<PAGE>
Fellow Shareholders
- --------------------------------------------------------------------------------
The capital markets remained under pressure during the second quarter as a
result of the anxiety associated with rising short-term interest rates and
the declining U.S. dollar. Bond prices have dropped for three consecutive
quarters (with a corresponding rise in long-term interest rates), while
stocks have generally fallen for the past two quarters.
This less-than-ideal investment climate affected the performance of
your Fund, which experienced a negative return over the first half despite a
gain during the second quarter. These results, however, do compare favorably
with the unmanaged Standard & Poor's 500 Stock Index and the Lipper average
of other growth and income funds.
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 6/30/94
3 Months 6 Months
---------------------
<S> <C> <C>
Growth & Income Fund 1.1% -3.0%
S&P 500 0.4 -3.4
Lipper Growth & Income
Fund Average -0.4 -3.6
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND DISTRIBUTION
Your Board of Directors declared a second quarter income dividend of $0.12
per share on June 27, payable to shareholders of record on that date. The
payment date was July 1, and your check or statement reflecting this dividend
was mailed separately. Your Fund has distributed $0.23 in dividend income and
$0.06 of long-term capital gains per share so far in 1994. These
distributions are taxable for this year, and will be reported on the 1099-DIV
Form sent to you in January 1995.
MARKET ENVIRONMENT
The second quarter was a continuation of the preceding quarter in many
respects. The concerns we mentioned in the March report roiled the stock
market again in the second quarter. Foremost among them was rising short-term
interest rates due to a tighter monetary policy on the part of the Federal
Reserve. The yield on three-month Treasury bills increased from 3.5% to 4.1%
during this period. Despite the wide spread between short- and long-term
rates, the yield on the benchmark 30-year Treasury bond rose along with
short-term rates; it started the year at 6.4%, climbed to 7.1% at the
beginning of the second quarter, and advanced to 7.6% by the time the quarter
was over.
Security Diversification
- --------------------------------------------------------------------------------
A pie chart showing the percent of the Fund's assets invested among
common stocks 81%
convertibles 8%
bonds and preferred stocks 6%
and reserves 5%
- --------------------------------------------------------------------------------
In addition, the falling value of the U.S. dollar contributed to
interest rate worries. The dollar declined about 12% versus both the Japanese
yen and German mark through mid July. Although the weaker dollar serves to
make goods and services produced domestically more competitive in world
markets, it also carries inflationary implications since imports become more
expensive. Even more important from a financial perspective, domestic markets
are less attractive to foreigners when their dollar-denominated holdings keep
falling in value. Foreign investors are major holders of U.S. Government
bonds -- creditors,
<PAGE>
in effect, who have played an important role in financing our enormous budget
deficits over the years.
In contrast to these currency and financial issues, the fundamental
health of the economy is strong. This phase of the expansion appears solid
with increasing employment, personal income, and corporate profits. We expect
these trends to continue during the second half of this year. The outlook for
the stock market should brighten going forward if the currency and interest
rate markets begin to stabilize.
PORTFOLIO REVIEW
The diversification of your Fund's portfolio (see chart on the previous page)
reflects only minor changes from the first quarter. Cash reserves were
reduced from 8% to 5% despite inflows of money from existing and new
shareholders, since purchases far exceeded sales of securities as shown in
the Major Portfolio Changes in the following section.
Most of the new purchases were of relatively high-yielding
securities, which will increase the income component of your Fund. GREAT
LAKES CHEMICAL and GENERAL MILLS were added for their capital growth
potential since they both have a strong history of earnings and dividend
growth, and should benefit from management's concerns with shareholder
interests. In addition, the share prices of these companies have fallen from
prior highs, offering good value and opportunity for patient long-term
investors.
Financial Profile
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
G&I Fund S&P
Stocks 500
-------- --------
<S> <C> <C>
Dividend Growth
(5-year annual average) 7.0% 4.2%
Current Yield 3.3% 2.9%
Price/Book Ratio 1.8X 2.5X
Price/Earnings Ratio
(1994 estimated EPS) 13.4X 15.1X
</TABLE>
- --------------------------------------------------------------------------------
The favorable relative value characteristics of your securities
holdings are indicated in the preceding table. We believe that the market
will reward this focus on above-average yield and dividend growth over the
long term.
