U.S. STOCK MARKET

Week Ended January 15, 2010

Stocks declined modestly for the week. Investors were confronted by several pieces of data suggesting the economic recovery was proceeding at a halting pace. On Tuesday, metals giant Alcoa lowered hopes for the quarterly earnings season after reporting disappointing results across several of its divisions. On Thursday, the government reported that weekly jobless claims had been larger than most expected, while retail sales in December had contracted after a good gain in November. Friday brought further disappointments in the form of a less-than-expected rise in the gauge of consumer sentiment. Investors also appeared concerned by quarterly results from financial giant JP Morgan, which reported strong earnings but disappointing revenues and offered a cautious outlook.

U.S. Stocks^1
Index^2	Friday’s Close	Week’s Change	% Change Year-to-Date
DJIA	10609.65	-8.54	1.74%
S&P 500	1136.03	-8.95	1.88%
NASDAQ Composite	2287.99	-29.18	0.83%
S&P MidCap 400	743.11	-8.97	2.26%
Russell 2000	637.77	-6.02	0.58%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

¹Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4:10 p.m. ET.

²The Dow Jones Industrial Average and the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.

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U.S. BOND MARKET

Week Ended January 15, 2010

Food and energy prices each rose 0.20% in December 2009, and upward pressures are mounting in these commodity-based sectors. Food inflation is staging a cyclical pickup in response to a rebound in demand at home and abroad, and data indicate that energy prices are rising strongly as the new year gets under way. Aside from volatile food and energy prices, housing costs were unchanged, but the prices of other services and goods rose 0.20%. Core inflation, which does not count food and energy, is trending in a range from 1.25% to 1.50%. We anticipate a cyclical trough in the third quarter of this year, at which time we believe that core consumer prices will rise at about a 0.50% annual rate compared with 1.50% in the fourth quarter of 2009. Treasury yields declined across the maturity spectrum in the midst of lingering uncertainty about the strength of the economic recovery.

U.S. Treasury Yields^1
Maturity	January 15, 2010	January 8, 2010
2-Year	0.87%	0.96%
10-Year	3.68%	3.81%
30-Year	4.58%	4.70%

This table is for illustrative purposes only. Past performance cannot guarantee future results.

¹Source of data: Bloomberg.com, as of 4 p.m. ET Friday, January 15, 2010.

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INTERNATIONAL MARKET

Week Ended January 8, 2010

International Stocks

Foreign stock markets closed higher for the week ending January 08, 2010 with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), gaining 2.34%.

Region/Country	Week’s Return	% Change Year-to-Date
EAFE	2.34%	2.34%
Europe ex-U.K.	2.13%	2.13%
Denmark	4.55%	4.55%
France	2.62%	2.62%
Germany	1.33%	1.33%
Italy	2.30%	2.30%
Netherlands	1.72%	1.72%
Spain	1.60%	1.60%
Sweden	2.60%	2.60%
Switzerland	1.59%	1.59%
United Kingdom	1.08%	1.08%
Japan	3.89%	3.89%
AC Far East ex-Japan	2.43%	2.43%
Hong Kong	2.46%	2.46%
Korea	3.20%	3.20%
Malaysia	3.18%	3.18%
Singapore	1.04%	1.04%
Taiwan	1.67%	1.67%
Thailand	1.46%	1.46%
EM Latin America	3.53%	3.53%
Brazil	2.93%	2.93%
Mexico	4.07%	4.07%
Argentina	3.79%	3.79%
EM (Emerging Markets)	2.74%	2.74%
Hungary	6.20%	6.20%
India	2.53%	2.53%
Israel	3.28%	3.28%
Russia	2.22%	2.22%
Turkey	5.37%	5.37%

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International Bond Markets

International bond markets in developed countries were lower this week, with the J.P. Morgan Global Government Bond Less U.S. Index losing -0.12%.

Region/Country	Week’s Return	% Change Year-to-Date
Developed Markets	-0.12%	-0.12%
Europe
Denmark	0.21%	0.21%
France	0.08%	0.08%
Germany	0.10%	0.10%
Italy	0.18%	0.18%
Spain	0.09%	0.09%
Sweden	0.07%	0.07%
United Kingdom	-1.68%	-1.68%
Japan	-0.21%	-0.21%
Emerging Markets	0.79%	0.79%
Argentina	-2.01%	-2.01%
Brazil	0.30%	0.30%
Bulgaria	0.34%	0.34%
Russia	1.33%	1.33%

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International Currency Markets

On the currency front, the U.S. dollar was stronger against the major currencies for the week.

Currency	Close (January 8, 2010)	Week’s Return (U.S. $)	% Change Year-to-Date (U.S. $)
Japanese yen	92.950	-0.16%	-0.16%
Euro	1.4326^1	0.15%	0.15%
British pound	1.5962^1	1.16%	1.16%

¹U.S. dollars per national currency unit.

Sources: Foreign stock markets and currency sections are from Rimes Technologies, using MSCI data. International bond markets are from J.P. Morgan.

Note: All returns are in U.S. dollars. All bond indices are J.P. Morgan. All stock indices are Morgan Stanley Capital International (MSCI).

