B-1 STATEMENT OF ADDITIONAL INFORMATION Dated May 1 ...

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management firms. Performance is primarily measured on a pre-tax basis though tax efficiency isconsidered and is especially important for tax efficient funds. It is important to note that compensation isviewed with a long-term time horizon. The more consistent a manager’s performance over time, thehigher the compensation opportunity. The increase or decrease in a fund’s assets due to the purchase orsale of fund shares is not considered a material factor.Contribution to T. Rowe Price’s overall investment process is an important consideration as well. Sharingideas with other portfolio managers, working effectively with and mentoring younger analysts, and beinggood corporate citizens are important components of T. Rowe Price’s long-term success and are highlyvalued.All employees of T. Rowe Price, including portfolio managers, participate in a 401(k) plan sponsored byT. Rowe Price Group. In addition, all employees are eligible to purchase T. Rowe Price common stockthrough an employee stock purchase plan that features a limited corporate matching contribution.Eligibility for and participation in these plans is on the same basis as for all employees. Finally, all vicepresidents of T. Rowe Price Group, including all portfolio managers, receive supplementalmedical/hospital reimbursement benefits.This compensation structure is used for all portfolios managed by the portfolio manager.Janus Capital. The following describes the structure and method of calculating the portfolio manager’scompensation as of December 31, 2008. The portfolio manager is compensated for managing the FocusedAppreciation Portfolio and any other funds, portfolios or accounts for which he has exclusive or sharedresponsibilities (collectively, the “Managed Funds”) through two components: fixed compensation andvariable compensation.Fixed Compensation: Fixed compensation is paid in cash and is comprised of an annual base salaryestablished based on factors such as the complexity of managing funds and other accounts and scope ofresponsibility (including assets under management).Variable Compensation: Variable compensation is paid in the form of cash and long-term incentiveawards (consisting of a mixture of Janus Capital Group Inc. (“JCGI”) restricted stock, stock options, anda cash-deferred award that is credited with income, gains, and losses based on the performance of Janusmutual fund investments selected by the portfolio manager). Variable compensation is calculated basedon pre-tax performance of the Managed Funds.Variable compensation is structured to pay a portfolio manager primarily on the Managed Funds’performance, with additional discretionary compensation available from one or more bonus pools asdiscussed below.Aggregate compensation derived from the Managed Funds’ performance is calculated based upon apercentage of the total revenue received on the Managed Funds adjusted to reflect the actual performanceof such Managed Funds. Actual performance is calculated based on the Managed Funds’ aggregate assetweightedLipper peer group performance ranking on a one-, three-, and five- year rolling period basiswith a predominant weighting on the Managed Funds’ performance in the three- and five-year periods.The compensation determined from the Managed Funds’ performance is then allocated to the respectiveportfolio manager(s).The portfolio manager is also eligible to participate in a portfolio manager discretionary bonus pool. Thesize of the portfolio manager bonus pool fluctuates depending on both the revenue derived from firmwidemanaged assets (excluding assets managed by subadvisers) and the investment performance of suchfirm-wide managed assets. Compensation from the portfolio manager bonus pool is then allocated amongthe eligible respective participants at the discretion of Janus based upon, among other things:(i) teamwork and support of team culture; (ii) mentoring of analysts; (iii) contributions to the salesprocess; and (iv) client relationships.B-88
The portfolio manager may elect to defer payment of a designated percentage of his fixed compensationand/or up to all of his variable compensation in accordance with the JCGI’s Executive Income DeferralProgram.The Fund’s Lipper peer group for compensation purposes is the Large-Cap Growth Funds.American Century Investment Management, Inc. As of October 31, 2008, the portfolio managers’compensation included a base salary, a bonus, restricted stock plans and deferred compensation plans.The portfolio managers’ compensation is not directly tied to the value of assets held in client portfolios.The base salary is in the form of a fixed annual salary. The annual bonus determined by a combination offactors. One factor is fund investment performance. A significant portion of portfolio managercompensation takes the form of an annual incentive bonus tied to performance. Bonus payments aredetermined by a combination of factors. One factor is fund investment performance. For most AmericanCentury mutual funds, investment performance is measured by a combination of one- and three-year pretaxperformance relative to various benchmarks and/or internally-customized peer groups. Theperformance comparison periods may be adjusted based on a fund’s inception date or a portfoliomanager’s tenure on the fund. Custom peer groups are constructed using all the funds in the indicatedcategories as a starting point. Funds are then eliminated from the peer group based on a standardizedmethodology designed to result in a final peer group that is both more stable over the long term (i.e., hasless peer turnover) and that more closely represents the fund’s true peers based on internal investmentmandates. Beginning in 2008, American Century Investments is placing increased emphasis on long-termperformance and is phasing in five year performance periods.Portfolio managers may have responsibility for multiple American Century mutual funds. In such cases,the performance of each is assigned a percentage weight appropriate for the portfolio manager’s relativelevels of responsibility.Portfolio managers also may have