N-30D 1 arbcg.txt ANNUAL REPORT BLUE CHIP GROWTH FUND Annual Report Blue Chip Growth Fund December 31, 2002 T. Rowe Price(registered trademark) (registered trademark) Report Highlights -------------------------------------------------------------------------------- Blue Chip Growth Fund o Despite a fourth-quarter rebound, growth stocks across all capitalizations suffered in the past six and 12 months. o Since June, the fund outperformed the S&P 500 Stock Index and the Lipper index of similar funds. Full-year results bested the Lipper index but lagged the S&P 500. o Our media and technology positions performed well in the second half of the year, but holdings in the health care sector hurt results. o The current uncertainty is allowing us to buy consistent-growth companies at reasonable valuations. 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 Global stock markets have been mired in one of the most prolonged bear markets on record. Although a sharp rally in the fourth quarter helped second-half results improve over the severe declines recorded in the first half, losses were significant. Large-cap growth stocks continued to perform poorly, and the year ended with significant uncertainty. Although questions regarding accounting integrity and corporate ethical lapses are being resolved, concerns about economic growth, global terrorism, possible war with Iraq, and, more recently, nuclear weapons production in North Korea have stymied investor confidence. Performance Comparison -------------------------------------------------------------------------------- Periods Ended 12/31/02 6 Months 12 Months -------------------------------------------------------------------------------- Blue Chip Growth Fund -8.85% -24.23% Blue Chip Growth Fund- Advisor Class -8.84 -24.26 S&P 500 Stock Index -10.30 -22.10 Lipper Large-Cap Growth Funds Index -12.38 -28.11 -------------------------------------------------------------------------------- Performance Comparison -------------------------------------------------------------------------------- Since Inception -------------------------------------------------------------------------------- Period Ended 12/31/02 9/30/02 -------------------------------------------------------------------------------- Blue Chip Growth Fund-R Class 7.66% S&P 500 Stock Index 8.44 Lipper Large-Cap Growth Funds Index 4.34 -------------------------------------------------------------------------------- The decline that the fund and its Advisor Class endured during the past six and 12 months largely reflects the difficult environment for investing in large-cap growth stocks. While our results lagged the broad S&P 500 for the full year, they bested the S&P 500 in the last six months. Our returns for both periods were significantly better than for the Lipper Large-Cap Growth Funds Index. As investors in the fund, we realize that favorable relative performance (with negative returns) is still quite painful. 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 after this letter, the fund's return since inception has outpaced the S&P 500 Index and its Lipper benchmark by a significant margin. We'd also like to take this opportunity to welcome our R Class shareholders. MARKET ENVIRONMENT Corporate improprieties continued to weigh on investor confidence even as major scandals surrounding Adelphia, Enron, WorldCom, and Tyco International began to slowly dissipate. As we had hoped, the August 14 deadline for companies to attest to the accuracy of their financial statements did not result in a significant increase in accounting restatements. This helped investor confidence, but investors continue to be wary of any company with complex accounting arrangements or that have grown via acquisitions. These concerns tend to be applicable to large growth holdings such as GE, American International Group, and Citigroup. It will take more time for confidence to be fully restored. Despite a fourth-quarter rebound, growth stocks across all capitalizations suffered in the past 12 months. Equities were volatile and unable to sustain solid gains, and geopolitical issues added a measure of risk.This environment began to weigh on consumer confidence, which in turn has dampened auto and retail sales-although housing remained quite strong. Confidence among business leaders and related corporate investment continued to be lackluster. The technology and telecommunications sectors have not recovered from excessive capital expenditures made during the tech bubble. Aerospace and other industries still feel the effects of September 11. Fortunately, these problems are being slowly resolved. Essentially, we think that easing monetary action by the Federal Reserve will result in a slow (but uneven) recovery. We do not factor geopolitical events into our investment strategy or stock selection because they are very difficult to predict and often do not affect the long-term fundamentals we seek in investing. However, we would be remiss if we did not acknowledge that the world is more unsettled than usual. War with Iraq is a distinct possibility, and North Korea's effort to build nuclear arms is troubling. Clearly, these are challenging times. However, we think these issues could be resolved (peacefully we hope) in 2003, and we believe that the uncertainty is allowing us to buy many consistent-growth companies at attractive valuations. PORTFOLIO REVIEW Sector Diversification -------------------------------------------------------------------------------- consumer 20 energy/util 4 financial 26 healthcare 20 Indust. BS, Mats. 12 info tech 16 telecomm. Serv. 2 -------------------------------------------------------------------------------- As we noted in the June report, the outlook for earnings is somewhat uncertain despite a slowly recovering economy. Accordingly, we continue to pay special attention to earnings prospects. We were disappointed that many companies generating sustainable earnings growth (such as Pfizer and American International Group) performed poorly in 2002. However, we recognize that investors are skeptical at this time 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 list of second-half winners includes several telephone services, technology, health care, and financial holdings, which were dismal performers in the first half. A level of patience in maintaining and often adding to these names helped second-half performance significantly. For example, throughout the year we added to our position in Vodafone, the largest global wireless services