-----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, J8K5CXoqBns0qxvdTMJuz8/r8InJ80SuueUD7S2PbD8dJFsp+wU4RM9XXJnISzVj HokZ2OXQiVUnFbM5F631ug== 0000773485-01-500043.txt : 20010815 0000773485-01-500043.hdr.sgml : 20010815 ACCESSION NUMBER: 0000773485-01-500043 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE NEW AMERICA GROWTH FUND CENTRAL INDEX KEY: 0000773485 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04358 FILM NUMBER: 1712778 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE COMMON STOCK FUND DATE OF NAME CHANGE: 19851003 N-30D 1 srnag.txt SRNAG.TXT Semiannual Report New America Growth Fund June 30, 2001 T. Rowe Price Report Highlights New America Growth Fund o Growth stocks were mostly lower during a volatile first half of 2001. o The New America Growth Fund posted losses during this difficult period, but our focus on companies with recurring revenues helped the fund outperform its peer group. o Many of the fund's technology holdings were hit hard, but consumer and business services stocks were stronger. o We believe that our focus on companies with good business models and strong recurring revenues will serve us well over the long term. UPDATES AVAILABLE For updates on T. Rowe Price funds following the end of each calendar quarter, please see our Web site at www.troweprice.com. Fellow Shareholders The last several months have tested the courage of growth investors. With intraday swings of 2% almost the norm-and 5%-plus swings not uncommon-the markets were not for the faint of heart. Unfortunately, the primary direction of the volatility was downward during the first half of 2001, as bleak earnings forecasts and declines in capital spending spread throughout the economy. As shown in the table below, the large-cap S&P 500 Stock Index fell, but the technology-dominated Nasdaq Composite Index fared even worse, dropping 12.53% for the six months and 45.51% for the year. Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 6/30/01 6 Months 12 Months New America Growth Fund -6.57% -15.19% S&P 500 Stock Index -6.70 -14.83 Lipper Multi-Cap Growth Funds Average -16.13 -31.72 As an aggressive growth fund, New America Growth could not avoid all the pitfalls in this environment. Your fund fell 6.57% for the six months ended June 30 and 15.19% for the 12 months, roughly in line with the S&P 500 Stock Index for both periods. As we have noted often in our reports, we prefer companies that have recurring revenues and do not have to resell their products every day. This focus allowed us to significantly outperform our average competitor fund as measured by the Lipper Multi-Cap Growth Funds Average, our new peer-group benchmark that replaces the Lipper Growth Funds Average. Since its inception, your fund has invested in both large- and mid-cap stocks, and the new Lipper benchmark reflects our strategy more accurately. MARKET ENVIRONMENT The U.S. economy weakened dramatically as 2000 ended, prompting aggressive action by the Federal Reserve. The Fed cut short-term interest rates six times during the last six months, lowering the federal funds target rate-a benchmark for various lending rates-from 6.50% to 3.75%. The economy remained stubbornly sluggish throughout the period, however. GDP grew at just over a 1% annual rate, unemployment rose, and productivity fell. We are in the midst of a major inventory correction in technology that is having repercussions for many companies and industries. The tech sector grew at unsustainable rates for several quarters, first because of Y2K expectations and then because of the reckless funding of both new and established companies. While growth investors benefited greatly during this period, many companies ran their businesses as though this level of growth would continue indefinitely. However, many proved to have unprofitable business models and eventually folded when funding became unavailable. Not only is this source of growth now gone from the market, but the large incumbents now do not feel the urgency to spend as aggressively to fend off new entrants. Billions of dollars of inventory have accumulated at many companies. The magnitude of this problem exceeded our expectations. Slowdown widened to rest of the economy In time, weakness in the telecommunications and technology industries spread into the general economy. Companies cut back on capital spending in response to lower profits and to adjust for excess inventory and weak demand. Weak global growth and a strong U.S. dollar compounded the problem, creating trouble for the manufacturing sector, which exports 30% of output. Consumer spending remained surprisingly resilient despite a rise in unemployment and the "negative wealth effect"-the reduction in wealth due to the stock market decline. Housing and auto sales remained relatively strong, and