Item 1. Report to Shareholders
T. ROWE PRICE CAPITAL OPPORTUNITY FUND
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Certified Financials
T. ROWE PRICE CAPITAL OPPORTUNITY FUND
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Certified Financials (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
6 Months Year
Ended Ended
6/30/03 12/31/02 12/31/01 12/31/00 12/31/99 12/31/98
NET ASSET VALUE
Beginning of period $ 9.23 $ 11.91 $ 13.26 $ 15.69 $ 18.11 $ 16.62
Investment activities
Net investment
income (loss) 0.01 0.03 0.01 (0.01) (0.01) (0.07)
Net realized
and unrealized
gain (loss) 1.22 (2.68) (1.35) (0.94) 1.86 2.44
Total from
investment
activities 1.23 (2.65) (1.34) (0.95) 1.85 2.37
Distributions
Net investment
income - (0.03) (0.01) - - -
Net realized
gain - - - (1.48) (4.27) (0.88)
Total
distributions - (0.03) (0.01) (1.48) (4.27) (0.88)
NET ASSET VALUE
End of period $ 10.46 $ 9.23 $ 11.91 $ 13.26 $ 15.69 $ 18.11
-----------------------------------------------------------
Ratios/Supplemental Data
Total return^ 13.33% (22.25)% (10.10)% (6.32)% 11.50% 14.70%
Ratio of total
expenses to
average net assets 1.47%+ 1.37% 1.25% 1.15% 1.26% 1.35%
Ratio of net
investment income
(loss) to average
net assets 0.29%+ 0.27% 0.08% (0.05)% (0.06)% (0.44)%
Portfolio
turnover rate 48.6%+ 48.2% 53.6% 64.7% 133.1% 73.8%
Net assets,
end of period
(in thousands) $65,132 $57,340 $76,786 $93,422 $109,057 $124,812
^ 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.
+ Annualized
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND
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Certified Financials (Unaudited) June 30, 2003
STATEMENT OF NET ASSETS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS 98.6%
CONSUMER DISCRETIONARY 10.6%
Auto Components 0.3%
Delphi 5,394 $ 47
Lear * 3,000 138
185
Hotels, Restaurants & Leisure 1.2%
Alliance Gaming * 1,900 36
Carnival 8,800 286
Darden Restaurants 1,150 22
Fairmont Hotels 1,300 30
Hilton 3,900 50
International Game Technology * 700 72
McDonald's 6,500 143
MGM Mirage * 600 20
Ruby Tuesday 1,800 45
Starbucks * 3,300 81
Station Casinos * 1,300 33
818
Household Durables 0.4%
Black & Decker 3,200 139
Fortune Brands 2,095 109
248
Leisure Equipment & Products 0.4%
Brunswick 3,300 82
Hasbro 8,900 156
238
Media 3.9%
AOL Time Warner * 13,600 219
Clear Channel Communications * 3,600 153
Comcast, Class A * 16,193 489
Cox Radio, Class A * 3,500 81
Disney 19,200 379
Dow Jones 600 26
Echostar Communications, Class A * 3,700 128
Gannett 1,750 134
Knight-Ridder 1,500 $ 103
McGraw-Hill 800 50
Meredith 600 26
New York Times, Class A 1,300 59
Scripps, Class A 400 36
Spanish Broadcasting, Class A * 12,000 98
Tribune 600 29
Univision Communications, Class A * 10,100 307
Viacom, Class B * 5,500 240
2,557
Multiline Retail 1.8%
Dollar Tree Stores * 4,900 156
Family Dollar Stores 3,800 145
Kohl's * 3,200 164
Target 18,800 711
1,176
Specialty Retail 2.6%
AnnTaylor Stores * 2,900 84
Bed Bath & Beyond * 1,100 43
Best Buy * 2,800 123
Christopher & Banks * 4,200 156
GAP 6,200 116
Home Depot 20,050 664
Lowe's 3,000 129
