Item 1. Report to Shareholders
November 30, 2004
Personal Strategy Funds
Semiannual Report
T. Rowe Price
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
REPORTS ON THE WEB
Sign up for our E-mail Program, and you can begin to receive updated fund
reports and prospectuses online rather than through the mail. Log in to your
account at troweprice.com for more information.
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Periods Ended 11/30/04 6 Months 12 Months
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Periods Ended 11/30/04 6 Months 12 Months
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Periods Ended 11/30/04 6 Months 12 Months
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Periods Ended 11/30/04 6 Months 12 Months
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
PORTFOLIO OVERVIEW
Percent of Percent of
Net Assets Net Assets
11/30/04 11/30/04
Personal Strategy Income Fund
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
GROWTH OF $10,000
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
FUND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
6/1/04 11/30/04 6/1/04 to 11/30/04
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
6/1/04 11/30/04 6/1/04 to 11/30/04
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Beginning Ending Expenses Paid
Account Value Account Value During Period*
6/1/04 11/30/04 6/1/04 to 11/30/04
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
Personal Strategy Growth Fund
November 30, 2004
Semiannual Report - Financial Statements
T. ROWE PRICE
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
Unaudited
FINANCIAL HIGHLIGHTS For a 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 $ 19.68 $ 16.64 $ 17.55 $ 18.63 $ 19.57 $ 19.02
Investment
activities
Net
investment
income (loss) 0.15*! 0.22*! 0.23*! 0.25* 0.34* 0.33*
Net realized
and unrealized
gain (loss) 1.72 3.06 (0.90) (1.06) 0.15 1.06
Total from
investment
activities 1.87 3.28 (0.67) (0.81) 0.49 1.39
Distributions
Net investment
income -- (0.23) (0.24) (0.27) (0.35) (0.32)
Net realized
gain -- (0.01) -- -- (1.08) (0.52)
Total
distributions -- (0.24) (0.24) (0.27) (1.43) (0.84)
NET ASSET VALUE
End of period $ 21.55 $ 19.68 $ 16.64 $ 17.55 $ 18.63 $ 19.57
-----------------------------------------------------------------
Ratios/
Supplemental Data
Total return^ 9.50%*! 19.79%*! (3.68)%*! (4.33)%* 2.46%* 7.49%*
Ratio of total
expenses to
average net
assets 0.99%*!+ 0.98%*! 1.00%*! 1.10%* 1.10%* 1.10%*
Ratio of net
investment
income (loss)
to average
net assets 1.51%*!+ 1.27%*! 1.64%*! 1.55%* 1.89%* 1.93%*
Portfolio
turnover rate 52.6%+ 47.2% 52.5% 68.4% 54.8% 42.6%
Net assets,
end of period
(in thousands) $660,373 $609,318 $411,929 $360,096 $302,848 $270,663
^ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
* See Note 4. Excludes expenses in excess of a 1.00% and a 1.10% contractual
expense limitation in effect through 9/30/06 and 5/31/02, respectively.
! See Note 4. Excludes expenses permanently waived of 0.01%, 0.02%, and 0.00%
of average net assets for the six months ended 11/30/04 and the years ended
5/31/04 and 5/31/03, respectively, related to investments in T. Rowe Price
mutual funds.
+ Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 2004
PORTFOLIO OF INVESTMENTS (1) Shares/$ Par Value
- --------------------------------------------------------------------------------
(Cost and value in $ 000s)
COMMON STOCKS 87.3%
CONSUMER DISCRETIONARY 12.7%
Auto Components 0.2%
Autoliv GDR (SEK) 14,500 679
Keystone Automotive * 4,900 115
Koito Manufacturing (JPY)(ss.) 32,000 264
Strattec Security *(ss.) 1,400 88
TRW *(ss.) 4,800 101
1,247
Automobiles 1.1%
Ford Motor 177,500 2,517
Fuji Heavy Industries (JPY)(ss.) 40,000 185
Harley-Davidson 30,800 1,781
Honda (JPY) 7,800 373
Peugeot (EUR)(ss.) 6,076 370
Renault (EUR)(ss.) 5,996 489
Toyota Motor (JPY) 44,100 1,652
Winnebago(ss.) 700 27
7,394
Distributors 0.0%
Cycle & Carriage (SGD) 9,758 59
59
Hotels, Restaurants & Leisure 2.0%
Applebee's 5,662 146
BJ's Restaurants *(ss.) 2,600 39
Carnival 55,600 2,947
CEC Entertainment * 3,800 155
Compass (GBP) 15,211 67
Hilton Group (GBP) 31,458 155
International Game Technology 84,500 2,987
Marriott, Class A 12,100 688
McDonald's 23,500 722
Mitchells & Butlers (GBP) 44,047 254
Panera Bread, Class A *(ss.) 3,200 128
PF Chang's China Bistro *(ss.) 3,100 174
Red Robin Gourmet Burgers *(ss.) 2,300 118
Ruby Tuesday(ss.) 3,400 94
Sonic *(ss.) 10,762 314
Starbucks * 21,400 1,204
Starwood Hotels & Resorts Worldwide 38,900 2,034
Texas Roadhouse, Class A * 800 20
The Cheesecake Factory *(ss.) 7,100 347
Whitbread (GBP) 20,089 306
12,899
Household Durables 1.3%
Fortune Brands 11,100 871
Goldcrest (JPY) 5,540 378
Jarden *(ss.) 8,600 330
Newell Rubbermaid 181,400 4,187
Persimmon (GBP) 26,816 317
Philips Electronics (EUR) 12,448 320
Pioneer (JPY) 18,200 341
SEB (EUR) 1,275 128
Sony (JPY) 19,900 724
Thomson (EUR)(ss.) 29,673 712
8,308
Internet & Catalog Retail 0.5%
Amazon.com * 5,900 234
eBay * 26,800 3,014
J. Jill Group *(ss.) 6,400 110
priceline.com *(ss.) 4,800 115
3,473
Leisure Equipment & Products 0.5%
Brunswick 10,000 488
Eastman Kodak 62,700 2,051
Heiwa (JPY) 7,600 114
MarineMax *(ss.) 5,800 171
Noritsu Koki (JPY) 7,600 157
Polaris Industries(ss.) 2,800 184
SCP Pool 6,375 201
3,366
Media 3.7%
Aegis (GBP) 70,136 333
Astro All Asia, 144A (MYR) * 63,700 93
British Sky Broadcasting (GBP) 29,288 311
Clear Channel Communications 24,778 834
Comcast
Class A * 106,957 3,213
