Annual Report
December 31, 1999
Personal Strategy
Balanced Portfolio
Invest with Confidence (registered trademark) T. Rowe Price
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
Dear Investor
During the past six months, the domestic economy continued to grow strongly
while overseas economies picked up steam. Third quarter GDP was revised upward
to 5.7%, and unemployment was at a 30-year low of 4.1%. With the dwindling
supply of available workers igniting concerns about higher inflation, the
Federal Reserve raised the federal funds target rate three times since June 30.
In this uncertain environment, stocks advanced powered by technology shares, but
bonds lost ground.
PERFORMANCE AND STRATEGY REVIEW
Performance Comparison
Periods Ended 12/31/99 6 Months 12 Months
---------------------------------------------------------------------------
Personal Strategy
Balanced Portfolio 2.98% 8.41%
Combined Index Portfolio* 5.10 12.61
Merrill Lynch-Wilshire Capital
Market Index 7.69 16.03
* An unmanaged portfolio composed of 60% stocks (S&P 500), 30% bonds
(Lehman Aggregate Bond Index), and 10% money market securities (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 fund posted modest returns for the 6- and 12-month periods ended
December 31, 1999. However, results trailed the Combined Index Portfolio
and the Merrill Lynch-Wilshire Capital Market Index primarily because of
the fund's focus on large-cap value stocks, which underperformed growth
stocks in general and technology stocks in particular. A fourth quarter
rally helped international stocks, measured by the MSCI EAFE Index,
outperform the S&P 500 for the first time since 1993. While the return for
the Russell 2000 also exceeded the S&P 500 in 1999, the average small-cap
stock underperformed. The fixed income component of the portfolio was weak,
but a rally in high-yield bonds helped boost returns in the fourth quarter.
Asset Allocation
12/31/99
Stocks 62
Reserves 5
Bonds 33
On December 31, your fund had 62% of its assets in stocks, up two
percentage points from the end of June; 33% in bonds, three percentage
points lower; and the balance in money market securities. Among equity
holdings we lowered our allocation to growth and increased our value and
international stocks. Our current fixed income bias favors high-yield over
investment-grade corporate bonds.
One of the strongest performers among the fund's top holdings was Corning,
whose stock rose in recent months after the company proposed doubling its
worldwide production capacity for liquid crystal displays used in portable
computers and hand-held information devices. Electronics and defense
conglomerate GE, another top position, benefited from the high valuations
afforded large-cap growth shares. Among our other major equity holdings, BP
Amoco participated in November's energy stock rally. The firm proposed a
$27 billion buyout of ARCO that is currently under review by the Federal
Trade Commission. The combined company would offer economies of scale in
its competition against newly merged Exxon Mobil, another top holding. The
fifth-largest holding in the portfolio is Microsoft, the world's largest
software company.
Valuation disparities between growth and value stocks grew even more
pronounced. In August we redirected some profits from our growth stocks
into the value sector. Despite the recent small-cap rally, which has been
focused in the small-cap growth sector, we believe small-cap stocks
continue to offer compelling valuations given their growth potential. We
also feel that foreign markets currently offer more attractive valuations
than domestic equities. Accordingly, in October we shifted some assets from
domestic stocks into international stocks.
The fourth quarter saw a strong rally in bonds that offer yield premiums
above Treasuries, as market liquidity began to return following a period of
a growing supply of new corporate issues and decreasing demand in late
summer. While we think improved liquidity over the next few months should
favor bonds in general, we believe the attractive income offered by
high-yield (below investment grade) bonds makes this sector particularly
appealing, and we currently favor high-yield over investment-grade
securities.
MARKET REVIEW
While overall inflation remains benign, there have been signs of
inflationary pressure in several areas of the U.S. economy, including
higher import prices, the weakening dollar, and mounting pipeline producer
prices. Oil prices rose 150% during the past 12 months and reached a
nine-year high of almost $27 per barrel in November.
Interest Rate Levels
30-Year 5-Year 90-Day
Treasury Bond Treasury Note Treasury Bill
12/31/98 5.12 4.59 4.55
5.12 4.56 4.47
5.49 5.11 4.65
3/99 5.63 5.12 4.47
5.58 5.15 4.51
5.80 5.51 4.65
6/99 6.03 5.76 4.77
6.05 5.75 4.71
5.93 5.71 4.97
9/99 6.09 5.81 4.88
6.30 6.09 5.13
6.22 6.03 5.28
12/31/99 6.46 6.31 5.29
International economies continued to strengthen. In Asia, corporate
restructuring boosted investor confidence and, consequently, stocks and
currencies. The Japanese yen gained ground against the U.S. dollar and
finished December at 102 to the dollar. The Bank of Japan intervened to
weaken the yen after it approached a four-year high of 101 versus the
greenback in late November. In Europe, economies also improved without
threat of inflation, although European central bankers are sending stronger
signals that rate hikes may lie ahead. Despite the prospect of higher
interest rates, the euro slid toward parity with the U.S. dollar, losing
about 17% in value in its first year.
U.S. corporations reported very strong profits in the third quarter.
After-tax profits rose 3% to post an 11.7% growth rate through September,
the strongest since third quarter 1997. The improvement in earnings growth
relative to nominal GDP suggests at least marginal improvement in pricing
power for domestic companies. Growth stocks dominated domestic equity
markets all year except for a brief rally in value stocks in the spring.
International equity markets, particularly in Japan, Hong Kong, and South
Korea, showed surprising strength. Japan and the rest of Asia tend to be
large net importers of commodities, and strength in those economies has
driven commodity prices higher.
In the fixed income markets, yields rose and prices fell as concerns about
accelerating inflation prompted the Fed to boost the fed funds target rate
a total of three-quarters of a percentage point since June 30. The
five-year Treasury yield rose 55 basis points while the 30-year yield
climbed 43 since the end of June, hampering bond returns (100 basis points
equal one percentage point).
