<PAGE>
Annual Report
NEW AMERICA
GROWTH
FUND
-----------------
DECEMBER 31, 1997
-----------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
New America Growth Fund
. The large-cap S&P 500 Stock Index returned 33.36% for the year, marking an
unprecedented third straight year of gains over 20%.
. The strongest gains were in large, dividend-paying stocks, whereas the fund
focuses on growth stocks, including small- and mid-cap issues, that
typically do not pay dividends.
. The fund's 6- and 12-month returns of 11.56% and 21.10%, respectively,
surpassed the S&P 500 and its Lipper peer group for the six months but not
for the year.
. Holdings in the financial and media/telecommunications areas were among our
best performers, while some computer services, restaurant, and health care
holdings did poorly.
. Our portfolio of high-growth domestic service companies has limited exposure
to weakness in Asia, and we believe investors will be increasingly attracted
to these stocks.
<PAGE>
FELLOW SHAREHOLDERS
The bull market continued to roar ahead in the second half of 1997 despite a
short but severe correction in October, triggered by serious financial and
economic problems sweeping throughout Asia. The market recovered strongly by
year-end, however, finishing 1997 with a full-year gain of 33.36%. This marked
three consecutive years of annual gains in excess of 20% -- a first in this
century. The market's compound average annual returns over the past 5- and
10-year periods of 20.3% and 18.1%, respectively, are also the highest such
returns in this century.
- ----------------------
PERFORMANCE COMPARISON
- ------------------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
- ------------------------------------------------------
New America Growth Fund 11.56% 21.10%
......................................................
S&P 500 Index 10.58 33.36
......................................................
Lipper Growth Funds Average 9.19 25.30
......................................................
The largest capitalization blue chip companies were the market leaders while
smaller and mid-sized companies showed lesser returns. Against this backdrop,
the New America Growth Fund returned 11.56% and 21.10%, respectively, for the 6-
and 12-month periods, outperforming the S&P 500 and the average growth fund for
the latest six months, but underperforming both for the full year due to a weak
first half. The fund's longer-term performance over the 10 years ended December
31, 1997, against the S&P 500 and the average growth fund is shown on page 9,
together with average annual total returns. Over this period, the fund ranked in
the top 10% among 763 equity mutual funds, according to Lipper Analytical
Services,* and its cumulative return of 484% surpassed the S&P's 426% gain.
YEAR-END DISTRIBUTIONS
The fund's Board of Trustees declared a capital gain distribution of $2.20 per
share, consisting of a short-term gain of $0.05 and a long-term gain of $2.15.
The distribution was paid on December 30 to
* For the one- and five-year periods ended 12/31/97, the fund's returns ranked
2,341 of 4,883 funds and 461 of 1,562 funds, respectively.
1
<PAGE>
shareholders of record December 26. In early January, we mailed your statement
reflecting this distribution, and Form 1099-DIV reporting this payment for tax
purposes was mailed separately later in January.
MARKET ENVIRONMENT
Investors benefited from an ideal combination of economic and financial
conditions in 1997. The domestic economy experienced another year of strong
growth, making 1997 the seventh consecutive year of expansion -- a near-record.
Corporate profits showed another strong gain. Earnings for S&P 500 companies
have now grown well over 150% from their 1991 low in the aftermath of the last
recession, and have been a leading contributor to the bull market of the 1990s.
- ----------------------
SECTOR DIVERSIFICATION
- -------------------------------------------------------
12/31/96 6/30/97 12/31/97
- -------------------------------------------------------
Financial Services 20% 20% 19%
.......................................................
Consumer Services 32 32 43
.......................................................
Business Services 44 41 33
.......................................................
Reserves 4 7 5
- -------------------------------------------------------
Total 100% 100% 100%
The political backdrop in Washington also proved to be positive for Wall Street
in 1997. Partly due to the bipartisan balanced budget agreement but primarily to
strong tax receipts from the booming economy, the federal budget deficit in 1997
was sharply lower than forecast, and there is a strong possibility that the U.S.
might have its first budget surplus since 1969 in the current fiscal year. Also,
Congress and the President passed a bill reducing the tax rate on certain long-
term capital gains for the first time since 1981.
Despite the continued strength in the domestic economy, there are virtually no
signs of a pickup in inflation. In fact, the consumer price index rose just 1.7%
in 1997, its lowest annual rate of increase since 1986. In response to the
benign inflation environment, interest rates on long-term government bonds fell
close to a full percentage point in 1997, ending the year below 6%. In early
January, yields on 30-year Treasury bonds fell to 5.70%, the lowest such rate
since the bonds were introduced in 1977.
