Semiannual Report
Capital Opportunity Fund
June 30, 1996
T. Rowe Price
Report Highlights
o The stock market generated impressive returns during the past 6- and
12-month periods as investors turned increasingly to growth and
small-capitalization stocks.
o Fund returns were solid and surpassed both the broad market and the
Lipper benchmark for similar funds, largely due to several major
holdings.
o A few longer-term positions continued to contribute strongly to fund
performance, and we also made successful investments in gold stocks that
came to life in recent months.
o Several lagging stocks were eliminated while others with the potential
for price appreciation were retained.
o The number of companies reporting disappointing earnings has increased,
but the fund's flexible investment program allows us to deploy funds in
opportune areas of the market.
Fellow Shareholders
After achieving impressive gains in 1995, the major U.S. stock market indexes
continued to post solid returns, setting record highs throughout the first
half of 1996. With conflicting economic data concerning the outlook for
economic growth and inflation, equity investors turned to growth stocks, and
in particular smaller-capitalization stocks, during the period.
As shown in the table, during the six-month period ended June 30, 1996, your
fund's return was solid on an absolute basis and ahead of both the unmanaged
Standard & Poor's 500 Stock Index and the Lipper Capital Appreciation Funds
Average. Over the 12-month period, the fund's return considerably exceeded
both benchmarks, largely because of strong performances by several of its
largest holdings.
Performance Comparison
Periods Ended 6/30/96 6 Months 12 Months
Capital Opportunity Fund 11.96% 29.51%
S&P 500 Stock Index 10.10 26.00
Lipper Capital Appreciation Funds Average 11.50 23.97
MARKET ENVIRONMENT
Given the S&P 500's 37.6% return in 1995, the highest in over 25 years,
investors entered 1996 cautiously optimistic that the best of all possible
stock market environments, characterized by moderate, noninflationary economic
growth, would continue. However, the long decline in interest rates, which
helped fuel the powerful bull market of the past few years, got derailed
during the first half of the year. Long-term rates increased by more than one
percentage point to a high of 7.2% due to investor anxiety over a pickup in
economic growth and an increase in inflationary pressures.
Historically, the prospect of higher interest rates has not augured well for
equity returns. A key positive factor helping to offset the negative impact of
rising interest rates was the continuation of strong cash flows into the
mutual fund industry. This powerful liquidity effect helped drive stock prices
higher throughout the period. With some equity investors chasing the
impressive returns of the past 18 months, the jury is still out on how much of
the record fund inflows of recent years were committed for long-term
appreciation rather than short-term speculative gains.
Although the S&P 500 last experienced a 9% or greater price decline more than
two years ago, the stock market is showing some signs of speculative excess.
The combination of never-ending initial and secondary stock offerings and the
dramatic increase in merger and acquisition activity, along with surging
mutual fund cash inflows, could lead to increased volatility over the balance
of the year.
STRATEGY REVIEW
Consistent with your fund's concentrated investment approach, the best
contributors came from a few major holdings during both the 6- and 12-month
periods. Two stocks we highlighted in prior reports continued to deliver
impressive returns. Catalina Marketing, a leader in the in-store marketing
industry, and OEA, a leading supplier of automotive air bag components, are
still positioned for strong earnings growth over the next several years. With
the strong runup in their share prices, we modestly reduced our exposure to
them but remain enthusiastic about their long-term potential.
THE CAPITAL OPPORTUNITY FUND USED ITS INVESTMENT FLEXIBILITY TO TAKE ADVANTAGE
OF STRONG GOLD SECTOR PERFORMANCE.
Two other strong contributors to fund performance were waste disposal
companies Republic Industries and USA Waste Services. Both entered into
attractive acquisition deals that should accelerate their earnings outlook.
During the period, the Capital Opportunity Fund used its investment
flexibility to take advantage of strong gold sector performance. After
disappointing investors for many years, the gold market finally came to life
during the past 12 months. Your fund made successful investments in the shares
of two smaller gold exploration companies, Golden Shamrock Mines and Dayton
Mining.
Unfortunately, the fund's concentrated investment approach can result in
increased volatility when a potentially attractive investment proves
unsuccessful. During the period, we had several large positions in companies
that delivered disappointing earnings results and suffered large price
declines. Cirrus Logic, a computer chip manufacturer, and Mobile
Telecommunication Technologies, a leading paging service provider, were among
your fund's largest decliners and were eliminated.