O'Reilly Automotive * 2,100 70
Ross Stores 5,800 248
Toys "R" Us * 1,500 18
Ultimate Electronics * 1,900 24
1,675
Total Consumer Discretionary 6,897
CONSUMER STAPLES 10.8%
Beverages 2.8%
Anheuser-Busch 5,565 284
Coca-Cola 19,590 909
PepsiCo 13,455 599
1,792
Food & Staples Retailing 3.2%
CVS 3,170 $ 89
Sysco 10,800 324
Wal-Mart 26,900 1,444
Walgreen 8,070 243
2,100
Food Products 0.7%
Campbell Soup 4,080 100
General Mills 4,625 219
Heinz 1,245 41
Wrigley 1,600 90
450
Household Products 2.5%
Clorox 3,295 140
Colgate-Palmolive 3,785 219
Kimberly-Clark 3,200 167
Procter & Gamble 12,375 1,104
1,630
Personal Products 0.3%
Gillette 6,140 196
196
Tobacco 1.3%
Altria Group 18,460 839
839
Total Consumer Staples 7,007
ENERGY 5.6%
Energy Equipment & Services 0.8%
Baker Hughes 2,850 96
FMC Technologies * 2,550 54
Noble Drilling * 1,000 34
Schlumberger 5,850 278
Transocean * 3,471 76
538
Oil & Gas 4.8%
Amerada Hess 1,400 $ 69
Anadarko Petroleum 1,794 80
ChevronTexaco 13,846 1,000
Devon Energy 1,200 64
Exxon Mobil 42,978 1,543
Kerr-McGee 700 31
Marathon Oil 6,400 169
Murphy Oil 3,100 163
3,119
Total Energy 3,657
FINANCIALS 21.7%
Capital Markets 4.4%
Charles Schwab 11,600 117
Eaton Vance 2,500 79
Franklin Resources 1,800 70
Goldman Sachs Group 3,800 318
Investor's Financial Services 3,900 113
J.P. Morgan Chase 30,200 1,032
Mellon Financial 4,000 111
Merrill Lynch 7,500 350
Morgan Stanley 8,500 364
Northern Trust 2,500 105
State Street 3,200 126
Waddell & Reed Financial, Class A 3,000 77
2,862
Commercial Banks 6.9%
Bank of America 13,300 1,051
Boston Private Financial 7,200 152
Comerica 11,400 530
FleetBoston Financial 20,400 606
Huntington Bancshares 3,200 62
Synovus Financial 6,300 135
U.S. Bancorp 33,900 831
Wachovia 19,700 787
Wells Fargo 6,500 328
4,482
Consumer Finance 0.3%
SLM Corporation 4,500 $ 176
176
Diversified Financial Services 3.4%
Citigroup 47,800 2,046
Moody's 1,100 58
Principal Financial Group 3,800 123
2,227
Insurance 5.4%
AMBAC 800 53
American International Group 18,987 1,048
Hartford Financial Services Group 5,200 262
John Hancock Financial Services 1,200 37
Loews 3,900 184
Marsh & McLennan 4,600 235
MaxRe Capital 2,400 36
Nationwide Financial Services, Class A 1,200 39
Ohio Casualty * 11,800 155
Protective Life 1,900 51
Prudential Financial 4,900 165
SAFECO 11,200 395
Scottish Annuity & Life 1,600 32
St. Paul Companies 6,800 248
Travelers Property Casualty, Class B 30,300 478
UnumProvident 7,200 97
3,515
Real Estate 0.2%
Camden Property Trust, REIT 1,400 49
Equity Office Properties, REIT 2,500 67
Simon Property Group, REIT 1,400 55
171
Thrifts & Mortgage Finance 1.1%
Fannie Mae 7,000 472
Freddie Mac 5,000 254
726
Total Financials 14,159
HEALTH CARE 14.7%
Biotechnology 1.6%
Amgen * 10,900 $ 724
Cephalon * 700 29
Genentech * 1,000 72
Gilead Sciences * 800 45
IDEC Pharmaceuticals * 1,800 61
MedImmune * 3,300 120
1,051
Health Care Equipment & Supplies 1.8%
Baxter International 4,200 109
Boston Scientific * 4,200 257
C. R. Bard 1,400 100
Guidant 3,000 133
Medtronic 5,500 264
St. Jude Medical * 2,000 115
Stryker 1,400 97
Waters Corporation * 1,000 29
Zimmer Holdings * 1,500 67
