- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Balanced Fund
- --------------------------------------------------------------------------------
December 31, 1998
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
* Despite significant volatility, both the equity and bond markets ended
1998 with solid gains.
* Your fund's 6- and 12-month gains were competitive with its Lipper
peer group but trailed a combined index portfolio.
* Large-cap domestic growth stocks were the dominant asset class in
1998.
* The fund's asset allocation remains near its long-term target of 60%
equities and 40% bonds, with significant exposure to international
stocks and high-yield bonds.
* Slowing economic growth may moderate gains, but bonds and equities
should benefit from continued low inflation and interest rates in
1999.
FELLOW SHAREHOLDERS
The domestic bond and equity markets posted good performances in 1998
despite numerous crises in foreign markets and sometimes extreme volatility.
Rising blue chip stocks once again buoyed equities. Interest rates also fell
sharply in autumn, sparked both by strong investor preference for low-risk
securities and by Federal Reserve action.
<PAGE>
================================================================================
Performance Comparison
Periods Ended 12/31/98 6 Months 12 Months
---------------------- -------- ---------
Balanced Fund 4.91% 15.97%
Lipper Balanced Fund Index 5.05 15.09
Combined Index Portfolio * 7.91 20.98
* An unmanaged portfolio of 60% stocks (S&P 500) and 40% bonds (Lehman
Brothers Aggregate Index).
================================================================================
In this environment, the Balanced Fund produced solid results with moderate
volatility. Returns during the past six months cooled from the first half of the
year but were appropriate to our modest-risk approach. Your fund's 4.91%
six-month and 15.97% 12-month results were in keeping with the Lipper Balanced
Fund Index, but trailed the Combined Index Portfolio, an unmanaged mix of the
Standard & Poor's 500 Stock Index and the Lehman Brothers Aggregate Index. The
blended index has recently outperformed your fund because it has little or no
exposure to international equities and high-yield bonds, which we include in the
fund for diversificat ion. During this extraordinary equity rally, which began
at the end of 1994, the S&P has dramatically outperformed practically every
other class of equity investment.
YEAR-END DISTRIBUTIONS
On December 15, 1998, your Board of Directors declared a long-term capital
gain distribution of $0.02 per share and a short-term capital gain of $0.01 per
share to shareholders of record on that date. These were paid on December 17. On
December 28, 1998, the Directors declared a quarterly income dividend of $0.13
per share to shareholders of record on that date. It was paid on December 30.
You should already have received your check or statement reflecting these
distributions, as well as Form 1099-DIV summarizing this information for 1998
tax purposes.
================================================================================
Preparing For The Year 2000
- --------------------------------------------------------------------------------
The Year 2000 draws closer every day, and it holds special meaning beyond
the arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
<PAGE>
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all
new systems process and store four-digit years. All critical systems have been
reprogrammed (including business applications required to service our customers
and processing infrastructure necessary to ensure the integrity of customer data
and investments), and they are currently being tested. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. In addition, we are
scheduling tests for critical vendors and companies that claim Year 2000
compliance to ensure that time-related data and calculations function properly
as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition
into the next millennium. We are assessing all systems providing products or
services to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we have modified them where necessary for the Year 2000.
The Securities Industry Association (SIA) is coordinating Year 2000 testing
to assure that securities markets, clearing corporations, depositories, and
third party service providers can send, receive, and process files and
transactions accurately. In late July 1998, the SIA completed a beta test of
Year 2000 readiness. The test was considered successful in terms of transactions
completed and will serve as the basis for the SIA's industry-wide approach.
During October 1998, T. Rowe Price completed its beta test of Year 2000
readiness with the SIA and is ready for the industry-wide test that is scheduled
for March and April 1999.
For a more detailed discussion of our Year 2000 effort, as well as
continuing updates on our progress, please check our Web site
(WWW.TROWEPRICE.COM).
================================================================================
MARKET ENVIRONMENT
The domestic economy coasted through another positive year in 1998.
Inflation was negligible and corporate profits were steadier than anticipated.
The investment markets were another story, however. A spate of problems in
international economies, which came to a head when Russia devalued the ruble and
defaulted on its debts in late summer, threw the global currency markets into
turmoil and sparked some panic selling. Investors abandoned higher-risk
investments during the height of the crisis, including domestic blue chips as
well as foreign stocks and bonds, high-yield corporate bonds, and small-cap
stocks. The U.S. equity market (as measured by the Dow Jones Industrial Average)
fell 15%, while low-risk Treasuries enjoyed a sharp rally.
<PAGE>
[Chart showing interest rates for 30-Year Treasury Bond, 5-Year Treasury
Note, and 90-day Treasury Bills, 12/31/97 through 12/31/98.]
The Federal Reserve responded by lowering the federal funds target rate in
late September to avert a liquidity crunch that threatened after the currency
crisis. Investor confidence was not so easily restored, however; additional
well-publicized problems -- in particular, the collapse of a prominent hedge
fund -- kept many investors on the sidelines. Eventually, the Fed reduced the
target rate two more times, in October and mid-November, to 4.75%. The
additional liquidity finally seemed to stabilize most markets. Remarkably, the
S&P 500 finished the year with an unprecedented fourth consecutive gain of 20%
or more.
Despite their difficulties during the crisis, domestic blue chip stocks
continued to be among the year's best performers. With valuations very high,
investors paid close attention to earnings. Stocks in the consumer, health care,
and financial industries, where earnings tend to be reliable, benefited. Toward
the end of the year, technology stocks also soared, buoyed by the promise of
Internet technology. Cyclicals and basic materials stocks were left behind, and
firms posting earnings disappointments were often sold off harshly. Merger and
acquisition activity continued to be an important driver for equities, helping
to maintain momentum in a market that already appeared expensive by historical
standards.
The most notable feature of the stock market over the past year must surely
be its increased level of volatility. The S&P 500's level of fluctuation during
this period has been topped only twice in the past 50 years. A simple measure of
volatility is the number of days in which the market moves up or down 1% or
more. For all of 1998, this threshold was exceeded on over 30% of the trading
days (almost 40% in the second half), compared with only 5% of trading days in
1995. The second most notable feature was the huge performance divergence
between the S&P and any index of smaller companies. The S&P posted another
superb year, rising 28.6%, while the Russell 2000, for example, declined 2.5%.
Indeed, the S&P's return actually masked significant size-related bias within
the index: the smallest half of the index was flat for the year, while its
largest 50 companies posted returns, on average, well above 30%. The disparity
between large- and small-cap stocks was as great as at any time in the past two
decades.
Within the bond market, Treasury bonds, bills, and notes led in the second
half and interest rates continued their long secular decline. Treasuries have
always been a safe harbor for nervous investors, but even their volatility
increased as investors swapped in and out of them during the year's short-term
crises. Corporate bonds, and in particular high-yield bonds, did poorly during
the summer "flight to quality," but their comparatively high yields helped them
recover quickly when stability returned. Only mortgage-backed bonds, which are
negatively affected by falling interest rates, struggled consistently through
the period.
PORTFOLIO HIGHLIGHTS
Given the unusual volatility, we chose to maintain a neutral approach to
asset allocation. The fund stayed close to its long-term target of 60% equities
and 40% bonds, with significant exposure to international stocks and high-yield
bonds. All sectors of the fund -- domestic equity, international equity, and
fixed income -- produced solid gains for the year.
<PAGE>
The U.S. equity market was particularly favorable toward growth stocks in
1998. The Barra/S&P Growth Index decisively outperformed the Barra/S&P Value
Index 42.2% to 14.7% for the year, and 15.5% to 2.3% for the second half. Stocks
and industries with higher dependence on the overall economy to generate
earnings growth, such as basic materials or consumer cyclicals, underperformed
those with less sensitivity to the economic cycle.
[Security Diversification chart here. Pie chart, based on net assets as of
12/31/98, with the following segments - Corporate Bonds, 17%; Mortgage-Backed
Securities, 5%; Large-Cap Stocks, 48%; International Stocks, 12%; Treasury and
Agency Bonds, 17%; Reserves, 1%.]
The domestic equity component of the fund was paced by our technology
holdings. Positions in ANALOG DEVICES, a semiconductor manufacturer, and the
personal-computer firm Compaq provided strong gains, as did INTEL. Another area
of good results was telecommunications, led by MCI WORLDCOM, BELLSOUTH, and
AMERITECH. Declining oil prices hurt energy stocks, and a generally deflationary
environment led to poor performance of other commodity-related stocks. Oil
service companies such as BAKER HUGHES declined sharply, as did chemical firms
DUPONT and HERCULES.
As noted, large-caps had a distinct performance advantage in 1998. Even
though this fund's equity portion has a marked large-cap orientation compared
with its peer group, it was nonetheless less concentrated than the S&P in the
largest companies, and this held back results compared with the Combined Index
Portfolio. Few actively managed portfolios have as much exposure to the largest
stocks as the index, which is one reason we fared better against the competition
(the Lipper Balanced Fund Index).
The international equity portfolio was up modestly in the past six months,
after a strong first half. The fund's holdings in the Pacific performed well
after June 30, with Hong Kong and Singapore rebounding from abysmal performance
earlier. Japanese stocks also did well in recent months, helped by a
strengthening yen. Both KAO, a Japanese food company, and TAKEDA CHEMICAL, a
pharmaceutical company, appreciated better than 45%. Our European stocks were
mixed during the second half, with the U.K. up, Continental markets mostly down
modestly, and Scandinavian holdings off sharply. A good performer for us was
ELECTRABEL, a Belgian electric utility. Nevertheless, for the fourth consecutive
year, our international stocks lagged behind their domestic counterparts. Part
of the fund's strategy is to provide exposure to a wide array of asset classes,
and while our primary motivation is to moderate volatility through
diversification, we think that in time our international holdings will also
enhance returns.
The past year also provided us with a positive interest rate environment.
Since year-end 1997, yields on various-maturity Treasury bonds have declined 96
to 116 basis points (one hundred basis points equal one percent), and bond
prices have jumped in tandem. Normally, an economic environment as strong as
this one would give rise to inflation and place upward pressure on interest
rates. However, inflation has been low. It has also helped that, during this
expansion, the very real measures of economic strength have typically been
tempered with more worrisome indications of earnings declines, high inventories,
or other signs of economic weakness. This mixed environment has discouraged the
Fed from raising rates and made good bond performance possible even in the late
stages of this economic cycle.
<PAGE>
Still, the bond market also exhibited its share of volatility, and your
portfolio reflected sometimes mixed results. With declining rates buffeting the
mortgage-backed bond market, our holdings in this segment declined to 5% of
assets from 7% a year ago. Falling rates prompt an increase in mortgage
refinancings, which undercut the value of existing mortgage-backed bonds. In
times of relatively stable interest rates, however, mortgage securities offer an
attractive mix of high credit quality and elevated yield. We therefore intend to
maintain a modest stake in this sector for diversification purposes.
Strong returns during the year's global financial crises pushed the fund's
Treasury and agency bond stake to 17% from 13% six months ago. Robust demand
helped these holdings score significant price gains in the second half. The flip
side of price gains, however, is a consequent decline in yields, and Treasury
yields have recently been as low as they've been in decades. These low yields
may make these issues less attractive to us in the future.
Corporate issues, especially high-yield bonds, had a wild ride during the
year: they led the market in the first half, were beaten up in the third
quarter, and then staged a strong recovery as the year closed.
Our stake in corporate bonds stayed fairly steady, slipping only a touch
from 18% to 17% of assets during the year. We have chosen to maintain this
weighting because of these issues' attractive income. Despite their sharp
third-quarter losses, we also continued to hold a healthy stake -- 7% of assets
- -- in high-yield (junk) bonds. High-yield bonds typically react well to strong
economic growth. In the absence of further overseas crises, we think our
holdings in the top-quality tiers of the noninvestment-grade sector will provide
an attractive combination of yield and price appreciation.
OUTLOOK
The domestic economy is still exhibiting considerable strength. For
example, despite newspaper headlines about layoffs, the U.S. expanded employment
by well over two million jobs in 1998. On the other hand, weakness in other
global regions, especially Asia and Latin America, has depressed the outlook for
future economic growth and threatened to slow corporate profit growth
significantly. Declining growth rates may inspire the Fed to keep rates steady
or even to lower them further, despite occasional pressure to raise them.
A flat-to-declining rate environment would benefit both the equity and bond
portions of this portfolio. However, while we expect positive performance in the
year ahead, we are viewing the markets with a cautious eye and maintaining
moderate expectations for 1999. Volatility has been high by historical
standards, and we think that trend is likely to continue. We intend to keep to
your fund's charter: to provide a well-diversified portfolio with exposure to a
variety of different asset classes, with the goal of moderating volatility where
possible and exposing shareholders to gains wherever they may occur in the
markets.
Respectfully submitted,
/s/
Richard T. Whitney
Chairman of the Investment Advisory Committee
January 25, 1999
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
Portfolio Highlights
LARGEST HOLDINGS
Percent of
Net Assets
12/31/98
--------
Stocks
- --------------------------------------------------------------------------------
GE 1.2%
Intel 0.8
Merck 0.8
Pfizer 0.7
Sun Microsystems 0.7
American International Group 0.7
Bristol-Myers Squibb 0.7
COMPAQ Computer 0.6
Lucent Technologies 0.6
BellSouth 0.6
Total 7.4%
Percent of
Net Assets
12/31/98
--------
Bonds
- --------------------------------------------------------------------------------
U.S. Treasury 14.5%
Ginnie Mae 4.1
Fannie Mae 2.9
Federal Home Loans 0.7
Kimberly Clark 0.3
WorldCom 0.3
Dillards 0.2
Siebe 0.2
Consumers Energy 0.2
Niagara Mohawk 0.2
Total 23.6%
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
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.
