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: 811-02958
| T. Rowe Price International Funds, Inc. |
|
|
| (Exact name of registrant as specified in charter) |
| 100 East Pratt Street, Baltimore, MD 21202 |
|
|
| (Address of principal executive offices) |
| David Oestreicher |
| 100 East Pratt Street, Baltimore, MD 21202 |
|
|
| (Name and address of agent for service) |
Registrant’s telephone number, including area
code: (410) 345-2000
Date of fiscal year end: October
31
Date of reporting period: October 31,
2013
Item 1. Report to Shareholders
 |
|
European
Stock Fund |
October 31, 2013 |
The views and opinions in this report were current as of October 31, 2013. 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.
REPORTS ON THE WEB
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Manager’s Letter
Fellow Shareholders
European stock markets posted strong gains over the past six months and fiscal year as investors bought shares of deeply discounted stocks amid improving eurozone economic fundamentals. The European Central Bank (ECB) continued to provide liquidity to the region’s banking system and lowered a key interest rate late in the period. Peripheral countries that had been in the doldrums, including Greece, Spain, and Italy, surged during the period. The eurozone is benefiting from improving sentiment, better economic data, and signs that the protracted recession ended over the summer. Our pursuit of solid growth companies with strong cash positions, particularly those with exposure to consumer-oriented sectors in restructuring or growing economies, benefited shareholders.
PERFORMANCE REVIEW
As shown in the Performance Comparison table, your fund returned 18.03% and 37.03% for the 6- and 12-month periods ended October 31, 2013, respectively. The fund handily outpaced the MSCI Europe Index and the Lipper European Region Funds Average in both periods. Our holdings in the consumer discretionary and financials sectors provided the fund’s largest absolute gains. Our energy stocks were the poorest performers amid a difficult operating environment. Stock selection provided a substantial boost to the fund’s performance versus its benchmark, with particularly strong results in the consumer discretionary, financials, and utilities sectors. Decisions to overweight and underweight sectors versus the benchmark also benefited the fund’s relative performance.
MARKET ENVIRONMENT
Over the past 12 months, the European economy strengthened, ending a protracted recession. Second-quarter gross domestic product (GDP) surprised on the upside, at 0.3%, due in large part to improvements in France and Germany. The region’s purchasing managers’ index (PMI) also gathered pace and moved into expansionary territory, reaching a 27-month high in September. Notably, Spain’s PMI expanded for the first time in two years.
Within the eurozone, consumer confidence improved, investor sentiment rose sharply above its long-term average, and retail sales edged higher. The UK economy also saw considerable improvements: Construction, factory output, car sales, and house price data all rose. The ECB’s economic forecast for the eurozone was revised upward, and we are encouraged that the GDP target for the UK was also raised. In the periphery, structural developments and rebalancing efforts continued to materialize. Current account balances returned to surpluses while unit labor costs continued to trend lower, signaling further improvements to competitiveness in the region.
Pockets of weakness persist, however, suggesting that a fragile and somewhat uneven recovery is taking place in the bloc. The eurozone’s unemployment rate among young people is at Great Depression levels in some periphery countries and shows no sign of abating. Many talented and educated young Italians, Spaniards, and Portuguese have fled their homeland in search of a better life in northern Europe, South America, and the U.S. This trend is becoming increasingly worrisome to European policymakers. Industrial production declined during the period, largely attributed to Germany’s weaker factory output. However, Germany’s business confidence survey, a more forward-looking indictor, increased for a fifth consecutive month in September following Chancellor Angela Merkel’s decisive victory in the German elections—a clear endorsement of Merkel’s cautious and pragmatic approach. On the monetary policy front, ECB President Mario Draghi reiterated the bank’s intentions to keep rates low and liquidity flowing. The Bank of England’s forward guidance was for a continuation of low benchmark rates.
PORTFOLIO REVIEW
Consumer discretionary holdings were far and away our best absolute and relative performers thanks to both stock selection and a significant overweight. We benefited from the strong performance of two recently purchased Spanish media holdings, Mediaset Espana Comunicacion and Atresmedia Corporacion de Medios de Comunicacion. Both stocks surged thanks to evidence that the Spanish TV advertising market was approaching a turning point, which could lead to a rapid and significant upturn in profits and margins for both broadcasters. Sky Deutschland, another recent portfolio addition, and JCDecaux were also among the portfolio’s best contributors for the year in the consumer discretionary sector. Sky, a German media company with more than 3 million subscribers, operates a rapidly expanding satellite and pay TV platform in Germany, Austria, and Switzerland, plus basic and premium digital subscription television channels. Solid revenues and earnings gains have propelled the stock to new highs over the past six months. JCDecaux is a multinational outdoor advertising firm based in France. Although revenue growth was rather lackluster in the third quarter, shares have advanced sharply. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)
Among other consumer discretionary holdings, we are overweight to luxury goods, mostly through Swiss luxury watch manufacturers Richemont and Swatch. Although recent data have confirmed a deceleration in the Asia-Pacific region’s economic growth, we remain optimistic about the long-term strength and sustainability of Chinese consumer demand and believe luxury goods companies offer upside potential at current valuations. In the second half of the year, we initiated a position in luxury fashion producer Burberry Group. Although the company is attractively valued and runs a quality business with improving fundamentals and strong long-term prospects, the shares declined significantly since we initiated the position. At current levels, the stock looks attractive compared with other high-quality growth companies, especially considering Burberry’s superior near- and medium-term earnings growth potential.
