N-30D 1 bcg47116.txt T. ROWE PRICE BLUE CHIP GROWTH FUND SEMIANNUAL REPORT BLUE CHIP GROWTH FUND T. ROWE PRICE(R) JUNE 30, 2002 REPORT HIGHLIGHTS ----------------- BLUE CHIP GROWTH FUND o The markets struggled greatly in the first six months of 2002, and blue chip growth stocks were among those hardest hit. o The fund stayed true to its mandate during the sell-off and posted a significant loss, but fared better than the average growth fund. Long-term results remain strong. o Large companies that have grown through acquisitions or firms deemed to have complex accounting were generally punished. o We are hopeful that improved corporate governance, financial disclosure, and earnings will help restore investor confidence quickly. 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 Market declines are never enjoyable, and this down market is proving to be more prolonged and significant than the average post-WWII bear market. In particular, the past six months have been among the most difficult periods for large-cap growth investing in recent memory. A crisis of confidence--fueled by questions regarding accounting integrity, corporate ethical lapses, lackluster earnings, and global terrorism--has hurt stocks and particularly large growth stocks. PERFORMANCE COMPARISON Periods Ended 6/30/02 6 Months 12 Months --------------------- -------- --------- Blue Chip Growth shares -16.88% -20.53% Blue Chip Growth- Advisor Class shares -16.92 -20.61 S&P 500 Index -13.16 -17.99 Lipper Large-Cap Growth Funds Index -17.96 -24.91 The steep drop that the fund and its Advisor Class endured during the past six months and year largely reflects the rapidly worsening environment of the most recent quarter. It was virtually impossible for a large-cap growth investment strategy to stay true to its mandate and avoid double-digit losses. While results were below those of the broad S&P 500, they were somewhat better than for the fund's growth-specific Lipper benchmark. This does not mitigate the impact of these losses, and we do not want to sugarcoat them. They are painful for us, as we know they are for you. However, we remain confident in our strategy, and we are working diligently to invest for solid long-term performance. As shown in the Performance Comparison chart on page 10, since inception, the fund has outpaced the S&P 500 and its Lipper benchmark by a significant margin. (Note that, to be consistent with other T. Rowe Price funds, we have switched from using the Lipper Large-Cap Growth Funds Average to the Lipper Large-Cap Growth Funds Index. During the 6- and 12-month periods, the Lipper average returned -18.68% and -25.53%, respectively.) MARKET ENVIRONMENT Corporate improprieties were the center of attention in the past six months, as several companies announced accounting irregularities, conflicts of interest, or SEC investigations. Adelphia, Enron, Xerox, and WorldCom were notable examples. Fortunately, your fund had no exposure to these (other than a very small amount of WorldCom sold much above current prices). We did not avoid the fallout altogether: meaningful positions in Tyco International declined significantly due to funding concerns and evidence of tax evasion by the now-former CEO, while our holding in Omnicom declined due to accounting questions. Moreover, in the post-Enron era, investors have become wary of all companies with complex accounting arrangements or that have grown via acquisitions. These qualities tend to be found more commonly among larger companies, and a number of large growth companies suffered, including leaders such as GE, American International Group, Citigroup, and Merck. The large growth segment remained among the market's worst performers (a place it has held for several quarters). However, the crisis of confidence hampered every sector of the market during the half year. This was the case despite a fairly consistent stream of positive economic news in the broader economy, including improved factory orders and strong housing, auto, and retail sales. Conversely, neither the information technology or telecommunication services sector has yet recovered from the excessive capital expenditures during the tech bubble. WorldCom announced that it had misstated expenses (apparently intentionally) and actually suffered losses for the previous 15 months. The news helped push the entire telecom sector down more than 40% in 2002. The health care sector, normally somewhat defensive, had inconsistent performance, with health care services performing quite well but pharmaceutical stocks declining sharply. Several large drug companies are facing patent expirations on blockbuster drugs while also experiencing difficulty in getting new products approved by the FDA. The financial sector was also bifurcated: some regional banks and non-market-sensitive stocks held up reasonably well, but brokers and other market-sensitive stocks did poorly. Although the concerns regarding accounting integrity and the ongoing threat of terrorism are formidable obstacles, investors may have become overly pessimistic. The economic backdrop is favorable, and the banking system appears to be reasonably sound (not always the case in market crises such as this). Inflation and interest rates also are quite supportive of improved equity performance. Restoring investor confidence in corporate governance and accounting integrity will take time. However, private sector actions (the pressures of the capital markets and resultant management actions to improve disclosure) and some level of increased regulation will improve financial reporting discipline. One