T. Rowe Price New America Growth Portfolio
Invest With Confidence
T. Rowe Price
Annual Report
December 31, 1995
Dear Investor
Nineteen ninety-five was another recordbreaking year for the stock market. The
Dow Jones Industrial Average broke through 4000, then 5000, on the way to its
best year since 1975. The Standard & Poor's 500 Stock Index recorded similarly
strong gains. The market climbed steadily with less of a correction along the
way than in any year on record. Sharply falling interest rates, a strong bond
market, and a healthy economy were the primary stimulants to the strong stock
market performance.
Your fund performed well in both absolute and relative terms. Its 6- and
12-month returns of 22.0% and 51.1%, respectively, outstripped by a wide
margin the unmanaged S&P 500 as well as the average growth mutual fund for
both periods.
Performance Comparison
Periods Ended 12/31/95
6 Months 12 Months
________ _________
New America Growth Portfolio 22.0% 51.1%
S&P 500 14.5 37.6
Lipper Growth Funds Average 11.1 30.8
Market Environment
The major driver behind the 1995 market surge was the sharp decline in
long-term interest rates from nearly 8% at year-end 1994 to under 6% by
year-end 1995. Falling rates have underpinned this long bull market, which
began in 1982. (When rates backtracked in 1994, the rally stalled.) The
Federal Reserve reversed course in July 1995, cutting short-term rates for the
first time in three years, as the economy appeared to have achieved a "soft
landing" of slower but more sustainable growth. A related positive for the
stock market was the lack of major inflationary pressures, and this, together
with falling rates, enabled price/earnings ratios to expand.
Corporate profit growth also continued to exceed expectations, while
slowing from 1994's torrid pace. Strong profits and rising margins are a
tribute to the increased competitiveness of U.S. companies in the global
arena. Managements of most major U.S. corporations have undertaken massive
cost-cutting programs, including layoffs and restructurings, to become more
competitive and boost their stock prices.
Another major contributor to last year's strong financial markets was
Wall Street's perception of a changed political attitude in Washington. After
winning control of Congress in the November 1994 elections, the Republicans
pushed for sweeping changes to reduce the government's involvement in the
economy and increase reliance on private market forces. This was viewed very
favorably by stock and bond market investors. Not surprisingly, the
reappearance of gridlock and infighting toward year-end, which cast doubt on
deficit reduction and the proposed capital gains tax cut, stalled the market's
advance, at least temporarily.
The Fed's success in slowing growth led investors to seek companies that
seemed likely to prosper regardless of the cyclical environment. Cyclical
stocks, particularly consumer-related, lagged, while growth stocks did well.
The current environment should be favorable for your fund, with its emphasis
on high-growth companies operating primarily in noncyclical, service sector
industries. This focus helped the fund outperform in 1995.
Portfolio Review
While technology stocks' impressive gains for much of the year grabbed the
headlines, most growth stocks did well. Your fund generally shuns the more
cyclical and volatile technology sector, but several large portfolio holdings
benefited from the market's love affair with the Internet. America Online, the
fastest growing company in the burgeoning on-line services field, almost
doubled in price after our purchase late in the second quarter. Long time top
holding CUC International, which has a small but rapidly growing division
offering on-line shopping and other services, was also touched by Internet
euphoria and rose over 50% for the year.
The market's search for companies with strong, consistent earnings
growth intensified as the year went on and helped focus attention on many of
our largest holdings. The top contributor to performance for the last six
months was HFS, a leading franchiser of hotel brands including Howard Johnson,
Ramada, and Days Inn. During 1995, the company entered the residential housing
field by acquiring major franchiser, Century 21. HFS stock tripled in price
during the year. Several leading HMOs, which came under pressure in the first
half, contributed strongly to performance in the second half, namely United
HealthCare and new holding PacifiCare Health Systems. For the full year, the
top contributor was The Money Store, a rapidly growing consumer lending
company focusing on home equity loans. The stock's price more than tripled in
1995.
Half of the fund's worst performers were in the consumer sector, where
retailing and restaurant companies generally lagged, particularly late in the
year as consumers pulled in their horns. Nevertheless, this sector produced
some winners. Vitamin and health product retailer General Nutrition rose more
than 50% for the year, while men's sportswear designer Tommy Hilfiger doubled
following our initial purchase in March.
