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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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November 2021 / THE U.S. EQUITY T. ROWE PRICE APPROACH

Our Careful Approach to Portfolio Manager Transitions

Skilled PMs and a talented analyst pool are both key.

Key Insights

  • We delivered strong performance and investment style consistency for clients even during periods of portfolio manager transitions.
  • Over the past 15 years, all incoming equity strategy PMs have come from our analyst ranks.
  • We credit our success to a process that leverages our talent development, succession planning, collaborative culture, long‑term orientation, and world‑class research organization.

Avoiding the potential disruption that can accompany portfolio manager (PM) transitions is a critical part of prioritizing clients’ long‑term interests and preserving our ability to pursue superior risk‑adjusted returns. Our transition process, developed and refined over eight decades, is complemented by the strength of our research platform and the expertise of our analysts. We consider PM skill and analyst expertise to be the twin pillars of our investment success. Every incoming PM gets the benefit of drawing on the work of the same group of talented analysts that fueled the success of his or her predecessor.

Though we are not immune to the fast‑changing labor market, T. Rowe Price remains a destination of choice for top investment talent—and, once here, people tend to stay. The firm’s current U.S. Equity Division PMs have been with us for an average of 19 years (as of September 30, 2021). Our PMs tend to remain with the firm until they retire and assist in a carefully orchestrated handoff of duties to their successor.

...T. Rowe Price remains a destination of choice for top investment talent....

This stability has helped ensure that our professionals have internalized our investment philosophy and can step in to provide the continuity of approach while seeking to provide sustainable long‑term investment performance that our clients expect. As described below, we put a great deal of effort into identifying and preparing candidates for the PM role.

Research Is the Foundation

T. Rowe Price’s research organization is the core of our Investment Division. All of T. Rowe Price’s U.S. equity PMs have served as investment research analysts on specific sectors before assuming their current duties, and over the past 15 years, all PM positions in the U.S. Equity Division have been filled internally. As of September 30, 2021, 386 professionals were employed in our global research organization, of whom 150 were in the U.S. Equity Division.

PMs, analysts, economists, and other experts cooperate in the search for investment opportunities and constantly share insights.

Our proprietary platform is designed to permit a close, ongoing examination of a firm’s strategy, product capabilities, management quality, balance sheet strength, and other factors. This centralized research structure encourages communication across regions and industries and requires each analyst to maintain a working familiarity with all our equity strategies.

Because we cover virtually every asset class in the global public markets, we have developed far‑reaching expertise across regions, market capitalizations, investment styles, sectors, and industries. PMs both draw on and contribute to this stockpile of insights. Crucially, when a PM retires or leaves the role for another reason, the incoming PM can continue to draw on the full breadth of our resources in making investment decisions.

T. Rowe Price U.S. Equity Group Portfolio Manager Transitions

(Fig. 1) We draw on an extensive pool of analyst talent

Graphic showing T. Rowe Price portfolio management statistics

As of September 30, 2021.
Past performance is not a reliable indicator of future performance.
1Alpha is the excess return of an investment relative to its benchmark.
Results based on an analysis of T. Rowe Price’s U.S. equity and global sector equity strategies that had a portfolio manager change in the past 15 years and where the successor manager served at least 2 years in the role. See Figure 2 for additional information on the analysis, including details on the benchmarks. Results for other time periods will differ.
All investments are subject to risk, including the possible loss of principal.

How T. Rowe Price Develops Talent

We approach talent development in much the same way as we think about the companies in which we invest: We are patient when we see potential, and we draw on decades of experience in making decisions. We want to allow young research analysts to grow into the role, learning from both their successes and failures. T. Rowe Price analysts are recruited from M.B.A. programs, hired laterally, or appointed from other roles within the firm. Once hired, they are assigned to become industry specialists, based on their experience and interests, as well as the firm’s coverage needs. Analysts typically follow and ultimately rate an average of 25–45 stocks each, depending on their area of expertise, and most follow another 10–20 stocks on a less formal basis.

