<PAGE>
PAGE 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Section 240.14a-11(c) or
Section 240.14a-12
T. Rowe Price Small-Cap Value Fund, Inc.
_______________________________________________________________
(Name of Registrant as Specified in its Charter)
T. Rowe Price Small-Cap Value Fund, Inc.
_______________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (1)
_________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________
1 Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number,
<PAGE>
PAGE 2
or the form or schedule and the date of its filing,
1) Amount previously paid:
_________________________________________________________
2) Form, schedule, or Registration Statement no.:
_________________________________________________________
3) Filing party:
_________________________________________________________
4) Date filed:
_________________________________________________________
The contents of the module should be inserted at this point in
the filing text.
PAGE 1
T. ROWE PRICE
_________________________________________________________________
T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
MD 21202
James S. Riepe
Managing Director
Dear Shareholder:
All of the T. Rowe Price mutual funds will hold shareholder
meetings in 1994 to elect directors, ratify the selection of
independent accountants, and approve amendments to a number of
investment policies.
The T. Rowe Price funds are not required to hold annual meetings
each year if the only items of business are to elect directors or
ratify accountants. In order to save fund expenses, most of the
funds have not held annual meetings for a number of years. There
are, however, conditions under which the funds must solicit
shareholder approval of directors, and one is to comply with a
requirement that a minimum number have been elected by
shareholders, not appointed by the funds' boards. Since the last
annual meetings of the T. Rowe Price funds, several directors
have retired and new directors have been added. In addition, a
number of directors will be retiring in the near future.
Given this situation, we believed it appropriate to hold annual
meetings for all the T. Rowe Price funds in 1994. At the same
time, we reviewed the investment policies of all of the funds for
consistency and to assure the portfolio managers have the
flexibility they need to manage your money in today's fast
changing financial markets. The changes being recommended, which
are explained in detail in the enclosed proxy material, do not
alter the funds' investment objectives or basic investment
programs.
PAGE 2
In many cases the proposals are common to several funds, so we
have combined certain proxy statements to save on fund expenses.
For those of you who own more than one of these funds, the
combined proxy may also save you the time of reading more than
one document before you vote and mail your ballots. The
proposals which are specific to an individual fund are easily
identifiable on the Notice and in the proxy statement discussion.
If you own more than one fund, please note that each fund has a
separate card. You should vote and sign each one, then return
all of them to us in the enclosed postage-paid envelope.
Your early response will be appreciated and could save your fund
the substantial costs associated with a follow-up mailing. We
know we are asking you to review a rather formidable proxy
PAGE 6
statement, but this approach represents the most efficient one
for your fund as well as for the other funds. Thank you for your
cooperation. If you have any questions, please call us at 1-800-
225-5132.
Sincerely,
James S. Riepe
Director, Mutual Funds Division
CUSIP#77957M102/Fund#061
CUSIP#77957Q103/Fund#046
<PAGE>
PAGE 3
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
Notice of Meeting of Shareholders
April 20, 1994
The Annual Meeting of Shareholders of the T. Rowe Price
Science & Technology Fund, Inc. ("Science & Technology Fund") and
T. Rowe Price Small-Cap Value Fund, Inc. ("Small-Cap Value Fund")
(each a "Fund" and collectively the "Funds"), each a Maryland
corporation, will be held on Wednesday, April 20, 1994, at
8:00 o'clock a.m., Eastern time, at the offices of the Funds, 100
East Pratt Street, Baltimore, Maryland 21202. The following
matters will be acted upon at that time:
1. For the shareholders of both Funds: To elect directors
for the Fund in which you invest to serve until the
next annual meeting, if any, or until their successors
shall have been duly elected and qualified;
2. For the shareholders of both Funds:
A. To amend each Fund's fundamental policies to
increase its ability to engage in borrowing
transactions;
B. To amend each Fund's fundamental policies on
investing in commodities and futures contracts to
permit greater flexibility in futures trading;
C. To amend each Fund's fundamental policies to
increase its ability to engage in lending
transactions;
D. To adopt a fundamental policy for each Fund to
increase the percentage of Fund assets which may be
invested in the securities of any single issuer;
E. To change from a fundamental to an operating policy
each Fund's policy on investing in other investment
companies;
F. To change from a fundamental to an operating policy
each Fund's policy on purchasing securities on
margin;
G. To change from a fundamental to an operating policy
each Fund's policy on pledging assets;
CUSIP#77957M102/fund#061
CUSIP#77957Q103/fund#046<PAGE>
PAGE 4
H. To change from a fundamental to an operating policy
each Fund's policy on short sales;
I. To amend the Fund's fundamental policies concerning
real estate;
For the shareholders of Science & Technology Fund only:
J. To amend the Fund's fundamental policies on the
issuance of senior securities;
3. For the shareholders of both Funds: To ratify or
reject the selection of the firm of Coopers & Lybrand
as the independent accountants for each Fund for the
fiscal year 1994; and
4. To transact such other business as may properly come
before the meeting and any adjournments thereof.
LENORA V. HORNUNG
Secretary
March 11, 1994
100 East Pratt Street
Baltimore, Maryland 21202
_________________________________________________________________
YOUR VOTE IS IMPORTANT
Shareholders are urged to designate their choices on each of the
matters to be acted upon and to date, sign, and return the
enclosed proxy in the envelope provided, which requires no
postage if mailed in the United States. Your prompt return of
the proxy will help assure a quorum at the meeting and avoid the
additional Fund expense of further solicitation.
_________________________________________________________________
<PAGE>
PAGE 5
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND, INC.
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
Meeting of Shareholders--April 20, 1994
PROXY STATEMENT
This statement is furnished in connection with the
solicitation of proxies by the T. Rowe Price Science & Technology
Fund, Inc. (the "Science & Technology Fund") and the T. Rowe
Price Small-Cap Value Fund, Inc. (the "Small-Cap Value Fund")
(each a "Fund" and collectively the "Funds"), each a Maryland
corporation, for use at the Annual Meeting of Shareholders of
each Fund to be held on April 20, 1994, and at any adjournments
thereof.
Shareholders may only vote on matters which concern the
Fund or Funds in which they hold shares. Shareholders are
entitled to one vote for each full share, and a proportionate
vote for each fractional share, of the Fund held as of the record
date. Under Maryland law, shares owned by two or more persons
(whether as joint tenants, co-fiduciaries, or otherwise) will be
voted as follows, unless a written instrument or court order
providing to the contrary has been filed with the Fund: (1) if
only one votes, that vote will bind all; (2) if more than one
votes, the vote of the majority will bind all; and (3) if more
than one votes and the vote is evenly divided, the vote will be
cast proportionately.
In order to hold the meeting, a majority of each Fund's
shares entitled to be voted must have been received by proxy or
be present at the meeting. In the event that a quorum is present
but sufficient votes in favor of one or more of the Proposals are
not received by the time scheduled for the meeting, the persons
named as proxies may propose one or more adjournments of the
meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of
the shares present in person or by proxy at the session of the
meeting adjourned. The persons named as proxies will vote in
favor of such adjournment if they determine that such adjournment
and additional solicitation is reasonable and in the interests of
each Fund's shareholders. The shareholders of each Fund vote
separately with respect to each Proposal.
The individuals named as proxies (or their substitutes) in
the enclosed proxy card (or cards if you own shares of more than
one Fund or have multiple accounts) will vote in accordance with
your directions as indicated thereon if your proxy is received
properly executed. You may direct the proxy holders to vote your
shares on a Proposal by checking the appropriate box "For" or
"Against," or instruct them not to vote those shares on the
Proposal by checking the "Abstain" box. Alternatively, you may
simply sign, date and return your proxy card(s) with no specific
PAGE 6
instructions as to the Proposals. If you properly execute your
proxy card and give no voting instructions with respect to a
Proposal, your shares will be voted for the Proposal. Any proxy
may be revoked at any time prior to its exercise by filing with
the Fund a written notice of revocation, by delivering a duly
executed proxy bearing a later date, or by attending the meeting
and voting in person.
Abstentions and "broker non-votes" (as defined below) are
counted for purposes of determining whether a quorum is present,
but do not represent votes cast with respect to any Proposal.
"Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund, but are not
voted as to one or more Proposals because instructions have not
been received from the beneficial owners or persons entitled to
vote and the broker or nominee does not have discretionary voting
power.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSAL 1 FOR EACH FUND. A
MAJORITY OF THE SHARES PRESENT IN PERSON OR BY PROXY AT THE
MEETING IS SUFFICIENT TO APPROVE PROPOSAL 3 FOR EACH FUND.
APPROVAL OF ALL REMAINING PROPOSALS OF EACH FUND REQUIRES THE
AFFIRMATIVE VOTE OF THE HOLDERS OF THE LESSER OF (A) 67% OF THE
SHARES PRESENT AT THE MEETING IN PERSON OR BY PROXY, OR (B) A
MAJORITY OF EACH FUND'S OUTSTANDING SHARES.
If the proposed amendments to each Fund's fundamental
investment policies are approved, they will become effective on
or about May 1, 1994. If any of the proposed amendments to each
Fund's fundamental investment policies are not approved, they
will remain unchanged.
Each Fund will pay a portion of the costs of the meeting,
including the solicitation of proxies, allocated on the basis of
the number of shareholder accounts of each Fund. Persons holding
shares as nominees will be reimbursed, upon request, for their
reasonable expenses in sending solicitation materials to the
principals of the accounts. In addition to the solicitation of
proxies by mail, directors, officers, and/or employees of each
Fund or of its investment manager, T. Rowe Price Associates, Inc.
("T. Rowe Price"), may solicit proxies in person or by telephone.
The approximate date on which this Proxy Statement and form
of proxy is first being mailed to shareholders of each Fund is
March 11, 1994.<PAGE>
PAGE 7
1. ELECTION OF DIRECTORS
The following table sets forth information concerning
each of the nominees for director indicating the particular
Board(s) on which the nominee has been asked to serve. Each
nominee has agreed to hold office until the next annual meeting
(if any) or his/her successor is duly elected and qualified.
With the exception of Mrs. Merriman and Messrs. Fagin and Lanier,
each of the nominees is a member of the present Board of
Directors of the Science & Technology Fund and has served in that
capacity since originally elected by the Board in 1987. With the
exception of Mrs. Merriman and Messrs. Bailey, Dick, Fagin,
Laporte and Major, each of the nominees is a member of the
present Board of Directors of the Small-Cap Value Fund and has
served in that capacity since originally elected by the Board in
1989. A shareholder using the enclosed proxy form can vote for
all or any of the nominees of each Fund's Board of Directors or
withhold his or her vote from all or any of such nominees. If
the proxy card is properly executed but unmarked, it will be
voted for all of the nominees. Should any nominee become unable
or unwilling to accept nomination or election, the persons named
in the proxy will exercise their voting power in favor of such
other person or persons as the Board of Directors may recommend.
There are no family relationships among these nominees.
The membership of the two Boards will not be identical
following election at the meeting. Specifically, certain
individuals who are interested persons of T. Rowe Price are being
elected to only one of the Funds. Shareholders are being asked
to elect the Board of Directors of their respective Fund only.<PAGE>
PAGE 8
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
Leo C. Bailey Retired; Director of the Science &
3396 S. Placita following T. Rowe Price Technology
Fabula Funds: Growth Stock, New Fund:
Green Valley, Era, Index Trust (since Small-Cap
AZ 85614 inception), Balanced (since Value Fund:
3/3/24 inception), Mid-Cap Growth
0Science & (since inception), OTC (since
Technology Fund: inception), Dividend Growth
Director since (since inception), Blue Chip
1988 Growth (since inception),
0Small-Cap Value International, and Institutional
Fund: Initial International (since inception)
election
Donald W. Dick, Partner, Overseas Partners, Science &
Jr. Inc., a financial Technology
375 Park Avenue investment firm; formerly Fund:
Suite 3505 (6/65-3/89) Director and Small-Cap
New York, NY Vice President-Consumer Fund:
10152 Products Division, McCormick &
1/27/43 Company, Inc., international
0Science & food processors; Director/
Technology Fund: Trustee, Waverly Press, Inc. and the
Initial election following T. Rowe Price Funds/
0Small-Cap Value Trusts: Growth Stock, Growth &
Fund: initial Income, New America Growth, Capital
election Appreciation, Balanced (since
inception), Mid-Cap Growth
(since inception), OTC (since
inception), Dividend Growth
(since inception), Blue Chip
Growth (since inception),
International, and Institutional
International (since inception)
<PAGE>
PAGE 9
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
David K. Fagin Chairman, Chief Executive Science &
One Norwest Officer and Director, Technology
Center Golden Star Resources, Fund:
1700 Lincoln Ltd.; formerly (1986-7/91) Small-Cap
Street President, Chief Operating Value Fund:
Suite 1950 Officer and Director, Homestake
Denver, Co Mining Company; Director/Trustee
80203 of the following T. Rowe Price
4/9/38 Funds/Trusts: New Horizons,
0Science & New Era, Equity Income, Capital
Technology Fund: Appreciation, Balanced (since
Initial election inception), Mid-Cap Growth
0Small-Cap Value (since inception), OTC (since
Fund: Initial inception), Dividend Growth
election (since inception), and Blue Chip
Growth (since inception)
Addison Lanier Financial management; Science &
441 Vine Street, President and Director, Technology
#2310 Thomas Emery's Sons, Inc. Fund:
Cincinnati, OH and Emery Group, Inc.; Small-Cap
45202-2913 Director/Trustee, Scinet Value Fund:
1/12/24 Development and Holdings,
0Science & Inc. and the following
Technology Fund: T. Rowe Price Funds/Trusts:
Initial election New America Growth, Equity
0Small-Cap Value Income, Balanced (since
Fund: Director inception), Mid-Cap Growth
since 1988 (since inception), OTC (since
inception), Dividend Growth
(since inception), Blue Chip
Growth (since inception),
International, and Institutional
International (since inception)<PAGE>
PAGE 10
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
*John H. Laporte Managing Director, T. Rowe Science &
100 East Pratt Price Associates, Inc.; Technology
Street Chairman of the Board, T. Fund:
Baltimore, MD Rowe Price OTC Fund, Inc.; Small-Cap
21202 President and Director/ Value Fund:
7/26/45 Trustee of the following T.
