Item 1. Report to Shareholders
T. Rowe Price Small-Cap Stock Fund
- --------------------------------------------------------------------------------
June 30, 2004
Certified Semiannual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price Small-Cap Stock Fund
- --------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Investor Class
6 Months Year
Ended Ended
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET
VALUE
Beginning of
period $ 27.98 $ 21.50 $ 25.34 $ 23.87 $ 22.80 $ 20.79
Investment
activities
Net investment
income (loss) (0.02) (0.02) 0.01 0.10 0.15 0.09
Net realized
and unrealized
gain (loss) 2.03 6.96 (3.61) 1.52 3.52 2.89
Total from
investment
activities 2.01 6.94 (3.60) 1.62 3.67 2.98
Distributions
Net investment
income -- -- (0.01) (0.10) (0.14) (0.08)
Net realized
gain -- (0.46) (0.23) (0.05) (2.46) (0.89)
Total
distributions -- (0.46) (0.24) (0.15) (2.60) (0.97)
NET ASSET
VALUE
End of period $ 29.99 $ 27.98 $ 21.50 $ 25.34 $ 23.87 $ 22.80
---------------------------------------------------------------
Ratios/
Supplemental
Data
Total return^ 7.18% 32.35% (14.21)% 6.81% 16.49% 14.66%
Ratio of total
expenses to
average net
assets 0.94%! 0.96% 0.96% 0.98% 0.94% 0.96%
Ratio of net
investment
income (loss)
to average
net assets (0.16)%! (0.10)% 0.04% 0.45% 0.63% 0.47%
Portfolio
turnover rate 21.9%! 16.3% 15.3% 16.5% 32.8% 42.3%
Net assets,
end of period
(in millions) $ 5,499 $ 4,864 $ 3,298 $ 3,158 $ 2,255 $ 1,740
^ 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 Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Advisor Class
6 Months Year 3/31/00
Ended Ended Through
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00
NET ASSET
VALUE
Beginning of period $ 27.88 $ 21.44 $ 25.32 $ 23.89 $ 24.93
Investment activities
Net investment
income (loss) (0.05) (0.05) (0.02) 0.04 0.07
Net realized and
unrealized
gain (loss) 2.01 6.91 (3.63) 1.53 1.53
Total from
investment
activities 1.96 6.86 (3.65) 1.57 1.60
Distributions
Net investment
income -- -- -- (0.09) (0.18)
Net realized gain -- (0.42) (0.23) (0.05) (2.46)
Total distributions -- (0.42) (0.23) (0.14) (2.64)
NET ASSET
VALUE
End of period $ 29.84 $ 27.88 $ 21.44 $ 25.32 $ 23.89
----------------------------------------------------------
Ratios/Supplemental
Data
Total return^ 7.03% 32.06% (14.41)% 6.60% 6.79%
Ratio of total
expenses to
average net assets 1.19%! 1.19% 1.19% 1.16% 0.82%!
Ratio of net
investment income
(loss) to average
net assets (0.41)%! (0.33)% (0.13)% 0.26% 0.85%!
Portfolio
turnover rate 21.9%! 16.3% 15.3% 16.5% 32.8%!
