T. Rowe Price
Equity Income Portfolio
Annual Report
December 31, 1996
Dear Investor
The equity market and your fund were strong in the second half of
1996, reflecting continued good corporate earnings, a generally
favorable economic and interest rate environment, and heavy
investor demand. The post-election rally was particularly notable
in light of how little the political scene actually changed. For
the year as a whole, equity returns were impressive, coming as they
did on the heels of considerable strength in 1995. Stocks have now
provided six consecutive years of positive returns with no interim
corrections of 10% or more.
PERFORMANCE REVIEW
As shown in the table, your fund performed well over the last six
months, with a return approximating that of the unmanaged Standard
& Poor's 500 Stock Index and comfortably ahead of the Lipper Equity
Income Funds Average. For the year as a whole, the fund exceeded
the Lipper average but trailed the broad market, a not uncommon
pattern for a conservative fund in robust years like 1996.
Performance Comparison
Periods Ended 12/31/96 6 Months 12 Months
____________________________________________________________
Equity Income Portfolio 11.12% 19.56%
S&P 500 11.68 22.96
Lipper Equity Income
Funds Average 10.33 18.85
DIVIDEND DISTRIBUTIONS
Your Board of Directors declared a fourth quarter income dividend
of $0.11 per share. At the same time, a $0.07 per share capital
gain distribution was declared, of which $0.02 was short-term and
$0.05 long-term. These distributions were paid on December 30 to
shareholders of record on December 26.
PORTFOLIO STRATEGY
While the last 12 months were a strong period for the broad equity
market, it was challenging for income-oriented investors. Bond and
money market returns were generally in the mid-single-digit range
in 1996, with shorter-maturity securities returning more than those
with longer maturities. Two traditional high-yield sectors of the
equity market, electric utilities and telephone companies, were
about flat on average for the year. These sectors suffered due to
their interest rate sensitivity and to concern about the impact of
a newly deregulated environment.
Despite poor returns from many traditional yield vehicles, your
fund performed reasonably well due to the continued strength of
companies in the financial (Chase Manhattan, American Express),
health care (Warner-Lambert), and energy (Exxon, Texaco) sectors.
We purchased many of these holdings in recent years when they were
out of favor and inexpensive on a relative valuation basis for
various reasons. We often make investment decisions based on the
tendency of a company's fundamentals and stock price to regress to
the mean within historical ranges and the likelihood that investor
perceptions about the relative values of these stocks will improve
over the intermediate term. This was clearly the case in 1996 with
respect to some of the companies just mentioned.
During the second half of the year, despite a market that had
advanced sharply, we were able to find opportunities in companies
with higher-than-average dividend yields, limited risk, and
attractive return potential. In many cases, investments that
interest us often involve stocks that have suffered relative to the
broad market for various reasons. Controversy and underperformance
often create opportunities that we hope to exploit profitably on
your behalf. We recently initiated new positions in AT&T, Amoco,
International Flavors & Fragrances, ITT, and Whirlpool, all fine
companies that have been struggling recently because of negative
fundamental trends affecting their businesses, negative investor
views of their prospects, or some combination of these factors.
Chart 1 - Security Diversification
The Security Diversification chart on page 1 shows that we had 86%
of total fund assets invested in common stocks on December 31, the
same percentage as at the end of our June reporting period.
SUMMARY AND OUTLOOK
The last two years were exceptionally profitable for equity
investors, who enjoyed attractive returns in a nearly perfect
environment for stocks. It is difficult to see how things can get
much better; at the same time, it is also difficult to see anything
on the horizon that would cause this environment to change for the
worse. Nonetheless, we are sensitive to the lessons of history,
particularly the tendency of the equity market to pause for breath
after consecutive powerful years like the past two.
Over the last few years, stock prices have appreciated at a much
faster rate than the earnings and dividends of the underlying
companies. Because of this "delinkage," we expect more subdued
equity performance in 1997. We do not have a bearish outlook for
the year ahead but simply want to raise the possibility that it may
not live up to many investors' high expectations for a continuation
of recent trends. Notwithstanding this cautionary tone, we continue
to believe we will find interesting investment opportunities during
the year.
As always, we appreciate your continued confidence and support.
