<PAGE>
- --------------------------------------------------------------------------------
Annual Report - Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price
Personal Strategy
Income Fund
------------
May 31, 1999
------------
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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<TABLE>
<CAPTION>
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- ---------------------------------------------------------------------------------------------------------------------------------
Year 7/29/94
Ended Through
5/31/99 5/31/98 5/31/97 5/31/96 5/31/95
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 13.13 $ 11.98 $ 11.85 $ 10.94 $ 10.00
Investment activities
Net investment income 0.51* 0.50* 0.51* 0.50* 0.41*
Net realized and
unrealized gain (loss) 0.31 1.43 1.10 0.98 0.85
Total from investment activities 0.82 1.93 1.61 1.48 1.26
Distributions
Net investment income (0.50) (0.50) (0.50) (0.47) (0.32)
Net realized gain (0.10) (0.28) (0.98) (0.10) --
Total distributions (0.60) (0.78) (1.48) (0.57) (0.32)
NET ASSET VALUE
End of period $ 13.35 $ 13.13 $ 11.98 $ 11.85 $ 10.94
----------------------------------------------------------------------------
Ratios/Supplemental Data
Total return. 6.43%* 16.61%* 14.70%* 13.84%* 12.90%*
Ratio of total expenses to
average net assets 0.90%* 0.95%* 0.95%* 0.95%* 0.95%*+
Ratio of net investment
income to average
net assets 3.91%* 4.13%* 4.38%* 4.31%* 4.71%*+
Portfolio turnover rate 48.9% 30.9% 44.8% 34.1% 50.5%+
Net assets, end of period
(in thousands) $ 208,208 $ 85,898 $ 44,368 $ 25,545 $ 20,705
</TABLE>
. 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.
* Excludes expenses in excess of a 0.90% voluntary expense limitation in effect
through 5/31/00 and expenses in excess of a 0.95% voluntary expense limitation
in effect through 5/31/98.
+ Annualized
The accompanying notes are an integral part of these financial statements.
2
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T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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May 31, 1999
- ------------------------
PORTFOLIO OF INVESTMENTS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS AND RIGHTS 41.6%
FINANCIAL 6.9%
Bank and Trust 3.4%
Abbey National (GBP) 10,500 $ 216
ABN Amro (EUR) 9,000 199
Australia & New Zealand Banking ADR 2,500 91
Banca Commerciale Italiana (EUR) 20,000 144
Banco de Bilbao Vizcaya ADR 10,200 149
Banco Frances del Rio de la Plata ADR 4,035 85
Bank of America 12,700 822
Bank of New York 8,600 307
Bank One 6,380 361
Bankgesellschaft Berlin (EUR) 2,300 33
Barclay's (GBP) 9,400 285
Charter One Financial 1,887 54
Chase Manhattan 6,300 457
Citizens Banking 2,500 74
Deutsche Bank (EUR) 3,580 187
Downey Financial 3,700 81
Dresdner Bank (EUR) 5,300 197
First Bell Bancorp 900 17
First Mariner Bancorp 600 7
First Security 1,400 27
Firstar 1,600 46
Frankfort First Bancorp 900 13
Glacier Bancorp 4,037 83
HSBC Holdings (GBP) 8,042 264
J. P. Morgan 1,830 255
KBC Bancassurance Holding (EUR) 2,000 122
KeyCorp 5,700 198
Marshall & Ilsley 400 28
Mediobanca (EUR) 13,800 157
Mellon Bank 13,200 471
Mercantile Bancorporation 700 41
Societe Generale (EUR) 1,110 202
State Street 1,000 76
3
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Summit Bancorp 1,800 $ 74
Svenska Handelsbank (SEK) 1,000 36
UBS (CHF) 978 283
UST 1,500 36
Washington Mutual 6,790 259
Wells Fargo 13,000 520
WestAmerica 900 31
Westpac Bank (AUD) 6,000 41
7,029
Insurance 1.4%
ACE Limited 5,600 171
American General 2,000 144
American International Group 725 83
Brown and Brown 1,900 68
Fairfax Financial, Rights (144a) (CAD) * 500 133
Harleysville Group 1,900 37
Istituto Nazionale delle Assicurazioni (EUR) 47,800 112
Marsh & McLennan 2,800 204
PartnerRe Holdings 2,600 97
Royal&Sun Alliance (GBP) 20,545 168
Schweizerische Rueckversicherungs (CHF) 90 171
Selective Insurance 1,300 24
St. Paul 16,100 572
Sumitomo Marine & Fire Insurance (JPY) 32,000 209
Travelers Property Casualty (Class A) 11,600 458
UNUM 1,900 102
W. R. Berkley 1,600 41
XL Capital (Class A) 3,343 203
2,997
Financial Services 2.1%
American Express 4,500 545
Associates First Capital (Class A) 5,700 234
Assurances Generales de France (EUR) 1,500 74
AXA (EUR) 1,700 196
Capital One Financial 1,500 226
Citigroup 12,849 851
Delta Financial * 2,200 15
Fannie Mae 8,700 592
4
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Financial Federal * 2,000 $ 45
Freddie Mac 12,300 717
Goldman Sachs Group * 700 47
ING Groep (EUR) 4,250 227