[Balanced Fund 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 12/31/98 1 Year 3 Years 5 Years 10 Years
- ---------------------- ------ ------- ------- --------
Balanced Fund 15.97% 16.49% 14.09% 14.05%
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>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Financial Highlights
Year
Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 16.54 $ 14.48 $ 13.22 $ 11.14 $ 12.02
- ------------------------------------------------------------------------------
Investment activities
Net investment income 0.53 0.53 0.51 0.48 0.43
Net realized and
unrealized gain (loss) 2.08 2.18 1.38 2.24 (0.68)
- ------------------------------------------------------------------------------
Total from
investment activities 2.61 2.71 1.89 2.72 (0.25)
- ------------------------------------------------------------------------------
Distributions
Net investment income (0.52) (0.53) (0.50) (0.47) (0.43)
Net realized gain (0.04) (0.12) (0.13) (0.17) (0.20)
- ------------------------------------------------------------------------------
Total distributions (0.56) (0.65) (0.63) (0.64) (0.63)
- ------------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 18.59 $ 16.54 $ 14.48 $ 13.22 $ 11.14
Ratios/Supplemental Data
Total return + 15.97% 18.97% 14.57% 24.88% (2.05)
- ------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.78% 0.81% 0.87% 0.95% 1.00%
- ------------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 3.04% 3.36% 3.70% 3.87% 3.72%
- ------------------------------------------------------------------------------
Portfolio turnover rate 12.5% 15.5% 22.3% 12.6% 33.3%
- ------------------------------------------------------------------------------
Net assets, end of period
(in millions) $ 1,650 $ 1,219 $ 876 $ 608 $ 392
- ------------------------------------------------------------------------------
+ Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment of
all distributions.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
December 31, 1998
PORTFOLIO OF INVESTMENTS
Shares/Par Value
In thousands
COMMON STOCKS 59.4%
FINANCIAL 9.8%
Bank and Trust 5.4%
Abbey National (GBP) 124,000 $ 2,651
- ----------------------------------------------------------------------------
Air Liquide (L) (FRF) * 7,762 1,423
- ----------------------------------------------------------------------------
AmSouth 12,150 554
- ----------------------------------------------------------------------------
Australia & New Zealand Banking ADR 21,500 699
- ----------------------------------------------------------------------------
Banca Commerciale Italiana (ITL) 210,000 1,451
- ----------------------------------------------------------------------------
Banco de Bilbao Vizcaya ADR 180,000 2,880
- ----------------------------------------------------------------------------
Banco Frances del Rio de la Plata (Class B) ADR 34,500 716
- ----------------------------------------------------------------------------
Bank One 56,397 2,880
- ----------------------------------------------------------------------------
BankAmerica * 161,637 9,718
- ----------------------------------------------------------------------------
BankBoston 65,300 2,543
- ----------------------------------------------------------------------------
Bankgesellschaft Berlin (DEM) * 57,000 930
- ----------------------------------------------------------------------------
Barclay's (GBP) 101,278 2,181
- ----------------------------------------------------------------------------
Charter One Financial 21,113 585
- ----------------------------------------------------------------------------
Chase Manhattan 110,080 7,492
- ----------------------------------------------------------------------------
Citigroup 178,023 8,812
- ----------------------------------------------------------------------------
Compass Bancshares 9,300 354
- ----------------------------------------------------------------------------
Crestar Financial 6,400 461
- ----------------------------------------------------------------------------
Deutsche Bank (DEM) * 18,700 1,100
- ----------------------------------------------------------------------------
Development Bank of Singapore (SGD) 35,200 318
- ----------------------------------------------------------------------------
Dresdner Bank (DEM) * 20,200 848
- ----------------------------------------------------------------------------
First American 15,600 692
- ----------------------------------------------------------------------------
First Security 24,975 583
- ----------------------------------------------------------------------------
First Union 101,919 6,198
- ----------------------------------------------------------------------------
<PAGE>
First Virginia Banks 8,550 402
- ----------------------------------------------------------------------------
Firstar 18,900 1,762
- ----------------------------------------------------------------------------
Fleet Financial Group 4,400 197
- ----------------------------------------------------------------------------
Grupo Financiero Bancomer ADR (144a) 20,000 83
- ----------------------------------------------------------------------------
HSBC Holdings (GBP) 105,745 2,839
- ----------------------------------------------------------------------------
J. P. Morgan 20,000 2,101
- ----------------------------------------------------------------------------
KBC Bancassurance Holding (BEF) * 25,000 1,978
- ----------------------------------------------------------------------------
KeyCorp 100,000 3,200
- ----------------------------------------------------------------------------
Mediobanca (ITL) 125,100 1,740
- ----------------------------------------------------------------------------
Mellon Bank 37,500 2,578
- ----------------------------------------------------------------------------
Mercantile Bancorporation 6,300 $ 291
- ----------------------------------------------------------------------------
Old Kent Financial 13,125 610
- ----------------------------------------------------------------------------
Overseas Chinese Bank (SGD) 32,200 218
- ----------------------------------------------------------------------------
Regions Financial 18,200 734
- ----------------------------------------------------------------------------
Societe Generale (FRF) * 11,790 1,909
- ----------------------------------------------------------------------------
SouthTrust 14,250 526
- ----------------------------------------------------------------------------
Svenska Handelsbank (SEK) * 26,000 1,094
- ----------------------------------------------------------------------------
U.S. Bancorp 46,152 1,638
- ----------------------------------------------------------------------------
UBS (CHF) * 16,089 4,943
- ----------------------------------------------------------------------------
Washington Federal 22,493 605
- ----------------------------------------------------------------------------
Washington Mutual 30,000 1,146
- ----------------------------------------------------------------------------
Wells Fargo 60,000 2,396
- ----------------------------------------------------------------------------
Westpac Bank (AUD) 90,000 602
- ----------------------------------------------------------------------------
89,661
Insurance 2.3%
ACE Limited 40,000 1,378
- ----------------------------------------------------------------------------
American General 48,000 3,744
- ----------------------------------------------------------------------------
American International Group 121,725 11,762
- ----------------------------------------------------------------------------
CIGNA 8,700 673
- ----------------------------------------------------------------------------
<PAGE>
Conseco 31,213 954
- ----------------------------------------------------------------------------
Equitable Companies 9,400 544
- ----------------------------------------------------------------------------
Hartford Financial Services Group 2,800 154
- ----------------------------------------------------------------------------
Horace Mann Educators 20,400 581
- ----------------------------------------------------------------------------
Marsh & McLennan 6,900 403
- ----------------------------------------------------------------------------
MBIA 6,200 406
- ----------------------------------------------------------------------------
Medical Assurance * 21,027 695
- ----------------------------------------------------------------------------
MGIC Investment 23,200 924
- ----------------------------------------------------------------------------
Old Republic International 10,575 238
- ----------------------------------------------------------------------------
Progressive 4,200 711
- ----------------------------------------------------------------------------
St. Paul Companies 86,000 2,988
- ----------------------------------------------------------------------------
Sumitomo Marine & Fire Insurance (JPY) * 175,000 1,108
- ----------------------------------------------------------------------------
Torchmark 78,600 2,776
- ----------------------------------------------------------------------------
Transamerica 17,400 2,010
- ----------------------------------------------------------------------------
UNUM 100,000 5,837
- ----------------------------------------------------------------------------
37,886
Financial Services 2.1%
A.G. Edwards 20,212 753
- ----------------------------------------------------------------------------
AMBAC 22,200 1,336
- ----------------------------------------------------------------------------
American Express 42,600 $ 4,356
- ----------------------------------------------------------------------------
Associates First Capital (Class A) 5,938 252
- ----------------------------------------------------------------------------
AXA (FRF) * 20,600 2,984
- ----------------------------------------------------------------------------
Countrywide Credit 113,925 5,718
- ----------------------------------------------------------------------------
Fannie Mae 78,000 5,772
- ----------------------------------------------------------------------------
Household International 72,000 2,853
- ----------------------------------------------------------------------------
ING Groep (NLG) 51,674 3,150
- ----------------------------------------------------------------------------
Medaphis * 14,600 48
- ----------------------------------------------------------------------------
Metris Companies 2,546 128
- ----------------------------------------------------------------------------
Morgan Stanley Dean Witter 25,600 1,818
<PAGE>
- ----------------------------------------------------------------------------
Pearson (GBP) 150,000 2,983
- ----------------------------------------------------------------------------
Unidanmark (Class A) (DKK) 20,000 1,807
- ----------------------------------------------------------------------------
United Asset Management 16,000 416
- ----------------------------------------------------------------------------
Waddell & Reed Financial (Class A) 4,472 106
- ----------------------------------------------------------------------------
Waddell & Reed Financial (Class B) * 19,249 447
- ----------------------------------------------------------------------------
34,927
- ----------------------------------------------------------------------------
Total Financial 162,474
UTILITIES 5.7%
Telephone Services 4.1%
ALLTEL 80,000 4,785
- ----------------------------------------------------------------------------
Ameritech 48,000 3,042
- ----------------------------------------------------------------------------
AT&T 107,500 8,089
- ----------------------------------------------------------------------------
Bell Atlantic 36,200 1,919
- ----------------------------------------------------------------------------
BellSouth 204,000 10,175
- ----------------------------------------------------------------------------
British Telecommunications ADR 21,600 3,276
- ----------------------------------------------------------------------------
Compania de Telecomunicaciones de Chile
(Class A) ADR 17,000 352
- ----------------------------------------------------------------------------
COMSAT 4,900 176
- ----------------------------------------------------------------------------
Frontier 8,000 272
- ----------------------------------------------------------------------------
GTE 53,800 3,497
- ----------------------------------------------------------------------------
Hong Kong Telecommunications ADR 37,288 655
- ----------------------------------------------------------------------------
Nippon Telegraph & Telephone (JPY) 168 1,296
- ----------------------------------------------------------------------------
SBC Communications 189,340 10,153
- ----------------------------------------------------------------------------
Sprint 50,900 4,282
- ----------------------------------------------------------------------------
Telebras ADR * 20,000 1,454
- ----------------------------------------------------------------------------
Telecom Corporation of New Zealand (NZD) 520,000 2,257
- ----------------------------------------------------------------------------
Telecom Italia (ITL) * 317,220 $ 2,710
- ----------------------------------------------------------------------------
Telecom Italia Mobile (ITL) * 571,000 4,221
- ----------------------------------------------------------------------------
Telefonica de Espana ADR * 12,240 1,657
<PAGE>
- ----------------------------------------------------------------------------
Telefonos de Mexico (Class L) ADR * 30,000 1,461
- ----------------------------------------------------------------------------
Telekom Malaysia (MYR) * 200 1
- ----------------------------------------------------------------------------
U S West 20,546 1,328
- ----------------------------------------------------------------------------
67,058
- ----------------------------------------------------------------------------
Electric Utilities 1.6%
Duke Energy 30,115 1,929
- ----------------------------------------------------------------------------
Edison International 104,000 2,899
- ----------------------------------------------------------------------------
Electrabel (BEF) * 3,100 1,361
- ----------------------------------------------------------------------------
Empresa Nacional de Electricidad Chile ADR 20,000 227
- ----------------------------------------------------------------------------
Endesa ADR 48,800 1,318
- ----------------------------------------------------------------------------
Entergy 53,000 1,650
- ----------------------------------------------------------------------------
FirstEnergy 75,000 2,442
- ----------------------------------------------------------------------------
FPL Group 25,600 1,578
- ----------------------------------------------------------------------------
GPU 75,000 3,314
- ----------------------------------------------------------------------------
Hong Kong Electric (HKD) 200,000 607
- ----------------------------------------------------------------------------
Niagara Mohawk * 102,500 1,653
- ----------------------------------------------------------------------------
Public Service of New Mexico 50,000 1,022
- ----------------------------------------------------------------------------
Texas Utilities 39,899 1,863
- ----------------------------------------------------------------------------
Unicom 68,600 2,645
- ----------------------------------------------------------------------------
Veba (DEM) * 29,700 1,776
- ----------------------------------------------------------------------------
26,284
- ----------------------------------------------------------------------------
Total Utilities 93,342
- ----------------------------------------------------------------------------
CONSUMER=NONDURABLES==13.6%=================================================
Cosmetics 0.4%
Gillette 45,174 2,182
- ----------------------------------------------------------------------------
International Flavors & Fragrances 11,700 517
- ----------------------------------------------------------------------------
Kao (JPY) 161,000 3,632
- ----------------------------------------------------------------------------
<PAGE>
Revlon (Class A) * 1,800 30
- ----------------------------------------------------------------------------
6,361
- ----------------------------------------------------------------------------
Beverages 1.4%
Anheuser-Busch 64,000 4,200
- ----------------------------------------------------------------------------
Coca-Cola 92,600 6,193
- ----------------------------------------------------------------------------
Diageo ADR 27,043 1,251
- ----------------------------------------------------------------------------
LVMH (FRF) 9,541 $ 1,888
- ----------------------------------------------------------------------------
PepsiCo 204,000 8,351
- ----------------------------------------------------------------------------
Starbucks * 24,400 1,366
- ----------------------------------------------------------------------------
23,249
- ----------------------------------------------------------------------------
Food Processing 2.1%
Agribrands International * 2,320 70
- ----------------------------------------------------------------------------
Archer Daniels Midland 70,741 1,216
- ----------------------------------------------------------------------------
Bestfoods 65,800 3,504
- ----------------------------------------------------------------------------
Cadbury Schweppes ADR 31,586 2,187
- ----------------------------------------------------------------------------
ConAgra 53,400 1,682
- ----------------------------------------------------------------------------
Corn Products International 8,225 250
- ----------------------------------------------------------------------------
CSM (NLG) * 17,000 981
- ----------------------------------------------------------------------------
Danisco (DKK) * 16,000 867
- ----------------------------------------------------------------------------
Earthgrains 5,120 158
- ----------------------------------------------------------------------------
Eridania Beghin-Say (FRF) 8,100 1,401
- ----------------------------------------------------------------------------
General Mills 57,500 4,471
- ----------------------------------------------------------------------------
Heinz 77,000 4,360
- ----------------------------------------------------------------------------
Hershey Foods 30,000 1,866
- ----------------------------------------------------------------------------
Kellogg 6,200 212
- ----------------------------------------------------------------------------
McCormick 10,300 348
- ----------------------------------------------------------------------------
Nestle (CHF) * 1,724 3,752
- ----------------------------------------------------------------------------
Ralston Purina 69,612 2,254
- ----------------------------------------------------------------------------
Sara Lee 165,800 4,673
<PAGE>
- ----------------------------------------------------------------------------
Universal Foods 14,200 390
- ----------------------------------------------------------------------------
Whitman 1,100 28
