UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-22810
| T. Rowe Price Global Allocation Fund, Inc. |
|
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| (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: October
31
Date of reporting period: April 30, 2017
Item 1. Report to Shareholders
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|
Global
Allocation Fund |
April 30, 2017 |
The views and opinions in this report were current as of April 30, 2017. 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, 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.
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Manager’s Letter
Fellow Shareholders
Global stocks generated strong gains in the six months ended April 30, 2017, supported by positive corporate earnings trends. U.S. markets began the period buoyed by expectations that stimulus proposals from the newly elected Trump administration would successfully spur economic growth. Improved earnings over the period supported equities even as stimulus expectations moderated. European markets overcame Brexit-related concerns—at least for the time being—amid a stabilizing political environment, improving economic conditions, and strengthening earnings. Japanese equities advanced modestly against mixed economic data, while emerging markets posted strong gains. U.S. bond returns were mixed. Treasuries fared worst, while investment-grade corporate bonds were modestly positive. High yield bonds generated strong performance as oil prices stabilized and investors searched for enhanced yield opportunities. Bonds in developed international markets declined in U.S. dollar terms, while emerging markets debt advanced. The U.S. dollar gained against most developed markets currencies, and its performance against major emerging markets currencies was mixed.
As shown in the Performance Comparison table, the Global Allocation Fund returned 7.94% for the first six months of its fiscal year and outperformed the Morningstar Global Allocation Index for the period. (Results for the Advisor Class and I Class shares may vary due to their different fee structures, cash flows, and other factors.)
STRATEGY OVERVIEW
The fund’s broadly diversified portfolio seeks long-term total return through both capital appreciation and income from investments in U.S. and international stocks, bonds, cash, and alternative investments. The portfolio consists of approximately 60% stocks, 30% bonds and cash, and 10% alternative investments, with the flexibility to overweight or underweight segments of the portfolio relative to those broad allocations. International securities generally account for about 50% of the fund’s equity holdings and 40% of the total portfolio.
Supported by the global reach of T. Rowe Price’s proprietary investment management and research capabilities, we anticipate security selection to be a primary contributor of added value in the portfolio over the long term. We also seek to add value through tactical overweighting and underweighting of asset classes and sectors, reflecting the views of T. Rowe Price’s Asset Allocation Committee. The breadth of the underlying sectors, diversified across geography, asset classes, and investment strategies, provides the ability to position the portfolio where we see attractive opportunities in the context of current valuations as well as our outlook for the economic and market environment.
The fund’s global fixed income allocation emphasizes specific attributes designed to contribute to the overall portfolio in a range of economic environments. International bonds account for about 40% of the fixed income allocation and include local currency and dollar-denominated debt from developed and emerging markets, providing exposure to a broad range of foreign bond markets and currencies. Our holdings of U.S. investment-grade bonds provide important ballast in “risk off” environments when investors gravitate toward higher-quality securities such as U.S. Treasuries. We maintain an allocation to high yield corporate bonds and emerging markets debt to take advantage of more attractive yields when possible, as well as opportunities to add value within these sectors through security selection driven by T. Rowe Price’s fundamental credit research. The fund’s fixed income holdings also include allocations to Treasury inflation protected securities (TIPS), which help preserve purchasing power in an environment of rising inflation, and floating rate bank loans, which could be beneficial in an environment of rising short-term interest rates.
Effective May 1, 2017, the Global Unconstrained Bond Fund, one of the fund’s underlying fixed income portfolios, was renamed the Dynamic Global Bond Fund. The name was changed to better align the fund with the broader marketplace and T. Rowe Price’s family of funds. The fund’s investment strategy has not changed. It invests in a variety of fixed income sectors offering the potential to benefit from interest rates, credit, and currency markets, expressing both long and short views while seeking to reduce downside risk and diversify against equity volatility and rising interest rates. Exposure to the Dynamic Global Bond Fund is intended to further diversify the Global Allocation Fund’s fixed income allocations among lower-volatility strategies, without the strategic sensitivity to interest rates of traditional bond strategies.
In addition, the portfolio includes asset classes and strategies that enhance its risk/reward profile by moderating risk and providing diversification through exposure to sources of less correlated returns. These asset classes and strategies include a diversified allocation to a conservative hedge fund and an equity index option strategy.
An externally managed hedge fund of funds managed by Blackstone Hedge Fund Solutions accounts for approximately 10% of the portfolio. A hedge fund of funds with exposure to multiple hedge fund strategies and managers can benefit portfolio diversification by offering returns that have historically been less correlated with returns of traditional stock and bond asset classes represented in the fund, which can help dampen portfolio volatility.
The equity index option strategy, which primarily involves selling call options on the Standard & Poor’s 500 Index, provides an alternative means of compensation for bearing the downside risk of equities.
We expect this strategy to offer a return profile that is less correlated with equity market returns as it earns a premium in exchange for forgoing some of the equity market’s upside potential. The consistency of receiving the premium collected from selling index call options coupled with the lower equity exposure associated with writing the call option can provide a more stable pattern of returns, which can be particularly beneficial in an environment of modestly positive or negative equity market performance.
In addition, we have an allocation to currency-hedged international equities. Hedging a portion of the fund’s developed market currency exposure back to the U.S. dollar helps moderate the foreign-exchange volatility associated with a significant international allocation while maintaining robust exposure to international investment opportunities.
MARKET ENVIRONMENT
The major U.S. stock indexes registered double-digit gains for the six months ended April 30, 2017. Equities entered the period in somewhat of a holding pattern in the lead-up to the U.S. elections in November. Uncertainty about a possible interest rate increase also held equities back, as Federal Reserve (Fed) officials cautioned that the case for raising short-term interest rates had “strengthened.” Donald Trump’s election victory sparked a sharp rally due to optimism about the beneficial economic impact of a potentially less onerous regulatory environment and stimulative fiscal policies, including tax cuts and spending on infrastructure renewal. Markets quickly shook off a Fed rate increase in December 2016 and entered 2017 on a positive note, helped by signs the that global economy was gathering momentum, particularly in Europe and key emerging markets. Importantly, a positive inflection in earnings after several quarters of negative growth offered a further boost to sentiment. Markets cooled later in the period as uncertainty increased surrounding the prospects for Mr. Trump’s aggressive stimulus policies.
Stocks in international developed markets posted solid overall gains for the reporting period. European shares advanced early in the period on hopes that stronger U.S. economic growth would support growth overseas. The rally continued into 2017 as economic data suggested that Europe’s modest economic recovery was gaining steam. In March, shares rose to their highest level since mid-2015 after a center-right election victory in the Netherlands tempered fears that a rising tide of populism in the wake of Brexit would further undermine European unity. In April, a victory by centrist candidate Emmanuel Macron in the first round of the French presidential elections and his wide lead in polls for the second and final round further elevated market sentiment and benefited stocks. (Mr. Macron won a decisive victory over populist candidate Marine Le Pen after our reporting period ended.)
Similar to European markets, Japanese shares rallied strongly after Mr. Trump’s election victory on hopes that fiscal stimulus and regulatory reform in the U.S. would boost global economic growth. Equities cooled in the early months of 2017, however, as investors digested a slew of mixed economic data. The economy grew 1.2% on an annualized basis in the fourth quarter of 2016—modest but improved versus the recent past—and higher hourly earnings for full-time workers was also encouraging. Corporate results generally have been positive, with a majority of companies beating earnings estimates. However, household spending remains decidedly subdued, and data suggest slowing growth for Japan’s important manufacturing and export sectors.
