-----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, Mi4SlalSzBg7In5lO1LMf/77LyAmU9x8Z6ZTmOC7qbv1MySRNhXi126KpnSS4Tpr bBtZJy80YT6VA1yXs2LKWw== 0000950109-01-000519.txt : 20010228 0000950109-01-000519.hdr.sgml : 20010228 ACCESSION NUMBER: 0000950109-01-000519 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010226 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: SEC FILE NUMBER: 811-04358 FILM NUMBER: 1554371 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 0001.txt T. ROWE PRICE NEW AMERICA GROWTH FUND Annual Report NEW AMERICA GROWTH FUND DECEMBER 31, 2000 [LOGO OF T. ROWE PRICE] REPORT HIGHLIGHTS - -------------------------------------------------------------------------------- New America Growth Fund . The technology bubble burst in 2000, and the stock market had its worst year in a decade. . Your fund declined along with the market, with losses comparable to those of the blue chip S&P 500 but more limited than the hard-hit aggressive growth sectors. . The fund's new investment objective enabled us to purchase leading New Economy companies at substantially lower prices. Our traditional holdings in the services sector rebounded. . Despite the recent pummeling in many sectors, prospects for the out-sourcing, information technology, and health care industries remain robust, which bodes well for the fund. 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 What a difference a year makes. After inflating to epic proportions in 1999, the technology bubble burst in 2000. The Nasdaq Composite Index had its worst year since its creation in 1971, plunging more than 39% and nearly wiping out the greater than 85% gain of the previous year. The Standard & Poor's 500 Stock Index fell 9.11% after rising more than 20% annually for the previous five years. Internet stocks lost nearly three-quarters of their value after rising more than sevenfold in 1998-99, according to one well-known dot-com index. - ---------------------- PERFORMANCE COMPARISON - -------------------------------------------------------------------------------- Periods Ended 12/31/00 6 Months 12 Months - -------------------------------------------------------------------------------- New America Growth Fund -9.23% -10.53% S&P 500 Stock Index -8.72 -9.11 Lipper Growth Funds Average -10.43 -7.61 Your fund's performance was mixed versus its benchmarks during the 6- and 12-month periods ended December 31, as shown in the table. The 10.53% loss for the full year was somewhat greater than that of the blue chip S&P 500 and the average competing fund as measured by the Lipper Growth Funds Average. Six-month performance was better in a relative sense as losses were more limited than the average fund and slightly behind the S&P 500. As we indicated in our last report, for the first four months of this year the New America Growth Fund was a services sector fund, as it had been since inception in 1985 when services defined the "new America." Shareholders approved a new investment objective effective May 1, but our services focus restrained results in the first half of the year (primarily in the first quarter) as many technology and telecom stocks held onto some of their early-year gains. Many stocks outside these momentum-driven sectors fared quite poorly in the first quarter. The second half of 2000 marked the first full period in which the New America Growth Fund operated with a focus on companies operating in what we believe will be the fastest-growing sectors of the economy. Since the change in objective, we have added several new sectors to 1 the fund, including technology (both software and hardware), pharmaceuticals, and biotechnology. We are encouraged by the fund's improved relative results. MARKET ENVIRONMENT Investors got a dose of reality in 2000, and the medicine got more bitter as the year wore on. While many factors came together to form a "perfect storm" in the financial markets, the preceding years of excessive speculation and gross overvaluation, focused in a few narrow sectors, caused the hangover to be more harsh and unforgiving than many investors had ever experienced. Fortunately, the bear market was also largely confined to those sectors. Investors in diversified portfolios experienced only a garden-variety correction. Growth stocks outperformed value stocks early in the year, but the tables turned in the second half. The Russell 1000 Growth Index (a measure of large-cap growth stocks) was up just over 4% in the first half while the Russell 1000 Value Index fell more than 4%. In the second half, the growth index plummeted 25% as its value counterpart gained nearly 12%. Despite the overall market downdraft, mid-cap stocks actually posted solid gains for the year, led again by value stocks. While this market hasn't been much fun for growth investors, the broadening trend and the wringing out of the excesses in technology and telecom is healthy for the markets, as we have frequently said. - ---------------- GROWTH