================================================================================
BLUE CHIP FUND
SEMIANNUAL REPORT
================================================================================
June 30,1996
- --------------------------------------------------------------------------------
================================================================================
Report Highlights
- --------------------------------------------------------------------------------
*Despite rising interest rates, the stock market posted a solid gain in the
first half of 1996, fueled primarily by record inflows into equity mutual
funds.
*Your fund performed slightly better than its peer group and the S&P 500 over
the last six months. For the 12 months ended June 30, it edged out the S&P
500 while significantly outpacing its peer group average.
*The fund had good results from pharmaceutical, retailing, and financial
stocks, while HMO holdings were a constraint.
*Our major purchases during the period were in various industries, including
insurance, health care, pharmaceuticals, defense, oil, and
telecommunications.
*Although stock valuations are undeniably expensive, our outlook remains
reasonably favorable. We believe our holdings will provide continued earnings
growth.
<PAGE>
================================================================================
Fellow Shareholders
- --------------------------------------------------------------------------------
Although slowing from last year's robust pace, the stock market posted a
solid gain through the first half of 1996. A surprisingly resilient economy and
the unprecedented flow of money into equity mutual funds helped stocks overcome
a rise in long-term interest rates that sent the bond market into a torpor.
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 6/30/96 6 Months 12 Months
- --------------------------------------------------------------------------------
Blue Chip Growth Fund 11.27% 27.88%
S&P 500 10.10 26.00
Lipper Growth Funds Average 10.08 22.20
- --------------------------------------------------------------------------------
For the six months ended June 30, the Blue Chip Growth Fund moderately
outperformed its peer group average and the overall stock market as measured by
the unmanaged Standard & Poor's 500 Stock Index. For the 12-month period, your
fund outpaced the peer group by a wide margin and also held an edge over the S&P
500.
================================================================================
Market Environment
- --------------------------------------------------------------------------------
The U.S. stock market continued to advance, fueled by mutual fund inflows,
strong earnings at selected companies, and relatively benign inflation. We
believe that certain companies will thrive in this environment. While the
underlying conditions for stocks continued to be reasonably favorable, the
market faces significant challenges in the months ahead.
The risk of rising inflation and a related tightening of interest rates by
the Federal Reserve has increased. Recent data indicate that the U.S. economy is
probably growing above the central bank's comfort level for keeping inflation in
check. In particular, the average hourly wage for U.S. workers has increased
markedly over the last 12 months. In prior letters, we warned of the potential
inflationary effects of poor grain harvests and rising energy prices.
Unfortunately, the combination of these factors certainly increases the risk of
inflation as well as the likelihood that the Fed will raise short-term interest
rates later this year.
Long-term interest rates have increased substantially in 1996, perhaps
already reflecting some of the increase in inflation risk. Rising rates and poor
bond market performance represent a challenge to stocks because corporate
earnings must be discounted at a higher rate, and higher yields increase the
attractiveness of bonds relative to stocks.
<PAGE>
Lackluster growth in many foreign economies creates another risk. In
particular, many European economies are showing only anemic growth, contributing
to a meaningful decline in earnings momentum at many multinational companies.
The capital goods and technology areas have been especially hard hit, with
companies such as Hewlett-Packard and Motorola recently announcing revenue or
earnings shortfalls.
================================================================================
Portfolio Review
- --------------------------------------------------------------------------------
Pharmaceutical stocks did well as investors continued to target companies
with solid fundamentals and consistent earnings growth. Your fund got strong
performance from Pfizer, Johnson & Johnson, American Home Products, and
Schering-Plough. Selected manufacturing stocks benefited from the strong
economic growth in the U.S. and superb management. GE, AlliedSignal, and Danaher
have been held by the fund for several years, and each made significant positive
contributions to performance during the last six months.
Although many technology stocks were punished recently, our holdings
generally produced solid results. Cisco Systems, the leading provider of
computer networking equipment, Microsoft, and BMC Software, a leading provider
of software for mainframe applications, produced strong earnings growth,
reflected in higher stock prices. First Data, the leading processor of credit
card transactions, also generated strong gains.