Special Class A * 41,600 1,233
Disney 89,800 2,414
EchoStar Communications, Class A * 47,700 1,564
Emmis Communications *(ss.) 5,200 96
Entercom Communications * 3,800 137
Gestevision Telecino (EUR) * 1,300 24
Getty Images * 1,500 87
Liberty Media, Class A * 20,700 214
McGraw-Hill 1,400 123
New York Times, Class A 62,700 2,571
News Corp, Class A *(ss.) 105,900 1,873
News Corp GDR, Class B (AUD) * 17,929 322
Omnicom 7,800 632
Publicis (EUR) 12,482 412
Scholastic * 10,800 356
Scripps, Class A 33,200 1,552
Singapore Press (SGD) 35,000 101
Time Warner * 123,200 2,182
Viacom, Class B 74,688 2,592
Washington Post, Class B 668 627
WPP Group (GBP) 30,356 335
WPP Group ADR(ss.) 5,200 285
Young Broadcasting, Class A *(ss.) 3,500 34
24,550
Multiline Retail 1.1%
Big Lots *(ss.) 6,100 71
Kohl's * 16,100 743
Neiman Marcus, Class A 1,000 66
Nordstrom 49,400 2,161
Target 77,200 3,954
6,995
Specialty Retail 2.2%
AC Moore Arts & Crafts *(ss.) 2,800 81
AnnTaylor Stores * 16,950 372
Best Buy 49,500 2,791
Charles Voegele (CHF) 4,168 186
Christopher & Banks(ss.) 7,375 145
Dixons (GBP) 98,135 273
Esprit Holdings (HKD) 32,500 178
Home Depot 135,450 5,655
Hot Topic *(ss.) 7,300 119
Kesa Electricals (GBP) 12,958 67
Linens 'n Things * 4,900 122
Monro Muffler Brake * 6,000 147
Nobia (SEK) 19,408 294
The Finish Line, Class A(ss.) 3,800 70
Toys "R" Us * 209,200 4,046
Ultimate Electronics *(ss.) 3,400 10
14,556
Textiles, Apparel, & Luxury Goods 0.1%
Adidas-Salomon (EUR) 2,041 319
Culp *(ss.) 2,000 12
Unifi *(ss.) 5,200 19
World Company (JPY) 6,000 212
Yue Yuen Industrial (HKD)(ss.) 105,000 272
834
Total Consumer Discretionary 83,681
CONSUMER STAPLES 5.8%
Beverages 0.6%
Allied Domecq (GBP) 48,483 478
Asahi Breweries (JPY) 16,000 189
Coca-Cola 12,300 484
Kirin Brewery (JPY) 47,000 450
Lion Nathan (NZD) 65,053 399
PepsiCo 34,200 1,707
3,707
Food & Staples Retailing 2.1%
Casey's General Stores 18,700 362
Casino Guichard-Perrachon (EUR)(ss.) 6,950 532
Coles Myer (AUD) 38,201 294
CVS 107,400 4,873
J Sainsbury (GBP) 53,401 266
Matsumotokiyoshi (JPY)(ss.) 7,400 205
METRO (EUR) 20,673 1,037
Performance Food Group * 11,400 299
Sysco 24,300 844
Tesco (GBP) 92,824 534
Wal-Mart 78,600 4,092
Wal-Mart de Mexico, Series V (MXN) 152,600 523
Wild Oats Markets * 7,200 52
York-Benimaru (JPY) 7,200 199
14,112
Food Products 1.3%
American Italian Pasta, Class A(ss.) 3,300 64
Associated British Foods (GBP) 32,797 468
Campbell Soup 60,600 1,729
General Mills 51,220 2,330
Koninklijke Wessanen GDS (EUR) 23,413 295
Nestle (CHF) 4,257 1,090
Seneca Foods
Class A * 2,200 41
Class B * 700 13
Unilever N.V. (GBP) 88,983 813
Unilever N.V. ADS 26,100 1,644
8,487
Household Products 0.6%
Colgate-Palmolive 47,000 2,162
Kimberly-Clark 21,100 1,342
Procter & Gamble 14,700 786
4,290
Personal Products 0.1%
Chattem *(ss.) 1,400 51
Gillette 9,100 396
L'Oreal (EUR)(ss.) 2,483 179
626
Tobacco 1.1%
Altria Group 97,350 5,597
UST 36,800 1,620
7,217
Total Consumer Staples 38,439
ENERGY 6.3%
Energy Equipment & Services 2.5%
Atwood Oceanics * 4,200 220
Baker Hughes 139,000 6,162
BJ Services 27,500 1,393
FMC Technologies * 14,300 470
Grant Prideco * 25,600 552
Hanover Compressor *(ss.) 13,300 194
Hydril * 3,000 141
Key Energy Services * 5,100 64
Lone Star Technologies *(ss.) 3,100 97
National Oilwell *(ss.) 17,200 623
Schlumberger 46,500 3,052
Seacor Holdings *(ss.) 7,400 411
Smith International * 39,300 2,380
Technip (EUR)(ss.) 1,001 168
Transocean * 6,500 262
W-H Energy Services *(ss.) 4,300 98
16,287
Oil & Gas 3.8%
BP (GBP) 68,054 693
BP ADR 80,694 4,951
ChevronTexaco 74,314 4,058
Eni SPA (EUR) 58,299 1,428
ExxonMobil 60,142 3,082
Forest Oil * 12,900 439
INPEX (JPY) * 15 75
Marathon Oil 44,800 1,767
Murphy Oil 4,000 341
Noble Energy 7,000 446
Norsk Hydro (NOK) 4,790 391
OMV (EUR) 200 53
Petroleo Brasileiro (Petrobras) ADR(ss.) 26,400 910
Shell Transport & Trading (GBP) 144,710 1,214
Shell Transport & Trading ADR(ss.) 6,800 344
Statoil ASA (NOK) 55,849 883
Tonen General Sekiyu (JPY)(ss.) 19,000 176
Total (EUR)(ss.) 7,270 1,588
Unocal 49,200 2,265
Woodside Petroleum (AUD) 17,439 281
25,385
Total Energy 41,672
FINANCIALS 18.3%
Capital Markets 4.0%
Affiliated Managers Group *(ss.) 4,100 260
AmeriTrade * 104,400 1,454
Babcock & Brown (AUD) * 15,123 110
Bank of New York 31,900 1,050
Charles Schwab 68,250 736
Credit Suisse Group (CHF) * 21,421 833
Franklin Resources 37,600 2,468
Goldman Sachs 22,100 2,315
Investors Financial Services (ss.) 6,200 272
Legg Mason 31,050 2,116
Macquarie Bank (AUD) 19,153 650
Mellon Financial 154,100 4,503
Merrill Lynch 40,200 2,239
Morgan Stanley 21,000 1,066
National Financial Partners 2,700 94
Northern Trust 43,000 2,023
Piper Jaffray Cos *(ss.) 8,100 373
State Street 80,500 3,587
26,149
Commercial Banks 5.0%
ABN Amro Holdings (EUR) 25,617 628
Alliance & Leicester (GBP) 28,513 463
Australia & New Zealand Banking (AUD) 73,134 1,133
Banca Intesa (EUR) 108,821 480
Banco Santander Central Hispano (EUR) 63,034 755
Banco Santander Chile ADR 12,379 368
Bank Austria Creditanstalt (EUR)(ss.) 8,785 745
Bank of America 121,800 5,636
Bank of Ireland (Dublin Listing) (EUR) 34,518 525
Bank of Yokohama (JPY) 75,000 473
Barclays (GBP) 162,821 1,677
BNP Paribas (EUR)(ss.) 16,754 1,162
Boston Private Financial(ss.) 4,700 127
Chittenden(ss.) 16,425 484
Citizens Banking(ss.) 12,300 432
DBS Group (SGD) 61,304 591
Dexia (EUR) 16,657 355
Glacier Bancorp 4,154 144
Grupo Financiero Banorte (MXN)(ss.) 194,808 1,092
HBOS (GBP) 53,745 751
HSBC (GBP) 38,732 658
