T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Balanced Fund
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
BALANCED FUND
- -------------
* Both U.S. and foreign economies advanced, prompting the Federal Reserve
to raise interest rates three times.
* Your fund's 6- and 12-month gains outpaced its Lipper peer group and
reflected its diversified approach.
* Selected technology and foreign equities advanced while health care
stocks sagged and bonds were flat to lower.
* Equities rose as a percentage of assets, but we may reduce them in coming
months.
* The economic environment is positive, although some market volatility
would not be unexpected.
================================================================================
UPDATES AVAILABLE
- -----------------
For updates on T. Rowe Price funds following the end of each calendar
quarter, please see our Web site at www.troweprice.com.
================================================================================
<PAGE>
FELLOW SHAREHOLDERS
- -------------------
The equity markets advanced strongly, if narrowly, during 1999, while
high-quality bonds struggled against rising interest rates. International
markets also recovered from previous weakness, leading to good performance for
foreign equities. Your fund largely benefited from these trends and posted good
performance for investors.
PERFORMANCE COMPARISON
----------------------
Periods Ended 12/31/99 6 Months 12 Months
---------------------- -------- ---------
Balanced Fund 4.44% 10.26%
Merrill Lynch - Wilshire
Capital Market Index 7.69 16.03
Lipper Balanced Fund Index 2.64 8.98
Combined Index Portfolio * 6.27 12.60
* An unmanaged portfolio of 50% domestic stocks (S&P 500), 40% bonds (Lehman
Aggregate Index), and 10% international stocks (MSCI EAFEIndex).
================================================================================
In the six months ended December 31, 1999, your fund posted a solid return of
4.44%, which contributed to a 10.26% result for the year. These results trailed
returns for the Merrill Lynch -- Wilshire Capital Market Index and our
internally generated benchmark, the Combined Index Portfolio. Over time, these
indexes have gained increasing exposure to high-growth stocks, and benefited
particularly from their advance in 1999. Conversely, we significantly
outperformed the Lipper Balanced Fund Index primarily because the funds included
in that benchmark have more exposure to traditional value stocks, which lagged
sharply during the year. As is often the case, our broadly diversified approach
produced an attractive return that outperformed some benchmarks but trailed
others.
YEAR-END DISTRIBUTIONS
- ----------------------
On December 14, 1999, your Board of Directors declared a quarterly income
dividend of $0.14 per share and an annual long-term capital gain distribution of
$0.23 per share to shareholders of record on that date. Both were paid on
December 16. You should already have received your check or statement reflecting
these distributions, as well as Form 1099-DIV summarizing this information for
1999 tax purposes.
<PAGE>
MARKET ENVIRONMENT
- ------------------
The equity market produced significant drama for investors in 1999. The
Standard & Poor's 500 Stock Index produced its fifth annual gain above 20%, and
several markets, including the Dow Jones Industrial Average and the Nasdaq,
reached record levels. However, the market was extremely uneven. While some
energy and media stocks performed well, in truth, only high-growth technology
and telecommunications firms really soared. Technology performed best, nearly
doubling from 1998 levels. Selected parts of the telecom industry also performed
very well. The growth of the Internet, and specifically trends favoring wireless
access to the Internet, sharply enhanced performance of specialty communications
companies. This was especially the case in the year's fourth quarter, in which
the S&P 500 gained nearly 15%, almost entirely on the strength of technology
stocks and others with very high forecasted earnings growth.
[Chart showing interest rates for 30-Year Treasury Bond, 5-Year Treasury
Note, and 90-day Treasury Bills, 12/31/98 through 120/31/99.]
Most other sectors fell during the second half of the year, particularly
the traditional value areas, such as financials, consumer cyclicals, and
non-telephone utilities. Given the good overall performance of the S&P 500, it
is surprising to realize how much of the market actually experienced price
declines. For example, the median stock in the New York Stock Exchange fell 7.4%
in 1999. For these areas of the market, there seemed to be ample bad news. An
environment of rising interest rates spurred significant weakness among interest
rate-sensitive and dividend-paying stocks, such as financials and utilities.
Concern over a resurrection of price controls on drugs hurt pharmaceuticals and
cast a pall over the entire health care sector. Investors also seemed concerned
that many traditional businesses would not be able to compete with Internet
rivals in the years ahead.
Unlike in past years, the large-cap stock indices did not outshine all
other investment areas. For the first time since the early 1990s, small-cap
stocks kept pace with their large-cap rivals in 1999. Here, too, stocks with
high-growth characteristics strongly outperformed value-oriented investments.
Foreign stocks, as represented by the Morgan Stanley Capital International
Europe, Australasia, and Far East (EAFE) Index, also outpaced the domestic
market for the first time since 1994. Japanese stocks posted especially good
returns, and a number of other Asian markets rallied strongly. In local
currency, Europe produced gains in excess of 30%, although a declining euro
dampened those returns for U.S. investors.
The domestic bond markets were dominated by rising interest rates over the
year, as labor markets continued to tighten and prices in some areas of the
economy rose modestly. Although rampant inflation did not materialize, as some
investors feared, strong economic and market gains in the U.S. and overseas
prompted the Federal Reserve to raise the federal funds target rate three times
in the summer and fall.
<PAGE>
Investors largely anticipated the Fed's actions, pushing rates up sharply
across all maturities. On December 31, the yield on the bellwether 30-year
Treasury bond reached 6.46%. In advance of the year 2000 changeover, the bond
market also experienced some illiquidity as many large-scale investors postponed
major buying and selling decisions. As a result, bonds overall experienced their
worst year since 1994, although higher-yielding areas of the market, notably
corporate bonds and mortgages, weathered the environment better.
ASSET ALLOCATION
- ----------------
Over the past six months, fund exposure to domestic equities stayed the
same, at 50%. However, good performance among our international equities,
particularly compared with our bond holdings, raised their portfolio allocation
to 14% from 11% on June 30. As a result, total equity exposure now stands at
64%. This is higher than the 60% weighting we consider neutral. Reserves
declined during the period as we invested opportunistically in certain equities,
while our allocations among Treasuries, corporates, and mortgage-backed bonds
changed very little. Given that interest rates have risen significantly and
equity valuations are high, we will likely move back toward a 60% equity target
over the coming months, with the proceeds going into the fixed income market.
*******************************************************************************
[Pie chart, based on net assets as
of 12/31/99, with the following
segments -- Corporate Bonds, 15%;
Mortgage-Backed Securities, 6%;
Large-Cap Stocks, 50%;
International Stocks, 14%; Treasury
and Agency Bonds, 14%; Reserves,
1%.]
*******************************************************************************
PORTFOLIO HIGHLIGHTS
- --------------------
A consistent theme emerged in our portfolio this year: while we did not
enjoy many of the more extreme performances in the market, we had enough winners
in many different areas to produce good overall returns. For example, the fund
was underweighted in technology stocks compared with the S&P 500 throughout the
year. Good performance in 1998 saddled many stocks in this sector with what we
considered to be high valuations, which quickly soared to excessive levels in
1999. We declined to chase these aggressively valued companies, even though, as
new technology stocks were regularly added, they began to take up an
increasingly large portion of the S&P. This is a key reason the fund's domestic
equity portion trailed the S&P's performance.
However, we did own several technology businesses that rallied,
particularly in the second half. Sun Microsystems, which makes servers that host
most of the Web pages used by e-commerce companies, was up nearly 125% in the
past six months. Oracle, which provides the leading database program used to
track on-line transactions, rose almost 290% in 1999, most of which came in the
second half. Semiconductor stock Analog Devices also enjoyed a huge gain. After
June 30, the fund's technology holdings rose almost 43%.
<PAGE>
A similar situation existed among our international holdings, where returns
trailed the EAFE's strong gains largely because we were underweighted in Japan.
Yet this segment of the portfolio saw some superb gains and provided a solid
enhancement to overall returns. The fund's best international holding in the
past six months was Ericsson , the Swedish telecommunications equipment
supplier. This stock doubled, refle cting the exuberance regarding the wireless
sector. Sony, the Japanese consumer electronics company, almost tripled as news
emerged of a sophisticated new video game system with many PC-like features.
The fund did not escape losses, however. One particularly disappointing
sector was health care. Our holdings in American Home Products fell 30% as the
company struggled to find a strategy that would raise earnings growth per share.
Medical products companies in general struggled with the prospect of increasing
governmental intervention and renewed political rhetoric as the presidential
election season heated up.
The bond market environment of the last six and 12 months was difficult for
high-quality bonds, such as U.S. Treasuries and investment-grade corporate
bonds, but less so for mortgage-backed securities. Across both government and
corporate bonds, long maturity bonds significantly underperformed those in the
intermediate range as interest rates rose. High-yield bonds, on the other hand,
performed best, despite their generally modest results. Their generous coupon
income and short durations helped protect them from the effects of rate
increases, while the strong economy helped buttress their credit quality.
(Duration is a measure of interest rate sensitivity where higher, or "longer,"
numbers reflect a greater potential negative response to a rise in rates,and
vice versa.)
The fourth quarter also saw a strong rally in the corporate sector as
market liquidity began to return following a period of heavy supply and
decreasing demand in late summer. This rally helped corporate bonds outperform
government bonds. Investment-grade financial securities were the top-performing
corporates for the year; their shorter duration helped them maintain principal
better than longer duration sectors such as industrials during 1999's rising
interest rate environment. Finally, mortgage-backed securities outperformed most
other sectors in both periods, because they are less sensitive to interest rates
than Treasuries and have topnotch credit quality.
BOND PORTFOLIO PROFILE
- ----------------------
Weighted Average Effective Duration (years) 5.4
Weighted Average Maturity (years) 9.3
Weighted Average Quality * AA
* Based on T. Rowe Price research.
<PAGE>
With rising rates threatening bond performance, we became somewhat more
defensive and shortened the duration of the portfolio in the second half of the
year. The portfolio's average credit quality remained high at AA, the same as
six months earlier, although we took steps to limit our credit quality risk by
trimming some of the less-liquid names from the portfolio earlier in the year.
OUTLOOK
- -------
We do not expect inflation or long-term interest rates to rise
significantly from current levels, although at least one Fed rate hike appears
likely in the first half of 2000. Given the Fed's proactive stance and the
positive influence of technological advancements, including the Internet, we
expect the economy to continue to grow and inflation to remain at 3% or lower.
These developments would ultimately be beneficial to the financial markets, but
would likely spark some interest rate-related volatility. Considering how costly
some sectors of the U.S. stock market are, we think a cautious approach is
warranted, but we think such volatility could provide some opportunity for us to
purchase more growth companies, particularly technology firms, at reduced
prices.
Respectfully submitted,
/s/
Richard T. Whitney
Chairman of the Investment Advisory Committee
January 25, 2000
================================================================================
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------
LARGEST HOLDINGS
- ----------------
Percent of
Net Assets
12/31/99
--------
STOCKS
- ------
GE 1.9%
Oracle 1.1
Lucent Technologies 1.0
SBCCommunications 0.9
Intel 0.9
<PAGE>
Citigroup 0.9
Exxon Mobil 0.8
American International Group 0.8
Hewlett-Packard 0.7
Sun Microsystems 0.6
- -------------------------------------------
Total 9.6%
BONDS
- -----
U.S. Treasury 12.0%
Ginnie Mae 4.9
Fannie Mae 3.0
Federal Home Loans 0.5
Time Warner 0.3
Anheuser-Busch 0.3
Comcast Cable 0.3
Atlantic Richfield 0.3
Distribution Financial
Services Marine Trust 0.3
Quantas Air 0.3
- -------------------------------------------
Total 22.2%
Note: Table excludes reserves.
