T. Rowe Price
Equity Income Portfolio
Semiannual Report
June 30, 1997
Dear Investor
After a strong 1996, the equity market continued to advance
sharply in the first half of 1997. The year began slowly with
the market progressing only modestly in the first several
months. April, May, and June, however, were another matter
altogether as the combination of good corporate earnings growth,
generally stable interest rates, and strong investor demand for
equities fueled a sharply rising, almost frenzied, equity
market.
Performance Comparison
Periods Ended 6/30/97 6 Months 12 Months
________________________________________________________________
Equity Income Portfolio 14.78% 27.54
%
S&P 500 20.61 34.70
Lipper Variable Annuity
Underlying Equity Income
Funds Average 16.83 29.45
As shown in the performance table, your fund trailed the
unmanaged Standard & Poor's 500 Stock Index over the past six
and 12 months in this environment and slightly lagged the Lipper
average of similar funds. Often in sharply rising markets,
conservative funds like Equity Income tend to advance at a
moderate pace. This certainly applied to the first half of 1997.
Over the last 12 months we were pleased by the fund's almost 28%
return but frustrated that it was not even higher! Nonetheless,
given the fund's conservative investment program, we are
reasonably satisfied with our progress over the last year.
DIVIDEND DISTRIBUTION
On June 25, your Board of Directors declared a second quarter
income dividend of $0.09 per share, bringing your 1997 total
income distribution to $0.18 per share. The dividend was paid on
June 27 to shareholders of record on June 25.
PORTFOLIO STRATEGY
What is a conservative, value-oriented fund to do in a market
environment like the first half of 1997? Our strategy has been
to worry about risk even more than we typically do. While we did
not alter the fund's overall asset allocation, we did reduce our
investments in a number of companies that have performed well
and, consequently, no longer appear as undervalued as they once
did. The Major Portfolio Changes table following this letter
highlights some of these sales. We always distinguish between
the quality of a company and the price of a company stock.
Several of our larger sales represent investments in some of the
world's great companies (Warner-Lambert, Corning, SmithKline
Beecham, Eastman Kodak). When the market fully values or even
more than fully values a company's equity, however, our
valuation discipline prompts us to "recycle" these holdings into
more reasonably valued companies with attractive upside
potential and relatively low downside risk. Both good upside and
low downside are equally important to us as we contemplate which
investments to make on your behalf.
Security Diversification Pie Chart 6/30/97
Stocks 86% Bonds 1% Reserves 13%
In looking at our large purchases over the past few months, the
companies share the characteristics of attractive relative
valuations, high relative dividend yields, and, in our opinion,
good appreciation potential with moderate downside risk. We
added to positions in five companies, including Dow Chemical,
GM, and Duke Energy. We purchased smaller positions in a number
of other electric utilities, one of the few groups that did not
participate in the market's advance. Occasionally, we can also
opportunistically capitalize on negative market responses to
specific company news. For example, bad winter weather affecting
Burlington Northern Santa Fe caused a sharp drop in the
company's stock price, which we viewed as a temporary
overreaction. We also initiated a position in Knight-Ridder, the
newspaper and publishing company.
SUMMARY AND OUTLOOK
As we entered 1997, we did not fully anticipate a market advance
as sharp as the one we witnessed in the first half of the year.
In the fund's 1996 annual report, we referred to the "delinkage"
that was occurring as stock prices surged at a much faster rate
than corporate earnings and dividends. This delinkage is even
more pronounced today after the market's first half rally. We
will continue to follow our conservative investment approach
because there are always interesting investment opportunities in
any market environment. However, we believe the going is likely
to get tougher for stocks sometime in the second half of the
year.
As always, we appreciate your continued confidence and support.
Respectfully submitted,
Brian C. Rogers
President and
Chairman of the Investment Advisory Committee
July 18, 1997
Portfolio Highlights
Twenty-Five Largest Holdings
Percent of
Net Assets
6/30/97
_____________________________________________________________
Mellon Bank 1.7%
Dow Chemical 1.6
Atlantic Richfield 1.4
GE 1.3
Exxon 1.3
Chase Manhattan 1.2
DuPont 1.2
International Flavors & Fragrances 1.2
Texaco 1.1
J.C. Penney 1.0
St. Paul Companies 1.0
ALLTEL 1.0
General Mills 1.0
Witco 1.0
Georgia-Pacific 1.0
American Home Products 0.9
Union Camp 0.9
AT&T 0.9
Duke Energy 0.9
Tambrands 0.9
Simon DeBartolo Group 0.9
Chevron 0.9
Mobil 0.9
J.P. Morgan 0.9
Royal Dutch Petroleum 0.9
______________________________________________________________
_______
Total
27.0%
______________________________________________________________
_______
Portfolio Highlights
Major Portfolio Changes
Six Months Ended 6/30/97
Listed in descending order of size
LARGEST PURCHASES (10)
__________________________
Dow Chemical
Duke Energy
Mellon Bank
Knight-Ridder *
GM
Burlington Northern Santa Fe *
Atlantic Richfield
UST
ALLTEL
Witco
LARGEST SALES (10)
__________________________
Warner-Lambert **
Sallie Mae **
Corning **
SmithKline Beecham **
U.S. Bancorp **
Great Western Financial
Kimberly-Clark **
Eastman Kodak **
Grand Metropolitan
Conrail **
__________________________
* Position added
** Position eliminated
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>
T. Rowe Price
Equity Income
Portfolio S&P 500
<S> <C> <C>
3/31/94 $ 10,000 $ 10,000
6/30/95 10,170 10,042
6/30/95 12,409 12,660
6/30/96 15,536 15,952
6/30/97 19,815 21,487
</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.
