-----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, BBvTFQv7lAQrB6ExwYFmo8QijzX5HQlO9YuAcMcWUhSPPJKYmy/ySuSIKFWdnRdS 3CL5Y/Am0lKVf+HA8XhOdw== 0000902259-02-000002.txt : 20020414 0000902259-02-000002.hdr.sgml : 20020414 ACCESSION NUMBER: 0000902259-02-000002 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE BLUE CHIP GROWTH FUND INC CENTRAL INDEX KEY: 0000902259 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: 02544589 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 arbcg.txt T. ROWE PRICE BLUE CHIP GROWTH FUND Annual Report Blue Chip Growth Fund December 31, 2001 T. Rowe Price Report Highlights - -------------------------------------------------------------------------------- Blue Chip Growth Fund o A slowing economy and September's terrorist attacks led to a second straight year of negative stock returns. o The portfolio posted losses for the 6- and 12-month periods, but has strongly outperformed its average peer over short- and long-term periods. o Despite a strong fourth-quarter rebound, growth stocks trailed their value counterparts throughout the year. o We intend to maintain a diversified portfolio of growth companies that we think will perform well in most economic environments. REPORTS ON THE WEB Sign up for our E-mail Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log on to your account at www.troweprice.com for more information. Fellow Shareholders The tragedy of September 11, a recession, and a correcting stock market created significant challenges in restoring consumer and investor confidence and corporate profit growth. Fortunately, calm but determined effort by the government, the military, citizens, and investors showcased the resiliency of the U.S. and laid the groundwork for a potential economic and market recovery. Your portfolio could not avoid losses during the past year but showed strong relative performance, particularly in the challenging second half. Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 12/31/01 6 Months 12 Months - -------------------------------------------------------------------------------- Blue Chip Growth Fund -4.39% -14.42% Blue Chip Growth Fund - Advisor Class -4.45 -14.42 S&P 500 Stock Index -5.56 -11.89 Lipper Large-Cap Growth Funds Average -8.78 -22.95 Both the fund and its Advisor Class shares posted modest six-month declines and a sharper loss for the full year. Although any losses are disappointing, the results were significantly better than those of the Lipper peer group average. Our attention to limiting risk in down markets has contributed to solid outperformance for the fund over long time horizons, when compared with the Lipper average. Comparisons to the S&P 500 are also generally favorable. Long-Term Rewards - -------------------------------------------------------------------------------- Since Inception Periods Ended 12/31/01 3 Years 5 Years 6/30/93 - -------------------------------------------------------------------------------- Blue Chip Growth Fund 0.03% 10.47% 15.24% Lipper Large-Cap Growth Funds Average -3.82 8.15 11.01 S&P 500 Stock Index -1.03 10.70 13.75 Market Environment The year 2001 was one of dubious achievements, as all major equity indexes (the Dow, the S&P 500, and the Nasdaq) posted annual losses for the second year in a row and the economy slipped into recession for the first time in 10 years. Though the year had a difficult start, as corporations struggled to work through excess capacity and reduced capital spending, the events of September 11 tipped the scales from weakness to recession. In their wake, consumer spending decelerated, unemployment rose to 5.8%, and GDP shrank at an annualized rate of 1.3% in the third quarter. The Federal Reserve responded by reducing short-term rates to their lowest levels in 40 years. These actions were helpful-as the year came to a close, economists began to see evidence that the recession could be shallow, and markets rallied. Nonetheless, stock losses were severe in 2001. As in 2000, growth stocks underperformed value, with technology, telecommunications, and biotech suffering the most. However, these losses were significantly pared by a fourth-quarter rebound that lifted major indexes about 20% above their September 21 lows. Bellwether technology stocks, such as Microsoft and Cisco Systems, were the primary beneficiaries. In health care, stocks of pharmaceutical companies were mostly lower, but a few well-positioned firms, such as Johnson & Johnson, bucked the trend. Biotechnology stocks declined but finished the period well above their late-September lows. Financials corrected, but proved resilient considering the environment. Brokerages and asset managers were directly affected by market losses and announced broad job cuts. Insurers were also hurt by claims following September 11. Nonetheless, the prospects of an improving stock market, higher premiums in the insurance area, and lower interest rates helped financial stocks later in the year. Portfolio Review Despite a slowly recovering economy and a favorable inflation and interest rate outlook, the outlook for corporate earnings is highly uncertain. Accordingly, we have been paying special attention to earnings prospects. We have substantial investments in technology, media, retailing, and other areas that should benefit from a recovering economy. However, many companies generating predictable, sustained earnings growth performed reasonably well, remain attractively valued, and could be poised for additional gains. Sector Diversification - -------------------------------------------------------------------------------- Consumer 18 Energy and Utilities 5 Financial 24 Health Care 22 Industrials, Business Services,Materials 13 Information Technology 14 Telecommunication Services 3 Reserves 1 One of the standout areas for the portfolio was data processing. First Data, a long-time holding and the top processor of credit card transactions and Western Union money transfers, was our largest contributor. Concord EFS, which processes debit card and automatic teller transactions, generated very strong revenue and earnings growth and was our third-largest contributor in the second half. Automatic Data Processing, the payroll processing company, performed well and has the longest streak of consecutive annual earnings increases in the S&P 500, at approximately 40 years. Health care stocks were inconsistent as investors rotated to more cyclical issues. Pharmaceuticals struggled as patent expirations and a lack of new drug approvals damaged earnings growth prospects. However, careful analysis guided us to several strong performers, particularly in the past six months. Growth in its pharmaceutical business, and FDA approval for a drug-coated stent in its medical device segment, helped make Johnson & Johnson our second-best contributor to second-half performance. UnitedHealth Group and Wellpoint Health Networks, both leading HMOs, continued to excel. Abbott Laboratories, a leader in diagnostics, possesses one of the best long-term growth records in the S&P 500. We noted significant purchases in our last report, and the position produced steady gains. However, the sector also yielded disappointments. Pfizer, our second-largest holding, was mediocre as investors worried that its growth would slow. However, Pfizer will spend over $5 billion in research and development this year, and its current and projected earnings growth still leads most pharmaceutical companies. We are maintaining our exposure to the stock. There were few gains in technology and telecommunications stocks, but being highly selective early in the year helped. For example, Maxim Integrated Products, a major producer of specialized analog integrated circuits, was a solid performer. The company has maintained its superior level of profitability despite weakness in many end markets, and we believe it is poised to resume strong growth sooner than most rivals. After a poor first half, Vodafone, the largest global wireless service provider, produced solid second-half gains. The company has dominant share in many European markets and also participates in the U.S. through its joint venture with Verizon. Gains were also generated in the personal computer area, notably by Intel and Dell Computer, despite nagging concerns about subpar growth. Other winners came from varied sectors. Highlights included discount retailers Wal-Mart, Target, and Best Buy, which continued to gain market share. Manufacturer Tyco International often generates controversy-many question its aggressive acquisitions strategy-but the firm has maintained its profitability better than most industrial firms because it owns solid businesses. It also generates strong cash flow and is positioned to grow in 2002 and beyond. Danaher, another manufacturer, probably generates more free cash flow as a percentage of earnings than any company we own and has just made two acquisitions that we believe will be very accretive to earnings. Financial winners included trust banks, such as State Street and Northern Trust, and also leading insurance broker Marsh & McLennan. Consumer bellwethers PepsiCo and Harley-Davidson also performed well. We generally avoided big losses by not having large bets on companies where fundamentals disappointed. For example, we had no exposure to Enron, which had one of the largest and fastest collapses in corporate history. Unfortunately, there were exceptions. AOL Time Warner was our largest second-half loser. Harry Potter and The Lord of the Rings were huge box office winners, and the company has managed expenses well, but a sharp decline in advertising hurt more than expected. Perhaps more important, the company set growth goals that were too aggressive, setting the stage for disappointment. We have concerns surrounding AOL's efforts to grow membership and increase prices, but the company has reduced its growth targets for 2002, and we have confidence in the management team. Also, the stock trades at a multiple of cash earnings representing only a moderate premium to the market. We will probably maintain this investment but wait for certain guideposts of improving fundamental performance before adding to it meaningfully. GE was our second largest loser in the second half of 2001. Concerns about GE's jet engine and insurance businesses hurt the company after September 11. Severe stress in the power production area (partially driven by Enron's debacle) raised fears that GE's power turbine business would suffer. We share some of these concerns and reduced our position modestly. However, we recently met with Jeff Immelt, the new CEO, and think he will be a solid leader. We also believe the company has exceptional financial strength and reasonable prospects for double-digit growth. While not cheap, GE is reasonably valued if our projections are correct. We will continue to hold a significant position in the company. Other major second-half losers included technology leaders Microsoft and VeriSign, which produced solid gains for your fund in prior periods and remain positioned to grow earnings rapidly. Viacom and Clear Channel Communications were hurt by the sharp decline in advertising that stymied most media companies. However, unlike AOL, both companies were quick to warn investors of challenges in the environment, and they preserved profitability reasonably well through careful expense management. Both stocks have rebounded sharply from their September lows. Strategy We continued to focus on maintaining positions in core holdings as long as the fundamentals remained strong and the valuations were reasonable. Additions to existing holdings, such as Tyco, Maxim, and Microsoft, were significant enough to be included in the 10-largest purchases for the past six months. However, we did establish three new positions. Affiliated Computer Services dominates its niche, business process outsourcing. The company processes paper-intensive functions, including food stamps and student loans, for governments and corporations. It has never missed an earnings projection since coming public in 1994, is an excellent cash generator, and continues to win major long-term contracts. The stock has performed very well since purchase. Apollo Group is a leader in post-secondary education services. With major online and campus-based college offerings, Apollo helps working people (and others who want convenience and service) gain degrees in various disciplines. Post-secondary education is a growth area, and Apollo is generally regarded as the best positioned company in the sector. AmerisourceBergen is a top pharmaceutical distribution firm. While pharmaceuticals have struggled with slowing earnings from patented drugs, the distributors have begun to reap profits on sales of generics. The industry faces some challenges, but we believe that the three major participants (Amerisource, Cardinal Health, and McKesson HBOC) will produce strong earnings growth. We also have a position in Cardinal Health, which has the longest and most consistent growth record of any of these companies. Major sales were driven by deteriorating fundamentals or the belief that other companies in the sector were better positioned. For example, credit card lender Providian Financial was eliminated after a sharp decline in credit quality. Fortunately, we noticed problems relatively early and sold the stock at prices substantially above current levels. Royal Dutch Petroleum and BP were eliminated because of our concern that falling energy prices might hurt their profitability, but also because other energy (and nonenergy) stocks had better upside potential. Our modest position in Honeywell was eliminated after September 11 because one of our analysts believed its aerospace businesses would struggle. We shared his view, and we felt there were other industrial companies better positioned to show sustained growth. Outlook Though economic prediction is fraught with difficulty, we are mindful that the strength of the expected economic recovery will be important for stock performance. History tells us that Fed efforts and other stimulus actions should produce a strong recovery. However, we are not betting the farm on a robust economic rebound. The pace of the recovery may be disappointing in some sectors, and by most historical measures, stocks still carry high valuations, even after recent declines. Consequently, we intend to maintain a diversified portfolio of growth companies that we think will perform well in most environments. As always, we believe that sound investing must be driven by fundamental analysis of earnings prospects and valuation. Considering these factors, we believe the outlook is positive: o Inflation and interest rates are very low-a favorable backdrop for valuations. o Earnings growth remains strong at many high-quality U.S. companies, and the valuations of selected companies are reasonable. o Our favored companies tend to have top-notch management with sound business models that have improved the durability and predictability of earnings. o Many of our holdings generate significant free cash flow. Shareholder-oriented management can be trusted to use this cash to repurchase shares or make acquisitions in difficult environments. We believe that corporate earnings at certain companies may prove to be more favorable than perceived by many. We are striving to opportunistically invest your hard-earned money in such companies at reasonable valuations. We appreciate your continued support in this endeavor. Respectfully submitted, Larry J. Puglia President and chairman of the Investment Advisory Committee January 19, 2002 The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund's investment program. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Portfolio Highlights - -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 12/31/01 - -------------------------------------------------------------------------------- Citigroup 4.3% Pfizer 3.9 Freddie Mac 3.6 Microsoft 3.0 GE 2.9 - -------------------------------------------------------------------------------- UnitedHealth Group 2.4 First Data 2.4 Tyco International 2.3 American Home Products 2.2 Johnson & Johnson 2.0 - -------------------------------------------------------------------------------- AOL Time Warner 2.0 Viacom 1.9 Exxon Mobil 1.8 AIG 1.7 Vodafone 1.6 - -------------------------------------------------------------------------------- Concord EFS 1.6 Fannie Mae 1.5 Home Depot 1.4 PepsiCo 1.4 Wellpoint Health Networks 1.3 - -------------------------------------------------------------------------------- ChevronTexaco 1.2 Omnicom 1.2 Cisco Systems 1.2 Wal-Mart 1.2 Marsh & McLennan 1.2 - -------------------------------------------------------------------------------- Total 51.2% Note: Table excludes reserves. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Portfolio Highlights - -------------------------------------------------------------------------------- MAJOR PORTFOLIO CHANGES Listed in descending order of size 6 Months Ended 12/31/01 Ten Largest Purchases - -------------------------------------------------------------------------------- Tyco International Cendant AIG Affiliated Computer Services* Apollo Group* Danaher AmerisourceBergen* AOL Time Warner Maxim Integrated Products Microsoft Ten Largest Sales - -------------------------------------------------------------------------------- Kroger Providian Financial** Pharmacia Philip Morris Safeway Royal Dutch Petroleum** Sprint PCS Baxter International BP** Honeywell International** * Position added ** Position eliminated T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Performance Comparison - -------------------------------------------------------------------------------- These charts show the value of a hypothetical $10,000 investment in each 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. BLUE CHIP GROWTH FUND - -------------------------------------------------------------------------------- S&P Lipper Blue Chip 500 Large-Cap Growth Fund 6/30/93 10.000 10.000 10.000 12/93 10.496 10.696 11.432 12/94 10.635 10.486 11.524 12/95 14.631 13.918 15.892 12/96 17.991 16.64 20.302 12/97 23.993 21.101 25.897 12/98 30.850 28.030 33.366 12/99 37.341 37.940 40.039 12/00 33.940 32.146 39.027 12/01 29.906 24.774 33.400 Performance for Advisor Class shares will vary from fund shares due to the differing fee structures. See returns table below. Average Annual Compound Total Return - -------------------------------------------------------------------------------- This table shows how each fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Since Inception Periods Ended 1 Year 3 Years 5 Years Inception Date 12/31/01 - -------------------------------------------------------------------------------- Blue Chip Growth Fund -14.42% 0.03% 10.47% 15.24% 6/30/93 Blue Chip Growth Fund - Advisor Class -14.42 -- -- -12.82 3/31/00 Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- Blue Chip Growth shares Year Ended 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 NET ASSET VALUE Beginning of period $ 33.85 $ 36.34 $ 30.60 $ 24.17 $ 19.06 Investment activities Net investment income (loss) (0.02) (0.03) 0.03 0.11 0.13 Net realized and unrealized gain (loss) (4.86) (0.84) 6.07 6.82 5.12 Total from investment activities (4.88) (0.87) 6.10 6.93 5.25 Distributions Net investment income -- -- (0.03) (0.11) (0.12) Net realized gain -- (1.62) (0.33) (0.39) (0.02) Total distributions -- (1.62) (0.36) (0.50) (0.14) NET ASSET VALUE End of period $ 28.97 $ 33.85 $ 36.34 $ 30.60 $ 24.17 - -------------------------------------------------------------------------------- Ratios/Supplemental Data Total return (diamond) (14.42)% (2.53)% 20.00% 28.84% 27.56% Ratio of total expenses to average net assets 0.96% 0.91% 0.91% 0.91% 0.95% Ratio of net investment income (loss) to average net assets (0.06)% (0.09)% 0.10% 0.43% 0.86% Portfolio turnover rate 48.3% 50.9% 41.3% 34.5% 23.7% Net assets, end of period (in millions) $ 6,242 $ 7,113 $ 6,709 $ 4,330 $ 2,345 (diamond) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- Blue Chip Growth Advisor shares Year 3/31/00 Ended Through 12/31/01 12/31/00 NET ASSET VALUE Beginning of period $ 33.91 $ 38.63 Investment activities Net investment income (loss) (0.01) 0.02* Net realized and unrealized gain (loss) (4.88) (3.12) Total from investment