SEMIANNual REPORT November 30, 2017 T. Rowe Price Personal Strategy Funds The funds invest for growth, income, or both through diversified portfolios of stocks, bonds, and money market securities.
T. Rowe Price Personal Strategy Funds HIGHLIGHTS Global stocks rallied over the past six months as the global economic recovery broadened and corporate earnings improved worldwide. U.S. investment-grade bonds edged slightly higher, while high yield bonds advanced amid buoyant demand for higher-risk assets. Non-U.S. dollar-denominated debt outpaced high yield as the dollar weakened against most developed markets currencies. The Personal Strategy Funds posted solid absolute returns in the six months ended November 30, 2017. Each fund outperformed its respective combined index benchmark and Lipper peer group. Synchronized global growth this year has brightened the macro and profitability outlooks for most regions. However, current valuations in global stock markets and for riskier assets in general largely reflect this view and may not sufficiently reflect risks, including the prospective tightening in monetary stimulus worldwide next year or continued political uncertainty in many countries. Given our current outlook, we believe the Personal Strategy Funds broad diversification and ability to exploit investment opportunities in various sectors and regions should benefit shareholders in a range of potential market environments. The views and opinions in this report were current as of November 30, 2017. 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 Email 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.
T. Rowe Price Personal Strategy Funds Manager s Letter Fellow Shareholders Stocks and bonds worldwide strengthened over the past six months as the global economic upswing that began at the end of 2016 continued to gain momentum in 2017. The major U.S. stock market indexes repeatedly hit record highs as corporate earnings rose and investors anticipated that corporate tax cuts would boost profits even further. Stocks in international developed and emerging markets posted strong returns as growth in Europe and Japan accelerated and global demand lifted commodity exporters in the developing world. In fixed income, U.S. investment-grade bonds edged higher, while high yield bonds gained on rising oil prices and steady demand for higher-yielding assets. Non-U.S. dollar-denominated debt advanced as the dollar fell against most developed markets currencies. Against this positive backdrop, the Personal Strategy Funds generated modest absolute returns over the six months ended November 30, 2017, and outperformed their respective combined index benchmarks. Market Environment Signs of a global economic recovery grew more plentiful over the past six months, pointing to the broadest synchronized upswing the world economy has experienced in the last decade, as the International Monetary Fund stated in July. The S&P 500 Index and other U.S. stock market indexes hit record levels amid better-than-expected earnings and optimism about tax changes and other pro-business policies under President Donald Trump. Small-cap stocks outperformed their largeand mid-cap counterparts. The U.S. economy expanded at an upwardly revised 3.2% annual rate in the third quarter of 2017, its strongest 1
growth pace in three years, raising hopes that the economy may be emerging from the modest growth trend seen since the recession ended in 2009. The Federal Reserve raised short-term interest rates by 25 basis points in March and June as the central bank continued to unwind its accommodative monetary policy in place since the 2008 financial crisis. Major Index Returns (The Fed raised rates for the third time this Six-Month Period Ended 11/30/17 year on December 13, S&P 500 Index 10.89% 2017, after our reporting Russell 3000 Index 11.09 period ended.) MSCI All Country World Index ex USA 9.54 Stocks in developed MSCI Emerging Markets Index 13.27 European markets rose as corporate earnings and Bloomberg Barclays economic growth picked U.S. Aggregate Bond Index 0.68 up across the Continent. Citigroup 3-Month Treasury Bill Index 0.51 The eurozone economy Credit Suisse High Yield Index 2.24 grew 2.6% year-overyear in the third quarter Bloomberg Barclays Global Aggregate ex USD Bond Index 3.77 of 2017, marking the currency area s highest growth rate since Note: Unlike stocks and bonds, U.S. Treasuries are guaranteed as to the timely payment of principal and interest. the start of 2011. The strengthening recovery led the European Central Bank to announce that it would reduce the size of its monthly bond purchases starting in January 2018 and extend the program until September and possibly longer, despite inflation remaining well below the bank s target. Japanese stocks rallied as the country s economy gained steam. Japan s gross domestic product expanded an upwardly revised 2.5% annual pace in the third quarter, marking the country s seventh straight quarter of growth and longest expansion in 16 years. However, inflation in Japan is still far from its official target, and years of ultra-loose monetary policy have so far failed to boost weak household spending. Emerging markets stocks were bolstered by signs of improving global demand, rising corporate earnings, and strong growth in China. 2
