<PAGE>
Semiannual Report
NEW
HORIZONS
FUND
--------------
JUNE 30, 2000
--------------
[LOGO OF T. ROWE PRICE]
T. ROWE PRICE
<PAGE>
REPORT HIGHLIGHTS
New Horizons Fund
. The market was exceedingly volatile during the period, though most indices
produced nearly flat results.
. Your fund posted very strong returns that were superior to its benchmarks,
largely due to well-timed technology purchases.
. We increased exposure to technology and health care and trimmed business
services.
. We are hopeful that the improved relative performance of small stocks in
general and your fund in particular will persist.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
Investors needed to keep their seat belts fastened in the first half of the year
as stock market volatility reached unprecedented levels. Led by highflying
technology and biotechnology shares, the market added to its 1999 advance early
in the year before suffering a vicious correction primarily in these same
sectors between March and May. A June rally, however, left the large-cap
dominated S&P 500 little changed from year-end levels.
Small-cap stocks somewhat outperformed their large-cap brethren, and the Russell
2000 Index rose 3.04% in the first half. Your fund, which focuses on small-cap
growth issues, did even better, rising 10.53% for the six-month period. These
results easily surpassed the relevant market and competitive fund benchmarks.
Its 12-month gain of 36.32% is also ahead of these benchmarks and is one of its
best one-year showings ever. We were pleased to see the trend of improved
relative performance of small-caps continue. Your fund's strong showing is
attributable to its broadly diversified approach across all sectors of the
small-cap growth market. For example, while technology stocks fell sharply from
their peaks early in the year, most other sectors of the portfolio held up
reasonably well.
----------------------
PERFORMANCE COMPARISON
--------------------------------------------------------------------------------
Periods Ended 6/30/00 6 Months 12 Months
---------------------------------------------------------
New Horizons Fund 10.53% 36.32%
Russell 2000 Growth Index 1.23 28.39
Russell 2000 Index 3.04 14.32
Lipper Small Cap Fund Index 4.58 35.27
S&P 500 -0.43 7.24
MARKET ENVIRONMENT
Extremely strong U.S. economic growth, a global economic recovery, and robust
corporate earnings increases continued to provide an excellent backdrop for the
stock market. Increasing productivity gains, spurred by continued investments in
technology, remained a long-term positive for the economy and the market, as did
the growing federal budget surplus.
The major stock market indices stalled out in the middle of the first half
primarily because investors feared a pickup in inflation. Other than energy
prices, which rose sharply between January and June, core
1
<PAGE>
inflation rates remained in the 2% to 3% range. Nonetheless, near-full
employment and an economy that has been growing above sustainable levels spooked
investors. The Fed took preemptive action, raising the fed funds rate three
times to 6.5% (for a total of six increases in the past 12 months). Despite the
sharp rise, long-term Treasury bond rates actually fell during the period due to
rising estimates of the federal budget surplus. It appears that the Fed's moves
are beginning to soften the economy's excesses as GDP growth in the second
quarter slowed markedly from the past few quarters.
The year began on a highly speculative note with huge price spikes in last
year's technology and biotechnology leaders. A frothy initial public offering
market added to the speculative environment. Biotechnology stocks peaked in
February and electronic-based technology issues topped out in March. The
technology-laden Nasdaq Composite Index plummeted 37% from its peak in March to
its low in late May--that index's sharpest falloff since 1990--and many former
market leaders declined in excess of 50%. "Old economy" companies held up
reasonably well while most "new economy" stocks, including the highflying
Internet sector, fell sharply. A market recovery in June partially reversed the
damage of the decline.
The volatile small-cap stock sector managed to show respectable gains for the
first half of the year. Within the small-cap market, growth issues were only
able to recoup part of their declines and thus under-performed value for the
first time in several years. However, small-cap growth maintained a very large
performance margin for the 12 months due to last year's strong technology-led
market.
-----------------------
SMALL-CAP STOCK RETURNS
----------------------------------------------------
Periods Ended 6/30/00 6 Months 12 Months
----------------------------------------------------
Russell 2000 Index 3.04% 14.32%
Russell 2000 Growth Index 1.23 28.39
Russell 2000 Value Index 5.85 -0.94
Average stock market volatility surged in the first half of the year to levels
not seen since the 1930s, a worrisome sign. Volatility in the Nasdaq was even
higher, reaching all-time highs. According to the Leuthold Group, a stock market
research firm, the Nasdaq market experienced daily moves of 1% or more in 79% of
the trading days in the first half and 3% or more in 33% of the days. For
purposes of comparison, there have been eight years since the inception of the
Nasdaq in 1972 in which there were no daily moves of 3% or more.
