- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Blue Chip Growth Fund
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
BLUE CHIP GROWTH FUND
* Steady economic growth and moderate inflation helped propel the U.S. stock
market to significant gains, despite serious problems in several Asian
economies.
* The Blue Chip Growth Fund recorded strong gains of 10.46% for the six-month
period and 27.56% for the full year, surpassing our peer group average but
not the broad market.
* Financials, telecommunications, and consumer-oriented stocks made
substantial contributions to performance.
* Fund purchases were focused on increasing existing positions.
* Although valuations are high for many stocks, we continue to see favorable
conditions in this market going forward.
<PAGE>
FELLOW SHAREHOLDERS
Building on a potent performance in the first half of 1997, the U.S. stock
market generated strong gains over the last six months as solid economic growth
and restrained inflation and interest rates continued to provide a fertile
backdrop. The market exhibited notable volatility, but this was not entirely
unexpected considering that the Dow Jones Industrial Average has returned more
than 20% for three years in a row (a record) and the S&P 500 has gained more
than 100% over the last three years.
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
- --------------------------------------------------------------------------------
Blue Chip Growth Fund 10.46% 27.56%
S&P 500 10.58 33.36
Lipper Growth Funds Average 9.19 25.30
================================================================================
In this favorable environment, your fund continued to perform well. For the
6-and 12-month periods ended December 31, the Blue Chip Growth Fund's returns of
10.46% and 27.56%, respectively, outperformed its peer group average and fell
short of the unmanaged Standard & Poor's 500 Stock Index. Over the three years
ended December 31, 1997, your fund's 124.72% gain outperformed its peer group's
97.08% return by a wide margin and approximated the S&P 500's total return of
over 120% (a 31% compounded annual return).
YEAR-END DISTRIBUTIONS
Your fund's directors declared a year-end dividend of $0.12 per share and a
long-term capital gain of $0.02 per share. These distributions were paid on
December 30 to shareholders of record on December 26. You should already have
received a check or statement reflecting these distributions, as well as your
form 1099-DIV reporting them for tax purposes.
<PAGE>
MARKET ENVIRONMENT
In 1997, the U.S. stock market again surprised investors with its
consistent strength, while the domestic economy maintained an impressive blend
of steady growth and low inflation. Interest rates, mutual fund inflows, and
corporate earnings continued to be favorable. Long-term interest rates declined
sharply in the second half (falling as low as 5.75% in early 1998). U.S.
wholesale prices declined 1.2%, and consumer price gains were benign--even
energy prices took a turn for the better, with crude oil recently falling well
below $20 per barrel. While this data, along with global trends, may suggest a
period of disinflation, corporate profits or stock prices in the U.S. might not
suffer. Job growth is very solid with the unemployment rate at 4.7%. Retail
sales ended the Christmas season on a strong note. Perhaps most important, U.S.
companies continue to improve efficiency and lower costs in ways that could
offset some of the pricing pressure.
Not all the news was good in the last half of 1997, however. Mounting
problems in several Asian economies caused some investors to question the
underpinnings of the long economic expansion in the U.S. and the health of many
of our trading partners. Specifically, currency devaluations and banking system
problems in Korea, Indonesia, Malaysia, Thailand, the Philippines, and Japan
caused a sharp slowdown in Asian economic growth and a reassessment of the
stability and growth potential for all of Asia. Because some global blue chip
companies cannot avoid these concerns, economic growth in the U.S. could be
affected. Investors also fear that a general slowdown in economic activity and a
flood of cheap imports (due to the devaluation of foreign currencies) could
worsen deflation pressures in the U.S.
Investors have been particularly concerned about the impact of the Asian
challenges on the U.S. multinationals, which compose a significant part of your
fund. While the severity and the ultimate effects should not be underestimated,
we believe there are reasons to be constructive on the prospects for these
companies:
* Many multinationals in the pharmaceutical, telecommunications, financial
services, and manufacturing sectors generate well below 10% of their
earnings from Asian markets. Europe, an important market for many
companies, appeared to improve in 1997.
* Of the companies with significant exposure to Asia, many have focused their
investments in China (which continued to show stability). Also, many U.S.
companies are in industries that are somewhat insensitive to changes in
economic activity. For example, PROCTER & GAMBLE and KIMBERLY-CLARK do not
expect significant changes in demand for personal care products.
