Item 1. Report to Shareholders
November 30, 2004
Personal Strategy Funds
Semiannual Report
T. Rowe Price
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The views and opinions in this report were current as of November 30, 2004. They
are not guarantees of performance or investment results and should not be taken
as investment advice. Investment decisions reflect a variety of factors, and the
managers reserve the right to change their views about individual stocks,
sectors, and the markets at any time. As a result, the views expressed should
not be relied upon as a forecast of the fund's future investment intent. The
report is certified under the Sarbanes-Oxley Act of 2002, which requires mutual
funds and other public companies to affirm that, to the best of their knowledge,
the information in their financial reports is fairly and accurately stated in
all material respects.
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T. Rowe Price Personal Strategy Funds
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Fellow Shareholders
U.S. stocks produced moderate gains in the six-month period ended November 30,
2004, thanks to a late-period rally that lifted some indexes to their highest
levels of the year. Despite rising short-term interest rates, U.S. bonds also
produced favorable returns, as longer-term rates fell to levels not seen since
the spring. Non-U.S. stocks outperformed their domestic counterparts, as the
dollar fell to multiyear lows versus several foreign currencies. The Personal
Strategy Funds recorded solid gains for the period on the back of both their
equity and bond investments.
MARKET ENVIRONMENT
Six months ago, the economy was growing at a steady clip, job growth seemed to
be reviving, and the Federal Reserve was telegraphing its intentions to begin
raising short-term interest rates in the near future. Starting on June 30, the
central bank lifted the federal funds target rate--which had been at a 46-year
low--from 1.00% to 2.00% in four quarter-point increments. (Following the end of
our reporting period, the Federal Reserve raised rates by another quarter point
on December 14.) While the Fed began to unwind the highly accommodative monetary
policy of recent years, longer-term interest rates declined as economic growth
moderated and the pace of job creation lost momentum amid the uncertainty of a
heated presidential race and a surge in oil prices to $55 per barrel by the end
of October.
[GRAPHIC OMITTED]
INTEREST RATE LEVELS
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10-Year Treasury Note
5-Year Treasury Note
90-Day Treasury Bill
10-Year 5-Year 90-Day
Treasury Note Treasury Note Treasury Bill
11/30/03 4.33% 3.35% 0.93%
4.25 3.25 0.92
4.13 3.14 0.91
2/04 3.97 2.94 0.94
3.84 2.78 0.94
4.51 3.62 0.96
5/04 4.65 3.79 1.06
4.58 3.77 1.26
4.48 3.69 1.43
8/04 4.12 3.31 1.58
4.12 3.37 1.70
4.02 3.28 1.89
11/30/04 4.35 3.69 2.22
Major U.S. stock indexes, which had traded in a relatively narrow range, sprang
to life in late October as oil prices backed away from their highest levels and
many investors cheered the clear outcome of the presidential election. Value
stocks surpassed growth across all market capitalizations. Most sectors in the
large-cap universe advanced, especially energy and industrials and business
services
stocks. Information technology, consumer staples, and health care
shares lagged.
The Lehman Brothers U.S. Aggregate Index, a broad measure of the taxable
investment-grade bond market, returned 3.82% over the period. High-yield bonds
posted the strongest returns, but long-term Treasuries and corporate bonds also
generated solid numbers. Shorter-term bonds lagged.
MAJOR INDEX RETURNS
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Periods Ended 11/30/04 6 Months 12 Months
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S&P 500 Stock Index 5.68% 12.86%
Wilshire 4500 Index 10.16 15.98
MSCI EAFE Index 12.72 24.66
Lehman Brothers U.S. Aggregate Index 3.82 4.44
Citigroup 3-Month Treasury Bill Index 0.68 1.15
CS First Boston High Yield Index 9.31 12.85
Note: Unlike stocks and bonds, U.S. Treasuries are guaranteed as to the timely
payment of principal and interest.
Non-U.S. stocks strongly surpassed their domestic counterparts, partially
because a weaker U.S. dollar lifted the dollar value of assets denominated in
non-U.S. currencies. Among developed markets, Asian and European equities rose
strongly, but Japanese shares lagged with more modest gains. The MSCI EAFE
Index, which measures the performance of stocks in Europe, Australasia, and the
Far East, returned 12.72% in the six-month period.
MANAGER COMMENTARY
Over the last six months, the funds' investment committee continued to
overweight stocks relative to bonds. The committee, which meets monthly to
adjust the weightings of stocks, bonds, and money market securities within each
portfolio, began to overweight stocks relative to bonds in mid-2002 based upon
the outlook that an improving economy would increase corporate profits while
also putting upward pressure on interest rates.
Corporate profits and stock prices have indeed rebounded strongly over the past
two years, resulting in strong stock returns. Interest rates, however, have
remained surprisingly low. Indeed, the bond market now appears quite richly
priced. We believe this provides further reason to overweight equities. Although
we do not necessarily suppose that the
equity markets will outperform over the next three to six months, current
valuations and solid corporate earnings lead us to believe that equities should
fare better than bonds over the next couple of years.
We are overweighting non-U.S. equities within the portfolios as relative
valuations, and the prospect for continued weakness in the U.S. dollar, seem to
favor non-U.S. equities. Given strong performance in non-U.S. equities over the
last several years, however, we have been moderating our overweight to the
sector. We are modestly underweighting small-cap stocks, given the extended
outperformance among small-cap stocks that began in March 1999. Valuations are
not as dramatically compelling as at the beginning of the current small-cap
cycle, particularly relative to sectors such as large-cap growth.
The large-cap growth sector has been trailing the other U.S. equity sectors in
recent periods. A potentially less robust pace of economic recovery should favor
quality large-cap growth companies that can maintain steady earnings growth in a
slower economic environment. A weaker U.S. dollar should also benefit large-caps
as many U.S.-based multinational companies could see higher profits associated
with earnings in appreciating foreign currencies.
High-yield borrowers tend to do well when the economy is thriving, reducing the
chance that they will default. As with international and small-cap stocks,
however, strong performance has led to historically rich valuations in this
sector of the bond market. Over the past year, we have gradually moderated our
overweight in high-yield securities.
The funds continue to overweight non-U.S. dollar bonds. The falling U.S. dollar
has increased the appeal of foreign bonds, which pay their dividends and repay
their principal in appreciating foreign currencies. While prices of these bonds
have already risen, we perceive that the structural issues posed by the federal
deficit and trade imbalances will continue to put pressure on the dollar.
A wide variety of our equity holdings performed well in the past six months. As
might be expected, large integrated energy producers, such as BP, thrived as oil
prices reached record highs. A particularly strong performer was energy services
firm Baker Hughes, which benefited from heightened demand for production as well
as the need to repair facilities following hurricanes in the Gulf of Mexico.
Economic growth, especially
in China, fueled demand for a number of other commodities. Nucor benefited from
rising steel prices, a weak U.S. dollar, and steep surcharges passed on to
customers to cover the rising cost of materials. Industrial services firms, such
as Tyco International and GE, hammered out profits as businesses shipped more
goods and added productive capacity. GE's management reiterated its confidence
that the company's growth--considered a bellwether for the economy as a
whole--would remain strong in 2005. (Please refer to our financial statements
for a complete listing of the funds' holdings and the amount each represents in
the portfolios.)
PERSONAL STRATEGY INCOME FUND
The Personal Strategy Income Fund's investment objective is to generate the
highest total return consistent with an emphasis on income first and capital
appreciation second. The typical mix of securities for the fund is 40% stocks,
40% bonds, and 20% money market securities, although allocations can vary by as
much as 10 percentage points above or below these levels.
The Personal Strategy Income Fund posted solid gains for both the six and 12
months ended November 30, 2004, as shown in the table. The fund outpaced its
Combined Index Portfolio benchmark and the Lehman Brothers U.S. Aggregate Index
over both periods. Overweighting stocks helped our relative returns, as stocks
outperformed bonds over both periods. We were also helped by our overweights in
high-yield bonds and international stocks.
PERFORMANCE COMPARISON
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Periods Ended 11/30/04 6 Months 12 Months
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Personal Strategy Income Fund 6.81% 11.41%
Combined Index Portfolio * 4.76 8.03
Lehman Brothers U.S. Aggregate Index 3.82 4.44
* For a definition of the Combined Index Portfolio, please see the glossary
at the end of this report.
Please see the fund's quarter-end returns following this letter.
In line with our view that equity investments hold more promise at this stage of
the expansion, we increased our allocation to equities while reducing our
allocation to bonds. At the end of the period, equities represented
47.9% of the portfolio and bonds represented 37.8%. Our reserves increased to
14.3% of net assets.
PERSONAL STRATEGY BALANCED FUND
The Personal Strategy Balanced Fund's investment objective is to provide the
highest total return consistent with an emphasis on both income and capital
appreciation. The typical asset mix is 60% stocks, 30% bonds, and 10% cash--with
10-percentage-point variations above and below these levels permitted for each
asset class. This asset allocation offers higher risk but also a higher
potential return over the long term than the Income Fund.
The Personal Strategy Balanced Fund handily surpassed its benchmarks and
registered strong returns for the 6- and 12-month periods ended November 30,
2004. Overweighting stocks helped our relative returns, as stocks outperformed
bonds over both time~periods. We were also helped by our overweights in
high-yield bonds and international stocks.
PERFORMANCE COMPARISON
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Periods Ended 11/30/04 6 Months 12 Months
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Personal Strategy Balanced Fund 8.28% 14.56%
Combined Index Portfolio * 5.84 10.52
Merrill Lynch-Wilshire Capital Market Index 5.76 10.06
* For a definition of the Combined Index Portfolio, please see the glossary
at the end of this report.
Please see the fund's quarter-end returns following this letter.
The fund's equity weighting increased over the past six months, ending the
period at 68% of net assets. Meanwhile, reflecting our skepticism about bond
prices and views on the likely direction of interest rates, our bond allocation
fell to 27.1%. Our allocation toward reserves, while still low, increased to
4.9%.
PERSONAL STRATEGY GROWTH FUND
The Personal Strategy Growth Fund's investment objective is to seek capital
appreciation by investing primarily in common stocks. The typical asset mix is
80% stocks and 20% bond and money market securities, with 10-percentage-point
allocation variations from these levels permitted.
The Personal Strategy Growth Fund posted strong results that easily outpaced its
benchmarks for the 6- and 12-month periods ended November 30, 2004.
Overweighting stocks helped our relative returns, as stocks outperformed bonds
over both time periods. We were also helped by our allocations to high-yield
bonds and international stocks.
PERFORMANCE COMPARISON
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Periods Ended 11/30/04 6 Months 12 Months
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Personal Strategy Growth Fund 9.50% 17.41%
Combined Index Portfolio * 6.91 13.02
Merrill Lynch-Wilshire Capital Market Index 5.76 10.06
* For a definition of the Combined Index Portfolio, please see the glossary
at the end of this report.
Please see the fund's quarter-end returns following this letter.
The fund's stock allocation increased to 87.4% of net assets at the end of our
reporting period. Our bond allocation fell near the low end of its permitted
range, at 11.4%, while we maintained only 1.2% in money market securities. This
stance reflected both our optimism about equities and our concerns about the
impact of rising interest rates on bond prices.
OUTLOOK
We continue to believe that based on current valuations, equities should fare
better than bonds over the intermediate and longer terms, and the funds continue
to overweight stocks relative to bonds. At the same time, we believe equity
valuations outside the U.S. remain more attractive than those of domestic firms,
leading us to maintain our overweight in non-U.S. stocks relative to their
neutral weighting.
While overweighting equities, the funds also remain well diversified according
to their varying investment objectives. Fixed-income securities are an important
tool for diversification because they tend to be less
volatile than equities and generate income that can help offset principal
losses. We believe that investors should be well served by the funds'
fundamental commitment to diversification across asset classes.
Respectfully submitted,
Edmund M. Notzon III
Chairman of the funds' Investment Advisory Committee
December 17, 2004
The committee chairman has day-to-day responsibility for managing the portfolios
and works with committee members in developing and executing the funds'
investment programs.
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Risks of Investing
As with all stock and bond mutual funds, each fund's share price can fall
because of weakness in the stock or bond markets, a particular industry, or
specific holdings. Stock markets can decline for many reasons, including adverse
political or economic developments, changes in investor psychology, or heavy
institutional selling. The prospects for an industry or company may deteriorate
because of a variety of factors, including disappointing earnings or changes in
the competitive environment. In addition, the investment manager's assessment of
companies held in a fund may prove incorrect, resulting in losses or poor
performance even in rising markets.
Bonds are subject to interest rate risk, the decline in bond prices that usually
accompanies a rise in interest rates, and credit risk, the chance that any fund
holding could have its credit rating downgraded or that a bond issuer will
default (fail to make timely payments of interest or principal), potentially
reducing the fund's income level and share price. High-yield corporate bonds
could have greater price declines than funds that invest primarily in
high-quality bonds. Companies issuing high-yield bonds are not as strong
financially as those with higher credit ratings, so the bonds are usually
considered speculative investments.
