T. Rowe Price Personal Strategy Balanced Portfolio
Annual Report
December 31, 1995
Invest With Confidence
T. Rowe Price
Dear Investor
The portfolio's inaugural year was exhilarating. U.S. stock and bond markets
enjoyed broad-based rallies, propelled by nearly perfect conditions: falling
interest rates, rising corporate earnings, a slowing yet fundamentally sound
economy, subdued inflation, and prospects for a balanced budget. The U.S.
stock market, as measured by the unmanaged Standard & Poor's 500 Stock Index,
continued its bull run through the second half, rising more than 14% and
bringing its full year gain to 37.6%, the best since 1958.
While large-capitalization, technology, financial, and health care
stocks led the way, the bull charged into nearly every equity category. The
technology rally faded in the fourth quarter, hurt by profit-taking and
earnings disappointments at some semiconductor firms, but the markets as a
whole suffered no serious correction all year.
After sputtering briefly in the summer, bonds regained momentum on
continued signs of subdued inflation and renewed budget-balancing efforts in
Washington. As measured by the Lehman Brothers Aggregate Bond Index, the
market returned 18.5% for 1995 and just over 6% for the second half. Over the
last six months, interest rates fell across all maturities as the market
expected further easing by the Federal Reserve to help the private sector
compensate for anticipated slower growth in federal spending. Indeed, in
December the Fed lowered the key federal funds target to 5.5%, its second cut
since July. As the year ended, the benchmark 30-year Treasury bond yield
dipped below 6%, its lowest level since 1993 and nearly two percentage points
lower than a year ago.
CHART 1 Interest Rate Levels
Foreign stocks, hampered earlier in the year by fallout from the Mexican
peso devaluation, rebounded over the last six months to post solid gains for
the year, though still well below their U.S. counterparts. Europe was the best
performing region over the year. The Japanese market, plagued by deflation and
a banking loan crisis, improved in the last quarter, reflecting a weaker yen
and the slow economic recovery that began in midyear. While some emerging
markets recovered in the second half - notably Mexico and Brazil - they
declined as a group for the year, dragged down by overall poor performance in
Latin America.
High-quality foreign bonds lost some momentum in the last six months as
the dollar strengthened against major foreign currencies, dampening returns to
U.S. investors. Nevertheless, buoyed by the dollar's weakness earlier in the
year, foreign bonds provided double-digit returns for the year, with the
Salomon World Government Bond Index (excluding the U.S.) gaining more than 19%
in dollar terms.
Performance and Strategy Review
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% variations permitted for
each asset class. The portfolio had a strong year, keeping pace with its
benchmark index in the second half, but lagging slightly for the full year
because of its lower exposure to stocks.
Performance Comparison
Periods Ended 12/31/95
6 Months 12 Months
________ _________
Personal Strategy
Balanced Portfolio 11.0% 28.7%
Combined Index Portfolio* 11.2 29.7
*An unmanaged portfolio composed of 60% stocks (S&P 500) and 40% bonds (Lehman
Brothers Aggregate Bond Index).
At year-end, the portfolio had 56% of its assets in stocks, 32% in
bonds, and 12% in cash reserves. We remained slightly underweighted in stocks
because, in our view, valuations have risen to uncomfortable levels. The
economic expansion is now in its fifth year and growth is expected to slow in
1996. Therefore, the portfolio tilted toward growth stocks that are expected
to sustain earnings momentum even during a slowdown.
We remained slightly overweighted in bonds, but reduced our exposure by
6% over the last six months. While economic fundamentals for bonds as a whole
remain favorable, our expectations dimmed somewhat for corporate bonds,
especially high-yield issues, and for foreign bonds, leading us to trim these
positions. The slowing pace of earnings growth could cause corporate bonds to
underperform, particularly lower-quality issues that are more vulnerable to
the economy than to interest rate changes. Meanwhile, we expect the U.S.
dollar to strengthen against most currencies in coming months, dampening the
return on foreign bonds for U.S. investors.
We held the proceeds in cash equivalents, more than doubling the
portfolio's position since last June, as a short-term precautionary measure.
