<PAGE> 1
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO
SEMIANNUAL REPORT [T. ROWE PRICE LOGO]
June 30, 1995
DEAR INVESTOR
In the first half of this year, the bond market all but erased memories of its
lamentable 1994 performance. After an extended period of tightening by the
Federal Reserve, culminating in a hike to a 6% federal funds rate in February,
the economy slowed dramatically from its previous robust pace. Economic growth
tailed off to an annualized rate of 1.6% in the first half, compared with 5.1%
in the last quarter of 1994. The soft landing sought by the Fed -- a
sustainable growth rate with moderate inflation -- clearly hit some bumps.
In recognition of the slowdown and relatively stable inflation, interest
rates plummeted across all maturities, sparking a broad rally in the bond
market. Yields on the five-year Treasury note dropped from 7.8% in January to
5.9% by the end of June; the two-year Treasury note yield fell from 7.7% to
5.7%. As a result, the broad-based Lehman Brothers Aggregate Bond Index rose 5%
in the first quarter and 6.1% in the second quarter, for a resounding first
half return of 11.4%.
The Fed, responding to the softening economy and a moderate annualized
inflation rate of 3.2% in the first half, cut the federal funds target by
one-quarter percentage point in July to 5.75%, its first reduction in nearly
three years.
INTEREST RATE LEVELS
[FIGURE 1]
PERFORMANCE AND STRATEGY REVIEW
Your fund turned in strong absolute performance in the first half. Since the
aim of this fund is to provide shareholders with a high level of income while
minimizing price fluctuations, we manage the fund conservatively with respect
to interest rate and credit risk.
Consequently, during the first quarter of 1995, when it was unclear that
the Fed was finished tightening, we maintained a lower weighted duration than
our peer group average. While a shorter duration helps protect the fund's share
price during periods of rising rates, such as last year, it limits price
appreciation when rates fall. Reflecting our defensive posture, results lagged
our peer group average for the first half.
PERFORMANCE COMPARISON
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Six Months Ended 6/30/95
------------------------
<S> <C>
Limited-Term Bond
Portfolio 5.37%
Lipper Short Investment-Grade
Debt Funds Average 6.46
---------------------------------------------------------------------------
</TABLE>
We made several adjustments to the portfolio during the period to
respond to the slowing economy and declining interest rates. We reduced
mortgage-backed securities in favor of Treasuries, which provide more stable
cash flows when rates are volatile. Treasuries now represent one-third of net
assets, up from 21% at the end of last year. Mortgage securities are down to a
quarter of net assets, from 41% last December.
While the economy remains fundamentally sound, the recent slowdown
raised concerns about lower-rated, high-yield corporate bonds, and we trimmed
the fund's holdings of these securities. To offset the small loss of income
from these adjustments, we slightly lengthened the fund's duration to 2.1
years, more in line with its peer group average.
SUMMARY AND OUTLOOK
In our view, the Fed has entered a period of fine-tuning, which should lead to
more stable interest rates than those of the first half. The economy appears to
remain sound and may pick up later this year. While bonds are not likely to
repeat their torrid price appreciation of the first half, they should produce
solid returns, with income playing a more central role.
We expect to maintain a neutral duration relative to our peer group,
and will continue to seek higher yields consistent with minimal credit risk to
the portfolio. Thank you for investing with T. Rowe Price.
Respectfully submitted,
/s/ EDWARD A. WIESE
-------------------
Edward A. Wiese
Executive Vice President
and Chairman of the
Investment Advisory Committee
July 26, 1995
1
<PAGE> 2
STATISTICAL HIGHLIGHTS
T. Rowe Price Limited-Term Bond Portfolio / June 30, 1995
QUALITY DIVERSIFICATION
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Percent of Net Assets
TRPA Quality Rating* 12/31/94 6/30/95
-------------------- -------- -------
<S> <C> <C>
1 68% 66%
2 0 1
3 11 17
4 16 12
5 4 3
6 1 1
---------------------------------------------------------------------------
Weighted Average 1.92 1.88
===========================================================================
</TABLE>
*On a scale of 1 to 10, with Grade 1 representing highest quality.
SECTOR DIVERSIFICATION*
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Percent of Net Assets
12/31/94 6/30/95
-------- -------
<S> <C> <C>
U.S. Treasury Obligations 21% 33%
U.S. Government
Mortgage-Backed Securities 41 26
Industrials 13 12
Banking and Finance 8 8
Investment Dealers 5 7
Commercial Paper 5 6
Consumer Products and Services 2 5
Utilities 3 2
============================================================================
</TABLE>
*Sectors representing at least 2% of net assets on 6/30/95.
