| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
| FORM N-Q |
| QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED |
| MANAGEMENT INVESTMENT COMPANIES |
| Investment Company Act File Number: 811-5833 |
| T. Rowe Price Institutional International Funds, Inc. |
| (Exact name of registrant as specified in charter) |
| 100 East Pratt Street, Baltimore, MD 21202 |
| (Address of principal executive offices) |
| David Oestreicher |
| 100 East Pratt Street, Baltimore, MD 21202 |
| (Name and address of agent for service) |
| Registrant’s telephone number, including area code: (410) 345-2000 |
| Date of fiscal year end: December 31 |
| Date of reporting period: September 30, 2011 |
Item 1. Schedule of Investments
 |
|
Institutional International Funds |
September
30, 2011 |
| T. ROWE PRICE INSTITUTIONAL EMERGING MARKETS BOND FUND |
|
|
Unaudited
The accompanying notes are an integral part of this Portfolio of Investments.
T. Rowe Price Institutional Emerging
Markets Bond Fund
Unaudited
Notes To Portfolio of Investments
T. Rowe Price Institutional International Funds, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The Institutional Emerging Markets Bond Fund (the fund), a nondiversified, open-end management investment company, is one portfolio established by the corporation. The fund seeks to provide high income and capital appreciation.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Basis of
Preparation
The accompanying
Portfolio of Investments was prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP), which require the use
of estimates made by management. Management believes that estimates and
valuations are appropriate; however, actual results may differ from those
estimates, and the valuations reflected in the Portfolio of Investments may
differ from the values ultimately realized upon sale or maturity.
Investment
Transactions
Investment transactions
are accounted for on the trade date.
Currency
Translation
Assets, including
investments, and liabilities denominated in foreign currencies are translated
into U.S. dollar values each day at the prevailing exchange rate, using the mean
of the bid and asked prices of such currencies against U.S. dollars as quoted by
a major bank. Purchases and sales of securities are translated into U.S. dollars
at the prevailing exchange rate on the date of the transaction.
NOTE 2 – VALUATION
The fund’s financial instruments are reported at fair value as defined by GAAP. The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business.
Valuation
Methods
Debt securities are generally
traded in the over-the-counter (OTC) market. Securities with remaining
maturities of one year or more at the time of acquisition are valued at prices
furnished by dealers who make markets in such securities or by an independent
pricing service, which considers the yield or price of bonds of comparable
quality, coupon, maturity, and type, as well as prices quoted by dealers who
make markets in such securities. Securities with remaining maturities of less
than one year at the time of acquisition
generally use amortized cost in local
currency to approximate fair value. However, if amortized cost is deemed not to
reflect fair value or the fund holds a significant amount of such securities
with remaining maturities of more than 60 days, the securities are valued at
prices furnished by dealers who make markets in such securities or by an
independent pricing service.
Investments in mutual funds are valued at the mutual fund’s closing net asset value per share on the day of valuation. Forward currency exchange contracts are valued using the prevailing forward exchange rate. Swaps are valued at prices furnished by independent swap dealers or by an independent pricing service.
Other investments, including restricted securities and private placements, and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors (the Board). Subject to oversight by the Board, the Valuation Committee develops pricing-related policies and procedures and approves all fair-value determinations. The Valuation Committee regularly makes good faith judgments, using a wide variety of sources and information, to establish and adjust valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of private-equity instruments, the Valuation Committee considers a variety of factors, including the company’s business prospects, its financial performance, strategic events impacting the company, relevant valuations of similar companies, new rounds of financing, and any negotiated transactions of significant size between other investors in the company. Because any fair-value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions.
