UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO
HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number:
811-07749
T. Rowe Price Financial Services Fund, Inc.
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(Exact name of
registrant as specified in charter)
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100 East Pratt
Street, Baltimore, MD 21202
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(Address of
principal executive offices)
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David
Oestreicher
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100 East Pratt
Street, Baltimore, MD 21202
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(Name and
address of agent for service)
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Registrants telephone number, including
area code: (410) 345-2000
Date of fiscal year end: December
31
Date of reporting period: September 30, 2012
Item 1. Schedule of
Investments
Financial
Services Fund
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September
30, 2012
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T. Rowe Price
Financial Services Fund
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Unaudited
The accompanying notes are an
integral part of this Portfolio of Investments.
T. Rowe Price Financial Services
Fund
Unaudited
Notes To
Portfolio of
Investments
T. Rowe Price Financial Services
Fund, Inc. (the fund), is registered under the Investment Company Act of 1940
(the 1940 Act) as a diversified, open-end management investment company. The
fund seeks long-term growth of capital and a modest level of income.
NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES
Basis of
Preparation
The accompanying
Portfolio of Investments was prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP), which require the use
of estimates made by management. Management believes that estimates and
valuations are appropriate; however, actual results may differ from those
estimates, and the valuations reflected in the Portfolio of Investments may
differ from the values ultimately realized upon sale or maturity.
Investment
Transactions
Investment transactions
are accounted for on the trade date.
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 are translated into U.S. dollars
at the prevailing exchange rate on the date of the transaction.
New Accounting
Pronouncements
In May 2011, the
Financial Accounting Standards Board (FASB) issued amended guidance to align
fair value measurement and disclosure requirements in U.S. GAAP with
International Financial Reporting Standards. The guidance is effective for
fiscal years and interim periods beginning on or after December 15, 2011.
Adoption had no effect on net assets or results of operations.
In December 2011, the FASB issued
amended guidance to enhance disclosure for offsetting assets and liabilities.
The guidance is effective for fiscal years and interim periods beginning on or
after January 1, 2013. Adoption will have no effect on the funds net assets or
results of operations.
NOTE 2 VALUATION
The funds financial instruments are
reported at fair value as defined by GAAP. 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.
Valuation
Methods
Equity securities listed or
regularly traded on a securities exchange or in the over-the-counter (OTC)
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 funds closing net asset value per share on the day of
valuation.
Other investments, including
restricted securities and private placements, 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 funds Board of Directors (the Board).
Subject to oversight by the Board, the Valuation Committee develops
pricing-related policies and procedures and approves all fair-value
determinations. The Valuation Committee regularly makes good faith judgments,
using a wide variety of sources and information, to establish and adjust
valuations of certain securities as events occur and circumstances warrant. For
instance, in determining the fair value of private-equity instruments, the
Valuation Committee considers a variety of factors, including the companys
business prospects, its financial performance, strategic events impacting the
company, relevant valuations of similar companies, new rounds of financing, and
any negotiated transactions of significant size between other investors in the
company. Because any fair-value determination involves a significant amount of
judgment, there is a degree of subjectivity inherent in such pricing decisions.
For valuation purposes, the last
quoted prices of non-U.S. equity securities may be adjusted under the
circumstances described below. 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, the fund
will adjust the previous closing prices to reflect what it believes to be the
fair value of the securities as of the close of the NYSE. In deciding whether it
is necessary to adjust closing prices to reflect fair value, 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. A
fund may also fair value securities in other situations, such as when a
particular foreign market is closed but the fund is open. The fund uses outside
pricing services to provide it with closing prices and information to evaluate
and/or adjust those prices. The fund cannot predict how often it will use
closing prices and how often it will determine it necessary to adjust those
prices to reflect fair value. As a means of evaluating its security valuation
process, the fund routinely compares closing prices, the next days opening
prices in the same markets, and adjusted prices. Additionally, trading in the
underlying securities of the fund may take place in various foreign markets on
certain days when the fund is not open for business and does not calculate a net
asset value. As a result, net asset values may be significantly affected on days
when shareholders cannot make transactions.
Valuation
Inputs
Various inputs are used to
determine the value of the funds financial instruments. These inputs are
summarized in the three broad levels listed below:
Level 1 quoted prices in active
markets for identical financial instruments
Level 2 observable inputs other
than Level 1 quoted prices (including, but not limited to, quoted prices for
similar financial instruments, interest rates, prepayment speeds, and credit
risk)
Level 3 unobservable
inputs
Observable inputs are those based on
market data obtained from sources independent of the fund, and unobservable
inputs reflect the funds own assumptions based on the best information
available. The input levels are not necessarily an indication of the risk or
liquidity associated with financial instruments at that level. For example,
non-U.S. equity securities actively traded in foreign markets generally are
reflected in Level 2 despite the availability of closing prices because the fund
evaluates and determines whether those closing prices reflect fair value at the
close of the NYSE or require adjustment, as described above. The following table
summarizes the funds financial instruments, based on the inputs used to
determine their values on September 30, 2012:
NOTE 3 OTHER INVESTMENT
TRANSACTIONS
Consistent with its investment
objective, the fund engages in the following practices to manage exposure to
certain risks and/or to enhance performance. The investment objective, policies,
program, and risk factors of the fund are described more fully in the funds
prospectus and Statement of Additional Information.
Restricted
Securities
The fund may invest in
securities that are subject to legal or contractual restrictions on resale.
Prompt sale of such securities at an acceptable price may be difficult and may
involve substantial delays and additional costs.
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. 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 adjustments to collateral balances resulting from
changes in security values are settled the next business day. Cash collateral is
invested by the funds lending agent(s) in accordance with investment guidelines
approved by management. 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 or if collateral
investments decline in value. In accordance with GAAP, investments made with
cash collateral are reflected in the accompanying Portfolio of Investments, but
collateral received in the form of securities is not. At September 30, 2012, the
value of loaned securities was $14,914,000; the value of cash collateral
investments was $15,442,000.
NOTE 4 - FEDERAL INCOME
TAXES
At September 30, 2012, the cost of
investments for federal income tax purposes was $302,639,000. Net unrealized
gain aggregated $63,031,000 at period-end, of which $66,457,000 related to
appreciated investments and $3,426,000 related to depreciated
investments.
NOTE 5 - RELATED PARTY
TRANSACTIONS
The fund may invest in the T. Rowe
Price Reserve Investment Fund and the T. Rowe Price Government Reserve
Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds),
open-end management investment companies managed by T. Rowe Price Associates,
Inc. (Price Associates) and considered affiliates of the fund. The T. Rowe Price
Reserve Investment 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 T. Rowe
Price Reserve Investment Funds pay no investment management fees.
Item 2. Controls and Procedures.
(a) The registrants principal
executive officer and principal financial officer have evaluated the
registrants disclosure controls and procedures within 90 days of this filing
and have concluded that the registrants 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-Q was recorded, processed,
summarized, and reported timely.
(b) The registrants principal
executive officer and principal financial officer are aware of no change in the
registrants internal control over financial reporting that occurred during the
registrants most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrants internal control over
financial reporting.
Item 3. Exhibits.
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.
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 Financial Services Fund, Inc.
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By
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/s/ Edward C.
Bernard
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Edward C.
Bernard
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Principal
Executive Officer
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Date November 21, 2012
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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.
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By
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/s/ Edward C.
Bernard
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Edward C.
Bernard
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Principal
Executive Officer
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Date November 21, 2012
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By
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/s/ Gregory K.
Hinkle
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Gregory K.
Hinkle
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Principal
Financial Officer
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Date November 21, 2012
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