<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
A flat fourth quarter contributed to a modest stock market performance in
1994. The total return of 1.3% for the unmanaged Standard & Poor's 500 Stock
Index was well below its average annualized return of more than 10% since 1926.
As can be seen below, your Fund lagged slightly behind the benchmark
S&P 500 for the three- and 12-month periods ended December 31, 1994.
- --------------------------------------------------------------------------------
Performance Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/94
3 Months 12 Months
----------------------
<S> <C> <C>
Growth Stock Fund -1.1% 0.9%
S&P 500 0.0 1.3
- ----------------------------------------------------------
</TABLE>
YEAR-END DISTRIBUTIONS
On December 27, your Board of Directors declared an $0.18 per-share dividend
and a $1.66 per-share long-term capital gain, payable to shareholders of
record on that date. The total distribution of $1.84 per share was reflected
in either a check or statement mailed to you early in January, and was also
reported on Form 1099-DIV mailed to you later in the month.
MARKET ENVIRONMENT
Actions taken by the Federal Reserve in 1994 were the most important
influence on both the stock and credit markets. The Fed increased the federal
funds rate in a series of six steps in an effort to control inflation by
slowing economic growth. The last hike of 75 basis points in November raised
the discount rate and the target for the federal funds rate to 4.75% and
5.5%, respectively.
Stocks have been locked in a delicate balancing act. On one hand,
higher interest rates, fears of inflation, and lower liquidity have combined
to exert downward pressure on share prices. On the other hand, surprisingly
strong corporate profits have created more attractive stock valuations with
lower price/earnings ratios. The net result was a trendless year for stocks,
with exceptionally low volatility overall.
Areas of particular strength in the domestic market included cyclical
commodity companies whose earnings surged due to the strong economy, stable
growth companies in the consumer nondurables and health care sectors, which
recovered from depressed valuations, and technology companies also benefiting
from strong economic growth. Pockets of weakness included financial stocks
hurt by rising interest rates, retailers and restaurants injured by sluggish
consumer spending, and energy stocks hampered by unusually warm weather
through the holiday season.
Foreign markets were mixed during the year. European stocks declined
in local currency terms but generated positive returns for the most part in
U.S. dollars. Far Eastern stocks were down sharply with the notable exception
of Japan. Latin America was generally weak with poor returns in Mexico,
Argentina, and Venezuela outweighing strong performances in Brazil, Colombia,
and Chile.
PORTFOLIO MANAGEMENT
Your Fund participated in the strong economy primarily through the shares of
such technology companies as MICROSOFT, SILICON GRAPHICS, and NORTHERN
TELECOM, as well as through such stocks as GENERAL ELECTRIC and DANAHER,
which benefited from increased capital spending. Commodity firms, including
aluminum, chemical, and paper stocks, are not part of our investment program.
The demise of President Clinton's health care reform initiatives last
year led to a rally in that long-depressed sector. Large positions in PFIZER
and SANDOZ among traditional pharmaceutical firms, as well as AMGEN, CHIRON,
and BIOGEN in the biotechnology area, also aided your Fund's performance.
During the past few quarters we have been following a strategy of
selling economically sensitive growth stocks and recycling the proceeds into
classic steady growth
<PAGE>
companies whose earnings are not as sensitive to economic cycles. In the
fourth quarter we put this strategy on hold because of general market
conditions: stocks we wanted to buy were up and those we wanted to sell were
down. Therefore, the most recent portfolio activity reflects unique
situations rather than a broad investment theme.
One notable transaction was the swap of one-third of our position in
Microsoft into INTUIT, which Microsoft agreed to purchase for stock. Intuit
shares traded at a discount of 25% or more to their proposed acquisition
value, primarily due to fears that the Department of Justice might block the
merger. We believe the fear is overdone and the merger will be allowed. If it
is consummated at the proposed price, we should capture the spread between
the purchase and acquisition prices. If the merger does not proceed, we
believe Intuit still represents good long-term value.
INVESTMENT OUTLOOK
Both economic growth and inflation for 1995 are widely expected to be
approximately 3%, the same as for the past three years. Unlike last year,
when our own expectations were more optimistic than the consensus for growth,
we now believe the consensus could be too optimistic -- particularly for the
second half of 1995 -- because of high interest rates. The cumulative effect
of Fed tightening, as well as any rate hikes to come, could dampen economic
growth. We believe this is far more likely to occur than an acceleration of
growth from the present pace.
This outlook has important implications for growth stocks.
Established growth stocks have been out of favor for three years, while
value, cyclical, and smaller-capitalization stocks have performed well. The
steady, stable earnings pattern of established growth companies has not been
as appealing to investors as the sharp rebound in earnings for cyclical and
value companies following the last recession. We expect consistent earnings
growth to become more attractive as the economy slows and enters the later
stages of the expansion.
