UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-05833
| T. Rowe Price Institutional International Funds, Inc. |
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| (Exact name of registrant as specified in charter) |
| 100 East Pratt Street, Baltimore, MD 21202 |
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| (Address of principal executive offices) |
| David Oestreicher |
| 100 East Pratt Street, Baltimore, MD 21202 |
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| (Name and address of agent for service) |
Registrant’s telephone number, including area
code: (410) 345-2000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2017
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Institutional Frontier Markets Equity Fund |
October 31, 2017 |
| Highlights |
| ● |
Frontier equity markets produced strong returns in the 12-month period ended October 31, 2017. |
| ● |
Your fund performed mostly in line with the MSCI Frontier Markets Index for the year. |
| ● |
In frontier Europe, most of our holdings are in Romania and Georgia, but we are expanding our search for new opportunities. In Africa, we are also warming up to new investment opportunities. We are
impressed with Vietnam’s macro backdrop, but Sri Lanka is our largest country overweight, as we anticipate a construction boom and strong growth in the next few years. |
| ● |
With about two-thirds of our holdings not represented in the MSCI benchmark, we believe our rigorous research efforts and active management can harness the long-term potential of frontier equity markets and help us to provide a meaningful performance advantage over time. |
The views and opinions in this report were current as of October 31, 2017. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
Manager’s Letter
T. Rowe Price Institutional Frontier Markets Equity Fund
Dear Investor
Frontier equity markets, as measured by the MSCI Frontier Markets Index, produced strong returns in the 12-month period ended October 31, 2017. In Asia, stocks in Vietnam produced solid returns, whereas Sri Lankan shares rose modestly. In the Middle East, the Kuwaiti and Saudi Arabian markets surged as oil prices firmed and global growth broadened across developed and emerging countries. In Africa, Kenyan and Nigerian shares also did well in local currency terms. In Europe, Romania and Georgia continued their strong growth trajectories, while in Latin America, Argentina’s market soared as the economy continued to recover and election results enabled President Mauricio Macri to press ahead with his reform agenda.
Your fund returned 11.10% in the second half of our fiscal year and 27.13% for the full year. As shown in the Performance Comparison table, the fund was mostly in line with the MSCI Frontier Markets Index for the 12-month period but lagged in the last six months.
For the one-year period, stock selection in several countries, especially Vietnam, Bangladesh, and Sri Lanka, worked in our favor. However, underweighting the strong Kuwaiti market—because we have struggled to find attractive long-term investments there—worked against us. Overweighting Sri Lanka also hurt our relative results. While our bet may have been a little early, we believe Sri Lanka is poised for better growth, and we are positioned to take advantage of it.
ASIA
Sri Lanka
Stocks in Sri Lanka rose close to 7% over the last year. Gross domestic product (GDP) growth is expected to be around 4.5% to 5% this year, and the
central bank is near the end of a tightening cycle. However, some economic reforms—after almost three years of government inactivity—should help lift GDP growth in 2018 and 2019.
Sri Lanka is now our largest country overweight versus the benchmark. It is strategically located in the Indian Ocean, yet it has been overlooked by many institutional investors in recent years due in part to some political deadlock and delayed infrastructure projects. However, we believe that the country is on the cusp of a construction boom, as infrastructure projects resume and as plans for new ports and major roads take shape. Tokyo Cement Co Lanka should be well positioned to capitalize on the buildout. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)
Our largest position in Sri Lanka is John Keells Holdings, which owns businesses in transportation, leisure, property, and consumer-related industries. We also own shares of Ceylon Cold Stores, which operates grocery stores and makes ice cream and soft drinks. Ceylon was one of our better-performing holdings over the last year. In the banking industry, we are seeing strong growth but cheap stock valuations. Two of our holdings—Hatton National Bank and Commercial Bank of Ceylon—produced reasonable gains. Both expect this year’s strong loan growth to persist for the next two to three years.
Pakistan
Pakistan moved to the emerging markets universe in June, and we sold most of our holdings in the second half of our fiscal year. As of October 31, we
owned only MCB Bank and Nestle Pakistan. We expect to maintain these very small positions until the investment
thesis for each stock either runs its course or is fully reflected in valuation.
Vietnam
Vietnamese stocks returned about 20% over the last 12 months, mostly due to an 18% gain in the second half of our fiscal year. Vietnam has one of the
healthiest macro backdrops in the frontier universe, and companies have been increasingly lifting foreign ownership restrictions, which has attracted more investment capital and boosted stock valuations. At the end of October, we were overweighting the
country.
In the financials sector, we enjoyed excellent returns from Military Commercial Joint Stock Bank, whose earnings have been driven by high loan growth and strong net interest margins. We believe it is still one of the cheapest banks in Vietnam. Asia Commercial Bank/Vietnam, the largest private bank with a focus on retail customers, also produced good returns. Toward the end of our reporting period, we added Vietnam Prosperity JSC Bank to the portfolio. The company, which has an investor-friendly senior management team, should benefit from a broader banking industry recovery.