The financials sector, led by strong stock selection in commercial banks, also powered the portfolio’s absolute and relative results. Our additions to the portfolio in the past 12 months generated exceptionally good returns. We increased our allocation to financials, and it’s now our second-largest sector overweight. The sector is highly geared to the economy, and we think that investors often underestimate the extent to which earnings rebound in a recovery. Given that the European economy is coming out of recession, we are optimistic about prospects for high-quality banks and expect a multiyear cycle of earnings upgrades as lending activity picks up.
The fund’s top absolute and relative performance contributor for the year was Bankinter, a leading Spanish commercial bank that offers retail and corporate services. In the past 12 months, we also added positions in several other commercial banks, including KBC, Intesa Sanpaolo, and BNP Paribas, and each generated solid 12-month gains. We believe that the poor eurozone environment that has persisted for several years has resulted in industry consolidation, especially in the peripheral countries, enhancing the long-term outlook for these banks. Our holdings should benefit from competitive advantages in their markets, and their valuations should rise as profitability normalizes.
The energy and telecommunication services sectors, where we have significantly underweight allocations compared with the benchmark, were the portfolio’s largest detractors from relative returns. We closed out positions in oil and gas producers BG Group and Tullow Oil, which were two of the portfolio’s largest decliners in the year. We also eliminated our energy equipment and services companies: Subsea 7 generated a modest gain for the year, AMEC had a small loss for the period, and Saipem was the fund’s poorest performer for the past 12 months. In our view, the sector faces structural downward pressure on oil prices and capital expenditures, which could squeeze margins. In this type of environment, we’d prefer to own companies, such as Eni and Royal Dutch Shell, which are positioned at the low end of the cost curve and offer economically secure growth.
Media attention surrounding merger activity among telecommunication services firms, particularly Vodafone’s sale of its stake in Verizon Wireless, has renewed investors’ interest in the sector. While we recognize the positive implications that some of these developments could mean for the sector, we have only modestly added to our allocation in telecom with the recent purchase of Telecom Italia and Telefonica and Iliad earlier in the year. We remain wary about the outlook for telecommunication companies, mostly due to unfavorable industry characteristics. Sluggish economic growth in Europe has created a challenging demand environment for this domestically oriented industry, which is facing a competitive landscape amid the fixed/mobile/media convergence and a wave of new entries. This has resulted in a rapid erosion of pricing power, which combined with rising capital expenditure requirements and structurally high fixed costs, led to significant pressures on cash flows and returns. In light of these structural issues, which we believe are not going away, we’ve maintained an underweight to the sector.
OUTLOOK
We expect the shallow eurozone recovery to continue as the region benefits from the gradual easing of austerity measures and positive effects of a U.S. recovery. Structural improvements are being realized as the current account balances improve—notably among the peripheries. As is the case with most economic recoveries, we expect that improvements in Europe will gather pace, which should also benefit our companies. We are also confident that the portfolio will benefit from our positioning, which has shifted somewhat over the last 12 months toward companies that generate a greater portion of their revenue in Europe.
The ECB has signaled its intention to provide monetary stimulus, which has elevated equity valuations from historic lows. European equities appear attractively valued versus other regions. On the basis of expected earnings for the next 12 months, Europe is trading at approximately a 5% discount to its historical average and below other developed markets, including the U.S. and Japan. Valuations also look inexpensive relative to other asset classes. For example, the dividend yield available from the European equity markets remains greater than the yield on a basket of similarly weighted European sovereign bonds.
European earnings have lagged earnings in the U.S. materially during the past 12 months and have significant potential to rebound as the domestic economy stabilizes. European earnings are still appreciably below their level from before the 2008 financial crisis unfolded. Furthermore, corporate margins remain below historical highs. European companies have continued to restructure, reduce costs, and improve their market positions. We, therefore, believe that many companies will experience significant operating leverage as the gradual European recovery continues. Valuation measures that incorporate normalized earnings, such as the cyclically adjusted real price/earnings ratio, suggest that valuations are still historically low.
