<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
Nineteen ninety-five was an outstanding year for stock investors as the markets
rose dramatically and consistently throughout the year. The combination of
rising corporate profits and declining interest rates generated the best market
returns since 1958, as measured by the unmanaged Standard & Poor's 500 Stock
Index.
The Growth & Income Fund fared well by gaining over 30% for the second time
in the past five years. Although this did not keep pace with the S&P 500, it was
in line with its Lipper peer group average for the year and slightly ahead of it
for the last six months. For the past five years of largely favorable markets,
your fund's cumulative return of 124.0% compared favorably with the 105.3%
cumulative return of the average growth & income fund as well as the 115.4%
advance of the S&P 500.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/95
6 Months 12 Months
-------- ---------
<S> <C> <C>
Growth & Income Fund 13.4% 30.9%
S&P 500 14.5 37.6
Lipper Growth & Income
Fund Average 12.0 30.8
- --------------------------------------------------------------------------------
</TABLE>
YEAR-END DISTRIBUTIONS
On December 26, your Board of Directors declared a fourth quarter dividend of
$0.18 per share, a short-term capital gain of $0.13 per share, and a long-term
gain of $0.31 per share, all payable to shareholders of record on that date.
Your check or statement reflecting these distributions was mailed to you in
early January, followed later in the month by Form 1099-DIV, which reports all
distributions for tax purposes.
MARKET ENVIRONMENT
The year was full of surprises, just about all of them good. Almost by
definition, a surging market like 1995's requires underlying investment
fundamentals to be exceptional -- and they were! Foremost, interest rates
declined significantly more than expected as the Federal Reserve reacted quickly
to signs that the economy was slowing. In response, the long Treasury bond yield
declined almost two percentage points to just under 6% by year-end.
Another equally important surprise was that corporate profits remained
robust, even though the economy did not. When the final numbers are in for 1995,
corporate profits are likely to have risen over 20%. Additionally, other
ingredients added spice to this tasty recipe: inflationary pressures and
expectations subsided as the economy slowed; the U.S. dollar generally rose in
value compared with other important foreign currencies; substantive discussions
regarding a balanced federal budget were begun; and record levels of investment
money flowed into equity mutual funds. It was a great environment for the equity
investor. We were surprised, but appreciative.
PORTFOLIO REVIEW
The year-end asset allocation of your fund is shown in the chart. The most
notable change from prior reports is the gradual rise in the
[PIE CHART APPEARS HERE]
- -------------------------------------------------------------------------------
Security Diversification
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Common Stocks 78%
Convertibles 4%
Bonds and Preferred Stocks 3%
Reserves 15%
</TABLE>
<PAGE>
reserve position from 8% to 15% of total assets. This reflects some increasing
shorter-term caution on our part, because it would not be unusual for bond and
stock prices to pull back after their stellar rise last year. This is consistent
with our typical portfolio management style, where we attempt to be a net seller
into rising markets and a net buyer during periods of market weakness.
As indicated by the list of major transactions following this letter, we
added quite a few large positions during the period, despite the rising market
trend. An ongoing element of our portfolio management is the discipline to
recycle money out of holdings that have achieved our price objectives into those
we believe provide better relative value or greater long-term opportunity.
Therefore, our new investments had no industry theme but were selected for their
individual merits. For example, we believed CORNING'S prospects were bright
following its restructuring, while we felt that both DUPONT and A. SCHULMAN (a
specialty chemical concern) had been unduly penalized by the general flight from
cyclical companies. Most of our major sales, particularly CPC INTERNATIONAL, ELI
LILLY, and COLGATE, had risen sharply in price but also in valuation.
Your fund's emphasis on attractive relative valuations is shown in the
Financial Profile.
