Annual Report
December 31, 1999
- --------------------------------------------------------------------------------
New America Growth Portfolio
T. Rowe Price, Invest With Confidence(registration mark)
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
While 1999 will be recalled as the continuation of a strong bull market, it
should also be remembered as the year of the technology stock. We spoke in the
last report about the narrowness of the market in the first half of the year,
and this only intensified in the second half. While the Standard & Poor's 500
Stock Index gained 7.71% in the six months ended December 31, the
technology-laden Nasdaq Composite rose 51.49% in the same period, following a
gain of "only" 22.50% in the first half. Internet-related stocks rose
significantly more than the overall Nasdaq index. While this might suggest a
broadly exuberant market, in fact, about half of all stocks had negative returns
for the year.
Performance Comparison
Periods Ended 12/31/99 6 Months 12 Months
- --------------------------------------------------------------------------------
New America
Growth Portfolio 1.55% 12.75%
- --------------------------------------------------------------------------------
S&P 500 Stock Index 7.71 21.04
- --------------------------------------------------------------------------------
Lipper Variable Annuity
Underlying Growth
Funds Average 16.27 31.48
- --------------------------------------------------------------------------------
The New America Growth Portfolio could not keep pace with the unmanaged S&P
500 Index and the average growth mutual fund in such a narrow market. While
we had hoped for a broadening of the market into mid-size and
non-technology companies, this did not occur. The New America Growth
Portfolio has always invested in a broad range of mid- and
large-capitalization growth stocks. As such, it typically has had the
advantage of a wider set of investment opportunities than the average
growth fund. In general, over the last 15 years, this has benefited
shareholders. More recently, the best gains have not been found in mid-cap
stocks but primarily in the largest, in spite of significantly more
attractive valuations in mid-caps. The S&P MidCap Index rose 14.72% in
1999, more in line with your fund's return. We believe that the ability to
invest across the capitalization spectrum will benefit shareholders in the
long run. (Capitalization is a measure of the size of a company, and is
defined by the company's stock price multiplied by shares outstanding.)
The other primary reason the New America Growth Portfolio has
underperformed recently is that it has not historically invested heavily in
technology stocks. The portfolio was established in 1994 (and the New
America Growth Fund on which it is based was established in 1985) on the
premise that the "new America" was moving from a manufacturing to a service
economy, and therefore the fund would focus primarily on service companies.
We still believe this premise is true, and we will continue to look for
companies with a high degree of recurring revenues (as opposed to one-time
revenues such as manufacturers typically rely on and receive only when they
make a new sale). However, we have spent significant time attempting to
redefine the new "new America" and how your fund should adapt. It is hard
to deny technology's impact on our economy: It is the primary enabler of
our strong economic growth without the inflation that generally accompanies
such long periods of prosperity. Technology is also the largest component
of the S&P 500, at approximately 30%. Furthermore, the majority of growth
funds have technology weightings far higher than 30%. By comparison, the
New America Growth Portfolio has about 4% of its holdings in technology.
We no longer believe it is appropriate to exclude such a large portion of
the economy from the fund's investment program. Therefore, we have
gradually begun to increase the fund's holdings of technology stocks, and
also plan to add selected investments in pharmaceuticals and biotechnology,
which are also major growth drivers in the "new America." Our same core
principles must apply to any technology stock or any other growth stock
added to the portfolio - the company should embody the "new America,"
should be a leader in its industry segment, and must have fundamentals that
justify its stock price and valuation.
MARKET ENVIRONMENT
In spite of concerns about inflation, interest rates, and the Y2K computer
glitch, the U.S. economy continued to perform very well in the second half.
In fact, 1999 represented the ninth consecutive year of economic growth.
Consumer confidence was also strong, and although it dipped in the third
quarter, it ended the year at an all-time high. In this environment, U.S.
corporate profits continued to grow strongly. But markets were extremely
volatile in the second half. Most of the fears discussed above manifested
themselves in the third quarter as the Federal Reserve raised short-term
rates and Y2K anxiety peaked. Most major indexes were down in the third
quarter, with the S&P 500 falling 6.24%. However, stocks surged in the
fourth quarter as growth and inflation news continued to be benign and Y2K
fears abated. The New America Growth Portfolio outperformed the S&P 500 in
the fourth quarter, rising 15.55% compared with 14.88% for the index.