provider. Its strong balance sheet and cash flow helped the shares outperform most other companies in the sector. AT&T and Nextel Communications were more moderate-sized positions initiated during 2002, and both were very strong second-half performers. Clear Channel Communications, Omnicom, and Viacom are long-term media holdings that have faced challenges due to the slow economy. However, these companies executed their business plans well. Clear Channel, the leading operator of radio stations and outdoor advertising, has improved efficiency and is repaying debt rapidly. Omnicom, a leading advertising agency, produced solid results especially relative to its competitors. Viacom's strong balance sheet and prodigious cash flow supported by strong operations at CBS, MTV, and Nickelodeon allowed it to perform relatively well. USA Interactive (managed by Barry Diller and a leading operator of Internet-based businesses such as Expedia and Ticketmaster), Liberty Media, EchoStar Communications (a leading satellite broadcasting services provider), and Univision Communications (the leading operator of Spanish television and radio properties) were also positive performers in the latter part of the year. Technology was another area where patience and a focus on high-quality leadership companies helped results. We added to longtime holding Microsoft, a solid second-half performer. However, we think that its earnings power and financial strength are still not adequately reflected in its valuation. Qualcomm, the leading producer of technology and chipsets for CDMA-based wireless telephones (CDMA is the most rapidly growing standard for wireless communication), also produced impressive results in a challenging environment. Nokia's results were less impressive, but its earnings, business model, and stock performance topped most of its peers. We also made additions to Maxim Integrated Products and Analog Devices in the semiconductor area. Both are leading analog semiconductor manufacturers and have produced relatively strong results during this tech correction. We also benefited from medium-sized positions in IBM, Dell Computer, and Lexmark International. Each of these holdings generated solid cash flow and earnings and aided second-half performance. We were disappointed that health care stocks did not perform better given their stable earnings growth in the lackluster economic environment. However, Forest Laboratories was a standout and our best contributor in the sector. The company's new antidepressant, Lexapro, has a superior side-effect profile and is taking market share aggressively. The company also has an Alzheimer's treatment called Memantine, which appears to be effective in improving cognition and slowing the disease. Johnson & Johnson, Pharmacia, Abbott Laboratories, Amgen, Eli Lilly, and Medtronic were also notable contributors for the last six months. Financial stocks generally outperformed for the year, although banks, insurance, and consumer finance did much better than brokers in the first half. However, in the second half, several companies with brokerage or market-sensitive revenues did quite well. Sticking with Citigroup through its regulatory travails paid off handsomely as the stock rebounded from its July and then October lows. The company's geographic and product breadth and also fundamental performance continue to be quite positive relative to most competitors. Merrill Lynch, Goldman Sachs Group, Morgan Stanley, SLM Corporation (the leading student loan servicer and a solid second-half performer), and Legg Mason were also money makers for your fund in the fourth quarter. Tyco International was the largest major second-half contributor that does not fall into the sectors already discussed. In previous reports, we chronicled some of the mistakes made by management. However, we continue to believe that Tyco's businesses in the home security, health care, and electronics areas are solid cash generators. New management is working methodically, but decisively, to improve corporate governance and the business operations. The list of second-half losers was extensive. However, relative to the first half, we think there were fewer instances of problem stocks where we misjudged the fundamentals. This view is consistent with the stronger relative performance the fund produced in the second half. Our largest second-half loser was Concord EFS, the leading processor of debit card transactions. Concord had been a solid performer for several years, but concerns regarding pricing pressure and contract negotiations caused investors to punish the stock. The company does face pricing pressure and earnings estimates were reduced modestly, but the firm should be able to successfully renegotiate several major bank processing deals. It also just won a major debit card processing contract for McDonald's. The company continues to grow at a solid pace and produces very strong cash flow. Wyeth was our second-largest negative contributor for the last six months. The company experienced modest shortfalls in several of its operating units, which we felt management failed to identify despite several meetings with the company. However, the primary problems that led to the lowered earnings forecast and poor stock performance were a study linking the Premarin family of estrogen-related products to a very small increase in cancer among women, and delays in the production ramp up for a vaccine and an arthritis product. The linkage of Premarin to certain tumors has been discussed for many years; nonetheless, many doctors continue to prescribe the products on the grounds that the benefits greatly outweigh the small increase in risk. The production bottlenecks are being resolved, and despite the drag of reduced Premarin sales, we think Wyeth could perform reasonably well over time. Home Depot has several major strengths, but we underestimated the degree to which investors would punish the stock for slowing same-store sales growth. The firm maintains a leadership position, a very strong balance sheet, and tremendous cash flow. New management has correctly recognized that they should slow square-footage growth and improve efficiency and return on capital for existing stores. They are doing this reasonably well but have not been effective in improving store formats and merchandising to be more competitive with their largest rival, Lowe's. We believe that investors will reevaluate the company more favorably over time, but until we see some improvement in same-store sales, we will