- --------------------------------------------------------------------------------
Weighted Portfolio Characteristics
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of 12/31/94
----------------------
Growth Stock
Domestic
Portfolio S&P 500
------------ -------
<S> <C> <C>
Earnings Growth Rate
Past 5 years 9.3% -3.5%
Projected 5 years 16.6 7.0
Dividend Growth Rate
Past 5 years 6.0 4.3
Projected 5 years 11.7 7.0
Return on Equity
Past 5 years 13.4 9.6
Projected 5 years 17.5 14.0
Long-Term Debt as % of Capital 21.8 23.9
P/E Ratio (12-month forward
projected earnings) 14.7x 13.3x
- --------------------------------------------------------
</TABLE>
On average, the stocks in the portfolio sell at a modest premium to
the market. The table above indicates that our domestic holdings represent
good value on a fundamental basis relative to the broad market. Because of
this, as well as our expectation that established growth companies will once
again attract the attention of investors, we believe the prospects are good
for stronger performance in 1995. The P/E ratio of the S&P 500 stood at 13.3
at year-end, down sharply from its level of the past few years. Corporate
earnings continue to be strong, reducing the valuation risk, in our view.
Europe appears to be on track with the U.S., with solid growth ahead
and the bulk of interest rate increases likely past. Latin America,
particularly Mexico, faces significant short-term challenges but, in our
view, remains a region with above-average long-term prospects. The Far East
should continue its strong growth over both the short and long term.
Respectfully submitted,
/s/ John Gillespie
John Gillespie
President
January 20, 1995
2
<PAGE>
- --------------------------------------------------------------------------------
Major Portfolio Changes
- --------------------------------------------------------------------------------
Three Months Ended December 31, 1994
- --------------------------------------------------------------------------------
TEN LARGEST PURCHASES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost (000)
----------
<S> <C>
Scott Paper* $15,617
- --------------------------------------------------------
Norwest 15,240
- --------------------------------------------------------
Interpublic Group* 13,271
- --------------------------------------------------------
Foundation Health* 11,836
- --------------------------------------------------------
Intuit 11,728
- --------------------------------------------------------
Boeing* 10,842
- --------------------------------------------------------
Newell* 10,583
- --------------------------------------------------------
Vodafone* 10,272
- --------------------------------------------------------
Hercules* 10,251
- --------------------------------------------------------
Ceridian* 8,184
- --------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
TEN LARGEST SALES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proceeds (000)
--------------
<S> <C>
Microsoft $12,521
- ---------------------------------------------------------
Genting Berhad** 12,256
- ---------------------------------------------------------
Cable & Wireless** 11,201
- ---------------------------------------------------------
Nordstrom** 9,422
- ---------------------------------------------------------
J. P. Morgan** 8,839
- ---------------------------------------------------------
W. R. Grace** 8,699
- ---------------------------------------------------------
Mead** 7,644
- ---------------------------------------------------------
American Premier Underwriters** 7,013
- ---------------------------------------------------------
Novell** 6,454
- ---------------------------------------------------------
Kimberly-Clark 5,793
- ---------------------------------------------------------
</TABLE>
* Position added
** Position eliminated
- --------------------------------------------------------------------------------
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
December 31, 1994
<TABLE>
<CAPTION>
Percent of
Company Net Assets
- ------------------------------------- ----------
<S> <C>
Freddie Mac 3.8%
- ---------------------------------------------------------
GE 2.5
- ---------------------------------------------------------
Berkshire Hathaway 2.0
- ---------------------------------------------------------
International Flavors & Fragrances 1.6
- ---------------------------------------------------------
Reader's Digest 1.5
- ---------------------------------------------------------
Hutchison Whampoa 1.4
- ---------------------------------------------------------
Danaher 1.3
- ---------------------------------------------------------
AMBAC 1.3
- ---------------------------------------------------------
Great Lakes Chemical 1.2
- ---------------------------------------------------------
Disney 1.2
- ---------------------------------------------------------
Schlumberger 1.2
- ---------------------------------------------------------
Viacom 1.1
- ---------------------------------------------------------
Halliburton 1.1
- ---------------------------------------------------------
Pfizer 1.1
- ---------------------------------------------------------
PartnerRe Holdings 1.1
- ---------------------------------------------------------
Time Warner 1.1
- ---------------------------------------------------------
Fannie Mae 1.1
- ---------------------------------------------------------
Reuters 1.1
- ---------------------------------------------------------
First Financial Management 1.0
- ---------------------------------------------------------
Elsevier 1.0
- ---------------------------------------------------------
Sandoz 1.0
- ---------------------------------------------------------
Northern Telecom 1.0
- ---------------------------------------------------------
Norwest 0.9
- ---------------------------------------------------------
Microsoft 0.9
- ---------------------------------------------------------
S I G Schweis 0.9
- ---------------------------------------------------------
Total 33.4%
- ---------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Growth Stock Fund P/E Ratio Relative to the S&P 500 P/E Ratio
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Graph shows the funds price/earnings ratio as compared to the S&P 500 from 3/69
to 12/94.
This chart is intended to show the history of the average (unweighted) P/E
ratio of the Fund's U.S. portfolio companies compared with the P/E ratio of
the S&P 500 Stock Index. Earnings per share are estimated by the Fund's
investment manager at each quarter-end.
3
<PAGE>
- --------------------------------------------------------------------------------
Fiscal-Year Performance Comparison
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
A two-line chart comparing the growth in an initial $10,000 investment in the
fund with the same investment in the S&P 500 INDEX starting 12/31/84 and ending
on 12/31/94.
*The Index return does not reflect expenses, which have been deducted from the
Fund's return.
