T. Rowe Price
Personal Strategy Balanced Portfolio
Semiannual Report
June 30, 1998
Dear Investor
Despite a slide in May from record highs, stocks posted strong returns for the
6- and 12-month periods ended June 30, 1998, with large-cap issues leading the
way. European shares were even more robust during the most recent half year.
Interest rates declined sharply from a year ago, pushing bond prices higher and
generating attractive returns for fixed income investors as well.
PERFORMANCE AND STRATEGY REVIEW
Performance Comparison
Periods Ended 6/30/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Personal Strategy
Balanced Portfolio 9.87% 18.34%
Combined Index Portfolio* 11.96 21.62
* An unmanaged portfolio composed of 60% stocks (S&P 500), 30% bonds (Lehman
Brothers Aggregate Bond Index), and 10% money markets (90-day Treasury bills).
The objective of this fund is to provide the highest total return consistent
with an emphasis on both income and capital appreciation. The typical asset mix
is 60% stocks, 30% bonds, and 10% cash-with 10-percentage-point variations
permitted for each asset class.
The rally in both U.S. stocks and bonds helped the fund post solid absolute
returns, although it trailed its benchmark during both periods shown in the
table. The fund's lagging performance was primarily due to a slight
underweighting in equities compared with the benchmark and a fairly heavy
exposure to value stocks, many of which were weaker than growth stocks in recent
months.
On June 30, your fund had 59% of its assets in stocks versus 57% at the end of
last December, 38% in bonds (down one percentage point), and the remaining 3% in
cash reserves. We overweighted high-yield bonds and underweighted foreign bonds.
Among the major holdings in the portfolio were Chase Manhattan, GE, Mobil,
Philip Morris, and American Express. The fund's fifth-largest stock position is
SPDR Trust, whose performance is directly linked to that of the S&P 500 Stock
Index.
Asset Allocation
6/30/98
Stocks Bonds Money Markets
59% 38% 3%
On the international equities front, we maintained a high exposure to foreign
stocks, which did not perform as well overall as their domestic counterparts in
U.S. currency terms despite strong European markets. We continue to believe
foreign stocks offer good value at this time and provide valuable
diversification for the fund.
MARKET REVIEW
The funds' investment committee meets monthly to adjust the weightings of
stocks, bonds, and money market securities within the appropriate ranges for
each fund, based on market conditions and economic fundamentals. The committee
maintained its defensive tilt by slightly underweighting the stock allocation
and overweighting the bond holdings. It continued to favor international stocks
over domestic. In the bond area, the committee maintained the funds' low
exposure to foreign bonds and focused on both investment-grade and high-yield
bonds in the domestic market because of falling interest rates and the
continuing strong economy.
The domestic economy kept sailing along with strong growth and extremely low
inflation, an ideal environment for both equities and bonds. The Federal Reserve
has left the key fed funds rate unchanged since March 1997, and bond yields fell
considerably from year-ago levels. As a result, high-grade bonds enjoyed good
returns overall, but their performance was once again overshadowed by the
high-yield sector, which usually does well in times of robust economic growth.
International bonds of developed countries disappointed U.S. investors because
of the strength of the dollar versus major foreign currencies.
Interest Rate Levels
30-ear 5-Year 90-Day
Treasury Treasury Treasury
Bond Note Bill
6/30/97 6.72 6.31 5.1
6.38 6.00 5.25
6.63 6.22 5.26
9/30/97 6.35 5.94 4.98
6.22 5.78 5.18
6.08 5.82 5.27
12/31/97 5.93 5.71 5.4
5.89 5.48 5.22
5.84 5.60 5.16
3/31/98 5.92 5.62 5.19
6.02 5.72 5.05
5.83 5.57 5.09
6/30/98 5.65 5.50 5.06
The 30-year Treasury bond yield fell from a height of 6.72% a year ago all the
way to 5.65% at the end of June. The five-year note yield also declined, but not
as far, from 6.31% to 5.50% during the same period. Money market rates were
stable by comparison, with the 90-day Treasury bill yield ending at 5.06%, close
to where it was a year earlier, although it fluctuated between 4.98% and 5.40%
along the way. (See chart.)
For the first time in years, some foreign stock markets have been outpacing the
S&P 500, although overseas results were mixed. Turmoil in Asia failed to dim the
luster of European bourses, but most of Asia and Latin America was sharply
lower.
OUTLOOK
Economic growth remains robust with few hints of inflation on the horizon. We
believe a period of stable to slightly lower rates may lie ahead as the economy
remains on a positive track but cools from its heated performance of 1997 and
the first quarter of 1998. As events play out in Asia and ripple across to
Europe and Latin America, we will look for opportunities to add value in
appropriate sectors of the fixed income market. Barring a dramatic slowdown in
the economy, leading to significant credit concerns and falling prices for
lower-quality bonds-something we do not expect to occur-fixed income securities
should continue to provide sound investment returns in the months ahead.
In the equity area, the stock market dropped in May from its earlier highs
before rallying at the end of June. Is this the beginning of a long anticipated
correction, or will the market rebound as in recent years? We have believed for
some time that U.S. stocks are fully valued and overdue for a pause. While many
foreign stock markets have been volatile and returns have varied from region to
region, we still think foreign markets provide a good opportunity to find
undervalued securities. The diversified strategy offered by the Personal
Strategy Balanced Portfolio should continue to offer investors attractive
returns over the long term. As always, we thank you for your ongoing support.
