-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R1hJMDNJpi3FXuJTplOXXFxBAASikgMaQQLb8nCxwG0h7A+sNVvy6t2u2hTuNh1k tXlm28UR9+IRI4XaiUtgEg== 0000080255-98-000361.txt : 19980424 0000080255-98-000361.hdr.sgml : 19980424 ACCESSION NUMBER: 0000080255-98-000361 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980423 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE ASSOCIATES INC /MD/ CENTRAL INDEX KEY: 0000080255 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 520556948 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14282 FILM NUMBER: 98599464 BUSINESS ADDRESS: STREET 1: 100 EAST PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: (410) 345-2000 MAIL ADDRESS: STREET 1: P.O. BOX 89000 CITY: BALTIMORE STATE: MD ZIP: 21289 10-Q 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended: MARCH 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. 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 the number of shares outstanding of the issuer's common stock ($.20 par value), as of the latest practicable date. 118,875,354 SHARES AT APRIL 15, 1998, RESTATED FOR THE TWO-FOR-ONE STOCK SPLIT TO BE EFFECTED AT APRIL 30, 1998. Exhibit index is at Item 6(a) on page 11. 2 PART I. FINANCIAL INFORMATION. ITEM 1. FINANCIAL STATEMENTS. T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) 12/31/97 03/31/98 ________ ________ ASSETS Cash and cash equivalents $200,409 $215,793 Accounts receivable 86,795 94,255 Investments in sponsored mutual funds 173,729 200,604 Partnership and other investments 19,030 18,781 Property and equipment (Note 2) 142,497 142,737 Other assets 23,607 16,771 ________ ________ $646,067 $688,941 ________ ________ ________ ________ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 30,722 $ 31,062 Accrued compensation and retirement costs 49,694 33,598 Income taxes payable 19,102 42,640 Dividends payable 10,039 10,088 Minority interests in consolidated subsidiaries 49,837 38,332 ________ ________ Total liabilities 159,394 155,720 ________ ________ Commitments and contingent liabilities (Note 2) Stockholders' equity 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, including 300,000,000 shares authorized on on April 16, 1998; issued 59,097,705 shares in 1997 and 118,705,104 shares in 1998, including 59,352,552 shares to be issued in the two-for-one stock split at April 30, 1998 (Note 3) 11,819 23,741 Capital in excess of par value 30,707 23,330 Retained earnings 415,279 446,480 Accumulated other comprehensive income 28,868 39,670 ________ ________ Total stockholders' equity 486,673 533,221 ________ ________ $646,067 $688,941 ________ ________ ________ ________ See the accompanying notes to the condensed consolidated financial statements. 3 T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per-share amounts) Three months ended ___________________ 03/31/97 03/31/98 ________ ________ Revenues Investment advisory fees $129,297 $163,717 Administrative fees 35,135 42,164 Investment and other income 3,527 4,553 ________ ________ 167,959 210,434 ________ ________ Expenses Compensation and related costs 59,182 70,400 Advertising and promotion 17,457 20,072 Occupancy and equipment 13,756 18,885 International investment research fees 10,957 12,560 Other operating expenses 12,266 12,921 ________ ________ 113,618 134,838 ________ ________ Income before income taxes and minority interests 54,341 75,596 Provision for income taxes 21,124 28,927 ________ ________ Income from consolidated companies 33,217 46,669 Minority interests in consolidated subsidiaries 4,670 5,379 ________ ________ Net income $ 28,547 $ 41,290 ________ ________ ________ ________ Basic earnings per share $ .25 $ .35 ________ ________ ________ ________ Diluted earnings per share $ .22 $ .32 ________ ________ ________ ________ Dividends declared per share $ .065 $ .085 ________ ________ ________ ________ Weighted average shares outstanding 115,554 118,495 ________ ________ ________ ________ Weighted average shares outstanding - assuming dilution 127,082 129,933 ________ ________ ________ ________ See the accompanying notes to the condensed consolidated financial statements. 4 T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three months ended __________________ 03/31/97 03/31/98 ________ ________ Cash flows from operating activities Net income $ 28,547 $ 41,290 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of property and equipment 5,071 7,928 Minority interests in consolidated subsidiaries 4,670 5,379 Increase in accounts receivable (2,009) (7,460) Change in accounts payable and accrued liabilities (4,858) (6,174) Increase in accrued income taxes payable 15,031 19,632 Other changes in assets and liabilities (954) 314 _________ ________ Net cash provided by operating activities 45,498 60,909 ________ ________ Cash flows from investing activities Investments in sponsored mutual funds (2,292) (9,813) Additions to property and equipment (14,247) (11,130) ________ ________ Net cash used in investing activities (16,539) (20,943) ________ ________ Cash flows from financing activities Purchases of stock (6,465) -- Receipts relating to stock issuances 3,701 2,471 Dividends paid to stockholders (7,484) (10,039) Distributions to minority interests -- (17,014) ________ ________ Net cash used in financing activities (10,248) (24,582) ________ ________ Cash and cash equivalents Net increase during period 18,711 15,384 At beginning of period 114,551 200,409 ________ ________ At end of period $133,262 $215,793 ________ ________ ________ ________ See the accompanying notes to the condensed consolidated financial statements. 