Annual Report
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T. Rowe Price
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This report is authorized for distri-bution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Balanced Fund.
T. Rowe Price
_____________
Balanced Fund
December 31, 1994
BAL
Fellow Shareholders
Most financial markets suffered through a difficult year in 1994, as the bond
market dropped precipitously and stock markets both here and abroad were
generally lackluster. However, your Fund, with its diversified investment
approach and primary focus on larger-capitalization U.S. stocks, avoided many
problem areas and declined only slightly during the year, as shown on the next
page.
Market Environment
The Federal Reserve's battle against the threat of accelerating inflation
dominated the financial news in 1994. A sharp November hike in the federal
funds rate continued the Fed's year-long tightening. In the fourth quarter,
the bankruptcy of Orange County, California, inflicted further damage on the
bond market, and Mexico's currency devaluation hurt the emerging markets of
Latin America.
The U.S. economy was strong in 1994: gross domestic product growth
exceeded most expectations and inflation remained subdued. Corporate earnings
grew more than 20%, and productivity gains were impressive. Such positive
factors would normally have been a recipe for strong stock returns, but the
negative impact of rising interest rates neutralized their effect.
After several years of small-company leadership, larger-capitalization
issues outperformed in 1994. The unmanaged Standard & Poor's 500 Stock Index
rose 1.3% on the strength of dividend income. The small-company sector, as
measured by the Nasdaq Composite Index, dropped 3.2%.
Technology was by far the best performing sector in 1994, followed by
certain natural re-source industries. The utility, transportation, and certain
consumer-oriented industries trailed the broader market. Electric utilities
wilted in the face of higher interest rates and a more hostile regulatory
environment. Airline stocks suffered when the industry plunged into an
expensive effort to meet Southwest Air's low prices. Retailing and restaurant
issues were also weak.
Many U.S. companies benefited from overseas exposure this year. The
dollar was weak versus several major currencies, declining by more than 10%
against the yen, mark, and Swiss franc. A weak dollar made U.S. exports more
competitive, and investors favored companies likely to benefit. It also
enhanced international operations, because a decline in the dollar versus the
yen, for example, meant that income earned in yen converted into more dollars
and boosted profits. The weak dollar also improved the performance of foreign
equity markets for U.S. investors, as negative returns were partially or
wholly erased through currency translation.
Rising rates (shown below) caused the bond market to have one of its
worst years in modern memory. For the first time since its inception in 1976,
for example, the Lehman Brothers Aggregate Bond Index, a widely followed
benchmark, was down (-2.92%) for a calendar year. For the last three months of
the year, however, the Lehman Index inched up 0.38%, reflecting a more stable
long-term market.
Chart 1 - Interest Rate Levels
Mortgage-backed bonds, benefiting from a drop in homeowner mortgage
prepayments, held up better than other fixed-income investments, except money
market securities. The Lehman Brothers Corporate Bond and U.S. Treasury
Indexes dropped 3.93% and 3.38%, respectively, compared with a decline of
1.61% for the Lehman Brothers Mortgage Index.
Performance and Strategy Review
Your Fund posted a small loss in the fourth quarter and finished the year down
2.1%. Performance tracked the peer group for the year, but trailed the
benchmark's mixture of U.S. stocks and bonds. The disparity was due mainly to
the Fund's international holdings and its 9% exposure to small-cap stocks.
Performance Comparison
Periods Ended 12/31/94
3 Months 12 Months
________________________
Balanced Fund - 0.6% - 2.1%
Lipper Balanced Fund Index - 1.2 - 2.2
Combined Index Portfolio* 0.4 - 0.4
*An unmanaged portfolio of 60% stocks (S&P 500) and 40% bonds (Lehman Brothers
Aggregate Index).
Year-End Distributions
Your Board of Directors declared a fourth quarter dividend of $0.12 per share
and a long-term capital gain of $0.20, payable on December 29 to shareholders
of record on December 27. You should have received a check or statement
reflecting these distributions as well as your Form 1099-DIV reporting them
for tax purposes.
Portfolio Review
Our overall strategy changed little during the last three months, but during
the year we in-creased our position in small-cap stocks (from 2% to 9% of
assets) at the expense of our large-cap holdings.
Our hefty overall allocation in U.S. stocks (44%), although not
providing stellar returns, acted as a safe harbor of sorts in 1994 compared
with the U.S. bond and international markets. Some of our best performers were
in the health care sector, where we were slightly overweighted for the year.
American Cyanamid more than doubled due to a takeover by American Home
Products. Other pharmaceutical stocks, such as Amgen, SmithKline Beecham, and
Pfizer, also shone. Our technology holdings, paced by computer manufacturers
Hewlett-Packard and Sun Microsystems and software firms Autodesk and Computer
Associates, performed well. Rising interest rates hurt many of the Fund's
financial and utility holdings; two of the hardest hit were Entergy, a
southern electrical utility, and J.P. Morgan, one of the nation's premier
financial institutions.
Our international stocks (10% of the portfolio) suffered from an
underweighting in Japan, the best performing international market for the
year, and from poorly performing markets in the Pacific Rim. We were concerned
about high stock valuations and political and economic problems in Japan.
Although our international holdings lean heavily toward more established
markets, exposure in rapidly growing countries such as Hong Kong and Malaysia
hurt performance. After a stellar 1993 these markets fell in 1994, but
prospects still appear bright, and we expect to maintain or even increase our
holdings there. Europe provided two of our best individual holdings for the
year, Ericcson, a Swedish telecommunications manufacturer, and Getronics, a
Dutch data processing firm.
Chart 2 - Security Diversification
Across-the-board bond market declines hurt our fixed-income investments.
We continued to emphasize corporate bonds (17% of the portfolio) to take
advantage of their attractive yields. Over the past six months, we began
focusing on attractively priced noninvestment-grade, or high-yield, bonds in
the corporate sector. We bought only bonds rated BB or B-the highest credit
quality in the high-yield sector. We believe these bonds offer greater
appreciation potential than the broader bond market, along with their
above-market yield advantage, and they also enhance diversification in the
Fund. Our 10% stake in mortgage-backed securities also offered good yields and
prospects for appreciation.
During the fourth quarter, we increased your Fund's reserve position to
a higher-than-normal 9%. We held only 3% cash reserves a year ago when money
market yields were extremely low but, as the Fed continually raised the fed
funds rate, extremely short-term fixed-income investments outperformed the
stock and bond markets in 1994.
Outlook
The pace of economic growth, the inflation rate, and the Federal Reserve's
response to those factors will largely determine the direction of interest
rates in 1995. We expect the robust growth in the U.S. economy to retreat
toward its historical trend rate of 2.5%, and inflation should rise only
mildly. Consequently, interest rates should move up in 1995, but not to the
degree seen in 1994. Rates should continue to rise until the economy slows
decisively and the threat of accelerating inflation recedes.
Compared with the previous decade, the 1990s have not been especially
rewarding for stocks so far. From 1980 to 1989, the S&P 500 Index returned an
average of 15% per year, while in the past five years it delivered a 8.7%
annualized return. Modest returns could continue through early 1995 at least,
but we believe they could presage better performance during the remainder of
the decade.
In the international markets, Europe appears to be on track with the
U.S., with solid growth ahead and the bulk of interest rate increases likely
past. Latin America, particularly Mexico, faces significant challenges, but in
our view has above-average long-term prospects. The Far East should continue
its strong growth, and we expect foreign holdings to contribute favorably to
performance in the years ahead.
Bond yields have already risen nearly to the levels of the late 1980s
and may soon plateau. In the coming months, we would expect bond returns to
consist almost entirely of income and to be more consistent with historical
levels. As the markets settle down, we may look to reduce our sizable cash
position and move the proceeds into promising overseas and U.S. small-cap
issues.
