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: 811-22810
T. Rowe Price Global Allocation Fund, Inc. |
(Exact name of registrant as specified in charter) |
100 East Pratt Street, Baltimore, MD 21202 |
(Address of principal executive offices) |
David Oestreicher |
100 East Pratt Street, Baltimore, MD 21202 |
(Name and address of agent for service) |
Registrant’s telephone number, including area code: (410) 345-2000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2015
Item 1. Report to Shareholders
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Global Allocation Fund | October 31, 2015 |
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The views and opinions in this report were current as of October 31, 2015. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.
REPORTS ON THE WEB
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Manager’s Letter
Fellow Shareholders
U.S. stocks produced moderate gains in the 12 months ended October 31, 2015. Markets were volatile, however, as investor sentiment swung between optimism about a resilient economic recovery and aggressive monetary stimulus overseas to concerns about slowing global growth. International developed markets stocks trailed U.S. shares with slim overall gains, while emerging markets equities declined sharply. In the investment-grade debt universe, long-term U.S. Treasury bonds performed well in an environment characterized by falling yields, tepid inflation, and strong demand. Investment-grade corporate bonds also gained, but high yield bonds fell. Non-U.S. dollar-denominated debt in international developed and emerging markets generally declined in dollar terms as the U.S. dollar strengthened versus most major currencies during the period.
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Against this uneven and challenging backdrop, the Global Allocation Fund returned -3.39% and 0.83% for the six and 12 months ended October 31, 2015, respectively. (Although there was minimal difference over the most recent reporting periods, results for the Advisor Class shares may differ slightly, reflecting their different expense ratio, cash flows, and other factors.) The fund performed in line with the Morningstar Global Allocation Index for the six-month reporting period and outperformed the benchmark for the 12-month period.
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STRATEGY OVERVIEW
The fund’s diversified portfolio seeks long-term total return through both capital appreciation and income from investments in U.S. and international stocks, bonds, cash, and alternative investments. The portfolio consists of approximately 60% stocks, 30% bonds and cash, and 10% alternative investments, with the flexibility to overweight or underweight segments of the portfolio relative to those broad allocations. International securities generally account for about 50% of the fund’s equity holdings and 40% of the total portfolio.
Supported by the global reach of T. Rowe Price’s proprietary investment management and research capabilities, security selection is anticipated to be the primary driver of added value in the portfolio over the long term. We also seek to add value through overweighting and underweighting of asset classes and sectors, reflecting the views of T. Rowe Price’s Asset Allocation Committee. The breadth of the underlying sectors, diversified across geography, asset classes, and investment strategies, provides the ability to position the portfolio where we see attractive opportunities in the context of current valuations as well as based on our outlook for the economic and market environments.
The fund’s global fixed income allocation emphasizes specific attributes designed to contribute to the overall portfolio in a range of economic environments. Non-U.S. bonds account for about one-third of the fixed income allocation, including local currency and dollar-denominated developed and emerging markets debt for exposure across a broad range of foreign bond markets and currencies. Our holdings of U.S. investment-grade bonds provide ballast in “risk off” environments when investors gravitate toward higher quality securities, including U.S. Treasuries. We also maintain a significant allocation to high yield corporate bonds and emerging markets debt to take advantage of their more attractive yields as well as opportunities to add value within these sectors through security selection driven by T. Rowe Price’s fundamental credit research. The fund’s fixed income holdings include allocations to shorter-duration Treasury inflation protected securities (TIPS) and floating rate bank loans that could be beneficial contributors to the portfolio’s risk and return profile in an environment of rising interest rates.
In addition, the portfolio includes asset classes and strategies that enhance its risk/reward profile by moderating risk and providing diversification through exposure to sources of less correlated returns. These asset classes and strategies include a diversified allocation to hedge funds, currency-hedged international equities, and an equity index option strategy.
An externally managed hedge fund-of-funds managed by Blackstone Hedge Fund Solutions accounts for approximately 9% of the portfolio. A hedge fund-of-funds designed to provide exposure to multiple hedge fund strategies and managers can benefit portfolio diversification by offering returns that historically have been less correlated with traditional (stock and bond) asset classes represented in the fund, which can help dampen portfolio volatility.
Hedging a portion of the fund’s developed market currency exposure back to the U.S. dollar helps moderate the foreign exchange volatility associated with a significant international allocation while maintaining robust exposure to non-U.S. investment opportunities. The equity index option strategy, which currently involves selling call options on the Standard & Poor’s 500 Index, provides an alternative way of being compensated for bearing the downside risk of equities. We expect this strategy to offer a return profile that is less correlated with equity market returns as it earns a premium in exchange for forgoing some of the equity market’s upside potential. The consistency of receiving the premium collected from selling index call options coupled with the lower equity exposure associated with writing the call option can provide a more stable pattern of returns, which can be particularly beneficial in an environment of modestly positive or negative equity market performance.
MARKET ENVIRONMENT
Global stocks generated mixed results for the 12-month reporting period in an uncertain market and economic environment. U.S. stocks posted moderate gains. Investor sentiment was generally positive throughout much of the period amid encouraging domestic economic data and optimism about aggressive monetary stimulus in Europe and Japan. The Federal Reserve (Fed) signaled that it is poised to begin normalizing U.S. monetary policy, with interest rate hikes now expected to start in December 2015 or early 2016. The U.S. dollar strengthened significantly versus most other currencies against a backdrop of relatively stronger U.S. economic growth and the divergence between expectations of less accommodative monetary policy from the Fed and aggressive stimulus measures in Europe, Japan, and elsewhere. Investor sentiment soured late in the period and markets retreated amid uncertainty about the timing and pace of Fed rate hikes and concerns about a sharper-than-expected economic slowdown in China and its potential to weigh on already muted global economic growth. According to various Russell indexes, U.S. large-cap stocks posted the biggest gains, followed by mid-caps and small-caps, respectively. Growth shares outpaced value stocks across all market capitalization ranges.
