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T. Rowe Price
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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 Balanced Fund.
SemiAnnual Report
Balanced Fund
June 30, 1995
T. Rowe Price
Invest With Confidence (registered trademark)
BAL
Fellow Shareholders
The first half of 1995 was a nearly perfect environment for stocks and bonds:
falling interest rates, rising corporate earnings, a slowing yet fundamentally
sound economy, and relatively stable inflation. As a result, your fund, with
its 55%/45% mix of equities and fixed income securities, enjoyed the best of
both worlds.
The second quarter mirrored the first, with the unmanaged Standard &
Poor's 500 Stock Index up 9.6%, bringing the six-month gain to a resounding
20.2%. Based on the historical 10% return on equities, the market provided two
years' worth of average gains in only six months. The rally was led by
technology stocks, with the financial sector also responding strongly to
falling interest rates. Large multinational companies, whose overseas earnings
were boosted by the generally weak dollar, were also big winners. Since the
S&P 500 is dominated by large companies, it outperformed many other equity
benchmarks and stock mutual funds for both the quarter and the half. However,
it was outpaced by the Nasdaq Composite Index, which is laden with technology
issues.
It was hard to go wrong in stocks. The value and growth sectors of the
overall market, which often take turns leading the market, both joined the
rally. The Barra/S&P Value and Growth indices advanced 19% and 21%,
respectively, in the first half.
The bond market also continued to soar, as increasing signs of slower
economic growth led to falling interest rates across all maturities. The
benchmark 30-year Treasury bond yield dropped 80 basis points during the
quarter, finishing at 6.6% (100 basis points is equal to one percentage
point). As measured by the Lehman Brothers Aggregate Bond Index, the bond
market returned 6.1% in the second quarter, for a six-month compound return of
11.4%.
In early July, the Federal Reserve finally acknowledged the slowing
economy, lowering the federal funds target rate on overnight loans among banks
by one-quarter percentage point, to 5.75%, its first reduction in nearly three
years.
The poor performance of foreign stocks in the first quarter was somewhat
offset for U.S. investors by an extremely weak dollar. While the dollar
stabilized against most European and Asian currencies during the second
quarter, foreign equity markets recovered enough to post positive returns for
the quarter and the first half. Japan was a notable exception. Latin American
returns, still haunted by the peso devaluation, were positive for the second
quarter but negative for the six months.
Performance and Strategy Review
The fund has had an excellent year so far, providing strong returns that
compared favorably with its peer group average for both the quarter and the
half. However, it underperformed the combined equity/fixed income portfolio.
Many mutual funds lagged unmanaged indices during the first half because the
indices represent pure plays on markets that enjoyed exuberant rallies.
Performance Comparison
Periods Ended 6/30/95
_______________________
3 Months 6 Months
_________ __________
Balanced Fund 7.1% 13.9%
Lipper Balanced Fund Index 7.0 13.4
Combined Index Portfolio* 8.2 16.6
*An unmanaged portfolio of 60% stocks (S&P 500) and 40%
bonds (Lehman Brothers Aggregate Index).
Portfolio Review
Your fund's broad diversification enabled it to take advantage of the forces
that propelled the overall market. With a third of the portfolio in large-cap
stocks, the fund participated in the strong advance of the S&P 500. We also
rode the surge in technology stocks, as chip makers Intel and Texas
Instruments nearly doubled during the quarter. Microsoft, whetting appetites
with the impending debut of its heralded Windows 95 operating systems
software, also appreciated nicely. While smaller stocks generally
underperformed large-caps for the first half, the fund's small-caps kept pace
with large stocks due to our concentration in financial issues. Mortgage
originator Countrywide Credit benefited from an increase in refinancings as
interest rates fell. Health care stocks continued rebounding from their 1993
nadir, which was caused by ill-fated proposals to overhaul the health system.
Biotechnology firm Amgen and pharmaceutical makers Abbott Laboratories and
SmithKline Beecham each rose more than 20% in the quarter.
Boosted by the weak dollar, our foreign equity holdings, led by Dutch
conglomerate Philips Electronics, rose about 10% during the first half, not as
impressive as the S&P's 20.2%, but not too shabby. They represent about 10% of
the portfolio.
Once again, uncertainty over competitive pressures held back utilities,
despite a favorable economic environment for these stocks. Increasing signs of
a slowdown held back consumer cyclicals, especially autos, construction, and
durable goods.
The bond part of the portfolio enjoyed a solid quarter, driven by the
sharp drop in interest rates that propelled prices steadily higher. Our
investment-grade and high-yield bonds, which represent 9% and 7% of the fund's
portfolio, respectively, produced strong returns. The high-yield bonds lagged
our investment-grade
Balanced Fund Chart
A pie chart showing the percent of the fund's assets invested among large-cap
stocks 35%, international stocks 10%, small-cap stocks 9%, Treasury and agency
issues 12%, mortgage-backed securities 10%, corporate bonds 16%, and reserves
8%.
holdings for the first time in almost a year, however, due to investor
concerns about the slowing economy and the creditworthiness of high-yield
bonds. These bonds are more sensitive to the outlook for the economy and
corporate earnings than to daily fluctuations in interest rates. We believe
these concerns will be short-lived and intend to maintain our current exposure
to BB- and B-rated bonds-the upper echelon of the high-yield universe. We like
their income, and, as long as the economy comes in for a soft landing as we
expect, they should continue to perform well.
Outlook
The cut in the federal funds rate should help allay fears of a near-term
recession. We believe the economy remains fundamentally sound and will pick up
later this year. That's good news for stocks and high-yield bonds. However, a
recovering economy could hamper high-grade bond performance by eliminating the
need for further interest rate cuts. Returns on these bonds are likely to come
primarily from income for the rest of the year.
Looking abroad, we expect foreign stocks to be bolstered by improving
global economies, but foreign bond returns for U.S. investors may be hurt by a
strengthening dollar. The Balanced Fund, with its broad diversification,
offers protection from these fluctuations because declines in any one sector
can be offset by its investments in other, unrelated sectors. Such
diversification offers the potential for attractive returns over the long haul
with less short-term volatility than more narrowly focused funds. We thank you
for your continued confidence.
