<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
After three excellent years of absolute and relative performance, the New
America Growth Fund had a disappointing year in 1994. Against a market
backdrop where all the unmanaged market indices registered marginal gains or
losses, your Fund fell more sharply, for both the quarter and the full year.
In addition, while the average growth mutual fund declined more than the
overall market for both periods, the Fund fell more sharply as growth
companies in service businesses--the focus of your Fund's investment
charter--underperformed the market. However, on a longer-term basis, over
the past five years, your Fund has outperformed both the market indices and
the average growth mutual fund.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/94
3 Months 12 Months
----------------------
<S> <C> <C>
New America Growth Fund -3.7% -7.4%
S&P 500 0.0 1.3
Nasdaq Composite* -1.6 -3.2
Lipper Growth Fund
Average -1.3 -2.2
</TABLE>
- --------------------------------------------------------------------------------
*Principal only
CAPITAL GAIN DISTRIBUTIONS
On December 27, the Fund's Board of Trustees declared a $0.45 per-share
long-term capital gain and a $0.08 short-term gain payable to shareholders of
record on that date. You should have received your check or statement
reflecting the latest distributions, as well as Form 1099-DIV summarizing
this information for 1994 tax purposes.
MARKET ENVIRONMENT
On the domestic economic front, 1994 was a truly outstanding year. Economic
growth accelerated in late 1993 and 1994 and was surprisingly robust for an
economy four years into an economic expansion. Corporate earnings exceeded
even the most optimistic forecasts as the cyclical side of the economy
experienced near-boom conditions. Employment growth and job creation were also
extremely strong. And, most important, hardly any inflationary pressures
developed during the year.
Why did the stock market sputter? The main reason was the rise in
both short- and long-term interest rates. The Federal Reserve boosted the
key federal funds rate six times to try to rein in the economy's growth to a
more sustainable rate. Equity investors feared that the Fed's actions might
cause a downturn in the economy and in corporate profits. In addition,
higher interest rates by themselves led to a reduction in price/earnings
(P/E) multiples for stocks. Investment theory dictates that rising interest
rates cause P/E ratios to contract and vice versa.
Thus, earnings grew strongly for most companies, but, as rates rose,
investors reduced the multiple they were willing to pay for those earnings.
Only companies reporting truly explosive earnings growth, primarily cyclical
manufacturers, saw their stocks rise in 1994. Steady growth companies
reporting 15% to 25% earnings gains, the types of companies your Fund favors,
did not stand out.
PORTFOLIO REVIEW
Your Fund seeks high growth companies operating in noncyclical service
businesses. Over time, this investment approach has paid off for
shareholders, but not last year. Many of the sectors and industries the
Fund has historically favored lagged the market significantly in 1994.
Consumer stocks, a major focus, generally performed poorly. While consumer
durable sales were strong, the rest of the retailing sector and restaurant
sales fell short of expectations. Financial service companies were hurt by
rising interest rates in some cases and the poor performance of
<PAGE>
the financial markets themselves in others. Companies close to the business
cycle generally provided the best returns.
To cope with the difficult market environment, we made some
significant changes to the portfolio during the year, as shown below.
- --------------------------------------------------------------------------------
Sector Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/93 12/31/94
-------- --------
<S> <C> <C>
Financial Services 15% 12%
Consumer Services 49 41
Business Services 32 43
Reserves 4 4
---- ----
Total 100% 100%
</TABLE>
- --------------------------------------------------------------------------------
We reduced our exposure to both consumer and financial companies and
boosted holdings in business service companies. New holdings in the latter area
include CARDINAL HEALTH, a leading distributor of pharmaceuticals; PATTERSON
DENTAL, a major distributor of dental products and supplies; and CERIDIAN
CORPORATION, a company providing payroll processing and other information
services.
The Fund's best performers for the quarter were GENERAL NUTRITION, a
specialty retailer of vitamins and other health products; CELLSTAR, a
wholesaler of cellular phones and accessories; and DANKA BUSINESS SYSTEMS, a
leading servicer and distributor of photocopiers and other office equipment.
