T. Rowe Price
New America Growth
Portfolio
Semiannual Report
June 30, 1997
Dear Investor
Continuing a powerful surge that began in December 1994, the
stock market rose to record highs in the first half of 1997. The
rally was led by large-capitalization, blue chip companies,
while the performance of small- and mid-cap growth stocks was
much more modest.
Since your fund invests across the size spectrum, it
significantly lagged the large-cap Standard & Poor's 500 Stock
Index over the last year. The fund also trailed the Lipper peer
group average, whose average market cap far exceeds that of New
America Growth Portfolio.
Performance Comparison
Periods Ended 6/30/97 6 Months 12 Months
New America
Growth Portfolio 8.94% 15.22%
S&P 500 20.61 34.70
Lipper Variable Annuity
Underlying Growth
Funds Average 13.57 23.63
Market Environment
Stock market investors have been treated to exemplary returns as
the backdrop for the market has been the best in years. The
economic expansion is in its seventh year and, after growing a
little too fast in the first quarter of 1997, seems to have
moderated its pace recently. Thus, we have an ideal environment
where the economy is growing fast enough to accommodate good
corporate earnings growth, yet slow enough to allay fears of an
impending inflationary surge. The U.S. inflation rate appears
benign, actually declining slightly in spite of a reasonably
tight job market. In Washington, the politicians are still
squabbling, but there appears to be movement by both parties
toward the middle of the political spectrum, at least on
economic issues. Both parties have agreed on capital gains tax
reduction. Meanwhile, the federal budget deficit has declined so
fast that extrapol-ating budget surpluses in the years ahead may
no longer be a fantastic notion. Globally, we are in the midst
of a relatively peaceful period in which capitalism and
democracy are ascendent. Consumer confidence is at record highs,
and individual investors continue to pour money into equity
mutual funds. Despite vibrant demand for equity offerings,
corporate stock buybacks and record merger and acquisition
activity are retiring stock as fast as it is issued.
After the 69.2% cumulative gain of the S&P 500 in 1995 and 1996,
its third-best two-year return in six decades, many observers,
ourselves included, believed the market was due for a pause.
While the market did correct almost 10% in March and April, it
rebounded. Large-cap companies led the way, as investors
continued to be enamored with the allure of franchise brands
like Coca-Cola, Procter & Gamble, and General Electric. Small-
and mid-cap companies lagged the rally by a significant margin.
Within these sectors, value stocks outperformed growth stocks by
a considerable margin.
Portfolio Review
Our objective is to invest in a diversified group of rapidly
growing companies primarily in the service sector of the
economy. The fund's relative performance is typically correlated
strongly to investor perceptions of economic growth. When the
economy is perceived to be strong, the stocks of cyclical
companies sprint ahead, whereas in periods of economic weakness,
investors tend to gravitate toward companies with steadier
growth rates, like the service companies in which we invest. In
the last year, however, we believe the underperformance of the
fund relative to the S&P 500 was attributable to two major
factors. First, the fund's many smaller and mid-cap companies
did not keep pace with their larger-company counterparts.
Secondly, while the largest growth stocks performed well, we had
an anomalous situation where smaller and mid-cap growth stocks
have significantly underperformed value stocks in their
respective categories.The fund's top contributor for the 6- and
12-month periods ending June 30 was Franklin Resources, the
mutual fund firm, which benefited from an ebullient stock
market, good cash inflows, and a well-timed acquisition. Three
retailers were also among the top contributors for both periods:
General Nutrition, the nation's leading retailer of vitamin and
other health- related products and a long-time fund holding,
which rebounded from a temporary sales slowdown in mid-1996;
Cole National, a retailer with interests in vision and gift
stores, which acquired Pearle Vision Centers in a transaction
that should boost earnings; and Costco Companies, the leading
membership warehouse club, which has reported strong sales and
earnings increases.
Unfortunately, some of these contributions were offset by
disappointments. The fund's largest detractor in the first half
was Boston Chicken, the restaurant franchisor, whose stock fell
over 50% when an unanticipated sales slowdown precipitated a
reevaluation by investors of what was, in hindsight, an overly
aggressive expansion plan and a problematic financial structure.
The second-worst stock was Mercury Finance, a leader in subprime
used car lending. Along with other investors, we were victimized
by management fraud and manipulation of financial statements,
and we are seeking redress through legal action.
The portfolio remains well diversified in the services sector
with few major changes since year-end.
Sector Diversification
12/31/96 6/30/97
________________________________________________________________
Financial Services 20% 19%
Consumer Services 30 31
Business Services 41 40
Reserves 9 10
________________________________________________________________
Total 100% 100%
Additions to the portfolio in the last several months include COREStaff and
Safeway. COREStaff is a leading provider of temporary help services, focusing
on the higher-margin, faster-growing professional services market, especially
information technology. The company is also participating in the rapid
consolidation of the staffing industry. In the last several years, new
management at Safeway, a supermarket chain, has transformed a mediocre
company into a well-operated, shareholder-oriented organization that we
believe can grow well into the future.
