-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KeB5XDZK0Q29SgNNlVRdmhhyD9F61mheiEaL8BhOLqFFpK5B2+pdmSWqORogKlg4 diRlkSyHFd1xceae34oxmA== 0000902259-94-000021.txt : 19940811 0000902259-94-000021.hdr.sgml : 19940811 ACCESSION NUMBER: 0000902259-94-000021 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE BLUE CHIP GROWTH FUND INC CENTRAL INDEX KEY: 0000902259 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07059 FILM NUMBER: 94542647 BUSINESS ADDRESS: STREET 1: C/O T ROWE PRICE ASSOCIATES INC STREET 2: 100 EAST E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 N-30D 1 Fellow Shareholders For the six months ended June 30, 1994, your Fund, though delivering negative returns, declined less than its peer group as represented by the Lipper Growth Fund Average. Though the Fund lagged the unmanaged Standard & Poor's 500 Stock Index for the three and six months, we are pleased to report that, for its first full year in operation, the Fund's 12-month total return of 10.26% substantially exceeded those of the S&P 500 (1.41%) and the Lipper Growth Fund Average (0.97%). While we are disappointed to report negative short-term returns, it is important to remember that the growth stock universe has not performed particularly well recently. The data below illustrate that growth funds performed poorly on an absolute basis and relative to the broad stock market. Investing in stocks, particularly the growth sector, involves accepting volatility. Performance Comparison Periods Ended 6/30/94 3 Months 6 Months ______________________ Blue Chip Growth Fund -1.1% -3.6% S&P 500 0.4 -3.4 Lipper Growth Fund Average -2.6 -6.0 Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Market Environment The equity and bond markets continued to be hampered by many of the factors that hurt their returns in the first quarter of 1994, specifically, the threat of higher inflation and a related increase in interest rates. Unsettled political and economic conditions in several foreign nations (North Korea, for example) also contributed to declines in both domestic and foreign markets. Unfortunately, these concerns contributed to a substantial devaluation of the U.S. dollar versus several key foreign currencies. A falling dollar generally makes dollar-denominated assets less attractive to foreign investors. Perhaps more important, the threat of further dollar devaluation could prompt the Federal Reserve to increase interest rates again. Long-term bond market rates have already risen by almost 200 basis points (from 5.8% to over 7.6%) in the last year, and short-term rates have also risen significantly. Additional increases in interest rates could have an adverse effect on eco-nomic growth as well as the financial markets. Portfolio Review As of June 30, we maintained approximately 86% of portfolio assets in common stocks and 14% in cash reserves. Financial and consumer-related stocks still represent our largest industry concentrations. In the current challenging market environment, we have continued to focus on blue chip companies with the potential for above-average earnings growth. We believe the recent decline creates selected opportunities in several market sectors where we are maintaining or building positions, including: o Capital equipment and manufacturer stocks. Investors remained apprehensive that interest rate increases might ultimately slow the economy substantially and hurt the earnings of many of these companies. As in the first quarter, we used market weakness to build positions, but only in well-managed capital equipment and industrial companies which should continue to show strong, sustainable earnings growth due to their leadership positions and favorable cost structures. With these companies, we