Semiannual Report
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June 30, 2000
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International Stock Portfolio
Invest With Confidence(registered trademark)
T. Rowe Price
This report is authorized for distribu-
tion only to those who have received a
copy of the portfolio's prospectus.
T. Rowe Price InvestmentServices, Inc.,
Distributor
Dear Investor
International stock markets declined in the first half of 2000 after surging
last year. As in the U.S., high valuations, increasing costs, and uncertain
profit prospects - combined with rising interest rates - caused a severe
correction in New Economy stocks. Heavy stock issuance by technology, media, and
telecom companies also weighed on stocks. Major currencies, including the euro,
Japanese yen, and British pound, also declined against the dollar, reducing the
value of overseas assets held by U.S. investors. Returns over the past 12
months, however, were robust.
PERFORMANCE REVIEW
Performance Comparison
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Periods Ended 6/30/00 6 Months 12 Months
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International Stock
Portfolio -4.73% 22.38%
MSCI EAFE Index -3.95 17.44
Lipper Variable Annuity
Underlying International
Funds Average -3.59 27.75
Your fund's six-month decline was slightly steeper than that of the MSCI
EAFE Index and the Lipper category, as shown in the table. For the 12
months ended June 30, 2000, however, performance was a strong 22.38%, ahead
of the EAFE (Europe, Australasia, and Far East) index but behind Lipper.
Our shortfall against the index in the first half is primarily attributable
to the fund's Japanese stocks - concentrated in New Economy sectors - which
underperformed those represented in EAFE but still hold large gains over
the past year. Portfolio holdings in other countries, particularly the
U.K., Germany, and Hong Kong, outperformed the relevant index components.
The fund also benefited from its relatively small positions in the U.K. and
Germany compared with EAFE, as well as its relatively large allocation to
stronger performers, such as Canada.
The declines of the euro (-4%), the yen (-3%), and the British pound (-6%)
hurt performance in U.S. dollar terms. After dipping to record lows in the
second quarter, the euro recovered somewhat as growth in Europe appears to
be accelerating even as the U.S. economy apparently began to slow. The
earlier strength of the yen and the pound had been cause for concern, and
both currencies' declines were considered necessary corrections.
The primary factors driving international market performance in the first
half were uncertainty about the growth prospects and profitability of New
Economy-related companies, abundant supply of newly issued shares in the
telecom and Internet sectors, and worries about U.S. interest rates. Early
in the year, powerful momentum in New Economy stocks carried over from
1999, but confidence began to falter in March. Rising interest rates
reduced the current value of expected future earnings of technology and
Internet-related companies - especially important for companies that have
no current earnings. Telecom and media stock valuations, driven up most by
earlier optimistic forecasts, fell hardest. In Europe, the technology
sector remained much more buoyant than in other regions. This, combined
with the gains of European energy, pharmaceutical, and food manufacturing
stocks, helped Europe perform relatively better than other regions. In
Japan, heavy selling of stocks by foreigners, margin investors, and
Japanese companies reducing their ownership in each other, hurt
performance. The Pacific ex-Japan performed poorly due to its greater
sensitivity to U.S. interest rates and market volatility, combined with
certain local factors. Market gyrations and rate hikes north of the border
were also a significant burden for Latin America, as was the pending
Mexican presidential election on July 2 (after the close of the reporting
period). As it turned out, the undisputed victory of pro-market opposition
candidate Vicente Fox was a major positive for the Mexican market.
INVESTMENT REVIEW
At the end of June, the portfolio's allocation to Europe represented 60% of
assets, up from 58% in December. Within Europe, the U.K. was our largest
country exposure, at about 18% of net assets (still underweight compared
with EAFE). New purchases and additions to existing holdings included
buying New Economy stocks after they had fallen sharply, as well as adding
to depressed Old Economy positions before they began to recover in April.
Europe's economic growth broadened and deepened in the first half. Unabated
oil price strength pushed euro-zone inflation up and it hovered around the
2.0% target of the European Central Bank (ECB). As a result of these
factors, and the weakness of the euro, the ECB raised interest rates 125
basis points over the period, to 4.25% (100 basis points equal one
percentage point). In contrast to the euro zone, the U.K. economy weakened,
inflation remained below the Bank of England's 2.5% target, and interest
rates, though increased 50 basis points in the first quarter to 6.00%, were
not changed in the second quarter. The strength of the pound relative to
the depressed euro was a problem for U.K. exporters.
Geographic Diversification
Europe Japan Far East Latin America Other and Reserves
60 19 6 4 11
Based on net assets as of 6/30/00.