- --------------------------------------------------------------------------------
Financial Profile
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
G&I Fund S&P
Stocks 500
-------- -----
<S> <C> <C>
Dividend Growth
(5-year annual average) 8.0% 3.4%
Current Yield 3.0% 2.3%
Price/Book Ratio 2.7X 3.1X
Price/Earnings Ratio
(1996 estimated EPS) 13.7X 15.8X
- --------------------------------------------------------------------------------
</TABLE>
SUMMARY AND OUTLOOK
Although the important market fundamentals are expected to remain positive on
balance in the period ahead, we are becoming more cautious regarding market
prospects. We believe the primary drop in interest rates has already occurred
and that corporate profits will grow at about a 10% rate in 1996, or half their
rate of last year.
Maybe 1996, like last year, will contain favorable surprises. Perhaps
interest rates will decline further than we anticipate and corporate profits
will grow faster (and for longer) than we expect. But if not, your fund's more
cautious stance should be advantageous. We will wait for periods of market
weakness before committing cash reserves. Meanwhile, we will remain 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
January 18, 1996
2
<PAGE>
- --------------------------------------------------------------------------------
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
December 31, 1995
<TABLE>
<CAPTION>
Percent of
Company Net Assets
- ------------------------------------------------------------------ ----------
<S> <C>
Cal Fed Bancorp 3.2%
Corning 2.7
Pfizer 2.5
Philip Morris 2.1
GE 1.8
Atlantic Richfield 1.7
Merck 1.6
Chemical Banking 1.5
PepsiCo 1.5
Fannie Mae 1.4
Texaco 1.3
Entergy 1.3
American Express 1.3
WMX Technologies 1.3
Honeywell 1.3
Pall 1.2
Great Lakes Chemical 1.2
Halliburton 1.2
Vodafone 1.2
RJR Nabisco 1.2
Schlumberger 1.2
Dayton Hudson 1.2
First Interstate 1.2
British Petroleum 1.2
KeyCorp 1.1
- --------------------------------------------------------------------------------
Total 38.4%
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
Major Portfolio Changes
- --------------------------------------------------------------------------------
Six Months Ended December 31, 1995
Listed in descending order of size
- --------------------------------------------------------------------------------
TEN LARGEST PURCHASES
- --------------------------------------------------------------------------------
Corning
DuPont*
A. Schulman*
Niagara Mohawk*
Heinz*
General Growth Properties*
Nucor*
Vodafone
Integra Financial*
Atlantic Richfield
- --------------------------------------------------------------------------------
TEN LARGEST SALES
- --------------------------------------------------------------------------------
CPC International**
Eli Lilly**
The Gap**
Colgate-Palmolive**
Circuit City Stores
Great Western Financial**
Dun & Bradstreet**
Sun Company**
Jostens**
Vulcan Materials**
- --------------------------------------------------------------------------------
* Position added
** Position eliminated
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended December 31, 1995
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C>
30.92% 17.50% 11.88%
</TABLE>
- --------------------------------------------------------------------------------
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
3
<PAGE>
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
[LINE CHART APPEARS HERE]
- --------------------------------------------------------------------------------
A Word on Market Corrections
- --------------------------------------------------------------------------------
After the stock market's spectacular run in 1995, concerns about a "correction"
have intensified. Most market observers consider a correction to be a short and
sometimes steep decline following a period of rising prices. Moderate
corrections of around 10% have been quite common, occurring on average about
once every two years over the last half-century, according to Ned Davis
Research.
The market as measured by the Dow Jones Industrial Average has not
experienced a moderate correction since early 1994. Furthermore, the Dow last
hit a bear market bottom -- defined as a drop of at least 20% -- in October
1990. Therefore, it would not be surprising to see a modest pullback in 1996, on
the order of 5% to 10%. In fact, as we write, the market has gotten off to a
rocky start.
Corrections are not only common, but can be beneficial for long-term
investors, especially those who invest in regular amounts through dollar cost
averaging. In a correction, overall stock prices decline, often leading to more
attractive valuations and good buying opportunities. History has shown that
investors who continue to buy through a downturn fare quite well. In fact, the
Dow has proven resilient in the aftermath of past corrections of around 10%,
taking an average of just six months to recover its losses, according to Ned
Davis. (To realize the benefits of dollar cost averaging, you should be prepared
to continuously purchase securities over a period of time, in up and down
markets. This approach does not assure a gain nor protect you from a loss in
declining markets.)
