-----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, LbBM4/9fpsEkutZCa+6bpl0wFKVSznEBHyq4yUgi9dsQlQ2M9MZLrletv9vaWa76 eaXTWUWUjWsDfhAmT2AEAQ== 0000080248-04-000003.txt : 20040224 0000080248-04-000003.hdr.sgml : 20040224 20040224151623 ACCESSION NUMBER: 0000080248-04-000003 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040224 EFFECTIVENESS DATE: 20040224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE NEW HORIZONS FUND INC CENTRAL INDEX KEY: 0000080248 IRS NUMBER: 520791372 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-00958 FILM NUMBER: 04624718 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 N-CSR 1 nhf.txt T. ROWE PRICE NEW HORIZONS FUND Item 1. Report to Shareholders T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- December 31, 2003 Certified Annual Report This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Performance Comparison This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. [Graphic Omitted] NEW HORIZONS FUND - -------------------------------------------------------------------------------- As of 12/31/03 New Horizons Fund $29,471 Russell 2000 Growth Index $16,976 Lipper Small-Cap Growth Funds Index $23,784 Russell 2000 Lipper Small-Cap New Horizons Growth Index Growth Funds Index Fund 12/93 10000 10000 10000 12/94 9757 9831 10030 12/95 12786 13419 15591 12/96 14226 15707 18247 12/97 16068 17470 20030 12/98 16265 17638 21282 12/99 23274 28427 28202 12/00 18054 26081 27678 12/01 16388 22699 26892 12/02 11429 16428 19738 12/03 16976 23784 29471 Average Annual Compound Total Return - -------------------------------------------------------------------------------- Periods Ended 12/31/03 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- New Horizons Fund 49.31% 6.73% 11.41% Russell 2000 Growth Index 48.54 0.86 5.43 Russell 2000 Index 47.25 7.13 9.47 Lipper Small-Cap Growth Funds Index 44.77 6.16 9.05 S&P 500 Stock Index 28.68 -0.57 11.07 Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. Past performance cannot guarantee future results. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Dear Shareholder, We are pleased to report that your fund returned 49.31% during the 12 months ended December 31, 2003. The fund outpaced the Lipper Small-Cap Growth Funds Index and its unmanaged Russell benchmarks, as you can see in the table on the previous page. The fund benefited from strong gains in our top holdings, especially in the consumer, industrial, and education areas, while our cautious stance on technology stocks hindered performance in the second half. [Graphic Omitted] Major Index Returns - -------------------------------------------------------------------------------- 12-Month Return S&P 500 Stock Index 29% S&P MidCap 400 Index 36% Russell 2000 Index 47% Nasdaq Composite Index 50% As you know, the fund's investment objective is to provide long-term capital growth by investing primarily in common stocks of small, rapidly growing companies. The fund typically invests in a diversified group of small emerging growth companies, preferably early in a company's life cycle before it becomes widely recognized by the investment community. The Major Index Returns chart shows how various domestic stock markets performed over the past 12 months. As you can see, domestic stocks registered solid returns, with the technology-heavy Nasdaq Composite and the small-cap Russell 2000 showing the best results. Mid-cap stocks also outperformed large-cap stocks, as represented by the S&P 500 Stock Index. The Top 5 Sectors table shows how the fund's assets were allocated as of December 31, 2003. Consumer discretionary and health care stocks were the largest sector allocations with information technology narrowly behind. Top 5 Sectors - -------------------------------------------------------------------------------- Percent of Net Assets 12/31/02 12/31/03 Consumer Discretionary 20% 22% Health Care 23 22 Information Technology 24 21 Industrials and Business Services 16 16 Financials 5 7 The Best and Worst Contributors table shows the stocks that contributed most to the fund's performance during the year. Health care services companies Omnicare, Henry Schein, and Davita were among the top positive contributors, while Tier Technologies, which provides technology processing services for state governments, and biotech firm Trimeris were among the worst detractors. Best and Worst Contributors - -------------------------------------------------------------------------------- 12 Months Ended 12/31/03 Best Contributors - -------------------------------------------------------------------------------- Apollo Group Omnicare Henry Schein Toll Brothers Davita - -------------------------------------------------------------------------------- Worst Contributors - -------------------------------------------------------------------------------- Tier Technologies Trimeris BISYS Group Westwood One Verisity Ltd. Finally, I'm sure you are aware that mutual fund companies have recently come under scrutiny for their trading policies. The investigations have led to allegations that executives of several mutual fund companies permitted or engaged in improper mutual fund trading. In addition, certain intermediaries that process fund transactions are alleged to have assisted some investors in executing improper mutual fund trades. I want T. Rowe Price shareholders to know that we emphatically condemn the abuses that have been revealed or alleged against other firms in our industry. Our firm has not entered and will not enter into any agreements with any investors or intermediaries that authorize after-hours trading or excessive short-term trading in any of our funds. T. Rowe Price investors can be assured that our firm unequivocally opposes illegal inappropriate trading of any nature and has policies and procedures in place designed to protect the best interests of our long-term shareholders. No T. Rowe Price executives or portfolio managers or investment personnel of the T. Rowe Price mutual funds have engaged in any inappropriate trading of T. Rowe Price mutual funds. You may find out more about our trading policies and the steps we take to protect your interests by visiting our Web site (troweprice.com). These policies are also spelled out in your fund's prospectus. We thank you for your continued support. Respectfully, James S. Riepe Chairman January 15, 2004 T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- Year Ended 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99 NET ASSET VALUE Beginning of period $ 16.61 $ 22.63 $ 23.89 $ 27.53 $ 23.34 Investment activities Net investment income (loss) (0.15) (0.17) (0.17) (0.13) (0.15) Net realized and unrealized gain (loss) 8.34 (5.85) (0.53) (0.37) 7.36 Total from investment activities 8.19 (6.02) (0.70) (0.50) 7.21 Distributions Net realized gain - - (0.56) (3.14) (3.02) NET ASSET VALUE End of period $ 24.80 $ 16.61 $ 22.63 $ 23.89 $ 27.53 ------------------------------------------------------ Ratios/Supplemental Data Total return^ 49.31% (26.60)% (2.84)% (1.86)% 32.52% Ratio of total expenses to average net assets 0.91% 0.92% 0.91% 0.88% 0.90% Ratio of net investment income (loss) to average net assets (0.75)% (0.81)% (0.77)% (0.51)% (0.66)% Portfolio turnover rate 28.6% 23.7% 27.4% 47.2% 44.7% Net assets, end of period (in millions) $ 4,955 $ 3,359 $ 5,583 $ 6,122 $ 6,022 ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. The accompanying notes are an integral part of these financial statements. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report December 31, 2003 Portfolio of Investments (ss.) Shares Value - -------------------------------------------------------------------------------- ($ 000s) EQUITY INVESTMENTS 99.5% (s.) CONSUMER DISCRETIONARY 22.4% Auto Components 0.1% LKQ Corporation * 192,900 3,463 3,463 Hotels, Restaurants & Leisure 6.5% Alliance Gaming * 1,500,000 36,975 CEC Entertainment * 731,300 34,656 Extended Stay America 1,771,000 25,644 Multimedia Games *! 875,000 35,963 Orbitz, Class A * 162,000 3,759 Panera Bread, Class A * 300,000 11,859 PF Chang's China Bistro * 1,000,000 50,880 Rare Hospitality International * 1,125,000 27,495 Ruby Tuesday 1,100,000 31,339 Sonic * 900,000 27,558 Station Casinos 1,175,000 35,990 322,118 Household Durables 3.8% Harman International 650,000 48,087 Ryland Group 500,000 44,320 Toll Brothers * 1,800,000 71,568 WCI Communities * 240,000 4,946 Yankee Candle Company * 800,000 21,864 190,785 Internet & Catalog Retail 0.0% priceline.com * 100,000 1,790 1,790 Leisure Equipment & Products 0.3% Polaris Industries 150,000 13,287 13,287 Media 5.1% ADVO 1,200,000 38,112 Catalina Marketing * 2,132,500 42,991 Cox Radio, Class A * 1,000,000 25,230 Entercom Communications * 600,000 31,776 Lamar Advertising, Class A * 150,000 5,598 Radio One, Class D * 2,250,000 43,425 Regent Communications * 1,631,700 10,361 Spanish Broadcasting, Class A *! 2,000,000 21,000 TiVo * 600,000 4,440 Westwood One * 400,000 13,684 XM Satellite Radio Holdings, Class A * 600,000 15,816 252,433 Multiline Retail 1.5% Tuesday Morning *! 2,500,000 75,625 75,625 Specialty Retail 5.1% AC Moore Arts & Crafts * 850,000 16,371 AnnTaylor Stores * 950,000 37,050 Christopher & Banks ! 2,000,000 39,060 Cole National * 350,000 7,000 Guitar Center * 83,100 2,707 Linens 'n Things * 600,000 18,048 O'Reilly Automotive * 1,800,000 69,048 Sonic Automotive 886,000 20,307 The Finish Line, Class A * 850,000 25,475 Tweeter Home Entertainment Group * 1,000,000 9,450 Ultimate Electronics *! 800,000 6,104 250,620 Total Consumer Discretionary 1,110,121 CONSUMER NONDURABLES 0.1% Biotechnology 0.1% Theravance, Pfd. *!!@ 513,334 4,620 Total Consumer Nondurables 4,620 CONSUMER STAPLES 0.9% Food & Staples Retailing 0.7% Duane Reade *! 2,100,000 35,532 35,532 Food Products 0.2% American Italian Pasta, Class A * 204,400 8,564 8,564 Total Consumer Staples 44,096 ENERGY 5.5% Energy Equipment & Services 4.5% BJ Services * 375,000 13,462 Cooper Cameron * 425,000 19,805 FMC Technologies * 1,400,000 32,620 Global Industries * 841,000 4,331 Grant Prideco * 1,500,000 19,530 Helmerich & Payne 750,000 20,947 Hydril * 531,000 12,707 Key Energy Services * 1,602,700 16,524 National Oilwell * 950,000 21,242 Seacor Smit * 300,000 12,609 Smith International * 275,000 11,418 Tidewater 700,000 20,916 Varco International * 150,000 3,095 W-H Energy Services * 784,000 12,701 221,907 Oil & Gas 1.0% Cimarex Energy * 550,000 14,680 Encore Aquisition * 620,000 15,283 Westport Resources * 743,000 22,186 52,149 Total Energy 274,056 FINANCIALS 7.1% Capital Markets 2.0% Affiliated Managers Group * 354,000 24,635 Investor's Financial Services 350,000 13,443 Legg Mason 350,000 27,013 National Financial Partners 350,000 9,643 Waddell & Reed Financial, Class A 1,050,000 24,633 99,367 Commercial Banks 1.5% Boston Private Financial 350,000 8,694 Silicon Valley Bancshares * 266,000 9,595 Texas Capital Bancshares * 600,000 8,677 UCBH Holdings 1,200,000 46,764 73,730 Consumer Finance 0.3% First Marblehead * 217,000 4,748 Nelnet, Class A * 400,000 8,960 13,708 Diversified Financial Services 0.3% CapitalSource * 650,000 14,092 14,092 Insurance 1.9% Direct General 400,000 13,240 Hilb Rogal and Hamilton 200,000 6,414 Hub International 350,900 5,881 Infinity Property & Casualty 570,000 18,838 MaxRe Capital 700,000 15,708 Platinum Underwriters 550,000 16,500 Scottish Annuity & Life 1,000,000 20,780 97,361 Real Estate 0.1% Trammell Crow * 548,200 7,264 7,264 Thrifts & Mortgage Finance 1.0% Radian Group 1,000,000 48,750 48,750 Total Financials 354,272 HEALTH CARE 21.9% Biotechnology 6.9% Abgenix * 875,000 10,903 Alexion Pharmaceutical * 487,400 8,296 Alkermes * 1,681,700 22,703 Amylin Pharmaceuticals * 550,000 12,221 BioCryst Pharmaceuticals * 323,400 2,206 Cephalon * 724,500 35,073 Cubist Pharmaceuticals * 750,000 9,120 Diversa * 1,300,000 12,025 Exelixis * 1,314,000 9,303 Gilead Sciences * 400,000 23,256 Human Genome Sciences * 450,000 5,963 Imclone Systems * 225,000 8,924 Lexicon Genetics * 1,000,000 5,890 Millennium Pharmaceuticals * 475,000 8,868 Myriad Genetics * 750,000 9,645 Neurocrine Biosciences * 965,000 52,631 NPS Pharmaceuticals * 1,176,100 36,153 ONYX Pharmaceuticals * 400,000 11,292 OSI Pharmaceuticals * 225,000 7,247 Protein Design Labs * 250,000 4,475 Regeneron Pharmaceuticals * 221,100 3,252 Transkaryotic Therapies * 750,000 11,707 Trimeris * 500,000 10,490 Tularik * 750,000 12,112 Vertex Pharmaceuticals * 475,000 4,859 ViroPharma * 509,000 1,415 XOMA * 850,000 5,610 345,639 Health Care Equipment & Supplies 1.7% Analogic 120,000 4,920 Control Delivery Systems, Cv. Pfd., 8.00%, Series A *!!@ 74,432 2,000 CTI Molecular Imaging * 350,000 5,918 Encore Medical * 1,000,000 8,150 EPIX Medical * 560,000 9,117 Integra LifeServices Holdings * 544,100 15,578 Nektar Therapeutics * 425,000 5,784 Steris * 100,000 2,260 Thoratec * 600,000 7,806 Viasys Healthcare * 241,000 4,965 Wilson Greatbatch Technologies * 400,000 16,908 83,406 Health Care Providers & Services 11.9% Accredo Health * 350,000 11,063 AMN Healthcare Services * 182,994 3,140 Community Health System * 1,000,000 26,580 Coventry Health Care * 850,000 54,816 Davita * 2,435,000 94,965 HealthStream *! 