Annual Report
December 31, 1999
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International Stock Portfolio
T. Rowe Price, Invest With Confidence (registered trademark)
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
Dear Investor
Stocks around the world surged last year, and foreign markets outperformed the
U.S. for the first time since 1994 as measured by the MSCI Europe, Australasia,
and Far East (EAFE) Index. Interest rate cuts, reforms and restructuring,
mergers and acquisitions, and economic recovery sparked an impressive rebound in
developed and emerging markets alike after the crises of 1997-98. Excitement
about the rapid growth prospects for New Economy stocks related to
telecommunications and the Internet spilled over from the U.S., driving the
unmanaged EAFE benchmark up 22.27% in the second half and 27.30% for the year
(all returns are cited in U.S. dollars).
PERFORMANCE REVIEW
Performance Comparison
Periods Ended 12/31/99 6 Months 12 Months
---------------------------------------------------------------------------
International Stock
Portfolio 28.45% 33.32%
MSCI EAFE 22.27 27.30
Lipper Variable Annuity
Underlying International
Funds Average 31.94 42.88
The International Stock Portfolio delivered excellent performance in 1999,
powered by outstanding gains in the second half, as shown in the table. The
fund's returns of 28.45% and 33.32% for the six and 12 months,
respectively, exceeded those of the EAFE index. Results were behind the
Lipper Variable Annuity Underlying International Funds Average, primarily
due to our relative underweighting in Japan versus our competitors.
Overweighting the strong Latin American markets (which are not represented
in EAFE) and Sweden, and underweighting the weaker U.K. market, aided
results compared with the index. Europe on the whole posted merely
respectable gains for U.S. investors last year, as the new euro fell 15%
against the U.S. dollar. Otherwise, local currency returns in the Eurozone
were quite strong. The market advance in the U.K., which is outside the
Eurozone, was tepid. Globally, the portfolio's emphasis on the surging
consumer electronics sector and underweighting of utilities and insurance
were also positive.
The major factors stimulating international markets were more vigorous
international growth and demand, as well as high levels of mergers,
acquisitions, and corporate restructuring. Europe benefited from an
impressive volume of corporate activity and restructuring as industry
consolidation accelerated. Merger and acquisition activity in Europe
totaled $1.6 trillion for the year, nearly double the pace of 1998.
The long-awaited economic upturn in Japan - though lackluster - helped
propel the yen up 10% versus the U.S. dollar last year, enhancing the
already excellent returns for U.S. investors there. Japan also enjoyed
better-than-expected economic performance and an unprecedented level of
company restructuring. However, the sharp rise of the yen led to concerns
that Japan's exports would be hurt, hindering the economic recovery.
Elsewhere in Asia, economies improved more vigorously and tentative steps
toward structural reform were taken. Latin American markets rallied
strongly, overcoming the devaluation of the Brazilian real in January as
well as lingering concerns about the region's large fiscal deficits, rising
U.S. interest rates, and political resistance to fiscal reforms,
particularly in Brazil.
YEAR-END DISTRIBUTIONS
Your portfolio's Board of Directors declared a year-end income dividend of
$0.07 and a long-term capital gain of $0.22. These were paid on December 16
to shareholders of record on December 14. You should already have received
a statement reflecting these distributions.
INVESTMENT REVIEW
Market Performance
Six Months Local Local Currency U.S.
Ended 12/31/99 Currency vs. U.S. Dollars Dollars
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France 31.72% -2.80% 28.03%
Germany 29.18 -2.80 25.56
Hong Kong 21.58 -0.19 21.35
Italy 18.25 -2.80 14.94
Japan 13.23 18.26 33.90
Mexico 19.74 -1.26 18.23
Netherlands 18.10 -2.80 14.79
Singapore 21.66 2.19 24.33
Sweden 51.51 -0.48 50.78
Switzerland 10.29 -2.88 7.11
United Kingdom 7.17 2.25 9.58
Source: RIMES Online, using MSCI indices
Europe
At the end of December, the portfolio's allocation to Europe represented
58% of assets, down from 67% in June. Within Europe, the U.K. was the
largest country exposure at about 15% of total assets (still underweight
compared with EAFE). New purchases (as well as additions to existing
holdings) focused on companies and sectors that we expect to benefit from
the expansion and integration of the Internet and telecommunications
arenas; these also led performance for the year.
Rising U.S. interest rates and the large number of initial public offerings
inhibited European equity market performance around midyear. However,
economic recovery gathered strength as exports, industrial production, and
business confidence picked up across the region, while consumer confidence
remained robust. Inflation in the Eurozone and the U.K. was restrained.
European stocks advanced strongly in the fourth quarter as enthusiasm for
the New Economy stocks grew. Across the region, telecom and
Internet-related companies and their suppliers led markets higher. The
Swedish and Finnish markets, dominated by Ericsson and Nokia, soared.
Germany also charged ahead late in the year as its two largest telecom
companies, Deutsche Telekom and Mannesmann surged, and tax changes sparked
heavy buying of other sectors. The U.K. and Switzerland were relatively
weak, held back by subdued performance in traditional growth sectors such
as pharmaceuticals and food manufacturing.
