately 32% of fund assets, while cash balances
ended the quarter at 7% of the total.
- ----------------------
Sector Diversification
- --------------------------------------------------------------------------------
[PIE GRAPH APPEARS HERE]
Electronic Technology 71%
Reserves 7%
Media and Telecommunications Services 3%
Information Services 18%
Life Sciences and Health Care 1%
During 1997, your fund benefited from its exposure to stocks of data services,
enterprise software, semiconductor, and media and telecommunications services
companies. Two of the top five contributors to performance were from the data
services segment, including Cendant, the surviving entity formed by the merger
between CUC International and HFS, and America Online. In addition, four of the
top 10 contributors were from the enterprise software segment, including systems
management vendor BMC Software and Microsoft. Semiconductor vendor Maxim
Integrated Products and cellular giant AirTouch Communications were steady
contributors throughout the year.
In contrast, investments in the life sciences and health care segment generated
modest overall losses. Although investments in pharmaceuticals contributed
positively to performance, our holdings in the health care services and medical
devices areas generated negative returns. Still, as mentioned, communications
equipment stocks had the most significant negative impact on portfolio
performance. Burdened by slowing demand, increasing price pressure, convergent
competition, and confusing merger transactions, these companies experienced
slowing revenue growth, eroding margins, and a series of profit shortfalls.
Formerly counted among Wall Street's darlings, stocks such as 3Com
4
<PAGE>
and Ascend Communications suffered as valuations adjusted to these changing
dynamics. While performance in the second half improved over the dismal first
six months, stocks of these companies still represented five of the fund's 10
worst-performing assets. Finally, late in the year, the fund contracted an early
case of the Asian flu as Electronics for Imaging, QUALCOMM, and Applied
Materials all identified their businesses in Korea and Japan as existing or
potential near-term concerns. We expect to see many more companies suffer from
this same malaise in early 1998.
Outlook
We are cautious regarding the outlook for science and technology stocks during
the early part of 1998. Slowing growth in the personal computer and wireless
communications industries, increasing pricing pressure across most segments,
convergent competition in select markets, and the crises in Southeast Asia have
created a particularly challenging environment for this sector. Moreover, after
such a record-breaking year for the stock market, some degree of pause should be
expected, and stocks of science and technology companies would, of course, have
a difficult time overcoming any sizable correction in the broader market.
Encouragingly, we believe the combination of significant industry product
cycles, reasonable valuation levels, and waning investor sentiment toward this
sector position stocks of science and technology companies for a steady and
sustainable recovery as 1998 progresses. Accordingly, we will maintain our
longstanding investment philosophy of managing a diversified portfolio of
science and technology stocks while keeping modest levels of cash reserves to
take advantage of any opportunities. After a particularly challenging year for
your fund, we appreciate your continued support.
Respectfully submitted,
/s/ Charles A. Morris
Charles A. Morris
President and Chairman of the Investment Advisory Committee
January 20, 1998
5
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- -------------------------------------------------------------------------------
- --------------------
PROTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- --------------------------------------------------------------------------------
<S> <C>
Parametric Technology 4.0%
................................................................................
Analog Devices 3.5
................................................................................
Network Associates 3.4
................................................................................
First Data 3.3
................................................................................
Maxim Integrated Products 3.2
- --------------------------------------------------------------------------------
Xilinx 3.0
................................................................................
Cendant 2.9
................................................................................
ASM Lithography 2.9
................................................................................
Synopsys 2.8
................................................................................
Microsoft 2.7
- --------------------------------------------------------------------------------
America Online 2.5
................................................................................
Altera 2.3
................................................................................
BMC Software 2.3
................................................................................
Sterling Commerce 2.2
................................................................................
Cisco Systems 2.1
- --------------------------------------------------------------------------------
Applied Materials 2.1
................................................................................
Gartner Group 2.1
................................................................................
Adaptec 2.1
................................................................................
EMC 2.1
................................................................................
QUALCOMM 2.1
- --------------------------------------------------------------------------------
Texas Instruments 2.0
................................................................................
PLATINUM technology 2.0
................................................................................
Microchip Technology 1.8
................................................................................
SunGard Data Systems 1.8
................................................................................
Electronics for Imaging 1.6
- --------------------------------------------------------------------------------
Total 62.8%
</TABLE>
6
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 12/31/97
<TABLE>
<CAPTION>
Ten Best Contributors Ten Worst Contributors
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
America Online 38(cent) First Data - 54(cent)
................................... ........................................
PLATINUM technology 37 Electronics for Imaging 49
................................... ........................................
Cendant 33 Altera 28
................................... ........................................
BMC Software 23 Xilinx 27
................................... ........................................
