Item 1. Report to Shareholders
T. Rowe Price Blue Chip Growth Fund
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June 30, 2004
Certified Semiannual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
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Investor Class
6 Months Year
Ended Ended
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET VALUE
Beginning
of period $ 28.45 $ 21.95 $ 28.97 $ 33.85 $ 36.34 $ 30.60
Investment
activities
Net investment
income (loss) 0.02 0.02 - (0.02) (0.03) 0.03
Net realized
and unrealized
gain (loss) 0.81 6.51 (7.02) (4.86) (0.84) 6.07
Total from
investment
activities 0.83 6.53 (7.02) (4.88) (0.87) 6.10
Distributions
Net investment
income - (0.03) - - - (0.03)
Net realized gain - - - - (1.62) (0.33)
Total
distributions - (0.03) - - (1.62) (0.36)
NET ASSET VALUE
End of period $ 29.28 $ 28.45 $ 21.95 $ 28.97 $ 33.85 $ 36.34
--------------------------------------------------------------
Ratios/
Supplemental
Data
Total return^ 2.92% 29.75% (24.23)% (14.42)% (2.53)% 20.00%
Ratio of
total expenses
to average
net assets 0.89%! 0.95% 0.96% 0.96% 0.91% 0.91%
Ratio of
net investment
income (loss)
to average
net assets 0.11%! 0.10% 0.00% (0.06)% (0.09)% 0.10%
Portfolio
turnover rate 30.2%! 32.6% 46.2% 48.3% 50.9% 41.3%
Net assets,
end of period
(in millions) $ 6,760 $ 6,300 $ 4,482 $ 6,242 $ 7,113 $ 6,709
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
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Advisor Class
6 Months Year 3/31/00
Ended Ended Through
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00
NET ASSET VALUE
Beginning of period $ 28.48 $ 21.97 $ 29.02 $ 33.91 $ 38.63
Investment activities
Net investment
income (loss) - 0.02 - (0.01) 0.02*
Net realized and
unrealized gain (loss) 0.80 6.52 (7.04) (4.88) (3.12)
Total from
investment activities 0.80 6.54 (7.04) (4.89) (3.10)
Distributions
Net investment income - (0.03) - - -
Net realized gain - - - - (1.62)
Tax return of capital - - (0.01) - -
Total distributions - (0.03) (0.01) - (1.62)
NET ASSET VALUE
End of period $ 29.28 $ 28.48 $ 21.97 $ 29.02 $ 33.91
----------------------------------------------------
Ratios/Supplemental Data
Total return^ 2.81% 29.77% (24.26)% (14.42)% (8.15)%
Ratio of total expenses
to average net assets 0.98%! 0.98% 0.99% 0.99% 0.69%!
Ratio of net investment
income (loss) to
average net assets 0.02%! 0.07% (0.01)% (0.04)% 0.25%!
Portfolio turnover rate 30.2%! 32.6% 46.2% 48.3% 50.9%
Net assets, end of
period (in thousands) $ 821,329 $ 769,970 $ 538,571 $ 469,089 $ 2,831
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the period. The per-share amounts for the investment activities of the
Advisor Class may be inconsistent with the aggregate amounts presented
elsewhere in the financial statements for the fund, due to the partial year
of operations for the Advisor Class and the timing of sales and redemptions
of shares in relation to fluctuating market values for the investment
portfolio.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
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R Class
6 Months Year 9/30/02
Ended Ended Through
6/30/04 12/31/03 12/31/02
NET ASSET VALUE
Beginning of period $ 28.31 $ 21.93 $ 20.37
Investment activities
Net investment income (loss) (0.06) (0.01)* (0.02)*
Net realized and unrealized gain (loss) 0.83 6.42 1.58**
Total from investment activities 0.77 6.41 1.56
Distributions
Net investment income - (0.03) -
NET ASSET VALUE
End of period $ 29.08 $ 28.31 $ 21.93
-------------------------------
Ratios/Supplemental Data
Total return^ 2.72% 29.23%* 7.66%*
Ratio of total expenses
to average net assets 1.21%! 1.35%* 1.35%!*
Ratio of net investment income
(loss) to average net assets (0.19%)! (0.25%)* (0.28%)!*
Portfolio turnover rate 30.2%! 32.6% 46.2%
Net assets, end of period
(in thousands) $ 23,933 $ 1,509 $ 108
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 1.35% contractual expense limitation in
effect through 4/30/06.
