<PAGE>
Semiannual Report
New
Horizons
Fund
- -------------
June 30, 1997
- -------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
New Horizons Fund
. The U.S. stock market posted record gains in the first half of 1997, but
small-company stocks in general and small growth stocks in particular trailed
large-cap stocks by wide margins.
. The New Horizons Fund struggled in this unfavorable environment. Its six-
month gain lagged both its comparison indexes and its Lipper peer group.
. Most fund sectors turned in mixed performances for the half. Energy services
stocks did best, but weakness in technology, particularly networking issues,
hurt fund performance.
. Small-cap stock valuations are now historically low, suggesting that the bulk
of the underperformance for small-cap growth stocks is behind us.
<PAGE>
Fellow Shareholders
It was a frustrating first half of the year for the New Horizons Fund. While the
large-company Standard & Poor's 500 Stock Index soared to new highs throughout
the first six months, small-cap stocks showed much more modest gains (even while
hitting new highs as well). Small-cap growth companies, where New Horizons
focuses, lagged even more, eking out only small gains for the half.
As the performance table below shows, the New Horizons Fund trailed the market
indices for the 6- and 12-month periods and also lagged the performance of the
average small-company mutual fund due to investor preference for small-cap value
stocks over growth. We will discuss this issue more fully under Market
Environment. It is worth noting, however, that New Horizons performed
significantly better than its indices and most small-company funds in 1995 and
1996, when small-cap growth stocks were the dominant performers. Lastly, the
fund's five-year return of 182.7% for the period ending June 30, 1997, remains
substantially ahead of all the relevant market indices (the Russell 2000, for
example, was up 82.4% for the same period) and most small-company mutual funds,
as represented by the Lipper Small Cap Fund Index's 123% gain. (See page 9 for
additional performance information.)
- ----------------------
Performance Comparison
- ----------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 6/30/97 6 Months 12 Months
- ----------------------------------------------------
<S> <C> <C>
New Horizons Fund 1.15% 4.87%
....................................................
Russell 2000 Index 10.20 16.33
....................................................
Lipper Small Cap Fund Index 6.04 6.35
....................................................
S&P 500 20.61 34.70
....................................................
</TABLE>
Please note that we have replaced the Nasdaq Composite Index in the Performance
Comparison table with the Russell 2000. The average market capitalization of the
Nasdaq has grown in recent years, and the Russell has become a more
representative small-cap stock index. (As we transition to using this new index,
you will still find the Nasdaq's long-term performance listed in the cumulative
performance graph on page 9.)
1
<PAGE>
Market Environment
The economy remains nearly ideal for stock market investors. First quarter
annualized gross domestic product (GDP) growth of 5.9% was the strongest since
the fourth quarter of 1987 and occurred without any trace of a pickup in
underlying inflationary expectations. The Federal Reserve maintained its
vigilance to prevent the economy from overheating and inflation from
accelerating by raising the federal funds target rate 0.25% in March. The
economy is now in its seventh year of expansion, and recent corporate profit
growth has actually accelerated to mid-teen levels, unprecedented for this stage
of the economic cycle.
Supply and demand forces also remain positive for the stock market. The public
has poured an average of nearly $20 billion per month into equities so far this
year, a rate which, if maintained, could outpace last year's record net inflows.
Yet the supply of stocks has remained stable: record merger and acquisition
activity as well as continued corporate stock buybacks are more than offsetting
the rate of new stock issuance by corporations.
It is no surprise that these forces have propelled the market to a series of new
highs. In fact, the S&P 500's second quarter gain of 17.5% was its strongest
quarterly return since March 1987, and its first half advance of 20.6% was well
above even the extraordinary average annual rate of increase the market has
achieved over the past 15 years. Even a 10% market correction in March and
April, in response to the Fed's tightening, was quickly forgotten as the market
raced back to record levels late in the quarter.
WHAT IS SURPRISING . . . IS THE DRAMATIC UNDERPERFORMANCE OF SMALL STOCKS . . .
What is surprising, however, is the dramatic underperformance of small stocks
during this year's market advance. Over the past 12 months, the Russell 2000 has
underperformed the S&P 500 by 18 percentage points. The last time small-caps
lagged by such a wide margin was October 1990, just prior to an early '90s bull
run that lasted until May of 1996--a five-and-a-half-year period. That surge was
fitting, given that euphoric market environments are usually periods of strong
small-company performance. Hindsight suggests to us now that, in last year's
second quarter, small-cap growth stocks got ahead of themselves, leading to a
sharp correction in mid-1996 and a change in market leadership to large, blue
chip stocks. The last 12 months, however, have more than corrected last year's
overvaluation.
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------
Small-Cap Stock Returns
- --------------------------------------------------
Periods Ended 6/30/97 6 Months 12 Months
- --------------------------------------------------
<S> <C> <C>
Russell 2000 Index 10.20% 16.33%
..................................................
Russell 2000 Growth Index 5.23 4.60
..................................................
Russell 2000 Value Index 14.81 28.24
..................................................
</TABLE>
Within the small-stock sector itself, another dramatic divergence has occurred.
As the table at left shows, small growth companies have sharply lagged small
value issues over the last 12 months. The 23-percentage-point underperformance
of the Russell 2000 Growth Index versus the Russell 2000 Value Index is
extraordinary for a 12-month period.
PORTFOLIO REVIEW
As the fund's small first half gain suggests, results from the portfolio's
various sectors were mixed. As was the case in the second half of 1996, the
best-performing group was energy services. In this sector, Smith International,
Cooper Cameron, and Weatherford Enterra were all major gainers. The leading
contributor to fund performance in the six months was General Nutrition, a long-
time fund holding that is the major retailer of vitamin and other health-related
products. After a tough year in 1996, when sales slowed sharply in several
product categories, results have improved markedly in 1997, and the stock rose
over 60% in the half. More than offsetting General Nutrition, however, was poor
performance among our restaurant holdings, particularly Boston Chicken, which
fell over 50% in the period. An unanticipated sales slowdown, overly aggressive
expansion plans, and a precarious financial structure combined to bring into
question the company's future growth potential.
Technology stocks were a drag on fund performance overall as extreme weakness in
networking stocks more than offset gains in our semiconductor holdings. Five of
the fund's 10 worst contributors came from the networking segment, where fears
of increased competition, earnings shortfalls, and confusion over the impact of
several large mergers led to declines of about 50% in many cases. We were
particularly hurt by 3Com, FORE Systems, and Shiva (which we eliminated). Ascend
Communications declined due to product transition concerns as well as
uncertainty surrounding its proposed merger with
3
<PAGE>
Cascade Communications, another portfolio holding. In the semiconductor area,
Maxim Integrated Products, Xilinx, and Altera were among the fund's 10 best
performers as investors sought out proprietary semiconductor producers serving
diversified end markets with relatively limited exposure to the personal
computer market.