5 T. ROWE PRICE ASSOCIATES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (dollars in thousands) Accumu- Capital lated Common in other Total stock excess compre- stock- - par of par Retained hensive holders' value value earnings income equity _______ _______ ________ ________ ________ Balance at December 31, 1997, 59,097,705 common shares $11,819 $30,707 $415,279 $28,868 $486,673 Comprehensive income Net income 41,290 Unrealized security holding gains 10,802 Total comprehensive income 52,092 254,847 common shares issued under stock-based compensation plans 51 4,493 4,544 Dividends declared (10,088) (10,088) 59,352,552 shares issued in 2-for-1 split of common stock at April 30, 1998 11,871 (11,870) (1) -- _______ _______ ________ _______ ________ Balance at March 31, 1998, 118,705,104 common shares $23,741 $23,330 $446,480 $39,670 $533,221 _______ _______ ________ _______ ________ _______ _______ ________ _______ ________ See the accompanying notes to the condensed consolidated financial statements. 6 T. ROWE PRICE ASSOCIATES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY AND BASIS OF PREPARATION. 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 portfolios and to private accounts of other institutional and individual investors, primarily domiciled in the United States of America. 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. Assets under management at March 31, 1998 total $139.3 billion, including $90.6 billion in the sponsored T. Rowe Price mutual funds. The unaudited condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. The unaudited interim financial information contained in the condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the 1997 Annual Report to Stockholders. NOTE 2 - COMMITMENTS AND CONTINGENT LIABILITIES. On February 11, 1998, the Company entered into an agreement to construct two office buildings having a combined 360,000 square feet of floor space and two parking garages for an aggregate price of $70.8 million. The facilities will be erected on land owned in Owings Mills, Maryland. NOTE 3 - SUBSEQUENT EVENT - COMMON STOCK. On April 16, 1998, the Company's stockholders approved an amendment of the Company's charter which increased the Company's authorized shares from 200,000,000 to 500,000,000 and split the outstanding common shares two-for- one. Additional common shares ($.20 par value) resulting from the split will be issued at the close of business on April 30, 1998. All per share and share data in the accompanying unaudited condensed consolidated financial statements have been adjusted to give retroactive effect to the stock split. 7 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of T. Rowe Price Associates, Inc. We have reviewed the condensed consolidated financial statements of T. Rowe Price Associates, Inc. and its subsidiaries as of March 31, 1998, and for the three-month periods ended March 31, 1997 and 1998, appearing on pages two through six of this Form 10-Q Quarterly Report. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1997, and the related consolidated statements of income, of cash flows, and of stock- holders' equity for the year then ended (not presented herein), and in our report dated January 26, 1998 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ PRICE WATERHOUSE LLP Baltimore, Maryland April 22, 1998 THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS' LIABILITY PROVISIONS OF SECTION 11 OF THE ACT DO NOT APPLY. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL. T. Rowe Price Associates, Inc. and its consolidated subsidiaries (the Company) derives its revenue primarily from investment advisory and administrative services provided to the sponsored Price Mutual Funds (the Funds), other sponsored investment portfolios, 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 portfolios which meet the varied needs and objectives of its individual and institutional investment advisory clients. At March 31, 1998, total assets under management are $139.3 billion, including $90.6 billion in the Funds. Equity investments comprise 74% of total assets under management. RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 VERSUS 1997. Net income increased $12.7 million or 45% to $41.3 