** The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the period. This amount is inconsistent with the fund's aggregate gains and
losses because of the timing of sales and redemptions of fund shares in
relation to fluctuating market values for the investment portfolio.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
PORTFOLIO OF INVESTMENTS (1) Shares Value
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Cost and value in $ 000s)
COMMON STOCKS 99.6%
CONSUMER DISCRETIONARY 15.8%
Automobiles 1.1%
Harley-Davidson 1,300,000 80,522
80,522
Hotels, Restaurants & Leisure 3.4%
Carnival 1,870,000 87,890
International Game Technology 2,530,000 97,658
McDonald's 700,000 18,200
MGM Mirage * 400,000 18,776
Starbucks * 820,000 35,654
258,178
Household Durables 0.3%
Fortune Brands 350,000 26,400
26,400
Internet & Catalog Retail 1.2%
Amazon.com * 250,000 13,600
eBay * 820,000 75,399
88,999
Media 5.9%
British Sky Broadcast (GBP) 700,000 7,893
Clear Channel Communications 950,000 35,103
Comcast, Class A * 2,000,000 55,220
Disney 400,000 10,196
EchoStar Communications, Class A * 1,670,000 51,352
McGraw-Hill 40,000 3,063
News Corporation ADR 860,000 28,277
Omnicom 400,000 30,356
Scripps, Class A 617,000 64,785
Time Warner * 3,400,000 59,772
Viacom, Class B 2,400,000 85,728
Washington Post, Class B 16,000 14,880
446,625
Multiline Retail 1.5%
Family Dollar Stores 220,000 6,692
Target 2,620,000 111,272
117,964
Specialty Retail 2.4%
Best Buy 1,450,000 73,573
Home Depot 3,100,000 109,120
182,693
Total Consumer Discretionary 1,201,381
CONSUMER STAPLES 4.5%
Beverages 1.6%
Coca-Cola 1,060,000 53,509
PepsiCo 1,240,000 66,811
120,320
Food & Staples Retailing 1.9%
CVS 200,000 8,404
Sysco 700,000 25,109
Wal-Mart 2,020,000 106,575
Walgreen 200,000 7,242
147,330
Household Products 0.4%
Procter & Gamble 482,000 26,240
26,240
Personal Products 0.2%
Gillette 340,000 14,416
14,416
Tobacco 0.4%
Altria Group 610,000 30,531
30,531
Total Consumer Staples 338,837
ENERGY 3.8%
Energy Equipment & Services 3.8%
Baker Hughes 2,020,000 76,053
BJ Services * 1,000,000 45,840
Schlumberger 1,475,000 93,677
Smith International * 1,300,000 72,488
288,058
Oil & Gas 0.0%
Exxon Mobil 10,000 444
444
Total Energy 288,502
FINANCIALS 22.0%
Capital Markets 7.6%
AmeriTrade * 1,000,000 11,350
Bank of New York 1,060,000 31,249
Charles Schwab 400,000 3,844
Franklin Resources 880,000 44,070
Goldman Sachs Group 712,000 67,042
Legg Mason 610,000 55,516
Mellon Financial 2,350,000 68,926
Merrill Lynch 1,450,000 78,271
Morgan Stanley 925,000 48,812
Northern Trust 1,225,000 51,793
State Street 2,320,000 113,773
574,646
Commercial Banks 2.5%
Bank of America 925,000 78,273
U.S. Bancorp 1,700,000 46,852
Wells Fargo 1,150,000 65,815
190,940
Consumer Finance 1.9%
American Express 1,720,000 88,374
SLM Corporation 1,400,000 56,630
145,004
Diversified Financial Services 3.7%
Citigroup 5,900,000 274,350
J.P. Morgan Chase 220,000 8,529
282,879
Insurance 4.6%
American International Group 2,410,000 171,785
Genworth Financial, Class A * 610,000 14,000
Hartford Financial Services 1,000,000 68,740
Marsh & McLennan 890,000 40,388
Saint Paul Companies 1,360,000 55,134
350,047
Thrifts & Mortgage Finance 1.7%
Fannie Mae 1,180,000 84,205
Freddie Mac 725,000 45,892
130,097
Total Financials 1,673,613
HEALTH CARE 16.5%
Biotechnology 2.7%
Amgen * 1,760,000 96,043
Biogen Idec * 415,000 26,249
Genentech * 400,000 22,480
Gilead Sciences * 740,000 49,580
MedImmune * 250,000 5,850
200,202
Health Care Equipment & Supplies 2.4%
Biomet 100,000 4,444
Boston Scientific * 1,180,000 50,504