OUTLOOK
We expect the U.S. economy to slow somewhat this year, although consumption
is still robust, which has been putting upward pressure on rates. We expect
the Fed to remain vigilant in its fight to head off inflation before it
becomes a problem, but real interest rates are already high - providing
attractive income for investors - and the Fed appears to be ahead of the
inflation curve so far.
Overall, we foresee a lessening of volatility in the financial markets and
an improvement in bond liquidity compared with 1999. Accordingly, we
believe bonds offer an attractive opportunity for investors searching for
income and long-term appreciation. On the equity side of the ledger, we
expect corporate profit growth to remain strong, getting a boost from
continuing high demand from domestic and, increasingly, international
consumers. In this environment, we remain optimistic that the fund's
balanced program of investing in attractive stocks and bonds will continue
to reward investors over the long term.
Edmund M. Notzon III
Chairman of the Investment Advisory Committee
January 21, 2000
Portfolio Highlights
Portfolio Overview
Percent of
Net Assets
12/31/99
- --------------------------------------------------------------------------------
Reserves 4.8%
- --------------------------------------------------------------------------------
Bonds 33.5%
- --------------------------------------------------------------------------------
U.S. Government Agencies 8.4
Corporate 14.8
Mortgage-Backed 10.3
Stocks 61.7%
- --------------------------------------------------------------------------------
10 Largest Holdings 7.4%
-------------------------------------------------------------------------
Corning 1.0
BP Amoco 1.0
GE 0.8
Exxon Mobil 0.7
Microsoft 0.7
American Home Products 0.7
Eastman Kodak 0.7
Colgate-Palmolive 0.6
International Flavors & Fragrances 0.6
Nokia 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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
For the SEC chart as follows (Personal Strategy Balanced Portfolio):
Strategy Combined Merrill Lynch
Balanced Index Wilshire Capital
Portfolio Portfolio Market Index
12/30/94 10,000 10,000 10,000
12/95 12,822 12,809 12,866
12/96 14,766 14,576 14,694
12/97 18,183 17,931 17,345
12/98 21,922 21,239 19,829
12/99 24,687 24,643 21,497
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 12/31/99
Since Inception
1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
8.41% 13.52% 16.54% 16.53% 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
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of period $ 16.16 $ 15.13 $ 13.44 $ 12.43 $ 10.00
Investment activities
Net investment
income (loss) 0.49 0.47 0.46 0.41 0.42
Net realized and
unrealized gain (loss) 0.80 1.65 1.93 1.32 2.41
Total from
investment activities 1.29 2.12 2.39 1.73 2.83
Distributions
Net investment income (0.49) (0.48) (0.46) (0.41) (0.40)
Net realized gain (0.96) (0.61) (0.24) (0.31) --
Total distributions (1.45) (1.09) (0.70) (0.72) (0.40)
NET ASSET VALUE
End of period $ 16.00 $ 16.16 $ 15.13 $ 13.44 $ 12.43
-----------------------------------------------------
Ratios/Supplemental Data
Total return (diamond) 8.41% 14.32% 18.04% 14.21% 28.66%
Ratio of total expenses to
average net assets 0.90% 0.90% 0.90% 0.90% 0.90
Ratio of net investment
income (loss) to average
net assets 3.03% 3.04% 3.37% 3.33% 3.69
Portfolio turnover rate 51.3% 47.6% 32.8% 51.7% 39.3%
Net assets,
end of period
(in thousands) $ 85,259 $ 79,475 $ 63,005 $ 33,263 $ 5,625
(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.
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
T. Rowe Price Personal Strategy Balanced Portfolio
December 31, 1999
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
Common Stocks 61.7%
FINANCIAL 9.3%
Bank and Trust 4.3%
Abbey National (GBP) 7,300 $ 117
Australia & New Zealand
Banking ADR 1,500 54
Banca Commerciale
Italiana (EUR) 18,100 98
Banco de Bilbao
Vizcaya ADR 7,200 102
Banco Frances del Rio
de la Plata ADR 1,195 28
Bank of America 6,000 301
Bank of New York 4,000 160
Bank One 6,590 211
Bankgesellschaft
Berlin (EUR) 3,000 50
Barclay's (GBP) 5,600 161
Charter One Financial 862 16
Chase Manhattan 2,860 222
Chittenden 1,700 50
