Fellow Shareholders
There were few ports in the storm for investors during the first half of the
year since stocks and bonds generally declined both in the U.S. and overseas.
Some market sectors fared far worse than others, however, so your Fund's broad
diversification provided some protection against the more negative results.
Although the stock market turned in a marginally positive performance
for the second quarter as measured by the unmanaged Standard & Poor's 500
Stock Index, the first quarter's pattern was repeated: two rising months
followed by a retreat. In April and May, returns were generally positive, but
in June rising interest rates and inflation fears caused losses in the bond
market that spilled over into stocks. Virtually every area of the U.S. stock
market experienced negative returns in June, but stocks of
larger-capitalization companies held up better than small-cap issues,
continuing another trend evident in the first quarter. Since the S&P 500 is
dominated by large companies, it outperformed many other equity benchmarks for
both the quarter and the first half. For instance, the Nasdaq Composite was
about five percentage points below the S&P 500 for both periods.
After several years of strong performance, intermediate- and long-term
bonds recorded their third consecutive negative quarter as interest rates
ratcheted higher. In most cases, declines in bond prices more than offset
income earned, resulting in negative returns. The 30-year Treasury bond, for
example, dropped almost 15% in price during the first half and generated a
total return (including income) of -11.7%. Broad-based bond indices generally
recorded losses in the 3% to 4% range for the six-month period.
The international investment scene was mixed, but overall stock and bond
returns were generally lackluster, if not negative, for the first half.
Japanese stocks were a major exception because positive local market results
were sharply magnified by the rise in the value of the yen versus the dollar.
Performance and Strategy Review
The Fund's performance lagged our benchmarks in the second quarter, primarily
due to weakness in our newly expanded small-company portfolio. In addition,
our portfolio's modest growth orientation was somewhat out of favor in recent
months. Our foreign stocks were mixed in the second quarter, with most of the
Pacific region issues appreciating while European stocks fell. For the
six-month period, our international investments, which have served us well in
the past, did not counter U.S. trends and hurt our performance relative to the
benchmarks shown below.
Performance Comparison
Periods Ended 6/30/94
3 Months 6 Months
_____________________
Balanced Fund -1.1% -5.0%
Lipper Balanced Fund Index -0.2 -3.8
Combined Index Portfolio* -0.2 -3.6
* An unmanaged portfolio of 60% stocks (S&P 500) and 40% bonds (Lehman
Brothers Aggregate Index).
Portfolio Review
The Fund's asset allocation was changed in two areas during the second
quarter. As mentioned in last quarter's report, we have been building up our
small-company exposure so that the domestic equity portion of the portfolio
(large cap and small cap combined) more closely resembles the overall U.S.
stock market. New positions in small-cap stocks, which now compose 10% of net
assets, were funded by reducing the cash balance and through sales of some
larger domestic companies. Over the next few years, we expect that small
companies will perform better than the S&P 500, and, at a minimum, we do not
want to bet against them.
The second noteworthy change was to redeploy part of the bond portfolio
(about 7% of Fund assets) into high-yield bonds. Our approach to this sector
of the bond market is to concentrate on issues rated just below investment
grade in the BB and B categories. With the economy strong and corporate
earnings generally robust, the default risk of these bonds is sufficiently
low, in our view, to justify an entry into the sector. This allocation change
is opportunistic, not necessarily permanent. We believe these bonds could
outperform their higher-quality counterparts in coming months. They also
supply additional diversification to the portfolio, since they often move
independently of other market sectors.
Chart 1 - Security Diversification
Outlook
The financial markets are likely to remain skittish until investors feel more
confident about the direction of interest rates. The Fed may be forced to
tighten again if inflation accelerates, but we believe it will wait to see the
effect of the last round of rate increases on the economy before raising the
federal funds rate again. If the economy grows at around a 3% rate in the
second half of 1994, we expect the Fed will push short-term rates higher
before the year is out. Longer-term yields should not rise as sharply
as they did earlier this year, so bond returns should turn positive.
Since the U.S. economy is fundamentally sound, equities could rebound
once investor psychology improves. Overseas, evidence of solid, low-inflation
growth provides a healthy investment environment, and we feel confident that
your Fund's international investments will be rewarding over time.
Respectfully submitted,
Richard T. Whitney
President
July 20, 1994
Industry Diversification
June 30, 1994
STOCKS*
Percent of
Net Assets
__________
Financial 8.7%
Utilities 6.3
Consumer Nondurables 11.0
Consumer Services 8.1
Consumer Cyclicals 3.9
Technology 5.1
Capital Equipment 3.6
Business Services 3.4
Energy 5.5
Process Industries 3.4
Basic Materials 1.6
_____________________________________________________________________________
Total Stocks 60.6%
*Includes foreign securities
BONDS AND RESERVES
U.S. Government & Agencies
U.S. Treasury Obligations 7.5%
Mortgage-Backed 9.1
Other U.S. Gov't. & Agencies 0.2
Agency-Backed CMOs 0.4
Project Loans 0.1
Corporate and Other
Investment Grade 12.4
Noninvestment Grade 7.5
Reserves 2.2
Total Bonds and Reserves 39.4%
_____________________________________________________________________________
Total 100.0%
_____________________________________________________________________________
Largest Holdings
June 30, 1994
STOCKS
Percent of
Company Net Assets
_____________________________________ __________
GE 1.0%
Mobil 0.9
American International Group 0.9
Royal Dutch Petroleum 0.8
AT&T 0.7
Hutchison Whampoa 0.7
Exxon 0.7
American Cyanamid 0.6
Alcoa 0.6
Hitachi 0.6
