Item 1. Report to Shareholders
T. Rowe Price International Stock Portfolio
- --------------------------------------------------------------------------------
December 31, 2003
Certified Annual Report
This report is certified under the Sarbanes-Oxley Act of 2002, which requires
that public companies, including mutual funds, affirm that the information
provided in their annual and semiannual shareholder reports fully and fairly
represents their financial position.
T. Rowe Price International Stock Portfolio
Certified Annual Report
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 a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
(Graphic Omitted)
International Stock Portfolio
- --------------------------------------------------------------------------------
As of 12/31/03
International Stock Portfolio $ 14,090
MSCI EAFE Index $ 15,402
Lipper Variable Annuity Underlying
International Funds Average $ 15,807
Lipper
Variable
Annuity
International MSCI Underlying
Stock EAFE International
Portfolio Index Funds Average
3/31/94 $ 10,000 $ 10,000 $ 10,000
12/94 10,180 10,435 10,039
12/95 11,318 11,640 11,124
12/96 12,982 12,380 12,691
12/97 13,383 12,635 13,638
12/98 15,505 15,204 15,488
12/99 20,672 19,355 21,597
12/00 16,984 16,653 18,051
12/01 13,211 13,122 14,237
12/02 10,795 11,067 11,698
12/03 14,090 15,402 15,807
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
Since
Inception
Periods Ended 12/31/03 1 Year 3 Years 5 Years 3/31/94
- --------------------------------------------------------------------------------
International Stock
Portfolio 30.52% -6.04% -1.90% 3.58%
MSCI EAFE Index 39.17 -2.57 0.26 4.53
Lipper Variable Annuity
Underlying International
Funds Average 35.41 -4.25 1.34 5.28
Past performance cannot guarantee future results. 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.
Dear Shareholder,
International stocks soared and the fund posted a powerful return of 30.52% in
2003, although performance lagged the MSCI EAFE Index and Lipper Variable
Annuity International Funds Average due to the fund's emphasis on growth stocks.
International value stocks significantly outperformed growth stocks from the end
of 2002 through most of 2003, although growth stocks began to narrow the gap in
recent months.
As you know, the fund seeks to provide long-term growth of capital by investing
primarily in established companies outside the U.S. The fund is diversified
broadly among developed and some emerging markets. It focuses primarily on
larger-cap and, to a lesser extent, on medium-cap growth stocks.
Major International Index Returns
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12-Month
Period Ended 12/31/03 Return
- --------------------------------------------------------------------------------
MSCI EAFE 39.17%
MSCI Europe 39.14
MSCI Japan 36.15
MSCI Pacific Ex-Japan 47.03
MSCI Latin America 73.66
S&P 500 Stock Index 28.68
The Major International Index Returns table shows how various international
markets performed over the fund's fiscal year. As you can see, Latin American
and other emerging markets outpaced the developed markets of Europe and Japan
over the 12-month period, and all international stocks surpassed U.S. shares
measured by the S&P 500 Index.
Top 5 Sectors
- --------------------------------------------------------------------------------
Percent of Net Assets
12/31/02 12/31/03
- --------------------------------------------------------------------------------
Financials 19.5% 23.3%
Consumer Discretionary 18.3 18.3
Telecommunication Services 9.3 10.3
Health Care 12.2 9.4
Consumer Staples 9.5 8.9
The Top 5 Sectors table reflects the portfolio's allocation to various sectors
during the same period. We reduced our exposure to health care stocks and
increased our allocation of financial and telecommunication services holdings
where we see opportunities in the months ahead.
(Graphic Omitted)
Geographic Diversification
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Europe Japan Pacific Rim Latin America Other and Reserves
69% 18% 8% 2% 3%
Based on net assets as of 12/31/03.
The Geographic Diversification chart shows the fund's geographic profile as of
December 31, 2003. In accordance with the fund's strategy of investing in
established larger-cap companies, our highest regional exposure was to European
markets and Japan, where most of these companies are located. The portfolio
normally invests only a small portion of its assets in Latin American and Asian
markets outside Japan. Please see the Portfolio of Investments section following
this letter for a breakdown by individual country.