million or diluted earnings per share of $0.32 from $28.5 million or diluted earnings per share of $0.22. Earnings per share have been retroactively restated for the two- for-one stock split to be effected at the end of April 1998. Total revenues increased 25% from $168 million to more than $210 million, led by an increase of $34.4 million in investment advisory fees. Investment advisory fees from the Funds increased $23.9 million as the Fund's average assets under management during the first quarter rose $18.0 billion to $85.0 billion. Fund assets totaled $90.6 billion at March 31, 1998, up $9.5 billion from December 31, 1997. Stock funds, which totaled $70.5 billion at March 31, 1998, accounted for most of the increase. Net cash inflows to the Funds during first quarter of 1998 were nearly $1.9 billion with the balance of Fund asset growth coming from market gains. Advisory fees from private accounts and other sponsored investment portfolios contributed the balance of the investment advisory revenue gains. These assets under management rose to $48.7 billion at March 31, 1998, up $5.5 billion from December 31, 1997 and $12.4 billion from March 31, 1997. Total assets under management closed the first quarter at $139.3 billion, up from $124.3 billion at December 31, 1997 and $102.9 billion at March 31, 1997. Administrative fees from services to the Funds and their shareholders grew $7.0 million to $42.2 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 offset these gains. Investment and other income rose $1.0 million due to greater income from the Company's larger money market fund holdings. 9 Operating expenses increased 19% to $134.8 million. Greater compensation and related costs, which were up $11.2 million, were attributable to a 20% increase in the number of associates as well as the greater use of temporary employees, primarily to support the Company's growing technology support and administrative services operations. At the end of the first quarter, the Company employed nearly 3,200 associates. Advertising and promotion expenditures increased 15% to $20.1 million as the Company endeavored to take advantage of favorable marketing conditions including opportunities presented by the new Roth IRA. 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. International investment research fees increased 15% or $1.6 million as international assets under management rose to $33.6 billion, including $18.3 billion in the Funds. Higher net income reported on a separate company basis by the Company's 50%- owned subsidiary, Rowe Price-Fleming International, Inc. (RPFI), resulted in the increase in income attributable to minority interests. FORWARD-LOOKING INFORMATION. Information or statements provided by or on behalf of the Company from time to time, including those within this Form 10-Q Quarterly 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. The Company's future revenues may fluctuate due to factors such as: the total value and composition of assets under management and related cash inflows or outflows in mutual funds and private accounts; 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 investment portfolios and private accounts as compared to competing offerings and market indices; the extent to which performance-based investment advisory fees are earned from private accounts; the expense ratios of the Company's sponsored investment portfolios; investor sentiment and investor confidence in mutual funds; the ability of the Company to maintain investment management fees at current levels; competitive conditions in the mutual funds industry; the introduction 10 of new mutual funds and investment portfolios; the ability of the Company to contract with the Funds for payment for administrative services offered 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 future operating results are also dependent upon the level of 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 service 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 revenues are substantially dependent on revenues from the Funds, which 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 agreements. 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 in general or in particular classes of mutual funds. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Because the Company's market capitalization on January 28, 1997 was less than $2.5 billion, this item is not applicable until the filing of the 1998 Form 10-K Annual Report. PART II. OTHER INFORMATION. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The 1998 annual meeting of the Company's stockholders was held on April 16, 1998. The Company's proxy statement and solicitation pertaining to this meeting were previously filed with the Commission. Shares eligible to vote were 59,254,226 as of the record date of February 13, 1998. Management's 14 nominees for the Board of Directors were elected to hold 11 office until the next annual meeting of stockholders and until their respective successors are elected and have qualified. The tabulation of votes was: Nominee For Withheld ________________ __________ _________ J.E. Halbkat, Jr. 51,122,088 650,059 H.H. Hopkins 51,105,120 707,027 J.A.C. Kennedy 51,014,787 797,360 J.H. Laporte 51,023,078 789,069 R.L. Menschel 51,102,802 709,345 W.T. Reynolds 51,095,336 716,812 J.S. Riepe 50,999,104 813,043 G.A. Roche 51,104,023 708,125 B.C. Rogers 51,123,144 689,004 J.W. Rosenblum 51,121,293 690,854 R.L. Strickland 51,104,458 707,689 M.D. Testa 51,121,771 690,376 P.C. Walsh 51,118,644 693,503 A.M. Whittemore 51,121,578 690,569 The charter amendment to effect a two-for-one stock split and to increase the Company's authorized common shares to 500,000,000 was approved by a vote of 41,930,290 for; 9,757,992 against; and 45,089 abstentions. Broker non-votes were 78,776. The 1998 Director Stock Option Plan was approved by a vote of: 39,206,784 for; 12,256,330 against; and 349,032 abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) The following exhibits required to be filed by Item 601 of Regulation S-K are filed herewith and incorporated by reference herein: 3.(i) - Composite Restated Charter of T. Rowe Price Associates, Inc. as of April 16, 1998. 15 - Letter from Price Waterhouse LLP, independent accountants, re unaudited interim financial information. 27 - Financial Data Schedule. All other items in Part II are omitted because they are not applicable or the answers are none. 12 SIGNATURES. Pursuant to the requirements 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 April 23, 1998. T. Rowe Price Associates, Inc. /s/ Alvin M. Younger, Jr., Chief Financial & Accounting Officer EX-3 2 1 EXHIBIT 3.(i) T. ROWE PRICE ASSOCIATES, INC. COMPOSITE RESTATED CHARTER (restated as of April 16, 1998) FIRST: That we, the subscribers, T. ROWE PRICE, WALTER H. KIDD and CHARLES W. SHAEFFER, the post-office address of each of whom is 10 Light Street, Baltimore 2, Maryland, all being of full legal age, do under and by virtue of the General Laws of the State of Maryland, authorizing the formation of corporation, associate ourselves with the intention of forming a corporation, SECOND: The name of the corporation (which is hereinafter called the "Corporation") is: T. ROWE PRICE ASSOCIATES, INC. THIRD: The purposes for which and any of which the Corporation is formed and the business and objects to be carried on and promoted by it are: (1) To advise and confer with clients in respect of their investments, changes in investments, and reinvestments and anything relating thereto; to act as agent for clients in making and implementing investment decisions and recommendations on a discretionary basis; to conduct investigations and examinations of businesses and enterprises of every kind and description with the aim of securing information and particulars for the investment and employment of capital; and to undertake and transact all kinds of business relating to financial counseling and investments. (2) To acquire by purchase, subscription, or otherwise, and to receive, hold, own, guarantee, sell, assign, exchange, transfer, mortgage, pledge, or otherwise dispose of or deal in and with any and all securities, as such term is hereinafter defined, issued or created by any corporation, firm, or other entity, public or private, whether formed under the laws of the United States of America or of any state, commonwealth, territory, dependency, or possession thereof, or of any foreign country or of any state, commonwealth, territory, dependency, possession, or other political subdivision thereof, or issued or created by the United States of America or any state or commonwealth thereof, or by any foreign country, or by any agency, subdivision, territory, dependency, possession, municipality, or other political subdivision of any of the foregoing, and as owner thereof to possess and exercise all the rights, powers, and privileges of ownership including the right to exercise consents and vote thereon, and to do any and all acts and things necessary or advisable for the preservation, protection, improvement, and enhancement in value thereof. 