0Science & Rowe Price Fund/Trust: New
Technology Fund: Horizons and New America Growth
Chairman of the
Board and member
of Executive
Committee since
1988
0Small-Cap Value
Fund: Initial
election Chairman
of the Board and
member of Executive
Committee since
January 19, 1994
John K. Major Chairman of the Board and Science &
126 E. 26 Place President, KCMA Technology
Tulsa, OK Incorporated, Tulsa, Fund:
74114-2422 Oklahoma; Director/Trustee Small-Cap
8/3/24 of the following T. Rowe Value Fund:
0Science & Price Funds/Trusts:
Technology Fund: Growth Stock, New Horizons,
Director since New Era, Growth & Income, Capital
1987 Appreciation, Balanced (since
0Small-Cap Value inception), Mid-Cap Growth (since
Fund: Initial inception), OTC (since
election inception), Dividend Growth
(since inception), and
Blue Chip Growth (since inception)
<PAGE>
PAGE 11
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
Hanne M. Retail business consultant; Science &
Merriman formerly, President and Technology
655 15th Street Chief Operating Officer Fund:
Suite 300 (1991-92), Nan Duskin, Small-Cap
Washington, Inc., a women's specialty Value Fund:
D.C. 20005 store, Director (1984-90) and
11/16/41 Chairman (1989-90) Federal
0Science & Reserve Bank of Richmond, and
Technology Fund: President and Chief Executive
Initial election Officer (1988-89), Honeybee, Inc.,
0Small-Cap Value a division of Spiegel, Inc.;
Fund: Initial Director, Central Illinois
election Public Service Company, CIPSCO
Incorporated, The Rouse Company,
State Farm Mutual Automobile
Insurance Company and USAir
Group, Inc.
*James S. Riepe Managing Director, T. Rowe Science &
100 East Pratt Price Associates, Inc.; Technology
Street President and Director, Fund:
Baltimore, MD T. Rowe Price Investment Small-Cap
21202 Services, Inc.; Chairman of Value
6/25/43 the Board, T. Rowe Price Fund:
0Science and Services, Inc., T. Rowe Price
Technology Fund: Trust Company, T. Rowe Price
Vice President Retirement Plan Services, Inc., and
and member of the following T. Rowe Price
Executive Funds: Growth & Income, Spectrum (since
Committee since inception), Balanced (since inception), and
1987 Mid-Cap Growth (since inception); Vice
0Small-Cap Value President of the following T. Rowe
Fund: Vice Price Funds/Trusts: New Era,
President and New America Growth, Prime Reserve,
member of International, and Institutional
Executive International (since inception); Vice
Committee since President and Director/ Trustee of
1988 the 22 other T. Rowe Price Funds/Trusts;
Director, T. Rowe Price
Tax-Free Insured Intermediate
Bond Fund, Inc. (since
PAGE 12
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
inception) and Rhone-Poulenc
Rorer, Inc.
*George A. Roche Managing Director and Chief Small-Cap Value
100 East Pratt Financial Officer, T. Rowe Fund:
Street Price Associates, Inc.;
Baltimore, MD President and Director, T.
21202 Rowe Price New Era Fund, Inc.;
7/6/41 Vice President and Director,
0Small-Cap Value Rowe Price-Fleming International, Inc.
Fund: Initial
election
Hubert D. Vos President, Stonington Science &
1231 State Capital Corporation, a Technology
Street private investment company; Fund:
Suite 210 Director/Trustee of the Small-Cap
Santa Barbara, following T. Rowe Price Value Fund:
CA 93190-0409 Funds/Trusts: New Horizons,
8/2/33 New Era, Equity Income,
0Science & Capital Appreciation,
Technology Fund: Balanced (since inception),
Director since Mid-Cap Growth (since
1988 inception), OTC (since
0Small-Cap Value inception), Dividend Growth
Fund: Director (since inception), and Blue Chip
since 1988 Growth (since inception)<PAGE>
PAGE 13
_________________________________________________________________
Fund All Other
Shares Price
Beneficially Funds'
Owned, Shares
Name, Address, Directly Beneficially
Date of Birth or Owned
of Nominee and Indirectly, Directly
Position with Principal as of as of
Fund Occupations(1) 1/31/94(2) 1/31/94
_________________________________________________________________
Paul M. Wythes Founding General Partner, Science &
755 Page Mill Sutter Hill Ventures, a Technology
Road venture capital limited Fund:
Suite A200 partnership providing Small-Cap
Palo Alto, CA equity capital to young Value Fund:
94304 high technology companies
6/23/33 throughout the United States;
0Science & Director/Trustee, Teltone Corporation,
Technology Fund: Interventional Technologies,
Director since Inc., Stuart Medical, Inc.,
1987 and the following T. Rowe Price
0Small-Cap Value Funds/Trusts: New Horizons,
Fund: Director Growth & Income, New America
since 1988 Growth, Index Trust (since
inception), Balanced (since
inception), Mid-Cap Growth
(since inception), OTC (since
inception), Dividend Growth
(since inception), and Blue
Chip Growth (since inception)
* Nominees considered "interested persons" of T. Rowe Price.
(1) Except as otherwise noted, each individual has held the
office indicated, or other offices in the same company, for
the last five years.
(2) In addition to the shares owned beneficially and of record
by each of the nominees, the amounts shown reflect the
proportionate interests of Messrs. Laporte and Riepe in
_____ shares of the Science & Technology Fund and _____
shares of the Small-Cap Value Fund which are owned by a
wholly-owned subsidiary of the Funds' investment manager, T.
Rowe Price, and their interests in _______ and _____ shares,
respectively, owned by the T. Rowe Price Associates, Inc.
Profit Sharing Trust.
The directors of each Fund who are officers or
employees of T. Rowe Price receive no remuneration from the Fund.
For the year ended December 31, 1993, Messrs. Bailey, Major, Vos,
and Wythes, received from the Science & Technology Fund
PAGE 14
directors' fees aggregating $14,058, including expenses. For the
same period, Messrs. Lanier, Vos, and Wythes received from the
Small-Cap Value Fund directors' fees aggregating $14,443,
including expenses. The fee paid to each such director is
calculated in accordance with the following fee schedule: a fee
of $25,000 per year as the initial fee for the first Price
Fund/Trust on which a director serves; a fee of $5,000 for each
of the second, third, and fourth Price Funds/Trusts on which a
director serves; a fee of $2,500 for each of the fifth and sixth
Price Funds/Trusts on which a director serves; and a fee of
$1,000 for each of the seventh and any additional Price
Funds/Trusts on which a director serves. Those nominees
indicated by an asterisk (*) are persons who, for purposes of
Section 2(a)(19) of the Investment Company Act of 1940, are
considered "interested persons" of T. Rowe Price. Each such
nominee is deemed to be an "interested person" by virtue of his
officership, directorship, and/or employment with T. Rowe Price.
Messrs. Bailey, Major, Vos and Wythes are the independent
directors of the Science & Technology Fund and Messrs. Bailey,
Dick, Fagin, Lanier, Major, Vos, and Wythes are the independent
directors of the Small-Cap Value Fund.
The Price Funds have established a Joint Audit
Committee, which is comprised of at least one independent
director representing each of the Funds. Messrs. Bailey and Vos,
who are directors of both Funds, and Mr. Dick, who is a director
of the Small-Cap Value Fund, are members of the Committee. The
other member is Anthony W. Deering. These directors also receive
a fee of $500 for each Committee meeting attended. The Audit
Committee holds two regular meetings during each fiscal year, at
which time it meets with the independent accountants of the Price
Funds to review: (1) the services provided; (2) the findings of
the most recent audit; (3) management's response to the findings
of the most recent audit; (4) the scope of the audit to be
performed; (5) the accountants' fees; and (6) any accounting
questions relating to particular areas of the Price Funds'
operations or the operations of parties dealing with the Price
Funds, as circumstances indicate.
The Board of Directors of each Fund has an Executive
Committee which is authorized to assume all the powers of the
Board to manage the Fund, in the intervals between meetings of
the Board, except the powers prohibited by statute from being
delegated.
The Board of Directors of each Fund has a Nominating
Committee, which is comprised of all the Price Funds' independent
directors. The Nominating Committee, which functions only in an
advisory capacity, is responsible for reviewing and recommending
to the full Board candidates for election as independent
directors to fill vacancies on the Fund's Board of Directors.
The Nominating Committee will consider written recommendations
from shareholders for possible nominees. Shareholders should
PAGE 15
submit their recommendations to the Secretary of the Fund.
Members of the Nominating Committee met informally during the
last full fiscal year, but the Committee as such held no formal
meetings.
The Science & Technology and Small-Cap Value Funds'
Board of Directors held seven and eight, respectively, meetings
during the last full fiscal year. With the exception of Messrs.
Mathias and Major of the Science & Technology Fund, the directors
of each Fund standing for election or reelection attended 75% or
more of the aggregate of (i) the total number of meetings of the
Board of Directors (held during the period for which he was a
director) and (ii) the total number of meetings held by all
committees of the Board on which he served.
2. APPROVAL OR DISAPPROVAL OF CHANGES TO THE FUNDS' FUNDAMENTAL
INVESTMENT POLICIES
The Investment Company Act of 1940 (the "1940 Act") requires
investment companies such as the Funds to adopt certain specific
investment policies that can be changed only be shareholder vote.
An investment company may also elect to designate other policies
that may be changed only by shareholder vote. Both types of
policies are often referred to as "fundamental policies."
Certain of the Funds' fundamental policies have been adopted in
the past to reflect regulatory, business or industry conditions
that are no longer in effect. Accordingly, each Fund's Board of
Directors has approved, and has authorized the submission to each
Fund's shareholders for their approval, the amendment and/or
reclassification of certain of the fundamental policies
applicable to each Fund.
The proposed amendments would (i) simplify and modernize the
limitations that are required to be fundamental by the 1940 Act
and (ii) eliminate as fundamental any limitations that are not
required to be fundamental by that Act. By reducing to a minimum
those limitations that can be changed only by shareholder vote,
the Funds would be able to minimize the costs and delay
associated with holding frequent annual shareholers' meetings.
The Directors also believe that T. Rowe Price's ability to manage
the Funds' assets in a changing investment environment will be
enhanced and that investment management opportunities will be
increased by these changes.
In the following discussion "the Fund" is intended to refer
to each Fund.
BOTH FUNDS
A. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
TO INCREASE ITS ABILITY TO ENGAGE IN BORROWING TRANSACTIONS
The Board of Directors has proposed an amendment to the
PAGE 16
Fund's fundamental policy which would permit the Fund greater
flexibility to engage in borrowing transactions. The current
restriction is not required by applicable law. The new
restriction would (1) allow the Fund to borrow slightly larger
amounts of money; (2) borrow from other Price Funds or persons to
the extent permitted by applicable law; and (3) clarify that the
Fund's restriction on borrowing does not prohibit the Fund from
entering into reverse repurchase agreements and other proper
investments and transactions. The new restriction would also
conform the Fund's policy on borrowing to one which is expected
to become standard for all T. Rowe Price mutual funds. The Board
believes that standardized policies will assist the Fund and T.
Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price mutual funds are subject.
The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
borrowing is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Borrow money, except the Fund may borrow from banks as a
temporary measure for extraordinary or emergency purposes,
and then only in amounts not exceeding 30% of its total
assets valued at market. The Fund will not borrow in order
to increase income (leveraging), but only to facilitate
redemption requests which might otherwise require untimely
disposition of portfolio securities (see page ___ of
prospectus). Interest paid on any such borrowings will
reduce net investment income. The Fund may enter into
futures contracts as set forth in [its fundamental policy on
futures];"
As amended, the Fund's fundamental policy on borrowing would
be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Borrow money except that the Fund may (i) borrow for non-
leveraging, temporary or emergency purposes and (ii) engage
in reverse repurchase agreements and make other investments
or engage in other transactions, which may involve a
borrowing, in a manner consistent with the Fund's investment
objective and program, provided that the combination of (i)
and (ii) shall not exceed 33 1/3% of the value of the Fund's
total assets (including the amount borrowed) less
liabilities (other than borrowings) or such other percentage
permitted by law. Any borrowings which come to exceed this
amount will be reduced in accordance with applicable law.
