Item 1: Report to Shareholders| International Stock Portfolio | June 30, 2005 |
The views and opinions in this report were current as of June 30, 2005. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act of 2002, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
Dear Investor
International stocks declined in the first half of 2005, joining U.S. equities in slightly negative territory. Concerns about rising oil prices and slowing global economic growth contributed to the weakness in overseas markets. In addition, the U.S. dollar rebounded against major foreign currencies, reducing returns for U.S. investors. In dollar terms, Latin American stocks posted the best results, while European markets and Japan were relatively sluggish.
| Performance Comparison | |
| Periods Ended 6/30/05 | 6 Months | 12 Months |
| International Stock Portfolio | -2.08% | 9.75% |
| MSCI EAFE Index | -0.85 | 14.13 |
| Lipper Variable Annuity | | |
| Underlying International | | |
| Growth Funds Average | -1.02 | 11.87 |
The portfolio delivered poor results through the first six months of 2005, trailing both the MSCI EAFE benchmark and the Lipper benchmark, which measures the average return of similarly managed funds. Relative performance over the past 12 months told a similar story due primarily to an underweight position in non-Japan Asia and disappointing stock selection in the financials and consumer sectors. For the first time in a while, both growth and value stocks registered similar returns so far this year, although value was dominant over the 12-month period. The long-term outperformance of value over growth has trimmed fund performance relative to the MSCI EAFE Index since the fund has maintained a growth-oriented investment style.
MARKET ENVIRONMENT
| Market Performance | | |
| Six Months | Local | Local Currency | U.S. |
| Ended 6/30/05 | Currency | vs. U.S. Dollars | Dollars |
| France | 13.40% | -10.93% | 1.00% |
| Germany | 8.26 | -10.93 | -3.57 |
| Hong Kong | 3.53 | -0.01 | 3.52 |
| Italy | 8.42 | -10.93 | -3.44 |
| Japan | 1.87 | -7.53 | -5.80 |
| Mexico | 6.48 | 3.40 | 10.10 |
| Netherlands | 15.69 | -10.93 | 3.04 |
| Singapore | 8.61 | -3.25 | 5.10 |
| Sweden | 15.05 | -14.90 | -2.09 |
| Switzerland | 11.95 | -11.24 | -0.63 |
| United Kingdom | 8.09 | -6.64 | 0.92 |
| Source: RIMES Online, using MSCI indices. | |
Rising oil prices, fears of global inflation, and rising bond yields contributed to poor performance to date in 2005, following a strong advance in the second half of last year. Emerging markets continued to lead the way, although they suffered most during a correction earlier in the year as risk-averse investors redirected their assets to less volatile regions.
Among the developed markets, Japan lagged once again because of the strong yen and a pause in the country’s economic recovery. Japan’s economy remains dependent on global consumers as domestic demand is still fragile. European markets also languished, reflecting a sluggish economic environment in Germany and France.
Higher oil prices and improved investor sentiment drove energy stocks, while food and tobacco stocks were particularly strong in the consumer staples segment. Utilities shares were also outstanding performers as investors sought defensive issues with relatively high dividend yields. Pharmaceuticals did well, but the information technology (IT) sector was a major disappointment, although semiconductor and Internet stocks rallied late in the period.
| Performance Comparison | |
| Periods Ended 6/30/05 | 6 Months | 12 Months |
| MSCI EAFE Growth Index | -1.47% | 11.73% |
| MSCI EAFE Value Index | -0.22 | 16.47 |
PORTFOLIO REVIEW
Energy stocks benefited from the sharp rise in oil prices, which topped $60 a barrel near the end of the period. Among the major contributors to performance was Brazilian oil producer Petrobras, the largest oil company in Latin America, which was boosted by increased production resulting from several new offshore drilling platforms. In addition, overweight positions in two large European oil producers, Total of France and the U.K.’s Shell Transport & Trading, also contributed favorably to results. (Please refer to our portfolio of investments for a complete listing of portfolio holdings and the amount each represents of the portfolio.)
| Sector Diversification | |
| | Percent of | Percent of |
| | Net Assets | Net Assets |
| | 12/31/04 | 6/30/05 |
| Financials | 26.3% | 30.7% |
| Consumer Discretionary | 17.1 | 17.0 |
| Health Care | 8.0 | 9.8 |
| Energy | 7.8 | 8.9 |
| Telecommunication Services | 9.8 | 7.6 |
| Industrials and Business Services | 8.8 | 7.2 |
| Information Technology | 7.4 | 7.0 |
| Consumer Staples | 7.4 | 5.4 |
| Materials | 3.9 | 2.4 |
| Utilities | 1.6 | 1.3 |
| Other and Reserves | 1.9 | 2.7 |
| Total | 100.0% | 100.0% |
| Historical weightings reflect current industry/sector classifications. |
Energy stock selection was not the only positive factor during the first half. Several telecommunication services and IT stocks also enhanced relative performance. Mexican wireless provider America Movil rallied sharply as it continued to build its business in an increasing number of Latin American markets. In the IT area, one of the best contributors was I-Flex, an Indian company that provides IT services to the financial industry. The company reported better-than-expected earnings and raised forecasts for the remainder of the year. Taiwan Semiconductor likewise did well, reflecting strong quarterly earnings.
On the downside, stock selection in the financials and consumer discretionary sectors detracted the most from relative results. Nomura Holdings, the largest brokerage firm in Japan, reported a substantial decline in earnings because of weakness in its underwriting business. Mitsui Fudosan, another Japanese financial holding, also trimmed performance. In the consumer discretionary sector, Europe-based home improvement retailer Kingfisher slumped after warning of lower profits because of slowing demand, while shares of satellite provider British Sky Broadcasting fell as the challenge of retaining and attracting customers seems likely to become increasingly difficult.
