SEMIANNUAL REPORT June 30, 2016
T. Rowe Price
PRNEX
New Era Fund
TRNEX
New Era Fund– I Class The fund invests in companies that own or develop natural resources and other basic commodities.
T. R owe P rice N ew E ra F und
HIGHLIGHTS • Natural resources stocks rose in the first half of 2016 against the backdrop of a strong bounce in prices for oil and many other commodities. • The New Era Fund returned 17.24% in the six months ended June 30, 2016, and significantly outpaced the S&P 500 Index and the Lipper Global Natural Resources Funds Average. • We believe that the commodity cycle entered a structural downturn in 2011. Technological innovation continues to compress energy costs, while loose monetary policies from global central banks are likely to prevent the appropriate cleansing mechanisms that would otherwise allow excess commodity capacity to fall away. • We continue to position the portfolio defensively and are looking for companies with low cost structures and healthy balance sheets that are more likely to survive the current challenges and emerge in a stronger competitive position when the cycle turns.
The views and opinions in this report were current as of June 30, 2016. 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 Sign up for our Email Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information.
T. Rowe Price New Era Fund Manager’s Letter
Fellow Shareholders Natural resources stocks rallied in the first six months of 2016 after a dismal second half of 2015. A number of factors played a role in the rebound, including economic stimulus in China, oil supply outages, a healthier high yield bond market, and a modestly weaker dollar. In the oil sector, optimism about the potential for several major oil-producing countries to agree on a production freeze served as the initial spark for a rally that pushed prices back toward $50 per barrel. (Oil prices discussed in this letter are for West Texas Intermediate, or WTI, unless otherwise noted.) Production outages in Canada, Nigeria, Ghana, and Brazil; better-than-expected demand; and optimism about supply/demand “rebalancing” in the latter half of the year were also supportive. In the natural gas space, a collapse in rig counts and improved demand after a weak winter have helped prices regain some footing. As shown in the Performance Comparison table, your fund returned Six-Month Period Ended 6/30/16 Total Return 17.24% for the six-month New Era Fund 17.24% reporting period ended New Era Fund–I Class 17.35 June 30, 2016. (Returns S&P 500 Index 3.84 for the I Class shares differ slightly due to their Lipper Global Natural Resources Funds Average 12.86 different fee structure.) The fund significantly outperformed the broad market S&P 500 Index and the Lipper Global Natural Resources Funds Average of similarly managed funds. Please note that we changed the fund’s secondary benchmark from the Lipper Global Natural Resources Funds Index to the Lipper Global Natural Resources Funds Average. The P erformance C omparison
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Lipper index was recently reduced to an aggregation of 10 underlying natural resources mutual funds, after previously comprising 30 such funds. We believe that the Lipper Global Natural Resources Average, which includes the entire category of similarly managed funds, is a more appropriate comparison of the broad universe of competitors for the T. Rowe Price New Era Fund. We actively accumulated oversold energy and metals equities and certain high yield instruments in the late stages of 2015’s downturn, but the amplitude of 2016’s rally has been a bit of a surprise. Our decisions to overweight and underweight underlying industries boosted performance versus our Lipper benchmark, led by overweights to construction materials and multi-utilities. Stock selection detracted from relative results, due in part to our refining and oil services stocks. MARKET ENVIRONMENT
As with recent shareholder letters, I plan to spend some time discussing our views on oil. In short, we continue to believe that we are in the midst of a long-term bear market in oil prices, which should average approximately $45 to $50 per barrel—if not less— for the next decade. This is not to say that oil will not rise above this price periodically along the way. In fact, we expect cyclical rallies to carry oil above the $45 to $50 range, not unlike previous rallies between 1986 and 1999 in the depressed period after the last significant supply shock. However, we believe upside surprises in productivity, something we discussed at length in our last shareholder letter, will quickly snuff out rallies above this trend line. In any event, these rallies serve to test the oil industry’s ability to sustain this productivity. At some point, productivity—the ease with which a barrel of oil can be found and produced—will stabilize and even reverse as it did between 1999 and 2011. In our opinion, this would mark a sustained rise in oil prices as costs steepen and would shape the next bull market for oil. Even during 2016’s recent rally, we saw evidence of a long period of weak fundamentals for oil. In the U.S., for example, previously shuttered oil rigs started to come back on line as WTI prices approached $50 per barrel—something we call “incentive pricing.”
2
O il R ig C ount vs. O il P rices L ast 12 M onths Baker Hughes U.S. Oil Rotary Rig Count Index WTI Oil Price
$60 55
700 650
$ per barrell
550
45
500
40
450
Index Level
600 50
400
35
350 30
300
6/15
9/15
12/15
3/16
6/16 7/16
Source: Bloomberg.
What is notable about this return of capital deployment is that it occurred only a scant four months after a near closure of the bond market to U.S. energy firms challenged with a low-price environment: E nergy H igh Y ield S preads S ince 2011 U.S. Dollar High Yield Energy Index - Option Adjusted Spread Mid-price 728.839 High 2/11/16 1,598.559 Average 649.358 Low 5/8/13 321.755
1,600
Index Level
1,400 1,200 1,000 800 600 400
1/3/12
2013
Source: Bloomberg.
3
2014
2015
2016 6/30/16
Furthermore, the rally in oil prices comes at a time when inventories for oil and refined petroleum products remain at generational highs in the U.S.: U.S. O il I nventory S ince 1982 U.S. Oil Inventory (excluding Strategic Petroleum Reserve) High 4/29/16 0.543M Average 0.339M Low 1/23/04 0.264M
0.55M
Billions of Barrels
0.50M 0.45M 0.40M 0.35M 0.30M 0.25M
8/20/82 1985–1989
1990–1994
1995–1999
2000–2004
2005–2009
2010–2014
7/1/16
Sources: Bloomberg and Department of Energy.
US P roduct I nventory S ince 1990 U.S. Petroleum Products Inventories (excluding Strategic Petroleum Reserve) High 7/8/16 1.382M Average 1.041M Low 3/14/03 0.882M
1.5M
Billions of Barrels
1.4M 1.3M 1.2M 1.1M 1.0M 0.9M
1990–1994
1995–1999
2000–2004
2005–2009
2010–2014
7/1/16
Source: Bloomberg and Department of Energy.