Our investment thesis is to identify high-quality businesses in Europe that trade at attractive valuations. We continue to find many of these. When we look across the broad universe of European stocks, including domestically oriented businesses that have been overlooked by investors and selective global franchises that have fallen out of favor amid recent emerging market growth concerns, we are finding many attractive investment opportunities. We will continue to leverage our independent global research platform to uncover compelling investment opportunities on behalf of our shareholders.
Thank you for your support and confidence in T. Rowe Price.
Respectfully submitted,
Dean Tenerelli
Portfolio manager
November 18, 2013
The portfolio manager 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 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.
GLOSSARY
Gross domestic product (GDP): The total market value of all goods and services produced in a country in a given year.
Lipper averages: The average of available mutual fund performance returns in categories defined by Lipper Inc.
MSCI Europe Index: A capitalization-weighted index of approximately 500 stocks traded in 15 European markets.
Note: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
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.
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.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
| Notes to Financial Statements |
T. Rowe Price International Funds, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The European Stock Fund (the fund) is a diversified, open-end management investment company established by the corporation. The fund commenced operations on February 28, 1990. The fund seeks long-term growth of capital through investments primarily in the common stocks of companies located (or with primary operations) in Europe.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), which require the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the 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. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. 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 to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid annually. Capital gain distributions, if any, 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.
Credits The fund earns credits on temporarily uninvested cash balances held at the custodian, which reduce the fund’s custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits.
Redemption Fees A 2% fee is assessed on redemptions of fund shares held for 90 days or less to deter short-term trading and to protect the interests of long-term shareholders. Redemption fees are withheld from proceeds that shareholders receive from the sale or exchange of fund shares. The fees are paid to the fund and are recorded as an increase to paid-in capital. The fees may cause the redemption price per share to differ from the net asset value per share.
New Accounting Guidance On May 1, 2013, the fund adopted new accounting guidance, issued by the Financial Accounting Standards Board, that requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. Adoption had no effect on the fund’s net assets or results of operations.
NOTE 2 - VALUATION
The fund’s financial instruments are valued, and its 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.
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) has been established 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 fund’s Board; is chaired by the fund’s treasurer; and has representation from legal, portfolio management and trading, operations, and risk management.
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 domestic equity securities 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.
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. 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 October 31, 2013:
There were no material transfers between Levels 1 and 2 during the year.
NOTE 3 - OTHER INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities other than short-term securities aggregated $703,034,000 and $414,784,000, respectively, for the year ended October 31, 2013.
NOTE 4 - 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 fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
Distributions during the years ended October 31, 2013 and October 31, 2012, totaled $14,136,000 and $16,238,000, respectively, and were characterized as ordinary income for tax purposes. At October 31, 2013, the tax-basis cost of investments and components of net assets were as follows:
The fund intends to retain realized gains to the extent of available capital loss carryforwards. Because the fund is required to use capital loss carryforwards that do not expire before those with expiration dates, all or a portion of its capital loss carryforwards subject to expiration could ultimately go unused. During the year ended October 31, 2013, the fund utilized $62,900,000 of capital loss carryforwards. The fund’s available capital loss carryforwards as of October 31, 2013, all expire in fiscal 2017.
NOTE 5 - 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 and 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 October 31, 2013, the fund had no deferred tax liability attributable to foreign securities and no foreign capital loss carryforwards.
NOTE 6 - 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). Price Associates has entered into a subadvisory agreement(s) with one or more of its wholly owned subsidiaries, to provide investment advisory services to the fund. 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 0.50% 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 0.275% for assets in excess of $400 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At October 31, 2013, the effective annual group fee rate was 0.30%.
In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates computes the daily share price and provides certain other 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 fund. For the year ended October 31, 2013, expenses incurred pursuant to these service agreements were $116,000 for Price Associates; $448,000 for T. Rowe Price Services, Inc.; and $32,000 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 is also one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum Funds) may invest. The Spectrum Funds do not invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to a special servicing agreement, expenses associated with the operation of the Spectrum Funds are borne by each underlying Price fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by the Spectrum Funds. Expenses allocated under this agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the year ended October 31, 2013, the fund was allocated $232,000 of Spectrum Funds’ expenses, of which $145,000 related to services provided by Price. The amount payable at period-end pursuant to this agreement is reflected as Due to Affiliates in the accompanying financial statements. Additionally, redemption fees received by the Spectrum Funds are allocated to each underlying Price fund in proportion to the average daily value of its shares owned by the Spectrum Funds. $11,000 of redemption fees reflected in the accompanying financial statements were received from the Spectrum Funds. At October 31, 2013, approximately 19% of the outstanding shares of the fund were held by the Spectrum Funds.
