-----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, QdbX1DJvzALPChq+3+IrYls5+7mqTXkkzN4ptAtCPrmVRMDCOelYipLrZYJtk16c W/v54VzGFXNDpKKA4GzW8g== 0000902259-98-000004.txt : 19980807 0000902259-98-000004.hdr.sgml : 19980807 ACCESSION NUMBER: 0000902259-98-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980806 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: SEC FILE NUMBER: 811-07059 FILM NUMBER: 98678119 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, 1998 - -------------------------------------------------------------------------------- REPORT HIGHLIGHTS ================================================================================ Blue Chip Growth Fund * An excellent domestic economic environment powered blue chip stocks higher, despite concerns about Asia's economic crisis. * The Blue Chip Growth Fund's 6- and 12-month returns significantly outpaced the Lipper Growth Funds Average and kept up with the surging S&P 500. * Technology, consumer products, financial, and health care stocks were among the fund's top performers while a few companies with disappointing earnings detracted from fund results. * Although valuations are high, market conditions continue to be favorable for stocks. Fellow Shareholders Recovering from early weakness stemming from the crisis in Asian economies, the U.S. stock market generated strong gains in the first half of 1998. The market, as measured by the Standard & Poor's 500 Stock Index, exhibited considerable volatility but could be on track for a fourth consecutive annual gain exceeding 20%. The S&P 500 is up well over 100% in the last three years and approximately 180% in the last five years. ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 6/30/98 6 Months 12 Months Blue Chip Growth Fund 17.46% 29.75% S&P 500 17.71 30.16 Lipper Growth Funds Average 15.10 25.38 ================================================================================ Your fund benefited from this favorable environment. For the six months ended June 30, 1998, the Blue Chip Growth Fund's 17.46% gains outdistanced the 15.10% results of the Lipper Growth Funds Average and essentially matched the 17.71% return of the unmanaged S&P 500. For the 12-month period, your fund surpassed its peer group average and came quite close to equaling the S&P. We are also pleased to note that the fund is celebrating its five-year anniversary, and its cumulative return of 204% since inception bested the S&P by a wide margin and put it in the top 5% of its peer group. The fund ranks 18 out of 338 funds in the Lipper Growth Funds category for the five-year period. (It ranks 302 out of 884 funds for the one-year time frame. Please see page 9 for additional performance information.) Market Environment The environment for U.S. equities during the period continued to be positive, with interest rates, mutual fund inflows, and corporate earnings all remaining favorable. Long-term interest rates moderated yet again, falling below 5.5% recently, while both wholesale and consumer prices extended their benign trend. Crop and related food prices were well behaved, and energy prices also took a turn for the better with crude oil falling well below $15 per barrel. Nonetheless, the equity market was troubled by developments in Asia. Currency devaluations and banking system problems in Korea, Indonesia, Malaysia, Thailand, and Japan caused a sharp slowdown in the region's economic growth and prompted investors to reassess the stability and growth potential for Asia in its entirety and for its trading partners. Investors concurrently questioned whether the long expansion in the U.S. and the related earnings growth of domestic and multinational companies could be affected. In fact, we noted a meaningful deterioration in growth for a number of industry sectors and companies. Technology and capital equipment companies saw demand soften in key Asian markets. Surprisingly, even some food companies, such as HERSHEY FOODS (which has relatively insignificant Asian operations), experienced earnings shortfalls. Investors also feared that a general slowdown in economic activity and a flood of cheap imports triggered by the devaluation of foreign currencies would result in severe pricing pressure-maybe even deflation-in the U.S. The specialty chemicals sector proved sensitive to these concerns, where even such stalwarts as DUPONT have seen sharp price competition. Pressures emanating from Asia and aggravating factors in the domestic markets, such as the General Motors strike, may continue to dampen growth in some areas. However, they did not result in meaningful problems for corporate profits or stock prices overall in the first half. Job growth in the U.S. was strong with the unemployment rate below 5%. Housing starts and retail sales remained solid. Perhaps most important, U.S. companies continued to improve efficiency and lower costs in ways that should at least partially offset the competitive pricing pressure experienced in many industries. PORTFOLIO REVIEW Your fund has less exposure to the technology sector than the average growth fund, but its technology holdings performed very well in the first half of 1998. This is particularly noteworthy given the uneven results in the sector because of the Asian crisis. In the traditional technology area, MICROSOFT, BMC SOFTWARE, CISCO SYSTEMS, and DELL COMPUTER were top contributors to fund returns. NOKIA, a leading maker of wireless telephones and telecommunication equipment, produced strong gains for the fund. Consumer products stocks once again played a key role in the fund's performance. Pharmaceutical stocks, for example, have been