We do not even view the current rally as cyclical in nature. In other words, there is no fundamental reason why oil should be at or near incentive pricing given the vast amounts of crude inventory and the ongoing oversupply situation we see extending into 2017. There are going to be long periods of time in a bear market when 4
the cyclical outlook and the structural outlook are consistent. This is one such time. As such, we continue to position our portfolio defensively by investing in companies with strong balance sheets, low-cost commodity producers, and companies offering attractive dividend yields. PORTFOLIO REVIEW AND POSITIONING
Stocks in commodity-related industries reacted favorably as prices found a bottom and, in many instances, rallied throughout the first half of 2016. As mentioned previously, we believe this is due to a variety of factors, including early optimism that several oil producers, led by Saudi Arabia and Russia, would freeze production. Supply disruptions and optimistic views on the future of the global supply/demand relationship added to the rally. With a few exceptions, we believe the bulk of these moves were driven by sentiment rather than fundamentals. Overall, we have a structurally defensive posture with a focus on strong balance sheets and low costs. Low-cost oil exploration and production companies in the Permian Basin continue to represent a significant area of focus for the fund and were strong contributors in the first half of 2016. Among these stocks were Concho Resources, Cimarex Energy, Matador Resources, Diamondback Energy, Occidental Petroleum, and Pioneer Natural Resources. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) We also have a significant position in North American natural gas producers. We think that natural gas prices reached unsustainably low levels in the first half of 2016, which appropriately chased rigs and capital away from the industry. These stocks were strong performers in the first half of the year, and we are optimistic about continued price appreciation in the second half from names such as EQT, Tourmaline Oil, Gulfport Energy, NRG Energy and ARC Resources. Construction materials companies, including Vulcan Materials and Martin Marietta Materials, also were among the top contributors for the period amid improvements in U.S. construction markets. In addition, investors are becoming more optimistic about the potential for a new U.S. presidential administration to renew fiscal stimulus measures in 2017.
5
Our metals and mining stocks helped the fund’s absolute performance in the first half of 2016, but an underweight position versus the Lipper benchmark detracted from relative results. The collapse in real interest rates in the U.S. helped fuel a gain of roughly 25% in gold prices and drove an I ndustry D iversification even more sizable gain in gold-related equities, Metals and Other and including Randgold Mining Reserves 9% 11% Resources, OceanaGold, Franco-Nevada, Exploration Utilities and Production 10% Centamin, and Fresnillo. 22%
In 2014, we elected to lessen our U.S. refining exposure given our view Chemicals Energy that wide differentials 11% Services and between U.S. oil indexes Processors 11% and the global market were behind us. We Based on net assets as of 6/30/16. became further disenchanted with this area of energy as the oil glut turned into a refined products glut. We expect this environment to persist until refiners eventually cave in and cut back on operational capacity. Although we currently do not own a refining stock in the portfolio, we do own Murphy USA. A strong performer during our reporting period, Murphy is a convenience store chain that benefits from low fuel prices and higher consumer disposable income. Energy Industrials 10%
Integrateds 16%
Our utility stocks generated robust absolute gains for the period as long-term interest rates fell to new lows. We continue to view these stocks favorably relative to their commodity-producing peers and have an overweight position versus our Lipper benchmark. We expect this to be the case for a considerable period. We do not see inflation as a medium-term threat given the high debt loads of Western economies, and we expect long-term interest rates to remain relatively low despite the likelihood of higher short-term rates as the Federal Reserve normalizes its rate policy, which could potentially resume in the latter half of 2016. As a result, valuations still look attractive for certain
6
utilities stocks, particularly when compared with other yield-oriented investment options in the market. Furthermore, we expect some utilities to benefit from low natural gas prices and/or “trapped gas” resulting from a shortage of infrastructure. NiSource, which recently spun off its midstream assets into Columbia Pipeline, was one such stock that contributed favorably to performance in the first half of 2016. We subsequently exited our position in Columbia Pipeline but maintained our position in NiSource. We also benefited from a position in Atmos Energy, a Texas natural gas utility that also plays on this theme. OUTLOOK
As we have written in previous shareholder letters, we believe that we are in the initial years of a secular downcycle in commodities. U.S. oil prices are now down over 50% from their peak a few years ago, and U.S. natural gas prices have fallen by almost 80% since 2008. Although cheaper energy benefits U.S. consumers’ budgets and energy-intensive manufacturers, it challenges Most of the the stocks of energy producers, particularly energy service companies. Falling oil prices have also punished factors that energy-exporting economies in the developing world contributed to the and affected the U.S. high yield bond market, which has a high percentage of energy-related issuers. steep fall in oil Most of the factors that contributed to the steep fall in oil prices since the latter half of 2014 remain in place latter half of 2014 while new factors have emerged. The shale oil revolution has changed the face of the competitive dynamics remain in place… in the oil industry and has had a profound impact on cost curves across the entire commodity complex. We believe the extraordinarily high inventory in the oil supply chain will take much longer to work off than most experts are predicting, especially if the market pushes into incentive pricing (above $50 per barrel) too soon. We believe these factors will ultimately prove to be structural rather than cyclical, resulting in long-term deflation to the cost curve that may feel permanent to many market participants. Our forecast is that long-term oil prices will average below most market participants’ forecasts and the current oil futures curve. prices since the
7
Regardless of the challenging environment, we remain committed to our bottom-up stock selection process and our philosophy of buying and holding a diverse selection of fundamentally sound natural resources companies with solid balance sheets and talented management. Despite the potential for near-term challenges, we believe the market will reward our consistent, disciplined investment approach over the long term. Respectfully submitted,
Shawn Driscoll Portfolio manager and chairman of the fund’s Investment Advisory Committee July 15, 2016 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.
8
T. Rowe Price New Era Fund
R isks of S tock I nvesting The fund’s share price can fall because of weakness in the stock 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. Funds that invest only in specific industries will experience greater volatility than funds investing in a broad range of industries. The rate of earnings growth of natural resources companies may be irregular since these companies are strongly affected by natural forces, global economic cycles, and international politics. For example, stock prices of energy companies can fall sharply when oil prices fall. G lossary Lipper averages: The averages of available mutual fund performance returns for specified time periods in categories defined by Lipper Inc. Lipper indexes: Fund benchmarks that consist of a small number (10 to 30) of the largest mutual funds in a particular category as tracked by Lipper Inc. S&P 500 Index: An unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies.
