1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended: DECEMBER 31, 1998.
Commission file number: 000-14282.
Exact name of registrant as specified in its charter:
T. ROWE PRICE ASSOCIATES, INC.
State of incorporation: MARYLAND.
I.R.S. Employer Identification No.: 52-0556948.
Address and Zip Code of principal executive offices: 100 EAST PRATT STREET,
BALTIMORE, MARYLAND 21202.
Registrant's telephone number, including area code: (410) 345-2000.
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.20 PAR VALUE.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the common stock (based on last reported
NNM price) held by non-affiliates of the registrant (excludes executive
officers and directors). $3,315,800,000 AT FEBRUARY 16, 1999.
Indicate the number of shares outstanding of the registrant's common stock,
as of the latest practicable date. 120,630,067 SHARES AT MARCH 5, 1999.
Documents incorporated by reference: IN PART III OF THIS FORM 10-K, THE
DEFINITIVE PROXY STATEMENT FOR THE 1999 ANNUAL MEETING OF STOCKHOLDERS (FORM
DEF 14A; ACCESSION NO. 0000080255-99-000454).
Exhibit index is at Item 14(a)3 on pages 37 - 39.
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PART I.
ITEM 1. BUSINESS.
T. Rowe Price Associates, Inc. (Price Associates) and its consolidated
subsidiaries (collectively, the Company) serve as investment adviser to
individual and institutional investors in the sponsored T. Rowe Price Mutual
Funds (the Price Funds) and private account investment portfolios, including
those of defined benefit and defined contribution retirement plans,
endowments, foundations, trusts, and other mutual funds, including those that
hold the assets of variable annuity insurance contracts. Total assets under
management increased $23.5 billion during 1998 to $147.8 billion at year-end,
including $86.2 billion of retirement assets and $107.9 billion of equity
investments. The Company also provides investment advisory clients with
related administrative services, including mutual fund transfer agent,
accounting and shareholder services; participant recordkeeping and transfer
agent services for defined contribution retirement plans; discount brokerage;
and trust services. The Company's clients are primarily domiciled in the
United States of America. The Company was incorporated in Maryland in 1947
as successor to the investment counseling business formed by the late Mr. T.
Rowe Price in 1937.
The Company offers the Price Funds' shareholders and private account advisory
clients a broad range of investment portfolios designed to attract and retain
investors with varying investment objectives. Shareholders are allowed to
exchange balances among mutual funds as economic and market conditions and
investor needs change. The Company frequently introduces new mutual funds
and investment portfolios designed to complement and expand its investment
offerings, respond to competitive developments in the financial marketplace,
and meet the changing needs of its investment advisory clients. New mutual
funds and other investment portfolios are introduced when the Company
believes that it has personnel with sufficient investment expertise to manage
the portfolio successfully for a substantial group of investors over a long
period of time. The Company's base of assets under management consists of a
broad range of domestic and international stock, bond and money market mutual
funds and other investment portfolios which meet the varied needs and
objectives of its individual and institutional investment advisory clients.
Investment advisory revenues are largely dependent on the total value and
composition of assets under management; accordingly, fluctuations in
financial markets and in the composition of assets under management impact
revenues and results of operations. Administrative services are provided as
an ancillary service to investment advisory clients; the majority of
administrative revenues results from services rendered under annual contracts
to the Price Funds. These administrative services do not significantly
impact the Company's net income.
In the performance of its investment advisory function, the Company uses
fundamental, technical and cyclical security analyses. The Company maintains
a substantial internal equity and fixed income investment research effort,
which includes original industry and company research using such sources as
inspection of corporate activities, management interviews, financial and
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other information published by companies including that filed with the U.S.
Securities and Exchange Commission (SEC), financial newspapers and magazines,
corporate rating services, and field checks with participants such as
suppliers or competitors in the industry or business sector. In addition,
the Company utilizes research provided by brokerage firms in a supportive
capacity; information is received from private economists, political
observers, foreign commentators, government experts, and market and security
analysts. In certain instances, computerized data analyses are the bases of
the stock selection process.
Investment objectives for the managed investment portfolios, including the
Price Funds, accommodate a variety of strategies. Investors in the Price
Funds select funds for investment based on the unique approaches that are
detailed in each fund's prospectus. Investment management of private account
stock portfolios include active approaches similar to those employed in
several of the Price Funds, including ones emphasizing large-cap blue chip
growth, large-cap value, mid-cap growth, mid-cap value, small-cap, small-cap
growth, small-cap value, international, and natural resources as well as
systematic and balanced portfolio strategies. Approaches for private account
investing in fixed income securities include active and systematic management
strategies. The Company has also developed several specialized investment
advisory services including investing in private companies with prospects of
becoming public companies, investing in securities and creditor claims of
financially-troubled companies, the efficient disposition of equity
distributions from venture capital investments, and stable value investment
contract management.
Information concerning revenues, results of operations and assets under
management during the past three years is contained in the consolidated
statements of income and in note 5 to the consolidated financial statements
included in Item 8 of this Form 10-K.
PRICE FUNDS. The Company provides investment advisory, distribution and
other administrative services to the Price Funds under investment management,
underwriting, transfer agency and service agreements. Pursuant to investment
management agreements with each of the Price Funds, the Company provides
investment advisory services to each fund, subject to the authority of each
fund's board and to each fund's fundamental investment objective. The
investment management agreements with the Price Funds are approved annually
by the boards of the respective funds, including a majority who are not
"interested persons" of the funds or the Company as defined under the
Investment Company Act of 1940, as amended (the Investment Company Act).
Amendments to such agreements must be approved by the Price Funds'
shareholders. Each agreement automatically terminates in the event of its
assignment (as defined in the Investment Company Act) and either party may
terminate the agreement without penalty after notice (generally 60 days).
Each fund has the right to use the "T. Rowe Price" name for so long as its
investment management agreement with the Company remains in effect.
The Company is paid an investment advisory fee based upon the average daily
net assets of each fund. Additionally, distinct fees are earned for other
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investment-advisory related administrative services. Management of the
Company and the independent directors and trustees of the Price Funds
regularly review the fund fee structures. The advisory fee paid by each of
the Price Funds (excluding the Spectrum and Summit Funds, the Equity Market
Index Funds, and the Foreign Equity and Mid-Cap Equity Growth Funds) is
computed by multiplying the individual fund's average daily net assets by a
fee rate equal to the sum of a group charge based on the combined net assets
of the Price Funds and the applicable individual fund charge. As the
combined net assets of the Price Funds increase, the group charge component
of fee rates decreases. Details of fund fee arrangements are available to
all fund investors in the offering prospectus for each of the Price Funds.
Except as noted in the following paragraph, each fund (excluding the Price
Spectrum and Summit Funds) bears all expenses associated with the operation
of the fund and the issuance and redemption of its securities. In
particular, each fund pays investment advisory fees; shareholder servicing
fees and expenses; fund accounting fees and expenses; transfer agent fees;
custodian fees and expenses; legal and auditing fees; expenses of preparing,
printing and mailing prospectuses and shareholder reports to existing
shareholders; registration fees and expenses; proxy and annual meeting
expenses; and independent trustees' or directors' fees and expenses. All
advertising, promotion and selling expenses are borne by the Company.
The Company generally guarantees that a newly-organized fund's expenses will
not exceed a specified percentage of the fund's net assets during its initial
operations. Advisory fees and other mutual fund expenses in excess of these
self-imposed limits are absorbed by the Company and have not been material to
the Company's revenues and results of operations.
Pursuant to underwriting agreements with each fund, T. Rowe Price Investment
Services, Inc. (TRP Investment Services) is the exclusive distributor of the
Price Funds. TRP Investment Services does not receive a separate fee for its
services to the Price Funds.
The Company expends substantial resources in advertising and direct mail
communications to existing and potential Price Funds' shareholders and in
providing the staff and communications capabilities to respond to inquiries.
The Company's marketing effort has traditionally been focused in the print
media, but in recent years, the Company has expanded its promotional
activities to the television market including cable channels. Advertising
and promotion expenditures will vary over time as market conditions and cash
flows to the Price Funds warrant. In addition, considerable marketing
efforts are targeted at participant-directed defined contribution plans that
invest, in whole or in part, in mutual funds.
Pursuant to agreements with the Price Funds, T. Rowe Price Services, Inc.
(TRP Services) provides mutual fund transfer agency and shareholder services,
including maintenance of staff and technology and other equipment to respond
to all inquiries from shareholders. In addition, Price Associates provides
mutual fund accounting services including maintenance of financial records,
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preparation of financial statements and reports, daily valuation of portfolio
securities and computation of daily net asset values per share.
T. Rowe Price Retirement Plan Services, Inc. (TRP Retirement Plan Services)
provides participant accounting, plan administration and transfer agent
services for defined contribution retirement plans that invest in the Price
Funds. Plan sponsors compensate TRP Retirement Plan Services for certain
services while the Price Funds compensate it for maintaining and
administering the individual participant accounts for those plans that invest
in the Price Funds.
The Company provides certain trust services through its Maryland-chartered
limited-service trust company, T. Rowe Price Trust Company, Inc. (TRP Trust
Company). TRP Trust Company serves as custodian or trustee for the Price
Funds' prototype retirement plans, IRAs, and certain other retirement plans.
TRP Trust Company also sponsors common trust funds principally for investment
by qualified retirement plans. Under its charter, TRP Trust Company may not
be in the business of accepting deposits and cannot make personal or
commercial loans.