8% 7 6 5 4 3 2 1 0 U.S. investment-grade bonds generated slightly positive returns. Treasury yields decreased in the first half of our reporting period but retraced their declines in subsequent months as investors anticipated that the Fed would Interest Rate Levels 10-Year Treasury Note 5-Year Treasury Note 90-Day Treasury Bill 11/30/16 2/17 5/17 8/17 11/30/17 Source: Federal Reserve Board. gradually tighten policy and that inflation would slowly pick up. Most Treasury yields ended the period at higher levels than at the start, with the yield on the benchmark 10-year note increasing to 2.42% at the end of November from 2.21% at the end of May. High yield bonds outperformed their investment-grade peers as rising oil prices brightened the outlook for the energy companies that compose a large part of the high yield market. Low yields on sovereign bonds in most developed markets outside the U.S. also fueled demand for credit, including high yield bonds. Non-U.S. dollar-denominated bonds in developed markets gained as the dollar fell against most developed markets currencies over the period, continuing a depreciation trend that began in January. Over the past six months, the euro and British pound strengthened roughly 6% and 5% against the dollar, respectively, while the Japanese yen slightly declined. The gains in most global currencies versus the dollar helped offset declining prices of government bonds in local currency terms as yields increased in many developed markets. Dollar-denominated emerging markets bonds advanced as relatively higher interest rates in developing countries drew yield-seeking investors. 3
Portfolio Review and Positioning Asset Allocation The Personal Strategy Funds have the ability to overweight or underweight allocations to asset classes or sub-asset classes based on the views of the T. Rowe Price Asset Allocation Committee. The committee meets every month to evaluate economic, market, and earnings trends and to look for opportunities over a 6- to 18-month investment horizon. We typically seek to overweight segments of the market that we believe are undervalued and underweight areas that appear fully valued. Several years of strong performance have left valuations at or above fair value in many asset classes, which has decreased the number of compelling investment opportunities. However, we continue to find opportunities in select areas where valuations appear more attractive and have reduced allocations where we see potential risks. As of November 30, 2017, we are underweight stocks relative to bonds. We maintained this allocation over the reporting period given our view of extended stock valuations, especially in the U.S., and elevated earnings expectations in an environment of modest economic growth. On the other hand, we believe that bonds offer downside protection despite low yields and extended duration. Though interest rates globally are on track to gradually rise in the coming months, inflation remains tame in most markets. Stocks We ended the period overweight to international stocks relative to U.S. stocks. We increased our overweight allocation over the past six months given our view that valuations in the U.S. appear extended relative to stocks in overseas markets, which are benefiting from stronger economic growth, positive earnings trends, and greater exposure to improving global trade. Over the summer, we gradually moved our allocation to emerging markets stocks relative to developed markets stocks from underweight to neutral. Our positioning shift reflected a lower risk of protectionist trade policies being implemented by the Trump administration, as well as supportive economic and earnings growth trends in emerging markets. While the runup in emerging markets stocks has pushed valuations slightly above their historical averages, they are still attractively valued versus their developed markets peers. 4
We maintained an underweight to real assets equities over the period. This stance reflects our continued caution regarding long-term imbalances between global energy supply and demand and our expectations for a slowdown in China, whose government has prioritized slower but more sustainable economic growth in the coming years. As for real estate investment trusts, we believe that they are fairly valued and vulnerable to rising interest rates. We gradually increased our overweight to U.S. small-cap stocks and associated underweight to large-cap stocks as small-cap stocks lagged large-caps for much of this year, making their relative valuations more attractive as a result. Moreover, despite the strong outperformance of large-cap stocks, market leadership has been driven by a few technology and consumer-related companies. We ended the period neutral between U.S. growth and value stocks after reducing our overweight to growth stocks over the summer following a period of significant outperformance. We eliminated our underweight to value, as value-focused sectors such as financials and energy could benefit from increased spending, tax cuts, and deregulation though we believe that low economic growth could restrain the impact of such measures. Bonds We moved to an underweight allocation to high yield bonds relative to U.S. investment-grade bonds in August, departing from a previously neutral stance as valuations became less compelling following a period of strong performance in the high yield sector. Despite the yield advantage that high yield debt has over investment-grade bonds, we believed that high yield bonds offered