In the health care sector, gains in health care service companies such as Quorum
Health Group and Renal Care Group were largely offset by declines in our
biotechnology holdings. The fund was also hurt by several company-specific
issues. Along with other investors, we were victimized by management fraud and
manipulation of the financial statements at Mercury Finance, a used car auto
finance company, and are seeking redress through legal action. We were also hurt
by a sharp decline at Employee Solutions, a company providing human resource
services to small businesses, which was forced to bolster its insurance
reserves.
Sector weightings did not change significantly, as shown in the accompanying
table. The major change was a reduction in our technology holdings from 22% of
the portfolio to 16%. In recent years, our technology weighting has varied
between 15% and 25% of the portfolio, and our present exposure reflects our
concern over near-term fundamentals, primarily in the software and networking
areas. We have recently experienced a number of earnings disappointments, and
summer is seasonally a weak time for many technology companies, both in terms of
fundamentals and stock price action. However, favorable product cycles in 1998,
such as the volume availability of Intel's new Pentium II microprocessor and
Microsoft's next operating system upgrades, may lead us to increase our holdings
in this sector later in the year.
- ----------------------
Sector Diversification
- ------------------------------------
<TABLE>
<CAPTION>
12/31/96 6/30/97
- ------------------------------------
<S> <C> <C>
Financial 6% 6%
....................................
Health Care 17 18
....................................
Consumer 15 15
....................................
Technology 22 16
....................................
Business Services 28 29
....................................
Energy 5 5
....................................
Industrial 5 4
....................................
Reserves 2 7
- ------------------------------------
Total 100% 100%
</TABLE>
OUTLOOK
Overall stock market fundamentals are strong. Economic growth remains healthy
and has slowed to a more sustainable pace. Inflation
4
<PAGE>
remains extremely subdued, even given relatively tight labor markets. Long-term
interest rates have declined 32 basis points since peaking above 7% in April.
Corporate profits are surprisingly robust. Washington seems quite benign toward
business and investors, as reflected in record low government deficits and the
possibility of capital gains tax reductions. Stock market valuation measures,
however, appear quite extended--at or near all-time highs in terms of
price/earnings (P/E) and price/book value ratios, and all-time lows in dividend
yields. Despite high valuations, the favorable economic backdrop does not make a
major stock market decline likely, in our opinion.
We are obviously disappointed by the recent underperformance of small stocks in
general and small growth stocks and the New Horizons Fund in particular. The
only near-term catalyst to improved relative performance for New Horizons is
much improved relative valuations. The fund's relative P/E, based on 12-month
forward estimated earnings, has historically fluctuated between 1.0 and 2.0
times the S&P 500 P/E over the fund's 37-year history. As the chart on the next
page shows, New Horizons' relative P/E has declined from 1.60 at the end of the
third quarter of 1996 to 1.17 as of midyear 1997. This puts the P/E firmly in
the low end of its historical range and suggests that the bulk of the
underperformance for small growth stocks is behind us. It is possible that the
relative P/E will remain in the low end of its range for a while, as it did in
the late 1980s, but the relative risk/return in the small-cap sector now appears
decidedly favorable for investors with a long-term investment horizon.
It is also worth keeping in mind that long-term returns for small-caps have
proven superior to that of the market as a whole, albeit with greater
volatility. We remain optimistic about the prospects of the companies in the
portfolio and about the longer-term performance of the New Horizons Fund.
Respectfully submitted,
/s/John H. Laporte
John H. Laporte
President and Chairman of the Investment Advisory Committee
July 18, 1997
5
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
- ---------------------------
New Horizons Fund P/E Ratio
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
12/61 36.3
25.3
06/62 16.6
16.8
19.2
18.4
06/63 19.7
23
24
20.1
06/64 20.6
20.1
22
19.9
06/65 17.5
21.1
24.6
20.4
06/66 21.4
20.7
23.6
30.9
06/67 32.4
36.4
31.9
29.2
06/68 37.1
32.8
33.5
30.1
06/69 31.4
28.6
28.6
25
06/70 17.7
20.4
22.2
29.7
06/71 28
27.7
28.6
33.5
06/72 33.5
29.7
29.2
22.6
06/73 17.9
21.7
16.8
15.7
06/74 12.5
8.7
8.7
13.7
06/75 15.3
11.7
11.5
12.4
06/76 10.7
10.1
10.4
9
06/77 8.7
8.6
8.8
8.6
06/78 9.5
10.7
8.9
9.6
06/79 9
9.8
10.7
9.3
06/80 10.4
14.2
16.5
15.7
06/81 14.9
11.3
11.5
10.4
06/82 10.8
13.1
16.8
19.4
06/83 21.5
19.3
17.3
14.4
06/84 13.9
13.5
12.4
14.5
06/85 15
14
16.1
17.3
06/86 17.5
14.6
14.5
18.3
06/87 17.9
18.2
12.5
13.9
06/88 14.7
12.8
12.5
13
06/89 13.8
14.5
14.3
13.4
06/90 15
12
13.6
18.3
06/91 17.1
17.8
19.8
19.4
06/92 16.8
17
19.8
19
06/93 19.7
20.9
21.5
20
06/94 18.2
18.9
18.2
18.9
06/95 20.4
22.8
23.6
24.1
06/96 26.2
3/31/97 21.4
6/30/97 23.1
</TABLE>
[LINE GRAPH APPEARS HERE]
- -------------------------------------------------
New Horizons Fund P/E Relative To The S&P 500 P/E
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
12/61 1.62
1.33
06/62 1.11
1.1
1.12
1.11
06/63 1.14
1.28
1.32
1.16
06/64 1.14
1.09
1.18
1.2
06/65 1.08
1.22
1.47
1.27
06/66 1.4
1.5
1.56
1.83
06/67 1.91
2.01
1.91
1.86
06/68 2.14
1.84
1.86
1.71
06/69 1.86
1.64
1.57
1.43
06/70 1.27
1.28
1.31
1.62
06/71 1.63
1.63
1.8
1.99
06/72 2.11
1.97
1.9
1.67
06/73 1.46
1.67
1.47
1.39
06/74 1.19
1.13
1.04
1.25
06/75 1.29
1.16
1.17
1.14
06/76 1.03
1.04
1.07
0.94
06/77 1.02
1.05
1.11
1.18
06/78 1.22
1.29
1.17
1.28
06/79 1.18
1.2
1.32
1.37
06/80 1.28
1.63
1.88
1.89
06/81 1.94
1.66
1.53
1.53
06/82 1.54
1.7
1.89
2.11
06/83 2.17
2.05
1.86
1.6
06/84 1.62
1.52
1.35
1.42
06/85 1.35
1.27
1.3
1.26
06/86 1.15
1.05
1.02
1.1
06/87 1.13
1.14
1.01
1.09
06/88 1.2
1.12
1.14
1.12
06/89 1.12
1.08
1.01
0.99
06/90 1.05
0.96
1.01
1.2
06/91 1.17
1.15
1.19
1.23
06/92 1.06
1.06
1.2
1.14
06/93 1.2
1.25
1.34
1.32
06/94 1.26
1.29
1.37
1.32
06/95 1.34
1.44
1.49
1.48
06/96 1.58
3/31/97 1.23
6/30/97 1.17
</TABLE>
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.
