<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
Your fund benefited as the capital markets soared during the second quarter. The
bond market continued to rebound from its setback of last year while the stock
market, paced by technology issues, surged to record high levels. The first half
gains were quite exceptional and, in fact, have only been exceeded in five other
such periods over the past 50 years.
Your fund provided excellent returns during these periods, but did not keep
pace with the unmanaged Standard & Poor's 500 Stock Index and slightly trailed
the competition. It is not unusual for your fund, with its more conservative,
yield-oriented investment approach, to lag during rapid market advances.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 6/30/95
3 Months 6 Months
---------------------
<S> <C> <C>
Growth & Income Fund 7.3% 15.4%
S&P 500 9.6 20.2
Lipper Growth & Income
Fund Average 8.1 16.8
</TABLE>
- --------------------------------------------------------------------------------
DIVIDEND DISTRIBUTION
On June 27, your Board of Directors declared a second quarter income dividend of
$0.13 per share, payable to shareholders of record on that date. This brings
your total 1995 distributions to $0.43 per share, including the $0.16 per share
capital gain paid in the first quarter. Your check or statement reflecting this
distribution was mailed separately.
MARKET ENVIRONMENT
The economy experienced a substantial slowdown during the first half, in
contrast to the favorable growth trend of the past year. Although the "pause"
was not widely anticipated, it did not roil the stock market as might normally
be expected, largely because long-term interest rates declined substantially as
the economy weakened. This decline was subsequently enhanced by the Federal
Reserve's shift toward an easier monetary policy as indicated by the early July
cut in the federal funds rate. Additionally, corporate profit growth remained
generally favorable despite the slowdown, lending crucial support to the market.
Favorable stock market periods tend to occur as investors, in their
collective expectations, anticipate future developments. Dramatic market
advances, such as this year's, usually anticipate a significant change and
typically follow periods of recession, declining corporate profits, or bear
markets. None of these elements was present during the first half, and we were
surprised by the intensity of this market rise, albeit pleasantly so. However,
we are mindful that, in the absence of significant improvement in the economy,
the higher level of stock prices makes the market more vulnerable to future
disappointment.
- --------------------------------------------------------------------------------
Security Diversification
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
- --------------------------------------------------------------------------------
GROWTH & INCOME PIE CHART PERCENTAGES
- --------------------------------------------------------------------------------
<S> <C>
Security Diversification
6/30/95
Common Stocks 78%
Convertibles 6%
Bonds & Preferred Stocks 4%
Reserves 12%
- -------------------------------------------------------------------------------
</TABLE>
PORTFOLIO REVIEW
The asset allocation of your fund (shown in the pie chart) became somewhat
more conservative during the quarter. Cash reserves were increased modestly
to 12%, and the bond
<PAGE>
component was almost halved to 4%. Although equity exposure increased from 76%
to 78% during the period, this reflected the effect of rising stock prices
rather than a deliberate increase in the equity allocation. At this time, we
are, in fact, gradually selling to reduce overall equity exposure.
As you can see in the list of major portfolio transactions following this
letter, the majority of sales were bond holdings, mostly high-yield securities
that had provided an excellent income stream and some appreciation. The high-
yield (lower credit quality) sector is more sensitive to stock market movements
than the typical high-grade bond, and since we were becoming more cautious, we
felt now was a good time to reduce exposure.
The largest purchases represented a blend of both new and existing
holdings. Occasionally, we discuss a sector theme that is guiding our stock
selection. In this case, these securities appealed to us because they met our
criteria of attractive relative dividend yields and good prospects for future
growth. As a group, they provide a higher dividend yield than the general
market.
A perennial element of our portfolio management is the discipline to
recycle money out of holdings that have met our objectives into those we believe
provide better value or greater long-term opportunity. Your fund's emphasis on
relative valuations is shown in the following financial profile.