risk is that in their zeal to eliminate impropriety, political leaders will aggressively implement a number of burdensome regulations and also vilify American business leaders. This would be ill advised and is a real risk for the U.S. stock market. PORTFOLIO REVIEW As we noted in our last report to you, the outlook for earnings is somewhat uncertain despite a slowly recovering economy. Accordingly, we continue to pay special attention to earnings prospects, and were disappointed that several of our holdings declined despite generating durable, sustainable earnings growth. Investors are simply skeptical of large, complex companies, even if they have strong long-term growth records and prospects. We also recognize that a hallmark of bear markets is that established growth companies can decline significantly, particularly in the latter stages of the correction. The following chart was depicted as a pie chart in the printed material. Consumer 19% Energy and Utilities 4% Financial 26% Health Care 23% Industrials and Business Services 12% Information Technology 14% Telecommunications Services 1% Reserves 1% There were some areas where your fund made money in the first half of 2002. UNITEDHEALTH GROUP and WELLPOINT HEALTH NETWORKS, leading HMOs, continued to generate very good earnings and cash flow growth and were the top two performers in the first half. The health care services area also produced other major winners, such as pharmaceutical distributor AMERISOURCEBERGEN, and leading hospital chains HCA and TENET HEALTHCARE. Financial stocks generally outperformed, although banks, insurance, and consumer finance did much better than brokers. WELLS FARGO, BANK OF AMERICA, FIFTH THIRD BANCORP, and U.S. BANCORP are all relatively high-quality banks and each was a top performer. PROGRESSIVE, a major provider of auto insurance, continued to be an outstanding stock for your fund. Other positive contributors came from various industry sectors but all possessed strong balance sheets, managements, and growth prospects. Selected consumer products companies such as COCA-COLA performed well. We were fortunate in that we increased our position meaningfully (after several years of being underweight) and captured much of its outperformance. Other winners included APOLLO GROUP, a leader in post-secondary education; SMITH INTERNATIONAL, a high-quality oil services firm; long-time holding DANAHER, an industrial company with outstanding free cash flow; and blue chip drug retailer WALGREEN. A Second Take on Our Misses The list of first-half losers was extensive. As always, we will try to share with you whether we think the market's punishment was deserved and perhaps, more important, whether the future prospects are solid for major problem holdings. After several years of stellar performance, TYCO INTERNATIONAL became a disastrous position. Although we think the extent of the decline has been overdone, the company gave investors ample reason to lose confidence. We disliked the company's acquisition of CIT, which contributed to a perceived funding crisis that ultimately caused Tyco to reverse course and sell CIT. The CEO also resigned following charges that he evaded taxes on purchases of art. Although there continue to be various concerns regarding the company, its core health care, security, and industrial businesses appear to be healthy. In our view, the sale of CIT and continued strong cash flow generation are strong positives. If our analyst's earnings projections are reasonable, the stock could recover quite well. AOL TIME WARNER also deserved some of its poor performance. The company had to lower earnings guidance modestly and incurred costs as it simplified its partnerships with other media players. However, we believe that the new management team is improving operations while increasing the transparency of financial results. While the AOL classic service has growth challenges, investors are not ascribing much worth to it in the firm's overall valuation, and any improvement in results could drive strong stock performance. This is a holding we will continue to monitor carefully. Longtime holding CITIGROUP was also a major loser in the first half. Its investment banking relationships with Enron, Adelphia, and WorldCom, as well as challenges in its corporate finance, consumer finance, and foreign operations, topped the list of concerns. These are legitimate issues. However, Citigroup's valuation is becoming compelling. Continued improvement in the global economy and capital markets could result in a sharp improvement in stock performance. GE also performed very poorly. Investors were concerned about the company's jet engine and power turbine business as well as its complexity and the adequacy of its financial disclosures. On balance, we think the company continues to improve disclosure. However, it has posted mediocre results in key divisions, including its GE Capital financial segment. Thus, while we will continue to hold GE, we are not overly enthusiastic about it relative to other holdings. OMNICOM, a top ad agency, was pummeled along with other media companies. Omnicom was plagued by a Wall Street Journal article questioning how it accounted for organic growth and noting large upcoming debt repayments. However, Omnicom has the best operating results in its industry and has demonstrated that it has adequate funding to meet its debt obligations. The company is reasonably valued and should perform well as the economy recovers. Home Depot declined sharply, but we believe investors will reevaluate the company more favorably over time. Home