activities (4.89) (3.10) Distributions Net realized gain -- (1.62) NET ASSET VALUE End of period $ 29.02 $ 33.91 Ratios/Supplemental Data Total return (diamond) (14.42)% (8.15)% Ratio of total expenses to average net assets 0.99% 0.69%! Ratio of net investment income (loss) to average net assets (0.04)% 0.25%! Portfolio turnover rate 48.3% 50.9%! Net assets, end of period (in thousands) $ 469,089 $ 2,831 * The amount presented is calculated pursuant to a methodology prescribed by the Securities and Exchange Commission for a share outstanding throughout the period. The per-share amounts for the investment activities of the Advisor Class may be inconsistent with the aggregate amounts presented elsewhere in the financial statements for the fund, due to the partial year of operations for the Advisor Class and the timing of sales and redemptions of shares in relation to fluctuating market values for the investment portfolio. (diamond) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. ! Annualized The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- December 31, 2001 Statement of Net Assets Shares Value - -------------------------------------------------------------------------------- In thousands Common Stocks 99.4% CONSUMER DISCRETIONARY 12.9% Automobiles 0.4% Harley-Davidson 500,000 $ 27,155 27,155 Media 8.3% AOL Time Warner * 4,150,000 133,215 Clear Channel Communications * 1,525,000 77,638 Comcast (Class A Special) * 1,120,000 40,326 Liberty Media (Series A) * 3,000,000 42,000 McGraw-Hill 500,000 30,490 Omnicom 910,000 81,308 TMP Worldwide * 575,000 24,670 Viacom (Class B) * 2,900,000 128,035 557,682 Multiline Retail 2.4% Target 1,900,000 77,995 Wal-Mart 1,400,000 80,570 158,565 Specialty Retail 1.8% Best Buy * 300,000 22,344 Home Depot 1,900,000 96,919 119,263 Total Consumer Discretionary 862,665 CONSUMER STAPLES 5.0% Beverages 2.4% Coca-Cola 1,400,000 66,010 PepsiCo 1,900,000 92,511 158,521 Food & Drug Retailing 1.0% Kroger * 300,000 6,261 Safeway * 1,000,000 41,750 Walgreen 590,000 19,859 67,870 Food Products 0.1% Hershey Foods 100,000 $ 6,770 6,770 Household Products 0.3% Colgate-Palmolive 400,000 23,100 23,100 Tobacco 1.2% Philip Morris 1,700,000 77,945 77,945 Total Consumer Staples 334,206 ENERGY 4.9% Energy Equipment & Services 1.8% Baker Hughes 1,820,000 66,375 BJ Services * 1,150,000 37,318 Smith * 340,000 18,231 121,924 Oil & Gas 3.1% Amerada Hess 100,000 6,250 ChevronTexaco 910,000 81,545 Exxon Mobil 3,000,000 117,900 205,695 Total Energy 327,619 FINANCIALS 23.7% Banks 4.6% Bank of America 730,000 45,954 Bank of New York 1,060,000 43,248 Fifth Third Bancorp 1,120,000 68,695 Mellon Financial 2,000,000 75,240 Northern Trust 400,000 24,080 Wells Fargo 1,210,000 52,574 309,791 Diversified Financials 13.2% American Express 300,000 10,707 Capital One Financial 590,000 31,830 Charles Schwab 1,000,000 15,470 Citigroup 5,750,000 $ 290,260 Fannie Mae 1,300,000 103,350 Franklin Resources 160,000 5,643 Freddie Mac 3,650,000 238,710 Goldman Sachs 325,000 30,144 Merrill Lynch 430,000 22,412 Morgan Stanley Dean Witter 1,100,000 61,534 State Street 1,460,000 76,285 886,345 Insurance 5.9% ACE 1,850,000 74,277 AIG 1,450,000 115,130 Berkshire Hathaway (Class A) * 220 16,632 Hartford Financial Services 820,000 51,521 Marsh & McLennan 740,000 79,513 Progressive 280,000 41,804 XL Capital (Class A) 200,000 18,272 397,149 Total Financials 1,593,285 HEALTH CARE 22.2% Biotechnology 2.1% Amgen * 770,000 43,455 Genentech * 430,000 23,328 IDEC Pharmaceuticals * 340,000 23,434 MedImmune * 1,120,000 51,890 142,107 Health Care Equipment & Supplies 2.4% Baxter International 1,330,000 71,328 Guidant * 575,000 28,635 Medtronic 340,000 17,411 Waters Corporation * 1,060,000 41,075 158,449 Health Care Providers & Services 5.7% AmerisourceBergen 520,000 33,046 Cardinal Health 310,000 20,045 HCA-Healthcare 820,000 31,603 Laboratory Corporation of America * 370,000 $ 29,915 Tenet Healthcare * 280,000 16,442 UnitedHealth Group 2,320,000 164,186 Wellpoint Health Networks (Class A) * 750,000 87,637 382,874 Pharmaceuticals 12.0% Abbott Laboratories 1,400,000 78,050 Allergan 700,000 52,535 American Home Products 2,375,000 145,730 Biovail * 325,000 18,281 Eli Lilly 100,000 7,854 Forest Laboratories * 300,000 24,585 Johnson & Johnson 2,260,000 133,566 King Pharmaceuticals * 610,000 25,699 Pfizer 6,620,000 263,807 Pharmacia 300,000 12,795 Schering-Plough 1,180,000 42,256 805,158 Total Health Care 1,488,588 INDUSTRIALS & BUSINESS SERVICES 13.1% Commercial Services & Supplies 7.1% Apollo Group (Class A) * 800,000 36,012 Automatic Data Processing 1,120,000 65,968 Cendant * 3,400,000 66,674 Concord EFS * 3,260,000 106,879 Convergys * 250,000 9,373 First Data 2,050,000 160,822 Paychex 200,000 6,969 Waste Management 790,000 25,209 477,906 Industrial Conglomerates 5.2% GE 4,930,000 197,594 Tyco International 2,575,000 151,668 349,262 Machinery 0.8% Danaher 920,000 55,485 55,485 Total Industrials & Business Services 882,653 INFORMATION TECHNOLOGY 13.9% Communications Equipment 2.4% Brocade Communications Systems * 100,000 $ 3,312 Cisco Systems * 4,460,000 80,793 Nokia ADR 2,260,000 55,438 QUALCOMM * 430,000 21,704 161,247 Computers & Peripherals 0.8% Dell Computer * 1,220,000 33,141 IBM 140,000 16,934 Sun Microsystems * 500,000 6,153 56,228 Electronic Equipment & Instruments 1.2% Flextronics * 3,250,000 77,984 Symbol Technologies 100,000 1,588 79,572 Internet Software & Services 0.8% Check Point Software Technologies * 250,000 9,974 VeriSign * 1,180,000 44,917 54,891 IT Consulting & Services 1.1% Affiliated Computer Services (Class A) * 390,000 41,390 Electronic Data Systems 500,000 34,275 75,665 Semiconductor Equipment & Products 3.5% Altera * 550,000 11,663 Analog Devices * 1,000,000 44,390 Applied Materials * 550,000 22,058 Intel 1,450,000 45,595 KLA-Tencor * 100,000 4,956 Maxim Integrated Products * 1,510,000 79,283 QLogic * 300,000 13,351 Texas Instruments 300,000 8,400 Xilinx * 100,000 3,904 233,600 Software 4.1% Adobe Systems 250,000 7,766 Amdocs * 100,000 3,397 Electronic Arts * 140,000 $ 8,394 Microsoft * 3,040,000 201,415 Oracle * 550,000 7,598 Siebel Systems * 590,000 16,514 VERITAS Software * 640,000 28,695 273,779 Total Information Technology 934,982 TELECOMMUNICATION SERVICES 2.5% Diversified Telecommunication Services 0.0% WorldCom * 300,000 4,226 4,226 Wireless Telecommunication Services 2.5% Sprint PCS * 2,350,000 57,363 Vodafone ADR 4,250,000 109,140 166,503 Total Telecommunication Services 170,729 UTILITIES 0.5% Gas Utilities 0.5% El Paso 700,000 31,227 Total Utilities 31,227 Other Miscellaneous Common Stocks 0.7% 45,389 Total Common Stocks (Cost $5,688,654) 6,671,343 Short-Term Investments 0.6% Money Market Fund 0.6% T. Rowe Price Reserve Investment Fund, 2.43% # 42,287,716 42,288 Total Short-Term