Annual Report
December 31, 1997
Personal Strategy Balanced Portfolio
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
T. Rowe Price
Personal Strategy Balanced Portfolio
Annual Report
December 31, 1997
Dear Investor
Despite turmoil in Asian economies, both stocks and bonds turned
in solid performances during the 6- and 12-month periods ended
December 31, 1997. Global stock markets reacted to the events in
Southeast Asia by falling dramatically after earlier gains, but
U.S. stocks recovered some lost ground. The main beneficiary was
the U.S. Treasury market, which surged on an investor flight to
safety.
PERFORMANCE AND STRATEGY REVIEW
Performance Comparison
Periods Ended 12/31/97 6 Months 12 Months
________________________________________________________
Personal Strategy
Balanced Portfolio 7.71% 18.04%
Combined Index Portfolio* 8.63 23.13
* An unmanaged portfolio composed of 60% stocks (S&P 500), 30%
bonds (Lehman Brothers Aggregate Bond Index), and 10% money
markets (90-day Treasury bills).
The objective of this fund is to provide the highest total
return consistent with an emphasis on both income and capital
appreciation. The typical asset mix is 60% stocks, 30% bonds,
and 10% cash-with 10-percentage-point variations permitted for
each asset class.
The rally in both U.S. stocks and bonds helped the fund post
solid absolute returns, although it trailed its benchmark during
both periods shown in the table. The fund's lagging performance
was primarily due to an underweighting in equities compared with
the benchmark and a fairly heavy exposure to foreign stocks.
On December 31, your fund had 57% of its assets in stocks versus
58% at the end of last June, 39% in bonds (unchanged), and the
remaining 4% in cash reserves.
We overweighted high-yield bonds and underweighted foreign
bonds. The mix of growth and value stocks in the portfolio is
reflected in our top 10 holdings, which include AT&T, GE, H&R
Block, Philip Morris, and SBC Communications. The fund's
sixth-largest stock position is SPDR Trust, whose performance is
directly linked to that of the S&P 500 Stock Index.
Asset Allocation pie chart
12/31/97
Stocks 57%
Bonds 39%
Money Markets 4%
On the international equities front, we maintained a high
exposure to foreign stocks, which unfortunately did not perform
as well as their domestic counterparts in U.S. currency terms
over the year. We continue to believe foreign stocks offer good
value at this time and provide valuable diversification for the
fund.
MARKET REVIEW
The fund's investment committee meets monthly to adjust the
weightings of stocks, bonds, and money market securities within
the appropriate ranges, based on market conditions and economic
fundamentals. The committee maintained the fund's slightly
defensive exposure to stocks and high bond position. It
continued to overweight international stocks and kept a fairly
equal mix of domestic growth and value stocks. In the bond area,
the committee underweighted fund exposure to foreign bonds,
while slightly overweighting high-yield securities. The
committee maintained a minimal position in cash equivalents.
Interest Rate Levels chart 12/31/97
30-Year 5-Year 90-Day
Treasury Treasury Treasury
Bond Note Bill
12/31/96 6.58 6.12 5.1
6.89 6.36 5.18
6.75 6.31 5.19
3/31 7 6.66 5.39
6.98 6.62 5.29
6.99 6.6 5.09
6/30 6.72 6.31 5.1
6.38 6 5.25
6.63 6.22 5.26
9/30 6.35 5.94 4.98
6.22 5.78 5.18
6.08 5.82 5.27
12/31/97 5.93 5.71 5.4
Negative fallout from overbuilding and excess manufacturing
capacity in Asia, along with the takeover of Hong Kong by China,
took their toll on U.S. financial markets. However, domestic
markets strengthened once it became apparent that the U.S.
economy was continuing along its path of high employment, high
consumer confidence, and low inflation.
The 30-year Treasury bond yield fell from a peak of 7.00% at the
end of March to 5.93% at year-end. The five-year note yield also
declined, but not as far, from 6.66% in March to 5.71%. Money
markets were relatively stable, with the 90-day Treasury bill
yield rising only 30 basis points during the year to 5.40%. (See
chart.) When earlier concerns about accelerating inflation
failed to materialize, the Federal Reserve remained on hold
following its quarter-point hike in the key fed funds rate in
March.
Stocks had reached a peak in late July and early August, then
entered a trading zone before plummeting in late October in
response to the turbulence in Southeast Asia. However, investors
who stayed the course were rewarded as equity markets recaptured
much of their earlier gains despite weakening again in December.
This was the third consecutive year that the broad market posted
returns in excess of 20%, a modern record.
OUTLOOK
With prospects looking good for a federal budget nearly in
balance in 1998, financial markets will be looking toward
Washington to get an idea of how any future surpluses will be
handled. A combination of tax cuts and debt reduction would be
regarded favorably, while any attempt to raise spending would
have the opposite effect. We anticipate a period of interest
rate stability, with slightly lower rates overall than during
recent years. In that environment, bonds should perform
relatively well in the months ahead.
A significant slowdown in Asian economic growth poses problems
for corporations whose earnings depend on exports to the region.
Even before the turbulence developed, we believed U.S. stock
valuations were fairly high. As we saw in October, when
corrections occur they can be swift and volatile, and we caution
investors that the robust returns of recent years are unlikely
to be sustained over the long term.
