Annual Report
Mid-Cap
Value
Fund
December 31, 1997
T. Rowe Price
Report Highlights
Mid-Cap Value Fund
o In a relatively volatile market environment, investors
preferred inexpensive companies with steady income or
earnings, helping value strategies to significantly
outperform growth funds.
o Your fund's 14.26% and 27.11% 6- and 12-month gains,
respectively, were well ahead of its peer group average,
although they did not keep pace with the S&P MidCap Index.
o Holdings in the financials, utilities, and consumer sectors
benefited fund performance, while modest investments in
natural resource stocks did not fare well.
o We continue to find attractive opportunities in our
universe, and expect mid-cap value stocks to hold up well
if the market environment stays volatile.
Fellow Shareholders
The year ended December 31, 1997, brought lofty returns for many
equity investors. The S&P 500 rose an eye-opening 33.36%, the
S&P MidCap Index rose 32.25%, and the average mid-cap fund
gained 19.63%. In this environment, your Mid-Cap Value Fund
turned in decent relative performance by rising 27.11%. While it
is always somewhat disappointing to lag the S&P indices, our
performance for the six months and the full year strongly
surpassed our peer group as measured by the Lipper Mid Cap
Funds Average.
Performance Comparison
Periods Ended 12/31/97 6 Months 12 Months
______________________________________________________________
Mid-Cap Value Fund 14.26% 27.11%
S&P MidCap Index 17.04 32.25
Lipper Mid Cap Funds Average 10.55 19.63
The economic environment was excellent for the year as a whole,
even though the market displayed significant short-term
volatility. An interest rate increase in March gave many
investors pause, and sharp declines in several Southeast Asian
currencies in October led to severe short-term market losses.
Although the market recovered-and continued to advance-after
each of these events, daily volatility increased notably from
1996. As a result, investors strongly preferred investments that
offer either reliable earnings or a steady income
component-favorable circumstances for value strategies.
Sectors in the mid-cap universe that turned in particularly
strong performance were financials, up a whopping 73%; consumer
staples, up 36%; and consumer cyclicals, up almost 32%. Lagging
sectors in the mid-cap indices included health care, which
gained a mere 5.5%, and basic materials and capital goods, up
17.4% and 21%, respectively. Your portfolio benefited from
overweighted positions in the financial, consumer cyclical, and
utility sectors compared with the average mid-cap portfolio. We
were disadvantaged, however, by modest holdings in gold stocks,
which substantially underperformed the market.
As we have noted in earlier reports, since the fund focuses on
the value subsector of the mid-cap universe, there will be
periods when its performance will differ markedly from the
benchmarks. Fortunately, value investing substantially
outperformed growth stock investing in 1997. This is readily
apparent in our superior performance this period to the Lipper
Mid Cap Funds Average, which is heavily skewed toward growth
funds. However, both growth and value investors failed to keep
up with the S&P MidCap Index in 1997, a benchmark representing
a blend of both growth and value, in part because the index had
higher exposure to very successful financial stocks. We remain
ahead of both the Lipper Mid Cap category and the S&P MidCap
benchmarks since inception.
Year-End Distributions
Your fund's Directors declared a fourth quarter dividend of
$0.08 per share, a short-term capital gain distribution of $0.10
per share, and a long-term capital gain distribution of $0.04
per share. These distributions were paid on December 30 to
shareholders of record on December 26. In early January we
mailed your check or statement reflecting these distributions,
and Form 1099-DIV, reporting them for tax purposes, was sent
late in the month.
Investment Review
The top performers for our Mid-Cap Value Fund in 1997's second
half included Aliant Communications, CCA Prison Realty Trust,
and Valassis Communications. You may recall reading about
Aliant, an independent telephone company based in Lincoln,
Nebraska, in our last letter to shareholders. We wrote of the
firm's strong management and inexpensive valuation, and we were
pleased to be rewarded almost immediately with excellent
relative performance in the stock. Aliant added about 10 cents
to NAV in the second half as investors, spooked by fall's market
volatility, sought safety and stability in the utility sector.
The shares rose nearly 61% in the half year and became our top
contributor to performance. We also mentioned in our June letter
that the utility sector overall was an excellent contrarian
play. In fact, our holdings in that sector made major
contributions to performance in 1997 by adding more than 44
cents to NAV, the bulk of which came in the second half.