responsibility for portfolios that are managed in a fashion similar tothat of other American Century mutual funds. This is the case for the Mid Cap Value Portfolio. If theperformance of a similarly managed account is considered for purposes of compensation, it is eithermeasured in the same way as a comparable American Century mutual fund (i.e., relative to theperformance of a benchmark and/or peer group) or relative to the performance of such mutual fund.Performance of the Mid Cap Value Portfolio is not separately considered in determining portfoliomanager compensation.A second factor in the bonus calculation refers to the performance of all American Century fundsmanaged according to a particular investment style, such as U.S. growth or value. Performance ismeasured for each product individually as described above and then combined to create an overallcomposite for the product group. These composites may measure one-year performance (equal weighted)or a combination of one– and three–year performance (asset weighted) depending on the portfoliomanager’s responsibilities and products managed. This feature is designed to encourage effectiveteamwork among portfolio management teams in achieving long-term investment success for similarlystyled portfolios.A portion of some portfolio managers’ bonuses may be tied to individual performance goals, such asresearch projects and the development of new products.Portfolio managers are eligible for grants of restricted stock of American Century Companies, Inc.(“ACC”). These grants are discretionary, and eligibility and availability can vary from year to year. Thesize of an individual’s grant is determined by individual and product performance as well as otherproduct-specific considerations. Grants can appreciate/depreciate in value based on the performance ofthe ACC stock during the restriction period (generally three years).B-89
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APPENDIX F - Proxy Voting Policies
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stocks that make up that index. Str
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Interest rate swaps do not involve
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the Adviser or Sub-Adviser will not
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Forward Contracts. The Portfolios m
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principal amount as the call writte
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Options on Foreign Currencies. The
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securities. The issuers of the unde
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the former pools. However, timely p
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CMO residuals are generally purchas
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utilize the underlying assets may r
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include range floaters which are a
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par unless the price of the underly
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to changes in interest rates genera
Page 38 and 39: corresponding floaters. The underly
Page 40 and 41: A Portfolio will not enter into suc
Page 42 and 43: egulations. The presence of an issu
Page 44 and 45: Portfolio TurnoverPortfolio turnove
Page 46 and 47: The ability of the Portfolio to ach
Page 48 and 49: Advisors, LLC, in accordance with t
Page 50 and 51: OWNERSHIP OF SHARES OF THE FUNDAll
Page 52 and 53: on the next $50 million, 0.50% on t
Page 54 and 55: Independent Registered Public Accou
Page 56 and 57: Name of Portfolio 2008 2007 2006Int
Page 58 and 59: Broker High Yield Bond BalancedAsse
Page 60 and 61: and cost of trade execution of Port
Page 62 and 63: Effective April 30, 2008, the Fund
Page 64 and 65: TAXES AND DIVIDENDSEach Portfolio i
Page 66 and 67: APPENDIX A - Credit RatingsDescript
Page 68 and 69: F2Good credit quality. A satisfacto
Page 70 and 71: . Moody’s Commercial Paper (short
Page 72 and 73: Plus (+) or minus (-)The ratings fr
Page 74 and 75: APPENDIX B - Directors and Officers
Page 76 and 77: Name, Address, andYear of BirthDavi
Page 78 and 79: APPENDIX C - Ownership of Shares of
Page 80 and 81: SMALL CAP VALUE PORTFOLIOGeneral Ac
Page 82 and 83: APPENDIX D - Portfolio ManagersOthe
Page 84 and 85: PortfolioManager(s)FundRegisteredIn
Page 86 and 87: Compensation of Portfolio ManagersM
Page 90 and 91: Portfolio managers are eligible for
Page 92 and 93: PortfolioPortfolio Manager(s)Dollar
Page 94 and 95: On August 25, 2005, the Court enter
Page 96 and 97: MSA’s Equity Trading Department s
Page 98 and 99: ERISA ClientsIn the case of client
Page 100 and 101: Shareholder Ability to Call Special
Page 102 and 103: • Exercise price• Participation
Page 104 and 105: Amend Quorum RequirementsVote propo
Page 106 and 107: Vote proposals to increase blank ch
Page 108 and 109: employees of Investment Manager and
Page 110 and 111: will not support the position of a
Page 112 and 113: company specifies the voting, divid
Page 114 and 115: egarding whether Investment Manager
Page 116 and 117: 3. The issuer is an entity particip
Page 118 and 119: manager(s) are responsible for maki
Page 120 and 121: Global Corporate Governance: Invest
Page 122 and 123: 13. The Proxy Group will review the
Page 124 and 125: determined by those investment comm
Page 126 and 127: T. Rowe Price has adopted these Pro
Page 128 and 129: shareholders and the effect on shar
Page 130 and 131: portfolio company could have influe
Page 132 and 133: The Proxy Voting Service will refer
Page 134 and 135: that substantially differs from dom
Page 136 and 137: 15. Janus will generally vote in fa
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46. For shareholder proposals outsi
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2. Staggered BoardIf a company has
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proposed for a legitimate business
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APPENDIX G - Portfolio Holdings Dis
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ICP Securities LLCIntermonte Securi
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