The Personal Strategy Balanced Portfolio is diversified in a way
that should serve investors well over time, in our view. We will
continue to look for opportunities to increase the portfolio's
equity exposure when valuations seem more attractive.
As always, we thank you for your ongoing support.
Respectfully submitted,
Peter Van Dyke
President and Chairman of the Investment Advisory Committee
January 26, 1998
Portfolio Highlights
Portfolio Overview
Percent of
Net Assets
12/31/97
_________________________________________________
Money Market Securities 4.3%
_________________________________________________
Money Market Funds 3.8
Other Assets Less Liabilities 0.5
Bonds 39.2%
_________________________________________________
U.S. Government Agencies 8.7
Corporate 16.3
Mortgage-Backed 11.8
Foreign Government Agencies 2.4
Stocks 56.5%
_________________________________________________
10 Largest Holdings 6.9%
AT&T 1.0
GE 0.8
H&R Block 0.7
Philip Morris 0.7
Delta 0.7
SPDR Trust 0.6
Dow Chemical 0.6
American Home Products 0.6
BANC ONE 0.6
SBC Communications 0.6
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.
Personal Strategy Balanced Portfolio SEC chart 12/31/97
Personal Strategy
Combined Index Balanced
Portfolio* Portfolio
12/30/94 $ 10,000 $ 10,000
12/95 12,821 12,866
12/96 14,763 14,694
12/97 18,177 17,345
* 60% S&P 500, 30% Lehman Brothers Aggregate Bond Index, 10%
90-day Treasury bills.
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.
Personal Strategy Balanced Portfolio
Periods Ended 12/31/97
Since Inception
1 Year 3 Years Inception Date
_________________________________________________________
18.04% 20.15% 20.13% 12/30/94
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 Personal Strategy Balanced Portfolio
For a share outstanding throughout each period
Year 12/30/94
Ended Through
12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of
period $ 13.44 $ 12.43 $ 10.00
Investment activities
Net investment income 0.46 0.41 0.42
Net realized and
unrealized gain (loss) 1.93 1.32 2.41
Total from
investment activities 2.39 1.73 2.83
Distributions
Net investment income (0.46) (0.41) (0.40)
Net realized gain (0.24) (0.31) -
Total distributions (0.70) (0.72) (0.40)
NET ASSET VALUE
End of period $ 15.13 $ 13.44 $ 12.43
_____________________________
Ratios/Supplemental Data
Total return 18.04% 14.21% 28.66%
Ratio of expenses to
average net assets 0.90% 0.90% 0.90%
Ratio of net investment
income to average
net assets 3.37% 3.33% 3.69%
Portfolio turnover rate 32.8% 51.7% 39.3%
Average commission rate
paid $ 0.0343 $ 0.0394 -
Net assets, end of period
(in thousands) $ 63,005 $ 33,263 $ 5,625
The accompanying notes are an integral part of these financial
statements.
Statement of Net Assets
T. Rowe Price Personal Strategy Balanced Portfolio
December 31, 1997
Shares/Par Value
In thousands
Common Stocks 56.5%
FINANCIAL 11.3%
Bank and Trust 6.3%
Abbey National (GBP) 9,500 $ 170
ABN Amro Holdings (NLG) 3,600 70
Air Liquide (L) (FRF) 420 66
Australia & New Zealand
Banking ADR 700 23
BANC ONE 7,000 380
Banca Commerciale
Italiana (ITL) 10,000 35
Banco de Bilbao
Vizcaya ADR 2,400 78
Banco Frances del Rio ADR 1,495 41
BankBoston 1,000 94
Barclay's (GBP) 4,000 106
Chase Manhattan 2,880 315
Citicorp 1,200 152
Deutsche Bank (DEM) 1,100 77
Dresdner Bank AG (DEM) 1,700 78
First Union 2,300 118
HSBC Holdings (GBP) 5,400 138
J. P. Morgan 1,700 192
KeyCorp 1,100 78
Kredietbank (BEF) 100 42
Mellon Bank 5,540 336
Mercantile Bancorporation 300 18
National City 1,600 105
NationsBank 1,500 91
Norwest 4,400 170
RHB Sakura Merchant
Bankers (MYR) * 350 0
Schweizerischer Bankverein
(CHF) * 530 165
Societe Generale (FRF) 513 70
Societe Generale de
Belgique (BEF) 200 18
Svenska Handelsbanken
(SEK) 2,000 69
U.S. Bancorp 1,200 134
Union Bank of
