Semiannual Report
Value
Fund
June 30, 2000
T. Rowe Price
Report Highlights
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Value Fund
o First-half volatility ended with the major stock market indices down
slightly, and growth stocks beating value stocks.
o Fund results were in line with the S&P 500 and the Lipper average, and we
were pleased that the fund held up well during the spring sell-off in
technology stocks.
o We made several significant purchases of sound companies whose share prices
were cut in half during the period.
o Value stocks remain inexpensive compared with the broad market, and we are
optimistic about their potential for growth as reality returns to the stock
market.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
Fellow Shareholders
We began the year with modest expectations for stocks due to the unsustainable
strength of the equity market in 1999, the stretched valuations for share
prices, and the tighter Fed monetary policy. Despite the market's extreme
volatility in the first half, with stocks first soaring then falling back to
earth, the broad indices ended only slightly lower. In a generally challenging
environment, value stocks and your fund posted a slim loss for the six-month
period.
Performance Comparison
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Periods Ended 6/30/00 6 Months 12 Months
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Value Fund -0.80% -9.49%
S&P 500 -0.43 7.24
Lipper Multi-Cap Value
Funds Average -0.47 -3.99
As shown in the Performance Comparison table, your fund declined by 0.80% in the
first six months, roughly in line with the unmanaged Standard & Poor's 500 Stock
Index and the Lipper average for similar funds. The fund enjoyed a slightly
positive return in the first quarter, and while it slipped a bit in the second
quarter, we were pleased to see the fund do relatively well during the sharp
correction in the spring. Overall, the fund's value orientation continued to
hamper investment returns during the past year, as investors favored the riskier
stocks of companies with little or no earnings over value stocks with histories
of earnings growth and sound fundamentals. In recent months, however, a welcome
dose of reality seems to have returned to the stock market, which bodes well for
our style of investing if the trend continues.
The year began with a continuation of the pattern that characterized the stock
market through most of last year. In the first quarter, the technology-heavy
Nasdaq Composite led the way as the more aggressive market sectors provided the
strongest performance. In April and May, those stocks experienced a sudden and
sharp decline, and traditional value stocks provided better relative
performance. In June the market underwent another reversal in sentiment, with
growth stocks rebounding from their spring decline. By the end of the second
quarter the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite
had all posted losses. Within these indices, growth stocks generally fared
better than value stocks, and smaller and mid-cap shares outperformed the
largest-cap stocks.
PORTFOLIO REVIEW
Our investment strategy is to invest in companies we determine to be undervalued
in terms of price/earnings, price/cash flow, price/sales, price/asset value or
replacement cost, and other measures of value. Many of our holdings are
contrarian in nature in that they normally have been out of favor with investors
for one reason or another and, as a result, their share prices have been beaten
down to levels we believe are unrealistically low.
Sector Diversification
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Consumer Nondurables 15
Financial 18
Consumer Services 16
Technology 9
Business Services & Transportation 10
Proces Industries 7
Energy 6
Reserves and Other 19
Based on net assets as of 6/30/00
The strategy we followed during the period was to invest in good companies after
the sell-off. Equity investors not only have high expectations for future
returns, but also little tolerance for any disappointing news affecting their
investments. What else could explain the recent collapse in stocks like
Honeywell International? It dropped about 50% after announcing slowing earnings
growth-not losses, but slower growth in profitability. Many small technology and
Internet companies have fared even worse. Imagine what would happen in a more
difficult economic environment.
In this climate we capitalized on the significant price declines in several
stocks to make new investments. Our experience suggests that investing in strong
companies after they lose half their value is often rewarding. This was the
reason for new purchases we made in Rockwell International, Gillette, AT&T, and
Honeywell. Rockwell is the classic value stock. Having declined substantially in
price, the stock sold for 10 times earnings and sported a dividend yield of
3%-an attractive valuation for a leading manufacturing company. The other
companies listed in the Major Portfolio Changes table following this letter
share the common characteristics of recent price weakness, strong market
position, and attractive valuations.
