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

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1 SEMIaNNual REPORT June 30, 2015 PRFDX PAFDX RRFDX T. Rowe Price Equity Income Fund Equity Income Fund Advisor Class Equity Income Fund R Class The fund invests in value-oriented stocks.

2 HIGHLIGHTS The equity market turned in its weakest first-half showing since 2010 as investors focused on slowing corporate earnings growth and the expectation that the Fed would begin to raise interest rates later this year. Fund performance was slightly negative during the six-month period ended June 30, 2015, as fears of rising interest rates put pressure on fixed income securities and dividend-paying stocks. Our energy stocks were disappointing, with oil prices continuing to slide. However, the portfolio s financial and health care positions, and other key holdings, benefited results. With equity valuations neutral at best, we have modest expectations for stock price gains in the second half of the year. 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 The equity market advanced only slightly in the first half of 2015, its weakest firsthalf showing since Investors focused on slowing corporate earnings growth and the expectation that the Fed would begin to raise interest rates later this year. These concerns had an impact on fixed income markets and stocks paying good dividends, which declined as long-term rates rose slightly. In addition, worries about Greece, the eurozone, and the Chinese economy subdued investor sentiment. After six years of stock price gains, investors were content to take a breather. Performance Comparison Dividends accounted Six-Month Period Ended 6/30/15 Equity Income Fund Total Return -1.59% for the bulk of the S&P 500 Index s return during the first half of Equity Income Fund Advisor Class the year. The Equity Income Fund returned Equity Income Fund R Class % during the S&P 500 Index Lipper Equity Income Funds Index six-month period ended June 30, 2015, compared with 1.23% for the S&P 500 Index and -0.62% for the Lipper Equity Income Funds Index. (Returns for the Advisor and R Class shares are also shown and reflect their different fee structures.) Weakness in fixed income, which affected higher-yielding stocks, took a toll on fund results during the period. In addition, our holdings in the energy sector, which declined sharply as oil prices remained volatile, trimmed fund performance. DIVIDEND DISTRIBUTION On June 26, 2015, your Board of Trustees declared a secondquarter dividend of $0.17 per share for shareholders of record on the same date, bringing the year-to-date dividend distributions to 1

4 $0.28 per share. You should have received your check or statement reflecting this most recent distribution. (Distributions for the Advisor and R Class shares were different.) PORTFOLIO REVIEW From the beginning of the year to the end of June, there was not much overall movement in equity prices, which masked the dramatic volatility in individual stocks and throughout sectors over the six-month period. As fixed income markets weakened, the electric utility sector was notably weak, with most companies posting price declines in excess of 10%. Oil stocks continued to lose ground, with the sector off almost 5% in the first half. Financials and other sectors performed better, and two of our holdings, JPMorgan Chase and GE, which had underperformed in 2014, contributed positively to fund results in the first half. Other portfolio holdings, such as Vulcan Materials, Boeing, Harris, Stanley Black & Decker, Walt Disney, Bristol-Myers Squibb, and Pfizer, were profitable investments. Our disappointments included several energy Sector Diversification Percent of Net Assets 12/31/14 6/30/15 Financials 19.3% 21.4% Industrials and Business Services Consumer Discretionary Energy Information Technology Health Care Utilities Materials Consumer Staples Telecommunication Services Other and Reserves Total 100.0% 100.0% Historical weightings reflect current industry/sector classifications. stocks Apache, Chevron, and Royal Dutch Shell among them. American Express struggled through the period. A few technology holdings, which included Qualcomm and Corning, also detracted from performance. (Please refer to the fund s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.) The Major Portfolio Changes table shows that we invested in companies that have the characteristics we like to see in our portfolio. 2