_____________________________________________________________________________
Total 7.5%
BONDS
Percent of
Company Net Assets
_____________________________________ __________
Ginnie Mae 8.9%
U.S. Treasury 7.5
British Columbia Hydro & Power 1.2
Banesto Del 0.6
Southwest Airlines 0.5
Sealand Services 0.5
RJR Nabisco 0.5
First Fidelity 0.4
Golden Financial 0.4
Newfoundland Province 0.4
_____________________________________________________________________________
Total 20.9%
Statement of Net Assets (Value in thousands)
T. Rowe Price Balanced Fund / June 30, 1994 (Unaudited)
Common Stocks & Warrants - 60.6%
FINANCIAL - 8.7%
Value
______
BANK & TRUST - 4.6%
5,400 shs. AmSouth Bancorporation . . . . . . . . . . $ 169
4,100 Bancorp Hawaii . . . . . . . . . . . . . . 131
12,200 Bank South . . . . . . . . . . . . . . . . 220
3,500 Baybanks . . . . . . . . . . . . . . . . . 11
5,700 Berliner Bank (DEM). . . . . . . . . . . . 1,270
6,300 Central Fidelity Banks . . . . . . . . . . 208
10,000 Chase Manhattan. . . . . . . . . . . . . . 383
33,200 Chemical Banking . . . . . . . . . . . . . 1,278
6,200 Compass Bancshares . . . . . . . . . . . . 153
3,200 Crestar Financial. . . . . . . . . . . . . 146
1,870 Deutsche Bank (DEM). . . . . . . . . . . . 805
200 wts. * Deutsche Bank, 6/30/97 (DEM) . . . . . . . 5
20 shs. Deutsche Bank, 8.75%,
GS, (DEM). . . . . . . . . . . . . . . . 14
7,800 First American . . . . . . . . . . . . . . 255
7,400 First Security . . . . . . . . . . . . . . 216
1,800 First Tennessee National . . . . . . . . . 79
25,000 First Union. . . . . . . . . . . . . . . . 1,153
3,500 First USA. . . . . . . . . . . . . . . . . 134
5,700 First Virginia Banks . . . . . . . . . . . 210
7,600 Firstfed Michigan. . . . . . . . . . . . . 177
10,000 * Grupo Financiero
Bancomer, ADR. . . . . . . . . . . . . . 225
20,000 J. P. Morgan . . . . . . . . . . . . . . . 1,237
50,000 Keycorp. . . . . . . . . . . . . . . . . . 1,594
12,500 Mellon Bank. . . . . . . . . . . . . . . . 703
4,200 Mercantile Bancorporation. . . . . . . . 148
5,200 Meridian Bancorp . . . . . . . . . . . . . 158
3,500 Michigan National. . . . . . . . . . . . . 252
20,000 NationsBank. . . . . . . . . . . . . . . 1,027
5,400 Old Kent Financial . . . . . . . . . . . . 189
9,100 Regions Financial. . . . . . . . . . . . . 317
6,800 Societe Generale (FRF) . . . . . . . . . . 699
9,500 Southtrust . . . . . . . . . . . . . . . 194
6,300 Star Banc. . . . . . . . . . . . . . . . . 239
74,000 Toronto-Dominion
Bank (CAD) . . . . . . . . . . . . . . . 1,064
4,200 UJB Financial. . . . . . . . . . . . . . . 116
16,900 Washington Federal
Savings & Loan . . . . . . . . . . . . . 372
12,600 West One Bancorp . . . . . . . . . . . . . 362
16,113
INSURANCE - 1.4%
35,400 American International Group . . . . . . . 3,067
2,900 Conseco. . . . . . . . . . . . . . . . . . 35
9,400 shs. Equitable Companies. . . . . . . . . . . . $ 167
10,200 Horace Mann Educators. . . . . . . . . . . 278
8,000 John Alden Financial . . . . . . . . . . . 276
3,100 MBIA . . . . . . . . . . . . . . . . . . . 178
11,600 MGIC Investment. . . . . . . . . . . . . . 307
7,717 * Mutual Assurance . . . . . . . . . . . . . 158
5,100 Ohio Casualty. . . . . . . . . . . . . . . 143
4,700 Old Republic International . . . . . . . . 105
4,200 Progressive Corporation. . . . . . . . . . 140
4,954
FINANCIAL SERVICES - 2.7%
4,500 ADVANTA. . . . . . . . . . . . . . . . . . 60
5,550 ADVANTA (Class B). . . . . . . . . . . . . 179
13,475 A.G. Edwards . . . . . . . . . . . . . . . 232
11,100 AMBAC. . . . . . . . . . . . . . . . . . . 436
113,925 Countrywide Credit . . . . . . . . . . . . 1,638
19,500 Federal National
Mortgage Assn. . . . . . . . . . . . . . 1,628
4,300 Green Tree Financial . . . . . . . . . . . 241
30,900 H&R Block. . . . . . . . . . . . . . . . . 1,213
24,000 Household International. . . . . . . . . . 816
7,300 * Medaphis . . . . . . . . . . . . . . . . . 201
12,400 Mercury Finance. . . . . . . . . . . . . . 204
150,000 Pearson (GBP). . . . . . . . . . . . . . . 1,361
6,000 * Presstek . . . . . . . . . . . . . . . . . 192
6,800 Salomon. . . . . . . . . . . . . . . . . . 25
15,333 Travelers. . . . . . . . . . . . . . . . . 494
8,000 United Asset Management. . . . . . . . . . 264
9,584
Total Financial 30,651
UTILITIES - 6.3%
TELEPHONE - 4.8%
4,000 * ALC Communications . . . . . . . . . . . . 123
24,000 Ameritech. . . . . . . . . . . . . . . . . 918
47,200 AT&T . . . . . . . . . . . . . . . . . . . 2,566
18,100 Bell Atlantic. . . . . . . . . . . . . . . 1,014
16,000 BellSouth. . . . . . . . . . . . . . . . . 988
224,097 Cable & Wireless (GBP) . . . . . . . . . . 1,405
4,900 COMSAT . . . . . . . . . . . . . . . . . . 114
35,600 GTE. . . . . . . . . . . . . . . . . . . . 1,121
36,300 Hong Kong
Telecommunications, ADR. . . . . . . . . 681
46,300 Pacific Telesis. . . . . . . . . . . . . . 1,430
571,000 SIP (ITL). . . . . . . . . . . . . . . . . 1,430
4,900 Southern New England
Telecommunications . . . . . . . . . . . 149
36,400 Southwestern Bell. . . . . . . . . . . . . 1,583
520,000 Telecom New Zealand (NZD). . . . . . . . . 1,403
60,000 Telekom Malaysia (MYR) . . . . . . . . . . 447
10,000 shs. Telmex . . . . . . . . . . . . . . . . . . $ 559
20,000 U. S. West . . . . . . . . . . . . . . . . 838
16,769
ELECTRIC UTILITIES - 1.5%
27,000 Commonwealth Edison. . . . . . . . . . . . 614
27,400 Duke Power . . . . . . . . . . . . . . . . 980
12,200 Empresa Nacional
de Electricidad, ADR . . . . . . . . . . 547
53,000 Entergy. . . . . . . . . . . . . . . . . . 1,312
25,600 FPL Group. . . . . . . . . . . . . . . . . 765
50,000 * Public Service of New Mexico . . . . . . . 575
20,000 Texas Utilities. . . . . . . . . . . . . . 627
5,420
Total Utilities 22,189
CONSUMER NONDURABLES - 11.0%
COSMETICS - 0.1%
11,700 International Flavors &
Fragrances . . . . . . . . . . . . . . . 458
BEVERAGES - 1.7%
32,000 Anheuser-Busch . . . . . . . . . . . . . . 1,624
46,300 Coke . . . . . . . . . . . . . . . . . . . 1,881
12,900 * Dr Pepper/Seven-Up . . . . . . . . . . . . 297
7,265 LVMH (FRF) . . . . . . . . . . . . . . . . 1,118
29,000 PepsiCo. . . . . . . . . . . . . . . . . . 88
12,200 * Starbucks. . . . . . . . . . . . . . . . . 308
6,116
FOOD PROCESSING - 2.1%
30,000 Cadbury Schweppes. . . . . . . . . . . . . 780
4,560 Continental Baking . . . . . . . . . . . . 22
12,900 CPC International. . . . . . . . . . . . . 622