Respectfully submitted,
Richard T. Whitney
President
January 23, 1995
Largest Holdings
December 31, 1994
STOCKS
Percent of
Net Assets
_____________________________________ __________
GE 1.0%
American International Group 0.9
Mobil 0.8
Alcoa 0.7
Exxon 0.6
Coca-Cola 0.6
AT&T 0.6
Hutchison Whampoa 0.6
SmithKline Beecham 0.5
Abbott Laboratories 0.5
__________________________________________________________________________
Total 6.8%
BONDS
Percent of
Net Assets
_____________________________________ __________
U.S. Treasury 9.3%
Ginnie Mae 8.7
Fannie Mae 1.2
British Columbia Hydro & Power 1.0
Banesto Del 0.5
Southwest Airlines 0.4
Sealand Services 0.4
Golden Financial 0.4
Newfoundland Province 0.4
First Fidelity 0.4
__________________________________________________________________________
Total 22.7%
Sector Diversification
December 31, 1994
STOCKS*
Percent of
Net Assets
__________
Financial 7.7%
Utilities 5.8
Consumer Nondurables 10.9
Consumer Services 6.4
Consumer Cyclicals 3.0
Technology 4.9
Capital Equipment 3.6
Business Services and Transportation 3.1
Energy 4.7
Process Industries 2.8
Basic Materials 1.2
__________________________________________________________________________
Total 54.1%
*Includes foreign securities
BONDS AND RESERVES
Percent of
Net Assets
__________
U.S. Government & Agencies Bonds:
U.S. Treasury Obligations 9.3%
Mortgages 8.9
Other U.S. Government & Agencies 1.0
Agency-Backed CMOs 0.3
Project Loans 0.1
Corporate and Other:
Investment Grade 10.2
Noninvestment Grade 6.7
Reserves 9.4
__________________________________________________________________________
Total 45.9%
Chart 3 - Balanced Fund Performance Comparison
Fiscal-Year Performance
Periods ended December 31, 1994
1 Year 5 Years* 10 Years*
________ ________ ________
- 2.05% 9.35% 12.52%
*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.
Statement of Net Assets (Value in thousands)
T. Rowe Price Balanced Fund / December 31, 1994
Common Stocks - 54.1%
FINANCIAL - 7.7%
Value
______
BANK & TRUST - 3.7%
5,400 shs. AmSouth Bancorporation . . . . . $ 139
4,100 Bancorp Hawaii . . . . . . . . . 104
12,200 Bank South . . . . . . . . . . . 217
3,500 BayBanks . . . . . . . . . . . . 185
5,700 Berliner Bank (DEM). . . . . . . 1,332
6,300 Central Fidelity Banks . . . . . 153
21,000 Chase Manhattan. . . . . . . . . 722
33,200 Chemical Banking . . . . . . . . 1,191
6,200 Compass Bancshares . . . . . . . 136
3,200 Crestar Financial. . . . . . . . 120
1,870 Deutsche Bank (DEM). . . . . . . 867
200 wts. * Deutsche Bank, 6/30/97 (DEM) . . 5
7,800 shs. First American . . . . . . . . . 210
7,400 First Security . . . . . . . . . 168
1,800 First Tennessee National . . . . 73
25,000 First Union. . . . . . . . . . . 1,034
3,500 First USA. . . . . . . . . . . . 115
5,700 First Virginia Banks . . . . . . 182
7,600 Firstfed Michigan. . . . . . . . 156
20,000 * Grupo Financiero
Bancomer ADR. . . . . . . . . 215
20,000 J. P. Morgan . . . . . . . . . . 1,120
50,000 Keycorp. . . . . . . . . . . . . 1,250
18,750 Mellon Bank. . . . . . . . . . . 574
4,200 Mercantile Bancorporation. . . . 131
5,200 Meridian Bancorp . . . . . . . . 139
2,020 Michigan National. . . . . . . . 151
30,000 NationsBank. . . . . . . . . . . 1,354
5,400 Old Kent Financial . . . . . . . 163
9,100 Regions Financial. . . . . . . . 282
6,800 Societe Generale
de France (FRF) . . . . . . . 714
9,500 Southtrust . . . . . . . . . . . 171
6,300 Star Banc. . . . . . . . . . . . 229
4,200 UJB Financial. . . . . . . . . . 101
16,900 Washington Federal
Savings & Loan. . . . . . . . 294
12,600 West One Bancorp . . . . . . . . 334
14,331
INSURANCE - 1.4%
35,400 American International Group . . 3,469
2,900 Conseco. . . . . . . . . . . . . 125
9,400 Equitable Companies. . . . . . . 170
10,200 Horace Mann Educators. . . . . . 217
8,000 John Alden Financial . . . . . . 230
3,100 shs. MBIA . . . . . . . . . . . . . . $ 174
11,600 MGIC Investment. . . . . . . . . 384
8,103 * Mutual Assurance . . . . . . . . 211
5,100 Ohio Casualty. . . . . . . . . . 144
4,700 Old Republic International . . . 100
4,200 Progressive Corporation. . . . . 147
2,700 Sunamerica . . . . . . . . . . . 98
5,469
FINANCIAL SERVICES - 2.6%
13,475 A.G. Edwards . . . . . . . . . . 243
4,500 ADVANTA. . . . . . . . . . . . . 118
5,550 ADVANTA (Class B). . . . . . . . 140
11,100 AMBAC. . . . . . . . . . . . . . 414
30,000 American Express . . . . . . . . 885
113,925 Countrywide Credit . . . . . . . 1,481
19,500 Fannie Mae . . . . . . . . . . . 1,421
8,600 Green Tree Financial . . . . . . 261
30,900 H&R Block. . . . . . . . . . . . 1,147
24,000 Household International. . . . . 891
7,300 * Medaphis . . . . . . . . . . . . 340
12,400 Mercury Finance. . . . . . . . . 161
150,000 Pearson (GBP). . . . . . . . . . 1,307
7,500 * Presstek . . . . . . . . . . . . 379
6,800 Salomon. . . . . . . . . . . . . 255
15,333 Travelers. . . . . . . . . . . . 498
8,000 United Asset Management. . . . . 295
10,236
Total Financial 30,036
UTILITIES - 5.8%
TELEPHONE - 4.2%
4,000 * ALC Communications . . . . . . . 125
24,000 Ameritech. . . . . . . . . . . . 969
47,200 AT&T . . . . . . . . . . . . . . 2,372
18,100 Bell Atlantic. . . . . . . . . . 900
16,000 BellSouth. . . . . . . . . . . . 866
20,000 British Telecommunications
ADR . . . . . . . . . . . . . 1,202
4,900 COMSAT . . . . . . . . . . . . . 91
35,600 GTE. . . . . . . . . . . . . . . 1,081
36,300 Hong Kong
Telecommunications ADR. . . . 694
46,300 Pacific Telesis. . . . . . . . . 1,320