- --------------------------------------------------------------------------------
Financial Profile
- --------------------------------------------------------------------------------
<TABLE>
G&I Fund S&P
Stocks 500
-------- -----
<S> <C> <C>
Dividend Growth
(5-year annual average) 7.9% 3.1%
Current Yield 3.3% 2.5%
Price/Book Ratio 2.4X 2.8X
Price/Earnings Ratio
(1995 estimated EPS) 13.2X 15.5X
- --------------------------------------------------------------------------------
</TABLE>
SUMMARY AND OUTLOOK
We are becoming more cautious regarding market prospects, mainly because the
market has risen so far in such a short time. In our view, the important market
fundamentals invite a more sober assessment. We believe the primary drop in
interest rates has already occurred, and while corporate profits are growing,
their rate of gain is slowing. Additionally, as has been the case for some time,
the general valuation level of the market is not appealing in a historical
context.
Maybe interest rates will decline more than we anticipate, corporate
profits will grow faster (and longer) than we expect, and investor enthusiasm
will continue to overwhelm valuation concerns. But maybe not. In that case, your
fund's more conservative stance should be advantageous.
We will wait for periods of market weakness before committing the cash
reserves held in the portfolio. Meanwhile, we stay alert for specific
opportunities that meet our relative value criteria.
Respectfully submitted,
/s/ Stephen W. Boesel
Stephen W. Boesel
President and Chairman of the
Investment Advisory Committee
July 20, 1995
2
<PAGE>
- --------------------------------------------------------------------------------
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
June 30, 1995
<TABLE>
<CAPTION>
Percent of
Company Net Assets
- -------------------------------------------------------------- ----------
<S> <C>
California Federal Bank 3.3%
- --------------------------------------------------------------------------------
Pfizer 2.2
- --------------------------------------------------------------------------------
Philip Morris 2.1
- --------------------------------------------------------------------------------
Atlantic Richfield 1.7
- --------------------------------------------------------------------------------
GE 1.7
- --------------------------------------------------------------------------------
Honeywell 1.5
- --------------------------------------------------------------------------------
WMX Technologies 1.5
- --------------------------------------------------------------------------------
Chemical Banking 1.5
- --------------------------------------------------------------------------------
PepsiCo 1.5
- --------------------------------------------------------------------------------
Merck 1.4
- --------------------------------------------------------------------------------
Dayton Hudson 1.4
- --------------------------------------------------------------------------------
RJR Nabisco 1.4
- --------------------------------------------------------------------------------
American Express 1.3
- --------------------------------------------------------------------------------
Corning 1.3
- --------------------------------------------------------------------------------
Fannie Mae 1.3
- --------------------------------------------------------------------------------
Entergy 1.3
- --------------------------------------------------------------------------------
Schlumberger 1.3
- --------------------------------------------------------------------------------
Great Lakes Chemical 1.3
- --------------------------------------------------------------------------------
Cooper Industries 1.2
- --------------------------------------------------------------------------------
Pall 1.2
- --------------------------------------------------------------------------------
Coltec Industries 1.2
- --------------------------------------------------------------------------------
Warner-Lambert 1.2
- --------------------------------------------------------------------------------
British Petroleum 1.2
- --------------------------------------------------------------------------------
SCEcorp 1.2
- --------------------------------------------------------------------------------
Texaco 1.1
- --------------------------------------------------------------------------------
Total 37.3%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended June 30, 1995
1 Year 5 Years 10 Years
-------- --------- ---------
18.77% 12.06% 11.50%
- --------------------------------------------------------------------------------
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
- --------------------------------------------------------------------------------