In other segments, electronics retailer Mobile World Investment was one of the top contributors. Real estate companies Vingroup and Nam Long Investment also produced good returns amid strong housing demand from a young and growing population. We maintained a position in Vietnam Dairy Products, which has enjoyed strong topline growth and performed well in recent years, helped by rising milk prices.
Bangladesh
We have only a few holdings here, and their performance was mixed over the last year. For example, BRAC Bank
performed very well thanks to strong earnings; we trimmed our position on strength, but we believe the market does not fully appreciate its upside potential as credit growth increases. GrameenPhone, a major telecommunications player, also posted good returns. The company remains far ahead of its competitors as smartphones proliferate and as management develops a high-growth data business unit.
Olympic Industries, which makes biscuits and cookies, declined.
MIDDLE EAST AND AFRICA
Kuwait
Kuwaiti shares climbed nearly 35% over the last year. Contributing to the rally was FTSE’s recent decision to add Kuwait to its emerging markets
index in September 2018. In the past, we have had some difficulty finding high-quality, attractively valued companies here, but we are looking more closely due to an improving environment. During recent visits to Kuwait, we have seen signs that some
economic stresses are dissipating and that much-needed infrastructure projects are getting underway. We like the prospects for logistics and warehousing company Agility, so we added it
to the fund. We also have a more favorable sentiment toward the banking system, in part because of a pickup in credit growth, so we added attractively valued Burgan Bank. Over the last
year, our position in National Bank of Kuwait, the country’s largest bank, was a significant performance contributor thanks in part to solid earnings. University operator
Human Soft Holding also did well, benefiting from more students studying domestically rather than abroad.
Saudi Arabia
Stocks in Saudi Arabia rose 21% over the last year. While firming oil prices have benefited this oil-rich kingdom, the country is pursuing an
ambitious economic and social reform plan spearheaded by Crown Prince Mohammed bin Salman, the 32-year-old son of King Salman. The crown prince is likely to succeed his father in the near future and—through his Vision 2030 program to reduce the
kingdom’s reliance on oil revenues—hopes to unlock Saudi Arabia’s substantial economic potential. However, the economy has been weak this year, and we have reduced our exposure slightly since the end of April.
Banque Saudi Fransi and Samba Financial were reasonable contributors over the last year. We believe banks will make more profitable loans as Saudi interest rates—which are tied to U.S. rates—rise over time. Food and dairy company Almarai also contributed to our results, as did hospital operator Al Mouwasat Medical Services, a well-managed company that is benefiting not only from increased demand, but also from greater government spending on health care. In the last six months, we added Al Hammadi Development & Investment to the portfolio. Given the favorable tailwinds for the Saudi health care industry, we believe this hospital provider is attractively valued and will experience an earnings pickup following a rough second half of 2016. While Bupa Arabia for Cooperative Insurance was disappointing, we believe this leading Saudi health insurer has strong medium-term growth prospects.
Nigeria
In Nigeria, there is still a wide spread of currency rates being used. Many of the banks are using the strongest rate to report their earnings, while
investors, such as ourselves, are able to buy and sell naira at the weakest rate. We have been slowly increasing our exposure to Nigeria, as the economy is now improving and as U.S. dollar liquidity has improved substantially. However, for us to be
completely comfortable and take an overweight position, we would like to see one unified, free-floating currency rate. For now, we are focusing our positions in companies such as Dangote Cement, Guaranty Trust Bank and consumer companies Nigerian Breweries and Nestle Foods Nigeria.
Kenya
We maintained a stake in the dominant telecom services provider Safaricom but
eliminated ARM Cement due to concerns about its balance sheet. We established a position in Equity Group Holdings,
Kenya’s second-largest bank, which has managed to partially mitigate the effects of the country’s mandated interest rate caps. We believe that the bank will continue to weather the tough economic backdrop, and that it could experience
stronger and more profitable loan growth if the rate caps are amended or removed.
FRONTIER EUROPE
Most of our exposure is in Georgia and Romania. In the former, our position in BGEO made a decent contribution to 12-month performance. BGEO, which is the second-largest bank with a focus on retail customers, is poised to benefit from improving macroeconomic trends. Georgia
Healthcare, on the other hand, was mostly flat. This has been a transition year for the hospital and clinic operator, as it is digesting a recent acquisition of a pharmacy retailer. We believe it has plenty of upside
potential over the next few years.
In Romania, where economic growth has been solid for several years, our stake in Banca Transilvania yielded good results. Hospital operator MedLife, which is growing through the integration of acquisitions, plans to issue new shares to raise capital. We remain confident in the company’s long-term prospects and added to our position, as we believe it is trading at a meaningful discount to its peers.
In the second half of our fiscal year, we established small positions in Croatia and Lithuania. Zagrebacka Banka is the largest bank in Croatia, and its earnings growth should turn strongly positive starting in 2018. Zagrebacka has a strong capital position, an attractive valuation, and a high dividend yield. Siauliu Bankas is the fourth-largest bank in Lithuania; it has a strong growth profile and an attractive valuation.
