<PAGE>
--------------------------------------------------------------------------------
Fellow Shareholders
--------------------------------------------------------------------------------
Buoyed by sharply falling interest rates and rising corporate earnings, stocks
skyrocketed again in the second quarter, with all the major market indices
finishing at record levels. The market was led by highflying technology stocks.
Large- and small-company stocks posted similar gains in the quarter, but small-
company stocks trailed their larger brethren for the first half of the year.
The New Horizons Fund enjoyed another strong quarter, with our technology
holdings -- nearly a quarter of the portfolio -- leading the way. Your fund beat
the unmanaged Standard & Poor's 500 Stock Index and substantially outperformed
the average small-company mutual fund in both the quarter and the first half. In
fact, its 24.1% return through June 30 was its best first half showing since
1983.
--------------------------------------------------------------------------------
Performance Comparison
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 6/30/95
3 Months 6 Months
---------------------
<S> <C> <C>
New Horizons Fund 13.0% 24.1%
Lipper Small Company
Fund Index 9.3 15.4
Nasdaq Composite* 14.2 24.1
S&P 500 9.6 20.2
--------------------------------------------------------------------------------
</TABLE>
*Principal only
MARKET ENVIRONMENT
Paradoxically, the stock market often seems to move in the opposite direction of
the economy. For instance, stock prices showed virtually no change in 1994 when
economic growth accelerated and corporate earnings surpassed expectations. This
pattern reversed in the first half of 1995, when the stock market soared while
economic growth cooled. Why the anomaly? Stock prices tend to foretell the
direction of the economy. In 1994, we believe low stock prices reflected
investors' fears that the surging economy would run out of steam, as the Federal
Reserve applied the brakes with its series of hikes in key interest rates. This
year's rising stock prices appear to reflect investors' confidence that the Fed
has engineered the much-desired soft landing -- sustainable economic growth with
stable inflation. When the central bank cut the federal funds rate by one-
quarter percentage point in early July, its first reduction in three years, the
economy appeared even more likely to stay on track.
Interest rates and inflationary expectations also play an important role in
the direction of stock prices. The strong economy in 1994 raised fears of a
pickup in inflation and spurred the Fed to tighten. The resulting high bond
yields provided stiff competition for stocks and also pushed price/earnings
ratios lower. But inflation rose only modestly in 1994 and remains under
control.
The slowing economy caused some concern that the Fed may have tightened too
much. (In fact, deflation, not inflation, is becoming more of a problem in some
key foreign economies, such as Japan and Germany.) The net result is that long-
term interest rates fell sharply in 1995, helping fuel sustained rallies in both
the stock and bond markets.
Small-company stocks lagged the major market indices early this year. The
sharp decline in the value of the dollar against the Japanese yen and the German
mark drew investors to large, multinational U.S. companies, whose earnings
benefit from the weak dollar. Nevertheless, small-company growth stocks, which
represent the core holdings of your fund, began to catch up to large-cap stocks
in the second quarter.
During periods of slow growth, investors typically seek growth stocks
because their consistently rising earnings often outpace a sluggish economy,
such as the one we have experienced over the last few months. In addition, the
drop in yields this year reduced the appeal of bonds. Falling interest rates
drove overall stock market P/E ratios higher, and growth stock P/Es rose even
more than other sectors of the market.
<PAGE>
PORTFOLIO REVIEW
Technology stocks led the market to new highs in the second quarter. The
technology surge was fueled by robust demand for personal computers, strong
growth for wireless communications, and the increasing pervasiveness of
semiconductor technology in homes as well as businesses. Fortunately, technology
stocks are a major focus of New Horizons' portfolio. As the table following this
letter shows, seven of the top 10 contributors to performance in both the
quarter and first half were technology stocks. Semiconductor companies were
particularly strong, led by MAXIM INTEGRATED PRODUCTS, CIRRUS LOGIC, and XILINX.
Financial service companies, not a major part of the portfolio, were also
strong performers, benefiting from the decline in interest rates and favorable
financial markets. MONEY STORE, a consumer lending company, and CMAC, a private
mortgage insurance provider, did especially well. Longtime top holdings PAYCHEX
and CUC INTERNATIONAL also were big winners so far this year.
As for your fund's laggards, most of the blame can be placed on health care
and consumer companies. Half of the fund's worst performers in the quarter were
health care companies, as shown in the accompanying tables. Investors were
spooked by increased competition and a shakeout in the health care services
area. As a result, HMO holdings FOUNDATION HEALTH, UNITED HEALTHCARE, and
COVENTRY all declined during the quarter. Women's apparel chain ANNTAYLOR fell
sharply on news of disappointing sales. Not all technology stocks soared.
Database software vendor SYBASE was our worst performer by far due to sharply
disappointing earnings caused by poor marketing and product transition.
The table on this page shows changes in the fund's portfolio weightings
since the end of 1994. We continued to emphasize the technology and business
service sectors, adding to the latter during the first half. Following our
pattern of the last several years, we further reduced our consumer and health
care positions. Cash reserves rose somewhat in the quarter, to 6%.
