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 Global 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: June 30, 2022
 |
Institutional Emerging Markets Bond Fund |
June 30, 2022 |
| T. ROWE PRICE INSTITUTIONAL EMERGING MARKETS BOND FUND |
|
|
HIGHLIGHTS
| ■ | The Institutional Emerging Markets Bond Fund underperformed its benchmark and the Lipper peer group for the six months ended June 30, 2022. |
| ■ | The fund’s security selection detracted from performance, while country allocation decisions contributed to relative results. |
| ■ | The portfolio remains underweight lower-yielding markets that provide limited relative value, such as Malaysia and the Philippines, in favor of higher-yielding countries that offer better opportunities for risk-adjusted return, including Oman and the Dominican Republic. |
| ■ | We added a measure of risk throughout the period. We currently see opportunities in select countries, informed by our research platform, that are, in our view, default remote/well-anchored sovereigns that are offering attractive yields with the potential of high returns. While we expect volatility to persist over the medium term, we will look to add as dislocations create attractive entry points. |
Log in to your account at troweprice.com for more information.
*Certain mutual fund accounts that are assessed an annual account service fee can also save money by switching to e-delivery.
Market Commentary
Dear Investor
Major stock and bond indexes produced sharply negative results during the first half of 2022 as investors contended with persistently
high inflation, tightening financial conditions, and slowing growth.
After reaching an all-time high on January 3, the S&P 500 Index
finished the period down about 20%, the worst first half of a calendar year for the index since 1970. Double-digit losses were common
in equity markets around the globe, and bond investors also faced a historically tough environment amid a sharp rise in interest rates.
Value shares outperformed growth stocks as equity investors turned risk averse and rising rates put downward pressure on growth stock
valuations. Emerging markets stocks held up somewhat better than shares in developed markets due to the strong performance of some oil-exporting
countries. Meanwhile, the U.S. dollar strengthened during the period, which weighed on returns for U.S. investors in international securities.
Within the S&P 500, energy was the only bright spot, gaining more than 30% as oil prices jumped in response to Russia’s invasion
of Ukraine and the ensuing commodity supply crunch. Typically defensive shares, such as utilities, consumer staples, and health care,
finished in negative territory but held up relatively well. The consumer discretionary, communication services, and information technology
sectors were the weakest performers. Shares of some major retailers fell sharply following earnings misses driven in part by overstocked
inventories.
Inflation remained the leading concern for investors throughout the period. Despite hopes in 2021 that the problem was transitory,
and later expectations that inflation would peak in the spring, headline consumer prices continued to grind higher throughout the first
half of 2022. The war in Ukraine exacerbated already existing supply chain problems, and other factors, such as the impact of the fiscal
and monetary stimulus enacted during the pandemic and strong consumer demand, also pushed prices higher. The May consumer price index
report (the last to be issued during our reporting period) showed prices increasing 8.6% over the 12-month period, the largest jump since
late 1981.
In response, the Federal Reserve, which at the end of 2021 had forecast that only three 25-basis-point (0.25 percentage point)
rate hikes would be necessary in all of 2022, rapidly shifted in a hawkish direction and executed three rate increases in the first six
months of the year. The policy moves included hikes of 25, 50, and 75 basis points—the largest single increase since 1994—increasing
the central bank’s short-term lending benchmark from near zero to a target range of 1.50% to 1.75% by the end of June. In addition,
the Fed ended the purchases of Treasuries and agency mortgage-backed securities that it had begun to support the economy early in the
pandemic and started reducing its balance sheet in June.
Longer-term bond yields also increased considerably as the Fed tightened monetary
policy, with the yield on the benchmark 10-year U.S. Treasury note reaching 3.49% on June 14, its highest level in more than a decade.
(Bond prices and yields move in opposite directions.) Higher mortgage rates led to signs of cooling in the housing market.
The economy
continued to add jobs during the period, and other indicators pointed to a slowing but still expanding economy. However, the University
of Michigan consumer sentiment index dropped in June to its lowest level since records began in 1978 as higher inflation expectations
undermined confidence.
Looking ahead, investors are likely to remain focused on whether the Fed can tame inflation without sending the
economy into recession, a backdrop that could produce continued volatility. We believe this environment makes skilled active management
a critical tool for identifying risks and opportunities, and our investment teams will continue to use fundamental research to identify
companies that can add value to your portfolio over the long term.
Thank you for your continued confidence in T. Rowe Price.
Sincerely,
Robert Sharps
CEO and
President
Management’s Discussion of Fund Performance
INVESTMENT OBJECTIVE
The fund seeks to provide high income and capital appreciation.
FUND COMMENTARY
How did the fund perform in the past six months?
The Institutional Emerging Markets Bond Fund returned -21.48% for the six months ended June 30, 2022, underperforming the benchmark J.P. Morgan Emerging Markets Bond Index Global Diversified and the Lipper peer group average. (Past performance cannot guarantee future results.)
What factors influenced the fund’s performance?