it could be argued that consumers have so far kept the economy from falling into a full-fledged recession. Growth vs. Value - -------------------------------------------------------------------------------- Second First 2001 Performance Quarter Half Russell 1000 Growth Index 8.42% -14.24% Russell 1000 Value Index 4.88 -1.26 Given this backdrop, it's not surprising that stock performance was poor over the past six months, despite some short-lived rallies. Large-cap growth stocks, especially technology-related issues, were hardest hit, as companies warned repeatedly that earnings would not meet expectations. For the first six months of the year value outperformed growth, as the Russell 1000 Growth Index fell 14% versus a 1% decline for the Russell 1000 Value Index, as shown in the table on the previous page. After a very difficult first quarter, when the growth index was down more than 20%, the second quarter was quite a bit stronger with growth stocks rising more than 8%. Overall, smaller was better during the first half of the year as small-caps outperformed mid-caps, which in turn outperformed large-caps. PORTFOLIO REVIEW The broadening of the market was reflected in fund results, as our top contributors came from several sectors. Overall, consumer services companies, including Family Dollar Stores and Apollo Group, led performance during the first half of the year. Family Dollar Stores is a discount-store operator that sells both consumables and apparel targeted at middle- to lower-income families, while Apollo Group is a leading degree-granting university that caters to working adults. Buoying Apollo is a fast-growing and profitable online business that has accelerated both the company's top and bottom lines. The business services sector was our next-best contributor, with three computer services companies in the top 10. First Data is the largest credit card processor in the world and owns Western Union. The stock rose as earnings growth accelerated at Western Union and margins expanded in many of its other businesses. Affiliated Computer Services is an outsourcing company that has expanded its service offerings to business process outsourcing. Affiliated has been one of the most consistent companies in the portfolio, growing at least 20% each quarter since its initial public offering in 1994. SunGard Data Systems provides software and systems for domestic and global financial institutions. In a very competitive environment, large multinational financial firms are using technology to offer new products and cut costs. SunGard is the leading vendor selling into this market. The fund's top contributor during the first half of the year was Microsoft, which bucked the negative technology trend. A favorable antitrust ruling along with anticipation of its next generation software (XP) and new game console (X-Box) helped the stock appreciate nearly 70% year-to-date. Two other tech stocks, AOL Time Warner and Jabil Circuit, also made the top 10. AOL Time Warner is the marriage of an Internet company with a cable and media giant. It outperformed other online media stocks because it is not overly dependent on online advertising. Jabil Circuit is a contract manufacturer that is benefiting from the growing outsourcing trend. Finally, two media stocks, AT&T Liberty Media and Clear Channel Communications, were solid contributors. AT&T Liberty Media is a portfolio of companies involved with cable, interactive TV, and the Internet. Many of these sectors came back into favor during the second quarter and allowed Liberty to regain some of the ground it lost the prior year. Clear Channel is a leading out-of-home advertising company, with ownership of more than 1,100 radio stations in the U.S. and more than 750,000 advertising displays throughout the world. Although the current environment is difficult, many investors now see the light at the end of the tunnel for the radio industry as it returns to steadier growth. Tech stocks led detractors Although we had some success in technology, the sector was also filled with torpedoes. The primary shell that hit the fund was Exodus Communications, a leader in hosting corporate Web sites. We were excited about the company's prospects because it appeared that the Web hosting market would become quite large. We also liked Exodus's recurring revenue model, as it charged corporations a monthly fee for space and bandwidth. While conceptually this made a lot of sense, much of the company's business was generated from less-than-stable dot-coms. We are guardedly optimistic that Exodus will make it through these troubling times, but readily admit that there is further risk. Other technology stocks that detracted from performance were concentrated primarily in telecommunications equipment. We were underweight in this sector, but the