<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
What a year 1995 was for the financial markets and your fund. The stock market,
as measured by the Standard & Poor's 500 Index, had its best year since 1958.
The bond market recorded one of its best years ever as interest rates fell
sharply. While the technology-laden Nasdaq Composite outpaced the S&P 500, other
small stock indices lagged the broad index.
The New Horizons Fund had its best year since 1980 and the third best in
its 35-year history. The fund sharply outperformed the unmanaged major market
indices and the average for other small-company mutual funds for both the 6- and
12-month periods ended December 31. New Horizons was one of the top 25
performing funds in the country for the year, attracting significant new assets
and investors. We want to welcome all our new shareholders.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/95
6 Months 12 Months
----------------------
<S> <C> <C>
New Horizons Fund 25.3% 55.4%
Lipper Small Company
Fund Index 13.9 31.4
Nasdaq Composite* 12.7 39.9
S&P 500 14.5 37.6
- --------------------------------------------------------------------------------
</TABLE>
* Principal only
Small stocks lagged their larger counterparts for the second consecutive
year, but outperformed by a wide margin over the past five years. Small-cap
performance cycles typically last five to seven years with a burst of
outperformance at the end. Therefore, we believe small stocks will regain market
leadership.
YEAR-END DISTRIBUTION
The fund's Board of Directors declared a capital gain distribution of $2.41 per
share (a short-term gain of $0.77 per share plus a long-term gain of $1.64 per
share) payable on December 28 to shareholders of record on December 26. In early
January, we mailed your check or statement reflecting this distribution. Form
1099-DIV, reporting this payment for tax purposes, was sent in late January.
MARKET ENVIRONMENT
The long bull market that has seen stock prices (as measured by the S&P 500)
climb more than sixfold since 1982 was driven primarily by an extended decline
in long-term interest rates. The market stalled in 1994 as the Federal Reserve
gradually tightened to corral a robust economy. Last year, however, the economy
cooled, inflation remained subdued, and interest rates dropped sharply and
unexpectedly, providing new fuel for the market's advance. The 30-year Treasury
bond yield slid almost two percentage points to just under 6% as 1995 came to a
close.
The other major factor behind the bull market of the 1990s has been strong
corporate earnings. Last year, robust profits helped technology and financial
services stocks lead the rally. As the year progressed, the run-up fed on
itself, with investors pouring unprecedented amounts of money into domestic
stock mutual funds, mergers and acquisitions reaching record levels, and
companies launching new and secondary equity offerings in near-record numbers.
On the whole, stock prices barely paused for breath, suffering no serious
decline during the year. The political climate was also favorable, as
Republicans resumed control of Congress for the first time in four decades,
promising smaller government, a capital gains tax cut, and a balanced budget.
However, investor enthusiasm waned somewhat toward year-end as deficit reduction
efforts stalled.
PORTFOLIO REVIEW
Repeating the pattern of the past several years, technology was again the best
perform-
<PAGE>
ing sector of the New Horizons portfolio, despite profit-taking in some areas
late in the year. Six of the fund's top 10 contributors to performance were
technology stocks, led by networking equipment manufacturer ASCEND
COMMUNICATIONS, which rode the wave of investor interest in companies involved
in voice/video/data communications networks. Ascend's stock price rose almost
eightfold. Other top technology performers included software companies INTUIT
and ADOBE SYSTEMS, and semiconductor manufacturer MAXIM INTEGRATED PRODUCTS.
Most semiconductor stocks, however, declined in the fourth quarter as the pace
of new orders slowed and price competition mounted.
Our financial stock holdings also rose sharply in 1995 due to the decline
in interest rates and the strength in the financial markets. The fund's health
care sector, and particularly its biotechnology holdings, had its best year
since 1991. Finally, business services holdings were strong performers
throughout the year, led by payroll processor PAYCHEX, which almost doubled, and
lodging and real estate franchiser HFS, which tripled. For the most part, the
fund also evaded "torpedoes" -- stocks that drop precipitously in response to
unexpected earnings shortfalls -- although it did take a few hits in several
issues, including SYBASE, QUANTUM HEALTH RESOURCES, and CYGNE DESIGNS.
We made no major shifts in sector weightings during the year, as shown in
the table, and the fund remained broadly diversified. We continued to reduce our
consumer holdings in response to broad-based weakness in that sector, while
modestly increasing our technology and business services holdings to just over
half of net assets. We slightly increased our position in health care for the
first time in several years in response to an improved fundamental and
regulatory environment.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Sector Diversification
- --------------------------------------------------------------------------------
12/31/94 12/31/95
-------- --------
<S> <C> <C>
Financial 5% 5%
Health Care 15 16
Consumer 22 19
Technology 23 24
Business Services 25 27
Energy 4 3
Basic Industrial 4 4
Reserves 2 2
-------- --------
Total 100% 100%
- --------------------------------------------------------------------------------
</TABLE>
OUTLOOK
Most of the factors that drove the market higher in 1995 remain favorable, but
are unlikely to be as positive in 1996. Inflation remains subdued and interest
rates should stay low, but further sharp declines appear unlikely. Early 1996
mutual fund inflows appear very strong, and the overall supply/demand
environment remains favorable. Economic growth remains healthy, and while
corporate profits will rise again, their rate of increase will likely drop below
10%. Indeed, the number of companies reporting earnings disappointments
increased significantly at year-end.