2
<PAGE>
The only negative overhanging the stock market was the spreading economic and
financial crisis in Asia during the second half. As investors in the U.S. woke
up to the possibility that Asia's economic problems could hurt growth in the
U.S. in 1998, the stock market experienced a sharp but short 10% correction
during the fourth quarter. The market recovered at year-end, but concern over
the fallout from Asia's problems is the primary uncertainty for investors
entering 1998.
The stock market's advance in 1997 was concentrated in an increasingly narrow
group of large-cap blue chip companies. Small-and mid-size-company stocks lagged
the S&P 500 by a wide margin. Even within the S&P 500, the average stock gained
less than 25%, with just 10% of the stocks in the S&P 500 accounting for over
half the gain for the year.
Growth stocks turned in a mixed performance but generally underperformed for the
year. Cyclicals led in the first half due to the strong economy, and financial
stocks in the second half due to declining interest rates. Your fund's program
focuses on noncyclical growth companies in domestic service businesses and
emphasizes many faster-growing, mid-size companies. These stocks trailed the
market in the first half but performed better in the second half as investors
began to worry more about the growth prospects of cyclicals and the foreign
exposure of multinationals. Your fund has a relatively small exposure to
companies operating outside the U.S.
PORTFOLIO REVIEW
The leading contributor to fund performance in both the second half of 1997 and
the full year was Cendant, our largest holding at year-end. Cendant is a new
name but is really an old friend. It was formed by the December 1997 merger
between CUC International and HFS, both long-time top holdings of the fund. CUC,
which we first purchased in 1990, is a consumer membership services company
providing its millions of customers discounts on purchases of electronics,
autos, travel, dining, and many other consumer items. HFS, which we purchased
when it went public in 1993, is a franchiser of lodging (Howard Johnson, Ramada,
Days Inn, and others), real estate brokerage (Century 21 and Coldwell Banker),
and rental cars (Avis). The result is a powerful marketing company with
outstanding growth prospects.
3
<PAGE>
Financial stocks, an area we boosted sharply in 1996, were among the fund's top
performers in both the second half and full year, benefiting from the unusual
combination of a robust economy and lower interest rates. With only a few
exceptions, our financial services stocks were extremely strong, including MGIC
Investment and ACE Limited in the insurance sector, Norwest in banking, and
Franklin Resources in the mutual fund area.
Another rewarding area was media and communications, where cable TV operator
Comcast, cellular telephone provider AirTouch Communications, and outdoor
advertising sign owner Outdoor Systems were all strong contributors. Also,
several retailers such as General Nutrition and Costco Companies provided well
above-average returns to the fund.
Not all areas were winners, however. In the second half, in the computer
services area, leading credit card processor First Data and bank and financial
services processor BISYS Group declined due to earnings shortfalls. Health care
was another difficult area. Vencor, a specialty hospital/nursing home operator,
declined sharply in the second half after disclosing an unexpected slowdown in
its growth. PhyCor came under pressure after entering into a merger agreement
(abandoned after year-end) with another physician practice management company
that investors viewed skeptically. Restaurant company Boston Chicken was the
worst contributor for the year due to operational and financial concerns. We
sold our position during the third quarter, avoiding substantial additional
losses over the remainder of the year.
We made several significant changes in our sector weightings in the second half
as noted in the accompanying table. We boosted our consumer services position
considerably, primarily adding to our media and communications services
holdings. New portfolio additions included WorldCom and MCI in
telecommunications services, Paging Network in the paging area, and Sinclair
Broadcast Group in the TV station ownership business. To make room for these new
holdings, we pared back our business services holdings in the health care,
energy service, and distribution areas.
4
<PAGE>
Portfolio characteristics remain vibrant. We continue to expect our companies to
show an average of 20% annual earnings growth over the next five years, more
than 50% faster than the growth expected for the S&P 500. Our companies
generally pay very limited dividends in order to be able to maintain their
above-average growth rates; the recent capital gains tax rate reduction makes
this policy potentially more tax-efficient for shareholders than receiving
dividend income. The fund's average P/E ratio remains at a modest premium to the
S&P 500 P/E despite the substantially higher growth prospects of our portfolio.