Each of the Price Funds has a distinct investment objective that has been
developed as part of the Company's strategy to provide a broad and balanced
selection of investment portfolios. All Funds are sold exclusively by the
Company on a no-load basis (without a sales commission). No-load mutual
funds offer investors a low-cost and relatively easy method of investing in a
variety of stock and bond portfolios. The Company believes that its
distribution methods and fund shareholder and administrative services promote
stability of assets in the Price Funds through market cycles in addition to
reducing costs to fund shareholders.
At December 31, 1998, assets under management in the Price Funds aggregated
$94.4 billion, an increase of $13.3 billion during 1998. Price Associates is
the investment adviser to the domestic funds. Advisory services to
international funds, which had total assets under management of $17.5 billion
at December 31, 1998, are provided by Rowe Price-Fleming International, Inc.
(RPFI). The following information sets forth the net assets (in millions) at
December 31, 1998 of each fund available to the investing public and includes
the year the fund was added to the Price family of funds.
STOCK AND BALANCED FUNDS:
DOMESTIC:
Growth Stock (1950) $ 5,041
New Horizons (1960) 5,229
New Era (1969) 999
Growth & Income (1982) 3,563
Equity Income (1985) 13,494
New America Growth (1985) 2,064
Capital Appreciation (1986) 1,004
Science & Technology (1987) 4,696
Small-Cap Value (1988) 1,632
Equity Index 500 (1990) 3,348
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Balanced (1991) $ 1,650
Dividend Growth (1992) 1,338
Mid-Cap Growth (1992) 3,310
Small-Cap Stock (1992) 1,153
Blue Chip Growth (1993) 4,330
Media & Telecommunications (1993) 246
Capital Opportunity (1994) 125
Personal Strategy - Balanced (1994) 421
Personal Strategy - Growth (1994) 194
Personal Strategy - Income (1994) 213
Value (1994) 775
Health Sciences (1995) 317
Financial Services (1996) 224
Mid-Cap Value (1996) 221
Diversified Small-Cap Growth (1997) 70
Real Estate (1997) 28
Tax-Efficient Balanced (1997) 32
Extended Equity Market Index (1998) 21
Total Equity Market Index (1998) 61
INTERNATIONAL:
International Stock (1980) 10,142
International Discovery (1988) 193
European Stock (1990) 1,549
New Asia (1990) 622
Japan (1991) 181
Latin America (1993) 182
Emerging Markets Stock (1995) 72
Global Stock (1995) 49
International Growth & Income (1998) 2
BOND AND MONEY MARKET FUNDS:
New Income (1973) 2,103
Prime Reserve (1976) 5,100
Tax-Free Income (1976) 1,481
Tax-Exempt Money (1981) 764
U.S. Treasury Money (1982) 927
Tax-Free Short-Intermediate (1983) 458
High Yield (1984) 1,704
Short-Term Bond (1984) 347
GNMA (1985) 1,146
Tax-Free High Yield (1985) 1,344
California Tax-Free Bond (1986) 220
California Tax-Free Money (1986) 102
International Bond (1986) 926
New York Tax-Free Bond (1986) 210
New York Tax-Free Money (1986) 104
Maryland Tax-Free Bond (1987) 1,039
U.S. Treasury Intermediate (1989) 263
U.S. Treasury Long-Term (1989) 310
Global Government Bond (1990) 42
New Jersey Tax-Free Bond (1991) 118
Short-Term U.S. Government (1991) 136
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Virginia Tax-Free Bond (1991) $ 270
Tax-Free Intermediate Bond (1992) 119
Florida Intermediate Tax-Free Bond (1993) 116
Georgia Tax-Free Bond (1993) 59
Maryland Short-Term Tax-Free Bond (1993) 119
Summit Cash Reserves (1993) 1,867
Summit GNMA (1993) 50
Summit Limited-Term Bond (1993) 50
Summit Municipal Income (1993) 72
Summit Municipal Intermediate (1993) 81
Summit Municipal Money Market (1993) 173
Emerging Markets Bond (1994) 148
Virginia Short-Term Tax-Free Bond (1994) 27
Corporate Income (1995) 55
The Company also sponsors two other stock funds for institutional investors:
the Mid-Cap Equity Growth Fund, a domestic fund begun in 1996, and the
Foreign Equity Fund, an international fund begun in 1989. Assets under
management in these two funds were $132 million and $3.415 billion,
respectively, at December 31, 1998. In addition, the Company also sponsors
the Spectrum series of funds (Growth, Income and International), three mutual
funds that invest in a broadly diversified portfolio of other T. Rowe Price
funds. Assets under management in these funds, which aggregated $5.397
billion at December 31, 1998, are included in the amounts presented above for
each underlying fund.
OTHER INVESTMENT PORTFOLIOS. The Company serves as investment adviser to
other private account investors. Total assets in these portfolios aggregate
$53.4 billion at December 31, 1998. No private account client accounted for
more than 1.5% of the Company's 1998 investment advisory revenues.
Investment management services are provided to client accounts on an
individual, separately-managed basis and through sponsored investment
portfolios organized generally as partnerships and common trust funds.
Sponsored investment portfolios have generally been issued through private
placements. Various special-purpose subsidiaries generally serve as the
general partner of the sponsored investment partnerships.
Fees for separately managed private account clients are generally computed
based on the value of assets under management. The standard form of
investment advisory agreement with private account clients provides that the
agreement may be terminated at any time and that any unearned fees paid in
advance will be refunded. Fees for sponsored portfolio management are based
on individual advisory agreements that consider, among other things, the
unique investment management services to be provided.
Many specialized investment advisory services are provided to private
accounts by Price Associates and its investment adviser subsidiaries.
International equity and fixed income securities management, which totalled
$15.4 billion at December 31, 1998, is provided by RPFI. Management of
stable value investment contracts, totalling $7.7 billion at December 31,
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1998, is provided by T. Rowe Price Stable Asset Management, Inc. (TRP Stable
Asset Management).
RPFI. The Company's investment holding company subsidiary, TRP Finance,
Inc., owns 50% of the common stock of RPFI which, by virtue of the Company's
controlling interest,is consolidated into the Company's financial statements.
The balance of the common stock of RPFI is owned equally by a United Kingdom
subsidiary of the London-based merchant banking group Robert Fleming Holdings
Limited and by a Cayman Islands subsidiary of the Jardine Fleming Group
Limited, an investment bank in the Asia-Pacific Region. (Robert Fleming
Holdings Limited has entered into an agreement to acquire the 50% interest in
the Jardine Fleming Group which it does not presently hold. Closing is
anticipated late in the first quarter of 1999.) During 1998, international
assets under management by RPFI increased $2.9 billion to $32.9 billion.
RPFI's financial information and assets under management are included in the
Company's consolidated financial data and statistical information presented
elsewhere in this Form 10-K.
International investment research is provided to RPFI by affiliates of its
minority stockholders. Fees paid for these services are based on RPFI's
assets under management.
REGULATION. Price Associates, RPFI, TRP Stable Asset Management, and T. Rowe
Price (Canada), Inc. (TRP Canada) are registered with the SEC under the
Investment Advisers Act of 1940 and all applicable state securities agencies.
TRP Services is registered under the Securities Exchange Act of 1934
(Exchange Act) as a transfer agent, and TRP Trust Company is regulated by the
State of Maryland Commissioner of Financial Regulation. TRP Canada is also
registered as an investment adviser with the Ontario Securities Commission,
though it has not conducted operations since mid-1996.
TRP Investment Services is registered as a broker-dealer under the Exchange
Act and all applicable state securities laws and is a member of the National
Association of Securities Dealers and the Securities Investor Protection
Corporation. TRP Investment Services provides discount brokerage services
primarily to complement the other investment services offered to shareholders
of the Price Funds. All discount brokerage transactions are cleared through
and accounts maintained by BHC Securities, Inc., an independent clearing
broker.
All aspects of the Company's business are subject to extensive federal and
state laws and regulations. These laws and regulations are primarily
intended to benefit or protect the Company's clients and the Price Funds'
shareholders and generally grant supervisory agencies and bodies broad
administrative powers, including the power to limit or restrict the Company
from carrying on its business in the event that it fails to comply with such
laws and regulations. In such event, the possible sanctions that may be
imposed include the suspension of individual employees, limitations on
engaging in certain lines of business for specified periods of time,
revocation of investment adviser and other registrations, censures and fines.
9
The Company and certain of its subsidiaries are subject to net capital
requirements including those of various federal and state regulatory
agencies. The Company's net capital, as defined, has consistently met or
exceeded all minimum requirements.
COMPETITION. As a member of the financial services industry, the Company is
subject to substantial competition in all aspects of its business. A
significant number of mutual funds are sold to the public by investment
management firms, broker-dealers, banks and insurance companies and, in
recent years, brokerage and other mutual fund companies have extended their
offerings to include other sponsors' mutual funds. The Company competes with
brokerage and investment banking firms, insurance companies, banks, and other
financial institutions in all aspects of its business. Many of these
financial institutions have substantially greater resources than the Company.
The Company competes with other providers of investment management services
primarily on the basis of the availability and objectives of investment
portfolios offered, investment performance, and the scope and quality of the
services provided.
The Company believes that competition within the investment management
industry will increase as a result of consolidation and acquisition activity.
In order to maintain and enhance its competitive position as an independent,
no-load, direct marketer of mutual funds, the Company may review acquisition
prospects and, if appropriate opportunities arise, engage in discussions or
negotiations that could lead to acquisitions by the Company. The Company is
not currently party to any agreements or understandings regarding any
acquisitions or ventures, except as set forth in the capital resources and
liquidity discussion in Item 7 of this Form 10-K.
