N-30D 1 argsf.txt GROWTH STOCK FUND ANNUAL REPORT Annual Report Growth Stock Fund December 31, 2001 T. Rowe Price Report Highlights Growth Stock Fund o Large-cap growth stocks declined in 2001, in spite of banner fourth-quarter results. o Your fund declined for the past 6- and 12-month periods, but outperformed the S&P 500 and its Lipper benchmark. o The fund benefited from the ownership of data processing and health care service companies; software and media holdings detracted from performance. o We are generally optimistic that the economy and the markets will be stronger in 2002. o While the last two years have been difficult, the fund's double-digit 5- and 10-year annualized returns affirm the merit of adhering to our time-tested investing strategies. REPORTS ON THE WEB Sign up for our E-mail Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log on to your account at www.troweprice.com for more information. Fellow Shareholders -------------------------------------------------------------------------------- Performance Comparison -------------------------------------------------------------------------------- Periods Ended 12/31/01 6 Months 12 Months Growth Stock Fund -2.55% -9.79% S&P 500 Stock Index -5.56 -11.89 Lipper Large-Cap Growth Funds Average -8.78 -22.95 Over the last six months, the U.S. markets have been like a Broadway play-encompassing gloom, tragedy, heroism, and hope. In Act I, the market continued to drift lower as earnings prospects dimmed and interest rate cuts seemed to have little effect. Act II opened with the tragedy of the September 11 terrorist attacks that, ironically, moved people from focusing on the current valley to the potential for a recovery. Act III included the market's year-end rally that almost retraced most of the losses of summer. There are several important lessons to glean from these events. The first is the U.S. economy's resilience, which wavered but did not fail. The second is that investor perceptions are fickle and can be unpredictable. Regardless of the current market clime, we focus on owning great companies and on generating solid returns over time without undo risk. We work hard at avoiding speculation when it is in vogue, and on maintaining a long-term focus when the short-term outlook is bleak. Over the past six months, your fund lost 2.55%, which was superior to the 5.56% decline for the S&P 500 Stock Index and well ahead of the 8.78% loss for the Lipper Large-Cap Growth Funds Average. Over 12 months, your fund fell 9.79%, versus an 11.89% loss for the S&P 500 Stock Index and a 22.95% drubbing for the Lipper Large-Cap Growth Funds Average. While we are never happy to report negative returns, we are pleased to have provided our long-term shareholders with superior returns. As seen in the following table, our 3-, 5-, and 10-year returns outpace both the S&P 500 Stock Index and the Lipper growth funds average in all periods. Annualized Gains -------------------------------------------------------------------------------- Periods Ended 12/31/01 3 Year 5 Year 10 Year -------------------------------------------------------------------------------- Growth Stock Fund 3.38% 12.25% 13.38% S&P 500 Stock Index -1.03 10.70 12.94 Lipper Large-Cap Growth Funds Average -3.82 8.15 10.09 Stock selection drove our superior relative performance in the last six months. For the 12-month period, technology and telecom stocks detracted from results while health care services and processing companies were positives. (Based on the total return, the T. Rowe Price Growth Stock Fund was ranked 5 out of 838 large-cap growth funds by Lipper Inc. for the one-year period ended 12/31/01. For the 3-, 5-, and 10-year periods, the rankings were 18 out of 504, 40 out of 308, and 8 out of 87, respectively. Of course, past performance is no guarantee of future results.) MARKET ENVIRONMENT I will borrow a phrase that we have used in a previous letter: "The only thing that's constant is change."The terrorist attacks and the personal devastation that followed were turning points in the market over the last six months. However, the market's reaction was much different than generally expected, furthering support for our long-term, gradualist approach to managing money. the market acted as though it were certain of a recovery and only slightly unsure of its timing. Even as the economy weakened, economically sensitive stocks rallied strongly after bottoming on September 21. Fears regarding the tragedy's effects on business very quickly became reality, and the sudden drop in fundamentals created a floor from which stocks could improve. Investors began to discount this expected improvement rapidly as lowered interest rates and liquidity moved the market higher. By the end of the year, while still in the midst of a poor economy, the market acted as though it were certain of a recovery and only slightly unsure of its timing. After taking a back seat to value for the prior nine months, growth stocks outperformed in the fourth quarter. Aggressive growth stocks in the technology, media, and retail sectors led the charge, while the pharmaceutical and energy sectors were weak. Portfolio Characteristics -------------------------------------------------------------------------------- Growth Stock Domestic As of 12/31/01 Portfolio S&P 500 Earnings Growth Rate Past 5 Years 18.5% 13.4% Projected 5 Years 1 15.0 14.0 Dividend Growth Rate Past 5 Years 13.7 1.1 Projected 5 Years 2 10.0 1.1 Return on Equity Past 5 Years 24.2 22.5 Long-Term Debt as Percent of Capital 35.4 35.5 P/E Ratio (12-month forward projected earnings)1 24.7X 23.5X 1 Source data: IBES. 2 Source data: Value Line. Forecast data are in no way indicative of future investment returns. The return to "upside uncertainty" from "downside uncertainty" was extremely fast. Once it happened, great companies whose fundamentals were in fine shape, like Freddie Mac, traded down from already low levels, while companies that were stumbling through the economic malaise were forgiven and were accorded valuations that assumed all would be fine very soon. The market was far too concerned with the direction of the next piece of economic data, rather than the longer-term prospects of a company and its share price. We attempted to use this shortsightedness as an opportunity to add to or trim from our holdings, offsetting any additional gray hair with higher returns for our shareholders. INVESTMENT REVIEW Sector Diversification -------------------------------------------------------------------------------- Consumer 23 Health Care 20 Financials 20 Industrials