pay careful attention to the balance of early- and late-cycle businesses and to the mix of European versus domestic business. European economic strength may help performance in 1995. o Financial services. We have maintained our holdings in this area, focusing on companies with manageable interest rate sensitivity and strong projected earnings growth. Although our holdings have generally outperformed the market thus far in 1994, additional increases in interest rates could create a more challenging environment for banks and other institutions. In our opinion, certain U.S. multinational companies also possess the leading market positions, seasoned management, and strong financial fundamentals expected of blue chip investment candidates. They may be poised to benefit from improved efficiency and consequent cost leadership. Also, some of these U.S. multinationals have relatively low debt-to-equity ratios, and several of the Fund's holdings have refinanced large portions of their borrowings at relatively low, fixed rates. This will be especially beneficial if interest rates continue to increase. Externally, they should benefit from less restricted world trade, renewed global economic growth (particularly in Europe), and the continued progress of developing countries, particularly in Latin America and Asia. The most rewarding three- and six-month performers in the Fund included certain financial, pharmaceutical, technology, capital equipment, and chemical/energy stocks. In the financial sector, NationsBank and Federal National Mortgage Association (Fannie Mae) provided strong returns relative to the broader market. Pharmaceutical stocks Pfizer and SmithKline Beecham rebounded significantly from poor first quarter results. Although the Fund includes few technology holdings, a large position in Microsoft generated solid gains. In the capital equipment area, Danaher again provided above-average performance. We have also accumulated positions in selected chemical and energy stocks, such as DuPont, Rohm & Haas, and Halliburton, which have done well since we began purchasing them in late 1993 or early this year. We remain optimistic about our holdings of certain underperforming stocks. Many investors sold cyclicals such as General Electric and Motorola, believing the sector's interest rate sensitivity might make such companies vulnerable to the possibility of an economic slowdown. However, we believe strong company fundamentals override these market considerations. Travelers underperformed as investors focused on slowing brokerage business, but the company is aggressively managing costs and its stock currently sells at what we believe is an attractive valuation. The stocks of Great Lakes Chemical and PepsiCo dropped due to lowered earnings expectations. We believe that the problems at Great Lakes Chemical are temporary, and, fortunately, much of our position was accumulated after the stock had declined significantly. Pep-siCo's problems are somewhat more difficult to evaluate. Strong competition for its restaurant subsidiaries (particularly Pizza Hut) and in the beverages business have sharply reduced earnings growth. We are carefully evaluating PepsiCo's long-term prospects. Outlook We noted in our previous reports that increased inflation and interest rates driven by a vigorous economy may lead to a further equity market correction in both domestic and foreign markets. However, the ultimate rise in inflation could be modest. Interest rate increases and other factors could result in a slower growth in late 1994 or early 1995, helping maintain what is currently a manageable level of inflation. Concurrently, prospects for strong earnings growth at many companies may not be diminished materially. Any additional