Guidant 300,000 16,764
Medtronic 1,450,000 70,644
St. Jude Medical * 200,000 15,130
Stryker 470,000 25,850
183,336
Health Care Providers & Services 4.5%
Anthem * 310,000 27,764
Cardinal Health 25,000 1,751
UnitedHealth Group 3,350,000 208,537
WellPoint Health Networks * 950,000 106,410
344,462
Pharmaceuticals 6.9%
Abbott Laboratories 700,000 28,532
Eli Lilly 400,000 27,964
Forest Laboratories * 1,330,000 75,318
Johnson & Johnson 1,500,000 83,550
Pfizer 7,200,000 246,816
Teva Pharmaceutical ADR 520,000 34,990
Wyeth 800,000 28,928
526,098
Total Health Care 1,254,098
INDUSTRIALS & BUSINESS SERVICES 12.1%
Aerospace & Defense 1.4%
General Dynamics 300,000 29,790
Honeywell International 640,000 23,443
Lockheed Martin 920,000 47,914
Rockwell Collins 50,000 1,666
102,813
Air Freight & Logistics 1.2%
UPS, Class B 1,200,000 90,204
90,204
Commercial Services & Supplies 1.9%
Apollo Group, Class A * 1,000,000 88,290
Cendant 1,500,000 36,720
ChoicePoint * 325,000 14,839
Waste Management 140,000 4,291
144,140
Industrial Conglomerates 4.9%
3M 310,000 27,903
General Electric Capital 6,440,000 208,656
Tyco International 4,210,000 139,519
376,078
Machinery 2.7%
Danaher 2,950,000 152,958
Deere 442,000 31,002
Illinois Tool Works 235,000 22,534
206,494
Total Industrials & Business Services 919,729
INFORMATION TECHNOLOGY 22.0%
Communications Equipment 4.0%
Cisco Systems * 6,500,000 154,050
Corning * 820,000 10,709
Juniper Networks * 1,200,000 29,484
Nokia ADR 100,000 1,454
QLogic * 610,000 16,220
QUALCOMM 370,000 27,003
Research In Motion * 925,000 63,307
302,227
Computers & Peripherals 2.5%
Dell * 3,700,000 132,534
IBM 70,000 6,170
Lexmark International, Class A * 500,000 48,265
186,969
Internet Software & Services 1.9%
InterActiveCorp * 1,600,000 48,224
Yahoo! * 2,750,000 99,908
148,132
IT Services 2.5%
Accenture, Class A * 500,000 13,740
Affiliated Computer Services, Class A * 820,000 43,411
Automatic Data Processing 200,000 8,376
First Data 1,420,000 63,218
Fiserv * 1,090,000 42,390
SunGard Data Systems * 650,000 16,900
188,035
Semiconductor & Semiconductor Equipment 4.9%
Analog Devices 1,660,000 78,153
Applied Materials * 880,000 17,266
Intel 3,100,000 85,560
Maxim Integrated Products 2,000,000 104,840
Microchip Technology 500,000 15,770
Texas Instruments 1,240,000 29,983
Xilinx 1,300,000 43,303
374,875
Software 6.2%
Adobe Systems 1,450,000 67,425
Intuit * 1,400,000 54,012
Microsoft 8,600,000 245,616
Oracle * 300,000 3,579
SAP ADR 1,225,000 51,217
Symantec * 340,000 14,885
VERITAS Software * 1,225,000 33,933
470,667
Total Information Technology 1,670,905
MATERIALS 1.2%
Metals & Mining 1.2%
Alcoa 460,000 15,194
BHP Billiton (AUD) 1,810,000 15,764
Nucor 835,000 64,095
Total Materials 95,053
TELECOMMUNICATION SERVICES 1.7%
Wireless Telecommunication Services 1.7%
Nextel Communications, Class A * 3,520,000 93,843
Vodafone ADR 1,600,000 35,360
Total Telecommunication Services 129,203
Total Common Stocks (Cost $5,772,514) 7,571,321
SHORT-TERM INVESTMENTS 0.3%
Money Market Fund 0.3%
T. Rowe Price Reserve
Investment Fund, 1.16% # 26,830,885 26,831
Total Short-Term Investments (Cost $26,831) 26,831
Total Investments in Securities
99.9% of Net Assets (Cost $5,799,345) $ 7,598,152
------------
(1) Denominated in U.S. dollars unless otherwise noted
# Seven-day yield
* Non-income producing
ADR American Depository Receipts
AUD Australian dollar
GBP British pound
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
STATEMENT OF ASSETS AND LIABILITIES
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(In thousands except shares and per share amounts)