================================================================================
<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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
[SEC chart for Balanced Fund 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 12/31/99 1 Year3 Years 5 Years 10 Years
---------------------- ------------- ------- --------
Balanced Fund 10.26%15.01% 16.83% 13.03%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
Year
Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 18.59 $ 16.54 $ 14.48 $ 13.22 $ 11.14
Investment activities
Net investment income (loss) 0.53 0.53 0.53 0.51 0.48
Net realized and
unrealized gain (loss) 1.34 2.08 2.18 1.38 2.24
<PAGE>
Total from
investment activities 1.87 2.61 2.71 1.89 2.72
Distributions
Net investment income (0.54) (0.52) (0.53) (0.50) (0.47)
Net realized gain (0.23) (0.04) (0.12) (0.13) (0.17)
Total distributions (0.77) (0.56) (0.65) (0.63) (0.64)
NET ASSET VALUE
End of period $ 19.69 $ 18.59 $ 16.54 $ 14.48 $ 13.22
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
TOTAL RETURN* 10.26% 15.97% 18.97% 14.57% 24.88%
- ------------
Ratio of total expenses to
average net assets 0.79% 0.78% 0.81% 0.87% 0.95%
- --------------------------------------------------------------------------------
Ratio of net investmentincome
(loss) to average net assets 2.80% 3.04% 3.36% 3.70% 3.87%
- --------------------------------------------------------------------------------
Portfolio turnover rate 20.7% 12.5% 15.5% 22.3% 12.6%
- --------------------------------------------------------------------------------
Net assets, end of period
(in millions) $ 2,091 $ 1,650 $ 1,219 $ 876 $ 608
- --------------------------------------------------------------------------------
* 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, 1999
PORTFOLIO OF INVESTMENTS
- ------------------------
Shares/Par Value
In thousands
------------
COMMON=STOCKS==63.6%============================================================
FINANCIAL==9.5%=================================================================
BANK AND TRUST 4.0%
- --------------------
Abbey National (GBP) 124,000 $ 1,982
- --------------------------------------------------------------------------------
ABN Amro (EUR) 40,000 999
- --------------------------------------------------------------------------------
Australia & New Zealand Banking ADR 21,500 770
- --------------------------------------------------------------------------------
Banca Commerciale Italiana (EUR) 210,000 1,142
- --------------------------------------------------------------------------------
Banco de Bilbao Vizcaya ADR 180,000 2,554
- --------------------------------------------------------------------------------
Banco Frances del Rio de la Plata ADR 34,500 817
- --------------------------------------------------------------------------------
Bank of America 191,637 9,618
- --------------------------------------------------------------------------------
Bank of New York 100,000 4,000
- --------------------------------------------------------------------------------
Bank One 143,397 4,598
- --------------------------------------------------------------------------------
Bankgesellschaft Berlin (EUR) 57,000 947
- --------------------------------------------------------------------------------
Barclay's (GBP) 101,278 2,915
- --------------------------------------------------------------------------------
Chase Manhattan 110,080 8,552
- --------------------------------------------------------------------------------
DBS Group Holdings (SGD) 40,937 671
- --------------------------------------------------------------------------------
Deutsche Bank (EUR) * 18,700 1,577
- --------------------------------------------------------------------------------
Dresdner Bank (EUR) * 20,200 1,119
- --------------------------------------------------------------------------------
First Union 101,919 3,344
- --------------------------------------------------------------------------------
FirStar 29,901 632
- --------------------------------------------------------------------------------
<PAGE>
Fleetboston Financial 77,341 2,692
- --------------------------------------------------------------------------------
Grupo Financiero Bancomer ADR, (144a) 20,000 162
- --------------------------------------------------------------------------------
KBC Bancassurance Holding (EUR) 25,000 1,347
- --------------------------------------------------------------------------------
KeyCorp 100,000 2,212
- --------------------------------------------------------------------------------
Mediobanca (EUR) 125,100 1,277
- --------------------------------------------------------------------------------
Mellon Financial 155,000 5,280
- --------------------------------------------------------------------------------
Overseas Chinese Bank (SGD) 33,810 311
- --------------------------------------------------------------------------------
Societe Generale (EUR) 11,790 2,743
- --------------------------------------------------------------------------------
State Street 25,000 1,827
- --------------------------------------------------------------------------------
Sumitomo Bank (JPY) 140,000 1,917
- --------------------------------------------------------------------------------
Svenska Handelsbanken (Series A) (SEK) * 78,000 981
- --------------------------------------------------------------------------------
U.S. Bancorp 128,952 3,071
- --------------------------------------------------------------------------------
UBS (CHF) * 16,089 4,345
- --------------------------------------------------------------------------------
Washington Mutual 60,000 1,560
- --------------------------------------------------------------------------------
Wells Fargo 180,000 7,279
- --------------------------------------------------------------------------------
Westpac Banking (EUR) 90,000 $ 621
- --------------------------------------------------------------------------------
83,862
----------
INSURANCE 2.0%
- ---------------
ACE Limited 160,000 2,670
- --------------------------------------------------------------------------------
Aegon 24,990 2,387
- --------------------------------------------------------------------------------
Allied Zurich (GBP) 160,000 1,883
- --------------------------------------------------------------------------------
American General 48,000 3,642
- --------------------------------------------------------------------------------
American International Group 152,156 16,452
- --------------------------------------------------------------------------------
Conseco 31,213 558
- --------------------------------------------------------------------------------
Horace Mann Educators 20,400 400
- --------------------------------------------------------------------------------
<PAGE>
Marsh & McLennan 6,900 660
- --------------------------------------------------------------------------------
Medical Assurance * 30,027 636
- --------------------------------------------------------------------------------
MGIC Investment 23,200 1,397
- --------------------------------------------------------------------------------
Progressive 4,200 307
- --------------------------------------------------------------------------------
St. Paul 86,000 2,897
- --------------------------------------------------------------------------------
Sumitomo Marine & Fire Insurance (JPY) 175,000 1,079
- --------------------------------------------------------------------------------
Torchmark 78,600 2,284
- --------------------------------------------------------------------------------
Unumprovident 100,000 3,206
- --------------------------------------------------------------------------------
XL Capital (Class A) 50,000 2,594
- --------------------------------------------------------------------------------
43,052
----------
FINANCIAL SERVICES 3.5%
- ------------------------
A.G. Edwards 20,212 648
- --------------------------------------------------------------------------------
AMBAC 22,200 1,159
- --------------------------------------------------------------------------------
American Express 52,600 8,745
- --------------------------------------------------------------------------------
Associates First Capital (Class A) 90,938 2,495
- --------------------------------------------------------------------------------
AXA (EUR) 20,600 2,872
- --------------------------------------------------------------------------------
Citigroup 327,034 18,171
- --------------------------------------------------------------------------------
Countrywide Credit 63,925 1,614
- --------------------------------------------------------------------------------
Fannie Mae 78,000 4,870
- --------------------------------------------------------------------------------
Freddie Mac 48,600 2,287
- --------------------------------------------------------------------------------
Goldman Sachs Group 25,000 2,355
- --------------------------------------------------------------------------------
Household International 72,000 2,682
- --------------------------------------------------------------------------------
HSBC Holdings (HKD) 343,092 4,755
- --------------------------------------------------------------------------------
ING Groep (EUR) 51,674 3,120
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter 69,800 9,964
- --------------------------------------------------------------------------------
<PAGE>
Pearson (GBP) 150,000 4,882
- --------------------------------------------------------------------------------
Per Se Technologies * 4,866 41
- --------------------------------------------------------------------------------
Unidanmark (Class A) (DKK) 20,000 1,407
- --------------------------------------------------------------------------------
Waddell & Reed Financial (Class A) 4,472 $ 121
- --------------------------------------------------------------------------------
Waddell & Reed Financial (Class B) 19,249 484
- --------------------------------------------------------------------------------
72,672
----------
Total Financial 199,586
- --------------------------------------------------------------------------------
UTILITIES==6.3%=================================================================
TELEPHONE 4.9%
- ---------------
ALLTEL 80,000 6,615
- --------------------------------------------------------------------------------
AT&T 254,963 12,939
- --------------------------------------------------------------------------------
Bell Atlantic 118,600 7,301
- --------------------------------------------------------------------------------
BellSouth 204,000 9,550
- --------------------------------------------------------------------------------
British Telecommunications ADR 21,600 5,141
- --------------------------------------------------------------------------------
Cable & Wireless ADR 37,288 1,086
- --------------------------------------------------------------------------------
Compania de Telecomunicaciones de Chile
(Class A) ADR 17,000 310
- --------------------------------------------------------------------------------
COMSAT 2,211 44
- --------------------------------------------------------------------------------
GTE * 113,800 8,030
- --------------------------------------------------------------------------------
Nippon Telegraph & Telephone (JPY) 168 2,878
- --------------------------------------------------------------------------------
SBC Communications 386,740 18,854
- --------------------------------------------------------------------------------
Sprint 101,800 6,852
- --------------------------------------------------------------------------------
Telebras ADR 20,000 2,570
- --------------------------------------------------------------------------------
Telecom Corporation of New Zealand (NZD) 520,000 2,445
- --------------------------------------------------------------------------------
<PAGE>
Telecom Italia (EUR) 317,220 4,474
- --------------------------------------------------------------------------------
Telecom Italia Mobile (EUR) 571,000 6,379
- --------------------------------------------------------------------------------
Telefonica de Espana ADR * 38,201 3,011
- --------------------------------------------------------------------------------
Telefonos de Mexico (Class L) ADR 30,000 3,375
- --------------------------------------------------------------------------------
Telekom Malaysia (MYR) 200 1
- --------------------------------------------------------------------------------
U S West 20,546 1,479
- --------------------------------------------------------------------------------
103,334
----------
ELECTRIC UTILITIES 1.4%
- ------------------------
Consolidated Edison 48,200 1,663
- --------------------------------------------------------------------------------
Duke Energy 70,115 3,515
- --------------------------------------------------------------------------------
Edison International 104,000 2,723
- --------------------------------------------------------------------------------
Electrabel (EUR) 3,100 1,015
- --------------------------------------------------------------------------------
Empresa Nacional de Electricidad Chile ADR 13,300 189
- --------------------------------------------------------------------------------
Endesa ADR 48,800 985
- --------------------------------------------------------------------------------
Entergy 73,000 1,880
- --------------------------------------------------------------------------------
FirstEnergy 75,000 $ 1,702
- --------------------------------------------------------------------------------
FPL Group 25,600 1,096
- --------------------------------------------------------------------------------
GPU 75,000 2,245
- --------------------------------------------------------------------------------
Hong Kong Electric (HKD) 200,000 625
- --------------------------------------------------------------------------------
Niagara Mohawk * 102,500 1,429
- --------------------------------------------------------------------------------
PECO Energy 66,000 2,293
- --------------------------------------------------------------------------------
PG&E 67,800 1,390
- --------------------------------------------------------------------------------
Public Service of New Mexico 50,000 812
- --------------------------------------------------------------------------------
Texas Utilities 39,899 1,419
- --------------------------------------------------------------------------------
Unicom 68,600 2,298
- --------------------------------------------------------------------------------
Veba (EUR) 29,700 1,448
- --------------------------------------------------------------------------------
28,727
----------
Total Utilities 132,061
- --------------------------------------------------------------------------------
<PAGE>
CONSUMER=NONDURABLES==10.3%=====================================================
COSMETICS 0.3%
- ---------------
Gillette 45,174 1,861
- --------------------------------------------------------------------------------
International Flavors & Fragrances 11,700 442
- --------------------------------------------------------------------------------
Kao (JPY) 161,000 4,593
- --------------------------------------------------------------------------------
Revlon (Class A) * 1,800 14
- --------------------------------------------------------------------------------
6,910
----------
BEVERAGES 1.1%
- ---------------
Anheuser-Busch 64,000 4,536
- --------------------------------------------------------------------------------
Coca-Cola 92,600 5,394
- --------------------------------------------------------------------------------
Diageo ADR 27,043 865
- --------------------------------------------------------------------------------
LVMH (EUR) 9,541 4,274
- --------------------------------------------------------------------------------
PepsiCo 204,000 7,191
- --------------------------------------------------------------------------------
Starbucks * 48,800 1,185
- --------------------------------------------------------------------------------
23,445
----------
FOOD PROCESSING 1.7%
- ---------------------
Agribrands International * 2,320 107
- --------------------------------------------------------------------------------