be cautious about adding to this position. Pfizer and UnitedHealth Group were major detractors; both are large holdings that suffered second-half declines. Pfizer came under pressure when the regulatory authorities said they needed more time to scrutinize its planned acquisition of Pharmacia (another significant fund holding). Also, recent studies questioned the efficacy of Norvasc, a major hypertension product, versus less expensive alternatives. Products being introduced to compete with Pfizer's Lipitor and Viagra have also caused investor angst. However, the combination of Pfizer and Pharmacia (we think the transaction has a high probability of approval) will have strong revenue and earnings growth prospects and below-average exposure to patent expirations. A recent decline below $30 only makes the stock more compelling in our view. UnitedHealth Group, a top performer in the first half, is to a certain degree a victim of its own success. It is one of the few stocks we have owned that has essentially ignored the bear market and appreciated several hundred percent during our ownership over the past several years. We trimmed some stock at prices above the current price. However, its recent pullback, combined with strong earnings and cash-flow growth, makes the valuation attractive, and the stock could perform quite well. STRATEGY This fund will have its 10-year anniversary in June 2003 (we have managed the fund since inception and have been investing for several decades). Our strategy is straightforward, and we believe it can be particularly helpful in uncertain or rapidly changing markets. We continue to add to core holdings as long as we are confident that the fundamentals and return potential are favorable, 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 Tyco International, Amgen, Kohl's, and Univision Communications were among our 10 largest purchases for the past six months. We also established several significant new positions. We added a substantial weighting in Schlumberger, the leading energy services company, in the last six months. We had sold Schlumberger several years ago because we were concerned about its acquisition of Sema, a technology company. The acquisition proved to be quite costly to the company (and Schlumberger stock declined substantially). However, Schlumberger's new CEO acted quickly to improve efficiency at the company, sell off noncore assets, and reduce debt. He also pledged to be much more disciplined about deploying capital for acquisitions. The company is a global leader, has very strong technology, and we believe the stock's valuation is attractive. Fiserv is a large processor of financial data for banks and other financial institutions. It has solid management, generates tremendous cash flow, and has one of the best long-term earnings growth records of all companies in the S&P 500. Carnival agreed to buy Princess Cruise Lines, which will extend the company's dominant position in the cruise business. Although concerns regarding terrorism have depressed most travel-related stocks, Carnival's business is recovering despite the recent incidence of flu-type illness on certain cruises. We believe the stock is attractively valued and that return on capital should improve consistently over the next several years. General Mills is another large recent purchase, favored by one of our most experienced analysts, despite the company's stumble with the integration of its Pillsbury acquisition. We purchased the stock when it was somewhat out of favor, but its latest quarterly results showed significant progress with the Pillsbury integration. Liberty Media, managed by John Malone, has significant ownership in cable networks like The Discovery Channel, and major holdings in media companies such as AOL and Newscorp. The company has a solid balance sheet, and cash-flow growth has been quite strong. We sold a small position at much higher prices earlier in the year and are always circumspect about coming back to a position we have sold, but recognize that this can yield advantages stemming from better knowledge of the company. We have a small profit in our new position, but think the company is worth much more than the current stock price. Most sales were driven by deteriorating fundamentals or the belief that other companies in the sector were better positioned. For example, Philip Morris has been a very solid performer for the fund during the past several years. However, the company is suffering from aggressive price competition from discount cigarette brands. It has also lost major legal cases, particularly in California. While we have been willing to accept the risk that the company faces from ongoing litigation, pricing pressure has caused a noticeable decline in earnings growth. We sold a large portion of this holding and are unlikely to buy more unless the company gets back on a solid earnings growth trajectory. Wyeth and GE were also trimmed because of concerns regarding their fundamentals. However, we retained meaningful positions (despite subsequent earnings shortfalls) because we believe both have reasonably good longer-term outlooks combined with attractive valuations. Fifth Third Bancorp, AmerisourceBergen, and WellPoint Health Networks were more pleasant sales. We reduced these holdings after the shares had performed quite well and approached price targets. ChevronTexaco and XL Capital were the only major eliminations. Both stocks had performed reasonably well and were sold primarily to fund other purchases that we believe have better growth and appreciation potential. OUTLOOK There are many challenges facing investors. If history is any guide, investors will focus on the economy and ultimately on the quality and quantity of earnings growth at individual companies. We believe that progress made in solving global conflicts could coincide with a gradual improvement in consumer confidence and business spending. The resulting increase in demand could produce strong profit growth at companies that have cut expenses dramatically. Despite lingering uncertainties, we think the outlook for U.S. stocks (and for your fund) is quite good for several reasons: o Earnings growth remains strong at many high-quality U.S. companies. Many of these companies do not need a robust economic recovery to produce strong profit growth. A number of these consistent-growth companies are large positions in the fund (and are generally valued quite reasonably). o Many of our holdings generate significant free cash flow. Shareholder-oriented