Emerging markets stocks gained overall. A more stable global political environment mitigated fears about protectionism, and improved fundamentals smoothed concerns about rising interest rates in developed markets. Commodity prices stabilized somewhat in 2016 and early 2017, but oil reversed course and started to decline again later in the period as increased output from U.S. producers renewed the downward pressure on prices. However, increased economic diversity, healthier fundamentals, and signs of stronger economic growth in China helped many emerging markets shrug off the latest slide in oil prices.
U.S. bond returns were mixed as sectors with higher-yielding sectors performed best. Treasuries fared worst against the backdrop of rising interest rate expectations and anticipation that accommodative monetary and fiscal policies, including reduced taxes and increased infrastructure spending, could lead to higher inflation and larger deficits. Investment-grade corporate bonds were modestly positive, while high yield bonds generated strong performance and easily outpaced other fixed income sectors. Floating rate bank loans were also positive for the period. Mortgage-backed securities (MBS) lost ground amid questions about the Fed’s plans to unwind its large holdings of MBS, but they still held up better than Treasuries. Asset-backed securities (ABS), which tend to have short durations and relatively high credit quality, were modestly positive.
Outside the U.S., bonds in developed international markets declined in U.S. dollar terms. Early in the period, bond yields in many developed markets increased in sync with U.S. Treasury yields as Donald Trump’s election victory raised expectations for U.S. fiscal stimulus and higher inflation. (Bond yields and prices move in opposite directions.) They recovered some ground in the early months of 2017. UK bonds declined amid expectations that inflation stemming from the pound’s weakness over the last year will eventually prompt the Bank of England to raise interest rates. Japanese bonds gained slightly as the Bank of Japan (BoJ) continued its policy of targeting the 10-year government bond yield near 0%.
Emerging markets debt declined in U.S. dollar terms early in the period amid concerns about the impact of rising interest rates and protectionism in the U.S. Dollar-denominated emerging markets bonds reversed course and registered strong gains in the first quarter of 2017, however, as concerns waned about Mr. Trump’s protectionist rhetoric and investors searched for higher-yielding securities. Emerging markets bonds denominated in local currencies performed well as several key emerging markets currencies rallied against the dollar in the latter half of our reporting period.
The U.S. dollar gained against most major developed markets currencies for the six-month period. The Japanese yen lost nearly 6% versus the dollar, while the euro declined approximately 1%. The British pound recovered some of the value lost when it came under heavy pressure due to Brexit-related concerns, and sterling gained approximately 6% against the dollar. The performance of major emerging markets currencies was mixed. China’s yuan and Brazil’s real lost roughly 2% and 1% versus the dollar, respectively, while the Indian rupee gained nearly 4% and the Russian ruble advanced more than 11%.
ASSET ALLOCATION STRATEGY
We made several moves to moderate risk within the portfolio, including moving to an underweight in equities, as well as trimming our allocation to high yield and emerging market debt.
Our decision to underweight equities resulted from several factors. Equity valuations appear extended against a backdrop of still-low economic growth and continued uncertainty surrounding the potential passage and final form of pro-growth economic proposals from the Trump administration. However, we expect only modest returns from bonds as the current low-yield environment offers a weak foundation and rising interest rates pose an ongoing headwind. Global economic growth began to broaden in the closing months of 2016 and should continue to do so over the next several quarters, although it will remain at a relatively modest pace. Any rise in U.S. interest rates should be gradual in light of subdued U.S. economic growth, limiting its impact on bonds. Additionally, yield-hungry investors are likely to support healthy demand for the higher yields available on U.S. Treasuries, particularly when compared with the low or negative yields available on many other developed market bonds as global monetary policies remain generally accommodative.
We ended the period with an overweight to international equities versus U.S. stocks. We lowered our allocation to international stocks earlier in the period due to concerns about the earnings impact of slowing global growth and trade. A strong postelection rally in U.S. stocks extended relative valuations, and we raised our allocation to international stocks as signs of improving global economic fundamentals supported the prospects for corporate earnings growth outside the U.S. In Europe, economic growth expectations have improved modestly, the central bank remains broadly supportive, and earnings growth expectations have improved. Japanese growth remains tepid as domestic consumption has yet to improve despite aggressive policy measures; however, many corporations are advancing shareholder-friendly policies, including share repurchases, and improving profitability and corporate governance.
Within international equities, we moved to an underweight in emerging markets. While emerging markets growth shows signs of stabilization and should benefit from improved global trade, emerging markets remain vulnerable to a decline in energy prices. Additionally, higher developed markets interest rates and a strong U.S. dollar represent risks to emerging markets, as does the potential for an increase in protectionist trade policies. While emerging markets valuations are cheaper than developed markets on an absolute basis, valuations are less compelling when viewing their historical relationship to developed markets equities and when accounting for differing sector profiles.
We continue to be underweight real assets equities versus global equities. We remain cautious on the longer-term prospects for energy and commodities prices given our concerns about structural supply and demand imbalances. In November, the Organization of the Petroleum Exporting Countries (OPEC) announced plans to limit oil production. However, the rise in oil prices resulting from OPEC production limits was met by increased production from the U.S. North American shale producers have become a larger contributor to global oil supplies and, with their increased efficiency, can now operate profitably at lower prices. We expect demand for industrial metals to stay subdued as China gradually transitions its economic model away from a dependence on industrial production and exports to one balanced by domestic consumption. Fundamentals for developed markets real estate investment trusts (REITs) remain broadly positive, supported by modestly improving economies and limited supply outside the U.S. Although REITs remain sensitive to rising interest rates, the Fed’s gradual pace in normalizing its interest rate policy could soften the risks over the near term.
Among U.S. equities, we are overweight growth versus value based on the former’s more attractive valuations and expectations for a protracted period of modest economic growth. Lower-quality value sectors such as industrials and materials rallied after the U.S. elections, but the rebound has moderated, with growth outperforming value since the start of 2017. While increased spending, tax cuts, and deregulation may provide support for cyclical sectors like financials and energy, the scope of these measures and their prospects for receiving congressional approval remain uncertain.
We moved from an overweight position in U.S. large-cap stocks versus small-caps to a neutral position. Small-caps benefited from a strong postelection rally in 2016 but have lagged large-caps in 2017 as waning optimism about the prospects for growth-oriented economic policies helped bring relative valuations in line with their historical averages. We remain mindful, however, that higher U.S. fiscal spending and tax reforms, if enacted, could offer larger benefits to more domestically focused small-caps than large-caps.
Outside the U.S., we are modestly overweight value versus growth as valuations appear expensive in growth areas such as consumer staples. Valuations for value sectors are broadly attractive and could benefit from improving global growth, but value sectors like financials and energy continue to face longer-term headwinds. We are modestly overweight international small-caps versus large-caps based on their potential to benefit from relatively nascent economic recoveries.
Within the portfolio’s broad fixed income allocation, we moved from an overweight position in high yield bonds relative to U.S. investment-grade debt to neutral. Despite renewed weakness in energy prices later in the period, the high yield sector performed well and credit spreads narrowed to levels below historical averages. (Credit spreads measure the additional yield above that of a comparable-maturity Treasury security that investors demand for holding a bond with credit risk.) High yield bonds continue to offer a yield advantage over investment-grade bonds, but current yields provide less opportunity for further appreciation and are vulnerable to a pullback in commodity prices.