Stocks in developed European markets generated good gains in local currency terms, but currency weakness resulted in roughly flat performance in U.S. dollar terms for the fiscal year. Launched in March 2015, the European Central Bank’s (ECB) quantitative easing program helped European exporters by further weakening the euro and making their goods more competitive in the global marketplace. Optimism about an improved credit environment was also beneficial, as were low energy costs. Stocks gave back most of the gains later in the period amid renewed concerns about Greece’s debt and the fractious relationships between eurozone members, as well as worries about the potential for slowing global growth to weigh on Europe’s fragile recovery. China’s slowdown was particularly concerning to many investors because it is perceived as a key end market for many European multinationals.
Japanese equities were solidly positive for the fund’s fiscal year. The Bank of Japan continued its aggressive monetary stimulus in its efforts to keep interest rates low, battle deflationary pressures, and boost domestic consumption. A weak yen and low prices for oil and other commodities helped many Japanese businesses, particularly exporters, reduce costs and increase revenues and earnings. Started in 2014, the Japanese Government Pension Investment Fund’s ongoing reallocation of assets from bonds to stocks also supported equities. However, uncertainty about the impact of slowing growth in China, an important end market for many Japanese exports, weighed on stocks later in the period. In addition, recent data suggest that Japan’s economy slipped back into recession. This has raised concerns that the series of fiscal, monetary, and structural reforms known as “Abenomics” may not be working and that even more aggressive stimulus measures may be forthcoming.
Emerging markets stocks declined broadly for the period. Concerns about the health of the Chinese economy and low commodity prices combined with uncertainty about pending U.S. interest rate hikes and burgeoning geopolitical risk to drag investor sentiment lower. Chinese stocks endured something of a roller-coaster ride but finished the period roughly where they began. Brazil was one of the weakest markets as its economy fell into recession and the government struggled to contain a growing corruption scandal surrounding the state-owned energy company. In emerging Europe, Turkey lagged following indecisive elections and Greece weakened sharply after its third bailout and the imposition of capital controls. India declined moderately, while Russia fell by double digits amid low oil prices and sanctions imposed as a result of its actions in Ukraine. Almost all emerging markets currencies weakened against the dollar over the 12-month reporting period, eroding returns for dollar-based investors.
U.S. bond returns were generally positive for the period. In the investment-grade universe, long-term U.S. Treasury bonds performed best as interest rates declined. Strong foreign demand for U.S. government bonds due to their relatively attractive yields and an uptick in risk aversion were contributing factors. High yield bonds declined amid concerns about weakness among energy-related issuers, which compose a significant portion of the high yield market. Non-U.S. dollar bonds in developed international markets declined in dollar terms. The U.S. dollar’s strong appreciation versus most currencies outstripped the returns from the overall decline of yields in key government bond markets. Emerging markets debt denominated in local currencies declined sharply due in large part to the stronger U.S. dollar, while U.S. dollar-denominated emerging markets debt was modestly positive.
ASSET ALLOCATION STRATEGY
Following several years of very strong market performance, we see few particularly compelling investment opportunities as valuations are at or above fair value in many market segments, and this is reflected in the number of smaller bets in our portfolios. While our positioning is close to neutral across a number of market segments, we are still finding investment opportunities in select areas where valuations appeared overly discounted to economic, market, and geopolitical uncertainties. We have a neutral position in stocks relative to bonds. Despite recent volatility, equity valuations are above historical averages by several measures, with limited support from earnings growth. At the same time, underlying fundamentals remain solid, and improving economic growth should support equities. We expect modest returns from bonds as the current low-yield environment offers a weak foundation and rising interest rates are likely to weigh on most bond sectors once the Fed begins to normalize its interest rate policy. However, the impact of higher interest rates should be softened by the Fed’s expected gradual approach to rate increases against a backdrop of modest economic growth. Additionally, demand for U.S. bonds should be supported by their yield advantage relative to investment-grade opportunities in other developed markets. International central banks’ monetary policies remain broadly accommodative, helping to moderate downside risks to bonds.
We favor international equities versus U.S. stocks based on the former’s attractive relative valuations and their potential for stronger earnings growth. Overseas economies and companies stand to benefit from aggressive central bank stimulus and weaker currencies versus the U.S. dollar. Earnings and profit margins in Europe are still well below pre-financial crisis levels and have more room for improvement than the U.S., where earnings and margins are at peak levels. Among international equities, we favor emerging markets equities over developed markets stocks as emerging markets valuations are below long-term historical averages relative to developed markets valuations. Slowing emerging markets economic growth and looming U.S. rate hikes pose near-term risks, but valuations appear to be deeply discounting longer-term growth potential. Continued weakness in global energy and commodity prices is expected to weigh on commodity exporters but are likely to benefit consumer- and service-oriented economies. We are overweight global equities relative to real assets stocks. Prices for global energy and commodities have fallen considerably as improved extraction technologies and increased production have raised supplies while slower global economic growth has dampened demand. We are optimistic about real estate stocks in light of favorable fundamentals, including a supportive economic environment and limited new supply. We favor global real estate stocks over U.S. real estate stocks as many overseas economies are in earlier stages of economic recovery than the U.S., with highly accommodative monetary policies and lower interest rates in contrast to the U.S., where rates are expected to rise. U.S. real estate stocks could be negatively affected by the potential for higher interest rates in the coming months, though the near-term risk could be softened if the Fed adopts a “low and slow” approach for rate hikes, as expected.
In the U.S., we have a reasonably balanced view between growth and value stocks. A low-growth economy typically favors growth stocks, but the gradual broadening of the U.S. recovery tempers our view. Growth stocks offer more attractive valuations and better earnings potential than value shares, which tend to be more cyclical and reliant on strong economic growth and commodities demand. A rising rate environment could support value-oriented sectors, including financials, although a low global growth environment is likely to weigh on commodity-related sectors. We are overweight large-cap stocks versus small-caps. Small-cap valuations still look expensive, although the valuation premium has moderated following recent underperformance. Additionally, elevated market volatility typically poses greater headwinds for small-caps.
Outside the U.S., we favor international value stocks over growth due to more attractive valuations and greater room to increase earnings and margins, but we have tempered our view in light of slowing global economic growth. More cyclical, value-oriented sectors, such as European financials, tend to perform better in stronger growth environments. While monetary stimulus in Europe and Japan is supportive, a slowdown in global trade could weigh on export-oriented companies that have led the recovery to this point. We are modestly overweight international small-cap stocks versus large-caps based on their reasonable valuations and potential to benefit from improving domestic economies.
