<PAGE>
- -------------------------------------------------------------
Semi-Annual Report - Financial Statements
- -------------------------------------------------------------
T. Rowe Price
Personal Strategy
Income Fund
November 30, 1997
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited
- --------------------
Financial Highlights For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year 7/29/94
Ended Ended Through
11/30/97 5/31/97 5/31/96 5/31/95
<S> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 11.98 $ 11.85 $ 10.94 $ 10.00
..................................................
Investment activities
Net investment income 0.25* 0.51* 0.50* 0.41*
Net realized and
unrealized gain (loss) 0.67 1.10 0.98 0.85
..................................................
Total from investment
activities 0.92 1.61 1.48 1.26
..................................................
Distributions
Net investment income (0.26) (0.50) (0.47) (0.32)
Net realized gain - (0.98) (0.10) -
..................................................
Total distributions (0.26) (1.48) (0.57) (0.32)
..................................................
NET ASSET VALUE
End of period $ 12.64 $ 11.98 $ 11.85 $ 10.94
--------------------------------------------------
Ratios/Supplemental Data
Total return 7.75%* 14.70%* 13.84%* 12.90%*
...................................................................................
Ratio of expenses to
average net assets 0.95%+* 0.95%* 0.95%* 0.95%+*
...................................................................................
Ratio of net investment
income to average net assets 4.25%+* 4.38%* 4.31%* 4.71%+*
...................................................................................
Portfolio turnover rate 13.0% 44.8% 34.1% 50.5%+
...................................................................................
Average commission rate paid $ 0.0339 $ 0.0375 $ 0.0522 $ -
...................................................................................
Net assets, end of period
(in thousands) $ 64,490 $ 44,368 $ 25,545 $ 20,705
...................................................................................
</TABLE>
* Excludes expenses in excess of a 0.95% 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 Income Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 1997
<TABLE>
<CAPTION>
- -----------------------
Statement of Net Assets Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Common Stocks 37.4%
FINANCIAL 7.2%
Bank and Trust 4.0%
Abbey National (GBP) 4,000 $ 63
................................................................................
Air Liquide (L) (FRF) 220 35
................................................................................
BANC ONE 5,000 257
................................................................................
Banca Commerciale Italiana (ITL) 20,000 57
................................................................................
Banco de Bilbao Vizcaya ADR 2,400 72
................................................................................
Banco Frances del Rio ADR 1,035 28
................................................................................
BankBoston 700 62
................................................................................
Barclay's (GBP) 3,000 72
................................................................................
Chase Manhattan 2,000 217
................................................................................
Citicorp 800 96
................................................................................
Deutsche Bank (DEM) 500 32
................................................................................
First Union 1,600 78
................................................................................
HSBC Holdings (GBP) 3,400 87
................................................................................
J. P. Morgan 1,230 140
................................................................................
KeyCorp 750 51
................................................................................
Kredietbank (BEF) 200 81
................................................................................
Mellon Bank 3,900 221
................................................................................
Mercantile Bancorporation 200 10
................................................................................
National City 1,200 80
................................................................................
NationsBank 1,000 60
................................................................................
Norwest 3,200 120
................................................................................
Schweizerischer Bankverein (CHF) * 300 86
................................................................................
Societe Generale (FRF) 410 54
................................................................................
Societe Generale de Belgique (BEF) 150 14
................................................................................
Svenska Handelsbanken (SEK) 1,000 35
................................................................................
U.S. Bancorp 800 86
................................................................................
Union Bank of Switzerland (CHF) 40 51
................................................................................
Washington Mutual 3,460 239
................................................................................
Wells Fargo 100 31
................................................................................
Westpac Bank (AUD) 6,000 38
................................................................................
2,553
.............
</TABLE>
3
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Insurance 1.5%
ACE Limited 1,400 $ 139
................................................................................
American General 1,500 81
................................................................................
American International Group 450 46
................................................................................
EXEL 800 49
................................................................................
Mid Ocean Limited 1,000 62
................................................................................
St. Paul Companies 2,700 216
................................................................................
Sumitomo Marine & Fire Insurance (JPY) 6,000 30
................................................................................
Travelers Property Casualty 5,400 215
................................................................................
UNUM 1,500 71
................................................................................
Willis-Corroon ADR 9,100 97
................................................................................
1,006
.............
Financial Services 1.7%
American Express 2,700 213
................................................................................
Associates First Capital (Class A) 100 6
................................................................................
AXA (FRF) 700 51
................................................................................
Fannie Mae 4,600 243
................................................................................
Freddie Mac 2,900 120
................................................................................
Green Tree Financial 500 15
................................................................................
Household International 600 76
................................................................................
ING Groep (NLG) 1,750 71
................................................................................
Money Store 500 12
................................................................................
Morgan Stanley Dean Witter Discover 400 22
................................................................................
Pearson (GBP) 2,000 28
................................................................................
SLM Holding 650 84
................................................................................
The CIT Group (Class A) * 500 15
................................................................................
Travelers Group 2,899 146
................................................................................
1,102
.............
Total Financial 4,661
.............
UTILITIES 3.0%
Telephone Services 1.9%
ALLTEL 1,400 56
................................................................................
AT&T 6,550 366
................................................................................
BellSouth 1,500 82
................................................................................
British Telecommunications PLC ADR 700 55
................................................................................
</TABLE>
4
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Frontier 5,700 $ 140
................................................................................
Hong Kong Telecommunications ADR 1,100 21
................................................................................
Nippon Telegraph & Telephone (JPY) 6 49
................................................................................