6
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
<TABLE>
<CAPTION>
6 Months Ended 6/30/97
Ten Best Contributors Ten Worst Contributors
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General Nutrition 10 cents Boston Chicken -16 cents
............................................................ ...........................................................
BMC Software 10 3Com 10
............................................................ ...........................................................
Maxim Integrated Products 9 FORE Systems 8
............................................................ ...........................................................
Xilinx 6 Shiva ** 8
............................................................ ...........................................................
Paychex 6 Employee Solutions 7
............................................................ ...........................................................
Cooper Cameron 5 Mercury Finance 7
............................................................ ...........................................................
Altera 5 PETsMART 7
............................................................ ...........................................................
Sylvan Learning Systems 5 Network General 6
............................................................ ...........................................................
America Online 5 Cascade Communications 6
............................................................ ...........................................................
Weatherford Enterra 5 Paging Network 5
- ------------------------------------------------------------ -----------------------------------------------------------
Total 66 cents Total -80 cents
</TABLE>
<TABLE>
<CAPTION>
12 Months Ended 6/30/97
Ten Best Contributors Ten Worst Contributors
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maxim Integrated Products 24 cents Shiva ** -19 cents
............................................................ ...........................................................
BMC Software 18 Paging Network 14
............................................................ ...........................................................
Cooper Cameron 17 Boston Chicken 11
............................................................ ...........................................................
Altera 14 Corporate Express 11
............................................................ ...........................................................
Linear Technology 12 Intuit 11
............................................................ ...........................................................
Xilinx 10 Glenayre Technologies 10
............................................................ ...........................................................
General Nutrition 10 Apria Healthcare 9
............................................................ ...........................................................
Paychex 10 PETsMART 8
............................................................ ...........................................................
Smith International 9 Employee Solutions * 8
............................................................ ...........................................................
Jones Apparel Group 9 Cascade Communications 7
- ------------------------------------------------------------ -----------------------------------------------------------
Total 133 cents Total -108 cents
</TABLE>
* Position added
** Position eliminated
7
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
- --------------------
Portfolio Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/97
- -----------------------------------------------------------------------------
<S> <C>
Paychex 2.3%
.............................................................................
CUC International 1.7
.............................................................................
BMC Software 1.6
.............................................................................
Maxim Integrated Products 1.5
.............................................................................
HFS 1.4
- -----------------------------------------------------------------------------
Cooper Cameron 1.3
.............................................................................
Analog Devices 1.1
.............................................................................
General Nutrition 1.1
.............................................................................
Quorum Health Group 1.1
.............................................................................
Xilinx 1.1
- -----------------------------------------------------------------------------
BISYS Group 1.0
.............................................................................
Orthodontic Centers of America 1.0
.............................................................................
Linear Technology 1.0
.............................................................................
SunGard Data Systems 1.0
.............................................................................
Republic Industries 1.0
- -----------------------------------------------------------------------------
Altera 1.0
.............................................................................
Sylvan Learning Systems 0.9
.............................................................................
Weatherford Enterra 0.9
.............................................................................
Catalina Marketing 0.9
.............................................................................
Omnicare 0.9
- -----------------------------------------------------------------------------
OEA 0.9
.............................................................................
Mutual Risk Management 0.8
.............................................................................
OccuSystems 0.8
.............................................................................
PennCorp Financial Group 0.8
.............................................................................
Synopsys 0.8
- -----------------------------------------------------------------------------
Total 27.9%
</TABLE>
8
<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.
[LINE GRAPH APPEARS HERE]
NEW HORIZONS FUND
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date Nasdaq Composite Russell Index 2000 New Horizons Fund
---- ---------------- ------------------ -----------------
<S> <C> <C> <C>
6/30/87 10,000 10,000 10,000
6/30/88 9,293 9,390 9,355
6/30/89 10,250 10,592 10,315
6/30/90 10,886 10,906 12,049
6/30/91 11,207 11,050 12,823
6/30/92 13,271 12,657 13,493
6/30/93 16,576 15,949 17,551
6/30/94 16,624 16,641 18,648
6/30/95 21,981 19,988 25,717
6/30/96 27,904 24,763 36,375
6/30/97 33,957 28,806 38,147
</TABLE>
- -------------------------------------
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 6/30/97 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Horizons Fund 4.87% 26.94% 23.10% 14.33%
................................................................................
</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.
9
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited
- --------------------
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
6/30/97 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 21.77 $ 20.50 $ 14.76 $ 16.16 $ 15.53 $ 15.68
.....................................................................................
Investment activities
Net investment income (0.06) (0.08) (0.04) (0.07) (0.07) (0.04)
Net realized and
unrealized gain (loss) 0.31 3.54 8.19 0.10 3.40 1.65
.....................................................................................
Total from
investment activities 0.25 3.46 8.15 0.03 3.33 1.61
.....................................................................................
Distributions
Net realized gain - (2.19) (2.41) (1.43) (2.70) (1.76)
.....................................................................................
NET ASSET VALUE
End of period $ 22.02 $ 21.77 $ 20.50 $ 14.76 $ 16.16 $ 15.53
-------------------------------------------------------------------------------------
Ratios/Supplemental Data
Total return 1.15% 17.03% 55.44% 0.30% 22.01% 10.58%
...............................................................................................................................
Ratio of expenses to
average net assets 0.90%+ 0.90% 0.90% 0.93% 0.93% 0.93%
...............................................................................................................................
Ratio of net investment
income to average
net assets (0.59)%+ (0.41)% (0.23)% (0.50)% (0.50)% (0.32)%
...............................................................................................................................
Portfolio turnover rate 37.4%+ 41.4% 55.9% 44.3% 49.4% 49.6%
...............................................................................................................................
Average commission
rate paid $ 0.0339 $ 0.0416 - - - -
...............................................................................................................................
Net assets, end of period
(in millions) $ 4,663 $ 4,363 $ 2,855 $ 1,648 $ 1,628 $ 1,547
...............................................................................................................................
</TABLE>
+ Annualized.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. Rowe Price New Horizons Fund
- ------------------------------------------------------------------------------
Unaudited June 30, 1997
<TABLE>
<CAPTION>
- ------------------------
Portfolio of Investments Shares/Par Value
- ------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Equity Investments ** 93.4%
FINANCIAL 5.8%
Insurance 3.7%
CMAC Investment 600,000 $ 28,650
..............................................................................
