SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Section Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
T. Rowe Price Capital Appreciation Fund
_________________________________________________________________
(Name of Registrant as Specified in its Charter)
T. Rowe Price Capital Appreciation Fund
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): (1)
_________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
_________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, schedule, or Registration Statement no.:
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3) Filing party:
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4) Date filed:
_________________________________________________________
T. Rowe Price
_________________________________________________________________
T. Rowe Price Capital Appreciation Fund, 100 East Pratt Street, Baltimore, MD
21202
George J. Collins
Chairman
March 7, 1997
Fellow Shareholder:
An annual meeting of shareholders of the T. Rowe Price Capital Appreciation
Fund ("the Fund") will be held on Thursday, April 24, 1997, at 2 p.m., in the
offices of the Fund s agent at 4200 West Cypress Street, Tampa, Florida. We
are asking you to vote on several matters and request that you vote your
shares by returning the enclosed proxy card even if you plan to join us for
the meeting.
As discussed in detail in the enclosed proxy materials, the Board of Trustees
of the Fund has recommended that the performance adjustment feature in the
Fund s advisory agreement be removed effective October 31, 1998. Currently,
the management fee is adjusted based on a comparison of the Fund s performance
to the performance of the Standard & Poor s 500 Composite Index ("the S&P
500"). The proposal, if approved, would remove the adjustment, which means the
Fund would pay only its current base rate for management of its assets.
In arriving at their recommendation, the Trustees determined that although the
S&P 500 is a widely used indicator of the general stock market, it has not
proven to be an appropriate benchmark for the Fund. As you well know, the Fund
attempts to achieve its goal of capital appreciation with much less risk and
volatility than the S&P 500. However, a comparison of only the return of the
Fund with that of the benchmark cannot take such risk reduction into account.
As a result, the performance adjustment may unfairly penalize the manager for
successfully keeping risk and volatility below that of the S&P 500. Because
the Trustees believe that such risk reduction is one of the primary attributes
of the Fund, and that no reliable risk-adjusted benchmark has been identified
as an acceptable alternative, they are recommending a change to the fee
structure.
If the performance adjustment were removed immediately, the Fund s effective
advisory fee rate would increase. For this reason, the Trustees have
recommended that the performance adjustment be left in place until October 31,
1998. Additionally, the Trustees have recommended that, until October 31,
1998, the Fund pay management fees equal to the lesser of the base rate or the
fee as determined with the performance adjustment. Significantly, the Fund's
overall expense ratio, even with removal of the performance adjustment, would
remain well below the median expense ratio for comparable mutual funds.
Your participation in this vote is extremely important and we encourage you to
vote your proxy now and return it in the postage-paid envelope. Your early
response will be appreciated and could save your Fund the substantial costs
associated with a follow-up mailing.
Sincerely,
George J. Collins
Chairman
CUSIP# 77954M-10-5
T. ROWE PRICE CAPITAL APPRECIATION FUND
Notice of Annual Meeting of Shareholders
April 24, 1997
An Annual Meeting of Shareholders of the T. Rowe Price Capital
Appreciation Fund (the "Fund"), a Massachusetts business trust, will be held
on Thursday, April 24, 1997, at 2 p.m., eastern time, in the offices of the
Fund s agent at 4200 West Cypress Street, Tampa, Florida. The following
matters will be acted upon at that time:
1. To elect eight trustees to serve until the next annual meeting, if
any, or until their successors shall have been duly elected and
qualified;
2. To consider and act upon a proposal to approve a new Investment
Management Agreement between the Fund and its investment manager,
T. Rowe Price Associates, Inc. ("T. Rowe Price"), by removing,
effective November 1, 1998, the performance fee adjustment set
forth in the current Investment Management Agreement;
3. To ratify or reject the selection of the firm of Coopers & Lybrand
L.L.P. as the independent accountants for the Fund for the fiscal
year 1997; and
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
LENORA V. HORNUNG
Secretary
March 7, 1997
100 East Pratt Street
Baltimore, Maryland 21202
______________________________________________________________________________
YOUR VOTE IS IMPORTANT
Shareholders are urged to designate their choices on each of the matters to be
acted upon and to date, sign, and return the enclosed proxy in the envelope
provided, which requires no postage if mailed in the United States. Your
prompt return of the proxy will help assure a quorum at the meeting and avoid
the additional Fund expense of further solicitation.
______________________________________________________________________________
T. ROWE PRICE CAPITAL APPRECIATION FUND
Annual Meeting of Shareholders--April 24, 1997
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies by the T. Rowe Price Capital Appreciation Fund (the "Fund"), a
Massachusetts business trust, for use at the Annual Meeting of Shareholders of
the Fund to be held on April 24, 1997, and at any adjournments thereof.
Shareholders are entitled to one vote for each full share, and a
proportionate vote for each fractional share, of the Fund held as of the
record date. Under Maryland law, shares owned by two or more persons (whether
as joint tenants, co-fiduciaries, or otherwise) will be voted as follows,
unless a written instrument or court order providing to the contrary has been
filed with the Fund: (1) if only one votes, that vote will bind all; (2) if
more than one votes, the vote of the majority will bind all; and (3) if more
than one votes and the vote is evenly divided, the vote will be cast
proportionately.
In order to hold the meeting, a majority of the Fund's shares entitled
to be voted must have been received by proxy or be present at the meeting. In
the event that a quorum is present but sufficient votes in favor of one or
more of the Proposals are not received by the time scheduled for the meeting,
the persons named as proxies may propose one or more adjournments of the
meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of the shares present in person or
by proxy at the session of the meeting adjourned. The persons named as proxies
will vote in favor of such adjournment if they determine that such adjournment
and additional solicitation is reasonable and in the interests of the Fund's
shareholders.
The individuals named as proxies (or their substitutes) in the enclosed
proxy card (or cards if you have multiple accounts) will vote in accordance
with your directions as indicated thereon if your proxy is received properly
executed. You may direct the proxy holders to vote your shares on a Proposal
by checking the appropriate box "For" or "Against," or instruct them not to
vote those shares on the Proposal by checking the "Abstain" box.
Alternatively, you may simply sign, date and return your proxy card(s) with no
specific instructions as to the Proposals. If you properly execute your proxy
card and give no voting instructions with respect to a Proposal, your shares
will be voted FOR the Proposal. Any proxy may be revoked at any time prior to
its exercise by filing with the Fund a written notice of revocation, by
delivering a duly executed proxy bearing a later date, or by attending the
meeting and voting in person.