SBC Communications 3,400 247
................................................................................
Telecom Corp. of New Zealand ADR 800 33
................................................................................
Telefonica de Espana ADR 1,000 86
................................................................................
Telmex (Class L) ADR 1,300 64
................................................................................
Telekom Malaysia (MYR) 3,000 7
................................................................................
1,206
.............
Electric Utilities 1.1%
Electrabel (BEF) 50 11
................................................................................
Empresa Nacional de Electricidad ADR 1,200 22
................................................................................
Entergy 1,100 29
................................................................................
FirstEnergy * 7,295 197
................................................................................
Hong Kong Electric (HKD) 10,000 34
................................................................................
Niagara Mohawk * 4,100 39
................................................................................
PECO Energy 3,000 73
................................................................................
Texas Utilities 2,200 88
................................................................................
Unicom 5,900 172
................................................................................
VEBA (DEM) 800 48
................................................................................
713
.............
Total Utilities 1,919
.............
CONSUMER NONDURABLES 8.5%
Cosmetics 0.4%
Gillette 300 28
................................................................................
International Flavors & Fragrances 3,100 149
................................................................................
Kao (JPY) 5,000 67
................................................................................
244
.............
Beverages 0.5%
Anheuser-Busch 3,300 143
................................................................................
LVMH (FRF) 200 34
................................................................................
PepsiCo 4,600 170
................................................................................
347
.............
Food Processing 1.8%
Cadbury Schweppes (GBP) 4,000 41
................................................................................
</TABLE>
5
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Cadbury Schweppes ADR 1,500 $ 63
................................................................................
CPC International 1,100 114
................................................................................
CSM (NLG) 500 21
................................................................................
Danisco (DKK) 1,000 54
................................................................................
Dean Foods 400 21
................................................................................
Eridania Beghin-Say (FRF) 300 47
................................................................................
General Mills 960 71
................................................................................
Heinz 1,000 50
................................................................................
Hershey Foods 500 31
................................................................................
Interstate Bakeries 900 31
................................................................................
McCormick 4,300 114
................................................................................
Nabisco Holdings (Class A) 1,100 51
................................................................................
Nestle (CHF) 50 74
................................................................................
Ralston Purina 1,600 149
................................................................................
Sara Lee 4,400 233
................................................................................
1,165
.............
Hospital Supplies/Hospital Management 0.6%
Abbott Laboratories 400 26
................................................................................
Baxter International 600 30
................................................................................
Boston Scientific * 900 41
................................................................................
HealthSouth * 2,300 60
................................................................................
Medtronic 1,000 48
................................................................................
Smith & Nephew (GBP) 8,000 23
................................................................................
St. Jude Medical * 600 18
................................................................................
Tenet Healthcare * 1,700 54
................................................................................
Terumo (JPY) 3,000 47
................................................................................
United States Surgical * 1,900 50
................................................................................
397
.............
Pharmaceuticals 2.6%
American Home Products 3,580 250
................................................................................
Astra (Class B) (SEK) 3,200 53
................................................................................
Biogen * 400 14
................................................................................
Bristol-Myers Squibb 1,500 140
................................................................................
Eli Lilly 992 63
................................................................................
Gehe (DEM) 1,000 51
................................................................................
Glaxo Wellcome ADR 1,100 50
................................................................................
Johnson & Johnson 1,400 88
................................................................................
Merck 1,300 123
................................................................................
</TABLE>
6
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Novartis (CHF) 64 $ 102
................................................................................
Pfizer 3,020 220
................................................................................
Pharmacia & Upjohn 2,205 74
................................................................................
Schering-Plough 1,200 75
................................................................................
SmithKline Beecham ADR 4,100 204
................................................................................
Takeda Chemical Industries (JPY) 3,000 88
................................................................................
Warner-Lambert 500 70
................................................................................
1,665
.............
Health Care Services 0.2%
Altana AG (DEM) 400 28
................................................................................
United HealthCare 1,600 83
................................................................................
111
.............
Miscellaneous Consumer Products 2.4%
Benetton Group (ITL) 4,160 63
................................................................................
Bridgestone (JPY) 3,000 65
................................................................................
Colgate-Palmolive 3,300 221
................................................................................
CUC International * 3,200 92
................................................................................
Grand Metropolitan ADR 1,100 41
................................................................................
Jones Apparel Group * 600 29
................................................................................
Kuraray (JPY) 3,000 26
................................................................................
Lion Nathan (NZD) 20,000 47
................................................................................
Mattel 1,800 72
................................................................................
Newell 1,000 41
................................................................................
Philip Morris 6,850 298
................................................................................
Procter & Gamble 700 53
................................................................................
Service Corp. International 2,300 84
................................................................................
Stanley Works 1,000 44
................................................................................
Textron 400 24
................................................................................
Tomkins ADR 2,000 41
................................................................................
Unifi 2,900 110
................................................................................
Unilever N.V. ADR 800 47
................................................................................
UST 4,400 136
................................................................................
1,534
.............
Total Consumer Nondurables 5,463
.............
</TABLE>
7
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
CONSUMER SERVICES 3.9%
Restaurants 0.0%
Tricon Global Restaurants * 210 $ 7
................................................................................
7
.............
General Merchandisers 0.9%
Dayton Hudson 1,000 66
................................................................................
Fred Meyer * 400 14
................................................................................
J.C. Penney 800 51
................................................................................
JUSCO (JPY) 2,000 34
................................................................................
Marui (JPY) 2,000 31
................................................................................
Neiman-Marcus * 1,400 46
................................................................................