Medical Assurance * 233,041 9,467
..............................................................................
Mutual Risk Management 860,000 39,452
..............................................................................
PennCorp Financial Group 1,000,000 38,500
..............................................................................
Presidential Life 977,200 18,964
..............................................................................
PXRE 450,000 13,838
..............................................................................
UICI * 754,500 22,211
..............................................................................
171,082
...........
Financial Services 2.1%
Aames Financial 1,000,000 18,500
..............................................................................
Delta Financial * 344,500 6,589
..............................................................................
First Alliance * 150,000 4,294
..............................................................................
First Investors Financial + * 400,000 2,950
..............................................................................
ITG * 300,000 7,894
..............................................................................
Legg Mason 275,000 14,798
..............................................................................
Mercury Finance 1,000,000 2,437
..............................................................................
Money Store 1,187,500 33,955
..............................................................................
Ocwen Financial 116,000 3,748
..............................................................................
World Acceptance * 400,000 2,575
..............................................................................
97,740
...........
Total Financial 268,822
...........
HEALTH CARE 17.8%
Pharmaceuticals 1.0%
Alkermes * 215,600 3,153
..............................................................................
Flamel Technologies ADS * 140,000 604
..............................................................................
Genta * ++ 12,931 23
..............................................................................
Genta, (Series A), Cv. Pfd. * 50,000 125
..............................................................................
Genta, Warrants, 10/28/98 * ++ 50,000 0
..............................................................................
Immulogic Pharmaceuticals * 1,000,000 3,125
..............................................................................
Incyte Pharmaceuticals * 200,000 13,175
..............................................................................
Inhale Therapeutic Systems * 300,000 7,313
..............................................................................
</TABLE>
11
<PAGE>
T. Rowe Price New Horizons Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Inhale Therapeutic Systems * ++ 243,750 $ 5,347
..............................................................................
Magainin Pharmaceuticals * 444,600 3,279
..............................................................................
Magainin Pharmaceuticals * ++ 518,921 3,386
..............................................................................
Magainin Pharmaceuticals, Warrants, 8/6/01 * ++ 337,299 0
..............................................................................
Perrigo * 750,000 9,422
..............................................................................
48,952
...........
Biotechnology 4.5%
Affymetrix * 84,300 2,924
..............................................................................
Anesta * 200,000 3,825
..............................................................................
Biogen * 400,000 13,563
..............................................................................
BioTransplant * 117,500 756
..............................................................................
Cambridge Neuroscience * 450,000 1,884
..............................................................................
Cell Genesys * 275,000 1,341
..............................................................................
Cephalon * 300,000 3,459
..............................................................................
COR Therapeutics * 700,000 7,525
..............................................................................
Corvas International + * 900,000 5,738
..............................................................................
Creative Biomolecules * 150,000 1,073
..............................................................................
Cytel * 390,000 652
..............................................................................
CytoTherapeutics * 400,000 2,125
..............................................................................
GeneMedicine * 300,000 2,288
..............................................................................
Genome Therapeutics * 120,000 1,020
..............................................................................
Gilead Sciences * 500,000 13,844
..............................................................................
Gliatech * 230,000 1,883
..............................................................................
Guilford Pharmaceuticals * 500,000 12,250
..............................................................................
Human Genome Sciences * 360,000 11,993
..............................................................................
IBAH, (Series A), Cv. Pfd. * ++ 214,190 1,912
..............................................................................
IBAH, Warrants, 8/9/00 * ++ 642,570 636
..............................................................................
IDEXX Laboratories * 854,600 10,602
..............................................................................
Imclone Systems * 650,000 3,981
..............................................................................
Intercardia * 150,000 3,497
..............................................................................
Isis Pharmaceuticals * 500,000 7,328
..............................................................................
Ligand Pharmaceuticals * 447,500 5,734
..............................................................................
MedImmune * 282,000 5,288
..............................................................................
Millennium Pharmaceuticals * 58,000 944
..............................................................................
NaPro BioTherapeutics + * 696,200 5,091
..............................................................................
NPS Pharmaceuticals + * 900,000 8,663
..............................................................................
Oncogene Science * 687,500 3,652
..............................................................................
</TABLE>
12
<PAGE>
T. Rowe Price New Horizons Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------
In thousands
<S> <C> <C>
PathoGenesis * 600,000 $ 17,437
..............................................................................
PerSeptive Biosystems * 200,000 1,200
..............................................................................
Pharmacopeia * 400,000 5,200
..............................................................................
Protein Design Labs * 293,200 8,283
..............................................................................
SangStat Medical * 300,000 6,844
..............................................................................
Shaman Pharmaceuticals + * 1,000,000 5,844
..............................................................................
Synaptic Pharmaceutical + * 400,000 5,350
..............................................................................
T Cell Sciences * 200,000 381
..............................................................................
Targeted Genetics * 535,000 1,521
..............................................................................
Targeted Genetics, Warrants, 7/31/97 * 135,000 1
..............................................................................
Triangle Pharmaceuticals * 100,000 2,456
..............................................................................
Visible Genetics * 300,000 1,781
..............................................................................
Xenova Group (GBP) * 517,500 2,801
..............................................................................
Xenova Group ADR + * 1,170,000 6,216
..............................................................................
210,786
...........
Medical Equipment 0.8%
Cholestech * 480,000 2,730
..............................................................................
Dentsply International 692,200 33,875
..............................................................................
36,605
...........
Medical Instruments and Devices 3.9%
Arrow International 645,000 18,907
..............................................................................
Autonomous Technologies * 200,000 788
..............................................................................
Cardima + 500,000 3,031
..............................................................................
CardioGenesis * 330,000 3,279
..............................................................................
Cardiometrics * 200,000 1,525
..............................................................................
CardioVascular Dynamics * 120,000 945
..............................................................................
Conceptus * 60,000 566
..............................................................................
Diagnostic Products 320,000 10,100
..............................................................................
Haemonetics * 400,000 7,650
..............................................................................
Incontrol * 470,000 4,230
..............................................................................
Innovasive Devices * 100,000 1,162
..............................................................................
Mentor 416,700 12,358
..............................................................................
Metra Biosystems * 375,000 1,805
..............................................................................
Minntech 245,000 2,542
..............................................................................
Novoste + * 421,000 6,999
..............................................................................
R. P. Scherer * 400,000 20,650
..............................................................................
ResMed * 287,500 6,864
..............................................................................
</TABLE>
13
<PAGE>
T. Rowe Price New Horizons Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------
In thousands
<S> <C> <C>
ReSound * ++ 773,023 $ 3,957
..............................................................................
Steris * 200,000 7,450
..............................................................................
Stryker 600,000 21,019
..............................................................................
Sybron International * 900,000 35,887
..............................................................................