LATIN AMERICA
Stocks in Argentina surged 51% for the year. The two main drivers for the market were the continuing economic recovery and expectations for
President Macri’s political party to do well in the October elections—which it did, thus supporting his efforts to further a reform agenda. We increased our allocation due to our greater confidence in the macro environment. New holdings
include mobile and cable operator Telecom Argentina, which should benefit from synergies connected to its merger with Cablevision
Holding, and Transportadora de Gas Del Sur, which produces natural gas liquids and is benefiting from gas transportation tariff increases.
Over the last year, Grupo Financiero Galicia and Grupo Supervielle were two of our top contributors. These holding companies own banks that are direct beneficiaries of the improving Argentinian macro environment, which is contributing to a ramp-up in credit growth. The former recently decided to raise about $600 million in new capital, and we added to our position as the stock price dipped. We also purchased shares of BBVA Banco Frances, another likely beneficiary of positive macro trends.
In the energy sector, YPF was a significant contributor to our results. This integrated energy giant has benefited from firming oil prices. President Macri’s support for developing Argentina’s shale gas assets could also be a big growth driver, as YPF owns one of the largest shale gas fields in the world. On the other hand, pipe manufacturer Tenaris sagged, partially because of shorter-term cost headwinds and slowing growth momentum in the U.S.; but this high-quality company has a strong balance sheet, a global industrial platform, astute management, and innovative strategies—all of which put Tenaris a step ahead of competitors.
Outlook
Frontier markets have rallied with the broad emerging markets universe over the last year, as individual countries—such as Argentina—are making meaningful economic and political improvements that are drawing in capital from global investors. Despite the rally, valuations are still appealing; by some measures, they are among the cheapest in the world, reflecting as much as a 20% discount to valuations in emerging markets.
We remain especially bullish regarding Asian markets with healthy macro backdrops and relatively low fiscal imbalances. Vietnam continues to impress, with steady export growth at levels that are consistent with many developed economies. Also, Pakistan’s recent reclassification as an emerging market highlights the potential for other rapidly growing frontier countries to raise their stature on the global stage over time. In Europe, we particularly like the robust economic growth and investment opportunities in Romania and Georgia, but we are expanding our search to look for other investment candidates.
In the Middle East, Saudi Arabia’s efforts to diversify its economy away from oil and its evolving political succession situation will be watched closely and will necessitate greater transparency to investors. In Africa, we are warming up to new investment opportunities, as we are seeing improving forecasts for economic growth in 2018; longer term, we see rising incomes and favorable demographics as key tailwinds, particularly for consumer sectors. Nigeria faces several challenges, but exchange rate reforms, new infrastructure projects, and sustained oil production would provide much-needed support for an economic recovery.
We continue to believe that frontier markets have a place—albeit a small one due to the heightened risks—in a global investor’s portfolio. Macro fundamentals and demographics in many frontier countries are favorable and, in some cases, resemble those of emerging countries about 15 to 20 years ago. Of course, conditions and investment opportunities vary widely by country, and there will be individual winners and losers, even in the same country and region. With about two-thirds of our holdings not represented in the MSCI benchmark, we believe our rigorous research efforts and active management can harness the long-term potential of frontier equity markets and help us to provide a meaningful performance advantage over time.
Thank you for your confidence in our investment management capabilities.
Respectfully submitted,
Oliver Bell
Portfolio manager
November 20, 2017
The portfolio manager has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund’s investment program.
| Risks of International Investing |
Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets. Funds investing in a single country, limited geographic region, or emerging markets tend to be riskier than more diversified funds. Risks can result from varying stages of economic and political development; differing regulatory environments, trading days, and accounting standards; and higher transaction costs of non-U.S. markets. Non-U.S. investments are also subject to currency risk, or a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
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 less 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.
| Glossary |
Gross domestic product: The total market value of all goods and services produced in a country in a given year.
MSCI Frontier Markets Index: An index that measures the performance of stocks in various frontier market countries.
Note: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
Portfolio Highlights
Performance and Expenses
T. Rowe Price Institutional Frontier Markets Equity Fund
| Growth of $1 Million |
This chart shows the value of a hypothetical $1 million investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes.
Fund Expense Example
As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period.
Actual Expenses
The first line of the following table (Actual) provides information about actual account values and actual expenses. You may use the information on this line, together with your account balance, to
estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses
Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of
return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports
of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.
Financial Highlights
T. Rowe Price Institutional Frontier Markets Equity Fund
The accompanying notes are an integral part of these financial statements.
Portfolio of Investments‡
T. Rowe Price Institutional Frontier Markets Equity Fund
October 31, 2017
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
T. Rowe Price Institutional Frontier Markets Equity Fund
October 31, 2017
($000s, except
shares and per share amounts)
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Institutional Frontier Markets Equity Fund
($000s)
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price Institutional Frontier Markets Equity Fund
($000s)
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Institutional Frontier Markets Equity Fund
October 31, 2017
T. Rowe Price Institutional International Funds, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act). The Institutional Frontier Markets Equity Fund (the fund) is a nondiversified, open-end management investment company established by the corporation. The fund seeks long-term growth of capital.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation The fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 (ASC 946). The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), including, but not limited to, ASC 946. GAAP requires the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.