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Within the portfolio’s broad fixed income allocation, high yield bonds feature better yields than investment-grade debt, as well as a lower duration profile and less sensitivity to rising interest rates. However, we are neutral between high yield and investment-grade bonds given the advanced stage of the credit cycle combined with a backdrop of slowing global growth, concerns about liquidity in the high yield market, and rising default potential in energy-related sectors. Within high yield, we favor floating rate bank loans due to their lower duration profile, senior status in the capital structure, and lower commodities exposure.
We removed our underweight to nondollar bonds versus U.S. investment-grade debt and presently have a neutral position. Relatively strong economic growth and expectations of higher interest rates in the U.S. support the dollar, but the slow pace of interest rate hikes could limit the U.S. dollar’s appreciation potential. Additionally, more monetary stimulus overseas is possible and could further weaken many international currencies. We maintained a neutral position between emerging markets debt versus U.S. investment-grade bonds. Emerging markets bond yields have become more attractive, and many emerging markets currencies are at multiyear lows. However, wide variations in fiscal and policy conditions between countries, muted global economic growth, and the start of U.S. interest rate normalization could weigh on valuations.
PORTFOLIO REVIEW
U.S. Stocks
U.S. companies across a range of industries contributed to performance. Amazon.com was one of our top performers for the 12-month reporting period. Amazon continues to benefit from its excellent position in two strong and durable businesses—Internet retail and Amazon Web Services (AWS), an online storage platform—that target huge markets with substantial growth potential. We are particularly optimistic about the prospects for long-term growth in its cloud computing and AWS businesses. Microsoft benefited performance as solid earnings results highlighted improvement in its already strong position in the global technology industry. The company is successfully transitioning to public cloud computing with its Office 365 application suite and Azure cloud platform. Commercial and military aircraft manufacturer Boeing was another strong contributor. The company beat earnings expectations and should benefit from steady sales of new and replacement aircraft amid a global secular trend toward increased air travel. Global payment processor Visa gained on strong revenue and earnings growth that was in line with consensus expectations. On the other hand, our utilities and energy stocks generally weighed on results as overcapacity, sluggish demand, and low prices continued to challenge global energy markets. Electric utility Exelon and independent power producer Calpine were particularly weak, as were onshore exploration and production companies Chesapeake Energy and Pioneer Natural Resources. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)
International Stocks
Outside the U.S., financial companies were some of the fund’s strongest contributors. These included commercial and retail bank Royal Bank of Scotland (UK) and insurers AIA Group (Hong Kong) and Aviva (UK). Swiss pharmaceutical firm Roche Holding was one of our top performers. Roche’s business model focuses on the high-margin oncology business, where it is a dominant player, and the company has a drug pipeline that should be more than sufficient to offset gradual erosion of existing franchises. Shares of Tencent Holdings (China) gained on the company’s dominant position as the leading Internet social media platform in the huge Chinese market (800 million users and growing). Global industrial conglomerate CK Hutchison Holdings (Hong Kong) was among our better performers. CK Hutchison is a conglomerate with interests in ports, retail, telecommunications, energy, infrastructure, and aircraft leasing. The group has been undergoing a major restructuring to streamline its corporate structure and business operations, and the stock continues to trade at an attractive discount. As with our portfolio of U.S. stocks, energy shares weighed heavily on results for our international equity portfolio. Baidu, China’s dominant search engine platform, detracted from results after reporting higher-than-expected expenses related to its online-to-offline (O2O) business investments, which could generate relatively low returns for some time. Low prices for oil and other commodities punished a number of our holdings, including oil exploration and production company Eni (Italy), integrated petroleum producer Royal Dutch Shell (UK/Netherlands), and global metals and mining company Rio Tinto (UK).
Domestic Bonds
The portfolio’s fixed income holdings consist of a core allocation to U.S. investment-grade bonds, including both nominal coupon securities and TIPS. This core investment-grade allocation emphasizes high-quality, longer-duration bonds that can provide ballast in an environment of heightened risk aversion. The TIPS allocation offers inflation protection through broad maturity U.S. TIPS and short-duration TIPS, which have less sensitivity to changes in real interest rates. While TIPS have attractive valuations, we believe near-term upside for TIPS may be limited as the Fed looks to normalize its interest rate policy, the dollar remains strong, wage pressures appear muted, and commodity prices stay low. We supplement the core allocation with allocations to fixed income sectors that offer more attractive yields and lower price sensitivity to interest rate changes, including high yield bonds and floating rate bank loans. Exposure to the hard-hit energy sector weighed on high yield bonds, but this was partially offset by our decision to underweight energy and metals and mining names in our high yield portfolio. Amid a turbulent credit market environment, our allocation to floating rate bank loans, which reflect less exposure to energy-related issuers, was also beneficial. Our TIPS allocation weighed on results for the period in an environment of muted inflation and expectations of higher interest rates, but our U.S. investment-grade portfolio helped performance due to its longer-duration profile as investors sought safety.
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International Bonds
The portfolio’s fixed income holdings also include international bonds, including developed and emerging markets sovereign and corporate bonds, denominated in both U.S. dollar and local currencies. These international bonds can provide an additional source of diversification relative to our allocations to domestic bonds and equities. Nondollar developed markets and emerging markets local currency bonds weighed on returns as the U.S. dollar appreciated versus most other currencies. Global growth concerns and easy monetary policies in Europe, Japan, and several key emerging markets combined to weaken most currencies versus the greenback.
Diversifying Strategies
The portfolio incorporates several diversifying components, such as the diversified hedge fund of funds allocation, currency-hedged international equities, and an equity index option strategy, to moderate volatility and diversify risk over a full market cycle. For example, the equity index option strategy is expected to have a lower-volatility profile than the broad stock market, while the hedge fund allocation is expected to have a volatility level comparable to bonds with potential value added from a broad range of underlying investment strategies and managers. The diversified hedge fund of funds allocation and currency-hedged international equities made positive contributions to performance during the reporting period.