Respectfully submitted,
Richard T. Whitney
President and Chairman of the
Investment Advisory Committee
July 19, 1995
Sector Diversification
June 30, 1995
STOCKS*
Percent of
Net Assets
______________
Consumer Nondurables 11.1%
Financial 8.2
Consumer Services 6.8
Utilities 5.5
Technology 4.9
Energy 4.2
Capital Equipment 3.4
Business Services 3.3
Consumer Cyclicals 3.1
Process Industries 2.9
Basic Materials 0.8
Conglomerates 0.3
________________________________________________________________
Total Stocks 54.5%
*Includes foreign securities
BONDS AND RESERVES
Percent of
Net Assets
______________
U.S. Government and Agencies
U.S. Treasury Obligations 10.7%
Mortgages 9.1
Other U.S. Gov't. and Agencies 0.9
Agency-Backed CMOs 0.5
Project Loans 0.7
Corporate and Other
Investment Grade 9.0
Noninvestment Grade 7.0
Reserves 7.6
________________________________________________________________
Total Bonds and Reserves 45.5%
Largest Holdings
June 30, 1995
STOCKS
Percent of
Company Net Assets
_______________________________ _____________
GE 0.8%
American International Group 0.8
Mobil 0.7
Coca-Cola 0.6
Exxon 0.6
SmithKline Beecham 0.6
Hutchison Whampoa 0.5
Bristol-Myers Squibb 0.5
SBC Communications 0.5
AT&T 0.5
________________________________________________________________
Total 6.1%
BONDS
Percent of
Company Net Assets
______________________________ ____________
U.S. Treasury 10.7%
GNMA 9.5
FNMA 1.4
British Columbia Hydro & Power 0.8
Banesto Del 0.4
Southwest Airlines 0.4
Sealand Services 0.3
Lehman Brothers 0.3
Golden Financial 0.3
First Fidelity 0.3
________________________________________________________________
Total 24.4%
Average Annual Compound Total Return
Periods ended June 30, 1995
1 Year 5 Years 10 Years
__________ ___________ ____________
17.49% 11.94% 12.27%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
Statement of Net Assets
T. Rowe Price Balanced Fund / June 30, 1995 (Unaudited)
(values in thousands)
Common Stocks & Warrants - 54.5%
FINANCIAL - 8.2%
Value
______________
BANK & TRUST - 4.0%
5,400 shs. AmSouth Bancorporation. . . . . . . . . $ 176
4,100 Bancorp Hawaii. . . . . . . . . . . . . 123
12,200 Bank South. . . . . . . . . . . . . . . 270
3,500 BayBanks. . . . . . . . . . . . . . . . 278
5,700 Berliner Bank (DEM) . . . . . . . . . . 1,508
6,300 Central Fidelity Banks. . . . . . . . . 191
21,000 Chase Manhattan . . . . . . . . . . . . 987
33,200 Chemical Banking. . . . . . . . . . . . 1,569
6,200 Compass Bancshares. . . . . . . . . . . 178
3,200 Crestar Financial . . . . . . . . . . . 157
18,700 Deutsche Bank (DEM) . . . . . . . . . . 910
200 wts. * Deutsche Bank, 6/30/98
(DEM) . . . . . . . . . . . . . . . . 5
7,800 shs. First American. . . . . . . . . . . . . 280
7,400 First Security. . . . . . . . . . . . . 209
1,800 First Tennessee National. . . . . . . . 83
25,000 First Union . . . . . . . . . . . . . . 1,131
3,500 First USA . . . . . . . . . . . . . . . 155
5,700 First Virginia Banks. . . . . . . . . . 214
7,600 FirstFed Michigan . . . . . . . . . . . 214
20,000 * Grupo Financiero Bancomer
ADR (144a). . . . . . . . . . . . . . 115
20,000 J. P. Morgan. . . . . . . . . . . . . . 1,402
50,000 KeyCorp . . . . . . . . . . . . . . . . 1,569
18,750 Mellon Bank . . . . . . . . . . . . . . 780
4,200 Mercantile Bancorporation . . . . . . . 188
5,200 Meridian Bancorp. . . . . . . . . . . . 178
2,020 Michigan National . . . . . . . . . . . 215
30,000 NationsBank . . . . . . . . . . . . . . 1,609
30,000 Norwest . . . . . . . . . . . . . . . . 862
5,400 Old Kent Financial. . . . . . . . . . . 184
9,100 Regions Financial . . . . . . . . . . . 337
120 wts. * Schweiz Bankverein (CHF). . . . . . . . 2
4,220 shs. Schweizerischer Bankverein
(CHF) . . . . . . . . . . . . . . . . 1,495
7,018 Societe Generale de France
(FRF) . . . . . . . . . . . . . . . . 820
9,500 SouthTrust. . . . . . . . . . . . . . . 221
6,300 Star Banc . . . . . . . . . . . . . . . 290
4,200 UJB Financial . . . . . . . . . . . . . 128
16,900 Washington Federal. . . . . . . . . . . 371
12,600 West One Bancorp. . . . . . . . . . . . 419
19,823
INSURANCE - 1.6%
35,400 shs. American International Group. . . . . . $ 4,036
2,900 Conseco . . . . . . . . . . . . . . . . 131
9,400 Equitable Companies . . . . . . . . . . 196
10,200 Horace Mann Educators . . . . . . . . . 235
8,000 John Alden Financial. . . . . . . . . . 137
3,100 MBIA. . . . . . . . . . . . . . . . . . 206
11,600 MGIC Investment . . . . . . . . . . . . 544
8,102 * Mutual Assurance. . . . . . . . . . . . 240
5,100 Ohio Casuality. . . . . . . . . . . . . 162
4,700 Old Republic International. . . . . . . 123
4,200 Progressive Corporation . . . . . . . . 161
2,700 Sunamerica. . . . . . . . . . . . . . . 138
39,300 Torchmark . . . . . . . . . . . . . . . 1,483
7,792
FINANCIAL SERVICES - 2.6%
13,475 A.G. Edwards. . . . . . . . . . . . . . 303
4,500 ADVANTA . . . . . . . . . . . . . . . . 187
5,550 ADVANTA (Class B) . . . . . . . . . . . 209
11,100 AMBAC . . . . . . . . . . . . . . . . . 445
30,000 American Express. . . . . . . . . . . . 1,054
113,925 Countrywide Credit. . . . . . . . . . . 2,392
19,500 Fannie Mae. . . . . . . . . . . . . . . 1,840
8,600 Green Tree Financial. . . . . . . . . . 382
30,900 H&R Block . . . . . . . . . . . . . . . 1,271
24,000 Household International . . . . . . . . 1,188
14,600 * Medaphis. . . . . . . . . . . . . . . . 314
12,400 Mercury Finance . . . . . . . . . . . . 239
150,000 Pearson (GBP) . . . . . . . . . . . . . 1,422
15,000 * Presstek. . . . . . . . . . . . . . . . 767
6,800 Salomon . . . . . . . . . . . . . . . . 273
15,333 Travelers . . . . . . . . . . . . . . . 671
8,000 United Asset Management . . . . . . . . 285
13,242
Total Financial 40,857
UTILITIES - 5.5%
TELEPHONE - 3.8%
4,000 * ALC Communications. . . . . . . . . . . 180
24,000 Ameritech . . . . . . . . . . . . . . . 1,056
47,200 AT&T. . . . . . . . . . . . . . . . . . 2,507
18,100 Bell Atlantic . . . . . . . . . . . . . 1,014
16,000 BellSouth . . . . . . . . . . . . . . . 1,016
20,000 British Telecommunications
ADR . . . . . . . . . . . . . . . . . 1,255
4,900 COMSAT. . . . . . . . . . . . . . . . . 96
50,600 GTE . . . . . . . . . . . . . . . . . . 1,727
36,300 Hong Kong Telecommunications
ADR . . . . . . . . . . . . . . . . . 721
46,300 shs. Pacific Telesis . . . . . . . . . . . . $ 1,239
54,400 SBC Communications. . . . . . . . . . . 2,591
4,900 Southern New England
Telecommunications. . . . . . . . . . 173
520,000 Telecom Corporation of
