Form N-CSR T. Rowe Price Credit For: May 31


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF
REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 
 

Investment Company Act File Number:
811-22939

T. Rowe Price Credit Opportunities Fund, Inc.

(Exact
name of registrant as specified in charter)
 
100
East Pratt Street, Baltimore, MD 21202

(Address of principal executive offices)
 
David
Oestreicher
100
East Pratt Street, Baltimore, MD 21202

(Name
and address of agent for service)

 

Registrant’s telephone number, including area code: (410) 345-2000
 
 
Date of fiscal year end: May 31
 
 
Date of reporting period: May 31, 2022

Item 1. Reports to Shareholders

(a) Report pursuant to Rule 30e-1.

Credit Opportunities Fund

May 31, 2022

PRCPX Investor Class
PAOPX Advisor Class
TCRRX I Class

T. ROWE PRICE CREDIT OPPORTUNITIES FUND

HIGHLIGHTS

The
Credit Opportunities Fund outperformed its benchmark, the Bloomberg U.S. High Yield 2% Issuer
Capped Bond Index, in the 12 months ended May 31, 2022.
   
The
portfolio’s allocations to senior secured floating rate bank loans and preferred securities
made meaningful contributions to relative performance.
   
As
the Federal Reserve began raising rates and the macroeconomic environment became more uncertain,
we endeavored to improve the portfolio’s overall credit quality.
   
Fundamental
conditions in the high yield asset class and its underlying credit quality remain solid.
We do not expect a meaningful increase in default activity during the rest of the year despite
the challenging performance environment.

Log
in to your account at troweprice.com for more information.

*Certain
mutual fund accounts that are assessed an annual account service fee can also save money by switching to e-delivery.

Market
Commentary

Dear
Shareholder

Global
stock markets produced mostly negative returns during your fund’s fiscal year, the 12-month period ended May 31, 2022, while rising
bond yields weighed on returns for fixed income investors. Positive sentiment surrounding the recovering economy and corporate earnings
growth in the first half of the period gave way to fears about new coronavirus variants, rising interest rates, soaring inflation, and
geopolitical turmoil in the second half.

Nearly
all major global and regional equity benchmarks receded during the period. Value shares outperformed growth stocks as equity investors
turned risk averse and rising rates put downward pressure on growth stock valuations. Sector performance diverged widely, with communication
services and consumer discretionary companies suffering amid the value rotation. Meanwhile, energy stocks registered exceptional returns
as oil prices jumped in response to Russia’s invasion of Ukraine and the ensuing commodity supply crunch.

Financial
markets entered the period on an upbeat note as an improving labor market and renewed stimulus efforts were reflected in higher consumer
spending. A robust increase in corporate earnings growth also drove markets for much of 2021. However, earnings tailwinds showed signs
of fading heading into 2022, as certain high-profile companies issued weaker-than-expected earnings reports or financial projections.

In
November 2021, the emergence of the omicron variant of the coronavirus prompted worries about the economic outlook and the potential
that a resurgence in cases could lead to further supply chain disruptions. While omicron variant trends and restrictions eased in most
regions early in 2022, China continued to pursue a “zero COVID” policy, resulting in large-scale lockdowns and industrial
production disruptions.

In
February 2022, markets were caught further by surprise when Russia launched a large-scale military offensive into Ukraine. The strong
sanctions on Russia that followed raised concerns about supply chains already stressed by the coronavirus. In March, the White House
announced that the U.S. was cutting off all oil imports from Russia. As a result, oil prices surged to their highest level in over a
decade.

Concerns
about inflation intensified over much of the period, driven in part by events in Ukraine and China. Along with supply chain problems,
the impact of the fiscal and monetary stimulus enacted during the pandemic and the release of pent-up demand for travel, recreation,
and other services also pushed prices higher. In the U.S., consumer prices rose 8.2% in April versus the year before, near multi-decade
highs, driven by accelerating energy and food prices. In March, the U.S. Federal Reserve approved its first interest rate hike in more
than three years and signaled an accelerating pace of rate increases ahead to combat inflation. In addition, the Fed ended its purchases
of Treasuries and agency mortgage-backed securities during the period and announced plans to begin reducing its balance sheet.

Bond
indexes were broadly negative as yields rose across the U.S. Treasury yield curve amid surging inflation and expectations of aggressive
monetary tightening. (Bond yields and prices move in opposite directions.) Investment-grade corporate bonds fared particularly poorly,
experiencing significant losses as concerns over a potential slowdown in economic growth took hold.

The
challenges global markets face are complex and could drive market volatility as we enter the second half of the year. Our investment
teams will be closely monitoring the Fed’s actions as the central bank attempts to use interest rate hikes to tame inflation without
stifling economic growth. Meanwhile, we remain focused on the ongoing geopolitical and humanitarian crisis in Ukraine, which continues
to disrupt supply chains, increase inflationary pressures, and dampen consumer confidence.

During
challenging times like these, I am heartened by our firm’s long-term focus and time-tested investment approach. I also recognize
that market volatility and sector rotation historically have presented attractive opportunities for active investors. I remain confident
in the ability of our global research organization to uncover compelling investment ideas that can help deliver strong long-term risk-adjusted
performance as market conditions normalize.

Thank
you for your continued confidence in T. Rowe Price.

Sincerely,

Robert
Sharps
CEO and President

Management’s
Discussion of Fund Performance

INVESTMENT
OBJECTIVE

The
fund seeks a combination of long-term capital appreciation and high income.

FUND
COMMENTARY

How
did the fund perform in the past 12 months?

The
Credit Opportunities Fund returned -3.41% in the 12 months ended May 31, 2022, outperforming its benchmark, the Bloomberg U.S. High Yield
2% Issuer Capped Bond Index. (Returns for Advisor and I Class shares varied
slightly, reflecting their different fee structures. Past performance cannot guarantee future results.)

What
factors influenced the fund’s performance?

The
second half of the 12-month period presented a challenging return environment for high yield bonds as the Federal Reserve began raising
rates to battle inflation. Despite increased uncertainty in the macroeconomic backdrop, high yield credit spreads have been remarkably
stable in 2022. Higher rates and, more specifically, the duration component of the asset class were the primary drivers of negative returns.
(Duration is a measure of a bond’s or a bond fund’s interest rate sensitivity.) The current higher-quality nature of our
market means that it is less vulnerable to credit issues, but with that comes lower coupons and longer duration. Therefore, the high
yield asset class is somewhat more interest rate sensitive than it may have been historically, which led to the negative returns over
the past year, particularly in the last six months.

Most
of the interest rate sensitivity in the high yield asset class is concentrated in the BB rating tier, where we maintained a significant
underweight compared with the benchmark to mitigate interest rate risk. We supplemented this lower relative weight with an off-benchmark
allocation to bank loans (also known as leveraged loans), which have floating rate coupons and are therefore less affected by rising
rates.

Over
the past year, the portfolio’s allocation to bank loans was a top contributor to relative performance, as were our holdings of
preferred securities. The latter consisted primarily of mandatory convertibles in utilities names we like from a longer-term perspective.
One such company is Vistra, which operates as a power company offering power generation, distribution, and transmission solutions. We
have a favorable view of Vistra’s power generation plus retail business model, which allows the company to naturally hedge its
generation book, and we continue to like its credit story. (Please refer to the portfolio of investments for a complete list of holdings
and the amount each represents in the portfolio.)

Credit
selection in the wireless communications segment was a notable contributor. Specifically, not owning international telecommunications
company VEON was beneficial to the portfolio’s relative performance. Amid the ongoing conflict in Ukraine and the resulting heavy
sanctions against Russia, these bonds came under pressure as the company generates the majority of its revenue in the Russian market.

Our
investments in Puerto Rico’s general obligation (GO) bond and Intelsat’s secured debt are two special situations that made
meaningful contributions over the past year. Puerto Rico’s GO bond was a top idea from our municipal team. Our investment highlights
the flexibility the strategy can employ to uncover value outside the corporate credit spectrum. We purchased the GO bonds of the defaulted
island after most of the objections to the restructuring plan had been overcome. Puerto Rico completed the restructuring of its public
debt and formally exited bankruptcy in March 2022.

Credit
selection in the satellites segment was beneficial, largely due to Intelsat, a global satellite operator that filed for bankruptcy in
2019. Our investment team closely followed developments in this credit story for several years and avoided the most junior parts of the
capital structure. We held the secured notes through bankruptcy, earned default interest during the entire case, and were paid in full
upon the company’s bankruptcy exit.

In
the broadcasting segment, Clear Channel Outdoor (CCO), one of the world’s largest outdoor advertising companies, weighed on relative
results. Although balance sheet issues have hurt CCO’s performance, the company should continue to enjoy certain advantages relative
to other traditional media credits. The out-of-home advertising industry has reasonable barriers to entry, low disintermediation risk,
and steady market share and has experienced consistent post-recession growth.

Although
credit selection in health care added value overall, the portfolio’s holdings of for-profit hospital system Community Health Systems
dragged. Despite the company’s first-quarter 2022 earnings beat, the bonds traded down after management lowered guidance for full-year
adjusted earnings due to higher 2022 labor cost estimates. Specifically, the labor shortage in nursing since the emergence of the coronavirus
pandemic has contributed to recent weakness in the health care space as companies had to increase compensation to attract/retain nurses,
which had a negative short-term impact on margins.

Credit
selection in the cable operators segment detracted, partly due to satellite television company DISH Network. The bonds experienced weakness
amid investors’ worries about the risks created by the company’s use of cash flows from its declining direct broadcast satellite
pay-television business to invest heavily in potential future growth.

How
is the fund positioned?

This
portfolio is structured to offer flexible and concentrated exposure to our highest-conviction high yield bonds and bank loans. Most of
the portfolio taps into the repeatable, traditional high yield and bank loan credit research process that defines the T. Rowe Price high
yield platform. The fund’s flexible mandate allows for more aggressive or conservative positioning as the opportunity set dictates,
and we have the ability to layer in special credit situations. In these situations, we look for jurisdictions in which we know our rights
and remedies and spend meaningful time on asset valuation and assessing potential outcomes. When we do participate in selective situations,
we stay in liquid, freely tradeable instruments and seek to be active members of creditor committees so that we can have a significant
impact on our outcome. These holdings, while limited in number, can offer the potential for meaningful total return, and they are another
factor differentiating this portfolio from traditional high yield bond funds.

