SemiAnnual Report
For yield, price, last transaction, and current balance, 24 hours,
7 days a week, call:
1-800-638-2587 toll free
625-7676 Baltimore area
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Capital
Appreciation Fund.
T. Rowe Price
Capital Appreciation
Fund
June 30, 1995
T. Rowe Price
Invest With Confidence (registered trademark)
CAF
Fellow Shareholders
We ate some dust, but continued to make good progress on the investment
performance road during the first six months of 1995. Our individual security
selection and risk avoidance strategy remained rewarding although our cautious
asset allocation and the market's love affair with technology meant that some
other funds had better results. Your fund's primary objective, to make money
and minimize losses during the market's inevitable weak periods, continues to
be met.
Performance Comparison
Periods Ended 6/30/95
_________________________
3 Months 6 Months
_________________________
Capital Appreciation Fund 6.4% 13.0%
S&P 500* 9.6 20.2
Lipper Capital Appreciation
Fund Average 9.2 16.6
*Unmanaged
Market Environment
The stock market surged to record levels during the second quarter, and the
bond market, which had suffered through a dismal 1994, rebounded strongly. As
is often the case, this performance was inspired less by actual events than by
a change in investor perceptions about the future. Six months ago, the Federal
Reserve was expected to continue its steady monetary tightening, whereas
during the past quarter, a mild stimulus was anticipated.
In fact, the Fed did ease a bit in early July. Thus, not only has the
likelihood of a severe recession diminished with this policy shift, but it now
seems likely that if a recession is avoided over the next six months, it may
not occur at all before the 1996 election. (You may detect a faint note of
cynicism.) The ability of economists to predict, much less manage, the U.S.
economy has always been suspect, in my view, but Fed Chairman Alan Greenspan
seems to be doing better than most.
The stock market was dominated by red-hot technology stocks. The
semiconductor group, for example, followed a strong first quarter with a
mind-numbing 46% gain in the second. Investors were rightly attracted to such
results and poured money into mutual funds specializing in the technology
sector. This cash flow further boosted performance. Unfortunately, all this
excitement pretty much passed us by. As one who barely understands
electricity, there's no way I'd venture very far into the Oz of gee-whiz
products, which, in any case, seldom meet our value-based criteria. We like to
buy out-of-favor securities with good potential and, we hope, much less risk.
Portfolio Highlights
The fund's positive results continued to be helped by the absence of
significant "losers." The 10 best and worst contributors table following this
letter makes pleasant reading in this regard. The small lacerations your fund
suffered, particularly in the natural resource area, seem no more than the
modest fluctuations that are always taking place in stock prices.
On the other hand, we had some significant winners. Student Loan
Marketing (Sallie Mae), for example, generated gains that offset the total of
all losing positions for the first six months. We purchased this stock as well
as Loews and Philip Morris when many investors were focusing on their
problems. As concerns subsided, their share prices rebounded. Other top
contributors, Manville, Weyerhaeuser, and PHH, continued to enhance fund
performance as the companies prospered.
The biggest disappointment this year was the sale with only a modest
profit of Rockefeller Center Property bonds. This had been one of the fund's
largest positions and appeared to have good appreciation potential with
limited risk. Unfortunately, the march of events was worse than we
anticipated. Pressure on New York City real estate and unexpected actions by
affiliated parties finally caused us to preempt a possible loss. May all our
disappointments end as benignly!
Chart1 - Security Diversification chart here
As a result of our transactions during the quarter, assets committed to
common stocks increased from 49% on March 31 to 52%, convertibles dropped one
percentage point, and reserves fell from 24% of total assets to 22%.
Outlook
We continue to believe that caution toward the broad stock market is sensible
given today's investment environment. We see one positive factor-continued
economic growth and the accompanying increase in corporate earnings; one
neutral factor-interest rates, which are unlikely to fall much further; and
one negative factor-stock valuation levels, particularly dividend yields,
which are disturbingly low. We try not to overanalyze these "macro" factors,
since all are dynamic and often cancel each other out. Nevertheless, in our
current reading of these signals, the caution light predominates over the
green or red.
