ITEM 1. BUSINESS.
T. Rowe Price Associates, Inc. and its subsidiaries (the Company) serve as investment adviser to the T. Rowe Price Mutual Funds (the Price Funds), other sponsored investment products, and private accounts of other institutional and individual investors, including defined benefit and defined contribution retirement plans, endowments, foundations, trusts, and other mutual funds. Total assets under management at December 31, 1995 were $75.4 billion, up $17.6 billion since December 31, 1994. The Company also provides various administrative services to the Price Funds and other clients, 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 was incorporated in Maryland in January 1947 as successor to the investment counseling business formed by the late Mr. T. Rowe Price in 1937.
The Company offers its Price Funds' shareholders and private accounts a broad range of investment products designed to attract and retain investors with varying investment objectives. Shareholders are allowed to exchange funds among mutual fund products as economic and market conditions and investor needs change. The Company frequently introduces new mutual funds designed to complement and expand its investment product offerings, respond to competitive developments in the financial marketplace, and meet the changing needs of its funds' shareholders. New mutual funds and other investment products are introduced when the Company has personnel with sufficient investment expertise to manage the product 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 products which meet the varied needs and objectives of its individual and institutional investors. In recent years, there have been significant net cash inflows to the stock mutual funds, particularly the international funds in 1993 and 1994 and the domestic funds in 1995. Company 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. Investment advisory fees earned on assets under management and related expenses incurred to generate such fees are generally higher for stock and international investment products which have become a substantially larger portion of the Company's assets under management than in the past.
The investment strategies employed by the Company accommodate a variety of private account client investment objectives encompassing both domestic and international securities. Management of investments in stocks include active approaches emphasizing established growth, mid-cap growth, New America growth (companies that participate in the growth of the service sector of the U.S. economy), small cap, equity income, capital appreciation, and natural resources as well as systematic and balanced portfolio strategies. Approaches for investing in fixed income securities portfolios include active and systematic (index) management strategies and management of high yield securities and cash reserves. The Company has also developed several specialized investment management services including private company investing, investing in debt securities and creditor claims of financially-troubled companies, the efficient disposition of equity distributions from venture capital investments, and stable value investment contract management.
Average assets under management (in millions) during the past five years and total assets under management at December 31, 1995 are:
1991 1992 1993 1994 1995 12/31/95 ________ ________ ________ ________ ________ ________ Price Funds Stock $ 7,599 $ 10,280 $ 14,713 $ 21,495 $ 27,211 $ 32,311 Taxable bond 3,304 5,150 6,025 5,412 5,392 5,763 Tax-free bond 2,530 3,187 4,169 4,225 4,211 4,487 Money market 6,177 5,428 4,903 5,333 5,865 6,008 ________ ________ ________ ________ ________ ________ Total 19,610 24,045 29,810 36,465 42,679 48,569 Other sponsored in- vestment products and private accounts 13,066 14,510 17,136 19,490 23,866 26,868 ________ ________ ________ ________ ________ ________ Total assets under management $ 32,676 $ 38,555 $ 46,946 $ 55,955 $ 65,545 $ 75,437 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
The Company's revenues (in thousands) from investment advisory and administrative services provided under agreements with the Price Funds and other clients during the past five years are:
1991 1992 1993 1994 1995 ________ ________ ________ ________ ________ Investment advisory fees Price Funds Stock $ 47,712 $ 65,202 $ 96,136 $145,020 $180,574 Taxable bond 17,730 25,149 31,869 28,561 28,404 Tax-free bond 12,960 15,869 19,873 19,744 20,018 Money market 25,416 21,780 19,137 20,132 22,113 ________ ________ ________ ________ ________ Total 103,818 128,000 167,015 213,457 251,109 Other sponsored investment products and private accounts 41,576 46,590 57,794 76,614 80,978 ________ ________ ________ ________ ________ Total 145,394 174,590 224,809 290,071 332,087 ________ ________ ________ ________ ________ Administrative fees Price Funds 37,623 45,153 54,184 61,057 67,166 Price Funds' shareholders and others 13,197 18,405 23,024 24,615 27,211 ________ ________ ________ ________ ________ Total 50,820 63,558 77,208 85,672 94,377 ________ ________ ________ ________ ________ Total investment advisory and administrative fees $196,214 $238,148 $302,017 $375,743 $426,464 ________ ________ ________ ________ ________ ________ ________ ________ ________ ________
MUTUAL FUND MANAGEMENT.
OVERVIEW. 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 products. 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 products. The Company's marketing effort is focused on advertising in the print media and direct mail communications. During 1996, the Company will expand its promotional activities to the television market including cable channels. In addition, considerable direct marketing efforts are targeted at large participant-directed defined contribution plans that invest, in whole or in part, in mutual funds. 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, 1995, assets under management in the Price Funds aggregated $48.6 billion, an increase of $11.3 billion during 1995. The following information includes the net assets (in millions) at December 31, 1995 of each fund available to the investing public, the year the fund was added to the Price family of funds, and the fund's primary investment objective.
STOCK FUNDS:
$ 2,762 GROWTH STOCK (1950) - Long-term growth of capital and, secondarily, increasing dividend income by investing primarily in common stocks of well-established growth companies.
$ 2,855 NEW HORIZONS (1960) - Long-term growth of capital by investing primarily in common stocks of small, rapidly growing companies.
$ 1,090 NEW ERA (1969) - Long-term capital appreciation by investing primarily in common stocks of companies that own or develop natural resources and other basic commodities, and selected nonresource growth companies.
$ 6,703 INTERNATIONAL STOCK (1980) - Long-term growth of capital through investments primarily in common stocks of established, non-U.S. companies.
$ 1,748 GROWTH & INCOME (1982) - Long-term capital growth, a reasonable level of current income, and increasing future income through investments primarily in dividend-paying stocks.
$ 1,028 NEW AMERICA GROWTH (1985) - Long-term growth of capital by investing primarily in common stocks of U.S. growth companies operating in service industries.
$ 5,215 EQUITY INCOME (1985) - Substantial dividend income as well as long- term capital appreciation through investments in common stocks of established companies.
$ 864 CAPITAL APPRECIATION (1986) - Maximum capital appreciation by investing primarily in common stocks.
$ 2,285 SCIENCE & TECHNOLOGY (1987) - Long-term growth of capital by investing primarily in common stocks of companies expected to benefit from the development, advancement, and use of science and technology.
$ 936 SMALL-CAP VALUE (1988) - Long-term capital growth by investing primarily in common stocks of small companies that are believed to be undervalued.
$ 303 INTERNATIONAL DISCOVERY (1988) - Long-term growth of capital through investments primarily in common stocks of rapidly growing, small- to medium-sized non-U.S. companies.
$ 532 EUROPEAN STOCK (1990) - Long-term growth of capital through investments primarily in common stocks of both large and small European companies.
$ 457 EQUITY INDEX (1990) - To match the total return performance of the U.S. equity market as represented by the Standard & Poor's 500 Composite Stock Index by investing in the stocks that compose the S&P 500 Index.
$ 1,358 SPECTRUM GROWTH (1990) - Long-term growth of capital and growth of income by investing primarily in a diversified group of T. Rowe Price mutual funds which, in turn, invest principally in equity securities.
$ 1,880 NEW ASIA (1990) - Long-term growth of capital through investments in large and small companies domiciled or with primary operations in Asia, excluding Japan, and in Pacific Rim countries such as Australia and New Zealand.
$ 608 BALANCED (1991) - Capital appreciation, current income, and preservation of capital through investments in a diversified portfolio consisting of approximately 60% in common stocks and the balance in fixed-income securities.
$ 208 JAPAN (1991) - Long-term growth of capital through investments in common stocks of large and small companies domiciled or with primary operations in Japan.
$ 264 MID-CAP GROWTH (1992) - Long-term capital appreciation by investing primarily in common stocks of medium-sized (mid-cap) companies offering the potential for above-average earnings growth.
$ 279 OTC (1992) - Long-term growth of capital by investing in securities traded in the U.S. over-the-counter (OTC) market, primarily the stocks of small- to medium-sized companies.
$ 84 DIVIDEND GROWTH (1992) - Increasing dividend income over time, long-term capital appreciation, and reasonable current income through investments primarily in dividend-paying stocks.