<PAGE>
* Many U.S. multinationals have manufacturing operations in Asia. Thus, they
may experience a decline in costs as these economies devalue currencies and
prices fall. For example, many technology companies buy and assemble a
significant number of components in the region.
* U.S.-based financial companies had limited direct lending exposure to Asian
economies. Even CITICORP, AMERICAN INTERNATIONAL GROUP, AMERICAN EXPRESS,
and MORGAN STANLEY DEAN WITTER DISCOVER, which have meaningful operations
in the region, believe that the current dislocation could allow them to
take significant market share in certain Asian countries.
PORTFOLIO REVIEW
Financial stocks performed well as interest rates moderated and investors
continued to focus on companies with consistent earnings growth and strong
capital generation (which, in many cases, funded significant share repurchases).
TRAVELERS GROUP, MELLON BANK, ACE LIMITED, NORWEST, FANNIE MAE, FREDDIE MAC, and
U.S. BANCORP were each among the top contributors to performance in the second
half and for all of 1997. American Express and SLM HOLDING also made sizable
contributions in the first half and to a lesser extent in the second.
Consumer products stocks continued to play a key role in the fund's
performance. Pharmaceuticals were the standouts, with PFIZER being a top
contributor throughout 1997. SCHERING-PLOUGH, BRISTOL-MYERS SQUIBB, ELI LILLY,
SMITHKLINE BEECHAM, and MERCK each generated meaningful gains. Procter & Gamble,
COLGATE-PALMOLIVE, and PHILIP MORRIS are long-term holdings that benefited fund
performance. MEDTRONIC, the leading maker of cardiovascular devices, also did
well.
Consumer services stocks were among the strongest performers for the fund.
In the entertainment area, CARNIVAL and DISNEY were standouts. Media giants TIME
WARNER and US WEST MEDIA, with their significant cable interests, and TRIBUNE,
with its newspaper and broadcasting operations, were also stellar holdings. In
the retailing area, the fund scored solid gains with long-time holdings SAFEWAY,
CVS, FEDERATED DEPARTMENT STORES, and HOME DEPOT. H&R BLOCK did very well as the
company shed its troubled investment in Compuserve, and its tax preparation and
financial consulting businesses thrived. Telecommunications stalwarts AT&T, SBC
COMMUNICATIONS, and VODAFONE (a leading provider of international wireless
communications services) rose sharply for the year, particularly in the second
half.
Your fund had less exposure to the technology sector than the average
growth fund, but its holdings in this area held up well in a difficult period
and added to fund gains. COMPAQ COMPUTER, CISCO SYSTEMS, BMC SOFTWARE, and IBM
all benefited returns.
<PAGE>
[Sector Diversification Pie chart shown here with the following slices --
Business Services & Transportation, 10%; Capital Equipment/Process
Industries/Basic Materials, 7%; Technology, 10%; Consumer Services/Consumer
Cyclicals, 14%; Financial, 20%; Energy/Utilities, 7%; Consumer Nondurables, 22%;
Reserves, 10%]
As always, some stocks produced disappointing results. Because 1997 was a
volatile year, investors were unusually unforgiving toward stocks with flawed
fundamentals or weakened earnings. FIRST DATA, the leading provider of credit
card servicing, was our largest loser. Margins contracted more than expected in
its core business, and several ancillary businesses did not meet expectations.
However, management exited one of these troubled businesses recently and appears
to have brought earnings expectations into alignment with more moderate
expectations. Although we have allowed this holding to shrink significantly as a
percent of assets, we think it will perform reasonably well over time. CORNING,
a big winner for the fund previously, pulled back sharply because of concerns
regarding optical fiber pricing. Fortunately, we saw some of the problems before
they were fully reflected in the stock price and reduced our position. We want
more information reassuring us that fiber pricing and profit growth are in line
with expectations before we rebuild this now-small position.
VENCOR, the leader in acute hospital and nursing care, continued to
struggle with Medicare reimbursement issues, and we eliminated it at prices
approximately 25% above current levels. UNITED STATES SURGICAL declined as
competitive conditions in its core business caused investors to avoid the stock.