2 (3) To engage in any one or more businesses or transactions, or to acquire all or any portion of any entity engaged in any one or more businesses or transactions which the Board of Directors may from time to time authorize or approve, whether or not related to the business described elsewhere in this Article or to any other business at the time or theretofore engaged in by the Corporation. The foregoing enumerated purposes and objects shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of this or any other Article of the charter of the Corporation, and each shall be regarded as independent; and they are intended to be and shall be construed as powers as well as purposes and objects of the Corporation and shall be in addition to and not in limitation of the general powers of corporations under the General Laws of the State of Maryland. FOURTH: The present address of the principal office of the Corporation in this State is 100 East Pratt Street, Baltimore, Maryland 21202. FIFTH: The name and address of the resident agent of the Corporation in this State are Alvin M. Younger, Jr., 100 East Pratt Street, Baltimore, Maryland 21202. Said resident agent is a citizen of the State of Maryland who resides there. SIXTH: (a) The total number of shares of stock of all classes which the Corporation has authority to issue is 520,000,000 shares of capital stock (par value $.20 per share) amounting in aggregate par value to $104,000,000, of which 500,000,000 shares (par value $.20 per share) amounting in aggregate par value to $100,000,000 are classified as "Common Stock" and 20,000,000 shares (par value $.20 per share) amounting in aggregate par value to $4,000,000 are classified as "Preferred Stock." (b) The following is a description of the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of the Common Stock and the Preferred Stock of the Corporation: COMMON STOCK (1) The Common Stock shall not be subject to classification or reclassification by the Board of Directors, and shall have the rights and terms hereinafter specified, subject to the terms of any other stock provided in the charter pursuant to classification or reclassification by the Board of Directors or otherwise in accordance with law. (2) Subject to the provisions of Article EIGHTH, Section (3) of the charter of the Corporation, each share of Common Stock shall have one vote, and, except as otherwise provided in 3 respect of any Preferred Stock, the exclusive voting power for all purposes shall be vested in the holders of the Common Stock. (3) Subject to the provisions of law and any preferences of any Preferred Stock, dividends, including dividends payable in shares of another class of the Corporation's stock, may be paid on the Common Stock of the Corporation at such time and in such amounts as the Board of Directors may deem advisable. (4) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any Preferred Stock shall be entitled, to share ratably in the remaining net assets of the Corporation. PREFERRED STOCK (5) The Board of Directors shall have authority to classify and reclassify any unissued shares of Preferred Stock by fixing or altering in any one or more respects from time to time before issuance the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock; provided, that the Board of Directors shall not classify or reclassify any of such shares into shares of the Common Stock, or into any class or series of stock (i) which is not prior to the Common Stock either as to dividends or upon liquidation and (ii) which is not limited in some respect either as to dividends or upon liquidation. Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of Preferred Stock shall include, without limitation, subject to the provisions of the charter, authority to classify or reclassify any unissued shares of such stock into a class or classes of preferred stock, preference stock, special stock or other stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing, or altering one or more of the following: (a) The distinctive designation of such class or series and the number of shares to constitute such class or series; provided that, unless otherwise prohibited by the terms of such or any other class or series, the number of shares of any class or series may be decreased by the Board of Directors in connection with any classification or reclassification of unissued shares and the number of shares of such class or series may be increased by the Board of Directors in connection with any such classification or 4 reclassification, and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall become part of the authorized capital stock and be subject to classification and reclassification as provided in this Section. (b) Whether or not and, if so, the rates, amounts and times at which, and the conditions under which, dividends shall be payable on shares of such class or series, whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of Preferred Stock, and the status of any such dividends as cumulative, cumulative to a limited extent or non-cumulative and as participating or non-participating. (c) Whether or not shares of such class or series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights. (d) Whether or not shares of such class or series shall have conversion or exchange privileges and, if so, the terms and conditions thereof, including provision for adjustment of the conversion or exchange rate in such events or at such times as the Board of Directors shall determine. (e) Whether or not shares of such class or series shall be subject to redemption and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; and