We continue to favor U.S. investment-grade debt over nondollar bonds but reduced our underweight to nondollar. Bond yields and extended duration profiles outside the U.S. continue to offer an unattractive risk/return trade-off, but the strength of the U.S. dollar, which has reinforced our underweight to nondollar bonds, may become less pronounced. The factors underpinning the dollar’s appreciation since 2014, including stronger relative economic growth and the Fed tightening in advance of other central banks, may offer less support as growth outside the U.S. improves and the Fed’s tightening path remains modest while other central banks, including the European Central Bank (ECB), take initial steps to rein in accommodative policies.
We reduced our overweight to emerging markets bonds relative to U.S. investment-grade debt and ended the period with a neutral position. Valuations for emerging markets bonds are less compelling after the risk-on rally since the U.S. elections. While emerging market economies benefited from the rise in commodity prices last year, energy prices have recently retreated and concerns remain about the impacts from protectionist trade policies, higher developed market interest rates, and a stronger U.S. dollar. Emerging markets economies enjoy better fundamentals than during the taper-tantrum sell-off in 2013, but there is considerable disparity between individual countries in their fiscal positions, political stability, and progress toward reforms, which highlights the importance of in-depth research and a selective approach to the market.
PORTFOLIO REVIEW
U.S. Stocks
Our portfolio’s U.S. stocks were solidly positive in absolute
terms for the six-month reporting period. Security selection benefited relative
performance as positive results in our underlying large-cap growth portfolios
overcame weakness in our large-cap value and small-cap portfolios. Financials
stocks were our strongest absolute contributors amid optimism about the benefits
from higher interest rates and improved economic growth. Our banks were
particularly strong, led by JPMorgan
Chase, Wells Fargo, and U.S. Bancorp. Our
information technology stocks were solidly positive as well. The sector accounts
for a number of our largest positions, including Apple, Microsoft, Alphabet, and Amazon.com, each of which
performed well during the period. The energy sector weighed on overall results
and gave back some of 2016’s strong gains amid indications that increased U.S.
production was renewing the downward pressure on global oil prices.
ExxonMobil,
Spectra Energy,
and EQT were among the fund’s weaker holdings. (Please refer to the fund’s
portfolio of investments for a complete list of holdings and the amount each
represents in the portfolio.)
International
Stocks
Our international stocks registered
attractive overall gains, although they generally trailed our broader U.S.
equity portfolio. Our portfolios of overseas developed markets stocks
outperformed our emerging markets portfolios for the period, although emerging
markets stocks outperformed in the early months of 2017 amid waning fears about
the impact of rising interest rates and protectionist rhetoric in the U.S. As
with our U.S. equity portfolio, financials stocks were the biggest positive
contributors in our developed markets portfolio and were led by Erste Group Bank (Austria), BNP Paribas (France), Lloyds Banking
Group (UK), and Nordea Banking Group (Sweden). On the
other hand, some of our European telecommunication stocks, including
Vodafone (UK)
and Telecom Italia (Italy), were challenged by concerns about rising competition in key
markets.
The information technology sector led the way among our emerging markets stocks. Shares of Samsung Electronics (South Korea) advanced after a positive earnings report showed improved profitability across its business lines, particularly in its memory and mobile phone divisions. Tencent Holdings, the dominant social networking platform in China, and MercadoLibre (Argentina), Latin America’s largest online trading platform, were also strong contributors. Our consumer staples exposure detracted from performance, with snack and beverage manufacturer Universal Robina (Philippines) and food retailer Magnit (Russia) among our weaker holdings.
Domestic Bonds
The portfolio’s U.S. fixed income allocation was modestly
negative in absolute terms for the six-month reporting period. The fund’s U.S.
investment-grade bond allocation consists of a conservative core component and
an allocation to TIPS. The core allocation emphasizes higher-quality bonds and
is intended to provide ballast in an environment of heightened risk aversion,
while TIPS offer inflation protection through a broad range of maturities. Our
core U.S. investment-grade debt portfolio declined as optimism about pro-growth
economic policies stoked investors’ appetite for riskier assets, while our TIPS
holdings fell slightly amid moderating inflation expectations.
Weakness in our investment-grade portfolio was offset somewhat by positive results in our high yield bonds, which generated good returns as investors shifted toward fixed income sectors with the potential for higher returns and less sensitivity to a rising interest rate environment. Price stability in certain sectors of the commodities complex, particularly oil and natural gas, for much of the period also supported the high yield sector.
International Bonds
The portfolio’s fixed income holdings also include
international bonds, encompassing developed and emerging market sovereign and
corporate bonds, denominated in both the U.S. dollar and local currencies. These
international bonds can provide an additional source of diversification relative
to our allocations to domestic bonds. The fund’s international bonds weighed
slightly on performance. Our overseas developed markets debt declined in U.S.
dollar terms, due largely to a sharp rise in the value of the U.S. dollar
following Donald Trump’s election victory. Emerging markets debt denominated in
both U.S. dollars and local currencies generated good gains as investors
continued to search for higher-yielding securities.
Diversifying
Strategies
The portfolio incorporates
several diversifying components in order to moderate volatility and diversify
risk over a full market cycle. These include a diversified hedge fund of funds
allocation, currency-hedged international equities, and an equity index option
strategy.
For example, the equity index option strategy is expected to have a lower-volatility profile than the broad stock market, while the hedge fund allocation is expected to have a volatility level comparable to bonds with potential value added from a broad range of underlying investment strategies and managers. The fund’s currency-hedged international equities recorded strong gains for the period, followed closely by healthy returns in our equity index option overlay strategy. Our diversified hedge fund of funds allocation generated favorable risk-adjusted returns.
We also have an allocation to real assets equities, which include companies that have direct exposure to physical assets, such as energy and commodities, real estate, industrial equipment, and utilities. We diversify the portfolio across a range of assets that tend to perform differently under varying inflation scenarios, seeking smoother long-term returns under a range of inflationary conditions. As a complement to more traditional equity investments, we believe real assets equities can enhance long-term outcomes in the context of a broader investment portfolio. Our real assets equities were modestly positive over the period but trailed the broader equities markets.
The fund’s exposure to derivatives benefited absolute performance during the period; U.S. small-cap equity futures and equity options and futures within the options overlay strategy were the principal contributors.
INVESTMENT OUTLOOK
Although still modest, the positive momentum for global economic growth has continued into 2017, with data showing synchronized improvements across most developed and emerging markets—an uncommon occurrence in the current economic cycle.
In the U.S., a decline in consumer spending contributed to tepid first-quarter economic growth, but we expect a pickup in growth over the remainder of the year. There is considerable uncertainty surrounding the Trump administration’s growth proposals, and inflation may have reached a near-term peak as support from higher energy prices continues to moderate. The Fed has signaled its intent to continue a modest pace of tightening this year amid a stronger labor market and firming inflation, and markets are expecting at least two more rate increases over the remainder of 2017. Corporate leverage has increased, but balance sheets appear generally healthy and provide flexibility to increase capital spending, engage in mergers and acquisitions, and return capital to shareholders through dividends and share repurchases. Companies are reporting solid profit increases in the first quarter of 2017, and the positive earnings growth trend is expected to last through the end of the calendar year against a backdrop of stronger revenue growth and positive contributions from the energy and materials sectors.