In the fourth quarter, the tech-laden Nasdaq Composite beat the S&P 500 for
the eighth time in 10 quarters. Over this period, the Nasdaq gained 182%
versus a 72% total return for the S&P 500. The top-20 companies in the S&P
500 account for about 34% of the market capitalization of the index but
represented nearly 65% of the appreciation in 1999. Both of these trends
have hurt your fund's recent returns as we invest not only in many
mid-capitalization names but also in services stocks due to the fund's
historical focus. A huge fourth quarter surge enabled the Russell 2000
Index of smaller companies to outperform the S&P 500 last year for the
first time since 1993. This advance was led again by technology stocks.
International markets continued to stabilize and advance. Stock markets
around the world hit new highs, including those in Germany, Mexico, and
Brazil. Although the Nikkei did not reach a record, the Japanese market is
at its highest level since early 1997. These strong equity performances
will likely add further to the global growth momentum.
PORTFOLIO REVIEW
The New America Growth Portfolio's performance mirrored the narrowness in
the general market during 1999. Communications services and media services
were by far the largest contributors in both the second half and full year.
Although they are not pure technology sectors, these industries are
participating directly in the movement toward wireless technologies,
broadband, and new forms of entertainment on different mediums. The top
performer in the fund during the second half and full year was VoiceStream
Wireless, the PCS company that was spun out of Western Wireless earlier in
the year. VoiceStream is benefiting from increasing penetration of cellular
phones in the U.S. as well as rising usage, which increases the customers'
monthly bill. VoiceStream's former parent was also a strong performer for
the second half and full year. Whereas VoiceStream focuses on major
metropolitan markets with its PCS service, Western Wireless focuses on
rural markets with its cellular service. The next best contributor in the
second half and the full year was AT&T Liberty Media, our largest holding.
Liberty Media, only nominally a subsidiary of AT&T, is a portfolio of
companies positioned to capitalize on the continuing growth of cable
networks. The majority of the company's portfolio is centered around
ownership interests in over a hundred cable networks, such as The Learning
Channel and The Discovery Channel. In addition, the company has several
investments in interactive TV and Internet infrastructure.
Among our other top holdings, Home Depot, AMFM, Outdoor Systems, and
Infinity Broadcasting all performed well in the second half. Infinity
Broadcasting recently closed its acquisition of Outdoor Systems to become
one of the largest providers of out-of-home media companies with a stable
of radio stations and outdoor displays. Home Depot has benefited from a
robust economy and, specifically, strong housing turnover in the last
several quarters. Additionally, the company has increased its focus on the
professional market, which is significantly increasing the available market
for the company and could serve as a buffer if the consumer market slows
because of higher interest rates. Another top holding, though not a top
performer in the latest period, is Catalina Marketing, the nation's leading
supplier of in-store electronic scanner-activated consumer promotions. The
company is taking its expertise in the grocery market and applying it to
the pharmaceutical market.
The worst-performing industry for the second half was environmental
services, and two of the worst-performing stocks were Waste Management and
Republic Services. Waste Management was significantly more problematic, as
there were accounting, management, and earnings issues. We have since
eliminated the position. Unfortunately, when the industry leader takes it
on the chin, it causes repercussions for the rest of the industry. Republic
Services and others fell precipitously after the Waste Management news came
out, and thus Republic's ability to use its stock as acquisition currency
was hampered. As a result, earnings estimates had to be brought down, which
put yet more pressure on the stock. We have maintained our position in
Republic as the company's internal growth potential does not appear to be
tarnished.
Another trend we saw in the fund and the market in general was fear that
certain companies would not be successful in the new on-line environment.
Office Depot performed poorly as its growth slowed due primarily to the
lower average selling prices of computers, but also due to fears that it
has not prepared adequately for an on-line environment. Galileo
International, which has met all of its earnings targets, is another
example of a company that performed poorly due to a perception that it is
an old-line company, though the company also experienced a slowdown in
domestic bookings because of a reorganization of its sales force.
