<PAGE>
Semiannual Report
New
Horizons
Fund
June 30, 1996
T. Rowe Price
<PAGE>
REPORT HIGHLIGHTS
. The stock market continued its advance over the last six months. Small-
company stocks slightly outperformed their larger counterparts.
. Your fund performed better than the unmanaged equity indices in the first
half but trailed its peer group. It significantly outperformed all its
benchmarks over the 12-month period.
. Due to the unprecedented inflow of new money, the fund was closed to new
investors as of June 18 to protect the interests of existing shareholders.
. We pared exposure to technology stocks but will likely buy more on weakness
later in the year. We continued reducing consumer holdings.
. Although the possibility of a near-term correction has increased, we remain
positive on stocks over the longer term. Small-company stocks, in our view,
should continue to outperform large-caps.
<PAGE>
Fellow Shareholders
Driven by a surprisingly resilient economy and unprecedented mutual fund
inflows, the stock market rose to record highs again in the first half of 1996,
with most major indices returning about 10%. This year's gains are all the more
impressive coming off last year's powerful advance. Small stocks generally
outperformed their larger brethren after trailing them in 1995.
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 6/30/96 6 Months 12 Months
- ---------------------------------------------
<S> <C> <C>
New Horizons Fund 12.88% 41.44%
.............................................
Lipper Small Company
Growth Fund Index 14.21 30.27
.............................................
Nasdaq Composite* 12.63 26.95
.............................................
S&P 500 10.10 26.00
.............................................
*Principal only
</TABLE>
Against this backdrop, the New Horizons Fund had a good first half, performing
slightly better than the unmanaged market indices. The fund somewhat lagged the
average small-company mutual fund because we were cautious as the market became
increasingly speculative late in the second quarter. For the past 12 months,
your fund outperformed all the market indices and its peer group average by a
substantial margin, reflecting last year's record-setting performance.
FUND CLOSES TO NEW INVESTORS
The fund experienced a record amount of net new money inflows in the first half
- -- $848 million -- bringing total assets to $4 billion as of June 30. In fact,
your fund's inflows accelerated to an average of $10 million per day through
most of the second quarter due to robust demand for mutual funds, our strong
absolute and relative performance in recent months, and a frothy market
environment. The fund's cash reserves rose from 2% at the end of 1995 to 10% at
mid-year because our portfolio team was unwilling to indiscriminately invest
these record inflows into an increasingly speculative market.
To protect current shareholders and enable us to cope with these inflows, we
closed the fund to new investors as of June 18, 1996. Existing shareholders and
most retirement accounts are still free to
1
<PAGE>
purchase additional shares. Although this action was taken partly in response
to the recent speculative market, we believe that the outlook for the fund and
for small-cap stocks remains favorable for the next several years. Relative
valuation measures in general remain comfortably below the peaks of previous
small-cap cycles, such as 1972 and 1983. We see plenty of attractive small-cap
growth companies in the market. This decision will reduce our cash inflows to
more manageable levels and allow us to invest our cash as opportunities develop
and liquidity permits. We expect to bring our cash reserves down from their
current 10% level to a more normal range under 5% by year-end.
MARKET ENVIRONMENT
The extraordinary bull market for stocks (a sixfold advance since 1982)
continued in the first half despite the loss of one of its primary
underpinnings. The major secular decline in long-term interest rates from over
14% in January 1982 to under 6% by the end of 1995 helped send price/earnings
ratios to all-time highs. However, long-term rates rose more than one
percentage point to over 7% in the first half of 1996, reflecting a
strengthening economy and fears of a pickup in inflation. Stock prices diverged
from the bond market and continued their long advance as corporate profits
remained robust, inflation was remarkably tame, and, most important, U.S. equity
mutual fund inflows broke all records, driving stock prices higher.
GROWTH AND VALUE
STOCKS POSTED
SIMILAR GAINS
Small-company stocks outperformed their larger brethren slightly in the first
half, helped by unexpected strength in the dollar against most major foreign
currencies. A stronger dollar hurts the earnings growth of large companies with
significant foreign operations since overseas earnings translate back into fewer
dollars. The growth and value sectors of the market performed roughly on par,
indicating that investors are not sure whether the economy will accelerate
(generally favoring value) or slow down (generally favoring growth).
As the market climbed to new highs, there was a surge in speculation, as
evidenced by record levels in three key areas: mutual fund inflows, mergers and
acquisitions, and stock offerings (both initial and secondary). These signs,
combined with high valuation levels, point to an increased likelihood that the
market will mark time or experience a
2
<PAGE>
meaningful correction in the short run. Longer term, if the economy maintains a
moderate growth rate and inflation remains firmly in check, a further market
advance seems likely.
PORTFOLIO REVIEW
Unlike 1995, technology stocks lagged other portfolio sectors. A slowdown in
the growth rate of personal computer sales led to earnings shortfalls at both
hardware and software makers, the semiconductor cycle turned downward, and
demand fell short of expectations for cellular telephone and paging equipment.
The lone bright spot in technology was in communications and networking
equipment companies, where demand is surging for faster and better
communications in computer networks. Eight of the 10 worst contributors to fund
performance for the six months were technology-related companies. On the other
hand, networking companies Cascade Communications and Shiva were among the best
performers, each more than doubling in price.
Sector Diversification
<TABLE>
<CAPTION>
12/31/95 6/30/96
- -----------------------------------
<S> <C> <C>
Financial 5% 5%
..................................