--------------------------------------------------------------------------------
Sector Diversification
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/94 06/30/95
----------------------
<S> <C> <C>
Financial 5% 4%
Health Care 15 14
Consumer 22 20
Technology 23 23
Business Services 25 26
Energy 4 3
Basic Industrial 4 4
Reserves 2 6
---- ----
Total 100% 100%
--------------------------------------------------------------------------------
</TABLE>
OUTLOOK
We were as surprised as most market forecasters by the stock market's strength
in the first half of 1995. While the U.S. economy slowed from its torrid pace as
expected, the nosedive in interest rates this year was quite a surprise, turning
out to be the main engine for the market's sustained rally. Equity investors
also applauded the Fed's decision in early July to cut the fed funds rate, a
sign that the central bank is determined to prevent the economy from slipping
into a recession. We agree with the consensus that the economy is headed toward
a soft landing and that growth and corporate profits will remain positive.
Growth stocks should continue to prosper in this environment and generate
stronger earnings increases than the market as a whole. Small-company stocks
have trailed the overall market in 1995, but should do as well or better into
1996, barring a major market downturn. Stock market valuations look reasonable
to us given the level of inflation and low interest rates. The fund's relative
P/E, currently at 1.34 times the S&P 500's P/E, changed little in the quarter
and still looks reasonable (see the chart on page 5). It is perched well below
the midpoint of the fund's historical 1.0-2.0 range. The valuations of small
stocks in general also look reasonable, and we continue to view their prospects
over the next several years as favorable.
New Horizons celebrated its 35th birthday in June and is one of the oldest
and largest small-company mutual funds in the country.
2
<PAGE>
We adhere to our original investment charter of investing in a diversified
portfolio of emerging growth companies relatively early in their life cycles.
This approach, in our view, leads to superior investment results over time as
demonstrated by the fund's long-term investment record. We thank you for your
continued confidence.
Respectfully submitted,
/s/ John H. Laporte
John H. Laporte
President and Chairman of the
Investment Advisory Committee
July 21, 1995
--------------------------------------------------------------------------------
Twenty-Five Largest Holdings
--------------------------------------------------------------------------------
June 30, 1995
<TABLE>
<CAPTION>
Percent of
Company Net Assets
------------------------------------------------------------------ ----------
<S> <C>
Paychex 3.5%
--------------------------------------------------------------------------------
CUC International 3.2
--------------------------------------------------------------------------------
Viacom 3.0
--------------------------------------------------------------------------------
Maxim Integrated Products 1.8
--------------------------------------------------------------------------------
Synopsys 1.5
--------------------------------------------------------------------------------
Xilinx 1.4
--------------------------------------------------------------------------------
SunGard Data Systems 1.4
--------------------------------------------------------------------------------
Adobe Systems 1.4
--------------------------------------------------------------------------------
Paging Network 1.3
--------------------------------------------------------------------------------
Office Depot 1.2
--------------------------------------------------------------------------------
Ascend Communications 1.1
--------------------------------------------------------------------------------
Intuit 1.1
--------------------------------------------------------------------------------
Broderbund Software 1.1
--------------------------------------------------------------------------------
Cirrus Logic 1.0
--------------------------------------------------------------------------------
Vishay Intertechnology 1.0
--------------------------------------------------------------------------------
Linear Technology 1.0
--------------------------------------------------------------------------------
Catalina Marketing 1.0
--------------------------------------------------------------------------------
Sanifill 1.0
--------------------------------------------------------------------------------
Oracle 0.9
--------------------------------------------------------------------------------
First Financial Management 0.9
--------------------------------------------------------------------------------
General Nutrition 0.9
--------------------------------------------------------------------------------
ADVO 0.9
--------------------------------------------------------------------------------
Apria Healthcare Group 0.8
--------------------------------------------------------------------------------
Franklin Quest 0.8
--------------------------------------------------------------------------------
America Online 0.8
--------------------------------------------------------------------------------
Total 34.0%
================================================================================
</TABLE>
--------------------------------------------------------------------------------
Average Annual Compound Total Return
--------------------------------------------------------------------------------
Periods Ended June 30, 1995
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C>
37.91% 16.37% 12.88%
</TABLE>
================================================================================
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
3
<PAGE>
--------------------------------------------------------------------------------
Contributions to the Change in Net Asset Value Per Share
--------------------------------------------------------------------------------
Three Months Ended June 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
TEN BEST CONTRIBUTORS
--------------------------------------------------------------------------------
<S> <C>
Paychex 10c
--------------------------------------------------------------------------------
Maxim Integrated Products 10
--------------------------------------------------------------------------------
Cirrus Logic 10
