T. Rowe Price
--------------------------------------------------------------------------------
Semiannual Report
Capital Appreciation Fund
--------------------------------------------------------------------------------
June 30, 2000
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REPORT HIGHLIGHTS
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CAPITAL APPRECIATION FUND
-------------------------
* Financial market results for the first half were generally
disappointing as stock prices were extremely volatile and bonds were
lackluster.
* The fund's risk-averse approach served shareholders well, resulting in
a positive six-month return that exceeded its benchmarks.
* Energy stocks were among the top contributors and several utilities
rebounded, but chemicals were weak.
* The fund's stock allocation rose to about 58%, with convertibles
accounting for another 20%.
* We will persevere with our conservative approach that seeks
undervalued securities and broad asset diversification.
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UPDATES AVAILABLE
-----------------
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
================================================================================
<PAGE>
FELLOW SHAREHOLDERS
-------------------
The lady or the tiger? Financial markets largely disappointed investor
expectations over the last six months -- they got the tiger, not the lady -- and
we suspect that greater uncertainty lies ahead. Equities, especially the more
aggressively priced ones, which we deliberately do not own, swung wildly in
price throughout the period, ending generally lower. Most bonds had modest
returns, but generally the more risky, the lower the reward.
PERFORMANCE COMPARISON
----------------------
Periods Ended 6/30/00 6 Months 12 Months
--------------------- -------- ---------
Capital Appreciation Fund 4.40% 2.76%
S&P 500 -0.43 7.24
Lipper Mid-Cap Value
Funds Average 4.30 5.49
Capital Appreciation Fund has been well positioned so far in 2000. Our
continuing conservative investment program featuring asset diversification and
risk reduction consistent with reasonable potential returns performed better in
the first half than the more aggressive approach followed by most equity mutual
funds. While the next 18 months could well see further continued favorable
relative performance, it's important to remember that our approach will remain
cautious regardless. This leopard does not change its spots.
MARKET ENVIRONMENT
------------------
The Federal Reserve responded to hints of higher inflation in the U.S. with
its fourth, fifth, and sixth interest rate hikes since its last reduction in
November 1998. Normally, such action has the gradually eroding effect of a
column of army ants on the economic and investment landscapes. So far, however,
that has not been the case. The economy roared ahead in the first quarter and
then, as in 1998 and 1999, slowed to a still-brisk pace in the second quarter.
Bonds were hurt by the higher interest rates, but most eked out positive
returns. Long maturity Treasuries were uniquely helped by the paydown of
government debt related to budget surpluses. Equities seemed to go everywhere at
once yet nowhere. Technology and growth stocks, which have zoomed these past
four years, performed more in line with the value stocks that we favor, although
larger cyclical companies, such as those represented in the popular Dow Jones
Industrial Average, were particularly poor performers. We admit to an
elephantine dose of smug satisfaction when the high-priced Nasdaq dropped close
to 40% from its March highs -- but, in fact, that index, whose stocks we avoid
like the tsetse fly, ended marginally better than most equities for the six
months.
Overseas equity markets made little or no progress. The dollar, despite the
mammoth U.S. trade deficit, was modestly stronger against major currencies.
Foreigners continue to confound me by accepting paper assets (our securities)
for their real goods. But then history books often report the trading of
fishhooks and glass beads for ivory and gold.
<PAGE>
PORTFOLIO HIGHLIGHTS
--------------------
Energy stocks, including top individual contributors, MITCHELL ENERGY &
DEVELOPMENT and AMERADA HESS, provided the lion's share of the fund's first-half
performance. We were mildly disappointed that they didn't do even better
considering the sky-high prices of petroleum products and natural gas.
Perversely, the fact that investors, consumers, and even oil company managements
all seem to believe energy prices will eventually fall has constrained the
industry's capital spending, and that, in turn, is likely to retard a price
decline. Meanwhile, we trimmed several of these holdings at high prices, leaving
us the flexibility to buy on possible weakness, and also initiated several small
new positions in underperforming companies.
The contribution tables on pages 7 and 8 following this letter are
recommended to shareholders wishing to understand the impact of our industry and
individual stock selections on both 6- and 12-month performance. In addition to
our energy success we were pleased that utilities finally showed some signs of
life. UNISOURCE ENERGY, which we began buying 15 months ago, was our best
electric holding. TIMES MIRROR convertible bonds, another good performance
contributor in the first half, benefited from corporate merger activity and were
largely sold at fine prices. Corporate actions designed to enhance shareholder
value also helped our holdings of CABOT and JOHNS MANVILLE.
Performance was hurt by holdings in the chemical industry. Owning GREAT
LAKES CHEMICAL, IMPERIAL CHEMICAL (ICI), and OCTEL was like wrestling with
crocodiles -- much sweat, no fun. Our suspicion is that higher energy and raw
materials prices will eventually boost chemical company profits, and then we
should make good profits. Until then, we will hold on stubbornly. Our newspaper
holdings also did poorly of late, although they have been major contributors in
the past.
***************************************************************
Sector Diversification pie chart based on net assets
as of 6/30/00. Showing bonds 13%; common stocks 58%;
convertibles 20%, preferred stocks 1% and reserves 8%.