However, we are constructive on the company's new, innovative products, such as
its dominant product offering for spinal care and its cardiovascular products.
Therefore, we are cautiously adding to this position.
STRATEGY
Our investment strategy focuses on maintaining positions in core holdings
as long as the fundamentals remain strong and valuations are reasonable.
Consequently, much of the substantial cash flow the fund received was invested
opportunistically in existing holdings. For example, additions to MICROSOFT,
ALLIEDSIGNAL, UNITED HEALTHCARE, Merck, Safeway, and Travelers Group were
significant enough to be included in the list of top-10 fund purchases for the
past six months.
However, we did establish some large new positions, none of which, we
think, will be particularly affected by the developments in Asia. Bristol-Myers
Squibb has rebuilt its product portfolio while also improving the efficiency of
its operations. The company has a particularly strong cardiovascular product
portfolio (including new potential blockbuster Avapro). As discussed, United
States Surgical has developed some innovative, high margin products that could
drive strong profit growth into the next century. FIRST UNION and U.S. Bancorp
are both leading U.S. banking companies with top-tier efficiency, product
offerings, and credit underwriting.
<PAGE>
OUTLOOK
Stock valuations remain expensive by all conventional measures,
particularly as evidenced by the historically low dividend yield on the S&P 500.
We are also cautious because the market (and your fund) has generated strong
results for several consecutive years, and the problems in Asia certainly have
the potential to hurt earnings growth for select multinational companies.
However, we realize that sound investing must be driven by the outlook for
the general investment environment, future company earnings, and careful
selection of stocks. Considering these factors, we believe the outlook for U.S.
stocks and your fund remains favorable:
* Inflation and interest rate trends are positive. Despite the concerns
regarding an economic slowdown and problematic deflation, economic data
support the thesis that the economy is growing at a moderate pace.
* Earnings growth is very strong at many high-quality U.S. companies, and the
valuations of selected companies remain reasonable.
* Top-notch, entrepreneurial management and sound business models have been
the hallmarks of many of our holdings. Through careful management of costs
and proper incentives, these management teams improved the competitiveness
of their businesses as well as the durability and predictability of
earnings.
* Many of our holdings have generated significant amounts of free cash flow.
Shareholder-oriented management can be trusted to use this cash to
repurchase shares or make acquisitions in a manner which often enhances
stock performance over time. This may prove to be particularly advantageous
if a challenging environment causes stock weakness, allowing opportunistic
share repurchases or acquisitions.
We invest your money with the knowledge that the stock market will not
always go up. We believe we can enhance returns and lower risk over time by
investing in all-season growth companies that can generate earnings growth
regardless of the economic or interest rate environment, and by striving to buy
such companies at reasonable valuations.
As always, we seek out blue chip companies with leading market positions,
seasoned management, and strong financial fundamentals because we believe they
will provide superior investment results over time. We appreciate your continued
support in this endeavor.
<PAGE>
Respectfully submitted,
/s/
Larry J. Puglia
President and Chairman of the Investment Advisory Committee
/s/
Thomas H. Broadus, Jr.
Executive Vice President
January 22, 1998
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- --------------------------------------------------------------------------------
Travelers Group 1.4%
AlliedSignal ................................................ 1.3
Merck ....................................................... 1.3
Fannie Mae .................................................. 1.2
Pfizer ...................................................... 1.2
- --------------------------------------------------------------------------------
Tyco International .......................................... 1.2
Mellon Bank ................................................. 1.1
Safeway ..................................................... 1.1
Freddie Mac ................................................. 1.1
Philip Morris ............................................... 1.1
- --------------------------------------------------------------------------------
SBC Communications .......................................... 1.1
ACE Limited ................................................. 1.1
GE .......................................................... 1.1
Disney ...................................................... 1.1
Cendant ..................................................... 1.0
- --------------------------------------------------------------------------------
Microsoft ................................................... 1.0
Norwest ..................................................... 1.0
American Express ............................................ 1.0
Citicorp .................................................... 1.0
Bristol-Myers Squibb ........................................ 1.0
- --------------------------------------------------------------------------------
Danaher ..................................................... 0.9
Travelers Property Casualty ................................. 0.9
Mobil ....................................................... 0.9
Chase Manhattan ............................................. 0.9
Sara Lee .................................................... 0.9
- --------------------------------------------------------------------------------
Total ....................................................... 26.9%
================================================================================
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 12/31/97
Ten Largest Purchases
- --------------------------------------------------------------------------------
Bristol-Myers Squibb *
United States Surgical *
First Union *
Microsoft
U.S. Bancorp *
AlliedSignal
United HealthCare
Merck
Safeway
Travelers Group
Ten Largest Sales
- --------------------------------------------------------------------------------
