T. Rowe Price
--------------------------------------------------------------------------------
Semiannual Report
Capital Opportunity Fund
--------------------------------------------------------------------------------
June 30, 2000
--------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
CAPITAL OPPORTUNITY FUND
------------------------
* Amid extreme volatility and a steep technology-stock correction, most major
averages declined in the first half of 2000.
* The Capital Opportunity Fund posted a modest gain during the period,
outperforming the S&P 500 but slightly trailing its Lipper benchmark.
* Technology and Internet-related stocks dominated the winners and losers
lists. Chip and networking companies were strong, while Microsoft, AOL, and
Yahoo! declined.
* Economic growth is likely to moderate, but continued corporate profit
growth and reasonable valuations in select sectors bode well for the
markets.
================================================================================
UPDATES AVAILABLE
-----------------
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
================================================================================
FELLOW SHAREHOLDERS
-------------------
Stocks were extremely volatile in the first half of 2000, and most market
indexes declined despite a powerful rebound late in the period. After a bout of
speculative glee late last year and early this year, reality returned to the
markets and investors were once again forced to evaluate company fundamentals.
The result was a quick 37% correction in the tech-heavy Nasdaq Composite and the
near wipeout of many profitless dot-com companies.
PERFORMANCE COMPARISON
----------------------
Periods Ended 6/30/00 6 Months 12 Months
--------------------- -------- ---------
Capital Opportunity Fund 2.04% 13.77%
S&P500 Stock Index -0.43 7.24
Lipper Multi-Cap Core
Funds Average 2.53 11.54
<PAGE>
The Capital Opportunity Fund posted a 2.04% gain in the first half --
modest in absolute terms but good compared with the Standard & Poor's 500 Stock
Index's 0.43% loss. Performance was slightly behind the Lipper Multi-Cap Core
Funds Average, however, as shown in the table. In the 12 months ended June 30,
2000, your fund's solid 13.77% return exceeded both benchmarks. This result was
encouraging because it indicates that the fund's relative performance improved
dramatically during the first full year in the fund's new investment program,
described in our last report.
MARKET ENVIRONMENT
------------------
In response to unflagging economic growth in the midst of a record
expansion, the Federal Reserve increased its key federal funds target rate three
times for a total of one percentage point in the first half, capped by a
half-point move on May 16. In the past year, the Fed raised rates six times, by
a total of 1.75 percentage points, to the present level of 6.5%. Finally, by
late May, the economy began to show signs of responding to the Fed's strong
medicine. GDP growth moderated in the second quarter, and job creation and
industrial demand slowed. A consensus began to build that the Fed's rate hikes
may be nearing an end. However, energy prices surged in the first half, and
unemployment remained at a historically low 4.0%, meaning there could still be
significant upward pressure on wages. Despite anecdotal evidence of inflation,
consumer and producer price measures continued to show only slight increases
over 1999. All this economic growth has helped generate huge federal government
budget surpluses. In the first half, a feared "shortage" of 30-year Treasury
bonds -- the result of reduced federal borrowing and a Treasury debt buyback --
drove their yields down sharply even as the Fed tightened monetary policy.
The stock market, like the economy, shrugged off the impact of rising
interest rates in the first quarter. Powerful momentum -- and extreme
speculation -- carried over from late 1999. Valuations on the favored
technology, Internet, biotech, and telecom stocks reached stratospheric levels
by the time the Nasdaq Composite peaked above 5000 on March 10. However, market
volatility was also extreme. During the first half, the Nasdaq experienced
intraday price swings of greater than 2% on more than 84% of all trading days!
The S&P 500 did the same on more than 40% of trading days. The only comparable
periods in market history came in the 1970s and the 1930s -- and stocks did not
fare well in either decade. A sharp correction took hold in March, as Internet
and biotech stocks, in particular, crashed to earth. Many technology stocks
bounced back quickly in June as investors grew more optimistic about an economic
soft landing. In fact, by mid-July, after the end of the period under review,
many biotech, telecom, networking, and semiconductor stocks had pushed back
toward their highs. But most of the dot-coms, particularly those with the
dimmest profit prospects, were down for the count. Many of the biggest winners
of 1999 and early 2000 were companies with no earnings. Midway through the first
half, investors began to demand profitability, though they were once again
willing to pay exorbitant price/earnings (P/E) ratios for stocks of fast-growing
companies.
<PAGE>
*****************************
During the first half, the
Nasdaq experienced intraday
price swings of greater than
2% on more than 84% of
all trading days!
*****************************
A more positive sign, however, is that market breadth improved in June as
investors began to embrace more reasonably priced, steady growth stocks.
Value-oriented shares, such as those of retailers and industrial companies, had
a brief moment in the sun during the Nasdaq correction but faded late in the
period on fears of an economic slowdown. While large-cap stocks have generally
dominated the market since 1994, small- and mid-cap shares have taken the lead
in the past year. This should work to your fund's benefit, as our average market
capitalization (stock price multiplied by shares outstanding) will generally be
lower than that of the S&P 500.
PORTFOLIO REVIEW
----------------
Technology and Internet-related stocks dominate both our top contributors
list and our worst detractors list -- a fitting indication of the extremely
volatile and selective market of the last six months. Some of our top
contributors from 1999 gave an encore in the first half; other former leaders
fell flat. There was reward and there was punishment in this market.
***************************************************************
Sector Diversification pie chart based on net assets as of
6/30/00. Showing Technology 26%; Consumber Nondurables 17%;
Business Services and Transportation 12%; Financial 12%;
Consumer Services and Cyclicals 11%; Energy and Utilities 11%;
Capital Equipment, Process Industries, and Basic Materials 9%;
Reserves 2%.