- --------------------------------------------------------------------------------
Fiscal-Year Performance
- --------------------------------------------------------------------------------
Periods Ended December 31, 1994
<TABLE>
<CAPTION>
1 Year 5 Years* 10 Years*
-------- -------- ---------
<S> <C> <C>
0.89% 9.61% 13.66%
- ---------------------------------------------------------
</TABLE>
*Average Annual Compound Total Return
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
- --------------------------------------------------------------------------------
Sector Diversification
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
12/31/94
--------
<S> <C>
Common Stocks 91.1%
Convertibles 0.2
Preferred Stocks 0.6
Corporate Bonds 0.1
Reserves 8.0
-----
Total Net Assets 100.0%
- --------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
Investment Record/1/
T. Rowe Price Growth Stock Fund
- --------------------------------------------------------------------------------
The table below shows the investment record of one share of the T. Rowe Price
Growth Stock Fund, purchased at the initial offering price of $1.97, for the
period 4/11/50 through 12/31/94. Over this time, stock prices in general have
risen. The results shown should not be considered as a representation of the
income or capital gain or loss which may be realized from an investment made in
the Fund today.
- --------------------------------------------------------------------------------
Per-Share Data
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5 YEARS Net Capital With Capital Gain With Dividends
ENDED Asset Gain Income Distributions and Capital Gains
12/31 Value Distributions/2/ Dividends Reinvested Reinvested
--------- -------- ---------------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1955/3/ $ 4.91 $ 0.41 $ 0.55 $ 5.38 $ 6.42
- -------------------------------------------------------------------------------------------------------------
1960 7.08 1.17 0.59 9.46 12.46
- -------------------------------------------------------------------------------------------------------------
1965 10.58 0.99 0.73 15.81 22.69
- -------------------------------------------------------------------------------------------------------------
1970 11.55 1.20 0.89 19.06 29.51
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED
12/31
----------
<S> <C> <C> <C> <C> <C>
1971 14.81 0.20 0.15 24.85 38.92
- -------------------------------------------------------------------------------------------------------------
1972 16.66 0.32 0.12 28.51 44.99
- -------------------------------------------------------------------------------------------------------------
1973 11.91 0.54 0.14 21.13 33.66
- -------------------------------------------------------------------------------------------------------------
1974 7.65 0.23 0.22 13.86 22.54
- -------------------------------------------------------------------------------------------------------------
1975 10.19 -- 0.13/4/ 18.46 30.51
- -------------------------------------------------------------------------------------------------------------
1976 11.26 -- 0.23 20.40 34.47
- -------------------------------------------------------------------------------------------------------------
1977 10.25 -- 0.23 18.57 32.03
- -------------------------------------------------------------------------------------------------------------
1978 11.12 -- 0.28 20.14 35.76
- -------------------------------------------------------------------------------------------------------------
1979 12.02 -- 0.33 21.77 39.80
- -------------------------------------------------------------------------------------------------------------
1980 15.08 -- 0.42 27.31 51.77
- -------------------------------------------------------------------------------------------------------------
1981 12.72 0.04 0.50 23.11 45.33
- -------------------------------------------------------------------------------------------------------------
1982 14.07 0.09 0.53 25.76 52.88
- -------------------------------------------------------------------------------------------------------------
1983 15.21 -- 0.50 27.85 59.22
- -------------------------------------------------------------------------------------------------------------
1984 14.20 0.45 0.36 26.80 58.36
- -------------------------------------------------------------------------------------------------------------
1985 17.95 0.64 0.34 35.44 78.95
- -------------------------------------------------------------------------------------------------------------
1986 16.96 4.18 0.38 42.24 96.18
- -------------------------------------------------------------------------------------------------------------
1987 14.27 2.66 0.63 42.22 99.73
- -------------------------------------------------------------------------------------------------------------
1988 14.55 0.26 0.32 43.83 105.78
- -------------------------------------------------------------------------------------------------------------
1989 16.27 1.58 0.34 53.92 132.68
- -------------------------------------------------------------------------------------------------------------
1990 14.71 0.43 0.43 50.17 126.98
- -------------------------------------------------------------------------------------------------------------
1991 18.75 0.62 0.25 66.22 169.89
- -------------------------------------------------------------------------------------------------------------
1992 18.66 1.03 0.18 69.55 180.08
- -------------------------------------------------------------------------------------------------------------
1993 20.42 0.99 0.14 79.84 208.10
- -------------------------------------------------------------------------------------------------------------
1994 18.75 1.66 0.18 79.84 209.94
- -------------------------------------------------------------------------------------------------------------
Total $19.69 $10.09
- -------------------------------------------------------------------------------------------------------------
</TABLE>
1. Per-share figures reflect the following stock splits: 2-for-1 9/17/54;
3-for-1 10/9/59; 2-for-1 5/1/73.
2. Includes short-term capital gains of $0.03 in 1986, $0.29 in 1987, $0.04 in
1988, and $0.30 in 1989.
3. From inception 4/11/50 to 12/31/55.
4. In 1975, the dividend schedule was shifted from semi-annual to annual by
consolidating the August 1975 dividend into the January 1976 payment.
