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Semiannual Report
VALUE
FUND
June 30, 1999
[LOGO OF T. ROWE PRICE APPEARS HERE]
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REPORT HIGHLIGHTS
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Value Fund
. Stocks staged a strong first half advance in the face of rising interest
rates, and the shift from growth to value stocks benefited fund shareholders.
. The fund's return for the six months ended June 30 surpassed both the Lipper
peer group average and the S&P 500.
. We took profits in many portfolio holdings that we originally purchased at
attractive prices.
. Merger and acquisition activity benefited results when several portfolio
companies were involved in takeover deals.
. Stocks will be hard-pressed to match the returns of the first half, but we
will continue our search for solid companies with attractively priced stocks.
<PAGE>
FELLOW SHAREHOLDERS
The broad stock market and the Value Fund advanced strongly during the first
half of 1999. Continued corporate earnings growth and a healthier global
outlook, particularly among some of last year's weaker economies, combined to
offset the negative effects of rising interest rates over the last six months.
Good overall economic news, high investor confidence, and trust in the Federal
Reserve's ability to take the proper preemptive action against potentially
higher inflation provided solid support for equities.
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PERFORMANCE COMPARISON
- -----------------------------------------------------------
Periods Ended 6/30/99 6 Months 12 Months
- -----------------------------------------------------------
Value Fund 19.64% 17.80%
S&P 500 12.38 22.76
Lipper Growth & Income Funds Average 10.93 14.48
For the six months ended June 30, your fund posted an exceptionally strong
19.64% return, comfortably exceeding both the unmanaged Standard & Poor's 500
Stock Index and the Lipper Growth & Income Funds Average. Over the past 12
months, the fund trailed the S&P 500 while surpassing the average performance of
our Lipper universe. While investors favored a small group of large-cap growth
stocks throughout 1998, the shift in emphasis toward value stocks during the
first half of 1999 had a positive impact on fund results so far this year.
DIVIDEND DISTRIBUTIONS
Your Board of Directors declared a second quarter income dividend of $0.05 per
share, bringing your 1999 income distribution total to $0.10 per share. This
distribution was paid on June 29 to shareholders of record on June 25. You
should have already received your check or statement reflecting the second
quarter dividend.
PORTFOLIO REVIEW
In our annual report, we discussed several factors that influenced fund
performance in 1998 including the narrow breadth of the advance, which was led
by a handful of large growth companies. What a
1
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difference a few months can make! While large-cap growth stocks were in vogue
last year, investors' preference for value stocks became strikingly evident
several months ago, much to the benefit of fund shareholders. Portfolio holdings
with exposure to commodities and the cyclical nature of the economy fared
particularly well, largely because of the expectation of an upturn in
international economies that had suffered last year. Several cyclical companies,
such as Georgia-Pacific and Union Carbide, advanced in price to the point where
we saw only limited additional upside potential, prompting us to take profits
during the period. These companies were among our 10 largest sales in the first
half, as can be seen in the table on page 5.
Several other portfolio sales also deserve comment, since they illustrate our
investment approach. The share prices of Analog Devices (our single largest
sale), Corning, and Morgan Stanley Dean Witter all declined, in our view, to
extremely attractive valuation levels last year. As their prices rebounded
sharply, their relative valuation appeal diminished, enabling us to take profits
and recycle the proceeds into stocks with more compelling values and, therefore,
more potential for capital appreciation. We rarely buy at the precise bottom and
sell at the exact top. Indeed, most market experts will admit that it is
virtually impossible to do so. However, over the years our focus on relative
valuation
- --------------------------------------
INFORMATION ON YEAR-END DISTRIBUTIONS
- --------------------------------------------------------------------------------
To help you with tax planning, we try to give you a good idea of the per-share
income and capital gain amounts our funds may distribute near year-end. In late
October, we will provide estimates of these amounts, which will be paid on
December 16, 1999, to shareholders of record on December 14. These preliminary
numbers will be included in The Price Report mailing to shareholders in late
October and will also be available on our Web site--www.troweprice.com.
