Equity Income Fund Equity Income Fund Advisor Class Equity Income Fund R Class Equity Income Fund I Class

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1 SEMIaNNual REPORT June 30, 2017 PRFDX PAFDX RRFDX REIPX T. Rowe Price Equity Income Fund Equity Income Fund Advisor Class Equity Income Fund R Class Equity Income Fund I Class The fund invests in value-oriented stocks.

2 HIGHLIGHTS U.S. stocks surged in the first six months of 2017 as a corporate earnings recovery and steady economic growth pushed the major benchmarks to record levels. The Equity Income Fund returned 5.57% over the period and lagged the S&P 500 Index and its Lipper peer group index of similarly managed funds. Every sector except energy and telecommunication services contributed to absolute returns. On a relative basis, the real estate sector added the most to performance, while information technology was the biggest detractor. We expect greater stock market volatility and more subdued returns given the market s first-half advance and heightened political instability. Uncertainty regarding the direction of U.S. fiscal policy has clouded the outlook for many companies, yet we continue to find idiosyncratic opportunities in a handful of sectors. The views and opinions in this report were current as of June 30, They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects. REPORTS ON THE WEB Sign up for our Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log in to your account at troweprice.com for more information.

3 Manager s Letter Fellow Shareholders Signs of stronger economic growth and a rebound in corporate earnings lifted stock markets worldwide in the first half of U.S. stock market benchmarks surged to record levels as earnings rebounded after more than a year of declining profits and investors continued to pin their hopes on business-friendly policies under President Donald Trump. The improving global backdrop allayed concerns about rising U.S. interest rates and geopolitical tensions in a few countries as well as misgivings about the Trump administration s ability to deliver on its agenda. In this supportive environment, the Equity Income Fund posted a solid return. The Equity Income Fund returned 5.57% for the six months ended June 30, 2017, versus 9.34% for the S&P 500 Index. The fund lagged the 6.28% return of its Performance Comparison Six-Month Period Ended 6/30/17 Total Return peer group, the Lipper Equity Income Funds Index. (Returns for the Equity Income Fund 5.57% Advisor, R, and I Class Equity Income Fund Advisor Class 5.45 shares reflect their different Equity Income Fund R Class 5.27 fee structures.) Equity Income Fund I Class 5.63 Every sector except energy S&P 500 Index 9.34 and telecommunication Lipper Equity Income Funds Index 6.28 services contributed to the fund s absolute returns. On a relative basis, real estate followed by telecommunication services stocks contributed the most to performance. Conversely, information technology stocks detracted the most from relative returns largely due to our sizable underweight to IT, the best-performing sector of the S&P

4 Market Environment The postelection rally in U.S. stocks continued into the first half of Hopes for tax reform, deregulation, and infrastructure spending under the Trump administration, along with a long-awaited corporate earnings recovery, drove the market s gains. Profits for the S&P 500 as a whole rose at their fastest year-over-year pace in several years in the first quarter of 2017, a welcome turnaround after five quarters of earnings declines that began in mid Overseas, indicators signaling rising demand and faster economic growth in many countries lifted confidence in the global outlook. The strong performance in the U.S. and other major developed markets occurred even as the Federal Reserve continued to tighten its accommodative monetary policy that has been in place since the 2008 financial crisis. The S&P 500 Index rose to record levels in June, joining many global stock benchmarks that reached all-time highs in the spring. Large-cap shares outperformed their smaller peers. Growth stocks widely outpaced value stocks across all market capitalizations, according to various Russell indexes. In the S&P 500 Index, nine of 11 sectors advanced and two fell. Information technology performed the best, driven by outsized gains in a handful of technology and Internet stocks, followed by health care and consumer discretionary. All three sectors produced double-digit returns. Conversely, energy stocks fared the worst as crude oil prices fell into a bear market amid a persistent global oversupply of oil. Telecommunication services was the next worst-performing sector as the leading U.S. wireless operators grappled with weak subscriber growth and competition from cable companies. Portfolio Review The Equity Income Fund seeks to buy well-established, large-cap companies that typically have a strong record of paying dividends and appear to be undervalued by the market. The fund s holdings tend to be solid, higher-quality companies going through a period of underperformance, reflecting our dual focus on valuation and dividend yield. 2

