-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SEe0BToUcm9ML6QrOcAA0JGd0NJ8597775iArrT/UNNCwtIPbtw4DbkghBusrBZW 9fXYf3g6zxuLsYq5h5Gzew== 0000902259-97-000007.txt : 19970731 0000902259-97-000007.hdr.sgml : 19970731 ACCESSION NUMBER: 0000902259-97-000007 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970730 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE BLUE CHIP GROWTH FUND INC CENTRAL INDEX KEY: 0000902259 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07059 FILM NUMBER: 97647668 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 - -------------------------------------------------------------------------------- T. Rowe Price - -------------------------------------------------------------------------------- SemiAnnual Report Blue Chip Growth Fund - -------------------------------------------------------------------------------- June 30, 1997 - -------------------------------------------------------------------------------- Report Highlights ================================================================================ Blue Chip Growth Fund * Favorable economic data and strong corporate earnings in the first half helped sustain strong performance in the stock market, especially in large-cap, blue chip stocks. * For the six-month period ended June 30, the fund's strong return outperformed its Lipper peer group average but trailed the S&P 500. * Many holdings in the consumer products, financial, and technology industries contributed to performance. However, sharp losses in certain individual stocks, such as 3Com, prevented even higher gains. * The fund continued to build positions in some large existing holdings and also initiated several positions. * Although the stock market's pace must inevitably slow, positive economic news and steady corporate earnings should continue to benefit investments in well-managed, reasonably priced blue chip companies. Fellow Shareholders ================================================================================ The U.S. stock market posted robust gains in the first half of 1997, accentuating the consistent strength the market has demonstrated throughout the past year. These gains were supported by economic data and market fundamentals that were quite positive. Large-capitalization, blue chip stocks were among the best performers. ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 6/30/97 6 Months 12 Months - -------------------------------------------------------------------------------- Blue Chip Growth Fund 15.48% 32.59% S&P 500 20.61 34.70 Lipper Growth Funds Average 14.28 23.96 ================================================================================ In this favorable environment, your fund continued to perform reasonably well. For the six months ended June 30, the Blue Chip Growth Fund outperformed its peer group average but lagged the overall stock market, as measured by the unmanaged Standard & Poor's 500 Stock Index. For the 12-month period, your fund outpaced the peer group average significantly and trailed the S&P 500 by a narrow margin. MARKET ENVIRONMENT ================================================================================ The U.S. stock market surprised many investors with its consistent strength. The S&P 500's double-digit percentage gain in the first half of 1997 comes on the heels of consecutive gains of more than 37% in 1995 and 22% in 1996. No immediate concerns appeared to interrupt this advance: inflation and interest rate data, mutual fund inflows, and corporate earnings remained favorable. Long-term interest rates have begun to moderate, falling below 6.75% recently. In prior letters we warned that economic growth might be accelerating above the Federal Reserve's comfort level. While some data support this thesis, other information, including slowing factory orders and retail sales, point to an economy growing at a controlled pace. Crop and related food prices are benign; certain food categories have even exhibited deflation. Energy prices have also declined, with crude oil recently falling below $20 per barrel. Although the interest rate environment has been beneficial, we remain concerned about the inconsistent economic performance of our key trading partners and a related risk to multinational companies' earnings. Japan's economy is growing only slowly. Several European economies, including Germany, are also struggling. However, even this risk could be diminishing, as many economies have begun to improve. We are aware that stock valuations already reflect much of this positive news. However, we continue to find quality growth companies at reasonable valuations. PORTFOLIO REVIEW ================================================================================ Consumer products stocks played a key role in the fund's performance. Pharmaceutical stocks have been the standouts, with PFIZER the top contributor to performance so far in 1997 and in the past 12 months. WARNER-LAMBERT, JOHNSON & JOHNSON, MERCK, SMITHKLINE BEECHAM, SCHERING-PLOUGH, and AMERICAN HOME PRODUCTS each generated meaningful gains for your fund. PEPSICO, PROCTER & GAMBLE, COLGATE-PALMOLIVE, and PHILIP MORRIS are long-term holdings that boosted performance. MEDTRONIC, the leading maker of cardiovascular devices, also performed well. In the entertainment area, CARNIVAL and DISNEY were steady, strong performers. Financial stocks did well as interest rates moderated. Investors focused on companies with consistent earnings growth and strong capital generation, which helped finance significant share repurchases. TRAVELERS GROUP, MELLON BANK, FREDDIE MAC, NORWEST, ACE LIMITED, AMERICAN EXPRESS, SALLIE MAE, and AMERICAN INTERNATIONAL GROUP each added meaningfully to performance. Manufacturing stocks were steady but potent holdings. In fact, CORNING, GE, and ALLIEDSIGNAL were among the top five performers for