<PAGE>
- --------------------------------------------------------------------------------
Annual Report - Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price
Personal Strategy
Growth Fund
- ------------
May 31, 1997
- ------------
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Year 7/29/94
Ended through
5/31/97 5/31/96 5/31/95
<S> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 13.69 $ 11.44 $ 10.00
..................................
Investment activities
Net investment income 0.27* 0.30* 0.25*
Net realized and unrealized gain (loss) 2.37 2.29 1.30
..................................
Total from investment activities 2.64 2.59 1.55
..................................
Distributions
Net investment income (0.24) (0.27) (0.11)
Net realized gain (0.89) (0.07) -
..................................
Total distributions (1.13) (0.34) (0.11)
..................................
NET ASSET VALUE
End of period $ 15.20 $ 13.69 $ 11.44
----------------------------------
Ratios/Supplemental Data
<CAPTION>
<S> <C> <C> <C>
Total return 19.89%* 22.83%* 15.65%*
................................................................................
Ratio of expenses to
average net assets 1.10%* 1.10%* 1.10%+*
................................................................................
Ratio of net investment
income to average
net assets 2.24%* 2.27%* 2.76%+*
................................................................................
Portfolio turnover rate 39.6% 39.5% 25.7%+
................................................................................
Average commission rate paid $ 0.0378 $ 0.0441 -
................................................................................
Net assets, end of period (in thousands) $ 67,552 $ 24,954 $ 10,748
................................................................................
</TABLE>
* Excludes expenses in excess of a 1.10% voluntary expense limitation in effect
through 5/31/98.
+ Annualized.
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
May 31, 1997
<TABLE>
<CAPTION>
- -----------------------
Statement of Net Assets Shares/Par Value
- -------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Common Stocks 77.1%
FINANCIAL 15.0%
Bank and Trust 7.0%
Abbey National (GBP) 12,000 $ 173
...............................................................................
ABN Amro Holdings (NLG) 6,400 118
...............................................................................
Air Liquide (L) (FRF) 730 112
...............................................................................
Australia & New Zealand Banking ADR 1,200 41
...............................................................................
BANC ONE 3,600 156
...............................................................................
Banca Commerciale Italiana (ITL) 27,000 53
...............................................................................
Banco de Bilbao Vizcaya ADR 1,500 106
...............................................................................
Banco Frances del Rio ADR 2,300 76
...............................................................................
Bank Boston 1,700 124
...............................................................................
Barclay's (GBP) 12,000 233
...............................................................................
Chase Manhattan 3,700 350
...............................................................................
Citicorp 1,700 194
...............................................................................
Deutsche Bank (DEM) 1,700 95
...............................................................................
Development Bank of Singapore (SGD) 5,000 63
...............................................................................
Dresdner Bank AG (DEM) 2,200 77
...............................................................................
Great Western Financial 10,000 485
...............................................................................
HSBC Holdings (GBP) 12,100 375
...............................................................................
J. P. Morgan 1,430 154
...............................................................................
KeyCorp 1,750 95
...............................................................................
Kredietbank (BEF) 200 82
...............................................................................
Mellon Bank 4,550 398
...............................................................................
National City 3,000 155
...............................................................................
NationsBank 2,200 130
...............................................................................
Norwest 4,600 246
...............................................................................
Overseas Chinese Bank (SGD) 6,000 75
...............................................................................
Schweizerischer Bankverein (CHF) * 400 96
...............................................................................
Societe Generale (FRF) 1,100 122
...............................................................................
Societe Generale de Belgique (BEF) 500 46
...............................................................................
Svenska Handelsbank (SEK) 2,000 54
...............................................................................
Union Bank of Switzerland (CHF) 100 110
...............................................................................
Wells Fargo 400 105
...............................................................................
Westpac Bank (AUD) 9,000 49
...............................................................................
4,748
.............
</TABLE>
3
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Insurance 3.9%
ACE Limited 3,900 $ 250
................................................................................
American General 4,000 177
................................................................................
American International Group 1,000 135
................................................................................
CKAG Colonia Konzern (DEM) 1,000 97
................................................................................
EXEL 2,300 102
................................................................................
Mid Ocean Limited 3,300 150
................................................................................
St. Paul Companies 8,800 630
................................................................................
Travelers Property Casualty (Class A) 15,200 585
................................................................................
UNUM 3,100 245
................................................................................
Willis-Corroon ADR 19,900 224
................................................................................
2,595
..............
Financial Services 4.1%
American Express 4,800 334
................................................................................
AXA (FRF) 1,900 114
................................................................................
DCB Holdings (MYR)
................................................................................
Fannie Mae 7,100 310
................................................................................
Freddie Mac 9,200 304
................................................................................
Green Tree Financial 2,600 91
................................................................................
H&R Block 18,400 607
................................................................................
Hartford Life (Class A) * 700 23
................................................................................
Household International 1,000 98
................................................................................
ING Groep (NLG) 3,050 135
................................................................................
Mercury Finance 20,000 52
................................................................................
Money Store 4,800 123
................................................................................
Pearson (GBP) 6,000 71
................................................................................
Sallie Mae 1,550 188
................................................................................
Travelers Group 4,766 261
................................................................................
2,750
..............
Total Financial 10,093
..............
UTILITIES 5.4%
Telephone Services 3.4%
ALLTEL 2,700 89
................................................................................
AT&T 11,850 437
................................................................................
BellSouth 5,000 227
................................................................................
British Telecommunications ADR 1,900 139
................................................................................
Compania de Telecommunicaciones de Chile ADR 850 29
................................................................................
</TABLE>
4
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Frontier 15,000 $ 276
................................................................................
Hong Kong Telecommunications ADR 2,232 51
................................................................................
SBC Communications 9,800 573
................................................................................
Sprint 1,200 59
................................................................................
Telecom Corp. of New Zealand ADR 1,600 61
................................................................................
Telecom Italia (ITL) 35,000 96
................................................................................
Telecom Italia Mobile (ITL) 15,000 44
................................................................................
Telefonica de Espana ADR 1,600 140
................................................................................
Telekom Malaysia (MYR) 5,000 37
................................................................................
