<PAGE>
Annual Report
GROWTH
STOCK
FUND
DECEMBER 31, 1996
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
----------------------------------------------------------------------------
. Last year was the second powerful year in a row for U.S. stocks and for your
fund, which generated its second consecutive year of performance above 20%.
. The Growth Stock Fund returned 13.04% and 21.70% for the last 6- and 12-month
periods, respectively, surpassing the Lipper average for similar funds but
lagging the S&P 500 over the year.
. Our foreign securities provided better overall returns than U.S. holdings
after several lagging years.
. We believe technology companies will enjoy above-average earnings growth, so
1997 could be an excellent year for this group.
. Despite full valuations, we do not expect a bear market in U.S. stocks in
1997 and we remain optimistic about the prospects for foreign stocks.
<PAGE>
FELLOW SHAREHOLDERS
It was another terrific year for common stock investors and your fund, which
returned more than 20% for the second year in a row. The past decade has been
phenomenal for shareholders, with positive returns in nine of 10 years. The
fund's most recent 5- and 10-year periods generated average annual compound
total returns of 14.52% and 13.28%, respectively.
<TABLE>
<CAPTION>
PERFORMANCE COMPARISON
- ---------------------------------------------------------
Periods Ended 12/31/96 6 Months 12 Months
- ---------------------------------------------------------
<S> <C> <C>
Growth Stock Fund 13.04% 21.70%
.........................................................
S&P 500 11.68 22.96
.........................................................
Lipper Growth Funds Average 8.23 19.24
.........................................................
</TABLE>
Your fund's returns for the 6- and 12-month periods ended
December 31, 1996, surpassed the Lipper peer group average but
trailed the unmanaged Standard & Poor's 500 Stock Index over
the longer period. Foreign securities, which represented
roughly one-quarter of fund assets, provided better returns
overall than the domestic portfolio holdings after several
years of relative underperformance.
YEAR-END DISTRIBUTIONS
On December 26, 1996, your Board of Directors declared a $0.19
per share income dividend, a $2.04 per share long-term capital
gain, and a $0.02 short-term capital gain, payable to
shareholders of record on that date. These distributions were
reflected in either a check or statement mailed to you early
in January and were also reported on Form 1099-DIV mailed to
you later in the month.
MARKET ENVIRONMENT
For the U.S. stock market, 1996 was a delightful encore to
1995's heroic rise. The U.S. economy remained in a sweet spot
for equity investors, characterized by low interest rates, low
inflation, positive economic growth, and rising corporate
profits.
Federal Reserve Chairman Alan Greenspan watched the economy
settle into and then stay in this sweet spot without much need
for any finetuning by the Fed. In a much publicized speech in
early December,
1
<PAGE>
Greenspan questioned whether "irrational exuberance" had
entered the U.S. equity market. His comment raised the specter
that high stock prices might be a reason for the Fed to raise
short-term rates. The logic behind this remark seemed somewhat
perverse, since the Fed's effort to control inflation was a
major reason for the rise in stock prices in the first place.
Traditionally, bull markets and economic expansions do not die
of natural causes; they are often killed off by the Fed.
Corporate profit growth, while still healthy, is decelerating.
Productivity remains the key driver of the market; indeed,
gains in this area were at historically high levels at
year-end. Companies have become more productive through
restructuring, better operating management, and the
application of technology to reduce costs.
Areas of strength in the domestic market included financial
stocks, which benefited from low interest rates, strong sales
growth, and declining credit costs; technology market leaders,
whose earnings growth continued to surprise on the upside; and
oil service companies, which benefited from higher commodity
prices and the application of new technologies that lower the
costs of finding and exploiting oil reserves.
Weak areas included health care services companies such as
health maintenance organizations (HMOs), whose costs rose
faster than their ability to raise prices, and cyclical
commodity companies, whose earnings growth potential mirrored
the slow-growth economy. Small-capitalization stocks also
underperformed.
Foreign markets, with the notable exception of Japan, did well
overall in 1996, although not nearly well enough to keep up
with U.S. equities. European stocks were strong in both local
currency and U.S. dollar terms, as investors anticipated a
revival of economic growth. Many Latin American emerging
markets performed well, bouncing back from two tough years.
INVESTMENT REVIEW AND PORTFOLIO MANAGEMENT
Technology stocks lagged the market after five consecutive
years of outperformance. Market leaders, however, such as
Intel, Microsoft, Oracle, Cisco Systems, and 3Com, continued
to deliver outstanding returns to the portfolio. We eliminated
technology stocks that no
2
<PAGE>
longer have dominant market positions, such as Sybase, Bay
Networks, and Adobe Systems.
We continue to endorse the case for above-average earnings
growth for technology companies and think 1997 is shaping up
to be an excellent year for the sector. Major new products
from Microsoft and Intel should drive personal computer sales.