The Fund may borrow from banks, other Price Funds or other
persons to the extent permitted by applicable law."
If approved, the primary effect of the proposals would be to
allow the Fund to: (1) borrow up to 33 1/3% (or such higher
PAGE 17
amount permitted by law) of its total assets (including the
amount borrowed) less liabilities (other than borrowings) as
opposed to the current limitation of 30%; (2) borrow from persons
other than banks including other mutual funds advised by T. Rowe
Price or Rowe Price-Fleming International, Inc. ("Price Funds");
and (3) enter into reverse repurchase agreements and other
investments consistent with the Fund's investment objective and
program.
33 1/3% Limitation
The increase in the amount of money which the Fund could
borrow is designed to allow the Fund greater flexibility to meet
shareholder redemption requests should the need arise. As is the
case under its current policy, the Fund would not borrow to
increase income through leveraging. It is possible the Fund's
ability to borrow a larger percentage of its assets could
adversely affect the Fund if the Fund were unable to liquidate
sufficient securities, or the Fund were forced to liquidate
securities at unfavorable prices, to pay back the borrowed sums.
However, the Directors believe the risks of such possibilities
are outweighed by the greater flexibility the Fund would have in
borrowing. The increased ability to borrow should permit the
Fund, if it were faced with substantial shareholder redemptions,
to avoid liquidating securities at unfavorable prices or times to
a greater degree than would be the case under the current policy.
Borrowing From Other Price Funds
Current law prohibits the Fund from borrowing from other
Price Funds. However, if the proposed amendments to the Fund's
fundamental investment policy on borrowing are approved by
shareholders, the Fund may apply to the SEC for an exemption from
this prohibition. There is, of course, no assurance that the SEC
would act favorably on such a request. If the SEC did grant such
an order, the Fund could be allowed to borrow from other Price
Funds. T. Rowe Price believes that the ability to engage in
borrowing transactions with the participating Price Funds as part
of a program, referred to as the "interfund lending program," may
allow the Fund to obtain lower interest rates on money borrowed
for temporary or emergency purposes. Any existing Price Fund
participating in the interfund lending program would only do so
upon approval of its shareholders.
As noted above, when the Fund is required to borrow money,
it currently may do so only from banks. When the Fund borrows
money from banks, it typically pays interest on those borrowings
at a rate that is higher than rates available contemporaneously
from investments in repurchase agreements. If the proposed
amendment is approved, eligible Price Funds would be permitted to
participate in an interfund lending program to allow various of
the Price Funds, through a master loan agreement, to lend
PAGE 18
available cash to and borrow from other Price Funds. Each
lending fund could lend available cash to another Price Fund only
when the interfund rate was higher than repurchase agreement
rates or rates on other comparable short-term investments. Each
borrowing fund could borrow through the interfund lending program
only when the interfund loan rate was lower than available bank
loan rates.
In determining to recommend the proposed amendment to
shareholders for approval, T. Rowe Price and the Directors
considered the possible risks to the Fund from participation in
the interfund lending program. T. Rowe Price does not view the
difference in rates available on bank borrowings and repurchase
agreements or other short-term investments as reflecting a
material difference in the quality of the risk of the
transactions, but rather as an indication of the ability of banks
to earn a higher rate of interest on loans than they pay on
repurchase agreements or other short-term investments. There is
a risk that a lending fund could experience a delay in obtaining
prompt repayment of a loan and, unlike repurchase agreements, the
lending fund would not necessarily have received collateral for
its loan, although it could require that collateral be provided
as a condition for making a loan. A delay in obtaining prompt
payment could cause a lending fund to miss an investment
opportunity or to incur costs to borrow money to replace the
delayed payment. There is also a risk that a borrowing fund
could have a loan recalled on one day's notice. In these
circumstances, the borrowing fund might have to borrow from a
bank at a higher interest cost if money to lend were not
available from another Price Fund. The Directors consider that
the benefits to the Fund of participating in the program outweigh
the possible risks to the Fund from such participation.
In order to permit the Fund to engage in interfund lending
transactions, regulatory approval of the SEC is required because,
among other reasons, the transactions may be considered to be
among affiliated parties. If the proposed amendment is approved
by shareholders, the proposed interfund lending program would be
implemented only to the extent permitted by rule or by order of
the SEC and to the extent that the transactions were otherwise
consistent with the investment objectives and limitations of each
participating Price Fund. If exemptive relief from the SEC is
not granted, the Fund, as previously noted, will not be able to
engage in the interfund lending program even though shareholders
have approved the proposal. As noted, no prediction can be made
as to whether the SEC would grant such relief.
Shareholders are being asked to approve an amendment to the
Fund's fundamental policy on borrowing in this proposal.
Shareholders are also being asked to vote separately on an
amendment to the Fund's fundamental policy on lending (see page
___). If both amendments are adopted, the Fund, subject to its
investment objective and policies, will be able to participate in
PAGE 19
the interfund lending program as both a lender and a borrower.
If only one of the two proposals is adopted, then the Fund's
participation in the interfund lending program will be confined
to either lending or borrowing, depending on which amendment is
approved.
The Directors believe the proposed amendment may benefit the
Fund by facilitating its flexibility to explore cost-effective
alternatives to satisfy its borrowing requirements and by
borrowing money from other Price Funds. Implementation of
interfund borrowing would be accomplished consistent with
applicable regulatory requirements, including the provisions of
any order the SEC might issue to the Fund and to other Price
Funds.
Reverse Repurchase Agreements
To facilitate portfolio liquidity, it is possible the Fund
could enter into reverse repurchase agreements. Reverse
repurchase agreements are ordinary repurchase agreements in which
a fund is a seller of, rather than the investor in, securities,
and agrees to repurchase them at an agreed upon time and price.
Reverse repurchase agreements can avoid certain market risks and
transaction costs associated with an outright sale and
repurchase. Reverse repurchase agreements, however, may be
viewed as borrowings. To the extent they are, the proposed
amendment would clarify that the Fund's restrictions on borrowing
would not prohibit the Fund from entering into a reverse
repurchase agreement.
Other Changes
The other proposed changes in the Fund's fundamental policy
- - to allow the Fund to borrow from persons other than banks and
other Price Funds to the extent consistent with applicable law -
and to engage in transactions other than reverse repurchase
agreements which may, or may be deemed to, involve a borrowing -
are simply designed to permit the Fund the greatest degree of
flexibility permitted by law in pursuing its investment program.
All activities of the Fund are, of course, subject to the 1940
Act and the rules and regulations thereunder as well as various
state securities laws.
The Board of Directors recommends that shareholders vote FOR
the proposal.
B. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL POLICIES ON
INVESTING IN COMMODITIES AND FUTURES CONTRACTS TO PROVIDE
GREATER FLEXIBILITY IN FUTURES TRADING
The Board of Directors has proposed amendments to the
Fundamental Investment Policies of the Fund to provide the Fund
PAGE 20
with greater flexibility in buying and selling futures. The
provisions of the Fund's current fundamental investment policies
in this area are not required by applicable law and the Directors
believe the Fund's investment manager, T. Rowe Price, should have
greater flexibility to enter into futures contracts consistent
with the Fund's investment objective and program and as market
and regulatory developments require and permit without the
necessity of seeking further shareholder approval. The new
restriction would also conform the Fund's policy on commodities
and futures to one which is expected to become standard for all
T. Rowe Price mutual funds. The Board believes that standardized
policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the
T. Rowe Price mutual funds are subject. The Board has directed
that such amendments be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policies in the area of
investing in commodities and futures are as follows:
Commodities
Science & Technology Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell commodities or commodity contracts; except
that it may (i) enter into futures contracts and options on
futures contracts, subject to [its fundamental policy on
futures]; and (ii) invest in or commit its assets to forward
foreign currency exchange contracts to the extent permitted
by the prospectus and Statement of Additional Information;"
Small-Cap Value Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell commodities or commodity contracts; except
that it may (i) enter into futures contracts and options on
futures contracts, subject to [its fundamental policy on
futures]; and (ii) enter into forward foreign currency
exchange contracts (although the Fund does not consider such
contracts to be commodities);"
Both Funds
Futures Contracts
"[As a matter of fundamental policy, the Fund may not:]
Enter into a futures contract or an option thereon, although
the Fund may enter into a futures contract or an option on a
futures contract if, as a result, no more than 5% of the
Fund's total assets (taken at market value at the time of
entering into the contract) would be committed to initial
margin or premiums on options on such futures contracts,
PAGE 21
provided however, that in the case of an option which is in-
the-money at the time of purchase, the in-the-money amount
as defined under certain CFTC regulations may be excluded in
computing such 5%;"
As amended, the Fund's fundamental policies on investing in
commodities and futures would be combined and would be as
follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell physical commodities; except that it may
enter into futures contracts and options thereon;"
In addition, the Board of Directors intends to adopt the
following operating policy, which may be changed by the Board of
Directors without further shareholder approval.
"[As a matter of operating policy, the Fund will not:]
Purchase a futures contract or an option thereon if, with
respect to positions in futures or options on futures which
do not represent bona fide hedging, the aggregate initial
margin and premiums on such positions would exceed 5% of the
Fund's net asset value (the "New Operating Policy")."
If approved, the primary effects of the amendments would be
to replace the restriction that the Fund may not commit more than
5% of its total assets to initial margin on futures contracts or
premiums on options (the "5% Limitation") with the New Operating
Policy. Although not specifically described in the amended
fundamental restriction, the Fund would continue to have the
ability to enter into forward foreign currency contracts and
could also invest in instruments which have the characteristics
of futures and securities or whose value is determined, in whole
or in part, by reference to commodity prices. Although it has no
current intention of doing so, the new policy would also permit
the Fund to enter into any type of futures contract, not just
those described in its current prospectus. The risks of such
futures could differ from the risks of the Fund's currently
permitted futures activity.
The 5% Limitation
The 5% Limitation was previously required by rules of the
CFTC in order for the Fund to be excluded from status as a
commodity pool operator under applicable CFTC regulations, even
if the Fund used futures for hedging purposes only. The CFTC no
longer applies the 5% test to bona fide hedging activities, which
is generally the type of futures activity in which the Fund
engages. Although applicable state law may still require
compliance with similar limitations, the Board of Directors
believes the best interest of the Fund would be served by
replacing the 5% Limitation with the New Operating Policy. This
would provide the Fund with the flexibility to adapt to changes
PAGE 22
in CFTC regulations and any state laws without seeking further
shareholder approval.
The Board of Directors recommends that shareholders vote FOR
the proposal.
C. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
REGARDING THE MAKING OF LOANS
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund in order to: (i)
increase the amount of its assets which may be subject to its
lending policy; (ii) authorize the Fund to participate as a
lender in an interfund lending program involving the funds
advised by T. Rowe Price or Rowe Price-Fleming International,
Inc. (the "Price Funds"); and (iii) allow the Fund to purchase
the entire or any portion of the debt of a company. The new
restriction would also conform the Fund's policy on lending to
one which is expected to become standard for all T. Rowe Price
mutual funds. The Board believes that standardized policies will
assist the Fund and T. Rowe Price in monitoring compliance with
the various investment restrictions to which the T. Rowe Price
mutual funds are subject. The Board has directed that such
amendment be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of making
loans is as follows:
Science & Technology Fund
"[As a matter of fundamental policy, the Fund may not:] Make
loans, although the Fund may (i) purchase money market
securities and enter into repurchase agreements; and (ii)
lend portfolio securities provided that no such loan may be
made if, as a result, the aggregate of such loans would
exceed 30% of the value of the Fund's total assets;
provided, however, that the Fund may acquire publicly-
distributed bonds, debentures, notes and other debt
securities and may purchase debt securities at private
placement within the limits imposed on the acquisition of
restricted securities;"
Small-Cap Value Fund
"[As a matter of fundamental policy, the Fund may not:] Make
loans, although the Fund may (i) purchase money market
securities and enter into repurchase agreements, and (ii)
lend portfolio securities provided that no such loan may be
made if, as a result, the aggregate of such loans would
exceed 30% of the value of the Fund's total assets;
provided, however, that the Fund may acquire publicly-
PAGE 23
distributed bonds, debentures, notes and other debt
securities and purchase debt securities at private placement
within the limits imposed on the acquisition of restricted
securities;"
As amended, the Fund's fundamental policy on loans would be
as follows:
"[As a matter of fundamental policy, the Fund may not:] Make
loans, although the Fund may (i) lend portfolio securities
and participate in an interfund lending program with other
Price Funds provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 33 1/3% of
the value of the Fund's total assets; (ii) purchase money
market securities and enter into repurchase agreements; and
(iii) acquire publicly-distributed or privately-placed debt
securities and purchase debt;"
33 1/3% Restriction
The Fund's current fundamental policy on lending restricts
the Fund to lending no more than 30% of the value of the Fund's
total assets. The new policy would raise this amount to 33 1/3%
of the value of the Fund's total assets. The purpose of this
change is to conform the Fund's policy to one that is expected to
become standard for all Price Funds and to permit the Fund to
lend its assets to the maximum extent permitted under applicable
law. The Board of Directors does not view this change as
significantly raising the level of risk to which the Fund would
be subject.