5 As of June 30, 2017, the dividend yield of the Equity Income Fund was 2.74% versus 2.03% for the S&P 500. All but two companies in the fund paid a dividend over the past 12 months. Most of our holdings are U.S. companies, though we will invest in opportunities overseas if they meet our investment criteria. We are bottom-up investors, meaning that we select stocks based on their individual merits as opposed to broader market or economic trends. Sector Diversification Percent of Net Assets 12/31/16 6/30/17 Financials 24.8% 25.1% Industrials and Business Services Health Care Energy Information Technology Consumer Discretionary Utilities Consumer Staples Materials Telecommunication Services Real Estate Other and Reserves Total 100.0% 100.0% Historical weightings reflect current industry/sector classifications. Financials was the biggest sector allocation and accounted for slightly more than a quarter of the fund s net assets at period-end. Our stock selection was strongest in this sector, driven by JPMorgan Chase, State Street, and financial services company Ameriprise Financial. These names ranked among your fund s biggest absolute contributors. After surging in the postelection rally, bank stocks lagged the broader market this year as long-term interest rates declined and investors grew less sanguine about the U.S. economy. However, banks received good news at the end of June after they all passed the Federal Reserve s annual stress test, effectively allowing them to significantly boost dividends and share buybacks. The surprisingly high payouts announced by many banks after passing the Fed s stress test supports our view that financial deregulation is already occurring behind the scenes and may prove to be more substantial than what the market expects. We reduced our positions in American Express and Bank of America after strong performance and added to U.S. Bancorp and Wells Fargo, both 3

6 durable banking franchises whose shares lagged the financials sector. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio). Financial Profile Equity Income S&P 500 As of 6/30/17 Fund Index Price/Book Ratio 2.4X 4.3X Price/Earnings Ratio (Based on next 12 months estimated earnings)* 16.4X 18.8X Historical Beta (Based on monthly returns for five years) * Source for data: IBES. Statistics are based on the companies in the fund s portfolio and are not a projection of future fund performance. Industrials and business services was the fund s second-largest allocation at roughly 12% of assets. Boeing led contributors in this sector as its shares climbed to a record on solid earnings and buoyant demand for new passenger planes. Boeing was the top contributor in the first half of 2017 and we trimmed our position to reduce risk, but the company remains a core holding. Other notable contributors were diversified industrial conglomerate Illinois Tool Works; Pentair, whose shares surged in May after the company announced plans to split into two separate businesses; and Cummins, which makes engines for industrial vehicles and heavy industry. We trimmed our position in Cummins, whose shares rose to a record high this year on surging demand from China, and eliminated rail operator Union Pacific after its shares approached fully valued levels, in our view. We used proceeds from these sales to accumulate shares of UPS, a laggard over the period as investors questioned the company s ability to manage margins in the face of surging home delivery demand as more people shop online. UPS benefits from solid revenue and volume growth, however, and we think its challenges related to pricing and margins can be resolved. We regard UPS as a company on the right side of secular change, an opportunity that rarely presents itself to value-focused investors. It was among our largest purchases over the period. Information technology represents a sizable portion of the fund, roughly 8% of assets. While information technology stocks contributed to absolute returns, they detracted from performance relative to the 4

7 S&P 500 Index largely because of our underweight to IT, by far the best-performing sector in the benchmark. Despite our lack of exposure to several highflying tech companies, we scored some success in the IT sector with our positions in semiconductor manufacturing equipment maker Applied Materials and Microsoft. Applied Materials has benefited from strong demand from semiconductor companies that are producing increasingly complex components for smartphone makers. Meanwhile, Microsoft continues to reap the rewards of pushing into the lucrative cloud-based computing market. Outlook Our outlook for the U.S. stock market is guardedly optimistic. Global economic growth and financial markets proved surprisingly resilient in the year s first half, despite headwinds related to a tightening Fed, a nuclear threat in North Korea, and a high level of U.S. policy uncertainty. The bull market for U.S. stocks marked its eighth year in March, putting the S&P 500 on track for its ninth year of gains. Much of the U.S. rally can be traced to continued hopes for businessfriendly policies to be enacted under President Trump. However, the administration s dwindling political capital after a string of controversies has made significant policy changes appear increasingly unlikely in the near term. Given that the major U.S. stock benchmarks are trading near record levels partly based on expectations of tax cuts, deregulation, and other pro-growth proposals promised by Trump any setback regarding the passage of these measures could dampen the market s performance. Valuations overall appear less compelling after the market s advance, making it harder to find areas of the market that can outperform over the long term. Uncertainty over the timing and scope of domestic fiscal and tax policies has clouded the outlook for many U.S. companies. Much of our buying has been idiosyncratic in nature across many sectors, rather than reflecting any broad investment themes. In this uncertain environment, we believe that sticking to our disciplined investment process and leveraging T. Rowe Price s strengths in fundamental research to identify companies with compelling valuations, attractive fundamentals, and strong dividend yields represent the best way to continue delivering solid returns for our shareholders. 5

8 Thank you for investing with T. Rowe Price. Respectfully submitted, John D. Linehan President of the fund and chairman of its Investment Advisory Committee Heather McPherson Associate portfolio manager July 14, 2017 The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund s investment program. 6