- ----------------------------------------------------------------------------
34,670
- ----------------------------------------------------------------------------
Hospital Supplies/Hospital Management 1.5%
Abbott Laboratories 127,200 6,233
- ----------------------------------------------------------------------------
Allegiance 16,000 746
- ----------------------------------------------------------------------------
Baxter International 50,000 3,216
- ----------------------------------------------------------------------------
Boston Scientific * 40,000 1,072
- ----------------------------------------------------------------------------
Columbia/HCA Healthcare 97,900 2,423
- ----------------------------------------------------------------------------
First Health Group * 25,800 426
- ----------------------------------------------------------------------------
Guidant 21,200 2,337
- ----------------------------------------------------------------------------
Health Management (Class A) * 81,252 1,757
- ----------------------------------------------------------------------------
Hillenbrand Industries 11,600 660
- ----------------------------------------------------------------------------
Humana * 22,400 399
- ----------------------------------------------------------------------------
Medtronic 32,000 2,376
- ----------------------------------------------------------------------------
Millipore 900 $ 26
- ----------------------------------------------------------------------------
Smith & Nephew (GBP) 210,000 638
- ----------------------------------------------------------------------------
St. Jude Medical * 26,000 720
- ----------------------------------------------------------------------------
Terumo (JPY) 75,000 1,765
- ----------------------------------------------------------------------------
24,794
- ----------------------------------------------------------------------------
Pharmaceuticals 5.8%
American Home Products 113,200 6,374
- ----------------------------------------------------------------------------
Amgen * 80,700 8,433
- ----------------------------------------------------------------------------
Astra (Class B) (SEK) * 80,000 1,625
- ----------------------------------------------------------------------------
Bristol-Myers Squibb 84,400 11,294
- ----------------------------------------------------------------------------
Chiron * 3,704 97
- ----------------------------------------------------------------------------
Eli Lilly 40,000 3,555
- ----------------------------------------------------------------------------
Gehe (DEM) 13,550 935
- ----------------------------------------------------------------------------
<PAGE>
Glaxo Wellcome ADR 32,800 2,280
- ----------------------------------------------------------------------------
IDEXX Laboratories * 11,800 317
- ----------------------------------------------------------------------------
Johnson & Johnson 26,900 2,256
- ----------------------------------------------------------------------------
Merck 87,900 12,982
- ----------------------------------------------------------------------------
Novartis (CHF) * 1,626 3,196
- ----------------------------------------------------------------------------
Pfizer 98,400 12,343
- ----------------------------------------------------------------------------
Pharmacia & Upjohn 80,000 4,530
- ----------------------------------------------------------------------------
Schering-Plough 72,600 4,011
- ----------------------------------------------------------------------------
SmithKline Beecham ADR 124,800 8,674
- ----------------------------------------------------------------------------
Takeda Chemical Industries (JPY) 84,000 3,232
- ----------------------------------------------------------------------------
Warner-Lambert 129,000 9,699
- ----------------------------------------------------------------------------
95,833
- ----------------------------------------------------------------------------
Biotechnology 0.0%
Covance * 7,500 218
- ----------------------------------------------------------------------------
218
- ----------------------------------------------------------------------------
Health Care Services 0.3%
Aetna 2,695 212
- ----------------------------------------------------------------------------
Altana AG (DEM) 12,000 871
- ----------------------------------------------------------------------------
Concentra Managed Care * 30,000 318
- ----------------------------------------------------------------------------
IMS Health 14,100 1,064
- ----------------------------------------------------------------------------
Olsten 4,118 30
- ----------------------------------------------------------------------------
United HealthCare 70,600 3,040
- ----------------------------------------------------------------------------
5,535
- ----------------------------------------------------------------------------
Miscellaneous Consumer Products 2.1%
Arctic Cat 2,550 26
- ----------------------------------------------------------------------------
Benetton Group (ITL) 446,200 $ 900
- ----------------------------------------------------------------------------
Bridgestone (JPY) 69,000 1,565
- ----------------------------------------------------------------------------
Burlington Industries * 17,700 195
- ----------------------------------------------------------------------------
Colgate-Palmolive 60,200 5,591
- ----------------------------------------------------------------------------
<PAGE>
Fruit of the Loom (Class A) * 4,300 59
- ----------------------------------------------------------------------------
Hasbro 75,000 2,709
- ----------------------------------------------------------------------------
Huhtamaki (FIM) * 10,000 383
- ----------------------------------------------------------------------------
Imperial Tobacco Group ADR 15,750 333
- ----------------------------------------------------------------------------
Jones Apparel Group * 67,200 1,483
- ----------------------------------------------------------------------------
Kuraray (JPY) 148,000 1,632
- ----------------------------------------------------------------------------
Lion Nathan (NZD) 175,000 445
- ----------------------------------------------------------------------------
Liz Claiborne 1,700 54
- ----------------------------------------------------------------------------
Mattel 20,000 456
- ----------------------------------------------------------------------------
NIKE (Class B) 900 36
- ----------------------------------------------------------------------------
Philip Morris 10,800 578
- ----------------------------------------------------------------------------
Philips Electronics ADR 31,200 2,112
- ----------------------------------------------------------------------------
PPG Industries 2,400 140
- ----------------------------------------------------------------------------
Procter & Gamble 98,800 9,022
- ----------------------------------------------------------------------------
Service Corp. International 74,600 2,839
- ----------------------------------------------------------------------------
Textron 2,000 152
- ----------------------------------------------------------------------------
Tomkins (GBP) 100,000 475
- ----------------------------------------------------------------------------
Tomkins ADR 30,000 600
- ----------------------------------------------------------------------------
Unilever N.V. ADR 20,000 1,659
- ----------------------------------------------------------------------------
UST 2,000 70
- ----------------------------------------------------------------------------
Yue Yuen Industrial (HKD) 127,000 241
- ----------------------------------------------------------------------------
33,755
- ----------------------------------------------------------------------------
Total Consumer Nondurables 224,415
CONSUMER SERVICES 7.0%
Restaurants 0.1%
Applebee's 10,600 221
- ----------------------------------------------------------------------------
Dayton Hudson 172,200 $ 9,342
- ----------------------------------------------------------------------------
Hussmann 550 11
- ----------------------------------------------------------------------------
<PAGE>
J.C. Penney 44,000 2,063
- ----------------------------------------------------------------------------
JUSCO (JPY) 67,000 1,354
- ----------------------------------------------------------------------------
Marui (JPY) * 53,000 1,020
- ----------------------------------------------------------------------------
May Department Stores 51,400 3,103
- ----------------------------------------------------------------------------
Pinault Printemps Redoute (FRF) 10,000 1,910
- ----------------------------------------------------------------------------
Sears 40,000 1,700
- ----------------------------------------------------------------------------
Tesco (GBP) 606,429 1,763
- ----------------------------------------------------------------------------
TJX 176,000 5,104
- ----------------------------------------------------------------------------
Wal-Mart 60,000 4,886
- ----------------------------------------------------------------------------
Warnaco Group (Class A) 46,100 1,164
- ----------------------------------------------------------------------------
42,410
- ----------------------------------------------------------------------------
Specialty Merchandisers 2.1%
Albertson's 1,300 83
- ----------------------------------------------------------------------------
Callaway Golf 13,000 133
- ----------------------------------------------------------------------------
Christian Dior (FRF) 7,000 774
- ----------------------------------------------------------------------------
Circuit City Stores 85,900 4,290
- ----------------------------------------------------------------------------
Federated Department Stores * 1,800 78
- ----------------------------------------------------------------------------
Fingerhut Companies 8,000 124
- ----------------------------------------------------------------------------
Gymboree * 8,400 53
- ----------------------------------------------------------------------------
Heilig-Meyers 4,500 30
- ----------------------------------------------------------------------------
Home Depot 60,200 3,683
- ----------------------------------------------------------------------------
Kohl's * 37,200 2,285
- ----------------------------------------------------------------------------
Kroger * 100,000 6,050
- ----------------------------------------------------------------------------
Lowes 4,000 205
- ----------------------------------------------------------------------------
Office Depot * 32,000 1,182
- ----------------------------------------------------------------------------
Omron (JPY) 68,000 931
- ----------------------------------------------------------------------------
Payless Shoesource * 8,224 390
- ----------------------------------------------------------------------------
Petrie Stores Liquidation Trust * 33,500 70
- ----------------------------------------------------------------------------
<PAGE>
Safeway * 25,200 1,536
- ----------------------------------------------------------------------------
Staples * 35,437 1,549
- ----------------------------------------------------------------------------
The Gap 178,200 10,024
- ----------------------------------------------------------------------------
Toys "R" Us * 63,300 1,068
- ----------------------------------------------------------------------------
34,538
Entertainment and Leisure 0.7%
Ascent Entertainment * 2,395 18
- ----------------------------------------------------------------------------
Brinker * 8,775 253
- ----------------------------------------------------------------------------
Buffets * 2,400 $ 29
- ----------------------------------------------------------------------------
Disney 150,417 4,512
- ----------------------------------------------------------------------------
Hilton 2,300 44
- ----------------------------------------------------------------------------
Hutchison Whampoa (HKD) 390,000 2,760
- ----------------------------------------------------------------------------
International Game Technology 9,000 219
- ----------------------------------------------------------------------------
McDonald's 10,000 766
- ----------------------------------------------------------------------------
Reader's Digest (Class A) 35,000 882
- ----------------------------------------------------------------------------
Sbarro * 37,500 982
- ----------------------------------------------------------------------------
Sharp (JPY) 72,000 649
- ----------------------------------------------------------------------------
US WEST Media * 20,000 940
- ----------------------------------------------------------------------------
Viacom (Class A) * 4,500 331
- ----------------------------------------------------------------------------
12,385
- ----------------------------------------------------------------------------
Media and Communications 1.5%
A. H. Belo (Class A) 13,600 271
- ----------------------------------------------------------------------------
A.C. Nielson * 4,700 133
- ----------------------------------------------------------------------------
Asatsu (JPY) 54,000 1,290
- ----------------------------------------------------------------------------
Banta 13,500 370
- ----------------------------------------------------------------------------
CBS 37,193 1,218
- ----------------------------------------------------------------------------
Comcast (Class A Special) 40,000 2,349
- ----------------------------------------------------------------------------
Dun & Bradstreet 14,100 445
- ----------------------------------------------------------------------------
Elsevier (NLG) 50,000 700
- ----------------------------------------------------------------------------
<PAGE>
France Telecom ADR 45,000 3,552
- ----------------------------------------------------------------------------
Gannett 27,600 1,780
- ----------------------------------------------------------------------------
Gaylord Entertainment 3,528 106
- ----------------------------------------------------------------------------
McGraw-Hill 32,200 3,280
- ----------------------------------------------------------------------------
Metronet Communications * 500 21
- ----------------------------------------------------------------------------
Nielsen Media Research 4,700 85
- ----------------------------------------------------------------------------
NTL * 11,999 677
- ----------------------------------------------------------------------------
R.H. Donnelley 2,820 41
- ----------------------------------------------------------------------------
Time Warner 58,000 3,600
- ----------------------------------------------------------------------------
Tribune 20,000 1,320
- ----------------------------------------------------------------------------
Vanguard Cellular (Class A) * 11,850 305
- ----------------------------------------------------------------------------
Vodafone ADR 20,000 3,222
- ----------------------------------------------------------------------------
24,765
- ----------------------------------------------------------------------------
Total Consumer Services 115,186
CONSUMER CYCLICALS 1.9%
Automobiles and Related 0.7%
Autoliv 21,653 805
- ----------------------------------------------------------------------------
Breed Technologies * 5,600 $ 46
- ----------------------------------------------------------------------------
Cycle & Carriage (SGD) 50,000 171
- ----------------------------------------------------------------------------
Dana 1,300 53
- ----------------------------------------------------------------------------
Ford Motor 11,330 665
- ----------------------------------------------------------------------------
Gentex * 36,400 729
- ----------------------------------------------------------------------------
Genuine Parts 81,975 2,741
- ----------------------------------------------------------------------------
GM 33,600 2,404
- ----------------------------------------------------------------------------
Goodyear Tire & Rubber 300 15
- ----------------------------------------------------------------------------
Honda ADR 30,100 2,009
- ----------------------------------------------------------------------------
MIDAS 183 6
- ----------------------------------------------------------------------------
Pep Boys 7,100 111
- ----------------------------------------------------------------------------
Superior Industries 8,000 223
<PAGE>
- ----------------------------------------------------------------------------
TRW 30,000 1,686
- ----------------------------------------------------------------------------
11,664
- ----------------------------------------------------------------------------
Building and Real Estate 0.3%
Cheung Kong Holdings (HKD) 283,000 2,036
- ----------------------------------------------------------------------------
City Developments (SGD) * 50,000 217
- ----------------------------------------------------------------------------
DBS Land (SGD) * 600,000 883
- ----------------------------------------------------------------------------
Patriot American Hospitality, REIT 150,001 900
- ----------------------------------------------------------------------------
Starwood Hotels & Resorts, REIT 1,561 35
- ----------------------------------------------------------------------------
Texas Industries 9,400 253
- ----------------------------------------------------------------------------
USG 14,600 744
- ----------------------------------------------------------------------------
5,068
- ----------------------------------------------------------------------------
Miscellaneous Consumer Durables 0.9%
Black & Decker 36,000 2,018
- ----------------------------------------------------------------------------
Corning 30,000 1,350
- ----------------------------------------------------------------------------
Eastman Kodak 22,600 1,627
- ----------------------------------------------------------------------------
Harley-Davidson 7,600 360
- ----------------------------------------------------------------------------
Imation * 1,800 32
- ----------------------------------------------------------------------------
Masco 99,800 2,869
- ----------------------------------------------------------------------------
Ricoh (JPY) 100,000 922
- ----------------------------------------------------------------------------
Scotts (Class A) * 10,000 384
- ----------------------------------------------------------------------------
Sony (JPY) 16,000 1,165
- ----------------------------------------------------------------------------
Tandy 40,000 1,648
- ----------------------------------------------------------------------------
Valspar 36,200 1,351
- ----------------------------------------------------------------------------
York International 2,600 106
- ----------------------------------------------------------------------------
13,832
- ----------------------------------------------------------------------------
Total Consumer Cyclicals 30,564
TECHNOLOGY 7.2%
Electronic Components 2.2%
Altera * 38,000 $ 2,311
- ----------------------------------------------------------------------------
