<PAGE>
Semiannual Report
Balanced
Fund
-------------
June 30, 1996
-------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price
<PAGE>
REPORT HIGHLIGHTS
- ---------------------------------------
. The stock and bond markets took off
in different directions this year, as
stocks continued to advance while ris-
ing interest rates led to sharply lower
bond prices.
. Over the last six months, we
increased our stock holdings to 57%
of net assets and our bond exposure
to 40%.
. The Balanced Fund outperformed its
Lipper peer group and trailed the
unmanaged index portfolio only
slightly in the six months ended
June 30. For the 12-month period,
the fund's solid gains outpaced the
peer group but lagged the index.
. The stock portion of the portfolio ben-
efited from strong performance in
consumer stocks, especially retailers.
While hurt by rising interest rates,
your bond portfolio was helped by an
overweighting in high-yield bonds.
. Equity valuations are high, though not
excessive, and bonds could outper-
form stocks in the second half. Your
fund's balanced approach should
help minimize market volatility.
<PAGE>
FELLOW SHAREHOLDERS
The stock market marched inexorably to new highs over the last six months,
fueled by a surprisingly resilient economy and record inflows into equity mutual
funds. The bond market rally, however, was snuffed out by a combination of
accelerating growth and renewed fears of inflation.
The broad stock market, as measured by the unmanaged Standard & Poor's 500
Index, gained 10.10% in the first half, although it came under selling
pressure in June and July. In contrast, the Lehman Aggregate Bond Index
declined 1.21% as rising interest rates drove bond prices sharply lower.
- ----------------------
PERFORMANCE COMPARISON
- ----------------------
<TABLE>
<CAPTION>
Periods Ended 6/30/96 6 Months 12 Months
- --------------------------------------------------------------------------------
<S> <C> <C>
Balanced Fund 5.34% 15.44%
- --------------------------------------------------------------------------------
Lipper Balanced Fund Index 4.50 15.03
- --------------------------------------------------------------------------------
Combined Index Portfolio* 5.46 17.24
- --------------------------------------------------------------------------------
*An unmanaged portfolio of 60% stocks (S&P 500) and 40%
bonds (Lehman Aggregate Bond Index).
</TABLE>
Over the last six months, we increased your fund's equity holdings from 53% to
57% of net assets and its bond exposure from 37% to 40%, emphasizing better-
performing corporate, mortgage-backed, and high-yield securities. As a result,
the fund provided strong gains, outperforming the average Lipper balanced fund
and trailing the unmanaged index portfolio by only a thin margin. For the 12
months ended June 30, the fund performed solidly, outpacing its peer group but
lagging the index.
FUND DISTRIBUTIONS
Your Board of Directors declared a first quarter dividend of $0.12 per
share and a long-term capital gain of $0.03 per share, paid on March 28 to
shareholders of record on March 26. The Board also declared a second
quarter dividend of $0.14 per share, paid on June 27 to shareholders of
record on June 25. In January 1997, you will receive your Form 1099-DIV
reporting these distributions for tax purposes.
MARKET ENVIRONMENT
After rising in tandem during 1995, the stock and bond markets veered in
different directions this year as the economy gave confusing
1
<PAGE>
signals. As the year dawned, GDP growth appeared to be weakening, inflation was
subdued, and interest rates were falling, stirring fears of a recession. This
scenario turned on a dime, however, when the economy showed unexpected strength,
growing at an annualized rate of 2.3% in the first quarter and an estimated 4%
in the second. Meanwhile, signs of inflation surfaced in rising oil and grain
prices and, most troubling, wage costs. As a result, interest rates rose
sharply. The yield on the benchmark 30-year Treasury bond jumped more than one
percentage point during the half to above 7%.
- --------------------
INTEREST RATE LEVELS
- --------------------
[INTEREST RATE LEVELS BAR GRAPH APPEARS HERE]
The stock market shrugged off the rising rates to post impressive gains, though
more modest than those of last year. The strong economy helped sustain corporate
earnings growth, although growth slowed in some industries. The real engine,
however, was the unprecedented flow of money into equity mutual funds.
Valuations rose throughout the market before retreating as stocks came under
selling pressure late in the period. The S&P 500 fell 1% in the last few weeks
of June, and a further 3.6% in early July (after the close of the reporting
period).
A number of foreign stocks posted gains, led by a robust recovery in Latin
America, where valuations were among the most attractive in the world. The best
returns in Europe came from smaller markets such as Italy and the Scandanavian
countries, while the U.K., the largest market, managed only a small gain in U.S.
dollar terms. In general, foreign equity returns to U.S. investors were dampened
by a strengthening of the dollar against most major currencies.
Most sectors of the bond market showed negative returns in the half as interest
rates rose. Treasuries and other high-quality bonds, which are the most
vulnerable to interest rate movements, were hardest hit. Corporate and mortgage-
backed securities, which offer higher levels of income and are more attractive
in a strengthening economy, performed
2
<PAGE>
slightly better than Treasuries. The best-performing sector was high-yield
bonds, which tend to move in the same direction as stocks.
PORTFOLIO REVIEW
As volatility picked up in both the stock and bond markets over the last
six months, we moved the portfolio further toward its long-term target of
60% stocks and 40% bonds, as we said we would in our December annual
report. As you know, the goal of the fund is to provide a widely
diversified portfolio that can produce attractive returns over the long
haul with less volatility than more concentrated portfolios.
We pared our reserves from 10% in December to 3% by June 30 (as shown in
the pie chart), redeploying the cash into stocks and bonds. Our 57%
exposure to stocks now consists of a 44% position in U.S. stocks (large-
cap, small-cap, and stock index futures) and 13% in international
equities.
In the U.S., our overweighting (versus the combined index) in consumer
services benefited fund performance as consumers opened up their wallets.
The increased spending helped retailers rebound from dismal results last
year. Dayton-Hudson, The Gap, and Circuit City Stores all posted
impressive gains. Other consumer stocks also thrived, with Coca-Cola, one
of our largest holdings, up 32%.
While smaller technology stocks took a beating late in the half, larger
companies did better because they are more capable of handling the growing
complexity and cost of producing innovative products. Chipmaker Intel,
another of our largest holdings, posted solid gains as did Sun
Microsystems, which is benefiting from the popularity of the Internet.
- ------------------------
SECURITY DIVERSIFICATION
- ------------------------
[SECURITY DIVERSIFICATION PIE GRAPH APPEARS HERE]
Rising interest rates dealt a blow to utility stocks, including our large
holding in SBC Communications, a regional telephone company. The company
3
<PAGE>
WE OVERWEIGHTED CORPORATE BONDS INCLUDING HIGH-YIELD ISSUES.
was also hurt by negative investor reaction to its planned purchase of PacTel.
Paper companies also lagged, with Kimberly-Clark retreating due to slower
earnings growth.
Although foreign equity returns, as represented by the Morgan Stanley EAFE
Index, lagged U.S. stocks, our overseas holdings kept pace with the S&P 500
because of our heavier weighting in European markets and lower exposure to
Japan. The fund benefited from the merger of Ciba-Geigy with Sandoz, which
created a huge Swiss pharmaceutical powerhouse.
Our increased exposure to Latin America (now 5% of our international holdings)
also helped fund performance, led by new positions in Telebras, the Brazilian
phone company, and Banco Frances del Rio, an Argentine bank. Foreign stocks can
provide protection against a possible correction in U.S. stocks since these
markets tend to move in divergent directions. We held our total foreign exposure
steady at 13% of net assets.
The bond part of your portfolio, while stung by the sharp reversal in interest
rates, benefited from our underweighting of Treasuries and overweighting in
corporate and mortgage-backed bonds. Given the strength of the economy, we
continued to overweight corporate bonds.
In our last report, we mentioned our caution on high-yield securities, given the
concerns about a recession. (These bonds are more sensitive to corporate
earnings than to interest rate movements and tend to do well during periods of
strong growth). As the economy strengthened and recession fears faded, we
fortunately held our exposure to high-yield securities steady at around 7% of
net assets (20% of the bond portfolio).
To minimize the higher credit risk associated with these securities, we
concentrated our high-yield holdings in single-and double-B-rated issues, the
upper echelon of the noninvestment-grade universe. They performed well as GDP
growth accelerated. We remained overweighted in high-yield issues compared with
the combined index portfolio.
OUTLOOK
In the first half of 1996, strong returns in the stock portion of your portfolio
offset weakness in bonds, but this could reverse in the second half. The U.S.
stock market is now at the high end of its historical valuation range, although
not all valuations are excessive. Still, as the recent
4
<PAGE>
market volatility suggests, domestic stocks are vulnerable and can move quickly.
Foreign stocks offer better value at this point, in our view.
Your fund's broadly diversified portfolio should provide some cushion against
volatility because declines in some sectors can be offset by gains in other,
unrelated sectors. Over the long term, this balanced approach to equity
investing has the potential to provide good returns at lower risk than that
which accompanies more concentrated portfolios. As always, thank you for your
continued confidence.