1,171
Health Care Providers & Services 2.0%
Aetna 800 48
AmerisourceBergen 800 55
Anthem * 1,400 108
Cardinal Health 4,100 264
HCA 4,700 151
Laboratory Corporation of America * 4,800 145
Omnicare 1,400 47
Triad Hospitals * 1,600 40
UnitedHealth Group 8,200 412
WellChoice * 1,000 29
1,299
Pharmaceuticals 9.3%
Abbott Laboratories 14,000 613
Bristol-Myers Squibb 12,000 326
Eli Lilly 8,000 552
Forest Labs * 3,600 $ 197
Johnson & Johnson 18,866 975
Merck 10,300 624
Pfizer 62,200 2,124
Schering-Plough 1,800 33
Wyeth 13,900 633
6,077
Total Health Care 9,598
INDUSTRIALS & BUSINESS SERVICES 9.6%
Aerospace & Defense 1.7%
Boeing 6,500 223
General Dynamics 1,400 102
Honeywell International 2,900 78
Lockheed Martin 3,200 152
Mercury Computer Systems * 1,400 25
Northrop Grumman 1,400 121
Raytheon 2,900 95
Rockwell Collins 1,200 30
United Technologies 3,800 269
1,095
Air Freight & Logistics 0.9%
Fedex 3,560 221
UPS, Class B 6,390 407
628
Airlines 0.2%
Delta 3,400 50
Frontier Airlines * 8,300 75
125
Building Products 0.3%
American Standard * 1,800 133
Masco 2,400 57
190
Commercial Services & Supplies 1.0%
Apollo Group, Class A * 1,000 62
Dun & Bradstreet * 500 21
Exult * 29,080 249
Manpower 1,520 $ 56
Robert Half International * 2,230 42
Waste Management 8,770 211
641
Industrial Conglomerates 3.4%
3M 1,000 129
GE 50,100 1,437
Roper Industries 2,500 93
Tyco International 28,600 543
2,202
Machinery 1.7%
Actuant, Class A * 3,200 151
Danaher 4,100 279
Deere 3,600 165
Eaton 800 63
Illinois Tool Works 1,300 86
ITT Industries 2,000 131
Navistar * 1,300 42
Oshkosh Truck, Class B 1,700 101
Pall 3,600 81
1,099
Road & Rail 0.4%
Burlington Northern Santa Fe 3,600 102
Norfolk Southern 4,700 90
Union Pacific 1,800 105
297
Total Industrials & Business Services 6,277
INFORMATION TECHNOLOGY 15.9%
Communications Equipment 2.4%
Cisco Systems * 59,400 991
Comverse Technology * 2,400 36
Corning * 10,400 77
Motorola 17,500 165
Nokia 3,700 61
QUALCOMM 5,600 200
1,530
Computer & Peripherals 3.5%
Dell Computer * 25,200 $ 805
Hewlett-Packard 17,100 364
IBM 9,500 784
Lexmark International, Class A * 2,200 156
Seagate Technology 8,900 157
2,266
Electronic Equipment & Instruments 0.5%
CDW * 2,300 105
Celestica * 4,300 68
Jabil Circuit * 7,600 168
341
Internet Software & Services 0.6%
InterActiveCorp * 4,000 158
VeriSign * 6,800 94
Yahoo! * 4,200 138
390
IT Services 1.2%
Accenture, Class A * 4,000 72
BearingPoint * 7,240 70
BISYS Group * 3,100 57
Certegy * 2,900 80
DST Systems * 4,250 162
First Data 3,400 141
Fiserv * 1,400 50
Paychex 5,580 164
796
Semiconductor & Semiconductor Equipment 3.1%
Analog Devices * 5,700 198
Applied Materials * 19,780 314
Intel 27,600 574
KLA-Tencor * 2,690 125
Linear Technology 3,900 126
Maxim Integrated Products 7,530 257
Microchip Technology 4,000 98
Novellus Systems * 1,900 70
QLogic * 1,800 87
Texas Instruments 10,700 188
2,037
Software 4.6%
Adobe Systems 4,600 $ 147
Cadence Design Systems * 5,400 65
Intuit * 3,000 134
Mercury Interactive * 1,200 46
Microsoft 84,300 2,159
Oracle * 22,100 266
Symantec * 1,700 75
VERITAS Software * 3,500 100
2,992