Funds that invest overseas may carry more risk than funds that invest strictly
in U.S. assets. Risks can result from varying stages of economic and political
development, differing regulatory environments, trading days, and accounting
standards, and higher transaction costs of non-U.S. markets. Non-U.S.
investments are also subject to currency risk, or a decline in the value of a
foreign currency versus the U.S. dollar, which reduces the dollar value of
securities denominated in that currency.
Glossary
Citigroup 3-Month Treasury Bill Index: An unmanaged index that tracks short-term
U.S. government debt instruments.
Combined Index Portfolios: Unmanaged portfolios composed of the following
underlying indexes:
Personal Strategy Income--40% stocks (34% Wilshire 5000 Index, 6% MSCI EAFE
Index), 40% bonds (Lehman Brothers U.S. Aggregate Index), and 20% money
market securities (Citigroup 3-Month Treasury Bill Index).
Personal Strategy Balanced--60% stocks (51% Wilshire 5000 Index, 9% MSCI EAFE
Index), 30% bonds (Lehman Brothers U.S. Aggregate Index), and 10% money
market securities (Citigroup 3-Month Treasury Bill Index).
Personal Strategy Growth--80% stocks (68% Wilshire 5000 Index, 12% MSCI EAFE
Index) and 20% bonds (Lehman Brothers U.S. Aggregate Index).
CS First Boston High Yield Index: An unmanaged index constructed to mirror the
high-yield debt market.
Duration: The average time (expressed in years) it takes investors to receive
the present value of the future cash flows on their investment. It is used to
measure the sensitivity of bond prices to interest rate changes (the shorter the
duration, the less the bond's price will rise or fall in value when interest
rates change). Duration is affected by maturity, the coupon, and the time
interval between payments. Other things being equal, a bond with a higher coupon
will have a shorter duration, while zero-coupon bonds have the longest.
Lehman Brothers U.S. Aggregate Index: An unmanaged index that tracks
investment-grade corporate and government bonds.
Merrill Lynch-Wilshire Capital Market Index: A market capitalization-weighted
index including the Wilshire 5000 and Merrill Lynch High Yield II and Domestic
Master indexes.
MSCI EAFE Index: An unmanaged index that tracks the stocks of about 1,000
companies in Europe, Australasia, and the Far East (EAFE).
S&P 500 Stock Index: An unmanaged index that tracks the stocks of 500 primarily
large-cap U.S. companies.
Wilshire 4500 Index: An unmanaged index that tracks the performance of all
stocks in the Wilshire 5000 Equity Index, excluding those found in the S&P 500
Stock Index.
Wilshire 5000 Index: An unmanaged index that tracks the performance of the most
active stocks in the broad U.S. market.
T. Rowe Price Personal Strategy Funds
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PORTFOLIO HIGHLIGHTS
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PORTFOLIO OVERVIEW
Percent of Percent of
Net Assets Net Assets
11/30/04 11/30/04
Personal Strategy Income Fund
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Reserves 14.3% Stocks 47.9%
Bonds 37.8% Five Largest Holdings:
Treasuries/Agencies 9.4 Nucor 0.8
Mortgage-Backed 9.3 Tyco International 0.8
Corporate 17.2 Microsoft 0.8
Municipal Securities 0.5 UnitedHealth Group 0.7
Foreign Government 1.4 Citigroup 0.6
Personal Strategy Balanced Fund
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Reserves 4.9% Stocks 68.0%
Bonds 27.1% Five Largest Holdings:
Treasuries/Agencies 6.8 Nucor 1.2
Mortgage-Backed 6.7 Tyco International 1.2
Corporate 12.0 Microsoft 1.1
Municipal Securities 0.4 UnitedHealth Group 0.9
Foreign Government 1.2 Citigroup 0.9
Personal Strategy Growth Fund
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Reserves 1.2% Stocks 87.4%
Bonds 11.4% Five Largest Holdings:
Treasuries/Agencies 2.8 Nucor 1.5
Mortgage-Backed 3.0 Microsoft 1.5
Corporate 5.0 Tyco International 1.4
Municipal Securities 0.2 UnitedHealth Group 1.2
Foreign Government 0.4 Citigroup 1.2
T. Rowe Price Personal Strategy Funds
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GROWTH OF $10,000
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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.
[GRAPHIC OMITTED]
PERSONAL STRATEGY INCOME FUND
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As of 11/30/04
Personal Strategy Income Fund $25,345
Combined Index Portfolio* $22,634
Lehman Brothers U.S. Aggregate Index $20,991
Personal Strategy Combined Lehman Brothers
Income Fund Index Portfolio* U.S. Aggregate Index
11/94 $10,000 $10,000 $10,000
11/95 12,414 12,052 11,764
11/96 14,212 13,547 12,478
11/97 15,981 15,342 13,421
11/98 17,739 17,272 14,689
11/99 18,633 18,916 14,683
11/00 19,687 19,377 16,014
11/01 20,421 19,469 17,801
11/02 20,038 18,999 19,108
11/03 22,749 20,851 20,098
11/04 25,345 22,634 20,991
AVERAGE ANNUAL COMPOUND TOTAL RETURN
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This table shows how the fund and its benchmarks would have performed if their
actual (or cumulative) returns for the periods shown had been earned at a
constant rate.
Periods Ended 11/30/04 1 Year 5 Years 10 Years
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Personal Strategy Income Fund 11.41% 6.35% 9.75%
Lehman Brothers U.S. Aggregate Index 4.44 7.41 7.70
Combined Index Portfolio * 8.03 3.65 8.51
* An unmanaged portfolio composed of 40% stocks (34% Wilshire 5000 Index, 6%
MSCI EAFE Index), 40% bonds (Lehman Brothers U.S. Aggregate Index), and 20%
money market securities (Citigroup 3-Month Treasury Bill Index).
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Personal Strategy Funds
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GROWTH OF $10,000
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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.
[GRAPHIC OMITTED]
PERSONAL STRATEGY BALANCED FUND
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As of 11/30/04
Personal Strategy Balanced Fund $27,939
Combined Index Portfolio* $24,800
Merrill Lynch - Wilshire Capital Market Index $25,795
Personal Strategy Combined Merrill Lynch - Wilshire
Balanced Fund Index Portfolio* Capital Market Index
11/94 $10,000 $10,000 $10,000
11/95 12,750 12,455 12,753
11/96 14,950 14,424 14,884
11/97 17,177 16,815 17,845
11/98 19,314 19,299 20,555
11/99 20,904 21,898 23,637
11/00 21,893 21,826 23,167
11/01 21,973 21,051 22,152
11/02 20,911 19,747 20,637
11/03 24,389 22,440 23,436
11/04 27,939 24,800 25,795
AVERAGE ANNUAL COMPOUND TOTAL RETURN
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This table shows how the fund and its benchmarks would have performed if their
actual (or cumulative) returns for the periods shown had been earned at a
constant rate.
Periods Ended 11/30/04 1 Year 5 Years 10 Years
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Personal Strategy Balanced Fund 14.56% 5.97% 10.82%
Merrill Lynch-Wilshire Capital
Market Index 10.06 1.76 9.94
Combined Index Portfolio * 10.52 2.52 9.51
* An unmanaged portfolio composed of 60% stocks (51% Wilshire 5000 Index, 9%
MSCI EAFE Index), 30% bonds (Lehman Brothers U.S. Aggregate Index), and 10%
money market securities (Citigroup 3-Month Treasury Index).
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Personal Strategy Funds
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GROWTH OF $10,000
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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.
[GRAPHIC OMITTED]
PERSONAL STRATEGY GROWTH FUND
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As of 11/30/04
Personal Strategy Growth Fund $30,403
Combined Index Portfolio* $26,905
Merrill Lynch - Wilshire Capital Market Index $25,795
Personal Strategy Combined Merrill Lynch - Wilshire
Growth Fund Index Portfolio* Capital Market Index
11/94 $10,000 $10,000 $10,000
11/95 13,098 12,869 12,753
11/96 15,828 15,348 14,884
11/97 18,580 18,405 17,845
11/98 21,139 21,492 20,555
11/99 23,474 25,251 23,637
11/00 24,448 24,454 23,167
11/01 23,707 22,602 22,152
11/02 21,788 20,344 20,637
11/03 25,894 23,806 23,436
11/04 30,403 26,905 25,795
AVERAGE ANNUAL COMPOUND TOTAL RETURN
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This table shows how the fund and its benchmarks would have performed if their
actual (or cumulative) returns for the periods shown had been earned at a
constant rate.
Periods Ended 11/30/04 1 Year 5 Years 10 Years
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Personal Strategy Growth Fund 17.41% 5.31% 11.76%
Merrill Lynch-Wilshire Capital
Market Index 10.06 1.76 9.94
Combined Index Portfolio * 13.02 1.28 10.40
* An unmanaged portfolio composed of 80% stocks (68% Wilshire 5000 Index, 12%
MSCI EAFE Index) and 20% bonds (Lehman Brothers U.S. Aggregate Index).
Returns do not reflect taxes that the shareholder may pay on fund distributions
or the redemption of fund shares. Past performance cannot guarantee future
results.
T. Rowe Price Personal Strategy Funds
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FUND EXPENSE EXAMPLE
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As a mutual fund shareholder, you may incur two types of costs: (1) transaction
costs such as redemption fees or sales loads and (2) ongoing costs, including
management fees, distribution and service (12b-1) fees, and other fund expenses.
The following example is intended to help you understand your ongoing costs (in
dollars) of investing in the fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The example is based on an investment
of $1,000 invested at the beginning of the most recent six-month period and held
for the entire period.
Actual Expenses
The first line of the following table ("Actual") provides information about
actual account values and expenses based on the fund's actual returns. You may
use the information in this line, together with your account balance, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
Hypothetical Example for Comparison Purposes
The information on the second line of the table ("Hypothetical") is based on
hypothetical account values and expenses derived from the fund's actual expense
ratio and an assumed 5% per year rate of return before expenses (not the fund's
actual return). You may compare the ongoing costs of investing in the fund with
other funds by contrasting this 5% hypothetical example and the 5% hypothetical
examples that appear in the shareholder reports of the other funds. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period.
Note: T. Rowe Price charges an annual small-account maintenance fee of $10,
generally for accounts with less than $2,000 ($500 for UGMA/UTMA). The fee is
waived for any investor whose T. Rowe Price mutual fund accounts total $25,000
or more, accounts employing automatic investing, and IRAs and other retirement
plan accounts that utilize a prototype plan sponsored by T. Rowe Price (although
a separate custodial or administrative fee may apply to such accounts). This fee
is not included in the accompanying tables. If you are subject to the fee, keep
it in mind when you are estimating the ongoing expenses of investing in the fund
and when comparing the expenses of this fund with other funds.
You should also be aware that the expenses shown in the table highlight only
your ongoing costs and do not reflect any transaction costs, such as redemption
fees or sales loads. Therefore, the second line of the table is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds. To the extent a fund charges transaction costs,
however, the total cost of owning that fund is higher.
T. ROWE PRICE PERSONAL STRATEGY INCOME FUND
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Beginning Ending Expenses Paid
Account Value Account Value During Period*
6/1/04 11/30/04 6/1/04 to 11/30/04
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Actual $1,000 $1,068.10 $3.89
Hypothetical (assumes 5%
return before expenses) 1,000 1,021.31 3.80
* Expenses are equal to the fund's annualized expense ratio for the six-month
period (0.75%), multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half year (183)
divided by the days in the year (365) to reflect the half-year period.
T. ROWE PRICE PERSONAL STRATEGY BALANCED FUND
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Beginning Ending Expenses Paid
Account Value Account Value During Period*
6/1/04 11/30/04 6/1/04 to 11/30/04
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Actual $1,000 $1,082.80 $4.54
Hypothetical (assumes 5%
return before expenses) 1,000 1,020.71 4.41
* Expenses are equal to the fund's annualized expense ratio for the six-month
period (0.87%), multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half year (183)
divided by the days in the year (365) to reflect the half-year period.
T. ROWE PRICE PERSONAL STRATEGY GROWTH FUND
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Beginning Ending Expenses Paid
Account Value Account Value During Period*
6/1/04 11/30/04 6/1/04 to 11/30/04
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Actual $1,000 $1,095.00 $5.20
Hypothetical (assumes 5%
return before expenses) 1,000 1,020.10 5.01
* Expenses are equal to the fund's annualized expense ratio for the six-month
period (0.99%), multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half year (183)
divided by the days in the year (365) to reflect the half-year period.