9
T. Rowe Price New Era Fund
P ortfolio H ighlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of Net Assets 6/30/16
Total ExxonMobil Royal Dutch Shell Occidental Petroleum Cimarex Energy
4.5% 3.2 3.0 2.8 2.4
Concho Resources RPM Vulcan Materials Baker Hughes Air Products & Chemicals
2.2 2.1 2.1 2.0 2.0
Pioneer Natural Resources EQT Atmos Energy Flowserve Tourmaline Oil
2.0 1.9 1.9 1.6 1.5
NiSource Southern Copper Randgold Resources Gulfport Energy Schlumberger
1.5 1.5 1.3 1.3 1.2
National Grid Pentair Seven Generations Energy Edison International PPG Industries
1.2 1.2 1.2 1.1 1.0
Total
47.7%
Note: The information shown does not reflect any exchange-traded funds (ETFs), cash reserves, or collateral for securities lending that may be held in the portfolio.
10
T. Rowe Price New Era Fund
P ortfolio H ighlights
MAJOR PORTFOLIO CHANGES Listed in descending order of size. Six Months Ended 6/30/16
Largest Purchases Royal Dutch Shell* Baker Hughes Tourmaline Oil* PPG Industries* Total ExxonMobil Schlumberger Exelon* Gulfport Energy NRG Energy* *Position added. **Position eliminated. ***Position added and eliminated.
11
Largest Sales Apache** Airgas** ExxonMobil Cameron International** EOG Resources Syngenta** Halliburton BG Group*** Noble Energy** Canadian Natural Resources
T. Rowe Price New Era Fund Performance and Expenses G rowth 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.
NEW ERA FUND As of 6/30/16 $30,000
New Era Fund $11,722
26,000
S&P 500 Index $20,465 Lipper Global Natural Resources Funds Index $9,707
22,000 18,000 14,000 10,000
6/06
6/07
6/08
6/09
6/10
6/11
6/12
6/13
6/14
6/15
6/16
Note: Performance for the I Class will vary due to its differing fee structure. See returns table below.
A verage A nnual C ompound T otal R eturn Periods Ended 6/30/16 New Era Fund
1 Year
5 Years
10 Years
-1.50%
-2.59%
1.60%
Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at 1-800-225-5132 or, for I Class shares, 1-800-638-8790. This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. New Era Fund–I Class has less than one year’s performance, as its inception date is 12/17/15. Its since-inception performance as of 6/30/16 was 18.13%.
12
T. Rowe Price New Era Fund
E xpense R atio New Era Fund
0.67%
New Era Fund–I Class
0.58
The expense ratio shown is as of the fund’s fiscal year ended 12/31/15. This number may vary from the expense ratio shown elsewhere in this report because it is based on a different time period and, if applicable, includes acquired fund fees and expenses but does not include fee or expense waivers.
F und E xpense E xample 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 I Class shares are also available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. 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.
13
T. Rowe Price New Era Fund
F und E xpense E xample ( continued ) 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.
N ew E ra F und
Beginning Account Value 1/1/16
Ending Account Value 6/30/16
Expenses Paid During Period* 1/1/16 to 6/30/16
$1,000.00
$1,172.40
$3.62
Hypothetical (assumes 5% return before expenses)
1,000.00
1,021.53
3.37
I Class Actual
1,000.00
1,173.50
3.03
Hypothetical (assumes 5% return before expenses)
1,000.00
1,022.08
2.82
Investor Class Actual
*Expenses are equal to the fund’s annualized expense ratio for the 6-month period, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), and divided by the days in the year (366) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.67%, and the I Class was 0.56%.
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T. Rowe Price New Era Fund Unaudited
F inancial H ighlights
For a share outstanding throughout each period
Investor Class Year 6 Months Ended Ended 6/30/16 12/31/15 12/31/14 12/31/13 12/31/12 12/31/11
NET ASSET VALUE Beginning of period
$ 27.27
$ 34.45
$ 44.42
$ 41.91
$ 42.05
$ 52.16
0.25
0.42
0.41
0.39
0.51
0.34
4.45
(6.87)
(4.32)
6.03
1.16
(8.32)
4.70
(6.45)
(3.91)
6.42
1.67
(7.98)
– – –
(0.42) (0.31) (0.73)
(0.42) (5.64) (6.06)
(0.25) (3.66) (3.91)
(0.53) (1.28) (1.81)
(0.38) (1.75) (2.13)
Investment activities Net investment income
(1)
Net realized and unrealized gain / loss Total from investment activities Distributions Net investment income Net realized gain Total distributions
NET ASSET VALUE End of period
$ 31.97
$ 27.27
$ 34.45
$ 44.42
$ 41.91
$ 42.05
(18.76)%
(7.83)%
15.72%
4.01%
(15.10)%
0.67%
0.65%
0.66%
0.67%
0.67%
Ratios/Supplemental Data (2)
Total return Ratio of total expenses to average net assets Ratio of net investment income to average net assets Portfolio turnover rate Net assets, end of period (in millions) (1) (2)
(3)
17.24% 0.67%
(3)
1.73%
(3)
1.28%
0.90%
0.87%
1.19%
0.68%
39.3%
76.7%
61.9%
54.6%
37.5%
26.5%
$ 2,734
$ 2,733
$ 3,611
$ 4,338
$ 4,440
$ 4,535
Per share amounts calculated using average shares outstanding method. Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. Annualized
The accompanying notes are an integral part of these financial statements.
15
T. Rowe Price New Era Fund Unaudited
F inancial H ighlights
For a share outstanding throughout each period
I Class 6 Months 12/17/15 Through Ended 6/30/16 12/31/15
NET ASSET VALUE Beginning of period
$ 27.26
$ 27.08
Investment activities Net investment income
(1)
0.32 4.41 4.73
Net realized and unrealized gain / loss Total from investment activities
0.01 0.17 0.18
NET ASSET VALUE End of period
$
31.99
$
27.26
Ratios/Supplemental Data (2)
Total return
17.35%
0.66%
Ratio of total expenses to average net assets
0.56%
(3)
0.58%
(3)
Ratio of net investment income to average net assets
2.21%
(3)
1.41%
(3)
Portfolio turnover rate Net assets, end of period (in thousands) (1) (2)
(3)
39.3%
76.7%
$ 577,751 $ 6,389
Per share amounts calculated using average shares outstanding method. Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. Annualized
The accompanying notes are an integral part of these financial statements.