Europe
Country performance depended on the returns of large index stocks,
particularly the telecom stocks that dominate many indices, rather than on
economic or local conditions. The U.K. and Germany were the weakest major
markets, down 12% and 7% in dollar terms, due largely to the sharp declines
of British Telecom and Deutsche Telekom. The poor performance of other
major index stocks (financials in the U.K., autos in Germany) also hampered
the indices. In contrast, France rose 6% as France Telecom, perceived to
have better assets than its neighboring state telecom companies, made
modest gains, and as oil major TotalFinaElf and technology stocks Alcatel
and STMicroelectronics powered higher. The strength of telecom equipment
company LM Ericsson, 50% of Sweden's index, was a major reason for that
market's 10% advance, which qualified Sweden as Europe's strongest major
market.
At the beginning of the year, excitement about telecom and media stocks
surged as U.K. global wireless giant Vodafone-Airtouch won its hostile bid
for German wireless operator Mannesmann and AOL's acquisition of Time
Warner in the U.S. turned attention to other media companies with desirable
film, TV, and musical "content." Later, greater-than-anticipated costs and
delays affecting new third-generation (3G) wireless services hurt the
telecom sector. Increased telecom stock issuance also weighed on returns,
as did reduced forecasts for the Internet-related businesses of media
companies.
Telecom deals came hard and heavy throughout the period as companies sought
to improve their market positions or focus their resources. Because it is
now focusing on global data and Internet protocol services, U.K.-based
Cable & Wireless (C&W) sold its subsidiary, Hong Kong's largest telecom
operator, Cable & Wireless Hong Kong Telecom. Telefonica of Spain bought
out its four subsidiaries in Latin America. France Telecom bought the
U.K.'s second-largest wireless network, Orange, which regulators obliged
Vodafone to divest. Deutsche Telekom successfully spun off its Internet
service provider, T-Online, and France Telecom announced plans to float its
own Wanadoo service provider in July.
As telecom companies looked ahead to planned launches of
Internet-compatible mobile services, they struck deals to build popular
portals and acquire content. Vodafone linked with French telecom and
Internet provider Vivendi and its media subsidiary, Canal Plus, so that it
can offer programs and e-commerce to its wireless subscribers. To enrich
its media catalogue, Vivendi later agreed to buy Canadian entertainment and
beverage conglomerate Seagram, and took control of Canal Plus. Spanish
Internet service provider Terra Networks (controlled by Telefonica)
announced plans to acquire leading U.S. portal Lycos. Across Europe,
telecom companies joined with banks to provide e-banking.
Market Performance
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Six Months Local Local Currency U.S.
Ended 6/30/00 Currency vs. U.S. Dollars Dollars
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France 11.01% -4.37% 6.16%
Germany -3.04 -4.37 -7.28
Hong Kong -12.81 -0.28 -13.05
Italy 8.95 -4.37 4.19
Japan -2.12 -3.26 -5.32
Mexico -3.03 -3.01 -5.96
Netherlands 5.89 -4.37 1.26
Singapore -19.74 -3.64 -22.67
Sweden 12.68 -2.60 9.75
Switzerland 1.34 -1.56 -0.24
United Kingdom -6.02 -6.07 -11.72
Source: RIMES Online, using MSCI indices
In the technology sector, news focused on booming demand, particularly for
semiconductors, mobile telecom-related components, and telecom
infrastructure. The surging semiconductor cycle helped ASM Lithography,
STMicroelectronics, Philips Electronics, and Infineon Technologies (the
semiconductor unit of Germany's Siemens, which came public in March) make
robust gains. Strength in optical and broadband networking caused French
telecom equipment manufacturer Alcatel to surge. Ericsson's gains reflected
its leading global position in telecom infrastructure.
European banks made acquisitions to build market share, increase operating
efficiency, and raise returns. Spanish banks extended their presence in the
rapidly growing Latin American market as Banco Bilbao Vizcaya (BBVA)
acquired Mexican bank Bancomer and Banco Santander (BSCH) won Serfin, which
was auctioned by the Mexican government. Netherlands-based banking and
insurance giant ING Groep acquired U.S. insurer Reliastar, giving it a
top-10 position in the U.S. life insurance market. Within Europe, Italian
Banca Popolare (BIPOP) acquired Germany's largest online bank, Entrium;
Finnish/Swedish Nordic Baltic Holding acquired its Danish neighbor,
Unidanmark; and Royal Bank of Scotland succeeded in its hostile bid to
acquire U.K. bank NatWest. Food producers and pharmaceuticals also made
acquisitions. Anglo/Dutch food group Unilever acquired U.S. Bestfoods to
create the world's second-largest food manufacturer, and U.K.
pharmaceutical giants Glaxo Wellcome and SmithKline Beecham agreed to join
forces.