Stubbornly high inflation, global central bank tightening, and the war between Russia and Ukraine all contributed to a
challenging investment environment. U.S. Treasury yields increased significantly amid three Federal Reserve rate hikes and
expectations for additional tightening in the near term. As expectations increased for higher rates, growth forecasts were reduced,
dragging down investors’ tolerance for risk. This caused credit spreads to notably widen. (Credit spreads measure the
additional yield that investors demand to hold a bond with credit risk compared with a high-quality government security with a
comparable maturity.)
The fund’s security selection detracted in aggregate, driven by exposure to companies in the
China high yield property sector, such as Shimao, Country Garden, and Times China. The real estate sector was dragged lower by
concerns of tightening domestic regulatory and financial conditions and distress in the most heavily indebted areas of the Chinese
property sector. Within China, our underweight exposure to high-quality sovereign and quasi-sovereign issues weighed further on
relative returns. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each
represents in the portfolio.)
Similarly, selection of highly liquid quasi-sovereign issuers within Mexico weighed on
relative performance. Holdings of Mexico City Airport Trust and Petroleos Mexicanos sold off during periods of market volatility as
investors looked to reduce risk. A significant central bank rate hike added to concerns about slowing growth. Our selection of
higher-yielding, higher-quality corporates, however, was beneficial. Mexican banks, such as Banco Mercantil de Norte, BBVA Bancomer,
and Banco Santander provided a boost as the higher-quality financial sector benefited from its defensive characteristics and
increased lending rates, outperforming the broader market.
Our selection of longer-maturity and euro-denominated issues in Romania detracted from relative performance. High inflation and concerns about a European energy crisis weighed on the country.
Euro-denominated issues underperformed amid U.S. dollar strength.
Country allocations, however, added to relative returns. The fund’s significant underweight to Russia and lack of exposure to Belarus aided relative performance as Russia’s invasion
of Ukraine and Belarus’s support were met with heavy economic sanctions, and the two countries’ assets were removed from
major indices at a price of zero. We eliminated our small Russian holdings during the period. Our overweight allocation to India was
supportive as the relatively shorter-duration country’s higher-quality assets held in well during bouts of market volatility.
(Duration measures a bond’s sensitivity to changes in interest rates.)
Our underweight allocation to Turkey, however, was a drag on relative results. The higher-yielding sovereign held in relatively well as the government’s unconventional program to
protect savings deposits from large currency fluctuations has stemmed hard currency losses at a manageable level. Additional support
in the form of foreign currency asset level restrictions for corporations seeking loans kept the lira relatively stable.
Underweight allocations to lower-yielding investment-grade sovereigns, such as United Arab Emirates, Malaysia, and Poland, held back relative
performance amid heightened demand for higher-quality assets as concerns about slowing global growth increased.
The fund’s slight exposure to emerging markets currencies was a marginal detractor from performance. Our exposure to euro-denominated government bonds was a slight drag in the face of a strong U.S. dollar. Our small exposure to the Chilean peso was also negative as prices for its chief export, copper, declined near the end of the period.
How is the fund positioned?
At the country level, we see both idiosyncratic risks and opportunities. We are confident in China’s ability to manage the challenging
economic climate through policy accommodation, but we are more mindful of risks posed by the lowest-quality issuers in the market. We
are buying into improved valuations in institutionally sound mainstream markets, such as Colombia, India, and Chile. Due to risks associated
with their war, we eliminated our small Russian holdings and moved to underweight Ukraine. In the frontier space, we remain overweight
in a variety of countries with improving macroeconomic and reform outlooks, such as the Dominican Republic, Oman, and Ivory Coast, though
we reduced some of our larger positions in this space, such as Argentina, and trimmed more vulnerable issuers. We maintain our structural
underweight to low-beta, investment-grade countries, such as Malaysia, Peru, and Saudi Arabia, which offer limited room for spread compression.
However, we added exposure to some defensive markets, such as Kazakhstan, which appeared poised to benefit from elevated energy prices
and improved relative value.
We maintain a meaningful allocation to off-benchmark emerging markets corporate bonds. Corporate debt is
positioned to benefit from recovering domestic growth and often offers higher yields, greater diversification, and smaller drawdowns in periods of stress. Within the emerging markets corporate
segment, we tend to favor issuers in domestically oriented sectors, such as technology, media, and telecommunications and real estate,
or larger quasi-sovereigns, which are generally more liquid than traditional corporates and may benefit from explicit or implicit state
support.
The fund at times holds small amounts of local currency-denominated sovereign bonds and local currencies where the relative value appears especially compelling versus debt denominated in U.S. dollars. At the end of the period, total local currency exposure accounted for less than 2% of the portfolio. Depending on our outlook for a particular currency and the costs involved, we may fully or partially hedge the currency exposure to reduce risk or opt not to hedge if a currency appears to be poised to gain against the dollar.
What is portfolio management’s outlook?
Idiosyncratic risks in a few markets combined with a global central bank rate hiking cycle have led to a challenging investment climate.
However, recent volatility has moved absolute valuations to below historical averages and increased value dispersion across major markets
in the asset class, creating some potential opportunities.