We raise the issue of a market correction not as a prediction, but as a
reminder that stock prices do not move in only one direction. If you are
satisfied that your investments are appropriate for your various objectives, we
recommend that you stay the course when a correction eventually occurs.
4
<PAGE>
- --------------------------------------------------------------------------------
Investment Record
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
The table below shows the investment record of one share of the T. Rowe Price
Growth & Income Fund, purchased at the initial price of $10.00, for the period
12/21/82 through 12/31/95. Over this time, stock prices in general have risen.
The results shown should not be considered as a representation of the income or
capital gain or loss which may be realized from an investment made in the fund
today.
- -------------------------------------------------------------------------------
Per Share Data
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
With Capital Gains and Income Dividends
Taken in Cash Reinvested in Additional Shares Annual Total Return
------------------------------------- -------------------------------------- On Investment
Year Net Capital Capital % Change
Ended Asset Gain Income Gain Income Value of -------------------
12/31 Value Distributions/1/ Dividends Distributions Dividends Investment Fund S&P 500
- ------- ------ ---------------- --------- ------------- --------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1982/2/ $10.33 -- -- -- -- $10.33 3.3% 1.6%
1983 13.05 -- $0.60 -- $ 0.61 13.68 32.4 22.6
1984 12.44 $0.06 0.79 $0.06 0.85 13.96 2.1 6.2
1985 14.18 -- 0.61 -- 0.70 16.70 19.6 31.7
1986 12.98 1.57 0.71 1.96 0.89 18.03 8.0 18.7
1987 10.63 1.04 0.88 1.53 1.27 17.27 -4.2 5.3
1988 12.32 0.47 0.49 0.78 0.81 21.60 25.1 16.5
1989 13.25 0.79 0.64 1.43 1.14 25.77 19.3 31.6
1990 11.22 0.01 0.56 0.02 1.11 22.90 -11.1 -3.1
1991 14.16 -- 0.56 -- 1.16 30.12 31.5 30.3
1992 15.53 0.15 0.60 0.33 1.30 34.74 15.3 7.6
1993 16.57 0.48 0.47 1.09 1.06 39.24 13.0 10.1
1994 15.63 0.42 0.49 1.02 1.18 39.18 -0.1 1.3
1995 19.18 0.60 0.59 1.54 1.51 51.30 30.9 37.6
- --------------------------------------------------------------------------------------------------------------
Total $5.59 $7.99 $9.76 $13.59
- --------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes short-term capital gains of $0.06 in 1984; $0.30 in 1986; $0.32 in
1988; $0.44 in 1989; $0.12 in 1993; $0.10 in 1994; and $0.13 in 1995.
/2/ From inception 12/21/82 to 12/31/82.