Tesco (GBP) 10,107 82
................................................................................
TJX 1,600 55
................................................................................
Wal-Mart 3,800 152
................................................................................
Warnaco Group (Class A) 2,300 68
................................................................................
599
.............
Specialty Merchandisers 1.3%
American Stores 1,800 36
................................................................................
CVS 1,384 92
................................................................................
Federated Department Stores * 1,500 68
................................................................................
General Nutrition * 1,700 58
................................................................................
Home Depot 850 48
................................................................................
Kohl's * 700 51
................................................................................
McKesson 100 11
................................................................................
Omron (JPY) 2,000 34
................................................................................
Safeway * 2,100 128
................................................................................
The Gap 100 5
................................................................................
Toys "R" Us * 3,200 109
................................................................................
Tupperware 7,000 167
................................................................................
807
.............
Entertainment and Leisure 0.7%
Carnival (Class A) ADR 1,600 87
................................................................................
Disney 1,100 104
................................................................................
Hutchison Whampoa (HKD) 11,000 73
................................................................................
ITT * 200 15
................................................................................
McDonald's 800 39
................................................................................
</TABLE>
8
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Reader's Digest (Class B) 5,540 $ 135
................................................................................
Sharp (JPY) 3,000 20
................................................................................
473
.............
Media and Communications 1.0%
Asatsu (JPY) 2,000 35
................................................................................
Elsevier (NLG) 3,000 51
................................................................................
R.R. Donnelley 3,800 134
................................................................................
Time Warner 1,500 87
................................................................................
Tribune 1,500 85
................................................................................
U S WEST Media * 1,900 50
................................................................................
Valassis Communications * 1,000 30
................................................................................
Vodafone ADR 2,300 152
................................................................................
624
.............
Total Consumer Services 2,510
.............
CONSUMER CYCLICALS 1.6%
Automobiles and Related 0.3%
Cycle & Carriage (SGD) 2,000 9
................................................................................
Honda ADR 1,000 71
................................................................................
Lear * 300 14
................................................................................
Lucasvarity ADR 1,270 40
................................................................................
SPX 600 41
................................................................................
175
.............
Building and Real Estate 0.5%
Cheung Kong Holdings (HKD) 8,000 56
................................................................................
Crescent Real Estate Equities, REIT 100 4
................................................................................
DBS Land (SGD) 10,000 17
................................................................................
Federal Realty Investment Trust, REIT 3,000 75
................................................................................
Patriot American Hospitality, REIT 1,398 44
................................................................................
Simon DeBartolo Group, REIT 2,168 71
................................................................................
Starwood Lodging, REIT 1,300 70
................................................................................
337
.............
Miscellaneous Consumer Durables 0.8%
Corning 6,300 267
................................................................................
Masco 1,000 47
................................................................................
OCE Van Der Grinten NV (NLG) 300 34
................................................................................
Ricoh (JPY) 4,000 48
................................................................................
</TABLE>
9
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ----------------------------------------------------------
In thousands
<S> <C> <C>
Sony ADR 400 $ 34
..........................................................
Whirlpool 1,800 99
..........................................................
529
............
Total Consumer Cyclicals 1,041
............
TECHNOLOGY 2.1%
Electronic Components 0.4%
Altera * 300 14
..........................................................
EMC * 600 18
..........................................................
Intel 1,100 85
..........................................................
Linear Technology 500 32
..........................................................
Maxim Integrated Products * 600 42
..........................................................
Motorola 600 38
..........................................................
229
............
Electronic Systems 0.3%
Hewlett-Packard 800 49
..........................................................
Honeywell 1,550 101
..........................................................
KLA Instruments * 200 8
..........................................................
Nokia ADR 500 42
..........................................................
200
............
Information Processing 0.5%
COMPAQ Computer 1,250 78
..........................................................
Dell Computer * 400 34
..........................................................
Hitachi ADR 500 36
..........................................................
IBM 1,360 149
..........................................................
297
............
Office Automation 0.0%
Xerox 400 31
..........................................................
31
............
Specialized Computer 0.0%
Sun Microsystems * 300 11
..........................................................
11
............
Telecommunications Equipment 0.5%
Cisco Systems * 900 77
..........................................................
Lucent Technologies 300 24
..........................................................
MCI 1,700 75
..........................................................
</TABLE>
10
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ----------------------------------------------------------
In thousands
<S> <C> <C>
Telecomunicacoes Brasileiras ADR 700 $ 73
..........................................................
WorldCom 1,800 58
..........................................................
307
..........
Aerospace and Defense 0.4%
AlliedSignal 3,880 144
..........................................................
Boeing 700 37
..........................................................
Lockheed Martin 600 58
..........................................................
Raytheon 300 17
..........................................................
256
............
Total Technology 1,331
............
CAPITAL EQUIPMENT 1.6%
Electrical Equipment 1.0%
ABB Group (CHF) 30 40
..........................................................
Canon (JPY) 2,000 48
..........................................................
GE 4,500 332
..........................................................
Hubbell (Class B) 1,300 59
..........................................................
Mitsubishi Electric (JPY) 5,000 14
..........................................................
Siemens (DEM) 1,000 59
..........................................................
Tyco International 2,932 115
..........................................................
667
............
Machinery 0.6%
Cooper Industries 400 21
..........................................................
Danaher 1,600 94
..........................................................
GKN (GBP) 3,000 65
..........................................................
Man (DEM) 200 59
..........................................................
Teleflex 2,100 80
..........................................................
Valmet (FIM) 2,000 30
..........................................................
