<PAGE>
Semiannual Report
GROWTH &
INCOME
FUND
-------------
JUNE 30, 2000
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[LOGO OF T. ROWE PRICE]
T. ROWE PRICE
<PAGE>
Report Highlights
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Growth & Income Fund
. Despite extreme volatility, stocks finished only modestly lower through the
first six months of the year.
. The fund posted solid returns for the six months ended June 30, reversing a
disappointing second half 1999.
. Investors focused on fundamentally sound companies as the market corrected,
aiding fund performance.
. The correction allowed us to add shares of reasonably priced, established
companies with strong growth prospects.
. If the Fed achieves a soft landing, the second half of the year should be
favorable for stocks.
UPDATES AVAILABLE
For updates on T.Rowe Price funds following the end of each calendar
quarter, please see our Web site a www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
Stocks were down modestly in the first half of 2000, reflecting steadily
rising interest rates and a partial reversal of the robust gains posted by
technology and telecommunications companies during the fourth quarter 1999.
Although the S&P 500 Index lost just 0.43% during the six-month period,
investors experienced a wild ride as shares of so-called New Economy stocks
surged through mid-March, then plummeted. Broader markets eventually
followed the downward course, but after a hair-raising period of rapid
price swings, tech stocks staged a comeback in late May and June. The
rebound appeared to signal a return to greater emphasis on fundamentals, as
the more successful tech companies led the advance, along with steady
growth companies in other industries.
----------------------
PERFORMANCE COMPARISON
--------------------------------------------------------------------------------
Periods Ended 6/30/00 6 Months 12 Months
--------------------------------------------------------------------------------
Growth & Income Fund 3.42% -4.69%
S&P 500 -0.43 7.24
Lipper Multi-Cap Value
Funds Average -0.47 -3.99
The Growth & Income Fund generated positive returns for the six-month period
ended June 30, 2000, despite the challenging market environment. Its 3.42% rise
exceeded both the S&P 500 and its Lipper benchmark. The market's earlier
enthusiasm for a relative handful of tech highfliers-and its neglect of the kind
of financially sound, reasonably priced stocks we favor-resulted in a
disappointing 4.69% 12-month loss that trailed the S&P index by a considerable
margin but was only modestly lower than the Lipper average.
Environment
The remarkable growth in corporate profits persisted over the past six
months. Profit increases were broad-based as rapid global economic
1
<PAGE>
growth fueled gains in many cyclical companies and a sharp rebound in the price
of oil boosted earnings throughout the energy industry. Additionally, technology
and telecommunications companies again registered impressive growth as trends
including optical networking, e-commerce, and wireless communications continued
to unfold.
The Federal Reserve continued its campaign to preempt inflation by raising
short-term rates three times since the beginning of the year (six times since
June 1999). By the end of June, it became clear that the Fed's efforts were
having an impact as housing activity and retail sales both showed signs of
slowing. The stock market's decline in the face of solid underlying earnings
growth was at least partly the result of fears that the Fed's tightening could
lead to a more pronounced slowdown, as well as the recognition that valuations
among many technology stocks had outstripped reality.
Portfolio and Strategy Review
Several of the fund's largest holdings contributed to first-half returns.
Corning, the world's largest maker of optical fiber and the fund's largest
holding, continues to benefit from explosive growth in optical networking.
Telecommunications service providers are aggressively developing optical
networks in an effort to lower their costs and add the capacity necessary to
carry Internet data. In addition to designing and manufacturing fiber, Corning
has established itself as a vendor of pump lasers and other components used to
transmit and manipulate light in optical networks. Nortel Networks and JDS
Uniphase, which also participate in the optical-networking arena, contributed to
fund performance as well.
Baker Hughes rallied sharply along with the oil service sector in response to
this year's dramatic rebound in the price of oil. Although we maintain a
favorable long-term view of the company, we reduced our holding, in part because
we were unhappy with the terms of its recently announced joint venture with
Schlumberger.