After sharply paring our consumer holdings and boosting business
services stocks in 1994, we reversed course in 1995 and brought these two
large sectors more into balance. Within the consumer sector, however, we
virtually eliminated our restaurant commitments while adding significantly to
the media/communication field, with new holdings such as Capital Cities/ABC,
soon to close a merger with Walt Disney; cable TV companies Comcast and Cox
Communications; and leading paging company Paging Network. While business
services were pared overall, we added several large new positions in ADT and
Olsten.
Sector Diversification
12/31/94 12/31/95
_______ _______
Financial Services 12% 10%
Consumer Services 34 40
Business Services 48 41
Reserves 6 9
_____________________________________________________________________________
Total 100% 100%
We continued to seek companies with exceptional growth prospects in all
economic climates, and the portfolio's growth characteristics remained strong,
as noted in the table. Most portfolio companies plow their earnings back into
their businesses rather than pay high dividends, so that they can maintain or
increase their earnings momentum. In fact, many pay no dividends at all in
order to help deliver sustainable earnings growth of 20% to 25% per year.
Portfolio Characteristics
New America
Growth Portfolio S&P 500
_______________________
Earnings Growth Rate Estimated
Next 5 Years 20.5% 7.0%
Profitability-Return on Equity
Latest 12 Months 16.0 16.5
Dividend Yield on Stocks 0.4 2.3
P/E Ratio (Based on Next 12 Months'
Estimated Earnings) 19.4X 15.8X
Outlook
Our outlook for the equity markets in 1996 remains positive. Most of the
forces that underpinned the market's advance last year are still in place,
albeit somewhat less pronounced. The economy continues to grow, inflation and
interest rates remain low, and demand for U.S. equities is robust. On the
negative side, corporate earnings growth is slowing and more companies are
reporting earnings shortfalls. In Washington, the President and the Congress
appear stalemated in their negotiations over the budget. Stock and bond
markets are both undergoing corrections as we write, which should not be
surprising given 1995's stellar advances.
We continue to believe that the fund is well positioned for the economic
environment we anticipate in 1996. Our portfolio companies show strong
earnings gains even as the overall rate of corporate profit growth slows.
While your fund will always focus on service-related holdings, we may take
advantage of the flexibility provided by our investment program to gradually
expand our exposure to promising nonservice businesses that meet our growth
criteria. (The prospectus allows up to 25% of assets to be invested in such
companies.) Any significant purchases outside the service sector will of
course be discussed in our reports to you.
While valuation levels have risen for many growth companies, we are
comfortable with the portfolio's valuation level and optimistic that the fund
will continue to generate attractive returns over the next several years.
Respectfully submitted,
John H. Laporte
President and Chairman
of the Investment Advisory Committee
Brian W. H. Berghuis
Executive Vice President
January 31, 1996
A Word on Market Corrections
_____________________________________________________________________________
After the stock market's spectacular run in 1995, concerns about a
"correction" have intensified. Most market observers consider a correction to
be a short and sometimes steep decline following a period of rising prices.
Moderate corrections of around 10% have been quite common, occurring on
average about once every two years over the last half-century, according to
Ned Davis Research.
The market as measured by the Dow Jones Industrial Average has not experienced
a moderate correction since early 1994. Furthermore, the Dow last hit a bear
market bottom - defined as a drop of at least 20% - in October 1990.
Therefore, it would not be surprising to see a modest pullback in 1996, on the
order of 5% to 10%.
Corrections are not only common, but can be beneficial for long-term
investors, especially those who invest in regular amounts through dollar cost
averaging. In a correction, overall stock prices decline, often leading to
more attractive valuations and good buying opportunities. History has shown
that investors who continue to buy through a downturn fare quite well. In
fact, the Dow has proven resilient in the aftermath of past corrections of
around 10%, taking an average of just six months to recover its losses,
according to Ned Davis. (To realize the benefits of dollar cost averaging, you
should be prepared to continuously purchase securities over a period of time,
in up and down markets. This approach does not assure a gain nor protect you
from a loss in declining markets.)
We raise the issue of a market correction not as a prediction, but as a
reminder that stock prices do not move in only one direction. If you are
satisfied that your investments are appropriate for your various objectives,
we recommend that you stay the course when a correction eventually occurs.