Most of the portfolio sales listed in the table were of successful investments
whose valuations reached unattractive levels as their share prices rose. Two
holdings, US West and Travelers Property Casualty, were takeover targets.
Among the stocks that helped fund performance were American Home Products, 3Com,
Ford, Starwood Hotels & Resorts Worldwide, and Seagram. Investments that hurt
performance in the first half were in many cases cyclical in orientation. Among
our laggards, concern over the Fed's tightening moves led to weakness in many
commodity and manufacturing companies such as Phelps Dodge and Dana.
Our holdings sell at a substantial discount to the overall market. Our
historical approach has been to invest in companies selling at relatively low
price/earnings ratios with attractive dividend yields and other compelling
valuation characteristics. Compared with the broad market, at the end of June we
had a portfolio of undervalued companies with good prospects over the next few
years.
OUTLOOK
After the shakeout of the past six months, the market ended up treading water as
investors digested a series of tightening moves by the Fed aimed at slowing the
pace of economic growth. In earlier reports we discussed the de-linkage between
stock prices and the earnings and dividend growth that normally support them,
since share prices have risen at a faster pace in recent years. This gap began
to close modestly during the first half of the year, with earnings and dividend
growth moving ahead while stocks declined in value. Despite the improved
performance of value stocks discussed earlier, they remain very inexpensive
relative to growth shares. If history is any guide, true value tends to reassert
itself over time. The fund holds investments in many companies with inexpensive
valuations, thanks to the contrary investor sentiment of recent years. We
believe our portfolio comprises stocks that offer a good combination of solid
return potential and relatively low downside risk.
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 21, 2000
Advisor Share Class Created
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T. Rowe Price has introduced a new class of shares for certain funds, including
this one. The new Advisor Class shares will be sold exclusively by financial
intermediaries, such as brokers and financial advisers, and will enhance our
ability to reach a new group of investors through this expanding channel. Since
the new share class has a modest 12b-1 fee (a distribution fee paid to the sales
intermediary), its performance will likely vary somewhat from your fund shares
even though both invest in the same portfolio.
We want to emphasize that the new class will have no impact whatsoever on your
investment in the fund or on the returns provided to you by the fund. The daily
net asset value and expenses for the existing shares and the Advisor Class
shares are calculated separately. In due course, you will see the Advisor Class
share prices listed in newspapers and other print and electronic media. Certain
expenses associated with the Advisor Class shares will be itemized in financial
statements in your fund's shareholder reports.
T. Rowe Price Value Fund
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Portfolio Highlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/00
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Hartford Financial Services Group 1.7%
Lockheed Martin 1.6
Great Lakes Chemical 1.6
Starwood Hotels & Resorts Worldwide 1.6
Aetna 1.5
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Hillenbrand Industries 1.5
Comcast 1.5
Black & Decker 1.4
American Home Products 1.4
Sprint 1.4
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Gillette 1.4
Safeway 1.4
Cabot 1.3
Amerada Hess 1.3
Stanley Works 1.3
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BP Amoco 1.3
Loews 1.2
Seagram 1.2
Delta 1.2
Honeywell International 1.2
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Washington Mutual 1.2
Aon 1.2
Becton, Dickinson 1.2
PartnerRe 1.2
Ceridian 1.2
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Total 34.0%
Note: Table excludes reserves.
T. Rowe Price Value Fund
Portfolio Highlights
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MAJOR PORTFOLIO CHANGES
(Listed in descending order of size)
6 Months Ended 6/30/00
Ten Largest Purchases
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Rockwell International*
Gillette*
Comcast*
AT&T*
Honeywell International
Cabot*
Becton, Dickinson*
Textron*
BMC Software*
Tricon Global Restaurants*
Ten Largest Sales
--------------------------------------------------------------------------------
News Corporation**
Boeing**
US West**
3Com**
Martin Marietta Materials**
Telebras**
Champion International**
Cytec Industries**
Hewlett-Packard**
Travelers Property Casualty**
* Position added
** Position eliminated
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 benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
Value Fund
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As of 6/30/00
Lipper
S&P 500 Multi-Cap Value
Index Funds Average Value Fund
9/30/94 10,000 10,000 10,000
6/95 12,019 11,514 12,723
6/96 15,144 14,146 16,413
6/97 20,399 18,263 21,713
6/98 26,552 22,613 25,989
6/99 32,595 25,914 30,615
6/00 34,956 22,824 27,710
Average Annual Compound Total Return
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This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 6/30/00 1 Year 3 Years 5 Years Inception Date
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Value Fund -9.49% 8.47% 16.84% 19.40 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.
