Annual Report
Value Fund
December 31, 1996
T. Rowe Price
Report Highlights
o The stock market and your fund were strong last year,
reflecting good corporate earnings, a generally favorable
economic and interest rate environment, and heavy demand for
stocks.
o The fund returned 12.90% and 28.51% for the 6- and 12-month
periods, respectively, far exceeding the S&P 500 and the
Lipper average.
o Fund strength was due primarily to good stock selection in
the financial sector and to acquisition activity affecting
holdings.
o We recently initiated positions in several stocks that
appeared undervalued, creating opportunities for potential
price appreciation over time.
o We are cautious about stock market prospects for 1997 but
still expect to find attractive investments for
shareholders.
Fellow Shareholders
The equity market and your fund were strong in the second half of
1996, reflecting continued good corporate earnings, a generally
favorable economic and interest rate environment, and heavy
investor demand. The postelection rally was particularly notable
in light of how little the political scene actually changed. For
the year as a whole, equity returns were impressive, coming as
they did on the heels of considerable strength in 1995. Stocks
have now provided six consecutive years of positive returns with
no interim corrections of 10% or more.
Performance Comparison
Periods Ended 12/31/96 6 Months 12 Months
_________________________________________________________
Value Fund 12.90% 28.51%
S&P 500 11.68 22.96
Lipper Growth & Income
Funds Average 10.57 20.78
As shown in the table, your fund's returns were robust during the
6- and 12-month periods ended December 31, 1996, exceeding those
of the unmanaged Standard & Poor's 500 Stock Index and Lipper
Growth & Income Funds Average. Fund strength was due primarily to
stock selection in the financial services area and to merger and
acquisition activity affecting several fund holdings.
YEAR-END DISTRIBUTIONS
Your Board of Directors declared a fourth quarter income dividend
of $0.06 per share. At the same time, a $0.78 per share capital
gain distribution was declared, of which $0.68 represented
short-term gains and $0.10 long-term. These distributions were
paid on December 30 to shareholders of record on December 26. You
should already have received your check or statement reflecting
this activity, as well as form 1099-DIV summarizing this
information for 1996 tax purposes.
PORTFOLIO REVIEW
As mentioned, your fund performed particularly well in 1996 due
to two primary factors. First, a number of investments made over
the last two years in the financial sector continued to pay off
handsomely. Many of our holdings in the bank, insurance, and
brokerage industries did very well throughout the year.
Second, 1996 will be known as a year of substantial corporate
consolidation. There was a tremendous amount of merger and
acquisition activity, and a number of these transactions involved
portfolio companies. We began 1996 with a large investment in
Helene Curtis, which was acquired at a substantial premium to our
cost in the first part of 1996. We ended the year with announced
acquisitions of other holdings, including Conrail, the subject of
competing bids from CSX and Norfolk Southern, and Alexander &
Alexander, which is being acquired by Aon. Over the year, your
fund held investments in half a dozen other companies that were
acquired at substantially higher-than-market prices.
Our investment approach focuses on companies we consider
undervalued in terms of price-to-earnings, price-to-cash flow,
price-to-asset value, or some combination of these measures. We
believe investments in such companies provide shareholders with
an attractive combination of relatively low risk and reasonable
return potential. Our major risk is not that we will lose a large
amount on a particular investment, but that our positions may not
rebound as much and as quickly as we might hope.
Chart 1 - Sector Diversification
Throughout the year, we bought several stocks that look
attractive based on a variety of valuation measures. Many
companies have been struggling for various reasons, and some have
underperformed the broad stock market averages. We take interest
in those with a discernable pattern of undervaluation and some
reasonable expectation that investor perception of their
potential can change for the better. We experienced almost
instant gratification with Alexander & Alexander, whose stock had
languished for many years and appeared underpriced before Aon
announced its acquisition plan at a price substantially above our
cost.
In addition, we made significant investments during the past six
months in companies such as C.R. Bard, ITT, John Nuveen,
Mercantile Stores, Tandy, Whitman, and Santa Fe Pacific Gold. All
have been suffering from somewhat disappointing performance,
creating interesting valuation opportunities. Sante Fe Pacific
Gold is another example of an undervalued company that became the
focus of two competing acquisition offers late in the year.