whether or not there shall be any sinking fund or purchase account in respect thereof, and if so, the terms thereof. (f) The rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock. (g) Whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action 5 under this Section, and, if so, the terms and conditions thereof. (h) Any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the charter of the Corporation. (6) For the purposes hereof and of any articles supplementary to the charter providing for the classification or reclassification of any shares of Preferred Stock or of any other charter document of the Corporation (unless otherwise provided in any such articles or document), any class or series of stock of the Corporation shall be deemed to rank: (a) prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series; (b) on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and (c) junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be. SEVENTH: The number of directors of the Corporation shall be 14, which number may be increased or decreased pursuant to the By-Laws of the Corporation, but shall never be less than the minimum number permitted by the General Laws of the State of Maryland now or hereafter in force. The names of the directors who will serve until the next annual meeting and until their successors are elected and qualify are as follows: 6 James E. Halbkat, Jr. Henry H. Hopkins James A.C. Kennedy John H. Laporte Richard L. Menschel William T. Reynolds James S. Riepe George A. Roche Brian C. Rogers John W. Rosenblum Robert L. Strickland M. David Testa Philip C. Walsh Anne Marie Whittemore EIGHTH: The following provisions are hereby adopted for the purpose of defining, limiting, and regulating the powers of the Corporation and of the directors and stockholders: (1) The Board of Directors is hereby empowered to authorize the issuance from time to time of shares of its stock of any class, whether now or hereafter authorized, or securities convertible into shares of its stock of any class or classes, whether now or hereafter authorized, for such consideration as may be deemed advisable by the Board of Directors and without any action by the stockholders. (2) No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series, or types of stock or other securities at the time outstanding. (3)(a) For purposes of this Paragraph (3), the following words have the meanings indicated: (i) "Affiliate", including the term "affiliated person", means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified person. (ii) "Associate", when used to indicate a relationship with any person, means: 7 (A) Any corporation or organization, other than the Corporation or a subsidiary of the Corporation, of which such person is an officer, director, or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities; (B) Any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; (C) Any relative or spouse of such person, or any relative of such spouse, who has the same home as such person; and (D) Any relative or spouse of such person, or any relative of such spouse who is a director or officer of the Corporation or any of its affiliates. (iii) "Beneficial Owner", when used with respect to any Voting Stock, means a person: (A) That is the beneficial owner of Voting Stock, directly or indirectly; (B) The Affiliate or Associate of which is the beneficial owner of Voting Stock, directly or indirectly; (C) That has, or whose Affiliate or Associate has, (I) The right to acquire Voting Stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement, or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or (II) The right to vote Voting Stock pursuant to any agreement, arrangement, or understanding; or (III) Any agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing of Voting Stock with any other person that beneficially owns, or whose Affiliates or Associates beneficially own, directly or indirectly, such shares of Voting Stock; provided, that directors, officers, and employees of the Corporation shall not be deemed to have any such agreement, arrangement, or understanding on the basis of their status, or actions taken in their capacities, as directors, officers, or employees of the Corporation or any subsidiaries of the Corporation or as general or limited partners of partnerships formed to make investments or on the basis of their voting Voting Stock with respect to management proposals. 