Valuation
Inputs
Various inputs are used to
determine the value of the fund’s financial instruments. These inputs are
summarized in the three broad levels listed below:
Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – observable inputs other than Level 1 quoted prices (including, but not limited to, quoted prices for similar financial instruments, interest rates, prepayment speeds, and credit risk)
Level 3 – unobservable inputs
Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund’s own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. The following table summarizes the fund’s financial instruments, based on the inputs used to determine their values on September 30, 2011:
NOTE 3 - DERIVATIVE INSTRUMENTS
The fund may invest in derivative instruments. As defined by GAAP, a derivative is a financial instrument whose value is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable; it requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the expected risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its prospectus and Statement of Additional Information. The fund may use derivatives for a variety of purposes, such as seeking to hedge against declines in principal value, increase yield, invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, or to adjust portfolio duration and credit exposure. The risks associated with the use of derivatives are different from, and potentially much greater than, the risks associated with investing directly in the instruments on which the derivatives are based. Investments in derivatives can magnify returns positively or negatively; however, the fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover the settlement obligations under its open derivative contracts.
The fund values its derivatives at fair value, as described below and in Note 2, and recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting, even for derivatives employed as economic hedges. The fund does not offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral.
Forward Currency Exchange
Contracts
The fund uses forward
currency exchange contracts (forwards) primarily to protect its non-U.S.
dollar-denominated holdings from adverse currency movements and to gain exposure
to currencies for the purposes of risk management or enhanced return. A forward
involves an obligation to purchase or sell a fixed amount of a specific currency
on a future date at a price set at the time of the contract. Although certain
forwards may be settled by exchanging only the net gain or loss on the contract,
most forwards are settled with the exchange of the underlying currencies in
accordance with the specified terms. Forwards are valued at the unrealized gain
or loss on the contract, which reflects the net amount the fund either is
entitled to receive or obligated to deliver, as measured by the difference
between the forward exchange rates at the date of entry into the contract and
the forward rates at the reporting date. Risks related to the use of forwards
include the possible failure of counterparties to meet the terms of the
agreements; that anticipated currency movements will not occur thereby reducing
the fund’s total return; and the potential for losses in excess of the fund’s
initial investment.
Credit Default
Swaps
The fund may use swaps in an
effort to manage exposure to changes in interest rates, inflation rates, and
credit quality; to adjust overall exposure to certain markets; to enhance total
return or protect the value of portfolio securities; to serve as a cash
management tool; and/or to adjust portfolio duration or credit exposure. Credit
default swaps are agreements where one party (the protection buyer) agrees to
make periodic payments to another party (the protection seller) in exchange for
protection against specified credit events, such as certain defaults and
bankruptcies related to an underlying credit instrument, or issuer or index of
such instruments. Upon occurrence of a specified credit event, the protection
seller is required to pay the buyer the difference between the notional amount
of the swap and the value of the underlying credit, either in the form of a net
cash settlement or by paying the gross notional amount and accepting delivery of
the relevant underlying credit. For credit default swaps where the underlying
credit is an index, a specified credit event may affect all or individual
underlying securities included in the index and will be settled based upon the
relative weighting of the affected underlying security(s) within the index.
Generally, the payment risk for the seller of protection is inversely related to
the current market price of the underlying credit or, in the case of an index
swap, the market value of the contract relative to the notional amount.
Therefore, the payment risk increases as the price of the relevant underlying
credit, or market value of the index swap, declines due to market valuations of
credit quality. The notional amount of protection sold by the fund reflects the
maximum potential amount the fund could be required to pay under such contracts.
The value of a swap included in net assets is the unrealized gain or loss on the
contract plus or minus any unamortized premiums paid or received, respectively.
Risks related to the use of credit default swaps include the possible inability
of the fund to accurately assess the current and future creditworthiness of
underlying issuers, the possible failure of a counterparty to perform in
accordance with the terms of the swap agreements, potential government
regulation that could adversely affect the fund’s swap investments, and
potential losses in excess of the fund’s initial investment.
NOTE 4 – OTHER INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.