***************************************************************
The unusual uniformity of results for most securities so far this year was
mirrored across Capital Appreciation's asset mix. Our common stocks, convertib
les, and even bonds all returned 4% to 5%. The fund's asset allocation shifted
again modestly toward a higher percentage of common stocks (58%). We continue to
find attractive issues to purchase and are actively but slowly building between
five and 10 positions on an almost daily basis. Were we to suspect an imminent
price surge, we would become selectively more aggressive buyers. Our convertible
and fixed-income positions declined as several long-term holdings matured as
planned, and we found few attractive replacements.
<PAGE>
FUND MANAGEMENT
---------------
Many observers of the investment scene ascribe a character to individual
mutual funds, saying, "Oh, that's a good fund," or "That's a bad fund." We
disagree, because a fund's investment approach, portfolio manager, and
supporting organization -- particularly research and trading -- define an
otherwise empty shell. The first and second of these elements can be changed
fairly easily, and when they are changed, investors should not assume they are
buying an entity with continuity. Since the bulk of short-term performance
differentials among funds reflects different investment programs and the ebb and
flow of market enthusiasms, pressure from public opinion and business objectives
may cause some managers to shift their approach in an often futile effort to
join the season's most popular safari.
Your fund's investment approach has been constant. As for the portfolio
manager, our definitely biased view is that he'll be going strong for at least
another decade -- having already been closely associated with the fund since its
1986 inception.
*****************************
Your fund's investment
approach has been constant.
*****************************
This fund's third key ingredient -- quality support from the T. Rowe Price
organization, particularly research and tradingNis also a constant. We have
often credited our research department in these letters. (For example, VASTAR
RESOURCES, our largest purchase in the past six months, was a significant
success of our energy analysts.) But trading, which makes many more, though
smaller, individual contributions to the fund's success, also deserves
discussion. Its number-one priority is to achieve the best possible price for
our buy and sell transactions. The manager and traders work together to size
orders so they neither influence the market excessively nor unduly delay the
implementation of our portfolio objectives. The traders' know-how enables us to
locate and critically assess the cost of obtaining the liquidity necessary for
major transactions. In addition to this emphasis on "best execution" and lowest
all-in transaction costs, trading adds further value in several ways: by acting
as a window on the flow of information that continually influences prices; by
assessing unexplained surges in trading that often accompany important
information not yet widely known; and by trading with firms that provide the
fund, and, indirectly its shareholders, with ideas and insights. There is a
Swahili saying that "little steps will get you where you want to go." We think
of trading's expertise as providing crucial little steps that move the fund
toward its (and your) objective.
<PAGE>
BY THE WAY . . .
----------------
We looked back over several years of sometimes contentious observations in
these shareholder letters to see how they were holding up:
* Accounting excesses continue unabated (Dec. 1997). Pooling, perhaps
the most egregious misrepresentation, has not ended despite concerted
attack by the Financial Accounting Standards Board. Improvement is
coming, but slowly.
* Short maturity interest rates are equal or higher than longNan
aberration that often precedes a recession or slowdown (Dec. 1999). So
far the recession hasn't happened, which is fine with us.
* Gooney bird Internet investors are being sucked into jet engines (June
1999). Good riddance.
* Large companies that lose money should have declining rather than
rising stock prices (Dec. 1999), and now they do.
OUTLOOK
-------
Like the nineteenth century explorers who searched and searched for the
source of the Nile, we have found no foolproof clues to the direction of the
financial markets. Nevertheless, we continue to regard interest rates, the
economy/corporate earnings, and valuation as the most important indicators.
Currently, the Fed's perception of inflationary trends is the dominant clue, and
the Fed has pointed to labor markets as the key to its actions. While recent
signals concerning joblessness, work-week length, and employment growth don't
show that trends are a problem, they do show that the level of labor utilization
is exceptionally high. If we are lucky and wage gains stop accelerating, and if
the more cyclical elements of the economy like housing continue slowing, then we
may have seen the Fed's last interest rate hike. On the other hand, the Fed may
be forced to play the 800-pound gorilla and raise rates beyond optimal levels to
restrain inflation. That would almost certainly lead to a recession and would
not be good for equity prices. A middle ground of additional modest rate
increases is more probable, resulting in a slowing but still expanding economy.
We have enjoyed several such soft landings under Greenspan and might as well
expect another.
*****************************
We have enjoyed
several soft landings
under greenspan . . .
*****************************
Valuation, the third key element in the outlook, is critical if things
don't go quite right. Whether measured against earnings, dividends, or more
exotic yardsticks such as gross national product or replacement values, stock
prices look very high compared with history. (By the way, if you are interested
in a 350-page review of this and related investment topics, I recommend VALUING
WALL STREET, a new book by Andrew Smithers. It's a bit negative, but
shareholders of this fund won't be overly disturbed.) These valuations translate
into heightened risk should investors start losing confidence in the future.
<PAGE>
Speaking of investor confidence, there is nothing like the promises of
presidential election campaigns to bring out the Tarzan in all of us. Tax cuts
are a particular favorite in the investment jungle. The problem, of course, is
that politicians redistribute rather than create wealth. After November 7, the
bills will come due for somebody. We're also mindful that years following
presidential elections have tended to be poor for equities. Should you be overly
concerned by this rather pessimistic outlook? Probably not. We look for
attractively priced common stocks that we believe will hold up relatively well
if difficult times loom ahead. Furthermore, our holdings of other, more
defensive securities can help protect your wealth. It is generally more sensible
to retain exposure to equities than to hop in and out, risking panic from too
much exposure and regret from too little. The fund remains committed to being a
holding that investors can maintain through both good and bad times.
