otcfx passx small-cap stock fund small-cap - simple ira

T. ROWE PRICE

December 31, 2018ANNUAL REPORT

OTCFX Small-Cap Stock Fund

PASSX Small-Cap Stock Fund– Advisor Class

OTIIX Small-Cap Stock Fund I Class

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T. ROWE PRICE SmAll-CAP STOCk Fund

CIO market Commentary


HIGHLIGHTS

n Small-cap stocks trailed the broader market for the 12-month period.

n The Small-Cap Stock Fund declined but significantly outperformed the Russell 2000 Index for the period.

n Our information technology and consumer discretionary holdings had a positive impact on relative performance, while positions in financials and health care detracted.

n U.S. small-cap equities dropped sharply in the last months of the period, particularly in December. The Russell 2000 declined by 20% in the fourth quarter, which is the widely accepted definition of a bear market. Growth ceded leadership to value within small-caps during the sell-off, but maintained outperformance for the full year by a sizable margin.

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CIO market Commentary


Dear Shareholder

The year 2018 was not one that investors will remember fondly. The major stock indexes recorded their worst declines in a decade, with most falling over 20% from recent peaks and bringing a technical end to the bull market that began in 2009. In direct contrast to 2017, financial assets performed poorly across asset classes and geographies. The broadest measure of domestic bond returns, the Bloomberg Barclays U.S. Aggregate Bond Index, returned exactly nothing (0.0%) for the year, and nearly all overseas bond and equity markets also performed poorly. “Cash was king,” in Wall Street parlance, which never makes for a happy reign.

Many issues were behind the market weakness, but we can point to four primary factors that weighed on sentiment:

Rising interest rates. Wage pressures appeared to be accelerating early in the year, sending longer-term bond yields to multiyear highs and sparking a sell-off in equities in early February. Wage gains soon moderated, but a continued decline in the unemployment rate—which reached a five-decade low of 3.7% in September—kept investors on the lookout for higher inflation ahead. In October, yields returned to their peaks on the back of good economic data and suggestions from Federal Reserve officials that they might keep hiking interest rates more quickly than expected. This was subsequently followed by a decline in long-term rates as investors sought safety late in the year and questioned the pace of future interest rate hikes.

Trade tensions. On March 1, President Donald Trump took markets by surprise in announcing a new series of metal tariffs. His administration quickly adopted a decidedly protectionist stance, with pro-trade advocates leaving and the announcement of plans for a range of new trade restrictions. Many threats never materialized, and the White House announced a renegotiated trade deal with Canada and Mexico. Trade tensions with China only appeared to deepen as the year progressed, however.

Slowing global growth. A global slowdown became apparent in the second half of 2018. Environmental and financial reforms put the brakes on the Chinese economy, as planned, but trade frictions caused growth to slow below official targets. Other emerging markets suffered from a stronger U.S. dollar and higher U.S. interest rates. In Europe, trade worries also hampered business spending, while unresolved Brexit fears and further threats to the eurozone from Italy and elsewhere also took a toll. Plummeting oil prices late in the year seemed to confirm a general weakening in global economic conditions.


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Peaking fundamentals. The U.S. economy stood apart by accelerating in 2018, but a moderation in 2019 appears all but inevitable as the effects of fiscal stimulus moderate. Of specific concern to investors is the almost certain slowdown in corporate profits in the coming year. Overall profits for the S&P 500 grew by 25% versus the year before in the first three quarters of 2018—a pace sure to slow as the year-over-year impact of the tax cut fades, wage gains pressure margins, and the global economy cools.

The market’s dramatic pullback in the final weeks of 2018—stocks suffered their worst December since the Great Depression—seemed to reflect fears that a recession might even be imminent. I think such concerns are overblown. The Fed has already completed most of its planned rate hikes, promising less of a headwind for the economy and markets. China and Europe are likely to respond to slowing growth with stimulus, and both will benefit from lower oil prices. As I write, some encouraging signs have also emerged on the trade front, although whether the U.S. and China can resolve their differences remains perhaps the largest uncertainty facing markets.

In terms of stock performance, the painful end to 2018 served to improve valuations, making gains in the coming year less of a hurdle. I would also note that a further stock market “bust” in 2019 seems unlikely given that we never experienced the concentrated “boom” that has preceded past bad bear markets. In the final stages of the dot-com boom of the late 1990s, for example, investors flooded in to telecom shares, and huge amounts of capital and risk flowed in to housing in the mid-2000s. Currently, I simply do not see those sorts of distortions in the financial system.

Of course, opinions about what 2019 holds vary among our investment profes-sionals at T. Rowe Price, and we sharpen each other’s thinking by constantly sharing opinions and insights. Please rest assured that your fund’s manager is drawing on the insights and perspectives across our global organization as he or she charts the course ahead.

Thank you for your continued confidence in T. Rowe Price.

Sincerely,

Robert SharpsGroup Chief Investment Officer


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management’s discussion of Fund Performance

INVESTMENT OBJECTIVE

The fund seeks to provide long-term capital growth by investing primarily in stocks of small companies.

FUND COMMENTARY

How did the fund perform in the last 12 months?

The Small-Cap Stock Fund returned -3.24% for the 12-month period ended December 31, 2018, outperforming the -11.01% return of the benchmark, the Russell 2000 Index. The Lipper Small-Cap Core Funds Index posted a decline of -11.19%. Small-cap stocks trailed the broader market, as measured by the S&P 500 Index, which returned -4.38% for the year. (Performance for the

fund’s Advisor and I Class shares will vary due to their different fee structures. Past performance cannot guarantee future results.)

What factors influenced the fund’s performance?

Within information technology, stock selection was positive in software, IT services, and the electronic equipment, components, and instruments group. Tableau Software is a software maker focused on business intelligence, which allows

end users to access various data sources and create sophisticated graphics and dashboards. The company predominantly uses a perpetual license software model but is moving toward a higher recurring revenue under new management. Okta provides identity management software-as-a-service. Its solutions help companies manage how employees, customers, and partners connect to applications, which is critical for security, and most of its sales are recurring. Five9 is a provider of cloud software for contact centers, with a suite of customer service, sales, and marketing functions. The company’s growth remains strong, including improved retention numbers and growth potential in niche markets. (Please refer to the portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

Total ReturnPeriods Ended 12/31/18 6 months 12 months

Small-Cap Stock Fund -10.94% -3.24%

Small-Cap Stock Fund– Advisor Class -11.06 -3.49

Small-Cap Stock Fund– I Class -10.88 -3.10

Russell 2000 Index -17.35 -11.01

lipper Small-Cap Core Funds Index -15.63 -11.19

S&P 500 Index -6.85 -4.38

PERFORMANCE COMPARISON


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In consumer discretionary, stock selection was strong in specialty retail, followed by the hotels, restaurants, and leisure industry. Wingstop is a fast-casual restaurant chain selling chicken wings and side items. Its highly franchised unit footprint provides for low capital intensity, and sales growth has been accelerating due to the introduction of national advertising. Chegg is a leading provider of textbook answers and tutoring for U.S. college students. It is an early-stage growth company with an intriguing value proposition and a large addressable market. The company has been reporting significant subscriber growth, and the shares have traded higher.

Conversely, within financials, stock selection detracted in banks, followed by consumer finance. Western Alliance Bancorp is one of the few remaining large community banks operating in Nevada, Arizona, and California. Shares were hampered by a challenging industry environment and a significant write-off at a similarly sized bank. Encore is an international debt consolidator of bad credit card receivables, with the top position in the U.S. market and leading positions in several others. Shares pulled back near the end of the period on sector weakness.

Negative stock selection in biotechnology drove relative results in health care. SAGE Therapeutics has a compound in late-stage development for major depressive disorder (MDD) and severe forms of post-partum depression. We have a positive long-term view of Sage’s potential for MDD, but approval appears to be years out. Prothena’s shares retreated on the discontinuation of one product and news of a trial delay for another. Shares of Insmed, which is developing a treatment for a lung disorder, traded down with the biotech group.

How is the fund positioned?

The consumer discretionary sector has an eclectic assortment of businesses, including retailers, homebuilders, hotels, and restaurants. We focus on companies with solid management teams, market share potential, and strong balance sheets. Our main allocations are to specialty retail and the hotels, restaurants, and leisure group. We are overweight in consumer staples, where we focus on fundamentals and tend to be agnostic to the economic cycle. We bought shares of Aaron’s, a specialty retailer of rent-to-own furniture, consumer electronics, household appliances, and related products. With a focus on lease ownership and on products that are difficult to ship, Aaron’s business model provides it with a level of protection against Amazon.com and other


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online retailers. We initiated Sanderson Farms, a low-cost, vertically integrated chicken producer with the third-largest position in the U.S. market. The company has been growing market share over time and managing its balance sheet well in a cyclical market. Sonic operates and franchises a chain of drive-in restaurants. Shares were boosted on news that the firm would be acquired by Inspire Brands at a premium, and we eliminated our position. GrubHub is an online and mobile platform for restaurant pickup and delivery orders.

It continues to command a dominant position in a large addressable market, where service in secondary and tertiary markets remains low. GrubHub recently announced a strategically significant deal with Yum! Brands, operator of Kentucky Fried Chicken, Taco Bell, and Pizza Hut. We trimmed our position on strength. We eliminated Pinnacle Foods, which was acquired by Conagra Brands.

Industrials and business services is our largest sector weighting. Generally, we look for companies with durable businesses, strong management teams, efficient production, and a focus on shareholder value. During the period, we purchased Cubic, a provider of various

defense products and systems to the U.S. government. Cubic also produces and maintains public transportation systems. We believe the company is positioned to benefit from long-term improvements in profitability and a focus on transportation. We added to Brinks Company, the global leader in cash management solutions with top positions in several of its biggest high-barrier markets. The company is currently undergoing restructuring to improve operating margins, led by a new management team with a history of good execution. We initiated Rentokil, the world’s leading pest control and hygiene company. The business model offers significant scale advantages, and the company is using innovative technology and growing faster than its peers in key markets.