- -------------------------
PORTFOLIO CHARACTERISTICS
- -------------------------------------------------------
New America
As of 12/31/97 Growth Fund S&P 500
- -------------------------------------------------------
Earnings Growth Rate
Estimated Next 5 Years* 20.0% 13.0%
.......................................................
Profitability - Return on
Equity Latest 12 Months 19.2 21.6
.......................................................
Dividend Yield on Stocks 0.3 1.6
.......................................................
P/E Ratio (Based on Next 12
Months' Estimated Earnings) 20.8X 19.1X
.......................................................
* Earnings forecasts are based on T. Rowe Price research and are in no way
indicative of future investment returns.
OUTLOOK
On the surface, economic and financial conditions entering 1998 remain strong.
Economic growth and corporate profits are healthy, and inflation rates and bond
yields are at record lows. Valuation levels, while high by historical standards,
are quite justifiable given the low rate of inflation and the current level of
interest rates. The number one concern for investors entering the new year is
fallout from Asia. Already, the Asian turmoil has led to increased market
volatility and a decline in the stock market in early January. The recent
decoupling of the U.S. stock and bond markets -- stocks declining while bond
prices rise -- suggests that investors are worried that the Asia situation will
lead to a downturn in corporate profits here and a serious risk of deflation.
While the indirect effects of the Asian downturn on the U.S. corporate sector
will become clearer in coming months, we believe the New America Growth
portfolio is more protected than the market as a whole. The fund owns no
manufacturers and, therefore, has limited exposure to a drop in foreign demand
for U.S. goods or to an increase in foreign competition stemming from weak Asian
currencies. Our
5
<PAGE>
portfolio of high-growth, domestic service businesses in areas such as financial
services, retailing, media and entertainment, health care, and computer services
has a very minor foreign component to sales and earnings. In a more uncertain
economic environment, we believe investors will be attracted to these more
assured, above-average growth businesses. Portfolio valuations are not out of
line, and we are optimistic that the fund will continue to deliver attractive
long-term returns to shareholders over time.
Respectfully submitted,
/s/ John H. Laporte
John H. Laporte
President
/s/ Brian W. H. Berghuis
Brian W. H. Berghuis
Executive Vice President
January 26, 1998
6
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- -------------------------------------------------------------------
Cendant 5.6%
...................................................................
Franklin Resources 3.2
...................................................................
Service Corp. International 2.6
...................................................................
Comcast 2.6
...................................................................
UNUM 2.3
- -------------------------------------------------------------------
USA Waste Services 2.2
...................................................................
AirTouch Communications 2.2
...................................................................
Cardinal Health 2.1
...................................................................
ACE Limited 2.0
...................................................................
Freddie Mac 2.0
- -------------------------------------------------------------------
General Nutrition 1.9
...................................................................
Quorum Health Group 1.9
...................................................................
Norwest 1.9
...................................................................
Carnival 1.8
...................................................................
Costco Companies 1.8
- -------------------------------------------------------------------
Interim Services 1.8
...................................................................
First Data 1.7
...................................................................
La Quinta Inns 1.6
...................................................................
Outback Steakhouse 1.6
...................................................................
Catalina Marketing 1.6
- -------------------------------------------------------------------
Disney 1.5
...................................................................
Circuit City Stores 1.5
...................................................................
SunGard Data Systems 1.5
...................................................................
Outdoor Systems 1.5
...................................................................
MGIC Investment 1.5
- -------------------------------------------------------------------
Total 51.9%
7
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
<TABLE>
<CAPTION>
6 Months Ended 12/31/97
Ten Best Contributors Ten Worst Contributors
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cendant 78(cents) First Data -39(cents)
.......................................... .........................................
Comcast 39 Vencor 37
.......................................... .........................................
AirTouch Communications 32 Cole National 30
.......................................... .........................................
ACE Limited 30 BISYS Group 14
.......................................... .........................................
Franklin Resources 27 Green Tree Financial ** 12
.......................................... .........................................
UNUM 25 La Quinta Inns 10
.......................................... .........................................
Cardinal Health 24 Fairfax Financial * 10
.......................................... .........................................
Outdoor Systems 24 PETsMART ** 9
.......................................... .........................................
Norwest 24 PhyCor 9
.......................................... .........................................
Costco Companies 23 Extended Stay America 8
- ------------------------------------------ -----------------------------------------
Total 326(cents) Total -178(cents)
<CAPTION>
12 Months Ended 12/31/97
Ten Best Contributors Ten Worst Contributors
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cendant 87(cents) Boston Chicken ** -48(cents)
.......................................... .........................................