As overall economic growth slows, companies showing strong earnings growth
should continue to attract investor attention. Small-company stocks, which
trailed the market advance in late 1995, are due to catch up. On a longer-term
basis, we believe small-cap stocks should outperform the overall market over the
next two years.
Market valuations do not look excessive given the interest rate
environment. The S&P 500 sold for 15.8 times estimated 1996 earnings at the end
of last year. The New Horizons Fund portfolio, which we estimate will show
earnings growth of close to 25% annually over the next three to five years,
sells at an average
2
<PAGE>
of 23.6 times estimated 1996 earnings, a relative P/E of 1.49. While this is the
fund's highest relative P/E since 1984, it is still well below the peak levels
of 2.0 and up that have foretold the end of earlier small-cap performance
cycles. While a short-term correction following 1995's strong advance would not
be surprising, we continue to be optimistic about the fund's longer-term
outlook.
Respectfully submitted,
/s/ John H. Laporte
John H. Laporte
President
January 17, 1996
- --------------------------------------------------------------------------------
A Word on Market Corrections
- --------------------------------------------------------------------------------
After the stock market's spectacular run in 1995, concerns about a "correction"
have intensified. Most market observers consider a correction to be a short and
sometimes steep decline following a period of rising prices. Moderate
corrections of around 10% have been quite common, occurring on average about
once every two years over the last half-century, according to Ned Davis
Research.
The market as measured by the Dow Jones Industrial Average has not
experienced a moderate correction since early 1994. Furthermore, the Dow last
hit a bear market bottom -- defined as a drop of at least 20% -- in October
1990. Therefore, it would not be surprising to see a modest pullback in 1996,
on the order of 5% to 10%. In fact, as we write, the market has gotten off to a
rocky start.
Corrections are not only common, but can be beneficial for long-term
investors, especially those who invest in regular amounts through dollar cost
averaging. In a correction, overall stock prices decline, often leading to more
attractive valuations and good buying opportunities. History has shown that
investors who continue to buy through a downturn fare quite well. In fact, the
Dow has proven resilient in the aftermath of past corrections of around 10%,
taking an average of just six months to recover its losses, according to Ned
Davis. (To realize the benefits of dollar cost averaging, you should be prepared
to continuously purchase securities over a period of time, in up and down
markets. This approach does not assure a gain nor protect you from a loss in
declining markets.)
We raise the issue of a market correction not as a prediction, but as a
reminder that stock prices do not move in only one direction. If you are
satisfied that your investments are appropriate for your various objectives, we
recommend that you stay the course when a correction eventually occurs.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
New Horizons Fund P/E Ratio
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
New Horizons Fund P/E Ratio Relative to the S&P 500 P/E Ratio
- --------------------------------------------------------------------------------
[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.
4
<PAGE>
- --------------------------------------------------------------------------------
Contributions to the Change in Net Asset Value Per Share
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund
Six Months Ended December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TEN BEST CONTRIBUTORS
- --------------------------------------------------------------------------------
<S> <C>
Ascend Communications 28c
Intuit 24
Paychex 20
HFS 19
Maxim Integrated Products 15
CUC International 13
America Online 10
Paging Network 10
Republic Industries* 9
Cascade Communications 8
- --------------------------------------------------------------------------------
Total 156c
<CAPTION>
- --------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
- --------------------------------------------------------------------------------
<S> <C>
Office Depot -6c
Quantum Health Resources 5
North American Biologicals 5
Electronic Arts* 4
Players International 4
Pyxis 4
DSC Communications** 3
Vishay Intertechnology 2
TriMas 2
Silicon Valley Group 2
- --------------------------------------------------------------------------------
Total -37c
- --------------------------------------------------------------------------------
</TABLE>
* Position added
** Position eliminated
Twelve Months Ended December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TEN BEST CONTRIBUTORS
- --------------------------------------------------------------------------------
<S> <C>
Ascend Communications 17c
Paychex 13
Intuit* 13
CUC International 11
Maxim Integrated Products 11
HFS 11
Adobe Systems 10
Xilinx 9
Synopsys 7
Money Store 7
- --------------------------------------------------------------------------------
Total 109c
<CAPTION>
- --------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
- --------------------------------------------------------------------------------
<S> <C>
Sybase -16c
Quantum Health Resources* 11
North American Biologicals 4
Electronic Arts* 4
Cygne Designs** 4
DSC Communications** 4
Franklin Quest** 3
Pyxis 3
AnnTaylor Stores** 3
Office Depot 3
- --------------------------------------------------------------------------------
Total -55c
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
December 31, 1995
Percent of
Company Net Assets
- --------------------------------------------------------------------------------
<S> <C>
CUC International 2.9%
Paychex 2.9
Viacom 2.2
Maxim Integrated Products 2.0
Intuit 1.9
Adobe Systems 1.7
HFS 1.5
Xilinx 1.4
Paging Network 1.4
General Nutrition 1.2
Ascend Communications 1.1
SunGard Data Systems 1.1
Synopsys 1.0
America Online 1.0
Olsten 1.0
ADVO 0.9
OEA 0.9%
BMC Software 0.9
Discount Auto Parts 0.9
Altera 0.9
United HealthCare 0.9
Broderbund Software 0.9
Omnicare 0.9
Catalina Marketing 0.8
Concord EFS 0.8
- --------------------------------------------------------------------------------
Total 33.1%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Periods Ended December 31, 1995
1 Year 5 Years 10 Years
55.44% 26.22% 14.46%
- --------------------------------------------------------------------------------
Investment return and principal value represent past
performance and will vary. Shares may be worth more or less at redemption
than at original purchase.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Note: The index return does not reflect expenses, which have been deducted from
the fund's return.