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T. Rowe Price New Era Fund Unaudited
June 30, 2016
P ortfolio of I nvestments
‡
Shares/Par
$ Value
160,600
20,783
(Cost and value in $000s)
COMMON STOCKS 97.5% AGRICULTURE 2.7% Agricultural Products 0.6% Ingredion
20,783 Fertilizers & Agricultural Chemicals 2.1% Agrium
271,480
24,547
CF Industries
938,550
22,619
Monsanto
220,900
22,844 70,010 90,793
Total Agriculture
CHEMICALS 11.2% Diversified Chemicals 2.4% Akzo Nobel (EUR)
240,410
15,125
EI du Pont de Nemours
485,300
31,448
PPG Industries
331,400
34,515 81,088
Specialty Chemicals 8.8% Air Liquide (EUR)
80,404
8,427
Air Products & Chemicals
458,400
65,111
Ashland
289,300
33,203
Croda International (GBP)
541,471
22,695
PolyOne
285,022
10,044
Praxair
195,000
21,916
1,391,800
69,520
39,350
11,556
303,507
15,639
RPM Sherwin-Williams Umicore (EUR)
17
T. Rowe Price New Era Fund
Shares/Par
$ Value
1,584,043
31,948
(Cost and value in $000s)
Victrex (GBP)
290,059 371,147
Total Chemicals
ENERGY INDUSTRIALS 9.5% Construction Materials 2.7% Martin Marietta Materials
103,410
19,855
Vulcan Materials
567,400
68,292 88,147
Electrical Components & Equipment 0.5% Legrand (EUR)
356,907
18,415 18,415
Industrial Machinery 4.3% Flowserve Pentair Sandvik, A Shares (SEK) Valmont Industries Watts Water Technologies, Class A
1,196,200
54,032
687,300
40,063
1,763,972
17,582
86,300
11,674
325,171
18,944 142,295
Metal & Glass Containers 1.3% Ball
421,400
30,463
Vidrala (EUR)
238,023
13,818 44,281
Trading Companies & Distributors 0.7% MRC Global (1)
1,551,100
22,041 22,041
Total Energy Industrials
18
315,179
T. Rowe Price New Era Fund
Shares/Par
$ Value
Aker Solutions (NOK) (1)
4,947,309
21,477
Baker Hughes
1,469,700
66,328
268,700
15,700
(Cost and value in $000s)
ENERGY SERVICES & PROCESSORS 10.6% Oil & Gas Equipment & Services 9.7%
Dril-Quip (1) Flotek Industries (1) FMC Technologies (1) Halliburton John Wood (GBP) Oceaneering International
709,299
9,363
1,074,300
28,652
739,200
33,478
1,719,828
15,768
586,900
17,525
RPC (1)
1,319,900
20,498
SBM Offshore (EUR)
1,962,911
22,871
Schlumberger
519,550
41,086
Tenaris (EUR)
1,699,468
24,577
868,200
5,808
Tesco
323,131 Oil & Gas Refining & Marketing 0.9% Murphy USA (1)
270,400
20,053
Valero Energy
181,900
9,277 29,330 352,461
Total Energy Services & Processors
EXPLORATION & PRODUCTION 21.6% Non-U.S. Oil & Gas Exploration & Production 8.4% Advantage Oil & Gas (CAD) (1)
2,641,800
14,764
ARC Resources (CAD)
1,294,991
22,162
977,500
30,136
Canadian Natural Resources Crew Energy (CAD) (1)
1,823,600
8,201
Kelt Exploration (CAD) (1)
4,203,700
15,390
Kosmos Energy (1)
4,176,452
22,762
771,765
13,953
1,751,655
8,474
Lundin Petroleum (SEK) (1) NuVista Energy (CAD) (1)
19
T. Rowe Price New Era Fund
Shares/Par
$ Value
(Cost and value in $000s)
Ophir Energy (GBP) (1)
11,834,824
12,458
Painted Pony Petroleum (CAD) (1)
1,768,500
10,376
Raging River Exploration (CAD) (1)
928,000
7,384
Seven Generations Energy (CAD) (1)
1,794,653
34,255
Tourmaline Oil (CAD) (1)
1,944,449
51,187
Woodside Petroleum (AUD)
1,288,855
26,125 277,627
U.S. Mixed Exploration & Production 2.4% Cabot Oil & Gas
126,200
3,249
EQT
797,740
61,769
1,223,700
15,394
Southwestern Energy (1)
80,412 U.S. Oil Exploration & Production 10.8% Cimarex Energy
658,310
78,550
Concho Resources (1)
581,100
69,308
Diamondback Energy (1)
277,500
25,311
EOG Resources
355,972
29,695
Gulfport Energy (1)
1,400,200
43,770
Matador Resources (1)
1,004,953
19,898
Parsley Energy (1)
260,400
7,046
PDC Energy (1)
317,164
18,272
Pioneer Natural Resources
427,550
64,650 356,500 714,539
Total Exploration & Production
INTEGRATEDS 16.1% Integrated Oil & Gas 16.1% Cenovus Energy (CAD)
1,012,200
14,001
251,600
26,375
ExxonMobil
1,141,659
107,019
Occidental Petroleum
1,246,550
94,189
Royal Dutch Shell, B Shares (GBP)
3,612,587
99,343
Chevron
20
T. Rowe Price New Era Fund
Shares/Par
$ Value
1,106,285
19,156
(Cost and value in $000s)
Statoil (NOK) Suncor Energy
854,300
23,690
Total (EUR)
3,062,261
147,667
Total, Rights, 6/30/16 (EUR) (1)
2,872,101
— 531,440
Total Integrateds
METALS & MINING 8.9% Diversified Metals & Mining 3.7% Acerinox (EUR)
1,034,302
11,458
Antofagasta (GBP)
2,520,835
15,660
Aurubis (EUR)
216,593
9,815
BHP Billiton Limited (AUD)
804,381
11,457
South32 (AUD) (1)
10,551,539
12,331
Southern Copper
1,792,700
48,367
332,100
14,048
Worthington Industries
123,136 Precious Metals & Minerals 5.2% Centamin (GBP)
10,418,809
18,328
318,450
24,215
Fresnillo (GBP)
1,511,648
33,406
OceanaGold (CAD)
5,974,800
22,799
Petra Diamonds (GBP)
9,257,098
14,386
Randgold Resources (GBP)
394,064
44,246
Tahoe Resources (CAD) (1)
894,500
Franco-Nevada (CAD)
13,397 170,777 293,913
Total Metals & Mining
OTHER 5.2% Building Products 0.3% Kingspan (EUR)
469,583
10,161 10,161
21
T. Rowe Price New Era Fund
Shares/Par
$ Value
633,136
6,319
(Cost and value in $000s)
Miscellaneous 0.2% Silver Run Acquisition, Equity Units (1)
6,319 Paper & Forest Products 4.7% Bemis
648,900
33,412
1,624,200
20,367
International Paper
449,778
19,062
Metsa Board, B Shares (EUR)
114,308
579
7,398,759
15,321
West Fraser Timber (CAD)
386,800
11,308
Westrock
801,518
31,155
Weyerhaeuser, REIT
797,903
23,754
Graphic Packaging Holding
Orora (AUD)
154,958 171,438
Total Other
UTILITIES 9.4% Electric Utilities 2.0% Edison International
468,200