After their strong advances in 1995, stocks - and to a lesser degree bonds -
are susceptible to a pullback. We are ready to reinvest our cash in the market
that offers the best value.
CHART 2 Asset Allocation
Benchmark Range
______________________________________
Money Markets 10% 0 - 20%
Bonds 30% 20 - 40%
Stocks 60% 50 - 70%
Summary and Outlook
The stock and bond markets are unlikely to repeat their robust 1995
performances. However, the bond market's fundamentals continue to look good:
stable to lower interest rates, subdued inflation, and slower economic growth
as the expansion matures. On the other hand, the stock market is more
vulnerable to a retreat, especially sectors that had the most spectacular
gains in 1995. If that occurs, we will be looking for issues available at
attractive valuations.
Looking abroad, foreign bond returns to U.S. investors may be dampened
if, as we expect, the dollar strengthens against most currencies. Conversely,
we believe foreign stocks offer good value at this time. As global economies
improve, especially in Japan, the performance of these markets should follow
suit.
Respectfully submitted,
Peter Van Dyke
President and Chairman of the
Investment Advisory Committee
January 31, 1996
A Word on Market Corrections
After the stock market's spectacular run in 1995, concerns about a
"correction" have intensified. Most market observers consider a correction to
be a short and sometimes steep decline following a period of rising prices.
Moderate corrections of around 10% have been quite common, occurring on
average about once every two years over the last half-century, according to
Ned Davis Research.
The market as measured by the Dow Jones Industrial Average has not
experienced a moderate correction since early 1994. Furthermore, the Dow last
hit a bear market bottom - defined as a drop of at least 20% - in October
1990. Therefore, it would not be surprising to see a modest pullback in 1996,
on the order of 5% to 10%.
Corrections are not only common, but can be beneficial for long-term
investors, especially those who invest in regular amounts through dollar cost
averaging. In a correction, overall stock prices decline, often leading to
more attractive valuations and good buying opportunities. History has shown
that investors who continue to buy through a downturn fare quite well. In
fact, the Dow has proven resilient in the aftermath of past corrections of
around 10%, taking an average of just six months to recover its losses,
according to Ned Davis. (To realize the benefits of dollar cost averaging, you
should be prepared to continuously purchase securities over a period of time,
in up and down markets. This approach does not assure a gain nor protect you
from a loss in declining markets.)
We raise the issue of a market correction not as a prediction, but as a
reminder that stock prices do not move in only one direction. If you are
satisfied that your investments are appropriate for your various objectives,
we recommend that you stay the course when a correction eventually occurs.
Average Annual Compound Total Return
Periods Ended December 31, 1995
Since Inception
1 Year (12/30/94)
_______ ________________
28.7% 28.7%
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.
Chart 3 Performance Comparison
Sector Diversification
December 31, 1995
Percent of
Net Assets
___________
Money Markets 11.9%