Altera **
3Com **
Vencor **
Xilinx **
Columbia/HCA Healthcare **
Eastman Kodak **
Cincinnati Bell **
Money Store
Corning
American Stores
* Position added
** Position eliminated
================================================================================
<PAGE>
T. Rowe Price Blue Chip Growth 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.
[Blue Chip Growth Fund SEC graph shown here]
================================================================================
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 12/31/97 1 Year 3 Years Inception Date
- --------------------------------------------------------------------------------
Blue Chip Growth Fund 27.56% 30.98% 23.53% 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>
T. Rowe Price Blue Chip Growth Fund
================================================================================
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year 6/30/93
Ended Through
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........................ $ 19.06 $ 15.09 $ 11.11 $11.24 $10.00
Investment activities
Net investment income .............. 0.13 0.14 0.16* 0.12* 0.05*
Net realized and
unrealized gain (loss) ............. 5.12 4.05 4.05 (0.03) 1.38
Total from
investment activities .............. 5.25 4.19 4.21 0.09 1.43
Distributions
Net investment income .............. (0.12) (0.14) (0.15) (0.10) (0.05)
Net realized gain .................. (0.02) (0.08) (0.08) (0.12) (0.14)
Total distributions ................ (0.14) (0.22) (0.23) (0.22) (0.19)
NET ASSET VALUE
End of period .............................. $ 24.17 $ 19.06 $ 15.09 $11.11 $11.24
Ratios/Supplemental Data
Total return ............................... 27.56% 27.75% 37.90%* 0.80%* 14.32%*
Ratio of expenses to
average net assets ......................... 0.95% 1.12% 1.25%* 1.25%* 1.25%*+
Ratio of net investment
income to average
net assets ................................. 0.86% 0.87% 1.27%* 1.05%* 0.80%*+
Portfolio turnover rate .................... 23.7% 26.3% 38.1% 75.0% 89.0%+
Average commission
rate paid .................................. $ 0.0537 $ 0.0544 - - -
Net assets, end of period
(in millions) .............................. $ 2,345 $ 540 $ 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>
T. Rowe Price Blue Chip Growth Fund
================================================================================
December 31, 1997
================================================================================
Portfolio of Investments
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
Common Stocks 89.8%
FINANCIAL 19.4%
Bank and Trust 8.4%
BANC ONE .............................................. 380,000 $ 20,639
BankBoston ............................................ 170,000 15,969
Chase Manhattan ....................................... 200,000 21,900
Citicorp .............................................. 182,000 23,012
First Union ........................................... 350,000 17,937
Mellon Bank ........................................... 444,000 26,917
Mercantile Bancorporation ............................. 89,000 5,473
NationsBank ........................................... 226,000 13,744
Norwest ............................................... 617,000 23,832
U.S. Bancorp .......................................... 178,000 19,925
Wells Fargo ........................................... 21,000 7,128
196,476
Insurance 4.2%
ACE Limited ........................................... 266,000 25,669
American International Group .......................... 75,000 8,156
EXEL .................................................. 200,000 12,675
Mid Ocean Limited ..................................... 220,000 11,935
St. Paul Companies .................................... 127,000 10,422
Travelers Property Casualty (Class A) ................. 500,000 22,000
UNUM .................................................. 170,000 9,244
100,101
Financial Services 6.8%
American Express ...................................... 266,000 23,740
Associates First Capital (Class A) .................... 25,000 1,778
Fannie Mae ............................................ 493,000 28,132
Freddie Mac ........................................... 625,000 26,211
Household International ............................... 137,000 17,476
Money Store ........................................... 100,000 2,100
Morgan Stanley Dean Witter Discover ................... 92,000 5,440
SLM Holding ........................................... 127,000 17,669
The CIT Group (Class A) * ............................. 100,000 3,225
Travelers Group ....................................... 617,499 33,268
159,039
Total Financial ....................................... 455,616
<PAGE>
UTILITIES 2.2%
Telephone Services 2.2%
ALLTEL ................................................ 250,000 $ 10,265
AT&T .................................................. 275,000 16,844
SBC Communications .................................... 352,000 25,784
Total Utilities ....................................... 52,893
CONSUMER NONDURABLES 21.3%
Cosmetics 0.1%
Gillette ............................................. 37,000 3,716
3,716
Beverages 0.8%
PepsiCo ............................................... 500,000 18,219
18,219
Food Processing 3.2%
Cadbury Schweppes (GBP) ............................... 700,000 7,065
Dean Foods ............................................ 100,000 5,950