Maxim Integrated Products 22 United States Surgical ** 26
................................... ........................................
3Com 17 Boston Scientific ** 18
................................... ........................................
Cisco Systems 16 Ascend Communications 15
................................... ........................................
AirTouch Communications 16 QUALCOMM 14
................................... ........................................
Sungard Data Systems 13 Applied Materials 14
................................... ........................................
Parametric Technology 12 KLA Instruments 12
- ----------------------------------- ----------------------------------------
Total 227(cent) Total - 257(cent)
<CAPTION>
12 Months Ended 12/31/97
Ten Best Contributors Ten Worst Contributors
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
America Online 90(cent) 3Com - 55(cent)
................................... ........................................
BMC Software 69 Electronics for Imaging * 49
................................... ........................................
Maxim Integrated Products 47 Ascend Communications 38
................................... ........................................
Dell Computer 44 Cascade Communications ** 35
................................... ........................................
Cendant 44 First Data 27
................................... ........................................
Microsoft 40 FORE Systems ** 27
................................... ........................................
PLATINUM technology 36 Shiva ** 26
................................... ........................................
Oracle ** 23 United States Surgical ** 22
................................... ........................................
AirTouch Communications 22 Altera * 22
................................... ........................................
Linear Technology 21 Netscape Communications ** 19
- ----------------------------------- ----------------------------------------
Total 436(cent) Total - 320(cent)
</TABLE>
* Position added
** Position eliminated
7
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
SCIENCE AND TECHNOLOGY FUND
Lipper Science
S&P 500 & Technology Science &
Date Stock Index Fund Index Technology Fund
---- ----------- ---------- ---------------
12/31/87 10,000 10,000 10,000
12/31/88 11,661 10,812 11,327
12/31/89 15,356 13,822 15,933
12/31/90 14,879 12,822 15,721
12/31/91 19,412 18,592 25,180
12/31/92 20,891 20,410 29,903
12/31/93 22,997 24,870 37,154
12/31/94 23,301 27,194 43,019
12/31/95 32,056 37,678 66,909
12/31/96 39,417 44,050 76,429
12/31/97 52,568 47,466 77,735
- ------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Periods Ended 12/31/97 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Science & Technology Fund 1.71% 21.80% 21.05% 22.76%
................................................................................
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
8
LINE GRAPH APPEARS HERE
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 29.71 $ 29.12 $ 21.64 $ 18.95 $ 17.33
................................................................
Investment activities
Net investment income (0.12) (0.09) (0.03) (0.09) (0.05)*
Net realized and
unrealized gain (loss) 0.54 4.28 12.05 3.08 4.18
................................................................
Total from
investment activities 0.42 4.19 12.02 2.99 4.13
................................................................
Distributions
Net realized gain (2.87) (3.60) (4.54) (0.30) (2.51)
................................................................
NET ASSET VALUE
End of period $ 27.26 $ 29.71 $ 29.12 $ 21.64 $ 18.95
----------------------------------------------------------------
</TABLE>
Ratios/Supplemental Data
<TABLE>
<S> <C> <C> <C> <C> <C>
Total return 1.71% 14.23% 55.53% 15.79% 24.25%*
..................................................................................................
Ratio of expenses to
average net assets 0.94% 0.97% 1.01% 1.11% 1.25%*
..................................................................................................
Ratio of net investment
income to average
net assets (0.44)% (0.33)% (0.15)% (0.58)% (0.68)%*
..................................................................................................
Portfolio turnover rate 133.9% 125.6% 130.3% 113.3% 163.4%
..................................................................................................
Average commission
rate paid $ 0.0388 $ 0.0427 - - -
..................................................................................................
Net assets, end of period
(in millions) $ 3,538 $ 3,292 $ 2,285 $ 915 $ 501
..................................................................................................
</TABLE>
* Excludes expenses in excess of a 1.25% voluntary expense limitation in effect
through 12/31/93.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------
PORTFOLIO OF INVESTMENTS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
COMMON STOCKS 92.8%
ELECTRONIC TECHNOLOGY 70.1%
Enterprise Software 13.3%
BMC Software * 1,250,000 $ 81,953
................................................................................
CBT ADR * 500,000 41,094
................................................................................
Microsoft * 750,000 96,914
................................................................................
Network Associates * 2,250,000 118,758
................................................................................
PLATINUM technology * 2,500,000 70,781
................................................................................
Security Dynamics Technologies * 1,250,000 44,766
................................................................................
Viasoft * 410,000 17,348
................................................................................
471,614
............
Consumer and Technical Software 6.8%
Parametric Technology * 3,000,000 141,937
................................................................................
Synopsys * 2,750,000 98,141
................................................................................