New Zealand (NZD) . . . . . . . . . . 1,947
571,000 Telecom Italia (ITL). . . . . . . . . . 1,548
12,000 Telefonica De Espana ADR. . . . . . . . 465
60,000 Telekom Malaysia (MYR). . . . . . . . . 455
10,000 Telmex ADR. . . . . . . . . . . . . . . 296
20,000 U. S. WEST. . . . . . . . . . . . . . . 832
19,118
ELECTRIC UTILITIES - 1.7%
27,400 Duke Power. . . . . . . . . . . . . . . 1,137
12,200 Empresa Nacional de
Electricidad ADR. . . . . . . . . . . 601
53,000 Entergy . . . . . . . . . . . . . . . . 1,279
25,600 FPL Group . . . . . . . . . . . . . . . 989
102,500 Niagara Mohawk. . . . . . . . . . . . . 1,512
50,000 * Public Service of New Mexico. . . . . . 712
54,000 SCEcorp . . . . . . . . . . . . . . . . 925
20,000 Texas Utilities . . . . . . . . . . . . 687
27,000 Unicom. . . . . . . . . . . . . . . . . 719
8,561
Total Utilities 27,679
CONSUMER NONDURABLES - 11.3%
COSMETICS - 0.1%
11,700 International Flavors &
Fragrances. . . . . . . . . . . . . . 582
BEVERAGES - 1.9%
32,000 Anheuser-Busch. . . . . . . . . . . . . 1,820
46,300 Coke. . . . . . . . . . . . . . . . . . 2,952
12,541 LVMH (FRF). . . . . . . . . . . . . . . 2,257
50,200 PepsiCo . . . . . . . . . . . . . . . . 2,290
12,200 * Starbucks . . . . . . . . . . . . . . . 433
9,752
FOOD PROCESSING - 2.6%
58,200 Archer Daniels Midland. . . . . . . . . 1,084
31,278 Cadbury Schweppes ADR . . . . . . . . . 927
24,900 ConAgra . . . . . . . . . . . . . . . . 868
12,900 CPC International . . . . . . . . . . . 797
6,300 General Mills . . . . . . . . . . . . . 324
15,000 Hershey Foods . . . . . . . . . . . . . 829
6,600 IBP . . . . . . . . . . . . . . . . . . 287
3,100 Kellogg . . . . . . . . . . . . . . . . 221
10,300 McCormick . . . . . . . . . . . . . . . 223
1,684 Nestle (CHF). . . . . . . . . . . . . . 1,753
2,500 * Ralcorp Holdings. . . . . . . . . . . . 57
23,204 Ralston Purina. . . . . . . . . . . . . 1,183
38,800 shs. Sara Lee. . . . . . . . . . . . . . . . $ 1,106
1,400 Schweizerische Bankgesellschaft
(CHF) . . . . . . . . . . . . . . . . 1,458
72,000 Unilever (GBP). . . . . . . . . . . . . 1,453
7,100 Universal Foods . . . . . . . . . . . . 230
12,800
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT - 1.2%
58,800 Abbott Laboratories . . . . . . . . . . 2,381
29,000 Columbia/HCA Healthcare . . . . . . . . 1,254
16,050 * Health Management (Class A) . . . . . . 469
12,900 * HealthCare COMPARE. . . . . . . . . . . 387
11,600 Hillenbrand Industries. . . . . . . . . 361
22,400 * Humana. . . . . . . . . . . . . . . . . 395
7,100 * Quantum Health Resources. . . . . . . . 117
12,000 U. S. Healthcare. . . . . . . . . . . . 369
12,700 United HealthCare . . . . . . . . . . . 526
6,259
PHARMACEUTICALS - 3.0%
20,800 American Home Products. . . . . . . . . 1,609
24,800 * Amgen . . . . . . . . . . . . . . . . . 1,993
30,000 Astra 'B' (SEK) . . . . . . . . . . . . 904
38,400 Bristol-Myers Squibb. . . . . . . . . . 2,616
926 * Chiron. . . . . . . . . . . . . . . . . 60
4,500 * Forest Laboratories . . . . . . . . . . 200
225 Gehe (DEM). . . . . . . . . . . . . . . 99
900 Gehe Ag (DEM) . . . . . . . . . . . . . 398
11,800 * IDEXX Laboratories. . . . . . . . . . . 309
35,500 Merck . . . . . . . . . . . . . . . . . 1,740
9,900 * Perrigo . . . . . . . . . . . . . . . . 109
24,300 Pfizer. . . . . . . . . . . . . . . . . 2,245
61,200 SmithKline Beecham ADR. . . . . . . . . 2,769
15,051
MISCELLANEOUS CONSUMER PRODUCTS - 2.5%
2,550 Arctco. . . . . . . . . . . . . . . . . 29
17,700 * Burlington Industries . . . . . . . . . 204
30,100 Colgate-Palmolive . . . . . . . . . . . 2,201
7,000 * CUC International . . . . . . . . . . . 294
6,900 Duracell International. . . . . . . . . 298
3,300 * Fruit Of The Loom (Class A) . . . . . . 70
63,000 Hanson ADR. . . . . . . . . . . . . . . 1,110
13,100 Ideon Group . . . . . . . . . . . . . . 129
16,800 * Jones Apparel Group . . . . . . . . . . 502
29,400 P & G . . . . . . . . . . . . . . . . . 2,113
2,500 Philip Morris . . . . . . . . . . . . . 186
51,200 Philips N.V. ADR. . . . . . . . . . . . 2,189
37,300 Service Corp. . . . . . . . . . . . . . 1,180
39,700 Springs Industries. . . . . . . . . . . 1,479
9,500 Tambrands . . . . . . . . . . . . . . . 406
12,390
Total Consumer Nondurables 56,834
CONSUMER SERVICES - 6.8%
GENERAL MERCHANDISERS - 1.4%
28,700 shs. Dayton Hudson . . . . . . . . . . . . . $ 2,059
51,400 May Department Stores . . . . . . . . . 2,139
60,000 * Price/Costco. . . . . . . . . . . . . . 979
44,000 TJX . . . . . . . . . . . . . . . . . . 583
51,400 Wal-Mart. . . . . . . . . . . . . . . . 1,375
7,135
SPECIALTY MERCHANDISERS - 2.1%
13,000 Callaway Golf . . . . . . . . . . . . . 195
65,900 Circuit City Stores . . . . . . . . . . 2,084
8,000 Fingerhut Companies . . . . . . . . . . 125
8,400 * Gymboree. . . . . . . . . . . . . . . . 245
4,500 Heilig-Meyers . . . . . . . . . . . . . 115
5,000 Ito-Yokado ADR. . . . . . . . . . . . . 1,052
9,300 * Kohl's. . . . . . . . . . . . . . . . . 424
50,000 * Kroger. . . . . . . . . . . . . . . . . 1,344
33,500 Petrie Stores . . . . . . . . . . . . . 226
5,600 * R. P. Scherer . . . . . . . . . . . . . 237
6,300 * Safeway . . . . . . . . . . . . . . . . 235
8,100 * Staples . . . . . . . . . . . . . . . . 234
5,600 * Stop & Shop . . . . . . . . . . . . . . 144
39,600 The Gap . . . . . . . . . . . . . . . . 1,381
55,750 * Toys "R" Us . . . . . . . . . . . . . . 1,631
16,000 * Viking Office Products. . . . . . . . . 586
10,258
ENTERTAINMENT & LEISURE - 1.5%
10,600 Applebee's. . . . . . . . . . . . . . . 272
8,775 * Brinker . . . . . . . . . . . . . . . . 151
6,200 * Buffets . . . . . . . . . . . . . . . . 85
8,600 * Casino America. . . . . . . . . . . . . 131
6,750 * Checkers Drive-In
Restaurants . . . . . . . . . . . . . 13
32,400 Disney. . . . . . . . . . . . . . . . . 1,802
10,800 * Hospitality Franchise Systems . . . . . 374
560,000 Hutchison Whampoa (HKD) . . . . . . . . 2,707
9,000 International Game
Technology. . . . . . . . . . . . . . 139
10,000 McDonald's. . . . . . . . . . . . . . . 391
1,080 * National Gaming . . . . . . . . . . . . 9
5,000 Reader's Digest (Class A),
non-voting. . . . . . . . . . . . . . 221
37,500 Sbarro. . . . . . . . . . . . . . . . . 872
4,500 * Viacom (Class A). . . . . . . . . . . . 209
7,376
MEDIA & COMMUNICATIONS - 1.8%
6,800 A. H. Belo (Class A). . . . . . . . . . 208
9,000 Banta . . . . . . . . . . . . . . . . . 303
15,000 Capital Cities/ABC. . . . . . . . . . . 1,620