Far East and Other
About 19% of net assets was invested in Japan, still less than in the EAFE
benchmark. More than half of the Japanese market's 5% decline over the six
months was due to the yen's 3% decline. The New Economy stocks that had led
in 1999 fell in the first half. Leadership shifted to Old Economy sectors
including food, pharmaceuticals, capital goods, and materials. Lackluster
markets echoed the tone of the economic environment. There were signs of
recovery - notably an increase in private-sector capital expenditure and
better-than-expected results in the Bank of Japan's quarterly Tankan
business survey. Yet these positive indications only reinforced the picture
of robust export demand, helping large, industrial, export-oriented
companies but not smaller, domestic businesses. With unemployment still
high by historic Japanese standards, consumers remained reluctant to spend.
Rising bankruptcies and continued company restructuring perpetuated job
uncertainty. A general election in June followed the sudden death of Prime
Minister Obuchi. The governing Liberal Democratic Party prevailed in the
election, although it lost strength, and the political environment is not
expected to change significantly.
News that banks and the government might grant debt forgiveness to some
major debtors disappointed investors in financial stocks. Underweighting
the sector was helpful. Brokerages, such as industry leader Nomura
Securities, performed well as they launched record-size stock mutual funds.
In April, $1.1 trillion invested in post office savings started to mature.
About a quarter of the sums maturing left the postal bank, and investors
expected a portion of those outflows to be channeled into equity mutual
funds.
Early in the year, dominant wireless operator NTT DoCoMo climbed higher on
news about the greater-than-expected success of its Internet compatible
"i-mode" mobile services. Later, however, concerns about profitability,
competition, and increasing stock issuance hurt its performance as well as
that of its parent, NTT. To extend their limited international interests,
NTT agreed to acquire U.S. Web-hosting firm Verio and DoCoMo bought 15% of
Dutch cellular operator KPN Mobile. However, disappointment about the
deals, expectations that the government will soon sell another portion of
its 53% holding in NTT, and the likelihood that NTT will then reduce its
ownership of DoCoMo, put pressure on both stocks. In the technology sector,
companies with significant semiconductor businesses, such as Toshiba and
NEC, performed well. Robust demand for semiconductor manufacturing
equipment and increased market share in digital copiers lifted Canon. In
contrast, wireless phone component maker Murata Manufacturing, which had
soared when mobile prospects were improving, fell sharply. The launch of
PlayStation2 did not enable Sony to sustain last year's peak levels.
Convenience store Seven-Eleven Japan, which soared last year on forecasts
for its Internet-related business, dropped steeply. While the six-month
performance of these stocks was poor, all had strong gains and many doubled
or tripled during the 12-month period.
Sector Diversification
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Percent of Percent of
Net Assets Net Assets
12/31/99 6/30/00
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Services 31.6% 33.9%
Capital Equipment 18.6 19.2
Finance 16.4 18.5
Consumer Goods 14.3 13.8
Energy 5.8 6.3
Materials 2.4 1.5
Multi-industry 1.5 1.5
Miscellaneous 1.9 --
Reserves 7.5 5.3
Total 100.0% 100.0%
Roughly 9% of the portfolio was invested in the Pacific ex-Japan (which
includes Australia and New Zealand, countries not part of MSCI's definition
of "Far East"). More than a third of the regional weighting is in Hong Kong
and about a quarter in Australia. The impact of rising U.S. interest rates,
poor sentiment about Internet stocks, and local factors sent Asian markets
lower. Companies that rose on Internet prospects early in the year later
fell sharply. Telecom and technology stocks with thriving, established
businesses performed better.
China's success clearing major U.S. and EU hurdles in its quest to join the
World Trade Organization was a significant positive for the region's
future. Economic growth, industrial production, and exports remained
strong. The consumer sector in Hong Kong and China, which had lagged
earlier, started to revive, and deflation appears to have moderated in
China. Korea struggled with concerns about its financial system, but the
government's steps to deal with insolvent conglomerates and provide market
liquidity helped the market recover. After the pro-independence opposition
party won Taiwan's presidential election, the island's markets were
affected by intermittent concerns about relations with China.
Australian media giant News Corp., Korean technology leader Samsung
Electronics, and China Mobile (Hong Kong), were leading performers. Markets
were enthusiastic as News Corp. filed for an initial public offering (IPO)
of its newly formed company, Sky Global Networks, which brings together
News Corp.'s worldwide satellite-TV-related businesses. The buoyant
semiconductor cycle boosted leading producer Samsung, which also has
significant market positions in flat panel screens and wireless phones.
China Mobile (Hong Kong)'s subscribers rose 2.3 million in the first
quarter, and it announced plans to acquire wireless operators in seven more
provinces. A focus on returns, government reforms, and a dominant market
position helped Indian finance company ICICI rise strongly. Important
changes in the telecom sector included the Hong Kong IPO of China Unicom,
and the acquisition of Cable & Wireless Hong Kong Telecom by Pacific
Century CyberWorks.