consistent standouts. Most of these companies do not have significant exposure to Asian markets, and the introduction of innovative products is providing unit growth, pricing flexibility, and strong revenue and earnings growth. WARNER-LAMBERT, PFIZER, SCHERING-PLOUGH, MERCK, and BRISTOL-MYERS SQUIBB each generated top-tier gains for your fund. [Include Sector Diversification chart here. Edgar description - A pie chart based on net assets as of 6/30/98 with the following segments: Business services & transportation, 13%. Capital equipment, process industries, and basic materials, 7%. Technology, 11%. Consumer services and consumer cyclicals, 17%. Financial, 21%. Energy and utilities, 5%. Consumer nondurables, 21%. Reserves, 5%.] Retailing is another area that was relatively unaffected by events in Asia. Discount food and drug retailers as a whole can be counted on for steady earnings growth in most economic environments. Longtime holdings WAL-MART, SAFEWAY, and CVS (a leading drug store chain) each have produced powerful improvements in same store sales, efficiency, and earnings growth over the past several years. They were stellar performers in the first half of 1998. Another area benefiting from the health of the American consumer is entertainment. CARNIVAL and DISNEY produced steady, strong returns. Media giants TIME WARNER and US WEST MEDIA, with significant cable interests, and TRIBUNE, with significant newspaper and broadcasting operations, posted fine results. Financial stocks performed well as interest rates moderated and investors focused on companies with consistent earnings growth and strong capital generation (funding significant share repurchases). Investors also became somewhat more constructive on consumer credit bankruptcy, delinquency, and loss trends. This helped our investments in CAPITAL ONE FINANCIAL, CHASE MANHATTAN, and AMERICAN EXPRESS generate major contributions to the fund's bottom line. Merger activity heated up in the consolidating financial services industry. Our investments in TRAVELERS GROUP and CITICORP, which are merging to form CITIGROUP, constitute a meaningful position that continued to perform well. Citigroup will have access to 100 million consumers in 100 countries. Consistent with its progenitors, the company should exhibit stringent cost controls, heavy stock ownership by management, aggressive share repurchase, and above-average return on equity. NATIONSBANK also posted good returns as investors began to appreciate the integration of its recent Barnett Banks acquisition, the impending merger with BankAmerica, and the resulting improvements in efficiency and cash flow. MORGAN STANLEY DEAN WITTER DISCOVER, also a product of mergers, did well. Morgan Stanley's heritage of superior international reach, first-rate systems, high return on equity, and balance sheet strength is driving meaningful market share gains and sharp advances in earnings power. Manufacturing stock gains were steady but potent. TYCO INTERNATIONAL, the leading provider of fire control and security systems and health care supplies, was a top performer. Its acquisition of UNITED STATES SURGICAL (also a significant fund holding) enhanced fund performance and should solidify Tyco's position as a leading maker of hospital supplies. DANAHER, ALLIEDSIGNAL, and GE also made meaningful contributions. As always, some stocks produced disappointing results. As we have noted in previous reports, the market has been rather unforgiving toward stocks of companies posting disappointing results. CENDANT was our largest loser in the first half of 1998 as accounting irregularities in its membership business caused a catastrophic decline in the stock. Management continues to assert that the issue is confined to one area and that its leading positions in hotel franchising, residential real estate (through Century 21), and car rental (through Avis) are unaffected. Although this holding has diminished significantly in weight (we have been reluctant to add to it as a special audit analyzes the accounting problems) , we have maintained a position and think it will perform reasonably well over time. PHILIP MORRIS disappointed as efforts failed to formulate a constructive plan to limit its exposure to tobacco litigation. Despite the company's impressive food franchises (General Foods, Oscar Meyer, Post, and Kraft) and other areas, we recognize that tobacco companies may be under siege for some time. Consequently, we have kept a slightly below market weighting in Philip Morris despite its attractive valuation and strong cash flow. STARWOOD HOTELS & RESORTS, the leading operator of hotels in the U.S., was also a disappointment. The company's status as a paired-share REIT (real estate investment trust) proved to be problematic as legislation has challenged many of the tax advantages once conferred upon this corporate structure. However, Starwood is successfully integrating ITT (which owns Sheraton Hotels and Caesar's World gaming) and should post continued strong operating results. 