Joyo Bank (JPY) 64,000 299
Mitsubishi Tokyo Financial (JPY) 37 350
National Australia Bank (AUD) 39,670 860
NORDEA (SEK) 118,205 1,158
Pinnacle Financial Partners *(ss.) 300 7
Provident Bankshares 7,800 287
Royal Bank of Scotland (GBP) 52,974 1,625
Sandy Spring Bancorp(ss.) 5,000 182
SEB, Series A (SEK) 34,787 661
Signature Bank *(ss.) 800 25
Southwest Bancorp of Texas 16,800 411
Sumitomo Mitsui Financial (JPY)(ss.) 86 597
Svenska Handelsbanken, Series A (SEK) 31,840 775
Texas Capital Bancshares *(ss.) 7,400 153
The 77 Bank (JPY) 39,000 254
U.S. Bancorp 115,400 3,419
UniCredito Italiano (EUR) 85,128 468
Valley National Bancorp(ss.) 11,809 330
Wells Fargo 33,500 2,069
WestAmerica 9,300 541
33,150
Consumer Finance 1.3%
AIFUL (JPY) 3,900 443
American Express 109,300 6,089
SLM Corporation 40,500 2,072
8,604
Diversified Financial Services 1.6%
Assured Guaranty 15,600 287
Citigroup 175,303 7,845
ING Groep GDS (EUR) 22,754 624
J.P. Morgan Chase 54,624 2,057
10,813
Insurance 4.1%
Aioi Insurance (JPY) 81,000 358
American International Group 120,062 7,606
Aspen Insurance Holdings 7,300 181
Aviva (GBP) 33,226 367
AXA (EUR) 40,553 947
Bristol West Holdings(ss.) 8,500 171
Brown & Brown(ss.) 1,800 73
CNP Assurances (EUR)(ss.) 9,746 659
Genworth Financial, Class A 78,300 2,059
Hannover Rueckversicherung (EUR) 5,835 210
Harleysville Group 2,500 60
Hartford Financial Services 33,700 2,157
Horace Mann Educators 14,500 276
Infinity Property & Casualty 8,200 303
Insurance Australia Group (AUD)(ss.) 49,054 221
Markel *(ss.) 900 290
Marsh & McLennan 33,100 946
Mitsui Sumitomo Insurance (JPY) 40,000 352
Ohio Casualty * 20,400 438
PartnerRe 5,700 349
QBE Insurance (AUD)(ss.) 36,080 389
Royal & Sun Alliance (GBP) 181,744 256
SAFECO(ss.) 62,700 3,039
Selective Insurance 4,900 220
St. Paul Companies 54,150 1,975
Unipol (EUR)(ss.) 103,519 457
UnumProvident(ss.) 63,300 986
W. R. Berkley 4,600 209
XL Capital 19,100 1,439
26,993
Real Estate 1.5%
Arden Realty, REIT 5,300 191
China Overseas Land (HKD) 774,000 183
Corio (EUR) 5,937 324
EastGroup Properties, REIT 7,300 275
Equity Lifestyle Properties, REIT 2,600 94
Essex Property Trust, REIT 800 64
Federal Realty Investment Trust, REIT 41,800 2,096
Gables Residential Trust, REIT(ss.) 6,000 214
General Property Trust, Equity Units (AUD)(ss.) 177,298 499
LaSalle Hotel Properties, REIT 3,700 114
Mirvac (AUD)(ss.) 60,275 220
Parkway Properties, REIT(ss.) 3,200 160
Reckson Associates Realty, REIT 51,192 1,658
Simon Property Group, REIT 40,540 2,517
Sun Hung Kai Properties (HKD) 41,000 407
Washington SBI, REIT(ss.) 8,000 264
Westfield Group (AUD) 13,343 162
Wheelock (HKD) 126,000 207
9,649
Thrifts & Mortgage Finance 0.8%
Bradford & Bingley (GBP) 84,006 441
Fannie Mae 42,300 2,906
Frankfort First 500 12
Freddie Mac 21,100 1,440
Hypo Real Estate (EUR) * 17,126 662
Triad Guaranty *(ss.) 2,200 132
5,593
Total Financials 120,951
HEALTH CARE 9.6%
Biotechnology 1.3%
Abgenix *(ss.) 800 8
Alexion Pharmaceutical *(ss.) 2,500 52
Alkermes *(ss.) 7,700 106
Amgen * 58,500 3,512
Amylin Pharmaceuticals *(ss.) 3,800 77
Anadys Pharmaceuticals *(ss.) 4,300 28
Biogen Idec * 16,300 956
Cephalon *(ss.) 2,905 138
CSL Limited (AUD) 4,814 99
Cubist Pharmaceuticals *(ss.) 8,200 98
CV Therapeutics *(ss.) 900 20
Cytogen *(ss.) 3,000 30
Cytokinetics *(ss.) 500 4
deCODE GENETICS *(ss.) 4,400 29
Dynavax Technologies *(ss.) 3,000 21
Exelixis *(ss.) 6,900 62
Genentech * 14,400 695
Gilead Sciences * 48,400 1,668
Martek Biosciences *(ss.) 2,500 97
Memory Pharmaceuticals *(ss.) 2,800 17
Myriad Genetics *(ss.) 8,000 154
Neurocrine Biosciences *(ss.) 3,600 166
NPS Pharmaceuticals *(ss.) 2,600 47
ONYX Pharmaceuticals *(ss.) 4,100 128
OSI Pharmaceuticals * 400 19
Rigel Pharmaceuticals *(ss.) 2,900 73
Trimeris *(ss.) 3,800 47
Vertex Pharmaceuticals *(ss.) 11,516 122
8,473
Health Care Equipment & Supplies 1.6%
Advanced Neuromodulation Systems *(ss.) 4,500 162
Analogic(ss.) 3,500 159
Baxter International 73,100 2,314
Biomet 11,900 570
Boston Scientific * 33,400 1,163
DJ Orthopedics * 6,000 121
Edwards Lifesciences *(ss.) 4,100 154
Elekta, Series B (SEK) * 7,853 214
EPIX Pharmaceuticals *(ss.) 2,200 39
Guidant 8,200 532
Integra LifeSciences *(ss.) 7,000 238
Matthews International, Class A 10,400 383
Medtronic 50,700 2,436
NuVasive *(ss.) 4,800 46
ResMed *(ss.) 8,400 420
St. Jude Medical * 12,000 458
Steris * 7,200 165
Stryker 16,900 743
Thoratec *(ss.) 4,800 48
Wilson Greatbatch Technologies *(ss.) 4,300 86
10,451
Health Care Providers & Services 2.7%
Accredo Health * 9,000 244
Alliance UniChem (GBP) 16,511 226
AmerisourceBergen 36,500 2,151
Anthem * 9,000 912
Celesio (EUR) 5,973 457
Henry Schein * 6,300 411
LabOne * 2,800 84
Lifeline Systems *(ss.) 5,700 154
LifePoint Hospitals *(ss.) 1,200 44
Sunrise Senior Living *(ss.) 11,000 473
Suzuken (JPY) 5,100 120
Symbion *(ss.) 5,500 105
United Surgical Partners International *(ss.) 8,300 328
UnitedHealth Group 96,100 7,962
WellChoice * 3,500 172
WellPoint Health Networks * 31,000 3,878
17,721
Pharmaceuticals 4.0%
Abbott Laboratories 20,400 856
Able Laboratories *(ss.) 2,200 48
AstraZeneca ADR 12,800 504
Atherogenics *(ss.) 6,600 157
Eisai (JPY) 8,900 265
Elan ADR *(ss.) 25,100 663
Eli Lilly 9,200 491
Eon Labs *(ss.) 3,400 92
Forest Laboratories * 25,800 1,005
GlaxoSmithKline (GBP) 50,400 1,058
GlaxoSmithKline ADR 11,600 494
Hisamitsu Pharmaceutical (JPY) 9,000 164
Inspire Pharmaceuticals *(ss.) 8,900 159
Johnson & Johnson 47,300 2,853
Kobayashi Pharmaceutical (JPY)(ss.) 7,600 201
