T. Rowe Price
Equity Income Portfolio
Semiannual Report
June 30, 1999
Dear Investor
The broad stock market and the Equity Income Portfolio advanced strongly during
the first half of 1999. Continued corporate earnings growth and a healthier
global outlook, particularly among some of last year's weaker economies,
combined to offset the negative effects of rising interest rates over the last
six months. Good overall economic news, high investor confidence, and trust in
the Federal Reserve's ability to take the proper preemptive action against
potentially higher inflation provided solid support for equities.
Performance Comparison
Periods Ended 6/30/99 6 Months 12 Months
- --------------------------------------------------------------------------------
Equity Income Portfolio 12.36% 15.25%
S&P 500 12.38 22.76
Lipper Variable Annuity
Underlying Equity Income
Funds Average 10.75 15.82
For the six months ended June 30, the fund posted a strong 12.36% return,
in line with the unmanaged Standard & Poor's 500 Stock Index and
comfortably exceeding the Lipper Variable Annuity Underlying Equity Income
Funds Average. We are pleased with this performance, particularly
considering the conservative nature of the fund's investment approach. The
last three months were particularly beneficial as value stocks, which make
up the majority of fund holdings, rebounded nicely.
For the last 12 months, the fund provided a return of 15.25%, close to that
of the universe of equity income funds but behind the S&P 500. The
Portfolio provided good downside protection during last year's turbulent
third quarter and posted sound results in the first half of 1999 when
investors shifted their attention to the cyclical and value stocks in which
we invest.
DIVIDEND DISTRIBUTIONS
Your Board of Directors declared a second quarter income dividend of $0.10
per share, bringing your 1999 income distribution total to $0.19 per share.
This distribution was paid on June 29 to shareholders of record on June 25.
PORTFOLIO STRATEGY
The strong stock market environment during the first half of 1999 was
profitable for many of our holdings. In our annual report, we discussed
many of last year's market trends that were not particularly favorable for
our investment approach. However, during the past six months new trends
came into play that benefited fund investments. While value characteristics
such as low price/earnings ratios and high dividend yields were penalized
in 1998, they returned to favor in the most recent period. Companies with
exposure to the cyclical nature of the economy or to commodities suddenly
sprang to life largely because of the expectation of an upturn in
international economies that had suffered last year. The share price of
Georgia-Pacific advanced to levels where we felt the upside potential was
somewhat limited. We eliminated that position and used the proceeds to take
advantage of new investment opportunities.
Several stocks that recently did well, such as Tyco International, AMP, and
AT&T, had been successful for us over the last several years, and we sold
either all or part of these positions when their prices rose to less
appealing levels. Our largest sale in the first half was AMP, which was
acquired by Tyco at a substantial premium to our average cost.
Among these new investments are Lockheed Martin, Campbell, Hershey Foods,
Honeywell, Fort James, and Merck, all of which are successful enterprises
that have hit what we believe to be temporary stumbling blocks. Their share
prices have plummeted to attractive levels in our view, and their
managements are working vigorously to improve earnings performance. In the
case of Honeywell, we benefited more quickly than we anticipated when
AlliedSignal announced its intention in June to acquire Honeywell at a
significant premium to our purchase price.
At the end of June, energy and utilities stocks accounted for 28% of
portfolio assets, consumer nondurables 17%, financial stocks 16%, and 15%
of assets were in capital equipment, process industries, and basic
materials. The balance was diversified among several other industries. The
narrow breadth of the market's advance over the past few years created a
large universe of out-of-favor stocks with appealing valutions: in
particular, low price/earnings ratios and relatively high dividend yields.
The Financial Profile table (at right) demonstrates the degree to which the
stocks we buy have below-average valuations. Our preference for
high-yielding, lower P/E companies is evident and has been a consistent
cornerstone of our investment approach since the fund commenced operations.
Given the wide variations in performance among companies and sectors over
the last two years, there is plenty of work to be done as we investigate
new investment opportunities on your behalf.