We hope that these preliminary numbers will be useful to you in approximating
the income and capital gains taxes you may pay on distributions to taxable
accounts.
If your fund distributed any capital gains earlier in 1999, you can find the
amounts on your statements and should include them in your tax planning
calculations. Please keep in mind that the numbers are not final and are likely
to be revised before the December 14 declaration and record date. As the fall
progresses, you may want to check our Web site for revisions.
If you would like information on tax matters relating to mutual funds, please
visit our Web site to download our Insights report, Tax Information for Mutual
Fund Investors, or call 1-800-225-5132 to request a copy.
2
<PAGE>
has often helped us identify attractively priced investments on your behalf,
with excellent prospects for future gains once the investing public recognizes
their true value. This concept is at the core of our investment philosophy.
- ----------------------
Sector Diversification
- --------------------------------------------------------------------------------
[PIE GRAPH APPEARS HERE]
Energy 6%
Reserves and Other 18%
Consumer Nondurables 14%
Financial 21%
Consumer Services 14%
Technology 11%
Business Serives and Transportation 8%
Process Industries 8%
Based on assets as of 6/30/99.
Regarding new investments, the Major Portfolio Changes table highlights
significant new purchases made in the first half of the year -- several of which
were in the banking sector. These stocks had been lagging somewhat and appeared
undervalued to us. Since we bought the shares, First American has become the
target of a takeover by Amsouth, a neighboring bank. Our other bank holdings
sell at relatively low price/earnings ratios and, in our opinion, also have good
potential for future gains. In addition, we initiated positions in Allstate,
Hillenbrand Industries, and Fort James, all of which share a similar profile
with other additions to the portfolio. Many of these stocks had been under
pressure because of some misunderstanding or uncertainty surrounding the
companies that created attractive buying opportunities for us. If we are able to
buy shares at appealing prices, we can profit later on as other investors
realize that the low prices were unwarranted. Over the years, we have benefited
from the tendency of stock prices to eventually return to more realistic levels.
In many cases, this has come about as a result of merger and acquisition
activity. M&A deals that helped us in the first half involved Transamerica,
Mercantile Bancorporation, Browning-Ferris, Raychem, and Alza, which were
acquired or are in the process of being acquired at significant premiums to our
cost.
Financial stocks composed 21% of portfolio assets at the end of June, with
consumer nondurables at 14%, consumer services at 14%, and technology shares at
11% representing other significant sectors. (The chart on this page shows the
sector breakdown.) The fund is well diversified by industries and by individual
holdings.
3
<PAGE>
SUMMARY AND OUTLOOK
In our last report, we commented that the market's recent preference for growth
stocks made us "relatively optimistic about the Value Fund's prospects over the
next few years" given the attractive valuations we saw. The recent shift into
value stocks has vindicated our optimism -- during the first six months of 1999
at least. Few trends proceed without interruption. This was true of the recent
penchant for large-cap growth stocks, and it will undoubtedly be true for value
stocks at some point. The only certainty is that investor preferences will
continue to ebb and flow, which underscores the futility of trying to predict
investor sentiment and market swings, as well as the value of staying with an
investment strategy over the long term. Over time, these alternating cycles tend
to balance each other.
So far this year, we are pleasantly surprised by the durability of the stock
market's strength and resilience, particularly in the face of rising interest
rates. We believe it will be difficult, but not impossible, for stocks to post
such robust returns in the second half of 1999. Given historically high stock
valuations and unrealistic investor expectations, we would not be surprised to
see a bit of turbulence ahead. Nevertheless, whatever happens over the short
term, our focus will remain unchanged; we will continue to search for sound
companies whose stocks appear undervalued relative to the overall market.
As always, we appreciate your confidence in T. Rowe Price and your continued
support.