2
<PAGE>
PORTFOLIO REVIEW
The fund's strong first-half performance is attributable to several factors.
First, unlike many small-cap growth funds, we did not have a disproportionately
high weighting in tech stocks--28% of assets at the beginning of the year. We
still benefited from the strength in the sector in winter but did not suffer as
much as our more aggressive competitors in the March through May decline. In
addition, we opportunistically added to our technology holdings during the
correction, which helped performance near quarter-end. By June 30, the tech
position was 32%.
Another contributing factor was strength in our heaviest industry
concentrations. Semiconductor stocks, close to half of our technology holdings,
were far and away the best performers in the volatile technology sector.
Biotechnology and drug delivery stocks, which dominate our health care
investments, were also excellent performers despite extreme volatility. As noted
in the table later in the report, semiconductor holdings comprised five of the
top-10 contributors to performance in the six-month period while biotechnology
stocks accounted for four of the top 10. Within semiconductors, Burr Brown was
our best performer, more than doubling in price in the first six months due to
strong results but also to an agreement to merge with Texas Instruments
announced at the end of June. Altera, Analog Devices, Xilinx, and Maxim
Integrated Products, all longtime holdings, were other strong semiconductor
contributors. Within biotechnology and drug delivery, COR Therapeutics tripled
in price during the period and was our biggest contributor, and Inhale
Therapeutics, Alkermes, and Alexion Pharmaceuticals were up about 100% or
better.
With the exception of energy, all other major sectors of the portfolio declined.
Within energy, our top holdings, BJ Services and Smith International, rose
nearly 50% each. Consumer stocks and business services holdings were generally
lackluster, with apparel and retailing and many media issues showing the most
weakness. While the technology sector had many of our best performers, it also
contained some of the worst: the sharp mid-period correction severely punished
many software and Internet e-commerce issues that had risen to unsustainably
high valuations. Liberate Technologies, a leading software company involved in
facilitating interactive television, was one of last year's top performers but
declined approximately 50% in the first half. Several technology holdings fell
in response to disappointing fundamentals, including Synopsys, Parametric
Technology, Electronics for Imaging, and Great Plains Software.
3
<PAGE>
----------------------
SECTOR DIVERSIFICATION
--------------------------------------------------
6/30/99 12/31/99 6/30/00
--------------------------------------------------
Financial 4% 3% 3%
Health Care 12 15 17
Consumer 18 14 11
Technology 23 28 32
Business Services 36 32 27
Energy 3 3 4
Industrial 2 1 1
Reserves 2 4 5
--------------------------------------------------
Total 100% 100% 100%
In terms of sector weighting shifts, the biggest increase was in technology, as
discussed. Health care increased from 15% to 17% of the portfolio due to the
strong performance of our biotechnology holdings and despite some opportunistic
cutbacks in the group during its first-quarter spike. The major reduction was in
business services holdings, where we trimmed under-performing areas and where
several portfolio companies, including longtime food distributor holding US
Foodservice, were taken over. The business services weighting fell from 32% to
27%.
OUTLOOK
Overall economic conditions remain favorable for stock prices. Economic growth
and corporate profit gains have been stronger than even the most optimistic
forecasters had predicted. The Fed's steady hand has raised short-term rates
three times so far this year and it appears that GDP growth will fall back to a
more sustainable 3% to 4% rate. Continued high corporate spending on
productivity-enhancing technology investments remains a positive for the economy
and for most technology companies. Corporate earnings growth remains robust and
the number of earnings shortfalls quite reasonable. This fall's presidential and
congressional elections remain a wildcard, but both parties seem to be moving to
the center so as not to alienate many voters.
The first-half correction reined in much of the earlier speculative behavior of
investors, which is positive for the market. Retail mutual fund flows remain
positive but at lower levels than the peak rates at the beginning of the year.
Stock market supply/demand forces seem to be in balance with the reduced net new
fund inflows being offset by a sharp decline in the amount of new financing by
corporations. Merger activity and corporate share repurchases continue at high
levels.
4
<PAGE>
The main market conundrum is the continuing wide valuation disparities in the
market. Technology companies clearly have the best environment for continued
strong sales and earnings growth, but their valuations remain exceedingly high
by any historical measure. Most other sectors sell at historically moderate
valuations but have less visible growth opportunities and have experienced more
earnings shortfalls.