The pharmaceutical sector rebounded from concerns over potential political and
regulatory challenges. Pfizer, which completed its merger with Warner-Lambert,
is now your fund's second-largest holding. We expect consistent earnings growth
in excess of 20% from the new Pfizer over the next few years, driven by a
portfolio of blockbuster drugs (including seven products with more than $1
billion in 1999 sales) and $1.6 billion in announced merger savings. Longer
term,
2
<PAGE>
Pfizer's growth should be sustained by its best-in-class sales organization and
unprecedented $5 billion research and development budget. American Home Products
also fared well as its management sold the company's agrochemical business to
BASF and took steps to address its Phen-Fen diet drug liability.
Although we have reduced the fund's overall exposure to food stocks, we
initiated a position in Quaker Oats based largely on the strength of the
company's Gatorade sports drink franchise. Solid earnings growth combined with
renewed consolidation in the food sector drove Quaker's strong returns this
year.
Even though we were pleased with the overall performance of the fund, some of
our investments posted disappointing returns and had a negative impact on fund
returns. Procter & Gamble's initiatives to boost sales growth through new
products diverted resources from important established products and resulted in
bloated expense levels. AT&T's financial results for 2000 are coming in well
below our estimates and the company's as the company continues to lose market
share in both the consumer and business markets.
The core of your fund continues to consist of attractively valued stocks with
above-average dividend yields, but we're also looking to include more companies
with higher sustainable growth rates. Changes in the first half raised the
portfolio's projected underlying growth by two percentage points while the
average price/earnings ratio remained about the same. Our new holdings focused
on well-positioned companies that we believe offer sustainable long-term growth.
In order to buy at attractive prices, we frequently invest amid controversy--
provided we're convinced that the market's concerns are merely temporary or
overdone. All of our top 10 purchases over the past six months met this
description.
------------------------
SECURITY DIVERSIFICATION
--------------------------------------------------------------------------------
[GRAPH]
Reserves and Other 22%
Consumer Services 7%
Consumer Cyclicals 7%
Business Services and Transportation 7%
Financial 18%
Consumer Nondurables 18%
Technology 13%
Energy 8%
Based on net assets as of 6/30/00
WorldCom was the largest purchase. Its stock price suffered despite strong
underlying earnings growth because the market anticipated the company's failure
to gain
3
<PAGE>
regulatory approval for its merger with Sprint. This gave us the opportunity to
buy one of the best sets of business, data, and international assets in the
telecommunications services industry at a P/E below its forecasted growth rate.
Our second-largest purchase was Freddie Mac, one of two publicly owned
government-sponsored residential mortgage businesses that have been under
intense political scrutiny recently. We believe that these political issues will
be resolved within the next year in a way that will permit Freddie Mac to
sustain its impressive track record of double-digit earnings per share growth.
Other major purchases included Tyco International, Microsoft, Quaker Oats, and
CIGNA, all bought on price dips.
-----------------
FINANCIAL PROFILE
--------------------------------------------------------------------------------
Growth &
As of 6/30/00 Income Fund S&P 500
--------------------------------------------------------------------------------
Current Yield 1.8% 1.1%
Price/Book Ratio 4.3X 8.9X
Price/Earnings Ratio
(2000 estimated EPS) 19.6X 32.0X
Historical Beta
(based on monthly
returns for 5 years) 0.75 1.00
We also took advantage of the second-quarter sell-off to gain exposure to the
tech sector. Although many technology companies still appear expensive on
traditional valuation models, trends such as optical networking, wireless
communications, and biotechnology should sustain profitable growth for such
established companies as Vodafone AirTouch, Nokia, Nortel Networks, and
Genentech. The fund's tech-related holdings stood at 13% at the end of June,
still well below the S&P 500's 32% tech weighting.
Although Corning remains the fund's largest holding, we reduced our position to
a more manageable size following its dramatic price gain. We also sold some of
our holdings in BP Amoco after its merger with Atlantic Richfield, which the
fund also owned. Eliminations from the portfolio were concentrated in companies
where we had less confidence in either the short- or long-term fundamentals.
Summary and Outlook
If the Federal Reserve is successful in containing inflation without damaging
the economic expansion--a prospect we believe is likely but by no means
assured--the second half of the year should prove favorable to stocks.