Investments (Cost $42,288) 42,288 T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Value - -------------------------------------------------------------------------------- In thousands Total Investments in Securities 100.0% of Net Assets (Cost $5,730,942) $ 6,713,631 Other Assets Less Liabilities (2,267) NET ASSETS $ 6,711,364 --------------- Net Assets Consist of: Undistributed net realized gain (loss) $ (485,777) Net unrealized gain (loss) 982,689 Paid-in-capital applicable to 231,656,355 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized 6,214,452 NET ASSETS $ 6,711,364 --------------- NET ASSET VALUE PER SHARE Blue Chip Growth share ($6,242,274,456/215,489,631 shares outstanding) $ 28.97 - --------------- ----------- --------------- Blue Chip Growth Advisor Class shares ($469,089,070/16,166,724 shares outstanding) $ 29.02 - ------------- ---------- --------------- # Seven-day yield * Non-income producing ADR American Depository Receipts The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Statement of Operations - -------------------------------------------------------------------------------- In thousands Year Ended 12/31/01 Investment Income (Loss) Income Dividend $ 56,412 Interest 3,463 Total income 59,875 Expenses Investment management 41,035 Shareholder servicing Blue Chip Growth shares 20,470 Blue Chip Growth Advisor Class shares 289 Distribution - Blue Chip Growth Advisor shares 729 Prospectus and shareholder reports Blue Chip Growth shares 575 Blue Chip Growth Advisor Class shares 5 Registration 300 Custody and accounting 285 Directors 30 Legal and audit 27 Proxy and annual meeting 26 Miscellaneous 49 Total expenses 63,820 Expenses paid indirectly (10) Net expenses 63,810 Net investment income (loss) (3,935) Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (451,674) Foreign currency transactions 47 Net realized gain (loss) (451,627) Change in net unrealized gain (loss) on securities (621,719) Net realized and unrealized gain (loss) (1,073,346) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(1,077,281) The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands Year Ended 12/31/01 12/31/00 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ (3,935) $ (6,351) Net realized gain (loss) (451,627) 212,509 Change in net unrealized gain (loss) (621,719) (441,404) Increase (decrease) in net assets from operations (1,077,281) (235,246) Distributions to shareholders Net realized gain Blue Chip Growth shares -- (334,278) Blue Chip Growth Advisor Class shares -- (118) Decrease in net assets from distributions -- (334,396) Capital share transactions * Shares sold Blue Chip Growth shares 1,459,474 2,591,854 Blue Chip Growth Advisor Class shares 513,096 3,403 Distributions reinvested Blue Chip Growth shares -- 326,573 Blue Chip Growth Advisor Class shares -- 13 Shares redeemed Blue Chip Growth shares (1,281,199) (1,944,981) Blue Chip Growth Advisor Class shares (18,623) (286) Increase (decrease) in net assets from capital share transactions 672,748 976,576 Net Assets Increase (decrease) during period (404,533) 406,934 Beginning of period 7,115,897 6,708,963 End of period $ 6,711,364 $ 7,115,897 T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands Year Ended 12/31/01 12/31/00 *Share information Shares sold Blue Chip Growth shares 49,123 69,458 Blue Chip Growth Advisor Class shares 16,749 92 Distributions reinvested Blue Chip Growth shares -- 9,357 Blue Chip Growth Advisor Class shares -- -- Shares redeemed Blue Chip Growth shares (43,771) (53,270) Blue Chip Growth Advisor Class shares (666) (8) Increase (decrease) in shares outstanding 21,435 25,629 The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- December 31, 2001 Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price Blue Chip Growth Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The fund seeks to provide long-term capital growth; income is a secondary objective. The fund has two classes of shares-Blue Chip Growth, offered since June 30, 1993, and Blue Chip Growth Advisor Class, first offered on March 31, 2000. Blue Chip Growth Advisor Class sells its shares only through financial intermediaries, which it compensates for distribution and certain administrative services under a Board-approved Rule 12b-1 plan. Each class has exclusive voting rights on matters related solely to that class, separate voting rights on matters that relate to both classes, and, in all other respects, the same rights and obligations as the other class. 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 Directors, 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 Directors. 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. Class Accounting The Blue Chip Growth Advisor Class pays distribution and administrative expenses, in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% of the class's average net assets. Shareholder servicing, prospectus, and shareholder report expenses are charged directly to the class to which they relate. Expenses common to both classes, investment income, and realized and unrealized gains and losses are allocated to the classes based upon the relative daily net assets of each class. Income distributions are declared and paid by each class on an annual basis. Capital gain distributions are declared and paid by the fund on an annual basis. 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 $3,810,803,000 and $3,185,170,000, respectively, for the year ended December 31, 2001. 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 to shareholders all of its taxable income and capital gains. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements. There were no distributions in the year ended December 31, 2001. The tax-basis components of net assets at December 31, 2001, were as follows: - -------------------------------------------------------------------------------- Unrealized appreciation $1,313,965,000 Unrealized depreciation (331,920,000) Net unrealized appreciation (depreciation) 982,045,000 Capital loss carryforwards (485,133,000) Distributable earnings 496,912,000 Paid-in capital 6,214,452,000 Net assets $6,711,364,000 Pursuant to federal income tax regulations applicable to investment companies, the fund has elected to treat net capital losses realized between November 1 and December 31 of each year as occurring on the first day of the following tax year. For the year ended December 31, 2001, $644,000 of realized capital losses reflected in the accompanying financial statements will not be recognized for federal income tax purposes until 2002. Further, the fund intends to retain realized capital gains that may be offset against available capital loss carryforwards for federal income tax purposes. As of December 31, 2001, the fund had $485,133,000 of capital loss carryforwards