Item 1. Report to Shareholders
DECEMBER 31, 2004
SCIENCE & TECHNOLOGY FUND
Annual Report
T. ROWE PRICE
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The views and opinions in this report were current as of December 31, 2004. They
are not guarantees of performance or investment results and should not be taken
as investment advice. Investment decisions reflect a variety of factors, and the
managers reserve the right to change their views about individual stocks,
sectors, and the markets at any time. As a result, the views expressed should
not be relied upon as a forecast of the fund's future investment intent. The
report is certified under the Sarbanes-Oxley Act of 2002, which requires mutual
funds and other public companies to affirm that, to the best of their knowledge,
the information in their financial reports is fairly and accurately stated in
all material respects.
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REPORTS ON THE WEB
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T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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Fellow Shareholders
The broad stock market ended 2004 near its highest level of the year. Most of
the year's gains were due to a rally that commenced on October 25, triggered by
falling oil prices, continuing economic growth, and the belief that the U.S.
presidential election would be resolved without controversy. The widely followed
Dow Jones Industrial Average registered the smallest gain, while the broader
market indices, including the S&P 500 Stock Index and Nasdaq Composite, were
stronger. Technology stocks were weak for most of the year but finished higher
after bottoming in August, driven largely by a solid quarter from software
companies and an improving inventory picture in semiconductors.
PERFORMANCE COMPARISON
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Periods Ended 12/31/04 6 Months 12 Months
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Science & Technology Fund 1.60% 1.60%
Science & Technology Fund--Advisor Class 1.54 1.60
S&P 500 Stock Index 7.19 10.88
Lipper Science & Technology Funds Index 3.57 4.11
Your fund ended the year marginally higher, with identical returns of 1.60% for
both the 6- and 12-month periods shown in the table since first-half performance
was precisely flat. (Advisor Class returns were lower over the year, reflecting
higher fees.) Returns lagged both the unmanaged Standard & Poor's 500 Stock
Index and the Lipper Science & Technology Funds Index. Relative performance
versus Lipper for the year was due to both sector allocation and stock
selection. Positive contributions from software stocks were offset by the
negative impact of telecom equipment and semiconductor stocks.
MARKET ENVIRONMENT
Following stellar returns in 2003, investors shifted their focus from the
strength of the economic recovery to its sustainability. Rising interest rates,
the weakening dollar, and escalating oil prices became fodder for the business
press. Investment returns were strongest in the fourth quarter due more to
end-of-year seasonality than to acceleration in underlying growth.
While all technology sectors enjoyed good returns in 2003, there was a marked
divergence between the best and worst performers of 2004. Investors chased areas
offering growth and shunned those in the midst
of temporary slowdowns. Both the hardware and Internet segments rose more than
20% while semiconductors declined almost 15%. Software returns fell between the
extremes. Spending to meet the requirements of the Sarbanes-Oxley Act, designed
to improve corporate governance and restore investor confidence, drained budget
dollars from information technology (IT). This diversion of funds was most
evident in second-quarter results for software, where short-term spending is
highly discretionary. Semiconductor companies were mired in excess inventory in
the latter half of 2003 and the beginning of 2004, which led to disappointing
results in the third quarter and materially lower earnings guidance for 2005.
With the post-bubble recovery solidly under way, technology companies reexamined
their pertinent markets and potential growth within them--a process that drove
some major decisions and subsequent changes in industry structure. In the
software segment, PeopleSoft finally agreed to be acquired by Oracle in the
largest software merger ever. In late 2004, Symantec and VERITAS Software
announced their agreement to combine two previously unrelated markets, security
and storage software. Within hardware, IBM decided to sell its personal
computing business unit to Lenovo Group, China's largest PC manufacturer.
Although consolidation should improve pricing within technology, it is also a
sign of a maturing industry.
PORTFOLIO REVIEW
We significantly increased our exposure to semiconductors and marginally
increased it to telecom equipment stocks during the past six months. During the
period, we reduced our allocation to software and media. However, since our
analysis indicated a better risk/reward profile for software relative to the
overall technology sector, software was still the largest industry represented
in the portfolio. Our largest purchases were Intel, Red Hat, and Maxim
Integrated Products, while our largest sales included VERITAS Software, Intuit,
and McAfee. (Please refer to our portfolio of investments for a complete listing
of the portfolio's holdings and the amount each represents of the portfolio.)
Among portfolio holdings, Dell, VeriSign, QLogic, and Oracle were the fund's
best contributors over the past six months, while laggards included Cisco
Systems, Red Hat, and Analog Devices. Cisco Systems continued to execute well
throughout 2004 but sales growth appears to be slowing as we enter 2005. Red Hat
failed to meet its growth targets in
its most recent quarters, and investors are worried about the pricing
environment in the LINUX market. After generating growth in excess of 35% in its
July quarter, Analog Devices saw a sudden order slowdown in the following
quarter as customers chose to reduce component inventories. Although the results
for each of these companies were disappointing, we remain confident about their
long-term prospects.