Although our consumer products holdings are not duplicating their stellar
results of 1995, several stocks contributed positively to fund performance in
the first half: PepsiCo, Philip Morris, Eastman Kodak, and Coca-Cola. Similarly,
while rising interest rates put a damper on financial stocks, several of our
holdings were strong performers, including Citicorp, Chase Manhattan, Travelers
Group, NationsBank, and UNUM. After a long slump, retailing stocks rebounded
sharply, benefiting our positions in department store giant Federated Department
Stores (which owns Macy's, Bloomingdales, Lazarus, and several other leading
chains), Kohl's, and Home Depot.
On a sour note, our HMO holdings, United HealthCare and PacifiCa re Health
Systems, were hurt by higher medical expenses incurred by enrolled plan members
and by pricing pressures. Both companies are leaders in their markets and have
strong balance sheets and cost management. However, United HealthCare in
particular faces significant short-term challenges in adjusting its prices to
allow continued profit growth. We are reevaluating our ownership of these stocks
given the adverse change in the environment for HMOs.
Inother industries, Great Lakes Chemical was weak due to an economic
slowdown in Europe. However, the company has tremendous free cash flow, and
management is aggressively repurchasing stock. Heinz was a minor disappointment
in the first half as an unexpected slowdown in earnings growth caused a pullback
in its price. However, the company possesses tremendous brand strength and
leadership positions in ketchup and condiments, tuna (Starkist), pet food (Nine
Lives), baby food, and potato products (Ore Ida). We believe the company will
generate improved results in the next year.
<PAGE>
During the first half, we made only minor changes to sector
diversification, reflecting our philosophy of maintaining low turnover and
holding onto core positions as long as their fundamentals remain positive.
[Edgar description: sector diversification pie chart as of 6/30/96 Showing:
Financial 20%, Energy and Utilities 7%, Consumer Nondurables 23%, Consumer
Servies and Cyclicals 11%, Technology 10%, Cap. Equip. and Proc. Ind. 10%,
Business Services and Transportation 9%, Reserves 10%.]
================================================================================
Strategy
- --------------------------------------------------------------------------------
I would like to discuss some of the largest purchases in your portfolio
over the last six months. In our view, ACE Limited, a highly profitable,
Bermuda-based reinsurer, is poised for strong earnings growth. National Data is
building a leading position in health care and credit card merchant processing,
two of our favorite businesses because they generate a high level of recurring
revenue. Our new position in the leading U.S. defense company, Lockheed Martin,
has already posted solid investment results for the fund. The company's
top-notch management and broad array of defense products should help it sustain
strong earnings growth regardless of the direction of the economy.
W.R. Berkley is a property and casualty insurance company that is using its
strong capital to repurchase shares and also build top-quality specialty
insurance businesses. Sallie Mae, also an aggressive share repurchaser, is
benefiting from solid growth in student lending and the increasing
securitization of loans. SBC Communications is a leading regional telephone
company whose chief executive, Jack Whitacre, has a reputation for increasing
earnings and dividends. After recently acquiring Pactel, the company dominates
the southwestern and western U.S. and should capture a hefty portion of
telephone service to and from Latin America and Asia.
Millipore is a leading provider of water and air filtration products for
the medical and electronics industries. Mobil is perhaps the best managed of the
major oil companies with a strong dividend growth record and a sharp focus on
cutting costs and eliminating low return businesses. American Home Products, a
strong first half performer, is well positioned to deliver double-digit earnings
gains as it integrates American Cyanamid. Its product pipeline is also
underappreciated by investors, in our view. For example, Redux, its new product
for treating obesity, is generating very strong sales growth.
=============================
we typically do not sell
holdings unless . . . a stock
becomes overvalued
- ------------------------------
In keeping with our long-term perspective, we typically do not sell
holdings unless there is a deterioration in fundamentals or a stock becomes
overvalued. We eliminated our position in Viacom due to worsening conditions in
its cable television operations and concerns about growth in its Blockbuster
subsidiary. Baker Hughes had been a strong performer, resulting in a higher
valuation relative to our other energy holdings. Consequently, we eliminated the
position at close to its current price.
