Item 1. Report to Shareholders
T. Rowe Price Diversified Mid-Cap Growth Fund
- --------------------------------------------------------------------------------
June 30, 2004
Certified Semiannual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout the period
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12/31/03
Through
6/30/04
NET ASSET VALUE
Beginning of period $ 10.00
Investment activities
Net investment income (loss) (0.03)*
Net realized and unrealized gain (loss) 0.65
Total from investment activities 0.62
NET ASSET VALUE
End of period $ 10.62
-----------------
Ratios/Supplemental Data
Total return^ 6.20%*
Ratio of total expenses to
average net assets 1.25%+*
Ratio of net investment
income (loss) to average
net assets (0.71)%+*
Portfolio turnover rate 4.0%+
Net assets, end of period
(in thousands) $ 34,012
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during the period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 1.25% contractual expense limitation in
effect through 4/30/06.
+ Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
PORTFOLIO OF INVESTMENTS (1) Shares Value
- --------------------------------------------------------------------------------
(Cost and value in $ 000s)
COMMON STOCKS 99.6%
CONSUMER DISCRETIONARY 20.8%
Auto Components 0.2%
Gentex 1,900 75
75
Automobiles 0.6%
Harley-Davidson 1,300 80
Thor Industries 1,600 54
Winnebago ss. 1,800 67
201
Hotels, Restaurants & Leisure 4.1%
Alliance Gaming * 3,700 63
Hilton 2,200 41
International Game Technology 5,600 216
Marriott, Class A 4,200 210
Multimedia Games *ss. 1,800 48
Outback Steakhouse 1,500 62
Royal Caribbean Cruises ss. 2,900 126
Ruby Tuesday 1,600 44
Shuffle Master *ss. 3,399 123
Starbucks * 3,100 135
Station Casinos 4,000 194
The Cheesecake Factory *ss. 1,600 64
Wynn Resorts *ss. 1,700 66
1,392
Household Durables 1.9%
Centex 2,800 128
Jarden * 1,700 61
KB Home 900 62
Lennar, Class A 3,800 170
Pulte 2,000 104
Toll Brothers * 3,000 127
652
Leisure Equipment & Products 0.6%
Brunswick 1,000 41
Mattel 4,800 87
Polaris Industries ss. 1,600 77
205
Media 6.5%
Citadel Broadcasting * 3,000 44
Cox Radio, Class A * 6,800 118
Cumulus Media, Class A * 2,300 39
Dow Jones ss. 1,700 77
Entercom Communications * 2,400 89
Getty Images * 2,300 138
Harte-Hanks 2,600 63
Lamar Advertising, Class A * 1,800 78
McGraw-Hill 1,000 77
Meredith 3,700 203
New York Times, Class A 3,700 165
Omnicom 1,100 83
Radio One, Class D *ss. 6,600 106
Regent Communications *ss. 10,600 66
Salem Communications, Class A * 3,200 87
Scripps, Class A 1,300 136
Spanish Broadcasting, Class A *ss. 9,200 86
Univision Communications, Class A * 5,300 169
Washington Post, Class B 100 93
Westwood One * 2,900 69
WPP Group ADR 4,600 236
2,222
Multiline Retail 2.1%
99 Cents Only Stores *ss. 3,100 47
Big Lots * 3,300 48
Dollar General 9,700 190
Dollar Tree Stores * 5,500 151
Family Dollar Stores 6,400 195
Fred's, Class A ss. 3,100 68
699
Specialty Retail 4.5%
AutoZone * 900 72
Bed Bath & Beyond * 2,400 92
Men's Wearhouse * 1,800 48
O'Reilly Automotive *ss. 1,600 72
PETsMART 5,600 182
Ross Stores 7,600 203
Staples 10,800 317
Tiffany 3,400 125
TJX 11,500 278
Williams-Sonoma * 4,800 158
1,547
Textiles, Apparel, & Luxury Goods 0.3%
Coach * 1,900 86
86
Total Consumer Discretionary 7,079
CONSUMER STAPLES 1.8%
Beverages 0.2%
Cott * 1,800 58
58
Food & Staples Retailing 0.2%
CVS 1,000 42
Duane Reade * 1,100 18
60
Food Products 1.0%
Delta Pine & Land 1,800 39
Hershey Foods 2,800 130