Regarding positions eliminated from the portfolio, most stocks
sold (see the Major Portfolio Changes table following this
letter) had risen to levels that met our original price targets.
SUMMARY AND OUTLOOK
The last two years were exceptionally profitable for equity
investors, who enjoyed attractive returns in a nearly perfect
environment for stocks. It is difficult to see how things can get
much better; at the same time, it is also difficult to see
anything on the horizon that would cause this environment to
change for the worse. Nonetheless, we are sensitive to the
lessons of history, particularly the tendency of the equity
market to pause for breath after consecutive powerful years like
the past two.
Over the last few years, stock prices have appreciated at a much
faster rate than the earnings and dividends of the underlying
companies. Because of this "delinkage," we expect more subdued
equity performance in 1997. We do not have a bearish outlook for
the year ahead but simply want to raise the possibility that it
may not live up to many investors' high expectations for a
continuation of recent trends. Despite this cautionary tone, we
continue to believe we will find interesting investment
opportunities during the year.
As always, we appreciate your continued confidence and support.
Respectfully submitted,
Brian C. Rogers
President and Chairman of the Investment Advisory Committee
January 17, 1997
Sticking To Your Game Plan
Chart 2 - Time Reduces Volatility of Market Returns
In our report to you one year ago, we mentioned the possibility
of a modest decline in stock prices. In fact, from May to July
1996, the broad market (as measured by the Standard & Poor's 500
Stock Index) fell around 7%. However, the bull market resumed its
charge to post a robust 23% gain for the year.
Some believe the market is poised for a significant downturn. We
do not expect a major drop in stock prices in 1997, although
another modest pullback is possible. On balance, we expect stocks
to advance at a much slower pace.
How should you prepare for a potential market pullback? As
always, our advice is to diversify your investments and focus on
the long term. If you've implemented a sound investment strategy,
stay the course. Stocks have historically overcome periods of
volatility to provide better returns than most other investments.
Market corrections can even have a silver lining because they
result in good buying opportunities.
Furthermore, the volatility of stock market returns has
diminished significantly over longer time frames. The chart shows
the best and worst annualized returns on stocks over various
rolling time periods between 1950 and 1996. (For instance, there
were 37 rolling 10-year periods: 1950-1960, 1951-1961, etc.)
Investors who held stocks for only one year could have had as
much as a 52.6% gain, or as little as a 26.5% loss - a spread of
79 percentage points. However, investors who held stocks for
10-year periods or longer always overcame interim volatility to
post gains for the entire period.
In addition, a well-diversified portfolio can weather volatility
better than a more concentrated portfolio over the long term and
particularly during market corrections. For example, during last
summer's correction, small-company stocks fell nearly 16% while
large-company issues dropped 7.3%. However, a portfolio
diversified among large U.S. companies (30% of assets), small
U.S. companies (15%), foreign companies (15%), intermediate-term
Treasury bonds (30%), and Treasury bills (10%) would have lost a
smaller 5.2% of its value.1
Above all, remember that investing is a long-distance race, not a
sprint.
1 Ned Davis Research.
T. Rowe Price Value Fund
Portfolio Highlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/96
____________________________________________________________
ITT 2.0%
Santa Fe Pacific Gold 1.9
Mercantile Stores 1.7
Great Lakes Chemical 1.7
FMC 1.6
_________________________________________________________________
______
Mid Ocean Limited 1.6
Citizens Bancorp Maryland 1.6
Witco 1.5
Alexander & Alexander 1.5
Whitman 1.5
_____________________________________________________________
C.R. Bard 1.4
Tandy 1.3
Time Warner 1.3
Texas Instruments 1.3
John Nuveen 1.3
_____________________________________________________________
ACE Limited 1.2
Amerada Hess 1.2
Tomkins 1.2
Signet Banking 1.2
Chris-Craft 1.2
____________________________________________________________
USF&G 1.2
Gaylord Entertainment 1.2
Boise Cascade 1.1
AT&T 1.1
H&R Block 1.1
___________________________________________________________
Total 34.9%
T. Rowe Price Value Fund
Portfolio Highlights
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 12/31/1996
Ten Largest Purchases Ten Largest Sales
____________________________________________________________
ITT* Huhtamaki Oy**
Mercantile Stores* Reebok**
Witco* American States Financial**
Santa Fe Pacific Gold Salomon**
C.R. Bard* Conrail
Alexander & Alexander* James River**
John Nuveen* Amtrol**
Whitman Commercial Intertech**
Mid Ocean Limited* Shopko Stores**
Tandy* Trinova
*Position added.