Sector Diversification
Pie chart showing:
Business Services & Transportation 3%
Capital Equipment, Process Industries,
and Basic Materials 14%
Technology 4%
Consumer Services and Cyclicals 22%
Financial 18%
Energy, Utilities, and Miscellaneous 15%
Consumer Nondurables 14%
Reserves 10%
CCA Prison Realty was an attractively priced REIT spun out of
Corrections Corp. of America. Corrections Corp. operates private
sector prisons for state and local governments. The REIT owns
the prison properties. CCA has reliable built-in growth as the
financing vehicle for Corrections Corp. The shares more than
doubled from their initial public offering last July. Finally,
Valassis Communications is a leading sales promotion company and
the number one player in free-standing coupon inserts in Sunday
newspapers. Valassis has strong free cash flow and solid
management and was priced quite attractively last year. Good
financial results helped the shares add almost nine cents to
fund NAV.
Of course, not all our ideas play out in a quarter or two. Our
principal losers in the half were concentrated in the natural
resource arena. Three of our top-five decliners were the metals
and mining shares of Inco, Cambior, and TVX Gold. Inco is one of
the world's leading nickel producers, and Cambior and TVX are
both gold exploration and production companies. Gold's
much-publicized price drop was a major negative for the stocks,
as investors feared declining gold demand from Asia and
increased selling by the world's central banks. However, we
believe the damage may be overdone. While nickel prices have
declined modestly, the shares of Inco fell more than 20% as
investors extrapolated gold's problems to other metals. We
continue to hold small positions in these companies and are
researching opportunities for adding to our portfolio. When
panic sets in on Wall Street, attractive buying opportunities
typically ensue. In total, these three positions cost us a bit
over 12 cents.
Portfolio Highlights
Major purchases in the past six months included A.O. Smith,
Security Capital Industrial Trust, and Meredith. A.O. Smith was
the largest new position added to the Mid-Cap Value Fund during
the second half of 1997. We at T. Rowe Price last invested in
A.O. Smith during the U.S. recession of 1990-1991. At that time,
this well-managed company was primarily an auto-parts supplier
selling at a deep discount-typical of cyclical shares during a
market correction. It recovered nicely along with the industry,
and we sold the stock later in the economic cycle at a large
profit. As an investment idea, the firm had been sitting on the
shelf until this past summer, when it exited its automotive
business through a strategic sale to Tower Automotive. A.O.
Smith emerged as a well-positioned electric equipment company,
with leading positions in home water heaters and small hermetic
motors for the HVAC market. The firm was also flush with the
$700 million proceeds of the sale, which we believe will be used
for acquisitions and a significant share repurchase. Trading at
14 times 1998 earnings and 1.6 times book value, A.O. Smith
looks cheap compared to its peers in the electric equipment
industry, which trade at much higher multiples of both book
value and earnings per share.
Security Capital Industrial is a REIT that focuses on industrial
distribution properties. The firm has excellent management and
a strong built-in pipeline of growing revenues from operations,
given its existing development plans. The company has prospects
for sustained 12% to 14% growth of these revenues. When coupled
with a 5% dividend yield, these shares became very attractive
for purchase. Meredith is a $1.6 billion market cap diversified
media company that prints books and magazines (45% of the
business) and operates a large broadcasting subsidiary (52%). It
possesses shareholder-driven management, headed by CEO Bill
Kerr. The firm's attractive cash flow generation, discount
valuation compared with comparable media properties, and
proclivity to repurchase shares piqued our interest.
Leading sales in the half year included First Union, Greenfield
Industries, and Anglo American Platinum. First Union and
Greenfield were sold as a result of second-half merger and
acquisition activity. First Union came into the portfolio when
it acquired our position in Signet Bank in an attractive
stock-for-stock transaction, but we sold the position because of
First Union's large market cap. Greenfield was taken from the
portfolio when it was acquired in a profitable cash tender offer
by Kennametal. Finally, we eliminated Anglo American Platinum
when we considered the shares to be fully valued.
Outlook
After three strong years of performance, stock valuations
continue to look expensive, particularly when measured by the
S&P 500. The market's dividend yield is close to historic lows.