On a regional basis, the portfolio’s overweight in emerging markets stocks contributed positively to performance, especially in Latin America; several of the portfolio’s top individual performers mentioned earlier were Latin American stocks. In contrast, an underweight in non-Japan Asian markets hindered relative performance, as did stock selection in the U.K., including our position in Compass Group, which disappointed over the first half.
OUTLOOK
Company balance sheets are strong, and we expect earnings to rise, although at a more measured rate than in 2004. Several factors are creating slightly greater risk than in the recent past, however. Low bond yields have supported stock prices for some time, but shorter-term yields have been rising in the U.S., and risk premiums could go up if the Federal Reserve decides to tighten monetary policy beyond the measured pace it has so far adopted. The price of oil remains elevated, and the dollar is still relatively weak despite its recent rise. That said, growth stocks tend to do best when the economy is growing steadily, and large-caps normally do better than small-caps in this environment. If this scenario unfolds as we expect, our large-cap growth bias should position the portfolio well in coming months.
The outlook for European profits remains largely positive. With European equities currently trading at attractive earnings multiples, we believe the downside risk for stocks in this arena is limited. In addition, the balance sheet restructuring that has been taking place is leading to healthy cash generation. We continue to be troubled by stubbornly high oil prices, which have affected consumer confidence. The wars in Iraq and Afghanistan threaten global stability as the horrific terrorist attacks in London all too vividly reminded us, but international financial markets have so far been resilient.
Japan’s economy should regain momentum in the second half of 2005, underpinned by an uplift in consumer spending. The risks here are the same as for Europe, namely high oil prices, rising U.S. interest rates, and a weak dollar as well as an upward trend in raw materials prices. We believe, however, that resilient domestic consumer demand will overcome these negatives.
Emerging markets continue to look healthy to us. Recent stock market declines were driven by the same issues discussed in regard to Europe and Japan. While ensuing risk aversion on the part of investors has prompted caution, we believe domestic demand is now driving growth in emerging markets, which are increasingly less dependent on global trade factors. In addition, political and economic stability is improving in these regions. Stock valuations appear attractive compared with those of developed markets, and our focus on high-quality stocks in consumer-sensitive industries such as media, retailers, banks, and mobile phone operators bodes well for investors, in our view.
Respectfully submitted,
David J.L. Warren
President, T. Rowe Price International Funds, Inc.
July 21, 2005
| Risks of International Investing |
Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets. Funds investing in a single country or in a limited geographic region tend to be riskier than more diversified funds. Risks can result from varying stages of economic and political development; differing regulatory environments, trading days, and accounting standards; and higher transaction costs of non-U.S. markets. Non-U.S. investments are also subject to currency risk, or a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
Lipper averages: The averages of available mutual fund performance returns for specified periods in defined categories as tracked by Lipper Inc.
MSCI EAFE Index: Widely accepted as the benchmark for international stock performance (EAFE refers to Europe, Australasia, and the Far East). The index represents the major markets of the world.
MSCI EAFE Growth Index: Benchmark for international growth stock performance.
MSCI EAFE Value Index: Benchmark for international value stock performance.
Price/earnings ratio: Calculated by dividing a stock’s market value per share by the company’s earnings per share for the past 12 months or by expected earnings for the coming year.
| Portfolio Highlights | | |
| Twenty-Five Largest Holdings | |
| | | Percent of |
| | | Net Assets |
| Company | Country | 6/30/05 |
| GlaxoSmithKline | United Kingdom | 3.3 |
| Total | France | 2.7 |
| Vodafone | United Kingdom | 2.1 |
| Sanofi-Aventis | France | 2.0 |
| Shell Transport & Trading | United Kingdom | 1.9 |
| UBS | Switzerland | 1.9 |
| UniCredito | Italy | 1.8 |
| Royal Bank of Scotland | United Kingdom | 1.7 |
| Nestle | Switzerland | 1.7 |
| Banco Bilbao | | |
| Vizcaya Argentaria | Spain | 1.6 |
| Eni | Italy | 1.4 |
| LVMH | France | 1.3 |
| Petroleo Brasileiro | Brazil | 1.3 |
| Credit Suisse Group | Switzerland | 1.2 |
| Assicurazioni Generali | Italy | 1.2 |
| | United States/ | |
| Carnival | United Kingdom | 1.1 |
| British Sky Broadcasting | United Kingdom | 1.1 |
| Mitsubishi | Japan | 1.1 |
| Reed Elsevier | United Kingdom | 1.1 |
| Nokia | Finland | 1.1 |
| Securitas | Sweden | 1.0 |
| National Bank of Greece | Greece | 1.0 |
| AXA | France | 1.0 |
| Societe Generale | France | 1.0 |
| France Telecom | France | 1.0 |
| Total | | 37.6 |
| Note: Table excludes investments in the T. Rowe Price Reserve Investment |
| Fund and collateral for securities lending. | |
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.
| Average Annual Compound Total Return | |
| |
| Periods Ended 6/30/05 | 1 Year | 5 Years | 10 Years |
| International Stock Portfolio | 9.75% | -4.44% | 4.03% |
| MSCI EAFE Index | 14.13 | -0.17 | 5.57 |
| Lipper Variable Annuity Underlying | | | |
| International Growth Funds Average | 11.87 | -4.17 | 5.56 |
Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance information, please visit our Web site (troweprice.com) or contact a T. Rowe Price representative at 1-800-469-5304. Total returns do not include charges imposed by your insurance company’s separate account. If these were included, performance would have been lower.