T. Rowe Price Personal Strategy Funds
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QUARTER-END RETURNS
- --------------------------------------------------------------------------------
Periods Ended 12/31/04 1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Personal Strategy Income Fund 9.95% 6.27% 9.81%
Combined Index Portfolio * 7.49 3.43 8.62
Lehman Brothers U.S. Aggregate Index 4.34 7.71 7.72
- --------------------------------------------------------------------------------
Personal Strategy Balanced Fund 12.55 5.87 10.92
Combined Index Portfolio * 9.70 2.12 9.67
Merrill Lynch-Wilshire Capital
Market Index 9.54 1.23 10.11
- --------------------------------------------------------------------------------
Personal Strategy Growth Fund 14.99 5.09 11.89
Combined Index Portfolio * 11.92 0.70 10.63
Merrill Lynch-Wilshire Capital
Market Index 9.54 1.23 10.11
- --------------------------------------------------------------------------------
* For definitions of the Combined Index Portfolios, please see the glossary
on page 8 of this report.
Current performance may be lower or higher than the quoted past performance,
which cannot guarantee future results. Share price, principal value, and return
will vary, and you may have a gain or loss when you sell your shares. For the
most recent month-end performance information, please visit our Web site
(troweprice.com) or contact a T. Rowe Price representative at 1-800-225-5132.
This table provides returns through the most recent calendar quarter-end rather
than through the end of the funds' fiscal period. It shows how the funds would
have performed each year if their actual (or cumulative) returns for the periods
shown had been earned at a constant rate. Average annual total return figures
include changes in principal value, reinvested dividends, and capital gain
distributions. Returns do not reflect taxes that the shareholder may pay on fund
distributions or the redemption of fund shares. When assessing performance,
investors should consider both short- and long-term returns.
November 30, 2004
Personal Strategy Income Fund
Semiannual Report - Financial Statements
T. Rowe Price
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited
FINANCIAL HIGHLIGHTS For share outstanding throughout each period
- --------------------------------------------------------------------------------
6 Months Year
Ended Ended
11/30/04 5/31/04 5/31/03 5/31/02 5/31/01 5/31/00
NET ASSET
VALUE
Beginning
of period $ 13.92 $ 12.83 $ 12.87 $ 13.14 $ 13.00 $ 13.35
Investment
activities
Net
investment
income (loss) 0.18*++ 0.32*++ 0.35*++ 0.43* 0.52* 0.54*
Net realized
and unrealized
gain (loss) 0.76 1.10 (0.02) (0.26) 0.31 0.02
Total from
investment
activities 0.94 1.42 0.33 0.17 0.83 0.56
Distributions
Net investment
income (0.17) (0.32) (0.37) (0.44) (0.53) (0.54)
Net realized
gain -- (0.01) -- -- (0.16) (0.37)
Total
distributions (0.17) (0.33) (0.37) (0.44) (0.69) (0.91)
NET ASSET VALUE
End of
period $ 14.69 $ 13.92 $ 12.83 $ 12.87 $ 13.14 $ 13.00
-----------------------------------------------------------------
Ratios/
Supplemental Data
Total
return^ 6.81%*++ 11.20%*++ 2.80%*++ 1.40%* 6.54%* 4.39%*
Ratio of total
expenses to
average net
assets 0.75%*++! 0.75%*++ 0.80%*++ 0.90%* 0.90%* 0.90%
Ratio of net
investment
income (loss)
to average
net assets 2.47%*++! 2.36%*++ 2.89%*++ 3.34%* 4.04%* 4.06%*
Portfolio
turnover rate 75.3%+ 97.5% 108.5% 115.9% 79.8% 45.4%
Net assets,
end of period
(in thousands) $375,128 $358,086 $293,775 $270,372 $246,144 $198,885
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* See Note 4. Excludes expenses in excess of a 0.80% and a 0.90% contractual
expense limitation in effect through 9/30/06 and 5/31/02, respectively.
++ See Note 4. Excludes expenses permanently waived of 0.05%, 0.05% and 0.00%
of average net assets for the six months ended 11/30/04 the years ended
5/31/04 and 5/31/03, respectively, related to investments in T. Rowe Price
Mutual Funds.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 2004
PORTFOLIO OF INVESTMENTS (1) Shares/$ Par Value
- --------------------------------------------------------------------------------
(Cost and value in $ 000s)
COMMON STOCKS 47.8%
CONSUMER DISCRETIONARY 6.9%
Auto Components 0.1%
Autoliv GDR (SEK) 4,400 206
Keystone Automotive * 1,700 40
Koito Manufacturing (JPY)(ss.) 10,000 82
Strattec Security *(ss.) 500 32
TRW * 1,600 34
394
Automobiles 0.6%
Ford Motor 53,800 763
Fuji Heavy Industries (JPY)(ss.) 13,000 60
Harley-Davidson 9,400 543
Honda (JPY) 2,400 115
Peugeot (EUR)(ss.) 1,793 109
Renault (EUR)(ss.) 1,664 136
Toyota Motor (JPY) 13,500 506
Winnebago(ss.) 200 8
2,240
Distributors 0.0%
Cycle & Carriage (SGD) 2,753 17
17
Hotels, Restaurants & Leisure 1.1%
Applebee's 1,875 48
BJ's Restaurants * 900 13
Carnival 17,700 938
CEC Entertainment * 1,150 47
Compass (GBP) 5,881 26
Hilton Group (GBP) 11,097 55
International Game Technology 26,500 937
Marriott, Class A 4,300 244
McDonald's 7,700 237
Mitchells & Butlers (GBP) 13,500 78
Panera Bread, Class A *(ss.) 1,000 40
PF Chang's China Bistro *(ss.) 1,100 62
Red Robin Gourmet Burgers * 700 36
Ruby Tuesday(ss.) 1,100 30
Sonic *(ss.) 3,487 102
Starbucks * 6,500 366
Starwood Hotels & Resorts Worldwide 11,900 622
Texas Roadhouse, Class A * 200 5
The Cheesecake Factory *(ss.) 2,300 112
Whitbread (GBP) 6,157 94
4,092
Household Durables 0.7%
Fortune Brands 3,200 251
Goldcrest (JPY) 1,700 116
Jarden *(ss.) 3,000 115
Newell Rubbermaid 56,400 1,302
Persimmon (GBP) 7,935 94
Philips Electronics (EUR) 3,850 99
Pioneer (JPY) 5,400 101
SEB (EUR) 466 47
Sony (JPY) 6,100 222
Thomson (EUR)(ss.) 9,095 218
2,565
Internet & Catalog Retail 0.3%
Amazon.com * 900 36
eBay * 8,300 933
J. Jill Group * 1,900 33
priceline.com *(ss.) 1,900 45
1,047
Leisure Equipment & Products 0.3%
Brunswick 3,200 156
Eastman Kodak 19,800 648
Heiwa (JPY) 2,100 31
MarineMax * 1,400 41
Noritsu Koki (JPY) 2,400 50
Polaris Industries(ss.) 900 59
SCP Pool(ss.) 1,968 62
1,047
Media 2.0%
Aegis (GBP) 52,146 102
Astro All Asia, 144A (MYR) * 22,500 33
British Sky Broadcasting (GBP) 9,195 98
Clear Channel Communications 7,700 259
Comcast
Class A * 32,211 968
Special Class A * 12,800 379
Disney 28,000 753
EchoStar Communications, Class A * 15,700 515
Emmis Communications *(ss.) 1,800 33
Entercom Communications * 1,200 43
Gestevision Telecino (EUR) * 300 6
Getty Images * 500 29
Liberty Media, Class A * 6,000 62
McGraw-Hill 400 35
New York Times, Class A 19,600 804
News Corp
Class A *(ss.) 32,900 582
Class B *(ss.) 1,200 22
News Corp GDR, Class B (AUD) * 4,151 74
Omnicom 2,500 202
Publicis (EUR) 3,965 131
Scholastic * 3,500 115
Scripps, Class A 10,000 467
Singapore Press (SGD) 9,500 27
Time Warner * 36,500 646
Viacom, Class B 23,428 813
Washington Post, Class B 201 189
WPP Group (GBP) 9,305 103
WPP Group ADR(ss.) 1,600 88
Young Broadcasting, Class A *(ss.) 1,200 12
7,590
Multiline Retail 0.6%
Big Lots *(ss.) 2,200 25
Kohl's * 4,300 198
Neiman Marcus, Class A 300 20
Nordstrom 15,700 687
Target 24,500 1,255
2,185
Specialty Retail 1.2%
AC Moore Arts & Crafts *(ss.) 900 26
AnnTaylor Stores * 5,400 118
Best Buy 15,750 888
Charles Voegele (CHF) 865 39
Christopher & Banks 2,125 42
Dixons (GBP) 30,078 83
Esprit Holdings (HKD) 11,500 63
Home Depot 42,700 1,783
Hot Topic *(ss.) 2,300 38
Kesa Electricals (GBP) 3,952 20
Linens 'n Things * 1,900 47
Monro Muffler Brake * 2,200 54
Nobia (SEK) 5,938 90
The Finish Line, Class A(ss.) 1,200 22
Toys "R" Us * 65,400 1,265
Ultimate Electronics *(ss.) 900 3
4,581
Textiles, Apparel, & Luxury Goods 0.0%
Adidas-Salomon (EUR) 626 98
Culp *(ss.) 700 4
Unifi *(ss.) 2,100 8
World Company (JPY) 1,700 60
Yue Yuen Industrial (HKD) 32,000 83
253
Total Consumer Discretionary 26,011
CONSUMER STAPLES 3.2%
Beverages 0.3%
Allied Domecq (GBP) 14,860 147
Asahi Breweries (JPY) 5,000 59
Coca-Cola 3,600 142
Kirin Brewery (JPY) 14,000 134
Lion Nathan (NZD) 19,938 122
PepsiCo 10,920 545
1,149
Food & Staples Retailing 1.2%
Casey's General Stores 5,900 114
Casino Guichard-Perrachon (EUR)(ss.) 2,130 163
Coles Myer (AUD) 11,709 90
CVS 33,800 1,534
J Sainsbury (GBP) 16,367 82
Matsumotokiyoshi (JPY) 2,300 64
METRO (EUR) 6,337 318
Performance Food Group * 3,600 95
Sysco 7,500 261
Tesco (GBP) 25,637 147
Wal-Mart 23,800 1,239
Wal-Mart de Mexico, Series V (MXN) 46,800 160
Wild Oats Markets *(ss.) 2,700 19
York-Benimaru (JPY) 2,500 69
4,355
Food Products 0.7%
American Italian Pasta, Class A(ss.) 1,000 19
Associated British Foods (GBP) 8,994 128
Campbell Soup 19,200 548
General Mills 16,220 738
Koninklijke Wessanen GDS (EUR) 6,844 86
Nestle (CHF) 1,305 334
Seneca Foods
Class A *(ss.) 300 5
Class B * 200 4
Unilever N.V. (GBP) 27,273 249
Unilever N.V. ADS 7,800 492
2,603
Household Products 0.4%
Colgate-Palmolive 15,100 694
Kimberly-Clark 7,000 445
Procter & Gamble 4,500 241
1,380
Personal Products 0.0%
Chattem *(ss.) 600 22
Gillette 2,700 117
L'Oreal (EUR)(ss.) 761 55
194
Tobacco 0.6%
Altria Group 30,250 1,739
UST 11,200 493
2,232
Total Consumer Staples 11,913
ENERGY 3.5%
Energy Equipment & Services 1.4%
Atwood Oceanics * 1,500 79
Baker Hughes 43,400 1,924
BJ Services 8,800 446
FMC Technologies * 4,500 148
Grant Prideco * 8,500 183
Hanover Compressor *(ss.) 4,400 64
Hydril *(ss.) 1,000 47
Key Energy Services * 2,300 29
Lone Star Technologies *(ss.) 1,200 38
National Oilwell *(ss.) 5,500 199