Assets
Investments in securities, at value (cost $5,799,345) $ 7,598,152
Other assets 71,771
Total assets 7,669,923
Liabilities
Total liabilities 65,081
NET ASSETS $ 7,604,842
----------------
Net Assets Consist of:
Undistributed net investment income (loss) $ 3,571
Undistributed net realized gain (loss) (1,167,425)
Net unrealized gain (loss) 1,798,807
Paid-in-capital applicable to 259,764,686 shares
of $0.0001 par value capital stock outstanding;
1,000,000,000 shares authorized 6,969,889
NET ASSETS $ 7,604,842
----------------
NET ASSET VALUE PER SHARE
Investor Class
($6,759,579,994/230,895,393 shares outstanding) $ 29.28
----------------
Advisor Class
($821,329,109/28,046,411 shares outstanding) $ 29.28
----------------
R Class
($23,933,136/822,882 shares outstanding) $ 29.08
----------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF OPERATIONS
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($ 000s)
6 Months
Ended
6/30/04
Investment Income (Loss)
Income
Dividend $ 36,632
Securities lending 86
Total income 36,718
Expenses
Investment management 22,688
Shareholder servicing
Investor Class 8,610
Advisor Class 400
R Class 27
Rule 12b-1 fees
Advisor Class 975
R Class 29
Custody and accounting 161
Prospectus and shareholder reports
Investor Class 135
Advisor Class 1
R Class 1
Registration 79
Legal and audit 20
Directors 8
Miscellaneous 13
Redemptions/repayment pursuant to expense limitation
Expenses (reimbursed by) repaid to manager 1
Total expenses 33,148
Expenses paid indirectly (1)
Net expenses 33,147
Net investment income (loss) 3,571
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (2,415)
Foreign currency transactions (111)
Net realized gain (loss) (2,526)
Change in net unrealized gain (loss) on securities 207,131
Net realized and unrealized gain (loss) 204,605
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 208,176
----------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 3,571 $ 5,726
Net realized gain (loss) (2,526) (184,521)
Change in net unrealized gain (loss) 207,131 1,761,118
Increase (decrease) in net
assets from operations 208,176 1,582,323
Distributions to shareholders
Net investment income
Investor Class - (6,682)
Advisor Class - (808)
R Class - (1)
Decrease in net assets from distributions - (7,491)
Capital share transactions *
Shares sold
Investor Class 860,069 1,289,603
Advisor Class 111,947 196,170
R Class 24,515 1,460
Distributions reinvested
Investor Class - 6,546
Advisor Class - 799
R Class - 1
Shares redeemed
Investor Class (585,325) (883,927)
Advisor Class (83,465) (134,017)
R Class (2,703) (216)
Increase (decrease) in net assets
from capital share transactions 325,038 476,419
Net Assets
Increase (decrease) during period 533,214 2,051,251
Beginning of period 7,071,628 5,020,377
End of period $ 7,604,842 $ 7,071,628
-----------------------------------
(Including undistributed net investment
income of $3,571 at 6/30/04 and $0
at 12/31/03)
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
*Share information
Shares sold
Investor Class 29,706 52,766
Advisor Class 3,866 8,044
R Class 864 56
Distributions reinvested
Investor Class - 238
Advisor Class - 29
Shares redeemed
Investor Class (20,235) (35,804)
Advisor Class (2,860) (5,549)
R Class (94) (8)
Increase (decrease) in shares outstanding 11,247 19,772
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Blue Chip Growth Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end
management investment company. The fund seeks provide long-term capital growth.
