Semiannual Report
Capital
Opportunity
Fund
June 30, 1999
T. Rowe Price
REPORT HIGHLIGHTS
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Capital Opportunity Fund
o Stocks continued to rally in the first half despite rising interest rates.
o Fund performance was poor in both the 6- and 12-month periods, as our
former emphasis on small- and mid-cap stocks hurt returns.
o We made changes to the fund's investment process late in the period and are
pleased with the improved performance since then.
o The market is caught between rising interest rates and rising earnings, but
we are confident that rigorous fundamental research by our team of analysts
can identify attractive investment opportunities.
Fellow Shareholders
U.S. stocks continued their rally in the first half of 1999, but the Capital
Opportunity Fund did not participate. As we discussed in our letter to you in
April, we have made changes to the fund's investment process with the objectives
of enhancing future performance and improving consistency. Since May 1, the
fund's stocks have been selected directly by our equity analysts, who
collectively cover a wide range of industry groups. Our goal is to utilize the
best thinking of the individual analysts in each industry sector.
Performance Comparison
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Periods Ended 6/30/99 6 Months 12 Months
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Capital Opportunity Fund 0.00% 0.02%
S&P 500 Stock Index 12.38 22.76
Lipper Capital Appreciation
Funds Average 13.68 20.04
The results shown in the accompanying table largely reflected the fund's
previous program, which had substantially more exposure to small- and
mid-cap stocks. Until the second quarter of this year, those stocks had
lagged far behind the handful of large growth stocks that had powered the
market's advance. We are happy to report that since the portfolio's
repositioning, results have improved. For the two months ended June 30, the
fund gained 3.72%, compared with 3.06% for the S&P 500 Stock Index and
4.85% for the Lipper category.
The fund's objective remains unchanged-to seek superior capital
appreciation over time by investing primarily in U.S. common stocks. Using
industry allocations similar to weightings in the S&P 500 index, T. Rowe
Price's equity analysts will select companies from within the industries
they follow. By investing across all of the S&P 500 sectors, the fund's
portfolio will be more diversified than formerly, both in terms of number
of securities held and exposure to various industries. Individual stock
selection within the S&P 500-designated industry sectors will be the key
determinant of performance.
We work diligently and systematically to strengthen our equity research
team and to provide the resources needed to compete effectively. Our
analysts meet with dozens of companies weekly across the country and,
increasingly, around the globe. We believe the new stock selection process
for Capital Opportunity Fund will enable the analysts to implement their
best ideas quickly and directly. As chairman of the fund's Investment
Advisory Committee, I will be responsible for reviewing the fund's overall
positioning on an ongoing basis.
MARKET AND PORTFOLIO REVIEW
Growth stocks, especially those in telecommunications and technology,
continued to lead the market in the first half. While small-cap stocks
declined through the first quarter, a dramatic shift took place in the
second quarter as long out-of-favor sectors, including small-caps, became
the market's leaders. Cyclical and value stocks also rebounded as global
business fundamentals showed noticeable improvement. Our domestic economy
strengthened significantly and economies in Asia and Latin America showed
renewed vigor, setting the stage for accelerating earnings growth after
several years of sluggish results. Short- and long-term interest rates rose
as investors braced for the possibility of a "too-hot" economy. Inflation
reports remained subdued though, and share prices rose despite a rise in
rates. Late in the second quarter, growth stocks of all sizes-but
especially those of large and mid-size companies-took the lead back from
value stocks, and have kept it as of this writing.
Information on Year-End Distributions
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To help you with tax planning, we try to give you a good idea of the per-share
income and capital gain amounts our funds may distribute near year-end. In late
October, we will provide estimates of these amounts, which will be paid on
December 16, 1999, to shareholders of record on December 14. These preliminary
numbers will be included in The Price Report mailing to shareholders in late
October and will also be available on our Web site-www.troweprice.com.
