Item 1. Report to Shareholders
T. Rowe Price Equity Income Fund
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December 31, 2003
Certified Annual 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 Equity Income Fund
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Certified Annual Report
Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
[Graphic Omitted]
EQUITY INCOME FUND
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As of 12/31/03
Lipper Equity Income Funds Index $24,073
Equity Income Fund $30,830
S&P 500 Stock Index $28,563
Lipper Equity
S&P 500 Income Funds Equity Income
Stock Index Index Fund
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12/93 $10,000 $10,000 $10,000
12/94 10,132 9,908 10,453
12/95 13,940 12,864 13,939
12/96 17,140 15,176 16,783
12/97 22,859 19,297 21,620
12/98 29,392 21,570 23,614
12/99 35,576 22,473 24,517
12/00 32,337 24,150 27,734
12/01 28,493 22,894 28,187
12/02 22,196 19,132 24,511
12/03 28,563 24,073 30,830
Note: Performance for the Advisor and R Class shares will vary due to their
differing fee structures.
See returns table on next page.
T. Rowe Price Equity Income Fund
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Certified Annual Report
Average Annual Compound Total Return
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Since Inception
Periods Ended 12/31/03 1 Year 5 Years 10 Years Inception Date
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Equity Income Fund 25.78% 5.48% 11.92% - -
S&P 500 Stock Index 28.68 -0.57 11.07 - -
Lipper Equity Income
Funds Index 25.83 2.22 9.18 - -
Equity Income Fund-
Advisor Class 25.59 - - 7.04% 3/31/00
S&P 500 Stock Index 28.68 - - -6.25* -
Lipper Equity Income
Funds Index 25.83 - - 2.07* -
Equity Income Fund-
R Class 25.27 - - 28.40 9/30/02
S&P 500 Stock Index 28.68 - - 30.51** -
Lipper Equity Income
Funds Index 25.83 - - 27.73** -
* Benchmark since-inception data are for the time period 3/31/00 - 12/31/03.
** Benchmark since-inception data are for the time period 9/30/02 - 12/31/03.
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Equity Income Fund
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Certified Annual Report
Dear Shareholder,
We are pleased to report that the fund posted an excellent return of 25.78%
during the 12 months ended December 31, 2003, trailing the unmanaged S&P 500
Index and performing in line with the Lipper Equity Income Funds Index, which
measures similarly managed funds. Smaller-cap, more speculative stocks led the
way in 2003, but the fund's conservative investment approach cushioned results
for shareholders during the recent bear market.
[Graphic Omitted]
Major Index Returns
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12-Month Return
S&P 500 Stock Index 28.7%
S&P MidCap 400 Index 35.6%
Russell 2000 Index 47.3%
Nasdaq Composite 50.0%
As you know, the fund seeks to provide substantial dividend income and long-term
growth of capital by investing primarily in well-established companies paying
above-average dividends. The fund seeks stocks with good prospects for
appreciation and dividend growth that appear undervalued by various measures and
are temporarily out of favor.
The Major Index Returns chart shows how various domestic equities indices
performed over the fund's fiscal year. As you can see, the Nasdaq Composite,
with its high component of technology stocks, outpaced S&P 500 stocks over the
12-month period, and both mid- and small-cap stocks outperformed larger-cap
shares.
The Top 5 Sectors table on the next page reflects the percentage of net assets
that were invested in various sectors at year-end. The fund's major allocations
were to financial and consumer discretionary stocks, with significant
percentages invested in industrials and business services, energy, and health
care shares.
The Best and Worst Contributors table shows the stocks that contributed most to
fund results throughout the year. FleetBoston Financial and Cooper Industries
were among the leading positive contributors to performance, while Merck and
Schering-Plough were the major laggards.
Top 5 Sectors
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Percent of Net Assets
12/31/02 12/31/03
- --------------------------------------------------------------------------------
Financials 17.4% 18.6%
Consumer Discretionary 15.1 17.7
Industrials and Business Services 15.4 13.6
Energy 9.9 9.6
Health Care 9.4 9.6
Finally, I'm sure you are aware that mutual fund companies have recently come
under scrutiny for their trading policies. The investigations have led to
allegations that executives of several mutual fund companies permitted or
engaged in improper mutual fund trading. In addition, certain intermediaries
that process fund transactions are alleged to have assisted some investors in
executing improper mutual fund trades. I want T. Rowe Price shareholders to know
that we emphatically condemn the abuses that have been revealed or alleged
against other firms in our industry. Our firm has not entered and will not enter
into any agreements with any investors or intermediaries that authorize
after-hours trading or excessive short-term trading in any of our funds. T. Rowe
Price investors can be assured that our firm unequivocally opposes illegal or
inappropriate trading of any nature and has policies and procedures in place
designed
Best and Worst Contributors
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12 Months
Ended 12/31/03
Best Contributors
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FleetBoston Financial
Cooper Industries
Honeywell International
McDonald's
ChevronTexaco
Worst Contributors
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Merck
Schering-Plough
Eastman Kodak
Verizon Communications
AT&T
to protect the best interests of our long-term shareholders. No T. Rowe Price
executives or portfolio managers or investment personnel of the T. Rowe Price
mutual funds have engaged in any inappropriate trading of T. Rowe Price mutual
funds. You may find out more about our trading policies and the steps we take to
protect your interests by visiting our Web site (troweprice.com). These policies
are also spelled out in your fund's prospectus.