Citizens Banking 2,100 47
DBS Group Holdings (SGD) * 3,489 57
Deutsche Bank (EUR) * 1,840 155
Downey Financial 3,100 63
Dresdner Bank (EUR) * 2,500 138
First Bell Bancorp 300 5
First Mariner Bancorp 400 3
First Security 600 15
FirStar 4,300 91
Frankfort First Bancorp 700 11
Glacier Bancorp 1,515 25
KBC Bancassurance
Holding (EUR) 1,500 81
Marshall & Ilsley 200 13
Mediobanca (EUR) 8,200 84
Mellon Financial 6,280 214
Overseas Chinese Bank (SGD) 5,250 48
Societe Generale (EUR) 813 189
State Street 500 37
Summit Bancorp 700 21
Svenska Handelsbanken
(Series A) (SEK) * 6,000 $ 75
UBS (CHF) 920 248
UST 1,000 32
Washington Mutual 3,185 83
Wells Fargo 4,900 198
WestAmerica 500 14
Westpac Banking (EUR) 4,000 28
3,645
Insurance 2.1%
ACE Limited 2,500 42
American General 2,300 174
American International Group 718 78
Brown and Brown 1,600 61
E.W. Blanch 1,000 61
Harleysville Group 900 13
Istituto Nazionale delle
Assicurazioni (EUR) 32,000 85
London Pacific Group ADR 600 22
Marsh & McLennan 1,300 124
Medical Assurance * 1,300 28
PartnerRe Holdings 1,600 52
Royal&Sun Alliance (GBP) 12,363 93
Schweizerische
Rueckversicherungs (CHF) 63 129
Selective Insurance 700 12
St. Paul Companies 7,800 263
Sumitomo Marine & Fire
Insurance (JPY) 18,000 111
UNUMProvident 140 4
W. R. Berkley 900 19
XL Capital (Class A) 7,721 400
1,771
Financial Services 2.9%
American Express 2,050 341
Associates First Capital
(Class A) 2,000 55
AXA (EUR) 1,300 181
Capital One Financial 2,400 116
Citigroup 8,248 458
Delta Financial * 1,800 7
Fannie Mae 4,220 264
Financial Federal * 1,200 27
Freddie Mac 6,480 $ 305
Goldman Sachs Group 200 19
HSBC Holdings (HKD) 13,239 184
ING Groep (EUR) 2,050 124
ITLA Capital * 500 6
Morgan Stanley Dean Witter 800 114
Pearson (GBP) 6,000 195
Providian Financial 100 9
Unidanmark (Class A) (DKK) 1,300 92
2,497
Total Financial 7,913
UTILITIES 4.0%
Telephone 2.9%
ALLTEL 700 58
AT&T 3,979 202
AT&T Liberty Group Media * 900 51
BellSouth 2,500 117
British Telecommunications ADR 800 190
Cable & Wireless ADR 2,500 73
Compania de Telecomunicaciones
de Chile (Class A) ADR 1,625 30
GTE 500 35
Nextel Communications * 700 72
Nippon Telegraph &
Telephone (JPY) 13 223
Rural Cellular (Class A) * 500 45
SBC Communications 4,420 215
Sprint 6,800 458
Telebras ADR 900 116
Telecom Corp. of
New Zealand ADR 1,000 38
Telecom Italia (EUR) 9,830 139
Telecom Italia Mobile (EUR) 17,400 194
Telefonica de Espana ADR * 1,219 96
Telefonos de Mexico
(Class L) ADR 700 79
Western Wireless 600 40
2,471
Electric Utilities 1.1%
Cleco 2,100 67
Electrabel (EUR) 210 69
Empresa Nacional de Electricidad
Chile ADR 1,930 27
Endesa ADR 1,800 $ 36
FirstEnergy 5,292 120
GPU 1,200 36
Hong Kong Electric (HKD) 15,000 47
PECO Energy 2,400 84
Powergen (GBP) 4,600 33
Texas Utilities 3,740 133
Unicom 4,100 137
Veba (EUR) 2,310 113
902
Water Utilities 0.0%
United Water Resources 400 14
14
Total Utilities 3,387
CONSUMER NONDURABLES 11.0%
Cosmetics 0.8%
Chattem * 1,300 25
International Flavors &
Fragrances 12,700 479
Kao (JPY) 6,000 171
675
Beverages 0.9%
Anheuser-Busch 3,500 248
Bass (GBP) 7,100 90
Coca-Cola 400 23
Diageo ADR 2,523 81
LVMH (EUR) 505 226
PepsiCo 3,460 122
790
Food Processing 1.7%
American Italian Pasta * 1,100 34
Associated British Foods (GBP) 7,200 39
Cadbury Schweppes (GBP) 1,800 11
Cadbury Schweppes ADR 3,600 87
Campbell 2,700 104
Carrefour (EUR) 210 39
Danisco (DKK) 1,300 51
Eridania Beghin-Say (EUR) 530 57
General Mills 7,860 281
International Multifoods 3,300 44
McCormick 2,800 83
Nestle (CHF) 125 229
Quaker Oats 100 6
Ralston Purina 6,340 $ 177
Sara Lee 3,660 81
Seneca Foods (Class A) * 400 5
Seneca Foods (Class B) * 500 6
Unilever 1,485 81
United Natural Foods * 700 8
1,423
Hospital Supplies/Hospital Management 0.5%
Baxter International 1,300 82
Cephalon * 100 3
Medtronic 200 7
Mentor 2,800 73
Molecular Devices * 200 10
Quorum Health Group * 1,900 18
Renal Care Group * 1,650 39
Smith & Nephew (GBP) 21,000 71
Steris * 1,600 16
Terumo (JPY) 5,000 134
453
Pharmaceuticals 3.5%
American Home Products 14,680 579
Amgen 1,400 84
AstraZeneca Group (SEK) 1,790 76
AstraZeneca Group ADR 2,600 109
Aurora Biosciences * 400 11
Biogen * 100 8
Boron Lepore & Associates * 300 2
Bristol-Myers Squibb 3,200 205