**Position eliminated.
T. Rowe Price Value Fund
Performance Comparison
This chart shows the value of a hypothetical $10,000 investment
in the fund over the past 10 fiscal year periods or since
inception (for funds lacking 10-year records). The result is
compared with a broad-based average or index. The index return
does not reflect expenses, which have been deducted from the
fund's return.
Chart 3 - Value Fund
Average Annual Compound Total Return
This table shows how the fund would have performed each year if
its actual (or cumulative) returns for the periods shown had been
earned at a constant rate.
Since Inception
Periods Ended 12/31/96 1 Year Inception Date
____________________________________________________________
Value Fund 28.51% 31.52% 09/30/94
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 Value Fund
Financial Highlights
For a share outstanding throughout each period
Year 9/30/94
Ended to
12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 13.21 $10.24 $ 10.00
Investment activities
Net investment income 0.27* 0.27* 0.08*
Net realized and
unrealized gain (loss) 3.45 3.78 0.23
Total from
investment activities 3.72 4.05 0.31
Distributions
Net investment income (0.26) (0.26) (0.07)
Net realized gain (0.91) (0.82) -
Total distributions (1.17) (1.08) (0.07)
NET ASSET VALUE
End of period $ 15.76 $13.21 $ 10.24
________________________________________
Ratios/Supplemental Data
Total return 28.51%* 39.85%* 3.10%*
Ratio of expenses to
average net assets 1.10%* 1.10%* 1.10%*!
Ratio of net investment
income to average
net assets 1.71%* 2.03%* 3.16%*!
Portfolio turnover rate 68.0% 89.7% 30.8%!
Average commission
rate paid $0.0691 - -
Net assets, end of period
(in thousands) $197,846 $46,582 $ 8,850
* Excludes expenses in excess of a 1.10% voluntary expense
limitation in effect through 12/31/96.
! Annualized.
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Value Fund
______________________________________________________________
December 31, 1996
Statement of Net Assets Shares/Par Value
______________________________________________________________
In thousands
Common Stocks 89.5%
FINANCIAL 21.5%
Bank and Trust 7.2%
Bankers Trust New York 16,000 $ 1,380
Citizens Bancorp Maryland 50,000 3,119
Dime Bancorp * 125,000 1,844
First Mariner Bancorp * 60,000 802
Greenpoint Financial 40,000 1,890
Mellon Bank 30,000 2,130
Provident Bankshares 17,850 702
Signet Banking 75,000 2,306
14,173
Insurance 11.9%
ACE Limited 40,000 2,405
Alexander & Alexander 175,000 3,041
FBL Financial Group 60,000 1,493
Harleysville Group 60,000 1,815
Hilb, Rogal and Hamilton 31,700 420
Horace Mann Educators 35,000 1,413
LaSalle Re Holdings 57,000 1,653
Loews 20,000 1,885
Mid Ocean Limited 60,000 3,150
USF&G 110,000 2,296
W.R. Berkley 40,000 2,042
Willis-Corroon ADR 175,000 2,013
23,626
Financial Services 2.4%
H&R Block 75,000 2,175
John Nuveen 95,000 2,517
4,692
Total Financial 42,491
UTILITIES 5.9%
Telephone Services 2.0%
AT&T 50,000 2,175
Telephone and Data Systems 50,000 1,812
3,987
Electric Utilities 3.9%
Centerior Energy 150,000 $ 1,612
New York State Electric & Gas 70,000 1,514
Ohio Edison 70,000 1,593
PECO Energy 55,000 1,389
Unicom 60,000 1,627
7,735
Total Utilities 11,722
CONSUMER NONDURABLES 13.2%
Beverages 0.9%
Brown-Forman (Class B) 40,000 1,830
1,830
Food Processing 3.2%
McCormick 85,000 2,003
Quaker Oats 34,300 1,307
Whitman 130,000 2,974
6,284
Hospital Supplies/Hospital Management 2.5%
Allergan 60,000 2,138
C.R. Bard 100,000 2,800
4,938
Pharmaceuticals 0.4%
Genentech * 15,000 804
804
Health Care Services 0.7%
Apria Healthcare * 80,000 1,500
1,500
Miscellaneous Consumer Products 5.5%
American Brands 40,000 1,985
Dial 100,000 1,475