Respectfully submitted,
/s/ Richard T. Whitney
Richard T. Whitney
President and
Chairman of the Investment Advisory Committee
July 19, 1996
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------
LARGEST HOLDINGS
<TABLE>
<CAPTION>
Percent of Percent of
Net Assets Net Assets
June 30, 1996 June 30, 1996
Stocks Bonds
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
GE 0.8% U.S. Treasury 12.8%
.................................... .......................................
American International Group 0.7 Ginnie Mae 10.5
.................................... .......................................
Coca-Cola 0.6 Fannie Mae 1.6
.................................... .......................................
Mobil 0.6 British Columbia Hydro & Power 0.3
.................................... .......................................
BellSouth 0.5 Banesto Del 0.3
.................................... .......................................
Intel 0.5 Anheuser-Busch 0.3
.................................... .......................................
Chase Manhattan 0.5 Chrysler 0.2
.................................... .......................................
British Petroleum 0.5 Southwest Airlines 0.2
.................................... .......................................
Getronics 0.5 Sealand Services 0.2
.................................... .......................................
PepsiCo 0.5 GTE 0.2
- ------------------------------------ ---------------------------------------
Total 5.7% Total 26.6%
</TABLE>
5
<PAGE>
T. ROWE PRICE BALANCED FUND
- --------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- --------------------
<TABLE>
<CAPTION>
SECTOR DIVERSIFICATION
Percent of Percent of
Net Assets Net Assets
12/31/95 6/30/96
<S> <C> <C>
Stocks*
- ---------------------------------------------------------------
Consumer Nondurables 11.0% 11.1%
...............................................................
Financial 8.4 9.3
...............................................................
Consumer Services 6.5 5.9
...............................................................
Technology 4.3 4.8
...............................................................
Utilities 5.2 4.6
...............................................................
Energy 4.2 4.5
...............................................................
Stock Index Futures - 3.9
...............................................................
Capital Equipment 3.2 3.3
...............................................................
Process Industries 3.3 3.2
...............................................................
Business Services 3.3 3.1
...............................................................
Consumer Cyclicals 2.7 2.6
...............................................................
Basic Materials 0.7 0.6
...............................................................
Conglomerates 0.3 0.3
...............................................................
Total 53.1% 57.2%
- ---------------------------------------------------------------
Bonds and Reserves
- ---------------------------------------------------------------
U.S. Government and Agency Bonds
U.S. Treasury Obligations 11.3% 12.8%
..........................................................
Mortgage-Backed 8.4 10.1
..........................................................
Other U.S. Gov't. and Agencies 0.7 1.4
..........................................................
Project Loans 0.5 0.4
..........................................................
Agency-Backed CMOs 0.4 0.2
..........................................................
Corporate and Other
Investment Grade 8.6 7.8
..........................................................
Noninvestment Grade 6.9 7.1
..........................................................
Reserves 10.1 3.0
- ---------------------------------------------------------------
Total 46.9% 42.8%
</TABLE>
* Includes foreign securities
6
<PAGE>
T. ROWE PRICE BALANCED FUND
- --------------------------------------------------------------------------------
- ----------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
BALANCED FUND
- --------------------------------------------------------------------------------
[BALANCED FUND LINE GRAPH APPEARS HERE]
- ---------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- ------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
<TABLE>
<S> <C> <C> <C> <C>
Periods Ended 6/30/96 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------
Balanced Fund 15.44% 11.47% 12.22% 10.24%
..........................................................................
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Performance prior to 9/1/92 reflects investment managers other than T. Rowe
Price.
7
<PAGE>
T. ROWE PRICE BALANCED FUND
- --------------------------------------------------------------------------------
Unaudited
- ----------------------
Financial Highlights++ For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year 11/1/92 Year
Ended Ended to Ended
6/30/96 12/31/95 12/31/94 12/31/93 12/31/92 10/31/92 10/31/91
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 13.22 $ 11.14 $ 12.02 $ 11.07 $ 10.86 $ 11.43 $ 9.81
....................................................................................
Investment activities
Net investment income 0.26 0.48 0.43 0.40* 0.06* 0.33 0.62
Net realized and
unrealized gain (loss) 0.44 2.24 (0.68) 1.05 0.29 0.86 1.51
....................................................................................
Total from
investment activities 0.70 2.72 (0.25) 1.45 0.35 1.19 2.13
....................................................................................
Distributions
Net investment income (0.26) (0.47) (0.43) (0.39) (0.09) (0.58) (0.51)
Net realized gain (0.03) (0.17) (0.20) (0.11) (0.05) (1.18) -
....................................................................................
Total distributions (0.29) (0.64) (0.63) (0.50) (0.14) (1.76) (0.51)
....................................................................................
NET ASSET VALUE
------------------------------------------------------------------------------------
End of period $ 13.63 $ 13.22 $ 11.14 $ 12.02 $ 11.07 $ 10.86 $ 11.43
------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------------
Total return 5.34% 24.88% (2.05)% 13.35%* 3.32%* 11.20% 22.06%
.................................................................................................................
Ratio of expenses to
average net assets 0.85%+ 0.95% 1.00% 1.00%* 1.00%+* 1.03% 1.10%
.................................................................................................................
Ratio of net investment
income to average
net assets 3.94%+ 3.87% 3.72% 3.45%* 3.85%+* 4.07% 5.61%
.................................................................................................................
Portfolio turnover rate 23.8%+ 12.6% 33.3% 8.7% 58.0%+ 207.7% 239.9%
.................................................................................................................
Average commission
rate paid $ 0.0471 - - - - - -
.................................................................................................................
Net assets, end of period
(in thousands) $ 788,343 $ 608,088 $ 392,003 $ 340,800 $ 250,035 $ 239,195 $175,093
.................................................................................................................
</TABLE>
* Excludes expenses in excess of a 1.00% voluntary expense limitation in effect
through 12/31/94.
+ 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 the two years in the period ended October 31 represents the
activities of Axe-Houghton Fund B, as restated.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
T. ROWE PRICE BALANCED FUND
- --------------------------------------------------------------------------------
Unaudited June 30, 1996
- -----------------------
STATEMENT OF NET ASSETS Shares/Par Value
- ------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
- --------------------
COMMON STOCKS 53.1%
- --------------------
- --------------------
FINANCIAL 9.1%
- --------------------
<S> <C> <C>
Bank and Trust 4.9%
AmSouth Bancorporation 5,400 $ 195
................................................................
Australia & New Zealand Banking ADR 21,500 508
................................................................
Banca Commerciale Italiana ADR 210,000 424
................................................................
Banco de Bilbao Vizcaya ADR 20,000 803
................................................................
Banco Frances del Rio ADR 30,000 863
................................................................
Bancorp Hawaii 4,100 148
................................................................
BankAmerica 27,000 2,045
................................................................
Barclays (GBP) 100,000 1,200
................................................................
BayBanks 3,500 378
................................................................
Berliner Bank (DEM) 5,700 1,215
................................................................
Central Fidelity Banks 9,450 213
................................................................
Charter One Financial 9,120 317
................................................................
Chase Manhattan 55,040 3,887
................................................................
Citicorp 35,000 2,892
................................................................
Compass Bancshares 6,200 204
................................................................
CoreStates Financial 6,370 245
................................................................
Crestar Financial 3,200 171
................................................................
Deutsche Bank (DEM) 18,700 890
................................................................
Deutsche Bank, warrants, 6/30/97 (DEM) * 200 3
................................................................
Development Bank of Singapore (SGD) 29,000 362
................................................................
First American 7,800 329
................................................................
First Security 11,100 268
................................................................
First Tennessee National 3,600 110
................................................................
First Union 25,000 1,522
................................................................
First USA 3,500 193
................................................................
First Virginia Banks 5,700 228
................................................................
Grupo Financiero Bancomer ADR (144a) 20,000 170
................................................................
HSBC Holdings (GBP) 80,000 1,252
................................................................
J. P. Morgan 20,000 1,692
................................................................
KeyCorp 50,000 1,937
................................................................
Kredietbank (BEF) 2,500 750
................................................................
Mellon Bank 18,750 1,069
................................................................
Mercantile Bancorporation 4,200 187
................................................................
NationsBank 35,368 2,922
................................................................
Norwest 30,000 1,046
................................................................
</TABLE>
9
<PAGE>
T. ROWE PRICE BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Overseas Chinese Bank (SGD) 26,000 $ 304
.............................................................................
Overseas Chinese Bank, rights, 7/9/96 (SGD) * 2,600 21
.............................................................................
Old Kent Financial 5,954 234
.............................................................................
Regions Financial 9,100 427
.............................................................................
Schweizerischer Bankgesellschaft (CHF) 1,400 1,372
.............................................................................
Schweizerischer Bankverein (CHF) 8,440 1,667
.............................................................................
Schweizerischer Bankverein, warrants, 6/30/98 (CHF) * 240 3
.............................................................................
Societe Generale (FRF) 7,018 772
.............................................................................