ITLA Capital * 500 8
Morgan Stanley Dean Witter 1,500 145
Pearson (GBP) 9,600 185
Unidanmark (Class A) (DKK) 2,200 154
4,261
Total Financial 14,287
UTILITIES 2.9%
Telephone 1.9%
Aliant Communications 4,100 193
ALLTEL 3,200 229
AT&T 7,975 443
BellSouth 5,400 255
British Telecommunications ADR 1,300 218
Compania de Telecomunicaciones de Chile (Class A) ADR 500 11
Frontier 7,900 416
GTE 1,800 113
Hong Kong Telecommunications ADR 1,100 26
Nippon Telegraph & Telephone (JPY) 20 195
Rural Cellular (Class A) * 2,900 47
SBC Communications 13,400 685
Telebras, Rights ADR 1,600 0
Telebras ADR 1,600 134
Telecom Corp. of New Zealand ADR 5,400 187
Telecom Italia (EUR) 23,000 237
Telecom Italia Mobile (EUR) * 27,000 159
Telefonica de Espana ADR * 1,040 150
Telefonos de Mexico (Class L) ADR 3,300 264
Western Wireless 1,900 46
4,008
Electric Utilities 1.0%
Cleco 2,300 76
Electrabel (EUR) 210 65
5
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Empresa Nacional de Electricidad Chile ADR 532 $ 6
Endesa ADR 5,100 110
FirstEnergy 10,895 347
GPU 2,600 113
Hong Kong Electric (HKD) 14,000 44
PECO Energy 4,600 225
Powergen (GBP) 7,600 82
Texas Utilities 8,200 369
Unicom 8,200 347
Veba (EUR) 3,410 194
1,978
Total Utilities 5,986
CONSUMER NONDURABLES 8.2%
Cosmetics 0.6%
Gillette 2,200 112
International Flavors & Fragrances 17,300 711
Kao (JPY) 12,000 330
1,153
Beverages 0.7%
Anheuser-Busch 7,300 534
Bass (GBP) 11,900 176
Coca-Cola 500 34
Diageo ADR 4,450 191
LVMH (EUR) 1,075 299
PepsiCo 6,400 229
1,463
Food Processing 1.3%
American Italian Pasta * 1,200 33
Associated British Foods (GBP) 12,000 92
Bestfoods 3,100 155
Cadbury Schweppes ADR 3,500 194
Campbell 5,300 234
Carrefour (EUR) 1,200 157
CSM (EUR) 800 40
Danisco (DKK) 1,200 58
Eridania Beghin-Say (EUR) 840 122
6
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
General Mills 5,260 $ 423
Heinz 1,800 87
Imperial Sugar 5,500 33
McCormick 6,700 203
Nestle (CHF) 162 291
Ralston Purina 5,600 153
Sara Lee 10,200 245
Seneca Foods (Class A) * 1,100 16
Seneca Foods (Class B) * 700 10
Unilever 2,317 151
United Natural Foods * 2,600 70
2,767
Hospital Supplies/Hospital Management 0.3%
American Oncology Resources * 4,200 43
Baxter International 1,200 78
Boston Scientific 1,100 42
Guidant 400 20
Medtronic 100 7
Mentor 5,300 84
Pediatrix Medical Group * 100 2
Quorum Health Group * 3,300 41
Renal Care Group * 2,650 73
Smith & Nephew (GBP) 34,900 97
Terumo (JPY) 9,000 212
699
Pharmaceuticals 2.5%
American Home Products 11,860 683
Amgen * 1,000 63
AstraZeneca Group (SEK) 1,614 63
AstraZeneca Group ADR 4,600 181
Biogen * 1,500 164
Boron Lepore & Associates * 1,100 10
Bristol-Myers Squibb 8,400 577
Eli Lilly 3,200 229
Gehe (EUR) 4,000 197
Genentech 1,100 96
Glaxo Wellcome ADR 3,300 186
Incyte Pharmaceuticals * 400 10
7
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
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In thousands
Johnson & Johnson 3,400 $ 315
Merck 5,600 378
Novartis (CHF) 203 294
Pfizer 5,220 559
Pharmacia & Upjohn 3,405 189
Schering-Plough 5,400 243
Takeda Chemical (JPY) 8,000 355
Triangle Pharmaceuticals * 1,300 24
Warner-Lambert 5,800 360
5,176
Biotechnology 0.1%
Abegenix * 700 10
Alkermes * 1,400 34
Anesta * 400 7
Cell Genesys * 700 3
COR Therapeutics * 1,600 23
Coulter Pharmaceutical * 600 16
Gilead Sciences * 500 22
Inhale Therapeutic Systems * 2,300 61
Millennium Pharmaceuticals * 700 26
Neurocrine Biosciences * 1,000 5
Northfield Laboratories * 2,300 28
PharmaPrint * 3,000 23
Serologicals * 2,700 21
Zonagen * 700 8
287
Health Care Services 0.4%
Aetna 1,100 100
Altana (EUR) 1,400 82
AmeriPath * 4,000 36
CIGNA 1,100 102
IMS Health 1,100 27
Monarch Dental * 1,300 5
Orthodontic Centers of America * 2,300 28
ProMedCo * 3,600 15
SteriGenics International * 4,100 64
United HealthCare 6,400 373
832
8
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Miscellaneous Consumer Products 2.3%
Benetton Group (EUR) 41,600 $ 81
Bridgestone (JPY) 8,000 210
Coles Myer Limited (AUD) 12,000 63
Colgate-Palmolive 8,200 819
Cone Mills * 5,600 35
Culp 1,700 14
Dan River * 5,800 53
Hasbro 6,450 185
Koninklijke Philips Electronics N.V. ADR 2,300 198
Kuraray (JPY) 18,000 196
Lion Nathan (NZD) 20,000 48
Mattel 25,200 666
Mitsui (JPY) 31,000 198
Newell Rubbermaid 2,200 89
NIKE (Class B) 1,700 104
Philip Morris 17,350 669
Procter & Gamble 2,300 215
Reebok * 1,500 30
Sola * 4,000 67
Stride Rite 1,600 17
Tomkins (GBP) 29,000 107
Tomkins ADR 968 14
Unifi * 18,200 300
US Can * 2,700 48
UST 9,200 281
WestPoint Stevens * 1,400 44
4,751
Total Consumer Nondurables 17,128