The most compelling lesson we draw from financial history is the superior
long-term returns generated by stocks versus money market securities and
bonds. But the stock market can suffer periodic debilitating losses, and
investors are wont to bail out during such times. Since major stock gains also
tend to occur in concentrated time periods, exiting the market increases the
chance of not being exposed to significant upward moves. By managing your fund
to try to cushion the effects of these inevitable downturns, we hope you will
feel more comfortable about remaining committed to the market and your
long-term financial goals.
In hindsight, we would probably have done better with a more aggressive
investment posture these past six months, but the next six months may be an
entirely different story. Our approach, which blends caution regarding the big
picture with a ceaseless search for attractively priced individual securities,
has served the fund well in the past, and we will stick with it.
Respectfully submitted,
Richard P. Howard
President and Chairman of
the Investment Advisory
Committee
July 19, 1995
Twenty-Five Largest Holdings
June 30, 1995
Percent of
Company Net Assets
___________________________________________ _____________
Automatic Data Processing 4.8%
Manville 3.5
Centerior Energy/Cleveland Electric 3.1
Entergy 3.0
Loews 2.8
Kemper 2.3
New York Times 2.3
Sallie Mae 2.2
Philip Morris 2.1
Genentech 2.0
Petrie Stores 2.0
Newmont Mining 1.8
Washington Post 1.8
Toys "R" Us 1.7
Texaco 1.7
Weyerhaeuser 1.6
Rouse 1.5
Price 1.5
PHH 1.5
Polaroid 1.4
American Express 1.3
Delta 1.2
CIGNA 1.2
Public Service of New Mexico 1.1
Chris-Craft Industries 1.0
________________________________________________________________
Total 50.4%
Average Annual Compound Total Return
Periods ended June 30, 1995
Since Inception
1 Year 5 Years 6/30/86
_________ ________ _________________
17.92% 11.85% 13.01%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
Performance Contributions /
Industry Sectors
Six Months Ended June 30, 1995
Cents-Per-Share Percent of
Sector Contribution Net Assets
________________________ _______________ ____________
Basic Materials 4(cents) 3%
Business Services and
Transportation 15 9
Capital Equipment 1 0
Consumer Cyclicals 17 7
Consumer Nondurables 16 6
Consumer Services 12 13
Energy 7 7
Financial 34 13
Process Industries 12 4
Technology 5 2
Utilities 12 9
U.S. Governments/Options 1 2
Total 136 75
Miscellaneous 0 3
Reserves and Income 21 22
________________________________________________________________
Total Portfolio 157(cents) 100%
Contributions to the Change in Net Asset Value Per Share
T. Rowe Price Capital Appreciation Fund
Three Months Ended June 30, 1995
TEN BEST CONTRIBUTORS
Sallie Mae 9(cents)
Manville 8
Loews 7
Entergy 5
Weyerhaeuser 4
Philip Morris 4
PHH 4
Polaroid 3
Delta 3
Toys "R" Us 3
________________________________________________________________
Total 50(cents)
TEN WORST CONTRIBUTORS
Intuit* - 1(cents)
Homestake Mining 1
Atlantic Richfield 1
Union Texas Petroleum 1
Teledyne 1
Murphy Oil 1
Newmont Mining 0
Texaco 0
Great Lakes Chemical 0
Unitrin 0
________________________________________________________________
Total - 6(cents)
*Position eliminated
Six Months Ended June 30, 1995
________________________________________________________________
TEN BEST CONTRIBUTORS
Sallie Mae 11(cents)
