Fellow Shareholders
Stocks and bonds in the U.S. and overseas provided attractive returns to
investors during 1993, and your Fund participated in these results through its
wide diversification in domestic and foreign securities.
Market Environment
On the global scene, foreign stocks were the star performers, rising almost
33% for the year according to Morgan Stanley's EAFE (Europe, Australia, and
Far East) Index. Investor enthusiasm reflected the high growth rates of the
smaller Pacific Rim countries and some emerging Latin American economies as
well as anticipated economic upturns in Europe and Japan.
U.S. equities had a good year, with the unmanaged Standard & Poor's 500
Stock Index rising by 10.1%. Secondary stocks performed even better as
indicated by the almost 15% rise in the Nasdaq Composite Index. While 10% may
not seem high compared with the outstanding returns of the '80s, it is
imminently respectable for a year of low inflation and is in line with the
market's long-term trend.
The major factors in the market's continued rise were the decline in
interest rates and the accumulating evidence of economic acceleration. Within
the market, these themes played out quite differently, as value-oriented
stocks substantially outperformed growth stocks. This was not surprising,
since lower interest rates tend to make higher-yielding stocks more valuable.
In addition, improving economic conditions tend to benefit mature companies
more than those that can grow independently of the business cycle.
There was also considerable divergence among industry groups during the
year. Health care stocks wilted early in 1993 in the face of the
Administration's health care reform proposals and tobacco stocks were
torpedoed by increasing price competition and prospects of higher excise
taxes. Groups that performed well included most cyclicals, especially
automotive stocks and construction and transportation issues. Mining,
machinery, and semiconductors also were strong, as investors anticipated
rising sales as the economy strengthened, and oil stocks rose along with oil
prices for the first three quarters.
The fourth quarter saw several exceptions to these trends. Interest
rates rose, depressing financial stocks, and oil prices fell, hurting the
energy sector. Consumer-related stocks rallied, and even the long-suffering
drug stocks advanced.
The fixed-income markets provided robust returns for the year, as
capital appreciation from falling rates bolstered their returns from income.
Treasuries and corporates were the best performers, and mortgage-backed
securities continued to lag due to the high level of prepayments. As in the
equity market, the fourth quarter saw some reversal in this pattern, and
rising rates resulted in lackluster three-month returns.
Performance and Strategy Review
Foreign stocks were definitely the portfolio's heavyweights during the quarter
and the year, but every major portfolio component contributed significantly to
the Fund's performance. For the year, our foreign stock holdings rose over 50%
(20% in the final quarter alone), the domestic equity portfolio returned
11.9%, and fixed-income securities returned 10.1%. The Fund's international
diversification helped it outstrip the Lipper Balanced Fund Index and an
unmanaged index whose stock/bond allocation matches your Fund's for both the
quarter and full year, as shown below.
Performance Comparison
Periods Ended 12/31/93
3 Months 12 Months
_____________________
Balanced Fund 3.1% 13.4%
Lipper Balanced Fund Index 1.1 11.7
Combined Index Portfolio* 1.4 9.9
*An unmanaged portfolio composed of 60% stocks (S&P 500) and 40% bonds (Lehman
Brothers Aggregate Index).
The Fund's exposure to foreign stocks grew during the quarter from 11%
to 13% of total assets, principally from market appreciation, and especially
from explosive returns on stocks of Pacific Rim companies. Other allocations,
shown below, were little changed from the previous period.
Chart 1 - Security Diversification
Our domestic stock portfolio-46% of assets-remained structured to
resemble the broader market in terms of industry concentrations and
fundamental characteristics, but with a few differences. We were slightly
underweighted in interest rate sensitive stocks, such as financials and
utilities, which helped the better performance when that sector declined. Our
underweighting in auto stocks meant that the Fund did not participate fully in
their strong price rise, but other holdings also likely to benefit from
increased consumer spending did extremely well-Gap Stores, for example, and
Procter & Gamble and Colgate Palmolive. Other holdings of economically
sensitive stocks that also did well include Inco, the western world's largest
nickel producer, and chemical companies Monsanto and Schulman. Falling oil
prices lifted airline stocks, benefiting our relatively large stake in
Southwest Airlines.
For the full year, your Fund's fixed-income investments benefited from
further declines in interest rates. Returns for the final quarter, however,
were only modestly positive, reflecting the backup in rates. With the economy
growing and corporate earnings improving, we continued to emphasize corporate
bonds to take advantage of their attractive yields. At the same time, we
underweighted Treasury issues because of their relatively lower yields. This
underweighting helped performance during the quarter, since Treasuries
suffered steeper price declines than corporates when rates rose. In addition,
to make sure the Fund participated in any rebound in the mortgage markets, we
increased our exposure to mortgage-backed securities a bit during the quarter,
moving from an underweighted position to a market-neutral one.
Outlook
The economy seems to be on a sustainable growth path that we expect will be
steadier in 1994 than the stop-and-go pattern of recent years. Improving
consumer and business sentiment and still-low interest rates should help
maintain growth around 3% in real terms, a mild acceleration from the '93
pace. Against this background, the Federal Reserve is likely to gradually
raise the federal funds rate above the inflation rate next year, but, unless
inflation flares up, the cumulative tightening will look small relative to
most prior economic expansions. Bond yields may edge higher in response to a
tighter Fed policy, but the spread between short- and long-term yields is
likely to narrow, leading to a flatter yield curve.
The global outlook is also positive on the whole. Continental Europe is
showing signs of emerging from recession, aided by interest rate declines. The
Pacific Rim countries should continue to grow at above-average rates-except
for Japan, which is struggling with a major economic and political
restructuring.
Against this background, we anticipate positive returns for stocks and
bonds both in the U.S. and abroad. International securities could well
continue to outperform U.S. markets, and we expect to maintain our significant
commitment to international securities. If U.S. interest rates remain fairly
stable or rise, bond returns will be more moderate than in '93. In the stock
market, we expect smaller-company stocks to continue setting the pace, but the
overall economic environment should be favorable for equities in general. This
does not preclude the possibility of a correction, which many believe is long
overdue. In this event, your Fund's broad diversification, especially in
foreign markets, should dampen the impact.
Your Fund has gained many new accounts during the year, and we welcome
all new shareholders.