CONSUMER SERVICES 4.2%
Restaurants 0.0%
Buca * 300 5
PJ America * 900 21
26
General Merchandisers 0.7%
Bon-Ton Stores * 5,300 34
9
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Casey's General Stores 5,900 $ 79
Columbia Sportswear * 2,500 37
Dayton Hudson 1,200 76
JUSCO (JPY) 7,000 133
Marui (JPY) 13,000 195
Pinault Printemps Redoute (EUR) 1,030 175
Saks * 6,000 166
Tesco (GBP) 65,421 191
Wal-Mart 6,700 285
Warnaco Group (Class A) 3,200 94
1,465
Specialty Merchandisers 1.5%
American Stores 12,500 412
Christian Dior (EUR) 720 102
CompuCom Systems * 6,900 28
CVS 5,668 261
Federated Department Stores * 200 11
Goody's Family Clothing * 3,000 33
Home Depot 3,600 205
Kroger * 5,400 316
Omron (JPY) 8,000 111
Performance Food Group * 1,400 33
Safeway * 7,700 358
St. John Knits 1,400 40
Toys "R" Us * 28,300 653
Tupperware 23,900 532
Urban Outfitters * 1,600 38
3,133
Entertainment and Leisure 0.8%
Carnival (Class A) 2,000 82
Disney 1,700 49
Hutchison Whampoa (HKD) 43,000 358
McDonald's 5,200 200
Media One * 3,600 266
Reader's Digest (Class A) 19,000 696
Sharp (JPY) 3,000 33
1,684
10
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Media and Communications 1.2%
American Tower Systems (Class A) * 400 $ 9
Asatsu (JPY) 2,000 50
CBS * 9,500 397
Clear Channel Communications * 3,147 208
Elsevier (EUR) 3,000 38
Emmis Broadcasting (Class A) * 1,300 61
Fox Entertainment Group (Class A) * 6,700 171
France Telecom ADR 2,200 169
Infinity Broadcasting (Class A) * 7,600 194
Pegasus Communications * 700 33
Publishing & Broadcasting (AUD) 9,600 60
R.R. Donnelley 5,100 185
Sinclair Broadcast Group (Class A) * 1,900 26
Time Warner 5,900 402
Tribune 2,000 158
Valassis Communications * 650 23
Vodafone ADR 1,500 287
Young Broadcasting (Class A) * 1,700 69
2,540
Total Consumer Services 8,848
CONSUMER CYCLICALS 2.8%
Automobiles and Related 0.4%
A.O. Smith (Class B) 6,550 160
Cycle & Carriage (SGD) 2,000 11
DaimlerChrysler (EUR) 2,000 173
Honda ADR 2,600 214
Keystone Automotive * 1,000 16
Littelfuse * 1,700 34
SPX * 1,900 147
Strattec Security * 100 3
758
Building and Real Estate 1.5%
Accor (EUR) 700 172
Apartment Investment & Management, REIT 1,200 50
Arden Realty, REIT 2,800 72
11
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Cheung Kong Holdings (HKD) 29,000 $ 236
DBS Land (SGD) 10,000 18
EastGroup Properties, REIT 4,400 89
Federal Realty Investment Trust, REIT 21,600 499
First Washington Realty Trust, REIT 2,700 59
Glenborough Realty Trust, REIT 1,000 18
JP Realty, REIT 1,800 37
Parkway Properties, REIT 3,500 116
Reckson REIT * 1,971 54
Reckson Associates Realty, REIT 20,800 538
Simon DeBartolo Group, REIT 10,568 309
Starwood Hotels & Resorts, REIT 22,800 747
Westfield Trust (AUD) 14,400 29
Woodhead Industries 5,100 64
3,107
Miscellaneous Consumer Durables 0.9%
CompX * 2,800 42
Corning 12,900 705
Eastman Kodak 8,400 568
Harman International 700 31
Juno Lighting 1,200 27
Masco 6,300 180
OCE (EUR) 1,200 33
Ricoh (JPY) 9,000 100
Sony (JPY) 2,000 188
1,874
Total Consumer Cyclicals 5,739
TECHNOLOGY 2.8%
Electronic Components 0.8%
Altera * 2,400 84
American Superconductor * 600 8
Analogic 3,200 104
Benchmark Electronics * 800 24
Burr Brown * 2,300 74
EMC * 1,900 189
Exar * 900 19
12
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Intel 7,200 $ 390
Linear Technology 1,100 58
Maxim Integrated Products * 4,100 219
Methode Electronics (Class A) 4,600 84
Optek Technology * 2,400 60
Planar Systems * 2,700 22
PMC-Sierra * 1,200 58
SIPEX * 1,200 19
Texas Instruments 1,600 175
Xilinx * 2,900 129
1,716
Electronic Systems 0.4%
Applied Materials * 1,500 83
Applied Micro Circuits * 1,500 89
EMS Technologies * 2,900 39
Hewlett-Packard 3,600 339
Lifeline Systems * 1,500 28
Lo-Jack * 3,400 26
Nokia ADR 1,700 121
Solectron * 1,400 77
802
Information Processing 0.2%
Dell Computer * 4,000 137
Hitachi ADR * 1,600 117
IBM 1,400 163
417
Office Automation 0.1%
Ceridian * 3,200 106
Technitrol 2,900 86
192
Specialized Computer 0.1%
Sun Microsystems * 2,500 149
149
Aerospace and Defense 0.3%
AlliedSignal 7,600 441
DONCASTERS ADR * 600 9
Raytheon (Class B) 1,100 75
Woodward Governor 1,700 43
568
13
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Telecommunications 0.9%
AirTouch Communications * 2,500 $ 251
Avant * 2,700 33
Cisco Systems * 2,725 297
Deutsche Telekom ADR 4,800 190
LM Ericsson (Class B) ADR 6,800 183
MCI WorldCom * 8,621 744
Premisys Communications * 1,500 13
Qwest Communications International * 2,400 103
Tellabs * 2,200 129
Voicestream Wireless 1,900 51
West TeleServices * 1,300 10
2,004
