For yield, price, last transaction,
and current balance, 24 hours,
7 days a week, call:
1-800-638-2587 toll free
625-7676 Baltimore area
For assistance with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Dividend
Growth Fund.
SemiAnnual Report
T. Rowe Price
Dividend Growth Fund
June 30, 1995
T. Rowe Price
Invest With Confidence (registered trademark)
DGF
Fellow Shareholders
U.S. stocks and bonds continued their powerful advances in the second quarter,
helping the unmanaged Standard & Poor's 500 Stock Index to its best first half
return since 1987 and eighth best since 1926. Continued earnings growth,
relatively benign inflation, and falling interest rates created an attractive
environment for stocks. Your investment in the Dividend Growth Fund rose
nicely but trailed the S&P 500 and the Lipper benchmark average.
Performance Comparison
Periods Ended 6/30/95
_____________________
3 Months 6 Months
________ ________
Dividend Growth Fund 5.7% 14.4%
S&P 500 9.6 20.2
Lipper Growth & Income
Fund Average 8.1 16.8
Dividend Distribution
On June 27, your Board of Directors declared a second quarter dividend of
$0.08 per share payable to shareholders of record on that date. You should
already have received your check or statement reflecting this distribution.
Year to date, dividends total $0.17, up from $0.15 for the same period last
year.
Market Environment
So far, our economic and market expectations for 1995 have been off the mark.
Economic growth slowed more than we thought likely, easing inflationary
pressures and allowing interest rates to fall substantially. Corporate
earnings remained strong except at many consumer-related companies, where the
slowdown has had the biggest impact. Whereas we had expected modest returns
from stocks, the combination of solid earnings, falling interest rates, and
moderate inflation led to substantial gains.
Dividends have continued to grow much more slowly than earnings, and the
current dividend yield of the S&P 500 has fallen to a record low of 2.5%. In
the past, extremely low yields have been a reliable warning that stock prices
were too high. However, many market participants believe this time is
different, pointing out that corporations could easily pay higher dividends
but are choosing to repurchase their shares instead. Actual corporate data,
however, provide little support for this view. Although dividend payouts are
low and stock repurchases are large, both are within normal historical
boundaries. So we take the low-yield warning seriously. Dividends have
accounted for nearly 45% of stocks' total returns over the last 70 years, and
we think they will remain critical to the appeal of equities in the future.
Performance Review
After two years of strong relative performance, your fund's returns have
lagged the broad market thus far in 1995. Several higher-dividend-paying
sectors that we focus on, such as telephone companies, electric utilities,
international energy companies, and real estate investment trusts (REITs),
have been weak performers, while many low-dividend-paying sectors that we
de-emphasize, such as technology, airlines, and business services, have
produced big gains. In addition, our cash reserves, which started the year at
13% and increased to 20% at quarter-end, have acted as a drag on performance.
We're not happy about holding reserves, but as stock prices have risen, we are
finding fewer and fewer dividend growth stocks at attractive prices. Finally,
several top holdings, ALLTEL, Reader's Digest, and Sbarro, experienced
substantial price declines when their earnings growth slowed. In each case we
thought the slowdown would be temporary and took advantage of the price
declines to increase positions.
We've had our share of winners, too. Financial services stocks, such as
Fannie Mae, Mellon Bank, Norwest, EXEL Limited, and Travelers, made big gains,
aided by falling interest rates. AlliedSignal, Hubbell, and Honeywell, our
productivity-driven manufacturing holdings, rose nicely after posting good
earnings. Accelerating worldwide growth in cellular phone usage led to solid
gains in Vodafone, and the resurgent strength of branded goods at Philip
Morris and PepsiCo brought investors back to their stocks in droves.
Portfolio Changes
As the sector diversification chart shows, your fund remains broadly
diversified among industry sectors. Noticeably absent are technology stocks,
most of which provide little in the way of dividends and, therefore, do not
meet your fund's investment criteria.
