Semiannual Report
Mid-Cap
Value Fund
June 30, 1997
T. Rowe Price
Report Highlights
Mid-Cap Value Fund
o A nearly ideal climate for stock investing benefited
investors. Mid-size companies performed well, although
larger firms in general had the highest gains.
o The fund's strong return for the six-month period
outperformed the Lipper Mid Cap Funds Average but trailed
the S&P MidCap Index.
o Financials, consumer cyclicals, and selected mergers and
acquisitions propelled the fund's gains. Utilities and
energy firms lagged, but we still see opportunity in these
out-of-favor sectors.
o Big-cap stocks currently sell at substantial premiums to
both mid-cap and small-cap stocks, and we believe the stage
is set for well-positioned mid-caps to outperform.
Fellow Shareholders
Your T. Rowe Price Mid-Cap Value Fund closed out its first year
with a solid performance that significantly outpaced both the
S&P MidCap Index and the Lipper Mid Cap Funds Average. A
near-ideal climate of economic growth, healthy corporate
earnings, and strong demand for equities was beneficial to the
mid-size, quality companies that we pursue.
Performance Comparison
Periods Ended 6/30/97 6 Months 12 Months
________________________________________________________
Mid-Cap Value Fund 11.25% 29.38%
S&P MidCap Index 12.99 23.33
Lipper Mid Cap Funds Average 9.09 15.61
The fund rose 29.38% in the year since its inception,
substantially outperforming the unmanaged S&P MidCap. As noted
in the table, the portfolio also gained a healthy edge against
the Lipper Mid Cap Funds Average. For the most recent six-month
period, the fund's 11.25% gain did not fully keep up with the
S&P MidCap, but continued to exceed its comparable Lipper
average. Because the fund focuses on the value sector of the
mid-cap universe, there will be periods when its performance
will differ significantly from its mid-cap benchmarks, which
include both growth and value stocks. Fortunately, for the first
year the market favored our style of investing.
While we managed to substantially outperform the relevant
indices for the year, the portfolio lost ground to the large-cap
S&P 500 in both the 6- and 12-month periods. The S&P's 20%-plus
first half return dwarfed all other domestic indices as
investors favored large, liquid stocks. However, such a
divergence of performance is relatively uncommon, and with
big-cap stocks selling at substantial premiums to both mid-cap
and small-cap stocks, we believe the stage is set for
mid-caps-particularly the well-positioned, cash-generating niche
businesses we prefer-to outperform.
Investment Review
Our investment approach is straightforward. We seek mid-size
companies that, because they are either overlooked or
misunderstood, are relatively inexpensive compared with their
intrinsic value or prospects. We use our proprietary research to
find little-known businesses in out-of-the-way sectors. Those
that have demonstrably good business fundamentals can grow
rapidly in value when they catch the market's eye.
So far in 1997, the mid-cap sector's performance has been
dominated by a whopping 24.4% gain in financial stocks.
Fortunately, as the Sector Diversification chart shows, your
portfolio held 19% of assets in financials, a full weighting
relative to the S&P MidCap. Other top-performing sectors
included consumer cyclicals, up 15.77%, and technology, up
12.9%. At 16% of assets, consumer services and cyclicals also
made up a significant weighting in the portfolio. However,
because many technology companies carry higher valuations than
we prefer, the tech sector remained underweighted.
Sector Diversification
Reserves 9%
Consumer Nondurables 14%
Energy, Utilities, and Miscellaneous 18%
Financials 19%
Business Services and Transportation 2%
Capital Equipment, Process Industries, and
Basic Materials 18%
Technology 4%
Consumer Services and Cyclicals 16%
Lagging sectors included utilities, up a mere 5% in the half,
and energy stocks (up 6%) which took a breather following
several great quarters of performance. The fund's weighting in
these areas was below the mid-cap benchmark. Nevertheless,
energy and utilities together totaled 18% of the portfolio-a
healthy weighting-because we see some opportunities in these
out-of-favor areas. Electric utilities, for example, make up 7%
of the portfolio at present. The market, concerned that industry
deregulation may severely disrupt the group's typically steady
earnings and dividends, is assigning electrics low valuations.
In certain cases, though, we believe the market's negative
sentiment is extreme, and the contrarian in us sees excellent
opportunity in the better-positioned, more competitive issues.