6,300 General Mills. . . . . . . . . . . . . . . 344
6,600 IBP. . . . . . . . . . . . . . . . . . . . 176
3,100 Kellogg. . . . . . . . . . . . . . . . . . 69
10,300 McCormick. . . . . . . . . . . . . . . . . 209
1,684 Nestle (CHF) . . . . . . . . . . . . . . . 1,418
19,300 Pet . . . . . . . . . . . . . . . . . . . 359
17,200 Quaker Oats. . . . . . . . . . . . . . . . 1,202
7,600 * Ralcorp Holdings . . . . . . . . . . . . . 121
22,800 Ralston Purina . . . . . . . . . . . . . . 789
38,800 Sara Lee . . . . . . . . . . . . . . . . . 25
7,100 Universal Foods. . . . . . . . . . . . . . 225
7,261
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT - 1.2%
58,800 Abbott Laboratories. . . . . . . . . . . . 1,705
16,050 * Health Management (Class A). . . . . . . . 329
12,900 * HealthCare COMPARE . . . . . . . . . . . . 229
27,100 Hillenbrand Industries . . . . . . . . . . 742
22,400 * Humana . . . . . . . . . . . . . . . . . . 61
7,100 * Quantum Health Resources . . . . . . . . . 224
12,700 shs. United HealthCare. . . . . . . . . . . . . $ 583
4,173
PHARMACEUTICALS - 2.8%
40,000 American Cyanamid. . . . . . . . . . . . . 2,240
11,800 American Home Products . . . . . . . . . . 670
24,800 * Amgen. . . . . . . . . . . . . . . . . . . 1,063
30,000 Astra 'B' (SEK). . . . . . . . . . . . . . 592
1,500 * Chiron . . . . . . . . . . . . . . . . . . 82
4,500 * Forest Laboratories. . . . . . . . . . . . 196
5,900 * IDEXX Laboratories . . . . . . . . . . . . 176
35,500 Merck. . . . . . . . . . . . . . . . . . . 1,056
9,900 * Perrigo. . . . . . . . . . . . . . . . . . 36
24,300 Pfizer . . . . . . . . . . . . . . . . . . 1,534
3,500 Schering-Plough. . . . . . . . . . . . . . 214
61,200 SmithKline Beecham, equity
units, ADR . . . . . . . . . . . . . . . 1,721
9,680
MISCELLANEOUS CONSUMER PRODUCTS - 3.1%
1,700 Arctco . . . . . . . . . . . . . . . . . . 45
17,700 * Burlington Industries. . . . . . . . . . . 259
30,100 Colgate-Palmolive. . . . . . . . . . . . . 1,565
7,000 * CUC International. . . . . . . . . . . . . 187
6,900 Duracell International . . . . . . . . . . 269
3,300 * Fruit Of The Loom. . . . . . . . . . . . . 86
63,000 Hanson, ADR. . . . . . . . . . . . . . . . 1,158
16,800 * Jones Apparel Group. . . . . . . . . . . . 475
12,200 Manpower . . . . . . . . . . . . . . . . . 56
446 Mattel . . . . . . . . . . . . . . . . . . 11
2,500 Philip Morris. . . . . . . . . . . . . . . 129
51,200 Philips, N.V., ADR . . . . . . . . . . . . 1,472
29,400 Procter & Gamble . . . . . . . . . . . . . 1,569
29,500 Reebok . . . . . . . . . . . . . . . . . . 881
13,100 SafeCard Services. . . . . . . . . . . . . 224
37,300 Service Corp.. . . . . . . . . . . . . . . 961
39,700 Springs Industries . . . . . . . . . . . . 1,186
9,500 Tambrands. . . . . . . . . . . . . . . . . 349
11,082
Total Consumer Nondurables 38,770
CONSUMER SERVICES - 8.1%
GENERAL MERCHANDISERS - 1.9%
18,700 Dayton Hudson. . . . . . . . . . . . . . . 1,515
26,600 J.C. Penney. . . . . . . . . . . . . . . . 1,443
33,400 May Department Stores. . . . . . . . . . . 1,311
44,000 TJX. . . . . . . . . . . . . . . . . . . . 963
51,400 Wal-Mart . . . . . . . . . . . . . . . . . 1,246
6,478
SPECIALTY MERCHANDISERS - 1.8%
34,400 Albertson's. . . . . . . . . . . . . . . . 946
6,500 Callaway Golf. . . . . . . . . . . . . . . 254
8,000 Fingerhut Companies. . . . . . . . . . . . 194
T. Rowe Price Balanced Fund / Statement of Net Assets
4,200 shs. * Gymboree . . . . . . . . . . . . . . . . . $ 166
4,500 Heilig-Meyers. . . . . . . . . . . . . . . 122
5,000 Ito Yokado, ADR. . . . . . . . . . . . . . 1,092
9,300 * Kohl's . . . . . . . . . . . . . . . . . . 37
3,500 * QVC Network. . . . . . . . . . . . . . . . 133
5,600 * R. P. Scherer. . . . . . . . . . . . . . . 185
6,300 * Safeway. . . . . . . . . . . . . . . . . . 50
5,400 * Staples. . . . . . . . . . . . . . . . . . 46
5,600 * Stop & Shop. . . . . . . . . . . . . . . . 134
19,600 The Gap. . . . . . . . . . . . . . . . . . 38
39,000 * Toys "R" Us. . . . . . . . . . . . . . . . 1,277
16,000 * Viking Office Products . . . . . . . . . . 400
6,474
ENTERTAINMENT & LEISURE - 2.3%
10,600 Applebee's . . . . . . . . . . . . . . . . 130
8,775 * Brinker. . . . . . . . . . . . . . . . . . 84
6,200 * Buffets. . . . . . . . . . . . . . . . . . 114
8,600 * Casino America . . . . . . . . . . . . . . 82
6,750 * Checkers Drive-In Restaurants. . . . . . . 40
32,400 Disney . . . . . . . . . . . . . . . . . . ,349
160,000 Genting Berhad (MYR) . . . . . . . . . . . 1,905
10,800 * ospitality Franchise . . . . . . . . . . . 264
560,000 Hutchison Whampoa (HKD). . . . . . . . . . 2,300
9,000 International Game
Technology . . . . . . . . . . . . . . . 170
10,000 McDonald's . . . . . . . . . . . . . . . . 289
5,000 Reader's Digest (Class A). . . . . . . . . 207
25,000 Sbarro . . . . . . . . . . . . . . . . . . 931
4,500 * Viacom (Class A) . . . . . . . . . . . . . 152
8,117
MEDIA & COMMUNICATIONS - 2.1%
9,000 Banta. . . . . . . . . . . . . . . . . . . 288
3,400 Belo A H (Class A) . . . . . . . . . . . . 147
15,000 Capital Cities/ABC . . . . . . . . . . . . 1,067
40,000 Comcast. . . . . . . . . . . . . . . . . . 20
14,100 Dun & Bradstreet . . . . . . . . . . . . . 782
13,800 Gannett. . . . . . . . . . . . . . . . . . 83
9,600 Gaylord Entertainment. . . . . . . . . . . 235
8,000 * Infinity Broadcasting. . . . . . . . . . . 194
9,000 * International CableTel . . . . . . . . . . 189
16,100 McGraw-Hill. . . . . . . . . . . . . . . . 1,071
12,100 * Multimedia . . . . . . . . . . . . . . . . 351
12,400 Reuters, ADR . . . . . . . . . . . . . . . 483
29,000 Time Warner. . . . . . . . . . . . . . . . 1,019
7,900 * Vanguard Cellular. . . . . . . . . . . . . 261
7,490
Total Consumer Services 28,559
CONSUMER CYCLICALS - 3.9%
AUTOMOBILES & RELATED - 2.0%
5,600 * Breed Technologies . . . . . . . . . . . . 155
9,100 * Gentex . . . . . . . . . . . . . . . . . . 32
9,650 shs. Genuine Parts. . . . . . . . . . . . . . . $ 349
30,000 GM . . . . . . . . . . . . . . . . . . . . 1,507
19,800 Honda, ADR . . . . . . . . . . . . . . . . 616
7,100 Pep Boys . . . . . . . . . . . . . . . . . 25
120 wts. Schweizerischer Bankverein
(CHF). . . . . . . . . . . . . . . . . . 2
46,000 shs. Standard Products. . . . . . . . . . . . . 1,346
8,000 Superior Industries
International. . . . . . . . . . . . . . 256
4,220 Swiss Bank (CHF) . . . . . . . . . . . . . 1,247