However, we believe large-cap shares are significantly more
expensive than their mid-cap and small-cap brethren. We also
suspect that any correction caused by the market's concerns over
the Asian financial crisis could hit larger-cap shares-which
have comparatively greater Asian exposure-particularly hard. It
is our belief that mid-cap shares in general and mid-cap value
shares in particular will fare comparatively better upon the
eventual reversion of this valuation gap. Historically, value
stocks have held up better during broad-based declines in share
prices.
We continue to find many attractive opportunities among mid-cap
value stocks. If the economic environment remains constructive
in the coming year, we believe investors will return to the
current values existing in the mid-cap segment of the market.
Thanks for your continued support.
Respectfully submitted,
Greg A. McCrickard
President and Chairman of the Investment Advisory Committee
January 24, 1998
T. Rowe Price Mid-Cap Value Fund
Portfolio Highlights
T. Rowe Price Mid-Cap Value Fund
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
______________________________________________________________
Unifi 2.0%
Security Capital Industrial Trust 1.8
PartnerRe Holdings 1.8
Valassis Communications 1.7
A.O. Smith 1.6
______________________________________________________________
Analogic 1.6
McCormick 1.6
Tomkins 1.6
Meredith 1.6
Neiman-Marcus 1.5
______________________________________________________________
Willis-Corroon 1.5
Stanley Works 1.5
Warnaco Group 1.5
BJ's Wholesale Club 1.5
Hubbell 1.5
______________________________________________________________
Sonoco Products 1.4
Gulfstream Aerospace 1.4
PennCorp Financial Group 1.4
Olin 1.4
Aliant Communications 1.4
_________________________________________________________________
NIPSCO 1.2
Pinnacle West Capital 1.2
Bank United 1.2
Illinova 1.2
International Multifoods 1.2
_________________________________________________________________
Total 37.3%
T. Rowe Price Mid-Cap Value Fund
Portfolio Highlights
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 12/31/97
Largest Purchases
_____________________
A.O. Smith*
Security Capital Industrial Trust*
Meredith*
BJ's Wholesale Club*
Sonoco Products*
Olin*
Neiman-Marcus
Willis-Corroon*
PartnerRe Holdings
Warnaco Group
Largest Sales
_____________________
First Union**
Greenfield Industries**
Anglo American Platinum**
Quest Diagnostics**
LaSalle Re Holdings**
Southern New England Telecommunications**
Aptargroup**
FirstEnergy
Green Tree Financial**
IDEX**
* 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.
Mid-Cap Value Fund
As of 12/31/97
S&P MidCap Lipper Mid Cap Mid-Cap
Index Funds Average Value Fund
6/30/96 $10,000 $ 10,000 $ 10,000
12/96 10,914 10,553 11,630
12/97 14,435 12,642 14,783
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 12/31/97 1 Year Inception Date
__________________________________________________________________
Mid-Cap Value Fund 27.11% 29.53% 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
Financial Highlights
For a share outstanding throughout each period
Year 6/28/96
Ended Through
12/31/97 12/31/96
NET ASSET VALUE
Beginning of period $ 11.56 $ 10.00
Investment activities
Net investment income 0.08* 0.10*
Net realized and
unrealized gain (loss) 3.05 1.53
Total from
investment activities 3.13 1.63
Distributions
Net investment income (0.08) (0.07)
Net realized gain (0.14) -
Total Distributions (0.22) (0.07)
NET ASSET VALUE
End of period $ 14.47 $ 11.56
________________________
Ratios/Supplemental Data
Total return 27.1%* 16.3%*
Ratio of expenses to
average net assets 1.25%* 1.25%*!
Ratio of net investment
income to average
net assets 1.18%* 2.10%*!
Portfolio turnover rate 16.0% 3.9%!
