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MAJOR EVENTS IN
T. Rowe Price HISTORY (continued)

1987

Establishes a research office in Hong Kong as part of efforts to promote proprietary global research.
Offices in Buenos Aires and Singapore follow soon.

LATE 1990s

Bull market in which the S&P 500 Index posts annual total returns greater than 21%.

to extend the firm's commitment to service and excellence into a while new arena. Total assets under management reach $100 billion.

1999

T. Rowe Price added to the S&P
500 Index.

2000

Forms T. Rowe Price International when the firm acquires full
ownership of Rowe Price-Fleming International. The move enhances
the firm's ability to distribute investment products outside
the United States.

These funds would reach $8 billion in assets in just two years — a new record in asset growth.

with the establishment of offices in Amsterdam and Sydney, underscoring the firm's growing presence in internation markets.

2012

T. Rowe Price turns 75 with more than 5,000 associates, 103 funds, and $489.5 billion* in assets
under management.

*As of December 31, 2011.

INNOVATION

Since its founding, T. Rowe Price has taken a client-centered approach to new investment products. Consider the key challenge most investors face: How to build sufficient assets to ensure adequate income during a retirement that could last 30 years or more. The industry's first target-date funds were introduced in the mid-1990s to address this issue. Jerome Clark, portfolio manager of the T. Rowe Price Retirement Funds, and his research team took time to study the new concept. "This was a new area, and we wanted to be sure we fully understood all the implications," says Clark. "We asked ourselves if this product would truly benefit investors."

His research team found that the most significant risk faced by retirement investors was the chance that they would outlive their savings. At the time, many investors were struggling to make asset allocation decisions that accurately reflected their time horizons and risk tolerances. Young investors often held a mix of investments that was far too conservative for their age, while older investors frequently held positions that were too aggressive—and both groups typically neglected to adjust their allocations over time. Extensive research and modeling at the firm resulted in the introduction, in 2002, of the T. Rowe Price Retirement Funds.¹ Each professionally managed fund invests in a diversified range of T. Rowe Price stock and bond mutual funds, with a base asset allocation set to retirement time horizons. Investors choose the fund date that is closest to the year they will turn (or turned) age 65. The fund doesn't hit a static allocation at this age; instead, the target date determines how the fund's allocation will shift leading up to and during retirement. A feature that sets the funds apart is the higher equity allocation, which provides the growth exposure needed to fund a lengthy retirement. Says Clark, "We stepped back and developed a product that we believe serves investors very well."

A focus on clients has led the firm to innovate in other areas as well. In recent years, with the fiscal crisis slowing growth in Europe and the U.S., finding opportunity in fixed income has become increasingly important. T. Rowe Price's Fixed Income Division has introduced several new mutual funds that allow investors to broaden their exposure to new and growing segments of global fixed income markets. Last year, for example, the firm launched the Emerging Markets Local Currency Bond Fund, which enables U.S. investors to gain exposure to emerging market sovereign debt denominated in local currencies.² Many emerging markets, Gitlin observes, have strong underlying fundamentals, including superior gross domestic product (GDP) growth, low debt-to-GDP ratios, and low deficit-to-GDP ratios. He points out that the fund gives investors access to the higher yields that can be found in emerging markets, in addition to diversification away from the U.S. dollar. But there was no rush to create the fund. "The firm avoids developing new products for novelty's sake," he says. "We may, at times, be less aggressive than some of our competitors in launching products—and we won't launch them if we don't believe they offer a durable investment case. Our core value is doing what is right for clients."

PUTTING CLIENTS FIRST

Thomas Rowe Price, Jr., believed that a buy-and-hold approach was the surest path to investment success. While T. Rowe Price employs a variety of investment strategies within its mutual funds today, a long-term view and a sharp focus on clients' needs remain central to the firm's approach—even in the most challenging conditions. "We all work for the clients every day," says Kennedy. "You can't do that without outstanding people. Thomas Rowe Price, Jr., believed that, and we still do."

This approach has stood the test of time and will continue to do so in the years ahead. That heritage, and a commitment to put the clients' interests above all else, gives T. Rowe Price the ability to sustain and strengthen its long-term perspective in the years to come.

The Firm Price Built

In 1937, Thomas Rowe Price, Jr., left a brokerage business to start his own firm. He believed clients should pay him based on his performance and not the number of commissions he could charge them.

After graduating from Swarthmore College in 1919 with a degree in chemistry, Thomas Rowe Price, Jr., worked for a stamping and enameling company, a large chemical maker, and several investment companies. Price gave new meaning to the term "honest broker"; by 1937, he had grown frustrated with the commission-based industry standard. In Price's view, his compensation should be based on how well he performed for his clients, a practice that continues at the firm 75 years after its founding. "Mr. Price was driven to perform for his clients, and he felt—properly so—that if he was paid based on performance it would align him much more with the client than if he got paid based on commissions," says Jim Kennedy, president and chief executive officer of T. Rowe Price.

While Price was confident, he did have some doubts that he would succeed. He was, after all, about to start a financial services company as the country was still recovering from the Great Depression. "I may be a darn fool," he wrote in his diary in 1937, "but I am going to have the satisfaction of knowing that I tried to build my own business. If I later fail, I will have no regrets."

"Each security, like a carpenter's tool, is selected to do a particular job well. The whole chest of tools, or security portfolio, should be picked to assure each investor what he needs and wants for protection as well as gain."
—T. Rowe Price, Jr., 1949

Price was neither a fool nor a failure. The principles he practiced—a firm belief in the wisdom of a long-term investment horizon, being an honest broker to his clients, hard work, and creating a collaborative work force—have guided the firm for three-quarters of a century. When Price retired in 1971, the firm he founded had amassed $4.7 billion in assets under management. When he died in 1983, he was lauded as a visionary investor and for his many achievements—among them, his lead role in creating the Growth Stock Fund, the New Horizons Fund of small-cap growth companies, and the New Era Fund.

George Roche, who joined the firm as a natural resources analyst in 1968 and became the company's president and chairman, describes the founder as demanding but open to new ideas. "Mr. Price liked to talk about the fact that change is the investor's only certainty," Roche says. "His willingness to change, to work extremely hard, and to invest in areas that were not popular but that had great long-term potential, made him a most unusual and able investor."

Many of the innovations at the company arose in large measure from a corporate culture that emphasizes collaboration. "Mr. Price always loved a good argument about investing," remembers Roche, who retired in 2006. "As long as he thought your conclusions were reasonable, he would listen to you with a lot of respect—even if he disagreed. He truly welcomed different opinions."
In many ways, Price's management approach is his most enduring legacy. "Over the years, I've learned that you don't create a corporate culture with words; you create it with behavior," says Jim Reipe, who was vice chairman of T. Rowe Price and retired in 2005. "When leaders in the firm consistently behave in the same way over time—with mutual respect and a high level of integrity—that is how you create a culture. And I'm proud to say that we've achieved that at T. Rowe Price."

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