<PAGE>
Annual Report
Science &
Technology
Fund
-----------------
December 31, 1998
-----------------
[ARTWORK APPEARS HERE]
T. Rowe Price
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------
Science & Technology Fund
. Technology stocks staged a powerful late-year rally following a steep
summer correction.
. The fund returned 22.38% and 42.35%, respectively, for the 6- and 12-month
periods ended December 31, 1998. The fund's 48% return for the fourth
quarter was its best ever.
. Sector performance was largely driven by a small group of technology
leaders.
. Electronic technology stocks remain the fund's largest component at
approximately three-quarters of portfolio assets.
. We are encouraged about prospects for 1999 but are concerned about high
valuations and manic speculation in Internet shares; we cannot rule out a
modest yet healthy correction sometime during the year.
<PAGE>
Fellow Shareholders
Following a steep correction in stock prices during July and August, technology
stocks advanced sharply, generating excellent returns for the sector and your
fund. Although the S&P 500 bounded to a record fourth consecutive year of
returns above 20%, technology stocks outperformed the broader market during the
past six months. Falling interest rates and good earnings results from leading
technology stocks fueled strength in the sector.
Your fund produced robust results for the 6- and 12-month periods ended December
31, 1998. For the past six months, the fund's return of 22.38% surpassed the
9.22% return for the unmanaged Standard & Poor's 500 Stock Index by a wide
margin. For the year, the fund's 42.35% return also far exceeded the broad index
but was slightly behind the performance of the Lipper Science & Technology Fund
Index, which may have benefited a bit more from the gains generated by a narrow
group of technology leaders. The Science & Technology Fund's powerful overall
performance reflected the strong rally in technology sector stocks during the
final months of 1998.
- ----------------------
Performance Comparison
- ----------------------
Periods Ended 12/31/98 6 Months 12 Months
- ------------------------------------------------------------------
Science & Technology Fund 22.38% 42.35%
..................................................................
S&P 500 9.22 28.57
..................................................................
Lipper Science & Technology
Fund Index 25.10 46.94
..................................................................
CAPITAL GAIN DISTRIBUTION
Your fund's Board of Directors declared a long-term capital gain distribution of
$0.99 per share for 1998, paid December 17, 1998, to shareholders of record on
December 15. 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.
1
<PAGE>
- --------------------------------------------------------------
Preparing For The Year 2000
- --------------------------------------------------------------------------------
The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. All critical systems have been
reprogrammed (including business applications required to service our customers
and processing infrastructure necessary to ensure the integrity of customer data
and investments), and they are currently being tested. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. In addition, we are
scheduling tests for critical vendors and companies that claim Year 2000
compliance to ensure that time-related data and calculations function properly
as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we have modified them where necessary for the Year 2000.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party service providers can send, receive, and process files and transactions
accurately. In late July 1998, the SIA completed a beta test of Year 2000
readiness. The test was considered successful in terms of transactions completed
and will serve as the basis for the SIA's industry-wide approach. During October
1998, T. Rowe Price completed its beta test of Year 2000 readiness with the SIA
and is ready for the industry-wide test that is scheduled for March and April
1999.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (www.troweprice.com).
2
<PAGE>
MARKET ENVIRONMENT
Coordinated interest rate cuts by key central banks, positive earnings
pronouncements by several leading technology companies, and some spillover
effect from manic Internet investing swung investor sentiment sharply positive
in early October. Your fund, down 4% year-to-date through the end of September,
finished 1998 with its strongest quarterly return ever of 48%. The fund's
significant annual return masks a technology market characterized by relatively
narrow leadership, heightened volatility, extreme valuation levels, and pockets
of exuberant speculation.
THE YEAR CONTINUED A RECORD-SETTING PERIOD FOR DOMESTIC STOCKS.
After a steady advance through the middle of July, concern over worldwide
economic growth and fear of global deflation caused the stock market to swoon.
The market's decline was abruptly halted when the Federal Reserve surprisingly
cut the fed funds rate 25 basis points in mid-October (the second of three cuts
since late-September). Neither the threat of presidential impeachment nor air
strikes on Iraq could stop the market's rebound toward new highs as we closed
the year. Once again, stocks of brand name, large-capitalization, blue chip
companies dramatically outperformed smaller-cap stocks. Valuations for these
companies reached unprecedented levels as the combination of low interest rates
and greater earnings certainty continued to expand investor interest in these
normally less volatile and more liquid securities.