Two other companies with disappointing earnings were Exide, the global leader
in the manufacturing of car batteries, and Cadmus Communications, a commercial
printer and communications concern. Although their short-term setbacks were
disappointing, we continue to believe the stocks offer attractive risk/return
potential at current price levels and have maintained our holdings.
PORTFOLIO FOCUS
Considering the unique investment charter of the Capital Opportunity Fund, we
believe it is helpful to review several of its major holdings to help you
better understand our investment approach.
During the period under review, your fund initiated a large position in La
Quinta Inns, a hotel concern with over 235 mid-priced hotels located primarily
in Texas, California, Florida, and several other states. Currently, La Quinta
is in the process of improving its room base with a $75 million capital
upgrade program. Early returns from the first phase of the program are
encouraging, and we believe the company will be well positioned for
surprisingly strong earnings growth during the 1997-98 period.
LA QUINTA IS . . . IMPROVING ITS ROOM BASE WITH A $75 MILLION CAPITAL UPGRADE
PROGRAM.
Another new addition to the portfolio was Tupperware, the global
direct-marketer of Tupperware and miscellaneous kitchen accessories.
Tupperware was recently spun off from Premark, an industrial conglomerate. As
an independent company, Tupperware will aggressively try to leverage its
valuable brand name and global distribution network. We feel the company's
domestic business is poised for renewed growth, and its operations in such
emerging markets as Latin America and the Far East could help accelerate
earnings expansion over the next few years. Tupperware has an attractive
business model and recognized brand name that we believe has not been fully
appreciated by Wall Street due to the company's previous ownership structure.
However, we think Tupperware's new-found independence should serve as a
catalyst to impress investors with its growth potential.
OUTLOOK
During your fund's first 19 months of operation, it benefited from a favorable
environment for stocks. However, as we enter the second half of 1996, the
market is attempting to digest several conflicting crosscurrents that could
result in greater market volatility. With anxiety over the outlook for
interest rates and inflation, we believe the next six to 12 months may prove
more challenging for the equity market and your fund.
The underlying economy appears solid, which is encouraging since it concerns
prospects for future earnings growth, but the number of companies reporting
disappointing earnings is troubling. One of the primary drivers of last year's
impressive gains was the ability of companies to deliver better-than-expected
earnings growth. Unfortunately, this pattern has deteriorated in recent
months, as the number of companies reporting earnings below expectations has
increased. Disappoint-ing earnings, combined with a speculative stock market
environment, could be disconcerting for new equity investors who have grown
accustomed to recent strong performance.
As we discussed in previous reports, your fund's flexible investment program
allows it to take advantage of periods of increased volatility to capitalize
on attractive opportunities independent of industry sector, investment style,
or market capitalization. So, while we are cautious near term, we believe your
fund is in a good position to deliver solid returns as long as the economy can
maintain modest growth.
Respectfully submitted,
John F. Wakeman
Chairman of the Investment Advisory Committee
July 19, 1996
T. Rowe Price Capital Opportunity Fund
Portfolio Highlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/96
ADT 3.4%
Centerior Energy 3.3
Exide 3.3
Scholastic 3.0
Intuit 3.0
Catalina Marketing 2.9
La Quinta Inns 2.9
Continental Waste Industries 2.7
Tupperware 2.5
OEA 2.5
Biogen 2.5
Columbia/HCA Healthcare 2.4
United HealthCare 2.4
Cadmus Communications 2.3
USA Waste Services 2.2
PacifiCare Health Systems 2.2
Pinkertons 2.1
First Data 2.1
Apria Healthcare 2.0
Copart 1.8
Ceridian 1.8
National Data 1.8
Eckerd 1.7
Bay Networks 1.6
Alliance Entertainment 1.6
_____________________________________________________________________________
Total 60.0%
T. Rowe Price Capital Opportunity Fund
Portfolio Highlights
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 6/30/96
Ten Best Contributors
OEA 23(cents)
Catalina Marketing 20
USA Waste Services 18
Dayton Mining 17
Republic Industries ** 16
Golden Shamrock Mines 15
National Data 15
TGV Software 14
ITG 13
ADT 11
_____________________________________________________________________________
Total 162(cents)
Ten Worst Contributors
Cadmus Communications - 21(cents)
Exide - 20
Copart - 14
Adobe Systems - 10
Alliance Entertainment - 10
Mobile Telecommunication
Technologies ** - 10
Centerior Energy * - 7
ADVO - 6
PacifiCare Health Systems - 4
General Nutrition - 4
_____________________________________________________________________________
Total - 106(cents)
12 Months Ended 6/30/96
Ten Best Contributors
