-----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, DbefVDpG7SNsqtrjIa2u7Eo/vfz4gn9d3rovX/P9Nc1Ph549DIb/uIqbwid1M+1W dltUgBf8fTFIO9QRr+cLOQ== 0000773485-05-000004.txt : 20050302 0000773485-05-000004.hdr.sgml : 20050302 20050302150600 ACCESSION NUMBER: 0000773485-05-000004 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050302 DATE AS OF CHANGE: 20050302 EFFECTIVENESS DATE: 20050302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE NEW AMERICA GROWTH FUND CENTRAL INDEX KEY: 0000773485 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04358 FILM NUMBER: 05653962 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-CSR 1 nag.txt T. ROWE PRICE NEW AMERICA GROWTH FUND Item 1. Report to Shareholders DECEMBER 31, 2004 NEW AMERICA GROWTH FUND Annual Report T. ROWE PRICE The views and opinions in this report were current as of December 31, 2004. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund's future investment intent. The report is certified under the Sarbanes-Oxley Act of 2002, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects. REPORTS ON THE WEB Sign up for our E-mail Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Fellow Shareholders U.S. stocks posted solid gains for the 12 months ended December 31, and most stock market benchmarks ended 2004 near their highest levels of the year. However, it wasn't all smooth sailing. The year began on a strong note, but as summer turned to fall, stocks dipped in a headwind of moderating economic growth, rising short-term interest rates, surging energy costs, and a heated presidential campaign. However, the tide turned in late October, and stock prices surged as oil prices backed away from multi-year highs and the U.S. presidential election concluded without controversy. As measured by various Russell indexes, smaller stocks outperformed larger stocks and growth lagged value across all market capitalizations. PERFORMANCE COMPARISON - -------------------------------------------------------------------------------- Periods Ended 12/31/04 6 Months 12 Months - -------------------------------------------------------------------------------- New America Growth Fund 5.54% 11.10% S&P 500 Stock Index 7.19 10.88 Lipper Multi-Cap Growth Funds Index 6.35 11.26 The New America Growth Fund gained 5.54% and 11.10% for the 6- and 12-month periods ended December 31, 2004, respectively. The fund's performance over the past six months lagged the S&P 500 Index and the Lipper Multi-Cap Growth Funds Index, which rose 7.19% and 6.35%, respectively. We underperformed our Lipper peer group because of our greater emphasis on large-caps--larger capitalization stocks generally underperformed smaller-cap shares for the past six months--and modest allocation to Internet holdings, which performed well since midyear. For the year, our double-digit result was in line with the unmanaged benchmark and our peer group. MARKET ENVIRONMENT Small-caps outperformed large-caps by a wide margin in 2004. The Russell 2000 Index rose more than 18% compared with the Russell 1000 Index return of less than 12%. Looking at just the growth components of these two indices, the results were similar; the Russell 2000 Growth Index gained 14.3% compared with the Russell 1000 Growth Index's 6.3%. Large-cap underperformance is not a new trend--small-caps have outperformed large-caps for the past five calendar years--the Russell 2000 Index posted annualized returns of better than 6% for the past five years, while the Russell 1000 Index fell an average of 1.8% per year since the end of 1999. As a result, large-caps appear cheap relative to small-caps (as measured by the trailing P/E multiples of the Russell 1000 and 2000 Indexes). Additionally, value stocks have outperformed growth stocks since the late 1990s. In 2004, for example, the Russell 1000 Value Index rose 16.5% and the Russell 1000 Growth Index, 6.3%. On an annualized basis over five years, the Russell 1000 Value Index has gained 5.3%, and the Russell 1000 Growth Index has declined 9.3%. The value/growth disparity is similar across the market-cap spectrum and has left growth stocks looking relatively cheap compared with value stocks. Not surprisingly, it follows that the performance of traditional "growth" sectors lagged slower-growth sectors. For example, in 2004, the two worst-returning sectors of the S&P 500 were information technology (+2.6%) and health care (+1.8%). Alternatively, energy (+31.5%), utilities (+24.3%), and telecom services (+19.9%) showed the best returns. While the New America Growth Fund has healthy exposure to energy stocks, our mandate of investing in growth stocks means we had little exposure to the slower-growth areas such as utilities and telecom and heavier exposure to technology and health care stocks. PORTFOLIO REVIEW The fund's largest contributors over the past 12 months were Diamond Offshore Drilling, Dell, and UnitedHealth Group. Diamond Offshore is a longtime holding in the oil services industry. The stock nearly doubled in 2004, as the company benefited from rising oil prices and a tightening in the market for its drilling rigs. Although we took some gains off the table this year, the portfolio continues to hold several energy stocks that provided solid 12-month returns, including Smith International, Baker Hughes, and Cooper Cameron, in addition to a promising newer holding, Murphy Oil. (Please refer to our portfolio of investments for a complete