Loews 11
Manville 9
Philip Morris 7
Delta 7
PHH 5
Weyerhaeuser 4
Polaroid 4
Automatic Data Processing 4
Champion International 4
________________________________________________________________
Total 66(cents)
TEN WORST CONTRIBUTORS
________________________________________________________________
Toys "R" Us - 4(cents)
Overseas Shipholding Group 1
Reebok* 1
Tandy 1
Murphy Oil 0
Chemical Waste Management 0
Intuit 0
Fund American Enterprises 0
Noram Energy 0
Ranger Oil Limited 0
________________________________________________________________
Total - 7(cents)
Statement of Net Assets
T. Rowe Price Capital Appreciation Fund / June 30, 1995 (Unaudited)
(values in thousands)
Common Stocks - 51.6%
FINANCIAL - 9.8%
Value
_______
INSURANCE - 5.3%
55,000 shs. * Fund American Enterprises . . . . . . . $ 3,926
200,000 Kemper. . . . . . . . . . . . . . . . . 9,325
180,000 Loews . . . . . . . . . . . . . . . . . 21,780
135,000 Unitrin . . . . . . . . . . . . . . . . 6,412
41,443
FINANCIAL SERVICES - 4.4%
275,000 American Express. . . . . . . . . . . . 9,659
75,000 Fannie Mae. . . . . . . . . . . . . . . 7,078
365,000 Sallie Mae. . . . . . . . . . . . . . . 17,110
33,847
BANK & TRUST - 0.1%
100 Bank for International
Settlements, (CHF). . . . . . . . . . 881
Total Financial 76,171
UTILITIES - 6.3%
ELECTRIC UTILITIES - 6.3%
900,000 Centerior Energy. . . . . . . . . . . . 8,662
959,200 Entergy . . . . . . . . . . . . . . . . 23,141
325,000 Niagara Mohawk. . . . . . . . . . . . . 4,794
595,000 * Public Service of New Mexico. . . . . . 8,479
240,000 SCEcorp . . . . . . . . . . . . . . . . 4,110
Total Utilities 49,186
CONSUMER NONDURABLES - 6.2%
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT - 0.0%
8,100 *! Lynx Therapeutics . . . . . . . . . . 2
PHARMACEUTICALS - 4.1%
85,000 Eli Lilly . . . . . . . . . . . . . . . 6,672
315,000 * Genentech . . . . . . . . . . . . . . . 15,317
120,000 Schering-Plough . . . . . . . . . . . . 5,295
130,000 Upjohn. . . . . . . . . . . . . . . . . 4,924
32,208
MISCELLANEOUS CONSUMER PRODUCTS - 2.1%
220,000 Philip Morris . . . . . . . . . . . . . 16,362
Total Consumer Nondurables 48,572
CONSUMER SERVICES - 10.0%
GENERAL MERCHANDISERS - 0.5%
173,000 shs. * Hills Stores. . . . . . . . . . . . . . $ 4,152
SPECIALTY MERCHANDISERS - 3.5%
2,267,790 Petrie Stores . . . . . . . . . . . . . 15,308
421,895 * Toys "R" Us . . . . . . . . . . . . . . 12,340
27,648
MEDIA & COMMUNICATIONS - 6.0%
223,519 * Chris-Craft Industries. . . . . . . . . 7,823
172,000 Meredith. . . . . . . . . . . . . . . . 4,365
750,000 New York Times (Class A). . . . . . . . 17,625
120,000 Times Mirror (Class A). . . . . . . . . 2,865
53,000 Washington Post (Class B) . . . . . . . 13,833
46,511
Total Consumer Services 78,311
CONSUMER CYCLICALS - 1.4%
MISCELLANEOUS CONSUMER DURABLES - 1.4%
275,000 Polaroid. . . . . . . . . . . . . . . . 11,206
Total Consumer Cyclicals 11,206
TECHNOLOGY - 1.0%
AEROSPACE & DEFENSE - 1.0%
50,000 Litton Industries . . . . . . . . . . . 1,844
255,000 Teledyne. . . . . . . . . . . . . . . . 6,247
Total Technology 8,091
BUSINESS SERVICES & TRANSPORTATION - 2.5%
TRANSPORTATION SERVICES - 2.5%
235,000 Overseas Shipholding Group. . . . . . . 4,876
255,000 PHH . . . . . . . . . . . . . . . . . . 11,348
120,000 Ryder System. . . . . . . . . . . . . . 2,865
Total Business Services & Transportation 19,089
ENERGY - 7.0%