Finally, I'm sure you are aware that mutual fund companies have recently come
under scrutiny for their trading policies. The investigations have led to
allegations that executives of several mutual fund companies permitted or
engaged in improper mutual fund trading. In addition, certain intermediaries
that process fund transactions are alleged to have assisted some investors in
executing improper mutual fund trades. I want T. Rowe Price shareholders to know
that we emphatically condemn the abuses that have been revealed or alleged
against other firms in our industry. Our firm has not entered and will not enter
into any agreements with any investors or intermediaries that authorize
after-hours trading or excessive short-term trading in any of our funds. T. Rowe
Price investors can be assured that our firm unequivocally opposes illegal or
inappropriate trading of any nature and has policies and procedures in place
designed to protect the best interests of our long-term shareholders. No T. Rowe
Price executives or portfolio managers or investment personnel of the T. Rowe
Price mutual funds have engaged in any inappropriate trading of T. Rowe Price
mutual funds. You may find out more about our trading policies and the steps we
take to protect your interests by visiting our Web site (troweprice.com). These
policies are also spelled out in your fund's prospectus.
We thank you for your continued support.
Respectfully,
James S. Riepe
Chairman
January 16, 2004
Financial Highlights
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
For a share outstanding throughout each period
----------------------------------------------------------
Year
Ended
12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET VALUE
Beginning
of period $ 9.26 $ 11.47 $ 15.07 $ 19.04 $ 14.52
Investment
activities
Net investment
income (loss) 0.13 0.10 0.24 0.07 0.12
Net realized and
unrealized gain
(loss) 2.69 (2.20) (3.59) (3.46) 4.69
Total from
investment
activities 2.82 (2.10) (3.35) (3.39) 4.81
Distributions
Net investment
income (0.13) (0.10) (0.25) (0.10) (0.07)
Net realized
gain (0.01) (0.01) -- (0.48) (0.22)
Total
distributions (0.14) (0.11) (0.25) (0.58) (0.29)
NET ASSET VALUE
End of period $ 11.94 $ 9.26 $ 11.47 $ 15.07 $ 19.04
----------------------------------------------------------
Ratios/Supplemental Data
Total return^ 30.52% (18.29)% (22.21)% (17.84)% 33.32%
Ratio of total
expenses to
average net assets 1.05% 1.05% 1.05% 1.05% 1.05%
Ratio of net
investment income
(loss) to average
net assets 1.22% 0.93% 1.90% 0.43% 0.83%
Portfolio turnover
rate 26.9% 28.8% 27.7% 41.7% 25.4%
Net assets,
end of period
(in thousands) $ 508,876 $ 439,350 $ 550,329 $ 662,159 $ 707,330
^ 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 accompanying notes are an integral part of these financial statements.
Portfolio of Investments ss.
T. Rowe Price International Stock Portfolio
Certified Annual Report
December 31, 2003
Shares Value
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($ 000s)
AUSTRALIA 1.5%
Common Stocks 0.9%
BHP Billiton 372,876 3,422
Coles Myer 179,000 1,019
4,441
Preferred Stocks 0.6%
News Corporation 395,569 2,979
2,979
Total Australia (Cost $6,050) 7,420
BELGIUM 0.8%
Common Stocks 0.8%
Dexia 117,450 2,021
Fortis 24,822 499
Fortis (Unified shares) 40,160 808
UCB 16,864 635
Total Belgium (Cost $2,919) 3,963
BRAZIL 0.9%
Common Stocks 0.9%
Companhia de Bebidas
ADR (USD) 64,600 1,648
Grupo Pao de Acucar
ADR (USD) 20,100 506
Petroleo Brasileiro (Petrobras) ADR
(1 ADR represents 1
preferred share) (USD) 91,120 2,429
Total Brazil (Cost $3,553) 4,583
CANADA 0.3%
Common Stocks 0.3%
Alcan Aluminum 16,680 782
Royal Bank of Canada 13,380 640