Telmex ADR 1,800 80
................................................................................
2,338
.............
Electric Utilities 2.0%
Centerior Energy 11,500 124
................................................................................
Electrabel (BEF) 300 67
................................................................................
Empresa Nacional de Electricidad Chile ADR 1,000 22
................................................................................
Empresa Nacional de Electricidad ADR 1,000 78
................................................................................
Entergy 2,700 71
................................................................................
Hong Kong Electric (HKD) 16,000 58
................................................................................
Niagara Mohawk * 12,000 105
................................................................................
Ohio Edison 10,000 212
................................................................................
PECO Energy 8,000 152
................................................................................
Texas Utilities 1,600 55
................................................................................
Unicom 11,000 250
................................................................................
Veba (DEM) 2,400 136
................................................................................
1,330
.............
Total Utilities 3,668
.............
CONSUMER NONDURABLES 15.6%
Cosmetics 0.8%
Gillette 700 62
................................................................................
Intl Flavors & Fragrances 6,000 266
................................................................................
Kao (JPY) 13,000 177
................................................................................
505
.............
Beverages 0.8%
Coca-Cola 600 41
................................................................................
LVMH (FRF) 300 73
................................................................................
PepsiCo 12,300 452
................................................................................
566
.............
</TABLE>
5
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Food Processing 3.0%
................................................................................
Cadbury Schweppes (GBP) 900 $ 8
................................................................................
Cadbury Schweppes ADR 2,000 72
................................................................................
CPC International 3,000 258
................................................................................
CSM (NLG) 2,000 102
................................................................................
Danisco (DKK) 1,800 107
................................................................................
Eridania Beghin-Say (FRF) 800 112
................................................................................
General Mills 2,460 156
................................................................................
Heinz 5,200 224
................................................................................
Interstate Bakeries 1,600 86
................................................................................
McCormick 8,200 214
................................................................................
Nabisco Holdings (Class A) 2,200 87
................................................................................
Nestle (CHF) 100 124
................................................................................
Ralston Purina 2,400 205
................................................................................
Sara Lee 7,300 298
................................................................................
2,053
.............
Hospital Supplies/Hospital Management 1.2%
Baxter International 1,700 90
................................................................................
Boston Scientific * 2,300 123
................................................................................
Columbia/HCA Healthcare 4,400 161
................................................................................
HealthSouth * 4,700 107
................................................................................
Medtronic 1,900 141
................................................................................
Quest Diagnostics * 787 15
................................................................................
Vencor * 4,400 179
................................................................................
816
.............
Pharmaceuticals 4.7%
American Home Products 4,580 349
................................................................................
Amgen 1,400 94
................................................................................
Astra (SEK) 4,266 66
................................................................................
Bristol-Myers Squibb 1,200 88
................................................................................
Eli Lilly 2,164 201
................................................................................
Gehe (DEM) 2,000 142
................................................................................
Glaxo Wellcome ADR 2,900 117
................................................................................
Johnson & Johnson 4,500 269
................................................................................
Merck 2,600 234
................................................................................
Novartis (CHF) 80 108
................................................................................
Pfizer 4,260 438
................................................................................
Pharmacia & Upjohn 6,160 213
................................................................................
</TABLE>
6
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Schering-Plough 2,100 $ 191
................................................................................
SmithKline Beecham ADR 3,600 315
................................................................................
Takeda Chemical Industries (JPY) 7,000 177
................................................................................
Warner-Lambert 1,400 141
................................................................................
3,143
.............
Health Care Services 0.5%
Altana AG (DEM) 120 110
................................................................................
PacifiCare Health Systems (Class B) * 1,500 119
................................................................................
United HealthCare 1,800 102
................................................................................
331
.............
Miscellaneous Consumer Products 4.6%
Benetton Group (ITL) 5,000 70
................................................................................
Bridgestone (JPY) 7,000 158
................................................................................
Colgate-Palmolive 4,100 254
................................................................................
CUC International * 4,750 109
................................................................................
Grand Metropolitan ADR 2,800 105
................................................................................
Jones Apparel Group * 1,800 84
................................................................................
Kuraray (JPY) 12,000 115
................................................................................
Lion Nathan (NZD) 30,000 79
................................................................................
Mattel 5,100 152
................................................................................
Newell 3,100 119
................................................................................
NIKE 700 40
................................................................................
Philip Morris 12,750 561
................................................................................
Procter & Gamble 1,300 179
................................................................................
Richfood Holdings 4,500 104
................................................................................
Service Corp. 3,800 134
................................................................................
Stanley Works 3,400 139
................................................................................
Tambrands 4,640 224
................................................................................
Unilever N.V. ADR 800 155
................................................................................
UST 12,300 351
................................................................................
3,132
.............
Total Consumer Nondurables 10,546
.............
CONSUMER SERVICES 7.6%
General Merchandisers 1.6%
Dayton Hudson 3,000 144
................................................................................
Marui (JPY) 4,000 74
................................................................................
</TABLE>
7
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Pinault Printemps (FRF) 350 $ 147
................................................................................
Tesco (GBP) 20,160 124
................................................................................
TJX 2,200 106
................................................................................
Wal-Mart 8,600 256
................................................................................
Warnaco Group (Class A) 7,000 229
................................................................................
1,080
.............
Specialty Merchandisers 2.2%
American Stores 2,200 100
................................................................................
Christian Dior (FRF) 700 110
................................................................................
Circuit City Stores 900 36
................................................................................
CVS * 3,006 144
................................................................................
Federated Department Stores * 4,600 170
................................................................................
General Nutrition * 5,900 136
................................................................................
Home Depot 1,900 120
................................................................................
Kohl's * 3,000 162
................................................................................
McKesson 300 23
................................................................................
Safeway * 3,500 157
................................................................................
The Gap 1,300 44
................................................................................
Toys "R" Us * 10,000 311
................................................................................
1,513
.............
Entertainment and Leisure 2.4%
Boston Chicken * 2,200 40
................................................................................
Carnival (Class A) 3,700 141
................................................................................
Disney 3,200 262
................................................................................
Hutchison Whampoa (HKD) 39,000 325
................................................................................