The best-performing stocks in the portfolio over the last six
months included FBL Financial Group, Harleysville Group, and
Unifi. FBL Financial Group, a $770 million market cap life
insurer out of Des Moines, Iowa, went public in 1996 at an
extremely attractive discount to book value. FBL is
conservatively managed and possesses both a great distribution
channel and a strong franchise as the largest underwriter to
America's farms and ranches. Moreover, at the offering, its book
value was dramatically understated due to large unrealized gains
in its investment portfolio. A program to capture these gains
drove the company's book value from $24 to $30, and FBL's shares
rallied in line. All in all, the position added nearly $400,000
in value to the portfolio.
Harleysville Group, the portfolio's second largest holding,
added just over $370,000 in value as the insurer rallied in
1997's first half due to strong earnings. Those of you who
reside in the mid-Atlantic region will undoubtedly recall last
January's "Blizzard of 1996"; Harleysville is a major auto
insurer in the region, and its earnings were hard hit in that
quarter. The shares fell to book value and prompted a great
buying opportunity. Fortunately, your Mid-Cap Value portfolio
took full advantage of the market's uncertainty, and we were
well positioned to benefit from Harleysville's predictably
strong first half in 1997.
Performance was further enhanced in our first year through
acquisition activity.
Unifi, your portfolio's largest holding, was also one of our
largest gainers in 1997's first half. This $2 billion market cap
firm is the world's largest texturizer of polyester and nylon
filament. We have known Unifi's management for most of the last
10 years and have been fortunate enough to pick several very
profitable investment opportunities in the name. We put a major
position in your portfolio last summer as the stock looked cheap
relative to its prodigious amount of cash flow. Our position was
validated when management announced a "Dutch Tender" to
repurchase a substantial amount of stock. The shares rallied
further recently as the firm announced its intention to spin off
its less-profitable spun yarn division. We gained over $300,000
from our position in Unifi in the first half.
Performance was further enhanced in our first year through
acquisition activity. During this year, four of our companies
were acquired,validating our focus on attractive niche
businesses. In 1997, Measurex (which makes industrial process
controls) agreed to be acquired by industrial giant Honeywell at
$35 per share-a gain of 45% above its then market value.
Chemicals supplier Petrolite was acquired by natural resources
conglomerate Baker Hughes at a 35% premium to its market value.
Electric utility DQE was in the midst of an acquisition by
competitor Allegheny Power at a 17% premium. Finally, financial
services firm PHH was acquired by HFS at an attractive 61%
premium.
Unfortunately, not all the stock stories were positive. Leading
losers in the period were Tupperware and Unisource Worldwide,
but the losses were limited to just over $200,000 each.
Tupperware reported weaker-than-expected earnings on
disappointing sales in both the U.S. and Asia, and a strong U.S.
dollar undermined profits in Tupperware's thriving European
division. Unisource also reported disappointing first quarter
earnings, as its net fell over 60% on declining paper prices and
a slower-than-expected pace of acquisitions in its system
services division. More on Unisource in our next section.
Portfolio Highlights
The largest purchases in the first half included American
Standard, Aliant Communications, and Stanley Works. American
Standard is a global manufacturer of air conditioning, plumbing,
and commercial-vehicle braking products. This $3.5 billion
market cap stock possesses very strong brands such as Trane,
American Standard, and WABCO. American Standard is a
high-quality industrial company which sells at discount prices.
The stock struggled in recent weeks as investors worried about
a potentially weak summer air conditioning season. Despite the
weather, we still see ASD posting excellent full-year results,
and the stock is quite attractively priced at 12.4 times
anticipated 1998 earnings.
Aliant is a $700 million market cap, independent telephone
company in Lincoln, Nebraska. It offers service in most of the
state, except Omaha. Aliant is well run and well positioned. We
believe it can make the most of excellent growth opportunities,
including second phone line penetration, voice mail, and caller
ID services. Moreover, it is arguably one of the finest cellular
operators in the country, given its 13% penetration rate in
Nebraska. These attributes aside, its rural location shields it
somewhat from the increasing competition in local exchange
services. Early this year you could acquire this fine company at
a 20% discount to the average regional Bell operating company.
This discount plus a hefty 4% yield made a great bargain.