We continue to seek companies with exceptional growth prospects in all
economic climates, and the portfolio's growth characteristics remain strong.
Rather than pay high dividends, most portfolio companies reinvest their
earnings in their businesses to maintain or increase their earnings growth.
In fact, many pay no dividends at all in order to sustain steady earnings
increases of 20% or more annually. As shown in the table, the prospective
earnings growth rate of our portfolio companies is well above that of the
market as a whole, yet the fund's aggregate price/earnings ratio (P/E) is
only modestly higher.
Portfolio Characteristics
New America
As of 6/30/97 Growth Portfolio S&P 500
________________________________________________________________
Earnings Growth Rate
Estimated Next 5 Years* 19.3% 12.4%
Profitability-Return on
Equity Latest 12 Months 15.2 20.5
Dividend Yield on Stocks 0.4 1.7
P/E Ratio (Based on Next 12
Months' Estimated Earnings) 20.7X 18.7X
*Earnings forecasts are based on T. Rowe Price research and are in no way
indicative of future investment returns.
Outlook
As we mentioned, a combination of factors-moderate domestic economic growth,
low inflation and interest rates, growing corporate earnings, rapidly
declining budget deficits, and a benign global political environment-present
a very favorable backdrop for the stock market, in our opinion. It is
difficult to envisage a major stock market setback in this context. However,
stock valuations are high by historical standards using traditional
benchmarks such as P/E and price/book ratios, and dividend yields. The
Leuthold Group reports that the 15-year compound annual return for the S&P
500 as of June 30 was 18.8%, the best such period ever recorded, far above
the 10.7% 1926-to-date median.
Perhaps we have entered a "new era" of peace and prosperity. However,
students of the stock market know from experience that the most dangerous
phrase in the language is "this time it's different." After all, the stock
market reflects human emotion, which can vary greatly over long periods.
It is interesting to note that small- and mid-cap stocks often lead the
market in the latter stages of bull markets, yet this is not the case today.
With blue chip stocks trading at P/Es well above their growth rates, it is
possible the sector many consider the "safest" may actually be the riskiest.
We remain optimistic about the long-term prospects for the portfolio's
companies. Their relatively noncyclical, service-oriented businesses appear
to be well positioned for the moderate economic growth environment we
anticipate. We believe your fund should be able to achieve attractive returns
over the next several years.
Respectfully submitted,
John H. Laporte
President
Brian W. H. Berghuis
Executive Vice President
July 25, 1997
Contributions to the Change in Net Asset Value Per Share
6 Months Ended 6/30/97
TEN BEST CONTRIBUTORS
_____________________________________________
Franklin Resources 22(cents)
General Nutrition 19
ADT 13
Cole National 13
Vencor 10
First Data 10
COREStaff* 9
Costco Companies 9
ACE Limited 8
Smith International 8
_____________________________________________
Total 121(cents)
_____________________________________________
*Position added **Position eliminated
TEN WORST CONTRIBUTORS
_____________________________________________
Boston Chicken - 21(cents)
Mercury Finance 18
Employee Solutions* 14
Scholastic** 12
Ikon Office Solutions 9
Corporate Express 8
Republic Industries 6
Paging Network** 5
Unisource Worldwide** 4
Outback Steakhouse 3
_____________________________________________
Total - 100(cents)
_____________________________________________
Twenty-Five Largest Holdings
Percent of
Net Assets
6/30/97
_____________________________________________
Franklin Resources 2.9%
First Data 2.9
CUC International 2.8
ACE Limited 2.3
General Nutrition 2.3
Vencor 2.1
Service Corp. International 2.0
Comcast 2.0
Cardinal Health 2.0
La Quinta Inns 2.0
UNUM 2.0
HFS 2.0
USA Waste Services 1.9
Quorum Health Group 1.9
Catalina Marketing 1.8
Freddie Mac 1.8
AccuStaff 1.7
Interim Services 1.7
Cole National 1.7
BISYS Group 1.6
Household International 1.6
Norwest 1.5
Costco Companies 1.5
Smith International 1.5
COREStaff 1.5
_____________________________________________
Total 49.0%
_____________________________________________
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.
Performance Comparison
as of 6/30/97
<TABLE>
<CAPTION>
Lipper Variable
T. Rowe Price Annuity Underlying
New America Growth S&P 500 Growth Funds
Portfolio Stock Index Average
<S> <C> <C> <C>
3/31/94 $10,000 $10,000 $ 10,000
6/94 9,670 10,042 9,758
6/95 12,504 12,660 12,044
6/96 17,326 15,952 14,865
6/97 19,964 21,487 18,574
</TABLE>
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.