40,000 Comcast (Class A Special) . . . . . . . 742
14,100 shs. Dun & Bradstreet. . . . . . . . . . . . $ 740
13,800 Gannett . . . . . . . . . . . . . . . . 749
10,080 Gaylord Entertainment . . . . . . . . . 254
12,000 * Infinity Broadcasting
(Class A) . . . . . . . . . . . . . . 400
9,000 * International CableTel. . . . . . . . . 290
16,100 McGraw-Hill . . . . . . . . . . . . . . 1,222
12,100 * Multimedia. . . . . . . . . . . . . . . 469
12,400 Reuters ADR . . . . . . . . . . . . . . 621
29,000 Time Warner . . . . . . . . . . . . . . 1,193
11,850 * Vanguard Cellular . . . . . . . . . . . 286
9,097
RESTAURANTS - 0.0%
6,300 * Darden Restaurants. . . . . . . . . . . 69
Total Consumer Services 33,935
CONSUMER CYCLICALS - 2.8%
AUTOMOBILES & RELATED - 0.9%
5,600 Breed Technologies. . . . . . . . . . . 134
9,100 * Gentex. . . . . . . . . . . . . . . . . 181
9,650 Genuine Parts . . . . . . . . . . . . . 366
30,000 GM. . . . . . . . . . . . . . . . . . . 1,406
19,800 Honda ADR . . . . . . . . . . . . . . . 609
7,100 Pep Boys. . . . . . . . . . . . . . . . 190
8,000 Superior Industries
International . . . . . . . . . . . . 249
15,000 TRW . . . . . . . . . . . . . . . . . . 1,198
4,333
MISCELLANEOUS CONSUMER DURABLES - 1.0%
36,000 Black & Decker. . . . . . . . . . . . . 1,111
30,000 Corning . . . . . . . . . . . . . . . . 982
21,700 Eastman Kodak . . . . . . . . . . . . . 1,316
3,800 Harley-Davidson . . . . . . . . . . . . 93
10,000 * Scotts (Class A). . . . . . . . . . . . 218
20,000 Tandy . . . . . . . . . . . . . . . . . 1,037
3,000 Valspar . . . . . . . . . . . . . . . . 114
2,600 York International. . . . . . . . . . . 117
4,988
BUILDING & REAL ESTATE - 0.9%
600,000 DBS Land (SGD). . . . . . . . . . . . . 1,880
948,339 Hopewell Holdings (HKD) . . . . . . . . 803
49,900 Masco . . . . . . . . . . . . . . . . . 1,347
4,700 Texas Industries. . . . . . . . . . . . 183
14,600 * USG . . . . . . . . . . . . . . . . . . 347
4,560
Total Consumer Cyclicals 13,881
TECHNOLOGY - 4.9%
ELECTRONIC COMPONENTS - 1.3%
9,000 * Altera. . . . . . . . . . . . . . . . . 390
11,500 shs. * EMC . . . . . . . . . . . . . . . . . . $ 279
34,400 Intel . . . . . . . . . . . . . . . . . 2,178
5,700 Linear Technology . . . . . . . . . . . 375
9,400 Micron Technology . . . . . . . . . . . 516
7,812 Molex . . . . . . . . . . . . . . . . . 302
20,000 Motorola. . . . . . . . . . . . . . . . 1,342
6,525 * Thermo Electron . . . . . . . . . . . . 263
6,525 * Thermo Instrument Systems . . . . . . . 160
6,000 * Vicor . . . . . . . . . . . . . . . . . 269
4,200 * Xilinx. . . . . . . . . . . . . . . . . 394
6,468
ELECTRONIC SYSTEMS - 0.6%
5,000 * Applied Materials . . . . . . . . . . . 432
20,000 Hewlett-Packard . . . . . . . . . . . . 1,490
20,000 Honeywell . . . . . . . . . . . . . . . 862
5,400 Sensormatic Electronics . . . . . . . . 192
4,800 * Solectron . . . . . . . . . . . . . . . 164
3,140
INFORMATION PROCESSING - 0.9%
7,000 * Adaptec . . . . . . . . . . . . . . . . 258
50,000 * COMPAQ Computer . . . . . . . . . . . . 2,269
18,900 Hitachi ADR . . . . . . . . . . . . . . 1,895
5,000 * Storage Technology. . . . . . . . . . . 123
4,545
TELECOMMUNICATIONS - 0.7%
4,785 * Bay Networks. . . . . . . . . . . . . . 197
48,000 LM Ericsson (Class B) ADR . . . . . . . 963
45,600 * Novell. . . . . . . . . . . . . . . . . 909
4,400 * PictureTel. . . . . . . . . . . . . . . 212
11,600 * Tellabs . . . . . . . . . . . . . . . . 558
18,400 * World Com . . . . . . . . . . . . . . . 496
3,335
AEROSPACE & DEFENSE - 1.1%
36,000 AlliedSignal. . . . . . . . . . . . . . 1,602
31,000 Boeing. . . . . . . . . . . . . . . . . 1,941
30,000 Northrop. . . . . . . . . . . . . . . . 1,564
4,700 United Technologies . . . . . . . . . . 367
5,474
SPECIALIZED COMPUTER - 0.3%
5,700 * Landmark Graphics . . . . . . . . . . . 146
14,700 * Silicon Graphics. . . . . . . . . . . . 586
15,000 * Sun Microsystems. . . . . . . . . . . . 729
1,461
Total Technology 24,423
CAPITAL EQUIPMENT - 3.6%
ELECTRICAL EQUIPMENT - 2.4%
10,300 * American Power Conversion . . . . . . . 236
775 BBC Brown Boveri (CHF). . . . . . . . . 802
28,100 shs. Emerson Electric. . . . . . . . . . . . $ 2,009
75,400 GE. . . . . . . . . . . . . . . . . . . 4,251
41,611 Getronics (NLG) . . . . . . . . . . . . 2,038
4,000 Hubbell (Class A) . . . . . . . . . . . 217
40,126 Hubbell (Class B) . . . . . . . . . . . 2,267
11,820
MACHINERY - 1.2%
250,000 BTR (AUD) . . . . . . . . . . . . . . . 1,269
435,000 BTR Nylex (GPB) . . . . . . . . . . . . 832
29,900 * Coltec Industries . . . . . . . . . . . 516
31,000 Danaher . . . . . . . . . . . . . . . . 938
160 * DOVatron International. . . . . . . . . 4
12,000 * FMC . . . . . . . . . . . . . . . . . . 807
4,600 Foster Wheeler. . . . . . . . . . . . . 162
2,800 * Imo Industries. . . . . . . . . . . . . 25
11,400 Kennametal. . . . . . . . . . . . . . . 402
6,300 Stewart & Stevenson . . . . . . . . . . 227
5,000 Teleflex. . . . . . . . . . . . . . . . 215
30,300 TriMas. . . . . . . . . . . . . . . . . 697
6,094
Total Capital Equipment 17,914
BUSINESS SERVICES & TRANSPORTATION - 3.3%
COMPUTER SERVICE & SOFTWARE - 1.2%
3,625 Amtech. . . . . . . . . . . . . . . . . 23
15,400 Autodesk. . . . . . . . . . . . . . . . 658
5,000 * BMC Software. . . . . . . . . . . . . . 385
19,700 Computer Associates . . . . . . . . . . 1,335
7,500 * Electronic Arts . . . . . . . . . . . . 204
6,600 HBO . . . . . . . . . . . . . . . . . . 361
18,400 * Informix. . . . . . . . . . . . . . . . 466
7,500 * LEGENT. . . . . . . . . . . . . . . . . 329
5,600 * Micro Warehouse . . . . . . . . . . . . 258
7,300 * Microsoft . . . . . . . . . . . . . . . 660
11,600 * Parametric Technology . . . . . . . . . 576
6,600 * SunGard Data Systems. . . . . . . . . . 346
7,000 * Sybase. . . . . . . . . . . . . . . . . 203
5,804
MISCELLANEOUS BUSINESS SERVICES - 1.0%
25,000 Browning-Ferris . . . . . . . . . . . . 903
3,600 Cintas. . . . . . . . . . . . . . . . . 129
10,284 Eaux Cie Generale (FRF) . . . . . . . . 1,145
8,900 Equifax . . . . . . . . . . . . . . . . 297
4,500 * GTECH . . . . . . . . . . . . . . . . . 132
12,200 Manpower. . . . . . . . . . . . . . . . 311
5,000 Merrill . . . . . . . . . . . . . . . . 94
6,700 Omnicom . . . . . . . . . . . . . . . . 406
12,450 Paychex . . . . . . . . . . . . . . . . 454
3,150 * U.S. Industries . . . . . . . . . . . . 43
47,200 WMX Technologies. . . . . . . . . . . . 1,339
5,253
RAILROADS - 0.6%
15,100 shs. Burlington Northern . . . . . . . . . . $ 957