Total Canada (Cost $681) 1,422
CHINA 0.2%
Common Stocks 0.2%
China Life Insurance
(Restricted shares) (HKD) * 1,255,000 1,026
Total China (Cost $586) 1,026
DENMARK 0.6%
Common Stocks 0.6%
Novo Nordisk, Series B 73,305 2,983
Total Denmark (Cost $2,307) 2,983
FINLAND 1.3%
Common Stocks 1.3%
Nokia 372,366 6,432
Total Finland (Cost $3,198) 6,432
FRANCE 15.6%
Common Stocks 15.6%
Aventis 60,247 3,978
AXA 146,744 3,137
BNP Paribas 143,326 9,015
Compagnie de Saint-Gobain 61,580 3,011
Credit Agricole 156,229 3,726
France Telecom * 162,400 4,637
Groupe Danone 4,610 752
Hermes 19,541 3,777
L'Oreal 32,086 2,628
Lafarge 6,605 587
LVMH 51,249 3,726
Pinault Printemps Redoute 9,128 881
Renault 10,396 716
Sanofi-Synthelabo 90,161 6,782
Schneider Electric 49,592 3,243
Societe Generale 15,298 1,349
Societe Television Francaise 1 164,693 5,744
Sodexho Alliance 86,779 2,614
STMicroelectronics 65,547 1,776
Thomson 61,200 1,301
Total, Series B 81,804 15,192
Vivendi Universal * 37,736 916
Total France (Cost $52,922) 79,488
GERMANY 2.4%
Common Stocks 2.4%
Allianz 13,253 1,671
Bayer 26,752 783
Bayerische Hypo-und
Vereinsbank * 41,041 948
Celesio 19,897 964
Deutsche Bank 38,803 3,212
E.On 18,233 1,188
Hypo Real Estate
(Spin Off Shares) * 10,260 256
Rhoen-Klinikum 18,139 1,017
SAP 8,070 1,354
Siemens 12,849 1,028
Total Germany (Cost $10,230) 12,421
HONG KONG 1.3%
Common Stocks 1.3%
Cheung Kong Holdings 171,000 1,355
China Mobile (Hong Kong) 695,000 2,130
Hong Kong & China Gas 684,000 1,044
Sun Hung Kai Properties 243,000 2,003
Total Hong Kong (Cost $5,282) 6,532
INDIA 1.3%
Common Stocks 1.3%
Hindustan Lever 720,910 3,241
Infosys Technologies 11,700 1,431
Zee Telefilms 527,800 1,735
Total India (Cost $5,905) 6,407
ISRAEL 0.1%
Common Stocks 0.1%
Check Point Software
Technologies (USD) * 28,726 483
Total Israel (Cost $560) 483
ITALY 5.0%
Common Stocks 5.0%
Alleanza Assicurazioni 253,540 2,773
Banca Intesa 282,135 1,102
Banco Popolare di
Verona e Novara 63,200 1,069
ENI 323,658 6,101
Mediaset 93,469 1,109
Mediolanum 121,295 955
Telecom Italia * 736,785 2,182
Telecom Italia Mobile 553,094 3,003
Telecom Italia-RNC * 897,147 1,825
UniCredito Italiano 1,013,411 5,465
Total Italy (Cost $17,092) 25,584
JAPAN 18.1%
Common Stocks 18.1%
Canon 56,000 2,608
Credit Saison 75,200 1,699
Dai Nippon Printing 81,000 1,138
Daito Trust Construction 53,500 1,588
Daiwa House Industry 172,000 1,830
Daiwa Securities 358,000 2,436
Denso 69,300 1,365
Fanuc 17,100 1,025
Fuji Television Network 219 1,186
Fujisawa Pharmaceutical 76,000 1,621
Funai Electric 12,900 1,771
Honda 66,900 2,972
Hoya 10,700 983
Keyence 5,500 1,160
Kirin Brewery 131,000 1,118
Kyocera 14,100 940
Marui 116,800 1,472
Mitsubishi 160,000 1,696
Mitsubishi Estate 224,000 2,124
Mitsubishi Heavy Industries 249,000 693
Mitsui Fudosan 433,000 3,912
Mitsui Trust Holdings * 253,000 1,414
NEC 61,000 449
Nippon Telegraph & Telephone 317 1,530
Nissan Motor 103,200 1,179
Nomura Holdings 337,000 5,741
NTT DoCoMo 1,730 3,924
Oji Paper 193,000 1,247
Oki Electric Industry * 185,000 723
Orix 8,200 678
Rohm 22,200 2,603
Secom 121,000 4,518
Sekisui House 154,000 1,591
Seven-Eleven Japan 116,000 3,519
Shin-Etsu Chemical 29,700 1,214
SMC 12,100 1,507
Sony 30,400 1,053
Sumitomo 84,000 626
Sumitomo Metal Industries 1,289,000 1,275
Sumitomo Mitsui Financial 596 3,176
Suzuki Motor 117,000 1,732
Takeda Chemical Industries 18,800 746
Teijin 335,000 985
Toyoda Gosei 32,700 943
Toyota Motor 74,800 2,527
UFJ Holdings * 746 3,586
Uniden 75,000 1,377
Vodafone Holdings K. K. 1,186 3,177
Yamanouchi Pharmaceutical 83,000 2,580
Yamato Transport 86,000 1,013
Total Japan (Cost $81,075) 91,970
LUXEMBOURG 0.1%
