Registration Nos. 033-29697/811-5833
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 78 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 74 /X/
T. ROWE PRICE INSTITUTIONAL INTERNATIONAL FUNDS, INC.
Exact Name of Registrant as Specified in Charter
100
East Pratt Street, Baltimore, Maryland 21202
Address of Principal Executive Offices
410-345-2000
Registrants
Telephone Number, Including Area Code
David Oestreicher
100 East Pratt Street, Baltimore, Maryland
21202
Name and Address of Agent for Service
Approximate Date of Proposed Public Offering March 1, 2018
It is proposed that this filing will become effective (check appropriate box):
// Immediately upon filing pursuant to paragraph (b)
/X/ On March 1, 2018 pursuant to paragraph (b)
// 60 days after filing pursuant to paragraph (a)(1)
// On (date) pursuant to paragraph (a)(1)
// 75 days after filing pursuant to paragraph (a)(2)
// On (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
// This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
PROSPECTUS | |
TRIAX | |
March 1, 2018 | |
T. Rowe Price Institutional Africa & Middle East Fund | |
A fund seeking long-term growth of capital through investments in common stocks of companies located (or with primary operations) in Africa and the Middle East. | |
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. | |
Table of Contents
SUMMARY
The fund seeks long-term growth of capital by investing primarily in the common stocks of companies located (or with primary operations) in Africa and the Middle East.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may also incur brokerage commissions and other charges when buying or selling shares of the fund, which are not reflected in the table.
Fees and Expenses of the Fund
Shareholder fees (fees paid directly from your investment) | ||
Redemption fee (as a percentage of amount redeemed on shares held for 90 days or less) | 2.00 | % |
Annual
fund operating expenses | ||
Management fees | 1.00 | % |
Other expenses | 0.21 | |
Total annual fund operating expenses | 1.21 |
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods, that your investment has a 5% return each year, and that the funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 year | 3 years | 5 years | 10 years |
$123 | $384 | $665 | $1,466 |
Portfolio Turnover The fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the funds shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the funds performance. During the most recent fiscal year, the funds portfolio turnover rate was 55.7% of the average value of its portfolio.
Investments, Risks, and Performance
Principal Investment Strategies The fund normally invests at least 80% of its net assets (including any borrowings for investment purposes) in African and Middle Eastern companies. For purposes of determining whether the fund invests at least 80% of its net assets in African and Middle Eastern companies, the fund relies on the
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country assigned to a security by MSCI Inc. or another unaffiliated data provider. The fund expects to primarily invest in common stocks and participation notes (P-notes) linked to common stocks of companies located (or with primary operations) in Africa and the Middle East. The countries in which the fund normally invests include, but are not limited to, the following:
· Primary Emphasis: Bahrain, Egypt, Jordan, Kenya, Kuwait, Lebanon, Morocco, Nigeria, Oman, Qatar, Saudi Arabia, South Africa, and United Arab Emirates.
· Others: Algeria, Angola, Botswana, Ghana, Ivory Coast, Mauritius, Mozambique, Namibia, Niger Republic, Rwanda, Senegal, Syria, Tanzania, Tunisia, Uganda, Zambia, and Zimbabwe.
The fund is nondiversified, meaning it may invest a greater portion of its assets in a single company and own more of the companys voting securities than is permissible for a diversified fund. The funds portfolio is expected to be composed of investments in about 50 to 80 different companies, although the number could vary depending on market conditions. The fund may purchase the stocks of companies of any size. While most assets will be invested directly in common stocks, the fund may gain exposure to common stocks by purchasing P-notes that offer a return linked to a particular underlying common stock. P-notes are primarily used to invest indirectly in certain stocks that trade in a market that restricts foreign investors, such as the fund, from investing directly in that market. The fund may make substantial investments (at times more than 25% of its total assets) in telecommunications and banking companies in various African and Middle Eastern countries.
While the adviser invests with an awareness of the outlook for certain industry sectors and individual countries within the region, the advisers decision-making process focuses on bottom-up stock selection. Country allocation is driven largely by stock selection, though the adviser may limit investments in markets or industries that appear to have poor overall prospects.
Security selection reflects a growth style. The adviser relies on a global team of investment analysts dedicated to in-depth fundamental research in an effort to identify companies capable of achieving and sustaining above-average, long-term earnings growth. The adviser seeks to purchase stocks of companies at reasonable prices in relation to present or anticipated earnings, cash flow, or book value.
In selecting investments, the adviser generally favors companies with one or more of the following characteristics:
· leading or improving market position;
· attractive business niche;
· attractive or improving franchise or industry position;
· seasoned management;
· stable or improving earnings and/or cash flow; and
· sound or improving balance sheet.
Summary | 3 |
The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.
Principal Risks As with any mutual fund, there is no guarantee that the fund will achieve its objective. The funds share price fluctuates, which means you could lose money by investing in the fund. The principal risks of investing in this fund are summarized as follows:
Active management risks The investment advisers judgments about the attractiveness, value, or potential appreciation of the funds investments may prove to be incorrect. The fund could underperform in comparison to other funds with a similar benchmark or similar objectives and investment strategies if the funds overall investment selections or strategies fail to produce the intended results.
Risks of stock investing Stocks generally fluctuate in value more than bonds and may decline significantly over short time periods. There is a chance that stock prices overall will decline because stock markets tend to move in cycles, with periods of rising and falling prices. The value of a stock in which the fund invests may decline due to general weakness in the stock market or because of factors that affect a particular company or industry.
International investing risks Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse local, political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S.
Emerging markets risks The risks of international investing are heightened for securities of issuers in emerging market countries. Emerging market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. In addition to all of the risks of investing in international developed markets, emerging markets are more susceptible to governmental interference, local taxes being imposed on international investments, restrictions on gaining access to sales proceeds, and less liquid and less efficient trading markets.
Frontier markets generally have smaller economies and less mature capital markets than emerging markets. As a result, the risks of investing in emerging market countries are magnified in frontier market countries. Frontier markets are more susceptible to abrupt changes in currency values, less mature markets and settlement practices, and lower trading volumes that could lead to greater price volatility and illiquidity.
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P-note risks To the extent the fund invests in P-notes, it is subject to certain risks in addition to the risks normally associated with a direct investment in the underlying foreign securities the P-note seeks to replicate. As the purchaser of a P-note, the fund is relying on the creditworthiness of the counterparty issuing the P-note and does not have the same rights under a P-note as it would as a shareholder of the underlying issuer. Therefore, if a counterparty becomes insolvent, the fund could lose the total value of its investment in the P-note. In addition, there is no assurance that there will be a trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
Geographic concentration risks Because the fund concentrates its investments in a particular geographic region, the funds performance is closely tied to the social, political, and economic conditions within that region. Political developments and changes in regulatory, tax, or economic policy in particular countries within the region could significantly affect the markets in those countries as well as the entire region. As a result, the fund is likely to be more volatile than more geographically diverse international funds.
Many African and Middle Eastern countries have histories of dictatorships, political and military unrest, and financial troubles, and their markets should be considered extremely volatile even when compared to those of other emerging market countries. Many of these countries tend to be highly reliant on the exportation of oil and other commodities so their economies can be significantly impacted by fluctuations in commodity prices and the global demand for certain commodities.
Risks of investing in Saudi Arabia The ability of foreign investors (such as the fund) to invest in Saudi Arabian issuers is new and untested. Such ability could be restricted or revoked by the Saudi Arabian government at any time, and unforeseen risks could materialize due to foreign ownership in such securities. The economy of Saudi Arabia is dominated by petroleum exports. A sustained decrease in petroleum prices could have a negative impact on all aspects of the economy. Although the political situation in Saudi Arabia is currently stable, there remains the possibility that instability in the larger Middle East region could adversely impact the economy of Saudi Arabia, and there is no assurance of political stability in Saudi Arabia.
Industry risks Because the fund may invest significantly in telecommunications and banking companies, the fund is more susceptible to adverse developments affecting such companies and may perform poorly during a downturn in one or more of the industries that heavily impact telecommunications and banking companies. Telecommunications companies can be adversely affected by, among other things, changes in government regulation, intense competition, and rapid obsolescence of products and services due to technological innovations or changing consumer preferences. Banks and other financial services companies can be adversely affected by, among other things, regulatory changes, interest rate movements, the availability of capital and cost to borrow, and the rate of debt defaults.
Summary | 5 |
Nondiversification risks As a nondiversified fund, the fund has the ability to invest a larger percentage of its assets in the securities of a smaller number of issuers than a diversified fund. As a result, poor performance by a single issuer could adversely affect fund performance more than if the fund were invested in a larger number of issuers. The funds share price can be expected to fluctuate more than that of a comparable diversified fund.
Investment style risks Different investment styles tend to shift in and out of favor depending on market conditions and investor sentiment. The funds growth approach to investing could cause it to underperform other stock funds that employ a different investment style. Growth stocks tend to be more volatile than certain other types of stocks, and their prices may fluctuate more dramatically than the overall stock market. A stock with growth characteristics can have sharp price declines due to decreases in current or expected earnings and may lack dividends that can help cushion its share price in a declining market.
Market capitalization risks Because the fund may invest in companies of any size, its share price could be more volatile than a fund that invests only in large companies. Small and medium-sized companies often have less experienced management, narrower product lines, more limited financial resources, and less publicly available information than larger companies. Larger companies may not be able to attain the high growth rates of successful smaller companies, especially during strong economic periods, and they may be less capable of responding quickly to competitive challenges and industry changes.
Performance The following performance information provides some indication of the risks of investing in the fund. The funds performance information represents only past performance (before and after taxes) and is not necessarily an indication of future results.
The following bar chart illustrates how much returns can differ from year to year by showing calendar year returns and the best and worst calendar quarter returns during those years for the fund.
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The following table shows the average annual total returns for the fund, and also compares the returns with the returns of a relevant broad-based market index, as well as with the returns of one or more comparative indexes that have investment characteristics similar to those of the fund.
In addition, the table shows hypothetical after-tax returns to demonstrate how taxes paid by a shareholder may influence returns. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as a 401(k) account or an IRA.
Summary | 7 |
Average Annual Total Returns | |||||||||||||||||||
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| December 31, 2017 |
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| Since | Inception |
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| 1 Year | 5 Years | inception | date |
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| Institutional Africa & Middle East Fund | 04/30/2008 |
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| Returns before taxes | 23.75 | % |
| 7.90 | % |
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| -0.87 | % |
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| Returns after taxes on distributions | 23.43 |
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| 6.67 |
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| -1.71 |
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| Returns after taxes on distributions |
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| and sale of fund shares | 13.84 |
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| 5.98 |
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| -0.85 |
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| MSCI Arabian Markets & Africa 10/40 IMI Index (reflects no deduction for fees, expenses, or taxes)a |
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| 18.11 | 3.62 | 4.16 | c |
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| S&P Emerging/Frontier ME & Africa BMI ex IL (reflects no deduction for fees, expenses, or taxes) |
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| 19.86 |
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| 4.20 |
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| 0.46 | d |
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| Combined Index Portfolio (reflects no deduction for fees, expenses, or taxes)b |
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| 19.86 |
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| 4.20 |
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| 1.20 | d |
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| Lipper Emerging Markets Funds Average |
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| 34.57 |
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| 4.26 |
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| 2.06 | d |
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a Effective January 1, 2018, the MSCI Arabian Markets & Africa 10/40 IMI Index replaced the S&P Emerging/Frontier ME & Africa BMI ex IL as the funds primary benchmark. The MSCI Index is a better reflection of the funds investment universe and strategy.
b Combined Index Portfolio is an unmanaged linked performance portfolio composed of: 100% S&P IFCG Africa & Middle East Index (excluding Saudi Arabia and Israel) through 6/30/09 (prior to 9/1/08, the index excluded Kuwait); 100% MSCI Arabian Markets & Africa Index from 7/1/09 through 9/29/10; and 100% S&P Emerging/Frontier ME & Africa BMI ex IL from 9/30/10 forward.
c Return as of 11/30/10.
d Return as of 4/30/08.
Updated performance information is available through troweprice.com.
Management
Investment Adviser T. Rowe Price Associates, Inc. (T. Rowe Price)
Investment Sub-adviser T. Rowe Price International Ltd (T. Rowe Price International)
Portfolio Manager | Title | Managed Fund Since | Joined Investment |
Oliver D.M. Bell | Chairman of Investment Advisory Committee | 2011 | 2011 |
Purchase and Sale of Fund Shares
The fund generally requires a $1,000,000 minimum initial investment and there is no minimum for additional purchases, although the initial investment minimum may be
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waived for certain types of accounts held through a retirement plan, financial advisor, or other financial intermediary.
For investors holding shares of the fund directly
with T. Rowe Price, you may purchase, redeem, or exchange fund shares by mail or by telephone
(1-800-638-8790).
If you hold shares through a financial intermediary or retirement plan, you must purchase, redeem, and exchange shares of the fund through your intermediary or retirement plan. You should check with your intermediary or retirement plan to determine the investment minimums that apply to your account.
Tax Information
Any dividends or capital gains are declared and paid annually, usually in December. Redemptions or exchanges of fund shares and distributions by the fund, whether or not you reinvest these amounts in additional fund shares, may be taxed as ordinary income or capital gains unless you invest through a tax-deferred account (in which case you will be taxed upon withdrawal from such account).
More About the Fund | 2 | |
How is the fund organized?
T. Rowe Price Institutional International Funds, Inc. (the Corporation) was incorporated in Maryland in 1989. Currently, the Corporation consists of 11 series, each representing a separate pool of assets with different investment objectives. Each series is an open-end management investment company, or mutual fund. Mutual funds pool money received from shareholders and invest it to try to achieve specified objectives.
What is meant by shares?
As with all mutual funds, investors purchase shares when they put money in the fund. These shares are part of the funds authorized capital stock, but share certificates are not issued.
Each share and fractional share entitles the shareholder to:
· Receive a proportional interest in income and capital gain distributions. For funds with multiple share classes, the income dividends for each share class will generally differ from those of other share classes to the extent that the expense ratios of the classes differ.
· Cast one vote per share on certain fund matters, including the election of the funds directors, changes in fundamental policies, or approval of material changes to the funds investment management agreement. Shareholders of each class have exclusive voting rights on matters affecting only that class.
Does the fund have annual shareholder meetings?
The mutual funds that are sponsored and managed by T. Rowe Price (the T. Rowe Price Funds) are not required to hold regularly scheduled shareholder meetings. To avoid unnecessary costs to the funds shareholders, shareholder meetings are only held when certain matters, such as changes in fundamental policies or elections of directors, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting for the purpose of voting on the removal of any fund director. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the funds will send or make available to you proxy materials that explain the matters to be decided and include instructions on voting by mail, telephone, or the Internet.
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Who runs the fund?
General Oversight
The fund is governed by a Board of Directors (the Board) that meets regularly to review the funds investments, performance, expenses, and other business affairs. The Board elects the funds officers. At least 75% of Board members are independent of T. Rowe Price and its affiliates (the Firm).
Investment Advisers
T. Rowe Price is the funds investment adviser and oversees the selection of the funds investments and management of the funds portfolio pursuant to an investment management agreement between the investment adviser and the fund. T. Rowe Price is a SEC-registered investment adviser that provides investment management services to individual and institutional investors, and sponsors and serves as adviser and sub-adviser to registered investment companies, institutional separate accounts, and common trust funds. The address for T. Rowe Price is 100 East Pratt Street, Baltimore, Maryland 21202. As of December 31, 2017, the Firm had approximately $991 billion in assets under management and provided investment management services for more than 8 million individual and institutional investor accounts.
T. Rowe Price has entered into a sub-advisory agreement with T. Rowe Price International under which T. Rowe Price International is authorized to trade securities and make discretionary investment decisions on behalf of the fund. T. Rowe Price International is an investment adviser registered or licensed with the SEC, United Kingdom Financial Conduct Authority, Financial Services Agency of Japan, and other non-U.S. regulatory authorities. T. Rowe Price International sponsors and serves as adviser to foreign collective investment schemes and provides investment management services to investment companies and other institutional investors. T. Rowe Price International is headquartered in London and has several branch offices around the world. T. Rowe Price International is a direct subsidiary of T. Rowe Price and its address is 60 Queen Victoria Street, London EC4N 4TZ, United Kingdom.
Portfolio Management
T. Rowe Price has established an Investment Advisory Committee with respect to the fund. The committee chairman has day-to-day responsibility for managing the funds portfolio and works with the committee in developing and executing the funds investment program. The members of the committee are as follows: Oliver D.M. Bell, Chairman, Roy H. Adkins, Malik Asif, Tala Boulos, Mark J. Lawrence, Johannes Loefstrand, Oluwaseun A. Oyegunle, and Gonzalo Pangaro. The following information provides the year that the chairman (the portfolio manager) first joined the Firm and the chairmans specific business experience during the past five years (although the chairman may have had portfolio management responsibilities for a longer period). Mr. Bell has been chairman of the committee since 2011. Mr. Bell joined the Firm in 2011 and his investment experience dates from 1997. He has served as a portfolio manager with the Firm throughout the past five years. The
More About the Fund | 11 |
Statement of Additional Information provides additional information about the portfolio managers compensation, other accounts managed by the portfolio manager, and the portfolio managers ownership of the funds shares.
The Management Fee
The fund pays the investment adviser an annual investment management fee based on 1.00% of the funds average daily net assets. The fund calculates and accrues the fee daily.
The expenses shown in the fee table in Section 1 are generally based on the funds prior fiscal year. If the funds assets decline significantly, the funds total annual fund operating expenses may become higher than the numbers shown in the fee table.
A discussion about the factors considered by the Board and its conclusions in approving the funds investment management agreement (and any sub-advisory agreement, if applicable) appear in the funds semiannual report to shareholders for the period ended April 30.
Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. The fund may be appropriate for you if you are seeking diversification for your equity investments and can accept the risks that accompany foreign investments. Your decision should take into account whether you have any other foreign stock investments. If you do not, you may want to consider investing in a more widely diversified fund to gain the broadest exposure to global opportunities. The fund may be an appropriate part of your overall portfolio if you are supplementing existing holdings primarily in the U.S. and developed international markets and are comfortable with the potentially significant volatility associated with investing in the African and Middle Eastern region.
The market may reward growth stocks with price increases when earnings expectations are met or exceeded. Funds that employ a growth-oriented approach to stock selection rely on the premise that by investing in companies that increase their earnings faster than both inflation and the overall economy, the market will eventually reward those companies with a higher stock price. The funds successful implementation of a growth-oriented strategy may lead to long-term growth of capital over time.
Investing a portion of your overall portfolio in stock funds with foreign holdings can enhance your diversification and increase your available investment opportunities.
The fund invests primarily in companies in African and Middle Eastern countries. Focusing on African and Middle Eastern countries provide the fund with the
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opportunity to seek superior growth in the areas the fund views as most promising, but with commensurately higher risks.
Portfolio managers closely monitor the funds investments as well as political and economic trends in the countries and regions in which the fund invests. Holdings are adjusted according to the portfolio managers analysis and outlook. The impact of unfavorable developments in a particular country may be reduced when investments are spread among many countries. However, the economies and financial markets of countries in a certain region may be heavily influenced by one another.
As with all stock funds, the funds share price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse local, political, social, 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 advisers assessment of companies held by the fund may prove incorrect, resulting in losses or poor performance, even in rising markets. Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets.
As with any mutual fund, there is no guarantee the fund will achieve its objective. The funds share price fluctuates, which means you could lose money when you sell your shares of the fund.
The principal risks associated with the funds principal investment strategies include the following:
Growth investment risks Growth stocks can be volatile for several reasons. Since these companies usually invest a high portion of earnings in their businesses, they may lack the dividends that can cushion stock prices in a falling market. Also, earnings disappointments often lead to sharply falling prices because investors buy growth stocks in anticipation of superior earnings growth.
Currency risks A decline in the value of a foreign currency versus the U.S. dollar could reduce the dollar value of securities denominated in that foreign currency. The overall impact on the funds holdings can be significant, unpredictable, and long-lasting, depending on the currencies represented in the funds portfolio and how each foreign currency appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the fund does not engage in extensive foreign currency hedging programs. Further, since exchange rate movements are volatile, the funds attempts at hedging could be unsuccessful, and it is not possible to effectively hedge the currency risks of many emerging market countries.
Other risks of foreign investing Risks can result from varying stages of economic and political development; differing regulatory environments, trading days and
More About the Fund | 13 |
accounting standards; uncertain tax laws; and higher transaction costs of non-U.S. markets. Investments outside the U.S. could be subject to governmental actions such as capital or currency controls, nationalization of a company or industry, expropriation of assets, or imposition of high taxes. A trading market may close without warning for extended time periods, preventing the fund from buying or selling securities in that market.
Trading in the securities in which the fund invests may take place in various foreign markets on certain days when the fund is not open for business and does not calculate its net asset value. For example, the fund may invest in securities that trade in various foreign markets that are open on weekends. As the securities trade, their value may substantially change. As a result, the funds net asset value may be significantly affected on days when shareholders cannot make transactions. In addition, market volatility may significantly limit the liquidity of securities of certain companies in a particular country or geographic region, or of all companies in the country or region. The fund may be unable to liquidate its positions in such securities at any time, or at a favorable price, in order to meet the funds obligations.
Emerging markets risks Investments in emerging markets are subject to the risk of abrupt and severe price declines. The economic and political structures of emerging market countries, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. These economies are less developed, can be overly reliant on particular industries, and more vulnerable to the ebb and flow of international trade, trade barriers, and other protectionist or retaliatory measures. Governments in many emerging market countries participate to a significant degree in their economies and securities markets. As a result, foreign investments may be restricted and subject to greater government control, including repatriation of sales proceeds. Some countries have histories of instability and upheaval that could cause their governments to act in a detrimental or hostile manner toward private enterprise or foreign investment. Investments in countries or regions that have recently begun moving away from central planning and state-owned industries toward free markets should be regarded as speculative.
While some countries have made progress in economic growth, liberalization, fiscal discipline, and political and social stability, there is no assurance these trends will continue. Significant risks, such as war and terrorism, currently affect some emerging market countries. The funds performance will likely be hurt by exposure to nations in the midst of hyperinflation, currency devaluation, trade disagreements, sudden political upheaval, or interventionist government policies. The volatility of emerging markets may be heightened by the actions (such as significant buying or selling) of a few major investors. For example, substantial increases or decreases in cash flows of mutual funds investing in these markets could significantly affect local securities prices and, therefore, could cause fund share prices to decline.
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All of these factors make investing in such countries significantly riskier than in other countries, and any one of these factors could cause the funds share price to decline.
Geographic concentration risks Funds that are less diversified across geographic regions, countries, industries, or individual companies are generally riskier than more diversified funds. The performance of a fund that is less diversified will be closely tied to market, currency, economic, political, environmental, or regulatory conditions and developments in the countries, regions, or industries in which the fund invests and may be more volatile than the performance of a more diversified fund. The economies and financial markets of certain regionssuch as Latin America, Asia, Europe, and the Middle East and Africacan be interdependent and may all decline at the same time.
Risks of investing in Africa and the Middle East The economies of certain African and Middle Eastern countries are in the earliest stages of economic development, which may result in a high concentration of trading volume and market capitalization in a small number of issuers or a limited number of industries. There are typically fewer brokers in African and Middle Eastern countries, and they are typically less well capitalized than brokers in the U.S. or other developed markets. Many African nations have a history of military intervention, dictatorship, civil war, and corruption, which all limit the effectiveness of markets in those countries. Many Middle Eastern countries are facing political and economic uncertainty, with little or no democratic tradition or free market history, which could result in significant economic downturn.
During periods of instability or upheaval, a countrys government may act in a detrimental or hostile manner toward private enterprise or foreign investment. In addition, at certain times, the fund may have to fair valueor assign a value on the basis of factors other than market quotationscertain securities. Portfolio holdings that are valued using techniques other than market quotations, including fair valued securities, may be subject to greater fluctuation than if market quotations had been used, and there is no assurance that the fund could sell or close out a portfolio position for the value established for it at any time. Further, the economies of many Middle Eastern and African countries are largely dependent on, and linked together by, certain commodities (such as gold, silver, copper, diamonds, and oil). As a result, African and Middle Eastern economies are vulnerable to changes in commodity prices, and fluctuations in demand for these commodities could significantly impact economies in these regions. A downturn in one countrys economy could have a disproportionally large effect on others in the region.
Risks of investing in Saudi Arabia The funds relatively high exposure to Saudi Arabia subjects the fund to a higher degree of risk that adverse developments in a single country will negatively impact the fund. Foreign investors have historically been restricted from investing directly in the Saudi Arabian stock exchange and have gained indirect exposure to Saudi Arabian stocks through instruments such as P-notes. Qualified foreign institutional investors (such as the fund) may now invest
More About the Fund | 15 |
directly in the Saudi Arabian stock exchange, although this new ability is relatively new and untested and investments in a particular Saudi Arabian company are subject to various aggregate foreign ownership limits. The ability of foreign investors to invest directly could be restricted or revoked by the Saudi Arabian government at any time and unforeseen risks could materialize due to foreign ownership in such securities.
The economy of Saudi Arabia is highly reliant on oil exportation and a sustained decrease in oil prices could have a negative impact on all aspects of the Saudi Arabian economy. Like many Middle Eastern governments, the government of Saudi Arabia exercises substantial influence over many aspects of the private sector and heightened risks relating to investing in Saudi Arabia may include, among others, expropriation of assets and confiscatory taxation, restrictions on foreign ownership, government intervention in international trade, and political instability as a result of religious, ethnic and/or socioeconomic unrest. Although efforts for liberalization in the broader Saudi Arabian economy are underway, in many areas it has lagged significantly and change has been impeded by the fact that Saudi Arabia is governed by an absolute monarchy. In addition, Saudi Arabias economy tends to rely heavily on cheap, foreign labor and changes in the availability of this labor supply could have an adverse effect on the economy.
Risks of investing in South Africa The funds relatively high exposure to South Africa subjects the fund to a higher degree of risk that adverse developments in a single country will negatively impact the fund. South Africas two-tiered economy, which exhibits characteristics of both developed and developing economies, is characterized by an uneven distribution of wealth and relatively high unemployment. This could lead to civil or social unrest, which, combined with the possibility of ethnic conflict in the country, could result in the rejection of South Africas free market reforms. South Africas insufficient reserves leave it vulnerable to currency devaluation in the future. The South African government controls a large share of the economy; heavy regulation of labor and product markets could stifle growth. A large portion of South Africas export market is dependent on agriculture and mining, leaving the countrys economy susceptible to fluctuations in the market for these commodities.
Small- and mid-cap company risks To the extent the fund invests in small- and mid-capitalization stocks, it is likely to be more volatile than a fund that invests only in large companies. Small and medium-sized companies are generally riskier because they may have more limited product lines, less capital reserves, and less seasoned management, all of which could hinder their efforts to respond to economic, market, and industry changes. In addition, their securities may trade less frequently and with greater price swings.
Nondiversification risks Because the fund is nondiversified and thus can invest more of its assets in a smaller number of issuers, it may be more exposed to the risks associated with an individual issuer than a fund that invests more broadly across many issuers. For example, poor performance by a single large holding of the fund
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would adversely affect the funds performance more than if the fund were invested in a larger number of issuers.
Banking and financial companies risks The fund may invest significantly in banks and other financial services companies (at times more than 25% of its total assets). To the extent the fund has significant investments in financial companies, it is more susceptible to adverse developments affecting such companies and may perform poorly during a downturn in the banking industry. Banks can be adversely affected by, among other things, regulatory changes, interest rate movements, the availability of capital and the cost to borrow, and the rate of debt defaults. Banks and other financial services institutions are often subject to extensive governmental regulation and intervention, and the potential for additional regulation could reduce profit margins and adversely affect the scope of their activities, and the amount of capital they must maintain, and limit the amounts and types of loans and other financial commitments they can make. In addition, companies in the financials sector may also be adversely affected by decreases in the availability of money or asset valuations, credit rating downgrades, increased competition, and adverse conditions in other related markets.
The oversight of, and regulations applicable to, banks in emerging markets may be ineffective when compared with the regulatory frameworks for banks in developed markets. Banks in emerging markets may have significantly less access to capital than banks in more developed markets, leading them to be more likely to fail under adverse economic conditions. In addition, the impact of future regulation on any individual bank, or on the financial services sector as a whole, can be very difficult to predict.
Telecommunication industry risks The fund may make substantial investments (at times more than 25% of its total assets) in telecommunications companies. To the extent that the fund has significant exposure to the telecommunications industry, it is less diversified than stock funds investing in a broader range of industries and, therefore, could experience significant volatility. Companies in this industry are subject to the additional risks of rapid obsolescence of their products or services, lack of investor or consumer acceptance, lack of standardization or compatibility with existing technologies, an unfavorable regulatory environment, intense competition, and a dependency on patent and copyright protection.
Some of the principal tools the adviser uses to try to reduce overall risk include intensive research when evaluating a companys prospects and limiting exposure to any one industry or company. In addition, other risks associated with the additional investment strategies that may be employed by the fund include the following:
Additional strategies and risks While most assets will be invested in common stocks, other strategies may be employed that are not considered part of the funds principal investment strategies. For instance, the fund may, to a limited extent, use derivatives such as futures contracts and forward currency exchange contracts. Any
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investments in futures would typically serve as an efficient means of gaining exposure to certain markets or as a cash management tool to maintain liquidity while being invested in the market. Forward currency exchange contracts would primarily be used to settle trades in a foreign currency or to help protect the funds holdings from unfavorable changes in foreign currency exchange rates, although other currency hedging techniques may be used from time to time. To the extent the fund uses futures and forward currency exchange contracts, it is exposed to potential volatility and losses greater than direct investments in the contracts underlying assets, and the risk that anticipated currency movements will not be accurately predicted.
A derivative involves risks different from, and possibly greater than, the risks associated with investing directly in the assets on which the derivative is based. Derivatives can be highly volatile, illiquid, and difficult to value. Changes in the value of a derivative may not properly correlate with changes in the value of the underlying asset, reference rate, or index. The fund could be exposed to significant losses if it is unable to close a derivatives position due to the lack of a liquid trading market. Derivatives involve the risk that a counterparty to the derivatives agreement will fail to make required payments or comply with the terms of the agreement. There is also the possibility that limitations or trading restrictions may be imposed by an exchange or government regulation, which could adversely impact the value and liquidity of a derivatives contract subject to such regulation.
Recent regulations have changed the requirements related to the use of certain derivatives. Some of these new regulations have limited the availability of certain derivatives and made their use by funds more costly. It is expected that additional changes to the regulatory framework will occur, but the extent and impact of additional new regulations are not certain at this time.
The Statement of Additional Information contains more detailed information about the fund and its investments, operations, and expenses.
This section provides a more detailed description of the various types of portfolio holdings and investment practices that may be used by the fund to execute its overall investment program. Some of these holdings are considered to be principal investment strategies of the fund and have already been described earlier in the prospectus. Any of the following holdings and investment practices that were not already described in Section 1 of the prospectus are not considered part of the funds principal investment strategies, but they may be used by the fund to help achieve its investment objective. The funds investments may be subject to further restrictions and risks described in the Statement of Additional Information.
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Shareholder approval is required to substantively change the funds investment objective. Shareholder approval is also required to change certain investment restrictions noted in the following section as fundamental policies. Portfolio managers also follow certain operating policies that can be changed without shareholder approval. Shareholders will receive at least 60 days prior notice of a change in the funds policy requiring it to normally invest at least 80% of its net assets in African and Middle Eastern companies.
The funds holdings in certain kinds of investments cannot exceed maximum percentages as set forth in this prospectus and the Statement of Additional Information. For instance, there are limitations regarding the funds investments in certain types of derivatives. While these restrictions provide a useful level of detail about the funds investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in derivatives could have a significantly greater impact on the funds share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all of the funds investments.
Certain investment restrictions, such as a required minimum or maximum investment in a particular type of security, are measured at the time the fund purchases a security. The status, market value, maturity, duration, credit quality, or other characteristics of the funds securities may change after they are purchased, and this may cause the amount of the funds assets invested in such securities to exceed the stated maximum restriction or fall below the stated minimum restriction. If any of these changes occur, it would not be considered a violation of the investment restriction and will not require the sale of an investment if it was proper at the time the investment was made (this exception does not apply to the funds borrowing policy). However, certain changes will require holdings to be sold or purchased by the fund during the time it is above or below the stated percentage restriction in order for the fund to be in compliance with applicable restrictions.
For purposes of determining whether the fund invests at least 80% of its net assets in companies that are located in, or that have economic ties to, Africa or the Middle East, the fund relies on the country assigned to a security by MSCI Inc., a third-party provider of benchmark indexes and data services, or another unaffiliated data provider. The data providers use various criteria to determine the country to which a security is economically tied. Examples include the following: (1) the country under which the issuer is organized; (2) the location of the issuers principal place of business or principal office; (3) where the issuers securities are listed or traded principally on an exchange or over-the-counter market; and (4) where the issuer conducts the predominant part of its business activities or derives a significant portion (e.g., at least 50%) of its revenues or profits.
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Changes in the funds holdings, the funds performance, and the contribution of various investments to the funds performance are discussed in the shareholder reports.
Portfolio managers have considerable discretion in choosing investment strategies and selecting securities they believe will help achieve the funds objective.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with its investment program. The following pages describe various types of the funds holdings and investment management practices, some of which are also described as part of the funds principal investment strategies.
Nondiversified Status
The fund is registered with the SEC as a nondiversified mutual fund. This means that the fund may invest a greater portion of its assets in, and own a greater amount of the voting securities of, a single issuer than a diversified fund, which may subject the fund to greater risk with respect to its portfolio securities and greater volatility with respect to its share price.
However, the fund intends to qualify as a regulated investment company under the Internal Revenue Code. As a result, the fund must invest so that, at the end of each fiscal quarter, with respect to 50% of its total assets, no more than 5% of its total assets are invested in the securities of a single issuer and not more than 10% of the voting securities of any issuer are held by the fund. With respect to the remaining 50% of the funds assets, no more than 25% may be invested in a single issuer.
The funds investments are primarily in common stocks and, to a lesser degree, other types of securities as follows:
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stocks have a specified dividend rate and rank after bonds and before common stocks in their claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis and profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a companys stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. Unlike common stock, preferred stock does not ordinarily carry voting rights. While most preferred stocks pay a dividend, the fund may decide to purchase preferred stock where the issuer has suspended, or is in danger of suspending, payment of its dividend. The fund may purchase American Depositary Receipts and Global Depositary Receipts, which are certificates evidencing ownership of shares of a
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foreign issuer. American Depositary Receipts and Global Depositary Receipts trade on established markets and are alternatives to directly purchasing the underlying foreign securities in their local markets and currencies. Such investments are subject to many of the same risks associated with investing directly in foreign securities. For purposes of the funds investment policies, investments in depositary receipts are deemed to be investments in the underlying securities. For example, a depositary receipt representing ownership of common stock will be treated as common stock.
Convertible Securities and Warrants
The fund may invest in debt instruments or preferred equity securities that are convertible into, or exchangeable for, equity securities at specified times in the future and according to a certain exchange ratio. Convertible bonds are typically callable by the issuer, which could in effect force conversion before the holder would otherwise choose. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appreciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree than common stock. Some convertible securities combine higher or lower current income with options and other features. Warrants are options to buy, directly from the issuer, a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more years). Warrants have no voting rights, pay no dividends, and can be highly volatile. In some cases, the redemption value of a warrant could be zero.
Participation Notes (P-notes)
The fund may gain exposure to securities traded in foreign markets through investments in P-notes. P-notes are generally issued by banks or broker-dealers and are designed to offer a return linked to an underlying common stock or other security. An investment in a P-note involves additional risks beyond the risks normally associated with a direct investment in the underlying security. While the holder of a P-note is entitled to receive from the broker-dealer or bank any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-notes are considered general unsecured contractual obligations of the banks or broker-dealers that issue them as the counterparty. As such, the fund must rely on the creditworthiness of the counterparty for its investment returns on the P-notes, and could lose the entire value of its investment in the event of default by a counterparty. Additionally, there is no assurance that there will be a secondary trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
Operating policy There is no limit on the funds investments in P-notes. Investments in P-notes are not subject to the limit on investments in hybrid instruments.
Fixed Income Securities
From time to time, the fund may invest in corporate and government fixed income securities as well as below investment-grade bonds, commonly referred to as junk
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bonds. These securities would be purchased in companies that meet the funds investment criteria. The price of a fixed income security fluctuates with changes in interest rates, generally rising when interest rates fall and falling when interest rates rise. Below investment-grade bonds, or junk bonds, can be more volatile and have greater risk of default than investment-grade bonds, and should be considered speculative.
Operating policy The fund may invest up to 10% of its total assets in below investment-grade bonds. The funds investments in convertible securities are not subject to this limit.
Futures and Options
Futures are often used to establish exposures or manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options may be used to generate additional income, to enhance returns, or as a defensive technique to protect against anticipated declines in the value of an asset. Call options give the investor the right to purchase (when the investor purchases the option), or the obligation to sell (when the investor writes or sells the option), an asset at a predetermined price in the future. Put options give the purchaser of the option the right to sell, or the seller (or writer) of the option the obligation to buy, an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for any number of reasons, including to manage exposure to changes in interest rates, bond prices, foreign currencies, and credit quality; as an efficient means of increasing or decreasing the funds exposure to certain markets; in an effort to enhance income; to improve risk-adjusted returns; to protect the value of portfolio securities; and to serve as a cash management tool. Call or put options may be purchased or sold on securities, futures, financial indexes, and foreign currencies. The fund may choose to continue a futures contract by rolling over an expiring futures contract into an identical contract with a later maturity date. This could increase the funds transaction costs and portfolio turnover rate.
Futures and options contracts may not always be successful investments or hedges; their prices can be highly volatile; using them could lower the funds total return; the potential loss from the use of futures can exceed the funds initial investment in such contracts; and the losses from certain options written by the fund could be unlimited.
Operating policies Initial margin deposits on futures and premiums on options used for non-hedging purposes will not exceed 5% of the funds net asset value. The total market value of securities covering call or put options may not exceed 25% of the funds total assets. No more than 5% of the funds total assets will be committed to premiums when purchasing call or put options.
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of
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some commodity, currency, security, or securities index. Such instruments may or may not bear interest or pay dividends. Under certain conditions, the redemption value of a hybrid could be zero.
Hybrids can have volatile prices and limited liquidity, and their use may not be successful.
Operating policy The funds investments in hybrid instruments are limited to 10% of its total assets.
Currency Derivatives
The fund will normally conduct any foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. The fund will generally not enter into a forward contract with a term greater than one year. The fund may enter into forward currency exchange contracts to lock in the U.S. dollar price of a security when it enters into a contract for the purchase or sale of a security denominated in a foreign currency, and when the fund believes that the currency of a particular foreign country may move substantially against another currency, it may enter into a forward contract to sell or buy the former foreign currency.
A fund that invests in foreign securities may attempt to hedge its exposure to potentially unfavorable currency changes. The primary means of doing this is through the use of forward currency exchange contracts, which are contracts between two counterparties to exchange one currency for another on a future date at a specified exchange rate. The fund may also use these instruments to create a synthetic bond, which is issued in one currency with the currency component transformed into another currency. However, futures, swaps, and options on foreign currencies may also be used. In certain circumstances, the fund may use currency derivatives to substitute a different currency for the currency in which the investment is denominated, a strategy known as proxy hedging. If the fund were to engage in any of these foreign currency transactions, it could serve to protect its foreign securities from adverse currency movements relative to the U.S. dollar, although the fund may also use currency derivatives in an effort to gain exposure to a currency expected to appreciate in value versus other currencies. As a result, the fund could be invested in a currency without holding any securities denominated in that currency. Such transactions involve, among other risks, the risk that anticipated currency movements will not occur, which could reduce the funds total return. There are certain markets, including many emerging markets, where it is not possible to engage in effective foreign currency hedging.
Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income.
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Investments in Other Investment Companies
The fund may invest in other investment companies, including open-end funds, closed-end funds, and exchange-traded funds.
The fund may purchase the securities of another investment company to temporarily gain exposure to a portion of the market while awaiting purchase of securities or as an efficient means of gaining exposure to a particular asset class. The fund might also purchase shares of another investment company to gain exposure to the securities in the investment companys portfolio at times when the fund may not be able to buy those securities directly. Any investment in another investment company would be consistent with the funds objective and investment program.
The risks of owning another investment company are generally similar to the risks of investing directly in the securities in which that investment company invests. However, an investment company may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the funds performance. In addition, because closed-end funds and exchange-traded funds trade on a secondary market, their shares may trade at a premium or discount to the actual net asset value of their portfolio securities and their shares may have greater volatility if an active trading market does not exist.
As a shareholder of another investment company, the fund must pay its pro-rata share of that investment companys fees and expenses. The funds investments in non-T. Rowe Price investment companies are subject to the limits that apply to investments in other funds under the Investment Company Act of 1940 or under any applicable exemptive order.
The fund may also invest in certain other T. Rowe Price Funds as a means of gaining efficient and cost-effective exposure to certain asset classes, provided the investment is consistent with the funds investment program and policies.
Investments in other investment companies could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available through direct investments in a particular asset class, and will subject the fund to the risks associated with the particular asset class or asset classes in which an underlying fund invests. Examples of asset classes in which other mutual funds (including T. Rowe Price Funds) focus their investments include high yield bonds, inflation-linked securities, floating rate loans, international bonds, emerging market bonds, stocks of companies involved in activities related to real assets, stocks of companies that focus on a particular industry or sector, and emerging market stocks. If the fund invests in another T. Rowe Price Fund, the management fee paid by the fund will be reduced to ensure that the fund does not incur duplicate management fees as a result of its investment.
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Illiquid Securities
Some of the funds holdings may be considered illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold in the ordinary course of business within seven days at approximately the prices at which they are valued. The determination of liquidity involves a variety of factors. Illiquid securities may include private placements that are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold (for example, pursuant to Rule 144A under the Securities Act of 1933) and therefore deemed liquid, others may have resale restrictions and be considered illiquid. The sale of illiquid securities may involve substantial delays and additional costs, and the fund may only be able to sell such securities at prices substantially lower than what it believes they are worth.
Operating policy The fund may not purchase an illiquid security if it holds 15% or more of its net assets in illiquid securities.
Types of Investment Management Practices
Reserve Position
A certain portion of the funds assets may be held in reserves. The funds reserve positions will primarily consist of: 1) shares of a T. Rowe Price internal money market fund or short-term bond fund (which does not charge any management fees); 2) short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements; and 3) U.S. dollar or non-U.S. dollar currencies. In order to respond to adverse market, economic, political, or other conditions, the fund may assume a temporary defensive position that is inconsistent with its principal investment objective and/or strategies and may invest, without limitation, in reserves. If the fund has significant holdings in reserves, it could compromise its ability to achieve its objective. The reserve position provides flexibility in meeting redemptions, paying expenses and managing cash flows into the fund, and can serve as a short-term defense during periods of unusual market volatility. Non-U.S. dollar reserves are subject to currency risk.
Borrowing Money and Transferring Assets
The fund may borrow from banks, other persons, and other T. Rowe Price Funds for temporary or emergency purposes, to facilitate redemption requests, or for other purposes consistent with the funds policies as set forth in this prospectus and the Statement of Additional Information. Such borrowings may be collateralized with the funds assets, subject to certain restrictions.
Fundamental policy Borrowings may not exceed 331/3% of the funds total assets. This limitation includes any borrowings for temporary or emergency purposes, and applies at the time of the transaction and continues to the extent required by the Investment Company Act of 1940.
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Operating policy The fund will not transfer portfolio securities as collateral except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 331/3% of its total assets. The fund will not purchase additional securities when its borrowings exceed 5% of its total assets.
Meeting Redemption Requests
We expect that the fund will hold cash or cash equivalents to meet redemption requests. The fund may also use the proceeds from the sale of portfolio securities to meet redemption requests if consistent with the management of the fund. These redemption methods will be used regularly and may also be used in deteriorating or stressed market conditions. The fund reserves the right to redeem in-kind as described under Large Redemptions. Redemptions in-kind are typically used to meet redemption requests that represent a large percentage of the funds net assets in order to minimize the effect of large redemptions on the fund and its remaining shareholders. In general, any in-kind redemptions will represent a pro-rata distribution of the funds securities, subject to certain limited exceptions. Redemptions in-kind may be used regularly in circumstances as described above, and may also be used in stressed market conditions.
The fund, along with other T. Rowe Price Funds, is a party to an interfund lending exemptive order received from the SEC that permits the T. Rowe Price Funds to borrow money from and/or lend money to other T. Rowe Price Funds to help the funds meet short-term redemptions and liquidity needs.
During periods of deteriorating or stressed market conditions, when an increased portion of a funds portfolio may be comprised of less-liquid investments, or during extraordinary or emergency circumstances, the fund may be more likely to pay redemption proceeds with cash obtained through interfund lending, short-term borrowing arrangements (if available), or by redeeming a large redemption request in-kind.
Lending of Portfolio Securities
The fund may lend its securities to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvestment of collateral received on loaned securities in investments that decline in value, default, or do not perform as well as expected.
Fundamental policy The value of loaned securities may not exceed 331/3% of the funds total assets.
Portfolio Turnover
Turnover is an indication of frequency of trading. Each time the fund purchases or sells a security, it incurs a cost. This cost is reflected in its net asset value but not in its operating expenses. The higher the turnover rate, the higher the transaction costs
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and the greater the impact on the funds total return. Higher turnover can also increase the possibility of taxable capital gain distributions. The funds portfolio turnover rates are shown in the Financial Highlights table.
The Financial Highlights table, which provides information about the funds financial history, is based on a single share outstanding throughout the periods shown. The table is part of the funds financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions and no payment of any applicable account or redemption fees). The financial statements in the annual report were audited by the funds independent registered public accounting firm, PricewaterhouseCoopers LLP.
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Financial Highlights
Year ended October 31 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||
Net asset
value, | $5.65 | $6.77 | $8.12 | $6.04 | $5.42 | |||||
Income From Investment Operations | ||||||||||
Net investment incomea | 0.12 | 0.12 | 0.12 | 0.15 | 0.11 | |||||
Net gains or losses on | 1.17 | 1.41 | (1.54 | ) | (0.40 | ) | 0.62 | |||
Total from investment | 1.29 | 1.53 | (1.42 | ) | (0.25 | ) | 0.73 | |||
Less Distributions | ||||||||||
Dividends
(from net | (0.12 | ) | (0.11 | ) | (0.12 | ) | (0.14 | ) | (0.12 | ) |
Distributions (from | (0.05 | ) | (0.07 | ) | (0.54 | ) | (0.23 | ) | | |
Returns of capital | | | | | | |||||
Total distributions | (0.17 | ) | (0.18 | ) | (0.66 | ) | (0.37 | ) | (0.12 | ) |
Net asset value, | $6.77 | $8.12 | $6.04 | $5.42 | $6.03 | |||||
Total return | 23.44 | % | 23.15 | % | (18.02 | )% | (3.82 | )% | 13.77 | % |
Ratios/Supplemental Data | ||||||||||
Net assets, end of | $191,328 | $245,264 | $158,868 | $173,583 | $174,744 | |||||
Ratio of
expenses to | 1.25 | % | 1.20 | % | 1.19 | % | 1.21 | % | 1.21 | % |
Ratio of net income to | 1.88 | % | 1.58 | % | 1.67 | % | 2.78 | % | 1.88 | % |
Portfolio turnover rate | 52.2 | % | 57.8 | % | 60.3 | % | 74.9 | % | 55.7 | % |
a Per share amounts calculated using average shares outstanding method.
The T. Rowe Price Funds full portfolio holdings as of their fiscal year-ends are disclosed in their annual shareholder reports and their full portfolio holdings as of their fiscal mid-point are disclosed in their semiannual shareholder reports. The annual and semiannual shareholder reports are filed with the SEC and sent to the funds shareholders within 60 days of the period covered. The T. Rowe Price Funds also disclose their full portfolio holdings as of their first and third fiscal quarter-ends on Form N-Q. Form N-Q is filed with the SEC within 60 days of the period covered, but is not sent to the funds shareholders. Under certain conditions, the shareholder
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reports and Form N-Q may include up to 5% of a funds holdings under the caption Miscellaneous Securities without identifying the specific security or issuer. Generally, a holding would not be individually identified if it is determined that its disclosure could be harmful to the fund or its shareholders. A holding will not be excluded for these purposes from a funds SEC filings for more than one year. The money market funds also file detailed month-end portfolio holdings information on Form N-MFP with the SEC each month. Form N-MFP, as well as the shareholder reports and Form N-Q, are publicly available immediately upon filing with the SEC.
In addition, most T. Rowe Price Funds disclose their calendar quarter-end full portfolio holdings on troweprice.com 15 calendar days after each quarter. At the discretion of the investment adviser, these holdings reports may exclude the issuer name and other information relating to a holding in order to protect the funds interests and prevent harm to the fund or its shareholders. Private placements and other restricted securities may not be individually identified in the calendar quarter-end holdings on troweprice.com, but would be disclosed in any SEC filings. Money market funds also disclose on troweprice.com their month-end full portfolio holdings five business days after each month-end and historical information about the funds investments for the previous six months, as of the last business day of the preceding month. This information includes, among other things, the percentage of the funds investments in daily and weekly liquid assets, the funds weighted average maturity and weighted average life, the funds market-based net asset value, and the funds net inflows and outflows. The calendar quarter-end portfolio holdings will remain on the website for one year and the month-end money market fund portfolio holdings will remain on the website for six months. In addition, most T. Rowe Price Funds disclose their 10 largest holdings on troweprice.com on the seventh business day after each month-end. These holdings are listed in alphabetical order along with the aggregate percentage of the funds total assets that these 10 holdings represent. Each monthly top 10 list will remain on the website for six months. A description of T. Rowe Prices policies and procedures with respect to the disclosure of portfolio information is available in the Statement of Additional Information.
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The following policies and procedures apply to the Institutional Funds within the T. Rowe Price Funds.
This section of the prospectus describes the policies and procedures that generally apply to investments in the T. Rowe Price Institutional Funds (except for the T. Rowe Price Institutional Cash Reserves Fund). The T. Rowe Price Institutional Funds may be purchased directly from T. Rowe Price or through a financial intermediary, such as a bank, broker, retirement plan recordkeeper, or financial advisor.
Most of the T. Rowe Price Institutional Funds are available only in a single share class (referred to as the Institutional Class). However, the Institutional Floating Rate Fund is also offered in an F Class. Each class of a funds shares represents an interest in the same fund with the same investment program and investment policies. While the Institutional Class may be held directly with T. Rowe Price or through a financial intermediary, the F Class is designed to be purchased only through financial advisors and certain financial intermediaries and has a different cost structure due to a shareholder servicing arrangement that applies only to that class.
This section generally describes investing only in the T. Rowe Price Institutional Funds, other than the T. Rowe Price Institutional Cash Reserves Fund, which has unique policies relating to its operation as an institutional money market fund. This section does not describe the policies that apply to other T. Rowe Price Funds. Policies for other T. Rowe Price Funds are described in their respective prospectuses, and all types of funds and available share classes for the T. Rowe Price Funds are described more fully in the funds Statement of Additional Information.
Institutional Class
The Institutional Class may be purchased directly through T. Rowe Price or through a financial intermediary. The Institutional Class does not make any payments to financial intermediaries for distribution of the funds shares (commonly referred to as 12b-1 fee payments) and does not make any payments to financial intermediaries for administrative services they provide (commonly referred to as administrative fee payments). However, you may incur brokerage commissions and other charges when buying or selling I Class shares.
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The Institutional Class is designed to be sold only to institutional investors, which include, but are not limited to: corporations, endowments and foundations, charitable trusts, investment companies and other pooled vehicles, defined benefit and defined contribution retirement plans, broker-dealers, registered investment advisers, banks and bank trust programs, and Section 529 college savings plans. The Institutional Class generally requires a $1 million initial investment minimum, although the minimum may be waived for retirement plans, financial intermediaries maintaining omnibus accounts, and certain other accounts.
F Class
The F Class must be purchased through a financial intermediary. The F Class does not make any 12b-1 fee payments to financial intermediaries but may make administrative fee payments at an annual rate of up to 0.15% of the class average daily net assets.
The F Class is designed to be sold only through financial advisors and certain financial intermediaries, including brokers, banks, insurance companies, retirement plan recordkeepers, and other financial intermediaries. F Class shares are generally not available to financial intermediaries that would make the fund available to their customers through a mutual fund supermarket platform. There is a $2,500 minimum initial investment requirement, but the minimum is waived for certain types of accounts.
Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by the funds transfer agent. The F Class may make administrative fee payments to retirement plan recordkeepers, broker-dealers, and other financial intermediaries (at an annual rate of up to 0.15% of the class average daily net assets) for transfer agency, recordkeeping, and other administrative services they provide on behalf of the funds. These administrative services may include maintaining account records for each customer; transmitting purchase and redemption orders; delivering shareholder confirmations, statements, and tax forms; and providing support to respond to customers questions regarding their accounts. These separate administrative fee payments are reflected in the Other expenses line that appears in the fee table in Section 1 with respect to the funds F Class.
Some broker-dealers or other financial intermediaries that are eligible to purchase F Class shares of T. Rowe Price Institutional Funds may also be eligible to purchase the Institutional Class. The Institutional Class shares require a much higher initial investment but have lower expenses than F Class shares because the Institutional Class does not participate in the administrative fee payment program. The payment
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of the administrative fee by the F Class creates a potential conflict of interest by influencing the broker-dealer or other financial intermediary to purchase F Class shares instead of Institutional Class shares. If this happens, you will incur higher expenses than if your financial intermediary had purchased Institutional Class shares on your behalf (assuming your financial intermediary would qualify to purchase Institutional Class shares). You should ask your salesperson for more information regarding the eligibility of your financial intermediary to purchase Institutional Class shares.
If you are opening an account through an employer-sponsored retirement plan or other financial intermediary, you should contact the retirement plan or financial intermediary for information regarding its policies on opening an account, including the policies relating to purchasing, exchanging, and redeeming shares, and the applicable initial and subsequent investment minimums.