$ 146 BLUE CHIP GROWTH (1993) - Long-term growth of capital by investing in common stocks of large- and medium-sized blue chip companies.
$ 150 LATIN AMERICA (1993) - Long-term growth of capital through investments primarily in common stocks of companies domiciled, or with primary operations, in Latin America.
$ 19 PERSONAL STRATEGY - BALANCED (1994) - Highest total return over time consistent with an emphasis on both capital appreciation and income by investing in a diversified portfolio consisting of 50-70% stocks and the balance in bonds and money market securities.
$ 16 PERSONAL STRATEGY - GROWTH (1994) - Highest total return over time consistent with a primary emphasis on capital appreciation by investing in a diversified portfolio consisting of 70-90% stocks and the balance in bonds and money market securities.
$ 26 PERSONAL STRATEGY - INCOME (1994) - Highest total return over time consistent with a primary emphasis on income and secondary emphasis on capital appreciation by investing in a diversified portfolio consisting of 30-50% stocks and the balance in bonds and money market securities.
$ 47 VALUE FUND (1994) - Long-term capital appreciation by investing primarily in common stocks believed to be undervalued.
$ 62 CAPITAL OPPORTUNITY (1994) - Superior capital appreciation over time by investing primarily in U.S. common stocks of small, medium and large companies.
$ 17 EMERGING MARKETS STOCK (1995) - Long-term growth of capital through investments primarily in common stocks of large and small companies domiciled, or with primary operations, in emerging markets in Latin America, Asia, Europe, Africa and the Middle East.
$ 2 GLOBAL STOCK (1995) - Long-term growth of capital through investments primarily in common stocks of established companies throughout the world, including the U.S.
$ 2 HEALTH SCIENCES (1995) - Long-term growth of capital by investing primarily in common stocks of companies engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences. TAXABLE BOND FUNDS:
$ 1,668 NEW INCOME (1973) - Highest level of income consistent with preservation of capital over time through investment primarily in marketable debt securities.
$ 1,227 HIGH YIELD (1984) - High current income and, secondarily, capital appreciation by investing in a widely diversified portfolio of lower-quality, long-term corporate bonds, often called high yield or junk bonds.
$ 464 SHORT-TERM BOND (1984) - High level of liquidity and income consistent with minimum fluctuation in principal value by investing in a diversified portfolio of short- and intermediate-term corporate, government, and debt securities.
$ 896 GNMA (1985) - High level of current income consistent with maximum credit protection and moderate price fluctuation by investing exclusively in securities backed by the full faith and credit of the U.S. Government, primarily mortgage-backed securities issued by the Government National Mortgage Association (GNMA), and instruments involving these securities.
$ 1,016 INTERNATIONAL BOND (1986) - High current income and capital appreciation by investing in high-quality, nondollar-denominated government and corporate bonds outside the U.S.
$ 183 U.S. TREASURY INTERMEDIATE (1989) - High level of income consistent with maximum credit protection and moderate fluctuation in principal value by investing primarily in U.S. Treasury securities and repurchase agreements.
$ 71 U.S. TREASURY LONG-TERM (1989) - Highest level of current income consistent with maximum credit protection by investing primarily in U.S. Treasury securities and repurchase agreements.
$ 987 SPECTRUM INCOME (1990) - High level of current income consistent with moderate price fluctuation by investing primarily in a diversified group of T. Rowe Price Mutual Funds which, in turn, invest principally in fixed-income securities.
$ 28 GLOBAL GOVERNMENT BOND (1990) - High current income and, secondarily, capital appreciation and protection of principal by investing primarily in high-quality foreign and U.S. government bonds.
$ 105 SHORT-TERM U.S. GOVERNMENT (1991) - Highest level of current income consistent with minimal share price fluctuation by investing in a diversified portfolio of short-term U.S. government-backed securities.
$ 40 SHORT-TERM GLOBAL INCOME (1992) - High level of current income consistent with modest share price fluctuation by investing primarily in high-quality fixed-income securities.
$ 24 SUMMIT GNMA (1993) - High level of income and maximum credit protection by investing in mortgage-backed certificates issued by GNMA.
$ 28 SUMMIT LIMITED-TERM BOND (1993) - High level of income consistent with moderate fluctuation in principal value by investing in short- and intermediate-term, investment-grade bonds.
$ 10 EMERGING MARKETS BOND (1994) - High income and capital appreciation by investing in the government and corporate debt securities of emerging nations.
$ 3 CORPORATE INCOME (1995) - High income and some capital appreciation by investing in investment-grade corporate debt securities.
TAX-FREE BOND FUNDS:
$ 1,397 TAX-FREE INCOME (1976) - High level of income exempt from federal income taxes by investing primarily in long-term, investment-grade municipal securities.
$ 451 TAX-FREE SHORT-INTERMEDIATE (1983) - High level of income exempt from federal income taxes consistent with modest price fluctuation by investing primarily in municipal securities in the four highest credit categories.
$ 983 TAX-FREE HIGH YIELD (1985) - High level of income exempt from federal income taxes by investing primarily in long-term, low- to upper-medium quality municipal securities.
$ 135 NEW YORK TAX-FREE BOND (1986) - Highest level of income exempt from federal, New York state and city income taxes by investing primarily in investment-grade New York municipal bonds.
$ 147 CALIFORNIA TAX-FREE BOND (1986) - Highest level of income exempt from federal and California state income taxes by investing primarily in investment-grade California municipal bonds.
$ 800 MARYLAND TAX-FREE BOND (1987) - Highest level of income exempt from federal and Maryland state and local income taxes by investing primarily in investment-grade Maryland municipal bonds.
$ 70 NEW JERSEY TAX-FREE BOND (1991) - Highest level of income exempt from federal and New Jersey state income taxes by investing primarily in investment-grade New Jersey municipal bonds.
$ 178 VIRGINIA TAX-FREE BOND (1991) - Highest level of income exempt from federal and Virginia state income taxes by investing primarily in investment-grade Virginia municipal bonds.
$ 91 TAX-FREE INSURED INTERMEDIATE BOND (1992) - High level of income exempt from federal income taxes and moderate price fluctuation while minimizing credit risk by investing primarily in insured municipal securities.
$ 84 MARYLAND SHORT-TERM TAX-FREE BOND (1993) - Highest level of income exempt from federal and Maryland state and local income taxes consistent with modest fluctuation in principal value by investing primarily in investment-grade Maryland municipal bonds.
$ 72 FLORIDA INSURED INTERMEDIATE TAX-FREE BOND (1993) - High level of income exempt from federal income taxes while minimizing credit risk by investing primarily in insured Florida municipal bonds.
$ 32 GEORGIA TAX-FREE BOND (1993) - Highest level of income exempt from federal and Georgia state income taxes by investing primarily in investment-grade Georgia municipal bonds.
$ 12 SUMMIT MUNICIPAL INCOME (1993) - High level of income exempt from federal income taxes by investing primarily in long-term, investment-grade municipal bonds.
$ 23 SUMMIT MUNICIPAL INTERMEDIATE (1993) - Highest possible income exempt from federal income taxes consistent with moderate price fluctuation by investing primarily in investment-grade municipal bonds.
$ 12 VIRGINIA SHORT-TERM TAX-FREE BOND (1994) - Highest level of income exempt from federal and Virginia state income taxes consistent with modest fluctuation in principal value by investing primarily in investment-grade Virginia municipal bonds.
MONEY MARKET FUNDS:
$ 3,988 PRIME RESERVE (1976) - Preservation of capital, liquidity and, consistent with these, the highest possible current income through investments primarily in high-quality, money market securities.
$ 660 TAX-EXEMPT MONEY (1981) - Preservation of capital, liquidity and, consistent with these, the highest current income exempt from federal income taxes by investing in high-quality, short-term municipal securities.
$ 717 U.S. TREASURY MONEY (1982) - Maximum safety of capital, liquidity and, consistent with these, the highest possible current income by investing primarily in a portfolio of U.S. Treasury securities.
$ 70 NEW YORK TAX-FREE MONEY (1986) - Highest possible current income exempt from federal, New York state and city income taxes consistent with preservation of principal and liquidity by investing in municipal securities.
$ 73 CALIFORNIA TAX-FREE MONEY (1986) - Highest possible current income exempt from federal and California state income taxes consistent with preservation of principal and liquidity by investing in municipal securities.