***************************************************************
Making a repeat appearance as top performers were INTEL, ORACLE, and CISCO
SYSTEMS. No surprises there, perhaps, as all are acknowledged leaders of the New
Economy. In fact, during the spring correction, Cisco and Oracle held up
exceptionally well -- testament to their status as must-own tech stocks. Oracle
is the leader in database software and is moving aggressively into e-commerce
applications. Cisco literally builds the Internet as the leading supplier of
networking equipment, especially routers. Intel -- the leader in processors for
PCs that is trying to extend its dominance to the faster-growing communications
field -- was by far our largest chip position. ANALOG DEVICES, however, was also
a major contributor. Analog Devices specializes in analog-to-digital signal
processors that are important in communications.
<PAGE>
Our top contributor in the first half was HEWLETT-PACKARD, a leader in
high-quality printers as well as in PCs, workstations, and servers. New CEO
Carly Fiorina is refocusing the company on its core strengths and imposing
important expense disciplines. Hewlett-Packard is a core technology holding
generating very strong earnings growth. The fund also benefited from strong
gains in NORTEL NETWORKS -- like Cisco, a key builder of Internet and
telecommunications infrastructure -- and SDL. SDL, a maker of the optical
components so critical to increasing network speed and capacity, recently agreed
to be acquired by JDS UNIPHASE -- one of our top contributors over the past
year.
The rare exceptions to this tech domination included pharmaceutical giants
PFIZER and WARNER-LAMBERT. Pfizer completed its acquisition of Warner-Lambert
late in the period, and both stocks were strong performers. Drug companies had
been somewhat out of favor in 1999 on concerns about patent expirations, new
drug pipelines, and possible government interference in drug pricing. But when
technology stocks turned wobbly in the second quarter, growth investors took
refuge in steady growth pharmaceutical stocks. Near the end of the period,
indications of an economic slowdown also boosted interest in the drug sector.
Leading our worst performers was MICROSOFT, which suffered a setback in its
federal antitrust trial as the presiding judge ordered the breakup of the
company. This verdict -- not unexpected -- is under appeal, with the federal
government trying to move the case directly to the Supreme Court while Microsoft
prefers to be heard first in the appellate court, where the company has fared
better in the past. After soaring late in 1999 as liquidity flowed into the
stock market (the stock was our second-best performer last year), Microsoft
shares plummeted nearly 50% in the first five-and-a-half months of 2000. The
stock has since recovered partially. The trials and tribulations of Microsoft
mirrored in no small measure the difficulties of tech stocks in the first half,
as the stock's abrupt decline in March helped set off selling in other
technology issues.
Other New Economy darlings that got beat up during the period were LUCENT
TECHNOLOGIES, AMERICA ONLINE, QUALCOMM, and YAHOO!. Lucent, a leader in
communications equipment and networking, stunned investors with a profit warning
in January and has not been able to mount a sustained recovery since. Competitor
Nortel currently has the upper hand in the white-hot optical networking area.
AOL, one of our best contributors in the second half of last year, lost some of
its luster among momentum investors due to its announcement in January of plans
to acquire Time Warner -- which some consider a relatively slow-growing,
established media company. Investors accustomed to staggering growth figures had
qualms about the prospective growth rate of the combined company. We think the
combination is a good one for the long run, but AOL may tread water in the near
term. QUALCOMM plummeted during the overall Nasdaq correction and continued
losing ground amid questions about its overseas growth, particularly in China
and South Korea. Yahoo! should be one of the long-term winners on the Internet.
But the collapse of so many dot-com stocks, along with questions about the
growth rate of online advertising, cast a pall over the online media sector, and
Yahoo! has yet to recover convincingly.
<PAGE>
Back in the Old Economy, Procter & Gamble slipped on a bar of soap after it
became apparent that CEO Durk Jager's turnaround plan was not going to work and
the company preannounced disappointing earnings. Jager has since resigned. P&G
remains a global growth company with terrific brand names whose value should
rise significantly once the company gets back on track. Finally, blue chip
retailers HOME DEPOT and WAL-MART were hurt in the first half by concern that
the Fed's persistent rate hikes could cause a significant slowdown in consumer
spending. We think both continue to be great growth stocks.
OUTLOOK
-------
It appears that the Fed has temporarily achieved its goals of slowing the
economy and reining in the exuberance on Wall Street, but at least one more rate
hike this year remains a possibility. For now, we expect that the economy will
slow without slipping into recession. This scenario could spell trouble in some
sectors, especially among technology stocks whose valuations have again become
excessive. Overall, however, more moderate but sustainable economic growth
should help support continued good news in corporate earnings and provide a more
positive interest rate backdrop, which should in turn support the equity
markets.
Earnings growth continues to be very strong at many high-quality U.S.
companies, and the valuations of selected companies remain reasonable. We
welcome the renewed attention on Wall Street to fundamentals and valuations. It
helps us serve the shareholders' interests when the companies we identify as
poised for above-average growth, or possessing catalysts for improved business
performance, are eventually recognized and rewarded by other investors. We are
confident that the rigorous fundamental research conducted by our talented team
of analysts can add value to investment returns over the long run.
Respectfully submitted,
/s/
William J. Stromberg
President and Chairman of the Investment Advisory Committee
July 21, 2000
================================================================================
<PAGE>
T. Rowe Price Capital Opportunity Fund
--------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
TWENTY-FIVE LARGEST HOLDINGS
----------------------------
Percent of
Net Assets
6/30/00
--------------------------------------------------------------------------------
GE 3.9%
--------------------------------------------------------------------------------
Cisco Systems 3.7
--------------------------------------------------------------------------------
Pfizer 3.2
--------------------------------------------------------------------------------
Intel 2.9
--------------------------------------------------------------------------------
Microsoft 2.8
--------------------------------------------------------------------------------
Oracle 2.4
--------------------------------------------------------------------------------
WorldCom 2.3
--------------------------------------------------------------------------------
Exxon Mobil 2.2
--------------------------------------------------------------------------------
Citigroup 2.0
--------------------------------------------------------------------------------
Wal-Mart 1.8
--------------------------------------------------------------------------------
Dell Computer 1.8
--------------------------------------------------------------------------------
Nortel Networks 1.7
--------------------------------------------------------------------------------
Hewlett-Packard 1.5
--------------------------------------------------------------------------------
American International Group 1.4
--------------------------------------------------------------------------------
Coca-Cola 1.2
--------------------------------------------------------------------------------
GTE 1.2
--------------------------------------------------------------------------------
Tyco International 1.1
--------------------------------------------------------------------------------
Royal Dutch Petroleum 1.1
--------------------------------------------------------------------------------
<PAGE>
Home Depot 1.1
--------------------------------------------------------------------------------
America Online 1.0
--------------------------------------------------------------------------------
Merc 1.0
--------------------------------------------------------------------------------
Morgan Stanley Dean Witter 1.0
--------------------------------------------------------------------------------
AT&T 1.0
--------------------------------------------------------------------------------
PepsiCo 0.9
--------------------------------------------------------------------------------
Pharmacia 0.9
--------------------------------------------------------------------------------
Total 45.1%
Note: Table excludes reserves.
