<PAGE> 1
T. ROWE PRICE EQUITY INCOME PORTFOLIO
SEMIANNUAL REPORT [T.ROWE PRICE LOGO]
June 30, 1995
DEAR INVESTOR
The equity market advanced strongly in the second quarter, continuing the trend
established at the beginning of the year. The 20.2% advance over the first half
is the strongest since the first half of 1987 and ranks among the top eight
first half advances of the last 70 years. It has been a perfect environment for
stocks, with expectations of a soft landing for the economy, falling interest
rates, good corporate earnings, and strong demand for equities. It is difficult
to see how the situation can improve.
As has often been the case in powerful markets, your fund's
conservative yield-oriented approach lagged the broad market measured by the
unmanaged Standard & Poor's 500 Stock Index. However, we are pleased by the
fund's strong absolute performance, which exceeded the average for similar
funds during the six months ended June 30, 1995.
PERFORMANCE COMPARISON
<TABLE>
<CAPTION>
-------------------------------------------------------------
Six Months Ended 6/30/95
---------------------------
<S> <C>
Equity Income Portfolio 15.8%
S&P 500 20.2
Lipper Equity Income Fund Average 14.6
-------------------------------------------------------------
</TABLE>
DIVIDEND DISTRIBUTION
On June 27, your Board of Trustees declared a second quarter dividend of $0.11
per share, which brings your 1995 dividend total to $0.48, including the $0.26
per share first quarter capital gains distribution. The second quarter
distribution was paid on June 29 to shareholders of record on June 27.
PORTFOLIO REVIEW
During the second quarter we focused on stocks in several areas. We are always
attracted to out-of-favor stocks with high dividend yields--particularly those
that are high compared with their histories. We made new or additional
investments in ALLTEL, DAYTON HUDSON, MAY DEPARTMENT STORES, and
WARNER-LAMBERT.
All these stocks carry high relative dividend yields and have been, in
varying degrees, recent underperformers. By investing in sound companies with
above-average dividend yields following periods of underperformance, we believe
your fund will benefit from the market's tendency to revalue them upward in the
months ahead. In addition to the above stocks, we increased positions in a
number of real estate investment trusts that have favorable risk and return
characteristics.
Regarding portfolio sales, we continued to reduce exposure to
high-yield bonds, whose yield advantage relative to Treasury bonds no longer
justifies their higher credit risk. We also reduced or eliminated other
positions, including SCHLUMBERGER and UNITED TECHNOLOGIES, fine companies whose
stock prices have risen to a level where their dividend yields no longer meet
our criteria.
In terms of asset allocation, we reduced exposure to stocks and bonds
slightly and increased cash reserves to 15% from 10% since the end of 1994.
SECURITY DIVERSIFICATION
-----------------------------------------------------------------------------
[FIGURE 1]
-----------------------------------------------------------------------------
SUMMARY AND OUTLOOK
In our last report, we said that "the economy should continue to perform
reasonably well in 1995, with good corporate earnings and dividend growth."
While we are happy with the robust performance of the past six months, we are
concerned about signs of overvaluation and troubling investor behavior.
Caution and risk-aversion are now viewed with disdain by many
investors, who are buoyed by recent results. A debate has broken out about
whether dividend yield is still a valid measure of stock market valuation. Our
view is that dividends do matter, and the historically low 2.5% average current
yield of S&P 500 stocks suggests that returns may be somewhat uninspiring over
the intermediate term. Therefore, we have grown increasingly cautious in our
outlook for the rest of the year, and we believe investors should be prepared
for increased volatility such as we experienced after the close of our
reporting period.
As always, we appreciate your confidence and support.