571,000 SIP (ITL). . . . . . . . . . . . 1,486
4,900 Southern New England
Telecommunications. . . . . . 157
36,400 Southwestern Bell. . . . . . . . 1,470
520,000 Telecom Corporation of
New Zealand (NZD) . . . . . . 1,698
12,000 Telefonica De Espana ADR. . . . 422
60,000 shs. Telekom Malaysia (MYR) . . . . . $ 407
10,000 Telmex ADR. . . . . . . . . . . 410
20,000 U. S. WEST . . . . . . . . . . . 712
16,382
ELECTRIC UTILITIES - 1.6%
27,400 Duke Power . . . . . . . . . . . 1,045
12,200 Empresa Nacional
de Electricidad ADR . . . . . 494
53,000 Entergy. . . . . . . . . . . . . 1,159
25,600 FPL Group. . . . . . . . . . . . 899
50,000 * Public Service of New Mexico . . 650
54,000 SCEcorp. . . . . . . . . . . . . 790
20,000 Texas Utilities. . . . . . . . . 640
27,000 Unicom . . . . . . . . . . . . . 648
6,325
Total Utilities 22,707
CONSUMER NONDURABLES - 10.9%
COSMETICS - 0.1%
11,700 International Flavors &
Fragrances. . . . . . . . . . 541
BEVERAGES - 2.0%
32,000 Anheuser-Busch . . . . . . . . . 1,628
46,300 Coca-Cola. . . . . . . . . . . . 2,384
12,900 * Dr Pepper/Seven-Up . . . . . . . 331
11,991 LVMH (FRF) . . . . . . . . . . . 1,893
29,000 PepsiCo. . . . . . . . . . . . . 1,051
12,200 * Starbucks. . . . . . . . . . . . 335
7,622
FOOD PROCESSING - 2.0%
30,000 Cadbury Schweppes ADR. . . . . . 810
4,560 Continental Baking . . . . . . . 17
12,900 CPC International. . . . . . . . 687
6,300 General Mills. . . . . . . . . . 359
6,600 IBP. . . . . . . . . . . . . . . 200
3,100 Kellogg. . . . . . . . . . . . . 180
10,300 McCormick. . . . . . . . . . . . 188
1,684 Nestle (CHF) . . . . . . . . . . 1,604
19,300 Pet. . . . . . . . . . . . . . . 381
34,400 Quaker Oats. . . . . . . . . . . 1,058
7,600 * Ralcorp Holdings . . . . . . . . 169
22,800 Ralston Purina . . . . . . . . . 1,017
38,800 Sara Lee . . . . . . . . . . . . 980
7,100 Universal Foods. . . . . . . . . 195
7,845
HOSPITAL SUPPLIES/
HOSPITAL MANAGEMENT - 1.2%
58,800 Abbott Laboratories. . . . . . . 1,919
14,000 Columbia/HCA Healthcare. . . . . 511
16,050 * Health Management (Class A). . . 401
12,900 * HealthCare COMPARE . . . . . . . 440
11,600 shs. Hillenbrand Industries . . . . . $ 322
22,400 * Humana . . . . . . . . . . . . . 507
7,100 * Quantum Health Resources . . . . 204
12,700 United HealthCare. . . . . . . . 573
4,877
PHARMACEUTICALS - 2.4%
11,800 American Home Products . . . . . 741
24,800 * Amgen. . . . . . . . . . . . . . 1,463
30,000 Astra 'B' (SEK). . . . . . . . . 765
1,500 * Chiron . . . . . . . . . . . . . 121
4,500 * Forest Laboratories. . . . . . . 210
900 Gehe Ag (DEM). . . . . . . . . . 325
5,900 * IDEXX Laboratories . . . . . . . 212
35,500 Merck. . . . . . . . . . . . . . 1,353
9,900 * Perrigo. . . . . . . . . . . . . 124
24,300 Pfizer . . . . . . . . . . . . . 1,877
3,500 Schering-Plough. . . . . . . . . 259
61,200 SmithKline Beecham,
equity units ADR . . . . . . 2,096
9,546
MISCELLANEOUS CONSUMER PRODUCTS - 3.2%
2,550 Arctco . . . . . . . . . . . . . 49
17,700 * Burlington Industries. . . . . . 175
30,100 Colgate-Palmolive. . . . . . . . 1,908
7,000 * CUC International. . . . . . . . 235
6,900 Duracell International . . . . . 299
3,300 * Fruit Of The Loom (Class A). . . 89
63,000 Hanson ADR. . . . . . . . . . . 1,134
16,800 * Jones Apparel Group. . . . . . . 433
12,200 Manpower . . . . . . . . . . . . 343
446 Mattel . . . . . . . . . . . . . 11
29,400 P & G. . . . . . . . . . . . . . 1,823
2,500 Philip Morris. . . . . . . . . . 144
51,200 Philips, N.V. ADR . . . . . . . 1,504
29,500 Reebok . . . . . . . . . . . . . 1,165
13,100 SafeCard Services. . . . . . . . 247
37,300 Service Corp.. . . . . . . . . . 1,035
39,700 Springs Industries . . . . . . . 1,469
9,500 Tambrands. . . . . . . . . . . . 367
12,430
Total Consumer Nondurables 42,861
CONSUMER SERVICES - 6.4%
GENERAL MERCHANDISERS - 1.4%
18,700 Dayton Hudson. . . . . . . . . . 1,323
26,600 J.C. Penney. . . . . . . . . . . 1,187
33,400 May Department Stores. . . . . . 1,127
44,000 TJX. . . . . . . . . . . . . . . 688
51,400 Wal-Mart . . . . . . . . . . . . 1,092
5,417
T. Rowe Price Balanced Fund / Statement of Net Assets
SPECIALTY MERCHANDISERS - 1.4%
6,500 shs. Callaway Golf. . . . . . . . . . $ 215
8,000 Fingerhut Companies. . . . . . . 124
8,400 * Gymboree . . . . . . . . . . . . 242
4,500 Heilig-Meyers. . . . . . . . . . 114
5,000 Ito-Yokado ADR. . . . . . . . . 1,070
9,300 * Kohl's . . . . . . . . . . . . . 370
3,500 * QVC. . . . . . . . . . . . . . . 147
5,600 * R. P. Scherer. . . . . . . . . . 254
6,300 * Safeway. . . . . . . . . . . . . 201
8,100 * Staples. . . . . . . . . . . . . 200
5,600 * Stop & Shop. . . . . . . . . . . 143
19,600 The Gap. . . . . . . . . . . . . 598
39,000 * Toys "R" Us. . . . . . . . . . . 1,189
16,000 * Viking Office Products . . . . . 490
5,357
ENTERTAINMENT & LEISURE - 1.6%
10,600 Applebee's . . . . . . . . . . . 142
8,775 * Brinker. . . . . . . . . . . . . 159
6,200 * Buffets. . . . . . . . . . . . . 61
8,600 * Casino America . . . . . . . . . 69
6,750 * Checkers Drive-In Restaurants. . 15
32,400 Disney . . . . . . . . . . . . . 1,494
10,800 * Hospitality Franchise. . . . . . 286
560,000 Hutchison Whampoa (HKD). . . . . 2,265
9,000 International Game
Technology. . . . . . . . . . 140
10,000 McDonald's . . . . . . . . . . . 293
5,000 Reader's Digest (Class A). . . . 246
37,500 Sbarro . . . . . . . . . . . . . 975
4,500 * Viacom (Class A) . . . . . . . . 187
6,332
MEDIA & COMMUNICATIONS - 2.0%
