Item 1. Report to Shareholders
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Certified Financials
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Certified Financials (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Small-Cap Stock shares
6 Months Year
Ended Ended
6/30/03 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98
------- -------- -------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 21.50 $ 25.34 $ 23.87 $ 22.80 $ 20.79 $ 22.20
Investment activities
Net investment
income (loss) (0.01) 0.01 0.10 0.15 0.09 0.08
Net realized and
unrealized gain
(loss) 2.36 (3.61) 1.52 3.52 2.89 (0.89)
Total from
investment
activities 2.35 (3.60) 1.62 3.67 2.98 (0.81)
Distributions
Net investment
income - (0.01) (0.10) (0.14) (0.08) (0.10)
Net realized
gain - (0.23) (0.05) (2.46) (0.89) (0.50)
Total
distributions - (0.24) (0.15) (2.60) (0.97) (0.60)
NET ASSET VALUE
End of period $ 23.85 $ 21.50 $ 25.34 $ 23.87 $ 22.80 $ 20.79
------- ------- ------- ------- ------- -------
Ratios/Supplemental Data
Total return^ 10.93% (14.21)% 6.81% 16.49% 14.66% (3.46)%
Ratio of total
expenses to
average net assets 0.98%! 0.96% 0.98% 0.94% 0.96% 1.01%
Ratio of net
investment income
(loss) to average
net assets (0.11)%! 0.04% 0.45% 0.63% 0.47% 0.46%
Portfolio turnover
rate 10.3%! 15.3% 16.5% 32.8% 42.3% 25.9%
Net assets,
end of period
(in millions) $ 3,852 $ 3,298 $ 3,158 $2,255 $1,740 $ 1,153
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Certified Financials (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Small-Cap Stock-Advisor Class shares
6 Months Year 3/31/00
Ended Ended Through
6/30/03 12/31/02 12/31/01 12/31/00
------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 21.44 $ 25.32 $ 23.89 $ 24.93
Investment activities
Net investment income (loss) (0.03)* (0.02) 0.04 0.07
Net realized and
unrealized gain (loss) 2.35 (3.63) 1.53 1.53
Total from
investment activities 2.32 (3.65) 1.57 1.60
Distributions
Net investment income - - (0.09) (0.18)
Net realized gain - (0.23) (0.05) (2.46)
Total distributions - (0.23) (0.14) (2.64)
NET ASSET VALUE
End of period $ 23.76 $ 21.44 $ 25.32 $ 23.89
-------- --------- --------- --------
Ratios/Supplemental Data
Total return^ 10.82%* (14.41)% 6.60% 6.79%
Ratio of total expenses to
average net assets 1.20%*! 1.19% 1.16% 0.82%!
Ratio of net investment
income (loss) to average
net assets (0.32)%*! (0.13)% 0.26% 0.85%!