Respectfully submitted,
Brian C. Rogers
President and Chairman of the Investment Advisory Committee
July 23, 1999
4
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T. ROWE PRICE VALUE FUND
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PORTFOLIO HIGHLIGHTS
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MAJOR PORTFOLIO CHANGES
(Listed in descending order of size)
6 Months Ended 6/30/99
Ten Largest Purchases Ten Largest Sales
- --------------------------------------------------------------------------------
Washington Mutual * Analog Devices **
Summit Bancorp * Corning **
Reed International * Georgia-Pacific **
Lockheed Martin * ALLTEL
Fort James * American Stores **
Hillenbrand Industries * First Union **
Allstate * FDX **
First American * First Data **
KeyCorp * Union Carbide **
Pall * Morgan Stanley Dean Witter **
* Position added
** Position eliminated
5
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T. ROWE PRICE VALUE FUND
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PORTFOLIO HIGHLIGHTS
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/99
- --------------------------------------------------------------------------------
Browning-Ferris 1.6%
Great Lakes Chemical 1.6
Lockheed Martin 1.6
Hercules 1.5
Loews 1.4
- --------------------------------------------------------------------------------
Amerada Hess 1.4
Boeing 1.4
Seagram 1.4
Hewlett-Packard 1.3
Toys "R" Us 1.3
- --------------------------------------------------------------------------------
Phelps Dodge 1.3
Washington Mutual 1.3
Raytheon 1.3
Motorola 1.3
Allegheny Teledyne 1.2
- --------------------------------------------------------------------------------
Transamerica 1.2
BP Amoco 1.2
Raychem 1.2
Bank of America 1.2
CBS 1.2
- --------------------------------------------------------------------------------
Inco 1.2
Starwood Hotels & Resorts Worldwide 1.1
Citigroup 1.1
Norfolk Southern 1.1
Summit Bancorp 1.1
- --------------------------------------------------------------------------------
Total 32.5%
Note: Table excludes reserves.
6
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T. ROWE PRICE VALUE FUND
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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.
[LINE GRAPH APPEARS HERE]
VALUE FUND
- --------------------------------------------------------------------------------
As of June 30, 1999
S & P 500 Lipper Growth
Stock and Income Funds
Index Average Value Fund
9/30/94 $ 10,000 $ 10,000 $ 10,000
6/95 $ 12,019 $ 11,514 $ 12,723
6/96 $ 15,144 $ 14,144 $ 16,413
6/96 $ 20,399 $ 18,256 $ 21,713
6/98 $ 26,552 $ 22,603 $ 25,989
6/99 $ 32,595 $ 25,906 $ 30,615
- -------------------------------------
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 6/30/99 1 Year 3 Years Inception Date
- --------------------------------------------------------------------------------
Value Fund 17.80% 23.10% 26.57% 9/30/94
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
7
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T. ROWE PRICE VALUE FUND
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Unaudited
<TABLE>
<CAPTION>
- ----------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- -----------------------------------------------------------------------------------------------------------------------------
6 Months Year 9/30/94
Ended Ended Through
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 18.31 $ 18.24 $ 15.76 $ 13.21 $ 10.24 $ 10.00
Investment activities
Net investment income 0.11 0.19 0.21 0.27* 0.27* 0.08*
Net realized and
unrealized gain (loss) 3.38 1.04 4.31 3.45 3.78 0.23
Total from
investment activities 3.49 1.23 4.52 3.72 4.05 0.31
Distributions
Net investment income (0.10) (0.20) (0.21) (0.26) (0.26) (0.07)
Net realized gain (0.76) (0.96) (1.83) (0.91) (0.82) --
Total distributions (0.86) (1.16) (2.04) (1.17) (1.08) (0.07)
NET ASSET VALUE
End of period $ 20.94 $ 18.31 $ 18.24 $ 15.76 $ 13.21 $ 10.24
------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Total return ++ 19.64% 6.85% 29.25% 28.51%* 39.85%* 3.10%*
Ratio of total expenses to
average net assets 0.94%+ 0.98% 1.05% 1.10%* 1.10%* 1.10%*+
Ratio of net investment
income to average
net assets 1.15%+ 1.06% 1.26% 1.71%* 2.03%* 3.16%*+
Portfolio turnover rate 68.3%+ 72.1% 67.2% 68.0% 89.7% 30.8%+
Net assets, end of period
(in thousands) $ 931,701 $ 774,514 $ 546,375 $ 197,846 $ 46,582 $ 8,850
</TABLE>
++ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 1.10% voluntary expense limitation in effect
through 12/31/96.