--------------------------------------------------------------------------------
Xilinx 8
--------------------------------------------------------------------------------
Ascend Communications 8
--------------------------------------------------------------------------------
Synopsys 7
--------------------------------------------------------------------------------
Lotus Development** 5
--------------------------------------------------------------------------------
CUC International 5
--------------------------------------------------------------------------------
Vishay Intertechnology 4
--------------------------------------------------------------------------------
General Nutrition 4
================================================================================
Total 71c
<CAPTION>
--------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
--------------------------------------------------------------------------------
<S> <C>
Sybase** - 9c
--------------------------------------------------------------------------------
AnnTaylor Stores* 4
--------------------------------------------------------------------------------
Franklin Quest 4
--------------------------------------------------------------------------------
Foundation Health 3
--------------------------------------------------------------------------------
Sbarro 3
--------------------------------------------------------------------------------
Quantum Health Resources* 2
--------------------------------------------------------------------------------
Cygne Designs 2
--------------------------------------------------------------------------------
United HealthCare 2
--------------------------------------------------------------------------------
HealthSouth 1
--------------------------------------------------------------------------------
Coventry 1
================================================================================
Total - 31c
</TABLE>
*Position added
**Position eliminated
Six Months Ended June 30, 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
TEN BEST CONTRIBUTORS
--------------------------------------------------------------------------------
<S> <C>
Paychex 17c
--------------------------------------------------------------------------------
CUC International 13
--------------------------------------------------------------------------------
Xilinx 13
--------------------------------------------------------------------------------
Adobe Systems 11
--------------------------------------------------------------------------------
Ascend Communications 11
--------------------------------------------------------------------------------
Maxim Integrated Products 11
--------------------------------------------------------------------------------
Cirrus Logic 10
--------------------------------------------------------------------------------
Synopsys 9
--------------------------------------------------------------------------------
Vishay Intertechnology 7
--------------------------------------------------------------------------------
SunGard Data Systems 7
================================================================================
Total 109c
<CAPTION>
--------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
--------------------------------------------------------------------------------
<S> <C>
Sybase** - 15c
--------------------------------------------------------------------------------
Quantum Health Resources* 6
--------------------------------------------------------------------------------
Franklin Quest 3
--------------------------------------------------------------------------------
AnnTaylor Stores* 3
--------------------------------------------------------------------------------
Cygne Designs 2
--------------------------------------------------------------------------------
Foundation Health 2
--------------------------------------------------------------------------------
Sbarro 2
--------------------------------------------------------------------------------
Cellular Communications 1
--------------------------------------------------------------------------------
United HealthCare 1
--------------------------------------------------------------------------------
Noven Pharmaceuticals 1
================================================================================
Total - 36c
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
New Horizons Fund P/E Ratio*
--------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
Chart Number 1: P/E
A bar chart showing the fund P/E quarterly for the period 3/61 to the current
quarter end 6/30/95.
--------------------------------------------------------------------------------
New Horizons Fund P/E* Ratio Relative to the S&P 500 P/E Ratio
--------------------------------------------------------------------------------
[BAR GRAPH APPEARS HERE]
Chart Number 2: P/E Relative to S & P 500
A bar chart showing the fund's P/E relative to the S & P 500 P/E for the period
3/61 to the current quarter end 6/30/95
--------------------------------------------------------------------------------
*The fund's P/E ratio is an average, unweighted number based on 12-month forward
earnings per share as estimated by the fund's investment manager at each
quarter-end.
5
<PAGE>
--------------------------------------------------------------------------------
Portfolio of Investments
T. Rowe Price New Horizons Fund / June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
(values in thousands)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Common Stocks, Convertibles,
Rights & Warrants -- 94.2%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FINANCIAL -- 4.2%
--------------------------------------------------------------------------------
Value
----------
INSURANCE -- 1.6%
<C> <S> <C>
285,000 shs. CMAC Investment......................... $ 12,362
207,406 *Mutual Assurance........................ 6,144
196,350 Mutual Risk Management.................. 6,578
1,000,000 Presidential Life....................... 8,188
33,272
FINANCIAL SERVICES -- 2.6%
150,000 ADVANTA (Class B)....................... 5,644
77,100 Alex. Brown............................. 3,200
330,000 +*Consumer Portfolio Services............. 6,270
182,700 Duff & Phelps Credit Rating............. 2,375
439,600 *ITG..................................... 3,187
275,000 Legg Mason.............................. 7,425
299,999 Mercury Finance......................... 5,775