decline in stock and bond prices could prove to be modest. Since the length and severity of the current period of stock market turbulence is difficult to predict, we continue to prudently seek out companies with durable, sustainable earnings growth and reasonable stock valuations. This approach should prove rewarding for our shareholders over time. Respectfully submitted, Thomas H. Broadus, Jr. President and Chairman of the Investment Advisory Committee July 25, 1994 Major Portfolio Changes Three Months Ended June 30, 1994 PURCHASES Cost ________ Great Lakes Chemical $403,747 Jones Apparel Group* 294,916 American International Group* 220,688 Standard Products 202,550 American Express* 189,335 TRW* 184,883 Bank of Suffolk* 170,000 Promus Companies 169,055 Procter & Gamble 161,930 Roberts Pharmaceutical 151,040 SALES Proceeds _________ UNUM** $327,224 TJX 249,139 U.S. HealthCare** 244,394 EXEL** 233,702 Forest Laboratories** 174,984 Geon** 165,198 Green Tree Financial** 146,410 Novell* 118,438 Storage USA** 104,496 Lubrizol** 103,330 * Position added ** Position eliminated Twenty-Five Largest Holdings June 30, 1994 Percent of Company Net Assets _______________________________________ __________ GE 1.8% Pfizer 1.7 AlliedSignal 1.7 NationsBank 1.7 Mellon Bank 1.6 Federated Department Stores 1.6 Disney 1.6 McDonald's 1.5 Great Lakes Chemical 1.5 SmithKline Beecham 1.4 First Financial Management 1.4 Danaher 1.3 Fannie Mae 1.3 Microsoft 1.3 Dayton Hudson 1.3 Money Store 1.3 Teleflex 1.3 Travelers 1.2 Philip Morris 1.2 Albertson's 1.2 Halliburton 1.2 PepsiCo 1.2 Schering-Plough 1.2 Hubbell 1.2 American Greetings 1.2 _____________________________________________________________________________ Total 34.9% Statement of Net Assets (Value in thousands) T. Rowe Price Blue Chip Growth Fund / June 30, 1994 (Unaudited) Common Stocks - 85.0% BASIC MATERIALS - 0.6% Value ______ METALS - 0.6% 2,000 shs. Alcoa . . . . . . . . . . . . . . . . . . . . . . $ 146 2,000 Inco. . . . . . . . . . . . . . . . . . . . . . . 49 Total Basic Materials 195 BUSINESS SERVICES & TRANSPORTATION - 5.6% COMPUTER SERVICE & SOFTWARE - 4.6% 5,500 Autodesk. . . . . . . . . . . . . . . . . . . . . 272 10,000 * Autotote (Class A). . . . . . . . . . . . . . . . 158 8,000 First Financial Management. . . . . . . . . . . . 444 8,000 * Microsoft . . . . . . . . . . . . . . . . . . . . 412 7,000 SEI . . . . . . . . . . . . . . . . . . . . . . . 128 1,414 DISTRIBUTION SERVICES - 1.0% 5,500 Alco Standard . . . . . . . . . . . . . . . . . . 314 Total Business Services & Transportation 1,728 CAPITAL EQUIPMENT - 9.3% ELECTRICAL EQUIPMENT - 3.0% 12,000 GE. . . . . . . . . . . . . . . . . . . . . . . . 559 6,500 Hubbell (Class B) . . . . . . . . . . . . . . . . 361 920 MACHINERY - 6.3% 17,000 * Coltec Industries . . . . . . . . . . . . . . . . 317 10,000 Danaher . . . . . . . . . . . . . . . . . . . . . 417 15,000 Greenfield Industries . . . . . . . . . . . . . . 293 6,300 * Reliance Electric (Class A) . . . . . . . . . . . 114 12,000 Teleflex. . . . . . . . . . . . . . . . . . . . . 392 10,000 TriMas. . . . . . . . . . . . . . . . . . . . . . 230 5,500 * Varity. . . . . . . . . . . . . . . . . . . . . . 200 1,963 Total Capital Equipment 2,883 CONSUMER CYCLICALS - 4.7% AUTOMOBILES & RELATED - 3.3% 4,000 Chrysler. . . . . . . . . . . . . . . . . . . . . 189 6,000 GM. . . . . . . . . . . . . . . . . . . . . . . . 301 12,000 Standard Products . . . . . . . . . . . . . . . . 351 3,000 TRW . . . . . . . . . . . . . . . . . . . . . . . 193 1,034 BUILDING & REAL ESTATE - 0.7% 12,000 shs. McArthur/Glen Realty. . . . . . . . . . . . . . . $ 209 MISCELLANEOUS CONSUMER DURABLES - 0.7% 6,500 Corning . . . . . . . . . . . . . . . . . . . . . 