Respectfully submitted,
Richard T. Whitney
President
January 28, 1994
Chart 2 - Performance Comparison
Total Return Performance
Periods ended December 31, 1993
1 Year 5 Years* 10 Years*
________ ________ ________
13.35% 14.01% 13.45%
*Average annual compound total return
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Industry Diversification
December 31, 1993
STOCKS*
Percent of
Net Assets
__________
Financial 8.1%
Utilities 7.1
Consumer Nondurables 10.4
Consumer Services 8.5
Consumer Cyclicals 3.2
Technology 3.9
Capital Equipment 4.5
Business Services & Transportation 4.6
Energy 4.3
Process Industries 3.1
Basic Materials 1.8
Total Stocks 59.5%
*Includes foreign securities
BONDS AND RESERVES
Percent of
Net Assets
__________
U.S. Government & Agencies Bonds:
U.S. Treasury Obligations 10.0%
Mortgages 9.0
Other U.S. Gov't. & Agencies 0.3
Agency Backed CMOs 0.3
Project Loans 0.1
Taxable Bonds:
Banking 1.3
Broadcasting 0.1
Canadian Gov't. & Muni. 2.2
Electric Utilities 1.8
Finance & Credit 1.6
Food Processing 0.4
Food/Tobacco 0.5
Foreign Gov't. & Muni. 3.6
Home Equity - Backed 0.3
Industrial - Other 0.5
Investment Dealers 0.8
Miscellaneous 0.1
Petroleum 0.8
Retail 0.2
Savings & Loan 0.5
Telephone 1.0
Transportation (not RR's) 1.5
Whole Loans - Backed 0.3
Reserves 3.3
Total Bonds and Reserves 40.5%
Total 100.0%
Largest Holdings
December 31, 1993
TEN LARGEST STOCK HOLDINGS
Percent of
Company Net Assets
_____________________________ __________
GE 1.2%
Southwest Airlines 1.0
American International Group 0.9
Mobil 0.9
H&R Block 0.9
Hutchison Whampoa 0.8
J. P. Morgan 0.8
Time Warner 0.8
Exxon 0.8
Pacific Telesis 0.7
Total 8.8%
TEN LARGEST BOND ISSUERS
Percent of
Company Net Assets
_____________________________ __________
U.S. Treasury 10.0%
Ginnie Mae 8.7
African Development Bank 1.9
Inter-American Development Bank 1.6
British Columbia Hydro & Power 1.3
ESCOM 1.1
Banesto Del 0.6
Southwest Airlines 0.5
FNMA 0.5
Shearson Lehman Hutton Holdings 0.5
Total 26.7%
Officers and Directors
James S. Riepe, Chairman
Richard T. Whitney, President
Leo C. Bailey, Director
Donald W. Dick, Jr., Director
David K. Fagin, Director
Addison Lanier, Director
John K. Major, Director
M. David Testa, Vice President/Director
Hubert D. Vos, Director
Paul M. Wythes, Director
Stephen W. Boesel, Vice President
Andrew M. Brooks, Vice President
Jonathan M. Greene, Vice President
Henry H. Hopkins, Vice President
James A. C. Kennedy III, Vice President
Edmund M. Notzon, Vice President
Peter Van Dyke, Vice President
Lenora V. Hornung, Secretary
Carmen F. Deyesu, Treasurer
David S. Middleton, Controller
Statement of Net Assets (Value in thousands)
T. Rowe Price Balanced Fund / December 31, 1993
Common Stocks & Warrants - 59.4%
FINANCIAL - 8.1%
BANK & TRUST - 4.0%
7,575 shs. BANC ONE . . . . . . . . . . . . . . . . . $ 296
4,100 Bank of New York . . . . . . . . . . . . . 234
600 BankAmerica. . . . . . . . . . . . . . . . 28
5,700 Berliner Bank (DEM). . . . . . . . . . . . 1,743
33,200 Chemical Banking . . . . . . . . . . . . . 1,332
1,350 Commerce Bancshares. . . . . . . . . . . . 38
910 Deutsche Bank (DEM). . . . . . . . . . . . 465
200 wts. * Deutsche Bank, 6/30/97,
warrants (DEM) . . . . . . . . . . . . . 7
20 shs. Deutsche Bank, 8.75% (DEM) . . . . . . . . 14
1,500 First Fidelity . . . . . . . . . . . . . . 68
25,000 First Union. . . . . . . . . . . . . . . . 1,031
5,700 First Virginia Banks . . . . . . . . . . . 187
10,000 * Grupo Financiero
Bancomer, ADR. . . . . . . . . . . . . . 418
38,200 J. P. Morgan . . . . . . . . . . . . . . . 2,650
12,500 Mellon Bank. . . . . . . . . . . . . . . . 663
8,000 National City. . . . . . . . . . . . . . . 196
20,000 NationsBank. . . . . . . . . . . . . . . . 980
1,000 Norwest. . . . . . . . . . . . . . . . . . 24
6,000 PNC Financial. . . . . . . . . . . . . . . 174
50,000 Society Corp.. . . . . . . . . . . . . . . 1,488
4,600 SunTrust . . . . . . . . . . . . . . . . . 207
74,000 Toronto-Dominion
Bank (CAD) . . . . . . . . . . . . . . . 1,194
13,437
INSURANCE - 1.3%
3,000 20th Century Industries. . . . . . . . . . 82
35,400 American International Group . . . . . . . 3,106
4,500 Aon. . . . . . . . . . . . . . . . . . . . 218
2,900 Conseco. . . . . . . . . . . . . . . . . . 161
9,100 Marsh & McLennan . . . . . . . . . . . . . 739
7,718 * Mutual Assurance . . . . . . . . . . . . . 168
4,474
FINANCIAL SERVICES - 2.8%
21,500 A.G. Edwards . . . . . . . . . . . . . . . 618
5,550 ADVANTA (Class B). . . . . . . . . . . . . 161
4,000 AMBAC. . . . . . . . . . . . . . . . . . . 168
68,250 Countrywide Credit . . . . . . . . . . . . 1,715
19,500 Fannie Mae . . . . . . . . . . . . . . . . 1,531
72,700 H&R Block. . . . . . . . . . . . . . . . . 2,963
12,400 Mercury Finance. . . . . . . . . . . . . . 237
150,000 Pearson (GBP). . . . . . . . . . . . . . . 1,347
15,333 shs. Primerica. . . . . . . . . . . . . . . . . $ 596
6,800 Salomon. . . . . . . . . . . . . . . . . . 324
9,660
Total Financial 27,571
UTILITIES - 7.1%
TELEPHONE - 4.9%
47,000 ALLTEL . . . . . . . . . . . . . . . . . . 1,387
12,000 Ameritech. . . . . . . . . . . . . . . . . 921
47,200 AT&T . . . . . . . . . . . . . . . . . . . 2,478
18,100 Bell Atlantic. . . . . . . . . . . . . . . 1,068
16,000 BellSouth. . . . . . . . . . . . . . . . . 926
222,920 Cable & Wireless (GBP) . . . . . . . . . . 1,732
35,600 GTE. . . . . . . . . . . . . . . . . . . . 1,246
12,100 Hong Kong