6
<PAGE>
- --------------------------------------------------------------------------------
Investment Record
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
The table below shows the investment record of one share of the T. Rowe Price
New Horizons Fund, purchased at the initial offering price of $3.33, for the
period 6/3/60 through 12/31/95. Over this time stock prices in general have
risen. The results shown should not be considered a representation of the
dividend income or capital gain or loss which may be realized from an investment
made in the fund today.
- --------------------------------------------------------------------------------
Per Share Data/1/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
With Capital Gains and Income Dividends
Taken in Cash Reinvested in Additional Shares Annual Total Return
--------------------------------- ----------------------------------- On Investment
% Change
--------------------
Year Net Capital Capital
Ended Asset Gain Income Gain Income Value of
12/31 Value Distributions/2/ Dividends Distributions Dividends Investment Fund S&P 500
- ------- ------- ---------------- --------- ------------- --------- ---------- -------- ----------
5 YEARS 5 YEARS
- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1965/3/ $ 4.47 $ 0.30 $0.02 $ 0.31 $0.02 $ 4.85 45.5% 96.5%
1970 8.12 1.64 0.20 1.93 0.23 10.85 123.8 17.8
1 YEAR 1 YEAR
- ------ -------
1971 12.21 0.15 0.05 0.20 0.07 16.71 54.0 14.3
1972 14.59 0.20 0.04 0.28 0.05 20.33 21.7 19.0
1973 8.02 0.69 0.04 0.96 0.06 11.82 -41.9 -14.7
1974 4.86 0.03 0.06 0.05 0.08 7.24 -38.7 -26.5
1975 6.66 -- 0.09 -- 0.14 10.11 39.6 37.2
1976 7.32 -- 0.07 -- 0.11 11.23 11.1 23.9
1977 8.17 -- 0.07 -- 0.11 12.66 12.7 -7.1
1978 9.75 -- 0.10 -- 0.15 15.30 20.8 6.6
1979 13.01 -- 0.16 -- 0.25 20.73 35.5 18.6
1980 19.53 0.37 0.23 0.59 0.37 32.67 57.6 32.4
1981 16.06 1.68 0.32 2.81 0.54 30.11 -7.8 -5.0
1982 15.90 2.62 0.35 4.91 0.66 36.98 22.8 21.6
1983 17.90 0.76 0.20 1.76 0.47 44.21 19.5 22.6
1984 12.78 3.72 0.16 9.19 0.40 39.95 -9.6 6.2
1985 15.13 0.52 0.14 1.63 0.44 49.66 24.3 31.7
1986 12.38 2.64 0.09 8.92 0.30 49.58 -0.2 18.7
1987 9.51 1.93 0.06 7.98 0.24 46.01 -7.2 5.3
1988 10.74 0.03 0.07 0.15 0.34 52.45 14.0 16.5
1989 12.43 1.01 0.07 4.93 0.34 66.19 26.2 31.6
1990 10.61 0.53 0.09 2.83 0.48 59.82 -9.6 -3.1
1991 15.68 0.39 0.05 2.20 0.28 91.10 52.3 30.3
1992 15.53 1.76 -- 10.23 -- 100.74 10.6 7.6
1993 16.16 2.70 -- 17.51 -- 122.91 22.0 10.1
1994 14.76 1.43 -- 10.88 -- 123.28 0.3 1.3
1995 20.50 2.41 -- 20.13 -- 191.64 55.4 37.6
- ---------------------------------------------------------------------------------------------------------------------------------
Total $27.51 $2.73 $110.38 $6.13
</TABLE>
- --------------------------------------------------------------------------------
/1/ Per share figures reflect the 3-for-1 stock split May 1, 1973.
/2/ Includes short-term capital gains of $0.01 in 1969; $0.13 in 1981; $0.17 in
1982; $0.29 in 1984; $0.02 in 1986; $0.06 in 1991; $0.37 in 1993; $0.07 in
1994; and $0.77 in 1995 which are taxable to shareholders at ordinary income
rates.
/3/ From inception 6/3/60 to 12/31/65.