INTEGRATED PETROLEUM - DOMESTIC - 4.8%
95,000 Atlantic Richfield. . . . . . . . . . . 10,426
36,000 Kerr-McGee. . . . . . . . . . . . . . . 1,930
185,000 Murphy Oil. . . . . . . . . . . . . . . 7,585
340,000 * Oryx Energy . . . . . . . . . . . . . . 4,675
101,000 Pennzoil. . . . . . . . . . . . . . . . 4,760
50,000 Sun Company . . . . . . . . . . . . . . 1,369
245,000 Union Texas Petroleum . . . . . . . . . 5,175
70,000 Unocal. . . . . . . . . . . . . . . . . 1,934
37,854
INTEGRATED PETROLEUM -
INTERNATIONAL - 1.7%
200,000 shs. Texaco. . . . . . . . . . . . . . . . . $ 13,125
ENERGY SERVICES - 0.5%
130,000 Helmerich & Payne . . . . . . . . . . . 3,835
Total Energy 54,814
PROCESS INDUSTRIES - 4.0%
DIVERSIFIED CHEMICALS - 0.1%
23,000 Cabot . . . . . . . . . . . . . . . . . 1,213
FOREST PRODUCTS - 1.6%
260,000 Weyerhaeuser. . . . . . . . . . . . . . 12,253
BUILDING & CONSTRUCTION - 1.5%
862,100 * Manville. . . . . . . . . . . . . . . . 11,854
SPECIALTY CHEMICALS - 0.8%
100,000 Great Lakes Chemical. . . . . . . . . . 6,025
Total Process Industries 31,345
BASIC MATERIALS - 2.0%
MINING - 2.0%
300,000 Homestake Mining. . . . . . . . . . . . 4,950
230,000 Newmont Mining. . . . . . . . . . . . . 9,631
68,000 Santa Fe Pacific Gold . . . . . . . . . 825
Total Basic Materials 15,406
Miscellaneous Common Stocks - 1.4% 10,554
Total Common Stocks (Cost - $341,027) 402,745
Preferred Stocks - 4.1%
7,000 Cleveland Electric, $1.88, Adj.,
Series L. . . . . . . . . . . . . . . 497
10,700 Cleveland Electric, $90,
Series S. . . . . . . . . . . . . . . 9,202
6,525 Cleveland Electric, 8.80%,
Series R. . . . . . . . . . . . . . . 5,579
210,700 Gulf Canada Resources, Adj.,
Series 1. . . . . . . . . . . . . . . 593
42,981 Gulf States Utilities, Adj.,
Series B. . . . . . . . . . . . . . . 2,119
550,000 Manville, $2.70, Cum., Series B . . . . 13,750
31,740
Miscellaneous Preferred Stocks 81
Total Preferred Stocks (Cost - $27,288) 31,821
Convertible Preferred Stocks - 1.9%
3,000 shs. GATX, $3.875, Series A. . . . . . . . . $ 168
182,000 Kemper, 144a, Series E. . . . . . . . . 8,930
80,000 Newmont Mining, 144a, $2.75 . . . . . . 4,670
25,000 Rouse, 6.5%, Series A . . . . . . . . . 1,275
Total Convertible Preferred Stocks
(Cost - $14,168) 15,043
Convertible Bonds - 17.5%
$84,000,000 Automatic Data Processing,
LYONS, Zero Coupon,
2/20/12 . . . . . . . . . . . . . . . 37,170
5,000,000 Champion International,
Sub. Deb., 6.50%, 4/15/11 . . . . . . 7,406
4,400,000 Chubb, 6.00%, 5/15/98 . . . . . . . . . 4,538
8,000,000 CIGNA, Sub. Deb.,
8.20%, 7/10/10. . . . . . . . . . . . 9,215
5,200,000 Comcast, 3.375%, 9/9/05 . . . . . . . . 4,914
2,378,000 Cooper Industries,
7.05%, 1/1/15 . . . . . . . . . . . . 2,461
10,000,000 Delta, Sub. Deb.,
3.23%, 6/15/03. . . . . . . . . . . . 9,537
1,600,000 Federated Department Stores,
9.72%, 2/15/04. . . . . . . . . . . . 1,617
2,000,000 Homestake Mining, Sub. Deb.
(144a), 5.50%, 6/23/00. . . . . . . . 1,965
19,186,685 FRF IBM, 5.75%, 1/1/98. . . . . . . . . . . 5,521
4,500,000 International Paper,
Sub. Deb., 5.75%, 9/23/02 . . . . . . 5,459
5,500,000 Potomac Electric Power,
Deb., 5.00%, 9/1/02 . . . . . . . . . 4,806
6,825,000 Price Company, Sub. Deb.,
5.50%, 2/28/12. . . . . . . . . . . . 6,398
5,000,000 Price Company, Sub. Deb.,
6.75%, 3/1/01 . . . . . . . . . . . . 4,950
1,000,000 * Rockefeller Center, Euro.