$ 427 SUMMIT CASH RESERVES (1993) - Preservation of capital, liquidity and, consistent with these, the highest possible current income by investing in a diversified portfolio of U.S. dollar-denominated money market securities.
$ 73 SUMMIT MUNICIPAL MONEY MARKET (1993) - Preservation of capital, liquidity and, consistent with these, the highest possible current income exempt from federal income taxes by investing in high- quality municipal securities.
The Company also sponsors the Foreign Equity Fund, an international stock fund begun in 1989 for institutional investors, which seeks to provide long- term growth of capital through investments primarily in common stocks of established, non-U.S. companies. Assets under management in this fund were $1,723 million at December 31, 1995.
AGREEMENTS WITH PRICE FUNDS. The Company provides investment advisory, distribution and 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 of directors and to each fund's fundamental investment objective. The investment management agreements with the Price Funds are approved annually by the directors of the respective funds, including a majority of the directors 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 the funds and separate administrative fees for the support services rendered by the Company. Management of the Company and the independent directors of the Price Funds regularly review the fund fee structures in light of fund performance, the level and range of services provided, industry conditions, and other factors. The current advisory fee paid by each of the Price Funds (excluding the Price Spectrum and Summit
Funds, the Price Equity Index Fund and the Foreign Equity Fund) is computed by multiplying the individual fund's average daily net assets by a composite fee determined by adding a group fee based on the combined net assets of the Price Funds and an individual fund fee applicable to each fund.
Each fund (excluding the Price 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 directors' fees and expenses. All advertising, promotion and selling expenses are borne by the Company.
The Company does, however, absorb expenses of funds that are in excess of limitations established under state securities laws. The Company does not expect that state expense limits, at current fee and expense levels, will have any significant effect on the results of its operations. The Company generally guarantees that a newly-organized fund's expenses will not exceed a specified ratio during its initial operations. Allowances made for reduced advisory fees and other mutual fund expenses in excess of limitations may be recovered in future periods if and when fund performance and related expense limitation provisions permit.
Pursuant to underwriting agreements with each fund, T. Rowe Price Investment Services, Inc. (TRP Investment Services) is the exclusive distributor of the Price Funds. The agreements provide that TRP Investment Services shall always offer the funds' shares at a public offering price equal to the net asset value per share and shall use its best efforts to obtain investors for the funds. The underwriting agreements with the Price Funds are approved annually by the directors of the respective funds, including a majority of the directors who are not "interested persons" of the funds or the Company as defined under the Investment Company Act. 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). 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 level of advertising and promotion expenditures varies over time as market conditions and cash inflows to the Price Funds warrant.
ADMINISTRATIVE SERVICES. T. Rowe Price Services, Inc. (TRP Services) provides transfer agent and shareholder services under contracts with the Price Funds. Shareholder servicing activities include maintenance of staff and equipment to respond to all telephone inquiries from existing Fund shareholders and to provide the mutual fund transfer agent function. In addition, the Company provides mutual fund accounting services including maintenance of financial records, 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, at least in part, in the Price Funds. Plan sponsors compensate TRP Retirement Plan Services for certain administrative 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 employee retirement plans. Under its charter, TRP Trust Company may not be in the business of accepting deposits and cannot make personal or commercial loans.
The Company also provides discount brokerage services through TRP Investment Services. Such services are provided primarily to shareholders of the Price Funds and are intended to complement the other investment services offered to them. All discount brokerage transactions are cleared through and accounts maintained by BHC Securities, Inc., an independent clearing broker.
OTHER SPONSORED PRODUCTS AND PRIVATE ACCOUNT MANAGEMENT.
The Company serves as investment adviser to pension, profit sharing and other employee benefit plans, endowments, foundations, trusts, individuals, corporations, other mutual funds and other investors who are principally domiciled in the United States. No private account client accounted for more than 5% of the Company's 1995 private account investment advisory revenues. Investment management services are provided to client accounts on an individual basis and through sponsored investment partnerships and trusts. Sponsored investment products have generally been issued through private placements.
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. The minimum account size is generally $20 million for institutional private account services, although the minimum account size for certain specialized investment services may be higher. Fees for sponsored product management are based on individual product advisory agreements, which result from consideration of, among other things, the type of investments to be made and the unique investment management services to be provided.
Many specialized investment advisory services are provided to private
accounts by subsidiaries of the Company. International equity and fixed income securities management is provided by Rowe Price-Fleming International, Inc. (RPFI). Management of stable value investment contracts, aggregating $5.3 billion at December 31, 1995, is provided by T. Rowe Price Stable Asset Management, Inc. (TRP Stable Asset Management).
INVESTMENT RESEARCH.
In the performance of its investment advisory functions, the Company uses fundamental, technical and cyclical security analysis methods. The Company maintains a substantial internal equity and fixed income investment research effort, undertaken by analysts, economists, statisticians and support personnel, which includes original industry and company research, utilizing such sources as inspection of corporate activities, management interviews, company-prepared information, financial information published by companies and/or filed with the SEC, financial newspapers and magazines, corporate rating services, and field checks with participants in the industry such as suppliers or competitors. 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 is the basis of the stock selection process rather than security analysis.
ROWE PRICE-FLEMING INTERNATIONAL, INC.
TRP Finance, Inc., an investment holding company subsidiary, 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 Copthall Overseas Limited (United Kingdom), a subsidiary of the London-based merchant banking group Robert Fleming Holdings Limited, and Jardine Fleming International Holdings Limited (Cayman Islands), a subsidiary of the Jardine Fleming Group Limited, an investment bank in the Asia-Pacific Region. RPFI serves as investment adviser to the Price International Funds and to other mutual funds, sponsored investment products and private accounts of institutional investors. During 1995, international assets under management by RPFI increased $3.9 billion to $22.2 billion at year end, including $12.6 billion in the T. Rowe Price International Funds. 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 are paid for these services based on RPFI's assets under management.
REGULATION.
The Company, RPFI, TRP Stable Asset Management, and T. Rowe Price (Canada), Inc. (TRP Canada) are registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940 and all applicable state securities agencies. Each of the Price Funds is registered with the Securities and Exchange Commission under the Investment Company Act and, except for the specific state tax-free funds, is qualified for sale throughout the United States and Puerto Rico. TRP Investment Services is registered as a broker- dealer under the Securities Exchange Act of 1934 (Exchange Act) and all applicable state securities laws and is a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. TRP Services is registered under the Exchange Act as a transfer agent, and TRP Trust Company is regulated by the State of Maryland Bank Commissioner. TRP Canada is also registered as an investment adviser with the Ontario Securities Commission.
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 the investment adviser and other registrations, censures and fines.
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 and insurance companies. In addition to other investment advisory and mutual fund management companies, 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 products and services primarily on the basis of the range of investment products offered, the investment performance of such products, the manner in which such products are distributed, and the scope and quality of the services provided.
The Company believes that competition among the mutual funds industry will increase as a result of consolidation and acquisition activity within the industry. In order to maintain and enhance its competitive position as an independent, no-load, direct marketer of mutual funds, the Company frequently reviews acquisition prospects and may, from time to time, engage in discussions or negotiations that could lead to acquisitions by the Company. Currently, the Company is not party to any agreements or understandings
regarding any acquisitions; however, as a result of the Company's process of reviewing possible acquisition prospects, negotiations may occur from time to time if appropriate opportunities arise.
EMPLOYEES.
At December 31, 1995, the Company and its subsidiaries had 1,910 active, full-time employees. The Company employs additional temporary and part-time personnel to meet seasonal and other periodic demands for mutual fund shareholder and investor services.
ITEM 2.
ITEM 2. PROPERTIES.
The Company's primary corporate offices consist of approximately 270,000 square feet of space located at 100 East Pratt Street in Baltimore, Maryland. The Company also leases facilities in Los Angeles and San Francisco, California; Owings Mills, Maryland; Glen Allen, Virginia; Washington, D.C.; and Tampa, Florida. Future minimum rental payments under noncancelable operating leases at December 31, 1995 are set forth in Note 9 to the consolidated financial statements included in Item 8. of this Form 10-K.
TRP Suburban, Inc. owns a $19.8 million financial operations center in Owings Mills, Maryland consisting of approximately 110,000 square feet of operating space. The facility houses a portion of the Company's administrative services operations. The land has been leased until 2089.