Respectfully submitted,
/s/ Stephen W. Boesel
Stephen W. Boesel
President and Chairman of the
Investment Advisory Committee
July 18, 1994
2
<PAGE>
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
June 30, 1994
<TABLE>
<CAPTION>
Percent of
Company Net Assets
- ------------------------------------- ----------
<S> <C>
California Federal Bank 3.7%
GE 2.1
Atlantic Richfield 1.9
Dayton Hudson 1.9
Pfizer 1.9
Philip Morris 1.7
WMX Technologies 1.7
Entergy 1.6
United Technologies 1.6
Coltec Industries 1.5
Schlumberger 1.5
Chemical Banking 1.5
RJR Nabisco 1.5
Great Lakes Chemical 1.4
Pacific Telesis 1.4
IBM 1.4
CPC International 1.3
Alcoa 1.3
Texaco 1.3
AT&T 1.3
Reader's Digest 1.2
Inco 1.2
British Petroleum 1.2
American Express 1.2
Halliburton 1.2
- ----------------------------------------------------------
TOTAL 39.5%
==========================================================
</TABLE>
Major Portfolio Changes
- --------------------------------------------------------------------------------
Three Months Ended June 30, 1994
TEN LARGEST PURCHASES
<TABLE>
<CAPTION>
Cost (000)
----------
<S> <C>
Great Lakes Chemical* $17,344
RJR Nabisco PERCS C* 11,960
DeBartolo Realty* 7,375
Pacific Telesis 7,106
Grupo Financiero InverMexico Bond* 5,000
Pet 4,853
Commonwealth Edison 4,578
Continental Cablevision Bond* 4,241
General Mills* 4,154
Riverwood International Bond* 3,974
==========================================================
TEN LARGEST SALES
Proceeds (000)
--------------
AirTouch Communications** $6,432
Alumax** 6,197
Greyhound Lines Bond** 4,950
Eastman Kodak** 2,348
Panamerican Beverages** 1,892
Stone Container Bond 1,550
Ralcorp Holdings** 1,383
Coca-Cola FEMSA** 1,309
Selective Insurance 1,267
Reader's Digest Class A 868
==========================================================
</TABLE>
* Position added
** Position eliminated
3
<PAGE>
Statement of Net Assets (Value in thousands)
T. Rowe Price Growth & Income Fund / June 30, 1994 (Unaudited)
- ------------------------------------------------------------------------------
Common Stocks and Warrants -- 81.4%
<TABLE>
<CAPTION> Value
---------------
<S> <C> <C>
FINANCIAL -- 14.9%
BANK & TRUST -- 9.1%
362,000 shs. Baltimore Bancorp................................ $ 7,195
318,380 BANC ONE......................................... 10,905
200,000 Banpais S.A., ADR................................ 2,000
3,476,124 *+ California Federal Bank.......................... 40,844
14,601 wts. * Chase Manhattan, 6/30/96......................... 120
450,000 shs. Chemical Banking................................. 17,325
150,000 First Interstate................................. 11,550
275,000 Great Western Financial.......................... 5,053
400,000 KeyCorp.......................................... 12,750
7,738 wts. * Shawmut National, 1/18/96........................ 37
107,779
INSURANCE -- 1.5%
160,000 shs. Foremost......................................... 4,960
170,000 Provident Life & Accident Insurance (Class A).... 4,122
330,000 Provident Life & Accident Insurance (Class B).... 8,415
12,100 Selective Insurance.............................. 303
17,800
FINANCIAL SERVICES -- 4.3%
550,000 American Express................................. 14,162
531,545 Bear Stearns..................................... 9,036
230,000 Beneficial....................................... 8,395
330,668 Household International.......................... 11,243
110,000 Lehman Brothers.................................. 1,664
175,000 Student Loan Marketing Assn...................... 6,300
50,800
TOTAL FINANCIAL 176,379
UTILITIES -- 6.5%
TELEPHONE -- 3.7%
275,000 AT&T............................................. 14,953
400,000 GTE.............................................. 12,600
525,000 Pacific Telesis.................................. 16,210
43,763
ELECTRIC UTILITIES -- 2.8%
