- --------------------------------------------------------------------------------
T. Rowe Price
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Annual Report
Capital Appreciation Fund
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December 31, 1997
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REPORT HIGHLIGHTS
================================================================================
CAPITAL APPRECIATION FUND
* Recovering from an October setback triggered by an Asian currency crisis,
the stock market posted its third consecutive annual advance of over 20%.
* The fund's returns of 6.83% and 16.20% were solid but, reflecting our
conservative approach, did not match the surging S&P 500 Stock Index or
Lipper peer group average.
* Security diversification changed little during the period, with 53% of net
assets in stocks and 23% in convertibles remaining our largest commitments.
* The consumer services and utilities groups were major contributors to the
fund's second-half advance. For the year, media stocks were major winners;
gold stocks performed poorly.
* We think the investment outlook deteriorated somewhat over 1997, and we
will maintain but not intensify our risk-averse strategy.
<PAGE>
FELLOW SHAREHOLDERS
Have you ever felt great but suspected you were coming down with a cold, or
worse? It's hardly scientific, but that's my stock market diagnosis. We have
completed an unprecedented third straight year of gains over 20%. The Capital
Appreciation Fund advanced strongly, but given its cautious strategy could not
keep up with the broad market. Competitive funds, which we think are typically
riskier, also topped our returns. During the year's few periods of market
difficulty, however, your fund's performance was outstanding.
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
- --------------------------------------------------------------------------------
Capital Appreciation Fund 6.83% 16.20%
S&P 500 10.58 33.36
Lipper Capital Appreciation
Funds Average 8.97 20.36
================================================================================
Nothing would please us more than another strong market advance in 1998.
But, regardless of the market's health, we will continue to practice preventive
medicine: maintaining financial health and preserving wealth will be our
priorities.
YEAR-END DISTRIBUTIONS
On December 26, your Board of Trustees declared an income distribution of
$0.50 per share, a short-term capital gain of $0.24 per share, and a long-term
capital gain of $1.34 per share to shareholders of record on that date. You
should already have received a check or statement reflecting these
distributions, as well as your Form 1099-DIV reporting them for tax purposes.
MARKET ENVIRONMENT
The broad stock market rose for the seventh consecutive year. Unlike the
prior six, however, 1997 saw considerably more price volatility. For example,
the Dow Jones Industrial Average fell nearly 11% from its March high to its
April low, and about 14% from its October high to low--including 7.5% in one
day. Previously, there had not been a decline greater than 10% since 1990.
Long-term interest rates fell during the year, while short-term rates were
largely unchanged. Although the relationship of short and long rates is still
"normal," one would expect that if 1997 trends continue, the economy might start
to wheeze. But, so far, so good.
<PAGE>
==============================
INFLATION REMAINS IN CHECK,
WHICH IS UNUSUAL SINCE LABOR
IS TIGHT AND WAGES . . . HAVE
BEGUN TO RISE.
- ------------------------------
Inflation remains in check, which is unusual since labor is tight and
wages, which represent about two-thirds of all costs, have begun to rise.
Drastic corporate cost reductions and foreign competition are a possible
explanation consistent with today's s trong corporate earnings, but we admit to
being mildly surprised. Although the inflation virus could remain dormant for a
long time, at some point it seems almost certain that the owners of the vast
financial wealth created over the past 15 years will want to spend it--or spend
more of it. When that happens, the threat of rising prices will again concern
investors. In the meantime, slower economic growth and subdued inflation could
lead to very low interest rates--one has only to look at the 1.5% rate in Japan
to realize just how low low can be!
Outside the United States, the big news was sick currencies and stock
markets in Korea, Thailand, Indonesia and some of their neighbors--the financial
Asian flu. What a change from only six months ago, when these economies were
being hailed for their vigor. Today the big banks who enthusiastically stoked
Korean companies with money are seeking bailouts from the international
community and, indirectly, U.S. taxpayers. Observers have tended to downplay the
potential negative effects on the U.S., but we remain concerned. While direct
trade links are small in relation to our huge economy, the financial and
commodity links are significant. The Asian flu looks contagious and difficult to
quarantine.
PORTFOLIO HIGHLIGHTS
Every six months we review the contribution that our individual holdings
make to the performance of the fund (see page 8 for the best and worst
contributors). This calculation captures both the performance of the security
(its percentage price change) and the size of our position in the portfolio. As
they have so often in the fund's history, media stocks deserve special
recognition. This year NEW YORK TIMES and WASHINGTON POST were important
contributors. Both remain large holdings, although we have found it prudent to
substantially reduce the Times position. We also trimmed two of our other big
winners, AUTOMATIC DATA PROCESSING convertible bonds and FirstEnergy.