5 Occidental Petroleum, Las Vegas Sands, and Canadian Natural Resources are examples of firms that have been out of favor and exhibit contrarian appeal. Their recent price declines have created opportunities to initiate positions in solid companies with undervalued stocks. Their dividend yields are attractive, and we believe their share Financial Profile Equity Income S&P 500 As of 6/30/15 Fund Index Price/Book Ratio 2.5X 3.6X Price/Earnings Ratio (Based on next 12 months estimated earnings)* 16.2X 17.2X 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. prices do not reflect the underlying value of the companies. Regarding our sales, we eliminated Quest Diagnostics and Apple, and we reduced our exposure to Murphy Oil. Both Quest Diagnostics and Apple had performed well for us, and they advanced to the point where we felt that other investment opportunities were more attractive. OUTLOOK We expect steady, albeit modest, economic growth in the second half of the year. Earnings growth should be similarly modest as the impact of lower oil prices and the strong U.S. dollar should continue to weigh on S&P 500 earnings. While record corporate profit margins have had a positive effect on earnings, we believe that there will be some downward pressure on margins as the economy continues to grow and cost pressures rise. Investors continue to focus on every statement from the Federal Reserve, which is suggesting that it is likely to raise rates sometime in the second half. The Fed will evaluate both global economic conditions and the underlying tone of the U.S. economy as it considers its next move. With equity valuations neutral at best, we have modest expectations for stock price gains in the second half of the year. As always, we hope to be pleasantly surprised if our expectations are exceeded. In closing, we announced last year that John Linehan would succeed me as Equity Income Fund portfolio manager on November 1, Consequently, this will be my last shareholder report to you. John and 3

6 I have been working together closely to ensure a smooth transition. November 1 will be the 30 th anniversary of the introduction of the Equity Income Fund, and it has been an honor for me to work for you during the past three decades. I have every confidence that John will do an outstanding job in the years ahead. Respectfully submitted, Brian C. Rogers President of the fund and chairman of its Investment Advisory Committee July 20, 2015 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. 4

7 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-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 the company s future earnings. The higher the P/E, the more investors are paying for the 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 the company s future earnings. The higher the P/E, the more investors are paying for the 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. 5

8 Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 6/30/15 JPMorgan Chase 3.1% GE 3.1 Wells Fargo 2.4 U.S. Bancorp 1.9 Bank of America 1.9 Chevron 1.8 PNC Financial Services Group 1.8 Johnson & Johnson 1.7 ExxonMobil 1.7 AT&T 1.6 Pfizer 1.6 Marsh & McLennan 1.5 Apache 1.5 NiSource 1.5 Time Warner 1.5 Bristol-Myers Squibb 1.4 Merck 1.4 Hess 1.3 Boeing 1.3 Illinois Tool Works 1.3 Northern Trust 1.3 International Paper 1.2 Royal Dutch Shell 1.2 Duke Energy 1.2 SunTrust 1.2 Total 41.4% 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. 6

9 Portfolio Highlights MAJOR PORTFOLIO CHANGES Listed in descending order of size. Six Months Ended 6/30/15 Largest Purchases Occidental Petroleum* Las Vegas Sands* Flowserve Viacom* Canadian Natural Resources* McDonald s Loews MetLife Kellogg Mattel Largest Sales Quest Diagnostics** Apple** Murphy Oil Schlumberger Talisman Energy** Illinois Tool Works Pearson** Honeywell International Kohl s Carnival 12 Months Ended 6/30/15 Largest Purchases MetLife* Occidental Petroleum* Qualcomm Las Vegas Sands* Loews McDonald s* IBM Flowserve* Rayonier* News Corp* Largest Sales Apple** United Continental** Legg Mason** Quest Diagnostics** Petrobras** Allstate** Schlumberger Murphy Oil Honeywell International Madison Square Garden** * Position added. ** Position eliminated. 7

10 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 $30,000 26,000 22,000 18,000 14,000 10,000 As of 6/30/15 Equity Income Fund $19,103 S&P 500 Index $21,377 Lipper Equity Income Funds Index $19,284 6/05 6/06 6/07 6/08 6/09 6/10 6/11 6/12 6/13 6/14 6/15 Note: Performance for the Advisor and R Classes will vary due to their differing fee structures. See returns table below. Average Annual Compound Total Return Periods Ended 6/30/15 1 Year 5 Years 10 Years Equity Income Fund -0.33% 14.30% 6.69% Equity Income Fund Advisor Class Equity Income Fund R Class 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 contact a T. Rowe Price representative at or, for Advisor and R 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. 8