Thank you for your continued support.
Respectfully submitted,
James S. Riepe
Chairman
January 16, 2004
T. Rowe Price Equity Income Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Equity Income class
Year
Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
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NET ASSET VALUE
Beginning of period $ 19.79 $ 23.65 $ 24.67 $ 24.81 $ 26.32
Investment activities
Net investment
income (loss) 0.38 0.38 0.37 0.50 0.54
Net realized and
unrealized gain (loss) 4.65 (3.43) (0.02)** 2.51 0.45
Total from
investment activities 5.03 (3.05) 0.35 3.01 0.99
Distributions
Net investment income (0.39) (0.36) (0.36) (0.51) (0.53)
Net realized gain (0.27) (0.45) (1.01) (2.64) (1.97)
Total distributions (0.66) (0.81) (1.37) (3.15) (2.50)
NET ASSET VALUE
End of period $ 24.16 $ 19.79 $ 23.65 $ 24.67 $ 24.81
------------------------------------------------------
Ratios/Supplemental Data
Total return^ 25.78% (13.04)% 1.64% 13.12% 3.82%
Ratio of total expenses to
average net assets 0.78% 0.79% 0.80% 0.78% 0.77%
Ratio of net investment
income (loss) to average
net assets 1.80% 1.72% 1.53% 2.01% 1.95%
Portfolio turnover rate 11.8% 15.2% 17.3% 21.9% 21.8%
Net assets, end of period
(in millions) $ 12,160 $ 8,954 $ 10,128 $ 10,187 $ 12,321
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
** The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the period. This amount is inconsistent with the fund's aggregate gains and
lossesbecause of the timing of sales and redemptions of fund shares in
relation tofluctuating market values for the investment portfolio.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Equity Income Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Advisor Class
Year 3/31/00
Ended Through
12/31/03 12/31/02 12/31/01 12/31/00
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NET ASSET VALUE
Beginning of period $ 19.75 $ 23.63 $ 24.68 $ 23.24
Investment activities
Net investment
income (loss) 0.35 0.37 0.34 0.36
Net realized and
unrealized gain (loss) 4.64 (3.45) (0.02) 3.41
Total from
investment activities 4.99 (3.08) 0.32 3.77
Distributions
Net investment income (0.35) (0.35) (0.36) (0.40)
Net realized gain (0.27) (0.45) (1.01) (1.93)
Total distributions (0.62) (0.80) (1.37) (2.33)
NET ASSET VALUE
End of period $ 24.12 $ 19.75 $ 23.63 $ 24.68
--------------------------------------------
Ratios/Supplemental Data
Total return^ 25.59% (13.18)% 1.51% 16.62%
Ratio of total expenses to
average net assets 0.93% 0.94% 0.90% 0.60%!
Ratio of net investment
income (loss) to average
net assets 1.65% 1.72% 1.44% 2.09%!
Portfolio turnover rate 11.8% 15.2% 17.3% 21.9%!
Net assets, end of period
(in thousands) $1,569,879 $ 878,375 $307,957 $ 851
^ 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 Equity Income Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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R Class
Year 9/30/02
Ended Through
12/31/03 12/31/02
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NET ASSET VALUE
Beginning of period $ 19.78 $ 18.54
Investment activities
Net investment income (loss) 0.30 0.09!!
Net realized and
unrealized gain (loss) 4.64 1.61!!
Total from
investment activities 4.94 1.70
Distributions
Net investment income (0.31) (0.11)
Net realized gain (0.27) (0.35)
Total distributions (0.58) (0.46)
NET ASSET VALUE
End of period $ 24.14 $ 19.78
----------------------------------
Ratios/Supplemental Data
Total return^ 25.27% 9.15%
Ratio of total expenses to
average net assets 1.18% 1.08%!
Ratio of net investment
income (loss) to average
net assets 1.43% 3.22%!
Portfolio turnover rate 11.8% 15.2%!