Over
the past year, bank loans significantly outperformed high yield bonds. However, we began rotating out of leveraged loans in 2022 as bond
valuations became more attractive. Through the end of 2021 we maintained the portfolio’s allocation to bank loans at approximately
20%, but by the end of May we had actively managed that position down to just over 13% while also reducing the portfolio’s exposure
to CCC rated bonds. We used the proceeds from these sales to increase the portfolio’s overall credit quality by augmenting our
investments in BB rated bonds.

We
also increased our holdings in the automotive and utilities industries. In the automotive segment, collaboration with our equity colleagues
enabled us to participate in a private deal with electric vehicle manufacturer Rivian. Our equity platform was a top shareholder of the
company’s private equity, which allowed our team to conduct a thorough due diligence process of the private credit deal. Rivian’s
successful initial public offering in November provided us with a meaningful cushion of subordinated capital. The company will be the
first pure-play electric automobile manufacturer to deliver commercial vehicles through its 100,000-unit contract with Amazon.com. Commercial
vehicles are an attractive, secularly growing end market—one which tends to be underappreciated but profitable. We have a favorable
outlook on the potential for electric vehicles to take market share broadly, and this investment provided an opportunity to express that
view.

Our
investments in the perpetual preferred securities of Vistra were the primary driver of the 230 basis point (100 basis points equals 1.00%)
increase in the portfolio’s utilities holdings during the reporting period.

What
is portfolio management’s outlook?

Fundamental
conditions in the high yield asset class and its underlying credit quality remain solid. We do not expect a meaningful increase in default
activity during the rest of the year despite the challenging performance environment. The upgrade cycle that has led to many of our companies
being elevated to investment-grade status also remains largely intact. The number of issuers to receive credit rating upgrades has exceeded
downgrades for several consecutive quarters, and we believe this trend will continue.

The
high yield market’s performance is strongly correlated with that of other risk assets. Therefore, we anticipate that events in
the broader market, such as equity sell-offs in response to the Fed continuing to raise rates, could lead to additional credit spread
widening. Historically, when the risk-free rate and credit spreads have reached current levels—as they have four times since the
global financial crisis—we have seen strong one-year forward returns in the high yield asset class, which bodes well for its performance
in 2023. Please keep in mind that past performance cannot guarantee future results.

The
views expressed reflect the opinions of T. Rowe Price as of the date of this report and are subject to change based on changes in market,
economic, or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

RISKS
OF BOND INVESTING

Bonds
are subject to interest rate risk, the decline in bond prices that usually accompanies a rise in interest rates, and credit risk, the
chance that any fund holding could have its credit rating downgraded or that a bond issuer will default (fail to make timely payments
of interest or principal), potentially reducing the fund’s income level and share price. High yield corporate bonds could have
greater price declines than funds that invest primarily in high-quality bonds. Companies issuing high yield bonds are not as strong
financially as those with higher credit ratings, so the bonds are usually considered to be speculative investments. Bank loans may at
times become difficult to value and highly illiquid; they are subject to credit risk, such as nonpayment of principal or interest, and
risks of bankruptcy and insolvency.

Investing
in the securities of non-U.S. issuers involves special risks not typically associated with investing in U.S. issuers. Foreign securities
tend to be more volatile and less liquid than investments in U.S. securities and may lose value because of adverse local, political,
social, or economic developments overseas or due to changes in the exchange rates between foreign currencies and the U.S. dollar. In
addition, foreign investments are subject to settlement practices and regulatory and financial reporting standards that differ from those
of the U.S. These risks are heightened for the fund’s investments in emerging markets, which are more susceptible to governmental
interference, less efficient trading markets, and the imposition of local taxes or restrictions on gaining access to sales proceeds for
foreign investors.

BENCHMARK
INFORMATION

Note:
“Bloomberg®” and Bloomberg U.S. High Yield 2% Issuer Capped Bond Index are service marks of Bloomberg Finance
L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively,
“Bloomberg”) and have been licensed for use for certain purposes by T. Rowe Price. Bloomberg is not affiliated with T. Rowe
Price, and Bloomberg does not approve, endorse, review, or recommend its products. Bloomberg does not guarantee the timeliness, accurateness,
or completeness of any data or information relating to its products.

GROWTH
OF $10,000

This
chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds
lacking 10-year records). The result is compared with benchmarks, which include a broad-based market index and may also include a peer
group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages
and indexes.

AVERAGE
ANNUAL COMPOUND TOTAL RETURN

EXPENSE
RATIO

FUND
EXPENSE EXAMPLE

As
a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing
costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to
help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing
in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period
and held for the entire period.

Please
note that the fund has three share classes: The original share class (Investor Class) charges no distribution and service (12b-1) fee,
the Advisor Class shares are offered only through unaffiliated brokers and other financial intermediaries and charge a 0.25% 12b-1 fee,
and I Class shares are available to institutionally oriented clients and impose no 12b-1 or administrative fee payment. Each share class
is presented separately in the table.

Actual
Expenses

The
first line of the following table (Actual) provides information about actual account values and expenses based on the fund’s actual
returns. You may use the information on this line, together with your account balance, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number on the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid
on your account during this period.

Hypothetical
Example for Comparison Purposes

The
information on the second line of the table (Hypothetical) is based on hypothetical account values and expenses derived from the fund’s
actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare
the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples
that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period.

Note:
T. Rowe Price charges an annual account service fee of $20, generally for accounts with less than $10,000. The fee is waived for
any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account
statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Personal
Services or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $250,000).
This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing
expenses of investing in the fund and when comparing the expenses of this fund with other funds.

You
should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs,
such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not
help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total
cost of owning that fund is higher.

QUARTER-END RETURNS

The
accompanying notes are an integral part of these financial statements.

The
accompanying notes are an integral part of these financial statements.

The
accompanying notes are an integral part of these financial statements.

May
31, 2022

The
accompanying notes are an integral part of these financial statements.

May
31, 2022

The
accompanying notes are an integral part of these financial statements.

The
accompanying notes are an integral part of these financial statements.

The
accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS

T.
Rowe Price Credit Opportunities Fund, Inc. (the fund) is registered under the Investment Company Act of 1940 (the 1940 Act) as a diversified,
open-end management investment company. The fund seeks a combination of long-term capital appreciation and high income. The fund has
three classes of shares: the Credit Opportunities Fund (Investor Class), the Credit Opportunities Fund–Advisor Class (Advisor Class)
and the Credit Opportunities Fund–I Class (I Class). Advisor Class shares are sold only through various brokers and other financial
intermediaries. I Class shares require a $500,000 initial investment minimum, although the minimum generally is waived or reduced for
financial intermediaries, eligible retirement plans, and certain other accounts. Prior to November 15, 2021, the initial investment minimum
was $1 million and was generally waived for financial intermediaries, eligible retirement plans, and other certain accounts. As a result
of the reduction in the I Class minimum, certain assets transferred from the Investor Class to the I Class. This transfer of shares from
Investor Class to I Class is reflected in the Statement of Changes in Net Assets within the Capital shares transactions as Shares redeemed
and Shares sold, respectively. The Advisor Class operates under a Board-approved Rule 12b-1 plan pursuant to which the class compensates
financial intermediaries for distribution, shareholder servicing, and/or certain administrative services; the Investor and I Classes
do not pay Rule 12b-1 fees. Each class has exclusive voting rights on matters related solely to that class; separate voting rights on
matters that relate to all classes; and, in all other respects, the same rights and obligations as the other classes.

NOTE
1 – SIGNIFICANT ACCOUNTING POLICIES

Basis
of Preparation
The fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards
Board (FASB) Accounting Standards Codification Topic 946 (ASC 946). The accompanying financial statements were prepared in accordance
with accounting principles generally accepted in the United States of America (GAAP), including, but not limited to, ASC 946. GAAP requires
the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may
differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately
realized upon sale or maturity.

Investment
Transactions, Investment Income, and Distributions
Investment transactions are accounted for on the trade date basis. Income and
expenses are recorded on the accrual basis. Realized gains and losses are reported on the identified cost basis. Premiums and discounts
on debt securities are amortized for financial reporting purposes. Income tax-related interest and penalties, if incurred, are recorded
as income tax expense. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are
reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Distributions from
REITs are initially recorded as dividend income and, to the extent such represent a return of capital or capital gain for tax purposes,
are reclassified when such information becomes available. Non-cash dividends, if any, are recorded at the fair market value of the asset
received. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared by each class daily and
paid monthly. A capital gain distribution may also be declared and paid by the fund annually.

Currency
Translation
Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values
each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as provided
by an outside pricing service. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing
exchange rate on the respective date of such transaction. The effect of changes in foreign currency exchange rates on realized and unrealized
security gains and losses is not bifurcated from the portion attributable to changes in market prices.

Class
Accounting
Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the
class to which they relate. Expenses common to all classes and investment income are allocated to the classes based upon the relative
daily net assets of each class’s settled shares; realized and unrealized gains and losses are allocated based upon the relative
daily net assets of each class’s outstanding shares. The Advisor Class pays Rule 12b-1 fees, in an amount not exceeding 0.25% of
the class’s average daily net assets; during the year ended May 31, 2022, the Advisor Class incurred less than $1,000 in these
fees.

Capital
Transactions
Each investor’s interest in the net assets of the fund is represented by fund shares. The fund’s net asset
value (NAV) per share is computed at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day the NYSE is open for
business. However, the NAV per share may be calculated at a time other than the normal close of the NYSE if trading on the NYSE is restricted,
if the NYSE closes earlier, or as may be permitted by the SEC. Purchases and redemptions of fund shares are transacted at the next-computed
NAV per share, after receipt of the transaction order by T. Rowe Price Associates, Inc., or its agents.

New
Accounting Guidance
In March 2020, the FASB issued Accounting Standards Update (ASU), ASU 2020–04, Reference Rate Reform (Topic
848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional, temporary relief with
respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London
Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. In March 2021, the administrator
for LIBOR announced the extension of the publication of a majority of the USD LIBOR settings to June 30, 2023. Management expects that
the adoption of the guidance will not have a material impact on the fund’s financial statements.