Interfund Lending Program
The proposed amendments to the Fund's fundamental policy
would allow the Fund to participate in an interfund lending
program with other Price mutual funds. The nature of this
program and the risks associated with the Fund's participation
are set forth under "Borrowing from Other Price Funds" beginning
on page ____. Shareholders are being asked to consider, and vote
separately, on the Fund's participation in the interfund lending
program as a borrower and as a lender.
The Directors believe that the interfund lending program:
(i) may benefit the Fund by providing it with greater flexibility
to engage in lending transactions; and (ii) would facilitate the
Fund's ability to earn a higher return on short-term investments
by allowing it to lend cash to other Price Funds. Implementation
of interfund lending would be accomplished consistent with
applicable regulatory requirements, including the provisions of
any order the SEC might issue to the Fund and to other Price
Funds.
Purchase of Debt
PAGE 24
The Fund's fundamental policy on lending allows the Fund to
purchase debt securities as an exception to the general
limitations on making loans. However, there is no similar
exception for the purchase of straight debt, e.g., debt held by a
bank for example which might not be considered a debt security.
Such an investment might be subject to greater risks of liquidity
and unavailability of public information than would be the case
for an investment in a publicly held security. The primary
purpose of this proposal is to conform the Fund's fundamental
policy in this area to one that is expected to become standard
for all Price Funds. The Fund will continue to invest primarily
in equity securities. However, the Board of Directors believes
that increased standardization will help promote operational
efficiencies and facilitate monitoring of compliance with the
Fund's investment restrictions.
Other Matters
For purposes of the restriction on lending, the Fund will
consider the acquisition of a debt security to include the
execution of a note or other evidence of an extension of credit
with a term of more than nine months.
The Board of Directors recommends that shareholders vote FOR
the proposal.
D. PROPOSAL TO ADOPT A NEW FUNDAMENTAL POLICY REGARDING
PURCHASING MORE THAN 10% OF AN ISSUER'S VOTING SECURITIES
The Board of Directors has proposed the adoption of a new
Fundamental Investment Restriction for the Fund to provide the
Fund with greater flexibility to invest its assets in the
outstanding voting securities of various companies. Under the
new policy, the Fund would be restricted from owning more than
10% of an issuer's outstanding voting securities only with
respect to 75% of the value of its total assets, as opposed to
100% under the current operating policy. By permitting the Fund
to own more than 10% of the outstanding voting securities of an
issuer, the proposed policy, if adopted, could increase the risk
to the Fund with respect to adverse developments concerning such
securities. The Board of Directors, however, believes the Fund
should have the increased flexibility which the amendment would
provide. Although the current operating policy could be changed
by a vote of the Board of Directors without seeking shareholder
approval, the Board is proposing to adopt the Fund's policy on
purchasing more than 10% of the voting securities of a company as
a fundamental policy in order conform such policy to Section
5(b)(1) of the 1940 Act. As a fundamental policy the proposal,
it adopted, could not be further changed without shareholder
vote. The Board has directed that such change be submitted to
shareholders for approval or disapproval.
PAGE 25
The Fund's current operating policy in the area of
purchasing more than 10% of an issuer's voting securities is as
follows:
Science & Technology Fund
"[As a matter of operating policy, the Fund may not purchase
the securities of any issuer (other than obligations issued
or guaranteed by the U.S. government, its agencies or
instrumentalities) if, as a result:] . . . more than 10% of
the outstanding voting securities of any issuer would be
held by the Fund;"
Small-Cap Value Fund
"[As a matter of operating policy, the Fund may not:] . . .
Purchase the securities of any issuer (other than
obligations issued or guaranteed by the U.S. government, it
agencies or instrumentalities) if, as a result, more than
10% of the outstanding voting securities of any issuer would
be held by the Fund;"
The Fund's fundamental policy on purchasing more than 10% of
an issuer's voting securities would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase a security if, as a result, with respect to 75% of
the value of the Fund's total assets, more than 10% of the
outstanding voting securities of any issuer would be held by
the Fund (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities);"
The new policy will not affect the status of the Fund as a
diversified investment company under the 1940 Act. However, the
proposal would permit the Fund, with respect to 25% of its
assets, to take a larger position in the voting securities of
companies than under the current investment limitation. Thus,
for example, the Fund could purchase 100% of the voting
securities of one or more companies. This would cause the Fund's
net asset value per share to be more affected by changes in the
value of, and market, credit and business developments with
respect to, the securities of such companies. In addition, if
the Fund were to own a substantial percentage of an issuer's
voting or other securities, there is a risk that the liquidity of
those securities would be reduced. However, the Fund's Board of
Directors believes the Fund should have the increased flexibility
to pursue its investment program which the proposal would allow.
The Board of Directors recommends that shareholders vote FOR
the proposal.
PAGE 26
E. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL POLICY ON
INVESTING IN THE SECURITIES OF OTHER INVESTMENT COMPANIES
The Board of Directors has proposed that the Fund's
Fundamental Investment Policy on investing in the securities of
other investment companies be eliminated and replaced with a
substantially similar operating policy. Fundamental policies may
be changed only by shareholder vote, while operating policies may
be changed by vote of the Board of Directors without shareholder
approval. The current policy of the Fund is not required by
applicable law to be fundamental. The purpose of the proposed
change is to provide the Fund greater flexibility in pursuing its
investment objective and in responding to regulatory and market
developments. Although the Fund does not typically invest in the
securities of other open-end investment companies and would only,
on occasion, purchase securities of closed-end investment
companies, the proposed change would permit the Fund to invest in
the securities of other investment companies to the maximum
extent permitted under the 1940 Act and applicable state law, as
described below, without further shareholder approval. The Board
has directed that such change be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of
investing in the securities of other investment companies is as
follows:
Science & Technology Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase securities of open-end investment companies except
in connection with a merger, consolidation, acquisition, or
reorganization. Duplicate fees may result from such
purchases;"
Small-Cap Value Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase securities of open-end investment companies except
in compliance with the Investment Company Act of 1940 and
applicable state law. Duplicate fees may result from such
purchases;"
The operating policy on investing in the securities of other
investment companies, to be adopted by the Fund, would be as
follows:
"[As a matter of operating policy, the Fund may not:]
Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company
Act of 1940 and applicable state law. Duplicate fees may
result from such purchases;"
PAGE 27
Under the 1940 Act, the Fund is subject to various
restrictions in purchasing the securities of closed-end and open-
end investment companies. The 1940 Act limits the Fund,
immediately after a purchase, (1) to investing no more than 10%
of its total assets in the securities of other investment
companies; (2) to owning no more than 3% of the total outstanding
voting stock of any other investment company; and (3) to having
no more than 5% of its total assets invested in securities of
another investment company. Additionally, in the case of a
closed-end investment company, the Fund, and all other mutual
funds having T. Rowe Price as an investment manager, are limited
to owning no more than 10% of the total outstanding voting stock
of any closed-end company.
The 1940 Act provides an alternative set of restrictions if
the Fund were to exceed certain of these percentage limitations.
Under the alternative, the Fund could invest any or all of its
assets in other investment companies, provided the Fund and all
of its affiliates, immediately after a purchase, did not own more
than 3% of the total outstanding stock of the other investment
company. Under this alternative restriction, the rate at which
the Fund could redeem its investment in the other investment
companies in which it invests might be restricted which could
result in a situation where the Fund would not be able to redeem
a portfolio security when it appears to T. Rowe Price to be in
the best interest of the Fund to do so. T. Rowe Price would
consider the effect on the Fund's liquidity and the Fund's
ability to timely dispose of securities, before purchasing the
securities of another investment company.
Certain states impose further limitations on the purchase by
the Fund of the securities of other investment companies. At the
present time, these restrictions could prohibit the Fund, with
certain exceptions, from: (i) purchasing or retaining the
securities of any open-end investment company; (ii) purchasing
the securities of any closed-end investment company except
through a purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other
than the customary broker's commission or when the purchase is
part of a plan of merger, consolidation, reorganization or
acquisition; and (iii) investing more than 10% of its assets in
one or more investment companies.
It is possible the requirements of the 1940 Act or the
states regarding the Fund's investment in the securities of
closed-end and open-end investment companies could change, or
that the Fund could obtain a waiver of their application. The
Board of Directors believes the Fund should have the ability to
respond to potential changes in these areas without the necessity
of holding a further meeting of shareholders.
The Board of Directors recommends that shareholders vote FOR
the proposal.
PAGE 28
F. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON PURCHASING SECURITIES ON MARGIN
The Board of Directors has proposed that the Fund's
Fundamental Investment Policy on purchasing securities on margin
be changed from a fundamental policy to an operating policy.
Fundamental policies may be changed only by shareholder vote,
while operating policies may be changed by the Board of Directors
without shareholder approval. The purpose of the proposal is to
allow the Fund greater flexibility in responding to market and
regulatory developments by providing the Board of Directors with
the authority to make changes in the Fund's policy on margin
without further shareholder approval. The new restriction would
also conform the Fund's policy on margin to one which is expected
to become standard for all T. Rowe Price mutual funds. The Board
believes that standardized policies will assist the Fund and T.
Rowe Price in monitoring compliance with the various investment
restrictions to which the T. Rowe Price mutual funds are subject.
The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
purchasing securities on margin is as follows:
Science & Technology Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase securities on margin, except for use of short-term
credit necessary for clearance of purchases of portfolio
securities; except that it may make margin deposits in
connection with futures contracts, subject to [its
fundamental policy on futures];"
Small-Cap Value Fund
"[As a matter of fundamental policy, the Fund may not:]
Purchase securities on margin, except (i) for use of short-
term credit necessary for clearance of purchases of
portfolio securities and (ii) it may make margin deposits in
connection with futures contracts, subject to [its
fundamental policy on futures];"
As amended, the Fund's operating policy on purchasing
securities on margin would be as follows:
"[As a matter of operating policy, the Fund may not:]
Purchase securities on margin, except (i) for use of short-
term credit necessary for clearance of purchases of
portfolio securities and (ii) it may make margin deposits in
connection with futures contracts or other permissible
investments;"
Both the Fund's current policy and the proposed operating
PAGE 29
policy prohibit the purchase of securities on margin but allow
the Fund to make margin deposits in connection with futures
contracts and use such short-term credit as is necessary for
clearance of purchases of portfolio securities. The proposed
operating policy also would acknowledge that the Fund is
permitted to make margin deposits in connection with other
investments in addition to futures. Such investments might
include, but are not limited to, written options where the Fund
could be required to put up margin with a broker as security for
the Fund's obligation to deliver the security on which the option
is written.
The Board of Directors recommends that shareholders vote FOR
the proposal.
G. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON PLEDGING ITS ASSETS
The Board of Directors has proposed that the Fund's
Fundamental Investment Restriction on pledging its assets be
eliminated and replaced with an operating policy. Fundamental
policies may be changed by shareholder vote, while operating
policies may be changed by vote of the Board of Directors without
shareholder approval. Applicable law does not require the
current percentage limitation set forth in the policy and does
not require such policy to be fundamental. The new operating
policy would allow the Fund to pledge, in connection with Fund
indebtedness 33 1/3% of its total assets (a slight increase from
the current restriction) and allow the Fund to pledge assets in
connection with permissible investments. The Board of Directors
believes it is advisable to provide the Fund with greater
flexibility in pursuing its investment objective and program and
responding to regulatory and market developments. The new
restriction would also conform the Fund's policy on pledging it
assets to one which is expected to become standard for all T.
Rowe Price mutual funds. The Board believes that standardized
policies will assist the Fund and T. Rowe Price in monitoring
compliance with the various investment restrictions to which the
T. Rowe Price mutual funds are subject. The Board has directed
that such proposals be submitted to shareholders for approval or
disapproval.