FIRSTENERGY was formed from the merger of two holdings, CENTERIOR, where we had
a very large position, and OHIO EDISON. Further, we own the preferred stock of
one of its operating entities, CLEVELAND ELECTRIC. FirstEnergy was our number
one contributor to fund performance and is our largest holding; it and UNICOM
continue our long line of utility successes. Our biggest disappointments were
the plummeting gold mining stocks, which we continue to own as insurance should
the environment unexpectedly weaken. The fund's 4.4% commitment in this sector
consists of NEWMONT MINING, HOMESTAKE MINING, and LONRHO, and their impact on
the portfolio was painful but not fatal. Moreover, while gold stock indices
generally fell by one-third, our holdings declined much less.
<PAGE>
[Edgar description: Security Diversification pie chart: Common stocks 53%;
Convertibles 23%; Preferred Stocks 3 %; Bonds 10 %; Reserves 11%.]
New purchases included 22 new convertibles and equities during the year.
NIAGARA MOHAWK and MACMILLAN BLOEDEL stocks and CHIRON convertible bonds were
three of the more significant recent purchases. More important than these new
positions and our eliminations was the constant adding or trimming of long-term
holdings. This activity seeks to take advantage of fluctuating individual share
prices and is also a response to the ebb and flow of shareholder money into the
fund. We always try to maximize your return and lock in some gains if we think
them vulnerable to a major market decline. An unusual fixed income purchase is
now one of our top five holdings--TENNESSEE VALLEY AUTHORITY (TVA) bonds. These
high-quality debt securities have provisions that allow us to sell them back to
the issuer. Should interest rates fall, we expect these bonds to appreciate
almost as much as similar maturity government bonds, and, if rates rise, we will
have much smaller losses. In return for these favorable risk/return
characteristics, we give up a portion of current income--a reasonable trade-off
given the uncertainty and potential magnitude of possible future interest rate
changes.
The aggregate portfolio positioning by asset class remained largely the
same over the course of the year. We have about one-half our money in common
stocks, about one-quarter in convertible securities, and the remainder largely
split between cash substitutes and fixed income holdings. This balanced diet
strikes us as appropriate, but we could change without hesitation if the
environment shifts, or, more likely, if we develop strong convictions about the
attractiveness of individual securities.
WHAT'S WRONG WITH AMERICA: SPOTLIGHT ON FINANCIAL ACCOUNTING
No, we are not going to launch into a diatribe about politics, morality, or
religion; but we think a word about financial accounting is in order. Despite
the efforts of the Financial Accounting Standards Board, reported numbers are
increasingly suspect. Using various excuses and subterfuges, including the
laudable desire to present conservative balance sheets, corporate managements
are overstating earnings. This overstatement, in turn, leads to possibly
inflated stock prices and top management compensation. Three of the obvious and
extreme excesses are (1) writing down assets to lower future costs, (2) merger
accounting practices that do not recognize the market value of assets
distributed for those assets acquired, and (3) stock options that enable
managements to reward themselves outside the normal flows of the income
statement.
Admittedly, these issues seem arcane, but they are critical to investors
and investment managers. The ability to measure a corporation's progress or
compare it to its competitors is being drastically degraded. Remember, changing
the scale on a thermometer may allow you to ignore the fever, but you are still
sick.
<PAGE>
FUND OPERATING GUIDELINES
Since the very beginning of the fund, we have sought to follow a set of
reasonably simple operating guidelines. Since they differ significantly from
most and perhaps all other mutual funds, they are worth repeating.
* We work as hard to reduce risk as to maximize gain.
* Attractively priced value stocks (as opposed to growth stocks) are our
investment of choice.
* We will make short-term, opportunistic investments as well as more typical
long-term ones.
* No type of investment is off-limits (bonds, stocks, convertibles, etc.) if
the risk/reward characteristics are attractive.
* Our decisions reflect case-by-case investment judgment; we have no
all-encompassing formula.
* Our asset allocations result largely from individual security decisions,
not vice versa.
* In general, we favor large-cap stocks over small-cap because we like to
take big positions, making the most of our intensive analysis of individual
securities.
OUTLOOK
One year ago we thought we were being a tad too optimistic in view of the
market's six consecutive years with almost no sick days. But with hindsight, we
were too cautious. What's changed since then in the environment and our
thinking?