3,400 A. H. Belo (Class A) . . . . . . 192
9,000 Banta. . . . . . . . . . . . . . 272
15,000 Capital Cities/ABC . . . . . . . 1,279
40,000 Comcast (Class A Special). . . . 628
14,100 Dun & Bradstreet . . . . . . . . 775
13,800 Gannett. . . . . . . . . . . . . 735
9,600 Gaylord Entertainment. . . . . . 218
8,000 * Infinity Broadcasting (Class A). 252
9,000 * International CableTel . . . . . 250
16,100 McGraw-Hill. . . . . . . . . . . 1,077
12,100 * Multimedia . . . . . . . . . . . 345
12,400 Reuters ADR. . . . . . . . . . . 544
29,000 Time Warner. . . . . . . . . . . 1,019
11,850 * Vanguard Cellular. . . . . . . . 305
7,891
Total Consumer Services 24,997
CONSUMER CYCLICALS - 3.0%
AUTOMOBILES & RELATED - 1.3%
5,600 shs. Breed Technologies . . . . . . . $ 159
9,100 * Gentex . . . . . . . . . . . . . 221
9,650 Genuine Parts. . . . . . . . . . 347
30,000 GM . . . . . . . . . . . . . . . 1,268
19,800 Honda ADR . . . . . . . . . . . 703
7,100 Pep Boys . . . . . . . . . . . . 220
120 wts. * Schweiz Bankverein (CHF) . . . . 1
8,000 shs. Superior Industries
International . . . . . . . . 211
4,220 Swiss Bank (CHF) . . . . . . . . 1,167
15,000 TRW. . . . . . . . . . . . . . . 990
5,287
MISCELLANEOUS CONSUMER DURABLES - 0.6%
36,000 Black & Decker . . . . . . . . . 855
21,700 Eastman Kodak. . . . . . . . . . 1,036
3,800 Harley-Davidson. . . . . . . . . 106
10,000 * Scotts (Class A) . . . . . . . . 159
3,000 Valspar. . . . . . . . . . . . . 101
2,600 York International . . . . . . . 96
2,353
BUILDING & REAL ESTATE - 1.1%
600,000 DBS Land (SGD) . . . . . . . . . 1,786
948,339 Hopewell Holdings (HKD). . . . . 784
49,900 Masco. . . . . . . . . . . . . . 1,129
4,700 Texas Industries . . . . . . . . 166
14,600 * USG. . . . . . . . . . . . . . . 285
4,150
Total Consumer Cyclicals 11,790
TECHNOLOGY - 4.9%
ELECTRONIC COMPONENTS - 1.3%
4,500 * Altera . . . . . . . . . . . . . 188
11,500 * EMC. . . . . . . . . . . . . . . 249
17,200 Intel. . . . . . . . . . . . . . 1,099
5,700 Linear Technology. . . . . . . . 282
4,700 Micron Technology. . . . . . . . 207
7,812 Molex. . . . . . . . . . . . . . 270
20,000 Motorola . . . . . . . . . . . . 1,157
12,900 Texas Instruments. . . . . . . . 966
4,350 * Thermo Electron. . . . . . . . . 195
4,350 * Thermo Instrument Systems. . . . 138
6,000 * Vicor. . . . . . . . . . . . . . 155
4,200 * Xilinx . . . . . . . . . . . . . 249
5,155
ELECTRONIC SYSTEMS - 0.5%
5,000 * Applied Materials. . . . . . . . 211
10,000 Hewlett-Packard. . . . . . . . . 999
20,000 shs. Honeywell. . . . . . . . . . . . $ 630
5,400 Sensormatic Electronics. . . . . 194
4,800 * Solectron. . . . . . . . . . . . 132
2,166
INFORMATION PROCESSING - 0.6%
7,000 * Adaptec. . . . . . . . . . . . . 165
18,900 Hitachi ADR . . . . . . . . . . 1,876
5,000 * Storage Technology . . . . . . . 145
2,186
TELECOMMUNICATIONS - 0.6%
4,785 * Bay Networks . . . . . . . . . . 141
18,400 * LDDS Metro Communication . . . . 358
12,000 LM Ericsson (Class B) ADR . . . 661
45,600 * Novell . . . . . . . . . . . . . 781
4,400 * PictureTel . . . . . . . . . . . 106
5,800 * Tellabs. . . . . . . . . . . . . 323
2,370
AEROSPACE & DEFENSE - 1.5%
36,000 AlliedSignal . . . . . . . . . . 1,224
31,000 Boeing . . . . . . . . . . . . . 1,449
30,000 Northrop . . . . . . . . . . . . 1,260
80,000 * Teledyne . . . . . . . . . . . . 1,610
4,700 United Technologies. . . . . . . 296
5,839
SPECIALIZED COMPUTER - 0.4%
5,700 * Landmark Graphics. . . . . . . . 103
29,700 * Silicon Graphics . . . . . . . . 917
15,000 * Sun Microsystems . . . . . . . . 532
1,552
Total Technology 19,268
CAPITAL EQUIPMENT - 3.6%
ELECTRICAL EQUIPMENT - 2.4%
10,300 * American Power Conversion. . . . 169
775 BBC Brown Boveri (CHF) . . . . . 667
28,100 Emerson Electric . . . . . . . . 1,756
75,400 GE . . . . . . . . . . . . . . . 3,846
41,000 Getronics (NLG). . . . . . . . . 1,495
4,000 Hubbell (Class A). . . . . . . . 205
24,025 Hubbell (Class B). . . . . . . . 1,279
9,417
MACHINERY - 1.2%
435,000 BTR Nylex (AUD). . . . . . . . . 809
29,900 * Coltec Industries. . . . . . . . 512
24,700 Danaher. . . . . . . . . . . . . 1,291
160 * DOVatron International . . . . . 4
12,000 * FMC. . . . . . . . . . . . . . . 693
4,600 Foster Wheeler . . . . . . . . . 137
2,800 * Imo Industries . . . . . . . . . 35
11,400 Kennametal . . . . . . . . . . . 279
6,300 shs. Stewart & Stevenson. . . . . . . $ 217
5,000 Teleflex . . . . . . . . . . . . 178
30,300 TriMas . . . . . . . . . . . . . 606
4,761
Total Capital Equipment 14,178
BUSINESS SERVICES & TRANSPORTATION - 3.1%
COMPUTER SERVICE & SOFTWARE - 1.1%
3,625 Amtech . . . . . . . . . . . . . 35
15,400 Autodesk . . . . . . . . . . . . 610
5,000 * BMC Software . . . . . . . . . . 284
19,700 Computer Associates. . . . . . . 956
7,500 * Electronic Arts. . . . . . . . . 144
6,600 HBO. . . . . . . . . . . . . . . 228
9,200 * Informix . . . . . . . . . . . . 296
7,500 * LEGENT . . . . . . . . . . . . . 216
5,600 * Micro Warehouse. . . . . . . . . 196
7,300 * Microsoft. . . . . . . . . . . . 446
11,600 * Parametric Technology. . . . . . 400
6,600 * SunGard Data Systems . . . . . . 254
7,000 * Sybase . . . . . . . . . . . . . 364
4,429
MISCELLANEOUS BUSINESS SERVICES - 0.9%
3,600 Cintas . . . . . . . . . . . . . 128
10,284 Eaux Cie Generale (FRF). . . . . 999
8,900 Equifax. . . . . . . . . . . . . 235
4,500 * GTECH. . . . . . . . . . . . . . 91
5,000 Merrill. . . . . . . . . . . . . 85
1,080 * National Gaming. . . . . . . . . 13