5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets
T. Rowe Price Growth & Income Fund / December 31, 1995
- --------------------------------------------------------------------------------
(values in thousands)
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
- -------------------------------------------------------------------------------------------
Common Stocks -- 77.5%
- -------------------------------------------------------------------------------------------
FINANCIAL -- 13.9%
- -------------------------------------------------------------------------------------------
BANK AND TRUST -- 8.0%
318,380 shs BANC ONE................................................. $ 12,019
3,372,100 *+ Cal Fed Bancorp (Class A)................................ 53,111
347,612 *+ California Federal Bank
Goodwill Certificates................................. 1,716
450,000 Chemical Banking......................................... 26,437
150,000 First Interstate......................................... 20,475
100,000 Integra Financial........................................ 6,300
550,000 KeyCorp.................................................. 19,938
139,996
INSURANCE -- 0.8%
250,000 UNUM..................................................... 13,750
FINANCIAL SERVICES -- 5.1%
550,000 American Express......................................... 22,756
558,122 Bear Stearns............................................. 11,092
230,000 Beneficial............................................... 10,724
200,000 Fannie Mae............................................... 24,825
330,668 Household International.................................. 19,551
88,948
TOTAL FINANCIAL 242,694
- -------------------------------------------------------------------------------------------
UTILITIES -- 7.9%
- -------------------------------------------------------------------------------------------
TELEPHONE -- 2.9%
225,000 AT&T..................................................... 14,569
30,000 BellSouth................................................ 1,305
400,000 GTE...................................................... 17,600
525,000 Pacific Telesis.......................................... 17,653
51,127
ELECTRIC UTILITIES -- 5.0%
2,000,000 Centerior Energy......................................... 17,750
780,379 Entergy.................................................. 22,826
1,000,000 Niagara Mohawk........................................... 9,625
1,001,700 SCEcorp.................................................. 17,780
600,000 Unicom................................................... 19,650
87,631
TOTAL UTILITIES 138,758
- -------------------------------------------------------------------------------------------
CONSUMER NONDURABLES -- 21.4%
- -------------------------------------------------------------------------------------------
BEVERAGES -- 4.2%
200,000 Anheuser-Busch........................................... 13,375
307,375 Bols Wessanen (NLG)...................................... 6,608
270,000 shs Brown-Forman (Class B)................................... 9,855
155,000 Coca-Cola................................................ 11,509
300,000 Coca-Cola FEMSA ADR...................................... 5,550
460,000 PepsiCo.................................................. 25,703
72,600
FOOD PROCESSING -- 3.5%
175,000 General Mills............................................ 10,106
400,000 Heinz.................................................... 13,250
40,000 Hershey Foods............................................ 2,600
286,200 Ralston Purina........................................... 17,852
550,000 Sara Lee................................................. 17,531
61,339
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT -- 1.1%
200,000 Abbott Laboratories...................................... 8,350
246,400 Baxter International..................................... 10,318
18,668
PHARMACEUTICALS -- 7.9%
200,000 American Home Products................................... 19,400
425,000 Merck.................................................... 27,944
875,000 * Perrigo.................................................. 10,445
700,000 Pfizer................................................... 44,100
300,000 SmithKline Beecham ADR................................... 16,650
200,000 Warner-Lambert........................................... 19,425
137,964
MISCELLANEOUS CONSUMER
PRODUCTS -- 4.7%
200,000 American Greetings
(Class A)............................................. 5,538
300,000 Brunswick................................................ 7,200
117,000 Newell................................................... 3,027
400,000 Philip Morris............................................ 36,200
300,000 RJR Nabisco.............................................. 9,262