As we venture on a "journey without maps" into the investment future, we
are pleased to have you as fellow shareholders.
Respectfully submitted,
/s/
Richard P. Howard
President and Chairman of the Investment Advisory Committee
July 20, 2000
================================================================================
T. Rowe Price Capital Appreciation Fund
---------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
--------------------------------------------------------
6 Months Ended 6/30/00
TEN BEST CONTRIBUTORS
---------------------
Mitchell Energy & Development 12 cents
Amerada Hess 7
OverseasShipholding Group 7
Reebok 7
Rouse 5
Unisource Energy 5
Cabot 5
White Mountains Insurance Group 4
Times Mirror 3
Philip Morris 2
Total 57 cents
<PAGE>
TEN WORST CONTRIBUTORS
----------------------
New York Times -6 cents
Washington Post 5
Newmont Mining 4
Octel 4
Imperial Chemical 4
Petrie Stores Liquidation Trust 4
Weyerhaeuser 3
PhyCor 3
Great Lakes Chemical 3
Chris-Craft 2
Total -38 cents
12 Months Ended 6/30/00
TEN BEST CONTRIBUTORS
---------------------
Mitchell Energy & Development 15 cents
Chris-Craft 13
Overseas Shipholding 9
Murphy Oil 6
Times Mirror 4
Amerada Hess 4
Unisource Energy 4
Cabot 4
Domtar * 4
Motorola 3
Total 66 cents
TEN WORST CONTRIBUTORS
----------------------
Loews -13 cents
Philip Morris 7
Great Lakes Chemical 7
Octel 7
FirstEnergy/Cleveland Electric 7
PhyCor 6
Niagara Mohawk 6
J.C. Penney 6
Union Pacific Capital Trust 5
Texaco 4
Total -68 cents
* Position eliminated
================================================================================
<PAGE>
T. Rowe Price Capital Appreciation Fund
---------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
PERFORMANCE CONTRIBUTIONS
-------------------------
6 Months Ended 6/30/00
Cents-Per-Share Percent of
Sector Contribution Net Assets
------ ------------ ----------
Basic Materials -9 cents 8%
Business Services and Transportation 11 7
Consumer Cyclicals 6 5
Consumer Nondurables 8 6
Consumer Services -12 14
Energy 25 13
Financial 3 9
Process Industries -8 7
Utilities 9 18
U.S. Governments - 4
Miscellaneous 1 1
Reserves and Income 21 8
Total Portfolio 55 cents 100%
================================================================================
T. Rowe Price Capital Appreciation Fund
---------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
TWENTY-FIVE LARGEST HOLDINGS
----------------------------
Percent of
Net Assets
6/30/00
--------------
Tennessee Valley 7.7%
Loews 5.7
Amerada Hess 4.8
Niagara Mohawk 4.4
Rouse 3.8
Chris-Craft 3.0
Newmont Mining 2.9
Hilton 2.7
Washington Post 2.7
Texaco 2.7
Mitchell Energy & Development 2.6
Inco 2.3
Murphy Oil 2.1
Union Pacific Capital Trust 2.0
<PAGE>
FirstEnergy/Cleveland Electric 2.0
Waste Management 1.9
New York Times 1.8
Unisource Energy 1.6
Cabot 1.4
Johns Manville 1.4
Teck 1.4
Philip Morris 1.3
White Mountains Insurance Group 1.2
Great Lakes Chemical 1.2
Roche Holdings 1.2
--------------
Total 65.8%
Note: Table excludes reserves.