9 Risks of Investing in the Fund Value investors seek to invest in companies whose stock prices are low in relation to their real worth or future prospects. By identifying companies whose stocks are currently out of favor or misunderstood, value investors hope to realize significant appreciation as other investors recognize the stock s intrinsic value and the price rises accordingly. The value approach carries the risk that the market will not recognize a security s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. Glossary Dividend yield: The annual dividend of a stock divided by the stock s price. Earnings growth rate current fiscal year: Measures the annualized percent change in earnings per share from the prior fiscal year to the current fiscal year. Lipper indexes: Fund benchmarks that consist of a small number (10 to 30) of the largest mutual funds in a particular category as tracked by Lipper Inc. Price-to-book ratio: A valuation measure that compares a stock s market price with its book value; i.e., the company s net worth divided by the number of outstanding shares. Price-to-earnings (P/E) ratio current fiscal year: A valuation measure calculated by dividing the price of a stock by its reported earnings per share from the latest fiscal year. The ratio is a measure of how much investors are willing to pay for the company s earnings. The higher the P/E, the more investors are paying for the company s current earnings. Price-to-earnings (P/E) ratio next fiscal year: A valuation measure calculated by dividing the price of a stock by its estimated earnings for the next fiscal year. The ratio is a measure of how much investors are willing to pay for a company s future earnings. The higher the P/E, the more investors are paying for a company s expected earnings growth in the next fiscal year. Price-to-earnings (P/E) ratio 12 months forward: A valuation measure calculated by dividing the price of a stock by the analysts forecast of the next 12 months expected earnings. The ratio is a measure of how much investors are willing to pay for a company s future earnings. The higher the P/E, the more investors are paying for a company s earnings growth in the next 12 months. Projected earnings growth rate (IBES): A company s expected earnings per share growth rate for a given time period based on the forecast from the Institutional Brokers Estimate System, which is commonly referred to as IBES. S&P 500 Index: An unmanaged index that tracks the stocks of 500 primarily large-cap U.S. companies. 7

10 Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 6/30/17 JPMorgan Chase 3.6% ExxonMobil 2.4 Wells Fargo 2.4 Morgan Stanley 2.1 Johnson & Johnson 2.0 Microsoft 2.0 Boeing 1.9 Verizon Communications 1.8 Total 1.8 State Street 1.7 EI du Pont de Nemours 1.7 Anthem 1.7 Johnson Controls International 1.7 MetLife 1.6 Citigroup 1.5 Pfizer 1.5 Qualcomm 1.5 Loews 1.5 Becton, Dickinson & Company 1.5 Twenty-First Century Fox 1.4 Harris 1.4 PG&E 1.3 Comcast 1.3 U.S. Bancorp 1.3 Ameriprise Financial 1.3 Total 43.9% 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. 8

11 Portfolio Highlights MAJOR PORTFOLIO CHANGES Listed in descending order of size. Six Months Ended 6/30/17 Largest Purchases U.S. Bancorp American International Group* Becton, Dickinson & Company Southern Company Wells Fargo Gilead Sciences Verizon Communications Qualcomm Occidental Petroleum Fifth Third Bancorp Largest Sales American Express Royal Dutch Shell Bank of America Analog Devices Union Pacific** AES FirstEnergy** Pfizer Boeing Marsh & McLennan 12 Months Ended 6/30/17 Largest Purchases Wells Fargo U.S. Bancorp Southern Company* Becton, Dickinson & Company Occidental Petroleum American International Group* Medtronic NextEra Energy* Equity Residential* Coty* Largest Sales GE Bank of America Royal Dutch Shell American Express Entergy** Union Pacific** Deere** FirstEnergy** AES Applied Materials *Position added. **Position eliminated. 9

12 Performance and Expenses Growth of $10,000 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 may include a broad-based market index and 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. EQUITY INCOME FUND $40,000 34,000 28,000 22,000 16,000 10,000 As of 6/30/17 Equity Income Fund $16,944 S&P 500 Index $20,008 Lipper Equity Income Funds Index $17,142 6/07 6/08 6/09 6/10 6/11 6/12 6/13 6/14 6/15 6/16 6/17 Note: Performance for the Advisor, R, and I Classes will vary due to their differing fee structures. See returns table below. Average Annual Compound Total Return Since Inception Periods Ended 6/30/17 1 Year 5 Years 10 Years Inception Date Equity Income Fund 17.92% 12.18% 5.41% Equity Income Fund Advisor Class Equity Income Fund R Class Equity Income Fund I Class % 12/17/15 Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance, please visit our website (troweprice.com) or contact a T. Rowe Price representative at , or for Advisor, R, and I Class shares, 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. 10

13 Expense Ratio Equity Income Fund 0.66% Equity Income Fund Advisor Class 0.94 Equity Income Fund R Class 1.21 Equity Income Fund I Class 0.54 The expense ratio shown is as of the fund s fiscal year ended 12/31/16. 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. 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 four share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee, R Class shares are available to retirement plans serviced by intermediaries and charge a 0.50% 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 Expenses The 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 Purposes The 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. 11

14 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. 12

15 Fund Expense Example (continued) Equity Income Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 1/1/17 6/30/17 1/1/17 to 6/30/17 Investor Class Actual $1, $1, $3.31 Hypothetical (assumes 5% return before expenses) 1, , Advisor Class Actual 1, , Hypothetical (assumes 5% return before expenses) 1, , R Class Actual 1, , Hypothetical (assumes 5% return before expenses) 1, , I Class Actual 1, , Hypothetical (assumes 5% return before expenses) 1, , * 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 (181), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.65%, the Advisor Class was 0.93%, the R Class was 1.22%, and the I Class was 0.54%. 13