7
<PAGE>
- --------------------------------------------------------------------------------
Portfolio of Investments
T. Rowe Price New Horizons Fund / December 31, 1995
- --------------------------------------------------------------------------------
(values in thousands)
<TABLE>
<CAPTION>
Value
----------
- -------------------------------------------------------------------------------------------
Common Stocks, Convertibles
& Warrants -- 97.9%
- -------------------------------------------------------------------------------------------
<S> <C>
FINANCIAL -- 3.8%
- -------------------------------------------------------------------------------------------
INSURANCE -- 1.5%
285,000 shs CMAC Investment....................................... $ 12,540
207,406 * MAIC Holdings......................................... 6,974
196,350 Mutual Risk Management................................ 8,983
1,000,000 Presidential Life..................................... 9,812
255,500 * United Insurance...................................... 4,807
43,116
FINANCIAL SERVICES -- 2.3%
300,000 * 1st Investors Financial............................... 2,475
150,000 ADVANTA (Class B)..................................... 5,475
330,000 *+ Consumer Portfolio Services........................... 6,084
216,033 Duff & Phelps Credit Rating........................... 3,106
450,000 * ITG................................................... 4,275
275,000 Legg Mason............................................ 7,563
449,998 Mercury Finance....................................... 5,962
1,187,500 Money Store........................................... 18,555
230,000 * Oxford Resources (Class A)............................ 5,261
112,500 * Union Acceptance (Class A)............................ 1,617
400,000 * World Acceptance...................................... 4,375
64,748
TOTAL FINANCIAL 107,864
- -------------------------------------------------------------------------------------------
HEALTH CARE -- 14.5%
- -------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.7%
190,000 * Aronex Pharmaceuticals................................ 807
46,500 * DepoTech.............................................. 872
82,500 * Ethical Holdings ADS.................................. 737
129,310 *# Genta................................................. 247
50,000 # Genta, (Series A)..................................... 388
50,000 wts *# Genta, 10/28/98....................................... 0
251,000 shs * Immulogic Pharmaceutical.............................. 4,785
320,800 * Incyte Pharmaceuticals................................ 8,020
100,000 * Inhale Therapeutic Systems............................ 1,000
175,000 *# Magainin Pharmaceuticals.............................. 2,028
100,000 * Noven Pharmaceuticals................................. 1,119
20,003
BIOTECHNOLOGY -- 4.5%
151,500 * Arris Pharmaceutical.................................. 2,083
100,000 * BioChem Pharma........................................ 4,013
200,000 * Biogen................................................ 12,250
150,000 *# Cambridge Neuroscience................................ 1,215
275,000 * Cell Genesys.......................................... 2,750
<CAPTION>
Value
----------
<C> <S> <C>
200,000 shs * COR Therapeutics...................................... $ 1,650
100,000 * Corvas International.................................. 550
150,000 *# Creative Biomolecules................................. 928
390,000 * Cytel................................................. 2,413
445,000 * CytoTherapeutics...................................... 7,621
100,000 * Energy BioSystems..................................... 738
90,000 * Genzyme Transgenics................................... 411
425,000 *+ Guilford Pharmaceuticals.............................. 6,694
200,000 * Human Genome Sciences................................. 7,625
400,000 * IBAH.................................................. 2,400
214,190 * IBAH, (Series A)...................................... 1,275
642,570 wts * IBAH, 8/9/00.......................................... 0
400,000 shs * IDEXX Laboratories.................................... 18,700
724,700 * Isis Pharmaceuticals
(Class B).......................................... 9,557
500,000 *# Isis Pharmaceuticals.................................. 5,906
200,000 * Matritech............................................. 806
1,469,000 *+ North American Biologicals............................ 15,975
364,700 *+ NPS Pharmaceuticals................................... 6,063
39,000 * Parexel International................................. 1,326
600,000 *+ SangStat Medical...................................... 6,187
200,000 *# T Cell Sciences....................................... 540
740,000 *+ Targeted Genetics..................................... 4,024
1,170,000 *+ Xenova Group ADR...................................... 4,022
127,722
MEDICAL EQUIPMENT -- 1.3%
400,000 Dentsply International................................ 15,975
200,000 * Fresenius USA......................................... 3,975
100,000 * Nellcor............................................... 5,838
300,000 * VISX.................................................. 11,737
37,525
MEDICAL INSTRUMENTS AND DEVICES -- 3.6%
75,000 Arrow International................................... 3,047
300,000 * Bio-Plexus............................................ 3,112
280,000 * Corvita............................................... 2,853
103,600 * Cyberonics............................................ 518
600,000 * Haemonetics........................................... 10,650
107,000 * IGEN.................................................. 615
19,200 * InStent............................................... 290
200,000 * Medisense............................................. 6,362
250,000 Minntech.............................................. 4,906
212,500 * Patterson Dental...................................... 5,764
600,000 * Pyxis................................................. 8,812
290,500 * R. P. Scherer......................................... 14,271
185,000 * ResMed................................................ 2,313
100,000 * SpaceLabs Medical..................................... 2,863
175,000 Sterile Concepts...................................... 2,538
125,000 Stryker............................................... 6,555