In terms of fundamentals, stressed fiscal conditions persist in some markets due to lingering effects of the coronavirus pandemic, though strong export demand has supported fiscal consolidation this year in many
markets. Vaccination rates in emerging markets are catching up to developed market rates, though growth recoveries are slowing in some
markets as inflation pressures build and the monetary policy trajectory is now less accommodative for growth.
However, emerging markets debt continues to offer a substantial yield premium and broadly sound fundamentals, making the asset class compelling on a risk-adjusted
basis relative to other credit sectors. This balances our view. As such, we have added a measure of risk throughout the period. We currently
see opportunities in select countries, informed by our research platform, that are, in our view, default remote/well-anchored sovereigns
that are offering attractive yields with the potential of high returns. While we expect volatility to persist over the medium term, we
will look to add as dislocations create attractive entry points.
The views expressed reflect the opinions of T. Rowe Price as of the date of this report and are subject to change based on changes in market, economic, or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
RISK OF INTERNATIONAL BOND INVESTING
Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets, including unpredictable changes in currency values. Investments in emerging markets are subject to abrupt and severe price declines and should be regarded as speculative. The economic and political structures of developing nations, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. Some countries also have legacies of hyperinflation, currency devaluations, and governmental interference in markets.
International investments are subject to currency risk, 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 overall impact on a fund’s holdings can be significant and long-lasting depending on the currencies represented in the portfolio, how each one appreciates or depreciates in relation to the U.S. dollar, and whether currency positions are hedged. Further, exchange rate movements are unpredictable, and it is not possible to effectively hedge the currency risks of many developing countries.
Bonds are also subject to interest rate risk, the decline in bond prices that usually accompanies a rise in interest rates, and credit risk, the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default (fail to make timely payments of interest or principal), potentially reducing the fund’s income level and share price.
BENCHMARK INFORMATION
Note: Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The index is used with permission. The index may not be copied, used, or distributed without J.P. Morgan’s prior written approval. Copyright 2022, J.P. Morgan Chase & Co. All rights reserved.
Note: Portions of the mutual fund information contained in this report was supplied by Lipper, a Refinitiv Company, subject to the following: Copyright 2022 © Refinitiv. All rights reserved. Any copying, republication or redistribution of Lipper content is expressly prohibited without the prior written consent of Lipper. Lipper shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
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 include a broad-based market index and may also include 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.
AVERAGE ANNUAL COMPOUND TOTAL RETURN
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.
Unaudited
The accompanying notes are an integral part of these financial statements.
June 30, 2022 (Unaudited)
The accompanying notes are an integral part of these financial statements.
June 30, 2022 (Unaudited)
The accompanying notes are an integral part of these financial statements.
Unaudited
The accompanying notes are an integral part of these financial statements.
Unaudited
The accompanying notes are an integral part of these financial statements.
Unaudited
| NOTES TO FINANCIAL STATEMENTS |
T. Rowe Price Global Funds, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act). The Institutional Emerging Markets Bond Fund (the fund) is a diversified, open-end management investment company established by the corporation. The fund seeks to provide high income and capital appreciation.
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. Premiums and discounts on debt securities are amortized for financial reporting purposes. Income tax-related interest and penalties, if incurred, are recorded as income tax expense. 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. Earnings on investments recognized as partnerships for federal income tax purposes reflect the tax character of such earnings. Non-cash dividends, if any, are recorded at the fair market value of the asset received. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared daily and paid monthly. 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 provided by an outside pricing service. 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 effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is not bifurcated from the portion attributable to changes in market prices.
Capital Transactions Each investor’s interest in the net assets of the fund is represented by fund shares. The fund’s net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted, if the NYSE closes earlier, or as may be permitted by the SEC. Purchases and redemptions of fund shares are transacted at the next-computed NAV per share, after receipt of the transaction order by T. Rowe Price Associates, Inc., or its agents.
New Accounting Guidance In March 2020, the FASB issued Accounting Standards Update (ASU), ASU 2020–04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. In March 2021, the administrator for LIBOR announced the extension of the publication of a majority of the USD LIBOR settings to June 30, 2023. Management expects that the adoption of the guidance will not have a material impact on the fund's financial statements.
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
Fair Value The fund’s financial instruments are valued at the close of the NYSE and 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 policies and procedures used in valuing financial instruments, including those which cannot be valued in accordance with normal procedures or using pricing vendors; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; evaluates the services and performance of the pricing vendors; oversees the pricing process to ensure policies and procedures are being followed; and provides guidance on internal controls and valuation-related matters. The Valuation Committee provides periodic reporting to the Board on valuation matters.
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 (including the fund’s own assumptions in determining fair value)
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 Debt securities generally are traded in the over-the-counter (OTC) market and are valued at prices furnished by independent pricing services or by broker dealers who make markets in such securities. When valuing securities, the independent pricing services consider 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.
Equity securities, including exchange-traded funds, 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.