Bestfoods 65,800 3,459
- --------------------------------------------------------------------------------
Cadbury Schweppes ADR 63,172 1,528
- --------------------------------------------------------------------------------
Carrefour (EUR) 12,000 2,213
- --------------------------------------------------------------------------------
ConAgra 53,400 1,205
- --------------------------------------------------------------------------------
Corn Products International 8,225 269
- --------------------------------------------------------------------------------
Danisco (DKK) 16,000 624
- --------------------------------------------------------------------------------
Earthgrains 5,120 $ 83
- --------------------------------------------------------------------------------
Eridania Beghin-Say (EUR) 8,100 871
- --------------------------------------------------------------------------------
<PAGE>
General Mills 115,000 4,111
- --------------------------------------------------------------------------------
Heinz 77,000 3,066
- --------------------------------------------------------------------------------
Hershey Foods 30,000 1,425
- --------------------------------------------------------------------------------
McCormick 10,300 306
- --------------------------------------------------------------------------------
Nestle (CHF) 1,724 3,158
- --------------------------------------------------------------------------------
Quaker Oats 80,000 5,250
- --------------------------------------------------------------------------------
Ralston Purina 69,612 1,940
- --------------------------------------------------------------------------------
Sara Lee 165,800 3,658
- --------------------------------------------------------------------------------
Unilever N V 14,285 778
- --------------------------------------------------------------------------------
Universal Foods 14,200 289
- --------------------------------------------------------------------------------
Whitman 1,100 15
- --------------------------------------------------------------------------------
34,355
----------
HOSPITAL SUPPLIES/HOSPITAL MANAGEMENT 0.9%
- -------------------------------------------
Abbott Laboratories 127,200 4,619
- --------------------------------------------------------------------------------
Baxter International 50,000 3,141
- --------------------------------------------------------------------------------
Becton, Dickinson 60,000 1,605
- --------------------------------------------------------------------------------
Guidant * 42,400 1,993
- --------------------------------------------------------------------------------
Health Management (Class A) * 81,252 1,087
- --------------------------------------------------------------------------------
Medtronic 96,000 3,498
- --------------------------------------------------------------------------------
Millipore 900 35
- --------------------------------------------------------------------------------
Smith & Nephew (GBP) 210,000 705
- --------------------------------------------------------------------------------
Terumo (JPY) 75,000 2,004
- --------------------------------------------------------------------------------
18,687
----------
<PAGE>
PHARMACEUTICALS 4.1%
- ---------------------
American Home Products 153,200 6,042
- --------------------------------------------------------------------------------
Amgen * 51,000 3,062
- --------------------------------------------------------------------------------
AstraZeneca Group (SEK) 40,360 1,707
- --------------------------------------------------------------------------------
Bristol-Myers Squibb 168,800 10,835
- --------------------------------------------------------------------------------
Daiichi Pharmaceutical (JPY) 115,000 1,496
- --------------------------------------------------------------------------------
Eli Lilly 40,000 2,660
- --------------------------------------------------------------------------------
Gehe (EUR) 13,550 525
- --------------------------------------------------------------------------------
Glaxo Wellcome ADR 30,400 1,699
- --------------------------------------------------------------------------------
Johnson & Johnson 51,900 4,833
- --------------------------------------------------------------------------------
Merck 175,800 11,790
- --------------------------------------------------------------------------------
Novartis (CHF) 1,626 2,387
- --------------------------------------------------------------------------------
Pfizer 295,200 9,575
- --------------------------------------------------------------------------------
Pharmacia & Upjohn 80,000 $ 3,600
- --------------------------------------------------------------------------------
Schering-Plough 72,600 3,063
- --------------------------------------------------------------------------------
SmithKline Beecham ADR 124,800 8,042
- --------------------------------------------------------------------------------
Takeda Chemical Industries (JPY) 84,000 4,152
- --------------------------------------------------------------------------------
Warner-Lambert 129,000 10,570
- --------------------------------------------------------------------------------
86,038
----------
BIOTECHNOLOGY 0.0%
- -------------------
Covance * 7,500 81
- --------------------------------------------------------------------------------
81
----------
HEALTH CARE SERVICES 0.5%
- --------------------------
Aetna 52,695 2,941
- --------------------------------------------------------------------------------
Altana (EUR) 12,000 804
- --------------------------------------------------------------------------------
<PAGE>
CIGNA 8,700 701
- --------------------------------------------------------------------------------
IMS Health 28,200 767
- --------------------------------------------------------------------------------
Olsten 4,118 46
- --------------------------------------------------------------------------------
United HealthCare 70,600 3,751
- --------------------------------------------------------------------------------
9,010
----------
MISCELLANEOUS CONSUMER PRODUCTS 1.7%
- -------------------------------------
Arctic Cat 2,550 25
- --------------------------------------------------------------------------------
Benetton Group (EUR) 446,200 1,025
- --------------------------------------------------------------------------------
Bridgestone (JPY) 69,000 1,520
- --------------------------------------------------------------------------------
Burlington Industries * 17,700 71
- --------------------------------------------------------------------------------
Colgate-Palmolive 120,400 7,826
- --------------------------------------------------------------------------------
Fortune Brands 40,000 1,322
- --------------------------------------------------------------------------------
Hasbro 112,500 2,145
- --------------------------------------------------------------------------------
Huhtamaki (EUR) 10,000 338
- --------------------------------------------------------------------------------
Imperial Tobacco Group ADR 15,750 249
- --------------------------------------------------------------------------------
Jones Apparel Group * 67,200 1,823
- --------------------------------------------------------------------------------
Koninklijke Philips Electronics * 28,704 3,875
- --------------------------------------------------------------------------------
Kuraray (JPY) 148,000 1,499
- --------------------------------------------------------------------------------
Lion Nathan (NZD) 175,000 407
- --------------------------------------------------------------------------------
Liz Claiborne 1,700 64
- --------------------------------------------------------------------------------
Mattel 20,000 263
- --------------------------------------------------------------------------------
NIKE (Class B) 900 45
- --------------------------------------------------------------------------------
Pactiv * 200 2
- --------------------------------------------------------------------------------
Philip Morris 10,800 250
- --------------------------------------------------------------------------------
PPG Industries 2,400 150
- --------------------------------------------------------------------------------
<PAGE>
Procter & Gamble 98,800 10,825
- --------------------------------------------------------------------------------
Service Corp. International * 74,600 $ 518
- --------------------------------------------------------------------------------
Takkt (EUR) * 13,550 89
- --------------------------------------------------------------------------------
Textron 2,000 153
- --------------------------------------------------------------------------------
Tomkins (GBP) 300,000 969
- --------------------------------------------------------------------------------
Tomkins ADR 3,720 55
- --------------------------------------------------------------------------------
UST 2,000 50
- --------------------------------------------------------------------------------
Yue Yuen Industrial (HKD) 127,000 302
- --------------------------------------------------------------------------------
35,860
----------
Total Consumer Nondurables 214,386
- --------------------------------------------------------------------------------
CONSUMER=SERVICES==7.6%=========================================================
RESTAURANTS 0.0%
- -----------------
Applebee's 10,600 313
- --------------------------------------------------------------------------------
Darden Restaurants 6,300 114
- --------------------------------------------------------------------------------
Tricon Global Restaurants * 15,040 581
- --------------------------------------------------------------------------------
1,008
----------
GENERAL MERCHANDISERS 2.2%
- ---------------------------
Costco Wholesale * 103,400 9,432
- --------------------------------------------------------------------------------
Dayton Hudson 122,200 8,974
- --------------------------------------------------------------------------------
Hussmann 550 8
- --------------------------------------------------------------------------------
J.C. Penney 44,000 877
- --------------------------------------------------------------------------------
JUSCO (JPY) 67,000 1,168
- --------------------------------------------------------------------------------
Marui (JPY) 53,000 792
- --------------------------------------------------------------------------------
May Department Stores 77,100 2,486
- --------------------------------------------------------------------------------
Pinault Printemps Redoute (EUR) 10,000 2,639
<PAGE>
- --------------------------------------------------------------------------------
Sears 40,000 1,218
- --------------------------------------------------------------------------------
Tesco (GBP) 606,429 1,842
- --------------------------------------------------------------------------------
TJX 176,000 3,597
- --------------------------------------------------------------------------------
Wal-Mart 180,000 12,442
- --------------------------------------------------------------------------------
Warnaco Group (Class A) 46,100 568
- --------------------------------------------------------------------------------
46,043
----------
SPECIALTY MERCHANDISERS 2.1%
- -----------------------------
Callaway Golf 13,000 230
- --------------------------------------------------------------------------------
Christian Dior (EUR) 7,000 1,735
- --------------------------------------------------------------------------------
Circuit City Stores 171,800 7,742
- --------------------------------------------------------------------------------
CVS 50,000 1,997
- --------------------------------------------------------------------------------
Federated Department Stores * 1,800 91
- --------------------------------------------------------------------------------
Gymboree * 8,400 $ 48
- --------------------------------------------------------------------------------
Heilig-Meyers 4,500 12
- --------------------------------------------------------------------------------
Home Depot 90,300 6,191
- --------------------------------------------------------------------------------
Kohl's * 37,200 2,685
- --------------------------------------------------------------------------------
Kroger * 200,000 3,775
- --------------------------------------------------------------------------------
Office Depot * 48,000 525
- --------------------------------------------------------------------------------
Omron (JPY) 68,000 1,567
- --------------------------------------------------------------------------------
Payless Shoesource * 8,224 386
- --------------------------------------------------------------------------------
Petrie Stores Liquidation Trust * 33,500 84
- --------------------------------------------------------------------------------
Safeway * 55,200 1,963
- --------------------------------------------------------------------------------
Staples * 53,155 1,100
- --------------------------------------------------------------------------------
The Gap 267,300 12,296
- --------------------------------------------------------------------------------
Toys "R" Us * 63,300 906
- --------------------------------------------------------------------------------
43,333
----------
<PAGE>
ENTERTAINMENT AND LEISURE 1.0%
- -------------------------------
Ascent Entertainment * 2,395 30
- --------------------------------------------------------------------------------
Brinker * 8,775 210
- --------------------------------------------------------------------------------
Buffets * 2,400 24
- --------------------------------------------------------------------------------
Disney 150,417 4,400
- --------------------------------------------------------------------------------
Hilton Hotels 2,300 22
- --------------------------------------------------------------------------------
Hutchison Whampoa (HKD) 390,000 5,669
- --------------------------------------------------------------------------------
International Game Technology * 9,000 183
- --------------------------------------------------------------------------------
McDonald's * 60,000 2,419
- --------------------------------------------------------------------------------
MediaOne * 50,000 3,840
- --------------------------------------------------------------------------------
Park Place Entertainment * 2,300 29
- --------------------------------------------------------------------------------
Reader's Digest (Class A) 35,000 1,024
- --------------------------------------------------------------------------------
Sharp (JPY) 72,000 1,843
- --------------------------------------------------------------------------------
Viacom (Class A) * 9,000 544
- --------------------------------------------------------------------------------
20,237
----------
MEDIA AND COMMUNICATIONS 2.3%
- ------------------------------
A. H. Belo (Class A) 13,600 259
- --------------------------------------------------------------------------------
A.C. Nielson * 4,700 116
- --------------------------------------------------------------------------------
Asatsu (JPY) 54,000 3,647
- --------------------------------------------------------------------------------
AT & T Canada * 1,714 62
- --------------------------------------------------------------------------------
Banta 13,500 305
- --------------------------------------------------------------------------------
CBS * 91,793 5,869
- --------------------------------------------------------------------------------
Clear Channel Communications * 20,000 1,785
- --------------------------------------------------------------------------------
Comcast (Class A Special) 80,000 4,042
- --------------------------------------------------------------------------------
Dun & Bradstreet 14,100 $ 416
- --------------------------------------------------------------------------------
<PAGE>
Elsevier (EUR) 50,000 597
- --------------------------------------------------------------------------------
France Telecom ADR 45,000 6,007
- --------------------------------------------------------------------------------
Gannett 27,600 2,251
- --------------------------------------------------------------------------------