5
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets (Value in thousands)
T. Rowe Price Growth Stock Fund / December 31, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Common Stocks,
Rights & Warrants -- 91.1%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FINANCIAL -- 17.2%
- --------------------------------------------------------------------------------
Value
-----
BANK & TRUST -- 6.2%
<C> <S> <C>
5,000,000 shs. Banca Fideuram (ITL)..................... $ 5,580
32,496 Berliner Bank (DEM)...................... 7,591
500,000 Cho Hung Bank (KRW)...................... 7,419
109,886 *Cho Hung Bank, new (KRW)................. 1,631
25,000 Deutsche Bank (DEM)...................... 11,587
714 wts. *Deutsche Bank, 6/30/95
(DEM).................................. 76
5,910 *Deutsche Bank, 6/30/97
(DEM).................................. 149
250,000 shs. *Grupo Financiero
Bancomer (144a) ADR.................... 2,687
250,000 Korea First Bank (KRW)................... 3,592
58,930 *Korea First Bank, new (KRW).............. 821
1,875,000 Lippo Bank (IDR)......................... 2,900
97,941,200 Lojas American (BRL)..................... 2,719
300,000 NationsBank.............................. 13,537
825,000 Norwest.................................. 19,284
140 *Seoul Access Trust....................... 2,135
55,000 Societe Generale de France
(FRF).................................. 5,777
8,320 Societe Generale de
Surveillance (CHF)..................... 11,628
600,000 *Swedbank (SEK)........................... 4,280
750,000 Toronto-Dominion Bank
(CAD).................................. 11,362
15,000 Union Bank of Switzerland
(CHF).................................. 12,441
127,196
INSURANCE -- 3.7%
600,000 ACE Limited.............................. 14,025
10,500 Alfa..................................... 108
210,000 Citizens Corp............................ 3,570
115,000 Foremost................................. 4,054
130,000 *Fund American Enterprises 9,392
100,000 Horace Mann Educators.................... 2,125
1,055,409 ++PartnerRe Holdings....................... 19,592
531,665 wts. ++PartnerRe Holdings, 4/15/98.............. 3,463
200,000 shs. Torchmark................................ 6,975
350,000 UNUM..................................... 13,212
76,516
FINANCIAL SERVICES -- 7.3%
700,000 AMBAC.................................... 26,075
600,000 Countrywide Credit....................... 7,800
109,400 shs. *Fairfax Financial........................ 5,264
305,100 Fannie Mae............................... 22,234
1,554,600 Freddie Mac.............................. 78,507
250,000 H&R Block................................ 9,281
110,250 Quick & Reilly........................... 3,129
152,290
TOTAL FINANCIAL 356,002
- --------------------------------------------------------------------------------
UTILITIES -- 1.4%
- --------------------------------------------------------------------------------
TELEPHONE -- 1.4%
500,000 Pacific Telesis.......................... 14,250
2,000,000 SIP (ITL)................................ 5,203
1,500,000 Telekom Malaysia (MYR)................... 10,163
29,616
TOTAL UTILITIES 29,616
- --------------------------------------------------------------------------------
CONSUMER NONDURABLES -- 18.0%
- --------------------------------------------------------------------------------
COSMETICS -- 1.6%
700,000 International Flavors
& Fragrances........................... 32,375
BEVERAGES -- 1.6%
350,000 Grolsch (NLG)............................ 10,827
60,000 LVMH Moet Hennessy (FRF)................. 9,470
350,000 PepsiCo.................................. 12,688
32,985
FOOD PROCESSING -- 1.0%
8,675 Hero (CHF)............................... 4,207
500,000 McCormick................................ 9,125
300,000 Sara Lee................................. 7,575
20,907
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT -- 3.4%
500,000 Abbott Laboratories...................... 16,312
350,000 *Foundation Health........................ 10,850
300,000 *SciMed Life Systems...................... 15,150
250,000 St. Jude Medical......................... 9,813
320,000 United HealthCare........................ 14,440
150,000 *Vivra.................................... 4,200
70,765
PHARMACEUTICALS -- 6.3%
125,000 *Amgen.................................... 7,359
15,000 Ares-Serono (CHF)........................ 8,237
500,000 Astra 'B' (SEK).......................... 12,751
175,000 *Biogen................................... 7,219
150,000 *Chiron................................... 11,962
100,000 *Genentech................................ 4,538
50,000 *Genzyme.................................. 1,550
6,750 *Genzyme Tissue Repair.................... 25
</TABLE>
6
<PAGE>
<TABLE>
<C> <S> <C>
400,000 shs. *Immunex.................................. $ 5,900
1,150,000 Medeva (GBP)............................. 2,924
80,000 Medeva ADR............................... 800
500,000 Mylan Laboratories....................... 13,500
300,000 Pfizer................................... 23,175
300,000 *Roberts Pharmaceutical................... 9,375
40,000 Sandoz (CHF)............................. 20,835
130,150
MISCELLANEOUS CONSUMER PRODUCTS -- 4.1%
600,000 American Greetings (Class A)............. 16,125
225,000 *CUC International........................ 7,537
400,000 Hasbro................................... 11,700
392,500 *Jones Apparel Group...................... 10,107
500,000 Newell................................... 10,500
100,000 P&G...................................... 6,200
452,500 Sunbeam-Oster............................ 11,652
100,000 Unilever N.V. ADR........................ 11,650
85,471
TOTAL CONSUMER NONDURABLES 372,653
- --------------------------------------------------------------------------------
CONSUMER SERVICES -- 19.6%
