T. Rowe Price New America Growth Portfolio
Semiannual Report
June 30, 1996
Dear Investor
Despite a substantial rise in interest rates, the stock market extended the
remarkable surge that began in December 1994. In a period when the economy was
perceived to be growing slowly, investors returned to growth stocks, and your
fund performed well.
Performance Comparison
Periods Ended 6/30/96
_____________________
6 Months 12 Months
_________ _________
New America Growth Portfolio 13.54% 38.56%
S&P 500 10.10 26.00
Lipper Growth Funds Average 10.08 22.20
For both the 6- and 12-month periods ended June 30, New America Growth
Portfolio exceeded the unmanaged Standard & Poor's 500 Stock Index and an
average of growth stock funds by a considerable margin.
Market Environment
The long bull market continued in the first half even though one of its main
supports over the past 14 years, falling interest rates, evaporated. A major
decline in long-term interest rates from over 14% in January 1982 to under 6%
by the end of 1995 had helped propel the stock market to all-time highs.
However, long-term rates rose over one percentage point to just above 7% in
the first half of 1996, reflecting perceptions of a strengthening economy and
fears of an increase in the rate of inflation. The stock market diverged from
the bond market, and, driven by huge cash inflows into U.S. equity mutual
funds, stocks continued their ascent.
The market's continued advance to record highs with returns well above
its long-term average of 10% to 11% per year contributed to a surge in
speculative activity. Record mutual fund inflows, feverish merger and
acquisition activity, and an unprecedented number of initial and secondary
stock offerings were all signs that the market was becoming overheated and
that a correction might be imminent.
Given the economy's apparently modest growth rate, many investors sought
companies that seemed likely to prosper regardless of the economic
environment. Therefore, growth stocks did well while cyclical stocks and those
sensitive to rising interest rates lagged. Energy service stocks were also
strong performers, benefiting from higher natural gas prices and rising
demand.
Portfolio Review
The recent environment was favorable for your fund, with its emphasis on
high-growth companies operating primarily in noncyclical, service industries.
In the first half, the top contributors to the fund were almost all in the
business services category: HFS, a hotel and real estate agency franchiser
that recently entered the rental car business and continued to exceed earnings
estimates by a considerable margin; Republic Industries, a fast-growing
company involved in electronic security systems, used car retailing, and waste
disposal, which announced several major acquisitions during the quarter; and
two waste management companies that plan to merge, USA Waste Services and
Sanifill.
The worst detractors to performance were concentrated in two industries,
health maintenance organizations (HMOs) and retailing. HMOs United HealthCare
and PacifiCare Health Systems were hurt by investor perceptions of rising
medical-cost inflation and by an excessively competitive pricing environment.
Micro Warehouse, a catalog retailer of computer hardware and software, and
General Nutrition, the nation's leading retailer of vitamins and nutritional
supplements, each suffered from declining sales increases and earnings
shortfalls. The stock of a third retailer, Revco, a drug store operator,
performed poorly in the period as a proposed merger was blocked by the Federal
Trade Commission.
The portfolio remains well diversified in the services sector within the
following broad categories:
Sector Diversification
12/31/95 6/30/96
_________ _________
Financial Services 10% 17%
Consumer Services 40 32
Business Services 41 42
Reserves 9 9
Total 100% 100%
Overall, the business services sector contributed almost two-thirds of
the portfolio's performance in the first half, and the portfolio's weighting
in this sector rose slightly as a result. We also added new holdings in this
sector including Republic Industries, discussed above, and Apria Healthcare, a
rapidly growing provider of home health services.
The consumer services weighting dropped significantly. We trimmed some
of our retail holdings in the first half as we saw less long-term opportunity
in the sector than 5 or 10 years ago. The megatrend in retailing, which
created many fortunes in the 1980s and early 1990s, was the development of
discount superstore chains in numerous categories. Today, there are few niches
left to exploit. Also within the consumer category, we sold several
communications companies that either had disappointed relative to our
expectations or were experiencing slowing growth rates.
Some of the proceeds from sales in the consumer sector were redeployed
into financial services, where we added positions in PMI Group, a major player
in the growing mortgage insurance industry, and Norwest, a well-managed bank
with significant consumer finance operations.
We continue to seek companies with exceptional growth prospects in all
economic climates, and the portfolio's growth characteristics remain strong.
Most of our companies reinvest their earnings in their businesses rather than
pay high dividends so that they can maintain or increase their earnings
growth. In fact, many pay no dividends at all to sustain steady earnings
increases of 20% or more annually.