New America Growth Portfolio
Periods Ended 6/30/97
Since Inception 1
Year3 YearsInception Date
_______________________________________________________________________
15.22% 27.33% 23.72% 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 New America Growth Portfolio
(Unaudited)
For a share outstanding throughout each period
__________________________________________________________
6 Months Year 3/31/94
Ended Ended Through
6/30/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period$ 17.67 $ 15.23 $ 10.10 $ 10.00
Investment activities
Net investment
income 0.01 0.04 0.03 0.01
Net realized and
unrealized gain
(loss) 1.57 2.94 5.12 0.09
Total from
investment
activities 1.58 2.98 5.15 0.10
Distributions
Net investment
income - (0.04) (0.02) -
Net realized gain - (0.50) - -
Total distributions - (0.54) (0.02) -
NET ASSET VALUE
End of period $ 19.25 $ 17.67 $ 15.23 $ 10.10
________________________________________________
Ratios/Supplemental Data
Total return 8.94% 20.09% 51.10% 1.00%
Ratio of expenses to
average net assets 0.85%! 0.85% 0.85% 0.85%!
Ratio of net investment
income to average
net assets 0.09%! 0.18% 0.23% 0.15%!
Portfolio turnover
rate 49.8%! 27.2% 54.5% 81.0%!
Average commission
rate paid $ 0.0478 $ 0.0524 - -
Net assets, end of
period
(in thousands) $ 79,996 $ 60,241 $ 12,304 $ 2,028
! Annualized.
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price New America Growth Portfolio
June 30, 1997 (Unaudited)
Shares/Par Value In
thousands
Common Stocks 89.7%
FINANCIAL SERVICES 18.8%
Bank and Trust 1.5%
Norwest 22,000 $ 1,238
1,238
Insurance 6.4%
ACE Limited 25,000 1,847
MGIC Investment 20,000 959
PMI Group 12,000 748
UNUM 38,000 1,596
5,150
Investment Services 2.9%
Franklin Resources 31,500 2,286
2,286
Other Financial Services 8.0%
Fairfax Financial
(144a) (CAD) * 2,900 840
Fannie Mae 20,000 872
Freddie Mac 41,000 1,409
Green Tree Financial 33,000 1,176
Household International 11,000 1,292
Mercury Finance 47,500 116
Money Store 23,400 669
6,374
Total Financial Services 15,048
CONSUMER SERVICES 30.8%
Retailing/General Merchandisers 2.7%
Costco Companies * 37,000 1,217
Safeway * 20,500 946
2,163
Retailing/Specialty Merchandisers 9.8%
AutoZone * 35,200 829
Circuit City Stores 26,000 925
Cole National (Class A) * 30,000 1,320
General Nutrition * 65,000 1,816
Home Depot 12,500 862
Kohl's * 15,000 794
PETsMART * 65,000 746
Tommy Hilfiger * 13,000 522
7,814
Entertainment and Leisure 5.5%
Carnival (Class A) 29,000 1,196
Disney 14,000 $ 1,124
Extended Stay America * 33,000 494
La Quinta Inns 73,000 1,597
4,411
Media/Communication Services 5.7%
AirTouch Communications * 43,000 1,177
Comcast (Class A Special) 76,000 1,622
Outdoor Systems * 25,500 972
Tribune 17,000 817
4,588
Restaurants/Food Distribution 2.2%
Boston Chicken * 38,800 542
Outback Steakhouse * 50,000 1,208
1,750
Personal Services 4.9%
CUC International * 87,500 2,259
Service Corp. International 49,500 1,627
3,886
Total Consumer Services 24,612
BUSINESS SERVICES 39.5%
Health Care Services 6.2%
Apria Healthcare * 9,600 170
Columbia/HCA Healthcare 25,500 1,003
PhyCor * 19,000 654
Quorum Health Group * 42,000 1,496
Vencor * 39,500 1,669
4,992
Distribution Services 4.1%
Cardinal Health 28,000 1,603
Ikon Office Solutions 47,000 1,172
Patterson Dental * 13,600 465
3,240
Computer Services 6.6%
BISYS Group * 31,000 1,301
First Data 52,000 2,285
SABRE Group Holdings * 20,000 542
SunGard Data Systems * 24,000 1,116
5,244
Environmental Services 3.0%
Republic Industries * 36,000 889
USA Waste Services * 40,000 1,545
2,434
Energy Services 5.5%
BJ Services * 11,000 $ 590
Camco International 17,500 958
Schlumberger 4,500 562
Smith International * 20,000 1,215
Western Atlas * 15,000 1,099
4,424
Other Business Services 14.1%
AccuStaff * 57,500 1,362
ADT * 23,700 782
ADVO * 38,500 626
Catalina Marketing * 30,000 1,444
COREStaff * 44,700 1,210
Corporate Express * 77,400 1,115
Employee Solutions * 28,300 157
Global DirectMail * 27,400 714
HFS * 27,500 1,595
Interim Services * 30,000 1,335
Paychex 22,500 863
Sylvan Learning Systems * 1,400 47
11,250
Total Business Services 31,584
Miscellaneous Common Stocks 0.6% 480
Total Common Stocks (Cost $58,766) 71,724
Short-Term Investments 12.0%
Certificates of Deposit 2.5%
Deutsche Bank AG
5.78%, 8/12/97 $1,000,000 1,000
World Savings Bank
5.57%, 7/8/97 1,000,000 1,000
2,000
Commercial Paper 9.5%
AC Acquisition
Holding Company
5.56%, 8/11/97 1,000,000 994
Banque National de Paris
5.55%, 7/14/97 1,000,000 998
Corporate Asset Funding, 4(2)
5.53%, 7/21/97 1,000,000 997
National Rural Utilities
Cooperative Finance