With growth picking up, the European Central Bank increased interest rates
50 basis points in the fourth quarter to 3.0% in a well-telegraphed,
preemptive move. Inflation is still below the European Central Bank target
of 2.0%. Significant downward pressure on prices (other than energy)
continued due to high unemployment, deregulation, competition, and
e-commerce. Outside the Eurozone, U.K. growth remained robust, and the Bank
of England raised interest rates twice for a total of 50 basis points (100
basis points equal one percentage point) in the second half to 5.50%. In
contrast to the Eurozone, where unemployment is 9.9%, U.K. unemployment has
fallen to a 19-year low of 4.1%, and higher wage settlements late in the
year reawakened concern about inflation.
Consolidation among European telecoms took off. The biggest news was mobile
telecom leader Vodafone-Airtouch's bid for Germany's second largest
telecom, Mannesmann. As the first hostile bid in Germany, the struggle is
seen as a test of how shareholder-oriented, as opposed to nationalistic,
the German market has become. Initial public offerings of Internet-related
companies were massively oversubscribed, and prices soared. One example was
Terra Networks, spun off by Spain's leading telecom provider, Telefonica.
Reflecting the importance of such New Economy companies, Morgan Stanley
added many to its MSCI indices in its quarterly index updates.
Outside the telecom industry, transactions were concentrated in the banking
and pharmaceutical sectors. In Italy, insurance giant Assicurazioni
Generali acquired INA. Spain's second and third largest banks BBV and
Argentaria merged to become BBVA as a precursor to a cross-border union
with Italian bank Unicredito. In the U.K., Royal Bank of Scotland appeared
as a second contender for National Westminster Bank, challenging Bank of
Scotland's hostile bid. Opposition to Dutch bank ING Groep's friendly offer
for French bank CCF seemed to indicate that French banks will be hindered
from participating in consolidation. Pharmaceutical companies took steps to
shed non-core businesses. For example, AstraZeneca and Novartis agreed to
combine their agricultural chemical businesses in a separate company, which
will be the world's largest agrochemical business.
Manufacturers of semiconductor equipment and components related to mobile
telecoms and the Internet, such as ASM Lithography of the Netherlands and
STMicroelectronics of France, were important contributors to performance.
Italy's largest Internet financial services company, BIPOP-Carire SPA, also
surged. In other sectors, strongly growing advertising revenues and the
announcement of joint ventures to extend its broadcasting and Internet
interests buoyed French television broadcaster TF1. Luxury goods firms
Gucci Group and Hermes dramatically outperformed other retailers, due to
the recovery of Asian demand and the belief that their brand strength would
protect them from potential Internet-related price erosion.
PIEGRAPH - Geographic Diversification
12/31/99
Europe 58%
Japan 21
Pacific Rim 9
Latin America 4
Other and Reserves 8
Far East
At the end of the year, about 21% of the portfolio was invested in Japan,
less than in the EAFE benchmark. Japan's market continued to soar in the
past six months, but more than half of the gain owed to the 18% rise of the
yen during the period. Leadership was narrow, and performance was
concentrated in the exuberant New Economy stocks. The buoyancy of those
sectors contrasted with the economy's middling performance. Recently, there
has been intermittent strength in industrial production but continued
weakness of domestic demand. The Bank of Japan's quarterly survey showed
encouraging improvements in business confidence, but also revealed reduced
plans for capital expenditure. Weak business and consumer spending
continued to leave the economy dependent on exports and government
stimulus. As a result, investors are nervous about the impact of protracted
yen strength on exports and about the magnitude of Japan's debt level.
In the third quarter, the announcement that Dai-Ichi Kangyo, Fuji Bank, and
the Industrial Bank of Japan would merge led to heavy buying of Japanese
banks by foreign investors, propelling the banking sector up. In the fourth
quarter, two other major banks, Sumitomo Bank and Sakura announced plans to
merge, sparking another flurry of excitement about the sector. However,
enthusiasm for banks then moderated as leading bank results revealed levels
of nonperforming loans well above expectations.
Transactions involving telecom companies and their suppliers were in the
news and the shares jumped. Japan's largest mobile telecom provider, NTT
Mobile Communications Network (NTT DoCoMo) acquired a 19% stake in a Hong
Kong mobile business, an important addition to its interests outside Japan.
Agreement about merger terms among three smaller telecom businesses - DDI,
IDO, and KDD - marked the first step in consolidation amongst Japanese
telecoms. Kyocera, the largest shareholder in the merged DDI/IDO/KDD group
and a manufacturer of telecom equipment including mobile handsets,
established a significant position in the U.S. handset market by acquiring
the cell phone production business of Qualcomm. Along with plans to provide
Internet banking and the upcoming launch of Internet-compatible
PlayStation, Sony's announcement of a share split propelled its price up.