Total Information Technology 10,352
MATERIALS 2.9%
Chemicals 1.9%
Agrium 12,300 135
Cabot 2,300 66
Dow Chemical 10,835 335
DuPont 9,340 389
Great Lakes Chemical 800 16
IMC Global 11,400 77
Minerals Technologies 600 29
Potash Corp./Saskatchewan 2,400 154
1,201
Metals & Mining 0.4%
Alcoa 6,072 155
Newmont Mining 2,000 65
Nucor 500 24
Phelps Dodge * 1,000 38
282
Paper & Forest Products 0.6%
Bowater 800 30
International Paper 4,200 150
MeadWestvaco 2,800 69
Potlatch 3,300 85
Weyerhaeuser 1,400 76
410
Total Materials 1,893
TELECOMMUNICATION SERVICES 3.9%
Diversified Telecommunication Services 2.9%
Alltel 2,700 $ 130
BellSouth 9,300 248
Centurytel 3,900 136
Qwest Communications International * 20,400 98
SBC Communications 18,600 475
Verizon Communications 19,800 781
1,868
Wireless Telecommunication Services 1.0%
AT&T Wireless * 10,600 87
Crown Castle International * 11,000 85
Nextel Communications, Class A * 13,800 250
Nextel Partners, Class A * 5,600 41
NII Holdings, Class B * 4,000 153
Western Wireless, Class A * 2,800 32
648
Total Telecommunication Services 2,516
UTILITIES 2.9%
Electric Utilities 2.6%
American Electric Power 1,400 42
CenterPoint Energy 2,800 23
Constellation Energy Group 1,800 62
El Paso Electric * 5,100 63
Entergy 3,900 206
Exelon 2,000 119
FirstEnergy 6,700 257
PG&E * 7,600 161
Pinnacle West Capital 2,600 97
PPL 3,300 142
Southern Company 4,300 134
Teco Energy 2,300 27
TXU 12,500 281
XCEL Energy 4,300 65
1,679
Gas Utilities 0.1%
NiSource 3,100 $ 59
59
Multi-Utilities & Unregulated Power 0.2%
Duke Energy 5,700 114
Dynegy, Class A * 2,400 10
124
Total Utilities 1,862
Total Common Stocks (Cost $63,836) 64,218
CONVERTIBLE PREFERRED STOCKS 0.1%
Ford Motor Company Capital Trust II, 6.50% 1,700 74
Total Convertible Preferred Stocks (Cost $85) 74
SHORT-TERM INVESTMENTS 1.3%
Money Market Funds 1.2%
T. Rowe Price Government Reserve Investment
Fund, 1.01% # 770,882 771
771
U.S. Treasury Obligations 0.1%
U.S. Treasury Bills, 0.862%, 9/18/03 ** 100,000 100
100
Total Short-Term Investments (Cost $871) 871
Value
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In thousands
Total Investments in Securities
100.0% of Net Assets (Cost $64,792) $ 65,163
FUTURES CONTRACTS
Contract Unrealized
Expiration Value Gain (Loss)
---------- ----------- -----------
In thousands
Long, 17 S&P Mini
500 Stock Index
contracts, $60,000
of U.S. Treasury
Bills pledged as
initial margin 9/03 $ 827 $ (7)
Net payments
(receipts) of
variation
margin to date 7
Variation margin
receivable (payable)
on open futures
contracts -
Other Assets
Less Liabilities (31)
NET ASSETS $ 65,132
----------
Net Assets Consist of:
Undistributed net
investment income (loss) $ 86
Undistributed net
realized gain (loss) (19,461)
Net unrealized
gain (loss) 364
Paid-in-capital applicable to
6,227,650 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares authorized 84,143
NET ASSETS $ 65,132
----------
NET ASSET VALUE PER SHARE $ 10.46
----------
# Seven-day yield
* Non-income producing
** All or a portion of this security is pledged to cover margin
requirements on futures contracts at June 30, 2003.