212 Total Consumer Cyclicals 1,455 CONSUMER NONDURABLES - 18.9% BEVERAGES - 1.7% 4,000 Coke. . . . . . . . . . . . . . . . . . . . . . . 163 12,000 PepsiCo . . . . . . . . . . . . . . . . . . . . . 367 530 COSMETICS - 0.8% 4,000 Gillette. . . . . . . . . . . . . . . . . . . . . 260 FOOD PROCESSING - 0.9% 8,500 Campbell. . . . . . . . . . . . . . . . . . . . . 292 HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT - 1.8% 7,000 Abbott Laboratories . . . . . . . . . . . . . . . 203 2,500 Columbia / HCA Healthcare . . . . . . . . . . . . 94 5,500 United HealthCare . . . . . . . . . . . . . . . . 252 549 MISCELLANEOUS CONSUMER PRODUCTS - 7.4% 12,000 American Greetings (Class A). . . . . . . . . . . 360 5,500 Colgate-Palmolive . . . . . . . . . . . . . . . . 286 10,000 * Jones Apparel Group . . . . . . . . . . . . . . . 283 12,000 Mattel. . . . . . . . . . . . . . . . . . . . . . 304 7,500 Philip Morris . . . . . . . . . . . . . . . . . . 386 10,000 Phillips-Van Heusen . . . . . . . . . . . . . . . 251 4,000 PPG Industries. . . . . . . . . . . . . . . . . . 150 5,500 Procter & Gamble. . . . . . . . . . . . . . . . . 294 2,314 PHARMACEUTICALS - 6.3% 7,000 Johnson & Johnson . . . . . . . . . . . . . . . . 300 8,500 Pfizer. . . . . . . . . . . . . . . . . . . . . . 537 14,000 * Roberts Pharmaceutical. . . . . . . . . . . . . . 291 6,000 Schering-Plough . . . . . . . . . . . . . . . . . 367 16,000 SmithKline Beecham equity units, ADR. . . . . . . . . . . . . . . . . . 450 1,945 Total Consumer Nondurables 5,890 CONSUMER SERVICES - 12.7% ENTERTAINMENT & LEISURE - 4.0% 12,000 shs. Disney. . . . . . . . . . . . . . . . . . . . . . $ 500 16,000 McDonald's. . . . . . . . . . . . . . . . . . . . 462 6,000 * Promus Companies. . . . . . . . . . . . . . . . . 178 7,500 * Shoney's. . . . . . . . . . . . . . . . . . . . . 114 1,254 GENERAL MERCHANDISERS - 3.4% 5,000 Dayton Hudson . . . . . . . . . . . . . . . . . . 405 5,000 Sears . . . . . . . . . . . . . . . . . . . . . . 240 8,000 TJX . . . . . . . . . . . . . . . . . . . . . . . 175 10,000 Wal-Mart. . . . . . . . . . . . . . . . . . . . . 242 1,062 MEDIA & COMMUNICATIONS - 0.7% 6,000 Time Warner . . . . . . . . . . . . . . . . . . . 211 SPECIALTY MERCHANDISERS - 4.6% 14,000 Albertson's . . . . . . . . . . . . . . . . . . . 385 25,000 * Federated Department Stores . . . . . . . . . . . 500 10,000 Talbots . . . . . . . . . . . . . . . . . . . . . 300 7,500 * Toys "R" Us . . . . . . . . . . . . . . . . . . . 245 1,430 Total Consumer Services 3,957 ENERGY - 2.1% ENERGY SERVICES - 2.1% 11,000 Halliburton . . . . . . . . . . . . . . . . . . . 371 5,000 Schlumberger. . . . . . . . . . . . . . . . . . . 296 Total Energy 667 FINANCIAL - 17.8% BANK & TRUST - 9.4% 6,500 BankAmerica . . . . . . . . . . . . . . . . . . . 297 8,000 Chemical Banking. . . . . . . . . . . . . . . . . 308 8,000 Cole Taylor Financial Group . . . . . . . . . . . 110 7,000 First Union . . . . . . . . . . . . . . . . . . . 323 5,000 Integra Financial . . . . . . . . . . . . . . . . 234 10,000 KeyCorp . . . . . . . . . . . . . . . . . . . . . 319 9,000 Mellon Bank . . . . . . . . . . . . . . . . . . . 506 10,000 NationsBank . . . . . . . . . . . . . . . . . . . 514 12,000 Norwest . . . . . . . . . . . . . . . . . . . . . 314 2,925 FINANCIAL SERVICES - 5.7% 7,000 American Express. . . . . . . . . . . . . . . . . 180 5,000 * Bank Of Suffolk . . . . . . . . . . . . . . . . . 87 15,000 Countrywide Credit. . . . . . . . . . . . . . . . 216 1,500 Freddie Mac . . . . . . . . . . . . . . . . . . . 91 5,000 shs. Fannie Mae. . . . . . . . . . . . . . . . . . . . $ 417 23,500 Money Store . . . . . . . . . . . . . . . . . . . 394 12,000 Travelers . . . . . . . . . . . . . . . . . . . . 