Gaylord Entertainment 3,528 106
- --------------------------------------------------------------------------------
McGraw-Hill 64,400 3,969
- --------------------------------------------------------------------------------
NTL * 14,998 1,869
- --------------------------------------------------------------------------------
R.H. Donnelley * 2,820 53
- --------------------------------------------------------------------------------
Time Warner 122,700 8,888
- --------------------------------------------------------------------------------
Tribune 40,000 2,203
- --------------------------------------------------------------------------------
Vodafone Airtouch ADR 100,000 4,950
- --------------------------------------------------------------------------------
47,394
----------
Total Consumer Services 158,015
- --------------------------------------------------------------------------------
CONSUMER=CYCLICALS==2.5%========================================================
AUTOMOBILES AND RELATED 1.1%
- -----------------------------
Autoliv 21,653 633
- --------------------------------------------------------------------------------
Cycle & Carriage (SGD) 50,000 155
- --------------------------------------------------------------------------------
Daimler Chrysler 15,000 1,174
- --------------------------------------------------------------------------------
Dana 1,300 39
- --------------------------------------------------------------------------------
Delphi Automotive Systems 59,968 944
- --------------------------------------------------------------------------------
Ford Motor 114,430 6,115
- --------------------------------------------------------------------------------
Gentex * 36,400 1,015
- --------------------------------------------------------------------------------
Genuine Parts 81,975 2,034
- --------------------------------------------------------------------------------
GM 85,800 6,237
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber 300 8
- --------------------------------------------------------------------------------
Honda ADR 30,100 2,303
- --------------------------------------------------------------------------------
MIDAS 183 4
- --------------------------------------------------------------------------------
Pep Boys 7,100 65
- --------------------------------------------------------------------------------
Superior Industries 8,000 214
- --------------------------------------------------------------------------------
TRW 30,000 1,558
- --------------------------------------------------------------------------------
22,498
----------
BUILDING AND REAL ESTATE 0.3%
- ------------------------------
Cheung Kong Holdings (HKD) 283,000 3,586
- --------------------------------------------------------------------------------
City Developments (SGD) 50,000 293
- --------------------------------------------------------------------------------
DBS Land (SGD) 600,000 1,181
- --------------------------------------------------------------------------------
Interstate Hotels * 5,000 16
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, REIT 1,561 $ 37
- --------------------------------------------------------------------------------
Texas Industries 9,400 400
- --------------------------------------------------------------------------------
USG 14,600 688
- --------------------------------------------------------------------------------
Wyndham International (Class A) * 150,001 441
- --------------------------------------------------------------------------------
6,642
----------
MISCELLANEOUS CONSUMER DURABLES 1.1%
- -------------------------------------
B. F. Goodrich 16,744 461
- --------------------------------------------------------------------------------
Black & Decker 36,000 1,881
- --------------------------------------------------------------------------------
Corning 30,000 3,868
- --------------------------------------------------------------------------------
Eastman Kodak 22,600 1,497
- --------------------------------------------------------------------------------
Harley-Davidson 7,600 487
- --------------------------------------------------------------------------------
Imation * 1,800 60
- --------------------------------------------------------------------------------
Masco 99,800 2,532
- --------------------------------------------------------------------------------
Ricoh (JPY) 100,000 1,885
- --------------------------------------------------------------------------------
Scotts (Class A) * 10,000 403
- --------------------------------------------------------------------------------
Sony (JPY) 16,000 4,745
- --------------------------------------------------------------------------------
Tandy 80,000 3,935
- --------------------------------------------------------------------------------
Valspar 36,200 1,516
- --------------------------------------------------------------------------------
York International 2,600 71
- --------------------------------------------------------------------------------
23,341
----------
<PAGE>
Total Consumer Cyclicals 52,481
- --------------------------------------------------------------------------------
TECHNOLOGY==9.7%================================================================
ELECTRONIC COMPONENTS 3.4%
- ---------------------------
Altera * 76,000 3,767
- --------------------------------------------------------------------------------
Analog Devices * 126,800 11,792
- --------------------------------------------------------------------------------
EMC * 98,600 10,772
- --------------------------------------------------------------------------------
Intel 228,000 18,760
- --------------------------------------------------------------------------------
Linear Technology 91,600 6,555
- --------------------------------------------------------------------------------
Maxim Integrated Products * 100,000 4,716
- --------------------------------------------------------------------------------
Molex 15,257 864
- --------------------------------------------------------------------------------
Motorola 40,000 5,890
- --------------------------------------------------------------------------------
Texas Instruments 50,000 4,844
- --------------------------------------------------------------------------------
Thermo Electron * 9,787 147
- --------------------------------------------------------------------------------
Thermo Instrument Systems * 10,195 113
- --------------------------------------------------------------------------------
Vicor * 12,000 489
- --------------------------------------------------------------------------------
Xilinx * 50,400 2,292
- --------------------------------------------------------------------------------
71,001
----------
ELECTRONIC SYSTEMS 1.3%
- ------------------------
Applied Materials * 40,000 $ 5,066
- --------------------------------------------------------------------------------
Hewlett-Packard 128,300 14,618
- --------------------------------------------------------------------------------
KLA-Tencor * 60,000 6,681
- --------------------------------------------------------------------------------
Solectron * 19,200 1,826
- --------------------------------------------------------------------------------
28,191
----------
<PAGE>
INFORMATION PROCESSING 0.8%
- ----------------------------
Adaptec * 14,000 698
- --------------------------------------------------------------------------------
Choicepoint * 3,560 147
- --------------------------------------------------------------------------------
COMPAQ Computer 254,000 6,874
- --------------------------------------------------------------------------------
Dell Computer * 9,600 489
- --------------------------------------------------------------------------------
Hitachi ADR 15,200 2,461
- --------------------------------------------------------------------------------
IBM 46,800 5,055
- --------------------------------------------------------------------------------
Storage Technology * 10,000 184
- --------------------------------------------------------------------------------
15,908
----------
OFFICE AUTOMATION 0.0%
- -----------------------
Pitney Bowes 5,200 251
- --------------------------------------------------------------------------------
Xerox 4,600 105
- --------------------------------------------------------------------------------
356
----------
SPECIALIZED COMPUTER 0.7%
- --------------------------
Silicon Graphics * 14,700 144
- --------------------------------------------------------------------------------
Sun Microsystems * 174,200 13,484
- --------------------------------------------------------------------------------
13,628
----------
TELECOMMUNICATIONS 2.6%
- ------------------------
Cox Communications (Class A) * 100,000 5,150
- --------------------------------------------------------------------------------
LM Ericsson (Class B) ADR 108,000 7,091
- --------------------------------------------------------------------------------
Lucent Technologies 277,239 20,741
- --------------------------------------------------------------------------------
MCI WorldCom * 245,637 13,026
- --------------------------------------------------------------------------------
Nortel Networks 8,612 870
- --------------------------------------------------------------------------------
PictureTel * 8,800 38
- --------------------------------------------------------------------------------
Sprint PCS * 50,450 5,171
- --------------------------------------------------------------------------------
Tellabs * 46,400 2,977
- --------------------------------------------------------------------------------
55,064
----------
<PAGE>
AEROSPACE AND DEFENSE 0.9%
- ---------------------------
Boeing 86,000 3,574
- --------------------------------------------------------------------------------
Honeywell International 159,500 9,201
- --------------------------------------------------------------------------------
Lockheed Martin 83,600 1,829
- --------------------------------------------------------------------------------
Northrop 30,000 1,622
- --------------------------------------------------------------------------------
Raytheon (Class A) 2,142 $ 53
- --------------------------------------------------------------------------------
Raytheon (Class B) 500 13
- --------------------------------------------------------------------------------
Trinity Industries 300 9
- --------------------------------------------------------------------------------
United Technologies 48,400 3,146
- --------------------------------------------------------------------------------
19,447
----------
Total Technology 203,595
- --------------------------------------------------------------------------------
CAPITAL=EQUIPMENT==4.0%=========================================================
ELECTRICAL EQUIPMENT 3.2%
- --------------------------
ABB (CHF) 12,562 1,536
- --------------------------------------------------------------------------------
American Power Conversion * 20,600 543
- --------------------------------------------------------------------------------
Canon (JPY) 55,000 2,186
- --------------------------------------------------------------------------------
Emerson Electric 56,200 3,224
- --------------------------------------------------------------------------------
GE 255,500 39,539
- --------------------------------------------------------------------------------
Hubbell (Class A) 8,000 225
- --------------------------------------------------------------------------------
Hubbell (Class B) 80,252 2,187
- --------------------------------------------------------------------------------
Matsushita Electric Industrial (JPY) 100,000 2,770
- --------------------------------------------------------------------------------
Matsushita Electric Works (JPY) 100,000 988
- --------------------------------------------------------------------------------
Mitsubishi Electric (JPY) 190,000 1,227
- --------------------------------------------------------------------------------
Tyco International 300,964 11,700
- --------------------------------------------------------------------------------
66,125
----------
<PAGE>
MACHINERY 0.8%
- ---------------
Caterpillar 50,000 2,353
- --------------------------------------------------------------------------------
Cooper Industries 600 24
- --------------------------------------------------------------------------------
Danaher 65,600 3,165
- --------------------------------------------------------------------------------
Deere 118,000 5,118
- --------------------------------------------------------------------------------
Dover 2,400 109
- --------------------------------------------------------------------------------
FMC * 42,000 2,407
- --------------------------------------------------------------------------------
Foster Wheeler 4,600 41
- --------------------------------------------------------------------------------
GKN (GBP) 90,000 1,402
- --------------------------------------------------------------------------------
Ingersoll-Rand 1,500 83
- --------------------------------------------------------------------------------
Kennametal 11,400 383
- --------------------------------------------------------------------------------
S I G Schweis (CHF) 2,080 1,241
- --------------------------------------------------------------------------------
Stewart & Stevenson 6,300 75
- --------------------------------------------------------------------------------
Teleflex 10,000 313
- --------------------------------------------------------------------------------
16,714
----------
Total Capital Equipment 82,839
- --------------------------------------------------------------------------------
BUSINESS=SERVICES=AND=TRANSPORTATION==5.2%======================================
COMPUTER SERVICE AND SOFTWARE 3.7%
- -----------------------------------
Automatic Data Processing 70,000 $ 3,771
- --------------------------------------------------------------------------------
BMC Software * 80,000 6,393
- --------------------------------------------------------------------------------
CBT Group ADR * 29,400 987
- --------------------------------------------------------------------------------
Computer Associates 112,587 7,874
- --------------------------------------------------------------------------------
Electronic Arts * 7,500 631
- --------------------------------------------------------------------------------
Electronic Data Systems 44,223 2,960
- --------------------------------------------------------------------------------
First Data 80,000 3,945
- --------------------------------------------------------------------------------
General Instrument * 1,400 119
- --------------------------------------------------------------------------------
<PAGE>
Intuit * 150,000 8,986
- --------------------------------------------------------------------------------
Micro Warehouse * 5,600 103
- --------------------------------------------------------------------------------
NCR * 6,718 254
- --------------------------------------------------------------------------------
Novell * 45,600 1,820
- --------------------------------------------------------------------------------
Oracle * 213,000 23,863
- --------------------------------------------------------------------------------
Parametric Technology * 262,000 7,082
- --------------------------------------------------------------------------------
SunGard Data Systems * 26,400 627
- --------------------------------------------------------------------------------
Sybase * 7,000 119
- --------------------------------------------------------------------------------
Synopsys * 95,600 6,366
- --------------------------------------------------------------------------------
Zixit * 3,625 143
- --------------------------------------------------------------------------------
76,043
----------
DISTRIBUTION SERVICES 0.1%
- ---------------------------
Cardinal Health 57,939 2,774
- --------------------------------------------------------------------------------
2,774
----------
ENVIRONMENTAL 0.0%
- -------------------
Allied Waste * 63,000 555
- --------------------------------------------------------------------------------
555
----------