EMPLOYEES. At December 31, 1998, the Company and its subsidiaries had almost
3,500 active, full-time employees. The Company also employs additional
temporary and part-time personnel to meet periodic or special project demands
of its technology-based support functions and for its mutual fund
administrative services.
ITEM 2. PROPERTIES.
The Company's primary corporate offices consist of approximately 270,000
square feet of leased space located at 100 East Pratt Street in Baltimore,
Maryland.
The Company owns an operations center in Owings Mills, Maryland consisting of
approximately 110,000 square feet. The facility houses a portion of the
Company's administrative services operations. The underlying land has been
leased until 2089.
TRP Suburban Second, Inc. owns 70 acres of land in Owings Mills, Maryland on
which the Company constructed two buildings totalling 207,000 square feet of
space for operating facilities. Construction of two additional buildings
totalling approximately 360,000 square feet is expected to be completed late
in 1999. The acreage will also accommodate additional development. TRP
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Suburban Second also owns a 46,000 square foot technology center on a
separate parcel of land in Owings Mills, Maryland.
Information concerning anticipated 1999 capital expenditures is set forth in
the capital resources and liquidity discussion in Item 7 of this Form 10-K.
The Company also leases other operating facilities in Baltimore and Owings
Mills, Maryland; Colorado Springs, Colorado; Tampa, Florida; Glen Allen,
Virginia; Washington, D.C.; and San Francisco, California. Future minimum
rental payments under noncancelable operating leases at December 31, 1998 are
set forth in note 7 to the consolidated financial statements included in Item
8 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS.
On July 6, 1998, RPFI, the T. Rowe Price International Stock Fund (the
International Stock Fund) and its five directors were named as defendants in
an action, Migdal v. Rowe Price-Fleming International, Inc., et al., filed in
the United States District Court for the District of Maryland. The Complaint
sought to invalidate the advisory agreement between RPFI and the
International Stock Fund, and sought recovery of an unspecified amount of
advisory fees paid by the International Stock Fund to RPFI. This action was
based on an allegation that the International Stock Fund does not have a
sufficient number of independent directors, as required by the Investment
Company Act of 1940, as amended, because its independent directors serve on
multiple boards of directors within the T. Rowe Price mutual fund complex and
receive substantial compensation in the form of director fees. On October
12, 1998, the plaintiffs filed an Amended Complaint adding as a plaintiff
Linda B. Rohrbaugh, a shareholder in the T. Rowe Price Growth Stock Fund.
The Amended Complaint also added as defendants T. Rowe Price Growth Stock
Fund, T. Rowe Price Associates, and three of the Company's wholly-owned
subsidiaries (T. Rowe Price Investment Services, T. Rowe Price Services and
T. Rowe Price Retirement Plan Services) which provide services to the Funds,
as well as five directors of the T. Rowe Price Growth Stock Fund. On January
21, 1999, the Amended Complaint was dismissed with leave for plaintiffs to
re-file. On February 16, 1999, the plaintiffs filed a Second Amended
Complaint, though the fund directors were excluded.
The Company believes that the factual and legal basis on which the complaint
is based is wholly unfounded, and the Company and the other defendants intend
to defend the case vigorously. Accordingly, the Company does not believe
that the ultimate resolution of this matter will have a material adverse
effect on the financial condition or results of operations of the Company.
From time to time, the Company is a party to various claims arising in the
ordinary course of business, including employment-related claims. In the
opinion of management, after consultation with counsel, it is unlikely that
any adverse determination in one or more pending claims would have a material
adverse effect on the Company's financial position or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of 1998.
ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information includes the names, ages, and positions of the
executive officers of the Company. There are no arrangements or
understandings pursuant to which any person serves the Company.
George A. Roche (57), Chairman (1997), President (1997), Managing Director
(1989) and Chief Financial Officer (1984-1997)
James S. Riepe (55), Vice Chairman (1997) and Managing Director (1989)
M. David Testa (54), Vice Chairman (1997) and Managing Director (1989)
Alvin M. Younger, Jr. (49), Chief Financial Officer (1997), Managing Director
(1990), Treasurer (1985) and Secretary (1987)
Edward C. Bernard (43), Managing Director (1995) and Vice President
(1989-1995)
Michael A. Goff (39), Managing Director (1997) and Vice President (1994-1997)
Henry H. Hopkins (56), Managing Director (1989)
James A.C. Kennedy (45), Managing Director (1990)
Wayne D. O'Melia (46), Managing Director (1998) and Vice President
(1991-1998)
William T. Reynolds (50), Managing Director (1990)
Charles E. Vieth (42), Managing Director (1993)
Similar information for certain significant employees who are the Company's
other managing directors follows.
John H. Laporte (53), Managing Director (1989)
Brian C. Rogers (43), Managing Director (1991)
Preston G. Athey (49), Managing Director (1997) and Vice President
(1991-1997)
Brian W.H. Berghuis (40), Managing Director (1997) and Vice President
(1991-1997)
Stephen W. Boesel (54), Managing Director (1993)
Gregory A. McCrickard (40), Managing Director (1998) and Vice President
(1991-1998)
Mary J. Miller (43), Managing Director (1993)
Charles A. Morris (36), Managing Director (1995) and Vice President
(1990-1995)
George A. Murnaghan (42), Managing Director (1997) and Vice President
(1986-1997)
Edmund M. Notzon (53), Managing Director (1997) and Vice President
(1991-1997)
Larry J. Puglia (38), Managing Director (1998) and Vice President (1993-1998)
John R. Rockwell (56), Managing Director (1998) and Vice President
(1991-1998)
R. Todd Ruppert (42), Managing Director (1997) and Vice President (1988-1997)
Robert W. Smith (37), Managing Director (1998) and Vice President (1993-1998)
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William J. Stromberg (38), Managing Director (1998) and Vice President
(1990-1998)
Richard T. Whitney (40), Managing Director (1995) and Vice President
(1988-1995)
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock ($.20 par value) trades on The Nasdaq National
Market under the symbol "TROW". The high and low trade price information and
dividends per share during the past two years, adjusted to give effect to the
2-for-1 stock split in April 1998, were:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
________ ________ ________ ________
1997 - High price $ 27.125 $ 26.000 $ 33.938 $ 36.875
Low price 18.563 18.250 25.000 28.938
Cash dividends declared .065 .065 .065 .085
1998 - High price 37.438 39.625 42.875 38.375
Low price 25.125 32.500 26.625 22.750
Cash dividends declared .085 .085 .085 .10
At February 16, 1999, there were approximately 3,600 registered holders of
record of the Company's outstanding common stock.
The Company currently expects that cash dividends comparable to that paid for
the fourth quarter of 1998 will be continued for the first three quarters of
1999.
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ITEM 6. SELECTED FINANCIAL DATA.
Year ended December 31,
____________________________________________________
1994 1995 1996 1997 1998
________ ________ ________ ________ ________
(in millions, except per-share amounts)
Revenues $ 382.4 $ 439.3 $ 586.1 $ 755.0 $ 886.1
Net income $ 61.2 $ 75.4 $ 98.5 $ 144.4 $ 174.1
Basic earnings
per share (1) $ .53 $ .66 $ .86 $ 1.24 $ 1.46
Diluted earnings
per share (1) $ .50 $ .62 $ .79 $ 1.13 $ 1.34
Cash dividends
declared per
share (1) $ .1375 $ .1725 $ .2225 $ .28 $ .355
Weighted average
shares
outstanding (1) 115.5 114.2 114.5 116.3 119.1
Weighted average
shares outstanding -
assuming dilution (1) 122.3 122.1 123.9 128.1 130.0
December 31,
________________________________________________
1994 1995 1996 1997 1998
________ ________ ________ ________ ________
(in millions, except as noted)
Balance sheet data
Total assets $ 297.3 $ 365.3 $ 478.8 $ 646.1 $ 796.8
Debt $ 12.6 $ -- $ -- $ -- --
Stockholders'
equity $ 216.2 $ 274.2 $ 345.7 $ 486.7 $ 614.3
Common shares
outstanding (1) 114.3 114.7 115.1 118.2 120.2
Assets under manage-
ment (in billions) $ 57.8 $ 75.4 $ 99.4 $ 124.3 $ 147.8
(1) Retroactively adjusted to give effect to the 2-for-1 stock splits in
April 1996 and April 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL.
The Company derives its revenue and net income primarily from investment
advisory services provided to individual and institutional investors in the
Company's sponsored mutual funds and private account investment portfolios.
The Company also provides investment advisory clients with related
administrative services, including mutual fund transfer agent, defined
contribution retirement plan recordkeeping, discount brokerage, and trust
services. The Company's clients are primarily domiciled in the United
States.
14
The Company's base of assets under management consists of a broad range of
domestic and international stock, bond, and money market mutual funds and
other investment portfolios which meet the varied needs and objectives of its
individual and institutional investment advisory clients. Investment
advisory revenues are largely dependent on the total value and composition of
assets under management; accordingly, fluctuations in financial markets and
in the composition of assets under management impact revenues and results of
operations. At December 31, 1998, assets under management totalled $147.8
billion, including $94.4 billion in the mutual funds. Equity investments
comprise 73% of all assets under management at the end of 1998.
RESULTS OF OPERATIONS.