Deb., 13.00%, 12/31/00. . . . . . . . 1,023
11,800,000 Rouse, Sub. Deb.,
5.75%, 7/23/02. . . . . . . . . . . . 10,738
10,000,000 U.S. West, LYONS,
Zero Coupon, 6/25/11. . . . . . . . . 3,219
4,685,000 WMX Technologies, Sub. Deb.,
2.00%, 1/24/05. . . . . . . . . . . . 3,941
124,878
Miscellaneous Convertible Bonds 11,414
Total Convertible Bonds (Cost - $123,491) 136,292
Corporate Bonds - 0.2%
$1,889,000 Manville, Def. Sub. Deb.,
Zero Coupon, 12/31/03 . . . . . . . . $ 1,889
Total Corporate Bonds (Cost - $1,593) 1,889
U.S. Government Obligations/
Agencies - 4.4%
U.S. Treasury Notes,
7,500,000 4.25%, 12/31/95-5/15/96 . . . . . . . . 7,435
7,000,000 4.625%, 8/15/95-2/29/96 . . . . . . . . 6,958
2,500,000 5.125%, 11/15/95. . . . . . . . . . . . 2,494
9,000,000 5.75%, 10/31/97 . . . . . . . . . . . . 8,975
8,000,000 7.375%, 11/15/97. . . . . . . . . . . . 8,260
Total U.S. Government Obligations/Agencies
(Cost - $33,708) 34,122
Index Notes - 0.1%
75,000 * Republic of Austria, 8/15/96. . . . . . 1,163
Total Index Notes (Cost - $780) 1,163
Options Purchased - 0.2%
300 shs. * American Express "B" Put,
10/21/95 @ $40.00 . . . . . . . . . . 146
400 * Champion International "B"
Put, 12/16/95 @ $50.00. . . . . . . . 95
400 * Champion International "B"
Put, 12/16/95 @ $55.00. . . . . . . . 210
70 * Champion International "B"
Put, 9/16/95 @ $45.00 . . . . . . . . 0
120 * Kerr McGee "B" Put,
10/21/95 @ $55.00 . . . . . . . . . . 29
120 * Kerr McGee "B" Put,
10/21/95 @ $60.00 . . . . . . . . . . 75
90 * Pennzoil "B" Put,
10/21/95 @ $55.00 . . . . . . . . . . 70
110 * Teledyne "B" Put,
10/21/95 @ $30.00 . . . . . . . . . . 61
910 * Toys "R" Us Put,
12/16/95 @ $25.00 . . . . . . . . . . 57
2,100 * Toys "R" Us Put,
12/16/95 @ $30.00 . . . . . . . . . . 499
350 * Toys "R" Us Put,
9/16/95 @ $25.00. . . . . . . . . . . 9
2,170 * Toys "R" Us Put,
9/16/95 @ $30.00. . . . . . . . . . . 434
1,685
Miscellaneous Options Purchased $ 18
Total Options Purchased (Cost - $3,112) 1,703
Short-Term Investments - 20.4%
BANK NOTES - 1.3%
$ 10,000,000 Fifth Third Bank,
6.21%, 10/27/95 . . . . . . . . . . . 10,002
CERTIFICATES OF DEPOSIT - 5.1%
10,000,000 Commerzbank, 6.12%, 8/14/95 . . . . . . 10,002
10,000,000 National Westminster Bank,
6.09%, 7/28/95. . . . . . . . . . . . 10,002
10,000,000 Swiss Bank, 6.01%, 7/21/95. . . . . . . 10,000
10,000,000 Toronto Dominion Bank,
6.04%, 8/22/95. . . . . . . . . . . . 10,000
40,004
COMMERCIAL PAPER - 13.4%
15,000,000 B.A.T. Capital, 5.95 -
5.97%, 7/17 - 7/20/95 . . . . . . . . 14,921
5,000,000 Caisse des Depots et
Consignations, 4(2),
6.03%, 7/17/95. . . . . . . . . . . . 4,924
49,000 Cargill Financial Services,
6.10%, 7/3/95 . . . . . . . . . . . . 49
10,000,000 Dean Witter Discover &
Company, 5.96%, 7/24/95 . . . . . . . 9,949
10,000,000 Dover, 4(2), 5.98%, 7/6/95. . . . . . . 9,955
10,000,000 Falcon Asset Securitization,
5.97%, 7/13/95. . . . . . . . . . . . 9,929
10,000,000 Fleet Mortgage Group,
6.00%, 7/21/95. . . . . . . . . . . . 9,950
10,000,000 New Center Asset Trust,
6.05%, 7/6/95 . . . . . . . . . . . . 9,857
10,000,000 Raytheon, 4(2), 6.00%, 7/6/95 . . . . . 9,978
10,000,000 Statoil (Den Norske Stats
Oljeselskap),
5.96%, 7/11/95. . . . . . . . . . . . 9,952
10,000,000 U.S. West Capital Funding,
4(2), 5.70%, 9/5/95 . . . . . . . . . 9,850
5,100,000 UBS Finance (Delaware),
6.25%, 7/3/95 . . . . . . . . . . . . 5,097
104,411
MEDIUM-TERM NOTES - 0.6%
5,000,000 Morgan Stanley Group, VR,
6.213%, 7/13/95 . . . . . . . . . . . 5,004
Total Short-Term Investments (Cost - $159,421) 159,421
T. Rowe Price Capital Appreciation Fund / Statement of Net Assets
(Unaudited)