McCormick ss. 1,600 54
Tootsie Roll Industries 1,618 53
Wrigley 1,200 76
352
Household Products 0.1%
Clorox 900 48
48
Personal Products 0.3%
Estee Lauder, Class A 2,000 98
98
Total Consumer Staples 616
ENERGY 2.8%
Energy Equipment & Services 1.9%
Baker Hughes 2,900 109
BJ Services * 3,600 165
Cooper Cameron *ss. 1,800 88
Diamond Offshore Drilling ss. 1,800 43
Smith International * 3,100 173
Weatherford International *ss. 1,600 72
650
Oil & Gas 0.9%
Apache 2,200 96
Devon Energy 1,800 118
XTO Energy 2,750 82
296
Total Energy 946
FINANCIALS 11.5%
Capital Markets 5.9%
A.G. Edwards ss. 1,600 54
AmeriTrade * 11,700 133
AMVESCAP ss. 3,000 42
Charles Schwab 13,700 132
Eaton Vance ss. 4,700 180
Federated Investors, Class B 3,700 112
Franklin Resources 5,500 275
Investor's Financial Services ss. 3,600 157
Janus Capital Group 3,500 58
LaBranche & Co. ss. 4,800 40
Legg Mason 1,100 100
Mellon Financial 7,900 232
Northern Trust 6,700 283
Raymond James Financial 2,400 63
SEI 2,400 70
Waddell & Reed Financial, Class A 3,900 86
2,017
Commercial Banks 1.6%
Boston Private Financial ss. 1,800 42
City National ss. 900 59
Community First Bankshares 1,600 52
East West Bancorp 2,000 61
First Horizon National 1,200 55
North Fork Bancorporation ss. 2,300 88
Silicon Valley Bancshares *ss. 1,800 71
Synovus Financial 2,700 68
UCBH Holdings ss. 1,600 63
559
Diversified Financial Services 0.8%
Moody's 4,000 259
259
Insurance 2.6%
Ambac 1,100 81
Arch Capital Group * 1,600 64
Arthur J. Gallagher 2,800 85
Brown and Brown 2,000 86
Markel * 200 56
MBIA 1,200 69
RenaissanceRe Holdings 1,600 86
Triad Guaranty * 900 52
Willis Group Holdings 7,700 288
867
Real Estate 0.1%
Jones Lang Lasalle * 1,800 49
49
Thrifts & Mortgage Finance 0.5%
MGIC Investment 1,300 99
Radian Group 1,400 67
166
Total Financials 3,917
HEALTH CARE 20.4%
Biotechnology 4.8%
Abgenix *ss. 4,100 48
Amylin Pharmaceuticals *ss. 2,300 53
Applied Biosystems Group - Applera 4,000 87
Biogen Idec * 1,600 101
Celgene ss. 2,100 120
Cephalon *ss. 1,600 86
Charles River Laboratories International * 1,600 78
Chiron * 1,500 67
deCODE GENETICS *ss. 5,200 44
Diversa *ss. 6,600 67
Genzyme * 1,700 81
Gilead Sciences * 1,400 94
Human Genome Sciences *ss. 3,900 45
Martek Biosciences *ss. 800 45
MedImmune * 3,400 80
Millennium Pharmaceuticals * 3,400 47
Neurocrine Biosciences * 1,400 73
ONYX Pharmaceuticals * 1,000 42
Protein Design Labs * 3,200 61
Qiagen * 5,000 61
Techne * 2,900 126
Tularik *ss. 1,900 47
Vertex Pharmaceuticals *ss. 6,200 67
1,620
Health Care Equipment & Supplies 6.6%
Apogent Technologies * 1,800 58
ArthroCare *ss. 1,800 52
Bausch & Lomb 900 59
Beckman Coulter 2,000 122
Becton, Dickinson 1,100 57
Biomet 4,900 218
C. R. Bard ss. 1,200 68
Cooper Companies 1,300 82
Dentsply International 2,400 125
Edwards Lifesciences *ss. 1,900 66
Integra LifeServices Holdings * 1,700 60
Invitrogen * 2,200 158
Millipore * 1,700 96
ResMed *ss. 1,600 81
Respironics * 900 53
Smith & Nephew ADR 1,700 94
St. Jude Medical * 1,200 91
Stryker 2,000 110
Sybron Dental Specialties * 1,600 48
Varian Medical Systems * 1,700 135
Waters Corporation * 2,500 119
Wright Medical Group * 1,600 57
Zimmer Holdings * 2,800 247
2,256
Health Care Providers & Services 7.8%
AmerisourceBergen ss. 900 54
Anthem *ss. 1,700 152
Caremark RX * 6,000 198
Coventry Health Care * 4,100 200
Davita *ss. 4,150 128
Express Scripts * 2,600 206
Health Management ss. 5,300 119
Henry Schein * 1,700 107
IMS Health 5,800 136
Laboratory Corporation of America *ss. 3,300 131