Societe Generale de Belgique (BEF) 8,500 649
.............................................................................
SouthTrust 9,500 268
.............................................................................
Star Banc 6,300 424
.............................................................................
Summit Bancorp 4,200 148
.............................................................................
U. S. Bancorp 18,522 668
.............................................................................
Washington Federal 18,590 383
.............................................................................
Westpac Banking * 90,000 398
.............................................................................
38,376
............
Insurance 1.8%
American General 20,000 728
.............................................................................
American International Group 53,100 5,237
.............................................................................
CK AG Colonia Konzern (DEM) 600 485
.............................................................................
Conseco 5,800 232
.............................................................................
Equitable Companies 9,400 234
.............................................................................
Horace Mann Educators 10,200 324
.............................................................................
John Alden Financial 8,000 177
.............................................................................
MAIC Holdings * 8,588 323
.............................................................................
MBIA 3,100 241
.............................................................................
MGIC Investment 11,600 651
.............................................................................
Ohio Casualty 5,100 179
.............................................................................
Old Republic International 7,050 152
.............................................................................
Progressive Corporation 4,200 194
.............................................................................
Sunamerica 4,050 229
.............................................................................
Torchmark 39,300 1,719
.............................................................................
UNUM 50,000 3,112
.............................................................................
14,217
............
Financial Services 2.4%
A.G. Edwards 13,475 366
.............................................................................
ADVANTA 4,500 229
.............................................................................
ADVANTA (Class B) 5,550 253
.............................................................................
AMBAC 11,100 579
.............................................................................
American Express 40,000 1,785
.............................................................................
</TABLE>
10
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
AXA (FRF) 15,000 $ 821
.............................................................................
Countrywide Credit 113,925 2,820
.............................................................................
Fannie Mae 78,000 2,613
.............................................................................
Green Tree Financial 17,200 538
.............................................................................
H&R Block 30,900 1,008
.............................................................................
Household International 24,000 1,824
.............................................................................
ING Groep (NLG) 40,714 1,215
.............................................................................
ING Groep, scrip shares, 8/2/96 (NLG) * 20,357 310
.............................................................................
Medaphis * 14,600 579
.............................................................................
Mercury Finance 18,600 237
.............................................................................
Pearson (GBP) 150,000 1,547
.............................................................................
Presstek * 15,000 958
.............................................................................
Salomon 6,800 299
.............................................................................
Travelers Group 22,999 1,049
.............................................................................
United Asset Management 16,000 392
.............................................................................
19,422
............
Total Financial 72,015
............
UTILITIES 4.6%
Telephone 3.2%
Ameritech 24,000 1,425
.............................................................................
AT&T 47,200 2,926
.............................................................................
Bell Atlantic 18,100 1,154
.............................................................................
BellSouth 97,000 4,110
.............................................................................
British Telecommunications ADR 20,000 1,075
.............................................................................
COMSAT 4,900 127
.............................................................................
GTE 50,600 2,264
.............................................................................
Hong Kong Telecommunications ADR 36,300 653
.............................................................................
Pacific Telesis 46,300 1,563
.............................................................................
SBC Communications 54,400 2,679
.............................................................................
Southern New England Telecommunications 4,900 206
.............................................................................
Telecom Corporation of New Zealand (NZD) 520,000 2,190
.............................................................................
Telecom Italia (ITL) 571,000 1,229
.............................................................................
Telecom Italia Mobile (ITL) 571,000 1,277
.............................................................................
Telefonica de Espana ADR 12,000 662
.............................................................................
Telekom Malaysia (MYR) 60,000 534
.............................................................................
Telmex ADR 30,000 1,005
.............................................................................
U S WEST Media * 20,000 365
.............................................................................
25,444
............
</TABLE>
11
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Electric Utilities 1.4%
Duke Power 27,400 $ 1,404
.............................................................................
Edison International 54,000 952
.............................................................................
Empresa Nacional de Electricidad ADR 12,200 764
.............................................................................
Entergy 53,000 1,504
.............................................................................
FPL Group 25,600 1,178
.............................................................................
Hong Kong Electric (HKD) 200,000 610
.............................................................................
Niagara Mohawk 102,500 794
.............................................................................
Public Service of New Mexico 50,000 1,025
.............................................................................
Texas Utilities 20,000 855
.............................................................................
Unicom 27,000 753
.............................................................................
Veba (DEM) 19,000 1,010
.............................................................................
10,849
............
Total Utilities 36,293
............
CONSUMER NONDURABLES 11.1%
Cosmetics 0.2%
International Flavors & Fragrances 11,700 557
.............................................................................
Kao (JPY) 87,000 1,178
.............................................................................
1,735
............
Beverages 1.7%
Anheuser-Busch 32,000 2,400
.............................................................................
Coca-Cola 92,600 4,526
.............................................................................
LVMH (FRF) 9,541 2,265
.............................................................................
PepsiCo 100,400 3,551
.............................................................................
Starbucks * 24,400 688
.............................................................................
13,430
............
Food Processing 1.7%
Archer Daniels Midland 61,110 1,169
.............................................................................
Cadbury Schweppes ADR 31,586 1,019
.............................................................................
ConAgra 24,900 1,130
.............................................................................
CPC International 12,900 929
.............................................................................
Danisco (DKK) 14,000 698
.............................................................................
Earthgrains * 1,280 42
.............................................................................
Eridania Beghin-Say (FRF) 4,000 627
.............................................................................
General Mills 6,300 343
.............................................................................
Heinz 35,000 1,063
.............................................................................
Hershey Foods 15,000 1,100
.............................................................................
Huhtamaki (FIM) 10,000 335
.............................................................................
</TABLE>
12
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Kellogg 3,100 $ 227
.............................................................................
McCormick 10,300 226
.............................................................................
Nestle (CHF) 1,684 1,925
.............................................................................
Ralston Purina 23,204 1,488
.............................................................................
Sara Lee 38,800 1,256
.............................................................................
Universal Foods 7,100 262
.............................................................................
13,839
............
Hospital Supplies/Hospital Management 1.4%
Abbott Laboratories 58,800 2,558
.............................................................................
Baxter International 40,000 1,890
.............................................................................
Columbia/HCA Healthcare 29,000 1,548
.............................................................................
Health Management (Class A) * 36,112 731
.............................................................................
HealthCare COMPARE * 12,900 628
.............................................................................
Hillenbrand Industries 11,600 432
.............................................................................
Humana * 22,400 401
.............................................................................
Medtronic 16,000 896
.............................................................................
St. Jude Medical * 26,000 868
.............................................................................
U.S. Healthcare 12,000 659
.............................................................................
10,611
............
Pharmaceuticals 3.4%
American Home Products 56,600 3,403
.............................................................................
Amgen * 49,600 2,672
.............................................................................
Astra (Class B) (SEK) 30,000 1,310
.............................................................................
Bristol-Myers Squibb 38,400 3,456
.............................................................................
Chiron * 926 90
.............................................................................
Ciba-Geigy (CHF) 1,300 1,586
.............................................................................
Forest Laboratories * 4,500 174
.............................................................................
Gehe (DEM) 1,125 756
.............................................................................
IDEXX Laboratories * 11,800 462
.............................................................................
Merck 35,500 2,294
.............................................................................
Perrigo * 9,900 112
.............................................................................
Pfizer 48,600 3,469
.............................................................................
Pharmacia & Upjohn 60,000 2,662
.............................................................................
SmithKline Beecham ADR 61,200 3,328
.............................................................................
Takeda Chemical Inds (JPY) 72,000 1,277
.............................................................................
27,051
............
Health Care Services 0.4%
Altana (DEM) 1,000 773
.............................................................................
Olsten 4,118 122
.............................................................................
</TABLE>
13
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
United HealthCare 37,700 $ 1,904
.............................................................................
2,799
............
Miscellaneous Consumer Products 2.2%
Arctco 2,550 32
.............................................................................
Benetton Group (ITL) 38,000 492
.............................................................................
Bridgestone (JPY) 69,000 1,319
.............................................................................
Burlington Industries * 17,700 250
.............................................................................
Colgate-Palmolive 30,100 2,551
.............................................................................
CUC International * 10,500 373
.............................................................................
Duracell International 6,900 297
.............................................................................
Fruit of the Loom (Class A) * 3,300 84
.............................................................................
Hanson ADR 63,000 898
.............................................................................
Ideon Group 13,100 177
.............................................................................
Jones Apparel Group * 16,800 825
.............................................................................
Kuraray (JPY) 127,000 1,428
.............................................................................
Lion Nathan (NZD) 175,000 459
.............................................................................
Philip Morris 2,500 260
.............................................................................
Philips N. V. ADR 31,200 1,018
.............................................................................
Procter & Gamble 29,400 2,664
.............................................................................
Service Corp. 37,300 2,145
.............................................................................
Springs Industries 39,700 2,005
.............................................................................
Tambrands 9,500 388
.............................................................................
17,665
............
