______________________
SEMIANNUAL REPORT
______________________
OTC Funds
______________________
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 OTC Fund
<PAGE>
--------------------------------------------------------------------------------
Fellow Shareholders
--------------------------------------------------------------------------------
The second quarter was terrific for U.S. stocks and your fund. A bracing
tonic of rising corporate earnings and falling interest rates sparked a broad
rally, paced by highflying technology stocks. Financial stocks and selected
large- capitalization issues also led the pack.
Small stocks sparkled too. Your OTC Fund essentially matched its benchmark,
the unmanaged Russell 2000 Index of small-company stocks, in the quarter and the
first half. After significantly lagging the unmanaged, large-c ap dominated S&P
500 in the first quarter, small stocks -- and your fund -- enjoyed a late surge
in the second quarter, nearly matching the broad market index in that period.
Nevertheless, your fund and most market indices trailed the technology-laden
Nasdaq composite in the three- and six-month periods.
Technology was the leading sector in "small-cap land" with that component
of the Russell 2000 rising a dazzling 18%. Durable goods and energy also soared,
up 17% and 10%, respectively. Meanwhile, real estate investment trusts (REITs)
and health care lagged, producing modest gains of 2.7% and 1.6%. While your fund
was modestly underweighted in technology during the quarter, good stock
selection in this sector, plus an overweighting in energy services and several
takeovers of portfolio holdings, allowed us to finish virtually neck-in-neck
with the Russell 2000.
--------------------------------------------------------------------------------
Performance Comparison
--------------------------------------------------------------------------------
Periods Ended 6/30/95
3 Months 6 Months
---------------------
OTC Fund 9.2% 14.6%
Russell 2000 9.4 14.4
Nasdaq Composite* 14.2 24.1
S&P 500 9.6 20.2
*Principal only
________________________________________________________________________________
Looking ahead, we believe the prospects for small-cap stocks are becoming
even brighter. The market's spectacular run this year has been narrowly led by
large multinational companies, whose overseas earnings got a boost from the
generally weak dollar and a speculative frenzy in technology stocks. We expect
this momentum will shift to small-cap stocks. More on that in the outlook
section.
<PAGE>
--------------------------------------------------------------------------------
INVESTMENT REVIEW
--------------------------------------------------------------------------------
In the past, we've repeatedly expressed our fondness for RICHFOOD HOLDINGS,
a Richmond, Virginia-based wholesale grocery distributor. In late June, Richfood
announced a definitive agreement to acquire SUPER RITE, a wholesale food
distributor headquartered in Pennsylvania. The deal substantially increases
Richfood's revenues and makes it the dominant low-cost distributor in the
Mid-Atlantic.
We expect Richfood's seasoned management to quickly combine the two
businesses, cut costs by eliminating redundant operations, and enhance
profitability by adding Richfood's higher margin fresh produce and meat
distribution lines to Super Rite's system. The resulting economies of scale
should lead to substantial earnings gains. Consequently, after the quarter
ended, we aggressively added to our already substantial position in Richfood by
acquiring shares in Super Rite. As a result, Richfood passed SELECTIVE INSURANCE
as the fund's largest holding, representing 2.7% of total assets. This late move
is not reflected in the table following this letter, which ranks holdings as of
June 30.
Richfood wasn't the only merger among our major holdings. Also in late
June, ENTERRA announced an agreement to merge with WEATHERFORD INDUSTRIES. The
combined company will dominate the oil service rental tool market. As with
Richfood-Super Rite, the deal offers tremendous opportunities for synergy
between the two companies. With improving fundamentals, substantial cost
savings, and strong combined management, we believe Weatherford-Enterra will
provide significant appreciation.