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 substantial cash flow the fund has received continues to be invested opportunistically in existing holdings. For example, additions to Bristol-Myers Squibb, NationsBank, FREDDIE MAC, USA WASTE SERVICES, ORACLE, WORLDCOM, and RAYTHEON were significant enough to be included in the 10 largest purchases of the fund for the past six months. We did establish some substantial new positions, none of which should be particularly affected by the developments in Asia. TELLABS, for example, is a leading producer of telecommunications equipment. The company has consistently generated strong revenue and profit growth, and recent acquisitions provide broader product positioning in proprietary, innovative technologies poised for growth. HASBRO is a leading toymaker with dominant positions in a number of key areas. Its boardgame franchise (including Monopoly and Trivial Pursuit) and brands such as Tonka and Mr. Potato Head continue to sell well. However, new products such as Teletubbies, co-promotions with the Star Wars movies, and a bevy of interactive electronic games should drive consistent growth for the next several years. CBS has transformed itself into a leading provider of radio and television broadcasting services. Although investors continue to focus on challenges for the television network, the larger and much more profitable radio broadcasting business continues to thrive. OUTLOOK Broadly speaking, our outlook for the stock market and for your fund has not changed appreciably in the past six months. We have some concerns about stock valuations, which have risen for several consecutive years and are still expensive by all conventional valuation measures. We are also cautious because the problems in Asia have the potential to hurt earnings growth for some multinational companies. However, we believe the outlook for the general investment environment and future company earnings remains favorable and careful selection of stocks will benefit long-term investment results. This view is supported by several positive factors: * Inflation and interest rate trends are positive, and the economy is growing at a moderate pace. * Earnings growth is very strong at many high-quality U.S. companies, and the valuations of selected companies remain reasonable. * Select blue chip stocks have sound business models and topnotch, entrepreneurial management that can be relied upon to act in shareholders' interests. We believe we can enhance returns and lower risk over time by investing in "all season" growth companies that can generate earnings growth regardless of the economic or interest rate environment and by buying such companies at reasonable valuations. We appreciate your continued support in this endeavor. Respectfully submitted, /s/ Larry J. Puglia President and Chairman of the Investment Advisory Committee /s/ Thomas H. Broadus, Jr. Executive Vice President July 23, 1998 T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- ================================================================================ Portfolio Highlights - -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 6/30/98 Travelers Group 1.6% Bristol-Myers Squibb ...................................... 1.6 Tyco International ........................................ 1.5 Freddie Mac ............................................... 1.5 Microsoft ................................................. 1.4 - -------------------------------------------------------------------------------- AlliedSignal .............................................. 1.4 Warner-Lambert ............................................ 1.4 Pfizer .................................................... 1.3 Danaher ................................................... 1.3 Merck ..................................................... 1.2 - -------------------------------------------------------------------------------- Safeway ................................................... 1.2 NationsBank ............................................... 1.2 Fannie Mae ................................................ 1.1 WorldCom .................................................. 1.1 USA Waste Services ........................................ 1.1 - -------------------------------------------------------------------------------- GE ........................................................ 1.1 ACE Limited ............................................... 1.0 American Express .......................................... 1.0 BMC Software .............................................. 1.0 Philip Morris ............................................. 1.0 - -------------------------------------------------------------------------------- Tribune ................................................... 1.0 Norwest ................................................... 1.0 CVS ....................................................... 1.0 United HealthCare ......................................... 1.0 SBC Communications ........................................ 0.9 - -------------------------------------------------------------------------------- Total ..................................................... 29.9% ================================================================================ T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- ================================================================================ Portfolio Highlights - -------------------------------------------------------------------------------- MAJOR PORTFOLIO CHANGES Listed in descending order of size 6 Months Ended 6/30/98 Ten Largest Purchases - -------------------------------------------------------------------------------- Bristol-Myers Squibb Tellabs * Hasbro * NationsBank Freddie Mac CBS * USA Waste Services Oracle WorldCom Raytheon Ten Largest Sales - -------------------------------------------------------------------------------- SmithKline Beecham ** Lockheed Martin ** COMPAQ Computer Vodafone St. Paul Companies ** IBM Hubbell ** Texaco ** Mattel American International Group * Position added ** Position eliminated ================================================================================ T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with 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 graph 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 6/30/98 1 Year 3 Years 5 Years Inception Date Blue Chip Growth Fund 29.75% 30.06% 24.92% 24.92% 6/30/93 Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. ================================================================================ T. Rowe Price Blue Chip Growth Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited For a share outstanding throughout each period ==================================================================================================================================== Financial Highlights - ------------------------------------------------------------------------------------------------------------------------------------