Equity Income Portfolio
Periods Ended 6/30/97
Since Inception
1 Year 3 Years Inception Date
______________________________________________________________
______
27.54% 24.90% 23.43% 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
(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 $ 15.26 $ 13.21 $ 10.42 $
10.00
Investment activities
Net investment
income 0.19 0.42 0.44 0.30
Net realized and
unrealized gain
(loss) 2.05 2.13 3.05 0.41
Total from
investment
activities 2.24 2.55 3.49 0.71
Distributions
Net investment
income (0.18) (0.42) (0.44)(0.29)
Net realized gain (0.10) (0.08) (0.26) -
Total
distributions (0.28) (0.50) (0.70)(0.29)
NET ASSET VALUE
End of period $ 17.22 $ 15.26 $ 13.21 $ 10.42
________________________________________________
Ratios/Supplemental Data
Total return 14.78% 19.56% 34.76%7.15%
Ratio of expenses to
average net assets 0.85%! 0.85% 0.85%0.85%!
Ratio of net investment
income to average
net assets 2.70%! 2.94% 3.61%3.88%!
Portfolio turnover
rate 23.3%! 17.4% 10.1%21.3%!
Average commission
rate paid $ 0.0308 $ 0.0359 - -
Net assets, end
of period
(in thousands) $213,258 $ 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
June 30, 1997 (Unaudited)
Shares/Par Value
In thousands
Common Stocks 85.9%
FINANCIAL 16.0%
Bank and Trust 9.3%
BANC ONE 35,670 $ 1,728
BankBoston 16,900 1,218
Bankers Trust New York 18,800 1,636
Chase Manhattan 25,904 2,514
Fleet Financial Group 23,600 1,493
Great Western Financial 6,200 333
J. P. Morgan 18,100 1,889
Mellon Bank 78,000 3,520
Mercantile Bankshares 16,900 674
National City 22,100 1,160
PNC Bank 20,000 832
Signet Banking 37,300 1,343
Wells Fargo 5,966 1,608
19,948
Insurance 4.1%
American General 37,300 1,781
EXEL 23,400
1,234
Hilb, Rogal and Hamilton 10,400 177
Lincoln National 14,100 908
SAFECO 27,100 1,266
St. Paul Companies 28,200 2,150
USF&G 29,400 706
Willis-Corroon ADR 41,100 460
8,682
Financial Services 2.6%
American Express 17,400 1,296
Fannie Mae 39,200 1,710
H&R Block 37,200 1,200
Travelers Group 22,233 1,402
5,608
Total Financial 34,238
UTILITIES 14.2%
Telephone Services 7.1%
ALLTEL 63,900 2,137
AT&T 57,000
1,999
BCE 38,300 1,072
Bell Atlantic 23,200 1,760
BellSouth 33,300 1,544
Frontier 44,900 895
GTE 35,600 1,562
SBC Communications 27,371 $ 1,694
Southern New England
Telecommunications 18,800 731
Sprint 14,700
774
U S WEST Communications 23,350 880
15,048
Electric Utilities 7.1%
BGE 28,600 763
Centerior Energy 44,000 492
Central and South West 26,800 570
Dominion Resources 28,450 1,042
DQE 28,912 817
Duke Energy 41,000 1,966
Edison International 25,200 627
Entergy 28,500 780
Florida Progress 8,600 269
GPU 13,800 495
Ohio Edison 33,600 733
PacifiCorp 44,200 972
PECO Energy 43,800 920
PG&E 24,500 594
Public Service Enterprise 24,300 608
Southern Company 54,500 1,192
Unicom 60,600 1,348
Western Resources 29,700 963
15,151
Total Utilities 30,199
CONSUMER NONDURABLES 16.4%
Cosmetics 1.1%
International Flavors &
Fragrances 48,600 2,454
2,454
Beverages 1.3%
Anheuser-Busch 39,200 1,644
Brown-Forman (Class B) 21,400 1,045
2,689
Food Processing 4.0%
General Mills 32,400 2,110
Heinz 34,100
1,573
Kellogg 13,300 1,139
McCormick 50,400 1,276
Quaker Oats 40,100 1,799
Sara Lee 17,400 724
8,621
Hospital Supplies/Hospital Management 2.4%
Abbott Laboratories 23,500 $ 1,569
Bausch & Lomb 29,200 1,376
Baxter International 22,100 1,155
C. R. Bard 25,400 922
5,022
Pharmaceuticals 2.6%
American Home Products 26,400 2,019
Novartis (CHF) 1,067 1,706
Pharmacia & Upjohn 53,092 1,845
5,570
Miscellaneous Consumer Products 5.0%
Armstrong World 14,400 1,057
Fortune Brands 26,300 981
Gallaher Group ADR * 26,300 485
Grand Metropolitan ADR 9,900 388
Philip Morris 29,800 1,322
Tambrands 38,800 1,935
Tomkins (GBP) 228,200 996