INVESTMENT OUTLOOK
We expect global economic growth to be mixed, with gradual improvements in developed markets and weaker growth in major emerging markets like China, Brazil, and Russia. In the U.S., estimates of third-quarter growth show the economy grew at a 2.1% annualized pace weighed down by weak inventory building. Inventories may continue to weigh on growth in the current quarter, with resilient consumer spending supported by strong job growth and low inflation. While inflation remains below the Fed’s 2% target, factors that supported low inflation have moderated with the pace of U.S. dollar strength slowing, energy prices off their near-term lows, and rents rising due to a tightening housing market. In addition, evidence suggests that wages are beginning to inflect higher from trough levels as the labor market has improved. The U.S. Federal Reserve has left open the possibility for interest rate policy normalization to begin before year-end despite previously acknowledged global growth concerns, with the subsequent pace of rate hikes still expected to be gradual and data dependent. On the corporate front, healthy balance sheets and cash flows outside of energy-related segments grant companies a measure of flexibility in the use of capital to increase capital spending, engage in mergers and acquisitions, and return capital to shareholders through dividend increases and share buybacks.
We continue to be encouraged by generally positive economic data out of Europe. Manufacturing activity is expanding, and while not strong, gross domestic product growth has improved steadily. The weak euro, cheap oil, reduced fiscal drag, and assurances by the ECB that it will take the steps necessary to stimulate growth going forward are also supportive. Remaining risks include lingering structural issues, elevated unemployment, high debt, and political uncertainty in several countries. After emerging from a tax-induced recession in the fourth quarter of 2014, Japan’s economy contracted again in the second and third quarters of 2015, weighed down by weak business spending and giving rise to concerns that Abenomics is failing and that even more aggressive monetary and fiscal stimulus may be forthcoming. Japanese consumer spending and wage growth remain muted.
Fiscal and monetary conditions continue to diverge among emerging markets economies. Slowing growth in China has hurt global trade, weighed on commodity prices, and punished commodity-producing economies like Brazil, while other developing countries that have made progress on reforms, such as India and Mexico, are showing signs of improvement. While there is significant divergence across developing countries in terms of economic growth, inflation, and fiscal health, many consumer-oriented economies should benefit from low commodity prices. Additionally, weaker local currencies should support export-focused companies in many emerging markets. The People’s Bank of China reduced its reserve requirements and lowered interest rates for the sixth time since last November in an effort to stimulate growth as evidence mounts that the economy is growing less than policymakers’ targets. Near-term risks include a worse-than-expected slowdown in China or a crisis in its financial system, a sharper-than-expected rise in U.S. interest rates as the Fed normalizes its monetary policy, and geopolitical turmoil.
The ongoing divergence in monetary policy globally could generate significant volatility as markets adjust to interest rates moving in varying directions, reinforcing the importance of the fund’s broad global diversification. Our allocations to several nontraditional strategies can dampen volatility and help provide a buffer against potentially turbulent markets. We believe that our access to T. Rowe Price’s global research platform enhances our ability to add value through strong security selection. The portfolio’s broad diversification across asset classes, regions, and countries, as well as our ability to make changes in the fund’s allocations to help enhance its risk/reward profile, should help it post attractive risk-adjusted returns in volatile, changing market environments.
Thank you for investing with T. Rowe Price.
Respectfully submitted,
Charles M. Shriver
Chairman of the fund’s Investment Advisory Committee
November 20, 2015
The committee chairman 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 INVESTING IN STOCKS
As with all stock and bond mutual funds, the fund’s share price can fall because of weakness in the stock or bond markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment manager’s assessment of companies held in a fund may prove incorrect, resulting in losses or poor performance even in rising markets. A sizable cash or fixed income position may hinder the fund from participating fully in a strong, rapidly rising bull market. In addition, significant exposure to bonds increases the risk that the fund’s share value could be hurt by rising interest rates or credit downgrades or defaults. Convertible securities are also exposed to price fluctuations of the company’s stock.
RISKS OF INTERNATIONAL INVESTING
Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets. Funds investing in a single country or in a limited geographic region tend to be riskier than more diversified funds. Risks can result from varying stages of economic and political development; differing regulatory environments, trading days, and accounting standards; and higher transaction costs of non-U.S. markets. Non-U.S. investments are also subject to currency risk, or a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.
RISKS OF INVESTING IN BONDS
Funds that invest in bonds are subject to interest rate risk, the decline in bond prices that usually accompanies a rise in interest rates. Longer-maturity bonds typically decline more than those with shorter maturities. Funds that invest in bonds are also subject to 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.
GLOSSARY
Call option: Gives the holder the right, but not the obligation, to buy a security or index at a specified price on or before a specified date. Writing a call option means selling it to collect the price, or premium.
Duration: A measure of a bond’s sensitivity to changes in interest rates. For example, a bond with a duration of five years would fall about 5% in price in response to a one-percentage-point rise in interest rates, and vice versa.
Gross domestic product: The total market value of all goods and services produced in a country.
Morningstar Global Allocation Index: An index that represents the performance of a portfolio of 60% global equities and 40% global bonds, with the allocation within each broad asset class determined by Morningstar’s asset allocation methodology and represented by Morningstar core equity and fixed income indexes.
Nominal coupon bonds: Fixed income securities with coupon payments that do not vary in response to changes in an inflation rate.
Standard & Poor’s 500 Index: An unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies.
Treasury inflation protected securities (TIPS): Income-generating bonds that are issued by the federal government and whose interest and principal payments are adjusted for inflation. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index.
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Performance and Expenses
Growth of $10,000 |
This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes.
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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.
Please note that the fund has two share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, and the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee. Each share class is presented separately in the table.
Actual Expenses
The first line of the following table (Actual) provides information about actual account values and expenses based on the fund’s actual returns. You may use the information on this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number on the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Note: T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Preferred Services, Personal Services, or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $100,000). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.