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. Each business day, the fund uses information from outside pricing services to evaluate and, if
appropriate, decide whether it is necessary to adjust quoted prices to reflect fair value by reviewing 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 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.
Investments in mutual
funds are valued at the mutual fund’s closing NAV per share on the day of valuation. Investments in private investment
companies are valued at the investee’s NAV per share as of the valuation date, if available. If the investee’s NAV is
not available as of the valuation date or is not calculated in accordance with GAAP, the Valuation Committee may adjust the
investee’s NAV to reflect fair value at the valuation date. Futures contracts are valued at closing settlement prices. Forward
currency exchange contracts are valued using the prevailing forward exchange rate. 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.
Investments for which market quotations or market-based valuations are not readily available or
deemed unreliable are valued at fair value as determined in good faith by the Valuation Committee, in accordance with fair valuation
policies and procedures. 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. Factors used in determining fair value
vary by type of investment and may include market or investment specific considerations. 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; discounted cash flows; yield to maturity; 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 investment. 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.
Valuation Inputs The following table summarizes the fund’s financial instruments, based on the inputs used to determine their fair values on June 30, 2022 (for further detail by category, please refer to the accompanying Portfolio of Investments):
NOTE 3 - DERIVATIVE INSTRUMENTS
During the six months ended
June 30, 2022, the fund invested in derivative instruments. As defined by GAAP, a derivative is a financial instrument whose value
is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable; it
requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the
expected risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its
prospectus and Statement of Additional Information. The fund may use derivatives for a variety of purposes and may use them to
establish both long and short positions within the fund’s portfolio. Potential uses include 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, to enhance return, 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. The fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types
to cover its settlement obligations under open derivative contracts.
The fund values its derivatives at fair value and
recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting,
even for derivatives employed as economic hedges. Generally, the fund accounts for its derivatives on a gross basis. It does not
offset the fair value of derivative liabilities against the fair value of derivative assets on its financial statements, nor does it
offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral. The following table
summarizes the fair value of the fund’s derivative instruments held as of June 30, 2022, and the related location on the
accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
Additionally, the amount of gains and losses on derivative instruments recognized in fund earnings during the six months ended June 30, 2022, and the related location on the accompanying Statement of Operations is summarized in the following table by primary underlying risk exposure:
Counterparty Risk and Collateral
The fund invests in derivatives in various markets, which expose it to differing levels of counterparty risk. Counterparty risk on
exchange-traded and centrally cleared derivative contracts, such as futures, exchange-traded options, and centrally cleared swaps, is
minimal because the clearinghouse provides protection against counterparty defaults. For futures and centrally cleared swaps, the fund
is required to deposit collateral in an amount specified by the clearinghouse and the clearing firm (margin requirement), and the margin
requirement must be maintained over the life of the contract. Each clearinghouse and clearing firm, in its sole discretion, may adjust
the margin requirements applicable to the fund.
Derivatives, such as bilateral swaps, forward currency exchange contracts, and OTC options, that are transacted and settle
directly with a counterparty (bilateral derivatives) may expose the fund to greater counterparty risk. To mitigate this risk, the
fund has entered into master netting arrangements (MNAs) with certain counterparties that permit net settlement under specified
conditions and, for certain counterparties, also require the exchange of collateral to cover mark-to-market exposure. MNAs may be in
the form of International Swaps and Derivatives Association master agreements (ISDAs) or foreign exchange letter agreements (FX
letters).
MNAs provide the ability to offset amounts the fund owes a counterparty against amounts the counterparty owes the
fund (net settlement). Both ISDAs and FX letters generally allow termination of transactions and net settlement upon the occurrence
of contractually specified events, such as failure to pay or bankruptcy. In addition, ISDAs specify other events, the occurrence of
which would allow one of the parties to terminate. For example, a downgrade in credit rating of a counterparty below a specified
rating would allow the fund to terminate, while a decline in the fund’s net assets of more than a specified percentage would
allow the counterparty to terminate. Upon termination, all transactions with that counterparty would be liquidated and a net
termination amount settled. ISDAs typically include collateral agreements whereas FX letters do not. Collateral requirements are
determined daily based on the net aggregate unrealized gain or loss on all bilateral derivatives with a counterparty, subject to
minimum transfer amounts that typically range from $100,000 to $250,000. Any additional collateral required due to changes in
security values is typically transferred the next business day.
Collateral may be in the form of cash or debt securities
issued by the U.S. government or related agencies, although other securities may be used depending on the terms outlined in the
applicable MNA. Cash posted by the fund is reflected as cash deposits in the accompanying financial statements and generally is
restricted from withdrawal by the fund; securities posted by the fund are so noted in the accompanying Portfolio of Investments;
both remain in the fund’s assets. Collateral pledged by counterparties is not included in the fund’s assets because the
fund does not obtain effective control over those assets. For bilateral derivatives, collateral posted or received by the fund is
held in a segregated account at the fund’s custodian. While typically not sold in the same manner as equity or fixed income
securities, exchange-traded or centrally cleared derivatives may be closed out only on the exchange or clearinghouse where the
contracts were cleared, and OTC and bilateral derivatives may be unwound with counterparties or transactions assigned to other
counterparties to allow the fund to exit the transaction. This ability is subject to the liquidity of underlying positions. As of
June 30, 2022, no collateral was pledged by either the fund or counterparties for bilateral derivatives. As of June 30, 2022, cash
of $531,000 had been posted by the fund for exchange-traded and/or centrally cleared derivatives.
