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: 811-22620
| T. Rowe Price Multi-Sector Account Portfolios, Inc. |
|
|
| (Exact name of registrant as specified in charter) |
| 100 East Pratt Street, Baltimore, MD 21202 |
|
|
| (Address of principal executive offices) |
| David Oestreicher |
| 100 East Pratt Street, Baltimore, MD 21202 |
|
|
| (Name and address of agent for service) |
Registrant’s 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
 |
|
Multi-Sector Account Portfolios |
September
30, 2012 |
| T. Rowe Price Emerging Markets Bond Multi-Sector Account Portfolio |
|
|
Unaudited
The accompanying notes are an integral part of this Portfolio of Investments.
T. Rowe Price Emerging Markets Bond
Multi-Sector Account Portfolio
Unaudited
Notes To Portfolio of Investments
T. Rowe Price Multi-Sector Account Portfolios, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The Emerging Markets Bond Multi-Sector Account Portfolio (the fund) is a nondiversified, open-end management investment company established by the corporation. The fund is available for investment only to institutional accounts managed by T. Rowe Price Associates, Inc., and is not available for direct purchase by members of the public. The fund seeks high current income and, secondarily, capital appreciation.
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 fund’s net assets or results of operations.
NOTE 2 – VALUATION
The fund’s 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
Debt securities are generally
traded in the over-the-counter (OTC) market. Securities with remaining
maturities of one year or more at the time of acquisition are valued at prices
furnished by dealers who make markets in such securities or by an independent
pricing service, which considers the 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 remaining maturities of less
than one year at the time of acquisition
generally use amortized cost in local
currency to approximate fair value. However, if amortized cost is deemed not to
reflect fair value or the fund holds a significant amount of such securities
with remaining maturities of more than 60 days, the securities are valued at
prices furnished by dealers who make markets in such securities or by an
independent pricing service.
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 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 fund’s 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 company’s 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.
Valuation
Inputs
Various inputs are used to
determine the value of the fund’s 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 fund’s 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. The following table summarizes the fund’s 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 fund’s prospectus and Statement of Additional Information.
Emerging
Markets
The fund may invest, directly
or through investments in T. Rowe Price institutional funds, in securities of
companies located in emerging markets, issued by governments of emerging market
countries, and/or denominated in or linked to the currencies of
emerging market countries. Emerging market securities are often subject to
greater price volatility, less liquidity, and higher rates of inflation than
U.S. securities. In addition, emerging markets may be subject to greater
political, economic and social uncertainty and differing regulatory environments
that may potentially impact the fund’s ability to buy or sell certain securities
or repatriate proceeds to U.S. dollars.
Noninvestment-Grade Debt
Securities
The fund may invest,
either directly or through its investments in T. Rowe Price institutional funds,
in noninvestment-grade debt securities, commonly referred to as “high yield” or
“junk” bonds. The noninvestment-grade bond market may experience sudden and
sharp price swings due to a variety of factors, including changes in economic
forecasts, stock market activity, large sustained sales by major investors, a
high-profile default, or a change in the market’s psychology. These events may
decrease the ability of issuers to make principal and interest payments and
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.
Prompt sale of such securities at an acceptable price may be difficult and may
involve substantial delays and additional costs.
NOTE 4 - FEDERAL INCOME TAXES
At September 30, 2012, the cost of investments for federal income tax purposes was $11,838,000. Net unrealized gain aggregated $646,000 at period-end, of which $714,000 related to appreciated investments and $68,000 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.
| T. Rowe Price Emerging Markets Local Multi-Sector Account Portfolio |
|
|
Unaudited
The accompanying notes are an integral part of this Portfolio of Investments.
T. Rowe Price Emerging Markets Local
Multi-Sector Account Portfolio
Unaudited
Notes To Portfolio of Investments
T. Rowe Price Multi-Sector Account Portfolios, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The Emerging Markets Local Multi-Sector Account Portfolio (the fund) is a nondiversified, open-end management investment company established by the corporation. The fund is available for investment only to institutional accounts managed by T. Rowe Price Associates, Inc., and is not available for direct purchase by members of the public. The fund seeks high current income and, secondarily, capital appreciation.
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 fund’s net assets or results of operations.