Poor performers included gaming company AUTOTOTE and restaurant operator
BRINKER INTERNATIONAL, both of whom announced earnings shortfalls.
For the full year, the Fund's two best performers were health care
companies: UNITED HEALTHCARE, a leading HMO, and CARDINAL HEALTH. The
remaining eight of the top 10 performers were business service companies.
Almost all of the worst performers were consumer or financial companies,
including PHILLIPS-VAN HEUSEN, AUTOTOTE, and PRESIDENT RIVERBOAT CASINOS.
Portfolio characteristics remain vibrant. We continue to search for
highly profitable, rapidly growing companies with excellent managements and
strong competitive positions. We favor companies that generate substantial
positive cash flows, have strong financial positions, and can finance their own
growth. We look for companies we can own for a number of years. Current
portfolio characteristics are shown below.
- --------------------------------------------------------------------------------
Portfolio Characteristics
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New America
Growth Fund S&P 500
---------------------
<S> <C> <C>
Earnings Growth Rate
Estimated Next 5 Years 21.4% 7.0%
Profitability-Return on
Equity Latest 12 Months 17.3 10.7
Dividend Yield on Stocks 0.6 2.9
P/E Ratio (Based on Next 12
Months Estimated Earnings) 15.8x 13.3x
</TABLE>
- --------------------------------------------------------------------------------
OUTLOOK
Entering 1995, the stock market is still going through a difficult transition
phase, and our near-term outlook is cautious. Economic growth remains very
strong but will inevitably slow as the year progresses. The Fed seems likely
to continue to push short-term interest rates higher in an effort to prevent
the economy from overheating and to prolong the current economic expansion.
Also, the Fed wants to nip in the bud any rise in inflationary pressures and
expectations.
The Fed's task is a tricky one: too little restraint might start a
new inflationary spiral and send long-term interest rates much higher;
applying the brakes too hard could end the expansion prematurely. Either
extreme would not be good for the stock market. Stock market valuations,
however, are much more reasonable than a year ago, as strong earnings gains
and little change in stock prices have brought P/E ratios down significantly.
We conclude that a modest gain in stock prices is likely, but by no means
assured.
We look for a better year for the New America Growth Fund in 1995.
Cyclicals, which did so well in 1994, may see their earnings peak and their
growth slow in the coming months.
2
<PAGE>
Our portfolio is much less economically sensitive, and the 20% or higher
earnings growth we expect from portfolio companies should attract investor
interest in a slower growth environment. Lastly, growth stocks, which have
tended to lag the market over the past several years, are likely to perform
better in 1995, particularly if the new Republican Congress succeeds in lowering
the capital gains tax rate.
We appreciate your continued support and confidence.
Respectfully submitted,
/s/ John H. Laporte
John H. Laporte
President and
Chairman of the Investment
Advisory Committee
/s/ Brian W.H. Berghuis
Brian W.H. Berghuis
Executive Vice President
January 18, 1995
- --------------------------------------------------------------------------------
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
December 31, 1994
<TABLE>
<CAPTION>
Percent of
Company Net Assets
- -------------------------------------------- ----------
<S> <C>
CUC International 4.6%
United HealthCare 2.8
Viacom 2.7
First Financial Management 2.6
Catalina Marketing 2.5
Alco Standard 2.4
Foundation Health 2.4
Sbarro 2.2
SunGard Data Systems 2.2
Paychex 2.1
Columbia/HCA Healthcare 2.0
Vodafone 2.0
Franklin Resources 1.9
MGIC Investment 1.9
Brinker International 1.8
Sanifill 1.8
ADVO 1.7
Cardinal Health 1.7
Wal-Mart 1.6
FIserv 1.6
Danka Business Systems 1.6
Nordstrom 1.6
Office Depot 1.6
State Street Boston 1.6
General Nutrition Companies 1.5
- ----------------------------------------------------------
Total 52.4%
==========================================================
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