Portfolio Characteristics
New America
Growth Portfolio S&P 500
______________ _________
Earnings Growth Rate
Estimated Next 5 Years* 18.6% 11.7%
Profitability-Return on Equity
Latest 12 Months 16.5 19.6
Dividend Yield on Stocks 0.4 2.2
P/E Ratio (Based on Next 12
Months' Estimated Earnings) 19.6X 15.9X
* Earnings forecasts are based on T. Rowe Price research and are in no way
indicative of future investment returns.
Outlook
For a year and a half, investors enjoyed virtually ideal conditions: enough
economic growth to drive increasing corporate profits, but not so much that
the Federal Reserve had to tighten monetary policy. We see challenges looming.
Interest rates have risen significantly without disturbing a somewhat
speculative stock market, and we wonder how long this can persist. The
political pendulum seems to be reversing: hostility toward business and
investors has been manifested lately in several Federal Trade Commission
rulings, the Clinton Administration's resolute opposition to capital gains tax
reduction, and the passage of legislation increasing the minimum wage.
There is also nascent evidence that the widespread corporate
cost-cutting efforts of recent years, which have driven corporate profits
(and, to some extent, the stock market), are winding down or possibly
reversing. One final, critical issue to monitor is inflation: while we do not
expect a resurgence, there are disquieting signs in the labor and commodities
markets, and we have probably seen the lows in inflation for this cycle.
We would not be surprised to encounter a stock market correction, but we
remain optimistic about the long-term prospects for the portfolio's companies.
Their relatively noncyclical, service-oriented businesses should fare
relatively well in the moderate economic growth environment we anticipate.
Respectfully submitted,
John H. Laporte
President and Chairman of the Investment Advisory Committee
Brian W. H. Berghuis
Executive Vice President
July 18, 1996
Twenty-Five Largest Holdings
June 30, 1996
Percent of
Company Net Assets
___________________________________ ___________
United HealthCare 3.0%
HFS 2.8
ADT 2.6
Olsten 2.1
Columbia/HCA Healthcare 2.1
General Nutrition 2.1
Franklin Resources 2.0
Boston Chicken 1.9
CUC International 1.9
Apria Healthcare 1.9
ACE Limited 1.8
Eckerd 1.8
Home Depot 1.8
Comcast 1.8
Cardinal Health 1.7
Catalina Marketing 1.7
UNUM 1.6
MGIC Investment 1.6
SunGard Data Systems 1.6
Corporate Express 1.6
First Data 1.6
Revco 1.6
Quorum Health Group 1.6
PriceCostco 1.6
Republic Industries 1.5
Total 47.3%
Average Annual Compound Total Return
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Periods Ended June 30, 1996
Since Inception
1 Year 3/31/94
_______ ________________
38.56% 27.69%
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 - SEC performance comparison graph
Statement of Net Assets
T. Rowe Price New America Growth Portfolio / June 30, 1996 (Unaudited)
(value in thousands)
Value
Common Stocks - 91.1%
FINANCIAL SERVICES - 16.3%
BANK AND TRUST - 1.4%
15,000 shs Norwest. . . . . . . . . . . . . . $ 523
INSURANCE - 6.4%
15,000 ACE Limited. . . . . . . . . . . . 705
11,000 MGIC Investment. . . . . . . . . . 617
12,000 PMI Group. . . . . . . . . . . . . 510
10,000 UNUM . . . . . . . . . . . . . . . 623
2,455
INVESTMENT SERVICES - 2.0%
12,500 Franklin Resources . . . . . . . . 762
OTHER FINANCIAL SERVICES - 6.5%
3,800 ADVANTA (Class B). . . . . . . . . 174
10,000 Fannie Mae . . . . . . . . . . . . 335
6,000 Freddie Mac. . . . . . . . . . . . 513
17,500 Green Tree Financial . . . . . . . 547
6,000 Household International. . . . . . 456
15,000 Mercury Finance. . . . . . . . . . 191
12,000 Money Store. . . . . . . . . . . . 263
2,479
Total Financial Services 6,219
CONSUMER SERVICES - 32.1%
RETAILING/GENERAL
MERCHANDISERS - 1.5%
27,500 * PriceCostco. . . . . . . . . . . . 591
RETAILING/SPECIALTY
MERCHANDISERS - 12.9%
10,000 * AutoZone . . . . . . . . . . . . . 347
15,000 Circuit City Stores. . . . . . . . 542
25,000 * Cole National (Class A). . . . . . 500
30,000 * Eckerd . . . . . . . . . . . . . . 679
45,000 * General Nutrition. . . . . . . . . 785