These conditions are particularly true in the small-cap market. The overall
relative P/E of the New Horizons Fund compared to the S&P 500 P/E rose from 1.03
at year-end to 1.33 as of June 30. Our technology and biotechnology holdings are
the principal drivers of the higher relative valuation level for the fund. Other
sectors of the portfolio continue to sell at significant discounts to the
market. This valuation anomaly leads us to maintain a broadly diversified small-
cap growth portfolio across all sectors. We will add to the faster-growing
sectors and companies in the portfolio, but only opportunistically.
We are encouraged by the improved relative performance of small stocks in
general and the New Horizons Fund in particular over the past year. We believe
the portfolio will continue to deliver attractive returns to investors in the
years to come.
Respectfully submitted,
/s/ John H. Laporte
John H. Laporte
President and Chairman of the Investment Advisory Committee
July 28, 2000
5
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
[GRAPH]
[PLOT POINTS TO COME]
[GRAPH]
[PLOT POINTS TO COME]
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
--------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/00
--------------------------------------------------------------------------------
Burr Brown 2.3%
Maxim Integrated Products 2.0
Altera 1.8
Analog Devices 1.8
Infinity Broadcasting 1.3
--------------------------------------------------------------------------------
BJ Services 1.2
Catalina Marketing 1.2
VoiceStream Wireless 1.1
COR Therapeutics 1.1
Lattice Semiconductor 1.1
--------------------------------------------------------------------------------
Xilinx 1.1
Radian Group 1.1
Inhale Therapeutic Systems 1.0
Pegasus Communications 1.0
Electronic Arts 1.0
--------------------------------------------------------------------------------
Abgenix 1.0
Informatica 0.9
WebTrends 0.9
Cognex 0.9
Alkermes 0.9
--------------------------------------------------------------------------------
Orthodontic Centers of America 0.9
BISYS Group 0.9
ISS Group 0.9
Concord Communications 0.9
NetIQ 0.9
--------------------------------------------------------------------------------
Total 29.2%
--------------------------------------------------------------------------------
Note: Table excludes reserves.
7
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
--------------------
PORTFOLIO HIGHLIGHTS
--------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 6/30/00
Ten Best Contributors Ten Worst Contributors
--------------------------------------------------------------------------------
Burr Brown 44 cents Liberate Technologies -30 cents
Altera 33 Synopsys 22
Analog Devices 32 Parametric Technology 17
Xilinx 27 Electronics for Imaging 17
COR Therapeutics 23 VoiceStream Wireless * 15
Inhale Therapeutic Systems 23 Great Plains Software 14
Maxim Integrated Products 21 Iron Mountain 12
Alkermes 16 Urban Outfitters 10
Orthodontic Centers of America 15 CyberSource 10
Alexion Pharmaceutical 14 EGL 9
----------------------------------------- -------------------------------------
Total 248 cents Total -156 cents
12 Months Ended 6/30/00
Ten Best Contributors Ten Worst Contributors
--------------------------------------------------------------------------------
Analog Devices 66 cents VoiceStream Wireless * -15 cents
Burr Brown 55 CSK Auto 14
Xilinx 51 Sylvan Learning Systems 14
Omnipoint ** 50 Lason ** 13
Altera 42 Synopsys 13
Maxim Integrated Products 37 Henry Schein 13
Inhale Therapeutic Systems 30 Electronics for Imaging 13
Optical Coating Laboratory ** 29 Comfort Systems USA 12
Abgenix 29 Affiliated Computer Services 11
COR Therapeutics 28 National Data ** 10
----------------------------------------- -------------------------------------
Total 417 cents Total -128 cents
* Position added
** Position eliminated
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 benchmarks, which may include a broad-
based market index and a peer group average or index. Market indexes do not
include expenses, which are deducted from fund returns as well as mutual fund
averages and indexes.
