<PAGE>
Annual Report
MID-CAP
GROWTH
FUND
-------------------
December 31, 1997
-------------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
Mid-Cap Growth Fund
. The stock market rose over 20% for an unprecedented third straight year;
the large-cap S&P 500 Stock Index returned 33.36%.
. Mid-cap stocks lagged large-caps for much of the year, and within the
mid-cap universe, value stocks outperformed growth.
. The fund's 6- and 12-month returns of 11.40% and 18.33%, respectively,
surpassed those of its Lipper peer group index but not the S&P MidCap
Index.
. We made few changes among sectors; business services and consumer stocks
remain our largest holdings.
. We believe mid-cap stocks could perform well in coming months relative to
the market, since their valuations are attractive vis-a-vis the broad
market and many of them have little exposure to Asian problems.
<PAGE>
Fellow Shareholders
Following stellar gains in 1995 and 1996, the stock market turned in another
unusually good performance in 1997, again led by the type of
large-capitalization, blue chip companies that compose the Standard & Poor's 500
Stock Index. The S&P 500's three-year gain of 125.61% was the best since the
inception of the index in 1936.
Mid-cap stocks lagged the major large-cap indices in the first half of the year,
staged a strong comeback in the third quarter, and faded again in the last three
months of 1997. Except for a brief period from April to October, growth stocks
lagged value stocks by a considerable margin. Consequently, while the Mid-Cap
Growth Fund outperformed an index of its peers for the last six months and the
year as a whole, it lagged the S&P MidCap Index for both periods. However, since
inception on June 30, 1992, your fund's return of 228.30% easily exceeds the
163.30% gain of the S&P MidCap Index.
- ----------------------
PERFORMANCE COMPARISON
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/97 6 Months 12 Months
- ------------------------------------------------------------
<S> <C> <C>
Mid-Cap Growth Fund 11.40% 18.33%
S&P MidCap Index 17.04 32.25
Russell Midcap Growth Index 10.86 22.54
Lipper Mid Cap Fund Index 8.66 17.57
</TABLE>
With this report, we are instituting two changes in your fund's benchmarks. For
our peer group comparison, we are using the Lipper Mid Cap Fund Index instead of
the Lipper Average of all mid-cap funds. The index, which is composed of the 30
largest mid-cap funds, includes your fund and is generally more representative
of our average market cap. (For the 6- and 12-month periods, the average
returned 10.55% and 19.63%, respectively.) We have also added the Russell Midcap
Growth Index to reflect the growth portion of the mid-cap universe, where the
fund's program is focused.
YEAR-END DISTRIBUTIONS
Your Board of Directors declared a short-term capital gain of $0.01 per share
and a long-term capital gain of $0.29 per share. Both were paid on December 30
to shareholders of record on December 26. You should already have received a
check or statement reflecting these distributions as well as your Form 1099-DIV
reporting them for tax purposes.
1
<PAGE>
MARKET ENVIRONMENT
The year was characterized by a nearly ideal environment for the domestic stock
market. The U.S. economy expanded for the seventh consecutive year at a rate
that was fast enough to accommodate good corporate earnings growth but slow
enough to allay any fears of resurgent inflation. Reflecting the taming of
inflation, long-term bond yields fell sharply, ending 1997 below 6%. Meanwhile,
in Washington, both Republicans and Democrats appear to have converged in the
middle of the political spectrum on most economic issues, facilitated in part,
perhaps, by surging tax receipts and the possibility of a balanced budget in the
current fiscal year. This convergence resulted in a tangible benefit for many
investors -- a reduction in the long-term capital gains rate. With the political
and economic backdrop so positive, it is not surprising that consumer confidence
remains close to record levels.
The major investment concern emanated from Asia, as the extraordinary economic
growth of the Asian tiger economies was imperiled. What began in July as a
currency crisis in Thailand was followed within weeks by devaluations in
Indonesia, Malaysia, and the Philippines, and by the de facto default of South
Korea in the fall. In Japan, which has still not recovered from the implosion of
its own real estate and stock market bubble, banks and brokerages failed. Asian
markets plunged, and their currencies fell dramatically against the U.S. dollar,
precipitating a major crisis. Except for a volatile period last October, the
U.S. stock market thus far has been relatively unaffected by these events.