Lincare Holdings * 2,500 82
Manor Care 1,600 52
McKesson 1,500 51
Medco * 6,300 236
Omnicare 3,200 137
Patterson Dental * 1,800 138
Quest Diagnostics 1,600 136
Renal Care Group * 2,400 80
WellChoice * 5,100 211
WellPoint Health Networks * 900 101
2,655
Pharmaceuticals 1.2%
Allergan 1,500 134
Atherogenics *ss. 2,400 46
Medicines Company *ss. 2,100 64
Medicis Pharmaceutical, Class A ss. 1,000 40
Nektar Therapeutics *ss. 3,400 68
Sepracor *ss. 1,300 69
421
Total Health Care 6,952
INDUSTRIALS & BUSINESS SERVICES 10.9%
Aerospace & Defense 0.8%
Embraer Aircraft ADR ss. 3,300 95
Mercury Computer Systems * 2,100 52
Rockwell Collins 3,700 123
270
Air Freight & Logistics 1.2%
C.H. Robinson Worldwide 3,700 170
Expeditors International of Washington 2,900 143
UTi Worldwide ss. 1,600 84
397
Airlines 0.3%
SkyWest 2,200 38
Southwest Airlines 3,500 59
97
Building Products 0.2%
Trex *ss. 1,600 60
60
Commercial Services & Supplies 6.4%
Apollo Group, Class A * 1,500 133
ARAMARK, Class B 2,600 75
Avery Dennison ss. 1,700 109
Career Education * 1,800 82
ChoicePoint * 3,400 155
Cintas 4,100 196
Corinthian Colleges * 2,800 69
Corporate Executive Board 2,700 156
Devry * 2,600 71
Dun & Bradstreet *ss. 1,900 102
Education Management * 3,600 118
Equifax 2,900 72
H&R Block 1,200 57
HNI Corporation 1,700 72
ITT Educational Services * 1,900 72
Manpower 2,400 122
Pitney Bowes 900 40
Robert Half International 4,300 128
Stericycle * 1,500 78
Universal Technical Institute * 1,300 52
University of Phoenix Online * 1,500 131
Viad 1,700 46
Watson Wyatt * 1,800 48
2,184
Industrial Conglomerates 0.3%
Roper Industries 1,700 97
97
Machinery 1.5%
Cuno *ss. 900 48
Danaher 1,000 52
Dover 1,500 63
IDEX ss. 1,350 46
ITT Industries 1,900 158
Kaydon ss. 2,100 65
Pall 2,900 76
508
Road & Rail 0.2%
Landstar Systems * 1,600 84
84
Total Industrials & Business Services 3,697
INFORMATION TECHNOLOGY 28.6%
Communications Equipment 3.5%
Corning * 20,100 263
Emulex *ss. 3,200 46
F5 Networks *ss. 3,200 85
JDS Uniphase *ss. 50,700 192
Juniper Networks * 9,400 231
Plantronics * 1,600 67
QLogic * 2,500 66
Research In Motion * 3,600 246
1,196
Computers & Peripherals 1.4%
Diebold ss. 1,200 63
Lexmark International, Class A * 2,900 280
Network Appliance * 6,300 136
479
Electronic Equipment & Instruments 2.2%
CDW 2,800 178
FLIR Systems *ss. 1,600 88
Jabil Circuit *ss. 4,800 121
Littelfuse * 1,700 72
Mettler-Toledo International * 1,700 84
Molex, Class A 3,400 93
National Instruments 1,350 41
Symbol Technologies 4,800 71
748
Internet Software & Services 1.5%
Internet Security Systems *ss. 3,900 60
MatrixOne *ss. 6,300 43
Monster Worldwide * 4,500 116
Sina *ss. 3,600 119
VeriSign * 6,100 121
Websense *ss. 1,200 45
504
IT Services 3.9%
Affiliated Computer Services, Class A * 2,400 127
Certegy ss. 4,100 159
Cognizant Technology Solutions *ss. 7,800 198
DST Systems *ss. 3,400 164
Fiserv * 6,000 233
Global Payments ss. 1,100 50
Hewitt Associates, Class A * 1,800 49
Iron Mountain * 2,800 135
Paychex 2,300 78
Sabre Holdings 1,800 50
SunGard Data Systems * 2,900 75
1,318
Office Electronics 0.3%
Zebra Technologies * 1,100 96
96
Semiconductor & Semiconductor Equipment 7.8%
Agere Systems, Class B * 17,500 38
Altera * 13,200 293
AMIS Holdings * 4,700 79
Analog Devices ss. 900 42
ASML Holding *ss. 2,700 46
Broadcom, Class A * 5,100 239
Cymer * 1,900 71
Integrated Circuit Systems * 1,700 46
Intersil Holding, Class A 4,800 104
KLA-Tencor *ss. 2,500 123
Lam Research * 3,400 91