[Graphic Omitted]
INDUSTRY DIVERSIFICATION
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Software 27%
Semiconductors 24%
Hardware 13%
Telecom Equipment 11%
Media 9%
IT Services 8%
Healthcare 3%
Other & Reserves 5%
The fund remains broadly diversified across the principal segments of the
science and technology sector. Stocks of software, semiconductors, hardware, and
telecom equipment companies accounted for 75% of the portfolio, and media, IT
services, and health care constituted an additional 20%.
The fund's 25 largest holdings, which included Microsoft, Cisco Systems, and
Dell, represented 58.8% of net assets. At the end of December, the average
market capitalization for the fund was $17.6 billion, compared with $19.9
billion six months ago.
OUTLOOK
In the near term, we are cautious since the first quarter is often challenging
given seasonal IT spending patterns, with many tech companies experiencing a
sequential sales decline. With the strong returns realized since the low for the
year in August, it may prove difficult for tech stocks to continue their ascent
with little incremental positive information feeding the momentum.
Technology stocks have recovered from their nadir in October 2002, but most of
the rally has occurred without a resurgence in corporate IT spending. Despite
record cash levels and historically high cash flow from operations, companies
have remained cautious about spending on IT. The urgency to stay on the
forefront of technology in the late 1990s has dissipated and is no longer
propelling chief information officers to seek larger budgets. We expect this
environment of steady-but-modest
improvement to persist because of the lower obsolescence risks associated with
retaining older technologies. Over the last 15 years, the number of Internet
users and wireless subscribers has grown to 850 million and 1.5 billion,
respectively, their sheer size making the historic growth rates impossible to
repeat.
Emerging technologies--wireless broadband, Voice over Internet Protocol (VoIP),
digital television, and radio frequency identification (RFID)--are evolutionary
rather than revolutionary. In other words, the next-generation wireless phone
with built-in camera capable of receiving e-mail is simply a replacement for an
older-generation phone rather than an initial adoption. If personal computers
and wireless are more mature markets, where are the opportunities going forward?
First, certain semiconductor companies still offer good long-term growth
potential, but their customers need to reduce inventories before order growth
resumes. Second, worldwide broadband penetration currently stands at less than
15% but is inexorably moving higher. Finally, the looming battle between cable
companies and traditional telephone carriers is likely to lead to incremental
spending on communications equipment.
We are shifting the portfolio from stocks that have already benefited from
general economic improvement and redeploying assets to those less likely to
benefit from an increase in corporate spending. Stock valuations appear
reasonable, and our focus remains on companies with growing market share and
strong management teams that are positioned to benefit from an improving
economic and IT spending environment. Technology is still the principal means of
improving corporate productivity, and we remain upbeat about prospects for this
segment of the equities markets over the long term.
As always, we appreciate your continued support.
Respectfully submitted,
Michael F. Sola
President of the fund and chairman of its Investment Advisory Committee
January 14, 2005
The committee chairman has day-to-day responsibility for managing the portfolio
and works with committee members in developing and executing the fund's
investment program.
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RISKS OF INVESTING IN THE FUND
Funds that invest only in specific industries will experience greater volatility
than funds investing in a broad range of industries. Technology stocks,
historically, have experienced unusually wide price swings, both up and down.
The potential for wide variation in performance reflects the special risks
common to companies in the rapidly changing field of technology. For example,
products or services that at first appear promising may not prove commercially
successful and may become obsolete quickly. Earnings disappointments and intense
competition for market share can result in sharp price declines.
GLOSSARY
Lipper Index: An index of mutual fund performance returns for specified periods
in defined categories as tracked by Lipper Inc.
S&P 500 Stock Index: A market cap-weighted index of 500 widely held stocks often
used as a proxy for the overall stock market. Performance is reported on a
total-return basis.
Price/earnings ratio: Calculated by dividing a stock's market value per share by
the company's earnings per share for the past 12 months or by expected earnings
for the coming year.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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PORTFOLIO HIGHLIGHTS
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/04
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Microsoft 6.2%
Cisco Systems 5.4
Intel 4.0
Dell 3.9
Oracle 2.9
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Mercury Interactive 2.8
SAP 2.6
Analog Devices 2.5
IBM 2.4
Maxim Integrated Products 2.3
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Red Hat 2.1
Yahoo! 1.9
Xilinx 1.8
Corning 1.7
Cadence Design Systems 1.7
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EMC 1.6
Accenture 1.6
QLogic 1.5
Applied Materials 1.5
Novellus Systems 1.5
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Viacom 1.5
Samsung Electronics 1.4
Microchip Technology 1.4
QUALCOMM 1.3
VERITAS Software 1.3
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Total 58.8%
Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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PORTFOLIO HIGHLIGHTS
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MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 12/31/04
Largest Purchases Largest Sales
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Intel Microsoft
Red Hat VERITAS Software
Microsoft Intuit
Maxim Integrated Products McAfee
Corning Fiserv
Analog Devices VeriSign
Mercury Interactive Adobe Systems
VERITAS Software Mercury Interactive
CDW Dell
eBay eBay
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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GROWTH OF $10,000
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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 12/31/04
S&P 500 Stock Index $31,258
Lipper Science & Technology Funds Index $23,079
Science & Technology Fund $18,270
S&P 500 Lipper Science & Science &
Stock Index Technology Funds Index Technology Fund
12/94 $ 10,000 $ 10,000 $ 10,000
12/95 13,758 13,855 15,553
12/96 16,917 16,200 17,766
12/97 22,561 17,469 18,070
12/98 29,008 25,669 25,723
12/99 35,112 54,910 51,701
12/00 31,915 38,287 34,024
12/01 28,122 24,992 20,011
12/02 21,907 14,650 11,890
12/03 28,190 22,167 17,983
12/04 31,258 23,079 18,270
Note: Performance for Advisor Class shares will vary due to the differing fee
structure. See returns table on the next page.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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AVERAGE ANNUAL COMPOUND TOTAL RETURN
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This table shows how the fund and its benchmarks would have performed if their
actual (or cumulative) returns for the periods shown had been earned at a
constant rate.