Average commission rate paid $ 0.0443 $ 0.0561
Net assets, end of period
(in thousands) $ 217,991 $ 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
December 31, 1997
Statement of Net Assets
Shares/Par Value
In thousands
Common Stocks 90.0%
FINANCIAL 17.9%
Bank and Trust 5.2%
Bank United 55,000 $ 2,705
First Security 60,000 2,516
Mercantile Bancorporation 21,750 1,338
Mercantile Bankshares 65,000 2,519
Northern Trust 33,000 2,308
11,386
Insurance 9.5%
ACE Limited 5,500 531
AmerUs Life 28,000 1,036
FBL Financial Group 24,000 963
Harleysville Group 64,000 1,548
PartnerRe Holdings 85,000 3,942
PennCorp Financial Group 86,000 3,069
Selective Insurance 32,000 870
UICI * 70,000 2,454
UNUM 10,400 566
W. R. Berkley 53,000 2,355
Willis-Corroon ADR 270,000 3,324
20,658
Financial Services 3.2%
Delta Financial * 120,000 1,605
INMC Mortgage Holdings 95,000 2,227
Leucadia National 65,000 2,242
SLM Holding 5,600 779
6,853
Total Financial 38,897
UTILITIES 11.0%
Telephone Services 3.9%
Aliant Communications 95,000 3,010
Century Telephone Enterprises 48,000 2,391
Cincinnati Bell 70,000 2,170
Frontier 15,000 361
Telephone and Data Systems 11,500 $ 536
8,468
Electric Utilities 7.1%
DQE 34,000 1,194
FirstEnergy 60,000 1,740
Illinova 100,000 2,694
New York State Electric & Gas 13,800 490
NIPSCO 55,000 2,719
Pinnacle West Capital 64,000 2,712
Teco Energy 95,000 2,672
United Water Resources 70,000 1,369
15,590
Total Utilities 24,058
CONSUMER NONDURABLES 13.9%
Food Processing 2.8%
International Multifoods 95,000 2,689
McCormick 125,000 3,508
6,197
Hospital Supplies/Hospital
Management 1.1%
United States Surgical 80,000 2,345
2,345
Pharmaceuticals 0.2%
Perrigo * 40,000 538
538
Health Care Services 0.5%
Apria Healthcare * 20,000 269
PacifiCare Health Systems
(Class A) * 4,000 202
PacifiCare Health Systems
(Class B) * 10,000 525
996
Miscellaneous Consumer Products 9.3%
Burlington Industries * 175,000 2,417
First Brands 90,000 2,424
Hasbro 15,000 473
Premark International 87,500 2,538
Reebok * 25,000 720
Stanley Works 70,000 3,303
Tomkins (GBP) 720,000 3,406
Unifi 105,000 $ 4,272
WestPoint Stevens * 15,500 737
20,290
Total Consumer Nondurables 30,366
CONSUMER SERVICES 11.1%
General Merchandisers 4.5%
BJ's Wholesale Club * 104,000 3,263
Neiman-Marcus * 110,000 3,328
Warnaco Group (Class A) 105,000 3,294
9,885
Specialty Merchandisers 1.2%
CVS 7,604 487
McKesson 6,000 649
Nordstrom 15,000 910
Tupperware 20,000 558
2,604
Media and Communications 5.4%
Chris-Craft * 40,000 2,092
Meredith 95,000 3,390
New York Times (Class A) 20,000 1,323
Pulitzer Publishing 7,599 477
Scholastic * 10,000 377
Valassis Communications * 100,000 3,700
Washington Post (Class B) 600 292
11,651
Total Consumer Services 24,140
CONSUMER CYCLICALS 10.8%
Automobiles and Related 3.4%
A.O. Smith (Class B) 85,000 3,591
Littelfuse * 25,000 615
Meritor Automotive 115,000 2,422
SPX 10,000 690
7,318
Building & Real Estate 6.5%
Arden Realty, REIT 17,500 538
CCA Prison Realty Trust, REIT 32,500 $ 1,450
Federal Realty Investment
Trust, REIT 20,000 515
Kilroy Realty, REIT 10,000 288
Owens Corning 50,000 1,706
Patriot American Hospitality,
REIT 9,299 268
Rouse 50,000 1,638
Security Capital Atlantic,
REIT 30,000 634
Security Capital Industrial
Trust, REIT 145,000 3,607
SECURITY CAPITAL PACIFIC TRUST, REIT 65,000 1,576
Starwood Lodging, REIT 17,800 1,030
Texas Industries 20,000 900
14,150
Miscellaneous Consumer Durables 0.9%
Masco 39,000 1,984
1,984
Total Consumer Cyclicals 23,452
TECHNOLOGY 4.3%
Electronic Components 1.9%
Analogic 93,400 3,526
Maxim Integrated Products * 10,900 377
Molex 8,358 268
4,171
Aerospace & Defense 2.4%
Gulfstream Aerospace * 105,000 3,071
Tracor * 67,100 2,059
5,130
Total Technology 9,301
CAPITAL EQUIPMENT 4.9%
Electrical Equipment 1.4%
Hubbell (Class A) 10,000 471
Hubbell (Class B) 55,000 2,712
3,183
Machinery 3.5%
American Standard * 39,000 1,494
Coltec Industries * 19,000 441
Danaher 10,000 $ 631
FMC * 10,000 673
Teleflex 55,000 2,076
TriMas 65,000 2,235
7,550
Total Capital Equipment 10,733
BUSINESS SERVICES AND
TRANSPORTATION 2.9%
Computer Service and Software 1.6%
Galileo International 80,000 2,210
Sterling Software * 30,000 1,230
3,440
Distribution Services 1.0%
Richfood Holdings 75,000 2,119
2,119
Transportation Services 0.2%
Landstar Systems * 10,000 264
Werner Enterprises 14,000 290
554