The Board of Trustees has fixed the close of business on February 21,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournment thereof.
Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present for purposes of convening
the meeting. "Broker non-votes" are shares held by a broker or nominee for
which an executed proxy is received by the Fund, but are not voted as to one
or more Proposals because instructions have not been received from the
beneficial owners or persons entitled to vote, and the broker or nominee does
not have discretionary voting power. If a Proposal must be approved by a
percentage of votes cast on the Proposal, for example (Proposal 1),
abstentions and broker non-votes will not be counted as "votes cast" on the
Proposal and will have no effect on the result of the vote. If the Proposal
must be approved by a percentage of voting securities present at the meeting,
for example (Proposal 3), abstentions and broker non-votes will be considered
to be voting securities that are present and will have the effect of being
counted as votes against the Proposal.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING IS
SUFFICIENT TO APPROVE PROPOSAL 1 FOR THE FUND. A MAJORITY OF THE SHARES
PRESENT IN PERSON OR BY PROXY AT THE MEETING IS SUFFICIENT TO APPROVE PROPOSAL
3 FOR THE FUND. APPROVAL OF PROPOSAL 2 REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF THE LESSER OF (A) 67% OF THE SHARES PRESENT AT THE MEETING IN
PERSON OR BY PROXY, OR (B) A MAJORITY OF THE FUND'S OUTSTANDING SHARES.
Solicitation of proxies by telephone. In addition to soliciting proxies
by mail, in person or by telephone, the Fund may arrange to have votes
recorded by telephone. The telephone voting procedure is designed to
authenticate shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions and to confirm
that their instructions have been properly recorded. The Fund has been advised
by counsel that these procedures are consistent with the requirements of
applicable law. If these procedures were subject to a successful legal
challenge, such votes would not be counted at the meeting. The Fund is unaware
of any such challenge at this time. Shareholders would be called at the
telephone number T. Rowe Price has in its records for their accounts, and
would be asked for their social security number or other identifying
information. The shareholders would then be given an opportunity to authorize
proxies to vote their shares at the meeting in accordance with their
instructions. To ensure that the shareholders' instructions have been recorded
correctly, they will also receive a confirmation of their instructions in the
mail. A special toll-free number will be available in case the information
contained in the confirmation is incorrect.
The costs of the meeting, including the solicitation of proxies, will be
paid by the Fund. Persons holding shares as nominees will be reimbursed, upon
request, for their reasonable expenses in sending solicitation materials to
the principals of the accounts. In addition to the solicitation of proxies by
mail, trustees, officers, and/or employees of the Fund or of its investment
manager, T. Rowe Price Associates, Inc. ("T. Rowe Price"), may solicit proxies
in person or by telephone.
The approximate date on which this Proxy Statement and form of proxy are
first being mailed to shareholders is March 7, 1997.
1. ELECTION OF TRUSTEES
The Fund's Board of Trustees has nominated the eight (8) persons listed
in the following table for election as trustees, each to hold office until the
next annual meeting (if any) or until his or her successor is duly elected and
qualified. Each of the nominees, with the exception of M. David Testa, is a
member of the present Board of Trustees of the Fund and has served in that
capacity since originally elected. A shareholder using the enclosed proxy form
can vote for all or any of the nominees of the Board of Trustees or withhold
his or her vote from all or any of such nominees. If the proxy card is
properly executed but unmarked, it will be voted for all of the nominees. Each
of the nominees has agreed to serve as a trustee if elected; however, should
any nominee become unable or unwilling to accept nomination or election, the
persons named in the proxy will exercise their voting power in favor of such
other person or persons as the Board of Trustees of the Fund may recommend.
There are no family relationships among these nominees.
______________________________________________________________________________
Fund All Other
Shares Price Funds'
Year Beneficially Shares
of Owned, Beneficially
Original Directly Owned
Name, Address Election or Indirectly, Directly
and Age Principal as as of as of
of Nominee Occupations (a) Trustee 12/31/96 (b) 12/31/96 (b)
______________________________________________________________________________
Donald W.
Dick Principal, 1986 -- 5,983.834
EuroCapital EuroCapital Advisors, LLC, an acquisition and
Advisors LLC management advisory firm (8/95-present);
P.O. Box 491 formerly (5/89-7/95) Principal, Overseas
Chilmark, MA Partners, Inc., a financial investment firm;
02535-0491 formerly (6/65-3/89) Director and Vice President-
54 Consumer Products Division, McCormick &
Company, Inc., international food processors;
Director/Trustee: Waverly, Inc., and 38 other
T. Rowe Price Funds/Trusts
David K.
Fagin Chairman, Chief 1988 524.903 22,542.279
One Norwest Executive Officer and Director
Center Golden Star Resources, Ltd.;
1700 Lincoln formerly (1986-7/91) President, Chief Operating
Street Officer and Director, Homestake Mining Company;
Suite 1950 Director/Trustee of 25 other T. Rowe Price
Denver, CO Funds/Trusts
80203
58
Hanne M. Retail business 1994 927.861 26,935.994
Merriman consultant; formerly,
655 15th St. President and Chief
Suite 300 Operating Officer (1991-92),
Washington, Nan Duskin, Inc., a women's
D.C. 20005 specialty store; Director (1984-90)
55 and Chairman (1989-90) Federal Reserve Bank
of Richmond; President and Chief Executive Officer
(1988-89), Honeybee, Inc., a division of
Spiegel, Inc.; Director, Ann Taylor Stores;
Central Illinois Public Service Company; CIPSCO
Incorporated; The Rouse Company; State Farm Mutual
Automobile Insurance Company and USAir Group, Inc.,
Director/Trustee of 25 other T. Rowe Price Funds/Trusts
*James S. Vice President and 1986 15,063.379 52,779.699
Riepe member of the Executive Committee of the Fund;
100 E. Pratt Managing Director, T. Rowe Price;
Street Chairman of the Board, T. Rowe Price Investment
Baltimore, Services, Inc., T. Rowe Price Services, Inc.,
MD 21202 T. Rowe Price Trust Company, T. Rowe Price Retirement Plan
53 Services, Inc., and the following T. Rowe Price Funds:
Spectrum (since inception), Balanced (since inception), Mid-
Cap Growth (since inception), and Growth & Income; Vice
President of the T. Rowe Price International Funds; Vice
President and Director/Trustee of 56 other T. Rowe Price
Funds/Trusts; Director, Rowe Price-Fleming International,
Inc., T. Rowe Price Tax-Free Insured Intermediate Bond Fund,
Inc. (since inception) and Rhone-Poulenc Rorer, Inc.
