______________________
SEMIANNUAL REPORT
______________________
Growth & Income Fund
______________________
================================================================================
Report Highlights
- --------------------------------------------------------------------------------
* The stock market was robust during the first half, propelled by a good
economy and record cash inflows from mutual funds.
* Your fund's strong returns of 9.90% and 24.66% for the 6- and 12-month
periods, respectively, exceeded the Lipper peer group average.
* About 84% of fund assets were in common stocks on June 30. We established
several major stock positions, including two paper companies and two insurers.
Our sales included our relatively small high-yield bond position.
* After six straight quarterly advances, we expect the equity market to
become more difficult. We will be alert to the investment opportunities that
often accompany higher volatility.
================================================================================
Fellow Shareholders
- --------------------------------------------------------------------------------
Your fund experienced solid gains in the first half of 1996 during a strong
period for the equity market. Overcoming concerns about rising interest rates
and the weak bond market, stocks were propelled onto higher ground by a
surprisingly good economy, significant cash inflows from mutual funds, and
increased demand by foreign investors.
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 6/30/96 6 Months 12 Months
- --------------------------------------------------------------------------------
Growth & Income Fund 9.90% 24.66%
S&P 500 10.10 26.00
Lipper Growth & Income
Funds Average 9.24 22.13
================================================================================
Your fund performed well in this environment, as shown in the table,
exceeding the return of the average growth and income fund for the recent 6- and
12-month periods. Even though the fund was not wholly invested in stocks,
results were close to the overall market as represented by the unmanaged
Standard & Poor's 500 Stock Index, particularly in the past six months.
<PAGE>
================================================================================
Dividend Distribution
================================================================================
On June 25 your Board of Directors declared a second quarter income
dividend of $0.11 per share, payable to shareholders of record on that date.
This brings total distributions for 1996 to date to $0.32 per share, including
the $0.09 per share long-term capital gain your fund paid in the first quarter.
Your check or statement reflecting the current income distribution was mailed
separately. All of these distributions will be reported to you in January 1997
on Form 1099-DIV.
================================================================================
Market Environment
- --------------------------------------------------------------------------------
The economy advanced at a faster pace in the first half of 1996 and was
accompanied by a rise in employment, hours worked, and consumer incomes. This
surprised most observers after last year's slowdown. These otherwise favorable
trends created concern in the bond market that inflationary pressures or credit
demands might accelerate and cause the Federal Reserve to pursue a more
restrictive monetary policy. In response, bond prices fell as the long Treasury
bond yield rose from under 6% at the beginning of the year to over 7% in June.
The broad stock market advance during this period reflected the favorable
trend in corporate profits and the huge inflows of mutual fund money into the
market. Although this period was rewarding, we see some cautionary signals for
the months ahead. The two most important investment fundamentals are trends in
corporate profits and interest rates. Although rising profits overcame rising
rates in the first half, we see increasing evidence that profit gains are
becoming more difficult for many companies. This suggests that the coming months
will be more challenging and that market volatility will be higher as
uncertainty increases.
================================================================================
Portfolio Review
- --------------------------------------------------------------------------------
The asset allocation of your fund is shown in the following chart. The most
notable change from the prior report is the reduction in the reserve position
from the 15% level. A portion of these reserves was directed to fixed income
investments, principally long Treasury bonds, as rising rates made longer
maturity securities more attractive on a tactical basis.
[Pie chart showing "Security Diversification" - Common stocks 84%; Bonds
and Preferred stocks 5%; Convertibles 3%; Reserves 8%]
<PAGE>
Common stock investments were our primary focus, as indicated by the list
of major transactions following this letter. Two of our largest purchases were
companies that produce and market consumer paper products, James River and
Kimberly-Clark. These companies were caught in a competitive pricing squeeze as
the widely diversified Procter & Gamble (also a new holding) dropped the prices
on some of its paper products. The stocks reacted negatively, and we felt this
created a good buying opportunity in these high-quality companies. In addition,
James River is undergoing a longer-term restructuring plan that should improve
its earnings outlook.