In managing your money, we have always felt a healthy dose of contrarian
thought can lead to attractive investment opportunities. Like the old maxim
about "buying straw hats in winter," great bargains can be found by betting
against the crowd. A year ago, it was quite profitable to purchase the then
out-of-favor technology sector, but at this point we're more inclined to sell
tech stocks. This year's downtrodden opportunity appears to be in REITs, which
now constitute a substantial part of the Russell 2000 Index. REITs essentially
offer an income-producing, liquid method of investing in professionally managed
real estate property. Due to special tax regulations, the lion's share of the
properties' income must be passed along to shareholders, making the securities
attractive to income-oriented investors. High-yielding stocks, such as utilities
and REITs, have been out of favor for most of the past 18 months. REITs in
particular have rarely looked as attractive for capital appreciation as they do
now.
FELCOR SUITES HOTELS, a REIT which owns equity interests in 10 EMBASSY
SUITES hotels, buys existing hotels at prices below replacement value.
Management implements better operating practices and raises room rates to market
levels. This strategy allows FelCor to earn a return on cash flow that exceeds
its cost of capital. Under tax law, the bulk of these returns must be paid to
shareholders as dividends. We believe FelCor management has the opportunity,
experience, and capital to aggressively acquire properties. We purchased the
company's shares at only 10 times cash flow, which is growing at 15% a year.
<PAGE>
Mergers that eliminated holdings also boosted fund performance. Two large
holdings accepted all-cash tender offers during the June quarter. These were
MOORCO, a manufacturer of meters and valves for the petroleum industry, acquired
by FMC; and FLAIR, an industrial filtration manufacturer, bought by United
Dominion of Canada. Both holdings were consequently eliminated by the fund. As
in the previous quarter, we continued to reduce our technology holdings because
we think they are fully valued. XILINX, the semiconductor firm, and 3COM, a
manufacturer of networking equipment, both fit this bill.
While the fund was fortunate to have six mergers or takeovers during the
quarter, we just missed the IBM acquisition of LOTUS DEVELOPMENT. Disappointing
sales of Lotus Notes networking software and a disastrous first quarter for
Lotus 1-2-3 spreadsheets eroded the company's fundamentals, persuading us to
sell our position just days before the lucrative offer was announced.
Nevertheless, six deals in a quarter is extraordinary, and we believe it
validates our approach to selecting well-managed niche companies.
--------------------------------------------------------------------------------
OUTLOOK
--------------------------------------------------------------------------------
Despite their strong second quarter, small-cap stocks slightly trailed the
S&P 500 for the third consecutive period. At the risk of sounding like a broken
record, we continue to believe small stocks are poised for significant
outperformance. The spectacular advance of 1995 has been dominated by large blue
chips and technology stocks, leaving many sectors behind.
Investors naturally seek the sectors with the best fundamentals and
superior earnings growth. A recent example is stocks that benefit from a falling
dollar, such as multinationals and export-driven domestic companies. Blue chips
dominate these categories, hence the S&P 500's superior return. However, with
the dollar stabilizing and some European economies slowing, we believe investors
may rediscover small-caps later this year. During periods of slow growth,
investors typically seek rapidly growing small companies because their
consistently rising earnings are expected to outpace a sluggish economy.
As always, thanks for your continuing confidence in the fund.