Health Care 16 16
..................................
Consumer 19 14
..................................
Technology 24 19
..................................
Business Services 27 28
..................................
Energy 3 3
..................................
Industrial 4 4
..................................
Miscellaneous 0 1
..................................
Reserves 2 10
- ----------------------------------
Total 100% 100%
</TABLE>
Our leading contributors in the first half were long-time top holding Paychex,
the leading payroll processing company for small businesses, and HFS, a
franchiser of lodging brands, real estate brokers, and rental cars (once its
agreement to acquire Avis is final). Paychex gained close to 50% in the half,
while HFS rose another 70% after tripling in price during 1995.
We made several shifts in major sector weightings. Continuing our steady
reduction in consumer holdings (from a recent peak of 33% in late 1991), we
pared our exposure to that sector from 19% to 14% of the portfolio. The reason
is that we are finding faster growth companies in other areas of the economy. We
also lowered our technology holdings on a tactical basis from 24% to 19% because
we expected 1996 to be a difficult, transitional year for these companies. We
anticipate building our technology position back up later this year, taking
advantage of recent price declines.
3
<PAGE>
OUTLOOK
As noted, we are cautious on the near-term outlook for stocks. The market
advanced strongly over the last 18 months and seems to have moved ahead of
fundamentals. Furthermore, interest rates have risen, signs of speculation
abound, and shortfalls in corporate earnings are on the increase. This year's
Presidential and Congressional elections add another element of uncertainty,
although the markets appear to have discounted a Clinton reelection.
However, we remain positive over the longer term. The economy may be self-
correcting and is likely to maintain moderate growth in coming years. Inflation
pressures remain subdued given the current stage of the economic cycle and the
recent rise in interest rates. If a correction occurs and corporate profits
continue growing, valuations would fall back to more attractive levels.
We continue to believe that small-cap stocks are likely to outperform over the
next one or two years. The relative P/E of the New Horizons Fund portfolio rose
from 1.49 times the P/E of the S&P 500 at year-end to 1.58 as of June 30. We own
a broadly diversified portfolio of over 300 of the most vibrant small-cap growth
companies in the U.S. Our analysts believe these companies can deliver close to
25% earnings growth annually over the next three to five years. If we are
right, the New Horizons Fund should continue to deliver above-average long-term
returns to shareholders.
Respectfully submitted,
/s/John H. Laporte
- -----------------------
John H. Laporte
President
July 17, 1996
4
<PAGE>
T. Rowe Price New Horizons Fund
[New Horizons Fund P/E Ratio Graph Appears Here]
[New Horizons Fund P/E Relative to the S&P 500 P/E Graph Appears Here]
Note: 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>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
Portfolio Highlights
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended June 30, 1996
<TABLE>
<CAPTION>
Ten Best Contributors Ten Worst Contributors
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Paychex 22c Intuit -15c
.................................... ....................................
HFS 19 Adobe Systems 15
.................................... ....................................
Career Horizons 11 Maxim Integrated Products 11
.................................... ....................................
Shiva 10 Broderbund Software 8
.................................... ....................................
Cascade Communications 9 Micro Warehouse 7
.................................... ....................................
SunGard Data Systems 8 Viacom 7
.................................... ....................................
Republic Industries 8 MobileMedia 6
.................................... ....................................
Security Dynamics Technologies 8 General Nutrition 6
.................................... ....................................
Apollo Group 8 Sybase 5
.................................... ....................................
PeopleSoft 7 Bay Networks 4
- ------------------------------------ ------------------------------------
Total 110c Total -84c
</TABLE>
12 Months Ended June 30, 1996
<TABLE>
<CAPTION>
Ten Best Contributors Ten Worst Contributors
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Paychex 42c Adobe Systems -9c
.................................... ....................................
HFS 38 Broderbund Software 8
.................................... ....................................
Ascend Communications 34 Micro Warehouse 7
.................................... ....................................
Republic Industries* 17 Viacom 7
.................................... ....................................
Cascade Communications 17 MobileMedia 6
.................................... ....................................
Shiva 16 Sybase * 5
.................................... ....................................
Career Horizons 16 Office Depot ** 5
.................................... ....................................
America Online 15 Vishay Intertechnology ** 4
.................................... ....................................
CUC International 14 Arrow International 4
.................................... ....................................
Money Store 14 Insituform Technologies 4
- ------------------------------------ ------------------------------------
Total 223c Total -59c
</TABLE>
* Position added
** Position eliminated
6
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
Portfolio Highlights
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/96
- --------------------------------------------------------------------
<S> <C>
Paychex 2.2%
....................................................................
HFS 1.9
....................................................................
CUC International 1.7
....................................................................
Intuit 1.1
....................................................................
Maxim Integrated Products 1.1
- --------------------------------------------------------------------
SunGard Data Systems 1.1
....................................................................
Boston Chicken 1.0
....................................................................
Xilinx 1.0
....................................................................
Paging Network 1.0
....................................................................
Shiva 1.0
- --------------------------------------------------------------------
Synopsys 1.0
....................................................................
Analog Devices 0.9
....................................................................
Republic Industries 0.9
....................................................................
Adobe Systems 0.9
....................................................................
Catalina Marketing 0.9
- --------------------------------------------------------------------
OEA 0.8
....................................................................
