-----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, MJcRIn/Tie5vcOvhXaBg7vpudaKaw1w68j1ESO8ZTKMwu8VIcgG4dkXr7ADQc1WE 7UNTZxfKnp3rXMiZczXD/A== 0000950109-99-002824.txt : 19990812 0000950109-99-002824.hdr.sgml : 19990812 ACCESSION NUMBER: 0000950109-99-002824 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 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: 99683605 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 T. ROWE PRICE NEW AMERICA GROWTH FUND S-A/R Semiannual Report NEW AMERICA GROWTH FUND --------------- June 30, 1999 --------------- [GRAPHIC APPEARS HERE] T. ROWE PRICE REPORT HIGHLIGHTS - ----------------- New America Growth Fund . U.S. stocks continued to rally in the first half, still led by large-cap stocks, but small- and mid-cap stocks rebounded in the second quarter. . The New America Growth Fund posted a solid six-month gain that was slightly behind its benchmarks. . Media and telecommunications stocks and consumer-related stocks were the best performers, while health care services stocks were the worst. . A continued broadening trend in the market would benefit small- and mid-cap stocks in the service sector, where the fund invests. FELLOW SHAREHOLDERS The stock market in the first half of 1999 was quite robust. Much like the last several years, a vibrant domestic economy led to solid GDP growth, strong employment, and high consumer confidence. In spite of this exuberance, inflation continued to be very mild. All of these factors helped the Standard & Poor's 500 Stock Index rise 12.38% during the period. Beginning in April, the market took a dramatic and quite encouraging turn in favor of a broader list of stocks, and this benefited your fund. ---------------------- PERFORMANCE COMPARISON -------------------------------------------------- Periods Ended 6/30/99 6 Months 12 Months -------------------------------------------------- New America Growth Fund 10.94% 11.54% S&P 500 12.38 22.76 Lipper Growth Funds Average 11.65 18.87 The fund's solid gain of 10.94% year-to-date represented a vast improvement over the previous six-month period, when the global financial crisis devastated the returns of all but a handful of the largest growth stocks. Nonetheless, market leadership over the six-month period was still quite narrow, as it was in 1998, with the largest 10 stocks in the S&P 500 contributing more than 40% of the index's total gain. The S&P 500's 12.38% gain was nearly double the S&P 400 MidCap Index's return of 6.87%. Another stunning example of the narrowness of the market is that, as of the end of March, 80% of all stocks were lagging the S&P 500 Index by more than 15 percentage points over the previous 12 months. By June, however, the figure was down to 69%, which may bode well for a continued broadening trend in the market. New America Growth invests in companies of all sizes seeking the best relative valuations, and has recently focused on the mid-cap area. Given the degree of dominance by large-caps over the past 12 months, the New America Growth Fund did not keep pace with the average growth fund or the unmanaged S&P 500. The fund's 11.54% advance for the past year was respectable but below its average annual returns for the past 5- and 10-year periods of 23.04% and 17.58%, respectively. 1 MARKET ENVIRONMENT Although we may sound like a broken record, the climate continued to be excellent for investors in the first half. We are now going on a record ninth consecutive year of economic expansion. With low inflation, low unemployment, and still-low interest rates, the stage was set for continued increases in consumer confidence. As a result, the consumer economy flourished and overshadowed an industrial economy that was mixed at best. Furthermore, corporate earnings accelerated since hitting a low of -2.8% in last year's third quarter. Earnings growth for the companies that make up the S&P 500 is expected to exceed 15% in the second half of the year. Stocks were somewhat volatile in the first half, as fears of inflation led many to speculate that the Federal Reserve would act aggressively to stunt growth. Long-term interest rates rose above 6% in the second quarter for the first time in more than a year. However, in spite of the vigor in the economy, signs of inflation were not that strong and the central bank chose a moderate course. The Fed raised the federal funds target rate just 25 basis points (100 basis points equal one percentage point) and promptly adopted a Among mid-size companies, growth continued to outperform value. - -------------------------------------- INFORMATION ON YEAR-END DISTRIBUTIONS - -------------------------------------------------------------------------------- To help you with tax