that expire in 2009. For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of permanent book/tax differences. For the year ended December 31, 2001, the fund recorded the following permanent reclassifications, which relate primarily to the current net operating loss. Results of operations and net assets were not affected by these reclassifications. - -------------------------------------------------------------------------------- Undistributed net investment income $3,935,000 Undistributed net realized gain (47,000) Paid-in-capital (3,888,000) At December 31, 2001, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $5,731,586. NOTE 4 - RELATED PARTY TRANSACTIONS The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price Associates), a wholly owned subsidiary of T. Rowe Price Group. The investment management agreement between the fund and the manager provides for an annual investment management fee, of which $3,503,000 was payable at December 31, 2001. The fee is computed daily and paid monthly, and consists 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 Price Associates (the group). The group fee rate ranges from 0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120 billion. At December 31, 2001, 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. The manager has agreed to bear any expenses through December 31, 2003, which would cause Blue Chip Growth Advisor Class's ratio of total expenses to average net assets to exceed 1.05%. Thereafter, through December 31, 2005, Blue Chip growth Advisor Class is required to reimburse the manager for these expenses, provided that its average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its ratio of total expenses to average net assets to exceed 1.05%. 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 $16,490,000 for the year ended December 31, 2001, of which $1,440,000 was payable at year end. The fund is one of several mutual funds in which certain college savings plans managed by Price Associates may invest. Price Associates provides program management, investment advisory, and administrative services to various state-sponsored college savings plans, which offer portfolios that invest in registered mutual funds (underlying funds) as investment options. These college savings plans do not invest in the underlying funds for the purpose of exercising management or control. As approved by the fund's Board of Directors, the fund bears the cost of shareholder servicing associated with each college savings plan in proportion to the average daily value of its shares owned by the college savings plan. For the year ended December 31, 2001, the fund was charged $24,000 for shareholder servicing costs related to the college savings plans, $4,000 of which was payable at period-end. At December 31, 2001, approximately 0.08% of the outstanding shares of the fund were held by college savings plans. Additionally, the fund is one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may invest. Spectrum does not invest in the underlying Price funds for the purpose of exercising management or control. Expenses associated with the operation of Spectrum are borne by each underlying Price fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by Spectrum, pursuant to special servicing agreements between and among Spectrum, the underlying Price funds, Price Associates, and, in the case of T. Rowe Price Spectrum International, T. Rowe Price International. For the year then ended, the fund was allocated $542,000 of Spectrum expenses, $88,000 of which was payable at year-end. At December 31, 2001, approximately 3% of the outstanding shares of the fund were held by Spectrum. The fund may invest in the T. Rowe Price Reserve Investment Fund and T. Rowe Price Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by Price Associates. The Reserve Funds are offered as cash management options only to mutual funds and other accounts managed by Price Associates and/or 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 year ended December 31, 2001, totaled $3,461,000 and are reflected as interest income in the accompanying Statement of Operations. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Report of Independent Accountants - -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of T. Rowe Price Blue Chip Growth Fund, Inc. 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 Blue Chip Growth Fund, Inc. (the "Fund") at December 31, 2001, 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, 2001, by correspondence with custodians, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland January 18, 2002 T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Annual Meeting Results - -------------------------------------------------------------------------------- The T. Rowe Price Blue Chip Growth Fund held an annual meeting on October 23, 2001, to elect an expanded slate of directors to increase the number of independent directors serving the fund. The results of voting were as follows (by number of shares): M. David Testa Affirmative: 135,757,569.325 Withhold: 1,152,494.961 Total: 136,910,064.286 James A.C. Kennedy Affirmative: 134,486,561.675 Withhold: 2,423,502.611 Total: 136,910,064.286 Calvin W. Burnett Affirmative: 135,614,666.856 Withhold: 1,295,397.430 Total: 136,910,064.286 Anthony W. Deering Affirmative: 135,738,886.951 Withhold: 1,171,177.335 Total: 136,910,064.286 Donald W. Dick, Jr. Affirmative: 135,766,645.947 Withhold: 1,143,418.339 Total: 136,910,064.286 David K. Fagin Affirmative: 135,745,400.800 Withhold: 1,164,663.486 Total: 136,910,064.286 F. Pierce Linaweaver Affirmative: 135,694,065.860 Withhold: 1,215,998.426 Total: 136,910,064.286 Hanne M. Merriman Affirmative: 135,743,975.950 Withhold: 1,166,088.336 Total: 136,910,064.286 John G. Schreiber Affirmative: 135,750,258.510 Withhold: 1,159,805.776 Total: 136,910,064.286 Hubert D. Vos Affirmative: 135,711,229.657 Withhold: 1,198,834.629 Total: 136,910,064.286 Paul M. Wythes Affirmative: 135,731,593.518 Withhold: 1,178,470.768 Total: 136,910,064.286 James S. Riepe Affirmative: 135,761,891.560 Withhold: 1,148,172.726 Total: 136,910,064.286 T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Independent Directors - -------------------------------------------------------------------------------- Number of Portfolios Term of in Fund Other Name, Office* Principal Complex Directorships Address, Position(s) and Length Occupation(s) Overseen of Public and Date Held With of Time During Past by Companies of Birth Fund Served 5 Years Director Held - -------------------------------------------------------------------------------- Calvin W. Director Elected President, 97 Provident Burnett, 2001 Coppin Bank of Ph.D. State College Maryland 100 East Pratt Street 3/16/32 - -------------------------------------------------------------------------------- Anthony W. Director Elected Director, 97 The Rouse Deering 2001 Chairman of Company 100 East the Board, Pratt President, and Street Chief Executive 1/28/45 Officer, The Rouse Company, real estate developers - -------------------------------------------------------------------------------- Donald W. Director Elected Principal, 97 Not Dick, Jr. 1993 EuroCapital Applicable 100 East Advisors, LLC, Pratt an acquisition Street and management 1/27/43 advisory firm - -------------------------------------------------------------------------------- David K. Director Elected Director, 97 Dayton Mining Fagin 1993 Dayton Mining Corporation, 100 East Corporation Golden Star Pratt (6/98 to present), Resources Street Golden Star Ltd., and 4/9/38 Resources Ltd., Canyon and Canyon Resources, Resources, Corp. Corp. (5/00 to present); Chairman and President, Nye Corporation - -------------------------------------------------------------------------------- *Each director serves until election of a successor. Independent Directors (continued) - -------------------------------------------------------------------------------- Number of Portfolios Term of in Fund Other Name, Office* Principal Complex Directorships Address, Position(s) and Length Occupation(s) Overseen of Public and Date Held With of Time During Past by Companies of Birth Fund Served 5 Years Director Held - -------------------------------------------------------------------------------- F. Pierce Director Elected President, 97 Not Linaweaver 2001 F. Pierce Applicable 100 East Linaweaver & Pratt Associates, Inc., Street consulting 8/22/34 environmental and civil engineers - -------------------------------------------------------------------------------- Hanne M. Director Elected Retail 97 Ann Taylor Merriman 1994 Business Stores 100 East Consultant Corporation, Pratt Ameren Corp., Street Finlay 11/16/41 Enterprises, Inc., The Rouse Company, and US Airways Group, Inc. - -------------------------------------------------------------------------------- John G. Director Elected Owner/President, 97 AMLI Schreiber 2001 Centaur Capital Residential 100 East Partners, Inc., Properties Pratt a real estate Trust, Street investment Host Marriott 10/21/46 company; Corporation, Senior Advisor and The Rouse and Partner, Company, Blackstone real estate Real Estate developers Advisors, L.P. - -------------------------------------------------------------------------------- *Each director serves until election of a successor. Independent Directors (continued) - -------------------------------------------------------------------------------- Number of Portfolios Term of in Fund Other Name, Office* Principal Complex Directorships Address, Position(s) and Length Occupation(s) Overseen of Public and Date Held With of Time During Past by Companies of Birth Fund Served 5 Years Director Held - -------------------------------------------------------------------------------- Hubert D. Director Elected Owner/President, 97 Not Vos 1993 Stonington Applicable 100 East Capital Pratt Street Corporation, 8/2/33 a private investment company - -------------------------------------------------------------------------------- Paul M. Director Elected Founding 97 Teltone Wythes 1993 Partner of Corporation 100 East Sutter Hill Pratt Ventures, a Street venture 6/23/33 capital limited partnership, providing equity capital to young high technology companies throughout the United States - -------------------------------------------------------------------------------- *Each director serves until election of a successor. Inside Directors - -------------------------------------------------------------------------------- Number of Portfolios Term of in Fund Other Name, Office* Principal Complex Directorships Address, Position(s) and Length Occupation(s) Overseen of Public and Date Held With of Time During Past by Companies of Birth Fund Served 5 Years Director Held - -------------------------------------------------------------------------------- James A. C. Director Elected Managing 32 Not Kennedy 1997 Director Applicable 100 East and Director, Pratt T. Rowe Street Price and 8/15/53 T. Rowe Price Group, Inc. - -------------------------------------------------------------------------------- *Each director serves until election of a successor. Inside Directors (continued) - -------------------------------------------------------------------------------- Number of Portfolios Term of in Fund Other Name, Office* Principal Complex Directorships Address, Position(s) and Length Occupation(s) Overseen of Public and Date Held With of Time During Past by Companies of Birth Fund Served 5 Years Director Held - -------------------------------------------------------------------------------- James S. Director Elected Vice Chairman 82 Not Riepe 1993 of the Board, Applicable 100 East Director and Pratt Managing Street Director, 6/25/43 T. Rowe Price Group, Inc.; Director and Managing Director, T. Rowe Price; Chairman of the Board and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- M. David Director Elected Vice Chairman 97 Not Testa 1993 of the Board, Applicable 100 East Chief Investment Pratt Officer, Director, Street and Managing 4/22/44 Director, T. Rowe Price Group, Inc.; Chief Investment Officer, Director, and Managing Director, T. Rowe Price; Vice President and Director, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- *Each director serves until election of a successor. T. Rowe Price Investment Services and Information - -------------------------------------------------------------------------------- Investment Services and Information KNOWLEDGEABLE SERVICE REPRESENTATIVES By Phone 1-800-225-5132. Available Monday through Friday from 7 a.m. until midnight ET and weekends from 8:30 a.m. until 5 p.m. ET. In Person. Available in T. Rowe Price Investor Centers. Please call a service representative at 1-800-225-5132 or visit the Web at www.troweprice.com/investorcenter to locate a center near you. ACCOUNT SERVICES Automated 24-Hour Services Including Tele*Access(registered trademark) and Account Access through the T. Rowe Price Web site on the Internet. Address: www.troweprice.com. Automatic Investing. From your bank account or paycheck. Automatic Withdrawal. Scheduled, automatic redemptions. IRA Rebalancing. Ensuring that your accounts reflect your desired asset allocation. BROKERAGE SERVICES * Individual Investments. Stocks, bonds, options, precious metals, and other securities at a savings over full-service commission rates. INVESTMENT INFORMATION Consolidated Statement. Overview of all of your accounts. Shareholder Reports. Manager reviews of their strategies and results. T. Rowe Price Report. Quarterly investment newsletter. Performance