NOTE 1 - SIGNIFICANT ACCOUNTING
POLICIES
Basis of Preparation
The accompanying financial statements
were prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP), which require the use of estimates made by
management. Management believes that estimates and valuations are appropriate;
however, actual results may differ from those estimates, and the valuations
reflected in the 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.
Dividends received from mutual fund investments are reflected as dividend
income; capital gain distributions are reflected as realized gain/loss. Dividend
income and capital gain distributions are recorded on the ex-dividend date.
Income tax-related interest and penalties, if incurred, 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. Income
distributions are declared and paid 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.
Rebates and Credits
Subject to best execution, the fund may
direct certain security trades to brokers who have agreed to rebate a portion of
the related brokerage commission to the fund in cash. Commission rebates are
reflected as realized gain on securities in the accompanying financial
statements and totaled $160,000 for the year ended December 31, 2012.
Additionally, the fund earns credits on temporarily uninvested cash balances
held at the custodian, which reduce the funds custody charges. Custody expense
in the accompanying financial statements is presented before reduction for
credits.
New Accounting Pronouncements
In December 2011, the FASB issued
amended guidance to enhance disclosure for offsetting assets and liabilities.
The guidance is effective for fiscal years and interim periods beginning on or
after January 1, 2013. Adoption will have no effect on the funds net assets or
results of operations.
NOTE 2 - VALUATION
The funds financial instruments are
reported at fair value as defined by GAAP. The fund determines the values of its
assets and liabilities and computes its net asset value per share at the close
of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the
NYSE is open for business.
Valuation Methods
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, except for OTC Bulletin Board securities,
which are valued at the mean of the latest 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 latest
bid and asked prices for domestic securities and the last quoted sale price for
international securities.
Debt securities are generally 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.
Securities with remaining maturities of less than one year at the time of
acquisition generally use amortized cost in local currency to approximate fair
value. However, if amortized cost is deemed not to reflect fair value or the
fund holds a significant amount of such securities with remaining maturities of
more than 60 days, the securities are valued at prices furnished by dealers who
make markets in such securities or by an independent pricing service.
Investments in mutual funds are
valued at the mutual funds closing net asset value per share on the day of
valuation.
Other investments, including
restricted securities and private placements, and those financial instruments
for which the above valuation procedures are inappropriate or are deemed not to
reflect fair value, are stated at fair value as determined in good faith by the
T. Rowe Price Valuation Committee, established by the funds Board of Directors
(the Board). Subject to oversight by the Board, the Valuation Committee develops
pricing-related policies and procedures and approves all fair-value
determinations. The Valuation Committee regularly makes good faith judgments,
using a wide variety of sources and information, to establish and adjust
valuations of certain securities as events occur and circumstances warrant. For
instance, in determining the fair value of private-equity instruments, the
Valuation Committee considers a variety of factors, including the companys
business prospects, its financial performance, strategic events impacting the
company, relevant valuations of similar companies, new rounds of financing, and
any negotiated transactions of significant size between other investors in the
company. Because any fair-value determination involves a significant amount of
judgment, there is a degree of subjectivity inherent in such pricing
decisions.
For valuation purposes, the last
quoted prices of non-U.S. equity securities may be adjusted under the
circumstances described below. If the fund determines that developments between
the close of a foreign market and the close of the NYSE will, in its judgment,
materially affect the value of some or all of its
portfolio securities, the fund will adjust the previous closing prices to
reflect what it believes to be the fair value of the securities as of the close
of the NYSE. In deciding whether it is necessary to adjust closing prices to
reflect fair value, the fund reviews a variety of factors, including
developments in foreign markets, the performance of U.S. securities markets, and
the performance of instruments trading in U.S. markets that represent foreign
securities and baskets of foreign securities. A fund may also fair value
securities in other situations, such as when a particular foreign market is
closed but the fund is open. The fund uses outside pricing services to provide
it with closing prices and information to evaluate and/or adjust those prices.