<PAGE>
================================================================================
Outlook
- --------------------------------------------------------------------------------
Stock valuations have reached expensive levels, as evidenced by the
historically low dividend yield on the S&P 500. Nevertheless, we believe the
outlook for U.S. stocks remains reasonably favorable for the following reasons:
*While the threat of inflation and the likelihood of a Fed rate hike have
increased, these factors should be kept in perspective. We cautioned in prior
reports that inflation and interest rate expectations were overly optimistic.
They are now perhaps more realistic. A slowing economy or continued market
discipline on pricing (such as we have seen in the recent aggressive price
cuts in breakfast cereal products) could help keep inflation under control.
*Earnings are growing rapidly at many high-quality U.S. companies, and the
valuations of selected companies are reasonable. The market correction in
July (after the close of the reporting period) is creating the opportunity to
buy these stocks at attractive valuations.
*Although the dividend yield of the market is relatively low, many
companies (particularly U.S. multinationals) are poised for strong dividend
growth. Also, many companies continue to emphasize share repurchases versus
dividend increases as a more tax-efficient way to return capital to
shareholders.
Overall, we expect continued earnings growth at many of our holdings
regardless of the economic or interest rate environment. As always, we continue
to target blue chip companies with leading market positions, seasoned
management, and strong financial fundamentals in the belief that they will
provide above-average performance.
Respectfully submitted,
[Signature]
Larry J. Puglia
President and
Chairman of the Investment Advisory Commitee
Thomas H. Broadus, Jr.
[Signature]
Executive Vice President
July 17, 1996
<PAGE>
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
- --------------------------------------------------------------------------------
Percent of
Net Assets
6/30/96
- --------------------------------------------------------------------------------
GE ......................................................... 1.5%
Freddie Mac ................................................ 1.5
First Data ................................................. 1.5
Travelers Group ............................................ 1.4
Pfizer ..................................................... 1.4
Philip Morris .............................................. 1.4
Kimberly-Clark ............................................. 1.3
AlliedSignal ............................................... 1.3
Great Lakes Chemical ....................................... 1.2
Johnson & Johnson .......................................... 1.2
Eastman Kodak .............................................. 1.1
United HealthCare .......................................... 1.1
Hubbell .................................................... 1.1
Mellon Bank ................................................ 1.1
PepsiCo .................................................... 1.1
Norwest .................................................... 1.1
McDonald's ................................................. 1.1
Danaher .................................................... 1.1
SmithKline Beecham ......................................... 1.1
Disney ..................................................... 1.1
Columbia/HCA Healthcare .................................... 1.1
Procter & Gamble ........................................... 1.0
Ceridian ................................................... 1.0
Vodafone ................................................... 1.0
Corning .................................................... 1.0
- --------------------------------------------------------------------------------
Total 29.8%
================================================================================
<PAGE>
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 6/30/96
- --------------------------------------------------------------------------------
Ten Largest Purchases Ten Largest Sales
ACE Limited * Echlin **
National Data * BankAmerica **
Lockheed Martin * Baker Hughes **
W.R. Berkley * Viacom **
Sallie Mae * Dayton Hudson **
SBC Communications * Varity **
United HealthCare Compaq Computer **
Millipore * Motorola **
Mobil * Imperial Thrift **
American Home Products * Ceridian
- --------------------------------------------------------------------------------
* Position added
** Position eliminated
================================================================================
================================================================================
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.
================================================================================
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.