Catalina Marketing 33(cents)
APAC TeleServices ** 28
ADT 27
PanAmSat ** 22
OEA 22
Dayton Mining 20
USA Waste Services 19
ITG * 17
National Data * 17
Oceaneering International ** 16
_____________________________________________________________________________
Total 221(cents)
Ten Worst Contributors
Exide - 21(cents)
Cadmus Communications * - 21
Mobile Telecommunication
Technologies ** - 13
Cirrus Logic ** - 12
Casino America ** - 11
Players International ** - 10
Centerior Energy - 10
Alliance Entertainment - 10
Rykoff Sexton ** - 9
Copart - 9
_____________________________________________________________________________
Total - 126(cents)
T. Rowe Price Capital Opportunity Fund
Performance Comparison
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
CHART 1 -- SEC Graph
Average Annual Compound Total Return
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 6/30/96 1 Year Inception Date
Capital Opportunity Fund 29.51% 40.42% 11/30/94
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
T. Rowe Price Capital Opportunity Fund
Unaudited
Financial Highlights For a share outstanding throughout each period
6 Months Year 11/30/94
Ended Ended to
6/30/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 14.13 $ 10.43 $ 10.00
Investment activities
Net investment income 0.05* 0.01* 0.02*
Net realized and
unrealized gain (loss) 1.64 4.83 0.41
Total from investment activities 1.69 4.84 0.43
Distributions
Net investment income - (0.01) -
Net realized gain - (1.13) -
Total distributions - (1.14) -
NET ASSET VALUE
End of period $ 15.82 $ 14.13 $ 10.43
Ratios/Supplemental Data
Total return 11.96%* 46.51%* 4.30%*
Ratio of expenses to
average net assets 1.35%!* 1.35%* 1.35%!*
Ratio of net investment
income to average net assets 0.88%!* 0.08%* 2.71%!*
Portfolio turnover rate 74.5%! 136.9% 134.5%!
Average commission rate paid $ 0.0720 - -
Net assets, end of period
(in thousands) $ 132,663 $ 61,923 $ 2,437
* Excludes expenses in excess of a 1.35% voluntary expense limitation in
effect through 12/31/96.
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Capital Opportunity Fund
Unaudited June 30, 1996
Statement of Net Assets Shares/Par Value
In thousands
Common Stocks 91.4%
FINANCIAL 1.4%
Financial Services 1.4%
ITG * 130,000 $ 1,820
_____________________________________________________________________________
Total Financial 1,820
UTILITIES 4.7%
Telephone 1.4%
Palmer Wireless * 90,000 1,817
_____________________________________________________________________________
1,817
Electric Utilities 3.3%
Centerior Energy 600,000 4,425
_____________________________________________________________________________
4,425
_____________________________________________________________________________
Total Utilities 6,242
CONSUMER NONDURABLES 19.2%
Food Processing 1.2%
Ben & Jerry's * 92,500 1,607
_____________________________________________________________________________
1,607
Hospital Supplies/Hospital Management 2.4%
Columbia/HCA Healthcare 60,000 3,203
_____________________________________________________________________________
3,203
Pharmaceuticals 3.4%
Biogen * 60,000 3,281
Global Pharmaceutical * 120,000 1,238
_____________________________________________________________________________
4,519
Health Care Services 7.8%
Apria Healthcare * 85,500 2,683
Olsten (Class A) 52,500 1,542
PacifiCare Health Systems (Class B) * 42,500 2,885
United HealthCare 63,000 3,181
_____________________________________________________________________________
10,291
Miscellaneous Consumer Products 4.4%
CUC International * 50,000 1,775
ERO * 105,000 643
Metromedia International * 150,000 $ 1,837
Richfood Holdings 49,900 1,619
_____________________________________________________________________________
5,874
_____________________________________________________________________________
Total Consumer Nondurables 25,494
CONSUMER SERVICES 22.0%
Specialty Merchandisers 6.2%
AnnTaylor Stores * 71,700 1,452
Eckerd * 100,400 2,271
General Nutrition * 60,900 1,062
Tupperware * 80,000 3,380
_____________________________________________________________________________
8,165
Entertainment and Leisure 6.7%
Boston Chicken * 50,000 1,622
Bristol Hotel * 50,000 1,625
La Quinta Inns 115,000 3,852
National Lodging * 112,000 1,764
_____________________________________________________________________________
8,863
Media and Communications 9.1%
ADVO 112,000 1,162
Cadmus Communications 200,800 3,075
Catalina Marketing * 42,300 3,871
Scholastic * 64,600 4,021
_____________________________________________________________________________
12,129
_____________________________________________________________________________
Total Consumer Services 29,157
CONSUMER CYCLICALS 1.8%
Automobiles and Related 1.8%
Copart * 147,500 2,434
_____________________________________________________________________________
Total Consumer Cyclicals 2,434
TECHNOLOGY 12.7%
Electronic Systems 5.5%
ADT * 239,800 4,526
Pinkertons * 121,200 2,803
_____________________________________________________________________________
7,329
Office Automation 1.8%
Ceridian * 47,100 $ 2,378
_____________________________________________________________________________
2,378