<PAGE>
AMP 26,167 1,362
- ----------------------------------------------------------------------------
Analog Devices * 126,800 3,978
- ----------------------------------------------------------------------------
EMC * 49,300 4,190
- ----------------------------------------------------------------------------
Intel 114,000 13,513
- ----------------------------------------------------------------------------
Linear Technology 45,800 4,101
- ----------------------------------------------------------------------------
Maxim Integrated Products * 50,000 2,183
- ----------------------------------------------------------------------------
Micron Technology * 9,400 475
- ----------------------------------------------------------------------------
Molex 15,257 581
- ----------------------------------------------------------------------------
Motorola 40,000 2,442
- ----------------------------------------------------------------------------
Thermo Electron * 9,787 166
- ----------------------------------------------------------------------------
Thermo Instrument Systems * 10,195 154
- ----------------------------------------------------------------------------
Vicor * 12,000 108
- ----------------------------------------------------------------------------
Xilinx * 12,600 820
- ----------------------------------------------------------------------------
36,384
- ----------------------------------------------------------------------------
Electronic Systems 0.8%
Applied Materials * 40,000 1,709
- ----------------------------------------------------------------------------
Hewlett-Packard 88,300 6,032
- ----------------------------------------------------------------------------
Honeywell 20,000 1,506
- ----------------------------------------------------------------------------
KLA-Tencor * 60,000 2,605
- ----------------------------------------------------------------------------
Solectron * 9,600 892
- ----------------------------------------------------------------------------
12,744
- ----------------------------------------------------------------------------
Information Processing 1.0%
Adaptec * 14,000 245
- ----------------------------------------------------------------------------
Choicepoint * 1,780 115
- ----------------------------------------------------------------------------
COMPAQ Computer 254,000 10,652
- ----------------------------------------------------------------------------
Dell Computer * 4,800 352
- ----------------------------------------------------------------------------
Hitachi ADR 15,200 919
- ----------------------------------------------------------------------------
IBM 23,400 4,323
- ----------------------------------------------------------------------------
Komag * 1,200 12
<PAGE>
- ----------------------------------------------------------------------------
Storage Technology * 10,000 356
- ----------------------------------------------------------------------------
16,974
- ----------------------------------------------------------------------------
Office Automation 0.0%
Pitney Bowes 5,200 344
- ----------------------------------------------------------------------------
Xerox 2,300 271
- ----------------------------------------------------------------------------
615
- ----------------------------------------------------------------------------
Specialized Computer 0.8%
Silicon Graphics * 14,700 $ 189
- ----------------------------------------------------------------------------
Sun Microsystems * 138,000 11,808
- ----------------------------------------------------------------------------
Western Digital * 20,000 301
- ----------------------------------------------------------------------------
12,298
- ----------------------------------------------------------------------------
Telecommunications 1.6%
Cox Communications (Class A) * 50,000 3,456
- ----------------------------------------------------------------------------
LM Ericsson (Class B) ADR 108,000 2,582
- ----------------------------------------------------------------------------
Lucent Technologies 96,792 10,647
- ----------------------------------------------------------------------------
MCI WorldCom * 83,758 6,012
- ----------------------------------------------------------------------------
Northern Telecom 4,306 216
- ----------------------------------------------------------------------------
Novell * 45,600 828
- ----------------------------------------------------------------------------
PictureTel * 8,800 58
- ----------------------------------------------------------------------------
Premisys Communications * 65,000 591
- ----------------------------------------------------------------------------
Sprint * 25,450 588
- ----------------------------------------------------------------------------
Tellabs * 23,200 1,591
- ----------------------------------------------------------------------------
26,569
- ----------------------------------------------------------------------------
Aerospace and Defense 0.8%
AlliedSignal 122,000 5,406
- ----------------------------------------------------------------------------
Boeing 86,000 2,806
- ----------------------------------------------------------------------------
Lockheed Martin 16,800 1,424
- ----------------------------------------------------------------------------
Northrop 30,000 2,194
- ----------------------------------------------------------------------------
Raytheon (Class A) 2,142 111
- ----------------------------------------------------------------------------
<PAGE>
Raytheon (Class B) 500 27
- ----------------------------------------------------------------------------
Trinity Industries 300 11
- ----------------------------------------------------------------------------
United Technologies 14,200 1,544
- ----------------------------------------------------------------------------
13,523
- ----------------------------------------------------------------------------
Total Technology 119,107
CAPITAL EQUIPMENT 3.3%
Electrical Equipment 2.5%
ABB (CHF) * 775 908
- ----------------------------------------------------------------------------
American Power Conversion * 10,300 499
- ----------------------------------------------------------------------------
Canon (JPY) 55,000 1,175
- ----------------------------------------------------------------------------
Emerson Electric 56,200 3,400
- ----------------------------------------------------------------------------
GE 195,500 19,953
- ----------------------------------------------------------------------------
Hubbell (Class A) 8,000 304
- ----------------------------------------------------------------------------
Hubbell (Class B) 80,252 $ 3,049
- ----------------------------------------------------------------------------
Matsushita Electric Works (JPY) 100,000 1,022
- ----------------------------------------------------------------------------
Mitsubishi Electric (JPY) 190,000 597
- ----------------------------------------------------------------------------
Siemens (DEM) * 16,900 1,090
- ----------------------------------------------------------------------------
Tyco International 130,424 9,839
- ----------------------------------------------------------------------------
41,836
- ----------------------------------------------------------------------------
Machinery 0.8%
Caterpillar 50,000 2,300
- ----------------------------------------------------------------------------
Coltec Industries * 29,900 583
- ----------------------------------------------------------------------------
Cooper Industries 600 29
- ----------------------------------------------------------------------------
Danaher 65,600 3,563
- ----------------------------------------------------------------------------
Deere 18,000 596
- ----------------------------------------------------------------------------
Dover 2,400 88
- ----------------------------------------------------------------------------
FMC * 12,000 672
- ----------------------------------------------------------------------------
Foster Wheeler 4,600 61
- ----------------------------------------------------------------------------
GKN (GBP) 90,000 1,196
- ----------------------------------------------------------------------------
<PAGE>
Ingersoll-Rand 1,500 70
- ----------------------------------------------------------------------------
Kennametal 11,400 242
- ----------------------------------------------------------------------------
Man (DEM) 3,500 1,029
- ----------------------------------------------------------------------------
S I G Schweis (CHF) 2,080 1,227
- ----------------------------------------------------------------------------
Stewart & Stevenson 6,300 61
- ----------------------------------------------------------------------------
Teleflex 10,000 456
- ----------------------------------------------------------------------------
Valmet (FIM) 32,000 429
- ----------------------------------------------------------------------------
12,602
- ----------------------------------------------------------------------------
Total Capital Equipment 54,438
BUSINESS SERVICES AND TRANSPORTATION 3.9%
Computer Service and Software 2.3%
Ascend Communications * 50,700 3,335
- ----------------------------------------------------------------------------
BMC Software * 80,000 3,568
- ----------------------------------------------------------------------------
CBT Group ADR * 29,400 439
- ----------------------------------------------------------------------------
Computer Associates 112,587 4,799
- ----------------------------------------------------------------------------
CustomTracks * 3,625 39
- ----------------------------------------------------------------------------
Electronic Arts * 7,500 420
- ----------------------------------------------------------------------------
Electronic Data Systems 44,223 2,222
- ----------------------------------------------------------------------------
First Data 80,000 2,535
- ----------------------------------------------------------------------------
General Instrument * 1,400 48
- ----------------------------------------------------------------------------
HBO 52,800 $1,516
- ----------------------------------------------------------------------------
Intuit * 50,000 3,625
- ----------------------------------------------------------------------------
Micro Warehouse * 5,600 189
- ----------------------------------------------------------------------------
NCR * 6,718 280
- ----------------------------------------------------------------------------
Oracle * 142,000 6,128
- ----------------------------------------------------------------------------
Parametric Technology * 262,000 4,257
- ----------------------------------------------------------------------------
SunGard Data Systems * 26,400 1,048
- ----------------------------------------------------------------------------
Sybase * 7,000 52
- ----------------------------------------------------------------------------
Synopsys * 45,600 2,471
<PAGE>
- ----------------------------------------------------------------------------
36,971
- ----------------------------------------------------------------------------
Distribution Services 0.0%
Cardinal Health 7,979 605
- ----------------------------------------------------------------------------
605
- ----------------------------------------------------------------------------
Environmental 0.1%
Allied Waste Industries * 63,000 1,488
- ----------------------------------------------------------------------------
1,488
- ----------------------------------------------------------------------------
Transportation Services 0.1%
Landstar Systems * 40,000 1,670
- ----------------------------------------------------------------------------
Mitsubishi Heavy Industries (JPY) 159,000 619
- ----------------------------------------------------------------------------
2,289
- ----------------------------------------------------------------------------
Miscellaneous Business Services 0.7%
British Airport Authorities (GBP) 108,371 1,273
- ----------------------------------------------------------------------------
Browning-Ferris 25,000 711
- ----------------------------------------------------------------------------
Cendant * 79,010 1,506
- ----------------------------------------------------------------------------
Cintas 7,200 507
- ----------------------------------------------------------------------------
Equifax 17,800 609
- ----------------------------------------------------------------------------
General Semiconductor * 350 3
- ----------------------------------------------------------------------------
GTECH * 4,500 115
- ----------------------------------------------------------------------------
H&R Block 30,900 1,391
- ----------------------------------------------------------------------------
Manpower 12,200 307
- ----------------------------------------------------------------------------
Merrill 10,000 193
- ----------------------------------------------------------------------------
Omnicom 26,800 1,554
- ----------------------------------------------------------------------------
Paychex 42,018 2,163
- ----------------------------------------------------------------------------
Waste Management 28,395 1,324
- ----------------------------------------------------------------------------
11,656
- ----------------------------------------------------------------------------
Airlines 0.3%
AMR * 40,000 2,375
- ----------------------------------------------------------------------------
ASA Holdings 4,200 128
- ----------------------------------------------------------------------------
KLM (NLG) 23,000 $ 695
<PAGE>
- ----------------------------------------------------------------------------
Mesa Air Group * 17,300 135
- ----------------------------------------------------------------------------
Northwest Airlines * 300 8
- ----------------------------------------------------------------------------
Singapore Airlines (SGD) 40,000 293
- ----------------------------------------------------------------------------
UAL * 30,000 1,791
- ----------------------------------------------------------------------------
5,425
- ----------------------------------------------------------------------------
Railroads 0.4%
Burlington Northern Santa Fe 75,300 2,541
- ----------------------------------------------------------------------------
Canadian National Railway 163 8
- ----------------------------------------------------------------------------
CSX 22,500 934
- ----------------------------------------------------------------------------
Norfolk Southern 63,200 2,003
- ----------------------------------------------------------------------------
Union Pacific 14,000 631
- ----------------------------------------------------------------------------
Wisconsin Central Transport * 20,400 349
- ----------------------------------------------------------------------------
6,466
- ----------------------------------------------------------------------------
Total Business Services and Transportation 64,900
ENERGY 4.0%
Energy Services 0.7%
Baker Hughes 800 14
- ----------------------------------------------------------------------------
BJ Services * 188,200 2,941
- ----------------------------------------------------------------------------
El Paso Energy 18,766 653
- ----------------------------------------------------------------------------
Elf Aquitaine (FRF) * 9,000 1,040
- ----------------------------------------------------------------------------
Halliburton 52,742 1,562
- ----------------------------------------------------------------------------
Helmerich & Payne 40,000 775
- ----------------------------------------------------------------------------
Imperial Oil 3,900 63
- ----------------------------------------------------------------------------
Johnson Electric (HKD) 247,200 633
- ----------------------------------------------------------------------------
Schlumberger 60,200 2,777
- ----------------------------------------------------------------------------
Smith International * 18,300 461
- ----------------------------------------------------------------------------
TOTAL ADR 18,000 896
- ----------------------------------------------------------------------------
Witco 5,400 86
- ----------------------------------------------------------------------------
11,901
<PAGE>
- ----------------------------------------------------------------------------
Exploration and Production 0.1%
Anadarko Petroleum 3,600 111
- ----------------------------------------------------------------------------
EEX * 7,147 50
- ----------------------------------------------------------------------------
Enron Oil & Gas 6,600 114
- ----------------------------------------------------------------------------
Santos (AUD) 200,000 537
- ----------------------------------------------------------------------------
Ultramar Diamond Shamrock 9,100 221
- ----------------------------------------------------------------------------
Union Pacific Resources 11,857 $ 107
- ----------------------------------------------------------------------------
1,140
- ----------------------------------------------------------------------------
Gas & Gas Transmission 0.3%
Consolidated Natural Gas 1,200 65
- ----------------------------------------------------------------------------
Enron 50,000 2,853
- ----------------------------------------------------------------------------
MCN 8,800 168
- ----------------------------------------------------------------------------
Questar 14,800 286
- ----------------------------------------------------------------------------
Sonat 29,000 785
- ----------------------------------------------------------------------------
Tenneco 200 7
- ----------------------------------------------------------------------------
4,164
- ----------------------------------------------------------------------------
Integrated Petroleum - Domestic 1.2%
Amerada Hess 37,700 1,876
- ----------------------------------------------------------------------------
Atlantic Richfield 64,600 4,215
- ----------------------------------------------------------------------------
British Petroleum ADR 78,600 7,467
- ----------------------------------------------------------------------------
Kerr-McGee 600 23
- ----------------------------------------------------------------------------
Phillips Petroleum 48,300 2,059
- ----------------------------------------------------------------------------
Santa Fe Energy Resources * 13,900 103
- ----------------------------------------------------------------------------
Unocal 4,400 128
- ----------------------------------------------------------------------------
USX-Marathon 140,000 4,217
- ----------------------------------------------------------------------------
20,088
- ----------------------------------------------------------------------------
Integrated Petroleum - International 1.7%
Amoco 800 47
- ----------------------------------------------------------------------------
Chevron 41,400 3,434
- ----------------------------------------------------------------------------
<PAGE>
ENI S.P.A. ADR 26,600 1,802
- ----------------------------------------------------------------------------
Exxon 101,200 7,400