Additionally, stocks have historically performed well
4
<PAGE>
during presidential election years. While the stock market's record five-year
gains and the age of the current economic expansion temper our enthusiasm, we
believe the outlook for your fund is favorable for several reasons:
. Earnings growth is strong at many companies, and quality companies in many
sectors, including retail and financial services, have reasonable share
price valuations.
. Recent economic data indicate that the pace of domestic growth is
moderating and inflation remains subdued.
. Many of your fund's holdings generate substantial free cash flow, which can
be used to reinvest in their businesses, increase dividends, buy back
shares, or make acquisitions.
. Your fund is conservatively positioned relative to the overall market, as
shown by its higher dividend yield (63% greater than the S&P 500) and lower
P/E ratio (60% of the S&P 500), leaving us well positioned for market
corrections.
Going forward, we will seek to develop and maintain a balance between growth-
and income-oriented investments in quality, established companies at reasonable
prices. We appreciate your confidence in T. Rowe Price and your continued
support.
Respectfully submitted,
/S/ Stephen W. Boesel
Stephen W. Boesel
President and Chairman of the Investment Advisory Committee
/S/ Robert W. Sharps
Robert W. Sharps
Executive Vice President
July 20, 2000
5
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
--------------------
PORTFOLIO HIGHLIGHTS
--------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/00
--------------------------------------------------------------------------------
Corning 5.1%
Pfizer 4.3
BP Amoco 2.4
GE 2.0
Chase Manhattan 1.8
--------------------------------------------------------------------------------
American Home Products 1.8
USX-Marathon 1.7
Citigroup 1.7
Baker Hughes 1.7
Eastman Kodak 1.7
--------------------------------------------------------------------------------
WorldCom 1.5
Pharmacia 1.5
Target 1.5
Tyco International 1.4
Fannie Mae 1.3
--------------------------------------------------------------------------------
Pall 1.3
CIGNA 1.3
PepsiCo 1.3
Fort James 1.2
Hartford Financial Services Group 1.2
--------------------------------------------------------------------------------
General Mills 1.2
Quaker Oats 1.2
Household International 1.2
Unicom 1.2
XL Capital 1.1
--------------------------------------------------------------------------------
Total 43.6%
Note: Table excludes reserves.
6
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
--------------------
PORTFOLIO HIGHLIGHTS
--------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 6/30/00
Ten Largest Purchases Ten Largest Sales
--------------------------------------------------------------------------------
WorldCom * Corning
Freddie Mac * BP Amoco
Tyco International * St. Paul Companies **
Microsoft * Dow Chemical **
Quaker Oats * H&R Block **
CIGNA * GE
Hartford Financial Services Group * Reader's Digest **
Bank of New York * USX-Marathon
CVS * Xerox **
E*TRADE, Cv. Bond * Amerada Hess
* Position added
** Position eliminated
7
<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 benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
GROWTH & INCOME FUND
[GRAPH]
[PLOT POINTS TO COME]
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 6/30/00 1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------
Growth & Income Fund -4.69% 8.89% 15.75% 13.89%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
8
<PAGE>
T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Unaudited
--------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 24.44 $ 26.25 $ 26.36 $ 22.63 $ 19.18 $ 15.63
Investment activities
Net investment income (loss) 0.16 0.49 0.55 0.55 0.52 0.58
Net realized and unrealized gain (loss) 0.67 0.46 2.00 4.71 4.34 4.16
Total from investment activities 0.83 0.95 2.55 5.26 4.86 4.74
Distributions
Net investment income (0.15) (0.51) (0.53) (0.56) (0.51) (0.59)
Net realized gain (0.03) (2.25) (2.13) (0.97) (0.90) (0.60)
Total distributions (0.18) (2.76) (2.66) (1.53) (1.41) (1.19)
NET ASSET VALUE
End of period $ 25.09 $ 24.44 $ 26.25 $ 26.36 $ 22.63 $ 19.18
===============================================================================
Ratios/Supplemental Data
Total return/\ 3.42% 3.78% 9.96% 23.53% 25.64% 30.92%
Ratio of total expenses to average net assets 0.78%+ 0.77% 0.77% 0.78% 0.82% 0.84%
Ratio of net investment income (loss) to
average net assets 1.34%+ 1.78% 2.03% 2.22% 2.53% 3.31%
Portfolio turnover rate 78.7%+ 20.3% 20.5% 15.7% 13.5% 26.2%
Net assets, end of period (in millions) $ 3,154 $ 3,440 $ 3,563 $ 3,447 $ 2,489 $ 1,748
</TABLE>
/\ 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
The accompanying notes are an integral part of these financial statements.