Tax Identification Number
Institutional investors must provide T. Rowe Price with a valid taxpayer identification number (and valid Social Security numbers for individuals opening the account on behalf of the institution) on a signed new account form or Form W-9. Otherwise, federal law requires the funds to withhold a percentage of dividends, capital gain distributions, and redemptions and may subject the investor to an Internal Revenue Service fine. If this information is not received within 60 days after the account is established, the account may be redeemed at the funds then-current net asset value. Financial intermediaries opening an account in a fund must also enter into a separate agreement with the fund or its agent.
Important Information Required to Open a New Account
Pursuant to federal law, all financial institutions must obtain, verify, and record information that identifies each person or entity that opens an account. This information is needed not only for the account owner and any other person who opens the account, but also for any person who has authority to act on behalf of the account. When you open an account for an entity, you will be required to provide the entitys name, U.S. street address (post office boxes are not acceptable), and taxpayer identification number, as well as your name, U.S. street address (post office boxes are not acceptable), date of birth, and Social Security number as the person opening the account on behalf of the entity. Corporate and other institutional accounts require documents showing the existence of the entity (such as articles of incorporation or partnership agreements) to open an account. Certain other fiduciary accounts (such as trusts or power of attorney arrangements) require documentation, which may include an original or certified copy of the trust agreement or power of attorney, to open an account.
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T. Rowe Price will use this information to verify the identity of the entity and person opening the account. An account cannot be opened until all of this information is received. If the identity of the entity or person opening the account on behalf of the entity cannot be verified, T. Rowe Price is authorized to take any action permitted by law. (See Rights Reserved by the Funds later in this section.)
Call Financial Institution Services at 1-800-638-8790 for more information on these requirements.
The Institutional Funds are generally available only to institutional investors with a U.S. address. T. Rowe Price will generally not authorize the transfer of ownership of an account in an Institutional Fund for an institutional investor to an account for a noninstitutional investor. Shares held directly with T. Rowe Price by noninstitutional investors are subject to involuntary redemption at any time, which could result in a taxable gain to the investor.
Opening an Account
Call Financial Institution Services at 1-800-638-8790 for an account number and wire transfer instructions. All initial purchases are typically made by bank wire, but checks or other forms of payment may be accepted in certain cases. In order to obtain an account number, you must supply the name, taxpayer identification number, and business street address for the account. Complete a new account form and mail it, along with proper documentation identifying your firm and any other necessary documentation, to one of the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: Although the purchase will be made, services may not be established and an Internal Revenue Service penalty withholding may occur until we receive a signed new account form.
How and When Shares Are Priced
The trade date for your transaction request depends on the day and time that T. Rowe Price receives your request and will normally be executed using the next share price calculated after your order is received in correct form by T. Rowe Price or its agent (or by your financial intermediary if it has the authority to accept transaction orders on behalf of the fund). The share price, also called the net asset value, for each share class of a fund is calculated at the close of trading on the New York Stock Exchange (NYSE), which is normally 4 p.m. ET, each day that the NYSE is open for
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business. Net asset values are not calculated for the funds on days when the NYSE is scheduled to be closed for trading (for example, weekends and certain U.S. national holidays). If the NYSE is unexpectedly closed due to weather or other extenuating circumstances on a day it would typically be open for business, or if the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share price as of the normally scheduled close of regular trading on the NYSE for that day.
To calculate the net asset value, a funds assets are valued and totaled, liabilities are subtracted, and each class proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Market values are used to price portfolio holdings for which market quotations are readily available. Market values generally reflect the prices at which securities actually trade or represent prices that have been adjusted based on evaluations and information provided by the funds pricing services. Investments in other mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. If a market value for a portfolio holding is not available or normal valuation procedures are deemed to be inappropriate, the fund will make a good faith effort to assign a fair value to the holding by taking into account various factors and methodologies that have been approved by the funds Board. This value may differ from the value the fund receives upon sale of the securities. Amortized cost is used to price securities held by money market funds and certain short-term debt securities held by a fund.
The funds use various pricing services to provide closing market prices, as well as information used to adjust those prices and to value most fixed income securities. A fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next days opening prices in the same markets, and adjusted prices.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices at 4 p.m. ET, except under the following circumstances. Most foreign markets close before 4 p.m. ET. For example, the most recent closing prices for securities traded in certain Asian markets may be as much as 15 hours old at 4 p.m. ET. If a fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of the funds securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. In deciding whether to make these adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities.
A fund may also fair value certain securities or a group of securities in other situationsfor example, when a particular foreign market is closed but the fund is open. For a fund that has investments in securities that are primarily listed on foreign
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exchanges which trade on weekends or other days when the fund does not price its shares, the funds net asset value may change on days when shareholders will not be able to purchase or redeem the funds shares. If an event occurs that affects the value of a security after the close of the market, such as a default of a commercial paper issuer or a significant move in short-term interest rates, a fund may make a price adjustment depending on the nature and significance of the event. The funds also evaluate a variety of factors when assigning fair values to private placements and other restricted securities. Other mutual funds may adjust the prices of their securities by different amounts or assign different fair values than the fair value that the fund assigns to the same security.
How the Trade Date Is Determined
If you invest directly with T. Rowe Price and your request to purchase, sell, or exchange shares is received by T. Rowe Price or its agent in correct form by the close of the NYSE (normally 4 p.m. ET), your transaction will be priced at that business days net asset value. If your request is received by T. Rowe Price or its agent in correct form after the close of the NYSE, your transaction will be priced at the next business days net asset value unless the fund has an agreement with your financial intermediary for orders to be priced at the net asset value next computed after receipt by the financial intermediary.
The funds have authorized certain financial intermediaries or their designees to accept orders to buy or sell fund shares on their behalf. When authorized financial intermediaries receive an order in correct form, the order is considered as being placed with the fund and shares will be bought or sold at the net asset value next calculated after the order is received by the authorized financial intermediary. The financial intermediary must transmit the order to T. Rowe Price and pay for such shares in accordance with the agreement with T. Rowe Price, or the order may be canceled and the financial intermediary could be held liable for the losses. If the fund does not have such an agreement in place with your financial intermediary, T. Rowe Price or its agent must receive the request in correct form from your financial intermediary by the close of the NYSE in order for your transaction to be priced at that business days net asset value. Contact your financial intermediary for trade deadlines and the applicable policies for purchasing, selling, or exchanging your shares, as well as initial and subsequent investment minimums. The financial intermediary may charge a fee for its services.
Note: There may be times when you are unable to contact us or access your account due to extreme market activity or other circumstances. Should this occur, your order must still be placed and received in correct form by T. Rowe Price (or by the financial intermediary in accordance with its agreement with T. Rowe Price) prior to the time the NYSE closes to be priced at that business days net asset value. The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the NYSE closes at a time other than 4 p.m. ET. The funds reserve the right to not treat an unscheduled intraday disruption or
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closure in NYSE trading as a closure of the NYSE and still accept transactions and calculate their net asset value as of 4 p.m. ET.
Transaction Confirmations
T. Rowe Price sends immediate confirmations for most of your fund transactions. However, certain transactions, such as dividend reinvestments, do not receive an immediate transaction confirmation but are reported on your account statement. Please review transaction confirmations and account statements as soon as you receive them and promptly report any discrepancies to Financial Institution Services.
Purchasing Shares
Purchases may be initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. All initial and subsequent investments are typically made by bank wire, although checks or other forms of payment may be accepted in certain cases. There is no assurance that the share price for a purchase will be the same day a wire was initiated.
The funds generally do not accept orders that request a particular day or price for a transaction or any other special conditions. However, when authorized by the fund, certain institutions, financial intermediaries, or retirement plans purchasing fund shares directly with T. Rowe Price may place a purchase order unaccompanied by payment. Payment for these shares must be received by the time designated by the fund (not to exceed the period established for settlement under applicable regulations). If payment is not received by this time, the order may be canceled. The institution, financial intermediary, or retirement plan is responsible for any costs or losses incurred by the fund or T. Rowe Price if payment is delayed or not received.
U.S. Dollars All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks and should be payable to the T. Rowe Price Funds.
Nonpayment Purchases of a fund may be canceled if payment is not received in a timely manner, and the shareholder may be responsible for any losses or expenses incurred by the fund or its transfer agent. The funds and their agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment.
Investment Minimums
The Institutional Class generally requires a $1 million minimum initial investment and the F Class generally requires a $2,500 minimum initial investment, although the minimums may be waived for financial intermediaries, retirement plans, and certain other institutional investors. In addition, we request that you give us at least three business days notice (seven business days notice for the Institutional Floating Rate Fund) for any purchase of $5 million or more. There is generally no minimum required for additional purchases.
You should check with your financial advisor, retirement plan, or financial intermediary to determine what minimum applies to your initial and additional investments.
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Exchanging and Redeeming Shares
Certain T. Rowe Price Funds assess a fee on redemptions of shares (including exchanges out of a fund) that are not held for a specified period of time. Please refer to Contingent Redemption Fee later in this section.
Exchanges You can move money from one account to an existing, identically registered account or open a new identically registered account. An exchange from one fund to another will be reported to the Internal Revenue Service as a sale for tax purposes.
Redemptions Redemptions are typically initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. Please note that certain redemption requests initiated through the National Securities Clearing Corporation may be rejected, and in such instances, the transaction must be placed by contacting a Financial Institution Services representative.
If for some reason we cannot accept your request to exchange or redeem shares, we will attempt to contact you.
If you request to redeem a specific dollar amount and the market value of your account is less than the amount of your request and we are unable to contact you, your redemption will not be processed and you will need to submit a new redemption request in correct form.
Receiving Redemption Proceeds Unless otherwise indicated, redemption proceeds will be sent via bank wire to the designated bank on file for the account. If a request is received in correct form by T. Rowe Price or its agent on a business day prior to the close of the NYSE, proceeds are usually sent on the next business day. Proceeds sent by bank wire are usually credited to an account the next business day after the sale. Redemption proceeds can be mailed to the account address by check if specifically requested. Normally, the fund transmits proceeds to financial intermediaries for redemption orders received in correct form on either the next business day or third business day after receipt of the order, depending on the arrangement with the financial intermediary. You must contact your financial intermediary about procedures for receiving your redemption proceeds.
Large Redemptions Large redemptions (for example, $250,000 or more) can adversely affect a portfolio managers ability to implement a funds investment strategy by causing the premature sale of securities that would otherwise be held longer. Therefore, the fund reserves the right (without prior notice) to pay all or part of redemption proceeds with securities from the funds portfolio rather than in cash (redemption in-kind). In general, any in-kind redemptions will represent a pro-rata distribution of a funds securities, subject to certain limited exceptions. If this occurs, the securities will be selected by the fund in its absolute discretion and the redeeming shareholder or account will be responsible for disposing of the securities and bearing any associated costs and risks (for example, market risks until the securities are
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disposed of). If you continue to hold the securities, you may be subject to any ownership restrictions imposed by the issuers. For example, real estate investment trusts often impose ownership restrictions on their equity securities.
Delays in Sending Redemption Proceeds
The T. Rowe Price Funds typically expect that it will take one to three days following the receipt of a redemption request that is in correct form to send redemption proceeds, regardless of the method the fund uses to make such payment (e.g., check, wire, or Automated Clearing House transfer). However, under certain circumstances and when deemed to be in a funds best interests, your proceeds may not be sent for up to seven calendar days after we receive your redemption request in correct form.
In addition, if shares are sold that were just purchased and paid for by check or Automated Clearing House transfer, the fund will process your redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or Automated Clearing House transfer to clear. If, during the clearing period, we receive a check drawn against your newly purchased shares, it will be returned and marked uncollected. (The 10-day hold does not apply to purchases paid for by bank wire or automatic purchases through payroll deduction.)
The Board of a retail or institutional money market fund may impose a redemption gate and elect to temporarily suspend redemptions for up to 10 business days in a 90-day period if the funds weekly liquid assets fall below 30% of its total assets and the funds Board determines that imposing a redemption gate is in the funds best interests. In addition, under certain limited circumstances, the Board of a retail or institutional money market fund may elect to permanently suspend redemptions in order to facilitate an orderly liquidation of the fund (subject to any additional liquidation requirements).
Contingent Redemption Fee
Short-term trading can disrupt a funds investment program and create additional costs for long-term shareholders. For these reasons, all share classes of the T. Rowe Price Institutional Funds, listed in the following table, assess a fee on redemptions (including exchanges out of a fund), which reduces the proceeds from such redemptions by the amounts indicated:
T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Africa & Middle East | 2% | 90 days or less |
Institutional Credit Opportunities | 2% | 90 days or less |
Institutional Emerging Markets Bond | 2% | 90 days or less |
Institutional Emerging Markets Equity | 2% | 90 days or less |
Institutional Floating Rate | 2% | 90 days or less |
Institutional Frontier Markets Equity | 2% | 90 days or less |
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T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Global Focused Growth Equity | 2% | 90 days or less |
Institutional Global Growth Equity | 2% | 90 days or less |
Institutional Global Value Equity | 2% | 90 days or less |
Institutional High Yield | 2% | 90 days or less |
Institutional International Bond | 2% | 90 days or less |
Institutional International Concentrated Equity | 2% | 90 days or less |
Institutional International Core Equity | 2% | 90 days or less |
Institutional International Growth Equity | 2% | 90 days or less |
Redemption fees are paid to a fund (and not to T. Rowe Price) to deter short-term trading, offset costs, and help protect the funds long-term shareholders. Subject to the exceptions described on the following pages, all persons holding shares of a T. Rowe Price Fund that imposes a redemption fee are subject to the fee, whether the person is holding shares directly with a T. Rowe Price Fund, through a retirement plan for which T. Rowe Price serves as recordkeeper; or indirectly through a financial intermediary (such as a broker, bank, or investment adviser), recordkeeper for retirement plan participants, or other third party.
Computation of Holding Period When an investor sells shares of a fund that assesses a redemption fee, T. Rowe Price will use the first-in, first-out method to determine the holding period for the shares sold. Under this method, the date of redemption or exchange will be compared with the earliest purchase date of shares held in the account. A redemption fee will be charged on shares sold on or before the end of the required holding period. The day after the date of your purchase is considered Day 1 for purposes of computing the holding period. For example, if you redeem your shares on or before the 90th day from the date of purchase, you will be assessed the redemption fee. If you purchase shares through a financial intermediary, consult your financial intermediary to determine how the holding period will be applied.
Transactions Not Subject to Redemption Fees The T. Rowe Price Funds will not assess a redemption fee with respect to certain transactions. As of the date of this prospectus, the following transactions in T. Rowe Price Funds will not be subject to redemption fees:
· Shares redeemed through an automated, systematic withdrawal plan;
· Shares redeemed through or used to establish certain rebalancing, asset allocation, wrap, and advisory programs, as well as non-T. Rowe Price fund-of-funds products, if approved in writing by T. Rowe Price;
· Shares purchased through the reinvestment of dividends or capital gain distributions;*
· Shares converted from one share class to another share class of the same fund;*
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· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees (e.g., for failure to meet account minimums);
· Shares purchased by rollover or changes of account registration within the same fund;*
· Shares redeemed to return an excess contribution from a retirement account;
· Shares of T. Rowe Price Funds purchased by another T. Rowe Price Fund and shares purchased by discretionary accounts managed by T. Rowe Price or one of its affiliates (please note that other shareholders of the investing T. Rowe Price Fund are still subject to the policy);
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares that are redeemed in-kind;
· Shares transferred to T. Rowe Price or a financial intermediary acting as a service provider when the age of the shares cannot be determined systematically;* and
· Shares redeemed in retirement plans or other products that restrict trading to no more frequently than once per quarter or other approved time period, if approved in writing by T. Rowe Price.
* Subsequent exchanges of these shares into funds that assess redemption fees will subject such shares to the fee.
Redemption Fees on Shares Held in Retirement Plans If shares are held in a retirement plan, redemption fees generally will be assessed on shares redeemed by exchange only if they were originally purchased by a participant-directed exchange. However, redemption fees may apply to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price or how the fees are applied by your plans recordkeeper. To determine which of your transactions are subject to redemption fees, you should contact T. Rowe Price or your plan recordkeeper.
Omnibus Accounts If your shares are held through a financial intermediary in an omnibus account, T. Rowe Price relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. T. Rowe Price seeks to enter into agreements with financial intermediaries establishing omnibus accounts that require the intermediary to assess the redemption fees. There are no assurances that T. Rowe Price will be successful in identifying all financial intermediaries or that the intermediaries will properly assess the fees.
Certain financial intermediaries may not apply the exemptions previously listed to the redemption fee policy; all redemptions by persons trading through such intermediaries may be subject to the fee. Certain financial intermediaries may exempt transactions not listed from redemption fees, if approved by T. Rowe Price. Persons redeeming shares through a financial intermediary should check with their respective intermediary to determine which transactions are subject to the fees.
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You may initiate transactions involving the Institutional Funds by telephone, by mail, or through the National Securities Clearing Corporation. The T. Rowe Price Funds and their agents use reasonable procedures to verify the identity of the person contacting T. Rowe Price and to ensure that the person is authorized to act on behalf of the account. If these procedures are followed, the funds and their agents are not liable for any losses that may occur from acting on unauthorized instructions. Please review the transaction confirmation carefully, and contact Financial Institution Services immediately about any transaction you believe to be unauthorized. Telephone conversations are recorded.
To place a transaction or make any inquiries regarding the T. Rowe Price Institutional Funds, please call Financial Institution Services at 1-800-638-8790. To mail any information to T. Rowe Price regarding the T. Rowe Price Institutional Funds, please use the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: If sending a check for a purchase, your transaction will receive the share price for the business day that the check is received by T. Rowe Price or its agent prior to the close of the NYSE (normally 4 p.m. ET), which could differ from the day that the check is received at the post office box.
If you hold shares of a T. Rowe Price Institutional Fund through a retirement plan or financial intermediary, you must contact your retirement plan or financial intermediary with any inquiries.
Involuntary Redemptions and Share Class Conversions
Shares held by any investors that no longer meet the definition of an institutional investor or fail to meet or maintain their account(s) at the investment minimum are subject to involuntary redemption at any time.
For all accounts in Institutional Funds (except for F Class accounts), to help keep operating expenses lower, we ask that you maintain an account balance of at least $1 million. If your investment falls below $1 million (even if due to market depreciation), we have the right to redeem your account at the then-current net asset value after giving you 60 days to increase your balance.
The redemption of your account could result in a taxable gain or loss.
For any F Class accounts that are no longer held through an eligible financial intermediary, we have the right to convert your account to the Institutional Class following notice to the financial intermediary or shareholder.
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Excessive and Short-Term Trading Policy
Excessive transactions and short-term trading can be harmful to fund shareholders in various ways, such as disrupting a funds portfolio management strategies, increasing a funds trading and other costs, and negatively affecting its performance. Short-term traders in funds that invest in foreign securities may seek to take advantage of developments overseas that could lead to an anticipated difference between the price of the funds shares and price movements in foreign markets. While there is no assurance that T. Rowe Price can prevent all excessive and short-term trading, the Boards of the T. Rowe Price Funds have adopted the following trading limits that are designed to deter such activity and protect the funds shareholders. The funds may revise their trading limits and procedures at any time as the Boards deem necessary or appropriate to better detect short-term trading that may adversely affect the funds, to comply with applicable regulatory requirements, or to impose additional or alternative restrictions.
Subject to certain exceptions, each T. Rowe Price Fund restricts a shareholders purchases (including through exchanges) into a fund account for a period of 30 calendar days after the shareholder has redeemed or exchanged out of that same fund account (the 30-Day Purchase Block). The calendar day after the date of redemption is considered Day 1 for purposes of computing the period before another purchase may be made.
General Exceptions As of the date of this prospectus, the following types of transactions generally are not subject to the funds excessive and short-term trading policy:
· Shares purchased or redeemed in money market funds and ultra short-term bond funds;
· Shares purchased or redeemed through a systematic purchase or withdrawal plan;
· Checkwriting redemptions from bond and money market funds;
· Shares purchased through the reinvestment of dividends or capital gain distributions;
· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees;
· Transfers and changes of account registration within the same fund;
· Shares purchased by asset transfer or direct rollover;
· Shares purchased or redeemed through IRA conversions and recharacterizations;
· Shares redeemed to return an excess contribution from a retirement account;
· Transactions in Section 529 college savings plans;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares converted from one share class to another share class in the same fund;
· Shares of T. Rowe Price Funds that are purchased by another T. Rowe Price Fund, including shares purchased by T. Rowe Price fund-of-funds products, and shares purchased by discretionary accounts managed by T. Rowe Price or one of its
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affiliates (please note that shareholders of the investing T. Rowe Price Fund are still subject to the policy); and
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price.
Transactions in certain rebalancing, asset allocation, wrap programs, and other advisory programs, as well as non-T. Rowe Price fund-of-funds products, may also be exempt from the 30-Day Purchase Block, subject to prior written approval by T. Rowe Price.
In addition to restricting transactions in accordance with the 30-Day Purchase Block, T. Rowe Price may, in its discretion, reject (or instruct a financial intermediary to reject) any purchase or exchange into a fund from a person (which includes individuals and entities) whose trading activity could disrupt the management of the fund or dilute the value of the funds shares, including trading by persons acting collectively (e.g., following the advice of a newsletter). Such persons may be barred, without prior notice, from further purchases of T. Rowe Price Funds for a period longer than 30 calendar days, or permanently.
Financial Intermediary Accounts If you invest in T. Rowe Price Funds through a financial intermediary, you should review the financial intermediarys materials carefully or consult with the financial intermediary directly to determine the trading policy that will apply to your trades in the funds as well as any other rules or conditions on transactions that may apply. If T. Rowe Price is unable to identify a transaction placed through a financial intermediary as exempt from the excessive trading policy, the 30-Day Purchase Block may apply.
Financial intermediaries may maintain their underlying accounts directly with the fund, although they often establish an omnibus account (one account with the fund that represents multiple underlying shareholder accounts) on behalf of their customers. When financial intermediaries establish omnibus accounts in the T. Rowe Price Funds, T. Rowe Price is not able to monitor the trading activity of the underlying shareholders. However, T. Rowe Price monitors aggregate trading activity at the financial intermediary (omnibus account) level in an attempt to identify activity that indicates potential excessive or short-term trading. If it detects such trading activity, T. Rowe Price may contact the financial intermediary to request personal identifying information and transaction histories for some or all underlying shareholders (including plan participants, if applicable) pursuant to a written agreement that T. Rowe Price has entered into with each financial intermediary. Any nonpublic personal information provided to the fund (for example, a shareholders taxpayer identification number or transaction records) is subject to the funds privacy policy. If T. Rowe Price believes that excessive or short-term trading has occurred and there is no exception for such trades under the funds Excessive and Short-Term Trading Policy as previously described, it will instruct the financial intermediary to impose restrictions to discourage such practices and take appropriate action with respect to the underlying shareholder, including restricting purchases for 30 calendar
Information About Accounts in T. Rowe Price Funds | 43 |
days or longer. Each financial intermediary has agreed to execute such instructions pursuant to a written agreement. There is no assurance that T. Rowe Price will be able to properly enforce its excessive trading policies for omnibus accounts. Because T. Rowe Price generally relies on financial intermediaries to provide information and impose restrictions for omnibus accounts, its ability to monitor and deter excessive trading will be dependent upon the intermediaries timely performance of their responsibilities.
T. Rowe Price may allow a financial intermediary or other third party to maintain restrictions on trading in the T. Rowe Price Funds that differ from the 30-Day Purchase Block. An alternative excessive trading policy would be acceptable to T. Rowe Price if it believes that the policy would provide sufficient protection to the T. Rowe Price Funds and their shareholders that is consistent with the excessive trading policy adopted by the funds Boards.
Retirement Plan Accounts If
shares are held in a retirement plan, generally the
30-Day Purchase Block applies only to shares
redeemed by a participant-directed exchange to another fund. However, the 30-Day Purchase Block may apply
to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price
or the excessive trading policy applied by your plans recordkeeper. An alternative excessive trading
policy may apply to the T. Rowe Price Funds where a retirement plan has its own policy deemed acceptable
to T. Rowe Price. You should contact T. Rowe Price or your plan recordkeeper to determine which
of your transactions are subject to the funds 30-Day Purchase Block or an alternative policy.
There is no guarantee that T. Rowe Price will be able to identify or prevent all excessive or short-term trades or trading practices.
Unclaimed Accounts and Uncashed Checks
If your account has no activity for a certain period of time and/or mail sent to you from T. Rowe Price (or your financial intermediary) is returned by the post office, T. Rowe Price (or your financial intermediary) may be required to transfer your account and any assets related to uncashed checks to the appropriate state under its abandoned property laws. To avoid such action, it is important to keep your account address up to date and periodically contact T. Rowe Price at least once every two years.
Delivery of Shareholder Documents
If two or more accounts own the same fund, share the same address, and T. Rowe Price reasonably believes that the two accounts are part of the same institution, we may economize on fund expenses by mailing only one shareholder report and prospectus for the fund. If you do not want your mailings to be householded, please call Financial Institution Services.
T. Rowe Price | 44 |
Signature Guarantees
A Medallion signature guarantee is designed to protect you and the T. Rowe Price Funds from fraud by verifying your signature.
A signature guarantee may be required in certain situations, such as:
· Remitting redemption proceeds to any person, address, or bank account not on file or
· Changing the account registration or broker-dealer of record for an account.
Consult Financial Institution Services for specific requirements.
The signature guarantee must be obtained from a financial institution that is a participant in a Medallion signature guarantee program. You can obtain a Medallion signature guarantee from certain banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. When obtaining a Medallion signature guarantee, please discuss with the guarantor the dollar amount of your proposed transaction. It is important that the level of coverage provided by the guarantors stamp covers the dollar amount of the transaction or it may be rejected. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud.
Fund Operations and Shareholder Services
T. Rowe Price and The Bank of New York Mellon, subject to the oversight of T. Rowe Price, each provide certain accounting services to the T. Rowe Price Funds. T. Rowe Price Services, Inc., acts as the transfer agent and dividend disbursing agent and provides shareholder and administrative services to the funds. T. Rowe Price Retirement Plan Services, Inc., provides recordkeeping, sub-transfer agency, and administrative services for certain types of retirement plans investing in the funds. These companies receive compensation from the funds for their services. The F Class may also pay financial intermediaries for performing shareholder and administrative services for underlying shareholders in omnibus accounts. All of the fees discussed above are included in a funds financial statements and, except for funds that have an all-inclusive management fee, are also reflected in the Other expenses line that appears in a funds fee table in Section 1.
Each fund intends to qualify to be treated each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. In order to qualify, a fund must satisfy certain income, diversification, and distribution requirements. A regulated investment company is not subject to U.S. federal income tax at the portfolio level on income and gains from investments that are distributed to shareholders. However, if a fund were to fail to qualify as a regulated investment
Information About Accounts in T. Rowe Price Funds | 45 |
company and was ineligible to or otherwise did not cure such failure, the result would be fund-level taxation and, consequently, a reduction in income available for distribution to the funds shareholders.
To the extent possible, all net investment income and realized capital gains are distributed to shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund shares in your account unless you select another option on your new account form. Reinvesting distributions results in compounding, which allows you to receive dividends and capital gain distributions on an increasing number of shares.
Distributions not reinvested are paid by check or transmitted electronically to your bank account. If the U.S. Postal Service cannot deliver your check or if your check remains uncashed for six months, the fund reserves the right to reinvest your distribution check in your account at the net asset value on the day of the reinvestment and to reinvest all subsequent distributions in additional shares of the fund. Interest will not accrue on amounts represented by uncashed distributions or redemption checks.
The following table provides details on dividend payments:
Dividend Payment Schedule | |
Fund | Dividends |
Bond funds | · Shares normally begin to earn dividends on the business day after payment is received by T. Rowe Price. · Declared daily and paid on the first business day of each month. |
Stock funds | · Must be a shareholder on the dividend record date. · Declared and paid annually, if any, generally in December. |
Shares of bond funds will earn dividends through the date of redemption. Shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. Generally, if you redeem all of your bond fund shares at any time during the month, you will also receive all dividends earned through the date of redemption in the same check. When you redeem only a portion of your bond fund shares, all dividends accrued on those shares will be reinvested, or paid in cash, on the next dividend payment date. The funds do not pay dividends in fractional cents. Any dividend amount earned for a particular day on all shares held that is one-half of one cent or greater (for example, $0.016) will be rounded up to the next whole cent ($0.02), and any amount that is less than one-half of one cent (for example, $0.014) will be rounded down to the nearest whole cent ($0.01). Please note that if the dividend payable on all shares held is less than one-half of one cent for a particular day, no dividend will be earned for that day.
T. Rowe Price | 46 |
If you purchase and redeem your shares through a financial intermediary, consult your financial intermediary to determine when your shares begin and stop accruing dividends as the information previously described may vary.
Capital Gain Payments
A capital gain or loss is the difference between the purchase and sale price of a security. If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is generally paid the following year. A fund may have to make additional capital gain distributions, if necessary, to comply with the applicable tax law.
Tax Information
In most cases, you will be provided information for your tax filing needs no later than mid-February.
If you invest in the fund through a tax-deferred account, such as an IRA or employer-sponsored retirement plan, you will not be subject to tax on dividends and distributions from the fund or the sale of fund shares if those amounts remain in the tax-deferred account. You may receive a Form 1099-R or other Internal Revenue Service forms, as applicable, if any portion of the account is distributed to you.
If you invest in the fund through a taxable account, you generally will be subject to tax when:
· You sell fund shares, including an exchange from one fund to another.
· The fund makes dividend or capital gain distributions.
For individual shareholders, a portion of ordinary dividends representing qualified dividend income received by the fund may be subject to tax at the lower rates applicable to long-term capital gains rather than ordinary income. You may report it as qualified dividend income in computing your taxes, provided you have held the fund shares on which the dividend was paid for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Ordinary dividends that do not qualify for this lower rate are generally taxable at the investors marginal income tax rate. This includes the portion of ordinary dividends derived from interest, short-term capital gains, distributions from nonqualified foreign corporations, and dividends received by the fund from stocks that were on loan. Little, if any, of the ordinary dividends paid by the bond funds is expected to qualify for this lower rate.
For corporate shareholders, a portion of ordinary dividends may be eligible for the 50% deduction for dividends received by corporations to the extent the funds income consists of dividends paid by U.S. corporations. Little, if any, of the ordinary dividends paid by the international stock or bond funds is expected to qualify for this deduction.
Information About Accounts in T. Rowe Price Funds | 47 |
A 3.8% net investment income tax is imposed on net investment income, including interest, dividends, and capital gains of U.S. individuals with income exceeding $200,000 (or $250,000 if married filing jointly) and of estates and trusts.
If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with any necessary tax forms. You should contact your financial intermediary for the tax information that will be sent to you and reported to the Internal Revenue Service.
Taxes on Fund Redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another in a taxable account is also a sale for tax purposes.
All or a portion of the loss realized from a sale or exchange of your fund shares may be disallowed under the wash sale rule if you purchase substantially identical shares within a 61-day period beginning 30 days before and ending 30 days after the date on which the shares are sold or exchanged. Shares of the same fund you acquire through dividend reinvestment are shares purchased for the purpose of the wash sale rule and may trigger a disallowance of the loss for shares sold or exchanged within the 61-day period of the dividend reinvestment. Any loss disallowed under the wash sale rule is added to the cost basis of the purchased shares.
T. Rowe Price (or your financial intermediary) will make available to you Form 1099-B, if applicable, no later than mid-February, providing certain information for each sale you made in the fund during the prior year. Unless otherwise indicated on your Form 1099-B, this information will also be reported to the Internal Revenue Service. For mutual fund shares acquired prior to 2012 in most accounts established or opened by exchange in 1984 or later, our Form 1099-B will provide you with the gain or loss on the shares you sold during the year based on the average cost single category method. This information on average cost and gain or loss from sale is not reported to the Internal Revenue Service. For these mutual fund shares acquired prior to 2012, you may calculate the cost basis using other methods acceptable to the Internal Revenue Service, such as specific identification.
For mutual fund shares acquired after 2011, federal income tax regulations require us to report the cost basis information on Form 1099-B using a cost basis method selected by the shareholder in compliance with such regulations or, in the absence of such selected method, our default method if you acquire your shares directly from T. Rowe Price. Our default method is average cost. For any fund shares acquired through a financial intermediary after 2011, you should check with your financial intermediary regarding the applicable cost basis method. You should, however, note that the cost basis information reported to you may not always be the same as what you should report on your tax return because the rules applicable to the determination of cost basis on Form 1099-B may be different from the rules applicable to the determination of cost basis for reporting on your tax return. Therefore, you should save your transaction records to make sure the information
T. Rowe Price | 48 |
reported on your tax return is accurate. T. Rowe Price and financial intermediaries are not required to issue a Form 1099-B to report sales of money market fund shares.
To help you maintain accurate records, T. Rowe Price will make available to you a confirmation promptly following each transaction you make (except for systematic purchases and systematic redemptions) and a year-end statement detailing all of your transactions in each fund account during the year. If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with transaction confirmations and statements.
Taxes on Fund Distributions
T. Rowe Price (or your financial intermediary) will make available to you, as applicable, generally no later than mid-February, a Form 1099-DIV, or other Internal Revenue Service forms, as required, indicating the tax status of any income dividends, dividends exempt from federal income taxes, and capital gain distributions made to you. This information will be reported to the Internal Revenue Service. Taxable distributions are generally taxable to you in the year in which they are paid. A dividend declared in October, November, or December and paid in the following January is generally treated as taxable to you as if you received the distribution in December. Dividends from tax-free funds are generally expected to be tax-exempt for federal income tax purposes. Your bond fund dividends for each calendar year will include dividends accrued up to the first business day of the next calendar year. Ordinary dividends and capital gain dividends may also be subject to state and local taxes. You will be sent any additional information you need to determine your taxes on fund distributions, such as the portion of your dividends, if any, that may be exempt from state and local income taxes.
Taxable distributions are subject to tax whether reinvested in additional shares or received in cash.
The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held the shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income, and gains on securities held more than one year are taxed at the lower rates applicable to long-term capital gains. If you realized a loss on the sale or exchange of fund shares that you held six months or less, your short-term capital loss must be reclassified as a long-term capital loss to the extent of any long-term capital gain distributions received during the period you held the shares. For funds investing in foreign instruments, distributions resulting from the sale of certain foreign currencies, currency contracts, and the foreign currency portion of gains on debt instruments are taxed as ordinary income. Net foreign currency losses may cause monthly or quarterly dividends to be reclassified as returns of capital.
A funds distributions that have exceeded the funds earnings and profits for the relevant tax year may be treated as a return of capital to its shareholders. A return of capital distribution is generally nontaxable but reduces the shareholders cost basis in
Information About Accounts in T. Rowe Price Funds | 49 |
the fund, and any return of capital in excess of the cost basis will result in a capital gain.
The tax status of certain distributions may be recharacterized on year-end tax forms, such as your Form 1099-DIV. Distributions made by a fund may later be recharacterized for federal income tax purposesfor example, from taxable ordinary income dividends to returns of capital. A recharacterization of distributions may occur for a number of reasons, including the recharacterization of income received from underlying investments, such as real estate investment trusts (REITs), and distributions that exceed taxable income due to losses from foreign currency transactions or other investment transactions. Certain funds, including international bond funds and funds that invest in REITs, are more likely to recharacterize a portion of their distributions as a result of their investments.
If the fund qualifies and elects to pass through nonrefundable foreign income taxes paid to foreign governments during the year, your portion of such taxes will be reported to you as taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for those amounts. There can be no assurance that a fund will meet the requirements to pass through foreign income taxes paid.
If you are subject to backup withholding, we will have to withhold a 24% backup withholding tax on distributions and, in some cases, redemption payments. You may be subject to backup withholding if we are notified by the Internal Revenue Service to withhold, you have failed one or more tax certification requirements, or our records indicate that your tax identification number is missing or incorrect. Backup withholding is not an additional tax and is generally available to credit against your federal income tax liability with any excess refunded to you by the Internal Revenue Service.
Tax Consequences of Hedging
Entering into certain transactions involving options, futures, swaps, and forward currency exchange contracts may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in a fund being required to distribute gains on such transactions even though it did not close the contracts during the year or receive cash to pay such distributions. The fund may not be able to reduce its distributions for losses on such transactions to the extent of unrealized gains in offsetting positions.
Tax Consequences of Shareholder Turnover
If the funds portfolio transactions result in a net capital loss (i.e., an excess of capital losses over capital gains) for any year, the loss may be carried forward and used to offset future realized capital gains. However, its ability to carry forward such losses will be limited if the fund experiences an ownership change within the meaning of the Internal Revenue Code. An ownership change generally results when shareholders owning 5% or more of the fund increase their aggregate holdings by more than 50 percentage points over a three-year period.
T. Rowe Price | 50 |
Because Institutional Funds may have only a few large shareholders, an ownership change can occur in the normal course of shareholder purchases and redemptions. The fund undertakes no obligation to avoid or prevent an ownership change. Moreover, because of circumstances beyond the funds control, there can be no assurance that the fund will not experience, or has not already experienced, an ownership change. An ownership change can reduce the funds ability to offset capital gains with losses, which could increase the amount of taxable gains that could be distributed to shareholders.
Tax Effect of Buying Shares Before an Income Dividend or Capital Gain Distribution
If you buy shares shortly before or on the record datethe date that establishes you as the person to receive the upcoming distributionyou may receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a funds record date before investing. In addition, a funds share price may, at any time, reflect undistributed capital gains or income and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return.
T. Rowe Price Funds and their agents, in their sole discretion, reserve the following rights: (1) to waive or lower investment minimums; (2) to accept initial purchases by telephone; (3) to refuse any purchase or exchange order; (4) to cancel or rescind any purchase or exchange order placed through a financial intermediary no later than the business day after the order is received by the financial intermediary (including, but not limited to, orders deemed to result in excessive trading, market timing, or 5% ownership); (5) to cease offering fund shares at any time to all or certain groups of investors; (6) to freeze any account and suspend account services when notice has been received of a dispute regarding the ownership of the account, or a legal claim against an account, upon initial notification to T. Rowe Price of a shareholders death until T. Rowe Price receives required documentation in correct form, or if there is reason to believe a fraudulent transaction may occur; (7) to otherwise modify the conditions of purchase and modify or terminate any services at any time; (8) to waive any wire, small account, maintenance, or fiduciary fees charged to a group of shareholders; (9) to act on instructions reasonably believed to be genuine; (10) to involuntarily redeem an account at the net asset value calculated the day the account is redeemed, in cases of threatening conduct, suspected fraudulent or illegal activity, or if the fund or its agent is unable, through its procedures, to verify the identity of the person(s) or entity opening an account; and (11) for money market funds, to suspend redemptions to facilitate an orderly liquidation.
The funds Statement of Additional Information, which contains a more detailed description of the funds operations, investment restrictions, policies and practices, has been filed with the SEC. The Statement of Additional Information is incorporated by reference into this prospectus, which means that it is legally part of this prospectus even if you do not request a copy. Further information about the funds investments, including a review of market conditions and the managers recent investment strategies and their impact on performance during the past fiscal year, is available in the annual and semiannual shareholder reports. These documents and updated performance information are available through troweprice.com. For inquiries about the fund and to obtain free copies of any of these documents, call 1-800-638-8790. If you invest in the fund through a financial intermediary, you should contact your financial intermediary for copies of these documents.
Fund information and Statements of Additional Information are also available from the Public Reference Room of the SEC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Fund reports and other fund information are available on the EDGAR Database on the SECs Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, U.S. Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1520.
T. Rowe Price Associates, Inc. |
1940 Act File No. 811-5833 | E171-040 3/1/18 |
PROSPECTUS | |
IEMFX | |
March 1, 2018 | |
T. Rowe Price Institutional Emerging Markets Equity Fund | |
A fund seeking long-term growth of capital through investments in common stocks of companies located (or with primary operations) in emerging market countries. | |
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. | |
Table of Contents
SUMMARY
The fund seeks long-term growth of capital through investments primarily in the common stocks of companies located (or with primary operations) in emerging markets.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may also incur brokerage commissions and other charges when buying or selling shares of the fund, which are not reflected in the table.
Fees and Expenses of the Fund
Shareholder fees (fees paid directly from your investment) | ||
Redemption fee (as a percentage of amount redeemed on shares held for 90 days or less) | 2.00 | % |
Annual
fund operating expenses | ||
Management fees | 1.10 | % |
Other expenses | | |
Total annual fund operating expenses | 1.10 |
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods, that your investment has a 5% return each year, and that the funds operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 year | 3 years | 5 years | 10 years |
$112 | $350 | $606 | $1,340 |
Portfolio Turnover The fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the funds shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the funds performance. During the most recent fiscal year, the funds portfolio turnover rate was 19.7% of the average value of its portfolio.
Investments, Risks, and Performance
Principal Investment Strategies The fund normally invests at least 80% of its net assets (including any borrowings for investment purposes) in emerging market companies. For purposes of determining whether the fund invests at least 80% of its net assets in emerging market companies, the fund relies on MSCI Inc. to determine
T. Rowe Price | 2 |
which countries are considered emerging markets and relies on the country assigned to a security by MSCI Inc. or another unaffiliated data provider. The fund considers frontier markets to be a subset of emerging markets and any investments in frontier markets will be counted toward the funds 80% investment policy. The fund expects to primarily invest in common stocks of companies located (or with primary operations) in emerging markets in Latin America, Asia, Europe, Africa, and the Middle East. The countries in which the fund normally invests include, but are not limited to, the following:
· Asia: China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Sri Lanka, Taiwan, Thailand, and Vietnam.
· Latin America: Argentina, Belize, Brazil, Chile, Colombia, Mexico, Panama, Peru, and Venezuela.
· Europe: Croatia, Czech Republic, Estonia, Greece, Hungary, Kazakhstan, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia, Turkey, and Ukraine.
· Africa and the Middle East: Bahrain, Botswana, Egypt, Jordan, Kenya, Kuwait, Lebanon, Mauritius, Morocco, Nigeria, Oman, Qatar, Saudi Arabia, South Africa, Tunisia, United Arab Emirates, and Zimbabwe.
The fund may purchase the stocks of companies of any size. While the adviser invests with an awareness of the global economic backdrop and the advisers outlook for certain industries, sectors, and individual countries, the advisers decision-making process focuses on bottom-up stock selection. Country allocation is driven largely by stock selection, though the adviser may limit investments in markets or industries that appear to have poor overall prospects. The fund may at times invest significantly in China.
Security selection reflects a growth style. The adviser relies on a global team of investment analysts dedicated to in-depth fundamental research in an effort to identify companies capable of achieving and sustaining above-average, long-term earnings growth. The adviser seeks to purchase stocks of companies at reasonable prices in relation to present or anticipated earnings, cash flow, or book value. The fund may at times invest significantly in certain sectors, such as the information technology and financial sectors.
In selecting investments, the adviser generally favors companies with one or more of the following characteristics:
· leading or improving market position;
· attractive business niche;
· attractive or improving franchise or industry position;
· seasoned management;
· stable or improving earnings and/or cash flow; and
· sound or improving balance sheet.
The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.
Summary | 3 |
Principal Risks As with any mutual fund, there is no guarantee that the fund will achieve its objective. The funds share price fluctuates, which means you could lose money by investing in the fund. The principal risks of investing in this fund are summarized as follows:
Active management risks The investment advisers judgments about the attractiveness, value, or potential appreciation of the funds investments may prove to be incorrect. If the investments selected and strategies employed by the fund fail to produce the intended results, the fund could underperform in comparison to other funds with a similar benchmark or similar objectives and investment strategies.
Risks of stock investing Stocks generally fluctuate in value more than bonds and may decline significantly over short time periods. There is a chance that stock prices overall will decline because stock markets tend to move in cycles, with periods of rising and falling prices. The value of a stock in which the fund invests may decline due to general weakness in the stock market or because of factors that affect a particular company or industry.
International investing risks Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse local, political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S.
Emerging markets risks The risks of international investing are heightened for securities of issuers in emerging market countries. Emerging market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed countries. In addition to all of the risks of investing in international developed markets, emerging markets are more susceptible to governmental interference, local taxes being imposed on international investments, restrictions on gaining access to sales proceeds, and less liquid and less efficient trading markets.
Investment style risks Different investment styles tend to shift in and out of favor depending on market conditions and investor sentiment. The funds growth approach to investing could cause it to underperform other stock funds that employ a different investment style. Growth stocks tend to be more volatile than certain other types of stocks, and their prices may fluctuate more dramatically than the overall stock market. A stock with growth characteristics can have sharp price declines due to decreases in current or expected earnings and may lack dividends that can help cushion its share price in a declining market.
Market capitalization risks Because the fund may invest in companies of any size, its share price could be more volatile than a fund that invests only in large companies.
T. Rowe Price | 4 |
Small and medium-sized companies often have less experienced management, narrower product lines, more limited financial resources, and less publicly available information than larger companies. Larger companies may not be able to attain the high growth rates of successful smaller companies, especially during strong economic periods, and they may be less capable of responding quickly to competitive challenges and industry changes.
Sector concentration risks At times, the fund may have a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector. Companies in the same economic sector may be similarly affected by economic or market events, making the fund more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly. For example, the fund may have a significant portion of its assets invested in securities of companies in the information technology and financials sectors. Companies in the financials sector may be adversely impacted by, among other things, regulatory changes, economic conditions, interest rates, credit rating downgrades, and decreased liquidity in credit markets. Companies in the information technology sector can be adversely affected by, among other things, intense competition, earnings disappointments, and rapid obsolescence of products and services due to technological innovations or changing consumer preferences.
Risks of investing in China The fund may invest significantly in China. The Chinese government exercises significant control over Chinas economy through its industrial policies (e.g., allocation of resources and other preferential treatment), monetary policy, management of currency exchange rates, and management of the payment of foreign currency-denominated obligations. Changes in these policies could adversely impact affected industries or companies. Additionally, Chinas economy may be adversely impacted by trade or political disputes with Chinas major trading partners, including the U.S. In addition, as its consumer class emerges, Chinas domestically oriented industries may be especially sensitive to changes in government policy and investment cycles. Chinas currency, which historically has been managed in a tight range relative to the U.S. dollar, may in the future be subject to greater uncertainty as Chinese authorities change the policies that determine the exchange rate mechanism.
Performance The following performance information provides some indication of the risks of investing in the fund. The funds performance information represents only past performance (before and after taxes) and is not necessarily an indication of future results.
The following bar chart illustrates how much returns can differ from year to year by showing calendar year returns and the best and worst calendar quarter returns during those years for the fund.
Summary | 5 |
The following table shows the average annual total returns for the fund, and also compares the returns with the returns of a relevant broad-based market index, as well as with the returns of one or more comparative indexes that have investment characteristics similar to those of the fund.
In addition, the table shows hypothetical after-tax returns to demonstrate how taxes paid by a shareholder may influence returns. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as a 401(k) account or an IRA.
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| 1 Year | 5 Years | 10 Years | date |
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| Institutional Emerging Markets Equity Fund | 10/31/2002 |
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| Returns before taxes | 42.87 | % |
| 6.55 | % |
| 1.54 | % |
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| Returns after taxes on distributions | 42.87 |
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| 6.50 |
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| 1.49 |
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| Returns after taxes on distributions |
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| and sale of fund shares | 24.60 |
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| 5.24 |
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| 1.30 |
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| MSCI Emerging Markets Index (reflects no deduction for fees, expenses, or taxes) |
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| 37.75 |
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| 4.73 |
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| 2.02 |
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| Lipper Emerging Markets Funds Average |
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| 34.57 |
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| 4.26 |
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| 1.49 |
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Updated performance information is available through troweprice.com.
Management
Investment Adviser T. Rowe Price Associates, Inc. (T. Rowe Price)
Investment Sub-adviser T. Rowe Price International Ltd (T. Rowe Price International)
Portfolio Manager | Title | Managed Fund Since | Joined Investment |
Gonzalo Pangaro | Chairman of Investment Advisory Committee | 2008 | 1998 |
Purchase and Sale of Fund Shares
The fund generally requires a $2,500 minimum initial investment ($1,000 minimum initial investment if opening an IRA, a custodial account for a minor, or a small business retirement plan account). Additional purchases generally require a $100 minimum. These investment minimums may be waived or modified for financial intermediaries and certain employer-sponsored retirement plans submitting orders on behalf of their customers.
For investors holding shares of the fund directly with T. Rowe Price, you may purchase, redeem, or exchange fund shares by mail; by telephone (1-800-225-5132 for IRAs and nonretirement accounts; 1-800-492-7670 for small business retirement plans; and 1-800-638-8790 for institutional investors and financial intermediaries); or, for certain accounts, by accessing your account online through troweprice.com.
If you hold shares through a financial intermediary or retirement plan, you must purchase, redeem, and exchange shares of the fund through your intermediary or retirement plan. You should check with your intermediary or retirement plan to determine the investment minimums that apply to your account.
Summary | 7 |
Tax Information
Any dividends or capital gains are declared and paid annually, usually in December. Redemptions or exchanges of fund shares and distributions by the fund, whether or not you reinvest these amounts in additional fund shares, may be taxed as ordinary income or capital gains unless you invest through a tax-deferred account (in which case you will be taxed upon withdrawal from such account).
More About the Fund | 2 | |
How is the fund organized?
T. Rowe Price Institutional International Funds, Inc. (the Corporation) was incorporated in Maryland in 1989. Currently, the Corporation consists of eleven series, each representing a separate pool of assets with different investment objectives. Each series is an open-end management investment company, or mutual fund. Mutual funds pool money received from shareholders and invest it to try to achieve specified objectives.
What is meant by shares?
As with all mutual funds, investors purchase shares when they put money in the fund. These shares are part of the funds authorized capital stock, but share certificates are not issued.
Each share and fractional share entitles the shareholder to:
· Receive a proportional interest in income and capital gain distributions. For funds with multiple share classes, the income dividends for each share class will generally differ from those of other share classes to the extent that the expense ratios of the classes differ.
· Cast one vote per share on certain fund matters, including the election of the funds directors, changes in fundamental policies, or approval of material changes to the funds investment management agreement. Shareholders of each class have exclusive voting rights on matters affecting only that class.
Does the fund have annual shareholder meetings?
The mutual funds that are sponsored and managed by T. Rowe Price (the T. Rowe Price Funds) are not required to hold regularly scheduled shareholder meetings. To avoid unnecessary costs to the funds shareholders, shareholder meetings are only held when certain matters, such as changes in fundamental policies or elections of directors, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting for the purpose of voting on the removal of any fund director. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the funds will send or make available to you proxy materials that explain the matters to be decided and include instructions on voting by mail, telephone, or the Internet.
More About the Fund | 9 |
Who runs the fund?
General Oversight
The fund is governed by a Board of Directors (the Board) that meets regularly to review the funds investments, performance, expenses, and other business affairs. The Board elects the funds officers. At least 75% of Board members are independent of T. Rowe Price and its affiliates (the Firm).
Investment Advisers
T. Rowe Price is the funds investment adviser and oversees the selection of the funds investments and management of the funds portfolio pursuant to an investment management agreement between the investment adviser and the fund. T. Rowe Price is a SEC-registered investment adviser that provides investment management services to individual and institutional investors, and sponsors and serves as adviser and sub-adviser to registered investment companies, institutional separate accounts, and common trust funds. The address for T. Rowe Price is 100 East Pratt Street, Baltimore, Maryland 21202. As of December 31, 2017, the Firm had approximately $991 billion in assets under management and provided investment management services for more than 8 million individual and institutional investor accounts.
T. Rowe Price has entered into a sub-advisory agreement with T. Rowe Price International under which T. Rowe Price International is authorized to trade securities and make discretionary investment decisions on behalf of the fund. T. Rowe Price International is an investment adviser registered or licensed with the SEC, United Kingdom Financial Conduct Authority, Financial Services Agency of Japan, and other non-U.S. regulatory authorities. T. Rowe Price International sponsors and serves as adviser to foreign collective investment schemes and provides investment management services to investment companies and other institutional investors. T. Rowe Price International is headquartered in London and has several branch offices around the world. T. Rowe Price International is a direct subsidiary of T. Rowe Price and its address is 60 Queen Victoria Street, London EC4N 4TZ, United Kingdom.
Portfolio Management
T. Rowe Price has established an Investment Advisory Committee with respect to the fund. The committee chairman has day-to-day responsibility for managing the funds portfolio and works with the committee in developing and executing the funds investment program. The members of the committee are as follows: Gonzalo Pangaro, Chairman, Ulle Adamson, Christopher D. Alderson, Oliver D.M. Bell, Anh Lu, Eric C. Moffett, Verena E. Wachnitz, and Ernest C. Yeung. The following information provides the year that the chairman (the portfolio manager) first joined the Firm and the chairmans specific business experience during the past five years (although the chairman may have had portfolio management responsibilities for a longer period). Mr. Pangaro became co-chairman in 2008 and has been sole chairman since 2009. He joined the Firm in 1998 and his investment experience dates from 1991. He has served as a portfolio manager with the Firm throughout the past five years.
T. Rowe Price | 10 |
The Statement of Additional Information provides additional information about the portfolio managers compensation, other accounts managed by the portfolio manager, and the portfolio managers ownership of the funds shares.
The Management Fee
The fund pays the investment adviser an annual all-inclusive management fee of 1.10% based on the funds average daily net assets. The management fee is calculated and accrued daily and it includes investment management services and ordinary, recurring operating expenses, but does not cover interest, expenses related to borrowing, taxes, and brokerage and other transaction costs, or nonrecurring extraordinary expenses.
A discussion about the factors considered by the Board and its conclusions in approving the funds investment management agreement (and any sub-advisory agreement, if applicable) appear in the funds semiannual report to shareholders for the period ended April 30.
Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. The fund may be appropriate for you if you are seeking diversification for your equity investments and can accept the risks that accompany foreign investments. Your decision should take into account whether you have any other foreign stock investments. If you do not, you may want to consider investing in a more widely diversified fund to gain the broadest exposure to global opportunities. The fund may be appropriate if you seek to supplement a diversified international portfolio with a more concentrated investment and are comfortable with the potentially significant volatility associated with investing in emerging markets.
The market may reward growth stocks with price increases when earnings expectations are met or exceeded. Funds that employ a growth-oriented approach to stock selection rely on the premise that by investing in companies that increase their earnings faster than both inflation and the overall economy, the market will eventually reward those companies with a higher stock price. The funds successful implementation of a growth-oriented strategy may lead to long-term growth of capital over time.