ITT * 4,500 268
................................................................................
McDonald's 3,300 166
................................................................................
Reader's Digest (Class B) 15,040 387
................................................................................
Sharp (JPY) 4,000 51
................................................................................
1,640
.............
Media and Communications 1.4%
Elsevier (NLG) 4,000 68
................................................................................
R. R. Donnelley 6,500 241
................................................................................
Time Warner 3,400 158
................................................................................
Tribune 3,200 138
................................................................................
U S WEST Media * 7,400 147
................................................................................
Vodafone ADR 3,700 165
................................................................................
917
.............
Total Consumer Services 5,150
.............
</TABLE>
8
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
CONSUMER CYCLICALS 3.9%
Automobiles and Related 0.8%
Cycle & Carriage (SGD) 6,000 $ 61
................................................................................
Honda ADR 2,400 145
................................................................................
Lear * 900 35
................................................................................
Lucasvarity ADR * 4,140 133
................................................................................
SPX 2,300 137
................................................................................
511
..............
Building and Real Estate 1.2%
Cheung Kong Holdings (HKD) 29,000 297
................................................................................
City Developments (SGD) 5,000 46
................................................................................
DBS Land (SGD) * 15,000 52
................................................................................
Federal Realty Investment Trust, REIT 8,000 209
................................................................................
Patriot American Hospitality, REIT 2,600 56
................................................................................
Simon DeBartolo Group, REIT 5,440 165
................................................................................
825
..............
Miscellaneous Consumer Durables 1.9%
Corning 11,900 600
................................................................................
Eastman Kodak 2,400 199
................................................................................
Masco 2,400 93
................................................................................
Oce Van Der Grinten NV (NLG) 500 65
................................................................................
Ricoh (JPY) 8,000 105
................................................................................
Whirlpool 5,000 249
................................................................................
1,311
..............
Total Consumer Cyclicals 2,647
..............
TECHNOLOGY 4.9%
Electronic Components 1.0%
Altera * 1,800 96
................................................................................
Intel 1,600 242
................................................................................
Linear Technology 1,400 70
................................................................................
Maxim Integrated Products * 2,300 124
................................................................................
Motorola 1,200 80
................................................................................
Xilinx * 1,800 96
................................................................................
708
..............
Electronic Systems 0.9%
ADT * 4,700 137
................................................................................
Hewlett-Packard 1,700 88
................................................................................
</TABLE>
9
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Honeywell 3,150 $ 229
................................................................................
Nokia ADR 1,900 125
................................................................................
579
..............
Information Processing 1.0%
COMPAQ Computer * 1,300 141
................................................................................
Dell Computer * 500 56
................................................................................
Hitachi ADR 1,100 119
................................................................................
IBM 3,860 334
................................................................................
650
..............
Telecommunications Equipment 1.1%
Cisco Systems * 2,900 196
................................................................................
LM Ericsson (Class B) ADR 3,400 122
................................................................................
Lucent Technologies 800 51
................................................................................
MCI 2,800 108
................................................................................
Telecomunicacoes Brasileiras ADR 1,400 192
................................................................................
Tellabs * 800 40
................................................................................
World Com 2,200 65
................................................................................
774
..............
Aerospace and Defense 0.9%
AlliedSignal 4,240 325
................................................................................
Boeing 1,400 147
................................................................................
Lockheed Martin 1,500 141
................................................................................
613
..............
Total Technology 3,324
..............
CAPITAL EQUIPMENT 3.3%
Electrical Equipment 2.3%
ABB AG (CHF) 100 137
................................................................................
Canon (JPY) 4,000 101
................................................................................
Emerson Electric 2,200 119
................................................................................
GE 8,600 519
................................................................................
Hubbell (Class B) 3,800 173
................................................................................
Matsushita Electric Works (JPY) 6,000 66
................................................................................
Mitsubishi Electric (JPY) 13,000 74
................................................................................
Siemens (DEM) 1,500 85
................................................................................
Tomkins ADR 5,000 91
................................................................................
Tyco International 2,600 165
................................................................................
1,530
..............
</TABLE>
10
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Machinery 1.0%
Danaher 4,300 $ 209
................................................................................
GKN (GBP) 5,500 95
................................................................................
Man (DEM) 300 86
................................................................................
S I G Schweis (CHF) 30 90
................................................................................
Teleflex 3,300 203
................................................................................
Valmet (FIM) 2,000 36
................................................................................
719
..............
Total Capital Equipment 2,249
..............
BUSINESS SERVICES AND
TRANSPORTATION 6.2%
Computer Service and Software 2.9%
Ascend Communications * 1,700 95
................................................................................
Automatic Data Processing 3,700 182
................................................................................
BMC Software * 4,500 243
................................................................................
Electronic Data Systems 12,700 475
................................................................................
First Data 6,670 267
................................................................................
Microsoft * 1,200 149
................................................................................
National Data 2,400 105
................................................................................
Oracle * 2,300 107
................................................................................
Parametric Technology * 1,300 58
................................................................................
Reynolds & Reynolds 3,700 86
................................................................................
SunGard Data Systems * 2,800 120
................................................................................
Synopsys * 1,900 71
................................................................................
1,958
..............
Distribution Services 0.1%
Ikon Office Solutions 3,100 90
................................................................................
90
..............
Environmental 0.1%
USA Waste Services * 2,300 83
................................................................................
83
..............
Transportation Services 0.2%
Mitsubishi Heavy Industries (JPY) 12,000 86
................................................................................
United Engineers (MYR) 5,000 41
................................................................................
127
..............
Miscellaneous Business Services 1.2%
BAA (GBP) 10,000 87
................................................................................
Corporate Express * 4,500 63
................................................................................
</TABLE>
11
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Omnicom 700 $ 41
................................................................................
Sime Darby (MYR) 19,000 62
................................................................................
Wallace Computer Services 1,800 50
................................................................................
Waste Management 15,560 494
................................................................................
797
..............
Airlines 1.5%
AMR * 1,840 183
................................................................................
Delta 7,600 712
................................................................................
KLM (NLG) 2,000 58
................................................................................
Singapore Airlines (SGD) 6,000 51
................................................................................