Heinz ................................................. 181,000 9,197
Hershey Foods ......................................... 124,000 7,680
Interstate Bakeries ................................... 140,000 5,232
Nabisco Holdings (Class A) ............................ 230,000 11,141
Ralston Purina ........................................ 100,000 9,294
Sara Lee .............................................. 370,000 20,836
76,395
Hospital Supplies/Hospital Management 3.3%
Abbott Laboratories ................................... 127,000 8,327
Baxter International .................................. 100,000 5,044
Boston Scientific * ................................... 190,000 8,716
HealthSouth * ......................................... 460,000 12,765
Medtronic ............................................. 210,000 10,986
St. Jude Medical * .................................... 140,000 4,270
Tenet Healthcare * .................................... 355,000 11,759
United States Surgical ................................ 500,000 14,656
76,523
Pharmaceuticals 7.5%
American Home Products ................................ 250,000 19,125
Bristol-Myers Squibb .................................. 241,000 22,805
Eli Lilly ............................................. 110,000 7,659
Johnson & Johnson ..................................... 304,000 20,026
Merck ................................................. 284,000 30,175
Pfizer ................................................ 370,000 27,588
Schering-Plough ....................................... 275,000 17,084
SmithKline Beecham ADR ................................ 280,000 14,402
Warner-Lambert ........................................ 130,000 16,120
174,984
<PAGE>
Health Care Services 0.8%
United HealthCare ..................................... 370,000 $ 18,384
18,384
Miscellaneous Consumer Products 5.6%
Colgate-Palmolive ..................................... 232,000 17,052
Mattel ................................................ 465,000 17,321
Newell ................................................ 255,000 10,837
Philip Morris ......................................... 575,000 26,055
Procter & Gamble ...................................... 140,000 11,174
Service Corp. International ........................... 500,000 18,469
Stanley Works ......................................... 160,000 7,550
Textron ............................................... 118,000 7,375
Unifi ................................................. 271,000 11,026
Unilever N.V. ADR ..................................... 70,000 4,371
131,230
Total Consumer Nondurables ............................ 499,451
CONSUMER SERVICES 11.5%
General Merchandisers 2.2%
Dayton Hudson ......................................... 65,000 4,388
J.C. Penney ........................................... 100,000 6,031
Neiman-Marcus * ....................................... 300,000 9,075
Wal-Mart .............................................. 395,000 15,578
Warnaco Group (Class A) ............................... 500,000 15,687
50,759
Specialty Merchandisers 4.1%
American Stores ....................................... 250,000 5,141
CVS ................................................... 304,262 19,492
Federated Department Stores * ......................... 275,000 11,842
General Nutrition * ................................... 350,000 11,878
Home Depot ............................................ 230,000 13,541
Kohl's * .............................................. 100,000 6,812
McKesson .............................................. 20,000 2,164
Safeway * ............................................. 420,000 26,565
97,435
Entertainment and Leisure 2.2%
Carnival ADR (Class A) ................................ 347,000 19,215
Disney ................................................ 250,000 24,766
McDonald's ............................................ 150,000 7,162
51,143
<PAGE>
Media and Communications 3.0%
R.R. Donnelly ......................................... 100,000 $ 3,725
Time Warner ........................................... 295,000 18,290
Tribune ............................................... 310,000 19,298
U S WEST Media * ...................................... 370,000 10,684
Valassis Communications * ............................. 200,000 7,400
Vodafone ADR .......................................... 150,000 10,875
70,272
Total Consumer Services ............................... 269,609
CONSUMER CYCLICALS 2.6%
Automobiles and Related 0.4%
SPX ................................................... 130,000 8,970
8,970
Building and Real Estate 1.1%
Patriot American Hospitality, REIT .................... 274,999 7,923
Starwood Lodging, REIT ................................ 300,400 17,386
25,309
Miscellaneous Consumer Durables 1.1%
Corning ............................................... 170,000 6,311
Masco ................................................. 257,000 13,075
Sony ADR .............................................. 77,000 6,988
26,374
Total Consumer Cyclicals .............................. 60,653
TECHNOLOGY 10.1%
Electronic Components 2.0%
EMC * ................................................. 220,000 6,036
Intel ................................................. 200,000 14,044
Linear Technology ..................................... 133,000 7,656
Maxim Integrated Products * ........................... 266,000 9,194
Motorola .............................................. 150,000 8,559