The fund may invest in the T. Rowe Price Reserve Investment Fund, the T. Rowe Price Government Reserve Investment Fund, or the T. Rowe Price Short-Term Reserve Fund (collectively, the Price Reserve Investment Funds), open-end management investment companies managed by Price Associates and considered affiliates of the fund. The Price Reserve Investment 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 Investment Funds pay no investment management fees.
NOTE 7 - BORROWING
To provide temporary liquidity, the fund may borrow from other T. Rowe Price-sponsored mutual funds under an interfund borrowing program developed and managed by Price Associates. The program permits the borrowing and lending of cash at rates beneficial to both the borrowing and lending funds. Pursuant to program guidelines, loans totaling 10% or more of a borrowing fund’s total assets require collateralization at 102% of the value of the loan; loans of less than 10% are unsecured. During the year ended October 31, 2013, the fund incurred $4,000 in interest expense related to outstanding borrowings on 23 days in the average amount of $5,870,000 and at an average annual rate of 1.16%. At October 31, 2013, there were no borrowings outstanding.
| Report of Independent Registered Public Accounting Firm |
To the Board of Directors of T.
Rowe Price International Funds, Inc. and
Shareholders of T. Rowe Price European
Stock Fund
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price European Stock Fund (one of the portfolios comprising T. Rowe Price International Funds, Inc., hereafter referred to as the “Fund”) at October 31, 2013, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2013 by correspondence with the custodian and brokers, and confirmation of the underlying funds by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers
LLP
Baltimore, Maryland
December 13, 2013
| Tax Information (Unaudited) for the Tax Year Ended 10/31/13 |
We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements.
For taxable non-corporate shareholders, $19,378,000 of the fund’s income represents qualified dividend income subject to the 15% rate category.
For corporate shareholders, $318,000 of the fund’s income qualifies for the dividends-received deduction.
The fund will pass through foreign source income of $19,378,000 and foreign taxes paid of $2,866,000.
| 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 website, troweprice.com. To access it, click on the words “Social Responsibility” at the top of our corporate homepage. Next, click on the words “Conducting Business Responsibly” on the left side of the page that appears. Finally, click on the words “Proxy Voting Policies” on the left side of the page that appears.
Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through our website, follow the above directions to reach the “Conducting Business Responsibly” page. Click on the words “Proxy Voting Records” on the left side of that page, and then click on the “View Proxy Voting Records” link at the bottom of the page that appears.
| 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.
| About the Fund’s Directors and Officers |
Your fund is overseen by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of the Board’s members are independent of T. Rowe Price Associates, Inc. (T. Rowe Price), and its affiliates; “inside” or “interested” directors are employees or officers of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-638-5660.
| Independent Directors | ||
| Name | ||
| (Year of Birth) | ||
| Year Elected* | ||
| [Number of T. Rowe Price | Principal Occupation(s) and Directorships of Public Companies and | |
| Portfolios Overseen] | Other Investment Companies During the Past Five Years | |
| William R. Brody | President and Trustee, Salk Institute for Biological Studies (2009 | |
| (1944) | to present); Director, Novartis, Inc. (2009 to present); Director, IBM | |
| 2009 | (2007 to present); President and Trustee, Johns Hopkins University | |
| [157] | (1996 to 2009); Chairman of Executive Committee and Trustee, | |
| Johns Hopkins Health System (1996 to 2009) | ||
| Anthony W. Deering | Chairman, Exeter Capital, LLC, a private investment firm (2004 to | |
| (1945) | present); Director and Member of the Advisory Board, Deutsche | |
| 1991 | Bank North America (2004 to present); Director, Under Armour | |
| [157] | (2008 to present); Director, Vornado Real Estate Investment Trust | |
| (2004 to 2012) | ||
| Donald W. Dick, Jr. | Principal, EuroCapital Partners, LLC, an acquisition and management | |
| (1943) | advisory firm (1995 to present) | |
| 1988 | ||
| [157] | ||
| Bruce W. Duncan | President, Chief Executive Officer, and Director, First Industrial Realty | |
| (1951) | Trust, owner and operator of industrial properties (2009 to present); | |
| 2013 | Chairman of the Board (2005 to present), Interim Chief Executive | |
| [157] | Officer (2007), and Director (1999 to present), Starwood Hotels & | |
| Resorts, hotel and leisure company; Senior Advisor, Kohlberg, | ||
| Kravis, Roberts & Co. LP, a global investment firm (2008 to 2009); | ||
| Trustee, Starwood Lodging Trust, a real estate investment trust and | ||
| former subsidiary of Starwood (1995 to 2006) | ||
| Robert J. Gerrard, Jr. | Advisory Board Member, Pipeline Crisis/Winning Strategies (1997 | |