the first six months of 1997, and DUPONT also did well. In the energy sector, HALLIBURTON and MOBIL were strong even though a recent decline in energy prices has dampened the performance of many energy stocks. Although your fund has less exposure to the technology sector than the average growth fund, our technology holdings, including MICROSOFT, BMC SOFTWARE, IBM, and CISCO SYSTEMS, generated strong gains. We were able to find some sound investment ideas in the struggling retail sector. Drugstore holding company REVCO was recently purchased by CVS, a leading drugstore chain. CVS is generating very strong same-store sales gains, and the stock has been performing well. Building products giant HOME DEPOT and supermarket giant SAFEWAY both did well. Safeway's recent acquisition of Von's Supermarkets is already adding to earnings, and it is emerging as a well-managed, blue chip food retailer. [Sector Diversificaton pie chart showing: Business Services and Transportation - 9%; Capital Equipment, Process Industries, and Basic Materials - - 8%; Technology - 11%; Consumer Services and Consumer Cyclicals - 14%; Financial - 19%; Energy and Utilities - 7%; Consumer Nondurables - 23%; Reserves - - 9%] As always, some stocks produced disappointing results. In fact, the volatility of the market in 1997 tended to ensure that our mistakes were punished. 3COM was our largest loser, as Intel's pricing activity in the adapter card market and a slowdown in several key businesses caused the stock to decline sharply. However, the company's business has improved, and its recent merger with U.S. Robotics should allow the combined company to thrive in the networking market. We reestablished a modest position based on these developments, and the stock has performed well recently. IKON OFFICE SOLUTIONS (formerly Alco Standard), a leading office products company, failed to meet ambitious milestones for integrating its business and achieving efficiencies. We think this company should be able to solve its problems, but we are not adding significantly to our position until we see more tangible signs of improvement. BOSTON CHICKEN appeared to be one of the few restaurant companies with strong growth. However, as is often the case in the restaurant industry, its concept seems to be losing some appeal. We visited with management, and we believe they offered an assessment of business prospects that later proved to be overly optimistic. Thus, we sold our relatively small position well above current prices, but not before incurring losses. STRATEGY ================================================================================ Our investment strategy focuses on maintaining positions in core holdings as long as the fundamentals remain strong and the valuations are reasonable. Consequently, much of the fund's substantial cash flow continues to be invested opportunistically in existing holdings. For example, additions to Philip Morris, AlliedSignal, FIRST DATA, SARA LEE, and Mellon Bank were significant enough to be listed in the 10 largest fund purchases table following this letter. However, we did establish some new positions. MATTEL, the world's leading toy maker, has powerful brands, such as Barbie and Hot Wheels, that have produced strong growth for several decades. The company is successfully integrating Fisher Price and Tyco Toys and generates very strong cash flow. We purchased the stock early in 1997 when it was out of favor and it has been a very solid performer. ST. PAUL COMPANIES is a high-quality property casualty insurer with a dominant position in the medical malpractice insurance area. The company is divesting lower-returning assets, controlling expenses well, and also repurchasing stock. It is positioned to generate improved returns as the property casualty insurance industry consolidates. Other purchases include TEXACO, a leading oil and gas producer, which is poised to increase production at an above-average rate relative to other oil and gas producers. Efficiency improvements invarious aspects of its upstream and downstream operations, combined with strong production, could result in surprising earnings growth even if energy prices do not increase. New holding TRIBUNE owns leading positions in the newspaper and broadcasting industries. While its ownership of key newspapers, such as the Chicago Tribune, is well recognized, its growing presence in televison broadcasting could drive double-digit earnings growth for the next several years. OUTLOOK ================================================================================ Stock valuations remain expensive by all conventional measures, particularly the S&P's historically low dividend yield. We are also cautious because the market and your fund have generated strong results for several consecutive years. However, we realize that sound investing must be driven by the outlook for the general investment environment, future company earnings, and careful selection of stocks. Considering these factors, we believe the outlook for U.S. stocks and your fund remains favorable: * As we have consistently noted when interest rates have risen (or fallen) in the past, the threat of inflation and Fed rate hikes are real but should be kept in perspective. Economic data support the thesis that the economy is growing at a solid pace. * Earnings growth continues to be very strong at many high-quality U.S. companies, and the valuations of selected companies remain reasonable. * Topnotch, entrepreneurial management and sound business models at many of our holdings are major positives. Through careful management of costs and proper incentives, many of these management teams have improved the competitiveness of their businesses and also the durability and predictability of earnings. * Many of our holdings generate significant amounts of free cash flow. Shareholder-oriented