<PAGE>
Annual Report
Value
Fund
-----------------
December 31, 1997
-----------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
-----------------------------------------------------------------------------
Value Fund
. Stocks posted the third consecutive year of more than 20% returns, fueled by
strong corporate earnings, low inflation, and declining interest rates.
. Your fund returned 10.30% and 29.25% for the 6 and 12 months ended December
31, 1997, respectively, ahead of the Lipper average for both periods but
trailing the broad market.
. Performance benefited from takeover targets such as ITT and from the shares
of other companies we had bought at attractive valuations.
. We will continue to seek out appealing opportunities in what is likely to be
a more challenging investment environment in 1998.
<PAGE>
FELLOW SHAREHOLDERS
The equity market performed well in 1997 as good corporate earnings results,
continued low inflation, and a supportive interest rate environment provided
ample fuel for the advance. The performance of stocks in the second half was
particularly impressive in light of the market's October jitters and concern
over the volatility of the Asian markets.
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 12/31/97 6 Months 12 Months
- ------------------------------------------------------------------------------
<S> <C> <C>
Value Fund 10.30% 29.25%
..............................................................................
S&P 500 10.58 33.36
..............................................................................
Lipper Growth & Income Funds Average 9.93 27.14
..............................................................................
</TABLE>
Your fund performed well over the last six months, as results slightly trailed
the unmanaged Standard & Poor's 500 Stock Index and exceeded the Lipper Growth &
Income Funds Average. For the year as a whole, your fund again surpassed the
Lipper average and lagged the broad market, a not uncommon pattern for
conservative funds like this one in powerful years such as 1997. Your fund
celebrated its third anniversary in September and has generated solid returns
since inception.
Equity returns were notably impressive coming on the heels of considerable
market strength in 1995 and 1996. The 1995-1997 period, in fact, is the first
time in modern history that stock market returns have exceeded 20% in three
consecutive years.
YEAR-END DISTRIBUTIONS
Your Board of Directors declared a fourth quarter income dividend of $0.05 per
share and a $1.65 per share capital gain distribution, of which $1.23
represented short-term gains and $0.42 long-term gains. These distributions were
paid on December 30 to shareholders of record on December 26. You should already
have received a check or statement reflecting this activity as well as Form
1099-DIV, which provides important information for 1997 tax purposes.
1
<PAGE>
PORTFOLIO REVIEW
The past year was characterized by tremendous equity market volatility. Stocks
struggled in the first quarter, particularly in the small-capitalization sector,
then rebounded sharply in the second and third quarters. The fourth quarter
returned to a pattern of mixed performance as weakness in October, culminating
with the 554-point decline in the Dow Jones Industrial Average on October 27,
was more than offset by steady gains in November and December. In this volatile
environment, our approach was to tune out as much short-term noise as possible
by focusing our efforts on identifying reasonably valued investment
opportunities.
- ----------------------
SECTOR DIVERSIFICATION
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Financial 16%
Consumer Services 11%
Consumer Nondurables 23%
Process Industries 7%
Basic Materials 2%
Capital Equipment 3%
Consumer Cyclicals 4%
All Others 34%
</TABLE>
We emphasize investments in companies we determine to be undervalued in terms of
price/earnings, price/cash flow, and price/asset ratios, replacement value
calculations, or a range of other analytical frameworks. Many of our holdings
are contrarian in nature, since we purchase shares of companies that have been
out of favor and priced accordingly in the marketplace. We believe companies
meeting our criteria provide an attractive combination of limited downside risk
and reasonable upside potential.
In the second half of the year, we initiated positions in several stocks
highlighted in the Major Portfolio Changes table following this letter. They
included United States Surgical, a leading manufacturer of medical and surgical
products; Loews, a shareholder-oriented conglomerate with a large property
casualty insurance business; AlliedSignal, a leading producer of industrial,
automotive, and aerospace products; and Waste Management, the largest waste
disposal company. These stocks have been lagging the powerful surge of the
broad stock market, and investor expectations for them have been low, resulting
in attractive valuations.