limited upside potential, particularly if energy prices were to fall or other risks materialized. Our neutral positioning between emerging markets bonds and U.S. investment-grade bonds stayed constant as strong performance for emerging markets bonds in 2017 made their valuations less appealing. While developing economies are broadly in better fiscal shape than they were just a few years ago, individual countries differ widely in their fiscal positions, political stability, and reform progress. We stayed underweight to nondollar bonds relative to U.S. investment-grade bonds and increased the size of our underweight in the fall. Developed markets bonds outside the U.S. have a less attractive outlook due to their low yields and long duration, and European bonds are at risk for capital losses as the European Central 5
Bank draws closer to scaling back its quantitative easing program. Moreover, yields on U.S. investment-grade bonds are the highest among developed markets, and the Fed is expected to continue gradually tightening policy in the coming years. Recent Changes to Underlying Investment Strategies At the end of 2017, we introduced three new investment strategies to the Personal Strategy Funds: the Floating Rate Fund, the U.S. Treasury Long-Term Fund, and the International Bond Fund (USD hedged). These changes are being implemented within the fixed income allocation across the three Personal Strategy Funds, and the process of fully integrating these changes is expected to occur over an extended period of time. The Floating Rate Fund seeks to generate high current income with a lesser focus on capital appreciation by investing in floating rate bank loans and bonds. The U.S. Treasury Long-Term Fund aims to generate a high level of income through investments in long-term U.S. Treasury securities. This fund s weighted average maturity typically ranges from 15 to 20 years but may range from 10 to 30 years. Finally, the International Bond Fund (USD hedged) invests in investmentgrade, nondollar-denominated bonds, most of which are hedged to the U.S. dollar. This fund is intended to give U.S. investors exposure to potentially higher yields or favorable changes in interest rates in overseas bond markets, which often move independently of each other and U.S. markets. The new underlying strategies are intended to increase the diversification benefits within the fixed income allocation for each of the Personal Strategy Funds. By incorporating a broader opportunity set within fixed income, the changes are designed to increase the funds ability to perform well in a variety of market conditions. However, the addition of these strategies will not change the overall strategic, or neutral, allocations assigned to the broad asset classes for each fund or its respective benchmark. 6
Performance Comparison Personal Strategy Income Fund The investment objective of the Personal Strategy Income Fund is to generate the highest total return consistent with a primary emphasis on income and a secondary emphasis on capital appreciation. The fund s typical asset mix is 40% stocks, 55% bonds and cash, and 5% alternatives. The stock and bond allocations can vary as much as 10 percentage points above or below these targets, while the alternatives allocation can vary as much as five percentage points above or below its target. As shown in the Performance Comparison table, the Personal Strategy Income Fund returned 5.36% for the six months ended November 30, 2017, outperforming its combined index benchmark and Lipper peer Performance Comparison Six-Month Period Ended 11/30/17 Total Return Personal Strategy Income Fund 5.36% Personal Strategy Income Fund I Class 5.42 Morningstar Moderately Conservative Target Risk Index 4.55 Combined Index Benchmark 4.54 Lipper Mixed-Asset Target Allocation Conservative Funds Index 3.66 For a definition of the benchmarks, please see the glossary at the end of this report. group index. The Personal Strategy Income Fund s performance versus its peers over longer time periods remained solid: The fund is in the top decile of its Lipper peer group for the trailing 1-, 3-, 5-, and 10-year periods. Based on cumulative total return, Lipper ranked the fund 7 of 353, 16 of 314, 9 of 287, and 12 of 214 mixed-asset target allocation conservative funds for the 1-, 3-, 5-, and 10-year periods, respectively, ended November 30, 2017. (Past performance cannot guarantee future results.) Security selection in the fund s underlying investments contributed the most to relative performance. Favorable security selection among the fund s U.S. large-cap value and U.S. large-cap growth stocks added the most to relative returns, as these underlying strategies outpaced their respective benchmarks. Selection within the fund s international 7