Communications and networking companies could also enjoy new
product offerings in wireless-, Internet-, and
intranet-related products. Also, consumer software is
benefiting from increased market penetration by the new
generation of video game platforms.
Financial stocks remained a featured part of your portfolio,
with large positions in outstanding companies such as Federal
Home Loan Mortgage (Freddie Mac), Federal National Mortgage
Association (Fannie Mae), ACE Limited, and UNUM contributing
positively to performance. We still like this sector because
of its low relative valuation and dependable earnings growth.
Other favorable trends in this sector included consolidation,
deregulation, increasing returns on invested capital, and
shareholder-oriented financial engineering. During the past
six months, we added to holdings in ACE Limited and EXEL, both
Bermuda-based excess liability insurers, and initiated a
position in Wells Fargo, a high-quality regional bank.
The weak relative showing of data services companies in the
second half of 1996 followed an extended period of terrific
performance. Companies such as Electronic Data Systems and
First Data have demonstrated stable 15% to 20% earnings growth
for the last several
<TABLE>
<CAPTION>
PORTFOLIO CHARACTERISTICS
- --------------------------------------------------------
Growth Stock
Domestic
As of 12/31/96 Portfolio S&P 500
- --------------------------------------------------------
<S> <C> <C>
Earnings Growth Rate
Past 5 Years 21.0% 13.7%
...................................................
Projected 5 Years * 15.9 12.2
...................................................
Dividend Growth Rate
Past 5 Years 9.7 6.8
...................................................
Projected 5 Years * 12.0 9.0
...................................................
Return on Equity
Past 5 Years 19.1 17.3
...................................................
Projected 5 Years * 19.7 18.4
...................................................
Long-Term Debt as
Percent of Capital 26.4 30.0
........................................................
P/E Ratio (12-month forward
projected earnings) 19.5X 16.5X
........................................................
</TABLE>
*Earnings forecast are based on T. Rowe Price research and are in no way
indicative of future investment returns.
3
<PAGE>
years. Recently, both companies signaled a slowdown in growth,
and the market reacted negatively to the news. We believe the
slowdown is temporary and added to our positions.
In a notable second half transaction, we substantially
increased our position in Berkshire Hathaway. The stock has
outperformed dramatically since our initial purchase in 1991,
with the price generally reflecting the company's underlying
fundamentals. In 1996, however, the company's value increased
considerably more than its stock price. Positive events
included: the purchase of the remainder of GEICO in a cash
tender, which added to an outstanding insurance operation; the
acquisition of Flightsafety International; and strong
appreciation in large portfolio positions such as Coke and
Gillette.
OUTLOOK
U.S. stocks benefited enormously in the last two years from
low inflation, moderate economic growth, and higher-than-
expected growth in corporate earnings. The first two
conditions are likely to remain intact in 1997, but rapid
profit growth will be more difficult to achieve. Nonetheless,
corporate cash flow is on the upswing, the price of capital is
low, and balance sheets are in great shape. There is no better
recipe for higher stock prices than an economy that rolls
along in a state of moderate growth.
On a cautionary note, the market has experienced two
consecutive years of 20% or more appreciation six times since
1900, and suffered an average loss of almost 8% the following
year, with the best year eking out a meager 2% gain. However,
this could turn out to be a year where corporate earnings
justify the lofty stock valuations, and we do not expect to
see a correction of major proportions.
OUR FORECAST OF CONTINUED MODERATE GROWTH HAS POSITIVE IMPLICATIONS . . .
Our forecast of continued moderate growth has positive
implications for the companies in the portfolio. The steady
pattern of earnings demonstrated by the established growth
companies held by your fund should continue to command the
attention of investors. On average, portfolio stocks sold at a
modest premium to the market. The Portfolio Characteristics
table and the Relative P/E chart in this letter indicate that
our domestic portfolio represents good value relative to the
broad market. Because of this,
4
<PAGE>
along with our conviction that established growth stocks will remain in favor
with investors, we believe the fund's prospects are good for strong relative
performance in 1997.
In addition, there is reason to be optimistic about foreign markets. Interest
rates are low worldwide, currencies are relatively stable, and economic growth
appears to be accelerating. While we are clearly at a late stage in the U.S.
economic cycle, Europe, Asia (with the notable exception of Japan), and Latin
America are on the upswing. In Europe, the major productivity gains that fueled
U.S. earnings growth have yet to be achieved. Both Latin America and the Far
East have strong long-term growth potential as well as improving near-term
prospects.
We welcome new shareholders, and we will continue to seek attractive investments
in the potentially challenging environment we foresee.