Respectfully submitted,
Peter Van Dyke
President and Chairman of the Investment Advisory Committee
July 24, 1998
Portfolio Highlights
Portfolio Overview
Percent of
Net Assets
6/30/98
- --------------------------------------------------------------------
Money Market Securities 2.5%
- --------------------------------------------------------------------
Money Market Securities 1.6
Other Assets Less Liabilities 0.9
Bonds 38.3%
- --------------------------------------------------------------------
U.S. Government Agencies 9.5
Corporate 16.4
Mortgage-Backed 10.5
Foreign Government Agencies 1.9
Stocks 59.2%
- --------------------------------------------------------------------
10 Largest Holdings 5.7%
------------------------------------------------------------------
Philip Morris 0.7
GE 0.6
Mobil 0.6
British Petroleum 0.6
SPDR Trust 0.6
American Home Products 0.6
BANC ONE 0.5
UBS 0.5
American Express 0.5
Chase Manhattan 0.5
- --------------------------------------------------------------------
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 a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
Personal Strategy Balanced Portfolio
As of 6/30/98
Personal Strategy Combined
Balanced Index
Portfolio Portfolio
12/31/94 10,000 10,000
6/95 11,587 11,573
6/96 13,399 13,570
6/97 16,103 16,733
6/98 19,056 20,351
Average Annual Compound Total Return
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Personal Strategy Balanced Portfolio
Periods Ended 6/30/98
Since Inception
1 Year 3 Years Inception Date
- --------------------------------------------------------------------------------
18.34% 18.04% 20.25% 12/30/94
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Total returns do not include charges imposed by your insurance company's
separate account. If these were included, performance would have been lower.
Financial Highlights
T. Rowe Price Personal Strategy Balanced Portfolio
(Unaudited)
For a share outstanding throughout each period
------------------------------------------------
6 Months Year 12/30/94
Ended Ended Through
6/30/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of period $ 15.13 $ 13.44 $ 12.43 $ 10.00
Investment activities
Net investment income 0.25 0.46 0.41 0.42
Net realized and
unrealized gain (loss) 1.24 1.93 1.32 2.41
Total from
investment activities 1.49 2.39 1.73 2.83
Distributions
Net investment income (0.24) (0.46) (0.41) (0.40)
Net realized gain (0.03) (0.24) (0.31) --
Total distributions (0.27) (0.70) (0.72) (0.40)
NET ASSET VALUE
End of period $ 16.35 $ 15.13 $ 13.44 $ 12.43
-----------------------------------------
Ratios/Supplemental Data
Total return(C) 9.87% 18.04% 14.21% 28.66%
Ratio of expenses to
average net assets 0.90%! 0.90% 0.90% 0.90%
Ratio of net investment
income to average
net assets 3.23%! 3.37% 3.33% 3.69%
Portfolio turnover rate 17.7% 32.8% 51.7% 39.3%
Net assets, end of period
(in thousands) $ 78,271 $ 63,005 $ 33,263 $ 5,625
(C) 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 Personal Strategy Balanced Portfolio
June 30, 1998 (Unaudited)
Shares/Par Value
In thousands
- --------------------------------------------------------------------------------
Common Stocks 59.2%
FINANCIAL 11.1%
Bank and Trust 6.2%
Abbey National (GBP) 9,500 $ 169
ABN Amro (NLG) 3,600 84
Air Liquide (L) (FRF) 495 82
Australia & New Zealand
Banking ADR 1,500 51
BANC ONE 7,650 427
Banca Commerciale
Italiana (ITL) 18,100 108
Banco de Bilbao
Vizcaya ADR 2,400 122
Banco Frances del Rio ADR 1,495 34
BankBoston 2,600 145
Bankgesellschaft
Berlin (DEM) 3,000 62
Barclay's (GBP) 4,000 115
Chase Manhattan 5,160 390
Citicorp 1,300 194
Deutsche Bank (DEM) 1,440 122
Dresdner Bank (DEM) 1,700 92
First Union 2,600 152
HSBC Holdings (GBP) 6,300 160
J. P. Morgan 1,400 164
KBC Bancassurance
Holding (BEF) 1,500 134
KeyCorp 1,300 46
Mediobanca (ITL) 8,100 103
Mellon Bank 4,740 330
Mercantile Bancorporation 300 15
National City 1,800 128
NationsBank 4,800 367