Telecommunications, ADR. . . . . . . . . 753
46,300 Pacific Telesis. . . . . . . . . . . . . . 2,500
6,700 Southern New England
Telecommunications . . . . . . . . . . . 242
36,400 Southwestern Bell. . . . . . . . . . . . . 1,511
650,000 Telecom Corp
New Zealand (NZD). . . . . . . . . . . . 1,620
60,000 Telekom Malaysia (MYR) . . . . . . . . . . 492
16,876
ELECTRIC UTILITIES - 2.2%
27,400 Duke Power . . . . . . . . . . . . . . . . 1,161
12,200 Empresa Nacional
de Electricidad, ADR . . . . . . . . . . 580
53,000 Entergy. . . . . . . . . . . . . . . . . . 1,908
25,600 FPL Group. . . . . . . . . . . . . . . . . 1,002
36,100 General Public Utilities . . . . . . . . . 1,115
59,200 Northeast Utilities. . . . . . . . . . . . 1,406
6,750 Wisconsin Energy . . . . . . . . . . . . . 186
7,358
Total Utilities 24,234
CONSUMER NONDURABLES - 10.3%
COSMETICS - 0.1%
3,900 International Flavors &
Fragrances . . . . . . . . . . . . . . . 444
BEVERAGES - 1.7%
32,000 Anheuser-Busch . . . . . . . . . . . . . . 1,572
46,300 Coke . . . . . . . . . . . . . . . . . . . 2,066
1,453 LVMH (FRF) . . . . . . . . . . . . . . . . 921
29,000 PepsiCo. . . . . . . . . . . . . . . . . . 1,185
5,744
FOOD PROCESSING - 1.5%
4,560 shs. Continental Baking . . . . . . . . . . . . $ 38
12,900 CPC International. . . . . . . . . . . . . 614
6,300 General Mills. . . . . . . . . . . . . . . 383
3,100 Kellogg. . . . . . . . . . . . . . . . . . 176
1,684 Nestle (CHF) . . . . . . . . . . . . . . . 1,452
17,200 Quaker Oats. . . . . . . . . . . . . . . . 1,221
22,800 Ralston Purina . . . . . . . . . . . . . . 906
1,800 Sara Lee . . . . . . . . . . . . . . . . . 45
4,835
HOSPITAL SUPPLIES/
HOSPITAL MANAGEMENT - 0.9%
58,800 Abbott Laboratories. . . . . . . . . . . . 1,735
1,500 * Acuson . . . . . . . . . . . . . . . . . . 18
2,700 * Continental Medical Systems. . . . . . . . 23
31,000 Hillenbrand Industries . . . . . . . . . . 1,290
3,066
PHARMACEUTICALS - 2.2%
24,800 * Amgen. . . . . . . . . . . . . . . . . . . 1,228
16,100 Bristol-Myers Squibb . . . . . . . . . . . 936
1,500 * Chiron . . . . . . . . . . . . . . . . . . 126
225,000 Fisons (GBP) . . . . . . . . . . . . . . . 445
35,500 Merck. . . . . . . . . . . . . . . . . . . 1,220
24,300 Pfizer . . . . . . . . . . . . . . . . . . 1,677
3,500 Schering-Plough. . . . . . . . . . . . . . 240
61,200 SmithKline Beecham,
equity units, ADR. . . . . . . . . . . . 1,675
7,547
MISCELLANEOUS CONSUMER PRODUCTS - 3.9%
3,500 A. T. Cross. . . . . . . . . . . . . . . . 53
700 Clorox . . . . . . . . . . . . . . . . . . 38
30,100 Colgate-Palmolive. . . . . . . . . . . . . 1,877
63,000 Hanson, ADR. . . . . . . . . . . . . . . . 1,260
2,000 Jostens. . . . . . . . . . . . . . . . . . 40
357 Mattel . . . . . . . . . . . . . . . . . . 10
1,488 Newell . . . . . . . . . . . . . . . . . . 60
2,500 Philip Morris. . . . . . . . . . . . . . . 139
25,600 * Philips, N.V., ADR . . . . . . . . . . . . 528
13,000 PPG Industries . . . . . . . . . . . . . . 986
29,400 Procter & Gamble . . . . . . . . . . . . . 1,676
49,500 Reebok . . . . . . . . . . . . . . . . . . 1,485
1,500 Rubbermaid . . . . . . . . . . . . . . . . 52
72,300 Service Corp . . . . . . . . . . . . . . . 1,898
39,700 Springs Industries . . . . . . . . . . . . 1,499
59,600 Sysco. . . . . . . . . . . . . . . . . . . 1,743
9,500 Tambrands. . . . . . . . . . . . . . . . . 420
750 Unifi. . . . . . . . . . . . . . . . . . . 20
13,784
Total Consumer Nondurables 35,420
CONSUMER SERVICES - 8.5%
GENERAL MERCHANDISERS - 1.8%
13,700 shs. Dayton Hudson. . . . . . . . . . . . . . . $ 914
26,600 J.C. Penney. . . . . . . . . . . . . . . . 1,393
46,400 May Department Stores. . . . . . . . . . . 1,827
9,500 TJX. . . . . . . . . . . . . . . . . . . . 277
51,400 Wal-Mart . . . . . . . . . . . . . . . . . 1,285
5,696
SPECIALTY MERCHANDISERS - 1.3%
34,400 Albertson's. . . . . . . . . . . . . . . . 920
11,100 Charming Shoppes . . . . . . . . . . . . . 132
8,000 Fingerhut Companies. . . . . . . . . . . . 225
4,500 Heilig-Meyers. . . . . . . . . . . . . . . 176
4,700 Merry-Go-Round Enterprises . . . . . . . . 16
3,500 * QVC Network. . . . . . . . . . . . . . . . 137
5,400 * Staples. . . . . . . . . . . . . . . . . . 138
39,300 The Gap. . . . . . . . . . . . . . . . . . 1,547
29,000 * Toys "R" Us. . . . . . . . . . . . . . . . 1,185
4,476
ENTERTAINMENT & LEISURE - 2.2%
5,850 * Brinker. . . . . . . . . . . . . . . . . . 269
6,200 * Buffets. . . . . . . . . . . . . . . . . . 160
6,750 * Checkers Drive-In Restaurants. . . . . . . 78
32,400 Disney . . . . . . . . . . . . . . . . . . 1,381
160,000 Genting Berhad (SGD) . . . . . . . . . . . 2,227
560,000 Hutchison Whampoa (HKD). . . . . . . . . . 2,790
5,000 Reader's Digest (Class A). . . . . . . . . 225
7,300 * Shoney's . . . . . . . . . . . . . . . . . 169
6,000 * Viacom (Class A) . . . . . . . . . . . . . 293
7,592
MEDIA & COMMUNICATIONS - 3.2%
3,000 Capital Cities/ABC . . . . . . . . . . . . 1,859
28,100 Dun & Bradstreet . . . . . . . . . . . . . 1,732
1,800 Gannett. . . . . . . . . . . . . . . . . . 103
16,100 McGraw-Hill. . . . . . . . . . . . . . . . 1,089
44,300 * Multimedia . . . . . . . . . . . . . . . . 1,517
6,200 Reuters, ADR . . . . . . . . . . . . . . . 490
58,000 Time Warner. . . . . . . . . . . . . . . . 2,567
10,000 Turner Broadcasting Systems
(Class A). . . . . . . . . . . . . . . . 273
52,900 Turner Broadcasting Systems
(Class B). . . . . . . . . . . . . . . . 1,428