- --------------------------------------------------------------------------------
GENERAL MERCHANDISERS -- 0.9%
175,000 Dayton Hudson............................ 12,381
250,000 Wal-Mart................................. 5,313
17,694
SPECIALTY MERCHANDISERS -- 2.1%
200,000 Ahold (NLG).............................. 6,187
250,000 *Department 56............................ 9,938
400,000 *Home Shopping Network.................... 4,000
487,000 J. Baker................................. 7,122
500,000 *Toys "R" Us.............................. 15,250
42,497
ENTERTAINMENT & LEISURE -- 6.6%
550,000 *Brinker.................................. 9,969
550,000 Disney................................... 25,369
7,000,000 Hutchison Whampoa (HKD).................. 28,318
88,600 *International Family
Entertainment (Class B)................ 1,119
450,000 McDonald's............................... 13,163
450,000 Reader's Digest (Class A),
non-voting............................. 22,106
204,600 Reader's Digest (Class B)................ 9,156
7,500 SMH Neuenburg (CHF)...................... 3,723
174,000 *Viacom (Class A)......................... 7,243
381,845 *Viacom (Class B)......................... 15,512
600,000 rts. *Viacom, 9/29/95.......................... 675
136,353
MEDIA & COMMUNICATIONS -- 10.0%
1,000,000 shs. American Media (Class A)................. 16,250
200,000 Capital Cities/ABC....................... 17,050
250,000 Dun & Bradstreet......................... 13,750
2,000,000 Elsevier (NLG)........................... 20,854
400,000 *Franklin Quest........................... 11,950
500,000 Gaylord Entertainment.................... 11,375
1,750,000 Granada (GBP)............................ 14,018
350,000 *Mobile Telecommunication
Technologies........................... 6,825
340,000 *Multimedia............................... 9,690
500,000 Reuters ADR.............................. 21,937
650,000 Time Warner.............................. 22,831
500,000 Turner Broadcasting
Systems (Class B)...................... 8,188
720,000 *United International Holdings............ 12,060
2,950,000 Vodafone (GBP)........................... 9,784
148,000 Wolters Kluwer (NLG)..................... 10,947
207,509
TOTAL CONSUMER SERVICES 404,053
- --------------------------------------------------------------------------------
CONSUMER CYCLICALS -- 0.3%
- --------------------------------------------------------------------------------
AUTOMOBILES & RELATED -- 0.1%
170,000 Ek Chor China Motorcycle................. 2,316
BUILDING & REAL ESTATE -- 0.2%
5,113,545 Hopewell Holdings (HKD).................. 4,230
TOTAL CONSUMER CYCLICALS 6,546
- --------------------------------------------------------------------------------
TECHNOLOGY -- 6.0%
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS -- 1.4%
150,000 Linear Technology........................ 7,387
320,000 *Maxim Integrated Products................ 11,200
75,000 Motorola................................. 4,341
100,000 *Xilinx................................... 5,900
28,828
OFFICE AUTOMATION -- 0.4%
320,000 *Ceridian................................. 8,600
SPECIALIZED COMPUTER -- 0.5%
350,000 *Silicon Graphics......................... 10,806
TELECOMMUNICATIONS -- 2.4%
250,000 *AirTouch Communications.................. 7,281
120,000 LM Ericsson (Class B) ADR................ 6,615
600,000 Northern Telecom......................... 20,025
3,000,000 Telmex (Class A) (MXN)................... 6,199
4,500,000 Telmex (Class L) (MXN)................... 9,299
49,419
AEROSPACE & DEFENSE -- 1.3%
400,000 Allied Signal............................ 13,600
250,000 Boeing................................... 11,688
25,288
TOTAL TECHNOLOGY 122,941
- --------------------------------------------------------------------------------
CAPITAL EQUIPMENT -- 8.0%
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 3.0%
1,000,000 GE....................................... 51,000
311,100 Getronics (NLG).......................... 11,344
62,344
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
MACHINERY -- 5.0%
900,000 shs. *Coltec Industries........................ $ 15,413
500,000 Danaher.................................. 26,125
237,500 Dina Group, Series L ADR................. 1,781
300,000 Greenfield Industries.................... 7,050
54,500 Mannesmann (DEM)......................... 14,842
9,300 *S I G Schweis (CHF)...................... 17,615
300,000 Teleflex................................. 10,650
500,000 TriMas................................... 10,000
103,476
TOTAL CAPITAL EQUIPMENT 165,820
- --------------------------------------------------------------------------------
BUSINESS SERVICES & TRANSPORTATION -- 8.5%
- --------------------------------------------------------------------------------
COMPUTER SERVICE & SOFTWARE -- 5.5%
225,000 Adobe Systems............................ 6,694
350,000 Autodesk................................. 13,737
250,000 Automatic Data Processing................ 14,625
481,400 *Autotote (Class A)....................... 5,416
350,000 First Financial Management............... 21,569
175,000 *Intuit................................... 11,638
300,000 *Microsoft................................ 18,337
300,000 *Oracle Systems........................... 13,237
180,000 *Sybase................................... 9,315
114,568
MISCELLANEOUS BUSINESS SERVICES -- 2.2%
350,000 *Assa-Abloy (SEK)......................... 1,178
100,000 *Corporate Express........................ 1,925
400,000 Interpublic Group........................ 12,850
176,400 Mutual Risk Management................... 4,630
135,000 Paychex.................................. 5,400
350,000 Securitas (SEK).......................... 9,421
875,000 *Waste Management
International ADR...................... 9,953
45,357
AIRLINES -- 0.8%