Unilever N.V. ADR 8,300 1,810
UST 61,200 1,698
10,672
Total Consumer Nondurables 35,028
CONSUMER SERVICES 6.5%
General Merchandisers 1.5%
J.C. Penney 41,800 2,181
May Department Stores 22,000 1,040
3,221
Specialty Merchandisers 0.2%
The Limited 23,500 476
476
Entertainment and Leisure 1.2%
ITT * 24,600 1,502
Reader's Digest (Class A) 30,600 878
Reader's Digest (Class B) 1,200 33
2,413
Media and Communications 3.6%
Dow Jones 34,800 1,398
Dun & Bradstreet 38,700 1,016
Gannett 9,100 899
Knight-Ridder 37,200 1,825
McGraw-Hill 18,900 1,112
R. R. Donnelly 39,700 1,454
7,704
Total Consumer Services 13,814
CONSUMER CYCLICALS 4.0%
Automobiles and Related 1.9%
Eaton 10,800 $ 943
Ford Motor 15,700 593
Genuine Parts 29,750 1,008
GM 25,400 1,414
3,958
Building and Real Estate 1.5%
Rouse 14,000 413
SECURITY CAPITAL
PACIFIC TRUST
REIT 15,100 345
Simon DeBartolo Group
REIT 60,236 1,928
Weingarten Realty Investors
REIT 10,600 448
3,134
Miscellaneous Consumer Durables 0.6%
Whirlpool 24,600 1,342
1,342
Total Consumer Cyclicals 8,434
TECHNOLOGY 0.7%
Electronic Components 0.7%
AMP 36,100 1,507
Total Technology 1,507
CAPITAL EQUIPMENT 2.6%
Electrical Equipment 1.8%
GE 43,900 2,870
Hubbell (Class B) 24,600 1,082
3,952
Machinery 0.8%
Cooper Industries 26,267 1,307
FMC * 4,800 381
1,688
Total Capital Equipment 5,640
BUSINESS SERVICES AND TRANSPORTATION 2.2%
Transportation Services 0.2%
Alexander & Baldwin 13,750 359
359
Miscellaneous Business Services 0.4%
Deluxe Corp. 17,500 597
GATX 6,000 347
944
Railroads 1.6%
Burlington Northern
Santa Fe 17,800 $ 1,600
Union Pacific 24,600 1,734
3,334
Total Business Services and
Transportation 4,637
ENERGY 11.0%
Energy Services 1.0%
Witco 54,500 2,068
2,068
Integrated Petroleum - Domestic 3.7%
Amerada Hess 20,000 1,111
Atlantic Richfield 43,700 3,081
British Petroleum ADR 19,400 1,453
Phillips Petroleum 23,800 1,041
USX-Marathon 40,800 1,178
7,864
Integrated Petroleum - International 6.3%
Amoco 20,300 1,765
Chevron 26,050 1,926
Exxon 45,900 2,823
Mobil 27,400 1,914
Repsol ADR 22,500 955
Royal Dutch Petroleum ADR 34,000 1,849
Texaco 21,500 2,338
13,570
Total Energy 23,502
PROCESS INDUSTRIES 10.4%
Diversified Chemicals 3.1%
Dow Chemical 38,400 3,345
DuPont 39,300 2,471
Eastman Chemical 13,900 883
6,699
Specialty Chemicals 4.0%
3M 12,900 1,316
Betz Laboratories 19,500 1,287
Great Lakes Chemical 33,500 1,755
Imperial Chemical ADR 20,000 1,137
Lubrizol 24,100 1,011
Nalco Chemical 25,600 989
Pall 43,400
1,009
8,504
Paper and Paper Products 1.6%
Consolidated Papers 25,300 $ 1,366
Union Camp 40,300 2,015
3,381
Forest Products 1.7%
Georgia-Pacific 24,100 2,057
International Paper 31,400 1,525
3,582
Total Process Industries 22,166
BASIC MATERIALS 1.7%
Metals 0.7%
Reynolds Metals 21,500 1,532
1,532
Mining 1.0%
LONRHO (GBP) 277,800 587
Newmont Mining 38,249 1,492
2,079
Total Basic Materials 3,611
Miscellaneous Common Stocks 0.2% 513
Total Common Stocks (Cost $159,800) 183,289
U.S. Government Obligations/Agencies 1.5%
U.S. Treasury Bonds
6.00%, 2/15/26 $500,000 447
6.25%, 8/15/23 20,000 19
U.S. Treasury Notes
5.625%, 2/15/06 250,000 235
5.75%, 8/15/03 400,000 386
5.875%
11/15/99 - 2/15/04 920,000 914
6.50%, 5/31/01 700,000 704
7.00%, 7/15/06 400,000 411
7.375%, 11/15/97 20,000 20
Total U.S. Government
Obligations/Agencies (Cost $3,124) 3,136
Short-Term Investments 12.3%
Certificates of Deposit 2.8%
Svenska Handlesbanken
5.705 - 5.68%
7/7/97 - 10/1/97 6,000,000 6,000
6,000
Commercial Paper 9.5%
AC Acquisition Holding
Company, 4(2), 5.56%
8/11/97 $3,000,000 $ 2,981
Chrysler Financial
5.60%, 7/10/97 3,000,000 2,996
General Electric Capital
5.58%, 8/15/97 2,000,000 1,986
Golden Managers Acceptance
5.56%, 7/10/97 3,000,000 2,996
Preferred Receivables Funding