Portfolio turnover rate 10.3%! 15.3% 16.5% 32.8%
Net assets, end of period
(in thousands) $ 196,957 $ 141,005 $ 38,632 $ 7,479
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 1.20% contractual expense limitation in
effect through 12/31/05.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Certified Financials (Unaudited) June 30, 2003
PORTFOLIO OF INVESTMENTS Shares Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS 91.8%
CONSUMER DISCRETIONARY 14.6%
Auto Components 0.5%
Keystone Automotive * 640,300 $ 11,692
Strattec Security *! 190,600 10,140
21,832
Automobiles 0.0%
Winnebago 25,000 947
947
Hotels, Restaurants & Leisure 3.4%
Applebee's 471,675 14,825
BUCA * 714,400 4,029
CEC Entertainment * 376,000 13,886
The Cheesecake Factory * 864,000 31,009
Chicago Pizza & Brewery * 296,300 2,963
O' Charley's * 491,600 10,584
Red Robin Gourmet Burgers * 277,500 5,261
Ruby Tuesday 1,289,800 31,897
Sonic * 878,500 22,340
136,794
Household Durables 1.9%
Harman International 953,900 75,492
75,492
Internet & Catalog Retail 0.2%
Alloy Online * 1,355,000 8,740
8,740
Leisure Equipment & Products 2.3%
Brunswick 1,220,200 30,530
Polaris Industries 170,000 10,438
SCP Pool *! 1,558,550 53,614
94,582
Media 2.1%
Emmis Communications * 644,300 14,787
Entercom Communications * 238,500 11,689
Getty Images * 182,000 7,516
Scholastic * 977,000 29,095
Sinclair Broadcast Group, Class A * 980,700 $ 11,386
Young Broadcasting, Class A * 430,700 9,101
83,574
Multiline Retail 0.8%
Neiman Marcus, Class A * 904,300 33,097
33,097
Specialty Retail 2.6%
AnnTaylor Stores * 1,025,000 29,674
Christopher & Banks * 549,300 20,319
Linens `n Things * 673,900 15,911
Stein Mart * 419,100 2,510
The Finish Line, Class A * 721,000 16,013
Too * 850,000 17,212
Ultimate Electronics * 337,800 4,331
105,970
Textiles, Apparel, & Luxury Goods 0.8%
Culp * 209,900 1,448
Dan River, Class A * 962,400 2,589
Stride Rite ! 2,097,300 20,889
Unifi * 908,400 5,632
30,558
Total Consumer Discretionary 591,586
CONSUMER STAPLES 2.3%
Food & Staples Retailing 1.5%
Casey's General Stores ! 2,648,000 37,443
Great Atlantic & Pacific Tea Company * 1,330,000 11,704
Performance Food Group * 112,100 4,147
Wild Oats Markets * 881,900 9,613
62,907
Food Products 0.7%
ADM Cranberry *++@ 164 53
American Italian Pasta, Class A * 274,000 11,412
International Multifoods * 431,200 9,879
Makepeace *@ 164 920
Seneca Foods, Class A * 187,600 3,286
Seneca Foods, Class B * 72,000 1,304
26,854
Personal Products 0.1%
Chattem * 243,000 $ 4,569
4,569
Total Consumer Staples 94,330
ENERGY 6.4%
Energy Equipment & Services 3.8%
Atwood Oceanics * 577,000 15,666
Cooper Cameron * 103,300 5,204
FMC Technologies * 1,699,200 35,768
Grant Prideco * 131,450 1,544
Hydril * 348,300 9,491
Key Energy Services * 668,100 7,162
Lone Star Technologies * 305,700 6,475
National Oilwell * 986,700 21,707
Seacor Smit * 899,500 32,823
Smith International * 260,200 9,560
W-H Energy Services * 473,900 9,232
154,632
Oil & Gas 2.6%
Forest Oil * 835,100 20,978
Noble Energy 859,400 32,485
Ultra Petroleum * 588,500 7,598
XTO Energy 2,117,366 42,580
103,641
Total Energy 258,273
FINANCIALS 16.9%
Capital Markets 1.1%
Investor's Financial Services 751,000 21,787
Neuberger Berman 544,700 21,739
43,526
Commercial Banks 5.9%
Boston Private Financial 575,400 12,130
Chittenden 1,758,150 48,085
Citizens Banking 1,256,600 33,639
Glacier Bancorp 446,289 10,988