2,405,000 6,253 Henry Schein * 2,100,000 141,918 LabOne * 100,000 3,247 Mid Atlantic Medical Services * 550,000 35,640 Omnicare 3,000,000 121,170 Priority Healthcare, Class B * 50,000 1,206 Renal Care Group * 750,000 30,900 United Surgical Partners International * 350,000 11,718 VCA Antech * 900,000 27,882 WebMD * 750,000 6,743 WellChoice * 357,600 12,337 589,578 Pharmaceuticals 1.4% Able Laboratories * 375,000 6,776 Atherogenics * 700,000 10,465 Eon Labs * 200,000 10,190 Medicines Company * 700,000 20,622 MGI Pharma * 185,000 7,613 Noven Pharmaceuticals * 375,000 5,704 Salix Pharmaceuticals * 300,000 6,801 68,171 Total Health Care 1,086,794 INDUSTRIALS & BUSINESS SERVICES 16.5% Aerospace & Defense 1.6% Armor Holdings * 775,000 20,390 Mercury Computer Systems * 641,000 15,961 MTC Technologies * 200,000 6,444 Triumph Group * 600,000 21,840 United Defense Industries * 435,000 13,868 78,503 Air Freight & Logistics 0.4% EGL * 200,000 3,512 Forward Air * 500,000 13,750 17,262 Commercial Services & Supplies 11.3% Apollo Group, Class A * 2,150,000 146,200 Bright Horizons Family Solutions * 450,000 18,900 Corporate Executive Board * 799,933 37,333 Education Management * 1,300,000 40,352 Exult * 4,750,000 33,820 First Advantage, Class A * 181,400 3,535 LECG * 167,900 3,843 Mobile Mini *! 1,100,000 21,692 Resources Connection * 500,000 13,655 School Specialty *! 1,500,000 51,015 SOURCECORP * 600,000 15,378 Sylvan Learning Systems * 1,550,000 44,625 Tetra Tech * 800,000 19,888 University of Phoenix Online * 1,000,000 68,930 Waste Connections * 1,125,900 42,525 561,691 Industrial Conglomerates 0.8% Roper Industries 850,000 41,871 41,871 Machinery 2.1% Actuant, Class A *! 1,200,000 43,440 Oshkosh Truck 1,200,000 61,236 104,676 Trading Companies & Distributors 0.3% MSC Industrial Direct 500,000 13,750 13,750 Total Industrials & Business Services 817,753 INFORMATION TECHNOLOGY 21.0% Communications Equipment 0.7% Black Box 450,000 20,731 Harmonic Lightwaves * 800,000 5,800 Packeteer * 525,000 8,915 35,446 Computer & Peripherals 0.1% Synaptics * 200,000 2,996 2,996 Electronic Equipment & Instruments 0.9% FLIR Systems * 30,000 1,095 Molex 100,000 3,489 National Instruments 425,000 19,325 Newport * 925,000 15,290 Trimble Navigation * 150,000 5,586 44,785 Internet Software & Services 1.3% Autobytel * 1,040,000 9,443 Internet Security Systems * 825,000 15,535 MatrixOne * 1,400,000 8,624 Netegrity * 725,000 7,475 Sonicwall * 1,100,000 8,580 The Knot *!!! 1,350,000 4,921 Websense * 350,000 10,234 64,812 IT Services 3.2% BISYS Group * 2,000,000 29,760 Certegy 1,000,000 32,800 DigitalThink * 2,214,000 6,221 Global Payments 100,000 4,712 Iron Mountain * 550,000 21,747 Maximus * 400,000 15,652 META Group *! 1,000,000 6,300 Paychex 100,000 3,720 SkillSoft ADR * 3,000,000 25,950 SRA International, Class A * 100,000 4,310 Tier Technologies, Class B * 619,320 5,060 156,232 Semiconductor & Semiconductor Equipment 6.8% Altera * 700,000 15,890 AMIS Holdings * 1,125,000 20,565 Analog Devices 800,000 36,520 ATMI * 1,100,000 25,454 Cabot Microelectronics * 300,000 14,700 Cognex 950,000 26,828 Integrated Circuit Systems * 516,300 14,709 Intersil Holding, Class A 975,000 24,229 Lattice Semiconductor * 800,000 7,744 Linear Technology 200,000 8,414 Maxim Integrated Products 900,000 44,820 Micrel * 775,000 12,075 Microsemi * 500,000 12,290 MIPS Technologies * 400,000 2,178 MKS Instruments * 525,000 15,225 Rambus * 200,000 6,140 Semtech * 800,000 18,184 Sigmatel * 115,000 2,838 Tessera Technologies * 500,000 9,405 Xilinx * 500,000 19,370 337,578 Software 8.0% Actuate * 1,900,000 5,909 Altiris * 320,000 11,674 Autodesk 825,000 20,278 Business Objects ADR * 500,000 17,335 Cadence Design Systems * 550,000 9,889 Callidus Software * 150,000 2,654 Concord Communications * 600,000 11,982 Convera, Class A *! 700,000 2,387 Convera *!!! 800,000 2,455 FactSet Research Systems 500,000 19,105 FileNet * 725,000 19,633 Informatica * 2,700,000 27,810 Jack Henry & Associates 1,250,000 25,725 Kronos * 1,050,000 41,590 Macromedia * 1,100,000 19,624 Magma Design Automation * 600,000 14,004 Mercury Interactive * 750,000 36,480 Nassda * 757,600 5,493 NetIQ * 1,425,000 18,881 Network Associates * 1,400,000 21,056 Open Solutions * 130,000 2,284 Quest Software * 425,000 6,035 Radiant Systems * 350,000 2,944 Red Hat * 800,000 15,016 RSA Security * 675,000 9,585 Verisity Ltd. * 550,000 7,012 Verity * 700,000 11,683 Wind River Systems * 900,000 7,884 396,407 Total Information Technology 1,038,256 MATERIALS 1.0% Chemicals 0.7% Airgas 360,000 7,733 Ferro 300,000 8,163 Symyx Technologies * 950,000 19,522 35,418 Metals & Mining 0.3% Steel Dynamics * 500,000 11,745 11,745 Total Materials 47,163 TELECOMMUNICATION SERVICES 3.0% Wireless Telecommunication Services 3.0% Crown Castle International * 500,000 5,515 Millicom International Cellular * 200,000 13,980 Nextel Partners, Class A * 2,850,000 38,333 NII Holdings, Class B * 750,000 55,972 Triton PCS Holdings, Class A * 736,900 4,112 Western Wireless, Class A * 1,000,000 18,360 Wireless Facilities * 1,000,000 14,860 Total Telecommunication Services 151,132 Total Miscellaneous Equity Investments 0.1% 4,412 Total Equity Investments (Cost $3,328,789) 4,932,675 SHORT-TERM INVESTMENTS 0.3% Money Market Fund 0.3% T. Rowe Price Reserve Investment Fund, 1.13% # 12,340,343 12,340 Total Short-Term Investments (Cost $12,340) 12,340 Total Investments in Securities 99.8% of Net Assets (Cost $3,341,129) $ 4,945,015 ----------------- (ss.) Denominated in U.S. Dollar unless otherwise noted # Seven-day yield * Non-income producing (s.) Common stocks, rights, and warrants--cost $3,320,169, value $4,926,055, 99.4% of net assets; Preferred stocks--cost $4,620, value $4,620, 0.1% of net assets; Convertible preferred stocks--cost $4,000, value $2,000, 0% of net assets ! Affiliated company--See Note 2. !! Security contains restrictions as to public resale pursuant to the Securities Act of 1933 and related rules--total of such securities at period-end amounts to $13,996 and represents 0.3% of net assets @ Security valued by the Fund's Board of Directors ADR American Depository Receipts The accompanying notes are an integral part of these financial statements. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report December 31, 2003 Statement of Assets and Liabilities - -------------------------------------------------------------------------------- ($ 000s) Assets Investments in securities, at value Affiliated companies (cost $306,833) $ 351,747 Other companies (cost $3,034,296) 4,593,268 Total investments in securities 4,945,015 Other assets 28,059 Total assets 4,973,074 Liabilities Total liabilities 17,998 NET ASSETS $ 4,955,076 --------------- Net Assets Consist of: Undistributed net realized gain (loss) (255,523) Net unrealized gain (loss) 1,603,886 Paid-in-capital applicable to 199,784,274 shares of $1.00 par value capital stock outstanding; 300,000,000 shares authorized 3,606,713 NET ASSETS $ 4,955,076 ----------------- NET ASSET VALUE PER SHARE $ 24.80 ----------------- The accompanying notes are an integral part of these financial statements. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Statement of Operations - -------------------------------------------------------------------------------- ($ 000s) Year Ended 12/31/03 Investment Income (Loss) Dividend Income $ 6,306 Expenses Investment management 26,921 Shareholder servicing 9,143 Custody and accounting 250 Prospectus and shareholder reports 245 Registration 51 Legal and audit 26 Directors 21 Miscellaneous 31 Total expenses 36,688 Expenses paid indirectly (3) Net expenses 36,685 Net investment income (loss) (30,379) Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities 115,360 Foreign currency transactions (24) Net realized gain (loss) 115,336 Change in net unrealized gain (loss) on securities 1,545,443 Net realized and unrealized gain (loss) 1,660,779 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 1,630,400 ----------------- The accompanying notes are an integral part of these financial statements. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Statement Of Changes In Net Assets - -------------------------------------------------------------------------------- ($ 000s) Year Ended 12/31/03 12/31/02 Increase (Decrease) in Net Assets Operations Net investment income $ (30,379) $ (33,401) Net realized gain (loss) 115,336 104,728 Change in net unrealized gain or loss 1,545,443 (1,367,631) Increase (decrease) in net assets from operations 1,630,400 (1,296,304) Capital share transactions * Shares sold 794,491 657,283 Shares reinvested 10 - Shares redeemed (829,181) (1,584,308) Increase (decrease) in net assets from capital share transactions (34,680) (927,025) Net Assets Increase (decrease) during period 1,595,720 (2,223,329) Beginning of period 3,359,356 5,582,685 End of period $ 4,955,076 $ 3,359,356 ------------------------------------- *Share information Shares sold 38,617 34,282 Shares redeemed (41,135) (78,724) Increase (decrease) in shares outstanding (2,518) (44,442) The accompanying notes are an integral part of these financial statements. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report December 31, 2003 Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price New Horizons, Inc. (the fund) is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company and commenced operations on June 3, 1960. The fund seeks long-term capital growth by investing primarily in common stocks of small, rapidly growing companies. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Valuation The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business. Equity securities listed or regularly traded on a securities exchange or in the over-the-counter market are valued at the last quoted sale price, or official closing price for certain markets, at the time the valuations are made. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the latest bid and ask prices for domestic securities and the last quoted sale price for international securities. Debt securities are generally traded in the over-the-counter market. Securities with original maturities of one year or more are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Securities with original maturities of less than one year are valued at amortized cost in local currency, which approximates fair value when combined with accrued interest. Investments in mutual funds are valued at the mutual fund's closing net asset value per share on the day of valuation. Other investments and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. Most foreign markets close before the NYSE. Normally, developments that could affect the values of securities that occur between the close of a foreign market and the close of the NYSE will not be reflected in security valuations used by the fund to compute its share price. However, if developments are so significant that they will, in the judgment of the fund, clearly and materially affect security values, such valuations may be adjusted to reflect the estimated fair value of the securities as of the close of the NYSE, as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and ask prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses. Rebates and Credits Subject to best execution, the fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the fund in cash. Commission rebates are included in realized gain on securities in the accompanying financial statements and totaled $208,000 for the year ended December 31, 2003. Additionally, the fund earns credits on temporarily uninvested cash balances at the custodian that reduce the fund's custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits, which are reflected as expenses paid indirectly. Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid on an annual basis. Other In the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is dependent on claims that may be made against the fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote. NOTE 2 - INVESTMENT TRANSACTIONS Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund's prospectus and Statement of Additional Information. Affiliated Companies The fund may invest in certain securities that are considered affiliated companies. As defined by the 1940 Act, an affiliated company is one in which the fund owns 5% or more of the outstanding voting securities. At December 31, 2003, the value of affiliated companies totaled $351,747,000, representing 7.1% of the value of the fund's investments in securities. For the year then ended, $158,000 (2.5%) of dividend income and $1,889,000 (1.6%) of net realized gain reflected in the accompanying financial statements resulted from the fund's transactions with affiliated companies. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $1,137,473,000 and $1,180,496,000, respectively, for the year ended December 31, 2003. NOTE 3 - FEDERAL INCOME TAXES No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ significantly in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. There were no distributions in the year ended December 31, 2003. At December 31, 2003, the tax-basis components of net assets were as follows: - -------------------------------------------------------------------------------- Unrealized appreciation $ 2,074,232,000 Unrealized depreciation (477,463,000) Net unrealized appreciation (depreciation) 1,596,769,000 Capital loss carryforwards (248,406,000) Paid-in capital 3,606,713,000 Net assets $ 4,955,076,000 ------------------- Pursuant to federal income tax regulations applicable to investment companies, the fund has elected to treat net capital losses realized between November 1 and December 31 of each year as occurring on the first day of the following tax year. Consequently, $7,117,000 of realized losses reflected in the accompanying financial statements will not be recognized for tax purposes until 2004. The fund intends