Net assets,
end of period
(in thousands) $ 386,836 $ 319,096 $ 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.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Small-Cap Stock Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
PORTFOLIO OF INVESTMENTS (1) Shares/$ Par Value
- --------------------------------------------------------------------------------
(Cost and value in $ 000s)
COMMON STOCKS 90.6%
CONSUMER DISCRETIONARY 10.3%
Auto Components 0.5%
Keystone Automotive * 640,300 17,858
Strattec Security * 190,600 13,043
30,901
Automobiles 0.1%
Winnebago 85,200 3,176
3,176
Hotels, Restaurants & Leisure 2.6%
Applebee's 707,512 16,287
CEC Entertainment * 464,000 13,693
Chicago Pizza & Brewery * 316,300 4,811
PF Chang's China Bistro * 400,000 16,460
Red Robin Gourmet Burgers * 277,500 7,595
Ruby Tuesday 1,064,800 29,229
Sonic * 1,317,750 29,979
The Cheesecake Factory * 864,000 34,378
152,432
Household Durables 0.8%
Harman International 120,000 10,920
Jarden * 1,050,000 37,789
48,709
Internet & Catalog Retail 0.3%
priceline.com * 570,000 15,350
15,350
Leisure Equipment & Products 2.0%
Brunswick 1,220,200 49,784
MarineMax * 672,000 19,273
Polaris Industries 480,000 23,040
SCP Pool 577,025 25,966
118,063
Media 1.4%
Emmis Communications * 644,300 13,517
Entercom Communications * 238,500 8,896
Getty Images * 186,000 11,160
Scholastic * 1,353,800 40,546
Young Broadcasting * 430,700 5,664
79,783
Multiline Retail 0.4%
Big Lots * 795,000 11,496
Neiman Marcus, Class A 259,300 14,430
25,926
Specialty Retail 2.1%
AC Moore Arts & Crafts * 313,800 8,633
AnnTaylor Stores * 2,062,500 59,771
Christopher & Banks 923,950 16,363
Hot Topic * 250,000 5,123
Linens 'n Things * 673,900 19,752
Monro Muffler Brake * 300,000 7,278
The Finish Line, Class A * 225,000 6,788
Ultimate Electronics * 337,800 1,669
125,377
Textiles, Apparel, & Luxury Goods 0.1%
Culp * 209,900 1,633
Unifi * 908,400 2,662
4,295
Total Consumer Discretionary 604,012
CONSUMER STAPLES 1.9%
Food & Staples Retailing 1.6%
Casey's General Stores 2,448,000 44,799
Performance Food Group * 1,271,700 33,751
Wild Oats Markets * 881,900 12,408
90,958
Food Products 0.2%
ADM Cranberry *!!@ 164 52
American Italian Pasta, Class A 274,000 8,352
Makepeace @ 164 984
Seneca Foods, Class A * 72,000 1,314
Seneca Foods, Class B * 187,600 3,611
14,313
Personal Products 0.1%
Chattem * 243,000 7,015
7,015
Total Consumer Staples 112,286
ENERGY 7.4%
Energy Equipment & Services 5.6%
Atwood Oceanics * 577,000 24,090
Cooper Cameron * 103,300 5,031
FMC Technologies * 1,749,900 50,397
Grant Prideco * 3,274,350 60,444
Hanover Compressor * 1,625,000 19,337
Hydril * 373,300 11,759
Key Energy Services * 750,600 7,086
Lone Star Technologies * 405,700 11,181
National Oilwell * 2,401,700 75,630
Seacor Smit * 899,500 39,515
Smith International * 260,200 14,509
W-H Energy Services * 473,900 9,288
328,267
Oil & Gas 1.8%
Forest Oil * 1,575,100 43,032
Noble Energy 859,400 43,829
Ultra Petroleum * 588,500 21,969
108,830
Total Energy 437,097
FINANCIALS 16.3%
Capital Markets 1.5%
Affiliated Managers Group * 550,000 27,703
Investor's Financial Services 751,000 32,729
National Financial Partners 338,000 11,921
Piper Jaffray * 383,000 17,323
89,676
Commercial Banks 5.6%
