Item 1. Report to Shareholders
T. Rowe Price Science & Technology 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 Science & Technology 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]
SCIENCE & TECHNOLOGY FUND
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As of 12/31/03
Lipper Science & Technology Funds Index $24,240
Science & Technology Fund $20,822
S&P 500 Stock Index $28,563
S&P Lipper
500 Science & Science &
Stock Technology Technology
Index Funds Index Fund
12/93 $ 10,000 $ 10,000 $ 10,000
12/94 10,132 10,935 11,579
12/95 13,940 15,150 18,009
12/96 17,140 17,714 20,571
12/97 22,859 19,102 20,923
12/98 29,392 28,068 29,784
12/99 35,576 60,043 59,863
12/00 32,337 41,866 39,396
12/01 28,493 27,328 23,170
12/02 22,196 16,019 13,767
12/03 28,563 24,240 20,822
Note: Performance for Advisor Class shares will vary due to the differing fee
structure. See returns table below.
Average Annual Compound Total Return
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Since Inception
Periods Ended 12/31/03 1 Year 5 Years 10 Years Inception Date
Science & Technology Fund 51.25% -6.91% 7.61% - -
S&P 500 Stock Index 28.68 -0.57 11.07 - -
Lipper Science &
Technology Funds Index 51.31 -2.89 9.26 - -
Science & Technology
Fund-Advisor Class 51.37 - - -26.69% 3/31/00
S&P 500 Stock Index 28.68 - - -6.25* -
Lipper Science & Technology
Funds Index 51.31 - - -25.48* -
* Benchmark since-inception data are for the time period 3/31/00-12/31/03.
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 Science & Technology Fund
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Certified Annual Report
Dear Shareholder,
We are pleased to report that the fund posted an excellent return of 51.25%
during the 12 months ended December 31, 2003, far surpassing the unmanaged S&P
500 Stock Index and performing in line with the Lipper Science & Technology
Funds Index, which measures similarly managed funds. Science and technology
stocks enjoyed solid gains following three years of steep losses, and the fund
benefited from good stock selection in the software industry.
As you know, the fund seeks to provide long-term growth of capital by investing
primarily in companies expected to benefit from the development, advancement,
and use of science and technology. The fund focuses on small- to
large-capitalization companies in these fields and employs a growth approach to
investing based on a company's prospects for above-average earnings.
[Graphic Omitted]
Major Index Returns
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Period Ended 12/31/03
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%
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 the S&P 500 Stock Index over
the 12-month period, and both mid- and small-cap stocks outperformed larger-cap
shares.
The Industry Diversification table reflects the percentage of net assets that
were invested in various sectors at year-end. The fund's major allocations were
to software stocks, with significant percentages invested in components,
hardware, and e-commerce shares.
Industry Diversification
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Percent of Net Assets
Periods Ended 12/31/02 12/31/03
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Software 27.3% 30.1%
Components 16.1 16.5
Hardware 13.3 12.6
E-Commerce 13.8 10.6
Communication Equipment 10.4 9.1
Note: For comparison purposes, we have restated the historical weightings to
incorporate changes made to the sector and industry classification system.
The Best and Worst Contributors table shows the stocks that contributed most to
fund results throughout the year. Cisco Systems and VERITAS Software were among
the leading positive contributors to performance, while poorly performing
Concord EFS and Internet Security Systems were the major laggards. We eliminated
both of the latter holdings before the end of the year.