Corporate Express 0.8
....................................................................
Viacom 0.8
....................................................................
Biogen 0.8
....................................................................
Career Horizons 0.8
- --------------------------------------------------------------------
Sanifill 0.8
....................................................................
3Com 0.8
....................................................................
PennCorp Financial Group 0.8
....................................................................
Quorum Health Group 0.8
....................................................................
Apria Healthcare 0.8
- --------------------------------------------------------------------
Total 25.7%
</TABLE>
7
<PAGE>
T. Rowe Price New Horizons 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 Horizons Fund Graph Appears Here]
Average Annual Compound Total Return
- --------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
<TABLE>
<CAPTION>
Periods Ended 6/30/96 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Horizons Fund 41.44% 27.50% 23.94% 14.13%
.............................................................................
</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.
8
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited
Financial Highlights For a share outstanding throughout each period
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
6/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 20.50 $ 14.76 $ 16.16 $ 15.53 $ 15.68 $ 10.61
.....................................................................
Investment activities
Net investment income (0.01) (0.04) (0.07) (0.07) (0.04) 0.05
Net realized and
unrealized gain (loss) 2.65 8.19 0.10 3.40 1.65 5.46
.....................................................................
Total from
investment activities 2.64 8.15 0.03 3.33 1.61 5.51
.....................................................................
Distributions
Net investment income - - - - - (0.05)
Net realized gain - (2.41) (1.43) (2.70) (1.76) (0.39)
.....................................................................
Total distributions - (2.41) (1.43) (2.70) (1.76) (0.44)
.....................................................................
NET ASSET VALUE
End of period $ 23.14 $ 20.50 $ 14.76 $ 16.16 $ 15.53 $ 15.68
---------------------------------------------------------------------
Ratios/Supplemental Data
Total return 12.88% 55.44% 0.30% 22.01% 10.58% 52.30%
..................................................................................................
Ratio of expenses to
average net assets 0.89%+ 0.90% 0.93% 0.93% 0.93% 0.92%
..................................................................................................
Ratio of net investment
income to average
net assets (0.05)%+ (0.23)% (0.50)% (0.50)% (0.32)% 0.35%
..................................................................................................
Portfolio turnover rate 44.3%+ 55.9% 44.3% 49.4% 49.6% 32.5%
..................................................................................................
Average commission
rate paid $ 0.1794 - - - - -
..................................................................................................
Net assets, end of period
(in millions) $ 4,099 $ 2,855 $ 1,648 $ 1,628 $ 1,547 $1,470
..................................................................................................
</TABLE>
+ Annualized.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
Unaudited June 30, 1996
<TABLE>
<CAPTION>
Portfolio of Investments Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Common Stocks 90.5%
FINANCIAL 4.9%
Insurance 2.9%
CMAC Investment 285,000 $ 16,388
....................................................................
MAIC Holdings * 219,850 8,272
....................................................................
Mutual Risk Management 860,000 26,875
....................................................................
Penncorp Financial Group 1,000,000 31,750
....................................................................
Presidential Life 977,200 10,077
....................................................................
PXRE 368,000 8,970
....................................................................
United Insurance * 754,500 17,118
....................................................................
119,450
............
Financial Services 2.0%
1st Investors Financial *+ 400,000 4,475
....................................................................
ADVANTA (Class B) 150,000 6,844
....................................................................
Consumer Portfolio Services * 660,000 5,857
....................................................................
Duff & Phelps Credit Rating 216,033 4,591
....................................................................
ITG * 450,000 6,300
....................................................................
Legg Mason 275,000 8,869
....................................................................
Mercury Finance 449,998 5,737
....................................................................
Money Store 1,187,500 26,051
....................................................................
Oxford Resources (Class A) * 300,000 7,031
....................................................................
Union Acceptance (Class A) * 54,800 829
....................................................................
World Acceptance * 400,000 2,950
....................................................................
79,534
............
Total Financial 198,984
............
HEALTH CARE 14.8%
Pharmaceuticals 0.7%
Genta *# 129,310 175
....................................................................
Genta, Series A *# 50,000 275
....................................................................
Genta, warrants, 10/28/98 *# 50,000 0
....................................................................
Immulogic Pharmaceutical * 891,000 7,963
....................................................................
Incyte Pharmaceuticals * 308,000 11,935
....................................................................
Inhale Therapeutic Systems * 100,000 1,838
....................................................................
Magainin Pharmaceutical * 349,600 3,649
....................................................................
</TABLE>
10
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Magainin Pharmaceuticals *# 175,000 $ 1,634
....................................................................
Pharmacyclics * 200,000 3,488
....................................................................
30,957
............
Biotechnology 4.1%
Biogen * 600,000 32,812
....................................................................
Cambridge Neuroscience *# 150,000 1,046
....................................................................
Cell Genesys * 275,000 2,063
....................................................................
Corvas International * 100,000 500
....................................................................
Creative Biomolecules *# 150,000 1,131
....................................................................
Cytel * 390,000 1,731
....................................................................
CytoTherapeutics * 285,000 3,171
....................................................................
Diacrin * 200,000 2,475
....................................................................
Gilead Sciences * 500,000 12,562
....................................................................
Gliatech * 230,000 2,329
....................................................................
Guilford Pharmaceuticals *+ 467,000 10,974
....................................................................
Houghten Pharmaceuticals * 240,000 1,950
....................................................................