9
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
-----------------------
STATEMENT OF NET ASSETS Shares/Par Value
--------------------------------------------------------------------------------
In thousands
COMMON STOCKS 92.9%
FINANCIAL 17.2%
Bank and Trust 6.0%
Bank of America 750,000 $ 32,250
Bank of New York 700,000 32,550
Bank One 260,000 6,906
Chase Manhattan 1,215,000 55,966
Firstar 1,010,000 21,273
Mellon Financial 700,000 25,507
Wells Fargo 400,000 15,500
----------
189,952
----------
Insurance 3.8%
American General 550,000 33,550
Hartford Financial Services Group 700,000 39,156
Marsh & McLennan 100,000 10,444
XL Capital (Class A) 665,000 35,993
----------
119,143
----------
Financial Services 7.4%
Bear Stearns 500,000 20,813
Capital One Financial 400,000 17,850
Citigroup 900,000 54,225
Fannie Mae 800,000 41,750
Freddie Mac 750,000 30,375
Household International 900,000 37,406
Morgan Stanley Dean Witter 390,000 32,467
----------
234,886
----------
Total Financial 543,981
----------
UTILITIES 6.4%
Telephone 4.0%
AT&T 600,000 18,975
GTE 372,100 23,163
SBC Communications 475,000 20,544
Vodafone AirTouch ADR 425,000 17,611
WorldCom * 1,060,000 48,661
----------
128,954
----------
10
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Electric Utilities 2.4%
FirstEnergy 1,075,000 $ 25,128
Niagara Mohawk * 1,000,000 13,938
Unicom 947,000 36,637
----------
75,703
----------
Total Utilities 204,657
----------
CONSUMER NONDURABLES 17.6%
Beverages 1.6%
Coca-Cola Enterprises 696,800 11,366
PepsiCo 900,000 39,994
----------
51,360
----------
Food Processing 2.8%
General Mills 1,000,000 38,250
Heinz 300,000 13,125
Quaker Oats 500,000 37,563
----------
88,938
----------
Hospital Supplies/Hospital Management 0.6%
Baxter International 246,400 17,325
----------
17,325
----------
Pharmaceuticals 8.5%
American Home Products 950,000 55,812
Bristol-Myers Squibb 300,000 17,475
Genetech * 65,000 11,180
Pfizer 2,825,000 135,600
Pharmacia 900,000 46,519
----------
266,586
----------
Miscellaneous Consumer Products 2.3%
Colgate-Palmolive 600,000 35,925
NIKE (Class B) 150,000 5,972
Philip Morris 750,000 19,922
Procter & Gamble 200,000 11,450
----------
73,269
----------
Health Care Services 1.8%
CIGNA 430,000 40,205
UnitedHealth Group 200,000 17,150
----------
57,355
----------
Total Consumer Nondurables 554,833
----------
11
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
CONSUMER SERVICES 6.7%
General Merchandisers 1.5%
Target 800,000 $ 46,400
----------
46,400
----------
Specialty Merchandisers 1.8%
CVS 675,000 27,000
Home Depot 320,000 15,980
Lowes 335,000 13,756
----------
56,736
----------
Entertainment and Leisure 0.8%
MGM Grand ++ * 490,566 14,972
Reader's Digest (Class B) 325,800 11,912
----------
26,884
----------
Media and Communications 2.6%
Clear Channel Communications * 190,000 14,250
Comcast (Class A Special)* 660,000 26,751
R.R. Donnelley 1,000,000 22,562
Viacom (Class B) * 259,550 17,698
----------
81,261
----------
Total Consumer Services 211,281
----------
CONSUMER CYCLICALS 7.4%
Automobiles and Related 1.1%
Eaton 230,000 15,410
Textron 330,000 17,923
----------
33,333
----------
Building and Real Estate 4.4%
Duke Realty Investments, REIT 450,000 10,069
Equity Office Properties, REIT 500,000 13,781
Federal Realty Investment Trust, REIT 1,175,000 23,500
ProLogis Trust, REIT 327,272 6,975
Reckson Associates Realty, REIT 750,000 17,812
Rouse 599,500 14,838
Simon Property Group, REIT 841,000 18,660
Spieker Properties, REIT 200,000 9,200
Starwood Hotels & Resorts Worldwide, REIT 775,000 25,236
----------
140,071
----------
12
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T. ROWE PRICE GROWTH & INCOME FUND
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Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Miscellaneous Consumer Durables 1.9%
