Semiannual Report
June 30, 2000
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Mid-Cap Growth Portfolio
Invest With Confidence(registered trademark)
T. Rowe Price
This report is authorized for distribu- tion only to those who have received a
copy of the portfolio's prospectus.
T. Rowe Price Investment Services, Inc.,
Distributor
Dear Investor
Stocks were extremely volatile in the first half of 2000, and most market
indices declined despite a powerful rebound late in the period. The signal event
was a 37% correction in the tech-heavy Nasdaq Composite in early spring that
resulted in the near destruction of many small- and mid-capitalization Internet
companies. After trailing large-caps for several years, mid-cap stocks were
strong performers during the period, led by the technology and biotechnology
sectors.
Performance Comparison
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Periods Ended 6/30/00 6 Months 12 Months
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Mid-Cap Growth Portfolio 5.84% 17.75%
S&P MidCap Index 8.97 16.98
Russell Midcap
Growth Index 12.15 48.59
Lipper Variable Annuity
Underlying Mid Cap
Funds Average 8.54 35.75
The Mid-Cap Growth Portfolio's 5.84% first-half return, while respectable
in absolute terms, lagged its benchmarks for the period. Our gain of 17.75%
in the 12 months ended June 30 exceeded the Standard & Poor's MidCap Index
but trailed the Russell Midcap Growth Index and our Lipper category.
Results in both periods were affected by our lower weighting in technology
stocks compared with the benchmarks as well as our more valuation-sensitive
approach.
MARKET ENVIRONMENT
In the midst of an economic expansion that has shattered all records for
duration, U.S. economic growth actually accelerated in the first quarter of
2000. The Federal Reserve, which had raised short-term rates three times
last year, raised the ante three more times in the first half of 2000,
capped by a half-point move on May 16. Finally, by late May, the economy
began to show signs of responding to the Fed's strong medicine. Retail
sales were sluggish, consumer confidence dipped slightly, and job creation
and industrial demand slowed. Despite anecdotal evidence of wage inflation
and a sharp increase in energy prices, the government's price measures
continued to show only slight increases over 1999. The economy's robust
growth has helped generate increasingly large federal government budget
surpluses, a situation most would have thought impossible just a few years
ago, and some are even predicting that the U.S. government could be
debt-free in a decade. Fixed-income investors nearly panicked at the
prospect of a looming "shortage" of 30-year Treasury bonds resulting from
reduced federal borrowing and the initiation of a Treasury debt buyback.
In the first quarter, the stock market, like the economy, proved amazingly
resilient in the face of generally rising interest rates. Powerful momentum
- and rabid speculation - carried over from late 1999. Valuations of the
favored technology, Internet, biotech, and telecom stocks reached
historically high levels by the time the Nasdaq Composite peaked above 5000
on March 10. However, market volatility was also extreme. During the first
half, the S&P 500 experienced intraday price swings of 2% or more on 40% of
all trading days, and the Nasdaq Composite fluctuated more than 2% intraday
an incredible 84% of the time. The only comparable periods in market
history were the 1930s and the 1970s - and stocks did not fare well overall
in either decade. In our opinion, the high volatility indicates a lack of
conviction on the part of investors.
A sharp correction - some called it a bear market - took hold in March, as
Internet and biotech stocks, in particular, crashed. Many technology stocks
bounced back quickly in June as investors grew more optimistic that the
Fed's rate hikes might be nearing an end. In fact, by mid-July, after the
close of our reporting period, many biotech, telecom, networking, and
semiconductor stocks had pushed back toward their highs. But most of the
dot-coms, particularly those with the slimmest profit prospects, have not
recovered. While many of the biggest winners of 1999 and early 2000 were
companies with no earnings, investors have begun to demand profitability,
though they are once again willing to pay very high price/earnings (P/E)
ratios for stocks with rapid profit growth.
Value-oriented shares, such as those of retailers and industrial companies,
had a brief moment in the sun during the Nasdaq correction, but faded late
in the period on fears of an economic slowdown. A more positive sign,
however, is that market breadth improved in June as investors also began to
embrace more reasonably priced, steady growth stocks. While large-cap
stocks have generally dominated the market since 1994, small- and mid-cap
shares have taken the lead in the past year. The S&P MidCap Index's robust
8.97% first-half gain was nearly three times that of the Russell 2000 Index
of smaller companies, while the Dow Jones Industrial Average, the S&P 500,
and the Nasdaq Composite all fell in the period.