| (1952) | to present); Chairman of Compensation Committee and Director, | |
| 2012 | Syniverse Holdings, Inc. (2008 to 2011); Executive Vice President | |
| [157] | and General Counsel, Scripps Networks, LLC (1997 to 2009) | |
| Karen N. Horn | Limited Partner and Senior Managing Director, Brock Capital Group, | |
| (1943) | an advisory and investment banking firm (2004 to present); Director, | |
| 2003 | Eli Lilly and Company (1987 to present); Director, Simon Property | |
| [157] | Group (2004 to present); Director, Norfolk Southern (2008 to | |
| present); Director, Fannie Mae (2006 to 2008) | ||
| Paul F. McBride | Former Company Officer and Senior Vice President, Human | |
| (1956) | Resources and Corporate Initiatives (2004 to 2010) | |
| 2013 | ||
| [157] | ||
| Theo C. Rodgers | Founder and President, A&R Development Corporation (1977 to | |
| (1941) | present) and A&R Management, Inc. (1984 to present) | |
| 2005 | ||
| [157] | ||
| Cecilia E. Rouse, Ph.D. | Dean, Woodrow Wilson School (2012 to present); Professor and | |
| (1963) | Researcher, Princeton University (1992 to present); Director, MDRC | |
| 2012 | (2011 to present); Member, National Academy of Education (2010 | |
| [157] | to present); Research Associate, National Bureau of Economic | |
| Research’s Labor Studies Program (1998 to 2009 and 2011 to | ||
| present); Member, President’s Council of Economic Advisors | ||
| (2009 to 2011); Member, The MacArthur Foundation Network on | ||
| the Transition to Adulthood and Public Policy (2000 to 2008); | ||
| Member, National Advisory Committee for the Robert Wood | ||
| Johnson Foundation’s Scholars in Health Policy Research Program | ||
| (2008); Director and Member, National Economic Association | ||
| (2006 to 2008); Member, Association of Public Policy Analysis and | ||
| Management Policy Council (2006 to 2008); Member, Hamilton | ||
| Project’s Advisory Board at The Brookings Institute (2006 to 2008); | ||
| Chair of Committee on the Status of Minority Groups in the Economic | ||
| Profession, American Economic Association (2006 to 2008 and | ||
| 2012 to present) | ||
| John G. Schreiber | Owner/President, Centaur Capital Partners, Inc., a real estate | |
| (1946) | investment company (1991 to present); Cofounder and Partner, | |
| 2001 | Blackstone Real Estate Advisors, L.P. (1992 to present); Director, | |
| [157] | General Growth Properties, Inc. (2010 to present); Director, BXMT | |
| (formerly Capital Trust, Inc.), a real estate investment company | ||
| (2012 to present); Director and Chairman of the Board, Brixmor | ||
| Property Group, Inc. (2013 to present) | ||
| Mark R. Tercek | President and Chief Executive Officer, The Nature Conservancy (2008 | |
| (1957) | to present); Managing Director, The Goldman Sachs Group, Inc. | |
| 2009 | (1984 to 2008) | |
| [157] | ||
| *Each independent director serves until retirement, resignation, or election of a successor. | ||
| Inside Directors | ||
| Name | ||
| (Year of Birth) | ||
| Year Elected* | ||
| [Number of T. Rowe Price | Principal Occupation(s) and Directorships of Public Companies and | |
| Portfolios Overseen] | Other Investment Companies During the Past Five Years | |
| Edward C. Bernard | Director and Vice President, T. Rowe Price; Vice Chairman of the | |
| (1956) | Board, Director, and Vice President, T. Rowe Price Group, Inc.; | |
| 2006 | Chairman of the Board, Director, and President, T. Rowe Price | |
| [157] | Investment Services, Inc.; Chairman of the Board and Director, | |
| T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Savings | ||
| Bank, and T. Rowe Price Services, Inc.; Chairman of the Board, Chief | ||
| Executive Officer, and Director, T. Rowe Price International; Chairman | ||
| of the Board, Chief Executive Officer, Director, and President, | ||
| T. Rowe Price Trust Company; Chairman of the Board, all funds | ||
| Brian C. Rogers, CFA, CIC | Chief Investment Officer, Director, and Vice President, T. Rowe Price; | |
| (1955) | Chairman of the Board, Chief Investment Officer, Director, and Vice | |
| 2006 | President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price | |
| [105] | Trust Company | |
| *Each inside director serves until retirement, resignation, or election of a successor. | ||
| Officers | ||
| Name (Year of Birth) | ||
| Position Held With International Funds | Principal Occupation(s) | |
| Ulle Adamson, CFA (1979) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Roy H. Adkins (1970) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Christopher D. Alderson (1962) | Director and President–International Equity, | |
| President | T. Rowe Price International; Company’s | |
| Representative, Director, and Vice President, | ||
| Price Hong Kong; Director and Vice President, | ||
| Price Singapore; Vice President, T. Rowe Price | ||
| Group, Inc. | ||
| Syed H. Ali (1970) | Vice President, Price Singapore and T. Rowe | |
| Vice President | Price Group, Inc.; formerly Research Analyst, | |
| Credit Suisse Securities (to 2010) | ||
| Paulina Amieva (1981) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Malik S. Asif (1981) | Employee, T. Rowe Price; formerly student, The | |
| Vice President | University of Chicago Booth School of Business | |
| (to 2012); Investment Consultant–Middle East | ||
| and North Africa Investment Team, International | ||