Norwest 4,500 168
RHB Sakura Merchant
Bankers (MYR) 350 0
Societe Generale (FRF) 813 169
Svenska Handelsbank (SEK) 2,000 93
U.S. Bancorp 3,800 163
Washington Mutual 6,885 299
Wells Fargo 300 $ 111
Westpac Bank (AUD) 4,000 25
4,824
Insurance 1.9%
ACE Limited 4,900 191
Allstate 100 9
American General 1,500 107
American International
Group 350 51
EXEL 1,800 140
Harleysville Group 700 15
Hartford Financial Services 100 11
Mid Ocean Limited 1,200 94
PartnerRe Holdings 700 36
St. Paul Companies 4,800 202
Sumitomo Marine & Fire
Insurance (JPY) 14,000 79
Travelers Property
Casualty (Class A) 7,000 300
UNUM 1,840 102
Willis-Corroon ADR 9,800 123
1,460
Financial Services 3.0%
American Express 3,450 393
Associates First
Capital (Class A) 900 69
AXA (FRF) 1,300 146
Capital One Financial 900 112
DCB Holdings (MYR) 7,000 3
Fairfax Financial (CAD) * 100 39
Fannie Mae 6,020 366
Freddie Mac 5,880 277
Household International 2,400 120
ING Groep (NLG) 2,050 134
Morgan Stanley Dean
Witter Discover 1,200 110
Pearson (GBP) 3,000 55
SLM Holding 2,350 115
Travelers Group 5,299 321
Unidanmark
(Class A) (DKK) 1,300 117
2,377
Total Financial 8,661
UTILITIES 3.9%
Telephone Services 2.3%
Aliant Communications 1,500 $ 41
ALLTEL 1,800 84
AT&T 6,120 350
BellSouth 2,000 134
British Telecommunications ADR 900 111
Compania de Telecomunicaciones
de Chile ADR 1,525 31
Frontier 5,900 186
Hong Kong Telecommunications
ADR 1,100 21
Nippon Telegraph &
Telephone (JPY) 13 108
SBC Communications 9,420 377
Telecom Corp. of
New Zealand ADR 800 26
Telecom Italia (ITL) 8,330 61
Telecom Italia Mobile (ITL) 15,000 92
Telefonica de Espana ADR 800 111
Telefonos de Mexico (Class L)
ADR 1,300 62
Telekom Malaysia (MYR) 3,000 5
1,800
Electric Utilities 1.6%
Electrabel (BEF) 310 88
Empresa Nacional de Electricidad
Chile ADR 2,000 29
Endesa ADR 2,000 43
FirstEnergy 8,592 264
GPU 1,900 72
Hong Kong Electric (HKD) 15,000 46
PECO Energy 3,100 91
Texas Utilities 6,340 264
Unicom 6,700 235
Veba (DEM) 2,310 155
1,287
Total Utilities 3,087
CONSUMER NONDURABLES 11.4%
Cosmetics 0.6%
Gillette 1,000 57
International Flavors &
Fragrances 6,100 $ 265
Kao (JPY) 8,000 124
446
Beverages 0.7%
Anheuser-Busch 6,000 283
Diageo ADR 1,123 54
LVMH (FRF) 245 49
PepsiCo 3,360 139
525
Food Processing 2.3%
Bestfoods 2,400 139
Cadbury Schweppes (GBP) 900 14
Cadbury Schweppes ADR 500 31
CSM (NLG) 1,500 72
Danisco (DKK) 1,300 88
Dean Foods 600 33
Eridania Beghin-Say (FRF) 530 117
General Mills 3,330 228
Heinz 1,200 67
Hershey Foods 900 62
Interstate Bakeries 400 13
McCormick 4,900 175
Nestle (CHF) 125 268
Ralston Purina 1,980 231
Sara Lee 5,430 304
1,842
Hospital Supplies/Hospital Management 0.9%
Abbott Laboratories 1,600 65
Arterial Vascular
Engineering * 1,000 36
Boston Scientific * 300 21
Guidant 800 57
HealthSouth * 5,400 144
Medtronic 900 57
Smith & Nephew (GBP) 10,000 25
Tenet Healthcare * 2,000 63
Terumo (JPY) 4,000 64
United States Surgical 3,500 160
692
Pharmaceuticals 3.4%
American Home Products 8,880 459
Astra (Class B) (SEK) 1,333 27
Bristol-Myers Squibb 3,280 377
Eli Lilly 900 $ 59
Gehe (DEM) 700 38
Glaxo Wellcome ADR 1,400 84
Johnson & Johnson 2,080 153
Merck 1,700 227
Novartis (CHF) 106 177
Pfizer 3,540 385
Pharmacia & Upjohn 2,317 107
Schering-Plough 1,700 156
Takeda Chemical
Industries (JPY) 6,000 160
Warner-Lambert 4,000 277
2,686
Health Care Services 0.3%
Altana AG (DEM) 600 46
United HealthCare 3,000 190
236
Biotechnology 0.1%
Biogen * 1,900 93
93
Miscellaneous Consumer Products 3.1%
Benetton Group Spa (ITL) 28,800 60
Bridgestone (JPY) 3,000 71
Colgate-Palmolive 4,340 382
Dan River * 1,200 20
Hasbro 3,500 138
Kuraray (JPY) 6,000 51
Lion Nathan (NZD) 26,300 58
Mattel 1,800 76
Newell 2,000 100
Philip Morris 13,580 535
Procter & Gamble 1,000 91
Service Corp. International 2,800 120
Stanley Works 600 25
Tomkins (GBP) 4,000 22
Tomkins ADR 3,200 73
Unifi 3,400 116
Unilever N.V. ADR 2,800 221
UST 7,430 201
WestPoint Stevens * 400 13