Total Technology 5,848
EDUCATION 0.0%
ITT Educational Service * 2,300 55
Total Education 55
CAPITAL EQUIPMENT 1.6%
Electrical Equipment 1.1%
ABB AG (CHF) * 102 144
Canon (JPY) 8,000 202
GE 8,000 814
Holophane * 3,800 104
Matsushita Electric Works (JPY) 8,000 80
Mitsubishi Electric (JPY) 13,000 41
Siemens (EUR) 1,300 88
Tyco International 9,147 799
2,272
Machinery 0.5%
Danaher 6,700 405
GKN (GBP) 13,700 229
JLG Industries 4,800 93
NN Ball & Roller 3,200 18
S I G Schweis (CHF) 430 266
14
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Toolex Alpha * 1,000 $ 13
Valmet (EUR) 2,000 20
1,044
Capital Equipment 0.0%
Omniquip International 3,000 32
32
Total Capital Equipment 3,348
BUSINESS SERVICES AND TRANSPORTATION 4.3%
Computer Service and Software 1.5%
America Online * 2,200 263
Analysts International 1,900 30
Ascend Communications * 2,500 232
Automatic Data Processing 5,200 214
BISYS Group * 600 33
BMC Software * 5,600 277
Compuware * 4,600 143
Concur Technologies * 300 10
Electronic Arts * 400 20
First Data 5,418 243
Galileo International 3,100 139
Great Plains Software * 900 34
HCIA * 4,100 35
Microsoft * 8,800 710
Parametric Technology * 8,400 117
Peerless Systems * 3,000 27
Phoenix Technologies * 1,700 18
Portal Software * 200 10
PSINet * 700 31
Salesloggix * 400 5
Saville Systems ADR * 4,100 64
Summit Design * 4,300 11
SunGard Data Systems * 3,200 112
Synopsys * 200 9
Vantive * 600 7
Viasoft * 3,600 14
Visio * 2,900 95
15
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Webtrends * 400 $ 12
Wind River Systems * 2,300 48
Zebra Technologies (Class A) * 500 16
2,979
Distribution Services 0.3%
Aviation Sales * 1,600 62
Cardinal Health 2,077 125
Jack Henry & Associates 800 29
MSC * 2,700 51
Primesource 1,400 9
Richfood Holdings 6,500 83
SunSource 1,800 26
U.S. Foodservice * 4,687 209
Watsco (Class A) 3,950 76
Wilmar Industries * 900 10
680
Environmental 0.1%
CUNO * 1,900 35
IT Group * 1,500 25
Rentokil Group (GBP) 4,300 18
Waterlink * 5,500 22
100
Transportation Services 0.3%
C.H. Robinson Worldwide 1,700 55
Coach USA * 4,700 137
Comfort Systems USA * 5,600 88
Eagle USA Air Freight * 1,700 80
Expeditors International of Washington 1,000 56
Frozen Food Express 1,700 12
Heartland Express * 1,000 15
Hub Group (Class A) * 500 14
International Shipholding 1,500 21
Mitsubishi Heavy Industries (JPY) 50,000 195
673
Miscellaneous Business Services 1.7%
Billing Information Concepts * 3,700 46
British Airport Authorities (GBP) 18,200 195
Browning-Ferris 20,500 851
16
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Cendant * 2,700 $ 50
CORT Business Services * 2,500 60
Electro Rent * 4,300 54
Equifax 800 29
H&R Block 10,800 520
Insituform Technologies (Class A) * 4,200 70
Iron Mountain * 1,700 47
Maximus * 800 24
McGrath RentCorp 2,600 49
Metamor Worldwide * 1,300 36
MPW Industrial Services Group * 1,900 19
New England Business Service 4,300 117
Omnicom 3,800 266
Paxar * 1,900 17
Renaissance Worldwide * 5,200 37
Romac International * 3,300 48
Shorewood Packaging * 7,300 125
Strayer Education 2,700 79
Superior Services * 600 13
Tetra Tech * 4,050 86
Waste Management 14,106 746
3,584
Airlines 0.2%
Delta 7,400 424
KLM (EUR) 1,000 29
Midwest Express Holdings * 300 9
462
Railroads 0.2%
Norfolk Southern 13,600 445
445
Total Business Services and Transportation 8,923
ENERGY 3.8%
Energy Services 0.9%
Baker Hughes 23,000 716
BG (GBP) 15,100 83
Cooper Cameron * 300 11
17
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Elf Aquitaine (EUR) 900 $ 130
Elf Aquitaine ADR 1,900 135
Halliburton 3,700 153
Smith International * 600 26
Tokyo Electric Power (JPY) 9,000 196
TOTAL ADR * 1,700 104
United Utilities (GBP) 15,700 189
Weatherford International * 1,000 33
1,776
Exploration and Production 0.3%
Key Energy * 2,600 8
Santos (AUD) 11,000 34
Unocal 15,800 628
670
Integrated Petroleum - Domestic 0.6%
Amerada Hess 600 36
Atlantic Richfield 5,800 486
Occidental Petroleum 8,300 175
USX-Marathon 17,400 521
1,218
Integrated Petroleum - International 2.0%
BP Amoco ADR 14,211 1,522
Chevron 1,800 167
ENI S.P.A. ADR 2,900 183
Exxon 3,260 260
Mobil 9,200 932
Repsol ADR 8,100 146
Royal Dutch Petroleum ADR 6,900 390
Shell Transport & Trading ADR 6,100 269
Texaco 5,100 334
4,203
Total Energy 7,867
PROCESS INDUSTRIES 2.9%
Diversified Chemicals 0.7%
Dow Chemical 4,000 486
DuPont 6,000 393
Hercules 18,900 660
1,539
18
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Specialty Chemicals 1.1%
3M 7,200 $ 617
A. Schulman 1,000 17
Air Liquide (L) (EUR) 371 56
Akzo Nobel (EUR) 3,100 129
BASF AG (EUR) 2,830 110