1998 versus 1997. Net income increased $29.7 million or 21% to $174.1
million, or diluted earnings per share of $1.34, from $144.4 million or
diluted earnings per share of $1.13. Total revenues increased 17% from $755
million to a record $886 million, led by an increase of $96 million in
investment advisory fees.
Investment advisory revenues earned from the mutual fund investment
portfolios increased $68.7 million as average mutual fund assets under
management rose $13.7 billion during 1998 to $88.0 billion. Fund assets
totalled $94.4 billion at December 31, 1998, up $13.3 billion during the
year, including more than $72.3 billion in stock funds. Net cash inflows to
the funds during 1998 totalled $3.7 billion, including inflows of $3.0
billion into domestic stock funds and $1.9 billion into the bond and money
market funds, offset in part by $1.2 billion of outflows from international
stock funds. The balance of the increase in mutual fund assets was due to
appreciation and income during the year. Fees earned from other investment
portfolios contributed the balance of the advisory revenue gains. These
assets under management rose to $53.4 billion at December 31, 1998, up $10.3
billion during 1998. Total assets under management closed 1998 at $147.8
billion, up from $124.3 billion at the end of 1997.
Administrative fees from advisory-related services to the funds and their
shareholders grew $28.4 million during 1998 to $173.3 million. These
increases were primarily attributable to defined contribution retirement plan
recordkeeping and mutual fund transfer agent services; however, increased
operating expenses offset these gains. Commissions earned on greater trading
volume in discount brokerage contributed $2.1 million of the revenue
increase.
Investment and other income rose $6.5 million from 1997, including $4.8
million of income from the higher money market and other mutual fund
investments. The balance of the increase was attributable to gains
recognized on the investment portfolios.
Operating expenses increased 17% to $573.3 million. Greater compensation and
related costs, which were up $50.7 million, were attributable to increases in
rates of compensation, including performance-related bonuses, and a nearly
12% increase in staff size in addition to greater use of temporary employees
15
primarily to support the Company's growing investment-related administrative
services and technology support operations. At year-end 1998, the Company
employed almost 3,500 associates. Advertising and promotion expenditures
increased 9% to $73.0 million. These expenditures will vary over time as
market conditions and cash flows to the funds warrant. Occupancy and
equipment expense was up due to the expansion of operating facilities and
equipment acquisitions, primarily investments in technology. Other operating
expenses increased $10.0 million primarily as a result of increased
technology spending including preparations for Year 2000 processing and the
growth of operations.
The provision for income taxes as a percentage of pretax income is lower in
1998 due to changes in state income taxation apportionment rules.
International assets under management by the Company's 50% owned subsidiary,
Rowe Price-Fleming International (RPFI), ended 1998 at $32.9 billion, up $2.9
billion over the year. Average international assets managed were $31.9
billion during 1998, up less than 2% from 1997. International investment
research fees expense and minority interests in RPFI's net income were up
only modestly, in line with average assets under management. Assets managed
by RPFI are included in the Company's reported assets under management.
1997 versus 1996. Net income increased $45.9 million or 47% to $144.4
million or diluted earnings per share of $1.13 from nearly $98.5 million or
diluted earnings per share of $0.79. Total revenues increased 29% from $586
million to a record of nearly $755 million, led by an increase of almost $137
million in investment advisory fees. (Earnings per-share have been restated
for the 2-for-1 common stock split in April 1998.)
Investment advisory revenues from the funds increased $100.0 million as the
funds' average assets under management rose more than $17.2 billion to $74.2
billion. Fund assets totalled $81.1 billion at December 31, 1997, up $16.7
billion during the year, with $61.8 billion in stock funds which also account
for most of the increase during the year. Net cash inflows to the funds
during 1997 totalled $8.5 billion while appreciation in U.S. stocks drove the
remaining increase of $8.2 billion. Advisory fees from other private account
investment portfolios contributed the balance of the investment advisory
revenue gains. These assets under management rose to $43.2 billion at
December 31, 1997, up $8.2 billion for 1997. Total assets under management
closed 1997 at $124.3 billion, up from $99.4 billion at the end of 1996.
Administrative fees from services to the funds and their shareholders grew
$27.1 million during 1997 to $144.9 million. Revenue gains were primarily
attributable to the Company's defined contribution retirement plan
recordkeeping services and mutual fund transfer agent; however, increases in
related operating expenses more than offset these gains. Commissions from
increased trading volume in discount brokerage contributed $3.7 million of
the revenue increase.
16
Investment and other income rose $5.1 million primarily due to greater income
from the Company's larger mutual fund investments, including its money market
fund holdings.
Operating expenses increased 23% to $490.2 million. Greater compensation and
related costs, which were up $56.8 million, were attributable to increases in
performance-related rates of compensation and a 20% increase in the number of
employees during the year primarily to support the Company's growing
administrative services and technology support operations. At year-end 1997,
the Company employed 3,100 associates. Advertising and promotion
expenditures increased 15% to $67.0 million as the Company endeavored to take
advantage of the generally favorable stock market environment and, late in
the year, retirement investing opportunities created by the Taxpayer Relief
Act of 1997. Occupancy and equipment expense was up due to the expansion of
operating facilities and equipment acquisitions, primarily investments in
technology. International investment research fees increased 20% or $7.8
million as international assets under management rose to $30.0 billion,
including $16.7 billion in the funds. Other operating expenses increased
$2.2 million due to greater costs associated with the Company's business
growth.
Higher net income reported on a separate company basis by RPFI resulted in
the increase in income attributable to the minority interests in the
Company's consolidated subsidiaries.
CHANGE IN ACCOUNTING PRINCIPLE.
On January 1, 1999, the Company prospectively adopted a new accounting
principle requiring the capitalization and subsequent amortization of certain
costs of computer software developed or obtained for internal use. This
change is not expected to be material to results of operations, though it
will be positive in 1999.
CAPITAL RESOURCES AND LIQUIDITY.
During the three years ended December 31, 1998, stockholders' equity
increased 124% from $274 million to $614 million. Stockholders' equity at
December 31, 1998 includes $49.1 million of unrealized security holding gains
(before income taxes) on the Company's investments in sponsored mutual funds
and $31.9 million which is restricted as to use under various regulations and
agreements to which the Company and its subsidiaries are subject in the
ordinary course of business. At December 31, 1998, the Company held net
liquid assets of almost $400 million to meet business demands and
opportunities.
Operating activities provided net cash inflows of $232.0 million in 1998 as
net income increased $29.7 million from the prior year. Comparatively, 1997
provided net operating cash inflows of $197.8 million. Net cash expended in
investing activities during 1998 totalled $67.6 million, a $12.1 million
decrease from 1997. Property and equipment expenditures decreased $13.5
million to $56.6 million in 1998, due to lower expenditures for furniture
17
which in 1997 was acquired to outfit completed buildings and for computer
equipment which in 1998 was acquired under operating leases. Financing
activities consumed $81.0 million in 1998, up $48.7 million from 1997. This
increase includes $26.8 million attributable to the repurchase of Company
stock, $10.3 million in dividends paid to common stockholders, and $9.5
million in distributions to RPFI's minority interests.
The Company anticipates 1999 property and equipment acquisitions of more than
$80 million, including approximately $41 million for the completion of two
office buildings and parking garages in Owings Mills, Maryland. These
capital expenditures are expected to be funded from liquid assets currently
available and from operating cash inflows.
Commitments for additional investments in partnerships and other ventures
aggregate $4.7 million at December 31, 1998. On January 25, 1999, the
Company entered into a letter of intent with The Sumitomo Bank and Daiwa
Securities Co. to jointly establish an asset management company based in
Japan to serve Japanese investors. The Company plans to acquire a 10%
interest in the venture for approximately $16 million. The Company does not
expect this long-term investment to have a material near-term impact on its
revenues and net income.
YEAR 2000 PROCESSING ISSUE.
Many existing computer programs employed throughout the world use two digits
rather than four to identify the year. These programs, if not adapted, will
not correctly handle the change from "99" to "00" on January 1, 2000, and
will no longer be able to perform necessary functions. The Year 2000 issue
affects all companies and organizations.
The Company has implemented steps intended to assure that its systems and
processes are capable of Year 2000 processing. Year 2000 readiness
assessments have been made throughout the Company. Remediation efforts have
been completed for mission critical systems and testing efforts are well
underway. Because the Company's operations include daily exchanges of data
electronically with customers and vendors, the Company is working with these
third parties to assess the adequacy of their compliance efforts, and is
developing contingency plans intended to assure that their noncompliance will
not materially affect the Company's operations. Additionally, consultants
are reviewing the Company's Year 2000 efforts at various times during 1998
and 1999.
The Company is dependent on several mission critical systems, including those
maintained by third-party service providers, to perform its core business
activities. Mission critical investment management systems have been
remediated and testing is on schedule. The mutual fund transfer agency
system is maintained by a third-party service provider and interfaces with
other Company systems. Remediation by the transfer agency service provider
and testing of the system and its interfaces by the Company is complete. The
defined contribution recordkeeping system has also been remediated and
testing is on schedule.
18
Preliminary activities and tests necessary for participation in the
Securities Industry Association (SIA) street-wide testing scheduled for March
and April 1999 are also complete. The Company is actively involved in
working with the SIA and other securities industry firms to establish the
processes, criteria and environment for this testing.
The following chart summarizes the Company's estimated timetable and current
state of completion for its mission critical systems efforts.
Stages Target Date Current state of Completion
_____________________________ ___________ ___________________________
Identification and assessment Complete Complete
Remediation Complete Complete
Internal testing 03/31/99 More than 75%
Point-to-point testing 06/30/99 26 - 50%
Implementation 06/30/99 26 - 50%
The target dates for non-mission critical systems are somewhat later than
those shown above, but in any event, are in advance of December 31, 1999.