600,000 Commonwealth Edison.............................. 13,650
780,379 Entergy.......................................... 19,314
32,964
TOTAL UTILITIES 76,727
CONSUMER NONDURABLES -- 21.4%
COSMETICS -- 0.5%
156,900 shs. International Flavors & Fragrances............... $ 6,139
BEVERAGES -- 3.0%
200,000 Anheuser-Busch................................... 10,150
232,500 Brown-Forman (Class B)........................... 6,568
155,000 Coke............................................. 6,297
425,000 PepsiCo.......................................... 13,015
36,030
FOOD PROCESSING -- 3.9%
325,400 CPC International................................ 15,701
700,000 * Foodmaker........................................ 3,937
75,000 General Mills.................................... 4,097
350,000 Pet.............................................. 6,519
282,200 Ralston Purina................................... 9,771
300,000 Sara Lee......................................... 6,375
46,400
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT -- 1.8%
400,000 Abbott Laboratories.............................. 11,600
346,400 Baxter International............................. 9,093
20,693
PHARMACEUTICALS -- 5.8%
200,000 American Home Products........................... 11,350
150,000 Bristol-Myers Squibb............................. 8,044
100,000 Eli Lilly........................................ 5,687
425,000 Merck............................................ 12,644
350,000 Pfizer........................................... 22,094
300,000 SmithKline Beecham, equity units, ADR............ 8,437
68,256
MISCELLANEOUS CONSUMER PRODUCTS -- 6.4%
307,375 Bols Wessanen (NLG).............................. 6,492
100,000 Colgate-Palmolive................................ 5,200
300,000 Jostens.......................................... 4,838
400,000 Philip Morris.................................... 20,600
372,000 Reebok........................................... 11,113
330,900 Springs Industries............................... 9,886
175,000 Tambrands........................................ 6,431
400,000 UST.............................................. 10,850
75,410
TOTAL CONSUMER NONDURABLES 252,928
</TABLE>
4
<PAGE>
CONSUMER SERVICES -- 5.1%
<TABLE>
<S> <C> <C>
GENERAL MERCHANDISERS -- 3.4%
275,000 shs. Dayton Hudson.................................... $ 22,275
200,000 Sears............................................ 9,600
395,000 TJX.............................................. 8,641
40,516
SPECIALTY MERCHANDISERS -- 0.5%
2,728,600 + Merry-Go-Round Enterprises....................... 5,457
ENTERTAINMENT & LEISURE -- 1.2%
287,800 Reader's Digest (Class A)........................ 11,944
72,800 Reader's Digest (Class B)........................ 2,839
14,783
TOTAL CONSUMER SERVICES 60,756
CONSUMER CYCLICALS -- 3.6%
AUTOMOBILES & RELATED -- 0.0%
20,000 A.O. Smith (Class B)............................. 505
BUILDING & REAL ESTATE -- 3.2%
150,000 Burnham Pacific Properties....................... 2,550
500,000 DeBartolo Realty................................. 7,312
250,000 Federal Realty Investment Trust.................. 6,406
250,000 IRT Property..................................... 2,469
239,500 * Rouse............................................ 4,491
235,000 *++ Rouse............................................ 4,406
200,000 South West Property Trust........................ 2,450
304,000 Taubman Centers.................................. 3,496
200,000 Wellsford Residential Property................... 4,550
38,130
MISCELLANEOUS CONSUMER DURABLES -- 0.4%
126,400 Corning.......................................... 4,124
TOTAL CONSUMER CYCLICALS 42,759
TECHNOLOGY -- 4.9%
ELECTRONIC SYSTEMS -- 0.8%
300,000 Honeywell........................................ 9,300
AEROSPACE & DEFENSE -- 1.6%
300,000 United Technologies.............................. 19,275
