-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, HHc51n+fbDED9ZgrA0o55IRtGNtEslYXF0X9PznyJBjVVdOLOE/OsUgQTXBYQ+fm zbdPD6KfdfnYFwmYJEpZtw== 0000902259-94-000007.txt : 19940216 0000902259-94-000007.hdr.sgml : 19940216 ACCESSION NUMBER: 0000902259-94-000007 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE BLUE CHIP GROWTH FUND INC CENTRAL INDEX KEY: 0000902259 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 40 SEC FILE NUMBER: 811-07059 FILM NUMBER: 94508727 BUSINESS ADDRESS: STREET 1: C/O T ROWE PRICE ASSOCIATES INC STREET 2: 100 EAST E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 4105472000 N-30D 1 BLUE CHIP GROWTH FUND 12/31/93 Fellow Shareholders We are pleased to report that the Blue Chip Growth Fund followed its strong inaugural quarter with good performance in its second quarter of operations. For the three and six months since inception on July 1, the Fund outperformed the unmanaged Standard & Poor's 500 Stock Index and the Lipper Growth Fund Average by significant margins. Performance Comparison Periods Ended 12/31/93 3 Months 6 Months ______________________ Blue Chip Growth Fund 4.6% 14.3% S&P 500 2.3 5.0 Lipper Growth Fund Average 2.3 7.4 Year-End Distributions On December 21, the Fund's Board of Directors declared a dividend of $.05 per share and a short-term capital gain of $.14 per share, payable December 31 to shareholders of record on December 21. In early January, we mailed your check or statement reflecting the total distributions of $.19 per share. Form 1099-DIV, reporting the distributions for tax purposes, was mailed to you in late January. Market Environment Your Fund's strong performance occurred in a global environment marked by unsettled political and economic conditions in many countries. Unrest in the former Soviet Union and North Korea's possible nuclear ascendancy loomed large. Foreign economies, particularly in Japan and certain European countries, continued to grow slowly or decline. Evidence suggested, however, that several important European economies were stabilizing and could resume growing in 1994. NAFTA's passage and the potential for liberalized trade with European countries and Japan could ultimately help fuel global economic growth. On the home front, statistical data (e.g., housing starts, auto sales) continued to confirm that U.S. economic growth was already accelerating. Against this backdrop, the U.S. equity market recorded more modest gains for the second half of 1993 than the substantial returns generated by foreign equity markets. As is often the case, an accommodative monetary policy (and falling interest rates) in many foreign countries provided a favorable environment for equities. Returns on foreign stocks were also bolstered by strong growth in certain Asian and Latin American economies and a surge of investment assets into those markets. Subdued inflation and relatively low interest rates in the U.S. also supported a reasonably good environment for equities. However, signs of accelerating economic growth raised the specter that meaningful increases in inflation and interest rates could occur in 1994. Based on this risk and other factors, our view of the various market sectors has been influenced as follows: o Though financial stocks have been under pressure, we believe current valuations reflect the risk of rising interest rates to some degree. Thus, quality financial companies with demonstrated earnings growth in diverse economic environments should perform well in 1994. o Consumer nondurable stocks, which often underperform during periods of accelerated economic growth, have performed reasonably well. In particular, selected health care and consumer products stocks could continue to show improved performance in 1994, considering the modest valuation levels of these stocks. o Investors have been rotating in and out of cyclical stocks as expectations for economic growth have changed. We continue to