9,800 CSX . . . . . . . . . . . . . . . . . . 736
9,900 Illinois Central. . . . . . . . . . . . 342
14,000 Union Pacific . . . . . . . . . . . . . 775
6,800 * Wisconsin Central
Transportation. . . . . . . . . . . . 331
3,141
AIRLINES - 0.5%
4,200 Atlantic Southeast Airlines . . . . . . 127
17,300 * Mesa Airlines . . . . . . . . . . . . . 159
269,000 Swire Pacific 'A' (HKD) . . . . . . . . 2,051
2,337
ENVIRONMENTAL - 0.0%
12,000 * Mid-American Waste Systems. . . . . . . 58
DISTRIBUTION SERVICES - 0.0%
3,625 Cardinal Health . . . . . . . . . . . . 171
Total Business Services & Transportation 16,764
ENERGY - 4.2%
ENERGY SERVICES - 0.8%
9,383 El Paso Natural Gas . . . . . . . . . . 267
23,000 Halliburton . . . . . . . . . . . . . . 822
20,000 Helmerich & Payne . . . . . . . . . . . 590
30,100 Schlumberger ADR. . . . . . . . . . . . 1,870
18,300 * Smith International . . . . . . . . . . 307
5,400 Witco . . . . . . . . . . . . . . . . . 174
4,030
EXPLORATION & PRODUCTION - 0.0%
6,600 Enron Oil & Gas . . . . . . . . . . . . 144
GAS TRANSMISSION - 0.3%
14,300 ENSERCH . . . . . . . . . . . . . . . . 245
8,800 MCN . . . . . . . . . . . . . . . . . . 174
7,400 Questar . . . . . . . . . . . . . . . . 213
29,000 Sonat . . . . . . . . . . . . . . . . . 884
1,516
INTEGRATED PETROLEUM - DOMESTIC - 1.2%
27,700 Amerada Hess. . . . . . . . . . . . . . 1,354
8,000 Atlantic Richfield. . . . . . . . . . . 878
1,700 MAPCO . . . . . . . . . . . . . . . . . 98
30,000 Phillips Petroleum. . . . . . . . . . . 1,001
13,900 * Santa Fe Energy Resources . . . . . . . 132
9,100 Ultramar. . . . . . . . . . . . . . . . 230
100,000 USX-Marathon. . . . . . . . . . . . . . 1,975
5,668
INTEGRATED PETROLEUM - INTERNATIONAL - 1.9%
40,600 Exxon . . . . . . . . . . . . . . . . . 2,867
38,900 shs. Mobil . . . . . . . . . . . . . . . . . $ 3,735
24,000 Repsol ADR. . . . . . . . . . . . . . . 758
10,000 Royal Dutch Petroleum ADR . . . . . . . 1,219
16,600 Texaco. . . . . . . . . . . . . . . . . 1,089
9,668
Total Energy 21,026
PROCESS INDUSTRIES - 2.9%
DIVERSIFIED CHEMICALS - 0.7%
25,300 DuPont. . . . . . . . . . . . . . . . . 1,739
3,675 Eastman Chemical. . . . . . . . . . . . 219
18,100 Monsanto. . . . . . . . . . . . . . . . 1,631
3,589
SPECIALTY CHEMICALS - 1.4%
18,000 3M. . . . . . . . . . . . . . . . . . . 1,031
26,325 A. Schulman . . . . . . . . . . . . . . 757
3,500 Crompton & Knowles. . . . . . . . . . . 49
25,000 Great Lakes Chemical. . . . . . . . . . 1,506
5,200 IVAX. . . . . . . . . . . . . . . . . . 128
7,100 Lyondell Petrochemical. . . . . . . . . 182
1,500 * McWhorter Technologies. . . . . . . . . 23
60,000 Morton International. . . . . . . . . . 1,755
8,533 Pall. . . . . . . . . . . . . . . . . . 190
28,000 Rohm & Haas . . . . . . . . . . . . . . 1,536
7,157
PAPER & PAPER PRODUCTS - 0.5%
10,000 Kimberly-Clark. . . . . . . . . . . . . 599
53,000 Kimberly-Clark Mexico
(Class A) (MXN) . . . . . . . . . . . 607
15,000 Mead. . . . . . . . . . . . . . . . . . 891
12,705 Sonoco Products . . . . . . . . . . . . 314
2,411
FOREST PRODUCTS - 0.3%
9,000 Georgia-Pacific . . . . . . . . . . . . 781
8,200 Pope & Talbot . . . . . . . . . . . . . 133
12,700 Weyerhaeuser. . . . . . . . . . . . . . 599
1,513
Total Process Industries 14,670
BASIC MATERIALS - 0.8%
METALS - 0.4%
30,000 Alcoa . . . . . . . . . . . . . . . . . 1,504
2,700 Carpenter Technology. . . . . . . . . . 184
9,600 Freeport-McMoRan Copper &
Gold (Class A). . . . . . . . . . . . 198
11,900 * Molten Metal Technology . . . . . . . . 279
2,165
MINING - 0.3%
200,000 *! TVX Gold ADR. . . . . . . . . . . . . 1,450
MISCELLANEOUS MATERIALS - 0.1%
15,300 shs. * Owens-Illinois. . . . . . . . . . . . . $ 199
Total Basic Materials 3,814
FOREIGN - 0.1%
EUROPE - 0.1%
210 Sig Schweiz (CHF) . . . . . . . . . . . 489
Total Foreign 489
CONGLOMERATES - 0.1%
170,000 LONRHO, (GBP) . . . . . . . . . . . . . 399
Total Conglomerates 399
Total Common Stocks & Warrants
(Cost $221,395) 272,685
Preferred Stocks - 0.0%
20 Deutsche Bank, 8.75% (DEM). . . . . . . 16
1,600 * Teledyne, $15.00, Cum. . . . . . . . . 24
Total Preferred Stocks (Cost $35) 40
Convertible Preferred Stocks - 0.1%
2,000 Ford Motor, Dep. Shs., $4.20,
Cum. Series A . . . . . . . . . . . . 194
3,000 General Motors, Dep. Shs.,
Rep. 1/10, Series C . . . . . . . . . 189
Total Convertible Preferred Stocks (Cost $250) 383
Convertible Bonds - 0.1%
$2,000,000 U.S. West, LYONS, Zero Coupon,
6/25/11 . . . . . . . . . . . . . . . 644
Total Convertible Bonds (Cost $607) 644
Corporate Bonds - 15.8%
1,000,000 African Development Bank,
7.75%, 12/15/01 . . . . . . . . . . . 1,060
750,000 Agriculture Minerals and
Chemicals, Sr. Notes,
10.75%, 9/30/03 . . . . . . . . . . . 771
725,000 Alabama Power, 7.00%, 1/1/03. . . . . . 731
500,000 American Media, Sr. Sub. Notes,
11.625%, 11/15/04 . . . . . . . . . . 535
750,000 American Standard, Sr. Sub.
Deb., 9.875%, 6/1/01. . . . . . . . . 772
500,000 Ametek, 9.75%, 3/15/04. . . . . . . . . 525
$ 500,000 Arcadian, Sr. Notes, Series B,
10.75%, 5/1/05. . . . . . . . . . . . $ 504
1,300,000 Associates Corp,
7.50%, 4/15/02. . . . . . . . . . . . 1,346
500,000 Ballys Park Place,
9.25%, 3/15/04. . . . . . . . . . . . 470
2,000,000 Banesto Delaware, Gtd. Notes,
8.25%, 7/28/02. . . . . . . . . . . . 2,078
125,000 Bankers Trust, Sub. Deb.,
8.00%, 3/15/97. . . . . . . . . . . . 128
1,000,000 Banque Nationale De Paris,
9.875%, 5/25/98 . . . . . . . . . . . 1,086
1,000,000 Boeing, 8.75%, 8/15/21. . . . . . . . . 1,159
250,000 British Columbia Hydro &
Power, 12.50%, 9/1/13 . . . . . . . . 302
1,000,000 British Columbia Hydro &
Power, 15.00%, 4/15/11. . . . . . . . 1,115
2,125,000 British Columbia Hydro &
Power, 15.50%, 11/15/11 . . . . . . . 2,507
500,000 Century Telephone Enterprises,
8.25%, 5/1/24 . . . . . . . . . . . . 525
100,000 Citicorp, 8.75%, 11/1/96. . . . . . . . 103
235,484 Citicorp Mortgage,
6.00%, 3/25/22. . . . . . . . . . . . 231
1,000,000 Coca Cola Enterprises,
8.50%, 2/1/22 . . . . . . . . . . . . 1,126
500,000 Coca-Cola Bottling Group, Sr.
Sub. Notes, 9.00%, 11/15/03 . . . . . 493
250,000 Coltec Industries, Sr. Notes,
9.75%, 4/1/00 . . . . . . . . . . . . 259
500,000 Coltec Industries, Sr. Sub.
Notes, 10.25%, 4/1/02 . . . . . . . . 517
500,000 Consolidated Cigar, Sr. Sub.
Notes, 10.50%, 3/1/03 . . . . . . . . 497
500,000 Container Corporation of
America, Sr. Notes,
9.75%, 4/1/03 . . . . . . . . . . . . 495
750,000 Continental Cablevision, Sr.