We approach talent development in much the same way as we think about the companies in which we invest.…

Analysts work closely with PMs, often contributing directly to buy and sell decisions. In some cases, high‑performing analysts can begin building experience managing client assets in the industry sleeves of our US Structured Research Equity Strategy. Managed by analysts and divided among the primary industries of the S&P 500 Index, the strategy maintains style and sector exposures similar to that of the index. This experience helps analysts with aspirations of portfolio management demonstrate their skills as investors in a live portfolio setting and under the guidance of senior research directors. Further, contributing to the strategy helps the analysts identify their investment strengths and naturally aligns them with like‑minded PMs who can serve as mentors.

Multiple Considerations…

From our extended team of investment analysts, we identify those who are interested and ready to begin transitioning into PM or associate PM roles. We categorize analysts by their readiness and desire to take on new roles in the investment enterprise in the firm’s annual talent planning and review process. The responsibility of this lies with the U.S. Equity Steering Committee, chaired by the head of U.S. Equity.

While an analyst’s track record in successfully identifying investment targets figures significantly in our search, it is part of a broader quantitative and qualitative assessment. Among the factors considered is how well the analyst’s investment style meshes with a particular portfolio. For example, is the analyst most comfortable with a growth or value style of investing? Or as a small‑cap or large‑cap stock picker? And how might the analyst handle the trade‑off between minimizing turnover and seizing opportunities during market dislocations?

How well the analyst shares ideas and advances the thinking of colleagues is another important consideration, as is how effectively she or he communicates, both internally and externally. T. Rowe Price maintains a very collaborative culture and is not a comfortable home for those individuals who are averse to feedback.

…and Multiple Paths

It is important to note that many of the firm’s most successful analysts choose to stay in the role instead of becoming a PM. Indeed, as they typically have a passion for the industry they cover, they often wish to remain focused on it. Many of our analysts are asked to present to the Boards of Directors of the companies they cover or speak at industry events because they are well known as thought leaders. Others prefer to work across a variety of investment styles, such as growth and value strategies, and both small and large companies. We also realize that preferences and goals can change, so we maintain an ongoing dialogue about career development with all our investment staff.

Likewise, our collaborative culture allows us to be highly flexible in the career path from analyst to U.S. equity PM. There is no single best path to becoming a U.S. equity PM at T. Rowe Price, and we maintain multiple avenues into the role. Future PMs often first serve on the strategy’s investment advisory committee. Some make the transition after being an associate PM, while others come from sector PM or analyst roles. As a result, our process may look different than other firms that preordain associate PMs as successors.

Preparing a New PM—an Unhurried and Careful Process

Once a departure and the identified successor are announced, the incoming and outgoing PMs begin cooperating on a transition plan. Since many departing PMs are retiring, they are often able to provide ample notice of their plans to leave—sometimes informing us even a year or more in advance. This allows the outgoing and incoming PMs to spend months together analyzing the steps that need to be taken and cooperating in the handoff of duties. Other PMs stepping down from the role remain at the company in a different position and serve as ongoing resources.

The transition plan starts by identifying any knowledge gaps the incoming PM may have. In some cases, that means deepening their familiarity with particular sectors; in other cases, the incoming PM may need a better understanding of how the portfolio has been assembled and maintained. He or she may tap into the experience of the outgoing PM around key performance drivers, such as sector weights or cash management. They also consult with the firm’s risk and quantitative teams to identify and avoid unintended bets or risks. The directors of research engage with the incoming PM to discuss best practices of how to work with the analysts and sector PMs. This is critical in retaining a high‑functioning culture.

Occasionally, departures come unexpectedly as managers seek out their own path. While we are not always able to plan for changes in our associates’ lives, we are able to ensure that these transitions are managed in a controlled and thoughtful manner. Every year, investment steering committees review each strategy’s succession plan and identify individuals who can step in should an unplanned departure occur.

Every year, investment steering committees review each strategy’s succession plan....