Investment Transactions, Investment Income, and Distributions Investment transactions are accounted for on the trade date basis. Income and expenses are recorded on the accrual basis. Realized gains and losses are reported on the identified cost basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, are recorded as income tax expense. Income distributions are declared and paid annually. Distributions to shareholders are recorded on the ex-dividend date. A capital gain distribution may also be declared and paid by the fund annually.
Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective date of such transaction. The portion of the results of operations attributable to changes in foreign exchange rates on investments is not bifurcated from the portion attributable to changes in market prices. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses.
Rebates Subject to best execution, the fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the fund in cash. Commission rebates are reflected as realized gain on securities in the accompanying financial statements and totaled $5,000 for the year ended October 31, 2017.
Redemption Fees A 2% fee is assessed on redemptions of fund shares held for 90 days or less to deter short-term trading and to protect the interests of long-term shareholders. Redemption fees are withheld from proceeds that shareholders receive from the sale or exchange of fund shares. The fees are paid to the fund and are recorded as an increase to paid-in capital. The fees may cause the redemption price per share to differ from the net asset value per share.
New Accounting Guidance In March 2017, the FASB issued amended guidance to shorten the amortization period for certain callable debt securities, held at a premium. The guidance is effective for fiscal years and interim periods beginning after December 15, 2018. Adoption will have no effect on the fund’s net assets or results of operations.
On August 1, 2017, the fund implemented amendments to Regulation S-X, issued by the Securities and Exchange Commission, which require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Adoption had no effect on the fund’s net assets or results of operations.
Indemnification In the normal course of business, the fund may provide indemnification in connection with its officers and directors, service providers, and/or private company investments. The fund’s maximum exposure under these arrangements is unknown; however, the risk of material loss is currently considered to be remote.
NOTE 2 - VALUATION
The fund’s financial instruments are valued and its net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted, if the NYSE closes earlier, or as may be permitted by the SEC.
Fair Value The fund’s financial instruments are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) is an internal committee that has been delegated certain responsibilities by the fund’s Board of Directors (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes procedures to value securities; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; oversees the selection, services, and performance of pricing vendors; oversees valuation-related business continuity practices; and provides guidance on internal controls and valuation-related matters. The Valuation Committee reports to the Board and has representation from legal, portfolio management and trading, operations, risk management, and the fund’s treasurer.
Various valuation techniques and inputs are used to determine the fair value of financial instruments. GAAP establishes the following fair value hierarchy that categorizes the inputs used to measure fair value:
Level 1 – quoted prices (unadjusted) in active markets for identical financial instruments that the fund can access at the reporting date
Level 2 – inputs other than Level 1 quoted prices that are observable, either directly or indirectly (including, but not limited to, quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in inactive markets, interest rates and yield curves, implied volatilities, and credit spreads)
Level 3 – unobservable inputs
Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use to price the financial instrument. Unobservable inputs are those for which market data are not available and are developed using the best information available about the assumptions that market participants would use to price the financial instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. When multiple inputs are used to derive fair value, the financial instrument is assigned to the level within the fair value hierarchy based on the lowest-level input that is significant to the fair value of the financial instrument. Input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining those values.
Valuation Techniques Equity securities listed or regularly traded on a securities exchange or in the over-the-counter (OTC) market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made. OTC Bulletin Board securities are valued at the mean of the closing bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the closing bid and asked prices for domestic securities and the last quoted sale or closing price for international securities.
For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted to reflect the fair value of such securities at the close of the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will affect the value of some or all of its portfolio securities, the fund will adjust the previous quoted prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust quoted prices to reflect fair value, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with quoted prices and information to evaluate or adjust those prices. The fund cannot predict how often it will use quoted prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares quoted prices, the next day’s opening prices in the same markets, and adjusted prices.
Actively traded equity securities listed on a domestic exchange generally are categorized in Level 1 of the fair value hierarchy. Non-U.S. equity securities generally are categorized in Level 2 of the fair value hierarchy despite the availability of quoted prices because, as described above, the fund evaluates and determines whether those quoted prices reflect fair value at the close of the NYSE or require adjustment. OTC Bulletin Board securities, certain preferred securities, and equity securities traded in inactive markets generally are categorized in Level 2 of the fair value hierarchy.
Investments in mutual funds are valued at the mutual fund’s closing NAV per share on the day of valuation and are categorized in Level 1 of the fair value hierarchy. Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at cost, or estimated realizable value, if less, which approximates fair value.
Thinly traded financial instruments and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee. The objective of any fair value pricing determination is to arrive at a price that could reasonably be expected from a current sale. Financial instruments fair valued by the Valuation Committee are primarily private placements, restricted securities, warrants, rights, and other securities that are not publicly traded.