| Finance Corporation–The World Bank Group | ||
| (to 2010); Equity Research Associate, Keefe, | ||
| Bruyette & Woods, Inc. (to 2009) | ||
| Hari Balkrishna (1983) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly intern, | |
| T. Rowe Price (to 2010); Analyst, Investment | ||
| Banking Division of Financial Institutions | ||
| Group, Goldman Sachs, Sydney, Australia | ||
| (to 2009) | ||
| Sheena L. Barbosa (1983) | Employee, T. Rowe Price; Vice President, Price | |
| Vice President | Hong Kong | |
| Peter J. Bates, CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Executive Vice President | Group, Inc. | |
| Luis M. Baylac (1982) | Employee, T. Rowe Price | |
| Vice President | ||
| Oliver D.M. Bell, IMC (1969) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International; formerly Head | |
| of Global Emerging Markets Research, Pictet | ||
| Asset Management Ltd. (to 2011), and Portfolio | ||
| Manager of Africa and Middle East portfolios | ||
| and other emerging markets strategies, Pictet | ||
| Asset Management Ltd. (to 2009) | ||
| R. Scott Berg, CFA (1972) | Vice President, T. Rowe Price and T. Rowe Price | |
| Executive Vice President | Group, Inc. | |
| Peter I. Botoucharov (1965) | Vice President, T. Rowe Price International; | |
| Vice President | formerly Director–EMEA Macroeconomic | |
| Research and Strategy (to 2012); Independent | ||
| Financial Advisor, Global Source (to 2010) | ||
| Brian J. Brennan, CFA (1964) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., T. Rowe Price International, and | |
| T. Rowe Price Trust Company | ||
| Ryan N. Burgess, CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Sheldon Chan (1981) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc.; formerly Associate Director, | |
| HSBC (Hong Kong) (to 2011) | ||
| Tak Yiu Cheng, CFA, CPA (1974) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Carolyn Hoi Che Chu (1974) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc.; formerly Director, Bank of | |
| America Merrill Lynch and Co-head of credit | ||
| and convertibles research team in Hong Kong | ||
| (to 2010) | ||
| Jonathan Chou (1980) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Archibald Ciganer Albeniz, CFA (1976) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Richard N. Clattenburg, CFA (1979) | Vice President, Price Singapore, T. Rowe | |
| Executive Vice President | Price, T. Rowe Price Group, Inc., and T. Rowe | |
| Price International | ||
| Michael J. Conelius, CFA (1964) | Vice President, T. Rowe Price, T. Rowe Price | |
| Executive Vice President | Group, Inc., T. Rowe Price International, and | |
| T. Rowe Price Trust Company | ||
| José Costa Buck (1972) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Andrew S. Davis (1978) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc.; formerly intern, Franklin Templeton | |
| Investments (to 2009) | ||
| Richard de los Reyes (1975) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Michael Della Vedova (1969) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly Cofounder | |
| and Partner, Four Quarter Capital (to 2009) | ||
| Jessie Q. Ding (1981) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Shawn T. Driscoll (1975) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Bridget A. Ebner (1970) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Mark J.T. Edwards (1957) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| David J. Eiswert, CFA (1972) | Vice President, T. Rowe Price, T. Rowe Price | |
| Executive Vice President | Group, Inc., and T. Rowe Price International | |
| Henry M. Ellenbogen (1973) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., and T. Rowe Price Trust Company | |
| Luis Fananas (1971) | Vice President, T. Rowe Price International; | |
| Vice President | formerly Equities Research Director, Deutsche | |
| Bank (to 2012) | ||
| Roger L. Fiery III, CPA (1959) | Vice President, Price Hong Kong, Price | |
| Vice President | Singapore, T. Rowe Price, T. Rowe Price Group, | |
| Inc., T. Rowe Price International, and T. Rowe | ||
| Price Trust Company | ||
| Mark S. Finn, CFA, CPA (1963) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., and T. Rowe Price Trust Company | |
| Melissa C. Gallagher (1974) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| John R. Gilner (1961) | Chief Compliance Officer and Vice President, | |
| Chief Compliance Officer | T. Rowe Price; Vice President, T. Rowe Price | |
| Group, Inc., and T. Rowe Price Investment | ||
| Services, Inc. | ||
| Gregory S. Golczewski (1966) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Trust Company | |
| Vishnu Vardhan Gopal (1979) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Paul D. Greene II (1978) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Benjamin Griffiths, CFA (1977) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| M. Campbell Gunn (1956) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Gregory K. Hinkle, CPA (1958) | Vice President, T. Rowe Price, T. Rowe Price | |
| Treasurer | Group, Inc., and T. Rowe Price Trust Company | |
| Stefan Hubrich, Ph.D., CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Leigh Innes, CFA (1976) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Tetsuji Inoue (1971) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly Equity | |