Yue Yuen Industrial (HKD) 25,000 45
2,418
Total Consumer Nondurables 8,938
CONSUMER SERVICES 6.6%
General Merchandisers 1.6%
Dayton Hudson 3,700 $ 179
Fred Meyer * 3,500 149
JUSCO (JPY) 4,000 74
Marui (JPY) 4,000 60
Neiman-Marcus * 1,700 74
Pinault Printemps (FRF) 200 167
Proffitt's * 200 8
Tesco (GBP) 10,053 99
Wal-Mart 5,100 310
Warnaco Group (Class A) 3,700 157
1,277
Specialty Merchandisers 2.1%
American Stores 10,500 254
Christian Dior (FRF) 400 50
CVS 4,828 188
Federated Department Stores * 1,100 59
General Nutrition * 2,500 78
Home Depot 1,750 146
Kohl's * 1,600 83
Omron (JPY) 4,000 61
Rite Aid 2,700 102
Safeway * 5,800 236
Toys "R" Us * 4,200 99
Tupperware 10,600 298
1,654
Entertainment and Leisure 1.3%
Carnival (Class A) 4,400 174
Disney 1,470 154
Hilton 2,900 83
Hutchison Whampoa (HKD) 24,000 127
McDonald's 1,270 88
Mediaone Group * 1,900 83
Reader's Digest (Class A) 8,100 220
Reader's Digest (Class B) 1,920 52
Sharp (JPY) 2,000 16
997
Media and Communications 1.6%
Asatsu (JPY) 3,000 61
CBS 3,300 105
Elsevier (NLG) 4,000 60
France Telecom ADR * 2,900 202
R.R. Donnelly 4,800 $ 220
Time Warner 2,100 179
Tribune 2,900 200
Valassis Communications * 1,200 46
Vodafone ADR 1,140 144
1,217
Total Consumer Services 5,145
CONSUMER CYCLICALS 2.4%
Automobiles and Related 0.3%
Cycle & Carriage (SGD) 4,000 10
Federal-Mogul 1,100 74
Honda ADR 1,500 107
SPX * 700 45
236
Building and Real Estate 1.3%
Cheung Kong Holdings (HKD) 12,000 59
City Developments (SGD) 5,000 14
Crescent Real Estate
Equities, REIT 2,700 91
DBS Land (SGD) 5,000 4
Federal Realty Investment
Trust, REIT 9,300 224
Reckson Service Industries * 3,000 10
Simon DeBartolo
Group, REIT 8,696 283
Starwood Hotels &
Resorts, REIT 7,100 343
1,028
Miscellaneous Consumer Durables 0.8%
Corning 8,200 285
Masco 2,400 145
OCE (NLG) 1,200 51
Ricoh (JPY) 4,000 42
Sony (JPY) 1,000 87
610
Total Consumer Cyclicals 1,874
TECHNOLOGY 3.6%
Electronic Components 0.4%
EMC * 2,000 90
Intel 1,600 119
Linear Technology 1,200 72
Maxim Integrated Products * 2,500 $ 79
360
Electronic Systems 1.0%
Hewlett-Packard 1,900 114
Honeywell 900 75
Nokia ADR 2,700 196
UBS (CHF) 1,070 398
783
Information Processing 0.3%
COMPAQ Computer 1,700 48
Dell Computer * 800 74
Hitachi ADR 800 52
IBM 500 58
232
Office Automation 0.1%
Ceridian * 600 35
Xerox 200 21
56
Specialized Computer 0.0%
Sun Microsystems * 700 30
30
Telecommunications Equipment 1.3%
AirTouch Communications * 1,700 99
Cisco Systems * 1,900 175
LM Ericsson (Class B) ADR 2,400 69
Lucent Technologies 200 17
MCI 2,900 168
Telebras ADR 1,000 109
Tellabs * 1,900 136
WorldCom * 4,400 213
986
Aerospace and Defense 0.5%
AlliedSignal 6,400 284
Boeing 100 5
Raytheon (Class B) 2,100 124
413
Total Technology 2,860
CAPITAL EQUIPMENT 2.2%
Electrical Equipment 1.3%
ABB (CHF) 50 74
Canon (JPY) 3,000 69
GE 5,560 506
Matsushita Electric Works (JPY) 3,000 $ 24
Mitsubishi Electric (JPY) 7,000 16
Siemens (DEM) 1,100 67
Tyco International 4,614 291
1,047
Machinery 0.9%
Cooper Industries 400 22
Danaher 6,900 253
GKN (GBP) 7,000 89
Man (DEM) 310 121
S I G Schweis (CHF) * 80 65
Teleflex 2,600 99
Valmet (FIM) 2,000 35
684
Total Capital Equipment 1,731
BUSINESS SERVICES AND TRANSPORTATION 5.1%
Computer Service and Software 2.1%
Adobe Systems 1,200 51
America Online 600 64
Automatic Data Processing 2,140 156
BMC Software * 4,000 208
Cadence Design Systems * 1,500 47
First Data 4,334 144
Galileo International 2,300 104
Microsoft * 2,520 273
Network Associates * 2,600 124
Oracle * 3,500 86
Parametric Technology * 5,100 138
Sterling Commerce * 2,400 116
SunGard Data Systems * 2,800 108
1,619
Distribution Services 0.2%
U.S. Foodservice * 3,542 124
124
Environmental 0.3%
USA Waste Services * 4,100 202
202
Transportation Services 0.0%
Mitsubishi Heavy
Industries (JPY) 6,000 23
23
Miscellaneous Business Services 1.5%
British Airport Authorities (GBP) 5,200 $ 56
Browning-Ferris 8,500 295
Cendant * 3,800 79