This table shows how the portfolio would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. When assessing performance, investors should consider both short- and long-term returns.
Fund Expense Example
As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs such as redemption fees or sales loads and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period.
Actual Expenses
The first line of the following table (“Actual”) provides information about actual account values and actual expenses. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information on the second line of the table (“Hypothetical”) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.
| International Stock Portfolio | |
| |
| | | | Expenses |
| | Beginning | Ending | Paid During |
| | Account | Account | Period* |
| | Value | Value | 1/1/05 to |
| | 1/1/05 | 6/30/05 | 6/30/05 |
| Actual | $1,000.00 | $979.20 | $5.15 |
| Hypothetical | | | |
| (Assumes 5% return | | | |
| before expenses) | 1,000.00 | 1,019.59 | 5.26 |
| * Expenses are equal to the fund’s annualized expense ratio for the six-month |
| period (1.05%), multiplied by the average account value over the period, |
| multiplied by the number of days in the most recent fiscal half year (181) |
| divided by the days in the year (365) to reflect the half-year period. |
| Financial Highlights | | | | | | | | | | | | |
| T. Rowe Price International Stock Portfolio | | | | | | | | | | |
| (Unaudited) | | | | | | | | | | | | |
| | | | | | | For a share outstanding throughout each period |
| |
| | | 6 Months | | Year | | | | | | | | |
| | | Ended | | Ended | | | | | | | | |
| | | 6/30/05** | | 12/31/04 | | 12/31/03 | | 12/31/02 | | 12/31/01 | | 12/31/00 |
| NET ASSET VALUE | | | | | | | | | | | | |
| Beginning of period | $ | 13.44 | $ | 11.94 | $ | 9.26 | $ | 11.47 | $ | 15.07 | $ | 19.04 |
|
|
| Investment activities | | | | | | | | | | | | |
| Net investment income (loss) | | 0.16 | | 0.14 | | 0.13 | | 0.10 | | 0.24 | | 0.07 |
| Net realized and | | | | | | | | | | | | |
| unrealized gain (loss) | | (0.44) | | 1.50 | | 2.69 | | (2.20) | | (3.59) | | (3.46) |
|
|
| Total from | | | | | | | | | | | | |
| investment activities | | (0.28) | | 1.64 | | 2.82 | | (2.10) | | (3.35) | | (3.39) |
|
|
| Distributions | | | | | | | | | | | | |
| Net investment income | | – | | (0.14) | | (0.13) | | (0.10) | | (0.25) | | (0.10) |
| Net realized gain | | – | | – | | (0.01) | | (0.01) | | – | | (0.48) |
|
|
| Total distributions | | – | | (0.14) | | (0.14) | | (0.11) | | (0.25) | | (0.58) |
|
|
| NET ASSET VALUE | | | | | | | | | | | | |
| End of period | $ | 13.16 | $ | 13.44 | $ | 11.94 | $ | 9.26 | $ | 11.47 | $ | 15.07 |
|
|
| |
| Ratios/Supplemental Data | | | | | | | | | | | | |
| Total return^ | | (2.08)% | | 13.77% | | 30.52% | | (18.29)% | | (22.21)% | | (17.84)% |
| 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 | | 2.38%† | | 1.11% | | 1.22% | | 0.93% | | 1.90% | | 0.43% |
| Portfolio turnover rate | | 71.1%† | | 30.4% | | 26.9% | | 28.8% | | 27.7% | | 41.7% |
| Net assets, end of period | | | | | | | | | | | | |
| (in thousands) | $ | 485,450 | $ | 518,106 | $ | 508,876 | $ | 439,350 | $ | 550,329 | $ | 662,159 |
| ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each |
| period, assuming reinvestment of all distributions. |
| † Annualized |
| **Per share amounts calculated using average shares outstanding method. |
| |
| The accompanying notes are an integral part of these financial statements. |
| Portfolio of Investments (1) | | |
| T. Rowe Price International Stock Portfolio | | |
| June 30, 2005 (Unaudited) | | |
| |
| | Shares | Value |
| (Cost and value in $ 000s) | | |
| | | |
| AUSTRALIA 1.0% | | |
| Common Stocks 1.0% | | |
| AMP | 339,500 | 1,663 |
| BHP Billiton | 137,395 | 1,880 |
| Brambles Industries § | 238,900 | 1,481 |
| Total Australia (Cost $3,672) | 5,024 |
| |
| BELGIUM 1.3% | | |
| Common Stocks 1.3% | | |
| Fortis | 174,760 | 4,826 |
| UCB | 27,064 | 1,316 |
| Total Belgium (Cost $5,463) | | 6,142 |