The ECONOMY still looks fine. Yes, Christmas retail sales disappointed some
merchants, and, yes, some Americans have too much credit card debt, but we
expect only a moderate slowing. CORPORATE EARNINGS growth in 1998, however, is
not likely to match that of 1997. We are at record-high profit margins, and if
inflation is truly subdued, with price increases hard to come by, profits could
well be squeezed. In this respect, we think the outlook has certainly
deteriorated. With regard to INTEREST RATES, we've gone from predicting a modest
rise to thinking that almost anything is possible. The combination of low
inflation and possible profit problems or a slowing economy might drive rates
far lower than we thought possible. On the other hand, financial turmoil might
move them up substantially. There is a strange syndrome here, and we're among
those whose predictive powers can't cope. Finally, we consider VALUATION to be
the most significant negative facing the stock market, just as it was 12 months
ago. Historic yardsticks like price/earnings ratios and dividend yields are off
the charts, and we're skeptical of the underlying accounting. Many observers
feel that, with strong money flows into equities and other financial assets, the
old rules are irrelevant. We have not been able to make that leap of faith--but
then, we may have hypochondriacal tendencies.
<PAGE>
==============================
BUT NOW IS ALWAYS THE MOST
DIFFICULT TIME TO INVEST.
- ------------------------------
Managing the portfolio within the context of this thinking is difficult.
But NOW is always the most difficult time to invest. Despite our concerns, we
are loath to eliminate holdings that have positive characteristics or to take up
an excessively defensive posture in other ways. Our experience has been that
extreme investment positions are rarely the best strategy and more often the
worst--two aspirin are good, 10 are not better. Of course, we wish we could
cheaply vaccinate the portfolio against loss, but we can't. What's possible and
reasonable is our continued cautious strategy, a balanced asset mix, focus on
value stocks, and the occasional investment with special terms like the TVA
bonds mentioned earlier. In closing, let me remind you of our two rules of
investing: Number one--don't lose your money. Number two--don't forget the first
rule.
Respectfully submitted,
/s/
Richard P. Howard
President and Chairman of the Investment Advisory Committee
January 19, 1998
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
Portfolio Highlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- --------------------------------------------------------------------------------
FirstEnergy/Cleveland Electric ............................... 7.1%
Tennessee Valley ............................................. 4.8
Genentech .................................................... 3.3
Amerada Hess ................................................. 3.2
Automatic Data Processing .................................... 3.0
- --------------------------------------------------------------------------------
Loews ........................................................ 2.9
Unicom ....................................................... 2.8
Rouse ........................................................ 2.5
Washington Post .............................................. 2.3
New York Times ............................................... 2.2
- --------------------------------------------------------------------------------
Time Warner .................................................. 1.9
WMX Technologies ............................................. 1.6
Texaco ....................................................... 1.6
Roche Holdings ............................................... 1.5
Great Lakes Chemical ......................................... 1.5
- --------------------------------------------------------------------------------
Newmont Mining ............................................... 1.5
Philip Morris ................................................ 1.5
Murphy Oil ................................................... 1.5
Chris-Craft .................................................. 1.5
Wheelabrator Technologies .................................... 1.4
- --------------------------------------------------------------------------------
Kemper ....................................................... 1.4
Homestake Mining ............................................. 1.4
ALZA ......................................................... 1.3
LONRHO ....................................................... 1.2
ENSERCH ...................................................... 1.1
- --------------------------------------------------------------------------------
Total ........................................................ 56.0%
================================================================================
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 12/31/97
Ten Best Contributors
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FirstEnergy/Cleveland Electric ........................................... 28c
Unicom ................................................................... 13
Automatic Data Processing ................................................ 13
New York Times ........................................................... 11
Washington Post 7
Mitchell Energy & Development ............................................ 2
Loews .................................................................... 2
Murphy Oil ............................................................... 2
Rouse .................................................................... 2
Atlantic Richfield ....................................................... 2