Respectfully submitted,
Brian C. Rogers
President and
Chairman of the Investment Advisory Committee
January 24, 1997
Portfolio Highlights
Twenty-Five Largest Holdings
Percent of
Net Assets
12/31/96
________________________________________________________
GE 1.7%
Atlantic Richfield 1.5
Chase Manhattan 1.5
Exxon 1.4
Mellon Bank 1.4
AT&T 1.3
DuPont 1.3
Simon DeBartolo Group 1.2
Texaco 1.2
Chevron 1.2
Warner-Lambert 1.2
General Mills 1.1
J. P. Morgan 1.0
International Flavors & Fragrances 1.0
Georgia-Pacific 1.0
Wells Fargo 1.0
Pharmacia & Upjohn 1.0
Union Camp 1.0
American Brands 1.0
Quaker Oats 1.0
American General 1.0
American Home Products 0.9
Royal Dutch Petroleum 0.9
3M 0.9
J. C. Penney 0.9
________________________________________________________
Total 28.6%
Portfolio Highlights
Major Portfolio Changes
Six Months Ended December 31, 1996
Listed in descending order of size
LARGEST PURCHASES (10)
________________________________________________
International Flavors & Fragrances*
AT&T *
GE
Amoco *
Dow Chemical
Chevron
ITT *
H&R Block
Whirpool *
Atlantic Richfield
LARGEST SALES (10)
________________________________________________
Eli Lilly **
PHH **
Salomon **
SmithKline Beecham
Conrail
Kimberly-Clark
Honeywell
Eastman Kodak
Vodafone **
TRW **
*Position added.
**Position eliminated.
T. Rowe Price Equity Income Portfolio
December 31, 1996
Performance Comparison
This chart shows the value of a hypothetical $10,000 investment in
the fund over the past 10 fiscal year periods or since inception
(for funds lacking 10-year records). The result is compared with a
broad-based average or index. The index return does not reflect
expenses, which have been deducted from the fund's return.
Chart 2 - Equity Income Portfolio
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.
Since Inception
Periods Ended 12/31/96 1 Year Inception Date
____________________________________________________________
Equity Income Portfolio 19.56% 21.93% 3/31/94
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.
Financial Highlights
T. Rowe Price Equity Income Portfolio
For a share outstanding
throughout each period
__________________________________
Year 3/31/94
Ended to
12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 13.21 $ 10.42 $ 10.00
Investment activities
Net investment income 0.42 0.44 0.30
Net realized and
unrealized gain (loss) 2.13 3.05 0.41
Total from
investment activities 2.55 3.49 0.71
Distributions
Net investment income (0.42) (0.44) (0.29)
Net realized gain (0.08) (0.26) -
Total distributions (0.50) (0.70) (0.29)
NET ASSET VALUE
End of period $ 15.26 $ 13.21 $ 10.42
__________________________________
Ratios/Supplemental Data
Total return 19.56% 34.76% 7.15%
Ratio of expenses to
average net assets 0.85% 0.85% 0.85%!
Ratio of net investment
income to average
net assets 2.94% 3.61% 3.88%!
Portfolio turnover rate 17.4% 10.1% 21.3%!
Average commission rate
paid $ 0.0388 - -
Net assets, end of period
(in thousands) $ 103,751 $ 14,658 $ 2,191
! Annualized.
The accompanying notes are an integral part of these financial
statements.