Science and technology stocks mirrored the profile of the overall market. After
a strong showing in the first half of the year, these stocks fell sharply from
mid-July to early October. In addition to the impact of the broader issues
already discussed, technology companies were challenged by slowing sales of
personal computers, accelerated price declines, excess component inventory,
semiconductor overcapacity, weakness in the developing markets of Asia and Latin
America, intensified SEC scrutiny of purchase acquisition accounting, and fear
of budgetary pressures from Year 2000 conversions. However, with interest rates
falling across the globe, positive earnings pronouncements from leadership
companies such as Intel and Microsoft, and the effects of speculative Internet
investing, science and technology stocks rallied significantly from early
October through year-end.
3
<PAGE>
While we are pleased to have participated in this sharp rally during the fourth
quarter, we are concerned about several characteristics of today's environment.
First, by most measures-- price/earnings and price/book value ratios, dividend
yield, and others-- valuations for the broad market are at record high levels.
Second, as the table illustrates, performance within the science and technology
sector during 1998 was disproportionately skewed toward the technology
bellwethers and Internet stocks.
Third, volatility in science and technology stocks increased significantly due
to the continued presence of momentum investors and surging participation by
retail day traders. This situation limits liquidity, pushes stock prices up well
in advance of any discernible improvement in company fundamentals, and
exacerbates the valuation dichotomy between companies that meet Wall Street
expectations and those that suffer even temporary setbacks. Finally, as
investment professionals, we are hard-pressed to find an alternative to the term
"manic speculation" to describes investors' current infatuation with Internet
stocks. While we certainly appreciate the far-reaching economic implications and
financial opportunities presented by companies taking advantage of the Internet,
in our view the current valuation of virtually every Internet-related company
grossly exceeds any reasonable expectation of future economic returns.
- ----------------------------
Electronic Technology Stocks
- -------------------------------------------------------------
Technology Segment 1998 Return
- ------------------------------------------------------------------------
Internet and PC Software 170%
........................................................................
Connectors and Contract Manufacturers 20
........................................................................
Computer and Business Services 33
........................................................................
Server and Enterprise Hardware 44
........................................................................
Enterprise Software 17
........................................................................
Telecommunications Equipment 17
........................................................................
Semiconductors 24
........................................................................
PC Hardware and Data Storage 39
........................................................................
Data Networking 8
........................................................................
Technical Software - 1
........................................................................
Semiconductor Capital Equipment -13
........................................................................
Morgan Stanley High Tech 35 Index
(35 Bellwether Electronic Technology Stocks) 95
........................................................................
Morgan Stanley Technology Universe Index
(349 Electronic Technology Stocks) 37
........................................................................
Source: Morgan Stanley Dean Witter
Portfolio Review
At year-end, your fund comprised 70 separate holdings diversified among
several rapidly growing segments of the science and technology
4
<PAGE>
sector. Electronic technology remained the largest, accounting for 74% of fund
assets. Within the electronic technology area, enterprise software,
hardware/peripherals/distribution, and semiconductors and components each
accounted for 17% to 18% of assets. Information services and media and
telecommunications services represented approximately 15% and 9%, respectively.
Reserves stood at 2%.
During the year, your fund benefited most from its exposure to stocks of
hardware, electronic commerce, communications, and semiconductor companies. For
both the 6- and 12-month periods, America Online and enterprise storage vendor
EMC were the most significant contributors. Similarly, during the full year, Sun
Microsystems, Cisco Systems, MCI WorldCom, Dell Computer, and wide area
networking vendor Ascend Communications were among the top 10 performers. With
mutual fund money flows gravitating toward larger-cap stocks and scale becoming
increasingly advantageous as the technology market matures, it is no coincidence
that the principal contributors were stocks of well-known companies.
Notwithstanding these larger-cap companies' dominant impact, fund performance
was positively influenced by several investments among our stable of
small-capitalization holdings. They included on-line broker E*TRADE; imaging
technology specialist Electronics for Imaging; enterprise software vendor Great
Plains Software; semiconductor vendors Galileo Technology and Applied Micro
Circuits; Internet service provider PSINet; and e-commerce player VeriSign, each
of which appreciated more than 70% in 1998.