Common Stocks 0.1%
SES Global
(1 FDR Represents 1 A share) 28,390 286
Total Luxembourg (Cost $408) 286
MEXICO 1.4%
Common Stocks 1.4%
America Movil ADR
Series L (USD) 78,400 2,144
Femsa UBD Units
(Represents 1 Series B
and 4 Series D shares) 381,790 1,409
Grupo Financiero BBVA
Bancomer, Series B * 2,139,000 1,827
Wal-Mart de Mexico 704,926 2,009
Total Mexico (Cost $6,034) 7,389
NETHERLANDS 4.8%
Common Stocks 4.8%
Akzo Nobel 7,184 277
ASML Holding * 151,490 3,001
ING Groep 215,400 5,018
Koninklijke Numico * 92,527 2,554
Philips Electronics 155,052 4,523
Reed Elsevier 135,670 1,684
Royal Dutch Petroleum 30,100 1,585
Royal KPN * 316,700 2,442
Royal KPN 144A * 78,500 605
VNU 53,538 1,690
Wolters Kluwer 78,242 1,222
Total Netherlands (Cost $20,003) 24,601
NORWAY 0.3%
Common Stocks 0.3%
Orkla, Series A 66,020 1,476
Total Norway (Cost $926) 1,476
RUSSIA 0.7%
Common Stocks 0.7%
Gazprom ADR (USD) 2,800 73
Lukoil ADR 144A (USD) 14,220 1,326
Mobile Telesystems ADR (USD) 3,900 323
YUKOS ADR (USD) 38,654 1,623
Total Russia (Cost $2,732) 3,345
SINGAPORE 0.9%
Common Stocks 0.9%
MobileOne Limited 1,156,000 1,021
United Overseas Bank 463,424 3,602
Total Singapore (Cost $3,656) 4,623
SOUTH KOREA 1.6%
Common Stocks 1.6%
POSCO ADR (USD) 35,922 1,220
Samsung Electronics 13,056 4,942
South Korea Telecom 13,540 2,262
Total South Korea (Cost $4,584) 8,424
SPAIN 3.8%
Common Stocks 3.8%
Antena 3 Television * 634 28
Banco Bilbao Vizcaya Argentaria 306,476 4,228
Banco Santander Central Hispano 325,345 3,849
Endesa 103,474 1,988
Gas Natural 85,580 2,000
Inditex 98,100 1,990
Repsol 53,362 1,040
Telefonica 179,536 2,633
Telefonica ADR (USD) 32,281 1,427
Total Spain (Cost $14,683) 19,183
SWEDEN 2.7%
Common Stocks 2.7%
Electrolux, Series B 69,590 1,529
Hennes & Mauritz, Series B 144,790 3,442
LM Ericsson, Series B * 531,629 953
NORDEA 206,288 1,549
Sandvik 16,720 577
Securitas, Series B 432,852 5,837
Total Sweden (Cost $12,255) 13,887
SWITZERLAND 6.2%
Common Stocks 6.2%
Adecco 116,720 7,500
Credit Suisse Group 106,500 3,895
Nestle 42,161 10,529
Roche Holding
(Participation certificates) 28,000 2,823
UBS 99,888 6,838
Total Switzerland (Cost $20,224) 31,585
TAIWAN 0.6%
Common Stocks 0.6%
China Trust Finance Holdings 621,600 624
MediaTek 94,150 885
Taiwan Semiconductor
Manufacturing 937,320 1,753
Total Taiwan (Cost $2,709) 3,262
THAILAND 0.5%
Common Stocks 0.5%
Bangkok Bank NVDR * 1,024,000 2,817
Total Thailand (Cost $1,286) 2,817
TURKEY 0.4%
Common Stocks 0.4%
Turkcell Iletisim Hizmet
ADR (USD) * 68,474 1,818
Total Turkey (Cost $1,093) 1,818
UNITED KINGDOM 24.4%
Common Stocks 24.4%
Abbey National 100,818 956
AstraZeneca 116,973 5,596
Astro All Asia (MYR) * 412,000 479
Astro All Asia
(Restricted shares) (MYR) * 345,000 401
Autonomy * 54,904 235
BG Group 213,166 1,091
BP 325,486 2,632
British Sky Broadcast * 80,638 1,012
Cadbury Schweppes 181,903 1,332
Capita 116,500 505
Carnival 23,637 950
Celltech * 147,157 993
Centrica 480,400 1,809
Compass 1,136,280 7,708
David S. Smith 160,000 464
Diageo 246,212 3,230
Electrocomponents 388,410 2,253
Friends Provident 148,000 349
GKN 23,000 110
GlaxoSmithKline 752,798 17,201
Granada 149,682 326
Hays 788,785 1,690
Hilton Group 170,000 682
HSBC (HKD) 88,800 1,401
Kesa Electricals 163,781 752
Kingfisher 1,273,144 6,329
Reckitt Benckiser 56,504 1,275
Reed Elsevier (Ordinary shares) 564,353 4,707
Rio Tinto 266,417 7,338
Royal Bank of Scotland Group 408,183 11,993
Shell Transport & Trading 736,945 5,466
Standard Chartered 89,500 1,474
Tesco 1,052,140 4,841
Tomkins 488,132 2,331
Unilever 370,285 3,442
United Business Media 82,663 723
Vodafone 6,033,354 14,916
Woolworths 330,500 261
WPP Group 495,580 4,852