Since
Inception
Periods Ended 12/31/04 1 Year 5 Years 10 Years 3/31/00
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Science & Technology Fund 1.60% -18.78% 6.21% --
S&P 500 Stock Index 10.88 -2.30 12.07 --
Lipper Science & Technology
Funds Index 4.11 -15.92 8.72 --
Science & Technology Fund--
Advisor Class 1.60 -- -- -21.48%
S&P 500 Stock Index 10.88 -- -- -2.88
Lipper Science & Technology
Funds Index 4.11 -- -- -20.07
Current performance may be higher or lower than the quoted past performance,
which cannot guarantee future results. Share price, principal value, and return
will vary, and you may have a gain or loss when you sell your shares. For the
most recent month-end performance information, please visit our Web site
(troweprice.com) or contact a T. Rowe Price representative at 1-800-225-5132.
Average annual total return figures include changes in principal value,
reinvested dividends, and capital gain distributions. Returns do not reflect
taxes that the shareholder may pay on distributions or the redemption of shares.
When assessing performance, investors should consider both short- and long-term
returns.
T. ROWE PRICE SCIENCE & Technology Fund
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FUND EXPENSE EXAMPLE
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As a mutual fund shareholder, you may incur two types of costs: (1) transaction
costs such as redemption fees or sales loads and (2) ongoing costs, including
management fees, distribution and service (12b-1) fees, and other fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 invested at the beginning of the most recent six-month period and held
for the entire period.
Please note that the fund has two share classes: The original share class
("investor class") charges no distribution and service (12b-1) fee. Advisor
Class shares are offered only through unaffiliated brokers and other financial
intermediaries and charge a 0.25% 12b-1 fee. Each share class is presented
separately in the table.
Actual Expenses
The first line of the following table ("Actual") provides information about
actual account values and expenses based on the fund's actual returns. You may
use the information in this line, together with your account balance, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The information on the second line of the table ("Hypothetical") is based on
hypothetical account values and expenses derived from the fund's actual expense
ratio and an assumed 5% per year rate of return before expenses (not the fund's
actual return). You may compare the ongoing costs of investing in the fund with
other funds by contrasting this 5% hypothetical example and the 5% hypothetical
examples that appear in the shareholder reports of the other funds. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period.
Note: T. Rowe Price charges an annual small-account maintenance fee of $10,
generally for accounts with less than $2,000 ($500 for UGMA/UTMA). The fee is
waived for any investor whose T. Rowe Price mutual fund accounts total $25,000
or more, accounts employing automatic investing, and IRAs and other retirement
plan accounts that utilize a prototype plan sponsored by T. Rowe Price (although
a separate custodial or administrative fee may apply to such accounts). This fee
is not included in the accompanying table. If you are subject to the fee, keep
it in mind when you are estimating the ongoing expenses of investing in the fund
and when comparing the expenses of this fund with other funds.
You should also be aware that the expenses shown in the table highlight only
your ongoing costs and do not reflect any transaction costs, such as redemption
fees or sales loads. Therefore, the second line of the table is useful in
comparing ongoing costs only and will not help you determine the relative total
costs of owning different funds. To the extent a fund charges transaction costs,
however, the total cost of owning that fund is higher.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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FUND EXPENSE EXAMPLE (CONTINUED)
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T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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Beginning Ending Expenses Paid
Account Value Account Value During Period*
7/1/04 12/31/04 7/1/04 to 12/31/04
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Investor Class
Actual $1,000 $1,016.00 $5.02
Hypothetical (assumes 5%
return before expenses) 1,000 1,020.16 5.03
Advisor Class
Actual 1,000 1,015.40 5.17
Hypothetical (assumes 5%
return before expenses) 1,000 1,020.01 5.18
* Expenses are equal to the fund's annualized expense ratio for the six-month
period, multiplied by the average account value over the period, multiplied
by the number of days in the most recent fiscal half year (184) divided by
the days in the year (366) to reflect the half-year period. The annualized
expense ratio of the Investor Class was 0.99%; the Advisor Class was 1.02%.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
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Investor Class
Year
Ended
12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
NET ASSET VALUE
Beginning of period $ 18.80 $ 12.43 $ 20.92 $ 35.57 $ 63.71
Investment activities
Net investment income (loss) (0.03) (0.11) (0.14) (0.18) (0.29)
Net realized and
unrealized gain (loss) 0.33 6.48 (8.35) (14.47) (20.57)
Total from
investment activities 0.30 6.37 (8.49) (14.65) (20.86)
Distributions
Net realized gain -- -- -- -- (7.28)
NET ASSET VALUE
End of period $ 19.10 $ 18.80 $ 12.43 $ 20.92 $ 35.57
------------------------------------------------
Ratios/Supplemental Data
Total return^ 1.60% 51.25% (40.58)% (41.19)% (34.19)%
Ratio of total expenses to
average net assets 1.01% 1.09% 1.11% 1.00% 0.86%
Ratio of net investment
income (loss) to average
net assets (0.15)% (0.73)% (0.87)% (0.73)% (0.55)%
Portfolio turnover rate 54.5% 47.8% 60.8% 143.6% 134.1%
Net assets, end of period
(in millions) $ 3,905 $ 4,380 $ 2,839 $ 5,209 $ 8,892
^ 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.