*M. David Managing Director, -- 1,011.642 345,439.800
Testa T. Rowe Price;Chairman of the Board,
100 E Pratt Rowe Price-Fleming International,
Street Inc., Vice President and Director, T. Rowe Price
Baltimore, Trust Company; Chairman of the Board and Director of
MD 21202 17 T. Rowe Price Funds; President and Director of 4 T. Rowe
52 Price Funds; Director/Trustee, of 9 T. Rowe Price Funds; Vice
President and Director, T. Rowe Price Balanced Fund, Inc.
(since inception); and Vice President, T. Rowe Price Spectrum
Fund, Inc. (since inception)
Hubert D.
Vos President, 1986 -- 13,330.072
1114 State St. Stonington Capital Corporation,
Suite 247 a private investment company;
Santa Barbara, Director/Trustee of 25 other
CA 93190-0409 T. Rowe Price Funds/Trusts
63
Paul M.
Wythes Founding General 1994 -- 4,736.438
755 Page Partner, Sutter Hill Ventures,
Mill Rd a venture capital limited partnership
Suite A200 providing equity capital to young
Palo Alto, high technology companies throughout
CA 94304 the United States; Director/Trustee, Teltone Corporation,
63 Interventional Technologies, Inc., Stuart Medical, Inc. and
38 other T. Rowe Price Funds/Trusts
*George A. Managing Director 1994 2,485.633 2,176.888
Roche and Chief Financial Officer,
100 E. Pratt T. Rowe Price; Vice President and
Street Director, Rowe Price Fleming International, Inc.;
Baltimore, Director, T. Rowe Price New Era and Small-Cap Value Funds
MD 21202
55
* Nominees considered "interested persons" of T. Rowe Price.
(a) Except as otherwise noted, each individual has held the office
indicated, or other offices in the same company, for the last five
years.
(b) In addition to the shares owned beneficially and of record by each of
the nominees, the amounts shown reflect the proportionate interests of
Messrs. Roche, Riepe and Testa in 102,289.425 shares of the Fund which
are owned by a wholly owned subsidiary of the Fund's investment manager,
T. Rowe Price. The amount shown also reflects the aggregate interest of
Mr. Riepe in 12,799.714 shares of the Fund owned by the T. Rowe Price
401(k) Plus Plan. (The T. Rowe Price 401(k) Plus Plan became effective
as of January 1, 1997. Prior to that date, the shares were owned by the
T. Rowe Price Associates, Inc. Profit Sharing Trust.)
The trustees of the Fund who are officers or employees of T. Rowe Price
receive no remuneration from the Fund, and officers of the Fund receive no
remuneration from the Fund. For the year ended December 31, 1996, the non-
interested trustees as a group received from the Fund trustees' fees
aggregating $11,602, plus expenses. Those nominees indicated by an asterisk
(*) are persons who, for purposes of Section 2(a)(19) of the Investment
Company Act of 1940 are considered "interested persons" of T. Rowe Price. Each
such nominee is deemed to be an "interested person" by virtue of his
officership, trusteeship and/or employment with T. Rowe Price. Messrs. Dick,
Fagin, Vos, and Wythes and Ms. Merriman are the independent trustees of the
Fund. The following table provides the amount of accrued remuneration received
by the Fund's trustees for the calendar year ended December 31, 1996. The
total compensation from the Fund complex is based on compensation received
from January 1, 1996 to December 31, 1996.
______________________________________________________________________________
Total
Compensation
Aggregate From Fund and
Compensation Fund Complex
Name of From the Paid to
Person/Position (a) Fund Trustees (b)
______________________________________________________________________________
Donald W. Dick, Jr./Trustee $1,693 $72,917
David K. Fagin/Trustee $2,646 $59,167
Hanne M. Merriman/Trustee $2,646 $59,167
Hubert D. Vos/Trustee $2,646 $59,167
Paul M. Wythes/Trustee $1,971 $69,667
______________________________________________________________________________
(a) The trustees of the Fund do not receive any pensions or retirement
benefits from the Fund or T. Rowe Price.
(b) The trustees' fees set forth in the above table for calendar year 1996
are based on the following fee schedules applicable to all independent
trustees of the T. Rowe Price funds: for the period January 1, 1996 to
September 30, 1996, the fee schedule was: a fee of $25,000 per year as
the initial fee for the first Price Fund/Trust on which a trustee
serves; a fee of $5,000 for each of the second, third, and fourth Price
Funds/Trusts on which a trustee serves; a fee of $2,500 for each of the
fifth and sixth Price Funds/Trusts on which a trustee serves; and a fee
of $1,000 for each of the seventh and any additional Price Funds/Trusts
on which a trustee serves. Beginning October 1, 1996, the schedule was
revised to an annual retainer of $65,000 per year for service on the
boards of the T. Rowe Price Domestic Funds, an additional annual
retainer of $15,000 for service on the boards of the T. Rowe Price
International Funds, and a fee of $1,000 for each Audit Committee
attended. The Price Fund group included 76 funds at December 31, 1996.
The Price Funds have established a Joint Audit Committee, which is
comprised of at least one independent trustee/director representing each of
the Price Funds. Messrs. Dick and Vos, trustees of the Fund, are members of
the Committee. The other members are John G. Schreiber and F. Pierce
Linaweaver. These trustees also receive a fee of $1,000 for each Committee
meeting attended. The Audit Committee holds two regular meetings during each
fiscal year (and two such meetings were held in 1996), at which time it meets
with the independent accountants of the Price Funds to review: (1) the
services provided; (2) the findings of the most recent audit; (3) management's
response to the findings of the most recent audit; (4) the scope of the audit
to be performed; (5) the accountants' fees; and (6) any accounting questions
relating to particular areas of the Price Funds' operations or the operations
of parties dealing with the Price Funds, as circumstances indicate.