PORTFOLIO REVIEW
Technology, telecom, and health care stocks once again dominated our top
contributors list for the past 6- and 12-month periods. Both PMC-Sierra, a
leader in chips that help speed network communications, and Analog Devices,
which specializes in analog-to-digital processors that are also important
for communications, were among our top three contributors for the two
periods. Xilinx, a leader in programmable logic chips, made it into the top
10 twice.
In health care, we benefited from powerful rallies in Waters Corp.,
Sepracor, Teva Pharmaceutical Industries, and AmeriSource Health over the
past six months. Waters manufactures equipment, including mass
spectrometers, necessary for drug research and development in the biotech
industry. Investors concluded - correctly, in our view - that one way to
profit from the surge of investment in genetic research, especially in the
early stages, is to invest in companies providing "picks and shovels" for
the prospectors engaged in the human genome gold rush. Sepracor, by
contrast, has been mining the biotech field for years and has struck gold
in the form of a strong pipeline of new products that have already begun
producing accelerating revenues for the company. Teva, expanding beyond its
roots as a leading generic-drug maker, is experiencing considerable success
with the introduction of a powerful new multiple sclerosis drug, Copaxone.
Fears of Internet disintermediation weighed heavily on many of the
portfolio's holdings in late 1999 and early 2000, and none more than
AmeriSource, the fourth-largest drug distributor in the U.S., which was
seen to be particularly vulnerable. The company's stock more than doubled
in the first half as investors concluded that its business would not be
imminently affected by the Internet. To the best of our knowledge,
pharmaceuticals still cannot be downloaded electronically!
Exceptions to this tech and health care hegemony included Waddell & Reed
Financial and BJ Services. Waddell & Reed, a 1998 spin-off from Torchmark,
is a well-run investment manager that is beginning to gain recognition on
Wall Street. BJ Services, which provides oil field equipment and services,
benefited from rising energy prices and an increase in exploration
activity.
The list of our worst performers was dominated by consumer and business
services stocks, such as CIBER, Royal Caribbean Cruises, Hertz, and Circuit
City Stores. CIBER, an information technology firm, experienced problems
transitioning its revenue base from packaged applications and Year 2000
assignments to Internet enablement, the segment now in greatest demand. We
eliminated Royal Caribbean Cruises as industry capacity appears likely to
outstrip demand in the intermediate term. Hertz, the world's largest car
rental firm, continued to grow earnings, but investors sold the stock
anyway, fearing an economic slowdown. We believe that Hertz's stock price
discounts a much more negative scenario than is likely, and we have added
to our position. Circuit City, a category killer well positioned to benefit
from increased consumer spending on all manner of digital devices,
experienced a sales slowdown in May, causing its stock to dive.
We added marginally to our technology and health care holdings, and their
sector weightings rose due to strong relative performance. Exposure to the
consumer sector fell because of weak performance and sales of stocks such
as Royal Caribbean.
Sector Diversification
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12/31/99 6/30/00
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Financial 9% 10%
Health Care 13 16
Consumer 14 8
Technology 17 21
Business Services 30 28
Energy 4 6
Industrial 4 3
Basic Materials -- --
Reserves 9 8
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Total 100% 100%
INVESTMENT STRATEGY AND OUTLOOK
We are in the midst of a remarkable period of technological change.
Advances in many fields - semiconductors, biotechnology, genomics,
telecommunications, and the Internet, to name just a few - are reported
daily. The changes are so rapid that it is often unclear what is important
or relevant, even to industry participants, until much later. The
technology revolution has coincided with two other phenomena that have led
to a combustible stock market environment. The first is a change in the
structure of markets, which we have discussed at length in earlier letters.
The dramatic reduction in trading commissions, driven by huge advances in
processing and communications technology, has made the individual investor
a greater force in the market. Even as individuals have greatly accelerated
their trading activity, intermediaries such as brokers and dealers have
reacted to lower commission structures by reducing the capital devoted to
their own market-making activities. The net result is that stock price
movements are exaggerated in both directions. Finally, it is worth noting
that these changes in technology and market structure have coincided with
the longest economic expansion ever, dulling our collective memories of the
risks inherent in the market.
Momentum investing is again ascendant. In spite of the spring correction,
technology stocks dominated first-half performance in the mid-cap sector,
contributing a significant amount of the indices' return. Virtually all of
this came from stocks with very high valuations, or without any earnings at
all. Many investors are buying stocks based on accelerating earnings per
share, accelerating revenues, or even accelerating increases in stock
prices. This can lead to very high valuations that are hard to justify by
traditional measures. While bulls rationalize high stock prices by noting
the boundless opportunities of many of these companies, the recent
experience of many dot-com companies should be instructive. Price movements
can suddenly reverse, and if fundamental problems develop, stocks can fall
dramatically before they find strong valuation support.