Provident Bankshares 952,078 $ 24,192
Southwest Bancorp * 858,500 27,910
Valley National Bancorp 1,378,091 36,313
WestAmerica 1,000,000 43,080
236,337
Insurance 5.9%
Brown & Brown 760,000 24,700
Harleysville Group 448,600 10,327
Horace Mann Educators ! 2,139,100 34,504
Markel * 111,500 28,544
Ohio Casualty * 2,215,800 29,204
PartnerRe 770,600 39,385
Selective Insurance 870,000 21,793
Triad Guaranty * 290,000 11,006
W. R. Berkley 729,000 38,418
237,881
Real Estate 4.0%
Arden Realty, REIT 739,200 19,182
EastGroup Properties, REIT 887,600 23,965
Essex Property Trust, REIT 100,000 5,725
Gables Residential Trust, REIT 792,600 23,960
Glenborough Realty Trust, REIT 775,000 14,841
LaSalle Hotel Properties, REIT 495,400 7,322
Manufactured Home Communities, REIT 315,000 11,060
Parkway Properties, REIT ! 599,700 25,218
Reckson Associates Realty, Class B, REIT 265,900 5,664
Washington, REIT 971,300 26,419
163,356
Thrifts & Mortgage Finance 0.0%
Frankfort First 61,400 1,362
1,362
Total Financials 682,462
HEALTH CARE 9.4%
Biotechnology 2.6%
Abgenix * 96,000 1,007
Alexion Pharmaceutical * 100,000 1,705
Alkermes * 938,700 10,091
Amylin Pharmaceuticals * 440,000 9,632
Cephalon * 353,517 $ 14,551
Cubist Pharmaceuticals * 169,200 1,804
CV Therapeutics * 104,300 3,093
deCODE GENETICS * 471,703 1,472
Exelixis * 819,700 5,689
Incyte * 171,800 797
Myriad Genetics * 98,000 1,334
Neurocrine Biosciences * 320,100 15,986
NPS Pharmaceuticals * 289,000 7,034
OSI Pharmaceuticals * 124,200 4,000
Regeneron Pharmaceuticals * 169,700 2,673
Trimeris * 270,000 12,334
Tularik * 415,000 4,125
Vicuron Pharmaceuticals * 186,200 2,640
Vertex Pharmaceuticals * 149,620 2,184
ViroPharma * 163,200 424
102,575
Health Care Equipment & Supplies 3.1%
Analogic 339,500 16,554
DJ Orthopedics * 300,000 3,288
Edwards Lifesciences * 589,900 18,959
EPIX Medical * 190,000 2,688
Matthews International, Class A ! 1,669,600 41,339
Nektar Therapeutics * 175,100 1,616
Steris * 1,050,100 24,247
Wilson Greatbatch Technologies * 487,300 17,592
126,283
Health Care Providers & Services 3.1%
AMN Healthcare Services * 32,100 408
Cross Country Healthcare * 190,800 2,517
Henry Schein * 777,200 40,679
Hooper Holmes 1,650,000 10,626
Lifeline Systems *! 333,600 9,474
LifePoint Hospitals * 100,000 2,094
Mid-Atlantic Medical Services * 700,000 36,610
Renal Care Group * 303,650 10,691
WellChoice * 425,000 12,444
125,543
Pharmaceuticals 0.6%
Eon Labs * 200,000 $ 7,030
Medicines Company * 350,000 6,891
Noven Pharmaceuticals * 1,056,300 10,817
24,738
Total Health Care 379,139
INDUSTRIALS & BUSINESS SERVICES 16.4%
Aerospace & Defense 0.5%
Armor Holdings *! 1,502,300 20,131
20,131
Air Freight & Logistics 2.3%
Expeditors International of Washington 478,600 16,579
Forward Air * 669,005 16,973
Pacer International * 830,000 15,654
Ryder System 720,000 18,446
UTi Worldwide 787,600 24,565
92,217
Airlines 0.2%
Frontier Airlines * 710,000 6,447
Midwest Express Holdings * 555,600 1,455
7,902
Building Products 0.1%
Simpson Manufacturing * 76,600 2,804
2,804
Commercial Services & Supplies 6.4%
Central Parking 1,486,400 18,372
CompX International ! 406,700 2,270
Consolidated Graphics *! 750,100 17,162
Electro Rent * 564,300 6,083
G&K Services, Class A 663,700 19,646
Herman Miller 1,345,100 27,185
Ionics *! 1,025,000 22,929
Layne Christensen * 343,700 2,774
New England Business Service ! 911,000 27,330
Resources Connection * 1,092,500 26,067