build positions in well-managed companies in cyclical industries. However, we strive to identify cyclicals that will show strong earnings growth even if the economy slows. o Many large multinational companies (particularly those in the U.S.) may be poised to benefit from several emerging trends including: 1) improved efficiency and the companies' resultant positions as low-cost providers of products and services; 2) less restricted world trade; 3) a pickup in global economic growth; and 4) the continued strong expansion in the emerging economies, particularly in Latin America and Asia. Portfolio Review By December 31, the Fund was invested approximately 81% in common stocks and 19% in cash reserves. The largest industry and company holdings are provided in the tables following this letter. In the more cyclical industrial and technology sectors, the Fund made major investments in several companies which generated positive contributions to performance. General Electric, which was our second largest holding as of December 31, contributed significantly, particularly in the final three months of 1993. The company's leadership position as a provider of low-cost products continued to drive strong earnings growth in an improving economy. Allied-Signal generated strong earnings growth despite continued weakness in the aerospace industry, and improved 1994 prospects for this industry could signal a continuance of the company's exceptional performance for the Fund. Selected consumer nondurable stocks also did well. In particular, Pepsi showed notable price appreciation over the past three months. Pfizer, a blue chip pharmaceutical company, and several other pharmaceutical and HMO companies were bought at attractive prices, providing meaningful contributions to three- and six-month results. Though cognizant of the risks associated with health care reform and the pricing pressure attributable to the growing role of managed care groups, we believe health care companies with innovative products and careful cost controls can continue to show solid earnings growth. Several holdings in the entertainment and leisure sector were also top performers. We believe investors have not fully recognized the value of Disney's film production, theme park, and merchandising operations (as well as the synergy developed among these areas). An example of the synergy is the company's ability to produce animated feature films and distribute film character products through its extensive retailing operation. McDonald's continues to experience strong growth in international markets, and the company is expected to generate substantial free cash flow in the next several years. We purchased Shoney's, the family restaurant chain, at what we believe will prove to be an attractive valuation. By revamping its menu and restaurant format, the company has begun to realize improved revenue growth at stores open longer than one year. Though the Fund invests overwhelmingly in domestic companies, we are always seeking investments in high-quality international companies on a selective basis. As our top 25 portfolio holdings notes, we did participate in the Mexican market's strong performance through positions in companies such as Telmex, the largest telecommunications company in Mexico. Outlook Stocks remain valued in the upper quartile of their historical range. Relatively low inflation and interest rates are the principal supports for these valuations. Consequently, the potential for increased inflation and higher interest rates (in response to accelerated economic growth) might cause a correction in the equity markets. We accept that market corrections or declines are inevitable, but they do not negate the long-term growth potential inherent in the stock market. Also, we are optimistic about the prospect for liberalized world trade, renewed global economic growth, and the improved efficiency at many U.S. companies. These factors could help drive sharp earnings growth, particularly for U.S.