Respectfully submitted,
/s/ BRIAN C. ROGERS
------------------------------
Brian C. Rogers
President and Chairman of the
Investment Advisory Committee
July 19, 1995
1
<PAGE> 2
<TABLE>
<CAPTION>
MAJOR PORTFOLIO CHANGES
==================================================
Six Months Ended June 30, 1995
TEN LARGEST PURCHASES Cost
--------------------------------------------------
<S> <C>
SmithKline Beecham $49,128
J.C. Penney* 44,298
British Petroleum* 44,182
Anheuser-Busch* 39,798
Honeywell 38,747
Mellon Bank 37,142
American Brands 35,820
American Express 35,513
Atlantic Richfield 34,538
Warner-Lambert 31,719
</TABLE>
<TABLE>
<CAPTION>
TEN LARGEST SALES Proceeds
--------------------------------------------------
<S> <C>
Heinz** $25,864
Continental** 24,000
Avery Dennison** 21,432
American General** 19,527
ITT** 19,186
Pet** 15,600
Reader's Digest 11,963
Cooper Industries Cv. Deb.** 11,677
PNCBank 10,653
Cooper Industries Pfd.** 10,442
==================================================
</TABLE>
*Position added
**Position eliminated
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
=====================================================
June 30, 1995
Percent of
Company Net Assets
----------------------------------- ----------
<S> <C>
SmithKline Beecham 2.4%
Philip Morris 2.0
Exxon 1.9
Honeywell 1.7
Upjohn 1.7
Atlantic Richfield 1.6
American Brands 1.6
American Express 1.6
Eli Lilly 1.6
Mellon Bank 1.6
GE 1.5
American Home Products 1.5
Royal Dutch Petroleum 1.5
Warner-Lambert 1.5
Texaco 1.5
J.P. Morgan 1.4
Eastman Kodak 1.4
GTE 1.3
Entergy 1.2
DuPont 1.2
Mobil 1.2
J.C. Penney 1.2
U.S. West 1.2
Dun & Bradstreet 1.2
Sallie Mae 1.2
-----------------------------------------------------
Total 37.7%
=====================================================
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL COMPOUND TOTAL RETURN
=====================================================
Periods Ended June 30, 1995
Since Inception
1 Year 3/31/94
------- ----------------
<S> <C>
22.01% 18.87%
=====================================================
</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.
2
<PAGE> 3
STATEMENT OF NET ASSETS
T. Rowe Price Equity Income Portfolio / June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS -- 78.7%
Value
---------
<S> <C>
FINANCIAL -- 14.8%
----------------------------------------------------------------------------
BANK & TRUST -- 7.6%
500 shs. BANC ONE . . . . . . . $ 16,125
600 Chase Manhattan . . . . 28,200
700 Chemical Banking . . . 33,075
500 First Interstate . . . 40,125
800 J. P. Morgan . . . . . 56,100
1,500 Mellon Bank . . . . . . 62,438
900 National City . . . . . 26,438
450 NationsBank . . . . . . 24,131
400 PNC Bank . . . . . . . 10,550
1,200 S-E-Banken (SEK) . . . 6,238
303,420
INSURANCE -- 2.0%
1,000 Hilb, Rogal and Hamilton 12,500
300 Loews . . . . . . . 36,300
800 Provident Life & Accident
Insurance (Class B) 18,600
1,000 Willis-Corroon ADR . . 12,000
79,400
FINANCIAL SERVICES -- 5.2%
1,800 American Express . . . 63,225
400 Fannie Mae . . . . . . 37,750
600 H&R Block . . . . . . . 24,675
1,000 Sallie Mae . . . . . . 46,875
800 Travelers . . . . . . . 35,000
207,525
TOTAL FINANCIAL 590,345