Respectfully submitted,
/s/John Gillespie
John Gillespie
President and Chairman of the Investment Advisory Committee
January 17, 1997
Growth Stock Fund P/E Relative To The S&P 500 P/E
- -------------------------------------------------
[CHART APPEARS HERE]
<TABLE>
<S> <C>
12/91 1.14
1.15
1.02
1.02
1.12
1.05
1.05
1.07
1.15
1.09
1.12
1.17
1.32
1.20
1.14
1.13
1.13
1.15
1.09
1.12
12/96 1.09
</TABLE>
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.
5
<PAGE>
STICKING TO YOUR GAME PLAN
- --------------------------------------------------------------------------------
TIME REDUCES VOLATILITY OF MARKET RETURNS
-----------------------------------------
(Annualized Returns for Best and Worst Period:
Rolling Periods From 1950 to 1996*)
[AN 8-BAR CHART SHOWING BEST AND WORST ANNUALIZED TOTAL RETURNS OF STOCKS FOR
VARIOUS ROLLING TIME PERIODS BETWEEN 1950 AND 1966.]
* From 1950-1996, there were 47 one-year periods; 42 five-year periods; 37
ten-year periods; and 27 twenty-year periods.
Source: T. Rowe Price Associates; data from Ibbotson Associates.
Chart is for illustrative pruposes only and is not intended to represent the
past performance or future results of any specific securities.
In our report to you one year ago, we mentioned the possibility of a modest
decline in stock prices. In fact, from May to July 1996, the broad market (as
measured by the Standard & Poor's 500 Stock Index) fell around 7%. However, the
bull market resumed its charge to post a robust 23% gain for the year.
Some believe the market is poised for a significant downturn. We do not expect a
major drop in stock prices in 1997, although another modest pullback is
possible. On balance, we expect stocks to advance at a much slower pace.
How should you prepare for a potential market pullback? As always, our advice is
to diversify your investments and focus on the long term. If you've implemented
a sound investment strategy, stay the course. Stocks have historically overcome
periods of volatility to provide better returns than most other investments.
Market corrections can even have a silver lining because they result in good
buying opportunities.
Furthermore, the volatility of stock market returns has diminished significantly
over longer time frames. The chart shows the best and worst annualized returns
on stocks over various rolling time periods between 1950 and 1996. (For
instance, there were 37 rolling 10-year periods: 1950-1960, 1951-1961, etc.)
Investors who held stocks for only one year could have had as much as a 52.6%
gain, or as little as a 26.5% loss -- a spread of 79 percentage points. However,
investors who held stocks for 10-year periods or longer always overcame interim
volatility to post gains for the entire period.
In addition, a well-diversified portfolio can weather volatility better than a
more concentrated portfolio over the long term and particularly during market
corrections. For example, during last summer's correction, small-company stocks
fell nearly 16% while large-company issues dropped 7.3%. However, a portfolio
diversified among large U.S. companies (30% of assets), small U.S. companies
(15%), foreign companies (15%), intermediate-term Treasury bonds (30%), and
Treasury bills (10%) would have lost a smaller 5.2% of its value./1/
Above all, remember that investing is a long-distance race, not a sprint.
/1/ Ned Davis Research.
6
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
- ----------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/96
-------------------------------------------------------------------------
<S> <C>
Freddie Mac 4.2%
.........................................................................
Berkshire Hathaway 3.1
.........................................................................
GE 2.9
.........................................................................
ACE Limited 2.1
.........................................................................
Danaher 1.9
-------------------------------------------------------------------------
Royal Dutch Petroleum 1.9
.........................................................................
UNUM 1.8
.........................................................................
PartnerRe Holdings 1.6
.........................................................................
Hutchison Whampoa 1.6
.........................................................................
AlliedSignal 1.4
-------------------------------------------------------------------------
Disney 1.4
.........................................................................
Intel 1.3
.........................................................................
Fannie Mae 1.3
.........................................................................
Vodafone 1.3
.........................................................................
Wells Fargo 1.3
-------------------------------------------------------------------------
BMC Software 1.2
.........................................................................
Corning 1.2
.........................................................................
First Data 1.1
.........................................................................
Great Lakes Chemical 1.1
.........................................................................
Columbia/HCA Healthcare 1.1
-------------------------------------------------------------------------
3Com 1.1
.........................................................................
Tupperware 1.1
.........................................................................
Boston Scientific 1.0
.........................................................................
Norwest 1.0
.........................................................................
Kimberly-Clark 1.0
-------------------------------------------------------------------------
Total 40.0%
</TABLE>
7
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended December 31, 1996
Ten Largest Purchases Ten Largest Sales
---------------------------------------------------------------------------
Berkshire Hathaway Ceridian **
........................................... .............................
H&R Block * 3Com
........................................... .............................
Cisco Systems * Altera **
........................................... .............................