-based multinational companies. We emphasize that the Fund is managed with a bias toward high-quality, well-managed companies with leading market positions and sound financial fundamentals-a philosophy designed to yield superior long-term results. While we would not expect to match our inaugural six-month performance on a regular basis, we believe our disciplined search for companies with durable, sustainable earnings growth and reasonable valuations will produce attractive returns for shareholders over time. Respectfully submitted, Thomas H. Broadus, Jr. President and Chairman of the Investment Advisory Committee January 28, 1994 Portfolio Highlights Three Months Ended December 31, 1993 SECTOR DIVERSIFICATION* Percent of Net Assets __________ Financial 22.3% Utilities 2.6 Consumer Nondurables 20.9 Consumer Services 12.8 Consumer Cyclicals 3.1 Technology 3.2 Capital Equipment 6.4 Business Services & Transportation 5.6 Energy 1.2 Process Industries 2.2 Basic Materials 1.1 Reserves 18.6 ____________________________________________________________________________ Total 100.0% *Sectors include securities listed as miscellaneous in the portfolio. Twenty-Five Largest Holdings December 31, 1993 Percent of Net Assets __________ Mid Ocean Limited 2.2% GE 1.8 Allied-Signal 1.7 Mellon Bank 1.6 PartnerRe Holdings 1.6 Pfizer 1.5 Albertson's 1.5 PepsiCo 1.5 UNUM 1.4 Fannie Mae 1.4 First Financial Management 1.4 Disney 1.4 TJX 1.4 Primerica 1.3 Telmex 1.3 Federated Department Stores 1.3 McArthur/Glen Realty 1.2 Charming Shoppes 1.2 McDonald's 1.2 NationsBank 1.2 Money Store 1.2 Chubb 1.2 Chemical Banking 1.1 Philip Morris 1.1 Danaher 1.1 ______________________________________________________________________________ Total 34.8% Key Statistics Change in N.A.V. ($10.93 to $11.24) $0.31* Dividend Per Share 0.05 Capital Gains Per Share 0.14 Total Net Assets $24.7 Million *Three months ended December 31, 1993. Chart 1 - Performance Comparison Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Major Portfolio Changes Three Months Ended December 31, 1993 PURCHASES Cost _________ PartnerRe Holdings* $500,000 Charming Shoppes* 327,750 NationsBank* 279,735 McArthur/Glen Realty* 268,750 U.S. West* 256,274 Danaher 246,023 Money Stores 246,000 Society Corp. 242,220 Toys "R" Us 239,130 First Financial Management 213,567 SALES Proceeds _________ Gillette $245,252 May Department Stores** 209,224 Dillard Department Stores** 201,488 Forest Laboratories 171,254 ONBANCorp** 166,863 Abbott Laboratories 143,885 Blockbuster Entertainment 137,997 General Mills** 135,888 Whirlpool 134,228 AMBAC** 132,006 * Position added ** Position eliminated Statement of Net Assets (Value in thousands) T. Rowe Price Blue Chip Growth Fund / December 31, 1993 Common Stocks - 81.4% BASIC MATERIALS - 1.1% Value ______ METALS - 1.1% 2,200 shs. Alcoa . . . . . . . . . . . . . . . $ 153 4,500 Inco. . . . . . . . . . . . . . . . 121 274 Total Basic Materials 274 BUSINESS SERVICES & TRANSPORTATION - 4.1% COMPUTER SERVICE & SOFTWARE - 2.5% 6,200 First Financial Management. . . . . 352 3,300 * Microsoft . . . . . . . . . . . . . 266 618 DISTRIBUTION SERVICES-0.7% 3,000 Alco Standard . . . . . . . . . . . 164 MISCELLANEOUS BUSINESS SERVICES-0.9% 8,500 WMX Technologies. . . . . . . . . . 224 Total Business Services & Transportation 1,006 CAPITAL EQUIPMENT-6.4% ELECTRICAL EQUIPMENT-1.8% 4,200 GE. . . . . . . . . . . . . . . . . 440 MACHINERY-4.6% 7,000 * Coltec Industries . . . . . . . . . 131 7,300 Danaher . . . . . . . . . . . . . . 279 16,000 * Reliance Electric (Class A) . . . . 270 7,000 Teleflex. . . . . . . . . . . . . . 259 8,000 TriMas. . . . . . . . . . . . . . . 195 1,134 Total Capital Equipment. . . . . . . . . . . . . . . . 1,574 CONSUMER CYCLICALS-3.1% BUILDING & REAL ESTATE-1.2% 12,500 McArthur/Glen Realty. . . . . . . . 305 MISCELLANEOUS CONSUMER DURABLES-1.9% 7,300 Corning . . . . . . . . . . . . . . 