T. Rowe Price International Stock Portfolio
Annual Report
December 31, 1994
Dear Investor
The year ended as it started. While the more established markets of Japan and
Europe held relatively steady or appreciated slightly, emerging markets
resumed their early-year downtrends. This was a disappointing finish to the
year, leaving your fund with a slight gain since inception nine months ago,
and behind the unmanaged Morgan Stanley Capital International Europe,
Australia and Far East Index, as shown on this page.
Performance Comparison
__________________________________________________________________________
Periods Ended 12/31/94
__________________________
9 Months
Since Inception
6 Months (3/31/94)
______________________________
International Stock
Portfolio 0.8% 1.8%
MSCI EAFE* - 0.9 4.1
S&P 500 4.9 5.3
__________________________________________________________________________
*Net of withholding taxes.
In the major markets the modest decline in bond yields late in the year,
led by U.S. Treasuries, provided some support for equities. This was expected
since real bond yields were at unusually high levels by historical standards.
Harder to predict was the extreme volatility of more minor markets
caused by a variety of factors. Most significant of these for your fund was
the devaluation of the Mexican peso, which along with the fall in securities
left the Mexican market down 40% in dollar terms during the final quarter.
This, in turn, had ripple effects on other Latin American markets late in
December. Southeast Asian markets also performed poorly as local rates again
rose with the short end of the U.S. yield curve. China continued to show
worrying signs of overheating.
Aside from the Mexican debacle, currencies were generally quiet,
although the dollar did rally a little from depressed levels. The performance
of various international markets is also shown to the left.
Market Performance
__________________________________________________________________________
6 Months Ended 12/31/94
____________________________________
Local
Currency
Local vs. U.S. In U.S.
Currency Dollars Dollars
____________________________________
Australia -0.4% 6.2% 5.7%
France -0.1 2.3 2.1
Germany 3.5 2.7 6.3
Hong Kong -6.2 -0.1 -6.3
Italy -4.7 -2.4 -7.0
Japan -5.4 -1.1 -6.5
Netherlands 8.5 2.9 11.6
Norway 15.2 2.7 18.2
Singapore 7.1 4.6 12.0
Spain -3.0 -3.0
Sweden 8.3 3.4 11.9
Switzerland 0.4 2.2 2.7
United Kingdom 6.3 1.4 7.7
Market Review
In sharp contrast to the end of 1993, the Japanese market finished 1994 on a
steady note. Bonds rallied but, more significantly, interim earnings from
Japan s major corporations were finally in positive territory after four years
of disappointment. This was particularly true of manufacturing companies,
especially autos and electronics, where strong export markets were at last
joined by modest improvements in domestic demand.
We expect this situation to last, with the local economy continuing its
steady, if subnormal, recovery into 1997. Encouraging signs over the past six
months included industrial production turning positive, unemployment steadying
at 3%, and a survey of healthy corporate confidence from the Bank of Japan. It
is also interesting to see that leadership in the economy has switched from
early-cycle public works and housing to consumption and capital expenditure.
With this improving backdrop, Japanese stocks in your fund moved higher. We
continue to find large sections of the market, notably financials, broadly
unattractive, which has prevented us from increasing our exposure to this
market more rapidly. Simply put, we find more appealing growth stocks at
cheaper valuations in other parts of the world. However, within Japan we moved
further into economically sensitive stocks, such as an addition to Sony after
disclosure of its problems at Columbia Pictures led to price weakness.
As in Japan, economies in Europe continued to grow. We expect the
current improvement to last into 1997, although the UK is likely to peak
sooner. After earlier caution, Germany now appears to be in the early phases
of a typical recovery. Growth is led by exports and capital expenditure, the
latter of which is especially strong in what used to be East Germany, while
rising capacity utilization looks promising in the former West Germany. Less
positive is the outlook for consumption because of tax surcharges effective in
1995. However, with inflation subdued at around 2%, money supply growth
falling closer to the Bundesbank s target of 4% to 6%, and Chancellor Kohl s
reelection auguring a continued cautious approach, the outlook seems benign
for further interest rate increases. We have maintained our exposure to
Germany at 3.2% of net assets but continue to find more attractive investments
elsewhere in Europe.
In France, balance sheets are generally healthy and industry is focused
on remaining competitive in a strong franc environment. With industrial
production positive, corporate earnings have been strong. We have increased
our weighting in France, with an emphasis on consumption and some special
situations such as Eaux Cie Generale, the water utility, which has used its
cash flow to diversify into mobile phones and other areas.
However, a major concentration in Europe remains the Netherlands, where
stocks rose strongly over the final months of 1994. This country is home to
several quality international growth companies that sell at attractive
valuations. The publishers Elsevier and Wolters Kluwer are among our major
holdings.
Europe s major loser in terms of stock market performance over the past
few months was Italy, where the euphoria of Berlusconi s rise to power and
promises of a restructuring of government finances came to an undignified end.