================================================================================
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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
Lipper Mid-Cap Value
S&P 500 Capital Appreciation Funds Average
------- -------------------- ----------------------
6/90 10,000 10,000 10,000
6/91 10,739 11,076 10,431
6/92 12,180 12,207 11,936
6/93 13,840 13,856 14,423
6/94 14,034 14,843 15,213
6/95 17,694 17,503 17,893
6/96 22,294 20,308 21,428
6/97 30,030 24,129 26,533
6/98 39,088 27,283 31,436
6/99 47,983 29,657 32,168
6/00 51,459 30,475 33,691
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 6/30/00 1 Year 3 Years 5 Years 10 Years
--------------------- ------ ------- ------- --------
Capital Appreciation Fund 2.76% 8.09% 11.73% 11.79%
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>
T. Rowe Price Capital Appreciation Fund
---------------------------------------
Unaudited For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
--------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
------- -------- -------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 12.51 $ 13.22 $ 14.71 $ 14.47 $ 13.67 $ 12.10
--------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) 0.22 0.51 0.49 0.50 0.60 0.43
Net realized and
unrealized gain (loss) 0.33 0.41 0.34 1.82 1.70 2.30
--------------------------------------------------------------------------------
Total from
investment activities 0.55 0.92 0.83 2.32 2.30 2.73
--------------------------------------------------------------------------------
Distributions
Net investment income - (0.50) (0.50) (0.50) (0.60) (0.44)
Net realized gain - (1.13) (1.82) (1.58) (0.90) (0.72)
--------------------------------------------------------------------------------
Total distributions - (1.63) (2.32) (2.08) (1.50) (1.16)
--------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 13.06 $ 12.51 $ 13.22 $ 14.71 $ 14.47 $ 13.67
RATIOS/SUPPLEMENTAL DATA
------------------------
Total return** 4.40% 7.07% 5.77% 16.20% 16.82% 22.57%
--------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 0.89%+ 0.88% 0.62% 0.64% 0.76% 0.97%
--------------------------------------------------------------------------------
Ratio of net investment
income (loss) to
average net assets 3.27%+ 3.44% 3.04% 3.17% 4.07% 3.28%
--------------------------------------------------------------------------------
Portfolio
turnover rate 21.3%+ 28.3% 52.6% 48.3% 44.2% 47.0%
--------------------------------------------------------------------------------
Net assets, end of
period (in millions) $ 778 $ 856 $ 1,004 $ 1,060 $ 960 $ 864
--------------------------------------------------------------------------------
** Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
+ Annualized
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Capital Appreciation Fund
---------------------------------------
Unaudited June 30, 2000
STATEMENT OF NET ASSETS
-----------------------
In thousands
Shares/Par Value
---------- ----------
COMMON STOCKS 58.1%
--------------------
FINANCIAL 7.1%
Bank and Trust 0.2%
Bank fuer International Zahlung (CHF) 340 $ 1,688
--------------------------------------------------------------------------------
1,688
----------
INSURANCE 4.8%
Loews 547,000 32,820
--------------------------------------------------------------------------------
Unitrin 94,000 2,764
--------------------------------------------------------------------------------
W. R. Berkley 65,000 1,217
--------------------------------------------------------------------------------
36,801
----------
FINANCIAL SERVICES 2.1%
Leucadia National 300,000 6,844
--------------------------------------------------------------------------------
White Mountains Insurance Group 59,700 9,552
--------------------------------------------------------------------------------
16,396
----------
Total Financial 54,885
----------
UTILITIES 8.0%
---------------
ELECTRIC UTILITIES 8.0%
FirstEnergy 595,000 13,908
--------------------------------------------------------------------------------
Kansas City Power & Light 135,000 3,037
--------------------------------------------------------------------------------
Niagara Mohawk * 2,390,000 33,311
--------------------------------------------------------------------------------
Unisource Energy 805,000 12,075
--------------------------------------------------------------------------------
Total Utilities 62,331
----------
<PAGE>
CONSUMER NONDURABLES 3.8%
--------------------------
FOOD PROCESSING 0.5%
McCormick 121,000 3,932
--------------------------------------------------------------------------------
3,932
----------
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT 0.9%
Smith & Nephew (GBP) 2,000,000 7,181
--------------------------------------------------------------------------------
7,181
----------
HEALTH CARE SERVICES 0.3%
Aetna 35,000 2,247
--------------------------------------------------------------------------------
2,247
----------
MISCELLANEOUS CONSUMER PRODUCTS 2.1%
Philip Morris 370,000 $ 9,828
--------------------------------------------------------------------------------
Reebok * 420,000 6,694
--------------------------------------------------------------------------------
16,522
----------
Total Consumer Nondurables 29,882
----------
CONSUMER SERVICES 11.3%
------------------------
GENERAL MERCHANDISERS 0.3%
Hills Store 175,000 0
--------------------------------------------------------------------------------
J.C. Penney 130,000 2,397
--------------------------------------------------------------------------------
2,397
----------
SPECIALTY MERCHANDISERS 1.3%
Petrie Stores Liquidation Trust 2,585,000 3,150
--------------------------------------------------------------------------------
Toys "R" Us 465,000 6,772
--------------------------------------------------------------------------------
9,922
----------
ENTERTAINMENT AND LEISURE 1.1%
Mandalay Resort Group * 440,000 8,800
--------------------------------------------------------------------------------
8,800
----------
<PAGE>
MEDIA AND COMMUNICATIONS 8.6%
Chris-Craft 356,000 23,518
--------------------------------------------------------------------------------
Meredith 245,000 8,269
--------------------------------------------------------------------------------
New York Times (Class A) 350,000 13,825
--------------------------------------------------------------------------------
Washington Post (Class B) 43,500 20,793
--------------------------------------------------------------------------------
66,405
----------
Total Consumer Services 87,524
----------
CONSUMER CYCLICALS 1.8%
------------------------
BUILDING AND REAL ESTATE 1.4%
Rouse 430,000 10,643
--------------------------------------------------------------------------------
10,643
----------
MISCELLANEOUS CONSUMER DURABLES 0.4%
Polaroid 195,000 3,522
--------------------------------------------------------------------------------
3,522
----------
Total Consumer Cyclicals 14,165
----------
BUSINESS SERVICES AND TRANSPORTATION 2.5%
------------------------------------------
TRANSPORTATION SERVICES 1.5%
Overseas Shipholding Group 357,000 $ 8,791
--------------------------------------------------------------------------------
Ryder System 170,000 3,220
--------------------------------------------------------------------------------
12,011
----------
Railroads 1.0%
Canadian Pacific 290,000 7,594