Total United Kingdom (Cost $108,520) 124,105
UNITED STATES 1.8%
Money Market Funds 1.8%
T. Rowe Price Reserve
Investment Fund 1.13% # 9,032,839 9,033
Total United States (Cost $9,033) 9,033
SECURITIES LENDING COLLATERAL 12.9%
Money Market Pooled Account 12.9%
Investment in money market
pooled account managed by
JP Morgan Chase Bank
London, (USD) 1.12% # 65,691,920 65,692
Total Securities Lending Collateral
(Cost $65,692) 65,692
Total Investments in Securities
112.5% of Net Assets (Cost $466,198) $572,240
--------
# Seven-day yield
* Non-income producing
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 buyers--total of such securities at period-end
amounts to $1,931,000 and represents 0.4% of net assets
ss. Denominated in currency of the country of incorporation unless otherwise
noted
ADR American Depository Receipts
FDR Fiduciary Depository Receipts
HKD Hong Kong dollar
MYR Malaysian ringgit
USD United States dollar
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
December 31, 2003
($ 000s)
Assets
Investments in securities, at value (cost $466,198) $ 572,240
Other assets 3,208
Total assets 575,448
Liabilities
Obligation to return securities lending collateral 65,692
Other liabilities 880
Total liabilities 66,572
NET ASSETS $ 508,876
--------------------
Net Assets Consist of:
Undistributed net realized gain (loss) $ (175,367)
Net unrealized gain (loss) 106,088
Paid-in-capital applicable to 42,608,422 shares of
$0.0001 par value capital stock outstanding;
1,000,000,000 shares of the Corporation authorized 578,155
NET ASSETS $ 508,876
--------------------
NET ASSET VALUE PER SHARE $ 11.94
--------------------
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
($ 000s)
Year
Ended
12/31/03
Investment Income (Loss)
Income
Dividend (net of foreign taxes of $1,318) $ 9,515
Securities lending 429
Interest (net of foreign taxes of $1) 13
Total income 9,957
Investment management and administrative expense 4,604
Net investment income (loss) 5,353
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (35,002)
Foreign currency transactions 292
Net realized gain (loss) (34,710)
Change in net unrealized gain (loss)
Securities 151,294
Other assets and liabilities
denominated in foreign currencies 271
Change in net unrealized gain (loss) 151,565
Net realized and unrealized gain (loss) 116,855
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 122,208
--------------------
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
($ 000s)
Year
Ended
12/31/03 12/31/02
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 5,353 $ 4,837
Net realized gain (loss) (34,710) (78,949)
Change in net unrealized gain (loss) 151,565 (26,917)
Increase (decrease) in net assets
from operations 122,208 (101,029)
Distributions to shareholders
Net investment income (5,454) (4,769)
Net realized gain (419) (477)
Decrease in net assets from distributions (5,873) (5,246)
Capital share transactions *
Shares sold 182,589 769,260
Distributions reinvested 5,873 5,235
Shares redeemed (235,271) (779,199)
Increase (decrease) in net assets from capital
share transactions (46,809) (4,704)
Net Assets
Increase (decrease) during period 69,526 (110,979)
Beginning of period 439,350 550,329
End of period $ 508,876 $ 439,350
--------------- ---------------
*Share information
Shares sold 19,072 71,664
Distributions reinvested 515 575
Shares redeemed (24,418) (72,780)
Increase (decrease) in shares outstanding (4,831) (541)
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price International Stock Portfolio
Certified Annual Report
December 31, 2003
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 and 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.