and Business Services 14 Information Technology 12 Energy & Utilities 4 Telecommunication Services 4 Reserves 3 Our sector allocations remained relatively unchanged over the last 6- and 12-month periods. The overweighted position in the consumer nondurables aided our performance in 2001. An underweighted position in telecommunications services was beneficial over 12 months and mixed for the last six months. In the last six months, your fund was helped by the ownership of processing companies First Data and Concord EFS, and health care service companies UnitedHealth Group and Wellpoint Health Networks. As prospects for consumers improved, due to lower mortgage rates and falling oil prices, retail stocks Target, Wal-Mart, and Home Depot performed well. Target and Wal-Mart both benefited as consumers shifted their spending habits to more value-conscious stores. On the downside, software stocks had a difficult year and VeriSign and Siebel Systems detracted from performance. In addition, media holdings like Viacom and Clear Channel Communications declined more than the general market. However, like technology stocks, a strong finish at the end of the year kept returns from being much worse. Most of our portfolio changes through the last six months were aimed at increasing the portfolio's economic sensitivity. As we began to feel that expectations were low enough, we added to Home Depot and Tyco International. We also initiated positions in Affiliated Computer Services and Merrill Lynch. In addition, we trimmed several more defensive names including Philip Morris, Johnson & Johnson, and Kroger in favor of faster growing companies in their sectors such as grocery retailer Royal Ahold and pharmaceutical company Sanofi-Synthelabo. Most of these changes have been successful. However, if we had anticipated the speed of the return of optimism, we would have moved more aggressively. GROWTH STOCK FUND P/E RELATIVE TO THE S&P 500 P/E -------------------------------------------------------------------------------- Ratio 12/76 1.295 1.218 1.224 1.207 1.215 1.219 1.263 1.193 1.145 1.090 1.118 1.061 1.025 1.088 1.111 1.195 1.295 1.313 1.312 1.426 12/81 1.267 1.235 1.186 1.286 1.483 1.522 1.424 1.500 1.473 1.264 1.233 1.103 1.185 1.196 1.216 1.171 1.226 1.204 1.163 1.122 12/86 1.106 1.108 1.000 1.063 1.024 0.992 1.066 1.105 1.191 1.207 1.153 1.209 1.028 1.000 1.035 0.944 0.985 1.072 1.007 1.026 12/91 1.144 1.152 1.019 1.019 1.122 1.054 1.055 1.072 1.149 1.086 1.118 1.170 1.316 1.196 1.145 1.130 1.133 1.147 1.090 1.120 12/96 1.085 1.074 1.016 1.025 0.950 0.986 1.005 0.967 1.019 1.019 1.046 1.086 1.067 1.111 1.260 1.077 1.363 1.202 1.212 1.038 12/01 1.124 This chart shows the history of the average (unweighted) price/earnings (P/E) ratio of the fund's U.S. portfoliocompanies compared with the P/E ratio of the S&P 500 Stock Index. The line labeled 1.0 represents the P/E ratioof the S&P 500 while the dark blue line is the fund's P/E relative to the S&P 500. As of December 31, 2001, the fund's P/E ratio was 25.8 versus 23.0 for the index, or 12% higher than the S&P 500's P/E ratio. OUTLOOK We are generally optimistic that the economy and equity markets will be stronger in 2002. What tempers our enthusiasm is that consumer spending remained relatively strong during the downturn. As a result, we expect a more modest recovery than normal. In addition, capital spending was stronger than expected in the late 90s, before its recent downturn, and may take longer than normal to recover. We are also mindful that September 11 may not be an isolated incident, although we hope that we will see nothing as grave. For these reasons, we continue to increase the portfolio's economic sensitivity on a stock-by-stock basis. We continue to look for market share gainers and companies that produce strong free cash flow and have management teams that can invest the free cash at high rates of return. While the last two years have been difficult, our double-digit 5- and 10-year annualized returns affirm the merit of adhering to our time-tested investing strategies. As always, we will continue to work diligently on your behalf in our search for attractive investments, both here and abroad. Respectfully submitted, Robert W. Smith Chairman of the fund's Investment Advisory Committee January 10, 2002 The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund's investment program. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- Portfolio Highlights -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 12/31/01 -------------------------------------------------------------------------------- Citigroup 4.2% Freddie Mac 3.5 Pfizer 3.2 Tyco International 2.5 UnitedHealth Group 2.5 -------------------------------------------------------------------------------- First Data 2.4 Microsoft 2.2 GE 2.2 American Home Products 2.0 Vodafone 1.9 -------------------------------------------------------------------------------- Home Depot 1.8 Viacom 1.7 Johnson & Johnson 1.7 Target 1.6 Concord EFS 1.6 -------------------------------------------------------------------------------- Liberty Media 1.5 Cendant 1.5 Fannie Mae 1.5 American International Group 1.4 Philip Morris 1.4 -------------------------------------------------------------------------------- Wellpoint Health Networks 1.3 AOL Time Warner 1.2 Flextronics 1.2 Exxon Mobil 1.1 Omnicom 1.0 -------------------------------------------------------------------------------- Total 48.1% Note: Table excludes reserves. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- Portfolio Highlights -------------------------------------------------------------------------------- MAJOR PORTFOLIO CHANGES Listed in descending order of size 6 Months Ended 12/31/01 Ten Largest Purchases -------------------------------------------------------------------------------- Tyco International Sanofi-Synthelabo * Royal Ahold * Affiliated Computer Services * Merrill Lynch * Home Depot Walgreen * WorldCom - WorldCom Group * American International Group Convergys * Ten Largest Sales -------------------------------------------------------------------------------- Kroger First Data Safeway Sprint PCS Philip Morris VNU ** Johnson & Johnson ACE Limited Providian Financial ** Univision Communications * Position added ** Position eliminated T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- Performance Comparison -------------------------------------------------------------------------------- This chart shows the value of a hypothetical 10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. Growth Stock Fund --------------------------------------------------------------------------- S&P 500 Growth Stock Stock Index Fund 12/31/91 10000 10000 12/31/92 10762 10599 12/31/93 11847 12249 12/31/94 12003 12357 12/31/95 16514 16184 12/31/96 20305 19696 12/31/97 27080 24929 12/31/98 34819 31761 12/31/99 42145 38796 12/31/00 38307 38901 12/31/01 33754 35092 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. Periods Ended 12/31/01 1 Yea 3 Year 5 Year 10 Years Growth Stock Fund -9.79 3.3 12.2 13.38% Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- Year Ended 12/31/01 12/31/00 12/31/99 12/31/98 12/31/97 NET ASSET VALUE Beginning of period $27.20 $33.27 $32.07 $28.99 $26.18 Investment activities Net investment income (loss) 0.09 0.07 0.11 0.22 0.23 Net realized and unrealized gain (loss) (2.76) 0.21 6.61 7.38 6.65 Total from investment activities (2.67) 0.28 6.72 7.60 6.88 Distributions Net investment income (0.08) (0.07) (0.10) (0.25) (0.20) Net realized gain (0.27) (6.28) (5.42) (4.27) (3.87) Total distributions (0.35) (6.35) (5.52) (4.52) (4.07) NET ASSET VALUE End of period $24.18 $27.20 $33.27 $32.07 $28.99 ------ ------ ------ ------ ------ Ratios/Supplemextal Data Total return(diamond) (9.79)% 0.27% 22.15% 27.41% 26.57% Ratio of total expenses to average net assets 0.77% 0.73% 0.74% 0.74% 0.75% Ratio of net investment income (loss) to average net assets 0.34% 0.20% 0.31% 0.67% 0.75% Portfolio turnover rate 64.1% 74.3% 55.8% 54.8% 4 0.9 Net assets, end of period (in millions) $ 4,685 5,428 $ 5,672 $ 5,041 $ 3,988 (diamond 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 accompanying notes are an integral part of these financial statements. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- December 31, 2001 Statement of Net Assets Shares Value -------------------------------------------------------------------------------- In thousands Common Stocks 96.4% CONSUMER DISCRETIONARY 15.7% Automobiles 0.9% Harley-Davidson 757,600 41,145 41,145 Hotels, Restaurants & Leisure 0.6% MGM Grand * 306,973 8,862 Starwood Hotels & Resorts Worldwide, REIT 640,900 19,131 27,993 Household Durables 0.4% Sony (JPY) 440,000 20,118 20,118 Media 8.0% AOL Time Warner * 1,690,000 54,249 Clear Channel Communications * 564,000 28,713 Comcast (Class A Special) * 910,000 32,765 Liberty Media (Series A) * 5,115,000 71,610 Omnicom 550,000 49,143 TMP Worldwide * 365,000 15,660 Univision Communications (Class A) * 508,800 20,586 Viacom (Class B) * 1,820,524 80,376 WPP (GBP) 2,110,000 23,313 376,415 Multiline Retail 3.5% Target 1,860,000 76,353 Wal-Mart 850,000 48,917 Wal-Mart de Mexico (MXN) 2,400,000 6,553 Wal-Mart de Mexico ADR 1,180,000 32,303 164,126 Specialty Retail 2.3% Home Depot 1,635,000 83,401 Inditex (EUR) * 1,308,400 24,936 108,337 Total Consumer Discretionary 738,134 CONSUMER STAPLES 6.8% Beverages 1.7% Coca-Cola 775,000 36,541 PepsiCo 900,000 43,821 80,362 Food & Drug Retailing 3.1% Royal Ahold (EUR) 1,305,000 37,963 Kroger * 955,000 19,931 Safeway * 610,400 25,484 Sysco 1,193,000 31,281 Walgreen 940,000 31,640 146,299 Household Products 0.6% Colgate-Palmolive 435,000 25,121 25,121 Tobacco 1.4% Philip Morris 1,450,900 66,524 66,524 Total Consumer Staples 318,306 ENERGY 3.6% Energy Equipment & Services 0.8% Baker Hughes 980,000 35,741 35,741 Oil & Gas 2.8% ChevronTexaco 500,000 44,805 Exxon Mobil 1,281,374 50,358 Royal Dutch Petroleum ADR 755,000 37,010 132,173 Total Energy 167,914 FINANCIALS 18.5% Banks 2.2% Bank of New York 585,000 23,868 Fifth Third Bancorp 500,000 30,667 Mellon Financial 850,000 31,977 Wells Fargo 350,000 15,208 101,720 Diversified Financials 11.4% Capital One Financial 315,000 16,994 Citigroup 3,867,853 195,249 Fannie Mae 860,400 68,402 Freddie Mac 2,530,000 165,462 Merrill Lynch 730,000 38,048 Morgan Stanley Dean Witter 565,000 31,606 State Street 340,000 17,765 533,526 Insurance 4.9% ACE Limited 1,035,000 41,555 American International Group 840,000 66,696 Fairfax Financial (CAD) * 119,600 12,318 Hartford Financial Services 700,000 43,981 Loews 215,000 11,907 Marsh & McLennan 280,000 30,086 Progressive Corporation 160,000 23,888 230,431 Total Financials 865,677 HEALTH CARE 19.3% Biotechnology 1.4% Amgen * 300,000 16,930 MedImmune * 1,018,900 47,206 64,136 Health Care Equipment & Supplies 1.5% Baxter International 885,000 47,462 Waters Corporation * 601,000 23,289 70,751 Health Care Providers & Services 5.5% AmerisourceBergen 466,600 29,653 HCA 860,000 33,144 Laboratory Corporation of America * 223,800 18,094 UnitedHealth Group 1,634,400 115,667 Wellpoint Health Networks (Class A) * 520,000 60,762 257,320 Pharmaceuticals 10.9% Abbott Laboratories 775,000 43,206 Allergan 515,000 38,651 American Home Products 1,510,000 92,654 Bristol-Myers Squibb 409,600 20,890 Johnson & Johnson 1,330,000 78,603 Pfizer 3,730,000 148,640 Pharmacia 285,000 12,155 Sanofi-Synthelabo (EUR) 595,000 44,384 Schering-Plough 895,000 32,050 511,233 Total Health Care 903,440 INDUSTRIALS & BUSINESS SERVICES 13.6% Aerospace & Defense 0.5% Honeywell 681,800 23,058 23,058 Commercial Services & Supplies 7.8% Apollo (Class A) * 670,000 30,160 Automatic Data Processing 725,000 42,703 Cendant * 3,500,000 68,635 Concord EFS * 2,260,000 74,094 Convergys * 990,000 37,115 First Data 1,415,000 111,007 363,714 Industrial Conglomerates 5.3% GE 2,570,000 103,006 Hutchison Whampoa (HKD) 2,980,000 28,853 Tyco International 2,022,700 119,137 250,996 Total Industrials & Business Services 637,768 INFORMATION TECHNOLOGY 10.2% Communications Equipment 1.5% Cisco Systems * 2,155,000 39,038 Crown Castle * 2,386,100 25,483 Nokia ADR 300,000 7,359 71,880 Computers & Peripherals 0.6% Dell Computer * 950,000 25,807 25,807 Electronic Equipment & Instruments 1.2% Flextronics * 2,253,600 54,075 54,075 Internet Software & Services 0.7% VeriSign * 904,100 34,415 34,415 IT Consulting & Services 1.4% Affiliated Computer Services (Class A) * 411,700 43,694 Electronic Data Systems 290,000 19,879 63,573 Semiconductor Equipment & Products 1.9% Analog Devices * 370,000 16,425 Applied Materials * 260,000 10,427 Maxim Integrated Products * 522,600 27,439 Samsung Electronics (KRW) 161,500 34,435 88,726 Software 2.9% Electronic Arts * 416,800 24,989 Microsoft * 1,569,800 104,007 Siebel Systems * 330,000 9,237 138,233 Total Information Technology 476,709 TELECOMMUNICATION SERVICES 4.0% Diversified Telecommunication Services 0.7% WorldCom-WorldCom Group * 2,226,373 31,358 31,358 Wireless Telecommunication Services 3.3% China Mobile (Hong Kong) (HKD) * 100 0 China Unicom ADR * 1,187,000 13,259 NTT DoCoMo (JPY) 900 10,579 Sprint PCS * 1,753,900 42,813 Vodafone (GBP) 34,450,000 90,025 