Indemnification
In the normal course of business, the fund may provide indemnification in connection with its officers and directors, service providers,
and/or private company investments. The fund’s maximum exposure under these arrangements is unknown; however, the risk of material
loss is currently considered to be remote.

NOTE
2 – VALUATION

Fair
Value
The fund’s financial instruments are valued at the close of the NYSE and are reported at fair value, which GAAP defines
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The T. Rowe Price Valuation Committee (the Valuation Committee) is an internal committee that has been delegated
certain responsibilities by the fund’s Board of Directors (the Board) to ensure that financial instruments are appropriately priced
at fair value in accordance with GAAP and the 1940 Act. Subject to oversight by the Board, the Valuation Committee develops and oversees
pricing-related policies and procedures and approves all fair value determinations. Specifically, the Valuation Committee establishes
policies and procedures used in valuing financial instruments, including those which cannot be valued in accordance with normal procedures
or using pricing vendors; determines pricing techniques, sources, and persons eligible to effect fair value pricing actions; evaluates
the services and performance of the pricing vendors; oversees the pricing process to ensure policies and procedures are being followed;
and provides guidance on internal controls and valuation-related matters. The Valuation Committee provides periodic reporting to the
Board on valuation matters.

Various
valuation techniques and inputs are used to determine the fair value of financial instruments. GAAP establishes the following fair value
hierarchy that categorizes the inputs used to measure fair value:

Level
1 – quoted prices (unadjusted) in active markets for identical financial instruments that the fund can access at the reporting
date

Level
2 – inputs other than Level 1 quoted prices that are observable, either directly or indirectly (including, but not limited to,
quoted prices for similar financial instruments in active markets, quoted prices for identical or similar financial instruments in inactive
markets, interest rates and yield curves, implied volatilities, and credit spreads)

Level
3 – unobservable inputs (including the fund’s own assumptions in determining fair value)

Observable
inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions
that market participants would use to price the financial instrument. Unobservable inputs are those for which market data are not available
and are developed using the best information available about the assumptions that market participants would use to price the financial
instrument. GAAP requires valuation techniques to maximize the use of relevant observable inputs and minimize the use of unobservable
inputs. When multiple inputs are used to derive fair value, the financial instrument is assigned to the level within the fair value hierarchy
based on the lowest-level input that is significant to the fair value of the financial instrument. Input levels are not necessarily an
indication of the risk or liquidity associated with financial instruments at that level but rather the degree of judgment used in determining
those values.

Valuation
Techniques
Debt securities generally are traded in the over-the-counter (OTC) market and are valued at prices furnished by independent
pricing services or by broker dealers who make markets in such securities. When valuing securities, the independent pricing services
consider the yield or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make
markets in such securities.

Equity
securities, including exchange-traded funds, listed or regularly traded on a securities exchange or in the over-the-counter (OTC) market
are valued at the last quoted sale price or, for certain markets, the official closing price at the time the valuations are made. OTC
Bulletin Board securities are valued at the mean of the closing bid and asked prices. A security that is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not
traded on a particular day are valued at the mean of the closing bid and asked prices for domestic securities.

Investments
in mutual funds are valued at the mutual fund’s closing NAV per share on the day of valuation. Forward currency exchange contracts
are valued using the prevailing forward exchange rate. Swaps are valued at prices furnished by an independent pricing service or independent
swap dealers. Assets and liabilities other than financial instruments, including short-term receivables and payables, are carried at
cost, or estimated realizable value, if less, which approximates fair value.

Investments
for which market quotations or market-based valuations are not readily available or deemed unreliable are valued at fair value as determined
in good faith by the Valuation Committee, in accordance with fair valuation policies and procedures. The objective of any fair value
pricing determination is to arrive at a price that could reasonably be expected from a current sale. Financial instruments fair valued
by the Valuation Committee are primarily private placements, restricted securities, warrants, rights, and other securities that are not
publicly traded. Factors used in determining fair value vary by type of investment and may include market or investment specific considerations.
The Valuation Committee typically will afford greatest weight to actual prices in arm’s length transactions, to the extent they
represent orderly transactions between market participants, transaction information can be reliably obtained, and prices are deemed representative
of fair value. However, the Valuation Committee may also consider other valuation methods such as market-based valuation multiples; a
discount or premium from market value of a similar, freely traded security of the same issuer; discounted cash flows; yield to maturity;
or some combination. Fair value determinations are reviewed on a regular basis and updated as information becomes available, including
actual purchase and sale transactions of the investment. Because any fair value determination involves a significant amount of judgment,
there is a degree of subjectivity inherent in such pricing decisions, and fair value prices determined by the Valuation Committee could
differ from those of other market participants.

Valuation
Inputs
The following table summarizes the fund’s financial instruments, based on the inputs used to determine their fair values
on May 31, 2022 (for further detail by category, please refer to the accompanying Portfolio of Investments):

NOTE
3 – DERIVATIVE INSTRUMENTS

During
the year ended May 31, 2022, the fund invested in derivative instruments. As defined by GAAP, a derivative is a financial instrument
whose value is derived from an underlying security price, foreign exchange rate, interest rate, index of prices or rates, or other variable;
it requires little or no initial investment and permits or requires net settlement. The fund invests in derivatives only if the expected
risks and rewards are consistent with its investment objectives, policies, and overall risk profile, as described in its prospectus and
Statement of Additional Information. The fund may use derivatives for a variety of purposes and may use them to establish both long and
short positions within the fund’s portfolio. Potential uses include to hedge against declines in principal value, increase yield,
invest in an asset with greater efficiency and at a lower cost than is possible through direct investment, to enhance return, or to adjust
portfolio duration and credit exposure. The risks associated with the use of derivatives are different from, and potentially much greater
than, the risks associated with investing directly in the instruments on which the derivatives are based. The fund at all times maintains
sufficient cash reserves, liquid assets, or other SEC-permitted asset types to cover its settlement obligations under open derivative
contracts.

The
fund values its derivatives at fair value and recognizes changes in fair value currently in its results of operations. Accordingly, the
fund does not follow hedge accounting, even for derivatives employed as economic hedges. Generally, the fund accounts for its derivatives
on a gross basis. It does not offset the fair value of derivative liabilities against the fair value of derivative assets on its financial
statements, nor does it offset the fair value of derivative instruments against the right to reclaim or obligation to return collateral.
The following table summarizes the fair value of the fund’s derivative instruments held as of May 31, 2022, and the related location
on the accompanying Statement of Assets and Liabilities, presented by primary underlying risk exposure:

Additionally,
the amount of gains and losses on derivative instruments recognized in fund earnings during the year ended May 31, 2022, and the related
location on the accompanying Statement of Operations is summarized in the following table by primary underlying risk exposure:

Counterparty
Risk and Collateral
The fund invests in derivatives in various markets, which expose it to differing levels of counterparty risk.
Counterparty risk on exchange-traded and centrally cleared derivative contracts, such as futures, exchange-traded options, and centrally
cleared swaps, is minimal because the clearinghouse provides protection against counterparty defaults. For futures and centrally cleared
swaps, the fund is required to deposit collateral in an amount specified by the clearinghouse and the clearing firm (margin requirement),
and the margin requirement must be maintained over the life of the contract. Each clearinghouse and clearing firm, in its sole discretion,
may adjust the margin requirements applicable to the fund.

Derivatives,
such as bilateral swaps, forward currency exchange contracts, and OTC options, that are transacted and settle directly with a counterparty
(bilateral derivatives) may expose the fund to greater counterparty risk. To mitigate this risk, the fund has entered into master netting
arrangements (MNAs) with certain counterparties that permit net settlement under specified conditions and, for certain counterparties,
also require the exchange of collateral to cover mark-to-market exposure. MNAs may be in the form of International Swaps and Derivatives
Association master agreements (ISDAs) or foreign exchange letter agreements (FX letters).

MNAs
provide the ability to offset amounts the fund owes a counterparty against amounts the counterparty owes the fund (net settlement). Both
ISDAs and FX letters generally allow termination of transactions and net settlement upon the occurrence of contractually specified events,
such as failure to pay or bankruptcy. In addition, ISDAs specify other events, the occurrence of which would allow one of the parties
to terminate. For example, a downgrade in credit rating of a counterparty below a specified rating would allow the fund to terminate,
while a decline in the fund’s net assets of more than a specified percentage would allow the counterparty to terminate. Upon termination,
all transactions with that counterparty would be liquidated and a net termination amount settled. ISDAs typically include collateral
agreements whereas FX letters do not. Collateral requirements are determined daily based on the net aggregate unrealized gain or loss
on all bilateral derivatives with a counterparty, subject to minimum transfer amounts that typically range from $100,000 to $250,000.
Any additional collateral required due to changes in security values is typically transferred the next business day.

Collateral
may be in the form of cash or debt securities issued by the U.S. government or related agencies, although other securities may be used
depending on the terms outlined in the applicable MNA. Cash posted by the fund is reflected as cash deposits in the accompanying financial
statements and generally is restricted from withdrawal by the fund; securities posted by the fund are so noted in the accompanying Portfolio
of Investments; both remain in the fund’s assets. Collateral pledged by counterparties is not included in the fund’s assets
because the fund does not obtain effective control over those assets. For bilateral derivatives, collateral posted or received by the
fund is held in a segregated account at the fund’s custodian. While typically not sold in the same manner as equity or fixed income
securities, exchange-traded or centrally cleared derivatives may be closed out only on the exchange or clearinghouse where the contracts
were cleared, and OTC and bilateral derivatives may be unwound with counterparties or transactions assigned to other counterparties to
allow the fund to exit the transaction. This ability is subject to the liquidity of underlying positions. As of May 31, 2022, no collateral
was pledged by either the fund or counterparties for bilateral derivatives. As of May 31, 2022, cash of $203,000 had been posted by the
fund for exchange-traded and/or centrally cleared derivatives.