Switzerland (CHF) 100 145
Washington Mutual 4,690 299
Wells Fargo 200 $ 68
Westpac Bank (AUD) 4,000 26
3,967
Insurance 2.4%
ACE Limited 1,900 183
American General 2,000 108
American International
Group 650 71
EXEL 1,100 70
Mid Ocean Limited 1,600 87
St. Paul Companies 4,200 345
Sumitomo Marine & Fire
Insurance (JPY) 9,000 47
Travelers Property
Casualty (Class A) 7,900 348
UNUM 2,340 127
Willis-Corroon ADR 12,900 159
1,545
Financial Services 2.6%
American Express 3,750 335
Associates First
Capital (Class A) 100 7
AXA (FRF) 1,000 77
Fannie Mae 6,520 372
Freddie Mac 3,980 167
Household International 900 115
ING Groep (NLG) 1,650 70
Money Store 800 17
Morgan Stanley Dean
Witter Discover 800 47
Pearson (GBP) 3,000 39
DCB Holdings (MYR) 7,000 3
SLM Holding 1,030 143
The CIT Group (Class A) * 700 23
Travelers Group 3,999 215
1,630
Total Financial 7,142
UTILITIES 4.8%
Telephone Services 3.0%
ALLTEL 1,800 74
AT&T 9,820 602
BellSouth 2,700 152
British Telecommunications
ADR 900 72
Compania de Telecomunicaciones
de Chile ADR 425 $ 13
Frontier 7,700 185
Hong Kong Telecommunications
ADR 1,100 23
Nippon Telegraph &
Telephone (JPY) 9 77
SBC Communications 5,160 378
Telecom Corp. of New
Zealand ADR 800 31
Telecom Italia (ITL) 8,330 53
Telecom Italia Mobile (ITL) 15,000 69
Telefonica de Espana ADR 800 73
Telekom Malaysia (MYR) 3,000 9
Telemex (Class L) ADR 1,000 56
1,867
Electric Utilities 1.8%
Electrabel (BEF) 200 46
Endesa ADR 2,000 36
Empresa Nacional de Electricidad
Chile ADR 500 9
Entergy 1,370 41
FirstEnergy 10,792 313
Hong Kong Electric (HKD) 6,000 23
Niagara Mohawk * 6,200 65
PECO Energy 4,300 104
Texas Utilities 3,340 139
Unicom 8,300 255
VEBA (DEM) 1,300 89
1,120
Total Utilities 2,987
CONSUMER NONDURABLES 12.3%
Cosmetics 0.5%
Gillette 300 30
International Flavors &
Fragrances 4,400 227
Kao (JPY) 6,000 86
343
Beverages 0.8%
Anheuser-Busch 4,500 198
Diageo ADR 1,300 49
LVMH (FRF) 100 17
PepsiCo 6,700 244
508
Food Processing 2.6%
Cadbury Schweppes (GBP) 6,900 $ 70
Cadbury Schweppes ADR 500 21
CPC International 1,500 162
CSM (NLG) 1,000 44
Danisco (DKK) 900 50
Dean Foods 600 36
Eridania Beghin-Say (FRF) 400 63
General Mills 1,230 88
Heinz 1,000 51
Hershey Foods 500 31
Interstate Bakeries 1,400 52
McCormick 6,000 168
Nabisco Holdings (Class A) 1,600 77
Nestle (CHF) 110 165
Ralston Purina 2,280 212
Sara Lee 6,330 356
1,646
Hospital Supplies/Hospital Management 0.9%
Abbott Laboratories 600 39
Baxter International 900 45
Boston Scientific * 1,300 60
HealthSouth * 3,400 94
Medtronic 1,400 73
Smith & Nephew (GBP) 10,000 30
St. Jude Medical * 1,400 43
Tenet Healthcare * 2,000 66
Terumo (JPY) 4,000 59
United States Surgical 2,700 79
588
Pharmaceuticals 3.9%
American Home Products 5,140 393
Astra (Class B) (SEK) 1,333 22
Biogen * 600 22
Bristol-Myers Squibb 2,280 216
Eli Lilly 1,300 91
Gehe (DEM) 700 35
Glaxo Wellcome ADR 1,400 67
Johnson & Johnson 2,080 137
Merck 1,900 202
Novartis (CHF) 106 172
Pfizer 4,040 301
Pharmacia & Upjohn 3,217 118
Schering-Plough 2,000 124
SmithKline Beecham ADR 6,020 310
Takeda Chemical
Industries (JPY) 5,000 $ 142
Warner-Lambert 700 87
2,439
Health Care Services 0.3%
Altana AG (DEM) 600 41
United HealthCare 2,500 124
165
Miscellaneous Consumer Products 3.3%
Benetton Group (ITL) 2,080 34
Bridgestone (JPY) 3,000 65
Colgate-Palmolive 4,640 341
Kuraray (JPY) 6,000 50
Lion Nathan (NZD) 8,000 18
Mattel 2,800 104
Newell 1,500 64
Philip Morris 9,480 429
Procter & Gamble 1,000 80
Service Corp. International 3,000 111
Stanley Works 1,500 71
Textron 800 50
Tomkins (GBP) 4,000 19
Tomkins ADR 2,000 38
Unifi 4,400 179
Unilever N.V. ADR 2,000 125
UST 6,330 234
Yue Yuen Industrial (HKD) 25,000 53
2,065
Total Consumer Nondurables 7,754
CONSUMER SERVICES 5.8%
Restaurants 0.0%
Tricon Global Restaurants * 334 10
10
General Merchandisers 1.6%