Percent of net Assets 6/30/18 12/31/18

Industrials and Business Services 17.8% 17.2%

Financials 16.7 17.1

Health Care 15.4 14.9

Information Technology 14.4 14.2

Consumer discretionary 12.0 12.0

Real Estate 5.6 6.0

utilities 4.4 5.2

Consumer Staples 4.4 5.0

Energy 2.4 2.1

materials 2.6 2.0

Communication Services 1.9 1.9

Other and Reserves 2.4 2.4

Total 100.0% 100.0%

Historical weightings reflect current industry/sector classifications.

SECTOR DIVERSIFICATION


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The views expressed reflect the opinions of T. Rowe Price as of the date of this report and are subject to change based on changes in market, economic, or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

What is portfolio management’s outlook?

U.S. small-cap equities dropped sharply in the last months of the period, particularly in December. The Russell 2000 declined by 20% in the fourth quarter, which is the widely accepted definition of a bear market. Growth ceded leadership to value within small-caps during the sell-off, giving up some of the outperformance gained earlier in the year.

Nonetheless, growth maintained outperformance for the full year by a sizable margin, although not as stark as the style disparity among large-caps. Disruptor companies, which tend to fall within growth indexes, have impacted this disparity, and we would note many of these held up better during the recent market turbulence. While we remain cautiously optimistic, we acknowledge that investors were not erroneous to question how much further this positive equity cycle can go. Some declines were overdone, and we took advantage of weakness. However, we would not argue that overall valuations are attractive, even in light of recent price declines. We remain diligent in seeking out opportunities for relative value and believe our fundamental and patient approach will provide strong long-term results regardless of the market environment.


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RISKS OF INVESTING IN THE SMALL-CAP STOCK FUND

Stocks generally fluctuate in value more than bonds and may decline significantly over short time periods. There is a chance that stock prices over-all will decline because stock markets tend to move in cycles, with periods of rising and falling prices. The value of a stock in which the fund invests may decline due to general weakness in the U.S. stock market, such as when the U.S. financial markets decline, or because of factors that affect a particular company or industry.

Because the fund may hold stocks with either growth or value characteristics, it could underperform other stock funds that take a strictly growth or value approach to investing when one style is currently in favor. Growth stocks tend to be more volatile than the overall stock market and can have sharp price declines as a result of earnings disappointments. Value stocks carry the risk that the market will not recognize their intrinsic value or that they are actually appropriately priced at a low level.

Because the fund invests primarily in securities issued by small-cap companies, it is likely to be more volatile than a fund that focuses on securities issued by larger companies. Small companies often have less experienced management, narrower product lines, more limited financial resources, and less publicly available information than larger companies. In addition, smaller companies are typically more sensitive to changes in overall economic conditions, and their securities may be difficult to trade.

BENCHMARK INFORMATION

Note: Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof.


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TWENTY-FIVE LARGEST HOLDINGS

Percent of net Assets 12/31/18

Teledyne Technologies 1.3%OnE Gas 1.2 molina Healthcare 1.2 Brinks Company 1.2 monro 1.1

Tableau Software 1.1 Cable One 1.1 Cboe Global markets 1.1 Burlington Stores 1.0 SS&C Technologies Holdings 1.0

PS Business Parks 1.0 Selective Insurance 1.0 Southwest Gas Holdings 0.9 EastGroup Properties 0.9 Post Holdings 0.8

Waste Connections 0.8 Euronet Worldwide 0.8 Chart Industries 0.8 SAGE Therapeutics 0.8 Pnm Resources 0.8

Boston Beer 0.8 novanta 0.8 TreeHouse Foods 0.7 John Bean Technologies 0.7 SiteOne landscape Supply 0.7

Total 23.6%

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.

PORTFOLIO HIGHLIGHTS


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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 include a broad-based market index and may also include 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.

GROWTH OF $10,000

As of 12/31/18

$40,76030,98331,731

Small-Cap Stock Fund Russell 2000 IndexLipper Small-Cap Core Funds Index

12/1812/1712/1612/1512/1412/1312/1212/1112/1012/0912/08

10,000

18,000

26,000

34,000

42,000

$50,000

SMALL-CAP STOCK FUND

Note: Performance for the Advisor and I Class shares will vary due to their differing fee structures. See returns table on the next page.


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Since InceptionPeriods Ended 12/31/18 1 Year 5 Years 10 Years Inception date

Small-Cap Stock Fund -3.24% 6.48% 15.09% – –

Small-Cap Stock Fund– Advisor Class -3.49 6.19 14.79 – –

Small-Cap Stock Fund– I Class -3.10 – – 8.76% 8/28/15

The fund’s performance information represents only past performance and is not necessarily an indication of future results. Current performance may be lower or higher than the performance data cited. 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 Advisor Class and I Class shares, 1-800-638-8790.

This table shows how the fund would have performed each year if its actual (or cumulative) returns 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.

AVERAGE ANNUAL COMPOUND TOTAL RETURN


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Small-Cap Stock Fund 0.89%

Small-Cap Stock Fund–Advisor Class 1.15

Small-Cap Stock Fund–I Class 0.75

The expense ratio shown is as of the fund’s fiscal year ended 12/31/17. 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.

EXPENSE RATIO

FUND EXPENSE EXAMPLE

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 three share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee, and I Class shares are available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class is presented separately in the table.

Actual ExpensesThe 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 PurposesThe 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.


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Beginning Ending Expenses Paid Account Value Account Value during Period* 7/1/18 12/31/18 7/1/18 to 12/31/18

Investor ClassActual $1,000.00 $890.60 $4.19

Hypothetical (assumes 5% return before expenses) 1,000.00 1,020.77 4.48

Advisor ClassActual 1,000.00 889.40 5.48


I ClassActual 1,000.00 891.20 3.58


*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 (184), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.88%, the Advisor Class was 1.15%, and the I Class was 0.75%.

SMALL-CAP STOCK FUND

FUND EXPENSE EXAMPLE (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 Personal Services or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $250,000). 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.


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FINANCIAL HIGHLIGHTS For a share outstanding throughout each period


Investor Class

Year Ended

12/31/18 12/31/17 12/31/16 12/31/15 12/31/14

NET ASSET VALUE

Beginning of period $ 47.70 $ 44.93 $ 38.61 $ 44.32 $ 44.56

Investment activities

Net investment income(1) (2) 0.01 0.02 0.06 0.04 0.06

Net realized and unrealized gain/loss (1.30) 6.77 7.11 (1.53) 2.88

Total from investment activities (1.29) 6.79 7.17 (1.49) 2.94

Distributions

Net investment income – (0.02) (0.06) (0.05) (0.05)

Net realized gain (5.13) (4.00) (0.79) (4.17) (3.13)

Total distributions (5.13) (4.02) (0.85) (4.22) (3.18)

NET ASSET VALUE

End of period $ 41.28 $ 47.70 $ 44.93 $ 38.61 $ 44.32


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The accompanying notes are an integral part of these financial statements.


Year Ended

12/31/18 12/31/17 12/31/16 12/31/15 12/31/14

Ratios/Supplemental Data

Total return(2) (3) (3.24)% 15.27% 18.57% (3.18)% 6.90%

Ratios to average net assets:(2)

Gross expenses before waivers/payments by Price Associates 0.89% 0.89% 0.90% 0.90% 0.91%

Net expenses after waivers/payments by Price Associates 0.89% 0.89% 0.90% 0.90% 0.91%

Net investment income 0.03% 0.05% 0.14% 0.09% 0.14%

Portfolio turnover rate 33.5% 36.3% 38.1% 20.4% 18.2%

Net assets, end of period (in millions) $ 6,520 $ 8,319 $ 8,498 $ 7,995 $ 9,351

(1) Per share amounts calculated using average shares outstanding method. (2) See Note 6 for details of expense-related arrangements with Price Associates. (3) 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.


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Advisor Class

Year Ended

12/31/18 12/31/17 12/31/16 12/31/15 12/31/14

NET ASSET VALUE

Beginning of period $ 47.25 $ 44.52 $ 38.26 $ 43.93 $ 44.17


Net investment loss(1) (2) (0.12) (0.11) (0.05) (0.10) (0.07)

Net realized and unrealized gain/loss (1.28) 6.70 7.04 (1.50) 2.86

Total from investment activities (1.40) 6.59 6.99 (1.60) 2.79

Distributions

Net realized gain (4.97) (3.86) (0.73) (4.07) (3.03)

NET ASSET VALUE

End of period $ 40.88 $ 47.25 $ 44.52 $ 38.26 $ 43.93


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Year Ended

12/31/18 12/31/17 12/31/16 12/31/15 12/31/14


Total return(2) (3) (3.49)% 14.96% 18.27% (3.47)% 6.60%


Gross expenses before waivers/payments by Price Associates 1.16% 1.15% 1.15% 1.21% 1.19%

Net expenses after waivers/payments by Price Associates 1.16% 1.15% 1.15% 1.21% 1.19%

Net investment loss (0.25)% (0.22)% (0.11)% (0.22)% (0.16)%

Portfolio turnover rate 33.5% 36.3% 38.1% 20.4% 18.2%

Net assets, end of period (in thousands) $ 131,528 $ 205,586 $ 263,002 $ 298,246 $ 428,268

(1) Per share amounts calculated using average shares outstanding method. (2) See Note 6 for details of expense-related arrangements with Price Associates. (3) 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.