Two other large purchases were in the insurance sector. American General is
a diversified financial services company selling traditional life insurance and
annuity products, in addition to having a consumer finance operation.
Travelers/Aetna is the property-casualty spinoff resulting from the combined
operations of the two parent companies. The remaining major purchases are a
combination of new and existing holdings that satisfy our valuation criteria and
have the potential to provide favorable long-term rewards.
There was no common theme to our major sales, but you may note in the Major
Portfolio Changes table that we sold three corporate bond holdings. These were
high-yield (lower-quality) bonds that had performed well over the past year and
that we felt had become fully valued. Unlike high-quality bonds, such as
Treasuries, high-yield bonds typically respond more strongly to the level of
economic activity than to the direction of interest rates.
Your fund's emphasis on attractive relative valuation characteristics is
shown in the Financial Profile table.
================================================================================
Financial Profile
- --------------------------------------------------------------------------------
Growth & Income
- --------------------------------------------------------------------------------
As of 6/30/96 Fund Stocks S&P 500
- --------------------------------------------------------------------------------
Dividend Growth
(5-year annual average) 7.4% 6.3%
Current Yield 2.7% 2.2%
Price/Book Ratio 3.3X 3.5X
Price/Earnings Ratio
(1996 estimated EPS) 15.9X 16.6X
================================================================================
================================================================================
<PAGE>
Outlook
- --------------------------------------------------------------------------------
The past six quarters were extremely favorable for the equity markets, and
your fund enjoyed an uninterrupted string of quarterly gains. The underlying
business fundamentals supporting the market were unusually positive. At this
stage of the business cycle, we suspect that the investment environment is
turning more difficult. On balance, we expect the market to be more volatile as
the uncertainty level increases. As always, we will be alert for the investment
opportunities that inevitably arise during such periods.
Respectfully submitted,
Stephen W. Boesel
[signature]
President and
Chairman of the Investment Advisory Committee
July 19, 1996
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
6/30/96
Corning .................................................... 3.3%
Cal Fed Bancorp ............................................ 2.8
Pfizer ..................................................... 2.4
Philip Morris .............................................. 2.0
GE ......................................................... 2.0
Atlantic Richfield ......................................... 1.6
PepsiCo .................................................... 1.6
Chase Manhattan ............................................ 1.5
Great Lakes Chemical ....................................... 1.5
Dayton Hudson .............................................. 1.4
James River ................................................ 1.3
Merck ...................................................... 1.3
Fannie Mae ................................................. 1.3
Schlumberger ............................................... 1.2
Texaco ..................................................... 1.2
Household International .................................... 1.2
WMX Technologies ........................................... 1.2
American Express ........................................... 1.2
Honeywell .................................................. 1.2
American Home Products ..................................... 1.2
Wells Fargo ................................................ 1.2
Halliburton ................................................ 1.1
Kimberly-Clark ............................................. 1.1
Entergy .................................................... 1.1
Centerior Energy ........................................... 1.1
Total ...................................................... 38.0%
================================================================================
<PAGE>
Portfolio Highlights
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended June 30, 1996
- --------------------------------------------------------------------------------
Ten Largest Purchases
- ---------------------------------------
James River *
Exide Cv. Bond *
Kimberly-Clark *
American General *
FMC *
USX-Marathon *
Procter & Gamble *
Travelers/Aetna Property Casualty *
Millipore *
Newell
Ten Largest Sales
- ---------------------------------------
General Growth Properties **
Coca-Cola FEMSA **
Brunswick **
Cal Fed Bancorp
Riverwood International Bond **
American Greetings **
Continental Cablevision Bond **
Dime Bancorp Bond **
Foodmaker **
Circuit City Stores
* Position added
** Position eliminated
================================================================================
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.
<PAGE>
[SEC chart shown here]
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.