TRP Suburban Second, Inc. acquired 32.5 acres of land in Owings Mills, Maryland in December 1995 and has begun development of two buildings with a combined 219,000 square feet of space in early 1996. Construction is expected to be completed in the second half of 1997. The acreage will accommodate additional development of approximately 300,000 square feet of space. TRP Suburban Second also has an option to acquire an adjacent 37.4 acres to meet further development needs.
Information concerning anticipated 1996 capital expenditures is set forth in the last paragraph of Item 7. of this Form 10-K.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is a party to various claims arising in the ordinary course of business. The Company is not currently the subject of any claim that, if adversely determined, is likely to have a material adverse effect on the Company's financial position or results of operations.
ITEM 4.
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 1995.
ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information includes the names, ages, and positions of the executive officers and certain significant employees of the Company. There are no arrangements or understandings pursuant to which any person serves the Company. The first seven individuals listed are presently members of the Board of Directors; however, Messrs. Broadus and Hoffman will retire from the Board in April 1996.
George J. Collins (55), President and Chief Executive Officer (1984) and Managing Director (1989) George A. Roche (54), Managing Director (1989) and Chief Financial Officer (1984) Thomas H. Broadus, Jr. (58), Managing Director (1989) Carter O. Hoffman (68), Managing Director (1989) Henry H. Hopkins (53), Managing Director (1989) James S. Riepe (52), Managing Director (1989) M. David Testa (51), Managing Director (1989) Edward C. Bernard (40), Managing Director (1995) and Vice President (1989-1995) Stephen W. Boesel (51), Managing Director (1993) and Vice President (1977-1993) James A.C. Kennedy (42), Managing Director (1990) John H. LaPorte (50), Managing Director (1989) Mary J. Miller (40), Managing Director (1993) and Vice President (1986-1993) Charles A. Morris (33), Managing Director (1995) and Vice President (1990-1995) Mark E. Rayford (44), Managing Director (1993) and Vice President (1984-1993) William T. Reynolds (47), Managing Director (1990) Brian C. Rogers (40), Managing Director (1991) Charles P. Smith (52), Managing Director (1990) Peter Van Dyke (57), Managing Director (1990) Charles E. Vieth (39), Managing Director (1993) and Vice President (1985-1993) Richard T. Whitney, (37), Managing Director (1995) and Vice President (1988-1995) Alvin M. Younger, Jr. (46), Managing Director (1990), Treasurer (1985) and Secretary (1987)
PART II.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock ($.20 par value) trades on The Nasdaq Stock Market under the symbol "TROW". The high and low trade price information and dividends per share during the past two years were:
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ________ ________ ________ ________
1994 - High price $ 38.25 $ 31.75 $ 34.75 $ 34.50 Low price $ 26.25 $ 26.25 $ 24.625 $ 27.75 Cash dividends declared $ .13 $ .13 $ .13 $ .16
1995 - High price $ 37.25 $ 41.00 $ 51.75 $ 56.75 Low price $ 27.00 $ 35.25 $ 33.75 $ 45.00 Cash dividends declared $ .16 $ .16 $ .16 $ .21
At February 12, 1996, there were approximately 2,400 holders of record of the Company's outstanding common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Year ended December 31, ___________________________________________________ 1991 1992 1993 1994 1995 ________ ________ ________ ________ ________ (in thousands, except per-share amounts)
Revenues $205,206 $245,112 $310,041 $382,378 $439,299 Net income $ 30,437 $ 35,784 $ 48,539 (1) $ 61,151 $ 75,409 (3) Earnings per share (2) $ 1.02 $ 1.19 $ 1.59 (1) $ 2.00 $ 2.47 (3) Cash dividends declared per share (2) $ .33 $ .375 $ .445 $ .55 $ .69 Weighted average shares outstanding (2) 29,823 30,158 30,615 30,571 30,525
(1) Net income and earnings per share before the cumulative effects of changes in accounting principles were $48,869 and $1.60, respectively. (2) Retroactively adjusted to give effect to the 2-for-1 stock split in November 1993. (3) Net income and earnings per share before an extraordinary charge were $76,458 and $2.50, respectively.
December 31, ________________________________________________ 1991 1992 1993 1994 1995 ________ ________ ________ ________ ________ (in thousands, except as noted) Balance sheet data Total assets $179,571 $206,072 $263,400 $297,282 $365,343 Debt $ 15,969 $ 13,190 $ 12,915 $ 12,613 $ -- Stockholders' equity $132,525 $154,198 $195,953 $216,239 $274,232 Assets under manage- ment (in millions) $ 35,623 $ 41,415 $ 54,396 $ 57,835 $ 75,437
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
GENERAL.
T. Rowe Price Associates, Inc. (the Company) derives its revenue primarily from investment advisory and administrative services provided to the Price Mutual Funds (the Funds), other sponsored investment products, and private accounts of other institutional and individual investors. Investment advisory fees are generally based on the net assets of the portfolios managed. The majority of administrative revenues are derived from services provided to the Funds.
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 products which meet the varied needs and objectives of its individual and institutional investors. In recent years, there have been significant net cash inflows to the stock mutual funds, particularly the international funds in 1993 and 1994 and the domestic funds in 1995. Company 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.
RESULTS OF OPERATIONS.
1995 versus 1994. Net income increased almost $14.3 million or 23% to $75.4 million. Earnings per share grew more than 23%, or $.47 per share, to an annual record of $2.47. The 1995 results include an extraordinary charge of $1.0 million or $.03 per share from the early extinguishment of the Company's 9.77% fixed rate, $12.4 million promissory note due in 2001. The Company's common stock repurchases during 1994 and 1995 resulted in a decrease in weighted average shares outstanding and account for $.03 of the increase in earnings per share. Total revenues increased 15% from $382.4 million to an annual record of $439.3 million, led by an increase of $42.0 million in investment advisory revenues.
Investment advisory revenues from the Funds increased more than $37.6 million as average assets under management rose $6.2 billion to $42.7 billion. Fund assets totaled $48.6 billion at December 31, 1995, up $11.3 billion from December 31, 1994, with stock funds accounting for $9.5 billion of the increase. Net cash inflows to the Funds during 1995 of $3.8 billion, including $3.6 billion to the stock funds, surpassed the 1994 total of $3.4 billion and nearly equaled the record of $3.9 billion in 1993. Private accounts and other sponsored products contributed the balance of the investment advisory revenue gains as these assets under management rose $6.3 billion to more than $26.8 billion at December 31, 1995. Total assets under management at year end increased to $75.4 billion from $57.8 billion.
Administrative fees from services to the Funds and their shareholders rose 10% during 1995 to $94.4 million, primarily as a result of growth in the
activities of the Company's mutual fund transfer agent and defined contribution retirement plan recordkeeping services; however, increases in related operating expenses more than offset these revenue gains.
Investment and other income rose $6.2 million primarily due to greater earnings on the Company's larger mutual fund holdings and capital gains realized on stock mutual fund investments.
Operating expenses increased 13% or $34.4 million to $295.6 million from $261.2 million. Greater compensation and related costs, which were up $14.0 million, were attributable to increases in overall compensation rates, including higher bonuses, and an 8% increase in the average number of employees primarily to support the Company's growing administrative operations. Advertising and promotion expenditures increased 12% to $34.8 million as fourth quarter 1995 spending was boosted significantly in response to investor demand for stock mutual funds. Early 1996 cash inflows to the mutual funds have been strong. Advertising and promotion expenditures in 1996 are expected to remain high relative to 1995 expenditures as long as market conditions and cash inflows warrant. Depreciation, amortization, and operating rentals of property and equipment increased $5.2 million as a result of the Company's recent investments in computer and communications equipment and office facilities. International investment research fees increased $4.3 million as international assets under management rose to $22.2 billion at December 31, 1995, including $12.6 billion in the mutual funds. Administrative and general expenses increased $7.2 million due to greater costs associated with the Company's growing operations and data processing capabilities.
The provision for income taxes decreased as a percentage of income before income taxes and minority interests primarily due to the recognition of federal research expenditure credits. Tax laws allowing such credits expired June 30, 1995.
Lower net income reported on a separate company basis by the Company's 50%- owned subsidiary, Rowe Price-Fleming International, Inc. (RPFI), was the primary reason for the decrease in income attributable to the minority interests in the Company's consolidated subsidiaries.