Income is a secondary objective. The fund has three classes of shares: Blue Chip
Growth Fund the original share class, referred to in this report as the Investor
Class, offered since June 30, 1993, Blue Chip Growth Fund-Advisor Class
(Advisor Class), offered since March 31, 2000, and Blue Chip Growth Fund-R
Class (R Class), offered since September 30, 2002. Advisor Class shares are sold
only through brokers and other financial intermediaries, and R Class shares are
available to retirement plans serviced by intermediaries. The Advisor Class and
R Class each operate under separate Board-approved Rule 12b-1 plans, pursuant to
which each class compensates financial intermediaries for distribution,
shareholder servicing, and/or certain administrative services. Each class has
exclusive voting rights on matters related solely to that class, separate voting
rights on matters that relate to all classes, and, in all other respects, the
same rights and obligations as the other classes.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Equity securities listed or regularly traded
on a securities exchange or in the over-the-counter market are valued at the
last quoted sale price or, for certain markets, the official closing price at
the time the valuations are made, except for OTC Bulletin Board securities,
which are valued at the mean of the latest bid and asked prices. A security that
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 are valued at the mean of the latest
bid and asked prices for domestic securities and the last quoted sale price for
international securities.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation.
Other investments and those 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 the T. Rowe Price Valuation Committee,
established by the fund's Board of Directors.
Most foreign markets close before the close of trading on the NYSE. If the fund
determines that developments between the close of a foreign market and the close
of the NYSE will, in its judgment, materially affect the value of some or all of
its portfolio securities, which in turn will affect the fund's share price, the
fund will adjust the previous closing prices to reflect the fair value of the
securities as of the close of the NYSE, as determined in good faith by the T.
Rowe Price Valuation Committee, established by the fund's Board of Directors. A
fund may also fair value securities in other situations, such as when a
particular foreign market is closed but the fund is open. In deciding whether to
make fair value adjustments, the fund reviews a variety of factors, including
developments in foreign markets, the performance of U.S. securities markets, and
the performance of instruments trading in U. S. markets that represent foreign
securities and baskets of foreign securities. The fund uses outside pricing
services to provide it with closing market prices and information used for
adjusting those prices. The fund cannot predict how often it will use closing
prices and how often it will adjust those prices. As a means of evaluating its
fair value process, the fund routinely compares closing market prices, the next
day's opening prices in the same markets, and adjusted prices.
Currency Translation
Assets, including investments, and liabilities denominated in foreign currencies
are translated into U.S. dollar values each day at the prevailing exchange rate,
using the mean of the bid and asked prices of such currencies against U.S.
dollars as quoted by a major bank. Purchases and sales of securities, income,
and expenses are translated into U.S. dollars at the prevailing exchange rate on
the date of the transaction. The effect of changes in foreign currency exchange
rates on realized and unrealized security gains and losses is reflected as a
component of security gains and losses.
Class Accounting
The Advisor Class and R Class each pay distribution, shareholder servicing,
and/or certain administrative expenses in the form of Rule 12b-1 fees, in an
amount not exceeding 0.25% and 0.50%, respectively, of the class's average daily
net assets. Shareholder servicing, prospectus, and shareholder report expenses
incurred by each class are charged directly to the class to which they relate.
Expenses common to all classes, investment income, and realized and unrealized
gains and losses are allocated to the classes based upon the relative daily net
assets of each class.
Rebates and Credits
Subject to best execution, the fund may direct certain security trades to
brokers who have agreed to rebate a portion of the related brokerage commission
to the fund in cash. Commission rebates are included in realized gain on
securities in the accompanying financial statements and totaled $169,000 for the
six months ended June 30, 2004. Additionally, the fund earns credits on
temporarily uninvested cash balances at the custodian that reduce the fund's
custody charges. Custody expense in the accompanying financial statements is
presented before reduction for credits, which are reflected as expenses paid
indirectly.