Human Genome Sciences * 100,000 3,687
....................................................................
IBAH, Series A * 214,190 4,404
....................................................................
IBAH, warrants, 8/9/00 * 642,570 3,129
....................................................................
IDEXX Laboratories * 350,000 13,694
....................................................................
Imclone Systems * 205,000 1,883
....................................................................
Intercardia * 100,000 2,888
....................................................................
Isis Pharmaceuticals *# 500,000 8,381
....................................................................
NPS Pharmaceuticals *+ 853,600 11,524
....................................................................
Oncogene Science * 687,500 6,961
....................................................................
PathoGensis * 435,000 6,715
....................................................................
SangStat Medical * 500,000 8,469
....................................................................
Sequus Pharmaceuticals * 380,000 7,576
....................................................................
Synaptic Pharmaceutical * 283,800 3,867
....................................................................
T Cell Sciences *# 200,000 675
....................................................................
Targeted Genetics * 535,000 2,508
....................................................................
Targeted Genetics, warrants, 7/31/97 * 135,000 1
....................................................................
Xenova Group ADR *+ 1,170,000 7,166
....................................................................
166,272
............
Medical Equipment 0.8%
Cholestech *+ 480,000 2,400
....................................................................
Dentsply International 500,000 21,156
....................................................................
</TABLE>
11
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Fresenius USA * 249,700 $ 5,369
....................................................................
Nellcor * 100,000 4,862
....................................................................
33,787
............
Medical Instruments and Devices 2.7%
Arrow International 591,200 16,480
....................................................................
Bio-Plexus * 300,000 2,887
....................................................................
Cyberonics * 103,600 622
....................................................................
FemRx * 100,000 1,088
....................................................................
Gynecare * 158,200 1,246
....................................................................
Haemonetics * 200,000 3,650
....................................................................
IGEN * 107,000 742
....................................................................
Incontrol * 180,000 2,070
....................................................................
Minntech 217,000 2,360
....................................................................
R. P. Scherer * 390,500 17,719
....................................................................
ResMed * 287,500 4,564
....................................................................
SpaceLabs Medical * 100,000 2,300
....................................................................
Steris * 200,000 6,387
....................................................................
Stryker 358,400 8,131
....................................................................
Sybron International * 900,000 22,500
....................................................................
Tecnol Medical Products * 200,000 3,812
....................................................................
Utah Medical Products * 400,000 5,025
....................................................................
VIVUS * 225,000 7,397
....................................................................
108,980
............
Health Care Services 6.5%
Access Health Marketing * 135,000 6,413
....................................................................
Amisys Managed Care Systems * 190,000 4,952
....................................................................
Apria Healthcare * 1,000,000 31,375
....................................................................
Cardinal Health 243,934 17,594
....................................................................
Health Management * 337,500 6,834
....................................................................
HEALTHSOUTH * 650,000 23,400
....................................................................
Inphynet Medical Management * 520,000 9,880
....................................................................
NCS Healthcare * 55,500 1,672
....................................................................
OccuSystems * 338,000 12,569
....................................................................
Omnicare, 5.75%, 10/1/03 7,776,000 28,538
....................................................................
Physicians Health Services *+ 425,600 9,576
....................................................................
Quorum Health Group * 1,200,000 31,650
....................................................................
Raytel Medical *+ 470,000 6,169
....................................................................
Renal Care Group * 402,900 12,968
....................................................................
</TABLE>
12
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Resound *# 893,023 $ 10,197
....................................................................
Synetic * 112,700 4,142
....................................................................
Total Renal Care * 300,000 12,675
....................................................................
United Dental Care * 300,000 12,488
....................................................................
United HealthCare 375,000 18,937
....................................................................
Veterinary Centers of America * 252,300 5,566
....................................................................
267,595
............
Total Health Care 607,591
............
CONSUMER 14.4%
Soft Goods Retailers 0.6%
AnnTaylor Stores * 730,400 14,791
....................................................................
Gadzooks * 120,000 3,847
....................................................................
Jos. A. Bank Clothiers * 200,000 950
....................................................................
Supreme International * 170,000 2,975
....................................................................
Urban Outfitters * 146,000 3,650
....................................................................
26,213
............
Hard Goods Retailers 2.8%
Brookstone * 279,900 3,114
....................................................................
Discount Auto Parts *+ 1,000,000 25,375
....................................................................
General Nutrition * 1,750,000 30,516
....................................................................
Little Switzerland *+ 431,100 2,209
....................................................................
Mark Bros. Jewelers * 90,000 2,036
....................................................................
Micro Warehouse * 500,000 9,875
....................................................................
PETsMART * 507,400 24,101
....................................................................
Sunglass Hut International * 200,000 4,863
....................................................................
TSC *+ 462,100 10,686
....................................................................
112,775
............
Consumer Durables 0.1%
GT Bicycles * 250,000 4,094
....................................................................
4,094
............
Consumer Nondurables 3.1%
BEC Group * 750,000 3,281
....................................................................
Chaus Bernard * 530,000 1,723
....................................................................
Chic by H.I.S. * 200,000 1,050
....................................................................
Donna Karan International * 135,000 3,780
....................................................................
ERO * 131,800 807
....................................................................
</TABLE>
13
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Jones Apparel Group * 400,000 $ 19,650
....................................................................
Marisa Christina * 346,500 6,887
....................................................................