Respectfully submitted,
[signature]
Greg McCrickard
President and Chairman of the
Investment Advisory Committee
July 19, 1995
<PAGE>
--------------------------------------------------------------------------------
Major Portfolio Changes
Three Months Ended June 30, 1995
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Twenty-Five Largest Holdings
June 30, 1995
--------------------------------------------------------------------------------
Percent of
Company Net Assets
---------------------------------- --------
Selective Insurance Group 2.4%
Richfood Holdings 2.0
St. Jude Medical 1.9
Enterra 1.6
United Financial of South Carolina 1.5
Holophane 1.4
Glacier Bancorp 1.4
Orthodontic Centers of America 1.4
Collective Bancorp 1.3
Analogic 1.3
Insituform Mid-America 1.2
Adobe Systems 1.2
Mercantile Bancorporation 1.2
JPFoodservice 1.2
Shorewood Packaging 1.2
Electro Rent 1.2
WestPoint Stevens 1.1
Unitog 1.1
Analysts International 1.1
Insituform Technologies (Class A) 1.0
Home Beneficial 1.0
Seneca Foods 1.0
FelCor Suites Hotel 1.0
Boston Acoustics 1.0
Maxim Integrated Products 0.9
Total 32.6%
================================================================================
<PAGE>
--------------------------------------------------------------------------------
TEN LARGEST PURCHASES
--------------------------------------------------------------------------------
Cost (000)
--------
FelCor Suites Hotels* $2,248
Home Beneficial* 2,203
Perrigo* 1,958
Jefferson Smurfit* 1,641
Inphynet Medical Management Company* 1,439
Inter-Tel* 1,408
Hauser Chemical Research 1,303
Sinclair Broadcast Group* 1,248
Poe & Brown* 1,116
American Radio Systems* 1,038
================================================================================
--------------------------------------------------------------------------------
TEN LARGEST SALES
--------------------------------------------------------------------------------
Proceeds (000)
------------
Flair** $2,520
Moorco International** 2,317
Xilinx** 2,062
Corporate Express 1,817
3Com** 1,529
Lotus Development** 1,218
Norton McNaughton 1,102
Regional Acceptance 1,060
Silicon Valley Group 1,018
Fritz Companies 978
* Position added
**Position eliminated
================================================================================
--------------------------------------------------------------------------------
Average Annual Compound Total Return*
--------------------------------------------------------------------------------
Periods Ended June 30, 1995
1 Year 5 Years 10 Years
------- ------- ---------
19.47% 11.57% 10.23%
* Until September 2, 1992, the fund was managed by Review Management.
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>
--------------------------------------------------------------------------------
Statement of Net Assets
--------------------------------------------------------------------------------
T. Rowe Price OTC Fund / June 30, 1995 (Unaudited)
(VALUE IN THOUSANDS)
Common Stocks & Warrants -- 85.5%
FINANCIAL -- 14.9%
Value
----------
BANK & TRUST -- 7.9%
60,000 shs Bell Banc $1,718
150,000 Collective Bancorp 3,019
70,000 First Sec 1,977
176,000 +Glacier Bancorp 3,300
30,000 Marshall & Ilsley 681
61,500 Mercantile Bancorporation 2,760
55,000 *Premier B 990
170,000 United Financial of South Carolina 3,432
52,500 ValliCorp 820
18,697
INSURANCE -- 6.8%
35,000 Foremost 1,348
70,000 Harleysville Group 1,715
110,000 Home Beneficial 2,296
30,000 Intercargo 334
75,000 PartnerRe Holdings ADR 1,955
47,600 Poe & Brown 1,136
171,400 Selective Insurance 5,613
42,500 W. R. Berkley 1,519
15,916
FINANCIAL SERVICES -- 0.2%
30,000 * Regional Acceptance 540
TOTAL FINANCIAL 35,153
================================================================================
UTILITIES -- 0.8%
ELECTRIC UTILITIES -- 0.8%
130,000 *Public Service of New
Mexico 1,853
TOTAL UTILITIES 1,853
================================================================================
<PAGE>
CONSUMER NONDURABLES -- 19.5%
BEVERAGES -- 0.1%
28,000 *Chalone Wine Group 205
FOOD PROCESSING-- 2.1%