Sector Diversification
Percent of Percent of
Net Assets Net Assets
6/30/99 12/31/99
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Services 30.2% 31.6%
Capital Equipment 14.4 18.6
Finance 20.2 16.4
Consumer Goods 19.4 14.3
Energy 8.2 5.8
Materials 3.0 2.4
Miscellaneous -- 1.9
Multi-Industry 1.2 1.5
Gold Mines -- --
Reserves 3.4 7.5
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Total 100.0% 100.0%
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Roughly 9% of the portfolio is invested in the Pacific ex-Japan, overweight
versus the benchmark. Just under a quarter of the regional weighting is in
Hong Kong, with another quarter in Australia. Here again, techs and
telecoms leapt, leaving other sectors far behind. Cellular phones and
Internet-compatible mobile phones have great growth potential in the
Pacific.
Late in the second half, concerns about U.S. interest rates were supplanted
by optimism for greater-than-expected economic growth, which spread from
the smaller economies to laggards Hong Kong and China. Across the region,
exports remained strong, underpinned by rising global demand. Domestic
consumption responded to the improved environment. Markets applauded the
Korean government's steps to contain the financial market impact of
conglomerate Daewoo's collapse. Australia's economy remained strong with
inflation muted.
The leading performers last year were China Telecom (Hong Kong), Hong Kong
giant Hutchison Whampoa, and Korean technology leader Samsung Electronics.
Rapidly growing demand for cellular phone service in mainland China, an
improving economic environment, and the agreement on terms for China's
admission to the World Trade Organization boosted China Telecom (Hong
Kong), now one of the world's largest cellular phone operators. Hutchison
Whampoa, a trading, transport, telecom, and property conglomerate, took off
on the strength of its Internet and telecom-related businesses. Rising
demand and firm pricing for technology and telecom components continued to
benefit Samsung.
Latin America
Approximately 4% of the portfolio is in Latin America. Nearly all of our
position in the region is in Brazil and Mexico, which ended 1999 in
triumph, rising 67% and 80%, respectively, for the year. Continued fiscal
discipline, robust oil prices, and strong U.S. demand kept the Mexican
economy buoyant. Banking reforms and candidate Labastida's huge success in
the ruling PRI party's primary election were positives. A prudent budget
for next year was also passed. Brazil's economy was weak but remained
stronger than expected. Better fiscal discipline and lower interest rates
continued to ward off high levels of inflation, despite the currency's near
33% devaluation since the beginning of the year. The pace of reform to
reduce government spending remained slow. However, gains in President's
Cardoso's popularity ratings late in the year should strengthen his ability
to effect change.
Our two largest holdings are telecom stocks, Telebras (Brazil) and Telmex
(Mexico), which joined in the strength of telecom stocks around the world.
Mexican cement producer Cemex and Brazilian energy company Petrobras also
outperformed during the year. The upturn in global growth, high cement
prices, and Cemex's strong market position spurred gains in the stock.
Petrobras surged due to rising oil prices, less government regulation, and
new management focused on restructuring.
OUTLOOK
We expect stronger economic growth in Europe, and fewer positive surprises
in other regions. This should pull capital flows back into Europe, lifting
stock markets and the euro. Moderate interest rate increases are probable,
and inflation may also rise modestly but should remain under control.
Technology and productivity improvements, ample manufacturing capacity,
high unemployment, deregulation, and the Internet should keep significant
downward pressure on prices. High levels of mergers and acquisitions, as
well as restructuring, should lift European markets relative to those of
other regions, as industry consolidation within countries and across
borders accelerates.
In Japan, the economy is apt to remain weak. The yen may spike higher, but
we expect some capital to flow out of Japan and the yen's strength to
moderate. The record $89 billion influx of foreign capital that propelled
the market last year is not likely to be beaten in 2000. Japanese
individuals are expected to increase their stock market investment as their
postal savings accounts expire in 2000 and 2001, but businesses are
expected to sell more stocks as they unwind cross-holdings in other
companies. Transactions and restructuring boosted stocks in 1999, but this
year attention should be paid to the pace and extent of the change planned.
Given these points and the fact that Japan's market is heavily weighted
toward high-priced technology stocks, we expect a weaker market this year.
Elsewhere in Asia, economic recovery is well under way, and we expect it to
continue - albeit at a more modest pace. After a very strong fourth quarter
dominated by the Internet stocks, markets may retrace some of their
progress in the short term. We are hopeful that the gentle but steady pace
of restructuring and reform will continue. Stock selection will remain
focused on companies with track records of boosting shareholder value.
In Latin America, we are optimistic that broad economic recovery can
continue in Brazil and that reform will get back on track next year. The
risk remains that Congress will oppose fiscal reforms vital to Brazil's
longer-term prosperity. Mexico's economic outlook is healthy, although the
economy and stock market are closely tied to the U.S. We have become more
confident that Mexico's presidential election in July will not disrupt
markets. Later in the year, we are hopeful that Mexico will gain
investment-grade status, enabling interest rates to fall. But given the
strong run that markets have just had, we retain a cautious stance.