The Fund's current fundamental policy in the area of
pledging its assets is as follows:
Science & Technology Fund
"[As a matter of fundamental policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any manner, transfer as
security for indebtedness any security owned by the Fund,
except (i) as may be necessary in connection with
permissible borrowings, in which event such mortgaging,<PAGE>
PAGE 30
pledging, or hypothecating may not exceed 30% of the Fund's
assets, valued at cost; and (ii) it may enter into stock
index futures contracts and options thereon;"
Small-Cap Value Fund
"[As a matter of fundamental policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any manner, transfer as
security for indebtedness any security owned by the Fund,
except (i) as may be necessary in connection with
permissible borrowings, in which event such mortgaging,
pledging, or hypothecating may not exceed 30% of the Fund's
assets, valued at cost; and (ii) it may enter into futures
contracts and options thereon;"
The operating policy on pledging of assets, to be adopted by
the Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:]
Mortgage, pledge, hypothecate or, in any manner, transfer
any security owned by the Fund as security for indebtedness
except as may be necessary in connection with permissible
borrowings or investments and then such mortgaging, pledging
or hypothecating may not exceed 33 1/3% of the Fund's total
assets at the time of the borrowing or investment;"
The operating policy would allow the Fund to pledge 33 1/3%
of its total assets instead of the current 30%. The new policy,
in addition to allowing pledging in connection with indebtedness
would clarify the Fund's ability to pledge its assets in
connection with permissible investments. Such pledging could
arise, for example, when the Fund engages in futures or options
transactions or purchases securities on a when-issued or forward
basis. As an operating policy, the Board of Directors could
modify the proposed policy on pledging in the future as the need
arose, without seeking further shareholder approval.
Pledging assets to other parties is not without risk.
Because assets that have been pledged to other parties may not be
readily available to the Fund, the Fund may have less flexibility
in liquidating such assets if needed. Therefore, the new policy,
by allowing the Fund to pledge a greater portion of its assets,
could, to a greater extent than the current policy, impair the
Fund's ability to meet current obligations, or impede portfolio
management. On the other hand, these potential risks should be
considered together with the potential benefits, such as
increased flexibility to borrow and the increased ability of the
Fund to pursue its investment program.
The Board of Directors recommends that shareholders
vote FOR the proposal.
PAGE 31
H. PROPOSAL TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT
POLICY ON SHORT SALES
The Fund's Board of Directors has proposed that the Fund's
Fundamental Policy on effecting short sales be eliminated and
replaced with a substantially similar operating policy.
Fundamental policies may be changed only by shareholder vote,
while operating policies may be changed by the Board of Directors
without shareholder approval. The current policy of the Fund is
not required by applicable law to be fundamental. The purpose of
the proposal is to provide the Fund with greater flexibility in
pursuing its investment objective and program. The Board has
directed that the proposal be submitted to shareholders for
approval or disapproval.
The Fund's current fundamental policy in the area of
effecting short sales of securities is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Effect short sales of securities . . .;"
The operating policy on short sales, to be adopted by the
Fund, would be as follows:
"[As a matter of operating policy, the Fund may not:]
Effect short sales of securities;"
The current fundamental policy was formerly required by
certain states to be fundamental. This is no longer the case and
the replacement of the policy with an operating policy will
adequately protect the Fund while providing greater flexibility
to the Fund to respond to market or regulatory developments by
allowing the Board of Directors the authority to make changes in
this policy without seeking further shareholder approval.
In a short sale, an investor, such as the Fund, sells a
borrowed security and must return the same security to the
lender. Although the Board has no current intention of allowing
the Fund to engage in short sales, if the proposed amendment is
adopted, the Board would be able to authorize the Fund to engage
in short sales at any time without further shareholder action.
In such a case, the Fund's prospectus would be amended and a
description of short sales and their risks would be set forth
therein.
The Board of Directors recommends that shareholders vote FOR
the proposal.
I. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICIES
CONCERNING REAL ESTATE
PAGE 32
Science & Technology Fund
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund to clarify the types
of securities in which the Fund is authorized to invest and to
conform the Fund's fundamental policy on investing in real estate
to a policy that is expected to become standard for all Price
Funds. The proposed amendment is not expected to affect the
investment program of the Fund or instruments in which the Fund
invests. The Fund will not purchase or sell real estate. In
addition, the proposed amendment would clarify that the Fund may
purchase all types of securities secured by real estate or
interests therein, or issued by companies which invest in real
estate, not only money market securities as set forth in the
current limitation. The Board has directed that such amendments
be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of
investing in real estate is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate (although it may purchase money
market securities secured by real estate or interests
therein, or issued by companies which invest in real estate
or interests therein);"
As amended, the Fund's fundamental policy on investing in
real estate would be as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall
not prevent the Fund from investing in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business);"
The Board of Directors recommends that shareholders vote FOR
the proposal.
Small-Cap Value Fund
The Board of Directors has proposed an amendment to the
Fundamental Investment Policies of the Fund to clarify the types
of securities in which the Fund is authorized to invest and to
conform the Fund's fundamental policy on investing in real estate
to a policy that is expected to become standard for all Price
Funds. The proposed amendment is not expected to affect the
investment program of the Fund or instruments in which the Fund
invests. The proposed amendment would clarify that the Fund is
prohibited from purchasing or selling real estate. Although not
specifically referred to in the new restriction, the Fund also
will not purchase or sell real estate limited partnerships. In
addition, the proposed amendment would clarify that the Fund may
purchase all types of securities secured by real estate or
PAGE 33
interests therein, or issued by companies which invest in real
estate, not only money market securities as set forth in the
current limitation. The Board has directed that such amendment
be submitted to shareholders for approval or disapproval.
The Fund's current fundamental policy on investing in real
estate in the area of investing in real estate is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate limited partnerships (although
it may purchase money market securities secured by real
estate or interests therein, or issued by companies which
invest in real estate or interests therein);"
As amended, the Fund's fundamental policy would be as
follows:
"[As a matter of fundamental policy, the Fund may not:]
Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall
not prevent the Fund from investing in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business);"
The Board of Directors recommends that shareholders vote FOR
the proposal.
SCIENCE & TECHNOLOGY FUND ONLY
J. PROPOSAL TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT POLICY
ON THE ISSUANCE OF SENIOR SECURITIES
The Fund's Board of Directors has proposed an amendment to
the Fund's fundamental policy on investing in senior securities
which would allow the Fund to invest in senior securities to the
extent permitted under the Investment Company Act of 1940. The
new policy, if adopted, would provide the Fund with greater
flexibility in pursuing its investment objective and program.
The Board has directed that such amendment be submitted to
shareholders for approval or disapproval.
The Fund's current fundamental policy in the area of issuing
senior securities is as follows:
"[As a matter of fundamental policy, the Fund may not:]
Issue any class of securities senior to any other class of
securities;"
As amended, the Fund's fundamental policy on issuing senior
securities would be as follows:
page 34
"[As a matter of fundamental policy, the Fund may not:]
Issue senior securities except in compliance with the
Investment Company Act of 1940;"
The 1940 Act limits a Fund's ability to issue senior
securities or engage in investment techniques which could be
deemed to create a senior security. Although the definition of a
"senior security" involves complex statutory and regulatory
concepts, a senior security is generally thought of as a class of
security preferred over shares of the Fund with respect to the
Fund's assets or earnings. It generally does not include
temporary or emergency borrowings by the Fund (which might occur
to meet shareholder redemption requests) in accordance with
federal law and the Fund's investment limitations. Various
investment techniques that obligate the Fund to pay money at a
future date (e.g., the purchase of securities for settlement on a
date that is longer than required under normal settlement
practices) occasionally raise questions as to whether a "senior
security" is created. The Fund utilizes such techniques only in
accordance with applicable regulatory requirements under the 1940
Act. Although the Fund has no current intention of issuing
senior securities, the proposed change will clarify the Fund's
authority to issue senior securities in accordance with the 1940
Act without the need to seek shareholder approval.
The Board of Directors recommends that shareholders vote FOR
the proposal.
<PAGE>
PAGE 35
3. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT
ACCOUNTANTS
The selection by the Board of Directors of each Fund of
the firm of Coopers & Lybrand as the independent accountants for
the Fund for the year 1994 is to be submitted for ratification or
rejection by the shareholders of each Fund at the Shareholders
Meeting. The firm of Coopers & Lybrand has served as independent
accountants for the Science & Technology Fund since the Fund's
inception and the Small-Cap Value Fund since 1988.
The independent accountants have advised each Fund that
they have no direct or material indirect financial interest in
the Fund. Representatives of the firm of Coopers & Lybrand are
expected to be present at the Shareholders Meeting and will be
available to make a statement, if they desire to do so, and to
respond to appropriate questions which the shareholders may wish
to address to them.<PAGE>
PAGE 36
INVESTMENT MANAGER
The Funds' investment manager is T. Rowe Price, a Maryland
corporation, 100 East Pratt Street, Baltimore, Maryland 21202.
The principal executive officer of T. Rowe Price is George J.
Collins, who together with Messrs. Thomas H. Broadus, Jr., James
E. Halbkat, Jr., Carter O. Hoffman, Henry H. Hopkins, James S.
Riepe, George A. Roche, John W. Rosenblum, Charles H. Salisbury,
Jr., Robert L. Strickland, M. David Testa, and Philip C. Walsh,
constitute its Board of Directors. The address of each of these
persons, with the exception of Messrs. Halbkat, Rosenblum,
Stickland and Walsh, is 100 East Pratt Street, Baltimore,
Maryland 21202, and, with the exception of Messrs. Halbkat,
Rosenblum, Strickland, and Walsh, all are employed by T. Rowe
Price. Mr. Halbkat is President of U.S. Monitor Corporation, a
provider of public response systems, P.O. Box 23109, Hilton Head
Island, South Carolina 29925. Mr. Rosenblum, whose address is
P.O. Box 6550, Charlottesville, Virginia 22906, is the Taylor
Murphy Professor at the University of Virginia, and a director
of: Chesapeake Corporation, a manufacturer of paper products;
Cadmus Communications Corp., a provider of printing and
communication services; Comdial Corporation, a manufacturer of
telephone systems for businesses; and Cone Mills Corporation, a
textiles producer. Mr. Strickland is Chairman of Lowe's
Companies, Inc., a retailer of specialty home supplies, 604 Two
Piedmont Plaza Building, Winston-Salem, North Carolina 27104.
Mr. Walsh, whose address is Blue Mill Road, Morristown, New
Jersey 07960, is a consultant to Cyprus Amax Minerals Company,
Englewood, Colorado, and a director of Piedmont Mining Company,
Charlotte, North Carolina.<PAGE>
PAGE 37
The officers of the Funds (other than the nominees for
election and reelection as directors) and their positions with T.
Rowe Price are as follows:
Science & Technology Fund
Position Position with
Officer with Fund Manager
*Charles A. Morris President Vice President
Lise J. Buyer Vice President Vice President
Gregory V. Donovan Vice President Vice President
Marcy L. Fisher Vice President Assistant Vice
President
Jill L. Hauser Vice President Vice President
Henry H. Hopkins Vice President Managing Director
Joseph Klein, III Vice President Vice President
Brian D. Stansky Vice President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
Roger L. Fiery Assistant Vice Employee
President
Edward T. Assistant Vice Employee
Schneider President
Ingrid I. Assistant Vice Employee
Vordemberge President
<PAGE>
PAGE 38
Small-Cap Value Fund
Position Position with
Officer with Fund Manager
**Preston G. Athey President Vice President
Marcy L. Fisher Vice President Assistant Vice
President
Jonathan M. Greene Vice President Vice President
Henry H. Hopkins Vice President Managing Director
Gregory A. McCrickard Vice President Vice President
Richard T. Whitney Vice President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
Roger L. Fiery Assistant Vice Employee
President
Francies W. Hawks Assistant Vice Assistant Vice
President President
Edward T. Schneider Assistant Vice Employee
President
Ingrid I. Vordemberge Assistant Vice Employee
President
*Mr. Morris' date of birth is 1/3/63. He has been the President
of the Science & Technology Fund since _________ and has been
employed by T. Rowe Price since 8/31/87.
**Mr. Athey's date of birth is 7/17/49. He has been the
President of the Small-Cap Value Fund since ___________ and has
been employed by T. Rowe Price since 3/1/82.
The Funds have an Underwriting Agreement with T. Rowe
Price Investment Services, Inc. ("Investment Services"), a
Transfer Agency Agreement with T. Rowe Price Services, Inc.
("Price Services"), and an Agreement with T. Rowe Price
Retirement Plan Services, Inc. ("Retirement Services"), which are
wholly-owned subsidiaries of T. Rowe Price. In addition, the
Funds have an Agreement with T. Rowe Price to perform fund
accounting services. James S. Riepe, a Vice President and
Director of the Funds, is Chairman of the Board of Price Services
and Retirement Services and President and Director of Investment
Services. Henry H. Hopkins, a Vice President of the Funds, is a
Vice President and Director of Investment Services, Price
Services, and Retirement Services. Edward T. Schneider, an
Assistant Vice President of the Funds, is a Vice President of
Price Services. Certain officers of the Funds own shares of the
common stock of T. Rowe Price, its only class of securities.
The following information pertains to transactions
involving common stock of T. Rowe Price, par value $.20 per share
("Stock"), during the period January 1, 1993 through December 31,
1993. There were no transactions during the period by any
PAGE 39
director or officer of the Funds, or any director or officer of
T. Rowe Price which involved more than 1% of the outstanding
Stock of T. Rowe Price. These transactions did not involve, and
should not be mistaken for, transactions in the stock of the
Funds.