SOURCECORP * 625,900 13,520
Spherion * 1,039,300 7,223
Tetra Tech * 1,614,262 $ 27,652
United Stationers * 823,400 29,782
Waterlink * 445,400 8
West Corporation * 371,908 9,911
257,914
Construction & Engineering 0.3%
Insituform Technologies, Class A * 698,100 12,342
12,342
Electrical Equipment 2.8%
A.O. Smith 1,670,700 47,030
American Superconductor * 219,000 1,312
Belden ! 1,915,000 30,429
LSI Industries 651,400 7,231
Paxar *! 2,255,000 24,805
PECO II * 260,200 163
Woodward Governor 89,700 3,857
114,827
Machinery 3.4%
Actuant, Class A * 477,880 22,613
Cuno * 518,800 18,739
Graco 680,000 21,760
Harsco 1,159,600 41,804
IDEX 246,300 8,926
Joy Global * 291,900 4,311
Lindsay Manufacturing ! 677,200 15,725
Reliance Steel & Aluminum 253,100 5,239
139,117
Marine 0.0%
International Shipholding * 135,062 1,459
1,459
Road & Rail 0.2%
Heartland Express * 233,391 5,193
Knight Transportation * 56,800 1,414
6,607
Trading Companies & Distributors 0.2%
MSC Industrial Direct, Class A * 246,400 4,411
Watsco 181,000 2,997
7,408
Total Industrials & Business Services 662,728
INFORMATION TECHNOLOGY 19.5%
Communications Equipment 1.2%
Black Box 750,000 $ 27,150
Emulex * 325,000 7,400
Packeteer * 477,500 7,435
Riverstone Networks * 1,750,000 2,065
Stratos Lightwave * 42,143 209
Tekelec * 416,700 4,709
48,968
Computer & Peripherals 0.2%
Synaptics * 550,000 7,403
7,403
Electronic Equipment & Instruments 3.0%
Artesyn Technologies * 1,150,000 6,451
KEMET * 1,845,000 18,634
Littelfuse * 1,070,600 23,939
Methode Electronics, Class A 1,254,700 13,488
Newport * 689,600 10,206
Plexus * 1,898,600 21,891
Technitrol * 954,500 14,365
Woodhead Industries ! 912,600 11,426
120,400
Internet Software & Services 0.9%
Digital Impact * 78,800 146
Internet Security Systems * 937,600 13,586
MatrixOne * 1,603,700 9,205
Netegrity * 875,000 5,110
Sonicwall * 340,200 1,633
Webex Communications * 125,000 1,744
Websense * 433,800 6,793
38,217
IT Services 4.6%
BISYS Group * 1,094,000 20,097
CACl International, Class A * 799,000 27,406
Global Payments 795,000 28,222
Iron Mountain * 1,486,825 55,146
ManTech, Class A * 353,900 6,788
Maximus *! 1,158,300 $ 32,004
MPS Group * 2,646,800 18,210
187,873
Semiconductor & Semiconductor Equipment 3.7%
Applied Micro Circuits * 23,700 143
ATMI * 1,050,000 26,219
Cabot Microelectronics * 414,000 20,895
Entegris * 1,441,200 19,370
Exar * 1,163,000 18,410
Lattice Semiconductor * 168,800 1,389
MKS Instruments * 1,459,700 26,377
Mykrolis * 1,404,800 14,259
Semtech * 1,639,000 23,339
150,401
Software 5.9%
Actuate * 545,500 1,516
Autodesk 525,000 8,484
Catapult Communications * 219,100 2,327
Concord Communications * 206,300 2,832
FactSet Research Systems 856,200 37,716
FileNet * 825,000 14,883
Jack Henry & Associates 2,277,500 40,517
Kronos *! 1,050,000 53,350
Magma Design Automation * 181,400 3,111
Mercury Interactive * 279,300 10,784
Midway Games * 1,721,000 6,247
NetIQ * 246,400 3,809
Progress Software * 900,000 18,657
Quest Software * 459,400 5,467
Renaissance Learning * 35,200 771
SPSS * 536,400 8,979
Verisity Ltd. * 348,600 4,162
Verity * 775,000 9,812
Wind River Systems * 1,010,900 3,852
237,276
Total Information Technology 790,538
MATERIALS 5.5%
Chemicals 4.5%
Airgas 2,187,800 $ 36,646
Arch Chemicals ! 1,198,100 22,884
Ferro 1,080,000 24,332
IMC Global 2,325,000 15,601
MacDermid 175,000 4,602
Material Sciences 691,100 6,704
Minerals Technologies 948,000 46,130