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I Class

Year Ended

12/31/18 12/31/17 12/31/16

8/28/15(1) Through 12/31/15

NET ASSET VALUE

Beginning of period $ 47.71 $ 44.94 $ 38.61 $ 43.07


Net investment income(2) (3) 0.10 0.11 0.13 0.09

Net realized and unrealized gain/loss (1.32) 6.75 7.11 (0.31)

Total from investment activities (1.22) 6.86 7.24 (0.22)

Distributions

Net investment income – (0.09) (0.12) (0.07)

Net realized gain (5.21) (4.00) (0.79) (4.17)

Total distributions (5.21) (4.09) (0.91) (4.24)

NET ASSET VALUE

End of period $ 41.28 $ 47.71 $ 44.94 $ 38.61


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Year Ended

12/31/18 12/31/17 12/31/16

8/28/15(1) Through 12/31/15


Total return(3) (4) (3.10)% 15.43% 18.75% (0.33)%


Gross expenses before waivers/payments by Price Associates 0.75% 0.75% 0.75% 0.78%(5)

Net expenses after waivers/payments by Price Associates 0.75% 0.75% 0.75% 0.78%(5)

Net investment income 0.20% 0.24% 0.32% 0.59%(5)

Portfolio turnover rate 33.5% 36.3% 38.1% 20.4%

Net assets, end of period (in millions) $ 1,811 $ 1,078 $ 671 $ 48

(1) Inception date (2) Per share amounts calculated using average shares outstanding method. (3) See Note 6 for details of expense-related arrangements with Price Associates. (4) 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.

(5) Annualized



december 31, 2018

PORTFOLIO OF INVESTMENTS‡

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(Cost and value in $000s)

Shares/Par $ Value

COMMON STOCKS 96.8%

COMMUNICATION SERVICES 1.9%

Entertainment 0.5%

Zynga, Class A (1) 10,836,700 42,588

42,588

Interactive Media & Services 0.3%

Cargurus (1) 765,727 25,828

Eventbrite, Class A (1) 141,154 3,926

29,754

Media 1.1%

Cable One 111,360 91,326

91,326

Total Communication Services 163,668

CONSUMER DISCRETIONARY 11.4%

Auto Components 0.7%

Gentherm (1) 885,841 35,416

Visteon (1) 350,099 21,104

56,520

Diversified Consumer Services 1.5%

American Public Education (1) 616,343 17,541

Bright Horizons Family Solutions (1) 345,000 38,450

Chegg (1) 1,614,324 45,879

J2 Acquisition (1)(2) 2,559,436 23,524

J2 Acquisition, Warrants, 10/10/20 (1) 2,573,386 1,094

126,488

Hotels, Restaurants & Leisure 3.0%

Boyd Gaming 179,500 3,730

Chuy's Holdings (1)(3) 846,711 15,021

Denny's (1)(3) 3,479,000 56,395

Dunkin' Brands Group 922,176 59,130

Fiesta Restaurant Group (1) 1,185,807 18,392




20

Shares/Par $ Value

Marriott Vacations Worldwide 102,556 7,231

Papa John's International 493,400 19,642

Red Robin Gourmet Burgers (1)(3) 770,321 20,583

Wingstop 876,000 56,230

256,354

Household Durables 1.0%

Skyline Champion 1,150,141 16,895

Tempur Sealy International (1) 812,300 33,629

TRI Pointe Group (1) 3,353,946 36,659

87,183

Internet & Direct Marketing Retail 0.3%

A Place for Rover, Acquisition Date: 5/25/18, Cost $330 (1)(4)(5) 48,677 330

GrubHub (1) 199,058 15,290

Quotient Technology (1) 1,182,917 12,633

28,253

Multiline Retail 0.8%

Ollie's Bargain Outlet Holdings (1) 867,728 57,713

Tuesday Morning (1)(3) 3,969,100 6,747

64,460

Specialty Retail 4.0%

Aaron's 1,295,900 54,493

Burlington Stores (1) 530,600 86,313

Five Below (1) 279,200 28,568

Michaels (1) 2,338,500 31,663

Monro 1,367,700 94,029

National Vision Holdings (1) 708,910 19,970

RH (1) 186,990 22,405

337,441

Textiles, Apparel & Luxury Goods 0.1%

Allbirds, Acquisition, Date: 10/10/18 - 12/21/18, Cost $6,034 (1)(4)(5) 110,039 6,034

6,034

Total Consumer Discretionary 962,733




21

Shares/Par $ Value

CONSUMER STAPLES 4.8%

Beverages 0.7%

Boston Beer, Class A (1) 269,146 64,821

64,821

Food & Staples Retailing 0.5%

Performance Food Group (1) 1,372,738 44,298

44,298

Food Products 3.4%

AD Makepeace (1) 164 976

ADM Holdings (1)(4) 164 428

Cal-Maine Foods 1,394,367 58,982

Collier Creek Holdings (1) 1,351,940 13,573

Nomad Foods (1) 99,900 1,670

Post Holdings (1) 786,100 70,065

Sanderson Farms 407,400 40,451

Simply Good Foods (1) 2,173,625 41,081

TreeHouse Foods (1) 1,235,175 62,636

289,862

Household Products 0.1%

Central Garden & Pet, Class A (1) 147,100 4,597

4,597

Personal Products 0.1%

Edgewell Personal Care (1) 149,900 5,599

5,599

Total Consumer Staples 409,177

ENERGY 2.1%

Energy Equipment & Services 0.2%

Computer Modelling Group (CAD) 1,546,900 6,900

Dril-Quip (1) 413,800 12,427

19,327

Oil, Gas & Consumable Fuels 1.9%

Centennial Resource Development, Class A (1) 2,140,444 23,588

Diamondback Energy 373,750 34,647




22

Shares/Par $ Value

Jagged Peak Energy (1) 1,823,000 16,626

Kosmos Energy (1) 688,511 2,802

Magnolia Oil & Gas (1) 901,900 10,110

Matador Resources (1) 1,039,340 16,141

Seven Generations Energy, Class A (CAD)(1) 2,685,900 21,917

Venture Global LNG, Series B, Acquisition Date: 3/8/18, Cost $1,247 (1)(4)(5) 413 2,147

Venture Global LNG, Series C, Acquisition Date: 5/25/17 - 3/8/18 Cost $20,149 (1)(4)(5) 5,556 28,891

156,869

Total Energy 176,196

FINANCIALS 17.1%

Banks 9.4%

Atlantic Capital Bancshares (1) 1,089,488 17,835

BankUnited 1,662,900 49,787

Blue Hills Bancorp 1,159,117 24,736

Bridge Bancorp 978,050 24,931

CenterState Bank 205,200 4,317

Columbia Banking System 635,561 23,065

Crossfirst Bankshares, Acquisition Date: 10/23/18, Cost: $7,105 (1)(4)(5) 498,616 7,105

Equity Bancshares, Class A (1) 216,996 7,649

FB Financial 1,104,837 38,691

First Bancshares 419,400 12,687

Grasshopper Bancorp, Warrants, 10/12/28, Acquisition Date: 10/12/18, Cost: $0 (1)(4)(5) 98,245 —