TRANSPORTATION SERVICES 0.1%
- -----------------------------
Landstar Systems * 40,000 1,679
- --------------------------------------------------------------------------------
Mitsubishi Heavy Industries (JPY) 159,000 530
- --------------------------------------------------------------------------------
2,209
----------
MISCELLANEOUS BUSINESS SERVICES 0.8%
- -------------------------------------
British Airport Authorities (GBP) 108,371 756
- --------------------------------------------------------------------------------
Cendant * 79,010 2,099
- --------------------------------------------------------------------------------
Cintas 7,200 382
- --------------------------------------------------------------------------------
<PAGE>
Equifax 17,800 420
- --------------------------------------------------------------------------------
General Semiconductor * 350 $ 5
- --------------------------------------------------------------------------------
GTECH * 4,500 99
- --------------------------------------------------------------------------------
H&R Block 30,900 1,352
- --------------------------------------------------------------------------------
Manpower 12,200 459
- --------------------------------------------------------------------------------
Omnicom 26,800 2,680
- --------------------------------------------------------------------------------
Paychex 63,027 2,519
- --------------------------------------------------------------------------------
United Parcel Service 75,000 5,175
- --------------------------------------------------------------------------------
Waste Management 28,395 488
- --------------------------------------------------------------------------------
16,434
----------
AIRLINES 0.3%
- --------------
AMR * 40,000 2,680
- --------------------------------------------------------------------------------
KLM (EUR) * 17,250 443
- --------------------------------------------------------------------------------
Mesa Air Group * 17,300 85
- --------------------------------------------------------------------------------
Northwest Airlines * 300 7
- --------------------------------------------------------------------------------
Singapore Airlines (SGD) 40,000 454
- --------------------------------------------------------------------------------
UAL * 30,000 2,327
- --------------------------------------------------------------------------------
5,996
----------
RAILROADS 0.2%
- ---------------
Burlington Northern Santa Fe 75,300 1,826
- --------------------------------------------------------------------------------
Canadian National Railway 326 8
- --------------------------------------------------------------------------------
CSX 22,500 706
- --------------------------------------------------------------------------------
Norfolk Southern 63,200 1,296
- --------------------------------------------------------------------------------
Union Pacific 14,000 611
- --------------------------------------------------------------------------------
Wisconsin Central Transport * 20,400 274
- --------------------------------------------------------------------------------
4,721
----------
Total Business Services and Transportation 108,732
- --------------------------------------------------------------------------------
<PAGE>
ENERGY==4.5%====================================================================
ENERGY SERVICES 1.0%
- ---------------------
BJ Services * 188,200 7,869
- --------------------------------------------------------------------------------
Friede Goldman Halter * 88 1
- --------------------------------------------------------------------------------
Halliburton * 52,742 2,123
- --------------------------------------------------------------------------------
Helmerich & Payne 40,000 873
- --------------------------------------------------------------------------------
Johnson Electric (HKD) 247,200 1,587
- --------------------------------------------------------------------------------
Schlumberger 60,200 3,386
- --------------------------------------------------------------------------------
Smith International * 18,300 909
- --------------------------------------------------------------------------------
Tokyo Electric Power (JPY) 80,000 2,145
- --------------------------------------------------------------------------------
TOTAL ADR 18,000 $ 1,246
- --------------------------------------------------------------------------------
Transocean Sedco Forex 11,654 393
- --------------------------------------------------------------------------------
20,532
----------
EXPLORATION AND PRODUCTION 0.1%
- --------------------------------
Anadarko Petroleum 3,600 123
- --------------------------------------------------------------------------------
EEX * 7,147 21
- --------------------------------------------------------------------------------
Santa Fe Snyder * 13,900 111
- --------------------------------------------------------------------------------
Santos (AUD) 200,000 545
- --------------------------------------------------------------------------------
Ultramar Diamond Shamrock 9,100 206
- --------------------------------------------------------------------------------
Union Pacific Resources 11,857 151
- --------------------------------------------------------------------------------
Unocal * 4,400 148
- --------------------------------------------------------------------------------
1,305
----------
GAS & GAS TRANSMISSION 0.3%
- ----------------------------
El Paso Energy 47,766 1,854
- --------------------------------------------------------------------------------
Enron 100,000 4,438
- --------------------------------------------------------------------------------
Tenneco Automotive 40 0
- --------------------------------------------------------------------------------
6,292
----------
<PAGE>
INTEGRATED PETROLEUM - DOMESTIC 1.0%
- -------------------------------------
Amerada Hess 137,700 7,815
- --------------------------------------------------------------------------------
Atlantic Richfield 64,600 5,588
- --------------------------------------------------------------------------------
Conoco (Class B) 73,705 1,833
- --------------------------------------------------------------------------------
Kerr-McGee 600 37
- --------------------------------------------------------------------------------
Phillips Petroleum 48,300 2,270
- --------------------------------------------------------------------------------
USX-Marathon 140,000 3,456
- --------------------------------------------------------------------------------
20,999
----------
INTEGRATED PETROLEUM - INTERNATIONAL 2.1%
- ------------------------------------------
BP Amoco ADR * 158,258 9,387
- --------------------------------------------------------------------------------
Chevron 41,400 3,586
- --------------------------------------------------------------------------------
ENI SPA ADR 26,600 1,466
- --------------------------------------------------------------------------------
Exxon Mobil 204,963 16,512
- --------------------------------------------------------------------------------
Repsol ADR 72,000 1,674
- --------------------------------------------------------------------------------
Royal Dutch Petroleum ADR 70,000 4,231
- --------------------------------------------------------------------------------
Shell Transport & Trading ADR 36,300 1,788
- --------------------------------------------------------------------------------
Texaco 80,727 4,385
- --------------------------------------------------------------------------------
Total Fina (Class B) (EUR) 13,148 1,755
- --------------------------------------------------------------------------------
44,784
----------
Total Energy 93,912
- --------------------------------------------------------------------------------
PROCESS=INDUSTRIES==2.4%========================================================
DIVERSIFIED CHEMICALS 0.7%
- ---------------------------
Dow Chemical 30,000 $ 4,009
- --------------------------------------------------------------------------------
DuPont 112,315 7,399
- --------------------------------------------------------------------------------
Hercules 1,800 50
- --------------------------------------------------------------------------------
Monsanto 92,300 3,288
- --------------------------------------------------------------------------------
14,746
----------
<PAGE>
SPECIALTY CHEMICALS 0.9%
- -------------------------
3M 18,600 1,820
- --------------------------------------------------------------------------------
A. Schulman 26,325 429
- --------------------------------------------------------------------------------
Air Liquide (EUR) 7,762 1,299
- --------------------------------------------------------------------------------
Akzo Nobel (EUR) 28,000 1,405
- --------------------------------------------------------------------------------
BASF (EUR) 36,200 1,867
- --------------------------------------------------------------------------------
Bayer (EUR) 34,600 1,642
- --------------------------------------------------------------------------------
Great Lakes Chemical 25,000 955
- --------------------------------------------------------------------------------
Imperial Chemical ADR 31,000 1,319
- --------------------------------------------------------------------------------
Lyondell Petrochemical 7,100 90
- --------------------------------------------------------------------------------
Octel * 6,250 65
- --------------------------------------------------------------------------------
Pall 8,533 184
- --------------------------------------------------------------------------------
Rohm & Haas 107,417 4,371
- --------------------------------------------------------------------------------
Solutia 18,460 285
- --------------------------------------------------------------------------------
Sumitomo Chemicals (JPY) 175,000 822
- --------------------------------------------------------------------------------
Technip (EUR) 15,000 1,538
- --------------------------------------------------------------------------------
18,091
----------
PAPER AND PAPER PRODUCTS 0.4%
- ------------------------------
Dai Nippon Printing (JPY) 67,000 1,069
- --------------------------------------------------------------------------------
Fort James 87,500 2,395
- --------------------------------------------------------------------------------
Kimberly-Clark 34,400 2,245
- --------------------------------------------------------------------------------
Kimberly-Clark de Mexico (Class A) (MXN) 265,000 1,035
- --------------------------------------------------------------------------------
Mead 30,000 1,303
- --------------------------------------------------------------------------------
Sonoco Products 13,975 318
- --------------------------------------------------------------------------------
Willamette Industries 24,000 1,114
- --------------------------------------------------------------------------------
9,479
---------
<PAGE>
FOREST PRODUCTS 0.3%
- ---------------------
Georgia Pac Timber 19,000 468
- --------------------------------------------------------------------------------
Georgia-Pacific 38,000 1,929
- --------------------------------------------------------------------------------
International Paper 46,000 2,596
- --------------------------------------------------------------------------------
Weyerhaeuser 12,700 $ 912
- --------------------------------------------------------------------------------
5,905
---------
BUILDING & CONSTRUCTION 0.1%
- -----------------------------
Blue Circle Industries (GBP) 136,612 799
- --------------------------------------------------------------------------------
Del Webb * 100 2
- --------------------------------------------------------------------------------
Grupo Dragados (EUR) 16,200 143
- --------------------------------------------------------------------------------
Hanson ADR 7,875 318
- --------------------------------------------------------------------------------
Holderbank Financiere Glarus (CHF) 1,210 1,657
- --------------------------------------------------------------------------------
2,919
---------
Total Process Industries 51,140
- --------------------------------------------------------------------------------
BASIC=MATERIALS==1.1%===========================================================
METALS 0.9%
- ------------
Alcoa 60,000 4,980
- --------------------------------------------------------------------------------
Anglo American Platinum (ZAR) 85,000 2,582
- --------------------------------------------------------------------------------
Inco * 200,000 4,700
- --------------------------------------------------------------------------------
Nucor 52,000 2,850
- --------------------------------------------------------------------------------
Reynolds Metals 38,000 2,912
- --------------------------------------------------------------------------------
18,024
---------
MINING 0.1%
- ------------
Lonrho Africa (GBP) 44,911 23
- --------------------------------------------------------------------------------
Newmont Mining 60,000 1,470
- --------------------------------------------------------------------------------
Rio Tinto (AUD) 40,000 860
- --------------------------------------------------------------------------------
2,353
---------
<PAGE>
MISCELLANEOUS MATERIALS 0.1%
- -----------------------------
Crown Cork & Seal 1,400 31
- --------------------------------------------------------------------------------
Malayan Cement (MYR) 187,200 55
- --------------------------------------------------------------------------------
Owens-Illinois * 78,500 1,967
- --------------------------------------------------------------------------------
Williams Companies 5,661 173
- --------------------------------------------------------------------------------
2,226
---------
Total Basic Materials 22,603
- --------------------------------------------------------------------------------
MISCELLANEOUS==0.0%=============================================================
CONGLOMERATES 0.0%
- -------------------
Berkshire Hathaway (Class B) * 136 249
- --------------------------------------------------------------------------------
Orkla (Class A) (NOK) 34,285 591
- --------------------------------------------------------------------------------
Total Miscellaneous 840
---------
FOREIGN==0.5%===================================================================
EUROPE 0.2%
- ------------
AXA Colonia Konzern (EUR) 6,000 $ 574
- --------------------------------------------------------------------------------
CSM (EUR) 34,000 726
- --------------------------------------------------------------------------------
Man (EUR) 35,000 1,299
- --------------------------------------------------------------------------------
Rolls Royce (GBP) 405,590 1,409
- --------------------------------------------------------------------------------
4,008
---------
FAR EAST 0.1%
- --------------
Nippon Express (JPY) 280,000 1,548
- --------------------------------------------------------------------------------
1,548
---------
<PAGE>
OTHER FOREIGN 0.2%
- -------------------
Bobst (CHF) 740 892
- --------------------------------------------------------------------------------
Siemens (EUR) * 16,900 2,162
- --------------------------------------------------------------------------------
Metso OYI * (EUR) 32,000 416
- --------------------------------------------------------------------------------
Companhia Vale do Rio Doce ADR 25,000 692
- --------------------------------------------------------------------------------
4,162
---------
Total Foreign 9,718
- --------------------------------------------------------------------------------
Total Common Stocks (Cost $701,721) 1,329,908
================================================================================
PREFERRED=STOCKS==0.1%==========================================================
CSC Holdings * 11,517 1,258
- --------------------------------------------------------------------------------
Total Preferred Stocks (Cost $1,268) 1,258
================================================================================
CONVERTIBLE=PREFERRED=STOCKS==0.4%==============================================
Prologis Trust (Series B), 7.00% 225,000 5,569