Forward
Currency Exchange Contracts
The fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment
objectives. It uses forward currency exchange contracts (forwards) primarily to protect its non-U.S. dollar-denominated securities from
adverse currency movements. A forward involves an obligation to purchase or sell a fixed amount of a specific currency on a future date
at a price set at the time of the contract. Although certain forwards may be settled by exchanging only the net gain or loss on the contract,
most forwards are settled with the exchange of the underlying currencies in accordance with the specified terms. Forwards are valued
at the unrealized gain or loss on the contract, which reflects the net amount the fund either is entitled to receive or obligated to
deliver, as measured by the difference between the forward exchange rates at the date of entry into the contract and the forward rates
at the reporting date. Appreciated forwards are reflected as assets and depreciated forwards are reflected as liabilities on the accompanying
Statement of Assets and Liabilities. Risks related to the use of forwards include the possible failure of counterparties to meet the
terms of the agreements; that anticipated currency movements will not occur, thereby reducing the fund’s total return; and the
potential for losses in excess of the fund’s initial investment. During the year ended May 31, 2022, the volume of the fund’s
activity in forwards, based on underlying notional amounts, was generally between 0% and 1% of net assets.

Options
The fund is subject to credit risk in the normal course of pursuing its investment objectives and uses options to help manage such
risk. The fund may use options to manage exposure to security prices, interest rates, foreign currencies, and credit quality; as an efficient
means of adjusting exposure to all or a part of a target market; to enhance income; as a cash management tool; or to adjust credit exposure.
Options are included in net assets at fair value, options purchased are included in Investments in Securities, and Options written are
separately reflected as a liability on the accompanying Statement of Assets and Liabilities. Premiums on unexercised, expired options
are recorded as realized gains or losses; premiums on exercised options are recorded as an adjustment to the proceeds from the sale or
cost of the purchase. The difference between the premium and the amount received or paid in a closing transaction is also treated as
realized gain or loss. In return for a premium paid, options on swaps give the holder the right, but not the obligation, to enter a specified
swap contract on predefined terms. The exercise price of an option on a credit default swap is stated in terms of a specified spread
that represents the cost of credit protection on the reference asset, including both the upfront premium to open the position and future
periodic payments. The exercise price of an interest rate swap is stated in terms of a fixed interest rate; generally, there is no upfront
payment to open the position. Risks related to the use of options include possible illiquidity of the options markets; trading restrictions
imposed by an exchange or counterparty; possible failure of counterparties to meet the terms of the agreements; movements in the underlying
asset values and credit ratings; and, for options written, the potential for losses to exceed any premium received by the fund. During
the year ended May 31, 2022, the volume of the fund’s activity in options, based on underlying notional amounts, was generally
between 0% and 4% of net assets.

Swaps
The fund is subject to credit risk in the normal course of pursuing its investment objectives and uses swap contracts to help manage
such risk. The fund may use swaps in an effort to manage both long and short exposure to changes in interest rates, inflation rates,
and credit quality; to adjust overall exposure to certain markets; to enhance total return or protect the value of portfolio securities;
to serve as a cash management tool; or to adjust portfolio duration and credit exposure. Swap agreements can be settled either directly
with the counterparty (bilateral swap) or through a central clearinghouse (centrally cleared swap). Fluctuations in the fair value of
a contract are reflected in unrealized gain or loss and are reclassified to realized gain or loss upon contract termination or cash settlement.
Net periodic receipts or payments required by a contract increase or decrease, respectively, the value of the contract until the contractual
payment date, at which time such amounts are reclassified from unrealized to realized gain or loss. For bilateral swaps, cash payments
are made or received by the fund on a periodic basis in accordance with contract terms; unrealized gain on contracts and premiums paid
are reflected as assets and unrealized loss on contracts and premiums received are reflected as liabilities on the accompanying Statement
of Assets and Liabilities. For bilateral swaps, premiums paid or received are amortized over the life of the swap and are recognized
as realized gain or loss in the Statement of Operations. For centrally cleared swaps, payments are made or received by the fund each
day to settle the daily fluctuation in the value of the contract (variation margin). Accordingly, the value of a centrally cleared swap
included in net assets is the unsettled variation margin; net variation margin receivable is reflected as an asset and net variation
margin payable is reflected as a liability on the accompanying Statement of Assets and Liabilities.

Credit
default swaps are agreements where one party (the protection buyer) agrees to make periodic payments to another party (the protection
seller) in exchange for protection against specified credit events, such as certain defaults and bankruptcies related to an underlying
credit instrument, or issuer or index of such instruments. Upon occurrence of a specified credit event, the protection seller is required
to pay the buyer the difference between the notional amount of the swap and the value of the underlying credit, either in the form of
a net cash settlement or by paying the gross notional amount and accepting delivery of the relevant underlying credit. For credit default
swaps where the underlying credit is an index, a specified credit event may affect all or individual underlying securities included in
the index and will be settled based upon the relative weighting of the affected underlying security(ies) within the index. Generally,
the payment risk for the seller of protection is inversely related to the current market price or credit rating of the underlying credit
or the market value of the contract relative to the notional amount, which are indicators of the markets’ valuation of credit quality.
As of May 31, 2022, the notional amount of protection sold by the fund totaled $1,317,000 (1.4% of net assets), which reflects the maximum
potential amount the fund could be required to pay under such contracts. Risks related to the use of credit default swaps include the
possible inability of the fund to accurately assess the current and future creditworthiness of underlying issuers, the possible failure
of a counterparty to perform in accordance with the terms of the swap agreements, potential government regulation that could adversely
affect the fund’s swap investments, and potential losses in excess of the fund’s initial investment.

During
the year ended May 31, 2022, the volume of the fund’s activity in swaps, based on underlying notional amounts, was generally between
0% and 2% of net assets.

NOTE
4 – OTHER INVESTMENT TRANSACTIONS

Consistent
with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance.
The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and
Statement of Additional Information.

Noninvestment-Grade
Debt
The fund invests, either directly or through its investment in other T. Rowe Price funds, in noninvestment-grade debt, including
“high yield” or “junk” bonds or leveraged loans. Noninvestment-grade debt issuers are more likely to suffer an
adverse change in financial condition that would result in the inability to meet a financial obligation. The noninvestment-grade debt
market may experience sudden and sharp price swings due to a variety of factors that may decrease the ability of issuers to make principal
and interest payments and adversely affect the liquidity or value, or both, of such securities. Accordingly, securities issued by such
companies carry a higher risk of default and should be considered speculative.

Restricted
Securities
The fund invests in securities that are subject to legal or contractual restrictions on resale. Prompt sale of such securities
at an acceptable price may be difficult and may involve substantial delays and additional costs.

Bank
Loans
The fund invests in bank loans, which represent an interest in amounts owed by a borrower to a syndicate of lenders. Bank loans
are generally noninvestment grade and often involve borrowers whose financial condition is highly leveraged. Bank loans may be in the
form of either assignments or participations. A loan assignment transfers all legal, beneficial, and economic rights to the buyer, and
transfer typically requires consent of both the borrower and agent. In contrast, a loan participation generally entitles the buyer to
receive the cash flows from principal, interest, and any fee payments on a portion of a loan; however, the seller continues to hold legal
title to that portion of the loan. As a result, the buyer of a loan participation generally has no direct recourse against the borrower
and is exposed to credit risk of both the borrower and seller of the participation. Bank loans often have extended settlement periods,
generally may be repaid at any time at the option of the borrower, and may require additional principal to be funded at the borrowers’
discretion at a later date (e.g. unfunded commitments and revolving debt instruments). Until settlement, the fund maintains liquid assets
sufficient to settle its unfunded loan commitments. The fund reflects both the funded portion of a bank loan as well as its unfunded
commitment in the Portfolio of Investments. However, if a credit agreement provides no initial funding of a tranche, and funding of the
full commitment at a future date(s) is at the borrower’s discretion and considered uncertain, a loan is reflected in the Portfolio
of Investments only if, and only to the extent that, the fund has actually settled a funding commitment.

LIBOR
Transition
The fund may invest in instruments that are tied to reference rates, including LIBOR. Over the course of the last several
years, global regulators have indicated an intent to phase out the use of LIBOR and similar interbank offered rates (IBOR). While publication
for most LIBOR currencies and lesser-used USD LIBOR settings ceased immediately after December 31, 2021, remaining USD LIBOR settings
will continue to be published until June 30, 2023. There remains uncertainty regarding the future utilization of LIBOR and the nature
of any replacement rate. Any potential effects of the transition away from LIBOR on the fund, or on certain instruments in which the
fund invests, cannot yet be determined. The transition process may result in, among other things, an increase in volatility or illiquidity
of markets for instruments that currently rely on LIBOR, a reduction in the value of certain instruments held by the fund, or a reduction
in the effectiveness of related fund transactions such as hedges. Any such effects could have an adverse impact on the fund’s performance.

Other
Purchases and sales of portfolio securities other than short-term securities aggregated $50,554,000 and $35,698,000, respectively,
for the year ended May 31, 2022.

NOTE
5 – FEDERAL INCOME TAXES

Generally,
no provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Distributions determined
in accordance with federal income tax regulations may differ in amount or character from net investment income and realized gains for
financial reporting purposes.

The
fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant
tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax
return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax
positions that require a provision for income taxes.

Capital
accounts within the financial reporting records are adjusted for permanent book/tax differences to reflect tax character but are not
adjusted for temporary differences. The permanent book/tax adjustments, if any, have no impact on results of operations or net assets.
The permanent book/tax adjustments relate primarily to differences between book/tax amortization policies.

The
tax character of distributions paid for the periods presented was as follows:

At
May 31, 2022, the tax-basis cost of investments (including derivatives, if any) and gross unrealized appreciation and depreciation were
as follows:

At
May 31, 2022, the tax-basis components of accumulated net earnings (loss) were as follows:

Temporary
differences between book-basis and tax-basis components of total distributable earnings (loss) arise when certain items of income, gain,
or loss are recognized in different periods for financial statement purposes versus for tax purposes; these differences will reverse
in a subsequent reporting period. The temporary differences relate primarily to the deferral of losses from wash sales and the recognition
of market discount and premium amortization. The loss carryforwards and deferrals primarily relate to capital loss carryforwards. Capital
loss carryforwards are available indefinitely to offset future realized capital gains. During the year ended May 31, 2022, the fund utilized
$803,000 of capital loss carryforwards. Capital loss carryforwards acquired through tax-free reorganizations may be subject to certain
limitations on amount or timing of use.