The U.S. stock market advanced 33.36%, as measured by the large-cap Standard &
Poor's 500 Stock Index. This was somewhat surprising to us since the
strengthening dollar is a drag on the earnings of many large multinational
companies. Furthermore, the stocks of small and mid-size companies usually
outdistance larger stocks late in economic expansions, but not this time.
Perhaps the reason is that larger companies have benefited from restructuring
and cost cutting, whereas small and mid-size companies are still growing rapidly
and have had little fat to cut. In any case, mid-cap stocks generally lagged
large-caps in 1997. Within the mid-cap group, there was a pronounced difference
between growth stocks and value stocks, as exemplified by the Russell indices on
page 3.
The largest difference in performance between the two mid-cap segments was the
performance of the financial stocks, particularly the slower-growing mid-cap
banks, which experienced a consolidation frenzy during the year.
2
<PAGE>
- ------------------------------
MID-CAP PERFORMANCE COMPARISON
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/97 6 Months 12 Months
- -----------------------------------------------------------------------
<S> <C> <C>
Russell Midcap Index 14.54% 29.01%
Russell Midcap Growth Index 10.86 22.54
Russell Midcap Value Index 17.34 34.37
</TABLE>
PORTFOLIO REVIEW
Driven by falling interest rates, financial services was the best-performing
sector in the market. Not surprisingly, two financial stocks were also the
fund's top contributors for 1997: Franklin Resources, a leading mutual fund
manager and distributor, benefited from strong stock and bond markets; and ACE
Limited, a leading multi-specialty property and casualty insurer, reported
sharply rising earnings from recently acquired lines of business. Several
consumer companies were also top contributors: General Nutrition, the leading
retailer of vitamins and health supplements in the U.S., had strong sales and
earnings gains; and Royal Caribbean Cruises experienced extremely strong
bookings on its ships. The top contributor for the second half of 1997 was Cox
Communications, a cable company that is leading its industry in the
implementation of new services, particularly high-speed Internet access and
local telephone service.
The year's worst detractor to performance was Mercury Finance, a leader in used
automobile lending. Along with other investors, we were victimized by suspected
management fraud and manipulation of financial statements and are seeking
redress through legal action. The fund was also hurt by its position in Boston
Chicken, a restaurant operator whose stock fell when an unanticipated slowdown
precipitated a reevaluation by investors of what was, in hindsight, an overly
aggressive expansion plan and a problematic financial structure. The worst-
performing industry in 1997 was precious metals, as gold fell from a 1997 high
of $370 per ounce to a low of $283 near year-end. Our holdings in two growing
gold companies, TVX Gold and Cambior, also fell. Finally, the worst performer in
the second half was United States Surgical. Unanticipated weakness in the
company's base noninvasive surgery supply business undercut exciting growth in
new product lines.
Your fund remains well diversified across sectors. We have made only modest
changes in the last six months, as shown on page 4.
INVESTMENT STRATEGY AND OUTLOOK
As we begin 1998, the critical investment issue is whether the Asian economic
crisis will affect the U.S. stock market. We have already seen
3
<PAGE>
tremendous damage inflicted on Asian financial markets and are likely to see the
economies of many of these countries begin to contract. There will be derivative
effects on western nations that are difficult to predict at this stage. However,
it is apparent that the overinvestment in productive capacity in many Asian
nations will take time to absorb, and part of the solution will inevitably
involve greater exports of cheaper goods into the United States and fewer
imports of suddenly expensive American goods into Asia. This may well slow the
U.S. economy and further dampen our inflation rate. If domestic labor markets
continue to tighten, the result could be a squeeze on corporate profits as wages
rise but companies are unable to pass through price increases. In 1998, we may
well find out how globally integrated the world's economies have become.
- ------------------------
INDUSTRY DIVERSIFICATION
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/97 12/31/97
- -------------------------------------------------------------------
<S> <C> <C>
Financial 9% 9%
...................................................................
Health Care 10 12
...................................................................
Consumer 18 19
...................................................................
Technology 7 10
...................................................................
Business Services 28 28
...................................................................
Energy 7 5
...................................................................
Industrial 10 7
...................................................................
Basic Materials 3 2
...................................................................
Reserves 8 8
- -------------------------------------------------------------------
Total 100% 100%
</TABLE>
One thing we do surmise is that we have entered a period of change. This usually
entails higher risks. Stock market volatility, which increased significantly in
1997, is often a signal of change, although it is rarely obvious at the time
what those changes are.