to retain realized gains to the extent of available capital loss carryforwards for federal income tax purposes. In 2003, the fund utilized $118,950,000 of capital loss carryforwards. As of December 31, 2003, the fund had $34,264,000 of capital loss carryforwards that expire in 2009 and $214,142,000 that expire in 2010. For the year ended December 31, 2003, the fund recorded the following permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to the current net operating loss. - -------------------------------------------------------------------------------- Undistributed net investment income $ 30,379,000 Undistributed net realized gain 25,000 Paid-in capital (30,404,000) At December 31, 2003, the cost of investments for federal income tax purposes was $3,348,246,000. NOTE 4 - RELATED PARTY TRANSACTIONS The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The investment management agreement between the fund and the manager provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.35% of the fund's average daily net assets, and the fund's pro-rata share of a group fee. The group fee is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120 billion. The fund's portion of the group fee is determined by the ratio of its average daily net assets to those of the group. At December 31, 2003, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $2,792,000. In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund's transfer and dividend disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. Expenses incurred pursuant to these service agreements totaled $6,617,000 for the year ended December 31, 2003, of which $572,000 was payable at period-end. The fund is also one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum Funds) may invest. The Spectrum Funds do not invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to a special servicing agreement, expenses associated with the operation of the Spectrum Funds are borne by each underlying Price fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by the Spectrum Funds. Expenses allocated under this agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the year ended December 31, 2003, the fund was allocated $879,000 of Spectrum Funds' expenses, of which $630,000 related to services provided by Price and $67,000 was payable at period-end. At December 31, 2003, approximately 8.4% of the outstanding shares of the fund were held by the Spectrum Funds. The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by Price Associates. The Reserve Funds are offered as cash management options only to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates, and are not available to the public. The Reserve Funds pay no investment management fees. During the year ended December 31, 2003, dividend income from the Reserve Funds totaled $649,000. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Report of Independent Auditors - -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of T. Rowe Price New Horizons Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price New Horizons Fund, Inc. (the "Fund") at December 31, 2003, and the results of its operations, the changes in its net assets and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland January 26, 2004 T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Information on Proxy Voting A description of the policies and procedures that the T. Rowe Price New Horizons Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request by calling 1-800-225-5132. It also appears in the fund's Statement of Additional Information (Form 485B), which can be found on the SEC's Web site, www.sec.gov. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report About the Fund's Directors and Officers Your fund is governed by a Board of Directors that meets regularly to review investments, performance, expenses, and other business matters, and is responsible for protecting the interests of shareholders. The majority of the fund's directors are independent of T. Rowe Price Associates, Inc. (T. Rowe Price); "inside" directors are officers of T. Rowe Price. The Board of Directors elects the fund's officers, who are listed in the final table. The business address of each director and officer is 100 East Pratt Street, Baltimore, MD 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-225-5132. Independent Directors Name (Date of Birth) Principal Occupation(s) During Past 5 Years Year Elected* and Directorships of Other Public Companies Anthony W. Deering Director, Chairman of the Board, President, and (1/28/45) Chief Executive Officer, The Rouse Company, real 2001 estate developers; Director, Mercantile Bank (4/03 to present) Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an (1/27/43) acquisition and management advisory firm 1994 David K. Fagin Director, Golden Star Resources Ltd., Canyon (4/9/38) Resources Corp. (5/00 to present), and Pacific 1988 Rim Mining Corp. (2/02 to present); Chairman and President, Nye Corp. Karen N. Horn Managing Director and President, Global Private (9/21/43) Client Services, Marsh Inc.; Managing Director 2003 and Head of International Private Banking, Bankers Trust; Director, Eli Lilly and Company F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates, (8/22/34) Inc., consulting environmental and civil engineers 2001 John G. Schreiber Owner/President, Centaur Capital Partners, Inc., (10/21/46) a real estate investment company; Senior Advisor 2001 and Partner, Blackstone Real Estate Advisors, L.P.; Director, AMLI Residential Properties Trust, Host Marriott Corp., and The Rouse Company Hubert D. Vos** Owner/President, Stonington Capital Corp., a (8/2/33) private investment company 1983 Paul M. Wythes** Founding Partner, Sutter Hill Ventures, a venture (6/23/33) capital limited partnership, providing equity 1981 capital to young high-technology companies throughout the United States; Director, Teltone Corp. * Each independent director oversees 107 T. Rowe Price portfolios and serves until retirement, resignation, or election of a successor. ** Retired from Board of Directors effective December 31, 2003. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Inside Directors Name (Date of Birth) Year Elected* [Number of T. Rowe Price Principal Occupation(s) During Past 5 Years and Portfolios Overseen] Directorships of Other Public Companies John H. Laporte, CFA Director and Vice President, T. Rowe Price Group, (7/26/45) Inc.; Vice President, T. Rowe Price; President, 1988 New Horizons Fund [15] James S. Riepe Director and Vice President, T. Rowe Price; (6/25/43) Vice Chairman of the Board, Director, and Vice 1983 President, T. Rowe Price Group, Inc.; Chairman [107] of the Board and Director, T. Rowe Price Global Asset Management Limited, T. Rowe Price Global Investment Services Limited, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President, and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc.; Chairman of the Board, New Horizons Fund M. David Testa, CFA, CIC Chief Investment Officer, Director, and Vice (4/22/44) President, T. Rowe Price; Vice Chairman of the 1994 Board, Chief Investment Officer, Director, and [107] Vice President, T. Rowe Price Group, Inc.; Chairman of the Board and Director, T. Rowe Price International, Inc.; Director, T. Rowe Price Global Asset Management Limited and T. Rowe Price Global Investment Services Limited; Director and Vice President, T. Rowe Price Trust Company * Each inside director serves until retirement, resignation, or election of a successor. Officers Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) Francisco Alonso (1/27/78) Vice President, T. Rowe Price; formerly Vice President, New Horizons Fund student, University of Ohio (to 2000); intern, Morgan Stanley Dean Witter (to 2000) Brian W.H. Berghuis, CFA (10/12/58) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Christopher A. Berrier (8/12/77) Employee, T. Rowe Price; formerly Vice President, New Horizons Fund intern, Riggs Capital Partners (to 1999) Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Officers (continued) Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) Stephen V. Booth (6/21/61) Vice President, T. Rowe Price, T. Rowe Vice President, New Horizons Fund Price Group, Inc., and T. Rowe Price Trust Company Christopher W. Carlson (1/27/67) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Joseph A. Carrier (12/30/60) Vice President, T. Rowe Price, T. Rowe Treasurer, New Horizons Fund Price Group, Inc., and T. Rowe Price Investment Services, Inc. Hugh M. Evans III, CFA (5/17/66) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Joseph B. Fath, CPA (10/5/71) Employee, T. Rowe Price; formerly Vice President, New Horizons Fund intern, T. Rowe Price (to 2001); Chief Financial Officer and cofounder, Broadform, Inc. (to 2000); student, The Wharton School, University of Pennsylvania (to 1999) Roger L. Fiery III, CPA (2/10/59) Vice President, T. Rowe Price, T. Rowe Vice President, New Horizons Fund Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company Eric M. Gerster, CFA (3/23/71) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Francies W. Hawks (2/2/44) Assistant Vice President, T. Rowe Price Assistant Vice President, New Horizons Fund Henry H. Hopkins (12/23/42) Director and Vice President, T. Rowe Vice President, New Horizons Fund Price Group, Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc. Kris H. Jenner, MD, D. Phil. (2/5/62) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Patricia B. Lippert (1/12/53) Assistant Vice President, T. Rowe Secretary, New Horizons Fund Price and T. Rowe Price Investment Services, Inc. Jay S. Markowitz, MD (12/19/62) Vice President, T. Rowe Price; formerly Vice President, New Horizons Fund Transplant Surgeon and Assistant Professor of Surgery, Johns Hopkins University School of Medicine (to 2001) Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. Rowe Price New Horizons Fund - -------------------------------------------------------------------------------- Certified Annual Report Officers (continued) Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) Joseph M. Milano, CFA (9/14/72) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Charles G. Pepin (4/23/66) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Michael F. Sola, CFA (7/21/69) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. John F. Wakeman (11/25/62) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc. Julie L. Waples (5/12/70) Vice President, T. Rowe Price Vice President, New Horizons Fund R. Candler Young (9/28/71) Vice President, T. Rowe Price and Vice President, New Horizons Fund T. Rowe Price Group, Inc.; formerly investment banking summer associate, Goldman Sachs & Company (to 1999) Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. Item 2. Code of Ethics. As of the end of the period covered by this report, the registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report. Item 3. Audit Committee Financial Expert. The registrant's Board of Directors/Trustees has determined that Mr. David K. Fagin qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. (a) - (d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant's principal accountant were as follows: 2003 2002 Audit Fees $14,823 $13,923 Audit-Related Fees 912 -- Tax Fees 3,850 3,371 All Other Fees 124 284 Audit fees include amounts related to the audit of the registrant's annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant's financial statements, specifically the issuance of a report on internal controls. Tax fees include amounts related to tax compliance, tax planning, and tax advice. Other fees include the registrant's pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant's Board of Directors/Trustees. (e)(1) The registrant's audit committee has adopted a policy whereby audit and non-audit services performed by the registrant's principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted. (2) No services included in (b) - (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant's principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $719,000 and $671,000, respectively, and were less than the aggregate fees billed for those same periods by the registrant's principal accountant for audit services rendered to the T. Rowe Price Funds. (h) All non-audit services rendered in (g) above were pre-approved by the registrant's audit committee. Accordingly, these services were considered by the registrant's audit committee in maintaining the principal accountant's independence. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. T. Rowe Price New Horizons Fund, Inc. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date February 13, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date February 13, 2004 By /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer Date February 13, 2004 EX-99.CERT 2 ex-99cert.txt 302 CERTIFICATIONS Item 10(a)(2). CERTIFICATIONS I, James S. Riepe, certify that: 1. I have reviewed this report on Form N-CSR of T. Rowe Price New Horizons Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 13, 2004 /s/ James S. Riepe James S. Riepe Principal Executive Officer CERTIFICATIONS I, Joseph A. Carrier, certify that: 1. I have reviewed this report on Form N-CSR of T. Rowe Price New Horizons Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 13, 2004 /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer EX-99.CODE ETH 4 ex-99_codeeth.txt CODE OF ETHICS Code of Ethics for Principal Executive and Senior Financial Officers of The Price Funds under the Sarbanes-Oxley Act of 2002 I. General Statement. This Code of Ethics (the "Price Funds S-O Code") has been designed to bring the Price Funds into compliance with the applicable requirements of the Sarbanes-Oxley Act of 2002 (the "Act") rules promulgated by The Securities and Exchange Commission thereunder ("Regulations"). The Price Funds S-O Code applies solely to the Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller of, or persons performing similar functions for, a Price Fund (whether such persons are employed by a Price Fund or third party) ("Covered Officers"). The "Price Funds" shall include each mutual fund that is managed, sponsored and distributed by affiliates of T. Rowe Price Group, Inc. ("Group"). The investment managers to the Price Funds will be referred to as the "Price Fund Advisers." A list of Covered Officers is attached as Exhibit A. The Price Fund Advisers have, along with their parent, T. Rowe Price Group, Inc. ("Group") also maintained a comprehensive Code of Ethics and Conduct (the "Group Code") since 1972, which applies to all officers, directors and employees of the Price Funds, Group and its affiliates. As mandated by the Act, Group has adopted a Code (the "Group S-O Code"), similar to the Price Funds S-O Code, which applies solely to its principal executive and senior financial officers. The Group S-O Code and the Price Funds S-O Code will be referred to collectively as the "S-O Codes". The Price Funds S-O Code has been adopted by the Price Funds in accordance with the Act and Regulations thereunder and will be administered in conformity with the disclosure requirements of Item 2 of Form N-CSR. The S-O Codes are attachments to the Group Code. In many respects the S-O Codes are supplementary to the Group Code, but the Group Code is administered separately from the S-O Codes, as the S-O Codes are from each other. II. Purpose of the Price Funds S-O Code. The purpose of the Price Funds S-O Code, as mandated by the Act and the Regulations, is to establish standards that are reasonably designed to deter wrongdoing and to promote: Ethical Conduct. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Disclosure. Full, fair, accurate, timely and understandable disclosure in reports and documents that the Price Funds file with, or submit to, the SEC and in other public communications made by the Price Funds. Compliance. Compliance with applicable governmental laws, rules and regulations. Reporting of Violations. The prompt internal reporting of violations of the Price Funds S-O Code to an appropriate person or persons identified in the Price Funds S-O Code. Accountability. Accountability for adherence to the Price Funds S-O Code. III. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest. Overview. Each Covered Officer owes a duty to the Price Funds to adhere to a high standard of honesty and business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Price Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with a Price Fund. Certain conflicts of interest covered by the Price Funds S-O Code arise out of the relationships between Covered Officers and the Price Funds and may already be subject to provisions regulating conflicts of interest in the Investment Company Act of 1940 ("Investment Company Act"), the Investment Advisers Act of 1940 ("Investment Advisers Act") and the Group Code. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Price Fund because of their status as "affiliated persons" of a Price Fund. The compliance programs and procedures of the Price Funds and Price Fund Advisers are designed to prevent, or identify and correct, violations of these provisions. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between a Price Fund and its Price Fund Adviser (and its affiliates) of which the Covered Officers may also be officers or employees. As a result, the Price Funds S-O Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Price Funds or for the Price Fund Advisers, or for both), be involved in establishing policies and implementing decisions which will have different effects on these entities. The participation of the Covered Officers in such activities is inherent in the contractual relationship between each Price Fund and its respective Price Fund Adviser. Such participation is also consistent with the performance by the Covered Officers of their duties as officers of the Price Funds and, if consistent with the provisions of the Investment Company Act and the Investment Advisers Act, it will be deemed to have been handled ethically. Other conflicts of interest are covered by the Price Funds S-O Code, even if these conflicts of interest are not addressed by or subject to provisions in the Investment Company Act and the Investment Advisers Act. Whenever a Covered Officer is confronted with a conflict of interest situation where he or she is uncertain as to the appropriate action to be taken, he or she should discuss the matter with the Chairperson of Group's Ethics Committee or another member of the Committee. Handling of Specific Types of Conflicts. Each Covered Officer (and close family members) must not: Entertainment. Accept entertainment from any company with which any Price Fund or any Price Fund Adviser has current or prospective business dealings, including portfolio companies, unless such entertainment is in full compliance with the policy on entertainment as set forth in the Group Code. Gifts. Accept any gifts, except as permitted by the Group Code. Improper Personal Influence. Use his or her personal influence or personal relationships improperly to influence investment decisions, brokerage allocations or financial reporting by the Price Funds to the detriment of any one or more of the Price Funds. Taking Action at the Expense of a Price Fund. Cause a Price Fund to take action, or fail to take action, for the personal benefit of the Covered Officer rather than for the benefit of one or more of the Price Funds. Misuse of Price Funds' Transaction Information. Use knowledge of portfolio transactions made or contemplated for a Price Fund or any other clients of the Price Fund Advisers to trade personally or cause others to trade in order to take advantage of or avoid the market impact of such portfolio transactions. Outside Business Activities. Engage in any outside business activity that detracts from a Covered Officer's ability to devote appropriate time and attention to his or her responsibilities to a Price Fund. Service Providers. Excluding Group and its affiliates, have any ownership interest in, or any consulting or employment relationship with, any of the Price Funds' service providers, except that an ownership interest in public companies is permitted Receipt of Payments. Have a direct or indirect financial interest in commissions, transaction