Best and Worst Contributors
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12 Months Ended 12/31/03
Best Contributors
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Cisco Systems
VERITAS Software
Analog Devices
Applied Materials
Maxim Integrated Products
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Worst Contributors
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Concord EFS **
Internet Security Systems **
Schering-Plough **
KT Corp. **
MedImmune
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** Position eliminated
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 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 Science & Technology Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Science & Technology class
Year
Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET VALUE
Beginning of period $ 12.43 $ 20.92 $ 35.57 $ 63.71 $ 37.67
Investment activities
Net investment
income (loss) (0.11) (0.14) (0.18) (0.29) (0.09)
Net realized and
unrealized gain (loss) 6.48 (8.35) (14.47) (20.57) 36.85
Total from
investment activities 6.37 (8.49) (14.65) (20.86) 36.76
Distributions
Net realized gain - - - (7.28) (10.72)
NET ASSET VALUE
End of period $ 18.80 $ 12.43 $ 20.92 $ 35.57 $ 63.71
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Ratios/Supplemental Data
Total return^ 51.25% (40.58)% (41.19)% (34.19)% 100.99%
Ratio of total expenses
to average net assets 1.09% 1.11% 1.00% 0.86% 0.87%
Ratio of net investment
income (loss) to average
net assets (0.73)% (0.87)% (0.73)% (0.55)% (0.26)%
Portfolio turnover rate 47.8% 60.8% 143.6% 134.1% 128.0%
Net assets, end of period
(in millions) $ 4,380 $ 2,839 $ 5,209 $ 8,892 $ 12,271
^ 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 accompanying notes are an integral part of these financial statements.
T. Rowe Price Science & Technology Fund
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Certified Annual Report
Financial Highlights For a share outstanding throughout each period
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Advisor Class
Year 3/31/00
Ended Through
12/31/03 12/31/02 12/31/01 12/31/00
NET ASSET VALUE
Beginning of period $ 12.42 $ 20.90 $ 35.54 $ 71.08
Investment activities
Net investment income (loss) (0.13) (0.12) (0.17) (0.13)
Net realized and
unrealized gain (loss) 6.51 (8.36) (14.47) (28.13)
Total from
investment activities 6.38 (8.48) (14.64) (28.26)
Distributions
Net realized gain - - - (7.28)
NET ASSET VALUE
End of period $ 18.80 $ 12.42 $ 20.90 $ 35.54
--------------------------------------------
Ratios/Supplemental Data
Total return^ 51.37% (40.57)% (41.19)% (41.06)%
Ratio of total expenses to
average net assets 1.05% 1.08% 0.99% 1.09%!
Ratio of net investment
income (loss) to average
net assets (0.69)% (0.83)% (0.71)% 0.80%!
Portfolio turnover rate 47.8% 60.8% 143.6% 134.1%!
Net assets, end of period
(in thousands) $ 656,154 $ 346,768 $ 554,665 $ 829,024
^ 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 Science & Technology Fund
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Certified Annual Report December 31, 2003
Portfolio of Investments (ss.) Shares Value
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($ 000s)
COMMON STOCKS AND WARRANTS 98.6%
COMMUNICATIONS EQUIPMENT 8.0%
Wireless Equipment 3.0%
Nokia ADR 4,500,000 76,500
QUALCOMM 1,400,000 75,502
152,002
Wireline Equipment 5.0%
CIENA * 2,000,000 13,280
Cisco Systems * 9,750,000 236,827
250,107
Total Communications Equipment 402,109
COMMUNICATION SERVICES 0.8%
Wireless Services 0.8%
Vodafone ADR 1,500,000 37,560
Total Communication Services 37,560
COMPONENT PROCESSING EQUIPMENT 5.8%
Semiconductor Processing Equipment 5.8%