Bayer (EUR) 2,030 79
Furon 2,300 42
Great Lakes Chemical 10,440 472
Hauser * 6,200 15
Imperial Chemical ADR 2,100 92
Pall 16,600 333
Sumitomo Chemicals (JPY) 52,000 219
Technip (EUR) 845 92
2,273
Paper and Paper Products 0.6%
Dai Nippon Printing (JPY) 14,000 210
Fort James 10,700 392
Kimberly-Clark 9,400 552
Smurfit-Stone Container * 1,600 34
1,188
Forest Products 0.3%
Georgia-Pacific 2,600 225
International Paper 1,300 65
Weyerhaeuser 5,100 316
606
Building and Construction 0.2%
Blue Circle Industries (GBP) 13,595 87
Heidelberg Zement (EUR) 1,500 121
Holderbank Financiere Glarus (CHF) 91 108
J. Ray Mcdermott * 500 18
Layne Christensen * 3,000 20
Simpson Manufacturing * 400 18
Trex * 2,400 53
425
Total Process Industries 6,031
19
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
BASIC MATERIALS 0.8%
Metals 0.8%
Anglo American Platinum (ZAR) 3,000 $ 55
AngloGold ADR 831 17
Cambior 7,500 25
Gibraltar Steel 1,000 22
Inco 20,800 296
Material Sciences * 1,500 17
Matthews International (Class A) 4,300 125
Phelps Dodge 7,900 409
Reynolds Metals 11,200 596
1,562
Mining 0.0%
Battle Mountain Gold 11,400 28
Rio Tinto (AUD) 3,200 45
TVX Gold * 8,700 9
82
Miscellaneous Materials 0.0%
Malayan Cement (MYR) 15,750 9
Synthetic Industries * 1,500 34
43
Total Basic Materials 1,687
MISCELLANEOUS 0.1%
Conglomerates 0.1%
Berkshire Hathaway (Class B) * 42 97
Orkla (Class A) (NOK) 2,800 44
141
Other Miscellaneous Common Stocks 0.0%
Schneider (EUR) 1,500 89
Other Miscellaneous Common Stocks 44
133
Total Miscellaneous 274
FOREIGN 0.3%
Europe 0.2%
AXA Colonia Konzern (EUR) 2,100 197
20
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Man Ag (EUR) 3,400 $ 99
Rhone Poulenc (EUR) 1,900 90
Svenska Cellulosa (SEK) 500 12
398
Far East 0.1%
Nippon Express (JPY) 36,000 206
206
Other Foreign 0.0%
Bobst (CHF) 43 53
Pacific Dunlop (AUD) 22,400 40
93
Total Foreign 697
Total Common Stocks (Cost $76,074) 86,718
Corporate Bonds 24.3%
ABN Amro Bank, Sub. Deb., 7.125%, 10/15/93 $ 2,000,000 1,879
Adelphia Communications
7.875%, 5/1/09 75,000 71
9.875%, 3/1/05 425,000 446
Allied Holdings, Gtd. Sr. Sub. Notes, 8.625%, 10/1/07 500,000 475
American Builders & Contractors Supply, Sr. Sub. Notes
10.625%, 5/15/07 500,000 470
American Express, 7.60%, 8/15/02 300,000 310
American Radio Systems, Sr. Sub. Notes, 9.00%, 2/1/06 100,000 106
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 500,000 505
American Standard, 9.25%, 12/1/16 70,000 72
Amerigas Partners, Sr. Notes, 10.125%, 4/15/07 100,000 104
Anchor Advanced, Sr. Notes, 11.75%, 4/1/04 500,000 512
APCOA, Sr. Sub. Notes, 9.25%, 3/15/08 200,000 184
Associated Materials, Sr. Sub. Notes, 9.25%, 3/1/08 200,000 204
Aurora Foods, Sr. Sub. Notes, 9.875%, 2/15/07 50,000 52
B&G Foods, Sr. Sub. Notes, 9.625%, 8/1/07 500,000 490
Bally Total Fitness, Sr. Sub. Notes, 9.875%, 10/15/07 350,000 342
BBV International Finance, 7.00%, 12/1/25 1,000,000 956
Building Materials, Sr. Notes, 7.75%, 7/15/05 500,000 474
BWAY, Sr. Sub. Notes, 10.25%, 4/15/07 200,000 207
CE Electric UK Funding, 6.853%, 12/30/04 1,850,000 1,844
21
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Chancellor Media
Sr. Notes, 8.00%, 11/1/08 $ 250,000 $ 249
Sr. Sub. Notes, 8.125%, 12/15/07 250,000 245
Charter Communications, Sr. Notes, (144a), 8.25%, 4/1/07 500,000 487
Chattem, Sr. Sub. Notes, 12.75%, 6/15/04 200,000 219
Cinemark USA, Sr. Sub. Notes, 8.50%, 8/1/08 500,000 485
Coach USA, Gtd. Sr. Sub. Notes, 9.375%, 7/1/07 175,000 178
Coinmach, Sr. Sub. Notes, 11.75%, 11/15/05 150,000 165
Comcast Cable Communications, 8.50%, 5/1/27 1,850,000 2,100
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 200,000 206
Container Corp of America
Sr. Notes, 9.75%, 4/1/03 100,000 105
Gtd. Sr. Notes, 10.75%, 5/1/02 100,000 105
Courtyard by Marriott II, Sr. Secured Notes
10.75%, 2/1/08 500,000 514
CSC Holdings, Sr. Deb., 7.625%, 7/15/18 375,000 364
Dan River, Sr. Sub. Notes, 10.125%, 12/15/03 100,000 102
Delta Air Lines, ETC, 10.00%, 5/17/10 146,000 173
Doane Pet Care, Sr. Sub. Notes, 9.75%, 5/15/07 829,000 850
Dyersburg, Sr. Sub. Notes, 9.75%, 9/1/07 150,000 74
Dyncorp, Sr. Sub. Notes, 9.50%, 3/1/07 100,000 100
Energy Corporation of America, Sr. Sub. Notes
9.50%, 5/15/07 500,000 465
Eye Care Centers of America, 9.125%, 5/1/08 500,000 435
Fairchild Semiconductor, Sr. Sub. Notes
10.125%, 3/15/07 75,000 75
Fairfax Financial, 8.25%, 10/1/15 1,850,000 1,852
Federal-Mogul, Sr. Notes, 7.75%, 7/1/06 500,000 484
First Federal Financial, 11.75%, 10/1/04 100,000 105
Frontiervision, Sr. Notes, 11.00%, 10/15/06 500,000 554