Franklin Resources 77 Mercury Finance ** 42
.......................................... .........................................
General Nutrition 64 Employee Solutions * 30
.......................................... .........................................
Comcast 50 Scholastic 29
.......................................... .........................................
ACE Limited 49 Paging Network * 27
.......................................... .........................................
Costco Companies 43 Corporate Express 26
.......................................... .........................................
Norwest 39 Republic Industries 18
.......................................... .........................................
AirTouch Communications 38 First Data 18
.......................................... .........................................
UNUM 36 Ikon Office Solutions 18
.......................................... .........................................
ADT ** 35 Green Tree Financial ** 17
- ------------------------------------------ -----------------------------------------
Total 518(cents) Total -273(cents)
</TABLE>
* Position added
** Position eliminated
8
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH 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.
NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
S&P 500 Lipper Growth New America
Date Index Funds Average Growth Fund
---- ----- ------------- -----------
12/31/87 10000 10000 10000
Dec-88 11661 11493 11847
Dec-89 15356 14669 16398
Dec-90 14879 14012 14390
Dec-91 19412 19360 23305
Dec-92 20891 20922 25610
Dec-93 22997 23453 30076
Dec-94 23301 22993 27841
Dec-95 32056 30375 40178
Dec-96 39417 36283 48218
Dec-97 52568 45618 58390
- ------------------------------------
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 12/31/97 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
New America Growth Fund 21.10% 28.00% 17.92% 19.30%
................................................................................
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
NET ASSET VALUE
<S> <C> <C> <C> <C> <C>
Beginning of period $ 38.37 $ 34.91 $ 25.42 $ 28.04 $ 24.86
.............................................................
Investment activities
Net investment income (0.13) (0.13) (0.12) (0.07) (0.08)
Net realized and
unrealized gain (loss) 8.15 7.08 11.36 (2.02) 4.39
.............................................................
Total from
investment activities 8.02 6.95 11.24 (2.09) 4.31
.............................................................
Distributions
Net realized gain (2.20) (3.49) (1.75) (0.53) (1.13)
.............................................................
NET ASSET VALUE
End of period $ 44.19 $ 38.37 $ 34.91 $ 25.42 $ 28.04
-------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
<S> <C> <C> <C> <C> <C>
Total return 21.10% 20.01% 44.31% (7.43)% 17.44%
......................................................................................
Ratio of expenses to
average net assets 0.96% 1.01% 1.07% 1.14% 1.23%
......................................................................................
Ratio of net investment
income to average
net assets (0.34)% (0.39)% (0.46)% (0.27)% (0.39)%
......................................................................................
Portfolio turnover rate 43.2% 36.7% 56.2% 31.0% 43.7%
......................................................................................
Average commission
rate paid $ 0.0457 $ 0.0545 - - -
......................................................................................
Net assets, end of period
(in millions) $ 1,758 $ 1,440 $ 1,028 $ 646 $ 619
......................................................................................
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------
STATEMENT OF NET ASSETS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
COMMON STOCKS 94.5%
FINANCIAL SERVICES 18.0%
Bank and Trust 1.9%
Norwest 850,000 $ 32,831
................................................................................
32,831
...........
Insurance 6.8%
ACE Limited 362,500 34,981
................................................................................
MGIC Investment 400,000 26,600
................................................................................
UICI * 519,500 18,215
................................................................................
UNUM 750,000 40,782
................................................................................
120,578
...........
Investment Services 3.2%
Franklin Resources 650,000 56,509
................................................................................
56,509
...........
Other Financial Services 6.1%
Fairfax Financial (CAD) * 68,800 15,406
................................................................................
Fannie Mae 400,000 22,825
................................................................................
Freddie Mac 825,000 34,599
................................................................................
Household International 200,000 25,513
................................................................................
Money Store 386,400 8,114
................................................................................
The CIT Group (Class A) * 18,700 590
................................................................................
107,047
...........
Total Financial Services 316,965
...........
CONSUMER SERVICES 43.0%
Retailing/General Merchandisers 4.1%
Costco Companies * 700,000 31,216
................................................................................
Kohl's * 225,000 15,328
................................................................................
Safeway * 400,000 25,300
................................................................................
71,844
...........
Retailing/Specialty Merchandisers 9.2%
AutoZone * 900,000 26,100
................................................................................
Circuit City Stores 760,800 27,056
................................................................................
Cole National (Class A) * + 800,000 23,950
................................................................................