--------------------------------------------------------------------------------
7,594
----------
Total Business Services and Transportation 19,605
----------
ENERGY 12.8%
-------------
EXPLORATION AND PRODUCTION 3.1%
Mitchell Energy & Development (Class A) 620,000 19,918
--------------------------------------------------------------------------------
Vastar Resources 51,000 4,188
--------------------------------------------------------------------------------
24,106
----------
<PAGE>
GAS & GAS TRANSMISSION 0.3%
Questar 145,000 2,809
--------------------------------------------------------------------------------
2,809
----------
INTEGRATED PETROLEUM - DOMESTIC 7.1%
Amerada Hess 600,000 37,050
--------------------------------------------------------------------------------
Murphy Oil 273,000 16,227
--------------------------------------------------------------------------------
USX-Marathon 70,000 1,754
--------------------------------------------------------------------------------
55,031
----------
INTEGRATED PETROLEUM - INTERNATIONAL 2.3%
Texaco 335,000 17,839
--------------------------------------------------------------------------------
17,839
----------
Total Energy 99,785
----------
PROCESS INDUSTRIES 6.3%
------------------------
DIVERSIFIED CHEMICALS 1.4%
Cabot 410,000 11,172
--------------------------------------------------------------------------------
11,172
----------
SPECIALTY CHEMICALS 3.0%
Great Lakes Chemical 300,000 9,450
--------------------------------------------------------------------------------
Imperial Chemical ADR 215,000 $ 6,625
--------------------------------------------------------------------------------
Octel + * 935,000 7,304
--------------------------------------------------------------------------------
23,379
----------
FOREST PRODUCTS 0.5%
Weyerhaeuser 85,000 3,655
--------------------------------------------------------------------------------
3,655
----------
BUILDING AND CONSTRUCTION 1.4%
Johns Manville 825,000 10,880
--------------------------------------------------------------------------------
10,880
----------
Total Process Industries 49,086
----------
<PAGE>
BASIC MATERIALS 3.4%
---------------------
MINING 0.5%
Homestake Mining 560,000 3,850
--------------------------------------------------------------------------------
Lonrho Africa (GBP) * 575,000 148
--------------------------------------------------------------------------------
3,998
----------
METALS 2.9%
Newmont Mining 1,035,000 22,382
--------------------------------------------------------------------------------
22,382
----------
Total Basic Materials 26,380
----------
Total Miscellaneous Common Stocks 1.1% 8,480
----------
Total Common Stocks (Cost $389,672) 452,123
----------
PREFERRED STOCKS 0.5%
----------------------
Cleveland Electric (Series L) 18,000 1,764
--------------------------------------------------------------------------------
Entergy-GSU (Series B) 24,000 1,146
--------------------------------------------------------------------------------
Niagara Mohawk (Series A) 14,000 343
--------------------------------------------------------------------------------
Niagara Mohawk (Series B) 9,000 225
--------------------------------------------------------------------------------
Niagara Mohawk (Series C) 5,000 122
--------------------------------------------------------------------------------
Total Preferred Stocks (Cost $2,874) 3,600
----------
CONVERTIBLE PREFERRED STOCKS 5.5%
----------------------------------
Hercules Trust II * 3,300 1,792
--------------------------------------------------------------------------------
Owens Illinois 105,000 2,362
--------------------------------------------------------------------------------
Rouse (Series B) 540,000 19,305
--------------------------------------------------------------------------------
Sinclair Broadcast Group, 6.00% 20,000 630
--------------------------------------------------------------------------------
Union Pacific Capital Trust, 6.25% 380,000 $ 15,897
--------------------------------------------------------------------------------
USX Capital Trust I 100,000 3,350
--------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $52,739) 43,336
----------
<PAGE>
CONVERTIBLE BONDS 15.1%
------------------------
Baker Hughes, Sr. Notes, Zero Coupon, 5/5/08 $ 2,600,000 $ 2,015
--------------------------------------------------------------------------------
Battle Mountain Gold, 6.00%, 1/4/05 1,000,000 825
--------------------------------------------------------------------------------
Exide, (144a), 2.90%, 12/15/05 2,100,000 954
--------------------------------------------------------------------------------
Healthsouth, 3.25%, 4/1/03 10,000,000 8,013
--------------------------------------------------------------------------------
Hilton Hotels, 5.00%, 5/15/06 26,000,000 20,800
--------------------------------------------------------------------------------
Inco, Deb. Notes, 5.75%, 7/1/04 20,000,000 17,950
--------------------------------------------------------------------------------
Lennar, Zero Coupon, 7/29/18 8,500,000 3,556
--------------------------------------------------------------------------------
Loews, 3.125%, 9/15/07 13,500,000 11,343
--------------------------------------------------------------------------------
McKesson, Sub. Deb. Notes, 4.50%, 3/1/04 3,000,000 2,524
--------------------------------------------------------------------------------
Ogden, Sub. Deb. Notes, 5.75%, 10/20/02 500,000 432
--------------------------------------------------------------------------------
Pep Boys, Sub. Notes, Zero Coupon, 9/20/11 8,300,000 4,648
--------------------------------------------------------------------------------
Phycor, 4.50%, 2/15/03 5,900,000 1,003
--------------------------------------------------------------------------------
Potomac Electric Power, Deb. Notes, 5.00%, 9/1/02 5,000,000 4,763
--------------------------------------------------------------------------------
Roche Holdings, LYONs, (144a), Zero Coupon, 5/6/12 19,000,000 9,120
--------------------------------------------------------------------------------
Teck, 3.75%, 7/15/06 14,000,000 10,640
--------------------------------------------------------------------------------
Texaco Capital, 3.50%, 8/5/04 3,000,000 2,865
--------------------------------------------------------------------------------
Times Mirror, Zero Coupon, 4/15/17 1,553,000 850
--------------------------------------------------------------------------------
Waste Management, 4.00%, 2/1/02 16,000,000 14,814
--------------------------------------------------------------------------------
Miscellaneous Convertible Bonds 894
--------------------------------------------------------------------------------
Total Convertible Bonds (Cost $129,921) 118,009
----------
CORPORATE BONDS 1.0%
---------------------
Bellsouth Telecommunications, Deb. Notes
5.85%, 11/15/45 7,000,000 6,958
--------------------------------------------------------------------------------
Total Corporate Bonds (Cost $6,996) 6,958
----------
<PAGE>
MUNICIPAL BONDS 0.7%
---------------------
California State, 5.25%, 10/1/11 5,450,000 5,651
--------------------------------------------------------------------------------
Total Municipal Bonds (Cost $6,021) 5,651
----------
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 11.3%
-------------------------------------------
Federal National Mortgage Assn.
