Semiannual Report
Mid-Cap
Value Fund
June 30, 1999
T. Rowe Price
Report Highlights
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Mid-Cap Value Fund
o Positive economic news helped cyclicals, mid-size companies, and value
stocks begin to recover in the second quarter of the year.
o The fund's 12-month performance still trails several larger,
growth-oriented indexes, but six-month gains reflect the turnaround.
o The fund benefited strongly from several inexpensively priced cyclical and
capital goods stocks.
o We continued to find high-quality companies at very attractive prices
during the period.
o Rapid changes in market leadership make us cautious about the future, but
we are confident our investment strategy will be effective in any market
environment.
Fellow Shareholders
The second quarter of 1999 saw the market headwinds change sharply in favor of
your fund. Improved foreign economies and strong domestic growth encouraged
investors to shift their attention to cyclicals as well as small- and mid-cap
stocks, many of which had become quite inexpensive. After leading for several
quarters, blue chips took a back seat to more modestly sized companies, and
high-priced growth stocks lagged value stocks.
Reflecting the turnaround, your fund had a strong second quarter, rising
12.81%. That showing contributed to a 7.03% six-month gain that outpaced
the growth-oriented S&P MidCap Index's 6.87% results. However, significant
technology exposure in the Lipper Mid Cap Funds Average helped it
outperform your fund so far in 1999. For the full year, your fund trailed
the broad benchmarks, as its value focus was severely out of favor in all
but the last three months of the period.
Performance Comparison
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Periods Ended 6/30/99 6 Months 12 Months
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Mid-Cap Value Fund 7.03% 2.29%
S&P MidCap Index 6.87 17.18
Lipper Mid Cap Funds Average 12.13 13.36
Economic data released in the fourth quarter of 1998 and the first of 1999
were surprisingly strong, with GDP growth running well ahead of projections
and consumer spending outpacing personal earnings. The price of oil also
rose significantly. The news prompted the Federal Reserve to raise the
federal funds target rate by a quarter percentage point in hopes of
forestalling inflationary pressures. Even this move, however, only modestly
reduced investor optimism regarding the domestic economy.
In this environment, some of the best-performing sectors during the past
quarter were capital goods and consumer cyclicals, which rose 26% and 9%,
respectively. For the full six-month period, energy was also among the
market leaders, with a 33% advance. Each of these market segments was well
represented in your portfolio as they carried very attractive value
characteristics, and the fund benefited greatly in April and May as
investors shunned the technology sector and focused on the solid values in
industrial America. On the other hand, your fund did not participate very
much when technology and communications services stocks rallied at the
period's end. We have so far found few attractively priced opportunities in
technology, particularly among Internet-dominated communications services
companies. Too many of the stocks in these sectors have been priced well
above what we consider appropriate valuations.
The worst-performing market sectors for the half year were those with
steady growth characteristics. Utilities, health care, and consumer staples
all declined, by 5.86%, 3.65%, and 3.33%, respectively. Fortunately, your
fund had an underweighted position in health care and also less utilities
exposure than the value segment of the mid-cap indices.
INVESTMENT REVIEW
In keeping with the trends described earlier, our top-three performers for
the second quarter were A.O. Smith, Unifi, and Inco, each of which showed
how 1999's more receptive environment for cyclicals could benefit
low-priced, high-quality companies. A.O. Smith, a well-managed manufacturer
that produces electric motors, water heaters, and storage tanks, suffered
inexplicably in the first quarter, selling off by 22.6% despite solid
fundamentals. Then it was rediscovered in the second quarter, rising 47.4%
and adding nine cents to the fund's NAV. The company recently purchased the
Industrial Motor assets of Magnetek, which we think should support higher
earnings per share going forward. Trading at only 12 times its adjusted
earnings per share, we still find great value here.
Information on Year-End Distributions
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To help you with tax planning, we try to give you a good idea of the per-share
income and capital gain amounts our funds may distribute near year-end. In late
October, we will provide estimates of these amounts, which will be paid on
December 16, 1999, to shareholders of record on December 14. These preliminary
numbers will be included in The Price Report mailing to shareholders in late
October and will also be available on our Web site-www.troweprice.com.