204 4,000 Whirlpool . . . . . . . . . . . . . 266 470 Total Consumer Cyclicals . . . . . . . . . . . . . . . 775 CONSUMER NONDURABLES-20.9% BEVERAGES-4.0% 6,000 shs. * Coca-Cola FEMSA, ADR. . . . . . . . $ 196 4,200 Coke. . . . . . . . . . . . . . . . 187 6,000 Panamerican Beverages (Class A) . . . . . . . . . . . 230 9,000 PepsiCo . . . . . . . . . . . . . . 368 981 COSMETICS-1.0% 4,000 Gillette. . . . . . . . . . . . . . 239 FOOD PROCESSING-2.8% 6,000 Campbell. . . . . . . . . . . . . . 246 7,500 McCormick . . . . . . . . . . . . . 185 11,000 Tyson Foods (Class A) . . . . . . . 264 695 HOSPITAL SUPPLIES/ HOSPITAL MANAGEMENT-2.7% 3,500 Abbott Laboratories . . . . . . . . 103 10,000 National Health Laboratories. . . . 143 4,200 U.S. Healthcare . . . . . . . . . . 242 2,200 United HealthCare . . . . . . . . . 167 655 MISCELLANEOUS CONSUMER PRODUCTS-3.7% 3,600 Colgate-Palmolive . . . . . . . . . 224 2,200 PPG Industries. . . . . . . . . . . 167 5,000 Philip Morris . . . . . . . . . . . 279 6,500 Phillips-Van Heusen . . . . . . . . 244 914 PHARMACEUTICALS-6.7% 5,000 * Forest Laboratories . . . . . . . . 238 5,500 Johnson & Johnson . . . . . . . . . 246 5,500 Pfizer. . . . . . . . . . . . . . . 379 7,000 * Roberts Pharmaceutical. . . . . . . 278 3,600 Schering-Plough . . . . . . . . . . 247 10,000 SmithKline Beecham, equity units, ADR . . . . . . . 274 1,662 Total Consumer Nondurables 5,146 CONSUMER SERVICES-11.8% ENTERTAINMENT & LEISURE-3.7% 8,200 Disney. . . . . . . . . . . . . . . 350 5,200 McDonald's. . . . . . . . . . . . . 296 11,000 * Shoney's. . . . . . . . . . . . . . 254 900 T. Rowe Price Blue Chip Growth Fund / Statement of Net Assets GENERAL MERCHANDISERS-2.9% 3,400 shs. Dayton Hudson . . . . . . . . . . . $ 227 12,000 TJX . . . . . . . . . . . . . . . . 350 6,000 Wal-Mart. . . . . . . . . . . . . . 150 727 SPECIALTY MERCHANDISERS-5.2% 14,000 Albertson's . . . . . . . . . . . . 375 300 BLOCKBUSTER Entertainment . . . . . 9 25,000 Charming Shoppes. . . . . . . . . . 297 15,000 * Federated Department Stores . . . . 311 1,000 * R.P. Scherer. . . . . . . . . . . . 38 6,000 * Toys "R" Us . . . . . . . . . . . . 245 1,275 Total Consumer Services 2,902 ENERGY-1.2% ENERGY SERVICES-0.9% 3,800 Schlumberger. . . . . . . . . . . . 225 INTEGRATED PETROLEUM- DOMESTIC-0.3% 700 Atlantic Richfield. . . . . . . . . 73 Total Energy 298 FINANCIAL-22.2% BANK & TRUST-8.5% 4,700 BankAmerica . . . . . . . . . . . . 218 7,000 Chemical Banking. . . . . . . . . . 281 2,000 First Security. . . . . . . . . . . 52 6,000 First Union . . . . . . . . . . . . 247 4,000 Integra Financial . . . . . . . . . 172 7,500 Mellon Bank . . . . . . . . . . . . 398 6,000 NationsBank . . . . . . . . . . . . 294 8,000 Norwest . . . . . . . . . . . . . . 195 8,500 Society Corp. . . . . . . . . . . . 253 2,110 FINANCIAL SERVICES-5.6% 8,000 Countrywide Credit. . . . . . . . . 201 4,500 Fannie Mae. . . . . . . . . . . . . 353 4,400 Green Tree Financial. . . . . . . . 211 12,000 Money Store . . . . . . . . . . . . 290 8,500 Primerica . . . . . . . . . . . . . 330 1,385 INSURANCE-8.1% 3,700 Chubb . . . . . . . . . . . . . . . 288 5,000 EXEL. . . . . . . . . . . . . . . . 222 19,000 * Mid Ocean Limited . . . . . . . . . 537 6,500 shs. National Re Holdings. . . . . . . . $ 201 18,000 * PartnerRe Holdings. . . . . . . . . 392 6,800 UNUM. . . . . . . . . . . . . . . . 357 1,997 Total Financial 5,492 PROCESS INDUSTRIES-2.2% PAPER & PAPER PRODUCTS-0.7% 3,300 Kimberly-Clark. . . . . . . . . . . 171 SPECIALTY CHEMICALS-1.5% 7,000 A. Schulman . . . . . . . . . . . . 236 6,200 Crompton & Knowles. . . . . . . . . 137 373 Total Process Industries 544 TECHNOLOGY-3.2% AEROSPACE & DEFENSE-1.7% 5,300 Allied-Signal . . . . . . . . . . . 419 ELECTRONIC COMPONENTS-1.0% 2,600 Motorola. . . . . . . . . . . . . . 240 TELECOMMUNICATIONS-0.5% 6,000 * Novell. . . . . . . . . . . . . . . 