15,000 TRW. . . . . . . . . . . . . . . . . . . . 968
6,903
MISCELLANEOUS CONSUMER DURABLES - 0.7%
36,000 Black & Decker . . . . . . . . . . . . . . 621
14,700 Eastman Kodak. . . . . . . . . . . . . . . 707
1,900 Harley Davidson. . . . . . . . . . . . . . 87
10,000 * Scotts (Class A) . . . . . . . . . . . . . 165
42,000 Shaw Industries. . . . . . . . . . . . . . 693
3,000 Valspar. . . . . . . . . . . . . . . . . . 09
2,600 York International . . . . . . . . . . . . 96
2,478
BUILDING & REAL ESTATE - 1.2%
600,000 DBS Land (SGD) . . . . . . . . . . . . . . 1,731
925,000 Hopewell Holdings (HKD). . . . . . . . . . 748
49,900 Masco. . . . . . . . . . . . . . . . . . . 1,372
2,700 Sunamerica . . . . . . . . . . . . . . . . 111
4,700 Texas Industries . . . . . . . . . . . . . 158
14,600 * USG. . . . . . . . . . . . . . . . . . . . 265
4,385
Total Consumer Cyclicals 13,766
TECHNOLOGY - 5.1%
ELECTRONIC COMPONENTS - 1.0%
4,500 * Altera . . . . . . . . . . . . . . . . . . 27
3,300 * Cirrus Logic . . . . . . . . . . . . . . . 102
11,500 * EMC. . . . . . . . . . . . . . . . . . . . 155
17,200 Intel. . . . . . . . . . . . . . . . . . . 1,006
5,700 Linear Technology. . . . . . . . . . . . . 251
4,700 Micron Technology. . . . . . . . . . . . . 162
6,250 Molex. . . . . . . . . . . . . . . . . . . 238
12,900 Texas Instruments. . . . . . . . . . . . . 1,026
4,350 * Thermo Electron. . . . . . . . . . . . . . 162
4,350 * Thermo Instrument Systems. . . . . . . . . 123
6,000 * Vicor. . . . . . . . . . . . . . . . . . . 114
4,200 * Xilinx . . . . . . . . . . . . . . . . . . 43
3,609
ELECTRONIC SYSTEMS - 0.6%
5,000 * Applied Materials. . . . . . . . . . . . . 214
10,000 Hewlett-Packard. . . . . . . . . . . . . . 754
20,000 Honeywell. . . . . . . . . . . . . . . . . 620
5,400 Sensormatic Electronics. . . . . . . . . . 155
4,800 shs. * Solectron. . . . . . . . . . . . . . . . . $ 122
1,865
INFORMATION PROCESSING - 0.7%
7,000 * Adaptec. . . . . . . . . . . . . . . . . . 122
18,900 Hitachi, ADR . . . . . . . . . . . . . . . 1,966
5,000 * Storage Technology . . . . . . . . . . . . 163
2,251
TELECOMMUNICATIONS - 1.0%
30,000 * cisco Systems. . . . . . . . . . . . . . . 701
18,400 * LDDS Communications. . . . . . . . . . . . 322
12,000 LM Ericsson. . . . . . . . . . . . . . . . 595
33,000 Northern Telecom . . . . . . . . . . . . . 911
45,600 * Novell . . . . . . . . . . . . . . . . . . 64
4,400 * icturetel. . . . . . . . . . . . . . . . . 56
6,600 * Optics Communications. . . . . . . . . . . 90
5,800 * Tellabs. . . . . . . . . . . . . . . . . . 80
3,619
AEROSPACE & DEFENSE - 1.5%
36,000 Allied-Signal. . . . . . . . . . . . . . . 1,246
31,000 Boeing . . . . . . . . . . . . . . . . . . 1,434
30,000 Northrop . . . . . . . . . . . . . . . . . 1,114
10,000 Raytheon . . . . . . . . . . . . . . . . . 647
40,000 * Teledyne . . . . . . . . . . . . . . . . . 640
4,700 UnitedTechnologies . . . . . . . . . . . . 302
5,383
SPECIALIZED COMPUTER - 0.3%
5,700 * Landmark Graphics. . . . . . . . . . . . . 175
29,700 * Silicon Graphics . . . . . . . . . . . . . 657
15,000 * Sun Microsystems . . . . . . . . . . . . . 310
1,142
Total Technology 17,869
CAPITAL EQUIPMENT - 3.6%
ELECTRICAL EQUIPMENT - 2.5%
5 ALCATEL ALSTHOM, ADR . . . . . . . . . . . 0
10,300 * American Power Conversion. . . . . . . . . 166
775 BBC Brown Boveri (CHF) . . . . . . . . . . 682
28,100 Emerson Electric . . . . . . . . . . . . . 1,598
75,400 GE . . . . . . . . . . . . . . . . . . . . 3,516
41,000 Getronics (NLG). . . . . . . . . . . . . . 1,007
4,000 Hubbell (Class A). . . . . . . . . . . . . 208
12,025 Hubbell (Class B). . . . . . . . . . . . . 667
2,800 Siemans (DEM). . . . . . . . . . . . . . . 1,142
8,986
MACHINERY - 1.1%
435,000 BTR Nylex (AUD). . . . . . . . . . . . . . 921
29,900 * Coltec Industries. . . . . . . . . . . . . 557
24,700 Danaher. . . . . . . . . . . . . . . . . . 1,031
160 * Dovatron . . . . . . . . . . . . . . . . . 3
8,300 * FMC. . . . . . . . . . . . . . . . . . . . 449
4,600 shs. Foster Wheeler . . . . . . . . . . . . . . $ 167
2,800 * Imo Industries . . . . . . . . . . . . . . 27
5,700 Kennametal . . . . . . . . . . . . . . . . 281
6,300 Stewart & Stevenson. . . . . . . . . . . . 262
5,000 Teleflex . . . . . . . . . . . . . . . . . 163
3,861
Total Capital Equipment 12,847
BUSINESS SERVICES & TRANSPORTATION - 3.4%
COMPUTER SERVICE & SOFTWARE - 0.8%
3,625 Amtech . . . . . . . . . . . . . . . . . . 43
7,700 Autodesk . . . . . . . . . . . . . . . . . 381
5,000 * BMC Software . . . . . . . . . . . . . . . 219
8,000 Computer Associates. . . . . . . . . . . . 320
7,500 * Electronic Arts. . . . . . . . . . . . . . 105
6,600 HBO. . . . . . . . . . . . . . . . . . . . 167
9,200 * Informix . . . . . . . . . . . . . . . . . 143
7,500 * LEGENT . . . . . . . . . . . . . . . . . . 202
5,600 * Micro Warehouse. . . . . . . . . . . . . . 119
7,300 * Microsoft. . . . . . . . . . . . . . . . . 376
11,600 * Parametric Technology. . . . . . . . . . . 262
6,600 * SunGard Data Systems . . . . . . . . . . . 239
7,000 * Sybase . . . . . . . . . . . . . . . . . . 343
2,919
MISCELLANEOUS BUSINESS SERVICES - 1.0%
3,600 Cintas . . . . . . . . . . . . . . . . . . 118
8,900 Equifax. . . . . . . . . . . . . . . . . . 251
2,571 Generale des Eaux (FRF). . . . . . . . . . 1,038
4,500 * GTECH. . . . . . . . . . . . . . . . . . . 76
5,000 Merrill. . . . . . . . . . . . . . . . . . 110
6,700 Omnicom. . . . . . . . . . . . . . . . . . 323
8,300 Paychex. . . . . . . . . . . . . . . . . . 243
47,200 WMX Technologies . . . . . . . . . . . . . 1,251
3,410
RAILROADS - 0.6%
9,800 CSX. . . . . . . . . . . . . . . . . . . . 740
9,900 Illinois Central . . . . . . . . . . . . . 328
14,000 Union Pacific. . . . . . . . . . . . . . . 793
3,400 * Wisconsin Central
Transportation . . . . . . . . . . . . . 220
2,081
AIRLINES - 1.0%
4,200 Atlantic Southeast Airlines. . . . . . . . 102
17,300 * Mesa Airlines. . . . . . . . . . . . . . . 171
43,900 Southwest Airlines . . . . . . . . . . . . 1,147
269,000 Swire Pacific 'A' (HKD). . . . . . . . . . 1,931
3,351
ENVIRONMENTAL - 0.0%
12,000 Mid-American Waste
Systems. . . . . . . . . . . . . . . . . 68
T. Rowe Price Balanced Fund / Statement of Net Assets
DISTRIBUTION SERVICES - 0.0%
2,900 shs. Cardinal Health. . . . . . . . . . . . . . $ 142
Total Business Services & Transportation 11,971
ENERGY - 5.5%
ENERGY SERVICES - 0.8%
9,383 El Paso Natural Gas. . . . . . . . . . . . 302