Electronic Data Systems * Vodafone ADR
........................................... .............................
Tupperware United HealthCare **
........................................... .............................
Reader's Digest Class A * 360 Communications **
........................................... .............................
CUC International * LM Ericsson ADR
........................................... .............................
St. Paul Companies * Adobe Systems **
........................................... .............................
Corporate Express * St. Jude Medical **
........................................... .............................
3Com Intuit **
........................................... .............................
* Position added
** Position eliminated
8
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or
index. The index return does not reflect expenses, which have been deducted
from the fund's return.
[CHART APPEARS HERE]
GROWTH STOCK FUND
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth Stock Fund S&P 500 Index
<S> <C> <C>
12/31/86 10,000 10,000
12/87 10,368 10,510
12/88 10,998 12,256
12/89 13,794 16,139
12/90 13,202 15,638
12/91 17,663 20,402
12/92 18,722 21,957
12/93 21,635 24,170
12/94 21,827 24,489
12/95 28,586 33,692
12/96 34,790 41,428
</TABLE>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
<TABLE>
<CAPTION>
Periods Ended December 31, 1996 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Stock Fund 21.70% 17.16% 14.52% 13.28%
..........................................................................................
</TABLE>
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
9
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 23.35 $ 18.75 $ 20.42 $ 18.66 $ 18.75
...............................................................
Investment activities
Net investment income 0.19 0.23 0.18 0.17 0.18
Net realized and
unrealized gain (loss) 4.89 5.57 (0.01) 2.72 0.94
...............................................................
Total from
investment activities 5.08 5.80 0.17 2.89 1.12
...............................................................
Distributions
Net investment income (0.19) (0.23) (0.18) (0.14) (0.18)
Net realized gain (2.06) (0.97) (1.66) (0.99) (1.03)
...............................................................
Total distributions (2.25) (1.20) (1.84) (1.13) (1.21)
...............................................................
NET ASSET VALUE
End of period $ 26.18 $ 23.35 $ 18.75 $ 20.42 $ 18.66
---------------------------------------------------------------
Ratios/Supplemental Data
Total return 21.70% 30.97% 0.89% 15.56% 5.99%
.......................................................................................................
Ratio of expenses to
average net assets 0.77% 0.80% 0.81% 0.82% 0.83%
.......................................................................................................
Ratio of net investment
income to average
net assets 0.74% 1.09% 0.91% 0.86% 0.94%
.......................................................................................................
Portfolio turnover rate 49.0% 42.5% 54.0% 35.3% 27.4%
.......................................................................................................
Average commission
rate paid $ 0.0615 - - - -
.......................................................................................................
Net assets, end of period
(in millions) $ 3,431 $ 2,762 $ 2,068 $ 1,976 $ 1,946
.......................................................................................................
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
December 31, 1996
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
COMMON STOCKS & WARRANTS 96.7%
FINANCIAL 22.7%
Bank and Trust 5.0%
Argentaria Banca de Espana (ESP) 70,000 $ 3,133
.............................................................................................
Banca Fideuram (ITL) 5,260,000 11,553
.............................................................................................
Cho Hung Bank (KRW) 609,886 5,073
.............................................................................................
Lippo Bank (IDR) 4,000,000 3,895
.............................................................................................
Lojas American (BRL) 97,941,200 1,225
.............................................................................................
Maculan (ATS) * 1,666 208
.............................................................................................
Northern Trust 540,000 19,609
.............................................................................................
Norwest 825,000 35,888
.............................................................................................
Seoul Access Trust IDR * 140 1,470
.............................................................................................
Societe Generale (FRF) * 55,000 5,947
.............................................................................................
Societe Generale de Surveillance (CHF) 8,320 20,450
.............................................................................................
Toronto-Dominion Bank (CAD) 750,000 19,280
.............................................................................................
Wells Fargo 160,000 43,160
.............................................................................................
170,891
................
Insurance 8.0%
ACE Limited 1,175,000 70,647
.............................................................................................
Erie Indemnity 178,800 5,230
.............................................................................................
EXEL 300,000 11,363
.............................................................................................
Foremost 169,500 10,170
.............................................................................................
Harleysville Group 200,000 6,050
.............................................................................................
Leucadia National 275,000 7,356
.............................................................................................
PartnerRe Holdings 1,355,409 46,084
.............................................................................................
PartnerRe Holdings, 11/04/00, warrants *++ 531,665 10,429
.............................................................................................
St. Paul Companies 300,000 17,587
.............................................................................................
UNUM 850,000 61,412
.............................................................................................
Zurich Reinsurance 900,000 28,125
.............................................................................................
274,453
................
Financial Services 9.7%
AMBAC 400,000 26,550
.............................................................................................