Emerging
Markets
The fund may invest, directly
or through investments in T. Rowe Price institutional funds, in securities of
companies located in emerging markets, issued by governments of emerging market
countries, and/or denominated in or linked to the currencies of
emerging market countries. Emerging market securities are often subject to
greater price volatility, less liquidity, and higher rates of inflation than
U.S. securities. In addition, emerging markets may be subject to greater
political, economic and social uncertainty and differing regulatory environments
that may potentially impact the fund’s ability to buy or sell certain securities
or repatriate proceeds to U.S. dollars.
Restricted
Securities
The fund may invest in
securities that are subject to legal or contractual restrictions on resale.
Prompt sale of such securities at an acceptable price may be difficult and may
involve substantial delays and additional costs.
Counterparty Risk and
Collateral
The fund has entered into
collateral agreements with certain counterparties to mitigate counterparty risk
associated with certain over-the-counter (OTC) financial instruments, including
swaps, forward currency exchange contracts, TBA purchase commitments, and OTC
options (collectively, covered OTC instruments). Subject to certain minimum
exposure requirements (which typically range from $100,000 to $500,000),
collateral requirements generally are determined and transfers made based on the
net aggregate unrealized gain or loss on all covered OTC instruments covered by
a particular collateral agreement with a specified counterparty. Collateral,
both pledged by the fund to a counterparty and pledged by a counterparty to the
fund, is held in a segregated account by a third-party agent and can be in the
form of cash or debt securities issued by the U.S. government or related
agencies. Securities posted as collateral by the fund to a counterparty are so
noted in the accompanying Portfolio of Investments and remain in the fund’s net
assets. As of September 30, 2011, no collateral had been posted by the fund to
counterparties. In accordance with GAAP, cash pledged by counterparties to the
fund is included in the fund’s net assets; however, securities pledged by
counterparties to the fund are not recorded by the fund. As of September 30,
2011, collateral pledged by counterparties to the fund consisted of securities
valued at $1,041,000.
At any point in time, the fund’s risk of loss from counterparty credit risk on covered OTC instruments is the aggregate unrealized gain on appreciated covered OTC instruments in excess of collateral, if any, pledged by the counterparty to the fund. In accordance with the terms of the relevant derivatives agreements, counterparties to OTC derivatives may be able to terminate derivative contracts prior to maturity after the occurrence of certain stated events, such as a decline in net assets above a certain percentage or a failure by the fund to perform its obligations under the contract. Upon termination, all transactions would typically be liquidated and a net amount would be owed by or payable to the fund.
NOTE 5 - FEDERAL INCOME TAXES
At September 30, 2011, the cost of investments for federal income tax purposes was $179,953,000. Net unrealized loss aggregated $1,355,000 at period-end, of which $8,900,000 related to appreciated investments and $10,255,000 related to depreciated investments.
NOTE 6 - RELATED PARTY TRANSACTIONS
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds), open-end management investment companies managed by T. Rowe Price Associates, Inc. (Price Associates) and considered affiliates of the fund. The T. Rowe Price Reserve Investment Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates and are not available for direct purchase by members of the public. The T. Rowe Price Reserve Investment Funds pay no investment management fees.
T. ROWE PRICE INSTITUTIONAL
INTERNATIONAL BOND FUND
Unaudited
The accompanying notes are an integral part of this Portfolio of Investments.
T. Rowe Price Institutional
International Bond Fund
Unaudited
Notes To Portfolio of Investments
T. Rowe Price Institutional International Funds, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The Institutional International Bond Fund (the fund), a nondiversified, open-end management investment company, is one portfolio established by the corporation. The fund seeks to provide high current income and capital appreciation.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Basis of
Preparation
The accompanying
Portfolio of Investments was prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP), which require the use
of estimates made by management. Management believes that estimates and
valuations are appropriate; however, actual results may differ from those
estimates, and the valuations reflected in the Portfolio of Investments may
differ from the values ultimately realized upon sale or maturity.
Investment
Transactions
Investment transactions
are accounted for on the trade date.