INFORMATION PROCESSING -- 1.3%
275,000 IBM.............................................. 16,156
TELECOMMUNICATIONS -- 1.2%
500,000 Northern Telecom................................. 13,813
TOTAL TECHNOLOGY 58,544
CAPITAL EQUIPMENT -- 4.0%
ELECTRICAL EQUIPMENT -- 2.1%
530,000 shs. GE............................................... $ 24,711
MACHINERY -- 1.9%
701,500 * Coltec Industries................................ 13,065
100,000 Cooper Industries................................ 3,600
92,500 Danaher.......................................... 3,862
4,000 Gardner Denver Machinery......................... 35
165,000 Gilbert Associates (Class A)..................... 2,434
22,996
TOTAL CAPITAL EQUIPMENT 47,707
BUSINESS SERVICES -- 3.1%
MISCELLANEOUS BUSINESS SERVICES -- 3.1%
300,000 Browning-Ferris.................................. 9,113
400,000 Ennis Business Forms............................. 5,450
400,000 Mid-American Waste Systems....................... 2,250
750,000 WMX Technologies................................. 19,875
TOTAL BUSINESS SERVICES 36,688
ENERGY -- 9.2%
ENERGY SERVICES -- 2.7%
418,000 Halliburton...................................... 14,108
300,000 Schlumberger..................................... 17,737
31,845
INTEGRATED PETROLEUM-DOMESTIC -- 4.7%
225,000 Atlantic Richfield............................... 22,978
200,000 British Petroleum, ADR........................... 14,350
125,000 Pennzoil......................................... 6,406
400,000 Unocal........................................... 11,450
55,184
INTEGRATED PETROLEUM-INTERNATIONAL -- 1.8%
250,000 Sun Company...................................... 6,719
250,000 Texaco........................................... 15,094
21,813
TOTAL ENERGY 108,842
PROCESS INDUSTRIES -- 4.1%
PAPER & PAPER PRODUCTS -- 0.9%
550,000 Albany International (Class A)................... 10,381
SPECIALTY CHEMICALS -- 3.2%
320,000 Geon............................................. 8,320
300,000 Great Lakes Chemical............................. 16,238
904,000 Pall............................................. 13,560
38,118
TOTAL PROCESS INDUSTRIES 48,499
</TABLE>
5
<PAGE>
T. Rowe Price Growth & Income Fund / Statement of Net Assets
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BASIC MATERIALS --4.6%
METALS -- 4.6%
208,200 shs. Alcoa............................................ $ 15,225
400,000 British Steel, ADR............................... 8,650
500,000 De Beers, ADR.................................... 11,125
600,000 Inco............................................. 14,625
100,000 Vulcan Materials................................. 4,587
TOTAL BASIC MATERIALS 54,212
TOTAL COMMON STOCKS (COST -- $853,856 964,041
Preferred Stocks -- 0.2%
8,139 Gulf States Utilities, $8.64, Cum. .............. 827
17,087 Gulf States Utilities, 8.75%, Dep., Series D..... 850
3,658 Gulf States Utilities, Adj., Series A............ 363
TOTAL PREFERRED STOCKS (COST -- $1,971) 2,040
Convertible Preferred Stocks -- 6.5%
75,000 + California Federal Bank, 7.75%, Series A......... 1,575
90,000 Citicorp, 5.375%................................. 10,102
100,000 Cooper Industries................................ 2,275
150,000 Delta, Dep. Shs., Rep. 1/1000, Series C.......... 6,787
200,000 Freeport-McMoRan (144a), $4.375, Cum. Exch. ..... 9,125
180,000 Freeport-McMoRan, Dep. Shs., Rep. 4.............. 4,590
200,000 Glendale Federal Bank, 8.75%, Series E........... 5,675
300,000 Mobile Telecommunication Technologies
(144a), $2.25................................... 8,588
150,000 Newmont Mining (144a), $2.75..................... 8,794
800,000 RJR Nabisco, $0.835, PERCS, Series A............. 5,000
1,840,000 RJR Nabisco, $0.6012, PERCS, Series C............ 12,190
100,000 Tanger Factory Outlet Centers, REIT.............. 2,563