- --------------------------------------------------------------------------------
Total .................................................................... 82c
Ten Worst Contributors
- --------------------------------------------------------------------------------
Newmont Mining ........................................................... -8c
Corning .................................................................. 4
LONRHO ................................................................... 4
Great Lakes Chemical ..................................................... 3
Homestake Mining ......................................................... 3
WMX Technologies ......................................................... 2
MacMillan Bloedel * ...................................................... 1
Polaroid ................................................................. 1
Inco * ................................................................... 1
Louisiana Pacific ........................................................ 1
- --------------------------------------------------------------------------------
Total .................................................................... -28c
<PAGE>
12 Months Ended 12/31/97
Ten Best Contributors
- --------------------------------------------------------------------------------
FirstEnergy/Cleveland Electric ........................................... 33c
New York Times ........................................................... 22
Automatic Data Processing ................................................ 16
Washington Post .......................................................... 12
Unicom ................................................................... 8
Sandoz Capital ** ........................................................ 8
Genentech ................................................................ 6
Loews .................................................................... 5
American Express ......................................................... 5
Chris-Craft .............................................................. 5
- --------------------------------------------------------------------------------
Total .................................................................... 120c
Ten Worst Contributors
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Newmont Mining ........................................................... -8c
LONRHO ................................................................... 4
Homestake Mining ......................................................... 3
Price Company ** ......................................................... 3
MacMillan Bloedel ........................................................ 1
Readers Digest ........................................................... 1
WMX Technologies ......................................................... 1
Inco ..................................................................... 1
Louisiana Pacific ........................................................ 1
Hills Stores ............................................................. 1
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Total .................................................................... -24c
* Position added
** Position eliminated
================================================================================
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
PERFORMANCE CONTRIBUTIONS
6 Months Ended 12/31/97
Cents-Per-Share Percent of
Sector Contribution Net Assets
- --------------------------------------------------------------------------------
Basic Materials ........................................ -16c 5%
Business Services and Transportation ................... 13 8
Consumer Cyclicals ..................................... -4 5
Consumer Nondurables ................................... 6 11
Consumer Services ...................................... 23 12
Energy ................................................. 8 11
Financial .............................................. 10 14
Process Industries ..................................... -7 5
Technology ............................................. 4 1
Utilities .............................................. 43 13
U.S. Governments/Options ............................... 2 3
Miscellaneous .......................................... -- 1
Reserves and Income .................................... 23 11
- --------------------------------------------------------------------------------
Total Portfolio ........................................ 105c 100%
================================================================================
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Capitial Appreciation Fund SEC graph shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Periods Ended 12/31/97 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Capital Appreciation Fund 16.20% 18.49% 14.84% 14.46%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price Capital Appreciation Fund
================================================================================
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..................... $ 14.47 $ 13.67 $ 12.10 $ 12.66 $ 11.39
Investment activities
Net investment income ........... 0.50 0.60 0.43 0.35 0.26
Net realized and
unrealized gain (loss) .......... 1.82 1.70 2.30 0.13 1.52
Total from
investment activities ........... 2.32 2.30 2.73 0.48 1.78
Distributions
Net investment income ........... (0.50) (0.60) (0.44) (0.35) (0.18)
Net realized gain ............... (1.58) (0.90) (0.72) (0.69) (0.33)
Total distributions ............. (2.08) (1.50) (1.16) (1.04) (0.51)
NET ASSET VALUE
End of period ........................... $ 14.71 $ 14.47 $ 13.67 $ 12.10 $ 12.66
Ratios/Supplemental Data
Total return ............................ 16.20% 16.82% 22.57% 3.80% 15.66%