NEW HORIZONS FUND
--------------------------------------------------------------------------------
[GRAPH]
[PLOT POINTS TO COME]
------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
--------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Periods Ended 6/30/00 1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------
New Horizons Fund 36.32% 19.09% 20.16% 18.25%
Income 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>
<TABLE>
<CAPTION>
T. ROWE PRICE NEW HORIZONS FUND
-------------------------------------------------------------------------------------------------------------------
Unaudited
--------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
-------------------------------------------------------------------------------------------------------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 27.53 $ 23.34 $ 23.30 $ 21.77 $ 20.50 $ 14.76
Investment activities
Net investment
income (loss) (0.08) (0.15) (0.15) (0.12) (0.08) (0.04)
Net realized and
unrealized gain (loss) 2.98 7.36 1.46 2.23 3.54 8.19
Total from
investment activities 2.90 7.21 1.31 2.11 3.46 8.15
Distributions
Net realized gain -- (3.02) (1.27) (0.58) (2.19) (2.41)
NET ASSET VALUE
End of period $ 30.43 $ 27.53 $ 23.34 $ 23.30 $ 21.77 $ 20.50
============================================================================
Ratios/Supplemental Data
Total return* 10.53% 32.52% 6.25% 9.77% 17.03% 55.44%
Ratio of total expenses to
average net assets 0.88%+ 0.90% 0.89% 0.88% 0.90% 0.90%
Ratio of net investment
income (loss) to average
net assets (0.53)%+ (0.66)% (0.65)% (0.57)% (0.41)% (0.23)%
Portfolio turnover rate 47.5%+ 44.7% 41.2% 45.2% 41.4% 55.9%
Net assets, end of period
(in millions) $ 7,163 $ 6,022 $ 5,228 $ 5,104 $ 4,363 $ 2,855
</TABLE>
* Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
+ Annualized
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
------------------------
PORTFOLIO OF INVESTMENTS Shares Value
--------------------------------------------------------------------------------
In thousands
EQUITY INVESTMENTS ** 94.7%
FINANCIAL 3.0%
Insurance 1.4%
Mutual Risk Management 625,000 $ 10,820
Presidential Life 977,200 13,528
Radian Group 1,500,000 77,625
-------------
101,973
-------------
Financial Services 1.6%
Affiliated Managers Group * 400,000 18,200
E*TRADE Group * 210,000 3,458
eSpeed (Class A) * 400,000 17,388
Financial Federal *+ 900,000 15,638
Investors Financial Services 320,000 12,710
Jones Lang Lasalle * 350,000 4,681
Legg Mason 600,000 30,000
NextCard * 1,000,000 8,469
110,544
-------------
Total Financial 212,517
-------------
HEALTH CARE 16.6%
Pharmaceuticals 1.7%
Alkermes * 1,370,000 64,518
Emisphere Technologies * 50,700 2,159
King Pharmaceuticals * 200,000 8,775
Magainin Pharmaceuticals, Warrants, 8/6/01 392,946 0
Noven Pharmaceuticals * 525,000 15,783
Shire Pharmaceuticals ADR * 450,000 23,372
Trega Biosciences *+ ++ (S) 1,333,334 3,788
-------------
118,395
-------------
Biotechnology 11.6%
Abgenix * 573,600 68,742
Affymetrix * 262,600 43,354
Alexion Pharmaceuticals * 605,000 43,257
Anesta * 600,000 14,906
Aurora Biosciences * 520,000 35,344
11
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
Cephalon * 731,300 $ 44,472
Charles River Laboratories International * 410,300 9,104
COR Therapeutics * 950,000 81,017
Cubist Pharmaceuticals * 400,000 19,713
CV Therapeutics * 25,000 1,739
Doubletwist (Series D) * ++ (S) 2,657,807 4,000
Epix Medical * 550,000 8,198
Exelixis * 190,000 6,306
Gene Logic * 250,000 8,930
Gilead Sciences * 680,000 48,386
Human Genome Sciences * 210,000 28,002
IDEC Pharmaceuticals * 136,900 16,056
Imclone Systems * 135,000 10,323
Incyte Genomics * 322,600 26,504
Inhale Therapeutic Systems * 725,000 73,565
Insmed * 700,000 2,363
Invitrogen * 140,000 10,531
LJL Biosystems * 323,600 6,260
Neurocrine Biosciences * 1,055,700 37,378
NPS Pharmaceuticals *+ 1,452,000 39,022
Pharmacopeia * 105,000 4,856
Qiagen * 50,000 8,700
QLT * 725,000 56,301
Serologicals *+ 1,825,000 9,182