Although we believe the valuations of some New Economy stocks have become
excessive, we are enthusiastic about the growth potential of well-managed
telecom, Internet-related, and technology companies with strong franchises
and business models. International economies are poised for better growth
with moderate inflation in 2000. Last year, surprising progress in
corporate restructuring and government reform occurred in all regions, and
merger-and-acquisition activity exceeded expectations in Europe and Japan.
These factors enhance the earnings potential of foreign companies and make
us optimistic about the overall performance of international markets in the
year ahead.
Respectfully submitted,
Martin G. Wade
President
January 20, 2000
Portfolio Highlights
Twenty-Five Largest Holdings
Percent of
Net Assets
12/31/99
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Sony, Japan 1.8%
Nokia, Finland 1.8
Mannesmann, Germany 1.7
National Westminster Bank, United Kingdom 1.7
Murata Manufacturing, Japan 1.7
Kyocera, Japan 1.7
Nippon Telegraph & Telephone, Japan 1.5
Telecom Italia Mobile, Italy 1.4
Cable & Wireless, Hong Kong/United Kingdom 1.2
Shell Transport & Trading, United Kingdom 1.2
NTT Mobile Communications Network, Japan 1.2
Telebras, Brazil 1.2
Adecco, Switzerland 1.1
NEC, Japan 1.1
Telefonica, Spain 1.0
Vivendi, France 1.0
ING Groep, Netherlands 1.0
Nestle, Switzerland 1.0
Total Fina, France 1.0
Canon, Japan 1.0
SmithKline Beecham, United Kingdom 1.0
Wolters Kluwer, Netherlands 1.0
ASM Lithography, Netherlands 1.0
Hennes & Mauritz, Sweden 1.0
Glaxo Wellcome, United Kingdom 0.9
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Total 31.2%
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Note: Table excludes reserves.
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 benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
SEC Chart: International Stock Portfolio
Lipper Variable Annuity
Underlying International International
MSCIEAFE Index Funds Average Stock Portfolio
3/31/1994 $10,000 $10,000 $10,000
12/31/1994 10,435 10,101 10,180
12/31/1995 11,640 11,330 11,318
12/31/1996 12,380 13,092 12,982
12/31/1997 12,635 14,001 13,383
12/31/1998 15,204 16,030 15,505
12/31/1999 19,355 22,133 20,672
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.
International Stock Portfolio
Periods Ended 12/31/99
Since Inception
1 Year 3 Years 5 Years Inception Date
33.32% 16.77% 15.22% 13.45% 3/31/94
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 International Stock Portfolio
For a share outstanding throughout each period
-------------------------------------------------------
Year
Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of period $ 14.52 $ 12.74 $ 12.64 $ 11.26 $ 10.18
-------------------------------------------------------
Investment activities
Net investment
income (loss) 0.12 0.17 0.12 0.09 0.07
Net realized and
unrealized gain (loss) 4.69 1.84 0.27* 1.55 1.06
Total from investment
activities 4.81 2.01 0.39 1.64 1.13
Distributions
Net investment income (0.07) (0.17) (0.12) (0.17) (0.05)
Net realized gain (0.22) (0.06) (0.06) (0.09) -
In excess of net
realized gain - - (0.11) - -
Total distributions (0.29) (0.23) (0.29) (0.26) (0.05)
NET ASSET VALUE
End of period $19.04 $14.52 $12.74 $12.64 $11.26
Ratios/Supplemental Data
Total return(diamond) 33.32% 15.86% 3.09% 14.70% 11.18%
Ratio of total expenses
to average net assets 1.05% 1.05% 1.05% 1.05% 1.05%
Ratio of net investment
income (loss) to
average net assets 0.83% 1.25% 1.10% 1.22% 1.47%
Portfolio turnover rate 25.4% 18.1% 16.6% 9.7% 17.4%
Net assets,
end of period
(in thousands) $707,330 $ 497,946 $369,400 $210,746 $51,661
(diamond) Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment
of all distributions.
* 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. The accompanying notes are an
integral part of these financial statements.