23,000 Halliburton. . . . . . . . . . . . . . . . 776
20,000 Helmerich & Payne. . . . . . . . . . . . . 530
16,200 Schlumberger . . . . . . . . . . . . . . . 958
18,300 * Smith International. . . . . . . . . . . . 279
5,400 Witco. . . . . . . . . . . . . . . . . . . 161
3,006
EXPLORATION & PRODUCTION - 0.0%
6,600 Enron Oil & Gas. . . . . . . . . . . . . . 152
GAS TRANSMISSION - 0.3%
14,300 ENSERCH. . . . . . . . . . . . . . . . . . 205
4,400 MCN. . . . . . . . . . . . . . . . . . . . 176
7,400 Questar. . . . . . . . . . . . . . . . . . 240
9,000 Sonat. . . . . . . . . . . . . . . . . . . 277
898
INTEGRATED PETROLEUM-DOMESTIC - 1.4%
27,700 Amerada Hess . . . . . . . . . . . . . . . 1,364
8,000 Atlantic Richfield . . . . . . . . . . . . 817
10,000 British Petroleum, ADR . . . . . . . . . . 718
1,700 Mapco. . . . . . . . . . . . . . . . . . . 100
13,900 Santa Fe Energy Resources. . . . . . . . . 130
9,100 Ultramar . . . . . . . . . . . . . . . . . 239
100,000 SX-Marathon. . . . . . . . . . . . . . . . 1,675
5,043
INTEGRATED PETROLEUM-
INTERNATIONAL - 3.0%
30,600 Chevron. . . . . . . . . . . . . . . . . . 1,282
40,600 Exxon. . . . . . . . . . . . . . . . . . . 2,299
38,900 Mobil. . . . . . . . . . . . . . . . . . . 3,175
26,100 Royal Dutch Petroleum, ADR . . . . . . . . 2,731
16,600 Texaco . . . . . . . . . . . . . . . . . . 1,002
10,489
Total Energy 19,588
PROCESS INDUSTRIES - 3.4%
DIVERSIFIED CHEMICALS - 0.9%
25,300 DuPont . . . . . . . . . . . . . . . . . . 1,477
3,675 Eastman Chemical . . . . . . . . . . . . . 175
18,100 Monsanto . . . . . . . . . . . . . . . . . 1,369
3,021
SPECIALTY CHEMICALS - 1.3%
18,000 3M . . . . . . . . . . . . . . . . . . . . 891
26,325 shs. A. Schulman. . . . . . . . . . . . . . . . $ 681
3,500 Crompton & Knowles . . . . . . . . . . . . 61
5,200 IVAX . . . . . . . . . . . . . . . . . . . 85
7,100 Lyondell Petrochemical . . . . . . . . . . 175
1,500 McWhorter Technologies . . . . . . . . . . 23
20,000 Morton International . . . . . . . . . . . 1,560
8,533 Pall . . . . . . . . . . . . . . . . . . . 128
13,000 Rohm & Haas. . . . . . . . . . . . . . . . 809
4,413
PAPER & PAPER PRODUCTS - 0.9%
10,000 Kimberly-Clark . . . . . . . . . . . . . . 529
103,000 Kimberly-Clark Mexico (MXN). . . . . . . . 1,907
15,000 Mead . . . . . . . . . . . . . . . . . . . 662
12,100 Sonoco Products. . . . . . . . . . . . . . 248
3,346
FOREST PRODUCTS - 0.3%
9,000 Georgia-Pacific. . . . . . . . . . . . . . 539
8,200 Pope & Talbot. . . . . . . . . . . . . . . 147
12,700 Weyerhaeuser . . . . . . . . . . . . . . . 508
1,194
Total 11,974
BASIC MATERIALS - 1.6%
METALS - 1.1%
30,000 Alcoa. . . . . . . . . . . . . . . . . . . 2,194
2,700 Carpenter Technology . . . . . . . . . . . 161
9,600 Freeport-McMoRan Copper &
Gold . . . . . . . . . . . . . . . . . . 214
51,900 Inco . . . . . . . . . . . . . . . . . . . 1,265
11,900 * Molten Metal Technology. . . . . . . . . . 214
4,048
MINING - 0.4%
4,800 American Barrick Resources . . . . . . . . 115
200,000 *# TVX Gold . . . . . . . . . . . . . . . . . 1,175
1,290
MISCELLANEOUS MATERIALS - 0.1%
15,300 * Owens Illinois . . . . . . . . . . . . . . 168
Total Basic Materials 5,506
Total Common Stocks &
Warrants (Cost - $200,214) 213,690
Convertible Preferred Stocks - 0.1%
2,000 Ford Motor, Dep. Shs., $4.20,
Cum., Series A . . . . . . . . . . . . . 194
3,000 General Motors, Dep. Shs.,
Rep. 1/10, Series C. . . . . . . . . . . 169
Total Convertible Preferred Stocks (Cost - $250) 363
Convertible Bonds - 0.2%
$2,000,000 U.S. West, Zero Coupon,
6/25/11. . . . . . . . . . . . . . . . . $ 602
Total Convertible Bonds (Cost - $592) 602
Corporate Bonds - 19.7%
1,000,000 African Development Bank,
7.75%, 12/15/01. . . . . . . . . . . . . 998
500,000 Agriculture Minerals and
Chemicals, 10.75%, 9/30/03 . . . . . . . 505
725,000 Alabama Power, 7.00%, 1/1/03 . . . . . . . 681
500,000 Allnet Communication
Services, 9.00%, 5/15/03 . . . . . . . . 485
500,000 American Standard, Sub. Deb.,
9.875%, 6/1/01 . . . . . . . . . . . . . 478
500,000 Ametek, 9.75%, 3/15/04 . . . . . . . . . . 495
500,000 ARA Services, Sr. Notes,
10.625%, 8/1/00. . . . . . . . . . . . . 525
1,300,000 Associates Corporation,
6.875%, 1/15/97. . . . . . . . . . . . . 1,298
500,000 Aztar, 11.00%, 10/1/02 . . . . . . . . . . 470
2,000,000 Banesto Delaware, Guaranteed
Notes, 8.25%, 7/28/02. . . . . . . . . . 1,988
125,000 Bankers Trust, Sub. Deb.,
8.00%, 3/15/97 . . . . . . . . . . . . . 128
1,000,000 Banque Nationale De Paris,
9.875%, 5/25/98. . . . . . . . . . . . . 1,085
250,000 British Columbia Hydro &
Power, 12.50%, 9/1/13. . . . . . . . . . 303
1,000,000 15.00%, 4/15/11. . . . . . . . . . . . 1,187
2,125,000 15.50%, 11/15/11 . . . . . . . . . . . 2,638
250,000 Capital Cities/ABC,
8.75%, 8/15/21 . . . . . . . . . . . . . 259
100,000 Citicorp, 8.75%, 11/1/96 . . . . . . . . . 104
272,734 Citicorp Mortgage Securities,
6.00%, 3/25/22 . . . . . . . . . . . . . 258
500,000 Coca-Cola Bottling Group Southwest),
9.00%, 11/15/03. . . . . . . . . . . . . 455
250,000 Coltec Industries, 9.75%, 4/1/00 . . . . . 250
500,000 Sr. Notes, 10.25%, 4/1/02. . . . . . . . 505
500,000 Container Corporation of
America, Sr. Notes,
9.75%, 4/1/03. . . . . . . . . . . . . . 475
750,000 Continental Cablevision,
9.00%, 9/1/08. . . . . . . . . . . . . . 675
500,000 Continental Medical Systems,
10.875%, 8/15/02 . . . . . . . . . . . . 480
843,028 Corestates Home Equity Trust,
5.10%, 3/15/09 . . . . . . . . . . . . . 812
$ 400,000 Dayton Hudson,
9.50%, 10/15/16. . . . . . . . . . . . . $ 422
265,000 Dow Chemical, 8.48%, 8/15/15 . . . . . . . 266
500,000 Dr Pepper Bottling Company
of Texas, 10.25%, 2/15/00. . . . . . . . 505
1,000,000 Duke Power, 6.75%, 8/1/25. . . . . . . . . 825
500,000 Eckard, 9.25%, 2/15/04 . . . . . . . . . . 470
750,000 Embassy Suites,
10.875%, 4/15/02 . . . . . . . . . . . . 795
500,000 Envirotest Systems,
9.125%, 3/15/01. . . . . . . . . . . . . 470
500,000 Exide, 10.75%, 12/15/02. . . . . . . . . . 520
500,000 Exxon Capital, 6.50%, 7/15/99. . . . . . . 483
800,000 Fairfax Financial,
7.75%, 12/15/03. . . . . . . . . . . . . 728
500,000 Federal Express,
9.95%, 8/15/06 . . . . . . . . . . . . . 530
425,000 Ferrellgas, 10.00%, 8/1/01 . . . . . . . . 424
1,500,000 First Fidelity, 8.50%, 4/1/98. . . . . . . 1,555
800,000 Fleet Norstar Financial
Group, 8.625%, 1/15/07 . . . . . . . . . 815