The Company, with the assistance of a consulting firm, is developing a
contingency plan for its mission critical systems and external dependencies.
However, in an operation as complex as providing global investment advisory
services, there are limited alternatives to certain mission critical systems
and third-party providers, including electrical power and communications
services. If these services or mission critical systems such as the mutual
fund transfer agent system fail for an extended period of time, there would
likely be a material adverse effect on the Company's business, results of
operations and financial condition. Although the Company is investigating
alternative solutions, it is unlikely that any adequate contingency plan can
be developed for any prolonged failure of these mission critical services and
systems.
Additionally, the investment portfolios from which the Company derives the
majority of its revenues could be subject to increased credit, market and
liquidity risk arising from the impact of Year 2000 issues on the issuers of
individual securities. The Company's investment staff are assessing the Year
2000 risks in the investment portfolios with particular attention to the more
significant holdings. Their findings are included in the information used in
making investment decisions. This process applies to actively managed
portfolios, but not to the index-based investment portfolios where
investments are generally determined by the composition of a third-party
index. Additionally, governments and financial markets around the world
could be affected by Year 2000 issues. To the extent that the market prices
of securities are negatively impacted by these or other Year 2000 issues, the
Company's investment advisory revenues, results of operations and financial
condition could be materially adversely affected.
The Company presently estimates that it will incur expenses of more than $44
million on the Year 2000 processing issue during the period 1997 - 2000.
Almost $26 million of these expenditures are anticipated after 1998 when the
bulk of external testing and implementation of remediated systems is to be
19
done. The Company cannot assure that the costs of its Year 2000 compliance
efforts will not be significantly more in the event that presently
unidentified complications arise; however, the Company believes that it will
be able to fund any additional costs from available resources without
materially affecting liquidity, financial condition, or future prospects.
FORWARD-LOOKING INFORMATION.
Information or statements provided by or on behalf of the Company from time
to time, including those within this 1998 Form 10-K Annual Report, may
contain certain "forward-looking information," including information relating
to anticipated growth in revenues or earnings per share, anticipated changes
in the amount and composition of assets under management, anticipated expense
levels, and expectations regarding financial market conditions. The Company
cautions readers that any forward-looking information provided by or on
behalf of the Company is not a guarantee of future performance. Actual
results may differ materially from those in forward-looking information as a
result of various factors, including but not limited to those discussed
below. Further, such forward-looking statements speak only as of the date on
which such statements are made, and the Company undertakes no obligation to
update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events.
In addition to those factors discussed above with respect to the Year 2000
processing issue, the Company's future revenues may fluctuate due to other
factors such as: the total value and composition of assets under management
and related cash inflows or outflows in mutual funds and private account
investment portfolios; fluctuations in the worldwide financial markets,
including those in emerging countries, resulting in appreciation or
depreciation of assets under management; the relative investment performance
of the Company's sponsored mutual funds and other investment portfolios as
compared to competing offerings and market indices; the extent to which
performance-based investment advisory fees are earned from private account
investment portfolios; the expense ratios of the Company's sponsored mutual
funds; investor sentiment and investor confidence; the ability of the Company
to maintain investment management and administrative fees at appropriate
levels; competitive conditions in the mutual funds industry; the introduction
of new mutual funds and investment portfolios; the ability of the Company to
contract with the funds for payment for investment advisory-related
administrative services provided to the funds and their shareholders; the
continuation of trends in the retirement plan marketplace favoring defined
contribution plans and participant-directed investments; and the amount and
timing of income recognized on the Company's investment portfolio. The
Company's revenues are substantially dependent on fees earned under contracts
with the funds and could be adversely affected if the independent directors
of one or more of the funds determined to terminate or significantly alter
the terms of one or more investment management and/or related administrative
services agreements.
The Company's future operating results are also dependent upon the level of
20
operating expenses, which are subject to fluctuation for the following or
other reasons: changes in the level of advertising expenses in response to
market conditions or other factors; variations in the level of compensation
expense incurred by the Company, including performance-based compensation
based on the Company's financial results, as well as changes in response to
the size of the total employee population, competitive factors, or other
reasons; changes in the manner in which the Company provides international
investment services; expenses and capital costs, including depreciation,
amortization and other non-cash charges, incurred by the Company to maintain
its administrative and services infrastructure, including costs incurred with
respect to readiness for Year 2000 processing; unanticipated costs that may
be incurred by the Company from time to time to protect investor accounts and
client goodwill; and third-party noncompliance in Year 2000 processing.
The Company's business is also subject to substantial governmental
regulation, and changes in legal, regulatory, accounting, tax, and compliance
requirements may have a substantial effect on the Company's business and
results of operations, including but not limited to effects on the level of
costs incurred by the Company and effects on investor interest in mutual
funds and investing in general or in particular classes of mutual funds or
other investments.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company invests in its sponsored mutual funds, which are market risk
sensitive financial instruments held for purposes other than trading; it does
not invest in derivative financial or commodity instruments. Mutual fund
investments expose the Company to market risk in the form of equity price
risk; that is, the potential future loss of value that would result from a
decline in the fair values of the mutual fund shares. Each fund and its
underlying net assets are also subject to market risk which may arise from
changes in equity prices, credit ratings, foreign currency exchange rates,
and interest rates.
The following table (in thousands of dollars) presents the Company s equity
price risk from its investments in sponsored mutual funds by assuming a
hypothetical decline in the fair values of mutual fund shares. This
potential future loss of value reflects the valuation of the Company s
December 31, 1998 mutual fund investments using each fund s lowest fair value
per share during 1998. With respect to this presentation, it is important to
note that: 1) all funds did not experience their lowest fair value per share
on the same day and, moreover, it is unlikely that this would occur; 2) it is
likely that the Company would modify the composition of its mutual fund
investment portfolios if adverse market conditions persisted; and 3) the
Company could experience future losses in excess of those presented below.
21
Fair value at Potential
December 31, % of lower % of Potential loss
1998 Portfolio value Portfolio of value
_____________ _________ _________ _________ _______________
Stock funds
Domestic $107,364 56 $ 84,162 52 $23,202 22%
International 25,976 13 21,448 14 4,528 17
________ ___ ________ ___ _______
Total 133,340 69 105,610 66 27,730 21
Balanced funds 18,838 10 16,594 10 2,244 12
Bond funds 40,736 21 39,212 24 1,524 4
________ ___ ________ ___ _______
$192,914 100 $161,416 100 31,498 16
________ ___ ________ ___
________ ___ ________ ___
Less potential loss attributable to minority interests 534
_______
Potential loss before income taxes attributable to
accumulated comprehensive income $30,964
_______
_______
Investments in mutual funds generally moderate market risk because funds, by
their nature, invest in a number of different financial instruments. The
Company further manages its exposure to market risk by diversifying its
investments into numerous stock, balanced, and bond funds, as well as both
domestic and international funds. In addition, the Company will alter its
investment holdings from time-to-time, in response to changes in market risks
and other factors, as deemed appropriate by management.
As noted in Item 7, the Company's revenues and net income are based primarily
on the value of the investment portfolios managed. Accordingly, financial
market declines will negatively impact the Company's assets under management
and, in turn, its revenues and net income.
Foreign currency denominated assets and liabilities are not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements:
Report of Independent Accountants 22
Consolidated Balance Sheets at December 31, 1997 and 1998 23
Consolidated Statements of Income for each of the
three years in the period ended December 31, 1998 24
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1998 25
Consolidated Statements of Stockholders' Equity for
each of the three years in the period ended December 31, 1998 26
Summary of Significant Accounting Policies 28
Notes to Consolidated Financial Statements
including Supplementary Quarterly Financial Data 30
22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of T. Rowe Price Associates, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of T. Rowe Price Associates, Inc. and its subsidiaries at
December 31, 1997 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards 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 provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
January 26, 1999
23
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
__________________
1997 1998
________ ________
(in thousands)
ASSETS
Cash and cash equivalents (Note 1) $200,409 $283,838
Accounts receivable (Note 5) 86,795 100,702
Investments in sponsored mutual funds (Note 1) 173,729 192,914
Partnership and other investments (Note 7) 19,030 26,597
Property and equipment (Note 2) 142,497 166,612
Other assets (Note 6) 23,607 26,121
________ ________
$646,067 $796,784
________ ________
________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 30,722 $ 45,737
Accrued compensation and retirement costs 49,694 56,757
Income taxes payable (Note 3) 19,102 15,308
Dividends payable 10,039 12,012
Minority interests in consolidated subsidiaries 49,837 52,666
________ ________
Total liabilities 159,394 182,480
________ ________
Commitments and contingent liabilities (Notes 2, 6 and 7)
Stockholders' equity (Notes 1, 4 and 7)
Preferred stock, undesignated, $.20 par value -
authorized and unissued 20,000,000 shares -- --
Common stock, $.20 par value - authorized
200,000,000 shares in 1997 and 500,000,000
shares in 1998; issued 59,097,705 shares
in 1997 and 120,183,266 shares in 1998 11,819 24,037
Capital in excess of par value 30,707 41,073
Retained earnings 415,279 517,631
Accumulated other comprehensive income 28,868 31,563
________ ________
Total stockholders' equity 486,673 614,304
________ ________
$646,067 $796,784
________ ________
________ ________
The accompanying notes are an integral part of the consolidated financial
statements.