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST -- $74,103) 77,264
Convertible Bonds -- 1.3%
$ 5,000,000 Banco Nacional de Mexico (144a), Sub. Deb.,
7.00%, 12/15/99................................ $ 5,337
5,000,000 Grupo Financiero InverMexico (144a),
7.50%, 6/16/01................................. 4,875
1,400,000 IRT Property, Sub. Deb., 7.30%, 8/15/03.......... 1,260
4,750,000 * Perpetual Savings Bank, Sub. Deb., 7.25%,
5/15/11....................................... 48
3,000,000 Southwestern Property Trust, Deb., 8.00%,
1/15/03....................................... 3,570
TOTAL CONVERTIBLE BONDS (COST -- $17,691) 15,090
Corporate Bonds -- 5.4%
4,000,000 American Standard, Sub. Deb., 9.875%, 6/1/01..... 3,820
4,250,000 ARA Services, Sr. Notes, 10.625%, 8/1/00......... 4,462
1,472,700 + California Federal Bank, Sub. Deb., 10.00%,
1/3/03.......................................... 1,370
5,000,000 Coltec Industries, Sr. Notes, 10.25%, 4/1/02..... 5,050
5,000,000 Container Corporation of America, Sr. Notes,
9.75%, 4/1/03................................... 4,750
4,635,000 Continental Cablevision, 9.00%, 9/1/08........... 4,172
2,725,000 Ferrellgas, 10.00%, 8/1/01....................... 2,718
3,000,000 Gulf Canada Resourses, 9.25%, 1/15/04............ 2,790
3,000,000 IMC Fertilizer Group, 9.25%, 10/1/00............. 2,835
3,000,000 IMC Fertilizer Group, 10.75%, 6/15/03............ 3,097
5,000,000 Paging Network, 8.875%, 2/1/06................... 4,475
3,980,000 Riverwood International, 10.375%, 6/30/04........ 3,960
5,000,000 Rowan Companies, Sr. Notes, 11.875%, 12/1/01..... 5,300
4,000,000 Southern Pacific Rail, 9.375%, 8/15/05........... 4,000
3,370,000 Stone Container, 9.875%, 2/1/01.................. 3,126
5,000,000 Texas Bottling Group, 9.00%, 11/15/03............ 4,587
4,000,000 Westpoint Stevens, Sr. Notes, 8.75%, 12/15/01.... 3,660
TOTAL CORPORATE BONDS (COST -- $64,898) 64,172
</TABLE>
6
<PAGE>
Short-Term Investments -- 5.6%
<TABLE>
<S> <C> <C>
COMMERCIAL PAPER -- 3.9%
$10,000,000 American General, 4.35%, 7/11/94............................... $ 9,983
6,560,000 Harvard University, 4.30%, 7/1/94.............................. 6,560
10,000,000 Kingdom of Sweden, 3.24%, 7/14/94.............................. 9,837
10,000,000 National Australia Funding (Delaware), 4.27%, 7/25/94.......... 9,950
10,000,000 Perferred Receivables Funding, 4.50%, 9/1/94................... 9,885
46,215
MEDIUM-TERM NOTES -- 1.7%
10,000,000 Merrill Lynch, VR, 4.357%, 9/16/94............................. 10,000
10,000,000 Morgan Stanley Group, VR, 4.713%, 7/13/95...................... 10,007
20,007
TOTAL SHORT-TERM INVESTMENTS (COST -- $66,222) 66,222
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.4%
(COST -- $1,078,741) $1,188,829
- --------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- (0.4%) (4,291)
NET ASSETS CONSISTING OF:
Accumulated net investment
income -- net of distributions............................... $ 813
Accumulated realized gains/
losses -- net of distributions............................... 26,525
Net unrealized appreciation
of investments............................................... 110,088
Paid-in-capital applicable to
75,034,167 shares of $0.01 par
value capital stock outstanding;
500,000,000 shares authorized................................ 1,047,112
-----------
NET ASSETS -- 100.0% $1,184,538
==========
NET ASSET VALUE PER SHARE $15.79
======
- --------------------------------------------------------------------------------------------------------------
</TABLE>
+ Affiliated company
* Non-income producing
++ Security contains some restrictions as to public resale -- total of
such securities at period-end amounts to 0.4% of net assets.
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers --total of such securities at period-end amounts
to 3.1% of net assets.