Eastman Kodak 875,000 $ 52,062
Masco 400,000 7,225
----------
59,287
----------
Total Consumer Cyclicals 232,691
----------
TECHNOLOGY 12.4%
Electronic Systems 1.9%
Hewlett-Packard 50,000 6,244
Nokia ADR 310,000 15,480
Solectron * 355,000 14,866
Waters * 175,000 21,842
----------
58,432
----------
Aerospace and Defense 0.7%
United Technologies 400,000 23,550
----------
23,550
----------
Information Processing 1.0%
COMPAQ Computer 450,000 11,503
Dell Computer * 400,000 19,738
----------
31,241
----------
Telecommunications 7.7%
Cisco Systems * 280,000 17,789
Corning 600,000 161,925
JDS Uniphase * 120,000 14,381
Nortel Networks 410,000 27,982
Tellabs * 300,000 20,541
----------
242,618
----------
Electronic Components 1.1%
Samsung Electronics GDR, (144a) * 100,000 19,650
Texas Instruments 210,000 14,424
----------
34,074
----------
Total Technology 389,915
----------
CAPITAL EQUIPMENT 3.5%
Electrical Equipment 3.5%
GE 1,200,000 63,600
Tyco International 960,000 45,480
----------
Total Capital Equipment 109,080
----------
13
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T. ROWE PRICE GROWTH & INCOME FUND
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Shares/Par Value
--------------------------------------------------------------------------------
In thousands
BUSINESS SERVICES AND
TRANSPORTATION 4.7%
Computer Service and Software 2.5%
America Online * 360,000 $ 18,990
Computer Associates 235,000 12,029
Microsoft * 425,000 33,987
Oracle * 160,000 13,445
----------
78,451
----------
Miscellaneous Business Services 1.2%
Galileo International 600,000 12,525
ServiceMaster 1,400,000 15,925
Waste Management 465,000 8,835
----------
37,285
----------
Airlines 0.4%
Delta 300,000 15,168
----------
15,168
----------
Railroads 0.6%
Burlington Northern Santa Fe 800,000 18,350
----------
18,350
----------
Total Business Services and Transportation 149,254
----------
ENERGY 8.3%
Energy Services 1.7%
Baker Hughes 1,675,000 53,600
----------
53,600
----------
Integrated Petroleum - Domestic 2.6%
Amerada Hess 440,000 27,170
USX-Marathon 2,170,000 54,386
----------
81,556
----------
Integrated Petroleum - International 3.3%
BP Amoco ADR 1,350,000 76,359
Texaco 555,000 29,554
----------
105,913
----------
Exploration and Production 0.7%
Unocol 675,000 22,359
----------
22,359
----------
Total Energy 263,428
----------
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T. ROWE PRICE GROWTH & INCOME FUND
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Shares/Par Value
--------------------------------------------------------------------------------
In thousands
PROCESS INDUSTRIES 4.0%
Specialty Chemicals 1.9%
Great Lakes Chemical 565,000 17,798
Pall 2,200,000 40,700
-----------
58,498
-----------
Paper and Paper Products 2.1%
Fort James 1,700,000 39,312
Kimberly-Clark 480,000 27,540
-----------
66,852
-----------
Total Process Industries 125,350
-----------
BASIC MATERIALS 2.0%
Metals 2.0%
Alcoa 1,060,000 30,740
Inco * 330,000 5,074
Newmont Mining 1,240,000 26,815
-----------
Total Basic Materials 62,629
-----------
Miscellaneous Common Stocks 2.7% 83,696
-----------
Total Common Stocks (Cost $1,992,814) 2,930,795
-----------
CONVERTIBLE PREFERRED STOCKS 0.5%
Union Pacific Capital Trust, 6.25% 400,000 16,733
-----------
Total Convertible Preferred Stocks (Cost $18,123) 16,733
-----------
CONVERTIBLE BONDS 1.9%
E* TRADE, (144a), 6.00%, 2/1/07 $ 25,000,000 22,688
Networks Associates, Zero Coupon, 2/13/18 100,000,000 35,493
-----------
Total Convertible Bonds (Cost $57,845) 58,181
-----------
OPTIONS WRITTEN (0.0%)
Bristol-Meyers Squibb, Call, 9/16/00 @ $65.00 (2,000) $ (194)
-----------
Total Options Written (Cost $(194)) (194)
-----------
15
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T. ROWE PRICE GROWTH & INCOME FUND