366,450 Money Store............................. 13,146
230,000 *Oxford Resources (Class A).............. 4,025
98,500 *World Acceptance........................ 3,324
54,371
TOTAL FINANCIAL 87,643
--------------------------------------------------------------------------------
HEALTH CARE -- 13.4%
--------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.7%
108,900 A.L. Laboratories....................... 2,042
190,000 *Argus Pharmaceuticals................... 416
175,000 *Ethical Holdings ADS.................... 1,028
50,000 ++*Genta Units............................. 350
324,100 *Incyte Pharmaceuticals.................. 5,307
200,000 *Inhale Therapeutic Systems.............. 1,562
175,000 ++*Magainin Pharmaceuticals................ 1,044
250,000 *Noven Pharmaceuticals................... 1,906
13,655
BIOTECHNOLOGY -- 3.0%
151,500 *Arris Pharmaceutical.................... 1,401
100,000 *Biochem Pharma.......................... 2,188
30,000 *BioCryst Pharmaceuticals................ 294
190,000 *Biogen.................................. 8,479
150,000 ++*Cambridge Neuroscience.................. 743
275,000 *Cell Genesys............................ 1,289
92,622 *Chiron.................................. 5,997
181,300 *Corvas International.................... 453
150,000 shs. ++*Creative Biomolecules................... $ 371
215,000 *Curative Technologies................... 1,881
390,000 *Cytel................................... 2,316
140,000 *Energy BioSystems....................... 630
90,000 *Genzyme Transgenics..................... 259
125,000 *Guilford Pharmaceuticals................ 781
661,538 *IBAH.................................... 1,447
400,000 *IDEXX Laboratories...................... 10,475
375,000 *Isis Pharmaceuticals
(Class B)............................ 4,688
500,000 ++*Isis Pharmaceuticals.................... 5,569
200,000 *Matritech............................... 494
200,000 *Nexstar Pharmaceuticals................. 1,750
400,000 +*NPS Pharmaceuticals..................... 1,900
600,000 +*SangStat Medical........................ 3,188
200,000 ++*T Cell Sciences......................... 585
200,000 *Targeted Genetics....................... 800
400,000 *Univax Biologics........................ 1,975
400,000 ++*Univax Biologics........................ 1,710
122,000 *Vertex Pharmaceuticals.................. 2,013
45,000 *Vical................................... 444
64,120
MEDICAL EQUIPMENT -- 0.7%
220,000 Dentsply International.................. 7,934
200,000 *Fresenius USA........................... 2,625
100,000 *Nellcor................................. 4,462
15,000 *VISX.................................... 197
15,218
MEDICAL INSTRUMENTS & DEVICES -- 2.5%
75,000 Arrow International..................... 3,141
103,600 *Cyberonics.............................. 466
658,700 *Haemonetics............................. 12,680
89,300 *Heart Technology........................ 1,719
107,000 *IGEN.................................... 655
265,000 *Medisense............................... 5,184
250,000 Minntech................................ 3,531
250,000 *Pyxis................................... 5,641
125,000 Stryker................................. 4,781
320,000 *Sybron International.................... 12,760
18,236 *Universal Display....................... 0
100,000 *VIVUS................................... 1,500
52,058
HEALTH CARE SERVICES -- 6.5%
80,000 *American Homepatient.................... 2,360
50,000 *American Oncology Resources............. 1,394
600,000 *Apria Healthcare Group.................. 16,800
225,000 Columbia/HCA Healthcare................. 9,731
100,000 *Coventry................................ 1,419
100,000 *EmCare Holdings......................... 1,906
</TABLE>
6
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
254,450 shs. *Foundation Health....................... $ 6,870
229,900 *Genesis Health Ventures................. 6,811
150,000 *Health Management (Class A)............. 4,387
500,000 *HEALTHSOUTH Rehabilitation.............. 8,687
200,000 *Lincare................................. 5,325
150,000 *Multicare............................... 2,616
150,800 Omnicare................................ 4,090
$ 5,610,000 Omnicare, 5.75%, 10/1/03................ 10,526
900,000 shs. +*Quantum Health Resources................ 14,794
555,000 *Quorum Health Group..................... 11,135
100,000 *SpaceLabs Medical....................... 2,537
175,000 Sterile Concepts........................ 2,166
432,900 *Syncor International.................... 4,735
112,700 *Synetic................................. 2,803
375,000 United HealthCare....................... 15,516
136,608
TOTAL HEALTH CARE 281,659
--------------------------------------------------------------------------------
CONSUMER -- 20.1%
--------------------------------------------------------------------------------
SOFT GOODS RETAILERS -- 0.5%
250,000 *AnnTaylor Stores........................ 5,812
200,000 *Jos. A. Bank Clothiers.................. 550
177,100 Phillips-Van Heusen..................... 2,745
154,800 *Shoe Carnival........................... 871
9,978
HARD GOODS RETAILERS -- 3.3%
279,900 *Brookstone.............................. 1,959
543,000 *General Nutrition....................... 18,937
441,000 +*Little Switzerland...................... 1,902
270,000 *Micro Warehouse......................... 12,454
242,300 *Neostar Retail Group.................... 3,756
900,000 *Office Depot............................ 25,312
200,000 ++*Phar-Mor (144a)......................... 0
259,000 *TSC..................................... 5,083
69,403
CONSUMER DURABLES -- 0.1%
131,200 *Recoton 2,509
CONSUMER NONDURABLES -- 4.0%
200,000 Anthony Industries...................... 3,675
1,120,000 *Benson Eyecare.......................... 11,340
200,000 *Chic by H.I.S........................... 2,250
438,200 *Cygne Designs........................... 2,657
131,800 *ERO..................................... 1,153
357,000 *Jones Apparel Group..................... 10,665
350,000 *Marisa Christina........................ 4,966
150,000 *Marker International.................... 994
359,843 *Nautica Enterprises..................... 12,954
189,600 *Norton McNaughton....................... 2,939
281,000 *Perrigo................................. 3,091
187,000 Rival................................... 2,712
990,000 +*Score Board............................ 5,816
60,400 shs. St. Ives Laboratories................... $ 472