listing of the fund's holdings and the amount each represents of the portfolio.) Dell was the second-biggest contributor in 2004 and our largest holding at the end of the reporting period. We highlighted Dell in the "Investment Strategy" section of last year's annual report, so we're particularly pleased that the stock worked well this year. In a tougher environment for technology stocks as a whole, Dell continued to generate market-leading growth and performance--the stock advanced 24% for the year--and we are encouraged about the company's prospects for the next three to five years. UnitedHealth Group is the largest managed care company in America. The company enjoyed another great year, buoyed by solid membership growth, improving profitability, and accretive acquisitions. Other significant 12-month contributors included Petsmart and Getty Images. Both delivered over 20% earnings growth for the year, and we remain optimistic that these market-leading companies can repeat this performance in the years to come. The portfolio's largest detractors for the year included Intersil, Novellus Systems, and Pfizer. Intersil and Novellus both suffered in the downturn for semiconductors and related capital equipment spending, while Pfizer was plagued by patent challenges to key drugs and drug-safety concerns. Although we expect the clouds that hang over the pharmaceutical industry to remain for some time, we continue to own a modest amount of Pfizer and other names like Johnson & Johnson, Forest Laboratories, and Elan, which recently received FDA approval for Tysabri, a potential blockbuster drug for the treatment of multiple sclerosis. SECTOR DIVERSIFICATION - -------------------------------------------------------------------------------- 12/31/03 6/30/04 12/31/04 - -------------------------------------------------------------------------------- Information Technology 28.0% 28.3% 30.2% Health Care 19.2 17.2 16.9 Consumer Discretionary 17.0 16.0 16.6 Industrials and Business Services 10.7 13.3 14.5 Financials 11.9 11.6 11.4 Energy 4.8 5.2 4.4 Consumer Staples 4.9 2.9 3.2 Telecommunication Services 2.9 2.7 1.3 Materials 0.0 0.5 0.4 Utilities 0.0 0.0 0.0 Reserves 0.6 2.3 1.1 - -------------------------------------------------------------------------------- Total 100.0% 100.0% 100.0% Historical weightings reflect current industry/sector classifications. The portfolio's winners and losers for the last six months were strikingly similar to those already mentioned for the year. The top three were identical, and in addition, UPS (United Parcel Service) and Franklin Resources were also strong performers. The largest detractors since June were Cisco Systems, Pfizer, and Intersil. The portfolio's largest recent purchases include Paychex and Iron Mountain. Paychex is a large payroll processor that should benefit from cyclical forces, including a domestic jobs recovery and rising interest rates. The company has solid fundamentals and should be able to grow its earnings in the mid-teens per year for the foreseeable future. Iron Mountain is a steady grower with a dominant position in document and media storage. The company has an exciting new product for digitally archiving e-mails--a market that we think will grow considerably due to regulations surrounding e-mail retention. Fiserv and Intersil were among our largest sales during the year. In both cases, we used the proceeds to buy better-positioned companies. In Fiserv's case, we opted in favor of other business services names such as Paychex, Iron Mountain, and Jack Henry. In Intersil's case, we chose to build positions in other semiconductor names including Analog Devices and Linear Technology. INVESTMENT STRATEGY The portfolio seeks to invest in America's best larger-cap growth companies. We want to own companies that dominate large and growing markets, enjoy solid profit margins and returns, feature strong balance sheets, and generate excellent free cash flow. We believe this investment strategy and discipline can generate solid results for our shareholders over the long run. Medtronic, a $60 billion leader in various areas of medical devices, is a good example of the kind of company that suits New America Growth's investment strategy. The company is best known for its implantable defibrillators ("ICDs") and pacemakers that help to regulate an abnormal heartbeat and even revive a heart that has stopped beating. Medtronic boasts about a 50% market share for these two products, and we think it can maintain low-teens sales growth for the next few years. Additionally, Medtronic serves other faster-growing, underpenetrated markets with products for spinal disorders, diabetes, Parkinson's, acid reflux, incontinence, and vascular diseases. In addition to what we view as exciting revenue growth prospects, Medtronic also boasts high profit margins and a strong financial position. A gross profit margin of 75% illustrates the intellectual property and advanced technologies used in the company's products. The balance sheet is rock solid, with more cash than debt. This allows Medtronic to devote its ample free cash flow to buying back stock and paying a modest dividend. Interestingly, Medtronic remains a controversial stock because many investors are concerned that its drug-eluting stent (a product that combines a drug coating to a conventional stent to battle the tendency for a propped open artery to close again) will not be approved