Applied Materials * 4,750,000 106,638
ASML Holding ADS * 1,000,000 20,050
Cabot Microelectronics * 350,000 17,150
KLA-Tencor * 1,200,000 70,404
Novellus Systems * 1,900,000 79,895
Total Component Processing Equipment 294,137
COMPONENTS 16.2%
Analog Semiconductors 7.1%
Analog Devices 3,200,000 146,080
Intersil Holding, Class A 1,200,000 29,820
Linear Technology 750,000 31,552
Maxim Integrated Products 3,000,000 149,400
356,852
Digital Semiconductors 8.9%
Altera * 900,000 20,430
Intel 1,750,000 56,350
Marvell Technology Group * 500,000 18,965
Microchip Technology 2,500,000 83,400
Samsung Electronics (KRW) 150,000 56,777
Taiwan Semiconductor Manufacturing,
Warrants, 8/16/05* 25,000,000 46,726
Texas Instruments 3,000,000 88,140
Xilinx * 2,000,000 77,480
448,268
Optical Components 0.2%
Agere Systems, Class A* 4,000,000 12,200
12,200
Total Components 817,320
E-COMMERCE 10.6%
E-Commerce 10.6%
Accenture, Class A * 2,250,000 59,220
Certegy 1,300,000 42,640
DST Systems * 700,000 29,232
e-Bay * 800,000 51,672
First Data 2,750,000 112,997
Fiserv * 2,400,000 94,824
Paychex 1,100,000 40,920
SunGard Data Systems * 1,200,000 33,252
VeriSign * 4,100,000 66,830
Total E-Commerce 531,587
HARDWARE 12.2%
Contract Manufacturing 1.0%
Flextronics * 2,000,000 29,680
Sanmina-SCI * 1,500,000 18,915
48,595
Hardware 0.3%
CDW 300,000 17,328
17,328
Peripherals 3.4%
Lexmark International, Class A * 800,000 62,912
Network Appliance * 550,000 11,291
QLogic * 1,250,000 64,500
Seagate Technology 1,750,000 33,075
171,778
Systems 7.5%
Dell * 6,250,000 212,250
Hewlett-Packard 4,000,000 91,880
IBM 800,000 74,144
378,274
Total Hardware 615,975
LIFE SCIENCES & HEALTH CARE 3.1%
Biotechnology 1.3%
Cephalon * 500,000 24,205
Genentech * 150,000 14,036
MedImmune * 1,000,000 25,400
63,641
Medical Devices 0.8%
Johnson & Johnson 750,000 38,745
38,745
Pharmaceuticals 1.0%
Bristol-Myers Squibb 700,000 20,020
Eli Lilly 200,000 14,066
Pfizer 500,000 17,665
51,751
Total Life Sciences & Health Care 154,137
MEDIA 7.5%
Media 7.5%
Clear Channel Communications 1,200,000 56,196
Comcast, Class A * 1,500,000 46,920
EchoStar Communications, Class A * 1,100,000 37,400
InterActiveCorp * 1,200,000 40,716
Time Warner * 3,125,000 56,219
Univision Communications, Class A * 200,000 7,938
Viacom, Class B 1,500,000 66,570
Yahoo! * 1,500,000 67,755
Total Media 379,714
SOFTWARE 29.7%
Consumer and Multimedia Software 5.1%
Adobe Systems 3,100,000 121,830
Electronic Arts * 300,000 14,334
Intuit * 2,250,000 119,048
255,212
Enterprise Software 22.4%
Informatica * 2,300,000 23,690
Mercury Interactive * 3,000,000 145,920
Microsoft 17,000,000 468,180
Network Associates * 3,500,000 52,640
Oracle * 8,000,000 105,600
Red Hat * 3,500,000 65,695
SAP (EUR) 300,000 50,329
SAP ADR 600,000 24,936
Siebel Systems * 4,250,000 58,947
Symantec * 1,300,000 45,045
VERITAS Software * 2,400,000 89,184
1,130,166
Technical Software 2.2%
Cadence Design Systems * 3,250,000 58,435
Synopsys * 1,500,000 50,640
109,075
Total Software 1,494,453
Total Miscellaneous Common Stock 4.7% 238,796
Total Common Stocks and Warrants (Cost $4,549,416) 4,965,788
CONVERTIBLE PREFERRED STOCKS 0.0%
idealab!, Series D*!!@ 1,000,000 1,000
Total Convertible Preferred Stocks (Cost $100,000) 1,000
SHORT-TERM INVESTMENTS 1.4%
Money Market Fund 1.4%
T. Rowe Price Government Reserve
Investment Fund, 0.94% #! 68,823,540 68,824
Total Short-Term Investments (Cost $68,824) 68,824
Total Investments in Securities
100.0% of Net Assets (Cost $4,718,239) $5,035,612
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(ss.) Denominated in U.S. dollar unless otherwise noted
# Seven-day yield
* Non-income producing
! Affiliated company - See Note 2.