================================================================================
T. Rowe Price Capital Opportunity Fund
--------------------------------------
PORTFOLIO HIGHLIGHTS
--------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
--------------------------------------------------------
6 Months Ended 6/30/00
TEN BEST CONTRIBUTORS
---------------------
Hewlett-Packard 27 cents
Intel 17
Oracle 13
Cisco Systems 10
Pfizer 8
Nortel Networks 7
Warner-Lambert 6
Analog Devices 6
Ford Motor 6
SDL* 5
Total 105 cents
TEN WORST CONTRIBUTORS
----------------------
Microsoft -22 cents
Agilent Technologies ** 18
Procter & Gamble 9
Lucent Technologies 7
Visteon 7
America Online 7
QUALCOMM* 7
Home Depot 7
Yahoo! 6
Wal-Mart 5
Total -95 cents
<PAGE>
12 Months Ended 6/30/00
TEN BEST CONTRIBUTORS
---------------------
Oracle 33 cents
Cisco Systems 31
Hewlett-Packard 29
Intel 26
GE 17
Nortel Networks * 13
JDS Uniphase * 13
Analog Devices 11
Genentech * 9
Warner-Lambert ** 8
Total 190 cents
TEN WORST CONTRIBUTORS
----------------------
Agilent Technologies ** -18 cents
Bank of America 10
WorldCom 8
Visteon 7
QUALCOMM* 7
Bristol-Myers Squibb ** 6
Waste Management 6
DuPont 5
Philip Morris 5
Procter & Gamble 4
Total -76 cents
* Position added
** Position eliminated
================================================================================
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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
<PAGE>
Lipper Multi-Cap Capital Opportunity
S&P 500 Index Core Funds Average Fund
11/30/94 10000 10000 10000
6/95 12200 11840 13210
6/96 15372 14594 17108
6/97 20705 18501 18532
6/98 26951 23265 23708
6/99 33083 26689 23712
6/00 35480 29087 26978
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 6/30/00 1 Year 3 Years 5 Years Inception Date
--------------------- ------ ------- ------- --------- ----
Capital Opportunity Fund 13.77% 13.33% 15.35% 19.46% 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
--------------------------------------
Unaudited For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
--------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of period $ 15.69 $ 18.11 $ 16.62 $ 15.75 $ 14.13 $10.43
--------------------------------------------------------------------------------
Investment activities
Net investment
income (loss) (0.01) (0.01) (0.07) 0.01 -* 0.01*
Net realized and
unrealized gain (loss) 0.33 1.86 2.44 2.45 2.36 4.83
--------------------------------------------------------------------------------
Total from
investment activities 0.32 1.85 2.37 2.46 2.36 4.84
--------------------------------------------------------------------------------
Distributions
Net investment income - - - - - (0.01)
Net realized gain - (4.27) (0.88) (1.59) (0.74) (1.13)
--------------------------------------------------------------------------------
Total distributions - (4.27) (0.88) (1.59) (0.74) (1.14)
--------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 16.01 $ 15.69 $ 18.11 $ 16.62 $ 15.75 $14.13
<PAGE>
RATIOS/SUPPLEMENTAL DATA
Total returnu 2.04% 11.50% 14.70% 15.87% 16.76%* 46.51%*
--------------------------------------------------------------------------------
Ratio of total expenses
to average net assets 1.18%+ 1.26% 1.35% 1.35% 1.35%* 1.35%*
--------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (0.13)%+ (0.06) (0.44)% 0.04% 0.02%* 0.08%*
--------------------------------------------------------------------------------
Portfolio turnover rate 62.9%+ 133.1% 73.8% 85.0% 107.3% 136.9%
--------------------------------------------------------------------------------
Net assets, end of
period (in thousands) $104,319 $109,057 $124,812 $109,055 $125,077 $61,923
--------------------------------------------------------------------------------
** 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
--------------------------------------
Unaudited June 30, 2000
STATEMENT OF NET ASSETS In thousands
----------------------- Shares/Par Value
---------- -----
COMMON STOCKS 97.6%
FINANCIAL 11.8%
Bank and Trust 4.1%
Bank of America 5,600 $ 241
------------------------------------------------------------------------------
Bank of New York 18,900 879
------------------------------------------------------------------------------
Chase Manhattan 19,890 916
------------------------------------------------------------------------------
Firstar 30,100 634
------------------------------------------------------------------------------
Mellon Financial 18,600 678
------------------------------------------------------------------------------
State Street 3,440 365
------------------------------------------------------------------------------
Wells Fargo 14,130 547
------------------------------------------------------------------------------
4,260
------------------------------------------------------------------------------
<PAGE>
Insurance 2.6%
ACE Limited 3,600 101
------------------------------------------------------------------------------
American General 2,810 171
------------------------------------------------------------------------------
American International Group 12,325 1,448
------------------------------------------------------------------------------
Aon 2,050 64
------------------------------------------------------------------------------
Hartford Financial Services Group 3,730 209
------------------------------------------------------------------------------
Loews 1,300 78
------------------------------------------------------------------------------
Marsh & McLennan 2,710 283
------------------------------------------------------------------------------
MGIC Investment 900 41
------------------------------------------------------------------------------
UNUMProvident 2,400 48
------------------------------------------------------------------------------
XL Capital (Class A) 5,302 287
------------------------------------------------------------------------------
2,730
------------------------------------------------------------------------------
Financial Services 5.1%
American Express 11,400 594
------------------------------------------------------------------------------
Associates First Capital (Class A) 6,900 154
------------------------------------------------------------------------------
Capital One Financial 1,500 67
------------------------------------------------------------------------------
Citigroup 35,030 2,111
------------------------------------------------------------------------------
Fannie Mae 9,300 485
------------------------------------------------------------------------------
Freddie Mac 8,100 328
------------------------------------------------------------------------------
Heller Financial 5,100 104
------------------------------------------------------------------------------
Household International 3,200 133
------------------------------------------------------------------------------
MBNA 7,400 201
------------------------------------------------------------------------------
Morgan Stanley Dean Witter 12,320 1,026
------------------------------------------------------------------------------
Providian Financial 1,400 126
------------------------------------------------------------------------------
5,329
------------------------------------------------------------------------------
Total Financial 12,319
------------------------------------------------------------------------------
<PAGE>
UTILITIES 5.3%
Telephone 3.7%
ALLTEL 2,700 $ 167
------------------------------------------------------------------------------
AT&T 32,205 1,019
------------------------------------------------------------------------------
Comverse Technology * 1,200 112
------------------------------------------------------------------------------
GTE 19,400 1,208
------------------------------------------------------------------------------
McLeod USA * 9,900 205
------------------------------------------------------------------------------