| |
| BRAZIL 1.8% | | |
| Common Stocks 1.8% | | |
| Petroleo Brasileiro | | |
| (Petrobras) ADR (USD) | 133,520 | 6,147 |
| Tele Norte Leste ADR (USD) § | 154,100 | 2,566 |
| Total Brazil (Cost $5,245) | | 8,713 |
| |
| CANADA 0.9% | | |
| Common Stocks 0.9% | | |
| Research In Motion (USD) *§ | 29,100 | 2,146 |
| Telus (Non-voting shares) | 68,600 | 2,333 |
| Total Canada (Cost $3,901) | | 4,479 |
| |
| CHINA 0.6% | | |
| Common Stocks 0.6% | | |
| China Telecom (HKD) | 1,318,000 | 466 |
| China Telecom 144A (HKD) | 3,596,000 | 1,273 |
| China Unicom (HKD) | 1,550,000 | 1,302 |
| Total China (Cost $2,819) | | 3,041 |
| |
| DENMARK 0.9% | | |
| Common Stocks 0.9% | | |
| Novo Nordisk, Series B | 84,655 | 4,307 |
| Total Denmark (Cost $3,347) | 4,307 |
| |
| FINLAND 1.1% | | |
| Common Stocks 1.1% | | |
| Nokia OYJ | 309,570 | 5,151 |
| Total Finland (Cost $2,043) | | 5,151 |
| | | |
| FRANCE 10.9% | | |
| Common Stocks 10.9% | | |
| AXA § | 201,517 | 5,010 |
| Compagnie de Saint-Gobain § | 52,080 | 2,877 |
| France Telecom § | 169,100 | 4,911 |
| Hermes International § | 15,540 | 3,130 |
| L’Oreal § | 15,296 | 1,097 |
| LVMH § | 80,870 | 6,225 |
| Sanofi-Aventis § | 118,887 | 9,731 |
| Societe Generale § | 48,628 | 4,925 |
| Sodexho Alliance § | 60,379 | 1,861 |
| Total | 55,803 | 13,065 |
| Total France (Cost $30,762) | | 52,832 |
| |
| GERMANY 2.6% | | |
| Common Stocks 2.6% | | |
| Allianz | 11,903 | 1,362 |
| Commerzbank | 224,900 | 4,861 |
| Hypo Real Estate Holding | 120,460 | 4,572 |
| Siemens | 22,343 | 1,624 |
| Total Germany (Cost $11,828) | | 12,419 |
| |
| GREECE 2.0% | | |
| Common Stocks 2.0% | | |
| Hellenic Telecommunications * | 12,500 | 235 |
| National Bank of Greece | 148,310 | 5,058 |
| OPAP | 152,600 | 4,384 |
| Total Greece (Cost $9,252) | | 9,677 |
| |
| HONG KONG 1.7% | | |
| Common Stocks 1.7% | | |
| Cheung Kong Holdings | 268,000 | 2,591 |
| Esprit Holdings | 260,500 | 1,874 |
| Li & Fung | 872,000 | 1,804 |
| Sun Hung Kai Properties | 221,000 | 2,174 |
| Total Hong Kong (Cost $6,456) | 8,443 |
| |
| INDIA 0.9% | | |
| Common Stocks 0.9% | | |
| I-Flex Solutions | 127,100 | 2,306 |
| Reliance Industries | 102,450 | 1,512 |
| Zee Telefilms | 109,500 | 391 |
| Total India (Cost $3,479) | | 4,209 |
| | | |
| IRELAND 1.2% | | |
| Common Stocks 1.2% | | |
| Anglo Irish Bank | 361,900 | 4,486 |
| CRH | 57,600 | 1,514 |
| Total Ireland (Cost $6,104) | | 6,000 |
| |
| ITALY 7.5% | | |
| Common Stocks 7.5% | | |
| Alleanza Assicurazioni § | 213,740 | 2,316 |
| Assicurazioni Generali § | 179,971 | 5,602 |
| Banca Intesa S.p.A. | 926,300 | 3,948 |
| Enel § | 533,400 | 4,635 |
| Eni S.p.A. § | 267,917 | 6,877 |
| Mediobanca § | 243,700 | 4,551 |
| UniCredito § | 1,629,700 | 8,572 |
| Total Italy (Cost $32,118) | | 36,501 |
| |
| JAPAN 22.1% | | |
| Common Stocks 22.1% | | |
| AIFUL | 33,225 | 2,467 |
| Astellas Pharmaceutical | 127,000 | 4,334 |
| Benesse | 39,700 | 1,266 |
| Canon | 42,900 | 2,247 |
| Credit Saison § | 37,000 | 1,226 |
| Dai Nippon Printing | 177,000 | 2,844 |
| Daikin Industries | 59,500 | 1,481 |
| Daiwa Securities Group | 291,000 | 1,790 |
| Fanuc § | 44,100 | 2,795 |
| Funai Electric § | 14,500 | 1,482 |
| HOYA | 18,400 | 2,114 |
| INPEX | 294 | 1,652 |
| JSR § | 91,500 | 1,918 |
| KDDI | 884 | 4,079 |
| Keyence | 10,000 | 2,226 |
| Kyocera | 23,700 | 1,806 |
| Leopalace21 § | 111,400 | 1,844 |
| Marui | 152,100 | 2,037 |
| Mitsubishi | 400,500 | 5,418 |
| Mitsubishi Estate | 137,000 | 1,499 |
| Mitsubishi Tokyo Financial § | 524 | 4,423 |
| Mitsui Fudosan | 360,000 | 4,031 |
| Mitsui Trust Holdings § | 204,000 | 2,081 |
| NEC | 198,000 | 1,064 |
| Nidec | 20,400 | 2,148 |
| Nissan § | 248,200 | 2,443 |
| Nitto Denko | 25,600 | 1,456 |
| Nomura Securities § | 329,300 | 3,910 |
| ORIX | 18,500 | 2,766 |
| Resona Holdings *§ | 1,478,000 | 2,745 |
| Rohm Company | 17,700 | 1,698 |
| Secom | 100,000 | 4,284 |
| Sega Sammy Holdings | 30,900 | 1,887 |
| Shin-Etsu Chemical | 69,800 | 2,638 |
| SMC | 10,900 | 1,182 |
