T. Rowe Price
Mid-Cap Growth Portfolio
Semiannual Report
June 30, 1997
Dear Investor
After a dull first quarter, stocks surged during the second.
Mid-cap stocks participated in the rebound but lagged behind
their larger brethren by significant margins for the six-month
period ended June 30. Moreover, mid-cap growth stocks,
exemplified by your fund, in turn trailed mid-cap value stocks,
which was the primary reason the fund lagged its mid-cap
benchmarks. In fact, the extraordinary advance of the unmanaged
Standard & Poor's 500 Stock Index, led primarily by large, blue
chip companies, made us feel as though we were not invited to
the party.
Performance Comparison
Periods Ended 6/30/97 6 Months
(Since Inception 12/31/96)
_______________________________________________________________
Mid-Cap Growth Portfolio 6.30%
S&P MidCap Index 12.99
Lipper Variable Annuity Underlying
Mid Cap Funds Average 8.22
S&P 500 20.61
Market Environment
Stock market investors have been treated to exemplary returns
against the best market backdrop 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
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 and
has actually declined slightly in spite of a reasonably tight
job market. In Washington, politicians are still squabbling, but
there appears to be a movement by both parties toward the middle
of the political spectrum, at least on economic issues. Both
parties agree on some measure of capital gains tax reduction.
Meanwhile, the federal budget deficit has declined so fast that
extrapolating 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 new equity offerings,
corporate stock buybacks and record merger and acquisition
activity are retiring stock as fast as it is issued.
After 1995 and 1996, when the S&P 500 posted a cumulative gain
of 69.7%-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 raced back to close with a strong gain for the first
half of 1997. Large-cap companies led the way, as investors
continued to be enamored of franchise brands like Coca-Cola,
Procter & Gamble, and GE. Small and mid-cap companies lagged the
rally by a significant margin. In the mid-cap sector, value
performed better than growth, an anomalous situation because the
reverse was true in the large-cap arena.
Portfolio Review
Divergence among industry groups was not significant, though
substantial volatility led to notable contributions and
detractions. Gartner Group, a leading provider of information
technology consulting services whose revenues and earnings are
growing, was the largest contributor to the fund's six-month
return. General Nutrition, the nation's largest retailer of
vitamin and other health-related products, was the second
highest, as the company rebounded from a temporary sales
slowdown in mid-1996. Other top contributors included Cooper
Cameron and Smith International, energy service companies
benefiting from extremely strong demand for products and
services that assist oil exploration and production companies in
the drilling process.
Unfortunately, gains from these stocks were offset by several
very disappointing stocks. Foremost was Mercury Finance, a
leader in used car automobile lending. Along with other
investors, we were victimized by suspected management fraud and
manipulation of financial statements, and are seeking redress
through legal action. The fund was also hurt by its position in
Boston Chicken, a restaurant operator whose stock fell 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 market has not treated the mid-cap growth sector well over
the last year, but it is worth noting that corporate buyers do
appear to recognize value in the sector as takeover activity
among mid-cap stocks is easily at its highest level in five
years. Portfolio companies acquired since the fund's inception
included ADT, Revco, Oxford Resources, Cascade Communications,
and Vivra. The acquisition of Palmer Wireless is pending. We do
not actively purchase companies we believe may be acquired, but
we do view this flurry of activity as a reaffirmation of the
current relative attractiveness of the mid-cap sector.
Your fund is well diversified across sectors, as shown in the
following table.
Sector Diversification
6/30/97
______________________________________________________________
Financial 9%
Health Care 10
Consumer 17
Technology 7
Business Services 28
Energy 7
Industrial 10
Basic Materials 2
Reserves 10
______________________________________________________________
Total 100%
Outlook
As mentioned earlier, 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 benchmarks such as
price/earnings ratios, price/book value 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 in the
latter stages of bull markets, yet this has not been the case recently.