1,004
..............
Railroads 0.2%
Burlington Northern Santa Fe 1,300 108
................................................................................
108
..............
Total Business Services and Transportation 4,167
..............
ENERGY 4.5%
Energy Services 1.1%
BJ Services * 1,800 100
................................................................................
Camco International 1,400 72
................................................................................
Cooper Cameron * 1,800 147
................................................................................
ELF Aquitaine ADR 1,400 73
................................................................................
Halliburton 2,000 155
................................................................................
Schlumberger 1,330 158
................................................................................
Total ADR 700 32
................................................................................
737
..............
Exploration and Production 0.1%
Santos (AUD) 18,000 74
................................................................................
74
..............
Integrated Petroleum - Domestic 1.6%
Atlantic Richfield 2,300 335
................................................................................
British Petroleum ADR 3,240 469
................................................................................
Unocal 1,300 55
................................................................................
USX-Marathon 8,400 250
................................................................................
1,109
..............
Integrated Petroleum - International 1.7%
ENI S.P.A. ADR 2,000 101
................................................................................
Exxon 1,660 98
................................................................................
</TABLE>
12
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Mobil 2,400 $ 336
................................................................................
Repsol ADR 1,800 76
................................................................................
Royal Dutch Petroleum ADR 700 137
................................................................................
Shell Transport & Trading ADR 1,200 143
................................................................................
Texaco 2,000 218
................................................................................
1,109
..............
Total Energy 3,029
..............
PROCESS INDUSTRIES 6.0%
Diversified Chemicals 1.6%
Dow Chemical 7,900 658
................................................................................
DuPont 2,000 218
................................................................................
Hercules 2,800 131
................................................................................
Monsanto 1,700 75
................................................................................
1,082
..............
Specialty Chemicals 2.8%
3M 1,100 101
................................................................................
A. Schulman 9,900 219
................................................................................
Akzo Nobel (NLG) 500 66
................................................................................
Akzo Nobel ADR 400 27
................................................................................
BASF (DEM) 3,200 118
................................................................................
Bayer AG (DEM) * 2,900 113
................................................................................
Great Lakes Chemical 13,740 672
................................................................................
Morton International 1,300 42
................................................................................
Pall 15,000 354
................................................................................
Sumitomo Chemicals (JPY) 11,000 46
................................................................................
Technip (FRF) 1,400 144
................................................................................
1,902
..............
Paper and Paper Products 1.0%
Dai Nippon Printing (JPY) 4,000 80
................................................................................
James River 6,000 211
................................................................................
Kimberly-Clark 7,200 361
................................................................................
652
..............
Forest Products 0.3%
Georgia-Pacific 800 71
................................................................................
International Paper 3,000 144
................................................................................
215
..............
</TABLE>
13
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Building and Construction 0.3%
Blue Circle Industries (GBP) 24,000 $ 165
................................................................................
165
.............
Total Process Industries 4,016
.............
BASIC MATERIALS 1.6%
Metals 0.9%
Alcoa 1,000 74
................................................................................
Nucor 2,000 118
................................................................................
Reynolds Metals 5,000 339
................................................................................
Rustenburg Platinum (ZAR) 6,000 98
................................................................................
629
.............
Mining 0.4%
CRA Limited (AUD) 3,000 49
................................................................................
LONRHO (GBP) 42,900 95
................................................................................
Newmont Mining 3,200 126
................................................................................
270
.............
Miscellaneous Materials 0.3%
Crown Cork & Seal 2,600 152
................................................................................
Malayan Cement (MYR) 33,750 56
................................................................................
208
.............
Total Basic Materials 1,107
.............
MISCELLANEOUS 3.1%
Other Miscellaneous 3.0%
SPDR Trust 23,700 2,020
................................................................................
2,020
.............
Conglomerates 0.1%
Orkla (Class A) (NOK) 500 43
................................................................................
43
.............
Total Miscellaneous 2,063
.............
Total Common Stocks (Cost $43,864) 52,059
.............
Corporate Bonds 11.7%
Agricultural Minerals and Chemicals, Sr. Notes
10.75%, 9/30/03 $ 50,000 53
................................................................................
Agrium, 7.00%, 2/1/04 400,000 395
................................................................................
</TABLE>
14
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Ahmanson, H.F., Sub. Notes, 7.875%, 9/1/04 $ 100,000 $ 103
............................................................................................
Airplane Pass Through Trust, 10.875%, 3/15/19 70,000 78
............................................................................................
Allied Waste North America, Sr. Sub. Notes, (144a)
10.25%, 12/1/06 50,000 53
............................................................................................
AMC Entertainment, Sr. Sub. Notes, (144a)
9.50%, 3/15/09 50,000 51
............................................................................................
American Radio Systems, Sr. Sub. Notes, 9.00%, 2/1/06 25,000 26
............................................................................................
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 50,000 52
............................................................................................
American Standard, Deb., 9.25%, 12/1/16 50,000 52
............................................................................................
Amerigas Partners L.P., Sr. Notes, 10.125%, 4/15/07 50,000 52
............................................................................................
Ametek, Sr. Notes, 9.75%, 3/15/04 10,000 11
............................................................................................
Associates Corporation, Sr. Notes, 5.25%, 3/30/00 15,000 14
............................................................................................
B. F. Saul, REIT, Sr. Secured Notes, 11.625%, 4/1/02 150,000 160
............................................................................................
Bank Nova Scotia, Sub. Notes, 6.25%, 9/15/08 15,000 14
............................................................................................
BE Aerospace, Sr. Sub. Notes, 9.875%, 2/1/06 50,000 52
............................................................................................
Boise Cascade, Deb., 7.35%, 2/1/16 330,000 306
............................................................................................
Building Material Corporation of America, Sr. Disc. Notes
STEP, Zero Coupon, 7/1/04 50,000 45
............................................................................................
BWAY, Sr. Sub. Notes, (144a), 10.25%, 4/15/07 50,000 53
............................................................................................
Chancellor Radio Broadcasting, Sr. Sub. Notes
9.375%, 10/1/04 50,000 51
............................................................................................