_____________________________________________________________________________
Commercial Paper 14.2
Other Assets Less Liabilities -2.3
Bonds 32.2
_____________________________________________________________________________
Corporate 15.8
U.S. Government Mortgage-Backed 10.0
U.S. Government Obligations/Agencies 4.3
Foreign Government Obligations/Agencies 2.1
Stocks 55.9
_____________________________________________________________________________
Ten Largest Holdings 13.2
Fannie Mae 1.8
Freddie Mac 1.6
Philip Morris 1.4
General Electric 1.4
PepsiCo 1.3
Great Lakes Chemical 1.2
Amgen 1.2
Pfizer 1.1
Johnson & Johnson 1.1
Schlumberger 1.1
Statement of Net Assets
T. Rowe Price Personal Strategy Balanced Portfolio / December 31, 1995
Value
Common Stocks - 55.9%
FINANCIAL - 8.6%
_____________________________________________________________________________
BANK AND TRUST - 2.3%
280 shs Chemical Banking. . . . . . . . . $ 16,450
500 Integra Financial . . . . . . . . 31,500
540 J. P. Morgan. . . . . . . . . . . 43,335
500 KeyCorp . . . . . . . . . . . . . 18,125
320 Mellon Bank . . . . . . . . . . . 17,200
126,610
INSURANCE - 1.9%
250 American International Group. . . 23,125
700 PartnerRe Holdings. . . . . . . . 19,119
970 UNUM. . . . . . . . . . . . . . . 53,350
1,200 Willis-Corroon ADR. . . . . . . . 13,950
109,544
FINANCIAL SERVICES - 4.4%
550 American Express. . . . . . . . . 22,756
830 Fannie Mae. . . . . . . . . . . . 103,024
1,070 Freddie Mac . . . . . . . . . . . 89,345
130 Sallie Mae. . . . . . . . . . . . 8,564
700 Zurich Reinsurance. . . . . . . . 21,262
244,951
Total Financial 481,105
UTILITIES - 2.5%
_____________________________________________________________________________
TELEPHONE - 1.0%
900 ALLTEL. . . . . . . . . . . . . . 26,550
120 AT&T. . . . . . . . . . . . . . . 7,770
360 SBC Communications. . . . . . . . 20,700
55,020
ELECTRIC UTILITIES - 1.5%
1,800 Centerior Energy. . . . . . . . . 15,975
670 Entergy . . . . . . . . . . . . . 19,597
1,300 Niagara Mohawk. . . . . . . . . . 12,513
250 PacifiCorp. . . . . . . . . . . . 5,313
440 Texas Utilities . . . . . . . . . 18,095
400 Unicom. . . . . . . . . . . . . . 13,100
84,593
Total Utilities 139,613
CONSUMER NONDURABLES - 17.4%
_____________________________________________________________________________
BEVERAGES - 2.7%
340 Anheuser-Busch. . . . . . . . . . 22,738
780 Coca-Cola . . . . . . . . . . . . 57,915
1,300 PepsiCo . . . . . . . . . . . . . 72,637
153,290
FOOD PROCESSING - 2.6%
370 Campbell. . . . . . . . . . . . . 22,200
230 CPC International . . . . . . . . 15,784
230 General Mills . . . . . . . . . . 13,283
300 Pioneer Hi-Bred . . . . . . . . . 16,687
380 Ralston Purina. . . . . . . . . . 23,702
1,670 Sara Lee. . . . . . . . . . . . . 53,231
144,887
HOSPITAL SUPPLIES/HOSPITAL
MANAGEMENT - 1.2%
460 shs Baxter International. . . . . . . $ 19,263
341 * Boston Scientific . . . . . . . . 16,709
640 Columbia/HCA Healthcare . . . . . 32,480
68,452
PHARMACEUTICALS - 7.1%
220 American Home Products. . . . . . 21,340
1,100 * Amgen . . . . . . . . . . . . . . 65,244
290 Bristol-Myers Squibb. . . . . . . 24,904
200 Eli Lilly . . . . . . . . . . . . 11,250
740 Johnson & Johnson . . . . . . . . 63,362
500 Merck . . . . . . . . . . . . . . 32,875
600 * Perrigo . . . . . . . . . . . . . 7,162
1,020 Pfizer. . . . . . . . . . . . . . 64,260
217 * Pharmacia & Upjohn. . . . . . . . 8,409