Latin America
About 4% of the portfolio was in Latin America, all of it in Brazil and
Mexico. Moody's upgrade of Mexican debt to "investment grade," foreign
investment in Mexican banks, and, most importantly, the smooth and
undisputed election victory of pro-market candidate Vicente Fox were major
positives for Mexico. Brazil's central bank reduced interest rates from 19%
to 17.5% in two steps, reflecting the vast economic improvements since last
year's currency devaluation. Further key reforms advanced. However, late in
the period, uncertainty arose about whether an upcoming Supreme Court
ruling would result in significant additional fiscal costs. Brazilian
energy leader Petrobras was your portfolio's strongest performer. Improved
margins and higher refined product prices boosted first-quarter results
above expectations. Telecom incumbents Telmex in Mexico and Telebras in
Brazil rose strongly in the first quarter, but declined in April and May
and ended June only modestly ahead. Telmex and Canadian telecom company BCI
announced a joint venture to combine their Latin American telecom assets
outside of Mexico. Grupo Televisa, Mexico's dominant television broadcaster
and a major producer of Spanish language programs (also shown on Univision
in the U.S.), entered advanced negotiations to acquire the largest radio
group in Mexico.
INVESTMENT POLICY AND OUTLOOK
We expect continued, but more moderate, economic growth in Europe through
the remainder of the year, even if the U.S. economy slows. Inflation may
creep due to the impact of weak currencies and higher oil prices. However,
if the gap between U.S. and European growth continues to narrow, as we
expect, the euro should find its ground relative to the dollar. The
attention focused recently on high U.S. productivity could help advance
tax, pension, and labor reforms. Industry consolidation, company
restructuring, and the New Economy are all less advanced than in the U.S.,
so there is greater scope for growth. We find European companies
attractive, but valuations relative to growth prospects are high compared
with most other overseas markets.
Japan's economy will continue to be challenged by depressed consumer demand
and yen strength. If the Bank of Japan raises interest rates, as it has
suggested, the economy might face additional difficulties. Foreigners,
heavy sellers in the second quarter, could continue to reduce positions.
Japan's corporate sector remains behind those of other developed regions in
its focus on increasing returns and shareholder value. The economic outlook
for the Pacific ex-Japan is healthy, but remains tied to U.S. growth.
Reforms in Asia continue gradually, but the job remains incomplete in most
countries. Valuations remain attractive compared with developed regions and
reasonable relative to historic levels. A slowdown in global spending on
technology could have a negative impact on market performance.
The half ended on a note of broad-based market strength after a year of
extremes. Yet negative and positive surprises are likely to continue. With
investors particularly sensitive to news about the less established
Internet-related businesses, there is still potential for volatility in the
coming months. Over time, as more experience of the New Economy
accumulates, we would expect the peaks and troughs to become less
pronounced. The painful process of winnowing the New Economy winners from
the losers has started, and we expect much more consolidation. Global
growth is presently robust. We do not expect a sharp slowdown, but are
aware that a less vigorous environment would accelerate the process of
weeding out weaker New Economy companies. The importance of stock selection
and attention to fundamentals would then rise further. The more convincing
evidence of a U.S. slowdown that emerged recently enhances the relative
prospects for international market performance.
Respectfully submitted,
Martin G. Wade
Chairman
John R. Ford
President
July 24, 2000
New President of T. Rowe Price
International Funds
After more than 20 years as president of the T. Rowe Price International
Funds, Inc., Martin G. Wade has passed the baton to his colleague, John R.
Ford. Like Mr. Wade, John Ford has been associated with T. Rowe Price's
international investment manager since 1984. He currently serves on the
Investment Advisory Committees of all the T. Rowe Price international
equity funds.
Mr. Wade was instrumental in the launching of T. Rowe Price's first foreign
stock offering, the International Stock Fund, in 1980, and played a key
role thereafter in the company's increasing presence as an international
asset manager. He remains associated with the International Funds as
chairman and is also a member of the Board of Directors of T. Rowe Price
Associates.
Portfolio Highlights
Twenty-Five Largest Holdings
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Percent of
Net Assets
6/30/00
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Nokia, Finland 2.7%
Vodafone-Airtouch, United Kingdom 2.5
Glaxo Wellcome, United Kingdom 1.7
TotalFinaElf, France 1.5
Telefonica, Spain/Brazil 1.5
Vivendi, France 1.4
Shell Transport & Trading, United Kingdom 1.4
News Corp. 1.4
Societe Television Francaise, France 1.4
Nippon Telegraph & Telephone, Japan 1.3
Canon, Japan 1.3
Royal Bank of Scotland, United Kingdom 1.3
Murata Manufacturing, Japan 1.3
Telecom Italia Mobile, Italy 1.3
NEC, Japan 1.2
Alcatel, France 1.2
LM Ericsson, Sweden 1.2
Cable & Wireless, United Kingdom 1.2
AXA, France 1.2
Philips Electronics, Netherlands 1.2
Kyocera, Japan 1.1
Sony, Japan 1.1
ING Groep, Netherlands 1.1
Reed International, United Kingdom 1.1
Telebras, Brazil 1.1
Total 34.7%
Note: Table excludes reserves.