Total Consumer Nondurables 87,130
............
CONSUMER SERVICES 5.9%
Restaurants 0.0%
Darden Restaurants 6,300 67
.............................................................................
67
............
General Merchandisers 1.7%
Carrefour (FRF) 2,000 1,121
.............................................................................
Carrefour, rights, 7/15/96 (FRF) * 2,000 553
.............................................................................
Dayton Hudson 28,700 2,960
.............................................................................
Marui (JPY) 53,000 1,178
.............................................................................
May Department Stores 51,400 2,249
.............................................................................
PriceCostco * 60,000 1,290
.............................................................................
Tesco (GBP) 200,000 916
.............................................................................
</TABLE>
14
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
TJX 44,000 $ 1,485
.............................................................................
Wal-Mart 51,400 1,304
.............................................................................
13,056
............
Specialty Merchandisers 1.6%
Callaway Golf 13,000 432
.............................................................................
Circuit City Stores 65,900 2,381
.............................................................................
Fingerhut Companies 8,000 125
.............................................................................
Gymboree * 8,400 255
.............................................................................
Heilig-Meyers 4,500 108
.............................................................................
Kohl's * 18,600 681
.............................................................................
Kroger * 50,000 1,975
.............................................................................
Payless Shoesource * 8,224 261
.............................................................................
Petrie Stores Liquidation Trust 33,500 94
.............................................................................
R. P. Scherer * 5,600 254
.............................................................................
Safeway * 12,600 416
.............................................................................
Staples * 18,225 354
.............................................................................
Stop & Shop * 5,600 187
.............................................................................
The Gap 79,200 2,544
.............................................................................
Toys "R" Us * 59,100 1,685
.............................................................................
Viking Office Products * 32,000 1,002
.............................................................................
12,754
............
Entertainment and Leisure 1.4%
Applebee's 10,600 343
.............................................................................
Brinker * 8,775 132
.............................................................................
Buffets * 6,200 75
.............................................................................
Casino America * 8,600 70
.............................................................................
Checkers Drive-In Restaurants * 6,750 7
.............................................................................
Disney 48,139 3,027
.............................................................................
HFS * 21,600 1,512
.............................................................................
Hutchison Whampoa (HKD) 390,000 2,454
.............................................................................
International Game Technology 9,000 152
.............................................................................
McDonald's 10,000 467
.............................................................................
National Lodging * 1,080 17
.............................................................................
Reader's Digest (Class A) 5,000 212
.............................................................................
Sbarro 37,500 942
.............................................................................
Sharp (JPY) 72,000 1,264
.............................................................................
Viacom (Class A) * 4,500 172
.............................................................................
10,846
............
</TABLE>
15
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Media and Communications 1.2%
A. H. Belo (Class A) 6,800 $ 253
.............................................................................
Banta 13,500 342
.............................................................................
Comcast (Class A Special) 40,000 735
.............................................................................
Dun & Bradstreet 14,100 881
.............................................................................
Elsevier (NLG) 50,000 759
.............................................................................
Gannett 13,800 976
.............................................................................
Gaylord Entertainment 10,584 299
.............................................................................
Infinity Broadcasting (Class A) * 18,000 540
.............................................................................
International CableTel * 11,999 356
.............................................................................
McGraw-Hill 32,200 1,473
.............................................................................
Time Warner 29,000 1,138
.............................................................................
U S WEST Communications 20,000 638
.............................................................................
Vanguard Cellular * 11,850 260
.............................................................................
Vodafone ADR 20,000 738
.............................................................................
9,388
............
Total Consumer Services 46,111
............
CONSUMER CYCLICALS 2.6%
Automobiles and Related 0.7%
Breed Technologies 5,600 125
.............................................................................
Ford Motor 6,530 211
.............................................................................
Gentex * 18,200 353
.............................................................................
Genuine Parts 9,650 442
.............................................................................
GM 30,000 1,571
.............................................................................
Honda ADR 19,800 1,010
.............................................................................
Pep Boys 7,100 241
.............................................................................
Superior Industries 8,000 212
.............................................................................
TRW 15,000 1,348
.............................................................................
5,513
............
Building and Real Estate 0.8%
Cheung Kong Holdings (HKD) 175,000 1,260
.............................................................................
DBS Land (SGD) 600,000 2,058
.............................................................................
Hopewell Holdings (HKD) 948,339 515
.............................................................................
Masco 49,900 1,509
.............................................................................
Texas Industries 4,700 323
.............................................................................
USG * 14,600 407
.............................................................................
6,072
</TABLE>
16
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Building & Construction 0.1%
United Engineers (MYR) 100,000 $ 694
.............................................................................
694
............
Miscellaneous Consumer Durables 1.0%
Black & Decker 36,000 1,390
.............................................................................
Corning 30,000 1,151
.............................................................................
Eastman Kodak 21,700 1,687
.............................................................................
Harley-Davidson 3,800 156
.............................................................................
Ricoh (JPY) 100,000 1,061
.............................................................................
Roussel UCLAF (FRF) 2,900 696
.............................................................................
Scotts (Class A) * 10,000 175
.............................................................................
Tandy 20,000 948
.............................................................................
Valspar 18,100 833
.............................................................................
York International 2,600 135
.............................................................................
8,232
............
Total Consumer Cyclicals 20,511
............
TECHNOLOGY 4.8%
Electronic Components 1.4%
Altera * 9,000 341
.............................................................................
EMC * 11,500 214
.............................................................................
Intel 54,400 3,995
.............................................................................
Linear Technology 35,800 1,072
.............................................................................
Micron Technology 9,400 243
.............................................................................
Molex 9,765 312
.............................................................................
Motorola 20,000 1,258
.............................................................................
Thermo Electron 9,787 407
.............................................................................
Thermo Instrument Systems * 8,156 263
.............................................................................
Tyco International 50,000 2,038
.............................................................................
Vicor * 12,000 280
.............................................................................
Xilinx * 12,600 399
.............................................................................
10,822
............
Electronic Systems 0.6%
Applied Materials * 10,000 304
.............................................................................
Exide Electric Group 500 13
.............................................................................
Hewlett-Packard 33,500 3,337
.............................................................................
Honeywell 20,000 1,090
.............................................................................
Solectron * 4,800 182
.............................................................................
4,926
............
</TABLE>
17
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Information Processing 0.7%
Adaptec * 7,000 $ 331
.............................................................................
COMPAQ Computer * 50,000 2,463
.............................................................................
Hitachi ADR 11,900 1,116
.............................................................................
IBM 10,000 990
.............................................................................
Storage Technology * 5,000 191
.............................................................................
5,091
............
Specialized Computer 0.5%
Landmark Graphics * 5,700 111
.............................................................................
Silicon Graphics * 14,700 353
.............................................................................
Sun Microsystems * 54,000 3,179
.............................................................................
3,643
............
Telecommunications Equipment 0.7%
Bay Networks * 7,177 185
.............................................................................
Frontier 8,000 245
.............................................................................
LM Ericsson (Class B) ADR 54,000 1,157
.............................................................................
Novell * 45,600 630
.............................................................................
PictureTel * 8,800 347
.............................................................................
Telecomunicacoes Brasileiras ADR 20,000 1,392
.............................................................................
Tellabs * 11,600 776
.............................................................................
World Com * 18,400 1,018
.............................................................................
5,750
............
Aerospace and Defense 0.9%
AlliedSignal 36,000 2,056
.............................................................................
Boeing 31,000 2,701
.............................................................................
Northrop 30,000 2,044
.............................................................................
United Technologies 4,700 541
.............................................................................
7,342
............
Total Technology 37,574
............
CAPITAL EQUIPMENT 3.3%
Electrical Equipment 2.3%
ABB (CHF) 775 960
.............................................................................
American Power Conversion * 10,300 107
.............................................................................
Emerson Electric 28,100 2,540
.............................................................................
GE 75,400 6,522
.............................................................................
Getronics 166,444 3,689
.............................................................................
Hubbell (Class A) 4,000 249
.............................................................................
</TABLE>
18
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Hubbell (Class B) 40,126 $ 2,658
.............................................................................
Mitsubishi Electric (JPY) 136,000 950
.............................................................................
Siemens (DEM) 13,000 695
.............................................................................
18,370
............
Machinery 0.9%
Caterpillar 25,000 1,694
.............................................................................
Coltec Industries * 29,900 426
.............................................................................
Deere 18,000 720
.............................................................................
DII Group * 160 4
.............................................................................
FMC * 12,000 783
.............................................................................
Foster Wheeler 4,600 206
.............................................................................
Imo Industries * 2,800 16
.............................................................................
Kennametal 11,400 388
.............................................................................
Man (DEM) 2,500 633
.............................................................................
SIG Schweis (CHF) 520 1,231
.............................................................................
Stewart & Stevenson 6,300 142
.............................................................................
Teleflex 5,000 239
.............................................................................
TriMas 30,300 708
.............................................................................
Valmet (FIM) 32,000 542
.............................................................................