SUMMARY AND OUTLOOK
So far this year, we have been pleasantly surprised by the durability of
the stock market's strength and resilience, particularly in the face of
rising interest rates. We believe it will be difficult, but not impossible,
for stocks to post such robust returns in the second half of 1999. Given
historically high stock valuations and unrealistic investor expectations,
we would not be surprised to see a bit of turbulence ahead. Nevertheless,
whatever happens over the short term, our investment approach will remain
constant. We will continue to emphasize investments in sound companies that
may be out of favor in the short run but offer an attractive combination of
good upside potential and relatively limited downside risk.
As always, we appreciate your confidence in T. Rowe Price and your
continued support.
Respectfully submitted,
Brian C. Rogers
President and Chairman of the
Investment Advisory Committee
July 22, 1999
Financial Profile
Equity Income
As of 6/30/99 Portfolio S&P 500
- --------------------------------------------------------------------------------
Current Yield 2.4% 1.2%
Price/Book Ratio 3.8X 6.6X
Price/Earnings Ratio
(1999 estimated EPS) 19.3X 27.9X
Historical Beta
(based on monthly
returns for 5 years) 0.65 1.00
Portfolio Highlights
Twenty-Five Largest Holdings
Percent of
Net Assets
6/30/99
- --------------------------------------------------------------------------------
SBC Communications 2.2%
Mellon Bank 1.8
ALLTEL 1.8
BP Amoco 1.6
Exxon 1.6
GTE 1.5
American Home Products 1.5
International Paper 1.5
Atlantic Richfield 1.4
Pharmacia & Upjohn 1.4
General Mills 1.4
Dow Chemical 1.4
Mobil 1.3
Chevron 1.3
Citigroup 1.3
Union Pacific 1.3
Kimberly-Clark 1.2
Texaco 1.2
Bell Atlantic 1.1
J.P. Morgan 1.1
DuPont 1.1
3M 1.1
Hewlett-Packard 1.1
Norfolk Southern 1.1
Philip Morris 1.1
- --------------------------------------------------------------------------------
Total 34.4%
- --------------------------------------------------------------------------------
Portfolio Highlights
Major Portfolio Changes
Six Months Ended 6/30/99
Listed in descending order of size
LARGEST PURCHASES (10)
- --------------------------------------------------------------------------------
Lockheed Martin*
Hershey Foods*
Campbell*
Honeywell*
Fort James*
Chubb
Abbott Laboratories
Merck*
Reynolds Metals
Eastman Kodak
LARGEST SALES (10)
- --------------------------------------------------------------------------------
AMP**
BP Amoco
First Union**
AT&T
Georgia-Pacific**
Bausch & Lomb**
Tomkins**
GM
Waste Management
Tyco International**
- --------------------------------------------------------------------------------
* 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. An index
return does not reflect expenses, which have been deducted from the fund's
return.
Equity Income Portfolio
Lipper Variable
Equity S&P 500 Annuity Underlying
Income Stock Equity Income
Portfolio Index Funds Average
3/31/94 10,000 10,000 10,000
6/94 10,170 10,040 10,080
6/95 12,410 12,660 12,130
6/96 15,540 15,950 14,800
6/97 19,820 21,490 19,240
6/98 23,650 27,970 23,660
6/99 27,260 34,330 26,940
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 6/30/99
Since Inception
1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
15.25% 20.61% 21.80% 21.05% 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
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 19.25 $ 18.59 $ 15.26 $ 13.21 $ 10.42 $ 10.00
Investment activities
Net investment
income 0.19 0.39 0.40 0.42 0.44 0.30
Net realized
and unrealized
gain (loss) 2.17 1.27 3.94 2.13 3.05 0.41
Total from
investment
activities 2.36 1.66 4.34 2.55 3.49 0.71
Distributions
Net investment
income (0.19) (0.39) (0.40) (0.42) (0.44) (0.29)
Net realized
gain (0.07) (0.61) (0.61) (0.08) (0.26) --
Total
distributions (0.26) (1.00) (1.01) (0.50) (0.70) (0.29)
NET ASSET VALUE
End of period $ 21.35 $ 19.25 $ 18.59 $ 15.26 $ 13.21 $ 10.42
---------------------------------------------------------
Ratios/Supplemental Data
Total
return(diamond) 12.36% 9.07% 28.85% 19.56% 34.76% 7.15%
Ratio of
total expenses
to average
net assets 0.85%! 0.85% 0.85% 0.85% 0.85% 0.85%!