1,000,000 Fletcher Challenge Finance,
9.80%, 6/15/98 . . . . . . . . . . . . . 1,078
1,500,000 Golden West Financial,
8.625%, 8/30/98. . . . . . . . . . . . . 1,552
500,000 Grand Union Company,
11.25%, 7/15/00. . . . . . . . . . . . . 490
550,000 Gulf Canada Resources
Limited, 9.25%, 1/15/04. . . . . . . . . 511
500,000 Gulf States Utilities,
5.375%, 2/1/97 . . . . . . . . . . . . . 460
500,000 Healthsouth Rehabilitation,
9.50%, 4/1/01. . . . . . . . . . . . . . 483
500,000 Healthtrust, 10.25%, 4/15/04 . . . . . . . 498
500,000 Heritage Media Services,
11.00%, 6/15/02. . . . . . . . . . . . . 515
500,000 Hillhaven Corporation Nevada,
10.125%, 9/1/01. . . . . . . . . . . . . 496
400,000 Hydro-Quebec, Series D,
10.75%, 6/15/10. . . . . . . . . . . . . 431
500,000 IMC Fertilizer Group,
9.45%, 12/15/11. . . . . . . . . . . . . 455
500,000 Integrated Health Services,
10.75%, 7/15/04. . . . . . . . . . . . . 500
1,000,000 Inter-American Development
Bank, 11.375%, 5/1/95. . . . . . . . . . 1,044
100,000 J. P. Morgan, Sub. Cap. Notes,
9.625%, 12/15/98 . . . . . . . . . . . . 104
400,000 J.C. Penney, 9.45%, 4/15/98. . . . . . . . 410
500,000 Jordan Industries,
10.375%, 8/1/03. . . . . . . . . . . . . 486
250,000 KFW, 9.14%, 6/4/01 . . . . . . . . . . . . 272
750,000 Kroger, 9.25%, 1/1/05. . . . . . . . . . . 731
500,000 Lear Seating, 8.25%, 2/1/02. . . . . . . . 450
250,000 11.25%, 7/15/00. . . . . . . . . . . . . 262
T. Rowe Price Balanced Fund / Statement of Net Assets
$1,500,000 Lehman Brothers Holdings,
8.875%, 3/1/02 . . . . . . . . . . . . . $ 1,535
500,000 Liberty National Bank & Trust,
6.75%, 6/1/03. . . . . . . . . . . . . . 460
500,000 Long Island Lighting,
7.50%, 3/1/07. . . . . . . . . . . . . . 404
100,000 9.75%, 5/1/21. . . . . . . . . . . . . . 103
500,000 Mafco, 11.875%, 11/15/02 . . . . . . . . . 500
500,000 Maxus Energy,
9.375%, 11/1/03. . . . . . . . . . . . . 459
500,000 McDonnell Douglas,
8.25%, 7/1/00. . . . . . . . . . . . . . 505
400,000 Merrill Lynch, 7.26%, 5/4/99 . . . . . . . 401
500,000 Methanex, 8.875%, 11/15/01 . . . . . . . . 490
500,000 NewCity Communications,
11.375%, 11/1/03 . . . . . . . . . . . . 510
1,378,112 NYNEX, 9.55%, 5/1/10 . . . . . . . . . . . 1,481
600,000 Accidental Petroleum,
11.75%, 3/15/11. . . . . . . . . . . . . 668
500,000 Ornda Healthcorp,
12.25%, 5/15/02. . . . . . . . . . . . . 537
750,000 Overhead Door,
12.25%, 2/1/00 . . . . . . . . . . . . . 791
750,000 Owens-Illinois,
11.00%, 12/1/03. . . . . . . . . . . . . 795
1,000,000 Pacific Bell, 7.375%, 7/15/43. . . . . . . 878
500,000 Paging Network,
8.875%, 2/1/06 . . . . . . . . . . . . . 448
500,000 Penn Traffic, 8.625%, 12/15/03 . . . . . . 453
1,500,000 Philip Morris, 6.00%, 11/15/99 . . . . . . 1,363
500,000 Plastic Containers,
10.75%, 4/1/01 . . . . . . . . . . . . . 501
500,000 PMI Acquisition,
10.25%, 9/1/03 . . . . . . . . . . . . . 505
1,000,000 Province of Alberta,
9.25%, 4/1/00. . . . . . . . . . . . . . 1,083
1,500,000 Province of Newfoundland,
8.50%, 10/15/96. . . . . . . . . . . . . 1,548
500,000 Prudential Home Mortgage
Securities, 6.90%, 3/25/23 . . . . . . . 491
1,000,000 Qantas Airways,
6.625%, 6/30/98. . . . . . . . . . . . . 967
500,000 Riverwood International,
10.375%, 6/30/04 . . . . . . . . . . . . 498
1,500,000 RJR Nabisco, Sr. Notes,
10.50%, 4/15/98. . . . . . . . . . . . . 1,588
1,000,000 Rouse Company,
8.50%, 1/15/03 . . . . . . . . . . . . . 980
500,000 Rowan Companies, Sr. Notes,
11.875%, 12/1/01 . . . . . . . . . . . . 530
250,000 Salomon, 7.50%, 6/15/99. . . . . . . . . . 250
750,000 Sea Containers Ltd.,
12.50%, 12/1/04. . . . . . . . . . . . . 787
1,550,000 Sea Land Service,
10.60%, 1/2/11 . . . . . . . . . . . . . 1,662
$ 500,000 Sherrit, 10.50%, 3/31/14 . . . . . . . . . $ 486
500,000 Showboat, 9.25%, 5/1/08. . . . . . . . . . 448
1,000,000 Skandinaviska Enskilda
Banken, 6.875%, 2/15/09. . . . . . . . . 872
1,650,000 Southwest Airlines,
9.25%, 2/15/98 . . . . . . . . . . . . . 1,734
1,400,000 Texaco Capital, 8.65%, 1/30/98 . . . . . . 1,465
250,000 Texas Bottling Group,
9.00%, 11/15/03. . . . . . . . . . . . . 229
1,000,000 Thailand Kingdom Bank Entry,
7.07%, 9/30/13 . . . . . . . . . . . . . 851
600,000 Time Warner Entertainment,
7.25%, 9/1/08. . . . . . . . . . . . . . 511
500,000 Westpoint Stevens, Sr. Notes,
8.75%, 12/15/01. . . . . . . . . . . . . 458
187,000 Westvaco, 12.65%, 1/15/14. . . . . . . . . 199
500,000 Wheeling Pittsburgh,
9.375%, 11/15/03 . . . . . . . . . . . . 463
Total Corporate Bonds (Cost - $71,451) 69,460
U.S. Government Mortgage-Backed
Securities - 9.6%
U.S. GOVERNMENT GUARANTEED
MORTGAGE OBLIGATIONS - 8.8%
1,953,781 Government National Mortgage
Assn., I, 6.50%, 12/15/23. . . . . . . . 1,731
4,191,493 7.00%, 10/15/22 - 1/15/24. . . . . . . 3,863
6,506,619 7.50%, 9/15/22 - 12/15/23. . . . . . . 6,212
5,825,348 8.00%, 6/15/17 - 8/15/23 . . . . . . . 5,740
448,716 8.50%, 3/15/05 - 8/15/21 . . . . . . . 455
1,890,461 9.00%, 5/15/16 - 6/15/21 . . . . . . . 1,961
2,599,950 9.50%, 8/15/09 - 8/20/22 . . . . . . . 2,747
142,437 10.00%, 11/15/09 - 5/15/13 . . . . . . 153
23,474 10.50%, 5/15/15. . . . . . . . . . . . 26
2,222,616 11.00%, 3/15/10 - 1/15/20. . . . . . . 2,478
1,269,926 11.50%, 3/15/10 - 11/15/15 . . . . . . 1,435
334,784 Government National
Mortgage Assn., I, ARM,
5.00%, 8/20/23 . . . . . . . . . . . . . 324
1,339,597 Government National
Mortgage Assn., II,
.00%,7/20/16 - 6/20/20 . . . . . . . . . 1,368
410,928 9.50%, 8/20/22 . . . . . . . . . . . . 427
391,353 10.00%, 10/20/16 - 1/20/22 . . . . . . 413
1,117,611 Government National
Mortgage Assn., GPM, I,
9.50%, 8/15/09 - 9/15/09 . . . . . . . . 1,148
463,556 10.75%, 1/15/16 - 12/15/17 . . . . . . 496
301,615 Government National
Mortgage Assn., PL, I,
8.50%, 1/15/27 . . . . . . . . . . . . . 304
31,281
U.S. GOVERNMENT AGENCY
MORTGAGE OBLIGATIONS - 0.7%
$1,000,000 Federal National Mortgage
Assn., 7.50%, 10/25/19 . . . . . . . . . $ 963
400,000 10.60%, 11/10/95 . . . . . . . . . . . 424
700,000 Federal Home Loan Mortgage,
6.00%, 6/15/05 . . . . . . . . . . . . . 663
91,008 8.00%, 3/1/17. . . . . . . . . . . . . 89
170,781 10.00%, 10/1/10. . . . . . . . . . . . 180
16,933 10.50%, 9/1/15 . . . . . . . . . . . . 18
2,337
STRIPPED MORTGAGE SECURITIES - 0.1%
454,213 Federal Home Loan Mortgage,
Principal Only, Zero
Coupon, 2/15/24. . . . . . . . . . . . . 353
Total U.S. Government Mortgage-Backed