| Sales, JP Morgan Chase Securities Ltd. (to | ||
| 2012); Equity Specialist Technology, ICAP | ||
| PLC (to 2010); Managing Director–Financial | ||
| Sector Fund Manager, North Sound Capital LLC | ||
| (to 2009) | ||
| Randal S. Jenneke (1971) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly Senior | |
| Portfolio Manager, Australian Equities (to 2010) | ||
| Jin W. Jeong (1976) | Vice President, T. Rowe Price and T. Rowe | |
| Vice President | Price International; formerly Research Analyst, | |
| Wellington Management (to 2009) | ||
| Prashant G. Jeyaganesh (1983) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Yoichiro Kai (1973) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly Japanese | |
| Financial/Real Estate Sector Analyst/Portfolio | ||
| Manager, Citadel Investment Group, Asia | ||
| Limited (to 2009) | ||
| Jai Kapadia (1982) | Employee, T. Rowe Price; Vice President, Price | |
| Vice President | Hong Kong; formerly student, MIT Sloan School | |
| of Management (to 2011); Associate Analyst, | ||
| Sirios Capital Management (to 2009) | ||
| Andrew J. Keirle (1974) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Ian D. Kelson (1956) | Director and President–International Fixed | |
| Executive Vice President | Income, T. Rowe Price International; Vice | |
| President, T. Rowe Price and T. Rowe Price | ||
| Group, Inc. | ||
| Christopher J. Kushlis, CFA (1976) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Aden Lau (1982) | Employee, T. Rowe Price; formerly student, The | |
| Vice President | Wharton School, University of Pennsylvania | |
| (to 2012); Private Equity Associate–Financial | ||
| Services, Stone Point Capital (to 2010); | ||
| Investment Banking Analyst–Financial | ||
| Institutions Group, Credit Suisse (to 2009) | ||
| Mark J. Lawrence (1970) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| David M. Lee, CFA (1962) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Patricia B. Lippert (1953) | Assistant Vice President, T. Rowe Price and | |
| Secretary | T. Rowe Price Investment Services, Inc. | |
| Christopher C. Loop, CFA (1966) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., and T. Rowe Price International | |
| Anh Lu (1968) | Vice President, Price Hong Kong and T. Rowe | |
| Executive Vice President | Price Group, Inc. | |
| Sebastien Mallet (1974) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Daniel Martino, CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Ryan Martyn (1979) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly Investment | |
| Analyst, VGI Partners (to 2009) | ||
| Jonathan H.W. Matthews, CFA (1975) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Susanta Mazumdar (1968) | Vice President, Price Singapore and T. Rowe | |
| Executive Vice President | Price Group, Inc. | |
| Raymond A. Mills, Ph.D., CFA (1960) | Vice President, T. Rowe Price, T. Rowe Price | |
| Executive Vice President | Group, Inc., T. Rowe Price International, and | |
| T. Rowe Price Trust Company | ||
| Jihong Min (1979) | Employee, T. Rowe Price; Vice President, | |
| Vice President | Price Singapore; formerly Financial Analyst, | |
| Geosphere Capital Management, Singapore | ||
| (to 2012); Financial Analyst, Fortress | ||
| Investment Group, Hong Kong (to 2009) | ||
| Eric C. Moffett (1974) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Samy B. Muaddi, CFA (1984) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Joshua Nelson (1977) | Vice President, T. Rowe Price and T. Rowe Price | |
| Executive Vice President | Group, Inc. | |
| Philip A. Nestico (1976) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Sridhar Nishtala (1975) | Vice President, Price Singapore and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Jason Nogueira, CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Executive Vice President | Group, Inc. | |
| David Oestreicher (1967) | Director, Vice President, and Secretary, T. Rowe | |
| Vice President | Price Investment Services, Inc., T. Rowe | |
| Price Retirement Plan Services, Inc., T. Rowe | ||
| Price Services, Inc., and T. Rowe Price Trust | ||
| Company; Vice President and Secretary, | ||
| T. Rowe Price, T. Rowe Price Group, Inc., and | ||
| T. Rowe Price International; Vice President, | ||
| Price Hong Kong and Price Singapore | ||
| Michael D. Oh, CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Kenneth A. Orchard (1975) | Vice President, T. Rowe Price Group, Inc., | |
| Vice President | and T. Rowe Price International; formerly Vice | |
| President, Moody’s Investors Service (to 2010) | ||
| Curt J. Organt, CFA (1968) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Paul T. O’Sullivan (1973) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Hiroaki Owaki, CFA (1962) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Gonzalo Pángaro, CFA (1968) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Timothy E. Parker, CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Craig J. Pennington, CFA (1971) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International; formerly Global | |
| Energy Analyst, Insight Investment (to 2010) | ||