156,676 Total Telecommunication Services 188,034 UTILITIES 0.6% Gas Utilities 0.6% El Paso Corporation 610,000 27,212 Total Utilities 27,212 Total Miscellaneous Common Stocks 4.1% 194,315 Total Common Stocks (Cost 3,413,332) 4,517,509 MISCELLANEOUS PREFERRED STOCKS 0.3% Total Miscellaneous Preferred Stocks (Cost 15,298) 14,009 Short-Term Investments 3.0% Money Market Fund 3.0% T. Rowe Price Reserve Investment Fund, 2.43% # 141,192,480 141,193 Total Short-Term Investments (Cost 141,193) 141,193 Total Investments in Securities 99.7% of Net Assets (Cost 3,569,823) 4,672,711 Other Assets Less Liabilities 12,125 NET ASSETS $4,684,836 ---------- Net Assets Consist of: Undistributed net realized gain (loss) (352,889) Net unrealized gain (loss) 1,102,870 Paid-in-capital applicable to 193,751,086 shares of 1.00 par value capital stock outstanding; 200,000,000 shares authorized 3,934,855 NET ASSETS $4,684,836 ---------- NET ASSET VALUE PER SHARE Growth Stock shares (4,684,735,805/193,746,950 shares outstanding) $ 24.18 -------------- ----------- ---------- Growth Stock Advisor Class shares (100,000/4,136 shares outstanding) $ 24.18 ---------- # Seven-day yield * Non-income producing ADR American Depository Receipts REIT Real Estate Investment Trust CAD Canadian dollar EUR Euro GBP British pound HKD Hong Kong dollar JPY Japanese yen KRW South Korean won MXN Mexican peso The accompanying notes are an integral part of these financial statements. Statement of Operations In thousands Year Ended 12/31/01 Investment Income (Loss) Income Interest 10,546 Dividend 42,949 Total income 53,495 Expenses Investment management 27,400 Shareholder servicing 8,977 Custody and accounting 336 Prospectus and shareholder reports 195 Registration 47 Directors 24 Legal and audit 22 Proxy and annual meeting 18 Miscellaneous 31 Total expenses 37,050 Expenses paid indirectly (16) Net expenses 37,034 Net investment income (loss) 16,461 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (353,414) Written options 2,167 Foreign currency transactions (819) Net realized gain (loss) (352,066) Change in net unrealized gain (loss) Securities (206,230) Written options 281 Other assets and liabilities denominated in foreign currencies (33) Change in net unrealized gain (loss) (205,982) Net realized and unrealized gain (loss) (558,048) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS (541,587) -------- The accompanying notes are an integral part of these financial statements. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- Statement of Changes in Net Assets In thousands Year Ended 12/31/01 12/31/00 Increase (Decrease) in Net Assets Operations Net investment income (loss) 16,461 11,827 Net realized gain (loss) (352,066) 966,317 Change in net unrealized gain (loss) (205,982) (961,386) Increase (decrease) in net assets from operations (541,587) 16,758 Distributions to shareholders Net investment income Growth Stock shares (15,356) (11,688) Net realized gain Growth Stock shares (51,744) (1,048,157) Decrease in net asset from distributions (67,100) (1,059,845) Capital share transactions * Shares Sold Growth Stock shares 459,860 719,902 Growth Stock Advisor Class shares 100 -- Distributions reinvested Growth Stock shares 63,231 996,094 Shares redeemed Growth Stock shares (657,967) (916,941) Increase (decrease) in net assets from capital share transactions (134,776) 799,055 Net Assets Increase (decrease) during period (743,463) (244,032) Beginning of period 5,428,299 5,672,331 End of period 4,684,836 5,428,299 --------- --------- *Share information Shares sold Growth Stock shares 18,719 20,884 Growth Stock Advisor Class shares 4 -- Distributions reinvested Growth Stock shares 2,666 35,524 Shares redeemed Growth Stock shares (27,224) (27,290) Increase (decrease) in shares outstanding (5,835) 29,118 The accompanying notes are an integral part of these financial statements. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- December 31, 2001 Notes to Financial Statements -------------------------------------------------------------------------------- NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price Growth Stock Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The fund seeks to provide long-term capital growth and, secondarily, increasing dividend income through investments in the common stocks of well-established growth companies. The fund originally commenced operations on April 11, 1950, and on December 31, 2001, launched a second share class, Growth Stock Fund Advisor Class, at an initial net asset value per share of 24.18. Growth Stock Fund Advisor Class sells its shares only through financial intermediaries, which it compensates for distribution and certain administrative services under a Board-approved Rule 12b-1 plan. Each class has exclusive voting rights on matters related solely to that class, separate voting rights on matters that relate to both classes, and, in all other respects, the same rights and obligations as the other class. The accompanying financial statements were prepared in accordance with generally accepted accounting principles, which require the use of estimates made by fund management. Valuation Equity securities listed or regularly traded on a securities exchange are valued at the last quoted sales price at the time the valuations are made. A security 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 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. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. In the absence of a last sale price, written options are valued at the mean of the latest bid and asked prices. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. Currency Translation Assets and liabilities 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 offer prices of such currencies against U.S. dollars quoted by a major bank. 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. Class Accounting The Growth Stock Fund Advisor Class pays distribution and administrative expenses, in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% of the class's average net assets; no such fees were incurred during the year ended December 31, 2001. Shareholder servicing, prospectus, and shareholder report expenses are charged directly to the class to which they relate. Expenses common to both 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. Income distributions are declared and paid by each class on annual basis. Capital gain distributions are declared and paid by the fund on an annual basis. 