<PAGE>
Semiannual Report
BALANCED
FUND
-------------
JUNE 30, 2000
--------------------------------------------------------------------------------
[LOGO OF T. ROWE PRICE]
T. ROWE PRICE
<PAGE>
REPORT HIGHLIGHTS
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Balanced Fund
. The Federal Reserve hiked short-term interest rates, roiling the financial
waters.
. Stocks finished slightly lower during a volatile period; bonds were weak,
except for long-term Treasuries.
. Returns were in line with the fund's Lipper peer group for the six months
and were stronger for the 12-month period.
. Our broad diversification across asset classes helped cushion volatility.
. Stable inflation and moderating U.S. growth are favorable for global stocks
and bonds.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
Domestic equities soared, swooped, then soared again in one of the most volatile
markets ever, yet finished the first half of 2000 roughly where they began.
International stocks, hampered by U.S. interest rate worries and a worldwide
tech sell-off, lost ground as well. Bonds generally finished higher despite
rising interest rates as longer-term issues benefited from an inverted yield
curve. Amid the turmoil, your fund posted positive returns.
Your fund rode the market volatility to a 1.52% gain during the six months ended
June 30, 2000, topping the Merrill Lynch-Wilshire Capital Market Index and our
internally generated Combined Index Portfolio while slightly underperforming the
Lipper Balanced Fund Index. For the 12-month period, the fund's 6.03% return
outdistanced the Lipper index but trailed its other benchmarks. Broad
diversification aided returns, with our health care and energy holdings
providing the greatest contribution. Long-term Treasuries were the strongest
sector of the bond portfolio.
----------------------
PERFORMANCE COMPARISON
--------------------------------------------------------------------------------
Periods Ended 6/30/00 6 Months 12 Months
--------------------------------------------------------------------------------
Balanced Fund 1.52% 6.03%
Merrill Lynch-Wilshire
Capital Market Index 0.36 8.08
Lipper Balanced Fund Index 1.74 4.43
Combined Index Portfolio * 1.09 7.43
* An unmanaged portfolio of 50% domestic stocks (S&P 500), 40% bonds (Lehman
Brothers Aggregate Index), and 10% international stocks (MSCI EAFE Index).
MARKET ENVIRONMENT
The U.S. economy forged ahead in 2000, growing 5.5% in the first quarter. The
Federal Reserve acted strongly to ward off inflationary pressures, raising
short-term interest rates three times, the most recent a 50-basis-point hike in
May (100 basis points equal 1%). The Fed has now raised rates six times since
last summer for a total of 175 basis points. It left its key fed funds target at
6.50% in late June, however, amid signs that the U.S. economy may be slowing.
1
<PAGE>
With rising rates adding uncertainty, the U.S. stock market reflected tremendous
shifts in investor preference during the first half of 2000. Early in the year,
stocks with strong price momentum performed well--a "rich getting richer"
effect. In February investors focused on stocks with robust earnings growth,
regardless of valuation, opening up an unprecedented spread between value and
growth stocks. While March was a terrific month for the stock market as a whole,
the relative outperformance of growth began to unwind, and the next two months
saw a dramatic reversal. The previously high-flying growth stocks, led by
technology, began a severe correction. The tech-heavy Nasdaq Composite tumbled
37% from its March peak and 22% from December 31. Just as remarkable, the market
reversed course again in late May, with high-growth, high-momentum stocks once
again performing very well. The Standard & Poor's 500 Stock Index ended down
0.43% and the Nasdaq Composite was off 2.54% for the first half.
International markets also corrected, largely following U.S. markets. Japanese
stocks fell sharply on weakness in the technology, automotive, and banking
sectors after a very strong 1999. Europe performed relatively well, aided by
strength in Old Economy sectors such as energy, pharmaceuticals, and food, and
select high-tech stocks. Returns were hampered in Europe by the weak euro,
however. Overall, the MSCI EAFE Index fell 3.95% for the six months.
Fixed-income markets were muddled by a unique event. Because of the growing
federal surplus, the Treasury Department announced plans to reduce government
borrowing by cutting back on the sale of new Treasuries and buying back some
outstanding debt. Investors rushed to buy long-term Treasuries, which drove
prices higher and yields lower. The result was an inverted yield curve, as
short-term Treasury yields rose above those on long-term issues. Normally,
long-term bonds offer higher yields than shorter-term bonds to compensate for
their higher risk. Holders of long-term Treasuries benefited from the higher
prices. With the release of more benign economic data late in the period, the
yield curve has begun to flatten. Yields on two-year and five-year Treasuries
ended the period below the fed funds rate at 6.44% and 6.25%, respectively. The
10-year Treasury ended at 6.08% and the 30-year at 5.94%. From the beginning of
the year, the yield on the 30-year Treasury was lower by 52 basis points, while
the two-year Treasury was 22 basis points higher.
Among domestic fixed-income sectors, Treasuries outperformed mortgages and
corporate bonds over the period. Among investment-grade
2
<PAGE>
corporate bonds, higher-quality issues did better than lower quality. The
high-yield market under-performed as defaults increased and yields rose versus
Treasuries to record levels, despite strong U.S. economic growth.
--------------------
Interest Rate Levels
--------------------------------------------------------------------------------
[GRAPH]
[PLOT POINTS TO COME]
90-day Treasury Bill 5-Year Treasury Note 30-Year Treasury Bond
Perhaps the major story so far in 2000 is the rise in stock market volatility.
One way to measure price volatility is to look at the percentage of trading days
when the S&P 500 changes by more than 1%, either up or down. During the middle
of the past decade, volatility was low--in 1995 only 4% of trading days broke
the 1% threshold. Volatility has steadily increased since then, to the point
where more than 43% of the days in the first six months have produced returns
either up or down by more than 1%. One advantage of a balanced approach is a
reduction in overall volatility. With roughly 60% of fund assets in equities,
Balanced Fund's return will certainly reflect price swings, but diversification
across asset classes reduces the overall impact on the portfolio. During the
first half, slightly less than 20% of the trading days produced 1% or greater
moves in the fund.
STRATEGY AND PORTFOLIO REVIEW
The fund's asset allocation remained roughly the same over the last six months.
Among equity holdings, exposure to domestic stocks dropped one percentage point,
to 49%, while international stocks stayed at 14% of net assets. Total equity
exposure thus ended the period at 63%, slightly higher than the 60% weighting
that we consider neutral. Exposure to Treasury and agency bonds rose to 15% from
14% while our allocation to corporate bond and mortgage-backed securities held
steady. Reserves remain at 1% of assets, consistent with our policy of having a
fully invested portfolio.
Within the domestic equity portfolio, the best performance came from health
care, which produced a number of stocks with double-digit returns, including
pharmaceutical companies Warner-Lambert and
3
<PAGE>
------------------------
Security Diversification
--------------------------------------------------------------------------------
[GRAPH]
Mortgage- Backed Securities 6%
International Stocks 14%
Corporate Bonds 15%
Treasury and Agency Bonds 15%
Reserves 1%
Large-Cap Stocks 49%
Based on net assets as of 6/30/00.
Pfizer. Pfizer acquired its rival in mid-June, and analysts expect the merger to
result in accelerating earnings per share growth for the combined company. The
new Pfizer is now the fund's second-largest stock holding. Another strong
performer was UnitedHealth Group, a major health care services company that has
rebounded after struggling during a very challenging period for companies
involved in delivering health care to consumers.
Technology stocks were strong overall, but uneven across different industries.
Our semiconductor holdings did very well, led by Intel and Altera.
Semiconductors tend to be cyclical, being subject to wide swings in supply and
demand. Microsoft fell largely as a result of its antitrust difficulties, and
Lucent Technologies, which manufactures telecommunications equipment, also fell.
Telecommunications equipment is probably the most dynamic sector of technology
right now--paced by the rapid build-out of broadband technologies for Internet
access, as well as the increased penetration of wireless services. This dynamism
creates great opportunity and risks for established companies. Generally,
telecommunication service stocks were weak, led lower by AT&T, which announced
disappointing results to investors. Long distance is rapidly evolving into a
commodity business.
Energy was a bright spot in the portfolio, as economic growth worldwide led to
sharply higher energy prices. The major beneficiaries in the portfolio were the
oil service companies--firms that support the exploration and production of new
oil fields. Our holdings in BJ Services and Smith International advanced
sharply. Typically oil services companies are more sensitive to the price of oil
than are integrated oil companies. Despite the brief return of value stocks in
the spring, durable goods holdings--such as Ford and GM--underperformed as
investors worried that economic growth would not be strong enough to translate
into good earnings.
4
<PAGE>
The fund's international stocks produced a negligible return, hampered by
currency effects as the dollar strengthened against the euro. Since about half
the international portfolio is in euro-denominated assets, the fledgling
currency's weakness hurt returns to U.S.-based investors.