Marker International * 100,000 738
....................................................................
Nautica Enterprises * 1,000,000 28,875
....................................................................
Norton McNaughton * 300,000 2,100
....................................................................
Norwood *+ 300,000 6,638
....................................................................
Oakley * 150,000 6,825
....................................................................
Perrigo * 1,000,000 11,312
....................................................................
Rival 187,000 4,254
....................................................................
Score Board *+ 700,000 3,281
....................................................................
Tommy Hilfiger * 400,000 21,450
....................................................................
Westpoint Stevens * 123,600 2,966
....................................................................
125,617
............
Restaurants 1.9%
Boston Chicken * 1,300,000 42,169
....................................................................
Lone Star Steakhouse & Saloon * 520,600 19,620
....................................................................
Outback Steakhouse * 390,400 13,420
....................................................................
Schlotzsky's *+ 320,000 3,800
....................................................................
79,009
............
Entertainment 2.2%
Bristol Hotel * 252,100 8,193
....................................................................
Carmike Cinemas (Class A) * 371,924 10,042
....................................................................
Cinar Films (Class B) * 90,000 1,710
....................................................................
Extended Stay America * 462,000 14,495
....................................................................
Graff Pay-Per-View *+ 650,000 2,194
....................................................................
Interstate Hotels * 135,300 3,010
....................................................................
Penske Motorsports * 250,000 6,563
....................................................................
Platinum Entertainment * 250,000 4,000
....................................................................
Speedway Motorsports * 200,000 5,125
....................................................................
Studio Plus America * 102,000 3,341
....................................................................
Viacom * 152,000 5,795
....................................................................
Viacom (Class B) * 700,000 27,212
....................................................................
91,680
............
Consumer Services 3.7%
Ambassadors International *+ 433,000 6,062
....................................................................
America Online * 300,000 13,088
....................................................................
Apollo Group * 959,850 26,636
....................................................................
CUC International * 2,000,000 71,000
....................................................................
</TABLE>
14
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Equity Corp International * 90,500 $ 2,432
....................................................................
Glacier Water Services * 100,000 1,975
....................................................................
Learning Tree International * 126,500 3,858
....................................................................
Sotheby's (Class A) 200,000 2,900
....................................................................
Sylvan Learning Systems * 539,000 20,415
....................................................................
TRM Copy Centers * 250,000 2,828
....................................................................
York Group 96,900 1,647
....................................................................
152,841
............
Total Consumer 592,229
............
TECHNOLOGY 18.6%
Computer Hardware 0.4%
Security Dynamics Technologies * 200,000 16,425
....................................................................
16,425
............
Computer Software 9.1%
Adobe Systems 1,000,000 35,687
....................................................................
BMC Software * 500,000 29,812
....................................................................
Broderbund Software * 500,000 16,188
....................................................................
Cadence Design Systems * 236,000 7,965
....................................................................
Cerner * 478,600 10,290
....................................................................
Electronic Arts * 400,000 10,650
....................................................................
EPIC * 500,000 12,875
....................................................................
Expert Software * 250,000 1,953
....................................................................
Factset Research Systems * 50,000 850
....................................................................
Informix * 1,000,000 22,438
....................................................................
Intuit * 1,000,000 47,000
....................................................................
Maxis *+ 700,000 14,088
....................................................................
Oracle Systems * 600,000 23,662
....................................................................
PeopleSoft * 350,000 24,894
....................................................................
PLATINUM technology * 1,750,000 26,359
....................................................................
Premenos Technology * 350,000 6,300
....................................................................
Sybase * 800,000 18,950
....................................................................
Synopsys * 1,000,000 39,875
....................................................................
VERITAS Software * 400,000 17,150
....................................................................
Worldtalk Communications *+ 500,000 5,938
....................................................................
372,924
............
</TABLE>
15
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Peripherals 1.2%
Analog Devices * 1,500,000 $ 38,250
....................................................................
Molex 62,500 2,000
....................................................................
SIPEX * 300,000 6,394
....................................................................
46,644
............
Networking and Telecom Equipment 4.5%
3Com * 700,000 31,981
....................................................................
Ascend Communications * 400,000 22,475
....................................................................
Bay Networks * 1,000,000 25,750
....................................................................
Cascade Communications * 250,000 17,016
....................................................................
FORE Systems * 200,000 7,212
....................................................................
Glenayre Technologies * 250,000 12,484
....................................................................
Intercel * 500,000 10,125
....................................................................
KVH Industries * 300,000 2,794
....................................................................
Level One * 275,000 5,500
....................................................................
Micro Linear * 400,000 2,950
....................................................................
Shiva * 500,000 40,000
....................................................................
Sync Research * 300,000 4,200
....................................................................
Telco Systems * 200,000 3,425
....................................................................
185,912
............
Semiconductors 3.4%
Actel * 485,000 8,942
....................................................................
Altera * 600,000 22,762
....................................................................
Linear Technology 750,000 22,453
....................................................................
Maxim Integrated Products * 1,650,000 45,066
....................................................................
Xilinx * 1,300,000 41,194
....................................................................
140,417
............
Total Technology 762,322
............
BUSINESS SERVICES 28.1%
Telecom Services 4.2%
Arch Communications * 410,447 7,593
....................................................................
Brightpoint * 200,000 4,263
....................................................................
Cellular Communications * 300,000 15,881
....................................................................