NOTE
6 – RELATED PARTY TRANSACTIONS

The
fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group).
The investment management agreement between the fund and Price Associates provides for an annual investment management fee, which is
computed daily and paid monthly. The fee consists of an individual fund fee and a group fee. The individual fund fee is equal to 0.27%
of the fund’s average daily net assets; prior to October 1, 2021, the individual fund fee had been 0.35%. The group fee rate is
calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated
fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.260% for assets in excess of $845 billion. The fund’s
group fee is determined by applying the group fee rate to the fund’s average daily net assets. The fee is computed daily and paid
monthly. At May 31, 2022, the effective annual group fee rate was 0.29%.

The
Investor Class and Advisor Class are each subject to a contractual expense limitation through the expense limitation dates indicated
in the table below. Prior to October 1, 2021, the contractual expense limitation for the Investor Class and Advisor Class were 0.90%
and 1.00%, respectively. During the limitation period, Price Associates is required to waive its management fee or pay any expenses (excluding
interest; expenses related to borrowings, taxes, and brokerage; and other non-recurring expenses permitted by the investment management
agreement) that would otherwise cause the class’s ratio of annualized total expenses to average net assets (net expense ratio)
to exceed its expense limitation. Each class is required to repay Price Associates for expenses previously waived/paid to the extent
the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the class’s net expense ratio
(after the repayment is taken into account) to exceed the lesser of: (1) the expense limitation in place at the time such amounts were
waived; or (2) the class’s current expense limitation. However, no repayment will be made more than three years after the date
of a payment or waiver.

The
I Class is also subject to an operating expense limitation (I Class Limit) pursuant to which Price Associates is contractually required
to pay all operating expenses of the I Class, excluding management fees; interest; expenses related to borrowings, taxes, and brokerage;
and other non-recurring expenses permitted by the investment management agreement, to the extent such operating expenses, on an annualized
basis, exceed the I Class Limit. This agreement will continue through the expense limitation date indicated in the table below, and may
be renewed, revised, or revoked only with approval of the fund’s Board. The I Class is required to repay Price Associates for expenses
previously paid to the extent the class’s net assets grow or expenses decline sufficiently to allow repayment without causing the
class’s operating expenses (after the repayment is taken into account) to exceed the lesser of: (1) the I Class Limit in place
at the time such amounts were paid; or (2) the current I Class Limit. However, no repayment will be made more than three years after
the date of a payment or waiver.

Pursuant
to these agreements, expenses were waived/paid by and/or repaid to Price Associates during the year ended May 31, 2022 as indicated in
the table below. Including these amounts, expenses previously waived/paid by Price Associates in the amount of $697,000 remain subject
to repayment by the fund at May 31, 2022. Any repayment of expenses previously waived/paid by Price Associates during the period would
be included in the net investment income and expense ratios presented on the accompanying Financial Highlights.

In
addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates, each
an affiliate of the fund (collectively, Price). Price Associates provides certain accounting and administrative services to the fund.
T. Rowe Price Services, Inc. provides shareholder and administrative services in its capacity as the fund’s transfer and dividend-disbursing
agent. T. Rowe Price Retirement Plan Services, Inc. provides subaccounting and recordkeeping services for certain retirement accounts
invested in the Investor Class and Advisor Class. For the year ended May 31, 2022, expenses incurred pursuant to these service agreements
were $97,000 for Price Associates; $70,000 for T. Rowe Price Services, Inc.; and less than $1,000 for T. Rowe Price Retirement Plan Services,
Inc. All amounts due to and due from Price, exclusive of investment management fees payable, are presented net on the accompanying Statement
of Assets and Liabilities.

The
fund may invest its cash reserves in certain open-end management investment companies managed by Price Associates and considered affiliates
of the fund: the T. Rowe Price Government Reserve Fund or the T. Rowe Price Treasury Reserve Fund, organized as money market funds, or
the T. Rowe Price Short-Term Fund, a short-term bond fund (collectively, the Price Reserve Funds). The Price Reserve Funds are offered
as short-term investment options to mutual funds, trusts, and other accounts managed by Price Associates or its affiliates and are not
available for direct purchase by members of the public. Cash collateral from securities lending, if any, is invested in the T. Rowe Price
Government Reserve Fund; prior to December 13, 2021, the cash collateral from securities lending was invested in the T. Rowe Price Short-Term
Fund. The Price Reserve Funds pay no investment management fees.

As
of May 31, 2022, T. Rowe Price Group, Inc., or its wholly owned subsidiaries, owned 699,124 shares of the Investor Class, representing
13% of the Investor Class’s net assets, and 2,484,689 shares of the I Class, representing 43% of the I Class’s net assets.

The
fund may participate in securities purchase and sale transactions with other funds or accounts advised by Price Associates (cross trades),
in accordance with procedures adopted by the fund’s Board and Securities and Exchange Commission rules, which require, among other
things, that such purchase and sale cross trades be effected at the independent current market price of the security. During the year
ended May 31, 2022, the fund had no purchases or sales cross trades with other funds or accounts advised by Price Associates.

NOTE
7 – OTHER MATTERS

Unpredictable
events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases, and similar public health
threats may significantly affect the economy and the markets and issuers in which a fund invests. Certain events may cause instability
across global markets, including reduced liquidity and disruptions in trading markets, while some events may affect certain geographic
regions, countries, sectors, and industries more significantly than others, and exacerbate other pre-existing political, social, and
economic risks. Since 2020, a novel strain of coronavirus (COVID-19) has resulted in disruptions to global business activity and caused
significant volatility and declines in global financial markets. In February 2022, Russian forces entered Ukraine and commenced an armed
conflict. Economic sanctions have since been imposed on Russia and certain of its citizens, including the exclusion of Russia from the
SWIFT global payments network. As a result, Russian-related stocks and debt have since suffered significant declines in value. The duration
of the coronavirus outbreak and the Russian-Ukraine conflict, and their effects on the financial markets, cannot be determined with certainty.
The fund’s performance could be negatively impacted if the value of a portfolio holding were harmed by these and such other events.
Management is actively monitoring these events.

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Shareholders of T. Rowe Price
Credit Opportunities Fund, Inc.

Opinion
on the Financial Statements

We
have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of T. Rowe Price Credit Opportunities
Fund, Inc. (the “Fund”) as of May 31, 2022, the related statement of operations for the year ended May 31, 2022, the statement
of changes in net assets for each of the two years in the period ended May 31, 2022, including the related notes, and the financial highlights
for each of the five years in the period ended May 31, 2022 (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2022,
the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended May
31, 2022 and the financial highlights for each of the five years in the period ended May 31, 2022 in conformity with accounting principles
generally accepted in the United States of America.

Basis
for Opinion

These
financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We
conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud.

Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation
of securities owned as of May 31, 2022 by correspondence with the custodians, transfer agent and brokers; when replies were not received
from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers
LLP
Baltimore, Maryland
July 20, 2022

We
have served as the auditor of one or more investment companies in the T. Rowe Price group of investment companies since 1973.

TAX
INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 5/31/22

We
are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report
because of differences between tax and financial reporting requirements.

For
taxable non-corporate shareholders, $122,000 of the fund’s income represents qualified dividend income subject to a long-term capital
gains tax rate of not greater than 20%.

For
corporate shareholders, $122,000 of the fund’s income qualifies for the dividends-received deduction.

For
shareholders subject to interest expense deduction limitation under Section 163(j), $5,109,000 of the fund’s income qualifies as
a Section 163(j) interest dividend and can be treated as interest income for purposes of Section 163(j), subject to holding period requirements
and other limitations.

INFORMATION
ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS

A
description of the policies and procedures used by T. Rowe Price funds to determine how to vote proxies relating to portfolio securities
is available in each fund’s Statement of Additional Information. You may request this document by calling 1-800-225-5132 or by
accessing the SEC’s website, sec.gov.

The
description of our proxy voting policies and procedures is also available on our corporate website. To access it, please visit the following
Web page:

https://www.troweprice.com/corporate/us/en/utility/policies.html

Scroll
down to the section near the bottom of the page that says, “Proxy Voting Guidelines.” Click on the links in the shaded box.

Each
fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through
T. Rowe Price, visit the website location shown above, and scroll down to the section near the bottom of the page that says, “Proxy
Voting Records.” Click on the Proxy Voting Records link in the shaded box.

HOW
TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS

The
fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters
of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s reports on Form N-PORT are available electronically
on the SEC’s website (sec.gov). In addition, most T. Rowe Price funds disclose their first and third fiscal quarter-end holdings
on troweprice.com.

APPROVAL
OF INVESTMENT MANAGEMENT AGREEMENT

Each
year, the fund’s Board of Directors (Board) considers the continuation of the investment management agreement (Advisory Contract)
between the fund and its investment adviser, T. Rowe Price Associates, Inc. (Adviser). In that regard, at a meeting held on March 7–8,
2022 (Meeting), the Board, including all of the fund’s independent directors, approved the continuation of the fund’s Advisory
Contract. At the Meeting, the Board considered the factors and reached the conclusions described below relating to the selection of the
Adviser and the approval of the Advisory Contract. The independent directors were assisted in their evaluation of the Advisory Contract
by independent legal counsel from whom they received separate legal advice and with whom they met separately.

In
providing information to the Board, the Adviser was guided by a detailed set of requests for information submitted by independent legal
counsel on behalf of the independent directors. In considering and approving the Advisory Contract, the Board considered the information
it believed was relevant, including, but not limited to, the information discussed below. The Board considered not only the specific
information presented in connection with the Meeting but also the knowledge gained over time through interaction with the Adviser about
various topics. The Board meets regularly and, at each of its meetings, covers an extensive agenda of topics and materials and considers
factors that are relevant to its annual consideration of the renewal of the T. Rowe Price funds’ advisory contracts, including
performance and the services and support provided to the funds and their shareholders.

Services
Provided by the Adviser

The
Board considered the nature, quality, and extent of the services provided to the fund by the Adviser. These services included, but were
not limited to, directing the fund’s investments in accordance with its investment program and the overall management of the fund’s
portfolio, as well as a variety of related activities such as financial, investment operations, and administrative services; compliance;
maintaining the fund’s records and registrations; and shareholder communications. The Board also reviewed the background and experience
of the Adviser’s senior management team and investment personnel involved in the management of the fund, as well as the Adviser’s
compliance record. The Board concluded that it was satisfied with the nature, quality, and extent of the services provided by the Adviser.