During the period, the holders of certain options
purchased a total of 343,525 shares of common stock at varying
prices from $0.67 to $18.75 per share. Pursuant to the terms of
T. Rowe Price's Employee Stock Purchase Plan, eligible employees
of T. Rowe Price and its subsidiaries purchased an aggregate of
96,931 shares at fair market value. Such shares were purchased
in the open market during this period for employees' accounts.
The Company's Board of Directors has approved the
repurchase of shares of its common stock in the open market.
During 1993, the Company purchased 80,000 common shares under
this plan, leaving 1,432,000 shares authorized for future
repurchase at December 31, 1993.
During the period, T. Rowe Price issued 1,154,000
common stock options with an exercise price of $28.13 per share
to certain employees under terms of the 1990 and 1993 Stock
Incentive Plans.
An audited consolidated balance sheet of T. Rowe Price
as of December 31, 1993, is included in this Proxy Statement.
<PAGE>
PAGE 40
INVESTMENT MANAGEMENT AGREEMENT
T. Rowe Price serves as investment manager to the Funds
pursuant to their respective Investment Management Agreements
(each the "Management Agreement" and collectively the "Management
Agreements"). Each Fund's Management Agreement, dated May 1,
1991, was approved by the shareholders of each Fund on April 18,
1991. By their terms, the Management Agreements will continue in
effect from year to year as long as it is approved annually by
each Fund's Board of Directors (at a meeting called for that
purpose) or by vote of a majority of each Fund's outstanding
shares. In either case, renewal of the Management Agreement must
be approved by a majority of each Fund's independent directors.
On March __, 1994, the directors of each Fund, including all of
the independent directors, voted to extend the Management
Agreement for an additional period of one year, commencing May 1,
1994, and terminating April 30, 1995. Each Management Agreement
is subject to termination by either party without penalty on 60
days' written notice to the other and will terminate
automatically in the event of assignment.
Under each Mangement Agreement, T. Rowe Price provides
the Fund with discretionary investment services. Specifically,
T. Rowe Price is responsible for supervising and directing the
investments of each Fund in accordance with the Funds' investment
objectives, program and restrictions as provided in their
prospectuses and Statements of Additional Information. T. Rowe
Price is also responsible for effecting all securities
transactions on behalf of the Funds, including the negotiation of
commissions and the allocation of principal business and
portfolio brokerage. In addition to these services, T. Rowe
Price provides the Funds with certain corporate administrative
services, including: maintaining each Fund's corporate existence,
corporate records, and registering and qualifying Fund shares
under federal and state laws; monitoring the financial,
accounting, and administrative functions of the Funds;
maintaining liaison with the agents employed by the Funds, such
as each Fund's custodian and transfer agent; assisting the Funds
in the coordination of such agents' activities; and permitting T.
Rowe Price's employees to serve as officers, directors and
committee members of the Funds without cost to the Funds.
Each Fund's Management Agreement also provides that T.
Rowe Price, its directors, officers, employees and certain other
persons performing specific functions for the Fund will only be
liable to the Fund for losses resulting from willful misfeasance,
bad faith, gross negligence, or reckless disregard of duty.
The Management Agreement provides that each Fund will
bear all expenses of its operations not specifically assumed by
T. Rowe Price. However, in compliance with certain state
regulations, T. Rowe Price will reimburse the Funds for any
expenses (excluding interest, taxes, brokerage, other
PAGE 41
expenditures which are capitalized in accordance with generally
accepted accounting principles, and extraordinary expenses) which
in any year exceed the limits prescribed by any state in which
the Funds' shares are qualified for sale. Presently, the most
restrictive expense ratio limitation imposed by any state is 2.5%
of the first $30 million of a Fund's average daily net assets, 2%
of the next $70 million of such assets, and 1.5% of net assets in
excess of $100 million. For the purpose of determining whether a
Fund is entitled to reimbursement, the expenses of the Fund are
calculated on a monthly basis. If the Fund is entitled to
reimbursement, that month's management fee will be reduced or
postponed, with any adjustment made after the end of the year.
Each Fund's Management Agreement provides that T. Rowe
Price may voluntarily agree to limit the expenses of a Fund.
Effective January 1, 1990, T. Rowe Price agreed to bear any
expenses through December 31, 1991, which would cause a Fund's
ratio of expenses to average net assets to exceed 1.25%.
Effective January 1, 1992, T. Rowe Price agreed to extend each
Fund's 1.25% expense limitation for a period of two years through
December 31, 1993. Expenses paid or assumed under each Fund's
agreement are subject to reimbursement to T. Rowe Price by each
Fund whenever a Fund's expense ratio is below 1.25%; however, no
reimbursement will be made after December 31, 1993 (for the first
agreement) or December 31, 1995 (for the second agreement), or if
it would result in the expense ratio exceeding 1.25%.
Pursuant to a previous agreement of the Science &
Technology Fund, $264,000 of unacccrued 1990-91 fees were repaid
during the year ended December 31, 1993, and $170,000 of 1990-91
fees have been permanently waived.
Pursuant to this and a previous agreement of the Small-
Cap Value Fund, $180,000 of unaccrued 1990-91 fees, representing
the entire unaccrued balance, were reimbursed to T. Rowe Price
during the year ended December 31, 1993.
The following chart shows the ratio of operating
expenses to average net assets of each Fund for the last three
years ended December 31.
1993 1992 1991
____ ____ ____
Science & Technology Fund 1.25% 1.25% 1.25%
Small-Cap Value Fund 1.05% 1.25% 1.25%
For its services to each Fund under the Management
Agreement, T. Rowe Price is paid a management fee ("Management
Fee") consisting of two elements: a "group" fee ("Group Fee") and
an "individual" fund fee ("Individual Fund Fee"). The Group Fee
varies and is based on the combined net assets of all of the
PAGE 42
Price Funds distributed by T. Rowe Price Investment Services,
Inc., other than institutional or "private label" products. For
this purpose, the Price Funds include all Funds managed and
sponsored by T. Rowe Price as well as those Funds managed and
sponsored by Rowe Price-Fleming International, Inc. Each Fund
pays, as its portion of the Group Fee, an amount equal to the
ratio of its daily net assets to the daily net assets of all the
Price Funds. In addition, each Fund pays a flat Individual Fund
Fee of 0.35% based on the net assets of the Fund. Based on
combined Price Funds' assets of approximately $34.7 billion at
December 31, 1993, the Group Fee was 0.35% and the total
management fee for the year would have been an annual rate of
0.70% of net assets of each Fund. The following chart shows the
net assets and the management fees, paid by each Fund to T. Rowe
Price, at December 31, 1993.
Net Assets Management Fee
__________ ______________
Science & Technology Fund $501,453,174 $2,841,791
Small-Cap Value Fund $452,116,353 $2,963,580
PORTFOLIO TRANSACTIONS
In the following discussion, "the Fund" is intended to refer
to each Fund.
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of portfolio
securities on behalf of the Fund are made by T. Rowe Price. T.
Rowe Price is also responsible for implementing these decisions,
including the negotiation of commissions and the allocation of
portfolio brokerage and principal business.
How Brokers and Dealers are Selected
Equity Securities
In purchasing and selling the Fund's portfolio securities,
it is T. Rowe Price's policy to obtain quality execution at the
most favorable prices through responsible brokers and dealers
and, in the case of agency transactions, at competitive
commission rates. However, under certain conditions, the Fund may
pay higher brokerage commissions in return for brokerage and
research services. As a general practice, over-the-counter
orders are executed with market-makers. In selecting among
market-makers, T. Rowe Price generally seeks to select those it
believes to be actively and effectively trading the security
being purchased or sold. In selecting broker-dealers to execute
the Fund's portfolio transactions, consideration is given to such
factors as the price of the security, the rate of the commission,
PAGE 43
the size and difficulty of the order, the reliability, integrity,
financial condition, general execution and operational
capabilities of competing brokers and dealers, and brokerage and
research services provided by them. It is not the policy of T.
Rowe Price to seek the lowest available commission rate where it
is believed that a broker or dealer charging a higher commission
rate would offer greater reliability or provide better price or
execution.
Fixed Income Securities
Fixed income securities are generally purchased from the
issuer or a primary market-maker acting as principal for the
securities on a net basis, with no brokerage commission being
paid by the client. Transactions placed through dealers serving
as primary market-makers reflect the spread between the bid and
asked prices. Securities may also be purchased from underwriters
at prices which include underwriting fees.
With respect to equity and fixed income securities, T. Rowe
Price may effect principal transactions on behalf of the Fund
with a broker or dealer who furnishes brokerage and/or research
services, designate any such broker or dealer to receive selling
concessions, discounts or other allowances, or otherwise deal
with any such broker or dealer in connection with the acquisition
of securities in underwritings.
How Evaluations are Made of the Overall Reasonableness of
Brokerage Commissions Paid
On a continuing basis, T. Rowe Price seeks to determine what
levels of commission rates are reasonable in the marketplace for
transactions executed on behalf of the Fund. In evaluating the
reasonableness of commission rates, T. Rowe Price considers: (a)
historical commission rates, both before and since rates have
been fully negotiable; (b) rates which other institutional
investors are paying, based on available public information; (c)
rates quoted by brokers and dealers; (d) the size of a particular
transaction, in terms of the number of shares, dollar amount, and
number of clients involved; (e) the complexity of a particular
transaction in terms of both execution and settlement; (f) the
level and type of business done with a particular firm over a
period of time; and (g) the extent to which the broker or dealer
has capital at risk in the transaction.
Description of Research Services Received from Brokers and
Dealers
T. Rowe Price receives a wide range of research services
from brokers and dealers. These services include information on
the economy, industries, groups of securities, individual
companies, statistical information, accounting and tax law
interpretations, political developments, legal developments
PAGE 44
affecting portfolio securities, technical market action, pricing
and appraisal services, credit analysis, risk measurement
analysis, performance analysis and analysis of corporate
responsibility issues. These services provide both domestic and
international perspective. Research services are received
primarily in the form of written reports, computer generated
services, telephone contacts and personal meetings with security
analysts. In addition, such services may be provided in the form
of meetings arranged with corporate and industry spokespersons,
economists, academicians and government representatives. In some
cases, research services are generated by third parties but are
provided to T. Rowe Price by or through broker-dealers.
Research services received from brokers and dealers are
supplemental to T. Rowe Price's own research effort and, when
utilized, are subject to internal analysis before being
incorporated by T. Rowe Price into its investment process. As a
practical matter, it would not be possible for T. Rowe Price's
Equity Research Division to generate all of the information
presently provided by brokers and dealers. T. Rowe Price pays
cash for certain research services received from external
sources. T. Rowe Price also allocates brokerage for research
services which are available for cash. While receipt of research
services from brokerage firms has not reduced T. Rowe Price's
normal research activities, the expenses of T. Rowe Price could
be materially increased if it attempted to generate such
additional information through its own staff. To the extent that
research services of value are provided by brokers or dealers, T.
Rowe Price may be relieved of expenses which it might otherwise
bear.
T. Rowe Price has a policy of not allocating brokerage
business in return for products or services other than brokerage
or research services. In accordance with the provisions of
Section 28(e) of the Securities Exchange Act of 1934, T. Rowe
Price may from time to time receive services and products which
serve both research and non-research functions. In such event,
T. Rowe Price makes a good faith determination of the anticipated
research and non-research use of the product or service and
allocates brokerage only with respect to the research component.
Commissions to Brokers who Furnish Research Services
Certain brokers who provide quality execution services also
furnish research services to T. Rowe Price. In order to be
assured of continuing to receive research services considered of
value to its clients, T. Rowe Price has adopted a brokerage
allocation policy embodying the concepts of Section 28(e) of the
Securities Exchange Act of 1934, which permits an investment
adviser to cause an account to pay commission rates in excess of
those another broker or dealer would have charged for effecting
the same transaction, if the adviser determines in good faith
that the commission paid is reasonable in relation to the value
PAGE 45
of the brokerage and research services provided. The
determination may be viewed in terms of either the particular
transaction involved or the overall responsibilities of the
adviser with respect to the accounts over which it exercises
investment discretion. Accordingly, while T. Rowe Price cannot
readily determine the extent to which commission rates or net
prices charged by broker-dealers reflect the value of their
research services, T. Rowe Price would expect to assess the
reasonableness of commissions in light of the total brokerage and
research services provided by each particular broker.
Internal Allocation Procedures
T. Rowe Price has a policy of not precommitting a specific
amount of business to any broker or dealer over any specific time
period. Historically, the majority of brokerage placement has
been determined by the needs of a specific transaction such as
market-making, availability of a buyer or seller of a particular
security, or specialized execution skills. However, T. Rowe
Price does have an internal brokerage allocation procedure for
that portion of its discretionary client brokerage business where
special needs do not exist, or where the business may be
allocated among several brokers which are able to meet the needs
of the transaction.