Stanley Works is a global producer of tools, hardware, and
specialty hardware items for the consumer, commercial, and
industrial markets. Even a brief tour of your local hardware
store will turn up dozens of items branded with the Stanley
Works logo. Long a terrific franchise, the firm has often been
cited as an underperforming property. Earlier in 1997, Stanley
Works announced that John Trani, a long-time key executive at
General Electric, had been hired as its new chairman. New
management at an underperforming franchise has long been one of
our favorite catalysts to help the market realize a company's
value. We've followed Trani's career at GE over the years, and
we were quite familiar with the role he played in building GE's
medical equipment division into a global powerhouse. Stanley has
the niche and we believe Trani has the skills to dramatically
improve returns. Priced at only 12 times 1998 earnings at
purchase, the shares have already proven quite the bargain by
rising over 30% in a very brief period. We expect more great
things to come.
Finally, we'd like to use a specific stock to highlight a
less-discussed aspect of our investment philosophy. As a rule,
we are patient investors and prefer to find solid companies to
own for two to three years. Occasionally, however, we blunder.
Our strategy in these cases is to quickly identify the mistake
and rectify it. Unisource Worldwide, identified earlier as a
losing fund investment, illustrates this point.
As a rule, we are patient investors and prefer to find solid
companies to own for two to three years.
Unisource was the paper distribution arm of Alco Standard, a
fine company with a great track record. At the time of
Unisource's spin-out from Alco, we believed the company
possessed solid management, an attractive business niche, and
significant growth opportunities through both internal sales and
a series of planned acquisitions. Unfortunately, the company
prereleased a poor quarter and disappointing business outlook
this past March. In retrospect it is clear that the business is
very vulnerable to paper prices and, further, that management is
struggling to pull together an adequate control system so
crucial to managing a difficult and fragmented cyclical
business.
Had we remained comfortable with the base business, we might
have added aggressively to the position as investors punished
the shares. In the wake of the company's many disappointments
and a slower-than-expected implementation of a cost reduction
program, we preferred to sell a portion of our shares at a
modest loss. Unisource may have a good niche, but much work
needs to be done before we can be confident that the firm is on
track.
Rounding out the major sales were Measurex and Petrolite as
tender offers followed the previously mentioned mergers.
Outlook
Stock valuations overall continue to look quite expensive, as
evidenced by the historically low 1.7% dividend yield on the S&P
500. The equity markets have been following a strong blue chip
rally for the past two and a half years, where much of the
market's gains have been concentrated in a few large household
names. As the quarter ended, the recent flood of "indexing"
dollars to large-caps at the expense of small- and mid-cap
investing strategies continued unabated.
However, we still see excellent value in the mid-cap sector. We
also believe that valuations will eventually catch up with the
large-caps and that investors will once again seek the better
values to be found among mid-size stocks. When the market
rotation occurs out of big-cap stocks it will undoubtedly be
accompanied by increased volatility and price weakness.
Fortunately, our investing strategy tends to help the fund hold
its value better during an overall downward movement in the
equity markets. We remain confident that our style of finding
attractively priced, cash-generating niche businesses will
enable us to con-tinue to build long-term value for our
shareholders. Thanks again for your continued support.
Respectfully submitted,
Greg A. McCrickard
President and Chairman of the Investment Advisory Committee
July 24, 1997
T. Rowe Price Mid-Cap Value Fund
Portfolio Highlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/97
______________________________________________________________
__________
Unifi 2.1%
Harleysville Group 1.9
Tomkins 1.7
Analogic 1.6
Aliant Communications 1.5
______________________________________________________________
__________
Masco 1.5
Hubbell 1.4
Richfood Holdings 1.4
First Brands 1.3
Selective Insurance 1.3
______________________________________________________________
__________
DQE 1.3
FBL Financial Group 1.2
TriMas 1.2
McCormick 1.2
W. R. Berkley 1.2
______________________________________________________________
__________
Great Lakes Chemical 1.1
Union Texas Petroleum 1.1
Stanley Works 1.1
Mercantile Bankshares 1.1
Chris-Craft 1.1
______________________________________________________________
_________
Signet Banking 1.1
AmerUs Life 1.0
Gulfstream Aerospace 1.0
American Standard 1.0
Teleflex 1.0
______________________________________________________________
__________
Total 32.4%
T. Rowe Price Mid-Cap Value Fund
Portfolio Highlights
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 6/30/97
Ten Largest Purchases
___________________________________
Unisource Worldwide *
American Standard *
Aliant Communications
Century Telephone Enterprises *
Gulfstream Aerospace *
Valassis Communications *
Stanley Works *
Kilroy Realty *
Texas Industries *
Richfood Holdings
Ten Largest Sales
___________________________________
Measurex **
Unisource Worldwide
Petrolite **
PECO Energy **
ARM Financial **
Tupperware
Compania A Venezuela **
Philip Services
Frontier
HFS **
*Position added
**Position eliminated
T. Rowe Price Mid-Cap Value Fund
Performance Comparison
This chart shows the value of a hypothetical $10,000 investment
in the fund over the past 10 fiscal year periods or since
inception (for funds lacking 10-year records). The result is
compared with a broad-based average or index. The index return
does not reflect expenses, which have been deducted from the
fund's return.