Medicines Company *(ss.) 2,900 72
Merck 40,700 1,140
Nektar Therapeutics *(ss.) 1,300 24
Novartis (CHF) 34,002 1,625
Noven Pharmaceuticals *(ss.) 7,100 130
Novo Nordisk, Series B (DKK) 3,553 188
Pfizer 168,532 4,680
Sanofi-Aventis (EUR)(ss.) 16,538 1,242
Schering-Plough 144,100 2,572
Takeda Chemical Industries (JPY) 8,900 437
Teva Pharmaceutical ADR(ss.) 34,000 928
Theravance *(ss.) 1,200 21
Wyeth 117,960 4,703
26,772
Total Health Care 63,417
INDUSTRIALS & BUSINESS SERVICES 11.3%
Aerospace & Defense 1.6%
Armor Holdings * 11,800 510
British Aerospace (GBP) 90,053 421
European Aeronautic Defense & Space (EUR)(ss.) 18,826 568
General Dynamics 9,100 986
Honeywell International 33,900 1,198
Lockheed Martin 107,800 6,559
Mercury Computer Systems *(ss.) 6,200 195
MTC Technologies *(ss.) 300 9
Rockwell Collins 4,600 183
10,629
Air Freight & Logistics 0.7%
EGL *(ss.) 10,500 354
Expeditors International of Washington 200 11
Pacer International * 6,800 133
Ryder System 2,200 118
TPG (EUR) 11,817 309
UPS, Class B 40,000 3,366
UTi Worldwide(ss.) 3,600 248
4,539
Airlines 0.1%
Frontier Airlines *(ss.) 5,200 61
Midwest Express Holdings *(ss.) 3,000 9
Qantas Airways (AUD) 51,510 142
212
Building Products 0.1%
Kaba Holding (CHF) 649 180
Pilkington (GBP) 180,993 370
Quixote(ss.) 1,800 38
Trex *(ss.) 4,400 207
795
Commercial Services & Supplies 2.1%
Apollo Group, Class A * 22,300 1,777
Cendant 44,400 1,006
Central Parking(ss.) 12,800 194
ChoicePoint * 8,200 360
Consolidated Graphics * 8,200 388
Education Management * 2,100 70
Electro Rent 4,300 61
First Advantage, Class A *(ss.) 1,900 36
G & K Services, Class A(ss.) 7,300 300
Glory (JPY) 7,400 116
H&R Block 24,000 1,145
Herman Miller(ss.) 12,300 302
Intersections *(ss.) 600 11
Ionics *(ss.) 9,400 406
KForce *(ss.) 10,700 128
Layne Christensen *(ss.) 1,000 19
LECG *(ss.) 7,200 141
R.R. Donnelley 93,700 3,251
Resources Connection *(ss.) 8,900 404
SOURCECORP *(ss.) 5,800 96
Tetra Tech *(ss.) 11,814 180
Waste Management 117,743 3,510
West Corporation * 3,000 104
14,005
Construction & Engineering 0.3%
Acciona (EUR) 6,601 516
Balfour Beatty (GBP) 66,873 384
Downer EDI (AUD)(ss.) 51,044 177
Insituform Technologies *(ss.) 5,700 133
JGC (JPY)(ss.) 24,000 206
NCC AB, Series B (SEK) 32,445 408
1,824
Electrical Equipment 0.1%
A.O. Smith(ss.) 14,300 430
American Superconductor *(ss.) 1,600 22
Artesyn Technologies *(ss.) 10,000 95
Sumitomo Electric Industries (JPY) 24,000 252
Woodward Governor 700 51
850
Industrial Conglomerates 3.0%
3M 15,900 1,265
DCC (EUR) 18,829 393
GE 199,400 7,051
Hutchison Whampoa (HKD) 43,200 387
Sembcorp (SGD) 472,000 418
Siemens (EUR) 12,306 983
Tyco International 280,098 9,515
20,012
Machinery 2.0%
Actuant, Class A *(ss.) 7,480 352
Cascade 2,800 90
Danaher 90,900 5,170
Deere 49,600 3,558
Fanuc (JPY) 7,400 462
Graco 8,350 306
Guinness Peat Group (NZD) 126,397 195
Harsco 9,500 505
IDEX 3,300 132
Lindsay Manufacturing(ss.) 8,700 245
Mitsubishi Heavy Industries (JPY) 108,000 309
NSK (JPY) 32,000 149
Pall 44,900 1,216
SKF, Series B (SEK) 5,915 251
Toro(ss.) 3,400 246
13,186
Marine 0.1%
Nippon Yusen (JPY) 100,000 532
532
Road & Rail 1.1%
Arriva (GBP) 49,971 467
Burlington Northern Santa Fe 62,700 2,824
Genesee & Wyoming, Class A * 1,700 47
Heartland Express 6,859 151
Knight Transportation *(ss.) 14,050 338
Nippon Express (JPY) 39,000 184
Norfolk Southern 90,300 3,100
Overnite(ss.) 5,000 177
7,288
Trading Companies & Distributors 0.1%
Mitsubishi (JPY) 46,000 582
Sumitomo (JPY) 29,000 244
826
Total Industrials & Business Services 74,698
INFORMATION TECHNOLOGY 11.5%
Communications Equipment 2.5%
Belden CDT(ss.) 15,300 355
Black Box(ss.) 5,400 230
Cisco Systems * 198,100 3,706
Corning * 383,700 4,827
F5 Networks * 3,800 164
Ixia *(ss.) 4,100 58
Juniper Networks * 51,800 1,426
Lucent Technologies *(ss.) 541,100 2,126
Nokia (EUR) 17,040 277
Nokia ADR 36,100 584
Packeteer * 2,700 35
QUALCOMM 40,800 1,698
Riverstone Networks * 13,300 15
Sagem (EUR)(ss.) 3,362 308
Sirf Technology Holdings *(ss.) 7,200 91
Tekelec *(ss.) 3,800 89
Uniden (JPY) 8,000 168
16,157
Computers & Peripherals 1.2%
Applied Films *(ss.) 700 15
Creative Technology (SGD) 12,750 159
Dell * 113,700 4,607
Emulex *(ss.) 10,100 143
Gateway * 29,600 202
IBM 6,500 613
Lexmark International * 8,300 705
Logitech International (CHF) * 4,571 267
NEC (JPY)(ss.) 24,000 132
QLogic * 15,700 540
Synaptics *(ss.) 4,500 173
Toshiba (JPY) 67,000 284
7,840
Electronic Equipment & Instruments 0.3%
Cogent *(ss.) 1,800 60
Digital Theater Systems *(ss.) 5,100 107
Global Imaging Systems *(ss.) 5,700 213
KEMET *(ss.) 15,100 134
Kyocera (JPY) 2,700 190
Littelfuse * 4,800 187
Methode Electronics 9,600 127
Newport *(ss.) 6,500 80
Plexus *(ss.) 15,600 215
Shimadzu (JPY) 72,000 404
TDK (JPY) 4,300 308
Technitrol * 2,900 50
Woodhead Industries(ss.) 8,100 122
2,197
Internet Software & Services 0.7%
Digital Insight *(ss.) 8,800 144
Google, Class A * 2,300 421
IAC/InterActiveCorp *(ss.) 43,800 1,081
MatrixOne *(ss.) 13,100 87
WebSideStory * 1,600 20
Yahoo! * 79,400 2,987
4,740
IT Services 1.2%
Accenture, Class A * 26,900 698
Affiliated Computer Services, Class A *(ss.) 23,500 1,391
Automatic Data Processing 14,900 678
BISYS Group * 9,600 154
CACI International, Class A * 5,900 367
First Data 30,540 1,255
Fiserv * 27,300 1,051
Global Payments(ss.) 7,100 392
Indra Sistemas (EUR) 26,553 416
Iron Mountain * 13,825 416
Logica CMG (GBP) 42,954 151
Maximus *(ss.) 8,100 254
MPS Group *(ss.) 21,700 244