Schlumberger 15,000 984
Seacor Holdings *(ss.) 2,400 133
Smith International * 12,300 745
Technip (EUR) 311 52
Transocean * 1,700 68
W-H Energy Services * 1,100 25
5,164
Oil & Gas 2.1%
BP (GBP) 25,338 258
BP ADR 24,302 1,491
ChevronTexaco 23,498 1,283
Eni SPA (EUR) 17,868 438
ExxonMobil 18,930 970
Forest Oil * 3,850 131
INPEX (JPY) * 5 25
Marathon Oil 13,700 540
Murphy Oil 1,300 111
Noble Energy 2,200 140
Norsk Hydro (NOK) 1,468 120
OMV (EUR) 100 26
Petroleo Brasileiro (Petrobras) ADR(ss.) 8,100 279
Shell Transport & Trading (GBP) 34,370 288
Shell Transport & Trading ADR 3,700 187
Statoil ASA (NOK) 17,118 271
Tonen General Sekiyu (JPY)(ss.) 6,000 56
Total (EUR)(ss.) 2,228 487
Unocal 15,700 723
Woodside Petroleum (AUD) 6,117 99
7,923
Total Energy 13,087
FINANCIALS 10.0%
Capital Markets 2.2%
Affiliated Managers Group *(ss.) 1,500 95
AmeriTrade * 31,500 439
Babcock & Brown (AUD) * 4,612 34
Bank of New York 10,100 332
Charles Schwab 17,000 183
Credit Suisse Group (CHF) * 6,567 256
Franklin Resources 11,700 768
Goldman Sachs 6,700 702
Investors Financial Services(ss.) 1,900 83
Legg Mason 10,050 685
Macquarie Bank (AUD) 5,872 199
Mellon Financial 49,100 1,435
Merrill Lynch 12,500 696
Morgan Stanley 6,700 340
National Financial Partners 900 31
Northern Trust 12,600 593
Piper Jaffray Cos * 2,600 120
State Street 24,800 1,105
8,096
Commercial Banks 2.7%
ABN Amro Holdings (EUR) 7,851 192
Alliance & Leicester (GBP) 8,739 142
Australia & New Zealand Banking (AUD) 22,415 347
Banca Intesa (EUR) 33,353 147
Banco Santander Central Hispano (EUR) 19,320 232
Banco Santander Chile ADR 3,784 113
Bank Austria Creditanstalt (EUR)(ss.) 2,693 228
Bank of America 38,800 1,795
Bank of Ireland (Dublin Listing) (EUR) 10,589 161
Bank of Yokohama (JPY) 23,000 145
Barclays (GBP) 49,904 514
BNP Paribas (EUR)(ss.) 5,135 356
Boston Private Financial(ss.) 1,500 41
Chittenden 5,200 153
Citizens Banking(ss.) 3,900 137
DBS Group (SGD) 19,978 193
Dexia (EUR) 5,105 109
Glacier Bancorp 1,326 46
Grupo Financiero Banorte (MXN) 59,708 335
HBOS (GBP) 16,473 230
HSBC (GBP) 11,871 202
Joyo Bank (JPY) 20,000 94
Mitsubishi Tokyo Financial (JPY) 11 104
National Australia Bank (AUD) 12,159 264
NORDEA (SEK) 36,229 355
Pinnacle Financial Partners *(ss.) 100 2
Provident Bankshares 2,500 92
Royal Bank of Scotland (GBP) 16,236 498
Sandy Spring Bancorp(ss.) 1,500 54
SEB, Series A (SEK) 10,662 202
Signature Bank *(ss.) 200 6
Southwest Bancorp of Texas 5,300 130
Sumitomo Mitsui Financial (JPY)(ss.) 26 180
Svenska Handelsbanken, Series A (SEK) 9,759 237
Texas Capital Bancshares *(ss.) 2,000 41
The 77 Bank (JPY) 12,000 78
U.S. Bancorp 35,200 1,043
UniCredito Italiano (EUR) 26,091 144
Valley National Bancorp(ss.) 3,734 104
Wells Fargo 10,700 661
WestAmerica 2,800 163
10,270
Consumer Finance 0.7%
AIFUL (JPY) 1,200 136
American Express 34,600 1,928
SLM Corporation 12,300 629
2,693
Diversified Financial Services 0.9%
Assured Guaranty 4,900 90
Citigroup 53,790 2,407
ING Groep GDS (EUR) 6,974 192
J.P. Morgan Chase 17,368 654
3,343
Insurance 2.2%
Aioi Insurance (JPY) 25,000 110
American International Group 36,617 2,320
Aspen Insurance Holdings 2,300 57
Aviva (GBP) 10,399 115
AXA (EUR) 12,431 290
Bristol West Holdings(ss.) 2,600 52
Brown & Brown(ss.) 800 32
CNP Assurances (EUR) 2,987 202
Genworth Financial, Class A 23,800 626
Hannover Rueckversicherung (EUR) 2,133 77
Harleysville Group 800 19
Hartford Financial Services 10,100 646
Horace Mann Educators(ss.) 4,700 89
Infinity Property & Casualty 2,600 96
Insurance Australia Group (AUD)(ss.) 17,289 78
Markel *(ss.) 300 97
Marsh & McLennan 9,500 272
Mitsui Sumitomo Insurance (JPY) 12,000 106
Ohio Casualty *(ss.) 6,500 140
PartnerRe 1,800 110
QBE Insurance (AUD) 11,058 119
Royal & Sun Alliance (GBP) 55,704 78
SAFECO(ss.) 19,500 945
Selective Insurance(ss.) 1,600 72
St. Paul Companies 16,110 588
Unipol (EUR) 32,107 142
UnumProvident(ss.) 20,800 324
W. R. Berkley 1,425 65
XL Capital 5,500 415
8,282
Real Estate 0.8%
Arden Realty, REIT 1,900 68
China Overseas Land (HKD) 236,000 56
Corio (EUR) 1,820 99
EastGroup Properties, REIT 2,400 90
Equity Lifestyle Properties, REIT 900 33
Essex Property Trust, REIT 300 24
Federal Realty Investment Trust, REIT 13,200 662
Gables Residential Trust, REIT(ss.) 2,100 75
General Property Trust, Equity Units (AUD)(ss.) 54,341 153
LaSalle Hotel Properties, REIT(ss.) 1,200 37
Mirvac (AUD) 18,474 67
Parkway Properties, REIT(ss.) 1,000 50
Reckson Associates Realty, REIT 16,471 533
Simon Property Group, REIT 12,868 799
Sun Hung Kai Properties (HKD) 13,000 129
Washington SBI, REIT(ss.) 2,600 86
Westfield Group (AUD) 4,901 60
Wheelock (HKD) 29,000 48
3,069
Thrifts & Mortgage Finance 0.5%
Bradford & Bingley (GBP) 23,276 122
Fannie Mae 13,400 921
Frankfort First 300 7
Freddie Mac 6,600 450
Hypo Real Estate (EUR) * 5,249 203
Triad Guaranty *(ss.) 700 42
1,745
Total Financials 37,498
HEALTH CARE 5.3%
Biotechnology 0.7%
Abgenix *(ss.) 100 1
Alexion Pharmaceutical *(ss.) 900 19
Alkermes *(ss.) 2,600 36
Amgen * 17,900 1,075
Amylin Pharmaceuticals *(ss.) 1,100 22
Anadys Pharmaceuticals * 2,100 14
Biogen Idec * 4,600 270
Cephalon *(ss.) 981 47
CSL Limited (AUD) 1,890 39
Cubist Pharmaceuticals *(ss.) 2,300 27
CV Therapeutics *(ss.) 600 13
Cytogen *(ss.) 1,300 13
Cytokinetics *(ss.) 200 2
deCODE GENETICS *(ss.) 900 6
Dynavax Technologies *(ss.) 1,000 7
Exelixis *(ss.) 1,900 17
Genentech * 4,200 203
Gilead Sciences * 15,300 527
Martek Biosciences *(ss.) 800 31
Memory Pharmaceuticals *(ss.) 1,000 6
Myriad Genetics *(ss.) 2,600 50
Neurocrine Biosciences *(ss.) 1,300 60
NPS Pharmaceuticals *(ss.) 600 11
ONYX Pharmaceuticals *(ss.) 1,300 41
OSI Pharmaceuticals * 200 9
Rigel Pharmaceuticals *(ss.) 700 17
Trimeris *(ss.) 1,400 17
Vertex Pharmaceuticals *(ss.) 3,396 36
2,616
Health Care Equipment & Supplies 0.9%
Advanced Neuromodulation Systems *(ss.) 1,600 58
Analogic(ss.) 1,100 50
Baxter International 22,500 712
Biomet 3,800 182
Boston Scientific * 10,200 355
DJ Orthopedics * 2,000 40
Edwards Lifesciences * 1,500 56
Elekta, Series B (SEK) * 2,878 79
EPIX Pharmaceuticals * 600 11
Guidant 2,700 175
Integra LifeSciences *(ss.) 2,300 78
Matthews International, Class A 3,300 122
Medtronic 15,200 730
NuVasive *(ss.) 1,500 14
ResMed *(ss.) 2,700 135
St. Jude Medical * 4,000 153
Steris * 2,700 62
Stryker 4,500 198
Thoratec *(ss.) 1,200 12
Wilson Greatbatch Technologies *(ss.) 1,200 24
3,246
Health Care Providers & Services 1.5%
Accredo Health * 3,000 81
Alliance UniChem (GBP) 5,060 69
AmerisourceBergen 11,400 672
Anthem *(ss.) 2,800 284
Celesio (EUR) 1,919 147
Henry Schein * 2,000 130
LabOne * 900 27
Lifeline Systems * 1,800 49
LifePoint Hospitals *(ss.) 300 11
Sunrise Senior Living *(ss.) 3,300 142
Suzuken (JPY) 1,500 35
Symbion *(ss.) 1,800 35
United Surgical Partners International *(ss.) 2,600 103
UnitedHealth Group 30,100 2,494
WellChoice * 1,100 54
WellPoint Health Networks * 9,500 1,188
5,521
Pharmaceuticals 2.2%
Abbott Laboratories 6,300 264
Able Laboratories *(ss.) 700 15
AstraZeneca ADR 3,900 154
Atherogenics *(ss.) 2,200 52
Eisai (JPY) 2,800 83
Elan ADR *(ss.) 7,300 193
Eli Lilly 3,100 165
Eon Labs *(ss.) 1,000 27
Forest Laboratories * 8,200 320
GlaxoSmithKline (GBP) 15,144 318
GlaxoSmithKline ADR 3,700 157
Hisamitsu Pharmaceutical (JPY) 3,000 55
Inspire Pharmaceuticals *(ss.) 2,600 47
Johnson & Johnson 14,800 893
Kobayashi Pharmaceutical (JPY)(ss.) 2,400 63
Medicines Company *(ss.) 1,000 25
Merck 13,000 364
Nektar Therapeutics *(ss.) 400 7
Novartis (CHF) 10,422 498
Noven Pharmaceuticals *(ss.) 2,700 49
Novo Nordisk, Series B (DKK) 1,093 58
Pfizer 53,916 1,497
Sanofi-Aventis (EUR)(ss.) 5,069 381
Schering-Plough 45,100 805
Takeda Chemical Industries (JPY) 2,700 133
Teva Pharmaceutical ADR(ss.) 11,700 319
Theravance *(ss.) 400 7
Wyeth 36,060 1,438
8,387
Total Health Care 19,770
INDUSTRIALS & BUSINESS SERVICES 6.2%
Aerospace & Defense 0.9%
Armor Holdings * 3,800 164
British Aerospace (GBP) 27,603 129
European Aeronautic Defense & Space (EUR)(ss.) 5,770 174
General Dynamics 2,800 304
Honeywell International 10,300 364
Lockheed Martin 33,700 2,050
Mercury Computer Systems *(ss.) 2,000 63
Rockwell Collins 1,600 64
3,312
Air Freight & Logistics 0.4%
EGL *(ss.) 3,400 115
Expeditors International of Washington 100 5
Pacer International * 2,100 41
Ryder System 800 43
TPG (EUR) 3,622 95
UPS, Class B 12,300 1,035
UTi Worldwide(ss.) 1,100 76
1,410
Airlines 0.0%
Frontier Airlines *(ss.) 1,800 21
Midwest Express Holdings *(ss.) 1,900 6
Qantas Airways (AUD) 15,963 44
71
Building Products 0.1%
Kaba Holding (CHF) 199 55
Pilkington (GBP) 55,474 113
Quixote 600 13
Trex *(ss.) 1,400 66
247
Commercial Services & Supplies 1.2%
Apollo Group, Class A * 6,900 550
Cendant 13,900 315
Central Parking(ss.) 4,400 67
ChoicePoint * 2,600 114
Consolidated Graphics * 2,600 123
Education Management * 700 23
Electro Rent(ss.) 1,800 25
First Advantage, Class A *(ss.) 600 11
G & K Services, Class A 2,300 94
Glory (JPY) 3,000 47
H&R Block 7,700 367
Herman Miller(ss.) 4,100 101
Intersections *(ss.) 200 4
Ionics *(ss.) 3,000 130
KForce *(ss.) 3,300 39
Layne Christensen *(ss.) 400 8
LECG * 2,200 43
R.R. Donnelley 29,400 1,020
Resources Connection *(ss.) 2,900 132
SOURCECORP *(ss.) 1,600 27
Tetra Tech *(ss.) 4,076 62
Waste Management 36,306 1,082
West Corporation *(ss.) 900 31
4,415
Construction & Engineering 0.1%
Acciona (EUR) 2,023 158