Linear Technology 6,200 245
Marvell Technology Group * 1,800 48
Maxim Integrated Products 2,000 105
Microchip Technology 8,900 281
Microsemi *ss. 3,700 53
National Semiconductor * 6,800 150
Novellus Systems * 5,000 157
Power Integrations *ss. 2,600 65
Semtech *ss. 3,500 82
Silicon Laboratories *ss. 1,600 74
Xilinx 6,600 220
2,652
Software 8.0%
Adobe Systems 6,400 298
BMC Software * 5,900 109
Cadence Design Systems *ss. 9,100 133
Check Point Software Technologies * 2,300 62
Citrix Systems *ss. 5,600 114
Cognos * 2,500 90
Electronic Arts * 5,500 300
FactSet Research Systems ss. 1,900 90
Fair Isaac ss. 2,500 84
FileNet * 2,000 63
Intuit * 4,400 170
Jack Henry & Associates 4,000 80
Kronos * 900 37
Mercury Interactive * 2,800 140
NetIQ * 4,700 62
Network Associates * 6,800 123
PeopleSoft * 6,100 113
Red Hat *ss. 5,800 133
Siebel Systems * 6,600 71
Symantec * 6,200 272
Synopsys * 4,200 120
VERITAS Software * 2,500 69
2,733
Total Information Technology 9,726
MATERIALS 1.7%
Chemicals 1.3%
Ecolab ss. 4,300 136
Engelhard 1,600 52
Praxair 2,300 92
Sigma Aldrich 900 53
Symyx Technologies * 1,700 41
Valspar 1,700 86
460
Construction Materials 0.0%
Eagle Materials ss. 22 2
Eagle Materials, Class B ss. 74 5
7
Containers & Packaging 0.4%
Sealed Air * 2,300 122
122
Total Materials 589
TELECOMMUNICATION SERVICES 1.1%
Wireless Telecommunication Services 1.1%
American Tower Systems, Class A *ss. 5,100 78
Crown Castle International * 4,600 68
Nextel Partners, Class A *ss. 7,000 111
Rogers Wireless Communications * 2,000 54
Western Wireless, Class A * 1,700 49
Total Telecommunication Services 360
Total Common Stocks (Cost $32,633) 33,882
SHORT-TERM INVESTMENTS 0.0%
Money Market Fund 0.0%
T. Rowe Price Reserve Investment Fund,
1.16% # 9,105 9
Total Short-Term Investments (Cost $9) 9
SECURITIES LENDING COLLATERAL 14.3%
Money Market Trust 14.3%
State Street Bank and Trust Company of
New Hampshire N.A. Securities Lending
Quality Trust units, 1.22% # 4,861,377 4,861
Total Securities Lending Collateral
(Cost $4,861) 4,861
Total Investments in Securities
113.9% of Net Assets (Cost $37,503) $38,752
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(1) Denominated in U.S. dollars unless otherwise noted
# Seven-day yield
* Non-income producing
ss. All or a portion of this security is on loan at June 30, 2004 -
See Note 2
ADR American Depository Receipts
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
STATEMENT OF ASSETS AND LIABILITIES
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(In thousands except shares and per share amounts)
Assets
Investments in securities, at value (Cost $37,503) $ 38,752
Other assets 230
Total assets 38,982
Liabilities
Obligation to return securities lending collateral 4,861
Other liabilities 109
Total liabilities 4,970
NET ASSETS $ 34,012
--------------------
Net Assets Consist of:
Undistributed net investment income (loss) $ (89)
Undistributed net realized gain (loss) (47)
Net unrealized gain (loss) 1,249
Paid-in-capital applicable to 3,203,715 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares authorized 32,899
NET ASSETS $ 34,012
--------------------
NET ASSET VALUE PER SHARE $ 10.62
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF OPERATIONS
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($ 000s)
12/31/03
Ended
6/30/04
Investment Income (Loss)
Income
Dividend $ 63
Securities lending 4
Total income 67
Expenses
Investment management 82
Custody and accounting 65
Shareholder servicing 31