Our exposure there is modest. Stocks in the UK were subdued for much of the
year. While growth prospects here look healthy, we expect the long-term
constraints of trade and inflation to reassert themselves. Since price/book
value and price/cash flow ratios are high by historical standards, the UK
remains a source of funds through sales of securities.
The ever volatile markets of Latin America declined sharply in December.
Mexico led the way with a precipitous drop in dollar terms, followed by
falling markets in Argentina and Brazil. The catalyst was the sharp
devaluation of the Mexican peso, which reflected the persistent current
account deficit, a ponderous start by the new President, and an attack on the
currency by speculators. We had sold some shares of TMX prior to the crisis,
and our current exposure in this region is about 5% of your portfolio. If
confidence can be restored, it will greatly enhance the cost competitiveness
of Mexican industry. We stick with our assumption that the trend toward
democracy and free markets is intact. This is likewise the case in Brazil
where President Cardoso s early moves to implement structural reform appear
successful. The task now is to improve the fiscal situation through a
combination of privatizations and constitutional reform. We believe the
risk/reward ratio in Brazil is attractive with many stocks selling at modest
valuations.
The markets of Asia (ex-Japan) were disappointing as many broke through
their lows of March and April. Interest rates rising in tandem with U.S.
rates, mutual fund redemptions, and concerns about China were all to blame.
Hong Kong fell the furthest, but Malaysia and Thailand were also down by
significant amounts.
Chart 1 - Geographic Diversification
The confluence of events could hardly have been worse for Hong Kong. On
one hand, Chinese urban inflation raced to 27%, causing the mainland
government to severely tighten fiscal policy, which affects Hong Kong. On the
other, monetary policy, indirectly influenced by the Federal Reserve since the
Hong Kong dollar is pegged to the U.S. currency, also tightened, causing
mortgage rates to rise above the rate of local inflation for the first time in
four years. Property earnings, which represent a large proportion of the Hang
Seng index, have fallen. This is not encouraging at first glance, but the
market plunge has brought the index down to nine times anticipated 1995
earnings, near the lower end of its historical range. After steadily cutting
our exposure throughout 1994, we intend to maintain our weighting here at 2%
of the portfolio.
Our position in Malaysia is similar as economic growth is a robust 8%,
which should eventually translate into strong corporate earnings growth. Some
examples of this are the infrastructure stocks United Engineers, which built
the North-South expressway through Malaysia, and Technology Resources
Industries, the mobile phone operator. Both continue to enjoy greater than 20%
profit growth. Showing more stability, Singapore maintained its safe-haven
image largely due to liquidity generated by its Central Provident Fund.
Australia and New Zealand were also little changed. Despite sharp upward moves
in commodity prices, which benefit these countries, both suffered from
attractive fixed-income alternatives with real yields over 10%. Our exposure
to these markets is likely to fall as industrial earnings slow.
Summary and Outlook
The main drag on your fund s performance during the past six months was Latin
America, especially the markets of Mexico and Brazil. The smaller markets of
Asia, most notably Malaysia, also subtracted value. The picture was similar
during the full nine months since inception, with the fund overweighted in the
smaller markets. Stock selection was also a culprit, as our exposure to
smaller companies proved disappointing. Many economies have since
strengthened, which usually favors smaller stocks. However, the rise in
interest rates worldwide has kept investors nervous. Currencies, outside of
Mexico, had negligible impact.
When it becomes clearer that U.S. rates have stopped rising, we will
begin to see more grounds for optimism. The Japanese and European economies
are back on a growth path (notwithstanding the recent natural disasters in
both regions) and valuations have improved with rapidly rising earnings. A
relatively heavy exposure to European markets, selective exposure to Japan,
and an overweighting in the less developed markets of the world where superior
growth can now be found at modest valuation levels will, we believe, serve
investors well in 1995 and beyond.