National Presto 50,000 1,869
Philips N.V. ADR 50,000 2,000
Seagram 30,000 1,162
Tomkins (GBP) 500,000 2,313
10,804
Total Consumer Nondurables 26,160
CONSUMER SERVICES 14.9%
General Merchandisers 2.8%
Fred Meyer * 25,000 $ 888
Mercantile Stores 70,000 3,456
Wal-Mart 50,000 1,144
5,488
Specialty Merchandisers 1.9%
Fleming Companies 50,000 863
Lillian Vernon 120,000 1,470
Nordstrom 40,000 1,417
3,750
Entertainment and Leisure 3.0%
Host Marriott * 40,000 640
Houghton Mifflin 25,000 1,415
ITT * 90,000 3,904
5,959
Media and Communications 7.2%
Chris-Craft * 55,000 2,303
Comcast (Class A) 100,000 1,769
Dun & Bradstreet 75,000 1,781
Gaylord Entertainment 100,000 2,287
New York Times (Class A) 50,000 1,900
Tele-Communications (Class A) * 120,000 1,568
Time Warner 70,000 2,625
14,233
Total Consumer Services 29,430
CONSUMER CYCLICALS 2.4%
Miscellaneous Consumer Durables 2.4%
Polaroid 50,000 2,175
Tandy 60,000 2,640
Total Consumer Cyclicals 4,815
TECHNOLOGY 3.1%
Electronic Components 1.3%
Texas Instruments 40,000 2,550
2,550
Electronic Systems 0.9%
BW/IP (Class A) 110,000 $ 1,815
1,815
Aerospace and Defense 0.9%
Allegheny Teledyne 80,000 1,840
1,840
Total Technology 6,205
CAPITAL EQUIPMENT 5.2%
Electrical Equipment 1.8%
ESCO Electronics 52,900 529
Exide 50,000 1,150
Westinghouse 90,000 1,789
3,468
Machinery 3.4%
Coltec Industries * 90,000 1,699
Farrel 25,000 66
FMC * 45,000 3,155
TRINOVA 50,000 1,819
6,739
Total Capital Equipment 10,207
BUSINESS SERVICES AND
TRANSPORTATION 3.2%
Computer Service and Software 0.8%
Broderbund Software * 25,000 742
Intuit * 28,900 918
1,660
Transportation Services 1.6%
Caliber Systems 100,000 1,925
Ryder System 40,000 1,125
3,050
Railroads 0.8%
Conrail 15,310 1,525
1,525
Total Business Services and Transportation
6,235
ENERGY 5.5%
Energy Services 1.5%
Witco 100,000 $ 3,050
3,050
Integrated Petroleum - Domestic 3.0%
Amerada Hess 40,000 2,315
Atlantic Richfield 8,000 1,060
Union Texas Petroleum 80,000 1,790
USX-Marathon 30,000 717
5,882
Integrated Petroleum - International 1.0%
Repsol ADR 50,000 1,906
1,906
Total Energy 10,838
PROCESS INDUSTRIES 9.1%
Specialty Chemicals 3.5%
Georgia Gulf 60,000 1,613
Great Lakes Chemical 70,000 3,272
Petrolite 44,100 2,073
6,958
Paper and Paper Products 2.0%
Champion International 45,000 1,946
Consolidated Papers 40,000 1,965
3,911
Forest Products 3.6%
Boise Cascade 70,000 2,222
Louisiana Pacific 80,000 1,690
Potlatch 30,000 1,290
Rayonier 50,000 1,919
7,121
Total Process Industries 17,990
BASIC MATERIALS 5.3%
Metals 2.2%
Cambior 100,000 1,463
Lukens 50,000 1,006
Reynolds Metals $ 30,000 $ 1,691
Rustenburg Platinum (ZAR) 21,000 287
4,447
Mining 3.1%
Highlands Gold (AUD) 113,340 67
Homestake Mining 125,000 1,781
LONRHO (GBP) 200,000 428
Santa Fe Pacific Gold 250,000 3,844
6,120
Total Basic Materials 10,567
Miscellaneous Common Stocks 0.2% 464
Total Common Stocks (Cost $160,086) 177,124
Short-Term Investments 10.0%
Commercial Paper 10.0%
Asset Securitization Cooperative,
4(2), 5.30%, 2/20/97 $ 2,000,000 1,985
Caterpillar Financial Services,
5.42%, 2/20/97 1,000,000 993
Delaware Funding, 4(2), 5.37%, 2/3/97 2,000,000
1,990
Finova Capital, 5.36%, 2/10/97 2,000,000 1,988
Investments in Commercial Paper
through a joint account
6.75% - 7.10%, 1/2/97 10,809,305 10,807
Unifunding, 5.44%, 1/6/97 2,000,000 1,999
Total Short-Term Investments
(Cost $19,762) 19,762
Total Investments in Securities
99.5% of Net Assets (Cost $179,848) $ 196,886
Other Assets Less Liabilities 960
NET ASSETS $ 197,846
__________
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions $ 2,818
Net unrealized gain (loss) 17,037
Paid-in-capital applicable to
