ANNUAL REPORT December 31, 2020 T. ROWE PRICE Moderate Allocation Portfolio For more insights from T. Rowe Price investment professionals, go to troweprice.com. arpsp_1220_P5Proof # T. ROWE PRICE MODerate ALLocatioN PortfoLIO HIGHLIGHTS n The Moderate Allocation Portfolio returned 14.54% in the 12 months ended December 31, 2020, outperforming its combined index portfolio benchmark and its Lipper peer group average. n Favorable tactical allocation decisions and security selection in the portfolio’s underlying investments drove outperformance. The inclu- sion of diversifying sectors such as real assets equities and high yield bonds had a negative impact on relative results due to height- ened volatility and risk aversion early in the year. n We have a balanced view of the current market and are neutral between stocks and bonds. We tilted to an overweight to international stocks relative to U.S. stocks. After being overweight to growth stocks in the U.S. for much of the year, we shifted to an overweight to value stocks. n We believe that the Moderate Allocation Portfolio’s diversification and flexibility to identify investment opportunities across sectors and regions should allow us to generate solid long-term returns in a variety of market environments. Go Paperless It’s fast—receive your statements and Sign up for e-delivery of your statements, confirmations, confirmations faster than U.S. mail. and prospectuses or shareholder reports. It’s convenient—access your important account TO ENROLL: documents whenever you need them. If you invest directly with T. 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ROWE PRICE MODerate ALLocatioN PortfoLIO CIO Market Commentary Dear Investor Nearly all major stock and bond indexes produced positive $900 billion coronavirus relief package, supplementing the results during 2020 as markets recovered from the steep $2.4 trillion allocated to address the crisis earlier in the year, sell-off that resulted from the spread of the coronavirus. and the Fed continued to pledge very accommodative Extraordinary fiscal and monetary support from global monetary policies for the foreseeable future. Meanwhile, governments and central banks helped spur the rebound, political uncertainty diminished with Joe Biden’s victory in the although the pandemic continued to pose significant public U.S. presidential election and the completion of a Brexit trade health and economic challenges as the year came to an end. deal between the UK and the European Union. In the U.S., the large-cap Dow Jones Industrial Average and On the negative side, concerns about a resurgence in virus S&P 500 Index reached record highs, as did the technology- hospitalizations led to new lockdowns and business restrictions heavy Nasdaq Composite Index—a result that few would have in many countries, which in turn appeared to threaten predicted in late March after the benchmarks tumbled more economic recoveries. In the U.S., after a strong recovery in the than 30% as governments instituted lockdowns to try to halt summer and fall, the pace of hiring slowed late in the year, and the spread of the virus. Large-cap information technology and household spending declined in November for the first time internet-related firms helped lead the rebound as they since April. benefited from the work-from-home environment and an It was a remarkable 12-month period in many ways, but as acceleration in demand for online services. far as markets are concerned, I can recall no calendar year Within the S&P 500, the technology and consumer that so starkly displayed evidence of both fear and greed. discretionary sectors were the top performers, and Fear emerged during the March sell-off and again in April communication services and materials stocks also as oil futures briefly traded in negative territory. Greed outperformed. Despite a late rally, the energy sector trailed surfaced later as some assets seemed to continue to rally with significant losses due to a plunge in oil prices. without fundamental support. Bitcoin rocketed to a record high of $29,000 by year-end, and the amount of money raised Most equity markets outside the U.S. also performed well. by initial public offerings also climbed to historic levels. While Emerging markets outpaced developed markets, and Asian valuations are still attractive in some areas of the market, other shares delivered strong results as China and other countries in sectors appear to have already priced in a strong rebound in the region proved relatively successful in containing earnings and are trading at elevated levels. the coronavirus. There are both risks and potential rewards in this Growth stocks significantly outpaced their value counterparts environment, and we believe strong fundamental analysis and for the full year; however, value shares rallied late in the skilled active security selection will remain critical components period. Positive vaccine news in November raised hopes for a of investment success. return to normalcy in 2021 and boosted sectors that had been beaten down in the initial phases of the pandemic. Thank you for your continued confidence in T. Rowe Price. Within the fixed income universe, corporate bonds delivered strong results as the market easily absorbed a torrent of new Sincerely, issuance. After falling to record lows in March, intermediate- and longer-term Treasury yields ticked higher later in the year but remained very low by historical standards, a factor that encouraged investors to seek out riskier securities with higher return potential. Robert Sharps Group Chief Investment Officer While investors had reason to cheer the market’s recovery, the global economic outlook remained unclear as the year came to an end. Most notable on the positive side was the start of vaccine distributions, which provided hope that the pandemic was in its final phase. In addition, Congress passed a 1 arpsp_1220_P5Proof # T. ROWE PRICE MODerate ALLocatioN PortfoLIO Management’s Discussion of Fund Performance INVESTMENT OBJECTIVE Security selection in the portfolio’s underlying investments positively contributed to relative performance. Strong selection The fund seeks the highest total return over time consistent among U.S. large-cap value stocks was a notable contributor, with an emphasis on both capital appreciation and income. driven by holdings in the information technology and health care sectors. Effective security selection within the allocations to U.S. small-cap stocks and international developed markets FUND COMMENTARY equities also contributed. Conversely, unfavorable security How did the fund perform in the past 12 months? selection within the U.S. large-cap growth equity allocation detracted from relative performance. Despite producing strong The Moderate Allocation Portfolio returned 14.54% in the absolute returns, the allocation underperformed its 12 months ended December 31, 2020. The portfolio style-specific benchmark, driven largely by portfolio outperformed its combined index portfolio benchmark and its underweights to certain high-performing names in the peer group, the Lipper Variable Annuity Underlying Mixed- consumer discretionary and information technology sectors. Asset Target Allocation Moderate Funds Average. (Past Security selection within the U.S. investment-grade debt performance cannot guarantee future results.) allocation also weighed. PERFORMANCE COMPARISON The inclusion of diversifying sectors hurt relative returns. Total Return Exposure to real assets equities detracted from relative Periods Ended 12/31/20 6 Months 12 Months performance, although this negative impact was partly offset by Moderate Allocation Portfolio 17.22% 14.54% a tactical underweight allocation to the sector. Real assets staged a rally late in the period, driven by optimism that Morningstar Moderate progress in the fight against the coronavirus would lead to a Target Risk Index 15.54 12.82 return to more normalized economic activity. Most notably, Combined Index Portfolio* 15.07 13.70 names in energy were supportive for the sector, as oil prices Lipper Variable Annuity Underlying surged late in the year. Despite positive returns, the sector Mixed-Asset Target Allocation continued to trail during a period of strong performance in Moderate Funds Average 13.20 10.66 global equities. The inclusion of emerging markets and high * For a definition of the combined index portfolio, please see the yield bonds as diversifying fixed income sectors also detracted Benchmark Information section. from relative returns. This negative impact was largely concentrated in the first half of the year, when periods of What factors influenced the fund’s performance? heightened volatility led investors to shun riskier assets in favor of higher-quality government debt and cash. Improved risk Overall, tactical decisions to overweight and underweight asset appetite and historically low yields in the investment-grade classes and security selection in the underlying investments space helped both high yield and emerging markets debt pare contributed to relative returns. Our positioning between stocks losses over the back half of the year. A weaker U.S. dollar was and bonds added value over the full 12-month period also supportive to emerging markets debt late in the period. (outlined in greater detail within the positioning section). We held a favorable overweight to U.S. growth stocks early in the How is the fund positioned? period, which benefited from a market recovery that was As of December 31, 2020, we were neutral to global stocks heavily concentrated in growth-oriented sectors.