You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements |
T. Rowe Price Global Allocation Fund, Inc. (the fund), is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund seeks long-term capital appreciation and income. The fund has two classes of shares: the Global Allocation Fund original share class, referred to in this report as the Investor Class, offered since May 28, 2013, and the Global Allocation Fund–Advisor Class (Advisor Class), offered since May 28, 2013. Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries that are compensated by the class for distribution, shareholder servicing, and/or certain administrative services under a Board-approved Rule 12b-1 plan; the Investor Class does not pay Rule 12b-1 fees. Each class has exclusive voting rights on matters related solely to that class; separate voting rights on matters that relate to both classes; and, in all other respects, the same rights and obligations as the other class.
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 Income and expenses are recorded on the accrual basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Paydown gains and losses are recorded as an adjustment to interest income. Inflation adjustments to the principal amount of inflation-indexed bonds are reflected as interest income. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Earnings on investments recognized as partnerships for federal income tax purposes reflect the tax character of such earnings. Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Distributions from REITs are initially recorded as dividend income and, to the extent such represent a return of capital or capital gain for tax purposes, are reclassified when such information becomes available. Income distributions are declared and paid by each class annually. Capital gain distributions, if any, are generally declared and paid by the fund annually.
Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses.
Class Accounting Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the class to which they relate. Expenses common to both classes, investment income, and realized and unrealized gains and losses are allocated to the classes based upon the relative daily net assets of each class. The Advisor Class pays distribution, shareholder servicing, and/or certain administrative expenses in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% of the class’s average daily net assets.
Credits The fund earns credits on temporarily uninvested cash balances held at the custodian, which reduce the fund’s custody charges. Custody expense in the accompanying financial statements is presented before reduction for credits.
New Accounting Guidance In May 2015, FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The ASU removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and amends certain disclosure requirements for such investments. The ASU is effective for interim and annual reporting periods beginning after December 15, 2015. Adoption will have no effect on the fund’s net assets or results of operations.
NOTE 2 - VALUATION
The fund’s financial instruments are valued and each class’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.
Fair Value The fund’s financial instruments are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) has been established by the fund’s Board of Directors (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes procedures to value securities; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; oversees the selection, services, and performance of pricing vendors; oversees valuation-related business continuity practices; and provides guidance on internal controls and valuation-related matters. The Valuation Committee reports to the 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, in its judgment, materially affect the value of some or all of its portfolio securities, the fund will adjust the previous quoted prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust quoted prices to reflect fair value, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with quoted prices and information to evaluate or adjust those prices. The fund cannot predict how often it will use quoted prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares quoted prices, the next day’s opening prices in the same markets, and adjusted prices.
Actively traded 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.
Debt securities generally are traded in the OTC market. Securities with remaining maturities of one year or more at the time of acquisition are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which considers the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Generally, debt securities are categorized in Level 2 of the fair value hierarchy; however, to the extent the valuations include significant unobservable inputs, the securities would be categorized in Level 3.
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. 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. Investments in private investment companies generally are categorized either in Level 2 or 3, depending on the significance of unobservable inputs. Listed options, and OTC options with a listed equivalent, are valued at the mean of the closing bid and asked prices and generally are categorized in Level 2 of the fair value hierarchy. Financial futures contracts are valued at closing settlement prices and are categorized in Level 1 of the fair value hierarchy. Forward currency exchange contracts are valued using the prevailing forward exchange rate and are categorized in Level 2 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, 2015:
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There were no material transfers between Levels 1 and 2 during the year ended October 31, 2015.
Following is a reconciliation of the fund’s Level 3 holdings for the year ended October 31, 2015. 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, 2015, totaled $431,000 for the year ended October 31, 2015.
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In accordance with GAAP, the following table provides quantitative information about significant unobservable inputs used to determine the fair valuations of the fund’s Level 3 assets, by class of financial instrument; it also indicates the sensitivity of the Level 3 valuations to changes in those significant unobservable inputs. Because the Valuation Committee considers a wide variety of factors and inputs, both observable and unobservable, in determining fair values, the unobservable inputs presented do not reflect all inputs significant to the fair value determination.
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NOTE 3 - DERIVATIVE INSTRUMENTS
During the year ended October 31, 2015, 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, such as seeking to hedge against declines in principal value, increase yield, invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, or to adjust 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, as described in Note 2, and recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting, even for derivatives employed as economic hedges. 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 October 31, 2015, and the related location on the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:
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Additionally, the amount of gains and losses on derivative instruments recognized in fund earnings during the year ended October 31, 2015, and the related location on the accompanying Statement of Operations is summarized in the following table by primary underlying risk exposure:
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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 equal to a certain percentage of the contract value (margin requirement), and the margin requirement must be maintained over the life of the contract. Each clearing broker, 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) 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 provide collateral agreements. MNAs may be in the form of International Swaps and Derivatives Association master agreements (ISDAs) or foreign exchange letter agreements (FX letters).
MNAs govern 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 net settlement in the event of contract termination and permit termination by either party prior to maturity upon the occurrence of certain stated 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 would allow the fund to terminate while a decline in the fund’s net assets of more than a certain percentage would allow the counterparty to terminate. Upon termination, all bilateral derivatives with that counterparty would be liquidated and a net amount settled. ISDAs typically include collateral agreements whereas FX letters do not. Collateral requirements are determined based on the net aggregate unrealized gain or loss on all bilateral derivatives with each 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 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. Cash and currencies posted by the fund are reflected as cash deposits in the accompanying financial statements and generally are 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 by the fund’s custodian. As of October 31, 2015, no collateral was pledged by either the fund or counterparties for bilateral derivatives. As of October 31, 2015, cash of $405,000 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 relative to the U.S. dollar. 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 year ended October 31, 2015, the volume of the fund’s activity in forwards, based on underlying notional amounts, was generally between 7% and 8% of net assets.
Futures Contracts The fund is subject to interest rate risk and equity price risk in the normal course of pursuing its investment objectives and uses futures contracts to help manage such risks. The fund may enter into futures contracts to manage exposure to interest rates, security prices, foreign currencies, and credit quality; 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 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 year ended October 31, 2015, the volume of the fund’s activity in futures, based on underlying notional amounts, was generally between 3% and 5% of net assets.