6,700 Omnicom. . . . . . . . . . . . . 347
8,300 Paychex. . . . . . . . . . . . . 336
47,200 WMX Technologies . . . . . . . . 1,239
3,473
RAILROADS - 0.5%
9,800 CSX. . . . . . . . . . . . . . . 682
9,900 Illinois Central . . . . . . . . 304
14,000 Union Pacific. . . . . . . . . . 639
6,800 * Wisconsin Central
Transportation. . . . . . . . 281
1,906
AIRLINES - 0.5%
4,200 Atlantic Southeast Airlines. . . 65
17,300 * Mesa Airlines. . . . . . . . . . 158
269,000 Swire Pacific 'A' (HKD). . . . . 1,676
1,899
ENVIRONMENTAL - 0.0%
12,000 * Mid-American Waste Systems . . . 82
DISTRIBUTION SERVICES - 0.1%
3,625 Cardinal Health. . . . . . . . . 168
Total Business Services & Transportation 11,957
T. Rowe Price Balanced Fund / Statement of Net Assets
ENERGY - 4.7%
ENERGY SERVICES - 0.7%
9,383 shs. El Paso Natural Gas. . . . . . . $ 286
23,000 Halliburton. . . . . . . . . . . 762
20,000 Helmerich & Payne. . . . . . . . 512
16,200 Schlumberger . . . . . . . . . . 816
18,300 * Smith International. . . . . . . 229
5,400 Witco. . . . . . . . . . . . . . 133
2,738
EXPLORATION & PRODUCTION - 0.0%
6,600 Enron Oil & Gas. . . . . . . . . 124
GAS TRANSMISSION - 0.4%
14,300 ENSERCH. . . . . . . . . . . . . 188
8,800 MCN. . . . . . . . . . . . . . . 160
7,400 Questar. . . . . . . . . . . . . 203
29,000 Sonat. . . . . . . . . . . . . . 812
1,363
INTEGRATED PETROLEUM-DOMESTIC - 1.3%
27,700 Amerada Hess . . . . . . . . . . 1,264
8,000 Atlantic Richfield . . . . . . . 814
1,700 MAPCO. . . . . . . . . . . . . . 87
30,000 Phillips Petroleum . . . . . . . 983
13,900 * Santa Fe Energy Resources. . . . 111
9,100 Ultramar . . . . . . . . . . . . 232
100,000 USX-Marathon . . . . . . . . . . 1,637
5,128
INTEGRATED PETROLEUM-
INTERNATIONAL - 2.3%
30,600 Chevron. . . . . . . . . . . . . 1,366
40,600 Exxon. . . . . . . . . . . . . . 2,466
38,900 Mobil. . . . . . . . . . . . . . 3,277
10,000 Royal Dutch Petroleum ADR . . . 1,075
16,600 Texaco . . . . . . . . . . . . . 994
9,178
Total Energy 18,531
PROCESS INDUSTRIES - 2.8%
DIVERSIFIED CHEMICALS - 0.7%
25,300 DuPont . . . . . . . . . . . . . 1,423
3,675 Eastman Chemical . . . . . . . . 186
18,100 Monsanto . . . . . . . . . . . . 1,276
2,885
SPECIALTY CHEMICALS - 1.2%
18,000 3M . . . . . . . . . . . . . . . 961
26,325 A. Schulman. . . . . . . . . . . 724
3,500 Crompton & Knowles . . . . . . . 58
5,200 IVAX . . . . . . . . . . . . . . 99
7,100 Lyondell Petrochemical . . . . . 184
1,500 shs. McWhorter Technologies . . . . . $ 22
60,000 Morton International . . . . . . 1,710
8,533 Pall . . . . . . . . . . . . . . 160
13,000 Rohm & Haas. . . . . . . . . . . 742
4,660
PAPER & PAPER PRODUCTS - 0.6%
10,000 Kimberly-Clark . . . . . . . . . 505
53,000 Kimberly-Clark Mexico (MXN). . . 618
15,000 Mead . . . . . . . . . . . . . . 729
12,100 Sonoco Products. . . . . . . . . 265
2,117
FOREST PRODUCTS - 0.3%
9,000 Georgia-Pacific. . . . . . . . . 644
8,200 Pope & Talbot. . . . . . . . . . 130
12,700 Weyerhaeuser . . . . . . . . . . 476
1,250
Total Process Industries 10,912
BASIC MATERIALS - 1.2%
METALS - 0.8%
30,000 Alcoa. . . . . . . . . . . . . . 2,599
2,700 Carpenter Technology . . . . . . 151
9,600 Freeport-McMoRan
Copper & Gold (Class A) . . . 204
11,900 * Molten Metal Technology. . . . . 194
3,148
MINING - 0.4%
200,000 *## TVX Gold. . . . . . . . . . . 1,350
MISCELLANEOUS MATERIALS - 0.0%
15,300 * Owens-Illinois . . . . . . . . . 168
Total Basic Materials 4,666
Total Common Stocks (Cost $196,198) 211,903
Preferred Stocks - 0.0%
20 Deutsche Bank, 8.75%,
participating certificates
(DEM) . . . . . . . . . . . . 14
Total Preferred Stocks (Cost $11) 14
Convertible Preferred Stocks - 0.1%
2,000 Ford Motor, Dep. Shs., $4.20,
Series A. . . . . . . . . . . 184
3,000 General Motors, Dep. Shs.,
Rep. 1/10, Series C . . . . . 172
Total Convertible Preferred Stocks (Cost $250) 356
Convertible Bonds - 0.1%
$2,000,000 U.S. West, Zero Coupon,
LYONS, 6/25/11. . . . . . . . $ 615
Total Convertible Bonds (Cost $588) 615
Corporate Bonds - 16.8%
1,000,000 African Development Bank,
7.75%, 12/15/01 . . . . . . . 969
750,000 Agriculture Minerals and
Chemicals, Sr. Notes,
10.75%, 9/30/03 . . . . . . . 757
725,000 Alabama Power, 7.00%, 1/1/03 . . 664
500,000 American Media Operations,
11.625%, 11/15/04 . . . . . . 513
500,000 American Standard, Sr. Sub. Deb.,
9.875%, 6/1/01 . . . . . . . 485
500,000 Ametek, 9.75%, 3/15/04 . . . . . 500
500,000 ARA Services, Sr. Notes,
10.625%, 8/1/00 . . . . . . . 525
1,300,000 Associates Corporation,
6.875%, 1/15/97 . . . . . . . 1,267
2,000,000 Banesto Delaware, Gtd. Notes,
8.25%, 7/28/02. . . . . . . . 1,906
125,000 Bankers Trust, Sub. Deb.,
8.00%, 3/15/97. . . . . . . . 124
1,000,000 Banque Nationale De Paris,
9.875%, 5/25/98 . . . . . . . 1,042
250,000 British Columbia Hydro &
Power, 12.50%, 9/1/13 . . . . 290
1,000,000 British Columbia Hydro &
Power, 15.00%, 4/15/11. . . . 1,131
2,125,000 British Columbia Hydro &
Power, 15.50%, 11/15/11 . . . 2,508
250,000 Capital Cities/ABC,
8.75%, 8/15/21. . . . . . . . 256
100,000 Citicorp, 8.75%, 11/1/96 . . . . 101
245,384 Citicorp Mortgage,
6.00%, 3/25/22. . . . . . . . 221
500,000 Coca-Cola Bottling Group, Sr.
Sub. Notes, 9.00%, 11/15/03 . 439
250,000 Coltec Industries, Sr. Notes,
9.75%, 4/1/00 . . . . . . . . 246
500,000 Coltec Industries, Sr. Sub.
Deb., Sr. Sub. Notes,
10.25%, 4/1/02. . . . . . . . 490
500,000 Container Corporation of
America, Sr. Notes,
9.75%, 4/1/03 . . . . . . . . 474
750,000 Continental Cablevision, Sr.