RightNow Technologies *(ss.) 6,200 113
Trans Cosmos (JPY)(ss.) 9,000 309
7,889
Office Electronics 0.1%
Canon (JPY) 11,000 551
Neopost (EUR) 3,464 248
799
Semiconductor & Semiconductor Equipment 2.0%
AMIS Holdings * 5,300 80
Analog Devices 45,800 1,692
Artisan Components * 2,700 93
Atheros Communications *(ss.) 2,500 28
ATMI *(ss.) 6,900 159
Brooks-Pri Automation * 5,700 88
Cabot Microelectronics *(ss.) 4,500 166
Credence Systems *(ss.) 9,800 75
Cymer *(ss.) 700 21
Entegris *(ss.) 11,600 113
Exar *(ss.) 8,400 117
Intel 104,100 2,327
Jenoptik (EUR) * 17,652 188
KLA-Tencor * 8,300 374
Lattice Semiconductor * 16,500 88
Maxim Integrated Products 63,600 2,605
Microchip Technology 11,800 333
Microsemi *(ss.) 6,600 118
MKS Instruments *(ss.) 12,700 216
Mykrolis * 12,700 156
PDF Solutions * 7,800 100
Power Integrations *(ss.) 3,700 73
Rohm (JPY) 600 57
Semiconductor Manufacturing International ADR *(ss.) 6,700 80
Semtech *(ss.) 14,500 297
Silicon Laboratories *(ss.) 5,100 154
Tessera Technologies *(ss.) 5,600 199
Texas Instruments 49,300 1,192
Xilinx 60,400 1,886
13,075
Software 3.5%
Actuate * 4,700 11
Adobe Systems 37,200 2,253
Altiris *(ss.) 5,200 146
Blackbaud * 1,000 13
Catapult Communications *(ss.) 2,700 73
Concord Communications *(ss.) 4,300 40
Electronic Arts * 2,700 132
FactSet Research Systems(ss.) 7,000 362
FileNet *(ss.) 12,700 340
Hyperion Solutions * 2,900 130
Internet Security Systems *(ss.) 7,600 184
Intuit * 39,900 1,669
Jack Henry & Associates 19,800 382
Kronos * 10,450 528
Magma Design Automation *(ss.) 4,200 57
Mercury Interactive * 2,500 114
Microsoft 361,600 9,695
Motive *(ss.) 5,200 66
NEC Soft (JPY) 7,700 197
NetIQ * 9,364 115
Open Solutions *(ss.) 2,200 58
Oracle * 100,300 1,270
PortalPlayer *(ss.) 300 9
Progress Software * 7,300 166
Quest Software *(ss.) 10,300 159
Red Hat *(ss.) 7,000 101
RSA Security * 9,800 207
SAP (EUR) 4,718 841
SAP ADR 38,700 1,722
SPSS * 3,300 53
Symantec * 14,200 906
Trend Micro (JPY)(ss.) 5,000 262
Verisity *(ss.) 2,900 24
VERITAS Software * 29,725 651
Verity * 8,600 118
23,054
Total Information Technology 75,751
MATERIALS 7.1%
Chemicals 2.8%
Agrium(ss.) 104,400 1,940
Airgas(ss.) 22,400 595
Arch Chemicals(ss.) 9,800 286
BASF (EUR) 13,261 890
Degussa (EUR)(ss.) 17,765 768
Dow Chemical 69,600 3,513
DuPont 53,861 2,441
Ferro 14,300 327
Hercules * 87,200 1,299
International Flavors & Fragrances 41,800 1,693
Kaneka (JPY) 37,000 405
MacDermid 2,300 85
Material Sciences * 5,700 95
Minerals Technologies 7,400 491
Mitsubishi Gas Chemical (JPY) 79,000 374
Mosaic * 19,300 336
Potash Corp./Saskatchewan 35,100 2,688
Symyx Technologies *(ss.) 4,800 151
Yara International (NOK) * 6,592 85
18,462
Construction Materials 0.3%
Aggregate (GBP) 194,972 366
Boral (AUD) 167,903 895
Cemex (MXN) 89,151 574
Lafarge (EUR) 2,149 201
RMC (GBP) 23,918 384
2,420
Containers & Packaging 0.0%
Chesapeake Corp. 5,800 157
Smurfit-Stone Container * 1,400 25
182
Metals & Mining 3.4%
Alcoa 45,764 1,555
Anglo American (GBP) 16,166 392
BHP Billiton (AUD) 88,500 1,056
Bluescope Steel (AUD) 153,187 998
Gibraltar Industries(ss.) 3,750 90
Lihir Gold (AUD) * 102,240 101
Meridian Gold *(ss.) 13,900 272
Nippon Steel (JPY) 288,000 710
NN 2,200 28
Nucor 190,600 10,083
Phelps Dodge 59,500 5,779
SSAB Svenskt Stal, Series A (SEK) 24,321 585
Steel Dynamics(ss.) 5,400 219
Voestalpine (EUR)(ss.) 5,151 367
22,235
Paper & Forest Products 0.6%
Buckeye Technologies *(ss.) 14,600 181
MeadWestvaco 47,000 1,581
UPM-Kymmene (EUR) 8,368 188
Weyerhaeuser 30,000 1,980
3,930
Total Materials 47,229
TELECOMMUNICATION SERVICES 2.5%
Diversified Telecommunication Services 1.0%
Cable & Wireless (GBP) 59,214 128
China Telecom (H shares) (HKD) 1,064,000 393
Royal KPN (EUR) 64,599 559
SBC Communications 37,700 949
Sprint 103,100 2,352
TDC (DKK) 10,197 417
Tele Norte Leste ADR(ss.) 24,500 375
Tele2, Series B (SEK)(ss.) 9,346 366
Telenor (NOK) 72,159 635
Telmex ADR 9,900 347
Telus 2,700 69
6,590
Wireless Telecommunication Services 1.5%
America Movil ADR, Series L 13,900 649
Bouygues (EUR) 14,283 613
China Unicom (HKD) 166,000 128
KDDI (JPY) 132 651
mmO2 (GBP) * 453,104 987
Nextel Communications, Class A * 97,600 2,778
Spectrasite * 6,900 400
Telecom Italia Mobile (EUR) 132,404 876
Vodafone ADR(ss.) 92,500 2,522
Western Wireless, Class A * 2,700 73
9,677
Total Telecommunication Services 16,267
UTILITIES 2.2%
Electric Utilities 1.7%
Black Hills(ss.) 2,800 86
Cleco 6,100 121
E.On (EUR) 16,780 1,409
El Paso Electric * 6,300 113
Electric Power, 144A (JPY) * 2,100 58
Exelon 44,550 1,858
FirstEnergy 45,719 1,931
Hong Kong Electric (HKD) 32,500 146
Iberdrola (EUR)(ss.) 25,582 599
Tohoku Electric Power (JPY) 25,200 447
TXU(ss.) 67,800 4,259
11,027
Gas Utilities 0.2%
Australian Gas Light (AUD) 19,031 191
Centrica (GBP) 161,902 765
Toho Gas (JPY) 139,000 448
1,404
Multi-Utilities & Unregulated Power 0.3%
Constellation Energy Group 31,300 1,368
RWE (EUR) 5,990 317
United Utilities (GBP) 32,652 351
2,036
Total Utilities 14,467
Total Common Stocks (Cost $440,460) 576,572
PREFERRED STOCKS 0.1%
Fresenius (EUR) 3,519 326
Porsche (EUR) 710 451
Total Preferred Stocks (Cost $451) 777
CORPORATE BONDS 2.2%
ABN Amro Bank (Chicago), 7.125%, 6/18/07 70,000 76
Ace Ina Holdings, 5.875%, 6/15/14 100,000 101
AIG Sunamerica Global Financing XII,
144A, 5.30%, 5/30/07 150,000 156
Alabama Power, Series B, VR, 2.571%, 8/25/09 90,000 90
Alcan, 6.125%, 12/15/33 100,000 103
Allstate Financial Global Funding,
144A, 5.25%, 2/1/07 85,000 88
Amerada Hess, 7.875%, 10/1/29 75,000 86