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
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Advisor Class
Year 3/31/00
Ended Through
12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
NET ASSET VALUE
Beginning of period $ 18.80 $ 12.42 $ 20.90 $ 35.54 $ 71.08
Investment activities
Net investment income (loss) (0.02) (0.13) (0.12) (0.17) (0.13)
Net realized and
unrealized gain (loss) 0.32 6.51 (8.36) (14.47) (28.13)
Total from
investment activities 0.30 6.38 (8.48) (14.64) (28.26)
Distributions
Net realized gain -- -- -- -- (7.28)
NET ASSET VALUE
End of period $ 19.10 $ 18.80 $ 12.42 $ 20.90 $ 35.54
------------------------------------------------
Ratios/Supplemental Data
Total return^ 1.60% 51.37% (40.57)% (41.19)% (41.06)%
Ratio of total expenses to
average net assets 1.03% 1.05% 1.08% 0.99% 1.09%+
Ratio of net investment
income (loss) to average
net assets (0.16)% (0.69)% (0.83)% (0.71)% 0.80%+
Portfolio turnover rate 54.5% 47.8% 60.8% 143.6% 134.1%+
Net assets, end of period
(in thousands) $602,458 $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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December 31, 2004
PORTFOLIO OF INVESTMENTS (1) Shares Value
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(Cost and value in $ 000s)
COMMON STOCKS AND WARRANTS 96.5%
HARDWARE 12.0%
Enterprise Hardware 9.9%
Dell * 4,200,000 176,988
EMC * 5,000,000 74,350
Hewlett-Packard 2,500,000 52,425
Lexmark International * 550,000 46,750
LG Electronics (KRW) * 400,000 24,768
QLogic * 1,900,000 69,787
445,068
Supply Chain & Electronic Manufacturing 2.1%
CDW 750,000 49,763
Flextronics * 3,250,000 44,915
94,678
Total Hardware 539,746
HEALTH CARE 1.5%
Biotechnology 0.8%
Cephalon * 300,000 15,264
MedImmune * 750,000 20,333
35,597
Pharmaceuticals 0.7%
Forest Laboratories * 750,000 33,645
33,645
Total Health Care 69,242
IT SERVICES 8.0%
IT Services 4.1%
Accenture, Class A * 2,750,000 74,250
IBM 1,100,000 108,438
182,688
Processors 3.9%
Certegy 1,000,000 35,530
First Data 1,300,000 55,302
Fiserv * 1,250,000 50,237
Paychex 1,000,000 34,080
175,149
Total IT Services 357,837
MEDIA 8.3%
Cable & Satellites 0.5%
EchoStar Communications, Class A 750,000 24,930
24,930
Gaming 1.1%
International Game Technology 1,400,000 48,132
48,132
Internet 4.1%
eBay * 375,000 43,605
IAC/InterActiveCorp * 2,000,000 55,240
Yahoo! * 2,250,000 84,780
183,625
Media & Entertainment 2.6%
Time Warner * 2,750,000 53,460
Viacom, Class B 1,800,000 65,502
118,962
Total Media 375,649
SEMICONDUCTORS 23.5%
Analog Semiconductors 7.0%
Analog Devices 3,000,000 110,760
Intersil Holding, Class A 2,500,000 41,850
Linear Technology 800,000 31,008
Maxim Integrated Products 2,400,000 101,736
STMicroelectronics ADS 1,500,000 28,980
314,334
Digital Semiconductors 11.9%
Altera * 1,500,000 31,050
Intel 7,750,000 181,273
Marvell Technology Group * 500,000 17,735
Microchip Technology 2,400,000 63,984
Samsung Electronics (KRW) 150,000 65,277
Taiwan Semiconductor Manufacturing,
Warrants, 8/16/05 * 20,000,000 38,938
Texas Instruments 2,300,000 56,626
Xilinx 2,800,000 83,020
537,903
Semiconductor Capital Equipment 4.6%
Applied Materials * 4,000,000 68,400
ASML Holding ADS * 1,000,000 15,910
KLA-Tencor * 1,200,000 55,896
Novellus Systems * 2,400,000 66,936
207,142
Total Semiconductors 1,059,379
SOFTWARE 26.8%
Applications Software 4.8%
Adobe Systems 350,000 21,959
Cognos * 700,000 30,842
Informatica * 2,200,000 17,864
SAP (EUR) 300,000 53,363
SAP ADR 1,400,000 61,894
Siebel Systems * 3,000,000 31,500
217,422
Consumer Software 1.0%
Intuit * 1,000,000 44,010
44,010
Infrastructure Software 12.2%
Citrix Systems * 1,850,000 45,380
Microsoft 10,500,000 280,455
Oracle * 9,500,000 130,340
Red Hat * 7,000,000 93,450
549,625
Systems Software 6.4%
McAfee * 1,000,000 28,930
Mercury Interactive * 2,750,000 125,263
Symantec * 1,250,000 32,200
VeriSign * 1,350,000 45,252
VERITAS Software * 2,000,000 57,100
288,745
Technical Software 2.4%
Cadence Design Systems * 5,500,000 75,955
Synopsys * 1,700,000 33,354
109,309
Total Software 1,209,111
TELECOM EQUIPMENT 11.0%
Wireless Equipment 2.3%
Nokia ADR 3,000,000 47,010
QUALCOMM 1,350,000 57,240
104,250
Wireline Equipment 8.7%
Cisco Systems * 12,500,000 241,250
Corning * 6,500,000 76,505
Juniper Networks * 1,750,000 47,582
Nortel Networks * 8,000,000 27,920
393,257
Total Telecom Equipment 497,507
TELECOM SERVICES 0.9%
Wireless - Domestic 0.8%
Crown Castle International * 750,000 12,480
Nextel Communications, Class A * 750,000 22,500
34,980
Wireline- International 0.1%
Telus (CAD) 162,100 4,880
4,880
Total Telecom Services 39,860
Total Miscellaneous Common Stocks 4.5% (s.) 200,463
Total Common Stocks and Warrants (Cost $4,479,964) 4,348,794
SHORT-TERM INVESTMENTS 3.5%
Money Market Fund 3.5%
T. Rowe Price Government Reserve Investment Fund
1.85% !# 158,401,485 158,401