Miscellaneous Business Services 0.1%
H&R Block 5,000 224
224
Total Business Services and
Transportation 6,337
ENERGY 4.4%
Energy Services 2.2%
Camco International 10,000 637
Cooper Cameron * 6,000 366
McDermott International 25,000 916
Western Atlas 15,000 1,110
Witco 45,000 1,836
4,865
Exploration and Production 0.8%
Devon Energy 11,550 445
Rutherford-Moran Oil * 40,000 720
Weatherford Enterra * 13,500 590
1,755
Integrated Petroleum - Domestic 1.4%
Murphy Oil 12,500 $ 677
Union Texas Petroleum 110,000 2,290
2,967
Total Energy 9,587
PROCESS INDUSTRIES 5.3%
Diversified Chemicals 1.4%
Olin 65,000 3,047
3,047
Specialty Chemicals 1.4%
Georgia Gulf 30,000 919
Great Lakes Chemical 45,000 2,019
2,938
Paper and Paper Products 2.2%
Consolidated Papers 11,000 587
Fort James 8,725 334
Jefferson Smurfit * 20,000 285
Sonoco Products 90,000 3,122
Unisource Worldwide 12,500 178
Willamette Industries 11,000 354
4,860
Forest Products 0.3%
Rayonier 15,000 639
639
Total Process Industries 11,484
BASIC MATERIALS 3.5%
Metals 2.5%
Cambior 150,000 881
Inco 110,000 1,870
Nucor 44,000 2,126
Reynolds Metals 10,000 600
5,477
Mining 1.0%
LONRHO (GBP) 250,000 386
Newmont Mining 40,000 $ 1,175
TVX Gold * 200,000 675
2,236
Total Basic Materials 7,713
Total Common Stocks
(Cost $171,930) 196,068
Convertible Preferred Stocks 0.2%
Security Capital Industrial
Trust (Class B) 12,000 384
Total Convertible Preferred
Stocks (Cost $281) 384
Convertible Bonds 0.1%
Liberty Property Trust, Sub.
Deb., 8.20%, 7/1/01 $ 200,000 282
Total Convertible Bonds
(Cost $205) 282
Short-Term Investments 12.2%
Money Market Funds 12.2%
Reserve Investment Fund, 5.84%# 26,614,489 26,614
Total Short-Term Investments
(Cost $26,614) 26,614
Total Investments in Securities
102.5% of Net Assets (Cost $199,030) $ 223,348
Other Assets Less Liabilities (5,357)
NET ASSETS $ 217,991
___________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 21
Accumulated net realized gain/loss -
net of distributions 699
Net unrealized gain (loss) 24,319
Paid-in-capital applicable to
15,068,692 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares authorized 192,952
NET ASSETS $ 217,991
___________
NET ASSET VALUE PER SHARE $ 14.47
___________
* Non-income producing
# Seven-day Yield
ADR American Depository Receipt
REIT Real Estate Investment Trust
GBP British sterling
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Mid-Cap Value Fund
Statement of Operations
In thousands
Year
Ended
12/31/97
Investment Income
Income
Dividend $ 1,728
Interest 657
Total income 2,385
Expenses
Investment management 728
Shareholder servicing 273
Custody and accounting 95
Registration 71
Prospectus and shareholder reports 21
Legal and audit 11
Directors 7
Miscellaneous 19
Total expenses 1,225
Net investment income 1,160
Realized and Unrealized Gain (Loss)
Net realized gain
(loss) on securities 2,769
Change in net unrealized gain or loss
Securities 19,274
Other assets and liabilities
denominated in foreign currencies 1
Change in net unrealized
gain or loss 19,275
Net realized and unrealized
gain (loss) 22,044
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 23,204
___________
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Mid-Cap Value Fund
Statement of Changes in Net Assets
In thousands
Year 6/28/96
Ended Through
12/31/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,160 $ 303
Net realized gain (loss) 2,769 (17)
Change in net unrealized
gain or loss 19,275 5,044
Increase (decrease) in net assets
from operations 23,204 5,330
Distributions to shareholders
Net investment income (1,175) (289)
Net realized gain (2,056) -
Decrease in net assets
from distributions (3,231) (289)
Capital share transactions*
Shares sold 169,513 48,225
Distributions reinvested 3,185 280
Shares redeemed (23,869) (4,590)
Increase (decrease) in net
assets from capital
share transactions 148,829 43,915
Net equalization - 133
Net Assets
Increase (decrease) during period 168,802 49,089
Beginning of period 49,189 100
End of period $ 217,991 $ 49,189
________________________
*Share information
Shares sold 12,445 4,647
Distributions reinvested 224 24
Shares redeemed (1,855) (426)
Increase (decrease) in shares
outstanding 10,814 4,245
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Mid-Cap Value Fund
December 31, 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.