16 Unaudited Financial Highlights For a share outstanding throughout each period Investor Class 6 Months Ended 6/30/17 Year Ended 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.28 (2) 0.70 (2) 0.63 (2) 0.64 (2) 0.54 (2) 0.55 (2) Net realized and unrealized gain / loss (3) (2.84) Total from investment activities (2.21) Distributions Net investment income (0.28) (0.73) (0.65) (0.66) (0.54) (0.56) Net realized gain (1.71) (1.48) (1.78) (0.85) Total distributions (0.28) (2.44) (2.13) (2.44) (1.39) (0.56) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (4) 5.57% (2) 19.28% (2)(3) (6.66)% (2) 7.49% (2) 29.75% (2) 17.25% (2) Ratio of total expenses to average net assets 0.65% (2)(5) 0.66% (2) 0.66% (2) 0.66% (2) 0.67% (2) 0.68% (2) Ratio of net investment income to average net assets 1.76% (2)(5) 2.36% (2) 1.98% (2) 1.92% (2) 1.77% (2) 2.20% (2) 14

17 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/17 Year Ended 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 Ratios/Supplemental Data (continued) Portfolio turnover rate 9.7% 19.4% 27.2% 9.7% 9.5% 15.6% Net assets, end of period (in millions) $ 18,371 $ 18,516 $ 21,935 $ 28,254 $ 26,851 $ 22,111 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 6. Excludes expenses permanently waived 0.00%, 0.00%, 0.00%, 0.00%, 0.00%, and 0.00% of average net assets for the six months ended 6/30/17 and years ended 12/31/16, 12/31/15, 12/31/14, 12/31/13 and 12/31/12, respectively, related to investments in T. Rowe Price mutual funds. (3) See Note 6. Includes a voluntary payment from Price Associates, representing $0.12 per share based upon shares outstanding on the date of payment. The payment increased total return by 0.48%. (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 The accompanying notes are an integral part of these financial statements. 15

18 Unaudited Financial Highlights For a share outstanding throughout each period Advisor Class 6 Months Ended 6/30/17 Year Ended 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.24 (2) 0.62 (2) 0.53 (2) 0.56 (2) 0.45 (2) 0.49 (2) Net realized and unrealized gain / loss (3) (2.82) Total from investment activities (2.29) Distributions Net investment income (0.22) (0.65) (0.57) (0.55) (0.46) (0.49) Net realized gain (1.71) (1.48) (1.78) (0.85) Total distributions (0.22) (2.36) (2.05) (2.33) (1.31) (0.49) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (4) 5.45% (2) 18.94% (2)(3) (6.92)% (2) 7.18% (2) 29.44% (2) 16.92% (2) Ratio of total expenses to average net assets 0.93% (2)(5) 0.94% (2) 0.93% (2) 0.93% (2) 0.94% (2) 0.93% (2) Ratio of net investment income to average net assets 1.47% (2)(5) 2.08% (2) 1.68% (2) 1.66% (2) 1.49% (2) 1.95% (2) 16

19 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/17 Year Ended 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 Ratios/Supplemental Data (continued) Portfolio turnover rate 9.7% 19.4% 27.2% 9.7% 9.5% 15.6% Net assets, end of period (in millions) $ 480 $ 521 $ 686 $ 1,392 $ 2,561 $ 2,092 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 6. Excludes expenses permanently waived 0.00%, 0.00%, 0.00%, 0.00%, 0.00%, and 0.00% of average net assets for the six months ended 6/30/17 and the years ended 12/31/16, 12/31/15, 12/31/14, 12/31/13 and 12/31/12, respectively, related to investments in T. Rowe Price mutual funds. (3) See Note 6. Includes a voluntary payment from Price Associates, representing $0.12 per share based upon shares outstanding on the date of payment. The payment increased total return by 0.48%. (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 The accompanying notes are an integral part of these financial statements. 17

20 Unaudited Financial Highlights For a share outstanding throughout each period R Class 6 Months Ended 6/30/17 Year Ended 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.19 (2) 0.53 (2) 0.45 (2) 0.46 (2) 0.37 (2) 0.42 (2) Net realized and unrealized gain / loss (3) (2.82) Total from investment activities (2.37) Distributions Net investment income (0.18) (0.56) (0.47) (0.48) (0.38) (0.42) Net realized gain (1.71) (1.48) (1.78) (0.85) Total distributions (0.18) (2.27) (1.95) (2.26) (1.23) (0.42) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (4) 5.27% (2) 18.63% (2)(3) (7.18)% (2) 6.91% (2) 29.07% (2) 16.62% (2) Ratio of total expenses to average net assets 1.22% (2)(5) 1.20% (2) 1.19% (2) 1.19% (2) 1.20% (2) 1.22% (2) Ratio of net investment income to average net assets 1.17% (2)(5) 1.80% (2) 1.44% (2) 1.39% (2) 1.23% (2) 1.65% (2) 18