================================================================================
Periods Ended 6/30/96 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Growth & Income Fund 24.66% 14.52% 15.53% 11.71%
================================================================================
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
Unaudited
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6 Months Year
Ended Ended
6/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
NET ASSET VALUE
Beginning of period ......... $19.18 $15.63 $16.57 $15.53 $14.16 $11.22
Investment activities
Net investment income ... 0.24 0.58 0.50 0.46 0.55 0.56
Net realized and
unrealized gain (loss) 1.65 4.16 (0.53) 1.53 1.57 2.94
Total from
investment activities . 1.89 4.74 (0.03) 1.99 2.12 3.50
Distributions
Net investment income ... (0.23) (0.59) (0.49) (0.47) (0.60) (0.56)
Net realized gain ....... (0.09) (0.60) (0.42) (0.48) (0.15) --
Total distributions (0.32) (1.19) (0.91) (0.95) (0.75) (0.56)
NET ASSET VALUE
End of period ................ $20.75 $19.18 $15.63 $16.57 $15.53 $14.16
Ratios/Supplemental Data
Total return ................. 9.90% 30.92% (0.15)% 12.96% 15.33% 31.52%
Ratio of expenses to
average net assets ........... 0.83%+ 0.84% 0.81% 0.83% 0.85% 0.93%
Ratio of net investment
income to average
net assets ................... 2.48%+ 3.31% 3.08% 2.91% 3.75% 4.23%
Portfolio turnover rate ...... 10.1%+ 26.2% 25.6% 22.4% 29.9% 47.9%
Average commission
rate paid .................... $0.0799 -- -- -- -- --
Net assets, end of period
(in millions) ................ $2,058 $1,748 $1,229 $1,167 $840 $656
<FN>
+ Annualized.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Unaudited
- --------------------------------------------------------------------------------
June 30, 1996
Statement of Net Assets
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
Common Stocks 83.9%
FINANCIAL 16.6%
Bank and Trust 8.8%
BANC ONE ...................................... 350,218 $ 11,907
Cal Fed Bancorp (Class A) * ................... 3,000,000 54,750
California Federal Bank Goodwill
Certiificates * ........................... 347,612 3,020
Chase Manhattan ............................... 450,000 31,781
Citicorp ...................................... 246,575 20,373
KeyCorp ....................................... 550,000 21,313
National City ................................. 400,000 14,050
Wells Fargo ................................... 100,000 23,888
--------
181,082
Insurance 2.6%
American General .............................. 600,000 21,825
Travelers/Aetna Property Casualty (Class A) * . 600,000 17,025
UNUM .......................................... 250,000 15,562
--------
54,412
Financial Services 5.2%
American Express .............................. 550,000 24,544
Associates First Capital (Class A) * .......... 100,000 3,762
Bear Stearns .................................. 586,028 13,845
Beneficial .................................... 230,000 12,909
Fannie Mae .................................... 800,000 26,800
Household International ....................... 330,668 25,131
--------
106,991
Total Financial 342,485
========
<PAGE>
UTILITIES 6.7%
Telephone 2.5%
AT&T .................................... 225,000 13,950
BellSouth ............................... 30,000 1,271
GTE ..................................... 400,000 17,900
Pacific Telesis ......................... 525,000 17,719
--------
50,840
Electric Utilities 4.2%
Centerior Energy ........................ 3,000,000 22,125
Edison International .................... 1,001,700 17,655
Entergy ................................. 780,379 22,143
Niagara Mohawk .......................... 1,000,000 7,750
Unicom .................................. 600,000 16,725
--------
86,398
Total Utilities 137,238
========
CONSUMER NONDURABLES 22.3%
Beverages 3.8%
Anheuser-Busch .......................... 190,300 14,273
Bols Wessanen (NLG) ..................... 307,375 5,154
Brown-Forman (Class B) .................. 270,000 10,800
Coca-Cola ............................... 310,000 15,151
PepsiCo ................................. 920,000 32,545
--------
77,923
Food Processing 4.0%
General Mills ........................... 300,000 16,350
Heinz ................................... 700,000 21,262
McCormick ............................... 250,000 5,500
Ralston Purina .......................... 325,500 20,873