We have always prided ourselves on being able to achieve market-beating
returns while taking below-average risk for a mid-cap growth fund. Risk
reduction is achieved through individual security and sector
diversification as well as a strong bias toward buying growth at reasonable
valuations. Over the long run this has held us in good stead, but in the
last few quarters, our valuation bias strongly hindered returns. One of our
benchmarks, the Russell Midcap Growth Index, is composed of 52% technology
stocks, and 26% of the index's stocks are Internet-related, according to
Prudential Securities. We have not been able to keep pace with this index
while maintaining our valuation discipline (even though our loss in the
second quarter was only about half that of the index). We do not feel it is
appropriate to concentrate more than half of our holdings in a particular
sector like technology.
Some of the many newly minted companies will become the blue chips of the
next decade. We realize that fundamentals in the technology sector are
terrific. But from a stock standpoint, many technology companies have been
driven by price-momentum strategies, and valuations have become divorced
from the fundamentals. Finding good companies at reasonable prices - which
is our philosophy - has not been a market-beating strategy.
New Economy wisdom holds that technology is not cyclical given the
megatrends in global commerce. However, history tells us that in general,
technology, as a capital good, is indeed cyclical. Furthermore, in
fast-evolving areas where product cycles are short, the propensity for
technology firms to remain growth companies over an extended period is
lower than average. This would argue for lower-than-average price-earnings
ratios, not higher, relative to underlying growth rates.
In the last few months, a refreshing reality has returned to the high
growth marketplace. In fact, it almost seems that investors' valuation
methodology has come full circle. A year or so ago, in an attempt to
rationalize bringing unprofitable dot-com companies with unproven business
models public, investors moved from analyzing price-to-earnings ratios to
gauging price-to-sales ratios. By the beginning of this year, as valuations
continued to climb and underwriting standards fell further, investors
collectively migrated from price-to-sales ratios to a true
back-of-the-envelope construct, price-to-market opportunity. In this
surreal environment, dreams seemed reality, and economic reason was
ignored. But in the span of six short months, we have returned to analyzing
earnings again. Eventually, we are confident, investors will rediscover
that P (price) can get too high compared with E (earnings).
Although highly valued stocks have driven investment performance in the
last year, a large part of the market remains untouched by the excitement.
Valuations remain well above historical averages in sectors such as
semiconductors, communications equipment, and biotechnology, but many other
segments, such as business services and telecom services, appear reasonably
priced. We have even added some new holdings in the Internet sector in the
last few months. Mid-caps remain a segment of the market where, on balance,
prices are reasonable compared with earnings, and valuations are especially
attractive compared with large-caps. We believe that the Mid-Cap Growth
Portfolio remains an excellent vehicle for capitalizing on the exciting
opportunities available in mid-cap stocks today.
Respectfully submitted,
Brian W.H. Berghuis
President and Chairman of the
Investment Advisory Committee
John F. Wakeman
Executive Vice President
July 17, 2000
Portfolio Highlights
Contributions to the Change in Net Asset Value Per Share
6 Months Ended 6/30/00
TEN BEST CONTRIBUTORS
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Waddell & Reed Financial 19(cents)
PMC-Sierra 19
Analog Devices 18
Waters Corp. 17
Sepracor 17
Robert Half International 15
BJ Services 15
AmeriSource Health 15
Xilinx 14
Teva Pharmaceutical Industries 13
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Total 162(cents)
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TEN WORST CONTRIBUTORS
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Novell ** -11(cents)
CIBER 10
Royal Caribbean Cruises ** 10
Hertz 9
Synopsys ** 8
Circuit City Stores 7
Affiliated Computer Services 7
Rhythms NetConnections * 7
Intuit 7
VoiceStream Wireless 7
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Total -83(cents)
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12 Months Ended 6/30/00
TEN BEST CONTRIBUTORS
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VoiceStream Wireless 60(cents)
PMC-Sierra 37
Analog Devices 35
Western Wireless 28
Xilinx 25
BJ Services 23
MedImmune 23
Teva Pharmaceutical Industries 21
Sepracor 20
Waddell & Reed Financial 19
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Total 291(cents)
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TEN WORST CONTRIBUTORS
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Galileo International -15(cents)
Warnaco Group ** 14
Affiliated Computer Services 10
Shopko Stores 10
Republic Services 9
Circuit City Stores 8
Ingram Micro ** 8
National Data ** 8
Premier Parks 8
Covance ** 7
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Total -97(cents)
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* Position added
** Position eliminated
Portfolio Highlights
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Twenty-Five Largest Holdings
--------------------------------------------------------------------------------
Percent of
Net Assets
6/30/00
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Waddell & Reed Financial 2.3%
Analog Devices 2.0
Western Wireless 2.0
Waters Corp. 1.6
AmeriSource Health 1.6
Devon Energy 1.5
Sepracor 1.5
VoiceStream Wireless 1.5
Xilinx 1.5
Robert Half International 1.4
Teva Pharmaceutical Industries 1.4
MedImmune 1.4
Federated Investors 1.4
Concord EFS 1.3
Gilead Sciences 1.3
Circuit City Stores 1.2
NOVA Corporation 1.2
Intuit 1.2
Republic Services 1.2
Shire Pharmaceuticals 1.2
Maxim Integrated Products 1.2
PMC-Sierra 1.1
Tech Data 1.1
Viad 1.1
Wellpoint Health Networks 1.1
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Total 35.3%
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Note: Table excludes reserves.