NOTE 2 – VALUATION
The fund’s 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
Debt securities are generally
traded in the over-the-counter (OTC) market. Securities with remaining
maturities of one year or more at the time of acquisition are valued at prices
furnished by dealers who make markets in such securities or by an independent
pricing service, which considers the 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 remaining maturities of less
than one year at the time of acquisition
generally use amortized cost in local
currency to approximate fair value. However, if amortized cost is deemed not to
reflect fair value or the fund holds a significant amount of such securities
with remaining maturities of more than 60 days, the securities are valued at
prices furnished by dealers who make markets in such securities or by an
independent pricing service.
Investments in mutual funds are valued at the mutual fund’s closing net asset value per share on the day of valuation. Financial futures contracts are valued at closing settlement prices. Forward currency exchange contracts are valued using the prevailing forward exchange rate.
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 fund’s 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 company’s 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.
Valuation
Inputs
Various inputs are used to
determine the value of the fund’s 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 fund’s 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. The following table summarizes the fund’s financial instruments, based on the inputs used to determine their values on September 30, 2012:
NOTE 3 - DERIVATIVE INSTRUMENTS
The fund may invest in derivative instruments. As defined by GAAP, a derivative is a financial instrument whose value is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable; it requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the expected risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its prospectus and Statement of Additional Information. The fund may use derivatives for a variety of purposes, such as seeking to hedge against declines in principal value, increase yield, invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, or to adjust portfolio duration and credit exposure. The risks associated with the use of derivatives are different from, and potentially much greater than, the risks associated with investing directly in the instruments on which the derivatives are based. Investments in derivatives can magnify returns positively or negatively; however, the fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover the settlement obligations under its open derivative contracts.
The fund values its derivatives at fair value, as described below and in Note 2, and recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting, even for derivatives employed as economic hedges. The fund does not offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral.
Forward Currency Exchange
Contracts
The fund uses forward
currency exchange contracts (forwards) primarily to protect its non-U.S.
dollar-denominated holdings from adverse currency movements and to gain exposure
to currencies for the purposes of risk management or enhanced return. A forward
involves an obligation to purchase or sell a fixed amount of a specific currency
on a future date at a price set at the time of the contract. Although certain
forwards may be settled by exchanging only the net gain or loss on the contract,
most forwards are settled with the exchange of the underlying currencies in
accordance with the specified terms. Forwards are valued at the unrealized gain
or loss on the contract, which reflects the net amount the fund either is
entitled to receive or obligated to deliver, as measured by the difference
between the forward exchange rates at the date of entry into the contract and
the forward rates at the reporting date. Risks related to the use of forwards
include the possible failure of counterparties to meet the terms of the
agreements; that anticipated currency movements will not occur thereby reducing
the fund’s total return; and the potential for losses in excess of the fund’s
initial investment.
Futures
Contracts
The fund may enter into
futures contracts to manage exposure to interest rate and yield curve movements,
security prices, foreign currencies, credit quality, and mortgage prepayments;
as an efficient means of adjusting exposure to all or part of a target market;
to enhance income; as a cash management tool; and/or to adjust portfolio
duration and credit exposure. A futures contract provides for the future sale by
one party and purchase by another of a specified amount of a specific underlying
financial instrument at an agreed upon price, date, time, and place. The fund
currently invests only in exchange-traded futures, which generally are
standardized as to maturity date, underlying financial instrument, and other
contract terms. The fund is required to deposit collateral with the broker in
the form of cash or securities in an amount sufficient to cause the value of its
account to equal a specified percentage of the aggregate value of the fund’s
futures contracts with that broker (margin requirement). The margin requirement
must then be maintained at the established level over the life of the contract
and is restricted from withdrawal by the fund; however, any amounts in excess of
the margin requirement may be withdrawn at the fund’s election. Fluctuations in
the value of a futures contract reflect changes in the value of the underlying
financial instrument and are recorded as unrealized gain or loss until the
contract is closed. The value of a futures contract included in net assets is
the cumulative amount of unrealized gain or loss. Risks related to the use of
futures contracts include possible illiquidity of the futures markets, contract
prices that can be highly volatile and imperfectly correlated to movements in
hedged security values, interest rates, and/or currency values; and potential
losses in excess of the fund’s initial investment.