Depot is producing same-store-sales gains somewhat below its largest competitor, Lowe's. This is chiefly because Home Depot is significantly larger and its store base is more mature (its stores produce a much higher level of sales per store and profitability). Also, the new management at Home Depot is emphasizing improved inventory management, efficiency, and cash flow. The company has been very successful in these areas and is now able to finance growth internally. While management may have been a bit too zealous and thus hurt same-store sales, it remains an outstanding company at an attractive valuation. MICROSOFT and PFIZER were also major detractors, but mainly because both are large holdings. Microsoft was a strong relative performer in the technology area, and Pfizer performed reasonably well versus other pharmaceutical stocks. In our view, both companies are well positioned to generate very strong earnings and cash-flow growth. STRATEGY We have been managing this fund for approximately nine years (and investing for several decades). Our strategy of seeking high-quality fundamentals is particularly important in this emotion-driven market. We continue to add to core holdings as long as we are confident regarding fundamentals and return potential, and we try to be decisive about weeding out holdings where we believe the return potential relative to risk is no longer attractive. Additions to existing holdings such as TEXAS INSTRUMENTS, PHARMACIA, U.S. Bancorp, and Bank of America were significant enough to be included in the 10 largest purchases for the past six months. However, we did establish four new major positions, all of which we think have quality balance sheets and profitability. We expect UPS to perform well once it resolves negotiations with its labor unions. Printer company LEXMARK INTERNATIONAL has done well relative to other technology stocks since purchase. While we continue to view Internet-based companies with skepticism, USA INTERACTIVE (parent to online travel company Expedia and Ticketmaster) has strong management (Barry Diller) and continues to generate attractive cash-flow growth. Student-loan provider SLM, also known as Sallie Mae, continues to benefit from strong growth in student enrollment, increasing lending amounts, and a competitive advantage in loan servicing compared to the government's direct lending program. Most stock sales were driven by deteriorating fundamentals or the belief that other companies in the sector were better positioned. It was somewhat gratifying that several stocks that were eliminated declined very significantly after their sale (falling far more than market averages). Included in this group were contract manufacturer FLEXTRONICS, SPRINT PCS, SAFEWAY, media firm LIBERTY MEDIA, and ELECTRONIC DATA SYSTEMS. The fund's analysts have played an important role in identifying problems with these companies before we suffered significant losses. OUTLOOK Despite reassurance from the Federal Reserve that the economic recovery is on target, the markets have not reacted well. However, history tells us that almost every investment boom has been accompanied by excess investment in certain sectors and corporate mismanagement. While the problems may be somewhat more widespread currently, there are many excellent companies run by competent and honest managements in which we can invest. Our job in this difficult environment is to invest in such companies at prices that increase your odds of making solid returns. Lower stock prices can help us in this endeavor, but we must effectively distinguish between stocks suffering short-term setbacks and those facing long-term decline. Market critics have asserted that stock returns could be poor for several years. On balance, however, we think the outlook is quite good for several reasons: 1. Earnings growth remains strong at many high-quality U.S. companies. 2. Valuations are now much more reasonable. 3. Many of our holdings generate significant free cash flow. Shareholder-oriented management will use this cash to repurchase shares or make value-added acquisitions at advantageous prices. 4. Forces are building to restore investor confidence in U.S. companies. The U.S. regulatory agencies are heightening their scrutiny, and in the private sector, the capital markets and responsible management teams are encouraging better standards for disclosure. We expect that when companies generate solid results after these measures are undertaken, investors should feel much more assured. Respectfully submitted, /s/ Larry J. Puglia President and chairman of the fund's Investment Advisory Committee July 26, 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 6/30/02 -------------------------------------------------------------------------------- Pfizer 4.1% Citigroup 3.9 UnitedHealth Group 3.4 Microsoft 3.3 Freddie Mac 3.3 -------------------------------------------------------------------------------- First Data 2.6 Wyeth 2.3 GE 2.3 Viacom 2.3 American International Group 2.1 -------------------------------------------------------------------------------- Johnson & Johnson 1.9 Target 1.7 Wal-Mart 1.7 Home Depot 1.6 Bank of America 1.6 -------------------------------------------------------------------------------- Fannie Mae 1.5 Concord EFS 1.5 Coca-Cola 1.5 Wellpoint Health Networks 1.5 Cisco Systems 1.5 -------------------------------------------------------------------------------- Danaher 1.4 Philip Morris 1.3 AOL Time Warner 1.2 Marsh & McLennan 1.2 Vodafone 1.2 -------------------------------------------------------------------------------- Total 