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.
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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $144,860,000 and $14,408,000, respectively, for the
year ended December 31, 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.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1997. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
Undistributed net investment income $ 16,000
Paid-in-capital (16,000)
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $199,030,000, and net unrealized
gain aggregated $24,318,000, of which $28,640,000 related to appreciated
investments and $4,322,000 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 $137,000 was payable at December 31, 1997. The fee is computed
daily and paid monthly, 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. The effective annual group fee rate was 0.32% at December 31, 1997,
and 0.33% for the year then ended. 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%. 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, $71,000 of previously unaccrued management fees were repaid during
the year ended December 31, 1997, and $7,000 remains 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.
(TRPS) 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 $250,000
for the year ended December 31, 1997, of which $28,000 was payable at
period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual funds
(underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may
invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings
to it and in proportion to the average daily value of its shares owned by
Spectrum, pursuant to special servicing agreements between and among
Spectrum, the underlying funds, T. Rowe Price, and, in the case of T. Rowe
Price Spectrum International, Rowe Price-Fleming International. Spectrum
Growth Fund held approximately 45.2% of the outstanding shares of the Mid-Cap
Value Fund at December 31, 1997. For the year then ended, the fund was
allocated $25,000 of Spectrum expenses.
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 year ended December
31, 1997, totaled $385,000 and are reflected as interest income in the
accompanying Statement of Operations.
During the year ended December 31, 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.
Tax Information (Unaudited) for the Tax Year Ended 12/31/97
We are providing this information as required by the Internal Revenue
Service. The amounts shown may differ from those reported in a fund's
financial statements because of differences between IRS and financial
statement reporting requirements.
The fund distributions to shareholders included:
o $1,469,000 from short-term capital gains, and
o $587,000 from long-term capital gains; of which $56,000 was subject to
the 20% rate gains category.
For corporate shareholders, 52.0% of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
T. Rowe Price Mid-Cap Value Fund
Report of Independent Accountants
To the Board of Directors and Shareholders of
T. Rowe Price Mid-Cap Value Fund, Inc.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position
of T. Rowe Price Mid-Cap Value Fund, Inc. (the "Fund") at December 31, 1997,
the results of its operations for the year then ended, and the changes in its
net assets and the financial highlights for the year then ended and for the
period June 28, 1996 (commencement of operations) through December 31, 1996,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1997 by correspondence with
custodians and, where appropriate, the application of alternative auditing
procedures for unsettled security transactions, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 21, 1998
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.
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*Access(registered trademark) and
T. Rowe Price OnLine.
Discount Brokerage*
Individual Investments Stocks, bonds, options, precious metals,
and other securities at a savings over regular commission rates.
Investment Information
Combined Statement Overview of your T. Rowe Price accounts.
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.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
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
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor.
F15-050 12/31/97