100,000 St. John Knits.......................... 4,487
400,000 *Tommy Hilfiger.......................... 11,200
119,000 *Westpoint Stevens...................... 2,105
83,476
RESTAURANTS -- 2.8%
100,000 *Boston Chicken.......................... 2,419
$30,000,000 Boston Chicken LYONs,
Zero Coupon, 6/1/15.................. 6,825
130,000 shs. *DAKA International...................... 3,022
531,500 *Lone Star Steakhouse &
Saloon............................... 16,078
390,400 *Outback Steakhouse...................... 11,322
125,000 *Rock Bottom Restaurants................. 3,609
633,300 Sbarro.................................. 14,724
57,999
FOOD & BEVERAGES -- 0.3%
204,300 *Starbucks............................... 7,253
ENTERTAINMENT -- 4.3%
371,924 *Carmike Cinemas (Class A)............... 9,019
500,000 +*Graff Pay-Per-View...................... 4,563
180,000 *International Family
Entertainment (Class B).............. 2,835
40,970 *National Gaming......................... 348
500,000 *Players International................... 10,063
160,000 *Savoy Pictures.......................... 1,430
1,900,000 rts. *Viacom.................................. 2,850
152,000 shs. *Viacom (Class A)........................ 7,068
1,151,685 *Viacom (Class B)........................ 53,409
91,585
CONSUMER SERVICES -- 4.8%
212,200 +*Advanced Ross........................... 5,729
380,000 *America Online.......................... 16,625
184,400 *Apollo Group............................ 4,921
1,619,716 *CUC International....................... 68,028
100,000 *Glacier Water Services.................. 1,988
200,000 Sotheby's............................... 2,725
165,000 *Steck-Vaughn............................ 1,361
75,300 *ValueVision International
(Class A)............................. 339
101,716
TOTAL CONSUMER 423,919
--------------------------------------------------------------------------------
TECHNOLOGY -- 22.8%
--------------------------------------------------------------------------------
COMPUTER HARDWARE -- 0.2%
100,000 *Silicon Graphics........................ 3,988
COMPUTER SOFTWARE -- 9.3%
500,000 Adobe Systems........................... 29,125
99,900 *Baan Company............................ 3,084
150,000 *BMC Software............................ 11,550
</TABLE>
7
<PAGE>
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / Portfolio of Investments (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<C> <C> <C>
COMPUTER SOFTWARE (cont'd)
350,000shs. *Broderbund Software..................... $ 22,269
145,600 *Expert Software......................... 2,657
400,000 *Informix................................ 10,125
300,000 *Intuit.................................. 22,819
150,000 *Learning Company........................ 5,362
300,000 *NetManage............................... 5,175
500,000 *Oracle Systems.......................... 19,281
250,000 *PeopleSoft.............................. 13,500
10,000 SAP (DEM)............................... 12,597
300,000 *Symantec................................ 8,644
500,000 *Synopsys................................ 31,250
197,438
PERIPHERALS -- 0.6%
300,000 *Analog Devices.......................... 10,200
50,000 Molex................................... 1,931
12,131
NETWORKING & TELECOM
EQUIPMENT -- 4.9%
225,000 *3Com.................................... 15,075
250,000 *ALANTEC................................. 8,688
474,600 *Ascend Communications................... 24,027
375,000 *Bay Networks............................ 15,469
300,000 *Cascade Communications.................. 12,937
100,000 *Firefox Communications.................. 2,550
225,000 *Glenayre Technologies................... 11,531
150,000 *Micro Linear............................ 2,447
250,000 *Shiva................................... 10,750
103,474
SEMICONDUCTORS -- 7.8%
350,000 *Actel................................... 4,550
75,000 *Applied Materials....................... 6,487
350,000 *Cirrus Logic............................ 21,941
75,000 *Lam Research............................ 4,791
325,000 Linear Technology....................... 21,369
750,000 *Maxim Integrated Products............... 38,250
144,500 *Microchip Technology.................... 5,274
250,000 *Silicon Valley Group.................... 9,078
600,000 *Vishay Intertechnology.................. 21,675
325,000 *Xilinx.................................. 30,509
163,924
TOTAL TECHNOLOGY 480,955
--------------------------------------------------------------------------------
BUSINESS SERVICES -- 25.0%
--------------------------------------------------------------------------------
TELECOM SERVICES -- 3.9%
217,500 *ALC Communications...................... 9,815
71,600 *Arch Communications..................... 1,580
$4,000,000 Arch Communications
(144a), 6.75%, 12/1/03................ 5,325
290,000shs. *CellStar................................ 6,706
171,411shs. *Cellular Communications
$.01 Red. Cv. Pfd..................... $ 7,713
200,000 *Dial Page............................... 2,900
200,000 *International CableTel.................. 6,450
365,000 *Mobile Telecommunication
Technologies.......................... 9,969
820,000 *Paging Network.......................... 27,880
150,000 *Vanguard Cellular....................... 3,619
81,957
COMPUTER SERVICES -- 8.8%
250,000 *Acxiom.................................. 6,000
468,000 *BISYS Group............................. 10,355
600,000 *Concord Computing....................... 15,900
225,000 First Financial Management.............. 19,237
575,000 *FIserv.................................. 16,064
79,800 *Health Management Systems............... 2,304
322,000 National Data........................... 7,446
100,000 *New Envoy............................... 863
2,008,575 Paychex................................. 73,313
470,500 *Payco American.......................... 3,823
579,700 *SunGard Data Systems.................... 30,434
185,739
TRANSPORTATION -- 0.1%
200,000 *M.S. Carriers........................... 3,725
MEDIA & ADVERTISING -- 3.3%
325,000 *ACS Enterprises......................... 5,789
1,000,000 ADVO.................................... 18,875
144,000 *CAI Wireless............................ 1,692
382,000 *Catalina Marketing...................... 20,485
95,000 Central Newspapers
(Class A)............................. 2,814
50,000 *Clear Channel
Communications........................ 3,219
125,000 McClatchy Newspapers
(Class A)............................. 2,766