51.9% Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- PORTFOLIO HIGHLIGHTS MAJOR PORTFOLIO CHANGES ----------------------- Listed in descending order of size 6 Months Ended 6/30/02 ---------------------------------- ---------------------- Ten Largest Purchases Ten Largest Sales --------------------- ----------------- Texas Instruments Exxon Mobil UPS* Flextronics** Pharmacia Sprint PCS** U.S. Bancorp Freddie Mac Bank of America ACE Limited Oracle Safeway** Intel ChevronTexaco Lexmark International* Liberty Media** USA Interactive* Electronic Data Systems** SLM Corporation* Allergan * Position added ** Position eliminated T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- PERFORMANCE COMPARISON ---------------------- This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. The following chart was depicted as a line graph in the printed material. Lipper Large-Cap Growth Blue Chip S&P 500 Index Funds Index Growth shares ------------- ----------- ------------- 6/30/1993 10000 10000 10000 6/30/1994 10140.2 10123.6 11025.5 6/30/1995 12784.4 12723.3 13826.9 6/30/1996 16108.5 15789 17681.8 6/30/1997 21698.1 20197.3 23444.2 6/30/1998 28242.7 26601.9 30418.8 6/30/1999 34669.7 33745.7 36648.1 6/30/2000 37181.4 40720.8 42793.3 6/30/2001 31667.4 27144.3 34933.7 6/30/2002 25971 20381.7 27762.5 Note: Performance for Advisor Class shares will vary due to the differing fee structures. See returns table below. AVERAGE ANNUAL COMPOUND TOTAL RETURN ------------------------------------ This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Since Inception Periods Ended 6/30/02 1 Year 3 Years 5 Years Inception Date --------------------- ------ ------- ------- --------- ---- Blue Chip Growth shares -20.53% -8.84% 3.44% 12.01% 6/30/93 Blue Chip Growth- Advisor Class shares -20.61 - - -17.26 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 distributions or the redemption of shares. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Unaudited For a share outstanding throughout each period FINANCIAL HIGHLIGHTS -------------------- BLUE CHIP GROWTH SHARES 6 Months Year Ended Ended 6/30/02 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 NET ASSET VALUE Beginning of period $ 28.97 $ 33.85 $ 36.34 $ 30.60 $ 24.17 $ 19.06 Investment activities Net investment income (loss) (0.01) (0.02) (0.03) 0.03 0.11 0.13 Net realized and unrealized gain (loss) (4.88) (4.86) (0.84) 6.07 6.82 5.12 Total from investment activities (4.89) (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 $ 24.08 $ 28.97 $ 33.85 $ 36.34 $ 30.60 $ 24.17 RATIOS/SUPPLEMENTAL DATA ------------------------ Total return^ (16.88)% (14.42)% (2.53)% 20.00% 28.84% 27.56% Ratio of total expenses to average net assets 0.95%# 0.96% 0.91% 0.91% 0.91% 0.95% Ratio of net invest- ment income (loss) to average net assets (0.05)%# (0.06)% (0.09)% 0.10% 0.43% 0.86% Portfolio turnover rate 48.7%# 48.3% 50.9% 41.3% 34.5% 23.7% Net assets, end of period (in millions) $ 5,083 $ 6,242 $ 7,113 $ 6,709 $ 4,330 $ 2,345 ^ 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 -------------------------------------------------------------------------------- Unaudited For a share outstanding throughout each period FINANCIAL HIGHLIGHTS -------------------- BLUE CHIP GROWTH - ADVISOR CLASS SHARES --------------------------------------- 6 Months Year 3/31/00 Ended Ended Through 6/30/02 12/31/01 12/31/00 ------- -------- -------- NET ASSET VALUE Beginning of period $ 29.02 $ 33.91 $ 38.63 Investment activities Net investment income (loss) (0.01) (0.01) 0.02* Net realized and unrealized gain (loss) (4.90) (4.88) (3.12) Total from investment activities (4.91) (4.89) (3.10) Distributions Net realized gain - - (1.62) NET ASSET VALUE End of period $ 24.11 $ 29.02 $ 33.91 RATIOS/SUPPLEMENTAL DATA ------------------------ Total return^ (16.92)% (14.42)% (8.15)% Ratio of total expenses to average net assets 0.99%# 0.99% 0.69%# Ratio of net investment income (loss) to average net assets (0.10)%# (0.04)% 0.25%# Portfolio turnover rate 48.7%# 48.3% 50.9%# Net assets, end of period (in thousands) $ 418,778 $ 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. ^ 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 -------------------------------------------------------------------------------- Unaudited June 30, 2002 STATEMENT OF NET ASSETS Shares Value In thousands COMMON STOCKS 99.8% CONSUMER DISCRETIONARY 13.8% Automobiles 0.5% Harley-Davidson 550,000 $ 28,198 28,198 Hotels, Restaurants & Leisure 0.5% Starbucks * 1,000,000 24,850 24,850 Internet & Catalog Retail 0.4% USA Interactive * 1,030,000 24,154 24,154 Leisure Equipment & Products 0.1% Mattel 280,000 5,902 5,902 Media 6.3% AOL Time Warner * 4,600,000 67,666 Clear Channel Communications * 1,900,000 60,838 Comcast, Class A * 1,850,000 44,104 Disney 100,000 1,890 Omnicom 880,000 40,304 Univision Communications, Class A * 220,000 6,908 Viacom, Class B * 2,800,000 124,236 345,946 Multiline Retail 3.8% Kohl's * 310,000 21,725 Target 2,525,000 96,202 Wal-Mart 1,660,000 91,317 209,244 Specialty Retail 1.9% Best Buy * 460,000 16,698 Home Depot 2,440,000 89,621 106,319 Textiles, Apparel, & Luxury Goods 0.3% Nike, Class B 280,000 15,022 15,022 Total Consumer Discretionary 759,635 CONSUMER STAPLES 5.3% Beverages 2.8% Anheuser-Busch 115,000 $ 5,750 Coca-Cola 1,500,000 84,000 PepsiCo 1,300,000 62,660 152,410 Food & Drug Retailing 0.5% Sysco 160,000 4,355 Walgreen 680,000 26,269 30,624 Household Products 0.7% Colgate-Palmolive 500,000 25,025 Procter & Gamble 130,000 11,609 36,634 Tobacco 1.3% Philip Morris 1,670,000 72,945 72,945 Total Consumer Staples 292,613 