Some Recent Transitions

  1. In one example of a carefully planned transition, Justin White was selected to become the manager of the US All‑Cap Opportunities Equity Strategy in early 2016. Justin had demonstrated his investment talent through the performance of the investment sleeve he was charged with for the US Structured Research Equity Strategy. His stock‑picking success was characterized by a high batting average, consistency across different types of market environments, and success with both high‑growth and value‑oriented ideas.

    But it wasn’t just about the numbers. Justin also demonstrated success with a variety of business models, which informed us of his ability to learn other areas beyond his coverage responsibilities of telecom and media. Finally, and most importantly, Justin had a clearly defined investment framework that we felt very confident would translate to diversified equity portfolio management.
     
  2. Taymour Tamaddon’s nearly year‑long transition to become the PM of the US Large‑Cap Growth Equity Strategy in 2016 illustrates how transitions sometimes operate across portfolios. It is also notable because Taymour replaced Robert Sharps, who transitioned into the role of Group CIO and Head of Investments.

    When appointed to the role, Taymour was PM of the Health Sciences Equity Strategy. While gradually taking on the managerial responsibilities for the Large‑Cap Growth Equity Strategy, Taymour slowly handed off responsibilities for the Health Sciences Equity Strategy to his own successor, Ziad Bakri, who has gone on to a successful tenure as PM. Once Ziad was fully in charge, Taymour dedicated six months to deepening his knowledge of the large‑cap growth portfolio and gradually put his mark on the strategy as Rob continued to offer advice and guidance. Over the last three months of the transition, Taymour essentially had primary responsibility, with Rob still involved but much more in a consultative fashion.
     
  3. At the start of 2014, the PM of the US Growth Stock Strategy surprised us by announcing his imminent departure. Because of our planning, however, we were able to quickly identify a successor in Joe Fath, who had served as an associate PM for the adjacent US Large-Cap Growth Equity Strategy the previous seven years. Joe had experience in portfolio construction and a high degree of familiarity with the portfolio’s top holdings. Equally important, Joe had intimate knowledge of the research platform and how to work with analysts. This allowed us to have Joe step into the role on relatively short notice.

Our Performance Record Over U.S. Equity PM Transitions

As the following table shows, our strategies generally maintained or even improved their solid relative performance records over recent transitions. We believe this reflects not only the talent of the outgoing and incoming U.S. Equity PMs, but also the strength of our research platform and the expertise of the analysts. Every incoming PM gets the benefit of drawing on the work of the same group of talented analysts that fueled the success of his or her predecessor.

Indeed, every person listed in the table first served as a T. Rowe Price analyst, with the sole exception of Brian Rogers, who came to the firm in the early 1980s to establish our value franchise. In most ways, however, he was more the rule than the exception—Brian went on to spend well over three decades at the firm before retiring in 2017 as our chairman and chief investment officer.

T. Rowe Price U.S. Equity Group PM Transitions—Performance Comparisons1

(Fig. 2) Our results remained strong across recent transitions

Chart of performance comparisons

Past performance is not a reliable indicator of future performance.
Gross performance returns are presented before management and all other fees, where applicable, but after trading expenses. Net of fees performance reflects the deduction of the highest applicable management fee that would be charged based on the maximum fee shown in the table. Gross and net performance returns reflect the reinvestment of dividends and are net of all non-reclaimable withholding taxes on dividends, interest income, and capital gains. GIPS® Composite Reports, including composite descriptions and fee schedules, are available upon request.
*Annualized.
1Includes T. Rowe Price’s U.S. equity and global sector equity strategies that had a PM change in the past 15 years and where the successor manager had served at least 2 years in the role. PM changes that occurred prior to the past 15 years are not reflected in the table. Strategy composite performance data only available starting December 31, 1995. Managers whose tenure began before that date are noted. Composite performance data only available at month end. Managers whose tenure began at mid‑month are noted. Unless otherwise noted, comparisons were relative to the composite’s primary benchmark.
2Value added is defined as the difference between composite net‑of‑fees performance return and listed index/benchmark.
3Manager inception date 8/31/1991.
4Manager inception date 10/31/1985.