The Board of Trustees of the Fund has an Executive Committee consisting
of the interested trustees of the Fund which is authorized to assume all the
powers of the Board to manage the Fund, in the intervals between meetings of
the Board, except the powers prohibited by statute from being delegated.
The Board of Trustees of the Fund has a Nominating Committee, which is
comprised of all the Price Fund's independent trustees. The Nominating
Committee, which functions only in an advisory capacity, is responsible for
reviewing and recommending to the full Board candidates for election as
independent trustees to fill vacancies on the Fund's Board of Trustees. The
Nominating Committee will consider written recommendations from shareholders
for possible nominees. Shareholders should submit their recommendations to the
Secretary of the Fund. Members of the Nominating Committee met informally
during the last full fiscal year, but the Committee as such held no formal
meetings.
The Board of Trustees held six meetings during the last full fiscal
year. Each trustee standing for reelection attended all of the meetings of the
Board of Trustees (held during the period for which he or she was a trustee)
and (ii) all of the meetings held by all committees of the Board on which he
or she served.
2. PRESENT AND PROPOSED INVESTMENT MANAGEMENT AGREEMENTS
On February 5, 1997, the Board of Trustees of the Fund, including the
trustees who are not "interested persons" of T. Rowe Price or the Fund,
unanimously voted to approve a new management agreement between the Fund and
T. Rowe Price (the "Proposed Agreement"), which is identical to the Fund's
present investment advisory agreement (the "Present Agreement") except that:
(i) the Performance Fee Adjustment component of the Present Agreement would be
removed from the Proposed Agreement effective November 1, 1998; and (ii) the
group fee portion of the management fee has been revised to add new break
points that reduce the Fund s fee as the assets of the T. Rowe Price mutual
funds grow. To prevent unfairness to the Fund, during the initial 18-month
period of Management Fee owed by the Fund to T. Rowe Price can only be
decreased, but not increased as a result of the Performance Fee Adjustment.
The Performance Fee Adjustment is described on page 13.
If the Proposed Agreement is approved by the shareholders of the Fund,
it will become effective on May 1, 1997. If the Proposed Agreement is not
approved by the shareholders of the Fund, the Present Agreement will continue
in effect through April 30, 1998.
PRESENT AGREEMENT
Approval of Present Agreement
The Present Agreement was approved by the shareholders of the Fund on
April 22, 1987 and became effective on May 1, 1987. The Present Agreement was
submitted to shareholders at that time for the purpose of adopting the present
fee structure described below. By its terms, the Present Agreement will
continue in effect from year to year as long as it is approved annually by the
Fund's Board of Trustees (at a meeting called for that purpose) or by vote of
a majority of the Fund's outstanding shares. In either case, renewal of the
Present Agreement must be approved by a majority of the Fund's independent
Trustees. The Present Agreement is subject to termination without penalty on
60 days' written notice by either party to the other and will terminate
automatically in the event of assignment.
Role of T. Rowe Price
Under the Present Agreement, T. Rowe Price provides the Fund with
discretionary investment services. Specifically, T. Rowe Price is responsible
for supervising and directing the investments of the Fund in accordance with
the Fund's investment objective, program, and restrictions as provided in its
prospectus and Statement of Additional Information. T. Rowe Price is also
responsible for effecting all securities transactions on behalf of the Fund,
including the negotiation of commissions and the allocation of principal
business and portfolio brokerage. In addition to these services, T. Rowe Price
provides the Fund with a wide range of corporate administrative services. The
Present Agreement provides that the Fund will bear all expenses of its
operations not specifically assumed by T. Rowe Price.
The Present Agreement also provides that T. Rowe Price, its directors,
officers, employees, and certain other persons performing specific functions
for the Fund will only be liable to the Fund for losses resulting from willful
misfeasance, bad faith, gross negligence, or reckless disregard of duty.
Management Fee
Group and Individual Fund Fee. For its services to the Fund under the
Present Agreement, T. Rowe Price is paid a management fee ("Management Fee")
consisting of three elements: a "group" fee ("Group Fee"), an "individual"
fund fee ("Individual Fund Fee"), and a Performance Fee Adjustment. The Group
Fee and Individual Fund Fee combine to make the Base Management Fee. The Group
Fee varies and is based on the combined net assets of all of the Price Funds
(other than institutional or "private label" funds, Equity Index, and Spectrum
Funds). Based on combined Price Funds' assets of approximately $61 billion at
December 31, 1996, the Group Fee was 0.33%. The Individual Fund Fee is 0.30%.
Present Performance-Based Fee. The Base Management Fee (Group Fee and
Individual Fund Fee) is adjusted each month, upward or downward, depending on
the extent to which the investment performance of the Fund exceeds, or is
exceeded by, the record of the Standard & Poor s 500 Composite Index (the
"Index" or "S&P 500") over the immediately preceding 36-month period. The
amount of the adjustment is .02% for each percentage point of difference
between the performance of the Fund and the performance of the Index. The
Performance Fee Adjustment is subject to a maximum adjustment of .30%.
PROPOSED AGREEMENT
The Proposed Agreement is identical to the Present Agreement except
that: (1) the Performance Fee Adjustment terminates on October 31, 1998; and
(2) during the period May 1, 1997 to October 31, 1998, the Performance Fee
Adjustment can only be negative, that is, the Management Fee will never be
higher than the Base Management Fee but may be lower if the Fund's performance
is less than the S&P 500's performance. After October 31, 1998, the Fund's
Management Fee will be the Base Management Fee only.
Reference is made to the attached Proposed Agreement for more detailed
information.
MATTERS CONSIDERED BY THE BOARD OF TRUSTEES
On February 5, 1997, the Board of Trustees met to consider termination
of the Performance Fee Adjustment. In reviewing this matter, the Trustees
considered: (1) the fairness of the fee when Fund performance equals the
Index's performance (the "fulcrum" fee); (2) the appropriateness of the Index;
(3) the length of time over which performance is calculated; and (4) the
computation of performance over a rolling 36-month period.
Why the Fund Has a Performance Fee
The Performance Fee Adjustment was adopted when the Fund began
operations in 1986. At that time, it was believed that the S&P 500 Index would
be an appropriate benchmark against which to measure the Fund's performance.
The Trustees believed it would be appropriate to reward T. Rowe Price if it
were able to outperform the Index and penalize T. Rowe Price if it failed to
do so.