387 1,772 INSURANCE - 2.7% 2,500 American International Group. . . . . . . . . . . 217 4,000 Chubb . . . . . . . . . . . . . . . . . . . . . . 306 12,500 * Mid Ocean Limited . . . . . . . . . . . . . . . . 314 837 Total Financial 5,534 PROCESS INDUSTRIES - 4.0% DIVERSIFIED CHEMICALS - 0.9% 5,000 DuPont. . . . . . . . . . . . . . . . . . . . . . 292 PAPER & PAPER PRODUCTS - 0.6% 10,000 Albany International (Class A). . . . . . . . . . 189 SPECIALTY CHEMICALS - 2.5% 8,500 Great Lakes Chemical. . . . . . . . . . . . . . . 460 5,000 Rohm & Haas . . . . . . . . . . . . . . . . . . . 311 771 Total Process Industries 1,252 TECHNOLOGY - 4.0% AEROSPACE & DEFENSE - 1.7% 15,000 Allied-Signal . . . . . . . . . . . . . . . . . . 520 ELECTRONIC COMPONENTS - 0.9% 6,000 Motorola. . . . . . . . . . . . . . . . . . . . . 267 ELECTRONIC SYSTEMS - 0.8% 8,000 Honeywell . . . . . . . . . . . . . . . . . . . . 248 TELECOMMUNICATIONS - 0.6% 4,000 LM Ericsson . . . . . . . . . . . . . . . . . . . 198 Total Technology 1,233 UTILITIES - 1.9% TELEPHONE - 1.9% 6,000 Telmex, ADR . . . . . . . . . . . . . . . . . . . 335 6,000 U. S. WEST. . . . . . . . . . . . . . . . . . . . 251 Total Utilities 586 Miscellaneous Stocks - 3.4% 1,051 Total Common Stocks (Cost - $26,730) 26,431 Miscellaneous Bonds - 0.8% (Cost - $250) 244 T. Rowe Price Blue Chip Growth Fund / Statement of Net Assets Short-Term Investments - 15.6% BANK NOTE - 1.6% $500,000 Huntington National Bank, VR, 4.41%, 4/6/95 . . . $ 500 COMMERCIAL PAPER - 10.8% 550,000 Arco Coal Australia, 4(2), 4.42%, 9/6/94 . . . . . . . . . . . . . . . . . 544 500,000 Asset Securitization Cooperative, 4(2), 4.43%, 9/8/94 . . . . . . . . . . . . . . . . . 494 500,000 BASF, 4.00%, 8/10/94. . . . . . . . . . . . . . . 492 500,000 Bell Atlantic Financial Services, 4.47%, 8/22/94. . . . . . . . . . . . . . . . . 495 540,000 Harvard University, 4.30%, 7/1/94 . . . . . . . . 540 800,000 Unilever Capital, 4(2), 4.53%, 7/5/94 . . . . . . 794 3,359 MEDIUM-TERM NOTES - 3.2% 500,000 Ciesco L.P. (144a), VR, 3.970%, 10/25/94. . . . . 500 500,000 Morgan Stanley Group, VR, 4.662%, 3/15/95 . . . . 500 1,000 Total Short-Term Investments (Cost - $4,859) 4,859 Total Investments in Securities - 101.4% (Cost - $31,839) 31,534 Other Assets Less Liabilities - (1.4)% . . . . . . . . . . . . . $ (443) Net Assets Consisting of: Accumulated net investment income - net of distributions. . . . . . . . . . . . $ 151 Accumulated realized gains/losses - net of distributions . . . . . . . . . . . . . . . . 566 Net unrealized depreciation of investments. . . . . . . . . . . . . . . . . . . . . (305) Paid-in-capital applicable to 2,869,025 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized. . . . . . . . . . . . . . . . . . 30,679 ________ Net Assets - 100.0%. . . . . . . . . . . . . . . . . . $31,091 ________ ________ Net Asset Value Per Share $ 10.84 _______ _______ * Non-income producing 144a Security was purchased pursuant to Rule 144a under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers - total of such securities at period-end amounts to 1.6% of net assets. VR Variable rate 4(2) Commercial Paper sold within terms of a private placement memorandum, exempt from registration under section 4.2 of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." The accompanying notes are an integral part of these financial statements. Statement of Operations T. Rowe Price Blue Chip Growth Fund / Six Months Ended June 30, 1994 (Unaudited) Amounts in Thousands _______________________ INVESTMENT INCOME Income Dividends. . . . . . . . . . . . . . . . . . . . $ 220 Interest . . . . . . . . . . . . . . . . . . . . 91 __________ Total income . . . . . . . . . . . . . . . . . . $ 311 Expenses Shareholder servicing fees & expenses. . . . . . 