11,058
Total Consumer Services 28,822
CONSUMER CYCLICALS - 3.2%
AUTOMOBILES & RELATED - 1.3%
30,000 General Motors . . . . . . . . . . . . . . 1,646
9,650 Genuine Parts. . . . . . . . . . . . . . . 363
T. Rowe Price Balanced Fund / Statement of Net Assets
AUTOMOBILES & RELATED (Cont'd)
19,800 shs. Honda, ADR . . . . . . . . . . . . . . . . $ 540
7,100 Pep Boys . . . . . . . . . . . . . . . . . 186
4,100 Swiss Bank (CHF) . . . . . . . . . . . . . 1,312
4,047
MISCELLANEOUS CONSUMER DURABLES - 1.3%
30,000 B. F. Goodrich . . . . . . . . . . . . . . 1,208
14,700 Eastman Kodak. . . . . . . . . . . . . . . 823
10,000 * Scotts (Class A) . . . . . . . . . . . . . 198
92,000 Shaw Industries. . . . . . . . . . . . . . 2,335
3,000 Valspar. . . . . . . . . . . . . . . . . . 114
2,600 York International . . . . . . . . . . . . 92
4,770
BUILDING & REAL ESTATE - 0.6%
49,900 Masco. . . . . . . . . . . . . . . . . . . 1,846
2,700 Sunamerica . . . . . . . . . . . . . . . . 117
1,963
Total Consumer Cyclicals 10,780
TECHNOLOGY - 3.9%
ELECTRONIC COMPONENTS - 1.1%
4,500 * Altera . . . . . . . . . . . . . . . . . . 147
500 AMP. . . . . . . . . . . . . . . . . . . . 32
3,300 * Cirrus Logic . . . . . . . . . . . . . . . 122
12,000 * EMC. . . . . . . . . . . . . . . . . . . . 198
17,200 Intel. . . . . . . . . . . . . . . . . . . 1,066
5,700 Linear Technology. . . . . . . . . . . . . 221
4,800 Micron Technology. . . . . . . . . . . . . 223
6,250 Molex. . . . . . . . . . . . . . . . . . . 222
4,800 * Read-Rite. . . . . . . . . . . . . . . . . 72
12,900 Texas Instruments. . . . . . . . . . . . . 819
4,350 * Thermo Electron. . . . . . . . . . . . . . 183
4,350 * Thermo Instrument Systems. . . . . . . . . 152
6,000 * Vicor. . . . . . . . . . . . . . . . . . . 138
4,200 * Xilinx . . . . . . . . . . . . . . . . . . 201
3,796
ELECTRONIC SYSTEMS - 0.6%
15,200 * Applied Materials. . . . . . . . . . . . . 589
10,000 Hewlett-Packard. . . . . . . . . . . . . . 790
20,000 Honeywell. . . . . . . . . . . . . . . . . 685
4,800 * Solectron. . . . . . . . . . . . . . . . . 136
2,200
INFORMATION PROCESSING - 0.6%
3,500 * Adaptec. . . . . . . . . . . . . . . . . . 139
4,600 Apple Computer . . . . . . . . . . . . . . 136
5,700 * Dell Computer. . . . . . . . . . . . . . . 129
18,900 Hitachi, ADR . . . . . . . . . . . . . . . 1,389
5,000 * Storage Technology . . . . . . . . . . . . 158
1,951
TELECOMMUNICATIONS - 0.2%
5,400 shs. * DSC Communications . . . . . . . . . . . . $ 332
5,600 * Novell . . . . . . . . . . . . . . . . . . 116
4,400 * Picturetel . . . . . . . . . . . . . . . . 83
6,600 * SynOptics Communications . . . . . . . . . 184
715
AEROSPACE & DEFENSE - 1.4%
18,000 Allied-Signal. . . . . . . . . . . . . . . 1,422
31,000 Boeing . . . . . . . . . . . . . . . . . . 1,341
10,000 Raytheon . . . . . . . . . . . . . . . . . 660
40,000 Teledyne . . . . . . . . . . . . . . . . . 1,040
4,700 United Technologies. . . . . . . . . . . . 291
4,754
Total Technology 13,416
CAPITAL EQUIPMENT - 4.5%
ELECTRICAL EQUIPMENT - 2.9%
45,605 * ALCATEL ALSTHOM, ADR . . . . . . . . . . . 1,305
775 BBC Brown Boveri (CHF) . . . . . . . . . . 566
28,100 Emerson Electric . . . . . . . . . . . . . 1,693
37,700 GE . . . . . . . . . . . . . . . . . . . . 3,954
41,000 Getronics (NLG). . . . . . . . . . . . . . 923
4,000 Hubbell (Class A). . . . . . . . . . . . . 209
25 Hubbell (Class B). . . . . . . . . . . . . 1
2,800 Siemans (DEM). . . . . . . . . . . . . . . 1,280
9,931
MACHINERY - 1.6%
435,000 BTR Nylex (AUD). . . . . . . . . . . . . . 942
81,600 * Coltec Industries. . . . . . . . . . . . . 1,530
2,600 Cooper Industries. . . . . . . . . . . . . 128
20,000 Crane. . . . . . . . . . . . . . . . . . . 495
49,700 Danaher. . . . . . . . . . . . . . . . . . 1,895
160 * Dovatron . . . . . . . . . . . . . . . . . 4
1,600 Dover. . . . . . . . . . . . . . . . . . . 97
4,600 Foster Wheeler . . . . . . . . . . . . . . 154
2,800 * Imo Industries . . . . . . . . . . . . . . 26
5,000 Teleflex . . . . . . . . . . . . . . . . . 185
5,456
Total Capital Equipment 15,387
BUSINESS SERVICES & TRANSPORTATION - 4.6%
COMPUTER SERVICE & SOFTWARE - 0.7%
3,625 Amtech . . . . . . . . . . . . . . . . . . 87
6,100 * BMC Software . . . . . . . . . . . . . . . 293
8,000 Computer Associates. . . . . . . . . . . . 320
7,500 * Electronic Arts. . . . . . . . . . . . . . 225
9,200 * Informix . . . . . . . . . . . . . . . . . 196
9,000 * LEGENT . . . . . . . . . . . . . . . . . . 204
4,400 * Lotus Development. . . . . . . . . . . . . 242
12,000 shs. * Parametric Technology. . . . . . . . . . . $ 465
2,000 * Policy Management Systems. . . . . . . . . 62
7,000 * Sybase . . . . . . . . . . . . . . . . . . 294
2,388
MISCELLANEOUS BUSINESS
SERVICES - 0.9%
3,600 Cintas . . . . . . . . . . . . . . . . . . 122
2,571 Generale des Eaux (FRF). . . . . . . . . . 1,270
6,700 Omnicom. . . . . . . . . . . . . . . . . . 310
47,200 WMX Technologies . . . . . . . . . . . . . 1,245
2,947
RAILROADS - 0.6%
9,800 CSX. . . . . . . . . . . . . . . . . . . . 794
14,000 Union Pacific. . . . . . . . . . . . . . . 877
3,400 * Wisconsin Central
Transportation . . . . . . . . . . . . . 203
1,874
AIRLINES - 2.4%
4,200 Atlantic Southeast Airlines. . . . . . . . 144
246,000 Singapore Airlines (SGD) . . . . . . . . . 2,064
93,900 Southwest Airlines . . . . . . . . . . . . 3,521
269,000 Swire Pacific 'A' (HKD). . . . . . . . . . 2,420
8,149
ENVIRONMENTAL - 0.0%