Transkaryotic Therapies * 50,000 1,836
Triangle Pharmaceuticals * 1,700,000 15,619
Trimeris * 341,400 23,887
Viropharma * 490,800 7,699
Visible Genetics * 375,000 16,898
-------------
832,450
-------------
Medical Instruments and Devices 1.7%
Advanced Neuromodulation Systems * 250,000 4,203
Aspect Medical Systems * 25,000 674
Mentor 1,000,000 27,156
Mettler Toledo International * 370,000 14,800
Molecular Devices * 100,000 6,916
Novoste * 208,800 12,737
Packard BioScience * 600,000 10,181
12
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
ResMed * 500,000 $ 13,375
Sybron International * 1,000,000 19,813
Waters * 112,000 13,979
-------------
123,834
-------------
Health Care Services 1.6%
AmeriPath * 1,000,000 8,750
Boron Lepore & Associates *+ 1,030,000 9,463
Immunomedics * 100,000 2,431
Medical Manager * 361,000 12,285
Omnicare 2,000,000 18,125
Omnicare, Warrants, 8/11/00 * 105,253 0
Renal Care Group * 2,125,000 51,996
Total Renal Care Holdings * 1,940,400 11,643
-------------
114,693
-------------
Total Health Care 1,189,372
-------------
CONSUMER 11.2%
Soft Goods Retailers 0.8%
Jo Ann Stores (Class B) * 470,000 3,584
Pacific Sunwear * 1,250,000 23,476
Tuesday Morning * 1,600,000 16,450
Urban Outfitters *+ 1,250,000 11,055
-------------
54,565
-------------
Hard Goods Retailers 2.9%
Casey's General Stores 2,000,000 20,813
CSK Auto * + 2,000,000 15,125
Discount Auto Parts * 798,700 7,987
Duane Reade *+ 1,500,000 38,625
Family Dollar Stores 1,500,000 29,344
O'Reilly Automotive * 2,000,000 27,562
Office Depot * 600,000 3,750
Sonic Automotive * 1,000,000 10,688
TSC + 800,000 13,275
Tweeter Home Entertainment Group * 800,000 24,050
Ultimate Electronics 300,000 8,034
Wild Oats Markets * 700,000 8,750
-------------
208,003
-------------
13
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
Consumer Nondurables 1.6%
American Italian Pasta (Class A) * 500,000 $ 10,344
Natrol * 600,000 2,025
Nautica Enterprises *+ 1,750,000 18,758
Quicksilver * + 1,250,000 19,453
Rayovac * 850,000 19,018
Wesley Jessen VisionCare *+ 1,260,000 47,368
-------------
116,966
-------------
Restaurants 1.8%
O' Charley's * 267,400 3,635
Outback Steakhouse * 1,750,000 51,188
P. F. Chang's China Bistro * 500,000 15,984
Papa John's International * 750,000 18,398
Sonic *+ 1,350,000 39,699
-------------
128,904
-------------
Entertainment 1.8%
American Classic Voyages * 750,000 15,211
Dover Downs Entertainment 150,000 2,100
Imax * 1,000,000 22,687
Intrawest 300,000 5,700
Premier Parks * 399,000 9,077
SFX Entertainment (Class A) * 1,250,000 56,641
Speedway Motorsports * 500,000 11,500
Vail Resorts * 610,000 9,951
-------------
132,867
-------------
Consumer Services 2.3%
Advantage Learning Systems * 250,000 3,836
Apollo Group (Class A) * 1,500,000 41,953
Avis Group Holdings * 1,292,500 24,234
Bright Horizons Family Solution * 500,000 10,672
Caliber Learning Network * 560,000 2,275
Devry * 300,000 7,931
Extended Stay America * 2,000,000 18,500
School Specialty * 400,000 7,413
Strayer Education + 800,000 19,125
Sunterra * 1,250,000 288
Sylvan Learning Systems * 2,000,000 27,437
-------------
163,664
-------------
Total Consumer 804,969
-------------
14
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
TECHNOLOGY 31.6%
Computer Software 9.5%
Active Software * 500,000 $ 38,859
Actuate * 1,100,000 58,678
Avant * 500,000 9,344
Electronic Arts * 943,500 68,846
Eloquent * 300,000 2,695
Excalibur Technologies *+ 750,000 29,883
Firepond * 635,000 22,880
Great Plains Software * 600,000 11,756
Informatica * 826,800 67,694
Interact Commerce * 750,000 8,836
ISS Group * 625,000 61,699
Matrixone * 985,000 40,046
National Instruments * 600,000 26,212
net.Genesis * 775,000 14,023
NetIQ * 1,022,669 60,977
Parametric Technology * 2,561,700 28,099
Selectica * 675,000 47,145
Synopsys * 1,250,000 43,164
Verity * 850,000 32,300
Websense * 232,000 5,815
-------------
678,951
-------------
Semiconductors and Components 14.0%
Altera * 1,250,000 127,383