250,000 *Peoples Choice TV....................... 6,375
37,500 *Preferred Entertainment................. 628
400,000 *United International
Holdings (Class A).................... 6,550
69,193
ENVIRONMENTAL -- 1.2%
190,500 *N-Viro International.................... 286
651,400 *Sanifill................................ 20,437
120,000 *United Waste Systems.................... 4,290
25,013
ENGINEERING & CONSTRUCTION -- 0.8%
961,200 +*Insituform Technologies
(Class A)............................. 12,856
100,000 *Mastec.................................. 1,300
219,900 *Stimsonite.............................. 2,625
16,781
</TABLE>
8
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
MISCELLANEOUS BUSINESS
SERVICES -- 5.7%
94,000shs. *Access Health Marketing................. $ 1,898
100,800 *Affiliated Computer Services
(Class A)............................. 3,037
418,400 +*Career Horizons......................... 8,106
373,500 *Copart.................................. 8,450
150 *Corporate Express....................... 3
155,000 *DIMAC................................... 2,403
697,500 *Franklin Quest.......................... 16,740
132,000 Gilbert Associates (Class A)............ 1,650
450,000 *Hospitality Franchise
Systems............................... 15,581
100,000 *Keane................................... 2,487
227,200 McGrath RentCorp........................ 3,891
500,000 Olsten.................................. 16,375
340,500 *Orthodontic Centers
of America............................ 8,172
100,000 *Sealed Air.............................. 4,400
50,000 *Shorewood Packaging..................... 738
300,000 *Viking Office Products.................. 10,987
450,000 Watsco (Class A)........................ 6,075
890,000 +*WorldCorp............................... 8,789
119,782
DISTRIBUTION -- 1.2%
850,000 *Alliance Entertainment.................. 7,969
353,200 Danka Business Systems ADR.............. 8,565
644,700 *JP Foodservice.......................... 8,865
25,399
TOTAL BUSINESS SERVICES 527,589
--------------------------------------------------------------------------------
ENERGY -- 3.2%
--------------------------------------------------------------------------------
EXPLORATION & PRODUCTION -- 0.7%
300,387 Devon Energy............................ 6,458
200,000 Noble Affiliates........................ 5,100
210,000 Southwestern Energy..................... 2,914
14,472
ENERGY SERVICES -- 2.5%
475,000 *BJ Services............................. 10,806
300,000 Camco International..................... 7,012
228,000 Coflexip ADR............................ 5,786
340,000 *Enterra................................. 7,140
67,043 *Geophysique (FRF)....................... 3,994
251,500 *NS Group................................ 849
700,000 *Oceaneering International............... 6,212
450,000 *Smith International..................... 7,538
300,000 *Weatherford International............... 3,788
53,125
TOTAL ENERGY 67,597
--------------------------------------------------------------------------------
INDUSTRIAL -- 3.5%
--------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS -- 0.5%
450,000shs. Albany International
(Class A)............................. $ 10,744
AUTO RELATED -- 1.0%
520,832 *Jason................................... 5,209
291,400 Methode Electronics
(Class A)............................. 5,682
327,900 OEA..................................... 9,714
20,605
MACHINERY -- 1.4%
400,000 Danaher................................. 12,100
200,000 Farrel.................................. 1,200
50,000 Teleflex................................ 2,150
616,000 TriMas.................................. 14,168
29,618
AEROSPACE & DEFENSE -- 0.2%
69,600 *ECC International....................... 774
231,900 ++*ECC International....................... 2,322
3,096
SPECIALTY CHEMICALS -- 0.4%
269,500 *Gelman Sciences......................... 5,087
223,650 Synalloy................................ 4,263
9,350
TOTAL INDUSTRIAL 73,413
MISCELLANEOUS COMMON STOCKS -- 2.0% 41,733
TOTAL COMMON STOCKS, CONVERTIBLES, RIGHTS &
WARRANTS (COST $1,291,571) 1,984,508
--------------------------------------------------------------------------------
Short-Term Investments -- 6.3%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BANK NOTES -- 0.3%
--------------------------------------------------------------------------------
$5,000,000 Fifth Third Bank,
6.21%, 10/27/95....................... 5,000
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 2.1%
--------------------------------------------------------------------------------
5,000,000 Bank of Montreal,
6.03%, 8/17/95........................ 5,000
5,000,000 Bayerische Hypotheken,
6.11%, 7/14/95........................ 5,000
5,000,000 Commerzbank,
6.12%, 8/14/95........................ 5,001
5,000,000 Credit Suisse,
6.27%, 10/12/95....................... 5,004
5,000,000 First Union National Bank,
6.12%, 7/31/95........................ 5,001
5,000,000 Landes Bank Hesson Thurin,
6.02%, 8/9/95......................... 5,000
</TABLE>
9
<PAGE>
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / Portfolio of Investments (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
CERTIFICATES OF DEPOSIT (cont'd)
$10,000,000 MBNA America Bank N A,
6.00%, 7/7/95........................ $ 10,000
5,000,000 National Westminster Bank,
6.125%, 11/8/95...................... 5,002
45,008
--------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.7%
--------------------------------------------------------------------------------
5,000,000 AT&T, 6.01%, 8/4/95................... 4,912
5,000,000 Bank of Nova Scotia,
6.02%, 7/7/95........................ 5,000
385,000 Cargill Financial Services,
6.10%, 7/3/95........................ 385
5,000,000 Ciesco L.P., 4(2),
6.01%, 7/21/95....................... 4,923
10,000,000 Corporate Asset Funding,
6.05%, 7/17/95....................... 9,968
5,000,000 General Electric Capital,
6.04%, 7/21/95....................... 4,916
5,000,000 Halifax Building Society,
6.01%, 7/20/95....................... 4,923
5,000,000 New Center Asset Trust,
6.05%, 7/6/95........................ 4,929
10,000,000 PHH, 5.95%, 7/28/95.................... 9,942
10,000,000 Province of Quebec,
5.82%, 9/26/95....................... 9,854
5,000,000 Repsol International,
6.10%, 7/14/95....................... 4,881
10,000,000 Southwestern Bell Telephone,
5.94%, 8/3/95........................ 9,939
3,000,000 UBS Finance (Delaware),