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Shares/Par Value
--------------------------------------------------------------------------------
In thousands
SHORT-TERM INVESTMENTS 5.2%
Money Market Funds 5.2%
Reserve Investment Fund, 6.68% # 162,320,796 162,321
-------------
Total Short-Term Investments (Cost $162,321) 162,321
-------------
Total Investments in Securities
100.5% of Net Assets (Cost $2,230,909) $ 3,167,836
Other Assets Less Liabilities (14,120)
-------------
NET ASSETS $ 3,153,716
=============
Net Assets Consist of:
Accumulated net investment income - net of
distributions $ 1,795
Accumulated net realized gain/loss - net of
distributions 96,862
Net unrealized gain (loss) 936,927
Paid-in-capital applicable to 125,706,238 shares of
$0.01 par value capital stock outstanding; 500,000,000
shares authorized 2,118,132
-------------
NET ASSETS $ 3,153,716
=============
NET ASSET VALUE PER SHARE $ 25.09
=============
# Seven-day yield
* Non-income producing
++ Securities contain some restrictions as to public resale--total of such
securities at period-end amounts to 0.5% of net assets.
ADR American Depository Receipt
GDR Global depository receipt
REIT Real Estate Investment Trust
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
1.3% of net assets.
The accompanying notes are an integral part of these financial statements.
16
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Unaudited
-----------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Dividend $ 27,692
Interest 5,320
--------
Total income 33,012
--------
Expenses
Investment management 8,828
Shareholder servicing 3,101
Custody and accounting 112
Prospectus and shareholder reports 80
Registration 39
Legal and audit 8
Directors 6
Miscellaneous 12
--------
Total expenses 12,186
--------
Expenses paid indirectly (10)
--------
Net expenses 12,176
--------
Net investment income (loss) 20,836
--------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 96,083
Foreign currency transactions (102)
--------
Net realized gain (loss) 95,981
Change in net unrealized gain or loss on securities (26,337)
--------
Net realized and unrealized gain (loss) 69,644
--------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 90,480
--------
The accompanying notes are an integral part of these financial statements.
17
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T. ROWE PRICE GROWTH & INCOME FUND
--------------------------------------------------------------------------------
Unaudited
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
In thousands
6 Month Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 20,836 $ 64,567
Net realized gain (loss) 95,981 282,642
Change in net unrealized gain or loss (26,337) (209,734)
------------------------
Increase (decrease) in net assets from operations 90,480 137,475
------------------------
Distributions to shareholders
Net investment income (19,105) (66,985)
Net realized gain (3,870) (292,034)
------------------------
Decrease in net assets from distributions (22,975) (359,019)
------------------------
Capital share transactions *
Shares sold 173,155 537,422
Distributions reinvested 22,314 350,545
Shares redeemed (548,793) (790,045)
------------------------
Increase (decrease) in net assets from capital
share transactions (353,324) 97,922
------------------------
Net Assets
Increase (decrease) during period (285,819) (123,622)
Beginning of period 3,439,535 3,563,157
End of period $3,153,716 $3,439,535
------------------------
*Share information
Shares sold 7,276 19,809
Distributions reinvested 911 14,343
Shares redeemed (23,212) (29,176)
------------------------
Increase (decrease) in shares outstanding (15,025) 4,976
The accompanying notes are an integral part of these financial statements.