Forward Currency Exchange
Contracts The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives.
It uses forward currency exchange contracts (forwards) primarily to protect its non-U.S. dollar-denominated securities from adverse
currency movements and to increase exposure to a particular foreign currency, to shift the fund’s foreign currency exposure
from one country to another, or to enhance the fund’s 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. Appreciated forwards are reflected as
assets and depreciated forwards are reflected as liabilities on the accompanying Statement of Assets and Liabilities. Risks related
to the use of forwards include the possible failure of counterparties to meet the terms of the agreements; that anticipated currency
movements will not occur, thereby reducing the fund’s total return; and the potential for losses in excess of the fund’s
initial investment. During the six months ended June 30, 2022, the volume of the fund’s activity in forwards, based on
underlying notional amounts, was generally between 2% and 5% of net assets.
Futures Contracts The fund is subject to
interest rate risk in the normal course of pursuing its investment objectives and uses futures contracts to help manage such risk.
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; 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. Payments are made or received by the
fund each day to settle daily fluctuations in the value of the contract (variation margin), which reflect changes in the value of
the underlying financial instrument. Variation margin is recorded as unrealized gain or loss until the contract is closed. The value
of a futures contract included in net assets is the amount of unsettled variation margin; net variation margin receivable is
reflected as an asset and net variation margin payable is reflected as a liability on the accompanying Statement of Assets and
Liabilities. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that
can be highly volatile and imperfectly correlated to movements in hedged security values and/or interest rates, and potential losses
in excess of the fund’s initial investment. During the six months ended June 30, 2022, the volume of the fund’s activity
in futures, based on underlying notional amounts, was generally between 3% and 9% of net assets.
Swaps The fund is
subject to credit risk in the normal course of pursuing its investment objectives and uses swap contracts to help manage such risk.
The fund may use swaps in an effort to manage both long and short 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; or to adjust portfolio duration and credit exposure. Swap agreements can be settled either directly
with the counterparty (bilateral swap) or through a central clearinghouse (centrally cleared swap). Fluctuations in the fair value
of a contract are reflected in unrealized gain or loss and are reclassified to realized gain or loss upon contract termination or
cash settlement. Net periodic receipts or payments required by a contract increase or decrease, respectively, the value of the
contract until the contractual payment date, at which time such amounts are reclassified from unrealized to realized gain or loss.
For bilateral swaps, cash payments are made or received by the fund on a periodic basis in accordance with contract terms;
unrealized gain on contracts and premiums paid are reflected as assets and unrealized loss on contracts and premiums received are
reflected as liabilities on the accompanying Statement of Assets and Liabilities. For bilateral swaps, premiums paid or received are
amortized over the life of the swap and are recognized as realized gain or loss in the Statement of Operations. For centrally
cleared swaps, payments are made or received by the fund each day to settle the daily fluctuation in the value of the contract
(variation margin). Accordingly, the value of a centrally cleared swap included in net assets is the unsettled variation margin; net
variation margin receivable is reflected as an asset and net variation margin payable is reflected as a liability on the
accompanying Statement of Assets and Liabilities.
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(ies) within the index. 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.
During the six months ended June 30, 2022, the volume of the fund’s activity in swaps, based on
underlying notional amounts, was generally between 0% and 4% of net assets.
NOTE 4 - OTHER INVESTMENT TRANSACTIONS
Consistent with its investment
objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The
investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and
Statement of Additional Information.
Emerging and Frontier Markets The fund invests, either directly or through
investments in other T. Rowe Price 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. 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.
Noninvestment-Grade
Debt The fund invests, either directly or through its investment in other T. Rowe Price funds, in noninvestment-grade debt,
including “high yield” or “junk” bonds or leveraged loans. Noninvestment-grade debt issuers are more likely
to suffer an adverse change in financial condition that would result in the inability to meet a financial obligation. The
noninvestment-grade debt market may experience sudden and sharp price swings due to a variety of factors that may decrease the
ability of issuers to make principal and interest payments and adversely affect the liquidity or value, or both, of such securities.
Accordingly, securities issued by such companies carry a higher risk of default and should be considered speculative.
Restricted
Securities The fund invests 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.