Among companies eliminated from the portfolio, one of the most notable was ITT,
the fund's largest holding as we entered 1997. This
2
<PAGE>
became an extremely successful investment as a bidding war for the company
unfolded between Hilton and Starwood Lodging, and we were able to sell our
shares at a substantial premium to your fund's cost. We also eliminated
companies such as GM, Outback Steakhouse, and Corporate Express after strong
price appreciation resulted in less attractive valuations.
SUMMARY AND OUTLOOK
The equity market has provided investors with three unprecedented years of
prosperity, culminating in the gains of the last six months. As prices have
advanced, the market's valuation appeal and near-term potential for further
appreciation have diminished. We question how long the "delinkage" between the
long-term rate of corporate earnings and dividend growth on one hand, and the
more rapid advance of security prices on the other, can continue.
The volatility we experienced in the early days of 1998 is a reminder that
investing entails risk as well as the pursuit of positive returns. We do not
manage your fund with any overall stock market forecast or top-down strategy to
guide us. Instead, we evaluate each investment on its own merits and build the
portfolio one company at a time. Accordingly, we still expect to uncover
attractive investment opportunities in what is likely to be a more challenging
environment in 1998.
As always, we appreciate your continued confidence and support.
Respectfully submitted,
/s/ Brian C. Rogers
Brian C. Rogers
President and Chairman of the Investment Advisory Committee
January 20, 1998
3
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
(Listed in descending order of size)
6 Months Ended 12/31/97
Ten Largest Purchases Ten Largest Sales
- --------------------------------------------------------------------------------
United States Surgical * ITT **
.................................. ...................................
Tupperware * GM **
.................................. ...................................
Inco * TriMas **
.................................. ...................................
Loews * FMC
.................................. ...................................
Aetna * Toys "R" Us **
.................................. ...................................
Hilton * Outback Steakhouse **
.................................. ...................................
AlliedSignal * Time Warner **
.................................. ...................................
Union Carbide * Aeroquip-Vickers **
.................................. ...................................
Waste Management * Corporate Express **
.................................. ...................................
PartnerRe Holdings * ADVANTA **
.................................. ...................................
* Positions added
** Positions eliminated
4
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
- --------------------------------------------------------------------------------
<S> <C>
First Union 1.6%
................................................................................
Loews 1.6
................................................................................
Tupperware 1.5
................................................................................
Amerada Hess 1.5
................................................................................
Valassis Communications 1.5
- --------------------------------------------------------------------------------
United States Surgical 1.5
................................................................................
Aetna 1.4
................................................................................
AT&T 1.4
................................................................................
RJR Nabisco 1.4
................................................................................
Hilton 1.4
- --------------------------------------------------------------------------------
Viacom 1.3
................................................................................
Hasbro 1.3
................................................................................
Willis-Corroon 1.3
................................................................................
PartnerRe Holdings 1.3
................................................................................
Owens Corning 1.2
- --------------------------------------------------------------------------------
AlliedSignal 1.2
................................................................................
Great Lakes Chemical 1.2
................................................................................
Amgen 1.2
................................................................................
Union Carbide 1.2
................................................................................
Inco 1.2
- --------------------------------------------------------------------------------
Mellon Bank 1.2
................................................................................
EXEL 1.2
................................................................................
Intuit 1.1
................................................................................
Waste Management 1.1
................................................................................
McCormick 1.1
- --------------------------------------------------------------------------------
Total 32.9%
</TABLE>
5
<PAGE>
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.
Value Fund
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P 500 Index Value Fund
------------- ----------
<S> <C> <C>
9/30/94 10,000 10,000
Dec-94 9,998 10,310
Dec-95 13,756 14,419
Dec-96 16,914 18,529
Dec-97 22,557 23,948
</TABLE>
- ------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how the fund would have performed if its actual (or cumulative)
returns for the periods shown had been earned at a constant rate each year.
<TABLE>
<CAPTION>
Since Inception
Periods Ended 12/31/97 1 Year 3 Years Inception Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Value Fund 29.25% 32.43% 30.81% 9/30/94
................................................................................
</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.
6
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 9/30/94
Ended Through
12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 15.76 $ 13.21 $ 10.24 $ 10.00
...................................................