21 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/17 Year Ended 12/31/16 12/31/15 12/31/14 12/31/13 12/31/12 Ratios/Supplemental Data (continued) Portfolio turnover rate 9.7% 19.4% 27.2% 9.7% 9.5% 15.6% Net assets, end of period (in thousands) $ 114,083 $ 134,460 $ 203,518 $ 353,908 $ 351,544 $ 270,641 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 6. Excludes expenses permanently waived 0.00%, 0.00%, 0.00%, 0.00%, 0.00%, and 0.00% of average net assets for the six months ended 6/30/17 and for the years ended 12/31/16, 12/31/15, 12/31/14, 12/31/13 and 12/31/12, respectively, related to investments in T. Rowe Price mutual funds. (3) See Note 6. Includes a voluntary payment from Price Associates, representing $0.12 per share based upon shares outstanding on the date of payment. The payment increased total return by 0.44%. (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 The accompanying notes are an integral part of these financial statements. 19

22 Unaudited Financial Highlights For a share outstanding throughout each period I Class 6 Months Ended 6/30/17 Year 12/17/15 (1) Ended Through 12/31/16 12/31/15 NET ASSET VALUE Beginning of period $ $ $ Investment activities Net investment income (2) 0.30 (3) 0.88 (3) (3)(4)(5) Net realized and unrealized gain / loss (6) 0.20 Total from investment activities Distributions Net investment income (0.29) (0.77) Net realized gain (1.71) Total distributions (0.29) (2.48) NET ASSET VALUE End of period $ $ $ Ratios/Supplemental Data Total return (7) 5.63% (3) 19.40% (3)(6) 0.71% (3)(4) Ratio of total expenses to average net assets 0.54% (3)(8) 0.54% (3) 0.58% (3)(4)(8) Ratio of net investment income to average net assets 1.87% (3)(8) 2.89% (3) 1.15% (3)(4)(8) 20

23 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/17 Year 12/17/15 (1) Ended Through 12/31/16 12/31/15 Ratios/Supplemental Data (continued) Portfolio turnover rate 9.7% 19.4% 27.2% Net assets, end of period (in millions) $ 3,709 $ 3,521 $ 6 (1) Inception date (2) Per share amounts calculated using average shares outstanding method. (3) See Note 6. Excludes expenses permanently waived 0.00% and 0.00% of average net assets for the year ended 12/31/16 and for the period ended 12/31/15, respectively, related to investments in T. Rowe Price mutual funds. (4) See Note 6. Excludes expenses waived (0.06% of average net assets) related to the contractual operating expense limitation in effect through 4/30/18. (5) Amounts round to less than $0.01 per share. (6) See Note 6. Includes a voluntary payment from Price Associates, representing $0.12 per share based upon shares outstanding on the date of payment. The payment increased total return by 0.45%. (7) 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. (8) Annualized The accompanying notes are an integral part of these financial statements. 21

24 Unaudited June 30, 2017 Portfolio of Investments Shares/Par $ Value (Cost and value in $000s) COMMON STOCKS 95.5% CONSUMER DISCRETIONARY 8.1% Auto Components 0.6% Adient 2,017, , ,898 Automobiles 0.4% Ford Motor 7,340,700 82,142 82,142 Hotels, Restaurants & Leisure 1.5% Carnival 1,558, ,158 Las Vegas Sands 3,770, , ,036 Leisure Products 0.6% Mattel 6,566, , ,381 Media 4.0% Comcast, Class A 7,470, ,752 News Corp, Class A 13,632, ,768 Time Warner 259,700 26,077 Twenty-First Century Fox 11,610, ,579 Walt Disney 809,000 85, ,132 Multiline Retail 1.0% Kohl's 3,545, ,105 Macy's 3,345,800 77, ,861 Total Consumer Discretionary 1,826,450 22

25 (Cost and value in $000s) CONSUMER STAPLES 6.3% Shares/Par $ Value Beverages 1.7% Diageo (GBP) 3,945, ,582 PepsiCo 2,297, , ,874 Food & Staples Retailing 1.0% Wal-Mart 2,846, , ,416 Food Products 2.4% Archer-Daniels-Midland 5,493, ,300 Kellogg 1,388,200 96,424 Tyson Foods, Class A 3,695, , ,161 Personal Products 0.5% Avon (1) 3,600,000 13,680 Coty, Class A 5,642, , ,541 Tobacco 0.7% Philip Morris International 1,318, , ,834 Total Consumer Staples 1,426,826 ENERGY 9.3% Oil, Gas & Consumable Fuels 9.3% Apache 3,720, ,314 Canadian Natural Resources 3,096,100 89,291 Chevron 2,197, ,234 EQT 679,100 39,788 ExxonMobil 6,741, ,241 Hess 4,234, ,772 23