58 Custodian and accounting fees & expenses . . . . 50 Investment management fees . . . . . . . . . . . 26 Legal & auditing fees. . . . . . . . . . . . . . 14 Registration fees & expenses . . . . . . . . . . 9 Prospectus & shareholder reports . . . . . . . . 8 Directors' fees & expenses . . . . . . . . . . . 5 Proxy & annual meeting . . . . . . . . . . . . . 1 Miscellaneous expenses . . . . . . . . . . . . . 5 __________ Total expenses . . . . . . . . . . . . . . . . . 176 __________ Net investment income. . . . . . . . . . . . . . . 135 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain. . . . . . . . . . . . . . . . . 194 Change in net unrealized appreciation or depreciation . . . . . . . . . . . . . . . . (1,490) __________ Net loss on investments. . . . . . . . . . . . . . (1,296) __________ DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . $ (1,161) __________ __________ The accompanying notes are an integral part of these financial statements. Statement of Changes in Net Assets T. Rowe Price Blue Chip Growth Fund (Unaudited) June 30, 1993 (Commencement Six Months Ended of Operations) to June 30, 1994 Dec. 31, 1993 ________________ _______________ Amounts in Thousands ____________________________________ INCREASE (DECREASE) IN NET ASSETS Operations Net investment income. . . . . . . . . . . $ 135 $ 67 Net realized gain on investments . . . . . 194 703 Change in net unrealized appreciation or depreciation of investments . . . . . (1,490) 1,185 ________ ________ Increase (decrease) in net assets from operations. . . . . . . . . . . . . (1,161) 1,955 ________ ________ Distributions to shareholders Net investment income. . . . . . . . . . . - (106) Net realized gain on investments . . . . . - (298) ________ ________ Decrease in net assets from distributions to shareholders. . . . . . - (404) ________ ________ Capital share transactions Sold 1,148 and 2,377 shares. . . . . . . . 12,927 25,060 Distributions reinvested of 0 and 35 shares. . . . . . . . . . . . . - 389 Redeemed 473 and 228 shares. . . . . . . . (5,342) (2,492) ________ ________ Increase in net assets from capital share transactions . . . . . . . . . . . 7,585 22,957 ________ ________ Net equalization . . . . . . . . . . . . . . 16 43 ________ ________ Total increase . . . . . . . . . . . . . . . 6,440 24,551 NET ASSETS Beginning of period. . . . . . . . . . . . 24,651 100 ________ ________ End of period. . . . . . . . . . . . . . . $ 31,091 $ 24,651 ________ ________ ________ ________ The accompanying notes are an integral part of these financial statements. Notes to Financial Statements T. Rowe Price Blue Chip Growth Fund / June 30, 1994 (Unaudited) Note 1 - Significant Accounting Policies T. Rowe Price Blue Chip Growth Fund (the Fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. A) Valuation - Equity securities listed or regularly traded on a securities exchange (including Nasdaq) 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. Other equity securities and those listed securities that are not traded on a particular day are valued at a price within the limits of the latest bid and asked prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. Short-term debt securities are valued at their cost which, when combined with accrued interest, approximates fair value. 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 Directors. B) 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 an 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 which may differ from generally accepted accounting principles. The Fund follows the practice of equalization under which undistributed net investment income per share is unaffected by Fund shares sold or redeemed. Note 2 - Portfolio Transactions Purchases and sales of portfolio securities, other than short-term and U.S. Government securities, aggregated $16,790,000 and $8,888,000 respectively, for the six months ended June 30, 1994. 