management can be trusted to use this cash to repurchase shares or make acquisitions in a manner that often enhances stock performance over time. While the environment appears favorable, changes in inflation, interest rates, and other key determinants of stock performance are notoriously difficult to predict. Significant surprises do occur. There is also the risk that stock valuations already reflect much of the favorable news. Consequently, we are attempting to invest your money with the knowledge that the market will not always go up. We strive to manage risk by investing in well-managed companies whose strong fundamentals and leading market positions are not particularly sensitive to changes in the economic environment. We also seek to buy these companies at reasonable valuations. Over the long term, we believe this approach will provide superior investment results. Respectfully submitted, /s/ Larry J. Puglia President and Chairman of the Investment Advisory Committee /s/ Thomas H. Broadus, Jr. Executive Vice President July 22, 1997 =============================================================================== Portfolio Highlights - -------------------------------------------------------------------------------- MAJOR PORTFOLIO CHANGES Listed in descending order of size 6 Months Ended 6/30/97 Ten Largest Purchases - -------------------------------------------------------------------------------- Philip Morris Mattel * St. Paul Companies * Texaco * Tribune * US West Media * AlliedSignal First Data Sara Lee Mellon Bank Ten Largest Sales - -------------------------------------------------------------------------------- 3Com Tupperware ** CPC International ** Crown Cork & Seal LM Ericsson ** Reynolds & Reynolds ** PMI Group ** Unisource Worldwide ** Delta Air Lines ** Schlumberger ** * Position added ** Position eliminated ================================================================================ ================================================================================ Portfolio Highlights - -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 6/30/97 AlliedSignal ............................................. 1.4% Pfizer ................................................... 1.3 First Data ............................................... 1.3 Travelers Group .......................................... 1.3 Philip Morris ............................................ 1.3 ACE Limited .............................................. 1.3 Mellon Bank .............................................. 1.3 Merck .................................................... 1.2 Johnson & Johnson ........................................ 1.2 Corning .................................................. 1.1 Freddie Mac .............................................. 1.1 GE ....................................................... 1.1 Mobil .................................................... 1.1 Citicorp ................................................. 1.0 Norwest .................................................. 1.0 SBC Communications ....................................... 1.0 Disney ................................................... 1.0 BMC Software ............................................. 1.0 Sara Lee ................................................. 1.0 Fannie Mae ............................................... 0.9 Travelers Property Casualty .............................. 0.9 Danaher .................................................. 0.9 IBM ...................................................... 0.9 Warnaco Group ............................................ 0.9 Great Lakes Chemical ..................................... 0.9 - -------------------------------------------------------------------------------- Total .................................................... 27.4% ================================================================================ ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with a broad-based average or index. The index return does not reflect expenses, which have been deducted from the fund's return. [Blue Chip Growth Fund SEC chart shown here] ================================================================================ Average Annual Compound Total Return - -------------------------------------------------------------------------------- This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. ================================================================================ Since Inception Periods Ended 6/30/97 1 Year 3 Years Inception Date - -------------------------------------------------------------------------------- Blue Chip Growth Fund 32.59% 28.59% 23.74% 6/30/93 Investment return represents past performance and will vary. Shares may be worth more or less at redemption than at original purchase. ================================================================================ Unaudited For a share outstanding throughout each period ==================================================================================================================================== Financial Highlights