We should note, however, that we manage your fund not by making major
macroeconomic judgments but by picking stocks we believe will produce good
returns over a reasonable time horizon. We will continue to invest based on the
precept that fundamental research will deliver superior long-term results. We
devote our time to carefully researching and evaluating company fundamentals.
While we typically examine a multitude of factors before we invest, and
virtually never invest before a face-to-face meeting with a company's
management, several of the criteria we focus on include the growth in the
company's industry sector; the growth rate we foresee for the company over the
next several years; the strength of a company's business model (competitive
advantages such as brand names, low-cost production, and patent
4
<PAGE>
positions); management we respect; strong financial characteristics such as good
cash flow and healthy balance sheets; and, finally, reasonable valuations.
Nevertheless, at the margin, we make adjustments over time to respond to
changing conditions. A year ago, we noted that there had been a bifurcation in
the mid-cap growth stock universe into two groups: the momentum stocks,
featuring fast-growing companies with accelerating fundamentals trading at
extremely high valuations; and the plodders, growing more slowly and less
assuredly, but trading at dramatically lower valuations. In the last year, many
(though not all!) of the formerly high-flying momentum stocks have returned to
more reasonable valuations, and we are more focused on some of these faster
growers than we were a year ago. Conversely, we are emphasizing the plodders a
little less, not only because the valuation differential with the faster growers
has narrowed, but also because we believe that in a more difficult pricing
environment, the faster-growing companies are generally less dependent on
pricing for their growth.
While the stock market as a whole continues to trade near the upper end of its
traditional valuation range, low interest rates provide some support as long as
earnings growth continues. Relative to the overall market, we believe mid-cap
growth stocks look quite attractive. The aggregate underlying growth rate of our
portfolio companies is well in excess of the market as a whole, yet the
price/earnings ratio is only modestly higher than the market, and well below
many of the blue chip leaders. In addition, many of our mid-cap companies have
little direct foreign exposure, a factor that could be an advantage for the
first time in several years. Finally, the drop in the long-term U.S. capital
gains tax rate should favor small and mid-cap growth companies, most of which
pay little or no dividends in order to reinvest in their own growth. We believe
the mid-cap growth sector and your fund are well positioned to achieve
attractive returns over the long run.
Respectfully submitted,
/s/ Brian W.H. Berghuis
Brian W.H. Berghuis
President and Chairman of the Investment Advisory Committee
January 19, 1998
5
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
<TABLE>
<CAPTION>
Percent of
Net Assets
12/31/97
- --------------------------------------------------------------------------------
<S> <C>
Warnaco Group 2.1%
................................................................................
JP Foodservice 1.9
................................................................................
Biogen 1.8
................................................................................
Suiza Foods 1.8
................................................................................
TriMas 1.8
- --------------------------------------------------------------------------------
Affiliated Computer Services 1.8
................................................................................
Danaher 1.6
................................................................................
Royal Caribbean Cruises 1.6
................................................................................
Culligan Water Technologies 1.5
................................................................................
Outdoor Systems 1.5
- --------------------------------------------------------------------------------
ACE Limited 1.5
................................................................................
Circuit City Stores 1.5
................................................................................
SunGard Data Systems 1.5
................................................................................
PartnerRe Holdings 1.5
................................................................................
Cox Communications 1.4
- --------------------------------------------------------------------------------
Interim Services 1.4
................................................................................
DST Systems 1.4
................................................................................
Cendant 1.4
................................................................................
FINOVA Group 1.4
................................................................................
Network Associates 1.3
- --------------------------------------------------------------------------------
360 Communications 1.3
................................................................................
Galileo International 1.3
................................................................................
Franklin Resources 1.3
................................................................................
Teleflex 1.2
................................................................................
Quorum Health Group 1.2
- --------------------------------------------------------------------------------
Total 38.0%
</TABLE>
6
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended December 31, 1997
<TABLE>
<CAPTION>
Ten Best Contributors
- ----------------------------------------
<S> <C>
Cox Communications 17(cents)
........................................
Royal Caribbean Cruises 16
........................................
Outdoor Systems 16
........................................
ACE Limited 15
........................................
Cendant 14
........................................
Comcast 12
........................................
SunGard Data Systems 11
........................................
JP Foodservice 11
........................................