Performance Comparison
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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.
International Stock Portfolio
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As of 6/30/00
International Lipper Variable Annuity
Stock MSCI EAFE Underlying International
Portfolio Index Funds Average
3/31/94 10,000 10,000 10,000
6/94 10,100 10,518 10,089
6/95 10,574 10,723 10,570
12/96 12,341 12,183 12,362
6/97 14,491 13,787 14,706
6/98 15,222 14,667 16,230
6/99 16,093 15,829 17,058
6/00 19,695 18,590 21,221
Average Annual Compound Total Return
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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 6/30/00
Since Inception
1 Year 3 Years 5 Years Inception Date
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22.38% 10.77% 13.25% 11.46% 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
Unaudited
For a share outstanding throughout each period
-----------------------------------------------------------
6 Months Year
Ended Ended
6/30/00 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
NET ASSET VALUE
Beginning of
period $ 19.04 $ 14.52 $ 12.74 $ 12.64 $ 11.26 $ 10.18
-----------------------------------------------------------
Investment
activities
Net investment
income (loss) 0.05 0.12 0.17 0.12 0.09 0.07
Net realized
and unrealized
gain (loss) (0.95) 4.69 1.84 0.27* 1 .55 1.06
Total from
investment
activities (0.90) 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 $18.14 $19.04 $14.52 $12.74 $12.64 $11.26
-----------------------------------------------------------
Ratios/Supplemental Data
Total return(diamond) (4.73)% 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 1.05%
Ratio of net
investment income
(loss) to average
net assets 0.65%! 0.83% 1.25% 1.10% 1.22% 1.47%
Portfolio turnover
rate 40.8%! 25.4% 18.1% 16.6% 9.7% 17.4%
Net assets,
end of period
(in thousands) $767,025 $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 inconsistant 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.
! Annualized
The accompanying notes are an integral part of these financial statements.
Portfolio of Investments
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
Shares Value
--------------------------------------------------------------------------------
In thousands
AUSTRALIA 2.7%
Common Stocks 1.8%
Brambles Industries 68,000 $ 2,088
Commonwealth Bank
of Australia 124,118 2,055
Lend Lease 71,852 916
News Corp. 289,352 3,980
Publishing & Broadcasting 269,000 2,067
TABCORP Holdings 139,000 798
Telstra 449,744 1,824
Telstra, Installment Receipts 78,000 177
13,905
Preferred Stocks 0.9%
News Corp. 545,932 6,584
6,584
Total Australia (Cost $16,051) 20,489
BELGIUM 0.7%
Common Stocks 0.7%
Dexia (EUR) 11,715 1,728
Fortis B (EUR) 83,702 2,436
Societe Europeenne des
Satellites (Class A) (EUR) 3,328 559
UCB (EUR) 8,270 304
Total Belgium (Cost $3,850) 5,027
BRAZIL 2.1%
Common Stocks 1.3%
Embratel Participacoes
ADR (USD) 30,000 709
Telebras ADR (USD) 84,445 8,202
Unibanco GDR (USD) 23,802 684
9,595
Preferred Stocks 0.8%
Banco Itau 7,340,700 645
Petrol Brasileiros 153,020 4,624
Telefonica ADR (USD) 24,305,616 456
Telesp Cellular Participacoes 27,319,985 494
6,219
Total Brazil (Cost $15,492) 15,814
CANADA 1.2%
Common Stocks 1.2%
Alcan Aluminum 35,420 $ 1,101
Celestica (USD) 85,512 4,244
Nortel Networks 44,230 3,069
Royal Bank of Canada 15,190 777
Total Canada (Cost $6,909) 9,191
DENMARK 0.2%
Common Stocks 0.2%
Tele Danmark A/S 18,280 1,230
Total Denmark (Cost $1,042) 1,230
FINLAND 2.7%
Common Stocks 2.7%
Nokia (EUR) 403,820 20,606
Total Finland (Cost $8,183) 20,606
FRANCE 12.3%
Common Stocks 12.3%
Alcatel (EUR) * 141,390 9,274
Altran Technologies (EUR) 5,530 1,083
Aventis (EUR) 92,952 6,784
Aventis (DAX Exchange) (EUR) 15,387 1,102
AXA (EUR) 56,878 8,960
BNP Paribas (EUR) 73,230 7,047