Dayton Hudson 2,300 155
Fred Meyer * 1,500 55
J.C. Penney 700 42
JUSCO (JPY) 4,000 56
Marui (JPY) 2,000 31
Neiman-Marcus * 2,100 64
Pinault Printemps
Redoute (FRF) 200 107
Tesco (GBP) 10,053 83
TJX 2,300 $ 79
Wal-Mart 4,900 193
Warnaco Group (Class A) 3,800 119
984
Specialty Merchandisers 1.9%
American Stores 1,700 35
Christian Dior (FRF) 400 41
CVS 2,214 142
Federated Department
Stores * 1,800 78
General Nutrition * 2,300 78
Home Depot 1,350 80
Kohl's * 900 61
McKesson 100 11
Omron (JPY) * 4,000 63
Safeway * 2,600 164
Toys "R" Us * 5,100 160
Tupperware 10,200 284
1,197
Entertainment and Leisure 1.0%
Carnival (Class A) ADR 1,900 105
Disney 1,770 175
Hutchison Whampoa (HKD) 20,000 125
McDonald's 1,070 51
Reader's Digest (Class B) 7,820 191
Sharp (JPY) 2,000 14
661
Media and Communications 1.3%
Asatsu (JPY) 3,000 43
Elsevier (NLG) 4,000 65
R.R. Donnelley 5,900 220
Time Warner 2,000 124
Tribune 1,800 112
U S WEST Media * 2,800 81
Valassis Communications * 1,300 48
Vodafone ADR 1,840 133
826
Total Consumer Services 3,678
CONSUMER CYCLICALS 2.5%
Automobiles and Related 0.4%
Cycle & Carriage (SGD) 4,000 16
Honda ADR 1,500 111
Lucasvarity ADR 2,084 73
SPX 1,000 69
269
Building and Real Estate 0.8%
Cheung Kong
Holdings (HKD) 12,000 $ 79
City Developments (SGD) 5,000 23
Crescent Real Estate
Equities, REIT 1,300 51
DBS Land (SGD) 5,000 8
Federal Realty Investment
Trust, REIT 4,100 106
Patriot American
Hospitality, REIT 2,099 60
Simon DeBartolo
Group, REIT 2,596 85
Starwood Lodging, REIT 2,100 121
533
Miscellaneous Consumer Durables 1.3%
Black & Decker 300 12
Corning 8,900 330
Masco 1,700 86
Oce Van Der
Grinten NV (NLG) 300 33
Ricoh (JPY) 4,000 50
Sony (JPY) 1,000 89
Sony ADR 500 45
Whirlpool 2,700 149
794
Total Consumer Cyclicals 1,596
TECHNOLOGY 3.1%
Electronic Components 0.5%
ASM Lithography * 500 34
EMC * 1,100 30
Intel 1,300 91
Linear Technology 800 46
Maxim Integrated Products * 2,200 76
Motorola 800 46
323
Electronic Systems 0.5%
Hewlett-Packard 1,500 94
Honeywell 2,100 144
KLA Instruments * 300 11
Nokia ADR 1,200 84
333
Information Processing 0.7%
COMPAQ Computer 2,000 $ 113
Dell Computer * 600 51
Hitachi ADR 800 55
IBM 1,820 190
409
Office Automation 0.1%
Xerox 600 44
44
Specialized Computer 0.0%
Sun Microsystems * 700 28
28
Telecommunications Equipment 0.7%
Cisco Systems * 2,300 128
LM Ericsson (Class B) ADR 1,200 45
Lucent Technologies 400 32
MCI 2,100 90
Telecomunicacoes
Brasileiras ADR 700 81
WorldCom 2,300 70
446
Aerospace and Defense 0.6%
AlliedSignal 5,240 204
Boeing 1,300 64
Lockheed Martin 800 79
Raytheon 400 20
367
Total Technology 1,950
CAPITAL EQUIPMENT 2.3%
Electrical Equipment 1.5%
ABB Group (CHF) 50 63
Canon (JPY) 3,000 70
GE 6,560 481
Hubbell (Class B) 1,600 79
Matsushita Electric
Works (JPY) 3,000 26
Mitsubishi Electric (JPY) 7,000 18
Siemens (DEM) 500 29
Tyco International 4,014 181
947
Machinery 0.8%
Danaher 2,200 139
GKN (GBP) 3,500 72
Man (DEM) 200 $ 58
S I G Schweis (CHF) 20 55
Teleflex 3,200 121
Valmet (FIM) 2,000 27
472
Total Capital Equipment 1,419
BUSINESS SERVICES AND TRANSPORTATION 4.7%
Computer Service and Software 1.8%
Automatic Data Processing 2,140 131
BMC Software * 2,100 138
Electronic Data Systems 5,400 237
First Data 3,834 112
Galileo International 1,200 33
Microsoft * 1,060 137
National Data 900 32
Network Associates * 1,700 90
Oracle * 1,350 30
Parametric Technology * 1,500 71
SunGard Data Systems * 2,600 81
Synopsys * 1,400 50
1,142
Distribution Services 0.1%
JP Foodservice * 1,342 50
50
Environmental 0.1%
USA Waste Services * 2,100 82
82
Transportation Services 0.1%
Mitsubishi Heavy
Industries (JPY) 6,000 25
United Engineers (MYR) 4,000 3
28
Miscellaneous Business Services 1.6%
British Airport
Authorities (GBP) 5,200 42
Cendant * 4,400 151
Corporate Express * 2,650 34