Utah Medical Products * 400,000 3,150
..............................................................................
Vital Signs 300,000 5,156
..............................................................................
180,020
...........
Health Care Services 7.6%
Access Health Marketing * 108,000 2,660
..............................................................................
American Oncology Resources * 150,000 2,522
..............................................................................
APACHE Medical Systems * 160,000 1,200
..............................................................................
Apria Healthcare * 454,100 8,060
..............................................................................
Capstone Pharmacy Services * 750,000 8,133
..............................................................................
Carematrix * 400,000 9,875
..............................................................................
Cerner * 400,000 8,400
..............................................................................
Collaborative Clinical Research * 275,000 1,977
..............................................................................
Harborside Healthcare * 342,200 4,876
..............................................................................
HCIA * 25,000 838
..............................................................................
Health Management Systems * 144,700 665
..............................................................................
HealthSouth * 1,000,000 24,937
..............................................................................
IDX Systems * 72,500 2,510
..............................................................................
LanVision Systems * 222,000 1,443
..............................................................................
Medic Computer Systems * 742,000 16,533
..............................................................................
Medical Alliance * 185,200 914
..............................................................................
Medical Manager * 390,000 5,826
..............................................................................
Medpartners * 236,000 5,104
..............................................................................
NCS HealthCare * 200,000 6,137
..............................................................................
NeoPath * 550,000 10,416
..............................................................................
OccuSystems + * 1,350,000 39,192
..............................................................................
Omnicare 1,277,131 40,070
..............................................................................
Physician Reliance Network * 1,000,000 9,281
..............................................................................
Quorum Health Group * 1,400,000 49,875
..............................................................................
Raytel Medical + * 470,000 5,434
..............................................................................
Renal Care Group + * 770,000 32,147
..............................................................................
Renal Treatment Center * 250,000 6,719
..............................................................................
Stericycle * 425,000 3,427
..............................................................................
Summit Medical Systems * 100,000 284
..............................................................................
Sunrise Assisted Living * 250,000 8,781
..............................................................................
</TABLE>
14
<PAGE>
T. Rowe Price New Horizons Fund
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Synetic * 112,700 $ 4,156
..............................................................................
Synetic, Cv. Sub. Deb., 5.00%, 2/15/07 $12,000,000 10,550
..............................................................................
Total Renal Care * 318,100 12,784
..............................................................................
United Dental Care + * 564,500 8,397
..............................................................................
UroMed, Cv. Sub. Note, (144a) 6.00%, 10/15/03 $ 3,000,000 1,665
..............................................................................
355,788
...........
Total Health Care 832,151
...........
CONSUMER 15.1%
Soft Goods Retailers 0.9%
AnnTaylor Stores * 600,000 11,700
..............................................................................
Gymboree * 655,600 15,714
..............................................................................
Jos. A. Bank Clothiers * 200,000 750
..............................................................................
Urban Outfitters + * 1,014,700 14,016
..............................................................................
42,180
...........
Hard Goods Retailers 2.7%
Brookstone * 90,000 776
..............................................................................
Discount Auto Parts + * 1,004,100 19,580
..............................................................................
Dominicks Supermarkets * 386,400 10,288
..............................................................................
General Nutrition * 1,800,000 50,288
..............................................................................
Guitar Center * 268,900 4,554
..............................................................................
Micro Warehouse * 500,000 8,578
..............................................................................
PETsMART * 1,500,000 17,203
..............................................................................
TSC + * 828,900 14,713
..............................................................................
125,980
...........
Consumer Durables 0.1%
GT Bicycles * 312,300 2,498
..............................................................................
2,498
...........
Consumer Nondurables 2.7%
American Pad & Paper * 1,281,750 21,630
..............................................................................
Designer Holdings * 700,000 7,131
..............................................................................
Jones Apparel Group * 600,000 28,650
..............................................................................
Linens 'n Things * 371,300 11,000
..............................................................................
Nautica Enterprises * 830,100 21,972
..............................................................................
Norton McNaughton * 128,500 643
..............................................................................
Norwood Promotional Products + * 300,000 4,350
..............................................................................
QuikSilver * 252,000 8,032
..............................................................................
</TABLE>
15
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Rival 187,000 $ 2,676
................................................................................
Score Board * 719,845 697
................................................................................
Tommy Hilfiger * 400,000 16,075
................................................................................
WestPoint Stevens * 123,600 4,828
................................................................................
127,684
.............
Restaurants 2.1%
Boston Chicken * 1,355,500 18,935
................................................................................
Einstein/Noah Bagel * 750,000 8,930
................................................................................
Lone Star Steakhouse & Saloon * 900,000 23,456
................................................................................
Outback Steakhouse * 1,550,000 37,442
................................................................................
Quality Dining * 400,000 1,887
................................................................................
Schlotzsky's + * 320,000 4,360
................................................................................
Silver Diner + * ++ 750,000 2,025
................................................................................
97,035
.............
Entertainment 0.8%
Carmike Cinemas (Class A) * 456,924 14,964
................................................................................
Cinar Films (Class B) * 106,850 3,406
................................................................................
Dover Downs Entertainment + 150,000 2,700
................................................................................
Penske Motorsports * 257,000 8,369
................................................................................
Speedway Motorsports * 250,600 5,451
................................................................................
Spice Entertainment + * 650,000 2,295
................................................................................
37,185
.............
Consumer Services 5.8%
Ambassadors International + * 433,000 5,791
................................................................................
America Online * 350,000 19,469
................................................................................
Apollo Group * 1,000,000 35,313
................................................................................
CUC International * 3,000,000 77,438
................................................................................
Diamond Home Services * 390,800 3,810
................................................................................
Equity Corp International * 978,400 23,665
................................................................................
Extended Stay America * 1,663,994 26,208
................................................................................
Golden Books Financing, Cv. Pfd., 8.75% 70,000 4,333
................................................................................
Interstate Hotels * 135,300 3,983
................................................................................
Signature Resorts * 256,000 8,864
................................................................................
Strayer Education 362,400 14,043
................................................................................
Sylvan Learning Systems * 1,256,800 42,653
................................................................................
TRM Copy Centers + * 425,000 4,542
................................................................................
270,112
.............
Total Consumer 702,674
.............
</TABLE>
16
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
- -------------------------------------------
TECHNOLOGY 15.7%
- -------------------------------------------
Computer Hardware 0.5%
Discreet Logic * 15,000 $ 240
................................................................................
Security Dynamics Technologies * 622,600 22,920
................................................................................
23,160
.............
Computer Software 6.2%
AmeriTrade * 83,700 1,313
................................................................................
BMC Software * 1,350,000 74,841
................................................................................
Broderbund Software * 200,000 4,950
................................................................................
Cadence Design Systems * 396,000 13,266
................................................................................
CBT ADR * 200,000 12,562
................................................................................