planning, we try to give you a good idea of the per-share income and capital gain amounts our funds may distribute near year-end. In late October, we will provide estimates of these amounts, which will be paid on December 16, 1999, to shareholders of record on December 14. These preliminary numbers will be included in The Price Report mailing to shareholders in late October and will also be available on our Web site--www.troweprice.com. We hope that these preliminary numbers will be useful to you in approximating the income and capital gains taxes you may pay on distributions to taxable accounts. If your fund distributed any capital gains earlier in 1999, you can find the amounts on your statements and should include them in your tax planning calculations. Please keep in mind that the numbers are not final and are likely to be revised before the December 14 declaration and record date. As the fall progresses, you may want to check our Web site for revisions. If you would like information on tax matters relating to mutual funds, please visit our Web site to download our Insights report, Tax Information for Mutual Fund Investors, or call 1-800-225-5132 to request a copy. 2 neutral stance toward future hikes. In spite of low unemployment, wage growth has not accelerated and strong productivity gains appear to have mitigated much of that growth. Although cyclical and value stocks advanced late in the period, growth stocks still performed well in the first half, and, among mid-size companies, growth continued to outperform value. Many cyclical companies continued to see their results hurt by the problems in Asia, and investors are seeking out companies whose growth prospects are relatively immune to slowdowns in foreign economies. This has increased investor interest in the types of businesses New America focuses on - domestic, non-cyclical service-based companies. The Internet mania that has swept mainstream America is a trend that cannot be ignored. Surely, the Internet is one of the most important developments in recent history. However, many Internet stocks have risen to valuations that defy logic. An unmanaged Internet index of 20 stocks surged 52% in the first half and more than 290% in the past 18 months, compared with the S&P 500's nearly 42% rise in the longer period. We have invested in several companies that will benefit greatly from the Internet, but have tended to stay away from many of the pure-play Internet stocks as the valuations are too extreme. We certainly want to be exposed to the Internet and its great growth prospects, but we will continue to be judicious with our entry points (that is, purchase prices). We firmly believe that any stock's valuation is a function of the future cash flows that the business will deliver. Buying companies just because they are generating a lot of revenues will be a poor strategy unless the companies are expected to generate significant cash flow in the future. Our focus is on finding the stocks that will generate that cash flow and then finding the appropriate entry point. PORTFOLIO REVIEW Each major sector had positive contributors to the portfolio in the first half, though consumer-related and media and telecommunications stocks tended to perform best as a strong economy paved the way for solid earnings growth. Five of the top 10 companies were in media and telecommunications. The fund's top performer was Circuit City Stores, which benefited from both a strong consumer economy and new digital product cycles. Western Wireless, which split into two companies - Western Wireless and VoiceStream Wireless - was the 3 next best contributor during the six-month period. Western Wireless is a leading rural provider of wireless telecommunications services, while VoiceStream is a faster-growing PCS operator in major markets. AT&T Liberty Media, AirTouch Communications, Comcast, and MCI WorldCom were other media and telecommunications names that performed well in the period. First Data, the world's largest credit card processor, benefited as well from the strong consumer economy. SECTOR DIVERSIFICATION --------------------------------------------------- 6/30/98 12/31/98 6/30/99 --------------------------------------------------- Financial Services 16.0% 15.4% 14.6% Consumer Services 35.7 39.6 35.8 Business Services 44.1 44.8 47.8 Reserves 4.2 0.2 1.8 =================================================== Total 100.0% 100.0% 100.0% Health care services was the fund's worst-performing industry. Total Renal Care Holdings, the second-largest worldwide provider of integrated dialysis services for patients suffering from chronic kidney failure, was the fund's worst contributor. The stock was weak due to a lack of expense