Guaranty Bancorp (1) 913,100 18,947

Heritage Commerce 2,017,535 22,879

Heritage Financial 956,100 28,415

Home BancShares 3,093,100 50,541

Hope Bancorp 1,361,300 16,145

Independent Bank Group 427,977 19,589

Investors Bancorp 2,545,900 26,477

Live Oak Bancshares 1,087,666 16,108

National Commerce (1) 392,400 14,126

Origin Bancorp 527,300 17,970




23

Shares/Par $ Value

Pacific Premier Bancorp (1) 848,100 21,644

Pinnacle Financial Partners 1,010,695 46,593

Prosperity Bancshares 676,300 42,134

Seacoast Banking (1) 1,965,644 51,146

Simmons First National, Class A 750,700 18,114

South State 537,144 32,202

Texas Capital Bancshares (1) 348,840 17,822

Towne Bank / Portsmouth VA 1,119,584 26,814

Univest Financial 825,521 17,807

Webster Financial 624,037 30,759

Western Alliance Bancorp (1) 1,267,700 50,061

797,096

Capital Markets 1.2%

Barings BDC 1,238,422 11,158

Cboe Global Markets 932,377 91,215

102,373

Consumer Finance 1.2%

Encore Capital Group (1) 1,349,034 31,702

PRA Group (1) 1,686,300 41,095

SLM (1) 2,977,228 24,741

97,538

Insurance 3.3%

Assurant 496,900 44,443

Axis Capital Holdings 744,700 38,456

Goosehead Insurance, Class A (1) 409,785 10,773

Hanover Insurance Group 521,100 60,849

Safety Insurance Group 308,950 25,275

Selective Insurance Group 1,330,200 81,063

State Auto Financial 573,242 19,513

280,372

Thrifts & Mortgage Finance 2.0%

Beneficial Bancorp 1,966,644 28,103

Capitol Federal Financial 2,754,835 35,179

Essent Group (1) 584,900 19,992

Meridian Bancorp 2,167,293 31,036




24

Shares/Par $ Value

PennyMac Financial Services 823,200 17,501

Radian Group 1,612,400 26,379

Sterling Bancorp 1,276,230 8,870

167,060

Total Financials 1,444,439

HEALTH CARE 14.9%

Biotechnology 5.6%

Abeona Therapeutics (1) 322,700 2,304

Acceleron Pharma (1) 585,600 25,503

Agios Pharmaceuticals (1) 264,986 12,218

Aimmune Therapeutics (1) 603,912 14,446

Alder Biopharmaceuticals (1) 1,272,600 13,044

Alkermes (1) 351,484 10,372

Allogene Therapeutics (1) 161,671 4,354

AnaptysBio (1) 21,187 1,351

Argenx, ADR (1) 223,083 21,432

Ascendis Pharma, ADR (1) 478,287 29,965

BeiGene, ADR (1) 28,264 3,964

Blueprint Medicines (1) 406,449 21,912

Cara Therapeutics (1) 266,417 3,463

Corvus Pharmaceuticals (1) 347,156 1,274

Crinetics Pharmaceuticals (1) 233,876 7,014

CytomX Therapeutics (1) 588,080 8,880

Enanta Pharmaceuticals (1) 49,600 3,513

Exelixis (1) 221,200 4,351

Five Prime Therapeutics (1) 150,106 1,396

Global Blood Therapeutics (1) 601,815 24,704

GlycoMimetics (1) 407,651 3,860

Guardant Health (1) 126,636 4,760

ImmunoGen (1) 262,047 1,258

Immunomedics (1) 962,800 13,739

Insmed (1) 1,671,539 21,931

Loxo Oncology (1) 136,600 19,134

MacroGenics (1) 219,348 2,786

Madrigal Pharmaceuticals (1) 40,701 4,588




25

Shares/Par $ Value

Momenta Pharmaceuticals (1) 866,590 9,567

Orchard Therapeutics, ADR (1) 189,232 2,977

Principia Biopharma (1) 315,085 8,630

PTC Therapeutics (1) 149,800 5,141

Radius Health (1) 1,321,965 21,799

Sage Therapeutics (1) 707,556 67,777

Sarepta Therapeutics (1) 73,600 8,032

Scholar Rock Holding (1) 140,214 3,221

Seattle Genetics (1) 250,921 14,217

Spark Therapeutics (1) 213,100 8,341

Ultragenyx Pharmaceutical (1) 147,980 6,434

Xencor (1) 826,378 29,882

473,534

Health Care Equipment & Supplies 3.5%

AtriCure (1) 522,200 15,979

Avanos Medical (1) 1,223,100 54,783

Cutera (1) 481,500 8,195

ICU Medical (1) 148,235 34,039

JAND, Class A, Acquisition Date: 3/9/18, Cost: $6,622 (1)(4)(5) 421,333 6,446

Nevro (1) 247,187 9,613

NuVasive (1) 568,800 28,190

Quidel (1) 998,900 48,766

STERIS 536,000 57,271

Wright Medical Group (1) 1,347,342 36,675

299,957

Health Care Providers & Services 2.8%

Acadia Healthcare (1) 1,170,795 30,101

Amedisys (1) 149,200 17,473

Centene (1) 134,800 15,542

Cross Country Healthcare (1) 1,295,340 9,495

Hanger (1) 1,050,700 19,911

Molina Healthcare (1) 900,040 104,603

U.S. Physical Therapy 359,308 36,775

233,900




26

Shares/Par $ Value

Health Care Technology 0.5%

HMS Holdings (1) 1,474,227 41,470

41,470

Life Sciences Tools & Services 0.5%

Bruker 1,326,468 39,489

39,489

Pharmaceuticals 2.0%

Amneal Pharmaceuticals (1) 1,000,400 13,535

Catalent (1) 1,551,138 48,365

MyoKardia (1) 300,127 14,664

Pacira Pharmaceuticals (1) 398,800 17,156

Prestige Consumer Healthcare (1) 774,700 23,923

Reata Pharmaceuticals, Class A (1) 68,800 3,860

TherapeuticsMD (1) 7,345,324 27,986

WaVe Life Sciences (1) 446,557 18,773

168,262

Total Health Care 1,256,612

INDUSTRIALS & BUSINESS SERVICES 17.2%

Aerospace & Defense 3.6%

Aerojet Rocketdyne Holdings (1) 1,371,623 48,322

BWX Technologies 1,497,153 57,236

Cubic 1,022,600 54,955

Moog, Class A 355,800 27,567

Teledyne Technologies (1) 550,300 113,951

302,031

Airlines 0.6%

Alclear Holdings, Class B, Acquisition Date: 3/6/18 - 12/13/18, Cost $16,753 (1)(4)(5)(6) 111,905 25,179

Hawaiian Holdings 1,022,000 26,991

52,170

Building Products 1.6%

CSW Industrials (1) 462,255 22,350

Gibraltar Industries (1) 1,260,165 44,849

Lennox International 20,900 4,574




27

Shares/Par $ Value

PGT Innovations (1) 1,574,375 24,954

Quanex Building Products 995,910 13,535

Simpson Manufacturing 513,900 27,817

138,079

Commercial Services & Supplies 3.2%

Brink's 1,520,301 98,287

Healthcare Services Group 601,900 24,184

Heritage-Crystal Clean (1) 803,000 18,477

Rentokil Initial (GBP) 9,996,987 43,007

Team (1) 1,391,500 20,386

Waste Connections 938,650 69,695

274,036

Construction & Engineering 0.5%

Valmont Industries 352,608 39,122

39,122

Electrical Equipment 0.8%

AZZ 975,054 39,353

Bloom Energy, Class A (1) 492,483 4,915

Thermon Group Holdings (1) 1,245,464 25,258

69,526

Machinery 4.7%

Barnes Group 481,200 25,802

Chart Industries (1) 1,051,600 68,386

ESCO Technologies 913,161 60,223

Gardner Denver Holdings (1) 451,000 9,223

Graco 854,700 35,769

John Bean Technologies 857,800 61,599

Luxfer Holdings 1,425,169 25,126

Mueller Water Products, Class A 4,033,100 36,701

REV Group 964,363 7,242

Sun Hydraulics 455,805 15,128

Toro 869,600 48,593

393,792




28

Shares/Par $ Value

Marine 0.5%

Matson 1,298,160 41,567

41,567

Professional Services 0.2%

Huron Consulting Group (1) 318,700 16,353

16,353

Road & Rail 0.7%

Genesee & Wyoming, Class A (1) 167,700 12,413

Knight-Swift Transportation Holdings 229,878 5,763

Landstar System 253,700 24,271

Schneider National, Class B 999,015 18,652

61,099

Trading Companies & Distributors 0.8%

SiteOne Landscape Supply (1) 1,106,324 61,146

Watsco 55,030 7,657

68,803

Total Industrials & Business Services 1,456,578

INFORMATION TECHNOLOGY 14.2%

Electronic Equipment, Instruments & Components 1.7%

CTS 923,400 23,907

Littelfuse 80,600 13,821

National Instruments 973,824 44,192

Novanta (1) 1,009,578 63,604

145,524

IT Services 3.0%

Booz Allen Hamilton Holding 1,298,600 58,528

Euronet Worldwide (1) 677,600 69,373

Evo Payments, Class A (1) 259,536 6,403

GTT Communications (1) 938,200 22,198

Okta (1) 124,500 7,943

ServiceTitan, Acquisition Date: 11/9/18, Cost $484 (1)(4)(5) 18,389 484

StoneCo, Class A, Acquisition Date: 7/10/18, Cost $12,060 (1)(5) 1,607,256 28,156

StoneCo, Class A (1) 674,434 12,436




29

Shares/Par $ Value

Tucows, Class A (1) 234,664 14,094

Wix.com (1) 323,371 29,213

248,828

Semiconductors & Semiconductor Equipment 2.2%

Entegris 1,576,800 43,985

Inphi (1) 1,047,065 33,663

Lattice Semiconductor (1)(3) 7,283,060 50,399

MACOM Technology Solutions Holdings (1) 1,085,300 15,747

MKS Instruments 246,600 15,933

Monolithic Power Systems 123,633 14,372

PDF Solutions (1) 1,340,911 11,304

185,403

Software 6.9%

2U (1) 592,277 29,448

Avalara (1) 90,846 2,830

Ceridian HCM Holding (1) 473,092 16,317

Checkr, Acquisition Date: 6/29/18, Cost $827 (1)(4)(5) 67,290 827

Coupa Software (1) 831,867 52,291

CyberArk Software (1) 374,300 27,751

Descartes Systems Group (1) 2,182,200 57,741

Ellie Mae (1) 482,744 30,331

Five9 (1) 1,391,766 60,848

Guidewire Software (1) 54,400 4,364

Pagerduty, Acquisition Date: 9/28/18, Cost $346 (1)(4)(5) 64,029 1,038

Paycom Software (1) 149,800 18,343

Proofpoint (1) 496,800 41,637

Q2 Holdings (1) 174,621 8,652

SS&C Technologies Holdings 1,845,769 83,263

SVMK (1) 172,341 2,115

SVMK, Acquisition, Date: 11/25/14, Cost $7,584 (1)(5) 461,018 5,374

Tableau Software, Class A (1) 780,345 93,641

Toast, Acquisition Date: 9/14/18, Cost $18 (1)(4)(5) 1,059 29

Zendesk (1) 858,900 50,134

586,974




30

Shares/Par $ Value

Technology Hardware, Storage & Peripherals 0.4%

Cray (1) 1,073,300 23,173

Pure Storage, Class A (1) 730,623 11,748

34,921

Total Information Technology 1,201,650

MATERIALS 2.0%

Chemicals 0.9%

GCP Applied Technologies (1) 1,068,400 26,229

Minerals Technologies 302,200 15,515

PolyOne 703,600 20,123

Quaker Chemical 80,600 14,323

76,190

Construction Materials 0.1%

Martin Marietta Materials 28,300 4,864

4,864

Metals & Mining 1.0%

Constellium, Class A (1) 1,312,700 9,176

Franco-Nevada (CAD) 424,300 29,753

Haynes International (3) 769,672 20,319

Northern Star Resources (AUD) 2,824,015 18,434

Osisko Gold Royalties (CAD) 1,643,300 14,408

92,090

Total Materials 173,144

REAL ESTATE 6.0%

Equity Real Estate Investment Trusts 4.9%

Acadia Realty Trust, REIT 974,000 23,142

Alexander & Baldwin, REIT (1) 1,401,708 25,763

American Campus Communities, REIT 1,365,900 56,535

CubeSmart, REIT 525,900 15,088

EastGroup Properties, REIT 867,100 79,539

Equity Commonwealth, REIT (1) 1,260,800 37,837

First Industrial Realty Trust, REIT 607,444 17,531

JBG SMITH Properties, REIT 399,800 13,917




31

Shares/Par $ Value

Paramount Group, REIT 3,247,626 40,790

PS Business Parks, REIT 632,874 82,906

Regency Centers, REIT 397,220 23,309

416,357

Real Estate Management & Development 1.1%

Colliers International Group 297,711 16,386

FirstService 883,722 60,517

Redfin (1) 1,032,259 14,865

91,768

Total Real Estate 508,125

UTILITIES 5.1%

Electric Utilities 0.8%

PNM Resources 1,608,400 66,089

66,089

Gas Utilities 2.7%

Chesapeake Utilities 519,257 42,216

ONE Gas 1,316,100 104,761

South Jersey Industries 220,538 6,131

Southwest Gas Holdings 1,047,932 80,167

233,275

Independent Power & Renewable Electricity Producers 0.3%

Nextera Energy Partners 585,400 25,202

25,202

Water Utilities 1.3%

California Water Service Group 1,012,300 48,246

Middlesex Water 362,279 19,328

SJW Group 697,900 38,817

106,391

Total Utilities 430,957

Total Miscellaneous Common Stocks 0.1% (7) 4,470

Total Common Stocks (Cost $6,941,625) 8,187,749




32

Shares/Par $ Value

CONVERTIBLE PREFERRED STOCKS 1.8%

CONSUMER DISCRETIONARY 0.6%

Internet & Direct Marketing Retail 0.4%

A Place for Rover, Series G, Acquisition Date: 5/11/18, Cost $5,243 (1)(4)(5) 696,458 5,243