Investment
Performance of the Fund

The
Board took into account discussions with the Adviser and reports that it receives throughout the year relating to fund performance. In
connection with the Meeting, the Board reviewed the fund’s total returns for various periods through December 31, 2021, and compared
these returns with the performance of a peer group of funds with similar investment programs and a wide variety of other previously agreed-upon
comparable performance measures and market data, including relative performance information as of September 30, 2021, supplied by Broadridge,
which is an independent provider of mutual fund data.

On
the basis of this evaluation and the Board’s ongoing review of investment results, and factoring in the relative market conditions
during certain of the performance periods, the Board concluded that the fund’s performance was satisfactory.

Costs,
Benefits, Profits, and Economies of Scale

The
Board reviewed detailed information regarding the revenues received by the Adviser under the Advisory Contract and other direct and indirect
benefits that the Adviser (and its affiliates) may have realized from its relationship with the fund. In considering soft-dollar arrangements
pursuant to which research may be received from broker-dealers that execute the fund’s portfolio transactions, the Board noted
that the Adviser bears the cost of research services for all client accounts that it advises, including the T. Rowe Price funds. The
Board received information on the estimated costs incurred and profits realized by the Adviser from managing the T. Rowe Price funds.
While the Board did not review information regarding profits realized from managing the fund in particular because the fund had either
not achieved sufficient portfolio asset size or not recognized sufficient revenues to produce meaningful profit margin percentages, the
Board concluded that the Adviser’s profits were reasonable in light of the services provided to the T. Rowe Price funds.

The
Board also considered whether the fund benefits under the fee levels set forth in the Advisory Contract or otherwise from any economies
of scale realized by the Adviser. Under the Advisory Contract, the fund pays a fee to the Adviser for investment management services
composed of two components—a group fee rate based on the combined average net assets of most of the T. Rowe Price funds (including
the fund) that declines at certain asset levels and an individual fund fee rate based on the fund’s average daily net assets—and
the fund pays its own expenses of operations (subject to contractual expense limitations). At a meeting held in July 2021, the Board
approved lowering the fund’s individual fund fee rate from 0.35% to 0.27% effective October 1, 2021. The Board concluded that the
advisory fee structure for the fund continued to provide for a reasonable sharing of benefits from any economies of scale with the fund’s
investors.

Fees
and Expenses

The
Board was provided with information regarding industry trends in management fees and expenses. Among other things, the Board reviewed
data for peer groups that were compiled by Broadridge, which compared: (i) contractual management fees, actual management fees, nonmanagement
expenses, and total expenses of the Investor Class of the fund with a group of competitor funds selected by Broadridge (Investor Class
Expense Group); (ii) actual management fees and total expenses of the Advisor Class of the fund with a group of competitor funds selected
by Broadridge (Advisor Class Expense Group); and (iii) actual management fees, nonmanagement expenses, and total expenses of the Investor
Class of the fund with a broader set of funds within the Lipper investment classification (Expense Universe). The Board considered the
fund’s contractual management fee rate, actual management fee rate (which reflects the management fees actually received from the
fund by the Adviser after any applicable waivers, reductions, or reimbursements), operating expenses, and total expenses (which reflect
the net total expense ratio of the fund after any waivers, reductions, or reimbursements) in comparison with the information for the
Broadridge peer groups. Broadridge generally constructed the peer groups by seeking the most comparable funds based on similar investment
classifications and objectives, expense structure, asset size, and operating components and attributes and ranked funds into quintiles,
with the first quintile representing the funds with the lowest relative expenses and the fifth quintile representing the funds with the
highest relative expenses. The information provided to the Board indicated that the fund’s contractual management fee ranked in
the third quintile (Investor Class Expense Group), the fund’s actual management fee rate ranked in the first quintile (Investor
Class Expense Group, Advisor Class Expense Group, and Expense Universe), and the fund’s total expenses ranked in the fourth quintile
(Investor Class Expense Group and Expense Universe) and first quintile (Advisor Class Expense Group).

The
Board also reviewed the fee schedules for other investment portfolios with similar mandates that are advised or subadvised by the Adviser
and its affiliates, including separately managed accounts for institutional and individual investors; subadvised funds; and other sponsored
investment portfolios, including collective investment trusts and pooled vehicles organized and offered to investors outside the United
States. Management provided the Board with information about the Adviser’s responsibilities and services provided to subadvisory
and other institutional account clients, including information about how the requirements and economics of the institutional business
are fundamentally different from those of the proprietary mutual fund business. The Board considered information showing that the Adviser’s
mutual fund business is generally more complex from a business and compliance perspective than its institutional account business and
considered various relevant factors, such as the broader scope of operations and oversight, more extensive shareholder communication
infrastructure, greater asset flows, heightened business risks, and differences in applicable laws and regulations associated with the
Adviser’s proprietary mutual fund business. In assessing the reasonableness of the fund’s management fee rate, the Board
considered the differences in the nature of the services required for the Adviser to manage its mutual fund business versus managing
a discrete pool of assets as a subadviser to another institution’s mutual fund or for an institutional account and that the Adviser
generally performs significant additional services and assumes greater risk in managing the fund and other T. Rowe Price funds than it
does for institutional account clients, including subadvised funds.

On
the basis of the information provided and the factors considered, the Board concluded that the fees paid by the fund under the Advisory
Contract are reasonable.

Approval
of the Advisory Contract

As
noted, the Board approved the continuation of the Advisory Contract. No single factor was considered in isolation or to be determinative
to the decision. Rather, the Board concluded, in light of a weighting and balancing of all factors considered, that it was in the best
interests of the fund and its shareholders for the Board to approve the continuation of the Advisory Contract (including the fees to
be charged for services thereunder).

ABOUT
THE FUND’S DIRECTORS AND OFFICERS

Your
fund is overseen by a Board of Directors (Board) that meets regularly to review a wide variety of matters affecting or potentially affecting
the fund, including performance, investment programs, compliance matters, advisory fees and expenses, service providers, and business
and regulatory affairs. The Board elects the fund’s officers, who are listed in the final table. The directors who are also employees
or officers of T. Rowe Price are considered to be interested directors because of their relationships with T. Rowe Price and its affiliates.
The business address of each director and officer is 100 East Pratt Street, Baltimore, Maryland 21202. The Statement of Additional Information
includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at
1-800-638-5660.

INDEPENDENT
DIRECTORS(a)

Name
(Year of Birth)
Year Elected
[Number of T. Rowe Price
Portfolios Overseen]
      Principal
Occupation(s) and Directorships of Public Companies and
Other Investment Companies During the Past Five Years
     
Teresa Bryce Bazemore
(1959)
2018
[204]
  President and Chief Executive
Officer, Federal Home Loan Bank of San Francisco (2021 to present); President, Radian Guaranty (2008 to 2017); Chief Executive Officer,
Bazemore Consulting LLC (2018 to 2021); Director, Chimera Investment Corporation (2017 to 2021); Director, First Industrial Realty
Trust (2020 to present); Director, Federal Home Loan Bank of Pittsburgh (2017 to 2019)
     
Ronald J. Daniels(b)
(1959)
2018
[0]
  President, The Johns Hopkins
University and Professor, Political Science Department, The Johns Hopkins University (2009 to present); Director, Lyndhurst Holdings
(2015 to present); Director, BridgeBio Pharma, Inc. (2020 to present)
     
Bruce W. Duncan
(1951)
2014
[204]
  President, Chief Executive Officer,
and Director, CyrusOne, Inc. (2020 to 2021); Chief Executive Officer and Director (2009 to 2016), Chair of the Board (2016 to 2020),
and President (2009 to 2016), First Industrial Realty Trust, owner and operator of industrial properties; Chair of the Board (2005
to 2016) and Director (1999 to 2016), Starwood Hotels & Resorts, a hotel and leisure company; Member, Investment Company Institute
Board of Governors (2017 to 2019); Member, Independent Directors Council Governing Board (2017 to 2019); Senior Advisor, KKR (2018
to present); Director, Boston Properties (2016 to present); Director, Marriott International, Inc. (2016 to 2020)
     
Robert J. Gerrard, Jr.
(1952)
2014
[204]
  Advisory Board Member, Pipeline
Crisis/Winning Strategies, a collaborative working to improve opportunities for young African Americans (1997 to 2016); Chair of
the Board, all funds (July 2018 to present)
     
Paul F. McBride
(1956)
2014
[204]
  Advisory Board Member, Vizzia
Technologies (2015 to present); Board Member, Dunbar Armored (2012 to 2018)
     
Kellye L. Walker(c)
(1966)
2021
[204]
  Executive Vice President and
Chief Legal Officer, Eastman Chemical Company (April 2020 to present); Executive Vice President and Chief Legal Officer, Huntington
Ingalls Industries, Inc. (NYSE: HIl) (January 2015 to March 2020); Director, Lincoln Electric Company (October 2020 to present)
     
(a)All
information about the independent directors was current as of December 31, 2021, unless otherwise indicated, except for the number
of portfolios overseen, which is current as of the date of this report.
(b)Effective
April 27, 2022, Mr. Daniels resigned from his role as an independent director of the Price Funds.
(c)Effective
November 8, 2021, Ms. Walker was appointed as an independent director of the Price Funds.

INTERESTED
DIRECTORS(a)

Name

(Year of Birth)
Year Elected

[Number of T. Rowe Price
Portfolios Overseen]
      Principal
Occupation(s) and Directorships of Public Companies and
Other Investment
Companies During the Past Five Years
     
David
Oestreicher
(1967)

2018
[204]
  Director,
Vice President, and Secretary, T. Rowe Price, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc.,
and T. Rowe Price Services, Inc.; Director and Secretary, T. Rowe Price Investment Management, Inc. (Price Investment Management);
Vice President and Secretary, T. Rowe Price International (Price International); Vice President, T. Rowe Price Hong Kong (Price Hong
Kong), T. Rowe Price Japan (Price Japan), and T. Rowe Price Singapore (Price Singapore); General Counsel, Vice President, and Secretary,
T. Rowe Price Group, Inc.; Chair of the Board, Chief Executive Officer, President, and Secretary, T. Rowe Price Trust Company; Principal
Executive Officer and Executive Vice President, all funds
     
Robert
W. Sharps, CFA, CPA
(1971)
2019
[0]
  Director
and Vice President, T. Rowe Price; Director, Price Investment Management; Chief Executive Officer and President, T. Rowe Price Group,
Inc.; Vice President, T. Rowe Price Trust Company
     
Eric
L. Veiel, CFA
(1972)
2022
[204]
  Director
and Vice President, T. Rowe Price; Vice President, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
     
(a)All
information about the interested directors was current as of January 1, 2022, unless otherwise indicated, except for the number of
portfolios overseen, which is current as of the date of this report.