11 Expense Ratio Equity Income Fund 0.66% Equity Income Fund Advisor Class 0.94 Equity Income Fund R Class 1.20 The expense ratio shown is as of the fund s fiscal year ended 12/31/14. 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 three 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, and R Class shares are available to retirement plans serviced by intermediaries and charge a 0.50% 12b-1 fee. 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. 9

12 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 Preferred Services, Personal Services, or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $100,000). 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. Equity Income Fund Beginning Ending Expenses Paid Account Value Account Value During Period* 1/1/15 6/30/15 1/1/15 to 6/30/15 Investor Class Actual $1, $ $3.25 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, , * 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 0.66%, the Advisor Class was 0.92%, and the R Class was 1.19%. 10

13 Unaudited Financial Highlights For a share outstanding throughout each period Investor Class 6 Months Ended 6/30/15 Year Ended 12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.28 (2) 0.64 (2) 0.54 (2) 0.55 (2) 0.47 (2) 0.43 (2) Net realized and unrealized gain / loss (0.80) (0.65) 2.71 Total from investment activities (0.52) (0.18) 3.14 Distributions Net investment income (0.28) (0.66) (0.54) (0.56) (0.45) (0.44) Net realized gain (1.78) (0.85) Total distributions (0.28) (2.44) (1.39) (0.56) (0.45) (0.44) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (3) (1.59)% (2) 7.49% (2) 29.75% (2) 17.25% (2) (0.72)% (2) 15.15% (2) Ratio of total expenses to average net assets 0.66% (2)(4) 0.66% (2) 0.67% (2) 0.68% (2) 0.68% (2) 0.68% (2) Ratio of net investment income to average net assets 1.72% (2)(4) 1.92% (2) 1.77% (2) 2.20% (2) 2.00% (2) 2.01% (2) 11

14 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/15 Ratios/Supplemental Data (continued) Year Ended 12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 Portfolio turnover rate 3.8% 9.7% 9.5% 15.6% 15.3% 12.4% Net assets, end of period (in millions) $ 25,745 $ 28,254 $ 26,851 $ 22,111 $ 19,348 $ 18,748 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 5. Excludes expenses permanently waived 0.00%, 0.00%, 0.00%, 0.00%, 0.00%, and 0.01% of average net assets for the six months ended 6/30/15 and the years ended 12/31/14, 12/31/13, 12/31/12, 12/31/11, and 12/31/10, respectively, related to investments in T. Rowe Price mutual funds. (3) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. (4) Annualized The accompanying notes are an integral part of these financial statements. 12

15 Unaudited Financial Highlights For a share outstanding throughout each period Advisor Class 6 Months Ended 6/30/15 Year Ended 12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.24 (2) 0.56 (2) 0.45 (2) 0.49 (2) 0.42 (2) 0.38 (2) Net realized and unrealized gain / loss (0.80) (0.65) 2.70 Total from investment activities (0.56) (0.23) 3.08 Distributions Net investment income (0.24) (0.55) (0.46) (0.49) (0.40) (0.39) Net realized gain (1.78) (0.85) Total distributions (0.24) (2.33) (1.31) (0.49) (0.40) (0.39) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (3) (1.72)% (2) 7.18% (2) 29.44% (2) 16.92% (2) (0.94)% (2) 14.87% (2) Ratio of total expenses to average net assets 0.92% (2)(4) 0.93% (2) 0.94% (2) 0.93% (2) 0.92% (2) 0.92% (2) Ratio of net investment income to average net assets 1.46% (2)(4) 1.66% (2) 1.49% (2) 1.95% (2) 1.78% (2) 1.77% (2) 13

16 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/15 Ratios/Supplemental Data (continued) Year Ended 12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 Portfolio turnover rate 3.8% 9.7% 9.5% 15.6% 15.3% 12.4% Net assets, end of period (in millions) $ 1,075 $ 1,392 $ 2,561 $ 2,092 $ 1,932 $ 1,618 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 5. Excludes expenses permanently waived 0.00%, 0.00%, 0.00%, 0.00%, 0.00%, and 0.01% of average net assets for the six months ended 6/30/15 and the years ended 12/31/14, 12/31/13, 12/31/12, 12/31/11, and 12/31/10, respectively, related to investments in T. Rowe Price mutual funds. (3) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. (4) Annualized The accompanying notes are an integral part of these financial statements. 14