Deb., Sr. Deb.,
9.00%, 9/1/08 . . . . . . . . 675
$763,226 Corestates Home Equity Loan,
5.10%, 3/15/09 . . . . . . . $ 691
380,212 Corestates Home Equity Loan,
6.65%, 5/15/09. . . . . . . . 361
400,000 Dayton Hudson,
9.50%, 10/15/16 . . . . . . . 409
500,000 Dial Page, Sr. Notes,
12.25%, 2/15/00 . . . . . . . 500
265,000 Dow Chemical, 8.48%, 8/15/15 . . 253
500,000 Dr Pepper Bottling Texas,
10.25%, 2/15/00 . . . . . . . 494
1,000,000 Duke Power, 6.75%, 8/1/25. . . . 802
750,000 Embassy Suites,
10.875%, 4/15/02. . . . . . . 765
500,000 Exide, Sr. Sub. Deb.,
10.75%, 12/15/02. . . . . . . 500
500,000 Exxon Capital, 6.50%, 7/15/99. . 468
800,000 Fairfax Financial, Sr. Notes,
7.75%, 12/15/03 . . . . . . . 709
500,000 Federal Express,
9.95%, 8/15/06. . . . . . . . 513
750,000 Ferrellgas, Sr. Notes,
10.00%, 8/1/01. . . . . . . . 739
1,500,000 First Fidelity, 8.50%, 4/1/98. . 1,502
200,000 Flagstar, Sr. Notes,
10.75%, 9/15/01 . . . . . . . 188
800,000 Fleet/Norstar Financial Group,
8.625%, 1/15/07 . . . . . . . 785
500,000 Fleming Companies,
10.625%, 12/15/01 . . . . . . 500
1,000,000 Fletcher Challenge Finance,
9.80%, 6/15/98. . . . . . . . 1,038
500,000 Fort Howard, Sr. Sub. Notes,
9.00%, 2/1/06 . . . . . . . . 430
1,500,000 Golden West Financial,
8.625%, 8/30/98 . . . . . . . 1,508
750,000 Gulf Canada Resources, Sr.
Sub. Deb., 9.25%, 1/15/04 . . 688
500,000 Gulf States Utilities,
5.375%, 2/1/97. . . . . . . . 451
500,000 Heritage Media,
11.00%, 6/15/02 . . . . . . . 508
500,000 Hillhaven, Sr. Sub. Notes,
10.125%, 9/1/01 . . . . . . . 500
400,000 Hydro-Quebec, Series D,
10.75%, 6/15/10 . . . . . . . 420
500,000 IMC Fertilizer Group, Sr.
Notes, 9.45%, 12/15/11. . . . 446
500,000 Imo Industries, Sr. Sub. Deb.,
12.00%, 11/1/01 . . . . . . . 504
1,000,000 Inter-American Development
Bank, 11.375%, 5/1/95 . . . . 1,014
100,000 J. P. Morgan, Sub. Cap. Notes,
9.625%, 12/15/98. . . . . . . 102
T. Rowe Price Balanced Fund / Statement of Net Assets
$400,000 J.C. Penney, 9.45%, 4/15/98. . . $ 403
500,000 Jordan Industries, Sr. Notes,
10.375%, 8/1/03 . . . . . . . 445
250,000 KFW, 9.14%, 6/4/01 . . . . . . . 260
750,000 Kroger, 9.25%, 1/1/05. . . . . . 735
250,000 Lear Seating, Sr. Sub. Notes,
11.25%, 7/15/00 . . . . . . . 255
500,000 Lear Seating, Sub. Notes,
8.25%, 2/1/02 . . . . . . . . 440
1,500,000 Lehman Brothers Holdings,
8.875%, 3/1/02. . . . . . . . 1,412
500,000 Liberty National Bank & Trust,
6.75%, 6/1/03 . . . . . . . . 448
500,000 Long Island Lighting,
7.50%, 3/1/07 . . . . . . . . 393
100,000 Long Island Lighting,
9.75%, 5/1/21 . . . . . . . . 92
500,000 MAFCO, Sr. Sub. Notes,
11.875%, 11/15/02 . . . . . . 481
500,000 Maxus Energy, 9.375%, 11/1/03. . 422
250,000 Maxus Energy, Sr. Notes,
9.875%, 10/15/02. . . . . . . 218
500,000 McDonnell Douglas,
8.25%, 7/1/00 . . . . . . . . 493
500,000 Methanex, 8.875%, 11/15/01 . . . 488
1,378,112 NYNEX, 9.55%, 5/1/10 . . . . . . 1,434
750,000 O. M. Scott, 9.875%, 8/1/04. . . 763
600,000 Occidental Petroleum,
11.75%, 3/15/11 . . . . . . . 649
500,000 Oranda Healthcorp,
12.25%, 5/15/02 . . . . . . . 535
750,000 Overhead Door, Sr. Notes,
12.25%, 2/1/00. . . . . . . . 757
750,000 Owens-Illinois, Sr. Deb.,
11.00%, 12/1/03 . . . . . . . 778
1,000,000 Pacific Bell, 7.375%, 7/15/43. . 849
500,000 Paging Network, Sr. Sub.
Notes, 8.875%, 2/1/06 . . . . 390
1,500,000 Philip Morris, 6.00%, 11/15/99 . 1,335
500,000 Plastic Containers, Sr. Secured
Notes, 10.75%, 4/1/01 . . . . 495
500,000 PMI Acquisition,
10.25%, 9/1/03. . . . . . . . 470
1,000,000 Province of Alberta,
9.25%, 4/1/00 . . . . . . . . 1,043
1,500,000 Province of Newfoundland,
8.50%, 10/15/96 . . . . . . . 1,505
500,000 Prudential Home,
6.90%, 3/25/23. . . . . . . . 481
1,000,000 Qantas Airways (144a),
6.625%, 6/30/98 . . . . . . . 934
500,000 Repap Wisconsin,
9.25%, 2/1/02 . . . . . . . . 450
$750,000 Riverwood International, Sr.
Sub. Notes,
10.375%, 6/30/04. . . . . . . $ 744
1,000,000 Rouse, 8.50%, 1/15/03. . . . . . 968
500,000 Rowan Companies, Sr. Notes,
11.875%, 12/1/01. . . . . . . 515
250,000 Salomon, 7.50%, 6/15/99. . . . . 250
750,000 Sea Containers Ltd., Sr. Sub.
Deb., 12.50%, 12/1/04 . . . . 750
1,550,000 Sea Land Services,
10.60%, 1/2/11. . . . . . . . 1,626
750,000 Showboat, 1st Mtg. Bonds,
9.25%, 5/1/08 . . . . . . . . 626
1,000,000 Skandinaviska Enskilda
Banken, 6.875%, 2/15/09 . . . 832
1,650,000 Southwest Airlines,
9.25%, 2/15/98. . . . . . . . 1,686
500,000 Stone Container,
10.75%, 10/1/02 . . . . . . . 498
1,400,000 Texaco Capital, 8.65%, 1/30/98 . 1,412
250,000 Texas Bottling Group, Sr. Sub.
Notes, 9.00%, 11/15/03. . . . 218
1,000,000 Thailand Kingdom Bank Entry,
7.07%, 9/30/13. . . . . . . . 812
600,000 Time Warner Entertainment,
7.25%, 9/1/08 . . . . . . . . 482
500,000 Westpoint Stevens, Sr. Notes,
8.75%, 12/15/01 . . . . . . . 460
187,000 Westvaco, 12.65%, 1/15/14. . . . 198
500,000 Young Broadcasting, Sr. Sub.