Scotts, Class A * 467,000 23,116
Symyx Technologies * 148,000 2,415
182,430
Containers & Packaging 0.1%
Constar International * 275,000 2,087
Smurfit-Stone Container * 191,100 2,490
4,577
Metals & Mining 0.6%
Adrian Steel !@ 13,000 3,640
Coal Creek @ 9,295 1,673
Gibraltar Steel 228,500 4,680
Lihir Gold (AUD) 7,971,900 6,959
Newmont Mining 138,856 4,507
NN, Inc. 224,100 2,837
24,296
Paper & Forest Products 0.3%
Buckeye Technologies * 1,530,100 10,405
Potlatch 100,500 2,588
12,993
Total Materials 224,296
TELECOMMUNICATION SERVICES 0.1%
Wireless Telecommunication Services 0.1%
Western Wireless, Class A * 340,000 3,920
Total Telecommunication Services 3,920
UTILITIES 0.7%
Electric Utilities 0.7%
Cleco 767,200 $ 13,288
El Paso Electric * 726,200 8,954
Unisource Energy 344,500 6,477
Total Utilities 28,719
Total Common Stocks (Cost $3,448,960) 3,715,991
SHORT-TERM INVESTMENTS 8.3%
Money Market Funds 8.3%
T. Rowe Price Reserve Investment Fund,1.16% #! 335,563,103 335,563
Total Short-Term Investments (Cost $335,563) 335,563
Total Investments in Securities
100.1% of Net Assets (Cost $3,784,523) $ 4,051,554
Other Assets Less Liabilities (2,490)
NET ASSETS $ 4,049,064
---------------
# Seven-day yield
* Non-income producing
! Affiliated company - See Note 2.
++ Security contains restrictions as to public resale pursuant to
the Securities Act of 1933 and related rules -- total of such
securities at period-end amounts to $53,000 and represents 0% of
net assets
@ Security valued by the Fund's Board of Directors
AUD Australian dollar
REIT Real Estate Investment Trust
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SMALL-CAP STOCK FUND
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Certified Financials (Unaudited) June 30, 2003
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value
Affiliated companies (cost $817,902) $ 852,269
Other companies (cost $2,966,621) 3,199,285
Total investments in securities 4,051,554
Other assets 18,818
Total assets 4,070,372
Liabilities
Total liabilities 21,308
NET ASSETS $ 4,049,064
------------
Net Assets Consist of:
Undistributed net investment income (loss) $ (2,067)
Undistributed net realized gain (loss) 16,647
Net unrealized gain (loss) 267,031
Paid-in-capital applicable to 169,783,150 shares of
$0.50 par value capital stock outstanding;
200,000,000 shares authorized 3,767,453
NET ASSETS $ 4,049,064
------------
NET ASSET VALUE PER SHARE
Small-Cap Stock shares
($3,852,106,878/161,493,837 shares outstanding) $ 23.85
--------------- ----------- ------------
Small-Cap Stock-Advisor Class shares
($196,956,733/8,289,313 shares outstanding) $ 23.76
------------- --------- ------------
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SMALL-CAP STOCK FUND
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Certified Financials (Unaudited)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/03
Investment Income (Loss)
Income
Dividend $ 13,175
Income distributions from mutual funds 2,163
Total income 15,338
Expenses
Investment management 13,598
Shareholder servicing
Small-Cap Stock shares 3,132
Small-Cap Stock-Advisor Class shares 112
Distribution - Small-Cap Stock-Advisor Class shares 196
Prospectus and shareholder reports
Small-Cap Stock shares 168
Small-Cap Stock-Advisor Class shares 22
Custody and accounting 111
Registration 80
Legal and audit 12
Directors 11
Total expenses 17,442
Expenses paid indirectly (37)