- --------------------------------------------------------------------------------
Reckson Associates Realty, Cv. Pfd., (Series A), 7.625% 200,000 4,000
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $10,073) 9,569
================================================================================
CORPORATE=BONDS==14.7%==========================================================
Abbey National First Capital,
Sub. Notes, 8.20%, 10/15/04 $1,205,000 1,244
- --------------------------------------------------------------------------------
Adelphia Communications, Sr. Notes, 9.875%, 3/1/07 1,000,000 1,015
- --------------------------------------------------------------------------------
African Development Bank,
Sub. Notes, 7.75%, 12/15/01 1,000,000 1,013
- --------------------------------------------------------------------------------
Alaska Communications, 9.375%, 5/15/09 700,000 677
- --------------------------------------------------------------------------------
Allied Holdings, Gtd. Sr. Sub. Notes, 8.625%, 10/1/07 500,000 443
- --------------------------------------------------------------------------------
AMERCO, Sr. Notes, 7.85%, 5/15/03 1,000,000 968
- --------------------------------------------------------------------------------
American Builders & Contractors Supply, Sr. Sub. Notes
10.625%, 5/15/07 $ 500,000 $ 460
- --------------------------------------------------------------------------------
<PAGE>
American Portable Telecom, Gtd. Notes
(144a), Zero Coupon, 11/1/06 3,615,000 2,063
- --------------------------------------------------------------------------------
Ameritech Capital Funding, 6.15%, 1/15/08 2,000,000 1,852
- --------------------------------------------------------------------------------
Amkor Technology, 9.25%, 5/1/06 300,000 297
- --------------------------------------------------------------------------------
Anchor Advanced, Sr. Notes, 11.75%, 4/1/04 1,000,000 850
- --------------------------------------------------------------------------------
Anheuser-Busch
5.75%, 4/1/10 5,000,000 4,400
- --------------------------------------------------------------------------------
6.90%, 10/1/02 2,000,000 1,999
- --------------------------------------------------------------------------------
Applied Extrusion Technology,
Sr. Notes, 11.50%, 4/1/02 1,000,000 1,017
- --------------------------------------------------------------------------------
Associated Materials, Sr. Sub. Notes, 9.25%, 3/1/08 1,250,000 1,202
- --------------------------------------------------------------------------------
Associates, Sr. Notes, 7.50%, 4/15/02 1,300,000 1,313
- --------------------------------------------------------------------------------
AT&T, 6.50%, 3/15/29 4,000,000 3,431
- --------------------------------------------------------------------------------
Atlantic Richfield
8.50%, 4/1/12 4,000,000 4,318
- --------------------------------------------------------------------------------
Deb. Notes, 8.75%, 3/1/32 1,570,000 1,756
- --------------------------------------------------------------------------------
Atlas Air, 7.63%, 1/2/15 3,300,000 2,987
- --------------------------------------------------------------------------------
Aurora Foods, Sr. Sub. Notes, 9.875%, 2/15/07 750,000 759
- --------------------------------------------------------------------------------
Ball, 7.75%, 8/1/06 500,000 488
- --------------------------------------------------------------------------------
Banesto Delaware, Sub. Notes, 8.25%, 7/28/02 2,000,000 2,044
- --------------------------------------------------------------------------------
Bank United, 10.25%, 12/31/26 1,000,000 880
- --------------------------------------------------------------------------------
BankAmerica, Sub. Notes, 6.625%, 8/1/07 3,000,000 2,843
- --------------------------------------------------------------------------------
Baxter International, 7.125%, 2/1/07 1,500,000 1,456
- --------------------------------------------------------------------------------
BB&T, 6.375%, 6/30/05 3,000,000 2,819
- --------------------------------------------------------------------------------
BCH Cayman Islands, Sub. Notes, 7.50%, 6/15/05 1,000,000 989
- --------------------------------------------------------------------------------
BHP Finance, Gtd. Notes, 6.69%, 3/1/06 2,000,000 1,889
- --------------------------------------------------------------------------------
Boeing, 8.75%, 8/15/21 2,000,000 2,198
- --------------------------------------------------------------------------------
<PAGE>
Burlington Northern, PTC, 7.33%, 6/23/10 833,529 817
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe, 7.00%, 12/15/25 2,000,000 1,798
- --------------------------------------------------------------------------------
Bway, Sr. Sub. Notes, 10.25%, 4/15/07 1,050,000 1,029
- --------------------------------------------------------------------------------
Century Telephone Enterprises,
Sr. Notes, 8.25%, 5/1/24 500,000 480
- --------------------------------------------------------------------------------
Chase Manahattan Auto Owner Trust, 5.85%, 5/15/03 4,000,000 3,935
- --------------------------------------------------------------------------------
Chattem, Sr. Sub. Notes, 12.75%, 6/15/04 1,000,000 1,067
- --------------------------------------------------------------------------------
Chemical Master Credit Card Trust I
5.55%, 9/15/03 100,000 99
- --------------------------------------------------------------------------------
6.23%, 4/15/05 110,000 108
- --------------------------------------------------------------------------------
Chrysler Financial, 5.875%, 2/7/01 2,000,000 1,980
- --------------------------------------------------------------------------------
Cinemark USA, Sr. Sub. Notes, 8.50%, 8/1/08 500,000 435
- --------------------------------------------------------------------------------
Citibank Credit Card Master Trust 1,
Zero Coupon, 2/7/03 $ 170,000 $ 158
- --------------------------------------------------------------------------------
Citicorp Mortgage, 6.00%, 3/25/22 1,820 2
- --------------------------------------------------------------------------------
Citizens Utilities, Deb. Notes, 7.00%, 11/1/25 1,500,000 1,368
- --------------------------------------------------------------------------------
Classic Cable, Sr. Sub. Notes, 9.375%, 8/1/09 750,000 731
- --------------------------------------------------------------------------------
Coca Cola Bottling, 7.20%, 7/1/09 5,000,000 4,803
- --------------------------------------------------------------------------------
Coinmach, Sr. Sub. Notes, 11.75%, 11/15/05 500,000 515
- --------------------------------------------------------------------------------
Colt Telecom, Sr. Disc. Notes
STEP, Zero Coupon, 12/15/06 1,250,000 1,091
- --------------------------------------------------------------------------------
Comcast Cable Communications
8.125%, 5/1/04 1,500,000 1,537
- --------------------------------------------------------------------------------
8.375%, 5/1/07 4,500,000 4,663
- --------------------------------------------------------------------------------
Communications & Power,
Sr. Sub. Notes, 12.00%, 8/1/05 750,000 608
- --------------------------------------------------------------------------------
Conoco, 6.95%, 4/15/29 4,000,000 3,604
- --------------------------------------------------------------------------------
Consolidated Container, Sr. Sub. Notes
(144a), 10.125%, 7/15/09 1,000,000 1,017
- --------------------------------------------------------------------------------
<PAGE>
Consumers Energy, 1st Mtg., 7.375%, 9/15/23 3,500,000 3,102
- --------------------------------------------------------------------------------
Continental Airlines, PTC, 7.206%, 6/30/04 435,202 423
- --------------------------------------------------------------------------------
Corestates Home Equity Loan
5.10%, 3/15/09 89,754 88
- --------------------------------------------------------------------------------
6.65%, 5/15/09 121,802 120
- --------------------------------------------------------------------------------
Corporacion Andina De Fomento, 6.75%, 3/15/05 2,500,000 2,364
- --------------------------------------------------------------------------------
Countrywide Funding, MTN, 6.875%, 9/15/05 860,000 828
- --------------------------------------------------------------------------------
Courtyard by Marriott II, Sr. Secured Notes
10.75%, 2/1/08 500,000 491
- --------------------------------------------------------------------------------
Cox Communications, Deb. Notes, 6.375%, 6/15/00 1,500,000 1,500
- --------------------------------------------------------------------------------
CSX, Deb. Notes, 7.45%, 5/1/07 1,000,000 982
- --------------------------------------------------------------------------------
Delta Airlines, Deb. Notes, 8.95%, 1/12/12 1,473,308 1,517
- --------------------------------------------------------------------------------
Deutsche Financial Capital, 6.75%, 9/15/27 1,976,785 1,966
- --------------------------------------------------------------------------------
Dillards, 7.13%, 8/1/18 4,000,000 3,444
- --------------------------------------------------------------------------------
Distribution Financial Services Marine,
6.93%, 9/15/17 6,000,000 5,626
- --------------------------------------------------------------------------------
Doane Pet Care, Sr. Sub. Notes, 9.75%, 5/15/07 1,732,000 1,728
- --------------------------------------------------------------------------------
Duke Energy, 1st Ref. Mtg.
6.75%, 8/1/25 1,000,000 842
- --------------------------------------------------------------------------------
7.50%, 8/1/25 1,000,000 911
- --------------------------------------------------------------------------------
Dyersburg, Sr. Sub. Notes, 9.75%, 9/1/07 500,000 200
- --------------------------------------------------------------------------------
Dyncorp, Sr. Sub. Notes, 9.50%, 3/1/07 900,000 792
- --------------------------------------------------------------------------------
Embotelladora Andina, 7.625%, 10/1/27 2,000,000 1,678
- --------------------------------------------------------------------------------
Energis, 9.75%, 6/15/09 1,000,000 1,037
- --------------------------------------------------------------------------------
Energy Corporation of America, Sr. Sub. Notes
9.50%, 5/15/07 $ 1,000,000 $ 700
- --------------------------------------------------------------------------------
Enron Oil & Gas, 6.50%, 12/1/07 4,000,000 3,687
- --------------------------------------------------------------------------------
Equitable Resources, Deb. Notes, 7.75%, 7/15/26 2,000,000 1,925
- --------------------------------------------------------------------------------
<PAGE>
ERAC USA Finance, 6.75%, 5/15/09 5,000,000 4,579
- --------------------------------------------------------------------------------
Exodus Communications, 10.75%, 12/15/09 550,000 560
- --------------------------------------------------------------------------------
Fairfax Financial Holdings
7.75%, 12/15/03 800,000 767
- --------------------------------------------------------------------------------
8.30%, 4/15/26 2,500,000 2,079
- --------------------------------------------------------------------------------
Federal Express, MTN, 9.95%, 8/15/06 500,000 543
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Assn., 6.45%, 4/29/09 2,000,000 1,865
- --------------------------------------------------------------------------------
First USA Secured Note Trust, 6.50%, 1/18/06 4,000,000 3,865
- --------------------------------------------------------------------------------
Fleet Financial Group, Sub. Notes, 8.625%, 1/15/07 800,000 842
- --------------------------------------------------------------------------------
Food Lion, 8.05%, 4/15/27 1,900,000 1,701
- --------------------------------------------------------------------------------
Ford Capital BV, 9.50%, 6/1/10 4,000,000 4,495
- --------------------------------------------------------------------------------
Ford Motor, Deb. Notes, 7.50%, 8/1/26 2,500,000 2,407
- --------------------------------------------------------------------------------
Ford Motor Credit
6.70%, 7/16/04 2,000,000 1,957
- --------------------------------------------------------------------------------
8.20%, 2/15/02 170,000 174
- --------------------------------------------------------------------------------
Freeport McMoRan Resources,
Sr. Notes, 7.00%, 2/15/08 900,000 812
- --------------------------------------------------------------------------------
Fresenius Med Care Capital Trust II, 7.875%, 2/1/08 1,000,000 930
- --------------------------------------------------------------------------------
Frontier Oil, 11.75%, 11/15/09 500,000 493
- --------------------------------------------------------------------------------
Frontiervision, Sr. Notes, 11.00%, 10/15/06 1,000,000 1,057
- --------------------------------------------------------------------------------
General Motors Acceptance, MTN, 6.75%, 6/17/02 80,000 79
- --------------------------------------------------------------------------------
Global Imaging, 10.75%, 2/15/07 500,000 483
- --------------------------------------------------------------------------------
GM, Deb. Notes, 9.625%, 12/1/00 140,000 144
- --------------------------------------------------------------------------------
GMAC Commercial Mortgage Security, 6.42%, 8/15/08 3,000,000 2,796
- --------------------------------------------------------------------------------
Green Tree Financial, 5.75%, 10/15/18 40,454 40
- --------------------------------------------------------------------------------
Group Maintenance America, Sr. Sub. Notes
9.75%, 1/15/09 1,000,000 995
- --------------------------------------------------------------------------------
GTE Florida, Deb. Notes, 7.41%, 12/15/23 1,000,000 913
- --------------------------------------------------------------------------------
Halliburton, 5.625%, 12/1/08 3,000,000 2,654
- --------------------------------------------------------------------------------
<PAGE>
Harrahs, 7.875%, 12/15/05 1,000,000 977
- --------------------------------------------------------------------------------
Hawk, Sr. Notes, 10.25%, 12/1/03 750,000 728
- --------------------------------------------------------------------------------
Hayes Lemmerz International, 8.25%, 12/15/08 1,000,000 915
- --------------------------------------------------------------------------------
HCC Industries, Sr. Sub. Notes, 10.75%, 5/15/07 675,000 392
- --------------------------------------------------------------------------------
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 1,125,000 1,194
- --------------------------------------------------------------------------------
Hermes Europe Railtel BV, 10.375%, 1/15/09 750,000 741
- --------------------------------------------------------------------------------
Hollywood Park, 9.25%, 2/15/07 700,000 695
- --------------------------------------------------------------------------------
Holmes Products, Gtd. Notes, 9.875%, 11/15/07 $ 450,000 $ 329
- --------------------------------------------------------------------------------
Horseshoe Gaming LLC, 8.625%, 5/15/09 425,000 409
- --------------------------------------------------------------------------------
Host Marriott Travel, Sr. Notes, 9.50%, 5/15/05 1,000,000 1,044
- --------------------------------------------------------------------------------
Houston Lighting & Power, 7.50%, 7/1/23 3,000,000 2,755
- --------------------------------------------------------------------------------
IBM, 6.45%, 8/1/07 1,000,000 957
- --------------------------------------------------------------------------------
Intermedia Communications
Zero Coupon, 3/1/09 1,000,000 600
- --------------------------------------------------------------------------------
Sr. Notes, 8.60%, 6/1/08 500,000 461
- --------------------------------------------------------------------------------
International Bank For Reconstruction & Development
7.625%, 1/19/23 1,800,000 1,882
- --------------------------------------------------------------------------------
International Home Foods, Gtd. Sr. Sub. Notes
10.375%, 11/1/06 1,000,000 1,037
- --------------------------------------------------------------------------------