Collagenex Pharmaceuticals * 100 2
Eli Lilly 1,600 106
Emisphere Technologies * 200 6
Gehe (EUR) 2,400 93
Genetech * 800 108
Glaxo Wellcome ADR 2,000 112
Imclone Systems * 300 12
Incyte Pharmaceuticals * 300 18
Johnson & Johnson 1,580 147
Liposome * 200 2
Merck 2,500 168
Novartis (CHF) 142 208
Noven Pharmaceuticals * 400 7
NPS Pharmaceuticals * 500 6
Pfizer 7,020 228
Pharmacia & Upjohn 1,717 77
Schering-Plough 3,100 131
Takeda Chemical
Industries (JPY) 4,000 $ 198
Triangle Pharmaceuticals * 1,300 17
Warner-Lambert 3,200 262
2,982
Health Care Services 0.4%
Altana (EUR) 600 40
AmeriPath * 2,200 18
CIGNA 100 8
IMS Health 1,400 38
Orthodontic Centers of America * 900 11
United HealthCare 2,900 154
US Oncology * 2,200 11
Wellpoint Health Networks * 900 59
339
Biotechnology 0.3%
Abegenix * 100 13
Alkermes * 700 34
Anesta * 800 14
COR Therapeutics * 400 11
Coulter Pharmaceutical * 500 11
Cubist Pharmaceuticals * 400 8
Gilead Sciences * 200 11
Inhale Therapeutic Systems * 1,500 64
Millennium Pharmaceuticals * 100 12
Neurocrine Biosciences * 300 7
Northfield Laboratories * 1,100 12
Serologicals * 1,500 9
Viropharma * 200 8
214
Miscellaneous Consumer Products 2.9%
Benetton Group (EUR) 28,800 66
Bridgestone (JPY) 4,000 88
Coles Myer Limited (EUR) 7,300 38
Colgate-Palmolive 7,580 493
Cone Mills * 3,100 14
Culp 900 6
Dan River * 3,200 16
Hasbro 1,100 21
Huhtamaki (EUR) 600 20
Kuraray (JPY) 10,000 101
Lion Nathan (NZD) 26,300 61
Mattel 14,000 184
Mitsui (JPY) 19,000 133
NIKE (Class B) 1,200 59
Philip Morris 7,980 $ 185
Philips Electronics 1,380 186
Procter & Gamble 900 99
Reebok * 700 6
Sola * 2,200 30
Stanley Works 7,500 226
Stride Rite 2,900 19
Takkt (EUR) 2,400 16
Tomkins (GBP) 18,100 58
Tomkins ADR 521 8
Unifi * 8,900 110
US Can * 3,500 70
UST 4,730 119
WestPoint Stevens 800 14
Yue Yuen Industrial (HKD) 25,000 59
2,505
Total Consumer Nondurables 9,381
CONSUMER SERVICES 6.9%
Restaurants 0.0%
Buca * 1,300 13
PJ America * 1,100 17
30
General Merchandisers 1.1%
Bon-Ton Stores * 2,400 9
Casey's General Stores 4,700 49
Columbia Sportswear * 1,600 35
Dayton Hudson 1,300 95
JUSCO (JPY) 4,000 70
Marui (JPY) 8,000 119
Pinault Printemps
Redoute (EUR) 700 185
Tesco (GBP) 40,159 122
Wal-Mart 3,800 263
947
Specialty Merchandisers 1.6%
Christian Dior (EUR) 400 99
CompuCom Systems * 4,700 20
CVS 2,528 101
Goody's Family Clothing * 1,300 7
Home Depot 3,300 226
Kroger * 4,800 91
O'Charley's * 2,000 26
Omron (JPY) 5,000 115
Safeway * 3,900 139
Toys "R" Us * 20,400 $ 292
Tupperware 11,700 198
Urban Outfitters * 700 20
1,334
Entertainment and Leisure 1.4%
Carnival (Class A) 200 10
Disney 14,710 430
Hutchison Whampoa (HKD) 16,000 233
McDonald's 1,840 74
MediaOne Group * 2,100 161
Reader's Digest (Class A) 8,900 260
Sharp (JPY) 2,000 51
1,219
Media and Communications 2.8%
American Tower Systems
(Class A) * 200 6
Asatsu (JPY) 3,000 203
CBS * 4,000 256
Classic Communications * 900 33
Clear Channel Communications * 1,701 152
Comcast (Class A Special) 1,200 61
Elsevier (EUR) 4,000 48
Emmis Broadcasting (Class A) * 700 87
Fox Entertainment Group
(Class A) * 1,500 37
France Telecom ADR 1,600 214
Infinity Broadcasting (Class A) * 2,700 98
Pegasus Communications * 300 29
Publishing &
Broadcasting (EUR) 5,800 44
R.R. Donnelley 18,300 454
Sinclair Broadcast
Group (Class A) * 2,000 24
Time Warner 2,400 174
Tribune 1,100 60
Vodafone Airtouch ADR 6,400 317
Young Broadcasting
(Class A) * 1,000 51
2,348
Education 0.0%
ITT Educational Service * 500 8
8
Total Consumer Services 5,886
CONSUMER CYCLICALS 4.6%
Automobiles and Related 0.4%
A.O. Smith (Class B) 3,650 $ 80
Cycle & Carriage (SGD) 4,000 12
DaimlerChrysler (EUR) 1,100 85
Honda ADR 1,500 115
Keystone Automotive * 600 3
Littelfuse * 2,000 49
Strattec Security * 300 10
354
Building and Real Estate 1.9%
Accor (EUR) * 2,000 97
Apartment Investment &
Management, REIT 700 28
Arden Realty, REIT 1,600 32
Cemex (Represents 2 Class A
and 1 Class B shares) (MXN) * 3,700 21
Cheung Kong Holdings (HKD) 9,000 114
City Developments (SGD) 5,000 29
DBS Land (SGD) 7,000 14
EastGroup Properties, REIT 2,100 39
Federal Realty Investment
Trust, REIT 13,200 248
First Washington Realty
Trust, REIT 1,600 30
Glenborough Realty
Trust, REIT 1,300 17
JP Realty, REIT 1,400 22