Canal Plus (EUR) 3,680 618
Cap Gemini (EUR) 12,230 2,154
Carrefour (EUR) 10,144 693
Cie de St. Gobain (EUR) 17,630 2,383
Groupe Danone (EUR) * 4,100 544
Hermes (EUR) 8,390 1,133
L'Oreal (EUR) 914 791
Lafarge (EUR) 3,884 302
Legrand (EUR) 14,820 3,325
LVMH (EUR) 4,369 1,802
Sanofi Synthelabo (EUR) 115,712 5,513
Schneider Electric (EUR) 11,602 809
Societe Generale (EUR) * 21,826 1,313
Societe Television Francaise * 150,500 10,489
Sodexho Alliance (EUR) 4,997 906
STMicroelectronics (EUR) 67,799 $ 4,272
TotalFinaElf (Class B) (EUR) 77,159 11,830
Vivendi (EUR) 124,434 10,983
Total France (Cost $63,483) 94,110
GERMANY 4.4%
Common Stocks 4.3%
Allianz (EUR) 11,180 4,016
Bayer (EUR) 23,002 898
Bayerische Vereinsbank (EUR) 73,040 4,749
Deutsche Bank (EUR) 56,914 4,684
Deutsche Telekom (EUR) 63,621 3,632
E.on (EUR) 48,170 2,322
Gehe (EUR) 34,221 1,127
Infineon Technologies (EUR) * 48,901 3,875
Rhoen Klinikum (EUR) 11,350 450
SAP (EUR) 41,430 6,107
Siemens (EUR) 7,773 1,173
33,033
Preferred Stocks 0.1%
SAP (EUR) 2,640 488
488
Total Germany (Cost $29,163) 33,521
HONG KONG 3.3%
Common Stocks 3.3%
Cable & Wireless (HKT) 603,600 1,332
Cheung Kong Holdings 327,000 3,597
China Mobile (Hong Kong) * 787,000 6,941
China Unicom * 1,040,000 2,195
Dao Heng Bank Group 330,000 1,460
Henderson Land Development 288,000 1,267
Hutchison Whampoa 453,200 5,697
Pacific Century CyberWorks * 1,230,000 2,430
Sun Hung Kai Properties 86,000 618
Total Hong Kong (Cost $17,070) 25,537
INDIA 1.0%
Common Stocks 1.0%
Global Tele-Systems 46,000 $ 1,383
Hindustan Lever 47,000 2,997
ICICI Limited 342,000 970
ICICI Limited ADR (USD) 74,347 1,394
Mahanagar Telephone 265,000 1,273
Total India (Cost $7,795) 8,017
IRELAND 0.2%
Common Stocks 0.2%
SmartForce ADR (USD) * 38,411 1,841
Total Ireland (Cost $1,168) 1,841
ITALY 5.3%
Common Stocks 5.3%
Alleanza Assicurazioni (EUR) 198,000 2,637
Banca Intesa (EUR) 1,472,030 6,591
Bipop-Carire (EUR) * 400,000 3,147
ENI (EUR) 622,655 3,596
Mediaset (EUR) 56,000 855
Mediolanum (EUR) 197,295 3,210
San Paolo IMI (EUR) 28,041 498
Tecnost (EUR) 333,800 1,259
Telecom Italia (EUR) 441,550 6,070
Telecom Italia Mobile (EUR) 948,784 9,692
Unicredito (EUR) 718,601 3,437
Total Italy (Cost $26,977) 40,992
JAPAN 19.0%
Common Stocks 19.0%
Bridgestone 53,000 1,121
Canon 207,000 10,301
DDI 115 1,106
East Japan Railway 141 819
Fanuc 30,600 3,112
Fuji Bank 639,000 4,854
Fuji Television Network 275 4,302
Fujitsu 138,000 4,773
Hitachi 93,000 1,341
Ito-Yokado 22,000 1,323
Kao 43,000 1,313
Kokuyo 55,000 901
Kyocera 51,000 $ 8,647
Makita 72,000 686
Marui 170,000 3,252
Matsushita Electric Industrial 246,000 6,376
Mitsui Fudosan 426,000 4,617
Murata Manufacturing 68,000 9,754
NEC 302,000 9,478
Nippon Telegraph & Telephone 778 10,339
Nomura Securities 255,000 6,237
NTT DoCoMo 276 7,465
Sankyo 96,000 2,167
Seven-Eleven Japan 46,000 3,845
Shin-Etsu Chemical 48,000 2,434
Shiseido 103,000 1,592
Softbank 12,100 1,642
Sony 92,500 8,631
Sumitomo 174,000 1,956
Sumitomo Bank 376,000 4,607
Sumitomo Electric Industries 55,000 942
TDK 21,000 3,016
Toshiba 686,000 7,739
Yamanouchi Pharmaceutical 93,000 5,075
Total Japan (Cost $102,219) 145,763
MEXICO 2.3%
Common Stocks 2.3%
Femsa UBD (Represents 1
Class B and 4 Series
D shares) 509,290 2,172
Grupo Iusacell ADR (USD) * 51,000 797
Grupo Televisa GDR (USD) * 99,245 6,842
Telefonos de Mexico (Class L)
ADR (USD) 136,492 7,797
Total Mexico (Cost $13,065) 17,608
NETHERLANDS 6.2%
Common Stocks 6.2%
ABN Amro (EUR) 32,212 789
Akzo Nobel (EUR) 9,664 411
ASM Lithography (EUR) * 124,780 5,363
CSM (EUR) 54,482 1,071
Equant (EUR) 28,118 1,143
Fortis NI (EUR) 118,090 3,437
ING Groep (EUR) 126,215 $ 8,531
KPN (EUR) 42,248 1,890
Philips Electronics (EUR) * 188,566 8,893
Royal Dutch Petroleum (EUR) 77,040 4,788
TNT Post Groep (EUR) 6,434 174
UTD Pan-Europe
Communications (EUR) * 51,217 1,339