Chart 1 - Sector Diversification
Our largest purchase during the quarter was UNUM, the leading provider
of disability insurance in the United States. We think the company is poised
for a period of substantial and sustained growth as this niche of the
insurance industry returns to health after several years of competitive
shakeout. Our largest sale was the convertible bonds of Rockefeller Center
Properties, the REIT that holds the mortgage on Rockefeller Center in New
York. Although the owners of the property filed for bankruptcy in May, the
value of the bonds has actually risen. Preferring not to be involved in the
bankruptcy process, we elected to sell our holdings.
Outlook
Our outlook has shifted from cautiously optimistic at the start of the year to
quite cautious at present. Stock prices in relation to dividends, book value,
and normalized earnings are at or near all-time highs. We see plenty of great
companies that we would like to purchase on your behalf but precious few at
bargain prices. We plan to be patient and stick to our strategy of buying
consistent dividend growth companies, but only at reasonable prices.
As always we appreciate your confidence and support.
Respectfully submitted,
William J. Stromberg
President and Chairman of the
Investment Advisory Committee
Brian C. Rogers
Executive Vice President
July 19, 1995
Twenty-Five Largest Holdings
June 30, 1995
Percent of
Company Net Assets
___________________________ ____________
Hubbell 3.5%
Fannie Mae 2.3
Vodafone 2.0
UNUM 1.9
Philip Morris 1.8
AlliedSignal 1.7
Mellon Bank 1.7
GE 1.5
SmithKline Beecham 1.5
Pfizer 1.5
Great Lakes Chemical 1.4
GTE 1.4
Royal Dutch Petroleum 1.4
Norwest 1.2
Exxon 1.2
ALLTEL 1.1
Reader's Digest 1.1
Newell 1.1
PepsiCo 1.1
Bell Atlantic 1.1
Selective Insurance 1.1
Schering-Plough 1.1
Sbarro 1.0
Automatic Data Processing 1.0
Honeywell 1.0
Total 36.7%
Major Portfolio Changes
Three Months Ended June 30, 1995
TEN LARGEST PURCHASES
Cost (000)
____________
UNUM $1,098
Reckson Associates* 364
PMI Group* 340
Exide Notes* 300
Nucor* 250
South West Property Trust 179
Bell Atlantic 164
Cleveland Electric Pfd. Series L* 136
Sbarro 135
Analysts International 129
TEN LARGEST SALES
Proceeds (000)
_________________
Rockefeller Center Cv. Bond** $ 524
Toys "R" Us** 516
Eli Lilly** 447
Medicine Shoppe International** 424
Analysts International 414
J.C. Penney** 385
TRW** 319
SCEcorp** 311
Selective Insurance 296
Vodafone 287
*Position added
**Position eliminated
Average Annual Compound Total Return
Periods ended June 30, 1995
1 Year Since Inception 12/30/92
________ ___________________________
19.45% 14.28%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
Statement of Net Assets
T. Rowe Price Dividend Growth Fund / June 30, 1995 (Unaudited)
(amounts in thousands, except capital stock information)
(values in thousands)
Common Stocks - 73.1%
FINANCIAL - 14.2%
Value
_________
BANK & TRUST - 5.0%
10,000 shs. Integra Financial. . . . . . . $ 486
26,500 Mellon Bank. . . . . . . . . . 1,103
6,000 Mercantile