Currency
Translation
Assets, including
investments, and liabilities denominated in foreign currencies are translated
into U.S. dollar values each day at the prevailing exchange rate, using the mean
of the bid and asked prices of such currencies against U.S. dollars as quoted by
a major bank. Purchases and sales of securities are translated into U.S. dollars
at the prevailing exchange rate on the date of the transaction.
NOTE 2 – VALUATION
The fund’s financial instruments are reported at fair value as defined by GAAP. The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business.
Valuation
Methods
Debt securities are generally
traded in the over-the-counter (OTC) market. Securities with remaining
maturities of one year or more at the time of acquisition are valued at prices
furnished by dealers who make markets in such securities or by an independent
pricing service, which considers the yield or price of bonds of comparable
quality, coupon, maturity, and type, as well as prices quoted by dealers who
make markets in such securities. Securities with remaining maturities of less
than one year at the time of acquisition
generally use amortized cost in local
currency to approximate fair value. However, if amortized cost is deemed not to
reflect fair value or the fund holds a significant amount of such securities
with remaining maturities of more than 60 days, the securities are valued at
prices furnished by dealers who make markets in such securities or by an
independent pricing service.
Investments in mutual funds are valued at the mutual fund’s closing net asset value per share on the day of valuation. Financial futures contracts are valued at closing settlement prices. Forward currency exchange contracts are valued using the prevailing forward exchange rate. Swaps are valued at prices furnished by independent swap dealers or by an independent pricing service.
Other investments, including restricted securities and private placements, and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value, are stated at fair value as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund’s Board of Directors (the Board). Subject to oversight by the Board, the Valuation Committee develops pricing-related policies and procedures and approves all fair-value determinations. The Valuation Committee regularly makes good faith judgments, using a wide variety of sources and information, to establish and adjust valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of private-equity instruments, the Valuation Committee considers a variety of factors, including the company’s business prospects, its financial performance, strategic events impacting the company, relevant valuations of similar companies, new rounds of financing, and any negotiated transactions of significant size between other investors in the company. Because any fair-value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions.
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with closing prices and information to evaluate and/or adjust those prices. The fund cannot predict how often it will use closing prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices. Additionally, trading in the underlying securities of the fund may take place in various foreign markets on certain days when the fund is not open for business and does not calculate a net asset value. As a result, net asset values may be significantly affected on days when shareholders cannot make transactions.
Valuation
Inputs
Various inputs are used to
determine the value of the fund’s financial instruments. These inputs are
summarized in the three broad levels listed below:
Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – observable inputs other than Level 1 quoted prices (including, but not limited to, quoted prices for similar financial instruments, interest rates, prepayment speeds, and credit risk)
Level 3 – unobservable inputs
Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund’s own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. For example, non-U.S. equity securities actively traded in foreign markets generally are reflected in Level 2 despite the availability of closing prices because the fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described above. The following table summarizes the fund’s financial instruments, based on the inputs used to determine their values on September 30, 2011:
NOTE 3 - DERIVATIVE INSTRUMENTS
The fund may invest in derivative instruments. As defined by GAAP, a derivative is a financial instrument whose value is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable; it requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the expected risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its prospectus and Statement of Additional Information. The fund may use derivatives for a variety of purposes, such as seeking to hedge against declines in principal value, increase yield, invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, or to adjust portfolio duration and credit exposure. The risks associated with the use of derivatives are different from, and potentially much greater than, the risks associated with investing directly in the instruments on which the derivatives are based. Investments in derivatives can magnify returns positively or negatively; however, the fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover the settlement obligations under its open derivative contracts.
The fund values its derivatives at fair value, as described below and in Note 2, and recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting, even for derivatives employed as economic hedges. The fund does not offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral.