Registration 30
Legal and audit 14
Prospectus and shareholder reports 10
Directors 2
Reductions/repayments pursuant to expense limitation
Investment management fees (waived) repaid (78)
Total expenses 156
Net investment income (loss) (89)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (47)
Change in net unrealized gain (loss) on securities 1,249
Net realized and unrealized gain (loss) 1,202
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 1,113
--------------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
12/31/03
Ended
6/30/04
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (89)
Net realized gain (loss) (47)
Change in net unrealized gain (loss) 1,249
Increase (decrease) in net assets from operations 1,113
Capital share transactions *
Shares sold 35,572
Shares redeemed (2,773)
Increase (decrease) in net assets from capital
share transactions 32,799
Net Assets
Increase (decrease) during period 33,912
Beginning of period 100
End of period $ 34,012
--------------------
(Including undistributed net investment income (loss)
of $(89) at 6/30/04)
*Share information
Shares sold 3,463
Shares redeemed (269)
Increase (decrease) in shares outstanding 3,194
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Diversified Mid-Cap Growth Fund, Inc. (the fund) is registered
under the Investment Company Act of 1940 (the 1940 Act) as a diversified,
open-end management investment company and commenced operations on December 31,
2003. The fund seeks long-term growth of capital by investing primarily in
common stocks of medium-sized growth companies.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Equity securities listed or regularly traded
on a securities exchange or in the over-the-counter market are valued at the
last quoted sale price or, for certain markets, the official closing price at
the time the valuations are made, except for OTC Bulletin Board securities,
which are valued at the mean of the latest bid and asked prices. A security that
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 are valued at the mean of the latest
bid and asked prices for domestic securities and the last quoted sale price for
international securities.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation.
Other investments and those 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 the T. Rowe Price Valuation Committee,
established by the fund's Board of Directors.
Rebates and Credits
Subject to best execution, the fund may direct certain security trades to
brokers who have agreed to rebate a portion of the related brokerage commission
to the fund in cash. Commission rebates are included in realized gain on
securities in the accompanying financial statements. Additionally, the fund
earns credits on temporarily uninvested cash balances at the custodian that
reduce the fund's custody charges. Custody expense in the accompanying financial
statements is presented before reduction for credits.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Dividends received from
mutual fund investments are reflected as dividend income; capital gain
distributions are reflected as realized gain/loss. Dividend income and capital
gain distributions are recorded on the ex-dividend date. Investment transactions
are accounted for on the trade date. Realized gains and losses are reported on
the identified cost basis. Distributions to shareholders are recorded on the
ex-dividend date. Income distributions are declared and paid on an annual basis.