Performance Comparison
As of 6/30/97
<TABLE>
<CAPTION>
Lipper
Mid-Cap S&P MidCap Mid Cap
Value Fund Index Funds Average
<S> <C> <C> <C>
6/28/96 $ 10,000 $ 10,000 $ 10,000
6/97 $ 12,938 $ 12,333 $ 11,561
</TABLE>
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 6/30/97 1 Year Inception Date
Mid-Cap Value Fund 29.38% 29.20% 6/28/96
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 Mid-Cap Value Fund
Unaudited
Financial HighlightsFor a share outstanding throughout each period
6 Months 6/28/96
Ended Through
6/30/97 12/31/96
NET ASSET VALUE
Beginning of period $ 11.56 $ 10.00
Investment activities
Net investment income 0.05* 0.10*
Net realized and
unrealized gain (loss) 1.25 1.53
Total from
investment activities 1.30 1.63
Distributions
Net investment income - (0.07)
NET ASSET VALUE
End of period $ 12.86 $ 11.56
Ratios/Supplemental Data
Total return 11.25%* 16.30%*
Ratio of expenses to
average net assets 1.25%*! 1.25%*!
Ratio of net investment
income to average
net assets 1.05%*! 2.10%*!
Portfolio turnover rate 21.5%! 3.9%!
Average commission rate paid $0.0335 $ 0.0286
Net assets, end of period
(in thousands) $75,347 $ 49,189
* Excludes expenses in excess of a 1.25% voluntary expense
limitation in effect through 12/31/97.
! Annualized.
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Mid-Cap Value Fund
Unaudited
June 30, 1997
Statement of Net Assets Shares/Par Value
In thousands
Common Stocks 90.1%
FINANCIAL 18.6%
Bank and Trust 5.4%
Bank United 9,800 $ 374
First Security 26,250 718
Mercantile Bancorporation 11,000 668
Mercantile Bankshares 20,000 798
Northern Trust 14,200 688
Signet Banking 22,000 792
4,038
Insurance 10.5%
ACE Limited 5,500 406
AmerUs Life 28,000 779
FBL Financial Group 24,000 906
Harleysville Group 38,000 1,446
LaSalle Re Holdings 17,000 502
PartnerRe Holdings 18,000 686
PennCorp Financial Group 10,000 385
PMI Group 2,000 125
Selective Insurance 20,300 983
UICI * 14,100 415
UNUM 10,400 437
W. R. Berkley 15,000 877
7,947
Financial Services 2.7%
Delta Financial * 28,000 535
Green Tree Financial 12,000 428
H&R Block 12,000 387
Sallie Mae 5,600 711
2,061
Total Financial 14,046
UTILITIES 11.1%
Telephone Services 4.2%
Aliant Communications 58,000 1,135
Century Telephone Enterprises 22,000 $ 741
Frontier 15,000 299
Southern New England Telecomm 14,000 544
Telephone and Data Systems 11,500 437
3,156
Electric Utilities 6.9%
DQE 34,000 960
Illinova 30,000 660
New York State Electric & Gas 13,800 288
NIPSCO 17,400 719
Ohio Edison 23,000 502
Pinnacle West Capital 24,500 736
Teco Energy 26,000 665
United Water Resources 34,000 659
5,189
Total Utilities 8,345
CONSUMER NONDURABLES 14.1%
Food Processing 1.7%
International Multifoods 15,000 377
McCormick 35,000 886
1,263
Pharmaceuticals 0.7%
Perrigo * 40,000 502
502
Health Care Services 1.0%
Apria Healthcare * 20,000 355
PacifiCare Health Systems (Class A) * 2,000 121
PacifiCare Health Systems (Class B) * 5,000 319
795
Miscellaneous Consumer Products 9.8%
First Brands 44,000 1,009
Premark International 23,000 615
Reebok 10,000 468
Richfood Holdings 40,000 1,040
Stanley Works 20,000 800
Tomkins (GBP) 290,000 1,265
Unifi 42,000 $ 1,570
WestPoint Stevens * 15,500 606
7,373
Hospital Supplies/Hospital
Management 0.9%
Quest Diagnostics * 32,500 668
668
Total Consumer Nondurables 10,601
CONSUMER SERVICES 7.2%
Specialty Merchandisers 1.3%