600 Schering-Plough . . . . . . . . . 32,850
800 SmithKline Beecham ADR. . . . . . 44,400
240 Warner-Lambert. . . . . . . . . . 23,310
399,366
MISCELLANEOUS CONSUMER PRODUCTS - 3.6%
300 Brunswick . . . . . . . . . . . . 7,200
220 Colgate-Palmolive . . . . . . . . 15,455
805 * CUC International . . . . . . . . 27,471
770 Harcourt General. . . . . . . . . 32,244
470 Hasbro. . . . . . . . . . . . . . 14,570
540 Newell. . . . . . . . . . . . . . 13,972
860 Philip Morris . . . . . . . . . . 77,830
120 Tambrands . . . . . . . . . . . . 5,730
230 UST . . . . . . . . . . . . . . . 7,676
202,148
BIOTECHNOLOGY - 0.2%
314 Guidant . . . . . . . . . . . . . 13,267
Total Consumer Nondurables 981,410
CONSUMER SERVICES - 6.4%
_____________________________________________________________________________
GENERAL MERCHANDISERS - 0.7%
200 Dayton Hudson . . . . . . . . . . 15,000
1,000 * Price/Costco. . . . . . . . . . . 15,375
600 TJX . . . . . . . . . . . . . . . 11,325
41,700
SPECIALTY MERCHANDISERS - 1.5%
600 Circuit City Stores . . . . . . . 16,575
300 * Federated Department Stores . . . 8,250
700 Home Depot. . . . . . . . . . . . 33,512
700 * Revco . . . . . . . . . . . . . . 19,775
370 * Toys "R" Us . . . . . . . . . . . 8,048
86,160
ENTERTAINMENT AND LEISURE - 1.3%
570 Disney. . . . . . . . . . . . . . 33,630
270 McDonald's. . . . . . . . . . . . 12,184
220 Reader's Digest (Class B) . . . . 10,395
70 shs* Viacom (Class A). . . . . . . . . $ 3,211
315 * Viacom (Class B). . . . . . . . . 14,923
74,343
MEDIA AND COMMUNICATIONS - 2.7%
120 Dun & Bradstreet. . . . . . . . . 7,770
715 Gaylord Entertainment . . . . . . 19,841
500 Reuters ADR . . . . . . . . . . . 27,656
800 Time Warner . . . . . . . . . . . 30,300
362 Times Mirror (Class A). . . . . . 12,263
300 Turner Broadcasting
Systems (Class B) . . . . . . . . 7,800
1,240 Vodafone ADR. . . . . . . . . . . 43,710
149,340
RESTAURANTS - 0.2%
930 Darden Restaurants. . . . . . . . 11,044
Total Consumer Services 362,587
CONSUMER CYCLICALS - 1.5%
_____________________________________________________________________________
MISCELLANEOUS CONSUMER DURABLES - 1.5%
1,500 Corning . . . . . . . . . . . . . 48,000
500 Eastman Kodak . . . . . . . . . . 33,500
Total Consumer Cyclicals 81,500
TECHNOLOGY - 4.6%
_____________________________________________________________________________
ELECTRONIC COMPONENTS - 1.7%
500 * Altera. . . . . . . . . . . . . . 24,844
800 * Cirrus Logic. . . . . . . . . . . 15,850
200 Intel . . . . . . . . . . . . . . 11,362
300 * Maxim Integrated Products . . . . 11,550
200 Motorola. . . . . . . . . . . . . 11,400
600 * Xilinx. . . . . . . . . . . . . . 18,225
93,231
ELECTRONIC SYSTEMS - 0.7%
300 Hewlett-Packard . . . . . . . . . 25,125
300 Honeywell . . . . . . . . . . . . 14,587
39,712
INFORMATION PROCESSING - 0.3%
210 IBM . . . . . . . . . . . . . . . 19,268
TELECOMMUNICATIONS - 0.6%
100 * Cisco Systems . . . . . . . . . . 7,469
400 * DSC Communications. . . . . . . . 14,800
500 * PanAmSat. . . . . . . . . . . . . 11,062
33,331
AEROSPACE AND DEFENSE - 0.8%
120 AlliedSignal. . . . . . . . . . . 5,700
520 Boeing. . . . . . . . . . . . . . 40,755
46,455
OFFICE AUTOMATION - 0.3%
400 * Ceridian. . . . . . . . . . . . . 16,500
SPECIALIZED COMPUTER - 0.2%
400 shs* Silicon Graphics. . . . . . . . . $ 11,000
Total Technology 259,497
CAPITAL EQUIPMENT - 2.5%