6.25%, 7/3/95........................ 2,998
77,570
--------------------------------------------------------------------------------
MEDIUM TERM NOTES -- 0.2%
--------------------------------------------------------------------------------
5,000,000 Wells Fargo, VR,
6.063%, 9/16/96...................... 4,999
TOTAL SHORT-TERM INVESTMENTS (COST $132,577)................... 132,577
--------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.5%
OF NET ASSETS (COST $1,424,148).............................. 2,117,085
--------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES.................................. (9,630)
----------
NET ASSETS $2,107,455
==========
--------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
+ Affiliated company
* Non-income producing
++ Securities contain some restrictions as to public resale--total of such
securities at period-end amounts to 0.60% of net assets.
VR Variable rate
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers--total of such securities at period-end amounts to
0.25% of net assets.
DEM German deutschemark
FRF French franc
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / June 30, 1995 (Unaudited)
(in thousands)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
Affiliated companies (cost $84,378).......................................... $ 74,356
Other companies (cost $1,339,770)............................................ 2,042,729
-----------
Total investments in securities.............................................. 2,117,085
Other assets.................................................................... 39,870
-----------
Total assets.................................................................... 2,156,955
-----------
LIABILITIES..................................................................... 49,500
-----------
NET ASSETS...................................................................... $ 2,107,455
===========
NET ASSETS CONSIST OF:
Accumulated net investment income - net of distributions........................ $ (2,946)
Accumulated net realized gain/loss - net of distributions....................... 166,170
Net unrealized gain (loss)...................................................... 692,937
Paid-in-capital applicable to 115,079,702 shares of $1.00 par
value capital stock outstanding; 200,000,000 shares authorized............... 1,251,294
-----------
NET ASSETS...................................................................... $ 2,107,455
===========
NET ASSET VALUE PER SHARE....................................................... $ 18.31
===========
</TABLE>
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / Six Months Ended June 30, 1995 (Unaudited)
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest.......................................................... $ 3,761
Dividend.......................................................... 1,653
---------
Total income...................................................... 5,414
---------
Expenses
Investment management............................................. 6,298
Shareholder servicing............................................. 1,755
Custody and accounting............................................ 131
Prospectus and shareholder reports................................ 82
Registration...................................................... 32
Legal and audit................................................... 21
Directors......................................................... 19
Miscellaneous..................................................... 22
---------
Total expenses.................................................... 8,360
---------
Net investment income................................................ (2,946)
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities............................... 145,202
Change in net unrealized gain or loss on securities.................. 262,548
---------
Net realized and unrealized gain (loss).............................. 407,750
---------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.................... $ 404,804
=========
</TABLE>
--------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended, Year Ended,
June 30, 1995 Dec. 31, 1994
---------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income...................................................... $ (2,946) $ (8,172)
Net realized gain (loss)................................................... 145,202 120,130
Change in net unrealized gain or loss...................................... 262,548 (108,665)
---------- ----------
Increase (decrease) in net assets from operations.......................... 404,804 3,293
---------- ----------
Distributions to shareholders
Net realized gain.......................................................... -- (146,497)
---------- ----------
Capital share transactions*
Shares sold................................................................ 288,990 481,534
Distributions reinvested................................................... -- 138,041
Shares redeemed............................................................ (234,716) (455,716)
---------- ----------
Increase (decrease) in net assets from capital share transactions.......... 54,274 163,859
---------- ----------
Increase (decrease) in net assets............................................. 459,078 20,655
NET ASSETS
Beginning of period........................................................... 1,648,377 1,627,722
---------- ----------
End of period................................................................. $2,107,455 $1,648,377
========== ==========
-----------------------------------------------------------------------------------------------------------------------
*Share information
Shares sold................................................................ 17,827 30,376
Distributions reinvested................................................... -- 9,474
Shares redeemed............................................................ (14,396) (28,895)
---------- ----------
Increase (decrease) in shares outstanding.................................. 3,431 10,955
========== ==========
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / June 30, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price New Horizons 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 are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed by
the Board of Directors, or by persons delegated by the Board, best to reflect
fair value.