Investing a portion of your overall portfolio in stock funds with foreign holdings can enhance your diversification and increase your available investment opportunities.
The fund invests significantly in emerging market countries and typically has substantial investments in Asia and Latin America, which provide the fund with the
More About the Fund | 11 |
opportunity to seek superior growth in the areas the fund views as most promising, but with commensurately higher risks.
Portfolio managers closely monitor the funds investments as well as political and economic trends in the countries and regions in which the fund invests. Holdings are adjusted according to the portfolio managers analysis and outlook. The impact of unfavorable developments in a particular country may be reduced when investments are spread among many countries. However, the economies and financial markets of countries in a certain region may be heavily influenced by one another.
As with all stock funds, the funds share price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse local, political, social, 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 advisers assessment of companies held by the fund may prove incorrect, resulting in losses or poor performance, even in rising markets. Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets.
As with any mutual fund, there is no guarantee the fund will achieve its objective. The funds share price fluctuates, which means you could lose money when you sell your shares of the fund.
The principal risks associated with the funds principal investment strategies include the following:
Growth investment risks Growth stocks can be volatile for several reasons. Since these companies usually invest a high portion of earnings in their businesses, they may lack the dividends that can cushion stock prices in a falling market. Also, earnings disappointments often lead to sharply falling prices because investors buy growth stocks in anticipation of superior earnings growth.
Currency risks A decline in the value of a foreign currency versus the U.S. dollar could reduce the dollar value of securities denominated in that foreign currency. The overall impact on the funds holdings can be significant, unpredictable, and long-lasting, depending on the currencies represented in the funds portfolio and how each foreign currency appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the fund does not engage in extensive foreign currency hedging programs. Further, since exchange rate movements are volatile, the funds attempts at hedging could be unsuccessful, and it is not possible to effectively hedge the currency risks of many emerging market countries.
Other risks of foreign investing Risks can result from varying stages of economic and political development; differing regulatory environments, trading days and
T. Rowe Price | 12 |
accounting standards; uncertain tax laws; and higher transaction costs of non-U.S. markets. Investments outside the U.S. could be subject to governmental actions such as capital or currency controls, nationalization of a company or industry, expropriation of assets, or imposition of high taxes. A trading market may close without warning for extended time periods, preventing the fund from buying or selling securities in that market.
Trading in the securities in which the fund invests may take place in various foreign markets on certain days when the fund is not open for business and does not calculate its net asset value. For example, the fund may invest in securities that trade in various foreign markets that are open on weekends. As the securities trade, their value may substantially change. As a result, the funds net asset value may be significantly affected on days when shareholders cannot make transactions. In addition, market volatility may significantly limit the liquidity of securities of certain companies in a particular country or geographic region, or of all companies in the country or region. The fund may be unable to liquidate its positions in such securities at any time, or at a favorable price, in order to meet the funds obligations.
Emerging markets risks Investments in emerging markets are subject to the risk of abrupt and severe price declines. The economic and political structures of emerging market countries, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. These economies are less developed, can be overly reliant on particular industries, and more vulnerable to the ebb and flow of international trade, trade barriers, and other protectionist or retaliatory measures. Governments in many emerging market countries participate to a significant degree in their economies and securities markets. As a result, foreign investments may be restricted and subject to greater government control, including repatriation of sales proceeds. Some countries have histories of instability and upheaval that could cause their governments to act in a detrimental or hostile manner toward private enterprise or foreign investment. Investments in countries or regions that have recently begun moving away from central planning and state-owned industries toward free markets should be regarded as speculative.
While some countries have made progress in economic growth, liberalization, fiscal discipline, and political and social stability, there is no assurance these trends will continue. Significant risks, such as war and terrorism, currently affect some emerging market countries. The funds performance will likely be hurt by exposure to nations in the midst of hyperinflation, currency devaluation, trade disagreements, sudden political upheaval, or interventionist government policies. The volatility of emerging markets may be heightened by the actions (such as significant buying or selling) of a few major investors. For example, substantial increases or decreases in cash flows of mutual funds investing in these markets could significantly affect local securities prices and, therefore, could cause fund share prices to decline.
More About the Fund | 13 |
All of these factors make investing in such countries significantly riskier than in other countries, and any one of these factors could cause the funds share price to decline.
Geographic concentration risks Funds that are less diversified across geographic regions, countries, industries, or individual companies are generally riskier than more diversified funds. The performance of a fund that is less diversified will be closely tied to market, currency, economic, political, environmental, or regulatory conditions and developments in the countries, regions, or industries in which the fund invests and may be more volatile than the performance of a more diversified fund. The economies and financial markets of certain regionssuch as Latin America, Asia, Europe, and the Middle East and Africacan be interdependent and may all decline at the same time.
Risks of investing in Asia The funds relatively high exposure to Asia subjects the fund to a higher degree of risk that adverse developments in the region will negatively impact the fund. Certain Asian economies have experienced high inflation, high unemployment, currency devaluations and restrictions, and overextension of credit. Many Asian economies have experienced rapid growth and industrialization, and there is no assurance that this growth rate will be maintained. Economic events in any one Asian country may have a significant economic effect on the entire Asian region, as well as on major trading partners outside Asia. Any adverse event in the Asian markets may have a significant adverse effect on some or all of the economies of the countries in which the fund invests. Many Asian countries are subject to political risk, including corruption and regional conflict with neighboring countries. In addition, many Asian countries are subject to social and labor risks associated with demands for improved political, economic, and social conditions. The Asian region, and particularly China and South Korea, may be adversely affected by political, military, economic, and other factors related to North Korea.
Risks of investing in China The funds relatively high exposure to China subjects the fund to a higher degree of risk that adverse developments in a single country will negatively impact the fund. Under Chinas political and economic system, the central government historically has exercised substantial control over virtually every sector of the Chinese economy through administrative regulation and/or state ownership. The Chinese government has been, and is expected to continue, reforming its economic policies, which has resulted in less direct central and local government control over the business and production activities of Chinese enterprises and companies. Notwithstanding the economic reforms instituted by the Chinese government and the Chinese Communist Party, actions of the Chinese central and local government authorities continue to have a substantial effect on economic conditions in China, which could affect the public and private sector companies in which the fund invests. In the past, the Chinese government has from time to time taken actions that influence the prices at which certain goods may be sold, encourage companies to invest or concentrate in particular industries, induce mergers between companies in certain industries, and induce private companies to publicly offer their securities to
T. Rowe Price | 14 |
increase or continue the rate of economic growth, control the rate of inflation, or otherwise regulate economic expansion. Such actions and a variety of other centrally planned or determined activities by the Chinese government could have a significant adverse effect on economic conditions in China; the economic prospects for, and the market prices and liquidity of, the securities of Chinese companies; and the payments of dividends and interest by Chinese companies. In addition, expropriation, including nationalization; confiscatory taxation; political, economic, or social instability; or other developments could adversely affect and significantly diminish the values of the Chinese companies in which the fund invests.
Small- and mid-cap company risks To the extent the fund invests in small- and mid-capitalization stocks, it is likely to be more volatile than a fund that invests only in large companies. Small and medium-sized companies are generally riskier because they may have more limited product lines, less capital reserves, and less seasoned management, all of which could hinder their efforts to respond to economic, market, and industry changes. In addition, their securities may trade less frequently and with greater price swings.
Information technology sector risks The fund may invest significantly in the information technology sector. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on their profit margins. Like other technology companies, information technology companies may have limited product lines, markets, financial resources, or personnel. The products of information technology companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, and competition for the services of qualified personnel. Companies in the information technology sector are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies.
Banking and financial companies risks The fund may invest significantly in banks and other financial services companies. To the extent the fund has significant investments in financial companies, it is more susceptible to adverse developments affecting such companies and may perform poorly during a downturn in the banking industry. Banks can be adversely affected by, among other things, regulatory changes, interest rate movements, the availability of capital and the cost to borrow, and the rate of debt defaults. Banks and other financial services institutions are often subject to extensive governmental regulation and intervention, and the potential for additional regulation could reduce profit margins and adversely affect the scope of their activities, and the amount of capital they must maintain, and limit the amounts and types of loans and other financial commitments they can make. In addition, companies in the financials sector may also be adversely affected by decreases in the availability of money or asset valuations, credit rating downgrades, increased competition, and adverse conditions in other related markets.
More About the Fund | 15 |
The oversight of, and regulations applicable to, banks in emerging markets may be ineffective when compared with the regulatory frameworks for banks in developed markets. Banks in emerging markets may have significantly less access to capital than banks in more developed markets, leading them to be more likely to fail under adverse economic conditions. In addition, the impact of future regulation on any individual bank, or on the financial services sector as a whole, can be very difficult to predict.
Some of the principal tools the adviser uses to try to reduce overall risk include intensive research when evaluating a companys prospects and limiting exposure to any one industry or company. In addition, other risks associated with the additional investment strategies that may be employed by the fund include the following:
Additional strategies and risks While most assets will be invested in common stocks, other strategies may be employed that are not considered part of the funds principal investment strategies. For instance, the fund may, to a limited extent, use derivatives such as futures contracts and forward currency exchange contracts. Any investments in futures would typically serve as an efficient means of gaining exposure to certain markets or as a cash management tool to maintain liquidity while being invested in the market. Forward currency exchange contracts would primarily be used to settle trades in a foreign currency or to help protect the funds holdings from unfavorable changes in foreign currency exchange rates, although other currency hedging techniques may be used from time to time. To the extent the fund uses futures and forward currency exchange contracts, it is exposed to potential volatility and losses greater than direct investments in the contracts underlying assets, and the risk that anticipated currency movements will not be accurately predicted.
A derivative involves risks different from, and possibly greater than, the risks associated with investing directly in the assets on which the derivative is based. Derivatives can be highly volatile, illiquid, and difficult to value. Changes in the value of a derivative may not properly correlate with changes in the value of the underlying asset, reference rate, or index. The fund could be exposed to significant losses if it is unable to close a derivatives position due to the lack of a liquid trading market. Derivatives involve the risk that a counterparty to the derivatives agreement will fail to make required payments or comply with the terms of the agreement. There is also the possibility that limitations or trading restrictions may be imposed by an exchange or government regulation, which could adversely impact the value and liquidity of a derivatives contract subject to such regulation.
Recent regulations have changed the requirements related to the use of certain derivatives. Some of these new regulations have limited the availability of certain derivatives and made their use by funds more costly. It is expected that additional changes to the regulatory framework will occur, but the extent and impact of additional new regulations are not certain at this time.
T. Rowe Price | 16 |
Risks of investing in Latin America Latin American economies are generally considered emerging markets and are generally characterized by high interest rates, inflation, and unemployment rates. Currency devaluations in any one Latin American country can have a significant effect on the entire Latin American region. Because commodities such as oil and gas, minerals, and metals represent a significant percentage of the regions exports, the economies of Latin American countries are particularly sensitive to fluctuations in commodity prices. A relatively small number of Latin American companies represents a large portion of Latin Americas total market and thus may be more sensitive to adverse political or economic circumstances and market movements.
The Statement of Additional Information contains more detailed information about the fund and its investments, operations, and expenses.
This section provides a more detailed description of the various types of portfolio holdings and investment practices that may be used by the fund to execute its overall investment program. Some of these holdings are considered to be principal investment strategies of the fund and have already been described earlier in the prospectus. Any of the following holdings and investment practices that were not already described in Section 1 of the prospectus are not considered part of the funds principal investment strategies, but they may be used by the fund to help achieve its investment objective. The funds investments may be subject to further restrictions and risks described in the Statement of Additional Information.
Shareholder approval is required to substantively change the funds investment objective. Shareholder approval is also required to change certain investment restrictions noted in the following section as fundamental policies. Portfolio managers also follow certain operating policies that can be changed without shareholder approval. Shareholders will receive at least 60 days prior notice of a change in the funds policy requiring it to normally invest at least 80% of its net assets in emerging market companies.
The funds holdings in certain kinds of investments cannot exceed maximum percentages as set forth in this prospectus and the Statement of Additional Information. For instance, there are limitations regarding the funds investments in certain types of derivatives. While these restrictions provide a useful level of detail about the funds investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in derivatives could have a significantly greater impact on the funds share price than its weighting in the portfolio. The net effect of a particular investment
More About the Fund | 17 |
depends on its volatility and the size of its overall return in relation to the performance of all of the funds investments.
Certain investment restrictions, such as a required minimum or maximum investment in a particular type of security, are measured at the time the fund purchases a security. The status, market value, maturity, duration, credit quality, or other characteristics of the funds securities may change after they are purchased, and this may cause the amount of the funds assets invested in such securities to exceed the stated maximum restriction or fall below the stated minimum restriction. If any of these changes occur, it would not be considered a violation of the investment restriction and will not require the sale of an investment if it was proper at the time the investment was made (this exception does not apply to a funds borrowing policy). However, certain changes will require holdings to be sold or purchased by the fund during the time it is above or below the stated percentage restriction in order for the fund to be in compliance with applicable restrictions.
For purposes of determining whether the fund invests at least 80% of its net assets in stocks that are located in or that have economic ties to emerging markets, the fund relies on MSCI Inc., a third-party provider of benchmark indexes and data services, to determine whether a country is an emerging market and relies on the country assigned to a security by MSCI Inc. or another unaffiliated data provider. The data providers use various criteria to determine the country to which a security is economically tied. Examples include the following: (1) the country under which the issuer is organized; (2) the location of the issuers principal place of business or principal office; (3) where the issuers securities are listed or traded principally on an exchange or over-the-counter market; and (4) where the issuer conducts the predominant part of its business activities or derives a significant portion (e.g., at least 50%) of its revenues or profits.
Changes in the funds holdings, the funds performance, and the contribution of various investments to the funds performance are discussed in the shareholder reports.
Portfolio managers have considerable discretion in choosing investment strategies and selecting securities they believe will help achieve the funds objective.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with its investment program. The following pages describe various types of the funds holdings and investment management practices, some of which are also described as part of the funds principal investment strategies.
Diversification As a fundamental policy, the fund will not purchase a security if, as a result, with respect to 75% of its total assets, more than 5% of the funds total assets
T. Rowe Price | 18 |
would be invested in securities of a single issuer or more than 10% of the outstanding voting securities of the issuer would be held by the fund.
The funds investments are primarily in common stocks and, to a lesser degree, other types of securities as follows:
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stocks have a specified dividend rate and rank after bonds and before common stocks in their claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis and profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a companys stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. Unlike common stock, preferred stock does not ordinarily carry voting rights. While most preferred stocks pay a dividend, the fund may decide to purchase preferred stock where the issuer has suspended, or is in danger of suspending, payment of its dividend. The fund may purchase American Depositary Receipts and Global Depositary Receipts, which are certificates evidencing ownership of shares of a foreign issuer. American Depositary Receipts and Global Depositary Receipts trade on established markets and are alternatives to directly purchasing the underlying foreign securities in their local markets and currencies. Such investments are subject to many of the same risks associated with investing directly in foreign securities. For purposes of the funds investment policies, investments in depositary receipts are deemed to be investments in the underlying securities. For example, a depositary receipt representing ownership of common stock will be treated as common stock.
Convertible Securities and Warrants
The fund may invest in debt instruments or preferred equity securities that are convertible into, or exchangeable for, equity securities at specified times in the future and according to a certain exchange ratio. Convertible bonds are typically callable by the issuer, which could in effect force conversion before the holder would otherwise choose. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appreciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree than common stock. Some convertible securities combine higher or lower current income with options and other features. Warrants are options to buy, directly from the issuer, a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more years). Warrants have no voting rights, pay no dividends, and can be highly volatile. In some cases, the redemption value of a warrant could be zero.
More About the Fund | 19 |
Participation Notes (P-notes)
The fund may gain exposure to securities traded in foreign markets through investments in P-notes. P-notes are generally issued by banks or broker-dealers and are designed to offer a return linked to an underlying common stock or other security. An investment in a P-note involves additional risks beyond the risks normally associated with a direct investment in the underlying security. While the holder of a P-note is entitled to receive from the broker-dealer or bank any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-notes are considered general unsecured contractual obligations of the banks or broker-dealers that issue them as the counterparty. As such, the fund must rely on the creditworthiness of the counterparty for its investment returns on the P-notes, and could lose the entire value of its investment in the event of default by a counterparty. Additionally, there is no assurance that there will be a secondary trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
Operating policy The funds investments in P-notes are limited to 20% of its total assets. Investments in P-notes are not subject to the limit on investments in hybrid instruments.
Fixed Income Securities
From time to time, the fund may invest in corporate and government fixed income securities as well as below investment-grade bonds, commonly referred to as junk bonds. These securities would be purchased in companies that meet the funds investment criteria. The price of a fixed income security fluctuates with changes in interest rates, generally rising when interest rates fall and falling when interest rates rise. Below investment-grade bonds, or junk bonds, can be more volatile and have greater risk of default than investment-grade bonds, and should be considered speculative.
Operating policy The fund may invest up to 10% of the funds total assets in below investment-grade bonds. The funds investments in convertible securities are not subject to this limit.
Futures and Options
Futures are often used to establish exposures or manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options may be used to generate additional income, to enhance returns, or as a defensive technique to protect against anticipated declines in the value of an asset. Call options give the investor the right to purchase (when the investor purchases the option), or the obligation to sell (when the investor writes or sells the option), an asset at a predetermined price in the future. Put options give the purchaser of the option the right to sell, or the seller (or writer) of the option the obligation to buy, an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for any number of reasons, including to manage exposure to changes
T. Rowe Price | 20 |
in interest rates, bond prices, foreign currencies, and credit quality; as an efficient means of increasing or decreasing the funds exposure to certain markets; in an effort to enhance income; to improve risk-adjusted returns; to protect the value of portfolio securities; and to serve as a cash management tool. Call or put options may be purchased or sold on securities, futures, financial indexes, and foreign currencies. The fund may choose to continue a futures contract by rolling over an expiring futures contract into an identical contract with a later maturity date. This could increase the funds transaction costs and portfolio turnover rate.
Futures and options contracts may not always be successful investments or hedges; their prices can be highly volatile; using them could lower the funds total return; the potential loss from the use of futures can exceed the funds initial investment in such contracts; and the losses from certain options written by the fund could be unlimited.
Operating policies Initial margin deposits on futures and premiums on options used for non-hedging purposes will not exceed 5% of the funds net asset value. The total market value of securities covering call or put options may not exceed 25% of the funds total assets. No more than 5% of the funds total assets will be committed to premiums when purchasing call or put options.
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, security, or securities index. Such instruments may or may not bear interest or pay dividends. Under certain conditions, the redemption value of a hybrid could be zero.
Hybrids can have volatile prices and limited liquidity, and their use may not be successful.
Operating policy The funds investments in hybrid instruments are limited to 10% of its total assets.
Currency Derivatives
The fund will normally conduct any foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. The fund will generally not enter into a forward contract with a term greater than one year. The fund may enter into forward currency exchange contracts to lock in the U.S. dollar price of a security when it enters into a contract for the purchase or sale of a security denominated in a foreign currency, and when the fund believes that the currency of a particular foreign country may move substantially against another currency, it may enter into a forward contract to sell or buy the former foreign currency.
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A fund that invests in foreign securities may attempt to hedge its exposure to potentially unfavorable currency changes. The primary means of doing this is through the use of forward currency exchange contracts, which are contracts between two counterparties to exchange one currency for another on a future date at a specified exchange rate. The fund may also use these instruments to create a synthetic bond, which is issued in one currency with the currency component transformed into another currency. However, futures, swaps, and options on foreign currencies may also be used. In certain circumstances, the fund may use currency derivatives to substitute a different currency for the currency in which the investment is denominated, a strategy known as proxy hedging. If the fund were to engage in any of these foreign currency transactions, it could serve to protect its foreign securities from adverse currency movements relative to the U.S. dollar, although the fund may also use currency derivatives in an effort to gain exposure to a currency expected to appreciate in value versus other currencies. As a result, the fund could be invested in a currency without holding any securities denominated in that currency. Such transactions involve, among other risks, the risk that anticipated currency movements will not occur, which could reduce the funds total return. There are certain markets, including many emerging markets, where it is not possible to engage in effective foreign currency hedging.
Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income.
Investments in Other Investment Companies
The fund may invest in other investment companies, including open-end funds, closed-end funds, and exchange-traded funds.
The fund may purchase the securities of another investment company to temporarily gain exposure to a portion of the market while awaiting purchase of securities or as an efficient means of gaining exposure to a particular asset class. The fund might also purchase shares of another investment company to gain exposure to the securities in the investment companys portfolio at times when the fund may not be able to buy those securities directly. Any investment in another investment company would be consistent with the funds objective and investment program.
The risks of owning another investment company are generally similar to the risks of investing directly in the securities in which that investment company invests. However, an investment company may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the funds performance. In addition, because closed-end funds and exchange-traded funds trade on a secondary market, their shares may trade at a premium or discount to the actual net asset value of their portfolio securities and their shares may have greater volatility if an active trading market does not exist.
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As a shareholder of another investment company, the fund must pay its pro-rata share of that investment companys fees and expenses. The funds investments in non-T. Rowe Price investment companies are subject to the limits that apply to investments in other funds under the Investment Company Act of 1940 or under any applicable exemptive order.
The fund may also invest in certain other T. Rowe Price Funds as a means of gaining efficient and cost-effective exposure to certain asset classes, provided the investment is consistent with the funds investment program and policies.
Investments in other investment companies could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available through direct investments in a particular asset class, and will subject the fund to the risks associated with the particular asset class or asset classes in which an underlying fund invests. Examples of asset classes in which other mutual funds (including T. Rowe Price Funds) focus their investments include high yield bonds, inflation-linked securities, floating rate loans, international bonds, emerging market bonds, stocks of companies involved in activities related to real assets, stocks of companies that focus on a particular industry or sector, and emerging market stocks. If the fund invests in another T. Rowe Price Fund, the management fee paid by the fund will be reduced to ensure that the fund does not incur duplicate management fees as a result of its investment.
Illiquid Securities
Some of the funds holdings may be considered illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold in the ordinary course of business within seven days at approximately the prices at which they are valued. The determination of liquidity involves a variety of factors. Illiquid securities may include private placements that are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold (for example, pursuant to Rule 144A under the Securities Act of 1933) and therefore deemed liquid, others may have resale restrictions and be considered illiquid. The sale of illiquid securities may involve substantial delays and additional costs, and the fund may only be able to sell such securities at prices substantially lower than what it believes they are worth.
Operating policy The fund may not purchase an illiquid security if it holds 15% or more of its net assets in illiquid securities.
Types of Investment Management Practices
Reserve Position
A certain portion of the funds assets may be held in reserves. The funds reserve positions will primarily consist of: 1) shares of a T. Rowe Price internal money market fund or short-term bond fund (which does not charge any management fees); 2) short-term, high-quality U.S. and foreign dollar-denominated money market
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securities, including repurchase agreements; and 3) U.S. dollar or non-U.S. dollar currencies. In order to respond to adverse market, economic, political, or other conditions, the fund may assume a temporary defensive position that is inconsistent with its principal investment objective and/or strategies and may invest, without limitation, in reserves. If the fund has significant holdings in reserves, it could compromise its ability to achieve its objective. The reserve position provides flexibility in meeting redemptions, paying expenses and managing cash flows into the fund, and can serve as a short-term defense during periods of unusual market volatility. Non-U.S. dollar reserves are subject to currency risk.
Borrowing Money and Transferring Assets
The fund may borrow from banks, other persons, and other T. Rowe Price Funds for temporary or emergency purposes, to facilitate redemption requests, or for other purposes consistent with the funds policies as set forth in this prospectus and the Statement of Additional Information. Such borrowings may be collateralized with the funds assets, subject to certain restrictions.
Fundamental policy Borrowings may not exceed 331/3% of the funds total assets. This limitation includes any borrowings for temporary or emergency purposes, and applies at the time of the transaction and continues to the extent required by the Investment Company Act of 1940.
Operating policy The fund will not transfer portfolio securities as collateral except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 331/3% of its total assets. The fund will not purchase additional securities when its borrowings exceed 5% of its total assets.
Meeting Redemption Requests
We expect that the fund will hold cash or cash equivalents to meet redemption requests. The fund may also use the proceeds from the sale of portfolio securities to meet redemption requests if consistent with the management of the fund. These redemption methods will be used regularly and may also be used in deteriorating or stressed market conditions. The fund reserves the right to redeem in-kind as described under Large Redemptions. Redemptions in-kind are typically used to meet redemption requests that represent a large percentage of the funds net assets in order to minimize the effect of large redemptions on the fund and its remaining shareholders. In general, any in-kind redemptions will represent a pro-rata distribution of the funds securities, subject to certain limited exceptions. Redemptions in-kind may be used regularly in circumstances as described above, and may also be used in stressed market conditions.
The fund, along with other T. Rowe Price Funds, is a party to an interfund lending exemptive order received from the SEC that permits the T. Rowe Price Funds to borrow money from and/or lend money to other T. Rowe Price Funds to help the funds meet short-term redemptions and liquidity needs.
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During periods of deteriorating or stressed market conditions, when an increased portion of a funds portfolio may be comprised of less-liquid investments, or during extraordinary or emergency circumstances, the fund may be more likely to pay redemption proceeds with cash obtained through interfund lending, short-term borrowing arrangements (if available), or by redeeming a large redemption request in-kind.
Lending of Portfolio Securities
The fund may lend its securities to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvestment of collateral received on loaned securities in investments that decline in value, default, or do not perform as well as expected.
Fundamental policy The value of loaned securities may not exceed 331/3% of the funds total assets.
Portfolio Turnover
Turnover is an indication of frequency of trading. Each time the fund purchases or sells a security, it incurs a cost. This cost is reflected in its net asset value but not in its operating expenses. The higher the turnover rate, the higher the transaction costs and the greater the impact on the funds total return. Higher turnover can also increase the possibility of taxable capital gain distributions. The funds portfolio turnover rates are shown in the Financial Highlights table.
The Financial Highlights table, which provides information aboutthe funds financial history, is based on a single share outstanding throughout the periods shown. The table is part of the funds financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions and no payment of any applicable account or redemption fees). The financial statements in the annual report were audited by the funds independent registered public accounting firm, PricewaterhouseCoopers LLP.
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Financial Highlights
Year ended October 31 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||
Net asset
value, | $29.60 | $30.71 | $31.76 | $27.35 | $31.09 | |||||
Income From Investment Operations | ||||||||||
Net investment incomea | 0.26 | 0.21 | 0.19 | 0.19 | 0.23 | |||||
Net gains or losses on securities (both realized and unrealized) | 1.04 | 1.09 | (4.27 | ) | 3.73 | 8.40 | ||||
Total from investment | 1.30 | 1.30 | (4.08 | ) | 3.92 | 8.63 | ||||
Less Distributions | ||||||||||
Dividends (from net | (0.18 | ) | (0.25 | ) | (0.24 | ) | (0.18 | ) | (0.20 | ) |
Distributions (from | (0.01 | ) | | (0.09 | ) | | (0.04 | ) | ||
Returns of capital | | | | | | |||||
Total distributions | (0.19 | ) | (0.25 | ) | (0.33 | ) | (0.18 | ) | (0.24 | ) |
Net asset value, | $30.71 | $31.76 | $27.35 | $31.09 | $39.48 | |||||
Total return | 4.39 | % | 4.30 | % | (12.89 | )% | 14.46 | % | 28.06 | % |
Ratios/Supplemental Data | ||||||||||
Net assets, end of period (in millions) | $1,095 | $983 | $997 | $974 | $1,603 | |||||
Ratio of expenses to average net assets | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % | 1.10 | % |
Ratio of net income to average net assets | 0.88 | % | 0.71 | % | 0.65 | % | 0.70 | % | 0.69 | % |
Portfolio turnover rate | 36.4 | % | 23.8 | % | 21.1 | % | 35.6 | % | 19.7 | % |
a Per share amounts calculated using average shares outstanding method.
The T. Rowe Price Funds full portfolio holdings as of their fiscal year-ends are disclosed in their annual shareholder reports and their full portfolio holdings as of their fiscal mid-point are disclosed in their semiannual shareholder reports. The annual and semiannual shareholder reports are filed with the SEC and sent to the funds shareholders within 60 days of the period covered. The T. Rowe Price Funds also disclose their full portfolio holdings as of their first and third fiscal quarter-ends on Form N-Q. Form N-Q is filed with the SEC within 60 days of the period covered,
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but is not sent to the funds shareholders. Under certain conditions, the shareholder reports and Form N-Q may include up to 5% of a funds holdings under the caption Miscellaneous Securities without identifying the specific security or issuer. Generally, a holding would not be individually identified if it is determined that its disclosure could be harmful to the fund or its shareholders. A holding will not be excluded for these purposes from a funds SEC filings for more than one year. The money market funds also file detailed month-end portfolio holdings information on Form N-MFP with the SEC each month. Form N-MFP, as well as the shareholder reports and Form N-Q, are publicly available immediately upon filing with the SEC.
In addition, most T. Rowe Price Funds disclose their calendar quarter-end full portfolio holdings on troweprice.com 15 calendar days after each quarter. At the discretion of the investment adviser, these holdings reports may exclude the issuer name and other information relating to a holding in order to protect the funds interests and prevent harm to the fund or its shareholders. Private placements and other restricted securities may not be individually identified in the calendar quarter-end holdings on troweprice.com, but would be disclosed in any SEC filings. Money market funds also disclose on troweprice.com their month-end full portfolio holdings five business days after each month-end and historical information about the funds investments for the previous six months, as of the last business day of the preceding month. This information includes, among other things, the percentage of the funds investments in daily and weekly liquid assets, the funds weighted average maturity and weighted average life, the funds market-based net asset value, and the funds net inflows and outflows. The calendar quarter-end portfolio holdings will remain on the website for one year and the month-end money market fund portfolio holdings will remain on the website for six months. In addition, most T. Rowe Price Funds disclose their 10 largest holdings on troweprice.com on the seventh business day after each month-end. These holdings are listed in alphabetical order along with the aggregate percentage of the funds total assets that these 10 holdings represent. Each monthly top 10 list will remain on the website for six months. A description of T. Rowe Prices policies and procedures with respect to the disclosure of portfolio information is available in the Statement of Additional Information.
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The following policies and procedures apply to the Institutional Funds within the T. Rowe Price Funds.
This section of the prospectus describes the policies and procedures that generally apply to investments in the T. Rowe Price Institutional Funds (except for the T. Rowe Price Institutional Cash Reserves Fund). The T. Rowe Price Institutional Funds may be purchased directly from T. Rowe Price or through a financial intermediary, such as a bank, broker, retirement plan recordkeeper, or financial advisor.
Most of the T. Rowe Price Institutional Funds are available only in a single share class (referred to as the Institutional Class). However, the Institutional Floating Rate Fund is also offered in an F Class. Each class of a funds shares represents an interest in the same fund with the same investment program and investment policies. While the Institutional Class may be held directly with T. Rowe Price or through a financial intermediary, the F Class is designed to be purchased only through financial advisors and certain financial intermediaries and has a different cost structure due to a shareholder servicing arrangement that applies only to that class.
This section generally describes investing only in the T. Rowe Price Institutional Funds, other than the T. Rowe Price Institutional Cash Reserves Fund, which has unique policies relating to its operation as an institutional money market fund. This section does not describe the policies that apply to other T. Rowe Price Funds. Policies for other T. Rowe Price Funds are described in their respective prospectuses, and all types of funds and available share classes for the T. Rowe Price Funds are described more fully in the funds Statement of Additional Information.
Institutional Class
The Institutional Class may be purchased directly through T. Rowe Price or through a financial intermediary. The Institutional Class does not make any payments to financial intermediaries for distribution of the funds shares (commonly referred to as 12b-1 fee payments) and does not make any payments to financial intermediaries for administrative services they provide (commonly referred to as administrative fee payments). However, you may incur brokerage commissions and other charges when buying or selling I Class shares.
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The Institutional Class is designed to be sold only to institutional investors, which include, but are not limited to: corporations, endowments and foundations, charitable trusts, investment companies and other pooled vehicles, defined benefit and defined contribution retirement plans, broker-dealers, registered investment advisers, banks and bank trust programs, and Section 529 college savings plans. The Institutional Class generally requires a $1 million initial investment minimum, although the minimum may be waived for retirement plans, financial intermediaries maintaining omnibus accounts, and certain other accounts.
F Class
The F Class must be purchased through a financial intermediary. The F Class does not make any 12b-1 fee payments to financial intermediaries but may make administrative fee payments at an annual rate of up to 0.15% of the class average daily net assets.
The F Class is designed to be sold only through financial advisors and certain financial intermediaries, including brokers, banks, insurance companies, retirement plan recordkeepers, and other financial intermediaries. F Class shares are generally not available to financial intermediaries that would make the fund available to their customers through a mutual fund supermarket platform. There is a $2,500 minimum initial investment requirement, but the minimum is waived for certain types of accounts.
Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by the funds transfer agent. The F Class may make administrative fee payments to retirement plan recordkeepers, broker-dealers, and other financial intermediaries (at an annual rate of up to 0.15% of the class average daily net assets) for transfer agency, recordkeeping, and other administrative services they provide on behalf of the funds. These administrative services may include maintaining account records for each customer; transmitting purchase and redemption orders; delivering shareholder confirmations, statements, and tax forms; and providing support to respond to customers questions regarding their accounts. These separate administrative fee payments are reflected in the Other expenses line that appears in the fee table in Section 1 with respect to the funds F Class.
Some broker-dealers or other financial intermediaries that are eligible to purchase F Class shares of T. Rowe Price Institutional Funds may also be eligible to purchase the Institutional Class. The Institutional Class shares require a much higher initial investment but have lower expenses than F Class shares because the Institutional Class does not participate in the administrative fee payment program. The payment
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of the administrative fee by the F Class creates a potential conflict of interest by influencing the broker-dealer or other financial intermediary to purchase F Class shares instead of Institutional Class shares. If this happens, you will incur higher expenses than if your financial intermediary had purchased Institutional Class shares on your behalf (assuming your financial intermediary would qualify to purchase Institutional Class shares). You should ask your salesperson for more information regarding the eligibility of your financial intermediary to purchase Institutional Class shares.
If you are opening an account through an employer-sponsored retirement plan or other financial intermediary, you should contact the retirement plan or financial intermediary for information regarding its policies on opening an account, including the policies relating to purchasing, exchanging, and redeeming shares, and the applicable initial and subsequent investment minimums.
Tax Identification Number
Institutional investors must provide T. Rowe Price with a valid taxpayer identification number (and valid Social Security numbers for individuals opening the account on behalf of the institution) on a signed new account form or Form W-9. Otherwise, federal law requires the funds to withhold a percentage of dividends, capital gain distributions, and redemptions and may subject the investor to an Internal Revenue Service fine. If this information is not received within 60 days after the account is established, the account may be redeemed at the funds then-current net asset value. Financial intermediaries opening an account in a fund must also enter into a separate agreement with the fund or its agent.
Important Information Required to Open a New Account
Pursuant to federal law, all financial institutions must obtain, verify, and record information that identifies each person or entity that opens an account. This information is needed not only for the account owner and any other person who opens the account, but also for any person who has authority to act on behalf of the account. When you open an account for an entity, you will be required to provide the entitys name, U.S. street address (post office boxes are not acceptable), and taxpayer identification number, as well as your name, U.S. street address (post office boxes are not acceptable), date of birth, and Social Security number as the person opening the account on behalf of the entity. Corporate and other institutional accounts require documents showing the existence of the entity (such as articles of incorporation or partnership agreements) to open an account. Certain other fiduciary accounts (such as trusts or power of attorney arrangements) require documentation, which may include an original or certified copy of the trust agreement or power of attorney, to open an account.
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T. Rowe Price will use this information to verify the identity of the entity and person opening the account. An account cannot be opened until all of this information is received. If the identity of the entity or person opening the account on behalf of the entity cannot be verified, T. Rowe Price is authorized to take any action permitted by law. (See Rights Reserved by the Funds later in this section.)
Call Financial Institution Services at 1-800-638-8790 for more information on these requirements.
The Institutional Funds are generally available only to institutional investors with a U.S. address. T. Rowe Price will generally not authorize the transfer of ownership of an account in an Institutional Fund for an institutional investor to an account for a noninstitutional investor. Shares held directly with T. Rowe Price by noninstitutional investors are subject to involuntary redemption at any time, which could result in a taxable gain to the investor.
Opening an Account
Call Financial Institution Services at 1-800-638-8790 for an account number and wire transfer instructions. All initial purchases are typically made by bank wire, but checks or other forms of payment may be accepted in certain cases. In order to obtain an account number, you must supply the name, taxpayer identification number, and business street address for the account. Complete a new account form and mail it, along with proper documentation identifying your firm and any other necessary documentation, to one of the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: Although the purchase will be made, services may not be established and an Internal Revenue Service penalty withholding may occur until we receive a signed new account form.
How and When Shares Are Priced
The trade date for your transaction request depends on the day and time that T. Rowe Price receives your request and will normally be executed using the next share price calculated after your order is received in correct form by T. Rowe Price or its agent (or by your financial intermediary if it has the authority to accept transaction orders on behalf of the fund). The share price, also called the net asset value, for each share class of a fund is calculated at the close of trading on the New York Stock Exchange (NYSE), which is normally 4 p.m. ET, each day that the NYSE is open for
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business. Net asset values are not calculated for the funds on days when the NYSE is scheduled to be closed for trading (for example, weekends and certain U.S. national holidays). If the NYSE is unexpectedly closed due to weather or other extenuating circumstances on a day it would typically be open for business, or if the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share price as of the normally scheduled close of regular trading on the NYSE for that day.
To calculate the net asset value, a funds assets are valued and totaled, liabilities are subtracted, and each class proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Market values are used to price portfolio holdings for which market quotations are readily available. Market values generally reflect the prices at which securities actually trade or represent prices that have been adjusted based on evaluations and information provided by the funds pricing services. Investments in other mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. If a market value for a portfolio holding is not available or normal valuation procedures are deemed to be inappropriate, the fund will make a good faith effort to assign a fair value to the holding by taking into account various factors and methodologies that have been approved by the funds Board. This value may differ from the value the fund receives upon sale of the securities. Amortized cost is used to price securities held by money market funds and certain short-term debt securities held by a fund.
The funds use various pricing services to provide closing market prices, as well as information used to adjust those prices and to value most fixed income securities. A fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next days opening prices in the same markets, and adjusted prices.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices at 4 p.m. ET, except under the following circumstances. Most foreign markets close before 4 p.m. ET. For example, the most recent closing prices for securities traded in certain Asian markets may be as much as 15 hours old at 4 p.m. ET. If a fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of the funds securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. In deciding whether to make these adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities.
A fund may also fair value certain securities or a group of securities in other situationsfor example, when a particular foreign market is closed but the fund is open. For a fund that has investments in securities that are primarily listed on foreign
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exchanges which trade on weekends or other days when the fund does not price its shares, the funds net asset value may change on days when shareholders will not be able to purchase or redeem the funds shares. If an event occurs that affects the value of a security after the close of the market, such as a default of a commercial paper issuer or a significant move in short-term interest rates, a fund may make a price adjustment depending on the nature and significance of the event. The funds also evaluate a variety of factors when assigning fair values to private placements and other restricted securities. Other mutual funds may adjust the prices of their securities by different amounts or assign different fair values than the fair value that the fund assigns to the same security.
How the Trade Date Is Determined
If you invest directly with T. Rowe Price and your request to purchase, sell, or exchange shares is received by T. Rowe Price or its agent in correct form by the close of the NYSE (normally 4 p.m. ET), your transaction will be priced at that business days net asset value. If your request is received by T. Rowe Price or its agent in correct form after the close of the NYSE, your transaction will be priced at the next business days net asset value unless the fund has an agreement with your financial intermediary for orders to be priced at the net asset value next computed after receipt by the financial intermediary.
The funds have authorized certain financial intermediaries or their designees to accept orders to buy or sell fund shares on their behalf. When authorized financial intermediaries receive an order in correct form, the order is considered as being placed with the fund and shares will be bought or sold at the net asset value next calculated after the order is received by the authorized financial intermediary. The financial intermediary must transmit the order to T. Rowe Price and pay for such shares in accordance with the agreement with T. Rowe Price, or the order may be canceled and the financial intermediary could be held liable for the losses. If the fund does not have such an agreement in place with your financial intermediary, T. Rowe Price or its agent must receive the request in correct form from your financial intermediary by the close of the NYSE in order for your transaction to be priced at that business days net asset value. Contact your financial intermediary for trade deadlines and the applicable policies for purchasing, selling, or exchanging your shares, as well as initial and subsequent investment minimums. The financial intermediary may charge a fee for its services.
Note: There may be times when you are unable to contact us or access your account due to extreme market activity or other circumstances. Should this occur, your order must still be placed and received in correct form by T. Rowe Price (or by the financial intermediary in accordance with its agreement with T. Rowe Price) prior to the time the NYSE closes to be priced at that business days net asset value. The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the NYSE closes at a time other than 4 p.m. ET. The funds reserve the right to not treat an unscheduled intraday disruption or
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closure in NYSE trading as a closure of the NYSE and still accept transactions and calculate their net asset value as of 4 p.m. ET.
Transaction Confirmations
T. Rowe Price sends immediate confirmations for most of your fund transactions. However, certain transactions, such as dividend reinvestments, do not receive an immediate transaction confirmation but are reported on your account statement. Please review transaction confirmations and account statements as soon as you receive them and promptly report any discrepancies to Financial Institution Services.
Purchasing Shares
Purchases may be initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. All initial and subsequent investments are typically made by bank wire, although checks or other forms of payment may be accepted in certain cases. There is no assurance that the share price for a purchase will be the same day a wire was initiated.
The funds generally do not accept orders that request a particular day or price for a transaction or any other special conditions. However, when authorized by the fund, certain institutions, financial intermediaries, or retirement plans purchasing fund shares directly with T. Rowe Price may place a purchase order unaccompanied by payment. Payment for these shares must be received by the time designated by the fund (not to exceed the period established for settlement under applicable regulations). If payment is not received by this time, the order may be canceled. The institution, financial intermediary, or retirement plan is responsible for any costs or losses incurred by the fund or T. Rowe Price if payment is delayed or not received.
U.S. Dollars All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks and should be payable to the T. Rowe Price Funds.
Nonpayment Purchases of a fund may be canceled if payment is not received in a timely manner, and the shareholder may be responsible for any losses or expenses incurred by the fund or its transfer agent. The funds and their agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment.
Investment Minimums
The Institutional Class generally requires a $1 million minimum initial investment and the F Class generally requires a $2,500 minimum initial investment, although the minimums may be waived for financial intermediaries, retirement plans, and certain other institutional investors. In addition, we request that you give us at least three business days notice (seven business days notice for the Institutional Floating Rate Fund) for any purchase of $5 million or more. There is generally no minimum required for additional purchases.
You should check with your financial advisor, retirement plan, or financial intermediary to determine what minimum applies to your initial and additional investments.
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Exchanging and Redeeming Shares
Certain T. Rowe Price Funds assess a fee on redemptions of shares (including exchanges out of a fund) that are not held for a specified period of time. Please refer to Contingent Redemption Fee later in this section.
Exchanges You can move money from one account to an existing, identically registered account or open a new identically registered account. An exchange from one fund to another will be reported to the Internal Revenue Service as a sale for tax purposes.
Redemptions Redemptions are typically initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. Please note that certain redemption requests initiated through the National Securities Clearing Corporation may be rejected, and in such instances, the transaction must be placed by contacting a Financial Institution Services representative.
If for some reason we cannot accept your request to exchange or redeem shares, we will attempt to contact you.
If you request to redeem a specific dollar amount and the market value of your account is less than the amount of your request and we are unable to contact you, your redemption will not be processed and you will need to submit a new redemption request in correct form.
Receiving Redemption Proceeds Unless otherwise indicated, redemption proceeds will be sent via bank wire to the designated bank on file for the account. If a request is received in correct form by T. Rowe Price or its agent on a business day prior to the close of the NYSE, proceeds are usually sent on the next business day. Proceeds sent by bank wire are usually credited to an account the next business day after the sale. Redemption proceeds can be mailed to the account address by check if specifically requested. Normally, the fund transmits proceeds to financial intermediaries for redemption orders received in correct form on either the next business day or third business day after receipt of the order, depending on the arrangement with the financial intermediary. You must contact your financial intermediary about procedures for receiving your redemption proceeds.
Large Redemptions Large redemptions (for example, $250,000 or more) can adversely affect a portfolio managers ability to implement a funds investment strategy by causing the premature sale of securities that would otherwise be held longer. Therefore, the fund reserves the right (without prior notice) to pay all or part of redemption proceeds with securities from the funds portfolio rather than in cash (redemption in-kind). In general, any in-kind redemptions will represent a pro-rata distribution of a funds securities, subject to certain limited exceptions. If this occurs, the securities will be selected by the fund in its absolute discretion and the redeeming shareholder or account will be responsible for disposing of the securities and bearing any associated costs and risks (for example, market risks until the securities are
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disposed of). If you continue to hold the securities, you may be subject to any ownership restrictions imposed by the issuers. For example, real estate investment trusts often impose ownership restrictions on their equity securities.
Delays in Sending Redemption Proceeds
The T. Rowe Price Funds typically expect that it will take one to three days following the receipt of a redemption request that is in correct form to send redemption proceeds, regardless of the method the fund uses to make such payment (e.g., check, wire, or Automated Clearing House transfer). However, under certain circumstances and when deemed to be in a funds best interests, your proceeds may not be sent for up to seven calendar days after we receive your redemption request in correct form.
In addition, if shares are sold that were just purchased and paid for by check or Automated Clearing House transfer, the fund will process your redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or Automated Clearing House transfer to clear. If, during the clearing period, we receive a check drawn against your newly purchased shares, it will be returned and marked uncollected. (The 10-day hold does not apply to purchases paid for by bank wire or automatic purchases through payroll deduction.)
The Board of a retail or institutional money market fund may impose a redemption gate and elect to temporarily suspend redemptions for up to 10 business days in a 90-day period if the funds weekly liquid assets fall below 30% of its total assets and the funds Board determines that imposing a redemption gate is in the funds best interests. In addition, under certain limited circumstances, the Board of a retail or institutional money market fund may elect to permanently suspend redemptions in order to facilitate an orderly liquidation of the fund (subject to any additional liquidation requirements).
Contingent Redemption Fee
Short-term trading can disrupt a funds investment program and create additional costs for long-term shareholders. For these reasons, all share classes of the T. Rowe Price Institutional Funds, listed in the following table, assess a fee on redemptions (including exchanges out of a fund), which reduces the proceeds from such redemptions by the amounts indicated:
T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Africa & Middle East | 2% | 90 days or less |
Institutional Credit Opportunities | 2% | 90 days or less |
Institutional Emerging Markets Bond | 2% | 90 days or less |
Institutional Emerging Markets Equity | 2% | 90 days or less |
Institutional Floating Rate | 2% | 90 days or less |
Institutional Frontier Markets Equity | 2% | 90 days or less |
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T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Global Focused Growth Equity | 2% | 90 days or less |
Institutional Global Growth Equity | 2% | 90 days or less |
Institutional Global Value Equity | 2% | 90 days or less |
Institutional High Yield | 2% | 90 days or less |
Institutional International Bond | 2% | 90 days or less |
Institutional International Concentrated Equity | 2% | 90 days or less |
Institutional International Core Equity | 2% | 90 days or less |
Institutional International Growth Equity | 2% | 90 days or less |
Redemption fees are paid to a fund (and not to T. Rowe Price) to deter short-term trading, offset costs, and help protect the funds long-term shareholders. Subject to the exceptions described on the following pages, all persons holding shares of a T. Rowe Price Fund that imposes a redemption fee are subject to the fee, whether the person is holding shares directly with a T. Rowe Price Fund, through a retirement plan for which T. Rowe Price serves as recordkeeper; or indirectly through a financial intermediary (such as a broker, bank, or investment adviser), recordkeeper for retirement plan participants, or other third party.
Computation of Holding Period When an investor sells shares of a fund that assesses a redemption fee, T. Rowe Price will use the first-in, first-out method to determine the holding period for the shares sold. Under this method, the date of redemption or exchange will be compared with the earliest purchase date of shares held in the account. A redemption fee will be charged on shares sold on or before the end of the required holding period. The day after the date of your purchase is considered Day 1 for purposes of computing the holding period. For example, if you redeem your shares on or before the 90th day from the date of purchase, you will be assessed the redemption fee. If you purchase shares through a financial intermediary, consult your financial intermediary to determine how the holding period will be applied.
Transactions Not Subject to Redemption Fees The T. Rowe Price Funds will not assess a redemption fee with respect to certain transactions. As of the date of this prospectus, the following transactions in T. Rowe Price Funds will not be subject to redemption fees:
· Shares redeemed through an automated, systematic withdrawal plan;
· Shares redeemed through or used to establish certain rebalancing, asset allocation, wrap, and advisory programs, as well as non-T. Rowe Price fund-of-funds products, if approved in writing by T. Rowe Price;
· Shares purchased through the reinvestment of dividends or capital gain distributions;*
· Shares converted from one share class to another share class of the same fund;*
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· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees (e.g., for failure to meet account minimums);
· Shares purchased by rollover or changes of account registration within the same fund;*
· Shares redeemed to return an excess contribution from a retirement account;
· Shares of T. Rowe Price Funds purchased by another T. Rowe Price Fund and shares purchased by discretionary accounts managed by T. Rowe Price or one of its affiliates (please note that other shareholders of the investing T. Rowe Price Fund are still subject to the policy);
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares that are redeemed in-kind;
· Shares transferred to T. Rowe Price or a financial intermediary acting as a service provider when the age of the shares cannot be determined systematically;* and
· Shares redeemed in retirement plans or other products that restrict trading to no more frequently than once per quarter or other approved time period, if approved in writing by T. Rowe Price.
* Subsequent exchanges of these shares into funds that assess redemption fees will subject such shares to the fee.
Redemption Fees on Shares Held in Retirement Plans If shares are held in a retirement plan, redemption fees generally will be assessed on shares redeemed by exchange only if they were originally purchased by a participant-directed exchange. However, redemption fees may apply to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price or how the fees are applied by your plans recordkeeper. To determine which of your transactions are subject to redemption fees, you should contact T. Rowe Price or your plan recordkeeper.
Omnibus Accounts If your shares are held through a financial intermediary in an omnibus account, T. Rowe Price relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. T. Rowe Price seeks to enter into agreements with financial intermediaries establishing omnibus accounts that require the intermediary to assess the redemption fees. There are no assurances that T. Rowe Price will be successful in identifying all financial intermediaries or that the intermediaries will properly assess the fees.
Certain financial intermediaries may not apply the exemptions previously listed to the redemption fee policy; all redemptions by persons trading through such intermediaries may be subject to the fee. Certain financial intermediaries may exempt transactions not listed from redemption fees, if approved by T. Rowe Price. Persons redeeming shares through a financial intermediary should check with their respective intermediary to determine which transactions are subject to the fees.
T. Rowe Price | 38 |
You may initiate transactions involving the Institutional Funds by telephone, by mail, or through the National Securities Clearing Corporation. The T. Rowe Price Funds and their agents use reasonable procedures to verify the identity of the person contacting T. Rowe Price and to ensure that the person is authorized to act on behalf of the account. If these procedures are followed, the funds and their agents are not liable for any losses that may occur from acting on unauthorized instructions. Please review the transaction confirmation carefully, and contact Financial Institution Services immediately about any transaction you believe to be unauthorized. Telephone conversations are recorded.
To place a transaction or make any inquiries regarding the T. Rowe Price Institutional Funds, please call Financial Institution Services at 1-800-638-8790. To mail any information to T. Rowe Price regarding the T. Rowe Price Institutional Funds, please use the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: If sending a check for a purchase, your transaction will receive the share price for the business day that the check is received by T. Rowe Price or its agent prior to the close of the NYSE (normally 4 p.m. ET), which could differ from the day that the check is received at the post office box.
If you hold shares of a T. Rowe Price Institutional Fund through a retirement plan or financial intermediary, you must contact your retirement plan or financial intermediary with any inquiries.
Involuntary Redemptions and Share Class Conversions
Shares held by any investors that no longer meet the definition of an institutional investor or fail to meet or maintain their account(s) at the investment minimum are subject to involuntary redemption at any time.
For all accounts in Institutional Funds (except for F Class accounts), to help keep operating expenses lower, we ask that you maintain an account balance of at least $1 million. If your investment falls below $1 million (even if due to market depreciation), we have the right to redeem your account at the then-current net asset value after giving you 60 days to increase your balance.
The redemption of your account could result in a taxable gain or loss.
For any F Class accounts that are no longer held through an eligible financial intermediary, we have the right to convert your account to the Institutional Class following notice to the financial intermediary or shareholder.
Information About Accounts in T. Rowe Price Funds | 39 |
Excessive and Short-Term Trading Policy
Excessive transactions and short-term trading can be harmful to fund shareholders in various ways, such as disrupting a funds portfolio management strategies, increasing a funds trading and other costs, and negatively affecting its performance. Short-term traders in funds that invest in foreign securities may seek to take advantage of developments overseas that could lead to an anticipated difference between the price of the funds shares and price movements in foreign markets. While there is no assurance that T. Rowe Price can prevent all excessive and short-term trading, the Boards of the T. Rowe Price Funds have adopted the following trading limits that are designed to deter such activity and protect the funds shareholders. The funds may revise their trading limits and procedures at any time as the Boards deem necessary or appropriate to better detect short-term trading that may adversely affect the funds, to comply with applicable regulatory requirements, or to impose additional or alternative restrictions.
Subject to certain exceptions, each T. Rowe Price Fund restricts a shareholders purchases (including through exchanges) into a fund account for a period of 30 calendar days after the shareholder has redeemed or exchanged out of that same fund account (the 30-Day Purchase Block). The calendar day after the date of redemption is considered Day 1 for purposes of computing the period before another purchase may be made.