Total Investments in Securities - 100.4% of Net Assets
(Cost - $704,588) $784,199
Other Assets Less Liabilities . . . . . . . . . . . . . . . . (3,325)
________
Net Assets Consist of: Value
________
Accumulated net investment income -
net of distributions . . . . . . . . . . . . $ 12,756
Accumulated net realized gain/loss -
net of distributions . . . . . . . . . . . . 26,976
Net unrealized gain (loss) . . . . . . . . . 79,628
Paid-in-capital applicable to 57,131,678
no par value shares of beneficial interest;
unlimited number of shares
authorized . . . . . . . . . . . . . . . . 661,514
________
NET ASSETS . . . . . . . . . . . . . . . . . $780,874
________
________
NET ASSET VALUE PER SHARE. . . . . . . . . . $13.67
______
______
* Non-income producing
! Securities contain some restrictions as to public resale-total of such
securities at period-end amounts to 0.0% of net assets.
VR Variable rate
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers-total of such securities at period-end amounts to
2.0% of net assets.
CHF Swiss franc
FRF French franc
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Capital Appreciation Fund/Six Months Ended June 30, 1995
(Unaudited)
(in thousands)
INVESTMENT INCOME
Income
Interest. . . . . . . . . . . . . . . . . . . . . . . $ 8,997
Dividend . . . . . . . . . . . . . . . . . . . . . . 7,065
________
Total income. . . . . . . . . . . . . . . . . . . . . 16,062
________
Expenses
Investment management . . . . . . . . . . . . . . . . 2,508
Shareholder servicing . . . . . . . . . . . . . . . . 1,039
Custodian and accounting. . . . . . . . . . . . . . . 87
Prospectus and shareholder reports. . . . . . . . . . 60
Registration. . . . . . . . . . . . . . . . . . . . . 30
Legal and audit . . . . . . . . . . . . . . . . . . . 14
Trustees. . . . . . . . . . . . . . . . . . . . . . . 10
Miscellaneous . . . . . . . . . . . . . . . . . . . . 22
_______
Total expenses. . . . . . . . . . . . . . . . . . . . 3,770
_______
Net investment income. . . . . . . . . . . . . . . . . . 12,292
_______
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities. . . . . . . . . . . . . . . . . . . . . . 15,422
Options . . . . . . . . . . . . . . . . . . . . . . . 1,948
Foreign currency transactions . . . . . . . . . . . . 4
_______
Net realized gain (loss). . . . . . . . . . . . . . . 17,374
_______
Change in net unrealized gain or loss on:
Securities. . . . . . . . . . . . . . . . . . . . . . 60,918
Options . . . . . . . . . . . . . . . . . . . . . . . (2,832)
Other assets and liabilities
denominated in foreign currencies . . . . . . . . 14
_______
Change in net unrealized gain or loss . . . . . . . . 58,100
_______
Net realized and unrealized gain (loss). . . . . . . . . 75,474
_______
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . $87,766
_______
_______
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Capital Appreciation Fund (Unaudited)
(in thousands)
Six Months Ended Year Ended
June 30, 1995 Dec. 31, 1994
________________ _____________
INCREASE (DECREASE) IN NET
ASSETS FROM
Operations
Net investment income. . . . . . . . . $12,292 $ 17,318
Net realized gain (loss) . . . . . . . 17,374 35,332
Change in net unrealized gain
or loss. . . . . . . . . . . . . . . 58,100 (31,603)
________ _________
Increase (decrease) in net assets
from operations. . . . . . . . . . . 87,766 21,047
________ _________
Distributions to shareholders
Net investment income. . . . . . . . . - (17,429)
Net realized gain. . . . . . . . . . . - (34,365)
________ _________
Decrease in net assets from
distributions. . . . . . . . . . . . - (51,794)
________ _________
Capital share transactions*