Forward Currency Exchange
Contracts
The fund uses forward
currency exchange contracts (forwards) primarily to protect its non-U.S.
dollar-denominated holdings from adverse currency movements and to gain exposure
to currencies for the purposes of risk management or enhanced return. A forward
involves an obligation to purchase or sell a fixed amount of a specific currency
on a future date at a price set at the time of the contract. Although certain
forwards may be settled by exchanging only the net gain or loss on the contract,
most forwards are settled with the exchange of the underlying currencies in
accordance with the specified terms. Forwards are valued at the unrealized gain
or loss on the contract, which reflects the net amount the fund either is
entitled to receive or obligated to deliver, as measured by the difference
between the forward exchange rates at the date of entry into the contract and
the forward rates at the reporting date. Risks related to the use of forwards
include the possible failure of counterparties to meet the terms of the
agreements; that anticipated currency movements will not occur thereby reducing
the fund’s total return; and the potential for losses in excess of the fund’s
initial investment.
Futures
Contracts
The fund may enter into
futures contracts to manage exposure to interest rate and yield curve movements,
security prices, foreign currencies, credit quality, and mortgage prepayments;
as an efficient means of adjusting exposure to all or part of a target market;
to enhance income; as a cash management tool; and/or to adjust portfolio
duration and credit exposure. A futures contract provides for the future sale by
one party and purchase by another of a specified amount of a specific underlying
financial instrument at an agreed upon price, date, time, and place. The fund
currently invests only in exchange-traded futures, which generally are
standardized as to maturity date, underlying financial instrument, and other
contract terms. Upon entering into a futures contract, the fund is required to
deposit with the broker cash or securities in an amount equal to a certain
percentage of the contract value (initial margin deposit); the margin deposit
must then be maintained at the established level over the life of the contract.
Subsequent payments are made or received by the fund each day to settle daily
fluctuations in the value of the contract (variation margin), which reflect
changes in the value of the underlying financial instrument. At its election,
the fund may also hold additional U.S. dollars and foreign currencies in an
account with the broker to settle future variation margin obligations. Variation
margin is recorded as unrealized gain or loss until the contracts are closed.
For a futures contract, the value included in net assets is the amount of
unsettled variation margin, if any. Risks related to the use of futures
contracts include possible illiquidity of the futures markets, contract prices
that can be highly volatile and imperfectly correlated to movements in hedged
security values, interest rates, and/or
currency values; and potential losses in
excess of the fund’s initial investment.
Credit Default
Swaps
The fund may use swaps in an
effort to manage exposure to changes in interest rates, inflation rates, and
credit quality; to adjust overall exposure to certain markets; to enhance total
return or protect the value of portfolio securities; to serve as a cash
management tool; and/or to adjust portfolio duration or credit exposure. Credit
default swaps are agreements where one party (the protection buyer) agrees to
make periodic payments to another party (the protection seller) in exchange for
protection against specified credit events, such as certain defaults and
bankruptcies related to an underlying credit instrument, or issuer or index of
such instruments. Upon occurrence of a specified credit event, the protection
seller is required to pay the buyer the difference between the notional amount
of the swap and the value of the underlying credit, either in the form of a net
cash settlement or by paying the gross notional amount and accepting delivery of
the relevant underlying credit. For credit default swaps where the underlying
credit is an index, a specified credit event may affect all or individual
underlying securities included in the index and will be settled based upon the
relative weighting of the affected underlying security(s) within the index. The
value of a swap included in net assets is the unrealized gain or loss on the
contract plus or minus any unamortized premiums paid or received, respectively.
Risks related to the use of credit default swaps include the possible inability
of the fund to accurately assess the current and future creditworthiness of
underlying issuers, the possible failure of a counterparty to perform in
accordance with the terms of the swap agreements, potential government
regulation that could adversely affect the fund’s swap investments, and
potential losses in excess of the fund’s initial investment.
NOTE 4 – OTHER INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.