General Exceptions As of the date of this prospectus, the following types of transactions generally are not subject to the funds excessive and short-term trading policy:
· Shares purchased or redeemed in money market funds and ultra short-term bond funds;
· Shares purchased or redeemed through a systematic purchase or withdrawal plan;
· Checkwriting redemptions from bond and money market funds;
· Shares purchased through the reinvestment of dividends or capital gain distributions;
· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees;
· Transfers and changes of account registration within the same fund;
· Shares purchased by asset transfer or direct rollover;
· Shares purchased or redeemed through IRA conversions and recharacterizations;
· Shares redeemed to return an excess contribution from a retirement account;
· Transactions in Section 529 college savings plans;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares converted from one share class to another share class in the same fund;
· Shares of T. Rowe Price Funds that are purchased by another T. Rowe Price Fund, including shares purchased by T. Rowe Price fund-of-funds products, and shares purchased by discretionary accounts managed by T. Rowe Price or one of its
T. Rowe Price | 40 |
affiliates (please note that shareholders of the investing T. Rowe Price Fund are still subject to the policy); and
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price.
Transactions in certain rebalancing, asset allocation, wrap programs, and other advisory programs, as well as non-T. Rowe Price fund-of-funds products, may also be exempt from the 30-Day Purchase Block, subject to prior written approval by T. Rowe Price.
In addition to restricting transactions in accordance with the 30-Day Purchase Block, T. Rowe Price may, in its discretion, reject (or instruct a financial intermediary to reject) any purchase or exchange into a fund from a person (which includes individuals and entities) whose trading activity could disrupt the management of the fund or dilute the value of the funds shares, including trading by persons acting collectively (e.g., following the advice of a newsletter). Such persons may be barred, without prior notice, from further purchases of T. Rowe Price Funds for a period longer than 30 calendar days, or permanently.
Financial Intermediary Accounts If you invest in T. Rowe Price Funds through a financial intermediary, you should review the financial intermediarys materials carefully or consult with the financial intermediary directly to determine the trading policy that will apply to your trades in the funds as well as any other rules or conditions on transactions that may apply. If T. Rowe Price is unable to identify a transaction placed through a financial intermediary as exempt from the excessive trading policy, the 30-Day Purchase Block may apply.
Financial intermediaries may maintain their underlying accounts directly with the fund, although they often establish an omnibus account (one account with the fund that represents multiple underlying shareholder accounts) on behalf of their customers. When financial intermediaries establish omnibus accounts in the T. Rowe Price Funds, T. Rowe Price is not able to monitor the trading activity of the underlying shareholders. However, T. Rowe Price monitors aggregate trading activity at the financial intermediary (omnibus account) level in an attempt to identify activity that indicates potential excessive or short-term trading. If it detects such trading activity, T. Rowe Price may contact the financial intermediary to request personal identifying information and transaction histories for some or all underlying shareholders (including plan participants, if applicable) pursuant to a written agreement that T. Rowe Price has entered into with each financial intermediary. Any nonpublic personal information provided to the fund (for example, a shareholders taxpayer identification number or transaction records) is subject to the funds privacy policy. If T. Rowe Price believes that excessive or short-term trading has occurred and there is no exception for such trades under the funds Excessive and Short-Term Trading Policy as previously described, it will instruct the financial intermediary to impose restrictions to discourage such practices and take appropriate action with respect to the underlying shareholder, including restricting purchases for 30 calendar
Information About Accounts in T. Rowe Price Funds | 41 |
days or longer. Each financial intermediary has agreed to execute such instructions pursuant to a written agreement. There is no assurance that T. Rowe Price will be able to properly enforce its excessive trading policies for omnibus accounts. Because T. Rowe Price generally relies on financial intermediaries to provide information and impose restrictions for omnibus accounts, its ability to monitor and deter excessive trading will be dependent upon the intermediaries timely performance of their responsibilities.
T. Rowe Price may allow a financial intermediary or other third party to maintain restrictions on trading in the T. Rowe Price Funds that differ from the 30-Day Purchase Block. An alternative excessive trading policy would be acceptable to T. Rowe Price if it believes that the policy would provide sufficient protection to the T. Rowe Price Funds and their shareholders that is consistent with the excessive trading policy adopted by the funds Boards.
Retirement Plan Accounts If
shares are held in a retirement plan, generally the
30-Day Purchase Block applies only to shares
redeemed by a participant-directed exchange to another fund. However, the 30-Day Purchase Block may apply
to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price
or the excessive trading policy applied by your plans recordkeeper. An alternative excessive trading
policy may apply to the T. Rowe Price Funds where a retirement plan has its own policy deemed acceptable
to T. Rowe Price. You should contact T. Rowe Price or your plan recordkeeper to determine which
of your transactions are subject to the funds 30-Day Purchase Block or an alternative policy.
There is no guarantee that T. Rowe Price will be able to identify or prevent all excessive or short-term trades or trading practices.
Unclaimed Accounts and Uncashed Checks
If your account has no activity for a certain period of time and/or mail sent to you from T. Rowe Price (or your financial intermediary) is returned by the post office, T. Rowe Price (or your financial intermediary) may be required to transfer your account and any assets related to uncashed checks to the appropriate state under its abandoned property laws. To avoid such action, it is important to keep your account address up to date and periodically contact T. Rowe Price at least once every two years.
Delivery of Shareholder Documents
If two or more accounts own the same fund, share the same address, and T. Rowe Price reasonably believes that the two accounts are part of the same institution, we may economize on fund expenses by mailing only one shareholder report and prospectus for the fund. If you do not want your mailings to be householded, please call Financial Institution Services.
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Signature Guarantees
A Medallion signature guarantee is designed to protect you and the T. Rowe Price Funds from fraud by verifying your signature.
A signature guarantee may be required in certain situations, such as:
· Remitting redemption proceeds to any person, address, or bank account not on file or
· Changing the account registration or broker-dealer of record for an account.
Consult Financial Institution Services for specific requirements.
The signature guarantee must be obtained from a financial institution that is a participant in a Medallion signature guarantee program. You can obtain a Medallion signature guarantee from certain banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. When obtaining a Medallion signature guarantee, please discuss with the guarantor the dollar amount of your proposed transaction. It is important that the level of coverage provided by the guarantors stamp covers the dollar amount of the transaction or it may be rejected. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud.
Fund Operations and Shareholder Services
T. Rowe Price and The Bank of New York Mellon, subject to the oversight of T. Rowe Price, each provide certain accounting services to the T. Rowe Price Funds. T. Rowe Price Services, Inc., acts as the transfer agent and dividend disbursing agent and provides shareholder and administrative services to the funds. T. Rowe Price Retirement Plan Services, Inc., provides recordkeeping, sub-transfer agency, and administrative services for certain types of retirement plans investing in the funds. These companies receive compensation from the funds for their services. The F Class may also pay financial intermediaries for performing shareholder and administrative services for underlying shareholders in omnibus accounts. All of the fees discussed above are included in a funds financial statements and, except for funds that have an all-inclusive management fee, are also reflected in the Other expenses line that appears in a funds fee table in Section 1.
Each fund intends to qualify to be treated each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. In order to qualify, a fund must satisfy certain income, diversification, and distribution requirements. A regulated investment company is not subject to U.S. federal income tax at the portfolio level on income and gains from investments that are distributed to shareholders. However, if a fund were to fail to qualify as a regulated investment
Information About Accounts in T. Rowe Price Funds | 43 |
company and was ineligible to or otherwise did not cure such failure, the result would be fund-level taxation and, consequently, a reduction in income available for distribution to the funds shareholders.
To the extent possible, all net investment income and realized capital gains are distributed to shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund shares in your account unless you select another option on your new account form. Reinvesting distributions results in compounding, which allows you to receive dividends and capital gain distributions on an increasing number of shares.
Distributions not reinvested are paid by check or transmitted electronically to your bank account. If the U.S. Postal Service cannot deliver your check or if your check remains uncashed for six months, the fund reserves the right to reinvest your distribution check in your account at the net asset value on the day of the reinvestment and to reinvest all subsequent distributions in additional shares of the fund. Interest will not accrue on amounts represented by uncashed distributions or redemption checks.
The following table provides details on dividend payments:
Dividend Payment Schedule | |
Fund | Dividends |
Bond funds | · Shares normally begin to earn dividends on the business day after payment is received by T. Rowe Price. · Declared daily and paid on the first business day of each month. |
Stock funds | · Must be a shareholder on the dividend record date. · Declared and paid annually, if any, generally in December. |
Shares of bond funds will earn dividends through the date of redemption. Shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. Generally, if you redeem all of your bond fund shares at any time during the month, you will also receive all dividends earned through the date of redemption in the same check. When you redeem only a portion of your bond fund shares, all dividends accrued on those shares will be reinvested, or paid in cash, on the next dividend payment date. The funds do not pay dividends in fractional cents. Any dividend amount earned for a particular day on all shares held that is one-half of one cent or greater (for example, $0.016) will be rounded up to the next whole cent ($0.02), and any amount that is less than one-half of one cent (for example, $0.014) will be rounded down to the nearest whole cent ($0.01). Please note that if the dividend payable on all shares held is less than one-half of one cent for a particular day, no dividend will be earned for that day.
T. Rowe Price | 44 |
If you purchase and redeem your shares through a financial intermediary, consult your financial intermediary to determine when your shares begin and stop accruing dividends as the information previously described may vary.
Capital Gain Payments
A capital gain or loss is the difference between the purchase and sale price of a security. If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is generally paid the following year. A fund may have to make additional capital gain distributions, if necessary, to comply with the applicable tax law.
Tax Information
In most cases, you will be provided information for your tax filing needs no later than mid-February.
If you invest in the fund through a tax-deferred account, such as an IRA or employer-sponsored retirement plan, you will not be subject to tax on dividends and distributions from the fund or the sale of fund shares if those amounts remain in the tax-deferred account. You may receive a Form 1099-R or other Internal Revenue Service forms, as applicable, if any portion of the account is distributed to you.
If you invest in the fund through a taxable account, you generally will be subject to tax when:
· You sell fund shares, including an exchange from one fund to another.
· The fund makes dividend or capital gain distributions.
For individual shareholders, a portion of ordinary dividends representing qualified dividend income received by the fund may be subject to tax at the lower rates applicable to long-term capital gains rather than ordinary income. You may report it as qualified dividend income in computing your taxes, provided you have held the fund shares on which the dividend was paid for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Ordinary dividends that do not qualify for this lower rate are generally taxable at the investors marginal income tax rate. This includes the portion of ordinary dividends derived from interest, short-term capital gains, distributions from nonqualified foreign corporations, and dividends received by the fund from stocks that were on loan. Little, if any, of the ordinary dividends paid by the bond funds is expected to qualify for this lower rate.
For corporate shareholders, a portion of ordinary dividends may be eligible for the 50% deduction for dividends received by corporations to the extent the funds income consists of dividends paid by U.S. corporations. Little, if any, of the ordinary dividends paid by the international stock or bond funds is expected to qualify for this deduction.
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A 3.8% net investment income tax is imposed on net investment income, including interest, dividends, and capital gains of U.S. individuals with income exceeding $200,000 (or $250,000 if married filing jointly) and of estates and trusts.
If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with any necessary tax forms. You should contact your financial intermediary for the tax information that will be sent to you and reported to the Internal Revenue Service.
Taxes on Fund Redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another in a taxable account is also a sale for tax purposes.
All or a portion of the loss realized from a sale or exchange of your fund shares may be disallowed under the wash sale rule if you purchase substantially identical shares within a 61-day period beginning 30 days before and ending 30 days after the date on which the shares are sold or exchanged. Shares of the same fund you acquire through dividend reinvestment are shares purchased for the purpose of the wash sale rule and may trigger a disallowance of the loss for shares sold or exchanged within the 61-day period of the dividend reinvestment. Any loss disallowed under the wash sale rule is added to the cost basis of the purchased shares.
T. Rowe Price (or your financial intermediary) will make available to you Form 1099-B, if applicable, no later than mid-February, providing certain information for each sale you made in the fund during the prior year. Unless otherwise indicated on your Form 1099-B, this information will also be reported to the Internal Revenue Service. For mutual fund shares acquired prior to 2012 in most accounts established or opened by exchange in 1984 or later, our Form 1099-B will provide you with the gain or loss on the shares you sold during the year based on the average cost single category method. This information on average cost and gain or loss from sale is not reported to the Internal Revenue Service. For these mutual fund shares acquired prior to 2012, you may calculate the cost basis using other methods acceptable to the Internal Revenue Service, such as specific identification.
For mutual fund shares acquired after 2011, federal income tax regulations require us to report the cost basis information on Form 1099-B using a cost basis method selected by the shareholder in compliance with such regulations or, in the absence of such selected method, our default method if you acquire your shares directly from T. Rowe Price. Our default method is average cost. For any fund shares acquired through a financial intermediary after 2011, you should check with your financial intermediary regarding the applicable cost basis method. You should, however, note that the cost basis information reported to you may not always be the same as what you should report on your tax return because the rules applicable to the determination of cost basis on Form 1099-B may be different from the rules applicable to the determination of cost basis for reporting on your tax return. Therefore, you should save your transaction records to make sure the information
T. Rowe Price | 46 |
reported on your tax return is accurate. T. Rowe Price and financial intermediaries are not required to issue a Form 1099-B to report sales of money market fund shares.
To help you maintain accurate records, T. Rowe Price will make available to you a confirmation promptly following each transaction you make (except for systematic purchases and systematic redemptions) and a year-end statement detailing all of your transactions in each fund account during the year. If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with transaction confirmations and statements.
Taxes on Fund Distributions
T. Rowe Price (or your financial intermediary) will make available to you, as applicable, generally no later than mid-February, a Form 1099-DIV, or other Internal Revenue Service forms, as required, indicating the tax status of any income dividends, dividends exempt from federal income taxes, and capital gain distributions made to you. This information will be reported to the Internal Revenue Service. Taxable distributions are generally taxable to you in the year in which they are paid. A dividend declared in October, November, or December and paid in the following January is generally treated as taxable to you as if you received the distribution in December. Dividends from tax-free funds are generally expected to be tax-exempt for federal income tax purposes. Your bond fund dividends for each calendar year will include dividends accrued up to the first business day of the next calendar year. Ordinary dividends and capital gain dividends may also be subject to state and local taxes. You will be sent any additional information you need to determine your taxes on fund distributions, such as the portion of your dividends, if any, that may be exempt from state and local income taxes.
Taxable distributions are subject to tax whether reinvested in additional shares or received in cash.
The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held the shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income, and gains on securities held more than one year are taxed at the lower rates applicable to long-term capital gains. If you realized a loss on the sale or exchange of fund shares that you held six months or less, your short-term capital loss must be reclassified as a long-term capital loss to the extent of any long-term capital gain distributions received during the period you held the shares. For funds investing in foreign instruments, distributions resulting from the sale of certain foreign currencies, currency contracts, and the foreign currency portion of gains on debt instruments are taxed as ordinary income. Net foreign currency losses may cause monthly or quarterly dividends to be reclassified as returns of capital.
A funds distributions that have exceeded the funds earnings and profits for the relevant tax year may be treated as a return of capital to its shareholders. A return of capital distribution is generally nontaxable but reduces the shareholders cost basis in
Information About Accounts in T. Rowe Price Funds | 47 |
the fund, and any return of capital in excess of the cost basis will result in a capital gain.
The tax status of certain distributions may be recharacterized on year-end tax forms, such as your Form 1099-DIV. Distributions made by a fund may later be recharacterized for federal income tax purposesfor example, from taxable ordinary income dividends to returns of capital. A recharacterization of distributions may occur for a number of reasons, including the recharacterization of income received from underlying investments, such as real estate investment trusts (REITs), and distributions that exceed taxable income due to losses from foreign currency transactions or other investment transactions. Certain funds, including international bond funds and funds that invest in REITs, are more likely to recharacterize a portion of their distributions as a result of their investments.
If the fund qualifies and elects to pass through nonrefundable foreign income taxes paid to foreign governments during the year, your portion of such taxes will be reported to you as taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for those amounts. There can be no assurance that a fund will meet the requirements to pass through foreign income taxes paid.
If you are subject to backup withholding, we will have to withhold a 24% backup withholding tax on distributions and, in some cases, redemption payments. You may be subject to backup withholding if we are notified by the Internal Revenue Service to withhold, you have failed one or more tax certification requirements, or our records indicate that your tax identification number is missing or incorrect. Backup withholding is not an additional tax and is generally available to credit against your federal income tax liability with any excess refunded to you by the Internal Revenue Service.
Tax Consequences of Hedging
Entering into certain transactions involving options, futures, swaps, and forward currency exchange contracts may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in a fund being required to distribute gains on such transactions even though it did not close the contracts during the year or receive cash to pay such distributions. The fund may not be able to reduce its distributions for losses on such transactions to the extent of unrealized gains in offsetting positions.
Tax Consequences of Shareholder Turnover
If the funds portfolio transactions result in a net capital loss (i.e., an excess of capital losses over capital gains) for any year, the loss may be carried forward and used to offset future realized capital gains. However, its ability to carry forward such losses will be limited if the fund experiences an ownership change within the meaning of the Internal Revenue Code. An ownership change generally results when shareholders owning 5% or more of the fund increase their aggregate holdings by more than 50 percentage points over a three-year period.
T. Rowe Price | 48 |
Because Institutional Funds may have only a few large shareholders, an ownership change can occur in the normal course of shareholder purchases and redemptions. The fund undertakes no obligation to avoid or prevent an ownership change. Moreover, because of circumstances beyond the funds control, there can be no assurance that the fund will not experience, or has not already experienced, an ownership change. An ownership change can reduce the funds ability to offset capital gains with losses, which could increase the amount of taxable gains that could be distributed to shareholders.
Tax Effect of Buying Shares Before an Income Dividend or Capital Gain Distribution
If you buy shares shortly before or on the record datethe date that establishes you as the person to receive the upcoming distributionyou may receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a funds record date before investing. In addition, a funds share price may, at any time, reflect undistributed capital gains or income and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return.
T. Rowe Price Funds and their agents, in their sole discretion, reserve the following rights: (1) to waive or lower investment minimums; (2) to accept initial purchases by telephone; (3) to refuse any purchase or exchange order; (4) to cancel or rescind any purchase or exchange order placed through a financial intermediary no later than the business day after the order is received by the financial intermediary (including, but not limited to, orders deemed to result in excessive trading, market timing, or 5% ownership); (5) to cease offering fund shares at any time to all or certain groups of investors; (6) to freeze any account and suspend account services when notice has been received of a dispute regarding the ownership of the account, or a legal claim against an account, upon initial notification to T. Rowe Price of a shareholders death until T. Rowe Price receives required documentation in correct form, or if there is reason to believe a fraudulent transaction may occur; (7) to otherwise modify the conditions of purchase and modify or terminate any services at any time; (8) to waive any wire, small account, maintenance, or fiduciary fees charged to a group of shareholders; (9) to act on instructions reasonably believed to be genuine; (10) to involuntarily redeem an account at the net asset value calculated the day the account is redeemed, in cases of threatening conduct, suspected fraudulent or illegal activity, or if the fund or its agent is unable, through its procedures, to verify the identity of the person(s) or entity opening an account; and (11) for money market funds, to suspend redemptions to facilitate an orderly liquidation.
The funds Statement of Additional Information, which contains a more detailed description of the funds operations, investment restrictions, policies and practices, has been filed with the SEC. The Statement of Additional Information is incorporated by reference into this prospectus, which means that it is legally part of this prospectus even if you do not request a copy. Further information about the funds investments, including a review of market conditions and the managers recent investment strategies and their impact on performance during the past fiscal year, is available in the annual and semiannual shareholder reports. These documents and updated performance information are available through troweprice.com. For inquiries about the fund and to obtain free copies of any of these documents, call 1-800-638-8790. If you invest in the fund through a financial intermediary, you should contact your financial intermediary for copies of these documents.
Fund information and Statements of Additional Information are also available from the Public Reference Room of the SEC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Fund reports and other fund information are available on the EDGAR Database on the SECs Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, U.S. Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1520.
T. Rowe Price Associates, Inc. |
1940 Act File No. 811-5833 | E146-040 3/1/18 |
PROSPECTUS | |
PRFFX | |
March 1, 2018 | |
T. Rowe Price Institutional Frontier Markets Equity Fund | |
A fund seeking long-term growth of capital through investments in equity securities of frontier market companies. | |
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. | |
Table of Contents
SUMMARY
The fund seeks long-term growth of capital.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may also incur brokerage commissions and other charges when buying or selling shares of the fund, which are not reflected in the table.
Fees and Expenses of the Fund
Shareholder fees (fees paid directly from your investment) | ||
Redemption fee (as a percentage of amount redeemed on shares held for 90 days or less) | 2.00 | % |
Annual
fund operating expenses | ||
Management fees | 1.10 | % |
Other expenses | 0.59 | |
Total annual fund operating expenses | 1.69 | |
Fee waiver/expense reimbursement | (0.30 | )a |
Total annual fund operating expenses after fee waiver/expense reimbursement | 1.39 | a |
a T. Rowe Price Associates, Inc., has agreed (through February 28, 2019) to waive its fees and/or bear any expenses (excluding interest; expenses related to borrowings, taxes, and brokerage; nonrecurring, extraordinary expenses; and acquired fund fees and expenses) that would cause the funds ratio of expenses to average daily net assets to exceed 1.35%. The agreement may be terminated at any time beyond February 28, 2019, with approval by the funds Board of Directors. Fees waived and expenses paid under this agreement (and a previous limitation of 1.35%) are subject to reimbursement to T. Rowe Price Associates, Inc., by the fund whenever the funds expense ratio is below 1.35%. However, no reimbursement will be made more than three years from the date such amounts were initially waived or reimbursed. The fund may only make repayments to T. Rowe Price Associates, Inc., if such repayment does not cause the funds expense ratio (after the repayment is taken into account) to exceed both: (1) the expense limitation in place at the time such amounts were waived; and (2) the funds current expense limitation.
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods, that your investment has a 5% return each year, and that the funds operating expenses remain the same. The example also assumes that an expense limitation arrangement currently in place is not renewed; therefore, the figures have been adjusted to reflect fee waivers or expense reimbursements only in the periods for which the expense limitation arrangement is expected to continue. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
T. Rowe Price | 2 |
1 year | 3 years | 5 years | 10 years |
$142 | $503 | $890 | $1,973 |
Portfolio Turnover The fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the funds shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the funds performance. During the most recent fiscal year, the funds portfolio turnover rate was 57.8% of the average value of its portfolio.
Investments, Risks, and Performance
Principal Investment Strategies The fund normally invests at least 80% of its net assets (including any borrowings for investment purposes) in equity securities and equity-related investments of companies that are located in, or that have economic ties to, countries considered to be frontier markets. For purposes of determining whether the fund invests at least 80% in frontier markets, the fund relies on the country assigned to a security by MSCI Inc. or another unaffiliated data provider. The fund may purchase securities issued by companies of any size, but typically seeks larger companies to the extent opportunities are available within frontier markets. The fund expects to make most of its investments in companies in frontier markets in Africa, the Middle East, Asia, Europe, and Latin America.
Frontier markets are those markets which are not as developed as emerging markets. The fund considers a country to be a frontier market if it is not included in the MSCI All Country World Index, which contains all of the countries that MSCI Inc. has classified as either a developed market or emerging market. The countries that are considered frontier markets may change over time based on how they are classified by MSCI Inc. The fund expects to typically seek investments in the frontier markets listed below (other countries may be added or listed countries may be removed):
· Africa and Middle East: Bahrain, Botswana, Ghana, Jordan, Kenya, Kuwait, Lebanon, Mauritius, Morocco, Namibia, Nigeria, Oman, Saudi Arabia, Tanzania, Tunisia, Uganda, Zambia, and Zimbabwe.
· Asia: Bangladesh, Cambodia, Pakistan, Sri Lanka, and Vietnam.
· Europe: Bosnia, Bulgaria, Croatia, Estonia, Georgia, Kazakhstan, Lithuania, Romania, Serbia, Slovenia, and Ukraine.
· Latin America: Argentina, Jamaica, Panama, and Trinidad & Tobago.
The fund is nondiversified, meaning it may invest a greater portion of assets in a single company and own more of the companys voting securities than is permissible for a diversified fund. Most of the funds assets will be invested directly in common stocks. The fund may also gain exposure to common stocks by purchasing participation notes (P-notes) that offer a return linked to a particular common stock. P-notes are primarily used to invest indirectly in certain stocks that trade in a
Summary | 3 |
market that restricts foreign investors, such as the fund, from investing directly in that market.
While the adviser invests with an awareness of the global economic backdrop and the advisers outlook for certain industries, sectors, and individual countries, the advisers decision-making process focuses on bottom-up stock selection. Country allocation is driven largely by stock selection, though the adviser may limit investments in markets or industries that appear to have poor overall prospects. The growth of certain frontier market countries relies heavily on the success of the banking industry. As a result, the fund expects to concentrate its investments (i.e., invest more than 25% of its net assets) in securities issued by banks and other financial services companies. The fund may at times invest significantly in certain countries or geographical regions, such as Argentina.
The adviser relies on a global team of investment analysts dedicated to in-depth fundamental research in an effort to identify quality companies with strong cash flows and sustainable growth potential, and does not emphasize either a growth or value bias when identifying potential investments. The funds investments may at times include securities of companies that are in the process of being privatized by a government, securities of companies that trade in unregulated over-the-counter markets or other types of unlisted securities markets, and unregistered securities issued in private placements. In managing the funds portfolio, we principally employ a bottom-up approach to identify particular securities for investment. Research analysts conduct proprietary industry and company analysis to assess companies prospects while also considering macroeconomic factors that could limit opportunities in certain regions or frontier markets overall. The fund generally looks for companies with an attractive industry structure, compelling fundamentals, proven management team, and/or strong valuation upside.
The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.
Principal Risks As with any mutual fund, there is no guarantee that the fund will achieve its objective. The funds share price fluctuates, which means you could lose money by investing in the fund. The principal risks of investing in this fund are summarized as follows:
Active management risks The investment advisers judgments about the attractiveness, value, or potential appreciation of the funds investments may prove to be incorrect. The fund could underperform in comparison to other funds with a similar benchmark or similar objectives and investment strategies if the funds overall investment selections or strategies fail to produce the intended results.
Risks of stock investing Stocks generally fluctuate in value more than bonds and may decline significantly over short time periods. There is a chance that stock prices overall will decline because stock markets tend to move in cycles, with periods of rising and falling prices. The value of a stock in which the fund invests may decline
T. Rowe Price | 4 |
due to general weakness in the stock market or because of factors that affect a particular company or industry.
P-note risks To the extent the fund invests in P-notes, it is subject to certain risks in addition to the risks normally associated with a direct investment in the underlying foreign securities the P-note seeks to replicate. As the purchaser of a P-note, the fund is relying on the creditworthiness of the counterparty issuing the P-note and does not have the same rights under a P-note as it would as a shareholder of the underlying issuer. Therefore, if a counterparty becomes insolvent, the fund could lose the total value of its investment in the P-note. In addition, there is no assurance that there will be a trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
International investing risks Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse local, political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S.
Frontier markets risks The risks of international investing are heightened for investments in emerging market and frontier market countries. Emerging and frontier market countries tend to have economic structures that are less diverse and mature, and political systems that are less stable, than those of developed market countries. In addition to all of the risks of investing in international developed markets, emerging and frontier markets tend to have less liquid and efficient trading markets and are more susceptible to governmental interference, local taxes being imposed on international investments, and restrictions on gaining access to sales proceeds. Frontier markets generally have smaller economies or less mature capital markets than emerging markets and, as a result, the risks typically associated with investing in emerging market countries are magnified in frontier countries. Adverse changes in currency values of frontier market countries may be severe and settlement procedures and custody services may prove inadequate in certain markets. The markets of frontier countries typically have low trading volumes and the potential for extreme price volatility and illiquidity. This volatility may be further increased by the actions of a few major investors. For example, a substantial increase or decrease in cash flows of mutual funds investing in these markets could significantly affect local stock prices and, therefore, the net asset value of the fund. All of these factors make investing in frontier countries significantly riskier than investing in other countries, including emerging market countries.
Risks of investing in Argentina Argentina has experienced high interest rates, economic volatility, inflation, currency devaluations and high unemployment rates. The economy is heavily dependent on exports and commodities. Argentinas default
Summary | 5 |
on its debt in 2001, and its recent nationalization of private pensions, continues to impact the confidence of investors in Argentina, which might adversely impact returns in the fund. Argentinas willingness and ability to repay its sovereign debt is currently in question, and the possibility of default is not unlikely, which could limit its ability to borrow in the future.
Banking industry risks Because the fund invests significantly in banking and financial services companies, the fund is more susceptible to adverse developments affecting such companies and may perform poorly during a downturn in the banking industry. Banks and other financial services companies can be adversely affected by, among other things, regulatory changes, interest rate movements, the availability of capital and cost to borrow, and the rate of debt defaults. The oversight of banks in frontier markets may be ineffective and underdeveloped relative to more mature markets. In particular for frontier markets, the impact of future regulation on any individual bank, or on the financial services sector as a whole, can be very difficult to predict.
Nondiversification risks As a nondiversified fund, the fund has the ability to invest a larger percentage of its assets in the securities of a smaller number of issuers than a diversified fund. As a result, poor performance by a single issuer could adversely affect fund performance more than if the fund were invested in a larger number of issuers. The funds share price can be expected to fluctuate more than that of a comparable diversified fund.
Market capitalization risks The funds focus on large companies subjects the fund to the risks that larger companies may not be able to attain the high growth rates of successful smaller companies, especially during strong economic periods, and that they may be less capable of responding quickly to competitive challenges and industry changes. Because the fund may invest in companies of any size, its share price could be more volatile than a fund that invests only in large companies. Small and medium-sized companies typically have less experienced management, narrower product lines, more limited financial resources, and less publicly available information than larger companies.
Performance The following performance information provides some indication of the risks of investing in the fund. The funds performance information represents only past performance (before and after taxes) and is not necessarily an indication of future results.
The following bar chart illustrates how much returns can differ from year to year by showing calendar year returns and the best and worst calendar quarter returns during those years for the fund.
T. Rowe Price | 6 |
The following table shows the average annual total returns for the fund, and also compares the returns with the returns of a relevant broad-based market index, as well as with the returns of one or more comparative indexes that have investment characteristics similar to those of the fund.
In addition, the table shows hypothetical after-tax returns to demonstrate how taxes paid by a shareholder may influence returns. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as a 401(k) account or an IRA.
Average Annual Total Returns | ||||||||||||||
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| Periods ended |
| ||||||||||
| December 31, 2017 |
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| |||||||||||||
| Since | Inception |
| |||||||||||
| 1 Year | inception | date |
| ||||||||||
| Institutional Frontier Markets Equity Fund | 09/22/2014 |
| |||||||||||
| Returns before taxes | 31.69 | % |
|
| 3.87 | % |
|
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| ||||
| Returns after taxes on distributions | 31.89 |
|
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| 3.64 |
|
|
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| ||||
| Returns after taxes on distributions |
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|
|
|
|
| ||||
| and sale of fund shares | 18.29 |
|
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| 2.99 |
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|
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| ||||
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|
|
| |||||
| MSCI Frontier Markets Index (reflects no deduction for fees, expenses, or taxes) |
| ||||||||||||
| 32.32 |
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|
| 0.60 | a |
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| |||||
| Lipper Emerging Markets Funds Average |
| ||||||||||||
| 34.57 |
|
|
| 5.61 | b |
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|
|
Summary | 7 |
a Return as of 9/22/14.
b Return as of 9/30/14.
Updated performance information is available through troweprice.com.
Management
Investment Adviser T. Rowe Price Associates, Inc. (T. Rowe Price)
Investment Sub-adviser T. Rowe Price International Ltd (T. Rowe Price International)
Portfolio Manager | Title | Managed Fund Since | Joined Investment |
Oliver D.M. Bell | Chairman of Investment Advisory Committee | 2014 | 2011 |
Purchase and Sale of Fund Shares
The fund generally requires a $1,000,000 minimum initial investment and there is no minimum for additional purchases, although the initial investment minimum may be waived for certain types of accounts held through a retirement plan, financial advisor, or other financial intermediary.
For
investors holding shares of the fund directly with T. Rowe Price, you may purchase, redeem, or exchange
fund shares by mail or by telephone
(1-800-638-8790).
If you hold shares through a financial intermediary or retirement plan, you must purchase, redeem, and exchange shares of the fund through your intermediary or retirement plan. You should check with your intermediary or retirement plan to determine the investment minimums that apply to your account.
Tax Information
Any dividends or capital gains are declared and paid annually, usually in December. Redemptions or exchanges of fund shares and distributions by the fund, whether or not you reinvest these amounts in additional fund shares, may be taxed as ordinary income or capital gains unless you invest through a tax-deferred account (in which case you will be taxed upon withdrawal from such account).
More About the Fund | 2 | |
How is the fund organized?
T. Rowe Price Institutional International Funds, Inc. (the Corporation) was incorporated in Maryland in 1989. Currently, the Corporation consists of 11 series, each representing a separate pool of assets with different investment objectives. Each series is an open-end management investment company, or mutual fund. Mutual funds pool money received from shareholders and invest it to try to achieve specified objectives.
What is meant by shares?
As with all mutual funds, investors purchase shares when they put money in the fund. These shares are part of the funds authorized capital stock, but share certificates are not issued.
Each share and fractional share entitles the shareholder to:
· Receive a proportional interest in income and capital gain distributions. For funds with multiple share classes, the income dividends for each share class will generally differ from those of other share classes to the extent that the expense ratios of the classes differ.
· Cast one vote per share on certain fund matters, including the election of the funds directors, changes in fundamental policies, or approval of material changes to the funds investment management agreement. Shareholders of each class have exclusive voting rights on matters affecting only that class.
Does the fund have annual shareholder meetings?
The mutual funds that are sponsored and managed by T. Rowe Price (the T. Rowe Price Funds) are not required to hold regularly scheduled shareholder meetings. To avoid unnecessary costs to the funds shareholders, shareholder meetings are only held when certain matters, such as changes in fundamental policies or elections of directors, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting for the purpose of voting on the removal of any fund director. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the funds will send or make available to you proxy materials that explain the matters to be decided and include instructions on voting by mail, telephone, or the Internet.
More About the Fund | 9 |
Who runs the fund?
General Oversight
The fund is governed by a Board of Directors (the Board) that meets regularly to review the funds investments, performance, expenses, and other business affairs. The Board elects the funds officers. At least 75% of Board members are independent of T. Rowe Price and its affiliates (the Firm).
Investment Advisers
T. Rowe Price is the funds investment adviser and oversees the selection of the funds investments and management of the funds portfolio pursuant to an investment management agreement between the investment adviser and the fund. T. Rowe Price is a SEC-registered investment adviser that provides investment management services to individual and institutional investors, and sponsors and serves as adviser and sub-adviser to registered investment companies, institutional separate accounts, and common trust funds. The address for T. Rowe Price is 100 East Pratt Street, Baltimore, Maryland 21202. As of December 31, 2017, the Firm had approximately $991 billion in assets under management and provided investment management services for more than 8 million individual and institutional investor accounts.
T. Rowe Price has entered into a sub-advisory agreement with T. Rowe Price International under which T. Rowe Price International is authorized to trade securities and make discretionary investment decisions on behalf of the fund. T. Rowe Price International is an investment adviser registered or licensed with the SEC, United Kingdom Financial Conduct Authority, Financial Services Agency of Japan, and other non-U.S. regulatory authorities. T. Rowe Price International sponsors and serves as adviser to foreign collective investment schemes and provides investment management services to investment companies and other institutional investors. T. Rowe Price International is headquartered in London and has several branch offices around the world. T. Rowe Price International is a direct subsidiary of T. Rowe Price and its address is 60 Queen Victoria Street, London EC4N 4TZ, United Kingdom.
Portfolio Management
T. Rowe Price has established an Investment Advisory Committee with respect to the fund. The committee chairman has day-to-day responsibility for managing the funds portfolio and works with the committee in developing and executing the funds investment program. The members of the committee are as follows: Oliver D.M. Bell, Chairman, Ulle Adamson, Roy H. Adkins, Malik S. Asif, Peter I. Botoucharov, Tala Boulos, Michael J. Conelius, Richard Hall, Christopher J. Kushlis, Mark J. Lawrence, Johannes Loefstrand, Oluwaseun A. Oyegunle, Verena E. Wachnitz, and Ernest C. Yeung. The following information provides the year that the chairman (the portfolio manager) first joined the Firm and the chairmans specific business experience during the past five years (although the chairman may have had portfolio management responsibilities for a longer period). Mr. Bell has been chairman of the committee since the funds inception in 2014. He joined the Firm in 2011 and his
T. Rowe Price | 10 |
investment experience dates from 1997. He has served as a portfolio manager since joining the Firm. Prior to joining the Firm, he worked for Pictet Asset Management Ltd where he served as an emerging markets research manager (beginning in 1997), a portfolio manager for Africa and Middle East portfolios and other emerging markets strategies (beginning in 2000), and Head of Global Emerging Markets Research (beginning in 2009). The Statement of Additional Information provides additional information about the portfolio managers compensation, other accounts managed by the portfolio manager, and the portfolio managers ownership of the funds shares.
The Management Fee
The fund pays the investment adviser an annual investment management fee based on 1.10% of the funds average daily net assets. The fund calculates and accrues the fee daily.
A discussion about the factors considered by the Board and its conclusions in approving the funds investment management agreement (and any sub-advisory agreement, if applicable) appear in the funds semiannual report to shareholders for the period ended April 30.
Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. The fund may be appropriate for you if you are seeking diversification for your equity investments and can accept the risks that accompany foreign investments. Your decision should take into account whether you have any other foreign stock investments. If you do not, you may want to consider investing in a more widely diversified fund to gain the broadest exposure to global opportunities. The fund may be an appropriate part of your overall portfolio if you are supplementing existing holdings primarily in developed foreign markets and are comfortable with the potentially significant volatility associated with investing in frontier markets.
The fund invests significantly in frontier markets and may invest in companies of any market capitalization but typically seeks larger companies, to the extent opportunities are available, in those markets. The funds investments may at times include securities of companies that are in the process of being privatized by a government, securities of companies that trade in unregulated over-the-counter markets or other types of unlisted securities markets, and unregistered securities issued in private placements. In managing the funds portfolio, we principally employ a bottom-up approach to identify particular securities for investment. Research analysts conduct proprietary industry and company analysis to assess companies prospects while considering macroeconomic factors that could limit opportunities in certain regions
More About the Fund | 11 |
or frontier markets overall. The fund generally looks for companies with an attractive industry structure, compelling fundamentals, proven management team, and/or strong valuation upside.
The growth of certain frontier market countries relies heavily on the success of the commercial banking industry. The fund considers a country to be a frontier market if it is not included in the MSCI All Country World Index, which contains all of the countries that MSCI Inc. has classified as either a developed market or emerging market. The classification of a country by MSCI Inc. may change over time.
Investing a portion of your overall portfolio in stock funds with foreign holdings can enhance your diversification and increase your available investment opportunities.
Portfolio managers closely monitor the funds investments as well as political and economic trends in the countries and regions in which the fund invests. Holdings are adjusted according to the portfolio managers analysis and outlook. The impact of unfavorable developments in a particular country may be reduced when investments are spread among many countries. However, the economies and financial markets of countries in a certain region may be heavily influenced by one another.
As with all stock funds, the funds share price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse local, political, social, 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 advisers assessment of companies held by the fund may prove incorrect, resulting in losses or poor performance, even in rising markets. Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets.
As with any mutual fund, there is no guarantee the fund will achieve its objective. The funds share price fluctuates, which means you could lose money when you sell your shares of the fund.
The principal risks associated with the funds principal investment strategies include the following:
Currency risks A decline in the value of a foreign currency versus the U.S. dollar could reduce the dollar value of securities denominated in that foreign currency. The overall impact on the funds holdings can be significant, unpredictable, and long-lasting, depending on the currencies represented in the funds portfolio and how each foreign currency appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the fund does not engage in extensive foreign currency hedging programs. Further, since exchange rate movements are volatile, the funds attempts at hedging could be unsuccessful, and it
T. Rowe Price | 12 |
is not possible to effectively hedge the currency risks of many emerging market countries.
Other risks of foreign investing Risks can result from varying stages of economic and political development; differing regulatory environments, trading days and accounting standards; uncertain tax laws; and higher transaction costs of non-U.S. markets. Investments outside the U.S. could be subject to governmental actions such as capital or currency controls, nationalization of a company or industry, expropriation of assets, or imposition of high taxes. A trading market may close without warning for extended time periods, preventing the fund from buying or selling securities in that market.
Trading in the securities in which the fund invests may take place in various foreign markets on certain days when the fund is not open for business and does not calculate its net asset value. For example, the fund may invest in securities that trade in various foreign markets that are open on weekends. As the securities trade, their value may substantially change. As a result, the funds net asset value may be significantly affected on days when shareholders cannot make transactions. In addition, market volatility may significantly limit the liquidity of securities of certain companies in a particular country or geographic region, or of all companies in the country or region. The fund may be unable to liquidate its positions in such securities at any time, or at a favorable price, in order to meet the funds obligations.
Emerging markets risks Investments in emerging markets are subject to the risk of abrupt and severe price declines. The economic and political structures of emerging market countries, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. These economies are less developed, can be overly reliant on particular industries, and more vulnerable to the ebb and flow of international trade, trade barriers, and other protectionist or retaliatory measures. Governments in many emerging market countries participate to a significant degree in their economies and securities markets. As a result, foreign investments may be restricted and subject to greater government control, including repatriation of sales proceeds. Some countries have histories of instability and upheaval that could cause their governments to act in a detrimental or hostile manner toward private enterprise or foreign investment. Investments in countries or regions that have recently begun moving away from central planning and state-owned industries toward free markets should be regarded as speculative.
While some countries have made progress in economic growth, liberalization, fiscal discipline, and political and social stability, there is no assurance these trends will continue. Significant risks, such as war and terrorism, currently affect some emerging market countries. The funds performance will likely be hurt by exposure to nations in the midst of hyperinflation, currency devaluation, trade disagreements, sudden political upheaval, or interventionist government policies. The volatility of emerging markets may be heightened by the actions (such as significant buying or selling) of a
More About the Fund | 13 |
few major investors. For example, substantial increases or decreases in cash flows of mutual funds investing in these markets could significantly affect local securities prices and, therefore, could cause fund share prices to decline.
All of these factors make investing in such countries significantly riskier than in other countries, and any one of these factors could cause the funds share price to decline.
Frontier markets risks Investing in frontier market companies entails all of the risks of foreign and emerging market investing, but to a heightened degree. Compared with developed and emerging markets, investing in frontier markets may involve heightened volatility; greater political, regulatory, legal, and economic uncertainties; less liquidity; over-reliance on the commercial banking industry; dependence on particular commodities or international aid; high levels of inflation; and greater custody risk. Additional risks may include greater political instability (including the risk of war or natural disaster); increased risk of nationalization, expropriation, or other confiscation of assets of issuers to which the fund is exposed; greater risk of default (by both government and private issuers); more substantial governmental involvement in the economy; less governmental supervision and regulation; differences in, or lack of, auditing and financial reporting standards, which may result in unavailability of material information about issuers; less developed legal systems; inability to purchase and sell investments or otherwise settle securities (i.e., a market freeze); unavailability of currency hedging techniques; slower clearance and settlement; and difficulties in obtaining and/or enforcing legal judgments.
Certain frontier market countries may impose restrictions on foreign investments and repatriation of investment income and capital. In addition, foreign investors such as the fund may be required to register the proceeds of sales, and future economic or political crises could lead to price controls, forced mergers, nationalization, or the creation of government monopolies. The currencies of frontier market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain frontier market countries. Frontier market securities may trade in more limited volume than comparable securities in foreign developed and emerging markets.
In addition, frontier market securities may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems could cause the fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security, all of which would negatively affect the funds performance. Custody services in many frontier market countries remain undeveloped and, although the funds custodian will seek to establish control mechanisms, including the selection of appropriate sub-custodians to hold securities on behalf of the fund, there is greater transaction and custody risk in dealing in securities of frontier market
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countries. Overall, the laws and market practices of frontier market countries carry fewer safeguards than more mature markets, including, for example, the protection against claims from general creditors in the event of the insolvency of an agent selected to hold securities on behalf of the fund.
Geographic concentration risks Funds that are less diversified across geographic regions, countries, industries, or individual companies are generally riskier than more diversified funds. The performance of a fund that is less diversified will be closely tied to market, currency, economic, political, environmental, or regulatory conditions and developments in the countries, regions, or industries in which the fund invests and may be more volatile than the performance of a more diversified fund. The economies and financial markets of certain regionssuch as Latin America, Asia, Europe, and the Middle East and Africacan be interdependent and may all decline at the same time.
Risks of investing in Argentina Argentinas economy is heavily dependent on exports. Argentinas key trading and foreign investment partners are Brazil, China and the U.S. Reduction in spending on Argentinean products and services, or changes in China, the U.S., or any of the Latin American economies, trade regulations or currency exchange rates may adversely impact the Argentinean economy.
Argentina has experienced a high level of debt and public spending. Argentinas default on its debt in 2001, as well as its nationalization of private pensions in 2008, continues to impact the confidence of investors in Argentina, which might adversely impact returns in a Fund. In 2014, minority bondholders of Argentinas previously defaulted debt sought, and won, an injunction that prohibited Argentina from repaying bonds that had been renegotiated, unless they simultaneously paid the holdout minority bondholders their full amount due as well. Argentinas willingness and ability to repay its sovereign debt is currently in question, and the possibility of default is not unlikely, which could limit its ability to borrow in the future. Argentina has experienced periods of significant political instability and certain sectors and regions of Argentina experience high unemployment, which may cause downturns in the Argentinean market and adversely impact investments in a Fund. Heavy regulation of labor and product markets is pervasive in Argentina and may stifle Argentinean economic growth or contribute to prolonged periods of recession.
Nondiversification risks Because the fund is nondiversified and thus can invest more of its assets in a smaller number of issuers, it may be more exposed to the risks associated with an individual issuer than a fund that invests more broadly across many issuers. For example, poor performance by a single large holding of the fund would adversely affect the funds performance more than if the fund were invested in a larger number of issuers.
Banking risks Investments in banking industry stocks, as compared with other industries in general, may be considered to be more volatile or risky due to a number of factors, including more extensive government regulation that may reduce profit
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potential for banks compared with other entities. Financial services institutions are often subject to extensive governmental regulation, and the potential for additional regulation may adversely affect the scope of their activities, the prices they can charge, and the amount of capital they must maintain. The oversight of, and regulations applicable to, companies in the banking industry in frontier markets may be ineffective and are less developed when compared with the regulatory frameworks for banks in more developed markets. Banks and financial services companies in frontier markets may have significantly less access to capital than banks in more developed markets, leading them to be more likely to fail under adverse economic conditions. As a result, investing in banks of frontier markets should be considered much riskier than investing in banks elsewhere across the globe.
Some of the principal tools the adviser uses to try to reduce overall risk include intensive research when evaluating a companys prospects and limiting exposure to any one industry or company. In addition, other risks associated with the additional investment strategies that may be employed by the fund include the following:
Additional strategies and risks While most assets will be invested in common stocks, other strategies may be employed that are not considered part of the funds principal investment strategies. For instance, the fund may, to a limited extent, use derivatives such as futures contracts and forward currency exchange contracts. Any investments in futures would typically serve as an efficient means of gaining exposure to certain markets or as a cash management tool to maintain liquidity while being invested in the market. Forward currency exchange contracts would primarily be used to settle trades in a foreign currency or to help protect the funds holdings from unfavorable changes in foreign currency exchange rates, although other currency hedging techniques may be used from time to time. To the extent the fund uses futures and forward currency exchange contracts, it is exposed to potential volatility and losses greater than direct investments in the contracts underlying assets, and the risk that anticipated currency movements will not be accurately predicted.
A derivative involves risks different from, and possibly greater than, the risks associated with investing directly in the assets on which the derivative is based. Derivatives can be highly volatile, illiquid, and difficult to value. Changes in the value of a derivative may not properly correlate with changes in the value of the underlying asset, reference rate, or index. The fund could be exposed to significant losses if it is unable to close a derivatives position due to the lack of a liquid trading market. Derivatives involve the risk that a counterparty to the derivatives agreement will fail to make required payments or comply with the terms of the agreement. There is also the possibility that limitations or trading restrictions may be imposed by an exchange or government regulation, which could adversely impact the value and liquidity of a derivatives contract subject to such regulation.
Recent regulations have changed the requirements related to the use of certain derivatives. Some of these new regulations have limited the availability of certain derivatives and made their use by funds more costly. It is expected that additional
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changes to the regulatory framework will occur, but the extent and impact of additional new regulations are not certain at this time.
The Statement of Additional Information contains more detailed information about the fund and its investments, operations, and expenses.
This section provides a more detailed description of the various types of portfolio holdings and investment practices that may be used by the fund to execute its overall investment program. Some of these holdings are considered to be principal investment strategies of the fund and have already been described earlier in the prospectus. Any of the following holdings and investment practices that were not already described in Section 1 of the prospectus are not considered part of the funds principal investment strategies, but they may be used by the fund to help achieve its investment objective. The funds investments may be subject to further restrictions and risks described in the Statement of Additional Information.
Shareholder approval is required to substantively change the funds investment objective. Shareholder approval is also required to change certain investment restrictions noted in the following section as fundamental policies. Portfolio managers also follow certain operating policies that can be changed without shareholder approval. Shareholders will receive at least 60 days prior notice of a change in the funds policy requiring it to normally invest at least 80% of its net assets in equity securities and equity-related investments of companies that are located in, or that have economic ties to, countries considered to be frontier markets.
The funds holdings in certain kinds of investments cannot exceed maximum percentages as set forth in this prospectus and the Statement of Additional Information. For instance, there are limitations regarding the funds investments in certain types of derivatives. While these restrictions provide a useful level of detail about the funds investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in derivatives could have a significantly greater impact on the funds share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all of the funds investments.
Certain investment restrictions, such as a required minimum or maximum investment in a particular type of security, are measured at the time the fund purchases a security. The status, market value, maturity, duration, credit quality, or other characteristics of the funds securities may change after they are purchased, and this may cause the amount of the funds assets invested in such securities to exceed the stated maximum restriction or fall below the stated minimum restriction. If any of
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these changes occur, it would not be considered a violation of the investment restriction and will not require the sale of an investment if it was proper at the time the investment was made (this exception does not apply to the funds borrowing policy). However, certain changes will require holdings to be sold or purchased by the fund during the time it is above or below the stated percentage restriction in order for the fund to be in compliance with applicable restrictions.
For purposes of determining whether the fund invests at least 80% of its net assets in securities that are located in or that have economic ties to frontier markets, the fund relies on MSCI Inc., a third-party provider of benchmark indexes and data services, to determine whether a country is a frontier market and relies on the country assigned to a security by MSCI Inc., or another unaffiliated data provider. The data providers use various criteria to determine the country to which a security is economically tied. Examples include the following: (1) the country under which the issuer is organized; (2) the location of the issuers principal place of business or principal office; (3) where the issuers securities are listed or traded principally on an exchange or over-the-counter market; and (4) where the issuer conducts the predominant part of its business activities or derives a significant portion (e.g., at least 50%) of its revenues or profits.
Changes in the funds holdings, the funds performance, and the contribution of various investments to the funds performance are discussed in the shareholder reports.
Portfolio managers have considerable discretion in choosing investment strategies and selecting securities they believe will help achieve the funds objective.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with its investment program. The following pages describe various types of the funds holdings and investment management practices, some of which are also described as part of the funds principal investment strategies.
Nondiversified Status
The fund is registered with the SEC as a nondiversified mutual fund. This means that the fund may invest a greater portion of its assets in, and own a greater amount of the voting securities of, a single issuer than a diversified fund, which may subject the fund to greater risk with respect to its portfolio securities and greater volatility with respect to its share price.
However, the fund intends to qualify as a regulated investment company under the Internal Revenue Code. As a result, the fund must invest so that, at the end of each fiscal quarter, with respect to 50% of its total assets, no more than 5% of its total assets are invested in the securities of a single issuer and not more than 10% of the
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voting securities of any issuer are held by the fund. With respect to the remaining 50% of the funds assets, no more than 25% may be invested in a single issuer.
Industry Concentration As a matter of fundamental policy, the fund may concentrate its investments in the banking industry, which allows the fund to invest more than 25% of its net assets in the securities of issuers having their principal business activities in the banking industry.
The funds investments are primarily in common stocks and, to a lesser degree, other types of securities as follows:
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stocks have a specified dividend rate and rank after bonds and before common stocks in their claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis and profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a companys stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. Unlike common stock, preferred stock does not ordinarily carry voting rights. While most preferred stocks pay a dividend, the fund may decide to purchase preferred stock where the issuer has suspended, or is in danger of suspending, payment of its dividend. The fund may purchase American Depositary Receipts and Global Depositary Receipts, which are certificates evidencing ownership of shares of a foreign issuer. American Depositary Receipts and Global Depositary Receipts trade on established markets and are alternatives to directly purchasing the underlying foreign securities in their local markets and currencies. Such investments are subject to many of the same risks associated with investing directly in foreign securities. For purposes of the funds investment policies, investments in depositary receipts are deemed to be investments in the underlying securities. For example, a depositary receipt representing ownership of common stock will be treated as common stock.
Convertible Securities and Warrants
The fund may invest in debt instruments or preferred equity securities that are convertible into, or exchangeable for, equity securities at specified times in the future and according to a certain exchange ratio. Convertible bonds are typically callable by the issuer, which could in effect force conversion before the holder would otherwise choose. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appreciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree than common stock. Some convertible securities combine higher or lower current income with options and other features. Warrants are options to buy, directly from the issuer, a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally,
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two or more years). Warrants have no voting rights, pay no dividends, and can be highly volatile. In some cases, the redemption value of a warrant could be zero.
Participation Notes (P-notes)
The fund may gain exposure to securities traded in foreign markets through investments in P-notes. P-notes are generally issued by banks or broker-dealers and are designed to offer a return linked to an underlying common stock or other security. An investment in a P-note involves additional risks beyond the risks normally associated with a direct investment in the underlying security. While the holder of a P-note is entitled to receive from the broker-dealer or bank any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-notes are considered general unsecured contractual obligations of the banks or broker-dealers that issue them as the counterparty. As such, the fund must rely on the creditworthiness of the counterparty for its investment returns on the P-notes, and could lose the entire value of its investment in the event of default by a counterparty. Additionally, there is no assurance that there will be a secondary trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
Operating policy The funds investments in P-notes are limited to 20% of its total assets. Investments in P-notes are not subject to the limit on investments in hybrid instruments.