124 Total Technology 783 UTILITIES-2.3% TELEPHONE-2.3% 4,700 Telmex, ADR . . . . . . . . . . . . 317 5,400 U.S. WEST . . . . . . . . . . . . . 248 Total Utilities 565 MISCELLANEOUS-2.9% . . . . . . . . . . . . . . . . 710 Total Common Stocks (Cost-$18,884) 20,069 Short-Term Investments-17.9% COMMERCIAL PAPER-17.9% $ 1,000,000 Caisse des Depots et Consignations, 3.30%, 1/12/94. . . . . . . . . . 993 100,000 General Electric Capital, 3.26%, 5/9/94 . . . . . . . . . . 99 153,000 Harvard University, 3.20%, 1/3/94 . . . . . . . . . . 153 255,000 Kingdom of Spain, 3.22%, 2/15/94. . . . . . . . . . 252 500,000 Morgan Stanley Group, VRMTN, 3.475%, 3/15/95. . . . . . 500 $ 500,000 Panasonic Finance, 3.35%, 2/4/94 . . . . . . . . . . $ 496 500,000 PHH, 3.32%, 1/12/94. . . . . . . . . . 498 600,000 Procter & Gamble, 3.15%, 4/8/94. . . . . . . . . . . 594 300,000 Province of British Columbia, 3.30%, 2/11/94 . . . . . . . . . . 295 525,000 Volkswagon Of America, 3.30%, 1/31/94 . . . . . . . . . . 523 Total Short-Term Investments (Cost-$4,403) 4,403 Total Investments in Securities- 99.3% (Cost $23,287) 24,472 Other Assets Less Liabilities-0.7% 179 Net Assets Consisting of: Accumulated realized gains/losses- net of distributions. . . . . . . . . . . . . . . $ 372 Unrealized appreciation of investments. . . . . . . . . . . . . . . . . . . . 1,185 Paid-in-capital applicable to 2,194,008 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized. . . . . . . . . . 23,094 _______ Net Assets-100.0% $24,651 _______ _______ Net Asset Value Per Share $11.24 _______ _______ * Non-income producing VRMTN Variable rate medium term note Statement of Operations T. Rowe Price Blue Chip Growth Fund / From June 30, 1993 (Commencement of Operations) to December 31, 1993 Amounts in Thousands _______________________ INVESTMENT INCOME Income Dividends . . . . . . . . . . . . . . . . . . . $ 105 Interest . . . . . . . . . . . . . . . . . . . . 65 _______ Total income $ 170 Expenses Shareholder servicing fees & expenses. . . . . . 61 Custodian and accounting fees & expenses . . . . 41 Legal & auditing fees. . . . . . . . . . . . . . 12 Registration fees & expenses . . . . . . . . . . 7 Organizational expenses. . . . . . . . . . . . . 5 Directors' fees & expenses . . . . . . . . . . . 4 Prospectus & shareholder reports . . . . . . . . 3 Less: Expenses reimbursed by Manager . . . . . . (30) ________ Total expenses 103 ______ Net investment income 67 REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain. . . . . . . . . . . . . . . . . 703 Change in unrealized appreciation or depreciation . . . . . . . . . . 1,185 _______ Net gain on investments. . . . . . . . . . . . . . 1,888 ________ INCREASE IN NET ASSETS FROM OPERATIONS $1,955 ________ ________ The accompanying notes are an integral part of these financial statements. Statement of Changes in Net Assets T. Rowe Price Blue Chip Growth Fund / From June 30, 1993 (Commencement of Operations) to December 31, 1993 Amounts in Thousands _______________________ INCREASE (DECREASE) IN NET ASSETS Operations Net investment income. . . . . . . . . . . . . . $ 67 Net realized gain on investments . . . . . . . . 703 Change in unrealized appreciation or depreciation of investments. . . . . . . 1,185 _______ Increase in net assets from operations . . . . . 1,955 _______ Distributions to shareholders Net investment income. . . . . . . . . . . . . . (106) Net realized gain on investments . . . . . . . . (298) _______ Decrease in net assets from distributions to shareholders. . . . . . . . . . . (404) _______ Capital share transactions Sold 2,377 shares. . . . . . . . . . . . . . . . 25,060 Distributions reinvested of 35 shares. . . . . . 389 Redeemed 228 shares. . . . . . . . . . . . . . . (2,492) _______ Increase in net assets from capital share transactions . . . . . . . . . 22,957 _______ Net equalization . . . . . . . . . . . . . . . . . 43 _______ Total increase . . . . . . . . . . . . . . . . . . 