6 Months Year 6/30/93 Ended Ended Through 6/30/97 12/31/96 12/31/95 12/31/94 12/31/93 NET ASSET VALUE Beginning of period ..................... $ 19.06 $ 15.09 $ 11.11 $ 11.24 $ 10.00 Investment activities Net investment income ............... 0.07 0.14 0.16* 0.12* 0.05* Net realized and unrealized gain (loss) .............. 2.88 4.05 4.05 (0.03) 1.38 Total from investment activities ............... 2.95 4.19 4.21 0.09 1.43 Distributions Net investment income ............... -- (0.14) (0.15) (0.10) (0.05) Net realized gain ................... -- (0.08) (0.08) (0.12) (0.14) Total distributions ................. -- (0.22) (0.23) (0.22) (0.19) NET ASSET VALUE End of period ........................... $ 22.01 $ 19.06 $ 15.09 $ 11.11 $ 11.24 Ratios/Supplemental Data Total return ............................ 15.48% 27.75% 37.90%* 0.80%* 14.32%* Ratio of expenses to average net assets ...................... 1.01%+ 1.12% 1.25%* 1.25%* 1.25%*+ Ratio of net investment income to average net assets .............................. 0.86%+ 0.87% 1.27%* 1.05%* 0.80%*+ Portfolio turnover rate ................. 24.8%+ 26.3% 38.1% 75.0% 89.0%+ Average commission rate paid ............................... $ 0.0553 $ 0.0544 -- -- -- Net assets, end of period (in millions) ........................... $ 1,171 $ 540 $ 146 $ 39 $ 25 - ------------------------------------------------------------------------------------------------------------------------------------ * Excludes expenses in excess of a 1.25% voluntary expense limitation in effect through 12/31/96. + Annualized.
The accompanying notes are an integral part of these financial statements. Unaudited June 30, 1997 ================================================================================ Statement of Net Assets Shares/Par Value In thousands Common Stocks 91.1% FINANCIAL 18.5% Bank and Trust 6.3% BANC ONE ........................................ 175,000 $8,477 BankBoston ...................................... 64,000 4,612 Chase Manhattan ................................. 110,000 10,677 Citicorp ........................................ 100,000 12,056 Mellon Bank ..................................... 325,000 14,666 NationsBank ..................................... 95,000 6,127 Norwest ......................................... 210,000 11,812 Wells Fargo ..................................... 21,000 5,660 74,087 Insurance 5.4% ACE Limited ..................................... 200,000 14,775 American International Group .................... 45,000 6,722 EXEL ............................................ 115,000 6,066 Mid Ocean Limited ............................... 155,000 8,128 St. Paul Companies .............................. 112,000 8,540 Travelers Property Casualty (Class A) ........... 275,000 10,965 UNUM ............................................ 195,000 8,190 63,386 Financial Services 6.8% American Express ................................ 130,000 9,685 Fannie Mae ...................................... 255,000 11,124 Freddie Mac ..................................... 375,000 12,891 Green Tree Financial ............................ 115,000 4,097 H&R Block ....................................... 180,000 5,805 Household International ......................... 59,000 6,929 Money Store ..................................... 250,000 7,148 Sallie Mae ...................................... 50,000 6,350 Travelers Group ................................. 240,333 15,156 79,185 Total Financial ................................. 216,658 UTILITIES 1.9% Telephone Services 1.9% ALLTEL .......................................... 150,000 5,015 AT&T ............................................ 75,000 $ 2,630 SBC Communications .............................. 185,000 11,447 Sprint .......................................... 50,000 2,631 Total Utilities 21,723 CONSUMER NONDURABLES 22.3% Cosmetics 0.2% Gillette ........................................ 30,000 2,843 2,843 Beverages 1.0% Coca-Cola ....................................... 10,000 675 PepsiCo ......................................... 285,000 10,705 11,380 Food Processing 3.0% Heinz ........................................... 145,000 6,688 Interstate Bakeries ............................. 70,000 4,152 McCormick ....................................... 100,000 2,531 Nabisco Holdings (Class A) ...................... 140,000 5,583 Ralston Purina .................................. 59,000 4,849 Sara Lee ........................................ 270,000 11,239 35,042 Hospital Supplies/Hospital Management 3.2% Boston Scientific * ............................. 125,000 7,680 Columbia/HCA Healthcare ......................... 180,000 7,076 HealthSouth * ................................... 290,000 7,232 Medtronic ....................................... 95,000 7,695 Vencor * ........................................ 180,000 7,605 37,288 Pharmaceuticals 7.6% American Home Products .......................... 130,000 9,945 Amgen ........................................... 64,000 3,718 Eli Lilly ....................................... 55,000 6,012 Johnson & Johnson ............................... 210,000 13,519 Merck ........................................... 136,000 14,076 Pfizer .......................................... 127,000 15,176 Schering-Plough ................................. 187,000 8,953 SmithKline Beecham ADR .......................... 115,000 10,537 Warner-Lambert .................................. 58,000 7,206 89,142 Health Care Services 0.7% PacifiCare Health Systems (Class B) * ........... 50,000 3,192 United HealthCare ............................... 92,000 4,784 7,976 Miscellaneous Consumer Products 6.6% Colgate-Palmolive ............................... 100,000 6,525 CUC International * ............................. 310,825 8,023 Jones Apparel Group * ........................... 75,000 3,581 Mattel .......................................... 280,000 9,485 Newell .......................................... 150,000 5,944 NIKE ............................................ 10,000 584 Philip Morris ................................... 335,000 14,866 Procter & Gamble ................................ 53,000 7,486 Richfood Holdings ............................... 185,000 4,810 Service Corp. ................................... 200,000 6,575 Stanley Works ................................... 125,000 5,000 Unilever N.V. ADR ............................... 20,000 4,360 77,239 Total Consumer Nondurables ...................... 260,910 CONSUMER SERVICES 11.1% General Merchandisers 1.5% Wal-Mart ........................................ 185,000 6,255 Warnaco Group (Class A) ......................... 