We hope that these preliminary numbers will be useful to you in approximating
the income and capital gains taxes you may pay on distributions to taxable
accounts.
If your fund distributed any capital gains earlier in 1999, you can find the
amounts on your statements and should include them in your tax planning
calculations. Please keep in mind that the numbers are not final and are likely
to be revised before the December 14 declaration and record date. As the fall
progresses, you may want to check our Web site for revisions.
If you would like information on tax matters relating to mutual funds, please
visit our Web site to download our Insights report, Tax Information for Mutual
Fund Investors, or call 1-800-225-5132 to request a copy.
Unifi's shares also recovered smartly from an early-1999 sell-off, rising
66.7% in the second quarter. This textile company suffered from the "Asian
Flu" last year, as Far Eastern competitors dumped polyester fiber into the
U.S. market and made operating conditions quite difficult. The worst
troubles appear to have abated, however, and recently, operating rates and
profits were rising once again. Longtime Chairman Allen Mebane has
reassumed operating control of the firm, and we expect Unifi to quickly
recover to its old profitable form.
Finally, Inco, the world's largest producer of nickel outside the former
Soviet Union, benefited from several positive developments in 1999 after a
weak 1998. First, the price of nickel rose as producer cutbacks and delays
in commissioning new mines in Australia drained the supply of the metal. At
the same time, prospects improved for higher demand in Japan and the rest
of Asia. Second, the company has been successful in developing the large,
world-class Voiseys Bay nickel deposit in Labrador. Finally, first quarter
results showed that the firm had made visible progress in restructuring its
operations and balance sheet. These results helped drive Inco's shares from
$13 to $18.
During the second quarter rally, only two holdings were especially weak:
Parametric Technology and Richfood Holdings. Parametric shares declined 30%
as it missed its first quarter earnings expectations by one cent. But this
computer-aided design software firm is spending about five cents per share,
per quarter, ramping up its exciting new Windchill product line. Reports
from beta testing sites are very encouraging and we remain positive on the
holding. Richfood's stock price declined from $20 to $12 when investors
reacted negatively to news that the firm had lost a major wholesale
customer, Giant of Carlisle. The shares clearly fell below intrinsic value,
as SuperValu, a competitor in wholesale and retail grocery, bid $18 per
share for the company. Unfortunately, despite the takeover, the shares
still fell 18.3% in the quarter, costing us a bit under four cents in NAV.
In this case, we clearly underestimated the difficult operating conditions
in the wholesale food industry.
SECTOR DIVERSIFICATION
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Reserves 5%
Consumer Nondurables 13%
Energy, Utilities, and Miscellaneous 19%
Financial 14%
Business Services and Transportation 5%
Capital Equipment, Process Industries,
and Basic Materials 16%
Technology 4%
Consumer Services and Consumer Cyclicals 24%
Based on net assets as of 6/30/99.
INVESTMENT STRATEGY
During the period, we found good value throughout our sector, as evidenced
in our largest purchases list (see page 8). EG&G, our second-largest
purchase, produces components for semiconductors and security services
(bomb scanners), and also acquired a business in life science analytic
instruments from Perkin-Elmer early in 1999. The company has recently hired
a bright young CEO, Greg Summe, whom we know from his days at AlliedSignal
and GE. We think he will help improve returns at EG&G and turn it into a
world-class competitor using the "six sigma" quality-control initiatives
implemented by his former companies, as well as new management incentives
and a bold growth agenda. Although not inexpensive at 19 times earnings,
the shares look attractively valued versus other diversified industrials
like Allied and Danaher.
We also made a major commitment to Knight-Ridder, a newspaper publisher
with 31 daily papers in such key cities as Philadelphia, San Jose, Miami,
Kansas City, and Charlotte. The company is showing strong revenue growth
and good cost control. We found the stock attractive at eight times 1999
cash flow. In addition, the company has an exciting Internet business of
online classified advertising, which may prove to be of great value
someday.
