(PUB) Investing 2015

Morningstar Analyst Rating

04-22-15

„

Morningstar Pillars

Process

Performance

People

Parent

Price

Positive

Morningstar Analyst Rating

Morningstar evaluates mutual funds based on five key pillars, which

its analysts believe lead to funds that are more likely to outperform

over the long term on a risk-adjusted basis.

Analyst Rating Spectrum

Œ „ ´ˇ ¨

Pillar Spectrum

Positive

Negative

Neutral

NAV

27.03

25.58

24.99

17.44

15.45

15.82

11.85

8.59

14.25

14.48

14.01

12.68

Total Return %

5.67

6.38

44.19

15.69

1.54

33.50

37.98

-36.28

9.35

3.35

10.49

10.26

+/-S&P 500

3.75

-7.31

11.80

-0.31

-0.57

18.44

11.52

0.72

3.86

-12.44

5.58

-0.62

+/-Russ 2000 Gr

6.03

0.78

0.89

1.10

4.45

4.41

3.51

2.26

2.30

-10.00

6.34

-4.05

Income Return %

0.00

0.20

0.00

Capital Return %

5.67

6.38

44.19

15.49

1.54

33.50

37.98

-36.28

9.35

3.35

10.49

10.26

Total Rtn % Rank Cat

Income $

0.00

0.03

0.00

Capital Gains $

0.00

0.97

0.15

0.40

0.59

0.00

0.46

1.55

0.00

Expense Ratio %

0.85

0.82

0.91

1.10

1.25

Income Ratio %

-0.26

-0.19

0.22

-0.78

-0.74

-0.68

-0.84

-0.63

-1.01

-0.83

-0.99

Turnover Rate %

Net Assets $mil

1,283

979

771

396

189

134

Performance

04-30-15

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Total

2011

2012

2013

2014

2015

11.44 0.28 -21.27 15.40

1.54

14.05 -5.39

5.76 1.38 15.69

12.56 3.26 13.52 9.28 44.19

-0.40 3.05

-2.92 6.76

6.38

8.21

. . . .

Trailing

Total

+/-

+/- Russ %Rank Growth of

Return% S&P 500 2000 Gr

Cat

$10,000

3 Mo

6 Mo

1 Yr

3 Yr Avg

5 Yr Avg

10 Yr Avg

15 Yr Avg

6.29 1.22

2.30

48 10,629

7.67 3.27

5.90

22 10,767

16.46 3.48 12.16

9 11,646

18.45 1.72

4.60

6 16,619

17.39 3.06

7.49

6 22,292

11.68 3.36

4.46

5 30,182

6.29 1.86

44 24,968

Tax Analysis

Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat

3 Yr (estimated)

5 Yr (estimated)

10 Yr (estimated)

17.83

0.53

16.89

0.43

11.18

0.45

Potential Capital Gain Exposure: 26% of assets

Rating and Risk

Time Load-Adj

Morningstar

Period Return % Rtn vs Cat

Risk vs Cat

Risk-Adj Rating

1 Yr

16.46

3 Yr

18.45

High

-Avg

5 Yr

17.39

High

Avg

10 Yr

11.68

High

Avg

Incept

7.56

Other Measures

Standard Index

Best Fit Index

S&P 500 Mstar Small Growth

Alpha

0.6

3.5

Beta

1.08

0.91

R-Squared

Standard Deviation

12.48

Mean

18.45

Sharpe Ratio

1.42

Morningstar’s Take

by Greg Carlson 04-22-15

T. Rowe Price Diversified Small Cap Growth comes

with a caveat or two, but it’s a worthy holding.

This small-growth fund has racked up an excellent

record since Sudhir Nanda took the helm in October

2006. From his start date through March 2015, the fund

beat more than 95% of its Morningstar Category peers

on both a total-return and risk-adjusted basis and

outpaced its MSCI US Small Cap Growth benchmark

(which 90% of small-growth funds have lagged) by an

annualized percentage point. The fund has been a

consistent performer, too, landing in the category’s top

half in each calendar year during Nanda’s tenure--a

span marked by big rallies, a huge decline, and several

up-and-down years for stocks.

Its long run of outperformance owes to a strategy

that relies heavily on quantitative stock-picking

models. Many quant funds have sported

feast-or-famine profiles during Nanda’s 8.5-year

tenure, but he has kept a lid on volatility by relying less

on momentum than many quants, instead focusing on

valuation (particularly based on relatively stable

metrics such as cash flow) and earnings quality. Broad

diversification has smoothed the ride; the fund tends

to own about 300 stocks and positions are capped at

1% of assets. This sensible approach is implemented

by Nanda and a team of six analysts that has gradually

grown in size and experience.