Options The fund is subject to equity price risk in the normal course of pursuing its investment objectives and uses options to help manage such risk. The fund may use options to manage exposure to security prices, interest rates, foreign currencies, and credit quality; as an efficient means of adjusting exposure to all or a part of a target market; to enhance income; as a cash management tool; or to adjust credit exposure. Options are included in net assets at fair value, purchased options are included in Investments in Securities, and written options are separately reflected as a liability on the accompanying Statement of Assets and Liabilities. Premiums on unexercised, expired options are recorded as realized gains or losses; premiums on exercised options are recorded as an adjustment to the proceeds from the sale or cost of the purchase. The difference between the premium and the amount received or paid in a closing transaction is also treated as realized gain or loss. In return for a premium paid, call and put options give the holder the right, but not the obligation, to purchase or sell, respectively, a security at a specified exercise price. In return for a premium paid, call and put index options give the holder the right, but not the obligation, to receive cash equal to the difference between the value of the reference index on the exercise date and the exercise price of the option. Risks related to the use of options include possible illiquidity of the options markets; trading restrictions imposed by an exchange or counterparty; movements in the underlying asset values; and, for written options, potential losses in excess of the fund’s initial investment. During the year ended October 31, 2015, the volume of the fund’s activity in options, based on underlying notional amounts, was generally between 4% and 5% of net assets. Transactions in written options and related premiums received during the year ended October 31, 2015, were as follows:
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.
Restricted Securities The fund may invest in securities that are subject to legal or contractual restrictions on resale. Prompt sale of such securities at an acceptable price may be difficult and may involve substantial delays and additional costs.
Securities Lending The fund may lend its securities to approved brokers to earn additional income. Its securities lending activities are administered by a lending agent in accordance with a securities lending agreement. Security loans generally do not have stated maturity dates, and the fund may recall a security at any time. The fund receives collateral in the form of cash or U.S. government securities, valued at 102% to 105% of the value of the securities on loan. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities; any additional collateral required due to changes in security values is delivered to the fund the next business day. Cash collateral is invested by the lending agent(s) in accordance with investment guidelines approved by fund management. Additionally, the lending agent indemnifies the fund against losses resulting from borrower default. Although risk is mitigated by the collateral and indemnification, the fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities, collateral investments decline in value, and the lending agent fails to perform. Securities lending revenue consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower, compensation to the lending agent, and other administrative costs. In accordance with GAAP, investments made with cash collateral are reflected in the accompanying financial statements, but collateral received in the form of securities is not. At October 31, 2015, the value of loaned securities was $152,000; the value of cash collateral and related investments was $155,000.
Mortgage-Backed Securities The fund may invest in mortgage-backed securities (MBS or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the fund to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. MBS are sensitive to changes in economic conditions that affect the rate of prepayments and defaults on the underlying mortgages; accordingly, the value, income, and related cash flows from MBS may be more volatile than other debt instruments.
Investment in Blackstone Partners Offshore Fund The fund invested in Blackstone Partners Offshore Fund Ltd. (Blackstone Partners), a multi-strategy private investment company, to gain exposure to alternative investments primarily through Blackstone Partners’ investments in underlying private investment funds. Blackstone Partners and its underlying funds may use leverage, engage in short-selling, and invest in commodities or other speculative investments, which may increase the risk of investment loss. Blackstone Partners and its underlying funds are not subject to the same regulatory requirements as open-end mutual funds, and, therefore, their investments and related valuations may not be as transparent. Ownership interests in Blackstone Partners and certain of its underlying funds are not transferable and are subject to various redemption restrictions, such as advance notice requirements, limited redemption dates, and possible suspension of redemption rights. All of these restrictions are subject to change at the sole discretion of Blackstone Partners or an underlying fund’s management. As of October 31, 2015, the fund’s investment in Blackstone Partners is subject to semi-annual redemption with 95 days prior written notice and is considered an illiquid asset.
Other Purchases and sales of portfolio securities other than short-term and U.S. government securities aggregated $92,821,000 and $26,087,000, respectively, for the year ended October 31, 2015. Purchases and sales of U.S. government securities aggregated $14,436,000 and $8,820,000, respectively, for the year ended October 31, 2015.
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 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 paydown gains and losses on asset-backed securities. For the year ended October 31, 2015, 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, 2015 and October 31, 2014, were characterized for tax purposes as follows:
At October 31, 2015, the tax-basis cost of investments 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, the realization of gains/losses on passive foreign investment companies and certain open derivative contracts 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.
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). The investment management agreement between the fund and Price Associates provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.40% of the fund’s average daily net assets, and a group fee. The group fee rate is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.275% for assets in excess of $400 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At October 31, 2015, the effective annual group fee rate was 0.29%.
The Investor Class and Advisor Class are also each subject to a contractual expense limitation through the limitation dates indicated in the table below. During the limitation period, Price Associates is required to waive its management fee or pay any expenses, excluding interest, taxes, brokerage commissions, and extraordinary expenses, that would otherwise cause the class’s ratio of annualized total expenses to average net assets (expense ratio) to exceed its expense limitation. Each class is required to repay Price Associates for expenses previously waived/paid to the extent the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the class’s expense ratio to exceed its expense limitation. However, no repayment will be made more than three years after the date of a payment or waiver.
Pursuant to these agreements, $166,000 of expenses were waived/paid by Price Associates during the year ended October 31, 2015. Including these amounts, expenses previously waived/paid by Price Associates in the amount of $735,000 remain subject to repayment by the fund at October 31, 2015.
In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries 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. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the Investor Class. For the year ended October 31, 2015, expenses incurred pursuant to these service agreements were $172,000 for Price Associates; $54,000 for T. Rowe Price Services, Inc.; and $1,000 for T. Rowe Price Retirement Plan Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.
The fund may invest in the T. Rowe Price Reserve Investment Fund, the T. Rowe Price Government Reserve Investment Fund, or the T. Rowe Price Short-Term Reserve Fund (collectively, the Price Reserve Investment Funds), open-end management investment companies managed by Price Associates and considered affiliates of the fund. The Price Reserve Investment Funds are offered as short-term investment options to mutual funds, trusts, and other accounts managed by Price Associates or its affiliates and are not available for direct purchase by members of the public. The Price Reserve Investment Funds pay no investment management fees.