349
............
Total Capital Equipment 1,016
............
BUSINESS SERVICES AND
TRANSPORTATION 2.7%
Computer Service and Software 1.2%
Automatic Data Processing 1,200 68
..........................................................
BMC Software * 1,200 78
..........................................................
Electronic Data Systems 3,800 144
..........................................................
</TABLE>
11
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ----------------------------------------------------------
In thousands
<S> <C> <C>
First Data 2,618 $ 74
..........................................................
Galileo International 800 21
..........................................................
McAfee Associates * 900 41
..........................................................
Microsoft * 800 113
..........................................................
National Data 700 25
..........................................................
Oracle * 1,350 45
..........................................................
Parametric Technology * 1,100 56
..........................................................
SunGard Data Systems * 2,000 52
..........................................................
Synopsys * 900 37
..........................................................
754
............
Distribution Services 0.0%
Rykoff-Sexton 500 11
..........................................................
11
............
Environmental 0.0%
USA Waste Services * 1,200 40
..........................................................
40
............
Transportation Services 0.0%
Mitsubishi Heavy Industries (JPY) 4,000 16
..........................................................
United Engineers (MYR) 3,000 2
..........................................................
18
............
Miscellaneous Business Services 0.8%
British Airport Authorities (GBP) 4,100 35
..........................................................
Corporate Express * 2,600 41
..........................................................
H&R Block 6,200 254
..........................................................
Omnicom 500 37
..........................................................
Sime Darby (MYR) 6,000 6
..........................................................
Wallace Computer Services 700 24
..........................................................
Waste Management 4,960 122
..........................................................
519
............
Airlines 0.6%
AMR * 540 65
..........................................................
Delta 2,400 268
..........................................................
KLM (NLG) 1,000 36
..........................................................
369
............
Railroads 0.1%
Burlington Northern Santa Fe 600 55
..........................................................
55
............
Total Business Services and Transportation 1,766
............
</TABLE>
12
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- ----------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- ----------------------------------------------------------
In thousands
ENERGY 2.8%
<S> <C> <C>
Energy Services 0.5%
BJ Services * 300 $ 21
..........................................................
Camco International 300 19
..........................................................
Cooper Cameron * 800 49
..........................................................
Elf Aquitaine ADR 700 40
..........................................................
Halliburton 1,200 65
..........................................................
Schlumberger 1,060 87
..........................................................
TOTAL ADR 400 21
..........................................................
302
............
Exploration and Production 0.0%
Santos (AUD) 7,000 29
..........................................................
29
............
Integrated Petroleum - Domestic 1.3%
Atlantic Richfield 2,800 228
..........................................................
British Petroleum ADR 2,480 206
..........................................................
Occidental Petroleum 5,600 166
..........................................................
Unocal 1,900 76
..........................................................
USX-Marathon 4,300 147
..........................................................
823
............
Integrated Petroleum - International 1.0%
ENI S.p.A. ADR 700 41
..........................................................
Exxon 2,160 132
..........................................................
Mobil 2,500 180
..........................................................
Repsol ADR 500 22
..........................................................
Royal Dutch Petroleum ADR 1,200 63
..........................................................
Shell Transport & Trading ADR 1,500 62
..........................................................
Texaco 2,600 147
..........................................................
647
............
Total Energy 1,801
............
</TABLE>
13
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
PROCESS INDUSTRIES 2.5%
Diversified Chemicals 0.7%
Dow Chemical 2,800 $ 276
................................................................................
DuPont 1,500 91
................................................................................
Hercules 1,000 49
................................................................................
Olin 400 20
................................................................................
436
...........
Specialty Chemicals 1.1%
3M 500 49
................................................................................
A. Schulman 3,800 86
................................................................................
Akzo Nobel (NLG) 200 35
................................................................................
BASF AG (DEM) 1,000 35
................................................................................
Great Lakes Chemical 4,840 217
................................................................................
Pall 10,500 222
................................................................................
Sigma Aldrich 700 25
................................................................................
Technip (FRF) 500 52
................................................................................
721
...........
Paper and Paper Products 0.6%
Dai Nippon Printing (JPY) 3,000 59
................................................................................
Fort James 2,300 90
................................................................................
Kimberly-Clark 4,400 229
................................................................................
378
...........
Forest Products 0.1%
International Paper 1,200 57
................................................................................
57
...........
Building and Construction 0.0%
Blue Circle Industries (GBP) 8,095 46
................................................................................
46
...........
Total Process Industries 1,638
...........
BASIC MATERIALS 0.5%
Metals 0.3%
Alcoa 500 34
................................................................................
Anglo American Platinum (ZAR) 3,000 47
................................................................................
Nucor 700 35
................................................................................
Reynolds Metals 1,900 108
................................................................................
224
...........
</TABLE>
14
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Mining 0.1%
Newmont Mining 1,400 $ 42
..................................................................................................
Rio Tinto (AUD) 2,000 22
..................................................................................................
64
...........
Miscellaneous Materials 0.1%
Crown Cork & Seal 700 34
..................................................................................................
Malayan Cement (MYR) 26,250 16
..................................................................................................
50
...........
Total Basic Materials 338
...........
MISCELLANEOUS 0.9%
Other Miscellaneous 0.9%
SPDR Trust 5,800 555
..................................................................................................
Total Miscellaneous 555
...........
FOREIGN 0.1%
Europe 0.1%
AXA Colonia Konzern (DEM) 600 50
..................................................................................................
50
...........
Other Foreign 0.0%
Bobst AG (CHF) 25 37
..................................................................................................