6 Months Year 6/30/93 Ended Ended Through 6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 NET ASSET VALUE Beginning of period ...................... $ 24.17 $ 19.06 $ 15.09 $ 11.11 $11.24 $10.00 Investment activities Net investment income ............ 0.06 0.13 0.14 0.16* 0.12* 0.05* Net realized and unrealized gain (loss) ........... 4.16 5.12 4.05 4.05 (0.03) 1.38 Total from investment activities ............ 4.22 5.25 4.19 4.21 0.09 1.43 Distributions Net investment income ............ -- (0.12) (0.14) (0.15) (0.10) (0.05) Net realized gain ................ -- (0.02) (0.08) (0.08) (0.12) (0.14) Total distributions .............. -- (0.14) (0.22) (0.23) (0.22) (0.19) NET ASSET VALUE End of period ............................ $ 28.39 $ 24.17 $ 19.06 $ 15.09 $11.11 $11.24 Ratios/Supplemental Data Total return^ ............................ 17.46% 27.56% 27.75% 37.90%* 0.80%* 14.32%* Ratio of expenses to average net assets ....................... 0.91%+ 0.95% 1.12% 1.25%* 1.25%* 1.25%*+ Ratio of net investment income to average net assets ............................... 0.49%+ 0.86% 0.87% 1.27%* 1.05%* 0.80%*+ Portfolio turnover rate .................. 17.8% 23.7% 26.3% 38.1% 75.0% 89.0%+ Net assets, end of period (in millions) ............................ $ 3,320 $ 2,345 $ 540 $ 146 $ 39 $ 25 ^ 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. * 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. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Portfolio of Investments - -------------------------------------------------------------------------------- Shares/Par Value In thousands Common Stocks 94.9% FINANCIAL 21.0% Bank and Trust 9.4% BANC ONE ......................................... 550,000 $ 30,697 BankBoston ....................................... 460,000 25,587 Chase Manhattan .................................. 407,000 30,728 Citicorp ......................................... 200,000 29,850 First Union ...................................... 475,000 27,669 Mellon Bank ...................................... 440,000 30,635 National City .................................... 110,000 7,810 NationsBank ...................................... 500,000 38,250 Norwest .......................................... 880,000 32,890 U.S. Bancorp ..................................... 680,000 29,240 Washington Mutual ................................ 271,000 11,763 Wells Fargo ...................................... 50,000 18,450 313,569 Insurance 3.7% ACE Limited ...................................... 880,000 34,320 Allstate ......................................... 25,000 2,289 American International Group ..................... 31,000 4,526 EXEL ............................................. 310,000 24,122 Hartford Financial Services ...................... 25,000 2,859 Mid Ocean Limited ................................ 200,000 15,700 Travelers Property Casualty (Class A) ............ 500,000 21,438 UNUM ............................................. 290,000 16,095 121,349 Financial Services 7.9% American Express ................................. 300,000 34,200 Associates First Capital (Class A) ............... 127,000 9,763 Capital One Financial ............................ 155,000 19,249 Fannie Mae ....................................... 622,000 37,787 Freddie Mac ...................................... 1,030,000 48,474 Household International .......................... 440,000 21,890 Morgan Stanley Dean Witter Discover .............. 190,000 17,361 SLM Holding ...................................... 425,000 20,825 Travelers Group .................................. 890,499 53,987 263,536 Total Financial .................................. 698,454 UTILITIES 1.9% Telephone Services 1.9% ALLTEL ........................................... 250,000 $11,625 AT&T ............................................. 350,000 19,994 SBC Communications ............................... 770,000 30,800 Total Utilities .................................. 62,419 CONSUMER NONDURABLES 21.1% Cosmetics 0.3% Gillette ......................................... 176,000 9,977 9,977 Beverages 0.7% PepsiCo .......................................... 560,000 23,065 23,065 Food Processing 2.1% Dean Foods ....................................... 100,000 5,494 Heinz ............................................ 210,000 11,786 Hershey Foods .................................... 160,000 11,040 Interstate Bakeries .............................. 70,000 2,323 Ralston Purina ................................... 124,000 14,485 Sara Lee ......................................... 430,000 24,053 69,181 Hospital Supplies/Hospital Management 3.4% Abbott Laboratories .............................. 290,000 11,854 Arterial Vascular Engineering * .................. 200,000 7,144 Boston Scientific * .............................. 50,000 3,581 Guidant .......................................... 