30,000 *Lone Star Steakhouse &
Saloon 908
164 Makepeace 920
65,200 *Seneca Foods 2,290
35,000 Thorn Apple Valley 814
4,932
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT -- 4.0%
100,000 shs. Allied Healthcare Products 1,581
32,800 *Cephalon 603
35,000 *OccuSystems 588
110,000 *Quorum Health Group 2,207
90,000 St. Jude Medical 4,506
9,485
PHARMACEUTICALS -- 2.4%
40,000 *Biogen 1,785
29,792 *Chiron 1,929
175,000 *Perrigo 1,925
5,639
BIOTECHNOLOGY -- 0.3%
150,000 *Cell Genesys 703
HEALTH CARE SERVICES-- 3.7%
80,000 *EmCare Holdings 1,525
88,000 *Inphynet Medical
Management. 1,650
70,000 *Multicare 1,221
35,000 *NeoPath 573
135,000 *Orthodontic Centers of
America 3,240
25,000 *Ostex 581
8,790
MISCELLANEOUS CONSUMER PRODUCTS -- 6.9%
34,000 Armor-All Products 578
120,000 Boston Acoustics 2,265
34,500 +Crown City Plating 233
149,662 Culp 1,216
80,000 *Cygne Designs 485
90,800 DiMon 1,532
25,000 Phillips-Van Heusen 387
210,000 Richfood Holding 4,646
46,100 *Super Rite Foods Holdings 1,006
65,000 * TSC 1,276
150,000 * Westpoint Stevens 2,653
16,277
TOTAL CONSUMER NONDURABLES 46,031
================================================================================
<PAGE>
CONSUMER SERVICES -- 7.2%
GENERAL MERCHANDISERS -- 0.5%
75,000 *Carson Pirie Scott 1,228
SPECIALTY MERCHANDISERS-- 2.1%
48,000 * CSS Industries 864
200,000 * JP Foodservice 2,750
21,000 Medicine Shoppe
International 730
25,000 * Norton McNaughton 387
20,900 Wolohan Lumber 251
4,982
ENTERTAINMENT & LEISURE -- 1.5%
89,000 FelCor Suites Hotels, REIT 2,281
225,000 +*Noble Roman's 1,111
3,392
MEDIA & COMMUNICATIONS -- 3.1%
54,000 *American Radio Systems 1,256
48,978 +Cowles Media 1,175
38,000 Gray Communications
Systems 1,102
75,000 *Mobile Telecommunication
Technologies 2,048
40,000 *Shiva 1,720
7,301
TOTAL CONSUMER SERVICES 16,903
================================================================================
CONSUMER CYCLICALS -- 2.1%
AUTOMOBILES & RELATED -- 0.6%
7,756 Adrian Steel 1,314
BUILDING & REAL ESTATE-- 0.1%
7,684 *First Republic of America241
MISCELLANEOUS CONSUMER DURABLES -- 1.4%
20,970 wts. ++*Craftmatic Contour 12/31/02 0
160,000 shs. Ellett Brothers 1,100
55,000 Juno Lighting 887
76,200 *Vallen 1,343
3,330
TOTAL CONSUMER CYCLICALS 4,885
================================================================================
<PAGE>
TECHNOLOGY -- 7.3%
ELECTRONIC COMPONENTS -- 3.5%
175,000 Analogic 2,975
23,500 * Cirrus Logic 1,473
25,000 Linear Technology 1,644
43,500 *Maxim Integrated Products 2,219
8,311
ELECTRONIC SYSTEMS -- 0.5%
30,000 *Silicon Valley Group 1,089
INFORMATION PROCESSING -- 0.2%
15,000 *DH Technology 414
TELECOMMUNICATIONS -- 2.5%
55,000 *Cellular Communications of
Puerto Rico 1,685
100,000 *Inter-Tel 1,500
16,100 *LIN Television 541
55,000 *Sinclair Broadcast Group 1,523
40,000 *TriQuint Semiconductor 650
5,899
AEROSPACE & DEFENSE -- 0.6%
23,600 Woodward Governor 1,496
TOTAL TECHNOLOGY 17,209
================================================================================
CAPITAL EQUIPMENT -- 4.9%
ELECTRICAL EQUIPMENT -- 1.4%
150,000 * Holophane 3,356
MACHINERY -- 3.5%
101,000 AMTROL 1,856
35,000 Greenfield Industries 1,006
35,580 *Hardinge 687
85,000 *Hurco Companies 319
17,450 ++Laser Alignment 283
55,000 *Lindsay Manufacturing 1,890
276,000 *Sudbury 2,053
8,094
TOTAL CAPITAL EQUIPMENT 11,450
================================================================================
BUSINESS SERVICES & TRANSPORTATION -- 18.1%
COMPUTER SERVICE & SOFTWARE -- 5.5%
50,000 Adobe Systems 2,912
100,000 Analysts International 2,587
35,000 * Expert Software 639
60,000 * Frame Technology 1,747
30,000 * Softkey International 953
15,000 * SunGard Data Systems 788
60,000 * Symantec 1,729
25,000 * Synopsys 1,562
12,917
<PAGE>
ENVIRONMENTAL -- 1.5%
168,450 *EMCON 758
120,108 Heidemij ADR 1,149
188,800 *TRC 1,416
10,000 *United Waste Systems 357
3,680
TRANSPORTATION SERVICES -- 3.6%
60,000 Expeditors International of
Washington 1,358
31,100 *Fritz Companies 1,827
20,000 *Heartland Express 520
81,250 International Shipholding 1,696
65,000 *M.S. Carriers 1,211