Ratio of expenses to
average net assets ...................... 0.64% 0.76% 0.97% 1.10% 1.09%
Ratio of net investment
income to average
net assets .............................. 3.17% 4.07% 3.28% 2.91% 2.37%
Portfolio turnover rate ................. 48.3% 44.2% 47.0% 43.6% 39.4%
Average commission
rate paid ............................... $ 0.0377 $ 0.0584 -- -- --
Net assets, end of period
(in millions) ........................... $ 1,060 $ 960 $ 864 $ 655 $ 536
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
December 31, 1997
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
Common Stocks 52.7%
FINANCIAL 6.6%
Bank and Trust 0.2%
Bank Fuer International Zahlung (CHF) ............. 250 $ 1,561
1,561
Insurance 4.3%
Loews ............................................. 285,000 30,246
Unitrin ........................................... 125,000 8,109
Willis-Corroon ADR ................................ 580,000 7,141
45,496
Financial Services 2.1%
American Express .................................. 50,000 4,463
Fannie Mae ........................................ 70,000 3,994
Fund American Enterprises ......................... 73,000 8,833
Leucadia National ................................. 150,000 5,175
22,465
Total Financial ................................... 69,522
UTILITIES 9.0%
Electric Utilities 9.0%
FirstEnergy ....................................... 1,980,000 57,420
Niagara Mohawk* ................................... 800,000 8,400
Unicom ............................................ 960,000 29,520
Total Utilities ................................... 95,340
CONSUMER NONDURABLES 6.4%
Food Processing 0.5%
McCormick ......................................... 200,000 5,612
5,612
Hospital Supplies/Hospital Management 0.6%
Smith & Nephew (GBP) .............................. 2,000,000 5,913
5,913
Pharmaceuticals 3.7%
Genentech * ....................................... 570,000 34,556
Pharmacia & Upjohn ................................ 25,000 916
Schering-Plough ................................... 70,000 4,349
39,821
<PAGE>
Miscellaneous Consumer Products 1.6%
A. T. Cross (Class A) ............................. 115,000 $ 1,164
Philip Morris ..................................... 350,000 15,860
17,024
Total Consumer Nondurables ........................ 68,370
CONSUMER SERVICES 8.5%
General Merchandisers 0.4%
Hills Stores * .................................... 250,000 797
Wal-Mart .......................................... 75,000 2,958
3,755
Specialty Merchandisers 1.1%
Petrie Stores Liquidation Trust * ................. 2,560,000 7,820
The Limited ....................................... 150,000 3,825
11,645
Entertainment and Leisure 0.3%
Reader's Digest (Class A) ......................... 50,000 1,181
Reader's Digest (Class B) ......................... 75,000 1,828
3,009
Media and Communications 6.7%
Chris-Craft * ..................................... 300,000 15,694
Meredith .......................................... 205,000 7,316
New York Times (Class A) .......................... 355,000 23,474
Washington Post (Class B) ......................... 51,000 24,812
71,296
Total Consumer Services ........................... 89,705
CONSUMER CYCLICALS 1.2%
Miscellaneous Consumer Durables 1.2%
Corning ........................................... 160,000 5,940
Polaroid .......................................... 150,000 7,303
Total Consumer Cyclicals .......................... 13,243
TECHNOLOGY 0.9%
Information Processing 0.9%
IBM ............................................... 90,000 9,411
Total Technology .................................. 9,411
BUSINESS SERVICES AND
TRANSPORTATION 2.4%
Transportation Services 1.0%
Overseas Shipholding Group ........................ 275,000 5,998
Ryder System ...................................... 125,000 4,094
10,092
<PAGE>
Miscellaneous Business Services 1.4%
Wheelabrator Technologies ......................... 950,000 $ 15,260
15,260
Total Business Services and Transportation ........ 25,352
ENERGY 9.9%
Energy Services 0.7%
Energy Group ADR .................................. 160,000 7,140
7,140
Exploration and Production 0.7%
Mitchell Energy & Development (Class B) ........... 255,000 7,427
7,427
Integrated Petroleum - Domestic 7.0%
Amerada Hess ...................................... 625,000 34,297
Atlantic Richfield ................................ 130,000 10,416
Kerr-McGee ........................................ 30,000 1,899
Murphy Oil ........................................ 290,000 15,715
Union Texas Petroleum ............................. 575,000 11,967
74,294
Integrated Petroleum - International 1.5%
Texaco ............................................ 300,000 16,312
16,312
Total Energy ...................................... 105,173
PROCESS INDUSTRIES 4.6%
Specialty Chemicals 1.8%
Great Lakes Chemical .............................. 354,000 15,886
Millennium Chemicals .............................. 125,000 2,945
18,831
Forest Products 2.2%
Deltic Timber ..................................... 24,000 657
International Paper ............................... 50,000 2,156
Louisiana Pacific ................................. 140,000 2,660
MacMillan Bloedel ................................. 850,000 8,898
Weyerhaeuser ...................................... 190,000 9,322
23,693
Building and Construction 0.6%
Hanson ADR ........................................ 125,000 2,883
Johns Manville .................................... 380,000 3,824
6,707
Total Process Industries .......................... 49,231
<PAGE>
BASIC MATERIALS 3.0%
Mining 3.0%
Bougainville Copper (AUD) ......................... 1,000,000 $ 310
Homestake Mining .................................. 475,000 4,216
LONRHO (GBP) ...................................... 5,000,000 7,720
Newmont Mining .................................... 540,000 15,862