The fund may not always look this good. Its quant

models don’t take companies’ debt into account, so

the portfolio’s debt/capital ratio is sometimes above

the category norm. Thus, the fund could be hurt if

interest rates rise. (That said, it typically has held up

well when leveraged fare has suffered.) Also, the

fund’s stake in biotech was recently more than 9% of

assets, higher than its benchmark’s--that’s surprising

given the industry’s huge runup in recent years and the

emphasis on valuation here. The fund’s returns may be

dented if those highfliers fall back to earth.

Its disciplined strategy and record of strong stock

selection, coupled with well below-average fees,

merit raising its Morningstar Analyst Rating to Silver

from Bronze.

Address:

T. Rowe Price Divers Sm Cap Gr Fd, Inc

Baltimore, MD 21202

800-638-5660

Web Address:

www.troweprice.com

Inception:

06-30-97

Advisor:

T. Rowe Price Associates, Inc.

Subadvisor:

None

NTF Plans:

N/A

Minimum Purchase:

$2500

Add: $100 IRA: $1000

Min Auto Inv Plan:

$2500

Add: $100

Sales Fees:

No-load, 1.00%R

Management Fee:

0.35%, 0.15%A

Actual Fees:

Mgt:0.64% Dist:

Expense Projections:

3Yr:$262

5Yr:$455 10Yr:$1014

Income Distribution:

Annually

Data through April 30, 2015

T. Rowe Price Diversified Sm Cap Growth

Ticker

Status Yield Total Assets

Mstar Category

PRDSX Open

0.0% $1,283 mil

Small Growth

99% 99% 99% 95% 97% 99% 95% 95% 89%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 04-15

Historical Profile

Return

Risk

Rating

High

Average

Highest

Investment Style

Equity

Stock %

Manager Change

Partial Manager Change

Growth of $10,000

Investment Values of

Fund

Investment Values of

S&P 500

Performance Quartile

(within Category)

History

10.0

15.0

20.0

26.0

Portfolio Analysis

03-31-15

Share change since 12-14 Total Stocks:265 Sector

PE Tot Ret% % Assets

T. Rowe Price Short-Term

. . .

2.45

Maximus Inc

Industrl

28.5 16.80 1.11

The Middleby Corp

Industrl

29.8 2.26 0.91

Tyler Technologies Inc

Technology 67.1 11.43 0.91

Hanesbrands Inc

Cnsmr Cyc 30.5 11.74 0.88

NewMarket Corp

Basic Mat 23.4 11.09 0.87

Old Dominion Freight Lin

Industrl

22.9 -8.38 0.85

Incyte Corp

Hlth care

32.90 0.83

Pharmacyclics Inc

Hlth care

109.55 0.82

Domino’s Pizza Inc

Cnsmr Cyc 36.4 14.86 0.77

Centene Corp

Hlth care 25.3 19.38 0.76

Boston Beer Co Inc Class

Cnsmr Def 34.8 -14.42 0.76

Vail Resorts Inc

Cnsmr Cyc 38.8 9.55 0.75

Rite Aid Corp

Cnsmr Def

3.7 2.53 0.73

Toro Co

Industrl

21.5 5.45 0.72

J&J Snack Foods Corp

Cnsmr Def 27.3 -3.75 0.72

Salix Pharmaceuticals Lt

Hlth care

. .

0.71

WEX Inc

Industrl

23.4 13.94 0.69

Berry Plastics Group Inc

Cnsmr Cyc 60.6 8.46 0.69

Ultimate Software Group

Technology 108.7 13.22 0.69

Current Investment Style

Market Cap %

Giant

0.0

Large

2.0

Mid

50.2

Small

43.0

Micro

4.9

Avg $mil:

3,815

Value Blnd Growth

Large Mid Small

Value Measures

Rel Category

Price/Earnings

Price/Book

Price/Sales

Price/Cash Flow

Dividend Yield %

24.87

3.81

1.59

12.85

0.62

1.18

1.56

1.14

1.37

0.90

Growth Measures

% Rel Category

Long-Term Erngs

Book Value

Sales

Cash Flow

Historical Erngs

14.20

8.95

8.58

10.06

12.63

0.89

1.20

1.81

0.72

1.39

Profitability

% Rel Category

Return on Equity

Return on Assets

Net Margin

17.57

6.60

8.58

1.52

1.25

Sector

Weightings

% of

Stocks

Rel

S&P 500 High

3 Year

Low

Cyclical 30.21

BasicMat 3.60

4 3

CnsmrCyc18.29

18 16

FinanSvs 5.11

6 5

Real Est 3.21

3 2

Sensitive 44.66

CommSrvs 0.40

1 0

Energy 3.85

6 4

Industrl 23.86

24 24

Technlgy 16.55

20 17

Defensive25.13

CnsmrDef 4.94

5 4

Hlthcare 20.19

20 17

Utilities 0.00

. . .

Composition - Net

(% of Stock)

Cash

2.9

Stocks 88.8

Bonds 0.2

Other

8.1

Foreign 1.4

timely. Pastperformance is no guarantee of future results.Accessupdated reportsat

To order reprints, call 312-696-6100.

mfb.morningstar.com.

Mutual Funds