Cooper Cameron 10
........................................
PLATINUM technology 10
- ----------------------------------------
Total 132(cents)
Ten Worst Contributors
- ----------------------------------------
United States Surgical -11(cents)
........................................
Vencor* 10
........................................
Cambior 9
........................................
TVX Gold 8
........................................
OEA 7
........................................
St. Jude Medical 6
........................................
Fairfax Financial 6
........................................
Great Lakes Chemical 5
........................................
Xilinx 5
........................................
Quest Diagnostics** 4
- ----------------------------------------
Total -71(cents)
</TABLE>
12 Months Ended December 31, 1997
<TABLE>
<CAPTION>
Ten Best Contributors
- ----------------------------------------
<S> <C>
Franklin Resources 25(cents)
........................................
ACE Limited 25
........................................
General Nutrition 24
........................................
Royal Caribbean Cruises* 22
........................................
Outdoor Systems* 22
........................................
Costco Companies 19
........................................
Gartner Group* 19
........................................
Kohl's 18
........................................
Cox Communications 17
........................................
Cendant 17
- ----------------------------------------
Total 208(cents)
Ten Worst Contributors
- ----------------------------------------
Mercury Finance** -28(cents)
........................................
Boston Chicken** 21
........................................
TVX Gold 17
........................................
Cambior 17
........................................
OEA 16
........................................
Corporate Express 11
........................................
American Pad & Paper** 10
........................................
Ikon Office Solutions 10
........................................
Tupperware** 9
........................................
Scholastic** 8
- ----------------------------------------
Total -147(cents)
</TABLE>
* Position added
** Position eliminated
7
<PAGE>
T. ROWE PRICE MID-CAP GROWTH 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 GROWTH FUND
- --------------------------------------------------------------------------------
[LINE GRAPH APPERS HERE]
<TABLE>
<CAPTION>
S&P MidCap Index Lipper Mid Cap Fund Index Mid-Cap Growth Fund
---------------- ------------------------- -------------------
<S> <C> <C> <C>
6/30/92 10,000 10,000 10,000
12/92 11,609 11,802 12,454
12/93 13,229 13,615 15,721
12/94 12,755 13,340 15,767
12/95 16,702 17,753 22,224
12/96 19,909 20,643 27,744
12/97 26,330 24,270 32,830
</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.
<TABLE>
<CAPTION>
Since Inception
Periods Ended 12/31/97 1 Year 3 Years 5 Years Inception Date
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mid-Cap Growth Fund 18.33% 27.69% 21.39% 24.11% 6/30/92
...............................................................................
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
8
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- -------------------------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 24.43 $ 20.13 $ 14.85 $ 15.18 $ 12.27
..............................................................
Investment activities
Net investment income (0.03) (0.01) - -* -*
Net realized and
unrealized gain (loss) 4.50 5.00 6.07 0.04 3.21
..............................................................
Total from
investment activities 4.47 4.99 6.07 0.04 3.21
..............................................................
Distributions
Net realized gain (0.30) (0.69) (0.79) (0.37) (0.30)
..............................................................
NET ASSET VALUE
End of period $ 28.60 $ 24.43 $ 20.13 $ 14.85 $ 15.18
--------------------------------------------------------------
Ratios/Supplemental Data
Total return 18.33% 24.84% 40.95% 0.29%* 26.24%*
........................................................................................
Ratio of expenses to
average net assets 0.95% 1.04% 1.25% 1.25%* 1.25%*
........................................................................................
Ratio of net investment
income to average
net assets (0.14)% (0.11)% (0.01)% 0.02%* (0.12)%*
........................................................................................
Portfolio turnover rate 42.6% 38.1% 57.5% 48.7% 62.4%
........................................................................................
Average commission
rate paid $ 0.0515 $ 0.0531 - - -
........................................................................................
Net assets, end of period
(in millions) $ 1,839 $ 1,021 $ 264 $ 101 $ 65
........................................................................................
</TABLE>
* Excludes expenses in excess of a 1.25% voluntary expense limitation in effect
through 12/31/95.
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- ---------------------------------------------------------------------------
December 31, 1997
<TABLE>
<CAPTION>
- ------------------------
PORTFOLIO OF INVESTMENTS Shares/Par Value
- ---------------------------------------------------------------------------
In thousands
<S> <C> <C>
COMMON STOCKS 92.2%
FINANCIAL 8.4%
Insurance 3.8%
ACE Limited 285,000 $ 27,502
...........................................................................
