N-CSRS 1 bcg.txt T. ROWE PRICE BLUE CHIP GROWTH FUND Item 1. Report to Shareholders T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Certified Financials T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Certified Financials (Unaudited) FINANCIAL HIGHLIGHTS For a share outstanding throughout each period -------------------------------------------------------------------------------- Blue Chip Growth shares 6 Months Year Ended Ended 6/30/03 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98 -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $21.95 $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) 3.08 (7.02) (4.86) (0.84) 6.07 6.82 Total from investment activities 3.08 (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 $25.03 $21.95 $28.97 $33.85 $36.34 $30.60 ------ ------ ------ ------ ------ ------ Ratios/Supplemental Data Total return^ 14.03% (24.23)% (14.42)% (2.53)% 20.00% 28.84% Ratio of total expenses to average net assets 0.99%+ 0.96% 0.96% 0.91% 0.91% 0.91% Ratio of net investment income (loss) to average net assets 0.01%+ 0.00% (0.06)% (0.09)% 0.10% 0.43% Portfolio turnover rate 34.5%+ 46.2% 48.3% 50.9% 41.3% 34.5% Net assets, end of period (in millions) $ 5,384 $ 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. + Annualized The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Certified Financials (Unaudited) FINANCIAL HIGHLIGHTS For a share outstanding throughout each period -------------------------------------------------------------------------------- Blue Chip Growth-Advisor shares 6 Months Year 3/31/00 Ended Ended Through 6/30/03 12/31/02 12/31/01 12/31/00 -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 21.97 $ 29.02 $ 33.91 $ 38.63 Investment activities Net investment income (loss) -- -- (0.01) 0.02++ Net realized and unrealized gain (loss) 3.08 (7.04) (4.88) (3.12) Total from investment activities 3.08 (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 $ 25.05 $ 21.97 $ 29.02 $ 33.91 ----------- ----------- ----------- ----------- Ratios/Supplemental Data Total return^ 14.02% (24.26)% (14.42)% (8.15)% Ratio of total expenses to average net assets 0.98%+ 0.99% 0.99% 0.69%+ Ratio of net investment income (loss) to average net assets 0.03%+ (0.01)% (0.04)% 0.25%+ Portfolio turnover rate 34.5%+ 46.2% 48.3% 50.9% Net assets, end of period (in thousands) $ 598,006 $ 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. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Certified Financials (Unaudited) FINANCIAL HIGHLIGHTS For a share outstanding throughout each period -------------------------------------------------------------------------------- Blue Chip Growth-R Class shares 6 Months 9/30/02 Ended Through 6/30/03 12/31/02 -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 21.93 $ 20.37 Investment activities Net investment income (loss) (0.01)*++ (0.02)* Net realized and unrealized gain (loss) 3.04 1.58++ Total from investment activities 3.03 1.56 NET ASSET VALUE End of period $ 24.96 $ 21.93 --------------- --------------- Ratios/Supplemental Data Total return^ 13.82%* 7.66%* Ratio of total expenses to average net assets 1.35%+* 1.35%+* Ratio of net investment income (loss) to average net assets (0.32%)+* (0.28%)+* Portfolio turnover rate 34.5%+ 46.2% Net assets, end of period (in thousands) $ 432 $ 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 -------------------------------------------------------------------------------- Certified Financials (Unaudited) June 30, 2003 STATEMENT OF NET ASSETS Shares Value -------------------------------------------------------------------------------- In thousands COMMON STOCKS 100.0% CONSUMER DISCRETIONARY 15.4% AUTOMOBILES 0.4% Harley-Davidson 680,000 $ 27,105 27,105 HOTELS, RESTAURANTS & LEISURE 1.5% Carnival 1,240,000 40,312 International Game Technology * 220,000 22,512 MGM Mirage * 100,000 3,418 Starbucks * 880,000 21,578 87,820 MEDIA 9.3% AOL Time Warner * 3,300,000 53,097 Clear Channel Communications * 2,350,000 99,617 Comcast, Class A, Special * 2,200,000 63,426 Disney 1,000,000 19,750 Echostar Communications, Class A * 1,600,000 55,392 Liberty Media, Class A * 3,250,000 37,570 Omnicom 500,000 35,850 Scripps, Class A 340,000 30,165 Univision Communications, Class A * 1,360,000 41,344 Viacom, Class B * 2,725,000 118,973 555,184 MULTILINE RETAIL 1.9% Kohl's * 830,000 42,645 Target 1,940,000 73,410 116,055 SPECIALTY RETAIL 2.3% Best Buy * 770,000 33,818 Home Depot 3,000,000 99,360 Weight Watchers * 100,000 4,549 137,727 Total Consumer Discretionary 923,891 CONSUMER STAPLES 5.9% BEVERAGES 2.0% Coca-Cola 1,500,000 $ 69,615 PepsiCo 1,180,000 52,510 122,125 FOOD & STAPLES RETAILING 1.7% Sysco 830,000 24,933 Wal-Mart 1,475,000 79,163 Walgreen 10,000 301 104,397 FOOD PRODUCTS 0.3% Campbell Soup 100,000 2,450 General