37
...........
Total Foreign 87
...........
Total Common Stocks (Cost $ 19,864) 24,126
...........
Corporate Bonds 22.1%
AEI Holding, Sr. Notes, (144a) 10.00%, 11/15/07 $ 125,000 127
..................................................................................................
Agricultural Minerals, Sr. Notes, 10.75%, 9/30/03 50,000 54
..................................................................................................
Agrium, 7.00%, 2/1/04 200,000 205
..................................................................................................
Ahmanson, H.F., Sub. Notes, 7.875%, 9/1/04 100,000 106
..................................................................................................
Airplane Pass Thru, 10.875%, 3/15/19 150,000 169
..................................................................................................
Allied Waste, Sr. Sub. Notes, 10.25%, 12/1/06 150,000 163
..................................................................................................
AMC Entertainment, Sr. Sub. Notes, 9.50%, 3/15/09 100,000 103
..................................................................................................
American Builders & Contractors Supply, Sr. Sub. Notes
10.625%, 5/15/07 150,000 156
..................................................................................................
</TABLE>
15
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
American Express, 7.60%, 8/15/02 $ 300,000 $ 312
..................................................................................................
American Radio Systems, Sr. Sub. Notes, 9.00%, 2/1/06 100,000 106
..................................................................................................
American Safety Razor, Sr. Notes, 9.875%, 8/1/05 100,000 107
..................................................................................................
American Standard
Deb., 9.25%, 12/1/16 100,000 104
...............................................................................................
Sr. Sub. Notes, 9.875%, 6/1/01 100,000 104
..................................................................................................
Amerigas Partners L.P., Sr. Notes, 10.125%, 4/15/07 100,000 108
..................................................................................................
Ameriserve Food, Sr. Sub. Notes, (144a)
10.125%, 7/15/07 150,000 156
..................................................................................................
Ametek, Sr. Notes, 9.75%, 3/15/04 10,000 11
..................................................................................................
Archibald Candy, Sr. Secured Notes, 10.25%, 7/1/04 150,000 157
..................................................................................................
Associated Materials, Sr. Sub. Notes, 11.50%, 8/15/03 80,000 85
..................................................................................................
Associates Corporation, Sr. Notes, 5.25%, 3/30/00 60,000 59
..................................................................................................
Aurora Foods, Sr. Sub. Notes, 9.875%, 2/15/07 50,000 53
..................................................................................................
B E Aerospace, Sr. Sub. Notes, 9.875%, 2/1/06 100,000 106
..................................................................................................
B.F. Saul, REIT, Sr. Secured Notes, 11.625%, 4/1/02 90,000 96
..................................................................................................
Bank Nova Scotia, Sub. Notes, 6.25%, 9/15/08 80,000 77
..................................................................................................
Bay View Capital, Sub. Notes, 9.125%, 8/15/07 100,000 103
..................................................................................................
Boise Cascade, Deb., 7.35%, 2/1/16 100,000 100
..................................................................................................
Celestica International, Gtd. Sr. Sub. Notes
10.50%, 12/31/06 200,000 213
..................................................................................................
Chief Auto Parts, Sr. Notes, 10.50%, 5/15/05 75,000 74
..................................................................................................
Citicorp, Sub. Notes, 7.75%, 6/15/06 100,000 107
..................................................................................................
Coach USA, Gtd. Sr. Sub. Notes, 9.375%, 7/1/07 175,000 178
..................................................................................................
Coca-Cola Bottling Group, Sr. Sub. Notes
9.00%, 11/15/03 90,000 92
..................................................................................................
Coinmach, Sr. Sub. Notes, 11.75%, 11/15/05 150,000 166
..................................................................................................
Communications & Power Industries, Sr. Sub. Notes
12.00%, 8/1/05 150,000 168
..................................................................................................
Container Corporation of America
Sr. Notes, 9.75%, 4/1/03 100,000 108
...............................................................................................
Gtd., 10.75%, 5/1/02 100,000 109
..................................................................................................
Continental Airlines, 6.94%, 10/15/13 490,196 501
..................................................................................................
Courtyard by Marriott II, Sr. Secured Notes
10.75%, 2/1/08 100,000 108
..................................................................................................
Dan River, Sr. Sub. Notes, 10.125%, 12/15/03 100,000 106
..................................................................................................
Details, Sr. Sub. Notes, (144a) 10.00%, 11/15/05 50,000 51
..................................................................................................
Doane Products, Sr. Notes, 10.625%, 3/1/06 150,000 160
..................................................................................................
</TABLE>
16
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Dr Pepper Bottling, Sr. Disc. Notes, STEP
Zero Coupon, 2/15/03 $ 150,000 $ 155
..................................................................................................
Dyersburg, Sr. Sub. Notes, 9.75%, 9/1/07 150,000 155
..................................................................................................
Dyncorp, Sr. Sub. Notes, 9.50%, 3/1/07 100,000 103
..................................................................................................
Eli Lilly, 7.125%, 6/1/25 400,000 420
..................................................................................................
Energy Corporation of America, Sr. Sub. Notes
9.50%, 5/15/07 150,000 149
..................................................................................................
Fairchild Semiconductor, Sr. Sub. Notes
10.125%, 3/15/07 150,000 157
..................................................................................................
Fairfax Financial Holdings, 8.25%, 10/1/15 250,000 274
..................................................................................................
Falcon Building Products, Gtd. Sr. Sub. Notes
9.50%, 6/15/07 50,000 51
..................................................................................................