ENERGY 3.9% Energy Equipment & Services 2.0% Baker Hughes 1,360,000 45,274 BJ Services * 950,000 32,186 Smith International * 500,000 34,095 111,555 Oil & Gas 1.9% ChevronTexaco 500,000 44,250 Exxon Mobil 1,400,000 57,288 101,538 Total Energy 213,093 FINANCIALS 26.4% Banks 6.8% Bank of America 1,240,000 87,246 Bank of New York 1,150,000 38,813 Fifth Third Bancorp 790,000 52,653 Mellon Financial 2,000,000 $ 62,860 Northern Trust 460,000 20,268 U.S. Bancorp 2,300,000 53,705 Wells Fargo 1,180,000 59,071 374,616 Diversified Financials 14.1% American Express 250,000 9,080 Capital One Financial 500,000 30,525 Charles Schwab 1,400,000 15,680 Citigroup 5,600,000 217,000 Fannie Mae 1,150,000 84,813 Franklin Resources 610,000 26,010 Freddie Mac 2,950,000 180,540 Goldman Sachs Group 437,000 32,054 Merrill Lynch 890,000 36,045 Morgan Stanley 1,180,000 50,834 SLM Corporation 300,000 29,070 State Street 1,375,000 61,463 773,114 Insurance 5.5% ACE Limited 640,000 20,224 Allstate 100,000 3,698 American International Group 1,720,000 117,355 Hartford Financial Services Group 640,000 38,061 John Hancock Financial Services 100,000 3,520 Marsh & McLennan 680,000 65,688 Progressive Corporation 520,000 30,082 XL Capital, Class A 300,000 25,410 304,038 Total Financials 1,451,768 HEALTH CARE 22.7% Biotechnology 1.2% Amgen * 730,000 30,573 Genentech * 10,000 335 IDEC Pharmaceuticals * 232,000 8,224 MedImmune * 1,000,000 26,400 65,532 Health Care Equipment & Supplies 1.8% Baxter International 1,300,000 $ 57,785 Guidant * 325,000 9,825 Medtronic 650,000 27,852 Waters Corporation * 40,000 1,068 96,530 Health Care Providers & Services 8.2% AmerisourceBergen 700,000 53,200 Cardinal Health 560,000 34,390 HCA 880,000 41,800 Laboratory Corporation of America * 660,000 30,129 Tenet Healthcare * 310,000 22,180 UnitedHealth Group 2,050,000 187,677 Wellpoint Health Networks * 1,060,000 82,479 451,855 Pharmaceuticals 11.5% Abbott Laboratories 1,400,000 52,710 Allergan 300,000 20,025 Biovail * 550,000 15,928 Eli Lilly 280,000 15,792 Forest Laboratories * 232,000 16,426 Johnson & Johnson 2,000,000 104,520 King Pharmaceuticals * 40,000 890 Merck 10,000 506 Pfizer 6,460,000 226,100 Pharmacia 1,120,000 41,944 Schering-Plough 500,000 12,300 Wyeth 2,500,000 128,000 635,141 Total Health Care 1,249,058 INDUSTRIALS & BUSINESS SERVICES 11.9% Aerospace & Defense 0.4% General Dynamics 100,000 10,635 Honeywell International 250,000 8,808 19,443 Air Freight & Logistics 0.7% UPS, Class B 640,000 $ 39,520 39,520 Commercial Services & Supplies 6.3% Apollo Group, Class A * 1,030,000 40,603 Automatic Data Processing 920,000 40,066 Cendant * 2,100,000 33,348 Concord EFS * 2,800,000 84,392 Convergys * 1,000 19 First Data 3,830,000 142,476 Paychex 70,000 2,190 Waste Management 100,000 2,605 345,699 Industrial Conglomerates 3.1% 3M 92,000 11,316 GE 4,400,000 127,820 Tyco International 2,525,000 34,113 173,249 Machinery 1.4% Danaher 1,180,000 78,293 78,293 Total Industrials & Business Services 656,204 INFORMATION TECHNOLOGY 13.5% Communications Equipment 2.7% Brocade Communications Systems * 370,000 6,468 Cisco Systems * 5,720,000 79,794 Motorola 820,000 11,824 Nokia ADR 1,300,000 18,824 QUALCOMM * 1,150,000 31,614 148,524 Computers & Peripherals 1.6% Dell Computer * 1,700,000 44,438 IBM 210,000 15,120 Lexmark International, Class A * 520,000 28,288 87,846 IT Consulting & Services 1.1% Affiliated Computer Services, Class A * 1,300,000 $ 61,724 61,724 Semiconductor Equipment & Products 4.2% Analog Devices * 1,150,000 34,155 Applied Materials * 1,450,000 27,579 Intel 1,900,000 34,713 KLA-Tencor * 250,000 10,997 Linear Technology 200,000 6,286 Maxim Integrated Products * 1,540,000 59,028 QLogic * 250,000 9,525 Texas Instruments 1,730,000 41,001 Xilinx * 250,000 5,608 228,892 Software 3.9% Adobe Systems 250,000 7,125 Electronic Arts * 130,000 8,587 Microsoft * 3,310,000 181,057 Oracle * 100,000 947 Siebel Systems * 10,000 142 VERITAS Software * 770,000 15,238 213,096 Total Information Technology 740,082 TELECOMMUNICATION SERVICES 1.2% Diversified Telecommunication Services 0.0% Verizon Communications 70,000 2,811 2,811 Wireless Telecommunication Services 1.2% Vodafone ADR 4,700,000 64,155 64,155 Total Telecommunication Services 66,966 UTILITIES 0.0% Gas Utilities 0.0% El Paso Corporation 10,000 $ 206 Total Utilities 206 Total Miscellaneous Common Stocks 1.1% 60,649 Total Common Stocks (Cost $5,388,089) 5,490,274 SHORT-TERM INVESTMENTS 0.0% Money Market Fund 0.0% T. Rowe Price Reserve Investment Fund, 1.95% # 2,664,785 2,665 Total Short-Term Investments (Cost $2,665) 2,665 Total Investments in Securities 99.8% of Net Assets (Cost $5,390,754) $ 5,492,939 Other Assets Less Liabilities 8,632 NET ASSETS $ 5,501,571 Net Assets Consist of: Undistributed net investment income (loss) $ (1,773) Undistributed net realized gain (loss) (732,024) Net unrealized gain (loss) 102,185 Paid-in-capital applicable to 228,473,176 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized 6,133,183 NET ASSETS $ 5,501,571 NET ASSET VALUE PER SHARE Blue Chip Growth shares ($5,082,792,648/211,105,419 shares outstanding) $ 24.08 Blue Chip Growth - Advisor Class shares ($418,778,236/17,367,757 shares outstanding) $ 24.11 # 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 -------------------------------------------------------------------------------- Unaudited STATEMENT OF OPERATIONS 6 Months Ended 6/30/02 INVESTMENT INCOME (LOSS) Income Dividend $ 27,664 Interest 212 Total income 27,876 Expenses Investment management 19,466 Shareholder servicing Blue Chip Growth shares 8,719 Blue Chip Growth - Advisor Class