Analog Devices * 1,650,000 125,400
Burr Brown * 1,900,000 164,706
Cabot Microelectronics* 147,000 6,753
Cognex * 1,265,100 65,429
DDi * 775,000 22,063
hi/fn *+ 660,000 29,308
Lattice Semiconductor * 1,162,500 80,394
Linear Technology 600,000 38,344
Marvell Technology Group Limited * 80,000 4,558
Maxim Integrated Products * 2,150,000 145,998
Methode Electronics (Class A) 600,000 23,194
Micrel * 900,000 39,122
15
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
Molex 122,070 $ 5,882
SIPEX *+ 1,600,000 44,350
Xilinx * 950,000 78,464
--------------
1,001,348
--------------
Networking and Telecom Equipment 3.8%
Accelerated Networks * 100,000 4,216
ADC Telecommunications * 225,000 18,865
Airnet Commerce * 478,000 12,518
BreezeCom * 300,000 13,050
Concord Communications *+ 1,500,000 61,453
Harmonic Lightwaves * 1,000,000 24,844
JDS Uniphase * 400,000 47,937
Netsolve *+ 790,000 20,614
Nuance Communications * 350,000 29,006
Sonicwall * 391,500 34,464
Vyyo * 315,000 8,515
--------------
275,482
--------------
Computer Hardware/Peripherals 0.6%
Electronics for Imaging * 1,500,000 37,875
MIPS Technologies * 200,000 8,494
--------------
46,369
--------------
E-Commerce 3.7%
Bluestone Software * 150,000 3,848
CYBERSOURCE * 750,000 10,383
GoTo.com * 675,000 10,357
Keynote Systems * 665,000 46,405
Liberate Technologies * 980,000 28,757
Loislaw * 770,000 6,449
PSINet * 1,700,000 42,659
PurchasePro.com * 1,000,000 41,031
WebTrends *+ 1,750,000 67,430
Zonafinanciera.com (Series C) *+++ 1,190,760 5,000
--------------
262,319
--------------
Total Technology 2,264,469
--------------
16
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
BUSINESS SERVICES 26.6%
Telecom Services 5.4%
Airgate PCS * 250,000 $ 13,148
Alamosa PCS Holdings * 103,300 2,172
AT&T Canada (Class B) * 800,000 26,500
Brightpoint * 1,500,000 12,961
Choice One Communications * 500,000 20,422
Clearnet Communications * 200,000 5,587
Crown Castle International * 107,300 3,913
Cypress Communications * 500,000 3,594
ICG Communications * 750,000 16,617
Intermedia Communications * 350,000 10,391
ITC Deltacom * 500,000 11,141
Metromedia International * 1,000,000 4,750
MGC Communications * 300,000 17,991
Microcell Telecommunications * 750,000 27,211
Millicom International Cellular * 600,000 20,981
Net2000 * 177,000 2,904
NTL * 416,665 24,961
Pinnacle Holdings * 400,000 21,450
Rhythms NetConnections * 400,000 5,025
SBA Communciations * 500,000 25,984
Spectrasite Holdings * 750,000 21,305
US Unwired (Class A) * 500,000 6,594
VoiceStream Wireless * 700,000 81,419
387,021
-------------
Computer Services 3.3%
Affiliated Computer Services (Class A) * 1,534,800 50,744
BISYS Group * 1,000,000 61,812
Inspire Insurance Solutions * 600,000 1,763
NOVA * 1,707,600 47,706
Paychex 750,000 31,500
SunGard Data Systems * 1,478,700 45,840
239,365
-------------
Distribution 1.9%
Daisytek International * 700,000 6,628
Henry Schein * 2,000,000 34,437
17
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
MSC * 1,750,000 $ 36,641
United Stationers * 1,000,000 32,406
Watsco (Class A) 2,000,000 25,000
135,112
-------------
Transportation 0.7%
C.H. Robinson Worldwide 210,000 10,388
EGL * 1,302,800 39,980
50,368
-------------
Media and Advertising 6.3%
ADVO * 1,155,000 48,510
Catalina Marketing * 835,000 85,170
Classic Communications * 400,000 3,612
Clear Channel Communications * 499,999 37,500
E4L * 1,000,000 813
Emmis Broadcasting (Class A) * 600,000 24,844
Entercom Communications * 150,000 7,312
Infinity Broadcasting (Class A) * 2,470,077 90,003
Lamar Advertising * 875,000 37,926
Mediacom Communications (Class A) * 600,000 9,225
NDS Group * 105,000 6,569
Pegasus Communications * 1,500,000 73,453
Radio Unica Communications * 100,000 683
Regent Communications * 250,000 2,145
Sinclair Broadcast Group (Class A) * 1,535,000 16,837
Young Broadcasting (Class A) * 332,300 8,505
453,107
-------------
Environmental 0.5%
Casella Waste Systems (Class A) * 1,000,000 10,719
Catalytica * 250,000 2,742