In Europe, one of our better holdings was LM Ericsson, a Swedish manufacturer of
mobile telephones and other communications equipment. This is one of the few
sectors where non-U.S. companies are the clear leaders. Koninklijke Philips
Electronics, the diversified Dutch technology and consumer electronics firm,
also performed well. Laggards included British Telecom, a cheaply valued but
slow-growing incumbent that some investors fear will face continual erosion of
market share.
We have little exposure to the very highly valued Japanese stocks that grew to a
large weight in the Nikkei index, then fell sharply. Our holdings in
pharmaceutical stocks Daiichi Pharmaceutical and Takeda Chemical Industries did
well. Sony finished down for the first half. Portfolio holdings elsewhere in the
Far East were weaker, although the small Hong Kong electrical manufacturer
Johnson Electric was up sharply.
Treasuries, particularly long-term Treasuries, were the top-performing sector of
the U.S. fixed-income markets over the last six months. Corporate bonds trailed
other fixed-income sectors, with higher-quality bonds generally outperforming
BBB and high-yield issues. The fund's fixed-income allocation helped moderate
overall portfolio volatility and increase returns, as bonds outperformed
relative to the S&P 500 and the MSCI EAFE Index.
----------------------
BOND PORTFOLIO PROFILE
--------------------------------------------------------------------------------
Weighted Average Effective Duration (years) 5.5
Weighted Average Maturity (years) 9.1
Weighted Average Quality * AA
*Based on T. Rowe Price research.
Within the corporate sector, the yield advantages (or "credit spreads") of BBB
and lower-rated (high-yield) debt remain at historically high levels, even after
a modest tightening in June. We expect these sectors to benefit as investors are
attracted by the unusually high yields. The outlook in the mortgage market is
favorable, with low levels of new supply. There is little refinancing risk in
the current rate environment, and mortgage-backed bonds continue to be one of
the most liquid sectors of the fixed-income market. We made no changes to
portfolio duration over the period, and the average credit quality remained high
at AA.
5
<PAGE>
OUTLOOK
Although there are signs that the economy is slowing, the Fed will remain
vigilant in its efforts to keep inflation from accelerating. The combination of
sound fiscal policy, as reflected in the current budget surplus, and effective
monetary policy has reduced upward pressure on domestic interest rates, however.
Although the Fed may raise rates once again in August, we appear to be nearing
the end of this rate-hike cycle. In this environment, we anticipate stable
inflation and moderating economic growth in the U.S., which should provide a
favorable climate for stocks and bonds. Unless a U.S. slowdown pushes the
economy into recession, corporate and high-yield bonds should provide attractive
returns, and mortgage-backed bonds also offer solid yields. Internationally, the
economic recovery appears to be on track despite slower U.S. growth, although
Japan's economy remains problematic. A slowing U.S. economy would make
international markets more attractive. As always, we remain committed to a very
diversified portfolio that holds many securities and exposure to all asset
classes.
Respectfully submitted,
/s/ Richard T. Whitney
Richard T. Whitney
Chairman of the Investment Advisory Committee
July 25, 2000
6
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
--------------------
PORTFOLIO HIGHLIGHTS
--------------------------------------------------------------------------------
LARGEST HOLDINGS
Percent of Percent of
Net Assets Net Assets
6/30/00 6/30/00
Stocks Bonds
--------------------------------------------------------------------------------
GE 1.9% U.S. Treasury 12.6%
Pfizer 1.5 Ginnie Mae 5.5
Intel 1.4 Fannie Mae 1.8
Exxon Mobil 1.1 Federal Home Loans 0.7
Citigroup 0.9 Time Warner 0.3
Oracle 0.9 Anheuser-Busch 0.3
SBC Communications 0.8 Comcast Cable 0.3
Wal-Mart 0.8 Atlantic Richland 0.3
Hewlett-Packard 0.8 Quantas Airways 0.3
Sun Microsystems 0.7 Distribution Financial
Total 10.8% Services Marine Trust 0.3
Total 22.4%
Note: Table excludes reserves.
7
<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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
BALANCED FUND
--------------------------------------------------------------------------------
Merrill Lynch-Wilshire Combined Index
As of Balanced Fund Capital Market Index Portfolio
6/30/90 10,000 10,000 10,000
Jun-91 11,402 10,902 10,720
Jun-92 12,879 12,444 12,055
Jun-93 14,650 14,207 13,716
Jun-94 14,960 14,233 13,977
Jun-95 17,576 16,938 16,503
Jun-96 20,291 19,773 19,005
Jun-97 24,510 23,935 23,278
Jun-98 29,023 29,320 27,890
Jun-99 32,146 33,526 31,727
Jun-00 34,084 36,235 34,086
* An unmanaged portfolio of 50% domestic stocks (S&P 500), 40% bonds (Lehman
Brothers Aggregate Index), and 10% international stocks (MSCI EAFE Index)
------------------------------------
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.
Periods Ended 6/30/00 1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Balanced Fund 6.03% 11.62% 14.16% 13.05%
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
8
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
--------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
----------------------------------------------------------------------------------------------------------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 19.69 $ 18.59 $ 16.54 $ 14.48 $ 13.22 $ 11.14
Investment activities
Net investment income (loss) 0.27 0.53 0.53 0.53 0.51 0.48
Net realized and
unrealized gain (loss) 0.03 1.34 2.08 2.18 1.38 2.24
Total from investment activities 0.30 1.87 2.61 2.71 1.89 2.72
Distributions
Net investment income (0.26) (0.54) (0.52) (0.53) (0.50) (0.47)
Net realized gain (0.03) (0.23) (0.04) (0.12) (0.13) (0.17)
Total distributions (0.29) (0.77) (0.56) (0.65) (0.63) (0.64)
NET ASSET VALUE
End of period $ 19.70 $ 19.69 $ 18.59 $ 16.54 $ 14.48 $ 13.22
----------------------------------------------------------------------------------
Ratios/Supplemental Data
Total return* 1.52% 10.26% 15.97% 18.97% 14.57% 24.88%
Ratio of total expenses to
average net assets 0.80%+ 0.79% 0.78% 0.81% 0.87% 0.95%
Ratio of net investment
income (loss) to average
net assets 2.74%+ 2.80% 3.04% 3.36% 3.70% 3.87%
Portfolio turnover rate 19.4%+ 20.7% 12.5% 15.5% 22.3% 12.6%
Net assets, end of period
(in millions) $ 2,117 $ 2,091 $ 1,650 $ 1,219 $ 876 $ 608
</TABLE>
* Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
+ Annualized
The accompanying notes are an integral part of these financial statements.