Cellular Communications International * 300,000 10,013
....................................................................
Cellular Communications,
$.01 Red. Cv. Pfd. * 104,616 5,518
....................................................................
</TABLE>
16
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Centennial Cellular (Class A) * 350,500 $ 5,871
....................................................................
International CableTel * 266,666 7,900
....................................................................
Metromedia International * 1,259,500 15,429
....................................................................
Millicom International Cellular * 150,000 7,097
....................................................................
Mobile Telecommunication Technologies * 81,900 1,193
....................................................................
MobileMedia * 1,000,000 12,000
....................................................................
Paging Network * 1,713,600 40,805
....................................................................
Palmer Wireless * 500,000 10,094
....................................................................
Pronet * 500,000 6,156
....................................................................
Tele-Save Holdings * 77,850 1,635
....................................................................
Vanguard Cellular * 845,000 18,537
....................................................................
169,985
............
Computer Services 6.0%
Acxiom * 250,000 8,516
....................................................................
BDM International * 180,600 8,398
....................................................................
BISYS Group * 600,000 22,537
....................................................................
Concord EFS * 700,000 25,025
....................................................................
FIserv * 410,400 12,415
....................................................................
Health Management Systems * 119,700 3,815
....................................................................
National Data 716,000 24,523
....................................................................
Paychex 1,875,000 90,117
....................................................................
Payco American * 470,500 4,293
....................................................................
Sterling Commerce * 82,800 3,074
....................................................................
SunGard Data Systems * 1,100,000 44,069
....................................................................
246,782
............
Transportation 0.4%
Landstar Systems * 400,000 11,500
....................................................................
M.S. Carriers * 200,000 4,150
....................................................................
15,650
............
Media and Advertising 2.9%
ADVO 1,125,000 11,672
....................................................................
CAI Wireless * 680,250 6,250
....................................................................
Catalina Marketing * 382,000 34,953
....................................................................
Chancellor Corporation Delaware * 35,500 1,116
....................................................................
Clear Channel Communications * 100,000 8,238
....................................................................
Jacor Communications * 300,000 9,319
....................................................................
Metromail * 400,000 8,950
....................................................................
People's Choice TV * 333,305 5,999
....................................................................
</TABLE>
17
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Renaissance Communications * 500,000 $ 16,125
....................................................................
Scandinavian Broadcasting System * 300,000 7,406
....................................................................
United International Holdings (Class A) * 425,000 5,950
....................................................................
Wireless One * 200,000 3,525
....................................................................
119,503
............
Environmental 2.9%
Allied Waste Industries * 200,000 1,763
....................................................................
Continental Waste Industries *+ 1,000,000 22,375
....................................................................
Philip Environmental * 1,000,000 7,875
....................................................................
Republic Industries * 1,300,000 37,944
....................................................................
Sanifill * 651,400 32,081
....................................................................
Superior Services * 548,500 9,187
....................................................................
United Waste Systems * 240,000 7,680
....................................................................
118,905
............
Engineering and Construction 0.2%
Insituform Technologies (Class A) * 1,087,125 8,493
....................................................................
8,493
............
Miscellaneous Business Services 7.8%
APAC TeleServices * 104,200 3,725
....................................................................
Apache Medical Systems * 80,000 969
....................................................................
BT Office Products International * 500,000 8,937
....................................................................
Career Horizons *+ 936,800 32,788
....................................................................
CDI * 100,000 3,375
....................................................................
Copart *+ 791,600 13,061
....................................................................
Corporate Express * 838,400 33,588
....................................................................
HFS * 1,100,000 77,000
....................................................................
Hughes Supply 200,000 6,950
....................................................................
International Imaging Materials * 95,000 2,233
....................................................................
Lanvision Systems * 222,000 2,609
....................................................................
Olsten 1,050,000 30,844
....................................................................
Orthodontic Centers of America * 608,000 15,960
....................................................................
Quintiles Transnational * 130,000 8,515
....................................................................
Red Roof Inns * 354,500 5,007
....................................................................
Rexel * 200,000 2,825
....................................................................
Romac International * 100,000 2,538
....................................................................
Shorewood Packaging * 50,000 766
....................................................................
SITEL * 375,600 15,681
....................................................................
Staffing Resources *# 200,000 4,250
....................................................................
</TABLE>
18
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Strategic Distribution *+ 1,518,000 $ 11,907
....................................................................
Trident International * 135,000 2,903
....................................................................
Viking Office Products * 529,000 16,564
....................................................................
Wackenhut Corrections * 260,000 8,677
....................................................................
WorldCorp *+ 890,000 6,008
....................................................................
317,680
............
Distribution 3.7%
Alliance Entertainment *+ 2,050,000 14,094
....................................................................
Fisher Scientific 200,000 7,500
....................................................................
Henry Schein * 250,000 9,547
....................................................................
Jaco Electronics *+ 239,000 2,465
....................................................................
JP Foodservice *+ 1,000,000 24,625
....................................................................
MSC * 300,000 9,675
....................................................................
Patterson Dental * 600,000 21,600
....................................................................
Pioneer-Standard Electronics 378,900 4,973
....................................................................
Richfood Holdings 666,200 21,610
....................................................................
Tech Data * 500,000 10,906
....................................................................
U. S. Office Products * 100,000 4,187
....................................................................
Watsco (Class A) + 1,065,300 22,371
....................................................................