Fundy Cable, Sr. Secured 2nd Priority Notes
11.00%, 11/15/05 75,000 82
Group Maintenance America, Sr. Sub. Notes
(144a), 9.75%, 1/15/09 250,000 252
Harrahs Operating, 7.875%, 12/15/05 500,000 490
Hawk, Sr. Notes, 10.25%, 12/1/03 400,000 412
22
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 $ 150,000 $ 162
Hollinger International Publishing, Gtd. Notes
9.25%, 3/15/07 500,000 517
Holmes Products, Gtd. Notes, 9.875%, 11/15/07 200,000 197
Host Marriott Travel, Sr. Notes, 9.50%, 5/15/05 500,000 520
ICG Services, Sr. Disc. Notes
STEP, 0%, 9/15/05 250,000 224
Intermedia Communications, Sr. Notes, (144a)
9.50%, 3/1/09 200,000 196
International Home Foods, Gtd. Sr. Sub. Notes
10.375%, 11/1/06 500,000 532
International Wire, Sr. Sub. Notes, 11.75%, 6/1/05 500,000 520
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 100,000 97
Iron Mountain, Sr. Sub. Notes, 8.75%, 9/30/09 150,000 150
ISP Holdings, Sr. Notes, 9.75%, 2/15/02 150,000 153
Jitney-Jungle Stores, Sr. Sub. Notes, 12.00%, 3/1/06 500,000 500
Mastec, Sr. Sub. Notes, 7.75%, 2/1/08 250,000 240
MCI Worldcom, 7.75%, 4/1/07 1,850,000 1,957
Merrill Lynch & Company, 6.75%, 6/1/28 1,000,000 942
Metromedia Fiber, Sr. Notes, (144a), 10.00%, 11/15/08 250,000 259
Midland Bank, Sub. Notes, 7.65%, 5/1/25 1,000,000 1,051
Mohegan Tribal Gaming, Sr. Notes, (144a), 8.125%, 1/1/06 425,000 420
Newport News Shipbuilding, Sr. Notes, 8.625%, 12/1/06 500,000 520
Nextel Communications, Sr. Disc. Notes
STEP, 0%, 10/31/07 900,000 607
Nextlink Communications, Sr. Disc. Notes
STEP, 0%, 6/1/09 750,000 414
Niagara Mohawk, Sr. Notes, 7.75%, 10/1/08 350,000 361
Northland Cable Television, Sr. Sub. Notes
10.25%, 11/15/07 150,000 159
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 50,000 53
Owens Illinois, Sr. Notes, 7.35%, 5/15/08 1,850,000 1,783
Packaging Corp. of America, Sr. Sub. Notes, (144a)
9.625%, 4/1/09 500,000 509
Paine Webber, Sr. Notes, 6.55%, 4/15/08 1,850,000 1,769
Paragon Corporate Holdings, Sr. Notes, 9.625%, 4/1/08 100,000 57
Park Place Entertainment, Sr. Sub. Notes
7.875%, 12/15/05 500,000 480
23
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Plastic Containers, Sr. Secured Notes, 10.00%, 12/15/06 $ 500,000 $ 565
Premier Parks, Sr. Disc. Notes
STEP, 0%, 4/1/08 500,000 342
Price Communications Wireless, 9.125%, 12/15/06 500,000 520
Pride Petroleum Services, Sr. Notes, 9.375%, 5/1/07 100,000 99
Principal Mutual, (144a), 8.00%, 3/1/44 1,850,000 1,767
Protection One, Sr. Sub. Notes, (144a), 8.125%, 1/15/09 250,000 238
Purina Mills, Sr. Sub. Notes, 9.00%, 3/15/10 150,000 119
Quest Diagnostics, Gtd. Sr. Sub. Notes
10.75%, 12/15/06 150,000 173
Qwest Communications, Sr. Disc. Notes
STEP, 0%, 10/15/07 600,000 468
Sr. Notes, 7.50%, 11/1/08 50,000 50
R & B Falcon, Sr. Notes, 6.95%, 4/15/08 1,850,000 1,415
Red Roof Inns, Sr. Notes, 9.625%, 12/15/03 200,000 202
Rogers Cablesystems, Sr. Sec. 2nd Priority Notes
10.00%, 3/15/05 90,000 99
Safelite Glass, Sr. Sub. Notes, 9.875%, 12/15/06 50,000 46
Six Flags Entertainment, Sr. Notes, 8.875%, 4/1/06 500,000 505
Six Flags Theme Parks, Sr. Sub. Disc. Notes, STEP
12.25%, 6/15/05 200,000 224
Smithfield Foods, Sr. Sub. Notes, 7.625%, 2/15/08 350,000 324
Southern Foods, Sr. Sub. Notes, 9.875%, 9/1/07 150,000 155
Sovereign Speciality, Sr. Sub. Notes, 9.50%, 8/1/07 150,000 152
Sprint, 6.125%, 11/15/08 900,000 849
Stena, Sr. Notes, 10.50%, 12/15/05 500,000 496
Tenet Healthcare, Sr. Notes, 8.00%, 1/15/05 250,000 245
TravelCenters of America, Sr. Sub. Notes, 10.25%, 4/1/07 500,000 510
Union Planters Trust Capital, Gtd. Bonds, 8.20%, 12/15/26 1,850,000 1,853
United International Holdings, Sr. Disc. Notes
STEP, 0%, 2/15/08 300,000 197
US Can, Sr. Gtd. Notes, 10.125%, 10/15/06 100,000 105
Venture Holdings Trust, (144a), 11.00%, 6/1/07 350,000 355
Viasystems, Sr. Sub. Notes, 9.75%, 6/1/07 500,000 437
Westinghouse Air Brake, Sr. Notes, (144a), 9.375%, 6/15/05 500,000 507
Westpoint Stevens, Sr. Notes, 7.875%, 6/15/08 500,000 495
Total Corporate Bonds (Cost $53,296) 50,491
</TABLE>
24
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
U.S. Government Mortgage-Backed
Securities 13.3%
Government National Mortgage Assn
6.00%, 12/15/23 - 5/15/26 $ 1,477,983 $ 1,405
6.50%, 7/15/23 - 5/15/29 16,791,351 16,401
7.00%, 2/15/27 - 1/15/29 8,404,590 8,424
7.50%, 9/15/22 - 12/15/25 742,388 761
8.00%, 1/15/22 - 10/20/25 433,575 452
8.50%, 9/15/24 169,529 179
10.50%, 10/15/13 8,961 10
Total U.S. Government Mortgage-Backed Securities (Cost $27,950) 27,632
U.S. Government Obligations/
Agencies 10.8%
Federal Home Loan Mortgage Corp.