Nextel Communications * 6,200 379
------------------------------------------------------------------------------
NEXTLINK Communications * 4,800 182
------------------------------------------------------------------------------
SBC Communications 14,600 631
------------------------------------------------------------------------------
3,903
------------------------------------------------------------------------------
Electric Utilities 1.6%
Duke Energy 5,500 310
------------------------------------------------------------------------------
Entergy 5,700 155
------------------------------------------------------------------------------
Niagara Mohawk * 17,600 245
------------------------------------------------------------------------------
PECO Energy 7,600 306
------------------------------------------------------------------------------
Reliant Energy 8,200 242
------------------------------------------------------------------------------
TXU 2,700 80
------------------------------------------------------------------------------
Unicom 7,300 283
------------------------------------------------------------------------------
1,621
------------------------------------------------------------------------------
Total Utilities 5,524
------------------------------------------------------------------------------
CONSUMER NONDURABLES 16.9%
Beverages 2.5%
Anheuser-Busch 3,520 263
------------------------------------------------------------------------------
Coca-Cola 22,060 1,267
------------------------------------------------------------------------------
Coca-Cola Enterprises 3,500 57
------------------------------------------------------------------------------
PepsiCo 21,860 972
------------------------------------------------------------------------------
2,559
------------------------------------------------------------------------------
<PAGE>
Food Processing 1.2%
Bestfoods 2,350 163
------------------------------------------------------------------------------
ConAgra 4,310 82
------------------------------------------------------------------------------
General Mills 9,800 375
------------------------------------------------------------------------------
Heinz 7,060 309
------------------------------------------------------------------------------
Quaker Oats 1,100 83
------------------------------------------------------------------------------
Ralston Purina 4,510 90
------------------------------------------------------------------------------
Sara Lee 7,230 139
------------------------------------------------------------------------------
1,241
------------------------------------------------------------------------------
Hospital Supplies/Hospital Management 1.4%
Abbott Laboratories 6,000 $ 267
------------------------------------------------------------------------------
Baxter International 2,500 176
------------------------------------------------------------------------------
Beckman Coulter 3,100 181
------------------------------------------------------------------------------
Guidant * 4,200 208
------------------------------------------------------------------------------
Medtronic 10,100 503
------------------------------------------------------------------------------
Omnicare 9,700 88
------------------------------------------------------------------------------
Tenet Healthcare 900 24
------------------------------------------------------------------------------
1,447
------------------------------------------------------------------------------
Pharmaceuticals 8.6%
American Home Products 11,100 652
------------------------------------------------------------------------------
Amgen * 7,800 548
------------------------------------------------------------------------------
Eli Lilly 9,500 949
------------------------------------------------------------------------------
Genentech * 3,700 636
------------------------------------------------------------------------------
IDEC Pharmaceuticals * 2,700 317
------------------------------------------------------------------------------
Immunex * 4,500 223
------------------------------------------------------------------------------
MedImmune * 3,300 244
------------------------------------------------------------------------------
Merck 13,400 1,027
------------------------------------------------------------------------------
Pfizer 70,325 3,375
------------------------------------------------------------------------------
Pharmacia 18,723 968
------------------------------------------------------------------------------
8,939
------------------------------------------------------------------------------
<PAGE>
Health Care Services 0.7%
CIGNA 2,400 224
------------------------------------------------------------------------------
IMS Health 1,600 29
------------------------------------------------------------------------------
UnitedHealth Group 3,700 317
------------------------------------------------------------------------------
Wellpoint Health Networks * 2,300 167
------------------------------------------------------------------------------
737
------------------------------------------------------------------------------
Cosmetics 0.3%
Gillette 10,000 349
------------------------------------------------------------------------------
349
------------------------------------------------------------------------------
Biotechnology 0.4%
Affymetrix * 800 132
------------------------------------------------------------------------------
Edwards Lifesciences * 460 9
------------------------------------------------------------------------------
QLT * 4,200 326
------------------------------------------------------------------------------
467
------------------------------------------------------------------------------
Miscellaneous Consumer Products 1.8%
Clorox 1,950 87
------------------------------------------------------------------------------
Colgate-Palmolive 4,900 293
------------------------------------------------------------------------------
Energizer Holdings * 1,503 $ 27
------------------------------------------------------------------------------
Fortune Brands 4,980 115
------------------------------------------------------------------------------
Harcourt General 1,200 65
------------------------------------------------------------------------------
Liz Claiborne 500 18
------------------------------------------------------------------------------
Newell Rubbermaid 900 23
------------------------------------------------------------------------------
NIKE (Class B) 4,000 159
------------------------------------------------------------------------------
Philip Morris 16,810 447
------------------------------------------------------------------------------
Procter & Gamble 10,840 621
------------------------------------------------------------------------------
Viad 1,900 52
------------------------------------------------------------------------------
1,907
------------------------------------------------------------------------------
Total Consumer Nondurables 17,646
------------------------------------------------------------------------------
<PAGE>
CONSUMER SERVICES 9.4%
General Merchandisers 2.6%
Costco Wholesale * 4,600 152
------------------------------------------------------------------------------
Family Dollar Stores 3,600 70
------------------------------------------------------------------------------
May Department Stores 3,400 82
------------------------------------------------------------------------------
Neiman Marcus Group * 2,800 84
------------------------------------------------------------------------------
Target 6,200 360
------------------------------------------------------------------------------
TJX 3,300 62
------------------------------------------------------------------------------
Wal-Mart 33,400 1,925
------------------------------------------------------------------------------