- ----------------------------------------------------------------------------
Mobil 78,600 6,848
- ----------------------------------------------------------------------------
Repsol ADR 24,000 1,311
- ----------------------------------------------------------------------------
Royal Dutch Petroleum ADR 40,000 1,915
- ----------------------------------------------------------------------------
Shell Transport & Trading ADR 36,300 1,350
- ----------------------------------------------------------------------------
Texaco 80,727 4,268
- ----------------------------------------------------------------------------
28,375
- ----------------------------------------------------------------------------
Total Energy 65,668
PROCESS INDUSTRIES 2.3%
Diversified Chemicals 0.7%
Dow Chemical 30,000 2,728
- ----------------------------------------------------------------------------
DuPont 77,800 4,128
- ----------------------------------------------------------------------------
Eastman Chemical 3,675 165
- ----------------------------------------------------------------------------
Hercules 1,800 $ 49
- ----------------------------------------------------------------------------
Monsanto 92,300 4,384
- ----------------------------------------------------------------------------
11,454
- ----------------------------------------------------------------------------
Specialty Chemicals 0.9%
3M 18,600 1,323
- ----------------------------------------------------------------------------
A. Schulman 26,325 595
- ----------------------------------------------------------------------------
Akzo Nobel (NLG) 28,000 1,275
- ----------------------------------------------------------------------------
Avery Dennison 1,800 81
- ----------------------------------------------------------------------------
BASF AG (DEM) 36,200 1,381
- ----------------------------------------------------------------------------
Bayer (DEM) * 34,600 1,444
- ----------------------------------------------------------------------------
Crompton & Knowles 3,500 72
- ----------------------------------------------------------------------------
Great Lakes Chemical 25,000 1,000
- ----------------------------------------------------------------------------
Lyondell Petrochemical 7,100 128
- ----------------------------------------------------------------------------
McWhorter Technologies * 1,500 34
- ----------------------------------------------------------------------------
Morton International 63,500 1,556
- ----------------------------------------------------------------------------
<PAGE>
Octel * 6,250 87
- ----------------------------------------------------------------------------
Pall 8,533 216
- ----------------------------------------------------------------------------
Raychem 1,800 58
- ----------------------------------------------------------------------------
Rohm & Haas 84,000 2,530
- ----------------------------------------------------------------------------
Solutia 18,460 413
- ----------------------------------------------------------------------------
Sumitomo Chemicals (JPY) * 175,000 681
- ----------------------------------------------------------------------------
Technip (FRF) * 15,000 1,411
- ----------------------------------------------------------------------------
14,285
- ----------------------------------------------------------------------------
Paper and Paper Products 0.3%
Dai Nippon Printing (JPY) 67,000 1,068
- ----------------------------------------------------------------------------
Kimberly-Clark 34,400 1,875
- ----------------------------------------------------------------------------
Kimberly-Clark de Mexico (Class A) (MXN) 265,000 843
- ----------------------------------------------------------------------------
Mead 30,000 879
- ----------------------------------------------------------------------------
Schweitzer-Mauduit 1,000 15
- ----------------------------------------------------------------------------
Sonoco Products 13,975 414
- ----------------------------------------------------------------------------
Willamette Industries 24,000 804
- ----------------------------------------------------------------------------
5,898
- ----------------------------------------------------------------------------
Forest Products 0.3%
Georgia Pac Timber 19,000 453
- ----------------------------------------------------------------------------
Georgia-Pacific 19,000 1,113
- ----------------------------------------------------------------------------
International Paper 46,000 2,061
- ----------------------------------------------------------------------------
Pope & Talbot 8,200 69
- ----------------------------------------------------------------------------
Weyerhaeuser 12,700 645
- ----------------------------------------------------------------------------
4,341
- ----------------------------------------------------------------------------
Building & Construction 0.1%
Blue Circle Industries (GBP) 136,612 $ 715
- ----------------------------------------------------------------------------
Del Webb 100 3
- ----------------------------------------------------------------------------
Hanson ADR 7,875 307
- ----------------------------------------------------------------------------
Holderbank Financiere Glarus (CHF) * 1,210 1,432
- ----------------------------------------------------------------------------
2,457
- ----------------------------------------------------------------------------
Total Process Industries 38,435
<PAGE>
BASIC MATERIALS 0.6%
Metals 0.5%
Alcoa 30,000 2,237
- ----------------------------------------------------------------------------
Anglo American Platinum (ZAR) 85,000 1,165
- ----------------------------------------------------------------------------
Carpenter Technology 5,400 183
- ----------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold (Class A) 9,600 93
- ----------------------------------------------------------------------------
Inco 200,000 2,113
- ----------------------------------------------------------------------------
Reynolds Metals 38,000 2,002
- ----------------------------------------------------------------------------
7,793
- ----------------------------------------------------------------------------
Mining 0.1%
Lonrho Africa (GBP) 44,911 40
- ----------------------------------------------------------------------------
Rio Tinto (AUD) 40,000 474
- ----------------------------------------------------------------------------
TVX Gold * 200,000 363
- ----------------------------------------------------------------------------
877
- ----------------------------------------------------------------------------
Miscellaneous Materials 0.0%
Crown Cork & Seal 1,400 43
- ----------------------------------------------------------------------------
Malayan Cement (MYR) * 187,200 58
- ----------------------------------------------------------------------------
Owens-Illinois * 15,300 469
- ----------------------------------------------------------------------------
Williams Companies 5,661 176
- ----------------------------------------------------------------------------
746
- ----------------------------------------------------------------------------
Total Basic Materials 9,416
MISCELLANEOUS 0.0%
Conglomerates 0.0%
Berkshire Hathaway * 136 319
- ----------------------------------------------------------------------------
Orkla (Class A) (NOK) 30,000 448
- ----------------------------------------------------------------------------
767
- ----------------------------------------------------------------------------
Other Miscellaneous 0.0%
Halter Marine Group * 156 1
- ----------------------------------------------------------------------------
1
- ----------------------------------------------------------------------------
Total Miscellaneous 768
FOREIGN 0.1%
<PAGE>
Europe 0.0%
AXA Colonia Konzern (DEM) * 6,000 $ 680
- ----------------------------------------------------------------------------
680
- ----------------------------------------------------------------------------
Other Foreign 0.1%
Bobst (CHF) * 740 916
- ----------------------------------------------------------------------------
916
- ----------------------------------------------------------------------------
Total Foreign 1,596
- ----------------------------------------------------------------------------
============================================================================
Total Common Stocks (Cost $520,233) 980,309
PREFERRED STOCKS 0.1%
CSC Holdings * 10,323 1,156
Total Preferred Stocks (Cost $1,134) 1,156
CONVERTIBLE PREFERRED STOCKS 0.6%
Aetna (Class C), 6.25% 898 68
- ----------------------------------------------------------------------------
Prologis Trust (Series B), 7.00% 225,000 5,935
- ----------------------------------------------------------------------------
Reckson Associates Realty (Series A), 7.625% 200,000 4,200
Total Convertible Preferred Stocks (Cost $10,116) 10,203
CORPORATE BONDS 16.3%
Abbey National First Capital, Sub. Notes,
8.20%, 10/15/04 1,205,000 1,347
- ------------------------------------------------------------------------------
Adelphia Communications, Sr. Notes, 9.875%, 3/1/07 1,000,000 1,107
- ------------------------------------------------------------------------------
African Development Bank, Sub. Notes,
7.75%, 12/15/01 1,000,000 1,062
- ------------------------------------------------------------------------------
Agricultural Minerals, Sr. Notes, 10.75%, 9/30/03 1,000,000 1,005
- ------------------------------------------------------------------------------
Airplane Pass Thru, 8.15%, 3/15/19 1,917,076 2,050
- ------------------------------------------------------------------------------
Alabama Power, 1st Mtg. Notes, 7.00%, 1/1/03 725,000 737
- ------------------------------------------------------------------------------
Alliance Imaging, Sr. Sub. Notes, 9.625%, 12/15/05 950,000 941
- ------------------------------------------------------------------------------
Allied Holdings, Gtd. Sr. Sub. Notes,
8.625%, 10/1/07 1,000,000 1,015
- ------------------------------------------------------------------------------
AMERCO, Sr. Notes, 7.85%, 5/15/03 1,000,000 1,030
- ------------------------------------------------------------------------------
American Builders & Contractors Supply,
Sr. Sub. Notes
10.625%, 5/15/07 1,000,000 930
<PAGE>
- ------------------------------------------------------------------------------
American Business Information, Sr. Sub. Notes
(144a), 9.50%, 6/15/08 300,000 240
- ------------------------------------------------------------------------------
American Portable Telecom, Gtd. Notes
(144a), Zero Coupon, 11/1/06 3,615,000 $ 2,184
- ------------------------------------------------------------------------------
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 1,000,000 1,000
- ------------------------------------------------------------------------------
Ameriserve Food Distribution, Gtd. Sr. Sub. Notes
8.875%, 10/15/06 1,000,000 925
- ------------------------------------------------------------------------------
Ameritech Capital Funding, 6.15%, 1/15/08 2,000,000 2,107
- ------------------------------------------------------------------------------
Anchor Advanced, Sr. Notes, 11.75%, 4/1/04 1,000,000 1,090
- ------------------------------------------------------------------------------
Anheuser-Busch, 6.90%, 10/1/02 2,000,000 2,025
- ------------------------------------------------------------------------------
APCOA, Sr. Sub. Notes, 9.25%, 3/15/08 1,000,000 920
- ------------------------------------------------------------------------------
Applied Extrusion Technology, Sr. Notes,
11.50%, 4/1/02 1,000,000 1,035
- ------------------------------------------------------------------------------
Archibald Candy, Sr. Secured Notes,
10.25%, 7/1/04 150,000 152
- ------------------------------------------------------------------------------
Associated Materials, Sr. Sub. Notes,
9.25%, 3/1/08 1,250,000 1,275
- ------------------------------------------------------------------------------
Associates, Sr. Notes, 7.50%, 4/15/02 1,300,000 1,378
- ------------------------------------------------------------------------------
Atlantic Richfield, Deb. Notes, 8.75%, 3/1/32 1,570,000 2,056
- ------------------------------------------------------------------------------
Aurora Foods, Sr. Sub. Notes, 9.875%, 2/15/07 750,000 818
- ------------------------------------------------------------------------------
B&G Foods, Sr. Sub. Notes, 9.625%, 8/1/07 500,000 488
- ------------------------------------------------------------------------------
Ball, Sr. Notes, (144a), 7.75%, 8/1/06 500,000 523
- ------------------------------------------------------------------------------
Ballys Health & Tennis, Sr. Sub. Notes,
9.875%, 10/15/07 750,000 735
- ------------------------------------------------------------------------------
Banesto Delaware, Sub. Notes, 8.25%, 7/28/02 2,000,000 2,100
- ------------------------------------------------------------------------------
Bank United, Trust Pfd. Securities,
10.25%, 12/31/26 1,000,000 1,000
- ------------------------------------------------------------------------------
BankAmerica, Sub. Notes, 6.625%, 8/1/07 3,000,000 3,169
- ------------------------------------------------------------------------------
Baxter International, 7.125%, 2/1/07 1,500,000 1,625
- ------------------------------------------------------------------------------
BB&T, 6.375%, 6/30/05 3,000,000 3,087
- ------------------------------------------------------------------------------
BCH Cayman Islands, Sub. Notes, 7.50%, 6/15/05 1,000,000 1,069
- ------------------------------------------------------------------------------
<PAGE>
BHP Finance, Gtd. Notes, 6.69%, 3/1/06 2,000,000 2,038
- ------------------------------------------------------------------------------
Boeing, 8.75%, 8/15/21 2,000,000 2,546
- ------------------------------------------------------------------------------
Burlington Northern, PTC, 7.33%, 6/23/10 895,734 974
- ------------------------------------------------------------------------------
Burlington Northern Santa Fe, 7.00%, 12/15/25 2,000,000 2,129
- ------------------------------------------------------------------------------
BWAY, Sr. Sub. Notes, 10.25%, 4/15/07 1,050,000 1,102
- ------------------------------------------------------------------------------
Casino America, Sr. Notes, 12.50%, 8/1/03 500,000 551
- ------------------------------------------------------------------------------
Century Telephone Enterprises, Sr. Notes,
8.25%, 5/1/24 500,000 560
- ------------------------------------------------------------------------------
Chancellor Media, Sr. Sub. Notes
8.125%, 12/15/07 1,000,000 993
- ------------------------------------------------------------------------------
Chattem, Sr. Sub. Notes, 12.75%, 6/15/04 1,000,000 1,125
- ------------------------------------------------------------------------------
Chemical Master Credit Card Trust I
5.55%, 9/15/03 100,000 100
- ------------------------------------------------------------------------------
6.23%, 4/15/05 110,000 114
- ------------------------------------------------------------------------------
Chrysler Financial, 5.875%, 2/7/01 2,000,000 2,022
- ------------------------------------------------------------------------------
Cinemark USA, Sr. Sub. Notes, 9.625%, 8/1/08 1,000,000 1,045
- ------------------------------------------------------------------------------
Citibank Credit Card Master Trust 1,
Zero Coupon, 2/7/03 170,000 $ 153
- ------------------------------------------------------------------------------
Citicorp Mortgage, 6.00%, 3/25/22 39,835 40
- ------------------------------------------------------------------------------
Citizens Utilities, Deb. Notes, 7.00%, 11/1/25 1,500,000 1,637
- ------------------------------------------------------------------------------
Coach USA, Gtd. Sr. Sub. Notes, 9.375%, 7/1/07 750,000 773
- ------------------------------------------------------------------------------
Coinmach, Sr. Sub. Notes, 11.75%, 11/15/05 500,000 551
- ------------------------------------------------------------------------------
Colt Telecom, Sr. Disc. Notes
STEP, 0%, 12/15/06 1,250,000 1,038
- ------------------------------------------------------------------------------
Coltec Industries, Sr. Notes, 7.50%, 4/15/08 850,000 896
- ------------------------------------------------------------------------------
Comcast Cable Communications
8.125%, 5/1/04 1,500,000 1,655
- ------------------------------------------------------------------------------
8.375%, 5/1/07 1,500,000 1,735
- ------------------------------------------------------------------------------
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 1,000,000 1,038
- ------------------------------------------------------------------------------
Consumers Energy, 1st Mtg., 7.375%, 9/15/23 3,500,000 3,636
- ------------------------------------------------------------------------------
<PAGE>
Container Corp of America, Sr. Notes,
9.75%, 4/1/03 1,000,000 1,025
- ------------------------------------------------------------------------------
Continental Airlines, PTC, 7.206%, 6/30/04 477,929 486
- ------------------------------------------------------------------------------
Corestates Home Equity Loan
5.10%, 3/15/09 180,848 180
- ------------------------------------------------------------------------------
6.65%, 5/15/09 180,091 181
- ------------------------------------------------------------------------------
Corporacion Andina De Fomento, 6.75%, 3/15/05 2,500,000 2,369
- ------------------------------------------------------------------------------
Countrywide Funding, MTN, 6.875%, 9/15/05 860,000 881
- ------------------------------------------------------------------------------
Courtyard by Marriott II, Sr. Secured Notes
10.75%, 2/1/08 1,000,000 1,030
- ------------------------------------------------------------------------------
Cox Communications, Deb. Notes, 6.375%, 6/15/00 1,500,000 1,518
- ------------------------------------------------------------------------------
Credit Suisse First Boston Mortgage,
6.59%, 6/17/08 2,000,000 2,065
- ------------------------------------------------------------------------------
CSC Holdings, Sr. Notes, 7.875%, 12/15/07 600,000 630
- ------------------------------------------------------------------------------
CSX, Deb. Notes, 7.45%, 5/1/07 1,000,000 1,090
- ------------------------------------------------------------------------------
Delta Airlines, Deb. Notes, 8.95%, 1/12/12 1,504,271 1,714
- ------------------------------------------------------------------------------
Delta Mills, Sr. Notes, (144a), 9.625%, 9/1/07 1,000,000 968
- ------------------------------------------------------------------------------
Deutsche Financial Capital, 6.75%, 9/15/27 1,998,407 2,013
- ------------------------------------------------------------------------------
Dillards, 7.13%, 8/1/18 4,000,000 4,081
- ------------------------------------------------------------------------------
Doane Products, Sr. Sub. Notes, (144a),
9.75%, 5/15/07 1,732,000 1,784
- ------------------------------------------------------------------------------
Duke Energy, 1st Ref. Mtg.