management will use this cash to repurchase shares, pay dividends, which may receive favorable tax treatment, or make value-added acquisitions at advantageous prices. o Lower stock prices and more reasonable valuations increase the odds of making solid returns. This is especially true if we are able to invest in companies that produce strong earnings growth (which allows stock appreciation even if no expansion in the price/earnings ratio occurs). For favorable results over time, we must effectively distinguish between stocks suffering short-term setbacks and those facing long-term declines. This is particularly essential during market sell-offs when both good and mediocre businesses suffer price corrections. We continue to strive to invest in quality companies with durable market positions and sustainable earnings and cash flow growth. We appreciate your continued confidence in this endeavor. Respectfully submitted, Larry J. Puglia President and chairman of the Investment Advisory Committee January 10, 2003 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 12/31/02 -------------------------------------------------------------------------------- Citigroup 4.1% Microsoft 3.9 Pfizer 3.8 Freddie Mac 3.4 UnitedHealth Group 3.2 -------------------------------------------------------------------------------- First Data 2.7 American International Group 2.1 Viacom 2.1 Johnson & Johnson 2.1 Vodafone 1.9 -------------------------------------------------------------------------------- Bank of America 1.9 Cisco Systems 1.7 Danaher 1.7 GE 1.6 Affiliated Computer Services 1.6 -------------------------------------------------------------------------------- Wal-Mart 1.5 Tyco International 1.5 Clear Channel Communications 1.4 State Street 1.3 Maxim Integrated Products 1.3 -------------------------------------------------------------------------------- Mellon Financial 1.3 Marsh & McLennan 1.2 Target 1.2 Home Depot 1.2 Wells Fargo 1.1 -------------------------------------------------------------------------------- Total 50.8% Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund. -------------------------------------------------------------------------------- Portfolio Highlights -------------------------------------------------------------------------------- MAJOR PORTFOLIO CHANGES Listed in descending order of size 6 Months Ended 12/31/02 Ten Largest Purchases -------------------------------------------------------------------------------- Schlumberger* Fiserv* Tyco International Amgen Carnival* Kohl's Univision Communications General Mills* Liberty Media* Microsoft -------------------------------------------------------------------------------- Ten Largest Sales -------------------------------------------------------------------------------- Philip Morris Wyeth ChevronTexaco** GE Fifth Third Bancorp AmerisourceBergen XL Capital** Fannie Mae WellPoint Health Networks AOL Time Warner -------------------------------------------------------------------------------- * 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 500 Lipper Blue Chip x Large-Cap Growth Fund -------------------------------------------------------------------------------- 6/30/93 10 10 10 12/31/93 10.496 10.728 11.432 12/31/94 10.635 10.639 11.524 12/31/95 14.631 14.355 15.892 12/31/96 17.991 17.306 20.302 12/31/97 23.993 22.081 25.897 12/31/98 30.85 30.134 33.366 12/31/99 37.341 40.626 40.039 12/31/00 33.94 32.631 39.027 12/31/01 29.906 24.843 33.4 12/31/02 23.297 17.859 25.307 -------------------------------------------------------------------------------- Note: Performance for Advisor and R Class will vary due to their differing fee structures. See returns table below and Performance table on page 1. -------------------------------------------------------------------------------- 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. Periods Ended Since Inception 12/31/02 1 Year 3 Years 5 Years Inception Date -------------------------------------------------------------------------------- Blue Chip Growth Fund -24.23% -14.18% -0.46% 10.26% 6/30/93 Blue Chip Growth Fund- Advisor Class -24.26 -- -- 17.16 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. -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- Blue Chip Growth shares Year Ended 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98 -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 28.97 $ 33.85 $ 36.34 $ 30.60 $ 24.17 Investment activities Net investment income (loss) -- (0.02) (0.03) 0.03 0.11 Net realized and unrealized gain loss (7.02) (4.86) (0.84) 6.07 6.82 Total from investment activities (7.02) (4.88) (0.87) 6.10 6.93 Distributions Net investment income -- -- -- (0.03) (0.11) Net realized gain -- -- (1.62) (0.33) (0.39) Total distributions -- -- (1.62) (0.36) (0.50) NET ASSET VALUE End of period $ 21.95 $ 28.97 $ 33.85 $ 36.34 $ 30.60 ----------------------------------------------------------------- Ratios/Supplemental Data Total return^ (24.23)% (14.42)% (2.53)% 20.00% 28.84% Ratio of total expenses to average net assets 0.96% 0.96% 0.91% 0.91% 0.91% Ratio of net investment income (loss) to average net assets 0.00% (0.06)% (0.09)% 0.10% 0.43 Portfolio turnover rate 46.2% 48.3% 50.9% 41.3% 34.5% Net assets, end of period (in millions) $ 4,482 $ 6,242 $ 7,113 $ 6,709 $4 ,330 -------------------------------------------------------------------------------- ^ 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 the period -------------------------------------------------------------------------------- Blue Chip Growth-Advisor Class shares Year 3/31/00 Ended Through 12/31/02 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) 0.02* Net realized and unrealized gain (loss) (7.04 (4.88) (3.12) Total from investment activities (7.04) (4.89) (3.10) Distributions Net realized gain -- -- (1.62) Tax return of capital (0.01) -- -- Total distributions (0.01) -- (1.62) NET ASSET VALUE End of period $21.97 $ 29.02 $ 33.91 Ratios/Supplemental Data Total return^ (24.26)% (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 (0.01)% (0.04)% 0.25%! Portfolio turnover rate 46.2% 48.3% 50.9%! Net assets, end of period (in thousands) $538,571 $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. -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout the period -------------------------------------------------------------------------------- Blue Chip Growth - R Class shares 9/30/02 Through 12/31/02 -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 20.37 Investment activities Net investment income (loss) (0.02)* Net realized and unrealized gain (loss) 1.58** Total from investment activities 1.56 NET ASSET VALUE End of period $ 21.93 Ratios/Supplemental Data Total return^ 7.66%* Ratio of total expenses to average net assets 1.35%!