America Movil, 5.50%, 3/1/14 70,000 68
Amgen, 144A, 4.00%, 11/18/09 65,000 64
AOL Time Warner, 7.625%, 4/15/31 80,000 94
Appalachian Power, 4.80%, 6/15/05 85,000 86
AT&T Broadband, 8.375%, 3/15/13 125,000 152
Baker Hughes, 6.875%, 1/15/29 110,000 124
Bank One, 5.25%, 1/30/13 155,000 158
BB&T, 6.50%, 8/1/11 35,000 39
Black Hills, 6.50%, 5/15/13 90,000 92
Boeing, 8.75%, 8/15/21 125,000 165
Buckeye Partners
5.30%, 10/15/14 30,000 30
6.75%, 8/15/33 45,000 48
Bunge Limited Finance, 4.375%, 12/15/08 115,000 115
Canadian National Railway, 6.25%, 8/1/34 130,000 136
Canadian Natural Resources, 7.20%, 1/15/32 150,000 173
CE Electric UK Funding, 144A, 6.995%, 12/30/07 90,000 96
Celulosa Arauco y Constitucion, 5.125%, 7/9/13 90,000 88
Centerpoint Energy, 5.875%, 6/1/08 80,000 84
Centex, 4.55%, 11/1/10 100,000 99
Chancellor Media, 8.00%, 11/1/08 55,000 62
CIT Group, 2.875%, 9/29/06 55,000 54
CIT Group Holdings, 7.75%, 4/2/12 100,000 117
Cleveland Electric Illuminating, 5.65%, 12/15/13 105,000 107
ConocoPhillips, 5.90%, 10/15/32 130,000 132
Countrywide Home Loans, 4.125%, 9/15/09 115,000 114
Cox Communications, 7.875%, 8/15/09 115,000 129
CVS, 144A, 4.00%, 9/15/09 60,000 59
DaimlerChrysler
6.50%, 11/15/13 125,000 133
VR, 2.343%, 9/10/07 100,000 100
Deutsche Telekom International Finance,
STEP, 8.75%, 6/15/30 80,000 103
Developers Diversified Realty, 3.875%, 1/30/09 85,000 83
Devon Financing, 7.875%, 9/30/31 70,000 86
Diamond Offshore Drilling, 144A, 5.15%, 9/1/14 65,000 65
Dominion Resources, 5.00%, 3/15/13 85,000 84
Dow Chemical, 6.125%, 2/1/11 70,000 76
Duke Capital
4.302%, 5/18/06 55,000 56
6.25%, 2/15/13 100,000 107
Encana Holdings Finance, 5.80%, 5/1/14 125,000 131
Entergy Gulf States, 5.20%, 12/3/07 80,000 80
EOP Operating, 4.65%, 10/1/10 85,000 85
Exelon Generation, 5.35%, 1/15/14 90,000 91
Federated Department Stores, 6.625%, 4/1/11 95,000 105
First Union, 6.40%, 4/1/08 40,000 43
FirstEnergy, 7.375%, 11/15/31 60,000 67
Ford Motor Credit
5.625%, 10/1/08 300,000 305
VR, 3.24%, 11/16/06 60,000 60
France Telecom, STEP, 8.50%, 3/1/11 85,000 101
Franklin Resources, 3.70%, 4/15/08 30,000 30
Fund American Companies, 5.875%, 5/15/13 115,000 115
General Electric Capital, 6.00%, 6/15/12 70,000 76
Genworth Financial, 5.75%, 6/15/14 115,000 119
GlaxoSmithKline, 5.375%, 4/15/34 80,000 77
GM, 8.375%, 7/15/33 195,000 198
GMAC, 7.25%, 3/2/11 135,000 140
Goldman Sachs Capital I, 6.345%, 2/15/34 240,000 244
GTECH, 144A, 4.50%, 12/1/09 70,000 69
Halliburton, 144A, VR, 2.86%, 1/26/07 120,000 120
Harrah's Operating, 5.50%, 7/1/10 55,000 57
HBOS, 144A, 6.00%, 11/1/33 100,000 102
Hearst-Argyle, 7.00%, 1/15/18 65,000 72
Highmark, 144A, 6.80%, 8/15/13 90,000 97
Hospira, 4.95%, 6/15/09 120,000 122
Household Finance, 6.375%, 11/27/12 60,000 66
Hutchison Whampoa, 144A, 5.45%, 11/24/10 100,000 103
IBM, 4.25%, 9/15/09 95,000 96
International Lease Finance, 6.375%, 3/15/09 105,000 113
International Speedway, 4.20%, 4/15/09 55,000 55
John Deere Capital, 7.00%, 3/15/12 90,000 103
Kaneb Pipe Line Operations, 7.75%, 2/15/12 50,000 57
Kinder Morgan, 6.50%, 9/1/12 90,000 98
Kraft Foods, 5.625%, 11/1/11 110,000 115
Kroger, 8.05%, 2/1/10 120,000 138
Lear, 144A, 5.75%, 8/1/14 50,000 50
Lennar, 144A, 5.50%, 9/1/14 90,000 90
Masco, 5.875%, 7/15/12 140,000 149
May Department Stores, 144A, 3.95%, 7/15/07 40,000 40
MBNA America Bank, 4.625%, 8/3/09 125,000 126
McCormick, 6.40%, 2/1/06 200,000 208
MetLife, 6.125%, 12/1/11 120,000 130
Miller Brewing, 144A, 5.50%, 8/15/13 150,000 154
Morgan Stanley, 3.625%, 4/1/08 165,000 164
Motorola, 7.625%, 11/15/10 65,000 75
Nationwide Financial Services, 5.90%, 7/1/12 115,000 121
Nationwide Mutual Insurance, 144A, 6.60%, 4/15/34 65,000 63
News America, 144A, 6.20%, 12/15/34 65,000 64
NLV Financial, 144A, 7.50%, 8/15/33 70,000 74
Northern Trust, 4.60%, 2/1/13 50,000 49
NVR, 5.00%, 6/15/10 85,000 84
Panhandle Eastern Pipeline, 4.80%, 8/15/08 45,000 45
Pemex Project Funding Master Trust
7.375%, 12/15/14 80,000 87
144A, VR, 3.18%, 6/15/10 120,000 123
PG&E
6.05%, 3/1/34 95,000 96
VR, 2.72%, 4/3/06 36,000 36
Pinnacle West Capital, 6.40%, 4/1/06 75,000 78
Pioneer Natural Resource, 5.875%, 7/15/16 60,000 62
Plains All American Pipeline, 7.75%, 10/15/12 55,000 64
PPL Capital Funding, 4.33%, 3/1/09 120,000 120
Praxair, 2.75%, 6/15/08 100,000 96
Principal Life Global Funding, 144A, 5.125%, 10/15/13 110,000 110
Progress Energy, 6.75%, 3/1/06 70,000 73
Prudential Financial, 3.75%, 5/1/08 80,000 79
PSEG Power, 8.625%, 4/15/31 60,000 76
Public Service of New Mexico, 4.40%, 9/15/08 95,000 95
Puget Sound Energy, VR, 2.681%, 7/14/06 125,000 125
Pulte Homes, 7.875%, 8/1/11 90,000 104
Reckson Operating Partnership, 5.15%, 1/15/11 105,000 104
Rogers Cable, 5.50%, 3/15/14 100,000 93
Rouse, 8.43%, 4/27/05 225,000 229
SCA Coordination Center, 144A, 4.50%, 7/15/15 65,000 61
Sealed Air, 144A, 5.375%, 4/15/08 90,000 93
Security Benefit Life Insurance, 144A, 7.45%, 10/1/33 45,000 47
Sempra Energy, 6.00%, 2/1/13 85,000 89
Simon Property Group, 3.75%, 1/30/09 110,000 107
SLM Corporation, VR
2.30%, 1/26/09 125,000 125
3.66%, 4/1/09 90,000 91
Sprint Capital, 6.90%, 5/1/19 130,000 142
SunGard Data Systems, 3.75%, 1/15/09 65,000 63
Telefonos De Mexico, 4.50%, 11/19/08 55,000 55
Telus, 8.00%, 6/1/11 75,000 87
Transocean, 7.50%, 4/15/31 65,000 77
TXU Energy, VR, 2.838%, 1/17/06 55,000 55
Tyco International, 6.375%, 10/15/11 140,000 154
U.S. Bank, 2.87%, 2/1/07 105,000 103
U.S. Cellular, 6.70%, 12/15/33 165,000 166