Total Short-Term Investments (Cost $158,401) 158,401
Total Investments in Securities
100.0% of Net Assets (Cost $4,638,365) $4,507,195
----------
(1) Denominated in U.S. dollars unless otherwise noted
# Seven-day yield
* Non-income producing
(s.) The identity of certain securities has been concealed to protect the fund
while it completes a purchase or selling program for the securities.
! Affiliated company -- See Note 4.
ADR American Depository Receipts
ADS American Depository Shares
CAD Canadian dollar
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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December 31, 2004
STATEMENT OF ASSETS AND LIABILITIES
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(In thousands except shares and per share amounts)
Assets
Investments in securities, at value
Affiliated companies (cost $158,401) $ 158,401
Non-affiliated companies (cost $4,479,964) 4,348,794
Total investments in securities 4,507,195
Other assets 24,296
Total assets 4,531,491
Liabilities
Total liabilities 24,453
NET ASSETS $ 4,507,038
---------------
Net Assets Consist of:
Undistributed net realized gain (loss) $ (5,767,754)
Net unrealized gain (loss) (131,168)
Paid-in-capital applicable to 235,956,869 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 10,405,960
NET ASSETS $ 4,507,038
---------------
NET ASSET VALUE PER SHARE
Investor Class
($3,904,579,661/204,418,182 shares outstanding) $ 19.10
---------------
Advisor Class
($602,458,035/31,538,687 shares outstanding) $ 19.10
---------------
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
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STATEMENT OF OPERATIONS
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($ 000s)
Year
Ended
12/31/04
Investment Income (Loss)
Income
Dividend $ 39,428
Securities lending 87
Total income 39,515
Expenses
Investment management 30,509
Shareholder servicing
Investor Class 12,770
Advisor Class 613
Rule 12b-1 fees -- Advisor Class 1,522
Prospectus and shareholder reports
Investor Class 374
Advisor Class 5
Custody and accounting 288
Legal and audit 150
Registration 66
Directors 14
Miscellaneous 61
Total expenses 46,372
Net investment income (loss) (6,857)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 500,381
Foreign currency transactions (218)
Net realized gain (loss) 500,163
Change in net unrealized gain (loss)
Securities (448,543)
Other assets and liabilities
denominated in foreign currencies 2
Change in net unrealized gain (loss) (448,541)
Net realized and unrealized gain (loss) 51,622
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 44,765
---------------
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
Year
Ended
12/31/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (6,857) $ (29,507)
Net realized gain (loss) 500,163 (42,740)
Change in net unrealized gain (loss) (448,541) 1,760,368
Increase (decrease) in net assets
from operations 44,765 1,688,121
Capital share transactions *
Shares sold
Investor Class 581,659 1,012,841
Advisor Class 34,672 146,751
Shares redeemed
Investor Class (1,094,377) (952,995)
Advisor Class (95,664) (44,822)
Increase (decrease) in net assets from
capital share transactions (573,710) 161,775
Net Assets
Increase (decrease) during period (528,945) 1,849,896
Beginning of period 5,035,983 3,186,087
End of period $ 4,507,038 $ 5,035,983
------------ ------------
(Including undistributed net investment income
of $0 at 12/31/04 and $0 at 12/31/03)
*Share information
Shares sold
Investor Class 31,904 66,882
Advisor Class 1,912 9,847
Shares redeemed
Investor Class (60,494) (62,360)
Advisor Class (5,270) (2,862)
Increase (decrease) in shares outstanding (31,948) 11,507
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
December 31, 2004
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Science & 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: the Science & Technology Fund
original share class, referred to in this report as the Investor Class, offered
since September 30, 1987, and Science & Technology Fund--Advisor Class (Advisor
Class), offered since March 31, 2000. Advisor Class shares are sold only through
unaffiliated brokers and other unaffiliated financial intermediaries that are
compensated by the class for distribution, shareholder servicing, and/or certain
administrative services under a Board-approved Rule 12b-1 plan. Each class has
exclusive voting rights on matters related solely to that class, separate voting
rights on matters that relate to both classes, and, in all other respects, the
same rights and obligations as the other class.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Equity securities listed or regularly traded
on a securities exchange or in the over-the-counter market are valued at the
last quoted sale price or, for certain markets, the official closing price at