Contributions to the Change in Net Asset Value Per Share
- --------------------------------------------------------------------------------
Three Months Ended December 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------
TEN BEST CONTRIBUTORS
- -----------------------------------------------------
<S> <C>
General Nutrition Companies 9c
CellStar 6
Cardinal Health 6
Danka Business Systems 6
Sanifill 5
OfficeMax* 5
First Financial Management 5
MGIC Investment 4
SunGard Data Systems 4
Charles Schwab 4
- -----------------------------------------------------
Total 54c
- -----------------------------------------------------
<CAPTION>
- -----------------------------------------------------
TEN WORST CONTRIBUTORS
- -----------------------------------------------------
<S> <C>
Autotote -18c
Brinker 15
United HealthCare 13
State Street Boston 11
Columbia/HCA Healthcare 10
Phillips-Van Heusen 9
Foundation Health 8
Turner Broadcasting Systems 7
Kohl's 6
Toys "R" Us 6
- -----------------------------------------------------
Total -103c
- -----------------------------------------------------
</TABLE>
Twelve Months Ended December 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------
TEN BEST CONTRIBUTORS
- -----------------------------------------------------
<S> <C>
United HealthCare 13c
Cardinal Health* 11
Catalina Marketing 9
Revco* 9
Viking Office Products 8
Alco Standard 7
Paychex 7
CellStar 7
MGIC Investment* 7
Sanifill 6
- -----------------------------------------------------
Total 84c
- -----------------------------------------------------
<CAPTION>
- -----------------------------------------------------
TEN WORST CONTRIBUTORS
- -----------------------------------------------------
<S> <C>
Phillips-Van Heusen -35c
Autotote 28
President Riverboat Casinos 23
Turner Broadcastng Systems 20
Viacom 14
SEI 14
Toys "R" Us 13
NovaCare* 13
State Street Boston 12
Duff & Phelps 12
- -----------------------------------------------------
Total -184c
- -----------------------------------------------------
</TABLE>
* Position added
4
<PAGE>
- --------------------------------------------------------------------------------
Fiscal-Year Performance Comparison
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Fund Name: New America Growth
Fiscal-Year Performance Comparison: A two-line chart comparing the growth in an
initial $10,000 investment in the Fund with the same investment in the S&P 500
Stock Index starting on 9/30/85 and ending on 12/31/94.
- --------------------------------------------------------------------------------
Fiscal-Year Performance
- --------------------------------------------------------------------------------
Periods Ended December 31, 1994
<TABLE>
<CAPTION>
Since
Inception
1 Year 5 Years* 9/30/85*
------ -------- ---------
<S> <C> <C>
-7.43% 11.17% 14.21%
</TABLE>
- --------------------------------------------------------------------------------
*Average Annual Compound Total Return
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
Investment Record
T. Rowe Price New America Growth Fund
- --------------------------------------------------------------------------------
The table below shows the investment record of one share of the T. Rowe Price
New America Growth Fund, purchased at the initial price of $10.00, for the
period 9/30/85 through 12/31/94. 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/2/ Dividends Distributions Dividends Investment Fund S&P 500
----- ------ ---------------- --------- -------------- --------- ---------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1985/1/ $11.85 -- -- -- -- $11.85 18.5% 17.2%
1986 13.14 $0.30 $0.10 $0.30 $0.10 13.55 14.4 18.7
1987 10.45 1.39 0.06 1.46 0.06 12.28 -9.4 5.3
1988 12.38 -- -- -- -- 14.55 18.5 16.5
1989 16.90 0.23 -- 0.27 -- 20.14 38.4 31.6
1990 14.66 -- 0.17 -- 0.20 17.67 -12.2 -3.1
1991 22.79 0.87 -- 1.05 -- 28.62 61.9 30.3
1992 24.86 0.18 -- 0.23 -- 31.45 9.9 7.6
1993 28.04 1.13 -- 1.43 -- 36.93 17.4 10.1
1994 25.42 0.53 -- 0.70 -- 34.19 -7.4 1.3
- --------------------------------------------------------------------------------------------------------------------------
Total $4.63 $0.33 $5.44 $0.36
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ From inception 9/30/85 to 12/31/85.