Union Pacific, 6.50%, 4/15/12 95,000 105
UST, 6.625%, 7/15/12 140,000 154
Verizon Global Funding, 7.75%, 12/1/30 85,000 102
Webster Financial, 5.125%, 4/15/14 115,000 115
Wells Fargo, VR, 1.99%, 3/23/07 140,000 140
Western Power Distribution Holdings,
144A, 6.875%, 12/15/07 65,000 67
Weyerhaeuser
6.75%, 3/15/12 55,000 61
7.375%, 3/15/32 25,000 29
Wyeth, 6.50%, 2/1/34 75,000 78
XL Capital, 6.50%, 1/15/12 100,000 108
XTO Energy, 6.25%, 4/15/13 80,000 86
Yum! Brands, 7.70%, 7/1/12 115,000 135
Total Corporate Bonds (Cost $13,876) 14,159
ASSET-BACKED SECURITIES 0.3%
Capital Auto Receivables Asset Trust, Series 2002-2
Class CERT, 4.18%, 10/15/07 83,157 84
Chase Manhattan Auto Owner Trust
Series 2001-B, Class CTFS, 3.75%, 5/15/08 38,166 38
Series 2003-A, Class A4, 2.06%, 12/15/09 165,000 161
CIT RV Trust, Series 1998-A, Class A4, 6.09%,
2/15/12 66,200 66
Citibank Credit Card Issuance Trust
Series 2001-C1, Class C1, VR, 2.68%, 1/15/10 135,000 137
Series 2004-C1, Class C1, VR, 2.75%, 7/15/13 300,000 301
Hyundai Auto Receivables Trust
Series 2003-A, Class A4, 3.02%, 10/15/10 100,000 99
Series 2003-A, Class D, 4.06%, 10/15/10 50,000 50
MBNA Master Credit Card Trust II, Series 2000-D,
Class C 144A, 8.40%, 9/15/09 250,000 275
Morgan Stanley Auto Loan Trust, Series 2004-HB1,
Class C VR, 2.88%, 10/15/11 87,236 87
Peco Energy Transition Trust, Series 2001-A,
Class A1 6.52%, 12/31/10 275,000 306
Reliant Energy Transition Bond, Series 2001-1,
Class A4 5.63%, 9/15/15 175,000 185
World Financial Network, Series 2003-A, Class A2
VR, 2.47%, 5/15/12 225,000 226
Total Asset-Backed Securities (Cost $1,998) 2,015
NON-U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 0.6%
Banc of America Commercial Mortgage, Series 2003-1
Class A2, CMO, 4.648%, 9/11/36 175,000 174
Bank of America Mortgage Securities
Series 2003-L, Class 2A2, CMO, VR, 4.32%,
1/25/34 372,679 369
Series 2004-1, Class 3A2, CMO, VR, 5.008%,
10/25/34 145,399 147
Series 2004-A, Class 2A2, CMO, VR, 4.821%,
9/25/34 207,590 205
Series 2004-D, Class 2A2, CMO, VR, 4.224%,
5/25/34 116,853 116
Series 2004-H, Class 2A2, CMO, VR, 4.152%,
2/25/34 125,901 127
Bear Stearns Commercial Mortgage Securities,
Series 2004-T14 Class A2, CMO, 4.17%, 1/12/41 575,000 575
Chase Funding Mortgage Loan, Series 2002-2, Class 1M1
5.599%, 9/25/31 40,000 41
Countrywide Asset-Backed Certificates, Series 2003-5
Class AF3, 3.613%, 4/25/30 180,000 180
Countrywide Home Loans, Series 2003-60, Class 2A1
CMO, VR, 5.017%, 2/25/34 56,694 57
DLJ Commercial Mortgage, Series 1999-CG2, Class A1B
CMO, 7.30%, 6/10/32 200,000 223
GE Capital Commercial Mortgage, Series 2001-1,
Class A2 CMO, 6.531%, 3/15/11 225,000 247
GMAC Commercial Mortgage Securities, Series 2001-C2
Class A2, CMO, 6.70%, 4/15/34 275,000 305
Greenwich Capital Commercial Funding, Series 2004-GG1A
Class A2, CMO, 3.835%, 10/8/08 200,000 200
J.P. Morgan Chase Commercial Mortgage
Series 2001-CIB2, Class A2, CMO, 6.244%,
4/15/35 175,000 186
Series 2001-CIBC, Class A3, CMO, 6.26%,
3/15/33 260,000 284
LB-UBS Commercial Mortgage Trust
Series 2004-C2, Class A2, CMO, 3.246%,
3/15/29 300,000 290
Series 2004-C4, Class A2, CMO, VR, 4.567%,
5/15/29 275,000 279
Washington Mutual, Series 2004-AR1, Class A
CMO, VR, 4.229%, 3/25/34 124,333 122
Total Non-U.S. Government Mortgage-Backed Securities
(Cost $4,159) 4,127
FOREIGN GOVERNMENT OBLIGATIONS & MUNICIPALITIES 0.4%
Asian Development Bank, 6.25%, 6/15/11 (AUD) 240,000 193
European Investment Bank, 5.75%, 9/15/09 (AUD) 580,000 456
Federal Republic of Germany, 5.00%, 5/20/05 (EUR) 720,000 966
Government of Canada, 5.25%, 6/1/12 (CAD) 895,000 799
Republic of Chile, 5.50%, 1/15/13 80,000 83
Republic of South Africa, 6.50%, 6/2/14 65,000 71
United Mexican States
6.375%, 1/16/13 95,000 100
VR, 2.29%, 1/13/09(ss.) 80,000 81
Total Foreign Government Obligations &
Municipalities (Cost $2,441) 2,749
U.S. GOVERNMENT & AGENCY MORTGAGE-BACKED SECURITIES 3.0%
U.S. Government Agency Obligations +/- 2.3%
Federal Home Loan Mortgage
4.50%, 11/1/18 - 5/1/19 426,823 425
5.00%, 12/1/08 - 10/1/33 946,854 961
5.50%, 9/1 - 12/1/33 560,063 567
6.00%, 5/1/17 - 3/1/33 1,020,319 1,059
7.00%, 11/1/30 - 6/1/32 61,695 66
ARM, 4.577%, 9/1/32 68,679 69
CMO
4.50%, 3/15/16 600,000 597
5.50%, 4/15/28 475,000 490
CMO, IO, 4.50%, 7/15/11 - 5/15/16 578,000 64
TBA, 6.00%, 12/1/99 112,000 117
Federal National Mortgage Assn.
4.50%, 5/1/18 - 1/1/19 1,473,951 1,467
5.00%, 3/1 - 4/1/34 897,079 888
5.50%, 12/1/16 - 10/1/34 5,217,515 5,348
6.00%, 2/1/33 - 11/1/34 1,208,539 1,249
6.50%, 5/1/17 - 12/1/32 406,449 428
CMO
2.91%, 11/25/33 140,000 140
3.50%, 4/25/13 175,000 175
5.00%, 3/25/15 350,000 355
CMO, IO
5.50%, 11/25/28 126,042 8
6.50%, 2/1/32 60,066 12
TBA, 6.50%, 12/1/99 535,000 561
15,046
U.S. Government Obligations 0.7%
Government National Mortgage Assn.
5.00%, 7/15 - 10/20/33 2,633,781 2,621
5.50%, 1/20 - 5/20/34 1,578,443 1,604
6.00%, 5/15/26 - 2/20/34 148,483 154
6.50%, 3/15/26 - 9/20/34 108,978 115
7.00%, 3/15/13 - 2/15/30 78,870 84
7.50%, 10/15/22 1,705 2
8.00%, 1/15/22 - 10/20/25 46,626 51
CMO, 2.946%, 3/16/19 145,000 140
4,771
Total U.S. Government & Agency Mortgage-Backed Securities
(Cost $19,992) 19,817
U.S. GOVERNMENT AGENCY OBLIGATIONS (EXCLUDING MORTGAGE-BACKED) 2.8%
U.S. Government Agency Obligations +/- 0.5%
Federal Home Loan Bank, 5.75%, 5/15/12(ss.) 350,000 377
Federal Home Loan Mortgage
2.75%, 3/15/08(ss.) 375,000 365
4.625%, 2/15/07 (EUR) 470,000 650
5.125%, 7/15/12 155,000 162
Federal National Mortgage Assn.