Respectfully submitted,
Martin G. Wade
President and Chairman of the
Investment Advisory Committee
January 31, 1995
Industry Diversification
__________________________________________________________________________
December 31, 1994
Percent of
Net Assets
___________
Consumer Goods 23.0%
Capital Goods 12.1
Financial/Insurance 11.4
Basic Industry 11.4
Utilities 6.0
Energy 3.2
Transport/Storage 2.6
Miscellaneous 0.1
Reserves 30.2
__________________________________________________________________________
Net Assets 100.0%
__________________________________________________________________________
Security Classification
__________________________________________________________________________
December 31, 1994
Market
Cost Value
Percent of Net Assets (000) (000)
________________________________ _______ _______
Common Stocks, 68.8% $6,475 $6,260
Preferred Stocks, 1.0% 84 89
Short-Term Investments, 27.8% 2,529 2,529
______ ______
Total Investments, 97.6% 9,088 8,878
Other Assets Less
Liabilities, 2.4% 217 217
__________________________________________________________________________
Net Assets, 100.0% $9,305 $9,095
__________________________________________________________________________
Chart 2 - Fiscal-Year Performance Comparison
Twenty-Five Largest Holdings
__________________________________________________________________________
December 31, 1994
Percent of
Net Assets
___________
Wolters Kluwer, Netherlands 1.7%
Royal Dutch Petroleum, Netherlands 1.1
Elsevier, Netherlands 1.0
Nippon Steel, Japan 0.9
TMX ADS, Mexico 0.9
Kyocera, Japan 0.8
National Westminster Bank, United Kingdom 0.8
Sharp, Japan 0.8
Mitsubishi Heavy Industry, Japan 0.8
Canon, Japan 0.7
Cadbury Schweppes, United Kingdom 0.7
Eaux Cie Generale, France 0.7
Matsushita Electric Industries, Japan 0.7
United Engineers, Malaysia 0.7
Nippon Denso, Japan 0.7
Daiichi Pharmaceutical, Japan 0.7
Sumitomo, Japan 0.7
Technology Resources Industries, Malaysia 0.7
Hitachi, Japan 0.7
Sumitomo Electric, Japan 0.6
Sony, Japan 0.6
Brazil Fund, Brazil 0.6
Daiwa House, Japan 0.6
Swire Pacific A , Hong Kong 0.6
BBC Brown Boveri, Switzerland 0.6
__________________________________________________________________________
Total 19.4%
__________________________________________________________________________
Fiscal-Year Performance
__________________________________________________________________________
Period Ended December 31, 1994
Since Inception (March 31, 1994)
____________________________________
1.8%
__________________________________________________________________________
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Statement of Net Assets
T. Rowe Price International Stock Portfolio / December 31, 1994
Value
______
ARGENTINA 0.5%
COMMON STOCKS
230 shs. Banco de Galicia Buenos
Aires ADR (USD). . . . . . . $ 3,968
110 Banco Frances del Rio de la
Plata ADR (USD). . . . . . . 2,351
150 Buenos Aires Embotelladora
ADR (USD). . . . . . . . . . 4,837
70 Sociedad Comercial del Plata
ADS (USD). . . . . . . . . . 1,820
360 Telefonica de Argentina ADR
(USD). . . . . . . . . . . . 19,080
600 YPF Sociedad Anonima ADR
(USD). . . . . . . . . . . . 12,825
Total Argentina 44,881
AUSTRALIA 1.8%
COMMON STOCKS
6,000 ANI . . . . . . . . . . . . . . 6,698
1,013 Broken Hill Property. . . . . . 15,392
4,000 Burns Philp & Company . . . . . 9,458
3,000 Email . . . . . . . . . . . . . 8,536
10,000 John Fairfax Holdings . . . . . 21,397
3,000 Mayne Nickless. . . . . . . . . 15,350
3,000 News Corporation. . . . . . . . 11,745
2,000 Nine Network. . . . . . . . . . 5,597
19,000 TNT . . . . . . . . . . . . . . 32,406
5,500 Western Mining. . . . . . . . . 31,809
158,388
PREFERRED STOCK
1,500 * News Corporation. . . . . . . . 5,163
Total Australia 163,551
AUSTRIA 0.1%
PREFERRED STOCK
100 Creditanstalt Bankverein. . . . 5,813
BELGIUM 1.0%
COMMON STOCKS
90 Delhaize Freres . . . . . . . . 3,650
50 Generale Banque . . . . . . . . 12,685
170 Kredietbank . . . . . . . . . . 35,646
30 Solvay. . . . . . . . . . . . . 14,241
28 UCB . . . . . . . . . . . . . . 21,565
Total Belgium 87,787
BRAZIL 1.2%
COMMON STOCKS
1,700 Brazil Fund (USD) . . . . . . . 56,737
140 * Cia Energetica de Sao Paulo
GDS (USD). . . . . . . . . . 1,855
70 * Companhia Energetica Minas
Gerais ADR (USD) . . . . . . 1,733
60,325
PREFERRED STOCK
1,157 shs. Telebras ADR (USD). . . . . . . $ 52,065
Total Brazil 112,390
CANADA 0.3%
COMMON STOCKS
600 Alcan Aluminium . . . . . . . . 15,238
800 MacMillan Bloedel . . . . . . . 10,052
150 Royal Bank of Canada. . . . . . 2,994
Total Canada 28,284
CHILE 0.6%
COMMON STOCKS
790 Chile Fund (USD). . . . . . . . 36,439
280 Chilectra ADR (USD) . . . . . . 13,860
60 Compania de Telefonos de
Chile ADR (USD). . . . . . . 4,725
Total Chile 55,024
DENMARK 0.1%
COMMON STOCKS
100 Teledanmark . . . . . . . . . . 5,079
160 Unidanmark. . . . . . . . . . . 6,155
Total Denmark 11,234
FINLAND 0.2%
PREFERRED STOCK
140 Nokia . . . . . . . . . . . . . 20,626
FRANCE 5.3%
COMMON STOCKS
420 Accor . . . . . . . . . . . . . 45,609
150 CMB Packaging . . . . . . . . . 5,069
80 Carrefour . . . . . . . . . . . 33,132
50 Chargeurs . . . . . . . . . . . 10,916
250 Cie de St. Gobain . . . . . . . 28,740
690 Eaux Cie Generale . . . . . . . 67,049
165 Ecco. . . . . . . . . . . . . . 19,586
100 GTM Entrepose . . . . . . . . . 7,075
125 LVMH. . . . . . . . . . . . . . 19,730
20 L Oreal . . . . . . . . . . . . 4,078
260 Lafarge Coppee. . . . . . . . . 18,498
180 Lapeyre . . . . . . . . . . . . 9,066
20 Legrand . . . . . . . . . . . . 24,265
250 Peugeot . . . . . . . . . . . . 34,263
70 Pinault Printemps Redoute . . . 12,425
150 Poliet. . . . . . . . . . . . . 9,928
25 Primagaz. . . . . . . . . . . . 4,096
30 Promodes. . . . . . . . . . . . 5,583
50 Societe Generale de France. . . 5,252
300 Societe Nationale Elf
Aquitaine. . . . . . . . . .