5.55%, 9/9/97 1,000,000 989
Svenska Handelsbanken
5.75%, 11/14/97 $ 1,000,000 $ 978
Total SA, 5.54%, 7/7/97 1,000,000 999
Investments in Commercial
Paper through a Joint
Account, 6.05 -6.20%
7/1/97 1,647,108 1,647
7,602
Total Short-Term Investments
(Cost $9,602) 9,602
Total Investments in Securities
101.7% of Net Assets (Cost $68,368) $ 81,326
Other Assets Less Liabilities (1,330)
NET ASSETS $ 79,996
___________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 32
Accumulated net realized gain/loss -
net of distributions 395
Net unrealized gain (loss) 12,958
Paid-in-capital applicable to 4,155,382
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares
authorized 66,611
NET ASSETS $ 79,996
___________
NET ASSET VALUE PER SHARE $ 19.25
___________
* 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."
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 1.05% of net assets.
CAD Canadian dollar
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price New America Growth Portfolio
(Unaudited)
In thousands
6 Months
Ended
6/30/97
Investment Income
Income
Interest $ 197
Dividend 121
Total income 318
Expenses
Investment management and administrative 286
Net investment income 32
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 197
Change in net unrealized gain or loss on securities 6,321
Net realized and unrealized gain (loss) 6,518
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 6,550
__________
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
6 Months Year
Ended Ended
6/30/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 32 $ 65
Net realized gain (loss) 197 637
Change in net unrealized gain or loss 6,321 5,130
Increase (decrease) in net assets from
operations 6,550 5,832
Distributions to shareholders
Net investment income - (92)
Net realized gain - (765)
Decrease in net assets from distributions - (857)
Capital share transactions*
Shares sold 22,397 51,507
Distributions reinvested - 857
Shares redeemed (9,192) (9,492)
Increase (decrease) in net assets from
capital share transactions 13,205 42,872
Net equalization - 90
Net Assets
Increase (decrease) during period 19,755 47,937
Beginning of period 60,241 12,304
End of period $ 79,996 $ 60,241
________________________
*Share information
Shares sold 1,261 3,117
Distributions reinvested - 52
Shares redeemed (515) (568)
Increase (decrease) in shares outstanding746 2,601
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price New America Growth Portfolio
June 30, 1997 (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 to separate
accounts of certain insurance companies as an investment medium for both
variable annuity contracts and variable life insurance policies.
Valuation Equity securities are valued at the last quoted sales price on the
day the valuations are made. A security which is listed or traded on more
than one exchange is valued at the quotation on the exchange determined to
be the primary market for such security. Listed securities not traded on a
particular day and securities regularly traded in the over-the-counter market
are valued at the mean of the latest bid and asked prices.
Short-term debt securities are valued at amortized cost which, when combined
with accrued interest, approximates fair value.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the officers
of the fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars
at the prevailing exchange rate at the end of the reporting period. Purchases
and sales of securities and income and expenses are translated into U.S.
dollars at the 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. Effective January 1, 1997, the fund
discontinued its practice of equalization. The results of operations and net
assets were not affected by this change.
Note 2 - Investment Transactions
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 $25,889,000 and $15,252,000, respectively, for the six
months ended June 30, 1997.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income.
At June 30, 1997, the aggregate cost of investments for federal income tax
and financial reporting purposes was $68,368,000, and net unrealized gain
aggregated $12,958,000, of which $15,664,000 related to appreciated
investments and $2,706,000 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 $43,000 was payable at June 30, 1997. 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.
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to those who have received
a copy of the portfolio's prospectus.
T. Rowe Price Investment Services, Inc., Distributor
TRP652 (6/97)
K15-055 6/30/97