Over the years, however, the Fund's investment emphasis has changed and
the Index no longer appears to be a fair or reasonable measure of the Fund's
performance. Since January 1989, when Richard Howard, the Chairman of the
Fund's advisory committee, assumed primary responsibility for the Fund, the
Fund has been pursuing its investment program in a manner which generally has
resulted in an investment portfolio significantly less volatile than the
Index. As a result, during this time, the Fund's performance has tended to
exceed that of the S&P 500 when the Index's return has been moderate by
historical levels, and the Fund has lagged the Index when the S&P 500's return
has been significantly higher than historical averages. This is demonstrated
in the chart below.
Capital
S&P 500 Appreciation
Year Return Fund Return Difference
1996 23.0% 16.8% (6.2%)
1995 37.6% 22.6% (15.0%)
1994 1.3% 3.8% 2.5%
1993 10.1% 15.7% 5.6%
1992 7.6% 9.4% 1.8%
1991 30.5% 21.6% (8.9%)
1990 (3.1%) (1.3%) 1.8%
1989 31.7% 21.4% (10.3%)
1988 16.6% 21.2% 4.6%
1987 5.1% 5.7% 0.6%
1986 (1.8%) 8.5% 10.3%
The more conservative nature of the Fund's portfolio relative to the
Index can be seen by the composition of the Fund on December 31, 1996.
Common Stocks 50.4%
Convertible Bonds 27.6%
Preferred Stocks 5.2%
Government Bonds 7.5%
Cash Reserves 10.0%
Other (0.7%)
100.0%
Typically, the Fund's cash and fixed income positions have averaged 15%
to 20%. By contrast, the Index consists of 100% common stocks. Thus, without
adjusting for risk, it is not meaningful to compare the Fund's performance
with that of the Index. The Fund attempts to reduce risk as well as maximize
gains.
The Fund's Experience With the Performance Fee
Since the Performance Fee's inception, there have been 114 monthly
performance calculations: an increased fee was paid 52 times; a decreased fee
60 times; and no fee adjustment was made only two times. The monthly fee
payment has been increased by as much as $84,000 (December 1994) and decreased
by as much as $187,000 (November 1996).
Until 1996, the cumulative effect of the Performance Fee Adjustments was
roughly neutral -- increases essentially offset decreases. For 1996, however,
the fee was adjusted downward by about $1.5M, reducing the Base Management Fee
from .63% to .46%.
In light of all of these considerations, the Board decided it would be
appropriate to eliminate the Performance Fee Adjustment portion of the
Management Fee. In order to avoid the unfairness which could result to the
Fund by eliminating the Performance Fee Adjustment during the Fund's recent
period of underperformance relative to the Index, the Board decided that
during an 18-month phase-out period, the Performance Fee Adjustment will
remain in effect, but only to the extent it will decrease the fee payable to
T. Rowe Price.
Additional Board Deliberations
On March 5, 1997, in connection with their annual review of the advisory
contracts of all the equity mutual funds managed by T. Rowe Price, the Board
of Trustees met again and reviewed extensive data provided to it by T. Rowe
Price. This included: (1) the nature and quality of the services rendered and
the results achieved by T. Rowe Price in the areas of investment performance;
(2) the payments received by T. Rowe Price and its affiliates from all sources
involving both the Fund and the other Price Funds; (3) extensive financial,
personnel, and structural information as to the T. Rowe Price organization,
including the costs borne by, and profitability of, T. Rowe Price and its
affiliates in providing services of all types to the Fund, the other Price
Funds and with respect to T. Rowe Price's other investment advisory services;
(4)information as to the management fees charged the other Price Funds as well
as T. Rowe Price's other advisory clients; (5) competitive industry fee
structures and expense ratios; (6) the organizational capabilities and
financial condition of T. Rowe Price; and (7) the fall-out benefits which
T. Rowe Price and its affiliates may have received from T. Rowe Price's
relationship to the Fund.
The Board also compared the Management Fees that the Fund has paid under
the Present Agreement with the Management Fees that the Fund would have paid
under the Proposed Agreement had it been in effect during the most recent
fiscal year and information concerning the Fund's expense ratios on both an
existing and pro forma basis.
In addition, the Trustees considered the benefits received by T. Rowe
Price in the form of research services from broker dealers which effect
securities transactions for the T. Rowe Price Funds. Research services
received from brokers and dealers are supplemental to T. Rowe Price's own
research effort. As a practical matter, it would not be possible for T. Rowe
Price's Equity Research Division to generate all of the information presently
provided by brokers and dealers. T. Rowe Price pays cash for certain research
services received from external sources. T. Rowe Price also allocates
brokerage from the T. Rowe Price Funds for research services which are
available for cash. While receipt of research services from brokerage firms
has not reduced T. Rowe Price's normal research activities, the expenses of
T. Rowe Price could be materially increased if it attempted to generate such
additional information through its own staff. To the extent that research
services of value are provided by brokers or dealers, T. Rowe Price may be
relieved of expenses which it might otherwise bear.
Effect of Removal of the Performance Fee
The effect of the proposed removal of the Performance Fee Adjustment on
the Fund's Base Management Fee is set forth below, by showing what the Base
Management Fee would have been for the most recent year if the Performance Fee
had not been in effect.
12 Months Ended
Dec. 31, 1996
Effective Management Fee Rate
-Present agreement 0.46%
-Proposed agreement 0.63%
-Percentage change 37.00%
Expense Ratio
-Present agreement 0.76%
-Proposed agreement 0.93%
-Percentage change 22.37%
Management Fee
-Present agreement $4,218,000
-Proposed agreement $5,748,000
-Difference between aggregate amounts $1,530,000
-Percentage change 36.27%
Average Net Assets of the Fund $910,511,000
Shown below is a comparison between all expenses and fees the Fund
incurred during its fiscal year ended December 31, 1996, and the fees and
expenses the Fund would have incurred had the proposed fee change been in
effect.
Shareholder Transaction Expenses
Sales load "charge" on purchases None
Sales load "charge" on reinvested dividends None
Redemption fees None
Exchange fees None
Annual Fund Expenses
Current (a) Proposed
Management fee 0.46% 0.63%
Distribution fees (12b-1) None None
Total other (Shareholder servicing,
custodial, auditing, etc.) 0.30% 0.30%
Total Fund Expenses 0.76% 0.93%
(a) The management fee rate for January and February 1997 decreased to 0.40%
and 0.39%, respectively, under the Present Agreement. While it is not
possible to predict the future performance of the Fund relative to the
S&P 500 Index, based on current information, it is projected that the
effective management fee rate for fiscal 1997 will be in a range of
approximately 0.37% to 0.39%.