OFFICERS

Name
(Year of Birth)
Position Held With Credit
Opportunities Fund
     
Principal Occupation(s)
     
Jason A. Bauer (1979)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.
     
Armando (Dino) Capasso (1974)
Chief Compliance Officer
  Chief Compliance Officer and
Vice President, T. Rowe Price and Price Investment Management; Vice President, T. Rowe Price Group, Inc.; formerly, Chief Compliance
Officer, PGIM Investments LLC and AST Investment Services, Inc. (ASTIS) (to 2022); Chief Compliance Officer, PGIM Retail Funds complex
and Prudential Insurance Funds (to 2022); Vice President and Deputy Chief Compliance Officer, PGIM Investments LLC and ASTIS (to
2019); Senior Vice President and Senior Counsel, Pacific Investment Management Company LLC (to 2017)
     
Alan S. Dupski, CPA (1982)
Principal Financial Officer, Vice President, and Treasurer
  Vice President, Price Investment
Management, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
     
Daniel Fox, CFA (1985)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.
     
Gary J. Greb (1961)
Vice President
  Vice President, Price Investment
Management, T. Rowe Price, Price International, and T. Rowe Price Trust Company
     
Cheryl Hampton (1969)
Vice President
  Vice President, T. Rowe Price
     
Michael T. Hyland (1979)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.
     
Benjamin Kersse (1989)
Vice President
  Vice President, T. Rowe Price
     
Paul J. Krug, CPA (1964)
Vice President
  Vice President, T. Rowe Price,
T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
     
Fran M. Pollack-Matz (1961)
Vice President and Secretary
  Vice President, T. Rowe Price,
T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Services, Inc.
     
Shannon H. Rauser (1987)
Assistant Secretary
  Assistant Vice President, T.
Rowe Price
     
Rodney M. Rayburn, CFA (1970)
President
  Vice President, T. Rowe Price,
T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
     
Brian A. Rubin, CPA (1974)
Vice President
  Vice President, T. Rowe Price,
T. Rowe Price Group, Inc., and T. Rowe Price Trust Company
     
Reena Tilva, CFA (1981)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.
     
Michael J. Trivino (1981)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.
     
Adam Trusley (1987)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.; formerly, Analyst, Citadel LLC (to 2020); Analyst, Brigade Capital Management LLC (to 2018)
     
Megan Warren (1968)
Vice President
  OFAC Sanctions Compliance Officer
and Vice President, Price Investment Management; Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Retirement
Plan Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company
     
David Alan Yatzeck (1981)
Vice President
  Vice President, T. Rowe Price
and T. Rowe Price Group, Inc.
     
Unless otherwise
noted, officers have been employees of T. Rowe Price or Price International for at least 5 years.

Item
1. (b) Notice pursuant to Rule 30e-3.

Not applicable.

Item 2. Code of Ethics.

The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report.

Item 3. Audit Committee Financial Expert.

The registrant’s Board of Directors has determined that Ms. Teresa Bryce Bazemore qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Bazemore is considered independent for purposes of Item 3 of Form N-CSR.

Item 4. Principal Accountant Fees and Services.

(a)
– (d) Aggregate fees billed for the last two fiscal years for professional services rendered to, or on behalf of, the registrant
by the registrant’s principal accountant were as follows:

Audit
fees include amounts related to the audit of the registrant’s annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance
of the audit of the registrant’s financial statements and specifically include the issuance of a report on internal controls and,
if applicable, agreed-upon procedures related to fund acquisitions. Tax fees include amounts related to services for tax compliance,
tax planning, and tax advice. The nature of these services specifically includes the review of distribution calculations and the preparation
of Federal, state, and excise tax returns. All other fees include the registrant’s pro-rata share of amounts for agreed-upon procedures
in conjunction with service contract approvals by the registrant’s Board of Directors/Trustees.

(e)(1) The registrant’s audit committee has adopted a policy whereby audit and non-audit services performed by the registrant’s principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted.

(2) No services included in (b) – (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Less than 50 percent of the hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees.

(g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant’s principal
accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides ongoing services to the registrant
were $2,959,000 and $3,481,000, respectively.

(h) All non-audit services rendered in (g) above were pre-approved by the registrant’s audit committee. Accordingly, these services were considered by the registrant’s audit committee in maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Investments.

(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

There has been no change to the procedures by which shareholders may recommend nominees to the registrant’s board of directors.

Item 11. Controls and Procedures.

(a) The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures within 90 days of this filing and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely.

(b) The registrant’s principal executive officer and principal financial officer are aware of no change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

Not applicable.

Item 13. Exhibits.

(a)(1) The registrant’s code of ethics pursuant to Item 2 of Form N-CSR is attached.

(2) Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached.

(3) Written solicitation to repurchase securities issued by closed-end companies: not applicable.

(b) A certification by the registrant’s principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

T. Rowe Price Credit Opportunities Fund, Inc.

  By /s/ David Oestreicher
    David Oestreicher
    Principal Executive Officer
     
Date   July 20, 2022    

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

  By /s/ David Oestreicher
    David Oestreicher
    Principal Executive Officer
     
Date   July 20, 2022    
         
     
  By /s/ Alan S. Dupski
    Alan S. Dupski
    Principal Financial Officer
     
Date   July 20, 2022    

Item 13. (a)(2)

CERTIFICATIONS

I, David Oestreicher, certify that:

1. I have reviewed this
report on Form N-CSR of T. Rowe Price Credit Opportunities Fund;
 
2.       Based on my knowledge,
this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
 
3. Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of
the registrant as of, and for, the periods presented in this
report;
 
4. The registrant’s other
certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in rule
30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
 
(a)       Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being prepared;
 
(b) Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of a date within 90 days prior to the filing date of
this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other
certifying officer(s) and I have disclosed to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
 
(a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize, and report financial
information; and
 
(b) Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.

Date: July 20, 2022 /s/ David Oestreicher
David Oestreicher
Principal
Executive
Officer     

CERTIFICATIONS

I, Alan S. Dupski, certify that:

1. I have reviewed this
report on Form N-CSR of T. Rowe Price Credit Opportunities Fund;
 
2.       Based on my knowledge,
this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
 
3. Based on my knowledge,
the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition,
results of operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash flows) of
the registrant as of, and for, the periods presented in this
report;
 
4. The registrant’s other
certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in rule
30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) for the registrant and have:
 
(a)       Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being prepared;
 
(b) Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
 
(c) Evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of a date within 90 days prior to the filing date of
this report based on such evaluation; and
 
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other
certifying officer(s) and I have disclosed to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
 
(a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize, and report financial
information; and
 
(b) Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.

Date: July 20, 2022 /s/ Alan S. Dupski
Alan S. Dupski
Principal
Financial
Officer     

Item 13. (b)

CERTIFICATION UNDER SECTION 906
OF SARBANES-OXLEY ACT OF 2002
 
 
Name of Issuer: T. Rowe Price Credit Opportunities Fund
 
 
In connection with the Report on Form
N-CSR for the above named Issuer, the undersigned hereby certifies, to the
best of his knowledge, that:
 
1.       The Report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934;
 
2. The information contained in the
Report fairly presents, in all material respects, the financial condition
and results of operations of the
Issuer.
Date: July 20, 2022 /s/
David Oestreicher
David Oestreicher
Principal Executive
Officer     
 
 
Date: July 20, 2022 /s/
Alan S. Dupski
Alan S. Dupski
Principal Financial
Officer

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL
OFFICERS OF THE T. ROWE PRICE MUTUAL FUNDS AND EXCHANGE-
TRADED FUNDS
UNDER THE SARBANES-OXLEY ACT OF 2002

I.
General Statement.
This Code of Ethics for the T. Rowe Price Mutual Funds and Exchange-Traded Funds (the “Price
ETFs” and, together with the Mutual Funds, the “Price Funds”) has been designed to bring the Price
Funds into compliance with the applicable requirements of the Sarbanes-Oxley Act of 2002 (the “Act”) and
rules promulgated by the Securities and Exchange Commission thereunder (“Regulations”). This Price Funds’
Code of Ethics (the “S-O Code”) applies solely to the Principal Executive Officer, Principal Financial
Officer, Principal Accounting Officer or Controller of, or persons performing similar functions for, a Price Fund (whether
such persons are employed by a Price Fund or third party) (“Covered Officers”). The “Price
Funds”
shall include each mutual fund and ETF that is managed, sponsored and distributed by affiliates of T. Rowe
Price Group, Inc. (“Group”). The investment managers to the Price Funds will be referred to as the “Price
Fund Advisers.”
A list of Covered Officers is attached as Exhibit A.

The Price Fund Advisers have, along with their
parent, T. Rowe Price Group, Inc.
(“Group”) also maintained a comprehensive
Code of Ethics and Conduct
(the “Group Code”) since 1972, which applies to all officers, directors and employees of
the Price Funds, Group and its affiliates.

As mandated by the Act, Group has adopted a Code
(the “Group S-O Code”), similar to the Price
Funds S-O Code, which applies solely to its principal executive and senior
financial officers. The Group S-O Code and the Price Funds S-O Code will be
referred to collectively as the
“S-O
Codes”
.

The Price Funds S-O Code has been adopted by the
Price Funds in accordance with the Act and Regulations thereunder and will be
administered in conformity with the disclosure requirements of Item 2 of Form
N-CSR. The S-O Codes are attachments to the Group Code. In many respects the S-O
Codes are supplementary to the Group Code, but the Group Code is administered
separately from the S-O Codes, as the S-O Codes are from each other.

II. Purpose of the Price Funds S-O Code.
The purpose of the Price Funds S-O Code, as mandated
by the Act and the Regulations, is to establish standards that are reasonably
designed to deter wrongdoing and to promote:

Ethical Conduct.
Honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships.

Disclosure. Full, fair, accurate, timely
and understandable disclosure in reports and documents that the Price Funds file
with, or submit to, the SEC and in other public communications made by the Price
Funds.