Update. Quarterly review of all T. Rowe Price fund results. Insights. Educational reports on investment strategies and markets. Investment Guides. Asset Mix Worksheet, Diversifying Overseas: A Guide to International Investing, Retirement Planning Kit, Retirement Readiness Guide, and Tax Considerations Guide. * T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC. T. Rowe Price Web Services - -------------------------------------------------------------------------------- www.troweprice.com ACCOUNT INFORMATION Account Access allows you to access, in a secure environment, all of your T. Rowe Price mutual fund, brokerage, variable annuity, and workplace retirement accounts with a single login. AccountMinder is a personal page, with one password, that gives you access to all your online financial information and other records from the secure T. Rowe Price Account Access site. FINANCIAL TOOLS AND CALCULATORS College Planning Calculator. This application allows you to determine simultaneously the college costs for as many as five children. Portfolio Spotlight. This powerful tool provides investors with a clear picture of how all their investments fit together by sector and asset class. Investment Strategy Planner. This planning tool can help you develop and implement an asset allocation strategy that's appropriate for your needs. Retirement Income Calculator. This free calculator simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. INVESTMENT TRACKING AND INFORMATION My TRP e-Updates. This free e-mail service offers timely market reports, important information about investing, and the latest updates on the T. Rowe Price funds and services. Watchlist Pro. Powered by SmartMoney, this tool allows investors to easily track personalized lists of securities and other financial information. Portfolio Tracker. Powered by SmartMoney, this tool helps investors monitor the performance of their mutual fund and equity holdings. Portfolio Review. This convenient, four-step planning tool is designed to help you see where you stand now and whether your investments are on the right track for the future. T. Rowe Price College Planning - -------------------------------------------------------------------------------- College Planning With the costs of college steadily increasing, it's critical to plan early for this financial event. Our educational investment vehicles and information can help you lay the foundation for the future of your loved ones. For more information or to request a kit, call us at 1-800-638-5660, or visit our Web site at www.troweprice.com. T. Rowe Price College Savings Plan. This national "529" plan is sponsored by the Alaska Trust and designed to help families prepare for college education costs. The Plan, which is open to any U.S. resident, allows participants to invest up to a maximum account balance of $250,000 for a child's education. With systematic investing, you can invest as little as $50 per month. In addition, assets grow tax-deferred and are free of federal income taxes when used for qualified educational expenses (effective January 1, 2002). We also offer two additional college savings plans, including the Maryland College Investment Plan and the University of Alaska College Savings Plan, both of which offer federal tax-deferred growth and benefits for state residents. Education Savings Accounts (formerly Education IRAs). This education investment account allows individuals to invest a total of $2,000 per year per beneficiary to pay for educational costs at eligible schools including elementary, secondary, and post-secondary institutions (effective January 1, 2002). Withdrawals from Education Savings Accounts are tax-free if the proceeds are used for qualifying educational expenses. College Planning Calculator. This Web-based application allows you to determine simultaneously the college costs for as many as five children. The calculator is also connected with a database that lets you select specific schools with actual costs of tuition and room and board. College Planning Basics. This Insights report offers a college cost worksheet and describes the options available to individuals planning for college. T. Rowe Price Planning Tools and Services - -------------------------------------------------------------------------------- T. Rowe Price Retirement Services T. Rowe Price offers unique retirement resources that can help you meet a broad variety of planning challenges. Our retirement tools are suitable for individuals, the self-employed, small businesses, corporations, and nonprofit organizations. We also provide recordkeeping, communications, and investment management services. For more information, call us at 1-800-IRA-5000, or visit our Web site at www.troweprice.com. PLANNING TOOLS AND SERVICES T. Rowe Price(registered trademark) Retirement Income Manager helps retirees or those within two years of retirement determine how much income they can draw down in retirement. The program uses extensive statistical analysis and the input of a T. Rowe Price Advisory Counselor to suggest an income plan that best meets your objectives. Retirement Income Calculator. This free calculator, incorporating the analytic approach of the T. Rowe Price Retirement Income Manager program, simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. Rollover Investment Service offers asset allocation and fund selection advice to those planning a 401(k) rollover from a previous employer after changing jobs or retiring. IRA Rebalancing Service. T. Rowe Price will rebalance your IRA at the end of every quarter by exchanging shares between mutual fund accounts. This ensures that your accounts reflect your desired asset allocation. Quality Information. Thousands of investors have made their personal choices with the help of our Retirement Readiness Guide, Retirement Planning Kit, IRA Insights, and Retirement Planning Worksheet. INVESTMENT VEHICLES Individual Retirement Accounts (IRAs) No-Load Variable Annuities Small Business Retirement Plans 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 Maryland 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* For more information about T. Rowe Price funds or services, please contact us directly at 1-800-225-5132. * T. Rowe Price Advisor Class available for these funds. The T. Rowe Price Advisor Class is offered only through financial intermediaries. For more information about T. Rowe Price Advisor Class funds, contact your financial professional or T. Rowe Price at 1-877-804-2315. ** 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 risks, fees, and expenses. Read it carefully before investing. T. Rowe Price Invest with Confidence T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 F93-050 12/31/01 -----END PRIVACY-ENHANCED MESSAGE-----