Roofoods, Series F, Acquisition Date: 9/12/17, Cost $20,268 (1)(4)(5) 57,324 29,231

34,474

Specialty Retail 0.1%

Vroom, Series F, Acquisition Date: 6/30/18, Cost: $9,652 (1)(4)(5) 565,866 10,158

10,158

Textiles, Apparel & Luxury Goods 0.1%

Allbirds, Series A, Acquisition Date: 10/10/18, Cost $1,974 (1)(4)(5) 36,000 1,974

Allbirds, Series B, Acquisition Date: 10/10/18, Cost $347 (1)(4)(5) 6,325 347

Allbirds, Series C, Acquisition Date: 10/9/18, Cost: $3,314 (1)(4)(5) 60,445 3,314

Allbirds, Series Seed, Acquisition Date: 10/10/18, Cost: $1,061 (1)(4)(5) 19,342 1,061

6,696

Total Consumer Discretionary 51,328

CONSUMER STAPLES 0.2%

Food Products 0.2%

Farmers Business Network, Series D, Acquisition Date: 11/3/17, Cost $14,331 (1)(4)(5) 776,181 16,331

Total Consumer Staples 16,331

HEALTH CARE 0.1%

Health Care Equipment & Supplies 0.1%

JAND, Series E, Acquisition Date: 3/9/18, Cost $8,169 (1)(4)(5) 519,754 7,952

Total Health Care 7,952




33

Shares/Par $ Value

INDUSTRIALS & BUSINESS SERVICES 0.1%

Road & Rail 0.1%

Convoy, Series C, Acquisition Date: 9/14/18, Cost $8,346 (1)(4)(5) 1,175,394 8,346

Total Industrials & Business Services 8,346

INFORMATION TECHNOLOGY 0.7%

IT Services 0.1%

ServiceTitan, Series A-1, Acquisition Date: 11/9/18, Cost $10 (1)(4)(5) 381 10

ServiceTitan, Series D, Acquisition Date: 11/9/18, Cost $4,907 (1)(4)(5) 186,629 4,907

4,917

Software 0.6%

Checkr, Series C, Acquisition Date: 6/29/18, Cost $3,881 (1)(4)(5) 284,293 3,881

Pagerduty, Series D, Acquisition Date: 8/24/18 - 9/28/18, Cost $8611 (1)(4)(5) 504,477 8,611

Plex Systems Holdings, Series B, Acquisition Date: 6/9/14, Cost $10,984 (1)(4)(5) 4,787,573 10,916

Seismic Software, Series E, Acquisition Date: 12/13/18, Cost $7,110 (1)(4)(5) 225,572 7,110

Toast, Series D, Acquisition Date: 6/27/18, Cost: $11,952 (1)(4)(5) 690,616 18,992

Toast, Series B, Acquisition Date: 9/14/18, Cost $165 (1)(4)(5) 9,531 262

49,772

Total Information Technology 54,689

UTILITIES 0.1%

Gas Utilities 0.1%

South Jersey Industries, 7.25%, 4/15/21 247,595 11,488

Total Utilities 11,488

Total Convertible Preferred Stocks (Cost $132,707) 150,134

CONVERTIBLE BONDS 0.0%

Grasshopper Bancorp, Acquisition Date: 10/12/18, Cost $982, 4/12/19 (1)(4)(5) 982,450 982

Total Convertible Bonds (Cost $982) 982




34

Shares/Par $ Value

SHORT-TERM INVESTMENTS 1.8%

Money Market Funds 1.8%

T. Rowe Price Government Reserve Fund, 2.45% (3)(8) 152,553,984 152,554

U.S. Treasury Obligations 0.0%

U.S. Treasury Bills, 2.49%, 6/13/19 (9) 3,130,000 3,096

Total Short-Term Investments (Cost $155,649) 155,650

Total Investments in Securities

100.4% of Net Assets (Cost $7,230,963) $ 8,494,515

‡ Shares/Par are denominated in U.S. dollars unless otherwise noted. (1) Non-income producing (2)

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 $23,524 and represents 0.3% of net assets.

(3) Affiliated Companies (4) Level 3 in fair value hierarchy. See Note 2. (5)

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 $251,668 and represents 3.0% of net assets.

(6)

Investment in a partnership held indirectly through a limited liability company that is owned by the fund and treated as a corporation for U.S. tax purposes.

(7)

The identity of certain securities has been concealed to protect the fund while it completes a purchase or selling program for the securities.

(8) Seven-day yield (9)

At December 31, 2018, all or a portion of this security is pledged as collateral and/or margin deposit to cover future funding obligations.

ADR American Depositary Receipts AUD Australian Dollar CAD Canadian Dollar GBP British Pound PTC Pass-Through Certificate REIT

A domestic Real Estate Investment Trust whose distributions pass-through with original tax character to the shareholder



35

($000s)

FUTURES CONTRACTS

Expiration Date

Notional Amount

Value and Unrealized Gain (Loss)

Long, 788 Russell 2000 E-Mini Index contracts 3/19 53,151 (3,862)

Net payments (receipts) of variation margin to date 4,181Variation margin receivable (payable) on open futures contracts $ 319



36

($000s)

AFFILIATED COMPANIES

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 that is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the year ended December 31, 2018. Net realized gain (loss), investment income, change in net unrealized gain/loss, and purchase and sales cost reflect all activity for the period then ended.

Affiliate Net Realized Gain

(Loss)

Change in NetUnrealizedGain/Loss

InvestmentIncome

Bridge Bancorp $ 78 $ (9,354) $ 870 Chart Industries 6,905 27,833 — Chuy's Holdings 186 (9,088) — Denny's 2,477 8,943 — Farmers Business Network — 2,000 — Haynes International (3,368) (851) 743 Lattice Semiconductor 131 6,036 — Luxfer Holdings (142) 2,476 380 Novanta 29,734 (5,662) — Red Robin Gourmet Burgers 584 (23,844) — Tuesday Morning (289) (3,695) — Wingstop 18,548 15,668 7,942 T. Rowe Price Government Reserve Fund — — 4,212 Affiliates not held at period end 131,029 (65,974) 1,141 Totals $ 185,873# $ (55,512) $ 15,288+



37


($000s)

AFFILIATED COMPANIES (CONTINUED)

Supplementary Investment Schedule

Affiliate Value

12/31/17Purchase

CostSalesCost

Value12/31/18

Bridge Bancorp $ 35,096 2,112 2,924 $ * Chart Industries 81,091 1,362 41,900 * Chuy's Holdings * 9,617 455 15,021 Denny's 54,244 — 6,792 56,395 Farmers Business Network 14,331 — — * Haynes International 27,669 — 6,499 20,319 Infinity Property & Casualty 50,223 — 14,703 — K2M Group Holdings 53,861 — 50,874 — Lattice Semiconductor * 25,481 732 50,399 Luxfer Holdings * 8,728 4,466 * Novanta 94,682 — 25,417 * Red Robin Gourmet Burgers 41,912 3,101 586 20,583 Sonic 73,733 — 49,951 — Tuesday Morning 10,681 402 641 6,747 Wingstop 58,455 2,837 20,730 * Zumiez 18,222 — 14,537 — T. Rowe Price Government Reserve Fund 196,991 ¤ ¤ 152,554

$ 322,018^ # Capital gain distributions from mutual funds represented $0 of the net realized gain (loss). + Investment income comprised $15,288 of dividend income and $0 of interest income. ¤ Purchase and sale information not shown for cash management funds. ^ The cost basis of investments in affiliated companies was $364,889. * On the date indicated, issuer was held but not considered an affiliated company.



december 31, 2018

($000s, except shares and per share amounts)

STATEMENT OF ASSETS AND LIABILITIES

38

Assets Investments in securities, at value (cost $7,230,963) $ 8,494,515 Receivable for shares sold 6,285 Dividends receivable 4,185 Variation margin receivable on futures contracts 319 Foreign currency (cost $183) 180 Cash 26 Other assets 52 Total assets 8,505,562 Liabilities Payable for shares redeemed 33,293 Investment management fees payable 5,525 Payable for investment securities purchased 3,764 Due to affiliates 352 Payable to directors 9 Other liabilities 660 Total liabilities 43,603 N E T A S S E T S $ 8 , 4 6 1 , 9 5 9 Net Assets Consist of: Undistributed net investment income $ 5,901 Accumulated undistributed net realized loss (11,878) Net unrealized gain 1,259,687 Paid-in capital applicable to 205,015,149 shares of $0.50 par value capital stock outstanding; 1,000,000,000 shares authorized 7,208,249 N E T A S S E T S $ 8 , 4 6 1 , 9 5 9



december 31, 2018


($000s, except shares and per share amounts)