Net assets, end of period
(in thousands) $ 26,590 $ 5,759
!! The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the period. This amount is inconsistent with the fund's aggregate gains
and losses because of the timing of sales and redemptions of fund shares
in relation to fluctuating market values for the investment portfolio.
^ 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 Equity Income Fund
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Certified Annual Report
Portfolio of Investments (ss.) Shares/Par Value
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($ 000s)
COMMON STOCKS 96.0%
CONSUMER DISCRETIONARY 17.5%
Automobiles 0.4%
Ford Motor 3,500,000 56,000
56,000
Distributors 0.6%
Genuine Parts 2,500,000 83,000
83,000
Hotels, Restaurants & Leisure 2.7%
Hilton 5,520,000 94,558
McDonald's 6,250,000 155,187
Starwood Hotels & Resorts Worldwide,
REIT, Class B 3,500,000 125,895
375,640
Household Durables 2.4%
Black & Decker 1,000,000 49,320
Fortune Brands 1,900,000 135,831
Newell Rubbermaid 6,000,000 136,620
321,771
Leisure Equipment & Products 1.7%
Eastman Kodak 6,000,000 154,020
Hasbro 4,000,000 85,120
239,140
Media 7.4%
Comcast, Class A * 3,750,000 123,263
Disney 6,987,100 163,009
Dow Jones ! 3,100,000 154,535
Knight-Ridder 1,750,000 135,398
New York Times, Class A 3,200,000 152,928
Reader's Digest, Class A 1,047,300 15,353
Time Warner * 10,500,000 188,895
Viacom, Class B 2,000,000 88,760
1,022,141
Multiline Retail 0.8%
J.C. Penney 800,000 21,024
May Department Stores 2,900,000 84,303
105,327
Specialty Retail 1.5%
Home Depot 4,000,000 141,960
Toys "R" Us * 5,000,000 63,200
205,160
Total Consumer Discretionary 2,408,179
CONSUMER STAPLES 6.7%
Beverages 0.2%
Brown-Forman, Class B 346,500 32,380
32,380
Food & Staples Retailing 0.1%
Winn-Dixie 1,000,000 9,950
9,950
Food Products 2.8%
Campbell Soup 4,515,300 121,010
ConAgra 2,000,000 52,780
General Mills 1,750,000 79,275
McCormick 300,000 9,030
Unilever (EUR) 2,000,000 130,657
392,752
Household Products 1.5%
Clorox 1,600,000 77,696
Kimberly-Clark 2,200,000 129,998
207,694
Personal Products 0.7%
Gillette 2,500,000 91,825
91,825
Tobacco 1.4%
Altria Group 1,750,000 95,235
UST 2,600,000 92,794
188,029
Total Consumer Staples 922,630
ENERGY 9.6%
Energy Equipment & Services 0.8%
Baker Hughes 1,100,000 35,376
Schlumberger 1,500,000 82,080
117,456
Oil & Gas 8.8%
Amerada Hess 3,500,000 186,095
Anadarko Petroleum 2,000,000 102,020
BP ADR 3,000,000 148,050
ChevronTexaco 3,000,000 259,170
Exxon Mobil 6,750,000 276,750
Marathon Oil 2,000,000 66,180
Royal Dutch Petroleum ADS 3,200,000 167,648
1,205,913
Total Energy 1,323,369
FINANCIALS 18.6%
Capital Markets 3.2%
J.P. Morgan Chase 3,300,000 121,209
Janus Capital Group 1,500,000 24,615
Mellon Financial 4,000,000 128,440
Morgan Stanley 1,750,000 101,272
Northern Trust 1,500,600 69,658
445,194
Commercial Banks 5.8%
Bank of America 1,490,000 119,841
Bank One 4,250,000 193,758
FleetBoston Financial 4,750,000 207,337
Mercantile Bankshares 1,900,000 86,602
National City 2,100,000 71,274
Wells Fargo 1,300,000 76,557
Wilmington Trust 1,000,000 36,000
791,369
Consumer Finance 1.1%
American Express 3,100,000 149,513
149,513
Diversified Financial Services 0.8%
Citigroup 2,240,000 108,730
108,730
Insurance 6.4%
American International Group 1,070,658 70,963
Chubb 1,600,000 108,960
John Hancock Financial Services 1,000,000 37,500
Lincoln National 2,730,188 110,218
Marsh & McLennan 3,500,000 167,615
SAFECO 3,400,000 132,362
St. Paul Companies 2,100,000 83,265
Travelers Property Casualty, Class B 4,250,000 72,122
UnumProvident 6,233,300 98,299
881,304
Real Estate 0.5%