VNU (EUR) 146,730 7,579
Wolters Kluwer (EUR) 89,342 2,380
Total Netherlands (Cost $36,131) 47,788
NEW ZEALAND 0.2%
Common Stocks 0.2%
Telecom Corporation of
New Zealand 395,000 1,381
Total New Zealand (Cost $1,717) 1,381
NORWAY 0.2%
Common Stocks 0.2%
Orkla (Class A) 79,170 1,504
Total Norway (Cost $1,172) 1,504
PORTUGAL 0.1%
Common Stocks 0.1%
Jeronimo Martins (EUR) 45,280 746
Total Portugal (Cost $525) 746
SINGAPORE 0.4%
Common Stocks 0.4%
United Overseas Bank 414,424 2,712
Total Singapore (Cost $2,576) 2,712
SOUTH KOREA 1.4%
Common Stocks 1.4%
Korea Telecom ADR (USD) 56,200 2,719
Pohang Iron & Steel
ADR (USD) 18,074 434
Samsung Electronics 23,266 7,699
Total South Korea (Cost $5,907) 10,852
SPAIN 3.3%
Common Stocks 3.3%
Banco Bilbao Vizcaya
Argentaria (EUR) 334,456 $ 4,997
Banco Santander Central
Hispano (EUR) 402,472 4,246
Empresa Nacional de
Electricidad (EUR) 181,088 3,508
Repsol (EUR) 109,193 2,174
Telefonica (EUR) * 329,974 7,088
Tele Sudeste Celular
Participacoes ADR (USD) 15,289 712
Telesp - Telecomunicacoes de
Sao Paulo ADR (USD) 76,445 2,118
Telefonica de Argentina
ADR (USD) 21,360 760
Total Spain (Cost $17,685) 25,603
SWEDEN 3.2%
Common Stocks 3.2%
ABB 16,134 1,869
Atlas Copco (Class B) 17,780 333
Electrolux (Class B) 72,790 1,126
Hennes & Mauritz (Class B) 113,830 2,375
LM Ericsson (Class B) * 466,190 9,223
Nordic Baltic Holding 489,514 3,691
Nordic Baltic Holding (DKK) * 60,344 440
Sandvik 21,720 456
Securitas (Class B) 246,874 5,234
Total Sweden (Cost $18,235) 24,747
SWITZERLAND 3.9%
Common Stocks 3.9%
ABB 26,066 3,120
Adecco 9,617 8,171
Credit Suisse Group 14,770 2,938
Nestle 3,587 7,179
Roche Holdings 218 2,122
Swisscom 2,397 830
UBS * 35,286 5,170
Total Switzerland (Cost $19,787) 29,530
TAIWAN 0.9%
Common Stocks 0.9%
Hon Hai Precision Industry 352,000 $ 3,185
Taiwan Semiconductor
Manufacturing 796,136 3,783
Total Taiwan (Cost $5,191) 6,968
UNITED KINGDOM 17.5%
Common Stocks 17.5%
Abbey National 81,000 962
AstraZeneca Group 122,050 5,695
Baltimore Technologies * 217,000 1,655
BG Group 80,620 520
BP Amoco 341,000 3,274
Cable & Wireless 540,800 9,124
Cadbury Schweppes 326,320 2,148
Celltech Group * 93,200 1,791
Centrica 186,700 619
Compass Group 506,000 6,665
David S. Smith 121,000 289
Diageo 392,980 3,526
Electrocomponents 99,000 1,019
GKN 23,000 293
Glaxo Wellcome 455,400 13,258
Hays 55,600 310
Hilton Group 130,000 453
HSBC Holdings (HKD) 159,600 1,827
Kingfisher 297,500 2,712
Marconi 244,300 3,176
Reed International 971,000 8,455
Rio Tinto 198,000 3,257
Royal Bank of Scotland 611,400 10,158
Shell Transport & Trading 1,283,500 10,885
SmithKline Beecham 563,300 7,381
Standard Chartered 187,000 2,329
Tesco 398,900 1,240
Tomkins 572,592 1,858
Unilever 301,035 1,823
United News & Media 106,600 1,530
Vodafone AirTouch 4,751,694 19,376
WPP Group 460,000 6,710
Total United Kingdom (Cost $124,156) 134,318
UNITED STATES 2.2%
Money Market Funds 2.2%
Reserve Investment Fund
6.68% # 17,048,218 $ 17,048
Total United States (Cost $17,048) 17,048
Total Investments in Securities
96.9% of Net Assets (Cost $562,597) $ 742,943
Other Assets Less Liabilities 24,082
NET ASSETS $ 767,025
----------
# Seven-day yield
* Non-income producing
ADR American depository receipt
GDR Global depository receipt
DKK Danish krone
EUR Euro
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
June 30, 2000 (Unaudited)
In thousands
Assets
Investments in securities, at value (cost $562,597) $ 742,943
Securities lending collateral 56,361
Other assets 28,683
Total assets 827,987
Liabilities
Obligation to return securities lending collateral 56,361
Other liabilities 4,601
Total liabilities 60,962
NET ASSETS $ 767,025
----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 4,168
Accumulated net realized gain/loss - net of distributions 19,636
Net unrealized gain (loss) 180,333