CVS 7,604 390
McKesson 6,000 465
Tupperware 4,000 146
1,001
Entertainment and Leisure 0.2%
FelCor Suites Hotels 4,000 149
149
Media and Communications 4.1%
Chris-Craft * 16,480 795
New York Times (Class A) 11,000 544
Pulitzer Publishing 7,599 403
Scholastic * 10,000 350
Valassis Communications * 30,000 720
Washington Post (Class B) 600 239
3,051
General Merchandisers 1.6%
Neiman Marcus Group * 20,000 525
Warnaco Group (Class A) 22,000 701
1,226
Total Consumer Services 5,427
CONSUMER CYCLICALS 8.6%
Automobiles and Related 1.3%
Littelfuse * 13,400 375
SPX 10,000 648
1,023
Building & Real Estate 5.8%
Arden Realty Group, REIT 7,500 $ 195
CarrAmerica Realty, REIT 7,000 201
Federal Realty Investment
Trust, REIT 15,500 419
Kilroy Realty, REIT 18,500 467
Owens Corning 12,000 518
Patriot American Hospitality, REIT 9,300 237
Rouse 12,000 354
Security Capital Atlantic, REIT 24,500 587
SECURITY CAPITAL PACIFIC TRUST, REIT 13,000 297
Simon DeBartolo Group, REIT 6,290 201
Starwood Lodging, REIT 7,800 333
Texas Industries 20,000 531
4,340
Miscellaneous Consumer Durables 1.5%
Masco 26,500 1,107
1,107
Total Consumer Cyclicals 6,470
TECHNOLOGY 3.9%
Electronic Components 2.3%
Analogic 34,500 1,184
Maxim Integrated Products * 5,450 310
Molex 6,687 244
1,738
Aerospace & Defense 1.6%
Gulfstream Aerospace * 26,000 767
Tracor * 16,000 400
1,167
Total Technology 2,905
CAPITAL EQUIPMENT 8.0%
Electrical Equipment 1.4%
Hubbell (Class A) 1,000 42
Hubbell (Class B) 23,000 1,012
1,054
Machinery 6.6%
American Standard * 17,000 $ 761
Aptargroup 10,000 452
Coltec Industries * 19,000 371
Danaher 10,000 508
FMC * 4,500 357
Greenfield Industries 20,000 545
IDEX 10,000 330
Teleflex 24,000 750
TriMas 32,000 900
4,974
Total Capital Equipment 6,028
BUSINESS SERVICES AND
TRANSPORTATION 1.9%
Environmental 0.2%
Philip Services * 10,000 159
159
Transportation Services 0.8%
Landstar Systems * 10,000 282
Werner Enterprises 14,000 273
555
Computer Service and Software 0.9%
Sterling Software 22,500 703
703
Total Business Services and Transportation 1,417
ENERGY 7.1%
Energy Services 3.2%
Camco International 10,000 547
Cooper Cameron * 6,000 281
McDermott International 25,000 730
Santa Fe International * 4,800 163
Witco 19,000 721
2,442
Exploration and Production 2.0%
Devon Energy 11,550 $ 424
Rutherford-Moran Oil * 22,000 518
Weatherford Enterra * 13,500 520
1,462
Integrated Petroleum - Domestic 1.9%
Murphy Oil 12,500 609
Union Texas Petroleum 40,000 838
1,447
Total Energy 5,351
PROCESS INDUSTRIES 5.2%
Specialty Chemicals 1.9%
Georgia Gulf 19,000 552
Great Lakes Chemical 16,500 865
1,417
Paper and Paper Products 2.4%
Consolidated Papers 11,000 594
James River 8,725 323
Jefferson Smurfit * 20,000 322
Unisource Worldwide 12,500 200
Willamette Industries 5,500 385
1,824
Forest Products 0.9%
Deltic Timber 2,428 71
Rayonier 15,000 631
702
Total Process Industries 3,943
BASIC MATERIALS 4.4%
Metals 2.9%
Cambior 35,000 396
Nucor 12,000 678
Reynolds Metals 6,000 427
Rustenburg Platinum (ZAR) 36,000 659
2,160
Mining 1.5%
LONRHO (GBP) 200,000 $ 423
Newmont Mining 13,760 537
TVX Gold * 40,000 212
1,172
Total Basic Materials 3,332
Total Common Stocks (Cost $56,893) 67,865
Convertible Preferred Stocks 0.5%
Security Capital Industrial Trust,
REIT, (Series B), 7.00% 12,000 332
Total Convertible Preferred
Stocks (Cost $281) 332
Convertible Bonds 0.3%