and emerging markets equity strategies was also positive. A modest allocation to alternative investments through a hedge fund-of-funds also helped relative performance. On the other hand, selection in emerging markets bonds and small-cap stocks detracted from relative returns, as both underlying strategies trailed their respective benchmarks over the period. The inclusion of diversifying sectors, especially those within fixed income, also helped relative performance. Our exposure to nondollardenominated bonds in overseas markets lifted relative returns as most global currencies strengthened against the dollar. Additionally, our exposure to emerging markets and high yield bonds contributed to relative performance amid strong risk appetite and rising oil prices, which benefited the energy companies that dominate the high yield market. Conversely, an allocation to real assets weighed on relative returns, as this asset class lagged broader equity markets over the period. Tactical decisions to overweight and underweight asset classes detracted from relative returns. Our underweight to stocks relative to bonds held back our performance versus the benchmark as stronger economic and corporate earnings growth worldwide drove a rally in global stock markets, while bonds produced more muted returns. Microsoft, Amazon.com, and Facebook ranked among the fund s top contributors to absolute returns as investors piled into fast-growing technology companies. Banks and industrial companies such as JPMorgan Chase, Morgan Stanley, and Boeing also performed well as investors bet that they would benefit from anticipated tax cuts, looser regulations, and infrastructure spending. Among non-u.s. stocks, Chinese Internet companies Alibaba and Tencent produced outsized gains as both solidified their dominance in China s online economy. Large detractors included tobacco company Philip Morris International and drugmaker Merck, whose respective shares slumped after each reported disappointing third-quarter earnings, and utility PG&E, whose shares fell amid concerns about its potential liability in deadly wildfires that struck Northern California in October. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) 8
Personal Strategy Balanced Fund The investment objective of the Personal Strategy Balanced Fund is to generate the highest total return consistent with an equal emphasis on income and capital appreciation. The fund s typical asset mix is 60% stocks, 35% bonds and cash, and 5% alternatives. The stocks and bonds allocations can vary as much as 10 percentage points above or below these targets, while the alternatives allocation can vary as much as five percentage points above or below its target. This asset allocation entails higher risk but a higher potential return than the Personal Strategy Income Fund over the long term. As shown in the Performance Comparison table, the Personal Strategy Balanced Fund returned 7.52% for the six months ended November 30, 2017, outperforming its combined index benchmark and Lipper peer group index. The Personal Strategy Balanced Fund s performance versus its peers over longer time periods remained solid: The fund is in the top decile of its Lipper peer group for the trailing 1-, 3-, 5-, and 10-year periods. Based on cumulative total return, Lipper ranked the fund 19 of 549, 6 of 499, 40 of 452, and 12 of 343 mixed-asset target Performance Comparison allocation moderate funds for the 1-, 3-, 5-, Six-Month Period Ended 11/30/17 Total Return and 10-year periods, Personal Strategy Balanced Fund 7.52% respectively, ended Personal Strategy Balanced Fund I Class 7.56 November 30, 2017. Morningstar Moderate Target Risk Index 6.51 (Past performance cannot guarantee future results.) Combined Index Benchmark 6.55 Lipper Mixed-Asset Target Security selection in Allocation Moderate Funds Index 5.73 the fund s underlying investments contributed For a definition of the benchmarks, please see the glossary at the end of this report. the most to relative performance. Favorable security selection among the fund s U.S. large-cap value and U.S. large-cap growth stocks added the most to relative returns, as these underlying strategies outpaced their respective benchmarks. Selection within the fund s international and emerging markets equity strategies was also positive. 9
A modest allocation to alternative investments through a hedge fund-of-funds also helped relative performance. On the other hand, selection in emerging markets bonds and small-cap stocks detracted from relative returns, as both underlying strategies trailed their respective benchmarks over the period. The inclusion of diversifying sectors, especially those within fixed income, also helped relative performance. Our exposure to nondollardenominated bonds in overseas markets lifted relative returns as most global currencies strengthened against the dollar. Additionally, our exposure to emerging markets and high yield bonds contributed to relative performance amid strong risk appetite and rising oil prices, which benefited the energy companies that dominate the high yield market. An allocation to alternative investments through a hedge fund-of-funds also helped relative returns. Conversely, an allocation to real assets weighed on relative returns as this asset class lagged broader equity markets over the period. Tactical decisions to overweight and underweight asset classes detracted from relative returns. Our underweight to stocks relative to bonds held back our performance versus the benchmark as stronger economic and corporate earnings growth worldwide drove a rally in global stock markets, while bonds produced more muted returns. Microsoft, Amazon.com, and Facebook ranked among the fund s top contributors to absolute returns as investors piled into fast-growing technology companies. Banks and industrial companies such as JPMorgan Chase, Morgan Stanley, and Boeing also performed well as investors bet that they would benefit from anticipated tax cuts, looser regulations, and infrastructure spending. Among non-u.s. stocks, Chinese Internet companies Alibaba and Tencent produced outsized gains as both solidified their dominance in China s online economy. Large detractors included tobacco company Philip Morris International and drugmaker Merck, whose respective shares slumped after each reported disappointing third-quarter earnings, and utility PG&E, whose shares fell amid concerns about its potential liability in deadly wildfires that struck Northern California in October. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) 10