2,735
------------------------------------------------------------------------------
Specialty Merchandisers 2.9%
Albertson's 3,969 132
------------------------------------------------------------------------------
Circuit City Stores 2,800 93
------------------------------------------------------------------------------
CVS 5,600 224
------------------------------------------------------------------------------
Federated Department Stores * 1,200 40
------------------------------------------------------------------------------
Home Depot 23,250 1,161
------------------------------------------------------------------------------
Kohl's * 4,800 267
------------------------------------------------------------------------------
Kroger * 14,800 326
------------------------------------------------------------------------------
Lowes 3,400 140
------------------------------------------------------------------------------
Nordstrom 4,900 118
------------------------------------------------------------------------------
Safeway * 4,900 221
------------------------------------------------------------------------------
Staples * 4,000 62
------------------------------------------------------------------------------
The Gap 7,200 225
------------------------------------------------------------------------------
Toys "R" Us * 3,900 57
------------------------------------------------------------------------------
3,066
------------------------------------------------------------------------------
<PAGE>
Entertainment and Leisure 2.0%
Carnival (Class A) 6,400 $ 125
------------------------------------------------------------------------------
Disney 17,500 679
------------------------------------------------------------------------------
McDonald's 11,200 369
------------------------------------------------------------------------------
Papa John's * 1,600 40
------------------------------------------------------------------------------
Viacom (Class B) * 13,261 904
------------------------------------------------------------------------------
2,117
------------------------------------------------------------------------------
Media and Communications 1.8%
Clear Channel Communications * 3,300 247
------------------------------------------------------------------------------
Comcast (Class A Special) * 6,600 268
------------------------------------------------------------------------------
Dun & Bradstreet 1,700 49
------------------------------------------------------------------------------
McGraw-Hill 1,600 86
------------------------------------------------------------------------------
R.R. Donnelley 2,400 54
------------------------------------------------------------------------------
Time Warner 10,700 813
------------------------------------------------------------------------------
Tribune 2,300 81
------------------------------------------------------------------------------
Vodafone AirTouch (GBP) 53,500 218
------------------------------------------------------------------------------
1,816
------------------------------------------------------------------------------
Restaurants 0.1%
Outback Steakhouse * 1,400 41
------------------------------------------------------------------------------
Tricon Global Restaurants * 900 25
------------------------------------------------------------------------------
66
------------------------------------------------------------------------------
Total Consumer Services 9,800
------------------------------------------------------------------------------
CONSUMER CYCLICALS 2.2%
Automobiles and Related 1.8%
Delphi Automotive Systems 4,612 67
------------------------------------------------------------------------------
Eaton 4,500 302
------------------------------------------------------------------------------
Ford Motor 11,000 473
------------------------------------------------------------------------------
<PAGE>
General Motors (Class H) * 1,584 139
------------------------------------------------------------------------------
General Motors 4,513 262
------------------------------------------------------------------------------
Goodyear Tire & Rubber 1,900 38
------------------------------------------------------------------------------
ITT Industries 7,100 216
------------------------------------------------------------------------------
Textron 6,700 364
------------------------------------------------------------------------------
Visteon * 1,440 17
------------------------------------------------------------------------------
1,878
------------------------------------------------------------------------------
Miscellaneous Consumer Durables 0.4%
Black & Decker 1,600 $ 63
------------------------------------------------------------------------------
Eastman Kodak 3,350 199
------------------------------------------------------------------------------
Masco 5,800 105
------------------------------------------------------------------------------
367
------------------------------------------------------------------------------
Total Consumer Cyclicals 2,245
------------------------------------------------------------------------------
TECHNOLOGY 26.0%
Electronic Components 6.4%
Advanced Micro Devices * 900 70
------------------------------------------------------------------------------
Altera * 4,600 469
------------------------------------------------------------------------------
Analog Devices * 8,700 661
------------------------------------------------------------------------------
Flextronics International * 7,000 481
------------------------------------------------------------------------------
Intel 22,500 3,007
------------------------------------------------------------------------------
LSI Logic * 2,000 108
------------------------------------------------------------------------------
Maxim Integrated Products * 4,100 279
------------------------------------------------------------------------------
Motorola 6,300 183
------------------------------------------------------------------------------
National Semiconductor * 6,700 380
------------------------------------------------------------------------------
PMC-Sierra * 600 107
------------------------------------------------------------------------------
SDL * 1,000 285
------------------------------------------------------------------------------
Texas Instruments 7,400 508
------------------------------------------------------------------------------
Vitesse Semiconductor * 1,200 88
------------------------------------------------------------------------------
6,626
------------------------------------------------------------------------------
<PAGE>
Telecommunications 10.1%
3Com * 2,800 161
------------------------------------------------------------------------------
ADC Telecommunications * 2,600 218
------------------------------------------------------------------------------
Andrew * 900 30
------------------------------------------------------------------------------
Cisco Systems * 60,300 3,831
------------------------------------------------------------------------------
JDS Uniphase * 6,200 743
------------------------------------------------------------------------------
Lucent Technologies 6,500 385
------------------------------------------------------------------------------
Nortel Networks 26,000 1,775
------------------------------------------------------------------------------
QUALCOMM * 5,600 336
------------------------------------------------------------------------------
Sprint PCS * 11,200 666
------------------------------------------------------------------------------
WorldCom * 51,384 2,359
------------------------------------------------------------------------------
10,504
------------------------------------------------------------------------------
Aerospace and Defense 1.3%
Allegheny Technologies 2,500 $ 45
------------------------------------------------------------------------------