Ratio of net
investment income
to average
net assets 1.93%! 2.15% 2.56% 2.94% 3.61% 3.88%!
Portfolio
turnover rate 32.7%! 18.2% 20.5% 17.4% 10.1% 21.3%!
Net assets,
end of period
(in thousands) $ 615,509 $526,952 $344,724 $103,751 $ 14,658 $ 2,191
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
! Annualized.
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price Equity Income Portfolio
June 30, 1999 (Unaudited)
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS 95.2%
FINANCIAL 15.5%
Bank and Trust 8.2%
Bank of America 52,100 $ 3,820
Bank One 90,127 5,368
BankBoston 66,800 3,415
Chase Manhattan 52,608 4,557
Fleet Financial Group 107,000 4,748
J. P. Morgan 48,900 6,871
KeyCorp 42,300 1,359
Mellon Bank 308,600 11,225
Mercantile Bankshares 71,150 2,515
National City 43,900 2,875
Wells Fargo 97,060 4,149
50,902
Insurance 5.0%
American General 80,900 6,098
Chubb 51,200 3,558
Lincoln National 67,400 3,526
SAFECO 116,800 5,154
St. Paul Companies 169,576 5,395
Transamerica 58,100 4,357
XL Capital (Class A) 45,000 2,543
30,631
Financial Services 2.3%
Citigroup 166,948 7,930
Fannie Mae 89,800 6,140
14,070
Total Financial 95,603
UTILITIES 14.3%
Telephone Services 9.2%
ALLTEL 151,300 10,818
AT&T 53,400 2,981
BCE ADR 82,800 4,083
Bell Atlantic 106,800 6,982
BellSouth 46,000 2,156
GTE 124,300 9,416
SBC Communications 232,468 13,483
Telebras ADR 35,900 2
Telebras ADR 35,900 3,238
U.S. West 59,250 3,481
56,640
Electric Utilities 5.1%
Constellation Energy Group 48,400 $ 1,434
DQE 78,912 3,166
Duke Energy 71,900 3,910
Entergy 73,600 2,300
FirstEnergy 128,920 3,996
Niagara Mohawk 79,100 1,270
PacifiCorp 138,600 2,547
Reliant Energy 94,900 2,622
Southern 153,600 4,070
Teco Energy 74,500 1,695
Unicom 105,100 4,053
31,063
Total Utilities 87,703
CONSUMER NONDURABLES 17.3%
Cosmetics 1.0%
International Flavors &
Fragrances 141,700 6,288
6,288
Beverages 2.0%
Anheuser-Busch 89,400 6,342
Brown-Forman (Class B) 69,500 4,531
PepsiCo 42,400 1,640
12,513
Food Processing 5.3%
Campbell 74,900 3,473
General Mills 107,000 8,600
Heinz 86,700 4,346
Hershey Foods 60,600 3,598
Kellogg 94,900 3,132
McCormick 126,100 3,980
Quaker Oats 75,300 4,998
32,127
Hospital Supplies/Hospital Management 1.0%
Abbott Laboratories 87,000 3,958
Smith & Nephew (GBP) 745,100 2,255
6,213
Pharmaceuticals 3.4%
American Home Products 162,700 9,355
Merck 34,800 2,575
Pharmacia & Upjohn 153,892 8,743
20,673
Miscellaneous Consumer Products 4.6%
Armstrong World 76,700 $ 4,434
Fortune Brands 76,200 3,153
Philip Morris 161,900 6,506
PPG Industries 54,500 3,219
RJ Reynolds Tobacco * 39,066 1,231
RJR Nabisco 117,200 2,293
Stanley Works 79,800 2,568
UST 173,800 5,084
28,488
Total Consumer Nondurables 106,302
CONSUMER SERVICES 5.2%
General Merchandisers 1.0%
J.C. Penney 72,900 3,540
May Department Stores 63,600 2,600
6,140
Specialty Merchandisers 0.8%
Toys "R" Us * 132,600 2,743
Tupperware 77,600 1,979
4,722
Entertainment and Leisure 1.0%
Disney 43,300 1,334
Hilton 117,700 1,670
Reader's Digest (Class A) 85,800 3,410
6,414
Media and Communications 2.4%
Dow Jones 66,800 3,545
Dun & Bradstreet 90,200 3,196
Knight-Ridder 91,000 4,999
R.R. Donnelley 88,600 3,284
15,024
Total Consumer Services 32,300
CONSUMER CYCLICALS 5.5%
Automobiles and Related 1.6%