Fairfax Financial (CAD) * 70,000 15,675
...........................................................................
PartnerRe Holdings ADR 575,000 26,666
...........................................................................
69,843
............
Financial Services 4.6%
Capital One Financial 375,000 20,320
...........................................................................
FINOVA Group 500,000 24,844
...........................................................................
Franklin Resources 275,000 23,908
...........................................................................
INMC Mortgage Holdings 700,000 16,406
...........................................................................
85,478
............
Total Financial 155,321
............
HEALTH CARE 12.1%
Pharmaceuticals 1.6%
Agouron Pharmaceuticals * 325,000 9,516
...........................................................................
ALZA (Class A) * 600,000 19,088
...........................................................................
28,604
............
Biotechnology 2.9%
Biogen * 925,000 33,705
...........................................................................
Gilead Sciences * 514,800 19,755
...........................................................................
53,460
............
Medical Instruments and Devices 2.9%
St. Jude Medical * 500,000 15,250
...........................................................................
Sybron International * 400,000 18,775
...........................................................................
United States Surgical 625,000 18,320
...........................................................................
52,345
............
Health Care Services 4.7%
Cardinal Health 215,000 16,152
...........................................................................
Covance * 1,125,000 22,360
...........................................................................
Omnicare 650,000 20,150
...........................................................................
Quorum Health Group * 853,300 22,399
...........................................................................
Vencor * 247,900 6,058
...........................................................................
87,119
............
Total Health Care 221,528
............
</TABLE>
10
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
CONSUMER 19.4%
Soft Goods Retailers 2.1%
Gymboree * 775,000 $ 21,264
................................................................................
Kohl's * 250,000 17,031
................................................................................
38,295
..............
Hard Goods Retailers 6.5%
BJs Wholesale Club * 650,000 20,394
................................................................................
Circuit City Stores 770,800 27,411
................................................................................
Costco Companies * 500,000 22,297
................................................................................
Fred Myer * 525,000 19,097
................................................................................
General Nutrition * 550,000 18,666
................................................................................
Shopko Stores * 553,800 12,045
................................................................................
119,910
..............
Consumer Non-Durables 3.6%
Culligan Water Technologies * 566,700 28,477
................................................................................
Warnaco Group (Class A) 1,225,000 38,434
................................................................................
66,911
..............
Restaurants 0.9%
Outback Steakhouse * 550,000 15,916
................................................................................
15,916
..............
Food and Beverages 1.8%
Suiza Foods * 550,000 32,759
................................................................................
32,759
..............
Entertainment 1.6%
Royal Caribbean Cruises 560,000 29,855
................................................................................
29,855
..............
Consumer Services 2.9%
Cendant * 730,717 25,118
................................................................................
La Quinta Inns 775,000 14,967
................................................................................
Stewart Enterprises 294,800 13,764
................................................................................
53,849
..............
Total Consumer 357,495
..............
TECHNOLOGY 10.2%
Computer Software 4.3%
BMC Software * 215,000 14,096
................................................................................
Intuit * 235,000 9,708
................................................................................
</TABLE>
11
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Network Associates * 466,560 $ 24,626
................................................................................
PLATINUM technology * 175,000 4,955
................................................................................
Security Dynamics Technologies * 275,000 9,848
................................................................................
Synopsys * 450,000 16,059
................................................................................
79,292
.............
Networking and Telecom Equipment 0.5%
Anixter International * 575,000 9,488
................................................................................
9,488
.............
Semiconductors & Components 3.6%
Analog Devices * 500,000 13,844
................................................................................
Maxim Integrated Products * 480,000 16,590
................................................................................
Microchip Technology * 350,000 10,522
................................................................................
PMC-Sierra * 300,000 9,356
................................................................................
Xilinx * 425,000 14,875
................................................................................
65,187
.............
E-Commerce 1.8%
Checkfree * 475,000 12,914
................................................................................
Sterling Commerce * 525,000 20,180
................................................................................
33,094
.............
Total Technology 187,061
.............
BUSINESS SERVICES 28.0%
Telecom Services 6.4%
360 Communications * 1,210,000 24,427
................................................................................
Cincinnati Bell 400,000 12,400
................................................................................