PERCS Participating Equity Redemption Certificates
REIT Real Estate Investment Trust
VR Variable rate
(NLG) Dutch guilder denominated
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
Statement of Operations
- ------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund / Six Months Ended June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
Amounts in Thousands
----------------------------
<S> <C> <C>
INVESTMENT INCOME
Income
Dividends.................................................................... $ 17,512
Interest..................................................................... 5,176
---------
Total income................................................................. $ 22,688
Expenses
Investment management fees................................................... 2,914
Shareholder servicing fees & expenses........................................ 1,732
Custodian and accounting fees & expenses..................................... 101
Prospectus & shareholder reports............................................. 68
Registration fees & expenses................................................. 41
Legal & auditing fees........................................................ 17
Directors' fees & expenses................................................... 14
Proxy and annual meeting..................................................... 14
Miscellaneous expenses....................................................... 4
---------
Total expenses............................................................... 4,905
---------
Net investment income.......................................................... 17,783
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain............................................................ 27,000
Change in net unrealized appreciation or depreciation........................ (81,663)
---------
Net loss on investments........................................................ (54,663)
---------
DECREASE IN NET ASSETS FROM OPERATIONS $(36,880)
=========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30,1994 Dec. 31,1993
---------------- --------------
Amounts in Thousands
-----------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income......................................... $ 17,783 $ 30,382
Net realized gain on investments.............................. 27,000 37,365
Change in net unrealized appreciation or depreciation
of investments.............................................. (81,663) 54,654
---------- ----------
Increase (decrease) in net assets from operations............. (36,880) 122,401
---------- ----------
Distributions to shareholders
Net investment income......................................... (16,970) (30,491)
Net realized gain on investments.............................. (4,378) (32,680)
---------- ----------
Decrease in net assets from distributions to shareholders..... (21,348) (63,171)
---------- ----------
Capital share transactions
Sold 10,777 and 25,384 shares................................. 176,552 417,267
Distributions reinvested of 1,294 and 3,728 shares............ 20,584 61,217
Redeemed 7,488 and 12,736 shares.............................. (121,864) (210,132)
---------- ----------
Increase in net assets from capital share transactions........ 75,272 268,352
---------- ----------
Net equalization................................................ -- 325
---------- ----------
Total increase ................................................. 17,044 327,907
NET ASSETS
Beginning of period........................................... 1,167,494 839,587
---------- ----------
End of period................................................. $1,184,538 $1,167,494
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
Notes to Financial Statements
- ------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund / June 30, 1994 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Growth & Income Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange 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 that are not traded on a particular day
are valued at a price within the limits of the latest bid and asked prices
deemed by the Board of Directors or by persons delegated by the Board, best
to reflect fair value. Securities regularly traded in the over-the-counter
market are valued at the latest bid price.
Debt securities are generally traded in the over-the-counter market
and are valued at a price deemed best to reflect fair value as quoted by
dealers who make markets in these securities or by an independent pricing
service. Short-term debt securities are valued at their cost which, when
combined with accrued interest, approximates fair value.
For purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies are
converted into U.S. dollars at 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.
B) Affiliated Companies - Investments in companies 5% or more of whose
outstanding voting securities are held by the Fund are defined as "Affiliated
Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
C) Currency translation - Foreign currency amounts are translated into U.S.
dollars at prevailing exchange rates as follows: assets and liabilities at
the rate of exchange at the end of the respective period, purchases and sales
of securities, and income and expenses at the rate of exchange prevailing on
the dates of such transactions. The effect of changes in foreign exchange
rate on realized and unrealized security gains or losses is reflected as a
component of such gains or losses.
D) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions
to shareholders are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles.
E) Accounting Change - Effective as of the beginning of the year, the Fund
discontinued the practice of equalization. The results of operations and net
assets are not affected by this change.
NOTE 2 - PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $211,995,000 and $116,069,000,
respectively, for the six months ended June 30, 1994.
10
<PAGE>
- ------------------------------------------------------------------------------
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, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $1,078,741,000 and net
unrealized appreciation aggregated $110,088,000, of which $162,696,000
related to appreciated investments and $52,608,000 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, computed daily and paid monthly, consisting of an Individual Fund Fee
equal to 0.15% of average daily net assets and a Group Fee. The Group Fee is
based on the combined assets of certain mutual funds sponsored by the Manager
or Rowe Price-Fleming International, Inc. (the Group). The Group Fee rate
ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in
excess of $34 billion. The effective annual Group Fee rate at June 30, 1994
and for the period then ended was 0.34%. The Fund pays a pro rata portion of
the Group Fee based on the ratio of the Fund's net assets to those of the
Group.
T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services,
Inc. (RPS) are wholly owned subsidiaries of the Manager. TRPS provides
transfer and dividend disbursing agent functions and shareholder services for
all accounts. RPS provides subaccounting and recordkeeping services for
certain retirement accounts invested in the Fund. The Manager, under a
separate agreement, calculates the daily share price and maintains the
financial records of the Fund. The Fund is one of several T. Rowe Price mutua
l funds (the Underlying Funds) in which the T. Rowe Price Spectrum Growth
Fund (Spectrum) invests. In accordance with an Agreement between Spectrum,
the Underlying Funds, the Manager and TRPS, expenses from the operation of
Spectrum are borne by the Underlying Funds based on each Underlying Fund's
proportionate share of assets owned by Spectrum. For the six months ended
June 30, 1994, the Fund incurred fees totalling approximately $1,553,000 for
these services provided by related parties. At June 30, 1994, these
investment management and service fees payable were $816,000.