T. Rowe Price Value Fund
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Unaudited
Financial Highlights For a share outstanding throughout each period
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Value shares
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of period $ 17.50 $ 18.31 $ 18.24 $ 15.76 $ 13.21 $ 10.24
Investment activities
Net investment
income (loss) 0.12 0.22 0.19 0.21 0.27* 0.27*
Net realized and
unrealized gain(loss) (0.26) 1.38 1.04 4.31 3.45 3.78
Total from
investment
activities (0.14) 1.60 1.23 4.52 3.72 4.05
Distributions
Net investment income -- (0.21) (0.20) (0.21) (0.26) (0.26)
Net realized gain -- (2.20) (0.96) (1.83) (0.91) (0.82)
Total distributions -- (2.41) (1.16) (2.04) (1.17) (1.08)
NET ASSET VALUE
End of period $ 17.36 $ 17.50 $ 18.31 $ 18.24 $ 15.76 $ 13.21
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Ratios/Supplemental Data
Total return(diamond) (0.80)% 9.16% 6.85% 29.25% 28.51%* 39.85%*
Ratio of total
expenses to average
net assets 0.93%! 0.92% 0.98% 1.05% 1.10%* 1.10%*
Ratio of net investment
income (loss) to average
net assets 1.45%! 1.14% 1.06% 1.26% 1.71%* 2.03%*
Portfolio turnover
rate 65.3%! 67.8% 72.1% 67.2% 68.0% 89.7%
Net assets,
end of period
(in thousands) $831,398 $851,419 $774,514 $546,375 $197,846 $46,582
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
* Excludes expenses in excess of a 1.10% 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
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Unaudited
Financial Highlights For a share outstanding throughout each period
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Value Advisor Class shares
3/31/00
Through
6/30/00
NET ASSET VALUE
Beginning of period $ 17.57
Investment activities
Net investment income (loss) 0.07
Net realized and
unrealized gain (loss) (0.27)
Total from
investment activities (0.20)
NET ASSET VALUE
End of period $ 17.37
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Ratios/Supplemental Data
Total return(diamond) (1.14)%
Ratio of total expenses
to average net assets 0.81%!
Ratio of net investment
income (loss) to average
net assets 1.50%!
Portfolio turnover rate 65.3%!
Net assets, end of period
(in thousands) $ 10
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Value Fund
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Unaudited June 30, 2000
Statement of Net Assets Shares Value
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In thousands
Common Stocks 94.4%
FINANCIAL 17.6%
Bank and Trust 7.3%
AmSouth 374,200 $ 5,894
Bank of America 150,000 6,450
Bank One 300,000 7,969
Firstar 365,925 7,707
Huntington Bancshares 220,000 3,486
KeyCorp 300,000 5,287
Mellon Financial 210,000 7,652
Summit Bancorp 250,000 6,156
Washington Mutual 350,000 10,106
60,707
Insurance 8.6%
Allstate 300,000 6,675
Aon 325,000 10,095
Chubb 150,000 9,225
Hartford Financial Services Group 250,000 13,985
Loews 170,000 10,200
PartnerRe Holdings 275,000 9,745
SAFECO 150,000 2,986
UNUMProvident 425,000 8,527
71,438
Financial Services 1.7%
Citigroup 150,000 9,037
Fannie Mae 100,000 5,219
14,256
Total Financial 146,401
UTILITIES 4.6%
Telephone 3.6%
AT&T 300,000 9,487
Centurytel 300,000 8,625
Sprint 225,000 11,475
29,587
Electric Utilities 1.0%
Niagara Mohawk * 600,000 $ 8,363
8,363
Total Utilities 37,950
CONSUMER NONDURABLES 14.9%
Cosmetics 1.4%
Gillette 325,000 11,355
11,355
Beverages 0.8%
Coca-Cola Enterprises 400,000 6,525
6,525
Food Processing 0.8%
McCormick 200,000 6,500
6,500
Hospital Supplies/Hospital Management 2.7%
Becton, Dickinson 350,000 10,041
Hillenbrand Industries 400,000 12,525
22,566
Pharmaceuticals 1.4%
American Home Products 200,000 11,750
11,750
Health Care Services 1.5%
Aetna 200,000 12,837
12,837
Miscellaneous Consumer Products 6.3%
Fortune Brands 250,000 5,766
Harcourt General 100,000 5,438
Hasbro 550,000 8,284
Seagram 175,000 10,150
Stanley Works 450,000 10,687
Textron 150,000 8,147
UST 250,000 3,672
52,144
Total Consumer Nondurables 123,677