Boston Private Financial 575,400 13,326
Chittenden 1,758,150 61,799
Citizens Banking 1,497,500 46,497
Glacier Bancorp 505,736 14,247
Pinnacle Financial Partners * 80,700 1,477
Provident Bankshares 952,078 27,458
Sandy Spring Bancorp 450,000 15,637
Signature Bank * 93,000 2,210
Southwest Bancorp 998,500 44,054
Texas Capital Bancshares * 804,600 13,356
Valley National Bancorp 1,446,995 36,580
WestAmerica 1,000,000 52,450
329,091
Diversified Financial Services 0.6%
Assured Guaranty * 1,885,000 31,951
31,951
Insurance 5.7%
Aspen Insurance Holdings 779,000 18,096
Bristol West Holdings 832,000 15,134
Brown and Brown 750,000 32,325
Harleysville Group 316,200 5,960
Horace Mann Educators 2,029,100 35,469
Infinity Property & Casualty 948,900 31,314
Markel * 111,500 30,941
Ohio Casualty * 2,495,700 50,239
PartnerRe 700,000 39,711
Selective Insurance 814,000 32,462
Triad Guaranty * 290,000 16,878
W. R. Berkley 586,000 25,169
333,698
Real Estate 2.9%
Arden Realty, REIT 739,200 21,740
EastGroup Properties, REIT 887,600 29,885
Essex Property Trust, REIT 100,000 6,835
Gables Residential Trust, REIT 792,600 26,932
LaSalle Hotel Properties, REIT 495,400 12,088
Manufactured Home Communities, REIT 315,000 10,455
Parkway Properties, REIT ! 599,700 26,657
Reckson Associates Realty, REIT 265,900 7,302
Washington, REIT 971,300 28,537
170,431
Thrifts & Mortgage Finance 0.0%
Frankfort First 61,400 1,386
1,386
Total Financials 956,233
HEALTH CARE 10.4%
Biotechnology 3.0%
Abgenix * 96,000 1,125
Alexion Pharmaceutical * 100,000 1,860
Alkermes * 938,700 12,766
Amylin Pharmaceuticals * 440,000 10,032
Anadys Pharmaceuticals * 540,000 3,834
Cephalon * 353,517 19,090
Cubist Pharmaceuticals * 922,200 10,236
CV Therapeutics * 104,300 1,748
Cytogen * 360,000 5,724
Cytokinetics * 65,000 965
deCODE GENETICS * 471,703 4,010
Dynavax Technologies * 366,000 2,438
Exelixis * 819,700 8,271
Memory Pharmaceuticals * 366,000 3,331
Myriad Genetics * 1,000,000 14,920
Neurocrine Biosciences * 437,500 22,684
NPS Pharmaceuticals * 247,400 5,195
ONYX Pharmaceuticals * 489,700 20,744
OSI Pharmaceuticals * 54,400 3,832
Rigel Pharmaceuticals * 244,000 3,467
Trimeris * 391,900 5,655
Vertex Pharmaceuticals * 1,319,620 14,305
176,232
Health Care Equipment
& Supplies 3.2%
Advanced Neuromodulation
Systems * 575,000 18,860
Analogic 409,500 17,375
DJ Orthopedics * 478,000 10,994
Edwards Lifesciences * 589,900 20,558
EPIX Medical * 190,000 4,009
Integra LifeServices Holdings * 601,000 21,197
Matthews International,
Class A 1,419,600 46,762
Nuvasive * 360,000 3,928
Steris * 1,050,100 23,690
Thoratec * 525,000 5,633
Wilson Greatbatch Technologies * 487,300 13,620
186,626
Health Care Providers
& Services 3.0%
Henry Schein * 777,200 49,072
Hooper Holmes 1,103,200 6,332
LabOne * 350,000 11,123
Lifeline Systems * 667,200 15,786
LifePoint Hospitals * 125,000 4,653
Sunrise Senior Living *! 1,269,100 49,673
Symbion * 144,300 2,519
United Surgical Partners
International * 540,000 21,314
WellChoice * 425,000 17,595
178,067
Pharmaceuticals 1.2%
Able Laboratories * 35,700 734
Atherogenics * 625,000 11,894
Eon Labs * 400,000 16,372
Inspire Phamaceuticals * 250,000 4,180
Medicines Company * 350,000 10,678
Nektar Therapeutics * 175,100 3,495
Noven Pharmaceuticals * 1,056,300 23,260