Each year, T. Rowe Price assesses the contribution of the
brokerage and research services provided by brokers, and attempts
to allocate a portion of its brokerage business in response to
these assessments. Research analysts, counselors, various
investment committees, and the Trading Department each seek to
evaluate the brokerage and research services they receive from
brokers and make judgments as to the level of business which
would recognize such services. In addition, brokers sometimes
suggest a level of business they would like to receive in return
for the various brokerage and research services they provide.
Actual brokerage received by any firm may be less than the
suggested allocations but can, and often does, exceed the
suggestions, because the total brokerage business is allocated on
the basis of all the considerations described above. In no case
is a broker excluded from receiving business from T. Rowe Price
because it has not been identified as providing research
services.
Miscellaneous
T. Rowe Price's brokerage allocation policy is consistently
applied to all its fully discretionary accounts, which represent
a substantial majority of all assets under management. Research
services furnished by brokers through which T. Rowe Price effects
securities transactions may be used in servicing all accounts
(including non-Fund accounts) managed by T. Rowe Price.
Conversely, research services received from brokers which execute
transactions for the Fund are not necessarily used by T. Rowe
PAGE 46
Price exclusively in connection with the management of the Fund.
From time to time, orders for clients may be placed through
a computerized transaction network.
The Fund does not allocate business to any broker-dealer on
the basis of its sales of the Fund's shares. However, this does
not mean that broker-dealers who purchase Fund shares for their
clients will not receive business from the Fund.
Some of T. Rowe Price's other clients have investment
objectives and programs similar to those of the Fund. T. Rowe
Price may occasionally make recommendations to other clients
which result in their purchasing or selling securities
simultaneously with the Fund. As a result, the demand for
securities being purchased or the supply of securities being sold
may increase, and this could have an adverse effect on the price
of those securities. It is T. Rowe Price's policy not to favor
one client over another in making recommendations or in placing
orders. T. Rowe Price frequently follows the practice of
grouping orders of various clients for execution which generally
results in lower commission rates being attained. In certain
cases, where the aggregate order is executed in a series of
transactions at various prices on a given day, each participating
client's proportionate share of such order reflects the average
price paid or received with respect to the total order. T. Rowe
Price has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a
company for its clients (including the Price Funds) if, as a
result of such purchases, 10% or more of the outstanding common
stock of such company would be held by its clients in the
aggregate.
To the extent possible, T. Rowe Price intends to recapture
solicitation fees paid in connection with tender offers through
T. Rowe Price Investment Services, Inc., the Fund's distributor.
At the present time, T. Rowe Price does not recapture commissions
or underwriting discounts or selling group concessions in
connection with taxable securities acquired in underwritten
offerings. T. Rowe Price does, however, attempt to negotiate
elimination of all or a portion of the selling-group concession
or underwriting discount when purchasing tax-exempt municipal
securities on behalf of its clients in underwritten offerings.
Transactions with Related Brokers and Dealers
As provided in the Investment Management Agreement between
the Fund and T. Rowe Price, T. Rowe Price is responsible not only
for making decisions with respect to the purchase and sale of the
Fund's portfolio securities, but also for implementing these
decisions, including the negotiation of commissions and the
allocation of portfolio brokerage and principal business. It is
expected that T. Rowe Price may place orders for the Fund's
PAGE 47
portfolio transactions with broker-dealers through the same
trading desks T. Rowe Price uses for portfolio transactions in
domestic securities. The trading desk accesses brokers and
dealers in various markets in which the Fund's foreign securities
are located. These brokers and dealers may include certain
affiliates of Robert Fleming Holdings Limited ("Robert Fleming
Holdings") and Jardine Fleming Group Limited ("JFG"), persons
indirectly related to T. Rowe Price. Robert Fleming Holdings,
through Copthall Overseas Limited, a wholly-owned subsidiary,
owns 25% of the common stock of Rowe Price-Fleming International,
Inc. ("RPFI"), an investment adviser registered under the
Investment Advisers Act of 1940. Fifty percent of the common
stock of RPFI is owned by TRP Finance, Inc., a wholly-owned
subsidiary of T. Rowe Price, and the remaining 25% is owned by
Jardine Fleming Holdings Limited, a subsidiary of JFG. JFG is
50% owned by Robert Fleming Holdings and 50% owned by Jardine
Matheson Holdings Limited. Orders for the Fund's portfolio
transactions placed with affiliates of Robert Fleming Holdings
and JFG will result in commissions being received by such
affiliates.
The Board of Directors of the Fund has authorized T. Rowe
Price to utilize certain affiliates of Robert Fleming and JFG in
the capacity of broker in connection with the execution of the
Fund's portfolio transactions. These affiliates include, but are
not limited to, Jardine Fleming Securities Limited ("JFS"), a
wholly-owned subsidiary of JFG, Robert Fleming & Co. Limited
("RF&Co."), Jardine Fleming Australia Securities Limited, and
Robert Fleming, Inc. (a New York brokerage firm). Other
affiliates of Robert Fleming Holdings and JFG also may be used.
Although it does not believe that the Fund's use of these brokers
would be subject to Section 17(e) of the Investment Company Act
of 1940, the Board of Directors of the Fund has agreed that the
procedures set forth in Rule 17e-1 under that Act will be
followed when using such brokers.
Other
Shown below are the approximate total brokerage commissions,
including the discounts received by securities dealers in
connection with underwritings, paid by the Science & Technology
and Small-Cap Value Funds for the last three years:
1993 1992 1991
____ ____ ____
Science & Technology Fund$2,187,000 $861,000 $909,000
Small-Cap Value Fund $ 996,000 $661,000 $117,000
The approximate percentage of these commissions paid to
firms which provided research, statistical, or other services to
T. Rowe Price in connection with the management of each Fund, or
in some cases, to each Fund, for the last three years, are shown
PAGE 48
in the following chart.
1993 1992 1991
____ ____ ____
Science & Technology Fund 24% 19% 16%
Small-Cap Value Fund 11% 26% 13%
The portfolio turnover rate for each Fund for each of the
last three years has been as follows:
1993 1992 1991
____ ____ ____
Science & Technology Fund 163.4% 144.3% 148.2%
Small-Cap Value Fund 11.8% 12.1% 30.5%
OTHER BUSINESS
The management of each Fund knows of no other business
which may come before the meeting. However, if any additional
matters are properly presented at the meeting, it is intended
that the persons named in the enclosed proxy, or their
substitutes, will vote such proxy in accordance with their
judgment on such matters.
GENERAL INFORMATION
As of December 31, 1993, there were $26,468,891 and
$30,803,031 shares of the capital stock of the Science &
Technology and Small-Cap Value Funds, respectively, outstanding,
each with a par value of $.01. Of those shares, approximately
______________ and ________________, representing ____% and
____%, respectively, of the outstanding stock, were registered to
the T. Rowe Price Trust Company as Trustee for participants in
the T. Rowe Price Funds Retirement Plan for Self-Employed
(Keogh), as Trustee for participants in T. Rowe Price Funds
401(k) plans, as Custodian for participants in the T. Rowe Price
Funds Individual Retirement Account (IRA), as Custodian for
participants in various 403(b)(7) plans, and as Custodian for
various Profit Sharing and Money Purchase plans. The T. Rowe
Price Trust Company has no beneficial interest in such accounts,
nor in any other account for which it may serve as trustee or
custodian. <PAGE>
PAGE 49
As of December 31, 1993, approximately _______ and
_________ shares of the Science & Technology and Small-Cap Value
Funds, representing approximately ___% and ___%, respectively, of
the outstanding stock, were owned by various private counsel
clients of T. Rowe Price, as to which T. Rowe Price has
discretionary authority. Accordingly, such shares are deemed to
be owned beneficially by T. Rowe Price only for the limited
purpose as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934. T. Rowe Price disclaims actual
beneficial ownership of such shares. In addition, as of December
31, 1993, a wholly-owned subsididary of T. Rowe Price owned
directly 68,610 and 97,245 shares of the Science & Technology and
Small-Cap Value Funds, respectively, representing approximately
___% and ___%, respectively, of the outstanding stock.
As of December 31, 1993, the officers and directors of
the Science & Technology Fund, as a group, beneficially owned,
directly or indirectly, _______ shares, representing
approximately .__% of the Fund's outstanding stock. The
ownership of the officers and directors reflects their
proportionate interests, if any, in _____ shares of the Fund
which are owned by a wholly-owned subsidiary of T. Rowe Price,
and their interests in ___________ shares owned by the T. Rowe
Price Associates, Inc. Profit Sharing Trust.
As of December 31, 1993, the officers and directors of
the Small-Cap Value Fund, as a group, beneficially owned,
directly or indirectly, _______ shares, representing
approximately .__% of the Fund's outstanding stock. The
ownership of the officers and directors reflects their
proportionate interests, if any, in _____ shares of the Fund
which are owned by a wholly-owned subsidiary of T. Rowe Price,
and their interests in ___________ shares owned by the T. Rowe
Price Associates, Inc. Profit Sharing Trust.
A copy of the Annual Report of each Fund for the year
ended December 31, 1993, including financial statements, has been
mailed to shareholders of record at the close of business on that
date and to persons who became shareholders of record between
that time and the close of business on February 18, 1994, the
record date for the determination of the shareholders who are
entitled to be notified of and to vote at the meeting.
Shareholders should refer to the Annual Report for a Fund's
performance record.
ANNUAL MEETINGS
Under Maryland General Corporation Law, any corporation
registered under the Investment Company Act of 1940 ("the Act")
is not required to hold an annual meeting in any year in which
the Act does not require. The Board of Directors of each Fund
has determined that in order to avoid the significant expense
PAGE 50
associated with holding annual meetings, including legal,
accounting, printing and mailing fees incurred in preparing proxy
materials, each Fund will take advantage of these Maryland law
provisions. Accordingly, no annual meetings shall be held in any
year in which a meeting is not otherwise required to be held by
the Act for the election of Directors unless the Board of
Directors otherwise determines that there should be an annual
meeting. However, special meetings will be held in accordance
with applicable law or when otherwise determined by the Board of
Directors. Each Fund's By-Laws reflect this policy.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal to be
included in the Proxy Statement for the next Annual Meeting, and
if such Annual Meeting is held in April, 1995, such proposal must
be submitted in writing and received by the Corporation's
Secretary at its Baltimore office prior to November 12, 1994.
FINANCIAL STATEMENT OF INVESTMENT MANAGER
The audited consolidated balance sheet of T. Rowe Price
which follows is required by the Investment Company Act of 1940,
and should not be confused with, or mistaken for, the financial
statements of T. Rowe Price Science & Technology Fund, Inc. or T.
Rowe Price Small-Cap Value Fund, Inc., which are set forth in the
Annual Report for each Fund.
<PAGE>
PAGE 51
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(in thousands)
ASSETS
Cash and cash equivalents $ 46,218
Accounts receivable 43,102
Investments in sponsored mutual funds
Short-term bond and money market mutual funds
held as trading securities 27,647
Other funds held as available-for-sale securities 69,423
Partnership and other investments 19,606
Property and equipment 39,828
Goodwill and deferred expenses 9,773
Other assets 7,803
________
$263,400
________
________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 15,111
Accrued retirement and other compensation costs 19,844
Income taxes payable 5,097
Dividends payable 3,784
Debt 12,915
Deferred revenues 1,548
Minority interests in consolidated subsidiaries 9,148
________
Total liabilities 67,447
________
Commitments and contingent liabilities
Stockholders' equity
Common stock, $.20 par value - authorized 48,000,000
shares; issued and outstanding 29,095,039 shares 5,819
Capital in excess of par value 1,197
Unrealized security holding gains 5,345
Retained earnings 183,592
________
Total stockholders' equity 195,953
________
$263,400
________
________
The accompanying notes are an integral part of the consolidated
balance sheet.
PAGE 52
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Associates, Inc. and its consolidated subsidiaries
(the "Company") provide investment advisory and administrative
services to sponsored mutual funds and investment products, and
to private accounts of other institutional and individual
investors.
Basis of preparation
The Company's financial statements are prepared in accordance
with generally accepted accounting principles.
Principles of consolidation
The consolidated financial statements include the accounts of all
majority owned subsidiaries and, by virtue of the Company's
controlling interest, its 50%-owned subsidiary, Rowe Price-
Fleming International, Inc. ("RPFI"). All material intercompany
accounts are eliminated in consolidation.
Cash equivalents
For purposes of financial statement disclosure, cash equivalents
consist of all short-term, highly liquid investments including
certain money market mutual funds and all overnight commercial
paper investments. The cost of these investments is equivalent
to fair value.
Investments in sponsored mutual funds
The Company has historically accounted for its investments in
stock and bond mutual funds at the lower of aggregate cost or
market. On December 31, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which
requires the Company to state its mutual fund investments at fair
value and to classify these holdings as either trading (held for
only a short period of time) or available-for-sale securities.
Unrealized holding gains on available-for-sale securities at
December 31, 1993 are reported net of income tax effects in a
separate component of stockholders' equity.