U.S. Liquids * 350,000 1,925
Waste Connections * 850,000 16,761
32,147
-------------
Engineering and Construction 0.5%
Tetra Tech * 1,250,000 28,633
Toll Brothers * 500,000 10,250
38,883
-------------
Miscellaneous Business Services 7.7%
AnswerThink * 660,400 10,897
18
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
Breakaway Solutions * 100,000 $ 2,709
Cambridge Technology Partners * 884,700 7,727
Cape Success * 46,320 0
Cape Success (Series B) * 3,584 0
Comfort Systems USA * 1,750,000 7,000
Consolidated Graphics * 600,000 5,625
Corporate Executive Board * 200,000 12,175
eLoyalty * 925,000 11,736
Emerge Interactive * 400,000 7,200
F. Y. I. * 750,000 25,219
Forrester Research * 100,000 7,278
Global Imaging Systems *+ 1,100,000 11,516
Hagler Bailly *+ 1,250,000 6,172
Heidrick & Struggles International * 500,000 31,547
iGATE Capital * 250,000 3,445
Immedient * 13,056 95
Infousa 1,405,300 9,112
Interpublic Group 1,100,600 47,326
Iron Mountain * 700,000 23,800
Jupiter Communications * 162,000 3,731
kforce.com * 1,800,000 12,431
Leapnet *+ 1,573,792 4,943
META Group *+ 1,125,000 22,008
Modis Professional Services * 750,000 6,656
New England Business Service 200,000 3,250
Orthodontic Centers of America *+ 2,750,000 62,219
Prepaid Legal Services * 500,000 14,937
ProBusiness Services * 500,000 13,172
ProsoftTraining *++(SS) 500,000 7,552
ProsoftTraining.com * 675,000 11,327
SITEL * 1,500,000 7,406
SmartForce ADR * 500,000 23,969
Snyder Communications * 702,000 16,672
StaffMark * 1,250,000 8,340
Symyx Technologies * 90,000 3,842
Tier Technologies (Class B) * 1,250,000 6,699
Trammell Crow * 1,250,000 13,437
19
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
U.S. Interactive 603,300 $ 7,824
Viant * 500,000 14,828
West TeleServices * 545,300 13,820
Xpedior * 400,000 5,513
Zebra Technologies (Class A) * 744,000 32,829
-------------
547,984
-------------
Real Estate Services 0.3%
CoStar Group * 250,000 6,274
Delta Pine & Land 500,000 12,531
-------------
18,805
-------------
Total Business Services 1,902,792
-------------
ENERGY 4.5%
Exploration and Production 0.7%
Barrett Resources * 450,000 13,697
Cross Timbers Oil 500,000 11,062
Devon Energy 300,387 16,878
Noble Affiliates 200,000 7,450
-------------
49,087
-------------
Energy Services 3.8%
BJ Services * 1,400,000 87,500
Coflexip ADR 400,000 24,150
Cooper Cameron * 500,000 33,000
Helmerich & Payne 600,000 22,425
Key Energy * 3,250,000 31,281
National Oilwell * 350,000 11,506
Seacor Smit * 375,000 14,508
Smith International * 500,000 36,407
Tidewater 300,000 10,800
-------------
271,577
-------------
Total Energy 320,664
-------------
INDUSTRIAL 0.8%
Paper and Forest Products 0.1%
Lydall * 500,000 5,313
-------------
5,313
-------------
20
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
Machinery 0.7%
Encompass Services * 884,907 $ 5,088
Teleflex 600,000 22,238
United Rentals * 1,500,000 25,687
-------------
53,013
-------------
Total Industrial 58,326
-------------
BASIC MATERIALS 0.1%
Miscellaneous Materials 0.1%
Energy Conversion Devices, Warrants, 7/31/01 * 400,000 4,037
-------------
Total Basic Materials 4,037
-------------
Total Miscellaneous Common Stock 0.3% 23,919
-------------
Total Equity Investments (Cost $4,443,449) 6,781,065
-------------
SHORT-TERM INVESTMENTS 4.8%
Money Market Fund 4.8%
Reserve Investment Fund, 6.68%, #+ 342,740,800 342,741
-------------
Total Short-Term Investments (Cost $342,741) 342,741
-------------
21
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Value
--------------------------------------------------------------------------------
In thousands
Total Investments in Securities
99.5% of Net Assets (Cost $4,786,190) $ 7,123,806
Other Assets Less Liabilities 38,722
-------------
NET ASSETS $ 7,162,528
=============
# Seven-day yield
+ Affiliated company
* Non-income producing
(S) Private placement
++ Securities contain some restrictions as to public resale - total of
such securities at period-end amounts to 0.3% of net assets.