Capital gain distributions, if any, are declared and paid by the fund, typically
on an annual basis.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Securities Lending
The fund lends its securities to approved brokers to earn additional income. It
receives as collateral cash and U.S. government securities valued at 102% to
105% of the value of the securities on loan. Cash collateral is invested in a
money market pooled trust managed by the fund's lending agent in accordance with
investment guidelines approved by fund management. Collateral is maintained over
the life of the loan in an amount not less than the value of loaned securities,
as determined at the close of fund business each day; any additional collateral
required due to changes in security values is delivered to the fund the next
business day. Although risk is mitigated by the collateral, the fund could
experience a delay in recovering its securities and a possible loss of income or
value if the borrower fails to return the securities. Securities lending revenue
recognized by the fund consists of earnings on invested collateral and borrowing
fees, net of any rebates to the borrower and compensation to the lending agent.
At June 30, 2004, the value of loaned securities was $4,807,000; aggregate
collateral consisted of $4,861,000 in the money market pooled trust and U.S.
government securities valued at $42,000.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $31,722,000 and $477,000, respectively, for the period ended
June 30, 2004.
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 under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its taxable income
and gains. Federal income tax regulations differ from generally accepted
accounting principles; therefore, distributions determined in accordance with
tax regulations may differ in amount or character from net investment income and
realized gains for financial reporting purposes. Financial reporting records are
adjusted for permanent book/tax differences to reflect tax character. Financial
records are not adjusted for temporary differences. The amount and character of
tax-basis distributions and composition of net assets are finalized at fiscal
year-end; accordingly, tax-basis balances have not been determined as of
June 30, 2004.
At June 30, 2004, the cost of investments for federal income tax
purposes was $37,503,000. Net unrealized gain aggregated $1,249,000 at
period-end, of which $2,545,000 related to appreciated investments and
$1,296,000 related to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.35% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its average daily net assets to those of the group. At June 30, 2004,
the effective annual group fee rate was 0.31%, and investment management fee
payable totaled $4,000.
The fund is also subject to a contractual expense limitation through April 30,
2006. During the limitation period, the manager is required to waive its
management fee and reimburse the fund for any expenses, excluding interest,
taxes, brokerage commissions, and extraordinary expenses, that would otherwise
cause the fund's ratio of total expenses to average net assets (expense ratio)
to exceed its expense limitation of 1.25%. For a period of three years after the
date of any reimbursement or waiver, the fund is required to repay the manager
for expenses previously reimbursed and management fees waived to the extent its
net assets have grown or expenses have declined sufficiently to allow repayment
without causing the fund's expense ratio to exceed its expense limitation.
Pursuant to this agreement, at June 30, 2004, management fees waived in the
amount of $78,000 remain subject to repayment by the fund through
April 30, 2008.
In addition, the fund has entered into service agreements with Price Associates
and two wholly owned subsidiaries of Price Associates (collectively, Price).
Price Associates computes the daily share price and maintains the financial
records of the fund. T. Rowe Price Services, Inc., provides shareholder and
administrative services in its capacity as the fund's transfer and dividend
disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides
subaccounting and recordkeeping services for certain retirement accounts
invested in the fund. Expenses incurred pursuant to these service agreements
totaled $54,000 for the period ended June 30, 2004, of which $7,000 was payable
at period-end.
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe
Price Government Reserve Investment Fund (collectively, the Reserve Funds),
open-end management investment companies managed by Price Associates. The
Reserve Funds are offered as cash management options to mutual funds, trusts,
and other accounts managed by Price Associates and/or its affiliates, and are
not available for direct purchase by members of the public. The Reserve Funds
pay no investment management fees. During the period ended June 30, 2004,
dividend income from the Reserve Funds totaled $3,000.
T. Rowe Price Diversified Mid-Cap Growth Fund
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Certified Semiannual Report
INFORMATION ON PROXY VOTING
A description of the policies and procedures that the T. Rowe Price Diversified
Mid-Cap Growth Fund uses to determine how to vote proxies relating to portfolio
securities is available, without charge, upon request by calling 1-800-225-5132.
It also appears in the fund's Statement of Additional Information (Form 485B),
which can be found on the SEC's Web site, www.sec.gov.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions is filed as an
exhibit to the registrant's annual Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the registrant's
most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant's annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant's annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 10. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 11. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is filed
with the registrant's annual Form N-CSR.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end
companies: not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Diversified Mid-Cap Growth Fund, Inc.
By: /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date: August 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ James S. Riepe
James S. Riepe
Principal Executive Officer
Date: August 16, 2004
By: /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date: August 16, 2004