18
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T. ROWE PRICE GROWTH & INCOME FUND
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Unaudited June 30, 2000
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NOTES TO FINANCIAL STATEMENTS
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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 fund
seeks long-term capital growth, a reasonable level of current income, and
increasing future income by investing primarily in dividend-paying stocks.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
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. In the absence of a last
sale price, written options are valued at the mean of the latest bid and
asked prices.
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.
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T. ROWE PRICE GROWTH & INCOME FUND
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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. Expenses paid
indirectly reflect credits earned on daily uninvested cash balances at the
custodian and are used to reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Options Call and put options give the holder the right to purchase or sell,
respectively, a security at a specified price until a certain date. Risks
arise from possible illiquidity of the options market and from movements in
security values. Options are reflected in the accompanying Statement of Net
Assets at market value. Transactions in options written and related
premiums received during the six months ended June 30, 2000, were as
follows:
--------------------------------------------------------------------------------
Number of
Contracts Premiums
Outstanding at beginning of period - $ -
Written 2,000 194,000
------------------------
Outstanding at end of period 2,000 $ 194,000
------------------------
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $1,196,913,000 and $1,633,414,000, respectively, for
the six months ended June 30, 2000.
20
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T. ROWE PRICE GROWTH & INCOME FUND
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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, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$2,230,909,000. Net unrealized gain aggregated $936,927,000 at period-end,
of which $1,027,946,000 related to appreciated investments and $91,019,000
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 $1,476,000 was payable at June 30, 2000. 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 0.295% for assets
in excess of $120 billion. At June 30, 2000, and for the six months then
ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund
receives certain other services. The manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services,
Inc. is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $2,092,000 for the six months ended June 30, 2000, of which
$423,000 was payable at period-end.
21
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T. ROWE PRICE GROWTH & INCOME FUND
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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 10.4%
of the outstanding shares of the fund at June 30, 2000. For the six months
then ended, the fund was allocated $473,000 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, 2000, totaled $3,201,000 and are reflected as interest
income in the accompanying Statement of Operations.
22
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T. ROWE PRICE GROWTH & INCOME FUND
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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(R) and the T. Rowe
Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and
other securities at a savings over full-service 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.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending
on size of order.
23
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T. ROWE PRICE MUTUAL FUNDS
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STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS+
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced
Portfolio
Prime Reserve Portfolio
* Closed to new investors.
+ Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
Please call for a prospectus, which contains complete information, including
fees and expenses. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
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T. ROWE PRICE ADVISORY SERVICES AND RETIREMENT RESOURCES
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ADVISORY SERVICES, RETIREMENT RESOURCES
T. Rowe Price is your full-service retirement specialist. We have
developed unique advisory services that can help you meet the most
difficult retirement challenges. Our broad array of retirement plans
is suitable for individuals, the self-employed, small businesses,
corporations, and nonprofit organizations. We also provide
recordkeeping, communications, and investment management services, and
our educational materials, self-help planning guides, and software
tools are recognized as among the industry's best. For information or
to request literature, call us at 1-800-638-5660, or visit our Web
site at www.troweprice.com.
Advisory Services
T. Rowe Price Retirement Income Manager(SM) helps retirees or those
within two years of retirement determine how much income they can take
in retirement. The program uses extensive statistical analysis and the
input of financial planning professionals to suggest an income plan
that best meets your objectives.
T. Rowe Price Rollover Investment Service offers asset allocation
advice to those planning a major change in their qualified retirement
plans, such as a 401(k) rollover from a previous employer or an IRA
transfer.
RETIREMENT RESOURCES AT T.ROWE PRICE
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning
Analyzer(TM) CD-ROM or diskette $19.95.
To order, please call 1-800-541-5760.
Also available on the Internet for $9.95.
T. Rowe Price Variable Annuity Analyzer(TM)
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
T. Rowe Price Immediate Variable
Annuity (Income Account)
Investment Kits
We will be happy to send you one of our easy-to-follow investment kits
when you are ready to invest in any T. Rowe Price retirement vehicle,
including IRAs, qualified plans, small-business plans, or our no-load
variable annuities.
25
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For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate to the fund
or funds covered in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site.
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
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T. Rowe Price Investment Services, Inc., Distributor.