We hope that these preliminary numbers will be useful to you in approximating
the income and capital gains taxes you may pay on distributions to taxable
accounts.
If your fund distributed any capital gains earlier in 1999, you can find the
amounts on your statements and should include them in your tax planning
calculations. Please keep in mind that the numbers are not final and are likely
to be revised before the December 14 declaration and record date. As the fall
progresses, you may want to check our Web site for revisions.
If you would like information on tax matters relating to mutual funds, please
visit our Web site to download our Insights report, Tax Information for Mutual
Fund Investors, or call 1-800-225-5132 to request a copy.
SECTOR DIVERSIFICATION
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Consumer Nondurables 20
Technology 17
Financial 16
Consumer Services and Cyclicals 15
Energy and Utilities 13
Business Services and Transportation 10
Capital Equipment, Process Industries, Basic Materials 8
Reserves 1
Based on net assets as of 6/30/99.
The portfolio has more exposure to large-cap companies than previously, as
you can gather from the list of 25 largest holdings on page 5, and is much
more diversified, with representation in all industry sectors. Technology
and telecommunications companies play a more prominent role and several
large holdings in these areas were strong performers in the last two
months, including Hewlett-Packard, GTE, Nokia, Solectron, and BMC Software.
Banking and financial services companies held back performance in the first
half, but we are optimistic about the prospects for many of our holdings,
including Citigroup, Bank of New York, Freddie Mac, and Associates First
Capital. Insurance stocks, such as XL Capital Limited, look particularly
appealing at current prices as worries about soft industry pricing have
caused investors to sell the stocks down to attractive valuations. Several
prominent industrial holdings performed well including AlliedSignal and
Honeywell. Both stocks rose handsomely following their agreement to merge.
In health care, several major pharmaceutical stocks such as Schering Plough
and Warner-Lambert look appealing. After several strong years of
performance, 1999 has been tough sledding for the drug stocks as investors
began to focus on more economically sensitive issues and President
Clinton's proposal for a Medicare prescription drug benefit raised fears of
price controls. These companies continue to post strong earnings growth
though, and we are optimistic about their future performance.
OUTLOOK
Over the past few years, declining interest rates helped buoy stock prices
while earnings growth slowed. In a reversal of sorts, an expected
reacceleration of earnings growth is lifting stocks again but rising
interest rates threaten to dampen investor enthusiasm, and valuations are
high in historical terms. While we can't be sure how this tug of war
between earnings and interest rates will end, we can assure you that our
talented team of analysts will diligently pursue the best opportunities in
the marketplace, searching for companies whose earnings and share prices
can continue to grow. We're confident they will produce much improved
results for fund shareholders in the future.
We look forward to updating you on our progress. Thank you for your
continuing support.
Respectfully submitted,
William J. Stromberg
President and Chairman of the Investment Advisory Committee
July 22, 1999
T. Rowe Price Capital Opportunity Fund
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Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/99
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Microsoft 3.3%
GE 3.0
MCI WorldCom 2.5
GTE 1.9
Cisco Systems 1.8
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Merck 1.7
Citigroup 1.6
Bank of America 1.5
Hewlett-Packard 1.4
Royal Dutch Petroleum 1.4
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Lucent Technologies 1.4
Mobil 1.4
Coca-Cola 1.3
Tyco International 1.3
America Online 1.3
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Wal-Mart 1.3
Bristol-Myers Squibb 1.2
Intel 1.2
Procter & Gamble 1.2
MediaOne Group 1.2
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American International Group 1.2
IBM 1.1
Pfizer 1.1
Johnson & Johnson 1.0
Bank of New York 0.9
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Total 38.2%
Note: Table excludes reserves.