Subject to oversight by the Board, the Valuation Committee regularly makes good faith judgments to establish and adjust the fair valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of an equity investment with limited market activity, such as a private placement or a thinly traded public company stock, the Valuation Committee considers a variety of factors, which may include, but are not limited to, the issuer’s business prospects, its financial standing and performance, recent investment transactions in the issuer, new rounds of financing, negotiated transactions of significant size between other investors in the company, relevant market valuations of peer companies, strategic events affecting the company, market liquidity for the issuer, and general economic conditions and events. In consultation with the investment and pricing teams, the Valuation Committee will determine an appropriate valuation technique based on available information, which may include both observable and unobservable inputs. The Valuation Committee typically will afford greatest weight to actual prices in arm’s length transactions, to the extent they represent orderly transactions between market participants, transaction information can be reliably obtained, and prices are deemed representative of fair value. However, the Valuation Committee may also consider other valuation methods such as market-based valuation multiples; a discount or premium from market value of a similar, freely traded security of the same issuer; or some combination. Fair value determinations are reviewed on a regular basis and updated as information becomes available, including actual purchase and sale transactions of the issue. Because any fair value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions, and fair value prices determined by the Valuation Committee could differ from those of other market participants. Depending on the relative significance of unobservable inputs, including the valuation technique(s) used, fair valued securities may be categorized in Level 2 or 3 of the fair value hierarchy.
Valuation Inputs The following table summarizes the fund’s financial instruments, based on the inputs used to determine their fair values on October 31, 2017:
There were no material transfers between Levels 1 and 2 during the year ended October 31, 2017.
Following is a reconciliation of the fund’s Level 3 holdings for the year ended October 31, 2017. Gain (loss) reflects both realized and change in unrealized gain/loss on Level 3 holdings during the period, if any, and is included on the accompanying Statement of Operations. The change in unrealized gain/loss on Level 3 instruments held at October 31, 2017, totaled $ 0 for the year ended October 31, 2017.
NOTE 3 - OTHER INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.
Emerging and Frontier Markets The fund may invest, either directly or through investments in T. Rowe Price institutional funds, in securities of companies located in, issued by governments of, or denominated in or linked to the currencies of emerging and frontier market countries; at period-end, approximately 91% of the fund’s net assets were invested in frontier markets and 6% in emerging markets. Emerging markets, and to a greater extent frontier markets, generally have economic structures that are less diverse and mature, and political systems that are less stable, than developed countries. These markets may be subject to greater political, economic, and social uncertainty and differing regulatory environments that may potentially impact the fund’s ability to buy or sell certain securities or repatriate proceeds to U.S. dollars. Such securities are often subject to greater price volatility, less liquidity, and higher rates of inflation than U.S. securities. Investing in frontier markets is significantly riskier than investing in other countries, including emerging markets.
Other Purchases and sales of portfolio securities other than short-term securities aggregated $38,347,000 and $30,626,000, respectively, for the year ended October 31, 2017.
NOTE 4 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Distributions determined in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not adjusted for temporary differences.
The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
Reclassifications between income and gain relate primarily to the character of net currency losses or the character of foreign capital gains taxes. For the year ended October 31, 2017, the following reclassifications were recorded to reflect tax character (there was no impact on results of operations or net assets):
Distributions during the years ended October 31, 2017 and October 31, 2016, totaled $750,000 and $906,000, respectively, and were characterized as ordinary income for tax purposes. At October 31, 2017, the tax-basis cost of investments, including derivatives, and components of net assets were as follows:
The difference between book-basis and tax-basis net unrealized appreciation (depreciation) is attributable to the deferral of losses from wash sales for tax purposes. The fund intends to retain realized gains to the extent of available capital loss carryforwards. Net realized capital losses may be carried forward indefinitely to offset future realized capital gains. During the year ended October 31, 2017, the fund utilized $2,543,000 of capital loss carryforwards.
NOTE 5 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in which it invests. Additionally, certain foreign currency transactions are subject to tax, and capital gains realized upon disposition of securities issued in or by certain foreign countries are subject to capital gains tax imposed by those countries. All taxes are computed in accordance with the applicable foreign tax law, and, to the extent permitted, capital losses are used to offset capital gains. Taxes attributable to income are accrued by the fund as a reduction of income. Taxes incurred on the purchase of foreign currencies are recorded as realized loss on foreign currency transactions. Current and deferred tax expense attributable to capital gains is reflected as a component of realized or change in unrealized gain/loss on securities in the accompanying financial statements. At October 31, 2017, the fund had no deferred tax liability attributable to foreign securities and no foreign capital loss carryforwards.
NOTE 6 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group). Price Associates has entered into a sub-advisory agreement(s) with one or more of its wholly owned subsidiaries, to provide investment advisory services to the fund. The investment management agreement between the fund and Price Associates provides for an annual investment management fee equal to 1.10% of the fund’s average daily net assets. The fee is computed daily and paid monthly.
The fund is also subject to a contractual expense limitation through February 28, 2019. During the limitation period, Price Associates is required to waive its management fee and pay the fund for any expenses (excluding interest, expenses related to borrowings, taxes, brokerage, and other non-recurring expenses permitted by the investment management agreement) that would otherwise cause the fund’s ratio of annualized total expenses to average net assets (expense ratio) to exceed its expense limitation of 1.35%. The fund is required to repay Price Associates for expenses previously waived/ paid to the extent its net assets grow or expenses decline sufficiently to allow repayment without causing the fund’s 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’s current expense limitation. However, no repayment will be made more than three years after the date of a payment or waiver. Pursuant to this agreement, $158,000 of expenses were waived/paid by Price Associates during the year ended October 31, 2017 and remain subject to repayment by the fund. Including these amounts, expenses previously waived/paid by Price Associates in the amount of $508,000 remain subject to repayment by the fund at October 31, 2017.