Twenty-Five Largest Holdings
December 31, 1995
Percent of
Company Net Assets
________________________________________ ____________
CUC International 2.8%
United HealthCare 2.7
Viacom 2.5
Franklin Resources 2.5
ADT 2.4
General Nutrition 2.4
Service Corp. 2.3
Paging Network 2.3
Schlumberger 2.3
Cardinal Health 2.2
Comcast 2.2
Olsten 2.2
Columbia/HCA Healthcare 2.1
Office Depot 2.0
Capital Cities/ABC 2.0
Vodafone 2.0
Alco Standard 1.9
PacifiCare Health Systems 1.8
Quorum Health Group 1.8
HFS 1.7
First Data 1.6
Revco 1.6
ADVO 1.6
USA Waste Services 1.5
Catalina Marketing 1.5
_____________________________________________________________________________
Total 51.9%
Average Annual Compound Total Return
Periods Ended December 31, 1995
1 Year Since Inception 3/31/94
________ ________________________
51.08% 27.24%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
Total returns do not include charges imposed by your insurance company's
separate account. If these were included, performance would have been lower.
Chart 1 Performance Comparison Line Graph
Note: The index return does not reflect expenses, which have been deducted
from the fund's return. Past performance does not predict future results.
Statement of Net Assets
T. Rowe Price New America Growth Portfolio / December 31, 1995
Value
COMMON STOCKS - 91.4%
FINANCIAL SERVICES - 9.6%
_____________________________________________________________________________
INSURANCE - 3.8%
3,500 shs ACE Limited. . . . . . . . . . . . . $139,125
3,000 MGIC Investment. . . . . . . . . . . 162,750
3,000 UNUM . . . . . . . . . . . . . . . . 165,000
466,875
INVESTMENT SERVICES - 2.5%
6,000 Franklin Resources . . . . . . . . . 302,250
OTHER FINANCIAL SERVICES - 3.3%
1,000 Fannie Mae . . . . . . . . . . . . . 124,125
2,000 Freddie Mac. . . . . . . . . . . . . 167,000
1,000 Household International. . . . . . . 59,125
3,750 Money Store. . . . . . . . . . . . . 58,594
408,844
Total Financial Services 1,177,969
CONSUMER SERVICES - 39.8%
_____________________________________________________________________________
RETAILING/GENERAL MERCHANDISERS - 1.3%
10,000 * PriceCostco. . . . . . . . . . . . . 153,750
RETAILING/SPECIALTY MERCHANDISERS - 13.1%
5,000 * AutoZone . . . . . . . . . . . . . . 144,375
4,000 Circuit City Stores. . . . . . . . . 110,500
7,000 * Cole National (Class A). . . . . . . 97,125
2,500 * Eckerd . . . . . . . . . . . . . . . 111,562
12,500 * General Nutrition. . . . . . . . . . 290,625
3,000 Home Depot . . . . . . . . . . . . . 143,625
2,000 * Kohl's . . . . . . . . . . . . . . . 105,000
12,500 * Office Depot . . . . . . . . . . . . 246,875
7,000 * Revco. . . . . . . . . . . . . . . . 197,750
4,000 * Tommy Hilfiger . . . . . . . . . . . 169,500
1,616,937
ENTERTAINMENT AND LEISURE - 3.1%
2,000 * Mirage Resorts . . . . . . . . . . . 69,000
6,500 * Viacom (Class B) . . . . . . . . . . 307,937
376,937
MEDIA/COMMUNICATION SERVICES - 16.4%
5,000 * AirTouch Communications. . . . . . . 141,250
3,000 * America Online . . . . . . . . . . . 111,938
2,000 Capital Cities/ABC . . . . . . . . . 246,750
5,000 * CellStar . . . . . . . . . . . . . . 130,625
8,500 Comcast (Class A Special). . . . . . 154,594
6,500 Comcast (Class A). . . . . . . . . . 114,562
7,000 * Cox Communications (Class A) . . . . 136,500
4,000 Frontier . . . . . . . . . . . . . . 120,000
5,000 Gaylord Entertainment. . . . . . . . 138,750
5,000 shs* Mobile Telecommunication Technologies $106,875
11,600 * Paging Network . . . . . . . . . . . 279,125