Bancorporation . . . . . . . 269
3,000 Midlantic. . . . . . . . . . . 120
7,000 NationsBank. . . . . . . . . . 375
4,000 Northern Trust . . . . . . . . 160
28,00 Norwest. . . . . . . . . . . . 805
3,318
INSURANCE - 4.9%
10,000 EXEL . . . . . . . . . . . . . 520
21,000 PartnerRe Holdings ADR . . . . 547
5,000 PMI Group. . . . . . . . . . . 217
22,000 Selective Insurance. . . . . . 720
27,000 UNUM . . . . . . . . . . . . . 1,266
3,270
FINANCIAL SERVICES - 4.3%
14,000 American Express . . . . . . . 492
16,000 Fannie Mae . . . . . . . . . . 1,510
14,000 Travelers. . . . . . . . . . . 613
7,000 United Asset
Management . . . . . . . . . 249
2,864
Total Financial 9,452
UTILITIES - 4.8%
TELEPHONE - 3.6%
29,000 ALLTEL . . . . . . . . . . . . 736
13,000 Bell Atlantic. . . . . . . . . 728
28,000 GTE. . . . . . . . . . . . . . 956
2,420
ELECTRIC UTILITIES - 1.2%
11,000 General Public Utilities . . . 327
13,000 NIPSCO . . . . . . . . . . . . 442
769
Total Utilities 3,189
CONSUMER NONDURABLES - 15.6%
BEVERAGES - 2.1%
12,000 Anheuser-Busch . . . . . . . . 682
16,000 PepsiCo. . . . . . . . . . . . 730
1,412
FOOD PROCESSING - 1.5%
7,000 shs. CPC International. . . . . . . $ 432
5,000 Ralston Purina . . . . . . . . 255
11,000 Sara Lee . . . . . . . . . . . 314
1,001
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT - 0.7%
12,000 Abbott Laboratories. . . . . . 486
PHARMACEUTICALS - 5.7%
3,500 American Home Products . . . . 271
9,000 Merck. . . . . . . . . . . . . 441
10,500 Pfizer . . . . . . . . . . . . 970
16,000 Schering-Plough. . . . . . . . 706
22,000 SmithKline Beecham, equity
units ADR. . . . . . . . . . 995
5,000 Warner-Lambert . . . . . . . . 432
3,815
MISCELLANEOUS CONSUMER PRODUCTS - 5.6%
16,000 American Greetings
(Class A). . . . . . . . . . 469
8,500 Colgate-Palmolive. . . . . . . 622
13,000 Hanson ADR . . . . . . . . . . 229
30,000 Newell . . . . . . . . . . . . 735
16,000 Philip Morris. . . . . . . . . 1,190
16,000 UST. . . . . . . . . . . . . . 476
3,721
Total Consumer Nondurables 10,435
CONSUMER SERVICES - 6.2%
GENERAL MERCHANDISERS - 0.8%
7,000 Dayton Hudson. . . . . . . . . 502
ENTERTAINMENT & LEISURE - 2.7%
7,000 Disney . . . . . . . . . . . . 389
18,000 Reader's Digest
(Class B). . . . . . . . . . 736
30,000 Sbarro . . . . . . . . . . . . 698
1,823
MEDIA & COMMUNICATIONS - 2.7%
5,000 Dun & Bradstreet . . . . . . . 262
4,000 Gannett. . . . . . . . . . . . 217
35,000 Vodafone ADR . . . . . . . . . 1,326
1,805
Total Consumer Services 4,130
CONSUMER CYCLICALS - 6.7%
BUILDING & REAL ESTATE - 6.0%
20,000 shs. Chelsea GCA, REIT. . . . . . . $ 540
34,000 DeBartolo Realty, REIT . . . . 497
20,000 Developers Diversified
Realty . . . . . . . . . . . 575
25,000 General Growth Properties,
REIT . . . . . . . . . . . . 509
15,000 Reckson Associates . . . . . . 364
45,000 South West Property Trust,
REIT . . . . . . . . . . . . 518
30,000 Storage Trust Realty,
REIT . . . . . . . . . . . . 607
13,000 Storage USA, REIT. . . . . . . 369
3,979
MISCELLANEOUS CONSUMER DURABLES - 0.7%
15,000 Corning. . . . . . . . . . . . 491