17 Unaudited Financial Highlights For a share outstanding throughout each period R Class 6 Months Ended 6/30/15 Year Ended 12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 NET ASSET VALUE Beginning of period $ $ $ $ $ $ Investment activities Net investment income (1) 0.19 (2) 0.46 (2) 0.37 (2) 0.42 (2) 0.34 (2) 0.32 (2) Net realized and unrealized gain / loss (0.80) (0.64) 2.70 Total from investment activities (0.61) (0.30) 3.02 Distributions Net investment income (0.19) (0.48) (0.38) (0.42) (0.32) (0.34) Net realized gain (1.78) (0.85) Total distributions (0.19) (2.26) (1.23) (0.42) (0.32) (0.34) NET ASSET VALUE End of period $ $ $ $ $ $ Ratios/Supplemental Data Total return (3) (1.87)% (2) 6.91% (2) 29.07% (2) 16.62% (2) (1.24)% (2) 14.58% (2) Ratio of total expenses to average net assets 1.19% (2)(4) 1.19% (2) 1.20% (2) 1.22% (2) 1.21% (2) 1.20% (2) Ratio of net investment income to average net assets 1.20% (2)(4) 1.39% (2) 1.23% (2) 1.65% (2) 1.47% (2) 1.49% (2) 15

18 Unaudited Financial Highlights For a share outstanding throughout each period 6 Months Ended 6/30/15 Ratios/Supplemental Data (continued) Year Ended 12/31/14 12/31/13 12/31/12 12/31/11 12/31/10 Portfolio turnover rate 3.8% 9.7% 9.5% 15.6% 15.3% 12.4% Net assets, end of period (in thousands) $ 275,907 $ 353,908 $ 351,544 $ 270,641 $ 243,083 $ 229,907 (1) Per share amounts calculated using average shares outstanding method. (2) See Note 5. Excludes expenses permanently waived 0.00%, 0.00%, 0.00%, 0.00%, 0.00%, and 0.01% of average net assets for the six months ended 6/30/15 and the years ended 12/31/14, 12/31/13, 12/31/12, 12/31/11, and 12/31/10, respectively, related to investments in T. Rowe Price mutual funds. (3) Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. Total return is not annualized for periods less than one year. (4) Annualized The accompanying notes are an integral part of these financial statements. 16

19 Unaudited June 30, 2015 Portfolio of Investments Shares $ Value (Cost and value in $000s) COMMON STOCKS 96.3% CONSUMER DISCRETIONARY 12.9% Auto Components 0.7% Johnson Controls 4,000, , ,120 Automobiles 1.1% Ford Motor 10,000, ,100 General Motors 4,660, , ,418 Distributors 0.7% Genuine Parts 1,956, , ,121 Hotels, Restaurants & Leisure 2.2% Carnival 5,000, ,950 Las Vegas Sands 3,250, ,852 McDonald's 1,750, , ,175 Leisure Products 1.0% Mattel 11,005, , ,739 Media 4.3% Cablevision Systems, Class A 6,515, ,979 Comcast, Class A 2,608, ,887 New York Times, Class A 6,589,200 89,943 News Corp, Class A (1) 6,250,000 91,187 Time Warner 4,502, ,593 Viacom, Class B 1,350,000 87,264 Walt Disney 1,700, ,038 1,168,891 17

20 (Cost and value in $000s) Shares $ Value Multiline Retail 1.8% Kohl's 4,250, ,093 Macy's 3,423, , ,083 Specialty Retail 0.8% Staples 14,250, , ,167 Textiles, Apparel & Luxury Goods 0.3% Coach 2,000,000 69,220 69,220 Total Consumer Discretionary 3,498,934 CONSUMER STAPLES 4.6% Beverages 0.9% PepsiCo 2,495, , ,958 Food Products 2.7% Archer-Daniels-Midland 6,333, ,406 Campbell Soup 3,232, ,048 ConAgra 1,000,000 43,720 Kellogg 1,350,000 84,645 McCormick 1,655, , ,815 Household Products 0.8% Clorox 2,139, , ,520 18