Portfolio of Investments
T. Rowe Price International Stock Portfolio
December 31, 1999
Shares Value
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In thousands
ARGENTINA 0.2%
Common Stocks 0.2%
Banco de Galicia Buenos
Aires (Class B) ADR (USD) 23,618 $ 469
Banco Frances del Rio
de la Plata ADR (USD) 16,357 387
Telefonica de Argentina
(Class B) ADR (USD) 21,360 660
Total Argentina (Cost $1,400) 1,516
AUSTRALIA 2.3%
Common Stocks 2.1%
Brambles Industries 39,000 1,078
Broken Hill Proprietary 65,005 853
Colonial Limited 347,950 1,556
Commonwealth Bank of
Australia 103,118 1,776
Lend Lease 71,852 1,007
News Corporation 205,352 1,994
Publishing & Broadcasting 209,000 1,596
TABCORP Holdings 139,000 941
Telstra 368,744 2,004
Telstra, Installment Receipts * 78,000 275
Westpac Banking 243,354 1,679
14,759
Preferred Stocks 0.2%
News Corporation 145,932 1,250
1,250
Total Australia (Cost $11,308) 16,009
BELGIUM 1.1%
Common Stocks 1.1%
Dexia (EUR) 7,305 1,171
Dexia-STRIP VVPR (EUR) * 3,309 0
Fortis B (EUR) 72,122 2,602
KBC Bancassurance
Holding (EUR) 59,590 3,211
Societe Europeenne des
Satellites (Class A) (EUR) 3,328 486
UCB (EUR) 8,270 359
Total Belgium (Cost $5,191) 7,829
BRAZIL 2.1%
Common Stocks 1.4%
Pao de Acucar GDR (USD) 30,973 $ 1,001
Telebras ADR (USD) 65,445 8,410
Unibanco GDR (USD) 18,802 566
9,977
Preferred Stocks 0 7%
Banco Itau 7,340,700 630
Companhia Energetica
de Minas Gerais 14,334,541 322
Companhia Energetica
de Minas Gerais ADR
Sponsored, Nonvoting
(USD) 29,606 663
Pao de Acucar GDR (USD) 1,555 50
Petrol Brasileiros 8,762,069 2,231
Telecomunicacoes
de Sao Paulo Celular
(Class B) 4,282,641 339
Telesp Participacoes 24,305,615 589
4,824
Total Brazil (Cost $12,411) 14,801
CANADA 0.8%
Common Stocks 0.8%
Alcan Aluminum * 22,680 933
Celestica (USD) 53,110 2,948
Nortel Networks * 10,690 1,080
Royal Bank of Canada * 11,860 522
Total Canada (Cost $3,447) 5,483
CHINA 0.1%
Common Stocks 0.1%
Huaneng Power International
ADR (USD) 56,500 597
Total China (Cost $1,146) 597
DENMARK 0.3%
Common Stocks 0.3%
Den Danske Bank 6,460 $ 708
Tele Danmark A/S 13,980 1,039
Unidanmark (Class A) 4,750 334
Total Denmark (Cost $1,536) 2,081
FINLAND 1.8%
Common Stocks 1.8%
Nokia (EUR) 70,410 12,767
Total Finland (Cost $1,945) 12,767
FRANCE 9.6%
Common Stocks 9.6%
Alcatel Alsthom (EUR) 18,888 4,338
Aventis (DAX Exchange) (EUR) 11,207 655
Aventis (EUR) 19,180 1,115
AXA (EUR) 30,839 4,300
Banque National de Paris (EUR) 34,050 3,142
Cap Gemini (EUR) 11,370 2,886
Carrefour (EUR) 34,272 6,321
Cie de St. Gobain (EUR) 12,120 2,279
Danone (EUR) 2,050 483
Hermes (EUR) 10,580 1,597
L'Oreal (EUR) 914 733
Lafarge (EUR) 6,770 788
Legrand (EUR) 11,530 2,745
Pinault Printemps
Redoute (EUR) 8,595 2,268
Sanofi Synthelabo (EUR) * 86,732 3,612
Schneider Electric (EUR) 45,022 3,535
Societe Generale (EUR) 10,344 2,407
Sodexho Alliance (EUR) 19,038 3,370
Television Francaise (EUR) 12,200 6,391
Total Fina (Class B) (EUR) 54,399 7,261
Vivendi (EUR) 81,654 7,374
Total France (Cost $42,337) 67,600
GERMANY 6.0%
Common Stocks 5.9%
Allianz (EUR) 8,860 2,981
Bayer (EUR) 48,652 2,308
Bayerische Vereinsbank (EUR) 61,960 $ 4,232
Deutsche Bank (EUR) * 43,224 3,646
Deutsche Telekom (EUR) 53,971 3,860
Dresdner Bank (EUR) * 52,886 2,930
Gehe (EUR) 47,031 1,824
Mannesmann (EUR) 51,000 12,333
Rhoen Klinikum (EUR) 22,950 844
SAP (EUR) 6,470 3,161
Siemens (EUR) * 15,123 1,935
Veba (EUR) 40,870 1,992
42,046
Preferred Stocks 0.1%
Fielmann (EUR) 6,182 186
Fresenius (EUR) 2,370 435
621
Total Germany (Cost $28,587) 42,667
HONG KONG 2.8%
Common Stocks 2.8%
Cable & Wireless 376,400 1,087
Cheung Kong Holdings 169,000 2,142
China Telecom (HKD) 843,000 5,259
CLP Holdings 261,000 1,202
Dao Heng Bank Group 122,000 629
Henderson Land Development 259,000 1,666
Hutchison Whampoa 332,000 4,826
New World Development 214,000 482
Pacific Century 730,000 1,695
Sun Hung Kai Properties 86,000 896
Total Hong Kong (Cost $11,012) 19,884
INDIA 0.6%
Common Stocks 0.6%
Hindustan Lever 24,000 1,241
ICICI ADR (USD) 74,347 1,032
Mahanagar Telephone 265,000 1,176
Mahanagar Telephone
GDR (USD) * 35,000 397
State Bank of India
GDR (USD) 22,800 282
Total India (Cost $3,995) 4,128
IRELAND 0.2%
Common Stocks 0.2%
CBT Group ADR (USD) * 38,411 $ 1,289
Total Ireland (Cost $1,167) 1,289
ITALY 5.2%
Common Stocks 5.2%
Assicurazioni Generali (EUR) 68,330 2,258
Banca Popolare di
Brescia (EUR) 58,000 5,133
ENI (EUR) 528,655 2,907
Gucci Group (USD) 18,584 2,128
Italgas (EUR) 86,000 326
Mediolanum (EUR) 163,295 2,244
Sanpaolo IMI (EUR) 158,041 2,147
Seat Pagine Gialle (EUR) * 319,000 1,047