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.
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 official closing price for certain markets, at the
time the valuations are made. 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 ask prices for domestic
securities and the last quoted sale price for international securities.
Debt securities are generally traded in the over-the-counter market. Securities
with original maturities of one year or more are valued at prices furnished by
dealers who make markets in such securities or by an independent pricing
service, which considers yield or price of bonds of comparable quality, coupon,
maturity, and type, as well as prices quoted by dealers who make markets in such
securities. Securities with original maturities of less than one year are valued
at amortized cost in local currency, which approximates fair value when combined
with accrued interest.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation.
Other investments 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 NYSE. Normally, developments that could
affect the values of securities that occur between the close of a foreign market
and the close of the NYSE will not be reflected in security valuations used by
the fund to compute its share price. However, if developments are so significant
that they will, in the judgment of the fund, clearly and materially affect
security values, such valuations may be adjusted to reflect the estimated 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.
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 ask 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. Premiums and discounts on
debt securities are amortized for financial reporting purposes. 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 typically declared and
paid on an annual basis.
Other
In the normal course of business, the fund enters into contracts that provide
general indemnifications. The fund's maximum exposure under these arrangements
is dependent on claims that may be made against the fund in the future and,
therefore, cannot be estimated; however, based on experience, the risk of
material loss from such claims is considered remote.
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 December 31, 2003, approximately 10% 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.
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 December 31, 2003, the value of loaned
securities was $63,066,000; aggregate collateral consisted of $65,692,000 in the
money market pooled account.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $114,659,000 and $163,782,000, respectively, for the year ended
December 31, 2003.
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 significantly 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.
Distributions during the year ended December 31, 2003 totaled $5,873,000 and
were characterized as ordinary income for tax purposes. At December 31, 2003,
the tax-basis components of net assets were as follows:
- --------------------------------------------------------------------------------
Unrealized appreciation $ 126,074,000
Unrealized depreciation (20,290,000)
Net unrealized appreciation (depreciation) 105,784,000
Capital loss carryforwards (175,063,000)
Paid-in capital 578,155,000
Net assets $ 508,876,000
--------------------
The fund intends to retain realized gains to the extent of available capital
loss carryforwards for federal income tax purposes. As of December 31, 2003, the
fund had $54,322,000 of capital loss carryforwards that expire in 2009,
$70,854,000 that expire in 2010, and $49,887,000 that expire in 2011.
For the year ended December 31, 2003, the fund recorded the following permanent
reclassifications to reflect tax character. Results of operations and net assets
were not affected by these reclassifications.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 46,000
Undistributed net realized gain 126,000
Paid-in capital (172,000)
At December 31, 2003, the cost of investments for federal income tax purposes
was $466,502,000.
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 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.
NOTE 5 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (the manager or Price
Associates), a wholly owned subsidiary of 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. At December 31, 2003, $499,000 was
payable under the agreement.
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. The
Reserve Funds are offered as cash management options only to mutual funds,
trusts, and other accounts managed by Price Associates and/or its affiliates,
and are not available to the public. The Reserve Funds pay no investment
management fees. During the year ended December 31, 2003, dividend income from
the Reserve Funds totaled $80,000.
T. Rowe Price International Stock Portfolio
Certified Annual Report
Report of Independent Auditors
To the Board of Directors of T. Rowe Price International Series, Inc. and
Shareholders of T. Rowe Price International Stock Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of T. Rowe Price International Stock
Portfolio (comprising T. Rowe Price International Series, Inc., hereafter
referred to as the "Fund") at December 31, 2003, and the results of its
operations, the changes in its net assets and the financial highlights for each
of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2003 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 26, 2004
T. Rowe Price International Stock Portfolio
Certified Annual Report
Tax Information (Unaudited) for the Tax Year Ended 12/31/03
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included $420,000 from short-term
capital gains.