General Dynamics 1,600 84
------------------------------------------------------------------------------
Lockheed Martin 10,400 258
------------------------------------------------------------------------------
Rockwell International 19,000 598
------------------------------------------------------------------------------
United Technologies 6,600 389
------------------------------------------------------------------------------
1,374
------------------------------------------------------------------------------
Information Processing 3.9%
COMPAQ Computer 23,210 593
------------------------------------------------------------------------------
Dell Computer * 37,740 1,862
------------------------------------------------------------------------------
IBM 7,530 825
------------------------------------------------------------------------------
SCI Systems * 15,480 607
------------------------------------------------------------------------------
Unisys * 16,000 233
------------------------------------------------------------------------------
4,120
------------------------------------------------------------------------------
Office Automation 0.0%
Ceridian * 1,800 44
------------------------------------------------------------------------------
44
------------------------------------------------------------------------------
<PAGE>
Electronic Systems 4.3%
Applied Materials * 7,000 635
------------------------------------------------------------------------------
Applied Micro Circuits * 1,200 118
------------------------------------------------------------------------------
Hewlett-Packard 12,560 1,568
------------------------------------------------------------------------------
KLA-Tencor * 3,600 211
------------------------------------------------------------------------------
Nokia ADR 13,400 669
------------------------------------------------------------------------------
PE Biosystems 3,000 198
------------------------------------------------------------------------------
Solectron * 18,600 779
------------------------------------------------------------------------------
Waters * 2,500 312
------------------------------------------------------------------------------
4,490
------------------------------------------------------------------------------
Total Technology 27,158
------------------------------------------------------------------------------
CAPITAL EQUIPMENT 5.1%
Electrical Equipment 5.0%
GE 76,800 4,070
------------------------------------------------------------------------------
Tyco International 25,200 1,194
------------------------------------------------------------------------------
5,264
------------------------------------------------------------------------------
Machinery 0.1%
FMC * 1,300 76
------------------------------------------------------------------------------
76
------------------------------------------------------------------------------
Total Capital Equipment 5,340
------------------------------------------------------------------------------
<PAGE>
BUSINESS SERVICES AND
TRANSPORTATION 11.9%
Computer Service and Software 9.0%
America Online * 19,500 $ 1,029
------------------------------------------------------------------------------
Automatic Data Processing 4,900 262
------------------------------------------------------------------------------
BMC Software * 5,900 215
------------------------------------------------------------------------------
Computer Associates 4,900 251
------------------------------------------------------------------------------
Computer Sciences * 1,100 82
------------------------------------------------------------------------------
E*TRADE * 12,100 199
------------------------------------------------------------------------------
First Data 3,900 194
------------------------------------------------------------------------------
Microsoft * 37,100 2,967
------------------------------------------------------------------------------
Oracle * 29,700 2,496
------------------------------------------------------------------------------
Sapient * 300 32
------------------------------------------------------------------------------
Siebel Systems * 3,000 491
------------------------------------------------------------------------------
Synopsys * 300 10
------------------------------------------------------------------------------
VERITAS Software * 5,500 621
------------------------------------------------------------------------------
Yahoo! * 4,600 570
------------------------------------------------------------------------------
9,419
------------------------------------------------------------------------------
Distribution Services 0.7%
Cardinal Health 2,000 148
------------------------------------------------------------------------------
Tech Data * 12,740 555
------------------------------------------------------------------------------
703
------------------------------------------------------------------------------
Transportation Services 0.1%
CNF Transportation 1,300 30
------------------------------------------------------------------------------
Tidewater 2,000 72
------------------------------------------------------------------------------
102
------------------------------------------------------------------------------
<PAGE>
Miscellaneous Business Services 1.0%
Equifax 1,900 50
------------------------------------------------------------------------------
FedEx * 1,700 65
------------------------------------------------------------------------------
Galileo International 2,400 50
------------------------------------------------------------------------------
H&R Block 2,500 81
------------------------------------------------------------------------------
Marriott (Class A) 3,200 115
------------------------------------------------------------------------------
NOVA * 2,200 62
------------------------------------------------------------------------------
Omnicom 2,800 249
------------------------------------------------------------------------------
Waste Management 17,700 336
------------------------------------------------------------------------------
1,008
------------------------------------------------------------------------------
Railroads 0.9%
Kansas City Southern Industries 7,600 $ 674
------------------------------------------------------------------------------
Norfolk Southern 6,900 102
------------------------------------------------------------------------------
Union Pacific 3,600 134
------------------------------------------------------------------------------
910
------------------------------------------------------------------------------
Airlines 0.2%
Delta 2,100 106
------------------------------------------------------------------------------
Southwest Airlines 8,150 154
------------------------------------------------------------------------------
260
------------------------------------------------------------------------------
Total Business Services and Transportation 12,402
------------------------------------------------------------------------------
ENERGY 5.6%
Integrated Petroleum - Domestic 0.4%
Amerada Hess 1,400 87
------------------------------------------------------------------------------
Conoco (Class B) 1,700 42
------------------------------------------------------------------------------
Kerr-McGee 800 47
------------------------------------------------------------------------------
Occidental Petroleum 3,800 80
------------------------------------------------------------------------------
USX-Marathon 6,800 170
------------------------------------------------------------------------------
426
------------------------------------------------------------------------------
<PAGE>
Integrated Petroleum - International 4.2%
BP Amoco ADR 1,804 102
------------------------------------------------------------------------------
Chevron 6,800 577