Tecnost (EUR) 289,800 1,095
Telecom Italia (EUR) 388,550 5,480
Telecom Italia Mobile (EUR) 880,784 9,840
Unicredito (EUR) 424,601 2,087
Total Italy (Cost $20,830) 36,692
JAPAN 21.3%
Common Stocks 21.3%
Bridgestone 38,000 837
Canon 176,000 6,994
Citizen Watch 53,000 337
Daiichi Pharmaceutical 34,000 442
Daiwa House 111,000 826
DDI 222 3,042
Denso 145,000 3,463
East Japan Railway 284 1,532
Fanuc 24,200 3,082
Fuji Television Network 81 1,110
Fujitsu 117,000 5,336
Hitachi 133,000 2,135
Honda Motor 11,000 409
Ito-Yokado 21,000 2,282
Kao 104,000 2,967
Kokuyo 55,000 732
Komori 49,000 935
Kuraray 145,000 1,469
Kyocera 45,000 11,672
Makita 72,000 $ 648
Marui 113,000 1,688
Matsushita Electric
Industrial 214,000 5,928
Mitsubishi 132,000 1,019
Mitsubishi Heavy
Industries 614,000 2,049
Mitsui Fudosan 279,000 1,890
Murata Manufacturing 50,000 11,745
NEC 317,000 7,555
Nippon Telegraph
& Telephone 629 10,774
Nomura Securities 216,000 3,901
NTT Mobile Communications
Network 219 8,424
Sankyo 120,000 2,466
Sekisui Chemical 176,000 780
Sekisui House 124,000 1,098
Seven-Eleven Japan 12,000 1,903
Shin-Etsu Chemical 58,000 2,498
Shiseido 65,000 948
Softbank 1,000 957
Sony 43,200 12,812
Sumitomo 236,000 2,289
Sumitomo Bank 157,000 2,150
Sumitomo Electric Industries 231,000 2,670
TDK 43,000 5,938
Tokio Marine & Fire Insurance 58,000 678
Tokyo Electronics 7,000 959
Toppan Printing 104,000 1,038
Toshiba 440,000 3,359
Uny 67,000 655
Yamanouchi Pharmaceutical 64,000 2,236
Total Japan (Cost $91,314) 150,657
MEXICO 1.6%
Common Stocks 1.6%
Cemex ADR (USD) 40,212 1,121
Cemex (Represents 2 Class A
and 1 Class B shares) * 82,767 463
Femsa UBD (Represents 1
Class B and 4 Series
D shares) 216,290 965
Grupo Modelo (Class C) 252,056 692
Grupo Televisa GDR (USD) * 22,845 $ 1,559
Kimberly-Clark de Mexico
(Class A) 208,512 814
Telefonos de Mexico
(Class L) ADR (USD) 48,246 5,428
Total Mexico (Cost $5,777) 11,042
NETHERLANDS 7.7%
Common Stocks 7.7%
ABN Amro (EUR) 107,082 2,675
Akzo Nobel (EUR) 9,664 485
ASM Lithography (EUR) * 62,440 6,938
CSM (EUR) 54,482 1,163
Elsevier (EUR) 146,154 1,746
Equant (EUR) * 22,018 2,500
Fortis NI (EUR) 100,180 3,608
ING Groep (EUR) 122,125 7,374
Koninklijke Philips
Electronics (EUR) 45,164 6,142
KPN (EUR) 12,134 1,184
Royal Dutch Petroleum (EUR) 63,100 3,868
STMicroelectronics (EUR) 40,403 6,219
TNT Post Groep (EUR) 12,134 348
UTD Pan Europe
Communications (EUR) * 8,159 1,044
VNU (EUR) 39,750 2,089
Wolters Kluwer (EUR) * 205,610 6,959
Total Netherlands (Cost $35,817) 54,342
NEW ZEALAND 0.2%
Common Stocks 0.2%
Telecom Corporation of
New Zealand 312,000 1,467
Total New Zealand (Cost $1,418) 1,467
NORWAY 0.5%
Common Stocks 0.5%
Norsk Hydro 16,777 702
Orkla (Class A) 166,560 2,870
Total Norway (Cost $3,801) 3,572
PORTUGAL 0.3%
Common Stocks 0.3%
Jeronimo Martins (EUR) 85,060 $ 2,176
Total Portugal (Cost $1,709) 2,176
SINGAPORE 0.7%
Common Stocks 0.7%
Singapore Press 63,876 1,385
Singapore Telecommunications 318,000 657
United Overseas Bank 347,424 3,066
Total Singapore (Cost $3,732) 5,108
SOUTH KOREA 1.1%
Common Stocks 1.1%
Korea Telecom (USD) * 33,000 2,467
Pohang Iron & Steel ADR (USD) 18,074 632
Samsung Electronics 17,166 4,021
South Korea Telecom 280 1,004
Total South Korea (Cost $4,225) 8,124
SPAIN 2.8%
Common Stocks 2.8%
Argentaria Banca de
Espana (EUR) 49,540 1,164
Banco Bilbao Vizcaya (EUR) 55,920 797
Banco Popular Espanol (EUR) 8,990 586
Banco Santander Central
Hispano (EUR) 298,680 3,382
Empresa Nacional de
Electricidad (EUR) 82,528 1,639
Gas Natural (EUR) 41,691 960
Iberdrola (EUR) 135,450 1,877
Repsol (EUR) 79,553 1,845
Telefonica (EUR) * 295,414 7,380
Total Spain (Cost $12,288) 19,630
SWEDEN 3.1%
Common Stocks 3.1%
ABB * 13,614 1,659
Atlas Copco (Class B) 32,390 921
Electrolux (Class B) 145,940 3,670
Ericsson LM 45,360 2,916
Hennes & Mauritz 200,990 6,732
Nordbanken Holding 415,244 $ 2,440
Sandvik (Class B) 43,970 1,401
Securitas (Class B) 113,644 2,057
Total Sweden (Cost $12,231) 21,796
SWITZERLAND 4.3%
Common Stocks 4.3%
ABB * 23,536 2,879
Adecco * 9,967 7,762
Credit Suisse Group 12,530 2,491
Nestle 4,017 7,359
Roche Holdings
Participating Certificates 436 5,175
Swisscom 2,087 844
UBS 13,973 3,773
Total Switzerland (Cost $21,079) 30,283
TAIWAN 0.9%
Common Stocks 0.9%
Hon Hai Precision Industry 348,000 2,594
Taiwan Semiconductor
Manufacturing 622,200 3,311
United Microelectronics 218,000 778
Total Taiwan (Cost $5,762) 6,683
UNITED KINGDOM 14.9%
Common Stocks 14.9%
Abbey National 157,000 2,509
AstraZeneca Group 111,050 4,614
BG Transco Holdings 145,620 934