21 (Cost and value in $000s) Shares $ Value Personal Products 0.2% Avon 10,332,400 64,681 64,681 Total Consumer Staples 1,241,974 ENERGY 11.3% Energy Equipment & Services 0.6% Diamond Offshore Drilling 3,750,000 96,788 Schlumberger 926,400 79, ,634 Oil, Gas & Consumable Fuels 10.7% Anadarko Petroleum 2,180, ,225 Apache 7,000, ,410 BP, ADR 3,315, ,495 Canadian Natural Resources 3,000,000 81,480 Chevron 5,000, ,350 ConocoPhillips 1,665, ,254 CONSOL Energy 6,200, ,788 Exxon Mobil 5,414, ,461 Hess 5,250, ,120 Murphy Oil 1,012,100 42,073 Occidental Petroleum 2,750, ,868 Royal Dutch Shell, A Shares, ADR 5,819, ,753 2,896,277 Total Energy 3,072,911 FINANCIALS 21.4% Banks 12.7% Bank of America 29,700, ,511 JPMorgan Chase 12,531, ,114 PNC Financial Services Group 5,000, ,250 19

22 (Cost and value in $000s) Shares $ Value Regions Financial 10,510, ,890 SunTrust 7,615, ,627 U.S. Bancorp 11,992, ,488 Wells Fargo 11,569, ,674 3,440,554 Capital Markets 1.4% Bank of New York Mellon 200,000 8,394 Northern Trust 4,500, ,070 Och-Ziff Capital Management, Partnership 2,782,500 34, ,466 Consumer Finance 1.0% American Express 3,388, , ,339 Insurance 4.5% Chubb 1,266, ,476 Loews 6,000, ,060 Marsh & McLennan 7,272, ,356 MetLife 4,750, ,953 Sun Life Financial 3,315, ,721 Willis Group Holdings 1,829,441 85,801 1,226,367 Real Estate Investment Trusts 1.8% Digital Realty Trust, REIT 2,250, ,030 Rayonier, REIT 4,000, ,200 Weyerhaeuser, REIT 6,921, , ,266 Total Financials 5,786,992 20

23 (Cost and value in $000s) HEALTH CARE 6.5% Shares $ Value Pharmaceuticals 6.5% Bristol-Myers Squibb 5,814, ,917 GlaxoSmithKline (GBP) 6,250, ,874 Johnson & Johnson 4,633, ,532 Merck 6,625, ,201 Pfizer 12,737, ,075 Total Health Care 1,772,599 INDUSTRIALS & BUSINESS SERVICES 14.8% Aerospace & Defense 3.4% Boeing 2,526, ,532 Harris 3,889, ,141 Honeywell International 2,616, , ,437 Air Freight & Logistics 1.1% UPS, Class B 3,132, , ,599 Building Products 1.1% Masco 7,222, ,627 USG (1) 3,933, , ,930 Commercial Services & Supplies 0.1% Tyco International 500,000 19,240 19,240 Electrical Equipment 1.6% Eaton 2,202, ,657 Emerson Electric 5,086, , ,624 21

24 (Cost and value in $000s) Shares $ Value Industrial Conglomerates 3.1% GE 31,536, , ,925 Machinery 4.4% Deere 2,500, ,625 Flowserve 2,000, ,320 Illinois Tool Works 3,787, ,664 Joy Global 3,250, ,650 Stanley Black & Decker 2,049, ,668 Xylem 4,687, ,768 1,202,695 Total Industrials & Business Services 4,012,450 INFORMATION TECHNOLOGY 9.4% Communications Equipment 2.1% Cisco Systems 10,312, ,184 QUALCOMM 4,500, , ,019 Electronic Equipment, Instruments & Components 0.9% Corning 12,000, , ,760 IT Services 1.7% Computer Sciences 1,478,300 97,036 IBM 1,500, ,990 Western Union 5,750, , ,923 Semiconductor & Semiconductor Equipment 2.6% Analog Devices 3,635, ,313 Applied Materials 12,594, ,066 22