9
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T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
------------------------
PORTFOLIO OF INVESTMENTS Shares/Par Value
-------------------------------------------------------------------------------
In thousands
COMMON STOCKS 62.5%
FINANCIAL 9.0%
Bank and Trust 3.9%
Abbey National (GBP) 124,000 $ 1,473
ABN Amro (EUR) 40,000 980
Australia & New Zealand Banking Group (EUR) 31,000 237
Australia & New Zealand Bankinging Group ADR 21,500 818
Banca Commerciale Italiana (EUR) 210,000 1,175
Banco de Bilbao Vizcaya Argentaria ADR 180,000 2,655
Banco Frances del Rio de la Plata ADR 34,500 746
Bank of America 191,637 8,240
Bank of New York 100,000 4,650
Bank One 143,397 3,809
Bankgesellschaft Berlin (EUR) 57,000 827
Barclay's (GBP) 101,278 2,518
Chase Manhattan 165,120 7,606
DBS Group Holdings (SGD) 40,937 526
Deutsche Bank (EUR) 18,700 1,539
Dresdner Bank (EUR) 20,200 831
First Union 101,919 2,529
Firstar 29,901 630
Fleetboston Financial 77,341 2,630
Grupo Financiero Bancomer ADR * 20,000 200
HSBC Holdings (GBP) 343,092 3,933
KBC Bancassurance Holding (EUR) 25,000 1,100
KeyCorp 100,000 1,763
Mediobanca (EUR) 125,100 1,290
Mellon Financial 155,000 5,648
Overseas Chinese Bank (SGD) 33,810 233
Societe Generale (EUR) 47,160 2,836
State Street 25,000 2,652
Sumitomo Bank (JPY) 140,000 1,715
Svenska Handelsbanken (Series A) (SEK) 78,000 1,132
U.S. Bancorp 128,952 2,482
UBS (CHF) 32,178 4,714
Washington Mutual 60,000 1,733
10
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
-------------------------------------------------------------------------------
In thousands
Wells Fargo 180,000 $ 6,975
---------
82,825
---------
Insurance 1.8%
ACE Limited 160,000 4,480
Aegon 49,980 1,780
Allied Zurich (GBP) 160,000 1,880
American General 48,000 2,928
American International Group 127,156 14,941
Conseco 31,213 304
Horace Mann Educators 20,400 306
Marsh & McLennan 6,900 721
Medical Assurance 31,528 355
MGIC Investment 23,200 1,056
St. Paul Companies 86,000 2,935
Sumitomo Marine & Fire Insurance (JPY) 175,000 1,018
Torchmark 78,600 1,940
UNUMProvident 100,000 2,006
XL Capital (Class A) 50,000 2,706
---------
39,356
---------
Financial Services 3.3%
A.G. Edwards 20,212 788
AMBAC 22,200 1,217
American Express 157,800 8,225
Associates First Capital (Class A) 90,938 2,029
AXA (EUR) 20,600 3,245
Citigroup 327,034 19,704
Countrywide Credit 63,925 1,938
Fannie Mae 78,000 4,071
Freddie Mac 48,600 1,968
Goldman Sachs Group 25,000 2,372
Household International 72,000 2,992
ING Groep (EUR) 51,674 3,493
Morgan Stanley Dean Witter 139,600 11,622
Pearson (GBP) 150,000 4,721
Per Se Technologies * 4,866 45
Waddell & Reed Financial (Class A) 6,708 220
Waddell & Reed Financial (Class B) 28,873 839
---------
69,489
---------
Total Financial 191,670
---------
11
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
-------------------------------------------------------------------------------
In thousands
UTILITIES 5.6%
Telephone 4.1%
ALLTEL 80,000 $ 4,955
AT&T 302,463 9,565
Bell Atlantic 118,600 6,026
BellSouth 204,000 8,695
British Telecommunications ADR 21,600 2,857
Cable & Wireless ADR 37,288 802
Compania de Telecomunicaciones de Chile (Class A) ADR 17,000 308
COMSAT 2,211 55
GTE 113,800 7,084
Nippon Telegraph & Telephone (JPY) 168 2,233
SBC Communications 386,740 16,727
Sprint 101,800 5,192
Telebras ADR 20,000 1,942
Telecom Corporation of New Zealand (NZD) 520,000 1,817
Telecom Italia (EUR) 317,220 4,361
Telecom Italia Mobile (EUR) 571,000 5,833
Telefonica de Espana ADR 38,201 2,447
Telefonos de Mexico (Class L) ADR 60,000 3,427
Telekom Malaysia (MYR) 200 1
U.S. West 20,546 1,762
----------
86,089
----------
Electric Utilities 1.3%
Consolidated Edison 48,200 1,428
Duke Energy 70,115 3,953
E.On (EUR) 29,700 1,432
Edison International 104,000 2,132
Electrabel (EUR) 3,100 766
Empresa Nacional de Electricidad Chile ADR * 13,300 147
Endesa ADR 48,800 952
Entergy 73,000 1,985
FirstEnergy 75,000 1,753
FPL Group 25,600 1,267
GPU 75,000 2,030
Hong Kong Electric (HKD) 208,071 670
Niagara Mohawk * 102,500 1,428
12
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
PECO Energy 66,000 $ 2,661
PG&E 67,800 1,669
TXU 39,899 1,177
Unicom 68,600 2,654
--------------
28,104
--------------
Media and Communications 0.2%
Vodafone AirTouch ADR 100,000 4,144
--------------
4,144
--------------
Total Utilities 118,337
--------------
CONSUMER NONDURABLES 11.6%
Cosmetics 0.3%
Gillette 45,174 1,578
International Flavors & Fragrances 11,700 353
Kao (JPY) 161,000 4,916
Revlon (Class A) * 1,800 12
--------------
6,859
--------------
Beverages 1.2%
Anheuser-Busch 44,000 3,286
Coca-Cola 92,600 5,319
Diageo ADR 27,043 962
LVMH (EUR) 9,541 3,934
PepsiCo 204,000 9,065
Starbucks * 48,800 1,865
--------------
24,431
--------------
Food Processing 1.5%
Agribrands International * 2,320 97
Bestfoods 65,800 4,557
Cadbury Schweppes ADR 63,172 1,658
Carrefour (EUR) 24,000 1,641
ConAgra 53,400 1,018
Corn Products International 8,225 218
Danisco (DKK) 16,000 534
Earthgrains 5,120 99
Eridania Beghin-Say (EUR) 8,100 793
General Mills 115,000 4,399
Heinz 77,000 3,369
13
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
McCormick 10,300 $ 335
Nestle (CHF) 1,724 3,451
Quaker Oats 60,000 4,507
Ralston Purina 69,612 1,388
Sara Lee 165,800 3,202
Unilever 14,285 614
Universal Foods 14,200 263
Whitman 1,100 14
--------
32,157
--------
Hospital Supplies/Hospital Management 1.1%
Abbott Laboratories 127,200 5,668
Baxter International 50,000 3,516
Becton, Dickinson 60,000 1,721
Guidant * 42,400 2,099
Health Management (Class A) * 81,252 1,061
Medtronic 126,000 6,276
Millipore 900 68
Smith & Nephew (GBP) 210,000 754
Terumo (JPY) 75,000 2,538
---------
23,701
---------
Pharmaceuticals 5.5%
American Home Products 153,200 9,000
Amgen * 51,000 3,584
AstraZeneca Group (SEK) 40,360 1,876
Bristol-Myers Squibb 168,800 9,833
Daiichi Pharmaceutical (JPY) 115,000 2,916
Eli Lilly 80,000 7,990
Gehe (EUR) 13,550 446
Glaxo Wellcome ADR 30,400 1,758
Johnson & Johnson 51,900 5,287
Merck 175,800 13,471
Novartis (CHF) 1,626 2,576
Pfizer 649,950 31,198
Pharmacia 187,500 9,691
Schering-Plough 72,600 3,666
SmithKline Beecham ADR 124,800 8,135
Takeda Chemical Industries (JPY) 84,000 5,510
---------
116,937
---------
14
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Biotechnology 0.0%
Covance * 7,500 $ 66
Edwards Lifesciences * 10,000 191
-------
257
-------
Health Care Services 0.6%
Aetna 52,695 3,382
Altana (EUR) 12,000 962
CIGNA 8,700 814
Gentiva Health Services * 1,029 8
IMS Health 28,200 508
UnitedHealth Group 70,600 6,054
-------
11,728
-------
Miscellaneous Consumer Products 1.4%
Arctic Cat 2,550 30
Benetton Group (EUR) 446,200 933
Bridgestone (JPY) 69,000 1,460
Burlington Industries * 17,700 30
Colgate-Palmolive 120,400 7,209
Energizer Holdings * 23,204 423
Fortune Brands 40,000 923
Huhtamaki (EUR) 10,000 313
Imperial Tobacco Group ADR 15,750 305