12,000 Mid-American Waste
Systems. . . . . . . . . . . . . . . . . 99
DISTRIBUTION SERVICES - 0.0%
2,900 Cardinal Distribution. . . . . . . . . . . 138
Total Business Services & Transportation 15,595
ENERGY - 4.3%
ENERGY SERVICES - 0.3%
383 El Paso Natural Gas. . . . . . . . . . . . 14
5,400 * Rowan. . . . . . . . . . . . . . . . . . . 49
16,200 Schlumberger . . . . . . . . . . . . . . . 958
1,021
EXPLORATION & PRODUCTION - 0.0%
600 Burlington Resources . . . . . . . . . . . 25
GAS TRANSMISSION - 0.2%
14,300 ENSERCH. . . . . . . . . . . . . . . . . . 232
9,000 Sonat. . . . . . . . . . . . . . . . . . . 260
492
INTEGRATED PETROLEUM-DOMESTIC - 1.1%
27,700 Amerada Hess . . . . . . . . . . . . . . . 1,250
10,000 British Petroleum, ADR . . . . . . . . . . 640
13,900 Santa Fe Energy Resources. . . . . . . . . 125
100,000 USX-Marathon . . . . . . . . . . . . . . . 1,650
3,665
INTEGRATED PETROLEUM-
INTERNATIONAL - 2.7%
15,300 shs. Chevron. . . . . . . . . . . . . . . . . . $ 1,333
40,600 Exxon. . . . . . . . . . . . . . . . . . . 2,558
38,900 Mobil. . . . . . . . . . . . . . . . . . . 3,073
13,100 Royal Dutch Petroleum, ADR . . . . . . . . 1,367
16,600 Texaco . . . . . . . . . . . . . . . . . . 1,073
9,404
Total Energy 14,607
PROCESS INDUSTRIES - 3.1%
DIVERSIFIED CHEMICALS - 1.1%
25,300 Du Pont. . . . . . . . . . . . . . . . . . 1,221
33,100 Monsanto . . . . . . . . . . . . . . . . . 2,429
3,650
SPECIALTY CHEMICALS - 0.8%
9,000 3M . . . . . . . . . . . . . . . . . . . . 979
35,700 A. Schulman. . . . . . . . . . . . . . . . 1,205
3,500 Crompton & Knowles . . . . . . . . . . . . 77
2,600 IMCERA . . . . . . . . . . . . . . . . . . 87
11,300 IVAX . . . . . . . . . . . . . . . . . . . 325
8,533 Pall . . . . . . . . . . . . . . . . . . . 157
2,830
PAPER & PAPER PRODUCTS - 1.0%
103,000 * Kimberly-Clark Mexico (MXN). . . . . . . . 1,930
28,600 Mead . . . . . . . . . . . . . . . . . . . 1,287
5,700 Scott Paper. . . . . . . . . . . . . . . . 234
3,451
FOREST PRODUCTS - 0.2%
1,000 Georgia-Pacific. . . . . . . . . . . . . . 69
12,700 Weyerhaeuser . . . . . . . . . . . . . . . 566
635
Total Process Industries 10,566
BASIC MATERIALS - 1.8%
METALS - 1.0%
30,000 Alcoa. . . . . . . . . . . . . . . . . . . 2,081
4,000 Freeport-McMoRan Copper
& Gold . . . . . . . . . . . . . . . . . 100
51,900 Inco . . . . . . . . . . . . . . . . . . . 1,395
3,576
MINING - 0.8%
4,800 American Barrick Resources . . . . . . . . 137
700 Newmont Gold . . . . . . . . . . . . . . . 33
50,000 Pegasus Gold . . . . . . . . . . . . . . . 1,100
200,000 * TVX Gold . . . . . . . . . . . . . . . . . 1,325
2,595
Total Basic Materials 6,171
Total Common Stocks (Cost - $169,135) 202,569
T. Rowe Price Balanced Fund / Statement of Net Assets
Convertible Preferred Stocks - 0.1%
2,000 shs. Ford Motor, Dep. Shs., $4.20,
Cum. Cv. Pfd., Series A. . . . . . . . . $ 217
3,000 General Motors, Dep. Shs.,
Rep. 1/10 Pfd., Series C . . . . . . . . 164
Total Convertible Preferred Stocks (Cost - $250) 381
Convertible Bonds - 0.2%
$2,000,000 U.S. West, Zero Coupon,
6/25/11. . . . . . . . . . . . . . . . . 595
Total Convertible Bonds (Cost - $576) 595
Corporate Bonds - 17.4%
5,800,000 African Development Bank,
7.75%, 12/15/01. . . . . . . . . . . . . 6,362
725,000 Alabama Power,
7.00%, 1/1/03. . . . . . . . . . . . . . 748
1,300,000 Associates Corporation North
America, 6.875%, 1/15/97 . . . . . . . . 1,364
2,000,000 Banesto Delaware Incorporated,
8.25%, 7/28/02 . . . . . . . . . . . . . 2,120
125,000 Bankers Trust, Sub. Deb.,
8.00%, 3/15/97 . . . . . . . . . . . . . 135
1,000,000 Banque Nationale De Paris,
9.875%, 5/25/98. . . . . . . . . . . . . 1,154
400,000 Bear Stearns, Sr. Notes,
8.125%, 2/15/97. . . . . . . . . . . . . 401
250,000 British Columbia Hydro &
Power, 12.50%, 9/1/13. . . . . . . . . . 327
1,000,000 British Columbia Hydro &
Power, 15.00%, 4/15/11 . . . . . . . . . 1,265
2,125,000 British Columbia Hydro &
Power, 15.50%, 11/15/11. . . . . . . . . 2,840
250,000 Capital Cities/ABC,
8.75%, 8/15/21 . . . . . . . . . . . . . 297
100,000 Citicorp, 8.75%, 11/1/96 . . . . . . . . . 109
400,577 Citicorp Mortgage,
6.00%, 3/25/22 . . . . . . . . . . . . . 403
953,059 Corestates Home Equity
Trust, 5.10%, 3/15/09. . . . . . . . . . 954
400,000 Dayton Hudson,
9.50%, 10/15/16. . . . . . . . . . . . . 423
66,667 Discover Card, 8.75%, 2/16/96. . . . . . . 67
265,000 Dow Chemical, 8.48%, 8/15/15 . . . . . . . 272
1,000,000 Duke Power, 6.75%, 8/1/25. . . . . . . . . 933
17,170,000 (ZAR) ESCOM, 11.00%, 06/01/08. . . . . . . . . . 3,768
500,000 Exxon Capital, 6.50%, 7/15/99. . . . . . . 518
800,000 Fairfax Financial Hldgs,
7.75%, 12/15/03. . . . . . . . . . . . . 792
$ 500,000 Federal Express, Med. Term
Notes, 9.95%, 8/15/06. . . . . . . . . . $ 596
1,500,000 First Fidelity, 8.50%, 4/1/98. . . . . . . 1,649
800,000 Fleet Norstar Financial Group,
8.625%, 1/15/07. . . . . . . . . . . . . 910
1,000,000 Fletcher Challenge Finance,
9.80%, 6/15/98 . . . . . . . . . . . . . 1,147
1,500,000 Golden West Financial,
8.625%, 8/30/98. . . . . . . . . . . . . 1,662
400,000 Hydro-Quebec, Series D,
10.75%, 6/15/10. . . . . . . . . . . . . 449
5,000,000 Inter-American Development
Bank, 11.375%, 5/1/95. . . . . . . . . . 5,446
100,000 J. P. Morgan, Sub. Cap. Notes,
9.625%, 12/15/98 . . . . . . . . . . . . 109
400,000 J.C. Penney, 9.45%, 4/15/98. . . . . . . . 425
250,000 KFW, Med. Term Notes,