the time the valuations are made, except for OTC Bulletin Board securities,
which are valued at the mean of the latest bid and asked prices. A security that
is listed or traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market for such security. Listed
securities not traded on a particular day are valued at the mean of the latest
bid and asked prices for domestic securities and the last quoted sale price for
international securities.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation.
Other investments, including restricted securities, and those for which the
above valuation procedures are inappropriate or are deemed not to reflect fair
value are stated at fair value as determined in good faith by the T. Rowe Price
Valuation Committee, established by the fund's Board of Directors.
Most foreign markets close before the close of trading on the NYSE. If the fund
determines that developments between the close of a foreign market and the close
of the NYSE will, in its judgment, materially affect the value of some or all of
its portfolio securities, which in turn will affect the fund's share price, the
fund will adjust the previous closing prices to reflect the fair value of the
securities as of the close of the NYSE, as determined in good faith by the T.
Rowe Price Valuation Committee, established by the fund's Board of Directors. A
fund may also fair value securities in other situations, such as when a
particular foreign market is closed but the fund is open. In deciding whether to
make fair value adjustments, the fund reviews a variety of factors, including
developments in foreign markets, the performance of U.S. securities markets, and
the performance of instruments trading in U. S. markets that represent foreign
securities and baskets of foreign securities. The fund uses outside pricing
services to provide it with closing market prices and information used for
adjusting those prices. The fund cannot predict how often it will use closing
prices and how often it will adjust those prices. As a means of evaluating its
fair value process, the fund routinely compares closing market prices, the next
day's opening prices in the same markets, and adjusted prices.
Currency Translation
Assets, including investments, and liabilities denominated in foreign currencies
are translated into U.S. dollar values each day at the prevailing exchange rate,
using the mean of the bid and asked prices of such currencies against U.S.
dollars as quoted by a major bank. Purchases and sales of securities, income,
and expenses are translated into U.S. dollars at the prevailing exchange rate on
the date of the transaction. The effect of changes in foreign currency exchange
rates on realized and unrealized security gains and losses is reflected as a
component of security gains and losses.
Class Accounting
The Advisor Class pays distribution, shareholder servicing, and/or certain
administrative expenses in the form of Rule 12b-1 fees, in an amount not
exceeding 0.25% of the class's average daily net assets. Shareholder servicing,
prospectus, and shareholder report expenses incurred by each class are charged
directly to the class to which they relate. Expenses common to both classes,
investment income, and realized and unrealized gains and losses are allocated to
the classes based upon the relative daily net assets of each class.
Rebates and Credits
Subject to best execution, the fund may direct certain security trades to
brokers who have agreed to rebate a portion of the related brokerage
commission to the fund in cash. Commission rebates are included in realized gain
on securities in the accompanying financial statements and totaled $407,000 for
the year ended December 31, 2004. Additionally, the fund earns credits on
temporarily uninvested cash balances at the custodian that reduce the fund's
custody charges. Custody expense in the accompanying financial statements is
presented before reduction for credits.
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 by each class on an
annual basis. Capital gain distributions, if any, are declared and paid by the
fund, typically on an annual basis. During the year ended December 31, 2004, the
fund received a one-time special dividend on a security held in its portfolio
(Microsoft Corp.). The dividend, which totaled $24,948,000, represents 63% of
dividend income reflected in the accompanying financial statements and is not
expected to recur.
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.
Restricted Securities
The fund may invest in securities that are subject to legal or contractual
restrictions on resale. Although certain of these securities may be readily
sold, for example, under Rule 144A, others may be illiquid, and their
sale may involve substantial delays and additional costs, and prompt sale at an
acceptable price may be difficult.