* Ratio of net investment income (loss) to average net assets (0.28%)!* Portfolio turnover rate 46.2%! Net assets, end of period (in thousands) $ 108 -------------------------------------------------------------------------------- * Excludes expenses in excess of a 1.35% contractual expense limitation in effect through 4/30/04. ** The amount presented is calculated pursuant to a methodology prescribed by the Securities and Exchange Commission for a share outstanding throughout the period. This amount is inconsistent with the fund's aggregate gains and losses because of the timing of sales and redemptions of fund 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 -------------------------------------------------------------------------------- December 31, 2002 Statement of Net Assets -------------------------------------------------------------------------------- Common Stocks 100.0% CONSUMER DISCRETIONARY 15.1% Automobiles 0.6% Harley-Davidson 610,000 $ 28,182 28,182 Hotels, Restaurants & Leisure 1.2% Carnival 1,000,000 24,950 MGM Mirage * 485,000 15,990 Starbucks * 1,000,000 20,380 61,320 Internet & Catalog Retail 0.7% USA Interactive * 1,540,000 35,297 35,297 Media 7.6% AOL Time Warner * 3,000,000 39,300 Clear Channel Communications * 1,900,000 70,851 Comcast, Class A * 1,700,000 38,403 Disney 700,000 11,417 EchoStar Communications, Class A * 1,300,000 28,938 Liberty Media, Class A * 2,710,000 24,227 Omnicom 610,000 39,406 Scripps, Class A 70,000 5,387 Univision Communications, Class A * 770,000 18,865 Viacom, Class B * 2,620,000 106,791 383,585 Multiline Retail 3.5% Kohl's * 680,000 38,046 Target 2,000,000 60,000 Wal-Mart 1,500,000 75,765 173,811 Specialty Retail 1.5% Best Buy * 400,000 9,660 Home Depot 2,500,000 59,900 Weight Watchers * 100,000 4,597 74,157 Total Consumer Discretionary 756,352 CONSUMER STAPLES 4.8% Beverages 2.2% Anheuser-Busch 340,000 $ 16,456 Coca-Cola 1,150,000 50,393 PepsiCo 1,000,000 42,220 109,069 Food & Drug Retailing 0.6% Sysco 770,000 22,938 Walgreen 200,000 5,838 28,776 Food Products 0.7% General Mills 460,000 21,597 Unilever (GBP) 1,600,000 15,220 36,817 Household Products 0.9% Colgate-Palmolive 460,000 24,118 Procter & Gamble 257,000 22,086 46,204 Tobacco 0.4% Philip Morris 500,000 20,265 20,265 Total Consumer Staples 241,131 ENERGY 3.5% Energy Equipment & Services 2.8% Baker Hughes 1,580,000 50,860 BJ Services * 920,000 29,725 Schlumberger 750,000 31,568 Smith International * 950,000 30,989 143,142 Oil & Gas 0.7% Exxon Mobil 1,000,000 34,940 34,940 Total Energy 178,082 FINANCIALS 25.8% Banks 6.5% Bank of America 1,360,000 $ 94,615 Bank of New York 1,100,000 26,356 Fifth Third Bancorp 310,000 18,151 Mellon Financial 2,440,000 63,708 Northern Trust 640,000 22,432 U.S. Bancorp 2,050,000 43,501 Wells Fargo 1,200,000 56,244 325,007 Diversified Financials 14.0% American Express 290,000 10,252 Charles Schwab 1,180,000 12,803 Citigroup 5,800,000 204,102 Fannie Mae 790,000 50,821 Franklin Resources 380,000 12,950 Freddie Mac 2,875,000 169,769 Goldman Sachs Group 460,000 31,326 Legg Mason 370,000 17,960 Merrill Lynch 950,000 36,052 Morgan Stanley 1,180,000 47,106 SLM Corporation 412,000 42,790 State Street 1,735,000 67,665 703,596 Insurance 5.3% Allstate 100,000 3,699 AMBAC Financial Group 300,000 16,872 American International Group 1,850,000 107,023 Berkshire Hathaway, Class A * 100 7,275 Hartford Financial Services Group 610,000 27,712 Marsh & McLennan 1,300,000 60,073 Progressive Corporation 340,000 16,874 Travelers Property Casualty, Class A * 1,700,000 24,905 264,433 Total Financials 1,293,036 HEALTH CARE 19.8% Biotechnology 1.7% Amgen * 1,120,000 $ 54,140 IDEC Pharmaceuticals * 40,000 1,327 MedImmune * 1,200,000 32,604 88,071 Health Care Equipment & Supplies 1.1% Baxter International 820,000 22,960 Medtronic 680,000 31,008 53,968 Health Care Providers & Services 6.3% AmerisourceBergen 300,000 16,293 Cardinal Health 622,000 36,816 HCA 1,210,000 50,215 UnitedHealth Group 1,900,000 158,650 Wellpoint Health Networks * 755,000 53,726 315,700 Pharmaceuticals 10.7% Abbott Laboratories 1,300,000 52,000 Allergan 130,000 7,491 Biovail * 500,000 13,205 Bristol-Myers Squibb 100,000 2,315 Eli Lilly 290,000 18,415 Forest Laboratories * 340,000 33,395 Johnson & Johnson 1,940,000 104,197 Merck 70,000 3,963 Pfizer 6,260,000 191,368 Pharmacia 1,330,000 55,594 Schering-Plough 100,000 2,220 Wyeth 1,360,000 50,864 535,027 Total Health Care 992,766 INDUSTRIALS & BUSINESS SERVICES 11.8% Aerospace & Defense 0.2% Honeywell International 500,000 12,000 12,000 Air Freight & Logistics 0.4% UPS, Class B 340,000 $ 21,447 21,447 Commercial Services & Supplies 6.1% Apollo Group, Class A * 1,210,000 53,240 Automatic Data Processing 640,000 25,120 Cendant * 1,150,000 12,052 Concord EFS * 2,570,000 40,452 First Data 3,850,000 136,329 Fiserv * 860,000 29,197 Paychex 350,000 9,765 306,155 Industrial Conglomerates 3.4% 3M 110,000 13,563 GE 3,400,000 82,790 Tyco International 4,300,000 73,444 169,797 Machinery 1.7% Danaher 1,300,000 85,410 85,410 Total Industrials & Business Services 594,809 INFORMATION TECHNOLOGY 14.9% Communications Equipment 2.9% Cisco Systems * 6,550,000 85,805 Nokia ADR 1,750,000 27,125 QUALCOMM * 910,000 33,115 146,045 Computer Peripherals 2.1% Dell Computer * 2,050,000 54,817 IBM 286,000 22,165 Lexmark International, Class A * 430,000 26,015 102,997 IT Consulting & Services 1.8% Affiliated Computer Services, Class A * 1,510,000 79,501 SunGard Data Systems * 460,000 10,838 90,339 Semiconductor Equipment & Products 3.9% Analog Devices * 1,850,000 $ 44,159 Applied Materials * 950,000 12,379 Intel 1,200,000 18,684 KLA-Tencor * 130,000 4,598 Maxim Integrated Products 1,960,000 64,758 QLogic * 550,000 18,981 Samsung Electronics (KRW) 55,000 14,561 Texas Instruments 920,000 13,809 Xilinx * 160,000 3,296 195,225 Software 4.2% Adobe Systems 220,000 5,456 Electronic Arts * 25,000 1,244 Microsoft * 3,770,000 194,909 VERITAS Software * 740,000 11,559 213,168 Total Information Technology 747,774 TELECOMMUNICATION SERVICES 2.4% Wireless Telecommunication Services 2.4% Nextel Communications, Class A * 2,050,000 23,678 Vodafone ADR 5,360,000 97,123 Total Telecommunication Services 120,801 Total Miscellaneous Common Stocks 1.9% 94,345 Total Common Stocks (Cost $5,188,538) 5,019,096 Short-Term Investments 