_____________________________________________________________________________
ELECTRICAL EQUIPMENT - 2.0%
300 Emerson Electric. . . . . . . . . 24,525
200 Exide . . . . . . . . . . . . . . 9,175
1,080 GE. . . . . . . . . . . . . . . . 77,760
111,460
MACHINERY - 0.5%
180 Deere . . . . . . . . . . . . . . 6,345
600 * Varity. . . . . . . . . . . . . . 22,275
28,620
Total Capital Equipment 140,080
BUSINESS SERVICES AND TRANSPORTATION - 3.9%
_____________________________________________________________________________
COMPUTER SERVICE AND SOFTWARE - 1.9%
270 Automatic Data Processing . . . . 20,048
517 First Data. . . . . . . . . . . . 34,574
200 * Intuit. . . . . . . . . . . . . . 15,625
180 * Microsoft . . . . . . . . . . . . 15,806
300 * Oracle Systems. . . . . . . . . . 12,713
150 * Sybase. . . . . . . . . . . . . . 5,381
104,147
DISTRIBUTION SERVICES - 1.2%
740 Alco Standard . . . . . . . . . . 33,762
640 Cardinal Health . . . . . . . . . 35,040
68,802
MISCELLANEOUS BUSINESS SERVICES - 0.4%
170 Deluxe Corp.. . . . . . . . . . . 4,930
500 WMX Technologies. . . . . . . . . 14,938
19,868
AIRLINES - 0.4%
320 * AMR . . . . . . . . . . . . . . . 23,760
Total Business Services and Transportation 216,577
ENERGY - 4.5%
_____________________________________________________________________________
ENERGY SERVICES - 1.3%
200 Halliburton . . . . . . . . . . . 10,125
890 Schlumberger. . . . . . . . . . . 61,632
71,757
INTEGRATED PETROLEUM - DOMESTIC - 1.9%
480 Atlantic Richfield. . . . . . . . 53,160
220 British Petroleum ADR . . . . . . 22,467
230 Unocal. . . . . . . . . . . . . . 6,699
1,360 USX-Marathon. . . . . . . . . . . 26,520
108,846
INTEGRATED PETROLEUM - INTERNATIONAL - 1.3%
210 shs Exxon . . . . . . . . . . . . . . $ 16,826
180 Mobil . . . . . . . . . . . . . . 20,160
100 Royal Dutch Petroleum ADR . . . . 14,113
270 Texaco. . . . . . . . . . . . . . 21,195
72,294
Total Energy 252,897
PROCESS INDUSTRIES - 2.9%
_____________________________________________________________________________
DIVERSIFIED CHEMICALS - 0.4%
300 DuPont. . . . . . . . . . . . . . 20,963
SPECIALTY CHEMICALS - 2.0%
270 3M. . . . . . . . . . . . . . . . 17,887
700 A. Schulman . . . . . . . . . . . 15,663
950 Great Lakes Chemical. . . . . . . 68,400
400 Pall. . . . . . . . . . . . . . . 10,750
112,700
PAPER AND PAPER PRODUCTS - 0.3%
400 International Paper . . . . . . . 15,150
100 Mead. . . . . . . . . . . . . . . 5,225
20,375
FOREST PRODUCTS - 0.2%
170 Georgia-Pacific . . . . . . . . . 11,666
Total Process Industries 165,704
BASIC MATERIALS - 1.1%
_____________________________________________________________________________
METALS - 0.8%
180 Alcoa . . . . . . . . . . . . . . 9,517
140 * Alumax. . . . . . . . . . . . . . 4,288
140 Cyprus Amax Minerals. . . . . . . 3,658
500 Nucor . . . . . . . . . . . . . . 28,562
46,025
MINING - 0.3%
670 Barrick Gold. . . . . . . . . . . 17,671
Total Basic Materials 63,696
Total Common Stocks (Cost $2,726,183) 3,144,666
Corporate Bonds - 15.8%
$ 10,000 Arcadian, Sr. Notes, Series
B, 10.75%, 5/1/05 . . . . . . . . 11,050
60,000 B.F. Saul, REIT, Sr. Secured
Notes, 11.625%, 4/1/02. . . . . . 61,200
50,000 Black and Decker, MTN,
6.97%, 9/26/96. . . . . . . . . . 50,450
30,000 Boeing, 6.35%, 6/15/03. . . . . . 30,549
1,227 Carson Pirie Scott, 13.00%,
3/28/05 . . . . . . . . . . . . . 1,236
50,000 Citicorp, 7.75%, 6/15/06. . . . . 55,589
$ 10,000 Coca-Cola Bottling Group, Sr. Sub.