36,365
Exelon
843,400
30,666 67,031
Gas Utilities 1.9% Atmos Energy
757,734
61,619 61,619
Independent Power Producers & Energy Traders 0.9% NRG Energy
1,957,978
29,350 29,350
Multi-Utilities 3.9% National Grid (GBP)
2,763,379
40,637
NiSource
1,859,400
49,311
461,100
29,474
PG&E
22
T. Rowe Price New Era Fund
Shares/Par
$ Value
171,200
11,179
(Cost and value in $000s)
Wec Energy
130,601 Oil & Gas Storage & Transportation 0.7% Koninklijke Vopak (EUR)
473,162
23,700 23,700
Water Utilities 0.0% Western Water (1)(2) Western Water, Warrants, 9/1/17 Acquisition Date: 10/16/09 - 8/24/11, Cost $0 (1)(2)(4)
2,259
—
12,766
— — 312,301
Total Utilities
75,378
Total Miscellaneous Common Stocks 2.3% (3)
3,228,589
Total Common Stocks (Cost $2,670,154)
CORPORATE BONDS 0.6% Concho Resources, 7.00%, 1/15/21
2,500,000
2,575
Kosmos Energy, 7.875%, 8/1/21 (5)
5,241,000
5,057
Oceaneering International, 4.65%, 11/15/24
6,885,000
6,615
Seven Generations Energy, 8.25%, 5/15/20 (5)
3,701,000
3,835 18,082
Total Corporate Bonds (Cost $15,335)
BANK LOANS 0.0% (6) Western Water, VR, 10.00%, 9/1/17 (2) Total Bank Loans (Cost $1,991)
23
2,200,476
— —
T. Rowe Price New Era Fund
Shares/Par
$ Value
44,141,677
44,142
(Cost and value in $000s)
SHORT-TERM INVESTMENTS 1.3% Money Market Funds 1.3% T. Rowe Price Reserve Investment Fund, 0.32% (7)(8)
44,142
Total Short-Term Investments (Cost $44,142) Total Investments in Securities 99.4% of Net Assets (Cost $2,731,622) ‡ (1) (2) (3) (4)
(5)
(6)
(7) (8)
AUD CAD EUR GBP NOK REIT SEK VR
$
3,290,813
Shares/Par are denominated in U.S. dollars unless otherwise noted. Non-income producing Level 3 in fair value hierarchy. See Note 2. The identity of certain securities has been concealed to protect the fund while it completes a purchase or selling program for the securities. Security cannot be offered for public resale without first being registered under the Securities Act of 1933 and related rules ("restricted security"). Acquisition date represents the day on which an enforceable right to acquire such security is obtained and is presented along with related cost in the security description. The fund has registration rights for certain restricted securities. Any costs related to such registration are borne by the issuer. The aggregate value of restricted securities (excluding 144A holdings) at period-end amounts to $0 and represents 0.0% of net assets. Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration only to qualified institutional buyers -- total value of such securities at period-end amounts to $8,892 and represents 0.3% of net assets. Bank loan positions may involve multiple underlying tranches. In those instances, the position presented reflects the aggregate of those respective underlying tranches and the rate presented reflects their weighted average rate. Seven-day yield Affiliated Company Australian Dollar Canadian Dollar Euro British Pound Norwegian Krone A domestic Real Estate Investment Trust whose distributions pass-through with original tax character to the shareholder Swedish Krona Variable Rate; rate shown is effective rate at period-end.
24
T. Rowe Price New Era Fund
Affiliated Companies ($000s)
The fund may invest in certain securities that are considered affiliated companies. As defined by the 1940 Act, an affiliated company is one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the six months ended June 30, 2016. Purchase and sales cost and investment income reflect all activity for the period then ended. Purchase Cost
Affiliate T. Rowe Price Reserve Investment Fund
Sales Cost
¤
Totals
Investment Income
Value 6/30/16
Value 12/31/15
¤$
63 $
44,142 $
16,345
$
63 $
44,142 $
16,345
¤ Purchase and sale information not shown for cash management funds.
Amounts reflected on the accompanying financial statements include the following amounts related to affiliated companies: Investment in securities, at cost
$
Dividend income Interest income
44,142 63 -
Investment income
$
63
Realized gain (loss) on securities
$
-
Capital gain distributions from mutual funds
$
-
The accompanying notes are an integral part of these financial statements.
25
T. Rowe Price New Era Fund Unaudited
June 30, 2016
S tatement of A ssets and L iabilities ($000s, except shares and per share amounts)
Assets Investments in securities, at value (cost $2,731,622)
$ 3,290,813
Receivable for investment securities sold
32,060
Foreign currency (cost $15,128)
15,243
Receivable for shares sold
10,625
Dividends and interest receivable
5,042
Other assets
13,472
Total assets
3,367,255
Liabilities Payable for investment securities purchased
31,547
Payable for shares redeemed
10,212
Investment management fees payable
1,459
Due to affiliates
218
Other liabilities
12,567
Total liabilities
56,003
NET ASSETS
$ 3,311,252
Net Assets Consist of: Undistributed net investment income
$
27,324
Accumulated undistributed net realized loss
(455,068)
Net unrealized gain
559,076
Paid-in capital applicable to 103,561,110 shares of $1.00 par value capital stock outstanding; 300,000,000 shares authorized NET ASSETS
3,179,920 $ 3,311,252
NET ASSET VALUE PER SHARE Investor Class ($2,733,500,471 / 85,499,070 shares outstanding)
$
31.97
I Class ($577,751,224 / 18,062,040 shares outstanding)
$
31.99
The accompanying notes are an integral part of these financial statements.