depth of the slowdown caused many stocks to fall as much as 80% from their highs. JDS Uniphase, Cisco Systems, and Juniper Networks fall into this camp. Much of the growth from these companies had come from emerging carriers that now had no funding, and as a result, these equipment companies are mired in a massive inventory correction. We are maintaining our underweighted position and concentrating on those companies that will likely be long-term leaders of the next-generation networks. Macromedia, our second-largest detractor from performance, was also a casualty of the dot-com implosion. In hindsight, it appears that more business was coming from new entrants than we initially thought, and we eliminated our position in this stock. Technology stocks may have borne the brunt of the bad news, but the impact was felt in other sectors as well. Waddell & Reed Financial, an investment management company that sells its products primarily to middle-income Americans, felt the impact through lower asset values as the technology turmoil took the entire market lower. Crown Castle, a leading wireless infrastructure company, was affected by muted capital spending in the wireless arena. Sector Diversification - -------------------------------------------------------------------------------- 6/30/00 12/31/00 6/30/01 Financial Services 8.6% 12.4% 11.9% Consumer Services 14.3 14.7 12.4 Business Services 22.5 20.8 17.9 Health Care 7.0 9.3 11.9 Technology 20.0 21.9 20.2 Media Services 22.1 16.7 18.6 Reserves 5.5 4.2 7.1 Total 100% 100% 100% Changes in the fund's sector weightings primarily reflected the performance of the various sectors. However, we intentionally decreased the weighting in consumer services, particularly retail. Even though the stocks have performed well, we were concerned about whether consumer spending could remain strong. Consumers have been extremely resilient in a very difficult economic environment, but in spite of a coming tax rebate and interest rate cuts, layoffs have been mounting and the declining stock market has affected consumers' wealth. As a result, we thought it prudent to take some money off the table in the consumer area. We focused our trimming on companies exposed to apparel, such as Family Dollar and TJX. The majority of the proceeds went into the health care sector, primarily large-cap pharmaceuticals and some services companies. Health care is relatively non-cyclical, and, in our opinion, an attractive place to invest today. Health care stocks headed new purchases The largest health care addition was American Home Products, a diversified pharmaceutical company whose products primarily serve the women's health, central nervous system, and hematology markets. We like the company's current stable of products as well as its future pipeline. We also purchased Amgen, the sales leader in biotechnology. Amgen has two franchise products that each bring in more than $1 billion a year and a strong pipeline that is expected to produce several new products over the next 12 to 18 months. We also bought Laboratory Corporation of America (LabCorp), one of two national independent laboratory companies in the United States. Through a network of over 1,200 service sites, LabCorp conducts more than 4,000 different laboratory tests used by physicians, hospitals, and patients. Part of the excitement is the company's potential for genomics testing. For example, LabCorp was the first to introduce HIV viral load testing. Not all new purchases were health care companies. We added the nation's fourth-largest cable operator, Charter Communications, which has generated the fastest subscriber and cash flow growth in the industry. Cable TV is a relatively noncyclical business that will likely withstand a consumer slowdown quite well. We are also moving toward the end of a large capital spending cycle in which the country's cable infrastructure was upgraded for high-speed data and digital cable. Once this ends, there is a strong likelihood that the industry will begin to generate significant free cash flow. DST Systems, the country's largest independent processor of mutual fund accounts, is also somewhat insulated from an economic slowdown. Unlike most participants in the mutual fund industry, DST Systems does not get paid based on assets, but rather on number of accounts. Historically, DST has come through market downturns quite well. We are also moving toward the end of a large capital spending cycle in which the country's cable infrastructure was upgraded for high-speed data and digital cable. OUTLOOK A number of crosscurrents make any near-term market forecast very suspect. On the plus side are the Fed's six rate cuts that should be working their way through the economy. Additionally, consumers will soon be getting tax rebate checks that could help