by the FDA later this year. We believe the market is overly focused on this single issue and the valuation is attractive. In fact, Medtronic's per share earnings have nearly doubled over the past five years, but the stock still trades at about the same price as in January 2000. Over the next three to five years, we believe the company can maintain its mid-teens earnings growth rate, and there could be even further upside if its drug-eluting stent is approved and modestly successful in the marketplace. OUTLOOK From a macro standpoint, we expect a continued economic recovery in 2005, with solid corporate profit growth that is likely to be more modest than 2004's powerful gains. Although interest rates and inflation could continue to rise, both should remain at reasonable levels. Oil prices have subsided somewhat but remain a bit of a wildcard. We continue to find solid investment opportunities and believe New America Growth is well positioned if in fact 2005 brings a better growth stock environment. Additionally, while we continue to look for opportunities to invest in select mid-cap growth companies, the majority of the portfolio will remain invested in large-cap stocks that should fare well in an improving large-cap environment. At times, we are willing to take a contrarian view that can only be supported by our long-term investing horizon. Examples of this include our Medtronic position and our growing appetite for semiconductor stocks--one of the worst-performing areas of the market in 2004. While an inventory glut could hamper results for a few more quarters, we like the group's longer-term prospects and increasingly attractive valuations. Importantly, both in this specific case and across other sectors, we will maintain a diversified portfolio and a focus on the highest-quality companies. I look forward to updating the fund's shareholders every six months. However, it is important to remember that our investment horizon stretches beyond any single semiannual period. Our focus is on finding stocks that we can hold for three to five years. As such, we view short-term market gyrations, particularly on the downside, as opportunities to add to the high-quality, market-leading companies that make up the core of this portfolio. We do not intend to change this long-term, time-tested investment discipline, regardless of the investing terrain. Thank you for your continued confidence and support. Respectfully submitted, Joseph M. Milano Chairman of the fund's Investment Advisory Committee January 18, 2005 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. RISKS OF STOCK INVESTING The fund's share price can fall because of weakness in the stock markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment manager's assessment of companies held in a fund may prove incorrect, resulting in losses or poor performance even in rising markets. GLOSSARY Dividend yield: The annual dividend of a stock divided by the stock's price. Free cash flow: The excess cash a company is generating from its operations that can be taken out of the business for the benefit of shareholders, such as dividends, share repurchases, investments, and acquisitions. Lipper indexes: Fund benchmarks that consist of a small number (10 to 30) of the largest mutual funds in a particular category as tracked by Lipper Inc. Price/book ratio: A valuation measure that compares a stock's market price to its book value, i.e., the company's net worth divided by the number of outstanding shares. Price/earnings ratio (P/E): A valuation measure calculated by dividing the price of a stock by its current or projected earnings per share. This ratio gives investors an idea of how much they are paying for current or future earnings power. S&P 500 Stock Index: An unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 12/31/04 - -------------------------------------------------------------------------------- Dell 3.1% UPS 3.1 ChoicePoint 2.5 Cisco Systems 2.2 Microsoft 2.0 - -------------------------------------------------------------------------------- CDW 2.0 Sysco 1.9 GE 1.9 International Game Technology 1.8 Getty Images 1.8 - -------------------------------------------------------------------------------- Amgen 1.7 Medtronic 1.6 Smith International 1.5 UnitedHealth Group 1.4 PETsMART 1.4 - -------------------------------------------------------------------------------- Intel 1.4 Johnson & Johnson 1.4 Wal-Mart 1.4 Lockheed Martin 1.3 American International Group 1.3 - -------------------------------------------------------------------------------- Paychex 1.3 Intuit 1.2 Pfizer 1.2 Family Dollar Stores 1.2 SunGard Data Systems 1.2 - -------------------------------------------------------------------------------- Total 42.8% Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE 6 Months Ended 12/31/04 Best Contributors Worst Contributors - -------------------------------------------------------------------------------- Diamond Offshore Drilling 16(cents) Cisco Systems -11(cents) Dell 16 Pfizer -11 UnitedHealth Group 14 Intersil Holding ** -10 UPS 12 Omnicare ** -9 Franklin Resources 9 Forest Laboratories -8 Getty Images 9 International Game Technology -7 Amgen 8 Microsoft -5 PF Chang's China Bistro 8 Fiserv ** -4 VERITAS Software * 8 IVAX -4 Laboratory Corporation of America 7 Boston Scientific -4 - -------------------------------------------------------------------------------- Total 107(cents) Total -73(cents) 