Notes, 11.75%, 11/15/04 . . . 505
Total Corporate Bonds (Cost $69,789) 65,806
U.S. Government
Mortgage-Backed Securities - 10.2%
U.S. GOVERNMENT GUARANTEED MORTGAGE
OBLIGATIONS - 8.7%
Government National
Mortgage Assn., I,
1,932,228 6.50%, 12/15/23. . . . . . . . . 1,676
4,074,408 7.00%, 10/15/22 - 1/15/24. . . . 3,660
6,289,362 7.50%, 9/15/22 - 12/15/23. . . . 5,840
5,616,325 8.00%, 6/15/17 - 8/15/23 . . . . 5,391
6,016595 8.50%, 3/15/05 - 1/15/27 . . . . 5,926
1,727272 9.00%, 5/15/16 - 6/15/21 . . . . 1,761
2,270,085 9.50%, 8/15/09 - 8/20/22 . . . . 2,359
109,870 10.00%, 11/15/09 - 1/20/22 . . . 117
23,312 10.50%, 5/15/15. . . . . . . . . 25
1,977,271 11.00%, 3/15/10 - 1/15/20. . . . 2,150
1,139,722 11.50%, 3/15/10 - 11/15/15 . . . 1,252
Government National
Mortgage Assn., ARM,
$327,692 5.00%, 8/20/23 . . . . . . . . . $ 312
Government National
Mortgage Assn., II,
1,278,874 9.00%, 10/20/16. . . . . . . . . 1,276
401,653 9.5%, 8/20/22. . . . . . . . . . 409
334,817 10.0%, 1/20/22 . . . . . . . . . 347
Government National
Mortgage Assn., GPM, I,
948,102 9.5%, 8/15/09-9/15/09. . . . . . 969
381,130 10.75%, 1/15/16-12/15/17 . . . . 403
Government National
Mortgage Assn., PL, I,
300,819 8.5%, 1/15/27. . . . . . . . . . 296
34,169
U.S. GOVERNMNT AGENCY MORTGAGE
OBLIGATIONS - 1.4%
Federal National Mortgage
4,000,000 Assn., 5.80%, 12/10/03 . . . . . 3,410
1,000,000 7.50%, 10/25/19. . . . . . . . . 909
400,000 10.60%, 11/10/95 . . . . . . . . 411
Federal Home Loan Mortgage,
700,000 6.00%, 6/15/05 . . . . . . . . . 630
87,472 8.00%, 3/1/17. . . . . . . . . . 84
150,439 10.00%, 10/1/10. . . . . . . . . 156
16,830 10.50%, 9/1/15 . . . . . . . . . 18
5,618
STRIPPED MORTGAGE SECURITIES - 0.1%
409,589 Federal Home Loan Mortgage,
Principal Only,
Zero Coupon, 2/15/24. . . . . 203
Total U.S. Government Mortgage-Backed
Securities (Cost $42,759) 39,990
U.S. Government
Obligations/Agencies - 9.6%
840,658 Structured Asset Securities,
6.87%, 8/25/26. . . . . . . . 807
400,000 Tennessee Valley Authority,
8.625%, 11/15/29. . . . . . . 397
U.S. Treasury Bonds,
1,000,000 7.125%, 2/15/23 . . . . . . . 910
2,400,000 8.125%, 8/15/19-8/15/21 . . . 2,439
4,600,000 8.75%, 11/15/08-8/15/20 . . . 4,938
1,490,000 10.375%, 11/15/12 . . . . . . 1,773
200,000 10.625%, 8/15/15. . . . . . . 252
200,000 11.75%, 2/15/01 . . . . . . . 237
200,000 13.125%, 5/15/01. . . . . . . 253
$600,000 13.25%, 5/15/14 . . . . . . . $ 867
U.S. Treasury Notes,
7,600,000 6.375%, 6/30/97-1/15/00 . . . 7,250
5,200,000 7.00%, 4/15/99. . . . . . . . 5,039
2,500,000 7.75%, 2/15/01. . . . . . . . 2,490
4,000,000 8.00%, 5/15/01. . . . . . . . 4,031
2,800,000 8.25%, 7/15/98. . . . . . . . 2,835
2,000,000 8.75%, 8/15/00. . . . . . . . 2,082
900,000 8.875%, 2/15/99 . . . . . . . 932
Total U.S. Government Obligations/Agencies
(Cost $39,551) 37,532
Short-Term Investments - 9.0%
COMMERCIAL PAPER - 9.0%
5,000,000 Asset Securitization
Cooperative, 4(2),
5.45%, 1/18/95. . . . . . . . 4,935
5,000,000 Chubb Capital, 6.05%, 1/13/95. . 4,975
5,000,000 Delaware Funding,
5.88%, 1/23/95. . . . . . . . 4,974
5,000,000 Dover, 4(2), 6.07%, 1/13/95. . . 4,980
5,000,000 Golden Peanut, 5.47%, 1/30/95. . 4,932
4,000,000 John Hancock Capital, 4(2),
6.00%, 1/5/95 . . . . . . . . 3,996
770,000 Koch Industries, 4(2),
6.25%, 1/3/95 . . . . . . . . 769
861,000 President & Fellows Harvard
College, 6.00%, 1/3/95. . . . 860
5,000,000 Times Mirror, 6.07%, 1/12/95 . . 4,977
Total Short-Term Investments (Cost $35,398) 35,398
Total Investments in Securities - 99.9%
(Cost $384,544) 391,614
Other Assets Less Liabilities . . . . . . . . . . 389
Net Assets Consisting of:
Accumulated realized gains/losses -
net of distributions . $ 2,862
Net unrealized gain . 7,074
Paid-in-capital applicable to
35,177,795 shares of $.01 par
value capital stock outstanding;
1,000,000,000 shares authorized. . . . . . . . 382,067
__________
NET ASSETS $ 392,003
__________
__________
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . $11.14
______
______
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Balanced Fund / Statement of Net Assets
* Non-income producing
## Security contains some restrictions as to public resale - total of
such securities at year-end amounts to 0.34% of net assets.
ARM Adjustable rate mortgage
GPM Graduated payment mortgage
PL Project Loan
4(2) Commercial Paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to
qualified institutional buyers - total of such securities at year end
amounts to 0.23% of net assets.
AUD Australian dollar MXN Mexican peso
CHF Swiss franc MYR Malaysian ringgit
DEM German deutschemark NLG Dutch guilder
FRF French franc NZD New Zealand dollar
GBP British sterling SEK Swedish krona
HKD Hong Kong dollar SGD Singapore dollar
ITL Italian lira
Statement of Operations
T. Rowe Price Balanced Fund / Year Ended December 31, 1994
(Amounts in thousands)
INVESTMENT INCOME
Income
Interest . . . . . . . . . . . . . . . . $12,168
Dividends. . . . . . . . . . . . . . . . 5,247
Other. . . . . . . . . . . . . . . . . . 19
________
Total income . . . . . . . . . . . . . . 17,434
________
Expenses
Investment management. . . . . . . . . . 1,969
Shareholder servicing. . . . . . . . . . 1,292
Custody and accounting . . . . . . . . . 228
Prospectus and shareholder reports . . . 54
Registrations. . . . . . . . . . . . . . 49
Legal and auditing . . . . . . . . . . . 28
Proxy and annual meeting . . . . . . . . 26
Directors. . . . . . . . . . . . . . . . 15
Miscellaneous. . . . . . . . . . . . . . 21
________
Total expenses . . . . . . . . . . . . . 3,682
________
Net investment income . . . . . . . . . . 13,752
________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain on:
Securities . . . . . . . . . . . . . . . 9,836
Foreign currency transactions. . . . . . 47
________
Net realized gain . . . . . . . . . . . 9,883
________
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . (30,381)
Other assets and liabilities denominated
in foreign currencies. . . . . . . . . . 4
________
Change in net unrealized gain or loss. . (30,377)
________
Net realized and unrealized loss . . . . . (20,494)
________
DECREASE IN NET ASSETS FROM OPERATIONS . . $(6,742)
________
________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Balanced Fund
Year Ended December 31,
_______________________
1994 1993
_________ _________
(Amounts in thousands)
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income. . . . . . . . . $ 13,752 $10,033
Net realized gain . . . . . . . . . . 9,883 1,115
Change in net unrealized gain or loss. (30,377) 25,288
________ ________
Increase (decrease)in net assets
from operations. . . . . . . . . . . . (6,742) 36,436
________ ________
Distributions to shareholders
Net investment income. . . . . . . . . (13,663) (9,926)
Net realized gain. . . . . . . . . . . (7,078) (2,708)
________ ________
Decrease in net assets from
distributions. . . . . . . . . . . . . (20,741) (12,634)
________ ________
Capital share transactions1
Shares sold. . . . . . . . . . . . . . 121,258 92,519
Distributions reinvested . . . . . . . 17,963 10,365
Shares redeemed. . . . . . . . . . . . (60,775) (36,144)
________ ________
Increase in net assets from capital
share transactions . . . . . . . . . . 78,446 66,740
________ ________
Net equalization . . . . . . . . . . . . 240 223
________ ________
Increase in net assets . . . . . . . . . 51,203 90,765
NET ASSETS
Beginning of year . . . . . . . . . . . 340,800 250,035
________ ________
End of year . . . . . . . . . . . . . . $392,003 $340,800
________ ________
________ ________
1Capital share transactions (number of shares)
Shares sold. . . . . . . . . . . . . . 10,472 8,017
Distributions reinvested . . . . . . . 1,592 895
Shares redeemed. . . . . . . . . . . . (5,248) (3,144)
________ ________
Increase in capital shares
outstanding. . . . . . . . . . . . . . 6,816 5,768
________ ________
________ ________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Balanced Fund / December 31, 1994
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, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
Fund, as authorized by the Board of Directors.