Chief Auto Parts, Sr. Notes, 10.50%, 5/15/05 50,000 51
............................................................................................
Coinmach, Sr. Notes, 11.75%, 11/15/05 50,000 55
............................................................................................
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 50,000 55
............................................................................................
Consolidated Cigar, Sr. Sub. Notes, 10.50%, 3/1/03 50,000 53
............................................................................................
Container Corporation of America, Gtd., 10.75%, 5/1/02 25,000 27
............................................................................................
Continental Bank, Sub. Notes, 12.50%, 4/1/01 48,000 57
............................................................................................
Cyprus Amax Minerals, 6.625%, 10/15/05 100,000 95
............................................................................................
Daimler-Benz Auto Grantor Trust, 3.90%, 10/15/98 3,148 3
............................................................................................
Dan River, Sr. Sub. Notes, 10.125%, 12/15/03 50,000 52
............................................................................................
Delta Air Lines, MTN, 8.625%, 6/15/04 90,000 96
............................................................................................
Doane Products, Sr. Notes, 10.625%, 3/1/06 50,000 53
............................................................................................
Dominion Textile USA, Gtd. Sr. Notes, 9.25%, 4/1/06 50,000 52
............................................................................................
Dr Pepper Bottling, Sr. Disc. Notes, STEP
Zero Coupon, 2/15/03 50,000 49
............................................................................................
Dyncorp, Sr. Sub. Notes, (144a), 9.50%, 3/1/07 50,000 50
............................................................................................
Energy Corporation of America, Sr. Sub. Notes, (144a)
9.50%, 5/15/07 50,000 50
............................................................................................
</TABLE>
15
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Enhance Financial Services, Deb., 6.75%, 3/1/03 $ 300,000 $ 291
............................................................................................
Fairchild Semiconductor, Sr. Sub. Notes, (144a)
10.125%, 3/15/07 50,000 53
............................................................................................
Fairfax Financial Holdings, 8.25%, 10/1/15 250,000 253
............................................................................................
First Federal Financial, 11.75%, 10/1/04 50,000 54
............................................................................................
First USA Bank, Sr. Notes, 5.85%, 2/22/01 300,000 289
............................................................................................
FrontierVision Operating Partners, Sr. Sub. Notes
11.00%, 10/15/06 50,000 52
............................................................................................
Grand Casinos, 1st Mtg. Notes, 10.125%, 12/1/03 50,000 52
............................................................................................
HMC Acquisition Properties, Sr. Notes, 9.00%, 12/15/07 50,000 51
............................................................................................
Host Marriott Travel Plazas, Sr. Notes, 9.50%, 5/15/05 50,000 52
............................................................................................
Imed, Sr. Sub. Notes, (144a), 9.75%, 12/1/06 65,000 66
............................................................................................
International Knife & Saw, Sr. Sub. Notes
11.375%, 11/15/06 25,000 26
............................................................................................
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 50,000 52
............................................................................................
Jersey Central Power & Light, 1st Mtg. Notes
7.125%, 10/1/04 150,000 147
............................................................................................
Jordan Industries, Sr. Notes, 10.375%, 8/1/03 50,000 50
............................................................................................
K & F Industries, Sr. Sub. Notes, 10.375%, 9/1/04 25,000 26
............................................................................................
Lockheed Martin, Gtd. Notes, 6.55%, 5/15/99 200,000 200
............................................................................................
Loomis, Fargo & Co., Sr. Sub. Notes, (144a)
10.00%, 1/15/04 50,000 52
............................................................................................
Marcus Cable, Sr. Sub. Gtd. Disc. Notes, STEP
Zero Coupon, 8/1/04 50,000 43
............................................................................................
Maxxam Group Holdings, Sr. Secured Notes
12.00%, 8/1/03 50,000 52
............................................................................................
Mettler Toledo, Gtd. Sr. Sub. Notes, 9.75%, 10/1/06 50,000 52
............................................................................................
Northrop Grumman, 7.00%, 3/1/06 100,000 97
............................................................................................
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 25,000 27
............................................................................................
Owens-Illinois, Sr. Sub. Notes, 10.50%, 6/15/02 50,000 53
............................................................................................
Pacific Mutual Life, (144a), 7.90%, 12/30/23 500,000 494
............................................................................................
Paine Webber Group, 8.25%, 5/1/02 100,000 104
............................................................................................
Parker & Parsley Petroleum, Sr. Notes, 8.875%, 4/15/05 100,000 108
............................................................................................
Pillowtex, Gtd. Sr. Sub. Notes, 10.00%, 11/15/06 50,000 53
............................................................................................
Plastic Containers, Sr. Secured Notes, (144a)
10.00%, 12/15/06 50,000 52
............................................................................................
PMI Acquisition, Sr. Sub. Notes, 10.25%, 9/1/03 25,000 26
............................................................................................
</TABLE>
16
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Pride Petroleum Services, Sr. Notes, 9.375%, 5/1/07 $ 50,000 $ 52
............................................................................................
Principal Mutual, (144a), 8.00%, 3/1/44 190,000 185
............................................................................................
Quest Diagnostic, Gtd. Sr. Sub. Notes, 10.75%, 12/15/06 50,000 53
............................................................................................
Revlon Consumer Products, Sr. Sub. Notes
10.50%, 2/15/03 50,000 53
............................................................................................
Rio Hotel & Casino, Sr. Sub. Notes, 9.50%, 4/15/07 50,000 51
............................................................................................
Rogers Cablesystems, Sr. Secured 2nd Priority Notes
10.00%, 3/15/05 50,000 54
............................................................................................
Rouse, 8.50%, 1/15/03 15,000 15
............................................................................................
Rowan Companies, Sr. Notes, 11.875%, 12/1/01 38,000 41
............................................................................................
Safelite Glass, Sr. Sub. Notes, (144a), 9.875%, 12/15/06 50,000 53
............................................................................................
Scotland International Finance, Sub. Notes, (144a)
6.50%, 2/15/11 100,000 91
............................................................................................
Shawmut National, Sub. Notes, 7.20%, 4/15/03 15,000 15
............................................................................................