24
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
__________________________
1996 1997 1998
________ ________ ________
(in thousands, except
per-share amounts)
Revenues (Notes 1 and 5)
Investment advisory fees $451,307 $588,014 $684,296
Administrative fees 117,803 144,906 173,321
Investment and other income 16,960 22,037 28,525
________ ________ ________
586,070 754,957 886,142
________ ________ ________
Expenses
Compensation and related costs (Notes 4 and 6) 196,925 253,676 304,376
Advertising and promotion 58,291 66,954 73,044
Occupancy and equipment (Note 7) 51,850 68,018 83,374
International investment research fees 39,328 47,105 48,066
Other operating expenses (Note 7) 52,205 54,445 64,468
________ ________ ________
398,599 490,198 573,328
________ ________ ________
Income before income taxes and
minority interests 187,471 264,759 312,814
Provision for income taxes (Note 3) 72,608 101,208 118,676
________ ________ ________
Income from consolidated companies 114,863 163,551 194,138
Minority interests in consolidated subsidiaries 16,410 19,154 19,998
________ ________ ________
Net income $ 98,453 $144,397 $174,140
________ ________ ________
________ ________ ________
Earnings per share
Basic $ .86 $ 1.24 $ 1.46
________ ________ ________
________ ________ ________
Diluted $ .79 $ 1.13 $ 1.34
________ ________ ________
________ ________ ________
The accompanying notes are an integral part of the consolidated financial
statements.
25
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
______________________________
1996 1997 1998
________ ________ ________
(in thousands)
Cash flows from operating activities
Net income $ 98,453 $144,397 $174,140
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization of
property and equipment 18,062 29,034 32,615
Minority interests in consolidated
subsidiaries 16,410 19,154 19,998
Increase in accounts receivable (17,398) (13,556) (13,865)
Increase in accounts payable and accrued
liabilities 27,421 19,016 26,236
Other changes in assets and liabilities (1,792) (237) (7,149)
________ ________ ________
Net cash provided by operating activities 141,156 197,808 231,975
________ ________ ________
Cash flows from investing activities
Investments in sponsored mutual funds (14,151) (28,675) (32,538)
Proceeds from dispositions of sponsored
mutual funds 3,580 14,172 21,708
Partnership and other investments (7,186) (2,146) (3,119)
Distributions from partnership investments 7,201 7,062 2,934
Additions to property and equipment (58,771) (70,081) (56,558)
________ ________ ________
Net cash used in investing activities (69,327) (79,668) (67,573)
________ ________ ________
Cash flows from financing activities
Purchases of stock (19,667) (9,655) (36,424)
Receipts relating to stock issuances 5,061 15,066 12,901
Dividends paid to stockholders (24,058) (30,132) (40,406)
Distributions to minority interests (45) (7,561) (17,044)
________ ________ ________
Net cash used in financing activities (38,709) (32,282) (80,973)
________ ________ ________
Cash and cash equivalents
Net increase during year 33,120 85,858 83,429
At beginning of year 81,431 114,551 200,409
________ ________ ________
At end of year $114,551 $200,409 $283,838
________ ________ ________
________ ________ ________
The accompanying notes are an integral part of the consolidated financial
statements.
26
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumu-
Capital lated
Common in other Total
stock excess compre- stock-
- par of par Retained hensive holders'
value value earnings income equity
_______ _______ ________ ________ ________
(in thousands)
Balance at December 31, 1995,
28,665,472 common shares $ 5,733 $ 2,912 $252,934 $12,653 $274,232
Comprehensive income
Net income 98,453
Unrealized security
holding gains 7,110
Total comprehensive income 105,563
782,307 common shares
issued under stock-based
compensation plans 156 6,979 (1) 7,134
28,570,012 common shares
issued in 2-for-1 split 5,714 (547) (5,167) --
445,000 common shares
purchased (89) (1,521) (14,147) (15,757)
Dividends declared (25,506) (25,506)
_______ _______ ________ _______ ________
Balance at December 31, 1996,
57,572,791 common shares 11,514 7,823 306,566 19,763 345,666
Comprehensive income
Net income 144,397
Unrealized security
holding gains 9,105
Total comprehensive income 153,502
1,754,914 common shares
issued under stock-based
compensation plans 351 29,496 29,847
230,000 common shares
purchased (46) (6,612) (2,997) (9,655)
Dividends declared (32,687) (32,687)
_______ _______ ________ _______ ________
Balance at December 31, 1997,
59,097,705 common shares $11,819 $30,707 $415,279 $28,868 $486,673
_______ _______ ________ _______ ________
_______ _______ ________ _______ ________
Continued on next page.
The accompanying notes are an integral part of the consolidated financial
statements.
27
T. ROWE PRICE ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumu-
Capital lated
Common in other Total
stock excess compre- stock-
- par of par Retained hensive holders'
value value earnings income equity
_______ _______ ________ ________ ________
(in thousands)
Continued from prior page.
Balance at December 31, 1997,
59,097,705 common shares $11,819 $30,707 $415,279 $28,868 $486,673
Comprehensive income
Net income 174,140
Unrealized security
holding gains 2,695
Total comprehensive income 176,835
2,711,273 common shares
issued under stock-based
compensation plans 543 29,056 29,599
59,594,288 common shares
issued in 2-for-1 split 11,919 (11,919) --
1,220,000 common shares
purchased (244) (6,771) (29,409) (36,424)
Dividends declared (42,379) (42,379)
_______ _______ ________ _______ ________
Balance at December 31, 1998,
120,183,266 common shares $24,037 $41,073 $517,631 $31,563 $614,304
_______ _______ ________ _______ ________
_______ _______ ________ _______ ________
The accompanying notes are an integral part of the consolidated financial
statements.
28
T. ROWE PRICE ASSOCIATES, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the
Company) derives its revenue and net income primarily from investment
advisory services provided to individual and institutional investors in the
Company's sponsored mutual funds and private account investment portfolios.
The Company also provides investment advisory clients with related
administrative services, including mutual fund transfer agent, defined
contribution retirement plan recordkeeping, discount brokerage, and trust
services. The Company's clients are primarily domiciled in the United States
of America.
Investment advisory revenues are largely dependent on the total value and
composition of assets under management; accordingly, fluctuations in
financial markets and in the composition of assets under management impact
revenues and results of operations.
BASIS OF PREPARATION.
The consolidated financial statements are prepared in accordance with
generally accepted accounting principles which requires the use of estimates
made by the Company's management.
PRINCIPLES OF CONSOLIDATION.
The consolidated financial statements include the accounts of all majority
owned subsidiaries and, by virtue of the Company's controlling interest, its
50%-owned subsidiary, Rowe Price-Fleming International, Inc. (RPFI). All
material intercompany accounts and transactions are eliminated in
consolidation.
CASH EQUIVALENTS.
Cash equivalents consist of all short-term, highly liquid investments
including money market mutual funds and overnight commercial paper
investments. The cost of these investments is equivalent to fair value.
CONCENTRATION OF CREDIT RISK.
Concentration of credit risk in the Company's accounts receivable is believed
to be minimal in that the Company's clients have substantial assets including
those in the managed investment portfolios.
INVESTMENTS IN SPONSORED MUTUAL FUNDS.
The Company classifies its investments in sponsored stock and bond mutual
funds as available-for-sale securities and reports them at fair value.
Unrealized security holding gains are recognized in comprehensive income.
Mutual fund investments expose the Company to market risk in the form of
equity price risk; that is, the potential future loss of value that would
result from a decline in the fair values of the mutual funds. Each fund and
its underlying net assets are also subject to market risk which may arise
29
from changes in equity prices, credit ratings, foreign currency exchange
rates, and interest rates.
PARTNERSHIP AND OTHER INVESTMENTS.
The Company's investments in partnerships and other ventures, including those
sponsored by the Company, do not have a readily determinable fair value.
These entities, which hold venture capital, debt, and other equity
securities, are generally accounted for using the equity method which adjusts
the Company's cost for its share of subsequent earnings or losses. Minor
limited partnership investments are accounted for using the cost method.
PROPERTY AND EQUIPMENT.
Property and equipment is stated at cost net of accumulated depreciation and
amortization computed using the straight-line method. Provisions for
depreciation and amortization are based on the following estimated average
useful lives: computer and communications equipment, 3 to 4 years; furniture
and other equipment, 5 years; buildings, 33 years; leasehold improvements, 10
years; and leased land, 99 years.
REVENUE RECOGNITION.
Fees for investment advisory services and related administrative services
provided to investment advisory clients are recognized when earned.
ADVERTISING.
Costs of advertising are expensed the first time that the advertising takes
place.
INTERNATIONAL INVESTMENT RESEARCH FEES.
International investment research is provided by affiliates of the minority
stockholders of RPFI. Fees paid for these services are based on
international assets under management by RPFI.
EARNINGS PER SHARE.
Basic earnings per share excludes the dilutive effect of outstanding stock
options and is computed by dividing net income by the weighted average common
shares outstanding of 114,454,000 in 1996, 116,258,000 in 1997, and
119,134,000 in 1998. Diluted earnings per share reflects the potential
dilution that could occur if outstanding stock options were exercised. It is
computed by increasing the denominator of the basic calculation by potential
dilutive common shares, determined using the treasury stock method, of
9,430,000 shares in 1996, 11,815,000 shares in 1997, and 10,818,000 shares in
1998.
COMPREHENSIVE INCOME.
Total comprehensive income is reported in the consolidated statements of
stockholders' equity and includes net income and unrealized security holding
gains, net of income taxes and minority interests.