2,500,000 Swire Pacific `A' (HKD).................. 15,575
TOTAL BUSINESS SERVICES & TRANSPORTATION 175,500
- --------------------------------------------------------------------------------
ENERGY -- 4.2%
- --------------------------------------------------------------------------------
ENERGY SERVICES -- 3.2%
245,000 Baker Hughes............................. 4,471
452,000 *BJ Services.............................. 7,628
150,000 Camco International...................... 2,831
115,000 Coflexip ADR............................. 2,645
700,000 Halliburton.............................. 23,187
480,000 Schlumberger............................. 24,180
200,000 *Sithe Energies........................... 2,100
67,042
EXPLORATION & PRODUCTION -- 0.3%
313,000 *Kirby Corporation........................ 6,182
INTEGRATED PETROLEUM-DOMESTIC -- 0.2%
150,000 Union Texas Petroleum..................... 3,113
INTEGRATED PETROLEUM-
INTERNATIONAL -- 0.5%
100,000 Royal Dutch Petroleum ADR................ 10,750
TOTAL ENERGY 87,087
- --------------------------------------------------------------------------------
PROCESS INDUSTRIES -- 4.2%
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION -- 0.4%
200,000 *Grupo Mexicano de
Desarrollo, Series B ADR............... 1,525
100,000 Siam Cement (THB)........................ 5,991
7,516
DIVERSIFIED CHEMICALS -- 0.6%
100,000 Hercules................................. 11,538
SPECIALTY CHEMICALS -- 1.2%
450,000 Great Lakes Chemical..................... 25,650
PAPER & PAPER PRODUCTS -- 2.0%
400,000 Albany International (Class A)........... 7,700
225,000 Kimberly-Clark........................... 11,362
510,000 Kimberly-Clark Mexico
(Class A) (MXN)........................ 5,946
250,000 Scott Paper.............................. 17,281
42,289
TOTAL PROCESS INDUSTRIES 86,993
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 0.6%
- --------------------------------------------------------------------------------
METALS -- 0.6%
150,000 Hindalco (144a) GDR...................... 5,062
70,000 wts. *Hindalco, 11/2/95 GDR.................... 1,260
128,000 shs. Pohang Iron & Steel ADR.................. 3,744
210,000 *USIMINAS (144a) ADR...................... 2,835
12,901
TOTAL BASIC MATERIALS 12,901
- --------------------------------------------------------------------------------
CONGLOMERATES -- 3.0%
- --------------------------------------------------------------------------------
55,466 AGAB (DEM)............................... 5,978
6,400 wts. *AGAB, 3/11/96 (DEM)...................... 43
1,990 shs. *Berkshire Hathaway....................... 40,596
153,093 Hagemeyer (NLG).......................... 12,479
25,000 Maculan (ATS)............................ 2,063
TOTAL CONGLOMERATES 61,159
MISCELLANEOUS -- .1% 2,073
TOTAL COMMON STOCKS (COST $1,415,034) 1,883,344
</TABLE>
8
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.6%
- --------------------------------------------------------------------------------
<C> <S> <C>
1,066,289,693 shs. Banco Bradesco (BRL)..................... $ 9,064
591 Deutsche Bank, 8.75%,
participating certificates
(DEM).................................. 406
357 Deutsche Bank, 9.00%,
participating certificates
(DEM).................................. 249
55,966,400 Lojas American (BRL)..................... 1,652
35,000 Maculan (ATS)............................ 2,888
TOTAL PREFERRED STOCKS (COST $10,910) 14,259
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.2%
- --------------------------------------------------------------------------------
$ 2,200,000 J. Baker, 7.00%, 6/1/02.................. 2,202
2,000,000 Reliance Industries, 3.50%,
11/3/99................................ 2,200
TOTAL CONVERTIBLE BONDS (COST $4,961) 4,402
- --------------------------------------------------------------------------------
CORPORATE BONDS -- 0.1%
- --------------------------------------------------------------------------------
1,600,000 DEM AGAB, 8.875%, 4/9/96..................... 960
TOTAL CORPORATE BONDS (COST $929) 960
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 8.2%
- --------------------------------------------------------------------------------
BANKERS' ACCEPTANCES -- 0.5%
$ 10,000,000 Morgan Guaranty Company of
New York, 6.12%, 1/24/95............... 9,910
BANK NOTES -- 0.5%
10,000,000 Wachovia Bank North
Carolina, 5.70%, 2/15/95............... 9,991
COMMERCIAL PAPER -- 6.7%
10,000,000 Asset Securitization
Cooperative, 4(2),
5.45%, 1/18/95......................... 9,870
10,000,000 Banc One, 4(2),
6.00%, 1/11/95......................... 9,943
10,000,000 Chubb Capital,
6.05%, 1/13/95......................... 9,950
10,000,000 Countrywide Funding,
6.30%, 1/5/95.......................... 9,986
10,000,000 Delaware Funding,
5.88%, 1/23/95......................... 9,948
10,000,000 Dover, 4(2), 6.05%, 1/11/95.............. 9,939
10,000,000 Dun & Bradstreet,
5.47%, 2/7/95.......................... 9,839
10,000,000 General Electric Capital,
5.10%, 2/6/95.......................... 9,758
10,000,000 Hewlett Packard,
5.05%, 2/17/95......................... 9,754
10,000,000 ITT Hartford Group, 4(2),
5.45%, 1/13/95......................... 9,889
10,500,000 Koch Industries, 4(2),
6.25%, 1/3/95.......................... 10,493
10,000,000 Eli Lilly, 6.07%, 2/1/95................. 9,897
10,000,000 Preferred Receivables Funding,
5.50%, 1/13/95......................... 9,878
33,000 President & Fellows Harvard
College, 6.00%, 1/3/95................. 33
10,000,000 U.S. West Communications,
5.45%, 1/26/95......................... 9,870
139,047
MEDIUM-TERM NOTES -- 0.5%
10,000,000 Morgan Stanley Group, VR,
6.475%, 3/15/95........................ 10,000
TOTAL SHORT-TERM INVESTMENTS
(COST $168,948)................................. 168,948
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 100.2%