Total Consumer Cyclicals 4,470
TECHNOLOGY - 2.7%
ELECTRONIC SYSTEMS - 1.0%
16,000 Honeywell. . . . . . . . . . . 690
AEROSPACE & DEFENSE - 1.7%
25,000 AlliedSignal . . . . . . . . . 1,113
Total Technology . . . . . . . . . . . . . . . 1,803
CAPITAL EQUIPMENT - 5.6%
ELECTRICAL EQUIPMENT - 5.1%
18,000 GE . . . . . . . . . . . . . . 1,015
11,100 Hubbell (Class A). . . . . . . 601
31,000 Hubbell (Class B). . . . . . . 1,751
3,367
MACHINERY - 0.5%
8,000 Teleflex . . . . . . . . . . . 344
Total Capital Equipment 3,711
BUSINESS SERVICES & TRANSPORTATION - 3.4%
COMPUTER SERVICE & SOFTWARE - 1.8%
20,000 Analysts International . . . . 517
11,000 Automatic Data
Processing . . . . . . . . . 692
1,209
DISTRIBUTION SERVICES - 0.8%
7,000 Alco Standard. . . . . . . . . 559
MISCELLANEOUS BUSINESS SERVICES - 0.8%
650 * U.S. Industries. . . . . . . . 9
18,000 WMX Technologies . . . . . . . 511
520
Total Business Services & Transportation 2,288
ENERGY - 7.0%
ENERGY SERVICES - 2.0%
11,000 shs. Halliburton. . . . . . . . . . $ 393
11,000 Helmerich & Payne. . . . . . . 325
10,000 Schlumberger . . . . . . . . . 621
1,339
INTEGRATED PETROLEUM - DOMESTIC - 0.5%
5,000 Amoco. . . . . . . . . . . . . 333
INTEGRATED PETROLEUM -
INTERNATIONAL - 4.5%
11,000 Exxon. . . . . . . . . . . . . 777
7,000 Mobil. . . . . . . . . . . . . 672
21,000 Repsol ADR . . . . . . . . . . 664
7,500 Royal Dutch
Petroleum ADR. . . . . . . . 914
3,027
Total Energy 4,699
PROCESS INDUSTRIES - 3.2%
DIVERSIFIED CHEMICALS - 0.8%
8,000 DuPont . . . . . . . . . . . . 550
SPECIALTY CHEMICALS - 2.4%
16,000 Great Lakes Chemical . . . . . 964
8,000 Lubrizol . . . . . . . . . . . 283
6,000 Rohm & Haas. . . . . . . . . . 329
1,576
Total Process Industries 2,126
BASIC MATERIALS - 0.4%
METALS - 0.4%
5,000 Nucor. . . . . . . . . . . . . 268
Total Basic Materials 268
Miscellaneous Common Stocks - 3.3% 2,211
Total Common Stocks (Cost $42,166) 48,782
Preferred Stocks - 1.6%
3,000 California Federal Bank,
10.625%, Series B. . . . . . 323
2,000 Cleveland Electric, $1.88 Adj.,
Series L . . . . . . . . . . 142
320 Cleveland Electric, 8.80%,
Series R . . . . . . . . . . 274
12,000 Manville, $2.70, Cum.,
Series B . . . . . . . . . . 300
Total Preferred Stocks (Cost $974) 1,039
Convertible Preferred Stocks - 1.1%
16,000 shs. Freeport-McMoRan,
Dep. Shs.. . . . . . . . . . $ 400
6,000 Newmont Mining (144a),
$2.75. . . . . . . . . . . . 350
Total Convertible Preferred Stocks (Cost $869) . 750
Corporate Bonds - 3.5%
$ 250,000 American Standard, Sr. Sub.
Deb., 9.875%, 6/1/01 . . . . 258
35,000 American Standard, Sub.
Deb., 9.25%, 12/1/16 . . . . 35
300,000 Exide, Sr. Notes (144a),
10.00%, 4/15/05. . . . . . . 308
250,000 Imo Industries, Sr.
Sub. Deb., 12.00%,
11/1/01. . . . . . . . . . . 259
108,000 Imo Industries, Sr.
Sub. Deb., 12.25%,
8/15/97. . . . . . . . . . . 108
120,000 Lear Seating, Sub. Notes,
8.25%, 2/1/02. . . . . . . . 114
200,000 Southern Pacific Rail,
Sr. Notes, 9.375%,
8/15/05. . . . . . . . . . . 206
500,000 Texas Bottling Group, Sr.