CONSUMER SERVICES 15.6%
Restaurants 1.0%
Tricon Global Restaurants * 300,000 $ 8,475
8,475
General Merchandisers 2.2%
Dillards 500,000 6,125
May Department Stores 140,000 3,360
Neiman Marcus Group * 300,000 9,056
18,541
Specialty Merchandisers 4.2%
Nordstrom 350,000 8,444
Safeway * 250,000 11,281
Toys "R" Us * 650,000 9,465
Tupperware 250,000 5,500
34,690
Entertainment and Leisure 2.1%
Disney 200,000 7,763
Hilton 1,000,000 9,375
17,138
Media and Communications 4.9%
Chris-Craft 108,385 7,160
Comcast (Class A Special) * 300,000 12,159
Dun & Bradstreet 225,000 6,441
R.R. Donnelley 350,000 7,897
Viacom (Class B) * 108,500 7,398
41,055
Printing and Publishing 1.2%
Reed International (GBP) 1,100,000 9,579
9,579
Total Consumer Services 129,478
CONSUMER CYCLICALS 5.4%
Automobiles and Related 2.4%
Dana 350,000 7,416
Eaton 75,000 5,025
Ford Motor 100,000 4,300
ITT Industries 100,000 3,037
Visteon 13,093 $ 159
19,937
Building and Real Estate 1.6%
Starwood Hotels & Resorts Worldwide, REIT 400,000 13,025
13,025
Miscellaneous Consumer Durables 1.4%
Black & Decker 300,000 11,794
11,794
Total Consumer Cyclicals 44,756
TECHNOLOGY 8.7%
Electronic Components 0.3%
Motorola 100,000 2,906
2,906
Information Processing 1.8%
COMPAQ Computer 350,000 8,947
Unisys * 400,000 5,825
14,772
Aerospace and Defense 4.7%
Allegheny Technologies 337,500 6,075
Honeywell International 300,000 10,106
Lockheed Martin 550,000 13,647
Rockwell International 300,000 9,450
39,278
Office Automation 1.9%
Ceridian * 400,000 9,625
Xerox 300,000 6,225
15,850
Total Technology 72,806
CAPITAL EQUIPMENT 1.6%
Electrical Equipment 0.6%
Hubbell (Class B) 200,000 5,100
5,100
Machinery 1.0%
Cooper Industries 250,000 8,141
8,141
Total Capital Equipment 13,241
BUSINESS SERVICES AND
TRANSPORTATION 9.5%
Airlines 1.2%
Delta 200,000 $ 10,112
10,112
Computer Service and Software 2.1%
BMC Software * 200,000 7,294
Galileo International 200,000 4,175
NCR * 150,000 5,840
17,309
Transportation Services 1.5%
CNF Transportation 250,000 5,688
Ryder System 350,000 6,628
12,316
Miscellaneous Business Services 2.2%
H&R Block 250,000 8,094
ServiceMaster 100,000 1,137
Waste Management 500,000 9,500
18,731
Railroads 2.5%
Canadian Pacific 350,000 9,166
Norfolk Southern 400,000 5,950
Union Pacific 150,000 5,578
20,694
Total Business Services and Transportation 79,162
ENERGY 5.7%
Energy Services 0.7%
Baker Hughes 187,000 5,984
5,984
Integrated Petroleum - Domestic 1.9%
Amerada Hess 175,000 10,806
USX-Marathon 200,000 5,013
15,819
Exploration and Production 1.8%
Burlington Resources 225,000 8,606
Pure Resources 200,000 6,625
15,231
Integrated Petroleum - International 1.3%
BP Amoco ADR 184,666 $ 10,445
10,445
Total Energy 47,479
PROCESS INDUSTRIES 7.3%
Diversified Chemicals 2.8%
Cabot 400,000 10,900
Hercules 450,000 6,328
W. R. Grace * 475,000 5,759
22,987
Specialty Chemicals 2.6%
Great Lakes Chemical 418,800 13,192
Pall 450,000 8,325
21,517
Paper and Paper Products 0.9%
Fort James 325,000 7,516
7,516
Forest Products 1.0%
Georgia Pac Timber 250,000 5,406
Louisiana-Pacific 275,000 2,991
8,397
Total Process Industries 60,417
BASIC MATERIALS 2.4%
Metals 0.8%
Phelps Dodge 175,000 6,508
6,508
Mining 0.9%
Newmont Mining 350,000 7,569
7,569
Miscellaneous Materials 0.7%
Crown Cork & Seal 400,000 6,000
6,000
Total Basic Materials 20,077
MISCELLANEOUS 1.1%
Conglomerates 1.1%
Berkshire Hathaway (Class A) * 175 $ 9,415
Total Miscellaneous 9,415
Total Common Stocks (Cost $866,448) 784,859
Short-Term Investments 5.9%
Money Market Funds 5.9%
Reserve Investment Fund, 6.68% # 49,432,475 49,432
Total Short-Term Investments (Cost $49,432) 49,432
Total Investments in Securities
100.3% of Net Assets (Cost $915,880) $ 834,291
Other Assets Less Liabilities (2,883)
NET ASSETS $ 831,408
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Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 6,141
Accumulated net realized gain/loss -
net of distributions 51,809
Net unrealized gain (loss) (81,589)