| Sony § | 52,200 | 1,798 |
| Sumitomo Mitsui Financial | 692 | 4,662 |
| Suzuki Motor | 108,000 | 1,692 |
| T&D Holdings § | 32,600 | 1,525 |
| Takeda Chemical Industries | 39,800 | 1,968 |
| Toray Industries § | 437,000 | 2,065 |
| Toyota Motor | 131,000 | 4,684 |
| Trend Micro § | 58,000 | 2,050 |
| USS § | 22,250 | 1,422 |
| Total Japan (Cost $97,740) | | 107,147 |
| |
| LUXEMBOURG 0.4% | | |
| Common Stocks 0.4% | | |
| SES Global GDR | 116,800 | 1,760 |
| Total Luxembourg (Cost $1,735) | 1,760 |
| |
| MEXICO 2.6% | | |
| Common Stocks 2.6% | | |
| America Movil ADR | | |
| Series L (USD) | 72,000 | 4,292 |
| Grupo Financiero Banorte | 181,500 | 1,196 |
| Grupo Modelo, Series C | 462,000 | 1,441 |
| Grupo Televisa ADR (USD) | 33,300 | 2,068 |
| Wal-Mart de Mexico | | |
| Series V § | 849,226 | 3,443 |
| Total Mexico (Cost $7,016) | | 12,440 |
| |
| NETHERLANDS 0.6% | | |
| Common Stocks 0.6% | | |
| Koninklijke Numico * | 79,306 | 3,162 |
| Total Netherlands (Cost $1,578) | 3,162 |
| | | |
| NORWAY 1.0% | | |
| Common Stocks 1.0% | | |
| Norsk Hydro | 24,091 | 2,200 |
| Orkla | 6,170 | 226 |
| Statoil ASA § | 113,300 | 2,301 |
| Total Norway (Cost $4,151) | | 4,727 |
| |
| SINGAPORE 0.6% | | |
| Common Stocks 0.6% | | |
| United Overseas Bank | 167,424 | 1,408 |
| United Overseas Land * | 16,742 | 23 |
| Venture | 165,000 | 1,561 |
| Total Singapore (Cost $2,418) | | 2,992 |
| |
| SOUTH AFRICA 0.7% | | |
| Common Stocks 0.7% | | |
| Naspers (N shares) | 195,900 | 2,427 |
| Standard Bank Group | 106,100 | 1,023 |
| Total South Africa (Cost $3,593) | 3,450 |
| |
| SOUTH KOREA 1.3% | | |
| Common Stocks 1.3% | | |
| Hyundai GDR 144A (USD) | 49,700 | 1,404 |
| Kookmin Bank | 31,900 | 1,453 |
| Samsung Electronics | 7,486 | 3,550 |
| Total South Korea (Cost $4,494) | 6,407 |
| |
| SPAIN 3.8% | | |
| Common Stocks 3.8% | | |
| Banco Bilbao | | |
| Vizcaya Argentaria | 518,576 | 7,977 |
| Cia Distrib Integral Logista | 47,500 | 2,419 |
| Enagas | 109,800 | 1,938 |
| Indra Sistemas | 30,300 | 598 |
| Telefonica | 104,622 | 1,708 |
| Telefonica ADR (USD) | 29,516 | 1,443 |
| Vallehermoso | 96,300 | 2,269 |
| Vallehermoso Rights, | | |
| 7/12/05 *§ | 96,300 | 71 |
| Total Spain (Cost $15,879) | | 18,423 |
| | | |
| SWEDEN 1.0% | | |
| Common Stocks 1.0% | | |
| Securitas, Series B | 305,452 | 5,089 |
| Total Sweden (Cost $5,016) | | 5,089 |
| |
| SWITZERLAND 6.1% | | |
| Common Stocks 6.1% | | |
| Cie Financ Richemont | | |
| Equity Units, Class A | 105,400 | 3,530 |
| Credit Suisse Group | 147,400 | 5,777 |
| Nestle § | 31,603 | 8,069 |
| Roche Holding § | 23,400 | 2,948 |
| UBS | 119,240 | 9,271 |
| Total Switzerland (Cost $19,393) | 29,595 |
| |
| TAIWAN 1.1% | | |
| Common Stocks 1.1% | | |
| Acer | 917,000 | 1,803 |
| Far Eastone Telecom | | |
| GDR (USD) | 105,500 | 2,004 |
| Taiwan Semiconductor * | 870,564 | 1,506 |
| Total Taiwan (Cost $4,785) | | 5,313 |
| |
| THAILAND 0.7% | | |
| Common Stocks 0.7% | | |
| Bangkok Bank NVDR, GDR | 702,300 | 1,716 |
| Kasikornbank NVDR, GDR | 1,330,100 | 1,770 |
| Total Thailand (Cost $3,592) | | 3,486 |
| |
| TURKEY 0.8% | | |
| Common Stocks 0.8% | | |
| Turkiye Garanti Bankasi * | 354,100 | 1,521 |
| Turkiye Is Bankasi | 382,000 | 2,219 |
| Total Turkey (Cost $3,006) | | 3,740 |
| |
| UNITED KINGDOM 19.5% | | |
| Common Stocks 19.5% | | |
| AstraZeneca | 115,798 | 4,788 |
| Barclays | 481,087 | 4,776 |
| British Sky Broadcasting | 579,946 | 5,469 |
| Capita Group | 552,500 | 3,631 |
| Carnival | 41,227 | 2,343 |
| Emap | 97,500 | 1,356 |
| GlaxoSmithKline | 665,563 | 16,068 |
| GUS | 270,300 | 4,252 |
| iSOFT Group | 279,200 | 2,094 |
| Kingfisher | 927,344 | 4,067 |
| Reed Elsevier | 565,759 | 5,405 |
| Royal Bank of Scotland | 268,217 | 8,082 |
| Shell Transport & Trading | 956,535 | 9,271 |
| Signet Group | 1,288,800 | 2,504 |
| Tesco | 558,280 | 3,182 |
| Unilever | 311,405 | 2,995 |
| Vodafone | 4,155,014 | 10,102 |
| WPP Group | 403,670 | 4,143 |
| Total United Kingdom (Cost $79,010) | 94,528 |
| |
| UNITED STATES 1.9% | | |