In-Kind Redemptions
In certain circumstances, the fund may distribute portfolio securities rather
than cash as payment for a redemption of fund shares (in-kind redemption). For
financial reporting purposes, the fund recognizes a gain on in-kind redemptions
to the extent the value of the distributed securities on the date of redemption
exceeds the cost of those securities; the fund recognizes a loss if cost exceeds
value. Gains and losses realized on in-kind redemptions are not recognized for
tax purposes, and are reclassified from undistributed realized gain (loss) to
paid-in capital. During the six months ended June 30, 2004, the fund realized
$4,445,000 of net gain on $7,810,000 of in-kind redemptions.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Dividends received from
mutual fund investments are reflected as dividend income; capital gain
distributions are reflected as realized gain/loss. Dividend income and capital
gain distributions are recorded on the ex-dividend date. Investment transactions
are accounted for on the trade date. Realized gains and losses are reported on
the identified cost basis. Distributions to shareholders are recorded on the
ex-dividend date. Income distributions are declared and paid an annual basis.
Capital gain distributions, if any, are declared and paid by the fund, typically
on an annual basis.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment
objective, policies, program, and risk factors of the fund are described more
fully in the fund's prospectus and Statement of Additional Information.
Securities Lending
The fund lends its securities to approved brokers to earn additional income. It
receives as collateral cash and U.S. government securities valued at 102% to
105% of the value of the securities on loan. Cash collateral is invested in a
money market pooled trust managed by the fund's lending agent in accordance with
investment guidelines approved by fund management. Collateral is maintained over
the life of the loan in an amount not less than the value of loaned securities,
as determined at the close of fund business each day; any additional collateral
required due to changes in security values is delivered to the fund the next
business day. Although risk is mitigated by the collateral, the fund could
experience a delay in recovering its securities and a possible loss of income or
value if the borrower fails to return the securities. Securities lending revenue
recognized by the fund consists of earnings on invested collateral and borrowing
fees, net of any rebates to the borrower and compensation to the lending agent.
At June 30, 2004, there were no securities on loan.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $1,385,436,000 and $1,114,443,000, respectively, for the six months
ended June 30, 2004.
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 under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its taxable income
and gains. Federal income tax regulations differ from generally accepted
accounting principles; therefore, distributions determined in accordance with
tax regulations may differ in amount or character from net investment income and
realized gains for financial reporting purposes. Financial reporting records are
adjusted for permanent book/tax differences to reflect tax character. Financial
records are not adjusted for temporary differences. The amount and character of
tax-basis distributions and composition of net assets are finalized at fiscal
year-end; accordingly, tax-basis balances have not been determined as of June
30, 2004.
For tax purposes, the fund has elected to treat net capital losses realized
between November 1 and December 31 of each year as occurring on the first day of
the following tax year; consequently, $3,437,000 of realized losses recognized
for
financial reporting purposes in the year ended December 31, 2003 were recognized
for tax purposes on January 1, 2004. Further, the fund intends to retain
realized gains to the extent of available capital loss carryforwards. As of
December 31, 2003, the fund had $1,161,462,000 of unused capital loss
carryforwards, of which $485,133,000 expire in 2009, $433,036,000 expire in
2010, and $243,293,000 expire in 2011.
At June 30, 2004, the cost of investments for federal income tax purposes was
$5,799,345,000. Net unrealized gain aggregated $1,798,807,000 at period-end, of
which $1,843,501,000 related to appreciated investments and $44,694,000 related
to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.30% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its average daily net assets to those of the group. At June 30, 2004,
the effective annual group fee rate was 0.31%, and investment management fee
payable totaled $3,780,000.
The Advisor Class and R Class are also subject to a contractual expense
limitation through the limitation dates indicated in the table below. During the
limitation period, the manager is required to waive its management fee and
reimburse a class for any expenses, excluding interest, taxes, brokerage
commissions, and extraordinary expenses, that would otherwise cause the class's
ratio of total expenses to average net assets (expense ratio) to exceed its
expense limitation. Through the repayment date, each class is required to repay
the manager for expenses previously reimbursed and management fees waived to the
extent the class's net assets have grown or expenses have declined sufficiently
to allow repayment without causing the class's expense ratio to exceed its
expense limitation.