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
900,000 shs * Sybron International.................................. $ 21,375
173,200 * Tecnol Medical Products............................... 3,074
18,236 *# Universal Display..................................... 0
100,000 * VIVUS................................................. 3,106
103,024
HEALTH CARE SERVICES -- 4.4%
94,000 * Access Health Marketing............................... 4,183
52,900 * Apria Healthcare...................................... 1,508
493,400 *+ Community Care of America............................. 5,181
225,000 * Health Management
(Class A).......................................... 5,878
100,000 Healthdyne............................................ 875
650,000 * HEALTHSOUTH........................................... 18,931
145,000 * OccuSystems........................................... 2,900
$7,776,000 Omnicare, 5.75%, 10/1/03.............................. 24,276
900,000 shs *+ Quantum Health Resources.............................. 8,831
743,800 * Quorum Health Group................................... 16,271
352,100 * Raytel Medical........................................ 3,081
178,500 * Syncor International.................................. 1,227
112,700 * Synetic............................................... 3,296
375,000 United HealthCare..................................... 24,562
252,300 * Veterinary Centers
of America......................................... 4,258
125,258
TOTAL HEALTH CARE 413,532
- -------------------------------------------------------------------------------------------
CONSUMER -- 18.7%
- -------------------------------------------------------------------------------------------
SOFT GOODS RETAILERS -- 0.1%
200,000 * Jos. A. Bank Clothiers................................ 412
170,000 * Supreme International................................. 2,699
3,111
HARD GOODS RETAILERS -- 4.3%
279,900 * Brookstone............................................ 2,274
401,900 * Circle K.............................................. 10,198
800,000 * Discount Auto Parts................................... 24,900
1,500,000 * General Nutrition..................................... 34,875
433,600 *+ Little Switzerland.................................... 1,653
300,000 * Micro Warehouse....................................... 13,050
146,600 * Neostar Retail Group.................................. 1,072
900,000 * Office Depot.......................................... 17,775
350,000 * PETsMART.............................................. 10,850
327,500 * TSC................................................... 6,632
123,279
CONSUMER NONDURABLES -- 4.2%
21,900 Anthony Industries.................................... 504
1,750,000 *+ Benson Eyecare........................................ 15,750
530,000 * Chaus Bernard......................................... 1,921
200,000 * Chic by H.I.S......................................... 1,100
131,800 * ERO................................................... 807
357,000 * Jones Apparel Group................................... 14,057
350,000 * Marisa Christina...................................... 5,928
<CAPTION>
Value
----------
<C> <S> <C>
107,500 shs * Marker International.................................. $ 1,303
500,000 * Nautica Enterprises................................... 21,688
189,600 * Norton McNaughton..................................... 2,109
300,000 *+ Norwood............................................... 5,138
150,000 * Oakley................................................ 5,100
281,000 * Perrigo............................................... 3,354
187,000 Rival................................................. 4,172
700,000 *+ Score Board........................................... 3,150
100,000 St. John Knits........................................ 5,313
200,000 * Sunglass Hut International............................ 4,725
400,000 * Tommy Hilfiger........................................ 16,950
338,600 * Westpoint Stevens..................................... 6,751
119,820
RESTAURANTS -- 1.9%
200,000 * Boston Chicken........................................ 6,412
130,000 * DAKA International.................................... 3,559
531,500 * Lone Star Steakhouse
& Saloon........................................... 20,363
390,400 * Outback Steakhouse.................................... 14,030
309,700 Sbarro................................................ 6,659
300,000 *+ Schlotzsky's.......................................... 3,188
54,211
ENTERTAINMENT -- 3.2%
252,100 * Bristol Hotel......................................... 6,145
371,924 * Carmike Cinemas (Class A)............................. 8,368
57,300 * Casino America........................................ 355
95,000 * Extended Stay America................................. 2,589
500,000 * Graff Pay-Per-View.................................... 2,344
239,000 * Players International................................. 2,569
90,000 * Savoy Pictures........................................ 568
153,300 * Scandinavian Broadcasting
System............................................. 3,401
152,000 * Viacom (Class A)...................................... 6,973
1,194,748 * Viacom (Class B)...................................... 56,601
89,913
CONSUMER SERVICES -- 5.0%
424,400 *+ Advanced Ross......................................... 11,857
433,000 *+ Ambassadors International............................. 4,249
750,000 * America Online........................................ 27,984
276,600 * Apollo Group.......................................... 10,822
2,429,574 * CUC International..................................... 82,909
100,000 * Glacier Water Services................................ 1,863
200,000 Sotheby's (Class A)................................... 2,850
142,534
TOTAL CONSUMER 532,868
- -------------------------------------------------------------------------------------------
TECHNOLOGY -- 24.2%
- -------------------------------------------------------------------------------------------
COMPUTER HARDWARE -- 0.9%
242,900 * Security Dynamics
Technologies....................................... 13,299
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
400,000 shs * Silicon Graphics...................................... $ 11,000
24,299
COMPUTER SOFTWARE -- 11.1%