charges, spreads or other payments paid by a Price Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest (such as compensation or equity ownership) arising from the Covered Officer's employment by Group or any of its affiliates. Service as a Director or Trustee. Serve as a director, trustee or officer of any public or private company or a non-profit organization that issues securities eligible for purchase by any of the Price Funds, unless approval is obtained as required by the Group Code. IV. Covered Officers' Specific Obligations and Accountabilities. A. Disclosure Requirements and Controls. Each Covered Officer must familiarize himself or herself with the disclosure requirements (Form N-1A registration statement, proxy (Schedule 14A), shareholder reports, Forms N-SAR, N-CSR, etc.) applicable to the Price Funds and the disclosure controls and procedures of the Price Fund and the Price Fund Advisers. B. Compliance with Applicable Law. It is the responsibility of each Covered Officer to promote compliance with all laws, rules and regulations applicable to the Price Funds and the Price Fund Advisers. Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Price Funds and the Price Fund Advisers and take other appropriate steps with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Price Funds file with, or submit to, the SEC, and in other public communications made by the Price Funds. C. Fair Disclosure. Each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about a Price Fund to others, whether within or outside the Price organization, including to the Price Fund's directors and auditors, and to governmental regulators and self-regulatory organizations. D. Initial and Annual Affirmations. Each Covered Officer must: 1. Upon adoption of the Price Funds S-O Code (or thereafter, as applicable, upon becoming a Covered Officer), affirm in writing that he or she has received, read, and understands the Price Funds S-O Code. 2. Annually affirm that he or she has complied with the requirements of the Price Funds S-O Code. E. Reporting of Material Violations of the Price Funds S-O Code. If a Covered Officer becomes aware of any material violation of the Price Funds S-O Code or laws and governmental rules and regulations applicable to the operations of the Price Funds, he or she must promptly report the violation ("Report") to the Chief Legal Counsel of the Price Funds ("CLC"). Failure to report a material violation will be considered itself a violation of the Price Funds S-O Code. The CLC is identified in the attached Exhibit B. It is the Price Funds policy that no retaliation or other adverse action will be taken against any Covered Officer or other employee of a Price Fund, a Price Fund Adviser or their affiliates based upon any lawful actions of the Covered Officer or employee with respect to a Report made in good faith. F. Annual Disclosures. Each Covered Officer must report, at least annually, all affiliations or other relationships as called for in the "Annual Questionnaire for Executive Officers and/or Employee Directors/Trustees of Group and the Price Funds." V. Administration of the Price Funds S-O Code. The Ethics Committee is responsible for administering the Price Funds S-O Code and applying its provisions to specific situations in which questions are presented. A. Waivers and Interpretations. The Chairperson of the Ethics Committee has the authority to interpret the Price Funds S-O Code in any particular situation and to grant waivers where justified, subject to the approval of the Joint Audit Committee of the Price Funds. All material interpretations concerning Covered Officers will be reported to the Joint Audit Committee of the Price Funds at its next meeting. Waivers, including implicit waivers, to Covered Officers will be publicly disclosed as required in the Instructions to N-CSR. Pursuant to the definition in the Regulations, an implicit waiver means a Price Fund's failure to take action within a reasonable period of time regarding a material departure from a provision of the Price Funds S-O Code that has been made known to an "executive officer" (as defined in Rule 3b-7 under the Securities Exchange Act of 1934) of a Price Fund. An executive officer of a Price Fund includes its president and any vice-president in charge of a principal business unit, division or function. B. Violations/Investigations. The following procedures will be followed in investigating and enforcing the Price Funds S-O Code: 1. The CLC will take or cause to be taken appropriate action to investigate any potential or actual violation reported to him or her. 2. The CLC, after consultation if deemed appropriate with Outside Counsel to the Price Funds, will make a recommendation to the appropriate Price Funds Board regarding the action to be taken with regard to each material violation. Such action could include any of the following: a letter of censure or suspension, a fine, a suspension of trading privileges or termination of officership or employment. In addition, the violator may be required to surrender any profit realized (or loss avoided) from any activity that is in violation of the Price Funds S-O Code. VI. Amendments to the Price Funds S-O Code. Except as to the contents of Exhibit A and Exhibit B, the Price Funds S-O Code may not be materially amended except in written form, which is specifically approved or ratified by a majority vote of each Price Fund Board, including a majority of the independent directors on each Board. VII. Confidentiality. All reports and records prepared or maintained pursuant to the Price Funds S-O Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law, the Price Funds S-O Code or as necessary in connection with regulations under the Price Funds S-O Code, such matters shall not be disclosed to anyone other than the directors of the appropriate Price Fund Board, Outside Counsel to the Price Funds, members of the Ethics Committee and the CLC and authorized persons on his or her staff. Approved: October 2003 Exhibit A Persons Covered by the Price Funds S-O Code of Ethics James S. Riepe, Chairman and Chief Executive Officer Joseph A. Carrier, Treasurer and Chief Financial Officer Exhibit B Chief Legal Counsel to the Price Funds Henry H. Hopkins EX-99.906 5 ex-99_906cert.txt 906 CERTIFICATIONS Item 10(b). CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002 Name of Issuer: T. Rowe Price New Horizons Fund In connection with the Report on Form N-CSR for the above named issuer, the undersigned hereby certifies, to the best of his knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: February 13, 2004 /s/ James S. Riepe James S. Riepe Principal Executive Officer Date: February 13, 2004 /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----