/2/ Includes short-term capital gains of $0.24 in 1987, $0.24 in 1993, and
$0.08 in 1994.
6
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets (Value in thousands)
T. Rowe Price New America Growth Fund / December 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Common Stocks -- 96.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL SERVICES -- 11.8%
- --------------------------------------------------------------------------------
Value
---------
<S> <C>
BANK & TRUST -- 2.4%
220,000 shs. BANC ONE............................ $ 5,582
350,000 State Street Boston................. 10,019
15,601
INSURANCE -- 2.1%
53,500 CMAC Investment..................... 1,545
375,000 MGIC Investment..................... 12,422
13,967
INVESTMENT SERVICES -- 4.5%
160,000 Alex. Brown......................... 4,860
200,000 Charles Schwab...................... 6,975
400,000 Duff & Phelps....................... 3,450
133,333 Duff & Phelps Credit Rating......... 1,316
350,000 Franklin Resources.................. 12,469
29,070
OTHER FINANCIAL SERVICES -- 2.8%
75,000 Fannie Mae.......................... 5,466
120,000 Freddie Mac......................... 6,060
333,333 Mercury Finance..................... 4,333
107,300 Money Store......................... 1,985
17,844
TOTAL FINANCIAL SERVICES 76,482
- --------------------------------------------------------------------------------
CONSUMER SERVICES -- 40.0%
- --------------------------------------------------------------------------------
RETAILING/GENERAL MERCHANDISERS -- 1.7%
500,000 Wal-Mart............................ 10,625
RETAILING/SPECIALTY RETAILERS -- 14.7%
254,000 *Cole National (Class A)............. 2,445
175,000 *Consolidated Stores................. 3,259
50,000 Dayton Hudson....................... 3,538
336,800 *General Nutrition................... 9,767
300,000 *Jones Apparel Group................. 7,725
175,000 *Kohl's.............................. 6,956
185,000 *Little Switzerland.................. 971
220,000 *Nautica Enterprises................. 6,655
192,500 *Neostar Retail Group................ 1,973
244,000 Nordstrom........................... 10,248
422,011 *Office Depot........................ 10,128
174,000 *OfficeMax........................... 4,611
228,400 Phillips-Van Heusen................. 3,483
350,000 *Revco............................... 8,269
141,300 *Staples............................. 3,497
75,800 Talbots............................. 2,369
300,000 *Toys "R" Us......................... 9,150
95,044
ENTERTAINMENT & LEISURE -- 7.3%
614,700 shs. *Autotote (Class A).................. $ 6,992
18,500 Hollywood Park...................... 203
285,400 *International Family
Entertainment (Class B)........... 3,603
150,000 *Mirage Resorts...................... 3,075
30,970 *National Gaming..................... 372
139,450 *President Riverboat Casinos......... 1,238
200,000 *Promus Companies.................... 6,200
130,000 *Savoy Pictures...................... 845
446,386 Turner Broadcasting Systems
(Class B)......................... 7,310
48,000 *Viacom (Class A).................... 1,998
363,690 *Viacom (Class B).................... 14,775
600,000 rts. *Viacom, 9/29/95..................... 675
47,286
MEDIA/COMMUNICATION SERVICES -- 4.9%
241,000 shs. *ALC Communications.................. 7,501
240,000 *CellStar............................ 5,430
300,000 *Mobile Telecommunication
Technologies....................... 5,850
375,000 Vodafone ADR........................ 12,610
31,391
RESTAURANTS/FOOD DISTRIBUTION -- 5.9%
110,000 *Boston Chicken...................... 1,911
650,000 *Brinker International............... 11,781
175,000 *Lone Star Steakhouse
& Saloon.......................... 3,500
300,000 *Outback Steakhouse.................. 7,050
542,250 Sbarro.............................. 14,099
38,341
PERSONAL SERVICES -- 5.5%
891,531 *CUC International................... 29,866
100,000 *Home Shopping Network............... 1,000
404,800 Sotheby's........................... 4,655
35,521
TOTAL CONSUMER SERVICES 258,208