Silgan, Sr. Sub. Notes, 11.75%, 6/15/02 50,000 53
............................................................................................
Six Flags Theme Parks, Sr. Sub. Disc. Notes, STEP
Zero Coupon, 6/15/05 50,000 51
............................................................................................
Synthetic Industries, Sr. Sub. Notes, (144a)
9.25%, 2/15/07 50,000 51
............................................................................................
Tele-Communications, Deb., 8.75%, 2/15/23 200,000 194
............................................................................................
TeleWest, Sr. Disc. Deb., STEP
Zero Coupon, 10/1/07 50,000 35
............................................................................................
Tenet Healthcare, Sr. Sub. Notes, 8.625%, 1/15/07 50,000 51
............................................................................................
Tenneco, 8.20%, 11/15/99 15,000 15
............................................................................................
Texas Utilities, 1st Mtg. Bonds,
7.375%, 10/1/25 100,000 93
............................................................................................
7.875%, 4/1/24 100,000 97
............................................................................................
Texas-New Mexico Power, Deb., 12.50%, 1/15/99 50,000 54
............................................................................................
TLC Beatrice International Holdings, Sr. Secured Notes
11.50%, 10/1/05 50,000 56
............................................................................................
Tokheim, Sr. Sub. Notes, 11.50%, 8/1/06 50,000 54
............................................................................................
Trump Atlantic City Associates, 1st Mtg. Notes
11.25%, 5/1/06 50,000 49
............................................................................................
United Artists Theatre Circuit, PTC, 9.30%, 7/1/15 49,157 48
............................................................................................
US Can, Sr. Gtd. Notes, 10.125%, 10/15/06 50,000 53
............................................................................................
USF&G Capital II, Gtd. Notes, 8.47%, 1/10/27 500,000 494
............................................................................................
USG, Sr. Notes, 8.50%, 8/1/05 50,000 51
............................................................................................
</TABLE>
17
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
Wal-Mart Stores, Deb., 7.25%, 6/1/13 $ 280,000 $ 277
................................................................................
Westpoint Stevens, Sr. Sub. Deb. Notes,
9.375%, 12/15/05 50,000 52
................................................................................
Windy Hill Pet Food, Sr. Sub. Notes, (144a)
9.75%, 5/15/07 50,000 51
................................................................................
Total Corporate Bonds (Cost $7,872) 7,888
.............
Foreign Government Obligations/
Agencies 1.9%
European Investment Bank
3.00%, 9/20/06 JPY 34,000,000 300
................................................................................
4.625%, 2/26/03 JPY 10,000,000 97
................................................................................
Federal Republic of Germany
6.00%, 7/4/07 DEM 280,000 164
................................................................................
6.50%, 7/15/03 DEM 30,000 19
................................................................................
8.375%, 5/21/01 DEM 80,000 53
................................................................................
8.50%, 8/21/00 DEM 23,000 15
................................................................................
Government of Canada
6.50%, 6/1/04 CAD 3,000 2
................................................................................
8.50%, 4/1/02 CAD 111,000 89
................................................................................
9.75%, 6/1/21 CAD 5,000 5
................................................................................
Government of France
5.50%, 4/25/07 FRF 972,000 164
................................................................................
8.25%, 2/27/04 FRF 142,000 29
................................................................................
8.50%, 11/25/02 FRF 264,000 53
................................................................................
Government of Japan, 4.50%, 6/20/03 + JPY 8,400,000 80
................................................................................
Int'l Bank for Reconstruction & Development
6.75%, 3/15/00 JPY 1,000,000 10
................................................................................
Kingdom of Belgium, 7.25%, 4/29/04 BEF 300,000 9
................................................................................
Kingdom of Spain, 8.00%, 5/30/04 ESP 1,500,000 11
................................................................................
Kingdom of Sweden, 6.00%, 2/9/05 SEK 100,000 12
................................................................................
Republic of Italy, 8.50%, 8/1/04 ITL 45,000,000 28
................................................................................
United Kingdom Treasury
7.50%, 12/7/06 GBP 55,000 92
................................................................................
8.00%, 6/10/03 GBP 17,000 29
................................................................................
9.00%, 3/3/00 GBP 8,000 14
................................................................................
Total Foreign Government Obligations/Agencies (Cost $1,287) 1,275
.............
</TABLE>
18
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
U.S. Government Mortgage-Backed
Securities 4.9%
<S> <C> <C>
Federal National Mortgage Assn.
6.50%, 1/1/26 $ 192,248 $ 183
................................................................................
Government National Mortgage Assn., I
6.00%, 5/15/26 300,485 277
...........................................................................
6.50%, 12/15/23 - 3/15/26 532,351 506
...........................................................................
7.00%, 8/15/23 - 3/15/27 1,543,058 1,502
...........................................................................
7.50%, 10/15/22 - 1/15/26 455,194 455
...........................................................................
8.00%, 1/15/22 - 9/15/24 332,346 341
................................................................................
Government National Mortgage Assn. II, 8.00%, 10/20/25 44,474 45
................................................................................
Total U.S. Government Mortgage-Backed Securities (Cost $3,291) 3,309
........
U.S. Government Obligations/
Agencies 2.1%
Cooperative Utility Trust
9.50%, 2/15/17 500,000 534
................................................................................
Tennessee Valley Authority
5.98%, 4/1/36 350,000 351
...........................................................................
6.235%, 7/15/45 500,000 495
...........................................................................
7.25%, 7/15/43 70,000 65
................................................................................
Total U.S. Government Obligations/Agencies (Cost $1,466) 1,445
........
Short-Term Investments 1.9%
Commercial Paper 1.9%
Investments in Commercial Paper through a Joint Account,
5.60 - 5.69%, 6/2/97 329,199 329
................................................................................
Preferred Receivables Funding, 5.55%, 6/12/97 1,000,000 998
................................................................................
Total Short-Term Investments (Cost $1,327) 1,327
........
</TABLE>
19
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
Value
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
<S> <C>
Total Investments in Securities
99.6% of Net Assets (Cost $59,107) $ 67,303
Other Assets Less Liabilities 249
...........