H&R Block 9,600 430
Omnicom 1,600 68
Sime Darby (MYR) 6,000 6
Wallace Computer Services 1,200 47
Waste Management 8,000 220
998
Airlines 0.9%
AMR * 920 $ 118
Delta 3,600
429
KLM Royal Dutch
Airlines ADR 900 34
581
Railroads 0.1%
Burlington Northern
Santa Fe 700 65
Norfolk Southern 700 22
87
Total Business Services and
Transportation 2,968
ENERGY 4.1%
Energy Services 0.8%
BJ Services * 600 43
Camco International 400 25
Cooper Cameron * 1,200 73
Elf Aquitaine ADR 1,100 65
Halliburton 1,600 83
Johnson Electric
Holdings (HKD) 25,200 73
Schlumberger 1,380 111
TOTAL ADR 1,000 56
529
Exploration and Production 0.1%
Santos (AUD) 9,000 37
37
Integrated Petroleum - Domestic 1.7%
Atlantic Richfield 3,760 301
British Petroleum ADR 2,840 226
Occidental Petroleum 7,700 226
Unocal 2,930 114
USX-Marathon 6,460 218
1,085
Integrated Petroleum - International 1.5%
ENI S.P.A. ADR 1,100 63
Exxon 3,320 203
Mobil 3,660 264
Repsol ADR 900 38
Royal Dutch Petroleum
ADR 1,800 97
Shell Transport &
Trading ADR 1,800 79
Texaco 3,340 $ 182
926
Total Energy 2,577
PROCESS INDUSTRIES 3.9%
Diversified Chemicals 1.0%
Dow Chemical 3,900 396
DuPont 2,200 132
Hercules 1,400 70
Olin 600 28
626
Specialty Chemicals 1.8%
3M 470 39
A. Schulman 5,100 129
Akzo Nobel (NLG) 400 69
BASF AG (DEM) 2,200 78
Bayer AG (DEM) 1,500 55
Great Lakes Chemical 7,150 321
Pall 15,300 316
Sigma Aldrich 700 28
Sumitomo Chemicals (JPY) 7,000 16
Technip (FRF) 700 74
1,125
Paper and Paper Products 0.8%
Dai Nippon Printing (JPY) 3,000 56
Fort James 3,200 122
Kimberly-Clark 6,600 326
504
Forest Products 0.1%
International Paper 1,500 65
65
Building and Construction 0.2%
Blue Circle Industries (GBP) 12,143 68
Holderbank Financiere (CHF) 80 65
133
Total Process Industries 2,453
BASIC MATERIALS 0.7%
Metals 0.5%
Alcoa 580 41
Anglo American
Platinum (ZAR) 5,000 67
Nucor 1,000 48
Reynolds Metals 2,400 144
300
Mining 0.1%
LONRHO (GBP) 18,000 $ 28
Newmont Mining 1,700 50
Rio Tinto (AUD) 2,000 23
101
Miscellaneous Materials 0.1%
Crown Cork & Seal 1,100 55
Malayan Cement (MYR) 12,500 9
64
Total Basic Materials 465
MISCELLANEOUS COMMON STOCKS 0.7%
Conglomerates 0.1%
ORKLA (Class A) (NOK) 500 43
43
Other Miscellaneous Common Stocks 0.6%
SPDR Trust 4,100 397
397
Total Miscellaneous Common Stocks 440
FOREIGN 0.3%
Europe 0.2%
AXA Colonia
Konzern (DEM) 500 48
Svenska Cellulosa (SEK) 3,000 67
115
Other Foreign 0.1%
Bobst AG (CHF) 50 74
74
Total Foreign 189
Total Common Stocks (Cost $29,046) 35,618
Corporate Bonds 16.3%
AEI Holding, Sr. Notes, (144a)
10.00%, 11/15/07 $ 100,000 103
Agricultural Minerals, Sr. Notes
10.75%, 9/30/03 50,000 54
Agrium, 7.00%, 2/1/04 100,000 103
Allied Waste, Sr. Sub. Notes
10.25%, 12/1/06 100,000 110
AMC Entertainment, Sr. Sub. Notes
9.50%, 3/15/09 75,000 77
American Radio Systems
Sr. Sub. Notes
9.00%, 2/1/06 100,000 106
American Safety Razor, Sr. Notes
9.875%, 8/1/05 $ 25,000 $ 27
American Standard, Deb.
9.25%, 12/1/16 64,000 66
Amerigas Partners L.P., Sr. Notes
10.125%, 4/15/07 50,000 54
Ameriserve Food, Sr. Sub. Notes
(144a) 10.125%
7/15/07 100,000 105
Archibald Candy, Sr. Secured Notes
10.25%, 7/1/04 100,000 104
Aurora Foods, Sr. Sub. Notes
9.875%, 2/15/07 100,000 105
B E Aerospace, Sr. Sub. Notes
9.875%, 2/1/06 50,000 53
B.F. Saul, REIT, Sr. Secured Notes
11.625%, 4/1/02 160,000 170
Boeing, 6.35%, 6/15/03 30,000 30
Boise Cascade, Deb.
7.35%, 2/1/16 210,000 210
Bway, Sr. Sub. Notes, (144a)
10.25%, 4/15/07 70,000 76
Celestica International
Gtd. Sr. Sub. Notes
10.50%, 12/31/06 50,000 53
Chief Auto Parts, Sr. Notes
10.50%, 5/15/05 50,000 50
Citicorp, Sub. Notes
7.75%, 6/15/06 50,000 54
Coach USA, Gtd. Sr. Sub. Notes
9.375%, 7/1/07 100,000 102
Coca-Cola Bottling Group
Sr. Sub. Notes
9.00%, 11/15/03 50,000 51
Coinmach, Sr. Sub. Notes
11.75%, 11/15/05 50,000 56
Commonwealth Edison, Deb.