45,489
Electronic Systems 1.7%
Hewlett-Packard ....................................... 220,000 13,750
Honeywell ............................................. 226,000 15,481
KLA Instruments * ..................................... 82,000 3,165
Nokia ADR ............................................. 107,000 7,490
39,886
Information Processing 1.8%
COMPAQ Computer ....................................... 280,000 15,802
Dell Computer * ....................................... 95,000 7,983
IBM ................................................... 181,000 18,926
42,711
<PAGE>
Office Automation 0.3%
Xerox ................................................. 100,000 $ 7,381
7,381
Specialized Computer 0.2%
Sun Microsystems * .................................... 100,000 3,994
3,994
Telecommunications Equipment 2.0%
Cisco Systems * ....................................... 315,000 17,581
Lucent Technologies ................................... 50,000 3,994
MCI ................................................... 375,000 16,066
WorldCom .............................................. 320,000 9,690
47,331
Aerospace and Defense 2.1%
AlliedSignal .......................................... 790,700 30,788
Boeing ................................................ 75,000 3,670
Lockheed Martin ....................................... 127,000 12,510
Raytheon Company (Class B) ............................ 50,000 2,525
49,493
Total Technology ...................................... 236,285
CAPITAL EQUIPMENT 4.3%
Electrical Equipment 2.7%
GE .................................................... 338,000 24,801
Hubbell (Class B) ..................................... 200,000 9,863
Tyco International .................................... 610,784 27,523
62,187
Machinery 1.6%
Danaher ............................................... 350,000 22,093
Teleflex .............................................. 425,000 16,044
38,137
Total Capital Equipment ............................... 100,324
BUSINESS SERVICES AND
TRANSPORTATION 9.3%
Computer Service and Software 5.3%
Automatic Data Processing ............................. 304,000 18,658
BMC Software * ........................................ 280,000 18,358
First Data ............................................ 610,106 17,846
Galileo International ................................. 170,000 4,696
Microsoft * ........................................... 188,000 24,293
National Data ......................................... 100,000 3,613
Oracle * .............................................. 200,000 4,456
Parametric Technology * ............................... 266,000 12,585
SunGard Data Systems * ................................ 340,000 10,540
Synopsys * ............................................ 210,000 7,494
122,539
<PAGE>
Distribution Services 0.3%
JP Foodservice * ...................................... 200,620 $ 7,410
7,410
Environmental 0.5%
USA Waste Services * .................................. 310,000 12,167
12,167
Miscellaneous Business Services 2.6%
Cendant * ............................................. 710,825 24,435
Corporate Express * ................................... 315,650 4,074
H&R Block ............................................. 340,000 15,236
Omnicom ............................................... 274,000 11,611
Wallace Computer Services ............................. 140,000 5,442
60,798
Railroads 0.6%
Burlington Northern Santa Fe .......................... 121,000 11,246
Norfolk Southern ...................................... 100,000 3,081
14,327
Total Business Services and Transportation ............ 217,241
ENERGY 4.4%
Energy Services 1.5%
BJ Services * ......................................... 92,000 6,618
Camco International ................................... 55,000 3,503
Cooper Cameron * ...................................... 200,000 12,200
Halliburton ........................................... 225,000 11,686
34,007
Integrated Petroleum-Domestic 1.6%
Atlantic Richfield .................................... 150,000 12,019
British Petroleum ADR ................................. 181,000 14,423
USX-Marathon .......................................... 350,000 11,813
38,255
Integrated Petroleum - International 1.3%
Mobil ................................................. 304,000 21,945
Texaco ................................................ 160,000 8,700
30,645
Total Energy .......................................... 102,907
PROCESS INDUSTRIES 2.3%
Diversified Chemicals 1.0%
DuPont ................................................ 150,000 9,009
Hercules .............................................. 176,000 8,811
Olin .................................................. 115,000 5,391
23,211
<PAGE>
Specialty Chemicals 0.7%
Great Lakes Chemical .................................. 235,000 $ 10,546
Sigma Aldrich ......................................... 150,000 5,944
16,490
Paper and Paper Products 0.6%
Kimberly-Clark ........................................ 304,000 14,991
14,991
Total Process Industries .............................. 54,692
BASIC MATERIALS 0.6%
Mining 0.3%
Newmont Mining ........................................ 250,000 7,344
7,344
Miscellaneous Materials 0.3%
Crown Cork & Seal ..................................... 140,000 7,017
7,017
Total Basic Materials 14,361
Total Miscellaneous Common Stocks 1.8% ............... 42,038
Total Common Stocks (Cost $1,717,306) ................ 2,106,070