stimulate growth. At the same time, we are still in a major inventory correction in almost the entire technology sector, unemployment appears on the rise, capital spending is slowing materially after years of above-average growth, and companies are missing earnings forecasts at a record pace. That said, we believe the intermediate- to long-term prospects for certain segments of the market are positive. Valuations have corrected significantly, and the Fed's actions have set the wheels in motion for increased investment. Although there will still be bumps along the way, we believe that we are now closer to the bottom than the top. We continue to look for attractive growth opportunities at reasonable valuations-something that was very difficult to do in 1999 and early 2000 when valuations were stratospheric. We know we must tread carefully in certain sectors, but we believe that our discipline of focusing on companies with good business models and strong recurring revenues will serve us well over the long term. While it hasn't been fun for anyone to watch the market fall seemingly day after day, we are encouraged by the fact that we were able to pick up a lot of ground on our Lipper benchmark during the turmoil and managed to exceed it in a strong second quarter. We are not running a sprint but a marathon, and we believe our portfolio has an excellent chance of maintaining a solid pace over the long term. Respectfully submitted, Marc L. Baylin Chairman of the fund's Investment Advisory Committee July 26, 2001 The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund's investment program. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 6/30/01 ------------------------------------------------------------------------------ Waddell & Reed Financial 2.9% AT&T Liberty Media 2.9 First Data 2.8 Freddie Mac 2.7 Affiliated Computer Services 2.5 ------------------------------------------------------------------------------ Concord EFS 2.4 Clear Channel Communications 2.3 Viacom 2.3 Western Wireless 2.2 Apollo Group 2.2 ------------------------------------------------------------------------------ TMP Worldwide 2.0 AOL Time Warner 1.9 Family Dollar Stores 1.8 Microsoft 1.8 Pfizer 1.8 ------------------------------------------------------------------------------ Comcast 1.8 Home Depot 1.7 Crown Castle 1.7 Target 1.7 Flextronics 1.6 ------------------------------------------------------------------------------ SunGard Data Systems 1.6 Morgan Stanley Dean Witter 1.5 Jabil Circuit 1.5 Outback Steakhouse 1.4 GE 1.3 ------------------------------------------------------------------------------ Total 50.3% Note: Table excludes reserves. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Portfolio Highlights - -------------------------------------------------------------------------------- CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE 6 Months Ended 6/30/01 Ten Best Contributors ------------------------------------------------------------------------------ Microsoft 27(cents) AT&T Liberty Media 22 Clear Channel Communications 21 AOL Time Warner 21 Family Dollar Stores 19 First Data 19 Apollo Group 18 Affiliated Computer Services 17 Jabil Circuit 15 SunGard Data Systems 14 Total 193(cents) Ten Worst Contributors ------------------------------------------------------------------------------ Exodus Communications -76(cents) Macromedia ** -46 JDS Uniphase -41 Cisco Systems -32 Waddell & Reed Financial -24 Schlumberger -20 Vodafone -19 Crown Castle -19 Juniper Networks -18 Waters Corporation -17 Total -312(cents) ------------------------------------------------------------------------------ 12 Months Ended 6/30/01 Ten Best Contributors ------------------------------------------------------------------------------ Affiliated Computer Services 84(cents) Concord EFS 63 Freddie Mac 62 Apollo Group 55 SunGard Data Systems 45 Omnicare 41 Avis Group ** 35 First Data 29 Family Dollar Stores 28 TJX 26 Total 468(cents) Ten Worst Contributors ------------------------------------------------------------------------------ Exodus Communications * -123(cents) Macromedia ** -71 JDS Uniphase -64 Cisco Systems -62 Nextel Communications -58 WorldCom - WorldCom Group ** -55 Circuit City Stores ** -45 Clear Channel Communications * -42 AT&T Liberty Media -42 Dell Computer ** -33 Total -595(cents) * Position added ** Position eliminated T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- 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. NEW AMERICA GROWTH FUND --------------------------------------------------------------------------- Index#1 lipper Fund-Line 6/30/91 10,000 10,000 10,000 6/92 11,341 11,324 11,500 6/93 12,887 13,809 14,547 6/94 13,068 13,629 14,858 6/95 16,475 17,303 18,278 6/96 20,759 21,997 25,243 6/97 27,962 25,045 28,714 6/98 36,396 31,176 37,564 6/99 