Paid-in-capital applicable to 47,889,655
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized 855,047
NET ASSETS $ 831,408
----------
NET ASSET VALUE PER SHARE
Value shares
($831,397,988/47,889,086 shares outstanding) $ 17.36
----------
Value Advisor Class shares
($9,883/569 shares outstanding) $ 17.37
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
REIT Real Estate Investment Trust
GBP British sterling
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Value Fund
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Unaudited
Statement of Operations
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In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Dividend $ 8,253
Interest 1,285
Total income 9,538
Expenses
Investment management 2,683
Shareholder servicing
Value shares 878
Value Advisor Class shares --
Custody and accounting 61
Prospectus and shareholder reports
Value shares 52
Value Advisor Class shares --
Registration 28
Legal and audit 14
Directors 4
Miscellaneous 5
Total expenses 3,725
Expenses paid indirectly (1)
Net expenses 3,724
Net investment income (loss) 5,814
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 29,710
Foreign currency transactions 21
Net realized gain (loss) 29,731
Change in net unrealized gain or loss
Securities (47,123)
Other assets and liabilities
denominated in foreign currencies (1)
Change in net unrealized gain or loss (47,124)
Net realized and unrealized gain (loss) (17,393)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (11,579)
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Value Fund
--------------------------------------------------------------------------------
Unaudited
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 5,814 $ 9,671
Net realized gain (loss) 29,731 87,539
Change in net
unrealized gain or loss (47,124) (38,582)
Increase (decrease) in net
assets from operations (11,579) 58,628
Distributions to shareholders
Net investment income
Value shares -- (9,204)
Net realized gain
Value shares -- (95,424)
Decrease in net assets
from distributions -- (104,628)
Capital share transactions *
Shares sold
Value shares 238,769 468,108
Value Advisor Class shares 10 --
Increase in net assets
from shares sold 238,779 468,108
Distributions reinvested
Value shares -- 96,937
Shares redeemed
Value shares (247,211) (442,140)
Increase (decrease) in net assets
from capital share transactions (8,432) 122,905
Net Assets
Increase (decrease) during period (20,011) 76,905
Beginning of period 851,419 774,514
End of period $ 831,408 $ 851,419
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*Share information
Shares sold
Value shares 13,873 23,992
Value Advisor Class shares 1 --
Distributions reinvested
Value shares -- 5,545
Shares redeemed
Value shares (14,640) (23,188)
Increase (decrease) in
shares outstanding (766) 6,349
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Value Fund
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Unaudited June 30, 2000
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. The fund has two classes of shares-Value, offered since
September 30, 1994, and Value Advisor Class, first offered on March 31,
2000. Value Advisor Class sells its shares only through financial
intermediaries, which it compensates for distribution and certain
administrative services under a Board-approved Rule 12b-1 plan. Each class
has exclusive voting rights on matters related solely to that class,
separate voting rights on matters that relate to both classes, and, in all
other respects, the same rights and obligations as the other class. The
fund seeks long-term capital appreciation and, secondarily, income by
investing primarily in common stocks that are believed to be undervalued.
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.
Class Accounting The Value Advisor Class pays distribution and
administrative expenses, in the form of Rule 12b-1 fees, in an amount not
exceeding 0.25% of the class's average net assets. Shareholder servicing,