UTILITIES -- 11.3%
----------------------------------------------------------------------------
TELEPHONE -- 4.9%
600 ALLTEL . . . . . . . . 15,225
250 BCE . . . . . . . . . . 8,031
400 Bell Atlantic . . . . . 22,400
200 BellSouth . . . . . . . 12,700
300 COMSAT. . . . . . . . . 5,888
1,500 GTE . . . . . . . . . . 51,187
400 Pacific Telesis . . . . 10,700
700 Southern New England
Telecommunications. . 24,675
1,150 U. S. WEST . . . . . . 47,869
198,675
ELECTRIC UTILITIES -- 6.4%
1,000 BGE . . . . . . . . . . 25,000
1,700 Centerior Energy . . . 16,362
250 Dominion Resources . . 9,125
412 DQE . . . . . . . . . . 9,682
2,000 Entergy . . . . . . . . 48,250
800 Florida Progress . . . 25,000
600 General Public Utilities 17,850
800 Pacific Gas and Electric 23,200
1,400 PacifiCorp . . . . . . 26,250
900 SCEcorp . . . . . . . 15,413
800 Southern Company . . . 17,900
800 Unicom . . . . . . . . 21,300
255,332
TOTAL UTILITIES 454,007
CONSUMER NONDURABLES -- 21.4%
----------------------------------------------------------------------------
BEVERAGES -- 1.4%
700 Anheuser-Busch . . . . 39,812
500 Brown-Forman (Class B) 16,688
56,500
FOOD PROCESSING -- 2.8%
400 CPC International . . . 24,700
800 General Mills . . . . . 41,100
500 Quaker Oats . . . . . . 16,437
1,100 Sara Lee . . . . . . . 31,350
113,587
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT -- 1.3%
300 Bausch & Lomb . . . . . 12,450
1,100 Baxter International . 40,013
52,463
PHARMACEUTICALS -- 9.6%
800 American Home Products 61,900
800 Eli Lilly . . . . . . . 62,800
800 Schering-Plough . . . . 35,300
2,100 SmithKline Beecham
ADR . . . . . . . . 95,025
1,750 Upjohn . . . . . . . 66,281
700 Warner-Lambert . . . . 60,463
381,769
MISCELLANEOUS CONSUMER
PRODUCTS -- 6.3%
1,600 American Brands . . . . 63,600
200 Clorox . . . . . . . 13,050
600 Hanson ADR . . . . . . 10,575
1,100 Philip Morris . . . . . 81,812
700 RJR Nabisco . . . . . . 19,513
900 Tambrands . . . . . . . 38,475
800 UST . . . . . . . . . . 23,800
250,825
TOTAL CONSUMER NONDURABLES 855,144
CONSUMER SERVICES -- 6.2%
----------------------------------------------------------------------------
GENERAL MERCHANDISERS -- 3.3%
200 Dayton Hudson . . . . . 14,350
1,000 J.C. Penney . . . . . . 48,000
800 May Department Stores . 33,300
500 Sears . . . . . . . . . 29,937
400 TJX . . . . . . . . . 5,300
130,887
</TABLE>
3
<PAGE> 4
T. ROWE PRICE EQUITY INCOME PORTFOLIO / STATEMENT OF NET ASSETS (UNAUDITED)
<TABLE>
<S> <C>
SPECIALTY MERCHANDISERS -- 0.5%
400 shs. Fleming Companies . . . $ 10,600
300 Melville . . . . . . . 10,275
20,875
ENTERTAINMENT & LEISURE -- 0.3%
100 Reader's Digest (Class A),
non-voting . . . . . 4,413
200 Reader's Digest (Class B) 8,175
12,588
MEDIA & COMMUNICATIONS -- 2.1%
900 Dun & Bradstreet . . . 47,250
300 McGraw-Hill . . . . . . 22,762
491 Times Mirror (Class A) 11,723
81,735
TOTAL CONSUMER SERVICES 246,085
CONSUMER CYCLICALS -- 3.0%
----------------------------------------------------------------------------
BUILDING & REAL ESTATE -- 1.4%
500 DeBartolo Realty, REIT 7,313
1,000 General Growth Properties,
REIT . . . . . . . . 20,375
400 Simon Property Group . 10,050
500 Weingarten Realty