control and an ongoing investigation into reimbursement issues at a lab business that represents only about 2% of the company. Omnicare, a leading geriatric pharmacy company, was the second worst, as changes in Medicare reimbursement put pressure on its customers. Cole National was also disappointing as it miscalculated the sales environment in its optical business and missed sales targets as a result. Changes in sector weightings in the last six months were relatively modest. Business services continued to grow as a percentage of the fund, but it is important to note that our additions included stocks in several industries, such as health care services, computer services, and environmental services. New holdings included Republic Services, the fourth-largest provider of nonhazardous solid waste collection and disposal, NOVA, a credit card processor that focuses on the less-penetrated small and mid-market businesses, and Equifax, the leading provider of credit information on consumers. We reduced our consumer services positions slightly as we trimmed some stocks that had benefited from the strong economy and eliminated stocks such as AutoZone and Saks. 4 We remain excited about the fund's holdings. Among our largest are AT&T Liberty Media, Circuit City Stores, and Vodafone. Liberty Media is a portfolio of companies positioned to capitalize on the continuing growth of cable networks. The majority of the company's portfolio is centered around ownership interests in more than 100 cable networks, such as The Learning Channel and The Discovery Channel. In addition, Liberty Media boasts several investments in interactive TV and Internet infrastructure. As mentioned earlier, Circuit City is right in the middle of major digital product cycle for consumers. It will not be too long before DVD players, high-definition TVs, and digital cameras are commonplace. Our ownership of Vodafone came through its acquisition of AirTouch. The merger gave us the best portfolio of international wireless assets, and the combined company is poised for strong subscriber and cash flow growth. OUTLOOK The economy continues to look healthy, and the global environment looks much better than even six months ago. That said, many of the top 50 names in the S&P 500 remain very expensive on a relative valuation basis. We would feel much better about the market if it were to broaden significantly. There are many solid growth businesses that are not related to the Internet and are not among the top 50 S&P 500 stocks. Many of these trade at quite reasonable valuations and offer tremendous opportunities for growth. The outlook for the New America Growth Fund is favorable, in our view. We expect most of the companies in the fund to grow faster than the typical S&P 500 stock, but they trade at lower multiples. In addition, given the service focus of the fund, many of the companies have high levels of recurring revenues. Such companies are by definition more stable than those that have to resell their products every day. While we are disappointed with the fund's relative performance over the past year, we remain excited about our holdings, which are leaders in their respective industries. We believe the market will continue to broaden such that these stocks will better reflect their strong prospects. WE WOULD FEEL MUCH BETTER ABOUT THE MARKET IF IT WERE TO BROADEN SIGNIFICANTLY. 5 We would like to take this opportunity to introduce Marc Baylin to you. Marc, a business services analyst at T. Rowe Price for six years, has been a significant part of the fund's management team for several years as a member of its Investment Advisory Committee. He has agreed to take on an expanded role as executive vice president. In this role, Marc replaces Brian Berghuis, manager of the T. Rowe Price Mid-Cap Growth Fund, who served ably as executive vice president of New America Growth for many years and remains a member of the advisory committee. We are excited about Marc's greater involvement and confident he will add real value to future performance. Respectfully submitted, /s/ John H. Laporte John H. Laporte President and Chairman of the Investment Advisory Committee /s/ Marc Baylin Marc Baylin Executive Vice President July 21, 1999 6 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 6/30/99 ------------------------------------------------------------------------------ AT&T Liberty Media 3.2% Circuit City Stores 2.9 MCI WorldCom 2.7 Outdoor Systems 2.6 Vodafone 2.6 ------------------------------------------------------------------------------ Cendant 2.6 Chancellor Media 2.5 Office Depot 2.5 Waste Management 2.5 Affiliated Computer Services 2.3 ------------------------------------------------------------------------------ Galileo International 2.2 Apollo Group 2.1 Freddie Mac 2.1 Home Depot 2.1 Catalina Marketing 2.0 ------------------------------------------------------------------------------ Comcast 2.0 First Data 2.0 Morgan Stanley Dean Witter 1.9 BISYS Group 1.8 Costco Companies 1.8 ------------------------------------------------------------------------------ Clear Channel Communications 1.8 Associates First Capital 1.8 Outback Steakhouse 1.8 Kroger 1.8 Premier Parks 1.7 ------------------------------------------------------------------------------ Total 55.3% Note: Table excludes reserves. 