Mills 370,000 17,542 19,992 HOUSEHOLD PRODUCTS 0.8% Colgate-Palmolive 470,000 27,236 Procter & Gamble 220,000 19,620 46,856 PERSONAL PRODUCTS 0.6% Estee Lauder, Class A 500,000 16,765 Gillette 500,000 15,930 32,695 TOBACCO 0.5% Altria Group 640,000 29,082 29,082 Total Consumer Staples 355,147 ENERGY 3.9% ENERGY EQUIPMENT & SERVICES 3.3% Baker Hughes 1,700,000 57,069 BJ Services * 950,000 35,492 Schlumberger 1,400,000 66,598 Smith International * 950,000 34,903 194,062 OIL & GAS 0.6% Exxon Mobil 1,000,000 35,910 35,910 Total Energy 229,972 FINANCIALS 24.0% CAPITAL MARKETS 7.4% Bank of New York 1,150,000 $ 33,062 Charles Schwab 2,320,000 23,409 Franklin Resources 340,000 13,284 Goldman Sachs Group 668,000 55,945 Legg Mason 385,000 25,006 Mellon Financial 2,350,000 65,212 Merrill Lynch 1,475,000 68,853 Morgan Stanley 1,120,000 47,880 Northern Trust 1,030,000 43,044 State Street 1,630,000 64,222 439,917 COMMERCIAL BANKS 3.7% Bank of America 1,300,000 102,739 U.S. Bancorp 2,375,000 58,188 Wells Fargo 1,240,000 62,496 223,423 CONSUMER FINANCE 1.2% American Express 550,000 22,995 SLM Corporation 1,176,000 46,064 69,059 DIVERSIFIED FINANCIAL SERVICES 4.2% Citigroup 5,900,000 252,520 252,520 INSURANCE 5.6% AMBAC 550,000 36,437 American International Group 2,000,000 110,360 Hartford Financial Services Group 860,000 43,310 Marsh & McLennan 1,600,000 81,712 Progressive Corporation 280,000 20,468 Travelers Property Casualty, Class A 2,660,000 42,294 334,581 THRIFTS & MORTGAGE FINANCE 1.9% Fannie Mae 1,085,000 73,173 Freddie Mac 860,000 43,662 116,835 Total Financials 1,436,335 HEALTH CARE 18.9% BIOTECHNOLOGY 2.0% Amgen * 1,330,000 $88,365 MedImmune * 910,000 33,097 121,462 HEALTH CARE EQUIPMENT & SUPPLIES 1.6% Biomet 10,000 287 Boston Scientific * 700,000 42,770 Medtronic 680,000 32,619 St. Jude Medical * 130,000 7,475 Stryker 170,000 11,793 94,944 HEALTH CARE PROVIDERS & SERVICES 5.3% AmerisourceBergen 160,000 11,096 Cardinal Health 575,000 36,973 HCA 100,000 3,204 UnitedHealth Group 3,850,000 193,462 Wellpoint Health Networks * 820,000 69,126 313,861 PHARMACEUTICALS 10.0% Abbott Laboratories 1,475,000 64,546 Allergan 70,000 5,397 Biovail * 1,060,000 49,884 Eli Lilly 400,000 27,588 Forest Labs * 770,000 42,157 Johnson & Johnson 1,670,000 86,339 Pfizer 7,700,000 262,955 Wyeth 1,360,000 61,948 600,814 Total Health Care 1,131,081 INDUSTRIALS & BUSINESS SERVICES 7.4% Aerospace & Defense 0.2% General Dynamics 170,000 12,325 12,325 Air Freight & Logistics 0.5% UPS, Class B 470,000 29,939 29,939 COMMERCIAL SERVICES & SUPPLIES 1.7% Apollo Group, Class A * 1,180,000 $ 72,877 Cendant * 1,450,000 26,564 99,441 INDUSTRIAL CONGLOMERATES 3.4% 3M 25,000 3,224 GE 3,850,000 110,418 Tyco International 4,850,000 92,053 205,695 MACHINERY 1.6% Danaher 1,400,000 95,270 95,270 Total Industrials & Business Services 442,670 INFORMATION TECHNOLOGY 20.1% COMMUNICATIONS EQUIPMENT 2.6% Cisco Systems * 6,920,000 115,495 Nokia ADR 1,450,000 23,823 QUALCOMM 430,000 15,373 154,691 COMPUTER & PERIPHERALS 1.7% Dell Computer * 2,320,000 74,147 IBM 100,000 8,250 Lexmark International, Class A * 275,000 19,462 101,859 INTERNET SOFTWARE & SERVICES 2.1% InterActiveCorp * 1,900,000 75,183 Yahoo! * 1,540,000 50,450 125,633 IT SERVICES 5.1% Accenture, Class A * 1,300,000 23,517 Affiliated Computer Services, Class A * 1,300,000 59,449 Automatic Data Processing 10,000 339 First Data 3,700,000 153,328 Fiserv * 920,000 32,761 Paychex 610,000 17,879 SunGard Data Systems * 590,000 15,287 302,560 SEMICONDUCTOR & SEMICONDUCTOR EQUIPMENT 4.1% Analog Devices * 1,700,000 $ 59,194 Applied Materials * 2,250,000 35,685 Intel 1,200,000 24,941 KLA-Tencor * 430,000 19,991 Maxim Integrated Products 1,900,000 64,961 QLogic * 460,000 22,232 Texas Instruments 860,000 15,136 Xilinx * 160,000 4,049 246,189 SOFTWARE 4.5% Adobe Systems 500,000 16,035 Intuit * 610,000 27,163 Microsoft 7,550,000 193,356 Symantec * 550,000 24,123 VERITAS Software * 300,000 8,601 269,278 Total Information Technology 1,200,210 TELECOMMUNICATION SERVICES 2.9% WIRELESS TELECOMMUNICATION SERVICES 2.9% Nextel Communications, Class A * 3,400,000 61,472 Vodafone ADR 5,680,000 111,612 Total Telecommunication Services 173,084 Total Miscellaneous Common Stocks 1.5% 89,148 Total Common Stocks (Cost $5,202,738) 5,981,538 SHORT-TERM INVESTMENTS 0.3% MONEY MARKET FUND 0.3% T. Rowe Price Reserve Investment Fund, 1.16% # 21,074,684 21,075 Total Short-Term Investments (Cost $21,075) 21,075 Value -------------------------------------------------------------------------------- In thousands Total Investments in Securities 100.3% of Net Assets (Cost $5,223,813) $ 6,002,613 Other Assets Less Liabilities (20,242) NET ASSETS $ 5,982,371 ----------- Net Assets Consist of: Undistributed net investment income (loss) $ 339 Undistributed net realized gain (loss) (1,197,061) Net unrealized gain (loss) 778,800 Paid-in-capital applicable to 239,018,376 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized 6,400,293 NET ASSETS $ 5,982,371 ----------- NET ASSET VALUE PER SHARE Blue Chip Growth shares ($5,383,932,790/215,132,422 shares outstanding) $ 25.03 ----------- Blue Chip Growth-Advisor Class shares ($598,006,302/23,868,646 shares outstanding) $ 25.05 ----------- Blue Chip Growth-R Class shares ($432,022/17,308 shares outstanding) $ 24.96 ----------- # 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 -------------------------------------------------------------------------------- Certified Financials (Unaudited) STATEMENT OF OPERATIONS -------------------------------------------------------------------------------- In thousands 6 Months Ended 6/30/03 Investment Income (Loss) Income Dividend $ 26,337 Income distributions from mutual funds 119 Securities lending 31 Total income 26,487 Expenses Investment management 16,536 Shareholder servicing Blue Chip Growth shares 8,368 Blue Chip Growth-Advisor Class shares 289 Distribution Blue Chip Growth-Advisor Class shares 732 Blue Chip Growth-R Class shares 1 Prospectus and shareholder reports Blue Chip Growth shares 270 Custody and accounting 137 Registration 51 Directors 18 Legal and audit 17 Miscellaneous 4 Total expenses 26,423 Expenses paid indirectly (275) Net expenses 26,148 Net investment income (loss) 339 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (216,184) Foreign currency transactions (231) Net realized gain (loss) (216,415) Change in net unrealized gain (loss) on securities 948,242 Net realized and unrealized gain (loss) 731,827 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 732,166 --------- The accompanying notes are an integral part of these financial statements T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Certified Financials (Unaudited) STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 6/30/03 12/31/02 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ 339 $ (111) Net realized gain (loss) (216,415) (475,496) Change in net unrealized gain (loss) 948,242 (1,152,131) Increase (decrease) in net assets from operations 732,166 (1,627,738) Distributions to shareholders Tax return of capital Blue Chip Growth-Advisor Class shares - (245) Capital share transactions * Shares sold Blue Chip Growth shares 644,243 1,093,942 Blue Chip Growth-Advisor Class shares 98,111 251,622 Blue Chip Growth-R Class shares 308 100 Distributions reinvested Blue Chip Growth-Advisor Class shares - 244 Shares redeemed Blue Chip Growth shares (393,843) (1,355,267) Blue Chip Growth-Advisor Class shares (118,963) (53,645) Blue Chip Growth-R Class shares (28) - Increase (decrease) in net assets from capital share transactions 229,828 (63,004) Net Assets Increase (decrease) during period 961,994 (1,690,987) Beginning of period 5,020,377 6,711,364 End of period $5,982,371 $5,020,377 ---------- ---------- 6 Months Year Ended Ended 6/30/03 12/31/02 *Share information Shares sold Blue Chip Growth shares 28,342 43,856 Blue Chip Growth-Advisor Class shares 4,341 10,496 Blue Chip Growth-R Class shares 13 5 Distributions reinvested Blue Chip Growth-Advisor Class shares - 11 Shares redeemed Blue Chip Growth shares (17,434) (55,121) Blue Chip Growth-Advisor Class shares (4,988) (2,158) Blue Chip Growth-R Class shares (1) - Increase (decrease) in shares outstanding 10,273 (2,911) ------ ------ The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund -------------------------------------------------------------------------------- Certified Financials (Unaudited) June 30, 2003 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 (Blue Chip Growth class), 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), offered since 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 Investments are valued at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business. 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. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Other investments and those 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. Most foreign markets close before the NYSE. Developments that could affect the values of securities that occur between the close of a foreign market and the close of the NYSE normally will not be reflected in security valuations. However, if such developments are so significant that they will, in the judgment of the officers of the fund, clearly and materially affect the value of securities, the previous closing prices may be adjusted to reflect the fair value of the securities as of the close of the NYSE, 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, including investments, 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 as 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 date of the transaction. The effect of changes in foreign currency 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 $274,000 and $1,000, respectively, for the six months ended June 30, 2003. 