Electro Rent * 1,100 25
Equifax 1,200 44
H&R Block 8,400 354
Omnicom 2,800 140
Sime Darby (MYR) 6,000 4
Waste Management 6,100 213
1,210
Airlines 0.5%
Delta 2,800 362
KLM Royal Dutch Air ADR 900 37
399
Railroads 0.5%
Burlington Northern Santa Fe 900 89
Norfolk Southern 9,900 295
384
Total Business Services and Transportation 3,961
ENERGY 4.3%
Energy Services 0.7%
Camco International 900 70
Cooper Cameron * 1,300 66
Elf Aquitaine ADR 1,100 78
Halliburton 2,500 112
Johnson Electric Holdings (HKD) 25,200 93
TOTAL ADR 1,700 111
530
Exploration and Production 0.0%
Santos (AUD) 9,000 28
28
Integrated Petroleum - Domestic 1.5%
Atlantic Richfield 3,060 239
British Petroleum ADR 5,440 480
Occidental Petroleum 6,200 167
Unocal 2,030 73
USX-Marathon 4,860 167
1,126
Integrated Petroleum - International 2.1%
Amoco 8,400 $ 350
Chevron 400 33
ENI S.P.A. ADR 1,100 71
Exxon 2,520 180
Mobil 6,360 487
Repsol ADR 1,400 77
Royal Dutch Petroleum ADR 1,800 99
Shell Transport & Trading ADR 2,500 106
Texaco 4,240 253
1,656
Total Energy 3,340
PROCESS INDUSTRIES 4.0%
Diversified Chemicals 1.1%
Dow Chemical 3,200 309
DuPont 4,300 321
Hercules 5,200 214
844
Specialty Chemicals 1.8%
3M 1,570 129
A. Schulman 4,000 78
Akzo Nobel (NLG) 400 89
BASF AG (DEM) 3,050 145
Bayer (DEM) 2,930 152
Great Lakes Chemical 8,550 337
Pall 12,500 256
Sumitomo Chemicals (JPY) 7,000 22
Technip (FRF) 1,210 148
1,356
Paper and Paper Products 0.7%
Dai Nippon Printing (JPY) 3,000 48
Fort James 4,300 191
Kimberly-Clark 7,100 326
565
Forest Products 0.2%
Georgia-Pacific 1,900 112
International Paper 1,200 51
163
Building and Construction 0.2%
Blue Circle Industries (GBP) 12,143 69
Holderbank Financiere Glarus (CHF) 80 102
171
Total Process Industries 3,099
BASIC MATERIALS 0.6%
Metals 0.5%
Anglo American Platinum (ZAR) 5,000 $ 55
Inco 7,000 95
Reynolds Metals 3,900 218
368
Mining 0.1%
Lonrho (GBP) 4,500 21
Lonrho Africa (GBP) 3,000 4
Newmont Mining 2,000 47
Rio Tinto (AUD) 4,200 50
122
Miscellaneous Materials 0.0%
Crown Cork & Seal 300 14
Malayan Cement (MYR) 12,500 4
18
Total Basic Materials 508
MISCELLANEOUS COMMON STOCKS 3.6%
Conglomerates 0.1%
Orkla (NOK) 3,600 84
84
Other Miscellaneous Common Stocks 3.5%
SPDR Trust 4,100 465
Other Miscellaneous Common Stocks 2,292
2,757
Total Miscellaneous Common Stocks 2,841
FOREIGN EQUITY 0.4%
Europe 0.2%
AXA Colonia Konzern (DEM) 500 62
Svenska Cellulosa (SEK) 4,000 104
166
Other Foreign 0.2%
Bobst (CHF) 66 121
121
Total Foreign Equity 287
Total Common Stocks (Cost $36,545) 46,332
CORPORATE BONDS 16.4%
AEI Holding, Sr. Notes, (144a)
10.00%, 11/15/07 $ 100,000 $ 100
Agricultural Minerals, Sr. Notes
10.75%, 9/30/03 50,000 53
Agrium, 7.00%, 2/1/04 100,000 104
Allied Waste, Sr. Sub. Notes
10.25%, 12/1/06 100,000 110
AMC Entertainment, Sr. Sub. Notes
9.50%, 3/15/09 75,000 76
American Radio Systems Sr. Sub. Notes
9.00%, 2/1/06 100,000 107
American Safety Razor, Sr. Notes
9.875%, 8/1/05 25,000 27
American Standard
9.25%, 12/1/16 64,000 66
Amerigas Partners L.P., Sr. Notes
10.125%, 4/15/07 50,000 53
APCOA, Sr. Sub. Notes, (144a)
9.25%, 3/15/08 100,000 99
Archibald Candy, Sr. Secured Notes
10.25%, 7/1/04 100,000 106
Associated Materials
9.25%, 3/1/08 100,000 102
Aurora Foods, Sr. Sub. Notes
9.875%, 2/15/07 100,000 106
B&G Foods, Sr. Sub. Notes
9.625%, 8/1/07 100,000 101
Ballys Health & Tennis, Sr. Sub. Notes
9.875%, 10/15/07 75,000 77
Boeing, 6.35%, 6/15/03 30,000 30
Boise Cascade, Deb.
7.35%, 2/1/16 210,000 214
BWAY, Sr. Sub. Notes
10.25%, 4/15/07 100,000 109
Celestica International
Gtd. Sr. Sub. Notes
10.50%, 12/31/06 50,000 55
Chattem, Sr. Sub. Notes
12.75%, 6/15/04 100,000 112
Citicorp, Sub. Notes
7.75%, 6/15/06 50,000 54
Coach USA, Gtd. Sr. Sub. Notes
9.375%, 7/1/07 100,000 104
Coca-Cola Bottling Group
Sr. Sub. Notes
9.00%, 11/15/03 $ 50,000 $ 53
Coinmach, Sr. Sub. Notes
11.75%, 11/15/05 50,000 56
Columbus McKinnon
Sr. Sub. Notes, (144a)
8.50%, 4/1/08 75,000 74
Commonwealth Edison, Deb.