Citrix Systems * 125,000 5,488
................................................................................
Clarify * 200,000 2,256
................................................................................
Cognos * 500,000 15,594
................................................................................
Exigent International * 125 0
................................................................................
Exigent International, Warrants, 3/24/00 * 200 0
................................................................................
Expert Software * 29,700 120
................................................................................
Integrated Systems * 5,900 69
................................................................................
Macromedia * 100,000 866
................................................................................
McAfee Associates * 200,000 12,612
................................................................................
Metacreations Software * 20,000 215
................................................................................
Oracle * 700,000 35,241
................................................................................
PLATINUM technology * 2,000,000 26,750
................................................................................
Pure Atria * 500,000 7,094
................................................................................
Remedy * 318,300 12,682
................................................................................
Synopsys * 1,025,000 37,829
................................................................................
Vantive * 600,000 17,025
................................................................................
VERITAS Software * 150,000 7,519
................................................................................
Worldtalk Communications * 5,900 30
................................................................................
288,322
.............
Peripherals 0.1%
Cognex * 9,400 249
................................................................................
Molex 78,125 2,854
................................................................................
3,103
.............
Networking and Telecom Equipment 1.9%
3Com * 750,000 33,727
................................................................................
Ascend Communications * 250,000 9,820
................................................................................
</TABLE>
17
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Cascade Communications * 300,000 $ 8,278
................................................................................
CIDCO * 235,000 3,224
................................................................................
FORE Systems * 500,000 6,797
................................................................................
Glenayre Technologies * 400,000 6,562
................................................................................
Level One * 200,000 7,700
................................................................................
Network General * 800,000 11,875
................................................................................
Sync Research * 400,000 1,438
................................................................................
Telco Systems * 20,000 176
................................................................................
VideoServer * 25,000 334
................................................................................
89,931
.............
Semiconductors 7.0%
Adaptec * 500,000 17,375
................................................................................
Altera * 911,300 46,049
................................................................................
Analog Devices * 2,000,000 53,125
................................................................................
Burr Brown * 200,000 6,881
................................................................................
Lam Research * 75,000 2,784
................................................................................
Lattice Semiconductor * 200,000 11,288
................................................................................
Linear Technology 900,000 46,491
................................................................................
Maxim Integrated Products * 1,260,000 71,584
................................................................................
Microchip Technology * 500,000 14,859
................................................................................
SIPEX * 252,000 8,978
................................................................................
Xilinx * 1,000,000 49,031
................................................................................
328,445
.............
Total Technology 732,961
.............
BUSINESS SERVICES 28.7%
Telecom Services 2.4%
Arch Communications * 410,447 3,181
................................................................................
Cellular Communications International * 462,500 15,320
................................................................................
Commnet Cellular * 100,000 3,488
................................................................................
Intercel * 500,000 6,938
................................................................................
Intermedia Communications * 250,000 8,062
................................................................................
Metromedia International * 1,265,700 16,059
................................................................................
Millicom International Cellular * 200,000 9,625
................................................................................
NTL International * 266,666 6,600
................................................................................
Paging Network * 1,713,600 15,074
................................................................................
Palmer Wireless * 600,000 10,162
................................................................................
</TABLE>
18
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
ProNet + * 750,000 $ 2,953
................................................................................
SmarTalk TeleServices * 350,000 5,469
................................................................................
Vanguard Cellular (Class A) * 645,000 8,909
................................................................................
111,840
.............
Computer Services 6.9%
Acxiom * 500,000 10,281
................................................................................
Affiliated Computer Services (Class A) * 100,000 2,792
................................................................................
BDM International * 500,000 11,438
................................................................................
BISYS Group * 1,135,000 47,635
................................................................................
Checkfree * 338,400 5,954
................................................................................
Concord EFS * 515,000 13,422
................................................................................
Envoy * 1,700 55
................................................................................
FIserv * 200,000 8,950
................................................................................
Harbinger * 350,000 9,844
................................................................................
HBO 66,500 4,580
................................................................................
National Data 600,000 25,987
................................................................................
Paychex 2,812,500 107,930
................................................................................
Registry * 25,000 1,153
................................................................................
Sterling Commerce * 700,000 23,013
................................................................................
SunGard Data Systems * 997,000 46,360
................................................................................
319,394
.............
Transportation 0.9%
Coach USA * 716,400 19,029
................................................................................
Landstar Systems + * 771,000 21,733
................................................................................
40,762
.............
Media and Advertising 3.9%
ADVO * 1,125,000 18,281
................................................................................
American Radio Systems (Class A) * 300,000 11,963
................................................................................
Catalina Marketing * 845,000 40,666
................................................................................
Clear Channel Communications * 200,000 12,312
................................................................................
Getty Communications ADS * 700,000 10,106
................................................................................
Jacor Communications * 588,200 22,554
................................................................................
Lamar Advertising * 206,000 5,279
................................................................................
Metro Networks * 405,500 9,884
................................................................................
Metromail * 400,000 9,900
................................................................................
Outdoor Systems * 585,500 22,322
................................................................................
Pegasus Communications * 283,000 3,060
................................................................................
</TABLE>
19
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Scandinavian Broadcasting Systems * 300,000 $ 6,525
................................................................................
United International Holdings (Class A) * 425,000 4,383
................................................................................
Universal Outdoor Holdings * 114,000 3,983
................................................................................
Wireless One * 200,000 531
................................................................................
181,749
.............
Environmental 2.2%
Republic Industries * 1,860,000 46,267
................................................................................
Superior Services * 677,000 15,952
................................................................................
United Waste Systems * 240,000 9,825
................................................................................
USA Waste Services * 845,800 32,669
................................................................................
104,713
.............
Engineering and Construction 0.4%
Insituform Technologies (Class A) * 1,087,125 6,726
................................................................................
Tetra Tech * 382,500 9,252
................................................................................
Toll Brothers * 250,000 4,594
................................................................................
20,572
.............
Miscellaneous Business Services 7.0%
AccuStaff * 1,433,304 33,951
................................................................................
Alternative Resources * 707,000 14,383
................................................................................
Comfort Systems USA * 117,500 1,836
................................................................................
Copart + * 743,000 12,422
................................................................................
COREStaff * 1,250,000 33,828
................................................................................
Data Processing Resources * 175,000 4,091
................................................................................
Donnelley Enterprise Solutions + * 350,000 3,609
................................................................................
Employee Solutions * 910,000 5,048
................................................................................
G & K Services * 157,500 5,827
................................................................................
HFS * 1,100,000 63,800
................................................................................
International Imaging Materials * 300,000 4,819
................................................................................
MemberWorks 350,000 5,622
................................................................................
META Group * 200,000 4,300
................................................................................
NFO Research + * 530,400 13,525
................................................................................
Orthodontic Centers of America + * 2,600,300 47,374
................................................................................