7,732
............
Total Capital Equipment 26,102
............
BUSINESS SERVICES AND TRANSPORTATION 3.1%
Computer Service and Software 0.9%
Amtech * 3,625 27
.............................................................................
Autodesk 15,400 459
.............................................................................
BMC Software * 10,000 596
.............................................................................
Computer Associates 29,550 2,105
.............................................................................
Electronic Arts * 7,500 200
.............................................................................
Electronic Data Systems 4,223 227
.............................................................................
HBO 13,200 893
.............................................................................
Informix * 18,400 413
.............................................................................
Micro Warehouse * 5,600 111
.............................................................................
Parametric Technology * 23,200 1,005
.............................................................................
SunGard Data Systems * 13,200 529
.............................................................................
Sybase * 7,000 166
.............................................................................
6,731
............
</TABLE>
19
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Distribution Services 0.0%
Cardinal Health 3,625 $ 262
.............................................................................
262
............
Environmental 0.1%
Mid-American Waste Systems * 12,000 11
.............................................................................
Molten Metal Technology * 11,900 350
.............................................................................
361
............
Transportation Services 0.3%
Landstar Systems * 40,000 1,150
.............................................................................
Mitsubishi Heavy Industries (JPY) 137,000 1,194
.............................................................................
2,344
............
Miscellaneous Business Services 0.7%
Browning-Ferris 25,000 725
.............................................................................
Cintas 3,600 191
.............................................................................
Equifax 17,800 467
.............................................................................
GTECH * 4,500 133
.............................................................................
Manpower 12,200 479
.............................................................................
Merrill 5,000 127
.............................................................................
Omnicom 13,400 623
.............................................................................
Paychex 18,675 898
.............................................................................
Sime Darby (MYR) 200,000 553
.............................................................................
U.S. Industries * 3,150 76
.............................................................................
WMX Technologies 47,200 1,546
.............................................................................
5,818
............
Airlines 0.6%
AMR * 20,000 1,820
.............................................................................
Atlantic Southeast Airlines 4,200 119
.............................................................................
KLM (NLG) 23,000 736
.............................................................................
Mesa Airlines * 17,300 203
.............................................................................
Singapore Airlines (SGD) 40,000 422
.............................................................................
UAL * 30,000 1,613
.............................................................................
4,913
............
Railroads 0.5%
Burlington Northern Santa Fe 15,100 1,221
.............................................................................
CSX 19,600 946
.............................................................................
Illinois Central (Series A) 14,850 421
.............................................................................
Union Pacific 14,000 978
.............................................................................
Wisconsin Central Transportation * 20,400 658
.............................................................................
4,224
............
Total Business Services and Transportation 24,653
............
</TABLE>
20
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
ENERGY 4.5%
Energy Services 0.8%
El Paso Natural Gas 9,383 $ 361
.............................................................................
Elf Aquitaine (FRF) 9,000 662
.............................................................................
Halliburton 23,000 1,277
.............................................................................
Helmerich & Payne 20,000 733
.............................................................................
Highlands Insurance Group * 2,300 43
.............................................................................
Schlumberger 30,100 2,536
.............................................................................
Smith International * 18,300 551
.............................................................................
Witco 5,400 186
.............................................................................
6,349
............
Exploration and Production 0.0%
Enron Oil & Gas 6,600 184
.............................................................................
184
............
Gas Transmission 0.5%
Enron 50,000 2,044
.............................................................................
ENSERCH 14,300 311
.............................................................................
MCN 8,800 214
.............................................................................
Questar 7,400 252
.............................................................................
Sonat 29,000 1,305
.............................................................................
4,126
............
Integrated Petroleum - Domestic 1.3%
Amerada Hess 27,700 1,485
.............................................................................
Atlantic Richfield 10,900 1,292
.............................................................................
British Petroleum ADR 36,000 3,847
.............................................................................
MAPCO 1,700 96
.............................................................................
Phillips Petroleum 30,000 1,256
.............................................................................
Santa Fe Energy Resources * 13,900 165
.............................................................................
Ultramar 9,100 264
.............................................................................
USX-Marathon 100,000 2,013
.............................................................................
10,418
............
Integrated Petroleum - International 1.9%
Chevron 39,600 2,336
.............................................................................
Exxon 40,600 3,527
.............................................................................
Mobil 38,900 4,362
.............................................................................
Repsol ADR 24,000 834
.............................................................................
Royal Dutch Petroleum ADR 10,000 1,538
.............................................................................
Shell Transport & Trading 8,000 704
.............................................................................
</TABLE>
21
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Texaco 16,600 $ 1,392
.............................................................................
14,693
............
Total Energy 35,770
............
PROCESS INDUSTRIES 3.2%
Diversified Chemicals 0.7%
DuPont 25,300 2,002
.............................................................................
Eastman Chemical 3,675 224
.............................................................................
Monsanto 90,500 2,941
.............................................................................
5,167
............
Specialty Chemicals 1.5%
3M 18,000 1,242
.............................................................................
A. Schulman 26,325 642
.............................................................................
Akzo Nobel (NLG) 7,000 839
.............................................................................
BASF (DEM) 3,400 973
.............................................................................
Bayer (DEM) 30,000 1,063
.............................................................................
Crompton & Knowles 3,500 59
.............................................................................
Great Lakes Chemical 25,000 1,556
.............................................................................
IVAX 5,200 82
.............................................................................
Lyondell Petrochemical 7,100 171
.............................................................................
McWhorter Technologies * 1,500 27
.............................................................................
Morton International 60,000 2,235
.............................................................................
Pall 8,533 206
.............................................................................
Rohm & Haas 28,000 1,757
.............................................................................
Technip (FRF) 10,000 921
.............................................................................
11,773
............
Paper and Paper Products 0.8%
Dai Nippon Printng (JPY) 67,000 1,299
.............................................................................
International Paper 40,000 1,475
.............................................................................
Kimberly-Clark 10,000 772
.............................................................................
Kimberly-Clark Mexico (Class A) (MXN) 53,000 964
.............................................................................
Mead 15,000 778
.............................................................................
Schweitzer Mauduit 1,000 28
.............................................................................
Sonoco Products 12,705 361
.............................................................................
Willamette Industries 12,000 713
.............................................................................
6,390
............
</TABLE>
22
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Forest Products 0.2%
Georgia-Pacific 19,000 $ 1,349
.............................................................................
Pope & Talbot 8,200 124
.............................................................................
Weyerhaeuser 12,700 540
.............................................................................
2,013
............
Total Process Industries 25,343
............
BASIC MATERIALS 0.6%
Metals 0.3%
Alcoa 30,000 1,721
.............................................................................
Carpenter Technology 5,400 173
.............................................................................
Freeport-McMoRan Copper & Gold (Class A) 9,600 287
.............................................................................
2,181
............
Mining 0.2%
TVX Gold * 200,000 1,450
.............................................................................
CRA (AUD) 28,000 430
.............................................................................
1,880
............
Miscellaneous Materials 0.1%
Malayan Cement (MYR) 250,000 601
.............................................................................
Owens-Illinois * 15,300 245
.............................................................................
846
............
Total Basic Materials 4,907
............
CONGLOMERATES 0.3%
BTR (AUD) 250,000 984
.............................................................................
LONRHO (GBP) 170,000 488
.............................................................................
Tomkins ADR 30,000 458
.............................................................................
Total Conglomerates 1,930
............
Total Common Stocks (Cost $304,025) 418,339
............
PREFERRED STOCKS 0.0%
Deutsche Bank, 8.75%, participating certificates (DEM) 20 15
.............................................................................
Teledyne 1,600 25
.............................................................................
Total Preferred Stocks (Cost $35) 40
............
</TABLE>
23
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
- ------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 0.2%
- ------------------------------------------------
Security Capital Industrial Trust 70,000 $ 1,645
.............................................................................
- ------------------------------------------------
Total Convertible Preferred Stocks (Cost $1,562) 1,645
- ------------------------------------------------ ............
- ------------------------------------------------
CONVERTIBLE BONDS 0.1%
- ------------------------------------------------
U S WEST, Zero Coupon, 6/25/11 $2,000,000 695
.............................................................................
- ------------------------------------------------
Total Convertible Bonds (Cost $646) 695
- ------------------------------------------------ ............
- ------------------------------------------------
CORPORATE BONDS 14.8%
- ------------------------------------------------
Abbey National First, 8.20%, 10/15/04 1,205,000 1,273
.............................................................................
African Development Bank, 7.75%, 12/15/01 1,000,000 1,031
.............................................................................
Agricultural Minerals, Sr. Notes, 10.75%, 9/30/03 1,000,000 1,050
.............................................................................
Airplane Pass Through Trust, 10.875%, 3/15/19 490,000 510
.............................................................................
Alabama Power, 7.00%, 1/1/03 725,000 715
.............................................................................
Alpine Group, 12.25%, 7/15/03 500,000 504
.............................................................................
AMERCO, 7.85%, 5/15/03 1,000,000 999
.............................................................................