Simon Property Group, REIT 1,600,000 74,144
74,144
Thrifts & Mortgage Finance 0.8%
Fannie Mae 1,400,000 105,084
105,084
Total Financials 2,555,338
HEALTH CARE 9.6%
Health Care Equipment & Supplies 1.4%
Baxter International 4,500,000 137,340
Becton, Dickinson 1,250,000 51,425
188,765
Health Care Providers & Services 0.8%
CIGNA 2,000,000 115,000
115,000
Pharmaceuticals 7.4%
Abbott Laboratories 2,250,000 104,850
Bristol-Myers Squibb 8,000,000 228,800
Johnson & Johnson 3,000,000 154,980
Merck 5,500,000 254,100
Schering-Plough 6,250,000 108,688
Wyeth 3,750,000 159,187
1,010,605
Total Health Care 1,314,370
INDUSTRIALS & BUSINESS SERVICES 13.6%
Aerospace & Defense 4.6%
Boeing 1,800,000 75,852
Honeywell International 7,250,000 242,367
Lockheed Martin 1,250,000 64,250
Raytheon 4,250,000 127,670
Rockwell Collins 4,228,400 126,979
637,118
Commercial Services & Supplies 1.4%
Dun & Bradstreet * 1,250,000 63,388
Waste Management 4,560,000 134,976
198,364
Electrical Equipment 3.1%
Cooper Industries, Class A 3,400,000 196,962
Emerson Electric 1,100,000 71,225
Hubbell, Class B 1,300,000 57,330
Rockwell Automation 2,700,000 96,120
421,637
Industrial Conglomerates 1.6%
GE 7,000,000 216,860
216,860
Machinery 0.9%
Pall 4,500,000 120,735
120,735
Road & Rail 2.0%
Norfolk Southern 4,200,000 99,330
Union Pacific 2,500,000 173,700
273,030
Total Industrials & Business Services 1,867,744
INFORMATION TECHNOLOGY 4.3%
Communications Equipment 1.6%
Lucent Technologies * 11,250,000 31,950
Motorola 8,000,000 112,560
Nokia ADR 4,500,000 76,500
221,010
Computer & Peripherals 1.2%
Hewlett-Packard 6,920,625 158,967
158,967
Semiconductor & Semiconductor Equipment 0.7%
Agere Systems, Class A * 6,270,310 19,124
Texas Instruments 2,850,000 83,733
102,857
Software 0.8%
Microsoft 4,000,000 110,160
110,160
Total Information Technology 592,994
MATERIALS 6.3%
Chemicals 3.6%
Dow Chemical 3,500,000 145,495
DuPont 3,000,000 137,670
Great Lakes Chemical ! 2,700,000 73,413
Hercules * 4,641,400 56,625
International Flavors & Fragrances 2,250,000 78,570
491,773
Metals & Mining 1.1%
Alcoa 2,000,000 76,000
Nucor 1,500,000 84,000
160,000
Paper & Forest Products 1.6%
International Paper 4,000,000 172,440
MeadWestvaco 1,500,000 44,625
217,065
Total Materials 868,838
TELECOMMUNICATION SERVICES 5.4%
Diversified Telecommunication Services 5.4%
Alltel 2,250,000 104,805
AT&T 4,000,000 81,200
Qwest Communications International * 24,000,000 103,680
SBC Communications 5,750,000 149,903
Sprint 6,000,000 98,520
Verizon Communications 6,000,000 210,480
Total Telecommunication Services 748,588
UTILITIES 4.4%
Electric Utilities 1.4%
FirstEnergy 2,500,000 88,000
Teco Energy 1,000,000 14,410
TXU 4,114,500 97,596
200,006
Gas Utilities 0.8%
NiSource 4,750,000 104,215
104,215
Multi-Utilities & Unregulated Power 2.2%
Constellation Energy Group 3,000,000 117,480
Duke Energy 7,000,000 143,150
El Paso Energy 4,500,000 36,855
297,485
Total Utilities 601,706
Total Common Stocks (Cost $11,086,115) 13,203,756
CONVERTIBLE PREFERRED STOCKS 0.2%
Ford Motor Company Capital Trust II 574,000 32,058
Total Convertible Preferred Stocks (Cost $28,700) 32,058
CONVERTIBLE BONDS 0.5%
Lucent Technologies, 8.00%, 8/1/31 66,228,000 70,993
Total Convertible Bonds (Cost $71,768) 70,993
SHORT-TERM INVESTMENTS 3.1%
Money Market Fund 3.1%
T. Rowe Price Reserve
Investment Fund, 1.13% # ! 421,246,890 421,247
Total Short-Term Investments (Cost $421,247) 421,247
Total Investments in Securities
99.8% of Net Assets (Cost $11,607,830) $13,728,054
-----------
(ss.) Denominated in U.S. dollar unless otherwise noted
# Seven-day yield
* Non-income producing
! Affiliated company - See Note 2.