Personal Strategy Growth Fund The investment objective of the Personal Strategy Growth Fund is to seek capital appreciation by investing primarily in common stocks. The fund s typical asset mix is 80% stocks, 16% bonds and cash, and 4% alternatives. The allocation to stocks can vary as much as 10 percentage points above or below its target, while the allocation to bonds and cash can vary between 5% and 25%. The alternatives allocation can range from 0% to 10% of the fund. This asset allocation entails higher risk but also a higher potential long-term return than the Personal Strategy Income Fund and the Personal Strategy Balanced Fund. As shown in the Performance Comparison table, the Personal Strategy Growth Fund returned 9.62% for the six months ended November 30, 2017, outperforming its combined index benchmark and Lipper peer group index. The Personal Strategy Growth Fund s performance versus its peers over longer time periods remained solid: The fund is in the top decile of its Lipper peer group for the trailing 1-, 3-, 5-, and 10-year periods. Based on cumulative total return, Lipper ranked the fund 3 of 503, 12 of 452, 13 of 424, and 26 of 316 mixed-asset Performance Comparison Six-Month Period Ended 11/30/17 Total Return Personal Strategy Growth Fund 9.62% Personal Strategy Growth Fund I Class 9.70 Morningstar Moderately Aggressive Target Risk Index 8.54 target allocation growth funds for the 1-, 3-, 5-, and 10-year periods, respectively, ended November 30, 2017. (Past performance cannot guarantee future results.) Combined Index Benchmark 8.59 Security selection in Lipper Mixed-Asset Target the fund s underlying Allocation Growth Funds Index 7.19 investments contributed the most to relative For a definition of the benchmarks, please see the performance. Favorable glossary at the end of this report. security selection among the fund s U.S. large-cap value and U.S. large-cap growth stocks added the most to relative returns, as these underlying strategies outpaced their respective benchmarks. Selection within the fund s international and emerging markets equity strategies was also positive. A modest allocation to alternative investments through a hedge fund-of-funds also helped 11
T. Rowe Price Personal Strategy Funds relative performance. On the other hand, selection in emerging markets bonds and small-cap stocks detracted from relative returns, as both underlying strategies trailed their respective benchmarks over the period. Tactical decisions to overweight and underweight asset classes detracted from relative returns. Our underweight to stocks relative to bonds held back our performance versus the benchmark as stronger economic and corporate earnings growth worldwide drove a rally in global stock markets, while bonds produced more muted returns. The inclusion of diversifying sectors especially those within equity modestly detracted from relative performance. Allocations to real assets and an equity index option strategy weighed on relative returns. Conversely, our exposure to nondollar-denominated bonds in overseas markets lifted relative returns as most global currencies strengthened against the dollar, which extended its declines since January. Microsoft, Amazon.com, and Facebook ranked among the fund s top contributors to absolute returns as investors piled into fast-growing technology companies. Banks and industrial companies such as JPMorgan Chase, Morgan Stanley, and Boeing also performed well as investors bet that they would benefit from anticipated tax cuts, looser regulations, and infrastructure spending. Among non-u.s. stocks, Chinese Internet companies Alibaba and Tencent produced outsized gains as both solidified their dominance in China s online economy. Large detractors included tobacco company Philip Morris International and drugmaker Merck, whose respective shares slumped after each reported disappointing third-quarter earnings, and utility PG&E, whose shares fell amid concerns about its potential liability in deadly wildfires that struck Northern California in October. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) Outlook The broadening global economic recovery should be supportive for risk assets in 2018. However, relatively high stock valuations and low bond yields in many major markets provide little buffer against unexpected market events. Given elevated valuations, we believe that continued strong earnings growth will be required to sustain further 12