================================================================================
Since Inception
Periods Ended 6/30/96 1 Year 3 Years Inception Date
Blue Chip Growth Fund 27.88% 20.92% 20.92% 6/30/93
- --------------------------------------------------------------------------------
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
Unaudited For a share outstanding throughout each period
=====================================================================================
Financial Highlights
- -------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
6 Months Year 6/30/93
Ended Ended to
6/30/96 12/31/95 12/31/94 12/31/93
NET ASSET VALUE
Beginning of period ............ $ 15.09 $ 11.11 $ 11.24 $ 10.00
Investment activities
Net investment income .... 0.07 0.16* 0.12* 0.05*
Net realized and
unrealized gain (loss) ... 1.63 4.05 (0.03) 1.38
Total from
investment activities .... 1.70 4.21 0.09 1.43
Distributions
Net investment income .... -- (0.15) (0.10) (0.05)
Net realized gain ........ -- (0.08) (0.12) (0.14)
Total distributions ...... -- (0.23) (0.22) (0.19)
NET ASSET VALUE
End of period .................. $ 16.79 $ 15.09 $ 11.11 $ 11.24
Ratios/Supplemental Data
Total return ................... 11.27%+ 37.90%* 0.80%* 14.32%*
Ratio of expenses to
average net assets ............. 1.25% 1.25%* 1.25%* 1.25%+*
Ratio of net investment
income to average
net assets ..................... 0.80%+ 1.27%* 1.05%* 0.80%+*
Portfolio turnover rate ........ 39.6%+ 38.1% 75.0% 89.0%+
Average commission rate paid$ .. 0.1150 -- -- --
Net assets, end of period
(in millions) .................. $ 223 $ 146 $ 39 $ 25
- -------------------------------------------------------------------------------------
<FN>
* Excludes expenses in excess of a 1.25% voluntary expense limitation in effect
through 12/31/96.
+ Annualized.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Unaudited June 30, 1996
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
In thousands
Shares/Par Value
Common Stocks 89.9%
FINANCIAL 19.5%
Bank and Trust 7.0%
BANC ONE ................................ 27,000 $ 918
Bank of Boston .......................... 22,000 1,089
Chase Manhattan ......................... 30,000 2,119
Citicorp ................................ 24,000 1,983
Fleet Financial Group ................... 24,000 1,044
Mellon Bank ............................. 44,000 2,508
NationsBank ............................. 18,000 1,487
Northern Trust .......................... 14,000 810
Norwest ................................. 70,000 2,441
Wells Fargo ............................. 5,000 1,195
15,594
Insurance 3.9%
ACE Limited ............................. 44,000 2,068
American International Group ............ 17,000 1,676
PMI Group ............................... 30,000 1,275
UNUM .................................... 33,000 2,054
W. R. Berkley ........................... 37,000 1,559
8,632
Financial Services 8.6%
Aames Financial ........................ 25,000 897
ADVANTA (Class B) ...................... 32,000 1,460
American Express ....................... 44,000 1,963
Associates First Capital * ............. 27,000 1,016
Fannie Mae ............................. 50,000 1,675
Freddie Mac ............................ 40,000 3,420
Green Tree Financial ................... 34,000 1,062
Household International ................ 16,000 1,216
Money Store ............................ 85,000 1,865
Sallie Mae ............................. 21,000 1,554
Travelers Group ........................ 70,500 3,217
19,345
Total Financial 43,571
<PAGE>
UTILITIES 1.3%
Telephone 1.3%
AT&T ....................................... 22,000 $1,364
SBC Communications ......................... 32,000 1,576
Total Utilities 2,940
CONSUMER NONDURABLES 22.2%
Beverages 1.9%
Coca-Cola .................................. 16,000 782
Panamerican Beverages (Class A) ............ 20,000 895
PepsiCo .................................... 70,000 2,476
4,153
Food Processing 2.2%
Heinz ...................................... 70,000 2,126
Ralston Purina ............................. 20,000 1,283
Sara Lee ................................... 44,000 1,424
4,833
Hospital Supplies/Hospital Management 2.9%