(COST $1,600,782)............................... 2,071,913
- --------------------------------------------------------------------------------
Other Assets Less Liabilities (4,393)
NET ASSETS CONSISTING OF:
Accumulated net investment
income -- net of distributions....... 120
Accumulated realized gains/losses
-- net of distributions.............. 28,985
Net unrealized gain.................... 471,133
Paid-in-capital applicable to
110,271,394 shares of $1.00 par
value capital stock outstanding;
200,000,000 shares authorized........ 1,567,282
---------
NET ASSETS $2,067,520
==========
NET ASSET VALUE PER SHARE $18.75
==========
- --------------------------------------------------------------------------------
</TABLE>
* Non-income producing
++ Securities contain some restrictions as to public resale -- total
of such securities at year-end amounts to 1.1% of net assets.
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 year-end amounts to
0.5% of net assets.
9
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
VR Variable rate
ATS Austrian schilling
BRL Brazilian cruzeiro
CAD Canadian dollar
CHF Swiss franc
DEM German deutschemark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
IDR Indonesia rupia
ITL Italian lira
KRW S. Korean won
MXN Mexican peso
MYR Malaysian ringgit
NLG Dutch guilder
SEK Swedish krona
THB Thai baht
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund / Year Ended December 31, 1994
<TABLE>
<CAPTION>
(Amounts in thousands)
<S> <C>
INVESTMENT INCOME
Income
Dividends (net of foreign taxes of $1,168)........................... $ 27,659
Interest............................................................. 7,009
---------
Total income......................................................... 34,668
---------
Expenses
Investment management................................................ 11,982
Shareholder servicing................................................ 3,464
Custody and accounting............................................... 509
Prospectus and shareholder reports................................... 172
Proxy and annual meeting............................................. 92
Directors............................................................ 44
Legal and auditing................................................... 43
Registrations........................................................ 41
Miscellaneous........................................................ 44
---------
Total expenses....................................................... 16,391
---------
Net investment income.................................................. 18,277
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities........................................................... 193,486
Foreign currency transactions........................................ (291)
---------
Net realized gain.................................................... 193,195
---------
Change in net unrealized gain or loss on:
Securities........................................................... (195,794)
Other assets and liabilities denominated in foreign currencies....... 45
---------
Change in net unrealized gain or loss................................ (195,749)
---------
Net realized and unrealized loss....................................... (2,554)
---------
INCREASE IN NET ASSETS FROM OPERATIONS $ 15,723
=========
- ---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1994 1993
---------- ----------
(Amounts in thousands)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income...................................... $ 18,277 $ 15,925
Net realized gain.......................................... 193,195 189,220
Change in net unrealized gain or loss...................... (195,749) 65,249
---------- ----------
Increase in net assets from operations..................... 15,723 270,394
---------- ----------
Distributions to shareholders
Net investment income...................................... (18,157) (12,868)
Net realized gain.......................................... (167,419) (91,002)
---------- ----------
Decrease in net assets from distributions.................. (185,576) (103,870)
---------- ----------
Capital share transactions/1/
Shares sold................................................ 316,804 252,410
Distributions reinvested................................... 175,609 98,005
Shares redeemed............................................ (230,594) (487,635)
---------- ----------
Increase (decrease) in net assets from capital share
transactions............................................. 261,819 (137,220)
---------- ----------
Increase in net assets....................................... 91,966 29,304
NET ASSETS
Beginning of year.......................................... 1,975,554 1,946,250
---------- ----------
End of year................................................ $2,067,520 $1,975,554
========== ==========
- -----------------------------------------------------------------------------------------------------
/1/Capital share transactions (number of shares)
Shares sold................................................ 15,480 12,987
Distributions reinvested................................... 9,421 4,856
Shares redeemed............................................ (11,357) (25,400)
---------- ----------
Increase (decrease) in capital shares outstanding.......... 13,544 (7,557)
========== ==========
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund / December 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Growth Stock Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price 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 that are not traded on a particular day
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. Securities regularly traded in the over-the-counter
market are valued at the latest bid price.