Our final major purchase was SLI, a company that manufactures and
distributes lighting assemblies, bulbs, fixtures, and sockets. SLI has a
market capitalization of approximately $1 billion, is expected to grow
earnings at a 25% compounded annual growth rate, and is trading at 16 times
1999 earnings per share and 13 times 2000 EPS. There are a number of
fundamental reasons that make this company an attractive investment. Its
CEO, Frank Ward, has an impressive track record of generating excellent
returns for shareholders. Current analyst estimates do not reflect the
substantial potential for operating margin improvement that the firm can
achieve by making easy restructuring changes in its Sylvania International
division, which accounts for almost two-thirds of total sales.
Additionally, the lighting industry is an oligopoly with significant
barriers to entry. Moreover, SLI has a focus on vertical integration that
allows it to package its components into a lighting system (which carries a
higher average selling price and margin) instead of just selling the light
bulb (which is more of a commodity). Finally, management has a disciplined
acquisition strategy in which transactions must immediately benefit
earnings.
We sell stocks when we find their valuations rich or their fundamentals
weakening, or when we no longer understand management's strategic
direction. An example of the latter problem led us to eliminate NiSource
after it proposed a takeover of Columbia Energy. The offer is a departure
from its past strategy of buying smaller gas and water companies through
friendly deals. Columbia Energy is larger than NiSource and has clearly
indicated its opposition to being bought. This reluctance is likely to lead
to a long, drawn-out process during which management will be more focused
on completing the deal than on running the business. Getting regulatory
approval from five states may also prove prickly without Columbia's
support. From a financial perspective, we don't expect the deal to help
earnings in the near term. Finally, successful completion of the deal would
reduce the chances that NiSource would be taken over-eliminating one of the
reasons that we favored the stock.
We also trimmed existing positions in Tomkins and Aliant Communications. We
sold about half of our 1.5% position in Tomkins back to the company during
their recent Dutch tender offer. The stock was trading below the price the
company was willing to purchase shares so we opportunistically took some
money off the table. We continue to favor holding a position in this
multinational industrial. Finally, we have begun to exit our position in
Aliant as it trades at a very full value due to its pending merger with
Alltel. Alltel's capitalization will be significantly above the mid-cap
range, so we are in the process of exiting the position.
OUTLOOK
The market has been rapidly rotating leadership between sectors thus far in
1999, first toward growth-oriented blue chips and technology stocks, then
toward the Internet, followed by a manic turn into cyclicals in May, then
back to technology in June. Rapid and confused leadership shifts are
typical signs of market tops. Will the Fed tighten interest rates further
and finally take away our punch bowl? At the moment the Fed is talking
neutrality but, of course, reserves the right to change its mind. Typically
stocks do best in an environment of benign interest rates and robust
corporate profits. Currently, these two factors are being tested. On the
positive side, however, mid-caps remain inexpensive versus large-cap stocks
and could possibly buck the trend in some future blue chip correction. This
quarter offered a glimpse of the potential in small- and mid-cap shares.
Stay tuned and stay invested: we believe there is more to come.
Respectfully submitted,
Greg A. McCrickard
President and Chairman of the Investment Advisory Committee
July 23, 1999
T. Rowe Price Mid-Cap Value Fund
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Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/99
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Premark International 2.5%
BJ's Wholesale Club 2.5
Aliant Communications 2.0
Hubbell 2.0
A.O. Smith 1.9
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Galileo International 1.8
ProLogis Trust 1.7
McCormick 1.7
International Multifoods 1.7
PartnerRe Holdings 1.6
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Sonoco Products 1.6
Inco 1.5
New England Electric System 1.5
Neiman-Marcus 1.5
Meredith 1.5
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Parametric Technology 1.4
Teco Energy 1.3
Murphy Oil 1.3
Amerada Hess 1.3
Analogic 1.3
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Warnaco Group 1.3
TCF Financial 1.3
Unifi 1.3
Richfood Holdings 1.2
Mercantile Bankshares 1.2
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Total 39.9%
Note: Table excludes reserves.