800,000 Adobe Systems......................................... 49,700
139,700 * Baan Company.......................................... 6,321
600,000 * BMC Software.......................................... 25,575
400,000 * Broderbund Software................................... 24,350
750,000 * Electronic Arts....................................... 19,641
175,000 * Expert Software....................................... 2,472
750,000 * Informix.............................................. 22,547
700,000 * Intuit................................................ 54,687
250,000 * Oracle Systems........................................ 10,594
400,000 * PeopleSoft............................................ 17,050
1,187,200 * PLATINUM technology................................... 21,889
474,900 * Sybase................................................ 17,037
750,000 * Synopsys.............................................. 28,594
322,900 * Tivoli Systems........................................ 10,837
115,300 * Verity................................................ 5,044
316,338
PERIPHERALS -- 0.6%
400,000 * Analog Devices........................................ 14,150
62,500 Molex................................................. 2,000
16,150
NETWORKING AND TELECOM
EQUIPMENT -- 4.6%
350,000 * 3Com.................................................. 16,341
250,000 * ALANTEC............................................... 14,562
400,000 * Ascend Communications................................. 32,475
300,000 * Bay Networks.......................................... 12,319
150,000 * Cascade Communications................................ 12,769
200,000 * Glenayre Technologies................................. 12,450
610,300 *+ Microcom.............................................. 15,906
200,000 * Shiva................................................. 14,600
131,422
SEMICONDUCTORS -- 7.0%
485,000 * Actel................................................. 5,244
500,000 * Altera................................................ 24,844
750,000 * Cirrus Logic.......................................... 14,859
500,000 Linear Technology..................................... 19,687
1,500,000 * Maxim Integrated Products............................. 57,750
135,100 * Microchip Technology.................................. 4,948
300,000 * Silicon Valley Group.................................. 7,594
600,000 * Vishay Intertechnology................................ 18,900
1,340,700 * Xilinx................................................ 40,724
183,200 * Zilog................................................. 6,710
201,260
TOTAL TECHNOLOGY 689,469
<CAPTION>
Value
----------
<C> <S> <C>
- -------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 27.0%
- -------------------------------------------------------------------------------------------
TELECOM SERVICES -- 3.9%
5,200,000 shs * Arch Communications (144a)
6.75%, 12/1/03..................................... $ 7,594
290,000 * CellStar.............................................. 7,576
104,616 * Cellular Communications,
$.01 Red Cv. Pfd. ................................. 5,205
435,000 Frontier.............................................. 13,050
266,666 * International CableTel................................ 6,467
500,000 * Mobile Telecommunication
Technologies....................................... 10,687
770,300 * MobileMedia........................................... 17,043
1,640,000 * Paging Network........................................ 39,462
239,200 * Vanguard Cellular..................................... 4,814
111,898
COMPUTER SERVICES -- 7.8%
250,000 * Acxiom................................................ 6,875
600,000 * BISYS Group........................................... 18,300
570,000 * Concord EFS........................................... 23,798
342,260 First Data............................................ 22,889
410,400 * FIserv................................................ 12,286
79,800 * Health Management Systems............................. 3,092
650,000 National Data......................................... 16,088
1,658,575 Paychex............................................... 82,410
470,500 * Payco American........................................ 4,235
1,100,000 * SunGard Data Systems.................................. 30,937
220,910
TRANSPORTATION -- 0.1%
200,000 * M.S. Carriers......................................... 3,950
MEDIA AND ADVERTISING -- 2.7%
1,000,000 ADVO.................................................. 26,000
680,250 * CAI Wireless.......................................... 6,505
382,000 * Catalina Marketing.................................... 23,970
100,000 * Clear Channel
Communications..................................... 4,413
333,305 * People's Choice TV.................................... 6,291
425,000 * United International
Holdings (Class A)................................. 6,216
200,000 * Wireless One.......................................... 3,375
76,770
ENVIRONMENTAL -- 1.9%
488,667 * Continental Waste..................................... 5,528
650,000 * Republic Industries................................... 23,359
651,400 * Sanifill.............................................. 21,741
120,000 * United Waste Systems.................................. 4,440
55,068
ENGINEERING AND CONSTRUCTION -- 0.4%
1,087,125 * Insituform Technologies
(Class A).......................................... 12,502
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
MISCELLANEOUS BUSINESS SERVICES -- 7.4%
100,800 shs * Affiliated Computer
Services (Class A)................................. $ 3,780
131,900 * APAC TeleServices..................................... 4,402
500,000 * BT Office Products
International...................................... 8,000
418,400 *+ Career Horizons....................................... 13,964
170,900 * CDI................................................... 3,076
406,000 * Copart................................................ 10,708
129,500 * COREStaff............................................. 4,775
600,000 * Corporate Express..................................... 18,000
155,000 * DIMAC................................................. 4,224
521,000 * HFS................................................... 42,592
700,000 Olsten................................................ 27,650
330,500 * Orthodontic Centers of