Performance Comparison
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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.
Mid-Cap Growth Portfolio
--------------------------------------------------------------------------------
As of 6/30/00
Fund Index#1 Index#2
12/31/96 10000 10000 10000
6/97 10630 11299 10705
12/97 11880 13225 11723
6/98 13880 14367 13181
12/98 14503 15753 13786
6/99 16129 16836 15635
12/99 17945 18072 20844
6/00 18993 19694 22202
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.
Mid-Cap Growth Portfolio
Periods Ended 6/30/00
Since Inception
1 Year 3 Years Inception Date
--------------------------------------------------------------------------------
17.75% 21.34% 20.15% 12/31/96
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Total returns do not include charges imposed by your insurance company's
separate account. If these were included, performance would have been lower.
Financial Highlights
T. Rowe Price Mid-Cap Growth Portfolio
Unaudited
For a share outstanding throughout each period
--------------------------------------------------------------------------------
6 Months Year 12/31/96
Ended Ended Through
6/30/00 12/31/99 12/31/98 12/31/97
NET ASSET VALUE
Beginning of period $ 17.46 $ 14.27 $ 11.88 $ 10.00
Investment activities
Net investment
income (loss) -- -- (0.01) --
Net realized and
unrealized gain (loss) 1.02 3.37 2.61 1.88
Total from
investment activities 1.02 3.37 2.60 1.88
Distributions
Net realized gain -- (0.18) (0.21) --
NET ASSET VALUE
End of period $ 18.48 $ 17.46 $ 14.27 $ 11.88
---------------------------------------------------
Ratios/Supplemental Data
Total return(diamond) 5.84% 23.73% 22.08% 18.80%
Ratio of total expenses
to average net assets 0.85%! 0.85% 0.85% 0.85%
Ratio of net investment
income (loss)
to average net assets (0.04)%! 0.01% (0.11)% --
Portfolio turnover rate 53.2%! 48.1% 47.8% 40.3%
Net assets, end of
period (in thousands) $231,803 $127,228 $ 29,911 $ 15,272
(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 Mid-Cap Growth Portfolio
June 30, 2000 (Unaudited)
Shares Value
--------------------------------------------------------------------------------
In thousands
Common Stocks 92.0%
FINANCIAL 9.4%
Bank and Trust 0.4%
North Fork Bancorporation 63,300 $ 958
958
Insurance 2.9%
ACE Limited 67,900 1,901
MGIC Investment 36,600 1,665
Protective Life 47,500 1,265
Radian Group 37,000 1,915
6,746
Financial Services 6.1%
Capital One Financial 40,000 1,785
E*TRADE Group * 82,800 1,363
eSpeed (Class A) * 6,200 269
Federated Investors (Class B) 91,600 3,212
Heller Financial 97,500 1,999
NextCard * 17,800 151
Waddell & Reed Financial
(Class A) 96,800 3,176
Waddell & Reed Financial
(Class B) 75,550 2,196
14,151
Total Financial 21,855
HEALTH CARE 15.8%
Pharmaceuticals 3.2%
ALZA * 4,200 248
Shire Pharmaceuticals ADR * 54,000 2,805
Teva Pharmaceutical
Industries ADR 59,200 3,284
Watson Pharmaceuticals * 20,100 1,080
7,417
Biotechnology 7.1%
Abgenix * 8,000 959
Affymetrix * 7,800 1,288
Gilead Sciences * 41,700 2,967
IDEC Pharmaceuticals * 15,900 1,865
Incyte Genomics * 11,000 903
MedImmune * 43,700 3,232
QLT * 21,000 1,631
Sepracor * 28,900 3,486
16,331
Medical Instruments and Devices 2.9%
Millipore 15,700 $ 1,183
Sybron International * 101,600 2,013
Waters Corp. * 29,100 3,632
6,828
Health Care Services 2.6%
Lincare * 79,600 1,958
Omnicare 174,400 1,581
Wellpoint Health Networks * 33,800 2,448
5,987
Total Health Care 36,563
CONSUMER 8.4%
Soft Goods Retailers 0.9%
TJX 115,200 2,160
2,160
Hard Goods Retailers 5.4%
BJ's Wholesale Club * 65,600 2,165