6.40%, 10/15/05 75,000 75
Communications & Power Industries
Sr. Sub. Notes
12.00%, 8/1/05 100,000 112
Container Corporation of America
Sr. Notes
9.75%, 4/1/03 50,000 54
Gtd.
10.75%, 5/1/02 25,000 27
Continental Airlines
6.94%, 10/15/13 192,219 200
Dan River, Sr. Sub. Notes
10.125%, 12/15/03 100,000 106
Dayton Power & Light
1st Mtg. Notes
8.15%, 1/15/26 400,000 441
Delta Air Lines, MTN
8.625%, 6/15/04 60,000 66
Delta Mills, Sr. Notes
9.625%, 9/1/07 100,000 98
Doane Products, Sr. Notes
10.625%, 3/1/06 100,000 109
Dyersburg, Sr. Sub. Notes
9.75%, 9/1/07 50,000 49
Dyncorp, Sr. Sub. Notes
9.50%, 3/1/07 75,000 77
Energy Corporation of America
Sr. Sub. Notes
9.50%, 5/15/07 100,000 98
Enhance Financial Services, Deb.
6.75%, 3/1/03 200,000 204
EOP Operating, Sr. Notes, (144a)
6.75%, 2/15/08 250,000 250
Fairchild Semiconductor
Sr. Sub. Notes
10.125%, 3/15/07 100,000 103
Fairfax Financial Holdings
8.25%, 10/1/15 $ 250,000 $ 283
Federal Mogul
7.75%, 7/1/06 100,000 100
Ferrellgas, Sr. Notes
10.00%, 8/1/01 50,000 53
Finlay Fine Jewelry, Sr. Notes
8.375%, 5/1/08 100,000 100
First Federal Financial
11.75%, 10/1/04 50,000 56
First USA Bank, Sr. Notes
5.85%, 2/22/01 200,000 199
Flag Limited, Sr. Notes, (144a)
8.25%, 1/30/08 100,000 101
Frontiervision, Sr. Sub. Notes
11.00%, 10/15/06 50,000 56
Fundy Cable, Sr. Secured
2nd Priority Notes
11.00%, 11/15/05 100,000 111
Furon, Sr. Sub. Notes, (144a)
8.125%, 3/1/08 100,000 100
Genesis Health Ventures
Sr. Sub. Notes
9.25%, 10/1/06 100,000 101
GMAC, 7.125%, 6/1/99 25,000 25
Grand Casino, 1st Mtg. Notes
10.125%, 12/1/03 100,000 109
Grand Metropolitan, Gtd.
9.00%, 8/15/11 200,000 246
Harcourt General, Deb.
7.20%, 8/1/27 500,000 499
Hawk, Sr. Notes
10.25%, 12/1/03 100,000 108
Herff Jones, Sr. Sub. Notes
11.00%, 8/15/05 100,000 109
HMC Acquisition Properties
Sr. Notes
9.00%, 12/15/07 25,000 27
Holmes Products, Gtd. Notes
9.875%, 11/15/07 100,000 103
Host Marriott Travel, Sr. Notes
9.50%, 5/15/05 50,000 53
Intermedia Communications
Sr. Notes
8.50%, 1/15/08 100,000 100
International Wire, Sr. Sub. Notes
11.75%, 6/1/05 $ 75,000 $ 82
Intertek Finance, Sr. Sub. Notes
10.25%, 11/1/06 50,000 52
Iron Mountain, Sr. Sub. Notes
8.75%, 9/30/09 100,000 102
IXC Communications
Sr. Sub. Notes, (144a)
9.00%, 4/15/08 100,000 100
Keebler, Sr. Sub. Notes
10.75%, 7/1/06 50,000 57
Lenfest Communications, Sr. Notes
8.375%, 11/1/05 20,000 21
Lucent Technologies
7.25%, 7/15/06 200,000 215
Mastec, Sr. Sub. Notes, (144a)
7.75%, 2/1/08 100,000 95
Maxxam Group Holdings, Sr. Notes
11.25%, 8/1/03 50,000 53
May Department Stores
Gtd. Deb. Notes
8.30%, 7/15/26 500,000 547
Mediacom Capital
Sr. Notes, (144a)
8.50%, 4/15/08 75,000 75
Nextel Communications
Sr. Disc. Notes, STEP
0%, 10/31/07 150,000 98
Niagara Mohawk
0%, 7/1/10 100,000 69
Northland Cable Television
Sr. Sub. Notes
10.25%, 11/15/07 100,000 107
Northrop Grumman
7.00%, 3/1/06 200,000 207
Ocwen Financial, Sr. Notes
11.875%, 10/1/03 50,000 56
Owens & Minor, Sr. Sub. Notes
10.875%, 6/1/06 25,000 27
Pennsylvania Power and Light
1st Mtg. Notes
6.50%, 4/1/05 50,000 51
Plastic Containers, Sr. Secured Notes
10.00%, 12/15/06 75,000 81
Pride Petroleum Services, Sr. Notes
9.375%, 5/1/07 $ 75,000 $ 80
Public Service Electric & Gas
1st Ref. Mtg. Notes
7.00%, 9/1/24 200,000 202
Mtg. Bonds
8.875%, 6/1/03 100,000 112
Purina Mills
Sr. Sub. Notes, (144a)
9.00%, 3/15/10 150,000 154
Quest Diagnostics
Gtd. Sr. Sub. Notes
10.75%, 12/15/06 100,000 112
Qwest Communications
Sr. Disc. Notes, STEP
0%, 10/15/07 100,000 75
Revlon Consumer Products
Sr. Sub. Notes