Investment
in Bona Fide Investments Feeder LLC The fund invested in Bona Fide Investments Feeder LLC (Bona Fide Investments Feeder), a
private alternative debt investment fund offered by Gramercy Funds Management LLC (Gramercy). Bona Fide Investments Feeder invests
in the Bona Fide Investment Holdings LLC (underlying fund) which provides the fund exposure to alternative debt investments by
investing in sentencias (underlying interests), debt obligations owed to individual holders by the government of the Republic of
Colombia that have been converted from judgments against various Colombian governmental agencies. Bona Fide Investments
Feeder’s concentration of investments in sentencias through the underlying fund may expose it to greater risk than if its
investments were spread across a large variety of investment instruments. In addition, Colombia has experienced and may in the
future experience political and economic instability, which may increase the risk of investment loss. Bona Fide Investments Feeder,
and the underlying fund, are not subject to the same regulatory requirements as an open-end mutual fund, and, therefore, the
investments and related valuations may not be as transparent. Ownership interests in Bona Fide Investments Feeder are not
transferable and do not have redemption rights. In addition, the fund is subject to a 15-month commitment period after acquisition.
These restrictions are subject to change at the sole discretion of Gramercy. Following the expiration of the commitment period,
distributions attributable to the underlying interests, if any, will be received by the fund. As of June 30, 2022, the remaining
restriction period on this investment was 14 months and the fund had a remaining unfunded commitment of $265,000.
LIBOR
Transition The fund may invest in instruments that are tied to reference rates, including LIBOR. Over the course of the last
several years, global regulators have indicated an intent to phase out the use of LIBOR and similar interbank offered rates (IBOR).
While publication for most LIBOR currencies and lesser-used USD LIBOR settings ceased immediately after December 31, 2021, remaining
USD LIBOR settings will continue to be published until June 30, 2023. There remains uncertainty regarding the future utilization of
LIBOR and the nature of any replacement rate. Any potential effects of the transition away from LIBOR on the fund, or on certain
instruments in which the fund invests, cannot yet be determined. The transition process may result in, among other things, an
increase in volatility or illiquidity of markets for instruments that currently rely on LIBOR, a reduction in the value of certain
instruments held by the fund, or a reduction in the effectiveness of related fund transactions such as hedges. Any such effects
could have an adverse impact on the fund's performance.
Other Purchases and sales of portfolio securities other than
short-term securities aggregated $117,006,000 and $81,092,000, respectively, for the six months ended June 30, 2022.
NOTE 5 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Distributions determined
in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for
financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character but
are not adjusted for temporary differences. The amount and character of tax-basis distributions and composition of net assets are finalized
at fiscal year-end; accordingly, tax-basis balances have not been determined as of the date of this report.
The fund intends to retain realized gains to the extent of available capital loss carryforwards. Net realized capital losses may
be carried forward indefinitely to offset future realized capital gains. As of December 31, 2021, the fund had $9,652,000 of
available capital loss carryforwards.
At June 30, 2022, the cost of investments for federal income tax purposes was $507,038,000.
Net unrealized loss aggregated $125,143,000 at period-end, of which $700,000 related to appreciated investments and $125,843,000
related to depreciated investments.
NOTE 6 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in which it invests. Additionally, 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. 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. To the extent that the fund has country specific capital loss carryforwards, such carryforwards are applied against net unrealized gains when determining the deferred tax liability. Any deferred tax liability incurred by the fund is included in either Other liabilities or Deferred tax liability on the accompanying Statement of Assets and Liabilities.
NOTE 7 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price
Group). 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 and administrative agreement between the fund and Price Associates provides for
an all-inclusive annual fee equal to 0.70% of the fund’s average daily net assets. The fee is computed daily and paid monthly. The
all-inclusive fee covers investment management services and ordinary, recurring operating expenses but does not cover interest expense;
expenses related to borrowing, taxes, and brokerage; or nonrecurring expenses.
The fund may invest its cash reserves 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. Cash
collateral from securities lending, if any, is invested in the T. Rowe Price Government Reserve Fund; prior to December 13, 2021, the cash
collateral from securities lending was invested in the T. Rowe Price Short-Term Fund. The Price Reserve Funds pay no investment management
fees.
The fund may participate in securities purchase and sale transactions with other funds or accounts advised by Price Associates (cross
trades), in accordance with procedures adopted by the fund’s Board and Securities and Exchange Commission rules, which require, among
other things, that such purchase and sale cross trades be effected at the independent current market price of the security. During the
six months ended June 30, 2022, the fund had no purchases or sales cross trades with other funds or accounts advised by Price Associates.
NOTE 8 - OTHER MATTERS
Unpredictable events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases, and similar public health threats may significantly affect the economy and the markets and issuers in which a fund invests. Certain events may cause instability across global markets, including reduced liquidity and disruptions in trading markets, while some events may affect certain geographic regions, countries, sectors, and industries more significantly than others, and exacerbate other pre-existing political, social, and economic risks. Since 2020, a novel strain of coronavirus (COVID-19) has resulted in disruptions to global business activity and caused significant volatility and declines in global financial markets. In February 2022, Russian forces entered Ukraine and commenced an armed conflict leading to economic sanctions being imposed on Russia and certain of its citizens, creating impacts on Russian-related stocks and debt and greater volatility in global markets. These are recent examples of global events which may have an impact on the fund’s performance, which could be negatively impacted if the value of a portfolio holding were harmed by these and such other events. Management is actively monitoring the risks and financial impacts arising from these events.
INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS
A description of the policies and procedures used by T. Rowe Price funds 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://www.troweprice.com/corporate/us/en/utility/policies.html
Scroll down to the section near the bottom of the page that says, “Proxy Voting Guidelines.” Click on the links 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 (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s reports on Form N-PORT are available electronically on the SEC’s website (sec.gov). In addition, most T. Rowe Price funds disclose their first and third fiscal quarter-end holdings on troweprice.com.
APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND SUBADVISORY AGREEMENT
Each year, the fund’s Board of Directors (Board) considers the continuation of the investment management agreement (Advisory Contract) between the fund and its investment adviser, T. Rowe Price Associates, Inc. (Adviser). In that regard, at a meeting held on March 7–8, 2022 (Meeting), the Board, including all of the fund’s independent directors, approved the continuation of the fund’s Advisory Contract. At the Meeting, the Board also considered the initial approval of an investment subadvisory agreement (Subadvisory Contract) that the Adviser will enter into with T. Rowe Price Hong Kong Limited (Subadviser) on behalf of the fund effective May 1, 2022. The Subadvisory Contract authorizes the Subadviser to have investment discretion with respect to all or a portion of the fund’s portfolio. The Board noted that the Subadvisory Contract will be substantially similar to other subadvisory agreements that are in place for other T. Rowe Price funds that delegate investment management responsibilities to affiliated investment advisers and that the Adviser will retain oversight responsibilities with respect to the fund. At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of the Adviser and Subadviser and the approval of the Advisory Contract and Subadvisory Contract. The independent directors were assisted in their evaluation of the Advisory Contract and Subadvisory Contract by independent legal counsel from whom they received separate legal advice and with whom they met separately.
In providing information to the Board, the Adviser was guided by a detailed set of requests for information submitted by independent legal counsel on behalf of the independent directors. In considering and approving the Advisory Contract and Subadvisory Contract, the Board considered the information it believed was relevant, including, but not limited to, the information discussed below. The Board considered not only the specific information presented in connection with the Meeting but also the knowledge gained over time through interaction with the Adviser and Subadviser about various topics. The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers factors that are relevant to its annual consideration of the renewal of the T. Rowe Price funds’ advisory contracts, including performance and the services and support provided to the funds and their shareholders.
Services Provided by the
Adviser and Subadviser
The Board considered the nature, quality, and extent of the services provided to the fund by the
Adviser and to be provided by the Subadviser. These services included, but were not limited to, directing the fund’s
investments in accordance with its investment program and the overall management of the fund’s portfolio, as well as a variety
of related activities such as financial, investment operations, and administrative services; compliance; maintaining the
fund’s records and registrations; and shareholder communications. The Board also reviewed the background and experience of the
Adviser’s and Subadviser’s senior management teams and investment personnel involved in the management of the fund, as
well as the Adviser’s compliance record. The Board concluded that it was satisfied with the nature, quality, and extent of the
services provided by the Adviser and to be provided by the Subadviser.
Investment Performance of the Fund
The
Board took into account discussions with the Adviser and reports that it receives throughout the year relating to fund performance.
In connection with the Meeting, the Board reviewed the fund’s total returns for various periods through December 31, 2021, and
compared these returns with the performance of a peer group of funds with similar investment programs and a wide variety of other
previously agreed-upon comparable performance measures and market data, including relative performance information as of September
30, 2021, supplied by Broadridge, which is an independent provider of mutual fund data.
On the basis of this evaluation and
the Board’s ongoing review of investment results, and factoring in the relative market conditions during certain of the
performance periods, the Board concluded that the fund’s performance was satisfactory.
Costs, Benefits, Profits,
and Economies of Scale
The Board reviewed detailed information regarding the revenues received by the Adviser under the
Advisory Contract and other direct and indirect benefits that the Adviser (and its affiliates) may have realized from its
relationship with the fund. In considering soft-dollar arrangements pursuant to which research may be received from broker-dealers
that execute the fund’s portfolio transactions, the Board noted that the Adviser bears the cost of research services for all
client accounts that it advises, including the T. Rowe Price funds. The Board received information on the estimated costs incurred
and profits realized by the Adviser from managing the T. Rowe Price funds. The Board also reviewed estimates of the profits realized
from managing the fund in particular, and the Board concluded that the Adviser’s profits were reasonable in light of the
services provided to the fund.