Balfour Beatty (GBP) 19,475 112
Downer EDI (AUD)(ss.) 15,645 54
Insituform Technologies *(ss.) 1,800 42
JGC (JPY)(ss.) 7,000 60
NCC AB, Series B (SEK) 10,044 127
553
Electrical Equipment 0.1%
A.O. Smith(ss.) 4,350 131
American Superconductor *(ss.) 700 9
Artesyn Technologies *(ss.) 2,600 25
Sumitomo Electric Industries (JPY) 7,000 73
Woodward Governor 300 22
260
Industrial Conglomerates 1.7%
3M 4,900 390
DCC (EUR) 5,816 122
GE 62,300 2,203
Hutchison Whampoa (HKD) 13,300 119
Sembcorp (SGD) 145,000 128
Siemens (EUR) 3,772 301
Tyco International 88,094 2,993
6,256
Machinery 1.1%
Actuant, Class A *(ss.) 2,460 116
Cascade(ss.) 1,000 32
Danaher 28,400 1,615
Deere 15,000 1,076
Fanuc (JPY)(ss.) 2,100 131
Graco 2,600 95
Guinness Peat Group (NZD) 37,637 58
Harsco 3,000 159
IDEX 1,050 42
Lindsay Manufacturing(ss.) 2,800 79
Mitsubishi Heavy Industries (JPY) 34,000 97
NSK (JPY) 10,000 47
Pall 14,600 396
SKF, Series B (SEK) 1,813 77
Toro(ss.) 1,200 87
4,107
Marine 0.0%
Nippon Yusen (JPY) 31,000 165
165
Road & Rail 0.6%
Arriva (GBP) 14,837 139
Burlington Northern Santa Fe 18,700 842
Genesee & Wyoming, Class A * 300 8
Heartland Express 2,109 46
Knight Transportation *(ss.) 4,500 108
Nippon Express (JPY) 12,000 57
Norfolk Southern 26,800 920
Overnite(ss.) 1,600 57
2,177
Trading Companies & Distributors 0.0%
Mitsubishi (JPY) 14,000 177
Sumitomo (JPY) 7,000 59
236
Total Industrials & Business Services 23,209
INFORMATION TECHNOLOGY 6.3%
Communications Equipment 1.4%
Belden CDT(ss.) 5,000 116
Black Box(ss.) 1,700 73
Cisco Systems * 62,900 1,177
Corning * 118,500 1,491
F5 Networks * 1,500 65
Ixia *(ss.) 1,300 18
Juniper Networks * 15,800 435
Lucent Technologies *(ss.) 174,100 684
Nokia (EUR) 6,330 103
Nokia ADR 10,900 176
Packeteer * 1,200 16
QUALCOMM 12,500 520
Riverstone Networks * 6,400 7
Sagem (EUR)(ss.) 1,026 94
Sirf Technology Holdings *(ss.) 2,800 35
Tekelec *(ss.) 1,100 26
Uniden (JPY) 2,000 42
5,078
Computers & Peripherals 0.6%
Applied Films * 200 4
Creative Technology (SGD) 2,950 37
Dell * 35,100 1,422
Emulex *(ss.) 3,100 44
Gateway * 9,300 63
IBM 2,000 188
Lexmark International * 2,400 204
Logitech International (CHF) * 1,419 83
NEC (JPY)(ss.) 9,000 50
QLogic * 5,200 179
Synaptics *(ss.) 1,500 58
Toshiba (JPY) 17,000 72
2,404
Electronic Equipment & Instruments 0.2%
Cogent *(ss.) 600 20
Digital Theater Systems *(ss.) 1,500 31
Global Imaging Systems *(ss.) 1,800 67
KEMET *(ss.) 4,900 44
Kyocera (JPY) 800 56
Littelfuse * 1,300 51
Methode Electronics(ss.) 3,200 42
Newport *(ss.) 2,200 27
Plexus *(ss.) 4,900 68
Shimadzu (JPY) 22,000 124
TDK (JPY) 1,300 93
Technitrol *(ss.) 1,000 17
Woodhead Industries(ss.) 3,100 47
687
Internet Software & Services 0.4%
Digital Insight *(ss.) 2,700 44
Google, Class A * 700 128
IAC/InterActiveCorp *(ss.) 13,400 331
MatrixOne *(ss.) 4,100 27
WebSideStory * 500 7
Yahoo! * 25,200 948
1,485
IT Services 0.6%
Accenture, Class A * 7,200 187
Affiliated Computer Services, Class A * 7,200 426
Automatic Data Processing 4,800 218
BISYS Group * 2,700 43
CACI International, Class A * 2,000 124
First Data 9,336 384
Fiserv * 8,800 339
Global Payments(ss.) 2,200 121
Indra Sistemas (EUR) 7,792 122
Iron Mountain * 4,500 136
Logica CMG (GBP) 10,861 38
Maximus *(ss.) 2,700 85
MPS Group *(ss.) 6,900 78
RightNow Technologies *(ss.) 1,900 34
Trans Cosmos (JPY)(ss.) 3,000 103
2,438
Office Electronics 0.1%
Canon (JPY) 3,000 150
Neopost (EUR) 1,304 94
244
Semiconductor & Semiconductor Equipment 1.1%
AMIS Holdings * 1,900 29
Analog Devices 14,400 532
Artisan Components * 800 28
Atheros Communications *(ss.) 1,400 16
ATMI *(ss.) 2,200 51
Brooks-Pri Automation * 1,800 28
Cabot Microelectronics *(ss.) 1,200 44
Credence Systems *(ss.) 3,200 24
Cymer *(ss.) 200 6
Entegris *(ss.) 4,200 41
Exar *(ss.) 3,000 42
Intel 30,500 682
Jenoptik (EUR) * 5,164 55
KLA-Tencor * 2,300 104
Lattice Semiconductor * 5,600 30
Maxim Integrated Products 20,600 844
Microchip Technology 2,800 79
Microsemi * 2,500 44
MKS Instruments *(ss.) 4,300 73
Mykrolis *(ss.) 4,400 54
PDF Solutions * 2,200 28
Power Integrations *(ss.) 1,100 22
Rohm (JPY) 200 19
Semiconductor Manufacturing International ADR *(ss.) 3,200 38
Semtech *(ss.) 4,600 94
Silicon Laboratories *(ss.) 1,600 48
Tessera Technologies * 1,800 64
Texas Instruments 15,900 384
Xilinx 18,500 577
4,080
Software 1.9%
Actuate * 1,900 4
Adobe Systems 11,800 715
Altiris *(ss.) 2,000 56
Blackbaud * 300 4
Catapult Communications * 900 24
Concord Communications *(ss.) 1,700 16
Electronic Arts * 800 39
FactSet Research Systems(ss.) 2,200 114
FileNet *(ss.) 3,800 102
Hyperion Solutions * 1,000 45
Internet Security Systems * 2,400 58
Intuit * 11,900 498
Jack Henry & Associates 6,000 116
Kronos *(ss.) 3,400 172
Magma Design Automation *(ss.) 1,600 22
Mercury Interactive * 700 32
Microsoft 111,500 2,989
Motive *(ss.) 1,600 20
NEC Soft (JPY) 2,300 59
NetIQ * 3,560 44
Open Solutions * 1,000 26
Oracle * 32,400 410
PortalPlayer *(ss.) 100 3
Progress Software *(ss.) 2,200 50
Quest Software *(ss.) 3,300 51
Red Hat * 2,300 33
RSA Security *(ss.) 3,000 63
SAP (EUR) 1,446 258
SAP ADR 12,300 547
SPSS * 1,300 21
Symantec * 4,500 287
Trend Micro (JPY) 1,500 79
Verisity *(ss.) 1,100 9
VERITAS Software * 9,925 217
Verity * 3,200 44
7,227
Total Information Technology 23,643
MATERIALS 3.9%
Chemicals 1.5%
Agrium 33,200 617
Airgas 7,400 197
Arch Chemicals 3,200 93
BASF (EUR) 4,064 273
Degussa (EUR)(ss.) 5,445 235
Dow Chemical 21,200 1,070
DuPont 17,002 771
Ferro 4,400 101
Hercules * 28,300 422
International Flavors & Fragrances 12,400 502
Kaneka (JPY) 11,000 120
MacDermid 800 29
Material Sciences * 1,900 32
Minerals Technologies(ss.) 2,500 166
Mitsubishi Gas Chemical (JPY)(ss.) 25,000 118
Mosaic * 5,600 97
Potash Corp./Saskatchewan 11,100 850
Symyx Technologies *(ss.) 1,800 57
Yara International (NOK) * 2,016 26
5,776
Construction Materials 0.2%
Aggregate (GBP) 60,558 113
Boral (AUD) 51,462 274
Cemex (MXN) 27,271 176
Lafarge (EUR) 661 62
RMC (GBP) 7,331 118
743
Containers & Packaging 0.0%
Chesapeake Corp. 1,500 41
Smurfit-Stone Container *(ss.) 400 7
48
Metals & Mining 1.9%
Alcoa 13,520 459
Anglo American (GBP) 4,754 115
BHP Billiton (AUD) 27,600 329
Bluescope Steel (AUD) 46,951 306
Gibraltar Industries(ss.) 900 22
Lihir Gold (AUD) *(ss.) 39,140 39
Meridian Gold *(ss.) 4,400 86
Nippon Steel (JPY) 92,000 227
NN 300 4
Nucor 59,800 3,163
Phelps Dodge 18,600 1,806
SSAB Svenskt Stal, Series A (SEK) 7,858 189
Steel Dynamics(ss.) 1,800 73
Voestalpine (EUR)(ss.) 1,579 113
6,931
Paper & Forest Products 0.3%
Buckeye Technologies *(ss.) 4,900 61
MeadWestvaco 13,800 464
UPM-Kymmene (EUR) 2,566 58
Weyerhaeuser 9,500 627
1,210
Total Materials 14,708
TELECOMMUNICATION SERVICES 1.3%
Diversified Telecommunication Services 0.5%
Cable & Wireless (GBP) 25,414 55
China Telecom (H shares) (HKD) 326,000 120
Royal KPN (EUR) 19,799 171
SBC Communications 12,600 317
Sprint 30,500 696
TDC (DKK) 2,989 122
Tele Norte Leste ADR(ss.) 7,500 115
Tele2, Series B (SEK)(ss.) 2,927 115
Telenor (NOK) 22,116 195
Telmex ADR(ss.) 3,000 105
Telus 900 23
2,034
Wireless Telecommunication Services 0.8%
America Movil ADR, Series L 4,300 201
Bouygues (EUR) 4,378 188
China Unicom (HKD) 44,000 34
KDDI (JPY) 40 197
mmO2 (GBP) * 138,874 303
Nextel Communications, Class A * 31,900 908
Spectrasite * 2,200 127
Telecom Italia Mobile (EUR) 40,581 268
Vodafone ADR 28,450 776
Western Wireless, Class A * 900 24
3,026
Total Telecommunication Services 5,060
UTILITIES 1.2%
Electric Utilities 0.9%
Black Hills(ss.) 900 28
Cleco 2,000 40
E.On (EUR) 5,143 432
El Paso Electric * 2,000 36
Electric Power, 144A (JPY) * 600 16
Exelon 14,074 587
FirstEnergy 13,719 579
Hong Kong Electric (HKD) 11,000 49
Iberdrola (EUR)(ss.) 7,841 184
Tohoku Electric Power (JPY) 8,100 144
TXU(ss.) 21,200 1,332
3,427
Gas Utilities 0.1%
Australian Gas Light (AUD) 6,683 67
Centrica (GBP) 49,628 234
Toho Gas (JPY) 43,000 139
440
Multi-Utilities & Unregulated Power 0.2%
Constellation Energy Group 10,200 446
RWE (EUR) 1,865 99
United Utilities (GBP) 10,023 107
652
Total Utilities 4,519
Total Common Stocks (Cost $131,246) 179,418
PREFERRED STOCKS 0.1%
Fresenius (EUR) 1,052 97
Porsche (EUR) 218 139
Total Preferred Stocks (Cost $137) 236
CORPORATE BONDS 6.9%
ABN Amro Bank (Chicago), 7.125%, 6/18/07 165,000 179
Ace Ina Holdings, 5.875%, 6/15/14 165,000 166
AIG Sunamerica Global Financing XII,
144A, 5.30%, 5/30/07 300,000 312
Alabama Power, VR, 2.57%, 8/25/09 155,000 155
Alcan, 6.125%, 12/15/33 195,000 200
Allstate Financial Global Funding, 144A,
5.25%, 2/1/07 165,000 171
Amerada Hess, 7.875%, 10/1/29 140,000 161
America Movil, 5.50%, 3/1/14 125,000 122
Amgen, 144A, 4.00%, 11/18/09 120,000 119
AOL Time Warner, 7.625%, 4/15/31 180,000 211
Appalachian Power, 4.80%, 6/15/05 200,000 202
AT&T Broadband, 8.375%, 3/15/13 220,000 267
Baker Hughes, 6.875%, 1/15/29 250,000 282
Bank One, 5.25%, 1/30/13 285,000 290
BB&T, 6.50%, 8/1/11 80,000 88
Black Hills, 6.50%, 5/15/13 190,000 195
Boeing, 8.75%, 8/15/21 95,000 126
Buckeye Partners
5.30%, 10/15/14 55,000 55
6.75%, 8/15/33 90,000 97
Bunge Limited Finance, 4.375%, 12/15/08 225,000 226
Canadian National Railway, 6.25%, 8/1/34 215,000 226
Canadian Natural Resources, 7.20%, 1/15/32 275,000 317
CE Electric UK Funding, 144A, 6.995%, 12/30/07 165,000 175
Celulosa Arauco y Constitucion, 5.125%, 7/9/13 190,000 186
Centerpoint Energy, 5.875%, 6/1/08 150,000 157
Centex, 4.55%, 11/1/10 160,000 158