Comcast 700,000 22,072
................................................................................
Cox Communications * 660,000 26,441
................................................................................
Omnipoint * 550,000 12,822
................................................................................
Paging Network * 1,300,000 14,015
................................................................................
Vanguard Cellular * 425,000 5,432
................................................................................
117,609
.............
Computer Services 6.9%
Affiliated Computer Services * 1,225,000 32,233
................................................................................
DST Systems * 600,000 25,613
................................................................................
Galileo International 872,200 24,095
................................................................................
National Data 475,000 17,159
................................................................................
SunGard Data Systems * 881,400 27,323
................................................................................
126,423
.............
</TABLE>
12
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Distribution 5.9%
Corporate Express * 1,370,300 $ 17,685
................................................................................
Fastenal 175,000 6,727
................................................................................
Henry Schein * 150,000 5,269
................................................................................
Ikon Office Solutions 325,700 9,160
................................................................................
JP Foodservice * 944,667 34,894
................................................................................
MSC * 425,900 18,047
................................................................................
Richfood Holdings 600,000 16,950
................................................................................
108,732
.............
Media and Advertising 3.4%
ADVO * 225,000 4,388
................................................................................
Catalina Marketing * 387,600 17,926
................................................................................
Jacor Communications * 231,000 12,286
................................................................................
Outdoor Systems * 741,550 28,457
................................................................................
63,057
.............
Environmental 1.0%
USA Waste Services * 448,500 17,604
................................................................................
17,604
.............
Miscellaneous Business Services 3.3%
AccuStaff * 600,000 13,800
................................................................................
Gartner Group * 575,200 21,462
................................................................................
Interim Services * 1,000,000 25,875
................................................................................
61,137
.............
Real Estate Services 1.1%
Security Capital Group (Class B) * 600,000 19,500
................................................................................
19,500
.............
Total Business Services 514,062
.............
ENERGY 5.0%
Energy Services 4.2%
Camco International 328,200 20,902
................................................................................
Cooper Cameron * 325,000 19,825
................................................................................
Smith International * 300,200 18,425
................................................................................
Weatherford Enterra * 402,600 17,614
................................................................................
76,766
.............
</TABLE>
13
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Exploration and Production 0.8%
United Meridian * 515,900 $ 14,510
................................................................................
14,510
.............
Total Energy 91,276
.............
INDUSTRIAL 6.9%
Defense and Aerospace 1.0%
BE Aerospace * 675,000 18,077
................................................................................
18,077
.............
Automobiles and Related 0.4%
OEA 227,100 6,572
................................................................................
6,572
.............
Specialty Chemicals 0.9%
Great Lakes Chemical 375,000 16,828
................................................................................
16,828
.............
Machinery 4.6%
Danaher 475,000 29,984
................................................................................
Teleflex 607,800 22,945
................................................................................
TriMas 950,000 32,656
................................................................................
85,585
.............
Total Industrial 127,062
.............
BASIC MATERIALS 1.6%
Mining 1.6%
Battle Mountain Gold 2,550,000 14,981
................................................................................
Cambior 1,000,000 5,875
................................................................................
TVX Gold * 2,700,000 9,113
................................................................................
Total Basic Materials 29,969
.............
Miscellaneous Common Stocks 0.6% 11,419
.............
Total Common Stocks (Cost $1,335,812) 1,695,193
.............
SHORT-TERM INVESTMENTS 7.9%
Money Market Funds 7.9%
Government Reserve Investment
Fund, 5.55% #+ $ 144,738,284 144,738
................................................................................
144,738
.............
</TABLE>
14
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ----------------------------------------------------------------------------
In thousands
<S> <C> <C>
U.S. Government Obligations 0.0%
U.S. Treasury Bills, 5.02%, 2/5/98 $ 1,000,000 $ 995
.......................................................................
995
..............
Total Short-Term Investments (Cost $145,733) 145,733
..............
Total Investments in Securities
100.1% of Net Assets (Cost $1,481,545) $ 1,840,926
Other Assets Less Liabilities (2,274)
..............
NET ASSETS $ 1,838,652
--------------
</TABLE>
# Seven-day yield
+ Affiliated company
* Non-income producing
ADR American Depository Receipt
CAD Canadian dollar
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- -------------------------------------------------------------------------------
December 31, 1997
- -----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments in securities, at value
Affiliated companies (cost $144,738) $ 144,738
Other companies (cost $1,336,807) 1,696,188
............