Major Portfolio Changes
- --------------------------------------------------------------------------------
Three Months Ended June 30, 1995
- --------------------------------------------------------------------------------
TEN LARGEST PURCHASES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost (000)
---------
<S> <C>
Warner-Lambert* $16,026
- --------------------------------------------------------------------------------
Cooper Industries 10,346
- --------------------------------------------------------------------------------
UNUM* 10,181
- --------------------------------------------------------------------------------
Perrigo* 9,559
- --------------------------------------------------------------------------------
Reckson Associates* 6,281
- --------------------------------------------------------------------------------
J.C. Penney 4,492
- --------------------------------------------------------------------------------
Brunswick 4,000
- --------------------------------------------------------------------------------
H&R Block* 3,680
- --------------------------------------------------------------------------------
Exide Bond** 2,150
- --------------------------------------------------------------------------------
Corning 1,678
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TEN LARGEST SALES
- --------------------------------------------------------------------------------
Proceeds (000)
-------------
<S> <C>
Cooper Industries Cv. Bond** $10,324
- --------------------------------------------------------------------------------
CPC International 5,956
- --------------------------------------------------------------------------------
Coltec Industries Bond 5,250
- --------------------------------------------------------------------------------
Ferrellgas Bond** 5,219
- --------------------------------------------------------------------------------
The Gap 5,202
- --------------------------------------------------------------------------------
ARA Services Bond** 4,802
- --------------------------------------------------------------------------------
Southern Pacific Rail Bond** 4,080
- --------------------------------------------------------------------------------
Stone Container Bond** 3,353
- --------------------------------------------------------------------------------
IMC Fertilizer Group Bond** 3,248
- --------------------------------------------------------------------------------
Rowan Companies Bond** 3,098
- --------------------------------------------------------------------------------
</TABLE>
* Position added
** Position eliminated
3
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price Growth & Income Fund / June 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
(values in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Common Stocks & Warrants -- 78.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL -- 14.1%
- --------------------------------------------------------------------------------
Value
----------
<C> <S> <C>
BANK & TRUST -- 7.5%
318,380 shs. BANC ONE.................................. $ 10,268
3,476,124 +*California Federal Bank
(Class A).............................. 45,624
14,601 wts. *Chase Manhattan, 6/30/96.................. 190
450,000 shs. Chemical Banking.......................... 21,262
150,000 First Interstate.......................... 12,038
275,000 Great Western Financial................... 5,672
450,000 KeyCorp................................... 14,119
7,738 wts. *Shawmut National, 1/18/96................. 76
109,249
INSURANCE -- 1.0%
86,000 shs. Provident Life & Accident
Insurance (Class A).................... 2,010
17,000 Provident Life & Accident
Insurance (Class B).................... 395
250,000 UNUM...................................... 11,719
14,124
FINANCIAL SERVICES -- 5.6%
550,000 American Express.......................... 19,319
558,122 Bear Stearns.............................. 11,930
230,000 Beneficial................................ 10,120
200,000 Fannie Mae................................ 18,875
100,000 H&R Block................................. 4,112
330,668 Household International................... 16,368
80,724
TOTAL FINANCIAL 204,097
- --------------------------------------------------------------------------------
UTILITIES -- 7.4%
- --------------------------------------------------------------------------------
TELEPHONE -- 2.7%
225,000 AT&T...................................... 11,953
400,000 GTE....................................... 13,650
525,000 Pacific Telesis........................... 14,044
39,647
ELECTRIC UTILITIES -- 4.7%
1,650,000 Centerior Energy.......................... 15,881