MTN, 5.37%, 2/7/01 $ 5,000,000 $ 4,955
--------------------------------------------------------------------------------
6.375%, 1/16/02 5,000,000 4,957
--------------------------------------------------------------------------------
Tennessee Valley Authority
5.88%, 4/1/36 33,600,000 31,949
--------------------------------------------------------------------------------
5.98%, 4/1/36 10,000,000 9,792
--------------------------------------------------------------------------------
6.235%, 7/15/45 18,400,000 18,298
--------------------------------------------------------------------------------
U.S. Treasury Notes
5.875%, 9/30/02 7,900,000 7,815
--------------------------------------------------------------------------------
6.125%, 7/31/00 2,000,000 2,000
--------------------------------------------------------------------------------
6.25%, 4/30 - 10/31/01 8,000,000 7,981
--------------------------------------------------------------------------------
Total U.S. Government Obligations/Agencies (Cost $90,881) 87,747
----------
OPTIONS PURCHASED 0.0%
-----------------------
Tribune, Put, 11/18/00 @ $40.00 50 32
--------------------------------------------------------------------------------
Total Options Purchased (Cost $30) 32
----------
SHORT-TERM INVESTMENTS 7.0%
----------------------------
MONEY MARKET FUNDS 7.0%
Reserve Investment Fund, 6.68% # 54,236,905 54,237
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $54,237) 54,237
----------
TOTAL INVESTMENTS IN SECURITIES
99.2% of Net Assets (Cost $733,371) $ 771,693
----------
Other Assets Less Liabilities 6,248
----------
NET ASSETS $ 777,941
----------
<PAGE>
NET ASSETS CONSIST OF:
Accumulated net investment income - net of distributions $ 13,319
Accumulated net realized gain/loss - net of distributions 36,380
Net unrealized gain (loss) 38,322
Paid-in-capital applicable to 59,566,293 shares of no par
value capital stock outstanding; unlimited shares authorized 689,920
----------
NET ASSETS $ 777,941
----------
NET ASSET VALUE PER SHARE $ 13.06
----------
# Seven-day yield
+ Affiliated company
* Non-income producing
LYONs Liquid Yield Option Notes
MTN Medium term note
CHF Swiss franc
GBP British sterling
ADR American Depository Receipt
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
1.3% of net assets.
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Capital Appreciation Fund
---------------------------------------
Unaudited
STATEMENT OF OPERATIONS
-----------------------
In thousands
6 Months
Ended
6/30/00
----------
INVESTMENT INCOME (LOSS)
Income
Interest $ 9,692
Dividend 6,514
----------
Total income 16,206
----------
Expenses
Investment management 2,408
Shareholder servicing 900
Custody and accounting 66
Prospectus and shareholder reports 44
<PAGE>
Registration 19
Legal and audit 8
Trustees 4
Miscellaneous 4
----------
Total expenses 3,453
Expenses paid indirectly (5)
----------
Net expenses 3,448
----------
Net investment income (loss) 12,758
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Securities 14,783
Written options (672)
Foreign currency transactions (13)
----------
Net realized gain (loss) 14,098
----------
Change in net unrealized gain or loss
Securities 3,717
Written options 27
Change in net unrealized gain or loss 3,744
----------
Net realized and unrealized gain (loss) 17,842
----------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 30,600
----------
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Capital Appreciation Fund
---------------------------------------
Unaudited
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
---------- ----------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) $ 12,758 $ 32,182
Net realized gain (loss) 14,098 78,649
Change in net unrealized gain or loss 3,744 (47,189)
---------- ----------
Increase (decrease) in net assets from operations 30,600 63,642
---------- ----------
<PAGE>
Distributions to shareholders
Net investment income - (31,320)
Net realized gain - (70,780)
---------- ----------
Decrease in net assets from distributions - (102,100)
---------- ----------
Capital share transactions *
Shares sold 58,309 143,841
Distributions reinvested - 99,709
Shares redeemed (166,734) (353,024)
---------- ----------
Increase (decrease) in net assets from capital
share transactions (108,425) (109,474)
---------- ----------
NET ASSETS
Increase (decrease) during period (77,825) (147,932)
Beginning of period 855,766 1,003,698
---------- ----------
End of period $ 777,941 $ 855,766
---------- ----------
*Share information
Shares sold 4,651 10,394
Distributions reinvested - 8,041
Shares redeemed (13,466) (25,956)
---------- ----------
Increase (decrease) in shares outstanding (8,815) (7,521)
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Capital Appreciation Fund
---------------------------------------
Unaudited June 30, 2000
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 fund seeks maximum
long-term capital appreciation by investing primarily in the common stocks of
established U.S. companies that are believed to have above-average growth
potential, and in fixed income and other securities to help preserve principal
value in uncertain or declining markets.