T. Rowe Price Capital Opportunity Fund
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Portfolio Highlights
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CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 6/30/99
Ten Best Contributors
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Xilinx** 13(cents)
United HealthCare 12
MCI WorldCom 11
Univision Communications** 11
Tyco International 10
News Corporation 8
AlliedSignal 8
Avis Rent A Car** 7
Pacific Internet*** 6
Catalina Marketing** 6
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Total 92(cents)
Ten Worst Contributors
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Network Associates** -29(cents)
Romac International** 22
United Road Services** 17
Imax** 13
Parametric Technology** 12
Rite Aid** 10
XL Capital 8
America Online* 8
Allied Waste Industries** 7
Richfoods Holdings** 7
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Total -133(cents)
12 Months Ended 6/30/99
Ten Best Contributors
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MCI WorldCom 29(cents)
Xilinx** 29
Univision Communications*** 22
United HealthCare* 20
Tyco International 19
Catalina Marketing** 14
Fred Meyer** 13
U.S. Foodservice** 11
Galileo International*** 11
Learning Inc.** 10
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Total 178(cents)
Ten Worst Contributors
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Romac International** -32(cents)
Network Associates*** 20
General Nutrition** 19
Warnaco Group** 18
United Road Services** 17
International Specialty Products** 17
BE Aerospace** 16
Concentra Managed Care** 15
Citigroup* 15
Interim Services** 14
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Total -183(cents)
* Position added
** Position eliminated
*** Position added and eliminated
T. Rowe Price Capital Opportunity Fund
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Performance Comparison
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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. An index
return does not reflect expenses, which have been deducted from the fund's
return.
CAPITAL OPPORTUNITY FUND
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As of 6/30/99
Lipper Capital Capital
S&P 500 Apprpeciation Opportunity
Index Funds Average Fund
11/30/94 10.000 10.000 10.000
6/95 12.200 11.828 13.210
6/96 15.372 14.689 17.108
6/97 20.705 17.071 18.532
6/98 26.951 21.000 23.708
6/99 33.083 24.864 23.712
Average Annual Compound Total Return
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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 6/30/99 1 Year 3 Years Inception Date
- --------------------------------------------------------------------------------
Capital Opportunity Fund 0.02% 11.50% 20.74% 11/30/94
Investment 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
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Unaudited
Financial Highlights For a share outstanding throughout each period
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6 Months Year 11/30/94
Ended Ended Through
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 18.11 $ 16.62 $ 15.75 $ 14.13 $ 10.43 $ 10.00
Investment activities
Net investment
income (0.01) (0.07) 0.01 --* 0.01* 0.02*
Net realized and
unrealized gain
(loss) 0.01 2.44 2.45 2.36 4.83 0.41
Total from
investment
activities -- 2.37 2.46 2.36 4.84 0.43
Distributions
Net investment
income -- -- -- -- (0.01) --
Net realized
gain -- (0.88) (1.59) (0.74) (1.13) --
Total distributions -- (0.88) (1.59) (0.74) (1.14) --
NET ASSET VALUE
End of period $ 18.11 $ 18.11 $ 16.62 $ 15.75 $ 14.13 $ 10.43
Ratios/Supplemental Data
Total
return(diamond) 0.00% 14.70% 15.87% 16.76%* 46.51%* 4.30%*
Ratio of total
expenses to
average
net assets 1.32%! 1.35% 1.35% 1.35%* 1.35%* 1.35%*!
Ratio of net investment
income to average
net assets (0.07)%! (0.44)% 0.04% 0.02%* 0.08%* 2.71%*!
Portfolio
turnover rate 204.7%! 73.8% 85.0% 107.3% 136.9% 134.5%!
Net assets, end of period
(in thousands) $108,533 $124,812 $109,055 $125,077 $ 61,923 $ 2,437
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment of
all distributions.