Note: A $5 fee is charged for wire redemptions under $5,000, subject to change
without notice, and a $10 fee is charged for small accounts when
applicable.
The following example illustrates, for both the existing fee schedule
and the proposed fee change, the expenses you would incur on a $1,000
investment, assuming a 5% annual rate of return and redemption at the end of
each period shown. This is an illustration only. Actual expenses and
performance may be more or less than shown.
1 3 5 10
Year Years Years Years
Current $8 $24 $42 $ 94
Proposed $9 $30 $51 $114
Importantly, even if just the Base Management Fee had been in effect in
1996, the Fund's overall expense ratio of 0.93% would be below the median
expense ratio of comparable mutual funds.
Fees on Similar Funds
T. Rowe Price also acts as investment adviser or subadviser to several
registered investment companies (Price Funds and "Non-Price Funds") having
similar investment objectives and policies to those of the T. Rowe Price
Capital Appreciation Fund. For this purpose, Price Funds are mutual funds
sponsored by T. Rowe Price and Non-Price Funds are mutual funds not sponsored
by T. Rowe Price.
The following table sets forth the name of each investment company
having similar investment objectives to the T. Rowe Price Capital Appreciation
Fund, the annual rate of compensation (i.e., the fee T. Rowe Price is paid for
its services as adviser or subadviser to the respective portfolio), and net
assets as of December 31, 1996.
_____________________________________________________________________________
Net Assets Annual Rate Fees
Investment of Fund at of Com- Waived
Name of Fund Objective 12/31/96 pensation or Reduced
T. Rowe Price Capital $875,973,000 0.48% No
Balanced Fund appreciation;
current income, and
preservation of
capital
T. Rowe Price Long-term capital $2,489,000,000 0.58% No
Growth & Income growth, a reasonable
Fund level of current income,
and increasing future income
T. Rowe Price Substantial $7,818,000,000 0.58% No
Equity dividend income
Income Fund as well as long-
term capital
appreciation
Penn Series Capital $396,258,922 0.50% of No
Funds, Inc.(a) appreciation average
and income daily net
assets
Ohio National Maximum capital $37,967,035 0.70% of No
Fund, Inc. (a) growth the first
$5 million and
0.50% of average
daily net assets in
excess of $5 million
(a) T. Rowe Price does not provide administrative services to the Penn
Series and Ohio National Funds to the same degree as it does the other
funds in this table.
_____________________________________________________________________________
If approved, the Proposed Agreement will continue in effect until
April 30, 1998, and thereafter from year to year as long as it is approved
annually by the Board of Trustees of the Fund at a meeting called for that
purpose or by a vote of the Fund's outstanding shares. If the Proposed
Agreement is not approved by the shareholders, the Present Agreement will
continue in effect through April 30, 1998.
3. RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The selection by the Board of Trustees of the firm of Coopers & Lybrand
L.L.P. as the independent accountants for the Fund for the fiscal year ending
December 31, 1997, is to be submitted for ratification or rejection by the
shareholders at the Meeting. The firm of Coopers & Lybrand L.L.P. has served
the Fund as independent accountants since inception. The independent
accountants have advised the Fund that they have no direct or material
indirect financial interest in the Fund. Representatives of the firm of
Coopers & Lybrand L.L.P. are expected to be present at the Meeting and will be
available to make a statement, if they desire to do so, and to respond to
appropriate questions which the shareholders may wish to address to them.
OTHER BUSINESS
The management of the Fund knows of no other business which may come
before the meeting. However, if any additional matters are properly presented
at the meeting, it is intended that the persons named in the enclosed proxy,
or their substitutes, will vote such proxy in accordance with their judgment
on such matters.
INFORMATION ABOUT T. ROWE PRICE
Directors of T. Rowe Price
The Fund's investment manager is T. Rowe Price, a Maryland corporation,
100 East Pratt Street, Baltimore, Maryland 21202. The principal executive
officer of T. Rowe Price is George J. Collins, who together with Mr. Riepe,
James E. Halbkat, Jr., Henry H. Hopkins, James A. C. Kennedy III, John H.
Laporte, Richard L. Menschel, William T. Reynolds, George A. Roche, John W.
Rosenblum, Robert L. Strickland, M. David Testa, Philip C. Walsh, and Anne
Marie Whittemore, constitute its Board of Directors. The address of each of
these persons, with the exception of Messrs. Halbkat, Menschel, Rosenblum,
Strickland, Walsh, and Mrs. Whittemore, is 100 East Pratt Street, Baltimore,
Maryland 21202, and, with the exception of Messrs. Halbkat, Menschel,
Rosenblum, Strickland, Walsh, and Mrs. Whittemore, all are employed by T. Rowe
Price. Mr. Halbkat is President of U.S. Monitor Corporation, a provider of
public response systems. Mr. Halbkat's address is: P.O. Box 23109, Hilton
Head Island, South Carolina 29925. Mr. Menschel is a limited partner of The
Goldman Sachs Group, L.P. Mr. Menschel's address is 85 Broad Street, 2nd
Floor, New York, New York 10004. Mr. Rosenblum is the Dean of the Jepson
School of Leadership Studies at the University of Richmond, and a director of:
Chesapeake Corporation, a manufacturer of paper products; Cadmus
Communications Corp., a provider of printing and communication services;
Comdial Corporation, a manufacturer of telephone systems for businesses; Cone
Mills Corporation, a textiles producer, and Providence Journal Company, a
publisher of newspapers and owner of broadcast television stations. Mr.
Rosenblum's address is: University of Richmond, Virginia 23173. Mr.
Strickland is Chairman of Lowe's Companies, Inc., a retailer of specialty home
supplies and a Director of Hannaford Bros., Co., a food retailer. Mr.