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 Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund's prospectus and Statement of Additional Information. Securities Lending The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and U.S. government securities valued at 102% to 105% of the value of the securities on loan. Cash collateral is invested in a money market pooled trust managed by the fund's lending agent in accordance with investment guidelines approved by fund management. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund the next business day. Although risk is mitigated by the collateral, the fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. Securities lending revenue recognized by the fund consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower and compensation to the lending agent. At June 30, 2003, there were no securities on loan. Purchases and sales of portfolio securities, other than short-term securities, aggregated $1,155,270,000 and $921,670,000, respectively, for the six months ended June 30, 2003. 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 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, 2003. 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, $62,477,000 of realized losses recognized for financial reporting purposes in the year ended December 31, 2002 were recognized for tax purposes on January 1, 2003. Further, the fund intends to retain realized gains to the extent of available capital loss carryforwards. As of December 31, 2002, the fund had $918,169,000 of unused capital loss carryforwards, of which $485,133,000 expire in 2009, and $433,036,000 expire in 2010. At June 30, 2003, the cost of investments for federal income tax purposes was $5,223,813,000. Net unrealized gain aggregated $778,800,000 at period-end, of which $1,076,861,000 related to appreciated investments and $298,061,000 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, 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 June 30, 2003, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $3,063,000. Through December 31, 2003 for the Advisor Class and through April 30, 2004 for the R Class, the manager is required to bear any expenses, excluding interest, taxes, brokerage commissions, and extraordinary 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, each 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. This agreement had no impact on the fund's total expenses during the six months ended June 30, 2003. 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 class and R Class. Expenses incurred pursuant to these service agreements totaled $6,254,000 for the six months ended June 30, 2003, of which $1,267,000 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, 2003, the Blue Chip Growth class was charged $213,000 for shareholder servicing costs related to the college savings plans, of which $170,000 was for services provided by Price and $46,000 was payable at period-end. At June 30, 2003, approximately 1.9% of the outstanding shares of the Blue Chip Growth 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 six months ended June 30, 2003, the Blue Chip Growth class was allocated $236,000 of Spectrum Funds' expenses, of which $171,000 related to services provided by Price and $150,000 was payable at period-end. At June 30, 2003, approximately 4.0% 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, trusts, 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, 2003, totaled $119,000. NOTE 5 - INTERFUND BORROWING Pursuant to the fund's prospectus, the fund may borrow up to 33 1/3% 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 six months ended June 30, 2003, the fund had outstanding borrowings on 6 days, in the average amount of $11,200,000, and at an average annual rate of 1.55%. There were no borrowings outstanding at June 30, 2003. Item 2. Code of Ethics. Not required at this time. Item 3. Audit Committee Financial Expert. Not required at this time. Item 4. Principal Accountant Fees and Services. Not required at this time. Item 5. Audit Committee of Listed Registrants. Not required at this time. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures (a) The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a)(1) Not required at this time. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. T. Rowe Price Blue Chip Growth Fund, Inc. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date August 22, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date August 22, 2003 By /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer Date August 22, 2003