The Board also considered whether the fund benefits under the fee levels set forth in the
Advisory Contract or otherwise from any economies of scale realized by the Adviser. Under the Advisory Contract, the fund pays the
Adviser a single fee, or all-inclusive management fee, which is based on the fund’s average daily net assets. The
all-inclusive management fee includes investment management services and provides for the Adviser to pay all of the fund’s
ordinary, recurring operating expenses except for interest, taxes, portfolio transaction fees, and any nonrecurring extraordinary
expenses that may arise. Under the Subadvisory Contract approved at the Meeting, the Adviser may pay the Subadviser up to 60% of the
advisory fees that the Adviser receives from the fund. The Adviser has generally implemented an all-inclusive management fee
structure in situations where a fixed total expense ratio is useful for purposes of providing certainty of fees and expenses for the
investors in these funds and has historically sought to set the initial all-inclusive management fee rate at levels below the
expense ratios of comparable funds to take into account potential future economies of scale. In addition, the assets of the fund are
included in the calculation of the group fee rate, which serves as a component of the management fee for many T. Rowe Price funds
and declines at certain asset levels based on the combined average net assets of most of the T. Rowe Price funds (including the
fund). Although the fund does not have a group fee component to its management fee, its assets are included in the calculation
because certain resources utilized to operate the fund are shared with other T. Rowe Price funds. The Board concluded that, based on
the profitability data it reviewed and consistent with this all-inclusive management fee structure, the advisory fee structure for
the fund continued to be appropriate.
Fees and Expenses
The Board was provided with information regarding
industry trends in management fees and expenses. Among other things, the Board reviewed data for peer groups that were compiled by
Broadridge, which compared: (i) contractual management fees, actual management fees, nonmanagement expenses, and total expenses of
the fund with a group of competitor funds selected by Broadridge (Expense Group) and (ii) actual management fees, nonmanagement
expenses, and total expenses of the fund with a broader set of funds within the Lipper investment classification (Expense Universe).
The Board considered the fund’s contractual management fee rate, actual management fee rate, and total expenses (all of which
generally reflect the all-inclusive management fee rate and do not deduct the operating expenses paid by the Adviser as part of the
overall management fee) in comparison with the information for the Broadridge peer groups. Broadridge generally constructed the peer
groups by seeking the most comparable funds based on similar investment classifications and objectives, expense structure, asset
size, and operating components and attributes and ranked funds into quintiles, with the first quintile representing the funds with
the lowest relative expenses and the fifth quintile representing the funds with the highest relative expenses. The information
provided to the Board indicated that the fund’s contractual management fee ranked in the fourth quintile (Expense Group), the
fund’s actual management fee rate ranked in the fifth quintile (Expense Group) and fourth quintile (Expense Universe), and the
fund’s total expenses ranked in the second quintile (Expense Group and Expense Universe).
The Board also reviewed the
fee schedules for other investment portfolios with similar mandates that are advised or subadvised by the Adviser and its
affiliates, including separately managed accounts for institutional and individual investors; subadvised funds; and other sponsored
investment portfolios, including collective investment trusts and pooled vehicles organized and offered to investors outside the
United States. Management provided the Board with information about the Adviser’s responsibilities and services provided to
subadvisory and other institutional account clients, including information about how the requirements and economics of the
institutional business are fundamentally different from those of the proprietary mutual fund business. The Board considered
information showing that the Adviser’s mutual fund business is generally more complex from a business and compliance
perspective than its institutional account business and considered various relevant factors, such as the broader scope of operations
and oversight, more extensive shareholder communication infrastructure, greater asset flows, heightened business risks, and
differences in applicable laws and regulations associated with the Adviser’s proprietary mutual fund business. In assessing
the reasonableness of the fund’s management fee rate, the Board considered the differences in the nature of the services
required for the Adviser to manage its mutual fund business versus managing a discrete pool of assets as a subadviser to another
institution’s mutual fund or for an institutional account and that the Adviser generally performs significant additional
services and assumes greater risk in managing the fund and other T. Rowe Price funds than it does for institutional account clients,
including subadvised funds.
On the basis of the information provided and the factors considered, the Board concluded that
the fees paid by the fund under the Advisory Contract are reasonable.
Approval of the Advisory Contract and Subadvisory
Contract
As noted, the Board approved the continuation of the Advisory Contract and the new Subadvisory Contract to become
effective on May 1, 2022. No single factor was considered in isolation or to be determinative to the decision. Rather, the Board
concluded, in light of a weighting and balancing of all factors considered, that it was in the best interests of the fund and its
shareholders for the Board to approve the Advisory Contract and Subadvisory Contract (including the fees to be charged for services
thereunder).
Item 1. (b) Notice pursuant to Rule 30e-3.
Not applicable.
Item 2. Code of Ethics.
A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions is filed as an exhibit to the registrant’s annual Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the registrant’s most recent fiscal half-year.
Item 3. Audit Committee Financial Expert.
Disclosure required in registrant’s annual Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Disclosure required in registrant’s annual Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There has been no change to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.
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 period 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is filed with the registrant’s annual Form N-CSR.
(3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
T. Rowe Price Global Funds, Inc.
| By | /s/ David Oestreicher | |||||
| David Oestreicher | ||||||
| Principal Executive Officer | ||||||
| Date | August 17, 2022 | |||||
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/ David Oestreicher | |||||
| David Oestreicher | ||||||
| Principal Executive Officer | ||||||
| Date | August 17, 2022 | |||||
| By | /s/ Alan S. Dupski | |||||
| Alan S. Dupski | ||||||
| Principal Financial Officer | ||||||
| Date | August 17, 2022 | |||||