155,000 11,053 HealthSouth * .................................... 980,000 26,154 Medtronic ........................................ 140,000 8,925 Steris * ......................................... 115,000 7,313 Tenet Healthcare * ............................... 340,000 10,625 United States Surgical ........................... 610,000 27,831 114,480 Pharmaceuticals 8.2% American Home Products ........................... 565,000 29,239 Bristol-Myers Squibb ............................. 460,000 52,871 Eli Lilly ........................................ 170,000 11,231 Johnson & Johnson ................................ 325,000 $ 23,969 Merck ............................................ 307,000 41,061 Pfizer ........................................... 392,000 42,606 Schering-Plough .................................. 290,000 26,571 Warner-Lambert ................................... 665,000 46,134 273,682 Biotechnology 0.5% Biogen * ........................................ 325,000 15,925 15,925 Health Care Services 1.0% United HealthCare ................................ 500,000 31,750 31,750 Miscellaneous Consumer Products 4.9% Colgate-Palmolive ................................ 239,000 21,032 Hasbro ........................................... 541,000 21,268 Mattel ........................................... 300,000 12,694 Newell ........................................... 340,000 16,936 Philip Morris .................................... 851,000 33,508 Procter & Gamble ................................. 150,000 13,660 Service Corp. International ...................... 505,000 21,652 Stanley Works .................................... 100,000 4,156 Unifi ............................................ 235,000 8,049 Unilever N.V. ADR ................................ 106,000 8,367 161,322 Total Consumer Nondurables ....................... 699,382 CONSUMER SERVICES 13.7% General Merchandisers 3.1% Dayton Hudson .................................... 232,000 11,252 Fred Meyer * ..................................... 578,600 24,590 Neiman-Marcus * .................................. 290,000 12,597 Wal-Mart ......................................... 485,000 29,464 Warnaco Group (Class A) .......................... 610,000 25,887 103,790 Specialty Merchandisers 4.5% CVS .............................................. 830,524 32,339 Federated Department Stores * .................... 200,000 10,763 General Nutrition * .............................. 460,000 $ 14,346 Home Depot ....................................... 280,000 23,257 Kohl's * ......................................... 200,000 10,375 Rite Aid ......................................... 475,000 17,842 Safeway * ........................................ 1,009,000 41,054 149,976 Entertainment and Leisure 3.1% Carnival (Class A) ............................... 775,000 30,709 Disney ........................................... 250,000 26,266 Hilton ........................................... 500,000 14,250 McDonald's ....................................... 232,000 16,008 MediaOne Group * ................................. 335,000 14,719 101,952 Media and Communications 3.0% CBS .............................................. 590,000 18,732 R.R. Donnelly .................................... 110,000 5,033 Time Warner ...................................... 350,000 29,903 Tribune .......................................... 485,000 33,374 Valassis Communications * ........................ 200,000 7,712 Vodafone ADR ..................................... 40,000 5,043 99,797 Total Consumer Services .......................... 455,515 CONSUMER CYCLICALS 2.7% Automobiles and Related 0.6% Federal-Mogul .................................... 200,000 13,500 SPX * ............................................ 115,000 7,403 20,903 Building and Real Estate 1.3% Crescent Real Estate Equities, REIT .............. 485,000 16,308 Starwood Hotels & Resorts, REIT .................. 565,000 27,297 43,605 Miscellaneous Consumer Durables 0.8% Masco ............................................ 425,000 25,712 25,712 Total Consumer Cyclicals ......................... 90,220 TECHNOLOGY 11.2% Electronic Components 1.9% EMC * ............................................ 370,000 $16,581 Intel ............................................ 280,000 20,746 Linear Technology ................................ 170,000 10,253 Maxim Integrated Products * ...................... 406,000 12,878 Texas Instruments ................................ 25,000 1,458 61,916 Electronic Systems 1.5% Hewlett-Packard .................................. 275,000 16,466 Honeywell ........................................ 150,000 12,534 Nokia ADR ........................................ 310,000 22,494 51,494 Information Processing 1.0% COMPAQ Computer .................................. 300,000 8,513 Dell Computer * .................................. 140,000 12,989 IBM .............................................. 103,000 11,826 33,328 Office Automation 0.3% Ceridian * ....................................... 110,000 6,462 Xerox ............................................ 25,000 2,541 9,003 Specialized Computer 0.2% Sun Microsystems * ............................... 130,000 5,651 5,651 Telecommunications Equipment 4.2% AirTouch Communications * ........................ 340,000 19,869 Cisco Systems * .................................. 304,000 27,996 Lucent Technologies .............................. 25,000 2,080 MCI .............................................. 485,000 28,175 Tellabs * ........................................ 347,000 24,843 WorldCom * ....................................... 