Prime Resources Group (CAD) ....................... 525,000 3,576
Total Basic Materials ............................. 31,684
Miscellaneous Common Stocks 0.2% ................. 2,070
Total Common Stocks (Cost $410,021) ............... 559,101
Preferred Stocks 3.4%
Cleveland Electric, (Series L), $1.88, Adj ........ 60,000 5,760
Cleveland Electric, (Series R), 8.80% ............. 6,575 6,983
Cleveland Electric, (Series S), $90.00 ............ 5,000 5,369
Entergy-GSU, 8.75%, Adj. B ........................ 39,959 2,011
Kemper, (Series E) (144a) ......................... 280,000 14,560
Niagara Mohawk, (Series A), Adj ................... 30,000 671
Niagara Mohawk, (Series B), Adj ................... 25,349 589
Niagara Mohawk, (Series C), Adj ................... 16,000 384
Total Preferred Stocks (Cost $30,205) ............ 36,327
Convertible Preferred Stocks 1.2%
International Paper, 5.25% ........................ 10,000 489
Rouse, (Series B), $3.00 .......................... 234,500 11,842
Total Convertible Preferred Stocks (Cost $ 11,855). 12,331
Convertible Bonds 22.0%
ALZA, Sub. Notes, LYONs, Zero Coupon, 7/14/14 ..... $30,000,000 14,100
Automatic Data Processing, LYONs
Zero Coupon, 2/20/12 ............. 40,000,000 31,790
Chiron, 1.90%, 11/17/00 ........................... 12,000,000 10,964
Enserch, 6.375%, 4/1/02 ........................... 11,850,000 12,028
Grand Metropolitan, 6.50%, 1/31/00 ................ 4,000,000 5,579
Homestake Mining, Sub. Deb., (144a), 5.50%, 6/23/00 11,000,000 10,244
Inco, Deb. Notes
5.75%, 7/1/04 .................... 8,000,000 7,713
7.75%, 3/15/16 ................... 3,500,000 3,502
LONRHO Finance, 6.00%, 2/27/04 GBP ............... 3,800,000 5,430
Marriott International, LYONs, Zero Coupon, 3/25/11 $10,500,000 6,852
McKesson, Sub. Deb. Notes, 4.50%, 3/1/04 .......... 3,250,000 2,941
News America Holdings, Gtd. Notes, LYONs
Zero Coupon, 3/11/13 ............. 17,500,000 8,318
Office Depot, LYONs, Zero Coupon, 11/1/08 ......... 6,600,000 4,316
Peninsular & Orient, 7.25%, 5/19/03 ........ GBP 4,000,000 7,654
<PAGE>
Pep Boys, Sub. Notes
LYONs, Zero Coupon, 9/20/11 ....... $12,500,000 $ 6,726
4.00%, 9/1/99 .................... 2,000,000 1,977
Potomac Electric Power, Deb. Notes, 5.00%, 9/1/02 . 6,000,000 5,745
Roche Holdings, LYONs, (144a), Zero Coupon, 5/6/12 35,000,000 16,319
Rouse, 5.75%, 7/23/02 ............................. 12,400,000 14,136
Time Warner, Sr. Notes, LYONs, Zero Coupon, 6/22/13 $40,000,000 20,500
U.S. Cellular, LYONs, Zero Coupon, 6/15/15 ........ 30,000,000 11,017
UBS Finance, MTN, 2.00%, 12/15/00 ................. 1,000,000 967
WMX Technologies, Sub. Deb., 2.00%, 1/24/05 ....... 20,000,000 17,194
Miscellaneous Convertible Bonds ................... 6,439
Total Convertible Bonds (Cost $ 208,704) .......... 232,451
Corporate Bonds 0.7%
Bellsouth Telecommunications, Deb. Notes
5.85%, 11/15/45 .................. 5,000,000 5,032
Merck, MTN, 5.76%, 5/3/37 ......................... 2,500,000 2,573
Total Corporate Bonds (Cost $7,469) .............. 7,605
U.S. Government Obligations/
Agencies 9.0%
Federal National Mortgage Assn ....................
MTN, 5.37%, 2/7/01 ................ 5,000,000 4,928
6.375%, 1/16/02 ................... 5,000,000 5,079
Tennessee Valley Authority
5.88%, 4/1/36 ..................... 29,000,000 30,009
5.98%, 4/1/36 ..................... 10,000,000 10,022
6.235%, 7/15/45 ................... 10,000,000 10,326
U.S. Treasury Notes
5.50%, 2/28/99 .................... 25,000,000 24,961
6.125%, 7/31/00 ................... 2,000,000 2,021
6.25%, 4/30/01 .................... 3,000,000 3,047
6.75%, 5/31/99 .................... 5,000,000 5,073
Total U.S. Government Obligations/Agencies (Cost $94,505) 95,466
Options Purchased 0.2%
Automatic Data Processing
Put, 2/21/98 @ $55.00 * .......... 250 17
Put, 5/16/98 @ $60.00 * .......... 250 80
HFS, Put, 1/17/98 @ $65.00 * ...................... 200 2
IBM
Put, 1/17/98 @ $95.00 * .......... 250 16
Put, 1/17/98 @ $100.00 * ......... 240 32
Put, 1/17/98 @ $105.00 * ......... 250 78
Put, 1/17/98 @ $115.00 * ......... 250 262
Put, 7/18/98 @ $120.00 * ......... 250 456
Polaroid, Put, 4/18/98 @ $60.00 * ................. 100 115
Schering-Plough
Put, 2/21/98 @ $55.00 * .......... 500 25
Put, 2/21/98 @ $65.00 * .......... 250 108
Put, 8/22/98 @ $65.00 * .......... 250 156
<PAGE>
Texaco, Put, 4/18/98 @ $70.00 * ................... 250 $ 394
The Limited
Put, 2/21/98 @ $25.00 * .......... 250 23
Put, 5/16/98 @ $30.00 * .......... 100 48
Wal-Mart, Put, 6/20/98 @ $42.50 * ................. 250 111
Miscellaneous Options Purchased 108
Total Options Purchased (Cost $3,719) ............ 2,031
Short-Term Investments 11.5%
Money Market Funds 11.5%
Reserve Investment Fund, 5.84% # .................. $122,386,099 122,386
Total Short-Term Investments (Cost $122,386) ..... 122,386
Total Investments in Securities
100.7% of Net Assets (Cost $888,864) .............. $ 1,067,698
Other Assets Less Liabilities ..................... (7,816)
NET ASSETS ........................................ $ 1,059,882
Net Assets Consist of:
Accumulated net investment income -
net of distributions .............................. $ 540
Accumulated net realized gain/loss -
net of distributions .............................. 9,492
Net unrealized gain (loss) ........................ 178,833
Paid-in-capital applicable to 72,036,202
shares of no parvalue capital stock
outstanding; unlimited shares authorized ......... 871,017
NET ASSETS ........................................ $ 1,059,882
NET ASSET VALUE PER SHARE ......................... $ 14.71
* Non-income producing
# Seven-day yield
ADR American Depository Receipt
MTN Medium term note
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 year-end amounts to 3.9%
of net assets.