6.75%, 8/1/25 1,000,000 1,059
- ------------------------------------------------------------------------------
7.50%, 8/1/25 1,000,000 1,093
- ------------------------------------------------------------------------------
Dyersburg, Sr. Sub. Notes, 9.75%, 9/1/07 500,000 448
- ------------------------------------------------------------------------------
Dyncorp, Sr. Sub. Notes, 9.50%, 3/1/07 900,000 891
- ------------------------------------------------------------------------------
Embotelladora Andina, 7.625%, 10/1/27 2,000,000 1,455
- ------------------------------------------------------------------------------
Energy Corporation of America, Sr. Sub. Notes
9.50%, 5/15/07 1,000,000 925
- ------------------------------------------------------------------------------
Equitable Resources, Deb. Notes, 7.75%, 7/15/26 2,000,000 $ 2,224
- ------------------------------------------------------------------------------
Exxon Capital, Gtd. Notes, 6.50%, 7/15/99 500,000 503
- ------------------------------------------------------------------------------
<PAGE>
Eye Care Centers of America, (144a),
9.125%, 5/1/08 1,000,000 930
- ------------------------------------------------------------------------------
Fairchild Semiconductor, Sr. Sub. Notes
10.125%, 3/15/07 225,000 223
- ------------------------------------------------------------------------------
Fairfax Financial Holdings
7.75%, 12/15/03 800,000 832
- ------------------------------------------------------------------------------
8.30%, 4/15/26 2,500,000 2,571
- ------------------------------------------------------------------------------
Falcon Holding Group, Sr. Disc. Notes
STEP, 0%, 4/15/10 675,000 459
- ------------------------------------------------------------------------------
Federal Express, MTN, 9.95%, 8/15/06 500,000 626
- ------------------------------------------------------------------------------
Federal-Mogul, Sr. Notes, 7.75%, 7/1/06 700,000 710
- ------------------------------------------------------------------------------
First Federal Financial, 11.75%, 10/1/04 750,000 773
- ------------------------------------------------------------------------------
Fleet Financial Group, Sub. Notes
7.625%, 12/1/99 1,100,000 1,121
- ------------------------------------------------------------------------------
8.625%, 1/15/07 800,000 943
- ------------------------------------------------------------------------------
Fletcher Challenge, 9.00%, 9/15/99 270,000 276
- ------------------------------------------------------------------------------
Flores & Rucks, Sr. Sub. Notes, 9.75%, 10/1/06 275,000 281
- ------------------------------------------------------------------------------
Food Lion, 8.05%, 4/15/27 1,900,000 2,199
- ------------------------------------------------------------------------------
Ford Motor, Deb. Notes, 7.50%, 8/1/26 2,500,000 2,840
- ------------------------------------------------------------------------------
Ford Motor Credit, 8.20%, 2/15/02 170,000 183
- ------------------------------------------------------------------------------
Freeport McMoRan Resources, Sr. Notes,
7.00%, 2/15/08 900,000 920
- ------------------------------------------------------------------------------
Fresenius Med Care Capital Trust II,
7.875%, 2/1/08 1,000,000 1,005
- ------------------------------------------------------------------------------
Frontiervision
Sr. Disc. Notes, STEP, 0%, 9/15/07 250,000 209
- ------------------------------------------------------------------------------
Sr. Notes, 11.00%, 10/15/06 1,000,000 1,110
- ------------------------------------------------------------------------------
Fundy Cable, Sr. Secured 2nd Priority Notes
11.00%, 11/15/05 125,000 133
- ------------------------------------------------------------------------------
Furon, Sr. Sub. Notes, 8.125%, 3/1/08 600,000 594
- ------------------------------------------------------------------------------
General Motors, Deb. Notes, 9.625%, 12/1/00 140,000 150
- ------------------------------------------------------------------------------
General Motors Acceptance, MTN, 6.75%, 6/17/02 80,000 83
- ------------------------------------------------------------------------------
<PAGE>
Genesis Health Ventures, Sr. Sub. Notes,
9.25%, 10/1/06 300,000 282
- ------------------------------------------------------------------------------
Glenoit, Sr. Sub. Notes, (144a), 11.00%, 4/15/07 100,000 93
- ------------------------------------------------------------------------------
Grand Casinos, Sr. Sub. Notes, 9.00%, 10/15/04 1,000,000 1,120
- ------------------------------------------------------------------------------
Green Tree Financial, 5.75%, 10/15/18 84,356 85
- ------------------------------------------------------------------------------
Grove Worldwide, 9.25%, 5/1/08 500,000 455
- ------------------------------------------------------------------------------
GTE Florida, Deb. Notes, 7.41%, 12/15/23 1,000,000 1,053
- ------------------------------------------------------------------------------
Harcourt General, 6.70%, 8/1/07 1,000,000 $ 999
- ------------------------------------------------------------------------------
Hawk, Sr. Notes, 10.25%, 12/1/03 750,000 788
- ------------------------------------------------------------------------------
HCC Industries, Sr. Sub. Notes, 10.75%, 5/15/07 1,000,000 960
- ------------------------------------------------------------------------------
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 1,125,000 1,221
- ------------------------------------------------------------------------------
HMH Properties, Sr. Notes, 7.875%, 8/1/08 750,000 728
- ------------------------------------------------------------------------------
Holmes Products, Gtd. Notes, 9.875%, 11/15/07 750,000 705
- ------------------------------------------------------------------------------
Host Marriott Travel, Sr. Notes, 9.50%, 5/15/05 1,000,000 1,040
- ------------------------------------------------------------------------------
Houston Lighting & Power, 7.50%, 7/1/23 3,000,000 3,107
- ------------------------------------------------------------------------------
Hudson Respiratory Care, Sr. Sub. Notes,
9.125%, 4/15/08 400,000 324
- ------------------------------------------------------------------------------
IBM, 6.45%, 8/1/07 1,000,000 1,074
- ------------------------------------------------------------------------------
ICG Services, Sr. Disc. Notes
STEP, 0%, 9/15/05 1,000,000 817
- ------------------------------------------------------------------------------
Imax Corp, 7.875%, 12/1/05 500,000 501
- ------------------------------------------------------------------------------
Intermedia Communications, Sr. Notes,
8.50%, 1/15/08 500,000 478
- ------------------------------------------------------------------------------
International Bank For Reconstruction & Development
7.625%, 1/19/23 1,800,000 2,212
- ------------------------------------------------------------------------------
International Home Foods, Gtd. Sr. Sub. Notes
10.375%, 11/1/06 1,000,000 1,082
- ------------------------------------------------------------------------------
International Shipholding, Sr. Notes,
7.75%, 10/15/07 750,000 720
- ------------------------------------------------------------------------------
International Wire, Sr. Sub. Notes, 11.75%, 6/1/05 1,000,000 1,052
- ------------------------------------------------------------------------------
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 1,000,000 930
- ------------------------------------------------------------------------------
<PAGE>
Iron Mountain, Sr. Sub. Notes, 8.75%, 9/30/09 500,000 515
- ------------------------------------------------------------------------------
ISG Resources, Sr. Sub. Notes, 10.00%, 4/15/08 1,000,000 990
- ------------------------------------------------------------------------------
ISP Holdings, Sr. Notes, 9.75%, 2/15/02 1,000,000 1,062
- ------------------------------------------------------------------------------
Jefferson Pilot Capital Trust, (144a),
8.14%, 1/15/46 1,500,000 1,556
- ------------------------------------------------------------------------------
Jitney-Jungle Stores, Sr. Sub. Notes
10.375%, 9/15/07 325,000 330
- ------------------------------------------------------------------------------
12.00%, 3/1/06 700,000 780
- ------------------------------------------------------------------------------
Keebler, Sr. Sub. Notes, 10.75%, 7/1/06 1,000,000 1,130
- ------------------------------------------------------------------------------
Kelley Oil & Gas, Sr. Sub. Notes,
10.375%, 10/15/06 400,000 296
- ------------------------------------------------------------------------------
KFW International Finance, MTN, 9.14%, 6/4/01 250,000 272
- ------------------------------------------------------------------------------
Kimberly-Clark, Deb. Notes, 6.375%, 1/1/28 5,000,000 5,193
- ------------------------------------------------------------------------------
Kinetic Concepts, Sr. Sub. Notes, 9.625%, 11/1/07 300,000 285
- ------------------------------------------------------------------------------
Koppers Industry, Sr. Sub. Notes, 9.875%, 12/1/07 1,050,000 1,029
- ------------------------------------------------------------------------------
L 3 Communications, Sr. Sub. Notes,
10.375%, 5/1/07 725,000 798
- ------------------------------------------------------------------------------
Lehman Brothers, Sr. Sub. Notes, 6.625%, 2/15/08 1,500,000 1,501
- ------------------------------------------------------------------------------
Lehman Brothers Holdings, 8.875%, 3/1/02 1,500,000 1,599
- ------------------------------------------------------------------------------
Liberty National Bank & Trust, Sub. Notes,
6.75%, 6/1/03 500,000 $ 523
- ------------------------------------------------------------------------------
Loral, Sr. Notes, 7.625%, 6/15/04 1,500,000 1,622
- ------------------------------------------------------------------------------
Mail Well I, 8.75%, 12/15/08 1,000,000 1,000
- ------------------------------------------------------------------------------
Marcus Cable, Sr. Disc. Notes
STEP, 0%, 8/1/04 1,250,000 1,253
- ------------------------------------------------------------------------------
STEP, 0%, 12/15/05 775,000 744
- ------------------------------------------------------------------------------
Mastec, Sr. Sub. Notes, 7.75%, 2/1/08 1,000,000 965
- ------------------------------------------------------------------------------
McDonnell Douglas, 8.25%, 7/1/00 500,000 520
- ------------------------------------------------------------------------------
Metromedia Fiber, Sr. Notes, (144a)
10.00%, 11/15/08 400,000 411
- ------------------------------------------------------------------------------
Metronet Communications, Sr. Disc. Notes
STEP, 0%, 11/1/07 500,000 325
- ------------------------------------------------------------------------------
Sr. Notes, 12.00%, 8/15/07 500,000 544
<PAGE>
- ------------------------------------------------------------------------------
Microcell Telecommunications, Sr. Disc. Notes
STEP, 0%, 6/1/06 500,000 370
- ------------------------------------------------------------------------------
ML Capital Trust, Gtd. Notes, 9.875%, 3/1/27 500,000 613
- ------------------------------------------------------------------------------
Mrs. Fields, Gtd. Sr. Sub. Notes, 10.125%, 12/1/04 750,000 724
- ------------------------------------------------------------------------------
MTS, Sr. Sub. Notes, 9.375%, 5/1/05 100,000 98
- ------------------------------------------------------------------------------
Muzak, Gtd. Sr. Notes, 10.00%, 10/1/03 1,000,000 1,040
- ------------------------------------------------------------------------------
Nationsbank Credit Card Master Trust
6.00%, 12/15/05 140,000 143
- ------------------------------------------------------------------------------
New Jersey Bell Telephone, Deb. Notes,
6.80%, 12/15/24 2,500,000 2,524
- ------------------------------------------------------------------------------
News America Holdings, Gtd. Sr. Deb. Notes
9.25%, 2/1/13 90,000 112
- ------------------------------------------------------------------------------
Nextel Communications, Sr. Disc. Notes
STEP, 0%, 8/15/04 500,000 482
- ------------------------------------------------------------------------------
STEP, 0%, 10/31/07 1,000,000 610
- ------------------------------------------------------------------------------
Nextlink Communications, Sr. Notes,
12.50%, 4/15/06 1,000,000 1,070
- ------------------------------------------------------------------------------
NGC, Sr. Notes, 6.75%, 12/15/05 1,000,000 1,014
- ------------------------------------------------------------------------------
Niagara Mohawk
Sr. Disc. Notes, Zero Coupon, 7/1/10 1,000,000 773
- ------------------------------------------------------------------------------
1st Mtg., 7.75%, 5/15/06 2,000,000 2,211
- ------------------------------------------------------------------------------
Sr. Notes, 7.75%, 10/1/08 450,000 490
- ------------------------------------------------------------------------------
Nine West, Sr. Notes, 8.375%, 8/15/05 1,000,000 965
- ------------------------------------------------------------------------------
Northland Cable Television, Sr. Sub. Notes
10.25%, 11/15/07 1,000,000 1,052
- ------------------------------------------------------------------------------
Northrop Grumman, Deb. Notes, 7.875%, 3/1/26 2,000,000 2,214
- ------------------------------------------------------------------------------
NYNEX, Deb. Notes, 9.55%, 5/1/10 1,083,968 1,283
- ------------------------------------------------------------------------------
Octel, Sr. Notes, 10.00%, 5/1/06 650,000 676
- ------------------------------------------------------------------------------
Ocwen Capital Trust I, 10.875%, 8/1/27 375,000 300
- ------------------------------------------------------------------------------
Oracle, Sr. Notes, 6.91%, 2/15/07 3,000,000 $ 3,132
- ------------------------------------------------------------------------------
Orange & Rockland Utilities, Deb. Notes
9.375%, 3/15/00 1,500,000 1,568
- ------------------------------------------------------------------------------
<PAGE>
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 1,250,000 1,344
- ------------------------------------------------------------------------------
P & L Coal Holdings, 8.875%, 5/15/08 300,000 305
- ------------------------------------------------------------------------------
Pacific Bell, Deb. Notes, 7.375%, 7/15/43 1,000,000 1,089
