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T. Rowe Price
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Semiannual Report
Growth & Income Fund
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June 30, 1998
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REPORT HIGHLIGHTS
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GROWTH & INCOME FUND
* U.S. stocks surged in the six months ended June 30, 1998, buoyed by almost
ideal economic conditions.
* The fund provided solid returns for the 6- and 12-month periods but,
reflecting its income and value approach, trailed the broad market and its
peer group.
* We added a number of new positions in sectors that lagged the advance, such
as natural resources, and sold several in sectors that had been very
strong.
* We intend to stick to our valuation discipline, which should continue to be
rewarding for investors over time.
FELLOW SHAREHOLDERS
<PAGE>
The equity market appreciated significantly in the first half of 1998 as
the now familiar mix of solid economic growth, low inflation, and stable
interest rates encouraged investors. Growth stocks decisively outperformed
cyclicals and value stocks. Somewhat surprisingly, investors seemed to ignore
the slowing of corporate profit growth and the Asian crisis. Nevertheless, these
are increasingly important issues for individual companies in the portfolio.
================================================================================
Performance Comparison
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Periods Ended 6/30/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Growth & Income Fund 8.63% 18.84%
S&P 500 17.71 30.16
Lipper Growth & Income
Funds Average 12.11 22.86
================================================================================
Your fund provided a solid absolute return of 8.63% in the first half and
18.84% for the 12-month period, trailing the broad market and peer group
average. The more conservative nature of your portfolio makes it difficult to
keep pace during strong market advances. Your fund is more conservative than the
typical growth and income fund because of its emphasis on yield-oriented stocks
specifically and value stocks in general.
Distributions
Your Board of Directors declared a second quarter income dividend of $0.14
per share, bringing your total for the first half to $0.25. A long-term capital
gain distribution of $0.28 per share was previously declared and paid during the
first quarter. You should have already received your check or statement
reflecting these distributions.
Market Environment
In recent letters we have discussed the nearly perfect conditions that
stock market investors have enjoyed for several years. Virtually all the
important economic fundamentals or issues either continued to be very favorable
or continued to progress in the right direction: growth, corporate profits,
interest rates, inflation, unemployment, and the budget deficit. Investors
responded enthusiastically to this favorable mix, with the result that market
valuations have been stretched to historical extremes. This is the basis for the
cautious tone of our remarks.
Our concern is based on the belief that the market will become more
volatile and vulnerable to a change in investor sentiment when these
fundamentals begin to change. Although the environment remains quite favorable,
it is clear that the economy is currently slowing from its recent pace, and
corporate profit gains have been very modest over the past two quarters.
<PAGE>
We are puzzled that these hints of a change have not had a more adverse
impact upon the general market level. However, there have been considerable
currents beneath the surface. In particular, many consumer-related industries,
along with financial, health care, and consumer-oriented technology companies,
have surged. Meanwhile, sectors considered more economically sensitive and,
therefore, vulnerable to a slowing domestic or global economy have suffered.
Notable examples are industrial products, manufacturing, basic commodities, and
energy.
As a result, a two-tier market is developing in which a select group of
companies with a more assured fundamental outlook are being bid up to
ever-higher levels. In contrast, a much broader group of companies, with more
uncertain outlooks, are struggling in the stock market. This dynamic is having a
noticeable impact on the market index because the former group represents some
of the largest companies in the index. For example, during the second quarter
the S&P 500 rose 2.9% (principal only) while the average stock that makes up the
index actually experienced a price decline of 1.6%.
Portfolio Review
The major change in the fund's asset allocation over the first half was an
increase in holdings of common stocks from 87% to 95% of net assets and a
reduction in our reserve position. Activity summarized in the Major Portfolio
Changes table following this letter was quite substantial, particularly in terms
of purchases. As indicated, nine of the 10 major purchases were new investments
to the fund, including AMERADA HESS, NORFOLK SOUTHERN, and BROWNING-FERRIS. In
large measure, this reflected the market trends previously discussed. You will
note that all of the new positions shown in the table are in sectors identified
as lagging the market. In contrast, virtually all the major sales were holdings
in highly favored sectors that have been very rewarding investments for the
fund-SMITHKLINE BEECHAM, WARNER-LAMBERT, and MERCK in the pharmaceutical area,
for example, and WELLS FARGO in the surging financial sector. When we first
bought them, they also were generally out of favor in the market for one reason
or another.