Notes, 9.00%, 11/15/03. . . . . . $ 10,000
10,000 Coinmachine, Sr. Notes,
(144a), 11.75%, 11/15/05. . . . . 10,175
25,000 Coleman, Sr. Sec. Notes,
Zero Coupon, 5/27/98. . . . . . . 20,250
50,000 Coltec Industries, Sr. Sub.
Deb., 10.25%, 4/1/02. . . . . . . 51,375
25,000 Consolidated Cigar, Sr. Sub.
Notes, 10.50%, 3/1/03 . . . . . . 25,625
60,000 Delta, MTN, 8.625%,
6/15/04 . . . . . . . . . . . . . 65,490
10,000 Exide, Sr. Notes, 10.75%,
12/15/02. . . . . . . . . . . . . 10,850
10,000 Ferrellgas, Sr. Notes,
10.00%, 8/1/01. . . . . . . . . . 10,700
10,000 First Federal Financial,
11.75%, 10/1/04 . . . . . . . . . 9,800
25,000 GMAC, 7.125%, 6/1/99. . . . . . . 25,960
60,000 GTE Hawaiian Telephone,
7.00%, 2/1/06 . . . . . . . . . . 62,755
25,000 HMC Acquisition Properties
(144a), 9.00%, 12/15/07 . . . . . 25,250
25,000 IMC Fertilizer Group,
Sr. Notes, 9.45%, 12/15/11. . . . 27,000
25,000 IVAC, Sr. Notes, 9.25%,
12/1/02 . . . . . . . . . . . . . 25,875
20,000 Lenfest, 8.375%, 11/1/05. . . . . 20,075
5,000 Loral, 8.375%, 6/15/24. . . . . . 5,742
50,000 Pennsylvania Power and
Light, 6.50%, 4/1/05. . . . . . . 51,092
40,000 Petroleum Heat & Power,
10.125%, 4/1/03 . . . . . . . . . 39,200
35,000 Portola Packaging, Sr. Notes,
10.75%, 10/1/05 . . . . . . . . . 36,225
10,000 Quorum Health Group,
11.875%, 12/15/02 . . . . . . . . 11,200
10,000 Ralphs Grocery New, Sr.
Notes, 10.45%, 6/15/04. . . . . . 10,150
20,000 Repap New Brunswick, Sr. Secured
Notes, 9.875%, 7/15/00. . . . . . 19,800
10,000 Riverwood International, Sr.
Notes, 10.75%, 6/15/00. . . . . . 10,750
10,000 Safeway, 9.875%, 3/15/07. . . . . 11,600
10,000 Silgan, Sr. Sub. Notes,
11.75%, 6/15/02 . . . . . . . . . 10,700
10,000 Sinclair Broadcasting, Sr. Sub.
Notes, 10.00%, 9/30/05. . . . . . 10,200
25,000 Tenet Healthcare, Sr. Notes,
8.625%, 12/1/03 . . . . . . . . . 26,250
20,000 Texas Utilities Electric,
7.875%, 4/1/24. . . . . . . . . . 20,871
$ 10,000 UCAR Global Enterprises,
12.00%, 1/15/05 . . . . . . . . . $ 11,550
Total Corporate Bonds (Cost $852,305) 886,584
Foreign Government Obligations/Agencies - 2.1%
50,000 DEM Bundesrepublic, 6.50%,
7/15/03,. . . . . . . . . . . . . 36,304
40,000,000 ITL Italian Government
Bonds, 8.50%, 8/1/04. . . . . . . 22,187
4,000,000 JPY Japan, 4.50%, 6/20/03 . . . . . . 42,323
10,000 GBP United Kingdom Treasury
Notes, 8.50%, 12/7/05 . . . . . . 16,686
Total Foreign Government
Obligations/Agencies (Cost $109,166) 117,500
U.S. Government Mortgage-Backed Securities - 10.0%
Government National Mortgage Assn.