21,114 320 Television Francaise. . . . . . 29,010
300 Total . . . . . . . . . . . . . 17,424
1,000 Valeo . . . . . . . . . . . . . 49,785
Total France 481,693
GERMANY 3.2%
COMMON STOCKS
18 shs. Allianz Holdings. . . . . . . . $ 28,749
10 Ava Allgemeine Handels -
Der Verbr. . . . . . . . . . 3,130
80 Bayer . . . . . . . . . . . . . 18,689
10 Bayerische Motoren Werke. . . . 4,966
20 Bilfinger & Berger. . . . . . . 10,196
56 Deutsche Bank . . . . . . . . . 25,955
120 Gehe. . . . . . . . . . . . . . 43,366
70 Hoechst . . . . . . . . . . . . 15,020
10 Kaufhof Holdings. . . . . . . . 3,047
190 Mannesmann. . . . . . . . . . . 51,742
25 Rhon Klinikum . . . . . . . . . 21,296
25 Schering. . . . . . . . . . . . 16,359
50 Veba. . . . . . . . . . . . . . 17,424
100 Volkswagen. . . . . . . . . . . 27,426
287,365
PREFERRED STOCK
10 Krones Finance. . . . . . . . . 5,615
Total Germany 292,980
HONG KONG 2.3%
COMMON STOCKS
67,000 Great Eagle Holdings. . . . . . 26,845
14,085 Hong Kong Land Holdings . . . . 27,489
19,479 Hopewell Holdings . . . . . . . 16,113
7,000 Hutchison Whampoa . . . . . . . 28,319
9,000 Swire Pacific A . . . . . . . 56,068
16,000 Wharf Holdings. . . . . . . . . 53,974
Total Hong Kong 208,808
ITALY 1.8%
COMMON STOCKS
2,109 Assicurazioni Generali. . . . . 49,604
5,000 Banca Fideuram. . . . . . . . . 5,579
700 Imi . . . . . . . . . . . . . . 4,303
2,500 * Istituto Naz Delle
Assicurazioni. . . . . . . . 3,321
2,000 Italgas . . . . . . . . . . . . 5,506
10,700 Montedison. . . . . . . . . . . 8,068
900 RAS . . . . . . . . . . . . . . 5,446
7,900 Stet. . . . . . . . . . . . . . 23,281
17,800 Telecom Italia. . . . . . . . . 46,311
8,000 Telecom Italia,
savings shares . . . . . . . 15,956
Total Italy 167,375
JAPAN 20.2%
COMMON STOCKS
1,000 Advantest . . . . . . . . . . . 33,852
2,000 Alps Electric . . . . . . . . . 26,318
4,000 Amada . . . . . . . . . . . . . 50,226
4,000 Canon . . . . . . . . . . . . . 67,906
2,000 Citizen Watch Company . . . . . 15,450
1,000 Dai Nippon Screen
Manufacturing. . . . . . . . 7,725
4,000 shs. Daiichi Pharmaceutical. . . . . $ 63,084
4,000 Daiwa House . . . . . . . . . . 56,655
10 East Japan Railway. . . . . . . 50,025
6,000 Hitachi . . . . . . . . . . . . 59,608
4,000 Hitachi Zosen . . . . . . . . . 21,416
2,000 Honda Motor Company . . . . . . 35,560
1,000 Inax. . . . . . . . . . . . . . 10,447
1,000 Ishihara Sangyo . . . . . . . . 4,008
1,000 Ito-Yokado. . . . . . . . . . . 53,541
1,000 Kokuyo. . . . . . . . . . . . . 24,109
5,000 Komatsu . . . . . . . . . . . . 45,203
1,000 Komori. . . . . . . . . . . . . 26,821
1,000 Kumagai Gumi. . . . . . . . . . 5,203
4,000 Kuraray . . . . . . . . . . . . 47,413
1,000 Kyocera . . . . . . . . . . . . 74,234
2,000 Makita Electric Works . . . . . 36,163
2,000 Marui . . . . . . . . . . . . . 36,565
4,000 Matsushita Electric
Industries . . . . . . . . . 65,897
1,000 Mitsubishi. . . . . . . . . . . 13,159
9,000 Mitsubishi Heavy
Industries . . . . . . . . . 68,709
2,000 Mitsubishi Paper. . . . . . . . 14,907
4,000 Mitsui Fudosan. . . . . . . . . 42,592
1,000 Mitsui Petrochemical
Industries . . . . . . . . . 8,840
1,000 Murata Manufacturing. . . . . . 38,674
1,000 National House. . . . . . . . . 15,168
2,000 NEC . . . . . . . . . . . . . . 22,903
3,000 Nippon Denso. . . . . . . . . . 63,285
2,000 Nippon Hodo . . . . . . . . . . 32,948
22,000 Nippon Steel. . . . . . . . . . 82,873
2,000 Pioneer Electronic. . . . . . . 48,217
2,000 Sankyo. . . . . . . . . . . . . 49,824
4,000 Sekisui Chemical. . . . . . . . 39,779
4,000 Sekisui House . . . . . . . . . 44,601
4,000 Sharp . . . . . . . . . . . . . 72,325
1,000 Shinetsu Chemical . . . . . . . 19,890