Net expenses 17,405
Net investment income (loss) (2,067)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 5,622
Change in net unrealized gain (loss) on securities 394,254
Net realized and unrealized gain (loss) 399,876
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 397,809
----------
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SMALL-CAP STOCK FUND
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Certified Financials (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS In thousands
6 Months Year
Ended Ended
6/30/03 12/31/02
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (2,067) $ 1,380
Net realized gain (loss) 5,622 53,832
Change in net unrealized gain (loss) 394,254 (629,247)
Increase (decrease) in net assets from operations 397,809 (574,035)
Distributions to shareholders
Net investment income
Small-Cap Stock shares - (1,509)
Net realized gain
Small-Cap Stock shares - (34,853)
Small-Cap Stock-Advisor Class shares - (1,476)
Decrease in net assets from distributions - (37,838)
Capital share transactions *
Shares sold
Small-Cap Stock shares 577,670 1,667,944
Small-Cap Stock-Advisor Class shares 57,295 155,003
Distributions reinvested
Small-Cap Stock shares - 34,611
Small Cap Stock-Advisor Class shares - 1,379
Shares redeemed
Small-Cap Stock shares (403,448) (964,861)
Small-Cap Stock-Advisor Class shares (19,747) (39,553)
Increase (decrease) in net assets from
capital share transactions 211,770 854,523
Net Assets
Increase (decrease) during period 609,579 242,650
Beginning of period 3,439,485 3,196,835
End of period $ 4,049,064 $ 3,439,485
------------ -----------
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Certified Financials (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS In thousands
6 Months Year
Ended Ended
6/30/03 12/31/02
*Share information
Shares sold
Small-Cap Stock shares 26,712 69,031
Small-Cap Stock-Advisor Class shares 2,629 6,686
Distributions reinvested
Small-Cap Stock shares - 1,612
Small-Cap Stock-Advisor Class shares - 64
Shares redeemed
Small-Cap Stock shares (18,650) (41,840)
Small-Cap Stock-Advisor Class shares (917) (1,699)
Increase (decrease) in shares outstanding 27,970 33,854
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SMALL-CAP STOCK FUND
- --------------------------------------------------------------------------------
Certified Financials (Unaudited) June 30, 2003
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Small-Cap Stock Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end
management investment company. The fund seeks to provide long-term capital
growth by investing primarily in stocks of small companies. The fund has
two classes of shares: Small-Cap Stock Fund (Small-Cap Stock class),
offered since June 1, 1956, and Small-Cap Stock Fund-Advisor Class (Advisor
Class), which was first offered on March 31, 2000. Advisor Class shares are
sold only through brokers and other financial intermediaries that are
compensated by the class for distribution and certain administrative
services under a Board-approved Rule 12b-1 plan. Each class has exclusive
voting rights on matters related solely to that class, separate voting
rights on matters that relate to both classes, and, in all other respects,
the same rights and obligations as the other class.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America,
which require the use of estimates made by fund management.