780,379 Entergy................................... 18,827
1,000,000 SCEcorp................................... 17,125
600,000 Unicom.................................... 15,975
67,808
TOTAL UTILITIES 107,455
- --------------------------------------------------------------------------------
CONSUMER NONDURABLES -- 23.4%
- --------------------------------------------------------------------------------
COSMETICS -- 0.3%
100,000 shs. International Flavors &
Fragrances............................. $ 4,975
BEVERAGES -- 4.4%
200,000 Anheuser-Busch............................ 11,375
307,375 Bols Wessanen (NLG)....................... 6,368
270,000 Brown-Forman (Class B).................... 9,011
300,000 Coca-Cola FEMSA ADR....................... 6,375
155,000 Coke...................................... 9,881
460,000 PepsiCo................................... 20,988
63,998
FOOD PROCESSING -- 3.8%
225,400 CPC International......................... 13,918
175,000 General Mills............................. 8,991
100,000 Hershey Foods............................. 5,525
282,200 Ralston Purina............................ 14,392
400,000 Sara Lee.................................. 11,400
54,226
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT -- 1.5%
300,000 Abbott Laboratories....................... 12,150
246,400 Baxter International...................... 8,963
21,113
PHARMACEUTICALS -- 8.1%
200,000 American Home Products.................... 15,475
100,000 Eli Lilly................................. 7,850
425,000 Merck..................................... 20,825
875,000 *Perrigo................................... 9,625
350,000 Pfizer.................................... 32,331
300,000 SmithKline Beecham equity
units ADR.............................. 13,575
200,000 Warner-Lambert............................ 17,275
116,956
MISCELLANEOUS CONSUMER
PRODUCTS -- 5.3%
300,000 Brunswick................................. 5,100
100,000 Colgate-Palmolive......................... 7,312
242,400 Jostens................................... 5,151
400,000 Philip Morris............................. 29,750
126,700 Phillips-Van Heusen....................... 1,964
300,000 RJR Nabisco............................... 8,362
200,900 Springs Industries........................ 7,484
400,000 UST....................................... 11,900
77,023
TOTAL CONSUMER NONDURABLES 338,291
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
- --------------------------------------------------------------------------------
CONSUMER SERVICES -- 7.1%
- --------------------------------------------------------------------------------
RESTAURANTS -- 0.4%
175,000 shs. Darden Restaurants........................ $ 1,903
582,900 *Foodmaker................................. 3,206
5,109
GENERAL MERCHANDISERS -- 2.7%
275,000 Dayton Hudson............................. 19,731
200,000 J.C. Penney............................... 9,600
760,900 TJX....................................... 10,082
39,413
SPECIALTY MERCHANDISERS -- 1.5%
400,000 Circuit City Stores....................... 12,650
2,728,600 +*Merry-Go-Round Enterprises................ 2,558
200,000 The Gap................................... 6,975
22,183
ENTERTAINMENT & LEISURE -- 1.1%
264,300 Reader's Digest (Class A),
non-voting............................. 11,662
98,200 Reader's Digest (Class B)................. 4,014
15,676
MEDIA & COMMUNICATIONS -- 1.4%
100,000 Dun & Bradstreet.......................... 5,250
400,000 Vodafone ADR.............................. 15,150
20,400
TOTAL CONSUMER SERVICES 102,781
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 5.3%
- --------------------------------------------------------------------------------
BUILDING & REAL ESTATE -- 4.0%
200,000 Burnham Pacific Properties,
REIT................................... 2,700
800,000 DeBartolo Realty, REIT.................... 11,700
500,000 Federal Realty Investment
Trust, REIT............................ 10,812
259,000 Reckson Associates........................ 6,281
100,000 ROC Communities, REIT..................... 2,213
474,500 Rouse..................................... 9,327
625,000 South West Property Trust,
REIT................................... 7,187
404,000 Taubman Centers, REIT..................... 3,838
130,000 Wellsford Residential
Property, REIT......................... 2,958
57,016
MISCELLANEOUS CONSUMER DURABLES -- 1.3%
576,400 Corning................................... 18,877
TOTAL CONSUMER CYCLICALS 75,893
- --------------------------------------------------------------------------------
TECHNOLOGY -- 1.5%
- --------------------------------------------------------------------------------
ELECTRONIC SYSTEMS -- 1.5%
500,000 shs. Honeywell................................. $ 21,563