Borders Group * 46,500 724
Circuit City Stores 87,300 2,897
Consolidated Stores * 77,400 929
Family Dollar Stores 124,400 2,433
HomeGrocer.com * 52,200 316
O'Reilly Automotive * 75,700 1,043
ShopKo Stores * 38,500 592
Whole Foods Market * 34,300 1,418
12,517
Consumer Non-Durables 0.6%
Jones Apparel Group * 58,100 1,365
1,365
Restaurants 0.8%
Outback Steakhouse * 65,400 1,913
1,913
Entertainment 0.7%
Premier Parks * 64,500 1,468
1,468
Total Consumer 19,423
TECHNOLOGY 21.1%
Computer Software 6.1%
Electronic Arts * 23,200 1,693
Informatica * 17,900 1,466
Intuit * 69,000 2,850
ISS Group * 15,000 1,481
Macromedia * 12,000 $ 1,160
Mercury Interactive * 9,900 958
NetIQ * 20,000 1,192
Peregrine Systems * 59,800 2,082
Vitria Technology * 20,000 1,223
14,105
Semiconductors and Components 8.2%
Analog Devices * 60,700 4,613
CTS 6,200 279
KLA-Tencor * 31,900 1,869
Lattice Semiconductor * 32,000 2,213
Maxim Integrated Products * 40,900 2,777
Molex (Class A) 37,700 1,321
PMC-Sierra * 15,000 2,665
Xilinx * 40,800 3,370
19,107
Networking and Telecom Equipment 0.2%
Efficient Networks * 6,800 501
501
E-Commerce 3.8%
CNET Networks * 40,000 981
Commerce One * 9,200 418
Digex * 18,000 1,224
DoubleClick * 35,700 1,361
HomeStore.com * 43,600 1,278
Internet Capital Group * 39,800 1,470
Priceline.com * 31,900 1,210
USInternetworking * 43,700 892
8,834
Computer Hardware/Peripherals 2.8%
Flextronics International * 21,000 1,443
Jabil Circuit * 24,000 1,191
Sanmina * 23,100 1,974
SCI Systems * 48,600 1,905
6,513
Total Technology 49,060
BUSINESS SERVICES 27.6%
Telecom Services 7.7%
Allegiance Telecom * 11,300 724
AT&T (Class B) * 33,900 1,123
Charter Communications
(Class A) * 57,800 952
Covad Communications Group * 23,000 370
Crown Castle International * 56,400 2,057
McLeod USA * 43,600 $ 903
Pinnacle Holdings * 34,800 1,866
Rhythms NetConnections * 38,400 482
Rogers Communications * 48,600 1,385
Voicestream Wireless * 29,100 3,385
Western Wireless * 83,100 4,526
17,773
Computer Services 6.3%
Affiliated Computer
Services (Class A) * 67,500 2,232
BISYS Group * 10,000 618
Ceridian * 75,700 1,821
Concord EFS * 116,300 3,024
FIserv * 14,000 605
Galileo International 77,700 1,622
NOVA Corporation * 103,300 2,886
SunGard Data Systems * 55,700 1,727
14,535
Distribution 3.1%
AmeriSource Health * 116,500 3,612
MSC (Class A) * 50,500 1,057
Tech Data * 59,700 2,599
7,268
Media and Advertising 2.5%
Catalina Marketing * 21,800 2,224
Lamar Advertising * 20,300 880
TMP Worldwide * 18,000 1,328
Univision Communications
(Class A) * 13,000 1,345
5,777
Environmental 1.2%
Republic Services (Class A) * 176,800 2,829
2,829
Miscellaneous Business Services 5.5%
CIBER * 87,600 1,161
eLoyalty * 19,900 253
Hertz (Class A) 52,600 1,476
Keane * 76,700 1,659
Manpower 68,000 2,176
Robert Half International * 116,500 3,320
Viad 91,600 2,496
Xpedior * 16,700 230
12,771
Transportation 0.7%
C.H. Robinson Worldwide 16,700 $ 826
Expeditors International of
Washington 15,900 752
1,578
Engineering and Construction 0.6%
Martin Marietta Materials 31,800 1,286
1,286
Total Business Services 63,817
ENERGY 6.0%
Exploration and Production 3.0%
Devon Energy 62,800 3,529
Diamond Offshore Drilling 38,700 1,359
Ocean Energy * 155,000 2,199
7,087
Energy Services 3.0%
BJ Services * 38,500 2,406
Smith International * 28,400 2,068
Tidewater 67,700 2,437
6,911
Total Energy 13,998
INDUSTRIAL 3.3%
Machinery 2.8%
Danaher 31,800 1,572
Pentair 67,700 2,404
Teleflex 38,700 1,434
United Rentals * 65,800 1,127
6,537
Automobiles and Related 0.5%
ITT Industries 35,500 1,078
1,078
Total Industrial 7,615
BASIC MATERIALS 0.3%