Sector Diversification
- --------------------------------------------------------------------------------
12/31/98 6/30/99 12/31/99
- --------------------------------------------------------------------------------
Financial Services 15.3% 14.6% 10.0%
Consumer Services 31.5 27.8 23.8
Business Services 25.7 28.9 24.4
Health Care 4.0 2.8 2.0
Technology 1.3 1.2 4.1
Media Services 21.5 23.0 26.2
Reserves 0.7 1.7 9.5
Total 100% 100% 100%
While we are very cognizant of the threat the Internet poses to incumbents
and believe established firms must prepare for attacks on their traditional
markets, we do not believe that all incumbents will be losers. Although
some have gotten off to a slow start, many have the advantage of customer
relationships, internally developed earnings and cash flow, and years of
expertise in their respective markets. While it may look bleak in an
environment where any business model that involves the Internet seems to
attract capital at virtually zero cost, we do not believe this can continue
forever.
We have amended our industry categories to place technology, health care,
and media services under separate headings. This will give you a clearer
picture of how the fund is invested. Changes in sector weightings in the
last six months were relatively modest but important. We lowered our
weighting in health care, primarily due to fears that the political
environment will make the sector volatile in the near term. Given the
current valuations for most technology stocks, we have taken a very gradual
approach to adding new names. Many of the companies we have added are
market leaders, such as Dell Computer, Microsoft, and America Online. We
will continue to look for opportunities to add selected technology stocks,
and strongly believe that selected technology stocks will continue to lead
growth in the years ahead.
Significant other new holdings include TJX, the leader in off-price apparel
with its TJ Maxx and Marshalls stores. The company has some new store
concepts that look promising as well. We took advantage of some warm
weather fears during the Thanksgiving holiday period to initiate our
position. Two media names, Cox Communications and Charter Communications,
were also added. Both are cable companies that are benefiting from several
new services (high speed data, digital cable, telephony) that are being
offered over cable lines. Major eliminations were Waste Management, Total
Renal Care Holdings, and Acxiom.
OUTLOOK
Given the Fed's strong desire to slow the economy, it appears likely that
economic growth in 2000 will not be as robust as in 1999. That said,
employment growth is still strong, interest rates - although higher - are
still at relatively low levels, and there are no signs of significantly
higher inflation. These are all generally very positive signs for the
market.
A bigger issue is the continued narrowness of the market. Although all
major indexes were up during the second half of 1999, about 50% of all U.S.
stocks (with prices greater than $5.00) were down. Additionally, the
largest companies in the S&P 500 continued to significantly outperform the
smaller ones. We still believe a broadening of participation would be a big
positive for the overall market, but fear that the broadening might occur
in the context of a market correction. To put this in perspective, over the
last year, companies with price/earnings ratios greater than 37 gained more
than 35%, whereas stocks that had P/E ratios from 15 to 25 rose less than
5% overall. The disparity between the top-tier companies and second- and
third-tier companies is as wide as it has been in recent memory. Certainly
market leaders deserve to trade at a premium, but we question the degree of
that premium at current valuations.
Against this backdrop, we remain excited about the fund's holdings. We
believe that New America Growth Portfolio is well positioned with a mix of
attractively valued companies as well as some market leaders that trade at
high valuations. While we certainly wouldn't be immune to a market decline,
the fund is not positioned as aggressively as many other growth funds. We
always look to opportunistically increase the quality and growth rate of
fund holdings, and would certainly attempt to do so in any market decline
in which the valuation gap between certain companies narrowed. We still
expect most of the companies in the fund to grow faster than the typical
S&P 500 stock, even though they trade at lower multiples.
Respectfully submitted,
John H. Laporte
President
Marc L. Baylin
Executive Vice President
January 27, 2000
Effective March 31, 2000, Marc L. Baylin assumes day-to-day responsibility for
management of the New America Growth Portfolio as chairman of the fund's
Investment Advisory Committee. Mr. Baylin joined T. Rowe Price in 1993 as an
investment analyst and has been a member of the fund's Advisory Committee for
several years. In his new role, Mr. Baylin succeeds John H. Laporte, a director
of T. Rowe Price Associates, who remains president of the fund and a member of
its Advisory Committee.
This supplements the New America Growth Portfolio prospectus dated May 1, 1999.