Investors, REIT 18,875
56,613
MISCELLANEOUS CONSUMER
DURABLES -- 1.6%
900 Eastman Kodak . . . . . 54,562
600 Maytag . . . . . . . . 9,600
64,162
TOTAL CONSUMER CYCLICALS 120,775
TECHNOLOGY -- 2.2%
----------------------------------------------------------------------------
ELECTRONIC SYSTEMS -- 2.0%
600 EG&G . . . . . . . . . 10,050
1,600 Honeywell . . . . . . . 69,000
79,050
OFFICE AUTOMATION -- 0.2%
200 Pitney Bowes . . . . . 7,675
TOTAL TECHNOLOGY 86,725
CAPITAL EQUIPMENT -- 2.6%
----------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 2.0%
1,100 GE . . . . . . . . . . 62,012
300 Hubbell (Class B) . . . 16,950
. . . . . . . 78,962
MACHINERY -- 0.6%
409 Cooper Cameron . . . . 7,720
468 Cooper Industries . . . 18,486
26,206
TOTAL CAPITAL EQUIPMENT 105,168
ENERGY -- 11.1%
----------------------------------------------------------------------------
ENERGY SERVICES -- 0.8%
700 Halliburton . . . . . . 25,025
200 Witco . . . . . . . . 6,450
31,475
INTEGRATED PETROLEUM -
DOMESTIC -- 3.9%
600 Atlantic Richfield . . 65,850
500 British Petroleum ADR . 42,812
300 Pennzoil . . . . . . . 14,137
500 Sun Company . . . . . . 13,688
1,000 USX-Marathon . . . . . 19,750
156,237
INTEGRATED PETROLEUM -
INTERNATIONAL -- 6.4%
250 Chevron . . . . . . . . 11,656
1,100 Exxon . . . . . . . . 77,687
500 Mobil . . . . . . . . 48,000
500 Royal Dutch Petroleum
ADR . . . . . . . . . 60,938
900 Texaco . . . . . . . 59,063
257,344
TOTAL ENERGY 445,056
PROCESS INDUSTRIES -- 3.4%
----------------------------------------------------------------------------
DIVERSIFIED CHEMICALS -- 1.9%
700 DuPont . . . . . . . . 48,125
300 Monsanto . . . . . . . 27,038
75,163
SPECIALTY CHEMICALS -- 0.4%
300 3M . . . . . . . . . . 17,175
PAPER & PAPER PRODUCTS -- 1.1%
750 Kimberly-Clark . . . . 44,906
TOTAL PROCESS INDUSTRIES 137,244
BUSINESS SERVICES & TRANSPORTATION -- 2.2%
----------------------------------------------------------------------------
TRANSPORTATION SERVICES -- 1.0%
550 Alexander & Baldwin . . 12,375
600 PHH . . . . . . . . . 26,700
39,075
MISCELLANEOUS BUSINESS
SERVICES -- 0.5%
300 Deluxe Corp. . . . . . 9,938
200 GATX . . . . . . . 9,425
19,363
RAILROADS -- 0.7%
200 Conrail . . . . . . . 11,125
300 Union Pacific . . . . . 16,612
27,737
TOTAL BUSINESS SERVICES & TRANSPORTATION 86,175
4
</TABLE>
<PAGE> 5
T. ROWE PRICE EQUITY INCOME PORTFOLIO / STATEMENT OF NET ASSETS (UNAUDITED)
<TABLE>
<S> <C>
CONGLOMERATES -- 0.4%
7,000 shs. LONRHO (GBP) . . . . . $ 16,423
TOTAL CONGLOMERATES 16,423
MISCELLANEOUS COMMON STOCKS -- 0.1% 5,399
TOTAL COMMON STOCKS (COST $2,809,419) 3,148,546
CONVERTIBLE PREFERRED STOCKS -- 0.7%
400 Newmont Mining (144a)
$2.75 . . . . . . . . 23,350
209 Times Mirror, Series B,
$1.374 . . . . . . . 4,990
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $24,716) 28,340
CONVERTIBLE BONDS -- 0.4%
$ 15,000 Time Warner, Sub. Deb.,
8.75%, 1/10/15 15,694
TOTAL CONVERTIBLE BONDS (COST $14,971) 15,694
CORPORATE BONDS -- 3.3%
25,000 Coca-Cola Bottling Group,
Sr. Sub. Notes,
9.00%, 11/15/03 24,625
30,000 Continental Cablevision,
Sr. Deb.,
9.00%, 9/1/08 30,150
30,000 Crown Central Petroleum,
Sr. Notes,
10.875%, 2/1/05 31,350
25,000 Paging Network, Sr. Sub.