Short-Term Investments 7.1%
Medium-Term Notes 0.2%
Morgan Stanley Group, VR 6.176%, 5/18/98 ..............$ 5,000,000 5,005
5,005
Money Market Funds 6.9%
Reserve Investment Fund, 5.84%#+ 160,552,672 160,552
160,552
Total Short-Term Investments (Cost $165,557) ......... 165,557
Total Investments in Securities
96.9% of Net Assets (Cost $1,882,863) ................. $ 2,271,627
Other Assets Less Liabilities ......................... 72,928
NET ASSETS ............................................ $ 2,344,555
# Seven-day yield
+ Affiliated Company
* Non-income producing
ADR American Depository Receipt
REIT Real Estate Investment Trust
VR Variable rate
GBP British sterling
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
December 31, 1997
================================================================================
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value
Affiliated companies (cost $160,552) .................. $ 160,552
Other companies (cost $1,722,311) ..................... 2,111,075
Total investments in securities ....................... 2,271,627
Other assets .................................................. 104,473
Total assets .................................................. 2,376,100
Liabilities
Total liabilities ............................................. 31,545
NET ASSETS .................................................... $ 2,344,555
Net Assets Consist of:
Accumulated net investment income - net of distributions ...... $ 793
Accumulated net realized gain/loss - net of distributions ..... (3,882)
Net unrealized gain (loss) .................................... 388,764
Paid-in-capital applicable to 97,019,961 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares authorized ............................... 1,958,880
NET ASSETS .................................................... $ 2,344,555
NET ASSET VALUE PER SHARE ..................................... $ 24.17
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
Investment Income
Income
Dividend ............................................... $ 16,317
Interest ............................................... 8,857
Total income ........................................... 25,174
Expenses
Investment management .................................. 8,706
Shareholder servicing .................................. 3,509
Registration ........................................... 554
Prospectus and shareholder reports ..................... 235
Custody and accounting ................................. 162
Legal and audit ........................................ 14
Directors .............................................. 11
Miscellaneous .......................................... 28
Total expenses ......................................... 13,219
Net investment income .......................................... 11,955
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Securities ............................................. (4,267)
Futures ................................................ 385
Foreign currency transactions .......................... (18)
Net realized gain (loss) ............................... (3,900)
Change in net unrealized gain or loss .......................... 303,584
Net realized and unrealized gain (loss) on securities .......... 299,684
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ......................................... $ 311,639
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Blue Chip Growth Fund
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ...................................................... $ 11,955 $ 2,414
Net realized gain (loss) ................................................... (3,900) 4,994
Change in net unrealized gain or loss ...................................... 303,584 62,004
Increase (decrease) in net assets from operations .......................... 311,639 69,412
Distributions to shareholders
Net investment income ...................................................... (11,113) (3,801)
Net realized gain .......................................................... (1,852) (2,192)
Decrease in net assets from distributions .................................. (12,965) (5,993)
Capital share transactions *
Shares sold ................................................................ 1,862,992 423,555
Distributions reinvested ................................................... 12,659 5,800
Shares redeemed ............................................................ (369,444) (101,053)
Increase (decrease) in net assets from capital
share transactions ......................................................... 1,506,207 328,302
Net equalization ................................................................... -- 1,499
Net Assets
Increase (decrease) during period .................................................. 1,804,881 393,220
Beginning of period ................................................................ 539,674 146,454
End of period ...................................................................... $ 2,344,555 $ 539,674
*Share information
Shares sold ................................................................ 85,107 24,262
Distributions reinvested ................................................... 535 302
Shares redeemed ............................................................ (16,932) (5,958)
Increase (decrease) in shares outstanding .................................. 68,710 18,606