Chancellor Media, 8.00%, 11/1/08 105,000 118
CIT Group, 2.875%, 9/29/06 105,000 104
CIT Group Holdings, 7.75%, 4/2/12 175,000 206
Citigroup, 5.00%, 9/15/14 210,000 210
Cleveland Electric Illuminating, 5.65%, 12/15/13 175,000 178
ConocoPhillips, 5.90%, 10/15/32 270,000 274
Countrywide Home Loans, 4.125%, 9/15/09 210,000 207
Cox Communications, 7.875%, 8/15/09 195,000 219
CVS, 144A, 4.00%, 9/15/09 115,000 114
DaimlerChrysler
6.50%, 11/15/13 245,000 262
VR, 2.342%, 9/10/07 170,000 170
Delta, ETC, 10.00%, 5/17/10 146,000 79
Deutsche Telekom International Finance,
STEP, 8.75%, 6/15/30 160,000 205
Developers Diversified Realty, 3.875%, 1/30/09 155,000 151
Devon Financing, 7.875%, 9/30/31 155,000 191
Diamond Offshore Drilling, 144A, 5.15%, 9/1/14 120,000 120
Dominion Resources, 5.00%, 3/15/13 145,000 143
Dow Chemical, 6.125%, 2/1/11 140,000 151
Duke Capital
4.302%, 5/18/06 105,000 106
6.25%, 2/15/13 190,000 204
Encana Holdings Finance, 5.80%, 5/1/14 215,000 226
Entergy Gulf States, 5.20%, 12/3/07 180,000 180
EOP Operating, 4.65%, 10/1/10 150,000 149
Exelon Generation, 5.35%, 1/15/14 180,000 182
Federated Department Stores, 6.625%, 4/1/11 165,000 183
First Union, 6.40%, 4/1/08 85,000 92
FirstEnergy, 7.375%, 11/15/31 110,000 122
Ford Motor Credit
5.625%, 10/1/08 500,000 508
VR, 3.24%, 11/16/06 110,000 110
France Telecom, STEP, 8.50%, 3/1/11 170,000 202
Franklin Resources, 3.70%, 4/15/08 65,000 64
Fund American Companies, 5.875%, 5/15/13 200,000 200
General Electric Capital, 6.00%, 6/15/12 220,000 238
Genworth Financial, 5.75%, 6/15/14 200,000 208
GlaxoSmithKline, 5.375%, 4/15/34 145,000 139
GM, 8.375%, 7/15/33 350,000 356
GMAC, 7.25%, 3/2/11 260,000 270
Goldman Sachs Capital I, 6.345%, 2/15/34 415,000 421
GTECH, 144A, 4.50%, 12/1/09 120,000 119
Halliburton, 144A, VR, 2.86%, 1/26/07 210,000 210
Harrah's Operating, 5.50%, 7/1/10 100,000 103
HBOS, 144A, 6.00%, 11/1/33 195,000 199
Hearst-Argyle, 7.00%, 1/15/18 145,000 160
Highmark, 144A, 6.80%, 8/15/13 160,000 172
Hospira, 4.95%, 6/15/09 205,000 208
Household Finance, 6.375%, 11/27/12 135,000 148
Hutchison Whampoa, 144A, 5.45%, 11/24/10 145,000 149
IBM, 4.25%, 9/15/09 215,000 217
International Lease Finance, 6.375%, 3/15/09 190,000 205
International Speedway, 4.20%, 4/15/09 95,000 94
John Deere Capital, 7.00%, 3/15/12 205,000 234
Kaneb Pipe Line Operations, 7.75%, 2/15/12 115,000 132
Kinder Morgan, 6.50%, 9/1/12 200,000 217
Kraft Foods, 5.625%, 11/1/11 205,000 215
Kroger, 8.05%, 2/1/10 205,000 237
Lear, 144A, 5.75%, 8/1/14 90,000 90
Lennar, 144A, 5.50%, 9/1/14 160,000 160
Masco, 5.875%, 7/15/12 265,000 282
May Department Stores, 144A, 3.95%, 7/15/07 65,000 65
MBNA America Bank, 4.625%, 8/3/09 215,000 217
McCormick, 6.40%, 2/1/06 325,000 337
MetLife, 6.125%, 12/1/11 240,000 259
Miller Brewing, 144A, 5.50%, 8/15/13 260,000 267
Morgan Stanley, 3.625%, 4/1/08 330,000 328
Motorola, 7.625%, 11/15/10 110,000 127
Nationwide Financial Services, 5.90%, 7/1/12 225,000 237
Nationwide Mutual Insurance, 144A, 6.60%, 4/15/34 115,000 111
News America, 144A, 6.20%, 12/15/34 115,000 114
NLV Financial, 144A, 7.50%, 8/15/33 140,000 148
Northern Trust, 4.60%, 2/1/13 120,000 118
NVR, 5.00%, 6/15/10 150,000 148
Panhandle Eastern Pipeline, 4.80%, 8/15/08 90,000 91
Pemex Project Funding Master Trust
7.375%, 12/15/14 140,000 153
144A, VR, 3.18%, 6/15/10 205,000 210
PG&E
6.05%, 3/1/34 165,000 166
VR, 2.72%, 4/3/06 62,000 62
Pinnacle West Capital, 6.40%, 4/1/06 170,000 176
Pioneer Natural Resource, 5.875%, 7/15/16 110,000 114
Plains All American Pipeline, 7.75%, 10/15/12 95,000 110
PPL Capital Funding, 4.33%, 3/1/09 210,000 209
Principal Life Global Funding, 144A,
5.125%, 10/15/13 210,000 210
Progress Energy, 6.75%, 3/1/06 125,000 130
Prudential Financial, 3.75%, 5/1/08 170,000 168
PSEG Power, 8.625%, 4/15/31 120,000 153
Public Service of New Mexico, 4.40%, 9/15/08 190,000 191
Puget Sound Energy, VR, 2.68%, 7/14/06 215,000 215
Pulte Homes, 7.875%, 8/1/11 170,000 196
Reckson Operating Partnership, 5.15%, 1/15/11 190,000 188
Rogers Cable, 5.50%, 3/15/14 175,000 164
SCA Coordination Center, 144A, 4.50%, 7/15/15 140,000 131
Sealed Air, 144A, 5.375%, 4/15/08 180,000 185
Security Benefit Life Insurance, 144A,
7.45%, 10/1/33 95,000 100
Sempra Energy, 6.00%, 2/1/13 190,000 200
Simon Property Group, 3.75%, 1/30/09 200,000 195
SLM Corporation
VR, 2.30%, 1/26/09 250,000 250
VR, 3.66%, 4/1/09 165,000 166
Sprint Capital, 6.90%, 5/1/19 230,000 251
SunGard Data Systems, 3.75%, 1/15/09 120,000 116
Telefonos De Mexico, 4.50%, 11/19/08 110,000 110
Telus, 8.00%, 6/1/11 145,000 169
Transocean, 7.50%, 4/15/31 130,000 154
TXU Energy, VR, 2.838%, 1/17/06 95,000 95
Tyco International, 6.375%, 10/15/11 235,000 258
U.S. Bank, 2.87%, 2/1/07 200,000 197
U.S. Cellular, 6.70%, 12/15/33 120,000 120
Union Pacific, 6.50%, 4/15/12 210,000 232
UST, 6.625%, 7/15/12 260,000 286
Verizon Global Funding, 7.75%, 12/1/30 175,000 210
Webster Financial, 5.125%, 4/15/14 200,000 200
Wells Fargo, VR, 1.99%, 3/23/07 250,000 250
Western Power Distribution Holdings,
144A, 6.875%, 12/15/07 120,000 124
Weyerhaeuser
6.75%, 3/15/12 105,000 117
7.375%, 3/15/32 45,000 52
Wyeth, 6.50%, 2/1/34 125,000 129
XL Capital, 6.50%, 1/15/12 180,000 195
XTO Energy, 6.25%, 4/15/13 140,000 151
Yum! Brands, 7.70%, 7/1/12 210,000 247
Total Corporate Bonds (Cost $25,460) 25,928
ASSET-BACKED SECURITIES 1.0%
Capital Auto Receivables Asset Trust,
Series 2002-2, Class CERT 4.18%, 10/15/07 160,374 161
Chase Manhattan Auto Owner Trust
Series 2001-B, Class CTFS, 3.75%, 5/15/08 68,893 69
Series 2003-A, Class A4, 2.06%, 12/15/09 350,000 341
CIT RV Trust, Series 1998-A, Class A4,
6.09%, 2/15/12 81,477 82
Citibank Credit Card Issuance Trust
Series 2001-C1, Class C1, VR, 2.68%, 1/15/10 260,000 264
Series 2004-C1, Class C1, VR, 2.75%, 7/15/13 525,000 526
Hyundai Auto Receivables Trust
Series 2003-A, Class A4, 3.02%, 10/15/10 200,000 198
Series 2003-A, Class D, 4.06%, 10/15/10 90,000 91
MBNA Master Credit Card Trust II, Series 2000-D,
Class C, 144A 8.40%, 9/15/09 450,000 496
Morgan Stanley Auto Loan Trust, Series 2004-HB1,
Class C, VR 2.88%, 10/15/11 151,516 151
Peco Energy Transition Trust, Series 2001-A,
Class A1 6.52%, 12/31/10 500,000 556
Reliant Energy Transition Bond, Series 2001-1,
Class A4 5.63%, 9/15/15 375,000 396
World Financial Network, Series 2003-A,
Class A2, VR 2.47%, 5/15/12 475,000 477
Total Asset-Backed Securities (Cost $3,773) 3,808
NON-U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 2.0%
Banc of America Commercial Mortgage, Series 2003-1,
Class A2, CMO 4.648%, 9/11/36 400,000 399
Bank of America Mortgage Securities
Series 2003-L, Class 2A2, CMO, VR, 4.32%,
1/25/34 726,725 720
Series 2004-1, Class 3A2, CMO, VR, 5.008%,
10/25/34 242,331 244
Series 2004-A, Class 2A2, CMO, VR, 4.152%,
2/25/34 377,436 373
Series 2004-D, Class 2A2, CMO, VR, 4.225%,
5/25/34 151,817 150
Series 2004-H, Class 2A2, CMO, VR, 4.821%,
9/25/34 219,161 222
BankBoston Home Equity Loan Trust, Series 1998-1,
Class A6 6.35%, 2/25/13 380,577 384
Bear Stearns Commercial Mortgage Securities,
Series 2004-T14 Class A2, CMO, 4.17%, 1/12/41 300,000 300
Chase Funding Mortgage Loan, Series 2002-2,
Class 1M1 5.599%, 9/25/31 80,000 81
Countrywide Asset-Backed Certificates, Series
2003-5, Class AF3 3.613%, 4/25/30 350,000 349
Countrywide Home Loans, Series 2003-60,
Class 2A1, CMO, VR 5.017%, 2/25/34 107,089 107
DLJ Commercial Mortgage, Series 1999-CG2,
Class A1B, CMO 7.30%, 6/10/32 350,000 391
GE Capital Commercial Mortgage, Series 2001-1,
Class A2, CMO 6.531%, 3/15/11 460,000 506
GMAC Commercial Mortgage Securities, Series
2001-C2, Class A2 CMO, 6.70%, 4/15/34 375,000 416
Greenwich Capital Commercial Funding, Series
2004-GG1A, Class A2 CMO, 3.835%, 10/8/08 375,000 375
J.P. Morgan Chase Commercial Mortgage
Series 2001-CIB2, Class A2, CMO, 6.244%,
4/15/35 350,000 373
Series 2001-CIBC, Class A3, CMO, 6.26%,
3/15/33 460,000 502
LB-UBS Commercial Mortgage Trust
Series 2004-C2, Class A2, CMO, 3.246%,
3/15/29 525,000 507
Series 2004-C4, Class A2, CMO, VR, 4.567%,
5/15/29 475,000 483
Morgan Stanley Dean Witter Capital, Series
2002-TOP7, Class A2 CMO, 5.98%, 1/15/39 350,000 378
Washington Mutual, Series 2004-AR1, Class A,
CMO, VR 4.229%, 3/25/34 213,142 210
Total Non-U.S. Government Mortgage-Backed
Securities (Cost $7,493) 7,470
FOREIGN GOVERNMENT OBLIGATIONS & MUNICIPALITIES 1.4%
Asian Development Bank, 6.25%, 6/15/11 (AUD) 1,140,000 918
European Investment Bank, 5.75%, 9/15/09 (AUD) 580,000 456
Federal Republic of Germany, 5.00%, 5/20/05 (EUR) 1,555,000 2,088
Government of Canada, 5.25%, 6/1/12 (CAD) 1,300,000 1,161
Republic of Chile, 5.50%, 1/15/13 175,000 181
Republic of South Africa, 6.50%, 6/2/14 105,000 114
United Mexican States
6.375%, 1/16/13 215,000 226
VR, 2.29%, 1/13/09 155,000 157
Total Foreign Government Obligations & Municipalities
(Cost $4,301) 5,301
U.S. GOVERNMENT & AGENCY MORTGAGE-BACKED SECURITIES 9.3%
U.S. Government Agency Obligations+/- 7.2%
Federal Home Loan Mortgage
4.50%, 11/1/18 - 5/1/19 523,797 521
5.00%, 12/1/08 - 11/1/33 4,022,453 4,048
5.50%, 9/1 - 12/1/33 344,288 349
6.00%, 5/1/17 - 3/1/33 2,057,370 2,135
7.00%, 11/1/30 - 6/1/32 231,000 245
ARM, 4.577%, 9/1/32 156,980 158
CMO
4.50%, 3/15/16 1,125,000 1,120
5.50%, 4/15/28 950,000 980
CMO, IO, 4.50%, 6/15/11 - 4/15/18 1,220,949 121
TBA, 6.00%, 1/1/18 146,000 153
Federal National Mortgage Assn.