70,613
Total Health Care 611,538
INDUSTRIALS & BUSINESS SERVICES 16.6%
Aerospace & Defense 1.2%
Armor Holdings * 1,502,300 51,078
Mercury Computer Systems * 755,000 18,724
69,802
Air Freight & Logistics 2.2%
EGL * 1,522,300 40,493
Expeditors International
of Washington 83,600 4,131
Pacer International * 830,000 15,355
Ryder System 720,000 28,850
UTi Worldwide 787,600 41,499
130,328
Airlines 0.2%
Frontier Airlines * 710,000 7,725
Midwest Express Holdings * 555,600 2,317
10,042
Building Products 0.4%
Quixote 234,782 4,707
Trex * 443,500 16,742
21,449
Commercial Services
& Supplies 5.5%
Central Parking 1,486,400 27,781
Consolidated Graphics *! 1,001,900 44,134
Education Management * 163,600 5,376
Electro Rent 564,300 5,908
First Advantage, Class A * 245,800 4,646
G&K Services, Class A 807,700 32,461
Herman Miller 1,370,700 39,668
Intersections * 82,000 1,967
Ionics *! 1,150,000 32,487
KForce.com * 1,311,200 12,378
Layne Christensen * 343,700 5,688
LECG * 906,100 15,685
Resources Connection * 1,133,500 44,331
SOURCECORP * 625,900 17,225
Tetra Tech * 1,589,262 25,937
West Corporation * 371,908 9,725
325,397
Construction & Engineering 0.2%
Insituform Technologies * 698,100 11,358
11,358
Electrical Equipment 2.0%
A.O. Smith 1,745,700 55,496
American Superconductor * 219,000 2,865
Artesyn Technologies * 1,200,000 10,800
Belden ! 1,915,000 41,038
PECO II * 260,200 208
Woodward Governor 89,700 6,468
116,875
Machinery 3.5%
Actuant Corporation,
Class A * 918,260 35,803
Graco 1,020,000 31,671
Harsco 1,159,600 54,501
IDEX 406,950 13,979
Lindsay Manufacturing ! 1,062,200 25,514
Reliance Steel & Aluminum 323,100 13,028
Toro 475,000 33,283
207,779
Road & Rail 1.4%
Genesee & Wyoming, Class A * 200,000 4,740
Heartland Express 533,391 14,594
Knight Transportation * 1,544,800 44,382
Overnite 585,000 17,199
80,915
Total Industrials &
Business Services 973,945
INFORMATION TECHNOLOGY 20.1%
Communications Equipment 1.6%
Black Box 800,000 37,808
Emulex * 1,000,000 14,310
F5 Networks * 425,000 11,254
Ixia * 625,000 6,150
Packeteer * 477,500 7,712
Riverstone Networks * 1,750,000 2,292
Sirf Technology Holdings * 469,400 6,135
Stratos International * 42,143 231
Tekelec * 416,700 7,571
93,463
Computer & Peripherals 0.2%
Synaptics * 650,000 12,447
12,447
Electronic Equipment &
Instruments 2.3%
Digital Theater Systems * 425,000 11,114
KEMET * 1,845,000 22,546
Littelfuse * 601,600 25,514
Methode Electronics 1,254,700 16,273
Newport * 789,600 12,768
Plexus * 1,898,600 25,631
Technitrol * 379,500 8,311
Woodhead Industries ! 960,300 14,846
137,003
Internet Software &
Services 1.1%
Digital Insight * 845,000 17,517
Internet Security Systems * 937,600 14,383
MatrixOne * 1,603,700 11,082
Netegrity * 875,000 7,402
Sonicwall * 115,200 991
Websense * 433,800 16,150
67,525
IT Services 3.7%
BISYS Group * 1,094,000 15,382
CACl International, Class A * 870,800 35,215
Global Payments 868,000 39,078
Iron Mountain * 1,181,825 57,035
Maximus * 1,058,300 37,527
MPS Group * 2,646,800 32,079
216,316
Semiconductor & Semiconductor
Equipment 4.6%
AMIS Holdings * 680,000 11,506
Artisan Components * 875,000 22,575
Atheros Communications * 364,000 3,836
ATMI * 860,000 23,487
Cabot Microelectronics * 544,000 16,652
Entegris * 1,441,200 16,675