Valuation
Investments are valued at the close of the New York Stock Exchange (NYSE),
normally 4 p.m. ET, each day that the NYSE is open for business. Equity
securities listed or regularly traded on a securities exchange or in the
over-the-counter market are valued at the last quoted sale price, or
official closing price for certain markets, at the time the valuations are
made. A security that is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market
for such security. Listed securities not traded on a particular day are
valued at the mean of the latest bid and ask prices for domestic securities
and the last quoted sale price for international securities.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
Other investments and those for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Most foreign markets close before the NYSE. Developments that could affect
the values of securities that occur between the close of a foreign
market and the close of the NYSE normally will not be reflected in security
valuations. However, if such developments are so significant that they
will, in the judgment of the officers of the fund, clearly and materially
affect the value of securities, the previous closing prices may be adjusted
to reflect the fair value of the securities as of the close of the NYSE, as
determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Currency Translation
Assets, including investments, and liabilities denominated in foreign
currencies are translated into U.S. dollar values each day at the
prevailing exchange rate, using the mean of the bid and ask prices of such
currencies against U.S. dollars as quoted by a major bank. Purchases and
sales of securities, income, and expenses are translated into U.S. dollars
at the prevailing exchange rate on the date of the transaction. The effect
of changes in foreign currency exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and
losses.
Class Accounting
The Advisor Class pays distribution and administrative expenses in the form
of Rule 12b-1 fees, in an amount not exceeding 0.25% of the class's average
net assets. Shareholder servicing, prospectus, and shareholder report
expenses incurred by each class are charged directly to the class to which
they relate. Expenses common to both classes, investment income, and
realized and unrealized gains and losses are allocated to the classes based
upon the relative daily net assets of each class. Income distributions are
declared and paid by each class on an annual basis. Capital gain
distributions, if any, are declared and paid by the fund, typically on an
annual basis.
Expenses Paid Indirectly
Certain security trades are directed to brokers who have agreed to rebate a
portion of the related commission to the fund to pay fund expenses.
Additionally, credits earned on temporarily uninvested cash balances at the
custodian are used to reduce the fund's custody charges. Total expenses in
the accompanying statement of operations are presented before reduction for
rebates and credits, which totaled $35,000 and $2,000, respectively, for
the six months ended June 30, 2003.
Other
Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the fund on the ex-dividend
date.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Affiliated Companies
The fund may invest in certain securities that are considered affiliated
companies. As defined by the 1940 Act, an affiliated company is one in
which the fund owns 5% or more of the outstanding voting securities. At
June 30, 2003, the value of affiliated companies totaled $852,269,000,
representing 21.0% of the value of the fund's investments in securities.
For the six months then ended, $4,549,000 (34.5%) of dividend income,
$2,163,000 (100.0%) of interest income, and $212,000 (3.8%) of net realized
gain reflected in the accompanying financial statements resulted from
transactions with affiliated companies.
Other
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $363,497,000 and $167,658,000, respectively, for the
six months ended June 30, 2003.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute to
shareholders all of its taxable income and gains. Federal income tax
regulations differ from generally accepted accounting principles;
therefore, distributions determined in accordance with tax regulations may
differ in amount or character from net investment income and realized gains
for financial reporting purposes. Financial reporting records are adjusted
for permanent book/tax differences to reflect tax character. Temporary
differences are not adjusted. The amount and character of tax-basis
distributions and composition of net assets are finalized at fiscal
year-end; accordingly, tax-basis balances have not been determined as of
June 30, 2003.
At June 30, 2003, the cost of investments for federal income tax purposes
was $3,784,523,000. Net unrealized gain aggregated $267,031,000 at
period-end, of which $717,380,000 related to appreciated investments and
$450,349,000 related to depreciated investments.
NOTE 4- RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides
for an annual investment management fee, which is computed daily and paid
monthly. The fee consists of an individual fund fee, equal to 0.45% of the
fund's average daily net assets, and the fund's pro-rata share of a group
fee. The group fee is calculated based on the combined net assets of
certain mutual funds sponsored by Price Associates (the group) applied to a
graduated fee schedule, with rates ranging from 0.48% for the first $1
billion of assets to 0.295% for assets in excess of $120 billion. The
fund's portion of the group fee is determined by the ratio of its net
assets to those of the group. At June 30, 2003, the effective annual group
fee rate was 0.32%, and investment management fee payable totaled
$2,552,000.