Fixed Income Securities
From time to time, the fund may invest in corporate and government fixed income securities as well as below investment-grade bonds, commonly referred to as junk bonds. These securities would be purchased in companies that meet the funds investment criteria. The price of a fixed income security fluctuates with changes in interest rates, generally rising when interest rates fall and falling when interest rates rise. Below investment-grade bonds, or junk bonds, can be more volatile and have greater risk of default than investment-grade bonds, and should be considered speculative.
Operating policy The fund may invest up to 10% of its total assets in below investment-grade bonds. The funds investments in convertible securities are not subject to this limit.
Futures and Options
Futures are often used to establish exposures or manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options may be used to generate additional income, to enhance returns, or as a defensive technique to protect against anticipated declines in the value of an asset. Call options give the investor the right to purchase (when the investor purchases the option), or the obligation to sell (when the investor writes or sells the option), an asset at a predetermined price in the future. Put options give the purchaser of the option the right to sell, or the seller (or writer) of the option the obligation to buy,
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an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for any number of reasons, including to manage exposure to changes in interest rates, bond prices, foreign currencies, and credit quality; as an efficient means of increasing or decreasing the funds exposure to certain markets; in an effort to enhance income; to improve risk-adjusted returns; to protect the value of portfolio securities; and to serve as a cash management tool. Call or put options may be purchased or sold on securities, futures, financial indexes, and foreign currencies. The fund may choose to continue a futures contract by rolling over an expiring futures contract into an identical contract with a later maturity date. This could increase the funds transaction costs and portfolio turnover rate.
Futures and options contracts may not always be successful investments or hedges; their prices can be highly volatile; using them could lower the funds total return; the potential loss from the use of futures can exceed the funds initial investment in such contracts; and the losses from certain options written by the fund could be unlimited.
Operating policies Initial margin deposits on futures and premiums on options used for non-hedging purposes will not exceed 5% of the funds net asset value. The total market value of securities covering call or put options may not exceed 25% of the funds total assets. No more than 5% of the funds total assets will be committed to premiums when purchasing call or put options.
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, security, or securities index. Such instruments may or may not bear interest or pay dividends. Under certain conditions, the redemption value of a hybrid could be zero.
Hybrids can have volatile prices and limited liquidity, and their use may not be successful.
Operating policy The funds investments in hybrid instruments are limited to 10% of its total assets.
Currency Derivatives
The fund will normally conduct any foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. The fund will generally not enter into a forward contract with a term greater than one year. The fund may enter into forward currency exchange contracts to lock in the U.S. dollar price of a security when it enters into a contract for the purchase or sale of a security denominated in a foreign currency, and when the fund believes that the currency of a particular foreign country may move substantially
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against another currency, it may enter into a forward contract to sell or buy the former foreign currency.
A fund that invests in foreign securities may attempt to hedge its exposure to potentially unfavorable currency changes. The primary means of doing this is through the use of forward currency exchange contracts, which are contracts between two counterparties to exchange one currency for another on a future date at a specified exchange rate. The fund may also use these instruments to create a synthetic bond, which is issued in one currency with the currency component transformed into another currency. However, futures, swaps, and options on foreign currencies may also be used. In certain circumstances, the fund may use currency derivatives to substitute a different currency for the currency in which the investment is denominated, a strategy known as proxy hedging. If the fund were to engage in any of these foreign currency transactions, it could serve to protect its foreign securities from adverse currency movements relative to the U.S. dollar, although the fund may also use currency derivatives in an effort to gain exposure to a currency expected to appreciate in value versus other currencies. As a result, the fund could be invested in a currency without holding any securities denominated in that currency. Such transactions involve, among other risks, the risk that anticipated currency movements will not occur, which could reduce the funds total return. There are certain markets, including many emerging markets, where it is not possible to engage in effective foreign currency hedging.
Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income.
Investments in Other Investment Companies
The fund may invest in other investment companies, including open-end funds, closed-end funds, and exchange-traded funds.
The fund may purchase the securities of another investment company to temporarily gain exposure to a portion of the market while awaiting purchase of securities or as an efficient means of gaining exposure to a particular asset class. The fund might also purchase shares of another investment company to gain exposure to the securities in the investment companys portfolio at times when the fund may not be able to buy those securities directly. Any investment in another investment company would be consistent with the funds objective and investment program.
The risks of owning another investment company are generally similar to the risks of investing directly in the securities in which that investment company invests. However, an investment company may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the funds performance. In addition, because closed-end funds and exchange-traded funds trade on a secondary market, their shares may trade at a premium or discount to the actual
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net asset value of their portfolio securities and their shares may have greater volatility if an active trading market does not exist.
As a shareholder of another investment company, the fund must pay its pro-rata share of that investment companys fees and expenses. The funds investments in non-T. Rowe Price investment companies are subject to the limits that apply to investments in other funds under the Investment Company Act of 1940 or under any applicable exemptive order.
The fund may also invest in certain other T. Rowe Price Funds as a means of gaining efficient and cost-effective exposure to certain asset classes, provided the investment is consistent with the funds investment program and policies.
Investments in other investment companies could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available through direct investments in a particular asset class, and will subject the fund to the risks associated with the particular asset class or asset classes in which an underlying fund invests. Examples of asset classes in which other mutual funds (including T. Rowe Price Funds) focus their investments include high yield bonds, inflation-linked securities, floating rate loans, international bonds, emerging market bonds, stocks of companies involved in activities related to real assets, stocks of companies that focus on a particular industry or sector, and emerging market stocks. If the fund invests in another T. Rowe Price Fund, the management fee paid by the fund will be reduced to ensure that the fund does not incur duplicate management fees as a result of its investment.
Illiquid Securities
Some of the funds holdings may be considered illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold in the ordinary course of business within seven days at approximately the prices at which they are valued. The determination of liquidity involves a variety of factors. Illiquid securities may include private placements that are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold (for example, pursuant to Rule 144A under the Securities Act of 1933) and therefore deemed liquid, others may have resale restrictions and be considered illiquid. The sale of illiquid securities may involve substantial delays and additional costs, and the fund may only be able to sell such securities at prices substantially lower than what it believes they are worth.
Operating policy The fund may not purchase an illiquid security if it holds 15% or more of its net assets in illiquid securities.
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Types of Investment Management Practices
Reserve Position
A certain portion of the funds assets may be held in reserves. The funds reserve positions will primarily consist of: 1) shares of a T. Rowe Price internal money market fund or short-term bond fund (which does not charge any management fees); 2) short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements; and 3) U.S. dollar or non-U.S. dollar currencies. In order to respond to adverse market, economic, political, or other conditions, the fund may assume a temporary defensive position that is inconsistent with its principal investment objective and/or strategies and may invest, without limitation, in reserves. If the fund has significant holdings in reserves, it could compromise its ability to achieve its objective. The reserve position provides flexibility in meeting redemptions, paying expenses and managing cash flows into the fund, and can serve as a short-term defense during periods of unusual market volatility. Non-U.S. dollar reserves are subject to currency risk.
Borrowing Money and Transferring Assets
The fund may borrow from banks, other persons, and other T. Rowe Price Funds for temporary or emergency purposes, to facilitate redemption requests, or for other purposes consistent with the funds policies as set forth in this prospectus and the Statement of Additional Information. Such borrowings may be collateralized with the funds assets, subject to certain restrictions.
Fundamental policy Borrowings may not exceed 331/3% of the funds total assets. This limitation includes any borrowings for temporary or emergency purposes, and applies at the time of the transaction and continues to the extent required by the Investment Company Act of 1940.
Operating policy The fund will not transfer portfolio securities as collateral except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 331/3% of its total assets. The fund will not purchase additional securities when its borrowings exceed 5% of its total assets.
Meeting Redemption Requests
We expect that the fund will hold cash or cash equivalents to meet redemption requests. The fund may also use the proceeds from the sale of portfolio securities to meet redemption requests if consistent with the management of the fund. These redemption methods will be used regularly and may also be used in deteriorating or stressed market conditions. The fund reserves the right to redeem in-kind as described under Large Redemptions. Redemptions in-kind are typically used to meet redemption requests that represent a large percentage of the funds net assets in order to minimize the effect of large redemptions on the fund and its remaining shareholders. In general, any in-kind redemptions will represent a pro-rata distribution of the funds securities, subject to certain limited exceptions.
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Redemptions in-kind may be used regularly in circumstances as described above, and may also be used in stressed market conditions.
The fund, along with other T. Rowe Price Funds, is a party to an interfund lending exemptive order received from the SEC that permits the T. Rowe Price Funds to borrow money from and/or lend money to other T. Rowe Price Funds to help the funds meet short-term redemptions and liquidity needs.
During periods of deteriorating or stressed market conditions, when an increased portion of a funds portfolio may be comprised of less-liquid investments, or during extraordinary or emergency circumstances, the fund may be more likely to pay redemption proceeds with cash obtained through interfund lending, short-term borrowing arrangements (if available), or by redeeming a large redemption request in-kind.
Lending of Portfolio Securities
The fund may lend its securities to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvestment of collateral received on loaned securities in investments that decline in value, default, or do not perform as well as expected.
Fundamental policy The value of loaned securities may not exceed 331/3% of the funds total assets.
Portfolio Turnover
Turnover is an indication of frequency of trading. Each time the fund purchases or sells a security, it incurs a cost. This cost is reflected in its net asset value but not in its operating expenses. The higher the turnover rate, the higher the transaction costs and the greater the impact on the funds total return. Higher turnover can also increase the possibility of taxable capital gain distributions. The funds portfolio turnover rates are shown in the Financial Highlights table.
The Financial Highlights table, which provides information about the funds financial history, is based on a single share outstanding throughout the periods shown. The table is part of the funds financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions and no payment of any applicable account or redemption fees). The financial statements in the annual report were
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audited by the funds independent registered public accounting firm, PricewaterhouseCoopers LLP.
Financial Highlights
9/22/14* | Year ended October 31 | |||||||
2015 | 2016 | 2017 | ||||||
Net asset
value, | $10.00 | $9.65 | $8.01 | $8.26 | ||||
Income From Investment Operations | ||||||||
Net investment incomea | | b,c | 0.15 | b | 0.15 | b | 0.12 | b |
Net gains
or losses on | (0.35) | (1.78 | ) | 0.25 | 2.08 | |||
Total from investment | (0.35) | (1.63 | ) | 0.40 | 2.20 | |||
Less Distributions | ||||||||
Dividends (from net | | | (0.14 | ) | (0.15 | ) | ||
Distributions
(from | | (0.01 | ) | (0.01 | ) | | ||
Returns of capital | | | | | ||||
Total distributions | | (0.01 | ) | (0.15 | ) | (0.15 | ) | |
Net asset value, | $9.65 | $8.01 | $8.26 | $10.31 | ||||
Total return | (3.50) | % | (16.90 | )% | 5.17 | % | 27.13 | % |
Ratios/Supplemental Data | ||||||||
Net assets, end of period | $2,005 | $49,600 | $41,714 | $62,257 | ||||
Ratio of expenses to | 1.35 | %b,e | 1.35 | %b | 1.38 | %b,d | 1.39 | %b,d |
Ratio of net income to | (0.04) | %b,e | 1.67 | %b | 1.90 | %b | 1.24 | %b |
Portfolio turnover rate | 7.5 | % | 48.0 | % | 45.5 | % | 57.8 | % |
* Inception date.
a Per share amounts calculated using average shares outstanding method.
b Excludes expenses in excess of a 1.35% contractual expense limitation in effect through February 28, 2019.
c Amounts rounded to less than $0.01 per share.
d Includes investment-related costs borne by the fund in excess of the expense limitation.
e Annualized.
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The T. Rowe Price Funds full portfolio holdings as of their fiscal year-ends are disclosed in their annual shareholder reports and their full portfolio holdings as of their fiscal mid-point are disclosed in their semiannual shareholder reports. The annual and semiannual shareholder reports are filed with the SEC and sent to the funds shareholders within 60 days of the period covered. The T. Rowe Price Funds also disclose their full portfolio holdings as of their first and third fiscal quarter-ends on Form N-Q. Form N-Q is filed with the SEC within 60 days of the period covered, but is not sent to the funds shareholders. Under certain conditions, the shareholder reports and Form N-Q may include up to 5% of a funds holdings under the caption Miscellaneous Securities without identifying the specific security or issuer. Generally, a holding would not be individually identified if it is determined that its disclosure could be harmful to the fund or its shareholders. A holding will not be excluded for these purposes from a funds SEC filings for more than one year. The money market funds also file detailed month-end portfolio holdings information on Form N-MFP with the SEC each month. Form N-MFP, as well as the shareholder reports and Form N-Q, are publicly available immediately upon filing with the SEC.
In addition, most T. Rowe Price Funds disclose their calendar quarter-end full portfolio holdings on troweprice.com 15 calendar days after each quarter. At the discretion of the investment adviser, these holdings reports may exclude the issuer name and other information relating to a holding in order to protect the funds interests and prevent harm to the fund or its shareholders. Private placements and other restricted securities may not be individually identified in the calendar quarter-end holdings on troweprice.com, but would be disclosed in any SEC filings. Money market funds also disclose on troweprice.com their month-end full portfolio holdings five business days after each month-end and historical information about the funds investments for the previous six months, as of the last business day of the preceding month. This information includes, among other things, the percentage of the funds investments in daily and weekly liquid assets, the funds weighted average maturity and weighted average life, the funds market-based net asset value, and the funds net inflows and outflows. The calendar quarter-end portfolio holdings will remain on the website for one year and the month-end money market fund portfolio holdings will remain on the website for six months. In addition, most T. Rowe Price Funds disclose their 10 largest holdings on troweprice.com on the seventh business day after each month-end. These holdings are listed in alphabetical order along with the aggregate percentage of the funds total assets that these 10 holdings represent. Each monthly top 10 list will remain on the website for six months. A description of T. Rowe Prices policies and procedures with respect to the disclosure of portfolio information is available in the Statement of Additional Information.
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The following policies and procedures apply to the Institutional Funds within the T. Rowe Price Funds.
This section of the prospectus describes the policies and procedures that generally apply to investments in the T. Rowe Price Institutional Funds (except for the T. Rowe Price Institutional Cash Reserves Fund). The T. Rowe Price Institutional Funds may be purchased directly from T. Rowe Price or through a financial intermediary, such as a bank, broker, retirement plan recordkeeper, or financial advisor.
Most of the T. Rowe Price Institutional Funds are available only in a single share class (referred to as the Institutional Class). However, the Institutional Floating Rate Fund is also offered in an F Class. Each class of a funds shares represents an interest in the same fund with the same investment program and investment policies. While the Institutional Class may be held directly with T. Rowe Price or through a financial intermediary, the F Class is designed to be purchased only through financial advisors and certain financial intermediaries and has a different cost structure due to a shareholder servicing arrangement that applies only to that class.
This section generally describes investing only in the T. Rowe Price Institutional Funds, other than the T. Rowe Price Institutional Cash Reserves Fund, which has unique policies relating to its operation as an institutional money market fund. This section does not describe the policies that apply to other T. Rowe Price Funds. Policies for other T. Rowe Price Funds are described in their respective prospectuses, and all types of funds and available share classes for the T. Rowe Price Funds are described more fully in the funds Statement of Additional Information.
Institutional Class
The Institutional Class may be purchased directly through T. Rowe Price or through a financial intermediary. The Institutional Class does not make any payments to financial intermediaries for distribution of the funds shares (commonly referred to as 12b-1 fee payments) and does not make any payments to financial intermediaries for administrative services they provide (commonly referred to as administrative fee payments). However, you may incur brokerage commissions and other charges when buying or selling I Class shares.
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The Institutional Class is designed to be sold only to institutional investors, which include, but are not limited to: corporations, endowments and foundations, charitable trusts, investment companies and other pooled vehicles, defined benefit and defined contribution retirement plans, broker-dealers, registered investment advisers, banks and bank trust programs, and Section 529 college savings plans. The Institutional Class generally requires a $1 million initial investment minimum, although the minimum may be waived for retirement plans, financial intermediaries maintaining omnibus accounts, and certain other accounts.
F Class
The F Class must be purchased through a financial intermediary. The F Class does not make any 12b-1 fee payments to financial intermediaries but may make administrative fee payments at an annual rate of up to 0.15% of the class average daily net assets.
The F Class is designed to be sold only through financial advisors and certain financial intermediaries, including brokers, banks, insurance companies, retirement plan recordkeepers, and other financial intermediaries. F Class shares are generally not available to financial intermediaries that would make the fund available to their customers through a mutual fund supermarket platform. There is a $2,500 minimum initial investment requirement, but the minimum is waived for certain types of accounts.
Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by the funds transfer agent. The F Class may make administrative fee payments to retirement plan recordkeepers, broker-dealers, and other financial intermediaries (at an annual rate of up to 0.15% of the class average daily net assets) for transfer agency, recordkeeping, and other administrative services they provide on behalf of the funds. These administrative services may include maintaining account records for each customer; transmitting purchase and redemption orders; delivering shareholder confirmations, statements, and tax forms; and providing support to respond to customers questions regarding their accounts. These separate administrative fee payments are reflected in the Other expenses line that appears in the fee table in Section 1 with respect to the funds F Class.
Some broker-dealers or other financial intermediaries that are eligible to purchase F Class shares of T. Rowe Price Institutional Funds may also be eligible to purchase the Institutional Class. The Institutional Class shares require a much higher initial investment but have lower expenses than F Class shares because the Institutional Class does not participate in the administrative fee payment program. The payment
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of the administrative fee by the F Class creates a potential conflict of interest by influencing the broker-dealer or other financial intermediary to purchase F Class shares instead of Institutional Class shares. If this happens, you will incur higher expenses than if your financial intermediary had purchased Institutional Class shares on your behalf (assuming your financial intermediary would qualify to purchase Institutional Class shares). You should ask your salesperson for more information regarding the eligibility of your financial intermediary to purchase Institutional Class shares.
If you are opening an account through an employer-sponsored retirement plan or other financial intermediary, you should contact the retirement plan or financial intermediary for information regarding its policies on opening an account, including the policies relating to purchasing, exchanging, and redeeming shares, and the applicable initial and subsequent investment minimums.
Tax Identification Number
Institutional investors must provide T. Rowe Price with a valid taxpayer identification number (and valid Social Security numbers for individuals opening the account on behalf of the institution) on a signed new account form or Form W-9. Otherwise, federal law requires the funds to withhold a percentage of dividends, capital gain distributions, and redemptions and may subject the investor to an Internal Revenue Service fine. If this information is not received within 60 days after the account is established, the account may be redeemed at the funds then-current net asset value. Financial intermediaries opening an account in a fund must also enter into a separate agreement with the fund or its agent.
Important Information Required to Open a New Account
Pursuant to federal law, all financial institutions must obtain, verify, and record information that identifies each person or entity that opens an account. This information is needed not only for the account owner and any other person who opens the account, but also for any person who has authority to act on behalf of the account. When you open an account for an entity, you will be required to provide the entitys name, U.S. street address (post office boxes are not acceptable), and taxpayer identification number, as well as your name, U.S. street address (post office boxes are not acceptable), date of birth, and Social Security number as the person opening the account on behalf of the entity. Corporate and other institutional accounts require documents showing the existence of the entity (such as articles of incorporation or partnership agreements) to open an account. Certain other fiduciary accounts (such as trusts or power of attorney arrangements) require documentation, which may include an original or certified copy of the trust agreement or power of attorney, to open an account.
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T. Rowe Price will use this information to verify the identity of the entity and person opening the account. An account cannot be opened until all of this information is received. If the identity of the entity or person opening the account on behalf of the entity cannot be verified, T. Rowe Price is authorized to take any action permitted by law. (See Rights Reserved by the Funds later in this section.)
Call Financial Institution Services at 1-800-638-8790 for more information on these requirements.
The Institutional Funds are generally available only to institutional investors with a U.S. address. T. Rowe Price will generally not authorize the transfer of ownership of an account in an Institutional Fund for an institutional investor to an account for a noninstitutional investor. Shares held directly with T. Rowe Price by noninstitutional investors are subject to involuntary redemption at any time, which could result in a taxable gain to the investor.
Opening an Account
Call Financial Institution Services at 1-800-638-8790 for an account number and wire transfer instructions. All initial purchases are typically made by bank wire, but checks or other forms of payment may be accepted in certain cases. In order to obtain an account number, you must supply the name, taxpayer identification number, and business street address for the account. Complete a new account form and mail it, along with proper documentation identifying your firm and any other necessary documentation, to one of the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: Although the purchase will be made, services may not be established and an Internal Revenue Service penalty withholding may occur until we receive a signed new account form.
How and When Shares Are Priced
The trade date for your transaction request depends on the day and time that T. Rowe Price receives your request and will normally be executed using the next share price calculated after your order is received in correct form by T. Rowe Price or its agent (or by your financial intermediary if it has the authority to accept transaction orders on behalf of the fund). The share price, also called the net asset value, for each share class of a fund is calculated at the close of trading on the New York Stock Exchange (NYSE), which is normally 4 p.m. ET, each day that the NYSE is open for
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business. Net asset values are not calculated for the funds on days when the NYSE is scheduled to be closed for trading (for example, weekends and certain U.S. national holidays). If the NYSE is unexpectedly closed due to weather or other extenuating circumstances on a day it would typically be open for business, or if the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share price as of the normally scheduled close of regular trading on the NYSE for that day.
To calculate the net asset value, a funds assets are valued and totaled, liabilities are subtracted, and each class proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Market values are used to price portfolio holdings for which market quotations are readily available. Market values generally reflect the prices at which securities actually trade or represent prices that have been adjusted based on evaluations and information provided by the funds pricing services. Investments in other mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. If a market value for a portfolio holding is not available or normal valuation procedures are deemed to be inappropriate, the fund will make a good faith effort to assign a fair value to the holding by taking into account various factors and methodologies that have been approved by the funds Board. This value may differ from the value the fund receives upon sale of the securities. Amortized cost is used to price securities held by money market funds and certain short-term debt securities held by a fund.
The funds use various pricing services to provide closing market prices, as well as information used to adjust those prices and to value most fixed income securities. A fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next days opening prices in the same markets, and adjusted prices.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices at 4 p.m. ET, except under the following circumstances. Most foreign markets close before 4 p.m. ET. For example, the most recent closing prices for securities traded in certain Asian markets may be as much as 15 hours old at 4 p.m. ET. If a fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of the funds securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. In deciding whether to make these adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities.
A fund may also fair value certain securities or a group of securities in other situationsfor example, when a particular foreign market is closed but the fund is open. For a fund that has investments in securities that are primarily listed on foreign
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exchanges which trade on weekends or other days when the fund does not price its shares, the funds net asset value may change on days when shareholders will not be able to purchase or redeem the funds shares. If an event occurs that affects the value of a security after the close of the market, such as a default of a commercial paper issuer or a significant move in short-term interest rates, a fund may make a price adjustment depending on the nature and significance of the event. The funds also evaluate a variety of factors when assigning fair values to private placements and other restricted securities. Other mutual funds may adjust the prices of their securities by different amounts or assign different fair values than the fair value that the fund assigns to the same security.
How the Trade Date Is Determined
If you invest directly with T. Rowe Price and your request to purchase, sell, or exchange shares is received by T. Rowe Price or its agent in correct form by the close of the NYSE (normally 4 p.m. ET), your transaction will be priced at that business days net asset value. If your request is received by T. Rowe Price or its agent in correct form after the close of the NYSE, your transaction will be priced at the next business days net asset value unless the fund has an agreement with your financial intermediary for orders to be priced at the net asset value next computed after receipt by the financial intermediary.
The funds have authorized certain financial intermediaries or their designees to accept orders to buy or sell fund shares on their behalf. When authorized financial intermediaries receive an order in correct form, the order is considered as being placed with the fund and shares will be bought or sold at the net asset value next calculated after the order is received by the authorized financial intermediary. The financial intermediary must transmit the order to T. Rowe Price and pay for such shares in accordance with the agreement with T. Rowe Price, or the order may be canceled and the financial intermediary could be held liable for the losses. If the fund does not have such an agreement in place with your financial intermediary, T. Rowe Price or its agent must receive the request in correct form from your financial intermediary by the close of the NYSE in order for your transaction to be priced at that business days net asset value. Contact your financial intermediary for trade deadlines and the applicable policies for purchasing, selling, or exchanging your shares, as well as initial and subsequent investment minimums. The financial intermediary may charge a fee for its services.
Note: There may be times when you are unable to contact us or access your account due to extreme market activity or other circumstances. Should this occur, your order must still be placed and received in correct form by T. Rowe Price (or by the financial intermediary in accordance with its agreement with T. Rowe Price) prior to the time the NYSE closes to be priced at that business days net asset value. The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the NYSE closes at a time other than 4 p.m. ET. The funds reserve the right to not treat an unscheduled intraday disruption or
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closure in NYSE trading as a closure of the NYSE and still accept transactions and calculate their net asset value as of 4 p.m. ET.
Transaction Confirmations
T. Rowe Price sends immediate confirmations for most of your fund transactions. However, certain transactions, such as dividend reinvestments, do not receive an immediate transaction confirmation but are reported on your account statement. Please review transaction confirmations and account statements as soon as you receive them and promptly report any discrepancies to Financial Institution Services.
Purchasing Shares
Purchases may be initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. All initial and subsequent investments are typically made by bank wire, although checks or other forms of payment may be accepted in certain cases. There is no assurance that the share price for a purchase will be the same day a wire was initiated.
The funds generally do not accept orders that request a particular day or price for a transaction or any other special conditions. However, when authorized by the fund, certain institutions, financial intermediaries, or retirement plans purchasing fund shares directly with T. Rowe Price may place a purchase order unaccompanied by payment. Payment for these shares must be received by the time designated by the fund (not to exceed the period established for settlement under applicable regulations). If payment is not received by this time, the order may be canceled. The institution, financial intermediary, or retirement plan is responsible for any costs or losses incurred by the fund or T. Rowe Price if payment is delayed or not received.
U.S. Dollars All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks and should be payable to the T. Rowe Price Funds.
Nonpayment Purchases of a fund may be canceled if payment is not received in a timely manner, and the shareholder may be responsible for any losses or expenses incurred by the fund or its transfer agent. The funds and their agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment.
Investment Minimums
The Institutional Class generally requires a $1 million minimum initial investment and the F Class generally requires a $2,500 minimum initial investment, although the minimums may be waived for financial intermediaries, retirement plans, and certain other institutional investors. In addition, we request that you give us at least three business days notice (seven business days notice for the Institutional Floating Rate Fund) for any purchase of $5 million or more. There is generally no minimum required for additional purchases.
You should check with your financial advisor, retirement plan, or financial intermediary to determine what minimum applies to your initial and additional investments.
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Exchanging and Redeeming Shares
Certain T. Rowe Price Funds assess a fee on redemptions of shares (including exchanges out of a fund) that are not held for a specified period of time. Please refer to Contingent Redemption Fee later in this section.
Exchanges You can move money from one account to an existing, identically registered account or open a new identically registered account. An exchange from one fund to another will be reported to the Internal Revenue Service as a sale for tax purposes.
Redemptions Redemptions are typically initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. Please note that certain redemption requests initiated through the National Securities Clearing Corporation may be rejected, and in such instances, the transaction must be placed by contacting a Financial Institution Services representative.
If for some reason we cannot accept your request to exchange or redeem shares, we will attempt to contact you.
If you request to redeem a specific dollar amount and the market value of your account is less than the amount of your request and we are unable to contact you, your redemption will not be processed and you will need to submit a new redemption request in correct form.
Receiving Redemption Proceeds Unless otherwise indicated, redemption proceeds will be sent via bank wire to the designated bank on file for the account. If a request is received in correct form by T. Rowe Price or its agent on a business day prior to the close of the NYSE, proceeds are usually sent on the next business day. Proceeds sent by bank wire are usually credited to an account the next business day after the sale. Redemption proceeds can be mailed to the account address by check if specifically requested. Normally, the fund transmits proceeds to financial intermediaries for redemption orders received in correct form on either the next business day or third business day after receipt of the order, depending on the arrangement with the financial intermediary. You must contact your financial intermediary about procedures for receiving your redemption proceeds.
Large Redemptions Large redemptions (for example, $250,000 or more) can adversely affect a portfolio managers ability to implement a funds investment strategy by causing the premature sale of securities that would otherwise be held longer. Therefore, the fund reserves the right (without prior notice) to pay all or part of redemption proceeds with securities from the funds portfolio rather than in cash (redemption in-kind). In general, any in-kind redemptions will represent a pro-rata distribution of a funds securities, subject to certain limited exceptions. If this occurs, the securities will be selected by the fund in its absolute discretion and the redeeming shareholder or account will be responsible for disposing of the securities and bearing any associated costs and risks (for example, market risks until the securities are
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disposed of). If you continue to hold the securities, you may be subject to any ownership restrictions imposed by the issuers. For example, real estate investment trusts often impose ownership restrictions on their equity securities.
Delays in Sending Redemption Proceeds
The T. Rowe Price Funds typically expect that it will take one to three days following the receipt of a redemption request that is in correct form to send redemption proceeds, regardless of the method the fund uses to make such payment (e.g., check, wire, or Automated Clearing House transfer). However, under certain circumstances and when deemed to be in a funds best interests, your proceeds may not be sent for up to seven calendar days after we receive your redemption request in correct form.
In addition, if shares are sold that were just purchased and paid for by check or Automated Clearing House transfer, the fund will process your redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or Automated Clearing House transfer to clear. If, during the clearing period, we receive a check drawn against your newly purchased shares, it will be returned and marked uncollected. (The 10-day hold does not apply to purchases paid for by bank wire or automatic purchases through payroll deduction.)
The Board of a retail or institutional money market fund may impose a redemption gate and elect to temporarily suspend redemptions for up to 10 business days in a 90-day period if the funds weekly liquid assets fall below 30% of its total assets and the funds Board determines that imposing a redemption gate is in the funds best interests. In addition, under certain limited circumstances, the Board of a retail or institutional money market fund may elect to permanently suspend redemptions in order to facilitate an orderly liquidation of the fund (subject to any additional liquidation requirements).
Contingent Redemption Fee
Short-term trading can disrupt a funds investment program and create additional costs for long-term shareholders. For these reasons, all share classes of the T. Rowe Price Institutional Funds, listed in the following table, assess a fee on redemptions (including exchanges out of a fund), which reduces the proceeds from such redemptions by the amounts indicated:
T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Africa & Middle East | 2% | 90 days or less |
Institutional Credit Opportunities | 2% | 90 days or less |
Institutional Emerging Markets Bond | 2% | 90 days or less |
Institutional Emerging Markets Equity | 2% | 90 days or less |
Institutional Floating Rate | 2% | 90 days or less |
Institutional Frontier Markets Equity | 2% | 90 days or less |
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T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Global Focused Growth Equity | 2% | 90 days or less |
Institutional Global Growth Equity | 2% | 90 days or less |
Institutional Global Value Equity | 2% | 90 days or less |
Institutional High Yield | 2% | 90 days or less |
Institutional International Bond | 2% | 90 days or less |
Institutional International Concentrated Equity | 2% | 90 days or less |
Institutional International Core Equity | 2% | 90 days or less |
Institutional International Growth Equity | 2% | 90 days or less |
Redemption fees are paid to a fund (and not to T. Rowe Price) to deter short-term trading, offset costs, and help protect the funds long-term shareholders. Subject to the exceptions described on the following pages, all persons holding shares of a T. Rowe Price Fund that imposes a redemption fee are subject to the fee, whether the person is holding shares directly with a T. Rowe Price Fund, through a retirement plan for which T. Rowe Price serves as recordkeeper; or indirectly through a financial intermediary (such as a broker, bank, or investment adviser), recordkeeper for retirement plan participants, or other third party.
Computation of Holding Period When an investor sells shares of a fund that assesses a redemption fee, T. Rowe Price will use the first-in, first-out method to determine the holding period for the shares sold. Under this method, the date of redemption or exchange will be compared with the earliest purchase date of shares held in the account. A redemption fee will be charged on shares sold on or before the end of the required holding period. The day after the date of your purchase is considered Day 1 for purposes of computing the holding period. For example, if you redeem your shares on or before the 90th day from the date of purchase, you will be assessed the redemption fee. If you purchase shares through a financial intermediary, consult your financial intermediary to determine how the holding period will be applied.
Transactions Not Subject to Redemption Fees The T. Rowe Price Funds will not assess a redemption fee with respect to certain transactions. As of the date of this prospectus, the following transactions in T. Rowe Price Funds will not be subject to redemption fees:
· Shares redeemed through an automated, systematic withdrawal plan;
· Shares redeemed through or used to establish certain rebalancing, asset allocation, wrap, and advisory programs, as well as non-T. Rowe Price fund-of-funds products, if approved in writing by T. Rowe Price;
· Shares purchased through the reinvestment of dividends or capital gain distributions;*
· Shares converted from one share class to another share class of the same fund;*
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· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees (e.g., for failure to meet account minimums);
· Shares purchased by rollover or changes of account registration within the same fund;*
· Shares redeemed to return an excess contribution from a retirement account;
· Shares of T. Rowe Price Funds purchased by another T. Rowe Price Fund and shares purchased by discretionary accounts managed by T. Rowe Price or one of its affiliates (please note that other shareholders of the investing T. Rowe Price Fund are still subject to the policy);
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares that are redeemed in-kind;
· Shares transferred to T. Rowe Price or a financial intermediary acting as a service provider when the age of the shares cannot be determined systematically;* and
· Shares redeemed in retirement plans or other products that restrict trading to no more frequently than once per quarter or other approved time period, if approved in writing by T. Rowe Price.
* Subsequent exchanges of these shares into funds that assess redemption fees will subject such shares to the fee.
Redemption Fees on Shares Held in Retirement Plans If shares are held in a retirement plan, redemption fees generally will be assessed on shares redeemed by exchange only if they were originally purchased by a participant-directed exchange. However, redemption fees may apply to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price or how the fees are applied by your plans recordkeeper. To determine which of your transactions are subject to redemption fees, you should contact T. Rowe Price or your plan recordkeeper.
Omnibus Accounts If your shares are held through a financial intermediary in an omnibus account, T. Rowe Price relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. T. Rowe Price seeks to enter into agreements with financial intermediaries establishing omnibus accounts that require the intermediary to assess the redemption fees. There are no assurances that T. Rowe Price will be successful in identifying all financial intermediaries or that the intermediaries will properly assess the fees.
Certain financial intermediaries may not apply the exemptions previously listed to the redemption fee policy; all redemptions by persons trading through such intermediaries may be subject to the fee. Certain financial intermediaries may exempt transactions not listed from redemption fees, if approved by T. Rowe Price. Persons redeeming shares through a financial intermediary should check with their respective intermediary to determine which transactions are subject to the fees.
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You may initiate transactions involving the Institutional Funds by telephone, by mail, or through the National Securities Clearing Corporation. The T. Rowe Price Funds and their agents use reasonable procedures to verify the identity of the person contacting T. Rowe Price and to ensure that the person is authorized to act on behalf of the account. If these procedures are followed, the funds and their agents are not liable for any losses that may occur from acting on unauthorized instructions. Please review the transaction confirmation carefully, and contact Financial Institution Services immediately about any transaction you believe to be unauthorized. Telephone conversations are recorded.
To place a transaction or make any inquiries regarding the T. Rowe Price Institutional Funds, please call Financial Institution Services at 1-800-638-8790. To mail any information to T. Rowe Price regarding the T. Rowe Price Institutional Funds, please use the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: If sending a check for a purchase, your transaction will receive the share price for the business day that the check is received by T. Rowe Price or its agent prior to the close of the NYSE (normally 4 p.m. ET), which could differ from the day that the check is received at the post office box.
If you hold shares of a T. Rowe Price Institutional Fund through a retirement plan or financial intermediary, you must contact your retirement plan or financial intermediary with any inquiries.
Involuntary Redemptions and Share Class Conversions
Shares held by any investors that no longer meet the definition of an institutional investor or fail to meet or maintain their account(s) at the investment minimum are subject to involuntary redemption at any time.
For all accounts in Institutional Funds (except for F Class accounts), to help keep operating expenses lower, we ask that you maintain an account balance of at least $1 million. If your investment falls below $1 million (even if due to market depreciation), we have the right to redeem your account at the then-current net asset value after giving you 60 days to increase your balance.
The redemption of your account could result in a taxable gain or loss.
For any F Class accounts that are no longer held through an eligible financial intermediary, we have the right to convert your account to the Institutional Class following notice to the financial intermediary or shareholder.
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Excessive and Short-Term Trading Policy
Excessive transactions and short-term trading can be harmful to fund shareholders in various ways, such as disrupting a funds portfolio management strategies, increasing a funds trading and other costs, and negatively affecting its performance. Short-term traders in funds that invest in foreign securities may seek to take advantage of developments overseas that could lead to an anticipated difference between the price of the funds shares and price movements in foreign markets. While there is no assurance that T. Rowe Price can prevent all excessive and short-term trading, the Boards of the T. Rowe Price Funds have adopted the following trading limits that are designed to deter such activity and protect the funds shareholders. The funds may revise their trading limits and procedures at any time as the Boards deem necessary or appropriate to better detect short-term trading that may adversely affect the funds, to comply with applicable regulatory requirements, or to impose additional or alternative restrictions.
Subject to certain exceptions, each T. Rowe Price Fund restricts a shareholders purchases (including through exchanges) into a fund account for a period of 30 calendar days after the shareholder has redeemed or exchanged out of that same fund account (the 30-Day Purchase Block). The calendar day after the date of redemption is considered Day 1 for purposes of computing the period before another purchase may be made.
General Exceptions As of the date of this prospectus, the following types of transactions generally are not subject to the funds excessive and short-term trading policy:
· Shares purchased or redeemed in money market funds and ultra short-term bond funds;
· Shares purchased or redeemed through a systematic purchase or withdrawal plan;
· Checkwriting redemptions from bond and money market funds;
· Shares purchased through the reinvestment of dividends or capital gain distributions;
· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees;
· Transfers and changes of account registration within the same fund;
· Shares purchased by asset transfer or direct rollover;
· Shares purchased or redeemed through IRA conversions and recharacterizations;
· Shares redeemed to return an excess contribution from a retirement account;
· Transactions in Section 529 college savings plans;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares converted from one share class to another share class in the same fund;
· Shares of T. Rowe Price Funds that are purchased by another T. Rowe Price Fund, including shares purchased by T. Rowe Price fund-of-funds products, and shares purchased by discretionary accounts managed by T. Rowe Price or one of its
T. Rowe Price | 40 |
affiliates (please note that shareholders of the investing T. Rowe Price Fund are still subject to the policy); and
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price.
Transactions in certain rebalancing, asset allocation, wrap programs, and other advisory programs, as well as non-T. Rowe Price fund-of-funds products, may also be exempt from the 30-Day Purchase Block, subject to prior written approval by T. Rowe Price.
In addition to restricting transactions in accordance with the 30-Day Purchase Block, T. Rowe Price may, in its discretion, reject (or instruct a financial intermediary to reject) any purchase or exchange into a fund from a person (which includes individuals and entities) whose trading activity could disrupt the management of the fund or dilute the value of the funds shares, including trading by persons acting collectively (e.g., following the advice of a newsletter). Such persons may be barred, without prior notice, from further purchases of T. Rowe Price Funds for a period longer than 30 calendar days, or permanently.
Financial Intermediary Accounts If you invest in T. Rowe Price Funds through a financial intermediary, you should review the financial intermediarys materials carefully or consult with the financial intermediary directly to determine the trading policy that will apply to your trades in the funds as well as any other rules or conditions on transactions that may apply. If T. Rowe Price is unable to identify a transaction placed through a financial intermediary as exempt from the excessive trading policy, the 30-Day Purchase Block may apply.
Financial intermediaries may maintain their underlying accounts directly with the fund, although they often establish an omnibus account (one account with the fund that represents multiple underlying shareholder accounts) on behalf of their customers. When financial intermediaries establish omnibus accounts in the T. Rowe Price Funds, T. Rowe Price is not able to monitor the trading activity of the underlying shareholders. However, T. Rowe Price monitors aggregate trading activity at the financial intermediary (omnibus account) level in an attempt to identify activity that indicates potential excessive or short-term trading. If it detects such trading activity, T. Rowe Price may contact the financial intermediary to request personal identifying information and transaction histories for some or all underlying shareholders (including plan participants, if applicable) pursuant to a written agreement that T. Rowe Price has entered into with each financial intermediary. Any nonpublic personal information provided to the fund (for example, a shareholders taxpayer identification number or transaction records) is subject to the funds privacy policy. If T. Rowe Price believes that excessive or short-term trading has occurred and there is no exception for such trades under the funds Excessive and Short-Term Trading Policy as previously described, it will instruct the financial intermediary to impose restrictions to discourage such practices and take appropriate action with respect to the underlying shareholder, including restricting purchases for 30 calendar
Information About Accounts in T. Rowe Price Funds | 41 |
days or longer. Each financial intermediary has agreed to execute such instructions pursuant to a written agreement. There is no assurance that T. Rowe Price will be able to properly enforce its excessive trading policies for omnibus accounts. Because T. Rowe Price generally relies on financial intermediaries to provide information and impose restrictions for omnibus accounts, its ability to monitor and deter excessive trading will be dependent upon the intermediaries timely performance of their responsibilities.
T. Rowe Price may allow a financial intermediary or other third party to maintain restrictions on trading in the T. Rowe Price Funds that differ from the 30-Day Purchase Block. An alternative excessive trading policy would be acceptable to T. Rowe Price if it believes that the policy would provide sufficient protection to the T. Rowe Price Funds and their shareholders that is consistent with the excessive trading policy adopted by the funds Boards.
Retirement Plan Accounts If
shares are held in a retirement plan, generally the
30-Day Purchase Block applies only to shares
redeemed by a participant-directed exchange to another fund. However, the 30-Day Purchase Block may apply
to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price
or the excessive trading policy applied by your plans recordkeeper. An alternative excessive trading
policy may apply to the T. Rowe Price Funds where a retirement plan has its own policy deemed acceptable
to T. Rowe Price. You should contact T. Rowe Price or your plan recordkeeper to determine which
of your transactions are subject to the funds 30-Day Purchase Block or an alternative policy.
There is no guarantee that T. Rowe Price will be able to identify or prevent all excessive or short-term trades or trading practices.
Unclaimed Accounts and Uncashed Checks
If your account has no activity for a certain period of time and/or mail sent to you from T. Rowe Price (or your financial intermediary) is returned by the post office, T. Rowe Price (or your financial intermediary) may be required to transfer your account and any assets related to uncashed checks to the appropriate state under its abandoned property laws. To avoid such action, it is important to keep your account address up to date and periodically contact T. Rowe Price at least once every two years.
Delivery of Shareholder Documents
If two or more accounts own the same fund, share the same address, and T. Rowe Price reasonably believes that the two accounts are part of the same institution, we may economize on fund expenses by mailing only one shareholder report and prospectus for the fund. If you do not want your mailings to be householded, please call Financial Institution Services.
T. Rowe Price | 42 |
Signature Guarantees
A Medallion signature guarantee is designed to protect you and the T. Rowe Price Funds from fraud by verifying your signature.
A signature guarantee may be required in certain situations, such as:
· Remitting redemption proceeds to any person, address, or bank account not on file or
· Changing the account registration or broker-dealer of record for an account.
Consult Financial Institution Services for specific requirements.
The signature guarantee must be obtained from a financial institution that is a participant in a Medallion signature guarantee program. You can obtain a Medallion signature guarantee from certain banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. When obtaining a Medallion signature guarantee, please discuss with the guarantor the dollar amount of your proposed transaction. It is important that the level of coverage provided by the guarantors stamp covers the dollar amount of the transaction or it may be rejected. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud.
Fund Operations and Shareholder Services
T. Rowe Price and The Bank of New York Mellon, subject to the oversight of T. Rowe Price, each provide certain accounting services to the T. Rowe Price Funds. T. Rowe Price Services, Inc., acts as the transfer agent and dividend disbursing agent and provides shareholder and administrative services to the funds. T. Rowe Price Retirement Plan Services, Inc., provides recordkeeping, sub-transfer agency, and administrative services for certain types of retirement plans investing in the funds. These companies receive compensation from the funds for their services. The F Class may also pay financial intermediaries for performing shareholder and administrative services for underlying shareholders in omnibus accounts. All of the fees discussed above are included in a funds financial statements and, except for funds that have an all-inclusive management fee, are also reflected in the Other expenses line that appears in a funds fee table in Section 1.
Each fund intends to qualify to be treated each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. In order to qualify, a fund must satisfy certain income, diversification, and distribution requirements. A regulated investment company is not subject to U.S. federal income tax at the portfolio level on income and gains from investments that are distributed to shareholders. However, if a fund were to fail to qualify as a regulated investment
Information About Accounts in T. Rowe Price Funds | 43 |
company and was ineligible to or otherwise did not cure such failure, the result would be fund-level taxation and, consequently, a reduction in income available for distribution to the funds shareholders.
To the extent possible, all net investment income and realized capital gains are distributed to shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund shares in your account unless you select another option on your new account form. Reinvesting distributions results in compounding, which allows you to receive dividends and capital gain distributions on an increasing number of shares.
Distributions not reinvested are paid by check or transmitted electronically to your bank account. If the U.S. Postal Service cannot deliver your check or if your check remains uncashed for six months, the fund reserves the right to reinvest your distribution check in your account at the net asset value on the day of the reinvestment and to reinvest all subsequent distributions in additional shares of the fund. Interest will not accrue on amounts represented by uncashed distributions or redemption checks.
The following table provides details on dividend payments:
Dividend Payment Schedule | |
Fund | Dividends |
Bond funds | · Shares normally begin to earn dividends on the business day after payment is received by T. Rowe Price. · Declared daily and paid on the first business day of each month. |
Stock funds | · Must be a shareholder on the dividend record date. · Declared and paid annually, if any, generally in December. |
Shares of bond funds will earn dividends through the date of redemption. Shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. Generally, if you redeem all of your bond fund shares at any time during the month, you will also receive all dividends earned through the date of redemption in the same check. When you redeem only a portion of your bond fund shares, all dividends accrued on those shares will be reinvested, or paid in cash, on the next dividend payment date. The funds do not pay dividends in fractional cents. Any dividend amount earned for a particular day on all shares held that is one-half of one cent or greater (for example, $0.016) will be rounded up to the next whole cent ($0.02), and any amount that is less than one-half of one cent (for example, $0.014) will be rounded down to the nearest whole cent ($0.01). Please note that if the dividend payable on all shares held is less than one-half of one cent for a particular day, no dividend will be earned for that day.
T. Rowe Price | 44 |
If you purchase and redeem your shares through a financial intermediary, consult your financial intermediary to determine when your shares begin and stop accruing dividends as the information previously described may vary.
Capital Gain Payments
A capital gain or loss is the difference between the purchase and sale price of a security. If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is generally paid the following year. A fund may have to make additional capital gain distributions, if necessary, to comply with the applicable tax law.
Tax Information
In most cases, you will be provided information for your tax filing needs no later than mid-February.
If you invest in the fund through a tax-deferred account, such as an IRA or employer-sponsored retirement plan, you will not be subject to tax on dividends and distributions from the fund or the sale of fund shares if those amounts remain in the tax-deferred account. You may receive a Form 1099-R or other Internal Revenue Service forms, as applicable, if any portion of the account is distributed to you.
If you invest in the fund through a taxable account, you generally will be subject to tax when:
· You sell fund shares, including an exchange from one fund to another.
· The fund makes dividend or capital gain distributions.
For individual shareholders, a portion of ordinary dividends representing qualified dividend income received by the fund may be subject to tax at the lower rates applicable to long-term capital gains rather than ordinary income. You may report it as qualified dividend income in computing your taxes, provided you have held the fund shares on which the dividend was paid for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Ordinary dividends that do not qualify for this lower rate are generally taxable at the investors marginal income tax rate. This includes the portion of ordinary dividends derived from interest, short-term capital gains, distributions from nonqualified foreign corporations, and dividends received by the fund from stocks that were on loan. Little, if any, of the ordinary dividends paid by the bond funds is expected to qualify for this lower rate.
For corporate shareholders, a portion of ordinary dividends may be eligible for the 50% deduction for dividends received by corporations to the extent the funds income consists of dividends paid by U.S. corporations. Little, if any, of the ordinary dividends paid by the international stock or bond funds is expected to qualify for this deduction.
Information About Accounts in T. Rowe Price Funds | 45 |
A 3.8% net investment income tax is imposed on net investment income, including interest, dividends, and capital gains of U.S. individuals with income exceeding $200,000 (or $250,000 if married filing jointly) and of estates and trusts.
If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with any necessary tax forms. You should contact your financial intermediary for the tax information that will be sent to you and reported to the Internal Revenue Service.
Taxes on Fund Redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another in a taxable account is also a sale for tax purposes.
All or a portion of the loss realized from a sale or exchange of your fund shares may be disallowed under the wash sale rule if you purchase substantially identical shares within a 61-day period beginning 30 days before and ending 30 days after the date on which the shares are sold or exchanged. Shares of the same fund you acquire through dividend reinvestment are shares purchased for the purpose of the wash sale rule and may trigger a disallowance of the loss for shares sold or exchanged within the 61-day period of the dividend reinvestment. Any loss disallowed under the wash sale rule is added to the cost basis of the purchased shares.
T. Rowe Price (or your financial intermediary) will make available to you Form 1099-B, if applicable, no later than mid-February, providing certain information for each sale you made in the fund during the prior year. Unless otherwise indicated on your Form 1099-B, this information will also be reported to the Internal Revenue Service. For mutual fund shares acquired prior to 2012 in most accounts established or opened by exchange in 1984 or later, our Form 1099-B will provide you with the gain or loss on the shares you sold during the year based on the average cost single category method. This information on average cost and gain or loss from sale is not reported to the Internal Revenue Service. For these mutual fund shares acquired prior to 2012, you may calculate the cost basis using other methods acceptable to the Internal Revenue Service, such as specific identification.
For mutual fund shares acquired after 2011, federal income tax regulations require us to report the cost basis information on Form 1099-B using a cost basis method selected by the shareholder in compliance with such regulations or, in the absence of such selected method, our default method if you acquire your shares directly from T. Rowe Price. Our default method is average cost. For any fund shares acquired through a financial intermediary after 2011, you should check with your financial intermediary regarding the applicable cost basis method. You should, however, note that the cost basis information reported to you may not always be the same as what you should report on your tax return because the rules applicable to the determination of cost basis on Form 1099-B may be different from the rules applicable to the determination of cost basis for reporting on your tax return. Therefore, you should save your transaction records to make sure the information
T. Rowe Price | 46 |
reported on your tax return is accurate. T. Rowe Price and financial intermediaries are not required to issue a Form 1099-B to report sales of money market fund shares.
To help you maintain accurate records, T. Rowe Price will make available to you a confirmation promptly following each transaction you make (except for systematic purchases and systematic redemptions) and a year-end statement detailing all of your transactions in each fund account during the year. If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with transaction confirmations and statements.
Taxes on Fund Distributions
T. Rowe Price (or your financial intermediary) will make available to you, as applicable, generally no later than mid-February, a Form 1099-DIV, or other Internal Revenue Service forms, as required, indicating the tax status of any income dividends, dividends exempt from federal income taxes, and capital gain distributions made to you. This information will be reported to the Internal Revenue Service. Taxable distributions are generally taxable to you in the year in which they are paid. A dividend declared in October, November, or December and paid in the following January is generally treated as taxable to you as if you received the distribution in December. Dividends from tax-free funds are generally expected to be tax-exempt for federal income tax purposes. Your bond fund dividends for each calendar year will include dividends accrued up to the first business day of the next calendar year. Ordinary dividends and capital gain dividends may also be subject to state and local taxes. You will be sent any additional information you need to determine your taxes on fund distributions, such as the portion of your dividends, if any, that may be exempt from state and local income taxes.
Taxable distributions are subject to tax whether reinvested in additional shares or received in cash.
The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held the shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income, and gains on securities held more than one year are taxed at the lower rates applicable to long-term capital gains. If you realized a loss on the sale or exchange of fund shares that you held six months or less, your short-term capital loss must be reclassified as a long-term capital loss to the extent of any long-term capital gain distributions received during the period you held the shares. For funds investing in foreign instruments, distributions resulting from the sale of certain foreign currencies, currency contracts, and the foreign currency portion of gains on debt instruments are taxed as ordinary income. Net foreign currency losses may cause monthly or quarterly dividends to be reclassified as returns of capital.
A funds distributions that have exceeded the funds earnings and profits for the relevant tax year may be treated as a return of capital to its shareholders. A return of capital distribution is generally nontaxable but reduces the shareholders cost basis in
Information About Accounts in T. Rowe Price Funds | 47 |
the fund, and any return of capital in excess of the cost basis will result in a capital gain.
The tax status of certain distributions may be recharacterized on year-end tax forms, such as your Form 1099-DIV. Distributions made by a fund may later be recharacterized for federal income tax purposesfor example, from taxable ordinary income dividends to returns of capital. A recharacterization of distributions may occur for a number of reasons, including the recharacterization of income received from underlying investments, such as real estate investment trusts (REITs), and distributions that exceed taxable income due to losses from foreign currency transactions or other investment transactions. Certain funds, including international bond funds and funds that invest in REITs, are more likely to recharacterize a portion of their distributions as a result of their investments.
If the fund qualifies and elects to pass through nonrefundable foreign income taxes paid to foreign governments during the year, your portion of such taxes will be reported to you as taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for those amounts. There can be no assurance that a fund will meet the requirements to pass through foreign income taxes paid.
If you are subject to backup withholding, we will have to withhold a 24% backup withholding tax on distributions and, in some cases, redemption payments. You may be subject to backup withholding if we are notified by the Internal Revenue Service to withhold, you have failed one or more tax certification requirements, or our records indicate that your tax identification number is missing or incorrect. Backup withholding is not an additional tax and is generally available to credit against your federal income tax liability with any excess refunded to you by the Internal Revenue Service.