26
T. Rowe Price New Era Fund Unaudited
S tatement of O perations ($000s)
6 Months Ended 6/30/16
Investment Income (Loss) Income Dividend Interest Other
$
Total income Expenses Investment management Shareholder servicing Investor Class I Class Prospectus and shareholder reports Investor Class I Class Custody and accounting Registration Legal and audit Directors Miscellaneous
34,884 1,107 7 35,998 7,984
1,480 1
1,481
50 1
51 159 68 25 6 19
Total expenses
9,793
Net investment income
26,205
Realized and Unrealized Gain / Loss Net realized gain (loss) Securities Foreign currency transactions
(91,564) (322)
Net realized loss
(91,886)
Change in net unrealized gain / loss Securities Other assets and liabilities denominated in foreign currencies
546,121 (89)
Change in net unrealized gain / loss
546,032
Net realized and unrealized gain / loss
454,146
INCREASE IN NET ASSETS FROM OPERATIONS
The accompanying notes are an integral part of these financial statements.
27
$
480,351
T. Rowe Price New Era Fund Unaudited
S tatement of C hanges in N et A ssets ($000s)
6 Months Ended 6/30/16
Year Ended 12/31/15
Increase (Decrease) in Net Assets Operations Net investment income Net realized loss Change in net unrealized gain / loss Increase (decrease) in net assets from operations
$
Distributions to shareholders Net investment income Investor Class Net realized gain Investor Class Decrease in net assets from distributions Capital share transactions* Shares sold Investor Class I Class Distributions reinvested Investor Class Shares redeemed Investor Class I Class Increase (decrease) in net assets from capital share transactions
26,205 (91,886) 546,032
$
41,707 (249,490) (425,593)
480,351
(633,376)
–
(41,116)
– –
(30,443) (71,559)
218,969 531,586
629,881 6,491
–
66,846
(654,382) (4,804)
(869,675) –
91,369
(166,457)
571,720 2,739,532
(871,392) 3,610,924
Net Assets Increase (decrease) during period Beginning of period End of period Undistributed net investment income
28
$
3,311,252 27,324
$
2,739,532 1,119
T. Rowe Price New Era Fund Unaudited
S tatement of C hanges in N et A ssets (000s)
*Share information Shares sold Investor Class I Class Distributions reinvested Investor Class Shares redeemed Investor Class I Class Increase (decrease) in shares outstanding
The accompanying notes are an integral part of these financial statements.
29
6 Months Ended 6/30/16
Year Ended 12/31/15
7,534 17,983
19,930 234
–
2,401
(22,279) (155) 3,083
(26,889) – (4,324)
T. Rowe Price New Era Fund Unaudited
June 30, 2016
N otes to F inancial S tatements
T. Rowe Price New Era 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 to provide long-term capital growth primarily through the common stocks of companies that own or develop natural resources and other basic commodities, and also through the stocks of selected nonresource growth companies. The fund has two classes of shares: the New Era Fund original share class, referred to in this report as the Investor Class, incepted on January 20, 1969, and the New Era Fund–I Class (I Class), incepted on December 17, 2015. I Class shares generally are available only to investors meeting a $1,000,000 minimum investment or certain other criteria. 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. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions, if any, 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 from REITs are initially recorded as dividend income and, to the extent such
30
T. Rowe Price New Era Fund
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. Distributions to shareholders are recorded on the ex-dividend date. 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. Rebates Subject to best execution, the fund may direct certain security trades to brokers who have agreed to rebate a portion of the related brokerage commission to the fund in cash. Commission rebates are reflected as realized gain on securities in the accompanying financial statements and totaled $54,000 for the six months ended June 30, 2016. In-Kind Subscriptions Under certain circumstances, and when considered to be in the best interest of all shareholders, the fund may accept portfolio securities rather than cash as payment for the purchase of fund shares (in-kind subscription). For financial reporting and tax purposes, the cost basis of contributed securities is equal to the market value of the securities on the date of contribution. In-kind subscriptions result in no gain or loss and no tax consequences for the fund. During the six months ended June 30, 2016, the fund accepted $26,974,000 of in-kind subscriptions.
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. 31
T. Rowe Price New Era Fund
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 32
T. Rowe Price New Era Fund
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. 33
T. Rowe Price New Era Fund
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. Investments in mutual funds are valued at the mutual fund’s closing NAV per share on the day of valuation and are categorized in Level 1 of the fair value hierarchy. Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at cost, or estimated realizable value, if less, which approximates fair value. Thinly traded financial instruments and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the Valuation Committee. The objective of any fair value pricing determination is to arrive at a price that could reasonably be expected from a current sale. Financial instruments fair valued by the Valuation Committee are primarily private placements, restricted securities, warrants, rights, and other securities that are not publicly traded. Subject to oversight by the Board, the Valuation Committee regularly makes good faith judgments to establish and adjust the fair valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of an equity investment with limited market activity, such as a private placement or a thinly traded public company stock, the Valuation Committee considers a variety of factors, which may include, but are not limited to, the issuer’s business prospects, its financial standing and performance, recent investment transactions in the issuer, new rounds of financing, negotiated transactions of significant size between other investors in the company, relevant market valuations of peer companies, strategic events affecting the company, market liquidity for the issuer, and general economic conditions and events. In consultation with the investment and pricing teams, the Valuation Committee will determine an appropriate valuation technique based on available information, which may include both observable and unobservable inputs. The Valuation Committee typically will afford greatest weight to actual prices in arm’s length transactions, to the extent they represent orderly transactions between market participants, transaction information can be reliably obtained, and prices are deemed representative of fair value. However, the Valuation Committee may also consider other valuation methods such as market-based valuation multiples; a discount or premium from 34
T. Rowe Price New Era Fund
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 June 30, 2016: ($000s)
Investments in Securities, except:
$
Level 1
Level 2
Level 3
Quoted Prices
Significant Observable Inputs
Significant Unobservable Inputs
44,142 $
— $
Total Value
— $
44,142
Common Stocks
2,125,027
1,103,562
—
3,228,589
Corporate Bonds
—
18,082
—
18,082
Total
$
2,169,169 $
1,121,644 $
— $
3,290,813
There were no material transfers between Levels 1 and 2 during the six months ended June 30, 2016. Following is a reconciliation of the fund’s Level 3 holdings for the six months ended June 30, 2016. 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 June 30, 2016, totaled $3,884,000 for the six months ended June 30, 2016. Beginning Balance 1/1/16
($000s)
Gain (Loss) During Period
Total Sales
Ending Balance 6/30/16
Investments in Securities Common Stocks 35
$
3,523
$
(125) $
(3,398) $
—
T. Rowe Price New Era Fund
Note 3 - OTHER Investment Transactions
Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information. 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 are generally noninvestment grade and often involve borrowers whose financial condition is troubled or highly leveraged. Bank loans may be in the form of either assignments or participations. A loan assignment transfers all legal, beneficial, and economic rights to the buyer, and transfer typically requires consent of both the borrower and agent. In contrast, a loan participation generally entitles the buyer to receive the cash flows from principal, interest, and any fee payments; however, the seller continues to hold legal title to the loan. As a result, the buyer of a loan participation generally has no direct rights against the borrower and is exposed to credit risk of both the borrower and seller of the participation. Bank loans often have extended settlement periods, usually may be repaid at any time at the option of the borrower, and may require additional principal to be funded at the borrowers’ discretion at a later date (unfunded commitments). Until settlement, the fund maintains liquid assets sufficient to settle its unfunded loan commitments. The fund reflects both the funded portion of a bank loan as well as its unfunded commitment in the Portfolio of Investments. However, to the extent a credit agreement provides no initial funding of a tranche and funding of the full commitment at a future date(s) is at the borrower’s discretion and considered uncertain, no loan is reflected in the Portfolio of Investments until paid. Other Purchases and sales of portfolio securities other than short-term
securities aggregated $1,242,323,000 and $1,156,800,000, respectively, for the six months ended June 30, 2016.