America............................................ 15,905
200,000 * Quintiles Transnational............................... 8,175
50,000 * Shorewood Packaging................................... 719
142,800 * SITEL................................................. 4,355
305,600 * Sylvan Learning Systems............................... 8,977
36,700 * Team Rental Group..................................... 307
300,000 * Viking Office Products................................ 13,969
460,000 Watsco (Class A)...................................... 8,223
890,000 *+ WorldCorp............................................. 8,900
210,701
DISTRIBUTION -- 2.8%
1,600,000 * Alliance Entertainment................................ 15,200
200,000 Fisher Scientific..................................... 6,675
239,000 *+ Jaco Electronics...................................... 2,793
922,200 *+ JP Foodservice........................................ 17,522
300,000 * MSC................................................... 8,250
225,000 Pioneer Standard Electronics.......................... 2,967
666,200 Richfood Holdings..................................... 17,988
500,000 * Tech Data............................................. 7,531
78,926
TOTAL BUSINESS SERVICES 770,725
- -------------------------------------------------------------------------------------------
ENERGY -- 3.3%
- -------------------------------------------------------------------------------------------
EXPLORATION AND PRODUCTION -- 0.5%
300,387 Devon Energy.......................................... 7,660
200,000 Noble Affiliates...................................... 5,975
210,000 Southwestern Energy................................... 2,677
16,312
ENERGY SERVICES -- 2.8%
475,000 * BJ Services........................................... 13,775
550,000 Camco International................................... 15,400
228,000 Coflexip ADR.......................................... 4,304
153,700 * Cooper Cameron........................................ 5,456
67,043 * Geophysique (FRF)..................................... 2,204
700,000 * Oceaneering International............................. 9,013
<CAPTION>
Value
----------
<C> <S> <C>
600,000 shs * Smith International................................... $ 14,100
517,575 * Weatherford Enterra................................... 14,945
79,197
TOTAL ENERGY 95,509
- -------------------------------------------------------------------------------------------
INDUSTRIAL -- 3.6%
- -------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.3%
450,000 Albany International
(Class A).......................................... 8,156
AUTO RELATED -- 1.4%
192,800 * APS Holding........................................... 4,290
520,832 * Jason................................................. 3,483
437,100 Methode Electronics
(Class A).......................................... 6,229
861,400 OEA................................................... 25,734
39,736
MACHINERY -- 1.3%
400,000 Danaher............................................... 12,700
200,000 Farrel................................................ 650
200,000 Teleflex.............................................. 8,200
800,000 TriMas................................................ 15,100
36,650
AEROSPACE AND DEFENSE -- 0.1%
69,600 * ECC International..................................... 765
231,900 *# ECC International..................................... 2,296
3,061
SPECIALTY CHEMICALS -- 0.5%
447,300 *+ Gelman Sciences....................................... 11,294
223,650 Synalloy.............................................. 4,669
15,963
TOTAL INDUSTRIAL 103,566
- -------------------------------------------------------------------------------------------
PROCESS INDUSTRIES -- 0.5%
- -------------------------------------------------------------------------------------------
FOREST PRODUCTS -- 0.5%
399,999 Delta Pine & Land..................................... 14,700
TOTAL PROCESS INDUSTRIES 14,700
TOTAL MISCELLANEOUS COMMON STOCKS -- 2.3% 65,103
TOTAL COMMON STOCKS, CONVERTIBLES &
WARRANTS (COST $1,740,640) 2,793,336
- -------------------------------------------------------------------------------------------
Short-Term Investments -- 2.3%
- -------------------------------------------------------------------------------------------
MEDIUM-TERM NOTES -- 0.7%
$10,000,000 Federal National
Mortgage Assn.,
6.00%, 10/7/96..................................... 10,000
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
----------
<C> <S> <C>
5,000,000 PHH, VR, 5.82%, 11/12/96.............................. $ 4,997
5,000,000 Wells Fargo, VR,
5.813%, 9/16/96.................................... 4,999
19,996
CERTIFICATES OF DEPOSIT -- 0.3%
5,000,000 Banque National De Paris,
5.77%, 2/1/96...................................... 5,000
5,000,000 Wachovia Bank Georgia,
5.75%, 1/31/96..................................... 5,000
10,000
COMMERCIAL PAPER -- 1.3%
5,000,000 Abbey National North
America, 5.72%, 1/31/96............................ 4,927
5,000,000 ANZ (Delaware),
5.668%, 2/9/96..................................... 4,928
5,000,000 Chase Manhattan,
5.67%, 2/15/96..................................... 4,929
5,000,000 Daimler-Benz North America,
5.66%, 2/15/96..................................... 4,923
2,584,108 Investments in Commercial
Paper through a joint
account,
5.90-6.05%, 1/2/96................................. 2,583
5,000,000 Sears Roebuck Acceptance,
5.75%, 1/29/96..................................... 4,929
5,000,000 Southern New England
Telecommunications,
5.70%, 2/2/96...................................... 4,948
5,000,000 U.S. Borax & Chemical, 4(2),
5.67%, 2/12/96..................................... 4,925
37,092
TOTAL SHORT-TERM INVESTMENTS (COST $67,088) 67,088
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.2%
OF NET ASSETS (COST $1,807,728) 2,860,424
- -------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES.............................................. (5,879)
----------
NET ASSETS................................................................. $2,854,545
==========
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
+ Affiliated company
* Non-income producing
# Securities contain some restrictions as to public resale -- total of such
securities at year-end amounts to 0.5% 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 a year-end amounts to 0.3%
of net assets.