SECTOR DIVERSIFICATION
[PIE CHART APPEARS HERE]
Media and Telecommunications Services 9%
Information Services 15%
Reserves 2%
Electronic Technology 74%
Based on net assets as of 12/31/98.
In contrast, our investments in the data services, semiconductor equipment, and
media and telecommunications services segments performed poorly. CBT was the
fund's worst-performing holding for both the six and 12 months as poor
management of the sales force and inaccurate portrayals of business dynamics
climaxed in a material earnings shortfall for the September quarter. Similarly,
Gartner Group was a notably
5
<PAGE>
poor performer during both periods. While the stock suffered from slight but
persistent earnings shortfalls throughout 1998, Gartner Group's recent malaise
is due -- in our opinion -- to a severely unfair recapitalization agreement with
IMS Health. We are currently planning to retain our shares and vote against this
proposal. Although weakness in Japan, a significant sales force transition, and
a price restructuring caused Parametric Technology to stumble, we continue to
believe that the combination of a dynamic CAD/CAM market, adroit management, and
new product cycles will help the company recover over the next year. Finally,
Analog Devices and LAM Research fell victim to the Asian flu.
Outlook
We continue to be encouraged about the intermediate-term prospects for science
and technology stocks. Many of the sector-specific issues that dogged these
stocks in 1998 -- slowing sales of personal computers, accelerated price
declines, excess component inventory, semiconductor overcapacity, weakness in
the developing markets of Asia and Latin America, intensified SEC scrutiny of
purchase acquisition accounting, and fear of budgetary pressures from Year 2000
conversions -- should improve as we move toward 2000. In addition, as the
Internet's influence ripples through various economic sectors, information
technology should continue to capture a greater portion of corporate and
consumer discretionary expenditures.
Having said that, given the sector's torrid rally during the fall and our
near-term concerns about stock valuations, heightened sector volatility, and
feverish speculation in Internet stocks, we cannot rule out the possibility of a
modest, yet healthy, correction in science and technology stocks during the
early part of 1999. As many of our longer-term shareholders appreciate,
short-term volatility goes hand in hand with the potential for significant
long-term capital appreciation.
As always, we appreciate your continued support.
Respectfully submitted,
/s/ Charles A. Morris
Charles A. Morris
President and Chairman of the Investment Advisory Committee
January 22, 1999
6
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/98
- --------------------------------------------------------------------------------
Network Associates 4.6%
................................................................................
Microsoft 3.5
................................................................................
Ascend Communications 3.5
................................................................................
Parametric Technology 3.5
................................................................................
Cisco Systems 3.5
- --------------------------------------------------------------------------------
Analog Devices 3.3
................................................................................
America Online 3.3
................................................................................
Xilinx 3.2
................................................................................
Maxim Integrated Products 3.1
................................................................................
MCI WorldCom 3.1
- --------------------------------------------------------------------------------
Intel 2.9
................................................................................
EMC 2.9
................................................................................
Synopsys 2.9
................................................................................
BMC Software 2.6
................................................................................
Sun Microsystems 2.6
- --------------------------------------------------------------------------------
Computer Associates 2.5
................................................................................
Adobe Systems 2.3
................................................................................
E*TRADE 2.2
................................................................................
AirTouch Communications 2.2
................................................................................
Altera 2.1
- --------------------------------------------------------------------------------
First Data 2.0
................................................................................
Solectron 2.0
................................................................................
SCI Systems 2.0
................................................................................
Hewlett-Packard 2.0
................................................................................
Nokia 1.9
- --------------------------------------------------------------------------------
Total 69.7%
7
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 12/31/98
Ten Best Contributors
- --------------------------------------------------------------------------------
America Online 98(cents)
................................................................................
EMC 61
................................................................................
Xilinx 60
................................................................................
Network Associates 55
................................................................................
Sun Microsystems 55
................................................................................
Cisco Systems 46
................................................................................
E*TRADE 45
................................................................................
Altera 44
................................................................................
Netscape Communications * 40
................................................................................
MCI WorldCom 39
- --------------------------------------------------------------------------------
Total 543(cents)
Ten Worst Contributors
- --------------------------------------------------------------------------------
CBT - 47(cents)
................................................................................
Parametric Technology 38
................................................................................
Sterling Commerce 19
................................................................................
Gartner Group 18
................................................................................
CIENA ** 17
................................................................................
SAP ** 17
................................................................................
Advanced Fibre Communications ** 15
................................................................................