STATEMENT OF ASSETS AND LIABILITIES

39

NET ASSET VALUE PER SHARE Investor Class ($6,519,787,796 / 157,936,379 shares outstanding) $ 41.28 Advisor Class ($131,527,620 / 3,217,240 shares outstanding) $ 40.88 I Class ($1,810,643,595 / 43,861,530 shares outstanding) $ 41.28



($000s)

STATEMENT OF OPERATIONS

40

Year Ended

12/31/18Investment Income (Loss) Income Dividend $ 90,421 Interest 101

Total income 90,522 Expenses Investment management 72,517

Shareholder servicing Investor Class $ 11,285 Advisor Class 268 I Class 20 11,573

Rule 12b-1 fees Advisor Class 438

Prospectus and shareholder reports Investor Class 138 Advisor Class 13 I Class 7 158

Custody and accounting 399 Registration 119 Proxy and annual meeting 111 Legal and audit 57 Directors 34 Miscellaneous 35

Total expenses 85,441 Net investment income 5,081



($000s)

STATEMENT OF OPERATIONS


41

Year Ended

12/31/18Realized and Unrealized Gain / Loss Net realized gain (loss) Securities 1,328,126 Futures 3,642 Foreign currency transactions 3

Net realized gain 1,331,771 Change in net unrealized gain / loss Securities (1,566,365) Futures (4,882) Other assets and liabilities denominated in foreign currencies (4)

Change in net unrealized gain / loss (1,571,251) Net realized and unrealized gain / loss (239,480) DECREASE IN NET ASSETS FROM OPERATIONS $ (234,399)



($000s)

STATEMENT OF CHANGES IN NET ASSETS

42

Year Ended

12/31/18 12/31/17Increase (Decrease) in Net Assets Operations

Net investment income $ 5,081 $ 5,907 Net realized gain 1,331,771 1,213,376 Change in net unrealized gain / loss (1,571,251) 127,897 Increase (decrease) in net assets from operations (234,399) 1,347,180

Distributions to shareholders Net investment income

Investor Class – (3,244) I Class – (1,843)

Net realized gain Investor Class (740,245) (648,995) Advisor Class (14,801) (16,401) I Class (201,135) (81,915)

Decrease in net assets from distributions (956,181) (752,398)

Capital share transactions* Shares sold

Investor Class 490,742 700,696 Advisor Class 31,667 36,572 I Class 1,086,824 440,373

Distributions reinvested Investor Class 703,536 620,919 Advisor Class 14,775 16,379 I Class 186,194 76,233

Shares redeemed Investor Class (2,138,423) (2,033,622) Advisor Class (103,994) (127,721) I Class (220,742) (154,720)

Increase (decrease) in net assets from capital share transactions 50,579 (424,891)




($000s)

STATEMENT OF CHANGES IN NET ASSETS

43

Year Ended

12/31/18 12/31/17Net Assets Increase (decrease) during period (1,140,001) 169,891 Beginning of period 9,601,960 9,432,069 E n d o f p e r i o d $ 8 , 4 6 1 , 9 5 9 $ 9 , 6 0 1 , 9 6 0

Undistributed net investment income 5,901 820

*Share information Shares sold

Investor Class 9,789 14,645 Advisor Class 634 785 I Class 21,449 9,230

Distributions reinvested Investor Class 16,188 13,251 Advisor Class 343 353 I Class 4,284 1,627

Shares redeemed Investor Class (42,443) (42,626) Advisor Class (2,111) (2,695) I Class (4,459) (3,212)

Increase (decrease) in shares outstanding 3,674 (8,642)



NOTES TO FINANCIAL STATEMENTS

44

T. Rowe Price Small-Cap Stock Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 (the 1940 Act) as a nondiversified, open-end management investment company. The fund seeks to provide long-term capital growth by investing primarily in stocks of small companies. The fund has three classes of shares: the Small-Cap Stock Fund (Investor Class), the Small-Cap Stock Fund–Advisor Class (Advisor Class), and the Small-Cap Stock Fund–I Class (I Class). Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries. I Class shares generally are available only to investors meeting a $1,000,000 minimum investment, although the minimum is generally waived for certain client accounts. The Advisor Class operates under a Board-approved Rule 12b-1 plan pursuant to which the class compensates financial intermediaries for distribution, shareholder servicing, and/or certain administrative services; the Investor and I Classes do not pay Rule 12b-1 fees. Each class has exclusive voting rights on matters related solely to that class; separate voting rights on matters that relate to all classes; and, in all other respects, the same rights and obligations as the other classes.

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. Certain ratios in the accompanying Financial Highlights have been included to conform to the current year presentation.

Investment Transactions, Investment Income, and Distributions Investment transactions are accounted for on the trade date basis. Income and expenses are recorded on the accrual basis. Realized gains and losses are reported on the identified cost basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Income tax-related interest and penalties, if incurred, are recorded as income tax expense. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Earnings on investments recognized as partnerships for federal income tax purposes reflect the tax character of such earnings. Distributions from REITs are initially recorded as dividend income and, to the extent



45

such represent a return of capital or capital gain for tax purposes, are reclassified when such information becomes available. Distributions to shareholders are recorded on the ex-dividend date. Income distributions, if any, are declared and paid by each class annually. A capital gain distribution may also be 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 respective date of such transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is not bifurcated from the portion attributable to changes in market prices.

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 all 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. The Advisor Class pays Rule 12b-1 fees, in an amount not exceeding 0.25% of the class’s average daily net assets.

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 $7,000 for the year ended December 31, 2018.

In-Kind Redemptions In accordance with guidelines described in the fund’s prospectus, and when considered to be in the best interest of all shareholders, the fund may distribute portfolio securities rather than cash as payment for a redemption of fund shares (in-kind redemption). Gains and losses realized on in-kind redemptions are not recognized for tax purposes and are reclassified from undistributed realized gain (loss) to paid-in capital. During the year ended December 31, 2018, the fund realized $116,613,000 of net gain on $278,313,000 of in-kind redemptions.

New Accounting Guidance In March 2017, the FASB issued amended guidance to shorten the amortization period for certain callable debt securities held at a premium. The guidance is effective for fiscal years and interim periods beginning after December 15, 2018. Adoption will have no effect on the fund’s net assets or results of operations.

Indemnification In the normal course of business, the fund may provide indemnification in connection with its officers and directors, service providers, and/or private company investments. The fund’s maximum exposure under these arrangements is unknown; however, the risk of material loss is currently considered to be remote.



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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. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted, if the NYSE closes earlier, or as may be permitted by the SEC.

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) is an internal committee that has been delegated certain responsibilities 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



47

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 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 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



48

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.

Debt securities generally are traded in the OTC market and 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; however, to the extent the valuations include significant unobservable inputs, the securities would be categorized in Level 3.

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. Financial futures contracts are valued at closing settlement prices 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



49

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 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 December 31, 2018 (for further detail by category, please refer to the accompanying Portfolio of Investments):

($000s) Level 1 Level 2 Level 3 Total Value

Assets

Common Stocks $ 7,901,695 $ 207,116 $ 78,938 $ 8,187,749

Convertible Preferred Stocks — 11,488 138,646 150,134

Fixed Income Securities(1) — — 982 982

Short-Term Investments 152,554 3,096 — 155,650

Total Securities 8,054,249 221,700 218,566 8,494,515

Futures Contracts 319 — — 319

Total $ 8,054,568 $ 221,700 $ 218,566 $ 8,494,834

(1)Includes Convertible Bonds.

There were no material transfers between Levels 1 and 2 during the year ended December 31, 2018.



50

Following is a reconciliation of the fund’s Level 3 holdings for the year ended December 31, 2018. 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 December 31, 2018, totaled $39,180,000 for the year ended December 31, 2018. Transfers into and out of Level 3 are reflected at the value of the financial instrument at the beginning of the period. During the year, transfers out of Level 3 were because observable market data became available for the security.

($000s) Beginning Balance 1/1/18

Gain (Loss) During Period

Total Purchases

Transfers Out of

Level 3

Ending Balance

12/31/18

Investment in Securities

Common Stocks $ 39,332 $ 39,953 $ 41,497 $ (41,844) $ 78,938

Convertible Preferred Stocks 51,912 21,643 65,091 — 138,646

Convertible Preferred Bonds — — 982 — 982

Total $ 91,244 $ 61,596 $ 107,570 $ (41,844) $ 218,566

NOTE 3 - DERIVATIVE INSTRUMENTS

During the year ended December 31, 2018, the fund invested in derivative instruments. As defined by GAAP, a derivative is a financial instrument whose value is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable; it requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the expected risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its prospectus and Statement of Additional Information. The fund may use derivatives for a variety of purposes, such as seeking to hedge against declines in principal value, increase yield, invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, to enhance return, or to adjust credit exposure. The risks associated with the use of derivatives are different from, and potentially much greater than, the risks associated with investing directly in the instruments on which the derivatives are based. The fund at all times maintains sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover its settlement obligations under open derivative contracts.



51

The fund values its derivatives at fair value and recognizes changes in fair value currently in its results of operations. Accordingly, the fund does not follow hedge accounting, even for derivatives employed as economic hedges. Generally, the fund accounts for its derivatives on a gross basis. It does not offset the fair value of derivative liabilities against the fair value of derivative assets on its financial statements, nor does it offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral. As of December 31, 2018, the fund held equity futures with cumulative unrealized gain of $319,000; the value reflected on the accompanying Statement of Assets and Liabilities is the related unsettled variation margin.

Additionally, during the year ended December 31, 2018, the fund recognized $3,642,000 of realized gain on Futures and a $(4,882,000) change in unrealized gain/loss on Futures related to its investment in equity derivatives; such amounts are included on the accompanying Statement of Operations.

