UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2019~~2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-32191

______________________________________

T. ROWE PRICE GROUP, INC.

(Exact name of registrant as specified in its charter)



Maryland		52-2264646
(State of incorporation)		(I.R.S. Employer Identification No.)

100 East Pratt Street, Baltimore, Maryland21202

(Address, including Zip Code, of principal executive offices)

~~(410)~~ (410) 345-2000

(Registrant’s telephone number, including area code)

________________



Common stock, $.20 par value per share	TROW	The NASDAQ Stock Market LLC
(title of security)	(ticker symbol)	(Name of exchange on which registered)

______________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. x☒Yes¨☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months. x☒Yes¨☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerx	☒	Accelerated filer ¨	☐
Non-accelerated filer ¨ ~~(do~~(do not check if smaller reporting company)	☐	Smaller reporting company ¨	☐
		Emerging growth company¨	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yes x☒ No

The number of shares outstanding of the issuer’s common stock ($.20 par value), as of the latest practicable date, April ~~22, 2019~~,24, 2020, is ~~236,475,417.~~227,548,883.

The exhibit index is at Item 6 on page ~~38.~~36.

PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	3/31/2019			12/31/2018			3/31/2020			12/31/2019
ASSETS
Cash and cash equivalents	$	1,657.4		$	1,425.2		$	1,562.4		$	1,781.8
Accounts receivable and accrued revenue	604.6			549.6			585.3			646.6
Investments	2,546.7			2,453.4			2,731.3			2,939.8
Assets of consolidated T. Rowe Price investment products ($1,620.6 million at March 31, 2019 and $1,392.6 million at December 31, 2018, related to variable interest entities)	1,936.3			1,680.4
Assets of consolidated T. Rowe Price investment products ($1,795.8 million at March 31, 2020 and $1,975.3 million at December 31, 2019, related to variable interest entities)							2,024.3			2,276.9
Operating lease assets	127.2			—			137.6			110.8
Property and equipment, net	667.2			661.3			675.2			674.4
Goodwill	665.7			665.7			665.7			665.7
Other assets	253.8			253.7			255.1			234.4
Total assets	$	8,458.9		$	7,689.3		$	8,636.9		$	9,330.4

LIABILITIES
Accounts payable and accrued expenses	$	210.0		$	228.5		$	198.5		$	214.5
Liabilities of consolidated T. Rowe Price investment products ($41.1 million at March 31, 2019 and $22.7 million at December 31, 2018, related to variable interest entities)	64.7			38.7
Liabilities of consolidated T. Rowe Price investment products ($72.0 million at March 31, 2020 and $27.0 million at December 31, 2019, related to variable interest entities)							82.9			39.2
Operating lease liabilities	161.9			—			172.6			146.3
Accrued compensation and related costs	196.8			123.3			215.4			112.1
Supplemental savings plan liability	430.3			380.0			504.2			563.4
Income taxes payable	197.5			54.2			58.3			31.8
Total liabilities	1,261.2			824.7			1,231.9			1,107.3

Commitments and contingent liabilities

Redeemable non-controlling interests	886.7			740.3			971.0			1,121.0

STOCKHOLDERS’ EQUITY
Preferred stock, undesignated, $.20 par value – authorized and unissued 20,000,000 shares	—			—			—			—
Common stock, $.20 par value—authorized 750,000,000; issued 236,432,000 shares at March 31, 2019 and 238,069,000 at December 31, 2018	47.3			47.6
Common stock, $.20 par value—authorized 750,000,000; issued 227,985,000 shares at March 31, 2020 and 235,214,000 at December 31, 2019							45.6			47.0
Additional capital in excess of par value	654.5			654.6			654.6			654.6
Retained earnings	5,650.8			5,464.1			5,782.9			6,443.5
Accumulated other comprehensive loss	(41.6		)	(42.0		)	(49.1		)	(43.0		)
Total permanent stockholders’ equity	6,311.0			6,124.3			6,434.0			7,102.1
Total liabilities, redeemable non-controlling interests, and permanent stockholders’ equity	$	8,458.9		$	7,689.3		$	8,636.9		$	9,330.4

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)


	Three months ended				Three months ended
	3/31/2019		3/31/2018		3/31/2020			3/31/2019
Revenues
Investment advisory fees	$	1,194.2	$	1,189.2	$	1,327.8		$	1,194.2
Administrative, distribution, and servicing fees	133.1		138.8		134.8			133.1
Net revenues	1,327.3		1,328.0		1,462.6			1,327.3