36
T. Rowe Price New Era Fund
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 amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of the date of this report. The fund intends to retain realized gains to the extent of available capital loss carryforwards. Net realized capital losses may be carried forward indefinitely to offset future realized capital gains. As of December 31, 2015, the fund had $315,418,000 of available capital loss carryforwards. At June 30, 2016, the cost of investments for federal income tax purposes was $2,754,930,000. Net unrealized gain aggregated $535,768,000 at period-end, of which $679,485,000 related to appreciated investments and $143,717,000 related to depreciated investments. 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 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 0.270% for assets in excess of $500 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At June 30, 2016, the effective annual group fee rate was 0.29%.
37
T. Rowe Price New Era Fund
The I Class is subject to an operating expense limitation (I Class limit) pursuant to which Price Associates is contractually required to pay all operating expenses of the I Class, excluding management fees, interest, borrowing-related expenses, taxes, brokerage commissions, and extraordinary expenses, to the extent such operating expenses, on an annualized basis, exceed 0.05% of average net assets. This agreement will continue until April 30, 2018, and may be renewed, revised or revoked only with approval of the fund’s Board. The I Class is required to repay Price Associates for expenses previously paid to the extent the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the class’s operating expenses to exceed the I Class limit. However, no repayment will be made more than three years after the date of a payment or waiver. For the six months ended June 30, 2016, the I Class operated below its expense limitation. 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 and I Class. For the six months ended June 30, 2016, expenses incurred pursuant to these service agreements were $23,000 for Price Associates; $833,000 for T. Rowe Price Services, Inc.; and $48,000 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, if any. 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.
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T. Rowe Price New Era Fund
The fund may participate in securities purchase and sale transactions with other funds or accounts advised by Price Associates (cross trades), in accordance with procedures adopted by the fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security.During the six months ended June 30, 2016, the aggregate value of purchases and sales cross trades with other funds or accounts advised by Price Associates was less than 1% of the fund’s net assets as of June 30, 2016.
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T. Rowe Price New Era Fund
I nformation on P roxy V oting P olicies, P rocedures, and R ecords A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information. You may request this document by calling 1-800-225-5132 or by accessing the SEC’s website, sec.gov. The description of our proxy voting policies and procedures is also available on our corporate website. To access it, please visit the following Web page https://www3.troweprice.com/usis/corporate/en/utility/policies.html and scroll down to the section near the bottom of the page that says, “Proxy Voting Policies.” Click on the Proxy Voting Policies link in the shaded box. Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through T. Rowe Price, visit the website location shown above, and scroll down to the section near the bottom of the page that says, “Proxy Voting Records.” Click on the Proxy Voting Records link in the shaded box.
H ow to O btain Q uarterly P ortfolio H oldings 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.
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T. Rowe Price New Era Fund
A pproval of I nvestment M anagement A greement On March 11, 2016, the fund’s Board of Directors (Board), including a majority of the fund’s independent directors, approved the continuation of the investment management agreement (Advisory Contract) between the fund and its investment advisor, T. Rowe Price Associates, Inc. (Advisor). In connection with its deliberations, the Board requested, and the Advisor provided, such information as the Board (with advice from independent legal counsel) deemed reasonably necessary. The Board considered a variety of factors in connection with its review of the Advisory Contract, also taking into account information provided by the Advisor during the course of the year, as discussed below: Services Provided by the Advisor The Board considered the nature, quality, and extent of the services provided to the fund by the Advisor. These services included, but were not limited to, directing the fund’s investments in accordance with its investment program and the overall management of the fund’s portfolio, as well as a variety of related activities such as financial, investment operations, and administrative services; compliance; maintaining the fund’s records and registrations; and shareholder communications. The Board also reviewed the background and experience of the Advisor’s senior management team and investment personnel involved in the management of the fund, as well as the Advisor’s compliance record. The Board concluded that it was satisfied with the nature, quality, and extent of the services provided by the Advisor. Investment Performance of the Fund The Board reviewed the fund’s three-month, one-year, and year-by-year returns, as well as the fund’s average annualized total returns over the 3-, 5-, and 10-year periods, and compared these returns with a wide variety of comparable performance measures and market data, including those supplied by Lipper and Morningstar, which are independent providers of mutual fund data. On the basis of this evaluation and the Board’s ongoing review of investment results, and factoring in the relative market conditions during certain of the performance periods, the Board concluded that the fund’s performance was satisfactory. Costs, Benefits, Profits, and Economies of Scale The Board reviewed detailed information regarding the revenues received by the Advisor under the Advisory Contract and other benefits that the Advisor (and its affiliates) may have realized from its relationship with the fund, including any research received under “soft dollar” agreements and commission-sharing arrangements with broker-dealers. The Board considered that the Advisor may receive some benefit from soft-dollar arrangements pursuant to which research is received from broker-dealers that execute the applicable fund’s portfolio transactions. The Board received information on the estimated costs incurred and profits realized by the Advisor from managing T. Rowe Price mutual funds. The Board also reviewed estimates of the profits realized from managing the fund in particular, and the Board concluded that the Advisor’s profits were reasonable in light of the services provided to the fund.