1.8% Money Market Fund 1.8% T. Rowe Price Reserve Investment Fund, 1.53% # 92,958,905 92,959 Total Short-Term Investments (Cost $92,959) 92,959 Total Investments in Securities 101.8% of Net Assets (Cost $5,281,497) $ 5,112,055 Other Assets Less Liabilities (91,678) NET ASSETS $ 5,020,377 --------------- Net Assets Consist of: Undistributed net realized gain (loss) $ (980,646) Net unrealized gain (loss) (169,442) Paid-in-capital applicable to 228,744,876 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized 6,170,465 NET ASSETS $ 5,020,377 --------------- NET ASSET VALUE PER SHARE Blue Chip Growth shares ($4,481,698,841/204,223,896 shares outstanding) $ 21.95 --------------- Blue Chip Growth-Advisor Class shares ($538,570,855/24,516,071 shares outstanding) $ 21.97 --------------- Blue Chip Growth-R Class shares ($107,643/4,909 shares outstanding) $ 21.93 --------------- -------------------------------------------------------------------------------- # Seven-day yield * Non-income producing ADR American Depository Receipts GBP British pound KRW South Korean won The accompanying notes are an integral part of these financial statements. -------------------------------------------------------------------------------- T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- In thousands Statement of Operations -------------------------------------------------------------------------------- In thousands Year Ended 12/31/02 -------------------------------------------------------------------------------- I nvestment Income (Loss) Income Dividend $ 54,189 Interest 345 Total income 54,534 Expenses Investment management 35,354 Shareholder servicing Blue Chip Growth shares 16,658 Blue Chip Growth-Advisor Class shares 448 Distribution Blue Chip Growth-Advisor Class shares 1,144 Prospectus and shareholder reports Blue Chip Growth shares 676 Blue Chip Growth-Advisor Class shares 9 Custody and accounting 284 Proxy and annual meeting 170 Registration 51 Directors 39 Legal and audit 27 Miscellaneous 63 Total expenses 54,923 Expenses paid indirectly (278) Net expenses 54,645 Net investment income (loss) (111) Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (475,421) Foreign currency transactions (75) Net realized gain (loss) (475,496) Change in net unrealized gain (loss) on securities (1,152,131) Net realized and unrealized gain (loss) (1,627,627) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $(1,627,738) ----------- 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 Statement of Changes in Net Assets Year x Ended X 12/31/02 12/31/01 -------------------------------------------------------------------------------- Increase (Decrease) in Net Assets Operations Net investment income (loss) $ (111) $ (3,935) Net realized gain (loss) (475,496) (451,627) Change in net unrealized gain (loss) (1,152,131) (621,719) Increase (decrease) in net assets from operations (1,627,738) (1,077,281) Distributions to shareholders Tax return of capital Blue Chip Growth-Advisor Class shares (245) -- Capital share transactions * Shares sold Blue Chip Growth shares 1,093,942 1,459,474 Blue Chip Growth-Advisor Class shares 251,622 513,096 Blue Chip Growth-R Class shares 100 -- Distributions reinvested Blue Chip Growth shares -- -- Blue Chip Growth-Advisor Class shares 244 -- Shares redeemed Blue Chip Growth shares (1,355,267) (1,281,199) Blue Chip Growth-Advisor Class shares (53,645) (18,623) Increase (decrease) in net assets from capital share transactions (63,004) 672,748 Net Assets Increase (decrease) during period (1,690,987) (404,533) Beginning of period 6,711,364 7,115,897 End of period $ 5,020,377 $ 6,711,364 --------------- --------------- *Share information Shares sold Blue Chip Growth shares 43,856 49,123 Blue Chip Growth Advisor Class shares 10,496 16,749 Blue Chip Growth R Class shares 5 -- Distributions reinvested Blue Chip Growth Advisor Class shares 11 -- Shares redeemed Blue Chip Growth shares (55,121) (43,771) Blue Chip Growth Advisor Class shares (2,158) (666) Increase (decrease) in shares outstanding (2,911) 21,435 The accompanying notes are an integral part of these financial statements. -------------------------------------------------------------------------------- T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- December 31, 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 (the 1940 Act) 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 three classes of shares: Blue Chip Growth, offered since June 30, 1993, Blue Chip Growth-Advisor Class (Advisor Class), offered since March 31 2000, and Blue Chip Growth-R Class (R Class), which was first offered on September 30, 2002. Advisor Class shares are offered only through brokers and other financial intermediaries and R Class shares are only available to small retirement plans serviced by intermediaries. The Advisor Class and R Class each operate under separate Board-approved Rule 12b-1 plans, pursuant to which each class compensates financial intermediaries for distribution and certain administrative services. Each class has exclusive voting rights on matters related solely to that class, separate voting rights on matters that relate to all classes, and, in all other respects, the same rights and obligations as the other classes. 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 for domestic securities and the last quoted sale price for international securities. 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 The Advisor Class and R Class each pay distribution and administrative expenses in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% and 0.50%, respectively, 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 all 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 $277,000 and $1,000, respectively, for the year ended December 31, 2002. In-Kind Redemptions In certain circumstances, the fund may distribute portfolio securities rather than cash as payment for a redemption of fund shares (in-kind redemption). For financial reporting purposes, the fund recognizes a gain (loss) on in-kind redemptions to the extent fair value of the distributed securities on the date redemption exceeds cost. Gains and losses realized on in-kind redemptions are not recognized for tax purposes, and are reclassified from undistributed realized gain (loss) to paid-in capital. During the year ended December 31, 2002, the fund realized $19,412,000 of net gain (or loss) on $37,875,000 of in-kind redemptions. 