Tax Consequences of Hedging
Entering into certain transactions involving options, futures, swaps, and forward currency exchange contracts may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in a fund being required to distribute gains on such transactions even though it did not close the contracts during the year or receive cash to pay such distributions. The fund may not be able to reduce its distributions for losses on such transactions to the extent of unrealized gains in offsetting positions.
Tax Consequences of Shareholder Turnover
If the funds portfolio transactions result in a net capital loss (i.e., an excess of capital losses over capital gains) for any year, the loss may be carried forward and used to offset future realized capital gains. However, its ability to carry forward such losses will be limited if the fund experiences an ownership change within the meaning of the Internal Revenue Code. An ownership change generally results when shareholders owning 5% or more of the fund increase their aggregate holdings by more than 50 percentage points over a three-year period.
T. Rowe Price | 48 |
Because Institutional Funds may have only a few large shareholders, an ownership change can occur in the normal course of shareholder purchases and redemptions. The fund undertakes no obligation to avoid or prevent an ownership change. Moreover, because of circumstances beyond the funds control, there can be no assurance that the fund will not experience, or has not already experienced, an ownership change. An ownership change can reduce the funds ability to offset capital gains with losses, which could increase the amount of taxable gains that could be distributed to shareholders.
Tax Effect of Buying Shares Before an Income Dividend or Capital Gain Distribution
If you buy shares shortly before or on the record datethe date that establishes you as the person to receive the upcoming distributionyou may receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a funds record date before investing. In addition, a funds share price may, at any time, reflect undistributed capital gains or income and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return.
T. Rowe Price Funds and their agents, in their sole discretion, reserve the following rights: (1) to waive or lower investment minimums; (2) to accept initial purchases by telephone; (3) to refuse any purchase or exchange order; (4) to cancel or rescind any purchase or exchange order placed through a financial intermediary no later than the business day after the order is received by the financial intermediary (including, but not limited to, orders deemed to result in excessive trading, market timing, or 5% ownership); (5) to cease offering fund shares at any time to all or certain groups of investors; (6) to freeze any account and suspend account services when notice has been received of a dispute regarding the ownership of the account, or a legal claim against an account, upon initial notification to T. Rowe Price of a shareholders death until T. Rowe Price receives required documentation in correct form, or if there is reason to believe a fraudulent transaction may occur; (7) to otherwise modify the conditions of purchase and modify or terminate any services at any time; (8) to waive any wire, small account, maintenance, or fiduciary fees charged to a group of shareholders; (9) to act on instructions reasonably believed to be genuine; (10) to involuntarily redeem an account at the net asset value calculated the day the account is redeemed, in cases of threatening conduct, suspected fraudulent or illegal activity, or if the fund or its agent is unable, through its procedures, to verify the identity of the person(s) or entity opening an account; and (11) for money market funds, to suspend redemptions to facilitate an orderly liquidation.
The funds Statement of Additional Information, which contains a more detailed description of the funds operations, investment restrictions, policies and practices, has been filed with the SEC. The Statement of Additional Information is incorporated by reference into this prospectus, which means that it is legally part of this prospectus even if you do not request a copy. Further information about the funds investments, including a review of market conditions and the managers recent investment strategies and their impact on performance during the past fiscal year, is available in the annual and semiannual shareholder reports. These documents and updated performance information are available through troweprice.com. For inquiries about the fund and to obtain free copies of any of these documents, call 1-800-638-8790. If you invest in the fund through a financial intermediary, you should contact your financial intermediary for copies of these documents.
Fund information and Statements of Additional Information are also available from the Public Reference Room of the SEC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Fund reports and other fund information are available on the EDGAR Database on the SECs Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, U.S. Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1520.
T. Rowe Price Associates, Inc. |
1940 Act File No. 811-5833 | E99-040 3/1/18 |
PROSPECTUS | |
TRGSX | |
March 1, 2018 | |
T. Rowe Price Institutional Global Focused Growth Equity Fund | |
A fund seeking long-term growth of capital through investments primarily in common stocks of established companies throughout the world, including the U.S. | |
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. | |
Table of Contents
SUMMARY
The fund seeks long-term growth of capital through investments primarily in the common stocks of established companies throughout the world, including the U.S.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may also incur brokerage commissions and other charges when buying or selling shares of the fund, which are not reflected in the table.
Fees and Expenses of the Fund
Shareholder fees (fees paid directly from your investment) | ||
Redemption fee (as a percentage of amount redeemed on shares held for 90 days or less) | 2.00 | % |
Annual
fund operating expenses | ||
Management fees | 0.65 | % |
Other expenses | 0.67 | |
Total annual fund operating expenses | 1.32 | |
Fee waiver/expense reimbursement | (0.56 | )a |
Total annual fund operating expenses after fee waiver/expense reimbursement | 0.76 | a |
a T. Rowe Price Associates, Inc., has agreed (through February 28, 2019) to waive its fees and/or bear any expenses (excluding interest; expenses related to borrowings, taxes, and brokerage; nonrecurring, extraordinary expenses; and acquired fund fees and expenses) that would cause the class ratio of expenses to average daily net assets to exceed 0.75%. The agreement may be terminated at any time beyond February 28, 2019, with approval by the funds Board of Directors. Fees waived and expenses paid under this agreement (and a previous limitation of 0.75%) are subject to reimbursement to T. Rowe Price Associates, Inc., by the fund whenever the class expense ratio is below 0.75%. However, no reimbursement will be made more than three years from the date such amounts were initially waived or reimbursed. The fund may only make repayments to T. Rowe Price Associates, Inc., if such repayment does not cause the class expense ratio (after the repayment is taken into account) to exceed both: (1) the expense limitation in place at the time such amounts were waived; and (2) the class current expense limitation.
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods, that your investment has a 5% return each year, and that the funds operating expenses remain the same. The example also assumes that an expense limitation arrangement currently in place is not renewed; therefore, the figures have been adjusted to reflect fee waivers or expense reimbursements only in the periods for which the expense limitation arrangement is expected to continue. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
T. Rowe Price | 2 |
1 year | 3 years | 5 years | 10 years |
$78 | $363 | $670 | $1,541 |
Portfolio Turnover The fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the funds shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the funds performance. During the most recent fiscal year, the funds portfolio turnover rate was 105.7% of the average value of its portfolio.
Investments, Risks, and Performance
Principal Investment Strategies The fund seeks to be broadly diversified by investing in a variety of industries in developed and, to a lesser extent, emerging markets. The fund normally invests in at least five countries, one of which is the U.S. Under normal conditions, at least 80% of the funds net assets (including any borrowings for investment purposes) will be invested in stocks and at least 40% of the funds net assets will be invested in stocks of companies outside the U.S. (at least 30% if foreign market conditions are not favorable). While the fund has flexibility to purchase stocks of companies of any size, investments will typically focus on large- and mid-cap growth stocks. The fund may at times invest significantly in certain sectors, such as the information technology sector.
While the adviser invests with an awareness of the global economic backdrop and the advisers outlook for certain industries, sectors, and individual countries, the advisers decision-making process focuses on bottom-up stock selection. Country allocation is driven largely by stock selection, though the adviser may limit investments in markets or industries that appear to have poor overall prospects.
Security selection reflects a growth style. The adviser relies on a global team of investment analysts dedicated to in-depth fundamental research in an effort to identify companies capable of achieving and sustaining above-average, long-term earnings growth. The adviser seeks to purchase stocks of companies at reasonable prices in relation to present or anticipated earnings, cash flow, or book value.
In selecting investments, the adviser generally favors companies with one or more of the following characteristics:
· leading or improving market position;
· attractive business niche;
· attractive or improving franchise or industry position;
· seasoned management;
· stable or improving earnings and/or cash flow; and
· sound or improving balance sheet.
The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.
Summary | 3 |
Principal Risks As with any mutual fund, there is no guarantee that the fund will achieve its objective. The funds share price fluctuates, which means you could lose money by investing in the fund. The principal risks of investing in this fund are summarized as follows:
Active management risks The investment advisers judgments about the attractiveness, value, or potential appreciation of the funds investments may prove to be incorrect. The fund could underperform in comparison to other funds with a similar benchmark or similar objectives and investment strategies if the funds overall asset allocation investment selections or strategies fail to produce the intended results.
Risks of stock investing Stocks generally fluctuate in value more than bonds and may decline significantly over short time periods. There is a chance that stock prices overall will decline because stock markets tend to move in cycles, with periods of rising and falling prices. The value of a stock in which the fund invests may decline due to general weakness in the stock market or because of factors that affect a particular company or industry.
International investing risks Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse local, political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S. These risks are heightened for the funds investments in emerging markets, which are more susceptible to governmental interference, less efficient trading markets, and the imposition of local taxes and restrictions on gaining access to sales proceeds for foreign investors.
Investment style risks Different investment styles tend to shift in and out of favor depending on market conditions and investor sentiment. The funds growth approach to investing could cause it to underperform other stock funds that employ a different investment style. Growth stocks tend to be more volatile than certain other types of stocks, and their prices may fluctuate more dramatically than the overall stock market. A stock with growth characteristics can have sharp price declines due to decreases in current or expected earnings and may lack dividends that can help cushion its share price in a declining market.
Market capitalization risks The funds focus on large companies subjects the fund to the risks that larger companies may not be able to attain the high growth rates of successful smaller companies, especially during strong economic periods, and that they may be less capable of responding quickly to competitive challenges and industry changes. Because the fund may invest in companies of any size, its share price could be more volatile than a fund that invests only in large companies. Small
T. Rowe Price | 4 |
and medium-sized companies typically have less experienced management, narrower product lines, more limited financial resources, and less publicly available information than larger companies.
Sector concentration risks At times, the fund may have a significant portion of its assets invested in securities of companies conducting business in a broadly related group of industries within an economic sector. Companies in the same economic sector may be similarly affected by economic or market events, making the fund more vulnerable to unfavorable developments in that economic sector than funds that invest more broadly. For example, the fund may have a significant portion of its assets invested in securities of companies in the information technology sector. Companies in the information technology sector can be adversely affected by, among other things, intense competition, earnings disappointments, and rapid obsolescence of products and services due to technological innovations or changing consumer preferences.
Portfolio turnover risks The fund may actively and frequently trade its portfolio securities or other instruments to carry out its investment strategies. High portfolio turnover may adversely affect the funds performance and increase transaction costs, which could increase the funds expenses. High portfolio turnover may also result in the distribution of higher capital gains when compared to a fund with less active trading policies, which could have an adverse tax impact if the funds shares are held in a taxable account.
Performance The following performance information provides some indication of the risks of investing in the fund. The funds performance information represents only past performance (before and after taxes) and is not necessarily an indication of future results.
The following bar chart illustrates how much returns can differ from year to year by showing calendar year returns and the best and worst calendar quarter returns during those years for the fund.
Summary | 5 |
The following table shows the average annual total returns for the fund, and also compares the returns with the returns of a relevant broad-based market index, as well as with the returns of one or more comparative indexes that have investment characteristics similar to those of the fund.
In addition, the table shows hypothetical after-tax returns to demonstrate how taxes paid by a shareholder may influence returns. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as a 401(k) account or an IRA.
T. Rowe Price | 6 |
Average Annual Total Returns | |||||||||||||
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| Periods ended |
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| December 31, 2017 |
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| Inception |
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| 1 Year | 5 Years | 10 Years | date |
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| Institutional Global Focused Growth Equity Fund | 06/30/2006 |
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| Returns before taxes | 33.26 | % |
| 16.33 | % |
| 5.07 | % |
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| Returns after taxes on distributions | 26.31 |
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| 13.18 |
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| 3.51 |
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| Returns after taxes on distributions |
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| and sale of fund shares | 21.69 |
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| 12.42 |
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| 3.64 |
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| MSCI All Country World Index (reflects no deduction for fees, expenses, or taxes) |
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| 24.62 |
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| 11.40 |
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| 5.22 |
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| Lipper Global Multi-Cap Growth Funds Average |
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| 28.66 |
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| 11.75 |
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| 4.90 |
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Updated performance information is available through troweprice.com.
Management
Investment Adviser T. Rowe Price Associates, Inc. (T. Rowe Price)
Investment Sub-Adviser T. Rowe Price Hong Kong Limited (Price Hong Kong)
Portfolio Manager | Title | Managed Fund Since | Joined Investment |
David J. Eiswert | Chairman of Investment Advisory Committee | 2012 | 2003 |
Purchase and Sale of Fund Shares
The fund generally requires a $1,000,000 minimum initial investment and there is no minimum for additional purchases, although the initial investment minimum may be waived for certain types of accounts held through a retirement plan, financial advisor, or other financial intermediary.
For
investors holding shares of the fund directly with T. Rowe Price, you may purchase, redeem, or exchange
fund shares by mail or by telephone
(1-800-638-8790).
If you hold shares through a financial intermediary or retirement plan, you must purchase, redeem, and exchange shares of the fund through your intermediary or retirement plan. You should check with your intermediary or retirement plan to determine the investment minimums that apply to your account.
Tax Information
Any dividends or capital gains are declared and paid annually, usually in December. Redemptions or exchanges of fund shares and distributions by the fund, whether or not you reinvest these amounts in additional fund shares, may be taxed as ordinary
Summary | 7 |
income or capital gains unless you invest through a tax-deferred account (in which case you will be taxed upon withdrawal from such account).
More About the Fund | 2 | |
How is the fund organized?
T. Rowe Price Institutional International Funds, Inc. (the Corporation) was incorporated in Maryland in 1989. Currently, the Corporation consists of 11 series, each representing a separate pool of assets with different investment objectives. Each series is an open-end management investment company, or mutual fund. Mutual funds pool money received from shareholders and invest it to try to achieve specified objectives.
What is meant by shares?
As with all mutual funds, investors purchase shares when they put money in the fund. These shares are part of the funds authorized capital stock, but share certificates are not issued.
Each share and fractional share entitles the shareholder to:
· Receive a proportional interest in income and capital gain distributions. For funds with multiple share classes, the income dividends for each share class will generally differ from those of other share classes to the extent that the expense ratios of the classes differ.
· Cast one vote per share on certain fund matters, including the election of the funds directors, changes in fundamental policies, or approval of material changes to the funds investment management agreement. Shareholders of each class have exclusive voting rights on matters affecting only that class.
Does the fund have annual shareholder meetings?
The mutual funds that are sponsored and managed by T. Rowe Price (the T. Rowe Price Funds) are not required to hold regularly scheduled shareholder meetings. To avoid unnecessary costs to the funds shareholders, shareholder meetings are only held when certain matters, such as changes in fundamental policies or elections of directors, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting for the purpose of voting on the removal of any fund director. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the funds will send or make available to you proxy materials that explain the matters to be decided and include instructions on voting by mail, telephone, or the Internet.
More About the Fund | 9 |
Who runs the fund?
General Oversight
The fund is governed by a Board of Directors (the Board) that meets regularly to review the funds investments, performance, expenses, and other business affairs. The Board elects the funds officers. At least 75% of Board members are independent of T. Rowe Price and its affiliates (the Firm).
Investment Advisers
T. Rowe Price is the funds investment adviser and oversees the selection of the funds investments and management of the funds portfolio pursuant to an investment management agreement between the investment adviser and the fund. T. Rowe Price is a SEC-registered investment adviser that provides investment management services to individual and institutional investors, and sponsors and serves as adviser and sub-adviser to registered investment companies, institutional separate accounts, and common trust funds. The address for T. Rowe Price is 100 East Pratt Street, Baltimore, Maryland 21202. As of December 31, 2017, the Firm had approximately $991 billion in assets under management and provided investment management services for more than 8 million individual and institutional investor accounts.
T. Rowe Price has entered into a sub-advisory agreement with Price Hong Kong under which Price Hong Kong is authorized to trade securities and make discretionary investment decisions on behalf of the fund. Price Hong Kong is licensed with the Securities and Futures Commission of Hong Kong and is registered as an investment adviser with the SEC. Price Hong Kong serves as a sub-adviser to investment companies and provides investment management services for other clients who seek to primarily invest in the Asia-Pacific securities markets. Price Hong Kong is a subsidiary of T. Rowe Price, and its address is 1 Connaught Place, Room 2101-2120, Jardine House 21st Floor, Central Hong Kong.
Portfolio Management
T. Rowe Price has established an Investment Advisory Committee with respect to the fund. The committee chairman has day-to-day responsibility for managing the funds portfolio and works with the committee in developing and executing the funds investment program. The members of the committee are as follows: David J. Eiswert, Chairman, Peter J. Bates, R. Scott Berg, Archibald Ciganer, Richard de los Reyes, Shawn T. Driscoll, Paul D. Greene II, Nabil Hanano, Stefan Hubrich, Randal S. Jenneke, Nina P. Jones, Anh Lu, Joshua Nelson, Jason Nogueira, Gonzalo Pangaro, Robert W. Sharps, Gabriel Solomon, Joshua K. Spencer, Taymour R. Tamaddon, Dean Tenerelli, and Dai Wang. The following information provides the year that the chairman (the portfolio manager) first joined the Firm and the chairmans specific business experience during the past five years (although the chairman may have had portfolio management responsibilities for a longer period). Mr. Eiswert has been chairman of the committee since 2012. He joined the Firm in 2003 and his investment experience dates from 2000. He has served as a portfolio manager with the Firm throughout the past five years. The Statement of Additional Information
T. Rowe Price | 10 |
provides additional information about the portfolio managers compensation, other accounts managed by the portfolio manager, and the portfolio managers ownership of the funds shares.
The Management Fee
The fund pays the investment adviser an annual investment management fee based on 0.65% of the funds average daily net assets. The fund calculates and accrues the fee daily.
A discussion about the factors considered by the Board and its conclusions in approving the funds investment management agreement (and any sub-advisory agreement, if applicable) appear in the funds semiannual report to shareholders for the period ended April 30.
Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. The fund may be appropriate for you if you are seeking diversification for your equity investments and can accept the risks that accompany foreign investments. Your decision should take into account whether you have any other foreign stock investments. The fund may be appropriate if you seek to invest in a fund that is broadly diversified among developed and emerging non-US markets.
Investing a portion of your overall portfolio in stock funds with foreign holdings can enhance your diversification and increase your available investment opportunities.
Portfolio managers closely monitor the funds investments as well as political and economic trends in the countries and regions in which the fund invests. Holdings are adjusted according to the portfolio managers analysis and outlook. The impact of unfavorable developments in a particular country may be reduced when investments are spread among many countries. However, the economies and financial markets of countries in a certain region may be heavily influenced by one another.
As with all stock funds, the funds share price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse local, political, social, 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 advisers assessment of companies held by the fund may prove incorrect, resulting in losses or poor performance, even in rising markets. Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets.
More About the Fund | 11 |
As with any mutual fund, there is no guarantee the fund will achieve its objective. The funds share price fluctuates, which means you could lose money when you sell your shares of the fund.
The principal risks associated with the funds principal investment strategies include the following:
Currency risks A decline in the value of a foreign currency versus the U.S. dollar could reduce the dollar value of securities denominated in that foreign currency. The overall impact on the funds holdings can be significant, unpredictable, and long-lasting, depending on the currencies represented in the funds portfolio and how each foreign currency appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the fund does not engage in extensive foreign currency hedging programs. Further, since exchange rate movements are volatile, the funds attempts at hedging could be unsuccessful, and it is not possible to effectively hedge the currency risks of many emerging market countries.
Portfolio turnover risks High portfolio turnover may result in increased transaction costs to the fund, which may include dealer mark-ups, brokerage commissions, and other transaction costs related to the sale of holdings and reinvestment of the proceeds in other holdings.
Other risks of foreign investing Risks can result from varying stages of economic and political development; differing regulatory environments, trading days and accounting standards; uncertain tax laws; and higher transaction costs of non-U.S. markets. Investments outside the U.S. could be subject to governmental actions such as capital or currency controls, nationalization of a company or industry, expropriation of assets, or imposition of high taxes. A trading market may close without warning for extended time periods, preventing the fund from buying or selling securities in that market.
Trading in the securities in which the fund invests may take place in various foreign markets on certain days when the fund is not open for business and does not calculate its net asset value. For example, the fund may invest in securities that trade in various foreign markets that are open on weekends. As the securities trade, their value may substantially change. As a result, the funds net asset value may be significantly affected on days when shareholders cannot make transactions. In addition, market volatility may significantly limit the liquidity of securities of certain companies in a particular country or geographic region, or of all companies in the country or region. The fund may be unable to liquidate its positions in such securities at any time, or at a favorable price, in order to meet the funds obligations.
Emerging markets risks To the extent the fund invests in emerging markets, it will be subject to greater risk than a fund investing only in developed markets. The economic and political structures of developing countries, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and
T. Rowe Price | 12 |
stability, and their financial markets often lack liquidity. The funds performance will likely be hurt by exposure to countries in the midst of hyperinflation, currency devaluation, trade disagreements, sudden political upheaval, or interventionist government policies. Significant buying or selling by a few major investors may also heighten the volatility of emerging markets. These factors make investing in such countries significantly riskier than investing in other countries, and any one of these factors could cause the funds share price to decline.
Information technology sector risks The fund may invest significantly in the information technology sector. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on their profit margins. Like other technology companies, information technology companies may have limited product lines, markets, financial resources, or personnel. The products of information technology companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, and competition for the services of qualified personnel. Companies in the information technology sector are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies.
Banking and financial companies risks The fund may invest significantly in banks and other financial services companies. To the extent the fund has significant investments in financial companies, it is more susceptible to adverse developments affecting such companies and may perform poorly during a downturn in the banking industry. Banks can be adversely affected by, among other things, regulatory changes, interest rate movements, the availability of capital and the cost to borrow, and the rate of debt defaults. Banks and other financial services institutions are often subject to extensive governmental regulation and intervention, and the potential for additional regulation could reduce profit margins and adversely affect the scope of their activities, and the amount of capital they must maintain, and limit the amounts and types of loans and other financial commitments they can make. In addition, companies in the financials sector may also be adversely affected by decreases in the availability of money or asset valuations, credit rating downgrades, increased competition, and adverse conditions in other related markets.
The oversight of, and regulations applicable to, banks in emerging markets may be ineffective when compared with the regulatory frameworks for banks in developed markets. Banks in emerging markets may have significantly less access to capital than banks in more developed markets, leading them to be more likely to fail under adverse economic conditions. In addition, the impact of future regulation on any individual bank, or on the financial services sector as a whole, can be very difficult to predict.
Consumer discretionary risks The fund may invest significantly in the consumer discretionary sector. Companies in the consumer discretionary sector are generally considered to sell nonessential goods and services, and their stocks tend to be more
More About the Fund | 13 |
cyclical than consumer staples stocks. Since consumer discretionary companies produce products that consumers do not need to purchase, their sales and profits tend to grow when the economy is growing and lag when consumers are worried about the economy.
Some of the principal tools the adviser uses to try to reduce overall risk include intensive research when evaluating a companys prospects and limiting exposure to any one industry or company. In addition, other risks associated with the additional investment strategies that may be employed by the fund include the following:
Additional strategies and risks While most assets will be invested in common stocks, other strategies may be employed that are not considered part of the funds principal investment strategies. For instance, the fund may, to a limited extent, use derivatives such as futures contracts and forward currency exchange contracts. Any investments in futures would typically serve as an efficient means of gaining exposure to certain markets or as a cash management tool to maintain liquidity while being invested in the market. Forward currency exchange contracts would primarily be used to settle trades in a foreign currency or to help protect the funds holdings from unfavorable changes in foreign currency exchange rates, although other currency hedging techniques may be used from time to time. To the extent the fund uses futures and forward currency exchange contracts, it is exposed to potential volatility and losses greater than direct investments in the contracts underlying assets, and the risk that anticipated currency movements will not be accurately predicted.
A derivative involves risks different from, and possibly greater than, the risks associated with investing directly in the assets on which the derivative is based. Derivatives can be highly volatile, illiquid, and difficult to value. Changes in the value of a derivative may not properly correlate with changes in the value of the underlying asset, reference rate, or index. The fund could be exposed to significant losses if it is unable to close a derivatives position due to the lack of a liquid trading market. Derivatives involve the risk that a counterparty to the derivatives agreement will fail to make required payments or comply with the terms of the agreement. There is also the possibility that limitations or trading restrictions may be imposed by an exchange or government regulation, which could adversely impact the value and liquidity of a derivatives contract subject to such regulation.
Recent regulations have changed the requirements related to the use of certain derivatives. Some of these new regulations have limited the availability of certain derivatives and made their use by funds more costly. It is expected that additional changes to the regulatory framework will occur, but the extent and impact of additional new regulations are not certain at this time.
The Statement of Additional Information contains more detailed information about the fund and its investments, operations, and expenses.
T. Rowe Price | 14 |
This section provides a more detailed description of the various types of portfolio holdings and investment practices that may be used by the fund to execute its overall investment program. Some of these holdings are considered to be principal investment strategies of the fund and have already been described earlier in the prospectus. Any of the following holdings and investment practices that were not already described in Section 1 of the prospectus are not considered part of the funds principal investment strategies, but they may be used by the fund to help achieve its investment objective. The funds investments may be subject to further restrictions and risks described in the Statement of Additional Information.
Shareholder approval is required to substantively change the funds investment objective. Shareholder approval is also required to change certain investment restrictions noted in the following section as fundamental policies. Portfolio managers also follow certain operating policies that can be changed without shareholder approval. Shareholders will receive at least 60 days prior notice of a change in the funds policy requiring it to normally invest at least 80% of its net assets in stocks.
The funds holdings in certain kinds of investments cannot exceed maximum percentages as set forth in this prospectus and the Statement of Additional Information. For instance, there are limitations regarding the funds investments in certain types of derivatives. While these restrictions provide a useful level of detail about the funds investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in derivatives could have a significantly greater impact on the funds share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all of the funds investments.
Certain investment restrictions, such as a required minimum or maximum investment in a particular type of security, are measured at the time the fund purchases a security. The status, market value, maturity, duration, credit quality, or other characteristics of the funds securities may change after they are purchased, and this may cause the amount of the funds assets invested in such securities to exceed the stated maximum restriction or fall below the stated minimum restriction. If any of these changes occur, it would not be considered a violation of the investment restriction and will not require the sale of an investment if it was proper at the time the investment was made (this exception does not apply to the funds borrowing policy). However, certain changes will require holdings to be sold or purchased by the fund during the time it is above or below the stated percentage restriction in order for the fund to be in compliance with applicable restrictions.
More About the Fund | 15 |
For purposes of determining whether the fund invests at least 40% (at least 30% if market conditions are not favorable) of its net assets in stocks of companies outside the U.S., the fund uses a country assigned to a stock by MSCI Inc., a third-party provider of benchmark indexes and data services for institutions worldwide, or another unaffiliated third-party data provider.
Changes in the funds holdings, the funds performance, and the contribution of various investments to the funds performance are discussed in the shareholder reports.
Portfolio managers have considerable discretion in choosing investment strategies and selecting securities they believe will help achieve the funds objective.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with its investment program. The following pages describe various types of the funds holdings and investment management practices, some of which are also described as part of the funds principal investment strategies.
Diversification As a fundamental policy, the fund will not purchase a security if, as a result, with respect to 75% of its total assets, more than 5% of the funds total assets would be invested in securities of a single issuer or more than 10% of the outstanding voting securities of the issuer would be held by the fund.
The funds investments are primarily in common stocks and, to a lesser degree, other types of securities as follows:
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stocks have a specified dividend rate and rank after bonds and before common stocks in their claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis and profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a companys stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. Unlike common stock, preferred stock does not ordinarily carry voting rights. While most preferred stocks pay a dividend, the fund may decide to purchase preferred stock where the issuer has suspended, or is in danger of suspending, payment of its dividend. The fund may purchase American Depositary Receipts and Global Depositary Receipts, which are certificates evidencing ownership of shares of a foreign issuer. American Depositary Receipts and Global Depositary Receipts trade on established markets and are alternatives to directly purchasing the underlying foreign securities in their local markets and currencies. Such investments are subject to many
T. Rowe Price | 16 |
of the same risks associated with investing directly in foreign securities. For purposes of the funds investment policies, investments in depositary receipts are deemed to be investments in the underlying securities. For example, a depositary receipt representing ownership of common stock will be treated as common stock.
Convertible Securities and Warrants
The fund may invest in debt instruments or preferred equity securities that are convertible into, or exchangeable for, equity securities at specified times in the future and according to a certain exchange ratio. Convertible bonds are typically callable by the issuer, which could in effect force conversion before the holder would otherwise choose. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appreciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree than common stock. Some convertible securities combine higher or lower current income with options and other features. Warrants are options to buy, directly from the issuer, a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more years). Warrants have no voting rights, pay no dividends, and can be highly volatile. In some cases, the redemption value of a warrant could be zero.
Participation Notes (P-notes)
The fund may gain exposure to securities traded in foreign markets through investments in P-notes. P-notes are generally issued by banks or broker-dealers and are designed to offer a return linked to an underlying common stock or other security. An investment in a P-note involves additional risks beyond the risks normally associated with a direct investment in the underlying security. While the holder of a P-note is entitled to receive from the broker-dealer or bank any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-notes are considered general unsecured contractual obligations of the banks or broker-dealers that issue them as the counterparty. As such, the fund must rely on the creditworthiness of the counterparty for its investment returns on the P-notes, and could lose the entire value of its investment in the event of default by a counterparty. Additionally, there is no assurance that there will be a secondary trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
Operating policy The funds investments in P-notes are limited to 20% of its total assets. Investments in P-notes are not subject to the limit on investments in hybrid instruments.
Fixed Income Securities
From time to time, the fund may invest in corporate and government fixed income securities as well as below investment-grade bonds, commonly referred to as junk bonds. These securities would be purchased in companies that meet the funds investment criteria. The price of a fixed income security fluctuates with changes in
More About the Fund | 17 |
interest rates, generally rising when interest rates fall and falling when interest rates rise. Below investment-grade bonds, or junk bonds, can be more volatile and have greater risk of default than investment-grade bonds, and should be considered speculative.
Operating policy The fund may invest up to 5% of the funds total assets in below investment-grade bonds. The funds investments in convertible securities are not subject to this limit.
Futures and Options
Futures are often used to establish exposures or manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options may be used to generate additional income, to enhance returns, or as a defensive technique to protect against anticipated declines in the value of an asset. Call options give the investor the right to purchase (when the investor purchases the option), or the obligation to sell (when the investor writes or sells the option), an asset at a predetermined price in the future. Put options give the purchaser of the option the right to sell, or the seller (or writer) of the option the obligation to buy, an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for any number of reasons, including to manage exposure to changes in interest rates, bond prices, foreign currencies, and credit quality; as an efficient means of increasing or decreasing the funds exposure to certain markets; in an effort to enhance income; to improve risk-adjusted returns; to protect the value of portfolio securities; and to serve as a cash management tool. Call or put options may be purchased or sold on securities, futures, financial indexes, and foreign currencies. The fund may choose to continue a futures contract by rolling over an expiring futures contract into an identical contract with a later maturity date. This could increase the funds transaction costs and portfolio turnover rate.
Futures and options contracts may not always be successful investments or hedges; their prices can be highly volatile; using them could lower the funds total return; the potential loss from the use of futures can exceed the funds initial investment in such contracts; and the losses from certain options written by the fund could be unlimited.
Operating policies Initial margin deposits on futures and premiums on options used for non-hedging purposes will not exceed 5% of the funds net asset value. The total market value of securities covering call or put options may not exceed 25% of the funds total assets. No more than 5% of the funds total assets will be committed to premiums when purchasing call or put options.
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, security, or securities index. Such instruments may or
T. Rowe Price | 18 |
may not bear interest or pay dividends. Under certain conditions, the redemption value of a hybrid could be zero.
Hybrids can have volatile prices and limited liquidity, and their use may not be successful.
Operating policy The funds investments in hybrid instruments are limited to 10% of its total assets.
Currency Derivatives
The fund will normally conduct any foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. The fund will generally not enter into a forward contract with a term greater than one year. The fund may enter into forward currency exchange contracts to lock in the U.S. dollar price of a security when it enters into a contract for the purchase or sale of a security denominated in a foreign currency, and when the fund believes that the currency of a particular foreign country may move substantially against another currency, it may enter into a forward contract to sell or buy the former foreign currency.
A fund that invests in foreign securities may attempt to hedge its exposure to potentially unfavorable currency changes. The primary means of doing this is through the use of forward currency exchange contracts, which are contracts between two counterparties to exchange one currency for another on a future date at a specified exchange rate. The fund may also use these instruments to create a synthetic bond, which is issued in one currency with the currency component transformed into another currency. However, futures, swaps, and options on foreign currencies may also be used. In certain circumstances, the fund may use currency derivatives to substitute a different currency for the currency in which the investment is denominated, a strategy known as proxy hedging. If the fund were to engage in any of these foreign currency transactions, it could serve to protect its foreign securities from adverse currency movements relative to the U.S. dollar, although the fund may also use currency derivatives in an effort to gain exposure to a currency expected to appreciate in value versus other currencies. As a result, the fund could be invested in a currency without holding any securities denominated in that currency. Such transactions involve, among other risks, the risk that anticipated currency movements will not occur, which could reduce the funds total return. There are certain markets, including many emerging markets, where it is not possible to engage in effective foreign currency hedging.
Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income.
More About the Fund | 19 |
Investments in Other Investment Companies
The fund may invest in other investment companies, including open-end funds, closed-end funds, and exchange-traded funds.
The fund may purchase the securities of another investment company to temporarily gain exposure to a portion of the market while awaiting purchase of securities or as an efficient means of gaining exposure to a particular asset class. The fund might also purchase shares of another investment company to gain exposure to the securities in the investment companys portfolio at times when the fund may not be able to buy those securities directly. Any investment in another investment company would be consistent with the funds objective and investment program.
The risks of owning another investment company are generally similar to the risks of investing directly in the securities in which that investment company invests. However, an investment company may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the funds performance. In addition, because closed-end funds and exchange-traded funds trade on a secondary market, their shares may trade at a premium or discount to the actual net asset value of their portfolio securities and their shares may have greater volatility if an active trading market does not exist.
As a shareholder of another investment company, the fund must pay its pro-rata share of that investment companys fees and expenses. The funds investments in non-T. Rowe Price investment companies are subject to the limits that apply to investments in other funds under the Investment Company Act of 1940 or under any applicable exemptive order.
The fund may also invest in certain other T. Rowe Price Funds as a means of gaining efficient and cost-effective exposure to certain asset classes, provided the investment is consistent with the funds investment program and policies.
Investments in other investment companies could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available through direct investments in a particular asset class, and will subject the fund to the risks associated with the particular asset class or asset classes in which an underlying fund invests. Examples of asset classes in which other mutual funds (including T. Rowe Price Funds) focus their investments include high yield bonds, inflation-linked securities, floating rate loans, international bonds, emerging market bonds, stocks of companies involved in activities related to real assets, stocks of companies that focus on a particular industry or sector, and emerging market stocks. If the fund invests in another T. Rowe Price Fund, the management fee paid by the fund will be reduced to ensure that the fund does not incur duplicate management fees as a result of its investment.
T. Rowe Price | 20 |
Illiquid Securities
Some of the funds holdings may be considered illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold in the ordinary course of business within seven days at approximately the prices at which they are valued. The determination of liquidity involves a variety of factors. Illiquid securities may include private placements that are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold (for example, pursuant to Rule 144A under the Securities Act of 1933) and therefore deemed liquid, others may have resale restrictions and be considered illiquid. The sale of illiquid securities may involve substantial delays and additional costs, and the fund may only be able to sell such securities at prices substantially lower than what it believes they are worth.
Operating policy The fund may not purchase an illiquid security if it holds 15% or more of its net assets in illiquid securities.
Types of Investment Management Practices
Reserve Position
A certain portion of the funds assets may be held in reserves. The funds reserve positions will primarily consist of: 1) shares of a T. Rowe Price internal money market fund or short-term bond fund (which does not charge any management fees); 2) short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements; and 3) U.S. dollar or non-U.S. dollar currencies. In order to respond to adverse market, economic, political, or other conditions, the fund may assume a temporary defensive position that is inconsistent with its principal investment objective and/or strategies and may invest, without limitation, in reserves. If the fund has significant holdings in reserves, it could compromise its ability to achieve its objective. The reserve position provides flexibility in meeting redemptions, paying expenses and managing cash flows into the fund, and can serve as a short-term defense during periods of unusual market volatility. Non-U.S. dollar reserves are subject to currency risk.
Borrowing Money and Transferring Assets
The fund may borrow from banks, other persons, and other T. Rowe Price Funds for temporary or emergency purposes, to facilitate redemption requests, or for other purposes consistent with the funds policies as set forth in this prospectus and the Statement of Additional Information. Such borrowings may be collateralized with the funds assets, subject to certain restrictions.
Fundamental policy Borrowings may not exceed 331/3% of the funds total assets. This limitation includes any borrowings for temporary or emergency purposes, and applies at the time of the transaction and continues to the extent required by the Investment Company Act of 1940.
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Operating policy The fund will not transfer portfolio securities as collateral except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 331/3% of its total assets. The fund will not purchase additional securities when its borrowings exceed 5% of its total assets.
Meeting Redemption Requests
We expect that the fund will hold cash or cash equivalents to meet redemption requests. The fund may also use the proceeds from the sale of portfolio securities to meet redemption requests if consistent with the management of the fund. These redemption methods will be used regularly and may also be used in deteriorating or stressed market conditions. The fund reserves the right to redeem in-kind as described under Large Redemptions. Redemptions in-kind are typically used to meet redemption requests that represent a large percentage of the funds net assets in order to minimize the effect of large redemptions on the fund and its remaining shareholders. In general, any in-kind redemptions will represent a pro-rata distribution of the funds securities, subject to certain limited exceptions. Redemptions in-kind may be used regularly in circumstances as described above, and may also be used in stressed market conditions.
The fund, along with other T. Rowe Price Funds, is a party to an interfund lending exemptive order received from the SEC that permits the T. Rowe Price Funds to borrow money from and/or lend money to other T. Rowe Price Funds to help the funds meet short-term redemptions and liquidity needs.
During periods of deteriorating or stressed market conditions, when an increased portion of a funds portfolio may be comprised of less-liquid investments, or during extraordinary or emergency circumstances, the fund may be more likely to pay redemption proceeds with cash obtained through interfund lending, short-term borrowing arrangements (if available), or by redeeming a large redemption request in-kind.
Lending of Portfolio Securities
The fund may lend its securities to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvestment of collateral received on loaned securities in investments that decline in value, default, or do not perform as well as expected.
Fundamental policy The value of loaned securities may not exceed 331/3% of the funds total assets.
Portfolio Turnover
Turnover is an indication of frequency of trading. Each time the fund purchases or sells a security, it incurs a cost. This cost is reflected in its net asset value but not in its operating expenses. The higher the turnover rate, the higher the transaction costs
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and the greater the impact on the funds total return. Higher turnover can also increase the possibility of taxable capital gain distributions. The funds portfolio turnover rates are shown in the Financial Highlights table.
The Financial Highlights table, which provides information about the funds financial history, is based on a single share outstanding throughout the periods shown. The table is part of the funds financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions and no payment of any applicable account or redemption fees). The financial statements in the annual report were audited by the funds independent registered public accounting firm, PricewaterhouseCoopers LLP.
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Financial Highlights
Year ended October 31 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||
Net asset
value, | $9.31 | $12.27 | $13.78 | $11.51 | $11.61 | |||||
Income From Investment Operations | ||||||||||
Net investment incomea | 0.06 | b | 0.07 | b | 0.05 | b | 0.08 | b | 0.06 | b |
Net gains or losses on securities (both realized and unrealized) | 2.99 | 1.53 | 0.56 | 0.54 | 3.06 | |||||
Total from investment | 3.05 | 1.60 | 0.61 | 0.62 | 3.12 | |||||
Less Distributions | ||||||||||
Dividends
(from net | (0.08 | ) | (0.06 | ) | (0.06 | ) | (0.05 | ) | (0.21 | ) |
Distributions (from | (0.01 | ) | (0.03 | ) | (2.82 | ) | (0.47 | ) | (0.70 | ) |
Returns of capital | | | | | | |||||
Total distributions | (0.09 | ) | (0.09 | ) | (2.88 | ) | (0.52 | ) | (0.91 | ) |
Net asset
value, | $12.27 | $13.78 | $11.51 | $11.61 | $13.82 | |||||
Total return | 33.00 | %a | 13.11 | %a | 6.37 | %a | 5.64 | %a | 29.04 | %a |
Ratios/Supplemental Data | ||||||||||
Net assets, end of | $179,337 | $28,155 | $93,844 | $66,723 | $43,284 | |||||
Ratio of expenses to average net assets | 0.75 | %a | 0.75 | %b | 0.75 | %b | 0.75 | %b | 0.76 | %b,c |
Ratio of net income to average net assets | 0.54 | %b | 0.51 | %b | 0.47 | %b | 0.71 | %b | 0.54 | %b |
Portfolio turnover rate | 160.0 | % | 159.7 | % | 139.8 | % | 136.8 | % | 105.7 | % |
a Per share amounts calculated using average shares outstanding method.
b Excludes expenses in excess of a 0.75% contractual expense limitation in effect through February 28, 2019.
c Includes investment-related costs borne by the fund in excess of the expense limitation.
The T. Rowe Price Funds full portfolio holdings as of their fiscal year-ends are disclosed in their annual shareholder reports and their full portfolio holdings as of their fiscal mid-point are disclosed in their semiannual shareholder reports. The annual and semiannual shareholder reports are filed with the SEC and sent to the
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funds shareholders within 60 days of the period covered. The T. Rowe Price Funds also disclose their full portfolio holdings as of their first and third fiscal quarter-ends on Form N-Q. Form N-Q is filed with the SEC within 60 days of the period covered, but is not sent to the funds shareholders. Under certain conditions, the shareholder reports and Form N-Q may include up to 5% of a funds holdings under the caption Miscellaneous Securities without identifying the specific security or issuer. Generally, a holding would not be individually identified if it is determined that its disclosure could be harmful to the fund or its shareholders. A holding will not be excluded for these purposes from a funds SEC filings for more than one year. The money market funds also file detailed month-end portfolio holdings information on Form N-MFP with the SEC each month. Form N-MFP, as well as the shareholder reports and Form N-Q, are publicly available immediately upon filing with the SEC.
In addition, most T. Rowe Price Funds disclose their calendar quarter-end full portfolio holdings on troweprice.com 15 calendar days after each quarter. At the discretion of the investment adviser, these holdings reports may exclude the issuer name and other information relating to a holding in order to protect the funds interests and prevent harm to the fund or its shareholders. Private placements and other restricted securities may not be individually identified in the calendar quarter-end holdings on troweprice.com, but would be disclosed in any SEC filings. Money market funds also disclose on troweprice.com their month-end full portfolio holdings five business days after each month-end and historical information about the funds investments for the previous six months, as of the last business day of the preceding month. This information includes, among other things, the percentage of the funds investments in daily and weekly liquid assets, the funds weighted average maturity and weighted average life, the funds market-based net asset value, and the funds net inflows and outflows. The calendar quarter-end portfolio holdings will remain on the website for one year and the month-end money market fund portfolio holdings will remain on the website for six months. In addition, most T. Rowe Price Funds disclose their 10 largest holdings on troweprice.com on the seventh business day after each month-end. These holdings are listed in alphabetical order along with the aggregate percentage of the funds total assets that these 10 holdings represent. Each monthly top 10 list will remain on the website for six months. A description of T. Rowe Prices policies and procedures with respect to the disclosure of portfolio information is available in the Statement of Additional Information.
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The following policies and procedures apply to the Institutional Funds within the T. Rowe Price Funds.
This section of the prospectus describes the policies and procedures that generally apply to investments in the T. Rowe Price Institutional Funds (except for the T. Rowe Price Institutional Cash Reserves Fund). The T. Rowe Price Institutional Funds may be purchased directly from T. Rowe Price or through a financial intermediary, such as a bank, broker, retirement plan recordkeeper, or financial advisor.
Most of the T. Rowe Price Institutional Funds are available only in a single share class (referred to as the Institutional Class). However, the Institutional Floating Rate Fund is also offered in an F Class. Each class of a funds shares represents an interest in the same fund with the same investment program and investment policies. While the Institutional Class may be held directly with T. Rowe Price or through a financial intermediary, the F Class is designed to be purchased only through financial advisors and certain financial intermediaries and has a different cost structure due to a shareholder servicing arrangement that applies only to that class.
This section generally describes investing only in the T. Rowe Price Institutional Funds, other than the T. Rowe Price Institutional Cash Reserves Fund, which has unique policies relating to its operation as an institutional money market fund. This section does not describe the policies that apply to other T. Rowe Price Funds. Policies for other T. Rowe Price Funds are described in their respective prospectuses, and all types of funds and available share classes for the T. Rowe Price Funds are described more fully in the funds Statement of Additional Information.
Institutional Class
The Institutional Class may be purchased directly through T. Rowe Price or through a financial intermediary. The Institutional Class does not make any payments to financial intermediaries for distribution of the funds shares (commonly referred to as 12b-1 fee payments) and does not make any payments to financial intermediaries for administrative services they provide (commonly referred to as administrative fee payments). However, you may incur brokerage commissions and other charges when buying or selling I Class shares.
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The Institutional Class is designed to be sold only to institutional investors, which include, but are not limited to: corporations, endowments and foundations, charitable trusts, investment companies and other pooled vehicles, defined benefit and defined contribution retirement plans, broker-dealers, registered investment advisers, banks and bank trust programs, and Section 529 college savings plans. The Institutional Class generally requires a $1 million initial investment minimum, although the minimum may be waived for retirement plans, financial intermediaries maintaining omnibus accounts, and certain other accounts.
F Class
The F Class must be purchased through a financial intermediary. The F Class does not make any 12b-1 fee payments to financial intermediaries but may make administrative fee payments at an annual rate of up to 0.15% of the class average daily net assets.
The F Class is designed to be sold only through financial advisors and certain financial intermediaries, including brokers, banks, insurance companies, retirement plan recordkeepers, and other financial intermediaries. F Class shares are generally not available to financial intermediaries that would make the fund available to their customers through a mutual fund supermarket platform. There is a $2,500 minimum initial investment requirement, but the minimum is waived for certain types of accounts.
Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by the funds transfer agent. The F Class may make administrative fee payments to retirement plan recordkeepers, broker-dealers, and other financial intermediaries (at an annual rate of up to 0.15% of the class average daily net assets) for transfer agency, recordkeeping, and other administrative services they provide on behalf of the funds. These administrative services may include maintaining account records for each customer; transmitting purchase and redemption orders; delivering shareholder confirmations, statements, and tax forms; and providing support to respond to customers questions regarding their accounts. These separate administrative fee payments are reflected in the Other expenses line that appears in the fee table in Section 1 with respect to the funds F Class.
Some broker-dealers or other financial intermediaries that are eligible to purchase F Class shares of T. Rowe Price Institutional Funds may also be eligible to purchase the Institutional Class. The Institutional Class shares require a much higher initial investment but have lower expenses than F Class shares because the Institutional Class does not participate in the administrative fee payment program. The payment
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of the administrative fee by the F Class creates a potential conflict of interest by influencing the broker-dealer or other financial intermediary to purchase F Class shares instead of Institutional Class shares. If this happens, you will incur higher expenses than if your financial intermediary had purchased Institutional Class shares on your behalf (assuming your financial intermediary would qualify to purchase Institutional Class shares). You should ask your salesperson for more information regarding the eligibility of your financial intermediary to purchase Institutional Class shares.
If you are opening an account through an employer-sponsored retirement plan or other financial intermediary, you should contact the retirement plan or financial intermediary for information regarding its policies on opening an account, including the policies relating to purchasing, exchanging, and redeeming shares, and the applicable initial and subsequent investment minimums.
Tax Identification Number
Institutional investors must provide T. Rowe Price with a valid taxpayer identification number (and valid Social Security numbers for individuals opening the account on behalf of the institution) on a signed new account form or Form W-9. Otherwise, federal law requires the funds to withhold a percentage of dividends, capital gain distributions, and redemptions and may subject the investor to an Internal Revenue Service fine. If this information is not received within 60 days after the account is established, the account may be redeemed at the funds then-current net asset value. Financial intermediaries opening an account in a fund must also enter into a separate agreement with the fund or its agent.
Important Information Required to Open a New Account
Pursuant to federal law, all financial institutions must obtain, verify, and record information that identifies each person or entity that opens an account. This information is needed not only for the account owner and any other person who opens the account, but also for any person who has authority to act on behalf of the account. When you open an account for an entity, you will be required to provide the entitys name, U.S. street address (post office boxes are not acceptable), and taxpayer identification number, as well as your name, U.S. street address (post office boxes are not acceptable), date of birth, and Social Security number as the person opening the account on behalf of the entity. Corporate and other institutional accounts require documents showing the existence of the entity (such as articles of incorporation or partnership agreements) to open an account. Certain other fiduciary accounts (such as trusts or power of attorney arrangements) require documentation, which may include an original or certified copy of the trust agreement or power of attorney, to open an account.
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T. Rowe Price will use this information to verify the identity of the entity and person opening the account. An account cannot be opened until all of this information is received. If the identity of the entity or person opening the account on behalf of the entity cannot be verified, T. Rowe Price is authorized to take any action permitted by law. (See Rights Reserved by the Funds later in this section.)
Call Financial Institution Services at 1-800-638-8790 for more information on these requirements.
The Institutional Funds are generally available only to institutional investors with a U.S. address. T. Rowe Price will generally not authorize the transfer of ownership of an account in an Institutional Fund for an institutional investor to an account for a noninstitutional investor. Shares held directly with T. Rowe Price by noninstitutional investors are subject to involuntary redemption at any time, which could result in a taxable gain to the investor.
Opening an Account
Call Financial Institution Services at 1-800-638-8790 for an account number and wire transfer instructions. All initial purchases are typically made by bank wire, but checks or other forms of payment may be accepted in certain cases. In order to obtain an account number, you must supply the name, taxpayer identification number, and business street address for the account. Complete a new account form and mail it, along with proper documentation identifying your firm and any other necessary documentation, to one of the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: Although the purchase will be made, services may not be established and an Internal Revenue Service penalty withholding may occur until we receive a signed new account form.
How and When Shares Are Priced
The trade date for your transaction request depends on the day and time that T. Rowe Price receives your request and will normally be executed using the next share price calculated after your order is received in correct form by T. Rowe Price or its agent (or by your financial intermediary if it has the authority to accept transaction orders on behalf of the fund). The share price, also called the net asset value, for each share class of a fund is calculated at the close of trading on the New York Stock Exchange (NYSE), which is normally 4 p.m. ET, each day that the NYSE is open for
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business. Net asset values are not calculated for the funds on days when the NYSE is scheduled to be closed for trading (for example, weekends and certain U.S. national holidays). If the NYSE is unexpectedly closed due to weather or other extenuating circumstances on a day it would typically be open for business, or if the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share price as of the normally scheduled close of regular trading on the NYSE for that day.
To calculate the net asset value, a funds assets are valued and totaled, liabilities are subtracted, and each class proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Market values are used to price portfolio holdings for which market quotations are readily available. Market values generally reflect the prices at which securities actually trade or represent prices that have been adjusted based on evaluations and information provided by the funds pricing services. Investments in other mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. If a market value for a portfolio holding is not available or normal valuation procedures are deemed to be inappropriate, the fund will make a good faith effort to assign a fair value to the holding by taking into account various factors and methodologies that have been approved by the funds Board. This value may differ from the value the fund receives upon sale of the securities. Amortized cost is used to price securities held by money market funds and certain short-term debt securities held by a fund.
The funds use various pricing services to provide closing market prices, as well as information used to adjust those prices and to value most fixed income securities. A fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next days opening prices in the same markets, and adjusted prices.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices at 4 p.m. ET, except under the following circumstances. Most foreign markets close before 4 p.m. ET. For example, the most recent closing prices for securities traded in certain Asian markets may be as much as 15 hours old at 4 p.m. ET. If a fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of the funds securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. In deciding whether to make these adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities.
A fund may also fair value certain securities or a group of securities in other situationsfor example, when a particular foreign market is closed but the fund is open. For a fund that has investments in securities that are primarily listed on foreign
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exchanges which trade on weekends or other days when the fund does not price its shares, the funds net asset value may change on days when shareholders will not be able to purchase or redeem the funds shares. If an event occurs that affects the value of a security after the close of the market, such as a default of a commercial paper issuer or a significant move in short-term interest rates, a fund may make a price adjustment depending on the nature and significance of the event. The funds also evaluate a variety of factors when assigning fair values to private placements and other restricted securities. Other mutual funds may adjust the prices of their securities by different amounts or assign different fair values than the fair value that the fund assigns to the same security.
How the Trade Date Is Determined
If you invest directly with T. Rowe Price and your request to purchase, sell, or exchange shares is received by T. Rowe Price or its agent in correct form by the close of the NYSE (normally 4 p.m. ET), your transaction will be priced at that business days net asset value. If your request is received by T. Rowe Price or its agent in correct form after the close of the NYSE, your transaction will be priced at the next business days net asset value unless the fund has an agreement with your financial intermediary for orders to be priced at the net asset value next computed after receipt by the financial intermediary.
The funds have authorized certain financial intermediaries or their designees to accept orders to buy or sell fund shares on their behalf. When authorized financial intermediaries receive an order in correct form, the order is considered as being placed with the fund and shares will be bought or sold at the net asset value next calculated after the order is received by the authorized financial intermediary. The financial intermediary must transmit the order to T. Rowe Price and pay for such shares in accordance with the agreement with T. Rowe Price, or the order may be canceled and the financial intermediary could be held liable for the losses. If the fund does not have such an agreement in place with your financial intermediary, T. Rowe Price or its agent must receive the request in correct form from your financial intermediary by the close of the NYSE in order for your transaction to be priced at that business days net asset value. Contact your financial intermediary for trade deadlines and the applicable policies for purchasing, selling, or exchanging your shares, as well as initial and subsequent investment minimums. The financial intermediary may charge a fee for its services.