Sara Lee ................................ 600,000 19,425
--------
83,410
<PAGE>
Hospital Supplies/Hospital Management 1.8%
Abbott Laboratories ................... 200,000 8,700
Baxter International .................. 246,400 11,642
Millipore ............................. 378,600 15,854
--------
36,196
Pharmaceuticals 7.3%
American Home Products ................ 400,000 24,050
Merck ................................. 425,000 27,466
Perrigo * ............................. 900,000 10,181
Pfizer ................................ 700,000 49,962
SmithKline Beecham ADR ................ 300,000 16,313
Warner-Lambert ........................ 400,000 22,000
--------
149,972
Miscellaneous Consumer Products 5.4%
Newell ................................ 600,000 18,375
Philip Morris ......................... 400,000 41,600
Proctor & Gamble ...................... 200,000 18,125
RJR Nabisco ........................... 300,000 9,300
Springs Industries .................... 199,300 10,065
UST ................................... 400,000 13,700
--------
111,165
Total Consumer Nondurables 458,666
========
CONSUMER SERVICES 5.5%
General Merchandisers 3.0%
Dayton Hudson ......................... 275,000 28,360
J.C. Penney ........................... 200,000 10,500
TJX ................................... 560,900 18,930
Wal-Mart .............................. 150,000 3,806
--------
61,596
<PAGE>
Specialty Merchandisers 0.2%
Circuit City Stores ................... 100,000 3,613
--------
3,613
Entertainment and Leisure 1.2%
Host Marriott * ....................... 765,700 10,050
Reader's Digest (Class A) ............. 182,400 7,752
Reader's Digest (Class B) ............. 186,400 7,339
--------
25,141
Media and Communications 1.1%
Vodafone ADR ................................ 600,000 22,125
--------
22,125
Total Consumer Services 112,475
========
CONSUMER CYCLICALS 6.7%
Building and Real Estate 3.4%
Burnham Pacific Properties, REIT ............ 200,000 2,325
DeBartolo Realty, REIT ...................... 1,200,000 19,350
Federal Realty Investment Trust, REIT ....... 536,700 12,076
Reckson Associates, REIT .................... 259,000 8,547
Rouse ....................................... 574,500 14,865
South West Property Trust, REIT ............. 625,000 8,360
Taubman Centers, REIT ....................... 504,000 5,607
--------
71,130
Miscellaneous Consumer Durables 3.3%
Corning ..................................... 1,750,000 67,156
--------
67,156
Total Consumer Cyclicals 138,286
========
<PAGE>
TECHNOLOGY 1.2%
Electronic Systems 1.2%
Honeywell ................................... 450,000 24,525
--------
Total Technology 24,525
========
CAPITAL EQUIPMENT 4.4%
Electrical Equipment 2.0%
GE .......................................... 480,000 41,520
--------
41,520
Machinery 2.4%
Coltec Industries * ......................... 701,500 9,996
Cooper Industries ........................... 455,907 18,920
FMC * ....................................... 305,100 19,908
--------
48,824
Total Capital Equipment 90,344
========
BUSINESS SERVICES AND TRANSPORTATION 2.6%
Miscellaneous Business Services 1.3%
Gilbert Associates (Class A) ................ 165,000 2,145
WMX Technologies ............................ 750,000 24,563
--------
26,708
Airlines 0.5%
Delta ....................................... 126,807 10,525
--------
10,525
Railroads 0.8%
Burlington Northern Santa Fe ................ 200,000 16,175
--------
16,175
Total Business Services and Transportation 53,408
========
<PAGE>
ENERGY 8.8%
Energy Services 3.2%
Cooper Cameron * ............................ 400,484 17,521
Halliburton ................................. 418,000 23,199
Schlumberger ................................ 300,000 25,275
--------
65,995
Integrated Petroleum - Domestic 4.4%
Atlantic Richfield .......................... 275,000 32,587
British Petroleum ADR ....................... 200,000 21,375
Unocal ...................................... 500,000 16,875
USX-Marathon ................................ 1,000,000 20,125
--------
90,962
Integrated Petroleum - International 1.2%
Texaco ...................................... 300,000 25,163
--------
25,163
Total Energy 182,120
========
PROCESS INDUSTRIES 7.2%
Paper and Paper Products 3.0%
Albany International (Class A) ............. 450,000 10,181
James River ................................ 1,050,000 27,694