shares 233 Distribution - Blue Chip Growth - Advisor Class shares 584 Prospectus and shareholder reports Blue Chip Growth shares 398 Blue Chip Growth - Advisor Class shares 8 Proxy and annual meeting 169 Custody and accounting 146 Directors 21 Registration 18 Legal and audit 12 Total expenses 29,774 Expenses paid indirectly (125) Net expenses 29,649 Net investment income (loss) (1,773) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) Securities (246,209) Foreign currency transactions (38) Net realized gain (loss) (246,247) Change in net unrealized gain (loss) on securities (880,504) Net realized and unrealized gain (loss) (1,126,751) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(1,128,524) The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Unaudited STATEMENT OF CHANGES IN NET ASSETS In thousands 6 Months Year Ended Ended 6/30/02 12/31/01 INCREASE (DECREASE) IN NET ASSETS Operations Net investment income (loss) $ (1,773) $ (3,935) Net realized gain (loss) (246,247) (451,627) Change in net unrealized gain (loss) (880,504) (621,719) Increase (decrease) in net assets from operations (1,128,524) (1,077,281) Capital share transactions * Shares sold Blue Chip Growth shares 619,730 1,459,474 Blue Chip Growth - Advisor Class shares 62,510 513,096 Shares redeemed Blue Chip Growth shares (734,997) (1,281,199) Blue Chip Growth - Advisor Class shares (28,512) (18,623) Increase (decrease) in net assets from capital share transactions (81,269) 672,748 Net Assets Increase (decrease) during period (1,209,793) (404,533) Beginning of period 6,711,364 7,115,897 End of period $5,501,571 $ 6,711,364 *Share information Shares sold Blue Chip Growth shares 22,488 49,123 Blue Chip Growth - Advisor Class shares 2,245 16,749 Shares redeemed Blue Chip Growth shares (26,873) (43,771) Blue Chip Growth - Advisor Class shares (1,044) (666) Increase (decrease) in shares outstanding (3,184) 21,435 The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Unaudited June 30, 2002 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 Fund, offered since June 30, 1993, and Blue Chip Growth Fund-Advisor Class, which was 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 accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Valuation Equity securities listed or regularly traded on a securities exchange or in the over-the-counter market are valued at the last quoted sale price, or official closing price for certain markets, 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 are valued at the mean of the latest bid and ask prices. Other equity securities are valued at a price within the limits of the latest bid and ask 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 ask prices of such currencies against U.S. dollars quoted by a major bank. Purchases and sales of securities, 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 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 incurred by each class 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, if any, are declared and paid by the fund, typically on an annual basis. Expenses Paid Indirectly Certain security trades are directed to brokers who have agreed to rebate a portion of the related commission to the fund to pay fund expenses. Additionally, credits earned on temporarily uninvested cash balances at the custodian are used to reduce the fund's custody charges. Total expenses in the accompanying statement of operations are presented before reduction for rebates and credits, which totaled $124,000 and $1,000 respectively, for the period ended June 30, 2002. 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. NOTE 2 - INVESTMENT TRANSACTIONS Purchases and sales of portfolio securities, other than short-term securities, aggregated $1,524,671,000 and $1,578,534,000, respectively, for the six months ended June 30, 2002. 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. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Temporary differences are not adjusted. The amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of June 30, 2002. For tax purposes, 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; consequently, $316,000 of realized losses recognized for financial reporting purposes in 2001 were recognized for tax purposes on January 1, 2002. Further, the fund intends to retain realized gains to the extent of available capital loss carryforwards. As of December 31, 2002, the fund had $485,133,000 of unused capital loss carryforwards, of which $485,133,000 expire in 2009. Additionally, during the six-months ended June 30, 2002, the fund realized $19,412,000 of net gain on in-kind redemptions. Such gains are not taxable to the fund and have been reclassified from undistributed net realized gain to paid in-capital in the accompanying financial statements. At June 30, 2002, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $5,390,754,000. Net unrealized gain aggregated $102,185,000 at period-end, of which $794,610,000 related to appreciated investments and $692,425,000 related to depreciated investments. NOTE 4- RELATED PARTY TRANSACTIONS The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price Associates), a wholly owned subsidiary of T. Rowe Price Group. The investment management agreement between the fund and the manager provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.30% of the fund's average daily net assets, and the fund's pro-rata share of a group fee. The group fee is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120 billion. The fund's portion of the group fee is determined by the ratio of its net assets to those of the group. At June 