6.40%, 10/15/05 75,000 73
Communications & Power Industries
Sr. Sub. Notes
12.00%, 8/1/05 100,000 112
Container Corporation of America
Sr. Notes
9.75%, 4/1/03 50,000 54
Gtd.
10.75%, 5/1/02 25,000 27
Continental Airlines
6.94%, 10/15/13 $ 196,078 $ 202
Dan River, Sr. Sub. Notes
10.125%, 12/15/03 100,000 106
Delta Air Lines
MTN, 8.625%
6/15/04 60,000 67
Delta Mills, Sr. Notes
(144a) 9.625%
9/1/07 100,000 102
Doane Products, Sr. Notes
10.625%, 3/1/06 100,000 108
Dyersburg, 9.75%, 9/1/07 100,000 105
Dyncorp, Sr. Sub. Notes
9.50%, 3/1/07 75,000 77
Energy Corporation of America
Sr. Sub. Notes
9.50%, 5/15/07 100,000 100
Enhance Financial Services, Deb.
6.75%, 3/1/03 200,000 201
Fairchild Semiconductor
Sr. Sub. Notes
10.125%, 3/15/07 100,000 105
Fairfax Financial Holdings
8.25%, 10/1/15 250,000 275
Falcon Building Products
Gtd. Sr. Sub. Notes
9.50%, 6/15/07 75,000 77
Ferrellgas, Sr. Notes
10.00%, 8/1/01 50,000 53
First Federal Financial
11.75%, 10/1/04 50,000 56
First USA Bank, Sr. Notes
5.85%, 2/22/01 200,000 198
Frontiervision, Sr. Sub. Notes
11.00%, 10/15/06 50,000 56
Fundy Cable, Sr. Secured
2nd Priority Notes
11.00%, 11/15/05 100,000 107
GMAC, 7.125%, 6/1/99 25,000 25
Grand Casino, 1st Mtg. Notes
10.125%, 12/1/03 100,000 108
Grand Metropolitan
Investment, Gtd.
9.00%, 8/15/11 200,000 241
Hawk, Sr. Notes
10.25%, 12/1/03 $ 50,000 $ 53
Haynes International
Sr. Notes
11.625%, 9/1/04 50,000 57
Herff Jones, Sr. Sub. Notes
11.00%, 8/15/05 25,000 27
HMC Acquisition Properties
Sr. Notes
9.00%, 12/15/07 25,000 26
Host Marriott Travel Plazas
Sr. Notes
9.50%, 5/15/05 50,000 53
International Logistics
Sr. Notes, (144a)
9.75%, 10/15/07 100,000 99
International Wire
Sr. Sub. Notes, (144a)
11.75%, 6/1/05 75,000 82
Intertek Finance, Sr. Sub. Notes
10.25%, 11/1/06 50,000 53
Iron Mountain, Sr. Sub. Notes
8.75%, 9/30/09 100,000 103
Keebler, Sr. Sub. Notes
10.75%, 7/1/06 50,000 56
Kelley Oil & Gas, Sr. Sub. Notes
10.375%, 10/15/06 75,000 80
Lenfest Communications
Sr. Notes
8.375%, 11/1/05 20,000 21
Lucent Technologies
7.25%, 7/15/06 200,000 212
Maxxam Group Holdings
Sr. Notes
11.25%, 8/1/03 50,000 53
May Department Stores
Gtd. Deb. Notes
8.30%, 7/15/26 500,000 533
Northland Cable Television
Sr. Sub. Notes, (144a)
10.25%, 11/15/07 100,000 105
Northrop Grumman
7.00%, 3/1/06 200,000 206
Ocwen Financial, Sr. Notes
11.875%, 10/1/03 50,000 56
Owens & Minor, Sr. Sub. Notes
10.875%, 6/1/06 $ 25,000 $ 28
Pennsylvania Power and Light
1st Mtg. Notes
6.50%, 4/1/05 50,000 50
Plastic Containers, Sr. Secured Notes
10.00%, 12/15/06 75,000 81
Pride Petroleum Services, Sr. Notes
9.375%, 5/1/07 75,000 81
Public Service Electric & Gas
1st Ref. Mtg. Notes
7.00%, 9/1/24 200,000 197
Mtg. Bonds
8.875%, 6/1/03 100,000 111
Quest Diagnostics
Gtd. Sr. Sub. Notes
10.75%, 12/15/06 50,000 55
Revlon Consumer Products
Sr. Sub. Notes
10.50%, 2/15/03 50,000 53
Rio Hotel & Casino
Gtd. Sr. Sub. Notes
9.50%, 4/15/07 75,000 80
Safelite Glass, Sr. Sub. Notes, (144a)
9.875%, 12/15/06 50,000 53
Scotland International Finance
Sub. Notes, (144a)
6.50%, 2/15/11 100,000 98
Six Flags Theme Parks
Sr. Sub. Disc. Notes
STEP, Zero Coupon
6/15/05 125,000 133
Specialty Retailers, Sr. Notes
8.50%, 7/15/05 75,000 76
Sprint Spectrum, Sr. Notes
11.00%, 8/15/06 50,000 56
Synthetic Industries
Sr. Sub. Notes
9.25%, 2/15/07 50,000 53
Tele-Communications, Deb.
