<PAGE>
Semiannual Report
Personal
Strategy
Funds
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November 30, 1997
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[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
Report Highlights
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Personal Strategy Funds
. The past six months were good to both stock and bond investors, despite the
turbulence in international markets.
. The Personal Strategy Funds provided strong returns, although they trailed
their benchmarks primarily because of lower exposure to equities and an
overweighting in foreign stocks.
. The funds' sector weightings shifted slightly toward bonds at the expense of
equities because of full stock valuations.
. We believe the year ahead will be generally good for bonds, while stock
investors may face tougher sledding than in recent years.
<PAGE>
Fellow Shareholders
Despite turmoil in Asian economies, both stocks and bonds turned in solid
performances during the six months ended November 30, 1997. Global stock markets
reacted to the events in Southeast Asia by falling dramatically after earlier
gains, but U.S. stocks recovered some lost ground. The main beneficiary was the
U.S. Treasury market, which surged on an investor flight to safety.
MARKET REVIEW
Negative fallout from overbuilding and excess manufacturing capacity in Asia,
along with the takeover of Hong Kong by China, took their toll on U.S. financial
markets. However, domestic markets strengthened once it became apparent that the
U.S. economy was continuing along its path of high employment, high consumer
confidence, and low inflation.
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Interest Rate Levels
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[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
30-YR TREASURY BOND 5-YR TREASURY NOTE 90-DAY TREASURY BILL
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
11/30/96 6.41 5.9 5.03
6.58 6.12 4.92
6.89 6.36 5.06
2/28/97 6.75 6.31 5.01
7 6.66 5.26
6.98 6.62 5.22
5/31/97 6.99 6.6 5.03
6.72 6.31 5.12
6.38 6 5.12
8/31/97 6.63 6.22 5.12
6.35 5.94 4.93
6.22 5.78 4.97
11/30/97 6.08 5.82 5.15
</TABLE>
The 30-year Treasury bond yield fell from a peak of 7% at the end of March to
6.08% at the end of November. The five-year note yield also declined, but not as
far, from 6.66% in March to 5.82%. Money markets were relatively stable, with
the 90-day Treasury bill yield reaching a high of 5.26% in March and ending the
period at 5.15%. (See chart.) When earlier concerns about accelerating inflation
failed to materialize, the Federal Reserve remained on hold following its
quarter-point hike in the key fed funds rate in March.
Stocks had reached a peak in late July and early August, then entered a trading
zone before plummeting in late October in response to the turbulence in
Southeast Asia. However, investors who stayed the course were rewarded as equity
markets recaptured much of their earlier gains by the end of November.
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<PAGE>
PERFORMANCE AND STRATEGY REVIEW
The funds' investment committee meets monthly to adjust the weightings of
stocks, bonds, and money market securities within the appropriate ranges for
each fund, based on market conditions and economic fundamentals. The committee
took a more defensive posture in recent months by further trimming the
allocation to stocks and slightly increasing bond holdings. It continued to
overweight international stocks and shifted toward an equal weighting of
domestic growth and value stocks. In the bond area, the committee maintained the
funds' low exposure to foreign bonds, adopted a relatively high exposure to both
investment-grade and high-yield bonds, and added long-term Treasury bonds to the
portfolios.
PERSONAL STRATEGY INCOME FUND
This fund's investment goal is to generate the highest total return consistent
with an emphasis on income first and capital appreciation second. The typical
mix of securities for the fund is 40% bonds, 40% stocks, and 20% money market
securities, although these figures can vary by as much as 10 percentage points
above or below these levels.
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Asset Allocation
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[PIE GRAPH APPEARS HERE]
Personal Strategy Income Fund
Bonds 50%
Stocks 37%
Money Markets 13%
We altered the mix of securities in the portfolio during the past six months,
raising the bond allocation one percentage point to 50%, reducing stock exposure
from 40% to 37%, and moving from an 11% to a 13% weighting in money market
securities. In the fixed income area, we held a fairly high level of both high-
yield and investment-grade securities and underweighted foreign bonds, a
strategy that served investors well during the turmoil overseas. The portfolio's
component of long-term Treasuries helped performance when interest rates
declined from their levels of six months earlier.
2
<PAGE>
In the equity arena, we maintained the fund's heavy allocation to foreign
stocks, which we continue to believe offer more reasonable valuations than
domestic stocks. European economies, in particular, are at an earlier stage in
the economic cycle than the U.S. economy. Among domestic stocks, we moved toward
a fairly equal balance of growth and value companies. Your fund's returns were
solid during the 6- and 12-month periods ended November 30, although they
trailed the benchmark shown in the table because of the fund's lower exposure to
equities, which continued to perform well despite their extended valuations.
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 11/30/97 6 Months 12 Months
- ----------------------------------------------------
<S> <C> <C>
Personal Strategy
Income Fund 7.75% 12.45%
....................................................