T. Rowe Price Personal Strategy Funds stock market gains in the coming year. Regarding fixed income, we expect that low yields, tight credit spreads, and less accommodative central bank policies will leave little room for upside across most fixed income sectors. Despite this environment, bonds offer beneficial attributes within portfolios to counter potential periods of heightened stock market volatility. Positive factors include the potential for U.S. corporate tax cuts to generate further earnings upside and for domestic demand-driven recoveries underway in Europe and Japan to underpin growth prospects in their respective markets. On the other hand, risks to our outlook include a rise in geopolitical or trade tensions or the possibility of a central bank policy misstep. We are encouraged by the supportive factors underpinning our current outlook but are mindful of the geopolitical and policy risks that could derail the current recovery. In light of the many crosscurrents that have the potential to impact global financial markets, we believe that the Personal Strategy Funds broad diversification and T. Rowe Price s strengths in fundamental research will allow us to continue generating solid returns for our shareholders over the long run. Thank you for investing with T. Rowe Price. Respectfully submitted, Charles Shriver Portfolio manager and chairman of the funds Investment Advisory Committee December 15, 2017 The committee chairman has day-to-day responsibility for managing the portfolios and works with committee members in developing and executing the funds investment programs. 13
T. Rowe Price Personal Strategy Funds Risks of Investing As with all stock and bond mutual funds, each fund s share price can fall because of weakness in the stock or bond markets, a particular industry, or specific holdings. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment manager s assessment of companies held in a fund may prove incorrect, resulting in losses or poor performance even in rising markets. Bonds are subject to interest rate risk, the decline in bond prices that usually accompanies a rise in interest rates, and credit risk, the chance that any fund holding could have its credit rating downgraded or that a bond issuer will default (fail to make timely payments of interest or principal), potentially reducing the fund s income level and share price. High yield corporate bonds could have greater price declines than funds that invest primarily in high-quality bonds. Companies issuing high yield bonds are not as strong financially as those with higher credit ratings, so the bonds are usually considered speculative investments. Funds that invest overseas may carry more risk than funds that invest strictly in U.S. assets. Risks can result from varying stages of economic and political development; differing regulatory environments, trading days, and accounting standards; and higher transaction costs of non-u.s. markets. Non-U.S. investments are also subject to currency risk, or a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency. Glossary Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that tracks investment-grade bonds, including corporate, government, and mortgagebacked securities. Bloomberg Barclays Global Aggregate ex U.S. Dollar Bond Index: Tracks the performance of government, corporate, agency, and mortgage-related bonds in Europe, the Asia-Pacific region, and Canada. Citigroup 3-Month Treasury Bill Index: An unmanaged index that tracks short-term U.S. government debt instruments. Combined index benchmarks: Unmanaged portfolios composed of the following underlying indexes as of November 30, 2017: Personal Strategy Income 40% stocks (28% Russell 3000 Index, 12% MSCI All- Country World Index ex USA), 40% bonds (Bloomberg Barclays U.S. Aggregate Bond Index), and 20% money market securities (Citigroup 3-Month Treasury Bill Index). 14
T. Rowe Price Personal Strategy Funds Glossary (continued) Personal Strategy Balanced 60% stocks (42% Russell 3000 Index, 18% MSCI All-Country World Index ex USA), 30% bonds (Bloomberg Barclays U.S. Aggregate Bond Index), and 10% money market securities (Citigroup 3-Month Treasury Bill Index). Personal Strategy Growth 80% stocks (56% Russell 3000 Index, 24% MSCI All-Country World Index ex USA) and 20% bonds (Bloomberg Barclays U.S. Aggregate Bond Index). Credit Suisse High Yield Index: Tracks the performance of domestic noninvestment-grade corporate bonds. Federal funds rate (or target rate): The interest rate charged on overnight loans of reserves by one financial institution to another in the United States. The Federal Reserve sets a target federal funds rate to affect the direction of interest rates. Gross domestic product: The total market value of all goods and services produced in a country in a given year. Lipper Mixed-Asset Target Allocation Conservative Funds Index: A peer group benchmark that measures the performance of similar funds with a mix of between 20% and 40% equities, with the remainder invested in bonds and short-term investments. Lipper Mixed-Asset Target Allocation Growth Funds Index: A peer group benchmark that measures the performance of similar funds with a mix of between 60% and 80% equities, with the remainder invested in bonds and short-term investments. Lipper Mixed-Asset Target Allocation Moderate Funds Index: A peer group benchmark that measures the performance of similar funds with a mix of between 40% and 60% equities, with the remainder invested in bonds and short-term investments. Morningstar Moderate Target Risk Index: Represents a portfolio of global equities (fixed at 60%), bonds, and other asset classes. Morningstar Moderately Aggressive Target Risk Index: Represents a portfolio of global equities (fixed at 80%), bonds, and other asset classes. Morningstar Moderately Conservative Target Risk Index: Represents a portfolio of global equities (fixed at 40%), bonds, and other asset classes. MSCI All Country World Index ex USA: An index that measures equity market performance of developed and emerging countries, excluding the U.S. MSCI Emerging Markets Index: A capitalization-weighted index of stocks from emerging market countries that only includes securities that may be traded by foreign investors. 15