VS. VALUE - -------------------------------------------------------------------------------- Second First 2000 Performance Half Half - -------------------------------------------------------------------------------- Russell 1000 Growth Index -25.57% 4.23% Russell 1000 Value Index 11.74 -4.23 Euphoria fades Factors that helped sour the euphoria of the late 1990s included central bank rate hikes around the world, dramatically higher energy prices, and a rapid slowdown in economic growth. GDP fell from 6% in the second quarter to 2% in the third quarter of last year. Fourth-quarter data are expected to show even more weakness, and GDP could begin to contract in the first half of 2001. Earnings expectations for the S&P 500 have slowed even more precipitously. Estimates for fourth-quarter profit growth were as high as 15% as recently as August, but profit growth is now expected to be zero. Consensus expectations for 2001 have also been slashed, and some anticipate that 2 corporate profits could shrink this year after two consecutive years of strong double-digit growth. As the deteriorating outlook for the economy and profits began to ring alarm bells, the last thing Wall Street needed was protracted uncertainty over the outcome of the U.S. presidential election. But that is exactly what investors in the world's most stable democracy got. PORTFOLIO REVIEW Though we were able to take advantage of declining prices to gradually add to our technology holdings beginning in midyear, the sharpest declines came in the fourth quarter, unfortunately. As promised, however, we did not stray from our historical discipline despite the change in objective. The fund still has significant weighting in service companies and has focused on profitable, market-leading growth companies. But it was a difficult year in which to run a "new America" growth fund. Few of the fastest-growing sectors of the economy delivered good stock market performance in 2000. Fortunately, the fund's technology weighting at year-end remained light compared with most growth indexes. We recognized that valuations were extreme for much of the year and attempted to be opportunistic in our technology purchases. We are optimistic that these will benefit shareholders in the long term. Not only is the fund invested in a greater variety of sectors and industries, but the growth characteristics of the fund have been increased. The median expected long-term earnings growth rate of our holdings was about 22% at year-end, up from about 19% a year ago. Lagging sectors lifted The market's broadening in 2000 lifted sectors that had lagged in prior years. Financial services and business services were the fund's best-contributing sectors for both the second half and full year. Health care and consumer services were also strong. The fund's top-performing stocks were generally ones we have held for a long time but that had been out of favor for years. In financial services, Freddie Mac and Waddell & Reed Financial were two of the top contributors. Freddie Mac, a government-sponsored entity charged with making mortgages more widely available, suffered early in the year because of concern that Congress would impose restrictions on the company following its huge success in recent years. Freddie Mac surged 70% in the second half as those 3 political concerns abated and the Federal Reserve stopped raising interest rates. We have held the stock for more than five years. Waddell & Reed is an asset-management company that markets primarily to middle-income Americans through an exclusive sales force of more than 2,500 financial advisers. The stock, which we have held for more than two years, more than doubled last year. ...OUR GOAL IS TO FIND COMPANIES WITH STRONG GROWTH PROSPECTS THAT WE CAN HOLD FOR LONG PERIODS. In business services, Affiliated Computer Services and Concord EFS were top performers for both periods. Affiliated Computer Services is an outsourcing company that expanded its offerings to business process outsourcing, which entails taking over entire operations, such as claims processing, from client corporations. The company has posted consistent earnings growth of at least 20% annually since going public in 1994, and we have owned it for more than four years. Concord EFS, which we have owned for 18 months, is a credit and debit card processor that focuses on the supermarket, gas station, and convenience store markets. Earnings have grown at a more than 30% annual rate for several consecutive quarters. These companies are great examples of what the New America Growth Fund is trying to accomplish. Although sectors and companies will go in and out of favor, our goal is to find companies with strong growth prospects that we can hold for long periods. Other longtime fund holdings were also top performers. Apollo Group, which we've owned for more than three years, is a leading private education company that focuses on working adults. In addition