- --------------------------------------------------------------------------------
BUSINESS SERVICES -- 42.9%
- --------------------------------------------------------------------------------
HEALTH CARE SERVICES -- 9.7%
350,000 Columbia/HCA Healthcare............. 12,775
500,000 *Foundation Health................... 15,500
121,600 *Genesis Health Ventures............. 3,846
100,043 *HEALTHSOUTH
Rehabilitation.................... 3,702
92,500 *NovaCare............................ 671
216,450 Owens & Minor....................... 3,084
72,500 *Quorum Health Group................. 1,377
118,500 *RightCHOICE Managed Care
(Class A)......................... 1,659
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price New America Growth Statement of Net Assets (Cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
53,500 shs. *Sierra Health Services.............. $ 1,692
400,000 United HealthCare................... 18,050
62,356
DISTRIBUTION SERVICES -- 6.8%
250,000 Alco Standard....................... 15,687
234,300 Cardinal Health..................... 10,866
475,000 Danka Business Systems ADR.......... 10,272
350,000 *Patterson Dental.................... 7,263
44,088
COMPUTER SERVICES -- 8.8%
256,000 *BISYS Group......................... 5,664
150,000 *Ceridian............................ 4,031
275,000 First Financial Management.......... 16,947
492,900 *FIserv.............................. 10,597
325,800 SEI................................. 5,620
363,000 *SunGard Data Systems................ 13,976
56,835
ENVIRONMENTAL SERVICES -- 1.8%
458,900 *Sanifill............................ 11,472
ENERGY SERVICES -- 3.6%
325,000 *BJ Services......................... 5,484
145,400 Camco International................. 2,744
240,000 *Enterra............................. 4,560
151,500 Schlumberger........................ 7,632
241,100 *Smith International................. 3,014
23,434
OTHER BUSINESS SERVICES -- 12.2%
650,000 ADVO................................ 11,212
155,000 *Career Horizons..................... 2,519
291,800 *Catalina Marketing.................. 16,231
125,000 *Corporate Express................... 2,437
100,000 *DIMAC............................... 1,263
309,700 *Hospitality Franchise............... 8,207
200,000 *Micro Warehouse..................... 7,000
337,500 Paychex............................. 13,669
215,000 *Payco American...................... 1,478
250,000 Pittston Services................... 6,625
274,900 *Viking Office Products.............. 8,419
79,060
TOTAL BUSINESS SERVICES 277,245
MISCELLANEOUS COMMON STOCKS -- 1.4% 9,134
TOTAL COMMON STOCKS (COST $502,990) 621,069
<CAPTION>
- --------------------------------------------------------------------------------
Short-Term Investments -- 4.2%
- --------------------------------------------------------------------------------
<S> <C>
COMMERCIAL PAPER -- 4.2%
$ 5,000,000 Abbey National North America,
5.50%, 2/2/95..................... $ 4,930
5,000,000 Compagnie Bancaire,
6.05%, 1/19/95.................... 4,975
6,624,000 Koch Industries 4(2),
6.25%, 1/3/95..................... 6,619
244,000 President & Fellows Harvard
College, 6.00%, 1/3/95............ 244
5,000,000 R.R. Donnelley 4(2), 6.00%,
1/17/95........................... 4,970
5,000,000 Wool International, 6.05%,
1/19/95........................... 4,970
TOTAL SHORT-TERM INVESTMENTS (COST $26,708) 26,708
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.3%
(COST $529,698) 647,777
- --------------------------------------------------------------------------------
Other Assets Less Liabilities.................................. (1,631)
NET ASSETS CONSISTING OF:
Accumulated realized gains/losses -
net of distributions..................... $ 734
Net unrealized gain........................ 118,079
Paid-in-capital applicable to
25,419,626 shares of no par value
capital stock outstanding; unlimited
number of shares authorized.............. 527,333
-------
NET ASSETS $646,146
========
NET ASSET VALUE PER SHARE $25.42
======
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing
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."