5.55%, 7/29/97 2,000,000 1,992
Southern New England
Telecommunications
5.56%, 8/4/97 3,000,000 2,984
Total SA,
5.54%, 7/7/97 2,000,000 1,998
Investments in Commercial
Paper through a Joint
Account 6.05 - 6.20%
7/1/97 2,195,994 2,196
20,129
Total Short-Term Investments
(Cost $26,129) 26,129
Total Investments in Securities
99.7% of Net Assets (Cost $189,053) $ 212,554
Other Assets Less Liabilities 704
NET ASSETS $ 213,258
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 108
Accumulated net realized gain/loss -
net of distributions 4,465
Net unrealized gain (loss) 23,500
Paid-in-capital applicable to 12,386,235
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares of
the corporation authorized 185,185
NET ASSETS $ 213,258
___________
NET ASSET VALUE PER SHARE $ 17.22
___________
* Non-income producing
REIT Real Estate Investment Trust
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."
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
(Unaudited)
In thousands
6 Months
Ended
6/30/97
Investment Income
Income
Dividend $ 2,074
Interest 588
Total income 2,662
Expenses
Investment management and administrative 637
Net investment income 2,025
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 4,452
Foreign currency transactions (3
)
Net realized gain (loss) 4,449
Change in net unrealized gain or
loss on securities 15,255
Net realized and unrealized gain (loss)
19,704
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 21,729
___________
The accompanying notes are an integral part of these financial
statements.
Statement of Changes in Net Assets
T. Rowe Price Equity Income Portfolio
(Unaudited)
In thousands
6 Months Year
Ended Ended
6/30/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,025 $ 1,502
Net realized gain (loss) 4,449 1,676
Change in net unrealized gain or loss 15,255
6,821
Increase (decrease) in net assets
from operations 21,729 9,999
Distributions to shareholders
Net investment income (1,917) (1,787)
Net realized gain (918) (470)
Decrease in net assets from distributions (2,835)
(2,257)
Capital share transactions*
Shares sold 95,295 89,085
Distributions reinvested 2,835 2,256
Shares redeemed (7,517) (10,297)
Increase (decrease) in net assets
from capital share transactions 90,613 81,044
Net equalization - 307
Net Assets
Increase (decrease) during period 109,507 89,093
Beginning of period 103,751 14,658
End of period $213,258 $ 103,751
________________________
*Share information
Shares sold 5,883 6,273
Distributions reinvested 173 153
Shares redeemed (470) (736)
Increase (decrease) in shares outstanding 5,586
5,690
The accompanying notes are an integral part of these financial
statements.
Notes to Financial Statements
T. Rowe Price Equity Income 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 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 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.
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 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 and U.S. government securities, aggregated
$89,343,000 and $15,730,000, 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 $189,053,000,
and net unrealized gain aggregated $23,501,000, of which
$24,785,000 related to appreciated investments and $1,284,000 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 $126,000 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.
During the six months ended June 30, 1997, the fund, in the
ordinary course of business, placed security purchase and sale
orders aggregating $88,000 with certain affiliates of the
manager and paid commissions of $500 related thereto.
T. Rowe Price Equity Income Portfolio
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
TRP654 (6/97)
RPRTEIP 6/30/97