General Nutrition * 1,000,000 33,938
................................................................................
Home Depot 450,000 26,494
................................................................................
Republic Industries * 513,000 11,959
................................................................................
</TABLE>
11
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Republic Industries * ++ 224,000 $ 5,222
...............................................................................
Tommy Hilfiger * 180,900 6,354
...............................................................................
161,073
...........
Entertainment and Leisure 7.7%
Carnival ADR (Class A) 575,000 31,840
...............................................................................
Disney 275,000 27,242
...............................................................................
Extended Stay America * 630,000 7,836
...............................................................................
Extended Stay America * ++ 670,000 8,333
...............................................................................
Hilton 523,800 15,583
...............................................................................
La Quinta Inns 1,500,000 28,969
...............................................................................
Mirage Resorts * 588,600 13,391
...............................................................................
Vail Resorts * 89,400 2,319
...............................................................................
135,513
...........
Media/Communication Services 12.1%
AirTouch Communications * 925,000 38,445
...............................................................................
CBS 125,500 3,694
...............................................................................
Comcast (Class A Special) 1,450,000 45,720
...............................................................................
MCI 276,700 11,855
...............................................................................
Outdoor Systems * 700,000 26,863
...............................................................................
Paging Network * 1,250,000 13,477
...............................................................................
Sinclair Broadcast Group (Class A) 475,000 21,998
...............................................................................
Telecomm-Liberty Media (Series A) * 500,000 18,172
...............................................................................
Tribune 337,500 21,009
...............................................................................
WorldCom 400,000 12,113
...............................................................................
213,346
...........
Restaurants/Food Distribution 1.7%
Outback Steakhouse * 1,000,000 28,937
...............................................................................
28,937
...........
Personal Services 8.2%
Cendant * 2,865,503 98,501
...............................................................................
Service Corp. International 1,250,000 46,172
...............................................................................
144,673
...........
Total Consumer Services 755,386
...........
BUSINESS SERVICES 32.9%
Health Care Services 3.8%
Coram Healthcare, Warrants, 7/11/99 * 11,363 0
...............................................................................
PhyCor * 725,000 19,598
...............................................................................
</TABLE>
12
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- -------------------------------------------------------------------
In thousands
Quorum Health Group * 1,275,000 $ 33,469
...................................................................
Vencor * 527,400 12,888
...................................................................
65,955
............
Distribution Services 4.3%
Cardinal Health 500,000 37,562
...................................................................
Corporate Express * 1,870,300 24,139
...................................................................
Ikon Office Solutions 500,000 14,062
...................................................................
75,763
............
Computer Services 8.0%
Acxiom * 1,100,000 21,038
...................................................................
Affiliated Computer Services (Class A) * 750,000 19,734
...................................................................
BISYS Group * 700,000 23,362
...................................................................
First Data 1,000,000 29,250
...................................................................
Galileo International 740,000 20,443
...................................................................
SunGard Data Systems * 870,000 26,970
...................................................................
140,797
............
Environmental Services 2.2%
USA Waste Services * 1,000,000 39,250
...................................................................
39,250
............
Other Business Services 9.4%
AccuStaff * 900,000 20,700
...................................................................
ADVO * 775,000 15,113
...................................................................
Catalina Marketing * 592,500 27,403
...................................................................
COREStaff * 930,000 24,761
...................................................................
Employee Solutions * 359,800 1,574
...................................................................
Interim Services * 1,200,000 31,050
...................................................................
Paychex 453,500 23,043
...................................................................
Viking Office Products * 1,000,000 21,969
...................................................................
165,613
............
Energy Services 5.2%
BJ Services * 175,000 12,589
...................................................................
Camco International 300,000 19,106
...................................................................
Schlumberger 200,000 16,100
...................................................................
Smith International * 350,000 21,482
...................................................................
Western Atlas 300,000 22,200
...................................................................
91,477
............
Total Business Services 578,855
............
Miscellaneous Common Stocks 0.6% 10,426
............
Total Common Stocks & Warrants (Cost $1,025,883) 1,661,632
............
13
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------
In thousands
SHORT-TERM INVESTMENTS 5.1%
Money Market Funds 5.1%
Reserve Investment Fund, 5.84% # $ 89,145,785 $ 89,146
..........................................................................
Total Short-Term Investments (Cost $89,146) 89,146
.................
Total Investments in Securities
99.6% of Net Assets (Cost $1,115,029) 1,750,778
Other Assets Less Liabilities 7,107
.................