ADR American Depository Receipts
ADS American Depository Shares
EUR Euro
REIT Real Estate Investment Trust
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Equity Income Fund
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Certified Annual Report December 31, 2003
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
($ 000s)
Assets
Investments in securities, at value (cost $11,607,830) $ 13,728,054
Other assets 60,809
Total assets 13,788,863
Liabilities
Total liabilities 32,782
NET ASSETS $ 13,756,081
---------------
Net Assets Consist of:
Undistributed net realized gain (loss) $ 116,061
Net unrealized gain (loss) 2,120,224
Paid-in-capital applicable to 569,499,569 shares of
no par value capital stock outstanding;
unlimited shares authorized 11,519,796
NET ASSETS $ 13,756,081
---------------
NET ASSET VALUE PER SHARE
Equity Income class
($12,159,613,090/503,310,603 shares outstanding) $ 24.16
---------------
Advisor Class
($1,569,878,669/65,087,399 shares outstanding) $ 24.12
---------------
R Class
($26,589,733/1,101,567 shares outstanding) $ 24.14
---------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Operations
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
12/31/03
- --------------------------------------------------------------------------------
Investment Income (Loss)
Income
Dividend $ 289,237
Interest 538
Total income 289,775
Expenses
Investment management 63,960
Shareholder servicing
Equity Income Class 19,833
Advisor Class 1,092
R Class 16
Distribution and service (12b-1)
Advisor Class 2,822
R Class 78
Prospectus and shareholder reports
Equity Income Class 602
Advisor Class 100
R Class 1
Custody and accounting 393
Registration 198
Trustees 49
Legal and audit 41
Miscellaneous 87
Total expenses 89,272
Expenses paid indirectly (6)
Net expenses 89,266
Net investment income (loss) 200,509
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 269,913
Foreign currency transactions (145)
Net realized gain (loss) 269,768
Change in net unrealized gain (loss) on securities 2,254,536
Net realized and unrealized gain (loss) 2,524,304
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 2,724,813
------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
12/31/03 12/31/02
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 200,509 $ 175,910
Net realized gain (loss) 269,768 207,302
Change in net unrealized gain (loss) 2,254,536 (1,840,249)
Increase (decrease) in net assets from operations 2,724,813 (1,457,037)
Distributions to shareholders
Net investment income
Equity Income Class (187,746) (159,289)
Advisor Class (19,685) (10,398)
R Class (257) (12)
Net realized gain
Equity Income Class (133,655) (199,037)
Advisor Class (16,784) (16,452)
R Class (283) (40)
Decrease in net assets from distributions (358,410) (385,228)
Capital share transactions *
Shares sold
Equity Income Class 2,152,244 1,866,678
Advisor Class 715,816 914,477
R Class 21,501 5,925
Distributions reinvested
Equity Income Class 305,659 342,908
Advisor Class 36,193 26,707
R Class 539 52
Shares redeemed
Equity Income Class (1,371,563) (1,650,176)
Advisor Class (304,004) (262,683)
R Class (4,529) (123)
Increase (decrease) in net assets from
capital share transactions 1,551,856 1,243,765
Net Assets
Increase (decrease) during period 3,918,259 (598,500)
Beginning of period 9,837,822 10,436,322
End of period $ 13,756,081 $ 9,837,822
------------ ------------
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
12/31/03 12/31/02
- --------------------------------------------------------------------------------
*Share information
Shares sold
Equity Income Class 101,852 84,263
Advisor Class 33,921 43,125
R Class 999 294
Distributions reinvested
Equity Income Class 13,867 16,415
Advisor Class 1,628 1,309
R Class 24 3
Shares redeemed
Equity Income Class (64,729) (76,535)
Advisor Class (14,925) (13,002)
R Class (212) (6)
Increase (decrease) in shares outstanding 72,425 55,866
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report December 31, 2003
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Income Fund (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 substantial
dividend income as well as long-term growth of capital through investments
in the common stocks of established companies. The fund has three classes
of shares: Equity Income Fund (Equity Income Class), offered since October
31, 1985, Equity Income Fund--Advisor Class (Advisor Class), offered since
March 31, 2000, and Equity Income Fund--R Class (R Class), offered since
September 30, 2002. Advisor Class shares are sold only through brokers and
other financial intermediaries, and R Class shares are available to
retirement plans serviced by intermediaries. The Advisor Class and R Class
each operate under separate Board-approved Rule 12b-1 plans, pursuant to
which each class compensates financial intermediaries for distribution and
certain administrative services. Each class has exclusive voting rights on
matters related solely to that class, separate voting rights on matters
that relate to all classes, and, in all other respects, the same rights and
obligations as the other classes.