$ 98,400 6.50%, 4/15/24. . . . . . . . . . 97,650
150,000 7.00%, 5/15/23. . . . . . . . . . 151,882
30,497 7.50%, 7/15/25. . . . . . . . . . 31,857
123,583 8.00%, 10/15/25 . . . . . . . . . 128,841
101,258 8.50%, 12/15/24 . . . . . . . . . 106,389
39,319 11.50%, 11/15/19. . . . . . . . . 45,036
Total U.S. Government Mortgage-Backed
Securities (Cost $536,573) 561,655
U.S. Government Obligations/Agencies - 4.3%
Tennessee Valley Authority
50,000 7.25%, 7/15/43. . . . . . . . . . 52,113
160,000 8.25%, 4/15/42. . . . . . . . . . 190,795
Total U.S. Government Obligations/Agencies
(Cost $217,188) 242,908
Short-Term Investments - 14.2%
COMMERCIAL PAPER - 14.2%
200,000 General Electric Capital,
5.83%, 1/19/96. . . . . . . . . . 199,320
$ 503,666 Investments in Commercial
Paper through a joint
account, 5.90-6.05%, 1/2/96 . . . $ 503,333
100,000 U.S. Bancorp, 5.55%, 2/23/96. . . 99,137
Total Short-Term Investments (Cost $801,790) 801,790
Total Investments in Securities - 102.3%
of Net Assets (Cost $5,243,205) 5,755,103
Other Assets Less Liabilities (130,228)
__________
Net Assets Consist of: Value
________
Accumulated net realized
gain/loss - net of
distributions . . . . . . . . $ 64,748
Net unrealized gain (loss) . . . 511,965
Paid-in-capital applicable
to 452,385 shares of $0.0001
par value capital stock
outstanding; 1,000,000,000
shares authorized. . . . . . . . 5,048,162
________
NET ASSETS . . . . . . . . . . . . . . . . . $5,624,875
__________
__________
NET ASSET VALUE PER SHARE. . . . . . . . . . . . . $12.43
______
______
* Non-income producing
# Securities contain some restrictions as to public resale-total of
such securities at period-end amounts to 0.75% of net assets.
MTN Medium term note
REIT Real Estate Investment Trust
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 0.63% of net assets.
DEM German deutschemark
GBP British sterling
ITL Italian lira
JPY Japanese yen
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Personal Strategy Balanced Portfolio / From December 30, 1994
(Commencement of Operations) to December 31, 1995
INVESTMENT INCOME
Income
Interest . . . . . . . . . . . . . . . . . . . . $ 92,569
Dividend . . . . . . . . . . . . . . . . . . . . 32,850
_________
Total income . . . . . . . . . . . . . . . . . . 125,419
_________
Expenses
Investment management and administrative . . . . 24,590
_________
Net investment income. . . . . . . . . . . . . . . 100,829
_________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities . . . . . . . . . . . . . . . . . . . 69,933
Foreign currency transactions. . . . . . . . . . 3,969
_________
Net realized gain (loss) . . . . . . . . . . . . 73,902
_________
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . . . . 511,898
Other assets and liabilities denominated
in foreign currencies. . . . . . . . . . . . . . 67
_________
Change in net unrealized gain or loss. . . . . . 511,965
_________
Net realized and unrealized gain (loss). . . . . . 585,867
_________
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. $686,696
_________
_________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Personal Strategy Balanced Portfolio
From December 30, 1994
(Commencement of
Operations) to
December 31, 1995
_____________________
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income. . . . . . . . . . . . . . $100,829
Net realized gain (loss) . . . . . . . . . . . . 73,902
Change in net unrealized gain or loss. . . . . . 511,965
_________
Increase (decrease) in net assets from operations 686,696
_________
Distributions to shareholders
Net investment income. . . . . . . . . . . . . . (109,983)
_________
Capital share transactions*
Shares sold. . . . . . . . . . . . . . . . . . . 5,160,889
Distributions reinvested . . . . . . . . . . . . 109,913
Shares redeemed. . . . . . . . . . . . . . . . . (238,910)
_________
Increase (decrease) in net assets from
capital share transactions . . . . . . . . . . . 5,031,892
_________
Net equalization . . . . . . . . . . . . . . . . . 16,270
_________
Increase (decrease) in net assets. . . . . . . . . 5,624,875
NET ASSETS
Beginning of period. . . . . . . . . . . . . . . . -
_________
End of period. . . . . . . . . . . . . . . . . . . $5,624,875
_________
_________
*Share information
Shares sold. . . . . . . . . . . . . . . . . . . 462,996
Distributions reinvested . . . . . . . . . . . . 9,373
Shares redeemed. . . . . . . . . . . . . . . . . (19,984)
_________
Increase (decrease) in shares outstanding. . . . 452,385
_________
_________
The accompanying notes are an integral part of these financial statements.