Jones Apparel Group * 67,200 1,579
Koninklijke Philips Electronics * 114,816 5,454
Kuraray (JPY) 148,000 1,696
Lion Nathan (NZD) 175,000 390
Mattel 20,000 264
NIKE (Class B) 900 36
Pactiv * 200 2
Philip Morris 10,800 287
PPG Industries 2,400 106
Procter & Gamble 98,800 5,656
Takkt (EUR) * 13,550 127
Tomkins (GBP) 300,000 974
Tomkins ADR 3,720 48
UST 2,000 29
Yue Yuen Industrial (HKD) 127,000 280
-------
28,554
-------
Total Consumer Nondurables 244,624
-------
15
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
CONSUMER SERVICES 5.9%
Restaurants 0.0%
Applebee's 10,600 $ 322
Darden Restaurants 6,300 102
Tricon Global Restaurants * 15,040 425
-------
849
-------
General Merchandisers 2.1%
Costco Wholesale * 206,800 6,831
J.C. Penney 44,000 811
JUSCO (JPY) 67,000 1,269
Marui (JPY) 53,000 1,014
May Department Stores 77,100 1,850
Pinault Printemps Redoute (EUR) 10,000 2,221
Sears 40,000 1,305
Target 122,200 7,088
Tesco (GBP) 606,429 1,886
TJX 176,000 3,300
Wal-Mart 280,000 16,135
-------
43,710
-------
Specialty Merchandisers 1.4%
Callaway Golf 13,000 212
Christian Dior (EUR) 7,000 1,587
Circuit City Stores 171,800 5,702
CVS 50,000 2,000
Federated Department Stores * 1,800 61
Gymboree * 8,400 25
Heilig-Meyers 4,500 5
Home Depot 90,300 4,509
Kroger * 200,000 4,412
Office Depot * 48,000 300
Omron (JPY) 68,000 1,846
Payless Shoesource * 192 10
Petrie Stores Liquidation Trust 33,500 41
Safeway * 55,200 2,491
Staples * 53,155 819
The Gap 167,300 5,228
Toys "R" Us * 64,380 938
-------
30,186
-------
16
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Entertainment and Leisure 1.2%
Brinker * 8,775 $ 257
Buffets * 2,400 31
Disney 175,417 6,808
Hilton 2,300 22
Hutchison Whampoa (HKD) 429,000 5,393
International Game Technology * 9,000 239
McDonald's 60,000 1,976
Park Place Entertainment * 2,300 28
Reader's Digest (Class A) 35,000 1,391
Sharp (JPY) 72,000 1,272
Viacom (Class A) * 9,000 615
Viacom (Class B) * 99,595 6,791
--------
24,823
--------
Media and Communications 1.2%
A.H. Belo (Class A) 13,600 235
A.C. Nielson * 4,700 103
Asatsu (JPY) 54,000 2,214
AT&T Canada (144a) * 1,714 51
Banta 13,500 256
Clear Channel Communications * 20,000 1,500
Comcast (Class A Special) 80,000 3,242
Dun & Bradstreet 14,100 404
Elsevier (EUR) 50,000 606
Gannett 27,600 1,651
Gaylord Entertainment 3,528 76
McGraw-Hill 64,400 3,478
NTL * 18,747 1,123
R.H. Donnelley * 2,820 55
Time Warner 122,700 9,325
Tribune 40,000 1,400
--------
25,719
--------
Total Consumer Services 125,287
--------
CONSUMER CYCLICALS 2.2%
Automobiles and Related 1.2%
Autoliv 21,653 521
Cycle & Carriage (SGD) 50,000 118
17
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
DaimlerChrysler 15,000 $ 781
Dana 1,300 28
Delphi Automotive Systems 59,968 873
Ford Motor 114,430 4,920
Gentex * 36,400 912
Genuine Parts 81,975 1,640
GM 85,800 4,982
Goodyear Tire & Rubber 300 6
Honda ADR 30,100 2,069
ITT Industries 100,000 3,037
MIDAS 183 4
Pep Boys 7,100 43
Superior Industries 8,000 206
Textron 62,000 3,367
TRW 30,000 1,301
Visteon * 14,982 182
--------
24,990
--------
Building and Real Estate 0.2%
Cheung Kong Holdings (HKD) 283,000 3,113
City Developments (SGD) 50,000 194
DBS Land (SGD) 600,000 778
Interstate Hotels * 5,000 14
Starwood Hotels & Resorts Worldwide, REIT 1,561 51
Texas Industries 9,400 271
USG 14,600 444
Wyndham International (Class A) * 150,001 375
--------
5,240
--------
Miscellaneous Consumer Durables 0.8%
B.F. Goodrich 16,744 570
Black & Decker 36,000 1,415
Eastman Kodak 22,600 1,345
Harley-Davidson 15,200 585
Imation * 1,800 53
Masco 99,800 1,802
RadioShack 80,000 3,790
Ricoh (JPY) 100,000 2,116
Scotts (Class A) * 10,000 365
Sony (JPY) 32,000 2,986
18
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Valspar 36,200 $ 1,222
York International 2,600 66
16,315
-------
Total Consumer Cyclicals 46,545
-------
TECHNOLOGY 11.6%
Electronic Components 4.4%
Altera * 76,000 7,745
Analog Devices * 133,600 10,153
EMC * 197,200 15,172
Intel 228,000 30,474
Linear Technology 103,200 6,595
Maxim Integrated Products * 100,000 6,791
Molex 19,071 919
Motorola 120,000 3,487
Texas Instruments 100,000 6,869
Thermo Electron * 18,452 389
Vicor * 12,000 418
Xilinx * 50,400 4,163
-------
93,175
-------
Electronic Systems 1.5%
Agilent Technologies * 48,933 3,609
Applied Materials * 80,000 7,252
Hewlett-Packard 128,300 16,021
KLA-Tencor * 60,000 3,516
MIPS Technologies (Class B) * 2,037 79
Solectron * 38,400 1,608
-------
32,085
-------
Information Processing 1.0%
Adaptec * 14,000 319
Adecco 292 31
Choicepoint * 3,560 158
COMPAQ Computer 254,000 6,493
Dell Computer * 9,600 474
Hitachi ADR 15,200 2,191
IBM 96,800 10,606
Storage Technology * 10,000 109
-------
20,381
-------
19
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Office Automation 0.0%
Pitney Bowes 5,200 $ 208
Xerox 4,600 95
-------
303
-------
Specialized Computer 0.7%
Silicon Graphics * 14,700 55
Sun Microsystems * 174,200 15,847
-------
15,902
-------
Telecommunications 3.2%
Cisco Systems * 140,000 8,894
Corning 30,000 8,096
Cox Communications (Class A) * 100,000 4,556
France Telecom ADR 45,000 6,413
LM Ericsson (Class B) ADR 432,000 8,654
Lucent Technologies 137,239 8,131
Nortel Networks 17,224 1,176
PictureTel * 8,800 23
Sprint PCS * 100,900 6,004
Tele Norte Leste Participacoes ADR 2,341 55
Tele Sudeste Celular Participacoes ADR 4,000 187
Telecomunicacoes De Sao Paulo ADR 20,000 554
Tellabs * 46,400 3,177
WorldCom * 245,637 11,276
-------
67,196
-------
Aerospace and Defense 0.8%
Boeing 86,000 3,596
Honeywell International 159,500 5,373
Lockheed Martin 83,600 2,074
Northrop Grumman 30,000 1,987
Raytheon (Class A) 2,142 42
Raytheon (Class B) 500 10
Trinity Industries 300 6
United Technologies 48,400 2,849
-------
15,937
-------
Total Technology 244,979
-------
20
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
CAPITAL EQUIPMENT 4.1%
Electrical Equipment 3.4%
ABB (CHF) 12,562 $ 1,504
American Power Conversion * 20,600 840
Canon (JPY) 55,000 2,737
Emerson Electric 56,200 3,393
GE 766,500 40,625
Hubbell (Class A) 8,000 207
Hubbell (Class B) 80,252 2,046
Matsushita Electric Industrial (JPY) 100,000 2,592
Matsushita Electric Works (JPY) 100,000 1,238
Mitsubishi Electric (JPY) 190,000 2,056
Tyco International 300,964 14,258
-------
71,496
-------
Machinery 0.7%
Caterpillar 50,000 1,694
Cooper Industries 600 20
Danaher 65,600 3,243
Deere 118,000 4,366
Dover 2,400 97
FMC * 42,000 2,436
Foster Wheeler 4,600 40
GKN (GBP) 90,000 1,146
Ingersoll-Rand 1,500 60
Kennametal 11,400 244
SIG Schweis (CHF) 2,080 1,304
Stewart & Stevenson 6,300 95
Teleflex 10,000 371
-------
15,116
-------
Total Capital Equipment 86,612
-------
BUSINESS SERVICES AND
TRANSPORTATION 4.6%
Computer Service and Software 3.1%
Automatic Data Processing 70,000 3,749
BMC Software 80,000 2,918
21
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Computer Associates 112,587 $ 5,763
Electronic Arts * 7,500 547
Electronic Data Systems 44,223 1,824