Rexel * 120,000 2,220
................................................................................
Romac International * 118,000 3,909
................................................................................
SITEL * 823,900 16,993
................................................................................
Source Services + * 600,000 16,012
................................................................................
SRS Labs * 200,000 2,088
................................................................................
Staffing Resources * ++ 200,000 1,700
................................................................................
</TABLE>
20
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Trident International * 135,000 $ 2,379
................................................................................
Viking Office Products * 400,000 7,575
................................................................................
Wackenhut Corrections * 260,000 7,572
................................................................................
West TeleServices * 97,000 1,434
................................................................................
Whittman-Hart * 302,000 8,513
................................................................................
WorldCorp + * 890,000 2,281
................................................................................
327,111
.............
Distribution 5.0%
BT Office Products International 483,300 3,625
................................................................................
Corporate Express 2,210,700 31,848
................................................................................
Fisher Scientific 309,800 14,716
................................................................................
Henry Schein * 1,000,000 30,937
................................................................................
Jaco Electronics + * 350,000 2,559
................................................................................
JP Foodservice + * 1,200,000 34,425
................................................................................
MSC * 600,000 24,075
................................................................................
Patterson Dental * 455,000 15,555
................................................................................
Richfood Holdings 1,000,000 26,000
................................................................................
Strategic Distribution + * 1,761,000 6,714
................................................................................
Tech Data * 400,000 12,563
................................................................................
Watsco (Class A) 1,165,300 29,132
................................................................................
232,149
.............
Total Business Services 1,338,290
.............
ENERGY 4.8%
Exploration and Production 0.5%
Barrett Resources * 163,400 4,892
................................................................................
Devon Energy 300,387 11,039
................................................................................
Noble Affiliates 200,000 7,737
................................................................................
23,668
.............
Energy Services 4.3%
BJ Services * 550,000 29,494
................................................................................
Camco International 550,000 30,113
................................................................................
Cooper Cameron * 1,300,000 60,775
................................................................................
Smith International * 600,000 36,450
................................................................................
Weatherford Enterra * 1,105,000 42,542
................................................................................
199,374
.............
Total Energy 223,042
.............
</TABLE>
21
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
INDUSTRIAL 4.2%
Paper and Forest Products 0.2%
Lydall * 500,000 $ 10,562
................................................................................
10,562
.............
Defense and Aerospace 0.1%
ECC International * 269,600 1,415
................................................................................
ECC International * ++ 231,900 1,096
................................................................................
2,511
.............
Auto Related 1.1%
Custom Chrome * 240,000 3,855
................................................................................
Methode Electronics (Class A) 439,200 8,688
................................................................................
OEA 1,006,600 39,761
................................................................................
52,304
...........
Machinery 2.4%
Berg Electronics * 500,000 17,969
................................................................................
Danaher 400,000 20,325
................................................................................
DT Industries 150,000 5,344
................................................................................
Farrel 200,000 687
................................................................................
Greenfield Industries 436,000 11,881
................................................................................
Osmonics * 459,000 8,463
................................................................................
Teleflex 657,500 20,547
................................................................................
TriMas 1,024,500 28,814
................................................................................
114,030
.............
Specialty Chemicals 0.4%
GTS Duratek * 115,000 1,099
................................................................................
Polymer Group * 750,000 12,094
................................................................................
Synalloy 223,650 3,858
................................................................................
17,051
.............
Total Industrial 196,458
.............
MISCELLANEOUS 1.3%
Delta Pine & Land 800,000 28,500
................................................................................
Other Miscellaneous Portfolio Securities 30,902
................................................................................
Total Miscellaneous 59,402
.............
Total Portfolio Securities (Cost $3,072,479) 4,353,800
.............
</TABLE>
22
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Short-Term Investments 10.2%
Certificates of Deposit 0.8%
Bayerische Vereinsbank, (London), 5.63%, 8/5/97 $ 10,000,000 $ 10,000
...............................................................................
Caisse National De Credit Agricole, 5.63%, 8/11/97 10,000,000 10,000
...............................................................................
Deutsche Bank AG, 5.78%, 8/12/97 10,000,000 10,002
...............................................................................
Svenska Handlesbanken, 5.705%, 7/7/97 10,000,000 10,000
...............................................................................
40,002
..........
Commercial Paper 9.2%
Abbey National N.A., 5.55%, 8/12/97 45,000,000 44,708
...............................................................................
Allied Signal, 4(2), 5.58%, 7/14/97 19,000,000 18,962
...............................................................................
Asset Securitization Cooperative, 4(2), 5.57%, 7/14/97 10,000,000 9,980
...............................................................................
BBL North America, 5.60%, 9/5/97 10,000,000 9,897
...............................................................................
BMW U.S. Capital, 5.57%, 7/7/97 10,000,000 9,991
...............................................................................
Corporate Asset Funding, 4(2), 5.53%, 7/21/97 10,000,000 9,969
...............................................................................
Delaware Funding, 4(2), 5.57%, 7/16/97 10,000,000 9,977
...............................................................................
Den Danske, 5.55%, 7/23/97 10,000,000 9,966
...............................................................................
GE Capital, 5.57%, 8/14/97 15,000,000 14,898
...............................................................................
International Lease Finance, 5.50%, 7/7/97 10,000,000 9,991
...............................................................................
Island Finance Puerto Rico, 5.55%, 7/28/97 10,000,000 9,958
...............................................................................
Kreditbank N.A. Finance, 5.57%, 8/5/97 10,000,000 9,946
...............................................................................
Merrill Lynch & Co., 6.20%, 7/1/97 3,600,000 3,600
...............................................................................
National Rural Utilities Cooperative Finance
5.55%, 9/8/97 25,200,000 24,932
...............................................................................
Royal Bank of Scotland, 5.57%, 9/26/97 28,000,000 27,623
...............................................................................
Westdeutcshe Landesbank, 5.53%, 7/10/97 10,000,000 9,986
...............................................................................
Investments in Commercial Paper through a Joint Account
6.05 - 6.20%, 7/1/97 194,382,994 194,383
...............................................................................
428,767
...........
Structured Investment Vehicles 0.2%
Short Term Card Account Trust, VR, (144a)
5.708%, 7/15/97 10,000,000 10,000
...............................................................................
10,000
..........
Total Short-Term Investments (Cost $478,769) 478,769
..........
</TABLE>
23
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
103.6% of Net Assets (Cost $3,551,248) $ 4,832,569
Other Assets Less Liabilities (169,494)
.............
NET ASSETS $ 4,663,075
-------------
</TABLE>
+ Affiliated company
* Non-income producing
++ Securities contain some restrictions as to public resale -- total of such
securities at period-end amounts to 0.43% of net assets.