Statement of Net Assets
T. Rowe Price Equity Income Portfolio
December 31, 1996
Shares/Par Value
In thousands
Common Stocks and Warrants 86.3%
FINANCIAL 17.3%
Bank and Trust 9.4%
BANC ONE 9,470 $ 407
Bank of Boston 10,100 649
Bankers Trust New York 7,000 604
Chase Manhattan 17,004 1,518
Fleet Financial Group 14,700 733
J. P. Morgan 11,100 1,084
Mellon Bank 20,400 1,448
Mercantile Bankshares 8,800 280
National City 12,500 561
PNC Bank 16,200 610
Signet Banking 11,800 363
U. S. Bancorp 11,600 521
Wells Fargo 3,866 1,043
9,821
Insurance 3.8%
Alexander & Alexander 18,800 327
American General 24,200 989
Hilb, Rogal and Hamilton 4,400 58
Lincoln National 9,700 509
Provident 4,800 232
SAFECO 10,300 406
St. Paul Companies 13,500 792
USF&G 17,100 357
Willis-Corroon ADR 24,900 287
3,957
Financial Services 4.1%
American Express 16,200 915
Fannie Mae 19,200 715
H&R Block 28,700 832
Sallie Mae 9,700 904
Travelers Group 19,333 877
4,243
Total Financial 18,021
UTILITIES 13.7%
Telephone Services 7.2%
ALLTEL 27,600 866
AT&T 30,500 1,327
BCE 16,050 766
Bell Atlantic 9,900 641
BellSouth 19,900 $ 803
Frontier 19,000 430
GTE 17,800 810
Pacific Telesis 12,500 459
SBC Communications 11,100 574
Southern New England
Telecommunications 9,300 362
U S WEST Communications 12,050 389
7,427
Electric Utilities 6.5%
BGE 11,100 297
Centerior Energy 34,000 365
Dominion Resources 13,350 514
DQE 8,212 238
Duke Power 6,200 287
Echelon International * 573 9
Edison International 12,400 246
Entergy 19,300 536
Florida Progress 8,600 277
GPU 5,300 178
Ohio Edison 21,700 494
Pacific Gas and Electric 16,700 351
PacifiCorp 24,500 502
PECO Energy 24,300 614
Public Service Enterprise 15,700 428
Southern Company 13,200 299
Unicom 27,800 754
Western Resources 12,500 386
6,775
Total Utilities 14,202
CONSUMER NONDURABLES 18.3%
Cosmetics 1.0%
International Flavors &
Fragrances 23,800 1,071
1,071
Beverages 1.5%
Anheuser-Busch 17,900 716
Brown-Forman (Class B) 17,500 801
1,517
Food Processing 4.5%
General Mills 18,600 1,179
Heinz 23,400 836
Kellogg 5,800 381
McCormick 31,000 $ 730
Quaker Oats 26,200 999
Sara Lee 15,400 574
4,699
Hospital Supplies/
Hospital Management 1.9%
Abbott Laboratories 17,900 908
Bausch & Lomb 16,100 563
Baxter International 12,700 521
1,992
Pharmaceuticals 4.7%
American Home Products 16,500 967
Novartis (CHF) 697 798
Pharmacia & Upjohn 25,792 1,022
SmithKline Beecham ADR 11,700 796
Warner-Lambert 16,400 1,230
4,813
Miscellaneous Consumer Products 4.7%
American Brands 20,400 1,012
Armstrong World 4,400 306
Grand Metropolitan ADR 13,900 440
Philip Morris 5,700 642
RJR Nabisco 7,800 265
Tambrands 18,100 740
Unilever N.V. ADR 5,100 894
UST 17,500 566
4,865
Total Consumer Nondurables 18,957
CONSUMER SERVICES 4.9%
General Merchandisers 1.2%
J.C. Penney 18,800 916
May Department Stores 7,500 351
1,267
Specialty Merchandisers 0.1%
Fleming Companies 4,800 83
Hancock Fabrics 1,900 20
103
Entertainment and Leisure 1.3%
Homestead Village, warrants,
10/29/97 * 168 1
ITT * 15,600 677
Reader's Digest (Class A) 14,400 580
Reader's Digest (Class B) 1,200 43
1,301
Media and Communications 2.3%
Cognizant 3,200 $ 105
Dow Jones 10,600 359
Dun & Bradstreet 17,900 425
Gannett 6,300 472
McGraw-Hill 11,900 549
R. R. Donnelly 16,000 502
2,412
Total Consumer Services 5,083
CONSUMER CYCLICALS 4.8%
Automobiles and Related 1.2%
Eaton 6,900 481
Ford Motor 4,600 147
Genuine Parts 6,300 280
GM 5,900 329
1,237
Building and Real Estate 1.9%
Rouse 6,300 200
SECURITY CAPITAL
PACIFIC TRUST
REIT 4,000 92
Simon DeBartolo Group
REIT 41,236 1,278
Weingarten Realty Investors
REIT 9,100 370
1,940
Miscellaneous Consumer Durables 1.7%
Corning 18,300 846
Eastman Kodak 4,100 329
Whirlpool 13,400 625