340,000 10,838 17,093 Specialty Merchandisers 4.5% American Stores ................................. 140,000 6,912 Circuit City Stores ............................. 40,000 1,423 CVS ............................................. 110,262 5,651 Federated Department Stores * ................... 185,000 6,429 General Nutrition * ............................. 250,000 6,984 Home Depot ...................................... 100,000 6,894 Kohl's * ........................................ 100,000 5,294 McKesson ........................................ 25,000 1,937 Safeway * ....................................... 195,000 8,994 The Gap ......................................... 50,000 1,944 52,462 Entertainment and Leisure 2.4% Carnival (Class A) ADR .......................... 190,000 7,838 Disney .......................................... 142,000 11,395 ITT * ........................................... 34,000 2,076 McDonald's ...................................... 145,000 7,005 28,314 Media and Communications 2.7% R. R. Donnelly .................................. 125,000 4,578 Time Warner ..................................... 160,000 7,720 Tribune ......................................... 160,000 7,690 U S West Media * ................................ 340,000 6,885 Vodafone ADR .................................... 100,000 4,844 31,717 Total Consumer Services 129,586 CONSUMER CYCLICALS 2.5% Automobiles and Related 0.2% Lear * .......................................... 50,000 2,219 2,219 Building and Real Estate 0.1% Patriot American Hospitality, REIT .............. 50,000 1,275 1,275 Miscellaneous Consumer Durables 2.2% Corning ......................................... 235,000 13,072 Eastman Kodak ................................... 100,000 7,675 Masco ........................................... 130,000 5,427 26,174 Total Consumer Cyclicals ........................ 29,668 TECHNOLOGY 10.5% Electronic Components 2.9% Altera * ........................................ 82,000 4,144 Intel ........................................... 73,000 10,336 Linear Technology ............................... 82,000 4,236 Maxim Integrated Products * ..................... 105,000 5,965 Motorola ........................................ 79,000 6,004 Xilinx * ........................................ 61,000 2,991 33,676 Electronic Systems 1.6% ADT * ........................................... 220,000 7,260 Hewlett-Packard ................................. 60,000 3,360 Honeywell ....................................... 61,000 4,628 Nokia ADR ....................................... 44,000 3,245 18,493 Information Processing 1.7% COMPAQ Computer * ............................... 68,000 6,749 Dell Computer * ................................. 25,000 2,935 IBM ............................................. 121,000 10,913 20,597 Telecommunications Equipment 2.0% 3Com * .......................................... 82,000 3,687 Cisco Systems * ................................. 140,000 9,402 Lucent Technologies ............................. 55,000 3,964 MCI ............................................. 130,000 4,977 Tellabs * ....................................... 25,000 1,395 23,425 Aerospace and Defense 2.3% AlliedSignal .................................... 195,000 16,380 Boeing .......................................... 68,000 3,608 Lockheed Martin ................................. 65,000 6,732 26,720 Total Technology ................................ 122,911 CAPITAL EQUIPMENT 4.5% Electrical Equipment 2.7% Emerson Electric ................................ 68,000 3,744 GE .............................................. 195,000 12,748 Hubbell (Class B) ............................... 170,000 7,480 Tyco International .............................. 120,000 8,348 32,320 Machinery 1.8% Danaher ......................................... 215,000 $ 10,925 Teleflex ........................................ 320,000 10,000 20,925 Total Capital Equipment ......................... 53,245 BUSINESS SERVICES AND TRANSPORTATION 8.1% Computer Service and Software 6.3% Ascend Communications * ......................... 75,000 2,946 Automatic Data Processing ....................... 150,000 7,050 BMC Software * .................................. 205,000 11,365 Electronic Data Systems ......................... 100,000 4,100 First Data ...................................... 345,106 15,163 Microsoft * ..................................... 58,000 7,335 National Data ................................... 110,000 4,764 Oracle * ........................................ 135,000 6,796 Parametric Technology * ......................... 92,000 3,913 SunGard Data Systems * .......................... 135,000 6,278 Synopsys * ...................................... 100,000 3,691 73,401 Distribution Services 0.3% Ikon Office Solutions ........................... 160,000 3,990 3,990 Environmental 0.4% USA Waste Services * ............................ 135,000 5,214 5,214 Miscellaneous Business Services 0.6% Omnicom ......................................... 50,000 3,081 Wallace Computer Services ....................... 110,200 3,313 6,394 Railroads 0.5% Burlington Northern Santa Fe .................... 64,000 5,752 5,752 Total Business Services and Transportation ...... 94,751 ENERGY 4.3% Energy Services 1.3% BJ Services * ................................... 50,000 $ 2,681 Cooper Cameron * ................................ 130,000 6,078 Halliburton ..................................... 86,000 6,815 15,574 Integrated Petroleum-Domestic 1.3% Atlantic Richfield .............................. 74,000 5,217 British Petroleum ADR ........................... 136,000 10,183 15,400 Integrated Petroleum - International 1.7% Mobil ........................................... 179,000 12,508 Texaco .......................................... 