Investment activities
Net investment income 0.21 0.27* 0.27* 0.08*
Net realized and
unrealized gain (loss) 4.31 3.45 3.78 0.23
...................................................
Total from
Investment activities 4.52 3.72 4.05 0.31
...................................................
Distributions
Net investment income (0.21) (0.26) (0.26) (0.07)
Net realized gain (1.83) (0.91) (0.82) -
...................................................
Total distributions (2.04) (1.17) (1.08) (0.07)
...................................................
NET ASSET VALUE
End of period $ 18.24 $ 15.76 $ 13.21 $ 10.24
---------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
<S> <C> <C> <C> <C>
Total return 29.25% 28.51%* 39.85%* 3.10%*
.......................................................................................
Ratio of expenses to
average net assets 1.05% 1.10%* 1.10%* 1.10%*+
.......................................................................................
Ratio of net investment
income to average
net assets 1.26% 1.71%* 2.03%* 3.16%*+
.......................................................................................
Portfolio turnover rate 67.2% 68.0% 89.7% 30.8%+
.......................................................................................
Average commission rate paid $ 0.0468 $ 0.0471 - -
.......................................................................................
Net assets, end of period
(in thousands) $ 546,375 $ 197,846 $ 46,582 $ 8,850
.......................................................................................
</TABLE>
* 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.
7
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
December 31, 1997
<TABLE>
<CAPTION>
- -----------------------
STATEMENT OF NET ASSETS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Common Stocks 91.2%
FINANCIAL 15.5%
Bank and Trust 3.6%
First Union 167,000 $ 8,559
................................................................................
Mellon Bank 105,000 6,366
................................................................................
Mercantile Bancorporation 75,000 4,612
................................................................................
19,537
...............
Insurance 10.2%
ACE Limited 40,000 3,860
................................................................................
EXEL 100,000 6,338
................................................................................
Loews 80,000 8,490
................................................................................
Mid Ocean Limited 80,000 4,340
................................................................................
Ohio Casualty 120,000 5,415
................................................................................
PartnerRe Holdings ADR 150,000 6,956
................................................................................
St. Paul Companies 50,000 4,103
................................................................................
Transamerica 50,000 5,325
................................................................................
W. R. Berkley 90,000 3,999
................................................................................
Willis-Corroon ADR 566,500 6,975
................................................................................
55,801
...............
Financial Services 1.7%
John Nuveen (Class A) 100,000 3,500
................................................................................
Leucadia National 175,000 6,038
................................................................................
9,538
...............
Total Financial 84,876
...............
UTILITIES 5.3%
Telephone Services 2.8%
360 Communications * 250,000 5,047
................................................................................
AT&T 125,000 7,656
................................................................................
Frontier 110,000 2,647
................................................................................
15,350
...............
Electric Utilities 2.5%
FirstEnergy 148,750 4,314
................................................................................
Niagara Mohawk * 450,000 4,725
................................................................................
</TABLE>
8
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------
In thousands
<S> <C> <C>
Unicom 150,000 $ 4,612
...........................................................................
13,651
.............
Total Utilities 29,001
.............
CONSUMER NONDURABLES 22.2%
Beverages 1.5%
Allied Domecq PLC (GBP) 400,000 3,443
...........................................................................
Brown-Forman (Class B) 85,000 4,696
...........................................................................
8,139
.............
Food Processing 2.0%
McCormick 220,000 6,174
...........................................................................
Whitman 175,000 4,561
...........................................................................
10,735
.............
Hospital Supplies/Hospital Management 5.5%
Allergan 175,000 5,873
...........................................................................
Bausch & Lomb 75,000 2,972
...........................................................................
Columbia/HCA Healthcare 125,000 3,703
...........................................................................
Smith & Nephew (GBP) 1,500,000 4,435
...........................................................................
St. Jude Medical * 175,000 5,338
...........................................................................
United States Surgical 275,000 8,061
...........................................................................
30,382
.............
Pharmaceuticals 2.2%
Amgen 120,000 6,495
...........................................................................