199,300 Springs Industries....................................... 8,246
400,000 UST...................................................... 13,350
82,823
TOTAL CONSUMER NONDURABLES................................................... 373,394
- -------------------------------------------------------------------------------------------
CONSUMER SERVICES -- 5.2%
- -------------------------------------------------------------------------------------------
GENERAL MERCHANDISERS -- 2.4%
275,000 Dayton Hudson............................................ 20,625
200,000 J.C. Penney.............................................. 9,525
660,900 TJX...................................................... 12,475
42,625
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
SPECIALTY MERCHANDISERS -- 0.4%
200,000 shs Circuit City Stores..................................... $ 5,525
2,728,600 *+ Merry-Go-Round
Enterprises........................................... 767
6,292
ENTERTAINMENT AND LEISURE -- 1.0%
182,400 Reader's Digest (Class A),
non-voting............................................ 9,348
186,400 Reader's Digest (Class B)................................ 8,807
18,155
MEDIA AND COMMUNICATIONS -- 1.2%
600,000 Vodafone ADR............................................. 21,150
RESTAURANTS -- 0.2%
500,000 * Foodmaker................................................ 2,938
TOTAL CONSUMER SERVICES 91,160
- -------------------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 6.9%
- -------------------------------------------------------------------------------------------
BUILDING AND REAL ESTATE -- 4.2%
200,000 Burnham Pacific
Properties, REIT...................................... 1,925
1,000,000 DeBartolo Realty, REIT................................... 13,000
500,000 Federal Realty Investment
Trust, REIT........................................... 11,375
500,000 General Growth
Properties, REIT...................................... 10,375
259,000 Reckson Associates, REIT................................. 7,608
100,000 ROC Communities, REIT.................................... 2,400
474,500 Rouse.................................................... 9,668
625,000 South West Property
Trust, REIT........................................... 8,438
504,000 Taubman Centers, REIT.................................... 5,040
130,000 Wellsford Residential
Property, REIT........................................ 2,990
72,819
MISCELLANEOUS CONSUMER
DURABLES -- 2.7%
1,500,000 Corning.................................................. 48,000
TOTAL CONSUMER CYCLICALS 120,819
- -------------------------------------------------------------------------------------------
TECHNOLOGY -- 1.3%
- -------------------------------------------------------------------------------------------
ELECTRONIC SYSTEMS -- 1.3%
450,000 Honeywell................................................ 21,881
TOTAL TECHNOLOGY 21,881
- -------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 3.2%
- -------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.8%
430,000 GE....................................................... 30,960
MACHINERY -- 1.4%
701,500 *Coltec Industries........................................ 8,155
455,907 Cooper Industries........................................ 16,755
24,910
TOTAL CAPITAL EQUIPMENT 55,870
- -------------------------------------------------------------------------------------------
BUSINESS SERVICES AND TRANSPORTATION -- 2.3%
- -------------------------------------------------------------------------------------------
MISCELLANEOUS BUSINESS SERVICES -- 1.4%
165,000 Gilbert Associates (Class A)............................. 2,021
750,000 WMX Technologies......................................... 22,406
24,427
RAILROADS -- 0.9%
200,000 Burlington Northern
Santa Fe.............................................. 15,600
TOTAL BUSINESS SERVICES AND TRANSPORTATION 40,027
- -------------------------------------------------------------------------------------------
ENERGY -- 8.4%
- -------------------------------------------------------------------------------------------
ENERGY SERVICES -- 3.2%
400,484 *Cooper Cameron............................................ 14,217
418,000 Halliburton.............................................. 21,161
300,000 Schlumberger............................................. 20,775
56,153
INTEGRATED PETROLEUM -
DOMESTIC -- 3.7%
275,000 Atlantic Richfield....................................... 30,456
200,000 British Petroleum ADR.................................... 20,425
500,000 Unocal................................................... 14,563
65,444
INTEGRATED PETROLEUM -
INTERNATIONAL -- 1.5%
16,000 Exxon.................................................... 1,282
7,800 Mobil.................................................... 874
300,000 Texaco................................................... 23,550