| Common Stocks 0.6% | | |
| Carnival | 59,300 | 3,235 |
| | | 3,235 |
| Money Market Funds 1.3% | | |
| T. Rowe Price Reserve | | |
| Investment Fund 3.14% #† | 6,241,881 | 6,242 |
| | | 6,242 |
| Total United States (Cost $9,238) | 9,477 |
| | | |
| SECURITIES LENDING COLLATERAL 17.2% | | |
| Money Market Pooled Account 17.2% | | |
| Investment in money market | | |
| pooled account managed by | | |
| JP Morgan Chase Bank | | |
| London 3.198% # | 83,518,491 | 83,519 |
| Total Securities | | |
| Lending Collateral (Cost $83,519) | | 83,519 |
| | | |
| Total Investments in Securities | | |
| 115.8% of Net Assets (Cost $472,652) | | $ 562,193 |
| (1) | Denominated in currency of country of incorporation unless |
| | otherwise noted |
| # | Seven-day yield |
| * | Non-income producing |
| † | Affiliated company – See Note 5 |
| § | All or a portion of this security is on loan at June 30, 2005 - |
| | See Note 2 |
| 144A | Security was purchased pursuant to Rule 144A under the |
| | Securities Act of 1933 and may be resold in transactions |
| | exempt from registration only to qualified institutional buy- |
| | ers – total value of such securities at period-end amounts to |
| | $2,677 and represents 0.6% of net assets |
| ADR | American Depository Receipts |
| GDR | Global Depository Receipts |
| HKD | Hong Kong dollar |
| NVDR Non Voting Depository Receipt |
| USD | United States 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, 2005 (Unaudited) | | |
| (In thousands except shares and per share amounts) | | |
| |
| Assets | | |
| Investments in securities, at value | | |
| Affiliated companies (cost $6,242) | $ | 6,242 |
| Non-affiliated companies (cost $466,410) | | 555,951 |
|
|
| Total investments in securities | | 562,193 |
| Cash | | 47 |
| Foreign currency (cost $2,603) | | 2,594 |
| Dividends and interest receivable | | 592 |
| Receivable for investment securities sold | | 8,800 |
| Receivable for shares sold | | 136 |
| Other assets | | 897 |
|
|
| Total assets | | 575,259 |
|
|
| |
| Liabilities | | |
| Payable for investment securities purchased | | 4,826 |
| Payable for shares redeemed | | 209 |
| Obligation to return securities lending collateral | | 83,519 |
| Due to affiliates | | 447 |
| Other liabilities | | 808 |
|
|
| Total liabilities | | 89,809 |
|
|
| |
| NET ASSETS | $ | 485,450 |
|
|
| Net Assets Consist of: | | |
| Undistributed net investment income (loss) | $ | 6,001 |
| Undistributed net realized gain (loss) | | (117,125) |
| Net unrealized gain (loss) | | 89,536 |
| Paid-in-capital applicable to 36,880,708 shares of | | |
| $0.0001 par value capital stock outstanding; | | |
| 1,000,000,000 shares of the Corporation authorized | | 507,038 |
|
|
| |
| NET ASSETS | $ | 485,450 |
|
|
| NET ASSET VALUE PER SHARE | $ | 13.16 |
|
|
The accompanying notes are an integral part of these financial statements.
| Statement of Operations | | |
| T. Rowe Price International Stock Portfolio | | |
| (Unaudited) | | |
| ($ 000s) | | |
| |
| | | 6 Months |
| | | Ended |
| | | 6/30/05 |
| Investment Income (Loss) | | |
| Income | | |
| Dividend (net of foreign taxes of $778) | $ | 8,238 |
| Securities lending | | 267 |
| Interest | | 8 |
|
|
| Total income | | 8,513 |
|
|
| Investment management and administrative expense | | 2,607 |
|
|
| Net investment income (loss) | | 5,906 |
|
|
| Realized and Unrealized Gain (Loss) | | |
| Net realized gain (loss) | | |
| Securities (net of foreign taxes of $10) | | 39,824 |
| Foreign currency transactions | | (449) |
|
|
| Net realized gain (loss) | | 39,375 |
|
|
| Change in net unrealized gain (loss) | | |
| Securities | | (55,681) |
| Other assets and liabilities | | |
| denominated in foreign currencies | | (37) |
|
|
| Change in net unrealized gain (loss) | | (55,718) |
|
|
| Net realized and unrealized gain (loss) | | (16,343) |
|
|
| |
| INCREASE (DECREASE) IN NET | | |
| ASSETS FROM OPERATIONS | $ | (10,437) |
|
|
The accompanying notes are an integral part of these financial statements.