The fund may also invest in certain other T. Rowe Price funds (Price Funds) as a means of gaining efficient and cost-effective exposure to certain markets. The fund does not invest for the purpose of exercising management or control; however, investments by the fund may represent a significant portion of an underlying Price Fund’s net assets. Each underlying Price Fund is an open-end management investment company managed by Price Associates and is considered an affiliate of the fund. To ensure that the fund does not incur duplicate management fees (paid by the underlying Price Fund(s) and the fund), Price Associates has agreed to permanently waive a portion of its management fee charged to the fund in an amount sufficient to fully offset that portion of management fees paid by each underlying Price Fund related to the fund’s investment therein. Annual management fee rates and amounts waived related to investments in the underlying Price Fund(s) for the year ended October 31, 2015, are as follows:
![](https://capedge.com/proxy/N-CSR/0001206774-15-003851/argaf_ncsrx112x1.jpg)
As of October 31, 2015, T. Rowe Price Group, Inc., or its wholly owned subsidiaries owned 2,475,000 shares of the Investor Class and 25,000 shares of the Advisor Class, aggregating 17% of the fund’s net assets.
NOTE 7 - BORROWING
The fund may borrow to provide temporary liquidity. The fund, along with several other T. Rowe Price-sponsored mutual funds (collectively, the participating funds), has entered into a $500 million, 364-day, syndicated credit facility (the facility) pursuant to which the participating funds may borrow on a first-come, first-served basis up to the full amount of the facility. Interest is charged to the borrowing fund at a rate equal to 1.00% plus the greater of (a) the Federal Funds rate or (b) the one-month LIBOR. A commitment fee, equal to 0.08% per annum of the average daily undrawn commitment, is allocated to the participating funds based on each fund’s relative net assets; it is accrued daily and paid quarterly. Loans are generally unsecured; however, the fund must collateralize any borrowings under the facility on an equivalent basis if it has other collateralized borrowings. At October 31, 2015, the fund had no borrowings outstanding under the facility, and the undrawn amount of the facility was $500,000,000.
Report of Independent Registered Public Accounting Firm |
To the Board of Directors and Shareholders of T. Rowe Price Global
Allocation Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price Global Allocation Fund, Inc. (hereafter referred to as the “Fund”) at October 31, 2015, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2015 by correspondence with the custodian and brokers, and confirmation of the underlying funds by correspondence with the transfer agent, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 15, 2015
Tax Information (Unaudited) for the Tax Year Ended 10/31/15 |
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.
The fund’s distributions to shareholders included:
● | $1,196,000 from short-term capital gains, |
● | $299,000 from long-term capital gains, subject to a long-term capital gains tax rate of not greater than 20%. |
For taxable non-corporate shareholders, $1,201,000 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, $419,000 of the fund’s income qualifies for the dividends-received deduction.
Information on Proxy Voting Policies, Procedures, and Records |
A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information. You may request this document by calling 1-800-225-5132 or by accessing the SEC’s website, sec.gov.
The description of our proxy voting policies and procedures is also available on our website, troweprice.com. To access it, click on the words “Social Responsibility” at the top of our corporate homepage. Next, click on the words “Conducting Business Responsibly” on the left side of the page that appears. Finally, click on the words “Proxy Voting Policies” on the left side of the page that appears.
Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through our website, follow the above directions to reach the “Conducting Business Responsibly” page. Click on the words “Proxy Voting Records” on the left side of that page, and then click on the “View Proxy Voting Records” link at the bottom of the page that appears.
How to Obtain Quarterly Portfolio Holdings |
The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s website (sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 100 F St. N.E., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.
About the Fund’s Directors and Officers |
Your fund is overseen by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of the Board’s members are independent of T. Rowe Price Associates, Inc. (T. Rowe Price), and its affiliates; “inside” or “interested” directors are employees or officers of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-638-5660.
Independent Directors | ||
Name | ||
(Year of Birth) | ||
Year Elected* | ||
[Number of T. Rowe Price | Principal Occupation(s) and Directorships of Public Companies and | |
Portfolios Overseen] | Other Investment Companies During the Past Five Years | |
William R. Brody, M.D., Ph.D. | President and Trustee, Salk Institute for Biological Studies (2009 to | |
(1944) | present); Director, BioMed Realty Trust (2013 to present); Director, | |
2013 | Novartis, Inc. (2009 to 2014); Director, IBM (2007 to present) | |
[179] | ||
Anthony W. Deering | Chairman, Exeter Capital, LLC, a private investment firm (2004 to | |
(1945) | present); Director, Brixmor Real Estate Investment Trust (2012 to | |
2013 | present); Director and Advisory Board Member, Deutsche Bank | |
[179] | North America (2004 to present); Director, Under Armour (2008 | |
to present); Director, Vornado Real Estate Investment Trust (2004 | ||
to 2012) | ||
Donald W. Dick, Jr. | Principal, EuroCapital Partners, LLC, an acquisition and management | |
(1943) | advisory firm (1995 to present) | |
2013 | ||
[179) | ||
Bruce W. Duncan | President, Chief Executive Officer, and Director, First Industrial | |
(1951) | Realty Trust, an owner and operator of industrial properties | |
2013 | (2009 to present); Chairman of the Board (2005 to present) and | |
[179] | Director (1999 to present), Starwood Hotels & Resorts, a hotel and | |
leisure company | ||
Robert J. Gerrard, Jr. | Chairman of Compensation Committee and Director, Syniverse | |
(1952) | Holdings, Inc., a provider of wireless voice and data services for | |
2013 | telecommunications companies (2008 to 2011); Advisory Board | |
[179] | Member, Pipeline Crisis/Winning Strategies, a collaborative working | |