30
T. ROWE PRICE ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INVESTMENTS IN SPONSORED MUTUAL FUNDS.
Cash equivalents comprising investments in sponsored money market mutual
funds aggregate $196,513,000 at December 31, 1997 and $280,679,000 at
December 31, 1998. The Company's investments in other sponsored mutual funds
(in thousands) at December 31 include:
Aggregate
Aggregate Unrealized fair
cost holding gains value
_________ ______________ _________
1997
___________
Stock funds
Domestic $ 60,102 $34,160 $ 94,262
International 21,767 5,130 26,897
________ _______ ________
Total 81,869 39,290 121,159
Balanced funds 15,837 4,017 19,854
Bond funds 30,476 2,240 32,716
________ _______ ________
$128,182 $45,547 $173,729
________ _______ ________
________ _______ ________
1998
___________
Stock funds
Domestic $ 69,031 $38,333 $107,364
International 21,191 4,785 25,976
________ _______ ________
Total 90,222 43,118 133,340
Balanced funds 14,082 4,756 18,838
Bond funds 39,548 1,188 40,736
________ _______ ________
$143,852 $49,062 $192,914
________ _______ ________
________ _______ ________
The following table reconciles unrealized holding gains on investments (in
thousands) in sponsored mutual funds to that recognized in comprehensive
income.
1996 1997 1998
_______ _______ _______
Unrealized holding gains
during the year $11,233 $15,817 $ 8,355
Less gains (losses)
realized in net income (146) 1,527 4,840
_______ _______ _______
11,379 14,290 3,515
Deferred taxes (4,074) (5,108) (946)
_______ _______ _______
7,305 9,182 2,569
Minority interests (195) (77) 126
_______ _______ _______
Unrealized holding gains
recognized in compre-
hensive income $ 7,110 $ 9,105 $ 2,695
_______ _______ _______
_______ _______ _______
31
Dividends earned on the Company's investments in sponsored mutual funds,
including money market mutual funds, aggregate $12,293,000 in 1996,
$16,372,000 in 1997, and $20,878,000 in 1998.
NOTE 2 - PROPERTY AND EQUIPMENT.
Property and equipment (in thousands) at December 31 consists of:
1997 1998
________ ________
Computer and communications equipment $ 92,154 $ 92,138
Buildings and leasehold improvements 80,463 112,997
Furniture and other equipment 26,616 28,943
Land owned and leased 16,552 16,553
________ ________
215,785 250,631
Accumulated depreciation and amortization (73,288) (84,019)
________ ________
$142,497 $166,612
________ ________
________ ________
The Company is constructing two office buildings and parking garages on land
owned in Owings Mills, Maryland, for an aggregate price not to exceed
$70,840,000. Buildings and leasehold improvements at December 31, 1998
include in-progress construction of $40,397,000 for these facilities which
are expected to be completed in late 1999.
NOTE 3 - INCOME TAXES.
The provision for income taxes (in thousands) consists of:
1996 1997 1998
________ ________ ________
Current income taxes
Federal and foreign $ 63,399 $ 88,061 $104,376
State and local 9,531 15,624 13,562
Deferred income taxes (tax benefits) (322) (2,477) 738
________ ________ ________
$ 72,608 $101,208 $118,676
________ ________ ________
________ ________ ________
Deferred income taxes arise from temporary differences between taxable income
for financial statement and income tax return purposes. Significant
temporary differences resulted in deferred income taxes of $1,139,000 in 1996
related to RPFI's undistributed earnings and $1,728,000 in 1998 related to
investment income. Deferred tax benefits arising from significant temporary
differences include $1,614,000 in 1996, $1,161,000 in 1997, and $1,417,000 in
1998 related to accrued compensation and $1,619,000 in 1997 related to
depreciation expense.
The net deferred tax liability of $11,572,000 included in income taxes
payable at December 31, 1997 consists of total deferred tax liabilities of
$19,700,000 and total deferred tax assets of $8,128,000. Deferred tax
liabilities include $3,438,000 arising from RPFI's undistributed earnings and
$16,262,000 arising from unrealized holding gains on available-for-sale
securities. Deferred tax assets include $5,477,000 arising from accrued
32
compensation and $1,167,000 arising from depreciation expense.
The net deferred tax liability of $13,256,000 included in income taxes
payable at December 31, 1998 consists of total deferred tax liabilities of
$21,920,000 and total deferred tax assets of $8,664,000. Deferred tax
liabilities include $3,649,000 arising from RPFI's undistributed earnings and
$17,206,000 arising from unrealized holding gains on available-for-sale
securities. Deferred tax assets include $6,894,000 arising from accrued
compensation.
Cash outflows from operating activities include income taxes paid of
$64,975,000 in 1996, $86,897,000 in 1997, and $114,322,000 in 1998.
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate.
1996 1997 1998
______ ______ ______
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefits 3.4 3.7 2.9
Other items .3 (.5) -
______ ______ ______
Effective income tax rate 38.7% 38.2% 37.9%
______ ______ ______
______ ______ ______
NOTE 4 - COMMON STOCK AND STOCK-BASED COMPENSATION PLANS.
SHARES AUTHORIZED AND ISSUED.
Two-for-one splits of the Company's common stock were effected at the close
of business on April 30, 1996 and 1998. Earnings per-share data in the
accompanying consolidated financial statements and all per-share and share
data in these notes have been adjusted to give retroactive effect to these
stock splits.
At December 31, 1998, the Company had reserved 36,425,304 shares of its
unissued common stock for issuance upon the exercise of stock options and
1,680,000 shares for issuance under a plan whereby substantially all
employees may acquire shares of Company stock through payroll deductions at
prevailing market prices.
The Company's board of directors has authorized the future repurchase of up
to 3,720,000 common shares at December 31, 1998.
DIVIDENDS.
The Company declared cash dividends per share of $.2225 in 1996, $.28 in 1997
and $.355 in 1998.
33
FIXED STOCK OPTION PLANS.
The Company has six stock-based compensation plans (the 1986, 1990, 1993 and
1996 Stock Incentive Plans and the 1995 and 1998 Director Stock Option Plans)
under which it has granted fixed stock options with a maximum term of ten
years to its employees and directors. Vesting of employee options is based
solely on the individual continuing to render service to the Company and
generally occurs over a 5-year graded schedule. The exercise price of each
option granted is equivalent to the market price of the Company's stock at
the date of grant. The Company applies the intrinsic value based method of
accounting for its stock option awards. Accordingly, the Company has not
recognized any related compensation expense in its consolidated statements of
income.
The following table summarizes the status of and changes in the Company's
stock option plans during the past three years.
Weighted- Weighted-
average average
exercise Options exercise
Options price exercisable price
__________ __________ ___________ _________
Outstanding at
beginning of 1996 23,301,168 $ 7.12
Granted 3,826,000 17.94
Exercised (1,879,850) 3.64
Forfeited (525,200) 9.02
__________
Outstanding at
end of 1996 24,722,118 9.02 11,497,718 $5.46
Granted 2,600,796 31.16
Exercised (3,653,090) 5.23
Forfeited (551,400) 12.78
__________
Outstanding at
end of 1997 23,118,424 12.02 11,808,624 7.18
Granted 3,528,883 35.68
Exercised (3,491,738) 6.51
Forfeited (515,000) 18.30
__________
Outstanding at
end of 1998 22,640,569 16.41 12,479,069 9.91
__________
__________
Additional information regarding stock options outstanding at December 31,
1998 follows.
34
Weighted-
average
Weighted- remaining Weighted-
average contractual average
Range of exercise life (in exercise
exercise prices Outstanding price years) Exercisable price
______________________________ __________ ___________ ___________ _________
$ 1.80 to 2.13 459,110 $ 1.83 1.8 459,110 $ 1.83
2.84 to 4.25 1,343,764 3.94 2.4 1,343,764 3.94
4.69 to 7.03 4,161,402 6.13 4.5 4,161,402 6.13
8.06 to 11.88 3,601,570 8.10 5.9 2,591,570 8.10
13.06 to 19.88 7,140,244 15.33 7.4 3,215,844 14.99
27.13 to 39.09 5,934,479 33.94 9.4 707,379 32.30
__________ __________
1.80 to 39.09 22,640,569 16.41 8.1 12,479,069 9.91
__________ __________
__________ __________
Accounting principles require the Company to make the following disclosures
as if the fair value based method of accounting had been applied to the
Company's stock option grants made subsequent to 1994. Accordingly, the
Company estimated the grant-date fair value of each option awarded of $5.33
in 1996, $9.40 in 1997, and $9.88 in 1998 using the Black-Scholes option-
pricing model with the following weighted-average assumptions: dividend
yield of 1.6% in 1996, 1.5% in 1997, and 1.4% in 1998; expected volatility of
27% in 1996, 29% in 1997, and 30% in 1998; risk-free interest rates of 5.8%
in 1996, 5.9% in 1997, and 4.5% in 1998; and expected lives of 5.1 years in
1996, 4.7 years in 1997, and 4.4 years in 1998. Had compensation costs been
determined including the weighted-average estimate of the fair value of each
option granted, pro forma net income would be $92,825,000 in 1996,
$134,871,000 in 1997, and $161,723,000 in 1998. Pro forma basic earnings per
share would be $.81 in 1996, $1.16 in 1997, and $1.36 in 1998. Pro forma
diluted earnings per share would be $.75 in 1996, $1.06 in 1997, and $1.25 in
1998. These pro forma disclosures are not representative of the effects on
reported net income and earnings per share for future years because option
grants were primarily made in the fourth quarter of each year, most options
vest over several years, and additional awards are generally made each year.