25 (Cost and value in $000s) Shares $ Value Texas Instruments 4,586, ,271 Software 1.3% 711,650 CA 3,000,000 87,870 Microsoft 6,196, ,562 Technology Hardware, Storage & Peripherals 0.8% 361,432 Dell, Acquisition Date: 6/13 10/12/12 Cost $190,877 (1)(2)(3) 16,500, , ,875 Total Information Technology 2,559,659 MATERIALS 5.2% Chemicals 1.1% EI du Pont de Nemours 2,832, ,164 Potash Corporation of Saskatchewan 3,750, ,137 Construction Materials 1.0% 297,301 Vulcan Materials 3,238, ,833 Containers & Packaging 0.5% 271,833 MeadWestvaco 2,979, ,607 Metals & Mining 1.4% 140,607 Newmont Mining 6,000, ,160 Nucor 5,008, , ,902 23

26 (Cost and value in $000s) Shares $ Value Paper & Forest Products 1.2% International Paper 7,003, , ,294 Total Materials 1,403,937 TELECOMMUNICATION SERVICES 3.9% Diversified Telecommunication Services 3.6% AT&T 12,267, ,731 CenturyLink 4,436, ,335 Telefonica (EUR) 9,383, ,381 Verizon Communications 6,080, , ,857 Wireless Telecommunication Services 0.3% Vodafone (GBP) 17,074,248 61,664 61,664 Total Telecommunication Services 1,044,521 UTILITIES 6.3% Electric Utilities 4.5% Duke Energy 4,681, ,617 Entergy 3,954, ,806 Exelon 7,006, ,141 FirstEnergy 5,917, ,628 XCEL Energy 5,865, ,742 1,210,934 Independent Power & Renewable Electricity Producers 0.4% AES 7,750, , ,765 24

27 (Cost and value in $000s) Shares $ Value Multi-Utilities 1.4% NiSource 8,711, , ,175 Total Utilities 1,710,874 Total Common Stocks (Cost $18,799,991) 26,104,851 BOND MUTUAL FUNDS 0.8% T. Rowe Price Institutional Floating Rate Fund, 4.04% (4)(5) 21,760, ,434 Total Bond Mutual Funds (Cost $216,969) 220,434 SHORT-TERM INVESTMENTS 2.8% Money Market Funds 2.8% T. Rowe Price Reserve Investment Fund, 0.07% (5)(6) 748,791, ,791 Total Short-Term Investments (Cost $748,791) 748,791 Total Investments in Securities 99.9% of Net Assets (Cost $19,765,751) $ 27,074,076 Shares are denominated in U.S. dollars unless otherwise noted. (1) Non-income producing (2) Level 3 in fair value hierarchy. See Note 2. (3) Security cannot be offered for public resale without first being registered under the Securities Act of 1933 and related rules ("restricted security"). Acquisition date represents the day on which an enforceable right to acquire such security is obtained and is presented along with related cost in the security description. The fund has registration rights for certain restricted securities. Any costs related to such registration are borne by the issuer. The aggregate value of restricted securities (excluding 144A holdings) at period-end amounts to $226,875 and represents 0.8% of net assets. (4) SEC 30-day yield (5) Affiliated Companies (6) Seven-day yield ADR American Depository Receipts 25

28 EUR Euro GBP British Pound REIT A domestic Real Estate Investment Trust whose distributions pass-through with original tax character to the shareholder 26

29 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. Based on the fund s relative ownership, 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 6/30/15 Value 12/31/14 T. Rowe Price Institutional Floating Rate Fund, 4.04% $ 4,679 $ $ 4,679 $ 220,434 $ 213,627 T. Rowe Price Reserve Investment Fund, 0.07% ,791 1,999,537 Totals $ 5,057 $ 969,225 $ 2,213,164 Purchase and sale information not shown for cash management funds. Amounts reflected on the accompanying financial statements include the following amounts related to affiliated companies: Investment in securities, at cost $ 965,760 Dividend income 5,057 Interest income Investment income $ 5,057 Realized gain (loss) on securities $ Capital gain distributions from mutual funds $ The accompanying notes are an integral part of these financial statements. 27