to its traditional bricks-and-mortar business, Apollo Group is one of the largest companies offering "distance education" services over the Internet. Omnicare, held by the fund for more than 18 months, was our best-performing health care stock in both periods. Omnicare is the largest company in the institutional pharmacy industry and serves more than 600,000 residents in more than 8,000 long-term care facilities nationwide. The technology sector proved very difficult, especially in the second half, even as we moved into the group gradually and added to our positions on weakness. Blue chip technology companies with strong earnings were not spared in the meltdown. Microsoft, Dell, and Cisco were among our worst contributors in the second half. A slowdown in technology spending and fears of a recession led to a revaluation of the entire sector. 4 Technology spending is cyclical, and we are in a temporary down-cycle. However, we believe such spending will be higher in five years. Our goal is to find the leaders of the next up-cycle. Exodus Communications, the world's largest Web hosting company, was also a poor performer. Web hosting is a nascent industry that is expected to be among the economy's fastest growing over the next five years. Exodus is often thought of as an Internet company since dot-coms have historically been an important contributor to revenues; as a result the Internet blowup rattled the shares. However, we think the company is misunderstood by many investors, as growth is being fueled more by traditional enterprises like Microsoft and Merrill Lynch than by dot-coms that now generate less than half of the company's revenue. Meanwhile, Exodus is funded through 2001 to meet its growth objectives while many of its would-be competitors will likely be unable to raise the capital they need. As the company's profitability continues to improve with each successive quarter, investors are likely to return to Exodus. The stock was also your fund's largest new purchase for the year, and although Exodus is emblematic of our new investment objective, its business model is very familiar to us. The New America Growth Fund has been investing in service companies with recurring revenues since its inception, and Exodus fits this model beautifully as its customers rent space and pay for services on a monthly basis. - ---------------------- SECTOR DIVERSIFICATION - -------------------------------------------------------------------------------- 12/31/99 6/30/00 12/31/00 - -------------------------------------------------------------------------------- Financial Services 10.0% 8.6% 12.4% Consumer Services 24.0 14.3 14.7 Business Services 29.6 25.6 20.8 Health Care 2.0 7.0 9.3 Technology 3.4 21.1 22.9 Media Services 22.6 17.9 15.7 Reserves 8.4 5.5 4.2 - -------------------------------------------------------------------------------- Total 100% 100% 100% - -------------------------------------------------------------------------------- Changes in sector weightings in the last six months primarily reflect sector performance rather than the impact of fund buying and selling. Financial services grew primarily due to appreciation. On the other hand, despite the fact that we added to the technology sector in the second half, falling prices caused our weighting to stay relatively flat. The decline in media services resulted from a combination of weak sector performance and fund sales of key stocks. We trimmed VoiceStream Wireless substantially due to concern about the completion of its takeover by Deutsche Telekom. Infinity Broadcasting, 5 about to be acquired by Viacom, was also trimmed in an attempt to lower exposure to the advertising cycle. However, we remain bullish on the long-term prospects of the combined Viacom/Infinity. In addition to Exodus, other top purchases for the fund included Flextronics International, Jabil Circuit, and Solectron, each in the electronics manufacturing services industry. These companies allow original equipment manufacturers to outsource production, which helps them cut costs and focus on their core competencies. The fund has participated successfully in the outsourcing trend for years, as witnessed by long-term holdings like Affiliated Computer Services, discussed above, and SunGard Data Systems. SunGard allows clients, often financial services firms, to outsource data recovery and backup. Shopping for tech bargains Not all the stocks added to the portfolio are blessed with recurring revenues. Some of the best growth companies rely on selling more products to new and existing customers each quarter. The semiconductor industry is an example, and it certainly embodies the "new America." Semiconductors are required in a growing number of electronic gadgets, as well as in an increasing number of products that once contained no electronics, such as the automobile. It is a cyclical industry, however, and is currently in a slowdown. Your fund had been dramatically underweighted