Operating expenses
Compensation and related costs	491.5		441.4		440.7			491.5
Distribution and servicing	66.4		70.3		65.7			66.4
Advertising and promotion	21.6		24.6		24.9			21.6
Product-related costs	44.2		42.1		41.6			44.2
Technology, occupancy, and facility costs	98.1		94.1		105.4			98.1
General, administrative, and other	73.0		71.7		77.1			73.0
Total operating expenses	794.8		744.2		755.4			794.8

Net operating income	532.5		583.8		707.2			532.5

Non-operating income
Net gains on investments	100.1		14.4
Net gains on consolidated investment products	101.9		.8
Other income	.8		.9
Total non-operating income	202.8		16.1
Non-operating income (loss)
Net gains (losses) on investments					(154.6		)	100.1
Net gains (losses) on consolidated investment products					(330.3		)	101.9
Other income (loss)					(15.4		)	.8
Total non-operating income (loss)					(500.3		)	202.8

Income before income taxes	735.3		599.9		206.9			735.3
Provision for income taxes	181.3		144.4		40.3			181.3
Net income	554.0		455.5		166.6			554.0
Less: net income attributable to redeemable non-controlling interests	41.4		1.8
Less: net income (loss) attributable to redeemable non-controlling interests					(176.5		)	41.4
Net income attributable to T. Rowe Price Group	$	512.6	$	453.7	$	343.1		$	512.6

Earnings per share on common stock of T. Rowe Price Group					Earnings per share on common stock of T. Rowe Price Group
Basic	$	2.11	$	1.81	$	1.43		$	2.11
Diluted	$	2.09	$	1.77	$	1.41		$	2.09

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Three months ended						Three months ended
	3/31/2019			3/31/2018			3/31/2020			3/31/2019
Net income	$	554.0		$	455.5		$	166.6		$	554.0
Other comprehensive income (loss)
Currency translation adjustments
Consolidated T. Rowe Price investment products - variable interest entities	(5.8		)	16.2			(25.1		)	(5.8		)
Reclassification gains recognized in non-operating income upon deconsolidation of certain T. Rowe Price investment products	(.1		)	(3.1		)	(.1		)	(.1		)
Total currency translation adjustments of consolidated T. Rowe Price investment products - variable interest entities	(5.9		)	13.1			(25.2		)	(5.9		)
Equity method investments	4.9			3.8			(.1		)	4.9
Other comprehensive income (loss) before income taxes	(1.0		)	16.9
Net deferred tax benefits (income taxes)	.1			(2.5		)
Total other comprehensive income (loss)	(.9		)	14.4
Other comprehensive loss before income taxes							(25.3		)	(1.0		)
Net deferred tax benefits							2.0			.1
Total other comprehensive loss							(23.3		)	(.9		)

Total comprehensive income	553.1			469.9			143.3			553.1
Less: comprehensive income (loss) attributable to redeemable non-controlling interests	40.1			8.8			(193.7		)	40.1
Total comprehensive income attributable to T. Rowe Price Group	$	513.0		$	461.1		$	337.0		$	513.0

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)



	Three months ended
	3/31/2020			3/31/2019
Cash flows from operating activities
Net income	$	166.6		$	554.0
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	46.1			41.9
Stock-based compensation expense	58.3			43.5
Net (gains) losses recognized on investments	167.3			(82.0		)
Net investments in T. Rowe Price investment products used to economically hedge supplemental savings plan liability	(8.9		)	(18.2		)
Net change in securities held by consolidated T. Rowe Price investment products	234.6			(184.2		)
Other changes in assets and liabilities	123.7			223.7
Net cash provided by operating activities	787.7			578.7

Cash flows from investing activities
Purchases of T. Rowe Price investment products	(225.1		)	(15.6		)
Dispositions of T. Rowe Price investment products	299.1			33.5
Net cash of T. Rowe Price investment products on deconsolidation	(.8		)	(3.4		)
Additions to property and equipment	(46.0		)	(47.7		)
Other investing activity	.4			(.6		)
Net cash provided by (used in) investing activities	27.6			(33.8		)