================================================================================
Financial Profile
- --------------------------------------------------------------------------------
Growth &
As of 6/30/98 Income Fund S&P 500
Current Yield 2.3% 1.4%
Price/Book Ratio 3.6X 5.2X
Price/Earnings Ratio
(1998 estimated EPS) 20.7X 25.8X
Historical Beta
(based on monthly
returns for 5 years) 0.73 1.00
================================================================================
<PAGE>
This recycling process is a vital component of a value-oriented investment
approach. Our focus is to keep enhancing the yield and the relative valuation
profile of your portfolio holdings. We believe that, over time, this focus will
result in attractive returns and lower volatility. Your fund's emphasis on these
characteristics is shown in the Financial Profile table. The volatility measure
("beta") we added to the table shows that the fund can be expected to have about
73% of the volatility of the S&P 500.
OUTLOOK
The current environment remains a difficult one for a yield-oriented, value
approach like ours. Although this reality is frustrating in the short run, we
remain confident that sticking to our valuation discipline will prove rewarding
in the long run. Additionally, in a more adverse environment, we expect your
fund to perform better than the general market.
Respectfully submitted,
/s/
Stephen W. Boesel
President and Chairman of the Investment Advisory Committee
July 24, 1998
<PAGE>
T. Rowe Price Growth & Income Fund
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================================================================================
Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/98
GE .......................................................... 2.4%
Pfizer ...................................................... 2.4
Dayton Hudson ............................................... 1.9
Chase Manhattan ............................................. 1.9
Corning ..................................................... 1.8
Amerada Hess ................................................ 1.6
American Express ............................................ 1.6
Frontier .................................................... 1.5
American Home Products ...................................... 1.4
St. Paul Companies .......................................... 1.4
Household International ..................................... 1.4
Reader's Digest ............................................. 1.4
Burlington Northern Santa Fe ................................ 1.3
Unicom ...................................................... 1.3
Fannie Mae .................................................. 1.3
FirstEnergy ................................................. 1.3
Texaco ...................................................... 1.3
Waste Management ............................................ 1.3
Fort James .................................................. 1.3
H&R Block ................................................... 1.3
Norfolk Southern ............................................ 1.2
Great Lakes Chemical ........................................ 1.2
Sara Lee .................................................... 1.2
Atlantic Richfield .......................................... 1.2
American General ............................................ 1.2
- --------------------------------------------------------------------------------
Total ....................................................... 37.1%
================================================================================
<PAGE>
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 6/30/98
Ten Largest Purchases
- --------------------------------------------------------------------------------
Amerada Hess *
Norfolk Southern *
Browning-Ferris *
Amoco *
GPU *
Starwood Hotels & Resorts *
Texas Utilities *
Unifi
AlliedSignal *
Georgia-Pacific *
Ten Largest Sales
- --------------------------------------------------------------------------------
SmithKline Beecham **
Millipore **
Wells Fargo **
Warner-Lambert
Honeywell
Intuit **
Merck **
TJX **
Pfizer
Nabisco Holdings
* Position added
** Position eliminated
================================================================================
<PAGE>
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Growth & Income SEC graph shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Periods Ended 6/30/98 1 Year 3 Years 5 Years 10 Years
Growth & Income Fund 18.84% 24.13% 18.17% 15.45%
================================================================================