NET ASSETS $1,757,885
-----------------
Net Assets Consist of:
Accumulated net realized gain/loss - net of
distributions $ 47,833
Net unrealized gain (loss) 635,749
Paid-in-capital applicable to 39,776,467 shares
of no par value capital stock outstanding; unlimited
number of shares authorized 1,074,303
.................
NET ASSETS $1,757,885
-----------------
NET ASSET VALUE PER SHARE $ 44.19
-----------------
+ Affiliated company
* Non-income producing
++ Securities contain some restrictions as to public resale--total of such
securities at year-end amounts to 0.77% of net assets.
# Seven-day yield
ADR Amrican Depository Receipt
CAD Canadian dollar
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
- -----------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
Investment Income
Income
Dividend $ 5,228
Interest 4,475
.............
Total income 9,703
.............
Expenses
Investment management 10,541
Shareholder servicing 3,965
Prospectus and shareholder reports 181
Custody and accounting 126
Registration 86
Legal and audit 14
Trustees 13
Miscellaneous 20
.............
Total expenses 14,946
.............
Net investment income (5,243)
.............
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 101,929
Foreign currency transactions (105)
.............
Net realized gain (loss) 101,824
.............
Change in net unrealized gain or loss on securities 204,800
.............
Net realized and unrealized gain (loss) 306,624
.............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 301,381
-------------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
T. ROWE PRICE NEW AMERICA GROWTH FUND
- --------------------------------------------------------------------------------
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ (5,243) $ (4,941)
Net realized gain (loss) 101,824 148,351
Change in net unrealized gain or loss 204,800 76,091
.........................
Increase (decrease) in net assets from
operations 301,381 219,501
.........................
Distributions to shareholders
Net realized gain (83,203) (120,154)
.........................
Capital share transactions*
Shares sold 407,110 536,293
Distributions reinvested 81,127 117,263
Shares redeemed (388,719) (340,924)
.........................
Increase (decrease) in net assets
from capital share transactions 99,518 312,632
.........................
Net Assets
Increase (decrease) during period 317,696 411,979
Beginning of period 1,440,189 1,028,210
.........................
End of period $1,757,885 $1,440,189
-------------------------
*Share information
Shares sold 9,833 13,831
Distributions reinvested 1,898 3,087
Shares redeemed (9,494) (8,836)
.........................
Increase (decrease) in shares
outstanding 2,237 8,082
The accompanying notes are an integral part of these financial statements.
16
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T. ROWE PRICE NEW AMERICA GROWTH FUND
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December 31, 1997
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 and commenced operations on September 30, 1985.
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.
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.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the
outstanding voting securities.
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
17
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T. ROWE PRICE NEW AMERICA GROWTH FUND
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changes in foreign exchange rates on realized and unrealized security gains
and losses is reflected as a component of such gains and losses.
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 $638,692,000 and $664,471,000, respectively, for the
year ended December 31, 1997.
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, the following
reclassifications were made during the year ended December 31, 1997. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 5,243,000
Undistributed net realized gain 105,000
Paid-in-capital (5,348,000)
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,115,029,000, and net unrealized
gain aggregated $635,749,000, of which $667,663,000 related to appreciated
investments and $31,912,000 to depreciated investments.
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T. ROWE PRICE NEW AMERICA GROWTH FUND
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NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $982,000 was payable at December 31, 1997. 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 0.30% for
assets in excess of $80 billion. The effective annual group fee rate was
0.32% at December 31, 1997, and 0.33% for the year then ended. 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 $3,434,000 for the year ended December 31, 1997, of which
$319,000 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 year ended
December 31, 1997, totaled $1,557,000 and are reflected as interest income
in the accompanying Statement of Operations.
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T. ROWE PRICE NEW AMERICA GROWTH FUND
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- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
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 financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price New America Growth Fund (the "Fund") at December 31, 1997,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1997 by correspondence
with custodians 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 21, 1998
20
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T. ROWE PRICE NEW AMERICA GROWTH FUND
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- -----------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
. $1,825,000 from short-term capital gains, and
. $81,378,000 from long-term capital gains; of which $36,301,000 was subject
to the 20% rate gains category.
For corporate shareholders, 100% of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
- --------------------------------------------------------------------------------
21
<PAGE>
For yield, price, last transaction, current balance, or to conduct transactions,
24 hours, 7 days a week, call Tele*Access(R): 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 New America
Growth Fund(R).
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
[LOGO OF T.ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor.