Compliance. Compliance with applicable
governmental laws, rules and regulations.

Reporting of
Violations.
The prompt internal reporting of
violations of the Price Funds S-O Code to an appropriate person or persons
identified in the Price Funds S-O Code.

Accountability. Accountability for
adherence to the Price Funds S-O Code.

III. Covered Officers Should Handle Ethically
Actual and Apparent Conflicts of Interest.

Overview. Each
Covered Officer owes a duty to the Price Funds to adhere to a high standard of
honesty and business ethics and should be sensitive to situations that may give
rise to actual as well as apparent conflicts of interest.

A “conflict of interest” occurs when a Covered
Officer’s private interest interferes with the interests of, or his or her
service to, the Price Funds. For example, a conflict of interest would arise if
a Covered Officer, or a member of his or her family, receives improper personal
benefits as a result of his or her position with a Price Fund.

Certain conflicts of interest covered by the
Price Funds S-O Code arise out of the relationships between Covered Officers and
the Price Funds and may already be subject to provisions regulating conflicts of
interest in the Investment Company Act of 1940
(“Investment Company Act”), the
Investment Advisers Act of 1940
(“Investment Advisers
Act”)
and the Group Code. For example, Covered
Officers may not individually engage in certain transactions (such as the
purchase or sale of securities or other property) with a Price Fund because of
their status as “affiliated persons” of a Price Fund. The compliance programs
and procedures of the Price Funds and Price Fund Advisers are designed to
prevent, or identify and correct, violations of these provisions.

Although typically not presenting an opportunity
for improper personal benefit, conflicts arise from, or as a result of, the
contractual relationship between a Price Fund and its Price Fund Adviser (and
its affiliates) of which the Covered Officers may also be officers or employees.
As a result, the Price Funds S-O Code recognizes that the Covered Officers will,
in the normal course of their duties (whether formally for the Price Funds or
for the Price Fund Advisers, or for both), be involved in establishing policies
and implementing decisions which will have different effects on these entities.
The participation of the Covered Officers in such activities is inherent in the
contractual relationship between each Price Fund and its respective Price Fund
Adviser. Such participation is also consistent with the performance by the
Covered Officers of their duties as officers of the Price Funds and, if
consistent with the provisions of the Investment Company Act and the Investment
Advisers Act, it will be deemed to have been handled ethically.

Other conflicts of interest are covered by the
Price Funds and Price ETFs S-O Code, even if these conflicts of interest are not addressed by
or subject to provisions in the Investment Company Act and the Investment
Advisers Act.

Whenever a Covered Officer is confronted with a
conflict of interest situation where he or she is uncertain as to the
appropriate action to be taken, he or she should discuss the matter with the
Chairperson of Group’s Ethics Committee or another member of the
Committee.

Handling of Specific Types of
Conflicts.
Each Covered Officer (and close family
members) must not:

Entertainment. Accept entertainment from
any company with which any Price Fund or any Price Fund Adviser has current or
prospective business dealings including portfolio companies, unless such
entertainment is in full compliance with the policy on entertainment as set
forth in the Group Code.

Gifts.
Accept any gifts, except as permitted by the Group
Code.

Improper Personal
Influence.
Use his or her personal influence or
personal relationships improperly to influence investment decisions, brokerage
allocations or financial reporting by the Price Funds to the detriment of any
one or more of the Price Funds.

Taking Action at
the Expense of a Price Fund.
Cause a Price Fund to
take action, or fail to take action, for the personal benefit of the Covered
Officer rather than for the benefit of one or more of the Price Funds.

Misuse of Price
Funds’ Transaction Information.
Use knowledge of
portfolio transactions made or contemplated for a Price Fund or any other
clients of the Price Fund Advisers to trade personally or cause others to trade
in order to take advantage of or avoid the market impact of such portfolio
transactions; and in connection with Price ETFs that do not disclose portfolio holdings daily, use knowledge of pending changes to
an ETF’s proxy portfolio holdings for such purposes.

Outside Business
Activities.
Engage in any outside business activity
that detracts from a Covered Officer’s ability to devote appropriate time and
attention to his or her responsibilities to a Price Fund.

Service Providers.
Excluding Group and its affiliates, have any
ownership interest in, or any consulting or employment relationship with, any of
the Price Funds’ service providers, except that an ownership interest in public
companies is permitted

Receipt of
Payments.
Have a direct or indirect financial
interest in commissions, transaction charges, spreads or other payments paid by
a Price Fund for effecting portfolio transactions or for selling or redeeming
shares other than an interest (such as compensation or equity ownership) arising
from the Covered Officer’s employment by Group or any of its affiliates.

Service as a
Director or Trustee.
Serve as a director, trustee or
officer of any public or private company or a non-profit organization that
issues securities eligible for purchase by any of the Price Funds, unless
approval is obtained as required by the Group Code.

IV. Covered Officers’ Specific Obligations and
Accountabilities.

A. Disclosure
Requirements and Controls.
Each Covered Officer must
familiarize himself or herself with the disclosure requirements (Form N-1A
registration statement, proxy (Schedule 14A), shareholder reports, Forms N-CEN,
N-CSR, etc.) applicable to the Price Funds and the disclosure controls and
procedures of the Price Fund and the Price Fund Advisers.

B. Compliance with
Applicable Law.
It is the responsibility of each
Covered Officer to promote compliance with all laws, rules and regulations
applicable to the Price Funds and the Price Fund Advisers. Each Covered Officer
should, to the extent appropriate within his or her area of responsibility,
consult with other officers and employees of the Price Funds and the Price Fund
Advisers and take other appropriate steps with the goal of promoting full, fair,
accurate, timely and understandable disclosure in the reports and documents the
Price Funds file with, or submit to, the SEC, and in other public communications
made by the Price Funds.

C. Fair
Disclosure
. Each Covered Officer must not knowingly
misrepresent, or cause others to misrepresent, facts about a Price Fund to
others, whether within or outside the Price organization, including to the Price
Fund’s directors and auditors, and to governmental regulators and
self-regulatory organizations.

D. Initial and
Annual Affirmations.
Each Covered Officer must:

1. Upon adoption of
the Price Funds S-O Code (or thereafter, as applicable, upon becoming a Covered
Officer), affirm in writing that he or she has received, read, and understands
the Price Funds S-O Code.

2. Annually affirm
that he or she has complied with the requirements of the Price Funds S-O Code.

E. Reporting of
Material Violations of the Price Funds S-O Code.
If
a Covered Officer becomes aware of any material violation of the Price Funds S-O
Code or laws and governmental rules and regulations applicable to the operations
of the Price Funds, he or she must promptly report the violation
(“Report”) to the Chief Compliance Officer of the Price Funds (“CCO”).
Failure to report a material violation will be considered itself a violation of
the Price Funds S-O Code. The CCO is identified in the attached
Exhibit B.

It is the Price Funds’
policy that no retaliation or other adverse action will be taken against any
Covered Officer or other employee of a Price Fund, a Price Fund Adviser or their
affiliates based upon any lawful actions of the Covered Officer or employee with
respect to a Report made in good faith.

F. Annual
Disclosures.
Each Covered Officer must report, at
least annually, all affiliations or other relationships as called for in the “Annual Compliance Certification” for T. Rowe Price Group.

V. Administration of the Price Funds S-O Code.
The Ethics Committee is responsible for
administering the Price Funds S-O Code and applying its provisions to specific
situations in which questions are presented.

A. Waivers and
Interpretations.
The Chairperson of the Ethics
Committee has the authority to interpret the Price Funds S-O Code in any
particular situation and to grant waivers where justified, subject to the
approval of the Joint Audit Committee of the Price Funds. All material
interpretations concerning Covered Officers will be reported to the Joint Audit
Committee of the Price Funds at its next meeting. Waivers, including implicit
waivers, to Covered Officers will be publicly disclosed as required in the
Instructions to N-CSR. Pursuant to the definition in the Regulations, an
implicit waiver means a Price Fund’s failure to take action within a reasonable
period of time regarding a material departure from a provision of the Price
Funds S-O Code that has been made known to an “executive officer” (as defined in
Rule 3b-7 under the Securities Exchange Act of 1934) of a Price Fund. An
executive officer of a Price Fund includes its president and any vice-president
in charge of a principal business unit, division or function.

B.
Violations/Investigations.
The following procedures
will be followed in investigating and enforcing the Price Funds S-O Code:

1. The CCO will take
or cause to be taken appropriate action to investigate any potential or actual
violation reported to him or her.

2. The CCO, after
consultation if deemed appropriate with Outside
Counsel
to the Price Funds, will make a recommendation to the appropriate Price Funds
Board regarding the action to be taken with regard to each material violation.
Such action could include any of the following: a letter of censure or
suspension, a fine, a suspension of trading privileges or termination of
officership or employment. In addition, the violator may be required to
surrender any profit realized (or loss avoided) from any activity that is in
violation of the Price Funds S-O Code.

3. Investigations of Whistleblower complaints related to Price Funds will be handled
in accordance with the T. Rowe Price Global Whistleblower Policy.

VI. Amendments to the Price Funds S-O Code.
Except as to the contents of Exhibit A and
Exhibit B
, the Price Funds S-O Code may not be
materially amended except in written form, which is specifically approved or
ratified by a majority vote of each Price Fund Board, including a majority of
the independent directors on each Board.

VII. Confidentiality. All reports and records prepared or maintained pursuant to the Price
Funds S-O Code will be considered confidential and shall be maintained and
protected accordingly. Except as otherwise required by law, the Price Funds S-O
Code or as necessary in connection with regulations under the Price Funds S-O
Code, such matters shall not be disclosed to anyone other than the directors of
the appropriate Price Fund Board, Outside Counsel to the Price Funds,
members of the Ethics Committee and the CCO and authorized persons on his or her
staff.

Adoption Date: 10/22/03

Last Revised: 05/11/2022 (Exhibit B revised)

Exhibit A
Persons Covered by the Price Funds and Price ETFs S-O Code of
Ethics
David Oestreicher, Executive Vice President and Principal Executive Officer
Alan S. Dupski, Treasurer and Principal Financial Officer

Exhibit B
Dino Capasso, Chief Compliance Officer

About the Author: AKDSEO

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