in semiconductors because of their premium valuations early in the year. However, at recent prices, we have begun to buy companies we believe will perform well in the next up-cycle. One example is Altera, which designs and manufactures a broad range of high-performance programmable logic devices. Altera's chips serve a wide range of markets, including voice and data communications, data processing, and industrial applications. Applied Materials, the world's largest maker of semiconductor capital equipment, is another example. Obviously, when the chip industry is in a downtrend, semiconductor manufacturers buy fewer new chip-making machines and services. However, we were able to purchase Applied Materials as much as 60% off its high. The long-term prospects of the chip industry are quite solid, and Applied Materials should benefit during the next leg up. OUTLOOK Most economic data and many companies have indicated a marked slowdown in economic activity. The slowdown is not confined to any 6 THE BURSTING OF THE TECH AND TELECOM BUBBLE IS A LONG-TERM POSITIVE FOR THE MARKET. one sector, as we've seen earnings disappointments in the technology, media, retail, financial, and business services industries. Earnings estimate revisions in the fourth quarter were about as negative as any quarter in recent memory. We will likely see continued softness into the first half of 2001. Fortunately, the Fed has begun to take action to avert a recession. In early January, the Fed executed a rare intermeeting cut in the federal funds rate, and also moved in a convincing half-point increment. More cuts seem likely in the near term. Though we are clearly in a new information age and believe that intermediate- and long-term capital spending trends are strong, we have taken heed of this slowdown and, as a result, have maintained a diversified mix of stocks in a variety of industries. The bursting of the tech and telecom bubble is a long-term positive for the market. Perhaps now companies will be rewarded more for consistency in earnings growth and strong cash flow rather than for revenue growth alone. The New America Growth Fund is well positioned for such an environment. We have a strong stable of Old Economy stocks that should continue to do well and a substantial position in New Economy stocks that we think are poised to grow significantly over the next several years. It will likely take a major change in sentiment to get these stocks moving again, but many stocks are down more than 50% from recent highs, to levels we consider attractive. We will continue to be opportunistic buyers of leading "new America" companies, and expect these investments to prove rewarding in the future. Respectfully submitted, /s/ Marc L. Baylin Marc L. Baylin Chairman of the fund's Investment Advisory Committee January 12, 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. 7 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - -------------------- PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 12/31/00 - -------------------------------------------------------------------------------- Freddie Mac 3.7% Waddell & Reed Financial 3.6 Affiliated Computer Services 3.4 First Data 2.4 Family Dollar Stores 2.4 - -------------------------------------------------------------------------------- Clear Channel Communications 2.4 Concord EFS 2.3 Western Wireless 2.3 Morgan Stanley Dean Witter 2.2 AT&T Liberty Media 2.1 - -------------------------------------------------------------------------------- Pfizer 2.0 Apollo Group 1.9 Infinity Broadcasting 1.8 Macromedia 1.8 Home Depot 1.7 - -------------------------------------------------------------------------------- Pharmacia 1.7 Comcast 1.6 Schlumberger 1.6 SunGard Data Systems 1.6 TMP Worldwide 1.5 - -------------------------------------------------------------------------------- Catalina Marketing 1.5 Analog Devices 1.4 Cisco Systems 1.4 Costco Wholesale 1.4 Exodus Communications 1.4 - -------------------------------------------------------------------------------- Total 51.1% Note: Table excludes reserves. 8 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - -------------------- PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE 6 Months Ended 12/31/00 Ten Best Contributors - ------------------------------------------------ Affiliated Computer Services 67(cent) Freddie Mac 63 Concord EFS 51 Omnicare 44 Apollo Group 37 Avis Group 34 Waddell & Reed Financial 31 SunGard Data Systems 31 TJX 19 Safeway 16 ------- Total 393(cent) Ten Worst Contributors - ------------------------------------------------ Clear Channel Communications * -64(cent) AT&T Liberty Media 63 WorldCom 59 Exodus Communications * 47 Circuit City Stores 46 Nextel Communications 44 Dell Computer 37 Microsoft 35 Cisco Systems 30 Western Wireless 27 ------- Total -452(cent) 12 Months Ended 12/31/00 Ten Best Contributors - ------------------------------------------------ Waddell & Reed Financial 77(cent) Concord