Deb., 9.00%, 9/1/08 . . . . . . . . . 754
697,906 Corestates Home Equity Loan,
5.10%, 3/15/09. . . . . . . . . . . . 664
361,494 Corestates Home Equity Loan,
6.65%, 5/15/09. . . . . . . . . . . . 361
500,000 Dan River, 10.125%, 12/15/03. . . . . . 495
400,000 Dayton Hudson,
9.50%, 10/15/16 . . . . . . . . . . . 453
265,000 Dow Chemical, 7.13%, 8/15/15. . . . . . 268
500,000 Dr Pepper Bottling Texas,
10.25%, 2/15/00 . . . . . . . . . . . 517
1,000,000 Duke Power, 6.75%, 8/1/25 . . . . . . . 924
750,000 Embassy Suites,
10.875%, 4/15/02. . . . . . . . . . . 810
$ 500,000 Exide, Sr. Notes,
10.75%, 12/15/02. . . . . . . . . . . $ 529
500,000 Exxon Capital, 6.50%, 7/15/99 . . . . . 502
800,000 Fairfax Financial,
7.75%, 12/15/03 . . . . . . . . . . . 785
500,000 Federal Express, MTN,
9.95%, 8/15/06. . . . . . . . . . . . 572
750,000 Ferrellgas, Sr. Notes,
10.00%, 8/1/01. . . . . . . . . . . . 780
1,500,000 First Fidelity, 8.50%, 4/1/98 . . . . . 1,574
500,000 Firstfed Financial,
11.75%, 10/1/04 . . . . . . . . . . . 502
500,000 Flagstar, Sr. Notes,
10.75%, 9/15/01 . . . . . . . . . . . 470
800,000 Fleet/Norstar Financial Group,
8.625%, 1/15/07 . . . . . . . . . . . 884
250,000 Fleming Companies, Sr. Notes,
10.625%, 12/15/01 . . . . . . . . . . 263
1,000,000 Fletcher Challenge Finance,
9.80%, 6/15/98. . . . . . . . . . . . 1,085
1,500,000 Golden West Financial,
8.625%, 8/30/98 . . . . . . . . . . . 1,587
500,000 Granite Broadcasting, Sr. Sub.
Notes, Series A (144a),
10.375%, 5/15/05. . . . . . . . . . . 500
750,000 Gulf Canada Resources Limited,
9.625%, 7/1/05. . . . . . . . . . . . 743
500,000 Gulf States Utilities,
5.375%, 2/1/97. . . . . . . . . . . . 476
500,000 Heritage Media,
11.00%, 6/15/02 . . . . . . . . . . . 539
500,000 Hillhaven, Sr. Sub. Notes,
10.125%, 9/1/01 . . . . . . . . . . . 520
500,000 Hollywood Casino,
14.00%, 4/1/98. . . . . . . . . . . . 549
750,000 IMC Fertilizer Group, Sr. Notes,
9.45%, 12/15/11 . . . . . . . . . . . 754
500,000 IMO Industries, Sr. Sub. Deb.,
12.00%, 11/1/01 . . . . . . . . . . . 517
500,000 Infinity Broadcasting,
10.375%, 3/15/02. . . . . . . . . . . 530
100,000 J. P. Morgan, Sub. Cap. Notes,
9.625%, 12/15/98. . . . . . . . . . . 101
500,000 Jordan Industries, Sr. Notes,
10.375%, 8/1/03 . . . . . . . . . . . 461
400,000 K & F Industries, Sr. Secured
Notes, 11.875%, 12/1/03 . . . . . . . 408
250,000 KFW International, MTN,
9.14%, 6/4/01 . . . . . . . . . . . . 283
750,000 Kroger, 9.25%, 1/1/05 . . . . . . . . . 799
250,000 Lear Seating, Sr. Sub. Notes,
11.25%, 7/15/00 . . . . . . . . . . . 261
$ 500,000 Lear Seating, Sub. Notes,
8.25%, 2/1/02 . . . . . . . . . . . . $ 475
1,500,000 Lehman Brothers Holdings,
8.875%, 3/1/02. . . . . . . . . . . . 1,588
500,000 Liberty National Bank & Trust,
6.75%, 6/1/03 . . . . . . . . . . . . 492
500,000 Long Island Lighting,
7.50%, 3/1/07 . . . . . . . . . . . . 443
100,000 Long Island Lighting,
9.75%, 5/1/21 . . . . . . . . . . . . 102
500,000 MAFCO, Sr. Sub. Notes,
11.875%, 11/15/02 . . . . . . . . . . 499
500,000 Maxus Energy, Sr. Notes,
9.375%, 11/1/03 . . . . . . . . . . . 463
500,000 Maxxam Group, Sr. Secured
Notes, 11.25%, 8/1/03 . . . . . . . . 468
500,000 McDonnell Douglas,
8.25%, 7/1/00 . . . . . . . . . . . . 532
500,000 National Medical Enterprises,
Sr. Sub. Notes,
10.125%, 3/1/05 . . . . . . . . . . . 528
1,310,960 NYNEX, 9.55%, 5/1/10. . . . . . . . . . 1,494
600,000 Occidental Petroleum,
11.75%, 3/15/11 . . . . . . . . . . . 649
500,000 Ornda Healthcorp, Sr. Sub.
Notes, 12.25%, 5/15/02. . . . . . . . 554
750,000 Overhead Door, Sr. Notes,
12.25%, 2/1/00. . . . . . . . . . . . 754
750,000 Owens-Illinois, Sr. Deb.,
11.00%, 12/1/03 . . . . . . . . . . . 823
1,000,000 Pacific Bell, 7.375%, 7/15/43 . . . . . 973
500,000 Paging Network, Sr. Sub. Notes,
8.875%, 2/1/06. . . . . . . . . . . . 455
875,000 Pathmark Stores, Jr. Sub. Def.
Notes, STEP, Zero Coupon,
11/1/03 . . . . . . . . . . . . . . . 525
500,000 Penn Traffic, Sr. Sub. Notes,
9.625%, 4/15/05 . . . . . . . . . . . 471
1,500,000 Philip Morris, 6.00%, 11/15/99. . . . . 1,453
700,000 Plastic Containers, Sr. Secured
Notes, 10.75%, 4/1/01 . . . . . . . . 728
500,000 Players International (144a),
10.875%, 4/15/05. . . . . . . . . . . 495
1,000,000 Province of Alberta,
9.25%, 4/1/00 . . . . . . . . . . . . 1,120
1,500,000 Province of Newfoundland,
8.50%, 10/15/96 . . . . . . . . . . . 1,538
500,000 Prudential Home,
6.90%, 3/25/23. . . . . . . . . . . . 500
1,000,000 Quantas Airways (144a),
6.625%, 6/30/98 . . . . . . . . . . . 998
$ 500,000 Quorum Health Group,
11.875%, 12/15/02 . . . . . . . . . . $ 547
500,000 Repap Wisconsin,
9.25%, 2/1/02 . . . . . . . . . . . . 484
750,000 Riverwood International,
Sr. Sub. Notes,
10.375%, 6/30/04. . . . . . . . . . . 825
750,000 Rogers Cablesystems Limited,
10.00%, 3/15/05 . . . . . . . . . . . 771
1,000,000 Rouse, 8.50%, 1/15/03 . . . . . . . . . 1,059
500,000 S. D. Warren Company,
12.00%, 12/15/04. . . . . . . . . . . 539
500,000 Safeway, 9.875%, 3/15/07. . . . . . . . 570
683,026 SASCO, 6.87%, 8/25/26 . . . . . . . . . 682
750,000 Sea Containers Ltd., Sr. Sub.
Deb., 12.50%, 12/1/04 . . . . . . . . 817
1,550,000 Sea Land Services,
10.60%, 1/2/11. . . . . . . . . . . . 1,657
375,000 Silgan, 11.75%, 6/15/02 . . . . . . . . 392
375,000 Silgan Holdings, STEP, Zero
Coupon, 12/15/02. . . . . . . . . . . 343
1,000,000 Skandinaviska Enskilda Banken,
6.875%, 2/15/09 . . . . . . . . . . . 957
1,650,000 Southwest Airlines,
9.25%, 2/15/98. . . . . . . . . . . . 1,756
750,000 Stone Container,
10.75%, 10/1/02 . . . . . . . . . . . 786
1,400,000 Texaco Capital, 8.65%, 1/30/98. . . . . 1,475
500,000 Texas Bottling Group, Sr. Sub.