!! Security contains restrictions as to public resale pursuant to the
Securities Act of 1933 and related rules - total of such securities at
period-end amounts to $1,000 and represents 0.0% of net assets
@ Security valued by the Fund's Board of Directors
ADR American Depository Receipts
ADS American Depository Shares
EUR Euro
KRW South Korean won
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Science & Technology Fund
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Certified Annual Report December 31, 2003
Statement of Assets and Liabilities
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($ 000s)
Assets
Investments in securities, at value
Affiliated companies (cost $68,824) $ 68,824
Other companies (cost $4,649,415) 4,966,788
Total investments in securities 5,035,612
Other assets 40,488
Total assets 5,076,100
Liabilities
Total liabilities 40,117
NET ASSETS $ 5,035,983
------------
Net Assets Consist of:
Undistributed net realized gain (loss) (6,267,979)
Net unrealized gain (loss) 317,373
Paid-in-capital applicable to 267,905,384 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 10,986,589
NET ASSETS $ 5,035,983
------------
NET ASSET VALUE PER SHARE
Science & Technology class
($4,379,829,083/233,008,157 shares outstanding) $ 18.80
------------
Science & Technology - Advisor Class
($656,154,226/34,897,227 shares outstanding) $ 18.80
------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Science & Technology Fund
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Certified Annual Report
Statement of Operations
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($ 000s)
Year
Ended
12/31/03
Investment Income (Loss)
Income
Dividend $ 14,809
Securities lending 62
Total income 14,871
Expenses
Investment management 27,233
Shareholder servicing
Science & Technology class 13,338
Advisor Class 498
Distribution and service (12b-1) - Advisor Class 1,241
Legal and audit 901
Prospectus and shareholder reports
Science & Technology class 746
Advisor Class 1
Custody and accounting 259
Registration 85
Directors 28
Miscellaneous 49
Total expenses 44,379
Expenses paid indirectly (1)
Net expenses 44,378
Net investment income (loss) (29,507)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (42,628)
Foreign currency transactions (112)
Net realized gain (loss) (42,740)
Change in net unrealized gain (loss) on securities 1,760,368
Net realized and unrealized gain (loss) 1,717,628
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 1,688,121
-----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Science & Technology Fund
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Certified Annual Report
Statement of Changes in Net Assets
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($ 000s)
Year
Ended
12/31/03 12/31/02
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (29,507) $ (35,255)
Net realized gain (loss) (42,740) (1,528,459)
Change in net unrealized gain (loss) 1,760,368 (731,423)
Increase (decrease) in net assets from operations 1,688,121 (2,295,137)
Capital share transactions *
Shares sold
Science and Technology class 1,012,841 1,060,383
Advisor Class 146,751 66,815
Shares redeemed
Science and Technology class (952,995) (1,363,783)
Advisor Class (44,822) (45,703)
Increase (decrease) in net assets from
capital share transactions 161,775 (282,288)
Net Assets
Increase (decrease) during period 1,849,896 (2,577,425)
Beginning of period 3,186,087 5,763,512
End of period $ 5,035,983 $ 3,186,087
--------------------------
*Share information
Shares sold
Science and Technology class 66,882 68,692
Advisor Class 9,847 4,386
Shares redeemed
Science and Technology class (62,360) (89,235)
Advisor Class (2,862) (3,013)
Increase (decrease) in shares outstanding 11,507 (19,170)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Science & Technology Fund
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Certified Annual Report December 31, 2003
Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Science and Technology 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
appreciation. The fund has two classes of shares: Science and Technology Fund
(Science and Technology class), offered since September 30, 1987, and Science
and Technology--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 and certain
administrative services under a Board-approved Rule 12b-1 plan. Each class has
exclusive voting rights on matters related solely to that class, separate voting
rights on matters that relate to both classes, and, in all other respects, the
same rights and obligations as the other class.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
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.
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 Directors.
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
Directors.
Currency Translation
Assets, including investments, and liabilities denominated in foreign currencies
are translated into U.S. dollar values each day at the prevailing exchange rate,
using the mean of the bid and ask prices of such currencies against U.S. dollars
as quoted by a major bank. Purchases and sales of securities, income, and
expenses are translated into U.S. dollars at the prevailing exchange rate on the
date of the transaction. The effect of changes in foreign currency exchange
rates on realized and unrealized security gains and losses is reflected as a
component of security gains and losses.