Debt securities are generally traded in the over-the-counter market
and are valued at a price deemed best to reflect fair value as quoted by
dealers who make markets in these securities or by an independent pricing
service. Short-term debt securities are valued at their cost which, when
combined with accrued interest, approximates fair value.
For purposes of determining the Fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in
foreign currencies is determined by using the mean of the bid and offer
prices of such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the officers
of the Fund, as authorized by the Board of Directors.
B) Currency translation - Assets and liabilities are converted 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 or losses is reflected as a component of such
gains or losses.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions
to shareholders are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $1,024,235,000 and $1,009,010,000,
respectively, for the year ended December 31, 1994.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
In order for the Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $3,056,000
of undistributed net investment income was reclassified as an increase to
undistributed net realized gains during the year ended December 31, 1994. The
results of operations and net assets were not affected by the
reclassifications.
At December 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $1,600,782,000 and net
unrealized gain aggregated $471,131,000, of which $545,063,000 related to
appreciated investments and $73,932,000 to depreciated investments.
12
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Cont'd)
- --------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the Fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management
fee, of which $1,029,000 was payable at December 31, 1994. The fee is
computed daily and paid monthly, and consists of an Individual Fund Fee equal
to 0.25% of average daily net assets and a Group Fee. The Group Fee is based
on the combined assets of certain mutual funds sponsored by the Manager or
Rowe-Price Fleming International, Inc. (the Group). The Group Fee rate
ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in
excess of $34 billion. At December 31, 1994, and for the year then ended,
the effective annual Group Fee rate was 0.34%. The Fund pays a pro rata
share of the Group Fee based on the ratio of its net assets to those of the
Group.
In addition, the Fund has entered into agreements with the Manager
and two wholly-owned subsidiaries of the Manager, pursuant to which the Fund
receives certain other services. The Manager computes the daily share price
and maintains the financial records of the Fund. T. Rowe Price Services, Inc.
(TRPS) is the Fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the Fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the Fund. Additionally,
the Fund is one of several T. Rowe Price mutual funds (the Underlying Funds)
in which the T. Rowe Price Spectrum Growth Fund (Spectrum) invests. In
accordance with an Agreement between 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 $3,125,000 for the year ended
December 31, 1994, of which $328,000 was payable at year end.
During the year ended December 31, 1994, the Fund, in the ordinary
course of business, paid commissions of $203,000 to, and placed security
purchase and sale orders aggregating $31,393,000 with, certain affiliates of
the Manager in connection with the execution of various portfolio
transactions.
13
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
T. Rowe Price Growth Stock Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each
-------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $20.42 $18.66 $18.75 $14.71 $16.27
------ ------ ------ ------ ------
Investment Activities
Net investment income............... 0.18 0.17 0.18 0.24 0.38
Net realized and unrealized gain (loss) (0.01) 2.72 0.94 4.67 (1.08)
------ ------ ------ ------ ------
Total from Investment Activities........ 0.17 2.89 1.12 4.91 (0.70)
------ ------ ------ ------ ------
Distributions
Net investment income............... (0.18) (0.14) (0.18) (0.25) (0.43)
Net realized gain................... (1.66) (0.99) (1.03) (0.62) (0.43)
------ ------ ------ ------ ------
Total Distributions..................... (1.84) (1.13) (1.21) (0.87) (0.86)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $18.75 $20.42 $18.66 $18.75 $14.71
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Total Return............................ 0.9% 15.6% 6.0% 33.8% (4.3)%
Ratio of Expenses to Average Net Assets. 0.81% 0.82% 0.83% 0.85% 0.76%
Ratio of Net Investment Income to
Average Net Assets.................. .91% .86% .94% 1.40% 2.31%
Portfolio Turnover Rate................. 54.0% 35.3% 27.4% 31.8% 30.2%
Net Assets, End of Year (in thousands).. $2,067,520 $1,975,554 $1,946,250 $1,846,016 $1,396,961
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
T. Rowe Price Growth Stock Fund, Inc.
We have audited the accompanying statement of net assets of T. Rowe Price
Growth Stock Fund, Inc. as of December 31, 1994, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments owned as of December 31, 1994, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights,
referred to above, present fairly, in all material respects, the financial
position of T. Rowe Price Growth Stock Fund, Inc. as of December 31, 1994,
the results of its operations, the changes in its net assets and financial
highlights for each of the respective periods stated in the first paragraph
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 23, 1995
15
<PAGE>
ANNUAL REPORT
T. Rowe Price
- -------------
GROWTH STOCK FUND
DECEMBER 31, 1994
FOR YIELD, PRICE, LAST TRANSACTION, AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
FOR ASSISTANCE WITH YOUR EXISTING FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. ROWE PRICE
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to
others who have received a copy of the prospectus of the T. Rowe Price Growth
Stock Fund/(R)/.
T. Rowe Price
Invest With Confidence(R)
GSF