Notes, 9.00%, 11/15/03. . . . . . . . 493
1,000,000 Thailand Kingdom
7.07%, 9/30/13. . . . . . . . . . . . 835
600,000 Time Warner Entertainment,
7.25%, 9/1/08 . . . . . . . . . . . . 571
500,000 Videotron Group, Sr. Notes,
10.625%, 2/15/05. . . . . . . . . . . 526
750,000 Westpoint Stevens, Sr. Notes,
8.75%, 12/15/01 . . . . . . . . . . . 739
1,000,000 Weyerhaeuser, 7.95%, 3/15/25. . . . . . 1,070
500,000 Young Broadcasting, Gtd. Sr.
Sub. Notes,
11.75%, 11/15/04. . . . . . . . . . . 545
Total Corporate Bonds (Cost $78,399) 79,114
U.S. Government Mortgage-Backed
Securities - 11.1%
U.S. GOVERNMENT GUARANTEED MORTGAGE OBLIGATIONS - 9.5%
Government National Mortgage
Assn., I,
$ 1,897,613 6.50%, 12/15/23 . . . . . . . . . . . $ 1,824
4,029,015 7.00%, 10/15/22 - 1/15/24 . . . . . . 3,967
6,057,495 7.50%, 9/15/22 - 12/15/23 . . . . . . 6,096
5,410,468 8.00%, 6/15/17 - 8/15/23. . . . . . . 5,551
13,947,686 8.50%, 3/15/05 - 2/15/25. . . . . . . 14,539
3,345,581 9.00%, 5/15/16 - 6/15/25. . . . . . . 3,534
3,054,063 9.50%, 8/15/09 - 9/15/21. . . . . . . 3,268
88,746 10.00%, 11/15/09 - 5/15/13. . . . . . 97
23,141 10.50%, 5/15/15 . . . . . . . . . . . 26
1,729,439 11.00%, 3/15/10 - 1/15/20 . . . . . . 1,922
1,047,270 11.50%, 3/15/10 - 11/15/15. . . . . . 1,174
Government National Mortgage
Assn., II,
1,090,799 9.00%, 7/20/16 - 6/20/20. . . . . . . 1,137
374,740 9.50%, 8/20/22. . . . . . . . . . . . 393
316,546 10.00%, 10/20/16 - 1/20/22. . . . . . 339
318,338 ARM, II, 6.00%, 8/20/23 . . . . . . . . 322
307,661 GPM, I,
10.75%, 1/15/16 - 12/15/17. . . . . . 338
Project Loan, I,
299,986 8.50%, 1/15/27. . . . . . . . . . . . 311
686,434 8.872%, 2/15/30 . . . . . . . . . . . 708
2,310,269 8.95%, 5/15/35. . . . . . . . . . . . 2,356
47,902
U.S GOVERNMENT AGENCY MORTGAGE
OBLIGATIONS - 1.6%
Federal National Mortgage Assn.,
4,000,000 5.80%, 12/10/03 . . . . . . . . . . . 3,816
1,000,000 7.50%, 10/25/19 . . . . . . . . . . . 1,017
1,636,902 8.75%, 12/25/04 . . . . . . . . . . . 1,677
400,000 10.60%, 11/10/95. . . . . . . . . . . 407
Federal Home Loan Mortgage,
700,000 6.00%, 6/15/05. . . . . . . . . . . . 680
76,586 8.00%, 3/1/17 . . . . . . . . . . . . 78
144,865 10.00%, 10/1/10 . . . . . . . . . . . 155
16,721 10.50%, 9/1/15. . . . . . . . . . . . 18
7,848
Total U.S. Government Mortgage-Backed Securities
(Cost $55,408) 55,750
U.S. Government Obligations/
Agencies - 10.8%
$ 400,000 Tennessee Valley Authority,
8.625%, 11/15/29. . . . . . . . . . . $ 439
U.S. Treasury Bonds,
6,000,000 7.125%, 2/15/23 . . . . . . . . . . . 6,322
2,500,000 7.50%, 11/15/24 . . . . . . . . . . . 2,766
2,400,000 8.125%, 8/15/19 - 8/15/21 . . . . . . 2,804
6,600,000 8.75%, 11/15/08 - 8/15/20 . . . . . . 8,013
1,490,000 10.375%, 11/15/12 . . . . . . . . . . 1,971
200,000 10.625%, 8/15/15. . . . . . . . . . . 287
200,000 11.75%, 2/15/01 . . . . . . . . . . . 254
200,000 13.125%, 5/15/01. . . . . . . . . . . 269
600,000 13.25%, 5/15/14 . . . . . . . . . . . 963
U.S. Treasury Notes,
5,000,000 5.125%, 2/28/98 . . . . . . . . . . . 4,908
4,000,000 6.375%, 1/15/00 . . . . . . . . . . . 4,059
5,200,000 7.00%, 4/15/99. . . . . . . . . . . . 5,380
2,000,000 7.25%, 8/15/04. . . . . . . . . . . . 2,137
2,500,000 7.75%, 2/15/01. . . . . . . . . . . . 2,703
4,000,000 8.00%, 5/15/01. . . . . . . . . . . . 4,384
2,800,000 8.25%, 7/15/98. . . . . . . . . . . . 2,979
2,000,000 8.75%, 8/15/00. . . . . . . . . . . . 2,240
900,000 8.875%, 2/15/99 . . . . . . . . . . . 984
Total U.S. Government Obligations/Agencies
(Cost $51,508) 53,862
Short-Term Investments - 7.5%
BANK NOTES - 1.0%
$ 5,000,000 Fifth Third Bank,
6.08%, 11/10/95 . . . . . . . . . . . $ 5,000
CERTIFICATES OF DEPOSIT - 3.0%
5,000,000 Bank of New York,
6.52%, 8/15/95. . . . . . . . . . . . 5,005
5,000,000 MBNA Bank, 6.00%, 7/7/95. . . . . . . . 5,000
5,000,000 NBD Bank, NA,
6.17%, 10/31/95 . . . . . . . . . . . 5,003
15,008
COMMERCIAL PAPER - 3.5%
5,000,000 American Express Company,
6.00%, 7/6/95 . . . . . . . . . . . . 4,946
14,000 Cargill Financial Services,
6.10%, 7/3/95 . . . . . . . . . . . . 14
5,000,000 Delaware Funding,
5.90%, 8/18/95. . . . . . . . . . . . 4,934
5,000,000 Dover, 4(2), 5.98%, 7/7/95. . . . . . . 4,977
2,800,000 New Center Asset Trust,
6.30%, 7/3/95 . . . . . . . . . . . . 2,798
17,669
Total Short-Term Investments (Cost $37,677) 37,677
Total Investments in Securities - 99.9% of
Net Assets (Cost $445,279) $500,155
Other Assets Less Liabilities . . . . . . . . . . . . . . . . 540
________
Net Assets Consist of: Value
________
Accumulated net investment income -
net of distributions. . . . . . . . . $ 267
Accumulated net realized gain/loss -
net of distributions. . . . . . . . . 3,162
Net unrealized gain (loss) . . . . . . . . 54,881
Paid-in-capital applicable to
40,486,289 shares of $0.01 par
value capital stock outstanding;
1,000,000,000 shares
authorized. . . . . . . . . . . . . . 442,385
NET ASSETS . . . . . . . . . . . . . . . . $500,695
________
________
NET ASSET VALUE PER SHARE. . . . . . . . . $12.37
______
______
* Non-income producing
! Securities contain some restrictions as to public resale-total of such
securities at period-end amounts to 0.3% of net assets.
ARM Adjustable rate mortgage
GPM Graduated payment mortgage
MTN Medium term note
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers-total of such securities at period-end amounts to
0.4% of net assets.