770,000 37,225 140,188 Aerospace and Defense 2.1% AlliedSignal ..................................... 1,076,000 47,747 Boeing ........................................... 10,000 446 Raytheon (Class B) ............................... 375,000 22,172 70,365 Total Technology ................................. 371,945 CAPITAL EQUIPMENT 4.4% Electrical Equipment 2.5% GE ............................................... 395,000 $35,945 Tyco International ............................... 770,784 48,560 84,505 Machinery 1.9% Cooper Industries ................................ 70,000 3,846 Danaher .......................................... 1,150,000 42,190 Teleflex ......................................... 425,000 16,150 62,186 Total Capital Equipment .......................... 146,691 BUSINESS SERVICES AND TRANSPORTATION 11.9% Computer Service and Software 7.3% Adobe Systems .................................... 220,000 9,350 Automatic Data Processing ........................ 347,000 25,288 BMC Software * ................................... 650,000 33,780 Cadence Design Systems * ......................... 300,000 9,375 First Data ....................................... 740,106 24,655 Galileo International ............................ 407,000 18,340 Microsoft * ...................................... 444,000 48,132 Network Associates * ............................. 440,000 21,051 Oracle * ......................................... 640,000 15,700 Parametric Technology * .......................... 880,000 23,843 SunGard Data Systems * ........................... 350,000 13,431 242,945 Distribution Services 0.4% U.S. Foodservice * ............................... 370,620 12,995 12,995 Environmental 1.3% Rentokil Group (GBP) ............................. 1,000,000 7,196 USA Waste Services * ............................. 730,000 36,044 43,240 Miscellaneous Business Services 2.0% Cendant * ........................................ 650,000 13,569 Equifax .......................................... 235,000 8,533 H&R Block ........................................ 430,000 18,114 Omnicom .......................................... 475,000 $23,691 63,907 Railroads 0.9% Burlington Northern Santa Fe ..................... 133,000 13,059 Norfolk Southern ................................. 590,000 17,589 30,648 Total Business Services and Transportation ....... 393,735 ENERGY 3.4% Energy Services 1.2% Camco International .............................. 167,000 13,005 Cooper Cameron * ................................. 200,000 10,200 Halliburton ...................................... 380,000 16,934 40,139 Integrated Petroleum-Domestic 1.1% Atlantic Richfield ............................... 100,000 7,813 British Petroleum ADR ............................ 210,000 18,532 USX-Marathon ..................................... 250,000 8,578 34,923 Integrated Petroleum - International 1.1% Chevron .......................................... 75,000 6,230 Mobil ............................................ 389,000 29,807 36,037 Total Energy ..................................... 111,099 PROCESS INDUSTRIES 2.0% Diversified Chemicals 0.6% DuPont ........................................... 167,000 12,462 Hercules ......................................... 160,000 6,580 19,042 Specialty Chemicals 0.4% Great Lakes Chemical ............................. 325,000 12,817 12,817 Paper and Paper Products 1.0% Fort James ....................................... 340,000 15,130 Kimberly-Clark ................................... 425,000 19,497 34,627 Total Process Industries ......................... 66,486 BASIC MATERIALS 0.3% Mining 0.2% Newmont Mining ................................... 340,000 $ 8,032 8,032 Miscellaneous Materials 0.1% Crown Cork & Seal ................................ 55,000 2,613 2,613 Total Basic Materials ............................ 10,645 Miscellaneous Common Stocks 1.3% ................ 42,750 Total Common Stocks (Cost $2,388,403) ........... 3,149,341 Short-Term Investments 5.2% Money Market Funds 5.2% Reserve Investment Fund, 5.69% # + ............... 173,687,851 173,688 Total Short-Term Investments (Cost $173,688) .... 173,688 Total Investments in Securities 100.1% of Net Assets (Cost $2,562,091) ........... $ 3,323,029 Other Assets Less Liabilities .................... (2,579) NET ASSETS ....................................... $ 3,320,450 # Seven-day yield + Affiliated company * Non-income producing ADR American Depository Receipt REIT Real Estate Investment Trust GBP British sterling The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Statement of Assets and Liabilities - -------------------------------------------------------------------------------- In thousands Assets Investments in securities, at value Affiliated companies (cost $173,688) .................... $ 173,688 Other companies (cost $2,388,403) ....................... 3,149,341 Total investments in securities ......................... 3,323,029 Other assets .................................................... 15,805 Total assets .................................................... 3,338,834 Liabilities Total liabilities ............................................... 18,384 NET ASSETS ...................................................... $3,320,450 Net Assets Consist of: Accumulated net investment income - net of distributions ........ $ 7,785 Accumulated net realized gain/loss - net of distributions ....... 61,551 Net unrealized gain (loss) ...................................... 760,938 Paid-in-capital applicable to 116,963,799 shares of $0.0001 par value capital stock outstanding; 1,000,000,000 shares authorized ................................. 