AUD Australian dollar
CAD Canadian dollar
CHF Swiss franc
GBP British sterling
LYONs Liquid Yield Option Notes
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
Investment Income
Income
Interest ............................................. $ 22,905
Dividend ............................................. 15,708
Total income ......................................... 38,613
Expenses
Investment management ................................ 3,861
Shareholder servicing ................................ 2,243
Custody and accounting ............................... 165
Prospectus and shareholder reports ................... 121
Registration ......................................... 51
Proxy and annual meeting ............................. 47
Legal and audit ...................................... 20
Trustees ............................................. 11
Miscellaneous ........................................ 13
Total expenses ....................................... 6,532
Net investment income ........................................ 32,081
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ........................................... 91,256
Foreign currency transactions ........................ (56)
Net realized gain (loss) ............................. 91,200
Change in net unrealized gain or loss
Securities ........................................... 29,454
Other assets and liabilities
denominated in foreign currencies .................... (3)
Change in net unrealized gain or loss ................ 29,451
Net realized and unrealized gain (loss) ...................... 120,651
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ....................................... $ 152,732
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Capital Appreciation Fund
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ...................................................... $ 32,081 $ 37,057
Net realized gain (loss) ................................................... 91,200 69,939
Change in net unrealized gain or loss ...................................... 29,451 35,504
Increase (decrease) in net assets from operations .......................... 152,732 142,500
Distributions to shareholders
Net investment income ...................................................... (31,906) (36,888)
Net realized gain .......................................................... (100,813) (55,332)
Decrease in net assets from distributions .................................. (132,719) (92,220)
Capital share transactions *
Shares sold ................................................................ 233,817 233,393
Distributions reinvested ................................................... 129,454 89,884
Shares redeemed ............................................................ (283,344) (277,888)
Increase (decrease) in net assets from capital
share transactions ......................................................... 79,927 45,389
Net Assets
Increase (decrease) during period .................................................. 99,940 95,669
Beginning of period ................................................................ 959,942 864,273
End of period ...................................................................... $ 1,059,882 $ 959,942
*Share information
Shares sold ................................................................ 15,107 16,009
Distributions reinvested ................................................... 8,903 6,208
Shares redeemed ............................................................ (18,316) (19,115)
Increase (decrease) in shares outstanding .................................. 5,694 3,102
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
December 31, 1997
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 and commenced operations on June 30, 1986.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations are
made. A security which is listed or traded on more than one exchange is valued
at the quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Trustees, or by persons delegated by the Board, 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.
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, purchased and written options are valued at the mean of the latest bid
and asked prices, respectively.
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.
<PAGE>
CURRENCY TRANSLATION Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
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.
================================================================================
Number of
Contracts Premiums
- --------------------------------------------------------------------------------
Outstanding at beginning of period - $ -
Written 350 191,000
Exercised (350) (191,000)
Outstanding at end of period - $ -
================================================================================
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. Options are reflected in the accompanying Statement of Net Assets at
market value. Transactions in options written and related premiums received
during the year ended December 31, 1997, were as follows:
OTHER Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $396,762,000 and $479,880,000,
respectively, for the year ended December 31, 1997.
<PAGE>
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 December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $888,864,000, and net unrealized gain
aggregated $178,834,000, of which $201,235,000 related to appreciated
investments and $22,401,000 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 $337,000 was payable at December 31, 1997. The fee is computed daily
and paid monthly, and consists of an individual fund fee equal to 0.30% of
average daily net assets and a group fee. The group fee is based on the combined
assets of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.30% for assets in excess of $80 billion. The
effective annual group fee was 0.32% at December 31, 1997, and 0.33% for the
year then ended. The fund pays a pro-rata share of the group fee based on the
ratio of its net assets to those of the group.
Additionally, through October 31, 1998, 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 year ended December 31, 1997, decreased management fees by
$2,474,000.
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., 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 $1,999,000 for the year ended
December 31, 1997, of which $181,000 was payable at period-end.