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 net investment income and realized gains determined in accordance with generally accepted accounting principles. Expenses paid indirectly reflect credits earned on daily uninvested cash balances at the custodian and are used to reduce the fund's custody charges. 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. Options Call and put options give the holder the right to purchase or sell, respectively, a security at a specified price on a certain date. Risks arise from possible illiquidity of the options market and from movements in security values. Transactions in options written and related premiums received during the year ended December 31, 2001, were as follows: -------------------------------------------------------------------------------- Number of Contracts Premiums Outstanding at beginning of period 2,000 694,000 Written 10,500 2,477,000 Expired (2,000) (316,000) Closed (10,500) (2,855,000) Outstanding at end of period -- -- ----------------------------- Other Purchases and sales of portfolio securities, other than short-term securities, aggregated 2,958,295,000 and 3,057,747,000, respectively, for the year ended December 31, 2001. 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 to shareholders all of its taxable income and capital gains. Because federal income tax regulations differ from generally accepted accounting principles, income and capital gain distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements. Distributions during the year ended December 31, 2001 were characterized as follows for tax purposes: -------------------------------------------------------------------------------- Ordinary income 19,189,000 Long-term capital gain 47,911,000 Total distributions $67,100,000 ----------- The tax-basis components of net assets at December 31, 2001 were as follows: -------------------------------------------------------------------------------- Unrealized appreciation $1,303,160,000 Unrealized depreciation (200,452,000) Net unrealized appreciation (depreciation) 1,102,708,000 Capital loss carryforwards (352,727,000) Distributable earnings 749,981,000 Paid-in capital 3,934,855,000 Net assets $4,684,836,000 -------------- Pursuant to federal income tax regulations applicable to investment companies, 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. For the year ended December 31, 2001, 162,000 of realized capital losses reflected in the accompanying financial statements will not be recognized for federal income tax purposes until 2002. Further, the fund intends to retain realized capital gains that may be offset against available capital loss carryforwards for federal income tax purposes. As of December 31, 2001, the fund had 352,727,000 of capital loss carryforwards that expire in 2009. For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of permanent book/tax differences. For the year ended December 31, 2001, the fund recorded the following permanent reclassifications, which relate primarily to a tax practice that treats a portion of the proceeds from each redemption of capital shares as a distribution of taxable net investment income and/or realized capital gain. Results of operations and net assets were not affected by these reclassifications. -------------------------------------------------------------------------------- Undistributed net investment income (1,423,000) Undistributed net realized gain 60,000 Paid-in capital 1,363,000 At December 31, 2001, the cost of investments for federal income tax purposes was 3,569,985,000. 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. The investment management agreement between the fund and the manager provides for an annual investment management fee, of which 2,250,000 was payable at December 31, 2001. The fee is computed daily and paid monthly, and consists of an individual fund fee equal to 0.25% of average daily net assets and a group fee. The group fee is based on the combined assets of certain mutual funds sponsored by Price Associates (the group). The group fee rate ranges from 0.48% for the first 1 billion of assets to 0.295% for assets in excess of 120 billion. At December 31, 2001, and for the year then ended, the effective annual group fee rate was 0.32%. 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 Price Associates and two wholly owned subsidiaries of Price Associates, pursuant to which the fund receives certain other services. Price Associates computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc. is the fund's transfer and dividend disbursing agent and provides shareholder and administrative services to the fund. T. Rowe Price Retirement Plan Services, Inc. provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. The fund incurred expenses pursuant to these related party agreements totaling approximately 7,195,000 for the year ended December 31, 2001, of which 605,000 was payable at year end. Additionally, the fund is one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may invest. Spectrum does not invest in the underlying Price funds for the purpose of exercising management or control. Expenses associated with the operation of Spectrum 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 Spectrum, pursuant to special servicing agreements between and among Spectrum, the underlying Price funds, Price Associates, and, in the case of T. Rowe Price Spectrum International, T. Rowe Price International. For the year then ended, the fund was allocated 556,000 of Spectrum expenses, 86,000 of which was payable at year-end. At December 31, 2001, approximately 4% of the outstanding shares of the fund were held by Spectrum. The fund may invest in the T. Rowe Price Reserve Investment Fund and 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 only to mutual funds and other accounts managed by Price Associates and/or 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, 2001, totaled 10,515,000 and are reflected as interest income in the accompanying Statement of Operations. Report of Independent Accountants -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of T. Rowe Price Growth Stock Fund, Inc. In our opinion, the accompanying statement of net assets 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 Growth Stock Fund, Inc. (the "Fund") at December 31, 2001, 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 accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America, 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, 2001 by correspondence with custodians, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland January 18, 2002 T. Rowe Price Growth Stock Fund Tax Information (Unaudited) for the Tax Year Ended 12/31/01 -------------------------------------------------------------------------------- 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: o 3,833,000 from short-term capital gains, o 47,911,000 from long-term capital gains, subject to the 20% rate gains category. For corporate shareholders, 15,804,000 of the fund's distributed income and short-term capital gains qualified for the dividends-received deduction. T. Rowe Price Growth Stock Fund -------------------------------------------------------------------------------- Annual Meeting Results -------------------------------------------------------------------------------- The T. Rowe Price Growth Stock Fund held an annual meeting on October 23, 2001, to vote on two issues. The results of voting were as follows (by number of shares). 