B) Currency translation - Assets and liabilities are converted into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized and
unrealized security gains 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 and may differ from those determined in accordance with
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 - Financial Instruments
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $127,271,000 and $91,909,000, respectively,
for the year ended December 31, 1994. Purchases and sales of U.S. Government
securities aggregated $36,324,000 and $27,366,000, respectively, for the year
ended December 31, 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.
In order for the Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $230,000 of
undistributed net investment income was reclassified as an increase to
paid-in-capital during the year ended December 31, 1994. The results of
operations and net assets were not affected by the reclassifications.
At December 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $384,544,000 and net
unrealized gain aggregated $7,070,000, of which $27,810,000 related to
appreciated investments and $20,740,000 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, of which $161,000 was payable at December 31, 1994. The fee is computed
daily and paid monthly, and consists of an Individual Fund Fee equal to 0.15%
of average daily net assets and a Group Fee. The Group Fee is based on the
combined assets of certain mutual funds sponsored by the Manager or Rowe-Price
Fleming International, Inc. (the Group). The Group Fee rate ranges from 0.48%
for the first $1 billion of assets to 0.31% for assets in excess of $34
billion. At December 31, 1994, and for the year then ended, the effective
annual Group Fee rate was 0.34%. The Fund pays a pro rata share of the Group
Fee based on the ratio of its net assets to those of the Group.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through December 31, 1994, which would cause the
Fund's ratio of expenses to average net assets to exceed 1.00%. Thereafter
through December 31, 1996, the Fund is required to reimburse the Manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the Fund's ratio
of expenses to average net assets to exceed 1.00%. Pursuant to this and a
previous agreement, $153,000 of unaccrued 1991-1992 fees and expenses were
repaid during the year ended December 31, 1994, $280,000 of unaccrued
management fees from 1993 remain subject to reimbursement through December 31,
1996 and $419,000 of 1992 management fees have been permanently waived.
In addition, the Fund has entered into agreements with the Manager and
two wholly-owned subsidiaries of the Manager, pursuant to which the Fund
receives certain other services. The Manager computes the daily share price
and maintains the financial records of the Fund. T. Rowe Price Services, Inc.
(TRPS) is the Fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the Fund. T. Rowe Price Retirement
Plan Services, Inc. provides subaccounting and recordkeeping services for
certain retirement accounts invested in the Fund. The Fund incurred expenses
pursuant to these related party agreements totaling approximately $1,233,000
for the year ended December 31, 1994, of which $129,000 was payable at year
end.
During the year ended December 31, 1994, the Fund, in the ordinary
course of business, paid commissions of $47,000 to, and placed security
purchase and sale orders aggregating $6,477,000 with, certain affiliates of
the Manager in connection with the execution of various portfolio
transactions.
<TABLE>
Financial Highlights##
T. Rowe Price Balanced Fund
<CAPTION>
For a share outstanding throughout each period
_____________________________________________________________________
Two
Year Year Months
Ended Ended Ended Year Ended October 31,
Dec. 31, Dec. 31, Dec. 31, _______________________________
1994 1993 1992 1992 1991 1990
_____________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR. . . . $12.02 $11.07 $10.86 $11.43 $9.81$10.37
______ ______ ______ ______ ____________
Investment Activities
Net investment income. . 0.43 0.40* 0.06* 0.33* 0.62 0.71
Net realized and
unrealized
gain (loss) . . . . .(0.68) 1.05 0.29 0.86 1.51 (0.50)
______ ______ ______ ______ ____________
Total from Investment
Activities . . . . . . .(0.25) 1.45 0.35 1.19 2.13 0.21
Distributions
Net investment
income. . . . . . . .(0.43) (0.39) (0.09) (0.58) (0.51) (0.77)
Net realized gain. . . .(0.20) (0.11) (0.05) (1.18) - -
______ ______ ______ ______ ____________
Total Distributions. . . .(0.63) (0.50) (0.14) (1.76) (0.51) (0.77)
______ ______ ______ ______ ____________
NET ASSET VALUE,
END OF YEAR. . . . . . . $11.14 $12.02 $11.07 $10.86 $11.43$9.81
______ ______ ______ ______ ____________
______ ______ ______ ______ ____________
Total Return . . . . . . . (2.1)% 13.4%* 3.3%* 7.7% 22.0% 7.2%
Ratio of Expenses to
Average Net Assets . . . 1.00% 1.00%* 1.00%!* 1.03% 1.10% 0.94%
Ratio of Net Investment
Income to Average
Net Assets . . . . . . . 3.72% 3.45%* 3.85%!* 4.07% 5.61% 6.82%
Portfolio Turnover Rate. . 33.3% 8.7% 58.0%! 207.7% 239.9% 127.2%
Net Assets, End of
Year (in thousands). . . $392,003 $340,800 $250,035 $239,195 $175,093$156,374
<FN>
! All ratios are 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
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>
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, 1994, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the financial
highlights for each of the two years in the period then ended, 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. We did not audit the financial highlights for each of the two years in
the period ended October 31, 1991. Those statements were derived from the
financial statements which were audited by other independent accountants whose
report expressed unqualified opinions 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, 1994, 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., the results of its operations,
changes in its net assets, and financial highlights for each of the respective
periods stated in the first paragraph, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 23, 1995
Chart 1 - Interest Rate Levels
A line graph compares the yields on the 30-Year U.S. Treasury Bond, the
five-year U.S. Treasury Note, and the 90-Day Treasury Bill from 12/31/93 to
12/31/94.
Chart 2 - Security Diversification
A pie chart showing the percent of the fund's assets invested among large-cap
stocks 35%, international stocks 10%, small-cap stocks 9%, Treasury and agency
issues 10%, mortgage-backed securities 10%, corporate bonds 17%, and reserves
9%.
Chart 3 - Fund Performance Comparison
A line graph compares the 12/31/94 value of a hypothetical $10,000 investment
made ten years ago in the Balanced Fund and in the Combined Index Portfolio.
At 12/31/94, the Fund investment would have been worth $32,531 and the
Combined Index Portfolio investment would have been worth $33,258.