1,000 Sony. . . . . . . . . . . . . . 56,755
6,000 Sumitomo. . . . . . . . . . . . 61,477
4,000 Sumitomo Electric . . . . . . . 57,057
1,000 Sumitomo Forestry . . . . . . . 16,072
4,000 Teijin. . . . . . . . . . . . . 21,095
2,000 Tokio Marine & Fire
Insurance. . . . . . . . . . 24,510
Total Japan 1,833,089
MALAYSIA 2.8%
COMMON STOCKS
24,000 Affin Holdings. . . . . . . . . 39,287
3,000 Aokam Perdana . . . . . . . . . 18,563
22,000 Renong. . . . . . . . . . . . . 27,226
7,000 Resorts World . . . . . . . . . 41,120
19,000 Technology Resources
Industries . . . . . . . . . 60,642
13,000 United Engineers. . . . . . . . 64,147
Total Malaysia 250,985
MEXICO 2.5%
COMMON STOCKS
440 shs. Cemex A . . . . . . . . . . . $ 2,178
1,350 Cemex B . . . . . . . . . . . 7,069
16,070 Cifra C . . . . . . . . . . . 30,686
7,400 Cifra ADR (USD) . . . . . . . . 15,465
1,290 Desc B . . . . . . . . . . . . 6,223
670 Grupo Financiero
Banamex C . . . . . . . . . 1,980
4,520 Grupo Financiero
Bancomer C . . . . . . . . 2,453
370 Grupo Financiero Bancomer
ADS (USD). . . . . . . . . . 4,255
820 Grupo Financiero Bancomer
GDS (USD). . . . . . . . . . 10,455
3,090 Grupo Industrial Maseca . . . . 3,329
660 Grupo Televisa GDS (USD). . . . 20,955
230 Panamerican Beverages
ADR (USD). . . . . . . . . . 7,274
1,890 TMX ADS (USD) . . . . . . . . . 77,490
4,220 Tolmex B . . . . . . . . . . . 35,626
Total Mexico 225,438
NETHERLANDS 6.1%
COMMON STOCKS
350 ABN Amro. . . . . . . . . . . . 12,158
250 Akzo. . . . . . . . . . . . . . 28,861
270 AMEV. . . . . . . . . . . . . . 11,463
960 CSM . . . . . . . . . . . . . . 37,716
8,400 Elsevier. . . . . . . . . . . . 87,586
840 International Nederlanden
Groep. . . . . . . . . . . . 39,680
100 Nutricia Verenigde
Bedrijven. . . . . . . . . . 4,879
1,000 Polygram. . . . . . . . . . . . 46,489
900 Royal Dutch Petroleum . . . . . 97,990
300 Unilever. . . . . . . . . . . . 35,238
2,120 Wolters Kluwer. . . . . . . . . 156,811
Total Netherlands 558,871
NEW ZEALAND 1.3%
COMMON STOCKS
5,000 Air New Zealand B . . . . . . 15,684
10,000 Carter Holt Harvey. . . . . . . 20,485
22,000 Fletcher Challenge. . . . . . . 51,686
12,000 Fletcher Challenge, Forests
Division . . . . . . . . . . 14,365
6,000 Telecom Corporation of
New Zealand. . . . . . . . . 19,588
Total New Zealand 121,808
NORWAY 0.9%
COMMON STOCKS
180 Bergesen A . . . . . . . . . . 4,392
350 Kvaerner Industier A . . . . . 16,355
1,047 Norsk Hydro . . . . . . . . . . 41,183
400 shs. Orkla A . . . . . . . . . . . $ 14,610
190 Saga Petroleum B . . . . . . . 1,967
Total Norway 78,507
PORTUGAL 0.1%
COMMON STOCK
200 Jeronimo Martins. . . . . . . . 8,569
SINGAPORE 1.9%
COMMON STOCKS
3,000 Far East Levingston
Shipbuilding . . . . . . . . 13,894
3,000 Keppel. . . . . . . . . . . . . 25,523
4,000 Sembawang Shipyard. . . . . . . 29,914
2,000 Singapore Airlines. . . . . . . 18,388
2,000 Singapore Press . . . . . . . . 36,364
4,400 United Overseas Bank. . . . . . 46,490
Total Singapore 170,573
SPAIN 1.2%
COMMON STOCKS
40 Banco Popular Espanol . . . . . 4,756
250 Banco Santander . . . . . . . . 9,573
800 Centros Commerciales
Pryca. . . . . . . . . . . . 12,065
800 ENDESA. . . . . . . . . . . . . 32,577
120 FOSCA . . . . . . . . . . . . . 11,742
90 Gas Natural . . . . . . . . . . 7,740
750 Repsol. . . . . . . . . . . . . 20,342
950 Telefonica de Espana. . . . . . 11,223
Total Spain 110,018
SWEDEN 1.3%
COMMON STOCKS
240 Asea A . . . . . . . . . . . . 17,538
1,800 Astra B . . . . . . . . . . . 45,905
420 Atlas Copco B . . . . . . . . 5,370
370 Electrolux B . . . . . . . . . 18,773
160 Hennes & Mauritz B . . . . . . 8,204
440 Sandvik B . . . . . . . . . . 7,076