Class Accounting
The Advisor Class pays distribution and administrative expenses in the form of
Rule 12b-1 fees, in an amount not exceeding 0.25% of the class's average 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. Income distributions are declared and paid by each class
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 $328,000 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. 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 an annual 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.
Securities Lending
The fund lends its securities to approved brokers to earn additional income. It
receives as collateral cash and U.S. government securities valued at 102% to
105% of the value of the securities on loan. Cash collateral is invested in a
money market pooled trust managed by the fund's lending agent in accordance with
investment guidelines approved by fund management. Collateral is maintained over
the life of the loan in an amount not less than the value of loaned securities,
as determined at the close of fund business each day; any additional collateral
required due to changes in security values is delivered to the fund the next
business day. Although risk is mitigated by the collateral, the fund could
experience a delay in recovering its securities and a possible loss of income or
value if the borrower fails to return the securities. Securities lending revenue
recognized by the fund consists of earnings on invested collateral and borrowing
fees, net of any rebates to the borrower and compensation to the lending agent.
At December 31, 2003, there were no securities on loan.
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 fund's investment in the T. Rowe Price Government Reserve Investment Fund
was its only affiliated holding and represented 1.4% of the value of the fund's
investments in securities.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $2,003,191,000 and $1,836,677,000, 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.
There were no distributions in the year ended December 31, 2003. At December 31,
2003, the tax-basis components of net assets were as follows:
- --------------------------------------------------------------------------------
Unrealized appreciation $ 825,190,000
Unrealized depreciation (507,828,000)
Net unrealized appreciation (depreciation) 317,362,000
Capital loss carryforwards (6,267,968,000)
Paid-in capital 10,986,589,000
Net assets $ 5,035,983,000
-------------------
The fund intends to retain realized gains to the extent of available capital
loss carryforwards for federal income tax purposes. As of December 31, 2003, the
fund had $4,234,327,000 of capital loss carryforwards that expire in 2009,
$1,904,219,000 that expire in 2010, and $129,422,000 that expire in 2011.
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 the current net operating loss. Results of operations and
net assets were not affected by these reclassifications.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 29,507,000
Undistributed net realized gain 100,000
Paid-in capital (29,607,000)
At December 31, 2003, the cost of investments for federal income tax purposes
was $4,718,250,000.
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 0.35% 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 December 31,
2003, the effective annual group fee rate was 0.32%, and investment management
fee payable totaled $2,806,000.
The Advisor Class is also subject to a contractual expense limitation through
December 31, 2003. 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 1.15%. Through December 31,
2005, 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 year ended December 31, 2003, 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 Science and Technology class. Expenses incurred pursuant to
these service agreements totaled $9,684,000 for the year ended December 31,
2003, of which $1,055,000 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 $25,000 for shareholder servicing costs related to
the college savings plans, of which $19,000 was for services provided by Price.
At December 31, 2003, approximately 0.1% of the out-standing shares of the
Science and Technology class were held by college savings plans.
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 $2,385,000.
T. Rowe Price Science & Technology Fund
- --------------------------------------------------------------------------------
Certified Annual Report
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Science & Technology Fund, Inc.
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 Science & Technology
Fund, Inc. (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 custodians, provide a reasonable basis
for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 26, 2004
T. Rowe Price Science & Technology Fund
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Certified Annual Report
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price Science &
Technology 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 Science & Technology Fund
- --------------------------------------------------------------------------------
Certified Annual Report
About the Fund's Directors and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Directors 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 directors are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" directors are officers of T. Rowe Price. The Board of Directors
elects the fund's officers, who are listed in the final table. The business
address of each director and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund directors and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Directors
Name
(Date of Birth) Principal Occupation(s) During Past 5 Years
Year Elected* and 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
1994 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 and
2003 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,
(10/21/46) Inc., a real estate investment company; Senior
2001 Advisor and 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., a
(8/2/33) private investment company
1988
Paul M. Wythes** Founding Partner, Sutter Hill Ventures, a
(6/23/33) venture capital limited partnership,
1987 providing equity capital to young high-technology
companies throughout the United States; Director,
Teltone Corp.