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
December 31, 1997
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Blue Chip Growth Fund, Inc. (the fund) is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company and commenced operations on June 30, 1993.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations are
made. A security which is listed or traded on more than one exchange is valued
at the quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
Short-term debt securities are valued at amortized cost which, when
combined with accrued interest, approximates fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
AFFILIATED COMPANIES As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the outstanding
voting securities.
<PAGE>
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.
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. Effective January 1, 1997, the fund discontinued
its practice of equalization. The results of operations and net assets were not
affected by this change.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $1,616,244,000 and $293,845,000, respectively, for the
year ended December 31, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $2,275,000, which expire in 2005. The fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1997. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
================================================================================
Undistributed net investment income $(49,000)
Undistributed net realized gain 60,000
Paid-in-capital (11,000)
- --------------------------------------------------------------------------------
<PAGE>
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $1,882,863,000, and net unrealized gain
aggregated $388,764,000, of which $412,386,000 related to appreciated
investments and $23,622,000 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 $1,165,000 was payable at December 31, 1997. 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 0.30% for assets in excess of $80 billion. The
effective annual group fee rate was 0.32% at December 31, 1997, and 0.33% for
the year then ended. 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. The fund incurred expenses pursuant to these
related party agreements totaling approximately $2,721,000 for the year ended
December 31, 1997, of which $278,000 was payable at period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual
funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum)
may invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Growth Fund held
approximately 13.0% of the outstanding shares of the Blue Chip Growth Fund at
December 31, 1997. For the year then ended, the fund was allocated $118,000 of
Spectrum expenses.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the year ended December 31, 1997, totaled
$3,187,000 and are reflected as interest income in the accompanying Statement of
Operations.
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
T. ROWE PRICE BLUE CHIP GROWTH FUND, INC.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price Blue Chip Growth
Fund, Inc. (the "Fund") at December 31, 1997, and the results of its operations,
the changes in its net assets and the financial highlights for each of the
fiscal periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1997 by correspondence with
custodians and, where appropriate, the application of alternative auditing
procedures for unsettled security transactions, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 21, 1998
<PAGE>
T. Rowe Price Blue Chip Growth Fund
================================================================================
Tax Information (Unaudited) for the Tax Year Ended 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
* $1,623,000 from long-term capital gains; of which $1,623,000 was subject to
the 28% rate gains category.
For corporate shareholders, 100% of the fund's distributed income qualified for
the dividends-received deduction.
- --------------------------------------------------------------------------------
<PAGE>
T. Rowe Price Shareholder Services
================================================================================
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
CHECKING Available on most fixed income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your
distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*AccessRegistration Mark and
T. Rowe Price OnLine.
DISCOUNT BROKERAGE*
INDIVIDUAL INVESTMENTS Stocks, bonds, options, precious metals, and
other securities at a savings over regular commission rates.
INVESTMENT INFORMATION
COMBINED STATEMENT Overview of your T. Rowe Price accounts.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and
results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial
markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
T. Rowe Price Mutual Funds
================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications*
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons**
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value**
Spectrum Growth
Total Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
<PAGE>
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
** Closed to new investors.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Blue Chip Growth Fund.
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
T. Rowe Price Investment Services, Inc., Distributor. F93-050 12/31/97