* 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
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Unaudited June 30, 1999
Statement of Net Assets Shares Value
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In thousands
Common Stocks 98.9%
FINANCIAL 15.6%
Bank and Trust 7.1%
Bank of America 22,600 $ 1,657
Bank of New York 28,100 1,031
Bank One 16,200 965
Chase Manhattan 10,700 927
Fifth Third Bancorp 1,600 107
Firstar 2,100 59
Huntington Bancshares 8,100 283
Mellon Bank 16,800 611
Mercantile Bancorporation 6,600 377
State Street 3,700 316
U.S. Bancorp 10,800 367
Washington Mutual 2,800 99
Wells Fargo 20,800 889
7,688
Insurance 3.1%
Allstate 4,200 151
American General 4,400 331
American International Group 10,900 1,276
Aon 3,750 155
Hartford Financial
Services Group 2,800 163
Loews 2,300 182
Marsh & McLennan 8,500 642
MGIC Investment 1,300 63
St. Paul Companies 2,700 86
XL Capital (Class A) 5,752 325
3,374
Financial Services 5.4%
American Express 4,900 638
Associates First Capital (Class A) 8,900 395
Capital One Financial 2,700 150
Charles Schwab 1,400 154
Citigroup 35,550 1,689
Fannie Mae 9,400 643
Franklin Resources 2,000 $ 81
Freddie Mac 9,600 557
Goldman Sachs Group * 1,900 137
Household International 1,800 85
MBNA 8,200 251
Morgan Stanley Dean Witter 8,500 871
Providian Financial 1,700 159
SLM Holding 1,600 73
5,883
Total Financial 16,945
UTILITIES 6.8%
Telephone Services 4.8%
ALLTEL 2,600 186
Ameritech 11,200 823
AT&T 15,700 876
Centurytel 4,000 159
GTE 27,200 2,060
Sprint 12,600 666
U. S. Cellular * 2,800 150
Western Wireless 12,200 330
5,250
Electric Utilities 2.0%
Consolidated Edison 2,100 95
Constellation Energy Group 1,600 47
DQE 2,600 104
Duke Energy 5,600 304
Entergy 7,200 225
FirstEnergy 5,100 158
Niagara Mohawk * 13,800 222
PacifiCorp 3,900 72
PECO Energy 4,800 201
Reliant Energy 8,400 232
Texas Utilities 5,600 231
Unicom 5,900 228
2,119
Total Utilities 7,369
CONSUMER NONDURABLES 19.5%
Beverages 2.2%
Anheuser-Busch 3,700 $ 262
Coca-Cola 22,700 1,419
PepsiCo 20,000 774
2,455
Food Processing 2.2%
Campbell 4,200 195
ConAgra 4,900 130
General Mills 5,000 402
Heinz 6,800 341
Kellogg 2,000 66
Quaker Oats 3,100 206
Ralston Purina 14,500 441
Sara Lee 8,700 197
Unilever NV 5,714 399
2,377
Hospital Supplies/Hospital Management 2.4%
Abbott Laboratories 13,300 605
Baxter International 6,500 394
Beckman Coulter 6,700 326
Boston Scientific * 10,300 452
Guidant 3,300 170
HealthSouth * 2,200 33
Medtronic 3,000 234
Millipore 5,500 223
Omnicare 4,900 62
Wellpoint Health Networks * 900 76
2,575
Pharmaceuticals 8.5%
American Home Products 12,900 742
Amgen 5,300 322
Bristol-Myers Squibb 19,200 1,352
Eli Lilly 12,600 903
Johnson & Johnson 11,300 1,107
Merck 24,900 1,843
Pfizer 11,000 1,207
Schering-Plough 14,000 $ 742
Teva Pharmaceutical
Industries ADR 4,800 237
Warner-Lambert 11,500 798
9,253
Health Care Services 0.5%
Aetna 1,500 134
CIGNA 2,100 187
IMS Health 2,900 91
United HealthCare 2,000 125
537
Cosmetics 0.4%
Gillette 10,700 439
439
Miscellaneous Consumer Products 3.3%
Armstrong World 700 40
Clorox 1,200 128
Colgate-Palmolive 2,200 217
Fortune Brands 5,000 207
Harcourt General 600 31
Liz Claiborne 500 18
Mattel 9,400 249
Newell Rubbermaid 2,800 130
NIKE (Class B) 4,200 266
Philip Morris 20,300 816
Procter & Gamble 14,600 1,303
Reebok * 1,100 20
RJR Nabisco 3,100 61
V. F 1,400 60
3,546
Total Consumer Nondurables 21,182