3.25%, 8/15/08(ss.) 565,000 557
4.375%, 9/15/12(ss.) 250,000 247
6.00%, 5/15/11 375,000 410
7.125%, 1/15/30 240,000 293
3,061
U.S. Treasury Obligations 2.3%
U.S. Treasury Bonds
5.375%, 2/15/31(ss.) 310,000 326
6.00%, 2/15/26(ss.) 645,000 723
6.25%, 8/15/23 - 5/15/30(ss.) 440,000 511
6.375%, 8/15/27(ss.)++ 175,000 206
8.50%, 2/15/20(ss.) 75,000 104
U.S. Treasury Inflation-Indexed Bonds,
2.375%, 1/15/25(ss.) 614,453 636
U.S. Treasury Notes
2.375%, 8/31/06(ss.) 4,600,000 4,555
3.25%, 8/15/07(ss.) 3,310,000 3,314
3.375%, 12/15/08(ss.) 400,000 398
3.50%, 11/15/06(ss.) 2,585,000 2,609
4.00%, 6/15/09(ss.) 1,575,000 1,598
4.25%, 11/15/13(ss.) 85,000 84
4.75%, 11/15/08(ss.) 270,000 282
5.00%, 8/15/11(ss.) 170,000 180
15,526
Total U.S. Government Agency Obligations
(excluding Mortgage-Backed) (Cost $18,296) 18,587
MUNICIPAL BONDS 0.2%
California
Economic Recovery
5.00%, 7/1/23 (Tender 7/1/07) 55,000 58
5.00%, 7/1/23 (Tender 7/1/08) 60,000 65
GO, 5.25%, 4/1/34 55,000 57
Kansas Dev. Fin. Auth., Public Employee Retirement
5.501%, 5/1/34 (FSA Insured) 75,000 75
Massachusetts, GO, 5.25%, 8/1/15 (MBIA Insured) 225,000 249
New York State Urban Dev. Corp., Corrections &
Youth Fac., 5.25%, 1/1/21 (Tender 1/1/09) 135,000 146
North Carolina, GO, 5.25%, 3/1/13 365,000 410
Oregon, Taxable Pension, 5.892%, 6/1/27 40,000 42
Total Municipal Bonds (Cost $1,104) 1,102
DOMESTIC BOND MUTUAL FUNDS 1.9%
T. Rowe Price Institutional High Yield Fund, 6.92%p+ 1,140,745 12,662
Total Domestic Bond Mutual Funds (Cost $11,952) 12,662
SHORT-TERM INVESTMENTS 2.7%
Money Market Fund 2.7%
T. Rowe Price Reserve Investment Fund, 2.00% #+ 17,537,787 17,538
Total Short-Term Investments (Cost $17,538) 17,538
SECURITIES LENDING COLLATERAL 10.6%
Money Market Pooled Account 2.0%
Investment in money market pooled account managed by
JP Morgan Chase Bank, London, 1.984% # 13,374,536 13,374
13,374
Money Market Trust 8.6%
State Street Bank and Trust Company of
New Hampshire N.A. Securities Lending Quality
Trust units, 1.998% # 56,509,730 56,510
56,510
Total Securities Lending Collateral (Cost $69,884) 69,884
FUTURES CONTRACTS 0.0%
Variation margin receivable (payable) on open futures contracts (2) (1)
Total Futures Contracts (1)
Total Investments in Securities
112.1% of Net Assets (Cost $602,151) $739,998
--------
(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 20, 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 $2,481 and represents 0.4% of net assets
ADR American Depository Receipts
ADS American Depository Shares
ARM Adjustable Rate Mortgage
AUD Australian dollar
CAD Canadian dollar
CHF Swiss franc
CMO Collateralized Mortgage Obligation
DKK Danish krone
EUR Euro
FSA Financial Security Assurance Inc.
GBP British pound
GDR Global Depository Receipts
GDS Global Depository Shares
GO General Obligation
HKD Hong Kong dollar
IO Interest Only security for which the fund receives interest on notional
principal (par)
JPY Japanese yen
MBIA MBIA Insurance Corp.
MXN Mexican peso
MYR Malaysian ringgit
NOK Norwegian krone
NZD New Zealand dollar
REIT Real Estate Investment Trust
SEK Swedish krona
SGD Singapore dollar
STEP Stepped coupon bond for which the coupon rate of interest will adjust on
specified future date(s)
TBA To Be Announced security was purchased on a forward commitment basis
VR Variable Rate
(2) Open Futures Contracts at November 30, 2004 were as follows:
($ 000s)
Contract Unrealized
Expiration Value Gain (Loss)
----------- -------- -----------
Short, 9 U.S. Treasury five year contracts,
$40 par of 6.375% U.S. Treasury Bond
pledged as initial margin 3/05 $ (979) $ 1
Net payments (receipts) of variation
margin to date (2)
Variation margin receivable (payable)
on open futures contracts $(1)
----
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Growth 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 $29,490) $ 30,200
Non-affiliated companies (cost $572,661) 709,788
Total investments in securities 739,988
Other assets 4,018
Total assets 744,006
Liabilities
Obligation to return securities lending collateral 69,884
Other liabilities 13,749
Total liabilities 83,633
NET ASSETS $ 660,373
------------
Net Assets Consist of:
Undistributed net investment income (loss) $ 7,685
Undistributed net realized gain (loss) (12,753)
Net unrealized gain (loss) 137,855
Paid-in-capital applicable to 30,646,544 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares of the Corporation authorized 527,586
NET ASSETS $ 660,373
------------
NET ASSET VALUE PER SHARE $ 21.55
------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
Unaudited
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
($ 000s)
6 Months
Ended
11/30/04
Investment Income (Loss)
Income
Dividend $ 6,042
Interest 1,632
Securities lending 70
Total income 7,744
Expenses
Investment management 1,902
Shareholder servicing 918
Custody and accounting 145
Prospectus and shareholder reports 50
Registration 18
Legal and audit 9
Directors 3
Miscellaneous 5
Reductions/repayments of fees and expenses
Investment management fees (waived) repaid 3
Total expenses 3,053
Net investment income (loss) 4,691
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 7,888
Futures (110)
Foreign currency transactions 31
Net realized gain (loss) 7,809
Change in net unrealized gain (loss)
Securities 44,350
Futures 14
Other assets and liabilities
denominated in foreign currencies 13
Change in net unrealized gain (loss) 44,377
Net realized and unrealized gain (loss) 52,186
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 56,877
------------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Growth 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) $ 4,691 $ 6,529
Net realized gain (loss) 7,809 3,556
Change in net unrealized gain (loss) 44,377 75,962
Increase (decrease) in net assets from operations 56,877 86,047
Distributions to shareholders
Net investment income - (6,129)
Net realized gain - (266)
Decrease in net assets from distributions - (6,395)
Capital share transactions *
Shares sold 116,241 225,218
Distributions reinvested - 6,366
Shares redeemed (122,063) (113,847)
Increase (decrease) in net assets from capital
share transactions (5,822) 117,737
Net Assets
Increase (decrease) during period 51,055 197,389
Beginning of period 609,318 411,929
End of period $ 660,373 $ 609,318
--------- ---------
(Including undistributed net investment income of
$7,685 a 11/30/04 and $2,994 at 5/31/04)
*Share information
Shares sold 5,765 11,920
Distributions reinvested - 341
Shares redeemed (6,073) (6,056)
Increase (decrease) in shares outstanding (308) 6,205
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Personal Strategy Growth 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
Growth 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 capital growth and a secondary emphasis on income.
The fund pursues this objective by investing in a diversified portfolio
typically consisting of about 80% stocks and 20% bonds and 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. In addition,
trading in the portfolio securities of the fund may take place in various
foreign markets on certain days (such as Saturday) when the fund is not open for
business. On such days, these securities are valued in accordance with
procedures adopted by the Board.
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 $2,000 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
an annual 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 $1,104,000, represents
18% 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 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 $67,964,000; aggregate collateral consisted of $69,884,000 in
money market pooled accounts and U.S. government securities valued at $657,000.
Other
Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $114,114,000 and $115,068,000,
respectively, for the six months ended November 30, 2004. Purchases and sales of
U.S. government securities aggregated $46,536,000 and $46,973,000, 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 $20,165,000 of unused
capital loss carryforwards, of which $3,314,000 expire in fiscal 2010,
$13,240,000 expire in fiscal 2011, and $3,611,000 expire in fiscal 2012.
At November 30, 2004, the cost of investments for federal income tax purposes
was $602,151,000. Net unrealized gain aggregated $137,855,000 at period-end, of
which $148,191,000 related to appreciated investments and $10,336,000 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 0.30% 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 $347,000.
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 1.00%. 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 in the amount of $620,000 remain subject to
repayment by the fund through September 30, 2006.
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,
$140,000 for T. Rowe Price Services, Inc., and $580,000 for T. Rowe Price
Retirement Plan Services, Inc. At period-end, a total of $149,000 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
$85,000, and the value of shares of the Reserve Funds held at November 30, 2004
and May 31, 2004 was $17,538,000 and $11,512,000, 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 Growth 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 $44,000 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 $1,743,000 and
$8,516,000, respectively. Realized gains during the period were $104,000, and
investment income during the period was $686,000. At November 30, 2004 and May
31, 2004, the value of shares of High Yield Fund held were $12,662,000 and
$18,782,000, respectively.
T. Rowe Price Personal Strategy Growth 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