Strickland's address is 604 Two Piedmont Plaza Building, Winston-Salem, North
Carolina 27104. Mr. Walsh is a Consultant to Cyprus Amax Minerals Company,
Englewood, Colorado. Mr. Walsh's address is: Pleasant Valley, Peapack, New
Jersey 07977. Mrs. Whittemore is a partner of the law firm of McGuire, Woods,
Battle & Boothe and is a director of Owens & Minor, Inc.; USF&G Corporation;
the James River Corporation of Virginia; and Albemarle Corporation. Mrs.
Whittemore's address is One James Center, Richmond, Virginia 23219.
The officers of the Fund (other than the nominees for election as
trustees) and their positions with T. Rowe Price are as follows:
_________________________________________________________________
Position Position With
Officer With Fund T. Rowe Price
_________________________________________________________________
Richard P. Howard President Vice President
Arthur B. Cecil III Vice President Vice President
Henry H. Hopkins Vice President Managing Director
Charles A. Morris Vice President Managing Director
Charles M. Ober Vice President Vice President
Lenora V. Hornung Secretary Vice President
Carmen F. Deyesu Treasurer Vice President
David S. Middleton Controller Vice President
J. Jeffrey Lang Assistant
Vice President Assistant Vice President
Ingrid I.
Vordemberge Assistant
Vice President Employee
Patricia S. Butcher Assistant Secretary Assistant Vice President
The Fund has an Underwriting Agreement with T. Rowe Price Investment
Services, Inc. ("Investment Services"), a Transfer Agency Agreement with
T. Rowe Price Services, Inc. ("Price Services") and an Agreement with T. Rowe
Price Retirement Plan Services, Inc. ("Retirement Services"). Each of these
entities is a wholly owned subsidiary of T. Rowe Price. The address of each is
100 East Pratt Street, Baltimore, Maryland 21202. James S. Riepe, Trustee of
the Fund, is Chairman of the Board of Price Services, Retirement Plan
Services, and Investment Services. Henry H. Hopkins, a Vice President of the
Fund, is a Vice President and Director of both Investment Services and Price
Services and a Vice President of Retirement Services. Certain officers of the
Fund own shares of the common stock of T. Rowe Price, its only class of
securities.
Other Services Provided by T. Rowe Price
In addition to the services provided under the Present Agreement, Price
Services and Retirement Services perform certain non-advisory services for the
Fund under separate service contracts. T. Rowe Price also provides certain
accounting services for the Fund. Specifically,
(i) Price Services provides certain transfer agency and other
shareholder administrative and communication services for all accounts, for
which the Fund paid Price Services fees totaling $665,000 for the fiscal year
ended December 31, 1996, (ii) Retirement Services performs certain
subaccounting and record keeping services with respect to shareholder accounts
in certain retirement plans for which the Fund paid retirement services fees
totaling $1,298,000 for the same period, and (iii) T. Rowe Price calculates
the daily share price and maintains the portfolio and general accounting
records of the Fund, for which the Fund paid T. Rowe Price fees totaling
$85,000 for the same period. All such fees are reviewed annually by the Fund's
Trustees in connection with renewal of the service contracts involving these
entities. The services provided by these entities will continue to be provided
whether or not the Proposed Agreement is approved.
The T. Rowe Price Trust Company (the "Trust Company"), a wholly owned
subsidiary of T. Rowe Price, serves as trustee and custodian for certain IRA,
Keogh, and other prototype plans which utilize the Price Funds as investment
options. For these services, the Trust Company charges each such shareholder
account a fiduciary fee. During 1996, the aggregate of such fees totaled
approximately $2,958,000 (of this amount, approximately $29,900 were paid with
respect to Fund accounts). In addition, Retirement Services provides
administrative services to certain defined contribution retirement plans.
During 1996, Retirement Services received fees from all plans utilizing such
services in the amount of $16,415,000.
Investment Services, the distributor for the Price Funds, makes
available to shareholders of the Price Funds a discount brokerage service.
During 1996, this service generated net commissions totaling $9,025,000.
Transactions in T. Rowe Price Stock
The following information pertains to transactions involving common
stock of T. Rowe Price, par value $.20 per share ("Stock"), during the period
January 1, 1996 through December 31, 1996. On April 30, 1996, the Company
split these shares 2-for-1. All share data in this section has been adjusted
to reflect this stock split. There were no transactions during the period by
any trustee or officer of the Fund, or any trustee or officer of T. Rowe Price
which involved more than 1% of the outstanding stock of T. Rowe Price. These
transactions did not involve, and should not be mistaken for, transactions in
the stock of the Fund.
During the period, certain employees exercised their options for a total
of 939,925 shares of stock at an average price $7.28 per share. Pursuant to
the terms of T. Rowe Price's Employee Stock Purchase Plan, eligible employees
of T. Rowe Price and its subsidiaries purchased an aggregate (including
dividends reinvested) of 107,795 shares of stock at fair market value. Such
shares were purchased in the open market during this period for employees'
accounts.
T. Rowe Price's Board of Directors has approved the repurchase of shares
of its stock in the open market. During 1996, T. Rowe Price purchased 640,000
shares of stock under this plan, leaving 2,700,000 shares of Stock authorized
for future repurchase at December 31, 1996.
During the period, T. Rowe Price issued 1,913,000 common stock options
with an average exercise price of $35.88 per share to certain employees and
directors under terms of the 1990 and 1993 Stock Incentive Plans and the 1995
Director Stock Option Plan.
GENERAL INFORMATION ABOUT THE FUND
Share Ownership of Fund
As of December 31, 1996, there were 66,341,612 shares of the capital
stock of the Fund outstanding, each without par value. Of those shares,
approximately 22,450,901.674, representing 33.89% of the outstanding stock,
were registered to T. Rowe Price Trust Company as Trustee for participants in
various defined contribution retirement plans. The T. Rowe Price Trust Company
has no beneficial interest in such accounts nor in any other account for which
it may serve as trustee or custodian.
As of December 31, 1996, approximately 10,095 shares of the Fund,
representing approximately 0.02% of the outstanding stock, were owned by
various private counsel clients of T. Rowe Price, as to which T. Rowe Price
has discretionary authority. Accordingly, such shares are deemed to be owned
beneficially by T. Rowe Price only for the limited purpose as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934. T. Rowe Price
disclaims actual beneficial ownership of such shares. In addition, as of
December 31, 1996, a wholly owned subsidiary of T. Rowe Price owned directly
102,289.425 shares of the Fund, representing approximately 0.15% of the
outstanding stock.