TOTAL TECHNOLOGY 21,563
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 4.3%
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.7%
430,000 GE........................................ 24,241
MACHINERY -- 2.6%
701,500 *Coltec Industries......................... 12,101
399,357 Cooper Cameron............................ 7,538
456,408 Cooper Industries......................... 18,028
37,667
TOTAL CAPITAL EQUIPMENT 61,908
- --------------------------------------------------------------------------------
BUSINESS SERVICES & TRANSPORTATION -- 2.6%
- --------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 1.7%
95,200 Ennis Business Forms...................... 1,178
165,000 Gilbert Associates (Class A).............. 2,063
750,000 WMX Technologies.......................... 21,281
24,522
RAILROADS -- 0.9%
200,000 Burlington Northern....................... 12,675
TOTAL BUSINESS SERVICES & TRANSPORTATION 37,197
- --------------------------------------------------------------------------------
ENERGY -- 7.5%
- --------------------------------------------------------------------------------
ENERGY SERVICES -- 2.3%
418,000 Halliburton............................... 14,944
300,000 Schlumberger.............................. 18,637
33,581
INTEGRATED PETROLEUM -
DOMESTIC -- 4.1%
225,000 Atlantic Richfield........................ 24,694
200,000 British Petroleum ADR..................... 17,125
200,000 Sun Company............................... 5,475
400,000 Unocal.................................... 11,050
58,344
INTEGRATED PETROLEUM -
INTERNATIONAL -- 1.1%
250,000 Texaco.................................... 16,406
TOTAL ENERGY 108,331
- --------------------------------------------------------------------------------
PROCESS INDUSTRIES -- 3.5%
- --------------------------------------------------------------------------------
SPECIALTY CHEMICALS -- 2.6%
36,900 Geon...................................... 1,061
300,000 Great Lakes Chemical...................... 18,075
804,000 Pall...................................... 17,889
37,025
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund / Statement of Net Assets (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
PAPER & PAPER PRODUCTS -- 0.9%
550,000 shs. Albany International (Class A)............ $ 13,131
TOTAL PROCESS INDUSTRIES 50,156
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 1.5%
- --------------------------------------------------------------------------------
METALS -- 1.5%
316,400 Alcoa..................................... 15,860
100,000 Vulcan Materials.......................... 5,450
TOTAL BASIC MATERIALS 21,310
TOTAL COMMON STOCKS & WARRANTS
(COST $887,696) 1,128,982
- --------------------------------------------------------------------------------
Preferred Stocks -- 0.1%
- --------------------------------------------------------------------------------
7,558 Gulf States Utilities, $8.64,
Cumulative............................. 740
3,455 Gulf States Utilities, Adj.,
Series A............................... 340
15,865 Gulf States Utilities, Adj., Dep.,
Series B............................... 782
TOTAL PREFERRED STOCKS (COST $1,838) 1,862
- --------------------------------------------------------------------------------
Convertible Preferred Stocks -- 4.2%
- --------------------------------------------------------------------------------
75,000 +California Federal Bank,
Series A............................... 1,706
90,000 Citicorp (144a), 5.375%................... 14,316
180,000 Freeport-McMoRan, Dep. Shs................ 4,500
200,000 Glendale Federal Bank, $8.75,
Series E............................... 6,800
300,000 Mobile Telecommunication
Technologies (144a), $2.25............. 11,175
150,000 Newmont Mining (144a), $2.75.............. 8,756
1,840,000 RJR Nabisco, PERCS C...................... 11,270
100,000 Tanger Factory Outlet
Centers, REIT.......................... 2,325
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $46,755) 60,848
- --------------------------------------------------------------------------------
Convertible Bonds -- 1.5%
- --------------------------------------------------------------------------------
$8,000,000 Banco Nacional de Mexico,
Sub. Deb. (144a),
7.00%, 12/15/99........................ 5,770
15,000,000 Delta, Sub. Deb., 3.23%,
6/15/03................................ 14,306
$ 5,000,000 Grupo Financiero InverMexico
(144a), 7.50%, 6/16/01................. $ 1,800
TOTAL CONVERTIBLE BONDS (COST $22,777) 21,876
- --------------------------------------------------------------------------------
Corporate Bonds -- 3.8%
- --------------------------------------------------------------------------------
4,000,000 American Standard, Sr.