Exar * 1,163,000 17,050
Lattice Semiconductor * 168,800 1,183
Microsemi * 1,165,000 16,555
MKS Instruments * 1,456,200 33,230
Mykrolis * 1,554,800 27,085
PDF Solutions * 826,300 6,999
Power Integrations * 145,000 3,610
Semtech * 1,764,000 41,524
Sigmatel * 428,000 12,438
Tessera Technologies * 758,900 13,675
268,080
Software 6.6%
Actuate * 395,500 1,562
Altiris * 585,400 16,163
Catapult Communications * 418,600 9,628
Concord Communications * 499,400 5,698
FactSet Research Systems 856,200 40,473
FileNet * 1,271,400 40,138
Jack Henry & Associates 2,420,100 48,644
Kronos *! 1,575,000 64,890
Magma Design Automation * 506,400 9,738
Mercury Interactive * 279,300 13,918
Motive * 641,900 6,624
NetIQ * 1,346,400 17,773
Open Solutions * 422,000 10,542
Progress Software * 900,000 19,503
Quest Software * 1,059,400 13,666
Red Hat * 856,700 19,678
RSA Security * 1,177,200 24,097
SPSS * 536,400 9,639
Verisity Ltd. * 340,000 2,040
Verity * 1,225,000 16,550
390,964
Total Information Technology 1,185,798
MATERIALS 6.4%
Chemicals 4.3%
Airgas 2,875,000 68,742
Arch Chemicals ! 1,198,100 34,529
Ferro 1,340,000 35,751
IMC Global 2,325,000 31,155
MacDermid 175,000 5,924
Material Sciences * 691,100 7,360
Minerals Technologies 948,000 54,984
Symyx Technologies * 575,000 13,869
252,314
Containers & Packaging 0.4%
Chesapeake Corp. 710,000 18,943
Smurfit-Stone Container * 191,100 3,812
22,755
Metals & Mining 1.4%
Adrian Steel !@ 13,000 4,095
Coal Creek @ 9,295 1,924
Gibraltar Steel 378,500 12,423
Lihir Gold (AUD) * 7,971,900 5,486
Meridian Gold * 1,700,000 22,049
NN 163,900 2,083
Steel Dynamics * 1,175,000 33,640
81,700
Paper & Forest Products 0.3%
Buckeye Technologies * 1,780,100 20,471
20,471
Total Materials 377,240
TELECOMMUNICATION SERVICES 0.8%
Wireless Telecommunication Services 0.8%
Spectrasite * 896,000 38,725
Western Wireless, Class A * 340,000 9,829
Total Telecommunication Services 48,554
UTILITIES 0.4%
Electric Utilities 0.4%
Cleco 767,200 13,794
El Paso Electric * 726,200 11,213
Total Utilities 25,007
Total Common Stocks
(Cost $4,141,952) 5,331,710
TRUSTS & MUTUAL FUNDS 0.6%
Trusts & Mutual Funds 0.6%
Ishares Russell 2000 300,000 35,397
Total Trusts & Mutual Funds
(Cost $30,479) 35,397
SHORT-TERM INVESTMENTS 7.9%
U.S. Treasury Obligations 0.1%
U.S. Treasury Bills
0.97%, 8/26/04 ++ 1,000,000 998
1.005%, 8/26/04 ++ 4,600,000 4,593
1.02%, 8/26/04 ++ 250,000 250
1.07%, 8/26/04 ++ 250,000 250
6,091
Money Market Fund 7.8%
T. Rowe Price Reserve Investment
Fund, 1.16% #! 459,208,907 459,209
459,209
Total Short-Term Investments
(Cost $465,299) 465,300
Total Investments in Securities
99.1% of Net Assets
(Cost $4,637,730) $ 5,832,407
--------------------
Futures Contracts
($ 000s)
Contract Unrealized
Expiration Value Gain (Loss)
---------- -------- ----------
Long, 412 Russell 2000
contracts, $6,100 par
of U.S. Treasury Bills
pledged as initial margin 9/04 $ 122,024 $ 5,291
Net payments (receipts)
of variation
margin to date (4,498)
Variation margin receivable
(payable) on open futures
contracts $ 793
---------------
(1) Denominated in U.S. dollars unless otherwise noted
# Seven-day yield
* Non-income producing
++ All or a portion of this security is pledged to cover margin requirements
on futures contracts at 6/30/04.