153,553
............
Total Business Services 1,150,551
............
ENERGY 3.4%
Exploration and Production 0.5%
Barrett Resources * 163,400 4,861
....................................................................
Devon Energy 300,387 7,360
....................................................................
Noble Affiliates 200,000 7,550
....................................................................
19,771
............
Energy Services 2.9%
BJ Services * 525,000 18,441
....................................................................
Camco International 550,000 18,631
....................................................................
Coflexip ADR * 228,000 3,990
....................................................................
Cooper Cameron * 650,000 28,437
....................................................................
Geophysique (FRF) * 36,613 2,178
....................................................................
Oceaneering International * 700,000 10,588
....................................................................
Smith International * 600,000 18,075
....................................................................
</TABLE>
19
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Tuboscope Vetco * 400,000 $ 4,500
....................................................................
Weatherford Enterra * 517,575 15,527
....................................................................
120,367
............
Total Energy 140,138
............
INDUSTRIAL 3.9%
Paper and Forest Products 0.1%
Albany International (Class A) 22,500 509
....................................................................
Lydall * 250,000 5,500
....................................................................
6,009
............
Defense and Aerospace 0.3%
ECC International * 269,600 2,460
....................................................................
ECC International *# 231,900 1,905
....................................................................
EchoStar Communications (Class A) * 225,000 6,328
....................................................................
10,693
............
Auto Related 1.4%
APS Holding * 192,800 4,218
....................................................................
Custom Chrome * 240,000 6,420
....................................................................
Jason * 520,832 4,264
....................................................................
Methode Electronics (Class A) 437,100 7,540
....................................................................
OEA 900,000 33,750
....................................................................
56,192
............
Machinery 1.6%
Berg Electronics Holdings * 200,000 4,750
....................................................................
Danaher 400,000 17,400
....................................................................
DT Industries 35,500 652
....................................................................
Farrel 200,000 800
....................................................................
Teleflex 374,600 17,887
....................................................................
TriMas 1,024,500 23,948
....................................................................
65,437
............
Specialty Chemicals 0.5%
Gelman Sciences *+ 500,000 11,312
....................................................................
Polymer Group * 415,000 7,263
....................................................................
Synalloy 223,650 3,578
....................................................................
22,153
............
Total Industrial 160,484
............
</TABLE>
20
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
MISCELLANEOUS 0.6%
Delta Pine & Land 600,000 $ 25,350
....................................................................
Total Miscellaneous 25,350
............
Miscellaneous Common Stocks 1.8% 71,351
............
Total Common Stocks (Cost $2,518,052) 3,709,000
............
Short-Term Investments 10.8%
Medium-Term Notes 0.7%
Federal National Mortgage Assn.,
VR, 5.395%, 10/7/96 $ 10,000,000 10,000
....................................................................
PHH, VR, 5.415%, 11/12/96 5,000,000 4,998
....................................................................
SMM Trust, VR, 5.616%, 3/26/97 10,000,000 9,999
....................................................................
Wells Fargo, VR, 5.582%, 9/16/96 5,000,000 4,999
....................................................................
29,996
............
Certificates of Deposit 0.7%
Bank of America, 5.02%, 7/16/96 12,000,000 11,998
....................................................................
Banque Nationale de Paris, 5.44%,
10/22/96 8,000,000 7,999
....................................................................
Toronto Dominion Bank, (London), 5.39%,
10/25/96 10,000,000 9,998
....................................................................
29,995
............
Commercial Paper 9.2%
American Home Food Products,
4(2), 5.42%, 7/19/96 10,000,000 9,973
....................................................................
American Home Products, 4(2),
5.31%, 8/2/96 10,000,000 9,953
....................................................................
Asset Securitization Cooperative, 4(2),
5.34%, 7/8 - 7/10/96 28,000,000 27,965
....................................................................
BMW U.S. Capital, 5.39%, 8/12/96 10,000,000 9,937
....................................................................
BNP Canada, 5.40%, 7/25/96 10,000,000 9,964
....................................................................
Caisse des Depots et Consignations,
4(2), 5.27%, 7/1/96 10,000,000 10,000
....................................................................
Ciba-Geigy, 5.35%, 7/8/96 13,045,000 13,032
....................................................................
Ciesco, 5.35%, 7/23/96 10,000,000 9,967
....................................................................
Den Danske, 5.38%, 8/12/96 10,000,000 9,937
....................................................................
Dillard Investment, 5.31%, 7/16/96 10,000,000 9,978
....................................................................
Du Pont (EI) de Nemours, 5.32%, 7/15/96 20,000,000 19,959
....................................................................
Ford Motor Credit, 5.34%, 7/5/96 20,000,000 19,988
....................................................................
France Telecom, 5.27%, 7/10/96 12,000,000 11,984
....................................................................
Golden Managers Acceptance,
5.42%, 7/17/96 10,000,000 9,976
....................................................................
Internationale Nederland, 5.40%, 7/29/96 10,000,000 9,958
....................................................................
</TABLE>
21
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------
In thousands
<S> <C> <C>
Investments in Commercial Paper through a joint account,
5.49 - 5.68%, 7/1/96 2,878,347 $ 2,878
....................................................................
Island Finance Puerto Rico,
5.35%, 7/23/96 8,500,000 8,472
....................................................................
KFW International, 5.30%, 7/3/96 10,000,000 9,997
....................................................................