Total investments in securities $1,840,926
Other assets 15,265
............
Total assets 1,856,191
............
Liabilities
Total liabilities 17,539
............
NET ASSETS $1,838,652
------------
Net Assets Consist of:
Accumulated net realized gain/loss - net of
distributions $ 23,060
Net unrealized gain (loss) 359,381
Paid-in-capital applicable to 64,286,306
shares of $0.01 par value capital stock
outstanding; 1,000,000,000 shares authorized 1,456,211
............
NET ASSETS $1,838,652
------------
NET ASSET VALUE PER SHARE $ 28.60
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- ------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Year
Ended
12/31/97
<S> <C>
Investment Income
Income
Interest $ 7,630
Dividend 3,917
............
Total income 11,547
............
Expenses
Investment management 9,548
Shareholder servicing 3,247
Registration 283
Prospectus and shareholder reports 256
Custody and accounting 138
Legal and audit 14
Directors 12
Miscellaneous 23
............
Total expenses 13,521
............
Net investment income (1,974)
............
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 36,097
Futures (350)
Foreign currency transactions (63)
............
Net realized gain (loss) 35,684
Change in net unrealized gain or loss on securities 210,970
............
Net realized and unrealized gain (loss) 246,654
............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 244,680
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ (1,974) $ (675)
Net realized gain (loss) 35,684 31,550
Change in net unrealized gain or loss 210,970 101,719
.......................
Increase (decrease) in net assets from operations 244,680 132,594
.......................
Distributions to shareholders
Net realized gain (19,049) (27,658)
.......................
Capital share transactions *
Shares sold 1,031,810 794,631
Distributions reinvested 18,314 26,549
Shares redeemed (458,141) (169,185)
.......................
Increase (decrease) in net assets from capital
share transactions 591,983 651,995
.......................
Net equalization - 120
.......................
Net Assets
Increase (decrease) during period 817,614 757,051
Beginning of period 1,021,038 263,987
.......................
End of period $1,838,652 $1,021,038
-----------------------
* Share information
Shares sold 39,733 35,021
Distributions reinvested 657 1,102
Shares redeemed (17,896) (7,442)
.......................
Increase (decrease) in shares outstanding 22,494 28,681
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
December 31, 1997
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Mid-Cap Growth 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 30, 1992.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company
industry; these principles may require the use of estimates by fund
management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the
valuations are made. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter
market are valued at the mean of the latest bid and asked prices. Other
equity securities are valued at a price within the limits of the latest bid
and asked prices deemed by the Board of Directors, or by persons delegated
by the Board, best to reflect fair value.
Short-term debt securities are valued at amortized cost which, when
combined with accrued interest, approximates fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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.
Affiliated Companies As defined by the Investment Company Act of 1940, an
affiliated company is one in which the fund owns at least 5% of the
outstanding voting securities.
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
19
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
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 and U.S.
government securities, aggregated $1,062,122,000 and $545,431,000,
respectively, for the year ended December 31, 1997. Purchases of U.S.
government securities aggregated $30,163,000 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 $1,991,000
Undistributed net realized gain 66,000
Paid-in-capital (2,057,000)
20
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- -------------------------------------------------------------------------------
At December 31, 1997, the aggregate cost of investments for federal
income tax and financial reporting purposes was $1,481,545,000, and net
unrealized gain aggregated $359,381,000, of which $416,397,000 related to
appreciated investments and $57,016,000 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 $1,015,000 was payable at December 31, 1997. The fee is
computed daily and paid monthly, and consists of an individual fund fee
equal to 0.25% 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.
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 $2,652,000 for the year ended December 31, 1997, of which
$266,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available
to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the year ended
December 31, 1997, totaled $2,833,000 and are reflected as interest income
in the accompanying Statement of Operations.
21
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Mid-Cap Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including portfolio of investments, 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 Growth Fund, Inc. (the "Fund") at December 31, 1997, and the
results of its operations, the changes in its net assets and the financial
highlights for each of the fiscal periods presented, 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
22
<PAGE>
T. ROWE PRICE MID-CAP GROWTH FUND
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
. $877,000 from short-term capital gains, and
. $18,172,000 from long-term capital gains; of which $3,205,000 was subject
to the 20% rate gains category.