24,551 NET ASSETS Beginning of period. . . . . . . . . . . . . . . 100 End of period. . . . . . . . . . . . . . . . . . $24,651 _______ _______ The accompanying notes are an integral part of these financial statements. Notes to Financial Statements T. Rowe Price Blue Chip Growth Fund / December 31, 1993 Note 1-Significant Accounting Policies T. Rowe Price Blue Chip Growth Fund (the Fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. A) Valuation-Equity securities listed or regularly traded on a securities exchange (including NASDAQ) are valued at the last quoted sales price on the day the valuations are made. A security which is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Other equity securities and those listed securities that are not traded on a particular day are valued at a price within the limits of the latest bid and asked prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by, or under the supervision of, the officers of the Fund, as authorized by the Board of Directors. B) Other-Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on an identified cost basis. Dividend income and distributions to shareholders are recorded by the Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. The Fund follows the practice of equalization under which undistributed net investment income per share is unaffected by Fund shares sold or redeemed. Note 2-Organization The Fund was organized on April 21, 1993 and had no operations prior to June 30, 1993, other than those related to organizational matters, including the sale of 10,000 shares of its capital stock at $10.00 per share on June 25, 1993, to T. Rowe Price Associates, Inc. Note 3-Portfolio Transactions Purchases and sales of portfolio securities, other than short-term and U.S. Government securities, aggregated $23,806,000 and $5,625,000 respectively, for the period ended December 31, 1993. Note 4-Federal Income Taxes No provision for federal income taxes is required since the Fund intends to qualify as a regulated investment company and distribute all of its taxable income. At December 31, 1993, the aggregate cost of investments for federal income tax and financial reporting purposes was $23,287,000 and net unrealized appreciation aggregated $1,185,000, of which $1,560,000 related to appreciated investments and $375,000 to depreciated investments. Note 5-Related Party Transactions The investment management agreement between the Fund and T. Rowe Price Associates, Inc. (the Manager) provides for an annual investment management fee, computed daily and paid monthly, consisting of an Individual Fund Fee equal to 0.30% of average daily net assets and a Group Fee. The Group Fee is based on the combined assets of certain mutual funds sponsored by the Manager or Rowe Price-Fleming International, Inc. (the Group). The Group Fee rate ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in excess of $34 billion. The effective annual Group Fee rate at December 31, 1993 and for the period then ended was 0.35%. The Fund pays a pro rata portion of the Group Fee based on the ratio of the Fund's net assets to those of the Group. Under the terms of the investment management agreement, the Manager is required to bear any expenses through December 31, 1994, which would cause the Fund's ratio of expenses to average net assets to exceed 1.25%. Thereafter, the Fund is required to reimburse the Manager for these expenses, provided average net assets have grown or expenses have declined sufficiently so as not to cause the Fund's ratio of expenses to average net assets to exceed 1.25% in any month, and that no such reimbursement shall be made to the Manager after December 31, 1996. Pursuant to this agreement, $53,000 of management fees were not accrued by the Fund for the period ended December 31, 1993, and $30,000 of other expenses were borne by the Manager and subject to future reimbursement. T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc. (RPS) are