EFS 69 Apollo Group 63 SunGard Data Systems 50 Freddie Mac 50 U.S. Foodservice ** 45 Paychex 39 Affiliated Computer Services 35 Safeway 34 Omnicare 31 ------- Total 493(cent) Ten Worst Contributors - ------------------------------------------------ AT&T Liberty Media -88(cent) WorldCom 74 Clear Channel Communications * 64 Circuit City Stores 59 Microsoft 52 Exodus Communications * 47 Home Depot 45 Western Wireless 44 Nextel Communications * 42 Dell Computer 35 ------- Total -550(cent) * Position added ** Position eliminated 9 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 S&P 500 Lipper Growth New America Stock Index Funds Average Growth Fund Dec-90 10,000 10,000 10,000 Dec-91 13,047 13,796 16,195 Dec-92 14,041 14,968 17,797 Dec-93 15,456 16,806 20,901 Dec-94 15,660 16,547 19,348 Dec-95 21,545 21,864 27,921 Dec-96 26,491 26,140 33,508 Dec-97 35,330 32,986 40,576 Dec-98 45,427 40,075 47,837 Dec-99 54,985 50,761 53,939 Dec-00 49,977 47,268 48,259 - ------------------------------------ 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 12/31/00 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------- New America Growth Fund -10.53% 5.95% 11.57% 17.05% Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. 10 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - --------------------- FINANCIAL HIGHLIGHTS For a share outstanding throughout each period - --------------------------------------------------------------------------------
Year Ended 12/31/00 12/31/99 12/31/98 12/31/97 12/31/96 NET ASSET VALUE Beginning of period $ 48.06 $ 47.79 $ 44.19 $ 38.37 $ 34.91 Investment activities Net investment income (loss) (0.14) (0.20) (0.21) (0.13) (0.13) Net realized and unrealized gain (loss) (4.63) 5.87 7.65 8.15 7.08 Total from investment activities (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 $ 35.77 $ 48.06 $ 47.79 $ 44.19 $ 38.37 ------------------------------------------------------------------- Ratios/Supplemental Data Total return * (10.53)% 12.76% 17.89% 21.10% 20.01% Ratio of total expenses to average net assets 0.93% 0.94% 0.95% 0.96% 1.01% Ratio of net investment income (loss) to average net assets (0.33)% (0.43)% (0.49)% (0.34)% (0.39)% Portfolio turnover rate 81.4% 39.7% 45.6% 43.2% 36.7% Net assets, end of period (in millions) $ 1,519 $ 2,064 $ 2,064 $ 1,758 $ 1,440
* 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. 11 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- December 31, 2000 - ----------------------- STATEMENT OF NET ASSETS Shares Value - -------------------------------------------------------------------------------- In thousands COMMON STOCKS 95.8% FINANCIAL 12.4% Investment Services 7.0% Citigroup 155,000 $ 7,915 Goldman Sachs Group 100,000 10,694 Morgan Stanley Dean Witter 425,000 33,681 Waddell & Reed Financial (Class B) 1,447,200 54,270 ---------------- 106,560 ---------------- Other Financial Services 5.4% Fannie Mae 100,000 8,675 Freddie Mac 825,000 56,822 GE 150,000 7,191 Providian Financial 165,000 9,487 ---------------- 82,175 ---------------- Total Financial 188,735 ---------------- CONSUMER SERVICES 14.7% Retailing/General Merchandisers 6.3% Costco Wholesale * 525,000 20,983 Family Dollar Stores 1,700,000 36,444 Safeway * 300,000 18,750 Target 600,000 19,350 ---------------- 95,527 ---------------- Personal Services 3.0% Apollo Group (Class A) * 600,000 29,513 Avis Group Holdings * 500,000 16,281 ---------------- 45,794 ---------------- Restaurants 1.3% Outback Steakhouse * 725,000 18,759 ---------------- 18,759 ---------------- Retailing/Specialty Merchandisers 4.1% Circuit City Stores 575,000 6,613 CVS 175,000 10,489 Home Depot 575,000 26,270 TJX 700,000 19,425 ---------------- 62,797 ---------------- Total Consumer Services 222,877 ---------------- 12 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- In thousands BUSINESS SERVICES 20.5% Computer Services 12.7% Affiliated Computer Services (Class A) * 850,000 $ 51,584 Ceridian * 600,000 11,963 Concord EFS * 800,000 35,150 First Data 700,000 36,881 Galileo International 550,000 11,000 NOVA * 550,000 10,966 Paychex 250,000 12,164 SunGard Data Systems * 500,000 23,562 ---------------- 193,270 ---------------- Energy Services 3.6% Diamond Offshore Drilling 150,000 6,000 Schlumberger 300,000 23,981 Smith International * 200,000 14,913 Tidewater 200,000 8,875 ---------------- 53,769 ---------------- Marketing Services 1.5% Catalina Marketing * 600,000 23,362 ---------------- 23,362 ---------------- Other Business Services 2.7% Republic Services (Class A) * 200,000 3,437 TMP Worldwide * 425,000 23,402 Viad 600,000 13,800 ---------------- 40,639 ---------------- Total Business Services 311,040 ---------------- HEALTH CARE 8.9% Health Care Services 1.6% Laboratory Corporation America * 40,000 7,040 Omnicare 819,100 17,713 ---------------- 24,753 ---------------- Health Care Products/Devices 0.5% Waters * 85,000 7,098 ---------------- 7,098 ---------------- Pharmaceuticals and