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
<PAGE>
<TABLE>
T. Rowe Price Growth & Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year
Ended Ended
6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..................... $ 26.36 $ 22.63 $ 19.18 $ 15.63 $ 16.57 $ 15.53
Investment activities
Net investment income ........... 0.26 0.55 0.52 0.58 0.50 0.46
Net realized and
unrealized gain (loss) .......... 2.02 4.71 4.34 4.16 (0.53) 1.53
Total from
investment activities ........... 2.28 5.26 4.86 4.74 (0.03) 1.99
Distributions
Net investment income ........... (0.25) (0.56) (0.51) (0.59) (0.49) (0.47)
Net realized gain ............... (0.28) (0.97) (0.90) (0.60) (0.42) (0.48)
Total distributions ............. (0.53) (1.53) (1.41) (1.19) (0.91) (0.95)
NET ASSET VALUE
End of period ........................... $ 28.11 $ 26.36 $ 22.63 $ 19.18 $ 15.63 $ 16.57
Ratios/Supplemental Data
Total return^ ........................... 8.63% 23.53% 25.64% 30.92% (0.15)% 12.96%
Ratio of expenses to
average net assets ...................... 0.77%+ 0.78% 0.82% 0.84% 0.81% 0.83%
Ratio of net investment
income to average
net assets .............................. 1.91%+ 2.22% 2.53% 3.31% 3.08% 2.91%
Portfolio turnover rate ................. 5.8% 15.7% 13.5% 26.2% 25.6% 22.4%
Net assets, end of period
(in millions) ........................... $ 3,652 $ 3,447 $ 2,489 $ 1,748 $ 1,229 $ 1,167
<FN>
^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
Common Stocks 94.5%
FINANCIAL 17.5%
Bank and Trust 5.5%
BANC ONE ......................................... 495,239 $ 27,641
Chase Manhattan .................................. 900,000 67,950
Citicorp ......................................... 246,575 36,801
KeyCorp .......................................... 1,100,000 39,187
National City .................................... 400,000 28,400
199,979
Insurance 5.9%
American General ................................. 600,000 42,713
EXEL ............................................. 335,600 26,114
St. Paul Companies ............................... 1,200,000 50,475
Travelers Property Casualty (Class A) ............ 800,000 34,300
UNUM ............................................. 500,000 27,750
Willis-Corroon ADR ............................... 2,733,800 34,343
215,695
Financial Services 6.1%
American Express ................................. 500,000 57,000
Bear Stearns ..................................... 615,329 34,997
Beneficial ....................................... 230,000 35,233
Fannie Mae ....................................... 800,000 48,600
Household International .......................... 992,004 49,352
225,182
Total Financial .................................. 640,856
UTILITIES 11.4%
Telephone Services 4.6%
AT&T ............................................. 700,000 39,988
BellSouth ........................................ 330,000 22,151
Frontier ......................................... 1,700,000 53,550
GTE .............................................. 400,000 22,250
SBC Communications ............................... 768,022 30,721
168,660
<PAGE>
Electric Utilities 6.8%
Dominion Resources ............................... 350,000 14,263
DQE .............................................. 600,000 21,600
Edison International ............................. 1,001,700 $ 29,613
Entergy .......................................... 780,379 22,436
FirstEnergy ...................................... 1,575,000 48,431
GPU .............................................. 699,300 26,442
Niagara Mohawk * ................................. 1,000,000 14,938
Texas Utilities .................................. 500,000 20,812
Unicom ........................................... 1,400,000 49,087
247,622
Total Utilities .................................. 416,282
CONSUMER NONDURABLES 19.9%
Cosmetics 0.6%
International Flavors & Fragrances ............... 500,000 21,719
21,719
Beverages 1.9%
Anheuser-Busch ................................... 380,600 17,960
Bols Wessanen (NLG) .............................. 307,375 4,430
Brown-Forman (Class B) ........................... 220,000 14,135
PepsiCo .......................................... 820,000 33,774
70,299
Food Processing 4.2%
Agribrands International * ....................... 32,550 985
General Mills .................................... 450,000 30,769
Heinz ............................................ 300,000 16,837
McCormick ........................................ 472,400 16,874
Nabisco Holdings (Class A) ....................... 200,000 7,212
Ralston Purina ................................... 325,500 38,022