Counterparty Risk and Collateral The fund invests in exchange-traded or centrally cleared derivative contracts, such as futures, exchange-traded options, and centrally cleared swaps. Counterparty risk on such derivatives is minimal because the clearinghouse provides protection against counterparty defaults. For futures and centrally cleared swaps, the fund is required to deposit collateral in an amount specified by the clearinghouse and the clearing firm (margin requirement), and the margin requirement must be maintained over the life of the contract. Each clearinghouse and clearing firm, in its sole discretion, may adjust the margin requirements applicable to the fund.

Collateral may be in the form of cash or debt securities issued by the U.S. government or related agencies. Cash posted by the fund is reflected as cash deposits in the accompanying financial statements and generally is restricted from withdrawal by the fund; securities posted by the fund are so noted in the accompanying Portfolio of Investments; both remain in the fund’s assets. While typically not sold in the same manner as equity or fixed income securities, exchange-traded or centrally cleared derivatives may be closed out only on the exchange or clearinghouse where the contracts were traded. This ability is subject to the liquidity of underlying positions. As of December 31, 2018, securities valued at $2,871,000 had been posted by the fund for exchange-traded and/or centrally cleared derivatives.



52

Futures Contracts The fund is subject to equity price risk in the normal course of pursuing its investment objectives and uses futures contracts to help manage such risk. The fund may enter into futures contracts to manage exposure to interest rates, security prices, foreign currencies, and credit quality; as an efficient means of adjusting exposure to all or part of a target market; to enhance income; as a cash management tool; or to adjust credit exposure. A futures contract provides for the future sale by one party and purchase by another of a specified amount of a specific underlying financial instrument at an agreed upon price, date, time, and place. The fund currently invests only in exchange-traded futures, which generally are standardized as to maturity date, underlying financial instrument, and other contract terms. Payments are made or received by the fund each day to settle daily fluctuations in the value of the contract (variation margin), which reflect changes in the value of the underlying financial instrument. Variation margin is recorded as unrealized gain or loss until the contract is closed. The value of a futures contract included in net assets is the amount of unsettled variation margin; net variation margin receivable is reflected as an asset and net variation margin payable is reflected as a liability on the accompanying Statement of Assets and Liabilities. Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in hedged security values, and potential losses in excess of the fund’s initial investment. During the year ended December 31, 2018, the volume of the fund’s activity in futures, based on underlying notional amounts, was generally between 0% and 2% of net assets.

NOTE 4 - 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.

Other Purchases and sales of portfolio securities other than short-term securities aggregated $3,186,826,000 and $4,017,897,000, respectively, for the year ended December 31, 2018.



53

NOTE 5 - 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 fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

Reclassifications to paid-in capital relate primarily to redemptions in kind and a tax practice that treats a portion of the proceeds from each redemption of capital shares as a distribution of taxable net investment income or realized capital gain. For the year ended December 31, 2018, the following reclassifications were recorded to reflect tax character (there was no impact on results of operations or net assets):

($000s)

undistributed net realized loss $ (429,040)

Paid-in-capital 429,040

Distributions during the years ended December 31, 2018 and December 31, 2017, were characterized for tax purposes as follows:

($000s)

December 31

2018 2017

Ordinary income $ 160,611 $ 126,027

long-term capital gain 795,570 626,371

Total distributions $ 956,181 $ 752,398



54

At December 31, 2018, the tax-basis cost of investments, including derivatives, and components of net assets were as follows:

($000s)

Cost of investments $ 7,238,162

unrealized appreciation $ 2,030,913

unrealized depreciation (778,425)

net unrealized appreciation (depreciation) 1,252,488

undistributed ordinary income 9,181

Capital loss carryforwards (7,708)

late-year ordinary loss deferrals (251)

Paid-in capital 7,208,249

net assets $ 8,461,959

The difference between book-basis and tax-basis net unrealized appreciation (depre-ciation) is attributable to the realization of gains/losses on passive foreign investment companies and certain open derivative contracts, for tax purposes.

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. All or a portion of the capital loss carryforwards may be from losses realized between November 1 and the fund’s fiscal year-end, which are deferred for tax purposes until the subsequent year but recognized for financial reporting purposes in the year realized.

In accordance with federal tax laws applicable to investment companies, net specified losses realized between November 1 and December 31 are not recognized for tax purposes until the subsequent year (late-year ordinary loss deferrals); however, such losses are recognized for financial reporting purposes in the year realized.



55

NOTE 6 - 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 0.45% 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 0.265% for assets in excess of $650 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At December 31, 2018, the effective annual group fee rate was 0.29%.

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, expenses related to borrowings, taxes, brokerage, and other non-recurring expenses permitted by the investment management agreement, to the extent such operating expenses, on an annualized basis, exceed the I Class limit. This agreement will continue through the limitation date indicated in the table below, 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 (after the repayment is taken into account) to exceed both: (1) the I Class limit in place at the time such amounts were paid; and (2) the current I Class limit. However, no repayment will be made more than three years after the date of a payment or waiver.

Investor Class Advisor Class I Class

Expense limitation/I Class limit n/A n/A 0.05%

limitation date n/A n/A 04/30/20

In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates, each an affiliate of the fund (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. For the year ended December 31, 2018, expenses incurred pursuant to these service agreements were $79,000



56

for Price Associates; $1,623,000 for T. Rowe Price Services, Inc.; and $927,000 for T. Rowe Price Retirement Plan Services, Inc. All amounts due to and due from Price, exclusive of investment management fees payable, are presented net on the accompanying Statement of Assets and Liabilities.

Additionally, the fund is one of several mutual funds in which certain college savings plans managed by Price Associates may invest. As approved by the fund’s Board of Directors, shareholder servicing costs associated with each college savings plan are borne by the fund in proportion to the average daily value of its shares owned by the college savings plan. For the year ended December 31, 2018, the fund was charged $922,000 for shareholder servicing costs related to the college savings plans, of which $694,000 was for services provided by Price. All amounts due to and due from Price, exclusive of investment management fees payable, are presented net on the Statement of Assets and Liabilities. At December 31, 2018, approximately 6% of the outstanding shares of the Investor Class were held by college savings plans.

The fund is also one of several mutual funds sponsored by Price Associates (underlying Price Funds) in which the T. Rowe Price Retirement Funds (Retirement Funds) may invest. The Retirement Funds do not invest in the underlying Price Funds for the purpose of exercising management or control. Pursuant to a special servicing agreement, expenses associated with the operation of the Retirement Funds are borne by each underlying Price Fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by the Retirement Funds. Expenses allocated under this special servicing agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the year ended December 31, 2018, the fund was allocated $4,129,000 of Retirement Funds’ expenses. At period-end, the total amount payable to Price pursuant to this special servicing agreement is reflected as Due to Affiliates on the accompanying Statement of Assets and Liabilities. At December 31, 2018, approximately 34% of the outstanding shares of the Investor Class were held by the Retirement Funds.

In addition, other mutual funds, trusts, and other accounts managed by Price Associates or its affiliates (collectively, Price Funds and accounts) may invest in the fund and are not subject to a the special servicing agreements disclosed above. No Price fund or account may invest for the purpose of exercising management or control over the fund. At December 31, 2018, approximately 31% of the I Class’s outstanding shares were held by Price Funds and accounts.



57

The fund may invest its cash reserves in certain open-end management investment companies managed by Price Associates and considered affiliates of the fund: the T. Rowe Price Government Reserve Fund or the T. Rowe Price Treasury Reserve Fund, organized as money market funds, or the T. Rowe Price Short-Term Fund, a short-term bond fund (collectively, the Price Reserve Funds). The Price Reserve 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. Cash collateral from securities lending is invested in the T. Rowe Price Short-Term Fund. The Price Reserve Funds pay no investment management fees.

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 year ended December 31, 2018, 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 December 31, 2018.



58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of T. Rowe Price Small-Cap Stock Fund, Inc.

Opinion on the Financial StatementsWe have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of T. Rowe Price Small-Cap Stock Fund, Inc. (the “Fund”) as of December 31, 2018, the related statement of operations for the year ended December 31, 2018, the statement of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended December 31, 2018 and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America.

Basis for OpinionThese financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodians, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP Baltimore, Maryland February 15, 2019

We have served as the auditor of one or more investment companies in the T. Rowe Price group of investment companies since 1973.


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TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 12/31/18

We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements.

The fund’s distributions to shareholders included:

n $174,667,000 from short-term capital gains,

n $1,093,997,000 from long-term capital gains, subject to a long-term capital gains tax of not greater than 20%, and $232,000 to a long-term capital gains tax rate of not greater than 25%.

For taxable non-corporate shareholders, $74,352,000 of the fund’s income represents qualified dividend income subject to long-term capital gains tax rate of not greater than 20%.

For corporate shareholders, $68,654,000 of the fund’s income qualifies for the dividends-received deduction.

INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS

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

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.

HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS

Effective for reporting periods on or after March 1, 2019, the fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. Prior to March 1, 2019, the fund filed a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-PORT and N-Q are available electronically on the SEC’s website (sec.gov).


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ABOUT THE FUND’S DIRECTORS AND OFFICERS

Your fund is overseen by a Board of directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. At least 75% of the Board’s members are independent of the Boards of T. Rowe Price Associates, Inc. (T. Rowe Price), and its affiliates; “inside” or “interested” directors are employees or officers of T. Rowe Price. The business address of each director and officer is 100 East Pratt Street, Baltimore, maryland 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-638-5660.