Biotechnology 6.8% Abgenix * 230,000 13,591 Genentech * 217,100 17,694 13 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- In thousands Immunex * 175,000 $ 7,115 MedImmune * 210,000 10,021 Pfizer 646,250 29,727 Pharmacia 425,000 25,925 ---------------- 104,073 ---------------- Total Health Care 135,924 ---------------- MEDIA SERVICES 15.7% Broadcasting 5.9% Clear Channel Communications * 750,000 36,328 Comcast (Class A Special) * 600,000 25,031 Infinity Broadcasting (Class A) * 1,000,000 27,938 ---------------- 89,297 ---------------- Telecom Services 6.4% Allegiance Telecom * 700,000 15,619 Nextel Communications * 565,000 13,966 Vodafone 575,000 20,592 VoiceStream Wireless * 45,000 4,530 Western Wireless * 875,000 34,316 WorldCom * 600,000 8,438 ---------------- 97,461 ---------------- Other Media Services 3.4% American Tower (Class A) * 170,000 6,439 AT&T Liberty Media (Class A) * 2,300,000 31,193 Crown Castle International * 500,000 13,547 ---------------- 51,179 ---------------- Total Media Services 237,937 ---------------- TECHNOLOGY SERVICES 22.9% Software & Service 6.4% Electronic Arts * 225,000 9,598 Intuit * 135,000 5,320 Liberate Technologies * 245,000 3,330 Macromedia * 455,000 27,627 Microsoft * 400,000 17,363 Oracle * 300,000 8,719 14 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- In thousands Peregrine Systems * 625,000 $ 12,324 VERITAS Software * 140,000 12,254 -------------- 96,535 -------------- Semiconductors 4.5% Altera * 475,000 12,513 Analog Devices * 415,000 21,243 Applied Materials * 500,000 19,094 Maxim Integrated Products * 90,000 4,300 PMC-Sierra * 30,000 2,359 Texas Instruments 180,000 8,528 -------------- 68,037 -------------- E-Commerce 3.7% America Online * 450,000 15,660 Ariba * 215,000 11,536 Exodus Communications * 1,050,000 20,967 VeriSign * 105,000 7,783 -------------- 55,946 -------------- Communication Equipment 4.9% Cisco Systems * 550,000 21,038 Corning 100,000 5,281 JDS Uniphase * 120,000 4,995 Juniper Networks * 50,000 6,306 Nokia ADR 300,000 13,050 Nortel Networks 295,000 9,459 SDL * 100,000 14,834 -------------- 74,963 -------------- Computers & Hardware 3.4% Dell Computer * 450,000 7,861 EMC * 115,000 7,648 Flextronics International * 375,000 10,687 Jabil Circuit * 450,000 11,419 Solectron * 425,000 14,407 -------------- 52,022 -------------- Total Technology Services 347,503 -------------- Total Miscellaneous Common Stocks 0.7% 10,335 -------------- Total Common Stocks (Cost $1,108,449) 1,454,351 -------------- 15 T. ROWE PRICE NEW AMERICA GROWTH FUND - --------------------------------------------------------------------------------
Shares Value - ---------------------------------------------------------------------------------------------- In thousands SHORT-TERM INVESTMENTS 6.4% Money Market Funds 6.4% Reserve Investment Fund, 6.69 # 97,852,913 $ 97,853 ------------ Total Short-Term Investments (Cost $97,853) 97,853 ------------ Total Investments in Securities 102.2% of Net Assets (Cost $1,206,302) $ 1,552,204 Other Assets Less Liabilities (33,406) ------------ NET ASSETS $ 1,518,798 ------------ Net Assets Consist of: Accumulated net realized gain/loss - net of distributions $ 23,791 Net unrealized gain (loss) 345,902 Paid-in-capital applicable to 42,461,980 shares of no par value capital stock outstanding; unlimited shares auhorized 1,149,105 ------------ NET ASSETS $ 1,518,798 ------------ NET ASSET VALUE PER SHARE $ 35.77 ------------
# Seven-day yield * Non-income producing ADR American Depository Receipt The accompanying notes are an integral part of these financial statements. 16 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - ----------------------- STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- In thousands Year Ended 12/31/00 Investment Income (Loss) Income Interest $ 6,057 Dividend 4,809 ------------- Total income 10,866 ------------- Expenses Investment management 11,988 Shareholder servicing 4,338 Custody and accounting 157 Prospectus and shareholder reports 156 Proxy and annual meeting 50 Registration 33 Legal and audit 22 Trustees 10 Miscellaneous 11 ------------- Total expenses 16,765 Expenses paid indirectly (9) ------------- Net expenses 16,756 ------------- Net investment income (loss) (5,890) ------------- Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities 212,034 Foreign currency transactions (153) ------------- Net realized gain (loss) 211,881 Change in net unrealized gain or loss on securities (401,065) ------------- Net realized and unrealized gain (loss) (189,184) ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (195,074) ------------- The accompanying notes are an integral part of these financial statements. 