64,000 6,960 19,468 Total Energy .................................... 50,442 PROCESS INDUSTRIES 2.9% Diversified Chemicals 1.1% Dow Chemical .................................... 22,000 1,917 DuPont .......................................... 118,000 7,419 Monsanto ........................................ 82,000 3,531 12,867 Specialty Chemicals 0.9% Great Lakes Chemical ............................ 205,000 10,737 10,737 Paper and Paper Products 0.9% Kimberly-Clark .................................. 200,000 9,950 9,950 Total Process Industries ........................ 33,554 BASIC MATERIALS 1.1% Mining 0.6% Newmont Mining .................................. 185,000 7,215 7,215 Miscellaneous Materials 0.5% Crown Cork & Seal ............................... 115,000 $ 6,145 6,145 Total Basic Materials ........................... 13,360 Total Miscellaneous Common Stock 3.4% ........... 39,755 Total Common Stocks (Cost $ 847,638)............. 1,066,563 Short-Term Investments 9.7% Certificates of Deposit 4.3% ABN AMRO, (London), 5.81%, 8/29/97 .................... $5,000,000 5,001 Australia & New Zealand Banking, 5.76%, 12/18/97 ...... 5,000,000 5,000 Banque Nationale de Paris, 5.74%, 7/28/97 ............. 5,000,000 5,000 Caisse Nationale de Credit Agricole, (London), 5.63%, 8/11/97 ........................................ 5,000,000 5,000 Deutsche Bank AG New York, 6.00%, 7/29/97 ............. 5,000,000 5,001 Suntrust Bank, 5.79%, 12/4/97 ......................... 5,000,000 5,000 Svenska Handlesbanken, 5.68 - 5.705%, 7/7 - 10/1/97 ... 10,000,000 10,001 Union Bank of California, 5.55%, 7/11/97 .............. 5,000,000 5,000 World Savings Bank, 5.57%, 7/8/97 ..................... 5,000,000 5,000 50,003 Commercial Paper 5.0% Bank Of New York, 5.52%, 7/10/97 ........................ 5,000,000 4,993 Banque Nationale de Paris, 5.55%, 7/14/97 ............... 5,000,000 4,990 Beta Finance, 4(2), 5.56%, 8/8/97 ....................... 5,000,000 4,971 Finova Capital, 4(2), 5.60 - 5.62%, 7/24 - 9/9/97 ....... 10,000,000 9,927 Halifax Building Society, 5.54%, 7/14/97 ................ 5,000,000 4,990 Island Finance of Puerto Rico, 5.60%, 9/9/97 ............ 5,000,000 4,945 Preferred Receivables Funding, 5.54%, 7/17/97 ........... 5,000,000 4,988 RTZ America, 4(2), 5.57%, 7/14/97 ....................... 5,000,000 4,990 Westdeutsche Landesbank, 5.53%, 7/10/97 ................. 5,000,000 4,993 Investments in Commercial Paper through a Joint Account 6.05 - 6.20%, 7/1/97 ........................... 9,157,723 9,158 58,945 Medium-Term Notes 0.4% Morgan Stanley Group, VR, 6.05%, 9/17/98 ........ 5,000,000 5,012 5,012 Total Short-Term Investments (Cost $ 113,960) ... 113,960 Total Investments in Securities 100.8% of Net Assets (Cost $961,598) ............ $1,180,523 Other Assets Less Liabilities ................... (9,218) NET ASSETS ...................................... $1,171,305 Net Assets Consist of: Accumulated net investment income - net of distributions ............................ $ 3,822 Accumulated net realized gain/loss - net of distributions ............................ (450) Net unrealized gain (loss) ...................... 218,925 Paid-in-capital applicable to 53,222,029 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized ...................................... 949,008 NET ASSETS ...................................... $1,171,305 NET ASSET VALUE PER SHARE ....................... $ 22.01 * Non-income producing REIT Real Estate Investment Trust VR Variable rate 4(2) Commercial paper sold within terms of a private placement memorandum, exempt from registration under section 4.2 of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." ================================================================================ The accompanying notes are an integral part of these financial statements. Unaudited ================================================================================ Statement of Operations - -------------------------------------------------------------------------------- In thousands 6 Months Ended 6/30/97 Investment Income Income Dividend .................................................... $ 5,481 Interest .................................................... 2,816 Total income ................................................ 8,297 Expenses Investment management ....................................... 2,779 Shareholder servicing ....................................... 1,341 Registration ................................................ 164 Prospectus and shareholder reports .......................... 98 Custody and accounting ...................................... 68 Legal and audit ............................................. 7 Directors ................................................... 5 Miscellaneous ............................................... 13 Total expenses .............................................. 4,475 Net investment income ........................................... 3,822 Realized and Unrealized Gain (Loss) Net realized gain (loss) on securities .......................... (2,260) Change in net unrealized gain or loss on securities ............. 133,745 Net realized and unrealized gain (loss) ......................... 131,485 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .......................................... $135,307 ================================================================================ The accompanying notes are an integral part of these financial statements. Unaudited ================================================================================ Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 6/30/97 12/31/96 Increase (Decrease) in Net Assets Operations Net investment income ........................... $ 3,822 $ 2,414 Net realized gain (loss) ........................ (2,260) 4,994 Change in net unrealized gain or loss ........... 