Item 1. Report to Shareholders T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) FINANCIAL HIGHLIGHTS For a share outstanding throughout each period - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) FINANCIAL HIGHLIGHTS For a share outstanding throughout each period - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) FINANCIAL HIGHLIGHTS For a share outstanding throughout each period - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) June 30, 2004 PORTFOLIO OF INVESTMENTS (1) Shares Value - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) June 30, 2004 STATEMENT OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------- (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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- ($ 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 - -------------------------------------------------------------------------------- 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 $0 at 12/31/03) T. Rowe Price Blue Chip Growth Fund - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- ($ 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 - -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) June 30, 2004 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 (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. - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Certified Semiannual Report INFORMATION ON PROXY VOTING - -------------------------------------------------------------------------------- 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