17 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - ---------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- In thousands
Year Ended 12/31/00 12/31/99 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ (5,890) $ (8,692) Net realized gain (loss) 211,881 306,896 Change in net unrealized gain or loss (401,065) (58,606) -------------------------------- Increase (decrease) in net assets from operations (195,074) 239,598 -------------------------------- Distributions to shareholders Net realized gain (275,972) (210,030) -------------------------------- Capital share transactions * Shares sold 279,986 343,462 Distributions reinvested 267,337 204,229 Shares redeemed (620,989) (578,197) -------------------------------- Increase (decrease) in net assets from capital share transactions (73,666) (30,506) -------------------------------- Net Assets Increase (decrease) during period (544,712) (938) Beginning of period 2,063,510 2,064,448 -------------------------------- End of period $ 1,518,798 $ 2,063,510 -------------------------------- *Share information Shares sold 6,074 7,061 Distributions reinvested 7,184 4,585 Shares redeemed (13,733) (11,908) -------------------------------- Increase (decrease) in shares outstanding (475) (262)
The accompanying notes are an integral part of these financial statements. 18 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- December 31, 2000 - ----------------------------- 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 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. Currency Translation Assets and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing exchange rate on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains and losses is reflected as a component of such gains and losses. 19 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Other Income 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 $1,385,043,000 and $1,630,364,000, respectively, for the year ended December 31, 2000. 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 and distribute all of its taxable income. In order for the fund's capital accounts and distributions to shareholders to reflect the tax character of certain transactions, the following reclassifications were made during the year ended December 31, 2000. The reclassifications relate primarily to the current net operating loss and a tax practice that treats a portion of the proceeds from each redemption of capital shares as a distribution of taxable net investment incomes and/or realized capital gain. The results of operations and net assets were not affected by the increases/(decreases) to these accounts. --------------------------------------------------------------------------- Undistributed net investment income $ 5,890,000 Undistributed net realized gain (37,377,000) Paid-in-capital 31,487,000 At December 31, 2000, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $1,206,302,000. Net unrealized gain aggregated $345,902,000 at period-end, 20 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- of which $492,545,000 related to appreciated investments and $146,643,000 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 (Price Group). The investment management agreement between the fund and the manager provides for an annual investment management fee, of which $885,000 was payable at December 31, 2000. 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 Group (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 December 31, 2000, and for the year 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 $3,615,000 for the year ended December 31, 2000, of which $337,000 was payable at period-end. The fund may invest in the Reserve Investment Fund and 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 Group, 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 year ended December 31, 2000, totaled $6,056,000 and are reflected as interest income in the accompanying Statement of Operations. 21 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - --------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of T. Rowe Price New America Growth Fund In our opinion, the accompanying statement of net assets 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, 2000, and the results of its operations, the changes in its net assets and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2000 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland January 19, 2001 22 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- - ----------------------------------------------------------- TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/00 - -------------------------------------------------------------------------------- We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements. The fund's distributions to shareholders included: . $4,914,000 from short-term capital gains . $308,588,000 from long-term capital gains, subject to the 20% rate gains category. - -------------------------------------------------------------------------------- 23 T. ROWE PRICE SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- INVESTMENT SERVICES AND INFORMATION KNOWLEDGEABLE SERVICE REPRESENTATIVES By Phone 1-800-225-5132 Available Monday through Friday from 7 a.m. to