12 Months Ended 12/31/04 Best Contributors Worst Contributors - -------------------------------------------------------------------------------- Diamond Offshore Drilling 21(cents) Intersil Holding ** -16(cents) Dell 21 Pfizer -12 UnitedHealth Group 18 Novellus Systems -11 PETsMART 18 Cisco Systems -10 Getty Images 18 Forest Laboratories -9 ChoicePoint 16 Viacom -8 Harley-Davidson 15 Family Dollar Stores -8 Smith International 14 Intuit -8 UPS 13 Clear Channel Communications ** -6 CDW 12 Qlogic * -6 - -------------------------------------------------------------------------------- Total 166(cents) Total -94(cents) * Position added and eliminated ** Position eliminated T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- GROWTH OF $10,000 - -------------------------------------------------------------------------------- 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 AMERICA GROWTH FUND - -------------------------------------------------------------------------------- As of 12/31/04 New America Growth Fund $23,594 S&P 500 Stock Index $31,258 Lipper Multi-Cap Growth Funds Index $24,622 New America S&P 500 Lipper Multi-Cap Growth Fund Stock Index Growth Funds Index 12/94 $10,000 $10,000 $10,000 12/95 14,431 13,758 13,372 12/96 17,319 16,917 15,759 12/97 20,972 22,561 19,376 12/98 24,725 29,008 24,180 12/99 27,879 35,112 35,389 12/00 24,943 31,915 31,123 12/01 21,978 28,122 23,292 12/02 15,706 21,907 16,346 12/03 21,238 28,190 22,130 12/04 23,594 31,258 24,622 AVERAGE ANNUAL COMPOUND TOTAL RETURN - -------------------------------------------------------------------------------- This table shows how the fund and its benchmarks would have performed if their actual (or cumulative) returns for the periods shown had been earned at a constant rate. Periods Ended 12/31/04 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- New America Growth Fund 11.10% -3.28% 8.96% S&P 500 Stock Index 10.88 -2.30 12.07 Lipper Multi-Cap Growth Funds Index 11.26 -7.00 9.43 Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance information, please visit our Web site (troweprice.com) or contact a T. Rowe Price representative at 1-800-225-5132. Average annual total return figures include changes in principal value, reinvested dividends, capital gain distributions. When assessing performance, investors should consider both short- and long-term returns. FUND EXPENSE EXAMPLE - -------------------------------------------------------------------------------- As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs such as redemption fees or sales loads and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period. Actual Expenses The first line of the following table ("Actual") provides information about actual account values and actual expenses. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The information on the second line of the table ("Hypothetical") is based on hypothetical account values and expenses derived from the fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund's actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Note: T. Rowe Price charges an annual small-account maintenance fee of $10, generally for accounts with less than $2,000 ($500 for UGMA/UTMA). The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $25,000 or more, accounts employing automatic investing, and IRAs and other retirement plan accounts that utilize a prototype plan sponsored by T. Rowe Price (although a separate custodial or administrative fee may apply to such accounts). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Beginning Ending Expenses Paid Account Value Account Value During Period* 7/1/04 12/31/04 7/1/04 to 12/31/04 - -------------------------------------------------------------------------------- Actual $1,000 $1,055.40 $4.75 Hypothetical (assumes 5% return before expenses) 1,000 1,020.51 4.67 * Expenses are equal to the fund's annualized expense ratio for the six-month period (0.92%), multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184) divided by the days in the year (366) to reflect the half-year period. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share outstanding throughout each period - -------------------------------------------------------------------------------- Year Ended 12/31/04 12/31/03 12/31/02 12/31/01 12/31/00 NET ASSET VALUE Beginning of period $ 29.83 $ 22.06 $ 30.87 $ 35.77 $ 48.06 Investment activities Net investment income (loss) (0.02) (0.09) (0.11) (0.12) (0.14) Net realized and unrealized gain (loss) 3.33 7.86 (8.70) (4.14) (4.63) Total from investment activities 3.31 7.77 (8.81) (4.26) (4.77) Distributions Net realized gain - - - (0.64) (7.52) NET ASSET VALUE End of period $ 33.14 $ 29.83 $ 22.06 $ 30.87 $ 35.77 ------------------------------------------------ Ratios/Supplemental Data Total return^ 11.10% 35.22% (28.54)% (11.89)% (10.53)% Ratio of total expenses to average net assets 0.92% 0.98% 0.99% 0.99% 0.93% Ratio of net investment income (loss) to average net assets (0.07)% (0.34)% (0.42)% (0.36)% (0.33)% Portfolio turnover rate 50.9% 61.6% 61.5% 52.1% 81.4% Net assets, end of period (in millions) $ 935 $ 915 $ 761 $ 1,183 $ 1,519 ^ 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 AMERICA GROWTH FUND - -------------------------------------------------------------------------------- December 31, 2004 PORTFOLIO OF INVESTMENTS (1) Shares Value - -------------------------------------------------------------------------------- (Cost