Note: There may be times when you are unable to contact us or access your account due to extreme market activity or other circumstances. Should this occur, your order must still be placed and received in correct form by T. Rowe Price (or by the financial intermediary in accordance with its agreement with T. Rowe Price) prior to the time the NYSE closes to be priced at that business days net asset value. The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the NYSE closes at a time other than 4 p.m. ET. The funds reserve the right to not treat an unscheduled intraday disruption or
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closure in NYSE trading as a closure of the NYSE and still accept transactions and calculate their net asset value as of 4 p.m. ET.
Transaction Confirmations
T. Rowe Price sends immediate confirmations for most of your fund transactions. However, certain transactions, such as dividend reinvestments, do not receive an immediate transaction confirmation but are reported on your account statement. Please review transaction confirmations and account statements as soon as you receive them and promptly report any discrepancies to Financial Institution Services.
Purchasing Shares
Purchases may be initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. All initial and subsequent investments are typically made by bank wire, although checks or other forms of payment may be accepted in certain cases. There is no assurance that the share price for a purchase will be the same day a wire was initiated.
The funds generally do not accept orders that request a particular day or price for a transaction or any other special conditions. However, when authorized by the fund, certain institutions, financial intermediaries, or retirement plans purchasing fund shares directly with T. Rowe Price may place a purchase order unaccompanied by payment. Payment for these shares must be received by the time designated by the fund (not to exceed the period established for settlement under applicable regulations). If payment is not received by this time, the order may be canceled. The institution, financial intermediary, or retirement plan is responsible for any costs or losses incurred by the fund or T. Rowe Price if payment is delayed or not received.
U.S. Dollars All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks and should be payable to the T. Rowe Price Funds.
Nonpayment Purchases of a fund may be canceled if payment is not received in a timely manner, and the shareholder may be responsible for any losses or expenses incurred by the fund or its transfer agent. The funds and their agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment.
Investment Minimums
The Institutional Class generally requires a $1 million minimum initial investment and the F Class generally requires a $2,500 minimum initial investment, although the minimums may be waived for financial intermediaries, retirement plans, and certain other institutional investors. In addition, we request that you give us at least three business days notice (seven business days notice for the Institutional Floating Rate Fund) for any purchase of $5 million or more. There is generally no minimum required for additional purchases.
You should check with your financial advisor, retirement plan, or financial intermediary to determine what minimum applies to your initial and additional investments.
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Exchanging and Redeeming Shares
Certain T. Rowe Price Funds assess a fee on redemptions of shares (including exchanges out of a fund) that are not held for a specified period of time. Please refer to Contingent Redemption Fee later in this section.
Exchanges You can move money from one account to an existing, identically registered account or open a new identically registered account. An exchange from one fund to another will be reported to the Internal Revenue Service as a sale for tax purposes.
Redemptions Redemptions are typically initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. Please note that certain redemption requests initiated through the National Securities Clearing Corporation may be rejected, and in such instances, the transaction must be placed by contacting a Financial Institution Services representative.
If for some reason we cannot accept your request to exchange or redeem shares, we will attempt to contact you.
If you request to redeem a specific dollar amount and the market value of your account is less than the amount of your request and we are unable to contact you, your redemption will not be processed and you will need to submit a new redemption request in correct form.
Receiving Redemption Proceeds Unless otherwise indicated, redemption proceeds will be sent via bank wire to the designated bank on file for the account. If a request is received in correct form by T. Rowe Price or its agent on a business day prior to the close of the NYSE, proceeds are usually sent on the next business day. Proceeds sent by bank wire are usually credited to an account the next business day after the sale. Redemption proceeds can be mailed to the account address by check if specifically requested. Normally, the fund transmits proceeds to financial intermediaries for redemption orders received in correct form on either the next business day or third business day after receipt of the order, depending on the arrangement with the financial intermediary. You must contact your financial intermediary about procedures for receiving your redemption proceeds.
Large Redemptions Large redemptions (for example, $250,000 or more) can adversely affect a portfolio managers ability to implement a funds investment strategy by causing the premature sale of securities that would otherwise be held longer. Therefore, the fund reserves the right (without prior notice) to pay all or part of redemption proceeds with securities from the funds portfolio rather than in cash (redemption in-kind). In general, any in-kind redemptions will represent a pro-rata distribution of a funds securities, subject to certain limited exceptions. If this occurs, the securities will be selected by the fund in its absolute discretion and the redeeming shareholder or account will be responsible for disposing of the securities and bearing any associated costs and risks (for example, market risks until the securities are
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disposed of). If you continue to hold the securities, you may be subject to any ownership restrictions imposed by the issuers. For example, real estate investment trusts often impose ownership restrictions on their equity securities.
Delays in Sending Redemption Proceeds
The T. Rowe Price Funds typically expect that it will take one to three days following the receipt of a redemption request that is in correct form to send redemption proceeds, regardless of the method the fund uses to make such payment (e.g., check, wire, or Automated Clearing House transfer). However, under certain circumstances and when deemed to be in a funds best interests, your proceeds may not be sent for up to seven calendar days after we receive your redemption request in correct form.
In addition, if shares are sold that were just purchased and paid for by check or Automated Clearing House transfer, the fund will process your redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or Automated Clearing House transfer to clear. If, during the clearing period, we receive a check drawn against your newly purchased shares, it will be returned and marked uncollected. (The 10-day hold does not apply to purchases paid for by bank wire or automatic purchases through payroll deduction.)
The Board of a retail or institutional money market fund may impose a redemption gate and elect to temporarily suspend redemptions for up to 10 business days in a 90-day period if the funds weekly liquid assets fall below 30% of its total assets and the funds Board determines that imposing a redemption gate is in the funds best interests. In addition, under certain limited circumstances, the Board of a retail or institutional money market fund may elect to permanently suspend redemptions in order to facilitate an orderly liquidation of the fund (subject to any additional liquidation requirements).
Contingent Redemption Fee
Short-term trading can disrupt a funds investment program and create additional costs for long-term shareholders. For these reasons, all share classes of the T. Rowe Price Institutional Funds, listed in the following table, assess a fee on redemptions (including exchanges out of a fund), which reduces the proceeds from such redemptions by the amounts indicated:
T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Africa & Middle East | 2% | 90 days or less |
Institutional Credit Opportunities | 2% | 90 days or less |
Institutional Emerging Markets Bond | 2% | 90 days or less |
Institutional Emerging Markets Equity | 2% | 90 days or less |
Institutional Floating Rate | 2% | 90 days or less |
Institutional Frontier Markets Equity | 2% | 90 days or less |
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T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Global Focused Growth Equity | 2% | 90 days or less |
Institutional Global Growth Equity | 2% | 90 days or less |
Institutional Global Value Equity | 2% | 90 days or less |
Institutional High Yield | 2% | 90 days or less |
Institutional International Bond | 2% | 90 days or less |
Institutional International Concentrated Equity | 2% | 90 days or less |
Institutional International Core Equity | 2% | 90 days or less |
Institutional International Growth Equity | 2% | 90 days or less |
Redemption fees are paid to a fund (and not to T. Rowe Price) to deter short-term trading, offset costs, and help protect the funds long-term shareholders. Subject to the exceptions described on the following pages, all persons holding shares of a T. Rowe Price Fund that imposes a redemption fee are subject to the fee, whether the person is holding shares directly with a T. Rowe Price Fund, through a retirement plan for which T. Rowe Price serves as recordkeeper; or indirectly through a financial intermediary (such as a broker, bank, or investment adviser), recordkeeper for retirement plan participants, or other third party.
Computation of Holding Period When an investor sells shares of a fund that assesses a redemption fee, T. Rowe Price will use the first-in, first-out method to determine the holding period for the shares sold. Under this method, the date of redemption or exchange will be compared with the earliest purchase date of shares held in the account. A redemption fee will be charged on shares sold on or before the end of the required holding period. The day after the date of your purchase is considered Day 1 for purposes of computing the holding period. For example, if you redeem your shares on or before the 90th day from the date of purchase, you will be assessed the redemption fee. If you purchase shares through a financial intermediary, consult your financial intermediary to determine how the holding period will be applied.
Transactions Not Subject to Redemption Fees The T. Rowe Price Funds will not assess a redemption fee with respect to certain transactions. As of the date of this prospectus, the following transactions in T. Rowe Price Funds will not be subject to redemption fees:
· Shares redeemed through an automated, systematic withdrawal plan;
· Shares redeemed through or used to establish certain rebalancing, asset allocation, wrap, and advisory programs, as well as non-T. Rowe Price fund-of-funds products, if approved in writing by T. Rowe Price;
· Shares purchased through the reinvestment of dividends or capital gain distributions;*
· Shares converted from one share class to another share class of the same fund;*
Information About Accounts in T. Rowe Price Funds | 35 |
· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees (e.g., for failure to meet account minimums);
· Shares purchased by rollover or changes of account registration within the same fund;*
· Shares redeemed to return an excess contribution from a retirement account;
· Shares of T. Rowe Price Funds purchased by another T. Rowe Price Fund and shares purchased by discretionary accounts managed by T. Rowe Price or one of its affiliates (please note that other shareholders of the investing T. Rowe Price Fund are still subject to the policy);
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares that are redeemed in-kind;
· Shares transferred to T. Rowe Price or a financial intermediary acting as a service provider when the age of the shares cannot be determined systematically;* and
· Shares redeemed in retirement plans or other products that restrict trading to no more frequently than once per quarter or other approved time period, if approved in writing by T. Rowe Price.
* Subsequent exchanges of these shares into funds that assess redemption fees will subject such shares to the fee.
Redemption Fees on Shares Held in Retirement Plans If shares are held in a retirement plan, redemption fees generally will be assessed on shares redeemed by exchange only if they were originally purchased by a participant-directed exchange. However, redemption fees may apply to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price or how the fees are applied by your plans recordkeeper. To determine which of your transactions are subject to redemption fees, you should contact T. Rowe Price or your plan recordkeeper.
Omnibus Accounts If your shares are held through a financial intermediary in an omnibus account, T. Rowe Price relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. T. Rowe Price seeks to enter into agreements with financial intermediaries establishing omnibus accounts that require the intermediary to assess the redemption fees. There are no assurances that T. Rowe Price will be successful in identifying all financial intermediaries or that the intermediaries will properly assess the fees.
Certain financial intermediaries may not apply the exemptions previously listed to the redemption fee policy; all redemptions by persons trading through such intermediaries may be subject to the fee. Certain financial intermediaries may exempt transactions not listed from redemption fees, if approved by T. Rowe Price. Persons redeeming shares through a financial intermediary should check with their respective intermediary to determine which transactions are subject to the fees.
T. Rowe Price | 36 |
You may initiate transactions involving the Institutional Funds by telephone, by mail, or through the National Securities Clearing Corporation. The T. Rowe Price Funds and their agents use reasonable procedures to verify the identity of the person contacting T. Rowe Price and to ensure that the person is authorized to act on behalf of the account. If these procedures are followed, the funds and their agents are not liable for any losses that may occur from acting on unauthorized instructions. Please review the transaction confirmation carefully, and contact Financial Institution Services immediately about any transaction you believe to be unauthorized. Telephone conversations are recorded.
To place a transaction or make any inquiries regarding the T. Rowe Price Institutional Funds, please call Financial Institution Services at 1-800-638-8790. To mail any information to T. Rowe Price regarding the T. Rowe Price Institutional Funds, please use the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: If sending a check for a purchase, your transaction will receive the share price for the business day that the check is received by T. Rowe Price or its agent prior to the close of the NYSE (normally 4 p.m. ET), which could differ from the day that the check is received at the post office box.
If you hold shares of a T. Rowe Price Institutional Fund through a retirement plan or financial intermediary, you must contact your retirement plan or financial intermediary with any inquiries.
Involuntary Redemptions and Share Class Conversions
Shares held by any investors that no longer meet the definition of an institutional investor or fail to meet or maintain their account(s) at the investment minimum are subject to involuntary redemption at any time.
For all accounts in Institutional Funds (except for F Class accounts), to help keep operating expenses lower, we ask that you maintain an account balance of at least $1 million. If your investment falls below $1 million (even if due to market depreciation), we have the right to redeem your account at the then-current net asset value after giving you 60 days to increase your balance.
The redemption of your account could result in a taxable gain or loss.
For any F Class accounts that are no longer held through an eligible financial intermediary, we have the right to convert your account to the Institutional Class following notice to the financial intermediary or shareholder.
Information About Accounts in T. Rowe Price Funds | 37 |
Excessive and Short-Term Trading Policy
Excessive transactions and short-term trading can be harmful to fund shareholders in various ways, such as disrupting a funds portfolio management strategies, increasing a funds trading and other costs, and negatively affecting its performance. Short-term traders in funds that invest in foreign securities may seek to take advantage of developments overseas that could lead to an anticipated difference between the price of the funds shares and price movements in foreign markets. While there is no assurance that T. Rowe Price can prevent all excessive and short-term trading, the Boards of the T. Rowe Price Funds have adopted the following trading limits that are designed to deter such activity and protect the funds shareholders. The funds may revise their trading limits and procedures at any time as the Boards deem necessary or appropriate to better detect short-term trading that may adversely affect the funds, to comply with applicable regulatory requirements, or to impose additional or alternative restrictions.
Subject to certain exceptions, each T. Rowe Price Fund restricts a shareholders purchases (including through exchanges) into a fund account for a period of 30 calendar days after the shareholder has redeemed or exchanged out of that same fund account (the 30-Day Purchase Block). The calendar day after the date of redemption is considered Day 1 for purposes of computing the period before another purchase may be made.
General Exceptions As of the date of this prospectus, the following types of transactions generally are not subject to the funds excessive and short-term trading policy:
· Shares purchased or redeemed in money market funds and ultra short-term bond funds;
· Shares purchased or redeemed through a systematic purchase or withdrawal plan;
· Checkwriting redemptions from bond and money market funds;
· Shares purchased through the reinvestment of dividends or capital gain distributions;
· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees;
· Transfers and changes of account registration within the same fund;
· Shares purchased by asset transfer or direct rollover;
· Shares purchased or redeemed through IRA conversions and recharacterizations;
· Shares redeemed to return an excess contribution from a retirement account;
· Transactions in Section 529 college savings plans;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares converted from one share class to another share class in the same fund;
· Shares of T. Rowe Price Funds that are purchased by another T. Rowe Price Fund, including shares purchased by T. Rowe Price fund-of-funds products, and shares purchased by discretionary accounts managed by T. Rowe Price or one of its
T. Rowe Price | 38 |
affiliates (please note that shareholders of the investing T. Rowe Price Fund are still subject to the policy); and
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price.
Transactions in certain rebalancing, asset allocation, wrap programs, and other advisory programs, as well as non-T. Rowe Price fund-of-funds products, may also be exempt from the 30-Day Purchase Block, subject to prior written approval by T. Rowe Price.
In addition to restricting transactions in accordance with the 30-Day Purchase Block, T. Rowe Price may, in its discretion, reject (or instruct a financial intermediary to reject) any purchase or exchange into a fund from a person (which includes individuals and entities) whose trading activity could disrupt the management of the fund or dilute the value of the funds shares, including trading by persons acting collectively (e.g., following the advice of a newsletter). Such persons may be barred, without prior notice, from further purchases of T. Rowe Price Funds for a period longer than 30 calendar days, or permanently.
Financial Intermediary Accounts If you invest in T. Rowe Price Funds through a financial intermediary, you should review the financial intermediarys materials carefully or consult with the financial intermediary directly to determine the trading policy that will apply to your trades in the funds as well as any other rules or conditions on transactions that may apply. If T. Rowe Price is unable to identify a transaction placed through a financial intermediary as exempt from the excessive trading policy, the 30-Day Purchase Block may apply.
Financial intermediaries may maintain their underlying accounts directly with the fund, although they often establish an omnibus account (one account with the fund that represents multiple underlying shareholder accounts) on behalf of their customers. When financial intermediaries establish omnibus accounts in the T. Rowe Price Funds, T. Rowe Price is not able to monitor the trading activity of the underlying shareholders. However, T. Rowe Price monitors aggregate trading activity at the financial intermediary (omnibus account) level in an attempt to identify activity that indicates potential excessive or short-term trading. If it detects such trading activity, T. Rowe Price may contact the financial intermediary to request personal identifying information and transaction histories for some or all underlying shareholders (including plan participants, if applicable) pursuant to a written agreement that T. Rowe Price has entered into with each financial intermediary. Any nonpublic personal information provided to the fund (for example, a shareholders taxpayer identification number or transaction records) is subject to the funds privacy policy. If T. Rowe Price believes that excessive or short-term trading has occurred and there is no exception for such trades under the funds Excessive and Short-Term Trading Policy as previously described, it will instruct the financial intermediary to impose restrictions to discourage such practices and take appropriate action with respect to the underlying shareholder, including restricting purchases for 30 calendar
Information About Accounts in T. Rowe Price Funds | 39 |
days or longer. Each financial intermediary has agreed to execute such instructions pursuant to a written agreement. There is no assurance that T. Rowe Price will be able to properly enforce its excessive trading policies for omnibus accounts. Because T. Rowe Price generally relies on financial intermediaries to provide information and impose restrictions for omnibus accounts, its ability to monitor and deter excessive trading will be dependent upon the intermediaries timely performance of their responsibilities.
T. Rowe Price may allow a financial intermediary or other third party to maintain restrictions on trading in the T. Rowe Price Funds that differ from the 30-Day Purchase Block. An alternative excessive trading policy would be acceptable to T. Rowe Price if it believes that the policy would provide sufficient protection to the T. Rowe Price Funds and their shareholders that is consistent with the excessive trading policy adopted by the funds Boards.
Retirement Plan Accounts If
shares are held in a retirement plan, generally the
30-Day Purchase Block applies only to shares
redeemed by a participant-directed exchange to another fund. However, the 30-Day Purchase Block may apply
to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price
or the excessive trading policy applied by your plans recordkeeper. An alternative excessive trading
policy may apply to the T. Rowe Price Funds where a retirement plan has its own policy deemed acceptable
to T. Rowe Price. You should contact T. Rowe Price or your plan recordkeeper to determine which
of your transactions are subject to the funds 30-Day Purchase Block or an alternative policy.
There is no guarantee that T. Rowe Price will be able to identify or prevent all excessive or short-term trades or trading practices.
Unclaimed Accounts and Uncashed Checks
If your account has no activity for a certain period of time and/or mail sent to you from T. Rowe Price (or your financial intermediary) is returned by the post office, T. Rowe Price (or your financial intermediary) may be required to transfer your account and any assets related to uncashed checks to the appropriate state under its abandoned property laws. To avoid such action, it is important to keep your account address up to date and periodically contact T. Rowe Price at least once every two years.
Delivery of Shareholder Documents
If two or more accounts own the same fund, share the same address, and T. Rowe Price reasonably believes that the two accounts are part of the same institution, we may economize on fund expenses by mailing only one shareholder report and prospectus for the fund. If you do not want your mailings to be householded, please call Financial Institution Services.
T. Rowe Price | 40 |
Signature Guarantees
A Medallion signature guarantee is designed to protect you and the T. Rowe Price Funds from fraud by verifying your signature.
A signature guarantee may be required in certain situations, such as:
· Remitting redemption proceeds to any person, address, or bank account not on file or
· Changing the account registration or broker-dealer of record for an account.
Consult Financial Institution Services for specific requirements.
The signature guarantee must be obtained from a financial institution that is a participant in a Medallion signature guarantee program. You can obtain a Medallion signature guarantee from certain banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. When obtaining a Medallion signature guarantee, please discuss with the guarantor the dollar amount of your proposed transaction. It is important that the level of coverage provided by the guarantors stamp covers the dollar amount of the transaction or it may be rejected. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud.
Fund Operations and Shareholder Services
T. Rowe Price and The Bank of New York Mellon, subject to the oversight of T. Rowe Price, each provide certain accounting services to the T. Rowe Price Funds. T. Rowe Price Services, Inc., acts as the transfer agent and dividend disbursing agent and provides shareholder and administrative services to the funds. T. Rowe Price Retirement Plan Services, Inc., provides recordkeeping, sub-transfer agency, and administrative services for certain types of retirement plans investing in the funds. These companies receive compensation from the funds for their services. The F Class may also pay financial intermediaries for performing shareholder and administrative services for underlying shareholders in omnibus accounts. All of the fees discussed above are included in a funds financial statements and, except for funds that have an all-inclusive management fee, are also reflected in the Other expenses line that appears in a funds fee table in Section 1.
Each fund intends to qualify to be treated each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. In order to qualify, a fund must satisfy certain income, diversification, and distribution requirements. A regulated investment company is not subject to U.S. federal income tax at the portfolio level on income and gains from investments that are distributed to shareholders. However, if a fund were to fail to qualify as a regulated investment
Information About Accounts in T. Rowe Price Funds | 41 |
company and was ineligible to or otherwise did not cure such failure, the result would be fund-level taxation and, consequently, a reduction in income available for distribution to the funds shareholders.
To the extent possible, all net investment income and realized capital gains are distributed to shareholders.
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund shares in your account unless you select another option on your new account form. Reinvesting distributions results in compounding, which allows you to receive dividends and capital gain distributions on an increasing number of shares.
Distributions not reinvested are paid by check or transmitted electronically to your bank account. If the U.S. Postal Service cannot deliver your check or if your check remains uncashed for six months, the fund reserves the right to reinvest your distribution check in your account at the net asset value on the day of the reinvestment and to reinvest all subsequent distributions in additional shares of the fund. Interest will not accrue on amounts represented by uncashed distributions or redemption checks.
The following table provides details on dividend payments:
Dividend Payment Schedule | |
Fund | Dividends |
Bond funds | · Shares normally begin to earn dividends on the business day after payment is received by T. Rowe Price. · Declared daily and paid on the first business day of each month. |
Stock funds | · Must be a shareholder on the dividend record date. · Declared and paid annually, if any, generally in December. |
Shares of bond funds will earn dividends through the date of redemption. Shares redeemed on a Friday or prior to a holiday will continue to earn dividends until the next business day. Generally, if you redeem all of your bond fund shares at any time during the month, you will also receive all dividends earned through the date of redemption in the same check. When you redeem only a portion of your bond fund shares, all dividends accrued on those shares will be reinvested, or paid in cash, on the next dividend payment date. The funds do not pay dividends in fractional cents. Any dividend amount earned for a particular day on all shares held that is one-half of one cent or greater (for example, $0.016) will be rounded up to the next whole cent ($0.02), and any amount that is less than one-half of one cent (for example, $0.014) will be rounded down to the nearest whole cent ($0.01). Please note that if the dividend payable on all shares held is less than one-half of one cent for a particular day, no dividend will be earned for that day.
T. Rowe Price | 42 |
If you purchase and redeem your shares through a financial intermediary, consult your financial intermediary to determine when your shares begin and stop accruing dividends as the information previously described may vary.
Capital Gain Payments
A capital gain or loss is the difference between the purchase and sale price of a security. If a fund has net capital gains for the year (after subtracting any capital losses), they are usually declared and paid in December to shareholders of record on a specified date that month. If a second distribution is necessary, it is generally paid the following year. A fund may have to make additional capital gain distributions, if necessary, to comply with the applicable tax law.
Tax Information
In most cases, you will be provided information for your tax filing needs no later than mid-February.
If you invest in the fund through a tax-deferred account, such as an IRA or employer-sponsored retirement plan, you will not be subject to tax on dividends and distributions from the fund or the sale of fund shares if those amounts remain in the tax-deferred account. You may receive a Form 1099-R or other Internal Revenue Service forms, as applicable, if any portion of the account is distributed to you.
If you invest in the fund through a taxable account, you generally will be subject to tax when:
· You sell fund shares, including an exchange from one fund to another.
· The fund makes dividend or capital gain distributions.
For individual shareholders, a portion of ordinary dividends representing qualified dividend income received by the fund may be subject to tax at the lower rates applicable to long-term capital gains rather than ordinary income. You may report it as qualified dividend income in computing your taxes, provided you have held the fund shares on which the dividend was paid for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date. Ordinary dividends that do not qualify for this lower rate are generally taxable at the investors marginal income tax rate. This includes the portion of ordinary dividends derived from interest, short-term capital gains, distributions from nonqualified foreign corporations, and dividends received by the fund from stocks that were on loan. Little, if any, of the ordinary dividends paid by the bond funds is expected to qualify for this lower rate.
For corporate shareholders, a portion of ordinary dividends may be eligible for the 50% deduction for dividends received by corporations to the extent the funds income consists of dividends paid by U.S. corporations. Little, if any, of the ordinary dividends paid by the international stock or bond funds is expected to qualify for this deduction.
Information About Accounts in T. Rowe Price Funds | 43 |
A 3.8% net investment income tax is imposed on net investment income, including interest, dividends, and capital gains of U.S. individuals with income exceeding $200,000 (or $250,000 if married filing jointly) and of estates and trusts.
If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with any necessary tax forms. You should contact your financial intermediary for the tax information that will be sent to you and reported to the Internal Revenue Service.
Taxes on Fund Redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange from one fund to another in a taxable account is also a sale for tax purposes.
All or a portion of the loss realized from a sale or exchange of your fund shares may be disallowed under the wash sale rule if you purchase substantially identical shares within a 61-day period beginning 30 days before and ending 30 days after the date on which the shares are sold or exchanged. Shares of the same fund you acquire through dividend reinvestment are shares purchased for the purpose of the wash sale rule and may trigger a disallowance of the loss for shares sold or exchanged within the 61-day period of the dividend reinvestment. Any loss disallowed under the wash sale rule is added to the cost basis of the purchased shares.
T. Rowe Price (or your financial intermediary) will make available to you Form 1099-B, if applicable, no later than mid-February, providing certain information for each sale you made in the fund during the prior year. Unless otherwise indicated on your Form 1099-B, this information will also be reported to the Internal Revenue Service. For mutual fund shares acquired prior to 2012 in most accounts established or opened by exchange in 1984 or later, our Form 1099-B will provide you with the gain or loss on the shares you sold during the year based on the average cost single category method. This information on average cost and gain or loss from sale is not reported to the Internal Revenue Service. For these mutual fund shares acquired prior to 2012, you may calculate the cost basis using other methods acceptable to the Internal Revenue Service, such as specific identification.
For mutual fund shares acquired after 2011, federal income tax regulations require us to report the cost basis information on Form 1099-B using a cost basis method selected by the shareholder in compliance with such regulations or, in the absence of such selected method, our default method if you acquire your shares directly from T. Rowe Price. Our default method is average cost. For any fund shares acquired through a financial intermediary after 2011, you should check with your financial intermediary regarding the applicable cost basis method. You should, however, note that the cost basis information reported to you may not always be the same as what you should report on your tax return because the rules applicable to the determination of cost basis on Form 1099-B may be different from the rules applicable to the determination of cost basis for reporting on your tax return. Therefore, you should save your transaction records to make sure the information
T. Rowe Price | 44 |
reported on your tax return is accurate. T. Rowe Price and financial intermediaries are not required to issue a Form 1099-B to report sales of money market fund shares.
To help you maintain accurate records, T. Rowe Price will make available to you a confirmation promptly following each transaction you make (except for systematic purchases and systematic redemptions) and a year-end statement detailing all of your transactions in each fund account during the year. If you hold your fund through a financial intermediary, the financial intermediary is responsible for providing you with transaction confirmations and statements.
Taxes on Fund Distributions
T. Rowe Price (or your financial intermediary) will make available to you, as applicable, generally no later than mid-February, a Form 1099-DIV, or other Internal Revenue Service forms, as required, indicating the tax status of any income dividends, dividends exempt from federal income taxes, and capital gain distributions made to you. This information will be reported to the Internal Revenue Service. Taxable distributions are generally taxable to you in the year in which they are paid. A dividend declared in October, November, or December and paid in the following January is generally treated as taxable to you as if you received the distribution in December. Dividends from tax-free funds are generally expected to be tax-exempt for federal income tax purposes. Your bond fund dividends for each calendar year will include dividends accrued up to the first business day of the next calendar year. Ordinary dividends and capital gain dividends may also be subject to state and local taxes. You will be sent any additional information you need to determine your taxes on fund distributions, such as the portion of your dividends, if any, that may be exempt from state and local income taxes.
Taxable distributions are subject to tax whether reinvested in additional shares or received in cash.
The tax treatment of a capital gain distribution is determined by how long the fund held the portfolio securities, not how long you held the shares in the fund. Short-term (one year or less) capital gain distributions are taxable at the same rate as ordinary income, and gains on securities held more than one year are taxed at the lower rates applicable to long-term capital gains. If you realized a loss on the sale or exchange of fund shares that you held six months or less, your short-term capital loss must be reclassified as a long-term capital loss to the extent of any long-term capital gain distributions received during the period you held the shares. For funds investing in foreign instruments, distributions resulting from the sale of certain foreign currencies, currency contracts, and the foreign currency portion of gains on debt instruments are taxed as ordinary income. Net foreign currency losses may cause monthly or quarterly dividends to be reclassified as returns of capital.
A funds distributions that have exceeded the funds earnings and profits for the relevant tax year may be treated as a return of capital to its shareholders. A return of capital distribution is generally nontaxable but reduces the shareholders cost basis in
Information About Accounts in T. Rowe Price Funds | 45 |
the fund, and any return of capital in excess of the cost basis will result in a capital gain.
The tax status of certain distributions may be recharacterized on year-end tax forms, such as your Form 1099-DIV. Distributions made by a fund may later be recharacterized for federal income tax purposesfor example, from taxable ordinary income dividends to returns of capital. A recharacterization of distributions may occur for a number of reasons, including the recharacterization of income received from underlying investments, such as real estate investment trusts (REITs), and distributions that exceed taxable income due to losses from foreign currency transactions or other investment transactions. Certain funds, including international bond funds and funds that invest in REITs, are more likely to recharacterize a portion of their distributions as a result of their investments.
If the fund qualifies and elects to pass through nonrefundable foreign income taxes paid to foreign governments during the year, your portion of such taxes will be reported to you as taxable income. However, you may be able to claim an offsetting credit or deduction on your tax return for those amounts. There can be no assurance that a fund will meet the requirements to pass through foreign income taxes paid.
If you are subject to backup withholding, we will have to withhold a 24% backup withholding tax on distributions and, in some cases, redemption payments. You may be subject to backup withholding if we are notified by the Internal Revenue Service to withhold, you have failed one or more tax certification requirements, or our records indicate that your tax identification number is missing or incorrect. Backup withholding is not an additional tax and is generally available to credit against your federal income tax liability with any excess refunded to you by the Internal Revenue Service.
Tax Consequences of Hedging
Entering into certain transactions involving options, futures, swaps, and forward currency exchange contracts may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in a fund being required to distribute gains on such transactions even though it did not close the contracts during the year or receive cash to pay such distributions. The fund may not be able to reduce its distributions for losses on such transactions to the extent of unrealized gains in offsetting positions.
Tax Consequences of Shareholder Turnover
If the funds portfolio transactions result in a net capital loss (i.e., an excess of capital losses over capital gains) for any year, the loss may be carried forward and used to offset future realized capital gains. However, its ability to carry forward such losses will be limited if the fund experiences an ownership change within the meaning of the Internal Revenue Code. An ownership change generally results when shareholders owning 5% or more of the fund increase their aggregate holdings by more than 50 percentage points over a three-year period.
T. Rowe Price | 46 |
Because Institutional Funds may have only a few large shareholders, an ownership change can occur in the normal course of shareholder purchases and redemptions. The fund undertakes no obligation to avoid or prevent an ownership change. Moreover, because of circumstances beyond the funds control, there can be no assurance that the fund will not experience, or has not already experienced, an ownership change. An ownership change can reduce the funds ability to offset capital gains with losses, which could increase the amount of taxable gains that could be distributed to shareholders.
Tax Effect of Buying Shares Before an Income Dividend or Capital Gain Distribution
If you buy shares shortly before or on the record datethe date that establishes you as the person to receive the upcoming distributionyou may receive a portion of the money you just invested in the form of a taxable distribution. Therefore, you may wish to find out a funds record date before investing. In addition, a funds share price may, at any time, reflect undistributed capital gains or income and unrealized appreciation, which may result in future taxable distributions. Such distributions can occur even in a year when the fund has a negative return.
T. Rowe Price Funds and their agents, in their sole discretion, reserve the following rights: (1) to waive or lower investment minimums; (2) to accept initial purchases by telephone; (3) to refuse any purchase or exchange order; (4) to cancel or rescind any purchase or exchange order placed through a financial intermediary no later than the business day after the order is received by the financial intermediary (including, but not limited to, orders deemed to result in excessive trading, market timing, or 5% ownership); (5) to cease offering fund shares at any time to all or certain groups of investors; (6) to freeze any account and suspend account services when notice has been received of a dispute regarding the ownership of the account, or a legal claim against an account, upon initial notification to T. Rowe Price of a shareholders death until T. Rowe Price receives required documentation in correct form, or if there is reason to believe a fraudulent transaction may occur; (7) to otherwise modify the conditions of purchase and modify or terminate any services at any time; (8) to waive any wire, small account, maintenance, or fiduciary fees charged to a group of shareholders; (9) to act on instructions reasonably believed to be genuine; (10) to involuntarily redeem an account at the net asset value calculated the day the account is redeemed, in cases of threatening conduct, suspected fraudulent or illegal activity, or if the fund or its agent is unable, through its procedures, to verify the identity of the person(s) or entity opening an account; and (11) for money market funds, to suspend redemptions to facilitate an orderly liquidation.
The funds Statement of Additional Information, which contains a more detailed description of the funds operations, investment restrictions, policies and practices, has been filed with the SEC. The Statement of Additional Information is incorporated by reference into this prospectus, which means that it is legally part of this prospectus even if you do not request a copy. Further information about the funds investments, including a review of market conditions and the managers recent investment strategies and their impact on performance during the past fiscal year, is available in the annual and semiannual shareholder reports. These documents and updated performance information are available through troweprice.com. For inquiries about the fund and to obtain free copies of any of these documents, call 1-800-638-8790. If you invest in the fund through a financial intermediary, you should contact your financial intermediary for copies of these documents.
Fund information and Statements of Additional Information are also available from the Public Reference Room of the SEC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Fund reports and other fund information are available on the EDGAR Database on the SECs Internet site at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov, or by writing the Public Reference Room, U.S. Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549-1520.
T. Rowe Price Associates, Inc. |
1940 Act File No. 811-5833 | E160-040 3/1/18 |
PROSPECTUS | |
RPIGX | |
March 1, 2018 | |
T. Rowe Price Institutional Global Growth Equity Fund | |
A fund seeking long-term growth of capital primarily through investments in common stocks of large-cap companies throughout the world, including the U.S. | |
The Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. | |
Table of Contents
SUMMARY
The fund seeks long-term growth of capital through investments primarily in the common stocks of large-cap companies throughout the world, including the U.S.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold shares of the fund. You may also incur brokerage commissions and other charges when buying or selling shares of the fund, which are not reflected in the table.
Fees and Expenses of the Fund
Shareholder fees (fees paid directly from your investment) | ||
Redemption fee (as a percentage of amount redeemed on shares held for 90 days or less) | 2.00 | % |
Annual
fund operating expenses | ||
Management fees | 0.65 | % |
Other expenses | 0.09 | |
Total annual fund operating expenses | 0.74 | |
Fee waiver/expense reimbursement | 0.01 | a |
Total annual fund operating expenses after fee waiver/expense reimbursement | 0.75 | a |
a T. Rowe Price Associates, Inc., has agreed (through February 28, 2019) to waive its fees and/or bear any expenses (excluding interest; expenses related to borrowings, taxes, and brokerage; nonrecurring, extraordinary expenses; and acquired fund fees and expenses) that would cause the funds ratio of expenses to average daily net assets to exceed 0.75%. The agreement may be terminated at any time beyond February 28, 2019, with approval by the funds Board of Directors. Fees waived and expenses paid under this agreement (and a previous limitation of 0.75%) are subject to reimbursement to T. Rowe Price Associates, Inc., by the fund whenever the funds expense ratio is below 0.75%. However, no reimbursement will be made more than three years from the date such amounts were initially waived or reimbursed. The fund may only make repayments to T. Rowe Price Associates, Inc., if such repayment does not cause the funds expense ratio (after the repayment is taken into account) to exceed both: (1) the expense limitation in place at the time such amounts were waived; and (2) the funds current expense limitation.
Example This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated and then redeem all of your shares at the end of those periods, that your investment has a 5% return each year, and that the funds operating expenses remain the same. The example also assumes that an expense limitation arrangement currently in place is not renewed; therefore, the figures have been adjusted to reflect fee waivers or expense reimbursements only in the periods for which the expense limitation arrangement is expected to continue. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
T. Rowe Price | 2 |
1 year | 3 years | 5 years | 10 years |
$77 | $239 | $413 | $920 |
Portfolio Turnover The fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the funds shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the funds performance. During the most recent fiscal year, the funds portfolio turnover rate was 84.0% of the average value of its portfolio.
Investments, Risks, and Performance
Principal Investment Strategies The fund normally invests at least 80% of its net assets (including any borrowings for investment purposes) in stocks of large-cap companies. Under normal conditions, the fund will invest in at least five countries, one of which will be the U.S., and at least 40% of its net assets will be invested in stocks of large-cap companies outside the U.S., including companies in emerging markets (at least 30% if foreign market conditions are not favorable).
The fund defines a large-cap company as one whose market capitalization (number of shares outstanding multiplied by share price) falls within or above the applicable range for companies included in the MSCI All Country World Large Cap Index. The funds and MSCI Inc.s definition of a large-cap company depends on whether the company is located in a developed market or an emerging market. As of December 31, 2017, the Indexs market capitalization range for large-cap companies in developed markets was approximately $7 billion to $861 billion, and the market capitalization range for large-cap companies in emerging markets was approximately $1 billion to $493 billion. The fund also relies on MSCI Inc. to classify a particular country as developed or emerging. The market capitalization of the companies in the funds portfolio and the Index changes over time; the fund will not automatically sell or cease to purchase additional stock of a company it already owns just because the companys market capitalization falls below the range of the Index.
While the adviser invests with an awareness of the global economic backdrop and the advisers outlook for certain industries, sectors, and individual countries, the advisers decision-making process focuses on bottom-up stock selection. Country allocation is driven largely by stock selection, though the adviser may limit investments in markets or industries that appear to have poor overall prospects.
Security selection reflects a growth style. The adviser relies on a global team of investment analysts dedicated to in-depth fundamental research in an effort to identify companies capable of achieving and sustaining above-average, long-term earnings growth. The adviser seeks to purchase stocks of companies at reasonable prices in relation to present or anticipated earnings, cash flow, or book value.
Summary | 3 |
In selecting investments, the adviser generally favors companies with one or more of the following characteristics:
· leading or improving market position;
· attractive business niche;
· attractive or improving franchise or industry position;
· seasoned management;
· stable or improving earnings and/or cash flow; and
· sound or improving balance sheet.
The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.
Principal Risks As with any mutual fund, there is no guarantee that the fund will achieve its objective. The funds share price fluctuates, which means you could lose money by investing in the fund. The principal risks of investing in this fund are summarized as follows:
Active management risks The investment advisers judgments about the attractiveness, value, or potential appreciation of the funds investments may prove to be incorrect. The fund could underperform in comparison to other funds with a similar benchmark or similar objectives and investment strategies if the funds overall investment selections or strategies fail to produce the intended results.
Risks of stock investing Stocks generally fluctuate in value more than bonds and may decline significantly over short time periods. There is a chance that stock prices overall will decline because stock markets tend to move in cycles, with periods of rising and falling prices. The value of a stock in which the fund invests may decline due to general weakness in the stock market or because of factors that affect a particular company or industry.
International investing risks Investing in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. International securities tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse local, political, social, or economic developments overseas, or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In addition, international investments are subject to settlement practices and regulatory and financial reporting standards that differ from those of the U.S. These risks are heightened for the funds investments in emerging markets, which are more susceptible to governmental interference, less efficient trading markets, and the imposition of local taxes and restrictions on gaining access to sales proceeds for foreign investors.
Investment style risks Different investment styles tend to shift in and out of favor depending on market conditions and investor sentiment. The funds growth approach to investing could cause it to underperform other stock funds that employ a different investment style. Growth stocks tend to be more volatile than certain other
T. Rowe Price | 4 |
types of stocks, and their prices may fluctuate more dramatically than the overall stock market. A stock with growth characteristics can have sharp price declines due to decreases in current or expected earnings and may lack dividends that can help cushion its share price in a declining market.
Market capitalization risks Although stocks issued by larger companies tend to have less overall volatility than stocks issued by smaller companies, larger companies may not be able to attain the high growth rates of successful smaller companies, especially during strong economic periods. In addition, larger companies may be less capable of responding quickly to competitive challenges and industry changes, and may suffer sharper price declines as a result of earnings disappointments.
Portfolio turnover risks The fund may actively and frequently trade its portfolio securities or other instruments to carry out its investment strategies. High portfolio turnover may adversely affect the funds performance and increase transaction costs, which could increase the funds expenses. High portfolio turnover may also result in the distribution of higher capital gains when compared to a fund with less active trading policies, which could have an adverse tax impact if the funds shares are held in a taxable account.
Performance The following performance information provides some indication of the risks of investing in the fund. The funds performance information represents only past performance (before and after taxes) and is not necessarily an indication of future results.
The following bar chart illustrates how much returns can differ from year to year by showing calendar year returns and the best and worst calendar quarter returns during those years for the fund.
Summary | 5 |
The following table shows the average annual total returns for the fund, and also compares the returns with the returns of a relevant broad-based market index, as well as with the returns of one or more comparative indexes that have investment characteristics similar to those of the fund.
In addition, the table shows hypothetical after-tax returns to demonstrate how taxes paid by a shareholder may influence returns. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investors tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as a 401(k) account or an IRA.
Average Annual Total Returns | ||||||||||||||||||
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| Periods ended |
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| December 31, 2017 |
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| Since | Inception |
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| 1 Year | 5 Years | inception | date |
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| Institutional Global Growth Equity Fund | 10/27/2008 |
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| Returns before taxes | 34.62 | % |
| 12.92 | % |
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| 16.89 | % |
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| Returns after taxes on distributions | 32.41 |
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| 11.53 |
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| 15.43 |
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| Returns after taxes on distributions |
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| and sale of fund shares | 20.28 |
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| 9.82 |
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| 13.67 |
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| MSCI All Country World Index (reflects no deduction for fees, expenses, or taxes) |
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| 24.62 |
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| 11.40 |
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| 13.54 | a |
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| Lipper Global Multi-Cap Growth Funds Average |
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| 28.66 |
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| 11.75 |
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| 12.13 | b |
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T. Rowe Price | 6 |
a Return as of 10/27/08.
b Return as of 10/31/08.
Updated performance information is available through troweprice.com.
Management
Investment Adviser T. Rowe Price Associates, Inc. (T. Rowe Price)
Investment Sub-adviser T. Rowe Price International Ltd (T. Rowe Price International)
Portfolio Manager | Title | Managed Fund Since | Joined Investment |
R. Scott Berg | Chairman of Investment Advisory Committee | 2008 | 2002 |
Purchase and Sale of Fund Shares
The fund generally requires a $1,000,000 minimum initial investment and there is no minimum for additional purchases, although the initial investment minimum may be waived for certain types of accounts held through a retirement plan, financial advisor, or other financial intermediary.
For
investors holding shares of the fund directly with T. Rowe Price, you may purchase, redeem, or exchange
fund shares by mail or by telephone
(1-800-638-8790).
If you hold shares through a financial intermediary or retirement plan, you must purchase, redeem, and exchange shares of the fund through your intermediary or retirement plan. You should check with your intermediary or retirement plan to determine the investment minimums that apply to your account.
Tax Information
Any dividends or capital gains are declared and paid annually, usually in December. Redemptions or exchanges of fund shares and distributions by the fund, whether or not you reinvest these amounts in additional fund shares, may be taxed as ordinary income or capital gains unless you invest through a tax-deferred account (in which case you will be taxed upon withdrawal from such account).
More About the Fund | 2 | |
How is the fund organized?
T. Rowe Price Institutional International Funds, Inc. (the Corporation) was incorporated in Maryland in 1989. Currently, the Corporation consists of 11 series, each representing a separate pool of assets with different investment objectives. Each series is an open-end management investment company, or mutual fund. Mutual funds pool money received from shareholders and invest it to try to achieve specified objectives.
What is meant by shares?
As with all mutual funds, investors purchase shares when they put money in the fund. These shares are part of the funds authorized capital stock, but share certificates are not issued.
Each share and fractional share entitles the shareholder to:
· Receive a proportional interest in income and capital gain distributions. For funds with multiple share classes, the income dividends for each share class will generally differ from those of other share classes to the extent that the expense ratios of the classes differ.
· Cast one vote per share on certain fund matters, including the election of the funds directors, changes in fundamental policies, or approval of material changes to the funds investment management agreement. Shareholders of each class have exclusive voting rights on matters affecting only that class.
Does the fund have annual shareholder meetings?
The mutual funds that are sponsored and managed by T. Rowe Price (the T. Rowe Price Funds) are not required to hold regularly scheduled shareholder meetings. To avoid unnecessary costs to the funds shareholders, shareholder meetings are only held when certain matters, such as changes in fundamental policies or elections of directors, must be decided. In addition, shareholders representing at least 10% of all eligible votes may call a special meeting for the purpose of voting on the removal of any fund director. If a meeting is held and you cannot attend, you can vote by proxy. Before the meeting, the funds will send or make available to you proxy materials that explain the matters to be decided and include instructions on voting by mail, telephone, or the Internet.
T. Rowe Price | 8 |
Who runs the fund?
General Oversight
The fund is governed by a Board of Directors (the Board) that meets regularly to review the funds investments, performance, expenses, and other business affairs. The Board elects the funds officers. At least 75% of Board members are independent of T. Rowe Price and its affiliates (the Firm).
Investment Advisers
T. Rowe Price is the funds investment adviser and oversees the selection of the funds investments and management of the funds portfolio pursuant to an investment management agreement between the investment adviser and the fund. T. Rowe Price is a SEC-registered investment adviser that provides investment management services to individual and institutional investors, and sponsors and serves as adviser and sub-adviser to registered investment companies, institutional separate accounts, and common trust funds. The address for T. Rowe Price is 100 East Pratt Street, Baltimore, Maryland 21202. As of December 31, 2017, the Firm had approximately $991 billion in assets under management and provided investment management services for more than 8 million individual and institutional investor accounts.
T. Rowe Price has entered into a sub-advisory agreement with T. Rowe Price International under which T. Rowe Price International is authorized to trade securities and make discretionary investment decisions on behalf of the fund. T. Rowe Price International is an investment adviser registered or licensed with the SEC, United Kingdom Financial Conduct Authority, Financial Services Agency of Japan, and other non-U.S. regulatory authorities. T. Rowe Price International sponsors and serves as adviser to foreign collective investment schemes and provides investment management services to investment companies and other institutional investors. T. Rowe Price International is headquartered in London and has several branch offices around the world. T. Rowe Price International is a direct subsidiary of T. Rowe Price and its address is 60 Queen Victoria Street, London EC4N 4TZ, United Kingdom.
Portfolio Management
T. Rowe Price has established an Investment Advisory Committee with respect to the fund. The committee chairman has day-to-day responsibility for managing the funds portfolio and works with the committee in developing and executing the funds investment program. The members of the committee are as follows: R. Scott Berg, Chairman, Kennard W. Allen, Ziad Bakri, Harishankar Balkrishana, Peter J. Bates, Oliver D.M. Bell, Archibald Ciganer, Richard N. Clattenburg, Richard de los Reyes, Shawn T. Driscoll, Paul D. Greene II, Randal S. Jenneke, Nina P. Jones, Anh Lu, Eric C. Moffett, Jason Nogueira, Gonzalo Pangaro, Gabriel Solomon, Joshua K. Spencer, Taymour R. Tamaddon, Dean Tenerelli, and Rupinder Vig. The following information provides the year that the chairman (the portfolio manager) first joined the Firm and the chairmans specific business experience during the past five years (although the chairman may have had portfolio management responsibilities for a
More About the Fund | 9 |
longer period). Mr. Berg has been chairman of the committee since the funds inception in 2008. He joined the Firm in 2002 and his investment experience dates from that time. He has served as a portfolio manager with the Firm throughout the past five years. The Statement of Additional Information provides additional information about the portfolio managers compensation, other accounts managed by the portfolio manager, and the portfolio managers ownership of the funds shares.
The Management Fee
The fund pays the investment adviser an annual investment management fee based on 0.65% of the funds average daily net assets. The fund calculates and accrues the fee daily.
A discussion about the factors considered by the Board and its conclusions in approving the funds investment management agreement (and any sub-advisory agreement, if applicable) appear in the funds semiannual report to shareholders for the period ended April 30.
Consider your investment goals, your time horizon for achieving them, and your tolerance for risk. The fund may be appropriate for you if you are seeking diversification for your equity investments and can accept the risks that accompany foreign investments. Your decision should take into account whether you have any other foreign stock investments.
Investing a portion of your overall portfolio in stock funds with foreign holdings can enhance your diversification and increase your available investment opportunities.
Portfolio managers closely monitor the funds investments as well as political and economic trends in the countries and regions in which the fund invests. Holdings are adjusted according to the portfolio managers analysis and outlook. The impact of unfavorable developments in a particular country may be reduced when investments are spread among many countries. However, the economies and financial markets of countries in a certain region may be heavily influenced by one another.
As with all stock funds, the funds share price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse local, political, social, 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 advisers assessment of companies held by the fund may prove incorrect, resulting in losses or poor performance, even in rising markets.
T. Rowe Price | 10 |
Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets.
As with any mutual fund, there is no guarantee the fund will achieve its objective. The funds share price fluctuates, which means you could lose money when you sell your shares of the fund.
The principal risks associated with the funds principal investment strategies include the following:
Currency risks A decline in the value of a foreign currency versus the U.S. dollar could reduce the dollar value of securities denominated in that foreign currency. The overall impact on the funds holdings can be significant, unpredictable, and long-lasting, depending on the currencies represented in the funds portfolio and how each foreign currency appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the funds do not engage in extensive foreign currency hedging programs. Further, since exchange rate movements are volatile, the funds attempts at hedging could be unsuccessful, and it is not possible to effectively hedge the currency risks of many emerging market countries.
Other risks of foreign investing Risks can result from varying stages of economic and political development; differing regulatory environments, trading days and accounting standards; uncertain tax laws; and higher transaction costs of non-U.S. markets. Investments outside the U.S. could be subject to governmental actions such as capital or currency controls, nationalization of a company or industry, expropriation of assets, or imposition of high taxes. A trading market may close without warning for extended time periods, preventing the fund from buying or selling securities in that market.
Trading in the securities in which the fund invests may take place in various foreign markets on certain days when the fund is not open for business and does not calculate its net asset value. For example, the fund may invest in securities that trade in various foreign markets that are open on weekends. As the securities trade, their value may substantially change. As a result, the funds net asset value may be significantly affected on days when shareholders cannot make transactions. In addition, market volatility may significantly limit the liquidity of securities of certain companies in a particular country or geographic region, or of all companies in the country or region. The fund may be unable to liquidate its positions in such securities at any time, or at a favorable price, in order to meet the funds obligations.
Emerging markets risks To the extent the fund invests in emerging markets, it is subject to greater risk than a fund investing only in developed markets. The economic and political structures of developing countries, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. Fund performance will likely be hurt by exposure to countries in the midst of hyperinflation, currency
More About the Fund | 11 |
devaluation, trade disagreements, sudden political upheaval, or interventionist government policies. Significant buying or selling by a few major investors may also heighten the volatility of emerging markets. These factors make investing in such countries significantly riskier than investing in other countries, and any one of these factors could cause a funds share price to decline.
Small- and mid-cap company risks To the extent the fund invests in small- and mid-capitalization stocks, it is likely to be more volatile than a fund that invests only in large companies. Small and medium-sized companies are generally riskier because they may have more limited product lines, less capital reserves, and less seasoned management, all of which could hinder their efforts to respond to economic, market, and industry changes. In addition, their securities may trade less frequently and with greater price swings.
Some of the principal tools the adviser uses to try to reduce overall risk include intensive research when evaluating a companys prospects and limiting exposure to any one industry or company. In addition, other risks associated with the additional investment strategies that may be employed by the fund include the following:
Additional strategies and risks While most assets will be invested in common stocks, other strategies may be employed that are not considered part of the funds principal investment strategies. For instance, the fund may, to a limited extent, use derivatives such as futures contracts and forward currency exchange contracts. Any investments in futures would typically serve as an efficient means of gaining exposure to certain markets or as a cash management tool to maintain liquidity while being invested in the market. Forward currency exchange contracts would primarily be used to settle trades in a foreign currency or to help protect the funds holdings from unfavorable changes in foreign currency exchange rates, although other currency hedging techniques may be used from time to time. To the extent the fund uses futures and forward currency exchange contracts, it is exposed to potential volatility and losses greater than direct investments in the contracts underlying assets, and the risk that anticipated currency movements will not be accurately predicted.
A derivative involves risks different from, and possibly greater than, the risks associated with investing directly in the assets on which the derivative is based. Derivatives can be highly volatile, illiquid, and difficult to value. Changes in the value of a derivative may not properly correlate with changes in the value of the underlying asset, reference rate, or index. The fund could be exposed to significant losses if it is unable to close a derivatives position due to the lack of a liquid trading market. Derivatives involve the risk that a counterparty to the derivatives agreement will fail to make required payments or comply with the terms of the agreement. There is also the possibility that limitations or trading restrictions may be imposed by an exchange or government regulation, which could adversely impact the value and liquidity of a derivatives contract subject to such regulation.
T. Rowe Price | 12 |
Recent regulations have changed the requirements related to the use of certain derivatives. Some of these new regulations have limited the availability of certain derivatives and made their use by funds more costly. It is expected that additional changes to the regulatory framework will occur, but the extent and impact of additional new regulations are not certain at this time.
Information technology sector risks The fund may invest significantly in the information technology sector. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on their profit margins. Like other technology companies, information technology companies may have limited product lines, markets, financial resources, or personnel. The products of information technology companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, and competition for the services of qualified personnel. Companies in the information technology sector are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies.