25,706
TOTAL ENERGY 147,303
- -------------------------------------------------------------------------------------------
PROCESS INDUSTRIES -- 4.8%
- -------------------------------------------------------------------------------------------
PAPER AND PAPER PRODUCTS -- 0.4%
450,000 Albany International
(Class A)............................................. 8,156
SPECIALTY CHEMICALS -- 3.4%
700,000 A. Schulman.............................................. 15,663
300,000 Great Lakes Chemical..................................... 21,600
804,000 Pall..................................................... 21,607
58,870
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
DIVERSIFIED CHEMICALS -- 1.0%
250,000 shs DuPont.................................................. $ 17,469
TOTAL PROCESS INDUSTRIES 84,495
- -------------------------------------------------------------------------------------------
BASIC MATERIALS -- 2.2%
- -------------------------------------------------------------------------------------------
METALS -- 1.7%
326,400 Alcoa.................................................... 17,258
200,000 Nucor.................................................... 11,425
28,683
MINING -- 0.5%
206,072 Newmont Mining........................................... 9,325
TOTAL BASIC MATERIALS 38,008
TOTAL COMMON STOCKS (COST $970,251) 1,354,409
- -------------------------------------------------------------------------------------------
Preferred Stocks -- 0.1%
- -------------------------------------------------------------------------------------------
6,977 Gulf States Utilities,
$8.64, Cum............................................ 682
3,276 Gulf States Utilities,
Adj., (Series A)...................................... 312
15,865 Gulf States Utilities,
Adj., (Series B)...................................... 761
TOTAL PREFERRED STOCKS (COST $1,765) 1,755
- -------------------------------------------------------------------------------------------
Convertible Preferred Stocks -- 3.2%
- -------------------------------------------------------------------------------------------
75,000 +California Federal Bank,
(Series A)............................................ 1,828
90,000 Citicorp (144a), 5.375%.................................. 16,484
180,000 Freeport-McMoRan,
Dep. Shs.............................................. 5,175
200,000 Glendale Federal Bank,
8.75%, (Series E)..................................... 9,050
1,840,000 RJR Nabisco, PERCS,
(Series C)............................................ 11,730
100,000 Tanger Factory Outlet
Centers, REIT......................................... 2,300
300,000 Mobile Telecommunication
Technologies
(144a), $2.25......................................... 9,488
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $39,255) 56,055
- -------------------------------------------------------------------------------------------
Convertible Bonds -- 0.9%
- -------------------------------------------------------------------------------------------
8,000,000 Banco Nacional de Mexico,
Sub. Deb. (144a),
7.00%, 12/15/99....................................... 6,420
10,000,000 Delta, Sub. Deb., 3.23%,
6/15/03............................................... 9,548
TOTAL CONVERTIBLE BONDS (COST $14,240) 15,968
- -------------------------------------------------------------------------------------------
Corporate Bonds -- 3.1%
- -------------------------------------------------------------------------------------------
4,000,000 American Standard, Sr. Sub.
Deb., 9.875%, 6/1/01.................................. 4,310
3,500,000 B.F. Saul, REIT, Sr. Secured
Notes, 11.625%, 4/1/02................................ 3,570
5,000,000 Coltec Industries, Sr. Sub.
Deb., 10.25%, 4/1/02.................................. 5,138
5,000,000 Container Corporation of
America, Sr. Notes,
9.75%, 4/1/03......................................... 4,875
4,635,000 Continental Cablevision,
Sr. Deb., 9.00%, 9/1/08............................... 4,867
1,675,000 Crown Central Petroleum,
Sr. Notes,
10.875%, 2/1/05....................................... 1,767
4,250,000 Dime Bancorp, Sr. Notes,
10.50%, 11/15/05...................................... 4,675
500,000 Fleming Companies, Sr.
Notes, 10.625%, 12/15/01.............................. 485
3,000,000 IMC Fertilizer Group, Sr.
Notes, Series B, 9.25%,
10/1/00............................................... 3,173
2,000,000 IMC Fertilizer Group, Sr.
Notes, 9.45%, 12/15/11................................ 2,160
5,000,000 O. M. Scott, 9.875%, 8/1/04.............................. 5,400
5,000,000 Paging Network, Sr. Sub.
Notes, 8.875%, 2/1/06................................. 5,125
5,000,000 Riverwood International,
Sr. Sub. Notes, 10.375%,
6/30/04............................................... 5,562
3,000,000 Texas Bottling Group, Sr.