8.75%, 2/15/23 100,000 106
Teleport Communications
Sr. Notes
9.875%, 7/1/06 50,000 56
TeleWest, Sr. Disc. Deb.
STEP, Zero Coupon
10/1/07 $ 75,000 $ 58
Tenet Healthcare, Sr. Sub. Notes
8.625%, 1/15/07 50,000 52
Texas Utilities, 1st Mtg. Bonds
7.875%, 4/1/24 100,000 105
Time Warner Entertainment, Deb.
8.375%, 3/15/23 75,000 86
Trump Atlantic City
1st Mtg. Notes
11.25%, 5/1/06 25,000 25
United Artists Theatre Circuit, PTC
9.30%, 7/1/15 48,706 49
US Can, Sr. Gtd. Notes
10.125%, 10/15/06 50,000 53
USF&G Capital II, Gtd. Notes
8.47%, 1/10/27 900,000 955
Vencor, 8.625%, 7/15/07 100,000 100
Vesta Insurance Group
Deb. Notes
8.75%, 7/15/25 500,000 587
Viasystems, Sr. Sub. Notes, (144a)
9.75%, 6/1/07 75,000 77
Wal-Mart Stores, Deb.
7.25%, 6/1/13 150,000 161
Westpoint Stevens
Sr. Sub. Deb. Notes
9.375%, 12/15/05 75,000 79
Windy Hill Pet Food
Sr. Sub. Notes
9.75%, 5/15/07 100,000 104
Total Corporate Bonds (Cost $9,876) 10,287
Foreign Government Obligations/Agencies 2.4%
European Investment Bank
3.00%, 9/20/06 JPY 40,000,000 334
4.625%, 2/26/03 JPY 20,000,000 178
Federal Republic of Germany
6.00%, 7/4/07 DEM 330,000 191
6.50%, 7/15/03 DEM 50,000 30
8.375%, 5/21/01 DEM 145,000 90
Government of Canada
8.50%, 4/1/02 CAD 147,000 115
Government of France
5.50%, 4/25/07 FRF 1,140,000 $ 192
8.50%, 11/25/02 FRF 492,000 95
Government of Japan
4.50%, 6/20/03 + JPY 4,000,000 35
Republic of Italy
8.50%, 8/1/04 ITL 40,000,000 26
United Kingdom Treasury Notes
7.50%, 12/7/06 GBP 64,000 113
8.00%, 6/10/03 GBP 31,000 54
8.50%, 12/7/05 GBP 10,000 19
Total Foreign Government Obligations/
Agencies (Cost $1,531) 1,472
U.S. Government Mortgage-Backed
Securities 11.8%
Federal National Mortgage Assn.
6.50%, 1/1/26 $ 263,683 261
Government National Mortgage Assn.
I
6.00%
12/15/23 - 4/15/26 2,141,094 2,080
6.50%
4/15/24 - 4/15/26 1,843,091 1,827
7.00%
5/15/23 - 12/15/27 1,121,273 1,133
7.50%
5/15/24 - 11/15/25 466,717 480
8.00%
10/15/25 - 6/15/26 551,872 574
8.50%, 12/15/24 69,545 74
11.50%, 11/15/19 23,949 27
II
7.00%, 9/20/27 986,886 992
Total U.S. Government Mortgage-
Backed Securities (Cost $7,236) 7,448
U.S. Government Obligations/Agencies 8.7%
Cooperative Utility Trust
9.50%, 2/15/17 100,000 106
Tennessee Valley Authority
5.88%, 4/1/36 500,000 517
6.235%, 7/15/45 1,000,000 1,033
8.25%, 4/15/42 160,000 195
U.S. Treasury Bonds
6.75%, 8/15/26 $ 3,300,000 $ 3,633
Total U.S. Government Obligations/
Agencies (Cost $5,171) 5,484
Short-Term Investments 3.8%
Money Market Funds 3.8%
Reserve Investment Fund
5.84% # 2,401,355 2,401
Total Short-Term Investments
(Cost $2,401) 2,401
Total Investments in Securities
99.5% of Net Assets (Cost $55,261) $ 62,710
Other Assets Less Liabilities 295
NET ASSETS $ 63,005
_________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 11
Accumulated net realized gain/loss -
net of distributions 151
Net unrealized gain (loss) 7,447
Paid-in-capital applicable to 4,163,460
shares of $0.0001 value capital
stock par outstanding; 1,000,000,000
shares of the corporation authorized 55,396
NET ASSETS $ 63,005
_________
NET ASSET VALUE PER SHARE $ 15.13
_________
* Non-income producing
+ Securities contain some restrictions as to public
resale-total of such securities at year-end amounts to
0.06% of net assets.
# Seven-day yield
ADR American Depository Receipt
MTN Medium term note
PTC Pass-through Certificate
REIT Real Estate Investment Trust
STEP Stepped coupon note for which the interest rate
will adjust on specified future date(s)
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 year-end amounts to 1.43% of net
assets.