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.
<PAGE>
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 options are valued at the mean of the latest bid and asked
prices.
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.
AFFILIATED COMPANIES As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the outstanding
voting securities.
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. Expenses paid indirectly reflect credits earned
on daily uninvested cash balances at the custodian and are used to reduce the
fund's custody charges.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
OPTIONS Call and put options give the holder the right to purchase or sell,
respectively, a security at a specified price on a certain date. Risks arise
from possible illiquidity of the options market and from movements in security
values. Options are reflected in the accompanying Statement of Net Assets at
market value. Transactions in options written and related premiums received
during the period ended June 30, 2000, were as follows:
************************************************************************
Number of
Contracts Premiums
---------- ----------
Outstanding at beginning of period 260 $ 175,000
Expired (259) (174,000)
Closed (1) (1)
Outstanding at end of period - $ -
************************************************************************
OTHER Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $78,184,000 and $179,528,000,
respectively, for the six months ended June 30, 2000. Purchases and sales of
U.S. government securities aggregated $1,496,000 and $25,000,000, respectively,
for the six months ended June 30, 2000.
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, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled $733,371,000.
Net unrealized gain aggregated $38,322,000 at period-end, of which $103,652,000
related to appreciated investments and $65,330,000 to depreciated investments.
<PAGE>
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 $400,000 was payable at June 30, 2000. 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 0.295% for assets in excess of $120 billion. At
June 30, 2000, and for the six months then ended, the effective annual group fee
rate was 0.32%. The fund pays a pro-rata share of the group fee based on the
ratio of its net assets to those of the group.
In addition, the fund has entered into agreements with 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 $798,000 for the six months
ended June 30, 2000, of which $156,000 was payable at period-end.
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 six months ended June 30, 2000, totaled
$1,051,000 and are reflected as interest income in the accompanying Statement of
Operations.
================================================================================
T. Rowe Price Shareholder Services
----------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
-------------------------------------
BY PHONE 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
<PAGE>
ACCOUNT SERVICES
----------------
CHECKING Available on most fixed-income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*AccessRegistration Mark and the
T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
-------------------
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over full-service commission rates. **
INVESTMENT INFORMATION
----------------------
COMBINED STATEMENT Overview of all your accounts with T. Rowe Price.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of
order.
================================================================================
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
<PAGE>
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total
Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
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
<PAGE>
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond *
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Bond *
International Bond
MONEY MARKET FUNDS
------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
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
<PAGE>
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
* Closed to new investors.
+ Investments in the funds are not insured or guaranteed by the FDIC or
any other government agency. Although the funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the funds.
Please call for a prospectus, which contains complete information,
including fees and expenses. Read it carefully before investing.
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.
================================================================================
T. Rowe Price Advisory Services and Retirement Resources
--------------------------------------------------------
ADVISORY SERVICES, RETIREMENT RESOURCES
T. Rowe Price is your full-service retirement specialist. We have developed
unique advisory services that can help you meet the most difficult retirement
challenges. Our broad array of retirement plans is suitable for individuals, the
self-employed, small businesses, corporations, and nonprofit organizations. We
also provide recordkeeping, communications, and investment management services,
and our educational materials, self-help planning guides, and software tools are
recognized as among the industry's best. For information or to request
literature, call us at 1-800-638-5660, or visit our Web site at
WWW.TROWEPRICE.COM.
<PAGE>
ADVISORY SERVICES
-----------------
T. ROWE PRICE RETIREMENT INCOME MANAGERsm helps retirees or those within
two years of retirement determine how much income they can take in retirement.
The program uses extensive statistical analysis and the input of financial
planning professionals to suggest an income plan that best meets your
objectives.
T. ROWE PRICE ROLLOVER INVESTMENT SERVICE offers asset allocation advice to
those planning a major change in their qualified retirement plans, such as a
401(k) rollover from a previous employer or an IRA transfer.
RETIREMENT RESOURCES AT T. ROWE PRICE
-------------------------------------
Traditional, Roth, and Rollover IRAs
SEP-IRA and SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase
Pension and Profit Sharing Plans)
401(k) and 403(b)
457 Deferred Compensation
PLANNING AND INFORMATIONAL GUIDES
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
INSIGHTS REPORTS
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
SOFTWARE PACKAGES
T. Rowe Price Retirement Planning
AnalyzerTM CD-ROM or diskette $19.95.
To order, please call 1-800-541-5760.