wholly owned subsidiaries of the Manager. TRPS provides transfer and dividend disbursing agent functions and shareholder services for all accounts. RPS provides subaccounting and recordkeeping services for certain retirement accounts invested in the Fund. The Manager, under a separate agreement, calculates the daily share price and maintains the financial records of the Fund. For the period ended December 31, 1993 the Fund incurred fees totalling approximately $62,000 for these services provided by related parties. At December 31, 1993, these service fees payable were $16,000. Financial Highlights T. Rowe Price Blue Chip Growth Fund / From June 30, 1993 (Commencement of Operations) to December 31, 1993 For a share outstanding through the period ___________________________________________ NET ASSET VALUE, BEGINNING OF PERIOD. . . . . . . . . . $ 10.00 ______ Investment Activities Net investment income. . . . . . . . . 0.05* Net realized and unrealized gain . . . . . . . . . . 1.38 ______ Total from Investment Activities . . . . 1.43 ______ Distributions Net investment income. . . . . . . . . (0.05) Net realized gain. . . . . . . . . . . (0.14) ______ Total Distributions. . . . . . . . . . . (0.19) ______ NET ASSET VALUE, END OF PERIOD. . . . . . . . . . . . . $ 11.24 ______ ______ RATIOS / SUPPLEMENTAL DATA Total Return . . . . . . . . . . . . . . 14.3% Ratio of Expenses to Average Net Assets . . . . . . . . . . 1.25%!* Ratio of Net Investment Income to Average Net Assets . . . . . 0.80%! Portfolio Turnover Rate. . . . . . . . . 89.0%! Net Assets, End of Period (in thousands). . . . . . . . . $ 24,651 Number of Shareholder Accounts, End of Period. . . . . . . . . . . . 3,000 ! Annualized * Excludes expenses in excess of a 1.25% voluntary expense limitation in effect through December 31, 1994. Report of Independent Accountants To the Shareholders and Board of Directors of 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 selected per share data and information (which appears under the heading "Financial Highlights") present fairly, in all material respects, the financial position of T. Rowe Price Blue Chip Growth Fund, Inc. at December 31, 1993, the results of its operations, the changes in its net assets and the selected per share data and information for the period June 30, 1993 (commencement of operations) to December 31, 1993, in conformity with generally accepted accounting principles. These financial statements and selected per share data and information (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 audit. We conducted our audit of these financial statements in accordance with generally accepted auditing standards 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 audit, which included confirmation of securities at December 31, 1993 by correspondence with custodians and brokers and, where appropriate, the application of alternative auditing procedures for unsettled security transactions, provides a reasonable basis for the opinion expressed above. PRICE WATERHOUSE Baltimore, Maryland January 19, 1994 Officers and Directors Thomas H. Broadus, Jr., President/Director Leo C. Bailey, Director Donald W. Dick, Director David K. Fagin, Director Addison Lanier, Director John K. Major, Director James S. Riepe, Vice President/Director M. David Testa, Director Hubert D. Vos, Director Paul M. Wythes, Director Henry H. Hopkins, Vice President Larry J. Puglia, Vice President Lenora V. Hornung, Secretary Carmen F. Deyesu, Treasurer David S. Middleton, Controller Chart 1-Performance Comparison A line graph compares the 12/31/93 value of a hypothetical $10,000 investment made in the Blue Chip Growth Fund at its inception (6/30/93) and a similar investment made concurrently in the S&P 500. At 12/31/93, the Fund investment would have been worth $11,432, the Index investment would have been worth $10,496. -----END PRIVACY-ENHANCED MESSAGE-----