9.14%, 6/4/01. . . . . . . . . . . . . . 298
500,000 Liberty National Bank & Trust,
6.75%, 6/1/03. . . . . . . . . . . . . . 502
500,000 Long Island Lighting,
7.50%, 3/1/07. . . . . . . . . . . . . . 492
100,000 Long Island Lighting,
9.75%, 5/1/21. . . . . . . . . . . . . . 113
400,000 Merrill Lynch, 7.26%, 5/4/99 . . . . . . . 410
1,440,800 NYNEX Corporation,
9.55%, 5/1/10. . . . . . . . . . . . . . 1,671
600,000 Occidental Petroleum,
11.75%, 3/15/11. . . . . . . . . . . . . 706
1,000,000 Pacific Bell, 7.375%, 7/15/43. . . . . . . 1,007
1,500,000 Philip Morris, 6.00%, 11/15/99 . . . . . . 1,489
1,000,000 Province of Alberta,
9.25%, 4/1/00. . . . . . . . . . . . . . 1,177
1,500,000 Province of Newfoundland,
8.50%, 10/15/96. . . . . . . . . . . . . 1,628
500,000 Prudential Home Mortgage
Securities, 6.90%, 3/25/23 . . . . . . . 513
1,000,000 Qantas Airways,
6.625%, 6/30/98. . . . . . . . . . . . . 1,010
1,500,000 RJR Nabisco, Sr. Notes,
10.50%, 4/15/98. . . . . . . . . . . . . 1,661
250,000 Salomon, 7.50%, 6/15/99. . . . . . . . . . 257
1,550,000 Sea Land Service,
10.60%, 1/2/11 . . . . . . . . . . . . . 1,664
1,500,000 Shearson Lehman,
8.875%, 3/1/02 . . . . . . . . . . . . . 1,693
1,650,000 Southwest Airlines,
9.25%, 2/15/98 . . . . . . . . . . . . . 1,832
200,000 Tenneco, 8.375%, 2/1/97. . . . . . . . . . 201
1,400,000 Texaco Capital,
8.65%, 1/30/98 . . . . . . . . . . . . . 1,559
1,500,000 Westvaco Corporation,
12.65%, 1/15/14. . . . . . . . . . . . . 1,602
Total Corporate Bonds (Cost - $57,283) 59,130
U.S. Government
Obligations/Agencies - 19.6%
$ 400,000 Fannie Mae, 10.60%, 11/10/95 . . . . . . . $ 446
1,000,000 Fannie Mae, 7.50%, 10/25/19. . . . . . . . 1,044
250,000 Fannie Mae, 7.06%, 7/25/22 . . . . . . . . 249
700,000 Freddie Mac, 6.00%, 6/15/05. . . . . . . . 707
205,477 Freddie Mac, 10.00%, 10/1/10 . . . . . . . 223
69,894 Freddie Mac, 10.50%, 9/1/15. . . . . . . . 77
132,649 Freddie Mac, 8.00%, 3/1/17 . . . . . . . . 137
340,802 Government National
Mortgage Assn.,
5.00%, 8/20/23 . . . . . . . . . . . . . 349
1,964,999 Government National
Mortgage Assn.,
6.50%, 12/1- 12/15/23 . . . . . . . . . 1,953
4,274,853 Government National
Mortgage Assn.,
7.00%, 10/15/22 - 12/31/99 . . . . . . . 4,356
3,897,069 Government National
Mortgage Assn.,
7.50%, 9/15/22 - 12/15/23. . . . . . . . 4,055
5,030,322 Government National
Mortgage Assn.,
8.00%, 6/15/17 - 1/15/23 . . . . . . . . 5,310
795,421 Government National
Mortgage Assn.,
8.50%, 8/15/17 - 1/15/27 . . . . . . . . 846
4,004,607 Government National
Mortgage Assn.,
9.00%, 5/15/16 - 6/15/21 . . . . . . . . 4,279
3,807,387 Government National
Mortgage Assn.,
9.50%, 8/15/09 - 8/20/22 . . . . . . . . 4,073
749,117 Government National
Mortgage Assn.,
10.00%, 11/15/09 - 1/20/22 . . . . . . . 816
23,627 Government National
Mortgage Assn.,
10.50%, 5/15/15. . . . . . . . . . . . . 27
553,933 Government National
Mortgage Assn.,
10.75%, 1/15/16 - 12/15/17 . . . . . . . 603
2,530,739 Government National
Mortgage Assn.,
11.00%, 9/15/10 - 1/15/20. . . . . . . . 2,878
400,000 Tennessee Valley Authority,
8.625%, 11/15/29 . . . . . . . . . . . . 456
200,000 U.S. Treasury Bonds,
11.75%, 2/15/01. . . . . . . . . . . . . 272
200,000 U.S. Treasury Bonds,
13.125%, 5/15/01 . . . . . . . . . . . . 290
$1,490,000 U.S. Treasury Bonds,
10.375%, 11/15/12. . . . . . . . . . . . $ 2,057
600,000 U.S. Treasury Bonds,
13.25%, 5/15/14. . . . . . . . . . . . . 1,011
200,000 U.S. Treasury Bonds,
10.625%, 8/15/15 . . . . . . . . . . . . 295
300,000 U.S. Treasury Bonds,
8.125%, 8/15/19. . . . . . . . . . . . . 357
3,300,000 U.S. Treasury Bonds,
8.75%, 5/15/20 . . . . . . . . . . . . . 4,197
500,000 U.S. Treasury Bonds,
8.75%, 8/15/20 . . . . . . . . . . . . . 636
2,100,000 U.S. Treasury Bonds,
8.125%, 8/15/21. . . . . . . . . . . . . 2,515
5,100,000 U.S. Treasury Bonds,
7.125%, 2/15/23. . . . . . . . . . . . . 5,515
1,000,000 U.S. Treasury Notes,
9.50%, 5/15/94 . . . . . . . . . . . . . 1,022
300,000 U.S. Treasury Notes,
13.125%, 5/15/94 . . . . . . . . . . . . 311
400,000 U.S. Treasury Notes,
8.625%, 1/15/95. . . . . . . . . . . . . 419
4,000,000 U.S. Treasury Notes,
3.875%, 3/31/95. . . . . . . . . . . . . 4,001
5,100,000 U.S. Treasury Notes,
6.375%, 6/30/97. . . . . . . . . . . . . 5,365
200,000 U.S. Treasury Notes,
7.125%, 10/15/98 . . . . . . . . . . . . 216
900,000 U.S. Treasury Notes,
8.875%, 2/15/99. . . . . . . . . . . . . 1,045
3,200,000 U.S. Treasury Notes,
7.00%, 4/15/99 . . . . . . . . . . . . . 3,451
1,000,000 U.S. Treasury Notes,
6.375%, 1/15/00. . . . . . . . . . . . . 1,050
Total U.S. Government Obligations/Agencies
(Cost - $64,889) 66,909
Short-Term Investments - 4.2%
COMMERCIAL PAPER - 3.9%
2,000,000 Bank of Nova Scotia,
3.25%, 1/21/94 . . . . . . . . . . . . . 1,984
2,900,000 BT Securities, 3.25%, 1/3/94 . . . . . . . 2,899
1,000,000 Citicorp, VRMTN,
3.55%, 12/7/94 . . . . . . . . . . . . . 1,000
3,000,000 Finnish Export Credit Limited,
3.35%, 5/16/94 . . . . . . . . . . . . . 2,950
71,000 Harvard University,
3.20%, 1/3/94. . . . . . . . . . . . . . 71
1,000,000 Kingdom Of Sweden,
3.38%, 5/6/94. . . . . . . . . . . . . . 985
T. Rowe Price Balanced Fund / Statement of Net Assets
$1,000,000 Morgan Stanley Group,
VRMTN, 3.475%, 3/15/95 . . . . . . . . . $ 1,000
1,000,000 PPG Holdings B.V.,
3.35%, 2/2/94. . . . . . . . . . . . . . 993
1,000,000 Province of British Columbia,
3.30%, 2/11/94 . . . . . . . . . . . . . 983