NET ASSETS $ 67,552
-----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 444
Accumulated net realized gain/loss - net of distributions 312
Net unrealized gain (loss) 8,195
Paid-in-capital applicable to 4,445,523 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 58,601
...........
NET ASSETS $ 67,552
-----------
NET ASSET VALUE PER SHARE $ 15.20
-----------
</TABLE>
* Non-income producing
+ Securities contain some restrictions as to public resale--total of such
securities at year-end amounts to 0.12% of net assets.
MTN Medium term note
PTC Pass-through Certificate
REIT Real Estate Investment Trust
STEP Stepped Coupon Bond
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
2.08% of net assets.
AUD Australian dollar
BEF Belgian franc
CAD Canadian dollar
CHF Swiss franc
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FIM Finnish mark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
ITL Italian lira
JPY Japanese yen
MYR Malaysian ringgit
NLG Dutch guilder
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
ZAR South African rand
L Local registered shares
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Year
Ended
5/31/97
<S> <C>
Investment Income
Income
Interest $ 746
Dividend 669
Other 17
...........
Total income 1,432
...........
Expenses
Shareholder servicing 169
Custody and accounting 122
Investment management 92
Registration 37
Legal and audit 18
Prospectus and shareholder reports 17
Directors 6
Miscellaneous 11
...........
Total expenses 472
...........
Net investment income 960
...........
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 2,087
Foreign currency transactions (4)
...........
Net realized gain (loss) 2,083
...........
Change in net unrealized gain or loss
on securities 5,188
...........
Net realized and unrealized gain (loss) 7,271
...........
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 8,231
...........
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
T. Rowe Price Personal Strategy Growth Fund
- --------------------------------------------------------------------------------
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
Year Year
Ended Ended
5/31/97 5/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 960 $ 373
Net realized gain (loss) 2,083 738
Change in net unrealized
gain or loss 5,188 2,015
..........................
Increase (decrease) in
net assets from operations 8,231 3,126
..........................
Distributions to shareholders
Net investment income (656) (330)
Net realized gain (2,434) (86)
..........................
Decrease in net assets
from distributions (3,090) (416)
..........................
Capital share transactions *
Shares sold 43,489 14,369
Distributions reinvested 3,043 411
Shares redeemed (9,075) (3,374)
..........................
Increase (decrease) in
net assets from capital
share transactions 37,457 11,406
..........................
Net equalization - 90
..........................
Net Assets
Increase (decrease)
during period 42,598 14,206
Beginning of period 24,954 10,748
..........................
End of period $ 67,552 $ 24,954
--------------------------
*Share information
Shares sold 3,043 1,116
Distributions reinvested 215 32
Shares redeeemed (635) (264)
..........................
Increase (decrease)
in shares outstanding 2,623 884
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
May 31, 1997
- -----------------------------
Notes to Financial Statements
- -----------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Personal Strategy Funds, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The Personal Strategy Income Fund (the
Income Fund), the Personal Strategy Balanced Fund (the Balanced Fund), and the
Personal Strategy Growth Fund (the Growth Fund), diversified, open-end
management investment companies, are three of the portfolios established by the
corporation and commenced operations on July 29, 1994.
Valuation Equity securities 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.
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 amortized cost which, when combined with
accrued interest, approximates fair value.
For purposes of determining each 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 that
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.
23
<PAGE>
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
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 each 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. Effective January 1, 1997, the Growth Fund
discontinued its practice of equalization. The results of operations and net
assets were not affected by this change. The Income and Balanced Funds follow
the practice of equalization, under which undistributed net investment income
per share is unaffected by fund shares sold or redeemed.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with their investment objectives, the funds engage in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of each fund are
described more fully in each fund's prospectus and Statement of Additional
Information.
Noninvestment-Grade Debt Securities At May 31, 1997, each fund held investments
in noninvestment-grade debt securities, commonly referred to as "high-yield" or
"junk" bonds. A real or perceived economic downturn or higher interest rates
could adversely affect the liquidity or value, or both, of such securities
because such events could lessen the ability of issuers to make principal and
interest payments.
Commercial Paper Joint Account Each 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 each fund's criteria as to
quality, yield, and liquidity.
Securities Lending Each fund lends its securities to approved brokers to earn
additional income and takes cash and U.S. Treasury securities as collateral to
24
<PAGE>
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
secure the loans. Collateral is maintained at not less than 100% of the value of
loaned securities. At May 31, 1997, the value of securities on loan by the
Income Fund was $3,965,000, by the Balanced Fund was $12,028,000, and by the
Growth Fund was $4,561,000. Although the risk is mitigated by the collateral,
each 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
securities, for the year ended May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Income Fund Balanced Fund Growth Fund
<S> <C> <C> <C>
U.S. government securities
Purchases $ 2,043,000 $ 11,426,000 $ 2,816,000
Sales 457,000 985,000 91,000
Other securities
Purchases 23,602,000 140,518,000 48,060,000
Sales 13,162,000 84,327,000 16,317,000
</TABLE>
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since each fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
In order for each fund's capital accounts and distributions to shareholders to
reflect the tax character of certain transactions, the following
reclassifications were made during the year ended May 31, 1997. The results of
operations and net assets were not affected by the reclassifications.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Income Fund Balanced Fund Growth Fund
<S> <C> <C> <C>
Undistributed net investment income $ (18,000) $ (165,000) $ 8,000
Paid-in-capital 18,000 165,000 (8,000)
</TABLE>
25
<PAGE>
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
At May 31, 1997, the aggregate costs of investments for the Income, Balanced,
and Growth Funds for federal income tax and financial reporting purposes were
$40,289,000, $183,489,000, and $59,107,000, respectively. Net unrealized gain
(loss) on investments was as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Income Fund Balanced Fund Growth Fund
<S> <C> <C> <C>
Appreciated investments $ 4,036,000 $ 21,860,000 $ 9,278,000
Depreciated investments (533,000) (3,515,000) (1,082,000)
........................................