The fund cannot predict how often it will use closing prices and how often it
will determine it necessary to adjust those prices to reflect fair value. As a
means of evaluating its security valuation process, the fund routinely compares
closing prices, the next days opening prices in the same markets, and adjusted
prices. Additionally, trading in the underlying securities of the fund may take
place in various foreign markets on certain days when the fund is not open for
business and does not calculate a net asset value. As a result, net asset values
may be significantly affected on days when shareholders cannot make
transactions.
Valuation Inputs
Various inputs are used to determine the value of the
funds financial instruments. These inputs are summarized in the three broad
levels listed below:
Level 1 quoted prices in active
markets for identical financial instruments
Level 2 observable inputs other
than Level 1 quoted prices (including, but not limited to, quoted prices for
similar financial instruments, interest rates, prepayment speeds, and credit
risk)
Level 3 unobservable
inputs
Observable inputs are those based on
market data obtained from sources independent of the fund, and unobservable
inputs reflect the funds own assumptions based on the best information
available. The input levels are not necessarily an indication of the risk or
liquidity associated with financial instruments at that level. For example,
non-U.S. equity securities actively traded in foreign markets generally are
reflected in Level 2 despite the availability of closing prices because the fund
evaluates and determines whether those closing prices reflect fair value
at the close of the NYSE or require
adjustment, as described above. The following table summarizes the funds
financial instruments, based on the inputs used to determine their values on
December 31, 2012:
Following is a reconciliation of the
funds Level 3 holdings for the year ended December 31, 2012. 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
December 31, 2012, totaled $(2,056,000) for the year ended December 31,
2012.
NOTE 3 - OTHER INVESTMENT
TRANSACTIONS
Consistent with its investment
objective, the fund engages in the following practices to manage exposure to
certain risks and/or to enhance performance. The investment objective, policies,
program, and risk factors of the-fund are described more fully in the funds
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.
Bank Loans
The fund may invest in bank loans, which represent an
interest in amounts owed by a borrower to a syndication of lenders. Bank loans
may involve multiple loans with the same borrower under a single credit
agreement (each loan, a tranche), and each tranche may have different terms and
associated risks. A bank or other financial institution typically acts as the
agent and administers a bank loan in accordance with the associated credit
agreement. Bank loans are generally noninvestment grade and often involve
borrowers whose financial condition is troubled or uncertain and companies that
are highly leveraged. The fund may buy and sell bank loans in the form of either
loan assignments or loan participations. A loan assignment transfers all legal,
beneficial, and economic rights to the buyer. Although loan assignments continue
to be administered by the agent, the buyer acquires direct rights against the
borrower. In many cases, a loan assignment requires the consent of both the
borrower and the agent. In contrast, a loan participation generally entitles the
buyer to receive the cash flows from principal, interest, and any fee payments
that the seller is entitled to receive from the borrower; however, the seller
continues to hold legal title to the loan. As a result, with loan
participations, the buyer generally has no right to enforce compliance with the
terms of the credit agreement against the borrower, and the buyer is subject to
the credit risk of both the borrower and the seller. Bank loans often have
extended settlement periods, during which the fund is subject to nonperformance
risk by the counterparty. A portion of the funds bank loans may require
additional principal to be funded at the borrowers discretion at a later date
(unfunded commitments), and bank loans usually may be repaid at any time at the
option of the borrower. The fund reflects both the funded portion of the bank
loan as well as any unfunded commitment on the loan in the Portfolio of
Investments. At December 31, 2012, the funds total unfunded commitments were
$68,000.
Securities Lending
The fund lends its securities to
approved brokers to earn additional income. It receives as collateral cash and
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 as determined at the close of fund
business each day; 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 funds lending agent(s) in
accordance with investment guidelines approved by management. Although risk is
mitigated by the collateral, 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 or if collateral investments decline in value. Securities
lending revenue recognized by the fund consists of earnings on invested
collateral and borrowing fees, net of any rebates to the borrower and
compensation to the lending agent. 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 December 31, 2012,
there were no securities on loan.
Other
Purchases and sales of portfolio securities other than
short-term securities aggregated $1,648,964,000 and $1,950,511,000,
respectively, for the year ended December 31, 2012.