T. Rowe Price Mid-Cap Value Fund
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Portfolio Highlights
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MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 6/30/99
Largest Purchases
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Peoples Heritage Financial*
EG&G*
Knight-Ridder*
PMI Group*
SLI*
Arch Chemicals*
First Health Group*
Parker Hannifin*
Azurix*
Suiza Foods
Largest Sales
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Clorox**
Aliant Communications
NiSource**
Tomkins
Louisiana Pacific**
Medtronic**
L-3 Communications Holdings
Convergys**
Valassis Communications
Harleysville Group**
* Position added.
** Position eliminated.
T. Rowe Price Mid-Cap Value Fund
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Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or
index. An index return does not reflect expenses, which have been deducted
from the fund's return.
MID-CAP VALUE FUND
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As of 6/30/99
S&P MidCap Lipper Mid Cap Mid-Cap
Index Funds Value Fund
6/30/96 10,000 10,000 10,000
6/30/97 12,333 11,611 12,938
6/30/98 15,681 14,192 15,682
6/30/99 18,375 15,968 16,041
Average Annual Compound Total Return
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This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 6/30/99 1 Year 3 Years Inception Date
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Mid-Cap Value Fund 2.29% 17.06% 17.03% 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
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Unaudited
Financial Highlights For a share outstanding throughout each period
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6 Months Year 6/28/96
Ended Ended Through
6/30/99 12/31/98 12/31/97 12/31/96
NET ASSET VALUE
Beginning of period $ 13.66 $ 14.47 $ 11.56 $ 10.00
Investment activities
Net investment income 0.07 0.19 0.08* 0.10*
Net realized and
unrealized gain (loss) 0.89 (0.05) 3.05 1.53
Total from
investment activities 0.96 0.14 3.13 1.63
Distributions
Net investment income -- (0.19) (0.08) (0.07)
Net realized gain -- (0.76) (0.14) --
Total distributions -- (0.95) (0.22) (0.07)
NET ASSET VALUE
End of period $ 14.62 $ 13.66 $ 14.47 $ 11.56
-----------------------------------------------
Ratios/Supplemental Data
Total return(diamond) 7.03% 1.39% 27.1%* 16.3%*
Ratio of total expenses to
average net assets 1.08%! 1.08% 1.25%* 1.25%*!
Ratio of net investment
income to average
net assets 1.09%! 1.24% 1.18%* 2.10%*!
Portfolio turnover rate 20.7%! 32.0% 16.0% 3.9%!
Net assets, end of period
(in thousands) $227,971 $221,338 $217,991 $ 49,189
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
* Excludes expenses in excess of a 1.25% 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
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Unaudited June 30, 1999
Statement of Net Assets Shares/Par Value
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In thousands
Common Stocks 94.4%
FINANCIAL 14.0%
Bank and Trust 8.5%
Bank United 60,000 $ 2,409
First Security 96,750 2,633
Mercantile Bancorporation 25,000 1,428
Mercantile Bankshares 79,000 2,792
North Fork Bancorporation 105,000 2,238
Northern Trust 28,500 2,765
Peoples Heritage
Financial Group 120,000 2,261
TCF Financial 105,000 2,927
19,453
Insurance 4.4%
ACE Limited 16,500 466
Erie Indemnity 89,400 2,537
PartnerRe Holdings 100,000 3,737
PMI Group 29,000 1,822
W. R. Berkley 58,000 1,452
10,014
Financial Services 1.1%
Delta Financial * 120,000 765
Leucadia National 65,000 1,649
2,414
Total Financial 31,881
UTILITIES 12.8%
Telephone Services 3.9%
Aliant Communications 100,000 4,625
Centurytel 60,000 2,385