500,000 Wells Fargo, VRMTN,
3.825%, 8/31/94. . . . . . . . . . . . . 501
13,366
CERTIFICATES OF DEPOSIT - 0.3%
1,000,000 Banque Nationale de Paris,
3.22%, 3/7/94. . . . . . . . . . . . . . 999
Total Short-Term Investments
(Cost - $14,365) 14,365
Total Investments in Securities - 100.9%
(Cost - $306,498) 343,949
Other Assets Less Liabilities - (0.9)% (3,149)
Net Assets Consisting of:
Accumulated net investment income -
net of distributions $ (99)
Accumulated realized gains/losses -
net of distributions 57
Unrealized appreciation of
investments 37,451
Paid-in-capital applicable to
28,362,315 shares of $0.01 par
value capital stock outstanding;
1,000,000,000 shares authorized 303,391
_______
Net Assets - 100.0% $340,800
________
________
Net Asset Value Per Share $12.02
______
______
* Non-income producing
(AUD) Australian dollar denominated
(CAD) Canadian dollar denominated
(CHF) Swiss franc denominated
(DEM) German deutschemark denominated
(FRF) French franc denominated
(GBP) British sterling denominated
(HKD) Hong Kong dollar denominated
(MXN) Mexican peso denominated
(MYR) Malaysian ringgit denominated
(NLG) Dutch guilder denominated
(NZD) New Zealand dollar denominated
(SGD) Singapore dollar denominated
(ZAR) South African Rand
VRMTN Variable rate medium term note
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Balanced Fund / Year Ended December 31, 1993
Amounts in Thousands
_______________________
INVESTMENT INCOME
Income
Dividends . . . . . . . . . . . . . . . . . . . . $4,081
Interest. . . . . . . . . . . . . . . . . . . . . 8,857
_______
Total income. . . . . . . . . . . . . . . . . . . $ 12,938
Expenses
Shareholder servicing fees & expenses . . . . . . 1,377
Investment management fees. . . . . . . . . . . . 1,169
Custodian and accounting fees & expenses. . . . . 204
Prospectus & shareholder reports. . . . . . . . . 57
Registration fees & expenses. . . . . . . . . . . 40
Legal & auditing fees . . . . . . . . . . . . . . 21
Directors' fees & expenses. . . . . . . . . . . . 14
Miscellaneous expenses. . . . . . . . . . . . . . 23
_______
Total expenses. . . . . . . . . . . . . . . . . . 2,905
_______
Net investment income. . . . . . . . . . . . . . . . 10,033
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain
Securities. . . . . . . . . . . . . . . . . . . . 1,055
Currencies . . . . . . . . . . . . . . . . . . . 60
_______
Net realized gain. . . . . . . . . . . . . . . . . . 1,115
Change in unrealized appreciation or depreciation. . 25,288
_______
Net gain on investments. . . . . . . . . . . . . . . 26,403
________
INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . $ 36,436
________
________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Balanced Fund
Year Two Months Year
Ended Ended Ended
Dec. 31, Dec. 31, Oct. 31,
1993 1992 1992
__________ __________ __________
Amounts in Thousands
__________________________________
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income. . . . . . . . $ 10,033 $ 1,575 $ 7,740
Net realized gain on
investments. . . . . . . . . . . 1,115 2,764 10,765
Change in unrealized appreciation
or depreciation of
investments. . . . . . . . . . . 25,288 3,462 915
________ _______ ________
Increase in net assets
from operations. . . . . . . . . 36,436 7,801 19,420
________ _______ ________
Distributions to Shareholders
Net investment income. . . . . . . (9,926) (2,006) (10,374)
Net realized gain on
investments. . . . . . . . . . . (2,708) (1,115) (18,354)
________ _______ ________
Decrease in net assets from
distributions to shareholders. . (12,634) (3,121) (28,728)
________ _______ ________
Capital share transactions!
Sold 8,017, 790 and 1,568 shares . 92,519 8,639 17,251
Issued 0, 0 and 6,924 shares in
connection with the reorganiz-
ation of the Fund. . . . . . . . - - 74,110
Distributions reinvested of 895,228
and 1,921 shares . . . . . . . . 10,365 2,518 21,301
Redeemed 3,144, 458 and
3,696 shares . . . . . . . . . . (36,144) (5,014) (40,732)
________ _______ ________
Increase in net assets from
capital share transactions . . . 66,740 6,143 71,930
________ _______ ________
Net equalization . . . . . . . . . . 223 17 1,480
________ _______ ________
Total increase . . . . . . . . . . . 90,765 10,840 64,102
NET ASSETS
Beginning of period. . . . . . . . 250,035 239,195 175,093
________ _______ ________
End of period. . . . . . . . . . . $340,800 $250,035 $239,195
________ ________ ________
________ ________ ________
! All share figures reflect the reorganization of the Fund effective August
31, 1992.
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Balanced Fund / December 31, 1993
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.
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.
D) Accounting Change - Effective as of the beginning of the year, the Fund
adopted a recently issued accounting standard related to shareholder
distributions. This change resulted in a reclassification to paid-in-capital
of permanent differences between tax and financial reporting of net investment
income and net realized gains/losses. The cumulative effect of this change as
of December 31, 1992 decreased Accumulated net investment income - net of
distributions by $509,000, decreased Accumulated realized gains/losses - net
of distributions by $986,000, and increased Paid-in-capital by $1,495,000. The
results of operations and net assets were not affected by this change.