Pharmacia & Upjohn 150,000 5,494
...........................................................................
11,989
.............
Health Care Services 2.0%
Aetna 110,000 7,762
...........................................................................
Apria Healthcare * 225,000 3,023
...........................................................................
10,785
.............
Miscellaneous Consumer Products 9.0%
Armstrong World 75,000 5,606
...........................................................................
Fortune Brands 125,000 4,633
...........................................................................
Hasbro 225,000 7,087
...........................................................................
Reebok * 120,000 3,458
...........................................................................
RJR Nabisco 200,000 7,500
...........................................................................
Rubbermaid 225,000 5,625
...........................................................................
</TABLE>
9
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
<S> <C> <C>
Seagram 175,000 $ 5,655
...........................................................................
Tomkins (GBP) 1,000,000 4,730
...........................................................................
UST 140,000 5,171
...........................................................................
49,465
...........
Total Consumer Nondurables 121,495
...........
CONSUMER SERVICES 11.2%
General Merchandisers 2.3%
Mercantile Stores 70,000 4,261
...........................................................................
Neiman Marcus * 150,000 4,537
...........................................................................
Wal-Mart 100,000 3,944
...........................................................................
12,742
...........
Specialty Merchandisers 2.3%
American Stores 150,000 3,084
...........................................................................
Lillian Vernon 50,000 831
...........................................................................
Tupperware 300,000 8,363
...........................................................................
12,278
...........
Entertainment and Leisure 4.1%
Circus Circus * 150,000 3,075
...........................................................................
Harrah's Entertainment * 235,500 4,445
...........................................................................
Hilton 250,000 7,437
...........................................................................
Viacom (Class B) * 175,000 7,252
...........................................................................
22,209
...........
Media and Communications 2.5%
Chris-Craft * 65,000 3,401
...........................................................................
Dun & Bradstreet 75,000 2,320
...........................................................................
Valassis Communications * 220,000 8,140
...........................................................................
13,861
...........
Total Consumer Services 61,090
...........
CONSUMER CYCLICALS 4.1%
Building and Real Estate 1.2%
Owens Corning 200,000 6,825
...........................................................................
6,825
...........
Miscellaneous Consumer Durables 2.9%
Black & Decker 140,000 5,469
...........................................................................
Eastman Kodak 75,000 4,561
...........................................................................
</TABLE>
10
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
<S> <C> <C>
Imation * 200,000 $ 3,200
...........................................................................
Polaroid 50,000 2,434
...........................................................................
15,664
...........
Total Consumer Cyclicals 22,489
...........
TECHNOLOGY 7.4%
Telecommunications 2.8%
Harris 115,000 5,276
...........................................................................
MCI 125,000 5,355
...........................................................................
Telecomunicacoes Brazil ADR 40,000 4,658
...........................................................................
15,289
...........
Aerospace and Defense 3.9%
Allegheny Teledyne 80,000 2,070
...........................................................................
AlliedSignal 175,000 6,814
...........................................................................
General Dynamics 50,000 4,322
...........................................................................
Lockheed Martin 50,000 4,925
...........................................................................
Raytheon Company (Class B) 60,000 3,030
...........................................................................
21,161
...........
Specialized Computer 0.7%
Digital Equipment * 100,000 3,700
...........................................................................
3,700
...........
Total Technology 40,150
...........
CAPITAL EQUIPMENT 2.7%
Electrical Equipment 1.1%
CBS 200,000 5,888
...........................................................................
5,888
...........
Machinery 1.6%
American Standard * 100,000 3,831
...........................................................................
Farrel 25,000 123
...........................................................................
FMC 4,900 329
...........................................................................
Harnischfeger 120,000 4,237
...........................................................................
8,520
...........
Total Capital Equipment 14,408
...........
</TABLE>
11
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
BUSINESS SERVICES AND TRANSPORTATION 7.5%
Computer Service and Software 2.4%
Broderbund Software * 100,000 $ 2,566
................................................................................
Intuit * 150,000 6,197
................................................................................
NCR * 150,000 4,172
................................................................................
12,935
............
Miscellaneous Business Services 3.4%
H&R Block 100,000 4,481
................................................................................