First Data 80,000 3,970
Intuit * 150,000 6,197
Microsoft * 150,000 11,995
NCR * 6,718 262
Novell * 45,600 423
Oracle * 226,000 18,991
Parametric Technology * 262,000 2,874
SmartForce ADR * 29,400 1,409
SunGard Data Systems * 26,400 819
Sybase * 7,000 161
Synopsys * 95,600 3,301
Zixit * 3,625 167
------------
65,370
------------
Distribution Services 0.2%
Cardinal Health 57,939 4,287
------------
4,287
------------
Environmental 0.0%
Allied Waste * 63,000 630
------------
630
------------
Transportation Services 0.1%
Landstar Systems * 40,000 2,383
Mitsubishi Heavy Industries (JPY) 159,000 704
------------
3,087
------------
Miscellaneous Business Services 0.8%
British Airport Authorities (GBP) 108,371 861
Cendant * 79,010 1,106
Cintas 10,800 395
Equifax 17,800 467
General Semiconductor * 350 5
GTECH * 4,500 102
H&R Block 30,900 1,000
Manpower 12,200 390
Omnicom 26,800 2,387
Paychex 94,540 3,971
Sabre Holdings 28,906 824
22
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
United Parcel Service 75,000 $ 4,425
Waste Management 28,395 540
-------
16,473
-------
Airlines 0.2%
AMR * 40,000 1,058
KLM (EUR) 17,250 464
Mesa Air Group * 17,300 95
Northwest Airlines * 300 9
Singapore Airlines (SGD) 40,000 396
UAL 30,000 1,746
-------
3,768
-------
Railroads 0.2%
Burlington Northern Santa Fe 75,300 1,727
Canadian National Railway 326 9
CSX 22,500 477
Norfolk Southern 63,200 940
Union Pacific 14,000 521
Wisconsin Central Transport * 20,400 265
-------
3,939
-------
Total Business Services and Transportation 97,554
-------
ENERGY 4.8%
Energy Services 0.9%
BJ Services * 88,200 5,512
Friede Goldman Halter * 88 1
Halliburton 52,742 2,489
Helmerich & Payne 40,000 1,495
Johnson Electric (HKD) 247,200 2,347
Schlumberger 60,200 4,492
Smith International * 18,300 1,332
Tokyo Electric Power (JPY) 80,000 1,949
Transocean Sedco Forex 11,654 623
-------
20,240
-------
Exploration and Production 0.1%
Anadarko Petroleum 3,600 177
EEX * 7,147 41
Unocal 4,400 146
23
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Santa Fe Snyder * 13,900 $ 158
Santos (EUR) 200,000 609
Ultramar Diamond Shamrock 9,100 226
Union Pacific Resources 11,857 261
-------
1,618
-------
Gas & Gas Transmission 0.4%
El Paso Energy 47,766 2,433
Enron 100,000 6,450
Tenneco Automotive 40 0
-------
8,883
-------
Integrated Petroleum - Domestic 0.8%
Amerada Hess 137,700 8,503
Conoco (Class B) 73,705 1,811
Kerr-McGee 600 35
Phillips Petroleum 48,300 2,448
USX-Marathon 140,000 3,509
-------
16,306
-------
Integrated Petroleum - International 2.6%
BP Amoco ADR 264,202 14,944
Chevron 41,400 3,511
ENI SPA ADR 26,600 1,548
Exxon Mobil 284,963 22,370
Repsol ADR 72,000 1,426
Royal Dutch Petroleum 70,000 4,309
Shell Transport & Trading ADR 36,300 1,813
Texaco 40,727 2,169
TotalFinaElf (Class B) 13,148 2,016
TotalFinaElf ADR 18,000 1,383
-------
55,489
-------
Total Energy 102,536
-------
PROCESS INDUSTRIES 1.7%
Diversified Chemicals 0.4%
Dow Chemical 100,000 3,019
DuPont 112,315 4,914
Hercules 1,800 25
-------
7,958
-------
24
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Specialty Chemicals 0.7%
3M 18,600 $ 1,534
A. Schulman 26,325 317
Air Liquide (L) (EUR) 8,538 1,113
Akzo Nobel (EUR) 28,000 1,190
BASF (EUR) 36,200 1,455
Bayer (EUR) 34,600 1,350
Great Lakes Chemical 25,000 788
Imperial Chemical ADR 31,000 955
Lyondell Petrochemical 7,100 119
Octel * 6,250 49
Pall 8,533 158
Rohm & Haas 107,417 3,706
Solutia 18,460 254
Sumitomo Chemicals (JPY) 175,000 1,052
Technip (EUR) 15,000 1,814
-----------
15,854
-----------
Paper and Paper Products 0.4%
Dai Nippon Printing (JPY) 67,000 1,180
Fort James 87,500 2,023
International Paper 46,000 1,371
Kimberly-Clark 34,400 1,974
Kimberly-Clark de Mexico (Class A) (MXN) 265,000 754
Mead 30,000 758
Sonoco Products 13,975 287
-----------
8,347
-----------
Forest Products 0.1%
Georgia-Pac Timber 19,000 411
Georgia-Pacific 38,000 998
Weyerhaeuser 12,700 546
-----------
1,955
-----------
Building & Construction 0.1%
Blue Circle Industries (GBP) 136,612 888
Del Webb 100 1
Grupo Dragados (EUR) 16,200 116
Hanson ADR 7,875 278
Holderbank Financiere Glarus (CHF) 1,210 1,483
-----------
2,766
-----------
Total Process Industries 36,880
-----------
25
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
BASIC MATERIALS 0.8%
Metals 0.7%
Alcoa 200,560 $ 5,816
Anglo American Platinum (ZAR) 85,000 2,448
Inco * 200,000 3,075
Newmont Mining 60,000 1,298
Nucor 52,000 1,726
-----------
14,363
-----------
Mining 0.0%
Lonrho Africa (GBP) * 44,911 11
Rio Tinto (EUR) 40,000 661
-----------
672
-----------
Miscellaneous Materials 0.1%
Crown Cork & Seal 1,400 21
Malayan Cement (MYR) 187,200 62
Owens-Illinois * 78,500 917
Williams Companies 5,661 236
-----------
1,236
-----------
Total Basic Materials 16,271
-----------
MISCELLANEOUS 0.0%
Conglomerates 0.0%
Berkshire Hathaway (Class B) * 136 239
Orkla (Class A) (NOK) 34,285 651
-----------
Total Miscellaneous 890
-----------
FOREIGN 0.6%
Europe 0.3%
AXA Colonia Konzern (EUR) * 6,000 576
CSM (EUR) 34,000 668
Man (EUR) 35,000 1,058
Nordic Baltic Holding (SEK) * 254,080 1,853
Rolls Royce (GBP) 405,590 1,442
-----------
5,597
-----------
Far East 0.1%
Nippon Express (JPY) 280,000 1,718
-----------
1,718
-----------
26
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Other Foreign 0.2%
Bobst (CHF) 740 $ 1,191
Companhia Vale do Rio Doce ADR 25,000 715
Siemens (EUR) 16,900 2,549
Valmet Rauma (EUR) 32,000 385
----------
4,840
----------
Total Foreign 12,155
----------
Total Common Stocks (Cost $733,699) 1,324,340
----------
PREFERRED STOCKS 0.1%
CSC Holdings 12,166 1,290
----------
Total Preferred Stocks (Cost $1,338) 1,290
----------
CONVERTIBLE PREFERRED STOCKS 0.5%
ProLogis Trust (Series B), 7.00% 225,000 6,131
Reckson Associates Realty, Cv. Pfd., (Series A), 7.625% 200,000 4,475
----------
Total Convertible Preferred Stocks (Cost $10,073) 10,606
----------
CORPORATE BONDS 14.9%
Abbey National First Capital, Sub. Notes, 8.20%, 10/15/04 $ 1,205,000 1,247
African Development Bank, Sub. Notes, 7.75%, 12/15/01 1,000,000 1,006
Agrosy Gaming, 10.75%, 6/1/09 250,000 259
AIG Sunamerica Global Financing, Sr. Notes, (144a)
7.60%, 6/15/05 2,600,000 2,618
Alaska Communications, 9.375%, 5/15/09 700,000 647
Allied Holdings, Gtd. Sr. Sub. Notes, 8.625%, 10/1/07 500,000 443
AMERCO, Sr. Notes, 7.85%, 5/15/03 1,000,000 951
American Builders & Contractors Supply, Sr. Sub. Notes
10.625%, 5/15/07 500,000 410
Ameritech Capital Funding, 6.15%, 1/15/08 2,000,000 1,821
Amkor Technology
Sr. Notes, 9.25%, 5/1/06 300,000 296
Sr. Sub. Notes, 10.50%, 5/1/09 325,000 327
Andina De Fomento, 6.75%, 3/15/05 2,500,000 2,372
Anheuser-Busch
5.75%, 4/1/10 5,000,000 4,425
6.90%, 10/1/02 2,000,000 1,988
</TABLE>
27
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Anteon, 12.00%, 5/15/09 250,000 $ 229
Applied Extrusion Technology, Sr. Notes, 11.50%, 4/1/02 1,000,000 1,005
Associated Materials, Sr. Sub. Notes, 9.25%, 3/1/08 1,250,000 1,175