11
<PAGE>
Financial Highlights
- ------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
------------------------------------------------------------------------------
Year Ended December 31,
Six Months Ended ----------------------------------------------------------
June 30, 1994 1993 1992 1991 1990 1989
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............ $16.57 $15.53 $14.16 $11.22 $13.25 $12.32
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income....................... 0.24 0.46 0.55 0.56 0.56 0.65
Net realized and unrealized gain (loss)..... (0.73) 1.53 1.57 2.94 (2.02) 1.71
------ ------ ------ ------ ------ ------
Total from Investment Activities................ (0.49) 1.99 2.12 3.50 (1.46) 2.36
------ ------ ------ ------ ------ ------
Distributions
Net investment income....................... (0.23) (0.47) (0.60) (0.56) (0.56) (0.64)
Net realized gain........................... (0.06) (0.48) (0.15) -- (0.01) (0.79)
------ ------ ------ ------ ------ ------
Total Distributions............................. (0.29) (0.95) (0.75) (0.56) (0.57) (1.43)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ................ $15.79 $16.57 $15.53 $14.16 $11.22 $13.25
====== ====== ====== ====== ====== ======
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return.................................... (3.0)% 13.0% 15.3% 31.5% (11.1)% 19.3%
Ratio of Expenses to Average Net Assets......... 0.83%+ 0.83% 0.85% 0.93% 0.97% 0.96%
Ratio of Net Investment Income to
Average Net Assets.......................... 3.02%+ 2.91% 3.75% 4.23% 4.68% 4.70%
Portfolio Turnover Rate......................... 21.3%+ 22.4% 29.9% 47.9% 34.6% 57.1%
Net Assets, End of Year (in thousands).......... $1,184,538 $1,167,494 $839,587 $655,510 $474,970 $553,609
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized
12
<PAGE>
Shareholder Services
- ------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions
that accurately reflect their financial goals, T. Rowe Price offers a wide
variety of information and services -- at no extra cost.
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE--Shareholder Service Representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., E.T.
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. While
there, you can drop off applications or obtain prospectuses and other
literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access(R) (1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment,
and fund prices and yields. Additionally, you have the ability to request
prospectuses, statements, account and tax forms, reorder checks, and initiate
purchase, redemption, and exchange orders for identically registered
accounts.
PC*Access(R) provides the same information as Tele*Access, but on a
personal computer via dial-up modem.
ACCOUNT SERVICES
Checking--Write checks for $500 or more on any money market and most
bond fund accounts.
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 low, $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.
INVESTMENT INFORMATION
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides
total portfolio value, and lists your investments by type -- stock, bond, and
money market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports--Portfolio managers review the
performance of the funds in plain language and discuss T. Rowe Price's
economic outlook.
The T. Rowe Price Report--A quarterly newsletter with relevant
articles on market trends, personal financial planning, and T. Rowe Price's
economic perspective.
Insights--A library of information that includes reports on mutual
fund tax issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix
Worksheet, College Planning Kit, Retirees Financial Guide, Retirement
Planning Kit (also available on disk for PC use), and Guide to Risk-Adjusted
Performance can help you determine and reach your investment goals.
DISCOUNT BROKERAGE
You can trade stocks, bonds, options, precious metals, and other securities
at a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
13
<PAGE>
T. Rowe Price No-Load Mutual Funds
- ------------------------------------------------------------------------------
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate Tax-Free
Maryland Short-Term Tax-Free Bond
Summit Municipal Intermediate
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price Fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
14
<PAGE>
Semi Annual Report
- --------------------------------------------------------------------------------
For yield, price, last transaction, and current balance, 24 hours, 7 days a
week, call:
1-800-638-2587 toll free
625-7676 Baltimore area
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
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 Growth & Income
Fund.(R)
T. Rowe Price
Invest With Confidence(R)
GIF
T. ROWE PRICE
- -------------
GROWTH & INCOME
FUND
June 30, 1994
[ART OF APPEARS HERE]