Sub. Deb., 9.875%, 6/1/01.............. 4,120
5,000,000 Coltec Industries, Sr. Sub. Notes,
10.25%, 4/1/02......................... 5,175
5,000,000 Container Corporation of
America, Sr. Notes,
9.75%, 4/1/03.......................... 4,950
4,635,000 Continental Cablevision,
Sr. Deb., 9.00%, 9/1/08................ 4,658
4,000,000 Crown Central Petroleum,
Sr. Notes, 10.875%, 2/1/05............. 4,180
4,250,000 Dime Bancorp, Sr. Notes,
10.50%, 11/15/05....................... 4,590
1,500,000 Fleming Companies, Sr. Notes,
10.625%, 12/15/01...................... 1,579
3,000,000 IMC Fertilizer Group, Sr. Notes,
Series B, 9.25%, 10/1/00............... 3,083
5,000,000 O. M. Scott, 9.875%, 8/1/04............... 5,312
5,000,000 Paging Network, Sr. Sub. Notes,
8.875%, 2/1/06......................... 4,550
5,000,000 Riverwood International,
Sr. Sub. Notes,
10.375%, 6/30/04....................... 5,500
3,000,000 Texas Bottling Group,
Sr. Sub. Notes,
9.00%, 11/15/03........................ 2,955
4,000,000 Westpoint Stevens,
Sr. Notes, 8.75%, 12/15/01............. 3,940
TOTAL CORPORATE BONDS (COST $53,002) 54,592
- --------------------------------------------------------------------------------
Short-Term Investments -- 11.7%
- --------------------------------------------------------------------------------
MEDIUM-TERM NOTES -- 0.7%
10,000,000 Morgan Stanley Group,
VR, 6.212%, 7/13/95.................... 10,007
CERTIFICATES OF DEPOSIT -- 3.4%
20,000,000 Bank of Montreal, 5.97 - 6.03%,
7/12 - 8/17/95......................... 20,001
10,000,000 Bayerische Hypotheken
Wechsel, 6.45%, 5/24/96................ 10,009
10,000,000 Swiss Bank, 6.01%, 7/21/95................ 10,000
10,000,000 Toronto Dominion Bank,
6.04%, 8/22/95.......................... 10,001
50,011
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
COMMERCIAL PAPER -- 7.6%
$19,000,000 B.A.T. Capital, 5.95 - 5.97%,
7/17 - 7/20/95......................... $ 18,902
10,000,000 Cadbury Schweppes,
5.95%, 7/27/95......................... 9,942
10,000,000 Caisse des Depots et
Consignations, 4(2),
5.95%, 7/21/95......................... 9,936
93,000 Cargill Financial Services,
6.10%, 7/3/95.......................... 93
10,000,000 Countrywide Funding,
6.00%, 7/18/95......................... 9,957
10,000,000 Electronic Data Systems,
5.95%, 7/17/95......................... 9,924
10,000,000 Halifax Building Society,
6.01%, 7/20/95......................... 9,846
20,000,000 Raytheon, 4(2), 6.00 - 6.05%,
7/6 - 7/10/95.......................... 19,962
1,000,000 UBS Finance (Delaware),
6.25%, 7/3/95.......................... 999
10,000,000 Westpac Capital,
6.04%, 7/11/95......................... 9,849
10,000,000 Yorkshire Building Society,
6.00%, 7/5/95.......................... 9,893
109,303
TOTAL SHORT-TERM INVESTMENTS (COST $169,321) 169,321
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TOTAL INVESTMENTS IN SECURITIES -- 99.5%
OF NET ASSETS (COST $1,181,389) $1,437,481
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
OTHER ASSETS LESS LIABILITIES 7,273
------
</TABLE>
<TABLE>
NET ASSETS CONSIST OF: Value
-------
<S> <C>
Accumulated net investment
income-net of distributions............ $ 1,086
Accumulated net realized
gain/loss-net of distributions......... 24,310
Net unrealized gain (loss)................ 256,091
Paid-in-capital applicable to
82,117,079 shares of $0.01 par
value capital stock outstanding;
500,000,000 shares authorized.......... 1,163,267
----------
NET ASSETS........................................................ $1,444,754
==========
NET ASSET VALUE PER SHARE......................................... $17.59
======
- --------------------------------------------------------------------------------
</TABLE>
+ Affiliated company
* Non-income producing
PERCS Participating Equity Redemption Certificates
REIT Real Estate Investment Trust
VR Variable rate
4(2) Commercial Paper sold within terms of a private placement
memorandum, exempt from registration under section 4.2 of the
Securities Act of 1933, as amended, and may be sold only to dealers
in that program or other "accredited investors."