Concentration of credit risk
Financial instruments which potentially expose the Company to
concentrations of credit risk as defined by SFAS No. 105 consist
primarily of investments in sponsored money market and bond
mutual funds and accounts receivable. Credit risk is believed to
be minimal in that counterparties to these financial instruments
have substantial assets including the diversified portfolios
under management by the Company which aggregate $54.4 billion at
December 31, 1993.<PAGE>
PAGE 53
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Partnership and other investments
The Company invests in various partnerships and ventures
including those sponsored by the Company. These investments
which hold equity securities, venture capital investments, debt
securities and real estate are stated at cost adjusted for the
Company's share of the earnings or losses of the investees
subsequent to the date of investment. Because the majority of
these entities carry their investments at fair value and include
unrealized gains and losses in their reported earnings, the
Company's carrying value for these investments approximates fair
value.
Property and equipment
Property and equipment is stated at cost net of accumulated
depreciation and amortization computed using the straight-line
method. Provisions for depreciation and amortization are based
on the following estimated useful lives: computer and
communications equipment and furniture and other equipment, 3 to
7 years; building, 40 years; leased land, the 50-year lease term;
and leasehold improvements, the shorter of their useful lives or
the remainder of the lease term.
<PAGE>
PAGE 54
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET
NOTE 1 - INVESTMENTS IN SPONSORED MUTUAL FUNDS
Investments in sponsored money market mutual funds, which are
classified as cash equivalents in the accompanying consolidated
financial statements, aggregate $45,272,000 at December 31, 1993.
The Company's investments in sponsored mutual funds held as
available-for-sale at December 31, 1993 (in thousands) include:
Gross
unrealized Aggregate
Aggregate holding fair
cost gains value
________ _________ _________
Stock funds $ 34,990 $ 7,025 $ 42,015
Bond funds 26,190 1,218 27,408
________ _______ _________
Total $ 61,180 $ 8,243 $ 69,423
________ _______ _________
________ _______ _________
The Company provides investment advisory and administrative
services to the T. Rowe Price family of mutual funds which had
aggregate assets under management at December 31, 1993 of $34.7
billion. All services rendered by the Company are provided under
contracts that set forth the services to be provided and the fees
to be charged. These contracts are subject to periodic review
and approval by each of the funds' boards of directors and, with
respect to investment advisory contracts, also by the funds'
shareholders. Services rendered to the funds accounted for 71%
of 1993 revenues.
Accounts receivable from the sponsored mutual funds aggregated
$21,741,000 at December 31, 1993.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1993 (in thousands)
consists of:
Computer and communications equipment $ 31,431
Building and leased land 19,756
Furniture and other equipment 13,889
Leasehold improvements 4,691
_________
69,767
Accumulated depreciation and amortization (29,939)
_________
$ 39,828
_________
_________
<PAGE>
PAGE 55
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
NOTE 3 - GOODWILL AND DEFERRED EXPENSES
On September 2, 1992, the Company acquired an investment
management subsidiary of USF&G Corporation and combined six USF&G
mutual funds with aggregate net assets of $.5 billion into the T.
Rowe Price family of funds. The total transaction cost which has
been recognized using the purchase method of accounting was
approximately $11,024,000, including goodwill of $8,139,000 which
is being amortized over 11 years using the straight-line method.
Prepaid non-compete and transition services agreements totaling
$2,500,000 are being amortized over their three-year life.
Accumulated amortization at December 31, 1993 aggregates
$2,216,000.
Goodwill of $1,980,000 from an earlier corporate acquisition is
being amortized over 40 years using the straight-line method.
Accumulated amortization was $1,039,000 at December 31, 1993.
NOTE 4 - DEBT
In June 1991, the Company completed the long-term financing
arrangements for its administrative services facility. Terms of
the $13,500,000 secured promissory note with Confederation Life
Insurance Company include an interest rate of 9.77%, monthly
principal and interest payments totaling $128,000 for 10 years,
and a final principal payment of $9,845,000 in 2001. A
prepayment option is available under the terms of the note;
however, the payment of a substantial premium would have been
required to retire the debt at December 31, 1993. Related debt
issuance costs of $436,000 are included in deferred expenses and
are being amortized over the life of the loan to produce an
effective annual interest rate of 10.14%.
The outstanding principal balance for this note was $12,904,000
at December 31, 1993. A fair value of $16,030,000 was estimated
based on the cost of risk-free assets that could be acquired to
extinguish the obligation at December 31, 1993.
A maximum of $20,000,000 is available to the Company under unused
bank lines of credit at December 31, 1993.
NOTE 5 - INCOME TAXES
Deferred income taxes arise from differences between taxable
income for financial statement and income tax return purposes and
are calculated using the liability method prescribed by SFAS No.
109, "Accounting for Income Taxes."
PAGE 56
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
The net deferred tax liability of $2,596,000 included in income
taxes payable at December 31, 1993 consists of total deferred tax
liabilities of $5,609,000 and total deferred tax assets of
$3,013,000. Deferred tax liabilities include $2,898,000 arising
from unrealized holding gains on available-for-sale securities,
$1,353,000 arising from unrealized capital gains allocated from
the Company's partnership investments, and $677,000 from
differences in the recognition of depreciation expense. Deferred
tax assets include $1,100,000 from differences in the recognition
of the costs of the defined benefit retirement plan and
postretirement benefits.
NOTE 6 - COMMON STOCK AND EMPLOYEE STOCK INCENTIVE PLANS
Shares Authorized
At December 31, 1993, the Company had reserved 8,151,315 shares
of its unissued common stock for issuance upon the exercise of
stock options and 420,000 shares for issuance under an employee
stock purchase plan.
Share Repurchases
The Company's board of directors has authorized the future
repurchase of up to 1,432,000 common shares at December 31, 1993.
Executive Stock
At December 31, 1993, there were outstanding 1,226,540 shares of
common stock ("Executive Stock") which were sold to certain
officers of the Company in 1982 at a discount. These shares are
subject to restrictions which require payment of the discount of
$.32 per share to the Company at the earlier of the sale of such
stock or termination of employment.
<PAGE>
PAGE 57
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Stock Incentive Plans
The following table summarizes the status of noncompensatory
stock options granted at market value to certain officers and
directors of the Company.
Options
Unexer- Options Unexer- Exer-
cised Options Granted cised cisable
Options Exer- (Canceled) Options at
Year at Decem- cised During Decem- Decem- Exer-
of ber 31, During ber 31, ber 31, ber 31, cise
Grant 1992 1993 1993 1993 1993 Price
____ ________ ________ ________ ________ ________ ______
1983-4 53,000 (30,600) -- 22,400 22,400 $.67 &
$.75
1987 309,410 (68,064) -- 241,346 241,346 $5.38 &
$9.38
1988 359,000 (66,586) -- 292,414 292,414 $7.94
1989 632,280 (46,288) (5,600) 580,392 312,404 $11.38
1990 681,500 (83,387) (11,800) 586,313 141,313 $7.19 &
$8.50
1991 811,450 (37,000) (14,000) 760,450 283,450 $17.00
1992 926,000 (11,600) (27,400) 887,000 168,600 $18.75
1993 -- -- 1,154,000 1,154,000 -- $28.13
_________ ________ _________ _________ _________
3,772,640 (343,525) 1,095,200 4,524,315 1,461,927
_________ ________ _________ _________ _________
_________ ________ _________ _________ _________
The right to exercise stock options generally vests over the
five-year period following the grant. After the tenth year
following the grant, the right to exercise the related stock
options lapses and the options are canceled.
NOTE 7 - EMPLOYEE RETIREMENT PLANS
The Company sponsors two defined contribution retirement plans:
a profit-sharing plan based on participant compensation and a
401(k) plan.
The Company also has a defined benefit plan covering those
employees whose annual base salaries do not exceed a specified
salary limit. Participant benefits are based on the final
month's base pay and years of service subsequent to January 1,
1987. The Company's funding policy is to contribute annually the
maximum amount that can be deducted for federal income tax
purposes. The following table sets forth the plan's funded
status and the amounts recognized in the Company's consolidated
balance sheet (in thousands) at December 31, 1993.<PAGE>
PAGE 58
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Actuarial present value of
Accumulated benefit obligation for service rendered
Vested $ 780
Non-vested 1,362
______
Total 2,142
Obligation attributable to estimated future compensation
increases 2,594
______
Projected benefit obligation 4,736
Plan assets held in sponsored mutual funds, at fair value 2,594
______
Projected benefit obligation in excess of plan assets 2,142
Unrecognized loss from decreases in discount rate 407
______
Accrued retirement costs $1,735
______
______
Discount rate used in determining actuarial present
values 6.40%
______
______
NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a minority partner in the joint venture which owns
the land and building in which the Company leases its corporate
offices. Future minimum rental payments under the Company's
lease agreement are $3,110,000 in 1994 and 1995, $3,220,000 in
1996, $3,769,000 in 1997 and 1998, and $33,755,000 in 1999
through 2006. Other assets at December 31, 1992 includes a
receivable from the venture of $3,485,000 for leasehold
improvements made by the Company and reimbursed by the venture in
1993.
The Company leases office facilities and equipment under other
noncancelable operating leases. Future minimum rental payments
under these leases aggregate $4,621,000 in 1994, $4,123,000 in
1995, $1,776,000 in 1996, $1,259,000 in 1997, $696,000 in 1998,
and $4,806,000 in later years.
At December 31, 1993, the Company had outstanding commitments to
invest an additional $6,757,000 in various investment
partnerships and ventures.
The Company has contingent obligations at December 31, 1993 under
a $500,000 direct pay letter of credit expiring not later than
1999 and a $780,000 standby letter of credit which is renewable
annually.
<PAGE>
PAGE 59
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED BALANCE SHEET (Continued)
Consolidated stockholders' equity at December 31, 1993 includes
$32,635,000 which is restricted as to use under various
regulations and agreements to which the Company and its
subsidiaries are subject in the ordinary course of business.
From time to time, the Company is a party to various employment-
related claims, including claims of discrimination, before
federal, state and local administrative agencies and courts. The
Company vigorously defends itself against these claims. In the
opinion of management, after consultation with counsel, it is
unlikely that any adverse determination in one or more pending
employment-related claims would have a material adverse effect on
the Company's financial position.
<PAGE>
PAGE 60
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________
To the Stockholders and Board of Directors
of T. Rowe Price Associates, Inc.
In our opinion, the accompanying consolidated balance sheet
presents fairly, in all material respects, the financial position
of T. Rowe Price Associates, Inc. and its subsidiaries at
December 31, 1993 in conformity with generally accepted
accounting principles. This financial statement is the
responsibility of the Company's management; our responsibility is
to express an opinion on this financial statement based on our
audit. We conducted our audit 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 audit
provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Baltimore, Maryland
January 25, 1994
<PAGE>
PAGE 3
T. ROWE PRICE (LOGO) PROXY
_______________________________________________________________
INSTRUCTIONS:
1. Cast your vote by checking the appropriate boxes on the
reverse side. If you do not check a box, your vote will be
cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed
postage paid envelope, even if you will be attending the
meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
T. ROWE PRICE SMALL-CAP VALUE FUND, INC.
MEETING: 8:00 A.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John H. Laporte and James S.
Riepe, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as
designated below, all shares of stock of the Fund, which the
undersigned is entitled to vote at the Annual Meeting of
Shareholders to be held on Wednesday, April 20, 1994, at the time
indicated above, at the offices of the Fund, 100 East Pratt
Street, Baltimore, Maryland 21202, and at any and all
adjournments thereof, with respect to the matters set forth below
and described in the Notice of Annual Meeting and Proxy Statement
dated March 11, 1994, receipt of which is hereby acknowledged.
Please sign exactly as name
appears. Only authorized officers
should sign for corporations. For
information as to the voting of
stock registered in more than one
name, see page ___ of the Notice of
Annual Meeting and Proxy Statement.
Dated: __________________, 1994
___________________________________
___________________________________
Signature(s)
CUSIP#77957Q103/fund#046
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T. ROWE PRICE (LOGO) WE NEED YOUR PROXY VOTE BEFORE APRIL 20,
1994
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Please refer to the Proxy Statement discussion of each of these
matters.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
Please fold and detach card at perforation before mailing.
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1. Election of FOR all nominees / /WITHHOLD AUTHORITY / /1.
directors. listed below (except to vote for all
as marked to the nominees listed below
contrary)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Leo C. Bailey Donald W. Dick, Jr. David K. Fagin
Addison Lanier John H. Laporte John K. Major Hanne M. Merriman
James S. Riepe George A. Roche Hubert D. Vos Paul M. Wythes
2. Approve changes to the Fund's fundamental policies.
FOR each policy / / ABSTAIN / / 2.
listed below (except as
marked to the contrary)
PLEASE CHECK THE BOX FOR any policy change you do NOT
(underscored) wish to approve:
/ / / / / / / / / / / / / / / / / /
A B C D E F G H I
3. Ratify the selection of Coopers & Lybrand as independent
accountants. FOR / / AGAINST / / ABSTAIN / / 3.
4. I authorize the Proxies, in their discretion, to vote upon
such other business as may properly come before the meeting.
CUSIP#77957Q103/fund#046
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