Parkway Properties, REIT 2,300 66
Reckson Associates
Realty (Class B), REIT 1,126 26
Reckson Associates
Realty, REIT 12,100 248
Simon DeBartolo
Group, REIT 10,596 243
Singapore Land (SGD) 5,000 13
Starwood Hotels &
Resorts Worldwide, REIT 11,700 275
Westfield Trust (EUR) 8,800 17
Woodhead Industries 2,000 24
1,603
Miscellaneous Consumer Durables 2.3%
CompX 1,400 $ 26
Corning 6,800 877
Eastman Kodak 8,400 556
Harman International 800 45
Masco 2,200 56
OCE (EUR) 1,200 20
Ricoh (JPY) 7,000 132
Sony (JPY) 1,000 297
2,009
Total Consumer Cyclicals 3,966
TECHNOLOGY 5.4%
Electronic Components 1.5%
Altera * 1,400 69
American Superconductor * 600 17
Analog Devices * 100 9
Analogic 1,400 46
Benchmark Electronics * 1,400 32
Burr Brown * 1,500 54
EMC * 800 87
Exar * 300 18
Flextronics International * 600 28
Intel 3,400 280
Maxim Integrated Products * 3,600 170
Methode Electronics
(Class A) 2,700 87
Motorola 600 88
Planar Systems * 1,400 9
QuickLogic 500 8
SIPEX * 800 20
Texas Instruments 1,500 145
Xilinx * 2,000 91
1,258
Electronic Systems 1.2%
Applied Materials * 1,200 152
Applied Micro Circuits * 500 64
Armor Holdings * 1,900 25
EMS Technologies * 800 9
Hewlett-Packard 1,200 137
Lifeline Systems * 1,000 15
Lo-Jack * 1,800 12
Nokia ADR 2,500 475
Solectron * 1,000 95
984
Information Processing 0.5%
Dell Computer * 3,500 $ 178
F. Y. I. * 1,500 51
Hitachi ADR 800 130
IBM 300 33
Source Information
Management * 2,000 33
425
Office Automation 0.5%
Ceridian * 1,200 26
Technitrol 1,900 85
Xerox 13,900 315
426
Specialized Computer 0.1%
Sun Microsystems * 1,400 108
Virata * 300 9
117
Telecommunications 1.5%
3Com * 200 9
Aether Systems * 100 7
Airgate PCS * 200 11
Airnet Commerce * 100 4
Avant * 1,000 15
Cisco Systems * 2,800 300
Deutsche Telekom ADR 2,600 185
Ditech Communications * 200 19
LM Ericsson (Class B) ADR 2,300 151
Lucent Technologies 2,310 173
MCI WorldCom * 4,477 237
Singapore Telecommunications
(SGD) 23,000 47
Tellabs * 600 38
Uniphase * 400 64
West TeleServices * 800 20
1,280
Aerospace and Defense 0.1%
DONCASTERS ADR * 300 3
Honeywell International 1,500 87
Woodward Governor 600 16
106
Total Technology 4,596
CAPITAL EQUIPMENT 2.1%
Electrical Equipment 1.7%
ABB (CHF) 810 $ 99
Canon (JPY) 5,000 199
GE 4,560 705
hi/fn * 500 19
LSI Industries 1,900 41
Matsushita Electric
Works (JPY) 5,000 49
Mitsubishi Electric (JPY) 8,000 52
Tyco International 7,452 290
1,454
Machinery 0.4%
Danaher 2,000 97
GKN (GBP) 7,800 121
Kennametal 1,400 47
NN Ball & Roller 1,200 8
S I G Schweis (CHF) 65 39
312
Total Capital Equipment 1,766
BUSINESS SERVICES AND TRANSPORTATION 5.9%
Computer Service and Software 3.0%
America Online * 3,100 234
Analysts International 1,400 18
Automatic Data Processing 2,380 128
BISYS Group * 300 20
BMC Software * 1,800 144
Cambridge Technology
Partners * 800 21
Citrix Systems * 600 74
Computer Associates 1,700 119
Concord Communications * 600 27
Digital Impact * 100 5
Electronic Arts * 100 8
First Data 2,334 115
Great Plains Software * 500 37
Jack Henry & Associates 300 16
Lexmark International
Group (Class A) * 200 18
Loislaw * 400 16
Mastech * 1,300 32
Microsoft * 5,040 588
MMC Networks * 300 10
NetIQ * 700 $ 37
Netsolve * 200 6
Ondisplay * 100 9
Oracle * 2,200 246
Parametric Technology * 2,500 68
Peerless Systems * 1,500 12
PeopleSoft * 247 5
Phoenix Technologies * 900 14
Progress Software * 2,100 119
PSINet * 300 19
Quest Software * 100 10
SalesLoggix * 700 29
SPSS * 1,000 26
SunGard Data Systems * 300 7
Synopsys * 100 7
VERITAS Software * 650 93
Viasoft * 3,200 18
Visio * 600 29
WebTrends * 400 32
Wind River Systems * 450 16
Yahoo! * 300 130
Zebra Technologies (Class A) * 300 17
2,579
Distribution Services 0.3%
Aviation Sales * 900 15
MSC * 1,100 15
Performance Food Group * 800 19
Primesource 700 3
SCP Pool * 2,100 54
SunSource 1,100 5
U.S. Foodservice * 4,284 72
United Stationers * 1,600 46
Watsco (Class A) 2,300 27
Wilmar Industries * 600 10
266
Environmental 0.0%
CUNO * 1,400 29
IT Group * 800 8
Waterlink * 1,300 3
40
Transportation Services 0.4%
C.H. Robinson Worldwide 1,100 44
Comfort Systems USA * 2,500 18
Eagle USA Air Freight * 1,650 71
Expeditors International
of Washington 1,000 44
Frozen Food Express 700 $ 3
Heartland Express * 600 9
Hub Group (Class A) * 300 6