T. Rowe Price Personal Strategy Funds Glossary (continued) Russell 3000 Index: An index that tracks the performance of the 3,000 largest U.S. companies, representing approximately 98% of the investable U.S. equity market. S&P 500 Index: An index that tracks the stocks of 500 primarily large-cap U.S. companies. Note: Bloomberg Index Services Ltd. Copyright 2017, Bloomberg Index Services Ltd. Used with permission. Note: MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI. Note: Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell is a trademark of Russell Investment Group. 16
T. Rowe Price Personal Strategy Funds Portfolio Highlights PORTFOLIO OVERVIEW Personal Strategy Income Reserves 8.6% Bonds 48.6 Stocks 38.3 Hedged Fund 4.5 Total 100.0% Percent of Percent of Net Assets Net Assets 11/30/17 11/30/17 Largest Stock Holdings Microsoft 1.0% Amazon.com 1.0 Alphabet 0.7 JPMorgan Chase 0.6 Facebook 0.6 Personal Strategy Balanced Reserves 1.9% Bonds 35.1 Stocks 58.2 Hedged Fund 4.8 Total 100.0% Largest Stock Holdings Microsoft 1.5% Amazon.com 1.5 Alphabet 1.0 JPMorgan Chase 1.0 Facebook 0.9 Personal Strategy Growth Reserves 1.7% Bonds 16.7 Stocks 77.7 Hedged Fund 3.9 Total 100.0% Largest Stock Holdings Microsoft 2.0% Amazon.com 2.0 Alphabet 1.4 JPMorgan Chase 1.3 Facebook 1.2 17
T. Rowe Price Personal Strategy Funds 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. PERSONAL STRATEGY INCOME FUND $35,000 30,000 25,000 20,000 15,000 10,000 As of 11/30/17 Personal Strategy Income Fund $17,608 Linked Performance Benchmark* $19,390 Morningstar Moderately Conservative Target Risk Index $16,250 Lipper Mixed-Asset Target Allocation Conservative Funds Index $15,624 11/07 11/08 11/09 11/10 11/11 11/12 11/13 11/14 11/15 11/16 11/17 Note: Performance for the I Class will vary due to its differing fee structure. See returns table below. *The linked performance benchmark reflects the performance of the Bloomberg Barclays U.S. Aggregate Bond Index to 6/30/09 and the performance of the Morningstar Moderately Conservative Target Risk Index from 7/1/09 forward. Average Annual Compound Total Return Since Inception Periods Ended 11/30/17 1 Year 5 Years 10 Years Inception Date Personal Strategy Income Fund 13.40% 7.14% 5.82% Personal Strategy Income Fund I Class 13.46 10.63% 3/23/16 This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. Past performance cannot guarantee future results. 18
T. Rowe Price Personal Strategy Funds 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. PERSONAL STRATEGY BALANCED FUND $35,000 30,000 25,000 20,000 15,000 10,000 As of 11/30/17 Personal Strategy Balanced Fund $18,969 Linked Performance Benchmark* $17,094 Morningstar Moderate Target Risk Index $17,335 Lipper Mixed-Asset Target Allocation Moderate Funds Index $16,285 11/07 11/08 11/09 11/10 11/11 11/12 11/13 11/14 11/15 11/16 11/17 Note: Performance for the I Class will vary due to its differing fee structure. See returns table below. *The linked performance benchmark reflects the performance of the Merrill Lynch-Wilshire Capital Market Index to 6/30/09 and the performance of the Morningstar Moderate Target Risk Index from 7/1/09 forward. Average Annual Compound Total Return Since Inception Periods Ended 11/30/17 1 Year 5 Years 10 Years Inception Date Personal Strategy Balanced Fund 18.05% 9.58% 6.61% Personal Strategy Balanced Fund I Class 18.15 14.22% 3/23/16 This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. Past performance cannot guarantee future results. 19
T. Rowe Price Personal Strategy Funds 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. PERSONAL STRATEGY GROWTH FUND $35,000 30,000 25,000 20,000 15,000 10,000 As of 11/30/17 Personal Strategy Growth Fund $19,473 Linked Performance Benchmark* $19,807 Morningstar Moderately Aggressive Target Risk Index $18,060 Lipper Mixed-Asset Target Allocation Growth Funds Index $18,012 11/07 11/08 11/09 11/10 11/11 11/12 11/13 11/14 11/15 11/16 11/17 Note: Performance for the I Class will vary due to its differing fee structure. See returns table below. *The linked performance benchmark reflects the performance of the Merrill Lynch-Wilshire Capital Market Index to 6/30/09 and the performance of the Morningstar Moderately Aggressive Target Risk Index from 7/1/09 forward. Average Annual Compound Total Return Since Inception Periods Ended 11/30/17 1 Year 5 Years 10 Years Inception Date Personal Strategy Growth Fund 22.73% 11.88% 6.89% Personal Strategy Growth Fund I Class 22.90 17.71% 3/23/16 This table shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. Past performance cannot guarantee future results. 20
T. Rowe Price Personal Strategy Funds 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 two share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee, and the I Class shares are also 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. 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. 21