** Common stocks and warrants - cost $3,050,380, value $4,335,215, 93.0% of
net assets
Preferred stocks - cost $7,088, value $6,370, 0.1% of net assets
Bonds and notes - cost $15,011, value $12,215, 0.3% of net assets
VR Variable rate
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers -- total of such securities at period-end amounts to
0.25% of net assets.
GBP British sterling
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1997
<TABLE>
<CAPTION>
- -------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
<S> <C>
Assets
Investments in securities, at value
Affiliated companies (cost $354,115) $ 373,032
Other companies (cost $3,197,133) 4,459,537
...........
Total investments in securities 4,832,569
Other assets 28,270
...........
Total assets 4,860,839
...........
Liabilities
Total liabilities 197,764
...........
NET ASSETS $ 4,663,075
-----------
Net Assets Consist of:
Accumulated net investment income - net
of distributions $ (12,578)
Accumulated net realized gain/loss - net
of distributions 31,872
Net unrealized gain (loss) 1,281,321
Paid-in-capital applicable to
211,718,347 shares of
$1.00 par value capital stock
outstanding;
300,000,000 shares authorized 3,362,460
...........
NET ASSETS $ 4,663,075
-----------
NET ASSET VALUE PER SHARE $22.02
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months
Ended
6/30/97
<S> <C>
Investment Income
Income
Interest $ 3,875
Dividend 2,626
..........
Total income 6,501
..........
Expenses
Investment management 14,346
Shareholder servicing 4,323
Prospectus and shareholder reports 190
Custody and accounting 97
Registration 86
Directors 13
Legal and audit 12
Miscellaneous 12
..........
Total expenses 19,079
..........
Net investment income (12,578)
..........
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 49,104
Change in net unrealized gain or loss on securities 14,655
..........
Net realized and unrealized gain (loss) 63,759
..........
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 51,181
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
6/30/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ (12,578) $ (15,739)
Net realized gain (loss) 49,104 343,501
Change in net unrealized gain or loss 14,655 213,970
.........................
Increase (decrease) in net assets from operations 51,181 541,732
.........................
Distributions to shareholders
Net realized gain - (399,616)
.........................
Capital share transactions*
Shares sold 862,062 1,865,221
Distributions reinvested - 378,036
Shares redeemed (613,586) (876,500)
.........................
Increase (decrease) in net assets from capital
share transactions 248,476 1,366,757
.........................
Net Assets
Increase (decrease) during period 299,657 1,508,873
Beginning of period 4,363,418 2,854,545
.........................
End of period $4,663,075 $4,363,418
-------------------------
*Share information
Shares sold 40,848 83,019
Distributions reinvested - 17,615
Shares redeemed (29,568) (39,435)
........................
Increase (decrease) in shares outstanding 11,280 61,199
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1997
- -----------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price New Horizons Fund, Inc. (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 are valued at the last quoted sales price on the
day the valuations are made. A security which is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a particular
day and securities regularly traded in the over-the-counter market are valued at
the mean of the latest bid and asked prices.
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 amortized 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 in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
28
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
Premiums and Discounts Premiums and discounts on debt securities are amortized
for both financial reporting and tax purposes.
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 $778,747,000 and $784,626,000, respectively, for the six
months ended June 30, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1997, the aggregate cost of investments for federal income tax and
financial reporting purposes was $3,551,248,000, and net unrealized gain
aggregated $1,281,321,000, of which $1,612,356,000 related to appreciated
investments and $331,035,000 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 $2,434,000 was payable at June 30, 1997. The fee is computed
29
<PAGE>
T. Rowe Price New Horizons Fund
- --------------------------------------------------------------------------------
daily and paid monthly, and consists of an individual fund fee equal to 0.35% of
average daily net assets and a group fee. The group fee is based on the
combined assets of certain mutual funds sponsored by the manager or Rowe Price-
Fleming International, Inc. (the group). The group fee rate ranges from 0.48%
for the first $1 billion of assets to 0.30% for assets in excess of $80 billion.
At June 30, 1997, and for the six months then ended, the effective annual group
fee rate was 0.33%. 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 $3,766,000 for the six months ended June 30, 1997, of which
$701,000 was payable at period-end.
30
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone Shareholder service representatives are available from 8 a.m. to 10
p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m. ET on weekends. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. You can also
drop off applications or obtain prospectuses and other literature at these
centers.
AUTOMATED 24-HOUR SERVICES
Tele*Access(R) Call 1-800-638-2587 to obtain information such as account
balance, date and amount of your last transaction, latest dividend payment, fund
prices, and yields. Additionally, you have the ability to request prospectuses,
statements, and account and tax forms; to reorder checks; and to initiate
purchase, redemption, and exchange orders for identically registered accounts.
T. Rowe Price OnLine Through a personal computer via dial-up modem, you can
replicate all the services available on Tele*Access plus conduct transactions in
your Discount Brokerage and Variable Annuity accounts.
ACCOUNT SERVICES
Checking Write checks for $500 or more on any money market and most bond fund
accounts (except the High Yield and Emerging Markets Bond Funds).
Automatic Investing Build your account over time by investing directly from your
bank account or paycheck with Automatic Asset Builder. Additionally, Automatic
Exchange enables you to set up systematic investments from one fund account into
another, such as from a money fund into a stock fund. A $50 minimum makes it
easy to get started.
31
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Automatic Withdrawal If you need money from your fund account on a regular
basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
DISCOUNT BROKERAGE*
Investments Available You can trade stocks, bonds, options, precious metals, and
other securities at a savings over regular commission rates.
To Open an Account Call a shareholder service representative for more
information.
INVESTMENT INFORMATION
Combined Statement A comprehensive overview of your T. Rowe Price accounts is
provided. The summary page gives you earnings by tax category, provides total
portfolio value, and lists your investments by type--stock, bond, and money
market. Detail pages itemize account transactions by fund.
Shareholder Reports Portfolio managers review the performance of the funds in
plain language and discuss T. Rowe Price's economic outlook.
T. Rowe Price Report This is a quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Performance Update This quarterly report reviews recent market developments and
provides comprehensive performance information for every T. Rowe Price fund.
Insights This library of information includes reports on mutual fund tax issues,
investment strategies, and financial markets.
Detailed Investment Guides Our widely acclaimed Asset Mix Worksheet, College
Planning Kit, Diversifying Overseas: A Guide to International Investing,
Retirees Financial Guide, and Retirement Planning Kit (also available on disk
for PC use) can help you determine and reach your investment goals.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
32
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
............................
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Science & Technology
Small-Cap Stock**
Small-Cap Value*
Spectrum Growth
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
............................
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured
Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS
............................
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
............................
Balanced
Personal Strategy Balanced
Personal Strategy Income
Personal Strategy Growth
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
............................
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
**Formerly the OTC Fund.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY.
T. Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
33
<PAGE>
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price New Horizons Fund(R).
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. F42-051 6/30/97