Cash flows from financing activities
Repurchases of common stock	(891.3		)	(231.0		)
Common share issuances under stock-based compensation plans	38.1			43.6
Dividends paid to common stockholders of T. Rowe Price Group	(215.2		)	(184.6		)
Net subscriptions received from redeemable non-controlling interest holders	76.1			66.0
Net cash used in financing activities	(992.3		)	(306.0		)

Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	(1.2		)	(.7		)

Net change in cash and cash equivalents during period	(178.2		)	238.2
Cash and cash equivalents at beginning of period, including $76.5 million at December 31, 2019, and $70.1 million at December 31, 2018, held by consolidated T. Rowe Price investment products	1,858.3			1,495.3
Cash and cash equivalents at end of period, including $117.7 million at March 31, 2020, and $76.1 million at March 31, 2019, held by consolidated T. Rowe Price investment products	$	1,680.1		$	1,733.5

Three months ended
3/31/2019 3/31/2018
Cash flows from operating activities
Net income $ 554.0
$ 455.5
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization of property and equipment 41.9
36.9
Stock-based compensation expense 43.5
45.6
Net gains recognized on investments (82.0 ) (2.6 )
Net investments in T. Rowe Price investment products used to economically hedge supplemental savings plan liability (18.2 ) (12.9 )
Net change in securities held by consolidated T. Rowe Price investment products (184.2 ) (189.4 )
Other changes in assets and liabilities 223.7
187.9
Net cash provided by operating activities 578.7
521.0

Cash flows from investing activities
Purchases of T. Rowe Price investment products (15.6 ) (500.6 )
Dispositions T. Rowe Price investment products 33.5
37.2
Net cash of T. Rowe Price investment products on consolidation (deconsolidation) (3.4 ) (21.5 )
Additions to property and equipment (47.7 ) (36.7 )
Other investing activity (.6 ) 1.8
Net cash used in investing activities (33.8 ) (519.8 )

Cash flows from financing activities
Repurchases of common stock (231.0 ) (291.3 )
Common share issuances under stock-based compensation plans 43.6
46.2
Dividends paid to common stockholders of T. Rowe Price Group (184.6 ) (174.8 )
Net subscriptions received from redeemable non-controlling interest holders 66.0
177.8
Net cash used in financing activities (306.0 ) (242.1 )

Effect of exchange rate changes on cash and cash equivalents of consolidated
T. Rowe Price investment products
(.7 ) 1.3

Net change in cash and cash equivalents during period 238.2
(239.6 )
Cash and cash equivalents at beginning of period, including $70.1 million at December 31, 2018, and $103.1 million at December 31, 2017, held by consolidated T. Rowe Price investment products 1,495.3
2,005.8
Cash and cash equivalents at end of period, including $76.1 million at March 31, 2019, and $84.8 million at March 31, 2018, held by consolidated T. Rowe Price investment products $ 1,733.5
$ 1,766.2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(shares in thousands; dollars in millions)


																					Three months ended 3/31/2020
																					Common shares outstanding		Common stock			Additional capital in excess of par value			Retained earnings			AOCI⁽¹⁾			Total stockholders’ equity			Redeemable non-controlling interests
Balances at December 31, 2019																					235,214		$	47.0		$	654.6		$	6,443.5		$	(43.0	)	$	7,102.1		$	1,121.0
Net income																					—		—			—			343.1			—			343.1			(176.5		)
Other comprehensive loss, net of tax																					—		—			—			—			(6.1		)	(6.1		)	(17.2		)
Dividends declared ($0.90 per share)																					—		—			—			(214.7		)	—			(214.7		)	—
Shares issued upon option exercises																					1,068		.2			41.1			—			—			41.3			—
Net shares issued upon vesting of restricted stock units																					37		—			(3.0		)	—			—			(3.0		)	—
Stock-based compensation expense																					—		—			58.3			—			—			58.3			—
Restricted stock units issued as dividend equivalents																					—		—			.1			(.1		)	—			—			—
Common shares repurchased																					(8,334	)	(1.6		)	(96.5		)	(788.9		)	—			(887.0		)	—
Net subscriptions into T. Rowe Price investment products																					—		—			—			—			—			—			63.8
Net deconsolidations of T. Rowe Price investment products																					—		—			—			—			—			—			(20.1		)
Balances at March 31, 2020																					227,985		$	45.6		$	654.6		$	5,782.9		$	(49.1	)	$	6,434.0		$	971.0