Sub. Notes, 9.00%,
11/15/03 . . . . . . . . . . 492
200,000 Westpoint Stevens, Sr.
Notes, 8.75%,
12/15/01 . . . . . . . . . . 197
1,977
Miscellaneous Corporate Bonds 382
Total Corporate Bonds (Cost $2,351) 2,359
U.S. Government Mortgage-
Backed Securities - 0.5%
166,182 Government National
Mortgage Assn., I,
10.00%, 4/15/18. . . . . . . 181
132,668 Government National
Mortgage Assn., II,
10.50%, 12/20/20 . . . . . . 144
Total U.S. Government Mortgage-Backed
Securities (Cost $331) 325
Short-Term Investments - 20.3%
BANK NOTES - 1.5%
$1,000,000 Fifth Third Bank,
6.21%, 10/27/95. . . . . . . $ 1,000
COMMERCIAL PAPER - 12.8%
1,000,000 Caisse des Depots et
Consignations, 4(2),
5.95%, 7/27/95 . . . . . . . 994
156,000 Cargill Financial Services,
6.10%, 7/3/95. . . . . . . . 156
1,000,000 Countrywide Funding,
6.00%, 7/17/95 . . . . . . . 995
1,000,000 Electronic Data Systems,
5.95%, 7/17/95 . . . . . . . 993
1,000,000 Falcon Asset Securitization,
5.97%, 7/13/95 . . . . . . . 993
1,000,000 General Electric Capital,
6.04%, 7/21/95 . . . . . . . 983
1,500,000 Province of Quebec,
5.82%, 9/26/95 . . . . . . . 1,478
1,000,000 U.S. Bancorp, 6.05%, 7/11/95 . 985
1,000,000 Yorkshire Building Society,
6.00%, 7/5/95. . . . . . . . 989
8,566
CERTIFICATES OF DEPOSIT - 6.0%
2,000,000 Bayerische Hypotheken,
6.04 - 6.11%,
7/14 - 8/7/95. . . . . . . . 2,000
1,000,000 National Westminister Cd,
6.01%, 8/11/95 . . . . . . . 1,000
1,000,000 Swiss Bank, 6.01%,
7/21/95. . . . . . . . . . . 1,000
4,000
Total Short-Term Investments (Cost $13,566) 13,566
Total Investments in Securities - 100.1%
of Net Assets (Cost $60,257) $ 66,821
Other Assets Less Liabilities (35)
_________
Net Assets Consist of: Value
________
Accumulated net investment income -
net of distributions. . . . . . . . . . . . $ 9
Accumulated net realized gain/loss -
net of distributions. . . . . . . . . . . . 1,188
Net unrealized gain (loss) . . . . . . . . . . 6,564
Paid-in-capital applicable to
5,374,575 shares of $0.0001
par value capital stock outstanding;
1,000,000,000 shares authorized . . . . . . 59,025
________
NET ASSETS . . . . . . . . . . . . . . . $ 66,786
_________
_________
NET ASSET VALUE PER SHARE. . . . . . . . . . . $ 12.43
_________
_________
* Non-income producing
REIT Real Estate Investment Trust
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers - total of such securities at period-end amounts
to 1.0% of net assets.