Nevertheless, with blue chip stocks trading at price/earnings ratios well
above their growth rates, it is possible the sector many now consider the
"safest"-the large blue chips-may actually be the riskiest. While we are not
sure what catalyst may come along to change the leadership of the market, the
relative values in the mid-cap sector appear attractive, though absolute
valuations are high by historical standards.
We remain optimistic about the long-term prospects for mid-cap companies. The
aggregate underlying growth rate of our portfolio companies is well in excess
of the market as a whole, yet the price/earnings ratio is only modestly
higher than the market and well below many of the blue chip leaders. Over the
long run, we believe your fund is well positioned to achieve attractive
returns.
Respectfully submitted,
Brian W. H. Berghuis
President and
Chairman of the Investment Advisory Committee
July 21, 1997
Contributions to the Change in Net Asset Value Per Share
6 Months Ended 6/30/97
TEN BEST CONTRIBUTORS
______________________________________________________________
Gartner Group * 7(cents)
General Nutrition * 6
Franklin Resources * 6
ACE Limited * 5
ADT *** 5
Smith International * 4
Oxford Resources *** 4
Cooper Cameron * 3
Palmer Wireless * 3
Interim Services * 3
______________________________________________________________
Total 46(cents)
______________________________________________________________
*Position added **Position eliminate ***Acquired by another
company
TEN WORST CONTRIBUTORS
______________________________________________________________
Mercury Finance * - 17(cents)
Boston Chicken * 9
Ikon Office Solutions * 5
Corporate Express * 5
360 Communications * 5
Scholastic ** 4
Tupperware ** 4
Network General * 4
American Pad & Paper * 4
TVX Gold * 4
______________________________________________________________
Total - 61(cents)
______________________________________________________________
Twenty-Five Largest Holdings
Percent of Net Assets
6/30/97
______________________________________________________________
ACE Limited 2.0%
Warnaco Group 1.9
Danaher 1.8
TriMas 1.8
Smith International 1.7
Interim Services 1.6
Camco International 1.6
Franklin Resources 1.6
BE Aerospace 1.5
Gartner Group 1.5
Great Lakes Chemical 1.5
Sybron International 1.5
JP Foodservice 1.4
La Quinta Inns 1.4
PartnerRe Holdings 1.4
Cooper Cameron 1.4
Catalina Marketing 1.4
Teleflex 1.4
General Nutrition 1.4
Ikon Office Solutions 1.3
Money Store 1.3
Circuit City Stores 1.2
360 Communications 1.2
Stewart Enterprises 1.2
Waban 1.2
______________________________________________________________
Total 37.2%
______________________________________________________________
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
Mid-Cap Growth S&P Mid Cap Funds
Portfolio MidCap Index Average
<S> <C> <C> <C>
12/31/96 $10,000 $10,000 $10,000
6/30/97 10,630 10,822 11,299
</TABLE>
Total Return
Mid-Cap Growth Portfolio
Period Ended 6/30/97
Since Inception
6 Months Inception Date
________________________________________________________________________
6.30% 6.30% 12/31/96
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 Mid-Cap Growth Portfolio
(Unaudited)
For
a share outstanding
throughout each period
____________________________
12/31/96
Through
6/30/97
NET ASSET VALUE
Beginning of period $ 10.00
Investment activities
Net investment income 0.01
Net realized and unrealized gain (loss) 0.62
Total from investment activities 0.63
NET ASSET VALUE
End of period $ 10.63
___________
Ratios/Supplemental Data
Total return 6.30%
Ratio of expenses to average net assets 0.85%!
Ratio of net investment income to
average net assets 0.15%!
Portfolio turnover rate 44.3%!
Average commission rate paid $ 0.0440
Net assets, end of period (in thousands) $ 10,047
! Annualized.