Paid-in-capital applicable to 42,285,212 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares of the Corporation authorized 562,888
NET ASSETS $ 767,025
----------
NET ASSET VALUE PER SHARE $ 18.14
----------
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price International Stock Portfolio
(Unaudited)
In thousands
6 Months
Ended
6/30/00
Investment Income (Loss)
Income
Dividend (net of foreign taxes of $709) $ 4,901
Interest 1,025
Securities lending 174
Total income 6,100
Expenses
Investment management and administrative 3,771
Net investment income (loss) 2,329
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 15,669
Futures (108)
Foreign currency transactions (775)
Net realized gain (loss) 14,786
Change in net unrealized gain or loss
Securities (44,648)
Futures (689)
Other assets and liabilities denominated in foreign currencies 20
Change in net unrealized gain or loss (45,317)
Net realized and unrealized gain (loss) (30,531)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (28,202)
----------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price International Stock Portfolio
(Unaudited)
In thousands
6 Months Year
Ended Ended
6/30/00 12/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 2,329 $ 4,530
Net realized gain (loss) 14,786 20,576
Change in net unrealized gain or loss (45,317) 150,246
Increase (decrease) in net assets from operations (28,202) 175,352
Distributions to shareholders
Net investment income - (2,521)
Net realized gain - (7,924)
Decrease in net assets from distributions - (10,445)
Capital share transactions *
Shares sold 698,784 372,834
Distributions reinvested -- 10,445
Shares redeemed (610,887) (338,802)
Increase (decrease) in net assets from capital
share transactions 87,897 44,477
Net Assets
Increase (decrease) during period 59,695 209,384
Beginning of period 707,330 497,946
End of period $767,025 $707,330
---------------------
*Share information
Shares sold 38,532 23,632
Distributions reinvested - 602
Shares redeemed (33,403) (21,379)
Increase (decrease) in shares outstanding 5,129 2,855
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price International Stock Portfolio
June 30, 2000 (Unaudited)
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 fund seeks long-term growth of capital by investing
primarily in the common stocks of established, non-U.S. companies. 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.
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.
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
June 30, 2000, the value of loaned securities was $57,309,000; aggregate
collateral consisted of $56,361,000 in the securities lending collateral
pool and U.S. government securities valued at $2,748,000.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $259,501,000 and $139,881,000, respectively, for the
six months ended June 30, 2000.
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.
T. Rowe Price International Stock Portfolio
At June 30, 2000, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$562,597,000. Net unrealized gain aggregated $180,346,000 at period-end, of
which $205,063,000 related to appreciated investments and $24,717,000 to
depreciated investments.
NOTE 4 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in
which it invests. Foreign income taxes are accrued by the fund and withheld
from dividend and interest income.
NOTE 5 - 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 $683,000 was
payable at June 30, 2000. 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 six months ended
June 30, 2000, totaled $1,025,000 and are reflected as interest income in
the accompanying Statement of Operations.
During the six months ended June 30, 2000, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating
$11,221,000 with certain affiliates of the manager and paid commissions of
$18,000 related thereto.