8 (D) For purposes of subparagraph (a) (iii) of this Paragraph (3), (I) the solicitation of revocable proxies and the voting thereof by proxy holders in connection with annual or special meetings of stockholders prior to the time the Corporation is subject to the proxy rules under the Securities Exchange Act of 1934 or thereafter in accordance with such proxy rules, and (II) statements of recommendations on matters to be submitted for stockholder approval or intentions to vote Voting Stock of which such persons are the Beneficial Owners prior to the time the Corporation is subject to the proxy rules under the Securities Exchange Act of 1934 or thereafter in accordance with such proxy rules shall not constitute agreements, arrangements, or understandings for the purpose of acquiring, holding, voting, or disposing of Voting Stock. (iv) "Control", including the terms "controlling", "controlled by", and "under common control with", means the possession, directly or indirectly, of the power to vote or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise, and the beneficial ownership of 10% or more of the votes entitled to be cast by a corporation's voting stock creates a presumption of control. (v) "Group", when used to indicate those additional persons whose Voting Stock is Beneficially Owned by a person, shall include: (A) the person, (B) the Affiliates and Associates of the person; and (C) any additional person whose stock is Beneficially Owned by the person or an Affiliate or Associate of the person; and shall include all persons that jointly file a statement of beneficial ownership pursuant to Section 13(d) of the Securities Exchange Act of 1934, irrespective of any disclaimers of beneficial ownership. (vi) "Voting Stock" means shares of capital stock of the Corporation entitled to vote generally in the election of directors. (b) A person or Group that is the Beneficial Owner of more than 15% of any class of Voting Stock shall have the right to vote not more than 15% of the shares of such class, and the remaining shares Beneficially Owned by such person or Group shall be deducted from the total number of shares of Voting Stock of such class for purposes of determining the proportion of Voting Stock required to approve a matter submitted for stockholder approval. 9 In the case of a Group, the votes of individual members of a Group shall be reduced on a pro rata basis for purposes of determining which shares of such class of Voting Stock shall be voted so that the Group shall have in the aggregate the right to vote not more than 15% of the shares of such class of Voting Stock. A person that is a member of more than one Group shall vote the least number of shares of a class of voting stock that he may vote as a member of any such Group. (c) The operation of this Paragraph (3) shall not create any presumptions of control for purposes of the Investment Company Act of 1940. (4) The Board of Directors shall have power from time to time and in its sole discretion to determine in accordance with sound accounting practice, what constitutes annual or other net profits, earnings, surplus, or net assets in excess of capital; to fix and vary from time to time the amount to be reserved as working capital, or determine that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of any funds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any part thereof; to distribute and pay distributions or dividends in stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine; and to determine whether and to what extent and at what times and places and under what conditions and regulations the books, accounts and documents of the Corporation, or any of them, shall be open to the inspection of stockholders, except as otherwise provided by statute or by the By-Laws, and, except as so provided, no stockholder shall have any right to inspect any book, account, or document of the Corporation unless authorized so to do by resolution of the Board of Directors. (5) Notwithstanding any provision of law requiring the authorization of any action by a greater proportion than a majority of the total number of shares of all classes of capital stock, such action shall be valid and effective if authorized by the affirmative vote of the holders of a majority of the total number of shares of all classes outstanding and entitled to vote thereon, except that the affirmative vote of the holders of two-thirds of the total number of shares of all classes outstanding and entitled to vote thereon shall be required to amend, repeal, or adopt any provision inconsistent with Article EIGHTH, Section (3). (6) A contract or other transaction between the Corporation and any of its directors or between the Corporation and any other Corporation, firm or other entity in which any of its directors is 10 a director or has a material financial interest is not void or voidable solely because of any one or more of the following: the common directorship or interest; the presence of the director at the meeting of the Board of Directors which authorizes, approves, or ratifies the contract or transaction; or the counting of the vote of the director for the authorization, approval, or ratification of the contract or transaction. This Section applies if: (a) the fact of the common directorship or interest is disclosed or known to: the Board of Directors and the Board authorizes, approves, or