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price Mid-Cap Growth Portfolio
June 30, 1997 (Unaudited)
Shares/Par Value
In thousands
Common Stocks 89.9%
FINANCIAL 9.4%
Insurance 4.3%
ACE Limited 2,750 $ 203
PartnerRe Holdings 3,700 141
PMI Group 1,500 94
438
Financial Services 5.1%
Fairfax Financial
(144a) (CAD) * 400 116
Franklin Resources 2,200 159
Mercury Finance 2,300 5
Money Store 4,500 129
Nationwide Financial Services
(Class A) 3,800 101
510
Total Financial 948
HEALTH CARE 9.8%
Biotechnology 2.0%
Biogen * 3,000 102
Gilead Sciences * 3,700 102
204
Medical Instruments and Devices 3.2%
St. Jude Medical * 2,800 109
Sybron International * 3,800 151
United States Surgical 1,600 60
320
Health Care Services 4.6%
Apria Healthcare * 1,000 18
Cardinal Health 1,600 92
Covance * 6,100 118
Quest Diagnostics * 5,600 115
Quorum Health Group * 3,300 117
460
Total Health Care 984
CONSUMER 16.2%
Soft Goods Retailers 2.1%
Gymboree * 4,800 115
Kohl's * 1,800 95
210
Hard Goods Retailers 4.7%
Circuit City Stores 3,500 $ 125
Costco Companies * 2,800 92
General Nutrition * 4,900 137
Waban * 3,700 119
473
Consumer Non-Durables 3.1%
American Pad & Paper * 4,100 69
Consolidated Cigar
Holdings * 200 6
Culligan Water
Technologies * 900 40
Warnaco Group (Class A) 6,100 194
309
Restaurants 1.4%
Boston Chicken * 3,600 50
Outback Steakhouse * 3,700 90
140
Entertainment 1.2%
Royal Caribbean Cruises 3,400 119
119
Consumer Services 3.7%
CUC International * 4,200 108
La Quinta Inns 6,500 142
Stewart Enterprises
(Class A) 2,900 122
372
Total Consumer 1,623
TECHNOLOGY 7.1%
Computer Software 2.9%
BMC Software * 2,100 116
Intuit * 1,700 39
PLATINUM technology * 3,400 46
Synopsys * 2,600 96
297
Networking and Telecom Equipment 1.6%
Anixter International * 2,800 48
Cascade Communications * 1,900 52
Network General * 3,900 58
158
Semiconductors 2.6%
Analog Devices * 3,100 82
Maxim Integrated Products * 1,700 97
Xilinx * 1,700 $ 83
262
Total Technology 717
BUSINESS SERVICES 26.8%
Telecom Services 5.0%
360 Communications * 7,100 122
Aerial Communications * 2,100 18
Comcast (Class A Special) 4,800 103
Cox Communications
(Class A) * 4,000 96
Omnipoint * 3,200 53
Palmer Wireless * 3,600 61
Vanguard Cellular
(Class A) * 3,200 44
497
Computer Services 6.5%
Affiliated Computer Services
(Class A) * 3,900 109
BDM International * 4,100 94
Checkfree * 3,400 60
DST Systems * 3,350 112
National Data 2,400 104
Sterling Commerce * 1,900 62
SunGard Data Systems * 2,500 116
657
Distribution 5.8%
Corporate Express * 7,200 104
Ikon Office Solutions 5,200 130
JP Foodservice * 5,000 143
MSC * 2,600 104
Richfood Holdings 4,000 104
585
Media and Advertising 3.2%
ADVO * 1,700 28
Catalina Marketing * 2,900 140
Jacor Communications * 1,500 57
Outdoor Systems * 2,600 99
324
Environmental 1.7%
Republic Industries * 2,300 57
USA Waste Services * 2,800 108
165
Miscellaneous Business Services 4.6%
Fastenal 1,300 $ 64
Gartner Group (Class A) * 4,300 154
HFS * 1,400 81
Interim Services * 3,700 165
464
Total Business Services 2,692
ENERGY 6.7%
Energy Services 5.8%
Camco International 3,000 165
Cooper Cameron * 3,000 140
Smith International * 2,800 170
Weatherford Enterra * 2,700 104
579
Exploration and Production 0.9%
United Meridian * 3,000 90
90
Total Energy 669
INDUSTRIAL 9.6%
Defense and Aerospace 1.6%
BE Aerospace * 4,900 155
155
Auto Related 1.2%
OEA 3,000 119
119
Specialty Chemicals 1.8%
Great Lakes Chemical 2,900 152
Polymer Group * 2,000 32
184
Machinery 5.0%
Danaher 3,600 183
Teleflex 4,400 137
TriMas 6,500 183
503
Total Industrial 961
BASIC MATERIALS 2.5%
Mining 2.5%
Battle Mountain Gold
(Class A) 15,400 87
Cambior 7,400 84
TVX Gold * 15,200 81
Total Basic Materials $ 252
Miscellaneous Common Stocks 1.8% 182
Total Common Stocks (Cost $8,410) 9,028
Short-Term Investments 12.2%
Repurchase Agreements ** 4.3%
Investments in Repurchase
Agreements through a
Joint Account Dated 6/30/97,
5.80%, Delivery Value of
$432,000 on 7/1/97