Fairfax Financial (CAD) 109,400 23,169
.............................................................................................
Fannie Mae 1,220,400 45,460
.............................................................................................
Freddie Mac 1,295,000 $ 142,612
.............................................................................................
</TABLE>
11
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -----------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Fund American Enterprises 250,000 23,937
...............................................................................................
H&R Block 1,100,000 31,900
...............................................................................................
Mediolanum (144a) (ITL) * 343,500 3,249
...............................................................................................
Mercury Finance 888,000 10,878
...............................................................................................
Quick & Reilly 337,500 10,083
...............................................................................................
Travelers Group 378,400 17,170
...............................................................................................
335,008
...............................................................................................
Total Financial 780,352
..................
UTILITIES 0.6%
Telephone 0.6%
Telecom Italia Mobile (ITL) 2,000,000 5,069
..............................................................................................
Telecom Italia, Savings Shares (ITL) 2,900,000 5,764
..............................................................................................
Telekom Malaysia (MYR) 1,250,000 11,136
..............................................................................................
Total Utilities 21,969
.................
CONSUMER NONDURABLES 18.0%
Beverages 1.6%
Grolsch (NLG) 350,000 13,582
..............................................................................................
LVMH (FRF) 50,000 13,964
..............................................................................................
PepsiCo 1,000,000 29,250
..............................................................................................
56,796
.................
Food Processing 0.7%
Heinz 650,000 23,238
..............................................................................................
23,238
.................
Hospital Supplies/Hospital Management 3.0%
Apria Healthcare * 835,000 15,656
..............................................................................................
Boston Scientific * 600,000 36,000
..............................................................................................
Columbia/HCA Healthcare 900,000 36,675
..............................................................................................
Medtronic 201,000 13,668
..............................................................................................
101,999
.................
Biotechnology 2.1%
Amgen * 300,000 16,331
..............................................................................................
Biogen * 600,000 23,175
..............................................................................................
Genentech * 600,000 32,175
..............................................................................................
71,681
.................
Pharmaceuticals 4.6%
</TABLE>
12
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -----------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Ares-Serono (CHF) 7,500 $ 7,155
..............................................................................................
Astra (Class B) (SEK) 600,000 28,945
..............................................................................................
Merck 150,000 11,888
..............................................................................................
Novartis (CHF) 28,000 32,069
..............................................................................................
Pfizer 400,000 33,150
..............................................................................................
Schwarz Pharma AG (144a) (DEM) 65,000 4,815
..............................................................................................
Warner-Lambert 200,000 15,000
..............................................................................................
Zeneca Group (GBP) 900,000 25,364
..............................................................................................
158,386
................
Miscellaneous Consumer Products 6.0%
Corning 891,500 41,232
..............................................................................................
CUC International * 829,800 19,708
..............................................................................................
Hasbro 475,000 18,465
..............................................................................................
Hennes & Mauritz (Class B) (SEK) 35,000 4,845
..............................................................................................
Proctor & Gamble 190,000 20,425
..............................................................................................
Philip Morris 250,000 28,156
..............................................................................................
Tomkins (GBP) 3,900,000 18,040
..............................................................................................
Tupperware 682,000 36,572
..............................................................................................
Unilever N.V. ADR 100,000 17,525
..............................................................................................
204,968
................
Total Consumer Nondurables 617,068
................
CONSUMER SERVICES 12.9%
General Merchandisers 0.9%
Circuit City Stores 1,035,000 31,179
..............................................................................................
31,179
................
Specialty Merchandisers 1.8%
Home Depot 300,000 15,037
..............................................................................................
Kohl's * 300,200 11,783
..............................................................................................
Revco * 795,700 29,441
..............................................................................................
Tag Heuer ADR 410,600 6,621
..............................................................................................
62,882
................
Entertainment and Leisure 3.6%
Disney 684,864 47,684
..............................................................................................
Hutchison Whampoa (HKD) 7,000,000 54,981
..............................................................................................
Reader's Digest (Class A), non-voting 528,600 21,276
..............................................................................................
123,941
................
Media and Communications 5.0%
</TABLE>
13
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Elsevier (NLG) 2,000,000 $ 33,826
.........................................................................
Gaylord Entertainment 703,500 16,093
.........................................................................
Granada (GBP) 1,400,000 20,699
.........................................................................
Kinnevik (SEK) 225,000 6,202
.........................................................................
Reader's Digest (Class B) 86,300 3,128
.........................................................................
Schibsted (144a) (NOK) 670,000 12,218
.........................................................................
Total Access Communications (144a) 700,000 4,830
.........................................................................
VNU (NLG) 700,000 14,637
.........................................................................
Vodafone ADR 800,000 33,100
.........................................................................
Vodafone (GBP) 2,600,000 11,002
.........................................................................