1,800
Total Consumer Cyclicals 4,977
TECHNOLOGY 1.0%
Electronic Components 0.5%
AMP 12,400 476
476
Electronic Systems 0.3%
Honeywell 5,300 349
349
Office Automation 0.2%
Pitney Bowes 4,300 234
234
Total Technology 1,059
CAPITAL EQUIPMENT 3.2%
Electrical Equipment 2.3%
GE 17,800 $ 1,760
Hubbell (Class B) 15,400 666
2,426
Machinery 0.9%
Cooper Industries 14,567 614
FMC * 3,800 266
880
Total Capital Equipment 3,306
BUSINESS SERVICES AND TRANSPORTATION 1.3%
Transportation Services 0.2%
Alexander & Baldwin 8,550 212
212
Miscellaneous Business Services 0.4%
Deluxe Corp. 7,300 239
GATX 2,800 136
375
Railroads 0.7%
Conrail 2,296 229
Union Pacific 8,500 511
740
Total Business Services
and Transportation 1,327
ENERGY 10.7%
Energy Services 0.6%
McDermott International 5,500 91
Witco 18,900 577
668
Gas Transmission 0.1%
TransCanada PipeLines 8,400 147
147
Integrated Petroleum - Domestic 4.0%
Amoco 11,300 910
Atlantic Richfield 12,100 1,603
British Petroleum ADR 6,000 848
Sun Company 3,910 95
USX-Marathon 26,700 638
4,094
Integrated Petroleum - International 6.0%
Chevron 19,250 1,251
Exxon 15,000 1,470
Mobil 6,200 758
Repsol ADR 14,300 $ 545
Royal Dutch Petroleum ADR 5,500 939
Texaco 12,900 1,266
6,229
Total Energy 11,138
PROCESS INDUSTRIES 9.4%
Diversified Chemicals 2.1%
Dow Chemical 11,300 885
DuPont 13,900 1,312
2,197
Specialty Chemicals 3.3%
3M 11,200 928
Betz Laboratories 11,900 696
Great Lakes Chemical 15,700 734
Lubrizol 17,900 555
Nalco Chemical 14,600 528
3,441
Paper and Paper Products 3.0%
Consolidated Papers 10,300 506
International Paper 21,200 856
James River 8,400 278
Kimberly-Clark 4,050 386
Union Camp 21,400 1,022
3,048
Forest Products 1.0%
Georgia-Pacific 14,700 1,058
1,058
Total Process Industries 9,744
BASIC MATERIALS 1.5%
Metals 0.7%
Reynolds Metals 12,900 727
727
Mining 0.8%
LONRHO (GBP) 111,800 239
Newmont Mining 12,949 580
819
Total Basic Materials 1,546
Miscellaneous Common Stocks 0.2% 221
Total Common Stocks and
Warrants (Cost $81,387) 89,581
Corporate Bonds 0.4%
B.F. Saul REIT, Sr. Secured
Notes, 11.625%
4/1/02 $ 150,000 $ 162
Coca-Cola Bottling Group
Sr. Sub. Notes
9.00%, 11/15/03 25,000 25
El Paso Electric, 1st Mtg.
Notes, 8.90%
2/1/06 200,000 209
Total Corporate Bonds
(Cost $380) 396
U.S. Government Obligations 2.2%
U.S. Treasury Bonds
6.00%, 2/15/26 500,000 455
6.25%, 8/15/23 20,000 19
U.S. Treasury Notes
5.625%, 2/15/06 250,000 237
5.75%, 8/15/03 400,000 388
5.875%, 2/15/04 20,000 19
6.50%, 5/31/01 700,000 708
7.00%, 7/15/06 400,000 416
7.375%, 11/15/97 20,000 20
Total U.S. Government
Obligations (Cost $2,227) 2,262
Short-Term Investments 10.4%
Commercial Paper 10.4%
BHF Finance (Delaware)
5.30%, 4/11/97 1,000,000 985
Investments in Commercial
Paper through a joint
account 6.75 - 7.10%
1/2/97 2,832,729 2,832
Island Finance Puerto Rico
5.47%, 1/9/97 $2,000,000 $ 1,998
Preferred Receivables Funding
5.35%, 2/3/97 1,000,000 995
Tasmanian Public Finance
5.43%, 2/18/97 2,000,000 1,986
Unifunding, 5.44%, 1/6/97 2,000,000 1,998
Total Short-Term Investments
(Cost $10,794) 10,794
Total Investments in
Securities
99.3% of Net Assets
(Cost $94,788) $ 103,033
Other Assets Less Liabilities 718
NET ASSETS $ 103,751
___________
Net Assets Consist of:
Accumulated net realized
gain/loss -
net of distributions $ 934
Net unrealized gain (loss) 8,245
Paid-in-capital applicable to 6,800,066
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares of the
corporation authorized 94,572
NET ASSETS $ 103,751
___________
NET ASSET VALUE PER SHARE $ 15.26
___________
* Non-income producing
REIT Real Estate Investment Trust
CHF Swiss franc
GBP British sterling
The accompanying notes are an integral part of these financial
statements.