* Each independent director oversees 107 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
** Retired from Board of Directors effective December 31, 2003.
Inside Directors
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
John H. Laporte, CFA Director and Vice President, T. Rowe Price Group
(7/26/45) Inc.; Vice President, T. Rowe Price
1988
[15]
James S. Riepe Director and Vice President, T. Rowe Price;
(6/25/43) Vice Chairman of the Board, Director, and Vice
1987 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,
Science & Technology Fund
M. David Testa, CFA, CIC Chief Investment Officer, Director, and Vice
(4/22/44) President, T. Rowe Price; Vice Chairman of the
1997 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
* Each inside director serves until retirement, resignation, or election of a
successor.
Officers
Name (Date of Birth)
Title and Fund(s) Served Principal Occupation(s)
Kennard W. Allen (7/12/77) Employee, T. Rowe Price; formerly Equity
Vice President, Science & Research Intern, Tonge Investment
Technology Fund Advisors (to 2000); student, Colby
College (to 2000)
Stephen V. Booth (6/21/61) Vice President, T. Rowe Price, T. Rowe
Vice President, Science & Price Group, Inc., and T. Rowe Price
Technology Fund Trust Company
Joseph A. Carrier (12/30/60) Vice President, T. Rowe Price, T. Rowe
Treasurer, Science & Technology Fund Price Group, Inc., and T. Rowe Price
Investment Services, Inc.
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Officers (continued)
Name (Date of Birth)
Title and Fund(s) Served Principal Occupation(s)
Donald J. Easley, CFA (11/28/71) Vice President, T. Rowe Price and
Vice President, Science & T. Rowe Price Group, Inc.
Technology Fund
Roger L. Fiery III, CPA (2/10/59) Vice President, T. Rowe Price, T. Rowe
Vice President, Science & Price Group, Inc., T. Rowe Price
Technology Fund International, Inc., and T. Rowe Price
Trust Company
Robert N. Gensler (10/18/57) Vice President, T. Rowe Price and
Vice President, Science & T. Rowe Price Group, Inc.
Technology Fund
Eric M. Gerster, CFA (3/23/71) Vice President, T. Rowe Price and
Vice President, Science & T. Rowe Price Group, Inc.
Technology Fund
Jill L. Hauser (6/23/58) Vice President, T. Rowe Price and
Vice President, Science & T. Rowe Price Group, Inc.
Technology Fund
Henry H. Hopkins (12/23/42) Director and Vice President, T. Rowe
Vice President, Science & Price Group, Inc., T. Rowe Price
Technology Fund 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.
Patricia B. Lippert (1/12/53) Assistant Vice President, T. Rowe Price
Secretary, Science & Technology Fund and T. Rowe Price Investment Services,
Inc.
Anh Lu (6/11/68) Vice President, T. Rowe Price Group,
Vice President, Science & Inc., and T. Rowe Price International,
Technology Fund Inc.; formerly Business Development
Manager, Microsoft (to 2000); Vice
President, Salomon Smith Barney Hong
Kong (to 2001)
D. James Prey III (11/26/59) Vice President, T. Rowe Price and
Vice President, Science & T. Rowe Price Group, Inc.
Technology Fund
Jeffrey Rottinghaus, CPA (2/20/70) Vice President, T. Rowe Price; formerly
Vice President, Science & Information Technology Consultant,
Technology Fund Kelly-Lewey & Associates (to 1999);
student, The Wharton School, University
of Pennsylvania (to 2001)
Michael F. Sola, CFA (7/21/69) Vice President, T. Rowe Price and
President, Science & Technology Fund T. Rowe Price Group, Inc.
Julie L. Waples (5/12/70) Vice President, T. Rowe Price
Vice President, Science &
Technology 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 $18,187 $17,910 Audit-Related Fees 1,084 -- Tax
Fees 4,723 4,336 All Other Fees 124 290
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 Science & Technology Fund, Inc.
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