1. To elect an expanded slate of directors to increase the number of independent directors serving the fund: 2. To include in the Articles of Incorporation standard T. Rowe Price language authorizing the creation of different series and classes of shares, and to add other related provisions. M. David Testa Affirmative: 119,136,063.259 Withhold: 2,389,698.495 Total: 121,525,761.754 James A.C. Kennedy Affirmative: 118,949,813.690 Withhold: 2,575,948.064 Total: 121,525,761.754 Calvin W. Burnett Affirmative: 118,854,059.385 Withhold: 2,671,702.369 Total: 121,525,761.754 Anthony W. Deering Affirmative: 119,074,219.189 Withhold: 2,451,542.565 Total: 121,525,761.754 Donald W. Dick, Jr. Affirmative: 119,120,076.839 Withhold: 2,405,684.915 Total: 121,525,761.754 David K. Fagin Affirmative: 119,039,802.661 Withhold: 2,485,959.093 Total: 121,525,761.754 F. Pierce Linaweaver Affirmative: 119,034,736.299 Withhold: 2,491,025.455 Total: 121,525,761.754 Hanne M. Merriman Affirmative: 119,061,875.809 Withhold: 2,463,885.945 Total: 121,525,761.754 John G. Schreiber Affirmative: 119,075,629.654 Withhold: 2,450,132.100 Total: 21,525,761.754 Hubert D. Vos Affirmative: 118,932,284.050 Withhold: 2,593,477.704 Total: 121,525,761.754 Paul M. Wythes Affirmative: 119,046,534.104 Withhold: 2,479,227.650 Total: 121,525,761.754 James S. Riepe Affirmative: 119,048,077.286 Withhold: 2,477,684.468 Total: 121,525,761.754 Affirmative: 104,875,172.777 Against: 7,359,153.458 Abstain: 3,591,822.519 Broker Non-Votes: 5,699,613.000 Total: 121,525,761.754 Independent Directors -------------------------------------------------------------------------------- Calvin W. Director Elected President, 97 Provident Bank Burnett, 2001 Coppin State of Maryland Ph.D. College 100 East Pratt Street 3/16/32 -------------------------------------------------------------------------------- Anthony W. Director Elected Director, 97 The Rouse Deering 2001 Chairman of the Company 100 East Board, President, Pratt and Chief Street Executive 1/28/45 Officer, The Rouse Company, real estate developers -------------------------------------------------------------------------------- Donald W. Director Elected Principal, 97 Not Dick, Jr. 1980 EuroCapital Applicable 100 East Advisors, LLC, Pratt an acquisition Street and management 1/27/43 advisory firm -------------------------------------------------------------------------------- David K. Director Elected Director, 97 Dayton Mining Fagin 1994 Dayton Mining Corporation, 100 East Corporation Golden Star Pratt (6/98 to present), and Resources Street Golden Star Ltd., and 4/9/38 Resources Ltd., Canyon and Canyon Resources, Resources, Corp. Corp. (5/00 to present); Chairman and President, Nye Corporation -------------------------------------------------------------------------------- *Each director serves until election of a successor. Independent Directors (continued) -------------------------------------------------------------------------------- F. Pierce Director Elected President, 97 Not Linaweaver 2001 F. Pierce Applicable 100 East Linaweaver & Pratt Associates, Inc., Street consulting 8/22/34 environmental and civil engineers -------------------------------------------------------------------------------- Hanne M. Director Elected Retail 97 Ann Taylor Merriman 1994 Business Stores 100 East Consultant Corporation, Pratt Ameren Corp., Street Finlay 11/16/41 Enterprises, Inc., The Rouse Company, and US Airways Group, Inc. -------------------------------------------------------------------------------- John G. Director Elected Owner/President, 97 AMLI Schreiber 2001 Centaur Capital Residential 100 East Partners, Inc., Properties Pratt a real estate Trust, Street investment Host Marriott 10/21/46 company; Corporation, Senior Advisor and and Partner, The Rouse Blackstone Real Company, real Estate Advisors, estate L.P. developers -------------------------------------------------------------------------------- Hubert D. Director Elected Owner/President, 97 Not Vos 1994 Stonington Applicable 100 East Capital Pratt Corporation, a Street private 8/2/33 investment company -------------------------------------------------------------------------------- Paul M. Director Elected Founding 97 Teltone Wythes 1994 Partner Corporation 100 East of Sutter Pratt Hill Ventures, Street a venture 6/23/33 capital limited partnership, providing equity capital to young high technology companies throughout the United States -------------------------------------------------------------------------------- *Each director serves until election of a successor. Inside Directors -------------------------------------------------------------------------------- Number of Portfolios Term of in Fund Name, Office* Principal Complex Other Address, Position(s) and Length Occupation(s) Overseen Directorships and Date Held With of Time During Past by Held by of Birth Fund Served 5 Years Director Director -------------------------------------------------------------------------------- James A.C. Director Elected Managing 32 Not Kennedy 1997 Director Applicable 100 East and Director, Pratt T. Rowe Price Street and T. Rowe 8/15/53 Price Group, Inc. -------------------------------------------------------------------------------- James S. Director Elected Vice Chairman 82 Not Riepe 1982 of the Board, Applicable Pratt Director and Street Managing Director, 6/25/43 T. Rowe Price Group, Inc.; Director and Managing Director, T. Rowe Price; Chairman of the Board and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc. -------------------------------------------------------------------------------- M. David Director Elected Vice Chairman 97 Not Testa 1984 of the Board, Applicable Pratt Chief Investment Street Officer, Director, 4/22/44 and Managing