13
<PAGE>
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / June 30, 1995 (Unaudited)
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service. Short-
term debt securities are valued at their cost which, when combined with accrued
interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Affiliated Companies - Investments in companies 5% or more of whose
outstanding voting securities are held by the fund are defined as "Affiliated
Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
C) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
D) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on 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 securities,
aggregated $503,807,000 and $541,308,000, respectively, for the six months ended
June 30, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1995, the aggregate cost of investments for federal income tax
and financial reporting purposes was $1,424,148,000 and net unrealized gain
aggregated $692,937,000, of which $771,451,000 related to appreciated
investments and $78,514,000 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 $1,160,000 was payable at June 30, 1995. 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 June
30, 1995, and for the six months 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
14
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / June 30, 1995 (Unaudited)
owned subsidiaries of the Manager, pursuant to which the fund receives certain
other services. The Manager computes the daily share price and maintains the
financial records of the fund. T. Rowe Price Services, Inc. (TRPS) is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. Additionally, the fund is one of several T. Rowe
Price mutual funds (the Underlying Funds) in which the T. Rowe Price Spectrum
Growth Fund (Spectrum) invests. In accordance with an Agreement among Spectrum,
the Underlying Funds, the Manager and TRPS, expenses from the operation of
Spectrum are borne by the Underlying Funds based on each Underlying Fund's
proportionate share of assets owned by Spectrum. The fund incurred expenses
pursuant to these related party agreements totaling approximately $1,549,000 for
the six months ended June 30, 1995, of which $270,000 was payable at period-end.
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
-------------------------------------------------------------------------------------
Six Months Year Ended December 31,
Ended ------------------------------------------------------------------
June 30, 1995 1994 1993 1992 1991 1990
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.......................... $14.76 $16.16 $15.53 $15.68 $10.61 $12.43
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income.............. (0.03) (0.07) (0.07) (0.04) 0.05 0.09
Net realized and unrealized
gain (loss)...................... 3.58 0.10 3.40 1.65 5.46 (1.29)
------ ------ ------ ------ ------ ------
Total from Investment Activities... 3.55 0.03 3.33 1.61 5.51 (1.20)
------ ------ ------ ------ ------ ------
Distributions
Net investment income.............. -- -- -- -- (0.05) (0.09)
Net realized gain.................. -- (1.43) (2.70) (1.76) (0.39) (0.53)
------ ------ ------ ------ ------ ------
Total Distributions................ -- (1.43) (2.70) (1.76) (0.44) (0.62)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD....... $18.31 $14.76 $16.16 $15.53 $15.68 $10.61
====== ====== ====== ====== ====== ======
------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return......................... 24.1% 0.3% 22.0% 10.6% 52.3% (9.6)%
Ratio of Expenses to Average
Net Assets......................... 0.92%+ 0.93% 0.93% 0.93% 0.92% 0.82%
Ratio of Net Investment Income
to Average Net Assets.............. (0.32)%+ (0.50)% (0.50)% (0.32)% 0.35% 0.72%
Portfolio Turnover Rate.............. 58.5%+ 44.3% 49.4% 49.6% 32.5% 38.0%
Net Assets, End of Period
(in thousands)..................... $2,107,455 $1,648,377 $1,627,722 $1,547,258 $1,470,440 $855,490
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+Annualized.
15
<PAGE>
--------------------------------------------------------------------------------
SEMIANNUAL REPORT
--------------------------------------------------------------------------------
T. Rowe Price
-------------
NEW HORIZONS FUND
JUNE 30, 1995
[LOGO OF T. ROWE PRICE APPEARS HERE]
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 Horizons
Fund./(R)/
T. Rowe Price
Invest With Confidence/(R)/
NHF