Equity Indices
EAFE:	MSCI Europe, Australasia, and Far East Index
Europe Ex-U.K.:	MSCI Europe ex-U.K. Index
Far East Ex-Japan:	MSCI AC Far East ex-Japan Index
Latin America:	MSCI Emerging Markets Latin America Index
Emerging Markets:	MSCI Emerging Markets Index

Bond Indices
Developed Markets:	J.P. Morgan Global Government Bond Less U.S. Index
Emerging Markets:	J.P. Morgan Emerging Markets Bond Index Plus

All charts are for illustrative purposes only and do not represent the performance of any specific security. Past performance cannot guarantee future results.

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10 Lessons From a Tumultuous Year With Chairman and CIO, Brian Rogers

December 18, 2009

Brian Rogers, chairman and chief investment officer, T. Rowe Price.

When thinking back on the most recent global meltdown, two quotes come to mind, “What doesn’t kill us makes us stronger” and “Those who cannot remember the past are doomed to repeat it.” We at T. Rowe Price remember all too well the volatile financial markets of the past and have distilled some lessons from them for companies and individuals as we recover from the worst financial market crisis since the Great Depression.

1. Watch Your Liquidity. Don’t fund long-term assets with short-term liabilities. In the midst of last year’s crisis, the commercial paper and other short-term markets ground to a standstill. This posed a dilemma for companies that did not have enough cash on hand to finance their daily operations. Companies should always ask themselves how they will stay in business when they can’t borrow money from traditional sources.
2. Balance Sheet Strength Matters. Always be aware of your overall debt load and have a prudent appetite for leverage. While leverage enhances returns in a booming market, it causes problems when markets turn against us. Keep an eye on your corporate and household balance sheets and don’t get overextended.
3. We Are All Connected. No company or individual is an island in the global economy. We cannot disassociate ourselves from what is happening elsewhere since globalization has linked us all in an intricate network of financial transactions. When the U.S. catches a cold, smaller economies in the world are likely to come down with pneumonia.
4. Financial Innovation Helps Wall Street, Not Main Street. Innovation is a good thing, but too much of a good thing can prove disastrous. In recent years, Wall Street developed financial instruments that were so exotic that not even their creators fully understood them. Wall Street issued debt, repackaged it, then repackaged the repackaged debt. The Street developed a litany of acronyms to make them more palatable to the investing public—ABS, ARMs, CMOs, REMICs, and PIPEs. These acronyms only served to camouflage the instruments’ complexity and risks.

"We never lose sight of the fact that our clients come first."

5. Get a Map of Washington, D.C. Whether we like it or not, the federal government is going to become more and more involved in the financial services industry. We are embarking on an era of greater government involvement and regulation. While we welcome transparency and laws designed to protect people against fraud, it would be counterproductive for the regulators to tell well-run companies how to manage their businesses.
6. Simplicity Is a Virtue. The financial meltdown has brought most of us back to our senses. We are rediscovering the old virtues about how to properly finance our purchases—how to buy our homes and automobiles, and how to manage our households. We are learning once again to live within our means and not to adopt lifestyles we can’t afford.
7. If It Sounds Too Good to Be True… Well, it most surely is. If someone claims that he or she can generate outsized gains without a corresponding level of risk, get a firm grip on your wallet and checkbook. Returns in excess of historical norms are virtually impossible to sustain for long periods. Nobel prize-winning economist Milton Friedman said it best, “There’s no such thing as a free lunch.”
8. Don’t Reach for Yield in Money Market Funds*. Some money market funds, which are among the most stable of investment vehicles, got into a lot of trouble last year by lowering their standards in an effort to generate higher yields. Their managers included securities in their portfolios that didn’t belong there and, as a result, put their investors’ principal at risk. Money funds were designed to be ultraconservative and satisfy the cash needs of their shareholders. These funds did their shareholders no favors by investing in less than the highest-quality securities.
9. The World Doesn’t End That Often. In the midst of the latest financial crisis, it can appear as though the world as we know it is coming to an end. If this were true, however, civilization would have disappeared centuries ago. In the last century alone, we endured World War I, World War II, the Korean War, Vietnam, Watergate, the savings and loan implosion, the Argentine peso crisis, the Russian ruble crisis, and dozens of other world-shattering events. Each time the human race has managed not only to survive but to go on and prosper even more. Had we put our investment capital under the mattress each time a crisis reared its ugly head, we never would have benefited from the market rebounds that followed. Each time a bubble bursts, it is critical to remember that “This, too, shall pass.”
10. We Will Have Other Crises. There is another bubble waiting for us somewhere down the road. We don’t know what it will be and when it will burst, but we all need to be aware that bubbles do not continue to expand indefinitely. We need to take measures now to protect ourselves against the next tumultuous financial cycle. We do this by not overextending ourselves financially, remaining well diversified, keeping our own tolerance for risk at the forefront of our investment decisions, and establishing a long-term investment strategy that makes sense to us in all market environments.

T. Rowe Price has come through the most recent storm in excellent condition and today remains among the healthiest of global financial institutions. We have accomplished this by adhering to several key principles:

We have kept our focus on disciplined long-term investment strategies and positioned ourselves for the market environment we see unfolding. We constantly invest in our business in an effort to deliver outstanding investment results and client service. We take prudent investment risks by seeking attractive investment opportunities around the globe, by not following the latest trends, and by factoring both return expectations and risk considerations into our investment process. We never lose sight of the fact that our clients come first. Growing and preserving our clients’ capital are our primary concerns. Our company is a reflection of the health of our clients, and we are committed to retaining the trust and confidence of all those who entrust their money to T. Rowe Price.

*An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although these funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market funds.

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