44,679 38,287 41,897 6/00 47,916 57,371 41,971 6/01 40,810 38,780 35,595 Average Annual Compound Total Return - -------------------------------------------------------------------------------- This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Periods Ended 6/30/01 1 Year 3 Years 5 Years 10 Years New America Growth Fund -15.19% -1.78% 7.11% 13.54% Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Unaudited Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- 6 Months Year Ended Ended 6/30/01 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 NET ASSET VALUE Beginning of period 35.77 48.06 47.79 44.19 38.37 34.91 Investment activities Net investment income (loss) (0.07) (0.14) (0.20) (0.21) (0.13) (0.13) Net realized and unrealized gain (loss) (2.28) (4.63) 5.87 7.65 8.15 7.08 Total from investment activities (2.35) (4.77) 5.67 7.44 8.02 6.95 Distributions Net realized gain -- (7.52) (5.40) (3.84) (2.20) (3.49) NET ASSET VALUE End of period $ 33.42 $ 35.77 $ 48.06 $ 47.79 $ 44.19 $ 38.37 Ratios/Supplemental Data Total return(diamond) (6.57)% (10.53)% 12.76% 17.89% 21.10% 20.01% Ratio of total expenses to average net assets 1.00%! 0.93% 0.94% 0.95% 0.96% 1.01% Ratio of net investment income (loss) to average net assets (0.40)%! (0.33)% (0.43)% (0.49)% (0.34)% (0.39)% Portfolio turnover rate 60.6%! 81.4% 39.7% 45.6% 43.2% 36.7% Net assets, end of period (in millions) $ 1,354 $ 1,519 $ 2,064 $ 2,064 $ 1,758 $ 1,440 (diamond) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. ! Annualized The accompanying notes are an integral part of these financial statements. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Unaudited June 30, 2001 Statement of Net Assets Shares Value - -------------------------------------------------------------------------------- In thousands Common Stocks 92.9% FINANCIAL 11.6% Insurance 0.6% Marsh & McLennan 77,500 7,828 7,828 Investment Services 6.2% Charles Schwab 290,000 4,437 Citigroup 190,000 10,040 Goldman Sachs 112,500 9,653 Morgan Stanley Dean Witter 315,000 20,232 Waddell & Reed Financial (Class A) 1,250,000 39,687 84,049 Other Financial Services 4.8% Freddie Mac 515,000 36,050 GE 375,000 18,281 Providian Financial 180,000 10,656 64,987 Total Financial 156,864 CONSUMER SERVICES 12.4% Retailing/General Merchandisers 6.2% Costco Wholesale * 445,000 18,281 Family Dollar Stores 975,000 24,989 Safeway * 375,000 18,000 Target 655,000 22,663 83,933 Personal Services 2.2% Apollo Group (Class A) * 700,000 29,715 29,715 Restaurants 1.4% Outback Steakhouse * 675,000 19,440 19,440 Retailing/Specialty Merchandisers 2.6% Home Depot 500,000 23,275 TJX 385,000 12,270 35,545 Total Consumer Services 168,633 BUSINESS SERVICES 17.6% Computer Services 10.3% Affiliated Computer Services (Class A) * 475,000 34,157 Concord EFS * 615,000 31,986 DST Systems * 150,000 7,905 First Data 600,000 38,550 Paychex 140,000 5,600 SunGard Data Systems * 700,000 21,007 139,205 Energy Services 2.9% Diamond Offshore Drilling 150,000 4,958 Schlumberger 300,000 15,795 Smith * 200,000 11,980 Tidewater 175,000 6,597 39,330 Marketing Services 1.4% Catalina Marketing * 524,200 15,993 IMS Health 125,000 3,565 19,558 Other Business Services 3.0% Robert Half * 230,000 5,725 TMP Worldwide * 445,000 26,700 Viad 300,000 7,920 40,345 Total Business Services 238,438 HEALTH CARE 11.9% Health Care Services 3.3% Laboratory Corporation of America * 195,000 14,995 Omnicare 791,600 15,990 Wellpoint Health Networks * 140,000 13,194 44,179 Health Care Products/Devices 0.4% Waters Corporation * 180,000 4,970 4,970 Pharmaceuticals & Biotechnology 8.2% Abgenix * 230,000 10,350 Allergan 40,000 3,420 American Home Products 205,000 11,980 Amgen * 150,000 9,102 Cephalon * 80,000 5,640 Eli Lilly 75,000 5,550 Genentech * 145,000 7,990 King Pharmaceuticals * 115,000 6,181 MedImmune * 300,000 14,160 Pfizer 605,000 24,230 Pharmacia 285,000 13,096 111,699 Total Health Care 160,848 MEDIA SERVICES 18.6% Broadcasting 6.9% Charter Communications (Class A) * 375,000 8,756 Clear Channel Communications * 490,000 30,723 Comcast (Class A Special) * 550,000 23,870 Viacom (Class B) * 592,000 30,636 93,985 Telecom Services 5.2% Allegiance Telecom * 1,025,000 15,365 Nextel Communications * 650,000 11,375 Vodafone ADR 615,000 13,745 Western Wireless * 700,000 30,100 70,585 Other Media Services 6.5% AOL Time Warner * 480,000 25,440 AT&T Liberty Media (Class A) * 2,250,000 39,353 Crown Castle * 1,400,000 22,960 87,753 Total Media Services 252,323 TECHNOLOGY 19.3% Software & Service 6.3% Electronic Arts * 155,000 8,975 Internet Security Systems * 114,700 5,570 Mercury Interactive * 100,000 5,990 Microsoft * 340,000 24,820 Oracle * 315,000 5,985 Peregrine Systems * 550,000 15,950 Siebel Systems * 170,000 7,973 VERITAS Software * 155,000 10,312 85,575 Semiconductors 5.0% Agere Systems * 1,050,000 