Banking and financial companies risks The fund may invest significantly in banks and other financial services companies. To the extent the fund has significant investments in financial companies, it is more susceptible to adverse developments affecting such companies and may perform poorly during a downturn in the banking industry. Banks can be adversely affected by, among other things, regulatory changes, interest rate movements, the availability of capital and the cost to borrow, and the rate of debt defaults. Banks and other financial services institutions are often subject to extensive governmental regulation and intervention, and the potential for additional regulation could reduce profit margins and adversely affect the scope of their activities, and the amount of capital they must maintain, and limit the amounts and types of loans and other financial commitments they can make. In addition, companies in the financials sector may also be adversely affected by decreases in the availability of money or asset valuations, credit rating downgrades, increased competition, and adverse conditions in other related markets.
The oversight of, and regulations applicable to, banks in emerging markets may be ineffective when compared with the regulatory frameworks for banks in developed markets. Banks in emerging markets may have significantly less access to capital than banks in more developed markets, leading them to be more likely to fail under adverse economic conditions. In addition, the impact of future regulation on any individual bank, or on the financial services sector as a whole, can be very difficult to predict.
The Statement of Additional Information contains more detailed information about the fund and its investments, operations, and expenses.
More About the Fund | 13 |
This section provides a more detailed description of the various types of portfolio holdings and investment practices that may be used by the fund to execute its overall investment program. Some of these holdings are considered to be principal investment strategies of the fund and have already been described earlier in the prospectus. Any of the following holdings and investment practices that were not already described in Section 1 of the prospectus are not considered part of the funds principal investment strategies, but they may be used by the fund to help achieve its investment objective. The funds investments may be subject to further restrictions and risks described in the Statement of Additional Information.
Shareholder approval is required to substantively change the funds investment objective. Shareholder approval is also required to change certain investment restrictions noted in the following section as fundamental policies. Portfolio managers also follow certain operating policies that can be changed without shareholder approval. Shareholders will receive at least 60 days prior notice of a change in the funds policy requiring it to normally invest at least 80% of its net assets in stocks.
The funds holdings in certain kinds of investments cannot exceed maximum percentages as set forth in this prospectus and the Statement of Additional Information. For instance, there are limitations regarding the funds investments in certain types of derivatives. While these restrictions provide a useful level of detail about the funds investments, investors should not view them as an accurate gauge of the potential risk of such investments. For example, in a given period, a 5% investment in derivatives could have a significantly greater impact on the funds share price than its weighting in the portfolio. The net effect of a particular investment depends on its volatility and the size of its overall return in relation to the performance of all of the funds investments.
Certain investment restrictions, such as a required minimum or maximum investment in a particular type of security, are measured at the time the fund purchases a security. The status, market value, maturity, duration, credit quality, or other characteristics of the funds securities may change after they are purchased, and this may cause the amount of the funds assets invested in such securities to exceed the stated maximum restriction or fall below the stated minimum restriction. If any of these changes occur, it would not be considered a violation of the investment restriction and will not require the sale of an investment if it was proper at the time the investment was made (this exception does not apply to the funds borrowing policy). However, certain changes will require holdings to be sold or purchased by the fund during the time it is above or below the stated percentage restriction in order for the fund to be in compliance with applicable restrictions.
T. Rowe Price | 14 |
For purposes of determining whether the fund invests at least 40% (at least 30% if market conditions are not favorable) of its net assets in stocks of companies outside the U.S., the fund uses a country assigned to a stock by MSCI Inc., a third-party provider of benchmark indexes and data services for institutions worldwide, or another unaffiliated third-party data provider.
Changes in the funds holdings, the funds performance, and the contribution of various investments to the funds performance are discussed in the shareholder reports.
Portfolio managers have considerable discretion in choosing investment strategies and selecting securities they believe will help achieve the funds objective.
Types of Portfolio Securities
In seeking to meet its investment objective, the fund may invest in any type of security or instrument (including certain potentially high-risk derivatives described in this section) whose investment characteristics are consistent with its investment program. The following pages describe various types of the funds holdings and investment management practices, some of which are also described as part of the funds principal investment strategies.
Diversification As a fundamental policy, the fund will not purchase a security if, as a result, with respect to 75% of its total assets, more than 5% of the funds total assets would be invested in securities of a single issuer or more than 10% of the outstanding voting securities of the issuer would be held by the fund.
The funds investments are primarily in common stocks and, to a lesser degree, other types of securities as follows:
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stocks have a specified dividend rate and rank after bonds and before common stocks in their claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis and profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a companys stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. Unlike common stock, preferred stock does not ordinarily carry voting rights. While most preferred stocks pay a dividend, the fund may decide to purchase preferred stock where the issuer has suspended, or is in danger of suspending, payment of its dividend. The fund may purchase American Depositary Receipts and Global Depositary Receipts, which are certificates evidencing ownership of shares of a foreign issuer. American Depositary Receipts and Global Depositary Receipts trade on established markets and are alternatives to directly purchasing the underlying foreign securities in their local markets and currencies. Such investments are subject to many
More About the Fund | 15 |
of the same risks associated with investing directly in foreign securities. For purposes of the funds investment policies, investments in depositary receipts are deemed to be investments in the underlying securities. For example, a depositary receipt representing ownership of common stock will be treated as common stock.
Convertible Securities and Warrants
The fund may invest in debt instruments or preferred equity securities that are convertible into, or exchangeable for, equity securities at specified times in the future and according to a certain exchange ratio. Convertible bonds are typically callable by the issuer, which could in effect force conversion before the holder would otherwise choose. Traditionally, convertible securities have paid dividends or interest at rates higher than common stocks but lower than nonconvertible securities. They generally participate in the appreciation or depreciation of the underlying stock into which they are convertible, but to a lesser degree than common stock. Some convertible securities combine higher or lower current income with options and other features. Warrants are options to buy, directly from the issuer, a stated number of shares of common stock at a specified price anytime during the life of the warrants (generally, two or more years). Warrants have no voting rights, pay no dividends, and can be highly volatile. In some cases, the redemption value of a warrant could be zero.
Participation Notes (P-notes)
The fund may gain exposure to securities traded in foreign markets through investments in P-notes. P-notes are generally issued by banks or broker-dealers and are designed to offer a return linked to an underlying common stock or other security. An investment in a P-note involves additional risks beyond the risks normally associated with a direct investment in the underlying security. While the holder of a P-note is entitled to receive from the broker-dealer or bank any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-notes are considered general unsecured contractual obligations of the banks or broker-dealers that issue them as the counterparty. As such, the fund must rely on the creditworthiness of the counterparty for its investment returns on the P-notes, and could lose the entire value of its investment in the event of default by a counterparty. Additionally, there is no assurance that there will be a secondary trading market for a P-note or that the trading price of a P-note will equal the value of the underlying security.
Operating policy The funds investments in P-notes are limited to 20% of its total assets. Investments in P-notes are not subject to the limit on investments in hybrid instruments.
Fixed Income Securities
From time to time, the fund may invest in corporate and government fixed income securities as well as below investment-grade bonds, commonly referred to as junk bonds. These securities would be purchased in companies that meet the funds investment criteria. The price of a fixed income security fluctuates with changes in
T. Rowe Price | 16 |
interest rates, generally rising when interest rates fall and falling when interest rates rise. Below investment-grade bonds, or junk bonds, can be more volatile and have greater risk of default than investment-grade bonds, and should be considered speculative.
Operating policy The fund may invest up to 5% of its total assets in below investment-grade bonds. The funds investments in convertible securities are not subject to this limit.
Futures and Options
Futures are often used to establish exposures or manage or hedge risk because they enable the investor to buy or sell an asset in the future at an agreed-upon price. Options may be used to generate additional income, to enhance returns, or as a defensive technique to protect against anticipated declines in the value of an asset. Call options give the investor the right to purchase (when the investor purchases the option), or the obligation to sell (when the investor writes or sells the option), an asset at a predetermined price in the future. Put options give the purchaser of the option the right to sell, or the seller (or writer) of the option the obligation to buy, an asset at a predetermined price in the future. Futures and options contracts may be bought or sold for any number of reasons, including to manage exposure to changes in interest rates, bond prices, foreign currencies, and credit quality; as an efficient means of increasing or decreasing the funds exposure to certain markets; in an effort to enhance income; to improve risk-adjusted returns; to protect the value of portfolio securities; and to serve as a cash management tool. Call or put options may be purchased or sold on securities, futures, financial indexes, and foreign currencies. The fund may choose to continue a futures contract by rolling over an expiring futures contract into an identical contract with a later maturity date. This could increase the funds transaction costs and portfolio turnover rate.
Futures and options contracts may not always be successful investments or hedges; their prices can be highly volatile; using them could lower the funds total return; the potential loss from the use of futures can exceed the funds initial investment in such contracts; and the losses from certain options written by the fund could be unlimited.
Operating policies Initial margin deposits on futures and premiums on options used for non-hedging purposes will not exceed 5% of the funds net asset value. The total market value of securities covering call or put options may not exceed 25% of the funds total assets. No more than 5% of the funds total assets will be committed to premiums when purchasing call or put options.
Hybrid Instruments
Hybrid instruments (a type of potentially high-risk derivative) can combine the characteristics of securities, futures, and options. For example, the principal amount, redemption, or conversion terms of a security could be related to the market price of some commodity, currency, security, or securities index. Such instruments may or
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may not bear interest or pay dividends. Under certain conditions, the redemption value of a hybrid could be zero.
Hybrids can have volatile prices and limited liquidity, and their use may not be successful.
Operating policy The funds investments in hybrid instruments are limited to 10% of its total assets.
Currency Derivatives
The fund will normally conduct any foreign currency exchange transactions either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. The fund will generally not enter into a forward contract with a term greater than one year. The fund may enter into forward currency exchange contracts to lock in the U.S. dollar price of a security when it enters into a contract for the purchase or sale of a security denominated in a foreign currency, and when the fund believes that the currency of a particular foreign country may move substantially against another currency, it may enter into a forward contract to sell or buy the former foreign currency.
A fund that invests in foreign securities may attempt to hedge its exposure to potentially unfavorable currency changes. The primary means of doing this is through the use of forward currency exchange contracts, which are contracts between two counterparties to exchange one currency for another on a future date at a specified exchange rate. The fund may also use these instruments to create a synthetic bond, which is issued in one currency with the currency component transformed into another currency. However, futures, swaps, and options on foreign currencies may also be used. In certain circumstances, the fund may use currency derivatives to substitute a different currency for the currency in which the investment is denominated, a strategy known as proxy hedging. If the fund were to engage in any of these foreign currency transactions, it could serve to protect its foreign securities from adverse currency movements relative to the U.S. dollar, although the fund may also use currency derivatives in an effort to gain exposure to a currency expected to appreciate in value versus other currencies. As a result, the fund could be invested in a currency without holding any securities denominated in that currency. Such transactions involve, among other risks, the risk that anticipated currency movements will not occur, which could reduce the funds total return. There are certain markets, including many emerging markets, where it is not possible to engage in effective foreign currency hedging.
Hedging may result in the application of the mark-to-market and straddle provisions of the Internal Revenue Code. These provisions could result in an increase (or decrease) in the amount of taxable dividends paid by the fund and could affect whether dividends paid by the fund are classified as capital gains or ordinary income.
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Investments in Other Investment Companies
The fund may invest in other investment companies, including open-end funds, closed-end funds, and exchange-traded funds.
The fund may purchase the securities of another investment company to temporarily gain exposure to a portion of the market while awaiting purchase of securities or as an efficient means of gaining exposure to a particular asset class. The fund might also purchase shares of another investment company to gain exposure to the securities in the investment companys portfolio at times when the fund may not be able to buy those securities directly. Any investment in another investment company would be consistent with the funds objective and investment program.
The risks of owning another investment company are generally similar to the risks of investing directly in the securities in which that investment company invests. However, an investment company may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the funds performance. In addition, because closed-end funds and exchange-traded funds trade on a secondary market, their shares may trade at a premium or discount to the actual net asset value of their portfolio securities and their shares may have greater volatility if an active trading market does not exist.
As a shareholder of another investment company, the fund must pay its pro-rata share of that investment companys fees and expenses. The funds investments in non-T. Rowe Price investment companies are subject to the limits that apply to investments in other funds under the Investment Company Act of 1940 or under any applicable exemptive order.
The fund may also invest in certain other T. Rowe Price Funds as a means of gaining efficient and cost-effective exposure to certain asset classes, provided the investment is consistent with the funds investment program and policies.
Investments in other investment companies could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available through direct investments in a particular asset class, and will subject the fund to the risks associated with the particular asset class or asset classes in which an underlying fund invests. Examples of asset classes in which other mutual funds (including T. Rowe Price Funds) focus their investments include high yield bonds, inflation-linked securities, floating rate loans, international bonds, emerging market bonds, stocks of companies involved in activities related to real assets, stocks of companies that focus on a particular industry or sector, and emerging market stocks. If the fund invests in another T. Rowe Price Fund, the management fee paid by the fund will be reduced to ensure that the fund does not incur duplicate management fees as a result of its investment.
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Illiquid Securities
Some of the funds holdings may be considered illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold in the ordinary course of business within seven days at approximately the prices at which they are valued. The determination of liquidity involves a variety of factors. Illiquid securities may include private placements that are sold directly to a small number of investors, usually institutions. Unlike public offerings, such securities are not registered with the SEC. Although certain of these securities may be readily sold (for example, pursuant to Rule 144A under the Securities Act of 1933) and therefore deemed liquid, others may have resale restrictions and be considered illiquid. The sale of illiquid securities may involve substantial delays and additional costs, and the fund may only be able to sell such securities at prices substantially lower than what it believes they are worth.
Operating policy The fund may not purchase an illiquid security if it holds 15% or more of its net assets in illiquid securities.
Types of Investment Management Practices
Reserve Position
A certain portion of the funds assets may be held in reserves. The funds reserve positions will primarily consist of: 1) shares of a T. Rowe Price internal money market fund or short-term bond fund (which does not charge any management fees); 2) short-term, high-quality U.S. and foreign dollar-denominated money market securities, including repurchase agreements; and 3) U.S. dollar or non-U.S. dollar currencies. In order to respond to adverse market, economic, political, or other conditions, the fund may assume a temporary defensive position that is inconsistent with its principal investment objective and/or strategies and may invest, without limitation, in reserves. If the fund has significant holdings in reserves, it could compromise its ability to achieve its objective. The reserve position provides flexibility in meeting redemptions, paying expenses and managing cash flows into the fund, and can serve as a short-term defense during periods of unusual market volatility. Non-U.S. dollar reserves are subject to currency risk.
Borrowing Money and Transferring Assets
The fund may borrow from banks, other persons, and other T. Rowe Price Funds for temporary or emergency purposes, to facilitate redemption requests, or for other purposes consistent with the funds policies as set forth in this prospectus and the Statement of Additional Information. Such borrowings may be collateralized with the funds assets, subject to certain restrictions.
Fundamental policy Borrowings may not exceed 331/3% of the funds total assets. This limitation includes any borrowings for temporary or emergency purposes, and applies at the time of the transaction and continues to the extent required by the Investment Company Act of 1940.
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Operating policy The fund will not transfer portfolio securities as collateral except as necessary in connection with permissible borrowings or investments, and then such transfers may not exceed 331/3% of its total assets. The fund will not purchase additional securities when its borrowings exceed 5% of its total assets.
Meeting Redemption Requests
We expect that the fund will hold cash or cash equivalents to meet redemption requests. The fund may also use the proceeds from the sale of portfolio securities to meet redemption requests if consistent with the management of the fund. These redemption methods will be used regularly and may also be used in deteriorating or stressed market conditions. The fund reserves the right to redeem in-kind as described under Large Redemptions. Redemptions in-kind are typically used to meet redemption requests that represent a large percentage of the funds net assets in order to minimize the effect of large redemptions on the fund and its remaining shareholders. In general, any in-kind redemptions will represent a pro-rata distribution of the funds securities, subject to certain limited exceptions. Redemptions in-kind may be used regularly in circumstances as described above, and may also be used in stressed market conditions.
The fund, along with other T. Rowe Price Funds, is a party to an interfund lending exemptive order received from the SEC that permits the T. Rowe Price Funds to borrow money from and/or lend money to other T. Rowe Price Funds to help the funds meet short-term redemptions and liquidity needs.
During periods of deteriorating or stressed market conditions, when an increased portion of a funds portfolio may be comprised of less-liquid investments, or during extraordinary or emergency circumstances, the fund may be more likely to pay redemption proceeds with cash obtained through interfund lending, short-term borrowing arrangements (if available), or by redeeming a large redemption request in-kind.
Lending of Portfolio Securities
The fund may lend its securities to broker-dealers, other institutions, or other persons to earn additional income. Risks include the potential insolvency of the broker-dealer or other borrower that could result in delays in recovering securities and capital losses. Additionally, losses could result from the reinvestment of collateral received on loaned securities in investments that decline in value, default, or do not perform as well as expected.
Fundamental policy The value of loaned securities may not exceed 331/3% of the funds total assets.
Portfolio Turnover
Turnover is an indication of frequency of trading. Each time the fund purchases or sells a security, it incurs a cost. This cost is reflected in its net asset value but not in its operating expenses. The higher the turnover rate, the higher the transaction costs
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and the greater the impact on the funds total return. Higher turnover can also increase the possibility of taxable capital gain distributions. The funds portfolio turnover rates are shown in the Financial Highlights table.
The Financial Highlights table, which provides information about the funds financial history, is based on a single share outstanding throughout the periods shown. The table is part of the funds financial statements, which are included in its annual report and are incorporated by reference into the Statement of Additional Information (available upon request). The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions and no payment of any applicable account or redemption fees). The financial statements in the annual report were audited by the funds independent registered public accounting firm, PricewaterhouseCoopers LLP.
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Financial Highlights
Year ended October 31 | ||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | ||||||
Net asset
value, | $17.69 | $21.71 | $23.13 | $22.23 | $21.93 | |||||
Income From Investment Operations | ||||||||||
Net investment incomea | 0.18 | b | 0.14 | b | 0.27 | b | 0.15 | b | 0.14 | c |
Net gains or losses on securities (both realized and unrealized) | 3.96 | 2.19 | 0.16 | 0.41 | 6.23 | |||||
Total from investment | 4.14 | 2.33 | 0.43 | 0.56 | 6.37 | |||||
Less Distributions | ||||||||||
Dividends
(from net | (0.12 | ) | (0.13 | ) | (0.10 | ) | (0.26 | ) | (0.16 | ) |
Distributions (from | | (0.78 | ) | (1.23 | ) | (0.60 | ) | | ||
Returns of capital | | | | | | |||||
Total distributions | (0.12 | ) | (0.91 | ) | (1.33 | ) | (0.86 | ) | (0.16 | ) |
Net asset value, | $21.71 | $23.13 | $22.23 | $21.93 | $28.14 | |||||
Total return | 23.53 | %b | 11.18 | %b | 2.17 | %b | 2.68 | %b | 29.27 | %c |
Ratios/Supplemental Data | ||||||||||
Net assets, end of | $137,762 | $256,545 | $280,473 | $345,647 | $434,345 | |||||
Ratio of expenses to average net assets | 0.75 | %b | 0.75 | %b | 0.75 | %b | 0.75 | %b | 0.75 | %c |
Ratio of net income to average net assets | 0.91 | %b | 0.64 | %b | 1.18 | %b | 0.72 | %b | 0.55 | %c |
Portfolio turnover rate | 100.8 | % | 100.8 | % | 106.0 | % | 79.6 | % | 84.0 | % |
a Per share amounts calculated using average shares outstanding method.
b Excludes expenses in excess of a 0.75% contractual expense limitation in effect through February 28, 2019.
c Includes expenses repaid (0.02% of average net assets) related to its contractual expense limitation.
The T. Rowe Price Funds full portfolio holdings as of their fiscal year-ends are disclosed in their annual shareholder reports and their full portfolio holdings as of their fiscal mid-point are disclosed in their semiannual shareholder reports. The
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annual and semiannual shareholder reports are filed with the SEC and sent to the funds shareholders within 60 days of the period covered. The T. Rowe Price Funds also disclose their full portfolio holdings as of their first and third fiscal quarter-ends on Form N-Q. Form N-Q is filed with the SEC within 60 days of the period covered, but is not sent to the funds shareholders. Under certain conditions, the shareholder reports and Form N-Q may include up to 5% of a funds holdings under the caption Miscellaneous Securities without identifying the specific security or issuer. Generally, a holding would not be individually identified if it is determined that its disclosure could be harmful to the fund or its shareholders. A holding will not be excluded for these purposes from a funds SEC filings for more than one year. The money market funds also file detailed month-end portfolio holdings information on Form N-MFP with the SEC each month. Form N-MFP, as well as the shareholder reports and Form N-Q, are publicly available immediately upon filing with the SEC.
In addition, most T. Rowe Price Funds disclose their calendar quarter-end full portfolio holdings on troweprice.com 15 calendar days after each quarter. At the discretion of the investment adviser, these holdings reports may exclude the issuer name and other information relating to a holding in order to protect the funds interests and prevent harm to the fund or its shareholders. Private placements and other restricted securities may not be individually identified in the calendar quarter-end holdings on troweprice.com, but would be disclosed in any SEC filings. Money market funds also disclose on troweprice.com their month-end full portfolio holdings five business days after each month-end and historical information about the funds investments for the previous six months, as of the last business day of the preceding month. This information includes, among other things, the percentage of the funds investments in daily and weekly liquid assets, the funds weighted average maturity and weighted average life, the funds market-based net asset value, and the funds net inflows and outflows. The calendar quarter-end portfolio holdings will remain on the website for one year and the month-end money market fund portfolio holdings will remain on the website for six months. In addition, most T. Rowe Price Funds disclose their 10 largest holdings on troweprice.com on the seventh business day after each month-end. These holdings are listed in alphabetical order along with the aggregate percentage of the funds total assets that these 10 holdings represent. Each monthly top 10 list will remain on the website for six months. A description of T. Rowe Prices policies and procedures with respect to the disclosure of portfolio information is available in the Statement of Additional Information.
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The following policies and procedures apply to the Institutional Funds within the T. Rowe Price Funds.
This section of the prospectus describes the policies and procedures that generally apply to investments in the T. Rowe Price Institutional Funds (except for the T. Rowe Price Institutional Cash Reserves Fund). The T. Rowe Price Institutional Funds may be purchased directly from T. Rowe Price or through a financial intermediary, such as a bank, broker, retirement plan recordkeeper, or financial advisor.
Most of the T. Rowe Price Institutional Funds are available only in a single share class (referred to as the Institutional Class). However, the Institutional Floating Rate Fund is also offered in an F Class. Each class of a funds shares represents an interest in the same fund with the same investment program and investment policies. While the Institutional Class may be held directly with T. Rowe Price or through a financial intermediary, the F Class is designed to be purchased only through financial advisors and certain financial intermediaries and has a different cost structure due to a shareholder servicing arrangement that applies only to that class.
This section generally describes investing only in the T. Rowe Price Institutional Funds, other than the T. Rowe Price Institutional Cash Reserves Fund, which has unique policies relating to its operation as an institutional money market fund. This section does not describe the policies that apply to other T. Rowe Price Funds. Policies for other T. Rowe Price Funds are described in their respective prospectuses, and all types of funds and available share classes for the T. Rowe Price Funds are described more fully in the funds Statement of Additional Information.
Institutional Class
The Institutional Class may be purchased directly through T. Rowe Price or through a financial intermediary. The Institutional Class does not make any payments to financial intermediaries for distribution of the funds shares (commonly referred to as 12b-1 fee payments) and does not make any payments to financial intermediaries for administrative services they provide (commonly referred to as administrative fee payments). However, you may incur brokerage commissions and other charges when buying or selling I Class shares.
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The Institutional Class is designed to be sold only to institutional investors, which include, but are not limited to: corporations, endowments and foundations, charitable trusts, investment companies and other pooled vehicles, defined benefit and defined contribution retirement plans, broker-dealers, registered investment advisers, banks and bank trust programs, and Section 529 college savings plans. The Institutional Class generally requires a $1 million initial investment minimum, although the minimum may be waived for retirement plans, financial intermediaries maintaining omnibus accounts, and certain other accounts.
F Class
The F Class must be purchased through a financial intermediary. The F Class does not make any 12b-1 fee payments to financial intermediaries but may make administrative fee payments at an annual rate of up to 0.15% of the class average daily net assets.
The F Class is designed to be sold only through financial advisors and certain financial intermediaries, including brokers, banks, insurance companies, retirement plan recordkeepers, and other financial intermediaries. F Class shares are generally not available to financial intermediaries that would make the fund available to their customers through a mutual fund supermarket platform. There is a $2,500 minimum initial investment requirement, but the minimum is waived for certain types of accounts.
Certain financial intermediaries perform recordkeeping and administrative services for their clients that would otherwise be performed by the funds transfer agent. The F Class may make administrative fee payments to retirement plan recordkeepers, broker-dealers, and other financial intermediaries (at an annual rate of up to 0.15% of the class average daily net assets) for transfer agency, recordkeeping, and other administrative services they provide on behalf of the funds. These administrative services may include maintaining account records for each customer; transmitting purchase and redemption orders; delivering shareholder confirmations, statements, and tax forms; and providing support to respond to customers questions regarding their accounts. These separate administrative fee payments are reflected in the Other expenses line that appears in the fee table in Section 1 with respect to the funds F Class.
Some broker-dealers or other financial intermediaries that are eligible to purchase F Class shares of T. Rowe Price Institutional Funds may also be eligible to purchase the Institutional Class. The Institutional Class shares require a much higher initial investment but have lower expenses than F Class shares because the Institutional Class does not participate in the administrative fee payment program. The payment
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of the administrative fee by the F Class creates a potential conflict of interest by influencing the broker-dealer or other financial intermediary to purchase F Class shares instead of Institutional Class shares. If this happens, you will incur higher expenses than if your financial intermediary had purchased Institutional Class shares on your behalf (assuming your financial intermediary would qualify to purchase Institutional Class shares). You should ask your salesperson for more information regarding the eligibility of your financial intermediary to purchase Institutional Class shares.
If you are opening an account through an employer-sponsored retirement plan or other financial intermediary, you should contact the retirement plan or financial intermediary for information regarding its policies on opening an account, including the policies relating to purchasing, exchanging, and redeeming shares, and the applicable initial and subsequent investment minimums.
Tax Identification Number
Institutional investors must provide T. Rowe Price with a valid taxpayer identification number (and valid Social Security numbers for individuals opening the account on behalf of the institution) on a signed new account form or Form W-9. Otherwise, federal law requires the funds to withhold a percentage of dividends, capital gain distributions, and redemptions and may subject the investor to an Internal Revenue Service fine. If this information is not received within 60 days after the account is established, the account may be redeemed at the funds then-current net asset value. Financial intermediaries opening an account in a fund must also enter into a separate agreement with the fund or its agent.
Important Information Required to Open a New Account
Pursuant to federal law, all financial institutions must obtain, verify, and record information that identifies each person or entity that opens an account. This information is needed not only for the account owner and any other person who opens the account, but also for any person who has authority to act on behalf of the account. When you open an account for an entity, you will be required to provide the entitys name, U.S. street address (post office boxes are not acceptable), and taxpayer identification number, as well as your name, U.S. street address (post office boxes are not acceptable), date of birth, and Social Security number as the person opening the account on behalf of the entity. Corporate and other institutional accounts require documents showing the existence of the entity (such as articles of incorporation or partnership agreements) to open an account. Certain other fiduciary accounts (such as trusts or power of attorney arrangements) require documentation, which may include an original or certified copy of the trust agreement or power of attorney, to open an account.
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T. Rowe Price will use this information to verify the identity of the entity and person opening the account. An account cannot be opened until all of this information is received. If the identity of the entity or person opening the account on behalf of the entity cannot be verified, T. Rowe Price is authorized to take any action permitted by law. (See Rights Reserved by the Funds later in this section.)
Call Financial Institution Services at 1-800-638-8790 for more information on these requirements.
The Institutional Funds are generally available only to institutional investors with a U.S. address. T. Rowe Price will generally not authorize the transfer of ownership of an account in an Institutional Fund for an institutional investor to an account for a noninstitutional investor. Shares held directly with T. Rowe Price by noninstitutional investors are subject to involuntary redemption at any time, which could result in a taxable gain to the investor.
Opening an Account
Call Financial Institution Services at 1-800-638-8790 for an account number and wire transfer instructions. All initial purchases are typically made by bank wire, but checks or other forms of payment may be accepted in certain cases. In order to obtain an account number, you must supply the name, taxpayer identification number, and business street address for the account. Complete a new account form and mail it, along with proper documentation identifying your firm and any other necessary documentation, to one of the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: Although the purchase will be made, services may not be established and an Internal Revenue Service penalty withholding may occur until we receive a signed new account form.
How and When Shares Are Priced
The trade date for your transaction request depends on the day and time that T. Rowe Price receives your request and will normally be executed using the next share price calculated after your order is received in correct form by T. Rowe Price or its agent (or by your financial intermediary if it has the authority to accept transaction orders on behalf of the fund). The share price, also called the net asset value, for each share class of a fund is calculated at the close of trading on the New York Stock Exchange (NYSE), which is normally 4 p.m. ET, each day that the NYSE is open for
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business. Net asset values are not calculated for the funds on days when the NYSE is scheduled to be closed for trading (for example, weekends and certain U.S. national holidays). If the NYSE is unexpectedly closed due to weather or other extenuating circumstances on a day it would typically be open for business, or if the NYSE has an unscheduled early closing on a day it has opened for business, the funds reserve the right to treat such day as a business day and accept purchase and redemption orders and calculate their share price as of the normally scheduled close of regular trading on the NYSE for that day.
To calculate the net asset value, a funds assets are valued and totaled, liabilities are subtracted, and each class proportionate share of the balance, called net assets, is divided by the number of shares outstanding of that class. Market values are used to price portfolio holdings for which market quotations are readily available. Market values generally reflect the prices at which securities actually trade or represent prices that have been adjusted based on evaluations and information provided by the funds pricing services. Investments in other mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. If a market value for a portfolio holding is not available or normal valuation procedures are deemed to be inappropriate, the fund will make a good faith effort to assign a fair value to the holding by taking into account various factors and methodologies that have been approved by the funds Board. This value may differ from the value the fund receives upon sale of the securities. Amortized cost is used to price securities held by money market funds and certain short-term debt securities held by a fund.
The funds use various pricing services to provide closing market prices, as well as information used to adjust those prices and to value most fixed income securities. A fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next days opening prices in the same markets, and adjusted prices.
Non-U.S. equity securities are valued on the basis of their most recent closing market prices at 4 p.m. ET, except under the following circumstances. Most foreign markets close before 4 p.m. ET. For example, the most recent closing prices for securities traded in certain Asian markets may be as much as 15 hours old at 4 p.m. ET. If a fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of the funds securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of 4 p.m. ET. In deciding whether to make these adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities.
A fund may also fair value certain securities or a group of securities in other situationsfor example, when a particular foreign market is closed but the fund is open. For a fund that has investments in securities that are primarily listed on foreign
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exchanges which trade on weekends or other days when the fund does not price its shares, the funds net asset value may change on days when shareholders will not be able to purchase or redeem the funds shares. If an event occurs that affects the value of a security after the close of the market, such as a default of a commercial paper issuer or a significant move in short-term interest rates, a fund may make a price adjustment depending on the nature and significance of the event. The funds also evaluate a variety of factors when assigning fair values to private placements and other restricted securities. Other mutual funds may adjust the prices of their securities by different amounts or assign different fair values than the fair value that the fund assigns to the same security.
How the Trade Date Is Determined
If you invest directly with T. Rowe Price and your request to purchase, sell, or exchange shares is received by T. Rowe Price or its agent in correct form by the close of the NYSE (normally 4 p.m. ET), your transaction will be priced at that business days net asset value. If your request is received by T. Rowe Price or its agent in correct form after the close of the NYSE, your transaction will be priced at the next business days net asset value unless the fund has an agreement with your financial intermediary for orders to be priced at the net asset value next computed after receipt by the financial intermediary.
The funds have authorized certain financial intermediaries or their designees to accept orders to buy or sell fund shares on their behalf. When authorized financial intermediaries receive an order in correct form, the order is considered as being placed with the fund and shares will be bought or sold at the net asset value next calculated after the order is received by the authorized financial intermediary. The financial intermediary must transmit the order to T. Rowe Price and pay for such shares in accordance with the agreement with T. Rowe Price, or the order may be canceled and the financial intermediary could be held liable for the losses. If the fund does not have such an agreement in place with your financial intermediary, T. Rowe Price or its agent must receive the request in correct form from your financial intermediary by the close of the NYSE in order for your transaction to be priced at that business days net asset value. Contact your financial intermediary for trade deadlines and the applicable policies for purchasing, selling, or exchanging your shares, as well as initial and subsequent investment minimums. The financial intermediary may charge a fee for its services.
Note: There may be times when you are unable to contact us or access your account due to extreme market activity or other circumstances. Should this occur, your order must still be placed and received in correct form by T. Rowe Price (or by the financial intermediary in accordance with its agreement with T. Rowe Price) prior to the time the NYSE closes to be priced at that business days net asset value. The time at which transactions and shares are priced and the time until which orders are accepted may be changed in case of an emergency or if the NYSE closes at a time other than 4 p.m. ET. The funds reserve the right to not treat an unscheduled intraday disruption or
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closure in NYSE trading as a closure of the NYSE and still accept transactions and calculate their net asset value as of 4 p.m. ET.
Transaction Confirmations
T. Rowe Price sends immediate confirmations for most of your fund transactions. However, certain transactions, such as dividend reinvestments, do not receive an immediate transaction confirmation but are reported on your account statement. Please review transaction confirmations and account statements as soon as you receive them and promptly report any discrepancies to Financial Institution Services.
Purchasing Shares
Purchases may be initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. All initial and subsequent investments are typically made by bank wire, although checks or other forms of payment may be accepted in certain cases. There is no assurance that the share price for a purchase will be the same day a wire was initiated.
The funds generally do not accept orders that request a particular day or price for a transaction or any other special conditions. However, when authorized by the fund, certain institutions, financial intermediaries, or retirement plans purchasing fund shares directly with T. Rowe Price may place a purchase order unaccompanied by payment. Payment for these shares must be received by the time designated by the fund (not to exceed the period established for settlement under applicable regulations). If payment is not received by this time, the order may be canceled. The institution, financial intermediary, or retirement plan is responsible for any costs or losses incurred by the fund or T. Rowe Price if payment is delayed or not received.
U.S. Dollars All purchases must be paid for in U.S. dollars; checks must be drawn on U.S. banks and should be payable to the T. Rowe Price Funds.
Nonpayment Purchases of a fund may be canceled if payment is not received in a timely manner, and the shareholder may be responsible for any losses or expenses incurred by the fund or its transfer agent. The funds and their agents have the right to reject or cancel any purchase, exchange, or redemption due to nonpayment.
Investment Minimums
The Institutional Class generally requires a $1 million minimum initial investment and the F Class generally requires a $2,500 minimum initial investment, although the minimums may be waived for financial intermediaries, retirement plans, and certain other institutional investors. In addition, we request that you give us at least three business days notice (seven business days notice for the Institutional Floating Rate Fund) for any purchase of $5 million or more. There is generally no minimum required for additional purchases.
You should check with your financial advisor, retirement plan, or financial intermediary to determine what minimum applies to your initial and additional investments.
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Exchanging and Redeeming Shares
Certain T. Rowe Price Funds assess a fee on redemptions of shares (including exchanges out of a fund) that are not held for a specified period of time. Please refer to Contingent Redemption Fee later in this section.
Exchanges You can move money from one account to an existing, identically registered account or open a new identically registered account. An exchange from one fund to another will be reported to the Internal Revenue Service as a sale for tax purposes.
Redemptions Redemptions are typically initiated through the National Securities Clearing Corporation or by calling Financial Institution Services. Please note that certain redemption requests initiated through the National Securities Clearing Corporation may be rejected, and in such instances, the transaction must be placed by contacting a Financial Institution Services representative.
If for some reason we cannot accept your request to exchange or redeem shares, we will attempt to contact you.
If you request to redeem a specific dollar amount and the market value of your account is less than the amount of your request and we are unable to contact you, your redemption will not be processed and you will need to submit a new redemption request in correct form.
Receiving Redemption Proceeds Unless otherwise indicated, redemption proceeds will be sent via bank wire to the designated bank on file for the account. If a request is received in correct form by T. Rowe Price or its agent on a business day prior to the close of the NYSE, proceeds are usually sent on the next business day. Proceeds sent by bank wire are usually credited to an account the next business day after the sale. Redemption proceeds can be mailed to the account address by check if specifically requested. Normally, the fund transmits proceeds to financial intermediaries for redemption orders received in correct form on either the next business day or third business day after receipt of the order, depending on the arrangement with the financial intermediary. You must contact your financial intermediary about procedures for receiving your redemption proceeds.
Large Redemptions Large redemptions (for example, $250,000 or more) can adversely affect a portfolio managers ability to implement a funds investment strategy by causing the premature sale of securities that would otherwise be held longer. Therefore, the fund reserves the right (without prior notice) to pay all or part of redemption proceeds with securities from the funds portfolio rather than in cash (redemption in-kind). In general, any in-kind redemptions will represent a pro-rata distribution of a funds securities, subject to certain limited exceptions. If this occurs, the securities will be selected by the fund in its absolute discretion and the redeeming shareholder or account will be responsible for disposing of the securities and bearing any associated costs and risks (for example, market risks until the securities are
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disposed of). If you continue to hold the securities, you may be subject to any ownership restrictions imposed by the issuers. For example, real estate investment trusts often impose ownership restrictions on their equity securities.
Delays in Sending Redemption Proceeds
The T. Rowe Price Funds typically expect that it will take one to three days following the receipt of a redemption request that is in correct form to send redemption proceeds, regardless of the method the fund uses to make such payment (e.g., check, wire, or Automated Clearing House transfer). However, under certain circumstances and when deemed to be in a funds best interests, your proceeds may not be sent for up to seven calendar days after we receive your redemption request in correct form.
In addition, if shares are sold that were just purchased and paid for by check or Automated Clearing House transfer, the fund will process your redemption but will generally delay sending the proceeds for up to 10 calendar days to allow the check or Automated Clearing House transfer to clear. If, during the clearing period, we receive a check drawn against your newly purchased shares, it will be returned and marked uncollected. (The 10-day hold does not apply to purchases paid for by bank wire or automatic purchases through payroll deduction.)
The Board of a retail or institutional money market fund may impose a redemption gate and elect to temporarily suspend redemptions for up to 10 business days in a 90-day period if the funds weekly liquid assets fall below 30% of its total assets and the funds Board determines that imposing a redemption gate is in the funds best interests. In addition, under certain limited circumstances, the Board of a retail or institutional money market fund may elect to permanently suspend redemptions in order to facilitate an orderly liquidation of the fund (subject to any additional liquidation requirements).
Contingent Redemption Fee
Short-term trading can disrupt a funds investment program and create additional costs for long-term shareholders. For these reasons, all share classes of the T. Rowe Price Institutional Funds, listed in the following table, assess a fee on redemptions (including exchanges out of a fund), which reduces the proceeds from such redemptions by the amounts indicated:
T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Africa & Middle East | 2% | 90 days or less |
Institutional Credit Opportunities | 2% | 90 days or less |
Institutional Emerging Markets Bond | 2% | 90 days or less |
Institutional Emerging Markets Equity | 2% | 90 days or less |
Institutional Floating Rate | 2% | 90 days or less |
Institutional Frontier Markets Equity | 2% | 90 days or less |
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T. Rowe Price Institutional Funds With Redemption Fees | ||
Fund | Redemption fee | Holding period |
Institutional Global Focused Growth Equity | 2% | 90 days or less |
Institutional Global Growth Equity | 2% | 90 days or less |
Institutional Global Value Equity | 2% | 90 days or less |
Institutional High Yield | 2% | 90 days or less |
Institutional International Bond | 2% | 90 days or less |
Institutional International Concentrated Equity | 2% | 90 days or less |
Institutional International Core Equity | 2% | 90 days or less |
Institutional International Growth Equity | 2% | 90 days or less |
Redemption fees are paid to a fund (and not to T. Rowe Price) to deter short-term trading, offset costs, and help protect the funds long-term shareholders. Subject to the exceptions described on the following pages, all persons holding shares of a T. Rowe Price Fund that imposes a redemption fee are subject to the fee, whether the person is holding shares directly with a T. Rowe Price Fund, through a retirement plan for which T. Rowe Price serves as recordkeeper; or indirectly through a financial intermediary (such as a broker, bank, or investment adviser), recordkeeper for retirement plan participants, or other third party.
Computation of Holding Period When an investor sells shares of a fund that assesses a redemption fee, T. Rowe Price will use the first-in, first-out method to determine the holding period for the shares sold. Under this method, the date of redemption or exchange will be compared with the earliest purchase date of shares held in the account. A redemption fee will be charged on shares sold on or before the end of the required holding period. The day after the date of your purchase is considered Day 1 for purposes of computing the holding period. For example, if you redeem your shares on or before the 90th day from the date of purchase, you will be assessed the redemption fee. If you purchase shares through a financial intermediary, consult your financial intermediary to determine how the holding period will be applied.
Transactions Not Subject to Redemption Fees The T. Rowe Price Funds will not assess a redemption fee with respect to certain transactions. As of the date of this prospectus, the following transactions in T. Rowe Price Funds will not be subject to redemption fees:
· Shares redeemed through an automated, systematic withdrawal plan;
· Shares redeemed through or used to establish certain rebalancing, asset allocation, wrap, and advisory programs, as well as non-T. Rowe Price fund-of-funds products, if approved in writing by T. Rowe Price;
· Shares purchased through the reinvestment of dividends or capital gain distributions;*
· Shares converted from one share class to another share class of the same fund;*
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· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees (e.g., for failure to meet account minimums);
· Shares purchased by rollover or changes of account registration within the same fund;*
· Shares redeemed to return an excess contribution from a retirement account;
· Shares of T. Rowe Price Funds purchased by another T. Rowe Price Fund and shares purchased by discretionary accounts managed by T. Rowe Price or one of its affiliates (please note that other shareholders of the investing T. Rowe Price Fund are still subject to the policy);
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares that are redeemed in-kind;
· Shares transferred to T. Rowe Price or a financial intermediary acting as a service provider when the age of the shares cannot be determined systematically;* and
· Shares redeemed in retirement plans or other products that restrict trading to no more frequently than once per quarter or other approved time period, if approved in writing by T. Rowe Price.
* Subsequent exchanges of these shares into funds that assess redemption fees will subject such shares to the fee.
Redemption Fees on Shares Held in Retirement Plans If shares are held in a retirement plan, redemption fees generally will be assessed on shares redeemed by exchange only if they were originally purchased by a participant-directed exchange. However, redemption fees may apply to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price or how the fees are applied by your plans recordkeeper. To determine which of your transactions are subject to redemption fees, you should contact T. Rowe Price or your plan recordkeeper.
Omnibus Accounts If your shares are held through a financial intermediary in an omnibus account, T. Rowe Price relies on the financial intermediary to assess the redemption fee on underlying shareholder accounts. T. Rowe Price seeks to enter into agreements with financial intermediaries establishing omnibus accounts that require the intermediary to assess the redemption fees. There are no assurances that T. Rowe Price will be successful in identifying all financial intermediaries or that the intermediaries will properly assess the fees.
Certain financial intermediaries may not apply the exemptions previously listed to the redemption fee policy; all redemptions by persons trading through such intermediaries may be subject to the fee. Certain financial intermediaries may exempt transactions not listed from redemption fees, if approved by T. Rowe Price. Persons redeeming shares through a financial intermediary should check with their respective intermediary to determine which transactions are subject to the fees.
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You may initiate transactions involving the Institutional Funds by telephone, by mail, or through the National Securities Clearing Corporation. The T. Rowe Price Funds and their agents use reasonable procedures to verify the identity of the person contacting T. Rowe Price and to ensure that the person is authorized to act on behalf of the account. If these procedures are followed, the funds and their agents are not liable for any losses that may occur from acting on unauthorized instructions. Please review the transaction confirmation carefully, and contact Financial Institution Services immediately about any transaction you believe to be unauthorized. Telephone conversations are recorded.
To place a transaction or make any inquiries regarding the T. Rowe Price Institutional Funds, please call Financial Institution Services at 1-800-638-8790. To mail any information to T. Rowe Price regarding the T. Rowe Price Institutional Funds, please use the following addresses:
via U.S. Mail T. Rowe Price Financial Institution Services P.O. Box 17300 Baltimore, MD 21297-1603 | via private carriers/overnight services T. Rowe Price Financial Institution Services Mail Code: OM-4232 4515 Painters Mill Road Owings Mills, MD 21117-4842 |
Note: If sending a check for a purchase, your transaction will receive the share price for the business day that the check is received by T. Rowe Price or its agent prior to the close of the NYSE (normally 4 p.m. ET), which could differ from the day that the check is received at the post office box.
If you hold shares of a T. Rowe Price Institutional Fund through a retirement plan or financial intermediary, you must contact your retirement plan or financial intermediary with any inquiries.
Involuntary Redemptions and Share Class Conversions
Shares held by any investors that no longer meet the definition of an institutional investor or fail to meet or maintain their account(s) at the investment minimum are subject to involuntary redemption at any time.
For all accounts in Institutional Funds (except for F Class accounts), to help keep operating expenses lower, we ask that you maintain an account balance of at least $1 million. If your investment falls below $1 million (even if due to market depreciation), we have the right to redeem your account at the then-current net asset value after giving you 60 days to increase your balance.
The redemption of your account could result in a taxable gain or loss.
For any F Class accounts that are no longer held through an eligible financial intermediary, we have the right to convert your account to the Institutional Class following notice to the financial intermediary or shareholder.
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Excessive and Short-Term Trading Policy
Excessive transactions and short-term trading can be harmful to fund shareholders in various ways, such as disrupting a funds portfolio management strategies, increasing a funds trading and other costs, and negatively affecting its performance. Short-term traders in funds that invest in foreign securities may seek to take advantage of developments overseas that could lead to an anticipated difference between the price of the funds shares and price movements in foreign markets. While there is no assurance that T. Rowe Price can prevent all excessive and short-term trading, the Boards of the T. Rowe Price Funds have adopted the following trading limits that are designed to deter such activity and protect the funds shareholders. The funds may revise their trading limits and procedures at any time as the Boards deem necessary or appropriate to better detect short-term trading that may adversely affect the funds, to comply with applicable regulatory requirements, or to impose additional or alternative restrictions.
Subject to certain exceptions, each T. Rowe Price Fund restricts a shareholders purchases (including through exchanges) into a fund account for a period of 30 calendar days after the shareholder has redeemed or exchanged out of that same fund account (the 30-Day Purchase Block). The calendar day after the date of redemption is considered Day 1 for purposes of computing the period before another purchase may be made.
General Exceptions As of the date of this prospectus, the following types of transactions generally are not subject to the funds excessive and short-term trading policy:
· Shares purchased or redeemed in money market funds and ultra short-term bond funds;
· Shares purchased or redeemed through a systematic purchase or withdrawal plan;
· Checkwriting redemptions from bond and money market funds;
· Shares purchased through the reinvestment of dividends or capital gain distributions;
· Shares redeemed automatically by a fund to pay fund fees or shareholder account fees;
· Transfers and changes of account registration within the same fund;
· Shares purchased by asset transfer or direct rollover;
· Shares purchased or redeemed through IRA conversions and recharacterizations;
· Shares redeemed to return an excess contribution from a retirement account;
· Transactions in Section 529 college savings plans;
· Certain transactions in defined benefit and nonqualified plans, subject to prior approval by T. Rowe Price;
· Shares converted from one share class to another share class in the same fund;
· Shares of T. Rowe Price Funds that are purchased by another T. Rowe Price Fund, including shares purchased by T. Rowe Price fund-of-funds products, and shares purchased by discretionary accounts managed by T. Rowe Price or one of its
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affiliates (please note that shareholders of the investing T. Rowe Price Fund are still subject to the policy); and
· Transactions initiated by the trustee or adviser to a donor-advised charitable gift fund as approved by T. Rowe Price.
Transactions in certain rebalancing, asset allocation, wrap programs, and other advisory programs, as well as non-T. Rowe Price fund-of-funds products, may also be exempt from the 30-Day Purchase Block, subject to prior written approval by T. Rowe Price.
In addition to restricting transactions in accordance with the 30-Day Purchase Block, T. Rowe Price may, in its discretion, reject (or instruct a financial intermediary to reject) any purchase or exchange into a fund from a person (which includes individuals and entities) whose trading activity could disrupt the management of the fund or dilute the value of the funds shares, including trading by persons acting collectively (e.g., following the advice of a newsletter). Such persons may be barred, without prior notice, from further purchases of T. Rowe Price Funds for a period longer than 30 calendar days, or permanently.
Financial Intermediary Accounts If you invest in T. Rowe Price Funds through a financial intermediary, you should review the financial intermediarys materials carefully or consult with the financial intermediary directly to determine the trading policy that will apply to your trades in the funds as well as any other rules or conditions on transactions that may apply. If T. Rowe Price is unable to identify a transaction placed through a financial intermediary as exempt from the excessive trading policy, the 30-Day Purchase Block may apply.
Financial intermediaries may maintain their underlying accounts directly with the fund, although they often establish an omnibus account (one account with the fund that represents multiple underlying shareholder accounts) on behalf of their customers. When financial intermediaries establish omnibus accounts in the T. Rowe Price Funds, T. Rowe Price is not able to monitor the trading activity of the underlying shareholders. However, T. Rowe Price monitors aggregate trading activity at the financial intermediary (omnibus account) level in an attempt to identify activity that indicates potential excessive or short-term trading. If it detects such trading activity, T. Rowe Price may contact the financial intermediary to request personal identifying information and transaction histories for some or all underlying shareholders (including plan participants, if applicable) pursuant to a written agreement that T. Rowe Price has entered into with each financial intermediary. Any nonpublic personal information provided to the fund (for example, a shareholders taxpayer identification number or transaction records) is subject to the funds privacy policy. If T. Rowe Price believes that excessive or short-term trading has occurred and there is no exception for such trades under the funds Excessive and Short-Term Trading Policy as previously described, it will instruct the financial intermediary to impose restrictions to discourage such practices and take appropriate action with respect to the underlying shareholder, including restricting purchases for 30 calendar
T. Rowe Price | 38 |
days or longer. Each financial intermediary has agreed to execute such instructions pursuant to a written agreement. There is no assurance that T. Rowe Price will be able to properly enforce its excessive trading policies for omnibus accounts. Because T. Rowe Price generally relies on financial intermediaries to provide information and impose restrictions for omnibus accounts, its ability to monitor and deter excessive trading will be dependent upon the intermediaries timely performance of their responsibilities.
T. Rowe Price may allow a financial intermediary or other third party to maintain restrictions on trading in the T. Rowe Price Funds that differ from the 30-Day Purchase Block. An alternative excessive trading policy would be acceptable to T. Rowe Price if it believes that the policy would provide sufficient protection to the T. Rowe Price Funds and their shareholders that is consistent with the excessive trading policy adopted by the funds Boards.
Retirement Plan Accounts If
shares are held in a retirement plan, generally the
30-Day Purchase Block applies only to shares
redeemed by a participant-directed exchange to another fund. However, the 30-Day Purchase Block may apply
to transactions other than exchanges depending on how shares of the plan are held at T. Rowe Price
or the excessive trading policy applied by your plans recordkeeper. An alternative excessive trading
policy may apply to the T. Rowe Price Funds where a retirement plan has its own policy deemed acceptable
to T. Rowe Price. You should contact T. Rowe Price or your plan recordkeeper to determine which
of your transactions are subject to the funds 30-Day Purchase Block or an alternative policy.
There is no guarantee that T. Rowe Price will be able to identify or prevent all excessive or short-term trades or trading practices.
Unclaimed Accounts and Uncashed Checks
If your account has no activity for a certain period of time and/or mail sent to you from T. Rowe Price (or your financial intermediary) is returned by the post office, T. Rowe Price (or your financial intermediary) may be required to transfer your account and any assets related to uncashed checks to the appropriate state under its abandoned property laws. To avoid such action, it is important to keep your account address up to date and periodically contact T. Rowe Price at least once every two years.
Delivery of Shareholder Documents
If two or more accounts own the same fund, share the same address, and T. Rowe Price reasonably believes that the two accounts are part of the same institution, we may economize on fund expenses by mailing only one shareholder report and prospectus for the fund. If you do not want your mailings to be householded, please call Financial Institution Services.
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Signature Guarantees
A Medallion signature guarantee is designed to protect you and the T. Rowe Price Funds from fraud by verifying your signature.
A signature guarantee may be required in certain situations, such as:
· Remitting redemption proceeds to any person, address, or bank account not on file or
· Changing the account registration or broker-dealer of record for an account.
Consult Financial Institution Services for specific requirements.
The signature guarantee must be obtained from a financial institution that is a participant in a Medallion signature guarantee program. You can obtain a Medallion signature guarantee from certain banks, savings institutions, broker-dealers, and other guarantors acceptable to T. Rowe Price. When obtaining a Medallion signature guarantee, please discuss with the guarantor the dollar amount of your proposed transaction. It is important that the level of coverage provided by the guarantors stamp covers the dollar amount of the transaction or it may be rejected. We cannot accept guarantees from notaries public or organizations that do not provide reimbursement in the case of fraud.
Fund Operations and Shareholder Services
T. Rowe Price and The Bank of New York Mellon, subject to the oversight of T. Rowe Price, each provide certain accounting services to the T. Rowe Price Funds. T. Rowe Price Services, Inc., acts as the transfer agent and dividend disbursing agent and provides shareholder and administrative services to the funds. T. Rowe Price Retirement Plan Services, Inc., provides recordkeeping, sub-transfer agency, and administrative services for certain types of retirement plans investing in the funds. These companies receive compensation from the funds for their services. The F Class may also pay financial intermediaries for performing shareholder and administrative services for underlying shareholders in omnibus accounts. All of the fees discussed above are included in a funds financial statements and, except for funds that have an all-inclusive management fee, are also reflected in the Other expenses line that appears in a funds fee table in Section 1.
Each fund intends to qualify to be treated each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. In order to qualify, a fund must satisfy certain income, diversification, and distribution requirements. A regulated investment company is not subject to U.S. federal income tax at the portfolio level on income and gains from investments that are distributed to shareholders. However, if a fund were to fail to qualify as a regulated investment