International Shipholding 500 6
Mitsubishi Heavy
Industries (JPY) 29,000 97
298
Miscellaneous Business Services 1.7%
British Airport
Authorities (GBP) 11,000 77
Concord EFS * 100 3
Consolidated Graphics * 2,100 31
CORT Business Services * 1,300 23
Ebenx 100 5
Electro Rent * 1,900 22
G & K Services 200 6
H&R Block 4,900 214
Insituform Technologies
(Class A) * 2,300 65
Iron Mountain * 1,100 43
Ivex Packaging * 3,200 32
Maximus * 1,300 44
McGrath Rent 1,300 23
Metamor Worldwide * 700 20
MPW Industrial Services
Group * 1,600 13
New England Business
Service 2,900 71
Omnicom 1,700 170
Romac International * 1,400 19
Shorewood Packaging * 5,300 100
Strayer Education 1,200 24
Tetra Tech * 2,812 43
United Parcel Service 300 21
Waste Management 21,822 375
1,444
Airlines 0.1%
KLM Royal Dutch Airlines 525 13
Midwest Express Holdings * 1,400 45
Singapore Airlines (SGD) 5,000 57
115
Railroad 0.4%
Kansas City Southern
Industries 700 $ 52
Norfolk Southern 11,900 244
296
Total Business Services
and Transportation 5,038
ENERGY 5.7%
Energy Services 1.4%
Baker Hughes 14,100 297
Cooper Cameron * 300 15
Halliburton 1,200 48
Johnson Electric (HKD) 50,400 323
Smith International * 300 15
Tokyo Electric Power (JPY) 6,000 161
TOTAL ADR 2,696 187
United Utilities (GBP) 9,500 98
Weatherford International 400 16
1,160
Exploration and Production 0.6%
Chieftain International * 1,200 21
Key Energy * 3,400 18
National Oilwell * 900 14
Santos (EUR) 9,000 24
Unocal 12,730 427
504
Integrated Petroleum - Domestic 1.0%
Amerada Hess 300 17
Atlantic Richfield 2,860 247
Conoco (Class B) 3,677 91
Occidental Petroleum 6,200 134
USX-Marathon 16,060 397
886
Integrated Petroleum - International 2.7%
BP Amoco ADR 14,308 849
Chevron 1,300 112
ENI SPA ADR 1,300 72
Exxon Mobil 7,407 597
Repsol ADR 2,100 49
Royal Dutch Petroleum ADR 4,600 278
Shell Transport &
Trading ADR 3,500 172
Texaco 2,540 138
Total Fina (Class B) (EUR) 285 $ 38
2,305
Total Energy 4,855
PROCESS INDUSTRIES 4.2%
Diversified Chemicals 0.8%
Arch Chemicals 2,600 54
Dow Chemical 2,100 281
DuPont 1,684 111
Hercules 9,400 262
708
Specialty Chemicals 1.7%
3M 3,670 359
A. Schulman 500 8
Air Liquide (EUR) 495 83
Akzo Nobel (EUR) 1,600 80
BASF (EUR) 1,850 96
Bayer (EUR) 1,830 87
Great Lakes Chemical 4,650 178
Hauser * 200 1
Imperial Chemical ADR 1,200 51
Pall 11,700 252
Sumitomo Chemicals (JPY) 29,000 136
Technip (EUR) 810 83
1,414
Paper and Paper Products 1.1%
Dai Nippon Printing (JPY) 8,000 128
Fort James 13,100 359
Kimberly-Clark 5,400 352
Kimberly-Clark de Mexico
(Class A) (MXN) 11,700 46
Smurfit-Stone Container * 700 17
902
Forest Products 0.2%
International Paper 600 34
Weyerhaeuser 2,500 179
213
Building and Construction 0.4%
Blue Circle Industries (GBP) 12,143 71
Heidelberg Zement (EUR) 700 55
Heidelerger Zement (EUR) * 200 0
Holderbank Financiere
Glarus (CHF) 80 109
Layne Christensen * 2,100 15
Simpson Manufacturing * 400 $ 17
Trex * 1,300 35
U.S. Aggregates 1,400 17
319
Total Process Industries 3,556
BASIC MATERIALS 1.6%
Metals 1.4%
Gibraltar Steel 600 14
Inco * 9,800 230
Material Sciences * 2,700 27
Matthews International
(Class A) 3,100 84
Phelps Dodge 6,400 430
Reynolds Metals 5,700 437
Mining 0.2%
Battle Mountain Gold 7,600 16
Lihir Gold 11,900 9
Lonrho Africa (GBP) 2,000 1
Rio Tinto (EUR) 4,200 90
116
Miscellaneous Materials 0.0%
Malayan Cement (MYR) 7,500 2
2
Total Basic Materials 1,340
MISCELLANEOUS 0.2%
Conglomerates 0.1%
Berkshire Hathaway (Class B) * 10 18
Orkla (Class A) (NOK) 4,114 71
89
Other Miscellaneous 0.1%
BG Transco Holdings (GBP) 8,088 52
Carso Global Telecom (MXN) * 2,100 20
Compania Cervecerias
Unidas ADS 200 6
Enersis ADS 500 12
Other Miscellaneous
Common Stocks 30
120
Total Miscellaneous 209
FOREIGN 0.8%
Europe 0.4%
AXA Colonia Konzern (EUR) 1,100 $ 105
CSM (EUR) 1,200 26
Man (EUR) 3,100 115
Singapore Press (SGD) 2,000 43
Svenska Cellulosa (SEK) * 2,400 71
360
Far East 0.1%
Nippon Express (JPY) 20,000 111
111
Other Foreign 0.3%
Bobst (CHF) 66 79
Metso Oyi (EUR) 2,000 26
Pacific Dunlop (EUR) 13,900 20
Siemens (EUR) 1,100 141
266
Total Foreign 737
Total Common Stocks (Cost $40,039) 52,630
CORPORATE BONDS 13.9%
Adelphia Communications
7.875%, 5/1/09 $ 75,000 68
9.875%, 3/1/05 75,000 77
Allied Holdings, Gtd.