7,875 Analog Devices * 420,000 18,165 Applied Materials * 280,000 13,748 Maxim Integrated Products * 130,000 5,747 Newport 85,000 2,253 QUALCOMM * 70,000 4,094 Texas Instruments 175,000 5,512 Xilinx * 255,000 10,516 67,910 E-Commerce 1.6% Exodus Communications * 2,350,000 4,841 VeriSign * 275,000 16,503 21,344 Communication Equipment 2.7% Cisco Systems * 875,000 15,925 JDS Uniphase * 715,000 8,937 Juniper Networks * 105,000 3,266 Nokia ADR 190,000 4,188 ONI Systems * 145,000 4,045 36,361 Computers & Hardware 3.7% EMC * 265,000 7,698 Flextronics * 845,000 22,063 Jabil Circuit * 650,000 20,059 49,820 Total Technology 261,010 Total Miscellaneous Common Stocks 1.5% 20,719 Total Common Stocks (Cost $ 985,193) 1,258,835 Short-Term Investments 6.9% Money Market Funds 6.9% T. Rowe Price Reserve Investment Fund, 4.34%# 92,741,052 92,741 Total Short-Term Investments (Cost $92,741) 92,741 T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- In thousands Total Investments in Securities 99.8% of Net Assets (Cost $1,077,934) 1,351,576 Other Assets Less Liabilities 2,782 NET ASSETS 1,354,358 Net Assets Consist of: Accumulated net investment income - net of distributions (2,807) Accumulated net realized gain/loss - net of distributions (671) Net unrealized gain (loss) 273,642 Paid-in-capital applicable to 40,531,405 shares of no par value capital stock outstanding; unlimited shares authorized 1,084,194 NET ASSETS 1,354,358 NET ASSET VALUE PER SHARE 33.42 # Seven-day yield * Non-income producing ADR American Depository Receipt The accompanying notes are an integral part of these financial statements. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Unaudited Statement of Operations - -------------------------------------------------------------------------------- In thousands x 6 Months x Ended x 6/30/01 Investment Income (Loss) Income Interest 2,174 Dividend 1,973 Total income 4,147 Expenses Investment management 4,669 Shareholder servicing 2,135 Custody and accounting 67 Prospectus and shareholder reports 57 Registration 17 Legal and audit 6 Trustees 6 Total expenses 6,957 Expenses paid indirectly (3) Net expenses 6,954 Net investment income (loss) (2,807) Realized and Unrealized Gain (Loss) Net realized gain (loss) on securities (24,462) Change in net unrealized gain or loss on securities (72,260) Net realized and unrealized gain (loss) (96,722) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (99,529) The accompanying notes are an integral part of these financial statements. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Unaudited Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 6/30/01 12/31/00 Increase (Decrease) in Net Assets Operations Net investment income (loss) (2,807) (5,890) Net realized gain (loss) (24,462) 211,881 Change in net unrealized gain or loss (72,260) (401,065) Increase (decrease) in net assets from operations (99,529) (195,074) Distributions to shareholders Net realized gain - (275,972) Capital share transactions * Shares sold 94,945 279,986 Distributions reinvested - 267,337 Shares redeemed (159,856) (620,989) Increase (decrease) in net assets from capital share transactions (64,911) (73,666) Net Assets Increase (decrease) during period (164,440) (544,712) Beginning of period 1,518,798 2,063,510 End of period 1,354,358 1,518,798 *Share information Shares sold 2,774 6,074 Distributions reinvested - 7,184 Shares redeemed (4,705) (13,733) Increase (decrease) in shares outstanding (1,931) (475) The accompanying notes are an integral part of these financial statements. T. Rowe Price New America Growth Fund - -------------------------------------------------------------------------------- Unaudited June 30, 2001 Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTINGPOLICIES T. Rowe Price New America Growth Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company and commenced operations on September 30, 1985. The fund seeks to achieve long-term growth of capital by investing primarily in the common stocks of companies operating in sectors T. Rowe Price believes will be the fastest growing in the United States. The accompanying financial statements were prepared in accordance with generally accepted accounting principles, which require the use of estimates made by fund management. Valuation Equity securities listed or regularly traded on a securities exchange are valued at the last quoted sales price 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 and securities regularly traded in the over-the-counter market are valued at the mean of the latest bid and asked prices. Other equity securities are valued at a price within the limits of the latest bid and asked prices deemed by the Board of Trustees, or by persons delegated by the Board, best to reflect fair value. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Assets and liabilities 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 or under the supervision of the officers of the fund, as authorized by the Board of Trustees. OtherIncome and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Dividend income and distributions to shareholders are recorded by the fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from net investment income and realized gains determined in accordance with generally accepted accounting principles. Expenses paid indirectly reflect credits earned on daily uninvested cash balances at the custodian and are used to reduce the fund's custody charges. NOTE 2 - INVESTMENT TRANSACTIONS Purchases and sales of portfolio securities, other than short-term securities, aggregated $405,416,000 and $504,024,000, respectively, for the six months ended June 30, 2001. NOTE 3 - FEDERALINCOME TAXES No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. At June 30, 2001, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $1,077,934,000. Net unrealized gain aggregated $273,642,000 at period-end, of which $432,247,000 related to appreciated investments and $158,605,000 to depreciated investments. 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. The investment management agreement between the fund and the manager provides for an annual investment management fee, of which $750,000 was payable at June 30, 2001. The fee is computed daily and paid monthly, and consists of an individual fund fee equal to 0.35% of average daily net assets and a group fee. The group fee is based on the combined assets of certain mutual funds sponsored by Price Associates (the group). The group fee rate ranges from 0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120 billion. At June 30, 2001, and for the six months then ended, the effective annual group fee rate was 0.32%. The fund pays a pro-rata share of the group fee based on the ratio of its net assets to those of the group. In addition, the fund has entered into agreements with Price Associates and two wholly owned subsidiaries of Price Associates, pursuant to which the fund receives certain other services. Price Associates computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc. is the fund's transfer and dividend disbursing agent and provides shareholder and administrative services to the fund. T. Rowe Price Retirement Plan Services, Inc. provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. The fund incurred expenses pursuant to these related party agreements totaling approximately $1,868,000 for the six months ended June 30, 2001, of which $343,000 was payable at period-end. The fund may invest in the T. Rowe Price Reserve Investment Fund and 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 and other accounts sponsored by Price Associates, and are not available to the public. The Reserve Funds pay no investment management fees. Distributions from the Reserve Funds to the fund for the six months ended June 30, 2001, totaled $2,174,000 and are reflected as interest income in the accompanying Statement of Operations. For fund and account information or to conduct transactions, 24 hours, 7 days a week By touch-tone telephone Tele*Access(registered trademark) 1-800-638-2587 By Account Access on the Internet www.troweprice.com/access For assistance with your existing fund account, call: Shareholder Service Center 1-800-225-5132 To open a brokerage account or obtain information, call: 1-800-638-5660 For the hearing impaired, call: 1-800-367-0763 Internet address: www.troweprice.com Plan Account Lines for retirement plan participants: The appropriate 800 number appears on your retirement account statement. T. Rowe Price Associates 100 East Pratt Street Baltimore, Maryland 21202 This report is authorized for distribution only to shareholders and to others who have received a copy of the prospectus appropriate to the fund or funds covered in this report. Investor Centers: For directions, call 1-800-225-5132 or visit our Web site at www.troweprice.com/investorcenters Baltimore Area Downtown 105 East Lombard Street Owings Mills Three Financial Center 4515 Painters Mill Road Boston Area 386 Washington Street Wellesley Chicago Area 1900 Spring Road, Suite 104 Oak Brook Colorado Springs 2260 Briargate Parkway Los Angeles Area Warner Center 21800 Oxnard Street, Suite 270 Woodland Hills New Jersey/New York Area 51 JFK Parkway, 1st Floor Short Hills, New Jersey San Francisco Area 1990 North California Boulevard, Suite 100 Walnut Creek Tampa 4200 West Cypress Street 10th Floor Washington, D.C., Area Downtown 900 17th Street N.W. Farragut Square Tysons Corner 1600 Tysons Boulevard Suite 150 T. Rowe Price, Invest With Confidence (registered trademark) T. Rowe Price Investment Services, Inc., Distributor. F60-051 6/30/01 -----END PRIVACY-ENHANCED MESSAGE-----