CONSUMER SERVICES 11.4%
General Merchandisers 2.8%
Costco Companies * 2,300 184
Dayton Hudson 9,000 585
Dillards 1,300 46
Dollar General 5,250 152
J.C. Penney 1,900 $ 92
May Department Stores 3,500 143
Neiman-Marcus * 8,200 211
Saks * 6,500 188
Sears 2,200 98
Wal-Mart 28,800 1,389
3,088
Specialty Merchandisers 3.6%
Albertson's 3,969 205
Circuit City Stores 1,400 130
CVS 6,600 335
Federated Department Stores * 3,300 175
Home Depot 15,500 999
Kohl's * 2,400 185
Kroger * 14,800 413
Lowes 4,600 261
Safeway * 4,300 213
Staples * 5,800 179
The Gap 8,400 423
Toys "R" Us * 7,700 159
Walgreen 7,100 209
3,886
Entertainment and Leisure 2.3%
Carnival (Class A) 6,400 310
Disney 1,200 37
McDonald's 11,200 463
Papa Johns * 1,600 72
MediaOne Group * 17,400 1,294
Viacom (Class B) * 6,800 299
Wendys 600 17
2,492
Media and Communications 2.6%
CBS * 10,300 447
Clear Channel Communications * 4,500 310
Comcast (Class A Special) 7,100 273
Dun & Bradstreet 1,500 53
McGraw-Hill 1,700 92
Meredith 300 10
R.R. Donnelley 2,500 $ 93
Time Warner 13,000 956
Tribune 1,200 105
Vodafone ADR 2,650 522
2,861
Restaurants 0.1%
Darden Restaurants 800 17
Tricon Global Restaurants * 900 49
66
Total Consumer Services 12,393
CONSUMER CYCLICALS 3.5%
Automobiles and Related 2.4%
Dana 3,900 180
Delphi Automotive Systems 4,612 86
Eaton 6,100 561
Ford Motor 11,700 660
GM 6,600 435
Goodyear Tire & Rubber 1,900 112
TRW 10,100 554
2,588
Miscellaneous Consumer Durables 1.1%
Eastman Kodak 6,500 440
Masco 5,700 165
Whirlpool 7,900 585
1,190
Total Consumer Cyclicals 3,778
TECHNOLOGY 17.6%
Electronic Components 4.0%
Altera * 8,200 302
Analog Devices * 7,100 356
EMC * 9,700 534
Intel 22,500 1,338
Maxim Integrated Products * 5,300 352
Motorola 7,900 749
National Semiconductor * 4,900 124
Sanmina * 4,100 $ 311
Texas Instruments 2,000 290
4,356
Telecommunications 6.1%
ADC Telecommunications * 4,800 219
Cisco Systems * 30,800 1,984
Lucent Technologies 22,680 1,529
MCI WorldCom * 32,056 2,758
Scientific-Atlanta 500 18
Sprint PCS * 2,700 154
6,662
Aerospace and Defense 1.2%
AlliedSignal 6,000 378
General Dynamics 1,600 110
Lockheed Martin 3,700 138
Northrop 900 60
Raytheon (Class B) 3,800 267
United Technologies 4,400 315
1,268
Information Processing 2.0%
Dell Computer * 12,200 451
IBM 9,600 1,241
SCI Systems * 9,300 441
2,133
Office Automation 0.3%
Ceridian * 1,800 59
Pitney Bowes 800 51
Xerox 3,400 201
311
Specialized Computer 0.5%
Sun Microsystems * 8,400 579
579
Electronic Systems 3.5%
Applied Materials * 3,300 244
EG&G 700 25
Hewlett-Packard 15,600 1,568
Honeywell 2,300 266
KLA-Tencor * 1,800 117
Nokia ADR 9,700 888
Solectron * 10,700 $ 713
3,821
Total Technology 19,130
CAPITAL EQUIPMENT 4.5%
Electrical Equipment 4.3%
GE 28,500 3,220
Tyco International 14,932 1,415
4,635
Machinery 0.2%
FMC * 2,700 185
Foster Wheeler 700 10
195
Total Capital Equipment 4,830
BUSINESS SERVICES AND
TRANSPORTATION 9.9%
Computer Service and Software 7.2%
America Online * 12,600 1,392
Automatic Data Processing 5,500 242
BMC Software * 10,300 556
Citrix Systems * 8,700 490
Computer Associates 5,600 308
Computer Sciences * 500 35
Compuware * 5,000 159
Electronic Data Systems 1,300 74
First Data 4,700 230
General Instrument * 1,000 42
Microsoft * 40,200 3,623
Novell * 2,200 58
Oracle * 15,300 568
Synopsys * 700 39
7,816
Distribution Services 0.8%
Cardinal Health 5,400 346
Ikon Office Solutions 2,100 31
Tech Data * 11,500 440
817
