T. Rowe Price Equity Income

Objective And Strategy

Objective
High level of dividend income and long-term capital growth primarily through investments in stocks.

Strategy
Normally invests in at least 80% of assets in stocks, with 65% in the stocks of well-established companies paying above average dividends, with favorable prospects for both increasing dividends and capital appreciation. The Fund typically employs a "value" approach in selecting investments. Seeks companies that appear to be undervalued by various measures and may be temporarily out of favor but have good prospects for capital appreciation and dividend growth. Looks for companies with an established operating history, above-average dividend yields relative to the S&P 500, low price/earnings ratio relative to the S&P 500, a sound balance sheet and other positive financial characteristics, and a low stock price relative to the company's underlying value as measured by assets, cash flow, or business franchises. Can invest in foreign securities.

Principal Risks

* This portfolio invests in securities of foreign issuers which involves risks not typically associated with domestic issuers, including currency fluctuations and the possibility of political and economic instability. Emerging markets involve risks in addition to those generally associated with foreign securities, because political and economic structures in many emerging markets may be undergoing significant evolution and rapid development.

* This portfolio can leverage or use leveraged instruments or derivatives. Portfolios that use leverage, that is, borrow money, are subject to the risk that the cost of borrowing money to leverage will exceed the returns for the securities purchased or that the securities purchased may actually go down in value. Thus, the portfolio's net asset value can decrease more quickly than if the portfolio had not borrowed. Portfolios that use leveraged instruments or derivatives such as futures, options and swap agreements, may expose the portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The more a portfolio invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.