------------------------------------------------------------------------------
Exxon Mobil 28,854 2,265
------------------------------------------------------------------------------
Royal Dutch Petroleum 18,870 1,161
------------------------------------------------------------------------------
Texaco 6,100 325
------------------------------------------------------------------------------
4,430
------------------------------------------------------------------------------
Energy Services 0.5%
Baker Hughes 4,050 129
------------------------------------------------------------------------------
Schlumberger 4,300 321
------------------------------------------------------------------------------
Transocean Sedco Forex 1,026 55
------------------------------------------------------------------------------
505
------------------------------------------------------------------------------
Exploration and Production 0.3%
Anadarko Petroleum 1,300 64
------------------------------------------------------------------------------
Union Pacific Resources 1,600 35
------------------------------------------------------------------------------
Unocal 5,900 196
------------------------------------------------------------------------------
295
------------------------------------------------------------------------------
Gas and Gas Transmission 0.2%
Enron 2,800 $ 181
------------------------------------------------------------------------------
181
------------------------------------------------------------------------------
Total Energy 5,837
------------------------------------------------------------------------------
PROCESS INDUSTRIES 2.7%
Diversified Chemicals 1.1%
Air Products and Chemicals 2,700 83
------------------------------------------------------------------------------
Cabot 9,600 262
------------------------------------------------------------------------------
Dow Chemical 5,700 172
------------------------------------------------------------------------------
DuPont 8,800 385
------------------------------------------------------------------------------
Praxair 2,000 75
------------------------------------------------------------------------------
W. R. Grace * 10,900 132
------------------------------------------------------------------------------
1,109
------------------------------------------------------------------------------
<PAGE>
Forest Products 0.1%
Potlatch 800 27
------------------------------------------------------------------------------
Weyerhaeuser 2,800 120
------------------------------------------------------------------------------
147
------------------------------------------------------------------------------
Specialty Chemicals 0.8%
3M 2,000 165
------------------------------------------------------------------------------
Avery Dennison 1,500 100
------------------------------------------------------------------------------
Great Lakes Chemical 3,500 110
------------------------------------------------------------------------------
Millennium Chemicals 3,100 53
------------------------------------------------------------------------------
Pall 15,100 279
------------------------------------------------------------------------------
Solutia 7,700 106
------------------------------------------------------------------------------
813
------------------------------------------------------------------------------
Paper and Paper Products 0.7%
Fort James 7,250 168
------------------------------------------------------------------------------
International Paper 4,000 119
------------------------------------------------------------------------------
Kimberly-Clark 6,300 361
------------------------------------------------------------------------------
Packaging Corp. of America * 1,800 18
------------------------------------------------------------------------------
Pentair 3,000 107
------------------------------------------------------------------------------
Smurfit-Stone Container * 1,700 22
------------------------------------------------------------------------------
795
------------------------------------------------------------------------------
Total Process Industries 2,864
------------------------------------------------------------------------------
<PAGE>
BASIC MATERIALS 0.7%
Metals 0.4%
Alcoa 7,672 $ 222
------------------------------------------------------------------------------
Inco * 2,900 45
------------------------------------------------------------------------------
Newmont Mining 4,600 99
------------------------------------------------------------------------------
Phelps Dodge 1,600 59
------------------------------------------------------------------------------
USX-U.S. Steel 1,000 19
------------------------------------------------------------------------------
444
------------------------------------------------------------------------------
Mining 0.1%
Barrick Gold 3,800 69
------------------------------------------------------------------------------
Battle Mountain Gold * 9,100 20
------------------------------------------------------------------------------
Cleveland-Cliffs 1,000 26
------------------------------------------------------------------------------
115
------------------------------------------------------------------------------
Miscellaneous Materials 0.2%
Williams Companies 4,100 171
------------------------------------------------------------------------------
171
------------------------------------------------------------------------------
Total Basic Materials 730
------------------------------------------------------------------------------
Total Common Stocks (Cost $88,830) 101,865
SHORT-TERM INVESTMENTS 1.6%
U.S. Government Obligations 0.2%
U.S. Treasury Bills, 5.61%, 7/27/00 $ 200,000 199
------------------------------------------------------------------------------
199
------------------------------------------------------------------------------
<PAGE>
Money Market Funds 1.4%
Government Reserve Investment Fund, 6.27% # 1,457,046 1,457
------------------------------------------------------------------------------
1,457
------------------------------------------------------------------------------
Total Short-Term Investments (Cost $1,656) 1,656
99.2% of Net Assets (Cost $90,486) $ 103,521
Futures Contracts
In thousands
Contract Unrealized
Expiration Value Gain (Loss)
---------- -------- -----------
Long, 7 S&P 500 Index Contracts
$138,000 of U.S. Treasury Bills
pledged as initial margin 9/00 $ 2,569 $ 46
Net payments (receipts) of variation
margin to date (28)
------------------------------------------------------------------------------
Variation margin receivable
(payable) on open futures contracts 18
Other Assets Less Liabilities 780
NET ASSETS $ 104,319
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (69)
Accumulated net realized gain/loss - net of distributions 5,062
Net unrealized gain (loss) 13,081
Paid-in-capital applicable to 6,513,822 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 86,245
------------------------------------------------------------------------------
NET ASSETS $ 104,319
NET ASSET VALUE PER SHARE $ 16.01
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
GBP British sterling
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Capital Opportunity Fund
-------------------------------------- Unaudited
STATEMENT OF OPERATIONS
----------------------- In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Dividend $ 497
Interest 42
-------------------------------------------------------------------------------
Total income 539
-------------------------------------------------------------------------------
Expenses
Investment management 343
Shareholder servicing 174
Custody and accounting 49
Prospectus and shareholder reports 16
Registration 14
Legal and audit 6
Directors 4
Miscellaneous 2
-------------------------------------------------------------------------------
Total expenses 608