midnight ET and weekends from 8:30 a.m. to 5 p.m. ET. In Person Available in T. Rowe Price Investor Centers. ACCOUNT SERVICES Checking Available on most fixed-income funds ($500 minimum). Automatic Investing From your bank account or paycheck. Automatic Withdrawal Scheduled, automatic redemptions. Distribution Options Reinvest all, some, or none of your distributions. Automated 24-Hour Services Including Tele*Access(R) and the T. Rowe Price Web site on the Internet. Address: www.troweprice.com BROKERAGE SERVICES* Individual Investments Stocks, bonds, options, precious metals, and other securities at a savings over full-service commission rates. ** INVESTMENT INFORMATION Combined Statement Overview of all your accounts with T. Rowe Price. Shareholder Reports Fund managers' reviews of their strategies and results. T. Rowe Price Report Quarterly investment newsletter discussing markets and financial strategies. Performance Update Quarterly review of all T. Rowe Price fund results. Insights Educational reports on investment strategies and financial markets. Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A Guide to International Investing, Personal Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit. * T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC. ** Based on a January 2001 survey for representative-assisted stock trades. Services vary by firm, and commissions may vary depending on size of order. 24 T. ROWE PRICE MUTUAL FUNDS - -------------------------------------------------------------------------------- STOCK FUNDS Domestic Blue Chip Growth Capital Appreciation Capital Opportunity Developing Technologies Diversified Small-Cap Growth Dividend Growth Equity Income Equity Index 500 Extended Equity Market Index Financial Services Growth & Income Growth Stock Health Sciences Media & Telecommunications Mid-Cap Growth Mid-Cap Value New America Growth New Era New Horizons* Real Estate Science & Technology Small-Cap Stock Small-Cap Value Spectrum Growth Tax-Efficient Growth Tax-Efficient Multi-Cap Growth Total Equity Market Index Value BLENDED ASSET FUNDS Balanced Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Tax-Efficient Balanced BOND FUNDS Domestic Taxable Corporate Income GNMA High Yield New Income Short-Term Bond Spectrum Income Summit GNMA U.S. Bond Index U.S. Treasury Intermediate U.S. Treasury Long-Term Domestic Tax-Free California Tax-Free Bond Florida Intermediate Tax-Free Georgia Tax-Free Bond Maryland Short-Term Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Summit Municipal Intermediate Tax-Free High Yield Tax-Free Income Tax-Free Intermediate Bond Tax-Free Short-Intermediate Virginia Tax-Free Bond MONEY MARKET FUNDS+ Taxable Prime Reserve Summit Cash Reserves U.S. Treasury Money Tax-Free California Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money INTERNATIONAL/GLOBAL FUNDS Stock Emerging Europe & Mediterranean Emerging Markets Stock European Stock Global Stock Global Technology International Discovery* International Equity Index International Growth & Income International Stock Japan Latin America New Asia Spectrum International Bond Emerging Markets Bond International Bond T. ROWE PRICE NO-LOAD VARIABLE ANNUITY Blue Chip Growth Portfolio Equity Income Portfolio Equity Index 500 Portfolio Health Sciences Portfolio International Stock Portfolio Limited-Term Bond Portfolio Mid-Cap Growth Portfolio New America Growth Portfolio Personal Strategy Balanced Portfolio Prime Reserve Portfolio * Closed to new investors. + Investments in the funds are not insured or guaranteed by the FDIC or any other government agency. Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. Please call for a prospectus, which contains complete information, including fees and expenses. Read it carefully before investing. The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by First Security Benefit Life Insurance Company of New York, White Plains, NY. T. Rowe Price refers to the underlying portfolios' investment managers and the distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security Benefit Group of Companies and the T. Rowe Price companies are not affiliated. The variable annuity may not be available in all states. The contract has limitations. Call a representative for costs and complete details of the coverage. 25 For fund and account information or to conduct transactions, 24 hours, 7 days a week By touch-tone telephone Tele*Access 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. Walk-In 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 Colorado Springs 2260 Briargate Parkway Los Angeles Area Warner Center 21800 Oxnard Street, Suite 270 Woodland Hills San Francisco Area 1990 North California Boulevard Suite 100 Walnut Creek Tampa 4200 West Cypress Street 10th Floor Washington, D.C. 900 17th Street N.W. Farragut Square [LOGO OF T. ROWE PRICE] T. Rowe Price Investment Services, Inc., Distributor. F60-050 12/31/00 -----END PRIVACY-ENHANCED MESSAGE-----