NOTE 5 - INFORMATION ABOUT REVENUES AND SERVICES.
The Company's revenues (in thousands) from advisory services provided under
agreements with its sponsored mutual funds and other investment clients
include:
1996 1997 1998
_________ _________ _________
Sponsored mutual funds
Stock and balanced
Domestic $159,281 $232,928 $296,389
International 101,526 121,266 115,914
Bond and money market 75,181 81,771 92,360
________ ________ ________
335,988 435,965 504,663
Other portfolios 115,319 152,049 179,633
________ ________ ________
Total investment advisory fees $451,307 $588,014 $684,296
________ ________ ________
________ ________ ________
35
The following table summarizes the various investment portfolios and assets
under management (in billions) on which the Company earns its advisory fees.
Average during December 31,
________________________ _______________
1996 1997 1998 1997 1998
______ ______ ______ ______ ______
Sponsored mutual funds
Stock and balanced
Domestic $ 26.4 $ 39.3 $ 50.9 $ 46.2 $ 55.9
International 13.9 16.7 16.3 15.7 16.4
Bond and money market 16.7 18.3 20.8 19.2 22.1
______ ______ ______ ______ ______
57.0 74.3 88.0 81.1 94.4
Other portfolios 30.5 40.0 48.6 43.2 53.4
______ ______ ______ ______ ______
$ 87.5 $114.3 $136.6 $124.3 $147.8
______ ______ ______ ______ ______
______ ______ ______ ______ ______
Fees for advisory-related administrative services provided to the funds were
$87,031,000 in 1996, $105,042,000 in 1997, and $127,243,000 in 1998.
Accounts receivable from the funds aggregate $48,952,000 and $56,345,000 at
December 31, 1997 and 1998, respectively. All services to the sponsored
mutual funds are provided under contracts which are subject to periodic
review and approval by each of the funds' boards and, with respect to
investment advisory contracts, also by the funds' shareholders.
NOTE 6 - OTHER DISCLOSURES.
Goodwill of $7,937,000 arising from a 1992 acquisition is included in other
assets and is being amortized over eleven years using the straight-line
method. Accumulated amortization aggregates $3,973,000 at December 31, 1997
and $4,718,000 at December 31, 1998.
A maximum of $20,000,000 is available to the Company under unused bank lines
of credit at December 31, 1998.
Employee retirement plan expense for the Company's two defined contribution
plans was $10,048,000 in 1996, $13,912,000 in 1997, and $17,852,000 in 1998.
NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES.
The Company occupies certain office facilities and rents computer and other
equipment under noncancelable operating leases. Related rental expense was
$20,050,000 in 1996, $21,319,000 in 1997, and $25,953,000 in 1998. Future
minimum rental payments under these leases aggregate $15,201,000 in 1999,
$17,184,000 in 2000, $9,594,000 in 2001, $8,400,000 in 2002, $7,214,000 in
2003, and $24,306,000 in later years.
At December 31, 1998, the Company had outstanding commitments to invest an
additional $4,728,000 in various investment partnerships and ventures.
Consolidated stockholders' equity at December 31, 1998 includes $35,153,000
which is restricted as to use under various regulations and agreements to
which the Company and its subsidiaries are subject in the ordinary course of
36
business.
From time to time, the Company is a party to various claims arising in the
ordinary course of business, including employment-related claims. In the
opinion of management, after consultation with counsel, it is unlikely that
any adverse determination in one or more pending claims would have a material
adverse effect on the Company's financial position or results of operations.
NOTE 8 - SUPPLEMENTARY QUARTERLY FINANCIAL DATA (Unaudited).
Basic Diluted
earnings earnings
Net per per
Revenues income share share
_________ _______ _________ _________
(in thousands)
1997
___________
1st quarter $167,959 $28,547 $.25 $.22
2nd quarter 180,088 33,782 .29 .27
3rd quarter 199,769 41,337 .36 .32
4th quarter 207,141 40,731 .35 .31
1998
___________
1st quarter 210,434 41,290 .35 .32
2nd quarter 222,309 44,869 .38 .34
3rd quarter 218,559 42,974 .36 .33
4th quarter 234,840 45,007 .38 .35
37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item as to the identification of the Company's
executive officers and certain significant employees is contained as a
separate item at the end of Part I of this Form 10-K. The balance of the
information required by this item as to the Company's directors and executive
officers appears in the definitive proxy statement for the Company's 1999
Annual Meeting of Stockholders and is incorporated by reference in this Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by these Items appears in the definitive proxy statement
for the Company's 1999 Annual Meeting of Stockholders and is incorporated by
reference in this Form 10-K.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report.
1. Financial Statements: See index at Item 8 of Part II.
2. Financial Statement Schedules: None applicable.
3. The following exhibits required by Item 601 of Regulation S-K are
filed as part of this Form 10-K. Exhibits 10.07 through 10.13 are
compensatory plans or arrangements.
3.(i) Composite Restated Charter of T. Rowe Price Associates, Inc.
as of April 16, 1998. (Incorporated by reference from Form
10-Q Report for the quarterly period ended March 31, 1998;
Accession No. 0000080255-98-000361.)
3.(ii) Amended and Restated By-Laws of T. Rowe Price Associates,
Inc. as of April 17, 1997. (Incorporated by reference from
Form 10-Q Report for the quarterly period ended June 30,
1997; Accession No. 0000080255-97-000369.)
10.01 Form of Investment Management Agreement with each of the T.
Rowe Price Funds. (Incorporated by reference from Form N-1A;
Accession No. 0000775688-99-000003.)
38
10.02 Transfer Agency and Service Agreement dated as of January 1,
1999 between each of the T. Rowe Price Funds and T. Rowe
Price Services, Inc. (Incorporated by reference from Form N-
1A; Accession No. 0000775688-99-000003.)
10.03 Agreement dated January 1, 1999 between T. Rowe Price
Retirement Plan Services, Inc. and each of the T. Rowe Price
Taxable Funds. (Incorporated by reference from Form N-1A;
Accession No. 0000775688-99-000003.)
10.04 Form of Underwriting Agreement between each of the T. Rowe
Price Funds and T. Rowe Price Investment Services, Inc.
(Incorporated by reference from Form N-1A; Accession No.
0000775688-99-000003.)
10.05 Agreement dated February 11, 1998 between TRP Suburban
Second, Inc. and Riparius Construction, Inc. as Construction
Manager and Constructor (Incorporated by reference from the
paper filing of March 26, 1998, pursuant to a continuing
hardship exemption, on Form SE to the 1997 Form 10-K
[Accession No. 0000080255-98-00358].)
10.06 Amended, Restated, and Consolidated Office Lease dated as of
May 22, 1997 between 100 East Pratt Street Limited
Partnership and T. Rowe Price Associates, Inc. (Incorporated
by reference from Form 10-K for 1997; Accession No.
0000080255-98-000358.)
10.07 1986 Employee Stock Purchase Plan of T. Rowe Price
Associates, Inc. as Amended to April 5, 1990. (Incorporated
by reference from Exhibit A to the Definitive Proxy Statement
for the 1990 Annual Meeting of Stockholders which is included
in the 1989 Annual Report on Form 10-K [File No. 0-14282].)
10.08 T. Rowe Price Associates, Inc. 1986 Stock Incentive Plan.
(Incorporated by reference from Form S-1 Registration
Statement [File No. 33-3398].)
10.09 T. Rowe Price Associates, Inc. 1990 Stock Incentive Plan.
(Incorporated by reference from Form S-8 Registration
Statement [File No. 33-37573].)
10.10 T. Rowe Price Associates, Inc. 1993 Stock Incentive Plan.
(Incorporated by reference from Form S-8 Registration
Statement [File No. 33-72568].)
10.11 T. Rowe Price Associates, Inc. 1995 Director Stock Option
Plan. (Incorporated by reference from Form DEF 14A;
Accession No. 000933259-95-000009; CIK 0000080255.)
39
10.12 T. Rowe Price Associates, Inc. 1996 Stock Incentive Plan
(Incorporated by reference from Form DEF 14A; Accession No.
0001006199-96-000031; CIK 0000080255.)
10.13 T. Rowe Price Associates, Inc. 1998 Director Stock Option
Plan. (Incorporated by reference from Form DEF 14A;
Accession No. 00080255-98-000355.)
21 Subsidiaries of T. Rowe Price Associates, Inc.
23 Consent of Independent Accountants,
PricewaterhouseCoopers LLP.
27 Financial Data Schedule.
(b) Reports on Form 8-K: None were filed during the last quarter of 1998.
SIGNATURES.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 5,
1999.
T. Rowe Price Associates, Inc.
By: /s/ George A. Roche, Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 5, 1999.
/s/ George A. Roche, Chairman, President and Director
/s/ James S. Riepe, Vice Chairman and Director
/s/ M. David Testa, Vice Chairman and Director
/s/ James E. Halbkat, Jr., Director
/s/ Henry H. Hopkins, Director
/s/ James A.C. Kennedy, Director
/s/ John H. Laporte, Director
/s/ Richard L. Menschel, Director
/s/ William T. Reynolds, Director
/s/ Brian C. Rogers, Director
/s/ Robert L. Strickland, Director
/s/ Philip C. Walsh, Director
/s/ Anne Marie Whittemore, Director
/s/ Alvin M. Younger, Jr., Chief Financial and Accounting Officer