and value in $ 000s) COMMON STOCKS 98.9% CONSUMER DISCRETIONARY 16.6% Automobiles 1.2% Harley-Davidson 180,000 10,935 10,935 Hotels, Restaurants & Leisure 3.1% International Game Technology 500,000 17,190 Outback Steakhouse 80,000 3,662 PF Chang's China Bistro * 150,000 8,453 29,305 Household Durables 0.3% Harman International 20,000 2,540 2,540 Internet & Catalog Retail 0.6% Amazon.com * 125,000 5,536 5,536 Media 5.8% Getty Images * 240,000 16,523 Liberty Media, Class A * 1,000,000 10,980 News Corp, Class A * 270,000 5,038 Scripps, Class A 225,000 10,863 Viacom, Class B 300,000 10,917 54,321 Multiline Retail 1.9% Family Dollar Stores 365,000 11,399 Kohl's * 130,000 6,392 17,791 Specialty Retail 3.7% Best Buy 60,000 3,565 CarMax * 100,000 3,105 PETsMART 365,000 12,969 Ross Stores 190,000 5,485 Staples 300,000 10,113 35,237 Total Consumer Discretionary 155,665 CONSUMER STAPLES 3.2% Food & Staples Retailing 3.2% Sysco 462,500 17,654 Wal-Mart 239,500 12,650 Total Consumer Staples 30,304 ENERGY 4.4% Energy Equipment & Services 3.9% Baker Hughes 225,000 9,601 Cooper Cameron * 100,000 5,381 Diamond Offshore Drilling 200,000 8,010 Smith International * 250,000 13,602 36,594 Oil & Gas 0.5% Murphy Oil 55,000 4,425 4,425 Total Energy 41,019 FINANCIALS 11.4% Capital Markets 6.0% Eaton Vance 80,000 4,172 Franklin Resources 120,000 8,358 Goldman Sachs 85,000 8,843 Investors Financial Services 110,000 5,498 Legg Mason 75,000 5,494 Lehman Brothers 85,000 7,436 Morgan Stanley 125,000 6,940 State Street 180,000 8,842 55,583 Diversified Financial Services 1.1% Citigroup 200,000 9,636 Principal Financial Group 15,000 614 10,250 Insurance 3.4% American International Group 190,000 12,477 Assurant 75,000 2,291 Hartford Financial Services 100,000 6,931 Marsh & McLennan 115,000 3,784 Progressive Corporation 77,500 6,575 32,058 Thrifts & Mortgage Finance 0.9% Radian 160,000 8,519 8,519 Total Financials 106,410 HEALTH CARE 16.9% Biotechnology 5.1% Amgen * 242,500 15,556 Amylin Pharmaceuticals * 125,000 2,920 Biogen Idec * 60,000 3,997 Cephalon * 122,600 6,238 Eyetech Pharmaceuticals * 65,000 2,957 Genentech * 70,000 3,811 Gilead Sciences * 200,000 6,998 Neurocrine Biosciences * 55,000 2,712 OSI Pharmaceuticals * 40,000 2,994 48,183 Health Care Equipment & Supplies 3.5% Boston Scientific * 175,000 6,221 Medtronic 295,000 14,652 ResMed * 100,000 5,110 Stryker 135,000 6,514 32,497 Health Care Providers & Services 3.8% Henry Schein * 100,000 6,964 Laboratory Corporation of America * 130,000 6,477 Quest Diagnostics 96,000 9,173 UnitedHealth Group 150,000 13,204 35,818 Pharmaceuticals 4.5% Atherogenics * 75,000 1,767 Elan ADR * 140,000 3,815 Forest Laboratories * 205,000 9,196 IVAX * 100,000 1,582 Johnson & Johnson 200,000 12,684 Pfizer 425,000 11,428 Sepracor * 20,000 1,188 41,660 Total Health Care 158,158 INDUSTRIALS & BUSINESS SERVICES 14.5% Aerospace & Defense 1.4% Lockheed Martin 225,000 12,499 12,499 Air Freight & Logistics 3.7% Expeditors International of Washington 105,000 5,867 UPS, Class B 340,000 29,057 34,924 Airlines 0.7% Southwest Airlines 400,000 6,512 6,512 Commercial Services & Supplies 4.9% Apollo Group, Class A * 80,000 6,457 ChoicePoint * 515,000 23,685 Consolidated Graphics * 105,000 4,819 Education Management * 325,000 10,728 45,689 Industrial Conglomerates 2.8% GE 480,000 17,520 Roper Industries 137,300 8,344 25,864 Machinery 1.0% Deere 130,000 9,672 9,672 Total Industrials & Business Services 135,160 INFORMATION TECHNOLOGY 30.2% Communications Equipment 2.5% Cisco Systems * 1,075,000 20,747 Juniper Networks * 110,000 2,991 23,738 Computers & Peripherals 3.1% Dell * 690,000 29,077 29,077 Electronic Equipment & Instruments 2.0% CDW 275,000 18,246 18,246 Internet Software & Services 0.7% IAC/InterActiveCorp * 235,000 6,491 6,491 IT Services 6.9% Affiliated Computer Services, Class A * 160,000 9,630 Certegy 270,000 9,593 Checkfree * 110,000 4,189 First Data 240,000 10,209 Iron Mountain * 265,000 8,080 Paychex 346,800 11,819 SunGard Data Systems * 388,800 11,015 64,535 Semiconductor & Semiconductor Equipment 6.7% Altera * 267,000 5,527 Analog Devices 195,000 7,199 Intel 545,000 12,748 KLA-Tencor * 40,000 1,863 Linear Technology 165,800 6,426 Maxim Integrated Products 45,000 1,908 Microchip Technology 230,000 6,132 Novellus Systems * 190,000 5,299 Texas Instruments 199,800 4,919 Xilinx 350,000 10,378 62,399 Software 8.3% Adobe Systems 85,000 5,333 Amdocs * 135,000 3,544 Cadence Design Systems * 315,000 4,350 Intuit * 260,000 11,443 Jack Henry & Associates 445,000 8,860 Mercury Interactive * 190,000 8,654 Microsoft 715,000 19,098 Red Hat * 175,000 2,336 SAP ADR 200,000 8,842 Symantec * 200,000 5,152 77,612 Total Information Technology 282,098 MATERIALS 0.4% Metals & Mining 0.4% Nucor 77,500 4,056 Total Materials 4,056 TELECOMMUNICATION SERVICES 1.3% Diversified Telecommunication Services 0.4% Sprint 150,000 3,728 3,728 Wireless Telecommunication Services 0.9% Nextel Communications, Class A * 280,000 8,400 8,400 Total Telecommunication Services 12,128 Total Common Stocks (Cost $723,061) 924,998 SHORT-TERM INVESTMENTS 2.5% Money Market Fund 2.5% T. Rowe Price Reserve Investment Fund, 2.28% #! 23,279,176 23,279 Total Short-Term Investments (Cost $23,279) 23,279 Total Investments in Securities 101.4% of Net Assets (Cost $746,340) $948,277 -------- (1) Denominated in U.S. dollars unless otherwise noted # Seven-day yield * Non-income producing ! Affiliated company - See Note 4 ADR American Depository Receipts The accompanying notes are an integral part of these financial statements. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- December 31, 2004 STATEMENT OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- (In thousands except shares and per share amounts) Assets Investments in securities, at value Affiliated companies (cost $23,279) $ 23,279 Non-affiliated companies (cost $723,061) 924,998 Total investments in securities 948,277 Other assets 6,887 Total assets 955,164 Liabilities Total liabilities 20,394 NET ASSETS $ 934,770 --------------- Net Assets Consist of: Undistributed net realized gain (loss) (1,290) Net unrealized gain (loss) 201,937 Paid-in-capital applicable to 28,210,027 no par value shares of beneficial interest outstanding; 734,123 NET ASSETS $ 934,770 --------------- NET ASSET VALUE PER SHARE $ 33.14 --------------- The accompanying notes are an integral part of these financial statements. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- ($ 000s) Year Ended 12/31/04 Investment Income (Loss) Dividend income $ 7,778 Expenses Investment management 6,039 Shareholder servicing 2,088 Custody and accounting 132 Prospectus and shareholder reports 71 Registration 39 Legal and audit 14 Trustees 6 Miscellaneous 10 Total expenses 8,399 Net investment income (loss) (621) Realized and Unrealized Gain (Loss) Net realized gain (loss) on securities 117,834 Change in net unrealized gain (loss) on securities (20,932) Net realized and unrealized gain (loss) 96,902 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 96,281 --------------- The accompanying notes are an integral part of these financial statements. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- ($ 000s) Year Ended 12/31/04 12/31/03 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ (621) $ (2,861) Net realized gain (loss) 117,834 32,400 Change in net unrealized gain (loss) (20,932) 228,640 Increase (decrease) in net assets from operations 96,281 258,179 Capital share transactions * Shares sold 86,450 110,234 Shares redeemed (162,993) (214,424) Increase (decrease) in net assets from capital share transactions (76,543) (104,190) Net Assets Increase (decrease) during period 19,738 153,989 Beginning of period 915,032 761,043 End of period $ 934,770 $ 915,032 --------- ---------- (Including undistributed net investment income of $0 at 12/31/04 and $0 at 12/31/03) *Share information Shares sold 2,810 4,380 Shares redeemed (5,270) (8,208) Increase (decrease) in shares outstanding (2,460) (3,828) The accompanying notes are an integral part of these financial statements. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- December 31, 2004 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price New America Growth Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund commenced operations on September 30, 1985. The fund seeks to provide 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 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, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. 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 asked prices for domestic securities and the last quoted sale price for international securities. Investments in mutual funds are valued at the mutual fund's closing net asset value per share on the day of valuation. Other investments, including restricted securities, 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 Trustees. 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 $95,000 for the year ended December 31, 2004. 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. 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 an annual basis. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis. During the year ended December 31, 2004, the fund received a one-time special dividend on a security held in its portfolio (Microsoft Corp.). The dividend, which totaled $2,202,000, represents 28% of dividend income reflected in the accompanying financial statements and is not expected to recur. 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 Purchases and sales of portfolio securities, other than short-term securities, aggregated $457,384,000 and $537,178,000, respectively, for the year ended December 31, 2004. 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, 2004. At December 31, 2004, the tax-basis components of net assets were as follows: Unrealized appreciation $ 211,065,000 Unrealized depreciation (9,128,000) Net unrealized appreciation (depreciation) 201,937,000 Capital loss carryforwards (1,290,000) Paid-in capital 734,123,000 Net assets $ 934,770,000 ------------------ The fund intends to retain realized gains to the extent of available capital loss carryforwards for federal income tax purposes. During the year ended December 31, 2004, the fund utilized $117,834,000 of capital loss carryforwards. As of December 31, 2004, the fund had $1,290,000 of capital loss carryforwards that expire in 2010. For the year ended December 31, 2004, the fund recorded the following permanent reclassifications to reflect tax character. Reclassifications to paid-in capital relate primarily to the current net operating loss. Results of operations and net assets were not affected by these reclassifications. Undistributed net investment income $ 621,000 Paid-in capital (621,000) At December 31, 2004, the cost of investments for federal income tax purposes was $746,340,000. 