ADC Telecommunications ** 14
................................................................................
Intermedia Communications 14
................................................................................
Lam Research ** 14
- --------------------------------------------------------------------------------
Total - 213(cents)
12 Months Ended 12/31/98
Ten Best Contributors
- --------------------------------------------------------------------------------
America Online 151(cents)
................................................................................
EMC 99
................................................................................
Cisco Systems 89
................................................................................
Network Associates 80
................................................................................
Ascend Communications 80
................................................................................
Microsoft 73
................................................................................
MCI WorldCom 59
................................................................................
Xilinx 57
................................................................................
Sun Microsystems * 55
................................................................................
Dell Computer 51
- --------------------------------------------------------------------------------
Total 794(cents)
Ten Worst Contributors
- --------------------------------------------------------------------------------
CBT - 37(cents)
................................................................................
Lam Research ** 27
................................................................................
Parametric Technology 24
................................................................................
Adaptec ** 23
................................................................................
Gartner Group 21
................................................................................
Cendant ** 17
................................................................................
Security Dynamics Technologies 14
................................................................................
Viasoft 14
................................................................................
KLA-Tencor ** 14
................................................................................
Intermedia Communications 14
- --------------------------------------------------------------------------------
Total - 205(cents)
* Position added
** Position eliminated
8
<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 & TECHNOLOGY FUND
----------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Index#1 Index#2 Fund-Line
12/31/88 $10,000 $10,000 $10,000
12/31/89 $13,169 $12,784 $14,067
12/31/90 $12,760 $11,859 $13,880
12/31/91 $16,647 $17,195 $22,231
12/31/92 $17,916 $18,877 $26,400
12/31/93 $19,721 $23,002 $32,801
12/31/94 $19,982 $25,152 $37,980
12/31/95 $27,491 $34,849 $59,070
12/31/96 $33,603 $40,746 $67,475
12/31/97 $45,801 $43,938 $68,629
12/31/98 $57,958 $64,563 $97,695
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 12/31/98 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Science & Technology Fund 42.35% 18.26% 24.39% 25.60%
................................................................................
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 27.26 $ 29.71 $ 29.12 $ 21.64 $ 18.95
................................................................
Investment activities
Net investment income (0.18) (0.12) (0.09) (0.03) (0.09)
Net realized and
unrealized gain (loss) 11.58 0.54 4.28 12.05 3.08
................................................................
Total from
investment activities 11.40 0.42 4.19 12.02 2.99
................................................................
Distributions
Net realized gain (0.99) (2.87) (3.60) (4.54) (0.30)
................................................................
NET ASSET VALUE
End of period $ 37.67 $ 27.26 $ 29.71 $ 29.12 $ 21.64
----------------------------------------------------------------
Ratios/Supplemental Data
Total return* 42.35% 1.71% 14.23% 55.53% 15.79%
......................................................................................................
Ratio of expenses to
average net assets 0.94% 0.94% 0.97% 1.01% 1.11%
......................................................................................................
Ratio of net investment
income to average
net assets (0.61)% (0.44)% (0.33)% (0.15)% (0.58)%
......................................................................................................
Portfolio turnover rate 108.9% 133.9% 125.6% 130.3% 113.3%
......................................................................................................
Net assets, end of period
(in millions) $4,696 $3,538 $3,292 $2,285 $915
......................................................................................................
</TABLE>
* Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
December 31, 1998
Statement of Net Assets Shares Value
- --------------------------------------------------------------------------------
In thousands
Common Stocks 98.0%
ELECTRONIC TECHNOLOGY 74.4%
Enterprise Software 17.3%
BMC Software * 2,700,000 $ 120,403
................................................................................
CBT Group ADR * 500,000 7,469
................................................................................
Computer Associates 2,750,000 117,219
................................................................................
FileNet * 200,000 2,293
................................................................................
Great Plains Software * 150,000 7,247
................................................................................
Microsoft * 1,200,000 166,238
................................................................................
Netscape Communications * 1,250,000 75,586
................................................................................
Network Associates * 3,250,000 215,617
................................................................................
PLATINUM technology * 2,350,000 45,164
................................................................................
Security Dynamics Technologies * 750,000 17,273
................................................................................
VeriSign * 250,000 14,797
................................................................................
Visio * 550,000 19,955
................................................................................
809,261
.............
Consumer and Technical Software 12.5%
Adobe Systems 2,300,000 107,669
................................................................................