26 (Cost and value in $000s) Shares/Par $ Value Occidental Petroleum 4,394, ,093 Royal Dutch Shell, ADR 3,096, ,682 Total (EUR) 8,164, ,351 Total Energy 2,099,766 FINANCIALS 25.1% Banks 12.2% Bank of America 3,021,200 73,294 Citigroup 5,168, ,669 Fifth Third Bancorp 10,336, ,346 JPMorgan Chase 8,858, ,694 KeyCorp 9,188, ,191 PNC Financial Services Group 1,707, ,253 Royal Bank of Scotland (GBP) (1) 18,019,006 58,142 U.S. Bancorp 5,567, ,085 Wells Fargo 9,637, ,031 2,763,705 Capital Markets 6.9% Ameriprise Financial 2,247, ,046 Bank of New York Mellon 3,945, ,274 Morgan Stanley 10,611, ,853 Northern Trust 2,197, ,590 State Street 4,314, ,140 1,560,903 Consumer Finance 0.6% American Express 1,697, , ,023 Insurance 5.4% Chubb 799, ,158 Loews 7,240, ,942 Marsh & McLennan 2,556, ,328 MetLife 6,616, ,516 24

27 (Cost and value in $000s) Shares/Par $ Value Willis Towers Watson 878, ,845 XL Group 1,747,800 76,554 1,222,343 Total Financials 5,689,974 HEALTH CARE 10.5% Biotechnology 1.0% Gilead Sciences 3,270, ,514 Health Care Equipment & Supplies 1.9% 231,514 Becton, Dickinson & Company 938, ,169 Medtronic 2,706, ,211 Health Care Providers & Services 1.7% 423,380 Anthem 2,027, ,415 Pharmaceuticals 5.9% 381,415 Bristol-Myers Squibb 3,670, ,509 GlaxoSmithKline (GBP) 5,767, ,778 Johnson & Johnson 3,495, ,433 Merck 3,370, ,028 Pfizer 10,237, ,861 1,349,609 Total Health Care 2,385,918 INDUSTRIALS & BUSINESS SERVICES 11.5% Aerospace & Defense 3.5% Boeing 2,181, ,410 Harris 2,956, ,473 25

28 (Cost and value in $000s) Shares/Par $ Value United Technologies 239,700 29, ,153 Air Freight & Logistics 1.1% UPS, Class B 2,297, , ,036 Airlines 0.4% Southwest Airlines 1,573,000 97,746 97,746 Building Products 1.7% Johnson Controls International 8,664, , ,671 Electrical Equipment 0.9% Emerson Electric 3,595, , ,358 Industrial Conglomerates 1.2% GE 10,511, , ,921 Machinery 2.7% Cummins 489,400 79,390 Flowserve 2,322, ,815 Illinois Tool Works 1,907, ,264 Pentair 2,222, , ,334 Total Industrials & Business Services 2,617,219 INFORMATION TECHNOLOGY 8.1% Communications Equipment 1.2% Cisco Systems 8,738, , ,528 26

29 (Cost and value in $000s) Shares/Par $ Value Electronic Equipment, Instruments & Components 0.3% TE Connectivity 1,058,700 83,298 83,298 Semiconductors & Semiconductor Equipment 3.4% Analog Devices 848,900 66,044 Applied Materials 5,767, ,264 Qualcomm 6,167, ,553 Texas Instruments 1,687, , ,711 Software 2.2% CA 1,178,500 40,623 Microsoft 6,541, , ,542 Technology Hardware, Storage & Peripherals 1.0% Apple 669,200 96,378 Western Digital 1,438, , ,803 Total Information Technology 1,846,882 MATERIALS 4.8% Chemicals 2.5% CF Industries 6,292, ,924 EI du Pont de Nemours 4,764, , ,427 Construction Materials 0.7% Vulcan Materials 1,378, , ,603 Containers & Packaging 1.0% International Paper 4,069, , ,391 27

30 (Cost and value in $000s) Shares/Par $ Value Metals & Mining 0.6% Nucor 2,272, , ,487 Total Materials 1,096,908 REAL ESTATE 2.1% Equity Real Estate Investment Trusts 2.1% Equity Residential, REIT 2,167, ,673 Rayonier, REIT 6,192, ,150 Weyerhaeuser, REIT 4,669, ,415 Total Real Estate 477,238 TELECOMMUNICATION SERVICES 2.9% Diversified Telecommunication Services 2.6% CenturyLink 3,994,900 95,398 Telefonica (EUR) 7,440,574 77,022 Verizon Communications 9,163, , ,658 Wireless Telecommunication Services 0.3% Vodafone (GBP) 23,869,761 67,789 67,789 Total Telecommunication Services 649,447 UTILITIES 5.6% Electric Utilities 4.3% Edison International 2,736, ,967 Exelon 4,594, ,713 PG&E 4,414, ,984 Southern Company 4,044, ,670 XCEL Energy 2,596, , ,470 28

