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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- 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