1994 versus 1993. Net income increased $12.6 million or 26% from $48.5 million and $1.59 per share to $61.2 million and $2.00 per share. Revenues increased 23% to $382.4 million from $310.0 million. Results for 1993 included a net charge of $.3 million or $.01 per share reflecting the cumulative effects of changes in accounting principles.
Investment advisory revenues from the Funds increased $46.4 million as average assets under management rose $6.7 billion to $36.5 billion. Assets in the Funds closed 1994 at $37.3 billion, up $2.6 billion during the year, with stock funds accounting for $22.8 billion of the year-end total. Net cash inflows to the Funds during 1994 totaled nearly $3.4 billion as net subscriptions of $4.1 billion into the stock funds and $.8 billion into the money market funds were partially offset by net redemptions of $1.5 billion
from the bond funds. Private accounts and other sponsored products primarily in the international asset area and performance management fees earned from sponsored partnerships contributed $18.8 million of the revenue gains. Private account assets under management rose to $20.5 billion at December 31, 1994, up $.8 billion during the year. Total assets under management at year end increased to $57.8 billion from $54.4 billion.
Administrative fees from services to the Price Funds and their shareholders rose 11% during 1994 to $85.7 million as a result of growth in the activities of the Company's mutual fund transfer agent and defined contribution plan recordkeeping services; however, increases in related operating expenses more than offset these revenue gains. Investment and other income decreased $1.4 million from 1993 due to losses from dispositions and write-downs of the Company's bond fund holdings in the higher interest rate environment that existed throughout 1994.
Operating expenses increased 19% or $42.1 million to $261.2 million from $219.1 million. Greater compensation and related costs, which were up $19.7 million, were attributable to increases in overall compensation rates, including higher bonuses, and a 6% increase in the average number of employees, primarily to support the growing administrative services operations. The Company increased spending on advertising and promotion by $1.8 million primarily to attract additional investments into the international funds during early 1994. Such expenditures vary over time as market conditions and cash inflows to the Funds warrant. Depreciation, amortization, and operating rentals of property and equipment increased $3.5 million as a result of the Company's recent investments in computer and communications equipment, office facilities and furnishings. International investment research fees, which are based on international assets under management, increased $9.2 million. Administrative and general expenses increased $7.9 million as a result of greater operating costs associated with the Company's growing operations, including those related to data processing and communications.
Increased earnings by RPFI was the primary reason for the increase in income attributable to the minority interests in consolidated subsidiaries. The Company's international assets, which are managed by RPFI, increased $2.9 billion to $18.3 billion at December 31, 1994, including $10.8 billion in the Price Funds.
CAPITAL RESOURCES AND LIQUIDITY.
During the three years ended December 31, 1995, stockholders' equity increased 78% or $120.0 million to $274.2 million. Stockholders' equity at December 31, 1995 includes $12.7 million of net unrealized security holding gains on the Company's investments in sponsored mutual funds and $43.2 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.
Operating activities provided net cash inflows of $101.8 million in 1995 when net income increased $14.3 million. Comparatively, 1994 provided net operating cash inflows of $111.9 million, including $27.3 million from the
liquidation of sponsored mutual fund investments which had been held as trading securities. Net cash expended in investing activities during 1995 aggregated $35.5 million, down from the $53.4 million expended in 1994 when the proceeds of the liquidation of the trading securities portfolio were reinvested in the Company's longer-term investment portfolios. Property and equipment expenditures reached $23.9 million in 1995, including $7.8 million for the acquisition of 32.5 acres of land in suburban Owings Mills, Maryland on which the Company will develop additional office facilities for its expanding operations. Financing activities consumed $44.9 million in 1995, including common stock repurchases, dividends and distributions to minority interests as well as $13.6 million for the early extinguishment of the Company's long-term debt. The Company realized a substantial savings by retiring the debt at market rates versus the terms of the original borrowing.
At December 31, 1995, the Company held net liquid assets of more than $170 million, including $81.4 million of cash and cash equivalents, to meet business demands and opportunities. In addition, a maximum of $20 million is available to the Company under unused bank lines of credit.
The Company anticipates 1996 property and equipment acquisitions of approximately $50 million, including $20 million for development of two office buildings on the land acquired in 1995. Additional construction and furnishing costs of approximately $30 million for these new facilities are expected in 1997 before occupancy occurs in the latter half of the year. These capital expenditures are expected to be funded from liquid assets currently available and from operating cash inflows. The future need for additional facilities can be met on the substantial acreage remaining undeveloped and on an adjacent 37.4 acres presently under purchase option. Commitments for additional investments in partnerships and other ventures aggregate $7.5 million at December 31, 1995.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Financial Statements: Report of Independent Accountants 22 Consolidated Balance Sheets at December 31, 1994 and 1995 23 Consolidated Statements of Income for each of the three years in the period ended December 31, 1995 24 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1995 25 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1995 26 Summary of Significant Accounting Policies 28 Notes to Consolidated Financial Statements 30
Supplementary Data - Selected Quarterly Data. 37
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, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, 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.
During 1993, the Company changed its methods of accounting for postretirement benefits other than pensions and income taxes by adopting new standards of the Financial Accounting Standards Board. These changes are more fully described in Notes 8 and 4 accompanying the consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
Baltimore, Maryland January 25, 1996
T. ROWE PRICE ASSOCIATES, INC. CONSOLIDATED BALANCE SHEETS
December 31, __________________ 1994 1995 ________ ________ (in thousands) ASSETS Cash and cash equivalents (Note 1) $ 60,016 $ 81,431 Accounts receivable (Note 1) 46,722 55,841 Investments in sponsored mutual funds held as available-for-sale securities (Note 1) 93,010 121,606 Partnership and other investments (Note 9) 28,657 28,049 Property and equipment (Note 2) 49,341 60,222 Goodwill and other assets (Notes 3 and 4) 19,536 18,194 ________ ________ $297,282 $365,343 ________ ________ ________ ________
LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses (Note 6) $ 18,538 $ 27,287 Accrued compensation and retirement costs (Note 8) 27,413 28,803 Income taxes payable (Note 4) 1,573 7,376 Dividends payable 4,575 6,036 Debt (Note 5) 12,613 -- Minority interests in consolidated subsidiaries 16,331 21,609 ________ ________ Total liabilities 81,043 91,111 ________ ________
Commitments and contingent liabilities (Note 9)
Stockholders' equity (Notes 6 and 9) Preferred stock, undesignated, $.20 par value - authorized and unissued 20,000,000 shares in 1995 -- -- Common stock, $.20 par value - authorized 48,000,000 shares in 1994 and 100,000,000 shares in 1995; issued 28,569,419 shares in 1994 and 28,665,472 shares in 1995 5,714 5,733 Capital in excess of par value 1,935 2,912 Retained earnings 206,036 252,934 Unrealized security holding gains (Note 1) 2,554 12,653 ________ ________ Total stockholders' equity 216,239 274,232 ________ ________ $297,282 $365,343 ________ ________ ________ ________
The accompanying notes are an integral part of the consolidated financial statements.
T. ROWE PRICE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, __________________________ 1993 1994 1995 ________ ________ ________ (in thousands, except per-share amounts) Revenues Investment advisory fees (Note 1) $224,809 $290,071 $332,087 Administrative fees (Note 1) 77,208 85,672 94,377 Investment and other income (Notes 1 and 7) 8,024 6,635 12,835 ________ ________ ________ 310,041 382,378 439,299 ________ ________ ________
Expenses Compensation and related costs (Notes 6 and 8) 109,637 129,373 143,369 Advertising and promotion 29,448 31,201 34,843 Depreciation, amortization and operating rentals of property and equipment (Note 9) 21,528 24,993 30,247 International investment research fees 16,469 25,719 30,023 Administrative and general (Note 5) 41,975 49,899 57,124 ________ ________ ________ 219,057 261,185 295,606 ________ ________ ________
Income before income taxes and minority interests 90,984 121,193 143,693 Provision for income taxes (Note 4) 35,320 46,587 54,335 ________ ________ ________ Income from consolidated companies 55,664 74,606 89,358 Minority interests in consolidated subsidiaries 6,795 13,455 12,900 ________ ________ ________ Income before extraordinary charge and cumulative effects of changes in accounting principles 48,869 61,151 76,458 Extraordinary charge from early extinguishment of debt, net of income tax benefit (Note 5) -- -- (1,049 ) Cumulative effects of changes in accounting principles for Postretirement benefits other than pensions (Note 8) (621) -- -- Income taxes (Note 4) 291 -- -- ________ ________ ________ Net income $ 48,539 $ 61,151 $ 75,409 ________ ________ ________ ________ ________ ________
Earnings per share, including a net charge of $.01 per share in 1993 for the cumulative effects of changes in accounting principles and an extraordinary charge of $.03 per share in 1995 $ 1.59 $ 2.00 $ 2.47 ________ ________ ________ ________ ________ ________
The accompanying notes are an integral part of the consolidated financial statements.