| Statement of Changes in Net Assets | | | | |
| T. Rowe Price International Stock Portfolio | | | | |
| (Unaudited) | | | | |
| ($ 000s) | | | | |
| | | 6 Months | | Year |
| | | Ended | | Ended |
| | | 6/30/05 | | 12/31/04 |
| Increase (Decrease) in Net Assets | | | | |
| Operations | | | | |
| Net investment income (loss) | $ | 5,906 | $ | 5,511 |
| Net realized gain (loss) | | 39,375 | | 18,809 |
| Change in net unrealized gain (loss) | | (55,718) | | 39,166 |
|
|
| Increase (decrease) in net assets from operations | | (10,437) | | 63,486 |
|
|
| Distributions to shareholders | | | | |
| Net investment income | | – | | (5,358) |
|
|
| Capital share transactions * | | | | |
| Shares sold | | 21,334 | | 47,800 |
| Distributions reinvested | | – | | 5,358 |
| Shares redeemed | | (43,553) | | (102,056) |
|
|
| Increase (decrease) in net assets from capital | | | | |
| share transactions | | (22,219) | | (48,898) |
|
|
| |
| Net Assets | | | | |
| Increase (decrease) during period | | (32,656) | | 9,230 |
| Beginning of period | | 518,106 | | 508,876 |
|
|
| End of period | $ | 485,450 | $ | 518,106 |
|
|
| (Including undistributed net investment income of $6,001 | | | | |
| at 6/30/05 and $95 at 12/31/04) | | | | |
| |
| *Share information | | | | |
| Shares sold | | 1,601 | | 3,899 |
| Distributions reinvested | | – | | 411 |
| Shares redeemed | | (3,279) | | (8,359) |
|
|
| Increase (decrease) in shares outstanding | | (1,678) | | (4,049) |
The accompanying notes are an integral part of these financial statements.
| Notes to Financial Statements |
| T. Rowe Price International Stock Portfolio |
| June 30, 2005 (Unaudited) |
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Series, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act). The International Stock Portfolio (the fund), a diversified, open-end management investment company, is one portfolio established by the corporation. The fund commenced operations on March 31, 1994. The fund seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies. Shares of the fund are currently offered only through certain insurance companies as an investment medium for both variable annuity contracts and variable life insurance policies.
The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Fund management believes that estimates and security valuations are appropriate; however actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the fund receives upon sale of the securities.
Valuation The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business. Equity securities listed or regularly traded on a securities exchange or in the over-the-counter market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the latest bid and asked prices for domestic securities and the last quoted sale price for international securities.
Investments in mutual funds are valued at the mutual fund’s closing net asset value per share on the day of valuation.
Other investments, including restricted securities, and those 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 the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors.
Most foreign markets close before the close of trading on the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, which in turn will affect the fund’s share price, the fund will adjust the previous closing prices to reflect the fair value of the securities as of the close of the NYSE, as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. In deciding whether to make fair value adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U. S. markets that represent foreign securities and baskets of foreign securities. The fund uses outside pricing services to provide it with closing market prices and information used for adjusting those prices. The fund cannot predict when and how often it will use closing prices and when it will adjust those prices to reflect fair value. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next day’s opening prices in the same markets, and adjusted prices.
Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses.
Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid on an annual basis. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis.
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.
Emerging Markets At June 30, 2005, approximately 15% of the fund’s net assets were invested in securities of companies located in emerging markets or denominated in or linked to the currencies of emerging market countries. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities.
Restricted Securities The fund may invest in securities that are subject to legal or contractual restrictions on resale. Although certain of these securities may be readily sold, for example, under Rule 144A, others may be illiquid, their sale may involve substantial delays and additional costs, and prompt sale at an acceptable price may be difficult.
Securities Lending The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and U.S. government securities valued at 102% to 105% of the value of the securities on loan. Cash collateral is invested in a money market pooled account managed by the fund’s lending agent in accordance with investment guidelines approved by fund management. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund the next business day. 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 the securities. Securities lending revenue recognized by the fund consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower and compensation to the lending agent. At June 30, 2005, the value of loaned securities was $79,327,000; aggregate collateral consisted of $83,519,000 in the money market pooled account.
Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $173,711,000 and $193,539,000, respectively, for the six months ended June 30, 2005.
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 under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of June 30, 2005.
The fund intends to retain realized gains to the extent of available capital loss carryforwards. As of December 31, 2004, the fund had $156,444,000 of unused capital loss carryforwards, of which $35,702,000 expire in 2009, $70,854,000 expire in 2010, and $49,888,000 expire in 2011.
At June 30, 2005, the cost of investments for federal income tax purposes was $472,652,000. Net unrealized gain aggregated $89,536,000 at period-end, of which $96,929,000 related to appreciated investments and $7,393,000 related 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 as a reduction of income.
Gains realized upon disposition of certain Indian securities held by the fund are subject to capital gains tax in India, payable prior to repatriation of sale proceeds. The tax is computed on net realized gains, and realized losses in excess of gains may be carried forward eight years to offset future gains. In addition, the fund accrues a deferred tax liability for net unrealized gains on Indian securities when applicable. At June 30, 2005, the fund had no deferred tax liability, and $169,000 of capital loss carryforwards that expire in 2009, $3,159,000 that expire in 2010, and $1,995,000 that expire thereafter through 2013.
NOTE 5 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price International, Inc. (the manager), a wholly owned subsidiary of T. Rowe Price Associates, Inc. (Price Associates), which is wholly owned by T. Rowe Price Group, Inc. The investment management and administrative agreement between the fund and the manager provides for an all-inclusive annual fee equal to 1.05% of the fund’s average daily net assets. The fee is computed daily and paid monthly. The agreement provides that investment management, shareholder servicing, transfer agency, accounting, and custody services are provided to the fund, and interest, taxes, brokerage commissions, directors’ fees and expenses, and extraordinary expenses are paid directly by the fund.