Note 2 - Reorganization
On August 31, 1992 (reorganization date),
the Fund acquired the assets of Axe-Houghton Fund B (Axe Fund B) pursuant to a
plan of reorganization approved by Axe Fund B shareholders on August 26, 1992.
In accordance with the Agreement and Plan of Reorganization (the Plan), Axe
Fund B transferred substantially all of its assets to the Fund in exchange
solely for Fund shares of equal value. The Plan and federal income tax
regulations provided that the Fund be treated as the surviving legal entity.
Accordingly, the Fund retained its December 31 fiscal year-end and reported
its taxable income and capital gains based on the Fund's activities
Notes to Financial Statements (Cont'd)
prior to the reorganization date as well as the reorganized Fund's activities
subsequent to the reorganization date. Although the Fund is the surviving
legal entity, the reorganization was required to be treated as a "reverse
merger" for financial reporting purposes. As a result, the accompanying
financial statements reflect the activities of Axe Fund B from November 1,
1991 (the beginning of its most recent fiscal year) through the reorganization
date as well as the reorganized Fund's activities subsequent to the
reorganization date.
Note 3 - Portfolio Transactions
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $82,424,000 and $17,170,000. Purchases and
sales of U.S. Government securities aggregated $12,543,000 and $7,212,000
respectively, for the year ended December 31, 1993.
Note 4 - 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 December 31, 1993, the aggregate cost of investments for federal
income tax and financial reporting purposes was $306,498,000 and net
unrealized appreciation aggregated $37,451,000, of which $44,107,000 related
to appreciated investments and $6,656,000 to depreciated investments.
Note 5 - 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 December 31,
1993 and for the year then ended was 0.35%. 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%. Thereafter,
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, $280,000 of management fees
were not accrued by the Fund for the year ended December 31, 1993. Pursuant to
a previous agreement, $571,000 remains subject to reimbursement through
December 31, 1994.
During the year ended December 31, 1993, the Fund, in the ordinary
course of business, paid commissions of $10,000 to, and placed security
purchase and sale orders aggregating $1,995,000 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 year ended December 31, 1993 the Fund incurred fees totalling
approximately $1,267,000 for these services provided by related parties. At
December 31, 1993, these investment management and service fees payable were
$246,000.
<TABLE>
Financial Highlights#
T. Rowe Price Balanced Fund
<CAPTION>
For a share outstanding throughout each period
_____________________________________________________
Two
Year Months
Ended Ended Year Ended October 31,
Dec. 31, Dec. 31, _________________________________
1993 1992 1992 1991 1990 1989
_________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.07 $10.86 $11.43 $9.81 $10.37 $9.41
______ ______ ______ ______ ______ ______
Investment Activities
Net investment income . . . . . . . 0.40* 0.06* 0.33* 0.62 0.71 0.62
Net realized and unrealized
gain (loss). . . . . . . . . . . 1.05 0.29 0.86 1.51 (0.50) 0.95
______ ______ ______ ______ ______ ______
Total from Investment
Activities. . . . . . . . . . . . . 1.45 0.35 1.19 2.13 0.21 1.57
Distributions
Net investment income . . . . . . .(0.39) (0.09) (0.58) (0.51) (0.77) (0.61)
Net realized gain . . . . . . . . .(0.11) (0.05) (1.18) - - -
. . . . . . . . . . . . . . . .______ ______ ______ ______ ______ ______
Total Distributions. . . . . . . . . .(0.50) (0.14) (1.76) (0.51) (0.77) (0.61)
______ ______ ______ ______ ______ ______
NET ASSET VALUE,
END OF PERIOD . . . . . . . . . . .$12.02 $11.07 $10.86 $11.43 $9.81 $10.37
______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . 13.4% 3.3% 7.7% 22.0% 7.2% 20.7%
Ratio of Expenses to
Average Net Assets. . . . . . . . . 1.00%* 1.00%!* 1.03%* 1.10% 0.94% 1.15%
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . 3.45% 3.85%! 4.07% 5.61% 6.82% 6.27%
Portfolio Turnover Rate. . . . . . . . 8.7% 58.0%! 207.7% 239.9% 127.2% 219.1%
Net Assets, End of Period
(in thousands). . . . . . . . . . .$340,800$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 three years in the period ended October 31,
1991 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.
</TABLE>
Report of Independent Accountants
To the Shareholders and Board of Directors
of T. Rowe Price Balanced Fund, Inc.
We have audited the accompanying statement of net assets of T. Rowe
Price Balanced Fund, Inc., as of December 31, 1993, and the related statements
of operations for the year then ended, the statement of changes in net assets
and the financial highlights for the year ended December 31, 1993, the period
November 1, 1992 to December 31, 1992, and for the year ended October 31,
1992. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the three years in the period
ended October 31, 1991 were derived from the financial statements audited by
other independent accountants whose report expressed an unqualified opinion
thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of December 31, 1993 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of T. Rowe Price Balanced Fund, Inc. as of December 31, 1993, the
results of its operations for the year then ended, changes in its net assets
and financial highlights for the year ended December 31, 1993, the period
November 1, 1992 to December 31, 1992 and the year ended October 31, 1992 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Baltimore, Maryland
January 19, 1994
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.
Telephone Services
Access Your Account 24 Hours a Day by Calling 1- 800-638-2587.
Tele*Access(registered trademark)-Gives you your account balance, date
and amount of your last transaction, latest dividend payment, and fund prices
and yields. Also, lets you purchase, exchange, or redeem shares.
Shareholder Service Representatives are available from 8:30 a.m. to 10:00
p.m., Monday-Friday, and Saturday from 9:00 a.m. to 5:00 p.m., E.T. Call 1-
800-225-5132.
Shareholder Service Center-Call to exchange shares or move money between
your bank and fund accounts.
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. 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
Trade stocks, bonds, options, and precious met-als at substantial savings over
full- cost brokers.
Tele*Trade-Call this automated phone ser-vice after business hours to
place your orders.
Fax*Trade-Buy and sell by simply faxing your order.
Tele*Quote-Provides 24-hour access to stock and option quotes.
Money Fund Sweep Feature-Buy and sell securities and have your "sweep"
account automatically debited or credited. Dividend and interest payments are
credited daily.
If you have questions or would like to add a service to your account, please
call our Shareholder Service Center.
Chart 1 - Security Diversification
A pie chart showing the percent of the fund's assets invested among large-cap
stocks 44%, international stocks 13%, small-cap stocks 2%, Treasury and agency
issues 10%, mortgage-backed securities 9%, corporate bonds 18%, and reserves
4%.
Chart 2 - Performance Comparison
A line graph compares the 12/31/93 value of a hypothetical $10,000 investment
made ten years ago in the Balanced Fund and in the Combined Index Portfolio.
At 12/31/93, the Fund investment would have been worth $35,330 and the
Combined Index Portfolio investment would have been worth $36,370.