Sub. Notes, 9.00%,
11/15/03.............................................. 2,970
TOTAL CORPORATE BONDS (COST $51,407) 54,077
- -------------------------------------------------------------------------------------------
Short-Term Investments -- 14.7%
- -------------------------------------------------------------------------------------------
BANK NOTES -- 0.6%
- -------------------------------------------------------------------------------------------
10,000,000 Comerica Bank, 6.18%,
5/28/96............................................... 10,016
- -------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 1.7%
- -------------------------------------------------------------------------------------------
10,000,000 Abbey National North
America, 5.72%, 1/31/96............................... 9,854
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
$10,000,000 Den Danske Bank Euro,
5.74%, 2/20/96........................................ $ 10,000
10,000,000 National Westminster Bank
PLC, 5.81%, 1/12/96................................... 10,000
29,854
- -------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 10.7%
- -------------------------------------------------------------------------------------------
20,000,000 ANZ (Delaware), 5.668 - 5.7%,
1/26/96 - 2/9/96...................................... 19,690
10,000,000 Asset Securitization
Cooperative 4(2),
5.70%, 1/24/96........................................ 9,858
10,000,000 AT&T, 5.70%, 1/25/96..................................... 9,834
10,000,000 Barnett Banks, 5.70%,
1/25/96............................................... 9,945
10,000,000 Cheltenham & Glouster,
5.58%, 2/8/96......................................... 9,924
10,000,000 Commerzbank, 5.77%,
1/8/96................................................ 9,947
10,000,000 Countrywide Funding,
5.90%, 1/8/96......................................... 9,967
10,000,000 Finnish Export Credit Ltd.,
5.70%, 1/29/96........................................ 9,829
10,000,000 Ford Credit Europe, 5.68%,
2/12/96............................................... 9,812
10,000,000 Hanson Finance U.K.,
5.47%, 3/20/96........................................ 9,862
10,000,000 International Nederland
Bank, 5.47%, 3/22/96.................................. 9,862
9,723,143 Investments in Commercial
Paper through a joint
account, 5.90 - 6.05%,
1/2/96................................................ 9,717
10,000,000 National Australia Funding
(Delaware), 5.72%,
1/22/96............................................... 9,868
10,000,000 Preferred Receivables
Funding, 5.72%, 1/31/96............................... 9,903
10,000,000 Royal Bank Of Canada,
5.72%, 1/22/96........................................ 9,870
10,000,000 Statoil (Den Norske Stats
Oljeselskap), 5.81%,
1/17/96............................................... 9,945
10,000,000 Westpac Capital, 5.52%,
4/10/96............................................... 9,816
10,000,000 Yorkshire Building Society,
5.70%, 2/6/96......................................... 9,914
187,563
- -------------------------------------------------------------------------------------------
MEDIUM-TERM NOTES -- 1.7%
- -------------------------------------------------------------------------------------------
$10,000,000 Federal National Mortgage
Assn., VR, 6.00%,
10/7/96 $ 10,000
10,000,000 Morgan Stanley Group,VR,
6.063%, 1/31/96 10,003
10,000,000 PHH, VR, 5.820%, 1/12/96 9,995
29,998
TOTAL SHORT-TERM INVESTMENTS (COST $257,431) 257,431
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 99.5%
OF NET ASSETS (COST $1,334,349) 1,739,695
- -------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES 8,783
----------
<CAPTION>
NET ASSETS CONSIST OF: Value
----------
<S> <C> <C>
Accumulated net realized
gain/loss - net of distributions $ 8,715
Net unrealized gain (loss) 405,346
Paid-in-capital applicable to
91,163,102 shares of $0.01 par
value capital stock outstanding;
500,000,000 shares authorized 1,334,417
----------
NET ASSETS $1,748,478
==========
NET ASSET VALUE PER SHARE $19.18
======
- -------------------------------------------------------------------------------------------
</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 year-end amounts to
1.9% of net assets.