- ------------------------------------------------------------------------------
Paragon Corporate Holdings, Sr. Notes, (144a)
9.625%, 4/1/08 1,000,000 830
- ------------------------------------------------------------------------------
Park Place Enmt, 7.875%, 12/15/05 750,000 751
- ------------------------------------------------------------------------------
PDVSA Finance, (144a), 7.40%, 8/15/16 2,000,000 1,676
- ------------------------------------------------------------------------------
Pegasus Communications, Sr. Notes
9.625%, 10/15/05 1,000,000 1,000
- ------------------------------------------------------------------------------
Philadelphia Electric, 1st Ref. Mtg.,
5.625%, 11/1/01 3,000,000 3,010
- ------------------------------------------------------------------------------
Plains Resources, Sr. Sub. Notes, 10.25%, 3/15/06 500,000 505
- ------------------------------------------------------------------------------
Plastic Containers, Sr. Secured Notes,
10.00%, 12/15/06 1,000,000 1,050
- ------------------------------------------------------------------------------
Premier Parks, Sr. Disc. Notes, STEP
0%, 4/1/08 125,000 85
- ------------------------------------------------------------------------------
Price Communications Wireless, Sr. Notes
(144a), 9.125%, 12/15/06 1,000,000 1,010
- ------------------------------------------------------------------------------
Pride Petroleum Services, Sr. Notes,
9.375%, 5/1/07 1,000,000 930
- ------------------------------------------------------------------------------
Prime Credit Card Master Trust, 6.70%, 7/15/04 140,000 144
- ------------------------------------------------------------------------------
Protection One Alarm, 8.125%, 1/15/09 1,000,000 997
- ------------------------------------------------------------------------------
Province of Alberta, 9.25%, 4/1/00 1,000,000 1,048
- ------------------------------------------------------------------------------
PSINet, Sr. Notes, 10.00%, 2/15/05 1,100,000 1,089
- ------------------------------------------------------------------------------
Purina Mills, Sr. Sub. Notes, 9.00%, 3/15/10 1,000,000 995
- ------------------------------------------------------------------------------
Quantas Airways, Sr. Notes, (144a), 7.50%, 6/30/03 1,000,000 1,041
- ------------------------------------------------------------------------------
Quest Diagnostics, Gtd. Sr. Sub. Notes
10.75%, 12/15/06 500,000 555
- ------------------------------------------------------------------------------
Qwest Communications, Sr. Disc. Notes
Sr. Disc Notes, Zero Coupon, 10/15/07 1,675,000 1,306
- ------------------------------------------------------------------------------
Sr. Notes, (144a), 7.50%, 11/1/08 325,000 340
- ------------------------------------------------------------------------------
R&B Falcon, 6.75%, 4/15/05 3,000,000 2,737
- ------------------------------------------------------------------------------
<PAGE>
Rail Car Trust, 7.75%, 6/1/04 83,711 89
- ------------------------------------------------------------------------------
Repap New Brunswick, Sr. Secured 1st Priority Notes
9.00%, 6/1/04 1,000,000 910
- ------------------------------------------------------------------------------
Rio Hotel & Casino
Gtd. Sr. Sub. Notes, 9.50%, 4/15/07 500,000 556
- ------------------------------------------------------------------------------
Sr. Sub. Notes, 10.625%, 7/15/05 1,000,000 1,090
- ------------------------------------------------------------------------------
Riverwood International, Sr. Notes, 10.625%, 8/1/07 1,000,000 990
- ------------------------------------------------------------------------------
Rogers Cablesystems, Sr. Sec. 2nd Priority Notes
10.00%, 3/15/05 500,000 $ 560
- ------------------------------------------------------------------------------
RSL Communications, Gtd. Sr. Notes, 9.125%, 3/1/08 1,000,000 910
- ------------------------------------------------------------------------------
Safelite Glass, 9.875%, 12/15/06 500,000 461
- ------------------------------------------------------------------------------
Safety Kleen Services, 9.25%, 6/1/08 500,000 513
- ------------------------------------------------------------------------------
Santander Financial, Gtd. Sub. Notes,
6.375%, 2/15/11 3,000,000 2,929
- ------------------------------------------------------------------------------
Satelites Mexicanos, Sr. Notes, (144a),
10.125%, 11/1/04 500,000 415
- ------------------------------------------------------------------------------
Sears Credit Account Master Trust
6.05%, 1/16/08 80,000 82
- ------------------------------------------------------------------------------
6.45%, 10/16/06 70,000 72
- ------------------------------------------------------------------------------
Security Benefit Life, (144a), 8.75%, 5/15/16 3,000,000 3,301
- ------------------------------------------------------------------------------
Shoppers Food Warehouse, Sr. Notes, 9.75%, 6/15/04 1,000,000 1,077
- ------------------------------------------------------------------------------
Siebe, (144a)
6.50%, 1/15/10 2,000,000 2,057
- ------------------------------------------------------------------------------
7.125%, 1/15/07 1,500,000 1,680
- ------------------------------------------------------------------------------
Sinclair Broadcast Group, Sr. Sub. Notes,
8.75%, 12/15/07 1,000,000 1,013
- ------------------------------------------------------------------------------
Sitel, Sr. Sub. Notes, 9.25%, 3/15/06 350,000 315
- ------------------------------------------------------------------------------
Six Flags Entertainment, Sr. Notes, 8.875%, 4/1/06 350,000 359
- ------------------------------------------------------------------------------
Six Flags Theme Parks, Sr. Sub. Disc. Notes
12.25%, 6/15/05 1,000,000 1,110
- ------------------------------------------------------------------------------
Smithfield Foods, Sr. Sub. Notes
7.625%, 2/15/08 500,000 503
- ------------------------------------------------------------------------------
Southern Foods, Sr. Sub. Notes, 9.875%, 9/1/07 800,000 836
<PAGE>
- ------------------------------------------------------------------------------
Sovereign Speciality, Sr. Sub. Notes, 9.50%, 8/1/07 750,000 761
- ------------------------------------------------------------------------------
Specialty Retailers, Sr. Notes, 8.50%, 7/15/05 1,000,000 860
- ------------------------------------------------------------------------------
Speedway Motorsports, Gtd. Sr. Sub. Notes
8.50%, 8/15/07 1,000,000 1,055
- ------------------------------------------------------------------------------
Stena, Sr. Notes, 10.50%, 12/15/05 1,000,000 1,033
- ------------------------------------------------------------------------------
Sun Media, Sr. Sub. Notes
9.50%, 2/15/07 550,000 611
- ------------------------------------------------------------------------------
9.50%, 5/15/07 650,000 721
- ------------------------------------------------------------------------------
Synthetic Industries, Sr. Sub. Notes,
9.25%, 2/15/07 400,000 408
- ------------------------------------------------------------------------------
Tenet Healthcare, Sr. Sub. Notes, 8.625%, 1/15/07 1,000,000 1,040
- ------------------------------------------------------------------------------
Tenneco, 6.70%, 12/15/05 1,000,000 1,022
- ------------------------------------------------------------------------------
The Pantry, Sr. Sub. Notes, 10.25%, 10/15/07 1,000,000 1,045
- ------------------------------------------------------------------------------
Time Warner, Deb. Notes, 7.48%, 1/15/08 1,400,000 1,552
- ------------------------------------------------------------------------------
Transwestern Publishing, Sr. Sub. Notes
9.625%, 11/15/07 750,000 784
- ------------------------------------------------------------------------------
TravelCenters of America, Sr. Sub. Notes,
10.25%, 4/1/07 1,000,000 995
- ------------------------------------------------------------------------------
Travelers Property Casualty, Sr. Notes,
6.75%, 11/15/06 1,500,000 $ 1,554
- ------------------------------------------------------------------------------
Trident Automotive PLC, Sr. Sub. Notes
10.00%, 12/15/05 750,000 758
- ------------------------------------------------------------------------------
TRW, MTN, 7.37%, 4/18/07 2,000,000 2,209
- ------------------------------------------------------------------------------
TV Azteca, Gtd. Sr. Notes, 10.50%, 2/15/07 800,000 652
- ------------------------------------------------------------------------------
Union Bank Switzerland, Sub. Notes, 7.25%, 7/15/06 1,000,000 1,089
- ------------------------------------------------------------------------------
United International Holdings,
Sr. Disc. Notes, STEP
10.75%, 2/15/08 1,000,000 540
- ------------------------------------------------------------------------------
Universal Compression, Sr. Disc. Notes, STEP
9.875%, 2/15/08 1,000,000 570
- ------------------------------------------------------------------------------
US Can, Sr. Gtd. Notes, 10.125%, 10/15/06 475,000 500
- ------------------------------------------------------------------------------
UtiliCorp United, Sr. Notes, 6.875%, 10/1/04 3,000,000 3,138
- ------------------------------------------------------------------------------
<PAGE>
Verio, Sr. Notes, (144a), 11.25%, 12/1/08 500,000 505
- ------------------------------------------------------------------------------
Viasystems, Sr. Sub. Notes, 9.75%, 6/1/07 500,000 465
- ------------------------------------------------------------------------------
Wal-Mart Stores, 6.75%, 5/15/02 1,000,000 1,045
- ------------------------------------------------------------------------------
Westamerica Bank, Sub. Notes, (144a),
6.99%, 9/30/03 1,500,000 1,514
- ------------------------------------------------------------------------------
Westpoint Stevens, Sr. Notes, 7.875%, 6/15/08 1,000,000 1,008
- ------------------------------------------------------------------------------
Willamette Industries, MTN, 7.85%, 7/1/26 1,000,000 1,098
- ------------------------------------------------------------------------------
Worldcom, Sr. Notes, 6.95%, 8/15/28 4,000,000 4,302
Total Corporate Bonds (Cost $264,846) 269,492
U.S. GOVERNMENT MORTGAGE BACKED SECURITIES 5.2%
Federal Home Loan Mortgage Assn.
8.00%, 3/1/17 18,524 19
- ------------------------------------------------------------------------------
10.00%, 10/1/10 54,282 58
- ------------------------------------------------------------------------------
10.50%, 9/1/15 15,767 18
- ------------------------------------------------------------------------------
Federal National Mortgage Assn.
6.00%, 10/25/08 3,835,000 3,869
- ------------------------------------------------------------------------------
6.31%, 4/1/08 2,830,776 2,912
- ------------------------------------------------------------------------------
6.50%, 7/25/08 - 5/1/11 1,107,503 1,114
- ------------------------------------------------------------------------------
7.00%, 8/17/10 - 4/1/26 8,070,482 8,292
- ------------------------------------------------------------------------------
Government National Mortgage Assn.
I
6.00%, 1/15 - 5/15/24 2,228,515 2,212
- ------------------------------------------------------------------------------
6.50%, 9/15/23 - 8/15/28 7,178,850 7,253
- ------------------------------------------------------------------------------
7.00%, 10/15/22 - 7/15/28 9,712,058 9,934
- ------------------------------------------------------------------------------
7.50%, 9/15/22 - 6/15/27 11,058,911 11,408
- ------------------------------------------------------------------------------
Government National Mortgage Assn.
I
8.00%, 6/15/17 - 11/15/25 8,776,996 $ 9,183
- ------------------------------------------------------------------------------
8.50%, 3/15/05 - 1/15/27 2,994,696 3,199
- ------------------------------------------------------------------------------
9.00%, 5/15/16 - 6/15/21 655,090 704
- ------------------------------------------------------------------------------
9.50%, 8/15/09 - 8/20/22 760,029 822
- ------------------------------------------------------------------------------
10.00%, 11/15/09 - 1/20/22 29,827 33
<PAGE>
- ------------------------------------------------------------------------------
10.50%, 5/15/15 11,547 13
- ------------------------------------------------------------------------------
11.00%, 3/15/10 - 1/15/20 778,911 875
- ------------------------------------------------------------------------------
11.50%, 3/15/10 - 3/15/16 1,231,007 1,401
- ------------------------------------------------------------------------------
GPM, I
9.50%, 9/15/09 419,270 454
- ------------------------------------------------------------------------------
10.75%, 12/15/17 87,704 98
- ------------------------------------------------------------------------------
ARM
6.625%, 8/20/23 145,020 147
- ------------------------------------------------------------------------------
II
8.50%, 6/20/25 - 6/20/26 3,879,501 4,106
- ------------------------------------------------------------------------------
9.00%, 7/20/16 - 6/20/20 636,481 682
- ------------------------------------------------------------------------------
9.50%, 8/20/22 136,887 148
- ------------------------------------------------------------------------------
10.00%, 10/20/16 - 1/20/22 94,269 103
- ------------------------------------------------------------------------------
Project Loan
8.50%, 1/15/27 292,994 305
- ------------------------------------------------------------------------------
8.875%, 2/15/30 674,938 704
- ------------------------------------------------------------------------------
8.95%, 5/15/35 2,288,720 2,389
- ------------------------------------------------------------------------------
TBA
6.50%, 8/15/28 3,910,234 3,948
- ------------------------------------------------------------------------------
7.00%, 3/15/28 7,493,703 7,662
- ------------------------------------------------------------------------------
U. S. Department of Veteran Affairs, VR
9.545%, 3/15/25 755,555 835
Total U.S. Government Mortgage-Backed
Securities (Cost $82,941) 84,900
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 17.2%
Federal Home Loan Banks
6.34%, 10/19/05 4,875,000 5,177
- -------------------------------------------------------------------------------
6.425%, 8/14/02 6,450,000 6,621
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Assn.
6.00%, 6/15/05 264,121 264
- -------------------------------------------------------------------------------
Federal National Mortgage Assn.