Metals and Mining 0.3%
Allegheny Technologies 38,900 $ 700
Total Basic Materials 700
Total Miscellaneous
Common Stocks 0.1% 323
Total Common Stocks (Cost $185,142) 213,354
Short-Term Investments 8.1%
Money Market Funds 8.1%
Government Reserve Investment
Fund, 6.27% # 18,748,106 18,748
Total Short-Term Investments
(Cost $18,748) 18,748
Total Investments in Securities
100.1% of Net Assets (Cost $203,890) $232,102
Other Assets Less Liabilities (299)
NET ASSETS $231,803
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $(26)
Accumulated net realized gain/loss -
net of distributions 5,025
Net unrealized gain (loss) 28,212
Paid-in-capital applicable to 12,542,622
shares of $0.0001 par value capital
stock outstanding; 1,000,000,000
shares of the Corporation authorized 198,592
NET ASSETS $231,803
----------
NET ASSET VALUE PER SHARE $18.48
----------
# 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 Mid-Cap Growth Portfolio
In thousands
Unaudited
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Interest $462
Dividend 255
Total income 717
Expenses
Investment management and administrative 751
Net investment income (loss) (34)
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities 3,033
Change in net unrealized gain or loss on securities 7,016
Net realized and unrealized gain (loss) 10,049
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $10,015
----------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Mid-Cap Growth Portfolio
In thousands
Unaudited
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (34) $ 8
Net realized gain (loss) 3,033 3,171
Change in net unrealized gain or loss 7,016 15,316
Increase (decrease) in net
assets from operations 10,015 18,495
Distributions to shareholders
Net realized gain - (1,220)
Capital share transactions *
Shares sold 104,638 92,776
Distributions reinvested - 1,220
Shares redeemed (10,078) (13,954)
Increase (decrease) in net
assets from capital
share transactions 94,560 80,042
Net Assets
Increase (decrease) during period 104,575 97,317
Beginning of period 127,228 29,911
End of period $231,803 $127,228
*Share information
Shares sold 5,814 6,036
Distributions reinvested - 76
Shares redeemed (559) (919)
Increase (decrease) in shares outstanding 5,255 5,193
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Mid-Cap Growth Portfolio
June 30, 2000 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc. (the corporation) is registered under the
Investment Company Act of 1940. The Mid-Cap Growth Portfolio (the fund), a
diversified, open-end management investment company, is one of the
portfolios established by the corporation and commenced operations on
December 31, 1996. The fund seeks long-term capital appreciation by
investing primarily in the common stocks of mid-cap companies whose
earnings are expected to grow at a faster-than-average rate. 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 $131,237,000 and $43,417,000, respectively, for the
six months ended June 30, 2000.
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, 2000, the cost of investments for federal
income tax purposes was substantially the same as for financial reporting
and totaled $203,890,000. Net unrealized gain aggregated $28,212,000 at
period-end, of which $41,613,000 related to appreciated investments and
$13,401,000 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 $148,000 was payable at June 30, 2000 . 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 six months ended
June 30, 2000, totaled $460,000 and are reflected as interest income in the
accompanying Statement of Operations.