+ Annualized
The accompanying notes are an integral part of these financial statements.
8
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T. ROWE PRICE VALUE FUND
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Unaudited June 30, 1999
STATEMENT OF NET ASSETS Shares Value
- --------------------------------------------------------------------------------
In thousands
Common Stocks 95.8%
FINANCIAL 20.5%
Bank and Trust 9.1%
Bank of America 150,000 $ 10,997
Bank One 162,000 9,649
First American 200,000 8,313
Huntington Bancshares 200,000 7,000
KeyCorp 250,000 8,031
Mellon Bank 210,000 7,639
Mercantile Bancorporation 175,000 9,997
Summit Bancorp 250,000 10,453
Washington Mutual 350,000 12,381
84,460
----------
Insurance 9.7%
Allstate 250,000 8,969
Chubb 100,000 6,950
Loews 170,000 13,451
Ohio Casualty 200,000 7,212
PartnerRe Holdings 250,000 9,344
SAFECO 200,000 8,825
St. Paul 200,000 6,363
Transamerica 150,000 11,250
Travelers Property Casualty (Class A) 200,000 7,825
XL Capital (Class A) 181,720 10,267
90,456
----------
Financial Services 1.7%
Citigroup 225,000 10,687
Waddell & Reed Financial (Class A) 200,000 5,488
16,175
----------
Total Financial 191,091
----------
UTILITIES 2.8%
Telephone 1.3%
ALLTEL 63,300 4,526
Telebras ADR 85,000 7,666
12,192
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9
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T. ROWE PRICE VALUE FUND
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Shares Value
- --------------------------------------------------------------------------------
In thousands
Electric Utilities 1.5%
Niagara Mohawk * 500,000 $ 8,031
Western Resources 200,000 5,325
13,356
----------
Total Utilities 25,548
----------
CONSUMER NONDURABLES 13.9%
Food Processing 2.6%
ConAgra 300,000 7,988
General Mills 100,000 8,037
McCormick 250,000 7,891
23,916
----------
Hospital Supplies/Hospital Management 1.0%
Hillenbrand Industries 225,000 9,731
9,731
----------
Pharmaceuticals 2.4%
ALZA * 150,000 7,631
Pharmacia & Upjohn 150,000 8,522
Teva Pharmaceutical Industries ADR 125,000 6,172
22,325
----------
Health Care Services 0.7%
Aetna 75,000 6,708
6,708
----------
Miscellaneous Consumer Products 7.2%
Armstrong World 175,000 10,117
Fortune Brands 150,000 6,206
Hasbro 225,000 6,286
Mattel 250,000 6,609
RJR Nabisco 400,000 7,825
Seagram 250,000 12,594
Stanley Works 300,000 9,656
UST 250,000 7,313
66,606
----------
Total Consumer Nondurables 129,286
----------
10
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T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
CONSUMER SERVICES 12.2%
General Merchandisers 0.8%
Neiman-Marcus * 300,000 $ 7,706
7,706
------------
Specialty Merchandisers 4.3%
A & P 200,000 6,762
Food Lion 400,000 4,763
Safeway * 150,000 7,425
Toys "R" Us * 600,000 12,412
Tupperware 350,000 8,925
40,287
------------
Entertainment and Leisure 2.3%
Hilton 700,000 9,931
Mirage Resorts * 153,300 2,568
Reader's Digest (Class A) 225,000 8,944
21,443
------------
Media and Communications 3.7%
CBS * 250,000 10,859
Chris-Craft * 154,500 7,281
News Corporation 250,000 8,828
R.R. Donnelley 200,000 7,413
34,381
------------
Printing and Publishing 1.1%
Reed International (GBP) * 1,500,000 9,966
9,966
------------
Total Consumer Services 113,783
------------
CONSUMER CYCLICALS 4.1%
Automobiles and Related 2.0%
GM 75,000 4,950
Goodyear Tire & Rubber 150,000 8,822
TRW 100,000 5,487
19,259
------------
Building and Real Estate 2.1%
Owens Corning 250,000 8,594
Starwood Hotels & Resorts, REIT 350,000 10,697
19,291
------------
Total Consumer Cyclicals 38,550
------------
11
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T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
TECHNOLOGY 10.8%
Electronic Components 2.1%
Micron Technology * 200,000 $ 8,062
Motorola 125,000 11,844
19,906
-----------------