AUD Australian dollar
CHF Swiss franc
DEM German deutschemark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
ITL Italian lira
MXN Mexican peso
MYR Malaysian ringgit
NLG Dutch guilder
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Balanced Fund / Six Months Ended June 30, 1995 (Unaudited)
(in thousands)
INVESTMENT INCOME
Income
Interest. . . . . . . . . . . . . . . . . . . . .$ 8,565
Dividend. . . . . . . . . . . . . . . . . . . . . 3,055
________
Total income. . . . . . . . . . . . . . . . . . . 11,620
________
Expenses
Investment management . . . . . . . . . . . . . . 1,375
Shareholder servicing . . . . . . . . . . . . . . 714
Custody and accounting. . . . . . . . . . . . . . 112
Prospectus and shareholder reports. . . . . . . . 30
Registration. . . . . . . . . . . . . . . . . . . 28
Legal and audit . . . . . . . . . . . . . . . . . 12
Directors . . . . . . . . . . . . . . . . . . . . 7
Organization. . . . . . . . . . . . . . . . . . . 5
Miscellaneous . . . . . . . . . . . . . . . . . . 9
________
Total expenses. . . . . . . . . . . . . . . . . . 2,292
________
Net investment income. . . . . . . . . . . . . . . . 9,328
________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities. . . . . . . . . . . . . . . . . . . . 3,399
Foreign currency transactions . . . . . . . . . . 7
________
Net realized gain (loss). . . . . . . . . . . . . 3,406
________
Change in net unrealized gain or loss on:
Securities. . . . . . . . . . . . . . . . . . . . 47,807
Other assets and liabilities denominated
in foreign currencies . . . . . . . . . . . . . 1
________
Change in net unrealized gain or loss . . . . . . 47,808
________
Net realized and unrealized gain (loss). . . . . . . 51,214
________
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS. . . . . . . . . . . . . . . . . . . . $60,542
________
________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Balanced Fund (Unaudited)
(in thousands)
Six Months Ended, Year Ended
June 30, 1995 Dec. 31, 1994
________________ _____________
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . $ 9,328 $ 13,752
Net realized gain (loss) . . . . . . . . . . 3,406 9,883
Change in net unrealized gain or loss. . . . 47,808 (30,377)
_________ __________
Increase (decrease) in net assets from
operations . . . . . . . . . . . . . . . . . 60,542 (6,742)
_________ __________
Distributions to shareholders
Net investment income. . . . . . . . . . . . (9,084) (13,663)
Net realized gain. . . . . . . . . . . . . . (3,106) (7,078)
_________ __________
Decrease in net assets from
distributions. . . . . . . . . . . . . . . (12,190) (20,741)
_________ __________
Capital share transactions*
Shares sold. . . . . . . . . . . . . . . . . 87,751 121,258
Distributions reinvested . . . . . . . . . . 10,679 17,963
Shares redeemed. . . . . . . . . . . . . . . (38,114) (60,775)
_________ __________
Increase (decrease) in net assets from
capital share transactions . . . . . . . . 60,316 78,446
_________ __________
Net equalization . . . . . . . . . . . . . . . . 24 240
_________ __________
Increase (decrease) in net assets. . . . . . . . 108,692 51,203
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . 392,003 340,800
_________ __________
End of period. . . . . . . . . . . . . . . . . . $500,695 $392,003
_________ __________
_________ __________
*Share information
Shares sold. . . . . . . . . . . . . . . . . 7,663 10,472
Distributions reinvested . . . . . . . . . . 894 1,592
Shares redeemed. . . . . . . . . . . . . . . (3,249) (5,248)
_________ __________
Increase (decrease) in shares
outstanding. . . . . . . . . . . . . . . . 5,308 6,816
_________ __________
_________ __________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Balanced Fund / June 30, 1995 (Unaudited)
Note 1 - Significant Accounting Policies
T. Rowe Price Balanced Fund (the fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) 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.
B) 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.
C) 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 an 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. The fund follows the practice of
equalization under which undistributed net investment income per share is
unaffected by fund shares sold or redeemed.
Note 2 - Investment Transactions
A) Securities Lending - To earn additional income, the fund lends its
securities to approved brokers. At June 30, 1995, the market value of
securities on loan was $59,512,000, which was fully collateralized with cash.
Although the 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 them.
B) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $55,381,000
and $25,838,000, respectively, for the six months ended June 30, 1995.
Purchases and sales of U.S. government securities aggregated $35,024,000 and
$9,517,000, respectively, for the six months ended June 30, 1995.
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, 1995, the aggregate cost of investments for federal income tax
and financial reporting purposes was $ 445,279,000 and net unrealized gain
aggregated $54,876,000, of which $63,628,000 related to appreciated
investments and $8,752,000 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 $236,000 was payable at June 30, 1995. The fee is computed daily
and paid monthly, and consists of an Individual Fund Fee equal to 0.15% 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 0.31% for assets in excess of $34
billion. At June 30, 1995, and for the six months then ended, the effective
annual Group Fee rate was 0.34%. The fund pays a pro rata share of the Group
Fee based on the ratio of its net assets to those of the Group.
Under the terms of the investment management agreement, the fund is
required to reimburse the Manager for expenses, provided that average net
assets have grown or expenses have declined sufficiently to allow
reimbursement without causing the fund's ratio of expenses to average net
assets to exceed 1.00%. Pursuant to this agreement, $248,000 of unaccrued 1993
management fees were repaid during the six months ended June 30, 1995, and
$32,000 remains subject to reimbursement through December 31, 1996.
In addition, the fund has entered into agreements with the Manager and two
wholly owned subsidiaries of the Manager, pursuant to which the fund receives
certain other services. The Manager computes the daily share price and
maintains the financial records of the fund. T. Rowe Price Services, Inc. is
the fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $671,000 for the period ended
June 30, 1995, of which $115,000 was payable at period-end.
<TABLE>
<CAPTION>
Financial Highlights#
T. Rowe Price Balanced Fund (Unaudited)
For a share outstanding throughout each period
_________________________________________________________________
Six Months Year Year Year
Ended Ended Ended Ended Year Ended December 31,
June 30, Dec. 31, Dec. 31, Dec., 31, _______________________
1995 1994 1993 1992 1992 1991 1990
__________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD . . . . . . . . . . . . . $11.14 $12.02 $11.07 $10.86 $11.43 $9.81 $10.37
_______ _______ _______ _______ ______ ______ ______
Investment Activities
Net investment income . . . . . . . 0.24 0.43 0.40* 0.06* 0.33* 0.62 0.71
Net realized and unrealized
gain (loss) . . . . . . . . . . . 1.30 (0.68) 1.05 0.29 0.86 1.51 (0.50)
_______ _______ _______ _______ ______ ______ ______
Total from Investment
Activities . . . . . . . . . . . . . 1.54 (0.25) 1.45 0.35 1.19 2.13 0.21
_______ _______ _______ _______ ______ ______ ______
Distributions
Net investment income . . . . . . . (0.23) (0.43) (0.39) (0.09) (0.58) (0.51) (0.77)
Net realized gain . . . . . . . . . (0.08) (0.20) (0.11) (0.05) (1.18) - -
_______ _______ _______ _______ ______ ______ ______
Total Distributions. . . . . . . . . . (0.31) (0.63) (0.50) (0.14) (1.76) (0.51) (0.77)
_______ _______ _______ _______ ______ ______ ______
NET ASSET VALUE, END OF PERIOD . . . . $12.37 $11.14 $12.02 $11.07 $10.86 $11.43 $9.81
_______ _______ _______ _______ ______ ______ ______
_______ _______ _______ _______ ______ ______ ______
RATIOS / SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . 13.9% (2.1)% 13.4%* 3.3%* 7.7% 22.0% 7.2%
Ratio of Expenses to Average
Net Assets. . . . . . . . . . . . . 1.00%! 1.00% 1.00%* 1.00%!* 1.03% 1.10% 0.94%
Ratio of Net Investment Income
to Average Net Assets . . . . . . . 4.06%! 3.72% 3.45%* 3.85%!* 4.07% 5.61% 6.82%
Portfolio Turnover Rate. . . . . . . . 17.0%! 33.3% 8.7% 58.0%! 207.7% 239.9% 127.2%
Net Assets, End of Period
(in thousands). . . . . . . . . . .$500,695 $392,003 $340,800 $250,035 $239,195 $175,093 $156,374
<FN>
! Annualized.
# All share and per-share figures have been restated to reflect the reorganization of the Fund
effective August 31, 1992. The information provided for each of the three years in the period ended
October 31 represents the activities of Axe-Houghton Fund B, as restated.
* Excludes expenses in excess of a 1.00% voluntary expense limitation in effect from the
reorganization date through December 31, 1994.
</FN>
</TABLE>
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-Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m ET. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(registered trademark) (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Addition-
ally, you have the ability to request prospectuses, statements, account and
tax forms; reorder checks; and initiate purchase, redemption, and exchange
orders for identically registered
accounts.
PC*Access(registered trademark) provides the same information as
Tele*Access, but on a personal computer via dial-up modem.
Account Services
Checking-Write checks for $500 or more on any money market and most bond
fund accounts (except the High Yield Fund and Emerging Markets Bond Fund).
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal-If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights-A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