Securities (Cost - $35,887) 33,971
U.S. Government
Obligations/Agencies - 8.0%
992,312 Structured Asset Securities,
6.87%, 8/25/26 . . . . . . . . . . . . . 975
400,000 Tennessee Valley Authority,
8.625%, 11/15/29 . . . . . . . . . . . . 406
1,100,000 U.S. Treasury Bonds,
7.125%, 2/15/23. . . . . . . . . . . . . 1,030
2,400,000 8.125%, 8/15/19 - 8/15/21. . . . . . . . 2,507
3,800,000 8.75%, 11/15/08 - 8/15/20. . . . . . . . 4,186
1,490,000 10.375%, 11/15/12. . . . . . . . . . . . 1,823
200,000 10.625%, 8/15/15 . . . . . . . . . . . . 259
200,000 11.75%, 2/15/01. . . . . . . . . . . . . 249
200,000 13.125%, 5/15/01 . . . . . . . . . . . . 265
600,000 13.25%, 5/15/14. . . . . . . . . . . . . 894
9,100,000 U.S. Treasury Notes,
6.375%, 6/30/97 - 1/15/00. . . . . . . . 8,975
5,200,000 7.00%, 4/15/99 . . . . . . . . . . . . . 5,213
200,000 7.125%, 10/15/98 . . . . . . . . . . . . 202
400,000 8.625%, 1/15/95. . . . . . . . . . . . . 407
900,000 8.875%, 2/15/99. . . . . . . . . . . . . 969
Total U.S. Government
Obligations/Agencies (Cost - $29,399) 28,360
Short-Term Investments - 1.3%
COMMERCIAL PAPER - 1.3%
2,500,000 Daimler-Benz North America,
4.30%, 7/19/94 . . . . . . . . . . . . . 2,491
$2,181,000 Harvard University,
4.30%, 7/1/94. . . . . . . . . . . . . . $ 2,181
Total Short-Term Investments
(Cost - $4,672) 4,672
Total Investments in Securities - 99.5%
(Cost - $342,465) 351,118
Other Assets Less Liabilities - 0.5% 1,684
Net Assets Consisting of:
Accumulated net investment income -
net of distributions. . . . . . . . . . . . . . $ 311
Accumulated realized gains/losses -
net of distributions. . . . . . . . . . . . . . 4,350
Net unrealized appreciation of
investments . . . . . . . . . . . . . . . 8,658
Paid-in-capital applicable to
31,445,277 shares of $.01 par
value capital stock outstanding;
1,000,000,000 shares authorized . . . . . . . . 339,483
________
Net Assets - 100.0% $352,802
________
________
Net Asset Value Per Share $11.22
_______
_______
* Non-income producing
# Security contains some restrictions as to public resale - total of the
security at period-end amounts to 0.3% of net assets.
ARM Adjustable rate mortgage
GPM Graduated payment mortgage
PL Project loan
(AUD) Australian dollar denominated
(CAD) Canadian dollar denominated
(CHF) Swiss franc denominated
(DEM) German deutschemark denominated
(FRF) French franc denominated
(GBP) British serling denominated
(HKD) Hong Kong dollar denominated
(ITL) Italian lire denominated
(MXN) Mexican peso denominated
(MYR) Malaysian ringgit denominated
(NLG) Dutch guilder denominated
(NZD) New Zealand dollar denominated
(SEK) Swedish krona denominated
(SGD) Singapore dollar denominated
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Balanced Fund / Six Months Ended June 30, 1994 (Unaudited)
Amounts in Thousands
____________________
INVESTMENT INCOME
Income
Dividends . . . . . . . . . . . . . . . . . . . $ 2,667
Interest. . . . . . . . . . . . . . . . . . . . 5,466
_________
Total income. . . . . . . . . . . . . . . . . . $ 8,133
Expenses
Investment management fees. . . . . . . . . . . 847
Shareholder servicing fees & expenses . . . . . 692
Custodian and accounting fees & expenses. . . . 111
Prospectus & shareholder reports. . . . . . . . 38
Registration fees & expenses. . . . . . . . . . 20
Legal & auditing fees . . . . . . . . . . . . . 14
Director's fees & expenses. . . . . . . . . . . 8
Miscellaneous . . . . . . . . . . . . . . . . . 6
Proxy & annual meeting. . . . . . . . . . . . . 5
_________
Total expenses. . . . . . . . . . . . . . . . . 1,741
__________
Net investment income. . . . . . . . . . . . . . . 6,392
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain
Securities. . . . . . . . . . . . . . . . . . . 4,214
Foreign currency transactions . . . . . . . . . 79
_________
Net realized gain. . . . . . . . . . . . . . . . . 4,293
Change in net unrealized appreciation
or depreciation . . . . . . . . . . . . . . . . (28,794)
__________
Net loss on investments. . . . . . . . . . . . . . (24,501)
__________
DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . $ (18,109)
__________
__________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Balanced Fund (Unaudited)
Six Months Ended Year Ended
June 30, 1994 Dec. 31, 1993
_______________ ___________
Amounts in Thousands
_____________________________
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income . . . . . . . . . . . $ 6,392 $ 10,033
Net realized gain on investments. . . . . . 4,293 1,115
Change in net unrealized appreciation
or depreciation of investments. . . . . . (28,794) 25,288
__________ _________
Increase (decrease) in net assets
from operations . . . . . . . . . . . . . (18,109) 36,436
__________ _________
Distributions to shareholders
Net investment income . . . . . . . . . . . (6,118) (9,926)
Net realized gain on investments. . . . . . - (2,708)
__________ _________
Decrease in net assets from distributions
to shareholders . . . . . . . . . . . . . (6,118) (12,634)
__________ _________
Capital share transactions
Sold 5,212 and 8,017 shares . . . . . . . . 61,128 2,519
Distributions reinvested of 456 and
895 shares. . . . . . . . . . . . . . . . 5,192 10,365
Redeemed 2,586 and 3,144 shares . . . . . . (30,228) (36,144)
__________ _________
Increase in net assets from capital
share transactions. . . . . . . . . . . . 36,092 6,740
__________ _________
Net equalization . . . . . . . . . . . . . . . 137 223
__________ _________
Total increase . . . . . . . . . . . . . . . . 12,002 0,765
NET ASSETS
Beginning of period . . . . . . . . . . . . 340,800 50,035
__________ _________
End of period . . . . . . . . . . . . . . . $ 352,802 $ 340,800
__________ _________
__________ _________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Balanced Fund / June 30, 1994 (Unaudited)
Note 1 - Significant Accounting Policies
T. Rowe Price Balanced Fund (the Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange (including Nasdaq) are valued at the last quoted sales price on the
day the valuations are made. A security which is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Other equity securities and those listed
securities that are not traded on a particular day are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers
who make markets in these securities or by an independent pricing service.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair value.