REIT Real Estate Investment Trust
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND
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Certified Financials (Unaudited)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/03
Investment Income (Loss)
Income
Dividend $ 508
Income distributions from mutual funds 3
Interest 1
Total income 512
Expenses
Investment management 197
Shareholder servicing 127
Custody and accounting 65
Registration 18
Prospectus and shareholder reports 14
Legal and audit 6
Directors 3
Miscellaneous 3
Total expenses 433
Expenses paid indirectly (7)
Net expenses 426
Net investment income (loss) 86
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (3,327)
Futures 71
Net realized gain (loss) (3,256)
Change in net unrealized gain (loss)
Securities 10,784
Futures 3
Change in net unrealized gain (loss) 10,787
Net realized and unrealized gain (loss) 7,531
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 7,617
----------
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND
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Certified Financials (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/03 12/31/02
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 86 $ 177
Net realized gain (loss) (3,256) (7,344)
Change in net unrealized gain (loss) 10,787 (9,530)
Increase (decrease) in net assets
from operations 7,617 (16,697)
Distributions to shareholders
Net investment income - (186)
Capital share transactions *
Shares sold 5,821 11,016
Distributions reinvested - 181
Shares redeemed (5,646) (13,760)
Increase (decrease) in net
assets from capital
share transactions 175 (2,563)
Net Assets
Increase (decrease) during period 7,792 (19,446)
Beginning of period 57,340 76,786
End of period $ 65,132 $ 57,340
----------------------------
*Share information
Shares sold 613 1,054
Distributions reinvested - 19
Shares redeemed (596) (1,308)
Increase (decrease) in shares outstanding 17 (235)
The accompanying notes are an integral part of these financial statements.
T. ROWE PRICE CAPITAL OPPORTUNITY FUND
- --------------------------------------------------------------------------------
Certified Financials (Unaudited) June 30, 2003
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 (the 1940 Act) as a diversified,
open-end management investment company and commenced operations on November
30, 1994. The fund seeks superior capital appreciation over time by
investing primarily in U.S. common stocks.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America,
which require the use of estimates made by fund management.
Valuation
Investments are valued at the close of the New York Stock Exchange (NYSE),
normally 4 p.m. ET, each day that the NYSE is open for business. Equity
securities listed or regularly traded on a securities exchange or in the
over-the-counter market are valued at the last quoted sale price, or
official closing price for certain markets, at the time the valuations are
made. A security that 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 are
valued at the mean of the latest bid and ask prices for domestic securities
and the last quoted sale price for international securities.
Debt securities are generally traded in the over-the-counter market.
Securities with original maturities of one year or more are valued at
prices furnished by dealers who make markets in such securities or by an
independent pricing service, which considers yield or price of bonds of
comparable quality, coupon, maturity, and type, as well as prices quoted by
dealers who make markets in such securities. Securities with original
maturities less than one year are valued at amortized cost in local
currency, which approximates fair value when combined with accrued
interest.
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.
Other investments and those 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.
Most foreign markets close before the NYSE. Developments that could affect
the values of securities that occur between the close of a foreign market
and the close of the NYSE normally will not be reflected in security
valuations. However, if such developments are so significant that they
will, in the judgment of the officers of the fund, clearly and materially
affect the value of securities, the previous closing prices may be adjusted
to reflect the fair value of the securities as of the close of the NYSE, 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, including investments, and liabilities denominated in foreign
currencies are translated into U.S. dollar values each day at the
prevailing exchange rate, using the mean of the bid and ask prices of such
currencies against U.S. dollars as quoted by a major bank. Purchases and
sales of securities, income, and expenses are translated into U.S. dollars
at the prevailing exchange rate on the date of the transaction. The effect
of changes in foreign currency exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and
losses.
Premiums and Discounts
Premiums and discounts on debt securities are amortized for financial
reporting purposes.
Expenses Paid Indirectly
Certain security trades are directed to brokers who have agreed to rebate a
portion of the related commission to the fund to pay fund expenses.