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, 2004, there were no securities on loan.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $2,468,792,000 and $3,134,246,000, respectively, for the year ended
December 31, 2004.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its taxable income
and gains. Federal income tax regulations differ from generally accepted
accounting principles; therefore, distributions determined in accordance with
tax regulations may differ 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, 2004. At December 31,
2004, the tax-basis components of net assets were as follows:
- --------------------------------------------------------------------------------
Unrealized appreciation $ 404,941,000
Unrealized depreciation (536,277,000)
Net unrealized appreciation (depreciation) (131,336,000)
Capital loss carryforwards (5,767,586,000)
Paid-in capital 10,405,960,000
Net assets $ 4,507,038,000
------------------
The fund intends to retain realized gains to the extent of available capital
loss carryforwards for federal income tax purposes. During the year ended
December 31, 2004, the fund utilized $500,381,000 of capital loss carryforwards.
As of December 31, 2004, the fund had $3,733,946 of capital loss carryforwards
that expire in 2009, $1,904,219,000 that expire in 2010, and $129,421,000 that
expire in 2011.
For the year ended December 31, 2004, 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 $ 6,857,000
Undistributed net realized gain 62,000
Paid-in capital (6,919,000)
At December 31, 2004, the cost of investments for federal income tax purposes
was $4,638,533,000.
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,
2004, the effective annual group fee rate was 0.31%, and investment management
fee payable totaled $2,547,000.
The Advisor Class is also subject to a contractual expense limitation through
April 30, 2006. During the limitation period, the manager is required to waive
its management fee and reimburse the class for any expenses, excluding interest,
taxes, brokerage commissions, and extraordinary expenses, that would otherwise
cause the class's ratio of total expenses to average net assets (expense ratio)
to exceed its expense limitation of 1.15%. Through April 30, 2008, the class is
required to repay the manager for expenses previously reimbursed and management
fees waived to the extent its net assets have grown or expenses have declined
sufficiently to allow repayment without causing the class's expense ratio to
exceed its expense limitation. Pursuant to this agreement, at December 31, 2004,
there were no amounts subject to repayment. For the year ended December 31,
2004, the Advisor Class operated below its expense limitation.
In addition, the fund has entered into service agreements with Price Associates
and two wholly owned subsidiaries of Price Associates (collectively, Price).
Price Associates computes the daily share prices and maintains the financial
records of the fund. T. Rowe Price Services, Inc., provides shareholder and
administrative services in its capacity as the fund's transfer and dividend
disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides
subaccounting and recordkeeping services for certain retirement accounts
invested in the Investor Class. For the year ended December 31, 2004, expenses
incurred pursuant to these service agreements were $93,000 for Price Associates,
$5,753,000 for T. Rowe Price Services, Inc., and $3,657,000 for T. Rowe Price
Retirement Plan Services, Inc. At period-end, a total of $1,075,000 of these
expenses was payable.
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,
2004,
the fund was charged $31,000 for shareholder servicing costs related to
the college savings plans, of which $23,000 was for services provided by Price.
At December 31, 2004, approximately 0.3% of the outstanding Investor 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 and
affiliates of the fund. The Reserve Funds are offered as cash management options
to mutual funds, trusts, and other accounts managed by Price Associates and/or
its affiliates, and are not available for direct purchase by members of the
public. The Reserve Funds pay no investment management fees. During the year
ended December 31, 2004, dividend income from the Reserve Funds totaled
$891,000, and the value of shares of the Reserve Funds held at December 31, 2004
and December 31, 2003 was $158,401,000 and $68,824,000, respectively.
As of December 31, 2004, T. Rowe Price Group, Inc. and/or its wholly owned
subsidiaries owned 61,856 shares of the Investor Class, representing less than
1% of the fund's net assets.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
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, 2004, 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 the auditing standards
of the Public Company Accounting Oversight Board (United States). Those
standards 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, 2004 by
correspondence with the custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 11, 2005
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS
- --------------------------------------------------------------------------------
A description of the policies and procedures used by T. Rowe Price funds and
portfolios to determine how to vote proxies relating to portfolio securities is
available in each fund's Statement of Additional Information, which you may
request by calling 1-800-225-5132 or by accessing the SEC's Web site,
www.sec.gov. The description of our proxy voting policies and procedures is also
available on our Web site, www.troweprice.com. To access it, click on the words
"Company Info" at the top of our homepage for individual investors. Then, in the
window that appears, click on the "Proxy Voting Policy" navigation button in the
top left corner.
Each fund's most recent annual proxy voting record is available on our Web site
and through the SEC's Web site. To access it through our Web site, follow the
directions above, then click on the words "Proxy Voting Record" at the bottom of
the Proxy Voting Policy page.
HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------------
The fund files a complete schedule of portfolio holdings with the Securities and
Exchange Commission for the first and third quarters of each fiscal year on Form
N-Q. The fund's Form N-Q is available electronically on the SEC's Web site
(www.sec.gov); hard copies may be reviewed and copied at the SEC's Public
Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information
on the Public Reference Room, call 1-800-SEC-0330.