to improve opportunities for young African Americans (1997 | ||
to present) | ||
Karen N. Horn | Limited Partner and Senior Managing Director, Brock Capital Group, | |
(1943) | an advisory and investment banking firm (2004 to present); Director, | |
2013 | Eli Lilly and Company (1987 to present); Director, Simon Property | |
[179] | Group (2004 to present); Director, Norfolk Southern (2008 to present) | |
Paul F. McBride | Former Company Officer and Senior Vice President, Human | |
(1956) | Resources and Corporate Initiatives, Black & Decker Corporation | |
2013 | (2004 to 2010) | |
[179] | ||
Cecilia E. Rouse, Ph.D. | Dean, Woodrow Wilson School (2012 to present); Professor and | |
(1963) | Researcher, Princeton University (1992 to present); Director, MDRC, | |
2013 | a nonprofit education and social policy research organization | |
[179] | (2011 to present); Member, National Academy of Education (2010 | |
to present); Research Associate, National Bureau of Economic | ||
Research’s Labor Studies Program (2011 to present); Member, | ||
President’s Council of Economic Advisers (2009 to 2011); Chair | ||
of Committee on the Status of Minority Groups in the Economic | ||
Profession, American Economic Association (2012 to present) | ||
John G. Schreiber | Owner/President, Centaur Capital Partners, Inc., a real estate | |
(1946) | investment company (1991 to present); Cofounder and Partner, | |
2013 | Blackstone Real Estate Advisors, L.P. (1992 to present); Director, | |
[179] | General Growth Properties, Inc. (2010 to 2013); Director, Blackstone | |
Mortgage Trust, a real estate financial company (2012 to present); | ||
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 present) | ||
Mark R. Tercek | President and Chief Executive Officer, The Nature Conservancy (2008 | |
(1957) | to present) | |
2013 | ||
[179] | ||
*Each independent director serves until retirement, resignation, or election of a successor. |
Inside Directors | ||
Name | ||
(Year of Birth) | ||
Year Elected* | ||
[Number of T. Rowe Price | Principal Occupation(s) and Directorships of Public Companies and | |
Portfolios Overseen] | Other Investment Companies During the Past Five Years | |
Edward C. Bernard | Director and Vice President, T. Rowe Price; Vice Chairman of the | |
(1956) | Board, Director, and Vice President, T. Rowe Price Group, Inc.; | |
2013 | Chairman of the Board, Director, and President, T. Rowe Price | |
[179] | Investment Services, Inc.; Chairman of the Board and Director, | |
T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price | ||
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 | ||
Brian C. Rogers, CFA, CIC | Chief Investment Officer, Director, and Vice President, T. Rowe Price; | |
(1955) | Chairman of the Board, Chief Investment Officer, Director, and Vice | |
2013 | President, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price | |
[125] | Trust Company | |
*Each inside director serves until retirement, resignation, or election of a successor. |
Officers | ||
Name (Year of Birth) | ||
Position Held With Global Allocation Fund | Principal Occupation(s) | |
Stephen L. Bartolini, CFA (1977) | Vice President, T. Rowe Price and T. Rowe | |
Vice President | Price Group, Inc.; formerly, Senior Portfolio | |
Manager, Senior Trader, and Analyst, Fannie | ||
Mae (to 2010) | ||
Darrell N. Braman (1963) | Vice President, Price Hong Kong, Price | |
Vice President | 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. | ||
John R. Gilner (1961) | Chief Compliance Officer and Vice President, | |
Chief Compliance Officer | T. Rowe Price; Vice President, T. Rowe Price | |
Group, Inc., and T. Rowe Price Investment | ||
Services, Inc. | ||
Robert L. Harlow, CAIA, CFA (1986) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Group, Inc. | |
Steven C. Huber, CFA, FSA (1958) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Group, Inc. | |
Stefan Hubrich, Ph.D., CFA (1974) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Group, Inc. | |
Dominic Janssens (1965) | Vice President, T. Rowe Price, T. Rowe Price | |
Vice President | Group, Inc., and T. Rowe Price Trust Company | |
Paul J. Krug (1964) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Trust Company | |
Robert M. Larkins, CFA (1973) | Vice President, T. Rowe Price, T. Rowe Price | |
Vice President | Group, Inc., and T. Rowe Price Trust Company | |
Patricia B. Lippert (1953) | Assistant Vice President, T. Rowe Price and | |
Secretary | T. Rowe Price Investment Services, Inc. | |
Catherine D. Mathews (1963) | Vice President, T. Rowe Price and T. Rowe Price | |
Treasurer and Vice President | Trust Company | |
David Oestreicher (1967) | Director, Vice President, and Secretary, T. Rowe | |
Vice President | Price Investment Services, Inc., T. Rowe Price | |
Retirement Plan Services, Inc., T. Rowe | ||
Price Services, Inc., and T. Rowe Price Trust | ||
Company; 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 | ||
Robert A. Panariello (1983) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Group, Inc. | |
John W. Ratzesberger (1975) | Vice President, T. Rowe Price, T. Rowe Price | |
Vice President | Group, Inc., and T. Rowe Price Trust Company; | |
formerly, North American Head of Listed | ||
Derivatives Operation, Morgan Stanley | ||
(to 2013) | ||
Deborah D. Seidel (1962) | Vice President, T. Rowe Price, T. Rowe Price | |
Vice President | Group, Inc., T. Rowe Price Investment Services, | |
Inc., and T. Rowe Price Services, Inc. | ||
Charles M. Shriver, CFA (1967) | Vice President, T. Rowe Price, T. Rowe Price | |
President | Group, Inc., and T. Rowe Price Trust Company | |
Toby M. Thompson, CAIA, CFA (1971) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Group, Inc.; formerly, Director of Investments, | |
I.A.M. National Pension Fund (to 2012) | ||
Richard T. Whitney, CFA (1958) | Vice President, T. Rowe Price, T. Rowe Price | |
Vice President | Group, Inc., T. Rowe Price International, and | |
T. Rowe Price Trust Company | ||
Jeffrey T. Zoller (1970) | Vice President, T. Rowe Price and T. Rowe Price | |
Vice President | Trust Company | |
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:
![](https://capedge.com/proxy/N-CSR/0001206774-15-003851/argaf_ncsr1x2x1.jpg)
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 $2,366,000 and $2,159,000, 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 Global Allocation Fund, Inc.
By | /s/ Edward C. Bernard | |
Edward C. Bernard | ||
Principal Executive Officer | ||
Date December 15, 2015 |
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, 2015 | ||
By | /s/ Catherine D. Mathews | |
Catherine D. Mathews | ||
Principal Financial Officer | ||
Date December 15, 2015 |