Through December 31, 2003, the manager is required to bear any expenses,
excluding interest, taxes, brokerage commissions, and extraordinary
expenses, for the Advisor Class that would cause the class's ratio of total
expenses to average net assets (expense ratio) to exceed 1.20%. Thereafter,
through December 31, 2005, the Advisor Class is required to reimburse the
manager for these expenses, provided that its average net assets have grown
or expenses have declined sufficiently to allow reimbursement without
causing its expense ratio to exceed 1.20% for the Advisor Class. Pursuant
to this agreement, $2,000 of Advisor Class expenses were borne by the
manager during the six months ended June 30, 2003. At June 30, 2003,
Advisor Class expenses in the amount of $2,000 remain subject to
reimbursement through December 31, 2005. In addition, the fund has entered
into service agreements with Price Associates and two wholly owned
subsidiaries of Price Associates (collectively, Price). Price Associates
computes the daily share prices and maintains the financial records of the
fund. T. Rowe Price Services, Inc. provides shareholder and administrative
services in its capacity as the fund's transfer and dividend disbursing
agent. T. Rowe Price Retirement Plan Services, Inc. provides subaccounting
and recordkeeping services for certain retirement accounts invested in the
Small-Cap Stock class. Expenses incurred pursuant to these service
agreements totaled $2,121,000 for the six months ended June 30, 2003, of
which $384,000 was payable at period-end.
Additionally, the fund is one of several mutual funds in which certain
college savings plans managed by Price Associates may invest. As approved
by the fund's Board of Directors, shareholder servicing costs associated
with each college savings plan are borne by the fund in proportion to the
average daily value of its shares owned by the college savings plan. For
the six months ended June 30, 2003, the Small-Cap
Stock class was charged $84,000 for shareholder servicing costs related to
the college savings plans, of which $67,000 was for services provided by
Price and $17,000 was payable at period-end. At June 30, 2003,
approximately 0.9% of the outstanding shares of the Small-Cap Stock class
were held by college savings plans.
The fund is also one of several mutual funds sponsored by Price Associates
(underlying Price funds) in which the T. Rowe Price Retirement Funds
(Retirement Funds) may invest. The Retirement Funds do not invest in the
underlying Price funds for the purpose of exercising management or control.
Pursuant to special servicing agreements, expenses associated with the
operation of the Retirement Funds are borne by each underlying Price fund
to the extent of estimated savings to it and in proportion to the average
daily value of its shares owned by the Retirement Funds. Expenses allocated
under these agreements are reflected as shareholder servicing expense in
the accompanying financial statements. For the six months ended June 30,
2003, the Small-Cap Stock class was allocated $19,000 of Retirement Funds'
expenses, of which $10,000 related to services provided by Price and $1,000
was payable at period-end. At June 30, 2003, approximately 0.4% of the
outstanding shares of the Small-Cap Stock class were held by the Retirement
Funds.
The fund may invest in the T. Rowe Price Reserve Investment Fund and T.
Rowe Price Government Reserve Investment Fund (collectively, the Reserve
Funds), open-end management investment companies managed by Price
Associates. The Reserve Funds are offered as cash management options only
to mutual funds, trusts, and other accounts managed by Price Associates
and/or its affiliates, and are not available to the public. The Reserve
Funds pay no investment management fees. Distributions from the Reserve
Funds to the fund for the six months ended June 30, 2003, totaled
$2,163,000.
Item 2. Code of Ethics.
Not required at this time.
Item 3. Audit Committee Financial Expert.
Not required at this time.
Item 4. Principal Accountant Fees and Services.
Not required at this time.
Item 5. Audit Committee of Listed Registrants.
Not required at this time.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a)(1) Not required at this time.
(a)(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Small-Cap Stock Fund, Inc.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date August 22, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date August 22, 2003
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date August 22, 2003