5.80%, 12/10/03 13,000,000 $ 13,354
- -------------------------------------------------------------------------------
6.47%, 9/25/12 3,000,000 3,280
<PAGE>
- -------------------------------------------------------------------------------
8.45%, 7/12/99 4,000,000 4,074
- -------------------------------------------------------------------------------
REMIC, 7.50%, 10/25/19 513,350 515
- -------------------------------------------------------------------------------
MTN
6.34%, 2/4/08 10,000,000 10,238
- -------------------------------------------------------------------------------
6.36%, 8/16/00 270,000 276
- -------------------------------------------------------------------------------
Tennessee Valley Authority
8.25%, 9/15/34 435,000 442
- -------------------------------------------------------------------------------
U.S. Treasury Bonds
6.00%, 2/15/26 11,365,000 12,396
- -------------------------------------------------------------------------------
6.50%, 11/15/26 9,000,000 10,468
- -------------------------------------------------------------------------------
6.75%, 8/15/26 10,000,000 11,981
- -------------------------------------------------------------------------------
7.125%, 2/15/23 12,500,000 15,405
- -------------------------------------------------------------------------------
7.25%, 5/15/16 10,000,000 12,114
- -------------------------------------------------------------------------------
8.125%, 8/15/19 - 8/15/21 3,650,000 4,928
- -------------------------------------------------------------------------------
8.75%, 5/15/20 1,000,000 1,421
- -------------------------------------------------------------------------------
11.25%, 2/15/15 500,000 826
- -------------------------------------------------------------------------------
11.625%, 11/15/04 20,000 27
- -------------------------------------------------------------------------------
11.75%, 2/15/01 200,000 229
- -------------------------------------------------------------------------------
13.125%, 5/15/01 200,000 238
- -------------------------------------------------------------------------------
13.875%, 5/15/11 190,000 294
- -------------------------------------------------------------------------------
U.S. Treasury Notes
5.25%, 1/31/01 5,000,000 5,067
- -------------------------------------------------------------------------------
5.625%, 5/15/08 6,000,000 6,395
- -------------------------------------------------------------------------------
6.00%, 8/15/99 11,300,000 11,393
- -------------------------------------------------------------------------------
6.125%, 9/30/00 790,000 810
- -------------------------------------------------------------------------------
6.25%, 2/15/03 - 2/15/07 32,000,000 34,296
- -------------------------------------------------------------------------------
6.50%, 4/30/99 - 8/15/05 44,500,000 48,098
- -------------------------------------------------------------------------------
6.875%, 5/15/06 8,000,000 9,041
- -------------------------------------------------------------------------------
7.50%, 11/15/01 1,310,000 1,408
- -------------------------------------------------------------------------------
<PAGE>
7.75%, 1/31/00 - 2/15/01 16,800,000 17,414
- -------------------------------------------------------------------------------
7.875%, 11/15/04 8,150,000 9,442
- -------------------------------------------------------------------------------
8.00%, 5/15/01 12,000,000 12,904
- -------------------------------------------------------------------------------
8.75%, 8/15/00 12,500,000 13,295
- -------------------------------------------------------------------------------
Total U.S. Government Obligations/
Agencies (Cost $270,232) 284,131
SHORT-TERM INVESTMENTS 1.8%
Certificates of Deposit 0.0%
Chase Manhattan Bank, N.A., fixed deposit
4.00%, 12/31/99 MYR $ 1,149,356 $ 259
- -------------------------------------------------------------------------------
259
Money Market Funds 1.8%
Reserve Investment Fund, 5.42% # 29,233,020 29,233
- -------------------------------------------------------------------------------
29,233
<PAGE>
Total Short-Term Investments (Cost $29,500) 29,492
Total Investment in Securities
100.6% of Net Assets (Cost $1,179,002) $ 1,659,683
Other Assets Less Liabilities (9,884)
NET ASSETS $ 1,649,799
- --------------------------------------------------------------------------------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
ARM Adjustable rate mortgage
GPM Graduated payment mortgage
MTN Medium term note
PTC Pass-through Certificate
REMIC Real Estate Mortgage Investment Conduit
REIT Real Estate Investment Trust
STEP Stepped coupon note for which the interest rate will adjust on
specified future date(s)
TBA To be announced
VR Variable rate
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 1.2% of net assets.
AUD Australian dollar
BEF Belgian franc
CHF Swiss franc
DEM German deutschemark
DKK Danish krone
FIM Finnish mark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
ITL Italian lira
JPY Japanese yen
MXN Mexican peso
MYR Malaysian ringgit
NLG Dutch guilder
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
ZAR South African rand
L Local registered shares
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
December 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
In thousands
Assets
Investments in securities, at value (Cost $1,179,002) $ 1,659,683
Securities lending collateral 223,149
Other assets 14,552
- --------------------------------------------------------------------------------
Total assets 1,897,384
- --------------------------------------------------------------------------------
Liabilities
Obligation to return securities lending collateral 223,149
Other liabilities 24,436
- --------------------------------------------------------------------------------
Total liabilities 247,585
- --------------------------------------------------------------------------------
NET ASSETS $ 1,649,799
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 567
Accumulated net realized gain/loss - net of distributions (1,273)
Net unrealized gain (loss) 480,695
Paid-in-capital applicable to 88,768,120 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 1,169,810
- --------------------------------------------------------------------------------
NET ASSETS $ 1,649,799
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 18.59
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
Statement of Operations
In thousands
Year
Ended
12/31/98
Investment Income
Income
Interest $ 41,487
Dividend 13,687
- --------------------------------------------------------------------------------
Total income 55,174
- --------------------------------------------------------------------------------
Expenses
Investment management 6,809
Shareholder servicing 3,883
Custody and accounting 224
Prospectus and shareholder reports 242
Registration 108
Legal and audit 16
Directors 10
Miscellaneous 7
- --------------------------------------------------------------------------------
Total expenses 11,299
- --------------------------------------------------------------------------------
Net investment income 43,875
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 2,170
Futures (1,152)
Foreign currency transactions (9)
- --------------------------------------------------------------------------------
Net realized gain (loss) 1,009
- --------------------------------------------------------------------------------
Change in net unrealized gain or loss
Securities 169,936
Other assets and liabilities
denominated in foreign currencies 19
Change in net unrealized gain or loss 169,955
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 170,964
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $214,839
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
In thousands
Year
Ended
12/31/98 12/31/97
-------- --------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 43,875 $ 37,576
Net realized gain (loss) 1,009 9,027
Change in net unrealized gain or loss 169,955 145,478
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 214,839 192,081
- -------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (43,309) (38,055)
Net realized gain (3,438) (8,859)
- -------------------------------------------------------------------------------
Decrease in net assets from distributions (46,747) (46,914)
- -------------------------------------------------------------------------------
Capital share transactions *
Shares sold 544,483 425,797
Distributions reinvested 44,249 44,064
Shares redeemed (326,249) (271,777)
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 262,483 198,084
- -------------------------------------------------------------------------------
Net Assets
Increase (decrease) during period 430,575 343,251
Beginning of period 1,219,224 875,973
========= =======
End of period $1,649,799 $ 1,219,224
- --------------------------------------------------------------------------------
* Share information
Shares sold 31,158 27,623
Distributions reinvested 2,483 2,767
Shares redeemed (18,593) (17,176)
- -------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 15,048 13,214
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
December 31, 1998
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Balanced 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 31, 1939.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations are
made. A security which is listed or traded on more than one exchange is valued
at the quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
Premiums and Discounts Premiums and discounts on debt securities, other
than mortgage-backed securities (MBS), are amortized for both financial
reporting and tax purposes. Premiums and discounts on all MBS are recognized
upon disposition or principal repayment as gain or loss for financial reporting
purposes. For tax purposes, premiums and discounts on MBS acquired on or before
June 8, 1997, are recognized upon disposition or principal repayment as ordinary
income. For MBS acquired after June 8, 1997, premiums are recognized as gain or
loss; discounts are recognized as gain or loss, except to the extent of accrued
market discount.
<PAGE>
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
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Securities Lending The fund lends its securities to approved brokers to
earn additional income and receives cash and U.S. government securities as
collateral against the loans. Cash collateral received is invested in a money
market pooled account by the fund's lending agent. Collateral is maintained over
the life of the loan in an amount not less than 100% of the value of loaned
securities. Although risk is mitigated by the collateral, the fund could
experience a delay in recovering its securities and a possible loss of income or
value if the borrower fails to return them. At December 31, 1998, the value of
loaned securities was $217,324,000; aggregate collateral consisted of
$223,149,000 in the securities lending collateral pool. Other Purchases and
sales of portfolio securities, other than short-term and U.S. government
securities, aggregated $220,813,000 and $99,950,000, respectively, for the year
ended December 31, 1998. Purchases and sales of U.S. government securities
aggregated $173,379,000 and $76,596,000, respectively, for the year ended
December 31, 1998.
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 December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$1,179,002,000. Net unrealized gain aggregated $480,681,000 at period-end, of
which $511,734,000 related to appreciated investments and $31,053,000 to
depreciated investments.
<PAGE>
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 $648,000 was payable at December 31, 1998. 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 0.30% for assets in excess of $80 billion. At
December 31, 1998, and for the year then ended, the effective annual group fee
rate was 0.32%. The fund pays a pro-rata share of the group fee based on the
ratio of its net assets to those of the group.
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
$3,488,000 for the year ended December 31, 1998, of which $309,000 was payable
at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the year ended December 31, 1998, totaled
$1,166,000 and are reflected as interest income in the accompanying Statement of
Operations.
During the year ended December 31, 1998, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $44,000 with
certain affiliates of the manager and paid commissions of $1,000 related
thereto.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Directors and Shareholders of
T. Rowe Price Balanced Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price Balanced Fund, Inc.
(the "Fund") at December 31, 1998, and the results of its operations, the
changes in its net assets and the financial highlights for each of the fiscal
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with custodians, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 21, 1999
================================================================================
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
* $884,000 from short-term capital gains,
* $2,554,000 from long-term capital gains, all of which was subject to
the 20% rate gains category.
For corporate shareholders, $8,756,000 of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
================================================================================
================================================================================
<PAGE>
T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
CHECKING Available on most fixed income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION Options Reinvest all, some, or none of your
distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*Access [Registration Mark]
and the T. Rowe Price Web site on the Internet. Address:
www.troweprice.com
BROKERAGE SERVICES*
INDIVIDUAL INVESTMENTS Stocks, bonds, options, precious metals, and
other securities at a savings over full-service commission rates.
INVESTMENT INFORMATION
COMBINED STATEMENT Overview of all your accounts with T. Rowe Price.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and
results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial
markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment
Services, Inc., Member NASD/SIPC.
================================================================================
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500*
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era New Horizons**
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Total Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
<PAGE>
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Intermediate Tax-Free***
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond +
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond Global Bond ++
International Bond Money
MARKET FUNDS +++
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
<PAGE>
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly named Equity Index.
** Closed to new investors.
*** Formerly named Florida Insured Intermediate Tax-Free.
+ Formerly named Tax-Free Insured Intermediate Bond.
++ Formerly named Global Government Bond.
+++ Neither the funds nor their share prices are insured or guaranteed by the
U.S. government.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by SECURITY
BENEFIT LIFE INSURANCE COMPANY. In New York, it [#FSB201(11-96)] is issued by
FIRST SECURITY BENEFIT LIFE INSURANCE COMPANY OF NEW YORK, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
================================================================================
T. Rowe Price Retirement Plans and Resources
- --------------------------------------------------------------------------------
Retirement Plans and Resources
We recognize that saving for retirement is the number one investment
goal for most Americans. We can help you meet your retirement needs,
whether you are starting an IRA or designing a retirement program for
your employees. T. Rowe Price offers an assortment of retirement plans
for individuals, the self-employed, small businesses, corporations,
and nonprofit organizations. We provide recordkeeping, communications,
and investment management services, as well as a variety of
educational materials, self-help planning guides, and software tools
to help you choose and implement a retirement plan appropriate for
you. For information or to request literature, call us at
1-800-638-5660.
<PAGE>
IRAs AND QUALIFIED PLANS
----------------------------------------------------------------------
Traditional IRA
Roth IRA
Rollover IRA
SEP-IRA
SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase Pension and Profit Sharing Plans)
401(k)
403(b)
457 Deferred Compensation
<PAGE>
RETIREMENT RESOURCES AT T. ROWE PRICE
----------------------------------------------------------------------
PLANNING AND INFORMATIONAL GUIDES
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
INVESTMENT KITS
The IRA Investing Kit
Roth IRA Conversion Kit
Rollover IRA Kit
The T. Rowe Price SIMPLE IRA Plan Kit
The T. Rowe Price SEP-IRA Plan
The Simplified Keogh Plan [Registration Mark] From T. Rowe Price
The T. Rowe Price 401(k) Century PlanRegistration Mark (for small
businesses)
Money Purchase Pension/Profit Sharing Plan Kit
Investing for Retirement in Your 403(b) Account
The T. Rowe Price No-Load Variable Annuity Information Kit
INSIGHTS REPORTS
The Challenge of Preparing for Retirement
Financial Planning After Retirement The Roth IRA: A Review
SOFTWARE PACKAGES
T. ROWE PRICE RETIREMENT PLANNING ANALYZER TM CD-ROM or diskette
$19.95. To order, please call 1-800-541-5760. Also available on the
Internet for $9.95.
T. ROWE PRICE VARIABLE ANNUITY ANALYZER TM CD-ROM or diskette, free.
To order, please call 1-800-469-5304.
Many of these resources are also available for viewing or ordering on
the Internet at WWW.TROWEPRICE.COM.
================================================================================
<PAGE>
T. Rowe Price Insights Reports
- --------------------------------------------------------------------------------
THE FUNDAMENTALS OF INVESTING
Whether you are unsure how to get started or are saving for a specific
goal, such as retirement or college, the T. Rowe Price Insights series
can help you make informed investment decisions. These reports,
written in plain English about fundamental investment topics, can be
useful at every stage of your investment journey. They cover a range
of topics, from the basic, such as getting started with mutual funds,
to the more advanced, such as managing risk through diversification or
buying individual securities through a broker. To request one or more
Insights, call us at 1-800-638-5660.
INSIGHTS REPORTS
----------------------------------------------------------------------
GENERAL INFORMATION
The ABCs of Giving
Back to Basics: The ABCs of Investing
The Challenge of Preparing for Retirement
Financial Planning After Retirement
Getting Started: Investing With Mutual Funds
The Roth IRA: A Review
Tax Information for Mutual Fund Investors
INVESTMENT STRATEGIES
Conservative Stock Investing
Dollar Cost Averaging
Equity Index Investing
Growth Stock Investing
Investing for Higher Yield
Managing Risk Through Diversification
The Power of Compounding
Value Investing
<PAGE>
TYPES OF SECURITIES
The Basics of International Stock Investing
The Basics of Tax-Free Investing
The Fundamentals of Fixed Income Investing
Global Bond Investing
Investing in Common Stocks
Investing in Emerging Growth Stocks
Investing in Financial Services Stocks
Investing in Health Care Stocks
Investing in High-Yield Municipal Bonds
Investing in Money Market Securities
Investing in Mortgage-Backed Securities
Investing in Natural Resource Stocks
Investing in Science and Technology Stocks
Investing in Small-Company Stocks
Understanding Derivatives
Understanding High-Yield "Junk" Bonds
BROKERAGE INSIGHTS
Combining Individual Securities With Mutual Funds
Getting Started: An Introduction to Individual Securities
What You Should Know About Bonds
What You Should Know About Margin and Short-Selling
What You Should Know About Options
What You Should Know About Stocks
T. Rowe Price Insights are also available for reading or downloading
on the Internet at WWW.TROWEPRICE.COM.
================================================================================
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
shareholder service center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660 toll free
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INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Balanced Fund.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F68-050 12/31/98