Miscellaneous Business Services 1.1%
Browning-Ferris 2,200 $ 95
Equifax 2,500 89
FDX * 2,200 119
Fluor 1,400 57
H&R Block 1,400 70
Omnicom 2,900 232
Paychex 1,650 53
Waste Management 9,900 532
1,247
Railroads 0.5%
Burlington Northern Santa Fe 17,200 533
533
Airlines 0.3%
AMR * 1,700 116
Continental Airlines * 1,800 68
Delta 1,500 86
Southwest Airlines 2,900 90
360
Total Business Services and Transportation 10,773
ENERGY 6.3%
Integrated Petroleum - Domestic 0.8%
Amerada Hess 2,200 131
Atlantic Richfield 3,400 284
Kerr-McGee 1,400 70
Phillips Petroleum 3,100 156
USX-Marathon 7,700 251
892
Integrated Petroleum - International 4.4%
Chevron 5,700 543
Exxon 12,100 933
Mobil 15,100 1,495
Royal Dutch Petroleum ADR 25,800 1,554
Texaco 4,400 275
4,800
Energy Services 0.6%
Baker Hughes 6,500 $ 218
Halliburton 3,800 172
Helmerich & Payne 400 10
Schlumberger 3,900 248
648
Exploration and Production 0.3%
Anadarko Petroleum 1,000 37
Burlington Resources 2,100 91
Union Pacific Resources 1,600 26
Unocal 2,300 91
245
Gas and Gas Transmission 0.2%
Enron 2,400 196
196
Total Energy 6,781
PROCESS INDUSTRIES 3.0%
Diversified Chemicals 1.3%
Air Products and Chemicals 2,700 109
Dow Chemical 1,400 178
DuPont 12,200 833
Praxair 2,000 98
W. R. Grace * 12,200 224
1,442
Forest Products 0.3%
International Paper 3,700 187
Potlatch 1,000 44
Weyerhaeuser 1,900 130
361
Specialty Chemicals 0.7%
3M 2,000 174
Avery Dennison 1,500 91
Great Lakes Chemical 3,900 180
Millennium Chemicals 3,500 82
Raychem 6,500 240
767
Paper and Paper Products 0.7%
Bowater 1,100 $ 52
Champion International 1,800 86
Fort James 4,400 167
Kimberly-Clark 7,000 399
704
Total Process Industries 3,274
BASIC MATERIALS 0.8%
Metals 0.5%
Alcan Aluminum 2,300 74
Alcoa 3,600 223
Cyprus Amax Minerals 1,800 27
Inco 2,900 52
Nucor 800 38
Phelps Dodge 1,500 93
Reynolds Metals 800 47
554
Mining 0.1%
Battle Mountain Gold 9,100 22
Newmont Mining 4,600 92
114
Miscellaneous Materials 0.2%
Williams Companies 4,100 174
174
Total Basic Materials 842
Total Common Stocks (Cost $99,721) 107,297
Short-Term Investments 1.3%
Money Market Funds 1.3%
Government Reserve Investment
Fund, 4.77% # 1,476,334 1,476
Total Short-Term Investments (Cost $1,476) 1,476
Total Investments in Securities
100.2% of Net Assets (Cost $101,197) $ 108,773
Other Assets Less Liabilities (240)
NET ASSETS $ 108,533
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (39)
Accumulated net realized gain/loss -
net of distributions 23,759
Net unrealized gain (loss) 7,576
Paid-in-capital applicable to 5,992,445 shares
of $0.0001 par value capital stock outstanding;
1,000,000,000 shares authorized 77,237
NET ASSETS $ 108,533
----------
NET ASSET VALUE PER SHARE $ 18.11
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
CAD Canadian dollar
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Capital Opportunity Fund
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Unaudited
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/99
Investment Income
Income
Dividend $ 511
Interest 186
Total income 697
Expenses
Investment management 413
Shareholder servicing 215
Custody and accounting 45
Prospectus and shareholder reports 34
Registration 18
Legal and audit 6
Directors 3
Miscellaneous 2
Total expenses 736
Net investment income (39)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 22,517
Change in net unrealized gain
or loss on securities (22,991)
Net realized and