12,553,597 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares authorized 177,991
NET ASSETS $ 197,846
__________
NET ASSET VALUE PER SHARE $ 15.76
__________
* Non-income producing
4(2) Commercial paper sold within terms of a
private placement memorandum, exempt
from registration under section 4.2 of the
Securities Act of 1933, as amended, and
may be sold only to dealers in that program
or other "accredited investors."
AUD Australian dollar
GBP British sterling
ZAR South African rand
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Value Fund
Statement of Operations
______________________________________________________________
In thousands
Year
Ended
12/31/96
Investment Income
Income
Dividend $ 2,655
Interest 592
Total income 3,247
Expenses
Investment management 748
Shareholder servicing 270
Custody and accounting 102
Registration 84
Prospectus and shareholder reports 29
Legal and audit 14
Directors 8
Miscellaneous 15
Total expenses 1,270
Net investment income 1,977
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Securities 12,141
Foreign currency transactions (10)
Net realized gain (loss) 12,131
Change in net unrealized gain or loss on
Securities 13,511
Other assets and liabilities
denominated in foreign currencies (1)
Change in net unrealized gain or loss 13,510
Net realized and unrealized gain (loss) 25,641
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 27,618
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Value Fund
______________________________________________________________
Statement of Changes in Net Assets
______________________________________________________________
In thousands
Year
Ended
12/31/96 12/31/95
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,977 $ 523
Net realized gain (loss) 12,131 3,375
Change in net unrealized
gain or loss 13,510 3,452
Increase (decrease) in net
assets from operations 27,618 7,350
Distributions to shareholders
Net investment income (2,279) (572)
Net realized gain (9,734) (2,619)
Decrease in net assets
from distributions (12,013) (3,191)
Capital share transactions*
Shares sold 163,452 39,440
Distributions reinvested 11,582 3,127
Shares redeemed (39,776) (9,076)
Increase (decrease) in net
assets from capital
share transactions 135,258 33,491
Net equalization 401 82
Net Assets
Increase (decrease)
during period 151,264 37,732
Beginning of period 46,582 8,850
End of period $197,846 $46,582
______________________
*Share information
Shares sold 10,964 3,153
Distributions reinvested 744 238
Shares redeemed (2,680) (729)
Increase (decrease)
in shares outstanding 9,028 2,662
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Value Fund
______________________________________________________________
December 31, 1996
Notes to Financial Statements
T. Rowe Price Value Fund
Note 1 - Significant Accounting Policies
T. Rowe Price 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
September 30, 1994.
Valuation Equity securities listed or regularly traded on a
securities exchange are valued at the last quoted sales price at
the time 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 their amortized cost
which, when combined with accrued interest, approximates fair
value.
For purposes of determining the fund's net asset value per share,
the U.S. dollar value of all assets and liabilities initially
expressed in foreign currencies is determined by using the mean
of the bid and offer prices of such currencies against U.S.
dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures
are inappropriate or are deemed not to reflect fair value are
stated at fair value as determined in good faith by or under the
supervision of the officers of the fund, as authorized by the
Board of Directors.