Cincinnati Bell 80,000 1,995
9,005
Electric Utilities 8.9%
DQE 60,000 2,408
FirstEnergy 60,000 1,860
GPU 48,000 2,025
Illinova 100,000 $ 2,725
New England Electric System 70,000 3,509
Pinnacle West Capital 69,000 2,777
Teco Energy 135,000 3,071
United Water Resources 80,000 1,815
20,190
Total Utilities 29,195
CONSUMER NONDURABLES 13.2%
Food Processing 4.4%
International Multifoods 170,000 3,836
McCormick 125,000 3,945
Suiza Foods * 55,000 2,303
10,084
Hospital Supplies/Hospital Management 0.7%
First Health Group * 72,000 1,550
1,550
Miscellaneous Consumer Products 8.1%
Blyth Industries * 75,000 2,578
Hasbro 67,500 1,886
Premark International 154,500 5,794
Reebok * 75,000 1,397
Stanley Works 75,000 2,414
Tomkins (GBP) 365,100 1,582
Unifi * 135,000 2,869
18,520
Total Consumer Nondurables 30,154
CONSUMER SERVICES 11.4%
General Merchandisers 5.3%
BJ's Wholesale Club * 190,000 5,712
Neiman-Marcus * 135,000 3,468
Warnaco Group (Class A) 110,000 2,942
12,122
Specialty Merchandisers 1.6%
CVS 13,208 $ 670
Intimate Brands * 31,500 1,493
SLI * 50,000 1,350
3,513
Media and Communications 4.5%
Chris-Craft * 53,045 2,500
Knight-Ridder 40,000 2,197
Meredith 100,000 3,462
Valassis Communications * 58,500 2,143
10,302
Total Consumer Services 25,937
CONSUMER CYCLICALS 11.1%
Automobiles and Related 3.7%
A.O. Smith (Class B) 152,500 4,270
Eaton 10,000 920
Littelfuse * 60,000 1,138
SPX * 25,000 2,088
8,416
Building & Real Estate 6.4%
Archstone Communities Trust, REIT 95,000 2,084
Arden Realty, REIT 72,500 1,785
Prologis Trust, REIT 180,000 3,645
Reckson Associates Realty, REIT 100,000 2,350
Rouse 85,000 2,157
Security Capital U.S. Realty
(Class A) * 75,000 1,425
Starwood Hotels & Resorts, REIT 15,000 459
Texas Industries 20,000 775
14,680
Miscellaneous Consumer Durables 1.0%
Masco 78,000 2,252
2,252
Total Consumer Cyclicals 25,348
TECHNOLOGY 4.1%
Electronic Components 1.4%
Analogic 95,000 $ 2,954
Molex 8,358 308
3,262
Electronic Systems 1.1%
EG&G 70,000 2,494
2,494
Aerospace & Defense 1.6%
Harsco 45,000 1,440
L 3 Communications * 45,000 2,174
3,614
Total Technology 9,370
CAPITAL EQUIPMENT 4.4%
Electrical Equipment 2.0%
Hubbell (Class A) 10,000 399
Hubbell (Class B) 90,000 4,083
4,482
Machinery 2.4%
Coltec Industries * 19,000 412
Danaher 24,000 1,395
Parker Hannifin 30,000 1,373
Teleflex 55,000 2,389
5,569
Total Capital Equipment 10,051
BUSINESS SERVICES AND
TRANSPORTATION 5.4%
Computer Service and Software 4.1%
Galileo International 75,000 4,008
Parametric Technology * 225,000 3,129
Reynolds & Reynolds 95,000 2,214
9,351
Distribution Services 1.3%
Richfood Holdings 160,600 $ 2,831
2,831
Total Business Services and Transportation 12,182
ENERGY 5.9%
Energy Services 2.4%
Baker Hughes 40,500 1,357
BJ Services * 40,000 1,178
Smith International * 35,000 1,520
Weatherford International 8,000 293
Witco 50,000 1,000
5,348
Exploration and Production 0.9%
Devon Energy 11,550 413
Union Pacific Resources 100,000 1,631
2,044
Integrated Petroleum - Domestic 2.6%
Amerada Hess 50,000 2,975
Murphy Oil 62,500 3,051
6,026
Total Energy 13,418
PROCESS INDUSTRIES 6.2%
Diversified Chemicals 1.1%
Arch Chemicals 101,000 2,455
2,455
Specialty Chemicals 1.1%
Great Lakes Chemical 45,000 2,073
Octel * 30,250 378
2,451
Paper and Paper Products 2.8%
Consolidated Papers 22,000 589
Sonoco Products 120,000 3,592
Wausau-Mosinee Paper 90,000 1,620
Willamette Industries 11,000 507
6,308
Forest Products 1.2%
Domtar 225,000 $ 2,138
Rayonier 15,000 747
2,885
Total Process Industries 14,099
BASIC MATERIALS 5.5%
Metals 4.7%
Cambior 150,000 488
Inco 195,000 3,510
Nucor 54,000 2,562
Reynolds Metals 30,000 1,770
Ryerson Tull 100,000 2,256
10,586
Mining 0.8%
Newmont Mining 85,000 1,689