133,745 62,004 Increase (decrease) in net assets from operations 135,307 69,412 Distributions to shareholders Net investment income ........................... - (3,801) Net realized gain ............................... - (2,192) Decrease in net assets from distributions ....... - (5,993) Capital share transactions * Shares sold ..................................... 653,690 423,555 Distributions reinvested ........................ - 5,800 Shares redeemed ................................. (157,366) (101,053) Increase (decrease) in net assets from capital share transactions .............................. 496,324 328,302 Net equalization .................................... - 1,499 Net Assets Increase (decrease) during period ................... 631,631 393,220 Beginning of period ................................. 539,674 146,454 End of period ....................................... $ 1,171,305 $ 539,674 *Share information Shares sold ..................................... 32,762 24,262 Distributions reinvested ........................ - 302 Shares redeemed ................................. (7,850) (5,958) Increase (decrease) in shares outstanding ....... 24,912 18,606 ================================================================================ The accompanying notes are an integral part of these financial statements. Unaudited June 30, 1997 ================================================================================ Notes to Financial Statements - -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- T. Rowe Price Blue Chip Growth Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company and commenced operations on June 30, 1993. VALUATION Equity securities 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. Listed securities not traded on a particular day and securities regularly traded in the over-the-counter market are valued at the mean of the latest bid and asked prices. Short-term debt securities are valued at amortized cost which, when combined with accrued interest, approximates 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. PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are amortized for both financial reporting and tax purposes. OTHER Income and expenses are recorded on the accrual basis. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Dividend income and distributions to shareholders are recorded by the fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations and may differ from those determined in accordance with generally accepted accounting principles. Effective January 1, 1997, the fund discontinued its practice of equalization. The results of operations and net assets were not affected by this change. NOTE 2 - INVESTMENT TRANSACTIONS - -------------------------------------------------------------------------------- COMMERCIAL PAPER JOINT ACCOUNT The fund, and other affiliated funds, may transfer uninvested cash into a commercial paper joint account, the daily aggregate balance of which is invested in high-grade commercial paper. All securities purchased by the joint account satisfy the fund's criteria as to quality, yield, and liquidity. OTHER Purchases and sales of portfolio securities, other than short-term securities, aggregated $549,029,000 and $98,303,000, respectively, for the six months ended June 30, 1997. 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 all of its taxable income. At June 30, 1997, the aggregate cost of investments for federal income tax and financial reporting purposes was $961,598,000, and net unrealized gain aggregated $218,925,000, of which $224,530,000 related to appreciated investments and $5,605,000 to depreciated investments. NOTE 4 - 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, of which $580,000 was payable at June 30, 1997. The fee is computed daily and paid monthly, and consists of an individual fund fee equal to 0.30% of average daily net assets and a group fee. The group fee is based on the combined assets of certain mutual funds sponsored by 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 0.30% for assets in excess of $80 billion. At June 30, 1997, and for the six months then ended, the effective annual group fee rate was 0.33%. The fund pays a pro-rata share of the group fee based on the ratio of its net assets to those of the group. In addition, the fund has entered into agreements with the manager and two wholly owned subsidiaries of the manager, pursuant to which the fund receives certain other services. The manager computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc., is the fund's transfer and dividend disbursing agent and provides shareholder and administrative services to the fund. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. The fund incurred expenses pursuant to these related party agreements totaling approximately $1,148,000 for the six months ended June 30, 1997, of which $202,000 was payable at period-end. ================================================================================ T. Rowe Price Shareholder Services - -------------------------------------------------------------------------------- Investment Services And Information - -------------------------------------------------------------------------------- KNOWLEDGEABLE SERVICE REPRESENTATIVES BY PHONE Shareholder service representatives are available from 8 a.m. to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m. ET on weekends. Call 1-800-225-5132 to speak directly with a representative who will be able to assist you with your accounts. IN PERSON Visit one of our investor center locations to meet with a representative who will be able to assist you with your accounts. You can also drop off applications or obtain prospectuses and other literature at these centers. AUTOMATED 24-HOUR SERVICES TELE*ACCESS [REGISTRATION MARK] Call 1-800-638-2587 to obtain information such as account balance, date and