Liberty Property Trust, Sub.
Deb., 8.00%, 7/1/01 $ 200,000 248
Total Convertible Bonds (Cost $205) 248
Short-Term Investments 10.0%
Certificates of Deposit 4.0%
Banque Nationale de Paris,
5.74%, 7/28/97 1,000,000 1,000
Deutsche Bank AG, 5.78%, 8/12/97 1,000,000 1,000
Union Bank of California,
5.55%, 7/11/97 1,000,000 1,000
3,000
Commercial Paper 6.0%
Beta Finance, 4(2), 5.58%, 9/19/97 1,000,000 988
Chrysler Financial, 5.67%, 7/10/97 1,200,000
1,198
Investments in Commercial Paper
through a Joint Account
6.05 - 6.20%, 7/1/97 2,363,270 2,363
4,549
Total Short-Term Investments (Cost
$7,549) 7,549
Total Investments in Securities
100.9% of Net Assets (Cost $64,928) $ 75,994
Other Assets Less Liabilities (647)
NET ASSETS $ 75,347
Net Assets Consist of:
Accumulated net investment
income - net of distributions $350
Accumulated net realized gain/loss -
net of distributions 819
Net unrealized gain (loss) 11,066
Paid-in-capital applicable to
5,858,939 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares authorized 63,112
NET ASSETS $ 75,347
_________
NET ASSET VALUE PER SHARE $ 12.86
_________
* Non-income producing
REIT Real Estate Investment Trust
4(2) Commercial paper sold within terms of a private
placement memorandum, exempt from registration under
section 4.2 of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or
other "accredited investors."
GBP British sterling
ZAR South African rand
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Mid-Cap Value Fund
Unaudited
Statement of Operations
In thousands
6 Months
Ended
6/30/97
Investment Income
Income
Dividend $ 542
Interest 181
Total income 723
Expenses
Investment management 191
Shareholder servicing 118
Custody and accounting 45
Registration 17
Prospectus and shareholder reports 7
Legal and audit 4
Directors 3
Miscellaneous 8
Total expenses 393
Net investment income 330
Realized and Unrealized Gain (Loss)
Net realized gain (loss) Securities 834
Foreign currency transactions (1)
Net realized gain (loss) 833
Change in net unrealized gain or loss
on securities 6,022
Net realized and unrealized gain (loss) 6,855
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 7,185
________
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Mid-Cap Value Fund
Unaudited
Statement of Changes in Net Assets
In thousands
6 Months 6/28/96
Ended Through
6/30/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 330 $ 303
Net realized gain (loss) 833 (17)
Change in net unrealized
gain or loss 6,022 5,044
Increase (decrease) in net
assets from operations 7,185 5,330
Distributions to shareholders
Net investment income - (289)
Capital share transactions*
Shares sold 30,192 48,225
Distributions reinvested - 280
Shares redeemed (11,219) (4,590)
Increase (decrease) in net
assets from capital
share transactions 18,973 43,915
Net equalization - 133
Net Assets
Increase (decrease) during period 26,158 49,089
Beginning of period 49,189 100
End of period $ 75,347 $ 49,189
________________________
*Share information
Shares sold 2,552 4,647
Distributions reinvested - 24
Shares redeemed (948) (426)
Increase (decrease) in
shares outstanding 1,604 4,245
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Mid-Cap Value Fund
Unaudited June 30, 1997
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price Mid-Cap Value 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 June 28, 1996.