7 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- PORTFOLIO HIGHLIGHTS - -------------------------------------------------------------------------------- CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE 6 Months Ended 6/30/99 Ten Best Contributors ----------------------------------------- Circuit City Stores 73(cent) Western Wireless 68 AT&T Liberty Media 65 AirTouch Communications** 57 First Data 36 Outback Steakhouse 35 Comcast 34 MCI WorldCom 31 Morgan Stanley Dean Witter 30 Catalina Marketing 27 ========================================= Total 456(cent) Ten Worst Contributors ----------------------------------------- Total Renal Care Holdings -39(cent) Omnicare* 30 Cole National 22 Service Corp. International** 21 Allied Waste Industries** 19 Acxiom 17 Office Depot 15 Apollo Group 13 Freddie Mac 12 SunGard Data Systems 11 ========================================= Total -199(cent) 12 Months Ended 6/30/99 Ten Best Contributors ----------------------------------------- MCI WorldCom 91(cent) AirTouch Communications** 87 AT&T Liberty Media 82 Circuit City Stores 80 Comcast 77 Western Wireless 73 Catalina Marketing 48 Home Depot 40 Outback Steakhouse 37 Chancellor Media 34 ========================================= Total 649(cent) Ten Worst Contributors ----------------------------------------- Cole National -68(cent) General Nutrition 44 Quorom Health Group** 43 Sinclair Broadcast Group** 43 Total Renal Care Holdings 41 Paging Network** 39 Concentra Managed Care** 38 Republic Industries** 36 Franklin Resources 35 Interim Services 33 ========================================= Total -420(cent) * Position added ** Position eliminated 8 T. ROWE PRICE NEWAMERICA 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 a broad-based average or index. An index return does not reflect expenses, which have been deducted from the fund's return. NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- [CHART APPEARS HERE] AVERAGE ANNUAL COMPOUND TOTAL RETURN - -------------------------------------------------------------------------------- This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Periods Ended 6/30/99 1 Year 3 Years 5 Years 10 Years ------------------------------------------------------------------- New America Growth Fund 11.54% 18.40% 23.04% 17.58% Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. 9 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Unaudited FINANCIAL HIGHLIGHTS For a share outstanding throughout each period - --------------------------------------------------------------------------------
6 Months Year Ended Ended 6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94 NET ASSET VALUE Beginning of period $ 47.79 $ 44.19 $ 38.37 $ 34.91 $ 25.42 $ 28.04 ------------------------------------------------------------------ Investment activities Net investment income (0.14) (0.21) (0.13) (0.13) (0.12) (0.07) Net realized and unrealized gain (loss) 5.37 7.65 8.15 7.08 11.36 (2.02) ------------------------------------------------------------------ Total from investment activities 5.23 7.44 8.02 6.95 11.24 (2.09) ------------------------------------------------------------------ Distributions Net realized gain - (3.84) (2.20) (3.49) (1.75) (0.53) ------------------------------------------------------------------ NET ASSET VALUE End of period $ 53.02 $ 47.79 $ 44.19 $ 38.37 $ 34.91 $ 25.42 ================================================================== Ratios/Supplemental Data - -------------------------------------------------------------------------------------------- Total return* 10.94% 17.89% 21.10% 20.01% 44.31% (7.43)% - -------------------------------------------------------------------------------------------- Ratio of total expenses to average net assets 0.96%+ 0.95% 0.96% 1.01% 1.07% 1.14% - -------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (0.57)%+ (0.49)% (0.34)% (0.39)% (0.46)% (0.27)% - -------------------------------------------------------------------------------------------- Portfolio turnover rate 28.4%+ 45.6% 43.2% 36.7% 56.2% 31.0% - -------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ 2,186 $ 2,064 $ 1,758 $ 1,440 $ 1,028 $ 646 - --------------------------------------------------------------------------------------------
* Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. + Annualized The accompanying notes are an integral part of these financial statements. 10 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Unaudited June 30, 1999 STATEMENT OF NET ASSETS Shares Value - ------------------------------------------------------------------- In thousands COMMON STOCKS 98.1% FINANCIAL SERVICES 14.6% Bank and Trust 1.5% Wells Fargo 775,000 $ 33,131 33,131 ---------- Insurance 1.7% ACE Limited 525,000 14,831 MGIC Investment 435,000 21,152 35,983 ---------- Investment Services 4.8% Franklin Resources 525,000 21,328 Goldman Sachs Group * 100,000 7,225 Morgan Stanley Dean Witter 400,000 41,000 Waddell & Reed Financial (Class A) 325,000 8,918 Waddell & Reed Financial (Class B) 1,000,000 27,000 105,471 ---------- Other Financial Services 6.6% Associates First Capital (Class A) 900,000 39,881 Fannie Mae 385,000 26,324 Freddie Mac 800,000 46,400 The CIT Group (Class A) 1,100,000 31,763 144,368 ---------- Total Financial Services 318,953 ---------- CONSUMER SERVICES 35.6% Retailing/General Merchandisers 4.4% Costco Companies * 500,000 40,016 Kroger * 1,400,000 39,112 Safeway * 344,100 17,033 ----------------------------------------------------------------- 96,161 ---------- Retailing/Specialty Merchandisers 9.2% Circuit City Stores 675,000 62,775 Cole National (Class A) * + 1,000,000 7,938 CVS 236,000 11,977 General Nutrition * 369,100 8,593 Home Depot 705,000 45,429 11 T. ROWE PRICE NEW AMERICA GROWTH FUND - ------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------- In thousands Office Depot * 2,437,500 $ 53,777 Williams-Sonoma * 340,000 11,836 ---------- 202,325 ---------- Entertainment and Leisure 3.8% Carnival (Class A) 450,000 21,825 Extended Stay America * 2,000,000 24,000 Premier Parks * 1,000,000 36,750 ---------- 82,575 ---------- Restaurants/Food Distribution 1.8% Outback Steakhouse * 1,000,000 39,219 ---------- 39,219 ---------- Personal Services 8.4% Apollo Group (Class A) * 1,750,000 46,429 Avis Rent A Car * 1,000,000 29,125 Cendant * 2,750,000 56,375 ServiceMaster 1,200,000 22,500 Sylvan Learning Systems * 1,050,000 28,547 ---------- 182,976 ---------- Communications 8.0% MCI Worldcom * 675,000 58,071 Vodafone ADR 287,500 56,637 Voicestream Wireless * 1,034,000 29,437 Western Wireless 1,125,000 30,410 ---------- 174,555 ---------- Total Consumer Services 777,811 ---------- BUSINESS SERVICES 47.4% Health Care Services 3.4% Cardinal Health 325,000 20,840 IMS Health 500,000 15,625 Omnicare 1,200,000 15,150 Total Renal Care Holdings * 1,500,000 23,344 ---------- 74,959 ---------- Computer Services 11.9% Acxiom * 1,250,000 31,211 Affiliated Computer Services (Class A) * 1,000,000 50,625 BISYS Group * 690,000 40,387 12 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------- In thousands Ceridian * 400,000 $ 13,075 First Data 875,000 42,820 Galileo International 900,000 48,094 SunGard Data Systems * 1,000,000 34,500 260,712 ---------- Environmental Services 3.9% Republic Services (Class A) * 1,300,000 32,175 Waste Management 1,000,000 53,750 85,925 ---------- Other Business Services 10.4% ADVO * 775,000 16,081 Catalina Marketing * 475,000 43,700 Concord EFS * 250,000 10,586 Equifax 540,100 19,275 Gartner Group (Class A) * 850,000 17,425 Interim Services * 1,200,000 24,750 Metamor Worldwide * 1,075,000 25,800 Modis Professional Services * 2,000,000 27,500 NOVA * 950,900 23,772 Paychex 562,500 17,895 226,784 ---------- Energy Services 1.8% Schlumberger 400,000 25,475 Smith International 300,000 13,031 38,506 ---------- Media Services 15.0% AT&T Liberty Media * 1,900,000 69,825 Chancellor Media * 1,000,000 55,094 Clear Channel Communications * 578,657 39,891 Comcast (Class A Special) 1,125,000 43,242 Fox Entertainment Group (Class A) * 1,200,000 32,325 Infinity Broadcasting (Class A) * 1,000,000 29,750 Outdoor Systems * 1,575,000 57,488 327,615 ---------- Transportation Services 1.0% Coach USA * 523,300 21,946 21,946 ---------- Total Business Services 1,036,447 ---------- 13 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Shares Value - ------------------------------------------------------------------- In thousands Total Miscellaneous Common Stocks 0.5% $ 12,353 ---------- Total Common Stocks (Cost $1,274,279) 2,145,564 ---------- SHORT-TERM INVESTMENTS 1.9% Money Market Funds 1.9% Reserve Investment Fund, 5.05% # 40,692,273 40,692 ----------------------------------------------------------------- Total Short-Term Investments (Cost $40,692) 40,692 ---------- Total Investments in Securities 100.0% of Net Assets (Cost $1,314,971) $2,186,256 Other Assets Less Liabilities (506) ---------- NET ASSETS $2,185,750 ========== Net Assets Consist of: Accumulated net investment income - net of distributions $ (5,854) Accumulated net realized gain/loss - net of distributions 194,865 Net unrealized gain (loss) 871,285 Paid-in-capital applicable to 41,228,735 shares of no par value capital stock outstanding; unlimited number of shares authorized 1,125,454 ---------- NET ASSETS $2,185,750 ========== NET ASSET VALUE PER SHARE $ 53.02 ========== + Affiliated company * Non-income producing # Seven-day yield ADR American Depository Receipt The accompanying notes are an integral part of these financial statements. 