amount of your last transaction, latest dividend payment, fund prices, and yields. Additionally, you have the ability to request prospectuses, statements, and account and tax forms; to reorder checks; and to initiate purchase, redemption, and exchange orders for identically registered accounts. T.ROWE PRICE ONLINE Through a personal computer via dial-up modem, you can replicate all the services available on Tele*Access plus conduct transactions in your Discount Brokerage and Variable Annuity accounts. Account Services CHECKING Write checks for $500 or more on any money market and most bond fund accounts (except the High Yield and Emerging Markets Bond Funds). AUTOMATIC INVESTING Build your account over time by investing directly from your bank account or paycheck with Automatic Asset Builder. Additionally, Automatic Exchange enables you to set up systematic investments from one fund account into another, such as from a money fund into a stock fund. A $50 minimum makes it easy to get started. AUTOMATIC WITHDRAWAL If you need money from your fund account on a regular basis, you can establish scheduled, automatic redemptions. DIVIDEND AND CAPITAL GAINS PAYMENT Options Reinvest all or some of your distributions, or take them in cash. We give you maximum flexibility and convenience. DISCOUNT BROKERAGE* INVESTMENTS AVAILABLE You can trade stocks, bonds, options, precious metals, and other securities at a savings over regular commission rates. TO OPEN AN ACCOUNT Call a shareholder service representative for more information. Investment Information COMBINED STATEMENT A comprehensive overview of your T. Rowe Price accounts is provided. The summary page gives you earnings by tax category, provides total portfolio value, and lists your investments by typeNstock, bond, and money market. Detail pages itemize account transactions by fund. SHAREHOLDER REPORTS Portfolio managers review the performance of the funds in plain language and discuss T. Rowe Price's economic outlook. T. ROWE PRICE REPORT This is a quarterly newsletter with relevant articles on market trends, personal financial planning, and T. Rowe Price's economic perspective. PERFORMANCE UPDATE This quarterly report reviews recent market developments and provides comprehensive performance information for every T. Rowe Price fund. INSIGHTS This library of information includes reports on mutual fund tax issues, investment strategies, and financial markets. DETAILED INVESTMENT GUIDES Our widely acclaimed Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A Guide to International Investing, Retirees Financial Guide, and Retirement Planning Kit (also available on disk for PC use) can help you determine and reach your investment goals. * 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 Diversified Small-Cap Growth Dividend Growth Equity Income Equity Index Financial Services Growth & Income Growth Stock Health Sciences Media & Telecommunications Mid-Cap Growth Mid-Cap Value New America Growth New Era New Horizons* Science & Technology Small-Cap Stock** Small-Cap Value* Spectrum Growth Value INTERNATIONAL/GLOBAL Emerging Markets Stock European Stock Global Stock International Discovery International Stock Japan Latin America New Asia Spectrum International BOND FUNDS - -------------------------------------------------------------------------------- DOMESTIC TAXABLE Corporate Income GNMA High Yield New Income Short-Term Bond Short-Term U.S. Government Spectrum Income Summit GNMA Summit Limited-Term Bond U.S. Treasury Intermediate U.S. Treasury Long-Term DOMESTIC TAX-FREE California Tax-Free Bond Florida Insured 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 Insured Intermediate Bond Tax-Free Short-Intermediate Virginia Short-Term Tax-Free Bond Virginia Tax-Free Bond INTERNATIONAL/GLOBAL Global Government Bond Emerging Markets Bond International Bond MONEY MARKET FUNDS - -------------------------------------------------------------------------------- TAXABLE Prime Reserve Summit Cash Reserves U.S. Treasury Money TAX-FREE California Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money BLENDED ASSET FUNDS - -------------------------------------------------------------------------------- Balanced Personal Strategy Income Personal Strategy Balanced Personal Strategy Growth Tax-Efficient Balanced T. ROWE PRICE NO-LOAD VARIABLE ANNUITY - -------------------------------------------------------------------------------- Equity Income Portfolio International Stock Portfolio Limited-Term Bond Portfolio Mid-Cap Growth Portfolio New America Growth Portfolio Personal Strategy Balanced Portfolio Prime Reserve Portfolio * Closed to new investors. ** Formerly the OTC Fund. Please call for a prospectus. Read it carefully before you invest or send money. For yield, price, last transaction, current balance, or to conduct transactions, 24 hours, 7 days a week, call Tele*Access [Registration Mark]: 1-800-638-2587 toll free For assistance with your existing fund account, call: Shareholder Service Center 1-800-225-5132 toll free 410-625-6500 Baltimore area To open a Discount Brokerage account or obtain information, call: 1-800-638-5660 toll free Internet address: www.troweprice.com T. Rowe Price Associates 100 East Pratt Street Baltimore, Maryland 21202 This report is authorized for distribution only to shareholders and to others who have received a copy of the prospectus of the T. Rowe Price Blue Chip Growth Fund [Registration Mark]. Investor Centers: 101 East Lombard St. Baltimore, MD 21202 T. Rowe Price Financial Center 10090 Red Run Blvd. Owings Mills, MD 21117 Farragut Square 900 17th Street, N.W. Washington, D.C. 20006 ARCO Tower 31st Floor 515 South Flower St. Los Angeles, CA 90071 4200 West Cypress St. 10th Floor Tampa, FL 33607 T. Rowe Price Investment Services, Inc., Distributor. F93-051 6/30/97 -----END PRIVACY-ENHANCED MESSAGE-----