Portfolio Highlights
Twenty-Five Largest Holdings
- --------------------------------------------------------------------------------
Percent of
Net Assets
12/31/99
- --------------------------------------------------------------------------------
AT&T Liberty Media Group 4.1%
AMFM 3.6
Infinity Broadcasting 3.5
Home Depot 3.3
VoiceStream Wireless 3.0
Western Wireless 2.8
Circuit City Stores 2.6
Catalina Marketing 2.5
MCI WorldCom 2.3
Affiliated Computer Services 2.1
Ceridian 2.1
Morgan Stanley Dean Witter 2.0
Costco Wholesale 2.0
First Data 2.0
Freddie Mac 1.9
NOVA 1.9
Comcast 1.8
U.S. Foodservice 1.7
Waddell & Reed Financial 1.6
Outback Steakhouse 1.6
Premier Parks 1.5
Apollo Group 1.5
Family Dollar Stores 1.5
Fox Entertainment Group 1.4
Cox Communications 1.3
- --------------------------------------------------------------------------------
Total 55.6%
- --------------------------------------------------------------------------------
Note: Table excludes reserves.
Portfolio Highlights
Contributions to the Change in Net Asset Value Per Share
- --------------------------------------------------------------------------------
6 Months Ended 12/31/99
TEN BEST CONTRIBUTORS
- --------------------------------------------------------------------------------
VoiceStream Wireless 107(cents)
Western Wireless 52
AT&T Liberty Media Group 41
Home Depot 33
AMFM 29
Outdoor Systems *** 25
Morgan Stanley Dean Witter 15
Catalina Marketing 14
Cox Communications * 12
Cendant 12
- --------------------------------------------------------------------------------
Total 340(cents)
- --------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
- --------------------------------------------------------------------------------
Waste Management ** - 48(cents)
Office Depot 30
Galileo International 27
Sylvan Learning Systems 21
Associates First Capital 19
Republic Services 19
Outback Steakhouse 18
Kroger 15
Total Renal Care Holdings ** 15
Acxiom ** 14
- --------------------------------------------------------------------------------
Total - 226(cents)
- --------------------------------------------------------------------------------
12 Months Ended 12/31/99
TEN BEST CONTRIBUTORS
- --------------------------------------------------------------------------------
VoiceStream Wireless 118(cents)
Western Wireless 87
AT&T Liberty Media Group 75
AMFM 38
Outdoor Systems *** 37
Home Depot 36
Circuit City Stores 35
Morgan Stanley Dean Witter 31
AirTouch Communications *** 29
Comcast 29
- --------------------------------------------------------------------------------
Total 515(cents)
- --------------------------------------------------------------------------------
TEN WORST CONTRIBUTORS
- --------------------------------------------------------------------------------
Waste Management ** - 39(cents)
Office Depot 38
Total Renal Care Holdings ** 36
Sylvan Learning Systems 25
Acxiom ** 23
Apollo Group 20
SunGard Data Systems 19
Freddie Mac 18
Associates First Capital 17
Galileo International 15
- --------------------------------------------------------------------------------
Total - 250(cents)
- --------------------------------------------------------------------------------
* Position added
** Position eliminated
*** Acquired by another company
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.
SEC CHART: New America Growth Portfolio
Lipper Variable
S&P 500 Annuity Underlying New America
Index Growth Funds Average Growth Portfolio
3/31/94 10,000 10,000 10,000
12/94 10,532 10,231 10,100
12/95 14,489 13,559 15,260
12/96 17,816 16,374 18,325
12/97 23,760 20,886 22,195
12/98 30,547 26,181 26,303
12/99 36,978 33,386 29,657
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.