prospectus, and shareholder report expenses are charged directly to the
class to which they relate. Expenses common to both classes, investment
income, and realized and unrealized gains and losses are allocated to the
classes based upon the relative daily net assets of each class. Income
distributions are declared and paid by each class on an annual basis.
Capital gain distributions are declared and paid by the fund on an annual
basis.
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 and are used to reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $250,400,000 and $254,786,000, respectively, for the
six months ended June 30, 2000.
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.
At June 30, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$915,880,000. Net unrealized loss aggregated $81,589,000 at period-end, of
which $63,495,000 related to appreciated investments and $145,084,000 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 $472,000 was payable at June 30, 2000. 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 0.295% for assets
in excess of $120 billion. At June 30, 2000, and for the six months then
ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
The manager has agreed to bear any expenses through December 31, 2001,
which would cause Value Advisor Class's ratio of total expenses to average
net assets to exceed 1.10%. Thereafter, through December 31, 2003, Value
Advisor Class is required to reimburse the manager for these expenses,
provided that its average net assets have grown or expenses have declined
sufficiently to allow reimbursement without causing its ratio of total
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 $767,000 for the six months ended June 30, 2000, of which
$163,000 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, 2000, totaled $1,283,000 and are reflected as interest income in
the accompanying Statement of Operations.
T. Rowe Price Shareholder Services
--------------------------------------------------------------------------------
Investment Services and Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132-Available Monday through Friday from 8 a.m. to 10
p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person-Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking-Available on most fixed-income funds ($500 minimum).
Automatic Investing-From your bank account or paycheck.
Automatic Withdrawal-Scheduled, automatic redemptions.
Distribution Options- Reinvest all, some, or none of your distributions.
Automated 24-Hour Services-Including Tele*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments-Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement-Overview of all your accounts with T. Rowe Price.
Shareholder Reports-Fund managers' reviews of their strategies and results.
T. Rowe Price Report-Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update-Quarterly review of all T. Rowe Price fund results.
Insights-Educational reports on investment strategies and financial
markets.
Investment Guides-Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
** Based on a July 2000 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of order.
T. Rowe Price Mutual Funds
--------------------------------------------------------------------------------
STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Tax-Efficient Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery*
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS!
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors.
! Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the funds.
Please call for a prospectus, which contains complete information, including
fees and expenses. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY.
T. Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site.
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
"T. Rowe Price Invest With Confidence"(registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F07-051 6/30/00