12,500 Home Depot . . . . . . . . . . . . 675
10,000 * Kohl's . . . . . . . . . . . . . . 366
25,000 * Revco. . . . . . . . . . . . . . . 597
8,000 * Tommy Hilfiger . . . . . . . . . . 429
4,920
ENTERTAINMENT AND LEISURE - 3.1%
6,000 Disney . . . . . . . . . . . . . . 377
12,000 La Quinta Inns . . . . . . . . . . 402
10,000 * Viacom (Class B) . . . . . . . . . 389
1,168
MEDIA/COMMUNICATION SERVICES - 7.9%
17,500 * AirTouch Communications. . . . . . 494
1,500 shs * America Online . . . . . . . . . . $ 66
30,000 Comcast (Class A Special). . . . . 551
6,500 Comcast (Class A). . . . . . . . . 120
5,000 * Cox Communications (Class A) . . . 108
20,000 Gaylord Entertainment. . . . . . . 565
20,900 * Paging Network . . . . . . . . . . 498
2,000 * PanAmSat . . . . . . . . . . . . . 58
15,000 Vodafone ADR . . . . . . . . . . . 553
3,013
RESTAURANTS/FOOD DISTRIBUTION - 3.3%
22,500 * Boston Chicken . . . . . . . . . . 730
10,000 * Lone Star Steakhouse & Saloon. . . 377
5,000 * Outback Steakhouse . . . . . . . . 172
1,279
PERSONAL SERVICES - 3.4%
20,000 * CUC International. . . . . . . . . 710
10,000 Service Corp.. . . . . . . . . . . 575
1,285
Total Consumer Services 12,256
BUSINESS SERVICES - 42.2%
HEALTH CARE SERVICES - 10.5%
22,500 * Apria Healthcare . . . . . . . . . 706
15,000 Columbia/HCA Healthcare. . . . . . 801
6,000 * PacifiCare Health
Systems (Class B) . . . . . . . . 407
22,500 * Quorum Health Group. . . . . . . . 593
22,500 United HealthCare. . . . . . . . . 1,136
11,400 * Vencor . . . . . . . . . . . . . . 348
3,991
DISTRIBUTION SERVICES - 4.8%
15,000 * Airgas . . . . . . . . . . . . . . 285
10,000 Alco Standard. . . . . . . . . . . 453
9,000 * Cardinal Health. . . . . . . . . . 649
12,000 * Patterson Dental . . . . . . . . . 432
1,819
COMPUTER SERVICES - 5.2%
10,000 * BISYS Group. . . . . . . . . . . . 376
8,300 * Ceridian . . . . . . . . . . . . . 419
7,500 First Data . . . . . . . . . . . . 597
15,000 * SunGard Data Systems . . . . . . . 601
1,993
ENVIRONMENTAL SERVICES - 3.8%
12,000 * Republic Industries. . . . . . . . 350
8,000 *!Republic Industries. . . . . . . . 234
8,500 * Sanifill . . . . . . . . . . . . . 419
15,000 * USA Waste Services . . . . . . . . 444
1,447
ENERGY SERVICES - 4.7%
10,000 shs * BJ Services. . . . . . . . . . . . $ 351
9,000 Camco International. . . . . . . . 305
5,500 Schlumberger . . . . . . . . . . . 463
12,500 * Smith International. . . . . . . . 377
5,000 * Western Atlas. . . . . . . . . . . 291
1,787
OTHER BUSINESS SERVICES - 13.2%
52,500 * ADT. . . . . . . . . . . . . . . . 991
20,000 ADVO . . . . . . . . . . . . . . . 207
7,000 * Catalina Marketing . . . . . . . . 640
15,000 * Corporate Express. . . . . . . . . 601
3,600 * Global DirectMail. . . . . . . . . 142
15,000 * HFS. . . . . . . . . . . . . . . . 1,050
9,000 * Micro Warehouse. . . . . . . . . . 178
27,500 Olsten . . . . . . . . . . . . . . 808
7,000 * Scholastic . . . . . . . . . . . . 436
5,053
Total Business Services 16,090
Total Miscellaneous Common Stocks - 0.5% 178
Total Common Stocks (Cost $30,910) 34,743
Short-Term Investments - 9.3%
COMMERCIAL PAPER - 9.3%
$1,000,000 Asset Securitization Cooperative,
5.34%, 7/8/96 . . . . . . . . . 999
1,000,000 Falcon Asset Securitization,
5.30%, 7/12/96. . . . . . . . . 998
1,545,991 Investments in Commercial
Paper through a joint account,
5.49 - 5.68%, 7/1/96. . . . . . 1,546
Total Short-Term Investments
(Cost $3,543) 3,543
Total Investments in Securities -
100.4% of Net Assets (Cost $34,453) $ 38,286
Other Assets Less Liabilities . . . . . . . . . . (166)
NET ASSETS . . . . . . . . . . . . . . . . . $ 38,120
Net Assets Consist of:
Accumulated net investment income -
net of distributions . . . . . . . . . . . . . . 96
Accumulated net realized gain/loss -
net of distributions . . . . . . . . . . . . . . 348
Net unrealized gain (loss) . . . . . . . . . . . . 3,833
Paid-in-capital applicable to 2,263,937
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares of the
Corporation authorized . . . . . . . . . . . . . 33,843
NET ASSETS . . . . . . . . . . . . . . . . . $ 38,120
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . $ 16.84
* Non-income producing.