In Europe, growth expectations are improving, with support from resilient household consumption, increased business investment, and stronger global trade. The ECB acknowledged the improved growth prospects and diminished downside risk in April, although it held policy rates at record-low levels while extending its €60 billion per month bond purchases through year-end. Risks remain, however. Brexit continues to be a looming concern, but negotiations have yet to begin in earnest. Political uncertainty is still elevated with upcoming elections in Germany and Italy, but fears about a wave of populist victories have abated for the time being in the wake of centrist election wins in the Netherlands and France. Long-term structural issues such as high debt, low inflation, and elevated unemployment continue to plague growth in many European countries.
Japan’s economy expanded modestly in the fourth quarter of 2016, supported by stronger exports and government spending. However, Prime Minister Shinzo Abe’s efforts to reform the economy and stimulate growth remain challenged by weak consumption, tepid wage growth, and low inflation. The yen weakened against the U.S. dollar in the wake of the U.S. election but strengthened again in early 2017, which could weigh on exports and corporate profitability. While investors have been skeptical of Mr. Abe’s and the BoJ’s progress on stimulating economic growth and inflation, Japanese corporations are showing positive movement toward improving corporate governance and enhancing shareholder value.
Emerging markets growth should improve broadly in 2017, although commodity export-oriented economies may be challenged by any persistent decline in energy prices. Country-specific conditions vary in terms of economic growth, monetary and fiscal policy flexibility, dependence on commodity exports, and progress toward structural reforms. While the prospects for protectionist trade policies are less pronounced than they were a few months ago, they remain a risk to global trade. In addition, higher interest rates and a stronger U.S. dollar could contribute to capital outflows. China’s policymakers are using a number of fiscal and monetary policy tools to achieve their growth target—currently around 6.5%—as they try to engineer an orderly transition to a consumer-based growth model, although we note that signs of tightening financial conditions began to appear later in the period.
Key risks to global markets include the impacts of spreading populist and protectionist policies on political stability and global trade, the sustainability of energy prices, and global monetary policies. Heightened geopolitical tensions in several areas, including the Middle East and the Korean peninsula, pose additional risks. We believe that the broad diversification of our portfolios across asset classes, regions, and countries, combined with fundamental research, active management in security selection, and our ability to make tactical changes in the funds’ allocations, should help us generate attractive risk-adjusted returns in an uncertain market environment.
Thank you for investing with T. Rowe Price.
Respectfully submitted,
Charles M. Shriver
Chairman of the fund’s Investment Advisory
Committee
May 18, 2017
The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund’s investment program.
RISKS OF INVESTING IN STOCKS
As with all stock and bond mutual funds, the fund’s share price can fall because of weakness in the stock or bond markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment manager’s assessment of companies held in a fund may prove incorrect, resulting in losses or poor performance even in rising markets. A sizable cash or fixed income position may hinder the fund from participating fully in a strong, rapidly rising bull market. In addition, significant exposure to bonds increases the risk that the fund’s share value could be hurt by rising interest rates or credit downgrades or defaults. Convertible securities are also exposed to price fluctuations of the company’s stock.
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.
RISKS OF INVESTING IN BONDS
Funds that invest in bonds are subject to interest rate risk, the decline in bond prices that usually accompanies a rise in interest rates. Longer-maturity bonds typically decline more than those with shorter maturities. Funds that invest in bonds are also subject to credit risk, the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default (fail to make timely payments of interest or principal), potentially reducing the fund’s income level and share price.
GLOSSARY
Call option: Gives the holder the right but not the obligation to buy a security or index at a specified price on or before a specified date. Writing a call option means selling it to collect the price, or premium.
Duration: A measure of a bond’s sensitivity to changes in interest rates. For example, a bond with a duration of five years would fall about 5% in price in response to a one-percentage-point rise in interest rates, and vice versa.
Morningstar Global Allocation Index: An index that represents the performance of a portfolio of 60% global equities and 40% global bonds, with the allocation within each broad asset class determined by Morningstar’s asset allocation methodology and represented by Morningstar core equity and fixed income indexes.
Real estate investment trusts (REITs): Publicly traded companies that own, develop, and operate apartment complexes, hotels, office buildings, and other commercial properties.
S&P 500 Index: An unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies.
Treasury inflation protected securities (TIPS): Income-generating bonds that are issued by the federal government and whose interest and principal payments are adjusted for inflation. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index.
Performance and Expenses
| Growth of $10,000 |
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.
| 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.
Please note that the fund has three share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee, and I Class shares are available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class is presented separately in the table.
Actual Expenses
The first line of the following table (Actual) provides
information about actual account values and expenses based on the fund’s actual
returns. You may use the information on 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 on 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.
Note: T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Preferred Services, Personal Services, or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $100,000). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.
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.
Unaudited
The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
Unaudited
The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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| Notes to Financial Statements |
T. Rowe Price Global Allocation 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 capital appreciation and income. The fund has three classes of shares: the Global Allocation Fund (Investor Class), the Global Allocation Fund–Advisor Class (Advisor Class), and the Global Allocation Fund–I Class (I Class). Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries. I Class shares generally are available only to investors meeting a $1,000,000 minimum investment or certain other criteria. The Advisor Class operates under a Board-approved Rule 12b-1 plan pursuant to which the class compensates financial intermediaries for distribution, shareholder servicing, and/or certain administrative services; the Investor and I Classes do not pay Rule 12b-1 fees. Each class has exclusive voting rights on matters related solely to that class; separate voting rights on matters that relate to all classes; and, in all other respects, the same rights and obligations as the other classes.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation The fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 (ASC 946). The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), including, but not limited to, ASC 946. GAAP requires 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 accompanying financial statements may differ from the value ultimately realized upon sale or maturity.
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. Paydown gains and losses are recorded as an adjustment to interest income. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as interest income. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Earnings on investments recognized as partnerships for federal income tax purposes reflect the tax character of such earnings. Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions from REITs are initially recorded as dividend income and, to the extent such represent a return of capital or capital gain for tax purposes, are reclassified when such information becomes available. Income distributions are declared and paid by each class annually. Distributions to shareholders are recorded on the ex-dividend date. Capital gain distributions are generally declared and paid by the fund annually.
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.
Class Accounting Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the class to which they relate. Expenses common to all classes, investment income, and realized and unrealized gains and losses are allocated to the classes based upon the relative daily net assets of each class. The Advisor Class pays Rule 12b-1 fees, in an amount not exceeding 0.25% of the class’s average daily net assets.
Rebates Subject to best execution, the fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the fund in cash. Commission rebates are reflected as realized gain on securities in the accompanying financial statements and totaled $1,000 for the six months ended April 30, 2017.
New Accounting Guidance In October 2016, the Securities and Exchange Commission (SEC) issued a new rule, Investment Company Reporting Modernization, which, among other provisions, amends Regulation S-X to require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Compliance with the guidance is effective for financial statements filed with the SEC on or after August 1, 2017; adoption will have no effect on the fund’s net assets or results of operations.
NOTE 2 - VALUATION
The fund’s financial instruments are valued and each class’s net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted, if the NYSE closes earlier, or as may be permitted by the SEC.
Fair Value The fund’s financial instruments are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) is an internal committee that has been delegated certain responsibilities by the fund’s Board of Directors (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes procedures to value securities; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; oversees the selection, services, and performance of pricing vendors; oversees valuation-related business continuity practices; and provides guidance on internal controls and valuation-related matters. The Valuation Committee reports to the Board and has representation from legal, portfolio management and trading, operations, risk management, and the fund’s treasurer.