Sara Lee ......................................... 775,000 43,352
154,051
Hospital Supplies/Hospital Management 1.3%
Abbott Laboratories .............................. 400,000 16,350
Baxter International ............................. 246,400 13,259
Smith & Nephew (GBP) ............................. 6,700,000 16,725
46,334
Pharmaceuticals 5.8%
American Home Products ........................... 1,000,000 51,750
Pfizer ........................................... 800,000 86,950
Pharmacia & Upjohn ............................... 700,000 $ 32,287
Warner-Lambert ................................... 600,000 41,625
212,612
<PAGE>
Miscellaneous Consumer Products 6.1%
Colgate-Palmolive ................................ 352,500 31,020
Newell ........................................... 600,000 29,888
Philip Morris .................................... 780,000 30,712
Procter & Gamble ................................. 400,000 36,425
RJR Nabisco ...................................... 668,000 15,865
Tomkins (GBP) .................................... 2,500,000 13,577
Unifi ............................................ 1,000,000 34,250
UST .............................................. 1,100,000 29,700
221,437
Total Consumer Nondurables ....................... 726,452
CONSUMER SERVICES 6.7%
General Merchandisers 2.9%
Dayton Hudson .................................... 1,450,000 70,325
J.C. Penney ...................................... 500,000 36,156
106,481
Specialty Merchandisers 2.1%
Abercrombie & Fitch * ............................ 6,836 301
American Stores .................................. 1,313,800 31,778
The Limited ...................................... 500,000 16,562
Tupperware ....................................... 1,000,000 28,125
76,766
Entertainment and Leisure 1.7%
Host Marriott * .................................. 765,700 13,639
Reader's Digest (Class A) ........................ 1,032,400 28,004
Reader's Digest (Class B) ........................ 786,400 21,331
62,974
Total Consumer Services .......................... 246,221
CONSUMER CYCLICALS 6.6%
Building and Real Estate 4.2%
CarrAmerica Realty, REIT ......................... 590,000 16,741
Federal Realty Investment Trust, REIT ............ 700,000 16,844
Patriot American Hospitality, REIT ............... 800,003 $ 19,150
Reckson Associates Realty, REIT .................. 600,000 14,175
Reckson Service Industries * ..................... 240,000 818
Rouse ............................................ 574,500 18,061
Security Capital Industrial Trust, REIT .......... 327,272 8,182
Simon DeBartolo Group, REIT ...................... 816,000 26,520
Spieker Properties, REIT ......................... 200,000 7,750
Starwood Hotels & Resorts, REIT .................. 250,000 12,078
United Dominion Realty Trust, REIT ............... 1,057,900 14,678
154,997
Miscellaneous Consumer Durables 2.4%
Corning .......................................... 1,850,000 64,287
Eastman Kodak .................................... 300,000 21,919
86,206
Total Consumer Cyclicals ......................... 241,203
<PAGE>
TECHNOLOGY 1.5%
Electronic Systems 0.7%
Honeywell ........................................ 300,000 25,069
25,069
Telecommunications Equipment 0.2%
Telecom Corp. of New Zealand ADR ................. 500,000 8,406
8,406
Aerospace and Defense 0.6%
AlliedSignal ..................................... 500,000 22,187
22,187
Total Technology ................................. 55,662
CAPITAL EQUIPMENT 4.3%
Electrical Equipment 3.2%
GE ............................................... 960,000 87,360
Hubbell (Class B) ................................ 710,000 29,554
116,914
Machinery 1.1%
Cooper Industries ................................ 455,907 25,046
FMC * ............................................ 205,100 13,985
39,031
Total Capital Equipment .......................... 155,945
BUSINESS SERVICES AND
TRANSPORTATION 7.2%
Computer Service and Software 0.7%
First Data ................................. 800,000 $ 26,650
26,650
Miscellaneous Business Services 3.9%
Browning-Ferris .................................. 1,200,000 41,700
H&R Block ........................................ 1,100,000 46,337
Swire Pacific (Class A) (HKD) .................... 1,500,000 5,663
Waste Management ................................. 1,350,000 47,250
140,950
Railroads 2.6%
Burlington Northern Santa Fe ..................... 500,000 49,094
Norfolk Southern ................................. 1,500,000 44,719
93,813
Total Business Services and Transportation ....... 261,413
ENERGY 9.3%
Energy Services 1.9%