Combined Index Portfolio * 8.65 15.29
....................................................
</TABLE>
*An unmanaged portfolio composed of 40% stocks (S&P 500),
40% bonds (Lehman Brothers Aggregate Bond Index), and
20% money market securities (90-day Treasury bills).
PERSONAL STRATEGY BALANCED FUND
The objective of this fund is to provide the highest total return consistent
with an emphasis on both income and capital appreciation. The typical asset mix
is 60% stocks, 30% bonds, and 10% cash -- with 10 percentage point variations
permitted for each asset class. This asset allocation structure offers higher
risk but also a higher potential return than the Income Fund.
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Asset Allocation
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Personal Strategy Balanced Fund
[PIE CHART APPEARS HERE]
Bonds and Money Markets 42%
Stocks 58%
Note: For an explanation of the money markets position, see table
on page 7.
Based on net assets as of 11/30/97.
On November 30, your fund had 58% of its assets in stocks, the same as at the
end of May, and 42% in bonds and money market securities. We overweighted both
investment-grade and high-yield bonds and underweighted foreign bonds, for the
reasons mentioned previously. The mix of growth and value stocks in the
portfolio is reflected in our top five stock holdings, which include AT&T, GE,
Philip
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<PAGE>
Morris, and SBC Communications. The fund's largest stock position is SPDR Trust
(Standard & Poor's Depository Receipts), whose performance is directly linked to
that of the S&P 500 Stock Index.
On the international equities front, we maintained a maximum exposure to foreign
stocks, since we continue to believe they offer more attractive valuations
compared with domestic equities.
Your fund's returns for the 6- and 12-month periods ended November 30, 1997,
were strong but lagged the Combined Index Portfolio shown in the table because
of the fund's lower component of stocks and high allocation to foreign stocks,
which lagged their U.S. counterparts.
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 11/30/97 6 Months 12 Months
- --------------------------------------------------------------------------------
<S> <C> <C>
Personal Strategy
Balanced Fund 8.29% 14.90%
................................................................................
Combined Index Portfolio * 10.46 19.73
................................................................................
</TABLE>
*An unmanaged portfolio composed of 60% stocks (S&P 500), 30% bonds (Lehman
Brothers Aggregate Bond Index), and 10% money market securities (90-day
Treasury bills).
PERSONAL STRATEGY GROWTH FUND
Your fund seeks capital appreciation by investing primarily in common stocks.
The typical asset mix is 80% stocks and 20% bonds and money market securities,
with 10 percentage point variations permitted. As of November 30, 1997, the
fund's allocation was 72% stocks and 28% bonds and cash equivalents.
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Asset Allocation
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[PIE GRAPH APPEARS HERE]
Personal Strategy Growth Fund
Bonds and Money Markets 28%
Stocks 72%
Based on net assets as of 11/30/97
The allocation shown in the chart represents a five-percentage-point shift away
from stocks and toward fixed income securities since May. The fund's five
largest stock holdings include SPDR Trust (Standard & Poor's Depository
Receipts), which are a publicly traded proxy for S&P 500 stocks. Rounding out
the top five are AT&T, GE, Philip Morris, and Delta. As in
4
<PAGE>
the other funds, the portfolio contains a roughly equal balance of growth and
value stocks.
Among the fixed income holdings, we maintained a relatively high exposure to
investment-grade and high-yield securities and low exposure to foreign bonds. We
held a high component of foreign stocks at the expense of domestic stocks, which
hurt performance to some degree since international equities failed to keep pace
with their domestic brethren in U.S. dollar terms. However, we believe the
fund's component of foreign stocks will be rewarding over time.
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Performance Comparison
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<TABLE>
<CAPTION>
Periods Ended 11/30/97 6 Months 12 Months
- -----------------------------------------------------
<S> <C> <C>
Personal Strategy
Growth Fund 9.21% 17.39%
.....................................................
Combined Index Portfolio * 12.24 24.22
.....................................................
</TABLE>
*An unmanaged portfolio composed of 80% stocks (S&P 500)
and 20% bonds (Lehman Brothers Aggregate Bond Index).
Fund performance for both the last six and 12 months was solid, although it
lagged the benchmark portfolio shown in the table due primarily to our lower
stock position and higher exposure to foreign shares.
OUTLOOK
With prospects looking good for a federal budget nearly in balance in 1998,
financial markets will be looking toward Washington to get an idea of how any
future surpluses will be handled. A combination of tax cuts and debt reduction
would be regarded favorably, while any attempt to raise spending would have the
opposite effect. We anticipate a period of interest rate stability, with
slightly lower rates overall than during recent years. In that environment,
bonds should perform relatively well in the months ahead.