American Home Products, 7.90%, 2/15/05 1,500,000 1,569
.............................................................................
American Radio, Sr. Sub. Notes, 9.00%, 2/1/06 275,000 259
.............................................................................
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 1,000,000 1,010
.............................................................................
American Standard, 9.875%, 6/1/01 750,000 772
.............................................................................
Ametek, 9.75%, 3/15/04 500,000 529
.............................................................................
Anheuser-Busch, 6.90%, 10/1/02 2,000,000 1,990
.............................................................................
Arcadian, Sr. Notes, 10.75%, 5/1/05 750,000 810
.............................................................................
Associates Corp., 7.50%, 4/15/02 1,300,000 1,332
.............................................................................
B. F. Saul REIT, Sr. Secured Notes, 11.625%, 4/1/02 600,000 615
.............................................................................
Bally's Park Place, 9.25%, 3/15/04 500,000 532
.............................................................................
Banca Commerciale Italiana, Sr. Sub. Notes
8.25%, 7/15/07 1,000,000 1,013
.............................................................................
Banco Central, 7.50%, 6/15/05 1,000,000 988
.............................................................................
Banesto, 8.25%, 7/28/02 2,000,000 2,068
.............................................................................
Bankers Trust, Sub. Deb., 8.00%, 3/15/97 125,000 126
.............................................................................
Banque Nationale De Paris, 9.875%, 5/25/98 1,000,000 1,060
.............................................................................
Be Aerospace, 9.875%, 2/1/06 500,000 491
.............................................................................
Boeing, 8.75%, 8/15/21 1,000,000 1,134
.............................................................................
British Columbia Hydro & Power
12.50%, 9/1/13 250,000 288
........................................................................
15.50%, 11/15/11 2,125,000 2,337
.............................................................................
</TABLE>
24
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Bruno's, Sr. Notes, 10.50%, 8/1/05 $1,000,000 $ 986
.............................................................................
Burlington Industries, 7.25%, 9/15/05 1,000,000 963
.............................................................................
Century Enterprises, 8.25%, 5/1/24 500,000 508
.............................................................................
Chancellor Broadcasting, Sr. Sub. Notes, 9.375%,
10/1/04 750,000 709
.............................................................................
Chrysler Financial, 5.875%, 2/7/01 2,000,000 1,922
.............................................................................
Citicorp, 8.75%, 11/1/96 100,000 101
.............................................................................
Citicorp Mortgage, 6.00%, 3/25/22 192,936 185
.............................................................................
Coca-Cola Bottling Group, Sr. Sub. Notes
9.00%, 11/15/03 500,000 490
.............................................................................
Coda Energy, Sr. Sub. Notes, (144a) 10.50%, 4/1/06 250,000 247
.............................................................................
Coin Machine, Sr. Secured Notes, 11.75%, 11/15/05 1,000,000 1,047
.............................................................................
Coleman, Sr. Secured Disc. Notes, Zero Coupon,
5/27/98 1,250,000 1,045
.............................................................................
Collins & Aikman, 11.50%, 4/15/06 500,000 506
.............................................................................
Coltec Industries, Sr. Notes,
9.75%, 4/1/00 250,000 255
........................................................................
10.25%, 4/1/02 750,000 761
.............................................................................
Columbia/HCA Healthcare, 6.91%, 6/15/05 1,500,000 1,464
.............................................................................
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 750,000 793
.............................................................................
Consolidated Cigar, Sr. Sub. Notes, 10.50%, 3/1/03 1,000,000 1,037
.............................................................................
Container Corporation of America, Sr. Notes
9.75%, 4/1/03 1,000,000 982
.............................................................................
Corestates Home Equity Loan,
5.10%, 3/15/09 485,520 467
........................................................................
6.65%, 5/15/09 306,671 308
.............................................................................
Countrywide Funding, MTN, 6.875%, 9/15/05 860,000 825
.............................................................................
Courtyard by Marriott, 10.75%, 2/1/08 500,000 489
.............................................................................
Cox Communication, Notes, 6.375%, 6/15/00 1,500,000 1,472
.............................................................................
Dade International, Sr. Sub. Notes, 11.125%, 5/1/06 500,000 518
.............................................................................
Dan River, Sr. Sub. Notes, 10.125%, 12/15/03 750,000 720
.............................................................................
Dr. Pepper Bottling, Sr. Disc. Notes, STEP
Zero Coupon, 2/15/03 700,000 593
.............................................................................
Dr. Pepper Bottling Texas, Sr. Notes, 10.25%,
2/15/00 500,000 510
.............................................................................
Dual Drilling, Sr. Sub. Notes, 9.875%, 1/15/04 500,000 523
.............................................................................
Duke Power, 6.75%, 8/1/25 1,000,000 879
.............................................................................
El Paso Electric, 1st Mtg. Notes, 8.90%, 2/1/06 125,000 123
.............................................................................
Exide Electric Group, 11.50%, 3/15/06 500,000 500
.............................................................................
Exxon Capital, 6.50%, 7/15/99 500,000 499
.............................................................................
Fairfax Financial, 7.75%, 12/15/03 800,000 797
.............................................................................
</TABLE>
25
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Federal Express, 9.95%, 8/15/06 $ 500,000 $ 554
.............................................................................
Federated Department Stores, Sr. Notes, 8.125%,
10/15/02 750,000 735
.............................................................................
Ferrellgas, Sr. Notes, 10.00%, 8/1/01 750,000 767
.............................................................................
Ferrellgas Partnership, (144a) 9.375%, 6/15/06 400,000 387
.............................................................................
First Federal Financial, 11.75%, 10/1/04 750,000 746
.............................................................................
First Fidelity Bancorp, 8.50%, 4/1/98 1,500,000 1,548
.............................................................................
First Nationwide Holdings, 9.125%, 2/15/03 500,000 475
.............................................................................
Fleet/Norstar Financial Group, 8.625%, 1/15/07 800,000 865
.............................................................................
Freeport-McMoRan Resources, Sr. Notes, 7.00%,
2/15/08 900,000 828
.............................................................................
Fundy Cable, Sr. Secured 2nd Priority Notes
11.00%, 11/15/05 500,000 505
........................................................................
GNF, 1st Mtg. Notes, 10.625%, 4/1/03 800,000 870
.............................................................................
Golden West Financial, 8.625%, 8/30/98 1,500,000 1,559
.............................................................................
Grand Casino, 1st Mtg. Notes, 10.125%, 12/1/03 1,000,000 1,025
.............................................................................
GTE, 9.375%, 12/1/00 1,500,000 1,626
.............................................................................
Gulf CanadaResources, Sr. Sub. Deb.
9.625%, 7/1/05 750,000 742
........................................................................
9.25%, 1/15/04 250,000 244
.............................................................................
Gulf States Utilities, 5.375%, 2/1/97 500,000 497
.............................................................................
Hayes Wheels International, 11.00%, 7/15/06 250,000 253
.............................................................................
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 1,125,000 1,159
.............................................................................
Heritage Media, 11.00%, 6/15/02 1,000,000 1,061
.............................................................................
Hills Stores, Sr. Notes, 12.50%, 7/1/03 750,000 735
.............................................................................
HMC Acquisition Properties, Sr Notes
(144a) 9.00%, 12/15/07 1,000,000 910
.............................................................................
Host Marriott Travel, Sr. Notes, 9.50%, 5/15/05 1,000,000 955
.............................................................................
IMC Fertilizer Group, 9.45%, 12/15/11 750,000 754
.............................................................................
J. Q. Hammons Hotels, 1st Mtg. Notes, 8.875%,
2/15/04 1,000,000 935
.............................................................................
Jordan Industries, Sr. Notes, 10.375%, 8/1/03 750,000 713
.............................................................................
K & F Industries, Sr. Secured Notes, 11.875%,
12/1/03 400,000 428
.............................................................................
KFW International, 9.14%, 6/4/01 250,000 273
.............................................................................
Kingdom of Thailand, 7.07%, 9/30/13 1,000,000 834
.............................................................................
Lear Seating, Sr. Sub. Notes
11.25%, 7/15/00 250,000 258
.............................................................................
8.25%, 2/1/02 500,000 475
.............................................................................
Lehman Brothers Holdings, 8.875%, 3/1/02 1,500,000 1,603
.............................................................................
Liberty National Bank & Trust, 6.75%, 6/1/03 500,000 480
.............................................................................
Loehmann Holdings, Sr. Notes, 11.875%, 5/15/03 700,000 724
.............................................................................
</TABLE>
26
<PAGE>
T. Rowe Price Balanced Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Long Island Lighting
7.50%, 3/1/07 $ 500,000 $ 442
........................................................................
9.75%, 5/1/21 100,000 103
.............................................................................
Loral Corporation, 7.625%, 6/15/04 1,500,000 1,519
.............................................................................
MAFCO, Sr. Sub. Notes, 11.875%, 11/15/02 500,000 528
.............................................................................