For taxable non-corporate shareholders, $6,723,000 of the fund's income and
short-term capital gains represents qualified dividend income subject to the 15%
rate category.
The fund will pass through foreign source income of $6,723,000 and foreign taxes
paid of $1,076,000.
Information on Proxy Voting
- --------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price
International Stock Portfolio uses to determine how to vote proxies relating to
portfolio securities is available, without charge, upon request by calling
1-800-225-5132. It also appears in the fund's Statement of Additional
Information (Form 485B), which can be found on the SEC's Web site, www.sec.gov.
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
About the Fund's Directors and Officers
- --------------------------------------------------------------------------------
Your fund is governed by a Board of Directors that meets regularly to review
investments, performance, expenses, and other business matters, and is
responsible for protecting the interests of shareholders. The majority of the
fund's directors are independent of T. Rowe Price Associates, Inc. (T. Rowe
Price); "inside" directors are officers of T. Rowe Price. The Board of Directors
elects the fund's officers, who are listed in the final table. The business
address of each director and officer is 100 East Pratt Street, Baltimore, MD
21202. The Statement of Additional Information includes additional information
about the fund directors and is available without charge by calling a T. Rowe
Price representative at 1-800-225-5132.
Independent Directors
Name
(Date of Birth)
Year Elected*
Principal Occupation(s) During Past 5 Years and Other Directorships of Other
Public Companies
Anthony W. Deering
(1/28/45)
1994
Director, Chairman of the Board, President, and Chief Executive Officer, The
Rouse Company, real estate developers; Director, Mercantile Bank (4/03 to
present)
Donald W. Dick, Jr.
(1/27/43)
1994
Principal, EuroCapital Advisors, LLC, an acquisition and management advisory
firm
David K. Fagin
(4/9/38)
2001
Director, Golden Star Resources Ltd., Canyon Resources Corp. (5/00 to present),
and Pacific Rim Mining Corp. (2/02 to present); Chairman and President, Nye
Corp.
Karen N. Horn
(9/21/43)
2003
Managing Director and President, Global Private Client Services, Marsh Inc.;
Managing Director and Head of International Private Banking, Bankers Trust;
Director, Eli Lilly and Company
F. Pierce Linaweaver
(8/22/34)
2001
President, F. Pierce Linaweaver & Associates, Inc., consulting environmental and
civil engineers
John G. Schreiber
(10/21/46)
2001
Owner/President, Centaur Capital Partners, Inc., a real estate investment
company; Senior Advisor and Partner, Blackstone Real Estate Advisors, L.P.;
Director, AMLI Residential Properties Trust, Host Marriott Corp., and The Rouse
Company
Hubert D. Vos**
(8/2/33)
2001
Owner/President, Stonington Capital Corp., a private investment company
Paul M. Wythes**
(6/23/33)
1996
Founding Partner, Sutter Hill Ventures, a venture capital limited partnership,
providing equity capital to young high-technology companies throughout the
United States; Director, Teltone Corp.
* Each independent director oversees 107 T. Rowe Price portfolios and serves
until retirement, resignation, or election of a successor.
** Retired from Board of Directors effective December 31, 2003.
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
Inside Directors
Name
(Date of Birth)
Year Elected*
[Number of T. Rowe Price Portfolios Overseen]
Principal Occupation(s) During Past 5 Years and Directorships of Other Public
Companies
James S. Riepe
(6/25/43)
2002
[107]
Director and Vice President, T. Rowe Price; Vice Chairman of the Board,
Director, and Vice President, T. Rowe Price Group, Inc.; Chairman of the Board
and Director, T. Rowe Price Global Asset Management Limited, T. Rowe Price
Global Investment Services Limited, T. Rowe Price Investment Services, Inc.,
T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.;
Chairman of the Board, Director, President, and Trust Officer, T. Rowe Price
Trust Company; Director, T. Rowe Price International, Inc.; Chairman of the
Board, International Series
M. David Testa, CFA, CIC
(4/22/44)
1994
[107]
Chief Investment Officer, Director, and Vice President, T. Rowe Price; Vice
Chairman of the Board, Chief Investment Officer, Director, and Vice President,
T. Rowe Price Group, Inc.; Chairman of the Board and Director, T. Rowe Price
International, Inc.; Director, T. Rowe Price Global Asset Management Limited and
T. Rowe Price Global Investment Services Limited; Director and Vice President,
T. Rowe Price Trust Company; Vice President, International Series
* Each inside director serves until retirement, resignation, or election of a
successor.