Swire Pacific (Class A) (HKD) 600,000 3,291
................................................................................
Waste Management 225,000 6,188
................................................................................
Wheelabrator Technologies 275,000 4,417
................................................................................
18,377
............
Railroads 1.7%
Burlington Northern Santa Fe 50,000 4,647
................................................................................
Norfolk Southern 156,900 4,834
................................................................................
9,481
............
Total Business Services and Transportation 40,793
............
ENERGY 4.8%
Energy Services 0.7%
Witco 100,000 4,081
................................................................................
4,081
............
Integrated Petroleum - Domestic 3.2%
Amerada Hess 150,000 8,231
................................................................................
Occidental Petroleum 200,000 5,863
................................................................................
Union Texas Petroleum 150,000 3,122
................................................................................
17,216
............
Exploration and Production 0.9%
Union Pacific Resources 200,000 4,850
................................................................................
4,850
............
Total Energy 26,147
............
PROCESS INDUSTRIES 6.8%
Diversified Chemicals 3.5%
Dow Chemical 40,000 4,060
................................................................................
Hercules 100,000 5,006
................................................................................
</TABLE>
12
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Olin 85,000 $ 3,984
................................................................................
Union Carbide 150,000 6,441
................................................................................
19,491
............
Specialty Chemicals 1.9%
Great Lakes Chemical 150,000 6,731
................................................................................
Millennium Chemicals 150,000 3,535
................................................................................
10,266
............
Paper and Paper Products 0.5%
Consolidated Papers 50,000 2,669
................................................................................
2,669
............
Forest Products 0.9%
Boise Cascade 70,000 2,117
................................................................................
Louisiana Pacific 150,000 2,850
................................................................................
4,967
............
Total Process Industries 37,393
............
BASIC MATERIALS 2.5%
Metals 1.2%
Inco 375,000 6,375
................................................................................
6,375
............
Mining 1.3%
Homestake Mining 150,000 1,331
................................................................................
Newmont Mining 200,000 5,875
................................................................................
7,206
............
Total Basic Materials 13,581
............
Miscellaneous Common Stocks 1.2% 6,799
............
Total Common Stocks (Cost $452,093) 498,222
............
SHORT-TERM INVESTMENTS 9.7%
Money Market Funds 9.7%
Reserve Investment Fund, 5.84% # $ 52,992,400 52,992
................................................................................
Total Short-Term Investments (Cost $52,992) 52,992
............
</TABLE>
13
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- --------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
100.9% of Net Assets (Cost $505,085) $ 551,214
Other Assets Less Liabilities (4,839)
............
NET ASSETS $ 546,375
------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 130
Accumulated net realized gain/loss - net of distributions 6,278
Net unrealized gain (loss) 46,126
Paid-in-capital applicable to 29,950,235 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 493,841
............
NET ASSETS $ 546,375
------------
NET ASSET VALUE PER SHARE $ 18.24
------------
</TABLE>
* Non-income producing
# Seven-day yield
ADR American Depository Receipt
GBP British sterling
HKD Hong Kong dollar
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
- -----------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Year
Ended
12/31/97
<S> <C>
Investment Income
Income
Dividend $ 6,442
Interest 1,786
.............
Total income 8,228
.............
Expenses
Investment management 2,597
Shareholder servicing 756
Registration 132
Custody and accounting 101
Prospectus and shareholder reports 83
Legal and audit 14
Directors 7
Miscellaneous 11
Reimbursed to manager 35
.............
Total expenses 3,736
.............
Net investment income 4,492
.............
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 50,770
Foreign currency transactions (31)
.............
Net realized gain (loss) 50,739
.............
Change in net unrealized gain or loss
Securities 29,091
Other assets and liabilities
denominated in foreign currencies (2)
.............
Change in net unrealized gain or loss 29,089
.............
Net realized and unrealized gain (loss) 79,828
.............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 84,320
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
T. ROWE PRICE VALUE 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 $ 4,492 $ 1,977
Net realized gain (loss) 50,739 12,131
Change in net unrealized gain or loss 29,089 13,510
......................