FRF French franc
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / Year Ended December 31, 1995
(in thousands)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value
Affiliated companies (cost $151,006)............................................ $ 178,425
Other companies (cost $1,656,722)............................................... 2,681,999
----------
Total investments in securities................................................. 2,860,424
Other assets.................................................................... 37,429
----------
Total assets....................................................................... 2,897,853
----------
LIABILITIES........................................................................ 43,308
----------
NET ASSETS......................................................................... $2,854,545
==========
NET ASSETS CONSIST OF:
Accumulated net realized gain/loss - net of distributions.......................... 54,622
Net unrealized gain (loss)......................................................... 1,052,696
Paid-in-capital applicable to 139,238,701 shares of $1.00 par
value capital stock outstanding; 200,000,000 shares authorized.................. 1,747,227
----------
NET ASSETS......................................................................... $2,854,545
==========
NET ASSET VALUE PER SHARE.......................................................... $20.50
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / Year Ended December 31, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Interest................................................................ $ 10,470
Dividend................................................................ 4,180
--------
Total income............................................................ 14,650
--------
Expenses
Investment management................................................... 15,035
Shareholder servicing................................................... 4,032
Custody and accounting.................................................. 275
Prospectus and shareholder reports...................................... 245
Registration............................................................ 55
Legal and audit......................................................... 43
Directors............................................................... 40
Miscellaneous........................................................... 30
--------
Total expenses.......................................................... 19,755
--------
Net investment income...................................................... (5,105)
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities..................................... 337,164
Change in net unrealized gain or loss on securities........................ 622,307
--------
Net realized and unrealized gain (loss).................................... 959,471
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.......................... $954,366
========
- ---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
----------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income............................................................ $ (5,105) $ (8,172)
Net realized gain (loss)......................................................... 337,164 120,130
Change in net unrealized gain or loss............................................ 622,307 (108,665)
---------- ----------
Increase (decrease) in net assets from operations................................ 954,366 3,293
---------- ----------
Distributions to shareholders
Net realized gain................................................................ (298,405) (146,497)
---------- ----------
Capital share transactions*
Shares sold...................................................................... 836,250 481,534
Distributions reinvested......................................................... 283,060 138,041
Shares redeemed.................................................................. (569,103) (455,716)
---------- ----------
Increase (decrease) in net assets from capital share transactions................ 550,207 163,859
---------- ----------
Increase (decrease) in net assets................................................... 1,206,168 20,655
NET ASSETS
Beginning of period................................................................. 1,648,377 1,627,722
---------- ----------
End of period....................................................................... $2,854,545 $1,648,377
========== ==========
- -------------------------------------------------------------------------------------------------------------------
* Share information
Shares sold...................................................................... 43,859 30,376
Distributions reinvested......................................................... 14,002 9,474
Shares redeemed.................................................................. (30,271) (28,895)
---------- ----------
Increase (decrease) in shares outstanding........................................ 27,590 10,955
========== ==========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund / December 31, 1995
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.
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 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
A) 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.
B) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $1,360,180,000 and $1,140,567,000, respectively, for the
year ended December 31, 1995.
16
<PAGE>
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, $5,105,000 of
undistributed net investment income was reclassified as a decrease to
undistributed net realized gains during the year ended December 31, 1995. The
results of operations and net assets were not affected by the reclassifications.
At December 31, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,807,728,000 and net unrealized gain
aggregated $1,052,696,000, of which $1,127,326,000 related to appreciated
investments and $74,630,000 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 $1,612,000 was payable at December 31, 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
December 31, 1995, and for the year then ended, the effective annual Group Fee
rate was 0.34%. The fund pays a pro rata share of the Group Fee based on the
ratio of its net assets to those of the Group.
In addition, the fund has entered into agreements with the Manager and two
wholly owned subsidiaries of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (TRPS), is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. 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 $3,592,000 for
the year ended December 31, 1995, of which $386,000 was payable at period-end.
17
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price New Horizons Fund
<TABLE>
For a share outstanding throughout each period
----------------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $14.76 $16.16 $15.53 $15.68 $10.61
------ ------ ------ ------ ------
Investment activities
Net investment income......................... (0.04) (0.07) (0.07) (0.04) 0.05
Net realized and unrealized gain (loss)....... 8.19 0.10 3.40 1.65 5.46
------ ------ ------ ------ ------
Total from investment activities................. 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................... $20.50 $14.76 $16.16 $15.53 $15.68
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Total return..................................... 55.4% 0.3% 22.0% 10.6% 52.3%
Ratio of expenses to average net assets.......... 0.90% 0.93% 0.93% 0.93% 0.92%
Ratio of net investment income to
average net assets............................ (0.23)% (0.50)% (0.50)% (0.32)% 0.35%
Portfolio turnover rate.......................... 55.9% 44.3% 49.4% 49.6% 32.5%
Net assets, end of period (in thousands)......... $2,854,545 $1,648,377 $1,627,722 $1,547,258 $1,470,440
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
T. Rowe Price New Horizons Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
T. Rowe Price New Horizons Fund, Inc., including the portfolio of investments,
as of December 31, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights, referred
to above, present fairly, in all material respects, the financial position of T.
Rowe Price New Horizons Fund, Inc. as of December 31, 1995, the results of its
operations, the changes in its net assets and financial highlights for each of
the respective periods stated in the first paragraph in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 18, 1996
19
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
T. Rowe Price
- -------------
NEW HORIZONS FUND
DECEMBER 31, 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)/.
Invest With Confidence /(R)/ [LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price
NHF