4,000 * PanAmSat . . . . . . . . . . . . . . 88,500
7,000 Vodafone ADR . . . . . . . . . . . . 246,750
2,016,219
RESTAURANTS/FOOD DISTRIBUTION - 0.8%
3,000 * Brinker. . . . . . . . . . . . . . . 45,375
1,500 * Lone Star Steakhouse & Saloon. . . . 57,469
102,844
PERSONAL SERVICES - 5.1%
10,000 * CUC International. . . . . . . . . . 341,250
6,500 Service Corp.. . . . . . . . . . . . 286,000
627,250
Total Consumer Services 4,893,937
BUSINESS SERVICES - 41.0%
_____________________________________________________________________________
HEALTH CARE SERVICES - 8.3%
5,000 Columbia/HCA Healthcare. . . . . . . 253,750
2,600 * PacifiCare Health Systems (Class B). 226,850
10,000 * Quorum Health Group. . . . . . . . . 218,750
5,000 United HealthCare. . . . . . . . . . 327,500
1,026,850
DISTRIBUTION SERVICES - 6.3%
4,000 * Airgas . . . . . . . . . . . . . . . 133,000
5,000 Alco Standard. . . . . . . . . . . . 228,125
5,000 Cardinal Health. . . . . . . . . . . 273,750
5,000 * Patterson Dental . . . . . . . . . . 135,625
770,500
COMPUTER SERVICES - 5.3%
5,000 * BISYS Group. . . . . . . . . . . . . 152,500
3,500 * Ceridian . . . . . . . . . . . . . . 144,375
3,000 First Data . . . . . . . . . . . . . 200,625
5,500 * SunGard Data Systems . . . . . . . . 154,688
652,188
ENVIRONMENTAL SERVICES - 2.9%
5,000 * Sanifill . . . . . . . . . . . . . . 166,875
10,000 * USA Waste Services . . . . . . . . . 188,750
355,625
ENERGY SERVICES - 3.8%
4,000 Schlumberger . . . . . . . . . . . . 277,000
8,000 * Smith International. . . . . . . . . 188,000
465,000
OTHER BUSINESS SERVICES - 14.4%
20,000 * ADT. . . . . . . . . . . . . . . . . 300,000
7,500 ADVO . . . . . . . . . . . . . . . . 195,000
3,000 * Catalina Marketing . . . . . . . . . 188,250
6,000 * Corporate Express. . . . . . . . . . 180,000
5,000 shs* Global DirectMail. . . . . . . . . . $137,500
2,500 * HFS. . . . . . . . . . . . . . . . . 204,375
3,000 * Micro Warehouse. . . . . . . . . . . 130,500
6,700 Olsten . . . . . . . . . . . . . . . 264,650
2,500 Paychex. . . . . . . . . . . . . . . 124,219
1,000 * Viking Office Products . . . . . . . 46,562
1,771,056
Total Business Services 5,041,219
Miscellaneous Common Stocks - 1.0% 131,875
Total Common Stocks (Cost $9,738,367) 11,245,000
Short-Term Investments - 11.7%
BANK NOTES - 1.2%
$150,000 NBD Bank, N.A., 6.125%, 6/3/96 . . . 150,322
COMMERCIAL PAPER - 10.5%
300,000 Bayer, 4(2), 5.52%, 2/28/96. . . . . 297,194
654,636 Investments in Commercial Paper through
a joint account, 5.90-6.05%, 1/2/96. 654,203
250,000 Sysco, 5.70%, 2/1/96 . . . . . . . . 246,675
100,000 Wool International, 5.64%, 2/2/96. . 97,572
1,295,644
Total Short-Term Investments
(Cost $1,445,966) 1,445,966
Total Investments in Securities - 103.1% of Net Assets
(Cost $11,184,333) $ 12,690,966
Other Assets Less Liabilities . . . . . . . . . . (387,039)
__________
Net Assets Consist of: Value
______
Accumulated net investment income -
net of distributions . . . . . . . . . . $ 9,547
Accumulated net realized gain/loss -
net of distributions . . . . . . . . . . 368,868
Net unrealized gain (loss) . . . . . . .1,506,633
Paid-in-capital applicable to 807,705
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000
shares authorized. . . . . . . . . . . .10,418,879
__________
NET ASSETS . . . . . . . . . . . . . . . . . .$ 12,303,927
__________
__________
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . $15.23
______
______
* Non-income producing
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors."