Marvel Holdings, Zero Coupon, 4/15/98 1,000,000 800
.............................................................................
Maxus Energy, Sr. Notes, 9.375%, 11/1/03 500,000 483
.............................................................................
MAXXAM Group, Sr. Secured Notes, 11.25%, 8/1/03 600,000 600
.............................................................................
McDonnell Douglas, 8.25%, 7/1/00 500,000 522
.............................................................................
Mesa Operating Company, 10.625%, 7/1/06 500,000 510
.............................................................................
Methanex, Sr. Notes, 7.75%, 8/15/05 1,500,000 1,474
.............................................................................
Michaels Stores, 10.875%, 6/15/06 800,000 816
.............................................................................
NGC, 6.75%, 12/15/05 1,000,000 953
.............................................................................
Northrop Grumman Corporation, 7.875%, 3/1/26 1,000,000 974
.............................................................................
NYNEX, 9.55%, 5/1/10 1,239,488 1,386
.............................................................................
Ornda Healthcorp, 11.375%, 8/15/04 500,000 551
.............................................................................
Overhead Door, Sr. Notes, 12.25%, 2/1/00 375,000 380
.............................................................................
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 1,000,000 1,014
.............................................................................
Owens-Illinois, Sr. Deb., 11.00%, 12/1/03 750,000 806
.............................................................................
Pacific Bell, 7.375%, 7/15/43 1,000,000 947
.............................................................................
Paging Network, Sr. Sub. Notes, 8.875%, 2/1/06 200,000 181
.............................................................................
Petroleum Heat & Power, 10.125%, 4/1/03 500,000 483
.............................................................................
Plains Resource, Sr. Sub. Notes, (144a) 10.25%,
3/15/06 200,000 198
.............................................................................
Plastic Containers, Sr. Secured Notes, 10.75%,
4/1/01 700,000 694
.............................................................................
Players International, 10.875%, 4/15/05 500,000 509
.............................................................................
Portola Packaging, Sr. Notes, 10.75%, 10/1/05 500,000 509
.............................................................................
PriCellular Wireless, STEP, Zero Coupon, 10/1/03 575,000 451
.............................................................................
Province of Alberta, 9.25%, 4/1/00 1,000,000 1,084
.............................................................................
Province of Newfoundland, 8.50%, 10/15/96 1,500,000 1,509
.............................................................................
Prudential Home, 6.90%, 3/25/23 417,141 416
.............................................................................
Qantas Airways (144a), 6.625%, 6/30/98 1,000,000 995
.............................................................................
Quorum Health Group, 11.875%, 12/15/02 500,000 553
.............................................................................
Repap Wisconsin, 9.25%, 2/1/02 500,000 468
.............................................................................
Revlon Worldwide, Zero Coupon, 3/15/98 1,000,000 831
.............................................................................
Riverwood International, Sr. Notes, 10.25%, 4/1/06 250,000 248
.............................................................................
Rogers Cablesystem, Sr. Secured Notes, 10.00%,
3/15/05 750,000 739
.............................................................................
S. D. Warren, Sr. Sub. Notes, 12.00%, 12/15/04 500,000 528
.............................................................................
SASCO, 6.87%, 8/25/26 343,440 343
.............................................................................
Sea Containers Ltd., Sr. Sub. Deb., 12.50%, 12/1/04 500,000 560
.............................................................................
</TABLE>
27
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Sea-Land Services, 10.60%, 1/2/11 $ 1,550,000 $ 1,649
.............................................................................
Silgan, Sr. Sub. Notes, 11.75%, 6/15/02 625,000 634
.............................................................................
Silgan Holdings, Sr. Disc. Deb., STEP, 13.25%,
12/15/02 281,000 285
.............................................................................
Southwest Airlines, 9.25%, 2/15/98 1,650,000 1,714
.............................................................................
Stratosphere, 14.25%, 5/15/02 750,000 832
.............................................................................
Synthetic Industries, Sr. Sub. Deb., 12.75%,
12/1/02 750,000 793
.............................................................................
Tenneco, 6.50%, 12/15/05 1,000,000 933
.............................................................................
Texaco Capital, 8.65%, 1/30/98 1,400,000 1,448
.............................................................................
Texas Bottling Group, Sr. Sub. Notes, 9.00%,
11/15/03 500,000 485
.............................................................................
Time Warner Entertainment, 7.25%, 9/1/08 600,000 563
.............................................................................
Trump Atlantic City Associates, 1st Mtg. Notes
11.25%, 5/1/06 625,000 628
.............................................................................
UNC, Sr. Sub. Notes, 11.00%, 6/1/06 1,000,000 1,010
.............................................................................
United Artist, PTC, (144a) 9.30%, 7/1/15 500,000 455
.............................................................................
Wal-Mart, 6.75%, 5/15/02 1,000,000 991
.............................................................................
Westamerica Bank, 6.99%, 9/30/03 1,500,000 1,422
.............................................................................
Weyerhaeuser, 7.95%, 3/15/25 1,000,000 1,035
.............................................................................
Wright Medical Technologies, Sr. Secured Notes
10.75%, 7/1/00 750,000 739
.............................................................................
Young Broadcasting, Sr. Sub. Notes, 11.75%,
11/15/04 500,000 525
.............................................................................
Total Corporate Bonds (Cost $118,578) 117,000
............
</TABLE>
U.S. Government Mortgage-Backed Securities 10.7%
<TABLE>
<CAPTION>
Government National Mortgage Assn., I
<S> <C> <C>
6.00%, 1/15 - 5/15/24 2,873,771 2,605
........................................................................
6.50%, 9/15/23 - 3/15/26 8,719,557 8,151
........................................................................
7.00%, 10/15/22 - 1/15/24 3,737,541 3,616
........................................................................
7.50%, 9/15/22 - 5/15/26 15,357,160 15,194
........................................................................
8.00%, 6/15/17 - 11/15/25 14,560,419 14,866
........................................................................
8.50%, 4/15/17 - 2/15/25 17,670,699 18,341
........................................................................
9.00%, 5/15/16 - 6/15/25 2,592,031 2,733
........................................................................
9.50%, 8/15/09 - 10/15/16 2,497,616 2,687
........................................................................
10.00%, 11/15/09 43,913 48
........................................................................
10.50%, 5/15/15 16,746 18
........................................................................
10.75%, 1/15/16 - 12/15/17 275,323 308
........................................................................
11.00%, 3/15/10 - 1/15/20 1,287,465 1,429
........................................................................
11.50%, 3/15/10 - 3/15/16 2,207,727 2,487
........................................................................
</TABLE>
28
<PAGE>
T. Rowe Price Balanced Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Government National Mortgage Assn., II
9.00%, 7/20/16 - 6/20/20 $ 1,018,562 $ 1,059
........................................................................
9.50%, 8/20/22 313,079 331
........................................................................
10.00%, 10/20/16 - 1/20/22 225,509 243
.............................................................................
Government National Mortgage Assn., ARM
7.00%, 8/20/23 264,303 268
.............................................................................
Government National Mortgage Assn., PL
8.50%, 1/15/27 298,206 307
........................................................................
8.875%, 2/15/30 683,514 696
........................................................................
8.95%, 5/15/35 2,304,818 2,346
.............................................................................
Government National Mortgage Assn.
TBA, 8.50%, 12/15/99 3,787,535 3,950
.............................................................................
Federal National Mortgage Assn.
7.50%, 10/25/19 1,000,000 995
........................................................................
8.75%, 12/25/04 756,749 766
.............................................................................
Federal Home Loan Mortgage Corp.
8.00%, 3/1/17 38,691 39
........................................................................
10.00%, 10/1/10 106,412 114
........................................................................
10.50%, 9/1/15 16,485 18
.............................................................................
Total U.S. Government Mortgage-Backed Securities (Cost $84,078) 83,615
............
U.S. Government Obligations/Agencies 14.2%
Federal Home Loan Mortgage Corp., 6.00%, 6/15/05 700,000 687
.............................................................................
Federal National Mortgage Assn.
5.80%, 12/10/03 4,000,000 3,778
........................................................................
6.25%, 8/12/03 3,000,000 2,856
........................................................................
8.45%, 7/12/99 4,000,000 4,220
.............................................................................
Tennessee Valley Authority, 8.25%, 9/15/34 435,000 435
.............................................................................
U.S. Treasury Bonds
6.00%, 2/15/26 5,865,000 5,201
........................................................................
7.125%, 2/15/23 7,000,000 7,076
........................................................................
7.50%, 11/15/24 3,500,000 3,710
........................................................................
8.125%, 8/15/19 - 8/15/21 1,400,000 1,575
........................................................................
8.75%, 5/15 - 8/15/20 4,600,000 5,501
........................................................................
10.625%, 8/15/15 200,000 276
........................................................................
11.25%, 2/15/15 4,500,000 6,494
........................................................................
11.75%, 2/15/01 - 11/15/14 3,200,000 4,490
........................................................................
13.125%, 5/15/01 200,000 255
.............................................................................