Net unrealized gain (loss) $ 3,503,000 $ 18,345,000 $ 8,196,000
----------------------------------------
</TABLE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between each fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $7,000, $96,000, and $20,000 were payable at May 31, 1997 by the
Income, Balanced, and Growth Funds, respectively. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.15% of average
daily net assets for the Income Fund, 0.25% of average daily net assets for the
Balanced Fund, and 0.30% of average daily net assets for the Growth Fund, 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 0.30%
for assets in excess of $80 billion. At May 31, 1997, and for the year then
ended, the effective annual group fee rate was 0.33%. Each fund pays a pro-rata
share of the group fee based on the ratio of its net assets to those of the
group.
Under the terms of the investment management agreement, the manager is required
to bear any expenses through May 31, 1998, which would cause each fund's ratio
of expenses to average net assets to exceed 0.95% for the Income Fund, 1.05% for
the Balanced Fund, and 1.10% for the Growth Fund. Thereafter, through May 31,
2000, each fund is required to reimburse the manager for these expenses,
provided that average net assets have grown or expenses have declined
sufficiently to allow reimbursement without causing the fund's ratio of expenses
to average net assets to exceed 0.95%, 1.05%, and 1.10%, respectively. Pursuant
to this agreement, $141,000, $62,000, and $177,000 of management fees were not
accrued by the Income, Balanced, and Growth Funds, respectively for the year
ended May 31, 1997. Pursuant to a previous agreement, $285,000, $191,000, and
$325,000 of fees and expenses remain
26
<PAGE>
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
subject to reimbursement through May 31, 1998 for the Income, Balanced, and
Growth Funds, respectively.
In addition, each fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which each fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of each fund. T. Rowe Price Services, Inc., is each fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the funds. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in each fund. The Income, Balanced, and Growth Funds incurred
expenses pursuant to these related party agreements totaling approximately
$157,000, $578,000, and $211,000, respectively, for the year ended May 31, 1997,
of which $15,000, $52,000, and $21,000, respectively, were payable at period-
end.
During the year ended May 31, 1997, the Income, Balanced, and Growth Funds, in
the ordinary course of business, placed security purchase and sale orders
aggregating $478,000, $3,611,000, and $1,474,000, respectively, with certain
affiliates of the manager and paid commissions of $3,000, $20,000, and $9,000,
respectively related thereto.
27
<PAGE>
T. Rowe Price Personal Strategy Funds
- --------------------------------------------------------------------------------
- ---------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of T. Rowe Price Personal Strategy Funds, Inc.
We have audited the accompanying statement of net assets of T. Rowe Price
Personal Strategy Income Fund, T. Rowe Price Personal Strategy Balanced Fund and
T. Rowe Price Personal Strategy Growth Fund (collectively the "Funds") as of May
31, 1997, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of May
31, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights, referred to
above present fairly, in all material respects, the financial position of T.Rowe
Price Personal Strategy Income Fund, T. Rowe Price Personal Strategy Balanced
Fund and T. Rowe Price Personal Strategy Growth Fund as of May 31, 1997, the
results of their operations, the changes in their net assets and financial
highlights for each of the respective periods stated in the first paragraph, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
June 18, 1997
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T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone Shareholder service representatives are available from 8 a.m.
to 10 p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m. ET on
weekends. Call 1-800-225-5132 to speak directly with a representative
who will be able to assist you with your accounts.
In Person Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. You
can also drop off applications or obtain prospectuses and other
literature at these centers.
AUTOMATED 24-HOUR SERVICES
Tele*Access(R) Call 1-800-638-2587 to obtain information such as account
balance, date and amount of your last transaction, latest dividend
payment, fund prices, and yields. Additionally, you have the ability to
request prospectuses, statements, and account and tax forms; to reorder
checks; and to initiate purchase, redemption, and exchange orders for
identically registered accounts.
T. Rowe Price OnLine Through a personal computer via dial-up modem, you
can replicate all the services available on Tele*Access plus conduct
transactions in your Discount Brokerage and Variable Annuity accounts.
ACCOUNT SERVICES
Checking Write checks for $500 or more on any money market and most
bond fund accounts (except the High Yield and Emerging Markets Bond
Funds).
Automatic Investing Build your account over time by investing
directly from your bank account or paycheck with Automatic Asset
Builder. Additionally, Automatic Exchange enables you to set up
systematic investments from one fund account into another, such as from
a money fund into a stock fund. A $50 minimum makes it easy to get
started.
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T. Rowe Price Shareholder Services
- --------------------------------------------------------------------------------
Automatic Withdrawal If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options Reinvest all or some of
your distributions, or take them in cash. We give you maximum
flexibility and convenience.
DISCOUNT BROKERAGE*
Investments Available You can trade stocks, bonds, options, precious
metals, and other securities at a savings over regular commission rates.
To Open an Account Call a shareholder service representative for more
information.
INVESTMENT INFORMATION
Combined Statement A comprehensive overview of your T. Rowe Price
accounts is provided. The summary page gives you earnings by tax
category, provides total portfolio value, and lists your investments by
type--stock, bond, and money market. Detail pages itemize account
transactions by fund.
Shareholder Reports Portfolio managers review the performance of the
funds in plain language and discuss T. Rowe Price's economic outlook.
T. Rowe Price Report This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T. Rowe
Price's economic perspective.
Performance Update This quarterly report reviews recent market develop-
ments and provides comprehensive performance information for every T.
Rowe Price fund.
Insights This library of information includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Diversifying Overseas: A Guide to International
Investing, Retirees Financial Guide, and Retirement Planning Kit (also
available on disk for PC use) can help you determine and reach your
investment goals.
*A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
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T. Rowe Price Mutual Funds
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STOCK FUNDS
...........................
Domestic
Balanced
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Dividend Growth
Equity Income
Equity Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Science & Technology
Small-Cap Stock**
Small-Cap Value*
Spectrum Growth
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
BOND FUNDS
...........................
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured
Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
...........................
International/Global
Global Government Bond
Emerging Markets Bond
International Bond
MONEY MARKET FUNDS
...........................
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
...........................
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
T. ROWE PRICE NO-LOAD
VARIABLE ANNUITY
...........................
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
*Closed to new investors.
**Formerly the OTC Fund.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
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For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
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 of the
T. Rowe Price Personal Strategy Funds.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
[Logo Of T. Rowe Price Appears Here]