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by Price Associates and affiliates of the fund. The Reserve Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates, and are not available for direct purchase by members of the public. The Reserve Funds pay no investment management fees. During the six months ended June 30, 2005, dividend income from the Reserve Funds totaled $71,000, and the value of shares of the Reserve Funds held at June 30, 2005, and December 31, 2004, was $6,242,000 and $9,565,000, respectively.
On September 29, 2004, Price Associates fully reimbursed the fund for a $53,000 loss realized on the sale of foreign currency sold in error. The reimbursement had no impact on total return for the year ended December 31, 2004.
| Information on Proxy Voting Policies, Procedures, and Records |
A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC’s Web site, www.sec.gov. The description of our proxy voting policies and procedures is also available on our Web site, www.troweprice.com. To access it, click on the words “Company Info” at the top of our homepage for individual investors. Then, in the window that appears, click on the “Proxy Voting Policy” navigation button in the top left corner.
Each fund’s most recent annual proxy voting record is available on our Web site and through the SEC’s Web site. To access it through our Web site, follow the directions above, then click on the words “Proxy Voting Record” at the bottom of the Proxy Voting Policy page.
| How to Obtain Quarterly Portfolio Holdings |
The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s Web site (www.sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.
| Approval of Investment Management Agreement |
On March 2, 2005, the fund’s Board of Directors unanimously approved the investment advisory contract (“Contract”) between the fund and its investment manager, T. Rowe Price International, Inc. (“Manager”). The Board considered a variety of factors in connection with its review of the Contract, also taking into account information provided by the Manager during the course of the year, as discussed below:
Services Provided by the Manager
The Board considered the nature, quality, and extent of the services provided to the fund by the Manager. These services included, but were not limited to, management of the fund’s portfolio and a variety of activities related to portfolio management. The Board also reviewed the background and experience of the Manager’s senior management team and investment personnel involved in the management of the fund. The Board had previously conducted a detailed review of the organization, structure and investment teams of the Manager at a meeting held in October 2004. The Board concluded that it was satisfied with the nature, quality, and extent of the services provided by the Manager.
Investment Performance of the Fund
The Board reviewed the fund’s average annual total return over the 1-, 3-, 5-, and 10-year periods as well as the fund’s year-by-year returns and compared these returns to previously agreed upon comparable performance measures and market data, including those supplied by Lipper and Morningstar, which are independent providers of mutual fund data. On the basis of this evaluation and the Board’s ongoing review of investment results, the Board concluded that the fund’s results for certain time periods were less than satisfactory. The Manager provided its assessment of the fund’s investment results and reviewed steps taken to address issues raised by the Board. The Board concluded that the Manager’s response and steps taken were satisfactory.
Costs, Benefits, Profits, and Economies of Scale
The Board reviewed detailed information regarding the revenues received by the Manager under the Contract and other benefits that the Manager (and its affiliates) may have realized from its relationship with the fund, including research received under “soft dollar” agreements. The Board also received information on the estimated costs incurred and profits realized by the Manager and its affiliates from advising T. Rowe Price mutual funds, as well as estimates of the gross profits realized from managing the fund in particular. The Board concluded that the Manager’s profits were reasonable in light of the services provided to the fund. The Board also considered whether the fund or other funds benefit under the fee levels set forth in the Contract from any economies of scale realized by the Manager. The Board noted that, under the Contract, the fund pays the Manager a single fee based on the fund’s assets and the Manager, in turn, pays all expenses of the fund, with certain exceptions. The Board concluded that, based on the profitability data it reviewed and consistent with this single fee structure, the Contract provided for a reasonable sharing of benefits from any economies of scale with the fund.
Fees
The Board reviewed the fund’s single-fee structure and compared the rate to fees and expenses of other comparable funds based on information and data supplied by Lipper. The information provided to the Board indicated that the fund’s single fee rate was generally above the median management fee rate for comparable funds, but generally below the median expense ratio for comparable funds. The Board also reviewed the fee schedules for comparable privately managed accounts of the Manager and its affiliates. Management informed the Board that the Manager’s responsibilities for privately managed accounts are more limited than its responsibilities for the fund and other T. Rowe Price mutual funds that it or its affiliates advise. On the basis of the information provided, the Board concluded that the fees paid by the fund under the Contract were reasonable.
Approval of the Contract
As noted, the Board approved the continuation of the Contract. No single factor was considered in isolation or to be determinative to the decision. Rather, the Board concluded, in light of a weighting and balancing of all factors considered, that it was in the best interests of the fund to approve the continuation of the Contract, including the fees to be charged for services thereunder.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions is filed as an exhibit to the registrant’s annual Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the registrant’s most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant’s annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant’s annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is filed with the registrant’s annual Form N-CSR.
(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.
(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.
| |
| SIGNATURES |
| |
| | Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment |
| Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the |
| undersigned, thereunto duly authorized. |
| |
| T. Rowe Price International Series, Inc. |
| |
| By | /s/ James S. Riepe |
| | James S. Riepe |
| | Principal Executive Officer |
| |
| Date | August 18, 2005 |
| |
| |
| | Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment |
| Company Act of 1940, this report has been signed below by the following persons on behalf of |
| the registrant and in the capacities and on the dates indicated. |
| |
| |
| By | /s/ James S. Riepe |
| | James S. Riepe |
| | Principal Executive Officer |
| |
| Date | August 18, 2005 |
| |
| |
| |
| By | /s/ Joseph A. Carrier |
| | Joseph A. Carrier |
| | Principal Financial Officer |
| |
| Date | August 18, 2005 |