Notes, 8.875%, 2/1/06 22,750
25,000 Westpoint Stevens, Sr. Notes,
8.75%, 12/15/01 24,625
TOTAL CORPORATE BONDS (COST $129,027) 133,500
U.S. GOVERNMENT OBLIGATIONS/AGENCIES -- 2.1%
20,000 U.S. Treasury Notes,
6.25%, 8/15/23 18,891
20,000 U.S. Treasury Notes,
5.875%, 2/15/04 19,509
25,000 U.S. Treasury Notes,
6.125%, 7/31/96 25,086
20,000 U.S. Treasury Notes,
7.375%, 11/15/97 20,649
TOTAL U.S. GOVERNMENT OBLIGATIONS/AGENCIES
(COST $81,023) 84,135
SHORT-TERM INVESTMENTS -- 17.2%
COMMERCIAL PAPER -- 17.2%
143,000 Cargill Financial Services,
6.10%, 7/3/95 142,927
100,000 Delaware Funding,
5.95%, 8/18/95 99,173
150,000 Kellogg Company,
5.94%, 7/31/95 148,986
100,000 New Center Asset Trust,
6.00%, 7/6/95 98,917
100,000 Province of British
Columbia,
6.08%, 7/7/95 98,075
100,000 Province of Quebec,
5.82%, 9/26/95 98,545
TOTAL SHORT-TERM INVESTMENTS (COST $686,623) 686,623
============================================================================
TOTAL INVESTMENTS IN SECURITIES -- 102.4%
OF NET ASSETS (COST $3,745,779) $4,096,838
============================================================================
OTHER ASSETS LESS LIABILITIES (94,610)
--------
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS CONSIST OF: Value
----------
<S> <C> <C>
Accumulated net
investment income -
net of distributions . . . . . . . . . . . $ 1,939
Accumulated net
realized gain/loss -
net of distributions . . . . . . . . . . . 24,388
Net unrealized gain (loss) . . . . . . . . . 351,100
Paid-in-capital applicable
to 346,453 shares of $0.0001
par value capital stock
outstanding; 1,000,000,000
shares authorized . . . . . . . . . . . . . . . 3,624,801
----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $4,002,228
==========
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . $ 11.55
=======
============================================================================
</TABLE>
GBP British sterling
SEK Swedish krona
REIT Real Estate Investment Trust
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 0.6% of net assets.
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
STATEMENT OF OPERATIONS
T. Rowe Price Equity Income Portfolio / Six Months Ended June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend . . . . . . . . . . . . . . . . . . . . . . . $ 45,137
Interest . . . . . . . . . . . . . . . . . . . . . . . 23,092
---------
Total income . . . . . . . . . . . . . . . . . . . . . 68,229
---------
Expenses
Investment management and administrative . . . . . . . 12,240
---------
Net investment income . . . . . . . . . . . . . . . . . . 55,989
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . . . . . . 24,579
Foreign currency transactions . . . . . . . . . . . . . (26)
---------
Net realized gain (loss) . . . . . . . . . . . . . . . 24,553
---------
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . . . . . . . 325,367
Other assets and liabilities denominated in
foreign currencies . . . . . . . . . . . . . . . . . 41
---------
Change in net unrealized gain or loss . . . . . . . . . 325,408
---------
Net realized and unrealized gain (loss) . . . . . . . . . 349,961
---------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS . . . . $ 405,950
=========
=============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price Equity Income Portfolio (Unaudited)
<TABLE>
<CAPTION>
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 Dec. 31, 1994
------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . . . . $ 55,989 $ 61,507
Net realized gain (loss) . . . . . . . . . . . . 24,553 55,180
Change in net unrealized gain or loss . . . . . . 325,408 25,692
----------- -----------
Increase (decrease) in net assets from operations 405,950 142,379
----------- -----------
Distributions to shareholders
Net investment income . . . . . . . . . . . . . . (65,269) (59,148)
Net realized gain . . . . . . . . . . . . . . . . (55,345) --
----------- -----------
Decrease in net assets from distributions . . . . (120,614) (59,148)
----------- -----------
Capital share transactions*
Shares sold . . . . . . . . . . . . . . . . . . . 1,537,017 1,998,875
Distributions reinvested . . . . . . . . . . . . 120,404 59,128
Shares redeemed . . . . . . . . . . . . . . . . . (140,745) (168)
----------- -----------
Increase (decrease) in net assets from
capital share transactions . . . . . . . . . . 1,516,676 2,057,835
----------- -----------
Net equalization . . . . . . . . . . . . . . . . . 8,860 290
----------- -----------
Increase (decrease) in net assets . . . . . . . . . 1,810,872 2,141,356
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . 2,191,356 50,000
----------- -----------
End of period . . . . . . . . . . . . . . . . . . . $ 4,002,228 $ 2,191,356
=========== ===========
=====================================================================================================
*Share information
Shares sold . . . . . . . . . . . . . . . . . . . 137,822 199,651