| Austin Powell, CFA (1969) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Frederick A. Rizzo (1969) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Christopher J. Rothery (1963) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| David L. Rowlett, CFA (1975) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Federico Santilli, CFA (1974) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Sebastian Schrott (1977) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Deborah D. Seidel (1962) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., T. Rowe Price Investment Services, | |
| Inc., and T. Rowe Price Services, Inc. | ||
| Amitabh Shah (1980) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Jeneiv Shah, CFA (1980) | Employee, T. Rowe Price; Vice President, | |
| Vice President | T. Rowe Price International; formerly Analyst, | |
| Mirae Asset Global Investments (to 2010) | ||
| Robert W. Sharps, CFA, CPA (1971) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., and T. Rowe Price Trust Company | |
| John C.A. Sherman (1969) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Robert W. Smith (1961) | Vice President, T. Rowe Price, T. Rowe Price | |
| Executive Vice President | Group, Inc., and T. Rowe Price Trust Company | |
| Eunbin Song, CFA (1980) | Vice President, Price Singapore and T. Rowe | |
| Vice President | Price Group, Inc. | |
| David A. Stanley (1963) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Jonty Starbuck, Ph.D. (1975) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Taymour R. Tamaddon, CFA (1976) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Ju Yen Tan (1972) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Sin Dee Tan, CFA (1979) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Dean Tenerelli (1964) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Siby Thomas (1979) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc.; formerly student, The University of | |
| Chicago Graduate School of Business (to 2009) | ||
| Justin Thomson (1968) | Vice President, T. Rowe Price Group, Inc., and | |
| Executive Vice President | T. Rowe Price International | |
| Mitchell J.K. Todd (1974) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Eric L. Veiel, CFA (1972) | Vice President, T. Rowe Price and T. Rowe Price | |
| Vice President | Group, Inc. | |
| Verena E. Wachnitz, CFA (1978) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| David J. Wallack (1960) | Vice President, T. Rowe Price, T. Rowe Price | |
| Vice President | Group, Inc., and T. Rowe Price Trust Company | |
| Julie L. Waples (1970) | Vice President, T. Rowe Price | |
| Vice President | ||
| Hiroshi Watanabe, CFA (1975) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Christopher S. Whitehouse (1972) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Clive M. Williams (1966) | Vice President, Price Hong Kong, Price | |
| Vice President | Singapore, T. Rowe Price, T. Rowe Price Group, | |
| Inc., and T. Rowe Price International | ||
| J. Howard Woodward, CFA (1974) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| John Xie, CFA (1980) | Employee, T. Rowe Price; formerly Senior | |
| Vice President | Associate, The Boston Consulting Group | |
| (to 2010) | ||
| Marta Yago (1977) | Vice President, T. Rowe Price Group, Inc., and | |
| Vice President | T. Rowe Price International | |
| Ernest C. Yeung, CFA (1979) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Alison Mei Ling Yip (1966) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Christopher Yip, CFA (1975) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Wenli Zheng (1979) | Vice President, Price Hong Kong and T. Rowe | |
| Vice President | Price Group, Inc. | |
| Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least 5 years. | ||
Item 2. Code of Ethics.
The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Directors/Trustees has determined that Mr. Anthony W. Deering qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Deering is considered independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) – (d) Aggregate fees billed for the last two fiscal years for professional services rendered to, or on behalf of, the registrant by the registrant’s principal accountant were as follows:
Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant’s financial statements and specifically include the issuance of a report on internal controls and, if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance, tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation of Federal, state, and excise tax returns. All other fees include the registrant’s pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant’s Board of Directors/Trustees.
(e)(1) The registrant’s audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
(g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $1,828,000 and $1,333,000, respectively.
(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. Accordingly, these services were considered by the registrant’s audit committee in maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. 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 attached.
(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price International Funds, Inc.
| By | /s/ Edward C. Bernard | |
| Edward C. Bernard | ||
| Principal Executive Officer | ||
| Date December 13, 2013 | ||
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 December 13, 2013 | ||
| By | /s/ Gregory K. Hinkle | |
| Gregory K. Hinkle | ||
| Principal Financial Officer | ||
| Date December 13, 2013 | ||