Kimberly-Clark ............................. 300,000 23,175
--------
61,050
Specialty Chemicals 3.3%
A. Schulman ............................... 700,000 17,063
Great Lakes Chemical ...................... 500,000 31,125
Pall ...................................... 804,000 19,396
--------
67,584
<PAGE>
Diversified Chemicals 0.9%
DuPont .................................... 250,000 19,781
--------
19,781
Total Process Industries 148,415
========
BASIC MATERIALS 1.9%
Metals 1.4%
Alcoa ..................................... 326,400 18,727
Nucor ..................................... 200,000 10,125
--------
28,852
Mining 0.5%
Newmont Mining ............................ 206,072 10,175
--------
10,175
Total Basic Materials 39,027
========
Total Common Stocks (Cost $1,171,839) 1,726,989
Preferred Stocks 0.1%
Entergy Gulf States Utils., $8.64 ......... 6,977 691
Entergy Gulf States Utils., Adj. A ........ 3,276 300
Entergy Gulf States Utils., Dep.,Adj.B,8... 14,750 701
Total Preferred Stocks (Cost $1,713) 1,692
Convertible Preferred Stocks 1.7%
Freeport-McMoRan, Dep. Shs ...................... 180,000 5,580
Glendale Federal Bank, 8.75%, Series E .......... 200,000 9,600
RJR Nabisco, PERCS (Series C) ................... 1,840,000 11,960
Tanger Factory Outlet Centers, REIT ............. 75,000 1,655
Mobile Telecommunication Technologies,
(144a), $2.25 ................................. 300,000 7,387
Total Convertible Preferred Stocks (Cost $32,255) 36,182
<PAGE>
Convertible Bonds 1.4%
Banco Nacional de Mexico, Sub. Deb., (144a),
7.00%, 12/15/99 ............................... $ 8,000,000 7,360
Exide, 2.90%, 12/15/05 .......................... 40,000,000 22,063
Total Convertible Bonds (Cost $30,973) 29,423
Corporate Bonds 2.1%
American Standard, Sr. Sub. Deb.,
9.875%, 6/1/01 ............................... 4,000,000 4,120
B. F. Saul, REIT, Sr. Secured Notes,
11.625%, 4/1/02 ............................... 3,500,000 3,587
Coltec Industries, Sr. Sub. Notes,
10.25%, 4/1/02 ................................ 5,000,000 5,075
Container Corporation of America, Sr. Notes,
9.75%, 4/1/03 ................................ 5,000,000 4,912
El Paso Electric, 1st Mtg. Notes,
8.90%, 2/1/06 ................................ 850,000 835
El Paso Electric, 1st Mtg. Notes,
9.40%, 5/1/11 ................................ 1,250,000 1,238
IMC Fertilizer Group, Sr. Notes,
(Series B) 9.25%, 10/1/00 .................... 3,000,000 3,067
IMC Fertilizer Group,
9.45%, 12/15/11 .............................. 2,000,000 2,010
O. M. Scott, 9.875%,
8/1/04 ....................................... 5,000,000 5,175
Paging Network, Sr. Sub. Notes,
8.875%, 2/1/06 ............................... 1,300,000 1,177
Texas Bottling Group, Sr. Sub. Notes,
9.00%, 11/15/03 .............................. 3,000,000 2,910
Trump Atlantic City Associates, 1st Mtg. Notes,
11.25%, 5/1/06 ............................... $8,750,000 $ 8,794
Total Corporate Bonds (Cost $42,918) 42,900
U.S. Government Obligations 2.4%
U.S. Treasury Bonds, 6.875%, 8/15/25 ............ 50,000,000 49,492
Total U.S. Government Obligations (Cost $ 49,314) 49,492
<PAGE>
Short-Term Investments 8.7%
Commercial Paper 7.2%
Asset Securitization Cooperative,
4(2), 5.40%, 7/25/96 ......................... 10,000,000 9,964
BHF Finance (Delaware), 5.35%, 7/10/96 .......... 5,000,000 4,994
BMW U.S. Capital, 5.30%, 8/19/96 ................ 10,000,000 9,928
Caisse des Depots et Consignations,
4(2), 5.27%, 7/1/96 ......................... 10,000,000 10,000
Ciesco L.P., 5.35%, 7/15/96 ..................... 10,000,000 9,979
Corporate Asset Funding, 4(2), 5.35%, 7/15/96 ... 10,000,000 9,979
Investments in Commercial Paper through
a joint account, 5.49% - 5.68%, 7/1/96 ....... 3,399,872 3,400
Island Finance Puerto Rico, 5.35%, 7/23/96 ...... 10,000,000 9,967
Mobil Australia Finance, 4(2), 5.30%, 8/2/96 .... 10,000,000 9,953
Morgan Stanley Group, 5.30%, 7/18/96 ............ 10,000,000 9,975
National Rural Utilities Cooperative Finance,
5.35%, 8/19/96 ............................... 10,000,000 9,927
PHH, 5.30%, 7/11/96 ............................. 10,000,000 9,985
Rockwell International, 5.40%, 7/2/96 ........... 10,000,000 9,999
Statoil (Den Norske Stats Oljeselskap),
5.40%, 7/9/96 ............................... 10,000,000 9,988
Tasmanian Public Finance, 5.10%, 7/15/96 ........ 10,000,000 9,980