NLG Dutch guilder
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund / Year Ended December 31, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend........................................................ $ 41,471
Interest........................................................ 19,356
--------
Total income.................................................... 60,827
--------
Expenses
Investment management........................................... 8,195
Shareholder servicing........................................... 3,429
Prospectus and shareholder reports.............................. 211
Custody and accounting.......................................... 205
Registration.................................................... 87
Proxy and annual meeting........................................ 65
Legal and audit................................................. 36
Directors....................................................... 31
Miscellaneous................................................... 24
--------
Total expenses.................................................. 12,283
--------
Net investment income.............................................. 48,544
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities...................................................... 47,569
Foreign currency transactions................................... (1)
--------
Net realized gain (loss)........................................ 47,568
Change in net unrealized gain or loss on securities................ 293,468
--------
Net realized and unrealized gain (loss)............................ 341,036
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................. $389,580
========
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income............................................................ $ 48,544 $ 37,398
Net realized gain (loss)......................................................... 47,568 40,610
Change in net unrealized gain or loss............................................ 293,468 (79,873)
---------- ----------
Increase (decrease) in net assets from operations................................ 389,580 (1,865)
---------- ----------
Distributions to shareholders
Net investment income............................................................ (49,245) (36,709)
Net realized gain................................................................ (51,490) (31,863)
---------- ----------
Decrease in net assets from distributions........................................ (100,735) (68,572)
---------- ----------
Capital share transactions*
Shares sold...................................................................... 320,350 277,477
Distributions reinvested......................................................... 98,041 66,473
Shares redeemed.................................................................. (187,684) (212,081)
---------- ----------
Increase (decrease) in net assets from capital share transactions................ 230,707 131,869
---------- ----------
Increase (decrease) in net assets................................................... 519,552 61,432
NET ASSETS
Beginning of period................................................................. 1,228,926 1,167,494
---------- ----------
End of period....................................................................... $1,748,478 $1,228,926
========== ==========
- ---------------------------------------------------------------------------------------------------------------------------
* Share information
Shares sold...................................................................... 17,917 16,973
Distributions reinvested......................................................... 5,380 4,201
Shares redeemed.................................................................. (10,736) (13,023)
---------- ----------
Increase (decrease) in shares outstanding........................................ 12,561 8,151
========== ==========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund / December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Growth & Income Fund, Inc., (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 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
A) Commercial Paper Joint Account - The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
B) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $338,398,000 and $335,659,000, respectively, for the
year ended December 31, 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.
12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, $12,000 of undistributed
net investment income was reclassified as a decrease to undistributed net
realized gains during the year ended December 31, 1995. The results of
operations and net assets were not affected by the reclassifications.
At December 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,334,349,000 and net unrealized gain
aggregated $405,346,000, of which $434,268,000 related to appreciated
investments and $28,922,000 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 $858,000 was payable at December 31, 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
December 31, 1995, and for the year 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 $3,084,000 for
the year ended December 31, 1995, of which $333,000 was payable at period-end.
13
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price Growth & Income Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
--------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $15.63 $16.57 $15.53 $14.16 $11.22
------ ------ ------ ------ ------
Investment activities
Net investment income............................... 0.58 0.50 0.46 0.55 0.56
Net realized and unrealized gain (loss)............. 4.16 (0.53) 1.53 1.57 2.94
------ ------ ------ ------ ------
Total from investment activities.................... 4.74 (0.03) 1.99 2.12 3.50
------ ------ ------ ------ ------
Distributions
Net investment income............................... (0.59) (0.49) (0.47) (0.60) (0.56)
Net realized gain................................... (0.60) (0.42) (0.48) (0.15) --
------ ------ ------ ------ ------
Total distributions................................. (1.19) (0.91) (0.95) (0.75) (0.56)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD......................... $19.18 $15.63 $16.57 $15.53 $14.16
====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return........................................... 30.9% (0.1)% 13.0% 15.3% 31.5%
Ratio of expenses to average net assets................ 0.84% 0.81% 0.83% 0.85% 0.93%
Ratio of net investment income to
average net assets.................................. 3.31% 3.08% 2.91% 3.75% 4.23%
Portfolio turnover rate................................ 26.2% 25.6% 22.4% 29.9% 47.9%
Net assets, end of period (in thousands)............... $1,748,478 $1,228,926 $1,167,494 $839,587 $655,510
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Growth & Income Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
T. Rowe Price Growth & Income Fund, Inc. (the "Fund") at December 31, 1995, and
the results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1995 by
correspondence with custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 18, 1996
15
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
T. Rowe Price
- -------------
GROWTH & INCOME
FUND
DECEMBER 31, 1995
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)/.
Invest With Confidence/(R)/
T. Rowe Price
GIF