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T. Rowe Price New Era Fund
A pproval of I nvestment M anagement A greement ( continued ) The Board also considered whether the fund benefits under the fee levels set forth in the Advisory Contract from any economies of scale realized by the Advisor. Under the Advisory Contract, the fund pays a fee to the Advisor for investment management services composed of two components—a group fee rate based on the combined average net assets of most of the T. Rowe Price mutual funds (including the fund) that declines at certain asset levels and an individual fund fee rate based on the fund’s average daily net assets—and the fund pays its own expenses of operations (subject to an expense limitation on operating expenses with respect to the I Class). The Board concluded that the advisory fee structure for the fund continued to provide for a reasonable sharing of benefits from any economies of scale with the fund’s investors. Fees The Board was provided with information regarding industry trends in management fees and expenses, and the Board reviewed the fund’s management fee rate, operating expenses, and total expense ratio (for the Investor Class and I Class) in comparison with fees and expenses of other comparable funds based on information and data supplied by Lipper. The information provided to the Board indicated that the fund’s management fee rate was above the median for certain groups of comparable funds and at or below the median for other groups of comparable funds. The information also indicated that the total expense ratio for the Investor Class was above the median for certain groups of comparable funds and at or below the median for other groups of comparable funds, and the total expense ratio for the I Class was below the median for comparable funds. The Board also reviewed the fee schedules for institutional accounts (including subadvised mutual funds) and private accounts with similar mandates that are advised or subadvised by the Advisor and its affiliates. Management provided the Board with information about the Advisor’s responsibilities and services provided to subadvisory and other institutional account clients, including information about how the requirements and economics of the institutional business differ from those of the Advisor’s proprietary mutual fund business. The Board considered information showing that the Advisor’s proprietary mutual fund business is generally more complex from a business and compliance perspective than its institutional account business and considered various other relevant factors, including the broader scope of operations and oversight, more extensive shareholder communication infrastructure, greater asset flows, heightened business risks, and differences in applicable laws and regulations associated with the Advisor’s proprietary mutual fund business. In assessing the reasonableness of the fund’s management fee rate, the Board considered the differences in the nature of the services required for the Advisor to manage its proprietary mutual fund business versus managing a discrete pool of assets as a subadvisor to another institution’s mutual fund or for another institutional account and the degree to which the Advisor performs significant additional services and assumes greater risk in managing the fund and other T. Rowe Price mutual funds than it does for institutional account clients.
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T. Rowe Price New Era Fund
A pproval of I nvestment M anagement A greement ( continued ) On the basis of the information provided and the factors considered, the Board concluded that the fees paid by the fund under the Advisory Contract are reasonable. Approval of the Advisory Contract As noted, the Board approved the continuation of the Advisory Contract. No single factor was considered in isolation or to be determinative to the decision. Rather, the Board concluded, in light of a weighting and balancing of all factors considered, that it was in the best interests of the fund and its shareholders for the Board to approve the continuation of the Advisory Contract (including the fees to be charged for services thereunder). The independent directors were advised throughout the process by independent legal counsel.
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T. Rowe Price Mutual Funds This page contains supplementary information that is not part of the shareholder report.
STOCK FUNDS
BOND FUNDS
MONEY MARKET FUNDS (cont.)
Domestic
Domestic Taxable
Tax-Free
Corporate Income Credit Opportunities Floating Rate GNMA High Yield‡ Inflation Protected Bond Limited Duration Inflation Focused Bond New Income Short-Term Bond Ultra Short-Term Bond U.S. Bond Enhanced Index U.S. Treasury Intermediate U.S. Treasury Long-Term
California Tax-Free Money1 Maryland Tax-Free Money1 New York Tax-Free Money1 Summit Municipal Money Market1 Tax-Exempt Money1
Blue Chip Growth Capital Appreciation‡ Capital Opportunity Diversified Mid-Cap Growth Dividend Growth Equity Income Equity Index 500 Extended Equity Market Index Financial Services Growth & Income Growth Stock Health Sciences‡ Media & Telecommunications Mid-Cap Growth‡ Mid-Cap Value‡ New America Growth New Era New Horizons‡ QM U.S. Small & Mid-Cap Core Equity QM U.S. Small-Cap Growth Equity QM U.S. Value Equity Real Estate Science & Technology Small-Cap Stock‡ Small-Cap Value Tax-Efficient Equity Total Equity Market Index U.S. Large-Cap Core Value
ASSET ALLOCATION FUNDS Balanced Global Allocation Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Real Assets Spectrum Growth Spectrum Income Spectrum International Target Date Fundsˆ
Domestic Tax-Free California Tax-Free Bond Georgia Tax-Free Bond Intermediate Tax-Free High Yield Maryland Short-Term Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Summit Municipal Intermediate Tax-Free High Yield Tax-Free Income Tax-Free Short-Intermediate Virginia Tax-Free Bond
MONEY MARKET FUNDS Taxable Cash Reserves1 Government Money2 U.S. Treasury Money2
INTERNATIONAL/GLOBAL FUNDS Stock Africa & Middle East Asia Opportunities Emerging Europe Emerging Markets Stock Emerging Markets Value Stock European Stock Global Consumer Global Growth Stock Global Industrials Global Real Estate Global Stock Global Technology International Concentrated Equity International Discovery International Equity Index International Growth & Income International Stock Japan Latin America New Asia Overseas Stock QM Global Equity
Bond Emerging Markets Bond Emerging Markets Corporate Bond Emerging Markets Local Currency Bond Global High Income Bond Global Multi-Sector Bond Global Unconstrained Bond International Bond
Call 1-800-225-5132 to request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. ‡Closed to new investors except for a direct rollover from a retirement plan into a T. Rowe Price IRA invested in this fund. ˆThe Target Date Funds are inclusive of the Retirement Funds, the Target Funds, and the Retirement Balanced Fund.
Retail Funds: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. Beginning October 14, 2016, the Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. 2 Government Funds: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. 1
T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 2016-US-24683
F41-051 8/16
