T. Rowe Price Equity Income Fund commentary for the second quarter ended June 30, 2015.

T. Rowe Price Equity Income Fund – Environment

The broad market, measured by the S&P 500 Index, was virtually flat during the second quarter of 2015 and through the year to date, resulting in its weakest first half since 2010. Stocks sputtered to a close as the Federal Reserve signaled its intention to raise short-term interest rates sometime this year, should conditions warrant such a move. Turmoil in Greece and, more significantly, China added to equities’ lackluster performance. Large-cap growth stocks slightly outperformed large-cap value shares, propelled by strength in the health care sector.

T. Rowe Price Equity Income Fund

T. Rowe Price Equity Income Fund – Performance

The T. Rowe Price Equity Income Fund returned ?0.57% in the quarter compared with 0.28% for the S&P 500 Index and ?0.61% for the Lipper Equity Income Funds Index. For the 12 months ended June 30, 2015, the fund returned ?0.33% versus 7.42% for the S&P 500 Index and 2.60% for the Lipper Equity Income Funds Index. The fund’s average annual total returns were ?0.33%, 14.30%, and 6.69% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2015. The fund’s expense ratio was 0.66% as of its fiscal year ended December 31, 2014.

For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.

Current performance may be lower or higher 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.

T. Rowe Price Equity Income Fund

T. Rowe Price Equity Income Fund – Portfolio Highlights

Consumer discretionary stocks contributed most to portfolio performance, reflecting our overweight allocation to the sector. The portfolio’s materials holdings also did well, although their positive contribution was partly offset by an overweight in the generally lackluster group. Our stock selection in utilities was likewise positive, although the sector overall posted losses in the quarter. Energy detracted most, as the sector continued to weaken in the face of declining oil prices. The portfolio was overweight in the sector, which also trimmed performance. While health care shares performed relatively well, the portfolio was underweight in the sector, which hurt the portfolio’s return.

T. Rowe Price Equity Income Fund

T. Rowe Price Equity Income Fund – Outlook

We expect moderate equity returns in the second half of the year. We anticipate modest economic and earnings growth, but stock valuations are less reasonable than they have been. After more than six years of solid stock market performance, the economic recovery is still sluggish in the U.S. and Europe. China’s economy has slowed considerably, which could have a ripple effect throughout the global economy. Ongoing tensions in Ukraine and the Middle East, combined with a stalemate to date over the fate of Greece, could serve as strong headwinds in the months ahead. U.S. interest rates remain low, providing good support for equity prices, but the prospect of higher rates and monetary tightening could lead to a volatile environment over the next few months.

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