Emerging
Markets
The fund may invest, directly
or through investments in T. Rowe Price institutional funds, in securities of
companies located in emerging markets, issued by governments of emerging market
countries, and/or denominated in or linked to the currencies of
emerging market countries. Emerging market securities are often subject to
greater price volatility, less liquidity, and higher rates of inflation than
U.S. securities. In addition, emerging markets may be subject to greater
political, economic and social uncertainty and differing regulatory environments
that may potentially impact the fund’s ability to buy or sell certain securities
or repatriate proceeds to U.S. dollars.
Restricted
Securities
The fund may invest in
securities that are subject to legal or contractual restrictions on resale.
Prompt sale of such securities at an acceptable price may be difficult and may
involve substantial delays and additional costs.
Counterparty Risk and
Collateral
The fund has entered into
collateral agreements with certain counterparties to mitigate counterparty risk
associated with certain over-the-counter (OTC) financial instruments, including
swaps, forward currency exchange contracts, TBA purchase commitments, and OTC
options (collectively, covered OTC instruments). Subject to certain minimum
exposure requirements (which typically range from $100,000 to $500,000),
collateral requirements generally are determined and transfers made based on the
net aggregate unrealized gain or loss on all OTC instruments covered by a
particular collateral agreement with a specified counterparty. Collateral, both
pledged by the fund to a counterparty and pledged by a counterparty to the fund,
is held in a segregated account by a third-party agent and can be in the form of
cash or debt securities issued by the U.S. government or related agencies.
Securities posted as collateral by the fund to a counterparty are so noted in
the accompanying Portfolio of Investments and remain in the fund’s net assets.
As of September 30, 2011, securities valued at $300,000 had been posted by the
fund to counterparties. In accordance with GAAP, cash pledged by counterparties
to the fund is included in the fund’s net assets, however; securities pledged by
counterparties to the fund are not recorded by the fund. As of September 30,
2011, collateral pledged by counterparties to the fund consisted of securities
valued at $1,536,000.
At any point in time, the fund’s risk of loss from counterparty credit risk on covered OTC instruments is the aggregate unrealized gain on appreciated covered OTC instruments in excess of collateral, if any, pledged by the counterparty to the fund. Counterparty risk related to exchange-traded futures and options contracts is minimal because the exchange’s clearinghouse provides protection against counterparty defaults. Generally, for exchange-traded derivatives such as futures and options, each broker, in its sole discretion, may change margin requirements applicable to the fund. In accordance with the terms of the relevant derivatives agreements, counterparties to OTC derivatives may be able to terminate derivative contracts prior to maturity after the occurrence of certain stated events, such as a decline in net assets above a certain percentage or a failure by the fund to perform its obligations under the contract. Upon termination, all transactions would typically be liquidated and a net amount would be owed by or payable to the fund.
NOTE 5 - FEDERAL INCOME TAXES
At September 30, 2011, the cost of investments for federal income tax purposes was $149,666,000. Net unrealized loss aggregated $396,000 at period-end, of which $8,943,000 related to appreciated investments and $9,339,000 related to depreciated investments.
NOTE 6 - RELATED PARTY TRANSACTIONS
The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds), open-end management investment companies managed by T. Rowe Price Associates, Inc. (Price Associates) and considered affiliates of the fund. The T. Rowe Price Reserve Investment Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates and are not available for direct purchase by members of the public. The T. Rowe Price Reserve Investment Funds pay no investment management fees.
Item 2. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-Q was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 3. Exhibits.
Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Institutional International Funds, Inc.
| By | /s/ Edward C. Bernard | ||
| Edward C. Bernard | |||
| Principal Executive Officer | |||
| Date | November 17, 2011 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By | /s/ Edward C. Bernard | ||
| Edward C. Bernard | |||
| Principal Executive Officer | |||
| Date | November 17, 2011 | ||
| By | /s/ Gregory K. Hinkle | ||
| Gregory K. Hinkle | |||
| Principal Financial Officer | |||
| Date | November 17, 2011 | ||