Tribune, 4(2), 5.35%, 7/22/96 ................... 10,000,000 9,969
--------
147,987
Medium-Term Notes 1.5%
Federal National Mortgage Assn., VR,
5.39%, 7/7/96 ................................ 10,000,000 10,000
Morgan Stanley Group, VR, 5.61%, 7/31/96 ........ 10,000,000 10,003
PHH, VR, 5.41%, 7/12/96 ......................... 10,000,000 9,995
--------
29,998
<PAGE>
Total Short-Term Investments (Cost $177,985) 177,985
Total Investments in Securities
100.3% of Net Assets (Cost $1,506,997) $ 2,064,663
Other Assets Less Liabilities (6,985)
NET ASSETS $ 2,057,678
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 1,418
Accumulated net realized gain/loss - net of distributions 3,737
Net unrealized gain (loss) 557,666
Paid-in-capital applicable to 99,158,270 shares of $0.01 par
value capital stock outstanding; 500,000,000 shares authorized 1,494,857
NET ASSETS $ 2,057,678
NET ASSET VALUE PER SHARE $ 20.75
================================================================================
Affiliated company
* Non-income producing
PERCS Participating Equity Redemption Certificates
REIT Real Estate Investment Trust
VR Variable rate
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers -- total of such securities at period-end amounts
to 0.7% of net assets.
NLG Dutch guilder
================================================================================
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Unaudited
Statement of Operations
In thousands
6 Months
Ended
6/30/96
- --------------------------------------------------------------------------------
Investment Income
Income
Dividend .......................................... $ 21,656
Interest .......................................... 9,855
Total income ...................................... 31,511
Expenses
Investment management ............................. 5,549
Shareholder servicing ............................. 2,081
Custody and accounting ............................ 107
Registration ...................................... 75
Prospectus and shareholder reports ................ 40
Directors ......................................... 16
Legal and audit ................................... 13
Miscellaneous ..................................... 18
Total expenses .................................... 7,899
Net investment income ................................... 23,612
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ........................................ 3,503
Foreign currency transactions ..................... (2)
Net realized gain (loss) .......................... 3,501
Change in net unrealized gain or loss on securities 152,320
Net realized and unrealized gain (loss) ................. 155,821
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS .................................. $ 179,433
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
Unaudited
Statement of Changes in Net Assets
In thousands
6 Months Year
Ended Ended
6/30/96 12/31/95
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations
Net investment income ........................... $ 23,612 $ 48,544
Net realized gain (loss) ........................ 3,501 47,568
Change in net unrealized gain or loss ........... 152,320 293,468
Increase (decrease) in net assets from operations 179,433 389,580
Distributions to shareholders
Net investment income ........................... (22,194) (49,245)
Net realized gain ............................... (8,479) (51,490)
Decrease in net assets from distributions ....... (30,673) (100,735)
Capital share transactions *
Shares sold ..................................... 255,077 320,350
Distributions reinvested ........................ 29,848 98,041
Shares redeemed ................................. (124,485) (187,684)
Increase (decrease) in net assets from capital
share transactions .............................. 160,440 230,707
Net Assets
Increase (decrease) during period ................ 309,200 519,552
Beginning of period .......................... 1,748,478 1,228,926
End of period ................................ $ 2,057,678 $ 1,748,478
*Share information
Shares sold .................................. 12,714 17,917
Distributions reinvested ..................... 1,473 5,380
Shares redeemed .............................. (6,192) (10,736)
Increase (decrease) in shares outstanding..... 7,995 12,561
The accompanying notes are an integral part of these financial statements.