Various valuation techniques and inputs are used to determine the fair value of financial instruments. GAAP establishes the following fair value hierarchy that categorizes the inputs used to measure fair value:
Level 1 – quoted prices (unadjusted) in active markets for identical financial instruments that the fund can access at the reporting date
Level 2 – inputs other than Level 1 quoted prices that are observable, either directly or indirectly (including, but not limited to, quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in inactive markets, interest rates and yield curves, implied volatilities, and credit spreads)
Level 3 – unobservable inputs
Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use to price the financial instrument.Unobservable inputs are those for which market data are not available and are developed using the best information available about the assumptions that market participants would use to price the financial instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. When multiple inputs are used to derive fair value, the financial instrument is assigned to the level within the fair value hierarchy based on the lowest-level input that is significant to the fair value of the financial instrument. Input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining those values.
Valuation Techniques 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. OTC Bulletin Board securities are valued at the mean of the closing 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 closing bid and asked prices for domestic securities and the last quoted sale or closing price for international securities.
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted to reflect the fair value of such securities at the close of 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, the fund will adjust the previous quoted 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 quoted 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. The 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 quoted prices and information to evaluate or adjust those prices. The fund cannot predict how often it will use quoted 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 quoted prices, the next day’s opening prices in the same markets, and adjusted prices.
Actively traded equity securities listed on a domestic exchange generally are categorized in Level 1 of the fair value hierarchy. Non-U.S. equity securities generally are categorized in Level 2 of the fair value hierarchy despite the availability of quoted prices because, as described above, the fund evaluates and determines whether those quoted prices reflect fair value at the close of the NYSE or require adjustment. OTC Bulletin Board securities, certain preferred securities, and equity securities traded in inactive markets generally are categorized in Level 2 of the fair value hierarchy.
Debt securities generally are traded in the 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. Generally, debt securities are categorized in Level 2 of the fair value hierarchy.
Investments in mutual funds are valued at the mutual fund’s closing NAV per share on the day of valuation and are categorized in Level 1 of the fair value hierarchy. Investments in private investment companies are valued at the investee’s NAV per share as of the valuation date, if available. If the investee’s NAV is not available as of the valuation date or is not calculated in accordance with GAAP, the Valuation Committee may adjust the investee’s NAV to reflect fair value at the valuation date. Investments in private investment companies generally are categorized either in Level 2 or 3, depending on the significance of unobservable inputs. Listed options, and OTC options with a listed equivalent, are valued at the mean of the closing bid and asked prices and generally are categorized in Level 2 of the fair value hierarchy. Exchange-traded options on futures contracts are valued at closing settlement prices and generally are categorized in Level 1 of the fair value hierarchy. Financial futures contracts are valued at closing settlement prices and are categorized in Level 1 of the fair value hierarchy. Forward currency exchange contracts are valued using the prevailing forward exchange rate and are categorized in Level 2 of the fair value hierarchy. Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at cost, or estimated realizable value, if less, which approximates fair value.
Thinly traded financial instruments 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 Valuation Committee. The objective of any fair value pricing determination is to arrive at a price that could reasonably be expected from a current sale. Financial instruments fair valued by the Valuation Committee are primarily private placements, restricted securities, warrants, rights, and other securities that are not publicly traded.
Subject to oversight by the Board, the Valuation Committee regularly makes good faith judgments to establish and adjust the fair valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of an equity investment with limited market activity, such as a private placement or a thinly traded public company stock, the Valuation Committee considers a variety of factors, which may include, but are not limited to, the issuer’s business prospects, its financial standing and performance, recent investment transactions in the issuer, new rounds of financing, negotiated transactions of significant size between other investors in the company, relevant market valuations of peer companies, strategic events affecting the company, market liquidity for the issuer, and general economic conditions and events. In consultation with the investment and pricing teams, the Valuation Committee will determine an appropriate valuation technique based on available information, which may include both observable and unobservable inputs. The Valuation Committee typically will afford greatest weight to actual prices in arm’s length transactions, to the extent they represent orderly transactions between market participants, transaction information can be reliably obtained, and prices are deemed representative of fair value. However, the Valuation Committee may also consider other valuation methods such as market-based valuation multiples; a discount or premium from market value of a similar, freely traded security of the same issuer; or some combination. Fair value determinations are reviewed on a regular basis and updated as information becomes available, including actual purchase and sale transactions of the issue. Because any fair value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions, and fair value prices determined by the Valuation Committee could differ from those of other market participants. Depending on the relative significance of unobservable inputs, including the valuation technique(s) used, fair valued securities may be categorized in Level 2 or 3 of the fair value hierarchy.
Valuation Inputs The following table summarizes the fund’s financial instruments, based on the inputs used to determine their fair values on April 30, 2017:
There were no material transfers between Levels 1 and 2 during the six month ended April 30, 2017.
Following is a reconciliation of the fund’s Level 3 holdings for the six months ended April 30, 2017. Gain (loss) reflects both realized and change in unrealized gain/loss on Level 3 holdings during the period, if any, and is included on the accompanying Statement of Operations. The change in unrealized gain/loss on Level 3 instruments held at April 30, 2017, totaled $745,000 for the six months ended April 30, 2017. Transfers into and out of Level 3 are reflected at the value of the financial instrument at the beginning of the period. During the six months, transfers out of Level 3 were because observable market data became available for the security.
In accordance with GAAP, the following table provides quantitative information about significant unobservable inputs used to determine the fair valuations of the fund’s Level 3 assets, by class of financial instrument; it also indicates the sensitivity of the Level 3 valuations to changes in those significant unobservable inputs. Because the Valuation Committee considers a wide variety of factors and inputs, both observable and unobservable, in determining fair values, the unobservable inputs presented do not reflect all inputs significant to the fair value determination.
NOTE 3 - DERIVATIVE INSTRUMENTS
During the six months ended April 30, 2017, the fund invested 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 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. The fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover its settlement obligations under open derivative contracts.
The fund values its derivatives at fair value 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. Generally, the fund accounts for its derivatives on a gross basis. It does not offset the fair value of derivative liabilities against the fair value of derivative assets on its financial statements, nor does it offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral. The following table summarizes the fair value of the fund’s derivative instruments held as of April 30, 2017, and the related location on the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
Additionally, the amount of gains and losses on derivative instruments recognized in fund earnings during the six months ended April 30, 2017, and the related location on the accompanying Statement of Operations is summarized in the following table by primary underlying risk exposure:
Counterparty Risk and Collateral The fund invests in derivatives in various markets, which expose it to differing levels of counterparty risk. Counterparty risk on exchange-traded and centrally cleared derivative contracts, such as futures, exchange-traded options, and centrally cleared swaps, is minimal because the clearinghouse provides protection against counterparty defaults. For futures and centrally cleared swaps, the fund is required to deposit collateral in an amount specified by the clearinghouse and the clearing firm (margin requirement), and the margin requirement must be maintained over the life of the contract. Each clearinghouse and clearing firm, in its sole discretion, may adjust the margin requirements applicable to the fund.
Derivatives, such as bilateral swaps, forward currency exchange contracts, or OTC options, that are transacted and settle directly with a counterparty (bilateral derivatives) expose the fund to counterparty risk. To mitigate this risk, the fund has entered into master netting arrangements (MNAs) with certain counterparties that permit net settlement under specified conditions and, for certain counterparties, also require the exchange of collateral to cover mark-to-market exposure. MNAs may be in the form of International Swaps and Derivatives Association master agreements (ISDAs) or foreign exchange letter agreements (FX letters).