8.625%, 2/1/08 100,000 100
Rio Hotel & Casino
Gtd. Sr. Sub. Notes
9.50%, 4/15/07 75,000 80
Rural/Metro, Sr. Notes, (144a)
7.875%, 3/15/08 50,000 48
Safelite Glass
Sr. Sub. Notes, (144a)
9.875%, 12/15/06 50,000 53
Scotland International Finance
Sub. Notes, (144a)
6.50%, 2/15/11 100,000 101
Six Flags Entertainment
Sr. Notes
8.875%, 4/1/06 75,000 76
Six Flags Theme Parks
Sr. Sub. Disc. Notes, STEP
12.25%, 6/15/05 125,000 142
Smithfield Foods
Sr. Sub. Notes, (144a)
7.625%, 2/15/08 50,000 50
Specialty Retailers, Sr. Notes
8.50%, 7/15/05 75,000 77
Sprint Spectrum, Sr. Notes
11.00%, 8/15/06 100,000 116
Synthetic Industries
Sr. Sub. Notes
9.25%, 2/15/07 $ 50,000 $ 52
Tenet Healthcare, Sr. Sub. Notes
8.625%, 1/15/07 50,000 51
Texas Utilities, 1st Mtg. Bonds
7.375%, 10/1/25 400,000 412
7.875%, 4/1/24 100,000 107
Time Warner Entertainment, Deb.
8.375%, 3/15/23 75,000 88
US Can, Sr. Gtd. Notes
10.125%, 10/15/06 50,000 53
USF&G Capital II, Gtd. Notes
8.47%, 1/10/27 900,000 1,023
Wal-Mart, Deb.
7.25%, 6/1/13 150,000 164
Westpoint Stevens
7.875%, 6/15/08 100,000 100
Windy Hill Pet Food, Sr. Sub. Notes
9.75%, 5/15/07 100,000 104
Worldcom, 7.75%, 4/1/07 100,000 108
Total Corporate Bonds (Cost $12,323) 12,791
FOREIGN GOVERNMENT OBLIGATIONS/AGENCIES 1.9%
European Investment Bank
3.00%, 9/20/06 JPY 40,000,000 322
4.625%, 2/26/03 JPY 20,000,000 168
Federal Republic of Germany
6.00%, 7/4/07 DEM 330,000 199
6.50%, 7/15/03 DEM 50,000 30
8.375%, 5/21/01 DEM 145,000 90
Government of Canada
8.50%, 4/1/02 CAD 147,000 111
Government of France
5.50%, 4/25/07 FRF 1,140,000 198
8.50%, 11/25/02 FRF 492,000 95
Government of Japan
4.50%, 6/20/03 + JPY 4,000,000 33
Republic of Italy
8.50%, 8/1/04 ITL 40,000,000 27
United Kingdom Treasury Notes
7.50%, 12/7/06 GBP 64,000 $ 118
8.00%, 6/10/03 GBP 31,000 55
8.50%, 12/7/05 GBP 10,000 19
Total Foreign Government
Obligations/Agencies (Cost $1,527) 1,465
U.S. GOVERNMENT MORTGAGE-
BACKED SECURITIES 10.5%
Federal Home Loan Mortgage Corp.
5.75%, 4/15/08 $ 1,000,000 995
Federal National Mortgage Assn.
6.50%, 1/1/26 254,855 254
Government National Mortgage Assn.
I
6.00%
12/15/23 - 4/15/26 2,113,471 2,073
6.50%
4/15/24 - 4/15/26 1,808,232 1,805
7.00%
5/15/23 - 9/20/27 1,102,783 1,120
7.50%
5/15/24 - 11/15/25 450,393 463
8.00%
10/15/25 - 6/15/26 478,379 496
8.50%
12/15/24 29,670 31
11.50%
1/15/19 23,556 27
II
7.00%, 12/15/27 966,920 976
Total U.S. Government Mortgage-
Backed Securities (Cost $7,983) 8,240
U.S. GOVERNMENT OBLIGATIONS/AGENCIES 9.5%
Tennessee Valley Authority
5.88%, 4/1/36 $ 600,000 $ 624
6.235%, 7/15/45 1,000,000 1,036
8.25%, 4/15/42 160,000 194
U.S. Treasury Bonds
6.75%, 8/15/26 4,900,000 5,610
Total U.S. Government Obligations/
Agencies (Cost $6,955) 7,464
SHORT-TERM INVESTMENTS 1.6%
Money Market Funds 1.6%
Reserve Investment Fund
5.69% # 1,264,136 1,264
Total Short-Term Investments
(Cost $1,264) 1,264
Total Investments in Securities
99.1% of Net Assets (Cost $66,597) $ 77,556
Other Assets Less Liabilities 715
NET ASSETS $ 78,271
----------
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 47
Accumulated net realized gain/loss -
net of distributions 1,881
Net unrealized gain (loss) 10,956
Paid-in-capital applicable to 4,786,190
shares of $0.0001 value capital stock par
outstanding;1,000,000,000 shares
of the corporation authorized 65,387
NET ASSETS $ 78,271
----------
NET ASSET VALUE PER SHARE $ 16.35
----------
# Seven-day yield
* Non-income producing
+ Securities contain some restrictions as to public resale-total of such
securities at period-end amounts to 0.04% of net assets.