! Affiliated company - See Note 2.
!! Security contains restrictions as to public resale pursuant to the
Securities Act of 1933 and related rules - total value of such securities
at period-end amounts to $52 and represents 0.00% of net assets
@ Valued by the T. Rowe Price Valuation Committee, established 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 Semiannual Report (Unaudited) June 30, 2004
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
(In thousands except shares and per share amounts)
Assets
Investments in securities, at value
Affiliated companies
(cost $723,419) $ 797,072
Other companies
(cost $3,914,311) 5,035,335
Total investments in securities 5,832,407
Other assets 69,399
Total assets 5,901,806
Liabilities
Total liabilities 15,761
NET ASSETS $ 5,886,045
--------------------
Net Assets Consist of:
Undistributed net investment
income (loss) $ (4,952)
Undistributed net realized
gain (loss) 193,198
Net unrealized gain (loss) 1,199,968
Paid-in-capital applicable to
196,357,035 shares of $0.50
par value capital stock outstanding;
200,000,000 shares authorized 4,497,831
NET ASSETS $ 5,886,045
--------------------
NET ASSET VALUE PER SHARE
Investor Class
($5,499,208,857/183,391,973
shares outstanding) $ 29.99
--------------------
Advisor Class
($386,836,417/12,965,062
shares outstanding) $ 29.84
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Small-Cap Stock Fund
- --------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
($ 000s)
6 Months
Ended
6/30/04
Investment Income (Loss)
Income
Dividend $ 21,682
Interest 23
Total income 21,705
Expenses
Investment management 21,253
Shareholder servicing
Investor Class 4,227
Advisor Class 264
Rule 12b-1 fees - Advisor Class 455
Prospectus and shareholder reports
Investor Class 151
Advisor Class 39
Custody and accounting 138
Registration 111
Legal and audit 13
Directors 6
Miscellaneous 4
Total expenses 26,661
Expenses paid indirectly (4)
Net expenses 26,657
Net investment income (loss) (4,952)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 115,181
Futures 1,274
Net realized gain (loss) 116,455
Change in net unrealized gain (loss)
Securities 264,286
Futures 4,396
Change in net unrealized gain (loss) 268,682
Net realized and unrealized gain (loss) 385,137
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 380,185
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Small-Cap Stock Fund
- --------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (4,952) $ (4,492)
Net realized gain (loss) 116,455 159,039
Change in net unrealized gain (loss) 268,682 1,058,509
Increase (decrease) in net
assets from operations 380,185 1,213,056
Distributions to shareholders
Net realized gain
Investor Class -- (79,833)
Advisor Class -- (4,666)
Decrease in net assets
from distributions -- (84,499)
Capital share transactions *
Shares sold
Investor Class 857,971 1,456,686
Advisor Class 97,186 160,137
Distributions reinvested
Investor Class -- 75,918
Advisor Class -- 4,529
Shares redeemed
Investor Class (578,873) (1,037,784)
Advisor Class (53,666) (44,286)
Increase (decrease) in net
assets from capital
share transactions 322,618 615,200
Net Assets
Increase (decrease) during period 702,803 1,743,757
Beginning of period 5,183,242 3,439,485
End of period $ 5,886,045 $ 5,183,242
------------------------------------
(Including undistributed net investment income
(loss) of $(4,952) at 6/30/04 and $0 at 12/31/03)
T. Rowe Price Small-Cap Stock Fund
- --------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
*Share information
Shares sold
Investor Class 29,567 60,161
Advisor Class 3,375 6,571
Distributions reinvested
Investor Class -- 2,799
Advisor Class -- 168
Shares redeemed
Investor Class (20,006) (42,561)
Advisor Class (1,857) (1,869)
Increase (decrease) in shares outstanding 11,079 25,269
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Small-Cap Stock Fund
- --------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited) June 30, 2004
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: the Small-Cap Stock Fund original share class, referred to in
this report as the Investor Class, offered since June 1, 1956, and Small-Cap
Stock--Advisor Class (Advisor Class), offered since March 31, 2000. Advisor