Currency Translation Assets and liabilities are translated into
U.S. dollars at the prevailing exchange rate at the end of the
reporting period. Purchases and sales of securities and income
and expenses are translated into U.S. dollars at the prevailing
exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such
gains and losses.
Premiums and Discounts Premiums and discounts on debt securities
are amortized for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis.
Investment transactions are accounted for on the trade date.
Realized gains and losses are reported on the identified cost
basis. Dividend income and distributions to shareholders are
recorded by the fund on the ex-dividend date. Income and capital
gain distributions are determined in accordance with federal
income tax regulations and may differ from those determined in
accordance with generally accepted accounting principles. The
fund follows the practice of equalization under which
undistributed net investment income per share is unaffected by
fund shares sold or redeemed.
Note 2 - Investment Transactions
Commercial Paper Joint Account The fund, and other affiliated
funds, may transfer uninvested cash into a commercial paper joint
account, the daily aggregate balance of which is invested in
high-grade commercial paper. All securities purchased by the
joint account satisfy the fund's criteria as to quality, yield,
and liquidity.
Other Purchases and sales of portfolio securities, other than
short-term securities, aggregated $181,600,000 and $72,307,000,
respectively, for the year ended December 31, 1996.
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, 1996. The results of operations and
net assets were not affected by the reclassifications.
____________________________________________________________
Undistributed net investment income $ (99,000)
Undistributed net realized gain (292,000)
Paid-in-capital 391,000
At December 31, 1996, the aggregate cost of investments for
federal income tax and financial reporting purposes was
$179,848,000, and net unrealized gain aggregated $17,038,000, of
which $20,741,000 related to appreciated investments and
$3,703,000 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 $119,000 was payable at
December 31, 1996. 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
0.305% for assets in excess of $50 billion. At December 31, 1996,
and for the year then ended, the effective annual group fee rate
was 0.33%. The fund pays a pro-rata share of the group fee based
on the ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the
manager is required to bear any expenses through December 31,
1996, which would cause the fund's ratio of expenses to average
net assets to exceed 1.10%. Thereafter, through December 31,
1998, the fund is required to reimburse the manager for these
expenses, provided that average net assets have grown or expenses
have declined sufficiently to allow reimbursement without causing
the fund's ratio of expenses to average net assets to exceed
1.10%. Pursuant to this agreement, $35,000 of management fees
were not accrued by the fund for the year ended December 31,
1996. Additionally, $202,000 of 1994-1995 unaccrued fees and
expenses remain subject to reimbursement through December 31,
1998.
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 $259,000 for the year
ended December 31, 1996, of which $28,000 was payable at
period-end.
T. Rowe Price Value Fund
______________________________________________________________
Report of Independent Accountants
______________________________________________________________
To the Shareholders and Board of Directors of
T. Rowe Price Value Fund, Inc.
We have audited the accompanying statement of net assets of T.
Rowe Price Value Fund, Inc. as of December 31, 1996, and the
related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in
the period then ended and the financial highlights for each of
the two years in the period then ended and for the period
September 30, 1994 (commencement of operations) to December 31,
1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of
investments owned as of December 31, 1996, by correspondence with
the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of T. Rowe Price Value Fund, Inc. as of
December 31, 1996, the results of its operations, the changes in
its net assets and financial highlights for each of the
respective periods stated in the first paragraph, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 20, 1997
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
625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://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 Value Fund.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor
RPRTVAL 12/31/96
Chart 1 - Sector Diversification - Sector Diversification pie
chart showing Financial 21%, Consumer Services 15%, Consumer
Nondurables 13%, Process Industries 9%, Energy 5%, Utilities 6%,
All Other 21%, Reserves 10%.
Chart 2 - Time Reduces Volatility of Market Returns - An 8-bar
chart showing best and worst annualized total returns of stocks
for various rolling time periods between 1950 and 1996.
Chart 3 - Value Fund - SEC Graph: a line chart showing the
cumulative growth of $10,000 invested in the Value Fund from
inception compared with $10,000 invested in a broad-based index
or average over the same period.