KEY STATISTICS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Periods
Ended 6/30/95
-------------
<S> <C>
Dividend Yield*
--------------------------------------------------
6 Months 7.03%
12 Months 7.18
Dividend Per Share
--------------------------------------------------
6 Months $ 0.17
12 Months 0.35
Change in Price Per Share
--------------------------------------------------
6 Months (From $4.92 to $5.01) $ 0.09
12 Months (From $4.99 to $5.01) 0.02
---------------------------------------------------------------------------
SEC 30-Day Yield 5.60%
---------------------------------------------------------------------------
Weighted Average Maturity 2.8 yrs.
---------------------------------------------------------------------------
Weighted Average Effective Duration 2.1 yrs.
===========================================================================
</TABLE>
*Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same
period.
AVERAGE ANNUAL COMPOUND TOTAL RETURN
---------------------------------------------------------------------------
Periods Ended June 30, 1995
<TABLE>
<CAPTION>
Since Inception
1 Year (5/13/94)
------ ---------
<S> <C>
7.64% 7.16%
===========================================================================
</TABLE>
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Performance does not reflect insurance company contract and other separate
account charges. If these charges were deducted, performance would be lower.
2
<PAGE> 3
STATEMENT OF NET ASSETS
T. Rowe Price Limited-Term Bond Portfolio / June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Amount Value
------------ -------------
<S> <C> <C>
CORPORATE BONDS & NOTES -- 34.1%
-------------------------------------------------------------------------------
BANKING & FINANCE -- 8.1%
Aristar, 7.875%, 2/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000 $ 52,319
Dime Bancorp, Sr. Notes, 10.50%, 11/15/05 . . . . . . . . . . . . . . . . . . 10,000 10,800
Fleet Mortgage Group, Notes, 6.50%, 6/15/00 . . . . . . . . . . . . . . . . . 25,000 24,875
Provident Bank, MTN, 5.00%, 6/15/96 . . . . . . . . . . . . . . . . . . . . . 50,000 49,413
Shawmut, Sr. Notes, 8.125%, 2/1/97 . . . . . . . . . . . . . . . . . . . . . 50,000 51,283
188,690
CONSUMER PRODUCTS & SERVICES -- 4.6%
Columbia HCA, 6.41%, 6/15/00 . . . . . . . . . . . . . . . . . . . . . . . . 15,000 14,981
6.50%, 3/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 14,964
Federated Department Stores, Sr. Notes, 10.00%, 2/15/01 . . . . . . . . . . . 20,000 21,450
National Medical Enterprises, Sr. Notes, 10.125%, 3/1/05 . . . . . . . . . . 10,000 10,563
Pepsico, MTN, 6.80%, 5/15/00 . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,451
President Riverboat Casinos, Sr. Notes, (144a), 13.00%, 9/15/01 . . . . . . . 25,000 21,500
108,909
INDUSTRIALS -- 11.5%
Dow Capital, Deb., 8.25%, 2/15/96 . . . . . . . . . . . . . . . . . . . . . . 25,000 25,286
Exide, Sr. Notes, (144a), 10.00%, 4/15/05 . . . . . . . . . . . . . . . . . . 5,000 5,138
Ford Capital, Sr. Notes, 9.00%, 6/1/96 . . . . . . . . . . . . . . . . . . . 50,000 51,217
General Motors Acceptance Corporation, Sr. Notes, 8.625%, 7/15/96 . . . . . . 50,000 51,110
Lyondell Petrochemical, Sr. Notes, 9.95%, 6/1/96 . . . . . . . . . . . . . . 25,000 25,685
McDonnell Douglas, 8.625%, 4/1/97 . . . . . . . . . . . . . . . . . . . . . . 25,000 25,902
Tenneco Credit, Sr. Notes, 10.125%, 12/1/97 . . . . . . . . . . . . . . . . . 25,000 26,955
Toyota Motor Credit, MTN, 6.80%, 4/15/98 . . . . . . . . . . . . . . . . . . 30,000 30,550
Westinghouse Electric, 7.75%, 4/15/96 . . . . . . . . . . . . . . . . . . . . 25,000 25,153
266,996
INVESTMENT DEALERS -- 6.9%
Lehman Brothers Holdings, Sr. Notes, 5.50%, 6/15/96 . . . . . . . . . . . . . 50,000 49,318
Morgan Stanley Group, Sr. Notes, 8.00%, 10/15/96 . . . . . . . . . . . . . . 50,000 50,990
Salomon, 7.75%, 5/15/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 30,594
Smith Barney Holdings, 7.00%, 5/15/00 . . . . . . . . . . . . . . . . . . . . 30,000 30,333
161,235