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Dividend Growth Fund / Six Months Ended June 30, 1995
(Unaudited)
(in thousands)
INVESTMENT INCOME
Income
Dividend . . . . . . . . . . . . . . . . . . . . . . $ 758
Interest . . . . . . . . . . . . . . . . . . . . . . 442
_________
Total income . . . . . . . . . . . . . . . . . . . . 1,200
_________
Expenses
Investment management. . . . . . . . . . . . . . . . 136
Shareholder servicing. . . . . . . . . . . . . . . . 86
Custodian and accounting . . . . . . . . . . . . . . 53
Registration . . . . . . . . . . . . . . . . . . . . 17
Prospectus and shareholder reports . . . . . . . . . 12
Legal and audit. . . . . . . . . . . . . . . . . . . 12
Organization . . . . . . . . . . . . . . . . . . . . 5
Directors. . . . . . . . . . . . . . . . . . . . . . 4
Miscellaneous. . . . . . . . . . . . . . . . . . . . 4
_________
Total expenses . . . . . . . . . . . . . . . . . . . 329
_________
Net investment income. . . . . . . . . . . . . . . . . 871
_________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities . . . . . . . . 1,134
Change in net unrealized gain or
loss on securities . . . . . . . . . . . . . . . . . 6,040
_________
Net realized and unrealized gain (loss). . . . . . . . 7,174
_________
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS. . . . . . . . . . . . . . . . . . . $ 8,045
_________
_________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Dividend Growth Fund (Unaudited)
(in thousands)
Six Months Ended Year Ended
June 30, 1995 Dec. 31, 1994
________________ _____________
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . $ 871 $ 1,472
Net realized gain (loss) . . . . . . . . 1,134 1,673
Change in net unrealized
gain or loss . . . . . . . . . . . . . 6,040 (2,077)
_________ _________
Increase (decrease) in net assets
from operations. . . . . . . . . . . . 8,045 1,068
_________ _________
Distributions to shareholders
Net investment income. . . . . . . . . . (891) (1,477)
Net realized gain. . . . . . . . . . . . (103) (1,570)
_________ _________
Decrease in net assets
from distributions . . . . . . . . . . (994) (3,047)
_________ _________
Capital share transactions*
Shares sold. . . . . . . . . . . . . . . 10,858 25,974
Distributions reinvested . . . . . . . . 888 2,798
Shares redeemed. . . . . . . . . . . . . (5,630) (14,110)
_________ _________
Increase (decrease) in net
assets from capital
share transactions. . . . . . . . . . 6,116 14,662
_________ _________
Net equalization . . . . . . . . . . . . 22 52
_________ _________
NetIncrease (decrease) in net assets . . . 13,189 12,735
NET ASSETS
Beginning of period. . . . . . . . . . . . 53,597 40,862
_________ _________
End of period. . . . . . . . . . . . . . . $ 66,786 $ 53,597
_________ _________
_________ _________
____________________________________________________________________________
*Share information
Shares sold. . . . . . . . . . . . . . . 926 2,290
Distributions reinvested . . . . . . . . 74 252
Shares redeemed. . . . . . . . . . . . . (480) (1,248)
_________ _________
Increase (decrease) in
shares outstanding . . . . . . . . . . 520 1,294
_________ _________
The accompanying notes are an integral part of these financial statements.
Notes To Financial Statements
T. Rowe Price Dividend Growth Fund / June 30, 1995 (Unaudited)
Note 1 - Significant Accounting Policies
T. Rowe Price Dividend Growth Fund (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market
for such security. Listed securities that are not traded on a particular day
and securities that are regularly traded in the over-the-counter market are
valued at the mean of the latest bid and asked prices. Other equity securities
are valued at a price within the limits of the latest bid and asked prices
deemed by the Board of Directors, 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.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair market value.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
B) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized and
unrealized security gains and losses is reflected as a component of such gains
and losses.
C) Premiums and Discounts - Premiums and discounts on debt securities are
amortized for both financial and tax reporting purposes.
D) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. The fund follows the practice of
equalization under which undistributed net investment income per share is
unaffected by fund shares sold or redeemed.
Note 2 - Investment Transactions
Purchases and sales of portfolio securities, other than short-term and U.S.