130,000 *Team Rental Group 975
51,000 Werner Enterprises 1,007
8,594
MISCELLANEOUS BUSINESS SERVICES -- 7.1%
50,000 *Consolidated Graphics 709
200 *Corporate Express 4
120,000 *Electro Rent 2,730
200,000 Insituform Mid-America 2,925
184,200 *Insituform Technologies (Class A) 2,464
57,500 *Isomedix 776
100,000 McGrath RentCorp 1,713
186,000 *Shorewood Packaging 2,744
120,000 Unitog 2,610
16,675
RAILROADS -- 0.4%
28,900 *North Carolina Railroad 946
TOTAL BUSINESS SERVICES & TRANSPORTATION 42,812
================================================================================
ENERGY -- 4.4%
ENERGY SERVICES -- 4.4%
115,000 *Atwood Oceanics 1,854
180,000 *Enterra 3,780
10,000 *Geophysique (FRF) 596
100,000 *Maverick Tube 750
187,100 * Oceaneering International 1,661
61,500 Petroleum Helicopters 638
33,500 Petroleum Helicopters
(non-voting) 331
50,000 *Smith International 837
10,447
TOTAL ENERGY 10,447
================================================================================
<PAGE>
PROCESS INDUSTRIES -- 2.7%
SPECIALTY CHEMICALS -- 2.0%
40,000 A. Schulman 1,150
27,300 Furon 601
360,000 *Hauser Chemical Research 1,924
81,900 *Sybron Chemical 1,136
4,811
PAPER & PAPER PRODUCTS -- 0.7%
125,000 *Jefferson Smurfit 1,640
TOTAL PROCESS INDUSTRIES 6,451
================================================================================
BASIC MATERIALS -- 1.8%
MINING -- 1.8%
9,295 +Coal Creek 1,013
150,000 Pittston Minerals 1,481
15,728 Rochester & Pittsburgh 472
164,000 *TVX Gold ADR 1,189
4,155
TOTAL BASIC MATERIALS 4,155
================================================================================
MISCELLANEOUS COMMON STOCKS -- 1.8% 4,307
================================================================================
TOTAL COMMON STOCKS (COST $153,715) 201,656
================================================================================
Convertible Preferred Stocks -- 0.4%
51,000 ICO $25.00 1,039
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,033) 1,039
================================================================================
Convertible Bonds -- 2.3%
$1,500,000 American City Business
Journals, 6.00%, 12/31/11 1,890
1,000,000 Arch Communications (144a),
6.75%, 12/1/03 1,331
2,000,000 Cellular, 6.75%, 7/15/09 2,079
TOTAL CONVERTIBLE BONDS (COST $3,675) 5,300
================================================================================
Short-Term Investments -- 13.6%
BANK NOTES -- 0.9%
2,000,000 Fifth Third Bank, 6.21%,
10/27/95 2,000
<PAGE>
CERTIFICATES OF DEPOSIT -- 3.8%
2,000,000 Bank of Nova Scotia, 6.01%,
7/10/95 2,000
1,000,000 Bayerische Hypotheken,
6.04%, 8/7/95 1,000
3,000,000 National Westminster Bank,
6.09%, 7/28/95 3,000
3,000,000 Swiss Bank, 6.01%, 7/21/95 3,000
9,000
COMMERCIAL PAPER -- 8.5%
1,000,000 Air Products & Chemicals,
5.87%, 8/25/95 990
2,000,000 AT&T Capital, 6.01%, 8/4/95 1,965
3,000,000 BANC ONE, 4(2), 6.04%,
7/7/95 2,957
3,000,000 Caisse des Depots et
Consignations, 4(2), 5.95%,
7/21/95 2,981
330,000 Cargill Financial Services,
6.10%, 7/3/95 330
1,000,000 Ciesco L.P., 5.65%, 9/14/95 984
3,000,000 Electronic Data Systems,
5.95%, 7/12/95 2,980
1,000,000 Kingdom of Sweden, 6.025%,
9/25/95 974
3,000,000 Preferred Receivables
Funding, 5.95%, 8/9/95 2,976
3,000,000 Statoil (Den Norske Stats
Oljeselskap), 5.96%,
7/6/95 2,988
20,125
MEDIUM-TERM NOTES -- 0.4%
1,000,000 Morgan Stanley Group, VR,
6.213%, 7/13/95 1,001
TOTAL SHORT-TERM INVESTMENTS (COST $32,126) 32,126
================================================================================
TOTAL INVESTMENTS IN SECURITIES -- 101.8%
OF NET ASSETS (COST $190,549) 240,121
================================================================================
<PAGE>
Other Assets Less Liabilities (4,133)
----------
Net Assets Consist of: Value
------
Accumulated net investment income -
net of distributions $ 864
Accumulated net realized gain/loss -
net of distributions 19,030
Net unrealized gain (loss) 49,572
Paid-in-capital applicable to
14,919,508 shares of
$0.50 par value capital
stock outstanding; 200,000,000