5.75%, 4/15/08 3,000,000 2,900
Federal National Mortgage Assn.
7.00%, 4/18/22 1,250,000 1,259
Tennessee Valley Authority
5.88%, 4/1/36 2,475,000 2,454
6.235%, 7/15/45 500,000 504
U.S. Treasury Bonds
6.125%, 11/15/27 4,000,000 4,043
6.75%, 8/15/26 10,370,000 11,291
Total U.S. Government Obligations/Agencies (Cost $23,146) 22,451
Short-Term Investments 10.2%
Certificates of Deposit 0.0%
Chase Manhattan Bank, N.A., fixed deposit
2.00%, 12/31/99 (MYR) 33,983 9
9
Money Market Funds 10.2%
Reserve Investment Fund, 4.96% # 21,244,190 21,244
21,244
Total Short-Term Investments (Cost $21,252) 21,253
25
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
In thousands
Total Investments in Securities
100.2% of Net Assets (Cost $201,718) $ 208,545
Other Assets Less Liabilities (337)
NET ASSETS $ 208,208
--------------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
ETC Equipment Trust Certificate
L Local registered shares
REIT Real Estate Investment Trust
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 2.5% of net assets.
AUD Australian dollar
CAD Canadian dollar
CHF Swiss franc
DKK Danish krone
EUR European currency unit
GBP British sterling
HKD Hong Kong dollar
JPY Japanese yen
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.
26
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
May 31, 1999
- -----------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $201,718) $ 208,545
Securities lending collateral 11,398
Other assets 4,389
Total assets 224,332
Liabilities
Obligation to return securities lending collateral 11,398
Other liabilities 4,726
Total liabilities 16,124
NET ASSETS $ 208,208
----------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 1,510
Accumulated net realized gain/loss - net of distributions 4,577
Net unrealized gain (loss) 6,827
Paid-in-capital applicable to 15,597,213 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares authorized 195,294
NET ASSETS $ 208,208
----------------
NET ASSET VALUE PER SHARE $ 13.35
----------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
- -----------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
Year
Ended
5/31/99
Investment Income
Income
Interest $ 7,899
Dividend 1,362
Total income 9,261
Expenses
Investment management 897
Shareholder servicing 538
Custody and accounting 149
Registration 85
Prospectus and shareholder reports 37
Legal and audit 12
Directors 6
Miscellaneous 13
Total expenses 1,737
Expenses paid indirectly (3)
Net expenses 1,734
Net investment income 7,527
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 4,831
Foreign currency transactions (37)
Net realized gain (loss) 4,794
Change in net unrealized gain or loss
Securities (1,515)
Other assets and liabilities
denominated in foreign currencies 12
Change in net unrealized gain or loss (1,503)
Net realized and unrealized gain (loss) 3,291
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 10,818
----------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
5/31/99 5/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 7,527 $ 2,646
Net realized gain (loss) 4,794 2,006
Change in net unrealized gain or loss (1,503) 4,846
Increase (decrease) in net assets from operations 10,818 9,498
Distributions to shareholders
Net investment income (6,611) (2,388)
Net realized gain (1,572) (1,446)
Decrease in net assets from distributions (8,183) (3,834)
Capital share transactions *
Shares sold 175,277 61,162
Distributions reinvested 8,046 3,679
Shares redeemed (63,648) (28,975)
Increase (decrease) in net assets from capital
share transactions 119,675 35,866
Net Assets
Increase (decrease) during period 122,310 41,530
Beginning of period 85,898 44,368
End of period $ 208,208 $ 85,898
----------------------
* Share information
Shares sold 13,292 4,819
Distributions reinvested 616 295
Shares redeemed (4,852) (2,278)
Increase (decrease) in shares outstanding 9,056 2,836
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
May 31, 1999
- -----------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Personal Strategy Funds, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The Personal Strategy Income Fund (the
fund), a diversified, open-end management investment company, is one of the
portfolios established by the corporation and commenced operations on July 29,
1994.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars at
the prevailing exchange rate at the end of the reporting period. Purchases and
sales
30
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
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, 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.
Noninvestment-Grade Debt Securities At May 31, 1999, the fund held investments
in noninvestment-grade debt securities, commonly referred to as "high-yield" or
"junk" bonds. A real or perceived economic downturn or higher interest rates
could adversely affect the liquidity or value, or both, of such securities
because such events could lessen the ability of issuers to make principal and
interest payments.
31
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
Securities Lending The fund lends its securities to approved brokers to earn
additional income and receives cash and U.S. government securities as collateral
against the loans. Cash collateral received is invested in a money market pooled
account by the fund's lending agent. Collateral is maintained over the life of
the loan in an amount not less than 100% of the value of loaned securities.