New America Growth Portfolio
Periods Ended 12/31/99
Since Inception
1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
12.75% 17.41% 24.04% 20.80% 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 New America Growth Portfolio
For a share outstanding throughout each period
-------------------------------------------------------
Year
Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of period $ 24.74 $ 21.35 $ 17.67 $ 15.23 $ 10.10
-------------------------------------------------------
Investment activities
Net investment
income (loss) (0.07) (0.08) - 0.04 0.03
Net realized and
unrealized gain (loss) 3.10 3.97 3.73 2.94 5.12
Total from
investment activities 3.03 3.89 3.73 2.98 5.15
Distributions
Net investment income - - - (0.04) (0.02)
Net realized gain (1.59) (0.50) (0.05) (0.50) -
Total distributions (1.59) (0.50) (0.05) (0.54) (0.02)
NET ASSET VALUE
End of period $26.18 $24.74 $21.35 $17.67 $15.23
-------------------------------------------------------
Ratios/Supplemental Data
Total return(diamond) 12.75% 18.51% 21.12% 20.09% 51.10%
Ratio of total expenses to
average net assets 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment
income (loss) to average
net assets (0.30)% (0.34)% 0.02% 0.18% 0.23%
Portfolio turnover rate 42.1% 46.0% 37.3% 27.2% 54.5%
Net assets, end of period
(in thousands) $125,974 $118,989 $96,991 $ 60,241 $12,304
(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 New America Growth Portfolio
December 31, 1999
Shares Value
- --------------------------------------------------------------------------------
In thousands
COMMON STOCKS 90.5%
CONSUMER SERVICES 23.8%
Retailing/General Merchandisers 6.4%
Costco Wholesale * 28,000 $ 2,554
Family Dollar Stores 115,000 1,876
Kroger * 46,000 868
Safeway * 41,900 1,490
TJX 66,000 1,349
8,137
Retailing/Specialty Merchandisers 8.0%
Circuit City Stores 73,000 3,289
CVS 33,000 1,318
Home Depot 60,000 4,114
Office Depot * 126,000 1,378
10,099
Entertainment and Leisure 3.5%
Extended Stay America * 110,000 839
Premier Parks * 67,500 1,949
SFX Entertainment (Class A) * 45,000 1,628
4,416
Personal Services 4.3%
Apollo Group (Class A) * 97,000 1,943
Avis Rent A Car * 60,000 1,534
Cendant * 37,000 983
Sylvan Learning Systems * 72,000 945
5,405
Restaurants 1.6%
Outback Steakhouse * 76,000 1,976
1,976
Total Consumer Services 30,033
BUSINESS SERVICES 24.0%
Distribution Services 1.7%
U.S. Foodservice * 130,000 2,178
2,178
Computer Services 13.0%
Affiliated Computer Services
(Class A) * 57,500 2,645
BISYS Group * 21,000 1,369
Ceridian * 120,000 2,587
Concord EFS * 24,800 638
First Data 50,000 2,466
Galileo International 55,000 1,646
NOVA * 74,000 $ 2,336
Paychex 30,750 1,229
SunGard Data Systems * 62,900 1,494
16,410
Energy Services 1.9%
Schlumberger 23,500 1,322
Smith International * 18,000 894
Transocean Sedco Forex 4,549 153
2,369
Other Business Services 3.3%
Modis Professional Services * 86,500 1,233
Republic Services (Class A) * 100,000 1,438
Viad 52,000 1,449
4,120
Marketing Services 4.1%
ADVO * 45,000 1,069
Catalina Marketing * 27,500 3,183
IMS Health 31,500 856
5,108
Total Business Services 30,185
FINANCIAL 10.0%
Bank and Trust 1.4%
FirStar 37,000 782
Wells Fargo 24,000 970
1,752
Investment Services 4.9%
Franklin Resources 29,000 930
Goldman Sachs Group 6,000 565
Morgan Stanley Dean Witter 18,000 2,569
Waddell & Reed
Financial (Class A) 20,000 543
Waddell & Reed
Financial (Class B) 60,000 1,507
6,114
Other Financial 3.7%
Associates First
Capital (Class A) 45,000 1,235
Fannie Mae 18,000 1,124
Freddie Mac 50,000 2,353
4,712
Total Financial 12,578
TECHNOLOGY SERVICES 4.1%
E-Commerce 0.8%
America Online * 3,000 $ 226
CMGI * 1,000 277
e-Bay * 1,000 125
Yahoo! * 1,000 433
1,061
Software & Service 2.4%
Computer Associates 5,500 385
Metamor Worldwide * 30,000 876
Microsoft * 5,000 583
Unisys * 36,500 1,166
3,010
Computer 0.4%
Dell Computer * 9,000 459
459
Communications Equipment 0.5%
3Com * 15,000 704
704
Total Technology Services 5,234
MEDIA SERVICES 26.2%
Broadcasting 16.8%
AMFM * 57,500 4,499
AT&T Liberty Media Group
(Class A) * 92,000 5,221
Charter Communications
(Class A) * 60,000 1,312
Comcast (Class A Special) 45,000 2,274
Cox Communications
(Class A) * 32,500 1,674
Fox Entertainment Group
(Class A) * 69,000 1,721
Infinity Broadcasting
(Class A) * 121,500 4,397
21,098
Telecommunications Services 9.4%
MCI WorldCom * 55,000 $ 2,917
Vodafone Airtouch ADR 33,500 1,658
VoiceStream Wireless * 27,000 3,836