Delphi Automotive Systems 3,814 71
Genuine Parts 130,650 4,573
GM 33,500 2,211
TRW 52,400 2,875
9,730
Building and Real Estate 2.1%
Crescent Real Estate
Equities, REIT 86,700 $ 2,059
Rouse 61,000 1,548
Simon DeBartolo
Group, REIT 151,036 3,832
Starwood Hotels &
Resorts, REIT 178,605 5,459
12,898
Miscellaneous Consumer Durables 1.8%
Eastman Kodak 94,200 6,382
Whirlpool 65,500 4,847
11,229
Total Consumer Cyclicals 33,857
TECHNOLOGY 4.0%
Electronic Systems 1.7%
Hewlett-Packard 66,100 6,643
Honeywell 33,100 3,836
10,479
Aerospace and Defense 2.0%
AlliedSignal 78,800 4,964
Boeing 85,200 3,765
Lockheed Martin 103,300 3,848
12,577
Information Processing 0.3%
COMPAQ Computer 65,200 1,544
1,544
Total Technology 24,600
CAPITAL EQUIPMENT 1.8%
Electrical Equipment 1.2%
GE 39,100 4,418
Hubbell (Class B) 71,400 3,240
7,658
Machinery 0.6%
Cooper Industries 66,567 3,462
3,462
Total Capital Equipment 11,120
BUSINESS SERVICES AND TRANSPORTATION 5.0%
Transportation Services 0.1%
Alexander & Baldwin 38,950 $ 864
864
Miscellaneous Business Services 2.1%
Browning-Ferris 132,800 5,710
GATX 46,400 1,766
H&R Block 78,800 3,940
Waste Management 23,772 1,278
12,694
Railroads 2.8%
Burlington Northern
Santa Fe 94,000 2,914
Norfolk Southern 217,000 6,537
Union Pacific 135,400 7,896
17,347
Total Business Services and Transportation 30,905
ENERGY 13.4%
Energy Services 1.3%
Baker Hughes 178,600 5,983
Witco 119,300 2,386
8,369
Integrated Petroleum - Domestic 3.2%
Amerada Hess 96,300 5,730
Atlantic Richfield 105,900 8,849
Phillips Petroleum 45,600 2,294
USX-Marathon 86,100 2,804
19,677
Integrated Petroleum - International 8.1%
BP Amoco ADR 93,574 10,153
Chevron 84,650 8,058
Exxon 128,200 9,887
Mobil 81,700 8,088
Royal Dutch Petroleum ADR 105,800 6,374
Texaco 113,800 7,113
49,673
Exploration & Production 0.8%
Unocal 118,400 4,692
4,692
Total Energy 82,411
PROCESS INDUSTRIES 11.1%
Diversified Chemicals 3.7%
Arch Chemicals 26,450 $ 643
Dow Chemical 66,300 8,412
DuPont 99,200 6,777
Hercules 144,800 5,692
Olin 76,700 1,011
22,535
Specialty Chemicals 3.6%
3M 77,500 6,738
Great Lakes Chemical 92,900 4,279
Imperial Chemical ADR 58,800 2,337
Nalco Chemical 94,400 4,897
Pall 184,100 4,085
22,336
Paper and Paper Products 2.3%
Consolidated Papers 110,900 2,967
Fort James 95,300 3,609
Kimberly-Clark 131,400 7,490
14,066
Forest Products 1.5%
International Paper 181,553 9,169
9,169
Total Process Industries 68,106
BASIC MATERIALS 2.0%
Metals 1.6%
Inco 139,300 2,507
Phelps Dodge 42,200 2,614
Reynolds Metals 79,400 4,685
9,806
Mining 0.4%
Newmont Mining 123,249 2,449
2,449
Total Basic Materials 12,255
Miscellaneous Common Stocks 0.1% 876
Total Common Stocks (Cost $485,538) 586,038
U.S. Government Obligations/Agencies 0.5%
U.S. Treasury Bonds
6.00%, 2/15/26 $ 500,000 487
6.25%, 8/15/23 20,000 20
U.S. Treasury Notes
5.625%, 2/15/06 $ 250,000 $ 247
5.75%, 8/15/03 400,000 400
5.875%
11/15/99 - 2/15/04 920,000 923
6.50%, 5/31/01 700,000 712
7.00%, 7/15/06 400,000 424
Total U.S. Government Obligations
(Cost $3,117) 3,213
Short-Term Investments 3.9%
Money Market Funds 3.9%
Reserve Investment Fund
5.05% # 23,679,211 23,679
Total Short-Term Investments
(Cost $23,679) 23,679
Total Investments in Securities