2,490,176 NET ASSETS ...................................................... $3,320,450 NET ASSET VALUE PER SHARE ....................................... $ 28.39 The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Unaudited ================================================================================ Statement of Operations - -------------------------------------------------------------------------------- In thousands 6 Months Ended 6/30/98 Investment Income Income Dividend ............................................ $ 14,771 Interest ............................................ 5,237 Total income ........................................ 20,008 Expenses Investment management ............................... 8,832 Shareholder servicing ............................... 3,728 Registration ........................................ 215 Prospectus and shareholder reports .................. 124 Custody and accounting .............................. 84 Legal and audit ..................................... 7 Directors ........................................... 7 Miscellaneous ....................................... 19 Total expenses ...................................... 13,016 Net investment income ....................................... 6,992 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities .......................................... 65,446 Foreign currency transactions ....................... (13) Net realized gain (loss) ............................ 65,433 Change in net unrealized gain or loss ....................... 372,174 Net realized and unrealized gain (loss) ..................... 437,607 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ...................................... $ 444,599 The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited ==================================================================================================================================== Statement of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------------------------
In thousands 6 Months Year Ended Ended 6/30/98 12/31/97 Increase (Decrease) in Net Assets Operations Net investment income .................................................... $ 6,992 $ 11,955 Net realized gain (loss) ................................................. 65,433 (3,900) Change in net unrealized gain or loss .................................... 372,174 303,584 Increase (decrease) in net assets from operations ........................ 444,599 311,639 Distributions to shareholders Net investment income .................................................... -- (11,113) Net realized gain ........................................................ -- (1,852) Decrease in net assets from distributions ................................ -- (12,965) Capital share transactions * Shares sold .............................................................. 813,512 1,862,992 Distributions reinvested ................................................. -- 12,659 Shares redeemed .......................................................... (282,216) (369,444) Increase (decrease) in net assets from capital share transactions ....................................................... 531,296 1,506,207 Net Assets Increase (decrease) during period ................................................ 975,895 1,804,881 Beginning of period .............................................................. 2,344,555 539,674 End of period .................................................................... $ 3,320,450 $ 2,344,555 *Share information Shares sold .............................................................. 30,651 85,107 Distributions reinvested ................................................. -- 535 Shares redeemed .......................................................... (10,707) (16,932) Increase (decrease) in shares outstanding ................................ 19,944 68,710
The accompanying notes are an integral part of these financial statements. T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ 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. The accompanying financial statements are prepared in accordance with generally accepted accounting principles for the investment company industry; these principles may require the use of estimates by fund management. VALUATION Equity securities listed or regularly traded on a securities exchange 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. Other equity securities 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. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. For purposes of determining the fund's net asset value per share, the U.S. dollar value of all assets and liabilities initially expressed in foreign currencies is determined by using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. 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. AFFILIATED COMPANIES As defined by the Investment Company Act of 1940, an affiliated company is one in which the fund owns at least 5% of the outstanding voting securities. CURRENCY TRANSLATION Assets and liabilities are translated into U.S. dollars at the prevailing exchange rate at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing exchange rate on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains and losses is reflected as a component of such gains and losses. 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. NOTE 2 - INVESTMENT TRANSACTIONS Purchases and sales of portfolio securities, other than short-term securities, aggregated $1,082,264,000 and $476,608,000, respectively, for the six months ended June 30, 1998. 