T. ROWE PRICE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, ____________________________ 1993 1994 1995 ________ ________ ________ (in thousands) Cash flows from operating activities Net income $ 48,539 $ 61,151 $ 75,409 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 7,974 10,134 13,278 Amortization of goodwill and deferred expenses 1,845 1,761 1,281 Deferred income taxes (tax benefits) 3,139 (2,232) 711 Minority interests in consolidated subsidiaries 6,795 13,455 12,900 Increase in accounts receivable (13,036) (3,620) (9,119) Liquidation of (investment in) sponsored mutual funds held as trading securities (27,657) 27,292 -- Increase in accounts payable and accrued liabilities 8,648 6,505 6,055 Other changes in assets and liabilities 2,591 (2,587) 1,237 ________ ________ ________ Net cash provided by operating activities 38,838 111,859 101,752 ________ ________ ________ Cash flows from investing activities Investments in sponsored mutual funds (30,710) (33,962) (19,101) Proceeds from dispositions of sponsored mutual funds 1,034 5,192 6,846 Proceeds from disposition of MRT holdings 34,636 -- -- Partnership and other investments (3,214) (8,812) (1,387) Return of partnership investments 905 1,563 2,076 Additions to property and equipment (12,240) (17,431) (23,906) ________ ________ ________ Net cash used in investing activities (9,589) (53,450) (35,472) ________ ________ ________ Cash flows from financing activities Purchases of stock (2,251) (26,401) (9,679) Receipts relating to stock issuances 2,457 3,497 4,455 Dividends paid to stockholders (12,138) (15,085) (18,259) Distributions to minority interests (4,775) (6,320) (7,720) Debt payments (275) (302) (12,613) Extraordinary charge from early extinguishment of debt -- -- (1,049) ________ ________ ________ Net cash used in financing activities (16,982) (44,611) (44,865) ________ ________ ________ Cash and cash equivalents Net increase during year 12,267 13,798 21,415 At beginning of year 33,951 46,218 60,016 ________ ________ ________ At end of year $ 46,218 $ 60,016 $ 81,431 ________ ________ ________ ________ ________ ________
The accompanying notes are an integral part of the consolidated financial statements. T. ROWE PRICE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands)
Capital Unreal- Common in ized Total Common stock excess security stock- stock - par of par Retained holding holders' - shares value value earnings gains equity __________ ______ _______ ________ ________ ________ Balance at December 31, 1992 14,429,315 $2,886 $ 1,171 $150,141 $154,198 Common stock issued under stock-based compensation plans 254,629 51 2,963 3,014 2-for-1 stock split 14,491,095 2,898 (1,997) (901) -- Purchases of common stock (80,000) (16) (940) (1,295) (2,251) Net income 48,539 48,539 Dividends declared (12,892) (12,892) Unrealized security holding gains $5,345 5,345 __________ ______ _______ ________ ______ ________ Balance at December 31, 1993 29,095,039 5,819 1,197 183,592 5,345 195,953 Common stock issued under stock-based compensation plans 366,880 74 4,277 4,351 Purchases of common stock (892,500) (179) (3,539) (22,831) (26,549) Net income 61,151 61,151 Dividends declared (15,876) (15,876) Decrease in unrealized security holding gains (2,791) (2,791) __________ ______ _______ ________ ______ ________ Balance at December 31, 1994 28,569,419 5,714 1,935 206,036 2,554 216,239
Continued on next page.
T. ROWE PRICE ASSOCIATES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands)
Capital Unreal- Common in ized Total Common stock excess security stock- stock - par of par Retained holding holders' - shares value value earnings gains equity __________ ______ _______ ________ ________ ________
Continued from prior page.
Common stock issued under stock-based compensation plans 465,553 93 5,555 (2) 5,646 Purchases of common stock (369,500) (74) (4,578) (8,789) (13,441) Net income 75,409 75,409 Dividends declared (19,720) (19,720) Increase in unrealized security holding gains 10,099 10,099 __________ ______ _______ ________ _______ ________ Balance at December 31, 1995 28,665,472 $5,733 $ 2,912 $252,934 $12,653 $274,232 __________ ______ _______ ________ _______ ________ __________ ______ _______ ________ _______ ________
The accompanying notes are an integral part of the consolidated financial statements. T. ROWE PRICE ASSOCIATES, INC. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the Company) derives its revenue primarily from investment advisory and administrative services provided to sponsored mutual funds and investment products and to private accounts of other institutional and individual investors. Company revenues are largely dependent on the total value and composition of assets under management, which include domestic and international equity and debt securities; 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. Certain 1993 and 1994 amounts have been reclassified to conform to the 1995 presentation.
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.
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.
CASH EQUIVALENTS. For purposes of financial statement disclosure, cash equivalents consist of all short-term, highly liquid investments including certain money market mutual funds and all overnight commercial paper investments. The cost of these investments is equivalent to fair value.
INVESTMENTS IN SPONSORED MUTUAL FUNDS. On December 31, 1993, the Company began accounting for its investments in sponsored stock and bond mutual funds at fair value and, accordingly, classifies these holdings as either trading securities (held for only a short period of time) or available-for-sale securities. Unrealized holding gains on securities classified as available-for-sale are reported, net of income taxes, as a separate component of stockholders' equity.
CONCENTRATION OF CREDIT RISK. Financial instruments which potentially expose the Company to concentrations of credit risk as defined by Statement of Financial Accounting Standards (SFAS) No. 105 consist primarily of investments in sponsored money market and bond mutual funds and accounts receivable. Credit risk is believed to be minimal in that counterparties to these financial instruments have
substantial assets, including the diversified investment portfolios under management by the Company which aggregate $75.4 billion at December 31, 1995.
PARTNERSHIP AND OTHER INVESTMENTS. The Company invests in various partnerships and ventures, including those sponsored by the Company. These entities, which hold equity securities, venture capital investments and debt securities, are generally accounted for using the equity method which adjusts the Company's cost for its share of subsequent earnings or losses. These investments do not have a readily determinable fair value. 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 useful lives: computer and communications equipment, furniture and other equipment, 2 to 7 years; building, 40 years; leasehold improvements, the shorter of their estimated useful lives or the remainder of the lease term; and leased land, the term of the lease.
REVENUE RECOGNITION. Investment advisory and administrative services fees are recognized during the period in which such services are performed, except when advisory fees from mutual funds are adjusted in accordance with the expense limitation provisions of the investment advisory agreements between the Company and the funds. Allowances made for reduced advisory fees and other mutual fund expenses in excess of limitations may be recovered in future periods if and when fund performance and related expense limitation provisions permit.
ADVERTISING. Costs of advertising are expensed the first time that the advertising takes place.
EARNINGS PER SHARE. Earnings per share is computed based on the weighted average number of common shares outstanding, including share equivalents arising from unexercised stock options. The aggregate weighted average shares outstanding used in computing earnings per share were 30,615,114 in 1993, 30,571,496 in 1994, and 30,524,853 in 1995.
T. ROWE PRICE ASSOCIATES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INVESTMENTS IN AND TRANSACTIONS WITH SPONSORED MUTUAL FUNDS.
Investments in sponsored money market mutual funds, which are classified as cash equivalents in the accompanying consolidated financial statements, aggregate $59,355,000 at December 31, 1994 and $78,947,000 at December 31, 1995.