shares authorized 166,522
--------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 235,988
=============
Net Asset Value Per Share . . . . . . . . . . . . . . . . . $ 15.82
=============
+ Affiliated company
* Non-income producing
++ Securities contain some restrictions as to public resale--total of
such securities at year-end amounts to 0.12% of net assets.
REIT Real Estate Investment Trust
VR Variable rate
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933, as
amended, and may be sold only to dealers in that program or other "accredited
investors." 144a Security was purchased pursuant to Rule 144a under the
Securities Act of 1933 and may not be resold subject to that rule except to
qualified institutional buyers -- total of such securities at period-end amounts
to 0.56% of net assets.
FRF French franc
================================================================================
================================================================================
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
T. Rowe Price OTC Fund / Six Months Ended June 30, 1995 (Unaudited)
(IN THOUSANDS)
INVESTMENT INCOME
Income
Interest ................................................ $1,007
Dividend ................................................ 992
Total income ............................................ 1,999
Expenses
Investment management ....................................... 854
Shareholder servicing ....................................... 257
Custody and accounting ...................................... 71
Registration ................................................ 22
Prospectus and shareholder reports .......................... 17
Legal and audit ............................................. 12
Directors ................................................... 6
Miscellaneous ............................................... (19)
Total expenses .............................................. 1,220
Net investment income .................................................... 779
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities ............................. 13,286
Change in net unrealized gain or loss on securities ................ 16,125
Net realized and unrealized gain (loss) ....................... 29,411
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............... 30,190
<PAGE>
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
T. Rowe Price OTC 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 ................................ $779 $468
Net realized gain (loss) ............................. 13,286 20,036
Change in net unrealized gain or loss ................ 16,125 (20,462)
--------- ---------
Increase (decrease) in net assets from operations .... 30,190 42
--------- ---------
Distributions to shareholders
Net investment income ................................ -- (383)
Net realized gain .................................... -- (19,961)
--------- ---------
Decrease in net assets from distributions ............ -- (20,344)
--------- ---------
Capital share transactions*
Shares sold .......................................... 31,964 34,781
Distributions reinvested ............................. -- 18,722
Shares redeemed ...................................... (22,892) (41,084)
--------- ---------
Increase (decrease) in net assets from capital
share transactions ................................... 9,072 12,419
--------- ---------
Increase (decrease) in net assets .................... 39,262 (7,883)
NET ASSETS
Beginning of period .................................. 196,726 204,609
--------- ---------
End of period ........................................ $235,988 $196,726
========= =========
*Share information
Shares sold .......................................... 2,231 2,284
Distributions reinvested ............................. -- 1,367
Shares redeemed ...................................... (1,565) (2,695)
--------- ---------
Increase (decrease) in shares outstanding ............ 666 956
========= =========
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Notes to Financial Statements