Valuation Equity securities 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.
Debt securities are generally traded in the over-the-counter
market and are valued at a price deemed best to reflect fair
value as quoted by dealers who make markets in these securities
or by an independent pricing service. Short-term debt securities
are valued at amortized cost which, when combined with accrued
interest, approximates fair value.
For purposes of determining the fund's net asset value per
share, the U.S. dollar value of all assets and liabilities
initially expressed in foreign currencies is determined by using
the mean of the bid and offer prices of such currencies against
U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures
are inappropriate or are deemed not to reflect fair value are
stated at fair value as determined in good faith by or under the
supervision of the officers of the fund, as authorized by the
Board of Directors.
Currency Translation Assets and liabilities are translated into
U.S. dollars at the prevailing exchange rate at the end of the
reporting period. Purchases and sales of securities and income
and expenses are translated into U.S. dollars at the prevailing
exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such
gains and losses.
Premiums and Discounts Premiums and discounts on debt
securities are amortized for both financial reporting and tax
purposes.
Other Income and expenses are recorded on the accrual basis.
Investment transactions are accounted for on the trade date.
Realized gains and losses are reported on the identified cost
basis. Dividend income and distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital
gain distributions are determined in accordance with federal
income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles.
Effective January 1, 1997, the fund discontinued its practice of
equalization. The results of operations and net assets were not
affected by this change.
Note 2 - Investment Transactions
Commercial Paper Joint Account The fund, and other affiliated
funds, may transfer uninvested cash into a commercial paper
joint account, the daily aggregate balance of which is invested
in high-grade commercial paper. All securities purchased by the
joint account satisfy the fund's criteria as to quality, yield,
and liquidity.
Other Purchases and sales of portfolio securities, other than
short-term securities, aggregated $23,545,000 and $6,136,000,
respectively, for the six months ended June 30, 1997.
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. The fund has unused
realized capital loss carryforwards for federal income tax
purposes of $14,000 which expires in 2004. The fund intends to
retain gains realized in future periods that may be offset by
available capital loss carryforwards.
At June 30, 1997, the aggregate cost of investments for federal
income tax and financial reporting purposes was $64,928,000, and
net unrealized gain aggregated $11,066,000, of which $11,974,000
related to appreciated investments and $908,000 to depreciated
investments.
Note 4 - Related Party Transactions
The investment management agreement between the fund and T. Rowe
Price Associates, Inc. (the manager) provides for an annual
investment management fee, of which $42,000 was payable at June
30, 1997. 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
0.30% for assets in excess of $80 billion. At June 30, 1997, and
for the six months then ended, the effective annual group fee
rate was 0.33%. The fund pays a pro-rata share of the group fee
based on the ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the
manager is required to bear any expenses through December 31,
1997, which would cause the fund's ratio of expenses to average
net assets to exceed 1.25%. Thereafter, through December 31,
1999, the fund is required to reimburse the manager for these
expenses, provided that average net assets have grown or
expenses have declined sufficiently to allow reimbursement
without causing the fund's ratio of expenses to average net
assets to exceed 1.25%. Pursuant to this agreement, $22,000 of
management fees were not accrued by the fund for the six months
ended June 30, 1997. Additionally, $78,000 of unaccrued 1996
management fees are subject to reimbursement through December
31, 1999.
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 $121,000 for the
six months ended June 30, 1997, of which $23,000 was payable at
period-end.
During the six months ended June 30, 1997, the fund, in the
ordinary course of business, placed security purchase and sale
orders aggregating $216,000 with certain affiliates of the
manager and paid commissions of $1,000 related thereto.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Mid-Cap Value Fund.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T.RowePrice, Invest With Confidence(registered trademark)
T. Rowe Price Investment Services, Inc., Distributor.
F15-051 6/30/97