Halliburton ...................................... 636,000 28,342
Schlumberger ..................................... 600,000 40,987
69,329
<PAGE>
Integrated Petroleum - Domestic 5.2%
Amerada Hess ..................................... 1,100,000 59,744
Atlantic Richfield ............................... 550,000 42,969
British Petroleum ADR ............................ 400,000 35,300
Unocal ........................................... 500,000 17,875
USX-Marathon ..................................... 1,000,000 34,312
190,200
Integrated Petroleum - International 2.2%
Amoco ............................................ 800,000 33,300
Texaco ........................................... 800,000 47,750
81,050
Total Energy ..................................... 340,579
PROCESS INDUSTRIES 7.6%
Diversified Chemicals 2.1%
Dow Chemical ..................................... 400,000 $38,675
DuPont ........................................... 500,000 37,313
75,988
Specialty Chemicals 2.8%
A. Schulman ...................................... 700,000 13,650
Great Lakes Chemical ............................. 1,100,000 43,381
Octel * .......................................... 275,000 5,466
Pall ............................................. 2,000,000 41,000
103,497
Paper and Paper Products 2.2%
Fort James ....................................... 1,050,000 46,725
Kimberly-Clark ................................... 700,000 32,112
78,837
Forest Products 0.5%
Georgia-Pacific .................................. 325,000 19,155
19,155
Total Process Industries ......................... 277,477
BASIC MATERIALS 2.5%
Metals 1.9%
Alcoa ............................................ 326,400 21,522
Freeport-McMoRan Copper & Gold (Class A) ......... 183,748 2,618
Inco ............................................. 1,000,000 13,625
Nucor ............................................ 200,000 9,200
Reynolds Metals .................................. 400,000 22,375
69,340
Mining 0.6%
Newmont Mining ................................... 900,000 21,263
21,263
Total Basic Materials ............................ 90,603
Total Common Stocks (Cost ........................ $2,151,623) 3,452,693
<PAGE>
Preferred Stocks 0.1%
Entergy-GSU
$8.64 .................................... 4,630 470
Series A ................................ 2,866 $ 287
Series B ................................. 13,411 678
Total Preferred Stocks (Cost $1,396) ............ 1,435
Convertible Preferred Stocks 0.5%
Golden State Bancorp, (Series A), 8.75% .......... 200,000 17,337
Total Convertible Preferred Stocks (Cost $5,014).. 17,337
Convertible Bonds 1.0%
Corporate Express, (144a), 4.50%, 7/1/00 ......... $15,000,000 13,942
Exide, (144a), 2.90%, 12/15/05 ................... 40,000,000 25,132
Total Convertible Bonds (Cost $39,960) ........... 39,074
Corporate Bonds 0.9%
Container Corporation of America,
Sr. Notes, 9.75%, 4/1/03 ......................... 5,000,000 5,375
Scotts, Sr. Sub. Notes, 9.875%, 8/1/04 ........... 5,000,000 5,350
Starwood Hotel & Resort, Sr. Secured Notes, VR
7.898%, 2/23/03 .................. 21,250,000 21,250
Texas Bottling Group, Sr. Sub. Notes,
9.00%, 11/15/03 .................. 3,000,000 3,150
Total Corporate Bonds (Cost $34,201) ............. 35,125
U.S. Government Obligations/
Agencies 1.6%
U.S. Treasury Bonds 6.875%, 8/15/25 .............. 50,000,000 57,906
Total U.S. Government Obligations/Agencies
(Cost $49,330) .................................. 57,906
Short-Term Investments 1.7%
Money Market Funds 1.7%
Reserve Investment Fund, 5.69% # ................. 60,714,608 60,715
Total Short-Term Investments (Cost $60,715) ...... 60,715
Total Investments in Securities
100.3% of Net Assets (Cost $2,342,239) ........... $ 3,664,285
Other Assets Less Liabilities .................... (12,387)
<PAGE>
NET ASSETS ....................................... $ 3,651,898
Net Assets Consist of:
Accumulated net investment income -
net of distributions ............................. $ 1,928
Accumulated net realized gain/loss -
net of distributions ............................. 100,485
Net unrealized gain (loss) ....................... 1,322,053
Paid-in-capital applicable to 129,909,853
shares of $0.01 par value capital stock
outstanding; 500,000,000 shares authorized ....... 2,227,432
NET ASSETS ....................................... $ 3,651,898
NET ASSET VALUE PER SHARE ........................ $ 28.11
* Non-income producing
# Seven-day yield
ADR American Depository Receipt
REIT Real Estate Investment Trust
VR Variable rate
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
1.07% of net assets.