ratifies the contract or transaction by the affirmative vote of a majority of disinterested directors, even if the disinterested directors constitute less than a quorum; or the stockholders entitled to vote, and the contract or transaction is authorized, approved, or ratified by a majority of the votes cast by the stockholders entitled to vote other than the votes of shares owned of record or beneficially by the interested director or Corporation, firm, or other entity; or (b) the contract or transaction is fair and reasonable to the Corporation. Common or interested directors or the stock owned by them or by an interested corporation, firm, or other entity may be counted in determining the presence of a quorum at a meeting of the Board of Directors or at a meeting of the stockholders, as the case may be, at which the contract or transaction is authorized, approved, or ratified. If a contract or transaction is not authorized, approved, or ratified in one of the ways provided for in clause (a) of the second sentence of this Section, the person asserting the validity of the contract or transaction bears the burden of proving that the contract or transaction was fair and reasonable to the Corporation at the time it was authorized, approved, or ratified. The procedures in this Section do not apply to the fixing by the Board of Directors of reasonable compensation for a director, whether as a director or in any other capacity. (7) The Corporation shall indemnify (a) its directors to the full extent provided by the general laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures provided by such laws; (b) its officers to the same extent it shall indemnify its directors; and (c) its officers who are not directors to such further extent as shall be authorized by the Board of Directors and be consistent with law. The foregoing shall not limit the authority of the Corporation to indemnify other employees and agents consistent with law. (8) To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, no director or officer 11 of this Corporation shall be personally liable to the Corporation or its stockholders for money damages. No amendment or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal. (9) The Corporation reserves the right from time to time to make any amendments of its charter which may now or hereafter be authorized by law, including any amendments changing the terms or contract rights, as expressly set forth in its charter, of any of its outstanding stock by classification, reclassification, or otherwise, but no such amendment which changes such terms or contract rights of any of its outstanding stock shall be valid unless such amendment shall have been authorized by not less than a majority of the aggregate number of the votes entitled to be cast thereon, by a vote at a meeting or in writing with or without a meeting. The enumeration and definition of particular powers of the Board of Directors included in the foregoing shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of the charter of the Corporation, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under the General Laws of the State of Maryland now or hereafter in force. NINTH: The duration of the Corporation shall be perpetual. IN WITNESS WHEREOF, we have signed this certificate of incorporation on December 31, 1946. /s/ T. Rowe Price /s/ Walter H. Kidd /s/ Charles W. Shaeffer EX-15 3 EXHIBIT 15 April 22, 1998 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Dear Sirs: We are aware that our report dated April 22, 1998 (issued pursuant to the provisions of Statement on Auditing Standards No. 71) is incorporated by reference in the Prospectuses constituting parts of T. Rowe Price Associates, Inc.'s Registration Statements on Form S-8 (No. 033-07012, No. 033-08672, No. 033-37573, No. 033-72568, No. 033-58749 and No. 333-20333). We are also aware of our responsibilities under the Securities Act of 1933. Yours very truly, /s/ Price Waterhouse LLP EX-27 4
5 This schedule contains summary financial information extracted from the unaudited condensed consolidated financial statements of T. Rowe Price Associates, Inc. included in Part I, Item 1 of the accompanying Form 10-Q Quarterly Report for the period ended March 31, 1998 and is qualified in its entirety by reference to such financial statements. 0000080255 T. ROWE PRICE ASSOCIATES, INC. 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 215,793,000 200,604,000 94,255,000 0 0 0 142,737,000 0 688,941,000 0 0 0 0 23,741,000 509,480,000 688,941,000 0 210,434,000 0 134,838,000 0 0 0 75,596,000 28,927,000 41,290,000 0 0 0 41,290,000 .35 .32 Item is not contained in registrant's unclassified balance sheet. Item is reported net of accumulated depreciation at interim. Not reported at interim. Basic earnings per share. Restated for April 30, 1998 two-for-one stock split.
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