The fund seeks to track the investment returns of the Index, the Bloomberg U.S. 1-5 Year Treasury TIPS Index (Index). Under normal conditions, the fund invests at least 80% of its net assets (including any borrowings for investment purposes) in Treasury Inflation Protected Securities and in securities that are held in the Index. For purposes of the fund’s 80% investment policies, the fund includes derivative instruments that are linked to, or provide investment exposure to, Treasury Inflation Protected Securities or securities held in the Index. The fund normally maintains a duration between one and five years, and it will vary consistent with the duration of the Index, which measures the performance of inflation protected securities issued by the U.S. Treasury with remaining maturities between one and five years. As of July 31, 2023, the duration of the Index was 2.74 years.

Duration, which is expressed in years, is a calculation that attempts to measure the price sensitivity of a bond or bond fund to changes in interest rates. The longer a bond fund’s duration, the more sensitive that fund should be to changes in interest rates. For example, if

interest rates rise by 1% and a fixed-rate bond has a duration of 5 years, it is estimated that the principal value of the bond will decrease by approximately 5%.

To be eligible for inclusion in the Index, a security must be rated investment grade, its principal and interest must be inflation-linked and denominated in U.S. dollars, have a fixed rate coupon with at least $250 million par amount outstanding (not adjusted for inflation indexation), and have greater than one year and less than five years remaining to maturity. The Index is market value weighted and the securities represented in the Index are updated on the last business day of each month. The composition of the Index is rebalanced at each month-end and represents the fixed set of securities on which Index returns are calculated for the next month. As of July 31, 2023, there were 21 securities in the Index.

The adviser does not attempt to fully replicate the Index for the fund by holding each of the bonds represented in the Index. The portfolio will be structured to maintain an investment and risk profile, and overall characteristics, similar to the Index. Using a sampling of securities, the adviser seeks to closely track the returns of the Index and more efficiently replicate the key risk factors of the Index (such as maturity, duration, and credit quality) by attempting to capitalize on market inefficiencies through structural portfolio positioning and making small tactical bets on inflation, duration, and yield curve positioning.

Treasury Inflation Protected Securities, known as TIPS, are instruments issued by the U.S. Treasury that are structured to provide protection against inflation, which measures a sustained increase in the prices of goods and services in an economy that can erode the purchasing power of a currency over time. Interest and principal payments of TIPS are periodically adjusted in step with changes in the inflation rate. These inflation adjustments for TIPS are applied based on changes in the Consumer Price Index (CPI), while inflation adjustments for other types of inflation-linked securities may be based on a different inflation index. Inflation-linked securities tend to react to changes in real interest rates, which represent nominal (stated) interest rates reduced by the expected impact of inflation. For example, if a 3-year Treasury bond is yielding 5% and inflation expectations for the next 3 years are 2%, the real interest rate is 3%.

The fund will only purchase securities that are rated within the four highest credit rating categories (AAA, AA, A, BBB, or equivalent) at the time of purchase by at least one major credit rating agency or, if unrated, deemed by T. Rowe Price to be of comparable quality.

The fund may use a variety of derivatives, such as futures, options, foreign exchange currency contracts (forwards), and swaps for a number of purposes, such as for exposure or hedging. Specifically, the fund uses interest rate futures and interest rate future options, forwards, credit default swaps, and CPI swaps or other inflation swaps. Interest rate derivatives would typically be used to manage the fund’s exposure to interest rate changes or to adjust portfolio duration. Forwards would typically be used to protect any non-U.S. dollar denominated holdings from adverse currency movements, to increase or decrease exposure to a particular foreign currency, or to enhance the fund’s returns by gaining exposure to certain currencies expected to increase or decrease in value relative to other currencies. Credit default swaps would typically be used to protect the value of certain portfolio holdings or to manage the fund’s overall exposure to

changes in credit quality. CPI swaps, which are derivatives pegged directly to the rate of inflation, would typically be used to manage the fund’s inflation risk, maintain efficient exposure to TIPS and other inflation-linked securities, or help realign the portfolio with the overall characteristics of the Index.