240,078
............
Semiconductor 17.3%
Altera * 2,500,000 82,890
................................................................................
Analog Devices * 4,500,000 124,594
................................................................................
Linear Technology 900,000 51,806
................................................................................
Maxim Integrated Products * 3,240,500 112,000
................................................................................
Microchip Technology * 2,125,000 63,883
................................................................................
Texas Instruments 1,600,000 72,000
................................................................................
Xilinx * 3,000,000 105,000
................................................................................
612,173
............
Semiconductor Equipment 8.0%
Applied Materials * 2,500,000 75,234
................................................................................
ASM Lithography * 1,500,000 101,344
................................................................................
KLA Instruments * 1,400,000 54,031
................................................................................
Lam Research * 1,750,000 51,297
................................................................................
281,906
............
Communications Equipment 14.0%
3Com * 1,000,000 34,906
................................................................................
ADC Telecommunications * 500,000 20,906
................................................................................
Advanced Fibre Communications * 1,108,800 32,432
................................................................................
Ascend Communications * 1,500,000 36,891
................................................................................
CIENA * 750,000 45,937
................................................................................
Cisco Systems * 1,350,000 75,347
................................................................................
</TABLE>
10
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
DSC Communications * 1,400,000 $ 33,513
................................................................................
Motorola 600,000 34,238
................................................................................
Newbridge Networks * 1,000,000 34,875
................................................................................
Nokia ADR 500,000 35,000
................................................................................
PairGain Technologies * 2,000,000 38,813
................................................................................
QUALCOMM * 1,450,000 73,270
................................................................................
496,128
............
Hardware/Peripherals 10.7%
Adaptec * 2,000,000 74,375
................................................................................
Anixter International * 2,000,000 33,000
................................................................................
COMPAQ Computer 700,000 39,506
................................................................................
Dell Computer * 400,000 33,613
................................................................................
Electronics For Imaging *+ 3,500,000 58,078
................................................................................
EMC * 2,700,000 74,081
................................................................................
Hewlett-Packard 550,000 34,375
................................................................................
Sequent Computer Systems * 1,650,000 33,103
................................................................................
380,131
............
Total Electronic Technology 2,482,030
............
LIFE SCIENCES AND HEALTH CARE 1.1%
Pharmaceuticals 1.1%
ALZA (Class A) * 1,250,000 39,766
................................................................................
Total Life Sciences and Health Care 39,766
............
INFORMATION SERVICES 17.1%
Commerce 6.0%
America Online * 1,000,000 89,187
................................................................................
E*TRADE *+ 1,940,000 44,681
................................................................................
Sterling Commerce * 2,000,000 76,875
................................................................................
210,743
............
Data Services 11.1%
Cendant * 3,000,000 103,125
................................................................................
First Data 4,000,000 117,000
................................................................................
Gartner Group (Class A) * 2,000,000 74,625
................................................................................
National Data 1,000,000 36,125
................................................................................
SunGard Data Systems * 2,000,000 62,000
................................................................................
392,875
............
Total Information Services 603,618
............
</TABLE>
11
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
MEDIA/TELECOMMUNICATIONS
SERVICES 1.9%
Media/Telecom Services 1.9%
AirTouch Communications * 850,000 $ 35,328
................................................................................
WorldCom 1,000,000 30,282
................................................................................
Total Media/Telecommunications Services 65,610
............
Miscellaneous Common Stocks 2.6% 91,829
............
Total Common Stocks (Cost $2,983,181) 3,282,853
............
SHORT-TERM INVESTMENTS 7.5%
Money Market Funds 7.5%
Government Reserve Investment Fund 5.55% #+ 267,469,301 267,469
................................................................................
Total Short-Term Investments (Cost $267,469) 267,469
............
Total Investments in Securities
100.3% OF NET ASSETS (COST $3,250,650) $ 3,550,322
Other Assets Less Liabilities (11,830)
............
NET ASSETS $ 3,538,492
------------
</TABLE>
# Seven-day yield
+ Affiliated company
* Non-income producing
ADR American Depository Receipt
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
December 31, 1997
- -----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments in securities, at value
Affiliated companies (cost $441,377) $ 370,228
Other companies (cost $2,809,273) 3,180,094
..............
Total investments in securities 3,550,322
Other assets 22,960
..............
Total assets 3,573,282
..............
Liabilities
Total liabilities 34,790
..............
NET ASSETS $ 3,538,492
--------------
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions 8,022
Net unrealized gain (loss) 299,672
Paid-in-capital applicable to 129,828,546 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 3,230,798
..............