In addition, the fund has entered into service agreements with Price Associates and a wholly owned subsidiary of Price Associates (collectively, Price). Price Associates provides certain accounting and administrative services to the fund. T. Rowe Price Services, Inc. provides shareholder and administrative services in its capacity as the fund’s transfer and dividend-disbursing agent. For the year ended October 31, 2017, expenses incurred pursuant to these service agreements were $86,000 for Price Associates and less than $1,000 for T. Rowe Price Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.
The fund may invest in certain open-end management investment companies managed by Price Associates and considered affiliates of the fund: the T. Rowe Price Government Reserve Fund or the T. Rowe Price Treasury Reserve Fund, organized as money market funds, or the T. Rowe Price Short-Term Fund, a short-term bond fund (collectively, the Price Reserve Funds). The Price Reserve Funds are offered as short-term investment options to mutual funds, trusts, and other accounts managed by Price Associates or its affiliates and are not available for direct purchase by members of the public. The Price Reserve Funds pay no investment management fees.
As of October 31, 2017, T. Rowe Price Group, Inc., or its wholly owned subsidiaries owned 2,520,186 shares of the fund, representing 42% of the fund’s net assets.
The fund may participate in securities purchase and sale transactions with other funds or accounts advised by Price Associates (cross trades), in accordance with procedures adopted by the fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. During the year ended October 31, 2017, the fund had no purchases or sales cross trades with other funds or accounts advised by Price Associates.
Report of Independent Registered Public Accounting Firm
To the Board of Directors of T. Rowe Price Institutional International Funds, Inc. and
Shareholders of T. Rowe Price Institutional Frontier Markets Equity Fund
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the T. Rowe Price Institutional Frontier Markets Equity Fund (one of the portfolios comprising T. Rowe Price Institutional International Funds, Inc., hereafter referred to as the “Fund”) as of October 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of October 31, 2017 by correspondence with the custodian, brokers, and transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 15, 2017
| Tax Information (Unaudited) for the Tax Year Ended 10/31/17 |
We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements.
For taxable non-corporate shareholders, $291,000 of the fund’s income represents qualified dividend income subject to a long-term capital gains tax rate of not greater than 20%.
For corporate shareholders, $4,000 of the fund’s income qualifies for the dividends-received deduction.
The fund will pass through foreign source income of $506,000 and foreign taxes paid of $244,000.
| Information on Proxy Voting Policies, Procedures, and Records |
A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information. You may request this document by calling 1-800-225-5132 or by accessing the SEC’s website, sec.gov.
The description of our proxy voting policies and procedures is also available on our corporate website. To access it, please visit the following Web page:
https://www3.troweprice.com/usis/corporate/en/utility/policies.html
Scroll down to the section near the bottom of the page that says, “Proxy Voting Policies.” Click on the Proxy Voting Policies link in the shaded box.
Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through T. Rowe Price, visit the website location shown above, and scroll down to the section near the bottom of the page that says, “Proxy Voting Records.” Click on the Proxy Voting Records link in the shaded box.
| How to Obtain Quarterly Portfolio Holdings |
The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s website (sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 100 F St. N.E., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.
| About the Fund’s Directors and Officers |
Your fund is overseen by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of the Board’s members are independent of T. Rowe Price Associates, Inc. (T. Rowe Price), and its affiliates; “inside” or “interested” directors are employees or officers of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-638-5660.