Associates, Sr. Notes, 7.50%, 4/15/02 1,300,000 1,299
AT&T, 6.50%, 3/15/29 4,000,000 3,348
Atlantic Richfield
8.50%, 4/1/12 4,000,000 4,335
8.75%, 3/1/32 1,570,000 1,800
Atlas Air, 7.63%, 1/2/15 3,227,978 2,974
Ball, 7.75%, 8/1/06 500,000 468
Banesto Delaware, Sub. Notes, 8.25%, 7/28/02 2,000,000 2,023
Bank United, 10.25%, 12/31/26 1,000,000 840
BankAmerica, Sub. Notes, 6.625%, 8/1/07 3,000,000 2,804
Baxter International, 7.125%, 2/1/07 1,500,000 1,454
BB&T, 6.375%, 6/30/05 3,000,000 2,799
BCH Cayman Islands, Sub. Notes, 7.50%, 6/15/05 1,000,000 986
BHP Finance, Gtd. Notes, 6.69%, 3/1/06 2,000,000 1,851
Boeing, 8.75%, 8/15/21 2,000,000 2,165
Burlington Northern Santa Fe
7.00%, 12/15/25 2,000,000 1,764
PTC, 7.33%, 6/23/10 800,707 783
BWAY, Sr. Sub. Notes, 10.25%, 4/15/07 1,050,000 997
Capital One Bank, 8.25%, 6/15/05 2,500,000 2,487
Century Telephone Enterprises, Sr. Notes, 8.25%, 5/1/24 500,000 468
Charter Communication, Sr. Notes
8.25%, 4/1/07 250,000 221
10.00%, 4/1/09 1,000,000 970
Chase Manahattan Auto Owner Trust, 5.85%, 5/15/03 4,000,000 3,952
Chattem, Sr. Sub. Notes, 12.75%, 6/15/04 1,000,000 1,015
Chemical Master Credit Card Trust I
5.55%, 9/15/03 100,000 100
6.23%, 4/15/05 110,000 108
Chrysler Financial, 5.875%, 2/7/01 2,000,000 1,983
Cinemark USA, Sr. Sub. Notes, 8.50%, 8/1/08 300,000 140
Citibank Credit Card Master Trust I, Zero Coupon, 2/7/03 170,000 163
Citizens Utilities, 7.00%, 11/1/25 1,500,000 1,267
Classic Cable, Sr. Sub. Notes, 9.375%, 8/1/09 750,000 652
</TABLE>
28
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Clear Channel Communications, 7.875%, 6/15/05 $ 2,500,000 $ 2,510
Coca-Cola Bottling, 7.20%, 7/1/09 5,000,000 4,791
Coinmach, Sr. Sub. Notes, 11.75%, 11/15/05 500,000 480
Colt Telecom, Sr. Disc. Notes, STEP, 0%, 12/15/06 1,250,000 1,100
Comcast Cable Communications
8.125%, 5/1/04 1,500,000 1,520
8.375%, 5/1/07 4,500,000 4,639
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 600,000 450
Conoco, 6.95%, 4/15/29 4,000,000 3,642
Consolidated Container, Sr. Sub. Notes, 10.125%, 7/15/09 1,000,000 990
Consumers Energy, 1st Mtg., 7.375%, 9/15/23 3,500,000 3,041
Continental Airlines, PTC, 7.206%, 6/30/04 376,840 365
Corestates Home Equity Loan
5.10%, 3/15/09 65,338 64
6.65%, 5/15/09 107,065 104
Countrywide Funding, MTN, 6.875%, 9/15/05 860,000 812
Courtyard by Marriott II, Sr. Secured Notes, 10.75%, 2/1/08 500,000 491
CSX, Deb. Notes, 7.45%, 5/1/07 1,000,000 963
Dan River, Sr. Sub. Notes, 10.125%, 12/15/03 300,000 291
Delta Airlines, Deb. Notes, 8.95%, 1/12/12 1,459,294 1,485
Delta Mills, Sr. Notes, 9.625%, 9/1/07 120,000 101
Deutsche Financial Capital, 6.75%, 9/15/27 1,974,242 1,966
Deutsche Telekom International, 8.00%, 6/15/10 2,500,000 2,525
Dillards, 6.43%, 8/1/04 2,000,000 1,772
Distribution Financial Services Marine Trust, 6.93%, 9/15/17 6,000,000 5,400
Doane Pet Care, Sr. Sub. Notes, 9.75%, 5/15/07 1,200,000 1,020
Dobson Communications, Sr. Notes, (144a), 10.875%, 7/1/10 700,000 705
Duke Energy, 1st Ref. Mtg
6.75%, 8/1/25 1,000,000 847
7.50%, 8/1/25 1,000,000 926
Dyersburg, Sr. Sub. Notes, 9.75%, 9/1/07 500,000 50
Dyncorp, Sr. Sub. Notes, 9.50%, 3/1/07 575,000 460
Embotelladora Andina, 7.625%, 10/1/27 2,000,000 1,628
Energis, 9.75%, 6/15/09 1,000,000 980
Energy Corp. of America, Sr. Sub. Notes, 9.50%, 5/15/07 1,000,000 640
Enron Oil & Gas, 6.50%, 12/1/07 4,000,000 3,664
</TABLE>
29
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Equitable Resources, 7.75%, 7/15/26 $ 2,000,000 $ 1,864
ERAC USA Finance, (144a), 6.75%, 5/15/09 5,000,000 4,512
Exodus Communications, Sr. Notes, 10.75%, 12/15/09 550,000 531
Fairfax Financial Holdings
7.75%, 12/15/03 800,000 744
8.30%, 4/15/26 2,500,000 1,919
Federal Express, MTN, 9.95%, 8/15/06 500,000 549
First USA Secured Note Trust, 6.50%, 1/18/06 4,000,000 3,871
Fleet Financial Group, Sub. Notes, 8.625%, 1/15/07 800,000 824
Flextronics International, Sr. Sub. Notes, (144a)
9.875%, 7/1/10 650,000 658
Focal Communications, (144a), 11.875%, 1/15/10 500,000 497
Food Lion, 8.05%, 4/15/27 1,900,000 1,670
Ford Capital, 9.50%, 6/1/10 4,000,000 4,449
Ford Motor, 7.50%, 8/1/26 2,500,000 2,359
Ford Motor Credit
7.50%, 3/15/05 2,000,000 1,990
8.20%, 2/15/02 170,000 171
Freeport McMoRan Resources, Sr. Notes,
7.00%, 2/15/08 900,000 808
Fresenius Medical Care Capital Trust II,
7.875%, 2/1/08 1,000,000 910
Frontier Oil, 11.75%, 11/15/09 500,000 500
Frontiervision, Sr. Notes, 11.00%, 10/15/06 1,000,000 1,015
General Electric Capital, MTN, 7.25%, 5/3/04 2,000,000 2,012
General Motors Acceptance, MTN, 6.75%, 6/17/02 80,000 79
General Motors, Deb. Notes, 9.625%, 12/1/00 140,000 141
Global Crossing Holdings, Sr. Notes, 9.50%, 11/15/09 600,000 576
Global Imaging, 10.75%, 2/15/07 400,000 344
GMAC Commercial Mortgage Security, 6.42%, 8/15/08 3,000,000 2,806
Green Tree Financial, 5.75%, 10/15/18 23,943 24
GTE Florida, Deb. Notes, 7.41%, 12/15/23 1,000,000 895
Halliburton, 5.625%, 12/1/08 3,000,000 2,658
Harrahs, 7.875%, 12/15/05 300,000 282
Hawk, Sr. Notes, 10.25%, 12/1/03 550,000 532
HCC Industries, Sr. Sub. Notes, 10.75%, 5/15/07 675,000 284
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 1,125,000 1,170
Hermes Europe Railtel, 10.375%, 1/15/09 200,000 166
Holmes Products, Gtd. Notes, 9.875%, 11/15/07 50,000 35
30
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Horseshoe Gaming $ $
8.625%, 5/15/09 150,000 140
Sr. Sub. Notes, 9.375%, 6/15/07 850,000 841
Household Finance, 8.00%, 5/9/05 2,100,000 2,115
Houston Lighting & Power, 7.50%, 7/1/23 3,000,000 2,699
IBM, 6.45%, 8/1/07 1,000,000 959
Intermedia Communications of Florida, Sr. Disc.
Notes STEP, 0%, 7/15/07 1,000,000 790
International Bank For Reconstruction & Development
7.625%, 1/19/23 1,800,000 1,891
International Game Technology, 8.375%, 5/15/09 500,000 479
International Home Foods, Gtd. Sr. Sub. Notes
10.375%, 11/1/06 300,000 321
International Wire, Sr. Sub. Notes, 11.75%, 6/1/05 500,000 502
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 500,000 410
Iron Mountain, 11.125%, 7/15/06 500,000 516
ISG Resources, Sr. Sub. Notes, 10.00%, 4/15/08 500,000 456
Isle of Capri Casinos, Sr. Sub. Notes, 8.75%, 4/15/09 250,000 230
ISP Holdings, Sr. Notes, 9.75%, 2/15/02 1,000,000 965
Jack in the Box, Sr. Secured Notes, 9.75%, 11/1/03 290,000 289
Jefferson Pilot Capital Trust, (144a),
8.14%, 1/15/46 1,500,000 1,326
KFW International Finance, MTN, 9.14%, 6/4/01 250,000 254
Kimberly-Clark, 6.375%, 1/1/28 5,000,000 4,350
King Pharmaceuticals, 10.75%, 2/15/09 300,000 311
Koppers, Sr. Sub. Notes, 9.875%, 12/1/07 500,000 465
Kroger Company, 8.05%, 2/1/10 2,500,000 2,482
L3 Communications, Sr. Sub. Notes, 10.375%, 5/1/07 300,000 305
Lear, 8.11%, 5/15/09 500,000 455
Lehman Brothers
Sr. Sub. Notes, 6.625%, 2/15/08 1,500,000 1,347
8.875%, 3/1/02 1,500,000 1,523
Lennar, Sr. Notes, (144a), 9.95%, 5/1/10 650,000 637
Liberty National Bank & Trust, Sub. Notes
6.75%, 6/1/03 500,000 489