================================================================================
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Unaudited June 30, 1996
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Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Growth & Income 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 December 21, 1982.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are 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.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Affiliated Companies Investments in companies 5% or more of whose
outstanding voting securities are held by the fund are defined as "Affiliated
Companies" in Section 2(a)(3) of the Investment Company Act of 1940.
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.
<PAGE>
Premiums and Discounts Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Commercial Paper Joint Account The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
Other Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $286,676,000 and $86,250,000,
respectively, for the six months ended June 30, 1996. Purchases of U.S.
government securities aggregated $49,313,000 for the six months ended June 30,
1996.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1996, the aggregate cost of investments for federal income tax
and financial reporting purposes was $1,506,997,000, and net unrealized gain
aggregated $557,666,000, of which $579,592,000 related to appreciated
investments and $21,926,000 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 $977,000 was payable at June 30, 1996. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.25% of average
daily net assets and a group fee. The group fee is based on the combined assets
of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.305% for assets in excess of $50 billion. At
June 30, 1996, and for the six months then ended, the effective annual group fee
rate was 0.33% and 0.34%, respectively. The fund pays a pro rata share of the
group fee based on the ratio of its net assets to those of the group.
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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. (TRPS) 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. Additionally, the fund is one of several T. Rowe
Price mutual funds (the underlying funds) in which the T. Rowe Price Spectrum
Growth Fund (Spectrum) invests. In accordance with an agreement among Spectrum,
the underlying funds, the manager, and TRPS, expenses from the operation of
Spectrum are borne by the underlying funds based on each underlying fund's
proportionate share of assets owned by Spectrum. The fund incurred expenses
pursuant to these related party agreements totaling approximately $1,874,000 for
the six months ended June 30, 1996, of which $283,000 was payable at period-end.
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T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions
that accurately reflect their financial goals, T. Rowe Price offers a wide
variety of information and services -- at no extra cost.
Knowledgeable Service Representatives
- -------------------------------------------
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. 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. 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 [Registration Mark] and
T.Rowe Price OnLine.
Discount Brokerage*
- -------------------------------------------
Individual Securities Stocks, bonds, options, precious metals, and other
securities at a savings over regular commission rates.
<PAGE>
Investment Information
- -------------------------------------------
Combined Statement An overview of your T. Rowe Price accounts. Shareholder
Reports Fund managers' reviews of their strategies and results.
The T. Rowe Price Report A 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, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
*T. Rowe Price Discount Brokerage is a division of T. Rowe Price Investment
Services, Inc. Member NASD/SIPC.
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For yield, price, last transaction,
and current balance, 24 hours,
7 days a week, call: 1-800-638-2587 toll free
For assistance with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500
Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution
only to shareholders and to others
who have received a copy of the prospectus of the
T. Rowe Price Growth & Income Fund [registration mark]
================================================================================
T. Rowe Price Investment Services, Inc., Distributor RPRTGIF 6/30/96