Western Wireless (Class A) * 52,000 3,468
11,879
Total Media Services 32,977
HEALTH CARE 2.0%
Health Care Services 1.7%
Omnicare 105,000 1,260
Wellpoint Health Networks
(Class A) * 12,000 791
2,051
Pharmaceuticals 0.3%
Warner-Lambert 5,000 412
412
Total Health Care 2,463
Total Miscellaneous
Common Stocks 0.4% 562
Common Stocks (Cost $73,620) 114,032
SHORT-TERM INVESTMENTS 10.0%
Money Market Fund 10.0%
Reserve Investment Fund
6.16% # 12,542,042 12,542
Total Short-Term Investments
(Cost $12,542) 12,542
Total Investments in Securities
100.5% of Net Assets (Cost $86,162) $ 126,574
Other Assets Less Liabilities (600)
NET ASSETS $ 125,974
------------
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions 4,390
Net unrealized gain (loss) 40,412
Paid-in-capital applicable to
4,812,223 shares of $0.0001 par
value capital stock outstanding;
1,000,000,000 shares of the
Corporation authorized 81,172
NET ASSETS $ 125,974
-----------
NET ASSET VALUE PER SHARE $26.18
-----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price New America Growth Portfolio
In thousands
Year
Ended
12/31/99
Investment Income (Loss)
Income
Dividend $ 376
Interest 269
Total income 645
Expenses
Investment management and administrative 995
Net investment income (loss) (350)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)on securities 10,435
Change in net unrealized gain or loss on securities 4,336
Net realized and unrealized gain (loss) 14,771
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 14,421
------------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price New America Growth Portfolio
In thousands
Year
Ended
12/31/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (350) $ (370)
Net realized gain (loss) 10,435 3,712
Change in net unrealized gain or loss 4,336 13,748
Increase (decrease) in net assets from operations 14,421 17,090
Distributions to shareholders
Net realized gain (7,210) (2,354)
Capital share transactions *
Shares sold 22,622 32,866
Distributions reinvested 7,210 2,354
Shares redeemed (30,058) (27,958)
Increase (decrease) in
net assets from capital
share transactions (226) 7,262
Net Assets
Increase (decrease) during period 6,985 21,998
Beginning of period 118,989 96,991
End of period $ 125,974 $ 118,989
------------------------
*Share information
Shares sold 893 1,429
Distributions reinvested 297 107
Shares redeemed (1,187) (1,270)
Increase (decrease) in shares outstanding 3 266
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price New America Growth Portfolio
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series Fund, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The New America Growth 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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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.
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 $47,578,000 and $66,401,000, 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.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1999. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $350,000
Undistributed net realized gain (242,000)
Paid-in-capital (108,000)
At December 31, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$86,162,000. Net unrealized gain aggregated $40,412,000 at period-end, of
which $45,589,000 related to appreciated investments and $5,177,000 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 $82,000 was payable at December 31, 1999. The fee,
computed daily and paid monthly, is equal to 0.85% of the fund's average
daily net assets. Pursuant to the agreement, investment management,
shareholder servicing, transfer agency, accounting, and custody services
are provided to the fund, and interest, taxes, brokerage commissions, and
extraordinary expenses are paid directly by the fund.
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 $269,000 and are reflected as interest income in
the accompanying Statement of Operations.
Report of Independent Accountants
To the Board of Directors of T. Rowe Price Equity Series, Inc. and
Shareholders of New America Growth 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 New America Growth 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 the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 20, 2000
T. Rowe Price New America Growth Portfolio
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 $7,210,000 from long-term
capital gains, subject to the 20% rate gains category.