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 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.
Debt securities are generally traded in the over-the-counter market.
Securities with original maturities of one year or more are valued at
prices furnished by dealers who make markets in
such securities or by an independent pricing service, which considers yield
or price of bonds of comparable quality, coupon, maturity, and type, as
well as prices quoted by dealers who make markets in such securities.
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.
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 Trustees.
Most foreign markets close before the NYSE. Normally, developments that
could affect the values of securities that occur between the close of a
foreign market and the close of the NYSE will not be reflected in security
valuations used by the fund to compute its share price. However, if
developments are so significant that they will, in the judgment of the
fund, clearly and materially affect security values, such valuations may be
adjusted to reflect the estimated 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 Trustees.
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 security gains and
losses.
Class Accounting
The Advisor Class and R Class each pay distribution and administrative
expenses in the form of Rule 12b-1 fees, in an amount not exceeding 0.25%
and 0.50%, respectively, 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 all 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 a quarterly basis. Capital gain distributions, if
any, are declared and paid by the fund, typically on an annual basis.
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
$278,000 for the year ended December 31, 2003. 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. Distributions to shareholders are recorded on the ex-dividend date.
Income distributions are declared and paid on a quarterly basis. Capital
gain distributions, if any, are typically declared and paid 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.
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
December 31, 2003, the value of affiliated companies totaled $649,195,000,
representing 4.7% of the value of the fund's investments in securities. For
the
year then ended, $8,755,000 (3.0%) of dividend income 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 $2,507,114,000 and $1,274,059,000, respectively, for
the year ended December 31, 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 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 significantly 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.
Distributions during the year ended December 31, 2003 were characterized as
follows for tax purposes:
- --------------------------------------------------------------------------------
Ordinary income $ 241,418,000
Long-term capital gain 116,992,000
Total distributions $ 358,410,000
--------------------
At December 31, 2003, the tax-basis components of net assets were as
follows:
- --------------------------------------------------------------------------------
Unrealized appreciation $ 3,075,500,000
Unrealized depreciation (955,276,000)
Net unrealized appreciation (depreciation) 2,120,224,000
Undistributed ordinary income 18,574,000
Undistributed long-term capital gain 97,487,000
Paid-in capital 11,519,796,000
Net assets $ 13,756,081,000
-------------------
For the year ended December 31, 2003, the fund recorded the following
permanent reclassifications to reflect tax character. Reclassifications to
paid-in capital relate primarily to a tax practice that treats a portion of
the proceeds from each redemption of capital shares as a distribution of
taxable net investment income and/or realized capital gain. Results of
operations and net assets were not affected by these reclassifications.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 573,000
Undistributed net realized gain (12,639,000)
Paid-in capital 12,066,000
At December 31, 2003, the cost of investments for federal income tax
purposes was $11,607,830,000.
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 0.25% 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 Undistributed net
investment income $ 573,000 Undistributed net realized gain (12,639,000)
Paid-in capital 12,066,000of $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 December 31, 2003, the effective annual group fee rate was
0.32%, and investment management fee payable totaled $6,395,000.
The Advisor Class and R Class are also subject to a contractual expense
limitation through the limitation dates indicated in the table below.
During the limitation period, the manager is required to waive its
management fee and reimburse a 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. Through the repayment
date, each class is required to repay the manager for expenses previously
reimbursed and management fees waived to the extent the
class's net assets have grown or expenses have declined sufficiently to
allow repayment without causing the class's expense ratio to exceed its
expense limitation.
- --------------------------------------------------------------------------------
Advisor Class R Class
Expense Limitation 1.00% 1.00%
Limitation Date 12/31/03 4/30/04
Repayment Date 12/31/05 4/30/06
For the year ended December 31, 2003, each 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 Equity Income class and R
Class. Expenses incurred pursuant to these service agreements totaled
$13,759,000 for the year ended December 31, 2003, of which $1,269,000 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 year ended December 31, 2003, the fund was charged $1,000 for
shareholder servicing costs related to the college savings plans, of which
$1,000 was for services provided by Price. At December 31, 2003,
approximately 0.8% of the outstanding shares of the Equity Income 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 Spectrum Funds
(Spectrum Funds) may invest. The Spectrum 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 Spectrum 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 Spectrum Funds. Expenses allocated under this agreement are
reflected as shareholder servicing expense in the accompanying financial
statements. For the year ended December 31, 2003, the fund was allocated
$1,705,000 of Spectrum Funds' expenses, of which $1,196,000 related to
services provided by Price and $152,000 was payable at period-end. At
December 31, 2003, approximately 7.4% of the outstanding shares of the
Equity Income class were held by the Spectrum 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 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. During the year ended December 31,
2003, dividend income from the Reserve Funds totaled $4,719,000.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
T. Rowe Price Equity Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of T. Rowe
Price Equity Income Fund (the "Fund") at December 31, 2003, and the results
of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with auditing standards generally accepted in the United
States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodians, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 26, 2004
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Tax Information (Unaudited) for the Tax Year Ended 12/31/03
- --------------------------------------------------------------------------------
The fund's distributions to shareholders included:
o $40,975,000 from short-term capital gains,
o $122,385,000 from long-term capital gains, of which $51,952,000 was
subject to the 15% rate gains category, and $70,433,000 to the 20% rate
gains category.