For corporate shareholders, 100% of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
- --------------------------------------------------------------------------------
23
<PAGE>
T. ROWE PRICE DISCOUNT BROKERAGE
- -------------------------------------------------------------------------------
DISCOUNT BROKERAGE
A Division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC
This low-cost service gives you the opportunity to easily
consolidate all your investments with one company. Through T. Rowe
Price Discount Brokerage, you can buy and sell individual
securities--stocks, bonds, options, and others--at considerable
commission savings over full-service brokers.* We also provide a
wide range of services, including:
Automated Telephone and Computer Services You can enter trades,
access quotes, and review account information 24 hours a day, seven
days a week. Any trades executed through these programs save you an
additional 10% on commissions.**
Investor Information A variety of informative reports, such as our
Brokerage Insights series, S&P Market Month newsletter, and select
stock reports, can help you better evaluate economic trends and
investment opportunities.
Dividend Reinvestment Service Virtually all stocks held in customer
accounts are eligible for this service, free of charge.
*Based on a February 1997 telephone survey that compared our
commission rates on stock transactions of various sizes with those
of other full-service and discount brokerages. Commission rates
will vary based on size and nature of trades. Services vary by
firm. For additional information concerning our commission rates
and services, call 1-800-638-5660.
**Discount applies to our current commission schedule; subject to our
$35 minimum commission.
24
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone Shareholder service representatives are available from 8
a.m. to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5
p.m. ET on weekends. Call 1-800-225-5132 to speak directly with a
representative who will be able to assist you with your accounts.
In Person Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts.
You can also drop off applications or obtain prospectuses and other
literature at these centers.
AUTOMATED 24-HOUR SERVICES
Tele*Access(R) Call 1-800-638-2587 to obtain information such as
account balance, date and amount of your last transaction, latest
dividend payment, fund prices, and yields. Additionally, you have
the ability to request prospectuses, statements, and account and tax
forms; to reorder checks; and to initiate purchase, redemption, and
exchange orders for identically registered accounts.
T. Rowe Price OnLine Through a personal computer via dial-up modem,
you can replicate all the services available on Tele*Access plus
conduct transactions in your Discount Brokerage and Variable Annuity
accounts.
ACCOUNT SERVICES
Checking Write checks for $500 or more on any money market and most
bond fund accounts (except the High Yield and Emerging Markets Bond
Funds).
Automatic Investing Build your account over time by investing
directly from your bank account or paycheck with Automatic Asset
Builder. Additionally, Automatic Exchange enables you to set up
systematic investments from one fund account into another, such as
from a money fund into a stock fund. A $50 minimum makes it easy to
get started.
25
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Automatic Withdrawal If you need money from your fund account on a regular
basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
DISCOUNT BROKERAGE*
Investments Available You can trade stocks, bonds, options, precious metals,
and other securities at a savings over regular commission rates.
To Open an Account Call a shareholder service representative for more
information.
INVESTMENT INFORMATION
Combined Statement A comprehensive overview of your T. Rowe Price accounts is
provided. The summary page gives you earnings by tax category, provides total
portfolio value, and lists your investments by type--stock, bond, and money
market. Detail pages itemize account transactions by fund.
Shareholder Reports Portfolio managers review the performance of the funds in
plain language and discuss T. Rowe Price's economic outlook.
T. Rowe Price Report This is a quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Performance Update This quarterly report reviews recent market developments and
provides comprehensive performance information for every T. Rowe Price fund.
Insights This library of information includes reports on mutual fund tax
issues, investment strategies, and financial markets.
Detailed Investment Guides Our widely acclaimed Asset Mix Worksheet, College
Planning Kit, Diversifying Overseas: A Guide to International Investing,
Retirees Financial Guide, and Retirement Planning Kit (also available on disk
for PC use) can help you determine and reach your investment goals.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
26
<PAGE>
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 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 Insured 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 Insured Intermediate Bond
Tax-free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Government 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
* Formerly the Equity Index Fund.
** Formerly the closed-end New Age Media Fund. Converted to open-end status
on 7/28/97.
*** Closed to new investors.
+ Neither the funds nor their share prices are guaranteed by the U.S.
government.
Please call for a prospectus. Read it carefully before you invest or send money.
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.
27
<PAGE>
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(R):
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 Growth 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
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor.