Although risk is mitigated by the collateral, the fund could experience a delay
in recovering its securities and a possible loss of income or value if the
borrower fails to return them. At May 31, 1999, the value of loaned securities
was $10,957,000; aggregate collateral consisted of $11,398,000 in the securities
lending collateral pool.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $140,292,000 and $61,334,000,
respectively, for the year ended May 31, 1999. Purchases and sales of U.S.
government securities aggregated $47,456,000 and $18,073,000, respectively, for
the year ended May 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 May 31, 1999. The results of
operations and net assets were not affected by the increases/(decreases) to
these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 15,000
Paid-in-capital (15,000)
At May 31, 1999, the cost of investments for federal income tax purposes was
substantially the same as for financial reporting and totaled $201,718,000. Net
unrealized gain aggregated $6,827,000 at period-end, of which $13,927,000
related to appreciated investments and $7,100,000 to depreciated investments.
32
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
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 $80,000 was payable at May 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 0.30% for assets in excess of $80 billion. At May
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.
Under the terms of the investment management agreement, the manager is required
to bear any expenses through May 31, 2000, which would cause the fund's ratio of
total expenses to average net assets to exceed 0.90%. Thereafter, through May
31, 2002, the fund is required to reimburse the manager for these expenses,
provided that average net assets have grown or expenses have declined
sufficiently to allow reimbursement without causing the fund's ratio of total
expenses to average net assets to exceed 0.90%. Pursuant to this agreement,
$10,000 of management fees were not accrued by the fund for the year ended May
31, 1999. Additionally, $238,000 of unaccrued management fees related to a
previous expense agreement are subject to reimbursement through May 31, 2000.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc. (TRPS) is the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $543,000 for the year ended May
31, 1999, of which $56,000 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
33
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
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 May 31, 1999, totaled
$1,327,000 and are reflected as interest income in the accompanying Statement of
Operations.
34
<PAGE>
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
- --------------------------------------------------------------------------------
- ---------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of T. Rowe Price Personal Strategy Funds, Inc. and
Shareholders of T. Rowe Price Personal Strategy Income Fund
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 Personal Strategy
Income Fund (one of the portfolios comprising T. Rowe Price Personal Strategy
Funds, Inc., hereafter referred to as the "Fund") at May 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
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at May 31, 1999 by
correspondence with custodians, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
June 17, 1999
35
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T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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TAX INFORMATION (UNAUDITED) FOR THE YEAR ENDED 5/31/99
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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 $1,572,000 from long-term
capital gains, subject to the 20% rate gains category.
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T. ROWE PRICE SHAREHOLDER SERVICES
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INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m.
ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and the T. Rowe Price Web
site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund managers' reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
** Based on a January 1999 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of order.
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T. ROWE PRICE MUTUAL FUNDS
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STOCK FUNDS
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free**
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond***
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Bond
International Bond
MONEY MARKET FUNDS+
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors. ** Formerly named Florida Insured Intermediate
Tax-Free. *** Formerly named Tax-Free Insured Intermediate Bond.
+ Investments in the funds are not insured or guaranteed by the FDIC or any
other government agency. Although the funds seek to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
funds.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
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T. ROWE PRICE RETIREMENT PLANS AND RESOURCES
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RETIREMENT PLANS AND RESOURCES
We recognize that saving for retirement is the number one investment goal for
most Americans. We can help you meet your retirement needs, whether you are
starting an IRA or designing a retirement program for your employees. T. Rowe
Price offers an assortment of retirement plans for individuals, the self-
employed, small businesses, corporations, and nonprofit organizations. We
provide recordkeeping, communications, and investment management services, as
well as a variety of educational materials, self-help planning guides, and
software tools to help you choose and implement a retirement plan appropriate
for you. For information or to request literature, call us at 1-800-638-5660.
IRAs AND QUALIFIED PLANS
Traditional IRA
Roth IRA
Rollover IRA
SEP-IRA
SIMPLE IRA
Profit Sharing
Money Purchase Pension
"Paired" Plans (Money Purchase Pension and Profit Sharing Plans)
401(k)
403(b)
457 Deferred Compensation
RETIREMENT RESOURCES AT T. ROWE PRICE
Planning and Informational Guides
Minimum Required Distributions Guide
Retirement Planning Kit
Retirees Financial Guide
Tax Considerations for Investors
Investment Kits
The IRA Investing Kit
Roth IRA Conversion Kit
Rollover IRA Kit
The T. Rowe Price SIMPLE IRA Plan Kit
The T. Rowe Price SEP-IRA Plan
The Simplified Keogh Plan(R) From T. Rowe Price
The T. Rowe Price 401(k) Century Plan(R) (for small businesses)
Money Purchase Pension/Profit Sharing Plan Kit
Investing for Retirement in Your 403(b) Account
The T. Rowe Price No-Load Variable Annuity Information Kit
Insights Reports
The Challenge of Preparing for Retirement
Financial Planning After Retirement
The Roth IRA: A Review
Software Packages
T. Rowe Price Retirement Planning Analyzer(TM) CD-ROM or diskette $19.95. To
order, please call 1-800-541-5760. Also available on the Internet for $9.95.
T. Rowe Price Variable Annuity Analyzer(TM) CD-ROM or diskette, free. To order,
please call 1-800-469-5304.
Many of these resources are also available for viewing or ordering on the
Internet at www.troweprice.com.
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For yield, price, last transaction, current balance, or to conduct transactions,
24 hours, 7 days a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a brokerage account or obtain information, call:
1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus appropriate to the fund or funds
covered in this report.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
4410 ArrowsWest Drive
Colorado Springs, CO 80907
Warner Center Plaza 5
Mezzanine Level
21800 Oxnard Street, Suite 270
Woodland Hills, CA 91367
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. C11-054 5/31/99