| Independent Directors | ||
| Name (Year of Birth) | ||
| Year Elected* [Number of | ||
| T. Rowe Price Portfolios Overseen] |
Principal Occupation(s) and Directorships of Public Companies and Other Investment Companies During the Past Five Years | |
| Anthony W. Deering (1945) 1991 [191] |
Chairman, Exeter Capital, LLC, a private investment firm (2004 to present); Director and Advisory Board Member, Deutsche Bank North America (2004 to present); Director, Vornado Real Estate Investment Trust (2004 to 2012); Director, Under Armour (2008 to present); Director, Brixmor Real Estate Investment Trust (2012 to present) | |
| Bruce W. Duncan (1951) 2013 [191] |
Chief Executive Officer and Director (2009 to December 2016), Chairman of the Board (January 2016 to present), and President (2009 to September 2016), First Industrial Realty Trust, an owner and operator of industrial properties; Chairman of the Board (2005 to September 2016) and Director (1999 to September 2016), Starwood Hotels & Resorts, a hotel and leisure company; Director, Boston Properties (May 2016 to present); Director, Marriott International, Inc. (September 2016 to present) | |
| Robert J. Gerrard, Jr. (1952) 2012 [191] |
Advisory Board Member, Pipeline Crisis/Winning Strategies, a collaborative working to improve opportunities for young African Americans (1997 to present) | |
| Paul F. McBride (1956) 2013 [191] |
Advisory Board Member, Vizzia Technologies (2015 to present) | |
| Cecilia E. Rouse, Ph.D. (1963) 2012 [191] |
Dean, Woodrow Wilson School (2012 to present); Professor and Researcher, Princeton University (1992 to present); Member of National Academy of Education (2010 to present); Director, MDRC, a nonprofit education and social policy research organization (2011 to present); Research Associate of Labor Studies Program (2011 to 2015) and Board Member (2015 to present), National Bureau of Economic Research (2011 to present); Chair of Committee on the Status of Minority Groups in the Economic Profession (2012 to present); Vice President (2015 to present), American Economic Association | |
| John G. Schreiber (1946) 2001 [191] |
Owner/President, Centaur Capital Partners, Inc., a real estate investment company (1991 to present); Cofounder, Partner, and Cochairman of the Investment Committee, Blackstone Real Estate Advisors, L.P. (1992 to 2015); Director, General Growth Properties, Inc. (2010 to 2013); Director, Blackstone Mortgage Trust, a real estate finance company (2012 to 2016); Director and Chairman of the Board, Brixmor Property Group, Inc. (2013 to present); Director, Hilton Worldwide (2013 to present); Director, Hudson Pacific Properties (2014 to 2016) | |
| Mark R. Tercek (1957) 2009 [191] |
President and Chief Executive Officer, The Nature Conservancy (2008 to present) | |
| *Each independent director serves until retirement, resignation, or election of a successor. | ||
| Inside Directors | ||
| Name (Year of Birth) | ||
| Year Elected* [Number of | ||
| T. Rowe Price Portfolios Overseen] |
Principal Occupation(s) and Directorships of Public Companies and Other Investment Companies During the Past Five Years | |
| Edward C. Bernard (1956) 2006 [191] |
Director and Vice President, T. Rowe Price; Vice Chairman of the Board, Director, and Vice President, T. Rowe Price Group, Inc.; Chairman of the Board, Director, and Vice President, T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board and Director, T. Rowe Price Retirement Plan Services, Inc.; Chairman of the Board, Chief Executive Officer, Director, and President, T. Rowe Price International and T. Rowe Price Trust Company; Chairman of the Board, all funds | |
| Robert W. Sharps, CFA, CPA** (1971) 2017 [135] |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; Vice President Institutional International Funds | |
| *Each inside director serves until retirement, resignation, or election of a successor. | ||
| **Effective April 1, 2017, Brian C. Rogers was replaced by Robert W. Sharps as an inside director of certain Price Funds. | ||
| Officers | ||
| Name (Year of Birth) | ||
| Position Held With Institutional International Funds | Principal Occupation(s) | |
| Ulle Adamson, CFA (1979) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Roy H. Adkins (1970) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Christopher D. Alderson (1962) President |
Director and Vice President, T. Rowe Price International; Vice President, Price Hong Kong, Price Singapore, and T. Rowe Price Group, Inc. | |
| Paulina Amieva (1981) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Malik S. Asif (1981) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Harishankar Balkrishna (1983) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Sheena L. Barbosa (1983) Vice President |
Vice President, Price Hong Kong and T. Rowe Price Group, Inc. | |
| Peter J. Bates, CFA (1974) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Oliver D.M. Bell (1969) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| R. Scott Berg, CFA (1972) Executive Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Steven E. Boothe, CFA (1977) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Peter I. Botoucharov (1965) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Tala Boulos (1984) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International; formerly, Vice President, CEEMEA Corporate Credit Research, Deutsche Bank (to 2013) | |
| Darrell N. Braman (1963) Vice President and Secretary |
Vice President, Price Hong Kong, Price Singapore, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc. | |
| Carolyn Hoi Che Chu (1974) Vice President |
Vice President, Price Hong Kong and T. Rowe Price Group, Inc. | |
| Archibald Ciganer Albeniz, CFA (1976) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Richard N. Clattenburg, CFA (1979) Executive Vice President |
Vice President, Price Singapore, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Michael J. Conelius, CFA (1964) Executive Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, and T. Rowe Price Trust Company | |
| Michael Della Vedova (1969) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Richard de los Reyes (1975) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company | |
| Shawn T. Driscoll (1975) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company | |
| Bridget A. Ebner (1970) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| David J. Eiswert, CFA (1972) Executive Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Mark S. Finn, CFA, CPA (1963) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company | |
| Quentin S. Fitzsimmons (1968) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International; formerly, Portfolio Manager, Royal Bank of Scotland Group (to 2015) | |
| John R. Gilner (1961) Chief Compliance Officer |
Chief Compliance Officer and Vice President, T. Rowe Price; Vice President, T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc. | |
| Paul D. Greene II (1978) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Benjamin Griffiths, CFA (1977) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Amanda B. Hall, CFA (1985) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International; formerly, student, Stanford Graduate School of Business (to 2014) | |