NOTE 4 - FEDERAL INCOME
TAXES
No provision for federal income taxes
is required since the fund intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code and
distribute to shareholders all of its taxable income and gains. Distributions
determined in accordance with federal income tax regulations may differ in
amount or character from net investment income and realized gains for financial
reporting purposes. Financial reporting records are adjusted for permanent
book/tax differences to reflect tax character but are not adjusted for temporary
differences.
The fund files U.S. federal, state,
and local tax returns as required. The funds 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 to paid-in capital
relate primarily to a tax practice that treats a portion of the proceeds from
each redemption of capital shares as a distribution of taxable net investment
income and/or realized capital gain. Reclassifications
between income and gain relate primarily to per-share
rounding of distributions. For the year ended December 31, 2012, 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
December 31, 2012 and December 31, 2011, were characterized for tax purposes as
follows:
At December 31, 2012, 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 and the realization of gains/losses on
passive foreign investment companies 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. All or a portion of the capital loss carryforwards may
be from losses realized between November 1 and the funds fiscal year-end, which
are deferred for tax purposes until the subsequent year but recognized for
financial reporting purposes in the year realized. In accordance with federal
tax laws applicable to investment companies, specified net losses realized
between November 1 and December 31, are not recognized for tax purposes until
the subsequent year (late-year ordinary loss deferrals); however, such losses
are recognized for financial reporting purposes in the year realized.
NOTE 5 - 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 0.25% of the funds 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
0.28% for assets in excess of $300 billion. The funds group fee is determined
by applying the group fee rate to the funds average daily net assets. At
December 31, 2012, the effective annual group fee rate was 0.30%.
In addition, the fund has entered
into service agreements with Price Associates and two wholly owned subsidiaries
of Price Associates (collectively, Price). Price Associates computes the daily
share price and provides certain other administrative services to the fund. T.
Rowe Price Services, Inc., provides shareholder and administrative services in
its capacity as the funds transfer
and
dividend disbursing agent. T. Rowe Price Retirement Plan Services, Inc.,
provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. For the year ended December 31, 2012, expenses
incurred pursuant to these service agreements were $99,000 for Price Associates;
$1,928,000 for T. Rowe Price Services, Inc.; and $300,000 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 and the T. Rowe Price Government Reserve
Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds),
open-end management investment companies managed by Price Associates and
considered affiliates of the fund. The T. Rowe Price Reserve Investment Funds
are offered as cash management options to mutual funds, trusts, and other
accounts managed by Price Associates and/or its affiliates and are not available
for direct purchase by members of the public. The T. Rowe Price Reserve
Investment Funds pay no investment management fees.
As of December 31, 2012, T. Rowe
Price Group, Inc., and/or its wholly owned subsidiaries owned 573,241 shares of
the fund, representing 1% of the funds net assets.
Report of
Independent Registered Public Accounting
Firm
|
To the Board of Directors and
Shareholders of T. Rowe Price New Era 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 New Era Fund, Inc. (the Fund) at December 31, 2012,
and 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 Funds 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 December 31, 2012 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
February 15, 2013
Tax
Information (Unaudited) for the Tax Year Ended
12/31/12
|
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 funds distributions to
shareholders included:
-
$33,480,000 from short-term capital
gains,
-
$114,853,000 from long-term capital gains,
subject to the 15% rate gains category.
For taxable non-corporate
shareholders, $83,379,000 of the funds income represents qualified dividend
income subject to the 15% rate category.
For corporate shareholders,
$38,763,000 of the funds 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 funds Statement
of Additional Information, which you may request by calling 1-800-225-5132 or by
accessing the SECs 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 Our Company at the top of our corporate
homepage. Then, when the next page appears, click on the words Proxy Voting
Policies on the left side of the page.
Each funds most recent annual proxy
voting record is available on our website and through the SECs website. To
access it through our website, follow the directions above, then click on the
words Proxy Voting Records on the right side of the Proxy Voting Policies
page.
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 funds Form N-Q is available
electronically on the SECs website (sec.gov); hard copies may be reviewed and
copied at the SECs Public Reference Room, 100 F St. N.E., Washington, DC 20549.
For more information on the Public Reference Room, call 1-800-SEC-0330.