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 $2,633,788,000 and $2,657,962,000, respectively, for the year ended December 31, 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 gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ significantly 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. Distributions during the year ended December 31, 2002 totaled $245,000 and were characterized as return of capital for tax purposes. At December 31, 2002, the tax-basis components of net assets were as follows: -------------------------------------------------------------------------------- Unrealized appreciation $589,712,000 Unrealized depreciation (821,631,000) Net unrealized appreciation (depreciation) (231,919,000) Capital loss carryforwards (918,169,000) Paid-in capital 6,170,465,000 Net assets $5,020,377,000 -------------------------------------------------------------------------------- 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. Consequently, $62,477,000 of realized losses reflected in the accompanying financial statements will not be recognized for tax purposes until 2003. The fund intends to retain realized gains to the extent of available capital loss carryforwards for federal income tax purposes. As of December 31, 2002, the fund had $485,133,000 of capital loss carryforwards that expire in 2009, and $433,036,000 that expire in 2010. For the year ended December 31, 2002, the fund recorded the following permanent reclassifications, which relate primarily to the current net operating loss and redemptions in kind. Results of operations and net assets were not affected by these reclassifications. -------------------------------------------------------------------------------- Undistributed net investment income $ 111,000 Undistributed net realized gain (19,373,000) Paid-in-capital 19,262,000 At December 31, 2002, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $5,343,974,000. -------------------------------------------------------------------------------- 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, Inc. 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 December 31, 2002, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $2,763,000. Through December 31, 2003 for the Advisor Class and through April 30, 2004 for the R Class, the manager has agreed to bear any expenses that would cause the class's ratio of total expenses to average net assets (expense ratio) to exceed 1.05% and 1.35%, respectively. Thereafter, through December 31, 2005 for the Advisor Class and through April 30, 2006 for the R Class, the 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 expense ratio to exceed 1.05% and 1.35%, respectively. 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 price 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 fund. Expenses incurred pursuant to these service agreements totaled $12,301,000 for the year ended December 31, 2002, of which $1,163,000 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 year ended December 31, 2002, the Blue Chip Growth share class was charged $339,000 for shareholder servicing costs related to the college savings plans, of which $281,000 was for services provided by Price and $40,000 was payable at period-end. At December 31, 2002, approximately 1.6% 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 Funds) may invest. The Spectrum Funds do not invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to special servicing agreements, expenses associated with the operation of the Spectrum Funds 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 the Spectrum Funds. Expenses allocated under these agreements are reflected as shareholder servicing expense in the accompanying financial statements. For the year ended December 31, 2002, the Blue Chip Growth class was allocated $424,000 of Spectrum Funds' expenses, of which $320,000 related to services provided by Price and $91,000 was payable at period-end. At December 31, 2002, approximately 3.6% of the outstanding shares of the Blue Chip Growth class were held by the Spectrum Funds. 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 13, 2002, totaled $345,000 and are reflected as interest income in the accompanying Statement of Operations. NOTE 5 - INTERFUND BORROWING Pursuant to the fund's prospectus, the fund may borrow up to 331/3% of its total assets. The fund is party to an interfund borrowing agreement between the fund and other T. Rowe Price-sponsored mutual funds, which permits it to borrow or lend cash at rates beneficial to both the borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's total assets are collateralized at 102% of the value of the loan; loans of less than 10% are unsecured. During the year ended December 31, 2002, the fund had outstanding borrowings on 22 days, in the average amount of $12,459,000, and at an average annual rate of 2.03%. There were no borrowings outstanding at December 31, 2002. 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, 2002, 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, 2002 by correspondence with custodians, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland January 21, 2003 T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Tax Information (Unaudited) for the Tax Year Ended 12/31/02 -------------------------------------------------------------------------------- We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements. For corporate shareholders, $245,000 of the fund's distributed income and short-term capital gains qualified for the dividends-received deduction. -------------------------------------------------------------------------------- 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) Year Elected* Principal Occupation(s) During Past 5 Years and Directorships of Other Public Companies -------------------------------------------------------------------------------- Anthony W. Deering (1/28/45) 2001 Director, Chairman of the Board, President, and Chief Executive Officer, The Rouse Company, real estate developers -------------------------------------------------------------------------------- Donald W. Dick, Jr. (1/27/43) 1993 Principal, EuroCapital Advisors, LLC, an acquisition and management advisory firm -------------------------------------------------------------------------------- David K. Fagin (4/9/38) 1993 Director, Dayton Mining Corp. (6/98 to present), Golden Star Resources Ltd., and Canyon Resources Corp. (5/00 to present); Chairman and President, Nye Corp. -------------------------------------------------------------------------------- F. Pierce Linaweaver (8/22/34) 2001 President, F. Pierce