TVX Gold 180,000 180
1,869
Total Basic Materials 12,455
MISCELLANEOUS 0.4%
Azurix * 50,000 1,000
Total Miscellaneous 1,000
Total Common Stocks (Cost $196,831) 215,090
Convertible Preferred Stocks 0.1%
Prologis Trust (Series B)
REIT, 7.00% 12,000 311
Total Convertible Preferred Stocks (Cost $281) 311
Convertible Bonds 0.8%
Liberty Property Trust,
Sub. Deb., 9.00%, 7/1/01 $ 200,000 243
Security Capital U. S. Realty, (144a),
2.50%, 5/22/03 2,000,000 1,539
Total Convertible Bonds (Cost $1,882) 1,782
Short-Term Investments 5.7%
Money Market Funds 5.7%
Reserve Investment Fund,
5.05% # 13,038,603 $ 13,039
Total Short-Term Investments (Cost $13,039) 13,039
Total Investments in Securities
101.0% of Net Assets (Cost $212,033) $ 230,222
Other Assets Less Liabilities (2,251)
NET ASSETS $ 227,971
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 1,247
Accumulated net realized gain/loss -
net of distributions 6,236
Net unrealized gain (loss) 18,189
Paid-in-capital applicable to 15,591,955
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized 202,299
NET ASSETS $ 227,971
----------
NET ASSET VALUE PER SHARE $ 14.62
----------
# Seven-day yield
* Non-income producing
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers- total of such securities at period-end amounts
to 0.7% of net assets.
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
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Unaudited
Statement of Operations
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In thousands
6 Months
Ended
6/30/99
Investment Income
Income
Dividend $ 2,050
Interest 217
Total income 2,267
Expenses
Investment management 701
Shareholder servicing 324
Custody and accounting 47
Prospectus and shareholder reports 30
Registration 17
Legal and audit 6
Directors 3
Miscellaneous 2
Total expenses 1,130
Net investment income 1,137
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 5,068
Change in net unrealized gain or loss on securities 8,057
Net realized and unrealized gain (loss) 13,125
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 14,262
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Mid-Cap Value Fund
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Unaudited
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,137 $ 2,926
Net realized gain (loss) 5,068 12,035
Change in net unrealized
gain or loss 8,057 (14,187)
Increase (decrease) in net
assets from operations 14,262 774
Distributions to shareholders
Net investment income -- (2,892)
Net realized gain -- (11,566)
Decrease in net assets
from distributions -- (14,458)
Capital share transactions*
Shares sold 21,496 74,806
Distributions reinvested -- 14,239
Shares redeemed (29,125) (72,014)
Increase (decrease) in net
assets from capital
share transactions (7,629) 17,031
Net Assets
Increase (decrease) during period 6,633 3,347
Beginning of period 221,338 217,991
End of period $ 227,971 $ 221,338
-----------------------
*Share information
Shares sold 1,574 5,137
Distributions reinvested -- 1,109
Shares redeemed (2,184) (5,113)
Increase (decrease)
in shares outstanding (610) 1,133
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Mid-Cap Value Fund
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Unaudited June 30, 1999
Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price 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 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. Credits earned on
daily, uninvested cash balances at the custodian are used to reduce the
fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $21,332,000 and $29,782,000, respectively, for the
six months ended June 30, 1999.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its income.