International Wire, Sr. Sub. Notes, 11.75%, 6/1/05 500,000 516
- --------------------------------------------------------------------------------
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 500,000 460
- --------------------------------------------------------------------------------
Iron Mountain, Sr. Sub. Notes, 8.75%, 9/30/09 500,000 476
- --------------------------------------------------------------------------------
ISG Resources, Sr. Sub. Notes, 10.00%, 4/15/08 500,000 425
- --------------------------------------------------------------------------------
Isle of Capri Casinos,
Sr. Sub. Notes, 8.75%, 4/15/09 1,000,000 927
- --------------------------------------------------------------------------------
ISP Holdings, Sr. Notes, 9.75%, 2/15/02 1,000,000 1,002
- --------------------------------------------------------------------------------
IT Group, 11.25%, 4/1/09 425,000 412
- --------------------------------------------------------------------------------
Jefferson Pilot Capital Trust, (144a) 8.14%, 1/15/46 1,500,000 1,375
- --------------------------------------------------------------------------------
KFW International Finance, MTN, 9.14%, 6/4/01 250,000 258
- --------------------------------------------------------------------------------
<PAGE>
Kimberly-Clark, Deb. Notes, 6.375%, 1/1/28 5,000,000 4,354
- --------------------------------------------------------------------------------
King Pharmaceuticals, 10.75%, 2/15/09 450,000 477
- --------------------------------------------------------------------------------
Koppers, Sr. Sub. Notes, 9.875%, 12/1/07 500,000 460
- --------------------------------------------------------------------------------
Lear, 8.11%, 5/15/09 500,000 472
- --------------------------------------------------------------------------------
Lehman Brothers Sr. Sub. Notes, 6.625%, 2/15/08 1,500,000 1,379
- --------------------------------------------------------------------------------
8.875%, 3/1/02 1,500,000 1,544
- --------------------------------------------------------------------------------
Liberty National Bank & Trust,
Sub. Notes, 6.75%, 6/1/03 500,000 492
- --------------------------------------------------------------------------------
LNR Property, Sr. Sub. Notes, 9.375%, 3/15/08 500,000 470
- --------------------------------------------------------------------------------
Lodgian Financing, 12.25%, 7/15/09 500,000 498
- --------------------------------------------------------------------------------
Loral, Sr. Notes, 7.625%, 6/15/04 1,500,000 1,468
- --------------------------------------------------------------------------------
MCI Worldcom, Sr. Notes, 6.95%, 8/15/28 4,000,000 3,640
- --------------------------------------------------------------------------------
Lyondell Chemical, 10.875%, 5/1/09 500,000 528
- --------------------------------------------------------------------------------
McDonnell Douglas, 8.25%, 7/1/00 500,000 504
- --------------------------------------------------------------------------------
Metromedia Fiber Network, Sr. Notes, 10.00%, 11/15/08 400,000 410
- --------------------------------------------------------------------------------
Mohegan Tribal Gaming Authority, Sr. Notes
8.125%, 1/1/06 1,000,000 972
- --------------------------------------------------------------------------------
Morgan Stanley Group, 6.875%, 3/1/07 4,000,000 3,853
- --------------------------------------------------------------------------------
Mrs. Fields, Gtd. Sr. Sub. Notes, 10.125%, 12/1/04 $ 275,000 $ 223
- --------------------------------------------------------------------------------
Nationsbank Credit Card Master Trust
6.00%, 12/15/05 140,000 135
- --------------------------------------------------------------------------------
New Jersey Bell Telephone,
Deb. Notes, 6.80%, 12/15/24 2,500,000 2,155
- --------------------------------------------------------------------------------
News America Holdings, Gtd. Sr. Deb. Notes
9.25%, 2/1/13 3,090,000 3,356
- --------------------------------------------------------------------------------
Nextel Communications, Sr. Disc. Notes, STEP
0%, 10/31/07 1,000,000 722
- --------------------------------------------------------------------------------
0%, 2/15/08 250,000 178
- --------------------------------------------------------------------------------
Nextlink Communications
STEP, 0%, 6/1/09 500,000 307
- --------------------------------------------------------------------------------
Sr. Notes, 12.50%, 4/15/06 1,000,000 1,070
- --------------------------------------------------------------------------------
<PAGE>
NGC, Sr. Notes, 6.75%, 12/15/05 1,000,000 941
- --------------------------------------------------------------------------------
Niagara Mohawk Power, 7.625%, 10/1/05 1,512,195 1,509
- --------------------------------------------------------------------------------
Norfolk Southern, 7.80%, 5/15/27 4,000,000 3,909
- --------------------------------------------------------------------------------
Northland Cable Television, Sr. Sub. Notes
10.25%, 11/15/07 500,000 501
- --------------------------------------------------------------------------------
Northrop Grumman, Deb. Notes, 7.875%, 3/1/26 2,000,000 1,880
- --------------------------------------------------------------------------------
NTL Communications, Zero Coupon, 10/1/08 750,000 527
- --------------------------------------------------------------------------------
Nuevo Energy, Sr. Sub. Notes, 9.50%, 6/1/08 500,000 493
- --------------------------------------------------------------------------------
NYNEX, Deb. Notes, 9.55%, 5/1/10 1,000,000 1,073
- --------------------------------------------------------------------------------
Octel, Sr. Notes, 10.00%, 5/1/06 800,000 792
- --------------------------------------------------------------------------------
Oracle, Sr. Notes, 6.91%, 2/15/07 3,000,000 2,857
- --------------------------------------------------------------------------------
Orange, Sr. Notes, 9.00%, 6/1/09 1,100,000 1,149
- --------------------------------------------------------------------------------
Orange & Rockland Utilities,
Deb. Notes, 9.375%, 3/15/00 1,500,000 1,509
- --------------------------------------------------------------------------------
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 1,250,000 1,287
- --------------------------------------------------------------------------------
P&L Coal, 8.875%, 5/15/08 300,000 293
- --------------------------------------------------------------------------------
Pacific Bell, Deb. Notes, 7.375%, 7/15/43 4,000,000 3,591
- --------------------------------------------------------------------------------
Packaging Corporation of America, 9.625%, 4/1/09 1,000,000 1,025
- --------------------------------------------------------------------------------
Paine Webber, Sr. Notes, 6.55%, 4/15/08 4,000,000 3,650
- --------------------------------------------------------------------------------
Panamerican Beverages, Sr. Notes, 7.25%, 7/1/09 4,000,000 3,369
- --------------------------------------------------------------------------------
Paragon Corporate Holdings,
Sr. Notes, 9.625%, 4/1/08 500,000 160
- --------------------------------------------------------------------------------
Park Place Entertainment, Sr. Sub. Notes
7.875%, 12/15/05 750,000 714
- --------------------------------------------------------------------------------
PDVSA Finance Limited, 7.40%, 8/15/16 2,000,000 1,472
- --------------------------------------------------------------------------------
Pegasus Communications, Sr. Notes, 9.625%, 10/15/05 1,000,000 1,010
- --------------------------------------------------------------------------------
Philadelphia Electric, 1st Ref. Mtg., 5.625%, 11/1/01 3,000,000 2,933
- --------------------------------------------------------------------------------
Plains Resources, Sr. Sub. Notes, 10.25%, 3/15/06 125,000 122
- --------------------------------------------------------------------------------
Premier Parks Sr. Disc. Notes, STEP, 0%, 4/1/08 $ 1,000,000 $ 690
- --------------------------------------------------------------------------------
Sr. Notes, 9.75%, 6/15/07 500,000 501
- --------------------------------------------------------------------------------
<PAGE>
Price Communications Wireless, 9.125%, 12/15/06 1,000,000 1,020
- --------------------------------------------------------------------------------
Prime Credit Card Master Trust, 6.70%, 7/15/04 140,000 140
- --------------------------------------------------------------------------------
Protection One, Sr. Sub. Notes, (144a),
8.625%, 1/15/09 50,000 28
- --------------------------------------------------------------------------------
Protection One Alarm, Gtd. Sr. Disc. Notes
13.625%, 6/30/05 550,000 347
- --------------------------------------------------------------------------------
Province of Alberta, 9.25%, 4/1/00 1,000,000 1,008
- --------------------------------------------------------------------------------
PSINet, Sr. Notes, 10.00%, 2/15/05 500,000 495
- --------------------------------------------------------------------------------
Quantas Airways
Sr. Notes, 7.50%, 6/30/03 1,000,000 984
- --------------------------------------------------------------------------------
(144a), 7.75%, 6/15/09 4,690,000 4,540
- --------------------------------------------------------------------------------
Quest Diagnostics, Gtd. Sr. Sub. Notes,
10.75%, 12/15/06 500,000 525
- --------------------------------------------------------------------------------
R&B Falcon, 6.75%, 4/15/05 3,000,000 2,670
- --------------------------------------------------------------------------------
Rail Car Trust, 7.75%, 6/1/04 70,831 72
- --------------------------------------------------------------------------------
RBF Finance, 11.00%, 3/15/06 400,000 429
- --------------------------------------------------------------------------------
Repap New Brunswick
Sr. Sec. 1st Priority Notes, 9.00%, 6/1/04 175,000 171
- --------------------------------------------------------------------------------
Sr. Sec. Notes, 11.50%, 6/1/04 525,000 543
- --------------------------------------------------------------------------------
Residential Accredit Loans, 6.75%, 7/25/28 4,000,000 3,916
- --------------------------------------------------------------------------------
RSL Communications, Gtd. Sr. Notes, 9.125%, 3/1/08 500,000 440
- --------------------------------------------------------------------------------
Safelite Glass, 9.875%, 12/15/06 500,000 25
- --------------------------------------------------------------------------------
Santander Financial, Gtd. Sub. Notes,
6.375%, 2/15/11 3,000,000 2,656
- --------------------------------------------------------------------------------
Sears Credit Account Master Trust (Class A)
6.05%, 1/16/08 5,455,000 5,340
- --------------------------------------------------------------------------------
6.45%, 10/16/06 70,000 70
- --------------------------------------------------------------------------------
Security Benefit Life, (144a), 8.75%, 5/15/16 3,000,000 2,804
- --------------------------------------------------------------------------------
Siebe, (144a)
6.50%, 1/15/10 2,000,000 1,789
- --------------------------------------------------------------------------------
7.125%, 1/15/07 1,500,000 1,443
- --------------------------------------------------------------------------------
<PAGE>
Smithfield Foods, Sr. Sub. Notes, 7.625%, 2/15/08 500,000 450
- --------------------------------------------------------------------------------
Sovereign Speciality, Sr. Sub. Notes, 9.50%, 8/1/07 750,000 754
- --------------------------------------------------------------------------------
Speedway Motorsports, 8.50%, 8/15/07 1,000,000 962
- --------------------------------------------------------------------------------
Sun Media, Sr. Sub. Notes
9.50%, 2/15/07 550,000 546
- --------------------------------------------------------------------------------
9.50%, 5/15/07 650,000 645
- --------------------------------------------------------------------------------
Swift Energy, 10.25%, 8/1/09 375,000 381
- --------------------------------------------------------------------------------
Telecorp PCS, Zero Coupon, 4/15/09 500,000 315
- --------------------------------------------------------------------------------
Tenneco Packaging, 7.20%, 12/15/05 $ 1,000,000 $ 949
- --------------------------------------------------------------------------------
The Pantry, Sr. Sub. Notes, 10.25%, 10/15/07 1,000,000 975
- --------------------------------------------------------------------------------
Time Warner
Deb. Notes, 7.48%, 1/15/08 1,400,000 1,377
- --------------------------------------------------------------------------------
9.15%, 2/1/23 5,000,000 5,564
- --------------------------------------------------------------------------------
Transwestern Publishing, 9.625%, 11/15/07 750,000 746
- --------------------------------------------------------------------------------
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 1,437
- --------------------------------------------------------------------------------
Triad Hospitals, 11.00%, 5/15/09 500,000 518
- --------------------------------------------------------------------------------
TRW, MTN, 7.37%, 4/18/07 2,000,000 1,942
- --------------------------------------------------------------------------------
Union Bank Switzerland, Sub. Notes, 7.25%, 7/15/06 1,000,000 988
- --------------------------------------------------------------------------------
United International Holdings, Sr. Disc. Notes, STEP
0%, 2/15/08 1,000,000 640
- --------------------------------------------------------------------------------
Universal Compression, Sr. Disc. Notes, STEP
0%, 2/15/08 500,000 308
- --------------------------------------------------------------------------------
US Can, Sr. Gtd. Notes, 10.125%, 10/15/06 475,000 485
- --------------------------------------------------------------------------------
UtiliCorp United, Sr. Notes, 6.875%, 10/1/04 3,000,000 2,879
- --------------------------------------------------------------------------------
Venture Holdings Trust,
Sr. Sub. Notes, 9.50%, 7/1/05 650,000 592
- --------------------------------------------------------------------------------
Voicestrem Wireless, Zero Coupon, 11/15/09 1,500,000 904
- --------------------------------------------------------------------------------
<PAGE>
Wal-Mart Stores, 6.75%, 5/15/02 1,000,000 998
- --------------------------------------------------------------------------------
Westamerica Bank, Sub. Notes, 6.99%, 9/30/03 1,500,000 1,431
- --------------------------------------------------------------------------------
Westinghouse Air Brake, Sr. Notes, 9.375%, 6/15/05 1,000,000 1,000
- --------------------------------------------------------------------------------
Westpoint Stevens, Sr. Notes, 7.875%, 6/15/08 500,000 448
- --------------------------------------------------------------------------------
Willamette Industries, MTN, 7.85%, 7/1/26 1,000,000 979
- --------------------------------------------------------------------------------
Williams Communications Group, Sr. Notes
10.875%, 10/1/09 400,000 419
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $326,017) 305,369
================================================================================
U.S.=GOVERNMENT=MORTGAGE=BACKED=SECURITIES==6.6%================================
LB Commercial Conduit Mortgage Trust
6.78%, 4/15/09 3,500,000 3,330
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Assn.
8.00%, 3/1/17 11,697 12
- --------------------------------------------------------------------------------
10.00%, 10/1/10 23,003 24
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
6.00%, 10/25/08 3,835,000 3,606
- --------------------------------------------------------------------------------
7.00%, 8/17/10 - 4/1/26 8,049,030 7,708
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
7.50%, 7/1 - 11/1/29 $ 20,479,925 $ 20,249
- --------------------------------------------------------------------------------
REMIC, 6.50%, 7/25/08 496,827 479
- --------------------------------------------------------------------------------
Government National Mortgage Assn.