For purposes of determining the Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at the mean of the bid and offer prices of such currencies
against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by, or under the supervision of, the officers of
the Fund, as authorized by the Board of Directors.
B) Currency translation - Foreign currency amounts are translated into U.S.
dollars at prevailing exchange rates as follows: assets and liabilities at the
rate of exchange at the end of the respective period, purchases and sales of
securities, and income and expenses at the rate of exchange prevailing on the
dates of such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a component
of such gains or losses.
C) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Dividend income and distributions to
shareholders are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles. The Fund follows the practice of equalization under which
undistributed net investment income per share is unaffected by Fund shares
sold or redeemed.
Note 2 - Portfolio Transactions
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $108,760,000 and $65,305,000, respectively,
for the six months ended June 30, 1994. Purchases and sales of U.S. Government
securities aggregated $7,374,000 and $12,176,000 respectively, for the six
months ended June 30, 1994.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At June 30, 1994, the aggregate cost of investments for federal income
tax and financial reporting purposes was $342,465,000 and net unrealized
appreciation aggregated $8,653,000, of which $25,528,000 related to
appreciated investments and $16,875,000 to depreciated investments.
Note 4 - Related Party Transactions
The investment management agreement between the Fund and T. Rowe Price
Associates, Inc. (the Manager) provides for an annual investment management
fee, computed daily and paid monthly, consisting of an Individual Fund Fee
equal to 0.15% of average daily net assets and a Group Fee. The Group Fee is
based on the combined assets of certain mutual funds sponsored by the Manager
or Rowe Price-Fleming International, Inc. (the Group). The Group Fee rate
ranges from 0.48% for the first $1 billion of assets to 0.31% for assets in
excess of $34 billion. The effective annual Group Fee rate at June 30, 1994
and for the six months then ended was 0.34%. The Fund pays a pro rata portion
of the Group Fee based on the ratio of the Fund's net assets to those of the
Group.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through December 31, 1994, which would cause the
Fund's ratio of expenses to average net assets to exceed 1.00%. There-after,
the Fund is required to reimburse the Manager for these expenses, provided
average net assets have grown or expenses have declined sufficiently so as not
to cause the Fund's ratio of expenses to average net assets to exceed 1.00% in
any month, and that no such reimbursement shall be made to the Manager after
December 31, 1996. Pursuant to this agreement, $13,000 of management fees for
the six months ended June 30, 1994 and $280,000 of management fees for the
year ended December 31, 1993 were not accrued by the Fund. Additionally,
$571,000 of unaccrued management fees and expenses related to a previous
expense limitation are subject to reimbursement through December 31, 1994.
During the six months ended June 30, 1994, the Fund, in the ordinary
course of business, paid commissions of $27,000 to, and placed security
purchase and sale orders aggregating $4,516,000 with, certain affiliates of
the Manager in connection with the execution of various portfolio transactions
at the direction of Price-Fleming.
T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc.
(RPS) are wholly owned subsidiaries of the Manager. TRPS provides transfer and
dividend disbursing agent functions and shareholder services for all accounts.
RPS provides subaccounting and recordkeeping services for certain retirement
accounts invested in the Fund. The Manager, under a separate agreement,
calculates the daily share price and maintains the financial records of the
Fund. For the six months ended June 30, 1994, the Fund incurred fees totalling
approximately $696,000 for these services provided by related parties. At June
30, 1994, these investment management and service fees payable were $256,000.
<TABLE>
Financial Highlights#
T. Rowe Price Balanced Fund (Unaudited)
<CAPTION>
For a share outstanding throughout each period
______________________________________________________________________
Six Months Year Two Months
Ended Ended Ended Year Ended October 31,
June 30, Dec. 31, Dec. 31, ___________________________________
1994 1993 1992 1992 1991 1990 1989
______________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD. . . . . . . . . .$12.02$11.07 $10.86 11.43 $9.81 $10.37 $9.41
______ ______ ______ ______ ______ ______ ______
Investment Activities
Net investment income. . . . . . . . . .0.21* 0.40* 0.06* 0.33* 0.62 0.71 0.62
Net realized and unrealized
gain (loss) on investments . . . . . .(0.81) 1.05 0.29 0.86 1.51 (0.50) 0.95
______ _____ ______ ______ ______ ______ ______
Total from Investment
Activities . . . . . . . . . . . . . .(0.60) 1.45 0.35 1.19 2.13 0.21 1.57
Distributions
Net investment income. . . . . . . . .(0.20)(0.39) (0.09) 0.58) (0.51) (0.77) (0.61)
Net realized gain. . . . . . . . . . . - (0.11) (0.05) (1.18) - - -
______ _____ ______ ______ ______ ______ ______
Total Distributions. . . . . . . . . . .(0.20)(0.50) (0.14) (1.76) (0.51) (0.77) (0.61)
______ _____ ______ ______ _____ ______ ______
NET ASSET VALUE,
END OF YEAR. . . . . . . . . . . . . .$11.2212.02 $11.07 $10.86 $11.43 $ 9.81 $10.37
______ _____ ______ ______ ______ ______ ______
______ _____ ______ ______ ______ ______ ______
Total Return . . . . . . . . . . . . . .(5.0)% 3.4% 3.3% 7.7% 2.0% 7.2% 20.7%
Ratio of Expenses to Average
Net Assets . . . . . . . . . . . . . .1.00%!*1.00%* 1.00%!* 1.03% 1.10% 0.94% 1.25%
Ratio of Net Investment Income
to Average Net Assets. . . . . . . . .3.67%! 3.45% 3.85%! 4.07% 5.61% 6.82% 6.27%
Portfolio Turnover Rate. . . . . . . . .45.6%! 8.7% 58.0%! 07.7% 239.9% 127.2% 219.1%
Net Assets, End of Period
(in thousands) . . . . . . . . . . . .$352,802340,800$250,035$239,195 $175,093 $156,374 $167,040
<FN>
! Annualized.
# All share and per-share figures have been restated to reflect the reorganization of the Fund effective
August 31, 1992. The information provided for each of the four years in the period ended October 31
represents the activities of Axe-Houghton Fund B, as restated.
* Excludes expenses in excess of a 1.00% voluntary expense limitation in effect from the reorganization
date through December 31, 1994.
</FN>
</TABLE>
T. Rowe Price No-Load Mutual Funds
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate Tax-Free
Maryland Short-Term Tax-Free Bond
Summit Municipal Intermediate
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE
GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
Shareholder Services
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety
of information and services-at no extra cost.
Knowledgeable Service Representatives
By Phone-Shareholder Service Representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m E.T. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access (registered trademark) (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Addition-ally, you have the
ability to request prospectuses, statements, account and tax forms, reorder
checks, and initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access (registered trademark) provides the same information as
Tele*Access, but on a personal computer via dial-up modem.
Account Services
Checking-Write checks for $500 or more on any money market and most bond
fund accounts.
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal-If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles
on market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights-A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
Chart 1 - Balanced Fund Chart Descriptions
A pie chart showing the percent of the fund's assets invested among large-cap
stocks 37%, international stocks 14%, small-cap stocks 10%, Treasury and
agency issues 8%, mortgage-backed securities 9%, corporate bonds 20%, and
reserves 2%.