Officers
Name (Date of Birth)
Title and Fund(s) Served
Principal Occupation(s)
Mark C.J. Bickford-Smith (4/30/62)
Vice President, International Series
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc.
Stephen V. Booth (6/21/61)
Vice President, International Series
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Trust Company
Joseph A. Carrier (12/30/60)
Treasurer, International Series
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Investment Services, Inc.
Ann B. Cranmer, FCIS (3/23/47)
Assistant Vice President, International Series
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International,
Inc.; Vice President and Secretary, T. Rowe Price Global Asset Management
Limited and T. Rowe Price Global Investment Services Limited
Roger L. Fiery III, CPA (2/10/59)
Vice President, International Series
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price
International, Inc., and T. Rowe Price Trust Company
John R. Ford, CFA (11/25/57)
President, International Series
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Chief Investment
Officer, Director, and Vice President, T. Rowe Price International, Inc.
Henry H. Hopkins (12/23/42)
Vice President, International Series
Director and Vice President, T. Rowe Price Group, Inc., T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company;
Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe
Price Retirement Plan Services, Inc.
Patricia B. Lippert (1/12/53)
Secretary, International Series
Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
T. Rowe Price International Stock Portfolio
Certified Shareholder Report and Financials
Officers (continued)
George A. Murnaghan (5/1/56)
Vice President, International Series
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price
International, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price
Trust Company
James B.M. Seddon (6/17/64)
Vice President, International Series
Vice President, T. Rowe Price Group, Inc. and T. Rowe Price International, Inc.
Julie L. Waples (5/12/70)
Vice President, International Series
Vice President, T. Rowe Price
David J.L. Warren (4/14/57)
Vice President, International Series
Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Chief Executive
Officer, Director, and President, T. Rowe Price International, Inc.; Director,
T. Rowe Price Global Asset Management Limited
William F. Wendler II, CFA (3/14/62)
Vice President, International Series
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
International, Inc.
Edward A. Wiese, CFA (4/12/59)
Vice President, International Series
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price
Trust Company; Chief Investment Officer, Director, and Vice President, T. Rowe
Price Savings Bank
Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe
Price International for at least five years.
Item 2. Code of Ethics.
As of the end of the period covered by this report, the registrant has adopted 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. A copy of this code of
ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were
approved or waivers were granted to this code of ethics during the period
covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors/Trustees has determined that Mr. David K.
Fagin qualifies as an audit committee financial expert, as defined in Item 3 of
Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form
N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows:
2003 2002
Audit Fees $13,744 $13,104
Audit-Related Fees 790 --
Tax Fees 3,569 3,172
All Other Fees 124 144
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the accountant in
connection with statutory and regulatory filings. Audit-related fees include
amounts reasonably related to the performance of the audit of the registrant's
financial statements, specifically the issuance of a report on internal
controls. Tax fees include amounts related to tax compliance, tax planning, and
tax advice. Other fees include the registrant's pro-rata share of amounts for
agreed-upon procedures in conjunction with service contract approvals by the
registrant's Board of Directors/Trustees.
(e)(1) The registrant's audit committee has adopted a policy whereby audit and
non-audit services performed by the registrant's principal accountant for the
registrant, its investment adviser, and any entity controlling, controlled by,
or under common control with the investment adviser that provides ongoing
services to the registrant require pre-approval in advance at regularly
scheduled audit committee meetings. If such a service is required between
regularly scheduled audit committee meetings, pre-approval may be authorized by
one audit committee member with ratification at the next scheduled audit
committee meeting. Waiver of pre-approval for audit or non-audit services
requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's principal accountant for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $719,000 and $671,000, respectively, and
were less than the aggregate fees billed for those same periods by the
registrant's principal accountant for audit services rendered to the T. Rowe
Price Funds.
(h) All non-audit services rendered in (g) above were pre-approved by the
registrant's audit committee. Accordingly, these services were considered by the
registrant's audit committee in maintaining the principal accountant's
independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. 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 changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(a)(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.
(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 February 20, 2004
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 February 20, 2004
By /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date February 20, 2004