200 Stora Kopparberg B . . . . . . 12,058
Total Sweden 114,924
SWITZERLAND 2.4%
COMMON STOCKS
65 BBC Brown Boveri. . . . . . . . 55,947
20 Ciba Geigy. . . . . . . . . . . 11,929
20 CS Holdings . . . . . . . . . . 8,554
38 Nestle. . . . . . . . . . . . . 36,190
6 Roche Holdings. . . . . . . . . 29,030
70 Sandoz. . . . . . . . . . . . . 36,461
50 Swiss Bank. . . . . . . . . . . 13,824
28 Union Bank of Switzerland . . . 23,224
Total Switzerland 215,159
THAILAND 1.0%
COMMON STOCKS
1,500 shs. Advanced Information
Service. . . . . . . . . . . $ 20,793
2,000 Bangkok Bank. . . . . . . . . . 21,350
3,000 Bank of Ayudhya . . . . . . . . 12,308
400 Siam Cement . . . . . . . . . . 23,963
1,000 Siam Commercial Bank. . . . . . 9,162
1,000 Thai Farmers Bank . . . . . . . 8,126
Total Thailand 95,702
UNITED KINGDOM 9.7%
COMMON STOCKS
3,800 Abbey National. . . . . . . . . 25,564
3,000 Argos . . . . . . . . . . . . . 16,427
4,500 Argyll Group. . . . . . . . . . 18,833
12,000 Asda Group. . . . . . . . . . . 12,626
1,000 BAA . . . . . . . . . . . . . . 7,431
3,000 British Gas . . . . . . . . . . 14,785
2,000 British Petroleum . . . . . . . 13,330
8,900 Cable & Wireless. . . . . . . . 52,355
10,000 Cadbury Schweppes . . . . . . . 67,274
14,000 Caradon . . . . . . . . . . . . 55,196
3,000 Clyde Petroleum . . . . . . . . 1,737
2,000 Coats Viyella . . . . . . . . . 5,945
3,000 David S. Smith. . . . . . . . . 23,702
1,848 East Midlands Electricity . . . 24,286
1,000 Eastern Electricity . . . . . . 12,172
1,000 First National Finance. . . . . 939
3,000 Glaxo Holdings. . . . . . . . . 31,141
5,000 Grand Metropolitan. . . . . . . 31,994
4,000 Guinness. . . . . . . . . . . . 28,098
1,000 Heath . . . . . . . . . . . . . 3,864
1,000 Heywood Williams Group. . . . . 4,185
2,000 Hillsdown Holdings. . . . . . . 5,538
2,000 John Laing. . . . . . . . . . . 7,040
3,200 Kingfisher. . . . . . . . . . . 22,178
5,000 Ladbroke Group . . . . . . . . 13,376
2,000 London Electricity. . . . . . . 23,561
9,000 National Westminster Bank . . . 72,374
2,000 RTZ . . . . . . . . . . . . . . 25,814
3,000 Rank Organisation . . . . . . . 19,525
4,000 Reed International. . . . . . . 50,064
2,000 Rolls Royce . . . . . . . . . . 5,570
2,000 Sears . . . . . . . . . . . . . 3,434
3,000 Shell Transport & Trading . . . 32,620
6,000 Smithkline Beecham,
equity units . . . . . . . . 39,613
1,000 South Western Electricity . . . 13,768
6,000 T & N . . . . . . . . . . . . . 14,925
3,000 Tesco . . . . . . . . . . . . . 11,640
14,500 Tomkins . . . . . . . . . . . . 49,454
3,000 United Newspapers . . . . . . . 22,200
Total United Kingdom 884,578
SHORT-TERM INVESTMENTS 27.8%
COMMERCIAL PAPER
$150,000 Bell South Telecommuni-
cation, 5.80%, 1/23/95 . . . $148,671
250,000 BMW U.S. Capital, 6.10%,
1/13/95. . . . . . . . . . . 248,729
400,000 Hanson Finance (U.K.),
6.00%, 2/16/95 . . . . . . . 396,800
200,000 Merrill Lynch & Co., VRN,
5.75%, 1/17/95 . . . . . . . 198,051
350,000 New South Wales Treasury,
6.00%, 1/12/95 . . . . . . . 348,192
350,000 Preferred Receivables
Funding, 6.00%, 2/2/95 . . . 346,325
443,000 President & Fellows Harvard
College, 6.00%, 1/3/95 . . . 442,705
400,000 UBS Finance (Delaware),
6.00%, 1/3/95. . . . . . . . 399,733
Total Short-Term Investments 2,529,206
__________________________________________________________________________
Total Investments in Securities -
97.6% of Net Assets (cost $9,087,901) 8,877,873
__________________________________________________________________________
Other Assets Less Liabilities. . . . . . . . . . 217,087
Net Assets Consisting of:
Accumulated net
investment income . . . . . . . . . $ 51,545
Accumulated
realized losses . . . . . . . . . . (17,179)