$ 431,909 432
432
U.S. Government Obligations 7.9%
U.S. Treasury Bills
4.50%, 7/10/97 500,000 499
5.02%, 8/21/97 300,000 298
797
Total Short-Term Investments
(Cost $1,229) 1,229
Total Investments in Securities
102.1% of Net Assets (Cost $9,639) $ 10,257
Other Assets Less Liabilities (210)
NET ASSETS $ 10,047
___________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 4
Accumulated net realized gain/loss -
net of distributions (22)
Net unrealized gain (loss) 618
Paid-in-capital applicable to 945,581
shares of $0.0001 par value capital stock
outstanding;1,000,000,000 shares of the
corporation authorized 9,447
NET ASSETS $ 10,047
___________
NET ASSET VALUE PER SHARE $ 10.63
___________
* Non-income producing
** Fully collateralized by U.S. government securities
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 1.15% of net assets.
CAD Canadian dollar
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Mid-Cap Growth Portfolio
(Unaudited)
In thousands
12/31/96
Through
6/30/97
Investment Income
Income
Interest $ 21
Dividend 8
Total income 29
Expenses
Investment management and administrative 25
Net investment income 4
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (22)
Change in net unrealized gain or loss on securities 618
Net realized and unrealized gain (loss) 596
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 600
__________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Mid-Cap Growth Portfolio
(Unaudited)
In thousands
12/31/96
Through
6/30/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 4
Net realized gain (loss) (22)
Change in net unrealized gain or loss 618
Increase (decrease) in net assets from operations 600
Capital share transactions*
Shares sold 10,913
Shares redeemed (1,466)
Increase (decrease) in net assets from capital
share transactions 9,447
Net Assets
Increase (decrease) during period 10,047
Beginning of period -
End of period $ 10,047
___________
*Share information
Shares sold 1096
Shares redeemed (150)
Increase (decrease) in shares outstanding 946
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Mid-Cap 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 Mid-Cap Growth Portfolio (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the corporation and commenced operations on December 31, 1996.
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.
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.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Repurchase Agreements The fund, and other affiliated funds, may transfer
uninvested cash into a joint account, the daily aggregate balance of which
is invested in one or more overnight repurchase agreements. All repurchase
agreements purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity and are fully collaterallized by U.S.
government securities. Collateral is in the possession of the fund's
custodian and is evaluated daily to ensure that its market value exceeds the
delivery value of the repurchase agreements at maturity. Although risk is
mitigated by the collateral, the fund could experience a delay in recovering
its value and a possible loss of income or value if the counterparty fails
to perform in accordance with the terms of the agreement.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $9,593,000 and $1,161,000, respectively, for the
period ended June 30, 1997.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends 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 $9,639,000, and net unrealized gain
aggregated $618,000, of which $983,000 related to appreciated investments and
$365,000 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, 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.
T. Rowe Price Mid-Cap Growth Portfolio
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for dis-
tribution only to those who have
received a copy of the portfolio's
prospectus.
T. Rowe Price Investment Services, Inc., Distributor
TRP657 (6/97)
K15-071 6/30/97