30, 2002, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $2,926,000. The manager has agreed to bear any expenses through December 31, 2003, which would cause the Blue Chip Growth - Advisor Class's ratio of total expenses to average net assets to exceed 1.05%. Thereafter, through December 31, 2005, the 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 with-out causing its ratio of total expenses to average net assets to exceed 1.05%. In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates computes the daily share prices and maintains the financial records of the fund. T. Rowe Price Services, Inc. provides shareholder and administrative services in its capacity as the fund's transfer and dividend disbursing agent. T. Rowe Price Retirement Plan Services, Inc. provides subaccounting and recordkeeping services for certain retirement accounts invested in the Blue Chip Growth share class. Expenses incurred pursuant to these service agreements totaled $6,473,000 for the six months ended June 30, 2002, of which $1,248,000 was payable at period-end. Additionally, the fund is one of several mutual funds in which certain college savings plans managed by Price Associates may invest. As approved by the fund's Board of Directors, shareholder servicing costs associated with each college savings plan are borne by the fund in proportion to the average daily value of its shares owned by the college savings plan. For the six months ended June 30, 2002, the Blue Chip Growth share class was charged $143,000 for shareholder servicing costs related to the college savings plans, of which $124,000 was for services provided by Price and $20,000 was payable at period-end. At June 30, 2002, approximately 1.1% of the outstanding shares of the Blue Chip Growth share class were held by college savings plans. The fund is also one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may invest. 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 six months ended June 30, 2002, the Blue Chip Growth share class was allocated $212,000 of Spectrum expenses, of which $48,000 related to services provided by Price and $82,000 was payable at period-end. At June 30, 2002, approximately 3.4% of the outstanding shares of the Blue Chip Growth share class were held by Spectrum. Spectrum does not invest in the underlying Price funds for the purpose of exercising management or control. 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 six months ended June 30, 2002, totaled $212,000 and are reflected as interest income in the accompanying Statement of Operations. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- ABOUT THE FUND'S DIRECTORS AND OFFICERS Your fund is governed by a Board of Directors that meets regularly to review investments, performance, expenses, and other business matters, and is responsible for protecting the interests of shareholders. The majority of the fund's directors are independent of T. Rowe Price Associates, Inc. ("T. Rowe Price"); "inside" directors are officers of T. Rowe Price. The Board of Directors elects the fund's officers, who are listed in the final table. The business address of each director and officer is 100 East Pratt Street, Baltimore, MD 21202. INDEPENDENT DIRECTORS --------------------- NAME (DATE OF BIRTH) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND YEAR ELECTED* OTHER DIRECTORSHIPS OF PUBLIC COMPANIES Calvin W. Burnett, Ph.D. President, Coppin State College; Director, (3/16/32) Provident Bank of Maryland 2001 Anthony W. Deering Director, Chairman of the Board, President, and (1/28/45) Chief Executive Officer, The Rouse Company, 2001 real estate developers Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an (1/27/43) acquisition and management advisory firm 1993 David K. Fagin Director, Dayton Mining Corp. (6/98 to present), (4/9/38) Golden Star Resources Ltd., and Canyon Resources 1993 Corp. (5/00 to present); Chairman and President, Nye Corp. F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates, (8/22/34) Inc. consulting environmental and civil engineers 2001 Hanne M. Merriman Retail Business Consultant; Director, Ann Taylor (11/16/41) Stores Corp., Ameren Corp., Finlay Enterprises, 1994 Inc. The Rouse Company and US Airways Group, Inc. John G. Schreiber Owner/President, Centaur Capital Partners, Inc., (10/21/46) a real estate investment company; Senior Advisor 2001 and Partner, Blackstone Real Estate Advisors, L.P.; Director, AMLI Residential Properties Trust, Host Marriott Corp., and The Rouse Company Hubert D. Vos Owner/President, Stonington Capital Corp., a (8/2/33) private investment company 1993 * Each independent director oversees 98 T. Rowe Price portfolios and serves until the election of a successor. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- INDEPENDENT DIRECTORS (CONTINUED) --------------------------------- NAME (DATE OF BIRTH) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND YEAR ELECTED* OTHER DIRECTORSHIPS OF PUBLIC COMPANIES Paul M. Wythes Founding Partner, Sutter Hill Ventures, a venture (6/23/33) capital limited partnership, providing equity 1993 capital to young high-technology companies throughout the United States; Director, Teltone Corp. * Each independent director oversees 98 T. Rowe Price portfolios and serves until the election of a successor. INSIDE DIRECTORS ---------------- NAME (DATE OF BIRTH) PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS AND YEAR ELECTED** OTHER DIRECTORSHIPS OF PUBLIC COMPANIES James A.C. Kennedy Director and Vice President, T. Rowe Price and (8/15/53) T. Rowe Price Group, Inc. 1997 [32] James S. Riepe