31 (Cost and value in $000s) Shares/Par $ Value Independent Power & Renewable Electricity Producers 0.3% AES 5,193,400 57,699 57,699 Multi-Utilities 1.0% NiSource 9,088, , ,484 Total Utilities 1,273,653 Total Miscellaneous Common Stocks 1.2% (3) 269,991 Total Common Stocks (Cost $14,874,915) 21,660,272 CONVERTIBLE PREFERRED STOCKS 1.8% HEALTH CARE 0.7% Health Care Equipment & Supplies 0.7% Becton Dickinson, Series A (1) 2,854, , ,370 UTILITIES 1.1% Electric Utilities 1.0% Great Plains Energy 1,273,400 67,511 NextEra Energy 2,996, , ,077 Multi Utilities 0.1% DTE Energy 724,100 39,203 39,203 Total Utilities 265,280 Total Convertible Preferred Stocks (Cost $389,387) 420,650 29

32 (Cost and value in $000s) CORPORATE BONDS 0.2% Shares/Par $ Value Western Digital, 10.50%, 4/1/24 33,745,000 39,819 Total Corporate Bonds (Cost $33,584) 39,819 BOND MUTUAL FUNDS 0.3% T. Rowe Price Institutional Floating Rate Fund, 3.86% (2)(4) 6,331,846 63,508 Total Bond Mutual Funds (Cost $61,734) 63,508 SHORT-TERM INVESTMENTS 2.1% Money Market Funds 2.1% T. Rowe Price Government Reserve Fund, 0.99% (2)(5) 472,330, ,330 Total Short-Term Investments (Cost $472,330) 472,330 Total Investments in Securities 99.9% of Net Assets (Cost $15,831,950) $ 22,656,579 Shares/Par are denominated in U.S. dollars unless otherwise noted. (1) Non-income producing (2) Affiliated Company (3) The identity of certain securities has been concealed to protect the fund while it completes a purchase or selling program for the securities. (4) SEC 30-day yield (5) Seven-day yield ADR American Depository Receipts EUR Euro GBP British Pound REIT A domestic Real Estate Investment Trust whose distributions pass-through with original tax character to the shareholder 30

33 Futures Contracts ($000s) Expiration Contract Value Unrealized Gain (Loss) Long, 305 S&P 500 E-Mini Index contracts 9/17 $ 36,919 $ (110) Net payments (receipts) of variation margin to date 124 Variation margin receivable (payable) on open futures contracts $ 14 31

34 Affiliated Companies ($000s) 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 which is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the six months ended June 30, Purchase and sales cost and investment income reflect all activity for the period then ended. Affiliate Purchase Cost Sales Cost Investment Income Value 6/30/17 Value 12/31/16 Coty, Class A $ $ $ $ * $ 102,536 T. Rowe Price Institutional Floating Rate Fund 1,358 1,376 63,508 62,465 T. Rowe Price Government Reserve Fund 1, , ,652 Totals $ 2,846 $ 535,838 $ 660,653 Purchase and sale information not shown for cash management funds. * On the date indicated, issuer was held but not considered an affiliated company. Amounts reflected on the accompanying financial statements include the following amounts related to affiliated companies: Investment in securities, at cost $ 534,064 Dividend income 2,846 Interest income Investment income $ 2,846 Realized gain (loss) on securities $ Capital gain distributions from mutual funds $ The accompanying notes are an integral part of these financial statements. 32

35 Unaudited June 30, 2017 Statement of Assets and Liabilities ($000s, except shares and per share amounts) Assets Investments in securities, at value (cost $15,831,950) $ 22,656,579 Receivable for investment securities sold 62,260 Dividends and interest receivable 35,792 Receivable for shares sold 11,635 Foreign currency (cost $6,156) 6,299 Cash deposits on futures contracts 1,343 Variation margin receivable on futures contracts 14 Other assets 487 Total assets 22,774,409 Liabilities Payable for shares redeemed 51,317 Payable for investment securities purchased 35,470 Investment management fees payable 9,813 Due to affiliates 1,094 Other liabilities 2,030 Total liabilities 99,724 NET ASSETS $ 22,674,685 Net Assets Consist of: Undistributed net investment income $ 10,317 Accumulated undistributed net realized gain 1,054,347 Net unrealized gain 6,824,740 Paid-in capital applicable to 688,149,967 no par value shares of beneficial interest outstanding; unlimited number of shares authorized 14,785,281 NET ASSETS $ 22,674,685 33

36 Unaudited June 30, 2017 Statement of Assets and Liabilities NET ASSET VALUE PER SHARE Investor Class ($18,371,484,489 / 557,546,598 shares outstanding) $ Advisor Class ($479,679,191 / 14,586,419 shares outstanding) $ R Class ($114,082,754 / 3,475,769 shares outstanding) $ I Class ($3,709,438,331 / 112,541,181 shares outstanding) $ The accompanying notes are an integral part of these financial statements. 34