! Securities contain some restrictions as to public resale-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.
Statement of Operations
T. Rowe Price New America Growth Portfolio / Six Months Ended June 30, 1996
(Unaudited)
In thousands
INVESTMENT INCOME
Income
Dividend . . . . . . . . . . . . . . . . . . . . $ 91
Interest . . . . . . . . . . . . . . . . . . . . 79
_________
Total income . . . . . . . . . . . . . . . . . . 170
_________
Expenses
Investment management and administrative . . . . 100
_________
Net investment income. . . . . . . . . . . . . . . 70
_________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities . . . . . . 342
Change in net unrealized gain or loss on securities 2,326
_________
Net realized and unrealized gain (loss). . . . . . 2,668
_________
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. $ 2,738
_________
_________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price New America Growth Portfolio (Unaudited)
In thousands
Six Months Ended Year Ended
June 30, 1996December 31, 1995
_______________________________
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income. . . . . $ 70 $ 11
Net realized gain (loss) . . . 342 386
Change in net unrealized
gain or loss . . . . . . . . 2,326 1,472
__________ __________
Increase (decrease) in net
assets from operations . . . 2,738 1,869
__________ __________
Distributions to shareholders
Net investment income. . . . . (25) (4)
Net realized gain. . . . . . . (363) -
__________ __________
Decrease in net assets
from distributions . . . . . (388) (4)
__________ __________
Capital share transactions*
Shares sold. . . . . . . . . . 25,970 9,399
Distributions reinvested . . . 388 4
Shares redeemed. . . . . . . . (2,934) (998)
__________ __________
Increase (decrease) in net assets
from capital share transactions 23,424 8,405
__________ __________
Net equalization . . . . . . . . 42 6
__________ __________
NET ASSETS
Increase (decrease) during period 25,816 10,276
Beginning of period. . . . . . . 12,304 2,028
__________ __________
End of period. . . . . . . . . . $ 38,120 $ 12,304
__________ __________
__________ __________
*Share information
Shares sold. . . . . . . . . . 1,613 679
Distributions reinvested . . . 26 1
Shares redeemed. . . . . . . . (183) (73)
__________ __________
Increase (decrease) in
shares outstanding . . . . . 1,456 607
__________ __________
__________ __________
The accompanying notes are an integral part of these financial statements.
Notes To Financial Statements
T. Rowe Price New America Growth Portfolio / June 30, 1996 (Unaudited)
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 and commenced operations on March 31, 1994. 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.
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.
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.
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
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.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $23,653,000 and $2,764,000, respectively, for the six
months ended June 30, 1996.
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, 1996, the aggregate cost of investments for federal income
tax and financial reporting purposes was $34,453,000, and net unrealized gain
aggregated $3,833,000, of which $4,556,000 related to appreciated investments
and $723,000 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, of which $14,000 was payable at June 30, 1996. The fee, computed daily
and paid monthly, is 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 (Unaudited)
For a share outstanding throughout each period
__________________________________________
Six Months Year March 31,
Ended Ended 1994 to
June 30, Dec. 31, Dec 31,
1996 1995 1994
________ ________ ________
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.23 $ 10.10 $10.00
______ ______ ______
Investment activities
Net investment income. . . . . . . . 0.05 0.03 0.01
Net realized and unrealized gain (loss) 1.96 5.12 0.09
______ ______ ______
Total from investment activities . . 2.01 5.15 0.10
______ ______ ______
Distributions
Net investment income. . . . . . . . (0.02) (0.02) -
Net realized gain. . . . . . . . . . (0.38) - -
______ ______ ______
Total distributions. . . . . . . . . (0.40) (0.02) -
______ ______ ______
NET ASSET VALUE, END OF PERIOD . . . $16.84 $15.23 10.10
______ ______ ______
______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total return . . . . . . . . . . . . 13.54% 51.08% 1.00%
Ratio of expenses to average net assets0.85%! 0.85% 0.85%!
Ratio of net investment income
to average net assets. . . . . . . . 0.59%! 0.23% 0.15%!
Portfolio turnover rate. . . . . . . 25.7%! 54.5% 81.0%!
Average commission rate paid . . . . $0.0879 - -
Net assets, end of period (in thousands)$38,120$12,304 $2,028
! Annualized.
Chart 1 - SEC line graph showing the cumulative growth of $10,000 invested in
the New America Growth Portfolio from inception (3/31/94) compared with
$10,000 invested in a broad-based index and average over the same period.