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Advisor Class R Class
Expense Limitation 1.05% 1.35%
Limitation Date 4/30/06 4/30/06
Repayment Date 4/30/08 4/30/08
For the six months ended June 30, 2004, each class operated below its expense
limitation.
In addition, the fund has entered into service agreements with Price Associates
and two wholly owned subsidiaries of Price Associates (collectively, Price).
Price Associates computes the daily share prices and maintains the financial
records of the fund. T. Rowe Price Services, Inc., provides shareholder and
administrative services in its capacity as the fund's transfer and dividend
disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides
subaccounting and recordkeeping services for certain retirement accounts
invested in the Investor Class and R Class. Expenses incurred pursuant to these
service agreements totaled $6,181,000 for the six ended June 30, 2004, of which
$1,100,000 was payable at period-end.
Additionally, the fund is one of several mutual funds in which certain college
savings plans managed by Price Associates may invest. As approved by the fund's
Board of Directors, shareholder servicing costs associated with each college
savings plan are borne by the fund in proportion to the average daily value of
its shares owned by the college savings plan. For the six months ended June 30,
2004, the fund was charged $271,000 for shareholder servicing costs related to
the college savings plans, of which $192,000 was for services provided by Price
and $53,000 was payable at period-end. At June 30, 2004, approximately 2.7% of
the outstanding shares of the Investor Class were held by college savings plans.
The fund is also one of several mutual funds sponsored by Price Associates
(underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum
Funds) may invest. The Spectrum Funds do not invest in the underlying Price
funds for the purpose of exercising management or control. Pursuant to a special
servicing agreement, expenses associated with the operation of the Spectrum
Funds are borne by each underlying Price fund to the extent of estimated savings
to it and in proportion to the average daily value of its shares owned by the
Spectrum Funds. Expenses allocated under this agreement are reflected as
shareholder servicing expense in the accompanying financial statements. For the
six months ended June 30, 2004, the fund was allocated $267,000 of Spectrum
Funds' expenses, of which $193,000 related to services provided by Price and
$39,000 was payable at
period-end. At June 30, 2004, approximately 4.7% of the outstanding shares of
the Investor Class were held by the Spectrum Funds.
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe
Price Government Reserve Investment Fund (collectively, the Reserve Funds),
open-end management investment companies managed by Price Associates. The
Reserve Funds are offered as cash management options to mutual funds, trusts,
and other accounts managed by Price Associates and/or its affiliates, and are
not available for direct purchase by members of the public. The Reserve Funds
pay no investment management fees. During the six months ended June 30, 2004,
dividend income from the Reserve Funds totaled $122,000.
NOTE 5 - INTERFUND BORROWING
Pursuant to its prospectus, the fund may borrow up to 33 1/3% of its total
assets. The fund is party to an interfund borrowing agreement between itself and
other T. Rowe Price-sponsored mutual funds, which permits it to borrow or lend
cash at rates beneficial to both the borrowing and lending funds. Loans totaling
10% or more of a borrowing fund's total assets are collateralized at 102% of the
value of the loan; loans of less than 10% are unsecured. During the six months
ended June 30, 2004, the fund had outstanding borrowings on 11 days, in the
average amount of $16,045,000, and at an average annual rate of 1.28%. There
were no borrowings outstanding at June 30, 2004.
T. Rowe Price Blue Chip Growth Fund
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Certified Semiannual Report
INFORMATION ON PROXY VOTING
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A description of the policies and procedures that the T. Rowe Price Blue Chip
Growth Fund uses to determine how to vote proxies relating to portfolio
securities is available, without charge, upon request by calling 1-800-225-5132.
It also appears in the fund's Statement of Additional Information (Form 485B),
which can be found on the SEC's Web site, www.sec.gov.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions is filed as an
exhibit to the registrant's annual Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the registrant's
most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant's annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant's annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is filed
with the registrant's annual Form N-CSR.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end
companies: not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Blue Chip Growth Fund, Inc.
By: /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date: August 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date: August 16, 2004
By: /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date: August 16, 2004