LifePoint Hospitals, 10.75%, 5/15/09 400,000 411
Loral, Sr. Notes, 7.625%, 6/15/04 1,500,000 1,491
McDonnell Douglas, 8.25%, 7/1/00 500,000 500
McLeod USA, Zero Coupon, 3/1/07 600,000 495
31
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Mediacom, Sr. Notes, 7.875%, 2/15/11 $ 300,000 $ 263
Metromedia Fiber Network, Sr. Notes,
10.00%, 11/15/08 900,000 891
Millicom International Cellular, Zero Coupon, 6/1/06 500,000 425
Mohegan Tribal Gaming, Sr. Notes, 8.125%, 1/1/06 1,000,000 940
Morgan Stanley Group, 6.875%, 3/1/07 4,000,000 3,815
National Australia Bank Limited, Sub. Notes
8.60%, 5/19/10 3,200,000 3,347
Nationsbank Credit Card Master Trust, 6.00%, 12/15/05 140,000 136
New Jersey Bell Telephone, 6.80%, 12/15/24 2,500,000 2,157
News America Holdings, Gtd. Sr. Notes, 9.25%, 2/1/13 3,090,000 3,297
Nextel Communications, Sr. Disc. Notes, STEP
0%, 10/31/07 1,000,000 745
Nextlink Communications, Sr. Notes, 12.50%, 4/15/06 1,000,000 1,050
NGC, Sr. Notes, 6.75%, 12/15/05 1,000,000 943
Niagara Mohawk Power, 7.625%, 10/1/05 1,512,195 1,485
Norfolk Southern, 7.80%, 5/15/27 4,000,000 3,827
Northland Cable Television, Sr. Sub. Notes
10.25%, 11/15/07 500,000 415
Northrop Grumman, 7.875%, 3/1/26 2,000,000 1,874
NTL, Sr. Notes, STEP, 0%, 2/1/06 400,000 368
Nuevo Energy, 9.50%, 6/1/08 500,000 493
NYNEX, 9.55%, 5/1/10 911,856 984
Ocean Energy, Sr. Sub. Notes, 8.375%, 7/1/08 600,000 582
Octel, Sr. Notes, 10.00%, 5/1/06 800,000 724
Oracle, Sr. Notes, 6.91%, 2/15/07 3,000,000 2,866
Orange, Sr. Notes, 9.00%, 6/1/09 1,100,000 1,119
Orion Power Holdings, Sr. Notes, (144a),
12.00%, 5/1/10 650,000 682
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 1,850,000 1,915
P&L Coal, 8.875%, 5/15/08 300,000 284
Pacific Bell, 7.375%, 7/15/43 4,000,000 3,589
Packaging Corp. of America, 9.625%, 4/1/09 1,000,000 996
Paine Webber, Sr. Notes, 6.55%, 4/15/08 4,000,000 3,567
PDVSA Finance Limited, 7.40%, 8/15/16 2,000,000 1,526
Pegasus Communications, Sr. Notes, 9.625%, 10/15/05 1,000,000 965
Philadelphia Electric, 1st Ref. Mtg., 5.625%, 11/1/01 3,000,000 2,928
32
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
Plains Resources, Sr. Sub. Notes, 10.25%, 3/15/06 $ 125,000 $ 126
Premier Parks
Sr. Disc. Notes, STEP 0%, 4/1/08 1,000,000 682
Sr. Notes, 9.75%, 6/15/07 500,000 483
Price Communications Wireless, 9.125%, 12/15/06 1,000,000 1,010
Prime Credit Card Master Trust, 6.70%, 7/15/04 140,000 140
Province of Manitoba, 7.50%, 2/22/10 3,000,000 3,039
Quantas Airways
Sr. Notes, 7.50%, 6/30/03 1,000,000 985
(144a), 7.75%, 6/15/09 4,690,000 4,437
Quest Diagnostics, Gtd. Sr. Sub. Notes,
10.75%, 12/15/06 500,000 517
R&B Falcon, 6.75%, 4/15/05 3,000,000 2,700
Rail Car Trust, 7.75%, 6/1/04 64,009 65
RBF Finance, 11.00%, 3/15/06 400,000 430
Repap New Brunswick, Sr. Sec. Notes, 11.50%, 6/1/04 525,000 535
Residential Accredit Loans, 6.75%, 7/25/28 4,000,000 3,929
RSL Communications, Gtd. Sr. Notes, 9.125%, 3/1/08 400,000 256
Safelite Glass, 9.875%, 12/15/06 500,000 4
Santander Financial, Gtd. Sub. Notes, 6.375%, 2/15/11 3,000,000 2,668
Sears Credit Account Master Trust
6.05%, 1/15/08 5,455,000 5,322
6.45%, 10/16/06 70,000 70
Security Benefit Life, (144a), 8.75%, 5/15/16 3,000,000 2,801
Siebe, (144a)
6.50%, 1/15/10 2,000,000 1,876
7.125%, 1/15/07 1,500,000 1,478
Sinclair Broadcast Group, Sr. Sub. Notes
8.75%, 12/15/07 950,000 836
Spanish Broadcasting, 9.625%, 11/1/09 700,000 691
Speedway Motorsports, 8.50%, 8/15/07 1,000,000 930
State Street, 7.65%, 6/15/10 2,225,000 2,221
Station Casinos, Sr. Sub. Notes, 10.125%, 3/15/06 650,000 660
Sun Media, Sr. Sub. Notes, 9.50%, 2/15/07 1,200,000 1,164
Swift Energy, 10.25%, 8/1/09 500,000 506
Telecorp PCS, Zero Coupon, 4/15/09 500,000 329
Tenneco Packaging, 7.20%, 12/15/05 1,000,000 944
35
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Shares/Par Value
--------------------------------------------------------------------------------
In thousands
The Pantry, Sr. Sub. Notes, 10.25%, 10/15/07 $ 575,000 $ 545
Time Warner
7.48%, 1/15/08 1,400,000 1,374
9.15%, 2/1/23 5,000,000 5,469
Transwestern Publishing, 9.625%, 11/15/07 750,000 724
TravelCenters of America, Sr. Sub. Notes,
10.25%, 4/1/07 1,000,000 1,007
Travelers Property Casualty, Sr. Notes,
6.75%, 11/15/06 1,500,000 1,416
Triad Hospitals, 11.00%, 5/15/09 500,000 512
Triton PCS, Zero Coupon, 5/1/08 700,000 511
TRW, MTN, 7.37%, 4/18/07 2,000,000 1,910
Union Bank Switzerland, Sub. Notes, 7.25%, 7/15/06 1,000,000 973
United International Holdings, Sr. Disc. Notes
STEP, 0%, 2/15/08 1,000,000 690
Universal Compression, Sr. Disc. Notes, STEP
0%, 2/15/08 500,000 360
US Can, Sr. Gtd. Notes, 10.125%, 10/15/06 475,000 489
UtiliCorp United, Sr. Notes, 6.875%, 10/1/04 3,000,000 2,854
Venture Holdings Trust, Sr. Sub. Notes,
9.50%, 7/1/05 650,000 494
Verio, 10.625%, 11/15/09 500,000 550
VoiceStream Wireless
Sr. Disc. Notes, Zero Coupon, 11/15/09 550,000 369
Sr. Notes
10.375%, 11/15/09 350,000 364
11.50 %, 9/15/09 250,000 271
Wal-Mart Stores, 6.75%, 5/15/02 1,000,000 994
Washington Mutual, Sub. Notes, 8.25%, 4/1/10 2,500,000 2,479
Wells Fargo & Co., 7.20%, 5/1/03 3,000,000 2,969
WestAmerica Bank, Sub. Notes, 6.99%, 9/30/03 1,500,000 1,427
Westinghouse Air Brake, Sr. Notes, 9.375%, 6/15/05 750,000 724
Westpoint Stevens, 7.875%, 6/15/05 175,000 146
Willamette Industries, MTN, 7.85%, 7/1/26 1,000,000 955
Williams Communications Group, Sr. Notes
10.875%, 10/1/09 200,000 195
WorldCom, Sr. Notes, 6.95%, 8/15/28 4,000,000 3,529
---------
Total Corporate Bonds (Cost $336,983) 315,478
---------
34
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES 6.2%
Federal Home Loan Mortgage Assn.
6.50%, 7/1/29 $ 3,983,789 $ 3,757
8.00%, 3/1/17 11,107 11
10.00%, 10/1/10 10,927 11
Federal National Mortgage Assn.
6.00%, 10/25/08 - 3/1/29 7,764,641 7,220
7.00%, 4/1/26 44,442 43
7.50%, 11/1/29 4,910,101 4,836
REMIC, 6.50%, 7/25/08 496,827 479
Government National Mortgage Assn.
I
6.00%, 1/15/29 8,404,068 7,741
6.50%, 9/15/25 - 5/15/29 31,321,437 29,728
7.00%, 12/15/23 - 5/15/29 25,505,376 24,814
7.50%, 9/15/22 - 12/15/29 33,574,864 33,360
8.00%, 6/15/17 - 11/15/28 12,472,594 12,643
8.50%, 3/15/05 - 2/15/25 1,860,889 1,897
9.00%, 6/15/19 - 6/15/21 60,648 61
9.50%, 8/15/09 - 9/15/21 425,055 442
10.00%, 11/15/09 - 5/13/13 22,256 23
10.50%, 5/15/15 11,124 12
11.00%, 3/15/10 - 1/15/20 481,148 523
11.50%, 3/15/10 - 3/15/16 873,045 959
Project Loan, 8.875%, 2/15/30 668,775 671
II
8.50%, 6/20/25 - 6/20/26 2,110,440 2,168
9.00%, 10/20/13 - 6/20/20 212,356 220
9.50%, 8/20/22 42,568 44
10.00%, 10/20/16 - 1/20/22 57,156 60
ARM, 6.75%, 8/20/23 101,641 102
-----------
Total U.S. Government Mortgage-Backed Securities (Cost $133,702) 131,825
-----------
</TABLE>
37
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
In thousands
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS/
AGENCIES 14.5%
Federal Home Loan Banks
6.34%, 10/19/05 $ 4,875,000 $ 4,707
6.425%, 8/14/02 6,450,000 6,375
Federal Home Loan Mortgage Assn.