NET ASSETS $ 3,538,492
--------------
NET ASSET VALUE PER SHARE $ 27.26
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
<S> <C>
Investment Income
Income
Interest $ 15,212
Dividend 2,682
..............
Total income 17,894
..............
Expenses
Investment management 24,246
Shareholder servicing 7,960
Prospectus and shareholder reports 736
Custody and accounting 318
Registration 254
Legal and audit 21
Directors 21
Miscellaneous 51
..............
Total expenses 33,607
..............
Net investment income (15,713)
..............
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 330,756
Change in net unrealized gain or loss on securities (255,527)
..............
Net realized and unrealized gain (loss) 75,229
..............
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 59,516
--------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ (15,713) $ (9,674)
Net realized gain (loss) 330,756 274,169
Change in net unrealized gain or loss (255,527) 104,193
...........................
Increase (decrease) in net assets from operations 59,516 368,688
...........................
Distributions to shareholders
Net realized gain (336,840) (356,162)
...........................
Capital share transactions *
Shares sold 1,479,695 1,604,115
Distributions reinvested 327,230 346,237
Shares redeemed (1,282,906) (956,344)
...........................
Increase (decrease) in net assets from capital
share transactions 524,019 994,008
...........................
Net Assets
Increase (decrease) during period 246,695 1,006,534
Beginning of period 3,291,797 2,285,263
...........................
End of period $3,538,492 $3,291,797
---------------------------
* Share information
Shares sold 48,829 51,910
Distributions reinvested 12,371 11,502
Shares redeemed (42,170) (31,097)
...........................
Increase (decrease) in shares outstanding 19,030 32,315
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
December 31, 1997
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe price Science & Technology Fund, inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company and commenced operations on September 30, 1987.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the outstanding
voting securities.
Premiums and Discounts Premiums and discounts on debt securities are amortized
for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
16
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $4,393,082,000 and $4,411,264,000, respectively, for the year ended
December 31, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
In order for the fund's capital accounts and distributions to shareholders to
reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1997. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 15,713,000
Paid-in-capital (15,713,000)
At December 31, 1997, the aggregate cost of investments for federal income tax
and financial reporting purposes was $3,250,650,000, and net unrealized gain
aggregated $299,672,000, of which $553,626,000 related to appreciated
investments and $253,954,000 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 $2,012,000 was payable at December 31, 1997. The fee is computed daily
and paid monthly, and consists of an individual fund fee equal to 0.35% 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 0.30% for assets in excess of $80 billion. The
effective annual group fee rate was 0.32% at December 31, 1997, and 0.33% for
the year then ended. The fund pays a pro-rata share of the group fee based on
the ratio of its net assets to those of the group.
17
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
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 $6,507,000 for the year ended
December 31, 1997, of which $665,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the year ended December 31, 1997, totaled
$5,161,000 and are reflected as interest income in the accompanying Statement of
Operations.
- -----------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
. $336,840,000 from long-term capital gains; of which $156,114,000 was subject
to the 20% rate gains category.
- --------------------------------------------------------------------------------
18
<PAGE>
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
- ---------------------------------
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, 1997, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of T.
Rowe Price Science & Technology Fund, Inc. as of December 31, 1997, the results
of its operations, the changes in its net assets and financial highlights for
each of the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 21, 1998
19
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m.
ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and T. Rowe Price OnLine.
DISCOUNT BROKERAGE*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
INVESTMENT INFORMATION
Combined Statement Overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
20
<PAGE>
T. ROWE PRICE MUTUAL FUNDS
- --------------------------------------------------------------------------------
STOCK FUNDS
................................................................................
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications*
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons**
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value**
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
................................................................................
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured
Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS
................................................................................
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
................................................................................
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
................................................................................
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly the closed-end New Age Media Fund. Converted to open-end status
on 7/28/97.
** Closed to new investors.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
21
<PAGE>
For yield, price, last transaction, Investor Centers:
current balance, or to conduct 101 East Lombard St.
transactions, 24 hours, 7 days Baltimore, MD 21202
a week, call Tele*Access(R):
1-800-638-2587 toll free T. Rowe Price
Financial Center
For assistance with 10090 Red Run Blvd.
your existing Owings Mills, MD 21117
fund account, call:
Shareholder Service Center Farragut Square
1-800-225-5132 toll free 900 17th Street, N.W.
410-625-6500 Baltimore area Washington, D.C. 20006
To open a Discount Brokerage ARCO Tower
account or obtain information, 31st Floor
call: 1-800-638-5660 toll free 515 South Flower St.
Los Angeles, CA 90071
Internet address:
www.troweprice.com 4200 West Cypress St.
10th Floor
T. Rowe Price Associates Tampa, FL 33607
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Science &
Technology Fund.
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor.