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 2.9% of net assets.
NLG Dutch guilder
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, 1995 (Unaudited)
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend.......................................................... $ 18,185
Interest.......................................................... 9,216
--------
Total income...................................................... 27,401
--------
Expenses
Investment management............................................. 3,485
Shareholder servicing............................................. 1,584
Custody and accounting............................................ 101
Prospectus and shareholder reports................................ 74
Proxy and annual meeting.......................................... 50
Registration...................................................... 37
Legal and audit................................................... 20
Directors......................................................... 15
Miscellaneous..................................................... 19
--------
Total expenses.................................................... 5,385
--------
Net investment income............................................. 22,016
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities........................................................ 24,257
Foreign currency transactions..................................... (1)
--------
Net realized gain (loss).......................................... 24,256
--------
Change in net unrealized gain or loss on securities.................. 144,213
--------
Net realized and unrealized gain (loss).............................. 168,469
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................... $190,485
========
- --------------------------------------------------------------------------------
</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)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 Dec. 31, 1994
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income...................................................... $ 22,016 $ 37,398
Net realized gain (loss)................................................... 24,256 40,610
Change in net unrealized gain or loss...................................... 144,213 (79,873)
---------- ----------
Increase (decrease) in net assets from operations.......................... 190,485 (1,865)
---------- ----------
Distributions to shareholders
Net investment income...................................................... (21,619) (36,709)
Net realized gain.......................................................... (12,596) (31,863)
---------- ----------
Decrease in net assets from distributions.................................. (34,215) (68,572)
---------- ----------
Capital share transactions*
Shares sold................................................................ 126,735 277,477
Distributions reinvested................................................... 33,198 66,473
Shares redeemed............................................................ (100,375) (212,081)
---------- ----------
Increase (decrease) in net assets from capital share transactions.......... 59,558 131,869
---------- ----------
Increase (decrease) in net assets............................................. 215,828 61,432
NET ASSETS
Beginning of period........................................................... 1,228,926 1,167,494
---------- ----------
End of period................................................................. $1,444,754 $1,228,926
========== ==========
- -------------------------------------------------------------------------------------------------------------------
*Share information
Shares sold................................................................ 7,606 16,973
Distributions reinvested................................................... 1,969 4,201
Shares redeemed............................................................ (6,060) (13,023)
---------- ----------
Increase (decrease) in shares outstanding.................................. 3,515 8,151
========== ==========
- -------------------------------------------------------------------------------------------------------------------
</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, 1995 (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 at the time 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 and
securities that are 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.
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, 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.
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 - 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.
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 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 $158,295,000 and $195,062,000, respectively, for the six months ended
June 30, 1995.
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, 1995, the aggregate cost of investments for federal income tax
and financial reporting purposes was $1,181,389,000 and net unrealized gain
aggregated $256,092,000, of which $286,532,000 related to appreciated
investments and $30,440,000 to depreciated investments.
10
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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 $693,000 was payable at June 30, 1995. The fee is computed daily and
paid monthly, and consists of an Individual Fund Fee, equal to 0.25% 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. At June
30, 1995, and for the six months then ended, the effective annual Group Fee rate
was 0.34%. 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. (TRPS) 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. Additionally, the fund is one of several T. Rowe
Price mutual funds (the Underlying Funds) in which the T. Rowe Price Spectrum
Growth Fund (Spectrum) invests. In accordance with an Agreement among 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. The fund incurred expenses
pursuant to these related party agreements totaling approximately $1,410,000 for
the six months ended June 30, 1995, of which $266,000 was payable at period-end.