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, 1994, the aggregate cost of investments for federal income tax and financial reporting purposes was $31,839,000 and net unrealized depreciation aggregated $305,000, of which $983,000 related to appreciated investments and $1,288,000 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, computed daily and paid monthly, consisting of an Individual Fund Fee equal to 0.30% 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 0.31% for assets in excess of $34 billion. The effective annual Group Fee rate at June 30, 1994 and for the period then ended was 0.34%. The Fund pays a pro rata portion of the Group Fee based on the ratio of the Fund's net assets to those of the Group. Under the terms of the investment management agreement, the Manager is required to bear any expenses through December 31, 1994, Notes to Financial Statements which would cause the Fund's ratio of expenses to average net assets to exceed 1.25%. Thereafter, the Fund is required to reimburse the Manager for these expenses, provided average net assets have grown or expenses have declined sufficiently so as not to cause the Fund's ratio of expenses to average net assets to exceed 1.25% in any month, and that no such reimbursement shall be made to the Manager after December 31, 1996. Pursuant to this agreement, $65,000 of management fees were not accrued by the Fund for the six months ended June 30, 1994. Additionally, $83,000 of unaccrued management fees and expenses from 1993 are subject to future reimbursement. T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc. (RPS) are wholly owned subsidiaries of the Manager. TRPS provides transfer and dividend disbursing agent functions and shareholder services for all accounts. RPS provides subaccounting and recordkeeping services for certain retirement accounts invested in the Fund. The Manager, under a separate agreement, calculates the daily share price and maintains the financial records of the Fund. For the six months ended June 30, 1994, the Fund incurred fees totalling approximately $77,000 for these services provided by related parties. At June 30, 1994, these service fees payable were $16,000. Financial Highlights T. Rowe Price Blue Chip Growth Fund (Unaudited) For a share outstanding throughout each period _________________________________________________ June 30, 1993 (Commencement Six Months Ended of Operations) to June 30, 1994 Dec. 31, 1993 _________________________________________________ NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . $ 11.24 $ 10.00 ______ ______ Investment Activities Net investment income. . . . . . . . 0.05* 0.05* Net realized and unrealized gain (loss) . . . . . . (0.45) 1.38 ______ ______ Total from Investment Activities . . . . . . . . . . . . . (0.40) 1.43 Distributions Net investment income. . . . . . . . - (0.05) Net realized gain. . . . . . . . . . - (0.14) ______ ______ Total Distributions. . . . . . . . . . - (0.19) ______ ______ NET ASSET VALUE, END OF PERIOD . . . . $ 10.84 $ 11.24 ______ ______ ______ ______ RATIOS / SUPPLEMENTAL DATA Total Return . . . . . . . . . . . . . (3.6)% 14.3% Ratio of Expenses to Average Net Assets . . . . . . . . . 1.25%!* 1.25%!* Ratio of Net Investment Income to Average Net Assets . . . . . . . 0.96%! 0.80%! Portfolio Turnover Rate. . . . . . . . 75.5%! 89.0%! Net Assets, End of Period (in thousands). . . . . . . . . . . $31,091 $24,651 ! Annualized * Excludes expenses in excess of a 1.25% voluntary expense limitation in effect through December 31, 1994. -----END PRIVACY-ENHANCED MESSAGE-----