For taxable non-corporate shareholders, $260,058,000 of the fund's income and
short-term capital gains represents qualified dividend income subject to the 15%
rate category.
For corporate shareholders, $259,920,000 of the fund's income and
short-term capital gains qualified for the dividends-received deduction.
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price Equity
Income 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.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
About the Fund's Trustees and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Trustees that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's trustees are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" trustees are officers of T. Rowe Price. The Board of Trustees
elects the fund's officers, who are listed in the final table. The business
address of each trustee and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund trustees and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Trustees
Name
(Date of Birth) Principal Occupation(s) During Past 5 Years and
Year Elected * Directorships of Other Public Companies
Anthony W. Deering Director, Chairman of the Board, President, and
(1/28/45) Chief Executive Officer, The Rouse Company, real
2001 estate developers; Director, Mercantile Bank
(4/03 to present)
Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an
(1/27/43) acquisition and management advisory firm
1994
David K. Fagin Director, Golden Star Resources Ltd., Canyon
(4/9/38) Resources Corp. (5/00 to present), and Pacific
1988 Rim Mining Corp. (2/02 to present); Chairman
and President, Nye Corp.
Karen N. Horn Managing Director and President, Global Private
(9/21/43) Client Services, Marsh Inc.; Managing Director
2003 and Head of International Private Banking,
Bankers Trust; Director, Eli Lilly and Company
F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates,
(8/22/34) Inc.,consulting environmental and civil engineers
2001
John G. Schreiber Owner/President, Centaur Capital Partners, Inc., a
(10/21/46) real estate investment company; Senior Advisor and
2001 Partner, Blackstone Real Estate Advisors, L.P.;
Director, AMLI Residential Properties Trust, Host
Marriott Corp., and The Rouse Company
Hubert D. Vos ** Owner/President, Stonington Capital Corp.,
(8/2/33) a private investment company
1985
Paul M. Wythes ** Founding Partner, Sutter Hill Ventures, a venture
(6/23/33) capital limited partnership, providing equity
1994 capital to young high-technology companies
throughout the United States; Director, Teltone
Corp.
* Each independent trustee oversees 107 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
** Retired from Board of Trustees effective December 31, 2003.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Inside Trustees
Name
(Date of Birth)
Year Elected *
[Number of T. Rowe Price Principal Occupation(s) During Past 5 Years
Portfolios Overseen] and Directorships of Other Public Companies
James A.C. Kennedy, CFA Director and Vice President, T. Rowe Price
(8/15/53) and T. Rowe Price Group, Inc.
1997
[39]
James S. Riepe Director and Vice President, T. Rowe Price; Vice
(6/25/43) Chairman of the Board, Director, and Vice
1985 President, T. Rowe Price Group, Inc.; Chairman
[107] of the Board and Director, T. Rowe Price Global
Asset Management Limited, T. Rowe Price Global
Investment Services Limited, T. Rowe Price
Investment Services, Inc., T. Rowe Price
Retirement Plan Services, Inc., and T. Rowe
Price Services, Inc.; Chairman of the Board,
Director, President, and Trust Officer, T. Rowe
Price Trust Company; Director, T. Rowe Price
International, Inc.; Chairman of the Board,
Equity Income Fund
M. David Testa, CFA, CIC Chief Investment Officer, Director, and Vice
(4/22/44) President, T. Rowe Price; Vice Chairman of the
1994 Board, Chief Investment Officer, Director, and
[107] Vice President, T. Rowe Price Group, Inc.;
Chairman of the Board and Director, T. Rowe Price
International, Inc.; Director, T. Rowe Price
Global Asset Management Limited and T. Rowe Price
Global Investment Services Limited; Director and
Vice President, T. Rowe Price Trust Company; Vice
President, Equity Income Fund
* Each inside trustee serves until retirement, resignation, or election of a
successor.