<PAGE>
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the year ended December 31, 1997, totaled
$2,162,000 and are reflected as interest income in the accompanying Statement of
Operations.
During the year ended December 31, 1997, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $641,000 with
certain affiliates of the manager and paid commissions of $1,000 related
thereto.
================================================================================
Tax Information (Unaudited) for the Tax Year Ended 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
* $15,313,000 from short-term capital gains, and
* $85,500,000 from long-term capital gains; of which $32,900,000 was subject
to the 20% rate gains category.
For corporate shareholders, 22% of the fund's distributed income and short-term
capital gains qualified for the dividends-received deduction.
================================================================================
<PAGE>
T. Rowe Price Capital Appreciation Fund
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF
TRUSTEES OF T. ROWE PRICE
CAPITAL APPRECIATION FUND
We have audited the accompanying statement of net assets of T. Rowe Price
Capital Appreciation Fund as of December 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of T.
Rowe Price Capital Appreciation Fund as of December 31, 1997, the results of its
operations, the changes in its net assets and financial highlights for each of
the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 21, 1998
<PAGE>
T. Rowe Price Shareholder Services
================================================================================
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE Shareholder service representatives are available from 8
a.m. to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5
p.m. ET on weekends. 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. You can also drop off applications or obtain
prospectuses and other literature at these centers.
AUTOMATED 24-HOUR SERVICES
TELE*ACCESS [Registration Mark] Call 1-800-638-2587 to obtain
information such as account balance, date and amount of your last
transaction, latest dividend payment, fund prices, and yields.
Additionally, you have the ability to request prospectuses,
statements, and account and tax forms; to reorder checks; and to
initiate purchase, redemption, and exchange orders for
identically registered accounts.
T.ROWE PRICE ONLINE Through a personal computer via dial-up
modem, you can replicate all the services available on
Tele*Access plus conduct transactions in your Discount Brokerage
and Variable Annuity accounts.
ACCOUNT SERVICES
CHECKING Write checks for $500 or more on any money market and
most bond fund accounts (except the High Yield and Emerging
Markets Bond Funds).
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 $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.
<PAGE>
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.
DISCOUNT BROKERAGE*
INVESTMENTS AVAILABLE You can trade stocks, bonds, options,
precious metals, and other securities at a savings over regular
commission rates.
TO OPEN AN ACCOUNT Call a shareholder service representative for
more information.
INVESTMENT INFORMATION
COMBINED STATEMENT A comprehensive overview of your T. Rowe Price
accounts is provided. The summary page gives you 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.
SHAREHOLDER REPORTS Portfolio managers review the performance of
the funds in plain language and discuss T. Rowe Price's economic
outlook.
T. ROWE PRICE REPORT This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T.
Rowe Price's economic perspective.
PERFORMANCE UPDATE This quarterly report reviews recent market
develop- ments and provides comprehensive performance information
for every T. Rowe Price fund.
INSIGHTS This library of information includes reports on mutual
fund tax issues, investment strategies, and financial markets.
DETAILED INVESTMENT GUIDES Our widely acclaimed Asset Mix
Worksheet, College Planning Kit, Diversifying Overseas: A Guide
to International Investing, Retirees Financial Guide, and
Retirement Planning Kit (also available on disk for PC use) can
help you determine and reach your investment goals.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
T. Rowe Price Mutual Funds
================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications*
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons**
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value**
Spectrum Growth
Total Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
<PAGE>
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
** Closed to new investors.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
<PAGE>
T. Rowe Price Discount Brokerage
================================================================================
DISCOUNT BROKERAGE
A Division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC
This low-cost service gives you the opportunity to easily consolidate all
your investments with one company. Through T. Rowe Price Discount Brokerage, you
can buy and sell individual securities-stocks, bonds, options, and others-at
considerable commission savings over full-service brokers.* We also provide a
wide range of services, including:
AUTOMATED TELEPHONE AND COMPUTER SERVICES You can enter trades, access
quotes, and review account information 24 hours a day, seven days a week. Any
trades executed through these programs save you an additional 10% on
commissions.**
INVESTOR INFORMATION A variety of informative reports, such as our
Brokerage Insights series, S&P Market Month newsletter, and select stock
reports, can help you better evaluate economic trends and investment
opportunities.
DIVIDEND REINVESTMENT SERVICE Virtually all stocks held in customer
accounts are eligible for this service, free of charge.
* Based on a February 1997 telephone survey that compared our commission
rates on stock transactions of various sizes with those of other
full-service and discount brokerages. Commission rates will vary based on
size and nature of trades. Services vary by firm. For additional
information concerning our commission rates and services, call
1-800-638-5660.
** Discount applies to our current commission schedule; subject to our $35
minimum commission.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Capital Appreciation Fund.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F72-050 12/31/97