Wolters Kluwer (NLG) 125,000 16,616
.........................................................................
172,351
............
Restaurants 1.6%
Boston Chicken * 750,000 26,906
.........................................................................
McDonald's 350,000 15,838
.........................................................................
Outback Steakhouse * 400,000 10,650
.........................................................................
53,394
............
Total Consumer Services 443,747
............
CONSUMER CYCLICALS 1.9%
Building and Real Estate 1.9%
Masco 650,000 23,400
.........................................................................
Security Capital (144a) * 965,000 12,352
.........................................................................
Starwood Lodging, REIT 500,000 27,562
.........................................................................
Total Consumer Cyclicals 63,314
............
TECHNOLOGY 7.9%
Electronic Components 3.7%
Analog Devices * 350,000 11,856
.........................................................................
Intel 350,000 45,828
.........................................................................
Linear Technology 491,800 21,578
.........................................................................
Maxim Integrated Products * 576,000 24,948
.........................................................................
Molex (Class A), non-voting 300,000 10,669
.........................................................................
Xilinx * 300,000 11,044
.........................................................................
125,923
............
Electronic Systems 0.5%
Hewlett-Packard 375,000 18,844
.........................................................................
18,844
............
Telecommunications 3.7%
</TABLE>
14
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
3Com * 500,000 $ 36,656
.........................................................................
AT&T 350,000 15,225
.........................................................................
Cisco Systems * 400,000 25,475
.........................................................................
Colt Telecom Group * 109,800 2,127
.........................................................................
Compania Anonima Nacional Telefonos de
Venezuela ADR * 113,200 3,184
.........................................................................
Cox Communications (Class A) * 1,100,000 25,438
.........................................................................
LM Ericsson (Class B) ADR 100,000 3,019
.........................................................................
Omnipoint * 300,000 5,756
.........................................................................
Telecomunicacoes Brasileiras ADR 100,000 7,650
.........................................................................
United International Holdings (Class A) * 215,800 2,603
.........................................................................
127,133
............
Total Technology 271,900
............
CAPITAL EQUIPMENT 10.0%
Electrical Equipment 5.9%
AlliedSignal 715,000 47,905
.........................................................................
Exide 870,000 20,010
.........................................................................
GE 1,000,000 98,875
.........................................................................
Getronics (NLG) 480,000 13,039
.........................................................................
Tyco International 400,000 21,150
.........................................................................
200,979
............
Machinery 4.1%
Danaher 1,400,000 65,275
.........................................................................
Mannesmann (DEM) * 39,500 17,121
.........................................................................
SIG Schweis (CHF) * 8,000 20,261
.........................................................................
Teleflex 408,900 21,314
.........................................................................
TriMas 700,000 16,713
.........................................................................
140,684
............
Total Capital Equipment 341,663
............
BUSINESS SERVICES AND
TRANSPORTATION 11.6%
Distribution Services 0.3%
Alco Standard 200,000 10,325
.........................................................................
10,325
............
</TABLE>
15
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Environmental 0.5%
Rentokil Group (GBP) 2,500,000 $ 18,845
.........................................................................
18,845
............
Miscellaneous Business Services 3.8%
ADT * 468,200 10,710
.........................................................................
Assa-Abloy (SEK) 350,000 6,364
.........................................................................
Corporate Express * 500,000 14,719
.........................................................................
Interpublic Group 400,000 19,000
.........................................................................
Mutual Risk Management 738,666 27,331
.........................................................................
Reuters ADR 400,000 30,650
.........................................................................
Securitas (Class B) (SEK) * 750,000 21,829
.........................................................................
130,603
............
Airlines 0.4%
Swire Pacific (Class A) (HKD) * 1,500,000 14,303
.........................................................................
14,303
............
Computer Services 2.7%
Automatic Data Processing 500,000 21,437
.........................................................................
Electronic Data Systems 550,000 23,787
.........................................................................
First Data 1,076,942 39,308
.........................................................................
FORE Systems * 200,000 6,588
.........................................................................
SABRE Group Holdings * 51,000 1,422
.........................................................................
92,542
............
Computer Software 3.9%
BMC Software * 1,000,000 41,562
.........................................................................
Broderbund Software * 224,100 6,653
.........................................................................
Informix * 500,000 10,219
.........................................................................
Microsoft * 400,000 33,075
.........................................................................
Oracle * 750,000 31,266
.........................................................................
PLATINUM technology * 701,700 9,517
.........................................................................
132,292
............
Total Business Services and Transportation 398,910
............
ENERGY 4.6%
Energy Services 2.6%
BJ Services * 350,000 17,850
.........................................................................
Cooper Cameron * 400,000 30,600
.........................................................................
Halliburton 238,800 14,387
.........................................................................