Ferrellgas, Sr. Notes, 10.00%, 8/1/01 90,000 95
..................................................................................................
First Federal Financial, 11.75%, 10/1/04 100,000 113
..................................................................................................
Frontiervision, Sr. Sub. Notes, 11.00%, 10/15/06 100,000 108
..................................................................................................
Fundy Cable, Sr. Secured 2nd Priority Notes
11.00%, 11/15/05 150,000 162
..................................................................................................
Grand Casino, 1st Mtg. Notes, 10.125%, 12/1/03 150,000 159
..................................................................................................
Grand Metropolitan Investment, Gtd., 9.00%, 8/15/11 300,000 358
..................................................................................................
Herff Jones, Sr. Sub. Notes, 11.00%, 8/15/05 100,000 108
..................................................................................................
Host Marriott Travel Plazas, Sr. Notes, 9.50%, 5/15/05 100,000 106
..................................................................................................
International Logistics, Sr. Notes, (144a) 9.75%, 10/15/07 150,000 147
..................................................................................................
Intertek Finance, Sr. Sub. Notes, 10.25%, 11/1/06 100,000 105
..................................................................................................
Iron Mountain, Sr. Sub. Notes, 8.75%, 9/30/09 150,000 152
..................................................................................................
Keebler, Sr. Sub. Notes, 10.75%, 7/1/06 150,000 169
..................................................................................................
Kelley Oil & Gas, Sr. Sub. Notes, 10.375%, 10/15/06 100,000 106
..................................................................................................
Maxxam Group Holdings, Sr. Secured Notes
12.00%, 8/1/03 100,000 108
..................................................................................................
Northland Cable Television, Sr. Sub. Notes, (144a)
10.25%, 11/15/07 150,000 154
..................................................................................................
Northrop Grumman, 7.00%, 3/1/06 70,000 72
..................................................................................................
Ocwen Capital Trust I, 10.875%, 8/1/27 150,000 160
..................................................................................................
Owens & Minor, Sr. Sub. Notes, 10.875%, 6/1/06 50,000 55
..................................................................................................
Pennsylvania Power & Light, 1st Mtg. Notes
6.50%, 4/1/05 100,000 100
..................................................................................................
Plastic Containers, Sr. Secured Notes, 10.00%, 12/15/06 150,000 159
..................................................................................................
PNC Bank, 7.875%, 4/15/05 100,000 107
..................................................................................................
Pride Petroleum Services, Sr. Notes, 9.375%, 5/1/07 100,000 107
..................................................................................................
</TABLE>
17
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -----------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Principal Mutual, (144a) 8.00%, 3/1/44 $ 250,000 $ 265
...............................................................................................
Procter & Gamble, Deb., 9.36%, 1/1/21 100,000 127
...............................................................................................
Public Service Electric & Gas, 1st Ref. Mtg. Notes
7.00%, 9/1/24 200,000 195
...............................................................................................
Quest Diagnostics, Gtd. Sr. Sub. Notes, 10.75%, 12/15/06 75,000 82
...............................................................................................
Revlon Consumer Products, Sr. Sub. Notes
10.50%, 2/15/03 75,000 79
...............................................................................................
Rio Hotel & Casino, Gtd. Sr. Sub. Notes, 9.50%, 4/15/07 100,000 106
...............................................................................................
Rogers Cablesystems, Sr. Sec. 2nd Priority Notes
10.00%, 3/15/05 90,000 99
...............................................................................................
Rouse, 8.50%, 1/15/03 60,000 63
...............................................................................................
Safelite Glass, Sr. Sub. Notes, (144a) 9.875%, 12/15/06 100,000 109
...............................................................................................
Shawmut National, Sub. Notes, 7.20%, 4/15/03 60,000 62
...............................................................................................
Six Flags Theme Parks, Sr. Sub. Disc. Notes, STEP
Zero Coupon, 6/15/05 100,000 106
...............................................................................................
Southern Foods Group, Sr. Sub. Notes, (144a)
9.875%, 9/1/07 150,000 156
...............................................................................................
Sovereign Specialty Chemicals, Sr. Sub. Notes, (144a)
9.50%, 8/1/07 150,000 154
...............................................................................................
Stellex Industries, Sr. Sub. Notes, (144a) 9.50%, 11/1/07 150,000 150
...............................................................................................
TeleWest PLC, Sr. Disc. Deb., STEP
Zero Coupon, 10/1/07 100,000 76
...............................................................................................
Tenet Healthcare, Sr. Sub. Notes, 8.625%, 1/15/07 100,000 102
...............................................................................................
Tenneco, 8.20%, 11/15/99 60,000 62
...............................................................................................
Texas Utilities, 1st Mtg. Bonds, 7.375%, 10/1/25 120,000 118
...............................................................................................
Texas-New Mexico Power, Deb., 12.50%, 1/15/99 200,000 212
...............................................................................................
Time Warner Entertainment, Deb., 8.375%, 3/15/23 300,000 335
...............................................................................................
Trump Atlantic City, 1st Mtg. Notes, 11.25%, 5/1/06 50,000 50
...............................................................................................
United Artists Theatre Circuit, PTC, 9.30%, 7/1/15 97,412 97
...............................................................................................
US Can, Sr. Gtd. Notes, 10.125%, 10/15/06 100,000 106
...............................................................................................
USF&G Capital II, Gtd. Notes, 8.47%, 1/10/27 500,000 527
...............................................................................................
Vencor, Sr. Sub. Notes, 8.625%, 7/15/07 150,000 148
...............................................................................................