BP Amoco 290,000 2,923
Cable & Wireless 457,800 7,735
Cadbury Schweppes 495,320 2,984
Caradon 182,700 457
Centrica 137,700 400
Compass Group 430,000 5,904
David S. Smith 185,000 592
Diageo 397,980 3,215
Electrocomponents 117,000 1,295
GKN 40,000 623
Glaxo Wellcome 236,000 6,694
Hays 27,800 444
Hilton Group 226,000 734
HSBC Holdings (HKD) 181,200 $ 2,541
John Laing (Class A) 72,000 323
Kingfisher 590,000 6,531
Marconi 193,300 3,430
National Westminster Bank 570,000 12,282
Rank Group 65,340 211
Reed International 742,000 5,573
Rio Tinto 168,000 4,033
Safeway 163,500 567
Shell Transport & Trading 1,042,500 8,664
SmithKline Beecham 548,100 6,985
Tesco 644,900 1,958
Tomkins 515,592 1,666
Unilever 520,035 3,831
United News & Media 155,600 1,962
Vodafone Airtouch 641,000 3,158
Total United Kingdom (Cost $83,536) 105,772
SHORT-TERM INVESTMENTS 7.6%
Money Market Funds 7.6%
Reserve Investment Fund
6.16% # 53,892,784 53,893
Total Short-Term Investments
(Cost $53,893) 53,893
Total Investments in Securities
100.1% of Net Assets (Cost $482,894) $707,888
Futures Contracts
In thousands
Contract Unrealized
Expiration Value Gain (Loss)
---------- -------- -----------
Long, 39 FTSC 100 Index
Contracts,$ 265,000 of Cash
pledged as initial margin 3/00 $ 4,395 $ 107
Long, 26 DAX Index Contracts
$ 318,000 of Cash pledged as
initial margin 3/00 4,602 405
Long, 49 Nekkei 225 Index
Contracts $ 302,000 of Cash
pledged as initial margin 3/00 4,515 177
Net payments (receipts) of
variation margin to date (687)
Variation margin receivable
(payable) on open
futures contracts 2
Other Assets Less Liabilities (560)
NET ASSETS $707,330
----------
# Seven-day yield
* Non-income producing
ADR American depository receipt
EUR Euro
GDR Global depository receipt
HKD Hong Kong dollar
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
T. Rowe Price International Stock Portfolio
In thousands
Assets
Investments in securities, at value (cost $482,894) $ 707,888
Securities lending collateral 34,967
Other assets 10,915
Total assets 753,770
Liabilities
Obligation to return securities lending collateral 34,967
Other liabilities 11,473
Total liabilities 46,440
NET ASSETS $ 707,330
------------
Net Assets Consist of:
Accumulated net investment income
- - net of distributions $ 1,839
Accumulated net realized gain/loss
- - net of distributions 4,850
Net unrealized gain (loss) 225,650
Paid-in-capital applicable to 37,155,888
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares of the
Corporation authorized 474,991
NET ASSETS $ 707,330
------------
NET ASSET VALUE PER SHARE $ 19.04
------------
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price International Stock Portfolio
In thousands
Year
Ended
12/31/99
Investment Income (Loss)
Income
Dividend (net of foreign taxes of $1,198) $ 8,954
Interest 1,091
Securities lending 209
Total income 10,254
Expenses
Investment management and administrative 5,724
Net investment income (loss) 4,530
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 21,045
Foreign currency transactions (469)
Net realized gain (loss) 20,576
Change in net unrealized gain or loss
Securities 149,610
Futures 689
Other assets and liabilities denominated in foreign currencies (53)
Change in net unrealized gain or loss 150,246
Net realized and unrealized gain (loss) 170,822
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 175,352
-=---------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price International Stock Portfolio
In thousands
Year
Ended
12/31/99 12/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 4,530 $ 5,600
Net realized gain (loss) 20,576 (2,665)
Change in net unrealized
gain or loss 150,246 58,856
Increase (decrease) in net
assets from operations 175,352 61,791
Distributions to shareholders
Net investment income (2,521) (5,770)
Net realized gain (7,924) (2,036)
Decrease in net assets from distributions (10,445) (7,806)
Capital share transactions*
Shares sold 372,834 234,509
Distributions reinvested 10,445 7,806
Shares redeemed (338,802) (167,754)
Increase (decrease) in net
assets from capital
share transactions 44,477 74,561
Net Assets
Increase (decrease) during period 209,384 128,546
Beginning of period 497,946 369,400
End of period $ 707,330 $ 497,946
*Share information
Shares sold 23,632 16,773
Distributions reinvested 602 561
Shares redeemed (21,379) (12,035)
Increase (decrease) in
shares outstanding 2,855 5,299
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price International Stock Portfolio
December 31, 1999