Class shares are sold only through brokers and other financial intermediaries
that are compensated by the class for distribution, shareholder servicing,
and/or 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
The fund values its investments and computes its net asset value per share 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, for certain markets, the official closing price at
the time the valuations are made, except for OTC Bulletin Board securities,
which are valued at the mean of the latest bid and asked prices. 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 asked prices for domestic securities and the last quoted sale price for
international securities.
Debt securities with original maturities of less than one year are valued at
amortized cost in local currency, which approximates fair value when combined
with accrued interest.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation. Financial futures contracts are valued
at closing settlement prices.
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 the T. Rowe Price Valuation Committee,
established by the fund's Board of Directors.
Most foreign markets close before the close of trading on the NYSE. If the fund
determines that developments between the close of a foreign market and the close
of the NYSE will, in its judgment, materially affect the value of some or all of
its portfolio securities, which in turn will affect the fund's share price, the
fund will adjust the previous closing prices to reflect the fair value of the
securities as of the close of the NYSE, as determined in good faith by the T.
Rowe Price Valuation Committee, established by the fund's Board of Directors. A
fund may also fair value securities in other situations, such as when a
particular foreign market is closed but the fund is open. In deciding whether to
make fair value adjustments, the fund reviews a variety of factors, including
developments in foreign markets, the performance of U.S. securities markets, and
the performance of instruments trading in U. S. markets that represent foreign
securities and baskets of foreign securities. The fund uses outside pricing
services to provide it with closing market prices and information used for
adjusting those prices. The fund cannot predict how often it will use closing
prices and how often it will adjust those prices. As a means of evaluating its
fair value process, the fund routinely compares closing market prices, the next
day's opening prices in the same markets, and adjusted prices.
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 asked 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 security gains and losses.
Class Accounting
The Advisor Class pays distribution, shareholder servicing, and/or certain
administrative expenses in the form of Rule 12b-1 fees, in an amount not
exceeding 0.25% of the class's average daily 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.
Rebates and Credits
Subject to best execution, the fund may direct certain security trades to
brokers who have agreed to rebate a portion of the related brokerage commission
to the fund in cash. Commission rebates are included in realized gain on
securities in the accompanying financial statements and totaled $124,000 for the
six months ended June 30, 2004. Additionally, the fund earns credits on
temporarily uninvested cash balances at the custodian that reduce the fund's
custody charges. Custody expense in the accompanying financial statements is
presented before reduction for credits, which are reflected as expenses paid
indirectly.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Premiums and discounts on
debt securities are amortized for financial reporting purposes. Dividends
received from mutual fund investments are reflected as dividend income; capital
gain distributions are reflected as realized gain/loss. Dividend income and
capital gain distributions are recorded on the ex-dividend date. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Payments ("variation margin") made or
received to settle the daily fluctuations in the value of futures contracts are
recorded as unrealized gains or losses until the contracts are closed.