Principal Holders
As of February 28, 1997, approximately 4,945,279 shares of the Fund,
representing 7.00% of the outstanding stock, were owned by Charles Schwab &
Co., Inc., Reinvest. Account, Attn.: Mutual Fund Department, 101 Montgomery
Street, San Francisco, CA 94104-4122.
Security Ownership of Management
______________________________________________________________________________
Name of Beneficial Owner Amount and Nature
and Position With Fund of Ownership (a)(b)
George J. Collins, Trustee 3,068.683
Donald W. Dick, Trustee --
David K. Fagin, Trustee 524.903
Hanne M. Merriman, Trustee 927.861
James S. Riepe, Trustee 15,063.379
Hubert D. Vos, Trustee --
Paul M. Wythes, Trustee --
George A. Roche, Trustee 2,485.633
M. David Testa, Nominee 1,011.642
Richard P. Howard, President 6,228.927
Management as a Group (c) 29,311.028
(a) All securities listed represent ownership in shares of common stock.
(b) In addition to the shares owned beneficially and of record by each of
the nominees, the amounts shown reflect the proportionate interest of
Messrs. Collins, Howard, Riepe, Roche, and Testa in 102,289 shares of
the Fund which are owned by a wholly owned subsidiary of the Fund's
investment manager, T. Rowe Price. The amount shown also reflects the
aggregate interest of Messrs. Riepe and Howard in 18,819 shares of the
Fund owned by the T. Rowe Price 401(k) Plus Plan.
(c) Management as a group, as well as each member of management
individually, own less than one percent of the outstanding shares of the
Fund.
______________________________________________________________________________
As of December 31, 1996, the officers and trustees of the Fund, as a
group, beneficially owned, directly or indirectly, 39,860.445 shares,
representing approximately 0.06% of the Fund's outstanding stock. The
ownership of the officers and trustees reflects their proportionate interests,
if any, in 102,289.425 shares of the Fund which are owned by a wholly owned
subsidiary of the Fund's investment manager, T. Rowe Price, and their
interests in 28,693.412 shares owned by the T. Rowe Price 401(k) Plus
Plan.
A COPY OF THE ANNUAL REPORT OF THE FUND FOR THE YEAR ENDED DECEMBER 31, 1996,
INCLUDING FINANCIAL STATEMENTS WAS MAILED TO ALL SHAREHOLDERS OF RECORD AT THE
CLOSE OF BUSINESS ON THAT DATE. HOWEVER, A COPY OF THIS REPORT WILL BE
PROVIDED, WITHOUT CHARGE, TO ANY SHAREHOLDER UPON REQUEST. PLEASE CALL T. ROWE
PRICE AT 1-800-225-5132 OR WRITE TO 100 EAST PRATT STREET, BALTIMORE, MARYLAND
21202 TO REQUEST THE REPORT.
ANNUAL MEETINGS
Under Massachusetts Law, the Fund is not required to hold an annual
meeting. The Board of Trustees of the Fund has determined that in order to
avoid the significant expense associated with holding annual meetings,
including legal, accounting, printing and mailing fees incurred in preparing
proxy materials, the Fund will take advantage of these Massachusetts law
provisions. Accordingly, no annual meetings shall be held in any year in which
a meeting is not otherwise required to be held by the Act unless the Board of
Trustees otherwise determines that there should be an annual meeting. However,
special meetings will be held in accordance with applicable law or when
otherwise determined by the Board of Trustees. The Fund's By-Laws reflect this
policy.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal to be included in the
Proxy Statement for the next Annual Meeting, and if such Annual Meeting is
held in April 1998, such proposal must be submitted in writing and received by
the Fund's Secretary at its Baltimore office prior to November 1, 1997.
T. ROWE PRICE (LOGO) PROXY
_____________________________________________________________________________
INSTRUCTIONS:
1.Cast your vote by checking the appropriate boxes on the reverse side. If you
do not check a box, your vote will be cast FOR that proposal.
2.Sign and date the card below.
3.Please return the signed card promptly using the enclosed postage paid
envelope, even if you will be attending the meeting.
4.Please do not enclose checks or any other correspondence.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Please fold and detach card at perforation before mailing
T. ROWE PRICE CAPITAL APPRECIATION FUND ANNUAL MEETING: 2:00 P.M. EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints James S. Riepe and George A. Roche, as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all shares of stock of the Fund,
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held on Thursday, April 24, 1997, at the time indicated above, in the
offices of the Fund's agent at 4200 West Cypress Street, Tampa, Florida, 33607,
and at any and all adjournments thereof, with respect to the matters set forth
below and described in the Notice of Annual Meeting and Proxy Statement dated
March 7, 1997, receipt of which is hereby acknowledged.
Dated: _________________, 1997
Please sign exactly as name appears. Only
authorized officers should sign for
corporations. For information as to the
voting of stock registered in more than
one name, see page 2 of the Notice of
Annual Meeting and Proxy Statement.
__________________________________________
/ /
/ /
/ /
__________________________________________
Signature(s)
CUSIP# 77954M105/FUND#072
(FRONT)
T. ROWE PRICE (LOGO) We Need Your Proxy Vote Before April 24, 1997
_____________________________________________________________________________
Please refer to the Proxy Statement discussion of each matter.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE SHAREHOLDER. IF NO DIRECTION IS MADE FOR A PROPOSAL, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOXES BELOW, AS SHOWN, USING BLUE OR
BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
1.Election of trustees. FOR all nominees WITHHOLD AUTHORITY1.
Donald W. Dick, Jr. David K. Fagin listed at left to vote for all
Hanne M. Merriman James S. Riepe (except as marked nominees listed
George A. Roche M. David Testa to the contrary) at left
Hubert D. Vos Paul M. Wythes
(INSTRUCTION: TO WITHHOLD AUTHORITY TO / / / /
VOTE FOR AN INDIVIDUAL NOMINEE WRITE THE
NOMINEE'S NAME ON THE LINE BELOW.)
_______________________________________ FOR AGAINST ABSTAIN
2.Amendment of the Fund s / / / / / / 2.
Investment Management Agreement.
3.Ratify the selection of Coopers & / / / / / / 3.
Lybrand L.L.P. as
independent accountants.
In their discretion, the Proxies are authorized to consider and act upon such
other business as may properly come before the meeting.
CUSIP# 77954M105/FUND#072
(BACK)