Increase (decrease) in net assets from
operations 84,320 27,618
......................
Distributions to shareholders
Net investment income (4,372) (2,279)
Net realized gain (47,279) (9,734)
......................
Decrease in net assets from distributions (51,651) (12,013)
......................
Capital share transactions*
Shares sold 395,564 163,452
Distributions reinvested 50,164 11,582
Shares redeemed (129,868) (39,776)
......................
Increase (decrease) in net assets from capital
share transactions 315,860 135,258
......................
Net equalization - 401
......................
Net Assets
Increase (decrease) during period 348,529 151,264
Beginning of period 197,846 46,582
......................
End of period $ 546,375 $ 197,846
----------------------
*Share information
Shares sold 21,897 10,964
Distributions reinvested 2,810 744
Shares redeemed (7,310) (2,680)
......................
Increase (decrease) in shares outstanding 17,397 9,028
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
December 31, 1997
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the
officers of the fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars
at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated
into U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of such
gains and losses.
Premiums and Discounts Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
17
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
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 September 30, 1997, the
fund discontinued its practice of equalization. The results of operations
and net assets were not affected by this change.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $459,537,000 and $218,302,000, respectively, for the
year ended December 31, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1997. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
----------------------------------------------------------------------------
Undistributed net investment income $ 10,000
Paid-in-capital (10,000)
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $505,085,000, and net unrealized
gain aggregated $46,129,000, of which $63,966,000 related to appreciated
investments and $17,837,000 to depreciated investments.
18
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
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 $299,000 was payable at December 31, 1997. The fee is computed
daily and paid monthly, and consists of an individual fund fee equal to
0.35% of average daily net assets and a group fee. The group fee is based on
the combined assets of certain mutual funds sponsored by the manager or Rowe
Price-Fleming International, Inc. (the group). The group fee rate ranges
from 0.48% for the first $1 billion of assets to 0.30% for assets in excess
of $80 billion. The effective annual group fee rate was 0.32% at December
31, 1997, and 0.33% for the year then ended. The fund pays a pro-rata share
of the group fee based on the ratio of its net assets to those of the group.
Pursuant to a previous investment management agreement, $237,000 of
unaccrued 1994-1996 fees and expenses were repaid during the year ended
December 31, 1997. 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%.
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 $671,000 for the year ended December 31, 1997, of which
$72,000 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 $747,000 and are reflected as interest income in the
accompanying Statement of Operations.
19
<PAGE>
T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
During the year ended December 31, 1997, the fund, in the ordinary course of
business, placed security purchase and sale orders aggregating $2,235,000
with certain affiliates of the manager and paid commissions of $11,000
related thereto.
- -----------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue 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:
. $35,335,000 from short-term capital gains, and
. $11,944,000 from long-term capital gains; of which $3,827,000 was subject to
the 20% rate gains category.
For corporate shareholders, 13% of the fund's distributed income and short-term
capital gains qualified for the dividends-received deduction.
- --------------------------------------------------------------------------------
20
<PAGE>
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, 1997, 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 financial highlights
for each of the three years in the period then ended and the period from
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, 1997, by correspondence with the
custodian and brokers. 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, 1997, 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 21, 1998
21
<PAGE>
For yield, price, last transaction, Investor Centers:
current balance, or to conduct 101 East Lombard St.
transactions, 24 hours, 7 days Baltimore, MD 21202
a week, call Tele*Access(R):
1-800-638-2587 toll free T. Rowe Price
Financial Center
For assistance 10090 Red Run Blvd.
with your existing Owings Mills, MD 21117
fund account, call:
Shareholder Service Center Farragut Square
1-800-225-5132 toll free 900 17th Street, N.W.
410-625-6500 Baltimore area Washington, D.C. 20006
To open a Discount Brokerage ARCO Tower
account or obtain information, 31st Floor
call: 1-800-638-5660 toll free 515 South Flower St.
Los Angeles, CA 90071
Internet address:
www.troweprice.com 4200 West Cypress St.
10th Floor
T. Rowe Price Associates Tampa, FL 33607
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.
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor.