30 Unaudited June 30, 2015 Statement of Assets and Liabilities ($000s, except shares and per share amounts) Assets Investments in securities, at value (cost $19,765,751) $ 27,074,076 Dividends receivable 39,929 Receivable for investment securities sold 34,550 Receivable for shares sold 13,188 Foreign currency (cost $212) 209 Other assets 4,728 Total assets 27,166,680 Liabilities Payable for shares redeemed 53,012 Investment management fees payable 11,952 Due to affiliates 1,654 Other liabilities 4,095 Total liabilities 70,713 NET ASSETS $ 27,095,967 Net Assets Consist of: Undistributed net investment income $ 11,281 Accumulated undistributed net realized gain 855,885 Net unrealized gain 7,308,324 Paid-in capital applicable to 846,781,313 no par value shares of beneficial interest outstanding; unlimited number of shares authorized 18,920,477 NET ASSETS $ 27,095,967 NET ASSET VALUE PER SHARE Investor Class ($25,745,285,081 / 804,475,405 shares outstanding) $ Advisor Class ($1,074,775,053 / 33,649,184 shares outstanding) $ R Class ($275,907,106 / 8,656,724 shares outstanding) $ The accompanying notes are an integral part of these financial statements. 28

31 Unaudited Statement of Operations ($000s) 6 Months Ended 6/30/15 Investment Income (Loss) Dividend income $ 340,442 Expenses Investment management 74,927 Shareholder servicing Investor Class $ 17,834 Advisor Class 819 R Class ,910 Rule 12b-1 fees Advisor Class 1,548 R Class 774 2,322 Prospectus and shareholder reports Investor Class 490 Advisor Class 24 R Class Custody and accounting 313 Registration 123 Legal and audit 226 Trustees 68 Miscellaneous 62 Reductions of fees and expenses Investment management fees waived (594) Total expenses 96,875 Net investment income 243,567 29

32 Unaudited Statement of Operations ($000s) Realized and Unrealized Gain / Loss 6 Months Ended 6/30/15 Net realized gain (loss) Securities 694,904 Foreign currency transactions (16) Net realized gain 694,888 Change in net unrealized gain / loss Securities (1,379,914) Other assets and liabilities denominated in foreign currencies 44 Change in net unrealized gain / loss (1,379,870) Net realized and unrealized gain / loss (684,982) DECREASE IN NET ASSETS FROM OPERATIONS $ (441,415) The accompanying notes are an integral part of these financial statements. 30

33 Unaudited Statement of Changes in Net Assets ($000s) Increase (Decrease) in Net Assets 6 Months Ended 6/30/15 Year Ended 12/31/14 Operations Net investment income $ 243,567 $ 568,769 Net realized gain 694,888 1,666,896 Change in net unrealized gain / loss (1,379,870) (72,468) Increase (decrease) in net assets from operations (441,415) 2,163,197 Distributions to shareholders Net investment income Investor Class (228,754) (538,623) Advisor Class (8,420) (34,453) R Class (1,681) (5,137) Net realized gain Investor Class (1,462,375) Advisor Class (72,804) R Class (18,574) Decrease in net assets from distributions (238,855) (2,131,966) Capital share transactions* Shares sold Investor Class 1,179,087 3,926,403 Advisor Class 82, ,959 R Class 31,182 91,844 Distributions reinvested Investor Class 218,297 1,918,460 Advisor Class 8, ,573 R Class 1,672 23,527 Shares redeemed Investor Class (3,260,094) (4,426,150) Advisor Class (381,119) (1,597,511) R Class (103,635) (113,827) Increase (decrease) in net assets from capital share transactions (2,224,294) 206,278 31

34 Unaudited Statement of Changes in Net Assets ($000s) Net Assets 6 Months Ended 6/30/15 Year Ended 12/31/14 Increase (decrease) during period (2,904,564) 237,509 Beginning of period 30,000,531 29,763,022 End of period $ 27,095,967 $ 30,000,531 Undistributed net investment income 11,281 6,569 *Share information Shares sold Investor Class 36, ,004 Advisor Class 2,518 8,427 R Class 959 2,789 Distributions reinvested Investor Class 6,733 59,142 Advisor Class 256 3,219 R Class Shares redeemed Investor Class (99,651) (132,371) Advisor Class (11,653) (47,257) R Class (3,188) (3,429) Increase (decrease) in shares outstanding (67,866) 8,253 The accompanying notes are an integral part of these financial statements. 32