Sr. Sub. Notes
8.625%, 10/1/07 75,000 66
American Builders &
Contractors Supply
Sr. Sub. Notes
10.625%, 5/15/07 100,000 92
American Radio Systems
Sr. Sub. Notes
9.00%, 2/1/06 100,000 105
American Standard
9.25%, 12/1/16 42,000 42
Amerigas Partners
Sr. Notes
10.125%, 4/15/07 50,000 51
Anchor Advanced
Sr. Notes
11.75%, 4/1/04 150,000 128
Associated Materials
Sr. Sub. Notes
9.25%, 3/1/08 $ 100,000 $ 96
Aurora Foods
Sr. Sub. Notes
9.875%, 2/15/07 100,000 101
Avis Rent A Car
Sr. Sub. Notes
11.00%, 5/1/09 100,000 105
B&G Foods
Sr. Sub. Notes
9.625%, 8/1/07 100,000 90
Ballys Total Fitness
Sr. Sub. Notes
9.875%, 10/15/07 50,000 49
BWAY, Sr. Sub. Notes
10.25%, 4/15/07 100,000 98
Chancellor Media
Sr. Sub. Notes
9.00%, 10/1/08 150,000 156
Charter Communication
Sr. Notes
8.25%, 4/1/07 150,000 139
Chattem, Sr. Sub. Notes
12.75%, 6/15/04 100,000 107
Cinemark USA
Sr. Sub. Notes
8.50%, 8/1/08 100,000 87
Coinmach, Sr. Sub. Notes
11.75%, 11/15/05 50,000 52
Comcast Cable
Communications
8.50%, 5/1/27 800,000 846
Communications & Power
Sr. Sub. Notes
12.00%, 8/1/05 100,000 81
Consolidated Container
Sr. Sub. Notes, (144a)
10.125%, 7/15/09 75,000 76
Container Corp of America
Sr. Notes, 9.75%, 4/1/03 50,000 52
Gtd., 10.75%, 5/1/02 2 5,000 26
Dan River, Sr. Sub. Notes
10.125%, 12/15/03 100,000 98
Delta Mills, Sr. Notes
9.625%, 9/1/07 $ 50,000 $ 35
Doane Pet Care
Sr. Sub. Notes
9.75%, 5/15/07 173,000 173
Dyersburg, Sr. Sub. Notes
9.75%, 9/1/07 50,000 20
Dyncorp, Sr. Sub. Notes
9.50%, 3/1/07 75,000 66
Energy Corporation of America
Sr. Sub. Notes
9.50%, 5/15/07 100,000 70
Fairfax Financial
8.25%, 10/1/15 800,000 696
Federal-Mogul, Sr. Notes
7.75%, 7/1/06 100,000 93
Frontiervision, Sr. Notes
11.00%, 10/15/06 100,000 106
Group Maintenance America
Sr. Sub. Notes
9.75%, 1/15/09 75,000 75
Harrahs Operating
7.875%, 12/15/05 150,000 147
Hawk, Sr. Notes
10.25%, 12/1/03 100,000 97
Herff Jones, Sr. Sub. Notes
11.00%, 8/15/05 100,000 106
Hollinger International
Publishing, Gtd. Notes
9.25%, 3/15/07 150,000 148
Holmes Products, Gtd. Notes
9.875%, 11/15/07 75,000 55
Host Marriott Travel, Sr. Notes
9.50%, 5/15/05 150,000 157
Intermedia Communications
Sr. Notes
8.60%, 6/1/08 50,000 46
9.50%, 3/1/09 100,000 96
International Home Foods
Gtd. Sr. Sub. Notes
10.375%, 11/1/06 150,000 156
International Wire, Sr. Sub. Notes
11.75%, 6/1/05 25,000 26
(144a), 11.75%, 6/1/05 75,000 77
Intertek Finance, Sr. Sub. Notes
10.25%, 11/1/06 $ 50,000 $ 46
Iron Mountain, Sr. Sub. Notes
8.75%, 9/30/09 100,000 95
Isle of Capri Casinos
Sr. Sub. Notes
8.75%, 4/15/09 150,000 139
Jitney-Jungle Stores *
Sr. Sub. Notes
12.00%, 3/1/06 75,000 15
Keebler, Sr. Sub. Notes
10.75%, 7/1/06 150,000 162
Lenfest Communications
Sr. Notes
8.375%, 11/1/05 20,000 20
Mastec, Sr. Sub. Notes
7.75%, 2/1/08 100,000 94
MCI WorldCom
7.75%, 4/1/07 800,000 816
Mediacom LLC, Sr. Notes
7.875%, 2/15/11 150,000 132
Metronet Communications
Sr. Disc. Notes, STEP
0%, 6/15/08 200,000 160
Mohegan Tribal Gaming
Authority, Sr. Notes
8.125%, 1/1/06 150,000 146
Nextel Communications
Sr. Disc. Notes, STEP
0%, 10/31/07 225,000 163
Nextlink Communications
Sr. Disc. Notes, STEP
0%, 6/1/09 225,000 138
Niagara Mohawk, Sr. Notes
7.75%, 10/1/08 25,000 25
Northland Cable Television
Sr. Sub. Notes
10.25%, 11/15/07 100,000 100
NTL, Sr. Notes
Zero Coupon, 4/1/08 225,000 157
Orange, Sr. Notes
9.00%, 6/1/09 150,000 157
Owens & Minor
Sr. Sub. Notes
10.875%, 6/1/06 25,000 26
Packaging Corporation
of America
9.625%, 4/1/09 $ 150,000 $ 154
Paine Webber, Sr. Notes
6.55%, 4/15/08 800,000 730
Park Place Entertainment
Sr. Sub. Notes
7.875%, 12/15/05 100,000 95
Premier Parks
Sr. Disc. Notes, STEP
0%, 4/1/08 100,000 69
Pride Petroleum Services
Sr. Notes
9.375%, 5/1/07 75,000 75
Principal Mutual, (144a)
8.00%, 3/1/44 800,000 729
Quest Diagnostics, Gtd.
Sr. Sub. Notes
10.75%, 12/15/06 100,000 105
Qwest Communications
Sr. Disc. Notes
Zero Coupon, 10/15/07 100,000 80
Sr. Notes
7.50%, 11/1/08 25,000 25
R & B Falcon, Sr. Notes
6.95%, 4/15/08 800,000 680
Raytheon, 5.70%, 11/1/03 200,000 187
Scotland International
Finance, Sub. Notes
(144a), 6.50%, 2/15/11 100,000 88
Six Flags Entertainment
Sr. Notes
8.875%, 4/1/06 75,000 73
Smithfield Foods
Sr. Sub. Notes
7.625%, 2/15/08 50,000 45
Sprint, 6.125%, 11/15/08 350,000 317
Transco Holdings
4.188%, 12/14/09-12/14/22
(GBP) 2,000 3
7.00%, 12/16/24 (GBP) 1,000 2
United International Holdings
Sr. Disc. Notes
STEP, 10.75%, 2/15/08 100,000 64
US Can, Sr. Gtd. Notes
10.125%, 10/15/06 $ 50,000 $ 51
Venture Holdings Trust
Sr. Sub. Notes
9.50%, 7/1/05 75,000 68
Voicestream Wire
Sr. Notes, (144a)
10.375%, 11/15/09 150,000 154
Westinghouse Air Brake
Sr. Notes
9.375%, 6/15/05 50,000 50
Westpoint Stevens
Sr. Notes
7.875%, 6/15/08 150,000 134
Total Corporate Bonds (Cost $13,113) 11,902
U.S. GOVERNMENT MORTGAGE-
BACKED SECURITIES 10.3%
Federal National Mortgage Assn.