Electronic Systems 1.3%
Hewlett-Packard 125,000 12,563
12,563
-----------------
Information Processing 0.8%
COMPAQ Computer 300,000 7,106
7,106
-----------------
Aerospace and Defense 6.6%
Allegheny Teledyne 500,000 11,312
AlliedSignal 150,000 9,450
Boeing 300,000 13,256
Lockheed Martin 400,000 14,900
Raytheon (Class B) 175,000 12,316
61,234
-----------------
Total Technology 100,809
-----------------
CAPITAL EQUIPMENT 1.7%
Machinery 1.7%
FMC * 125,000 8,539
Parker Hannifin 150,000 6,863
Total Capital Equipment 15,402
-----------------
BUSINESS SERVICES AND
TRANSPORTATION 8.0%
Airlines 1.1%
Delta 175,000 10,084
10,084
-----------------
Computer Service and Software 1.5%
NCR * 200,000 9,763
Parametric Technology * 300,000 4,172
13,935
-----------------
Miscellaneous Business Services 2.5%
Browning-Ferris 350,000 15,050
Fluor 200,000 8,100
23,150
-----------------
12
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T. ROWE PRICE VALUE FUND
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Shares Value
- --------------------------------------------------------------------------------
In thousands
Railroads 2.9%
Canadian Pacific 350,000 $ 8,334
Norfolk Southern 350,000 10,544
Union Pacific 150,000 8,747
27,625
--------------
Total Business Services and Transportation 74,794
--------------
ENERGY 6.1%
Energy Services 0.8%
Baker Hughes 225,000 7,538
7,538
--------------
Integrated Petroleum - Domestic 2.3%
Amerada Hess 225,000 13,388
Murphy Oil 175,000 8,542
21,930
--------------
Exploration and Production 1.8%
Burlington Resources 225,000 9,731
Unocal 170,000 6,736
16,467
--------------
Integrated Petroleum - International 1.2%
BP Amoco ADR 102,333 11,103
11,103
--------------
Total Energy 57,038
--------------
PROCESS INDUSTRIES 8.4%
Diversified Chemicals 2.1%
Hercules 350,000 13,759
W. R. Grace * 300,000 5,513
19,272
--------------
Specialty Chemicals 5.5%
Cytec Industries * 300,000 9,562
Great Lakes Chemical 325,000 14,970
Imperial Chemical ADR 150,000 5,963
Pall 450,000 9,984
Raychem 300,000 11,100
51,579
--------------
13
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T. ROWE PRICE VALUE FUND
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Shares Value
- --------------------------------------------------------------------------------
In thousands
Paper and Paper Products 0.8%
Fort James 200,000 $ 7,575
7,575
------------
Total Process Industries 78,426
------------
BASIC MATERIALS 3.9%
Metals 3.1%
Cyprus Amax Minerals 375,000 5,695
Inco 600,000 10,800
Phelps Dodge 200,000 12,388
28,883
------------
Mining 0.8%
Newmont Mining 375,000 7,453
7,453
------------
Total Basic Materials 36,336
------------
Total Miscellaneous Common Stock 3.4% 31,143
------------
Total Common Stocks (Cost $799,359) 892,206
------------
SHORT-TERM INVESTMENTS 6.6%
Money Market Funds 6.6%
Reserve Investment Fund, 5.05% # 61,641,795 61,642
Total Short-Term Investments (Cost $ 61,642) 61,642
------------
14
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T. ROWE PRICE VALUE FUND
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Value
- --------------------------------------------------------------------------------
In thousands
Total Investments in Securities
102.4% of Net Assets (Cost $861,001) $ 953,848
Other Assets Less Liabilities (22,147)
-----------
NET ASSETS $ 931,701
-----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 314
Accumulated net realized gain/loss - net of distributions 49,205
Net unrealized gain (loss) 92,844
Paid-in-capital applicable to 44,491,861 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 789,338
NET ASSETS $ 931,701
-----------
NET ASSET VALUE PER SHARE $ 20.94
-----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
GBP British sterling
The accompanying notes are an integral part of these financial statements.