Net unrealized loss. . . . . . . . . . (209,939)
Paid-in-capital applicable to
893,040 shares of $0.0001
par value capital stock
outstanding; 1,000,000,000
shares of the Corporation
authorized . . . . . . . . . . . . . 9,270,533
_________
NET ASSETS . . . . . . . . . . . . . . $9,094,960
_________
_________
NET ASSET VALUE PER SHARE. . . . . . . $10.18
______
______
__________________________________________________________________________
* Non-income producing
(USD) U.S. dollar
(VRN) Variable Rate Note
The accompanying notes are an integral part of these financial statements.
Statements of Operations
T. Rowe Price International Stock Portfolio / From March 31, 1994
(Commencement of Operations) to December 31, 1994
INVESTMENT INCOME
Income
Dividends (net of foreign taxes of $6,569) . . $47,052
Interest . . . . . . . . . . . . . . . . . . . 40,397
_________
Total income . . . . . . . . . . . . . . . . . 87,449
Expenses
Investment management and administrative . . . 35,904
_________
Net investment income. . . . . . . . . . . . . . 51,545
_________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on:
Securities . . . . . . . . . . . . . . . . . . (9,866)
Foreign currency transactions. . . . . . . . . (7,313)
_________
Net realized loss. . . . . . . . . . . . . . . (17,179)
_________
Change in net unrealized gain or loss on:
Securities . . . . . . . . . . . . . . . . . . (210,028)
Other assets and liabilities denominated in
foreign currencies . . . . . . . . . . . . 89
_________
Change in net unrealized gain or loss . . . . (209,939)
_________
Net realized and unrealized loss . . . . . . . . (227,118)
_________
DECREASE IN NET ASSETS FROM OPERATIONS . . . . . $(175,573)
_________
_________
__________________________________________________________________________
Statement of Changes in Net Assets
T. Rowe Price International Stock Portfolio / From March 31, 1994
(Commencement of Operations) to December 31, 1994
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . . . . . . . . $51,545
Net realized loss. . . . . . . . . . . . . . . (17,179)
Change in net unrealized gain or loss. . . . . (209,939)
__________
Decrease in net assets from operations . . . . (175,573)
__________
Capital share transactions1
Shares sold. . . . . . . . . . . . . . . . . . 9,293,133
Shares redeemed. . . . . . . . . . . . . . . . (122,600)
__________
Increase in net assets from capital
share transactions . . . . . . . . . . . . . . 9,170,533
__________
Increase in net assets . . . . . . . . . . . . . 8,994,960
NET ASSETS
Beginning of period . . . . . . . . . . . . . . 100,000
__________
End of period . . . . . . . . . . . . . . . . . $9,094,960
__________
__________
__________________________________________________________________________
1Capital share transactions (number of shares)
Shares sold. . . . . . . . . . . . . . . . . . 894,837
Shares redeemed. . . . . . . . . . . . . . . . (11,797)
__________
Increase in capital shares outstanding . . . . 883,040
__________
__________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price International Stock Portfolio / December 31, 1994
Note 1 - Significant Accounting Policies
T. Rowe Price International Series, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The International Stock Portfolio (the
fund), a diversified, open-end management investment company, is the sole
portfolio currently 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 (including Nasdaq) 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. Other equity securities and those listed
securities that are not traded on a particular day 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.