Director, T. Rowe Price Group, Inc.; Chief Investment Officer, Director, and Managing Director, T. Rowe Price; Vice President and Director, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc. -------------------------------------------------------------------------------- *Each director serves until election of a successor. KNOWLEDGEABLE SERVICE REPRESENTATIVES By Phone 1-800-225-5132. Available Monday through Friday from 7 a.m. until midnight ET and weekends from 8:30 a.m. until 5 p.m. ET. In Person. Available in T. Rowe Price Investor Centers. Please call a service representative at 1-800-225-5132 or visit the Web at www.troweprice.com/investorcenter to locate a center near you. ACCOUNT SERVICES Automated 24-Hour Services Including Tele*Access(registered trademark) and Account Access through the T. Rowe Price Web site on the Internet. Address: www.troweprice.com. Automatic Investing. From your bank account or paycheck. Automatic Withdrawal. Scheduled, automatic redemptions. IRA Rebalancing. Ensuring that your accounts reflect your desired asset allocation. BROKERAGE SERVICES * Individual Investments. Stocks, bonds, options, precious metals, and other securities at a savings over full-service commission rates. INVESTMENT INFORMATION Consolidated Statement. Overview of all of your accounts. Shareholder Reports. Manager reviews of their strategies and results. T. Rowe Price Report. Quarterly investment newsletter. Performance Update. Quarterly review of all T. Rowe Price fund results. Insights. Educational reports on investment strategies and markets. Investment Guides. Asset Mix Worksheet, Diversifying Overseas: A Guide to International Investing, Retirement Planning Kit, Retirement Readiness Guide, and Tax Considerations Guide. * T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC. T. Rowe Price Planning Tools and Services T. Rowe Price offers unique retirement resources that can help you meet a broad variety of planning challenges. Our retirement tools are suitable for individuals, the self-employed, small businesses, corporations, and nonprofit organizations. We also provide recordkeeping, communications, and investment management services. For more information, call us at 1-800-IRA-5000, or visit our Web site at www.troweprice.com. PLANNING TOOLS AND SERVICES T. Rowe Price(registered trademark) Retirement Income Manager helps retirees or those within two years of retirement determine how much income they can draw down in retirement. The program uses extensive statistical analysis and the input of a T. Rowe Price Advisory Counselor to suggest an income plan that best meets your objectives. Retirement Income Calculator. This free calculator, incorporating the analytic approach of the T. Rowe Price Retirement Income Manager program, simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. Rollover Investment Service offers asset allocation and fund selection advice to those planning a 401(k) rollover from a previous employer after changing jobs or retiring. IRA Rebalancing Service. T. Rowe Price will rebalance your IRA at the end of every quarter by exchanging shares between mutual fund accounts. This ensures that your accounts reflect your desired asset allocation. Quality Information. Thousands of investors have made their personal choices with the help of our Retirement Readiness Guide, Retirement Planning Kit, IRA Insights, and Retirement Planning Worksheet. INVESTMENT VEHICLES Individual Retirement Accounts (IRAs) No-Load Variable Annuities Small Business Retirement Plans T. Rowe Price Retirement Services T. Rowe Price Web Services www.troweprice.com ACCOUNT INFORMATION Account Access allows you to access, in a secure environment, all of your T. Rowe Price mutual fund, brokerage, variable annuity, and workplace retirement accounts with a single login. AccountMinder is a personal page, with one password, that gives you access to all your online financial information and other records from the secure T. Rowe Price Account Access site. FINANCIAL TOOLS AND CALCULATORS College Planning Calculator. This application allows you to determine simultaneously the college costs for as many as five children. Portfolio Spotlight. This powerful tool provides investors with a clear picture of how all their investments fit together by sector and asset class. Investment Strategy Planner. This planning tool can help you develop and implement an asset allocation strategy that's appropriate for your needs. Retirement Income Calculator. This free calculator simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. INVESTMENT TRACKING AND INFORMATION My TRP e-Updates. This free e-mail service offers timely market reports, important information about investing, and the latest updates on the T. Rowe Price funds and services. Watchlist Pro. Powered by SmartMoney, this tool allows investors to easily track personalized lists of securities and other financial information. Portfolio Tracker. Powered by SmartMoney, this tool helps investors monitor the performance of their mutual fund and equity holdings. Portfolio Review. This convenient, four-step planning tool is designed to help you see where you stand now and whether your investments are on the right track for the future. T. Rowe Price College Planning College Planning With the costs of college steadily increasing, it's critical to plan early for this financial event. Our educational investment vehicles and information can help you lay the foundation for the future of your loved ones. For more information or to request a kit, call us at 1-800-638-5660, or visit our Web site at www.troweprice.com. T. Rowe Price College Savings Plan. This national "529" plan is sponsored by the Alaska Trust and designed to help families prepare for college education costs. The Plan, which is open to any U.S. resident, allows participants to invest up to a maximum account balance of 250,000 for a child's education. With systematic investing, you can invest as little as 50 per month. In addition, assets grow tax-deferred and are free of federal income taxes when used for qualified educational expenses (effective January 1, 2002). We also offer two additional college savings plans, including the Maryland College Investment Plan and the University of Alaska College Savings Plan, both of which offer federal tax-deferred growth and benefits for state residents. Education Savings Accounts (formerly Education IRAs). This education investment account allows individuals to invest a total of 2,000 per year per beneficiary to pay for educational costs at eligible schools including