15
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T. ROWE PRICE VALUE FUND
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Unaudited
- --------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/99
Investment Income
Income
Dividend $ 7,334
Interest 1,090
------------
Total income 8,424
------------
Expenses
Investment management 2,704
Shareholder servicing 900
Prospectus and shareholder reports 83
Custody and accounting 59
Registration 16
Legal and audit 7
Directors 4
Miscellaneous 5
------------
Total expenses 3,778
Expenses paid indirectly (2)
------------
Net expenses 3,776
------------
Net investment income 4,648
------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 48,941
Foreign currency transactions (36)
------------
Net realized gain (loss) 48,905
------------
Change in net unrealized gain or loss
Securities 88,734
Other assets and liabilities
denominated in foreign currencies (7)
------------
Change in net unrealized gain or loss 88,727
------------
Net realized and unrealized gain (loss) 137,632
------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 142,280
------------
The accompanying notes are an integral part of these financial statements.
16
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T. ROWE PRICE VALUE FUND
- --------------------------------------------------------------------------------
Unaudited
- -------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 4,648 $ 8,179
Net realized gain (loss) 48,905 62,691
Change in net unrealized gain or loss 88,727 (42,009)
-------------------------
Increase (decrease) in net assets from operations 142,280 28,861
-------------------------
Distributions to shareholders
Net investment income (4,194) (8,467)
Net realized gain (29,663) (39,006)
-------------------------
Decrease in net assets from distributions (33,857) (47,473)
-------------------------
Capital share transactions *
Shares sold 235,434 579,976
Distributions reinvested 31,924 45,081
Shares redeemed (218,594) (378,306)
-------------------------
Increase (decrease) in net assets from capital
share transactions 48,764 246,751
-------------------------
Net Assets
Increase (decrease) during period 157,187 228,139
Beginning of period 774,514 546,375
-------------------------
End of period $ 931,701 $ 774,514
-------------------------
*Share information
Shares sold 11,907 30,243
Distributions reinvested 1,707 2,469
Shares redeemed (11,429) (20,355)
-------------------------
Increase (decrease) in shares outstanding 2,185 12,357
The accompanying notes are an integral part of these financial statements.
17
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T. ROWE PRICE VALUE FUND
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Unaudited June 30, 1999
- ---------------------------------
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.
18
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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. Expenses paid indirectly reflect credits earned
on daily, uninvested cash balances at the custodian, used to reduce the fund's
custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $271,451,000 and $265,340,000, respectively, for the six months ended
June 30,1999.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
income.
At June 30, 1999, the cost of investments for federal income tax purposes was
substantially the same as for financial reporting and totaled $861,001,000. Net
unrealized gain aggregated $92,847,000 at period-end, of which $130,773,000
related to appreciated investments and $37,926,000 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 $509,000 was payable at June 30, 1999. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.35% of average
daily net assets and a group fee. The group fee is based on the combined assets
of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.30% for assets in excess of $80 billion. At June
30, 1999, and for the six months then ended, the effective annual group
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T. ROWE PRICE VALUE FUND
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fee rate was 0.32%. The fund pays a pro-rata share of the group fee based on the
ratio of its net assets to those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $744,000 for the six months
ended June 30, 1999, of which $155,000 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 six months ended June 30, 1999, totaled
$1,081,000 and are reflected as interest income in the accompanying Statement of
Operations.
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T. ROWE PRICE SHAREHOLDER SERVICES
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INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m.
ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and the T. Rowe Price Web
site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
** Based on a January 1999 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of order.
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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 brokerage account or obtain information, call: 1-800-638-5660 toll
free
Internet address: www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus appropriate to the fund or funds
covered in this report.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
4410 ArrowsWest Drive
Colorado Springs, CO 80907
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills, CA 91367
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor.