99.6% of Net Assets (Cost $512,334) $ 612,930
Other Assets Less Liabilities 2,579
NET ASSETS $ 615,509
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 58
Accumulated net realized gain/loss -
net of distributions 17,087
Net unrealized gain (loss) 100,596
Paid-in-capital applicable to 28,830,983
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares of the
Corporation authorized 497,768
NET ASSETS $ 615,509
----------
NET ASSET VALUE PER SHARE $ 21.35
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
REIT Real Estate Investment Trust
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
6/30/99
Investment Income
Income
Dividend $ 6,937
Interest 744
Total income 7,681
Expenses
Investment management and administrative 2,348
Net investment income 5,333
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 17,012
Foreign currency transactions 6
Net realized gain (loss) 17,018
Change in net unrealized gain or loss on securities 44,247
Net realized and unrealized gain (loss) 61,265
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 66,598
---------
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
6/30/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ 5,333 $ 9,569
Net realized gain (loss) 17,018 16,737
Change in net unrealized gain or loss 44,247 10,524
Increase (decrease) in net
assets from operations 66,598 36,830
Distributions to shareholders
Net investment income (5,373) (9,471)
Net realized gain (1,947) (15,696)
Decrease in net assets
from distributions (7,320) (25,167)
Capital share transactions*
Shares sold 62,967 201,955
Distributions reinvested 7,319 25,167
Shares redeemed (41,007) (56,557)
Increase (decrease) in net
assets from capital
share transactions 29,279 170,565
Net Assets
Increase (decrease) during period 88,557 182,228
Beginning of period 526,952 344,724
End of period $ 615,509 $ 526,952
---------------------------------
*Share information
Shares sold 3,156 10,502
Distributions reinvested 367 1,321
Shares redeemed (2,072) (2,983)
Increase (decrease) in
shares outstanding 1,451 8,840
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Equity Income Portfolio
June 30, 1999 (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.
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 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
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $111,841,000 and $86,829,000, respectively, for the
six months ended June 30, 1999.
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, 1999, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$512,334,000. Net unrealized gain aggregated $100,596,000 at period-end, of
which $112,670,000 related to appreciated investments and $12,074,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management
fee, of which $401,000 was payable at June 30, 1999. The fee is computed
daily and paid monthly, and 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.
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 six months ended
June 30, 1999, totaled $641,000 and are reflected as interest income in the
accompanying Statement of Operations.
Invest With Confidence (registered trademark)
T. Rowe Price
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
TRP654 (6/99)
K15-057 6/30/99