Avant * 1,200,000 19,125
................................................................................
Electronic Arts * 500,000 28,031
................................................................................
Intuit * 750,000 54,375
................................................................................
National Instruments * 475,000 16,194
................................................................................
Parametric Technology * 10,000,000 162,500
................................................................................
Synopsys * 2,500,000 135,469
................................................................................
The Learning Company * 2,500,000 64,844
................................................................................
588,207
.............
Semiconductors and Components 17.9%
Altera * 1,600,000 97,300
................................................................................
Analog Devices * 5,000,000 156,875
................................................................................
Applied Micro Circuits * 450,000 15,300
................................................................................
Burr Brown * 900,000 21,037
................................................................................
Cognex * 500,000 9,969
................................................................................
Galileo Technology * 600,000 16,219
................................................................................
Intel 1,150,000 136,311
................................................................................
Lattice Semiconductor * 150,000 6,886
................................................................................
Maxim Integrated Products * 3,300,000 144,066
................................................................................
11
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Micrel * 300,000 $ 16,575
................................................................................
Texas Instruments 800,000 68,450
................................................................................
Xilinx * 2,300,000 149,715
................................................................................
838,703
.............
Communication Equipment 9.2%
Ascend Communications * 2,500,000 164,453
................................................................................
Cisco Systems * 1,750,000 162,477
................................................................................
Nokia ADR 750,000 90,328
................................................................................
Premisys Communications * 800,000 7,275
................................................................................
Sawtek * 200,000 3,512
................................................................................
Tekelec * 250,000 4,149
................................................................................
432,194
.............
Hardware/Peripherals 17.5%
Anixter International * 2,000,000 40,625
................................................................................
Dell Computer * 650,000 47,592
................................................................................
Electronics for Imaging * 1,200,000 47,963
................................................................................
EMC * 1,600,000 136,000
................................................................................
Hewlett-Packard 1,350,000 92,222
................................................................................
Sanmina * 1,350,000 84,206
................................................................................
SCI Systems * 1,600,000 92,400
................................................................................
Solectron * 1,000,000 92,938
................................................................................
Sun Microsystems * 1,400,000 119,787
................................................................................
Tech Data * 1,750,000 70,328
................................................................................
824,061
.............
Total Electronic Technology 3,492,426
.............
INFORMATION SERVICES 14.6%
Data Services 6.8%
Affiliated Computer Services (Class A) * 400,000 18,000
................................................................................
Automatic Data Processing 850,000 68,159
................................................................................
BISYS Group * 200,000 10,313
................................................................................
Checkfree Holdings * 1,000,000 23,313
................................................................................
First Data 3,000,000 95,062
................................................................................
Gartner Group (Class A) * 3,000,000 63,750
................................................................................
National Data 850,000 41,384
................................................................................
Renaissance Worldwide * 150,000 928
................................................................................
320,909
.............
12
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
E-Commerce 7.8%
America Online 1,000,000 $154,000
................................................................................
E*Trade * 2,250,000 105,258
................................................................................
Preview Travel * 500,000 9,234
................................................................................
PSINet * 2,000,000 42,000
................................................................................
Sterling Commerce * 1,200,000 54,000
................................................................................
364,492
.............
Total Information Services 685,401
.............
MEDIA/TELECOMMUNICATIONS
SERVICES 9.0%
Media/Telecom Services 9.0%
AirTouch Communications * 1,400,000 100,975
................................................................................
Brightpoint * 1,000,000 13,656
................................................................................
ICG Communications * 1,200,000 25,875
................................................................................
Intermedia Communications * 1,500,000 25,969
................................................................................
MCI WorldCom * 2,000,000 143,562
................................................................................
PanAmSat * 1,000,000 38,906
................................................................................
Sprint * 1,300,000 30,063
................................................................................
Vodafone (GBP) 2,650,000 43,059
................................................................................
Total Media/Telecommunications Services 422,065
.............
Total Common Stocks (Cost $3,025,412) 4,599,892
.............
Short-Term Investments 2.2%
Money Market Funds 2.2%
Government Reserve Investment Fund, 4.82% #+ 103,343,595 103,344
................................................................................
Total Short-Term Investments (Cost $103,344) 103,344
.............
Total Investments in Securities
100.2% of Net Assets (Cost $3,128,756) $4,703,236
Other Assets Less Liabilities (7,683)
.............