At June 30, 1999, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$212,034,000. Net unrealized gain aggregated $18,188,000 at period-end, of
which $33,932,000 related to appreciated investments and $15,744,000 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 $122,000 was payable at June 30, 1999. The fee is computed
daily and paid monthly, and consists of an individual fund fee equal to
0.35% of average daily net assets and a group fee. The group fee is based
on the combined assets of certain mutual funds sponsored by the manager or
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, 1999, and for the six months then ended,
the effective annual group fee rate was 0.32%. The fund pays a pro-rata
share of the group fee based on the ratio of its net assets to those of the
group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund
receives certain other services. The manager computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services,
Inc. is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $184,000 for the six months ended June 30, 1999, of which
$45,000 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 52.2% of the
outstanding shares of the Mid-Cap Value Fund at June 30, 1999. For the six
months then ended, the fund was allocated $136,000 of Spectrum expenses,
$27,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
June 30, 1999, totaled $146,000 and are reflected as interest income in the
accompanying Statement of Operations.
T. Rowe Price Mid-Cap Value Fund
- --------------------------------------------------------------------------------
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
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial
markets. Investment Guides Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
** Based on a January 1999 survey for representative-assisted stock
trades. Services vary by firm, and commissions may vary depending on
size of order.
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free**
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond***
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors. ** Formerly named Florida Insured Intermediate
Tax-Free. *** Formerly named Tax-Free Insured Intermediate Bond.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
funds.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY.
T. Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
T. Rowe Price Retirement Plans and Resources
- --------------------------------------------------------------------------------
Retirement Plans and Resources
We recognize that saving for retirement is the number one investment goal
for most Americans. We can help you meet your retirement needs, whether you
are starting an IRA or designing a retirement program for your employees.
T. Rowe Price offers an assortment of retirement plans for individuals, the
self-employed, small businesses, corporations, and nonprofit organizations.
We provide recordkeeping, communications, and investment management
services, as well as a variety of educational materials, self-help planning
guides, and software tools to help you choose and implement a retirement
plan appropriate for you. For information or to request literature, call us
at 1-800-638-5660.
IRAs AND QUALIFIED PLANS
Traditional IRA
Roth IRA
Rollover IRA
SEP-IRA
SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase Pension and Profit Sharing Plans)
401(k)
403(b)
457 Deferred Compensation
RETIREMENT RESOURCES AT T. ROWE PRICE
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Investment Kits
The IRA Investing Kit
Roth IRA Conversion Kit
Rollover IRA Kit
The T. Rowe Price SIMPLE IRA Plan Kit
The T. Rowe Price SEP-IRA Plan
The Simplified Keogh Plan(registered trademark) From
T. Rowe Price
The T. Rowe Price 401(k) Century Plan(registered trademark)
(for small businesses)
Money Purchase Pension/Profit Sharing Plan Kit
Investing for Retirement in Your 403(b) Account
The T. Rowe Price No-Load Variable Annuity Information Kit
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning AnalyzerTM CD-ROM or diskette $19.95. To
order, please call 1-800-541-5760. Also available on the Internet for
$9.95.
T. Rowe Price Variable Annuity AnalyzerTM CD-ROM or diskette, free. To
order, please call 1-800-469-5304.
Many of these resources are also available for viewing or ordering on the
Internet at www.troweprice.com.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a brokerage account
or obtain information, call:
1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this
report.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
4410 ArrowsWest Drive
Colorado Springs, CO 80907
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills, CA 91367
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. F15-051 6/30/99