government securities, aggregated $15,052,000 and $15,469,000, respectively,
for the six months ended June 30, 1995.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income
At June 30, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $60,257,000 and net unrealized gain
aggregated $6,564,000, of which $6,934,000 related to appreciated investments
and $370,000 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 $17,000 was payable at June 30, 1995. The fee is computed daily
and paid monthly, and consists of an Individual Fund Fee equal to 0.20% of
average daily net assets and a Group Fee. The Group Fee is based on the
combined assets of certain mutual funds sponsored by the Manager or Rowe-Price
Fleming International, Inc. (the Group). The Group Fee rate ranges from 0.48%
for the first $1 billion of assets to 0.31% for assets in excess of $34
billion. At June 30, 1995, and for the six months then ended, the effective
annual Group Fee rate was 0.34%. The fund pays a pro rata share of the Group
Fee based on the ratio of its net assets to those of the Group.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through December 31, 1996 which would cause the
fund's ratio of expenses to average net assets to exceed 1.10%. Thereafter
through December 31, 1998, the fund is required to reimburse the Manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio
of expenses to average net assets to exceed 1.10%. Pursuant to this agreement,
$26,000 of management fees were not accrued by the fund for the six months
ended June 30, 1995. Additionally, $380,000 of unaccrued fees and expenses
related to a previous expense limitation are subject to reimbursement through
December 31, 1996.
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 $99,000 for the six
months ended June 30, 1995, of which $22,000 was payable at period-end.
Financial Highlights
T. Rowe Price Dividend Growth Fund (Unaudited)
For a share outstanding
throughout each period
_______________________________________
From December
30, 1992
Six (Commencement
Months Year of Operations)
Ended Ended to
June 30, December 31, December 31,
1995 1994 1993
_______________________________________
NET ASSET VALUE,
BEGINNING OF PERIOD . . . $11.04 $11.48 $10.00
______ ______ ______
Investment Activities
Net investment
income . . . . . . . . 0.17# 0.35* 0.29*
Net realized and
unrealized
gain (loss). . . . . . 1.41 (0.11) 1.63
______ ______ ______
Total from
Investment
Activities . . . . . . 1.58 0.24 1.92
______ ______ ______
Distributions
Net investment
income . . . . . . . . (0.17) (0.34) (0.29)
Net realized
gain . . . . . . . . . (0.02) (0.34) (0.15)
______ ______ ______
Total
Distributions. . . . . (0.19) (0.68) (0.44)
______ ______ ______
NET ASSET VALUE,
END OF PERIOD. . . . . . $12.43 $11.04 $11.48
______ ______ ______
______ ______ ______
RATIOS / SUPPLEMENTAL DATA
Total Return . . . . . . . 14.4%# 2.2%* 19.4%*
Ratio of Expenses
to Average
Net Assets . . . . . . . 1.10%!# 1.00%* 1.00%!*
Ratio of Net
Investment Income
to Average
Net Assets . . . . . . . 2.89%!# 3.11%* 2.60%!*
Portfolio Turnover
Rate . . . . . . . . . . 60.8%! 71.4% 51.2%!
Net Assets, End of Period
(in thousands) . . . . . $66,786 $53,597 $40,862
! Annualized.
* Excludes expenses in excess of a 1.00% voluntary expense limitation in
effect through December 31, 1994.
# Excludes expenses in excess of a 1.10% voluntary expense limitation in
effect through December 31, 1996.
Shareholder Services
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety
of information and services-at no extra cost.
Knowledgeable Service Representatives
By Phone-Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(registered trademark) (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Additionally, you have the
ability to request prospectuses, statements, account and tax forms; reorder
checks; and initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access(registered trademark) provides the same information as
Tele*Access, but on a personal computer via dial-up modem.
Account Services
Checking-Write checks for $500 or more on any money market and most bond
fund accounts (except the High Yield Fund and Emerging Markets Bond Fund).
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal-If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles
on market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights-A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
T. Rowe Price No-Load Mutual Funds
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money
Market
Tax-Exempt Money
CONSERVATIVE INCOME
Short-Term Bond
Short-Term Global Income
Short-Term U.S. Government
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate
Tax-Free
Maryland Short-Term
Tax-Free Bond
Summit Municipal
Intermediate
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE
GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
Emerging Markets Stock
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
T. Rowe Price Investment Services, Inc., Distributor.
Chart 1 - Sector Diversification - A pie chart showing the percent of the
Fund's assets invested among Consumer 26%, Financial 15%, Energy 7%, Capital
Equipment 7%, Utilities 5%, Business Services & Transportation 4%, REITS 7%,
Other 9%, Reserves 20%