T. ROWE PRICE SCIENCE & TECHNOLOGY FUND
- --------------------------------------------------------------------------------
ABOUT THE FUND'S DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Directors that meets regularly to review
investments, performance, compliance matters, advisory fees, expenses, and other
business affairs, 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
(Year 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
(1945) 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
(1943) acquisition and management advisory firm
1994
David K. Fagin Director, Golden Star Resources Ltd., Canyon
(1938) 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
(1943) Client Services, Marsh Inc. (1999-2003); Managing
2003 Director and Head of International Private
Banking, Bankers Trust (1996-1999); Director, Eli
Lilly and Company and Georgia Pacific
(5/04 to present)
F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates,
(1934) Inc., consulting environmental and civil engineers
2001
John G. Schreiber Owner/President, Centaur Capital Partners, Inc.,
(1946) a real estate investment company; Partner,
2001 Blackstone Real Estate Advisors, L.P.; Director,
AMLI Residential Properties Trust and The Rouse
Company, real estate developers
* Each independent director oversees 112 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
Inside Directors
Name
(Year 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 Vice President, T. Rowe Price and T. Rowe
(1945) Price Group, Inc.
1988
[15]
James S. Riepe Director and Vice President, T. Rowe Price;
(1943) Vice Chairman of the Board, Director, and
1987 Vice President, T. Rowe Price Group, Inc.;
[112] Chairman 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
* Each inside director serves until retirement, resignation, or election of a
successor.
Officers
Name (Year of Birth)
Title and Fund(s) Served Principal Occupation(s)
Kennard W. Allen (1977) Vice President, T. Rowe Price;
Vice President, Science & Technology Fund formerly Equity Research Intern,
Tonge Investment Advisors (2000);
student, Colby College (to 2000)
Stephen V. Booth, CPA (1961) Vice President, T. Rowe Price,
Vice President, Science & Technology Fund T. Rowe Price Group, Inc., and
T. Rowe Price Trust Company
Joseph A. Carrier (1960) Vice President, T. Rowe Price,
Treasurer, Science & Technology Fund T. Rowe Price Group, Inc., T. Rowe
Price Investment Services, Inc.,
and T. Rowe Price Trust Company
Donald J. Easley, CFA (1971) Vice President, T. Rowe Price and
Vice President, Science & Technology 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.
David J. Eiswert, CFA (1972) Employee, T. Rowe Price; formerly
Vice President, Science & Technology Fund Analyst, Mellon Growth Advisors and
Fidelity Management and Research
(to 2003)
Roger L. Fiery III, CPA (1959) Vice President, T. Rowe Price,
Vice President, Science & Technology Fund T. Rowe Price Group, Inc., T. Rowe
Price International, Inc., and
T. Rowe Price Trust Company
Robert N. Gensler (1957) Vice President, T. Rowe Price and
Vice President, Science & Technology Fund T. Rowe Price Group, Inc.
John R. Gilner (1961) Chief Compliance Officer and Vice
Chief Compliance Officer, President, T. Rowe Price; Vice
Science & Technology Fund President, T. Rowe Price Investment
Services, Inc., and T. Rowe Price
Group, Inc.
Gregory S. Golczewski (1966) Vice President, T. Rowe Price and
Vice President, Science & Technology Fund T. Rowe Price Trust Company
Jill L. Hauser (1958) Vice President, T. Rowe Price and
Vice President, Science & Technology Fund T. Rowe Price Group, Inc.
Henry H. Hopkins (1942) Director and Vice President,
Vice President, Science & Technology Fund 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 Group, Inc., T. Rowe
Price International, Inc., and
T. Rowe Price Retirement Plan
Services, Inc.
Patricia B. Lippert (1953) Assistant Vice President, T. Rowe
Secretary, Science & Technology Fund Price and T. Rowe Price Investment
Services, Inc.
Anh Lu (1968) Vice President, T. Rowe Price
Vice President, Science & Technology Fund Group, Inc., and T. Rowe Price
International, Inc.; formerly
Business Development Manager,
Microsoft (to 2000);Vice President,
Salomon Smith Barney Hong Kong
(to 2001)
D. James Prey III (1959) Vice President, T. Rowe Price and
Vice President, Science & Technology 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.
Jeffrey Rottinghaus, CPA (1970) Vice President, T. Rowe Price and
Vice President, Science & Technology Fund T. Rowe Price Group, Inc.; formerly
student, the Wharton School,
University of Pennsylvania
(to 2001)
Michael F. Sola, CFA (1969) Vice President, T. Rowe Price and
President, Science & Technology Fund T. Rowe Price Group, Inc.
Julie L. Waples (1970) 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.
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:
2004 2003
Audit Fees $15,929 $18,187
Audit-Related Fees 2,190 1,084
Tax Fees 6,440 4,723
All Other Fees - 124
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) Less than 50 percent of the hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees.
(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 $903,000 and $821,000, 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. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. 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 change in the registrant's internal control over financial
reporting that occurred during the registrant's second fiscal quarter covered by
this report that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end
companies: not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Science & Technology Fund, Inc.
By /s/ James S. Riepe
-----------------------------------
James S. Riepe
Principal Executive Officer
Date February 18, 2005
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 18, 2005
By /s/ Joseph A. Carrier
-----------------------------------
Joseph A. Carrier
Principal Financial Officer
Date February 18, 2005