T. Rowe Price OTC Fund / June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
T. Rowe Price OTC 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 value.
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 Directors.
B) Affiliated Companies - Investments in companies 5% or more of whose
outstanding voting securities are held by the fund are defined as "Affiliated
Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
C) 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.
<PAGE>
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.
--------------------------------------------------------------------------------
NOTE 2 - INVESTMENT TRANSACTIONS
--------------------------------------------------------------------------------
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $70,784,000 and $68,805,000, 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 $190,549,000 and net unrealized gain
aggregated $49,572,000, of which $57,086,000 related to appreciated investments
and $7,514,000 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 $151,000 was payable at June 30, 1995. The fee is computed daily and
paid monthly, and consists of an Individual Fund Fee equal to 0.45% 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.
<PAGE>
In addition, the fund has entered into agreements with the Manager and two
wholly owned subsidiaries of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (TRPS) is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $239,000 for the six months
ended June 30, 1995, of which $52,000 was payable at period-end.
<PAGE>
<TABLE>
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Financial Highlights
T. Rowe Price OTC Fund (Unaudited)
--------------------------------------------------------------------------------
For a share outstanding throughout each period
<S> <C> <C> <C> <C> <C> <C>
Six Months
Ended Year Ended December 31,
June 30, 1995 1994 1993 1992 1991 1990
====================================================================================================================================
NET ASSET VALUE, BEGINNING
OF PERIOD ............................................. $13.80 $15.39 $14.37 $16.86 $12.72 $16.23
------ ------ ------ ------ ------ ------
Investment Activities
Net investment income ................................. 0.05 0.04 -- 0.02 0.07 0.11
Net realized and unrealized
gain (loss) .......................................... 1.97 (.04) 2.60 2.20 4.84 (3.43)
------ ------ ------ ------ ------ ------
Total from Investment Activities ...................... 2.02 -- 2.60 2.22 4.91 (3.32)
------ ------ ------ ------ ------ ------
Distributions
Net investment income ................................. -- (0.03) -- (0.07) (0.09) (0.09)
Net realized gain ..................................... -- (1.56) (1.58) (4.64) (0.68) (0.10)
------ ------ ------ ------ ------ ------
Total Distributions ................................... -- (1.59) (1.58) (4.71) (0.77) (0.19)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $15.82 $13.80 $15.39 $14.37 $16.86 $12.72
====== ====== ====== ====== ====== ======
RATIOS / SUPPLEMENTAL DATA
Total Return .......................................... 14.6% 0.1% 18.4% 13.9% 38.6% (20.5)%
Ratio of Expenses to Average
Net Assets ............................................ 1.13%+ 1.11% 1.20% 1.32% 1.34% 1.47%
Ratio of Net Investment Income
to Average Net Assets ................................. 0.72%+ 0.24% (0.01)% 0.03% 0.48% 0.73%
Portfolio Turnover Rate ............................... 72.5%+ 41.9% 40.8% 30.7% 31.2% 34.8%
Net Assets, End of Period
(in thousands) ....................................... $235,988 $196,726 $204,609 $186,838 $266,584 $215,299
<FN>
+Annualized.
</FN>
</TABLE>