Korea Development Bank
5.30%, 7/25/96 10,000,000 9,965
..................................................................
5.33%, 8/7/96 10,000,000 9,945
....................................................................
Kredietbank N.A. Finance
5.31%, 7/3/96 10,000,000 9,997
..................................................................
5.34%, 7/10/96 20,000,000 19,973
....................................................................
Mobil Australia Finance, 4(2),
5.30%, 8/2/96 10,575,000 10,525
....................................................................
Morgan Stanley Group, 5.30%, 7/18/96 10,000,000 9,975
....................................................................
PHH, 5.30%, 7/11/96 9,000,000 8,987
....................................................................
Preferred Receivables Funding
5.32%, 7/2 - 7/9/96 21,000,000 20,985
..................................................................
5.37%, 7/17/96 7,700,000 7,682
....................................................................
Province of Quebec, 5.30%, 7/12/96 10,000,000 9,984
....................................................................
Rockwell International, 5.40%, 7/2/96 10,000,000 9,999
....................................................................
Siemens, 5.35%, 8/6 - 8/12/96 22,400,000 22,271
....................................................................
Southern, 4(2), 5.40%, 7/1/96 10,000,000 10,000
....................................................................
374,206
............
Bank Notes 0.2%
NBD Bank (Michigan), 5.38%, 9/3/96 10,000,000 10,000
....................................................................
10,000
............
Total Short-Term Investments
(Cost $444,197) 444,197
............
</TABLE>
22
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
101.3% of Net Assets (Cost $2,962,249) $ 4,153,197
Other Assets Less Liabilities (53,712)
............
NET ASSETS $ 4,099,485
------------
</TABLE>
+ Affiliated company
* Non-income producing
# Securities contain some restrictions as to public resale--total of such
securities at period-end amounts to 0.7% 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."
FRF French franc
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1996
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
<S> <C>
Investments in securities, at value
Affiliated companies (cost $244,450) $ 293,561
Other companies (cost $2,717,799) 3,859,636
..........
Total investments in securities 4,153,197
Other assets 11,565
..........
Total assets 4,164,762
..........
Liabilities
Total liabilities 65,277
..........
NET ASSETS $4,099,485
----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (902)
Accumulated net realized gain/loss - net of distributions 313,943
Net unrealized gain (loss) 1,190,948
Paid-in-capital applicable to 177,165,835 shares of
$1.00 par value capital stock outstanding;
200,000,000 shares authorized 2,595,496
..........
NET ASSETS $4,099,485
----------
NET ASSET VALUE PER SHARE $ 23.14
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
Statement of Operations
- --------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/96
<S> <C>
Investment Income
Income
Interest $ 7,769
Dividend 6,640
........
Total income 14,409
........
Expenses
Investment management 11,732
Shareholder servicing 3,177
Custody and accounting 147
Prospectus and shareholder reports 128
Registration 52
Legal and audit 21
Directors 19
Miscellaneous 35
........
Total expenses 15,311
........
Net investment income (902)
........
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 259,316
Foreign currency transactions 5
........
Net realized gain (loss) 259,321
Change in net unrealized gain or loss on securities 138,252
........
Net realized and unrealized gain (loss) 397,573
........
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $396,671
--------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/96 12/31/95
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ (902) $ (5,105)
Net realized gain (loss) 259,321 337,164
Change in net unrealized gain or loss 138,252 622,307
.......................
Increase (decrease) in net assets from operations 396,671 954,366
.......................
Distributions to shareholders
Net realized gain - (298,405)
.......................
Capital share transactions *
Shares sold 1,213,173 836,250
Distributions reinvested - 283,060
Shares redeemed (364,904) (569,103)
.......................
Increase (decrease) in net assets from capital
share transactions 848,269 550,207
.......................
Net Assets
Increase (decrease) during period 1,244,940 1,206,168
Beginning of period 2,854,545 1,648,377
.......................
End of period $4,099,485 $2,854,545
-----------------------
* Share information
Shares sold 54,603 43,859
Distributions reinvested - 14,002
Shares redeemed (16,676) (30,271)
.......................
Increase (decrease) in shares outstanding 37,927 27,590
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1996
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 and
commenced operations on June 3, 1960.
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.
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.
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.
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
27
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
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
Commercial Paper Joint Account The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $1,250,373,000 and $714,605,000, respectively, for the
six months ended June 30, 1996.
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, 1996, the aggregate cost of investments for federal income tax and
financial reporting purposes was $2,962,249,000, and net unrealized gain
aggregated $1,190,948,000, of which $1,337,761,000 related to appreciated
investments and $146,813,000 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 $2,280,000 was payable at June 30, 1996. The fee is computed
28
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
daily and paid monthly, and 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 0.305% for assets in excess of $50 billion. At
June 30, 1996, and for the six months then ended, the effective annual group fee
rate was 0.33% and 0.34%, respectively. The fund pays a pro rata share of the
group fee based on the ratio of its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc.
(TRPS) is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price Retirement
Plan Services, Inc., provides subaccounting and recordkeeping services for
certain retirement accounts invested in the fund. 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 $2,787,000 for the six months ended June 30, 1996, of which
$286,000 was payable at period-end.
29
<PAGE>
For yield, price, last transaction,
and current balance, 24 hours,
7 days a week, call:
1-800-638-2587 toll free
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)/.
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor RPRTNHF 6/30/96