Vesta Insurance Group, Deb. Notes, 8.75%, 7/15/25 500,000 588
...............................................................................................
Viasystems, Sr. Sub. Notes, (144a) 9.75%, 6/1/07 150,000 155
...............................................................................................
Wal-Mart Stores, Deb., 7.25%, 6/1/13 170,000 180
...............................................................................................
Westpoint Stevens, Sr. Sub. Deb. Notes, 9.375%, 12/15/05 100,000 105
...............................................................................................
Windy Hill Pet Food, Sr. Sub. Notes, 9.75%, 5/15/07 150,000 154
...............................................................................................
Total Corporate Bonds (Cost $13,734) 14,210
................
</TABLE>
18
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -----------------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C>
Foreign Government Obligations/
Agencies 2.9%
Commonwealth of Australia
9.50%, 8/15/03 AUD 10,000 $ 8
...............................................................................................
European Investment Bank, 3.00%, 9/20/06 JPY 18,000,000 153
...............................................................................................
Federal Republic of Germany
6.00%, 7/4/07 DEM 150,000 88
........................................................................................
6.50%, 7/15/03 DEM 425,000 257
........................................................................................
8.50%, 8/21/00 DEM 145,000 90
........................................................................................
Government of Canada
6.50%, 6/1/04 CAD 30,000 22
........................................................................................
8.50%, 4/1/02 CAD 45,000 36
........................................................................................
9.75%, 6/1/21 CAD 70,000 73
........................................................................................
Government of France
5.50%, 4/25/07 FRF 520,000 89
........................................................................................
8.25%, 2/27/04 FRF 270,000 53
........................................................................................
Government of Japan, 4.50%, 6/20/03 ++ JPY 40,500,000 365
...............................................................................................
Int'l Bank for Reconstruction & Development
6.75%, 3/15/00 JPY 6,000,000 54
........................................................................................
Kingdom of Belgium, 7.25%, 4/29/04 BEF 2,900,000 88
...............................................................................................
Kingdom of Denmark, 7.00%, 12/15/04 DKK 120,000 19
...............................................................................................
Kingdom of Spain, 8.00%, 5/30/04 ESP 8,000,000 61
...............................................................................................
Kingdom of Sweden, 6.00%, 2/9/05 SEK 100,000 13
...............................................................................................
Republic of Italy, 8.50%, 8/1/04 ITL 275,000,000 183
...............................................................................................
United Kingdom Treasury Notes
7.50%, 12/7/06 GBP 30,000 54
........................................................................................
8.50%, 12/7/05 GBP 65,000 122
........................................................................................
9.00%, 3/3/00 GBP 25,000 44
........................................................................................
Total Foreign Government Obligations/Agencies (Cost $1,854) 1,872
................
U.S. Government Mortgage-Backed
Securities 12.8%
Government National Mortgage Assn.
I
6.00%, 12/15/23 - 5/15/26 $ 1,702,981 1,646
........................................................................................
6.50%, 7/15/23 - 4/15/26 1,186,837 1,173
........................................................................................
7.00%, 2/15/27 980,551 984
........................................................................................
7.50%, 9/15/22 - 12/15/25 1,310,679 1,345
........................................................................................
</TABLE>
19
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- -----------------------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Government National Mortgage Assn.
I
8.00%, 1/15/22 - 11/15/24 $ 571,239 $ 594
........................................................................................
8.50%, 9/15/24 292,262 309
........................................................................................
10.50%, 2/15 - 10/15/13 14,949 17
........................................................................................
II
7.00%, 2/20 - 7/20/27 1,971,990 1,969
........................................................................................
8.00%, 10/20/25 181,339 187
...............................................................................................
Total U.S. Government Mortgage-Backed Securities (Cost $7,894) 8,224
................
U.S. Government Obligations/
Agencies 12.0%
Cooperative Utility Trust, 9.50%, 2/15/17 400,000 422
...............................................................................................
Tennessee Valley Authority
5.88%, 4/1/36 500,000 510
........................................................................................
6.235%, 7/15/45 500,000 512
........................................................................................
8.25%, 4/15/42 1,189,000 1,429
...............................................................................................
U.S. Treasury Bonds, 6.75%, 8/15/26 4,500,000 4,891
...............................................................................................
Total U.S. Government Obligations/Agencies (Cost $7,296) 7,764
................
Short-Term Investments 11.4%
Money Market Funds 11.4%
Reserve Investment Fund, 5.71% # 7,362,460 7,362
...............................................................................................
Total Short-Term Investments (Cost $7,362) 7,362
................
</TABLE>
20
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
- -----------------------------------------------------------------------------------------------
In thousands
<S> <C>
Total Investments in Securities
98.6% of Net Assets (Cost $58,004) $ 63,558
Other Assets Less Liabilities 932
................
NET ASSETS $ 64,490
----------------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 435
Accumulated net realized gain/loss - net of distributions 1,431
Net unrealized gain (loss) 5,528
Paid-in-capital applicable to 5,100,230 shares of $0.0001 par
value capital stock outstanding; 1,000,000,000 shares authorized 57,096
................
NET ASSETS $ 64,490
----------------
NET ASSET VALUE PER SHARE $ 12.64
----------------
</TABLE>
* Non-income producing
++ Securities contain some restrictions as to public resale--total of
such securities at period-end amounts to 0.57% of net assets.
# Seven-day yield
ADR American Depository Receipt
PTC Pass-through Certificate
REIT Real Estate Investment Trust
STEP Stepped coupon note for which the interest rate will adjust on
specified future date(s)
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers -- total of such securities at period-end amounts
to 2.52% 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
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.