4.50%, 5/1/18 - 1/1/19 1,881,768 1,873
5.00%, 10/1/33 - 6/1/34 2,389,029 2,364
5.50%, 12/1/16 - 6/1/34 8,081,588 8,287
6.00%, 10/1/13 - 11/1/34 1,323,172 1,370
6.50%, 12/1/10 - 12/1/32 665,339 703
7.00%, 1/1/31 - 7/1/32 150,833 160
CMO
2.91%, 11/25/33 275,000 274
3.50%, 4/25/13 325,000 325
5.00%, 3/25/15 675,000 685
CMO, IO
5.50%, 11/25/28 273,097 18
6.50%, 2/1/32 105,514 21
TBA, 6.50%, 1/1/33 965,000 1,012
26,922
U.S. Government Obligations 2.1%
Government National Mortgage Assn.
5.00%, 7/15 - 10/20/33 4,144,828 4,125
5.50%, 1/20 - 5/20/34 1,466,559 1,490
6.00%, 5/15/26 - 6/20/34 456,772 473
6.50%, 2/15/28 - 9/20/34 655,874 692
7.00%, 3/15/13 - 7/20/27 256,911 274
7.50%, 9/15/22 - 6/15/32 89,561 96
8.00%, 1/15/22 - 10/20/25 48,624 53
10.50%, 2/15/13 773 1
CMO, 2.946%, 3/16/19 265,000 256
TBA, 5.50%, 1/1/32 475,000 481
7,941
Total U.S. Government & Agency Mortgage-Backed Securities
(Cost $34,650) 34,863
U.S. GOVERNMENT AGENCY OBLIGATIONS (EXCLUDING MORTGAGE-BACKED) 9.4%
U.S. Government Agency Obligations+/- 1.6%
Federal Home Loan Bank, 5.75%, 5/15/12(ss.) 615,000 663
Federal Home Loan Mortgage
2.75%, 3/15/08(ss.) 1,000,000 974
4.625%, 2/15/07 (EUR) 1,285,000 1,777
Federal National Mortgage Assn.
3.25%, 8/15/08(ss.) 940,000 926
4.375%, 9/15/12(ss.) 500,000 495
5.75%, 2/15/08 210,000 224
6.00%, 5/15/11 945,000 1,033
7.125%, 1/15/30 65,000 79
6,171
U.S. Treasury Obligations 7.8%
U.S. Treasury Bonds
5.375%, 2/15/31(ss.) 85,000 89
6.00%, 2/15/26(ss.) 470,000 527
6.125%, 8/15/29(ss.) 130,000 149
6.25%, 8/15/23 - 5/15/30(ss.) 1,615,000 1,882
6.375%, 8/15/27(ss.) 1,375,000 1,614
7.50%, 11/15/16(ss.) 545,000 688
8.50%, 2/15/20(ss.) 145,000 202
U.S. Treasury Inflation-Indexed Bonds, 2.375%,
1/15/25(ss.) 1,047,592 1,084
U.S. Treasury Notes
1.50%, 3/31/06(ss.) 45,000 44
2.375%, 8/31/06(ss.) 8,800,000 8,713
3.25%, 8/15/07(ss.) 5,685,000 5,691
3.375%, 12/15/08(ss.) 105,000 104
3.50%, 11/15/06(ss.)++ 3,940,000 3,977
4.00%, 6/15/09(ss.) 2,890,000 2,932
4.25%, 11/15/13(ss.) 175,000 174
4.75%, 11/15/08(ss.) 175,000 183
5.00%, 8/15/11(ss.) 60,000 64
6.50%, 8/15/05(ss.) 940,000 967
29,084
Total U.S. Government Agency Obligations (excluding
Mortgage-Backed) (Cost $34,312) 35,255
MUNICIPAL BONDS 0.5%
California
Economic Recovery
5.00%, 7/1/23 (Tender 7/1/07) 95,000 101
5.00%, 7/1/23 (Tender 7/1/08) 105,000 113
GO, 5.25%, 4/1/34 105,000 108
Kansas Dev. Fin. Auth., Public Employee Retirement,
5.501%, 5/1/34 (FSA Insured) 130,000 130
Massachusetts, GO, 5.25%, 8/1/15 (MBIA Insured) 400,000 443
New York State Urban Dev. Corp., Corrections &
Youth Fac. 5.25%, 1/1/21 (Tender 1/1/09) 230,000 249
North Carolina, GO, 5.25%, 3/1/13 660,000 741
Oregon, Taxable Pension, GO, 5.892%, 6/1/27 75,000 79
Total Municipal Bonds (Cost $1,968) 1,964
DOMESTIC BOND MUTUAL FUNDS 7.3%
T. Rowe Price Institutional High Yield Fund,
6.92% p+ 2,476,648 27,491
Total Domestic Bond Mutual Funds (Cost $25,963) 27,491
SHORT-TERM INVESTMENTS 14.7%
Money Market Fund 14.7%
T. Rowe Price Reserve Investment Fund, 2.00% #+ 54,966,921 54,967
Total Short-Term Investments (Cost $54,967) 54,967
FUTURES CONTRACTS 0.0%
Variation margin receivable (payable) on open
futures contracts (2) 0
Total Futures Contracts 0
SECURITIES LENDING COLLATERAL 12.9%
Money Market Pooled Account 1.0%
Investment in money market pooled account managed
by JP Morgan Chase Bank, London, 1.984% # 3,660,309 3,660
3,660
Money Market Trust 11.9%
State Street Bank and Trust Company of New Hampshire
N.A. Securities Lending Quality Trust units,
1.998% # 44,822,005 44,822
44,822
Total Securities Lending Collateral (Cost $48,482) 48,482
Total Investments in Securities
113.3% of Net Assets (Cost $372,752) $425,183
--------
(1) Denominated in U.S. dollars unless otherwise noted
# Seven-day yield
* Non-income producing
(ss.) All or a portion of this security is on loan at November 30, 2004 - See
Note 2
+/- The issuer is a publicly-traded company that operates under a
congressional charter; its securities are neither issued nor guaranteed by
the U.S. government.
++ All or a portion of this security is pledged to cover margin requirements
on futures contracts at November 30, 2004.
+ Affiliated company - See Note 4
p SEC yield
144A Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be resold in transactions exempt from registration only to
qualified institutional buyers -- total value of such securities at
period-end amounts to $4,320 and represents 1.2% of net assets
ADR American Depository Receipts
ADS American Depository Shares
ARM Adjustable Rate Mortgage
AUD Australian dollar
CAD Canadian dollar
CHF Swiss franc
CMO Collateralized Mortgage Obligation
DKK Danish krone
ETC Equipment Trust Certificate
EUR Euro
FSA Financial Security Assurance Inc.
GBP British pound
GDR Global Depository Receipts
GDS Global Depository Shares
GO General Obligation
HKD Hong Kong dollar
IO Interest Only security for which the fund receives interest on notional
principal (par)
JPY Japanese yen
MBIA MBIA Insurance Corp.
MXN Mexican peso
MYR Malaysian ringgit
NOK Norwegian krone
NZD New Zealand dollar
REIT Real Estate Investment Trust
SEK Swedish krona
SGD Singapore dollar
STEP Stepped coupon bond for which the coupon rate of interest will adjust on
specified future date(s)
TBA To Be Announced security was purchased on a forward commitment basis
VR Variable Rate
(2) Open Futures Contracts at November 30, 2004 were as follows:
($ 000s)
Contract Unrealized
Expiration Value Gain (Loss)
----------- -------- -----------
Short, 5 U.S. Treasury five year notes
contracts, $6 par of 3.5% U.S. Treasury
Notes pledged as initial margin 3/05 $ (544) $ 1
Short, 24 U.S. Treasury ten year notes
contracts, $44 par of 3.5% U.S. Treasury
Notes pledged as initial margin 3/05 (2,658) 21
Net payments (receipts) of variation
margin to date (22)
Variation margin receivable (payable)
on open futures contracts $ 0
----
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 2004
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
(In thousands except shares and per share amounts)
Assets
Investments in securities, at value
Affiliated companies (cost $80,930) $ 82,458
Non-affiliated companies (cost $291,822) 342,725
Total investments in securities 425,183
Other assets 3,142
Total assets 428,325
Liabilities
Obligation to return securities lending collateral 48,482
Other liabilities 4,715
Total liabilities 53,197
NET ASSETS $ 375,128
-----------
Net Assets Consist of:
Undistributed net investment income (loss) $ 1,790
Undistributed net realized gain (loss) (4,381)
Net unrealized gain (loss) 52,469
Paid-in-capital applicable to 25,536,893 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares of the Corporation authorized 325,250
NET ASSETS $ 375,128
-----------
NET ASSET VALUE PER SHARE $ 14.69
-----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
($ 000s)
6 Months
Ended
11/30/04
Investment Income (Loss)
Income
Dividend $ 3,303
Interest 2,439
Securities lending 34
Total income 5,776
Expenses
Investment management 832
Shareholder servicing 484
Custody and accounting 129
Registration 22
Prospectus and shareholder reports 17
Legal and audit 8
Directors 3
Miscellaneous 5
Reductions/repayments of fees and expenses
Investment management fees (waived) repaid (148)
Total expenses 1,352
Net investment income (loss) 4,424
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 5,089
Futures (260)
Foreign currency transactions (1)
Net realized gain (loss) 4,828
Change in net unrealized gain (loss)
Securities 14,465
Futures 52
Other assets and liabilities
denominated in foreign currencies 17
Change in net unrealized gain (loss) 14,534
Net realized and unrealized gain (loss) 19,362
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 23,786
-----------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
11/30/04 5/31/04
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 4,424 $ 7,872
Net realized gain (loss) 4,828 2,071
Change in net unrealized gain (loss) 14,534 24,221
Increase (decrease) in net assets from operations 23,786 34,164
Distributions to shareholders
Net investment income (4,288) (7,747)
Net realized gain - (244)
Decrease in net assets from distributions (4,288) (7,991)
Capital share transactions *
Shares sold 60,056 129,878
Distributions reinvested 4,224 7,883
Shares redeemed (66,736) (99,623)
Increase (decrease) in net assets from capital
share transactions (2,456) 38,138
Net Assets
Increase (decrease) during period 17,042 64,311
Beginning of period 358,086 293,775
End of period $ 375,128 $ 358,086
--------- ---------
(Including undistributed net investment income
of $1,790 at 11/30/04 and $1,654 at 5/31/04)
*Share information
Shares sold 4,245 9,541
Distributions reinvested 301 589
Shares redeemed (4,740) (7,293)
Increase (decrease) in shares outstanding (194) 2,837
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 2004
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 1940 Act). The Personal Strategy
Income Fund (the fund), a diversified, open-end management investment company,
is one portfolio established by the corporation. The fund commenced operations
on July 29, 1994. The fund seeks the highest total return over time consistent
with a primary emphasis on income and a secondary emphasis on capital growth.