elementary, secondary, and post-secondary institutions (effective January 1, 2002). Withdrawals from Education Savings Accounts are tax-free if the proceeds are used for qualifying educational expenses. College Planning Calculator. This Web-based application allows you to determine simultaneously the college costs for as many as five children. The calculator is also connected with a database that lets you select specific schools with actual costs of tuition and room and board. College Planning Basics. This Insights report offers a college cost worksheet and describes the options available to individuals planning for college. T. Rowe Price Advisory Services Advisory Services If you are looking for professional investment advisory services with a personal touch, T. Rowe Price offers tools to help you make informed investing decisions and take control of your financial future. The T. Rowe Price(registered trademark) Retirement Income Manager helps retirees or those within two years of retirement determine how much income they can take in retirement. The program uses extensive statistical analysis and the input of financial planning professionals to suggest an income plan that best meets your objectives. Rollover Investment Service offers asset allocation advice to those planning a major change in their qualified retirement plans, such as a 401(k) rollover from a previous employer or an IRA transfer. T. Rowe Price Investment Checkup(registered trademark) offers a second opinion on your portfolio. We analyze your investments using proprietary software and provide asset allocation suggestions based on your personal profile. Retirement Income Calculator. This free calculator, incorporating the analytic approach of the T. Rowe Price Retirement Income Manager program, simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. Portfolio Spotlight. This powerful tool provides you with a clear picture of how all your investments fit together. After you provide the number of shares or dollar values of your stock, mutual fund, and annuity holdings, Portfolio Spotlight will show you a detailed summary of your current holdings by sector and asset class. Minimum Required Distribution (MRD) Guide. This guide discusses the potential effects of your MRD elections on your income, and includes a worksheet to help you make the MRD selections most appropriate for your retirement goals. T. Rowe Price Brokerage Services -------------------------------------------------------------------------------- Brokerage Services T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC. T. Rowe Price Brokerage provides high-quality services and financial tools you can use to manage your investments effectively and conveniently. We also offer commission savings over full-service brokerages on a number of transactions. Asset Manager Account. This premium relationship account is designed for investors with higher balances who seek to manage all of their investments through a single account. AMA clients also enjoy unlimited checking and VISA Gold ATM & Check Cards. Mutual Fund Gateway. This service lets you invest in more than 100 prominent no-load fund families using a single account. Margins and Options Trading for qualified investors. Online Account Access. This service lets you access your Brokerage account, place stock, option, and mutual fund orders, create personal watch lists, and get real-time quotes over the Internet. Customers can enjoy low flat-rate commissions of 19.95 on stock trades.* Tele-Trader. This automated, 24-hour trading service allows you to enter stock and option orders, access real-time quotes, and hear a report of your account balances. You can also create a quote list for your selected securities. Online Research and News.** Company news, stock information, and interactive charting available 24 hours a day, provided by Thomson Financial Services. * 19.95 per trade for up to 1,000 shares, plus 0.02 per share thereafter. ** The information provided through these services is prepared by independent investment research companies that are not affiliated with T. Rowe Price. While the information provided is deemed reliable, neither T. Rowe Price Brokerage nor the information providers guarantee the accuracy or completeness of the information or make any warranties with regard to the results obtained from its use. T. Rowe Price Mutual Funds -------------------------------------------------------------------------------- STOCK FUNDS Domestic Blue Chip Growth* Capital Appreciation Capital Opportunity Developing Technologies 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 Tax-Efficient Growth Tax-Efficient Multi-Cap Growth Total Equity Market Index Value* BLENDED ASSET FUNDS Balanced Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Tax-Efficient Balanced BOND FUNDS Domestic Taxable Corporate Income GNMA High Yield* New Income Short-Term Bond Spectrum Income Summit GNMA U.S. Bond Index U.S. Treasury Intermediate U.S. Treasury Long-Term Domestic Tax-Free California Tax-Free Bond Florida 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 Intermediate Bond Tax-Free Short-Intermediate Virginia Tax-Free Bond MONEY MARKET FUNDS! Taxable Prime Reserve Summit Cash Reserves U.S. Treasury Money Tax-Free California Tax-Free Money Maryland Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money INTERNATIONAL/GLOBAL FUNDS Stock Emerging Europe & Mediterranean Emerging Markets Stock European Stock Global Stock Global Technology International Discovery** International Equity Index International Growth & Income International Stock* Japan Latin America New Asia Spectrum International Bond Emerging Markets Bond International Bond* For more information about T. Rowe Price funds or services, please contact us directly at 1-800-225-5132. * T. Rowe Price Advisor Class available for these funds. The T. Rowe Price Advisor Class is offered only through financial intermediaries. For more information about T. Rowe Price Advisor Class funds, contact your financial professional or T. Rowe Price at 1-877-804-2315. ** Closed to new investors. ! Investments in the funds are not insured or guaranteed by the FDIC or any other government agency. Although the funds seek to preserve the value of your investment at 1.00 per share, it is possible to lose money by investing in the funds. Please call for a prospectus, which contains complete information, including risks, fees, and expenses. Read it carefully before investing. T. Rowe Price Invest with Confidence (registered trademark) T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 F40-050 12/31/01