Statement of Operations
T. Rowe Price New America Growth Portfolio / Year Ended December 31, 1995
INVESTMENT INCOME
Income
Interest. . . . . . . . . . . . . . . . . . . . $ 35,037
Dividend. . . . . . . . . . . . . . . . . . . . 18,752
_________
Total income. . . . . . . . . . . . . . . . . . 53,789
_________
Expenses
Investment management and administrative. . . . 42,353
_________
Net investment income. . . . . . . . . . . . . . . 11,436
_________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities . . . . . . 385,451
Change in net unrealized gain or loss on securities 1,471,678
_________
Net realized and unrealized gain (loss). . . . . . 1,857,129
_________
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. $1,868,565
_________
_________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price New America Growth Portfolio
From March 31, 1994
(Commencement of
Year Ended Operations) to
December 31, 1995December 31, 1994
_______________________________
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income. . . . . $ 11,436 $ 2,236
Net realized gain (loss) . . . 385,451 (16,582)
Change in net unrealized
gain or loss . . . . . . . . . 1,471,678 34,955
__________ __________
Increase (decrease) in net assets
from operations. . . . . . . . 1,868,565 20,609
__________ __________
Distributions to shareholders
Net investment income. . . . . (4,125) -
__________ __________
Decrease in net assets
from distributions . . . . . . (4,125) -
__________ __________
Capital share transactions*
Shares sold. . . . . . . . . . 9,398,517 1,957,764
Distributions reinvested . . . 4,125 -
Shares redeemed. . . . . . . . (998,021) (7)
__________ __________
Increase (decrease) in net assets
from capital share
transactions . . . . . . . . . 8,404,621 1,957,757
__________ __________
Net equalization . . . . . . . . 6,493 7
__________ __________
Increase (decrease)
in net assets. . . . . . . . . . 10,275,554 1,978,373
NET ASSETS
Beginning of period. . . . . . . 2,028,373 50,000
__________ __________
End of period. . . . . . . . . . $12,303,927 $ 2,028,373
__________ __________
__________ __________
*Share information
Shares sold. . . . . . . . . . 679,628 195,800
Distributions reinvested . . . 400 -
Shares redeemed. . . . . . . . (73,122) (1)
__________ __________
Increase (decrease) in
shares outstanding . . . . . . 606,906 195,799
__________ __________
__________ __________
The accompanying notes are an integral part of these financial statements.
Notes To Financial Statements
T. Rowe Price New America Growth Portfolio / December 31, 1995
Note 1 - Significant Accounting Policies
T. Rowe Price Equity Series, Inc., (the Corporation) is registered under the
Investment Company Act of 1940. The New America Growth 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.
Short-term debt securities are valued at their cost which, when combined
with accrued interest, approximates fair value.
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) 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. 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
A) Commercial Paper Joint Account - The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
B) Other - Purchases and sales of portfolio securities, other than short-term
securities, aggregated $9,983,236 and $2,496,509, respectively, for the year
ended December 31, 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.
In order for the fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $6,494 of
undistributed net investment income was reclassified as an increase to
paid-in-capital during the year ended December 31, 1995. The results of
operations and net assets were not affected by the reclassifications.
At December 31, 1995, the aggregate cost of investments for federal
income tax and financial reporting purposes was $11,184,333 and net unrealized
gain aggregated $1,506,633 of which $1,638,225 related to appreciated
investments and $131,592 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 New America Growth Portfolio
For a share outstanding throughout each period
_______________________________________
From March 31, 1994
(Commencement of
Year Ended Operations) to
December 31, 1995 December 31, 1994
________________ __________________
NET ASSET VALUE,
BEGINNING OF PERIOD. . . . . $ 10.10 $ 10.00
______ ______
Investment activities
Net investment income. . . 0.03 0.01
Net realized and
unrealized gain (loss) . . 5.12 0.09
______ ______
Total from investment
activities . . . . . . . . 5.15 0.10
______ ______
Distributions
Net investment income. . . (0.02) -
______ ______
Total distributions. . . . (0.02) -
______ ______
NET ASSET VALUE,
END OF PERIOD. . . . . . . . $ 15.23 $ 10.10
______ ______
______ ______
RATIOS / SUPPLEMENTAL DATA
Total return . . . . . . . . 51.1% 1.0%
Ratio of expenses to
average net assets . . . . . 0.85% 0.85%!
Ratio of net investment income
to average net assets. . . . 0.23% 0.15%!
Portfolio turnover rate. . . 54.5% 81.0%!
Net assets, end of period. . $12,303,927 $2,028,373
! Annualized.
Report of Independent Accountants
To the Board of Directors of T. Rowe Price Equity Series, Inc. and
Shareholders of New America Growth Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
New America Growth Portfolio (one of the portfolios constituting T. Rowe Price
Equity Series, Inc., hereafter referred to as the "Fund") at December 31,
1995, and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1995 by
correspondence with custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 18, 1996
Chart 1: Performance Comparison chart showing $10,000 growing to $15,260 for
NAGP and to $14,489 for S&P 500 from 3/31/94 through 12/31/95.