The Company's investments in sponsored mutual funds held as available-for- sale at December 31 include:
Gross unrealized Aggregate Aggregate holding gains fair cost (losses) value _________ ______________ _________ (in thousands) ___________ Stock funds $ 58,540 $ 4,346 $ 62,886 Bond funds 30,460 (336) 30,124 ________ _______ ________ Total $ 89,000 $ 4,010 $ 93,010 ________ _______ ________ ________ _______ ________
___________ Stock funds $ 70,872 $17,345 $ 88,217 Bond funds 30,856 2,533 33,389 ________ _______ ________ Total $101,728 $19,878 $121,606 ________ _______ ________ ________ _______ ________
Dividends earned on the Company's investments in sponsored mutual funds aggregated $4,439,000 in 1993, $5,644,000 in 1994, and $9,845,000 in 1995. The Company recognized net losses of $34,000 and $1,306,000 in 1993 and 1994, respectively, and a net gain of $473,000 in 1995 from dispositions and write- downs of fund investments.
The Company provides investment advisory and administrative services to the T. Rowe Price family of mutual funds which had aggregate net assets under management at December 31, 1995 of $48.6 billion. All services rendered by the Company are provided under contracts that set forth the services to be provided and the fees to be charged. These contracts are subject to periodic review and approval by each of the funds' boards of directors and, with respect to investment advisory contracts, also by the funds' shareholders. Revenues derived from services rendered to the sponsored mutual funds were $221,199,000 in 1993, $274,618,000 in 1994, and $318,276,000 in 1995.
Accounts receivable from the sponsored mutual funds aggregate $23,666,000 and $30,029,000 at December 31, 1994 and 1995, respectively.
NOTE 2 - PROPERTY AND EQUIPMENT.
Property and equipment at December 31 consists of:
1994 1995 ________ ________ (in thousands)
Computer and communications equipment $ 42,316 $ 52,265 Building and leasehold improvements 23,991 25,277 Furniture and other equipment 17,053 18,207 Land owned and leased 2,736 10,518 ________ ________ 86,096 106,267 Accumulated depreciation and amortization (36,755) (46,045) ________ ________ $ 49,341 $ 60,222 ________ ________ ________ ________
NOTE 3 - GOODWILL.
Goodwill of $7,937,000 arising from the 1992 acquisition of an investment management subsidiary of USF&G Corporation and the combination of six USF&G mutual funds into the T. Rowe Price family of funds is being amortized over 11 years using the straight-line method. Accumulated amortization at December 31, 1994 and 1995 aggregates $1,738,000 and $2,483,000, respectively.
Goodwill of $1,980,000 arising from an earlier corporate acquisition is being amortized over 40 years using the straight-line method. Accumulated amortization was $1,089,000 at December 31, 1994 and $1,138,000 at December 31, 1995.
NOTE 4 - INCOME TAXES.
The provision for income taxes consists of:
1993 1994 1995 ________ ________ ________ (in thousands) Current income taxes Federal and foreign $ 27,254 $ 42,635 $ 46,350 State and local 4,927 6,184 7,274 Deferred income taxes (tax benefits) 3,139 (2,232) 711 ________ ________ ________ $ 35,320 $ 46,587 $ 54,335 ________ ________ ________ ________ ________ ________
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 $2,713,000 in 1993 related to income from the MRT holdings and $944,000 in 1995 related to accrued compensation and retirement costs. Deferred tax benefits arising from significant temporary differences include $1,712,000 related to accrued compensation and $704,000 related to net unrealized investment income in 1994.
On January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes," which requires the use of the liability method for computing deferred income taxes instead of the deferred method previously used in the Company's financial statements. The cumulative effect of adopting the new accounting principle was a credit to earnings of $291,000 or $.01 per share.
The net deferred tax asset of $1,125,000 included in other assets at December 31, 1994 consists of total deferred tax liabilities of $3,660,000 and total deferred tax assets of $4,785,000. Deferred tax liabilities include $1,100,000 arising from RPFI's undistributed earnings, $1,901,000 arising from net unrealized investment income, and $659,000 from depreciation expense. Deferred tax assets include $3,646,000 arising from deferred compensation and retirement costs and $1,139,000 from other accrued expenses.
The net deferred tax liability of $5,189,000 included in income taxes payable at December 31, 1995 consists of total deferred tax liabilities of $8,991,000 and total deferred tax assets of $3,802,000. Deferred tax liabilities include $1,475,000 arising from RPFI's undistributed earnings, $7,037,000 arising from net unrealized investment income, and $479,000 from depreciation expense. Deferred tax assets include $2,702,000 arising from deferred compensation and retirement costs and $1,100,000 from other accrued expenses.
Cash outflows from operating activities include income taxes paid of $31,355,000 in 1993, $49,686,000 in 1994, and $52,956,000 in 1995.
The following table reconciles the statutory federal income tax rate to the Company's effective income tax rate.
1993 1994 1995 ______ ______ ______ Statutory federal income tax rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefits 3.6 3.1 3.3 Other items .2 .3 (.5) ______ ______ ______ Effective income tax rate 38.8% 38.4% 37.8% ______ ______ ______ ______ ______ ______
NOTE 5 - DEBT.
In September 1995, the Company extinguished the $12,375,000 balance of its 9.77% promissory note due in 2001 and recognized an extraordinary charge equal to the $1,500,000 prepayment premium and the unamortized debt issuance cost of $235,000, net of an income tax benefit of $686,000. The estimated fair value of this note at December 31, 1994 exceeded the outstanding principal balance at that time by $1,392,000.
A maximum of $20,000,000 is available to the Company under unused bank lines of credit at December 31, 1995.
Cash outflows from operating activities include interest paid of $1,481,000 in 1993, $1,643,000 in 1994, and $1,000,000 in 1995. Interest expense was $1,754,000 in 1993, $1,330,000 in 1994, and $1,023,000 in 1995.
NOTE 6 - COMMON STOCK AND STOCK-BASED COMPENSATION PLANS.
SHARES AUTHORIZED AND ISSUED.
A 2-for-1 split of the Company's common stock was effected on November 30, 1993. 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 the stock split.
At December 31, 1995, the Company had reserved 7,318,402 shares of its unissued common stock for issuance upon the exercise of stock options and 420,000 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 1,670,000 common shares at December 31, 1995. Accounts payable and accrued expenses includes $148,000 at December 31, 1994 and $3,910,000 at December 31, 1995 for pending settlements of common stock repurchases.
Subsequent to year end, the Company's board of directors adopted resolutions to effect a two-for-one split of common shares and a proportional increase in authorized common shares from 100,000,000 to 200,000,000. These changes require amendment of the Company's charter and have been recommended by the board to the Company's stockholders for approval at their annual meeting on April 12, 1996.
DIVIDENDS.
The Company declared cash dividends per share of $.445 in 1993, $.55 in 1994 and $.69 in 1995.
FIXED STOCK OPTION PLANS.
At December 31, 1995, the Company has four stock-based compensation plans (the 1986, 1990 and 1993 Stock Incentive Plans and the 1995 Director Stock Option Plan) under which it has granted fixed stock options with a maximum term of 10 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 prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its stock option awards. Accordingly, the Company has not recognized any related compensation expense. Beginning with financial statements for 1996, the Company will be required to make certain additional disclosures as if the fair value based method of accounting defined in SFAS No. 123, "Accounting for Stock-Based Compensation," had been applied to the Company's stock option grants made subsequent to 1994.
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 1993 3,772,640 $12.95 Granted 1,154,000 28.13 Exercised (343,525) 8.95 Forfeited (58,800) 15.31 _________ ______ Outstanding at end of 1993 4,524,315 17.09 1,461,927 $11.63 _________ ______ _________ ______ Granted 1,231,500 32.25 Exercised (387,392) 10.16 Forfeited (173,000) 18.24 _________ ______ Outstanding at end of 1994 5,195,423 21.16 1,989,913 $14.49 _________ ______ _________ ______ Granted 1,241,500 52.05 Exercised (515,521) 12.02 Forfeited (96,110) 25.52 _________ ______ Outstanding at end of 1995 5,825,292 $28.48 2,462,192 $17.07 _________ ______ _________ ______ _________ ______ _________ ______
Additional information regarding stock options outstanding at December 31, 1995 follows.
Weighted- average Weighted- remaining Weighted- average contractual average Range of exercise life (in exercise exercise prices Outstanding price years) Exercisable price ________________ ___________ __________ ___________ ___________ _________ $5.375 to 7.9375 474,720 $ 7.37 4.0 474,720 $ 7.37 8.50 to 11.375 514,645 10.74 3.2 514,645 10.74 17.00 to 18.75 1,352,910 17.98 6.3 889,310 17.85 28.125 to 38.375 2,257,517 30.37 8.4 583,517 29.35 45.75 to 52.25 1,225,500 52.23 9.8 0 -- _________ ______ ____ _________ ______ $5.375 to 52.25 5,825,292 $28.48 7.4 2,462,192 $17.07 _________ ______ ____ _________ ______ _________ ______ ____ _________ ______
NOTE 7 - OTHER INCOME.