13
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
In thousands
NET ASSETS $ 4,695,553
-------------
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions 50,755
Net unrealized gain (loss) 1,574,481
Paid-in-capital applicable to 124,639,839 shares of $0.01 par
value capital stock outstanding; 1,000,000,000 shares authorized 3,070,317
.............
NET ASSETS $ 4,695,553
-------------
NET ASSET VALUE PER SHARE $ 37.67
-------------
# Seven-day yield
+ Affiliated company
* Non-income producing
ADR American Depository Receipt
GBP British sterling
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/98
Investment Income
Income
Interest $ 7,289
Dividend 4,877
..............
Total income 12,166
..............
Expenses
Investment management 24,865
Shareholder servicing 8,879
Prospectus and shareholder reports 568
Custody and accounting 202
Registration 138
Legal and audit 24
Directors 16
Miscellaneous 28
..............
Total expenses 34,720
..............
Net investment income (22,554)
..............
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 162,192
Foreign currency transactions 69
..............
Net realized gain (loss) 162,261
..............
Change in net unrealized gain or loss
Securities 1,274,808
Other assets and liabilities
denominated in foreign currencies 1
..............
Change in net unrealized gain or loss 1,274,809
..............
Net realized and unrealized gain (loss) 1,437,070
..............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 1,414,516
--------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ (22,554) $ (15,713)
Net realized gain (loss) 162,261 330,756
Change in net unrealized gain or loss 1,274,809 (255,527)
............................
Increase (decrease) in net assets
from operations 1,414,516 59,516
............................
Distributions to shareholders
Net realized gain (119,458) (336,840)
............................
Capital share transactions *
Shares sold 1,287,933 1,479,695
Distributions reinvested 116,409 327,230
Shares redeemed (1,542,339) (1,282,906)
............................
Increase (decrease) in net assets
from capital share transactions (137,997) 524,019
............................
Net Assets
Increase (decrease) during period 1,157,061 246,695
Beginning of period 3,538,492 3,291,797
............................
End of period $ 4,695,553 $3,538,492
----------------------------
* Share information
Shares sold 42,952 48,829
Distributions reinvested 3,545 12,371
Shares redeemed (51,686) (42,170)
............................
Increase (decrease) in shares
outstanding (5,189) 19,030
The accompanying notes are an integral part of these financial statements.
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T. Rowe Price Science & Technology Fund
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December 31, 1998
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Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Science and 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.
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 .
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.
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
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T. Rowe Price Science & Technology Fund
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changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
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
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $3,907,270,000 and $4,027,861,000, respectively, for the year ended
December 31, 1998.
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, primarily net operating
losses, the following reclassifications were made during the year ended December
31, 1998. The results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
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Undistributed net investment income $22,554,000
Undistributed net realized gain (70,000)
Paid-in-capital (22,484,000)
At December 31, 1998, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$3,128,756,000. Net unrealized gain aggregated $1,574,480,000 at period end, of
which $1,648,690,000 related to appreciated investments and $74,210,000 to
depreciated investments.
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T. Rowe Price Science & Technology Fund
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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 $2,447,000 was payable at December 31, 1998. 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. At
December 31, 1998, and for the year then ended, the effective annual group fee
rate was 0.32%. 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 $7,068,000 for the year ended
December 31, 1998, of which $678,000 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, 1998, totaled
$7,274,000 and are reflected as interest income in the accompanying Statement of
Operations.
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T. Rowe Price Science & Technology Fund
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- ----------------------------------
Report of Independent Accountants
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To the Board of Directors and Shareholders of
T. Rowe Price Science & Technology Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
T. Rowe Price Science & Technology Fund, Inc. (the "Fund") at December 31, 1998,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with custodians, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 21, 1999
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T. Rowe Price Science & Technology Fund
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- ------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
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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 $119,458,000 from long-term
capital gains, subject to the 20% rate gains category.
For corporate shareholders, $4,152,000 of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
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21
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For yield, price, last transaction, current balance, or to conduct transactions,
24 hours, 7 days a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance with your existing fund account, call:
Shareholder Service Center 1-800-225-5132 toll free 410-625-6500 Baltimore area
To open a brokerage account or obtain information, call: 1-800-638-5660 toll
free
Internet address:
www.troweprice.com
T. Rowe Price Associates
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.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. F61-050 12/31/98