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. The fund has unused realized capital loss carryforwards for federal income tax purposes of $2,275,000, which expire in 2005. The fund intends to retain gains realized in future periods that may be offset by available capital loss carryforwards. At June 30, 1998, the aggregate cost of investments for federal income tax and financial reporting purposes was $2,562,091,000, and net unrealized gain aggregated $760,938,000, of which $786,716,000 related to appreciated investments and $25,778,000 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 $1,621,000 was payable at June 30, 1998. 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, 1998, and for the six months then ended, the effective annual group fee rate was 0.32%. 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 $2,606,000 for the six months ended June 30, 1998, of which $457,000 was payable at period-end. Additionally, the fund is one of several T. Rowe Price-sponsored mutual funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may invest. Spectrum does not invest in the underlying funds for the purpose of exercising management or control. Expenses associated with the operation of Spectrum are borne by each underlying fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by Spectrum, pursuant to special servicing agreements between and among Spectrum, the underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum International, Rowe Price-Fleming International. Spectrum Growth Fund held approximately 11.4% of the outstanding shares of the Blue Chip Growth Fund at June 30, 1998. For the six months then ended, the fund was allocated $414,000 of Spectrum expenses. The fund may invest in the Reserve Investment Fund and Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds are offered as cash management options only to mutual funds and other accounts managed by T. Rowe Price and 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, 1998, totaled $5,119,000 and are reflected as interest income in the accompanying Statement of Operations. 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. INTERNET. T. Rowe Price Web site: www.troweprice.com All the information and services available on Tele*Access are available on our Web site, including transactions in your fund and Discount Brokerage accounts (with preauthorized access). 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, mutual funds, 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 type. Detail pages itemize account transactions. 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 or CD-ROM 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 500* Extended Equity Market Index Financial Services Growth & Income Growth Stock Health Sciences Media & Telecommunications** Mid-Cap Growth Mid-Cap Value New America Growth New Era New Horizons*** Real Estate Science & Technology Small-Cap Stock Small-Cap Value*** Spectrum Growth Total Equity Market Index 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 Emerging Markets Bond Global 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 Balanced Personal Strategy Growth Personal Strategy Income 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 * Formerly named Equity Index. ** Formerly the closed-end New Age Media Fund. Converted to open-end status on 7/28/97. *** Closed to new investors. + Formerly named Global Government Bond. ++ Neither the funds nor their share prices are insured or guaranteed by the U.S. government. Please call for a prospectus. Read it carefully before investing. The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by First Security Benefit Life Insurance Company of New York, White Plains, NY. T. Rowe Price refers to the underlying portfolios' investment managers and the distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security Benefit Group of Companies and the T. Rowe Price companies are not affiliated. The variable annuity may not be available in all states. The contract has limitations. Call a representative for costs and complete details of the coverage. T. Rowe Price Discount Brokerage - -------------------------------------------------------------------------------- DISCOUNT BROKERAGE A Division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC This low-cost service gives you the opportunity to easily consolidate all your investments with one company. Through T. Rowe Price Discount Brokerage, you can buy and sell individual securities-stocks, bonds, options, and others-as well as mutual funds at considerable commission savings over full-service brokers.* We also provide a wide range of services, including: AUTOMATED TELEPHONE and Internet Services You can enter trades, access quotes, and review account information 24 hours a day, seven days a week. Any trades executed through these programs provide additional savings on commissions.** INVESTOR INFORMATION A variety of informative reports, such as our Brokerage Insights series, S&P Market Month newsletter, and select stock reports, can help you better evaluate economic trends and investment opportunities. DIVIDEND REINVESTMENT Service Virtually all stocks held in customer accounts are eligible for this service, free of charge. * Based on an April 1998 survey for representative-assisted stock trades. Services vary by firm, and commissions may vary by size of order. ** Discount applies to our current commission schedule. All trades subject to a $35 minimum commission except equity trades placed through Internet-Trader, which are subject to a $29.95 minimum commission. 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. 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 6/30/98 -----END PRIVACY-ENHANCED MESSAGE-----