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price New America Growth Fund / Year Ended December 31, 1994
<TABLE>
<CAPTION>
(Amounts in thousands)
<S> <C>
INVESTMENT INCOME
Income
Dividends............................................. $ 4,070
Interest.............................................. 1,487
--------
Total income.......................................... 5,557
--------
Expenses
Investment management................................. 4,395
Shareholder servicing................................. 2,341
Custody and accounting................................ 155
Prospectus and shareholder reports.................... 126
Registrations......................................... 100
Proxy and annual meeting.............................. 55
Legal and auditing.................................... 32
Trustees.............................................. 19
Miscellaneous......................................... 15
--------
Total expenses........................................ 7,238
--------
Net investment loss..................................... (1,681)
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on securities......................... 13,346
Change in net unrealized gain or loss on securities..... (61,025)
--------
Net realized and unrealized loss........................ (47,679)
--------
DECREASE IN NET ASSETS FROM OPERATIONS $(49,360)
========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price New America Growth Fund
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1994 1993
--------- ---------
(Amounts in thousands)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment loss....................................... $ (1,681) $ (2,063)
Net realized gain......................................... 13,346 27,571
Change in net unrealized gain or loss..................... (61,025) 61,725
--------- ---------
Increase (decrease) in net assets from operations......... (49,360) 87,233
--------- ---------
Distributions to shareholders
Net realized gain ........................................ (13,216) (23,859)
--------- ---------
Capital share transactions/1/
Shares sold............................................... 232,076 223,466
Distributions reinvested.................................. 12,762 23,019
Shares redeemed........................................... (155,234) (170,970)
--------- ---------
Increase in net assets from capital share transactions.... 89,604 75,515
--------- ---------
Increase in net assets ..................................... 27,028 138,889
NET ASSETS
Beginning of year........................................... 619,118 480,229
--------- ---------
End of year................................................. $ 649,146 $ 619,118
========= =========
- --------------------------------------------------------------------------------------------
/1/Capital share transactions (number of shares)
Shares sold............................................... 8,663 8,619
Distributions reinvested.................................. 508 839
Shares redeemed........................................... (5,834) (6,689)
--------- ---------
Increase in capital shares outstanding.................... 3,337 2,769
========= =========
- --------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price New America Growth Fund / December 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price New America Growth Fund (the Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange (including Nasdaq) 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. Other equity securities and those
listed securities that are not traded on a particular day are valued at a
price within the limits of the latest bid and asked prices deemed by the
Board of Trustees, or by persons delegated by the Board, best to reflect fair
value.
10
<PAGE>
Short-term debt securities are valued at their cost which, when
combined with accrued interest, approximates fair value.
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 Trustees.
B) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions
to shareholders are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $262,397,000 and $187,876,000 respectively,
for the year ended December 31, 1994.
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.
In order for the Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $1,681,000
of undistributed net investment loss was reclassified as an $898,000 decrease
to undistributed net realized gains and a $783,000 decrease to paid-in-
capital during the year ended December 31, 1994. The results of operations and
net assets were not affected by the reclassifications.
At December 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $529,698,000 and net
unrealized gain aggregated $118,079,000, of which $153,322,000 related to
appreciated investments and $35,243,000 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 $368,000 was payable at December 31, 1994. The fee is computed
daily and paid monthly, and consists of an Individual Fund Fee equal to 0.35%
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, 1994, 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. The Fund
incurred expenses pursuant to these related party agreements totaling
approximately $2,084,000 for the year ended December 31, 1994, of which
$235,000 was payable at year-end.