</TABLE>
29
<PAGE>
T. Rowe Price Balanced Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
U.S. Treasury Notes
5.125%, 2/28/98 $ 4,000,000 $ 3,941
........................................................................
6.00%, 6/30/96 3,000,000 3,000
........................................................................
6.375%, 1/15/00 - 8/15/02 7,000,000 6,972
........................................................................
6.50%, 4/30/99 5,000,000 5,027
........................................................................
7.00%, 4/15/99 5,200,000 5,293
........................................................................
7.50%, 5/15/02 3,500,000 3,664
........................................................................
7.75%, 1/31/00 - 2/15/01 11,000,000 11,487
........................................................................
8.00%, 8/15/99 - 5/15/01 18,000,000 19,031
........................................................................
8.25%, 7/15/98 5,300,000 5,510
........................................................................
8.75%, 8/15/00 2,000,000 2,166
.............................................................................
Total U.S. Government Obligations/Agencies (Cost $113,072) 112,645
............
Short-Term Investments 6.2%
Certificates of Deposit 0.6%
Bank of America, 5.02%, 7/16/96 5,000,000 4,999
.............................................................................
4,999
............
Commercial Paper 5.6%
Ciesco, 5.35%, 7/17 - 8/5/96 10,000,000 9,962
.............................................................................
Electronic Data Systems, 5.37%, 8/7/96 5,000,000 4,972
.............................................................................
General Electric Capital, 5.34%, 7/2/96 6,500,000 6,499
.............................................................................
Investments in Commercial Paper through a joint
account, 5.49% - 5.68%, 7/1/96 2,902,249 2,902
.............................................................................
Morgan Stanley Group,
5.30%, 7/18/96 5,000,000 4,988
........................................................................
5.70%, 1/20/97 5,000,000 5,006
.............................................................................
National Rural Utilities Cooperative Finance,
5.35%, 8/19/96 5,000,000 4,964
.............................................................................
Pfizer, 5.35%, 7/29/96 4,750,000 4,730
.............................................................................
44,023
............
Total Short-Term Investments (Cost $49,022) 49,022
............
</TABLE>
30
<PAGE>
T. Rowe Price Balanced Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- ----------------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C> <C>
Total Investments in Securities
99.3% of Net Assets (Cost $671,018) $783,001
Futures Contracts
In thousands
Contract Unrealized
Expiration Value Gain (Loss)
----------- --------- ------------
Long, 90 Standard & Poor's 500
Stock Index contracts, $3,000,000
of Federal National Mortgage Assn.
Bonds pledged as initial margin 9/96 $ 30,456 $ 88
Net payments (receipts) of variation
margin to date 160
Variation margin receivable ............
(payable) on open futures contracts 248
Other Assets Less Liabilities 5,094
............
NET ASSETS $ 788,343
------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 276
Accumulated net realized gain/loss - net of distributions 4,688
Net unrealized gain (loss) 112,071
Paid-in-capital applicable to 57,837,969 shares of $0.01 par
value capital stock outstanding; 1,000,000,000 shares authorized 671,308
............
NET ASSETS $ 788,343
------------
NET ASSET VALUE PER SHARE $ 13.63
------------
</TABLE>
* Non-income producing
ARM Adjustable rate mortgage
GPM Graduated payment mortgage
MTN Medium term note
PL Project Loan
REIT Real Estate Investment Trust
TBA To be announced security was purchased on a forward commitment basis
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 0.43% of net assets.
AUD Australian dollar
BEF Belgian franc
CHF Swiss franc
DEM German deutschemark
DKK Danish krone
FIM Finnish mark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
ITL Italian lira
JPY Japanese yen
MXN Mexican peso
MYR Malaysian ringgit
NLG Dutch guilder
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
T. Rowe Price Balanced Fund
- -------------------------------------------------------------------------------
Unaudited
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months
Ended
6/30/96
<S> <C>
Investment Income
Income
Interest $ 13,586
Dividend 4,049
............
Total income 17,635
............
Expenses
Investment management 1,777
Shareholder servicing 1,106
Custody and accounting 133
Registration 40
Prospectus and shareholder reports 31
Legal and audit 11
Directors 9
Miscellaneous 7
............
Total expenses 3,114
............
Net investment income 14,521
............
Realized and Unrealized Gain/Loss
Net realized gain (loss) on
Securities 1,664
Futures 3,145
Foreign currency transactions (21)
............
Net realized gain (loss) 4,788
............
Change in net unrealized gain or loss on
Securities 18,456
Futures 88
Other assets and liabilities
denominated in foreign currencies 8
............
Change in net unrealized gain or loss 18,552
............
Net realized and unrealized gain (loss) 23,340
............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 37,861
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
T. ROWE PRICE BALANCED FUND
- -------------------------------------------------------------------------------
Unaudited
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
6/30/96 12/31/95
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 14,521 $ 19,770
Net realized gain (loss) 4,788 5,809
Change in net unrealized gain or loss 18,552 86,445
......................
Increase (decrease) in net assets from operations 37,861 112,024
......................
Distributions to shareholders
Net investment income (14,394) (19,706)
Net realized gain (1,584) (7,187)
......................
Decrease in net assets from distributions (15,978) (26,893)
......................
Capital share transactions*
Shares sold 245,189 176,699
Distributions reinvested 14,583 23,920
Shares redeemed (101,474) (69,962)
......................
Increase (decrease) in net assets from capital
share transactions 158,298 130,657
......................
Net equalization 74 297
......................
Net Assets
Increase (decrease) during period 180,255 216,085
Beginning of period 608,088 392,003
......................
End of period $ 788,343 $608,088
----------------------
* Share information
Shares sold 18,311 14,638
Distributions reinvested 1,084 1,911
Shares redeemed (7,549) (5,735)
......................
Increase (decrease) in shares outstanding 11,846 10,814
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1996
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Balanced Fund, Inc. (the fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company.
Valuation Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time 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. Listed securities that are not traded on a
particular day and securities that are regularly traded in the over-the-
counter market are valued at the mean of the latest bid and asked prices.
Other equity securities 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. Financial futures contracts
are valued at closing settlement prices.
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.
Currency Translation Assets and liabilities are translated 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 and losses is reflected as a component of such
gains and losses.
34
<PAGE>
T. ROWE PRICE BALANCED FUND
- --------------------------------------------------------------------------------
Premiums and Discounts Premiums and discounts on debt securities, other than
mortgage-backed securities, are amortized for both financial reporting and
tax purposes. Premiums and discounts on mortgage-backed securities are
recognized upon principal repayment as gain or loss for financial reporting
purposes and as ordinary income for tax purposes.
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 the 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. Payments ("variation margin") made
or received by the fund to settle the daily fluctuations in the value of
futures contracts are recorded as unrealized gain or loss until the
contracts are closed. Unrealized gains and losses on futures contracts are
included in Change in net unrealized gain or loss in the accompanying
financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Futures Contracts At June 30, 1996, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an
agreed upon price, date, time, and place. Risks arise from possible
illiquidity of the futures market and from movements in security values.
Commercial Paper Joint Account The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
Securities Lending To earn additional income, the fund lends its securities
to approved brokers. At June 30, 1996, the market value of securities on
loan was
35
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
$97,480,000, which was fully collateralized with cash. Although the risk is
mitigated by the collateral, the fund could experience a delay in recovering
its securities and a possible loss of income or value if the borrower fails
to return them.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $124,760,000 and $33,580,000,
respectively, for the six months ended June 30, 1996. Purchases and sales of
U.S. government securities aggregated $119,330,000 and $43,850,000,
respectively, for the six months ended June 30, 1996.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At June 30, 1996, the aggregate cost of investments for federal income tax
and financial reporting purposes was $671,018,000, and net unrealized gain
aggregated $111,983,000, of which $125,953,000 related to appreciated
investments and $13,970,000 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 $311,000 was payable at June 30, 1996. 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 0.305% for assets in excess
of $50 billion. At June 30, 1996, and for the six months then ended, the
effective annual group fee rate was 0.33% and 0.34%, respectively. The fund
pays a pro rata share of the group fee based on the ratio of its net assets
to those of the group.
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
36
<PAGE>
T. Rowe Price Balanced Fund
- --------------------------------------------------------------------------------
maintains the financial records of the fund. T. Rowe Price Services, Inc.,
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 $1,032,000 for the six months ended June 30, 1996, of which
$101,000 was payable at period-end.
During the Six months ended June 30, 1996, the fund, in the ordinary course
of business, paid commissions of $53,000 to, and placed security purchase
and sale orders aggregating $10,970,000 with, certain affiliates of the
manager in connection with the execution of various portfolio transactions.
37
<PAGE>
For yield, price, last transaction,
and current balance, 24 hours,
7 days a week, call:
1-800-638-2587 toll free
For assistance with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution
only to shareholders and to others who have
received a copy of the prospectus of
the T. Rowe Price Balanced Fund.
[LETTER HEAD OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor RPRTBAL 6/30/96