37 Unaudited Statement of Operations ($000s) Investment Income (Loss) 6 Months Ended 6/30/17 Income Dividend $ 270,887 Interest 11 Total income 270,898 Expenses Investment management 59,405 Shareholder servicing Investor Class $ 10,584 Advisor Class 374 R Class 114 I Class 11 11,083 Rule 12b-1 fees Advisor Class 610 R Class Prospectus and shareholder reports Investor Class 158 Advisor Class 7 R Class 1 I Class Custody and accounting 319 Registration 214 Legal and audit 90 Trustees 38 Miscellaneous 16 Waived / paid by Price Associates (172) Total expenses 72,222 Net investment income 198,676 35

38 Unaudited Statement of Operations ($000s) Realized and Unrealized Gain / Loss Net realized gain (loss) Securities 888,021 Futures 3,120 Foreign currency transactions 37 Net realized gain 891,178 Change in net unrealized gain / loss Securities 145,460 Futures (110) Other assets and liabilities denominated in foreign currencies 265 Change in net unrealized gain / loss 145,615 Net realized and unrealized gain / loss 1,036,793 INCREASE IN NET ASSETS FROM OPERATIONS $ 1,235,469 The accompanying notes are an integral part of these financial statements. 36

39 Unaudited Statement of Changes in Net Assets ($000s) Increase (Decrease) in Net Assets 6 Months Ended 6/30/17 Year Ended 12/31/16 Operations Net investment income $ 198,676 $ 523,931 Net realized gain 891,178 1,246,357 Change in net unrealized gain / loss 145,615 2,055,307 Increase in net assets from operations 1,235,469 3,825,595 Distributions to shareholders Net investment income Investor Class (157,739) (435,481) Advisor Class (3,287) (11,473) R Class (645) (2,584) I Class (32,327) (68,754) Net realized gain Investor Class (957,764) Advisor Class (28,210) R Class (7,246) I Class (181,061) Decrease in net assets from distributions (193,998) (1,692,573) Capital share transactions* Shares sold Investor Class 585,558 1,487,940 Advisor Class 31,675 96,766 R Class 9,582 23,621 I Class 459,973 3,744,307 Distributions reinvested Investor Class 149,340 1,328,942 Advisor Class 3,243 39,229 R Class 645 9,830 I Class 31, ,156 Shares redeemed Investor Class (1,727,174) (8,155,729) Advisor Class (99,482) (352,668) R Class (36,409) (115,926) I Class (467,722) (623,653) Decrease in net assets from capital share transactions (1,059,309) (2,271,185) 37

40 Unaudited Statement of Changes in Net Assets ($000s) 6 Months Ended 6/30/17 Year Ended 12/31/16 Net Assets Decrease during period (17,838) (138,163) Beginning of period 22,692,523 22,830,686 End of period $ 22,674,685 $ 22,692,523 Undistributed net investment income 10,317 5,639 *Share information Shares sold Investor Class 18,156 50,120 Advisor Class 983 3,242 R Class I Class 14, ,094 Distributions reinvested Investor Class 4,557 42,209 Advisor Class 99 1,247 R Class I Class 959 7,773 Shares redeemed Investor Class (53,431) (274,717) Advisor Class (3,078) (12,046) R Class (1,132) (3,998) I Class (14,469) (20,229) Decrease in shares outstanding (32,849) (81,196) The accompanying notes are an integral part of these financial statements. 38

41 Unaudited June 30, 2017 Notes to Financial Statements T. Rowe Price Equity Income Fund (the fund), is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified, open-end management investment company. The fund seeks a high level of dividend income and long-term capital growth primarily through investments in stocks. The fund has four classes of shares: the Equity Income Fund (Investor Class), the Equity Income Fund Advisor Class (Advisor Class), the Equity Income Fund R Class (R Class), and the Equity Income Fund I Class (I Class). Advisor Class shares are sold only through unaffiliated brokers and other unaffiliated financial intermediaries, and R Class shares are available to retirement plans serviced by intermediaries. I Class shares generally are available only to investors meeting a $1,000,000 minimum investment or certain other criteria. The Advisor Class and R Class each operate under separate Board-approved Rule 12b-1 plans, pursuant to which each 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. Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Premiums and discounts on debt securities are amortized for financial reporting purposes. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. 39

42 Dividend income and capital gain distributions are recorded on the ex-dividend date. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions from REITs are initially recorded as dividend income and, to the extent such represent a return of capital or capital gain for tax purposes, are reclassified when such information becomes available. Income distributions are declared and paid by each class quarterly. Distributions to shareholders are recorded on the ex-dividend date. 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 date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses. 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 and R Class each pay Rule 12b-1 fees, in an amount not exceeding 0.25% and 0.50%, respectively, of the class s average daily net. 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 $79,000 for the six months ended June 30, 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 six months ended June 30, 2017, the fund realized $13,023,000 of net gain on $27,998,000 of in-kind redemptions. 40