In 1993, the Company received interest income of $2,046,000 and recognized a capital loss of $112,000 on its holdings of the defaulted indebtedness of Mortgage and Realty Trust (MRT).
NOTE 8 - EMPLOYEE RETIREMENT PLANS.
The Company sponsors two defined contribution retirement plans: a profit sharing plan based on participant compensation and a 401(k) plan. Costs recognized for these plans were $7,601,000 in 1993, $7,881,000 in 1994, and $8,676,000 in 1995.
The Company also has a defined benefit plan covering those employees whose annual base salaries do not exceed a plan-specified salary limit. Participant benefits are based on the final month's base pay and years of service subsequent to January 1, 1987. The Company's funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. The following table sets forth the plan's funded status and the amounts recognized in the Company's consolidated balance sheets.
1994 1995 ________ ________ (in thousands) Actuarial present value of Accumulated benefit obligation for service rendered Vested $ 1,430 $ 3,207 Non-vested 343 890 ________ ________ Total 1,773 4,097 Obligation attributable to estimated future compensation increases 685 1,725 ________ ________ Projected benefit obligation 2,458 5,822 Plan assets held in sponsored mutual funds, at fair value 2,747 3,956 ________ ________ Projected benefit obligation in excess of (less than) plan assets (289) 1,866 Unrecognized net gain from changes in discount rate and past experience different from that assumed 2,501 24 ________ ________ Accrued retirement costs $ 2,212 $ 1,890 ________ ________ ________ ________
Discount rate used in determining actuarial present values 8.25% 6.10% ________ ________ ________ ________
Net periodic retirement plan expense includes:
1993 1994 1995 ______ ______ ______ (in thousands) Service cost for benefits earned during the year $1,077 $867 $531 Interest cost on projected benefit obligation 252 230 202 Actual return on plan assets (94) (5 (754) Net amortization and deferral 489 (271 330) ______ _____ _____ $1,724 $821 $309 ______ _____ _____ ______ _____ _____
On January 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," which changed the Company's practice of accounting for postretirement health and life insurance benefits from the cash basis to the accrual basis. The effect of adopting the new accounting principle was an aftertax charge to earnings of $621,000 or $.02 per share. Postretirement benefits plan participants include only those retirees and their dependents who were receiving benefits on January 1, 1993.
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES.
The Company leases office facilities and equipment under noncancelable operating leases. Related rent expense was $13,554,000 in 1993, $14,859,000
in 1994, and $16,969,000 in 1995. Future minimum rental payments under these leases aggregate $9,516,000 in 1996, $7,062,000 in 1997, $5,937,000 in 1998, $5,203,000 in 1999, $5,203,000 in 2000, and $31,094,000 in later years.
At December 31, 1995, the Company had outstanding commitments to invest an additional $7,472,000 in various investment partnerships and ventures.
The Company has contingent obligations at December 31, 1995 under a $500,000 direct pay letter of credit expiring not later than 1999 and a $780,000 standby letter of credit which is renewable annually.
Consolidated stockholders' equity at December 31, 1995 includes $43,195,000 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 business.
From time to time, the Company is a party to various claims arising in the ordinary course of business. 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.
Supplementary Data - Selected Quarterly Financial Data:
1st 2nd 3rd 4th Quarter Quarter Quarter Quarter ________ ________ ________ ________ (in thousands, except per-share amounts)
Revenues $ 91,927 $ 92,468 $ 96,943 $101,040 Net income $ 13,753 $ 15,049 $ 16,262 $ 16,087 Earnings per share (1) $ .44 $ .49 $ .53 $ .53
Revenues $ 97,846 $104,789 $113,226 $123,438 Net income $ 14,991 $ 18,222 $ 20,502 (2) $ 21,694 Earnings per share $ .50 $ .60 $ .67 (2) $ .70
(1) The sum of the 1994 quarterly earnings per share does not equal the full-year amount because the quarterly computations are done independently based on average shares outstanding during each quarter.
(2) Net income and earnings per share before an extraordinary charge were $21,551 and $.70, respectively.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10.
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 other significant employees is contained as a separate item at the end of Part I of this Form 10-K Annual Report. 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 1996 Annual Meeting of Stockholders and is incorporated by reference in this Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION. ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by Items 11. through 13. appears in the definitive proxy statement for the Company's 1996 Annual Meeting of Stockholders and is incorporated by reference in this Form 10-K.
PART IV.
ITEM 14.
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: Not applicable. 3. The following exhibits required by Item 601 of Regulation S-K are filed as part of this Form 10-K. Exhibits 10.09 through 10.13 are compensatory plan arrangements.
3.(i) Composite Restated Charter of T. Rowe Price Associates, Inc. as of April 6, 1995. (Incorporated by reference from Form 8- A12G/A: Accession No. 933259-95-16; CIK 80255)
3.(ii) Amended and Restated By-Laws of T. Rowe Price Associates, Inc. as of April 7, 1993. (Incorporated by reference from Form 10-Q Report for the quarterly period ended September 30, 1995; Accession No. 80255-95-83)
10.01 Form of Investment Management Agreement with each of the T. Rowe Price Funds. (Incorporated by reference from Form N-1A; Accession No. 313212-96-5)
10.02 Transfer Agency and Service Agreement dated as of January 1, 1996 between each of the T. Rowe Price Funds and T. Rowe Price Services, Inc. (Incorporated by reference from Form N- 1A; Accession No. 313212-96-5)
10.03 Agreement dated January 1, 1996 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. 313212-96-5)
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. 313212-96-5)
10.05 Contract of Sale and Option dated September 29, 1995 between McDonogh School, Incorporated and TRP Suburban Second, Inc.
10.06 Office Lease dated as of July 27, 1989 between 100 East Pratt Street Limited Partnership and T. Rowe Price Associates, Inc. (Incorporated by reference from the 1989 Annual Report on Form 10-K [File No. 0-14282])
10.07 Lease agreement dated April 17, 1990 between McDonogh School, Incorporated and TRP Suburban, Inc. (Incorporated by reference from the 1990 Annual Report on Form 10-K [File No. 0-14282])
10.08 Amendment dated December 22, 1995 to Lease Agreement between McDonogh School, Incorporated and TRP Suburban, Inc.
10.09 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])
10.10 T. Rowe Price Associates, Inc. 1986 Stock Incentive Plan. (Incorporated by reference from Form S-1 Registration Statement [File No. 33-3398])
10.11 T. Rowe Price Associates, Inc. 1990 Stock Incentive Plan. (Incorporated by reference from Form S-8 Registration Statement [File No. 33-37573])
10.12 T. Rowe Price Associates, Inc. 1993 Stock Incentive Plan. (Incorporated by reference from Form S-8 Registration Statement [File No. 33-72568])
10.13 T. Rowe Price Associates, Inc. 1995 Director Stock Option Plan. (Incorporated by reference from Form DEF 14A; Accession No. 933259-95-9; CIK 80255)
21 Subsidiaries of T. Rowe Price Associates, Inc.
23 Consent of Independent Accountants, Price Waterhouse LLP.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None were filed during the three months ended December 31, 1995.
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 22, 1996.
T. Rowe Price Associates, Inc.
By: /s/ George J. Collins, President and Chief Executive Officer
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 22, 1996.
/s/ George J. Collins, Chief Executive Officer and Director
/s/ George A. Roche, Chief Financial Officer and Director
/s/ Thomas H. Broadus, Jr., Director
/s/ James E. Halbkat, Jr., Director
/s/ Carter O. Hoffman, Director
/s/ Henry H. Hopkins, Director
/s/ Richard L. Menschel, Director
/s/ James S. Riepe, Director
/s/ John W. Rosenblum, Director
/s/ Robert L. Strickland, Director
/s/ M. David Testa, Director
/s/ Philip C. Walsh, Director
/s/ Anne Marie Whittemore, Director
/s/ Alvin M. Younger, Jr., Principal Accounting Officer