Boston Scientific * ........................ 33,000 1,485
Columbia/HCA Healthcare .................... 44,000 2,349
Medtronic .................................. 20,000 1,120
Millipore .................................. 38,000 1,591
6,545
Pharmaceuticals 7.1%
American Home Products ...................... 28,000 1,683
Amgen * ..................................... 17,000 916
Eli Lilly ................................... 16,000 1,040
Johnson & Johnson ........................... 52,000 2,574
Merck ....................................... 17,000 1,099
Pfizer ...................................... 45,000 3,212
Pharmacia & Upjohn .......................... 20,000 888
Schering-Plough ............................. 32,000 2,008
SmithKline Beecham ADR ...................... 44,000 2,392
15,812
Health Care Services 3.1%
Apria Healthcare * .......................... 55,000 1,725
Olsten ...................................... 55,000 1,616
PacifiCare Health Systems (Class B) * ....... 17,000 $ 1,154
United HealthCare ........................... 50,000 2,525
7,020
<PAGE>
Miscellaneous Consumer Products 5.0%
Colgate-Palmolive ........................... 10,000 848
CUC International * ......................... 34,000 1,207
Jones Apparel Group * ....................... 20,000 982
Newell ...................................... 44,000 1,347
Philip Morris ............................... 29,000 3,016
Procter & Gamble ............................ 25,000 2,266
Richfood Holdings ........................... 50,000 1,622
11,288
Total Consumer Nondurables 49,651
CONSUMER SERVICES 9.0%
Specialty Merchandisers 5.1%
Circuit City Stores ...................... 36,000 1,301
Eckerd * ................................. 70,000 1,584
Federated Department Stores * ............ 57,000 1,945
General Nutrition * ...................... 50,000 872
Home Depot ............................... 38,000 2,052
Kohl's * ................................. 44,000 1,611
Revco * .................................. 44,000 1,051
Tupperware * ............................. 25,000 1,056
11,472
Entertainment and Leisure 2.2%
Disney ................................... 38,000 2,389
McDonald's ............................... 52,000 2,431
4,820
Media and Communications 1.7%
Catalina Marketing * ..................... 17,000 1,556
Vodafone ADR ............................. 60,000 2,212
3,768
Total Consumer Services 20,060
CONSUMER CYCLICALS 2.5%
Automobiles and Related 0.4%
Lear * ................................... 22,000 776
776
Miscellaneous Consumer Durables 2.1%
Corning .................................. 57,000 $2,187
Eastman Kodak ............................ 33,000 2,566
4,753
Total Consumer Cyclicals 5,529
<PAGE>
TECHNOLOGY 10.5%
Electronic Components 2.0%
Intel .................................... 15,000 1,102
Maxim Integrated Products * .............. 34,000 929
Tyco International ....................... 28,000 1,141
Xilinx * ................................. 40,000 1,267
4,439
Electronic Systems 2.1%
ADT ...................................... 65,000 1,227
Hewlett-Packard .......................... 12,500 1,245
Honeywell ................................ 40,000 2,180
4,652
Information Processing 0.9%
IBM ...................................... 20,000 1,980
1,980
Office Automation 1.0%
Ceridian * ............................... 44,000 2,222
2,222
Specialized Computer 0.2%
Silicon Graphics* ........................ 20,000 480
480
Telecommunications Equipment 2.3%
3Com * ...................................... 22,000 1,005
Cisco Systems * ............................. 25,000 1,417
LM Ericsson (Class B) ADR ................... 50,000 1,072
MCI ......................................... 44,000 1,125
Teleport Communications Group (Class A) * ... 24,300 462
5,081
Aerospace and Defense 2.0%
AlliedSignal ................................ 50,000 2,856
Lockheed Martin ............................. 21,000 1,764
4,620
Total Technology 23,474
<PAGE>
CAPITAL EQUIPMENT 5.7%
Electrical Equipment 3.7%
Emerson Electric ............................ 21,000 $ 1,898
Exide ....................................... 20,000 485
GE .......................................... 40,000 3,460
Hubbell (Class B) ........................... 38,000 2,517
8,360