MNAs govern the ability to offset amounts the fund owes a counterparty against amounts the counterparty owes the fund (net settlement). Both ISDAs and FX letters generally allow termination of transactions and net settlement upon the occurrence of contractually specified events, such as failure to pay or bankruptcy. In addition, ISDAs specify other events, the occurrence of which would allow one of the parties to terminate. For example, a downgrade in credit rating of a counterparty would allow the fund to terminate while a decline in the fund’s net assets of more than a specified percentage would allow the counterparty to terminate. Upon termination, all transactions with that counterparty would be liquidated and a net termination amount settled. ISDAs include collateral agreements whereas FX letters do not. Collateral requirements are determined daily based on the net aggregate unrealized gain or loss on all bilateral derivatives with each counterparty, subject to minimum transfer amounts that typically range from $100,000 to $250,000. Any additional collateral required due to changes in security values is typically transferred the same business day.
Collateral may be in the form of cash or debt securities issued by the U.S. government or related agencies. Cash posted by the fund is reflected as cash deposits in the accompanying financial statements and generally is restricted from withdrawal by the fund; securities posted by the fund are so noted in the accompanying Portfolio of Investments; both 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. For bilateral derivatives, collateral posted or received by the fund is held in a segregated account at the fund’s custodian. As of April 30, 2017, no collateral was pledged by either the fund or counterparties for bilateral derivatives. As of April 30, 2017, cash of $868,000 had been posted by the fund for exchange-traded and/or centrally cleared derivatives.
Forward Currency Exchange Contracts The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. It uses forward currency exchange contracts (forwards) primarily to protect its non-U.S. dollar-denominated securities from adverse currency movements relative to the U.S. dollar. 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. Appreciated forwards are reflected as assets and depreciated forwards are reflected as liabilities on the accompanying Statement of Assets and Liabilities. 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. During the six months ended April 30, 2017, the volume of the fund’s activity in forwards, based on underlying notional amounts, was generally between 7% and 8% of net assets.
Futures Contracts The fund is subject to interest rate risk and equity price risk in the normal course of pursuing its investment objectives and uses futures contracts to help manage such risks. The fund may enter into futures contracts to manage exposure to interest rates, security prices, foreign currencies, and credit quality; as an efficient means of adjusting exposure to all or part of a target market; to enhance income; as a cash management tool; or to adjust 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. Payments are made or received by the fund each day to settle daily fluctuations in the value of the contract (variation margin), which reflect changes in the value of the underlying financial instrument. Variation margin is recorded as unrealized gain or loss until the contract is closed. The value of a futures contract included in net assets is the amount of unsettled variation margin; net variation margin receivable is reflected as an asset, and net variation margin payable is reflected as a liability on the accompanying Statement of Assets and Liabilities. 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 and/or interest rates, and potential losses in excess of the fund’s initial investment. During the six months ended April 30, 2017, the volume of the fund’s activity in futures, based on underlying notional amounts, was generally between 10% and 19% of net assets.
Options The fund is subject to interest rate risk and equity price risk in the normal course of pursuing its investment objectives and uses options to help manage such risks. The fund may use options to manage exposure to security prices, interest rates, foreign currencies, and credit quality; as an efficient means of adjusting exposure to all or a part of a target market; to enhance income; as a cash management tool; or to adjust credit exposure. Options are included in net assets at fair value, purchased options are included in Investments in Securities, and written options are separately reflected as a liability on the accompanying Statement of Assets and Liabilities. Premiums on unexercised, expired options are recorded as realized gains or losses; premiums on exercised options are recorded as an adjustment to the proceeds from the sale or cost of the purchase. The difference between the premium and the amount received or paid in a closing transaction is also treated as realized gain or loss. In return for a premium paid, call and put options give the holder the right, but not the obligation, to purchase or sell, respectively, a security at a specified exercise price. In return for a premium paid, call and put options on futures give the holder the right, but not the obligation, to purchase or sell, respectively, a position in a particular futures contract at a specified exercise price. In return for a premium paid, call and put index options give the holder the right, but not the obligation, to receive cash equal to the difference between the value of the reference index on the exercise date and the exercise price of the option. Risks related to the use of options include possible illiquidity of the options markets; trading restrictions imposed by an exchange or counterparty; movements in the underlying asset values and interest rates and, for written options, potential losses in excess of the fund’s initial investment. During the six months ended April 30, 2017, the volume of the fund’s activity in options, based on underlying notional amounts, was generally between 6% and 13% of net assets. Transactions in written options and related premiums received during the six months ended April 30, 2017, were as follows:
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 and Frontier Markets The fund may invest, either directly or through investments in T. Rowe Price institutional funds, in securities of companies located in, issued by governments of, or denominated in or linked to the currencies of emerging and frontier market countries; at period-end, approximately 13% of the fund’s net assets were invested in emerging markets and 2% in frontier markets. Emerging markets, and to a greater extent frontier markets, generally have economic structures that are less diverse and mature, and political systems that are less stable, than developed countries. These 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. Such securities are often subject to greater price volatility, less liquidity, and higher rates of inflation than U.S. securities. Investing in frontier markets is significantly riskier than investing in other countries, including emerging markets.
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 may lend its securities to approved brokers to earn additional income. Its securities lending activities are administered by a lending agent in accordance with a securities lending agreement. Security loans generally do not have stated maturity dates, and the fund may recall a security at any time. The fund receives collateral in the form of cash or 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; any additional collateral required due to changes in security values is delivered to the fund the next business day. Cash collateral is invested by the lending agent(s) in accordance with investment guidelines approved by fund management. Additionally, the lending agent indemnifies the fund against losses resulting from borrower default. Although risk is mitigated by the collateral and indemnification, 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, collateral investments decline in value, and the lending agent fails to perform. Securities lending revenue consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower, compensation to the lending agent, and other administrative costs. In accordance with GAAP, investments made with cash collateral are reflected in the accompanying financial statements, but collateral received in the form of securities is not. At April 30, 2017, there were no securities on loan.
Mortgage-Backed Securities The fund may invest in mortgage-backed securities (MBS or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the fund to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. MBS are sensitive to changes in economic conditions that affect the rate of prepayments and defaults on the underlying mortgages; accordingly, the value, income, and related cash flows from MBS may be more volatile than other debt instruments.
Investment in Blackstone Partners Offshore Fund The fund invested in Blackstone Partners Offshore Fund Ltd. (Blackstone Partners), a multi-strategy hedge fund-of-funds offered by Blackstone Alternative Asset Management (BAAM), a unit of Blackstone Group L.P. (Blackstone). Blackstone Partners provides the fund exposure to alternative investments primarily through Blackstone Partners’ investments in underlying private investment funds, and the underlying funds are mostly managed by investment managers unaffiliated with BAAM or Blackstone. Blackstone Partners and the underlying funds may use leverage, engage in short-selling, and invest in commodities or other speculative investments, which may increase the risk of investment loss. Blackstone Partners and the underlying funds are not subject to the same regulatory requirements as open-end mutual funds, and, therefore, their investments and related valuations may not be as transparent. Ownership interests in Blackstone Partners are not transferable and are subject to various redemption restrictions, such as advance notice requirements, limited redemption dates, and possible suspension of redemption rights. In addition, Blackstone Partners’ ownership in the underlying funds may also be subject to transfer and redemption restrictions, such as advance notice requirements, limited redemption dates, and possible suspension of redemption rights. All of these restrictions are subject to change at the sole discretion of Blackstone Partners or an underlying fund’s management. As of April 30, 2017, the fund’s investment in Blackstone Partners is subject to semi-annual redemption with 95 days’ prior written notice and is considered an illiquid asset.