INDEPENDENT DIRECTORS(a)

Name(Year of Birth)Year Elected[Number of T. Rowe PricePortfolios Overseen]

Principal Occupation(s) and Directorships of Public Companies and Other Investment Companies During the Past Five Years

Teresa Bryce Bazemore(b)

(1959)2018[189]

President, Radian Guaranty (2008 to 2017); member, Bazemore Consulting llC (2018 to present); member, Chimera Investment Corporation (2017 to present); member, Federal Home loan Bank of Pittsburgh (2017 to present)

Ronald J. daniels(b)

(1959)2018[189]

President, The Johns Hopkins university(c) and Professor, Political Science department, The Johns Hopkins university (2009 to present); director, lyndhurst Holdings (2015 to present)

Bruce W. duncan(1951)2013[189]

Chief Executive Officer and director (January 2009 to december 2016), Chairman of the Board (January 2016 to present), and President (January 2009 to September 2016), First Industrial Realty Trust, an owner and operator of industrial properties; Chairman of the Board (2005 to September 2016) and director (1999 to September 2016), Starwood Hotels & Resorts, a hotel and leisure company; director, Boston Properties (may 2016 to present); director, marriott International, Inc. (September 2016 to present)

Robert J. Gerrard, Jr.(1952)2012[189]

Advisory Board member, Pipeline Crisis/Winning Strategies, a collaborative working to improve opportunities for young African Americans (1997 to present); Chairman of the Board, all funds (since July 2018)

Paul F. mcBride(1956)2013[189]

Advisory Board member, Vizzia Technologies (2015 to present); Board member, dunbar Armored (2012 to present)


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INDEPENDENT DIRECTORS(a) (CONTINUED)

Name(Year of Birth)Year Elected[Number of T. Rowe PricePortfolios Overseen]


Cecilia E. Rouse, Ph.d.(1963)2012[189]

dean, Woodrow Wilson School (2012 to present); Professor and Researcher, Princeton university (1992 to present); member of national Academy of Education (2010 to present); director, mdRC, a nonprofit education and social policy research organization (2011 to present); Research Associate of labor Studies Program at the national Bureau of Economic Research (2011 to 2015); Board member of the national Bureau of Economic Research (2011 to present); Chair of Committee on the Status of minority Groups in the Economic Profession of the American Economic Association (2012 to 2017); Vice President (2015 to 2016), American Economic Association

John G. Schreiber(1946)2001[189]

Owner/President, Centaur Capital Partners, Inc., a real estate investment company (1991 to present); Cofounder, Partner, and Cochairman of the Investment Committee, Blackstone Real Estate Advisors, l.P. (1992 to 2015); director, General Growth Properties, Inc. (2010 to 2013); director, Blackstone mortgage Trust, a real estate finance company (2012 to 2016); director and Chairman of the Board, Brixmor Property Group, Inc. (2013 to present); director, Hilton Worldwide (2013 to present); director, Hudson Pacific Properties (2014 to 2016); director, Invitation Homes (2014 to present)

mark R. Tercek(1957)2009[189]

President and Chief Executive Officer, The nature Conservancy (2008 to present)

(a) All information about the independent directors was current as of December 31, 2017, except for the information provided for Ms. Bazemore and Mr. Daniels, which is current as of January 1, 2018.

(b) Effective January 1, 2018, Ms. Bazemore and Mr. Daniels were elected as independent directors of the Price Funds.

(c) William J. Stromberg, president and chief executive officer of T. Rowe Price Group, Inc., the parent company of the Price Funds’ investment advisor, has served on the Board of Trustees of Johns Hopkins University since 2014 and is a member of the Johns Hopkins University Board’s Compensation Committee.


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INSIDE DIRECTORS

Name(Year of Birth)Year Elected*[Number of T. Rowe Price Portfolios Overseen]


Edward C. Bernard**(1956)2006[0]

director and Vice President, T. Rowe Price; Vice Chairman of the Board, director, and Vice President, T. Rowe Price Group, Inc.; Chairman of the Board, director, and Vice President, T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board and director, T. Rowe Price Retirement Plan Services, Inc.; Chairman of the Board, Chief Executive Officer, director, and President, T. Rowe Price International and T. Rowe Price Trust Company; Chairman of the Board, all funds (2006 to July 2018)

david Oestreicher(1967)2018[189]

Chief legal Officer, Vice President, and Secretary, T. Rowe Price Group, Inc.; director, Vice President, and Secretary, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President and Secretary, T. Rowe Price, T. Rowe Price Hong kong, and T. Rowe Price International; Vice President, T. Rowe Price Japan and T. Rowe Price Singapore; Principal Executive Officer and Executive Vice President, all funds

Robert W. Sharps, CFA, CPA (1971)2017[135]

Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company

* Each inside director serves until retirement, resignation, or election of a successor.** Effective at the conclusion of a meeting of the Boards of the Price Funds held on July 25, 2018,

Mr. Bernard resigned from his role as a director and chairman of the Boards of all the Price Funds.

OFFICERS

Name (Year of Birth)Position Held With Small-Cap Stock Fund Principal Occupation(s)

Francisco m. Alonso (1978)President


darrell n. Braman (1963)Vice President and Secretary

Vice President, Price Hong kong, Price Singapore, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc.

Andrew S. davis (1978)Vice President

Vice President, T. Rowe Price and T. Rowe Price Group, Inc.

Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least 5 years.


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OFFICERS (CONTINUED)


Christopher T. Fortune (1973)Vice President


John R. Gilner (1961)Chief Compliance Officer

Chief Compliance Officer and Vice President, T. Rowe Price; Vice President, T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc.

Gary J. Greb (1961)Vice President

Vice President, T. Rowe Price, T. Rowe Price International, and T. Rowe Price Trust Company

John Hall (1977)Vice President

Vice President, T. Rowe Price

Ryan S. Hedrick, CFA (1980)Vice President


Paul J. krug, CPA (1964)Vice President


Robert J. marcotte (1962)Vice President


Catherine d. mathews (1963)Treasurer and Vice President


Curt J. Organt, CFA (1968)Vice President


Charles G. Pepin (1966)Vice President


Robert T. Quinn, Jr. (1972)Vice President


John W. Ratzesberger (1975)Vice President

Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; formerly, north American Head of listed derivatives Operation, morgan Stanley (to 2013)

Shannon H. Rauser (1987)Assistant Secretary

Employee, T. Rowe Price

Alexander P. Roik, CFA (1991)Vice President

Vice President, T. Rowe Price

Joshua k. Spencer, CFA (1973)Vice President




65


OFFICERS (CONTINUED)


J. david Wagner, CFA (1974)Vice President


megan Warren (1968)Vice President

Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Retirement Plan Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; formerly, Executive director, JP morgan Chase (to 2017)

Rouven J. Wool-lewis, Ph.d. (1973)Vice President




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STOCK FUNDSDomestic Blue Chip GrowthCapital Appreciation‡

Capital OpportunityCommunications & TechnologyDiversified Mid-Cap GrowthDividend GrowthEquity IncomeEquity Index 500Extended Equity Market IndexFinancial ServicesGrowth & IncomeGrowth StockHealth SciencesMid-Cap Growth‡

Mid-Cap Value‡

New America GrowthNew EraNew Horizons‡

QM U.S. Small & Mid-Cap Core Equity

QM U.S. Small-Cap Growth EquityQM U.S. Value EquityReal EstateScience & TechnologySmall-Cap Stock‡

Small-Cap ValueTax-Efficient Equity Total Equity Market IndexU.S. Large-Cap CoreValue

ASSET ALLOCATION FUNDSBalanced Global AllocationMulti-Strategy Total ReturnPersonal Strategy BalancedPersonal Strategy GrowthPersonal Strategy IncomeReal AssetsSpectrum GrowthSpectrum IncomeSpectrum InternationalTarget Date Fundsˆ

BOND FUNDSDomestic TaxableCorporate IncomeCredit OpportunitiesFloating RateGNMA High Yield‡

Inflation Protected BondLimited Duration Inflation

Focused BondNew IncomeShort-Term BondTotal ReturnUltra Short-Term BondU.S. Bond Enhanced IndexU.S. High YieldU.S. Treasury IntermediateU.S. Treasury Long-Term

Domestic Tax-FreeCalifornia Tax-Free BondGeorgia Tax-Free BondIntermediate Tax-Free High YieldMaryland Short-Term Tax-Free BondMaryland Tax-Free BondNew Jersey Tax-Free BondNew York Tax-Free BondSummit Municipal IncomeSummit Municipal IntermediateTax-Free High YieldTax-Free IncomeTax-Free Short-IntermediateVirginia Tax-Free Bond

MONEY MARKET FUNDSTaxableCash Reserves1

Government Money2

U.S. Treasury Money2

MONEY MARKET FUNDS (cont.)Tax-FreeCalifornia Tax-Free Money1

Maryland Tax-Free Money1

New York Tax-Free Money1

Summit Municipal Money Market1

Tax-Exempt Money1

INTERNATIONAL/GLOBAL FUNDSStockAfrica & Middle EastAsia OpportunitiesEmerging EuropeEmerging Markets StockEmerging Markets Value StockEuropean Stock Global ConsumerGlobal Growth StockGlobal IndustrialsGlobal Real EstateGlobal StockGlobal Technology‡

International Concentrated EquityInternational Discovery‡

International Equity IndexInternational StockInternational Value EquityJapanLatin AmericaNew AsiaOverseas StockQM Global Equity

BondDynamic CreditDynamic Global BondEmerging Markets BondEmerging Markets Corporate BondEmerging Markets Local Currency

BondGlobal High Income BondGlobal Multi-Sector BondInternational BondInternational Bond (USD Hedged)

201902-700292F65-050 2/19 T. Rowe Price Investment Services, Inc. | 100 East Pratt Street | Baltimore, MD 21202-1009

T. Rowe Price mutual Funds This page contains supplementary information that is not part of the shareholder report.

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.

‡ Subject to certain exceptions, the fund is currently closed to new investors and new accounts.ˆ The Target Date Funds are inclusive of the Retirement Funds, the Target Funds, and the Retirement Balanced Fund.1 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.

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