| Richard L. Hall (1979) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Nabil Hanano, CFA (1984) Vice President |
Vice President, T. Rowe Price International | |
| Steven C. Huber, CFA, FSA (1958) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Stefan Hubrich, Ph.D., CFA (1974) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Arif Husain, CFA (1972) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International; formerly, Director/Head of UK and Euro Fixed Income, AllianceBernstein (to 2013) | |
| Randal S. Jenneke (1971) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Nina P. Jones, CPA (1980) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Yoichiro Kai (1973) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Jai Kapadia (1982) Vice President |
Vice President, Price Hong Kong and T. Rowe Price Group, Inc. | |
| Andrew J. Keirle (1974) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Paul J. Krug, CPA (1964) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company | |
| Christopher J. Kushlis, CFA (1976) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Mark J. Lawrence (1970) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Anh Lu (1968) Vice President |
Vice President, Price Hong Kong and T. Rowe Price Group, Inc. | |
| Sebastien Mallet (1974) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Catherine D. Mathews (1963) Treasurer and Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company | |
| Jonathan H.W. Matthews, CFA (1975) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Raymond A. Mills, Ph.D., CFA (1960) Executive Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, and T. Rowe Price Trust Company | |
| Eric C. Moffett (1974) Vice President |
Vice President, Price Hong Kong and T. Rowe Price Group, Inc. | |
| Tobias F. Mueller (1980) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Sudhir Nanda, Ph.D., CFA (1959) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Thibault Nardin (1983) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Joshua Nelson (1977) Executive Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Sridhar Nishtala (1975) Vice President |
Vice President, Price Singapore and T. Rowe Price Group, Inc. | |
| Jason Nogueira, CFA (1974) Executive Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| David Oestreicher (1967) Vice President |
Director, Vice President, and Secretary, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Chief Legal Officer, Vice President, and Secretary, T. Rowe Price Group, Inc.; Vice President and Secretary, T. Rowe Price and T. Rowe Price International; Vice President, Price Hong Kong and Price Singapore | |
| Kenneth A. Orchard (1975) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Oluwaseun A. Oyegunle, CFA (1984) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International; formerly, student, The Wharton School, University of Pennsylvania (to 2013) | |
| Gonzalo Pángaro, CFA (1968) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| John W. Ratzesberger (1975) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; formerly, North American Head of Listed Derivatives Operation, Morgan Stanley (to 2013) | |
| Shannon H. Rauser (1987) Assistant Secretary |
Employee, T. Rowe Price | |
| Federico Santilli, CFA (1974) Executive Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Sebastian Schrott (1977) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Deborah D. Seidel (1962) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc. | |
| John C.A. Sherman (1969) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Gabriel Solomon (1977) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Joshua K. Spencer, CFA (1973) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| David A. Stanley (1963) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Taymour R. Tamaddon, CFA (1976) Vice President |
Vice President, T. Rowe Price and T. Rowe Price Group, Inc. | |
| Ju Yen Tan (1972) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Dean Tenerelli (1964) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Eric L. Veiel, CFA (1972) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company | |
| Rupinder Vig (1979) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International; formerly, Partner, Egerton Capital (to 2016); Executive Director, Morgan Stanley (to 2014) | |
| Verena Wachnitz, CFA (1978) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Dai Wang (1989) Vice President |
Vice President, Price Hong Kong and T. Rowe Price Group, Inc.; formerly, student, Harvard Business School (to 2014) | |
| Megan Warren (1968) Vice President |
Vice President, T. Rowe Price, T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; formerly, Executive Director, JP Morgan Chase | |
| Christopher S. Whitehouse (1972) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| J. Howard Woodward, CFA (1974) Vice President |
Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International | |
| Ernest C. Yeung, CFA (1979) Vice President |
Director, Responsible Officer, and Vice President, Price Hong Kong; Vice President, T. Rowe Price Group, Inc. | |
| Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least 5 years. | ||
Item 2. Code of Ethics.
The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.
Item 3. Audit Committee Financial Expert.
The registrant’s Board of Directors/Trustees has determined that Mr. Bruce W. Duncan qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Duncan is considered independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) – (d) Aggregate fees billed for the last two fiscal years for professional services rendered to, or on behalf of, the registrant by the registrant’s principal accountant were as follows:
Audit fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant’s financial statements and specifically include the issuance of a report on internal controls and, if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance, tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation of Federal, state, and excise tax returns. All other fees include the registrant’s pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant’s Board of Directors/Trustees.
(e)(1) The registrant’s audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted.
(2) No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.
(g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $1,432,000 and $1,890,000, respectively.
(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. Accordingly, these services were considered by the registrant’s audit committee in maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.
(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.
(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.
(b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Institutional International Funds, Inc.
| By | /s/ Edward C. Bernard | |||||
| Edward C. Bernard | ||||||
| Principal Executive Officer | ||||||
| Date | December 15, 2017 | |||||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By | /s/ Edward C. Bernard | |||||
| Edward C. Bernard | ||||||
| Principal Executive Officer | ||||||
| Date | December 15, 2017 | |||||
| By | /s/ Catherine D. Mathews | |||||
| Catherine D. Mathews | ||||||
| Principal Financial Officer | ||||||
| Date | December 15, 2017 | |||||