Strategy. Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in companies with market capitalizations, at the time of investment, that do not exceed the maximum market capitalization of any security in the Russell 2000 Index ($15.1 million to $14.3 billion as of February 28, 2025). (The fund will provide written notice to shareholders at least 60 days prior to a change in its 80% investment policy.) The fund invests in small companies whose common stocks are believed to be undervalued. The market capitalization of the companies in the funds portfolio and the Russell 2000 Index changes over time, and the fund will not sell a stock just because the … Show more… Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in companies with market capitalizations, at the time of investment, that do not exceed the maximum market capitalization of any security in the Russell 2000 Index ($15.1 million to $14.3 billion as of February 28, 2025). (The fund will provide written notice to shareholders at least 60 days prior to a change in its 80% investment policy.) The fund invests in small companies whose common stocks are believed to be undervalued. The market capitalization of the companies in the funds portfolio and the Russell 2000 Index changes over time, and the fund will not sell a stock just because the company has grown to a market capitalization outside the range. The fund may, on occasion, purchase companies with a market capitalization above the range. Reflecting a value approach to investing, the fund will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets, earnings, cash flow, or business franchises. The subadvisors in house research team seeks to identify companies that appear to be undervalued by various measures, and may be temporarily out of favor, but have good prospects for capital appreciation. In selecting investments, they generally look for some of the following factors: ? Low price/earnings, price/book value, or price/cash flow ratios relative to the Russell 2000 Index, a companys peers, or companys historical norm; ? Low stock price relative to a companys underlying asset values; ? Above-average dividend yield relative to a companys peers or its own historic norm; ? A plan to improve the business through restructuring; and/or ? A sound balance sheet and other positive financial characteristics. ? Price/earnings ratio - Dividing a stocks price by its earnings per share generates a price/earnings or P/E ratio. A stock with a P/E ratio that is significantly below that of its peers, the market as a whole, or its own historical norm may represent an attractive opportunity. ? Price/book value ratio - Dividing a stocks price by its book value per share indicates how a stock is priced relative to the accounting (i.e., book) value of the companys assets. A ratio below the market, that of its competitors, or its own historical norm could indicate a stock that is undervalued. ? Dividend yield - A stocks dividend yield is found by dividing its annual dividend by its share price. A yield significantly above a stocks own historical norm or that of its peers may suggest an investment opportunity. A stock selling at $10 with an annual dividend of $0.50 has a 5% yield. ? Price/cash flow - Dividing a stocks price by the companys cash flow per share, rather than by its earnings or book value, provides a more useful measure of value in some cases. A ratio below that of the market or a companys peers suggests the market may be incorrectly valuing the companys cash flow for reasons that could be temporary. ? Undervalued assets - This analysis compares a companys stock price with its underlying asset values, its projected value in the private (as opposed to public) market, or its expected value if the company or parts of it were sold or liquidated. ? Restructuring opportunities - Many well-established companies experience business challenges that can lead to a temporary decline in their financial performance. These challenges can include a poorly integrated acquisition, difficulties in product manufacturing or distribution, a downturn in a major end market, or an increase in industry capacity that negatively affects pricing. The shares of such companies frequently trade at depressed valuations. These companies can become successful investments if their management is sufficiently skilled and motivated to properly restructure the organization, their financial flexibility is adequate, the underlying value of the business has not been impaired, or their business environment improves or remains healthy. While most assets will be invested in U.S. common stocks, including real estate investment trusts (REITs) that pool money to invest in properties and mortgages, the fund may purchase other securities, including foreign securities (up to 20% of its total net assets), futures, and options. The fund may invest in fixed-income and convertible securities without restrictions on quality or rating, including up to 10% of total assets in below-investment-grade fixed-income securities (junk bonds) and loans. The funds fixed-income investments may include privately negotiated notes or loans, including loan participations and assignments (bank loans). These investments in bank loans will be made only in companies, municipalities or entities that meet the funds investment criteria. Direct investments in bank loans may be illiquid and holding a loan could expose the fund to the risks of being a direct lender. Since the fund invests primarily in equity securities, the risks associated with fixed-income securities will not affect the fund as much as they would a fund that invests more of its assets in fixed-income securities. The fund holds a certain portion of its assets in money market reserves, which can consist of shares of certain T. Rowe Price money market funds as well as U.S. dollar and foreign currency-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less. The fund may sell securities for a variety of reasons, including to realize gains, limit losses or redeploy assets into more promising opportunities. The fund may invest up to 10% of its total assets in hybrid instruments. Hybrid instruments are a type of high-risk derivatives which can combine the characteristics of securities, futures and options. Such securities may bear interest or pay dividends at below (or even relatively nominal) rates. The fund may focus its investments in a particular sector or sectors of the economy. Show less