11
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Financial Highlights
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T. Rowe Price Growth & Income Fund (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
--------------------------------------------------------------------------------------
Six Months Year Ended December 31,
Ended ------------------------------------------------------------------
June 30, 1995 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............................. $15.63 $16.57 $15.53 $14.16 $11.22 $13.25
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income................. 0.27 0.50 0.46 0.55 0.56 0.56
Net realized and unrealized
gain (loss)......................... 2.12 (0.53) 1.53 1.57 2.94 (2.02)
------ ------ ------ ------ ------ ------
Total from Investment Activities...... 2.39 (0.03) 1.99 2.12 3.50 (1.46)
------ ------ ------ ------ ------ ------
Distributions
Net investment income................. (0.27) (0.49) (0.47) (0.60) (0.56) (0.56)
Net realized gain..................... (0.16) (0.42) (0.48) (0.15) -- (0.01)
------ ------ ------ ------ ------ ------
Total Distributions................... (0.43) (0.91) (0.95) (0.75) (0.56) (0.57)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD........... $17.59 $15.63 $16.57 $15.53 $14.16 $11.22
====== ====== ====== ====== ====== ======
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return............................. 15.4% (0.1)% 13.0% 15.3% 31.5% (11.1)%
Ratio of Expenses to Average
Net Assets............................ 0.81%+ 0.81% 0.83% 0.85% 0.93% 0.97%
Ratio of Net Investment Income
to Average Net Assets................. 3.32%+ 3.08% 2.91% 3.75% 4.23% 4.68%
Portfolio Turnover Rate.................. 26.4%+ 25.6% 22.4% 29.9% 47.9% 34.6%
Net Assets, End of Period
(in thousands)........................ $1,444,754 $1,228,926 $1,167,494 $839,587 $655,510 $474,970
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Annualized.
12
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Annual Meeting Results
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The Growth & Income Fund held an annual meeting on April 19, 1995, to elect
directors of the fund; to ratify the board of director's selection of Price
Waterhouse LLP as the fund's independent accountants; and to vote on a proposed
change in the fund's fee schedule. This change, which was approved by
shareholders, raised the individual fund fee 10 basis points from 0.15% to
0.25%, bringing the total management fee to 0.59% of total assets. At the new
level, the management fee and total expense ratio remain well below the average
charged by funds with similar investment objectives.
The results of the voting were as follows (by number of shares):
<TABLE>
<CAPTION>
In favor Withheld Opposed
------- -------- -------
<S> <C> <C> <C>
FOR NOMINEES TO THE BOARD OF DIRECTORS:
Leo C. Bailey 45,012,307 1,455,862
Stephen W. Boesel 45,231,593 1,236,576
Donald W. Dick, Jr. 45,221,130 1,247,039
David K. Fagin 45,065,762 1,402,407
Addison Lanier 45,014,607 1,453,562
John K. Major 45,184,095 1,284,074
Hanne M. Merriman 45,020,580 1,447,590
James S. Riepe 45,208,877 1,259,292
M. David Testa 45,111,417 1,356,752
Hubert D. Vos 45,056,987 1,411,186
Paul M. Wythes 45,247,132 1,221,037
FOR A CHANGE IN THE FUND'S FEE SCHEDULE: 32,071,695 1,895,365 12,501,110
FOR PRICE WATERHOUSE LLP AS
INDEPENDENT ACCOUNTANT: 44,705,106 1,087,914 675,149
</TABLE>
13
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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 ET. 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 (except the High Yield Fund and Emerging Markets Bond Fund).
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.
14
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T. Rowe Price No-Load Mutual Funds
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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
Short-Term Bond
Short-Term Global Income
Short-Term U.S. Government
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
Virginia Short-Term Tax-Free Bond
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
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
Emerging Markets Stock
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. T. Rowe Price
Investment Services, Inc., Distributor.
15
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SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
T. Rowe Price
-------------
GROWTH & INCOME
FUND
JUNE 30, 1995
[LOGO OF T. ROWE PRICE APPEARS HERE]
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