Schlumberger 250,000 24,969
.........................................................................
87,806
............
</TABLE>
16
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -----------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Integrated Petroleum - International 2.0%
ENI S.P.A. ADR 98,600 $ 5,090
.............................................................................................
Royal Dutch Petroleum ADR 375,000 64,032
.............................................................................................
69,122
...............
Total Energy 156,928
...............
PROCESS INDUSTRIES 2.4%
Specialty Chemicals 1.1%
Great Lakes Chemical 800,000 37,400
.............................................................................................
37,400
...............
Paper and Paper Products 1.3%
Kimberly-Clark 370,000 35,243
.............................................................................................
Kimberly-Clark Mexico (Class A) (MXN) * 510,000 9,912
.............................................................................................
45,155
...............
Total Process Industries 82,555
...............
BASIC MATERIALS 0.7%
Metals 0.6%
Nucor 300,000 15,300
.............................................................................................
Rustenburg Platinum (ZAR) 250,000 3,420
.............................................................................................
Rustenburg Platinum ADR 102,045 1,378
.............................................................................................
20,098
...............
Mining 0.1%
Newmont Mining 50,000 2,238
.............................................................................................
2,238
...............
Total Basic Materials 22,336
...............
FOREIGN 0.1%
Far East 0.1%
Korea Asia Fund * 300 2,194
.............................................................................................
Total Foreign 2,194
...............
MISCELLANEOUS 3.3%
Conglomerates 3.3%
Berkshire Hathaway * 3,085 105,198
.............................................................................................
Hagemeyer (NLG) * 100,000 7,999
.............................................................................................
Total Miscellaneous 113,197
...............
Total Common Stocks & Warrants (Cost $1,995,878) 3,316,133
...............
</TABLE>
17
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ----------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
PREFERRED STOCKS 0.4%
Banco Bradesco (BRL) 1,599,434,539 $ 11,591
.............................................................................................
Deutsche Bank, 9.00%, participating certificates (DEM) 357 279
.............................................................................................
Deutsche Bank, 8.75%, participating certificates (DEM) 591 451
.............................................................................................
Lojas Americanas (BRL) * 55,966,400 738
.............................................................................................
Maculan (ATS) * 2,333 291
.............................................................................................
Total Preferred Stocks (Cost $10,910) 13,350
...............
CONVERTIBLE BONDS 0.1%
ADT, LYONS, Zero Coupon, 7/6/10 $ 2,550,000 1,664
.............................................................................................
Reliance, (144a), 3.50%, 11/3/99 2,000,000 2,125
.............................................................................................
Total Convertible Bonds (Cost $3,393) 3,789
...............
SHORT-TERM INVESTMENTS 3.3%
Commercial Paper 3.3%
Air Products & Chemicals, 5.32%, 1/17/97 10,000,000 9,976
.............................................................................................
Asset Securitization Cooperative, 4(2), 5.30 - 5.36%
2/6/97 - 2/13/97 20,000,000 19,883
.............................................................................................
Bank of America, 5.41%, 2/6/97 10,000,000 9,946
.............................................................................................
Corporate Asset Funding, 4(2), 5.38%, 1/23/97 10,000,000 9,967
.............................................................................................
Countrywide Funding, 5.46%, 1/22/97 11,100,000 11,065
.............................................................................................
CS First Boston Group, 5.35%, 2/26/97 10,000,000 9,917
.............................................................................................
Investments in Commercial Paper through a joint account
6.75 - 7.10%, 1/2/97 3,459,475 3,459
.............................................................................................
MBNA, 5.75%, 2/3/97 10,000,000 10,001
.............................................................................................
Merrill Lynch & Co., 5.34%, 1/13/97 10,000,000 9,982
.............................................................................................
Morgan Stanley Group, 5.35%, 1/7/97 10,000,000 9,991
.............................................................................................
Sherwood Medical, 5.35%, 2/11/97 10,000,000 9,939
.............................................................................................
Total Short-Term Investments (Cost $114,126) 114,126
...............
</TABLE>
18
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- ----------------------------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
100.5% of Net Assets (Cost $2,124,307) $ 3,447,398
Other Assets Less Liabilities (16,589)
...............
NET ASSETS $ 3,430,809
---------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 161
Accumulated net realized gain/loss - net of distributions 30,164
Net unrealized gain (loss) 1,323,080
Paid-in-capital applicable to 131,056,346 shares of $1.00 par
value capital stock outstanding; 200,000,000 shares authorized 2,077,404
...............
NET ASSETS $ 3,430,809
---------------
NET ASSET VALUE PER SHARE $ 26.18
---------------
</TABLE>
* Non-income producing
++ Securities contain some restrictions as to public resale--total of such
securities at year-end amounts to 0.30% of net assets.