21
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited
- -----------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months
Ended
11/30/97
<S> <C>
Investment Income
Income
Interest $1,174
Dividend 189
Other 15
......
Total income 1,378
......
Expenses
Investment management 79
Shareholder servicing 70
Custody and accounting 61
Registration 19
Legal and audit 7
Prospectus and shareholder reports 7
Directors 3
Miscellaneous 6
Total expenses 252
......
Net investment income 1,126
......
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 642
Foreign currency transactions (6)
......
Net realized gain (loss) 636
......
Change in net unrealized gain or loss
Securities 2,051
Other assets and liabilities
denominated in foreign currencies (7)
Change in net unrealized gain or loss 2,044
......
Net realized and unrealized gain (loss) 2,680
......
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $3,806
------
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited
- ----------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
11/30/97 5/31/97
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,126 $ 1,492
Net realized gain (loss) 636 2,218
Change in net unrealized gain or loss 2,044 1,014
........ ........
Increase (decrease) in net assets from
operations 3,806 4,724
........ ........
Distributions to shareholders
Net investment income (1,055) (1,385)
Net realized gain - (2,421)
........ ........
Decrease in net assets from distributions (1,055) (3,806)
........ ........
Capital share transactions *
Shares sold 27,997 24,669
Distributions reinvested 999 3,613
Shares redeemed (11,625) (10,449)
........ ........
Increase (decrease) in net assets from capital
share transactions 17,371 17,833
........ ........
Net equalization - 72
........ ........
Net Assets
Increase (decrease) during period 20,122 18,823
Beginning of period 44,368 25,545
........ ........
End of period $ 64,490 $ 44,368
-------- --------
*Share information
Shares sold 2,248 2,135
Distributions reinvested 81 315
Shares redeemed (934) (900)
........ ........
Increase (decrease) in shares outstanding 1,395 1,550
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
Unaudited November 30, 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
fund), a diversified, open-end management investment company, is one of the
portfolios established by the corporation and commenced operations on July 29,
1994.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits
of the latest bid and asked prices deemed by the Board of Directors, or by
persons delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service. Short-
term debt securities are valued at amortized cost which, when combined with
accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
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
24
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
Premiums and Discounts Premiums and discounts on debt securities, other than
mortgage-backed securities, are amortized for both financial reporting and tax
purposes. Premiums and discounts on mortgage-backed securities are recognized
upon principal repayment as gain or loss for financial reporting purposes and as
ordinary income for tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. Effective June 1, 1997, the fund discontinued
its practice of equalization. The results of operations and net assets were not
affected by this change.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Noninvestment-Grade Debt Securities At November 30, 1997, the 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.
Securities Lending The fund lends its securities to approved brokers to earn
additional income and takes cash and U.S. Treasury securities as collateral to
secure the loans. Collateral is maintained at not less than 100% of the value
of loaned securities. At November 30, 1997, the value of securities on loan was
$9,890,000. Although the risk is mitigated by the collateral, the fund could
25
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
experience a delay in recovering its securities and a possible loss of income or
value if the borrower fails to return them.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, aggregated $12,500,000 and $5,739,000, respectively,
for the six months ended November 30, 1997. Purchases and sales of U.S.
government securities aggregated $7,619,000 and $317,000, respectively, for the
six months ended November 30, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
For federal income tax purposes, fund distributions included $1,251,055 ($0.46
per share) of long-term capital gains, which were paid to shareholders of record
on December 26, 1996. For corporate shareholders, 9% of the fund's distributions
of income and short-term capital gains paid during the tax year ended October
31, 1997 qualified for the dividends-received deduction. These amounts may
differ from amounts reported in the accompanying financial statements due to
differences in financial statement and federal income tax reporting
requirements.
At November 30, 1997, the aggregate cost of investments for federal income tax
and financial reporting purposes was $58,004,000, and net unrealized gain
aggregated $5,554,000, of which $6,293,000 related to appreciated investments
and $739,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $13,000 was payable at November 30, 1997. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.15% of average
daily net assets and a group fee. The group fee is based on the combined assets
of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.30% for assets in excess of $80 billion.
26
<PAGE>
T. Rowe Price Personal Strategy Income Fund
- --------------------------------------------------------------------------------
At November 30, 1997, and for the six months then ended, the effective annual
group fee rate was 0.32%. The fund pays a pro-rata share of the group fee based
on the ratio of its net assets to those of the group.
Under the terms of the investment management agreement, the manager is required
to bear any expenses through May 31, 1998, which would cause the fund's ratio of
expenses to average net assets to exceed 0.95%. Thereafter, through May 31,
2000, the fund is required to reimburse the manager for these expenses, provided
that average net assets have grown or expenses have declined sufficiently to
allow reimbursement without causing the fund's ratio of expenses to average net
assets to exceed 0.95%. Pursuant to this agreement, $47,000 of management fees
were not accrued by the fund for the six months ended November 30, 1997.
Pursuant to a previous agreement, $285,000 of fees and expenses remain subject
to reimbursement through May 31, 1998. Additionally, $141,000 of unaccrued
management fees related to the current expense limitation are subject to
reimbursement through May 31, 2000.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc., is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc., provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $94,000 for the six months ended
November 30, 1997, of which $13,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended November 30, 1997, totaled
$94,000 and are reflected as interest income in the accompanying Statement of
Operations.
27
<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.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
[T. ROWE PRICE LOGO APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. C11-058 11/30/97