Notes To Financial Statements
T. Rowe Price Personal Strategy Balanced Portfolio / December 31, 1995
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. 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 - Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price at the time 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 that are not traded on a particular day
and securities that are 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.
Short-term debt securities are valued at their cost which, when combined with
accrued interest, approximates fair value.
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.
B) 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.
C) Premiums and Discounts - Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
D) 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. The fund follows the practice of
equalization under which undistributed net investment income per share is
unaffected by fund shares sold or redeemed
Note 2 - Organization
The fund was organized on July 13, 1994, and had no operations prior to
December 30, 1994, other than those related to organizational matters.
Note 3 - Investment Transactions
A) Commercial Paper Joint Account - The fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
B) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. government securities, aggregated $4,235,924 and $578,450,
respectively, for the period ended December 31, 1995. Purchases and sales of
U.S. government securities aggregated $1,231,262 and $496,033 respectively,
for the period ended December 31, 1995.
Note 4 - Federal Income Taxes
No provision for federal income taxes is required since the fund intends to
qualify as a regulated investment company and distribute all of its income.
In order for the fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $7,115 of
undistributed net investment income and $9,154 of undistributed net realized
gains were reclassified as a $16,269 increase to paid-in-capital during the
year ended December 31, 1995. The results of operations and net assets were
not affected by the reclassifications.
At December 31, 1995, the aggregate cost of investments for federal
income tax and financial reporting purposes was $5,243,205 and net unrealized
gain aggregated $511,898, of which $542,981 related to appreciated investments
and $31,083 to depreciated investments.
Note 5 - 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. 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.
Financial Highlights
T. Rowe Price Personal Strategy Balanced Portfolio
For a share outstanding
From December 30, 1994
(Commencement of Operations)
to December 31, 1995
__________________________
NET ASSET VALUE, BEGINNING OF PERIOD . . . $10.00
______
Investment activities
Net investment income. . . . . . . . . . 0.42
Net realized and unrealized gain (loss). 2.41
______
Total from investment activities . . . . 2.83
______
Distributions
Net investment income. . . . . . . . . . (0.40)
______
NET ASSET VALUE, END OF PERIOD . . . . . . $12.43
______
______
RATIOS/SUPPLEMENTAL DATA
Total return . . . . . . . . . . . . . . . 28.7%
Ratio of expenses to average net assets . 0.90%!
Ratio of net investment income to
average net assets . . . . . . . . . . . . 3.69%!
Portfolio turnover rate. . . . . . . . . . 39.3%!
Net assets, end of period. . . . . . . . . $5,624,875
! Annualized
Report of Independent Accountants
To the Board of Directors of T. Rowe Price Equity Series, Inc.
and Shareholders of the 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
the Personal Strategy Balanced Portfolio (one of the portfolios constituting
T. Rowe Price Equity Series, Inc., hereafter referred to as the "Fund") at
December 31, 1995, and the results of its operations, the changes in its net
assets and the financial highlights for the period December 30, 1994
(Commencement of Operations) to December 31, 1995, in conformity with
generally accepted accounting principles. 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 audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards 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 audit, which included confirmation of securities at December 31, 1995 by
correspondence with custodians and brokers, provides a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 18, 1996
Chart 1 - Interest Rate Levels
A 4-line chart showing interest rate levels on the 30-year Treasury bond,
5-year Treasury note, 1-Year Treasury bill, and federal funds rate from
12/31/94 through 12/31/95.
Chart 2 - Asset Allocation
A pie chart showing Asset Allocation between stocks, bonds and money markets
on 12/31/95, along with the benchmarks and ranges for each category.
Chart 3: Performance Comparison
A line chart showing $10,000 growing to $12,866 for PSP and to $12,966 for
Combined Index Portfolio from 12/31/94 through 12/31/95.