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
1.15% of net assets.
REIT Real Estate Investment Trust
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."
ATS Austrian schilling
BRL Brazilian real
CAD Canadian dollar
CHF Swiss franc
DEM German deutschemark
ESP Spanish peseta
FRF French franc
GBP British sterling
HKD Hong Kong dollar
IDR Indonesian rupia
ITL Italian lira
KRW S. Korean won
MXN Mexican peso
MYR Malaysian ringgit
NLG Dutch guilder
NOK Norwegian krone
SEK Swedish krona
ZAR South African rand
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/96
<S> <C>
Investment Income
Income
Dividend $ 37,130
Interest 9,333
...............
Total income 46,463
...............
Expenses
Investment management 17,848
Shareholder servicing 5,247
Custody and accounting 417
Prospectus and shareholder reports 117
Registration 40
Legal and audit 32
Directors 30
Miscellaneous 43
...............
Total expenses 23,774
...............
Net investment income 22,689
...............
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Securities 226,480
Foreign currency transactions (398)
...............
Net realized gain (loss) 226,082
...............
Change in net unrealized gain or loss on
Securities 365,026
Other assets and liabilities
denominated in foreign currencies (16)
...............
Change in net unrealized gain or loss 365,010
...............
Net realized and unrealized gain (loss) 591,092
...............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 613,781
---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/96 12/31/95
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 22,689 $ 26,393
Net realized gain (loss) 226,082 134,580
Change in net unrealized gain or loss 365,010 486,937
...............................
Increase (decrease) in net assets from operations 613,781 647,910
...............................
Distributions to shareholders
Net investment income (23,110) (25,931)
Net realized gain (250,078) (109,405)
...............................
Decrease in net assets from distributions (273,188) (135,336)
...............................
Capital share transactions *
Shares sold 440,441 343,600
Distributions reinvested 259,226 128,459
Shares redeemed (371,279) (290,325)
...............................
Increase (decrease) in net assets from capital
share transactions 328,388 181,734
...............................
Net Assets
Increase (decrease) during period 668,981 694,308
Beginning of period 2,761,828 2,067,520
...............................
End of period $ 3,430,809 $ 2,761,828
-------------------------------
* Share information
Shares sold 17,612 16,103
Distributions reinvested 9,845 5,530
Shares redeemed (14,667) (13,638)
...............................
Increase (decrease) in shares outstanding 12,790 7,995
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
December 31, 1996
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Growth Stock 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 January 1, 1950.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market
for such security. Listed securities 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.
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 amortized cost which, when combined
with accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the officers
of the fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars
at the prevailing exchange rate at the end of the reporting period. Purchases
and sales of securities and income and expenses are translated into U.S.
dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and
losses.
Premiums and Discounts Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
22
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and distributions
to shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Commercial Paper Joint Account The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $1,620,223,000 and $1,423,923,000, respectively, for
the year ended December 31, 1996.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income
At December 31, 1996, the aggregate cost of investments for federal income
tax and financial reporting purposes was $2,124,307,000, and net unrealized
gain aggregated $1,323,091,000, of which $1,373,893,000 related to
appreciated investments and $50,802,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $1,681,000 was payable at December 31, 1996. 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
23
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
the combined assets of certain mutual funds sponsored by the manager or Rowe
Price-Fleming International, Inc. (the group). The group fee rate ranges from
0.48% for the first $1 billion of assets to 0.305% for assets in excess of $50
billion. At December 31, 1996, and for the year then ended, the effective annual
group fee rate was 0.33%. The fund pays a pro-rata share of the group fee based
on the ratio of its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (TRPS) is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. Additionally, the fund is one of several T. Rowe
Price mutual funds (the underlying funds) in which the T. Rowe Price Spectrum
Growth Fund (Spectrum) invests. In accordance with an agreement among Spectrum,
the underlying funds, the manager, and TRPS, expenses from the operation of
Spectrum are borne by the underlying funds based on each underlying fund's
proportionate share of assets owned by Spectrum. The fund incurred expenses
pursuant to these related party agreements totaling approximately $4,673,000 for
the year ended December 31, 1996, of which $441,000 was payable at period-end.
During the year ended December 31, 1996, the fund, in the ordinary course of
business, placed security purchase and sale orders aggregating $5,416,000 with,
certain affiliates of the manager in connection with the execution of various
portfolio transactions, on which no commissions were paid.
24
<PAGE>
T. ROWE PRICE GROWTH STOCK FUND
- --------------------------------------------------------------------------------
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, 1996, 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, 1996, by correspondence with the
custodian. 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, 1996, 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 20, 1997
25
<PAGE>
For yield, price, last transaction,
current balance or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Growth Stock Fund(R).
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor RPRTGSF 12/31/96