Linaweaver & Associates, Inc., consulting environmental and civil engineers -------------------------------------------------------------------------------- Hanne M. Merriman (11/16/41) 1994 Retail Business Consultant; Director, Ann Taylor Stores Corp., Ameren Corp., Finlay Enterprises, Inc., The Rouse Company, and US Airways Group, Inc. -------------------------------------------------------------------------------- John G. Schreiber (10/21/46) 2001 Owner/President, Centaur Capital Partners, Inc., a real estate investment company; Senior Advisor and Partner, Blackstone Real Estate Advisors, L.P.; Director, AMLI Residential Properties Trust, Host Marriott Corp., and The Rouse Company -------------------------------------------------------------------------------- Hubert D. Vos (8/2/33) 1993 Owner/President, Stonington Capital Corp., a private investment company -------------------------------------------------------------------------------- Paul M. Wythes (6/23/33) 1993 Founding Partner, Sutter Hill Ventures, a venture capital limited partnership, providing equity capital to young high-technology companies throughout the United States; Director, Teltone Corp. -------------------------------------------------------------------------------- * Each independent director oversees 105 T. Rowe Price portfolios and serves until the election of a successor. -------------------------------------------------------------------------------- T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Inside Directors Name (Date of Birth) Year Elected* [Number of T. Rowe Price Portfolios Overseen] Principal Occupation(s) During Past 5 Years and Directorships of Other Public Companies -------------------------------------------------------------------------------- James A.C. Kennedy (8/15/53) 1997 [37] Director and Vice President, T. Rowe Price and T. Rowe Price Group, Inc. -------------------------------------------------------------------------------- James S. Riepe (6/25/43) 1993 [105] Director and Vice President, T. Rowe Price; Vice Chairman of the Board, Director, and Vice President, T. Rowe Price Group, Inc.; Chairman of 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; Chairman of the Board, Blue Chip Growth Fund -------------------------------------------------------------------------------- M. David Testa (4/22/44) 1993 [105] Chief Investment Officer, Director, and Vice President, T. Rowe Price; Vice Chairman of the Board, Chief Investment Officer, Director, and Vice President, T. Rowe Price Group, Inc.; Director, T. Rowe Price Global Asset Management Limited, T. Rowe Price Global Investment Services Limited, and T. Rowe Price International, Inc.; Director and Vice President, T. Rowe Price Trust Company -------------------------------------------------------------------------------- * Each inside director serves until the election of a successor. -------------------------------------------------------------------------------- Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) -------------------------------------------------------------------------------- Joseph A. Carrier (12/30/60) Treasurer, Blue Chip Growth Fund Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc. -------------------------------------------------------------------------------- Donald J. Easley (11/28/71) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price -------------------------------------------------------------------------------- Henry M. Ellenbogen (1/21/71) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price; formerly Chief of Staff, U.S. Representative Peter Deutsch (to 1999); Executive Vice President, Business Development, HelloAsia (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 (continued) Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) -------------------------------------------------------------------------------- Robert N. Gensler (10/18/57) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price and T. Rowe Price Group, Inc. -------------------------------------------------------------------------------- Henry H. Hopkins (12/23/42) Vice President, Blue Chip Growth Fund Director and Vice President, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc. -------------------------------------------------------------------------------- Kris H. Jenner (2/5/62) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price and T. Rowe Price Group, Inc. -------------------------------------------------------------------------------- J. Jeffrey Lang (1/10/62) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price and T. Rowe Price Trust Company -------------------------------------------------------------------------------- Christopher R. Leonard (1/11/73) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price and T. Rowe Price Group, Inc. -------------------------------------------------------------------------------- Patricia B. Lippert (1/12/53) Secretary, Blue Chip Growth Fund Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services, Inc. -------------------------------------------------------------------------------- David S. Middleton (1/18/56) Controller, Blue Chip Growth Fund Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company -------------------------------------------------------------------------------- Timothy C. Parker (11/9/74) Vice President, Blue Chip Growth Fund Employee, T. Rowe Price; formerly Investment Banking Analyst, Robert W. Baird & Co., Inc. (to 1999); Student, Darden Graduate School, University of Virginia (to 2001) -------------------------------------------------------------------------------- Larry J. Puglia (8/25/60) President, Blue Chip Growth Fund Vice President, T. Rowe Price and 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, Blue Chip Growth Fund Vice President, T. Rowe Price and T. Rowe Price Group, Inc. -------------------------------------------------------------------------------- Robert W. Smith (4/11/61) Vice President, Blue Chip Growth Fund Vice President, T. Rowe Price, 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 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 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 Retirement 2010 Retirement 2020 Retirement 2030 Retirement 2040 Retirement Income Tax-Efficient Balanced BOND FUNDS Domestic Taxable Corporate Income GNMA High Yield* Inflation Protected Bond 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 (registerd trademark) T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 29058 F93-050 12/31/02