Director and Vice President, T. Rowe Price; (6/25/43) Vice Chairman of the Board, Director, and Vice 1993 President, T. Rowe Price Group,Inc.; Chairman of [98] the Board and Director, T. Rowe Price Global Asset Management Limited, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President, and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc., and T. Rowe Price Global Investment Services Limited; Vice President, Blue Chip Growth Fund M. David Testa Vice Chairman of the Board, Chief Investment (4/22/44) Officer, Director, and Vice President, T. Rowe 1993 Price Group, Inc.; Chief Investment Officer, [98] Director, and Vice President, T. Rowe Price; Chairman and Director, T. Rowe Price Global Asset Management Limited; Vice President and Director, T. Rowe Price Trust Company; Director, T. Rowe Price Global Investment Services Limited and T. Rowe Price International, Inc. ** Each inside director serves until the election of a successor. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- OFFICERS NAME (DATE OF BIRTH) TITLE AND FUND(S) SERVED PRINCIPAL OCCUPATION(S) Joseph A. Carrier (12/30/60) Vice President, T. Rowe Price, T. Rowe Treasurer, Blue Chip Growth Fund Price Group, Inc., and T. Rowe Price Investment Services, Inc. Donald J. Easley (11/28/71) Vice President, T. Rowe Price Vice President, Blue Chip Growth Fund Henry M. Ellenbogen (1/21/71) Vice President, T. Rowe Price; formerly Vice President, Blue Chip Growth Fund Chief of Staff, U.S. Representative Peter Deutsch (to 1999); Executive Vice President, Business Development, HelloAsia (to 2001) Robert N. Gensler (10/18/57) Vice President, T. Rowe Price and Vice President, Blue Chip Growth Fund T. Rowe Price Group, Inc. Henry H. Hopkins (12/23/42) Director and Vice President, T. Rowe Vice President, Blue Chip Growth Fund Price Group, Inc.; Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc.; Vice President and Director, T. Rowe Price Investment Services, Inc. T. Rowe Price Services, Inc., and T. Rowe Price Trust Company Kris H. Jenner (2/5/62) Vice President, T.Rowe Price and T.Rowe Vice President, Blue Chip Growth Fund Price Group, Inc. J. Jeffrey Lang (1/10/62) Vice President, T. Rowe Price and Vice President, Blue Chip Growth Fund T. Rowe Price Trust Company Christopher R. Leonard (1/11/73) Vice President, T. Rowe Price and Vice President, Blue Chip Growth Fund T. Rowe Price Group, Inc. Patricia B. Lippert (1/12/53) Assistant Vice President, T. Rowe Secretary, Blue Chip Growth Fund Price and T. Rowe Price Investment Services, Inc. David S. Middleton (1/18/56) Vice President, T. Rowe Price, T. Rowe Controller, Blue Chip Growth Fund Price Group, Inc., and T. Rowe Price Trust Company Timothy C. Parker (11/9/74) Employee, T. Rowe Price; formerly Vice President, Blue Chip Growth Fund investment banking analyst, Robert W. Baird & Co., Inc. (to 1999); student, Darden Graduate School, University of Virginia (to 2001) Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- OFFICERS NAME (DATE OF BIRTH) TITLE AND FUND(S) SERVED PRINCIPAL OCCUPATION(S) Larry J. Puglia (8/25/60) Vice President, T. Rowe Price and President, Blue Chip Growth Fund T. Rowe Price Group, Inc. Karen M. Regan (4/16/67) Vice President, Blue Chip Growth Fund Assistant Vice President, T. Rowe Price Robert W. Sharps (6/10/71) Vice President, T. Rowe Price and Vice President, Blue Chip Growth Fund T. Rowe Price Group, Inc. Robert W. Smith (4/11/61) Vice President, T. Rowe Price, Vice President, Blue Chip Growth Fund T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. ROWE PRICE MUTUAL FUNDS -------------------------------------------------------------------------------- STOCK FUNDS BOND FUNDS MONEYMARKET FUNDS++ ----------- ---------- ------------------- DOMESTIC DOMESTIC TAXABLE TAXABLE Blue Chip Growth* Corporate Income Prime Reserve Capital Appreciation GNMA Summit Cash Reserves Capital Opportunity High Yield* U.S. Treasury Money Developing Technologies New Income Diversified Small-Cap Short-Term Bond TAX-FREE Growth Spectrum Income California Tax-Free Dividend Growth Summit GNMA Money Equity Income* U.S. Bond Index Maryland Tax-Free Equity Index 500 U.S. Treasury Money Extended Equity Market Intermediate New York Tax-Free Money Index U.S. Treasury Summit Municipal Money Financial Services Long-Term Market Growth & Income Tax-Exempt Money Growth Stock* DOMESTIC TAX-FREE Health Sciences California Tax-Free INTERNATIONAL/GLOBAL Media & Telecommun Bond FUNDS -ications Florida Intermediate ----------------------- Mid-Cap Growth* Tax-Free STOCK Mid-Cap Value Georgia Tax-Free Bond Emerging Europe & New America Growth Maryland Short-Term Mediterranean New Era Tax-Free Bond Emerging Markets Stock New Horizons Maryland Tax-Free Bond European Stock Real Estate New Jersey Tax-Free Global Stock Science & Technology* Bond Global Technology Small-Cap Stock* New York Tax-Free Bond International Small-Cap Value*+ Summit Municipal Income Discovery+ Spectrum Growth Summit Municipal International Equity Tax-Efficient Growth Intermediate Index Tax-Efficient Multi-Cap Tax-Free High Yield International Growth Growth Tax-Free Income & Income Total Equity Market Index Tax-Free Intermediate International Stock* Value* Bond Japan Tax-Free Short- Latin America Intermediate New Asia BLENDED ASSET FUNDS Virginia Tax-Free Bond Spectrum International Balanced Personal Strategy Balanced BOND Personal Strategy Growth Emerging Markets Bond Personal Strategy Income International Bond* Tax-Efficient Balanced 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 Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 F93-051 6/30/02