A significant slowdown in Asian economic growth poses problems for corporations
whose earnings depend on exports to the region. Even before the turbulence
developed, we believed U.S. stock valuations were fairly high. As we saw in
October, when corrections occur they can be swift and steep, and we caution
investors that the robust returns of recent years are unlikely to be sustained
over the long term.
5
<PAGE>
The Personal Strategy Funds are currently diversified in a way that will serve
investors well over time, in our view. We will continue to look for
opportunities to increase each fund's equity exposure when valuations seem more
attractive.
Respectfully submitted,
/s/ Peter Van Dyke
Peter Van Dyke
President and Chairman of the Investment Advisory Committee
December 19, 1997
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<PAGE>
T. Rowe Price Personal Strategy Funds
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Portfolio Highlights
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PORTFOLIO OVERVIEW
<TABLE>
<CAPTION>
Percent of Percent of
Net Assets Net Assets
11/30/97 11/30/97
Personal Strategy Income Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Securities 12.8% Stocks 37.4%
................................................ .............................................
Five Largest Holdings:
Bonds 49.8% SPDR Trust 0.9
................................................ .............................................
Treasuries/Agencies 12.0 AT&T 0.6
................................................ .............................................
Mortgage-Backed 12.8 GE 0.5
................................................ .............................................
Corporate 22.1 Philip Morris 0.5
................................................ .............................................
Foreign 2.9 Dow Chemical 0.4
................................................ .............................................
<CAPTION>
Personal Strategy Balanced Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Securities 2.4% Stocks 57.7%
................................................ .............................................
Five Largest Holdings:
Bonds 42.7% SPDR Trust 1.0
................................................ .............................................
Treasuries/Agencies 8.4 AT&T 0.8
................................................ .............................................
Mortgage-Backed 13.2 GE 0.8
................................................ .............................................
Corporate 18.6 Philip Morris 0.7
................................................ .............................................
Foreign 2.5 SBC Communications 0.7
................................................ .............................................
Other Assets Less Liabilities -2.8
................................................
<CAPTION>
Personal Strategy Growth Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Securities 3.8% Stocks 72.2%
................................................ .............................................
Five Largest Holdings:
Bonds 24.0% SPDR Trust 2.2
................................................ .............................................
Treasuries/Agencies 6.6 AT&T 1.1
................................................ .............................................
Mortgage-Backed 5.8 GE 1.0
................................................ .............................................
Corporate 10.3 Philip Morris 0.9
................................................ .............................................
Foreign 1.3 Delta 0.8
................................................ .............................................
</TABLE>
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T. Rowe Price Personal Strategy Funds
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Performance Comparison
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These charts show the value of a hypothetical $10,000 investment in each fund
over the past 10 fiscal year periods or since inception (for funds lacking 10-
year records). The result is compared with a broad-based average or index. The
index return does not reflect expenses, which have been deducted from the fund's
return.
PERSONAL STRATEGY INCOME FUND
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As of 11/30/97
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Personal Strategy Combined Index
Income Fund Portfolio
<S> <C> <C>
7/29/94 10,000 10,000
Nov-94 9,939 9,973
May-95 11,290 11,239
Nov-95 12,338 12,214
May-96 12,852 12,779
Nov-96 14,125 13,956
May-97 14,741 14,809
Nov-97 15,883 16,090
</TABLE>
PERSONAL STRATEGY BALANCED FUND
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As of 11/30/97
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Personal Strategy Combined Index
Balanced Fund Portfolio
<S> <C> <C>
7/29/94 10,000 10,000
Nov-94 9,969 9,974
May-95 11,435 11,484
Nov-95 12,710 12,728
May-96 13,490 13,599
Nov-96 14,904 15,109
May-97 15,812 16,376
Nov-97 17,124 18,089
</TABLE>
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T. Rowe Price Personal Strategy Funds
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Performance Comparison
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PERSONAL STRATEGY GROWTH FUND
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As of 11/30/97
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Personal Strategy Combined Index
Growth Fund Portfolio
<S> <C> <C>
7/29/94 10,000 10,000
Nov-94 10,010 9,974
May-95 11,565 11,732
Nov-95 13,111 13,258
May-96 14,205 14,464
Nov-96 15,844 16,344
May-97 17,030 18,087
Nov-97 18,598 20,302
</TABLE>
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Average Annual Compound Total Return
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This table shows how each fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
<TABLE>
<CAPTION>
Since Inception
Periods Ended 11/30/97 1 Year 3 Years Inception Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Personal Strategy Income Fund 12.45% 16.91% 14.86% 7/29/94
................................................................................
Personal Strategy Balanced Fund 14.90 19.76 17.48 7/29/94
................................................................................
Personal Strategy Growth Fund 17.39 22.94 20.42 7/29/94
................................................................................
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
<PAGE>
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.
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4200 West Cypress St.
10th Floor
Tampa, FL 33607
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. C11-051 11/30/97