Machinery 2.0%
Danaher ..................................... 55,000 2,393
Teleflex .................................... 44,000 2,101
4,494
Total Capital Equipment 12,854
BUSINESS SERVICES AND
TRANSPORTATION 9.0%
Computer Service and Software 7.6%
Adobe Systems ................................ 20,000 714
Automatic Data Processing .................... 44,000 1,699
BMC Software * ............................... 24,000 1,431
First Data ................................... 41,753 3,325
Informix * ................................... 40,000 898
Microsoft * .................................. 14,000 1,681
National Data ................................ 50,000 1,712
Oracle Systems * ............................. 32,000 1,262
Reynolds & Reynolds .......................... 25,000 1,331
SunGard Data Systems * ....................... 50,000 2,003
Synopsys * ................................... 24,000 957
17,013
Distribution Services 0.6%
Alco Standard ................................ 28,000 1,267
1,267
Miscellaneous Business Services 0.3%
Deluxe ....................................... 20,000 710
710
Railroads 0.5%
Burlington Northern Santa Fe ................. 14,000 1,132
1,132
Total Business Services and Transportation 20,122
<PAGE>
ENERGY 4.5%
Energy Service 2.2%
BJ Services * ............................. 40,000 $ 1,405
Halliburton ............................... 28,000 1,554
Schlumberger .............................. 24,000 2,022
4,981
Integrated Petroleum-Domestic 1.7%
Atlantic Richfield ........................ 15,000 1,777
British Petroleum ADR ..................... 18,000 1,924
3,701
Integrated Petroleum - International 0.6%
Mobil ..................................... 12,500 1,402
1,402
Total Energy 10,084
PROCESS INDUSTRIES 3.5%
Diversified Chemicals 1.0%
DuPont .................................... 24,000 1,899
Union Carbide ............................. 10,000 398
2,297
Specialty Chemicals 1.2%
Great Lakes Chemical ...................... 42,000 2,614
2,614
Paper and Paper Products 1.3%
Kimberly-Clark ............................ 37,000 2,858
2,858
Total Process Industries 7,769
Miscellaneous Common Stock 2.2% 4,819
Total Common Stocks (Cost $163,227) 200,873
Short-Term Investments 11.8%
Certificates of Deposit 1.3%
Commerzbank, 5.31%, 7/1/96 ................ $3,000,000 3,000
3,000
<PAGE>
Commercial Paper 9.1%
Asset Securitization Cooperative, 4(2), 5.34%, 7/10/96 ... 3,000,000 2,996
Ciesco, 5.33%, 7/11/96 ................................... 1,000,000 998
Corporate Asset Funding, 4(2), 5.35%, 7/18/96 ............ $2,000,000 $1,995
Den Danske, 5.38%, 8/12/96 ............................... 3,000,000 2,981
Falcon Asset Securitization, 4(2), 5.30%, 7/12/96 ........ 3,000,000 2,995
Investments in Commercial Paper through a joint account,
5.49% - 5.68%, 7/1/96 ....... 2,297,842 2,298
Preferred Receivables Funding, 5.32%, 7/2/96 ............. 2,000,000 2,000
Statoil (Den Norske Stats Oljeselskap), 5.37%, 7/22/96 ... 3,000,000 2,991
Tasmanian Public Finance, 5.10%, 7/15/96 ................. 1,000,000 998
20,252
Medium-Term Notes 1.4%
Morgan Stanley Group, VR, 5.613%, 1/31/97 .. 2,000,000 2,001
PHH, VR, 5.414%, 11/12/96 .................. 1,000,000 999
3,000
Total Short-Term Investments (Cost $26,252) 26,252
Total Investments in Securities
101.7% of Net Assets (Cost $189,479) .............................. $ 227,125
Other Assets Less Liabilities ..................................... (3,721)
NET ASSETS ........................................................ $ 223,404
Net Assets Consist of:
Accumulated net investment income - net of distributions .......... $ 878
Accumulated net realized gain/loss - net of distributions ......... 3,487
Net unrealized gain (loss) ........................................ 37,647
Paid-in-capital applicable to 13,309,184 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized .. 181,392
NET ASSETS ........................................................ $ 223,404
NET ASSET VALUE PER SHARE ......................................... $ 16.79
* Non-income producing VR Variable rate
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors."
The accompanying notes are an integral part of these financial statements.