** Common stocks, rights, and warrants - cost $4,434,449, value
$6,722,065, 94.5% of net assets Preferred stocks - cost $4,000, value
$4,000, 0.1% of net assets
Convertible preferred stocks - cost $5,000, value $5,000, 0.1% of net
assets
ADR American Depository Receipt
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
-----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value
Affiliated companies (cost $949,996) $ 1,014,616
Other companies (cost $3,836,194) 6,109,190
-----------
Total investments in securities 7,123,806
Other assets 82,354
-----------
Total assets 7,206,160
Liabilities
Total liabilities 43,632
-----------
NET ASSETS $ 7,162,528
===========
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (17,833)
Accumulated net realized gain/loss - net of distributions 860,962
Net unrealized gain (loss) 2,337,616
Paid-in-capital applicable to 235,371,930 shares of
$1.00 par value capital stock outstanding;
300,000,000 shares authorized 3,981,783
-----------
NET ASSETS $ 7,162,528
===========
NET ASSET VALUE PER SHARE $ 30.43
===========
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Unaudited
-----------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Interest (including $9,437 from affiliated companies) $ 9,437
Dividend 2,151
---------
Total income 11,588
---------
Expenses
Investment management 22,341
Shareholder servicing 6,747
Custody and accounting 160
Prospectus and shareholder reports 127
Registration 68
Legal and audit 14
Directors 9
Miscellaneous 23
---------
Total expenses 29,489
Expenses paid indirectly (68)
---------
Net expenses 29,421
---------
Net investment income (loss) (17,833)
---------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 663,587
Change in net unrealized gain or loss on securities
(including $77,869 from affiliated companies) (19,724)
---------
Net realized and unrealized gain (loss) 643,863
---------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 626,030
=========
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Unaudited
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (17,833) $ (32,602)
Net realized gain (loss) 663,587 764,303
Change in net unrealized gain or loss (19,724) 753,938
--------------------------
Increase (decrease) in net assets from operations 626,030 1,485,639
--------------------------
Distributions to shareholders
Net realized gain -- (593,298)
--------------------------
Capital share transactions *
Shares sold 1,323,163 787,313
Distributions reinvested -- 571,898
Shares redeemed (808,661) (1,458,035)
--------------------------
Increase (decrease) in net assets from capital
share transactions 514,502 (98,824)
--------------------------
Net Assets
Increase (decrease) during period 1,140,532 793,517
Beginning of period 6,021,996 5,228,479
--------------------------
End of period $ 7,162,528 $ 6,021,996
==========================
*Share information
Shares sold 44,205 33,180
Distributions reinvested -- 23,390
Shares redeemed (27,536) (61,913)
--------------------------
Increase (decrease) in shares outstanding 16,669 (5,343)
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
-----------------------------
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. The fund seeks
long-term capital growth by investing primarily in common stocks of small,
rapidly growing companies.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the
outstanding voting securities.
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. Expenses paid
indirectly reflect credits earned
26
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
on daily uninvested cash balances at the custodian and are used to reduce
the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $1,907,440,000 and $1,519,881,000, respectively,
for the six months ended June 30, 2000.
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, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$4,786,190,000. Net unrealized gain aggregated $2,337,616,000 at
period-end, of which $3,080,840,000 related to appreciated investments and
$743,224,000 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 $3,800,000 was payable at June 30, 2000. The fee is computed
daily and paid monthly, and consists of an individual fund fee equal to
0.35% of average daily net assets and a group fee. The group fee is based
on the combined assets of certain mutual funds sponsored by the manager or
Rowe Price-Fleming International, Inc. (the group). The group fee rate
ranges from 0.48% for the first $1 billion of assets to 0.295% for assets
in excess of $120 billion. At June 30, 2000, and for the six months then
ended, the effective annual group fee rate was 0.32%. 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 main-
27
<PAGE>
T. ROWE PRICE NEW HORIZONS FUND
--------------------------------------------------------------------------------
tains the financial records of the fund. T. Rowe Price Services, Inc. is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $4,863,000 for the six months
ended June 30, 2000, of which $992,000 was payable at period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual funds
(underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may
invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Growth Fund held
approximately 10.3% of the outstanding shares of the fund at June 30, 2000. For
the six months then ended, the fund was allocated $802,000 of Spectrum expenses,
$138,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended June 30, 2000, totaled
$9,437,000 and are reflected as interest income in the accompanying Statement of
Operations.
28
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed-income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and the T. Rowe
Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and
other securities at a savings over full-service commission rates. **
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price
Investment Services, Inc., Member NASD/SIPC.
**Based on a July 2000 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending
on size of order.
29
<PAGE>
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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 appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site.
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
[LOGO OF T. ROWE PRICE]
T. Rowe Price Investment Services, Inc., Distributor.