11
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price New America Growth Fund
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For a share outstanding throughout each
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Year Ended December 31,
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1994 1993 1992 1991 1990
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<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR........... $28.04 $24.86 $22.79 $14.66 $16.90
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Investment Activities
Net investment income (loss)............. (0.07) (0.08) (0.04) (0.02) 0.13*
Net realized and unrealized gain (loss).. (2.02) 4.39 2.29 9.02 (2.20)
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Total from Investment Activities............. (2.09) 4.31 2.25 9.00 (2.07)
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Distributions
Net investment income.................... -- -- -- -- (0.17)
Net realized gain........................ (0.53) (1.13) (0.18) (0.87) --
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Total Distributions.......................... (0.53) (1.13) (0.18) (0.87) (0.17)
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NET ASSET VALUE, END OF YEAR................. $25.42 $28.04 $24.86 $22.79 $14.66
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RATIOS/SUPPLEMENTAL DATA
Total Return................................. (7.4)% 17.4% 9.9% 61.9% (12.2)%*
Ratio of Expenses to Average Net Assets...... 1.14% 1.23% 1.25% 1.25% 1.25%*
Ratio of Net Investment Income to
Average Net Assets....................... (0.27)% (0.39)% (0.44)% (0.12)% 0.81%*
Portfolio Turnover Rate...................... 31.0% 43.7% 26.4% 42.3% 41.7%
Net Assets, End of Year (in thousands)....... $646,146 $619,118 $480,229 $231,729 $95,697
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</TABLE>
* Excludes expenses in excess of a 1.25% voluntary expense limitation in
effect through December 31, 1993.
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Report of Independent Accountants
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To the Board of Trustees and Shareholders
of T. Rowe Price New America Growth Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the selected per
share data and information (which appears under the heading "Financial
Highlights") present fairly, in all material respects, the financial position
of the T. Rowe Price New America Growth Fund at December 31, 1994, and the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the selected
per share data and information for each of the five years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements and selected per share data and information (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, 1994 by
correspondence with custodians and brokers and, where appropriate, the
application of alternative auditing procedures for unsettled security
transactions, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 19, 1995
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T. Rowe Price No-Load Mutual Funds
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STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured
Intermediate Tax-Free
Maryland Short-Term Tax-Free Bond
Summit Municipal Intermediate
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price Fund. We'll send you a
prospectus with more complete information, including management fees and
other expenses. Read it carefully before you invest or send money.
14
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Shareholder Services
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To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information and services--at no extra cost.
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE--Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
IN PERSON--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access/(R)/ (1-800-638-2587) provides information such as
account balance, date and amount of your last transaction, latest dividend
payment, and fund prices and yields. Additionally, you have the ability to
request prospectuses, statements, account and tax forms; reorder checks; and
initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access/(R)/ provides the same information as Tele*Access, but on a
personal computer via dial-up modem. ACCOUNT SERVICES
Checking--Write checks for $500 or more on any money market and bond
fund accounts (except the High Yield and Emerging Markets Bond Funds).
Automatic Investing--Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal--If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options--Reinvest all or some of
your distributions, or take them in cash. We give you maximum flexibility and
convenience.
INVESTMENT INFORMATION
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides
total portfolio value, and lists your investments by type--stock, bond, and
money market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports--Portfolio managers review the
performance of the funds in plain language and discuss T. Rowe Price's
economic outlook.
The T. Rowe Price Report--A quarterly newsletter with relevant
articles on market trends, personal financial planning, and
T. Rowe Price's economic perspective.
Insights--A library of information that includes reports on mutual
fund tax issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix
Worksheet, College Planning Kit, Retirees Financial Guide, Retirement
Planning Kit (also available on disk for PC use), and Guide to Risk-Adjusted
Performance can help you determine and reach your investment goals.
DISCOUNT BROKERAGE
You can trade stocks, bonds, options, precious metals, and other securities
at a substantial savings over regular commission rates. Call a shareholder
service representative for more
information.
15
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ANNUAL REPORT
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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 New
America Growth Fund/(R)/.
T. ROWE PRICE
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NEW AMERICA GROWTH FUND
DECEMBER 31, 1994
T. ROWE PRICE
Invest With Confidence/(R)/
NAG