Additionally, credits earned on temporarily uninvested cash balances at the
custodian are used to reduce the fund's custody charges. Total expenses in
the accompanying statement of operations are presented before reduction for
rebates and credits, which totaled $7,000 and $0, respectively, for the six
months ended June 30, 2003.
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. 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
During the six months ended June 30, 2003, 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 $14,214,000 and $14,190,000, respectively, for the
six months ended June 30, 2003.
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 to
shareholders all of its taxable income and gains. Federal income tax
regulations differ from generally accepted accounting principles;
therefore, distributions determined in accordance with tax regulations may
differ in amount or character from net investment income and realized gains
for financial reporting purposes. Financial reporting records are adjusted
for permanent book/tax differences to reflect tax character. Temporary
differences are not adjusted. The amount and character of tax-basis
distributions and composition of net assets are finalized at fiscal
year-end; accordingly, tax-basis balances have not been determined as of
June 30, 2003.
For tax purposes, the fund has elected to treat net capital losses realized
between November 1 and December 31, of each year as occurring on the first
day of the following tax year; consequently, $950,000 of realized losses
recognized for financial reporting purposes in the year ended December 31,
2002 were recognized for tax purposes on January 1, 2003. Further, the fund
intends to retain realized gains to the extent of available capital loss
carryforwards. As of December 31, 2002, the fund had $15,256,000 of unused
capital loss carryforwards, of which $8,373,000 expire in 2009, and
$6,883,000 expire in 2010.
At June 30, 2003, the cost of investments for federal income tax purposes
was $64,792,000. Net unrealized gain aggregated $364,000 at period-end, of
which $7,167,000 related to appreciated investments and $6,803,000 related
to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides
for an annual investment management fee, which is computed daily and paid
monthly. The fee consists of an individual fund fee, equal to 0.35% of the
fund's average daily net assets, and the fund's pro-rata share of a group
fee. The group fee is calculated based on the combined net assets of
certain mutual funds sponsored by Price Associates (the group) applied to a
graduated fee schedule, with rates ranging from 0.48% for the first $1
billion of assets to 0.295% for assets in excess of $120 billion. The
fund's portion of the group fee is determined by the ratio of its net
assets to those of the group. At June 30, 2003, the effective annual group
fee rate was 0.32%, and investment management fee payable totaled $37,000.
Under the terms of the investment management agreement, the manager is
required to bear any expenses, excluding interest, taxes, brokerage
commissions, and extraordinary expenses, through April 30, 2005, which
would cause the fund's ratio of total expenses to average net assets
(expense ratio) to exceed 1.35%. Thereafter, through April 30, 2007, the
fund is required to reimburse the manager for these expenses, provided that
average net assets have grown or expenses have declined sufficiently to
allow reimbursement without causing the fund's expense ratio to exceed
1.35%. This agreement had no impact on the fund's total expenses during the
six months ended June 30, 2003 and, at that date, no amounts were subject
to future reimbursement by the fund.
In addition, the fund has entered into service agreements with Price
Associates and two wholly owned subsidiaries of Price Associates
(collectively, Price). Price Associates computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc.
provides shareholder and administrative services in its capacity as the
fund's transfer and dividend disbursing agent. T. Rowe Price Retirement
Plan Services, Inc. provides subaccounting and recordkeeping services for
certain retirement accounts invested in the fund. Expenses incurred
pursuant to these service agreements totaled $133,000 for the six months
ended June 30, 2003, of which $28,000 was payable at period-end.
The fund may invest in the T. Rowe Price Reserve Investment Fund and T.
Rowe Price Government Reserve Investment Fund (collectively, the Reserve
Funds), open-end management investment companies managed by Price
Associates. The Reserve Funds are offered as cash management options only
to mutual funds, trusts, and other accounts managed by Price Associates
and/or 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, 2003, totaled $3,000.
Item 2. Code of Ethics.
Not required at this time.
Item 3. Audit Committee Financial Expert.
Not required at this time.
Item 4. Principal Accountant Fees and Services.
Not required at this time.
Item 5. Audit Committee of Listed Registrants.
Not required at this time.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a)(1) Not required at this time.
(a)(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Capital Opportunity Fund, Inc.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date August 22, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date August 22, 2003
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date August 22, 2003