PETROLEUM -- 1.0%
Occidental Petroleum, MTN, 5.85%, 11/9/98 . . . . . . . . . . . . . . . . . . 25,000 24,395
UTILITIES -- 2.0%
Consumers Power, 1st Mtg. Bonds, 5.875%, 7/1/96 . . . . . . . . . . . . . . . 23,000 22,812
Long Island Lighting, 1st Mtg. Bonds, 5.50%, 4/1/97 . . . . . . . . . . . . . 25,000 24,427
47,239
------------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES (COST $789,689) 797,464
EQUITY & CONVERTIBLE SECURITIES -- 0.0%
-------------------------------------------------------------------------------
President Riverboat Casinos, Warrants (Cost $885) . . . . . . . . . . . . . . 221 wts. 663
</TABLE>
3
<PAGE> 4
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO / STATEMENT OF NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
Amount Value
----------- ------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES -- 26.2%
-------------------------------------------------------------------------------
U.S. GOVERNMENT GUARANTEED OBLIGATIONS -- 23.2%
Government National Mortgage Assn., I, 10.00%, 11/15/09 - 4/15/19 . . . . . . $ 181,226 $ 197,788
Midget, I, 10.00%, 11/15/00 - 2/15/01 . . . . . . . . . . . . . . . . . . . 164,188 172,858
10.50%, 4/15/98 - 6/15/99 . . . . . . . . . . . . . . . . . . . . . . . . 161,709 170,552
541,198
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.0%
Federal Home Loan Mortgage, 6.00%, 4/1/99 . . . . . . . . . . . . . . . . . . 50,598 50,123
8.25%, 7/15/12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 20,756
70,879
-------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED SECURITIES (COST $604,837) 612,077
U.S. GOVERNMENT OBLIGATIONS -- 32.5%
-------------------------------------------------------------------------------
U.S. Treasury Notes, 6.875%, 3/31/00 . . . . . . . . . . . . . . . . . . . . 30,000 31,050
7.50%, 5/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 53,828
7.75%, 1/31/00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000 288,479
8.00%, 10/15/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 102,656
9.125%, 5/15/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 27,671
9.375%, 4/15/96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 256,915
-------------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $747,782) 760,599
ASSET-BACKED SECURITIES -- 0.9%
-------------------------------------------------------------------------------
CREDIT CARD-BACKED -- 0.9%
Banc One Credit Card Master Trust, 6.15%, 7/15/02 (Cost $19,969) . . . . . . 20,000 19,875
COMMERCIAL PAPER -- 6.2%
-------------------------------------------------------------------------------
Cargill Financial Services, 6.10%, 7/3/95 . . . . . . . . . . . . . . . . . . 27,000 26,986
Corporate Asset Funding, 6.125%, 7/3/95 . . . . . . . . . . . . . . . . . . . 118,000 117,940
-------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST $144,926) 144,926
===============================================================================================================================
TOTAL INVESTMENTS IN SECURITIES -- 99.9% OF NET ASSETS (COST $2,308,088) . . $ 2,335,604
===============================================================================================================================
OTHER ASSETS LESS LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 1,927
------------
NET ASSETS CONSIST OF: Value
-----------
Accumulated net investment income - net of distributions . . . . . . . . . . (147)
Accumulated net realized gain/loss - net of distributions . . . . . . . . . . (20,297)
Net unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . 27,516
Paid-in-capital applicable to 466,290 shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized . . . . . . . . . . . . . . . 2,330,459
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,337,531
=============
NET ASSET VALUE PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.01
======
===============================================================================================================================
</TABLE>
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.