35 Unaudited June 30, 2015 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 three classes of shares: the Equity Income Fund original share class, referred to in this report as the Investor Class, offered since October 31, 1985; the Equity Income Fund Advisor Class (Advisor Class), offered since March 31, 2000; and the Equity Income Fund R Class (R Class), offered since September 30, 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. 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. 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. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Earnings on investments recognized as partnerships for federal income tax purposes reflect the tax character of such earnings. Dividend income and capital gain distributions are recorded on the 33

36 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 to shareholders are recorded on the ex-dividend date. 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. Capital gain distributions, if any, are generally 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 The Advisor Class and R Class each pay distribution, shareholder servicing, and/or certain administrative expenses in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% and 0.50%, respectively, of the class s average daily net assets. 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. 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 $52,000 for the six months ended June 30, New Accounting Guidance In June 2014, FASB issued Accounting Standards Update (ASU) No , Transfers and Servicing (Topic 860), Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU changes the accounting for certain repurchase agreements and expands 34

37 disclosure requirements related to repurchase agreements, securities lending, repurchase-to-maturity and similar transactions. The ASU is effective for interim and annual reporting periods beginning after December 15, Adoption will have no effect on the fund s net assets or results of operations. In May 2015, FASB issued ASU No , Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The ASU removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient and amends certain disclosure requirements for such investments. The ASU is effective for interim and annual reporting periods beginning after December 15, Adoption will have no effect on the fund s net assets or results of operations. NOTE 2 - VALUATION The fund s financial instruments are valued and each class s net asset value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for business. Fair Value The fund s financial instruments are reported at fair value, which GAAP defines as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) has been established by the fund s Board of Trustees (the Board) to ensure that financial instruments are appropriately priced at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes procedures to value securities; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; oversees the selection, services, and performance of pricing vendors; oversees valuation-related business continuity practices; and provides guidance on internal controls and valuation-related matters. The Valuation Committee reports to the Board; is chaired by the fund s treasurer; and has representation from legal, portfolio management and trading, operations, and risk management. 35

38 Various valuation techniques and inputs are used to determine the fair value of financial instruments. GAAP establishes the following fair value hierarchy that categorizes the inputs used to measure fair value: Level 1 quoted prices (unadjusted) in active markets for identical financial instruments that the fund can access at the reporting date Level 2 inputs other than Level 1 quoted prices that are observable, either directly or indirectly (including, but not limited to, quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in inactive markets, interest rates and yield curves, implied volatilities, and credit spreads) Level 3 unobservable inputs Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use to price the financial instrument. Unobservable inputs are those for which market data are not available and are developed using the best information available about the assumptions that market participants would use to price the financial instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable inputs. When multiple inputs are used to derive fair value, the financial instrument is assigned to the level within the fair value hierarchy based on the lowest-level input that is significant to the fair value of the financial instrument. Input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining those values. Valuation Techniques Equity securities listed or regularly traded on a securities exchange or in the over-the-counter (OTC) market are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made. OTC Bulletin Board securities are valued at the mean of the closing bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the closing bid and asked prices for domestic securities and the last quoted sale or closing price for international securities. 36

39 For valuation purposes, the last quoted prices of non-u.s. equity securities may be adjusted to reflect the fair value of such securities at the close of the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, the fund will adjust the previous quoted prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust quoted prices to reflect fair value, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with quoted prices and information to evaluate or adjust those prices. The fund cannot predict how often it will use quoted prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares quoted prices, the next day s opening prices in the same markets, and adjusted prices. Actively traded domestic equity securities generally are categorized in Level 1 of the fair value hierarchy. Non-U.S. equity securities generally are categorized in Level 2 of the fair value hierarchy despite the availability of quoted prices because, as described above, the fund evaluates and determines whether those quoted prices reflect fair value at the close of the NYSE or require adjustment. OTC Bulletin Board securities, certain preferred securities, and equity securities traded in inactive markets generally are categorized in Level 2 of the fair value hierarchy. Investments in mutual funds are valued at the mutual fund s closing NAV per share on the day of valuation and are categorized in Level 1 of the fair value hierarchy. Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at cost, or estimated realizable value, if less, which approximates fair value. 37