Distributions reinvested . . . . . . . . . . . . 11,027 5,711
Shares redeemed . . . . . . . . . . . . . . . . . (12,742) (16)
----------- -----------
Increase (decrease) in shares outstanding . . . . 136,107 205,346
=========== ===========
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
T. Rowe Price Equity Income Portfolio / June 30, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc. (the Corporation) is registered under the
Investment Company Act of 1940. The Equity Income Portfolio (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the Corporation. The shares of the fund are currently being
offered only to separate accounts of certain insurance companies as an
investment medium for both variable annuity contracts and variable life
insurance policies.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time the valuations
are made. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. Listed securities that are not traded on a particular day and
securities that are regularly traded in the over-the-counter market are valued
at the mean of the latest bid and asked prices. Other equity securities are
valued at a price within the limits of the latest bid and asked prices deemed
by the Board of Directors, or by persons delegated by the Board, best to
reflect fair value.
Debt securities are generally traded in the over-the-counter market
and are valued at a price deemed best to reflect fair value as quoted by
dealers who make markets in these securities or by an independent pricing
service. Short-term debt securities are valued at their cost which, when
combined with accrued interest, approximates fair value.
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.
7
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (CONT'D)
T. Rowe Price Equity Income Portfolio / June 30, 1995 (Unaudited)
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.
B) Currency Translation - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
C) Premiums and Discounts - Premiums and discounts on debt securities are
amortized for both financial and tax reporting purposes.
D) 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 an 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. The fund follows the practice of equalization
under which undistributed net investment income per share is unaffected by fund
shares sold or redeemed.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $1,343,004 and $254,076, respectively, for the six months ended June
30, 1995.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
At June 30, 1995, the aggregate cost of investments for federal income
tax and financial reporting purposes was $3,745,779 and net unrealized gain
aggregated $351,059 of which $384,536 related to appreciated investments and
$33,477 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management and administrative agreement between the fund and T.
Rowe Price Associates, Inc. (the Manager) provides for an all-inclusive annual
fee, computed daily and paid monthly, equal to 0.85% of the fund's average
daily net assets. Pursuant to the agreement, investment management, shareholder
servicing, transfer agency, accounting and custody services are provided to the
fund and interest, taxes, brokerage commissions and extraordinary expenses are
paid directly by the fund.
================================================================================
FINANCIAL HIGHLIGHTS
T. Rowe Price Equity Income Portfolio (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding through each period
-------------------------------------------
From March 31, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------ ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . $ 10.42 $ 10.00
------- -------
Investment Activities
Net investment income . . . . . . . . . . . 0.21 0.30
Net realized and unrealized gain (loss) . 1.40 0.41
------- -------
Total from Investment Activities . . . . . . 1.61 0.71
------- -------
Distributions
Net investment income . . . . . . . . . . . (0.22) (0.29)
Net realized gain . . . . . . . . . . . . . (0.26) --
------- -------
Total Distributions . . . . . . . . . . . . . (0.48) (0.29)
------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . $ 11.55 $ 10.42
======= =======
==========================================================================================
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . 15.8% 7.2%
Ratio of Expenses to Average Net Assets . . . 0.85%+ 0.85%+
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . 3.89%+ 3.88%+
Portfolio Turnover Rate . . . . . . . . . . . 20.1%+ 21.3%+
Net Assets, End of Period . . . . . . . . . $4,002,228 $2,191,356
==========================================================================================
</TABLE>
+Annualized.
8
<PAGE> 9
EDGAR APPENDIX
Insert Security Diversification pie chart showing stocks 79%, bonds 5%,
convertibles 1%, reserves 15%