Also available on the Internet for $9.95.
T. Rowe Price Variable Annuity AnalyzerTM
CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
<PAGE>
T. ROWE PRICE IMMEDIATE VARIABLE ANNUITY (INCOME ACCOUNT)
INVESTMENT KITS
We will be happy to send you one of our
easy-to-follow investment kits when you
are ready to invest in any T. Rowe Price
retirement vehicle, including IRAs,
qualified plans, small-business plans,
or our no-load variable annuities.
================================================================================
T. Rowe Price Insights Reports
------------------------------
THE FUNDAMENTALS OF INVESTING
-----------------------------
Whether you are unsure how to get started or are saving for a specific
goal, such as retirement or college, the T. Rowe Price Insights series can help
you make informed investment decisions. These reports, written in plain English
about fundamental investment topics, can be useful at every stage of your
investment journey. They cover a range of topics, from the basic, such as
getting started with mutual funds, to the more advanced, such as managing risk
through diversification or buying individual securities through a broker. To
request one or more Insights, call us at 1-800-638-5660.
INSIGHTS REPORTS
----------------
GENERAL INFORMATION
The ABCs of Giving
Back to Basics: The ABCs of Investing
The Challenge of Preparing for Retirement
Financial Planning After Retirement
Getting Started: Investing With Mutual Funds
The Roth IRA: A Review
Tax Information for Mutual Fund Investors
INVESTMENT STRATEGIES
Conservative Stock Investing
Dollar Cost Averaging
Equity Index Investing
Growth Stock Investing
Investing for Higher Yield
Managing Risk Through Diversification
The Power of Compounding
Value Investing
<PAGE>
TYPES OF SECURITIES
The Basics of International Stock Investing
The Basics of Tax-Free Investing
The Fundamentals of Fixed-Income Investing
Global Bond Investing
Investing in Common Stocks
Investing in Emerging Growth Stocks
Investing in Financial Services Stocks
Investing in Health Care Stocks
Investing in High-Yield Municipal Bonds
Investing in Money Market Securities
Investing in Mortgage-Backed Securities
Investing in Natural Resource Stocks
Investing in Science and Technology Stocks
Investing in Small-Company Stocks
Understanding Derivatives
Understanding High-Yield "Junk" Bonds
BROKERAGE INSIGHTS
Combining Individual Securities With Mutual Funds
Getting Started: An Introduction to Individual Securities
What You Should Know About Bonds
What You Should Know About Margin and Short-Selling
What You Should Know About Options
What You Should Know About Stocks
T. Rowe Price Insights are also available for reading or downloading on the
Internet at www.troweprice.com.
================================================================================
T. Rowe Price Brokerage
-----------------------
BROKERAGE SERVICES
------------------
T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
T. Rowe Price Brokerage provides high-quality services and financial tools
you can use to manage your investments effectively and conveniently. We also
offer significant commission savings over full-service brokerages on a wide
range of individual securities and other investments.*
Internet and Automated Services You can enter trades, access quotes, and
review account information 24 hours a day, seven days a week, by telephone or
computer. We offer a flat-rate commission of $24.95 on stock trades placed
through our Internet-Trader service.**
<PAGE>
Research Services To help you make informed investment decisions, we offer
access to several sources of data. You can research your investments using our
Online Research & News Service, provided by Thomson Investors Network, which
includes company profiles, intraday and 12-month interactive charting, and
analysts' ratings and earnings estimates. Using our Research On Call service,
you can request reports from Standard & Poor's, Vicker's, Lipper, and other
well-known research providers to be delivered by fax or by mail.
Dividend Reinvestment Service This service helps keep more of your money
working for you. Cash dividends (of $10 or greater) from your eligible
securities will be invested automatically in additional shares of the same
company, free of charge. Most stocks listed on national securities exchanges or
Nasdaq are eligible for this service.
* Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of
order.
** $24.95 per trade for up to 1,000 shares plus an additional $.02 for
each share over 1,000 shares. Visit our Web site for a complete
commission schedule or call for rates on representative-assisted and
other non-Internet trades.
================================================================================
FOR FUND AND ACCOUNT INFORMATION
OR TO CONDUCT TRANSACTIONS,
24 HOURS, 7 DAYS A WEEK
By touch-tone telephone
TELE*ACCESS 1-800-638-2587
By Account Access on the Internet
WWW.TROWEPRICE.COM/ACCESS
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132
TO OPEN A BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660
INTERNET ADDRESS:
www.troweprice.com
PLAN ACCOUNT LINES FOR RETIREMENT
PLAN PARTICIPANTS:
The appropriate 800 number appears
on your retirement account statement.
<PAGE>
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 appropriate
to the fund or funds covered in this
report.
WALK-IN INVESTOR CENTERS:
For directions, call 1-800-225-5132
or visit our Web site
BALTIMORE AREA
DOWNTOWN
101 East Lombard Street
OWINGS MILLS
Three Financial Center
4515 Painters Mill Road
BOSTON AREA
386 Washington Street
Wellesley
COLORADO SPRINGS
4410 ArrowsWest Drive
LOS ANGELES AREA
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
TAMPA
4200 West Cypress Street
10th Floor
WASHINGTON, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Investment Services, Inc., Distributor. F72-051 6/30/00