Telecommunications 2.9%
Bay Networks * 85,000 2,189
Cisco Systems * 28,000 1,587
_____________________________________________________________________________
3,776
Aerospace and Defense 2.5%
OEA 90,000 3,375
_____________________________________________________________________________
3,375
_____________________________________________________________________________
Total Technology 16,858
CAPITAL EQUIPMENT 4.6%
Electrical Equipment 4.6%
ESCO Electronics * 150,000 1,706
Exide 179,200 4,346
_____________________________________________________________________________
Total Capital Equipment 6,052
BUSINESS SERVICES AND
TRANSPORTATION 18.0%
Computer Service and Software 9.0%
Adobe Systems 45,000 1,606
First Data 34,500 2,747
Intuit * 85,000 3,995
National Data 68,100 2,333
Sybase * 50,000 1,184
_____________________________________________________________________________
11,865
Distribution Services 2.9%
Alco Standard 39,000 1,765
Alliance Entertainment * 299,900 2,062
_____________________________________________________________________________
3,827
Environmental 4.9%
Continental Waste Industries * 160,000 3,580
USA Waste Services * 100,000 2,962
_____________________________________________________________________________
6,542
Miscellaneous Business Services 1.2%
BISYS Group * 25,000 939
Casino Data Systems * 26,500 $ 396
Insituform Technologies (Class A) * 35,000 273
_____________________________________________________________________________
1,608
_____________________________________________________________________________
Total Business Services and Transportation 23,842
ENERGY 0.8%
Exploration and Production 0.8%
Weatherford Enterra * 37,500 1,125
_____________________________________________________________________________
Total Energy 1,125
BASIC MATERIALS 3.5%
Mining 3.5%
Dayton Mining * 234,000 1,404
Durban Roodepoort Deep ! 122,000 1,075
Golden Shamrock Mines (AUD) * 1,850,000 1,657
Pegasus Gold * 40,000 490
_____________________________________________________________________________
Total Basic Materials 4,626
_____________________________________________________________________________
Miscellaneous Common Stocks 2.7% 3,630
_____________________________________________________________________________
Total Common Stocks (Cost $113,276) 121,280
Convertible Bonds 0.3%
Golden Shamrock Mines, 7.50%, 5/9/00 $ 250,000 325
_____________________________________________________________________________
Total Convertible Bonds (Cost $250) 325
Corporate Bonds 2.3%
Stratosphere, 14.25%, 5/15/02 1,250,000 1,388
_____________________________________________________________________________
Total Miscellaneous Corporate Bonds 1,662
_____________________________________________________________________________
Total Corporate Bonds (Cost $3,067) 3,050
Short-Term Investments 7.1%
Federal Agencies 6.4%
Federal Home Loan Mortgage Discount Notes
5.21%, 7/15/96 2,000,000 1,996
5.22%, 7/24/96 1,474,000 1,469
5.28%, 7/31/96 $2,000,000 $ 1,991
5.52%, 7/1/96 3,010,000 3,010
_____________________________________________________________________________
8,466
U.S. Government Obligations 0.7%
United States Treasury Bills, 5.01%, 7/5/96 1,000,000 1,000
_____________________________________________________________________________
1,000
_____________________________________________________________________________
Total Short-Term Investments (Cost $9,466) 9,466
_____________________________________________________________________________
Total Investments in Securities
101.1% of Net Assets (Cost $126,059) $ 134,121
Other Assets Less Liabilities (1,458)
_____________________________________________________________________________
NET ASSETS $ 132,663
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 444
Accumulated net realized gain/loss - net of distributions 7,924
Net unrealized gain (loss) 8,062
Paid-in-capital applicable to 8,383,154 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares authorized 116,233
_____________________________________________________________________________
NET ASSETS $ 132,663
_____________________________________________________________________________
NET ASSET VALUE PER SHARE $ 15.82
_____________________________________________________________________________
! Affiliated company
* Non-income producing
AUD Australian dollar
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Capital Opportunity Fund
Unaudited
Statement of Operations
In thousands
6 Months
Ended
6/30/96
Investment Income
Income
Dividend $ 695
Interest 417
_____________________________________________________________________________
Total income 1,112
_____________________________________________________________________________
Expenses
Investment management 389
Shareholder servicing 159
Custody and accounting 49
Registration 37
Prospectus and shareholder reports 17
Legal and audit 9
Directors 4
Miscellaneous 7
Reimbursed to Manager 2
Total expenses 673
_____________________________________________________________________________
Net investment income 439