-------------------------------------------------------------------------------
Net investment income (loss) (69)
-------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 3,999
Futures (83)
-------------------------------------------------------------------------------
Net realized gain (loss) 3,916
-------------------------------------------------------------------------------
Change in net unrealized gain or loss
Securities (1,917)
Futures (21)
-------------------------------------------------------------------------------
Change in net unrealized gain or loss (1,938)
-------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 1,978
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 1,909
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Capital Opportunity Fund
-------------------------------------- Unaudited
STATEMENT OF CHANGES IN NET ASSETS
---------------------------------- In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (69) $ (68)
Net realized gain (loss) 3,916 26,372
Change in net unrealized gain or loss (1,938) (15,548)
-------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 1,909 10,756
-------------------------------------------------------------------------------
Distributions to shareholders
Net realized gain - (23,916)
-------------------------------------------------------------------------------
Capital share transactions *
Shares sold 17,669 21,948
Distributions reinvested - 23,137
Shares redeemed (24,316) (47,680)
-------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions (6,647) (2,595)
-------------------------------------------------------------------------------
Net Assets
Increase (decrease) during period (4,738) (15,755)
Beginning of period 109,057 124,812
-------------------------------------------------------------------------------
End of period $ 104,319 $ 109,057
*Share information
Shares sold 1,128 1,230
Distributions reinvested - 1,555
Shares redeemed (1,567) (2,722)
-------------------------------------------------------------------------------
Increase (decrease) in shares outstanding (439) 63
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Capital Opportunity Fund
--------------------------------------
Unaudited June 30, 2000
NOTES TO FINANCIAL STATEMENTS
-----------------------------
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 diversified, open-end management
investment company and commenced operations on November 30, 1994. The fund seeks
superior appreciation over time by investing primarily in the common stocks of
U.S. companies that appear to offer the best opportunities for capital
appreciation. 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.
Short-term debt securities are valued at amortized cost which, when
combined with accrued interest, approximates 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. Financial futures contracts
are valued at closing settlement prices.
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.
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>
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. Credits earned on daily uninvested cash balances
at the custodian are used to reduce the fund's custody charges. Payments
("variation margin") made or received by the fund to settle the daily
fluctuations in the value of futures contracts are recorded as unrealized gains
or losses until the contracts are closed. Unrealized gains and losses on futures
contracts are included in Change in net unrealized gain or loss in the
accompanying financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Futures Contracts At June 30, 2000, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $32,194,000 and $39,758,000, respectively, for the six
months ended June 30, 2000.
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, 2000, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$90,486,000. Net unrealized gain aggregated $13,035,000 at period-end, of which
$20,224,000 related to appreciated investments and $7,189,000 to depreciated
investments.
<PAGE>
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 $57,000 was payable at June 30, 2000. 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 Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.295% for assets in excess of $120 billion. At
June 30, 2000, 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 $171,000 for the six months
ended June 30, 2000, of which $40,000 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, 2000, totaled $35,000 and are reflected
as interest income in the accompanying Statem ent of Operations.
================================================================================
T. Rowe Price Shareholder Services
----------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
-------------------------------------
BY PHONE 1-800-225-5132 Available Monday through Friday from
8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
<PAGE>
ACCOUNT SERVICES
----------------
CHECKING Available on most fixed-income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*AccessRegistration Mark and the
T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
-------------------
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over full-service commission rates. **
INVESTMENT INFORMATION
----------------------
COMBINED STATEMENT Overview of all your accounts with T. Rowe Price.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of
order.
================================================================================
T. Rowe Price Mutual Funds
--------------------------
STOCK FUNDS
-----------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
<PAGE>
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total
Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
----------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government *
Spectrum Income
Summit GNMA
Summit Limited-Term Bond *
U.S. Treasury Intermediate
U.S. Treasury Long-Term
<PAGE>
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond *
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Bond *
International Bond
MONEY MARKET FUNDS
------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
---------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
<PAGE>
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
--------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced
Portfolio
Prime Reserve Portfolio
* Closed to new investors.
+ Investments in the funds are not insured or guaranteed by the FDIC or
any other government agency. Although the funds seek to preserve the
value of your investment at $1.00 per share, it is possible to lose
money by investing in the funds.
Please call for a prospectus, which contains complete information,
including fees and expenses. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
================================================================================
FOR FUND AND ACCOUNT INFORMATION
OR TO CONDUCT TRANSACTIONS,
24 HOURS, 7 DAYS A WEEK
By touch-tone telephone
TELE*ACCESS 1-800-638-2587
By Account Access on the Internet
WWW.TROWEPRICE.COM/ACCESS
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132
TO OPEN A BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660
<PAGE>
INTERNET ADDRESS:
www.troweprice.com
PLAN ACCOUNT LINES FOR RETIREMENT
PLAN PARTICIPANTS:
The appropriate 800 number appears
on your retirement account statement.
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.
WALK-IN INVESTOR CENTERS:
For directions, call 1-800-225-5132
or visit our Web site
BALTIMORE AREA
DOWNTOWN
101 East Lombard Street
OWINGS MILLS
Three Financial Center
4515 Painters Mill Road
BOSTON AREA
386 Washington Street
Wellesley
COLORADO SPRINGS
4410 ArrowsWest Drive
LOS ANGELES AREA
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
TAMPA
4200 West Cypress Street
10th Floor
WASHINGTON, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Investment Services, Inc., Distributor. F08-051 6/30/00