Other Purchases and sales of portfolio securities other than short-term and U.S. government securities aggregated $49,931,000 and $31,917,000, respectively, for the six months ended April 30, 2017. Purchases and sales of U.S. government securities aggregated $12,335,000 and $6,486,000, respectively, for the six months ended April 30, 2017.
NOTE 5 - 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. Distributions determined in accordance with federal income 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 but 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 the date of this report.
The fund intends to retain realized gains to the extent of available capital loss carryforwards. Net realized capital losses may be carried forward indefinitely to offset future realized capital gains. As of October 31, 2016, the fund had $3,263,000 of available capital loss carryforwards.
At April 30, 2017, the cost of investments for federal income tax purposes was $203,751,000. Net unrealized gain aggregated $22,225,000 at period-end, of which $27,445,000 related to appreciated investments and $5,220,000 related to depreciated investments.
NOTE 6 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in which it invests. Additionally, certain foreign currency transactions are subject to tax, and capital gains realized upon disposition of securities issued in or by certain foreign countries are subject to capital gains tax imposed by those countries. All taxes are computed in accordance with the applicable foreign tax law, and, to the extent permitted, capital losses are used to offset capital gains. Taxes attributable to income are accrued by the fund as a reduction of income. Taxes incurred on the purchase of foreign currencies are recorded as realized loss on foreign currency transactions. Current and deferred tax expense attributable to capital gains is reflected as a component of realized or change in unrealized gain/loss on securities in the accompanying financial statements. At April 30, 2017, the fund had no deferred tax liability attributable to foreign securities and no foreign capital loss carryforwards.
NOTE 7 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group). The investment management agreement between the fund and Price Associates provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.40% of the fund’s average daily net assets, and a group fee. The group fee rate is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.270% for assets in excess of $500 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At April 30, 2017, the effective annual group fee rate was 0.29%.
The Investor Class and Advisor Class are each subject to a contractual expense limitation through the limitation dates indicated in the table below. During the limitation period, Price Associates is required to waive its management fee or pay any expenses (excluding interest, expenses related to borrowings, taxes, brokerage, and other non-recurring expenses permitted by the investment management agreement) that would otherwise cause the class’s ratio of annualized total expenses to average net assets (expense ratio) to exceed its expense limitation. Each class is required to repay Price Associates for expenses previously waived/paid to the extent the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the class’s expense ratio to exceed its expense limitation in effect at the time of the waiver. However, no repayment will be made more than three years after the date of a payment or waiver. For the six months ended April 30, 2017, the Investor Class operated below its expense limitation.
The I Class is also subject to an operating expense limitation (I Class limit) pursuant to which Price Associates is contractually required to pay all operating expenses of the I Class, excluding management fees, interest, expenses related to borrowings, taxes, brokerage, and other non-recurring expenses permitted by the investment management agreement, to the extent such operating expenses, on an annualized basis, exceed 0.05% of average net assets. This agreement will continue until February 28, 2018, and may be renewed, revised, or revoked only with approval of the fund’s Board. The I Class is required to repay Price Associates for expenses previously paid to the extent the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the class’s operating expenses to exceed the I Class limit in effect at the time of the waiver. However, no repayment will be made more than three years after the date of a payment or waiver.
Pursuant to these agreements $17,000 of expenses were waived/paid by Price Associates during the six months ended April 30, 2017. Including these amounts, expenses previously waived/paid by Price Associates in the amount of $536,000 remain subject to repayment by the fund at April 30, 2017.
In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates provides certain accounting and administrative services to the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund’s transfer and dividend-disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the Investor Class and I Class. For the six months ended April 30, 2017, expenses incurred pursuant to these service agreements were $42,000 for Price Associates; $37,000 for T. Rowe Price Services, Inc.; and less than $1,000 for T. Rowe Price Retirement Plan Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.
The fund may invest in the T. Rowe Price Government Reserve Fund, the T. Rowe Price Treasury Reserve Fund, or the T. Rowe Price Short-Term Fund (collectively, the Price Reserve Funds), open-end management investment companies managed by Price Associates and considered affiliates of the fund. The Price Reserve Funds are offered as short-term investment options to mutual funds, trusts, and other accounts managed by Price Associates or its affiliates and are not available for direct purchase by members of the public. The Price Reserve Funds pay no investment management fees.
The fund may also invest in certain other T. Rowe Price funds (Price Funds) as a means of gaining efficient and cost-effective exposure to certain markets. The fund does not invest for the purpose of exercising management or control; however, investments by the fund may represent a significant portion of an underlying Price Fund’s net assets. Each underlying Price Fund is an open-end management investment company managed by Price Associates and is considered an affiliate of the fund. To ensure that the fund does not incur duplicate management fees (paid by the underlying Price Fund(s) and the fund), Price Associates has agreed to permanently waive a portion of its management fee charged to the fund in an amount sufficient to fully offset that portion of management fees paid by each underlying Price Fund related to the fund’s investment therein. Annual management fee rates and amounts waived related to investments in the underlying Price Fund(s) for the six months ended April 30, 2017, are as follows:
As of April 30, 2017, T. Rowe Price Group, Inc., or its wholly owned subsidiaries owned 2,475,000 shares of the Investor Class, representing 16% of the Investor Class’s net assets.
The fund may participate in securities purchase and sale transactions with other funds or accounts advised by Price Associates (cross trades), in accordance with procedures adopted by the fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. During the six months ended April 30, 2017, the fund had no purchases or sales cross trades with other funds or accounts advised by Price Associates.
NOTE 8 - BORROWING
The fund may borrow to provide temporary liquidity. The fund, along with several other T. Rowe Price-sponsored mutual funds (collectively, the participating funds), has entered into a $575 million, 364-day, syndicated credit facility (the facility) pursuant to which the participating funds may borrow on a first-come, first-served basis up to the full amount of the facility. Interest is charged to the borrowing fund at a rate equal to 1.00% plus the Federal Funds rate. A commitment fee, equal to 0.15% per annum of the average daily undrawn commitment is accrued daily and paid quarterly; legal and administrative fees are recognized as incurred. All fees are allocated to the participating funds based on each fund’s relative net assets and are reflected as a component of interest expense in the accompanying financial statements. Loans are generally unsecured; however, the fund must collateralize any borrowings under the facility on an equivalent basis if it has other collateralized borrowings. Effective January 9, 2017, the fund is no longer a participating fund in the facility. During the six months ended April 30, 2017, the fund incurred $4,000 in commitment fees.
NOTE 9 - SUBSEQUENT EVENT
Effective May 1, 2017, Price Associates will implement an additional tier in the graduated fee schedule for the group fee rate, whereby a rate of 0.265% will be applied for combined net assets of the group in excess of $650 billion.
| 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. You may request this document by calling 1-800-225-5132 or by accessing the SEC’s website, sec.gov.
The description of our proxy voting policies and procedures is also available on our corporate website. To access it, please visit the following Web page:
https://www3.troweprice.com/usis/corporate/en/utility/policies.html
Scroll down to the section near the bottom of the page that says, “Proxy Voting Policies.” Click on the Proxy Voting Policies link in the shaded box.
Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through T. Rowe Price, visit the website location shown above, and scroll down to the section near the bottom of the page that says, “Proxy Voting Records.” Click on the Proxy Voting Records link in the shaded box.
| 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 website (sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 100 F St. N.E., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.
| Approval of Investment Management Agreement |
Each year, the fund’s Board of Directors (Board) considers the continuation of the investment management agreement (Advisory Contract) between the fund and its investment advisor, T. Rowe Price Associates, Inc. (Advisor). In that regard, at an in-person meeting held on March 6–7, 2017 (Meeting), the Board, including a majority of the fund’s independent directors, approved the continuation of the fund’s Advisory Contract. At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of the Advisor and the approval of the Advisory Contract. The independent directors were assisted in their evaluation of the Advisory Contract by independent legal counsel from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, the Advisor was guided by a detailed set of requests for information submitted by independent legal counsel on behalf of the independent directors. In considering and approving the Advisory Contract, the Board considered the information it believed was relevant, including, but not limited to, the information discussed below. The Board considered not only the specific information presented in connection with the Meeting but also the knowledge gained over time through interaction with the Advisor about various topics. The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the T. Rowe Price funds’ advisory contracts, including performance and the services and support provided to the funds and their shareholders.
Services Provided by the
Advisor
The Board considered the nature,
quality, and extent of the services provided to the fund by the Advisor. These
services included, but were not limited to, directing the fund’s investments in
accordance with its investment program and the overall management of the fund’s
portfolio, as well as a variety of related activities such as financial,
investment operations, and administrative services; compliance; maintaining the
fund’s records and registrations; and shareholder communications. The Board also
reviewed the background and experience of the Advisor’s senior management team
and investment personnel involved in the management of the fund, as well as the
Advisor’s compliance record. The Board concluded that it was satisfied with the
nature, quality, and extent of the services provided by the Advisor.
Investment Performance of the
Fund
The Board took into account
discussions with the Advisor and reports that it receives throughout the year
relating to fund performance. In connection with the Meeting, the Board reviewed
the fund’s net annualized total returns for the one-year, two-year, and
three-year periods as of September 30, 2016, and compared these returns with the
performance of a peer group of funds with similar investment programs and a wide
variety of other previously agreed-upon comparable performance measures and
market data, including those supplied by Broadridge, which is an independent
provider of mutual fund data.
On the basis of this evaluation and the Board’s ongoing review of investment results and factoring in the relative market conditions during certain of the performance periods, the Board concluded that the fund’s performance was satisfactory.
Costs, Benefits, Profits, and Economies
of Scale
The Board reviewed detailed
information regarding the revenues received by the Advisor under the Advisory
Contract and other benefits that the Advisor (and its affiliates) may have
realized from its relationship with the fund, including any research received
under “soft dollar” agreements and commission-sharing arrangements with
broker-dealers. The Board considered that the Advisor may receive some benefit
from soft-dollar arrangements pursuant to which research is received from
broker-dealers that execute the fund’s portfolio transactions. The Board
received information on the estimated costs incurred and profits realized by the
Advisor from managing the T. Rowe Price funds. The Board also reviewed estimates
of the profits realized from managing the fund in particular, and the Board
concluded that the Advisor’s profits were reasonable in light of the services
provided to the fund.
The Board also considered whether the fund benefits under the fee levels set forth in the Advisory Contract from any economies of scale realized by the Advisor. Under the Advisory Contract, the fund pays a fee to the Advisor for investment management services composed of two components—a group fee rate based on the combined average net assets of most of the T. Rowe Price funds (including the fund) that declines at certain asset levels and an individual fund fee rate based on the fund’s average daily net assets—and the fund pays its own expenses of operations (subject to expense limitations agreed to by the Advisor with respect to the fund’s Investor Class, I Class, and Advisor Class). At the Meeting, the Board approved an additional 0.005% breakpoint to the group fee schedule, effective May 1, 2017. With the new breakpoint, the group fee rate will decline to 0.265% when the combined average net assets of the applicable T. Rowe Price funds exceed $650 billion. The Board concluded that the advisory fee structure for the fund continued to provide for a reasonable sharing of benefits from any economies of scale with the fund’s investors.
Fees and Expenses
The Board was provided with information regarding industry
trends in management fees and expenses. Among other things, the Board reviewed
data for peer groups that were compiled by Broadridge, which compared: (i)
contractual management fees, total expenses, actual management fees, and
non-management expenses of the Investor Class of the fund to a group of
competitor funds selected by Broadridge (Investor Class Expense Group); (ii)
total expenses and actual management fees of the Advisor Class of the fund to a
group of competitor funds selected by Broadridge (Advisor Class Expense Group);
and (iii) total expenses, actual management fees, and non-management expenses of
the Investor Class of the fund to a broader set of funds within the Lipper
investment classification (Expense Universe). The Board considered the fund’s
contractual management fee rate, actual management fee rate (which reflect the
management fees actually received from the fund
by the Advisor after any applicable waivers, reductions, or reimbursements),
operating expenses, and total expenses (which reflects the net total expense
ratio of the fund after any waivers, reductions, or reimbursements) in
comparison with the information for the Broadridge peer groups. Broadridge
generally constructed the peer groups by seeking the most comparable funds based
on similar investment classifications and objectives, expense structure, asset
size, and operating components and attributes and ranked funds into quintiles,
with the first quintile representing the funds with the lowest relative expenses
and the fifth quintile representing the funds with the highest relative
expenses. The information provided to the Board indicated that the fund’s
contractual management fee ranked in the first quintile (Investor Class Expense
Group) and second quintile (Advisor Class Expense Group), the fund’s actual
management fee rate ranked in the first quintile (Investor Class Expense Group,
Advisor Class Expense Group, and Expense Universe), and the fund’s total
expenses ranked in the first and second quintiles (Investor Class Expense Group
and Advisor Class Expense Group) and second and third quintiles (Expense
Universe).
The Board also reviewed the fee schedules for institutional accounts and private accounts with similar mandates that are advised or subadvised by the Advisor and its affiliates. Management provided the Board with information about the Advisor’s responsibilities and services provided to subadvisory and other institutional account clients, including information about how the requirements and economics of the institutional business are fundamentally different from those of the mutual fund business. The Board considered information showing that the Advisor’s mutual fund business is generally more complex from a business and compliance perspective than its institutional account business and considered various relevant factors, such as the broader scope of operations and oversight, more extensive shareholder communication infrastructure, greater asset flows, heightened business risks, and differences in applicable laws and regulations associated with the Advisor’s proprietary mutual fund business. In assessing the reasonableness of the fund’s management fee rate, the Board considered the differences in the nature of the services required for the Advisor to manage its mutual fund business versus managing a discrete pool of assets as a subadvisor to another institution’s mutual fund or for an institutional account and that the Advisor generally performs significant additional services and assumes greater risk in managing the fund and other T. Rowe Price funds than it does for institutional account clients.
On the basis of the information provided and the factors considered, the Board concluded that the fees paid by the fund under the Advisory Contract are reasonable.
Approval of the Advisory
Contract
As noted, the Board approved the
continuation of the Advisory 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 and its shareholders for the Board to approve the
continuation of the Advisory 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. Investments.
(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.
(b) Not applicable.
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 Global Allocation Fund,
Inc.
| By | /s/ Edward C. Bernard | |
| Edward C. Bernard | ||
| Principal Executive Officer | ||
| Date June 15, 2017 | ||
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 June 15, 2017 | ||
| By | /s/ Catherine D. Mathews | |
| Catherine D. Mathews | ||
| Principal Financial Officer | ||
| Date June 15, 2017 | ||