_____________________________________________________________________________
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 5,893
Foreign currency transactions (2)
_____________________________________________________________________________
Net realized gain (loss) 5,891
_____________________________________________________________________________
Change in net unrealized gain or loss on securities 1,932
_____________________________________________________________________________
Net realized and unrealized gain (loss) 7,823
_____________________________________________________________________________
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 8,262
_____________________________________________________________________________
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Capital Opportunity Fund
Unaudited
Statement of Changes in Net Assets
In thousands
6 Months Year
Ended Ended
6/30/96 12/31/95
Increase (Decrease) in Net Assets
Operations
Net investment income $ 439 $ 28
Net realized gain (loss) 5,891 6,420
Change in net unrealized gain or loss 1,932 6,035
_____________________________________________________________________________
Increase (decrease) in net assets
from operations 8,262 12,483
_____________________________________________________________________________
Distributions to shareholders
Net investment income - (39)
Net realized gain - (4,384)
_____________________________________________________________________________
Decrease in net assets from distributions - (4,423)
_____________________________________________________________________________
Capital share transactions*
Shares sold 84,283 65,826
Distributions reinvested - 4,286
Shares redeemed (21,805) (18,686)
_____________________________________________________________________________
Increase (decrease) in net assets from
capital share transactions 62,478 51,426
_____________________________________________________________________________
Net Assets
Increase (decrease) during period 70,740 59,486
Beginning of period 61,923 2,437
_____________________________________________________________________________
End of period $132,663 $ 61,923
_____________________________________________________________________________
*Share information
Shares sold 5,395 5,243
Distributions reinvested - 306
Shares redeemed (1,395) (1,400)
_____________________________________________________________________________
Increase (decrease) in shares outstanding 4,000 4,149
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Capital Opportunity Fund
Unaudited June 30, 1996
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price Capital Opportunity Fund (the fund) is registered under the
Investment Company Act of 1940 as a nondiversified, open-end management
investment company and commenced operations on November 30, 1994.
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.
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.
Currency Translation Assets and liabilities are translated into U.S. dollars
at the prevailing exchange rate at the end of the reporting period. Purchases
and sales of securities and income and expenses are translated into U.S.
dollars at the prevailing exchange rate on the dates of such transactions. The
effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and
losses.
Premiums and Discounts Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and distributions
to shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles.
Note 2 - Investment Transactions
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $94,473,000 and $33,012,000, respectively, for the six months ended
June 30, 1996.
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, 1996, the aggregate cost of investments for federal income tax and
financial reporting purposes was $126,059,000, and net unrealized gain
aggregated $8,062,000, of which $16,228,000 related to appreciated investments
and $8,166,000 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 $86,000 was payable at June 30, 1996. 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 0.305% for assets in excess of $50
billion. At June 30, 1996, and for the six months then ended, the effective
annual group fee rate was 0.33% and 0.34%, respectively. 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 1.35%. 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 1.35%. Pursuant to this agreement,
$2,000 of unaccrued 1994 fees were repaid during the six months ended June 30,
1996, and $155,000 remains subject to reimbursement through December 31, 1998.
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 $150,000 for the six months
ended June 30, 1996, of which $17,000 was payable at period-end.
For yield, price, last transaction, and current balance, 24 hours, 7 days a
week, call: 1-800-638-2587 toll free
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 Capital
Opportunity Fund.
T. Rowe Price Investment Services, Inc., Distributor RPRTCOF 6/30/96
Chart 1 -- SEC graph: line chart showing the cumulative growth of $10,000
invested in the Capital Opportunity Fund from inception (11/30/94) compared
with $10,000 invested in a broad-based index over the same period.