Officers
Name (Date of Birth)
Title and Fund(s) Served Principal Occupation(s)
Stephen W. Boesel (12/28/44) Vice President, T. Rowe Price, T. Rowe
Vice President, Equity Income Fund Price Group, Inc., and T. Rowe Price
Trust Company
Stephen V. Booth (6/21/61) Vice President, T. Rowe Price, T. Rowe
Vice President, Equity Income Fund Price Group, Inc., and T. Rowe Price
Trust Company
Andrew M. Brooks (2/16/56) Vice President, T. Rowe Price and
Vice President, Equity Income Fund T. Rowe Price Group, Inc.
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
T. Rowe Price Equity Income Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Officers (continued)
Name (Date of Birth)
Title and Fund(s) Served Principal Occupation(s)
Joseph A. Carrier (12/30/60) Vice President, T. Rowe Price, T. Rowe
Treasurer, Equity Income Fund Price Group, Inc., and T. Rowe Price
Investment Services, Inc.
Arthur B. Cecil III, CFA (9/15/42) Vice President, T. Rowe Price and
Vice President, Equity Income Fund T. Rowe Price Group, Inc.
Anna M. Dopkin, CFA (9/5/67) Vice President, T. Rowe Price and
Vice President, Equity Income Fund T. Rowe Price Group, Inc.
Roger L. Fiery III, CPA (2/10/59) Vice President, T. Rowe Price, T. Rowe
Vice President, Equity Income Fund Price Group, Inc., T. Rowe Price
International, Inc., and T. Rowe Price
Trust Company
Henry H. Hopkins (12/23/42) Director and Vice President, T. Rowe
Vice President, Equity Income Fund Price Group, Inc., T. Rowe Price
Investment Services, Inc., T. Rowe
Price Services, Inc., and T. Rowe
Price Trust Company; Vice President,
T. Rowe Price, T. Rowe Price
International, Inc., and T. Rowe Price
Retirement Plan Services, Inc.
John D. Linehan (1/21/65) Vice President, T. Rowe Price, T. Rowe
Vice President, Equity Income Fund Price Group, Inc., and T. Rowe Price
International, Inc.
Patricia B. Lippert (1/12/53) Assistant Vice President, T. Rowe Price
Secretary, Equity Income Fund and T. Rowe Price Investment Services,
Inc.
Heather K. McPherson, CPA (12/3/60) Employee, T. Rowe Price; formerly intern
Vice President, Equity Income Fund Salomon Smith Barney (to 2001); Vice
President of Finance and Administration,
Putnam Lovell Securities, Inc. (to 2000)
Brian C. Rogers, CFA, CIC (6/27/55) Director and Vice President, T. Rowe
President, Equity Income Fund Price Group, Inc.; Vice President,
T. Rowe Price and T. Rowe Price Trust
Company
William J. Stromberg, CFA (3/10/60) Vice President, T. Rowe Price and
Vice President, Equity Income Fund T. Rowe Price Group, Inc.
Julie L. Waples (5/12/70) Vice President, T. Rowe Price
Vice President, Equity Income Fund
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
As of the end of the period covered by this report, the registrant has adopted 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. A copy of this code of
ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the period
covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors/Trustees has determined that Mr. David K.
Fagin qualifies as an audit committee financial expert, as defined in Item 3 of
Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2003 2002
Audit Fees $27,837 $22,785
Audit-Related Fees 1,559 --
Tax Fees 7,230 5,517
All Other Fees 124 419
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements, specifically the issuance of a report on internal
controls. Tax fees include amounts related to tax compliance, tax planning, and
tax advice. Other fees include the registrant's pro-rata share of amounts for
agreed-upon procedures in conjunction with service contract approvals by the
registrant's Board of Directors/Trustees.
(e)(1) The registrant's audit committee has adopted a policy whereby audit and
non-audit services performed by the registrant's principal accountant for the
registrant, its investment adviser, and any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant require pre-approval in advance at regularly
scheduled audit committee meetings. If such a service is required between
regularly scheduled audit committee meetings, pre-approval may be authorized by
one audit committee member with ratification at the next scheduled audit
committee meeting. Waiver of pre-approval for audit or non-audit services
requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $719,000 and $671,000, respectively, and
were less than the aggregate fees billed for those same periods by the
registrant's principal accountant for audit services rendered to the T. Rowe
Price Funds.
(h) All non-audit services rendered in (g) above were pre-approved by the
registrant's audit committee. Accordingly, these services were considered by the
registrant's audit committee in maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
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. 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) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(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 Equity Income Fund
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date February 13, 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 February 13, 2004
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date February 13, 2004