GBP British sterling
HKD Hong Kong dollar
NLG Dutch guilder
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
Unaudited
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/98
Investment Income
Income
Dividend .............................................. $ 37,098
Interest .............................................. 11,507
Total income .......................................... 48,605
Expenses
Investment management ................................. 10,347
Shareholder servicing ................................. 3,337
Custody and accounting ................................ 114
Prospectus and shareholder reports .................... 76
Registration .......................................... 75
Legal and audit ....................................... 8
Directors ............................................. 8
Miscellaneous ......................................... 12
Total expenses ........................................ 13,977
Net investment income ......................................... 34,628
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ............................................ 100,639
Foreign currency transactions ......................... 3
Net realized gain (loss) .............................. 100,642
Change in net unrealized gain or loss
Securities ............................................ 163,541
Other assets and liabilities
denominated in foreign currencies ..................... 7
Change in net unrealized gain or loss ................. 163,548
Net realized and unrealized gain (loss) ....................... 264,190
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ........................................ $298,818
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
Unaudited
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income .................... $ 34,628 $ 67,215
Net realized gain (loss) ................. 100,642 153,146
Change in net unrealized gain or loss .... 163,548 413,196
Increase (decrease) in net assets from
operations ............................... 298,818 633,557
Distributions to shareholders
Net investment income .................... (32,745) (68,368)
Net realized gain ........................ (36,681) (121,448)
Decrease in net assets from distributions (69,426) (189,816)
Capital share transactions *
Shares sold .............................. 321,923 719,456
Distributions reinvested ................. 67,742 185,574
Shares redeemed .......................... (413,875) (390,878)
Increase (decrease) in net assets
from capital share transactions .......... (24,210) 514,152
Net Assets
Increase (decrease) during period ................ 205,182 957,893
Beginning of period .............................. 3,446,716 2,488,823
End of period .................................... $ 3,651,898 $ 3,446,716
*Share information
Shares sold .............................. 11,612 29,160
Distributions reinvested ................. 2,383 7,236
Shares redeemed .......................... (14,860) (15,606)
Increase (decrease) in shares outstanding (865) 20,790
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Growth & Income Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 and commenced operations on December 21, 1982.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations are
made. A security which is listed or traded on more than one exchange is valued
at the quotation on the exchange deter mined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
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.
<PAGE>
PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $385,609,000 and $196,405,000, respectively, for the six
months ended June 30, 1998.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1998, the aggregate cost of investments for federal income tax
and financial reporting purposes was $2,342,239,000, and net unrealized gain
aggregated $1,322,046,000, of which $1,397,088,000 related to appreciated
investments and $75,042,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $1,728,000 was payable at June 30, 1998. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.25% 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 0.30% for assets in excess of $80 billion. At June
30, 1998, and for the six months then ended, the effective annual group fee rate
was 0.32%. The fund pays a pro-rata share of the group fee based on the ratio of
its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (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 recordkeepin g services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $2,232,000 for the six months
ended June 30, 1998, of which $414,000 was payable at period-end.
<PAGE>
Additionally, the fund is one of several T. Rowe Price-sponsored mutual
funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum)
may invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Growth Fund held
approximately 9.3% of the outstanding shares of the Growth & Income at June 30,
1998. For the six months then ended, the fund was allocated $457,000 of Spectrum
expenses, $72,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended June 30, 1998, totaled
$6,491,000 and are reflected as interest income in the accompanying Statement of
Operations.
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers. Account
Services
CHECKING Available on most fixed income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your
distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*Access [Registration Mark]
and the T. Rowe Price Web site on the Internet. Address:
www.troweprice.com
DISCOUNT BROKERAGE*
INDIVIDUAL INVESTMENTS Stocks, bonds, options, precious metals, and
other securities at a savings over regular commission rates.
INVESTMENT INFORMATION
COMBINED STATEMENT Overview of all your accounts with T. Rowe Price.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and
results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial
markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Growth & Income Fund [Registration Mark].
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F54-051 6/30/98