ADR American Depository Receipt
MTN Medium term note
REIT Real Estate Investment Trust
STEP Stepped coupon note for which the interest rate will adjust on
specified future date(s)
144a Security was purchased pursuant to Rule 144a under the Securities Act
of 1933 and may not be resold subject to that rule except to qualified
institutional buyers-total of such securities at period-end amounts to
1.79% of net assets.
AUD Australian dollar
BEF Belgian franc
CAD Canadian dollar
CHF Swiss franc
DEM German deutschemark
DKK Danish krone
FIM Finnish mark
FRF French franc
GBP British sterling
HKD Hong Kong dollar
ITL Italian lira
JPY Japanese yen
MYR Malaysian ringgit
NLG Dutch guilder
NOK Norwegian krone
NZD New Zealand dollar
SEK Swedish krona
SGD Singapore dollar
ZAR South African rand
L Local registered shares
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Personal Strategy Balanced Portfolio
(Unaudited)
In thousands
6 Months
Ended
6/30/98
Investment Income
Income
Interest $ 1,054
Dividend 399
Total income 1,453
Expenses
Investment management and administrative 317
Net investment income 1,136
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 1,866
Foreign currency transactions (5)
Net realized gain (loss) 1,861
Change in net unrealized gain or loss
Securities 3,510
Other assets and liabilities
denominated in foreign currencies (1)
Change in net unrealized gain or loss 3,509
Net realized and unrealized gain (loss) 5,370
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 6,506
---------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Personal Strategy Balanced Portfolio
(Unaudited)
In thousands
6 Months Year
Ended Ended
6/30/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,136 $ 1,630
Net realized gain (loss) 1,861 1,039
Change in net unrealized
gain or loss 3,509 5,343
Increase (decrease) in
net assets from operations 6,506 8,012
Distributions to shareholders
Net investment income (1,100) (1,619)
Net realized gain (131) (951)
Decrease in net assets
from distributions (1,231) (2,570)
Capital share transactions*
Shares sold 13,266 28,650
Distributions reinvested 1,231 2,570
Shares redeemed (4,506) (6,920)
Increase (decrease) in net
assets from capital
share transactions 9,991 24,300
Net Assets
Increase (decrease) during period 15,266 29,742
Beginning of period 63,005 33,263
End of period $ 78,271 $ 63,005
---------------------------------
*Share information
Shares sold 830 1,996
Distributions reinvested 76 174
Shares redeemed (283) (482)
Increase (decrease) in
shares outstanding 623 1,688
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Personal Strategy Balanced Portfolio
June 30, 1998 (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Equity Series, Inc. (the corporation) is registered under the
Investment Company Act of 1940. The Personal Strategy Balanced Portfolio (the
fund), a diversified, open-end management investment company, is one of the
portfolios established by the corporation and commenced operations on December
30, 1994. The shares of the fund are currently being offered only to separate
accounts of certain insurance companies as an investment medium for both
variable annuity contracts and variable life insurance policies.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities listed or regularly traded on a securities exchange
are valued at the last quoted sales price on the day the valuations are made. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such security.
Listed securities not traded on a particular day and securities regularly traded
in the over-the-counter market are valued at the mean of the latest bid and
asked prices. Other equity securities are valued at a price within the limits of
the latest bid and asked prices deemed by the Board of Directors, or by persons
delegated by the Board, best to reflect fair value.
Debt securities are generally traded in the over-the-counter market and are
valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars at
the prevailing exchange rate at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
Premiums and Discounts Premiums and discounts on debt securities, other than
mortgage-backed securities, are amortized for both financial reporting and tax
purposes. Premiums and discounts on mortgage-backed securities are recognized
upon principal repayment as gain or loss for financial reporting purposes and as
ordinary income for tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term and U.S.
government securities, aggregated $18,812,000 and $10,624,000, respectively, for
the six months ended June 30, 1998. Purchases and sales of U.S. government
securities aggregated $3,762,000 and $1,327,000, respectively, for the six
months ended June 30, 1998.
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, 1998, the aggregate cost of investments for federal income tax and
financial reporting purposes was $66,597,000, and net unrealized gain aggregated
$10,959,000, of which $12,205,000 related to appreciated investments and
$1,246,000 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 $41,000 was payable at June 30, 1998. The fee, computed daily and
paid monthly, is equal to 0.90% of the fund's average daily net assets. Pursuant
to the agreement, investment management, shareholder servicing, transfer agency,
accounting, and custody services are provided to the fund, and interest, taxes,
brokerage commissions, and extraordinary expenses are paid directly by the fund.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended June 30, 1998, totaled
$79,000 and are reflected as interest income in the accompanying Statement of
Operations.
During the six months ended June 30, 1998, the fund, in the ordinary course of
business, placed security purchase and sale orders aggregating $2,000 with
certain affiliates of the manager and paid $20 commissions related thereto.
Invest With Confidence(registered trademark)
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
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
TRP655 (6/98) K15-058 6/30/98