MTN- Medium Term Notes
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
STATEMENT OF OPERATIONS
T. Rowe Price Limited-Term Bond Portfolio / Six Months Ended June 30, 1995
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,924
Expenses
Investment management and administrative . . . . . . . . . . . . . . . . . . . . 7,649
--------------
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,275
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on securities . . . . . . . . . . . . . . . . . . . . . . (9,871)
Change in net unrealized gain or loss on securities . . . . . . . . . . . . . . . . 52,975
--------------
Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . . . . . . 43,104
--------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . $ 118,379
=============
===============================================================================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
T. Rowe Price Limited-Term Bond Portfolio (Unaudited)
<TABLE>
<CAPTION>
May 13, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,275 $ 85,758
Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . (9,871) (10,426)
Change in net unrealized gain or loss . . . . . . . . . . . . . . . . . 52,975 (25,459)
-------------- --------------
Increase (decrease) in net assets from operations . . . . . . . . . . . 118,379 49,873
-------------- --------------
Distributions to shareholders
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . (75,422) (85,758)
-------------- --------------
Capital share transactions*
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,123 1,931,000
Distributions reinvested . . . . . . . . . . . . . . . . . . . . . . . . 76,295 85,757
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (69,596) (120)
-------------- -------------
Increase (decrease) in net assets from capital share transactions . . . 213,822 2,016,637
-------------- -------------
Increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . 256,779 1,980,752
NET ASSETS
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,080,752 100,000
-------------- -------------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,337,531 $ 2,080,752
============== ==============
===============================================================================================================================
*Share information
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,677 386,164
Distributions reinvested . . . . . . . . . . . . . . . . . . . . . . . . 15,319 17,195
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,041) (24)
-------------- -------------
Increase (decrease) in shares outstanding . . . . . . . . . . . . . . . 42,955 403,335
============== =============
===============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
T. Rowe Price Limited-Term Bond Portfolio / June 30, 1995 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Fixed Income Series, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The Limited-Term Bond Portfolio (the fund),
a diversified, open-end management investment company, is a portfolio
established by the Corporation. 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.
A) Valuation - Debt securities are generally traded in the over-the-counter
market. Investments in securities with remaining maturities of one year or more
are stated at fair value as furnished by dealers who make markets in such
securities or by an independent pricing service, which considers yield or price
of bonds of comparable quality, coupon, maturity, and type, as well as prices
quoted by dealers who make markets in such securities. Securities with
remaining maturities of less than one year are stated at fair value, which is
determined by using a matrix system that establishes a value for each security
based on money market yields. Equity securities are valued at the last bid
price.
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.
B) Premiums and Discounts - Except for mortgage-backed securities, premiums and
discounts on debt securities are amortized for both financial and tax reporting
purposes. In accordance with federal income tax regulations, market discounts
and premiums on mortgage-backed securities are included in the gain or loss
recorded upon principal repayment of the security for financial reporting
purposes and ordinary income for tax purposes.
C) 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 an identified cost basis. 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 $340,121 and $109,896, respectively, for the
six months ended June 30, 1995. Purchases and sales of U.S. government
securities aggregated $379,367 and $413,942, respectively, for the six months
ended June 30, 1995.
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. The fund has an unused realized capital loss carryforward for
federal income tax purposes of $2,217, which expires in 2002.
At June 30, 1995, the aggregate cost of investments for federal income tax
and financial reporting purposes was $2,308,088 and net unrealized gain
aggregated $27,516, of which $30,476 related to appreciated investments and
$2,960 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, computed daily and paid monthly, equal to 0.70% 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.
6
<PAGE> 7
FINANCIAL HIGHLIGHTS
T. Rowe Price Limited-Term Bond Portfolio (Unaudited)
<TABLE>
<CAPTION>
For a share outstanding throughout each period
------------------------------------------------
May 13, 1994
Six Months (Commencement of
Ended Operations) to
June 30, 1995 December 31, 1994
------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . . . . . . . $ 4.92 $ 5.00
------- -------
Investment Activities
Net investment income . . . . . . . . . . . . . . . . . . . . 0.17 0.21
Net realized and unrealized gain (loss) . . . . . . . . . . . 0.09 (0.08)
------- -------
Total from Investment Activities . . . . . . . . . . . . . . . 0.26 0.13
------- -------
Distributions
Net investment income . . . . . . . . . . . . . . . . . . . . (0.17) (0.21)
------- -------
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . . . . . . . $ 5.01 $ 4.92
======= =======
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . 5.37% 2.62%
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . 0.70%+ 0.70%+
Ratio of Net Investment Income
to Average Net Assets . . . . . . . . . . . . . . . . . . . . 6.89%+ 6.63%+
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . 52.7%+ 146.0%+
Net Assets, End of Period . . . . . . . . . . . . . . . . . . . $2,337,531 $2,080,752
==============================================================================================================
</TABLE>
+ Annualized.
7
<PAGE> 8
EDGAR APPENDIX
Edgar description: A 4-line chart of interest rate levels on the current coupon
GNMA, 5-Year Treasury note, 2-Year Treasury note and fed funds rate from
12/31/94 to 6/30/95.