6.50%, 1/1/26 174,560 165
Government National Mortgage Assn.
I
6.00%
12/15/23 - 4/15/26 1,744,452 1,602
6.50%
4/15/24 - 5/15/29 5,057,873 4,760
7.00%
5/15/23 - 5/15/29 1,710,435 1,653
7.50%
5/15/24 - 11/15/25 245,832 244
8.00%
10/15/25 - 6/15/26 276,333 279
8.50, 12/15/24 20,330 21
11.50, 11/15/19 22,189 25
Total U.S. Government Mortgage-
Backed Securities (Cost $9,100) 8,749
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 9.3%
Federal Home Loan Mortgage
5.95%, 1/19/06 $1,000,000 $ 948
Tennessee Valley Authority
5.88%, 4/1/36 600,000 563
6.235%, 7/15/45 1,000,000 997
U.S. Treasury Bonds
6.75%, 8/15/26 2,650,000 2,661
U.S. Treasury Notes
4.25%, 11/15/03 2,150,000 1,997
5.50%, 7/31/01 750,000 742
Total U.S. Government
Obligations/Agencies (Cost $8,247) 7,908
Short-Term Investments 4.2%
Money Market Funds 4.2%
Reserve Investment Fund
6.16%# 3,591,460 3,591
Total Short-Term Investments
(Cost $3,591) 3,591
T. Rowe Price Personal Strategy Balanced Portfolio
December 31, 1999
Value
- --------------------------------------------------------------------------------
In Thousands
Total Investments in Securities
99.4% of Net Assets (Cost $74,090) $ 84,780
Other Assets Less Liabilities 479
NET ASSETS $ 85,259
----------
Net Assets Consist of:
Accumulated net investment
income - net of distributions $ (9)
Accumulated net realized gain/loss -
net of distributions 664
Net unrealized gain (loss) 10,690
Paid-in-capital applicable to 5,330,223
shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares of the
corporation authorized 73,914
NET ASSETS $ 85,259
----------
NET ASSET VALUE PER SHARE $ 16.00
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
ADS American Depository Share
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 period-end amounts to
1.32% of net assets.
CHF Swiss franc
DKK Danish krone
EUR Euro
GBP British sterling
HKD Hong Kong dollar
JPY Japanese yen
MXN Mexican peso
MYR Malaysian ringgit
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
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
12/31/99
Investment Income (Loss)
Income
Interest $ 2,326
Dividend 903
Securities lending 13
Total income 3,242
Expenses
Investment management and administrative 741
Net investment income (loss) 2,501
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 3,851
Foreign currency transactions (36)
Net realized gain (loss) 3,815
Change in net unrealized gain or loss
Securities 391
Other assets and liabilities
denominated in foreign currencies (3)
Change in net unrealized gain or loss 388
Net realized and unrealized gain (loss) 4,203
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 6,704
----------
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
12/31/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 2,501 $ 2,243
Net realized gain (loss) 3,815 4,447
Change in net unrealized
gain or loss 388 2,855
Increase (decrease) in net
assets from operations 6,704 9,545
Distributions to shareholders
Net investment income (2,497) (2,267)
Net realized gain (4,892) (2,857)
Decrease in net assets
from distributions (7,389) (5,124)
Capital share transactions *
Shares sold 15,535 23,134
Distributions reinvested 7,389 5,124
Shares redeemed (16,455) (16,209)
Increase (decrease) in net
assets from capital
share transactions 6,469 12,049
Net Assets
Increase (decrease) during period 5,784 16,470
Beginning of period 79,475 63,005
End of period $ 85,259 $ 79,475
-----------------------
*Share information
Shares sold 963 1,450
Distributions reinvested 470 323
Shares redeemed (1,021) (1,018)
Increase (decrease) in
shares outstanding 412 755
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Personal Strategy Balanced Portfolio
December 31, 1999
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 (MBS), are amortized for both financial
reporting and tax purposes. Premiums and discounts on all MBS are
recognized upon disposition or principal repayment as gain or loss for
financial reporting purposes. For tax purposes, premiums and discounts on
MBS acquired on or before June 8, 1997, are recognized upon disposition or
principal repayment as ordinary income. For MBS acquired after June 8,
1997, premiums are recognized as gain or loss; discounts are recognized as
gain or loss, except to the extent of accrued market discount.
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 and U.S.
government securities, aggregated $25,861,000 and $28,882,000,
respectively, for the year ended December 31, 1999. Purchases and sales of
U.S. government securities aggregated $15,192,000 and $11,277,000,
respectively, for the year ended December 31, 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 December 31, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$74,090,000. Net unrealized gain aggregated $10,690,000 at period-end, of
which $15,748,000 related to appreciated investments and $5,058,000 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 $55,000 was payable at December 31, 1999. 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, 1999, totaled $217,000 and are reflected as interest income in
the accompanying Statement of Operations.
During the year ended December 31, 1999, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $1,000
with certain affiliates of the manager and paid commissions of $5 related
thereto.
Tax Information (Unaudited) for the Tax Year Ended 12/31/99
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 $100,000 from short-term capital gains,
o $4,792,000 from long-term capital gains, subject to the 20% rate gains
category
For corporate shareholders, $481,000 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 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 comprising
T. Rowe Price Equity Series, Inc., hereafter referred to as the "Fund") at
December 31, 1999, 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 accounting principles generally accepted in
the United States. 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 auditing standards generally
accepted in the United States, 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, 1999 by correspondence with
custodians, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 20, 2000