NOTE 4 – 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 fund’s prospectus and Statement of Additional Information.
Emerging
Markets
The fund may invest, directly
or through investments in T. Rowe Price institutional funds, in securities of
companies located in emerging markets, issued by governments of emerging market
countries, and/or denominated in or linked to the currencies of
emerging market countries. Emerging market securities are often subject to
greater price volatility, less liquidity, and higher rates of inflation than
U.S. securities. In addition, emerging markets may be subject to greater
political, economic and social uncertainty and differing regulatory environments
that may potentially impact the fund’s ability to buy or sell certain securities
or repatriate proceeds to U.S. dollars.
Noninvestment-Grade Debt
Securities
The fund may invest,
either directly or through its investments in T. Rowe Price institutional funds,
in noninvestment-grade debt securities, commonly referred to as “high yield” or
“junk” bonds. The noninvestment-grade bond market may experience sudden and
sharp price swings due to a variety of factors, including changes in economic
forecasts, stock market activity, large sustained sales by major investors, a
high-profile default, or a change in the market’s psychology. These events may
decrease the ability of issuers to make principal and interest payments and
adversely affect the liquidity or value, or both, of such securities.
Counterparty Risk and Collateral
The fund has entered into collateral
agreements with certain counterparties to mitigate counterparty risk associated
with certain over-the-counter (OTC) financial instruments, including swaps,
forward currency exchange contracts, TBA purchase commitments, and OTC options
(collectively, covered OTC instruments). Subject to certain minimum exposure
requirements (which typically range from $100,000 to $500,000), collateral
requirements generally are determined and transfers made based on the net
aggregate unrealized gain or loss on all OTC instruments covered by a particular
collateral agreement with a specified counterparty. At any point in time, the
fund’s risk of loss from counterparty credit risk on covered OTC instruments is
the aggregate unrealized gain on appreciated covered OTC instruments in excess
of collateral, if any, pledged by the counterparty to the fund. Further, in
accordance with the terms of the relevant agreements, counterparties to certain
OTC instruments may be able to terminate the contracts prior to maturity upon
the occurrence of certain stated events, such as a decline in net assets above a
certain percentage or a failure by the fund to perform its obligations under the
contract. Upon termination, all transactions would typically be liquidated and a
net amount would be owed by or payable to the fund.
Counterparty risk related to exchange-traded futures and options contracts is minimal because the exchange’s clearinghouse provides protection against counterparty defaults. Generally, for exchange-traded derivatives such as futures and options, each broker, in its sole discretion, may change margin requirements applicable to the fund.
Collateral can be in the form of cash or debt securities issued by the U.S. government or related agencies. For OTC instruments, collateral both pledged by the fund to a counterparty and pledged by a counterparty to the fund, is held in a segregated account by a third-party agent. For exchange-traded instruments, margin posted by the fund is held by the broker. Securities posted by the fund as collateral or to meet margin requirements are so noted in the accompanying Portfolio of Investments and remain in the fund’s assets. Collateral pledged by counterparties is not included in the fund’s assets because the fund does not obtain effective control over those assets. As of September 30, 2012, no collateral was pledged by either the fund or counterparties for covered OTC instruments. As of September 30, 2012, cash of $4,000 had been posted by the fund to the broker for exchange-traded derivatives.
NOTE 5 - FEDERAL INCOME TAXES
At September 30, 2012, the cost of investments for federal income tax purposes was $11,583,000. Net unrealized loss aggregated $36,000 at period-end, of which $276,000 related to appreciated investments and $312,000 related to depreciated investments.
NOTE 6 - 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 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-Q 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 most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s 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 Multi-Sector Account
Portfolios, Inc.
| By | /s/ Edward C. Bernard | |
| Edward C. Bernard | ||
| Principal Executive Officer | ||
| Date November 21, 2012 | ||
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/ Edward C. Bernard | |
| Edward C. Bernard | ||
| Principal Executive Officer | ||
| Date November 21, 2012 | ||
| By | /s/ Gregory K. Hinkle | |
| Gregory K. Hinkle | ||
| Principal Financial Officer | ||
| Date November 21, 2012 | ||