Shares sold. . . . . . . . . . . . . . 140,879 215,254
Distributions reinvested . . . . . . . - 50,316
Shares redeemed. . . . . . . . . . . . (102,770) (116,068)
________ _________
Increase (decrease) in net assets
from capital share
transactions . . . . . . . . . . . . 38,109 149,502
________ _________
Increase (decrease) in net assets. . . . . 125,875 118,755
NET ASSETS
Beginning of period. . . . . . . . . . . . 654,999 536,244
________ __________
End of period. . . . . . . . . . . . . . . $780,874 $654,999
________ __________
________ __________
______________________________________________________________________
*Share information
Shares sold. . . . . . . . . . . . . . 11,014 16,627
Distributions reinvested . . . . . . . - 4,162
Shares redeemed. . . . . . . . . . . . (8,013) (9,006)
________ _________
Increase (decrease) in shares
outstanding . . . . . . . . . . . . 3,001 11,783
________ _________
________ _________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Capital Appreciation Fund / June 30, 1995 (Unaudited)
Note 1 - Significant Accounting Policies T. Rowe Price Capital Appreciation
Fund (the fund) is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market
for such security. Listed securities that are not traded on a particular day
and securities that are regularly traded in the over-the-counter market are
valued at the mean of the latest bid and asked prices. Other equity securities
are valued at a price within the limits of the latest bid and asked prices
deemed by the Board of Trustees, or by persons delegated by the Trustees, best
to reflect fair value.
Debt securities are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair value. In the absence of a last sale
price, purchased options are valued at the latest bid price.
For purposes of determining the fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Trustees.
B) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized and
unrealized security gains and losses is reflected as a component of such gains
and losses.
C) 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 an identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors, and following practices
of the fund are described more fully in the fund's Prospectus and Statement of
Additional Information.
A) 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.
B) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $148,330,000 and $138,369,000,
respectively, for the six months ended June 30, 1995.
Notes to Financial Statements (cont'd)
T. Rowe Price Capital Appreciation Fund / June 30, 1995
(Unaudited)
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At June 30, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $704,588,000 and net unrealized gain
aggregated $79,611,000, of which $85,999,000 related to appreciated
investments and $6,388,000 to depreciated investments.
Note 4 - Related Party Transactions
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management
fee, of which $417,000 was payable at June 30, 1995. The fee is computed daily
and paid monthly, and consists of an Individual Fund Fee equal to 0.30% of
average daily net assets and a Group Fee. The Group Fee is based on the
combined assets of certain mutual funds sponsored by the Manager or Rowe-Price
Fleming International, Inc. (the Group). The Group Fee rate ranges from 0.48%
for the first $1 billion of assets to 0.31% for assets in excess of $34
billion. At June 30, 1995, and for the six months then ended, the effective
annual Group Fee rate was 0.34%. The fund pays a pro rata share of the Group
Fee based on the ratio of its net assets to those of the Group.