T. Rowe Price U.S. Equity Group PM Transitions—Performance Comparisons1

(Fig. 2, cont.) Our results remained strong across recent transitions

Chart showing T. Rowe Price performance comparisons (continued)

Past performance is not a reliable indicator of future performance.
Gross performance returns are presented before management and all other fees, where applicable, but after trading expenses. Net of fees performance reflects the deduction of the highest applicable management fee that would be charged based on the maximum fee shown in the table. Gross and net performance returns reflect the reinvestment of dividends and are net of all non-reclaimable withholding taxes on dividends, interest income, and capital gains. GIPS® Composite Reports, including composite descriptions and fee schedules, are available upon request.
*Annualized.
1Includes T. Rowe Price’s U.S. equity and global sector equity strategies that had a PM change in the past 15 years and where the successor manager had served at least 2 years in the role. PM changes that occurred prior to the past 15 years are not reflected in the table. Unless otherwise noted, comparisons were relative to the composite’s primary benchmark.
2Prior to March 1, 2021, the name of the US All-Cap Opportunities Equity Strategy was the US Multi-Cap Growth Equity Strategy.
3Value added is defined as the difference between composite net‑of‑fees performance return and listed index/benchmark.
4Manager inception date 5/13/2013.
5Manager inception date 9/2/1992.

T. Rowe Price U.S. Equity Group PM Transitions—Performance Comparisons1

(Fig. 2, cont.) Our results remained strong across recent transitions

Chart showing T. Rowe Price performance comparisons (continued)

Past performance is not a reliable indicator of future performance.
Gross performance returns are presented before management and all other fees, where applicable, but after trading expenses. Net of fees performance reflects the deduction of the highest applicable management fee that would be charged based on the maximum fee shown in the table. Gross and net performance returns reflect the reinvestment of dividends and are net of all non-reclaimable withholding taxes on dividends, interest income, and capital gains. GIPS® Composite Reports, including composite descriptions and fee schedules, are available upon request.
*Annualized.
1Includes T. Rowe Price’s U.S. equity and global sector equity strategies that had a PM change in the past 15 years and where the successor manager had served at least 2 years in the role. PM changes that occurred prior to the past 15 years are not reflected in the table. Unless otherwise noted, comparisons were relative to the composite’s primary benchmark.
2Value added is defined as the difference between composite net‑of‑fees performance return and listed index/benchmark.
3Manager inception date 1/14/2000.

T. Rowe Price U.S. Equity Group PM Transitions—Performance Comparisons1

(Fig. 2, cont.) Our results remained strong across recent transitions

Chart showing T. Rowe Price performance comparisons (continued)

Past performance is not a reliable indicator of future performance.
Gross performance returns are presented before management and all other fees, where applicable, but after trading expenses. Net of fees performance reflects the deduction of the highest applicable management fee that would be charged based on the maximum fee shown in the table. Gross and net performance returns reflect the reinvestment of dividends and are net of all non-reclaimable withholding taxes on dividends, interest income, and capital gains. GIPS® Composite Reports, including composite descriptions and fee schedules, are available upon request.
*Annualized.
1Includes T. Rowe Price’s U.S. equity and global sector equity strategies that had a PM change in the past 15 years and where the successor manager had served at least 2 years in the role. PM changes that occurred prior to the past 15 years are not reflected in the table. Unless otherwise noted, comparisons were relative to the composite’s primary benchmark.
2Value added is defined as the difference between composite net‑of‑fees performance return and listed index/benchmark.
3Manager inception date 2/15/2013.

(Fig. 3) Linked Benchmarks

Chart showing linked benchmarks

IMPORTANT INFORMATION

This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

Canada—Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to Accredited Investors as defined under National Instrument 45-106. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.

© 2021 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks or registered trademarks of T. Rowe Price Group, Inc.

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