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 established by the corporation and commenced operations on
March 31, 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 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.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Financial futures
contracts are valued at closing settlement prices. 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.
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.
Payments ("variation margin") made or received by the fund to settle the
daily fluctuations in the value of futures contracts are recorded as
unrealized gains or losses until the contracts are closed. Unrealized gains
and losses on futures contracts are included in Other assets and Other
liabilities respectively, and in Change in net unrealized gain or loss in
the accompanying financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Securities Lending The fund lends its securities to approved brokers to
earn additional income and receives cash and U.S. government securities as
collateral against the loans. Cash collateral received is invested in a
money market pooled account by the fund's lending agent. Collateral is
maintained over the life of the loan in an amount not less than 100% of the
value of loaned securities. Although risk is mitigated by the collateral,
the fund could experience a delay in recovering its securities and a
possible loss of income or value if the borrower fails to return them. At
December 31, 1999, the value of loaned securities was $36,758,000;
aggregate collateral consisted of $34,967,000 in the securities lending
collateral pool and U.S. government securities valued at $3,416,000.
Futures Contracts At December 31, 1999, the fund was a party to futures
contracts, which provide for the future sale by one party and purchase by
another of a specified amount of a specific financial instrument at an
agreed upon price, date, time, and place. Risks arise from possible
illiquidity of the futures market and from movements in security values.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $141,696,000 and $131,750,000, respectively, for the
year ended December 31, 1999.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income. The fund utilized capital loss carryforwards of
$5,671,000 in 1999.
At December 31, 1999, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$482,894,000. Net unrealized gain aggregated $224,994,000 at period end, of
which $243,895,000 related to appreciated investments and $18,901,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the
manager), which is owned by subsidiaries of T. Rowe Price Associates, Inc.
(Price Associates) and Robert Fleming Holdings Limited.
The investment management and administrative agreement between the fund and
the manager provides for an all-inclusive annual fee, of which $572,000 was
payable at December 31, 1999. The fee, computed daily and paid monthly, is
equal to 1.05% 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 year ended
December 31, 1999, totaled $1,070,000 and are reflected as interest income
in the accompanying Statement of Operations.
During the year ended December 31, 1999, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating
$1,974,000 with certain affiliates of the manager and paid commissions of
$1,000 related thereto.
Report of Independent Accountants
To the Board of Directors of T. Rowe Price International Series, Inc. and
Shareholders of International Stock Portfolio
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, 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
International Stock Portfolio (comprising T. Rowe Price International
Series, Inc., hereafter referred to as the "Fund") at December 31, 1999,
and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in
conformity with accounting principles generally accepted in the United
States. 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 audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, 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 audits, which included
confirmation of securities at December 31, 1999 by correspondence with
custodians and brokers, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 20, 2000
T. Rowe Price International Stock Portfolio
Tax Information (Unaudited) for the Tax Year Ended 12/31/99
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
o $7,924,000 from long-term capital gains, subject to the 20% rate gains
category,
The fund will pass through foreign source income of $7,354,000 and foreign
taxes paid of $1,074,000.