T. Rowe Price Personal Strategy Funds Fund Expense Example (continued) Personal Strategy Income Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 6/1/17 11/30/17 6/1/17 to 11/30/17 Investor Class Actual $1,000.00 $1,053.60 $2.11 Hypothetical (assumes 5% return before expenses) 1,000.00 1,023.01 2.08 I Class Actual 1,000.00 1,054.20 1.65 Hypothetical (assumes 5% return before expenses) 1,000.00 1,023.46 1.62 * 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 (183), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.41%, and the I Class was 0.32%. Personal Strategy Balanced Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 6/1/17 11/30/17 6/1/17 to 11/30/17 Investor Class Actual $1,000.00 $1,075.20 $2.91 Hypothetical (assumes 5% return before expenses) 1,000.00 1,022.26 2.84 I Class Actual 1,000.00 1,075.60 2.24 Hypothetical (assumes 5% return before expenses) 1,000.00 1,022.91 2.18 * 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 (183), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.56%, and the I Class was 0.43%. 22
T. Rowe Price Personal Strategy Funds Fund Expense Example (continued) Personal Strategy Growth Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 6/1/17 11/30/17 6/1/17 to 11/30/17 Investor Class Actual $1,000.00 $1,096.20 $3.47 Hypothetical (assumes 5% return before expenses) 1,000.00 1,021.76 3.35 I Class Actual 1,000.00 1,097.00 2.79 Hypothetical (assumes 5% return before expenses) 1,000.00 1,022.41 2.69 * 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 (183), and divided by the days in the year (365) to reflect the half-year period. The annualized expense ratio of the Investor Class was 0.66%, and the I Class was 0.53%. 23
T. Rowe Price Personal Strategy Funds Quarter-End Returns Since Inception Periods Ended 9/30/17 1 Year 5 Years 10 Years Inception Date Personal Strategy Income Fund 9.41% 6.85% 5.64% Personal Strategy Income Fund I Class 9.47 10.45% 3/23/16 Personal Strategy Balanced Fund 13.36 9.07 6.26 Personal Strategy Balanced Fund I Class 13.50 13.80 3/23/16 Personal Strategy Growth Fund 17.40 11.16 6.34 Personal Strategy Growth Fund I Class 17.54 16.97 3/23/16 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 1-800-225-5132 or, for I Class shares, 1-800-638-8790. This table provides returns through the most recent calendar quarter-end rather than through the end of the funds fiscal period. It shows how each fund would have performed each year if its actual (or cumulative) returns for the periods shown 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. Expense Ratio Personal Strategy Income Fund 0.75% Personal Strategy Income Fund I Class 0.68 Personal Strategy Balanced Fund 0.87 Personal Strategy Balanced Fund I Class 0.75 Personal Strategy Growth Fund 0.88 Personal Strategy Growth Fund I Class 0.76 The expense ratio shown is as of each fund s fiscal year ended 5/31/17. 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. 24
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T. Rowe Price Mutual Funds This page contains supplementary information that is not part of the shareholder report. STOCK FUNDS BOND FUNDS Domestic Domestic Taxable Blue Chip Growth Corporate Income Capital Appreciation Credit Opportunities Capital Opportunity Floating Rate Diversified Mid-Cap Growth GNMA Dividend Growth High Yield Equity Income Inflation Protected Bond Equity Index 500 Limited Duration Inflation Extended Equity Market Index Focused Bond Financial Services New Income Growth & Income Short-Term Bond Growth Stock Total Return Health Sciences Ultra Short-Term Bond Media & Telecommunications U.S. Bond Enhanced Index Mid-Cap Growth U.S. High Yield Mid-Cap Value U.S. Treasury Intermediate New America Growth U.S. Treasury Long-Term New Era New Horizons Domestic Tax-Free California Tax-Free Bond QM U.S. Small & Mid-Cap Core Equity Georgia Tax-Free Bond QM U.S. Small-Cap Growth Equity Intermediate Tax-Free High Yield QM U.S. Value Equity Maryland Short-Term Tax-Free Bond Real Estate Maryland Tax-Free Bond Science & Technology Small-Cap Stock New Jersey Tax-Free Bond New York Tax-Free Bond Small-Cap Value Summit Municipal Income Tax-Efficient Equity Summit Municipal Intermediate Total Equity Market Index Tax-Free High Yield U.S. Large-Cap Core Tax-Free Income Value Tax-Free Short-Intermediate Virginia Tax-Free Bond ASSET ALLOCATION FUNDS Balanced Global Allocation Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Real Assets Spectrum Growth Spectrum Income Spectrum International Target Date Fundsˆ MONEY MARKET FUNDS Taxable Cash Reserves 1 Government Money 2 U.S. Treasury Money 2 MONEY MARKET FUNDS (cont.) Tax-Free California Tax-Free Money 1 Maryland Tax-Free Money 1 New York Tax-Free Money 1 Summit Municipal Money Market 1 Tax-Exempt Money 1 INTERNATIONAL/GLOBAL FUNDS Stock Africa & Middle East Asia Opportunities Emerging Europe Emerging Markets Stock Emerging Markets Value Stock European Stock Global Consumer Global Growth Stock Global Industrials Global Real Estate Global Stock Global Technology International Concentrated Equity International Discovery International Equity Index International Stock International Value Equity Japan Latin America New Asia Overseas Stock QM Global Equity Bond Dynamic Global Bond Emerging Markets Bond Emerging Markets Corporate Bond Emerging Markets Local Currency Bond Global High Income Bond Global Multi-Sector Bond International Bond International Bond (USD Hedged) 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. 201801-326086 T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 C11-051 1/18