Additionally, the management fee is subject to a performance adjustment
dependent upon the investment performance of the fund as compared to the
Standard & Poor's 500 Stock Index over a running 36-month period, as set forth
in the investment management agreement. The performance adjustment for the six
months ended June 30, 1995 increased management fees by $211,000.
In addition, the fund has entered into agreements with the Manager and
two wholly owned subsidiaries of the Manager, pursuant to which the fund
receives certain other services. The Manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services, Inc.
(TRPS) is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price Retirement
Plan Services, Inc. provides subaccounting and recordkeeping services for
certain retirement accounts invested in the fund. The fund incurred expenses
pursuant to these related party agreements totaling approximately $954,000 for
the six months ended June 30, 1995, of which $175,000 was payable at
period-end.
<TABLE>
<CAPTION>
Financial Highlights
T. Rowe Price Capital Appreciation Fund (Unaudited)
For a share outstanding throughout each period
____________________________________________________________
Six Months Year Ended December 31,
Ended ____________________________________________
June 30, 1995 1994 1993 1992 1991 1990
____________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD. . . . . . . . . . . . . . . . $12.10 $12.66 $11.39 $11.02 $9.98 $10.82
______ ______ ______ _______ _______ _______
Investment Activities
Net investment income. . . . . . . . . . 0.21 0.35 0.26 0.51 0.44 0.37*
Net realized and unrealized
gain (loss). . . . . . . . . . . . . . 1.36 0.13 1.52 0.52 1.67 (0.51)
______ ______ ______ _______ _______ _______
Total from Investment Activities . . . . . . 1.57 0.48 1.78 1.03 2.11 (0.14)
Distributions
Net investment income. . . . . . . . . . - (0.35) (0.18) (0.50) (0.43) (0.39)
Net realized gain. . . . . . . . . . . . - (0.69) (0.33) (0.16) (0.64) (0.31)
______ ______ ______ _______ _______ _______
Total Distributions. . . . . . . . . . . . . - (1.04) (0.51) (0.66) (1.07) (0.70)
______ ______ ______ _______ _______ _______
NET ASSET VALUE, END OF PERIOD . . . . . . . $13.67 $12.10 $12.66 $11.39 $11.02 $9.98
______ ______ ______ _______ _______ _______
______ ______ ______ _______ _______ _______
RATIOS / SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . 13.0% 3.8% 15.7% 9.4% 21.6% (1.3)%*
Ratio of Expenses to Average
Net Assets . . . . . . . . . . . . . . . 1.05%! 1.10% 1.09% 1.08% 1.20% 1.25%*
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . 3.43%! 2.91% 2.37% 4.28% 3.90% 3.44%*
Portfolio Turnover Rate. . . . . . . . . . . 49.7%! 43.6% 39.4% 30.3% 50.7% 49.9%
Net Assets, End of Period
(in thousands) . . . . . . . . . . . . .$780,874 $654,999 $536,244 $359,272 $215,693 $141,923
<FN>
! Annualized.
* Excludes expenses in excess of a 1.25% voluntary expense limitation in effect
through December 31, 1993.
</FN>
</TABLE>
Shareholder Services
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety
of information and services-at no extra cost.
Knowledgeable Service Representatives
By Phone-Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(registered trademark) (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Additionally, you have the
ability to request prospectuses, statements, account and tax forms; reorder
checks; and initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access(registered trademark) provides the same information as
Tele*Access, but on a personal computer via dial-up modem.
Account Services
Checking-Write checks for $500 or more on any money market and most bond
fund accounts (except the High Yield Fund and Emerging Markets Bond Fund).
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal-If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles on
market trends, personal financial planning, and
T. Rowe Price's economic perspective.
Insights-A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
T. Rowe Price No-Load Mutual Funds
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money
Market
Tax-Exempt Money
CONSERVATIVE INCOME
Short-Term Bond
Short-Term Global Income
Short-Term U.S. Government
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate
Tax-Free
Maryland Short-Term
Tax-Free Bond
Summit Municipal
Intermediate
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE
GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
Emerging Markets Stock
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
T. Rowe Price Investment Services, Inc., Distributor.
Chart 1 - Security Diversification pie 6/30/95
A pie chart showing the percent of the Fund's asset investment among common
stocks 52%, preferred stocks 4%, convertibles 19%, bonds 3%, and reserves 22%.