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, 2004, the effective annual group fee rate was 0.31%, and investment management fee payable totaled $527,000. 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. For the year ended December 31, 2004, expenses incurred pursuant to these service agreements were $64,000 for Price Associates, $783,000 for T. Rowe Price Services, Inc., and $773,000 for T. Rowe Price Retirement Plan Services, Inc. At period-end, a total of $166,000 of these expenses was payable. 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 and affiliates of the fund. The Reserve Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates, and are not available for direct purchase by members of the public. The Reserve Funds pay no investment management fees. During the year ended December 31, 2004, dividend income from the Reserve Funds totaled $168,000, and the value of shares of the Reserve Funds held at December 31, 2004 and December 31, 2003 was $23,279,000 and $12,295,000, respectively. As of December 31, 2004, T. Rowe Price Group, Inc. and/or its wholly owned subsidiaries owned 62,659 shares of the fund, representing less than 1% of the fund's net assets. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of T. Rowe Price New America Growth Fund 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 America Growth Fund (the "Fund") at December 31, 2004, 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 the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards 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, 2004 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland February 11, 2005 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS - -------------------------------------------------------------------------------- A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund's Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC's Web site, www.sec.gov. The description of our proxy voting policies and procedures is also available on our Web site, www.troweprice.com. To access it, click on the words "Company Info" at the top of our homepage for individual investors. Then, in the window that appears, click on the "Proxy Voting Policy" navigation button in the top left corner. Each fund's most recent annual proxy voting record is available on our Web site and through the SEC's Web site. To access it through our Web site, follow the directions above, then click on the words "Proxy Voting Record" at the bottom of the Proxy Voting Policy page. HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS - -------------------------------------------------------------------------------- The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available electronically on the SEC's Web site (www.sec.gov); hard copies may be reviewed and copied at the SEC's Public Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330. T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- ABOUT THE FUND'S TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- Your fund is governed by a Board of Trustees that meets regularly to review investments, performance, compliance matters, advisory fees, expenses, and other business affairs, and is responsible for protecting the interests of shareholders. The majority of the fund's trustees are independent of T. Rowe Price Associates, Inc. (T. Rowe Price); "inside" trustees are officers of T. Rowe Price. The Board of Trustees elects the fund's officers, who are listed in the final table. The business address of each trustee and officer is 100 East Pratt Street, Baltimore, MD 21202. The Statement of Additional Information includes additional information about the fund trustees and is available without charge by calling a T. Rowe Price representative at 1-800-225-5132. Independent Trustees Name (Year 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 (1945) 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 (1943) acquisition and management advisory firm 1985 David K. Fagin Director, Golden Star Resources Ltd., Canyon (1938) Resources Corp. (5/00 to present), and Pacific 1994 Rim Mining Corp. (2/02 to present); Chairman and President, Nye Corp. Karen N. Horn Managing Director and President, Global Private (1943) Client Services, Marsh Inc. (1999-2003); Managing 2003 Director and Head of International Private Banking, Bankers Trust (1996-1999); Director, Eli Lilly and Company and Georgia Pacific (5/04 to present) F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates, (1934) Inc., consulting environmental and civil 2001 engineers John G. Schreiber Owner/President, Centaur Capital Partners, Inc., a (1946) real estate investment company; Partner, 2001 Blackstone Real Estate Advisors, L.P.; Director, AMLI Residential Properties Trust and The Rouse Company, real estate developers * Each independent trustee oversees 112 T. Rowe Price portfolios and serves until retirement, resignation, or election of a successor. Inside Trustees Name (Year of Birth) Year Elected * [Number of T. Rowe Price Principal Occupation(s) During Past 5 Years Portfolios Overseen] and Directorships of Other Public Companies John H. Laporte, CFA Vice President, T. Rowe Price and T. Rowe Price (1945) Price Group, Inc. 1985 [15] James S. Riepe Director and Vice President, T. Rowe Price; Vice (1943) Chairman of the Board, Director, and Vice 1985 President, T. Rowe Price Group, Inc.; Chairman of [112] 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 