Statement of Operations
T. Rowe Price Equity Income Portfolio
In thousands
Year
Ended
12/31/96
Investment Income
Income
Dividend $ 1,457
Interest 480
Total income 1,937
Expenses
Investment management and administrative 435
Net investment income 1,502
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 1,676
Change in net unrealized gain or loss on
Securities 6,822
Other assets and liabilities
denominated in foreign currencies (1)
Change in net unrealized gain or loss 6,821
Net realized and unrealized gain (loss) 8,497
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 9,999
__________
The accompanying notes are an integral part of these financial
statements.
Statement of Changes in Net Assets
T. Rowe Price Equity Income Portfolio
In thousands
Year
Ended
12/31/96 12/31/95
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,502 $ 195
Net realized gain (loss) 1,676 59
Change in net unrealized gain
or loss 6,821 1,398
Increase (decrease) in net
assets from operations 9,999 1,652
Distributions to shareholders
Net investment income (1,787) (243)
Net realized gain (470) (55)
Decrease in net assets from
distributions (2,257) (298)
Capital share transactions*
Shares sold 89,085 12,026
Distributions reinvested 2,256 297
Shares redeemed (10,297) (1,266)
Increase (decrease) in net assets
from capital share transactions 81,044 11,057
Net equalization 307 55
Net Assets
Increase (decrease) during period 89,093 12,466
Beginning of period 14,658 2,192
End of period $ 103,751 $ 14,658
_________________________
*Share information
Shares sold 6,273 978
Distributions reinvested 153 25
Shares redeemed (736) (103)
Increase (decrease) in shares
outstanding 5,690 900
The accompanying notes are an integral part of these financial
statements.
Notes to Financial Statements
T. Rowe Price Equity Income Portfolio
December 31, 1996
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
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 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 their 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 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
are amortized for both financial reporting and 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. 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 $79,590,000 and $7,988,000,
respectively, for the year ended December 31, 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.
In order for the fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions,
the following reclassifications were made during the year ended
December 31, 1996. The results of operations and net assets were
not affected by the reclassifications.
Undistributed net investment income $ (22,000)
Undistributed net realized gain (286,000)
Paid-in-capital 308,000
At December 31, 1996, the aggregate cost of investments for federal
income tax and financial reporting purposes was $94,788,000, and
net unrealized gain aggregated $8,245,000, of which $8,971,000
related to appreciated investments and $726,000 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 $54,000 was payable at
December 31, 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.
Report of Independent Accountants
To the Board of Directors of T. Rowe Price Equity Series, Inc.
and Shareholders of the Equity Income 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 the Equity Income Portfolio (one of the
portfolios constituting T. Rowe Price Equity Series, Inc.,
hereafter referred to as the "Fund") at December 31, 1996, 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, 1996 by correspondence with custodians and, where
appropriate, the application of alternative auditing procedures for
unsettled security transactions, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 20, 1997
Invest WithConfidence(registered trademark)
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to contractholders
and to others who have received a copy of the portfolio's
prospectus.
T. Rowe Price Investment Services, Inc., Distributor
TRP654 (3/97)
RPRTEIP 12/31/96
Chart 1 - Security Diversification - pie chart showing Common
Stocks 86%, Bonds 3%, Reserves 11%.
Chart 2 - Equity Income Portfolio - Performance Comparison showing
the cumulative growth of $10,000 invested in the Equity Income
Portfolio from inception compared with $10,000 invested in a
broad-based index or average over the same period.