6.45%, 4/29/09 2,000,000 1,854
Federal National Mortgage Assn.
5.80%, 12/10/03 13,000,000 12,538
6.47%, 9/25/12 3,000,000 2,791
7.125%, 2/15/05 10,000,000 10,040
Federal National Mortgage Assn., MTN
6.36%, 8/16/00 270,000 270
Tennessee Valley Auth.
8.25%, 9/15/34 435,000 429
U.S. Department of Veteran Affairs
9.553%, 3/15/25 525,603 553
U.S. Treasury Bonds
6.50%, 11/15/26 20,750,000 21,651
6.75%, 8/15/26 6,000,000 6,447
7.125%, 2/15/23 15,500,000 17,198
7.25%, 5/15/16 10,000,000 11,006
8.125%, 8/15/19 - 8/15/21 3,650,000 4,446
8.75%, 5/15/20 1,000,000 1,281
9.25%, 2/15/16 3,000,000 3,886
11.625%, 11/15/04 20,000 24
11.75%, 2/15/01 200,000 206
13.125%, 5/15/01 200,000 211
13.875%, 5/15/11 190,000 258
U.S. Treasury Inflation-Indexed Notes
3.375%, 1/15/07 2,161,140 2,072
3.625%, 7/15/02 2,137,880 2,123
U.S. Treasury Notes
5.25%, 1/31/01 5,000,000 4,968
5.625%, 2/15/06 - 5/15/08 50,900,000 49,174
5.75%, 6/30/01 37,000,000 36,745
5.875%, 11/15/04 3,500,000 3,450
6.125%, 9/30/00 790,000 790
</TABLE>
36
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
U.S. Treasury Notes
6.25%, 2/15/03 $ 20,500,000 $ 20,437
6.50%, 5/31/02 - 8/15/05 48,500,000 48,740
6.875%, 5/15/06 2,000,000 2,059
7.50%, 11/15/01 1,310,000 1,327
7.75%, 2/15/01 2,500,000 2,519
7.875%, 11/15/04 8,150,000 8,630
8.00%, 5/15/01 5,000,000 5,064
8.75%, 8/15/00 12,500,000 12,542
-----------
Total U.S. Government Obligations/Agencies (Cost $310,952) 306,811
-----------
SHORT-TERM INVESTMENTS 2.6%
Money Market Funds 2.6%
Reserve Investment Fund, 6.68% # 54,537,499 54,537
-----------
Total Short-Term Investments (Cost $54,537) 54,537
-----------
</TABLE>
37
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
--------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
101.3% of Net Assets (Cost $1,581,284) $ 2,144,887
Other Assets Less Liabilities (27,891)
----------------
NET ASSETS $ 2,116,996
----------------
</TABLE>
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
ARM Adjustable Rate Mortgage
L Local registered shares
MTN Medium Term Note
PTC Pass-Through Certificate
STEP Stepped coupon note for which the interest rate will adjust on a
specified future date(s)
REIT Real Estate Investment Trust
REMIC Real Estate Mortgage Investment Conuit
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 period-end amounts
to 1.1% of net assets.
AUD Australian dollar
CHF Swiss franc
DKK Danish krone
EUR Euro
GBP British sterling
HKD Hong Kong dollar
JPY Japanese yen
MXN Mexican peso
MYR Malaysian ringgit
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
ZAR South African rand
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
In thousands
<S> <C>
Assets
Investments in securities, at value (cost $1,581,284) $ 2,144,887
Securities lending collateral 313,987
Other assets 18,193
-------------
Total assets 2,477,067
-------------
Liabilities
Obligation to return securities lending collateral 313,987
Other liabilities 46,084
-------------
Total liabilities 360,071
-------------
NET ASSETS $ 2,116,996
-------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 544
Accumulated net realized gain/loss - net of distributions 30,679
Net unrealized gain (loss) 563,593
Paid-in-capital applicable to 107,442,344 shares of
$0.01 par value capital stock outstanding;
1,000,000,000 shares authorized 1,522,180
NET ASSETS $ 2,116,996
-------------
NET ASSET VALUE PER SHARE $ 19.70
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Unaudited
-----------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Interest $ 26,475
Dividend 9,244
Securities lending 244
-------------
Total income 35,963
-------------
Expenses
Investment management 4,741
Shareholder servicing 3,152
Custody and accounting 128
Prospectus and shareholder reports 87
Registration 22
Legal and audit 7
Directors 5
Miscellaneous 7
-------------
Total expenses 8,149
Expenses paid indirectly (32)
-------------
Net expenses 8,117
-------------
Net investment income (loss) 27,846
-------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 31,579
Foreign currency transactions (25)
-------------
Net realized gain (loss) 31,554
-------------
Change in net unrealized gain or loss
Securities (28,678)
Other assets and liabilities
denominated in foreign currencies 1
-------------
Change in net unrealized gain or loss (28,677)
-------------
Net realized and unrealized gain (loss) 2,877
-------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 30,723
-------------
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Unaudited
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
In thousands
<S> <C> <C>
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 27,846 $ 54,546
Net realized gain (loss) 31,554 27,782
Change in net unrealized gain or loss (28,677) 111,575
--------------------------
Increase (decrease) in net assets from operations 30,723 193,903
--------------------------
Distributions to shareholders
Net investment income (27,302) (55,273)
Net realized gain (3,085) (24,139)
--------------------------
Decrease in net assets from distributions (30,387) (79,412)
--------------------------
Capital share transactions *
Shares sold 319,101 786,592
Distributions reinvested 29,161 76,225
Shares redeemed (322,316) (536,393)
--------------------------
Increase (decrease) in net assets from capital
share transactions 25,946 326,424
--------------------------
Net Assets
Increase (decrease) during period 26,282 440,915
Beginning of period 2,090,714 1,649,799
--------------------------
End of period $ 2,116,996 $ 2,090,714
--------------------------
* Share information
Shares sold 16,315 41,479
Distributions reinvested 1,470 4,008
Shares redeemed (16,527) (28,071)
--------------------------
Increase (decrease) in shares outstanding 1,258 17,416
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
Unaudited June 30, 2000
-----------------------------
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 and
commenced operations on December 31, 1939. The fund seeks capital growth,
current income, and preservation of capital through a portfolio of stocks and
fixed income securities.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities 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.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
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
42
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
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.
Premiums and Discounts Premiums and discounts on debt securities, other than
mortgage-backed securities (MBS), are amortized for both financial reporting and
tax purposes. Premiums and discounts on all MBS are recognized upon disposition
or principal repayment as gain or loss for financial reporting purposes. For tax
purposes, premiums and discounts on MBS acquired on or before June 8, 1997, are
recognized upon disposition or principal repayment as ordinary income. For MBS
acquired after June 8, 1997, premiums are recognized as gain or loss; discounts
are recognized as gain or loss, except to the extent of accrued market discount.
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. Expenses paid indirectly reflect credits earned
on daily uninvested cash balances at the custodian and are used to reduce the
fund's custody charges.
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.
Securities Lending The fund lends its securities to approved brokers to earn
additional income and receives cash and U.S. government securities as collateral
against the loans. Cash collateral received is invested in a money market pooled
account by the fund's lending agent. Collateral is maintained over the life of
the loan in an amount not less than 100% of the value of loaned securities.
Although risk is mitigated by the collateral, the fund could experience a delay
43
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
in recovering its securities and a possible loss of income or value if the
borrower fails to return them. At June 30, 2000, the value of loaned securities
was $304,558,000; aggregate collateral consisted of $313,987,000 in the
securities lending collateral pool and U.S. government securities valued at
$1,480,000.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $110,998,000 and $104,294,000,
respectively, for the six months ended June 30, 2000. Purchases and sales of
U.S. government securities aggregated $96,304,000 and $90,981,000, respectively,
for the six months ended June 30, 2000.
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, 2000, the cost of investments for federal income tax purposes was
substantially the same as for financial reporting and totaled $1,581,284,000.
Net unrealized gain aggregated $563,603,000 at period-end, of which $649,153,000
related to appreciated investments and $85,550,000 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 $803,000 was payable at June 30, 2000. 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 0.295% for assets in excess of $120 billion. At
June 30, 2000, and for the six months then ended, the effective annual group fee
rate was 0.32%. 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
44
<PAGE>
T. ROWE PRICE BALANCED FUND
--------------------------------------------------------------------------------
certain other services. The manager computes the daily share price and 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 $2,808,000 for the six months
ended June 30, 2000, of which $507,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended June 30, 2000, totaled
$1,078,000 and are reflected as interest income in the accompanying Statement of
Operations.
45
<PAGE>
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
T. Rowe Price Associates
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 appropriate
to the fund or funds covered in this
report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site.
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
[LOGO OF T. ROWE PRICE]
T. Rowe Price Investment Services, Inc., Distributor. F68-051 6/30/00