The fund pursues this objective by investing in a diversified portfolio
typically consisting of about 40% stocks, 40% bonds, and 20% money market
securities.
The accompanying financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, which
require the use of estimates made by fund management.
Valuation
The fund values its investments and computes its net asset value per share at
the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day
that the NYSE is open for business. Equity securities listed or regularly traded
on a securities exchange or in the over-the-counter market are valued at the
last quoted sale price or, for certain markets, the official closing price at
the time the valuations are made, except for OTC Bulletin Board securities,
which are valued at the mean of the latest bid and asked prices. A security that
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 are valued at the mean of the latest
bid and asked prices for domestic securities and the last quoted sale price for
international securities.
Debt securities are generally traded in the over-the-counter market. Securities
with original maturities of one year or more are valued at prices furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities. Securities with original maturities of less than one year are valued
at amortized cost in local currency, which approximates fair value when combined
with accrued interest.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation. Financial futures contracts are valued
at closing settlement prices.
Other investments and those 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 the T. Rowe Price Valuation Committee,
established by the fund's Board of Directors. In the course of making a good
faith determination of a security's fair value, the fund reviews a variety of
factors, including market and trading trends and the value of comparable
securities, such as unrestricted securities of the same issuer.
Most foreign markets close before the close of trading on the NYSE. If the fund
determines that developments between the close of a foreign market and the close
of the NYSE will, in its judgment, materially affect the value of some or all of
its portfolio securities, which in turn will affect the fund's share price, the
fund will adjust the previous closing prices to reflect the fair value of the
securities as of the close of the NYSE, as determined in good faith by the T.
Rowe Price Valuation Committee, established by the fund's Board of Directors. A
fund may also fair value securities in other situations, such as when a
particular foreign market is closed but the fund is open. In deciding whether to
make fair value adjustments, the fund reviews a variety of factors, including
developments in foreign markets, the performance of U.S. securities markets, and
the performance of instruments trading in U. S. markets that represent foreign
securities and baskets of foreign securities. The fund uses outside pricing
services to provide it with closing market prices and information used for
adjusting those prices. The fund cannot predict how often it will use closing
prices and how often it will adjust those prices. As a means of evaluating its
fair value process, the fund routinely compares closing market prices, the next
day's opening prices in the same markets, and adjusted prices.
Currency Translation
Assets, including investments, and liabilities denominated in foreign currencies
are translated into U.S. dollar values each day at the prevailing exchange rate,
using the mean of the bid and asked prices of such currencies against U.S.
dollars as quoted by a major bank. Purchases and sales of securities, income,
and expenses are translated into U.S. dollars at the prevailing exchange rate on
the date of the transaction. The effect of changes in foreign currency exchange
rates on realized and unrealized security gains and losses is reflected as a
component of security gains and losses.
Rebates and Credits
Subject to best execution, the fund may direct certain security trades to
brokers who have agreed to rebate a portion of the related brokerage commission
to the fund in cash. Commission rebates are included in realized gain on
securities in the accompanying financial statements and totaled $1,000 for the
six months ended November 30, 2004. Additionally, the fund
earns credits on temporarily uninvested cash balances at the custodian that
reduce the fund's custody charges. Custody expense in the accompanying financial
statements is presented before reduction for credits.
Investment Transactions, Investment Income, and Distributions
Income and expenses are recorded on the accrual basis. Premiums and discounts on
debt securities are amortized for financial reporting purposes. Inflation
adjustments to the principal amount of inflation-indexed bonds are included in
interest income. Dividends received from mutual fund investments are reflected
as dividend income; capital gain distributions are reflected as realized
gain/loss. Dividend income and capital gain distributions are recorded on the
ex-dividend date. Investment transactions are accounted for on the trade date.
Realized gains and losses are reported on the identified cost basis. Payments
("variation margin") made or received to settle the daily fluctuations in the
value of futures contracts are recorded as unrealized gains or losses until the
contracts are closed. Unsettled variation margin on futures contracts is
included in investments in securities, and unrealized gains and losses on
futures contracts are included in the change in net unrealized gain or loss in
the accompanying financial statements. Distributions to shareholders are
recorded on the ex-dividend date. Income distributions are declared and paid on
a quarterly basis. Capital gain distributions, if any, are declared and paid by
the fund, typically on an annual basis. During the six months ended November 30,
2004, the fund received a one-time special dividend on a security held in its
portfolio (Microsoft Corp.). The dividend, which totaled $343,000, represents
10% of dividend income reflected in the accompanying financial statements and is
not expected to recur.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
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.
Restricted Securities
The fund may invest in securities that are subject to legal or contractual
restrictions on resale. Although certain of these securities may be readily
sold, for example, under Rule 144A, others may be illiquid, and their sale may
involve substantial delays and additional costs, and prompt sale at an
acceptable price may be difficult.
Futures Contracts
During the six months ended November 30, 2004, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values and/or interest rates.
Securities Lending
The fund lends its securities to approved brokers to earn additional income. It
receives as collateral cash and U.S. government securities valued at 102% to
105% of the value of the securities on loan. Cash collateral is invested in
money market pooled accounts managed by the fund's lending agents in accordance
with investment guidelines approved by fund management. Collateral is maintained
over the life of the loan in an amount not less than the value of loaned
securities, as determined at the close of fund business each day; any additional
collateral required due to changes in security values is delivered to the fund
the next business day. 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 the securities. Securities
lending revenue recognized by the fund consists of earnings on invested
collateral and borrowing fees, net of any rebates to the borrower and
compensation to the lending agent. At November 30, 2004, the value of loaned
securities was $47,817,000; aggregate collateral consisted of $48,482,000 in
money market pooled accounts and U.S. government securities valued at
$1,132,000.
Other
Purchases and sales of portfolio securities, other than short-term and U.S.
government securities, aggregated $57,155,000 and $63,679,000, respectively, for
the six months ended November 30, 2004. Purchases and sales of U.S. government
securities aggregated $59,987,000 and $66,751,000, respectively, for the six
months ended November 30, 2004.
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 under Subchapter M of the
Internal Revenue Code and distribute to shareholders all of its taxable income
and gains. Federal income tax regulations differ from generally accepted
accounting principles; therefore, distributions determined in accordance with
tax regulations may differ in amount or character from net investment income and
realized gains for financial reporting purposes. Financial reporting records are
adjusted for permanent book/tax differences to reflect tax character. Financial
records are not adjusted for temporary differences. The amount and character of
tax-basis distributions and composition of net assets are finalized at fiscal
year-end; accordingly, tax-basis balances have not been determined as of
November 30, 2004.
The fund intends to retain realized gains to the extent of available capital
loss carryforwards. As of May 31, 2004, the fund had $8,860,000 of unused
capital loss carryforwards, of which $1,463,000 expire in fiscal 2009,
$3,127,000 expire in fiscal 2010, and $4,270,000 expire thereafter through
fiscal 2012.
At November 30, 2004, the cost of investments for federal income tax purposes
was $372,752,000. Net unrealized gain aggregated $52,469,000 at period-end, of
which $55,412,000 related to appreciated investments and $2,943,000 related to
depreciated investments.
NOTE 4- RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. The
investment management agreement between the fund and the manager provides for an
annual investment management fee, which is computed daily and paid monthly. The
fee consists of an individual fund fee, equal to 0.15% of the fund's average
daily net assets, and the fund's pro-rata share of a group fee. The group fee is
calculated based on the combined net assets of certain mutual funds sponsored by
Price Associates (the group) applied to a graduated fee schedule, with rates
ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in
excess of $120 billion. The fund's portion of the group fee is determined by the
ratio of its average daily net assets to those of the group. At November 30,
2004, the effective annual group fee rate was 0.31%, and investment management
fee payable totaled $120,000.
The fund is also subject to a contractual expense limitation through September
30, 2006. During the limitation period, the manager is required to waive its
management fee and reimburse the fund for any expenses, excluding interest,
taxes,
brokerage commissions, and extraordinary expenses, that would otherwise cause
the fund's ratio of total expenses to average net assets (expense ratio) to
exceed its expense limitation of 0.80%. Through September 30, 2008, the fund is
required to repay the manager for expenses previously reimbursed and management
fees waived to the extent its net assets have grown or expenses have declined
sufficiently to allow repayment without causing the fund's expense ratio to
exceed its expense limitation. Pursuant to this agreement, at November 30, 2004,
management fees waived remain subject to repayment by the fund in the following
amounts: $833,000 through September 30, 2006 and $24,000 through September 30,
2008.
In addition, the fund has entered into service agreements with Price Associates
and two wholly owned subsidiaries of Price Associates (collectively, Price).
Price Associates computes the daily share price and maintains the financial
records of the fund. T. Rowe Price Services, Inc., provides shareholder and
administrative services in its capacity as the fund's transfer and dividend
disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides
subaccounting and recordkeeping services for certain retirement accounts
invested in the fund. For the six months ended November 30, 2004, expenses
incurred pursuant to these service agreements were $62,000 for Price Associates,
$59,000 for T. Rowe Price Services, Inc., and $324,000 for T. Rowe Price
Retirement Plan Services, Inc. At period-end, a total of $82,000 of these
expenses was payable.
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe
Price Government Reserve Investment Fund (collectively, the Reserve Funds),
open-end management investment companies managed by Price Associates and
affiliates of the fund. The Reserve Funds are offered as cash management options
to mutual funds, trusts, and other accounts managed by Price Associates and/or
its affiliates, and are not available for direct purchase by members of the
public. The Reserve Funds pay no investment management fees. During the six
months ended November 30, 2004, dividend income from the Reserve Funds totaled
$375,000, and the value of shares of the Reserve Funds held at November 30, 2004
and May 31, 2004 was $54,967,000 and $44,706,000, respectively.
The fund may invest in the T. Rowe Price Institutional High Yield Fund, Inc.
(High Yield Fund) as a means of gaining efficient and cost-effective exposure to
the high-yield bond markets. The High Yield Fund is an open-end management
investment company managed by Price Associates, and an affiliate of the fund.
The High Yield Fund pays an annual all-inclusive management and administrative
fee to Price Associates equal to 0.50% of average daily net assets. To ensure
that Personal Strategy Income Fund does not incur duplicate fees for its assets
invested in High Yield Fund, Price Associates has agreed to reduce its
management fee to the fund. Accordingly, the management fee waiver reflected on
the accompanying Statement of Operations includes $82,000 of management fees
permanently waived pursuant to this agreement. During the six months ended
November 30, 2004, purchases and sales of High Yield Fund were $1,347,000 and
$11,626,000, respectively. Realized gains during the period were $74,000, and
investment income during the period was $1,288,000. At November 30, 2004 and May
31, 2004, the value of shares of High Yield Fund held were $27,491,000 and
$36,456,000, respectively.
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS
- --------------------------------------------------------------------------------
A description of the policies and procedures used by T. Rowe Price funds and
portfolios to determine how to vote proxies relating to portfolio securities is
available in each fund's Statement of Additional Information, which you may
request by calling 1-800-225-5132 or by accessing the SEC's Web site,
www.sec.gov. The description of our proxy voting policies and procedures is also
available on our Web site, www.troweprice.com. To access it, click on the words
"Company Info" at the top of our homepage for individual investors. Then, in
the window that appears, click on the "Proxy Voting Policy" navigation button in
the top left corner.
Each fund's most recent annual proxy voting record is available on our Web site
and through the SEC's Web site. To access it through our Web site, follow the
directions above, then click on the words "Proxy Voting Record" at the bottom
of the Proxy Voting Policy page.
HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS
- --------------------------------------------------------------------------------
The fund files a complete schedule of portfolio holdings with the Securities and
Exchange Commission for the first and third quarters of each fiscal year on Form
N-Q. The fund's Form N-Q is available electronically on the SEC's Web site
(www.sec.gov); hard copies may be reviewed and copied at the SEC's Public
Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information
on the Public Reference Room, call 1-800-SEC-0330.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions is filed as an
exhibit to the registrant's annual Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the registrant's
most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant's annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant's annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of
this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial officer
have evaluated the registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The registrant's principal executive officer and principal financial officer
are aware of no change in the registrant's internal control over financial
reporting that occurred during the registrant's second fiscal quarter covered by
this report that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is filed
with the registrant's annual Form N-CSR.
(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end
companies: not applicable.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940,
is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Personal Strategy Funds, Inc.
By /s/ James S. Riepe
-----------------------------------
James S. Riepe
Principal Executive Officer
Date January 14, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ James S. Riepe
-----------------------------------
James S. Riepe
Principal Executive Officer
Date January 14, 2005
By /s/ Joseph A. Carrier
-----------------------------------
Joseph A. Carrier
Principal Financial Officer
Date January 14, 2005