14 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Unaudited STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- In thousands 6 Months Ended 6/30/99 Investment Income Income Dividend $ 2,636 Interest 1,308 ---------- Total income 3,944 ---------- Expenses Investment management 6,854 Shareholder servicing 2,655 Prospectus and shareholder reports 140 Custody and accounting 83 Registration 49 Legal and audit 7 Trustees 6 Miscellaneous 9 ---------- Total expenses 9,803 Expenses paid indirectly (5) ---------- Net expenses 9,798 ---------- Net investment income (5,854) ---------- Realized and Unrealized Gain (Loss) Net realized gain (loss) on securities 157,780 Change in net unrealized gain or loss on securities 65,712 ---------- Net realized and unrealized gain (loss) 223,492 ---------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 217,638 ========== The accompanying notes are an integral part of these financial statements. 15 T ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Unaudited STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 6/30/99 12/31/98 Increase (Decrease) in Net Assets Operations Net investment income $ (5,854) $ (9,205) Net realized gain (loss) 157,780 146,088 Change in net unrealized gain or loss 65,712 169,824 ------------------------ Increase (decrease) in net assets from operations 217,638 306,707 ------------------------ Distributions to shareholders Net realized gain - (153,725) ------------------------ Capital share transactions* Shares sold 189,610 553,381 Distributions reinvested - 149,481 Shares redeemed (285,946) (549,281) ------------------------ Increase (decrease) in net assets from capital share transactions (96,336) 153,581 ------------------------ Net Assets Increase (decrease) during period 121,302 306,563 Beginning of period 2,064,448 1,757,885 ------------------------ End of period $2,185,750 $2,064,448 ======================== *Share information Shares sold 3,904 11,747 Distributions reinvested - 3,508 Shares redeemed (5,874) (11,832) ------------------------ Increase (decrease) in shares outstanding (1,970) 3,423 The accompanying notes are an integral part of these financial statements. 16 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Unaudited June 30, 1999 NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - Significant Accounting Policies T. Rowe Price New America Growth Fund (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 accompanying financial statements are prepared in accordance with generally accepted accounting principles for the investment company industry; these principles may require the use of estimates by fund management. Valuation Equity securities listed or regularly traded on a securities exchange are valued at the last quoted sales price on the day the valuations are made. A security which 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 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. Affiliated Companies As defined by the Investment Company Act of 1940, an affiliated company is one in which the fund owns at least 5% of the outstanding voting securities. 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 those determined in accordance with generally accepted accounting principles. Expenses paid indirectly reflect credits earned on daily, uninvested cash balances at the custodian, used to reduce the fund's custody credits. 17 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- Note 2 - Investment Transactions Purchases and sales of portfolio securities, other than short-term securities, aggregated $288,230,000 and $426,883,000, respectively, for the six months ended June 30, 1999. 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. At June 30, 1999, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $1,314,971,000. Net unrealized gain aggregated $871,286,000 at period-end, of which $915,850,000 related to appreciated investments and $44,564,000 to depreciated investments. Note 4 - Related Party Transactions The investment management agreement between the fund and T. Rowe Price Associates, Inc. (the manager) provides for an annual investment management fee, of which $1,166,000 was payable at June 30, 1999. 