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 or losses is reflected as a component of such gains
or losses.
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. 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 - Organization
The fund was organized on January 31, 1994, and had no operations prior to
March 31, 1994, other than those related to organizational matters, including
the sale of 10,000 shares of its capital stock at $10.00 per share on March
28, 1994 to T. Rowe Price Associates, Inc.
Note 3 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors and following practices
of the fund are described more fully in the fund's Prospectus and Statement of
Additional Information.
A) Emerging Markets - The fund has investments in securities of companies
located in emerging markets as well as securities denominated in the
currencies of emerging market countries. Future economic or political
developments could adversely affect the liquidity or value, or both, of such
securities.
B) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. Government securities, aggregated $6,659,291 and $91,565,
respectively, for the period ended December 31, 1994.
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 taxable
income. The fund has unused realized capital loss carryforwards for federal
income tax purposes of $949 which expire in 2002. The fund intends to retain
gains realized in future periods that may be offset by available capital loss
carryforwards.
At December 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $9,087,901 and net unrealized
loss aggregated $210,028, of which $209,125 related to appreciated investments
and $419,153 to depreciated investments.
Note 5 - Related Party Transactions
The fund is managed by Rowe Price-Fleming International, Inc. (Price-Fleming)
which is owned by T. Rowe Price Associates, Inc., Robert Fleming Holdings
Limited, and Jardine Fleming Holdings Limited under a joint venture agreement.
The investment management and administrative agreement between the fund
and Rowe Price-Fleming International, Inc. (the Manager) provides for an
all-inclusive annual fee, computed daily and paid monthly, equal to 1.05% of
the fund's average daily net assets. Pursuant to the agreement, investment
management, shareholder servicing, transfer agency, fund accounting and
investment custody services are provided to the fund and interest, taxes,
brokerage commissions and extraordinary expenses are paid directly by the
fund.
During the period ended December 31, 1994, the fund, in the ordinary
course of business, paid commissions of $1,256 to, and placed security
purchase and sale orders aggregating $260,050 with, certain affiliates of the
Manager in connection with the execution of various portfolio transactions.
Financial Highlights
T. Rowe Price International Stock Portfolio
For a share outstanding through the period
__________________________________________
From March 31, 1994
(Commencement of
Operations) to
December 31, 1994
_________________
NET ASSET VALUE, BEGINNING
OF PERIOD. . . . . . . . . . . $ 10.00
______
Investment Activities
Net investment income. . . . . 0.06
Net realized and
unrealized gain . . . . . . 0.12*
______
Total from Investment
Activities . . . . . . . . . . 0.18
______
NET ASSET VALUE, END
OF PERIOD. . . . . . . . . . . $ 10.18
______
______
__________________________________________________________________________
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . 1.8%
Ratio of Expenses to Average
Net Assets . . . . . . . . . . 1.05%!
Ratio of Net Investment Income to
Average Net Assets . . . . . . 1.50%!
Portfolio Turnover Rate. . . . . 4.6%!
Net Assets, End of Period . . . $9,094,960
__________________________________________________________________________
!Annualized.
*The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout the
period. This amount is inconsistent with the fund's aggregate gains and losses
because of the timing of sales and redemptions of fund shares in relation to
fluctuating market values for the investment portfolio.
To the Board of Directors of
T. Rowe Price International Series, Inc. and
Shareholders of the International Stock Portfolio
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the selected per
share data and information (which appears under the heading "Financial
Highlights") present fairly, in all material respects, the financial position
of the International Stock Portfolio (constituting T. Rowe Price International
Series, Inc.) at December 31, 1994, and the results of its operations, the
changes in its net assets and the selected per share data and information for
the period March 31, 1994 (commencement of operations) through December 31,
1994, in conformity with generally accepted accounting principles. These
financial statements and selected per share data and information (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, 1994 by correspondence with
custodians, provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 19, 1995
<PAGE>
Chart 1 - Geographic Diversification
Pie chart for International Stock Portfolio annual report (Dec. 31, 1994)
Entitled "Geographic Diversification": shows Europe 33%, Japan 20%, Far East
11%, Latin America 5%, and All Others 31%.
Chart 2 - Fiscal-Year Performance Comparison
Fiscal-Year Performance Comparison line graph for International Stock
Portfolio annual report (Dec. 31, 1994) shows $10,000 investments in
International Stock Portfolio, MSCI EAFE, and S&P 500 from March 1994 to
December 1994 growing to $10,180, $10,435, and $10,532, respectively.