I
6.00%, 1/15 - 5/15/24 2,024,938 1,864
- --------------------------------------------------------------------------------
6.50%, 9/15/23 - 5/15/29 14,988,573 14,129
- --------------------------------------------------------------------------------
7.00%, 10/15/22 - 5/15/29 24,106,883 23,344
- --------------------------------------------------------------------------------
7.50%, 9/15/22 - 8/15/29 40,806,504 40,424
- --------------------------------------------------------------------------------
8.00%, 6/15/17 - 11/15/28 13,590,102 13,785
- --------------------------------------------------------------------------------
8.50%, 3/15/05 - 2/15/25 1,985,945 2,052
- --------------------------------------------------------------------------------
9.00%, 7/15/18 - 6/15/21 67,900 72
- --------------------------------------------------------------------------------
9.50%, 8/15/09 - 9/15/21 515,543 551
- --------------------------------------------------------------------------------
<PAGE>
10.00%, 11/15/09 - 5/15/13 24,390 28
- --------------------------------------------------------------------------------
10.50%, 5/15/15 11,270 12
- --------------------------------------------------------------------------------
11.00%, 3/15/10 - 1/15/20 578,417 637
- --------------------------------------------------------------------------------
11.50%, 3/15/10 - 3/15/16 916,506 1,022
- --------------------------------------------------------------------------------
PL, 8.875%, 2/15/30 670,923 676
- --------------------------------------------------------------------------------
II
8.50%, 6/20/25 - 6/20/26 2,470,251 2,529
- --------------------------------------------------------------------------------
9.00%, 7/20/16 - 6/20/20 293,549 306
- --------------------------------------------------------------------------------
9.50%, 8/20/22 48,953 52
- --------------------------------------------------------------------------------
10.00%, 10/20/16 - 1/20/22 61,919 66
- --------------------------------------------------------------------------------
ARM, 6.75%, 8/20/23 109,789 111
- --------------------------------------------------------------------------------
U.S. Department of Veteran Affairs
1.00%, 3/15/25 592,877 625
- --------------------------------------------------------------------------------
Total=U.S.=Government=Mortgage-Backed Securities (Cost $141,817) 137,693
================================================================================
U.S.=GOVERNMENT=OBLIGATIONS/AGENCIES==13.9%=====================================
Federal Home Loan Banks
6.34%, 10/19/05 4,875,000 4,740
- --------------------------------------------------------------------------------
6.425%, 8/14/02 6,450,000 6,358
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
5.80%, 12/10/03 13,000,000 12,541
- --------------------------------------------------------------------------------
6.47%, 9/25/12 3,000,000 2,805
- --------------------------------------------------------------------------------
7.50%, 6/1 - 8/1/29 4,843,874 4,789
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.
MTN
6.34%, 2/4/08 $ 10,000,000 $ 9,334
- --------------------------------------------------------------------------------
6.36%, 8/16/00 270,000 270
- --------------------------------------------------------------------------------
Tennessee Valley Auth.
8.25%, 9/15/34 435,000 435
- --------------------------------------------------------------------------------
<PAGE>
U.S. Treasury Bonds
6.50%, 11/15/26 20,750,000 20,215
- --------------------------------------------------------------------------------
6.75%, 8/15/26 6,000,000 6,025
- --------------------------------------------------------------------------------
7.125%, 2/15/23 15,500,000 16,134
- --------------------------------------------------------------------------------
7.25%, 5/15/16 10,000,000 10,442
- --------------------------------------------------------------------------------
8.125%, 8/15/19 - 8/15/21 3,650,000 4,181
- --------------------------------------------------------------------------------
8.75%, 5/15/20 1,000,000 1,209
- --------------------------------------------------------------------------------
9.25%, 2/15/16 3,000,000 3,701
- --------------------------------------------------------------------------------
11.625%, 11/15/04 20,000 24
- --------------------------------------------------------------------------------
11.75%, 2/15/01 200,000 212
- --------------------------------------------------------------------------------
13.125%, 5/15/01 200,000 218
- --------------------------------------------------------------------------------
13.875%, 5/15/11 190,000 259
- --------------------------------------------------------------------------------
U.S. Treasury Inflation-Indexed Notes
3.375%, 1/15/07 2,123,140 1,993
- --------------------------------------------------------------------------------
3.625%, 7/15/02 2,100,340 2,076
- --------------------------------------------------------------------------------
U.S. Treasury Notes
5.25%, 1/31/01 5,000,000 4,957
- --------------------------------------------------------------------------------
5.625%, 2/15/06 - 5/15/08 16,650,000 15,818
- --------------------------------------------------------------------------------
5.75%, 6/30/01 37,000,000 36,765
- --------------------------------------------------------------------------------
6.125%, 9/30/00 790,000 790
- --------------------------------------------------------------------------------
6.25%, 2/15/03 20,500,000 20,440
- --------------------------------------------------------------------------------
6.50%, 5/31/02 - 8/15/05 58,500,000 58,645
- --------------------------------------------------------------------------------
6.875%, 5/15/06 2,000,000 2,036
- --------------------------------------------------------------------------------
7.50%, 11/15/01 1,310,000 1,338
- --------------------------------------------------------------------------------
7.75%, 1/31/00 - 2/15/01 16,800,000 16,870
- --------------------------------------------------------------------------------
7.875%, 11/15/04 8,150,000 8,614
- --------------------------------------------------------------------------------
8.00%, 5/15/01 5,000,000 5,116
- --------------------------------------------------------------------------------
8.75%, 8/15/00 12,500,000 12,712
- --------------------------------------------------------------------------------
Total U.S. Government Obligations/Agencies (Cost $302,682) 292,062
================================================================================
<PAGE>
SHORT-TERM=INVESTMENTS==0.4%====================================================
MONEY MARKET FUNDS 0.4%
- ------------------------
Reserve Investment Fund, 6.16% # 7,862,508 7,863
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $7,863) 7,863
================================================================================
Total=Investments=in=Securities=================================================
99.7% of Net Assets (Cost $1,491,441) $ 2,083,722
Other Assets Less Liabilities 6,992
================================================================================
NET ASSETS $ 2,090,714
================================================================================
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
ARM Adjustable rate mortgage
MTN Medium term note
PL Project Loan
PTC Pass-through Certificate
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conduit
STEP Stepped coupon note for which the interest rate will adjust on specified
future date(s)
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except
to qualified institutional buyers -- total of such securities at period-
end amounts to 0.73% of net assets.
AUD Australian dollar
CHF Swiss franc
DKK Danish krone
EUR Euro
GBP British sterling
HKD Hong Kong dollar
JPY Japanese yen
MXN Mexican peso
MYR Malaysian ringgit
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
ZAR South African rand
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1999
- -----------------------------------
In thousands
ASSETS
- ------
Investments in securities, at value (cost $1,491,441) $ 2,083,722
Other assets 118,524
- --------------------------------------------------------------------------------
Total assets 2,202,246
- --------------------------------------------------------------------------------
LIABILITIES
- -----------
Total liabilities 111,532
- --------------------------------------------------------------------------------
NET ASSETS $ 2,090,714
================================================================================
NET ASSETS CONSIST OF:
- ----------------------
Accumulated net realized gain/loss - net of distributions $ 2,210
Net unrealized gain (loss) 592,270
Paid-in-capital applicable to 106,183,946 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 1,496,234
- --------------------------------------------------------------------------------
NET ASSETS $ 2,090,714
================================================================================
NET ASSET VALUE PER SHARE $ 19.69
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------
In thousands
Year
Ended
12/31/99
INVESTMENT INCOME (LOSS)
- ------------------------
Income
Interest $ 52,392
Dividend 16,793
Securities lending 619
- --------------------------------------------------------------------------------
Total income 69,804
- --------------------------------------------------------------------------------
Expenses
Investment management 9,154
Shareholder servicing 5,500
Custody and accounting 274
Prospectus and shareholder reports 228
Registration 127
Legal and audit 17
Directors 10
Miscellaneous 11
- --------------------------------------------------------------------------------
Total expenses 15,321
Expenses paid indirectly (63)
- --------------------------------------------------------------------------------
Net expenses 15,258
- --------------------------------------------------------------------------------
Net investment income (loss) 54,546
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------
Net realized gain (loss)
Securities 27,892
Foreign currency transactions (110)
- --------------------------------------------------------------------------------
Net realized gain (loss) 27,782
- --------------------------------------------------------------------------------
<PAGE>
Change in net unrealized gain or loss
Securities 111,600
Other assets and liabilities
denominated in foreign currencies (25)
- --------------------------------------------------------------------------------
Change in net unrealized gain or loss 111,575
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 139,357
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 193,903
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
In thousands
Year
Ended
12/31/99 12/31/98
-------- --------
INCREASE (DECREASE) IN NET ASSETS
- ---------------------------------
Operations
Net investment income (loss) $ 54,546 $ 43,875
Net realized gain (loss) 27,782 1,009
Change in net unrealized gain or loss 111,575 169,955
-------------------------
Increase (decrease) in net assets from operations 193,903 214,839
-------------------------
Distributions to shareholders
Net investment income (55,273) (43,309)
Net realized gain (24,139) (3,438)
-------------------------
Decrease in net assets from distributions (79,412) (46,747)
-------------------------
Capital share transactions *
Shares sold 786,592 544,483
Distributions reinvested 76,225 44,249
Shares redeemed (536,393) (326,249)
-------------------------
Increase (decrease) in net assets from capital
share transactions 326,424 262,483
-------------------------
<PAGE>
NET ASSETS
- ----------
Increase (decrease) during period 440,915 430,575
Beginning of period 1,649,799 1,219,224
---------------------------
END OF PERIOD $2,090,714 $ 1,649,799
===========================
*Share information
Shares sold 41,479 31,158
Distributions reinvested 4,008 2,483
Shares redeemed (28,071) (18,593)
---------------------------
Increase (decrease) in shares outstanding 17,416 15,048
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
December 31, 1999
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.
<PAGE>
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.
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. Expenses paid indirectly reflect credits earned
on daily uninvested cash balances at the custodian and are used to reduce the
fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
- --------------------------------
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.
<PAGE>
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 inco me
or value if the borrower fails to return them. At December 31, 1999, the value
of loaned securities was $99,526,000; aggregate collateral consisted of
$103,348,000 in the securities lending collateral pool.
OTHER Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $363,981,000 and $157,264,000,
respectively, for the year ended December 31, 1999. Purchases and sales of U.S.
government securities aggregated $333,991,0 00 and $233,315,000, respectively,
for the year ended December 31, 1999.
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.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1999. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
********************************************************************************
Undistributed net investment income $ 160,000
Undistributed net realized gain (160,000)
********************************************************************************
At December 31, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$1,491,441,000. Net unrealized gain aggregated $592,281,000 at period-end, of
which $672,166,000 related to appreciated investments and $79,885,000 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 $825,000 was payable at December 31, 1999. 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 0.295% for assets in excess of $120 billion. At
December 31, 1999, 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 $5,000,000 for the year ended
Decembe r 31, 1999, of which $469,000 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, 1999, totaled
$2,052,000 and are reflected as interest income in the accompanying Statement of
Operations.
During the year ended December 31, 1999, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $63,000 with
certain affiliates of the manager and paid commissions of $1,000 related
thereto.
================================================================================
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/99
- -----------------------------------------------------------
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:
* $24,667,000 from long-term capital gains, subject to the 20% rate
gains category.
For corporate shareholders, $11,585,000 of the fund's distributed income
and short-term capital gains qualified for the dividends-received deduction.
================================================================================
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, 1999, 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 accounting principles generally accepted
in the United States. 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 auditing standards generally accepted in
the United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
<PAGE>
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, 1999 by
correspondence with custodians, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 20, 2000
================================================================================
For fund and account information or to conduct transactions, 24 hours, 7 days a
FOR FUND AND ACCOUNT INFORMATION
OR TO CONDUCT TRANSACTIONS,
24 HOURS, 7 DAYS A WEEK
By touch-tone telephone
TELE*ACCESS 1-800-638-2587
By Account Access on the Internet
WWW.TROWEPRICE.COM/ACCESS
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132
TO OPEN A BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660
INTERNET ADDRESS:
www.troweprice.com
PLAN ACCOUNT LINES FOR RETIREMENT
PLAN PARTICIPANTS:
The appropriate 800 number appears on
your retirement account statement.
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
<PAGE>
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this
report.
WALK-IN INVESTOR CENTERS:
For directions, call 1-800-225-5132
or visit our Web site
BALTIMORE AREA
DOWNTOWN
101 East Lombard Street
OWINGS MILLS
Three Financial Center
4515 Painters Mill Road
BOSTON AREA
386 Washington Street
Wellesley
COLORADO SPRINGS
4410 ArrowsWest Drive
LOS ANGELES AREA
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
TAMPA
4200 West Cypress Street
10th Floor
WASHINGTON, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price Investment Services, Inc., Distributor. F68-050 12/31/99