unrealized gain (loss) (474)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (513)
---------
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
6/30/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ (39) $ (520)
Net realized gain (loss) 22,517 5,258
Change in net unrealized
gain or loss (22,991) 11,091
Increase (decrease) in net
assets from operations (513) 15,829
Distributions to shareholders
Net realized gain -- (5,807)
Capital share transactions*
Shares sold 9,256 41,118
Distributions reinvested -- 5,668
Shares redeemed (25,022) (41,051)
Increase (decrease) in net
assets from capital
share transactions (15,766) 5,735
Net Assets
Increase (decrease)
during period (16,279) 15,757
Beginning of period 124,812 109,055
End of period $ 108,533 $ 124,812
---------------------------------
*Share information
Shares sold 524 2,323
Distributions reinvested -- 339
Shares redeemed (1,422) (2,333)
Increase (decrease) in
shares outstanding (898) 329
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Capital Opportunity Fund
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Unaudited June 30, 1999
Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Capital Opportunity Fund, Inc. (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.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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.
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. Credits earned on
daily, uninvested cash balances at the custodian, are used to reduce the
fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $109,583,000 and $116,658,000, respectively, for the
six months ended June 30, 1999.
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, 1999, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$101,197,000. Net unrealized gain aggregated $7,576,000 at period-end, of
which $10,507,000 related to appreciated investments and $2,931,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and the manager
provides for an annual investment management fee, of which $58,000 was
payable at June 30, 1999. The fee is computed daily and paid monthly, and
consists of an individual fund fee equal to 0.35% 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 Price Associates (the
group). The group fee rate ranges from 0.48% for the first $1 billion of
assets to 0.30% for assets in excess of $80 billion. At June 30, 1999, and
for the six months then ended, the effective annual group fee rate was
0.32%. The fund pays a pro-rata share of the group fee based on the ratio
of its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund
receives certain other services. The manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services,
Inc. is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $204,000 for the six months ended June 30, 1999, of which
$47,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
June 30, 1999, totaled $186,000 and are reflected as interest income in the
accompanying Statement of Operations.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a brokerage account
or obtain information, call:
1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this
report.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
4410 ArrowsWest Drive
Colorado Springs, CO 80907
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills, CA 91367
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. F08-051 6/30/99