AUD Australian dollar
BEF Belgian franc
CAD Canadian dollar
CHF Swiss franc
DEM German deutschemark
DKK Danish krone
FIM Finnish mark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
ITL Italian lira
JPY Japanese yen
MYR Malaysian ringgit
NLG Dutch guilder
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
ZAR South African rand
L Local registered shares
The accompanying notes are an integral part of these financial
statements.
Statement of Operations
T. Rowe Price Personal Strategy Balanced Portfolio
In thousands
Year
Ended
12/31/97
Investment Income
Income
Interest $ 1,522
Dividend 533
Other 10
Total income 2,065
Expenses
Investment management
and administrative 435
Net investment income 1,630
Realized and Unrealized
Gain (Loss)
Net realized gain (loss)
Securities 1,046
Foreign currency transactions (7)
Net realized gain (loss) 1,039
Change in net unrealized gain
or loss
Securities 5,345
Other assets and liabilities
denominated in foreign currencies (2)
Change in net unrealized gain or loss 5,343
Net realized and unrealized gain (loss) 6,382
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 8,012
_________
The accompanying notes are an integral part of these financial
statements.
Statement of Changes in Net Assets
T. Rowe Price Personal Strategy Balanced Portfolio
In thousands
Year
Ended
12/31/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,630 $ 596
Net realized gain (loss) 1,039 671
Change in net unrealized
gain or loss 5,343 1,592
Increase (decrease) in net
assets from operations 8,012 2,859
Distributions to shareholders
Net investment income (1,619) (679)
Net realized gain (951) (584)
Decrease in net assets
from distributions (2,570) (1,263)
Capital share transactions*
Shares sold 28,650 29,528
Distributions reinvested 2,570 1,263
Shares redeemed (6,920) (4,849)
Increase (decrease) in net
assets from capital
share transactions 24,300 25,942
Net equalization - 100
Net Assets
Increase (decrease) during period 29,742 27,638
Beginning of period 33,263 5,625
End of period $ 63,005 $ 33,263
_____________________
*Share information
Shares sold 1,996 2,308
Distributions reinvested 174 96
Shares redeemed (482) (382)
Increase (decrease) in
shares outstanding 1,688 2,022
The accompanying notes are an integral part of these financial
statements.
Notes to Financial Statements
T. Rowe Price Personal Strategy Balanced Portfolio
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc. (the corporation) is
registered under the Investment Company Act of 1940. The
Personal Strategy Balanced Portfolio (the fund), a diversified,
open-end management investment company, is one of the portfolios
established by the corporation and commenced operations on
December 30, 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.
The accompanying financial statements are prepared in accordance
with generally accepted accounting principles for the investment
company industry; these principles may require the use of
estimates by fund management.
Valuation Equity securities listed or regularly traded on a
securities exchange 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. 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.
Investments in mutual funds are valued at the closing net asset
value per share of the mutual fund on the day of valuation.
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, other than mortgage-backed securities, are amortized
for both financial reporting and tax purposes. Premiums and
discounts on mortgage-backed securities are recognized upon
principal repayment as gain or loss for financial reporting
purposes and as ordinary income for 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
Purchases and sales of portfolio securities, other than
short-term and U.S. government securities, aggregated
$30,212,000 and $12,556,000, respectively, for the year ended
December 31, 1997. Purchases and sales of U.S. government
securities aggregated $7,788,000 and $2,516,000, respectively,
for the year ended December 31, 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 December 31, 1997, the aggregate cost of investments for
federal income tax and financial reporting purposes was
$55,261,000, and net unrealized gain aggregated $7,449,000, of
which $8,467,000 related to appreciated investments and
$1,018,000 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 $36,000 was
payable at December 31, 1997. The fee, computed daily and paid
monthly, is equal to 0.90% 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.
The fund may invest in the Reserve Investment Fund and
Government Reserve Investment Fund (collectively, the Reserve
Funds), open-end management investment companies managed by T.
Rowe Price Associates, Inc. The Reserve Funds are offered as
cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not
available to the public. The Reserve Funds pay no investment
management fees. Distributions from the Reserve Funds to the
fund for the year ended December 31, 1997, totaled $36,000 and
are reflected as interest income in the accompanying Statement
of Operations.
During the year ended December 31, 1997, the fund, in the
ordinary course of business, placed security purchase and sale
orders aggregating $768,000 with certain affiliates of the
manager and paid commissions of $3,000 related thereto.
Tax Information (Unaudited) for the Tax Year Ended 12/31/97
We are providing this information as required by the Internal
Revenue Code. The amounts shown may differ from those elsewhere
in this report because of differences between tax and financial
reporting requirements.
The fund's distributions to shareholders included:
o $284,000 from short-term capital gains, and
o $667,000 from long-term capital gains; of which $308,000 was
subject to the 20% rate gains category.
For corporate shareholders, 19% of the fund's distributed income
and short-term capital gains qualified for the
dividends-received deduction.
Report of Independent Accountants
To the Board of Directors of T. Rowe Price Equity Series, Inc.
and Shareholders of the Personal Strategy Balanced 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 Personal Strategy Balanced
Portfolio (one of the portfolios constituting T. Rowe Price
Equity Series, Inc., hereafter referred to as the "Fund") at
December 31, 1997, 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, 1997 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 21, 1998
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
TRP655 (12/97)
K15-053 12/31/97