<PAGE>
Unaudited
================================================================================
Statement of Operations In thousands
6 Months
Ended
6/30/96
- --------------------------------------------------------------------------------
Investment Income
Income
Dividend .................................................... $ 1,157
Interest .................................................... 753
Total income ................................................ 1,910
Expenses
Investment management ....................................... 687
Shareholder servicing ....................................... 295
Registration ................................................ 63
Custody and accounting ...................................... 56
Prospectus and shareholder reports .......................... 15
Legal and audit ............................................. 9
Directors ................................................... 5
Miscellaneous ............................................... 7
Reimbursed to Manager ....................................... 30
Total expenses .............................................. 1,167
Net investment income ............................................. 743
Realized and Unrealized Gain/Loss
Net realized gain (loss) on Securites ....................... 3,103
Change in net unrealized gain or loss on Securities ......... 14,471
Net realized and unrealized gain (loss) ........................... 17,574
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ............................................ $18,317
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
Unaudited
================================================================================
Statement of Changes in Net Assets In thousands
6 Months Year
Ended Ended
6/30/96 12/31/95
Increase (Decrease) in Net Assets
Operations
Net investment income ........................... $ 743 $ 1,069
Net realized gain (loss) ........................ 3,103 1,484
Change in net unrealized gain or loss ........... 14,471 22,108
Increase (decrease) in net assets from operations 18,317 24,661
Distributions to shareholders
Net investment income ........................... -- (1,428)
Net realized gain ............................... -- (761)
Decrease in net assets from distributions ....... -- (2,189)
Capital share transactions *
Shares sold ..................................... 98,675 117,768
Distributions reinvested ........................ -- 2,073
Shares redeemed ................................. (40,142) (35,383)
Increase (decrease) in net assets from capital
share transactions .............................. 58,533 84,458
Net equalization ................................ 100 546
Net Assets
Increase (decrease) during period ..................... 76,950 107,476
Beginning of period ................................... 146,454 38,978
End of period ......................................... $ 223,404 $146,454
*Share information
Shares sold ..................................... 6,144 8,666
Distributions reinvested ........................ -- 138
Shares redeemed ................................. (2,539) (2,609)
Increase (decrease) in shares outstanding ....... 3,605 6,195
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
Unaudited June 30, 1996
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Blue Chip Growth Fund (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed by
the Board of Directors, or by persons delegated by the Board, best to reflect
fair value.
Short-term debt securities are valued at their cost which, when combined
with accured interest, approximates fair value. 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.
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. The fund follows the practice of equalization
under which undistributed net investment income per share is unaffected by fund
shares sold or redeemed.
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 $91,632,000 and $32,097,000, respectively, for the six
months ended June 30, 1996.
<PAGE>
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1996, the aggregate cost of investments for federal income tax
and financial reporting purposes was $189,479,000, and net unrealized gain
aggregated $37,646,000, of which $38,289,000 related to appreciated investments
and $643,000 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 $140,000 was payable at June 30, 1996. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.30% 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 0.305% for assets in excess of $50 billion. At
June 30, 1996, and for the six months then ended, the effective annual group fee
rate was 0.33% and .34% respectively. The fund pays a pro rata share of the
group fee based on the ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through December 31, 1996, which would cause the
fund's ratio of expenses to average net assets to exceed 1.25%. Thereafter,
through December 31, 1998, the fund is required to reimburse the manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio of
expenses to average net assets to exceed 1.25%. Pursuant to a previous
agreement, $126,000 of unaccrued 1993-1994 fees and expenses were repaid during
the six months ended June 30, 1996. Additionally, $87,000 of unaccrued
management fees related to a previous expense limitation are subject to
reimbursement through December 31, 1996.
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., is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $260,000 for the six months
ended June 30, 1996, of which $38,000 was payable at period-end.
<PAGE>
For yield, price, last transaction,
and current balance, 24 hours,
7 days a
week, call: 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
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 Blue Chip Growth Fund.
T. Rowe Price Investment Services, Inc., Distributor
RPRTBCG 6/30/96