Unrealized gains and losses on futures contracts are included in other assets
and other liabilities, respectively, and in the change in net unrealized gain or
loss in the accompanying financial statements. Distributions to shareholders are
recorded on the ex-dividend date. 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.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
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.
Futures Contracts
During the six months ended June 30, 2004, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values.
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, 2004, the
value of affiliated companies totaled $797,072,000, representing 13.7% of the
value of the fund's investments in securities. For the six months then ended,
$5,222,000 (24.1%) of dividend income and $6,116,000 (5.3%) of net realized gain
reflected in the accompanying financial statements resulted from the fund's
transactions with affiliated companies.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $750,180,000 and $558,038,000, respectively, for the six months ended
June 30, 2004.
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 under Subchapter M of the
Internal Revenue Code 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. Financial
records are not adjusted for temporary differences. 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, 2004.
At June 30, 2004, the cost of investments for federal income tax purposes was
$4,637,730,000. Net unrealized gain aggregated $1,199,968,000 at period-end, of
which $1,442,556,000 related to appreciated investments and $242,588,000 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 average daily net assets to those of the group. At June 30, 2004,
the effective annual group fee rate was 0.31%, and investment management fee
payable totaled $3,569,000.
The Advisor Class is also subject to a contractual expense limitation through
April 30, 2006. During the limitation period, the manager is required to waive
its management fee and reimburse the class for any expenses, excluding interest,
taxes, brokerage commissions, and extraordinary expenses, that would otherwise
cause the class's ratio of total expenses to average net assets (expense ratio)
to exceed its expense limitation of 1.20%. Through April 30, 2008, the class is
required to repay the manager for expenses previously reimbursed and management
fees waived to the extent its net assets have grown or expenses have declined
sufficiently to allow repayment without causing the class's expense ratio to
exceed its expense limitation. For the six months ended June 30, 2004, the
Advisor Class operated below its expense limitation.
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 Investor Class. Expenses incurred pursuant to these service
agreements totaled $2,476,000 for the six months ended June 30, 2004, of which
$392,000 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, 2004, the fund was charged $98,000 for shareholder servicing costs
related to the college savings plans, of which $71,000 was for services provided
by Price and $18,000 was payable at period-end. At June 30, 2004, approximately
1.1% of the outstanding shares of the Investor 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 a special
servicing agreement, 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 this agreement are reflected as
shareholder servicing expense in the accompanying financial statements. For the
six months ended June 30, 2004, the fund was allocated $180,000 of Retirement
Funds' expenses, of which $120,000 related to services provided by Price and
$36,000 was payable at period-end. At June 30, 2004, approximately 2.2% of the
outstanding shares of the Investor Class were held by the Retirement Funds.
The fund may invest in the T. Rowe Price Reserve Investment Fund and the 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 to mutual funds, trusts,
and other accounts managed by Price Associates and/or its affiliates, and are
not available for direct purchase by members of the public. The Reserve Funds
pay no investment management fees. During the six months ended June 30, 2004,
dividend income from the Reserve Funds totaled $2,620,000.
T. Rowe Price Small-Cap Stock Fund
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Certified Semiannual Report
INFORMATION ON PROXY VOTING
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A description of the policies and procedures that the T. Rowe Price Small-Cap
Stock Fund uses to determine how to vote proxies relating to portfolio
securities is available, without charge, upon request by calling 1-800-225-5132.
It also appears in the fund's Statement of Additional Information (Form 485B),
which can be found on the SEC's Web site, www.sec.gov.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions is filed as an
exhibit to the registrant's annual Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the registrant's
most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant's annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant's annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. 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 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is filed
with the registrant's annual Form N-CSR.
(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.
(3) Written solicitation to repurchase securities issued by closed-end
companies: not applicable.
(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 16, 2004
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 16, 2004
By: /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date: August 16, 2004