America Growth Fund * Each inside trustee serves until retirement, resignation, or election of a successor. Officers Name (Year of Birth) Title and Fund(s) Served Principal Occupation(s) Jeffrey W. Arricale, CPA (1971) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc.; formerly student, the Wharton School, University of Pennsylvania (to 2001) R. Scott Berg (1972) Vice President, T. Rowe Price; Vice President, New America Growth Fund formerly student, Stanford Graduate School of Business (to 2002); Intern, T. Rowe Price (to 2001); Financial Analysis and Planning Manager, Mead Consumer & Office Products (to 2000) Brian W.H. Berghuis, CFA (1958) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc. Stephen V. Booth, CPA (1961) Vice President, T. Rowe Price, Vice President, New America Growth Fund T. Rowe Price Group, Inc., and T. Rowe Price Trust Company Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. Officers (continued) Name (Year of Birth) Title and Fund(s) Served Principal Occupation(s) Joseph A. Carrier (1960) Vice President, T. Rowe Price, Treasurer, New America Growth Fund T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company Roger L. Fiery III, CPA (1959) Vice President, T. Rowe Price, Vice President, New America Growth Fund T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company John R. Gilner (1961) Chief Compliance Officer and Vice Chief Compliance Officer, New America President,T. Rowe Price; Vice Growth Fund President, T. Rowe Price Investment Services, Inc., and T. Rowe Price Group, Inc. Gregory S. Golczewski (1966) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Trust Company Henry H. Hopkins (1942) Director and Vice President, Vice President, New America Growth Fund 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 Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc. Patricia B. Lippert (1953) Assistant Vice President, T. Rowe Secretary, New America Growth Fund Price and T. Rowe Price Investment Services, Inc. Robert J. Marcotte (1962) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc. Joseph M. Milano, CFA (1972) Vice President, T. Rowe Price and President, New America Growth Fund T. Rowe Price Group, Inc. Charles G. Pepin (1966) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc. Jeffrey Rottinghaus, CPA (1970) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc.; formerly student, the Wharton School, University of Pennsylvania (to 2001) Robert W. Sharps, CFA, CPA (1971) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc. Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. Robert W. Smith (1961) Vice President, T. Rowe Price, Vice President, New America Growth Fund T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. Julie L. Waples (1970) Vice President, T. Rowe Price Vice President, New America Growth Fund R. Candler Young (1971) Vice President, T. Rowe Price and Vice President, New America Growth Fund T. Rowe Price Group, Inc. 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. 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: 2004 2003 Audit Fees $7,952 $9,699 Audit-Related Fees 1,103 546 Tax Fees 2,156 2,519 All Other Fees - 124 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) Less than 50 percent of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (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 $903,000 and $821,000, 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. Schedule of Investments. Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. 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 change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (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. (3) Written solicitation to repurchase securities issued by closed-end companies: not applicable. (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 America Growth Fund By /s/ James S. Riepe ----------------------------------- James S. Riepe Principal Executive Officer Date February 18, 2005 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 18, 2005 By /s/ Joseph A. Carrier ----------------------------------- Joseph A. Carrier Principal Financial Officer Date February 18, 2005 EX-99.CERT 2 ex-99cert.txt 302 CERTIFICATIONS Item 12(a)(2). CERTIFICATIONS I, James S. Riepe, certify that: 1. I have reviewed this report on Form N-CSR of T. Rowe Price New America Growth 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 second fiscal quarter of the period covered by this 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 18, 2005 /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 America Growth 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 second fiscal quarter of the period covered by this 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 18, 2005 /s/ Joseph A. Carrier -------------------------------- Joseph A. Carrier Principal Financial Officer EX-99.CODE ETH 3 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 4 ex-99_906cert.txt 906 CERTIFICATIONS Item 12(b). CERTIFICATION UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002 Name of Issuer: T. Rowe Price New America Growth 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 18, 2005 /s/ James S. Riepe ---------------------------------- James S. Riepe Principal Executive Officer Date: February 18, 2005 /s/ Joseph A. Carrier ---------------------------------- Joseph A. Carrier Principal Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----