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 the manager or Rowe Price-Fleming International, Inc. (the group). The group fee rate ranges from 0.48% for the first $1 billion of assets to 0.30% for assets in excess of $80 billion. At June 30, 1999, and for the six months then ended, the effective annual group fee rate was 0.32%. The fund pays a pro-rata share of the group fee based on the ratio of its net assets to those of the group. In addition, the fund has entered into agreements with the manager and two wholly owned subsidiaries of the manager, pursuant to which the fund receives certain other services. The manager 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 18 T. ROWE PRICE NEW AMERICA GROWTH FUND - -------------------------------------------------------------------------------- invested in the fund. The fund incurred expenses pursuant to these related party agreements totaling approximately $2,274,000 for the six months ended June 30, 1999, of which $452,000 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 T. Rowe Price Associates, Inc. The Reserve Funds are offered as cash management options only to mutual funds and other accounts managed by T. Rowe Price and its affiliates and are not available to the public. The Reserve Funds pay no investment management fees. Distributions from the Reserve Funds to the fund for the six months ended June 30, 1999, totaled $1,308,000 and are reflected as interest income in the accompanying Statement of Operations. 19 T. ROWE PRICE SHAREHOLDER SERVICES - -------------------------------------------------------------------------------- INVESTMENT SERVICES AND INFORMATION KNOWLEDGEABLE SERVICE REPRESENTATIVES By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m. 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 1999 survey for representative-assisted stock trades. Services vary by firm, and commissions may vary depending on size of order. 20 T. ROWE PRICE MUTUAL FUNDS - -------------------------------------------------------------------------------- STOCK FUNDS - --------------------------------------- Domestic Blue Chip Growth Capital Appreciation Capital Opportunity 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 Total Equity Market Index Value International/Global Emerging Markets Stock European Stock Global Stock International Discovery International Growth & Income International Stock Japan Latin America New Asia Spectrum International BOND FUNDS - --------------------------------------- Domestic Taxable Corporate Income GNMA High Yield New Income Short-Term Bond Short-Term U.S. Government Spectrum Income Summit GNMA Summit Limited-Term Bond 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 Short-Term Tax-Free Bond Virginia Tax-Free Bond International/Global Emerging Markets Bond Global Bond International 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 BLENDED ASSET FUNDS - --------------------------------------- Balanced Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Tax-Efficient Balanced T. ROWE PRICE NO-LOAD VARIABLE ANNUITY - --------------------------------------- Equity Income 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. ** Formerly named Florida Insured Intermediate Tax-Free. *** Formerly named Tax-Free Insured Intermediate Bond. + 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. 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. 21 For yield, price, last transaction, current balance, or to conduct transactions, 24 hours, 7 days a week, call Tele*Access(r): 1-800-638-2587 toll free For assistance with your existing fund account, call: Shareholder Service Center 1-800-225-5132 toll free 410-625-6500 Baltimore area To open a brokerage account or obtain information, call: 1-800-638-5660 toll free Internet address: www.troweprice.com T. Rowe Price Associates 100 East Pratt Street Baltimore, Maryland 21202 This report is authorized for distribution only to shareholders and to others who have received a copy of the prospectus appropriate to the fund or funds covered in this report. Investor Centers: 101 East Lombard St. Baltimore, MD 21202 T. Rowe Price Financial Center 10090 Red Run Blvd. Owings Mills, MD 21117 Farragut Square 900 17th Street, N.W. Washington, D.C. 20006 4200 West Cypress St. 10th Floor Tampa, FL 33607 4410 ArrowsWest Drive Colorado Springs, CO 80907 Warner Center 21800 Oxnard Street, Suite 270 Woodland Hills, CA 91367 Invest With Confidence(R) [LOGO APPEARS HERE] T. Rowe Price T. Rowe Price Investment Services, Inc., Distributor. F60-051 6/30/99 -----END PRIVACY-ENHANCED MESSAGE-----