	Three months ended 3/31/2019																				Three months ended 3/31/2019
	Common shares outstanding		Common stock			Additional capital in excess of par value			Retained earnings			AOCI⁽¹⁾			Total stockholders’ equity			Redeemable non-controlling interests			Common shares outstanding		Common stock			Additional capital in excess of par value			Retained earnings			AOCI⁽¹⁾			Total stockholders’ equity			Redeemable non-controlling interests
Balances at December 31, 2018	238,069		$	47.6		$	654.6		$	5,464.1		$	(42.0	)	$	6,124.3		$	740.3		238,069		$	47.6		$	654.6		$	5,464.1		$	(42.0	)	$	6,124.3		$	740.3
Net income	—		—			—			512.6			—			512.6			41.4			—		—			—			512.6			—			512.6			41.4
Other comprehensive income (loss), net of tax	—		—			—			—			.4			.4			(1.3		)	—		—			—			—			.4			.4			(1.3		)
Dividends declared ($0.76 per share)	—		—			—			(183.8		)	—			(183.8		)	—			—		—			—			(183.8		)	—			(183.8		)	—
Shares issued upon option exercises	830		.2			44.8			—			—			45.0			—			830		.2			44.8			—			—			45.0			—
Net shares issued upon vesting of restricted stock units	14		—			(1.2		)	—			—			(1.2		)	—			14		—			(1.2		)	—			—			(1.2		)	—
Forfeiture of restricted awards	(5	)	—			—			—			—			—			—			(5	)	—			—			—			—			—			—
Stock-based compensation expense	—		—			43.5			—			—			43.5			—			—		—			43.5			—			—			43.5			—
Common shares repurchased	(2,476	)	(.5		)	(87.2		)	(142.1		)	—			(229.8		)	—			(2,476	)	(.5		)	(87.2		)	(142.1		)	—			(229.8		)	—
Net subscriptions into T. Rowe Price investment products	—		—			—			—			—			—			85.9			—		—			—			—			—			—			85.9
Net reconsolidations of T. Rowe Price investment products	—		—			—			—			—			—			20.4			—		—			—			—			—			—			20.4
Balances at March 31, 2019	236,432		$	47.3		$	654.5		$	5,650.8		$	(41.6	)	$	6,311.0		$	886.7		236,432		$	47.3		$	654.5		$	5,650.8		$	(41.6	)	$	6,311.0		$	886.7

	Three months ended 3/31/2018
	Common shares outstanding		Common stock			Additional capital in excess of par value			Retained earnings			AOCI⁽¹⁾			Total stockholders’ equity			Redeemable non-controlling interests
Balances at December 31, 2017	245,111		$	49.0		$	846.1		$	4,932.9		$	(3.6	)	$	5,824.4		$	992.8
Cumulative effect adjustment upon adoption of financial instruments and accumulated other comprehensive income guidance on January 1, 2018⁽²⁾	—		—			—			22.4			(7.9		)	14.5			—
Reclassification of stranded tax benefits on currency translation adjustments on January 1, 2018	—		—			—			2.3			(2.3		)	—			—
Balances at January 1, 2018	245,111		49.0			846.1			4,957.6			(13.8		)	5,838.9			992.8
Net income	—		—			—			453.7			—			453.7			1.8
Other comprehensive income (loss), net of tax	—		—			—			—			7.4			7.4			7.0
Dividends declared ($0.70 per share)	—		—			—			(174.9		)	—			(174.9		)	—
Shares issued upon option exercises	1,103		.2			44.9			—			—			45.1			—
Net shares issued upon vesting of restricted stock units	6		—			(.4		)	—			—			(.4		)	—
Forfeiture of restricted awards	(4	)	—			—			—			—			—			—
Stock-based compensation expense	—		—			45.6			—			—			45.6			—
Restricted stock units issued as dividend equivalents	—		—			.1			(.1		)	—			—			—
Common shares repurchased	(2,934	)	(.5		)	(281.7		)	(31.3		)	—			(313.5		)	—
Net subscriptions into T. Rowe Price investment products	—		—			—			—			—			—			177.8
Net deconsolidations of T. Rowe Price investment products	—		—			—			—			—			—			(632.9		)
Balances at March 31, 2018	243,282		$	48.7		$	654.6		$	5,205.0		$	(6.4	)	$	5,901.9		$	546.5

⁽¹⁾ Accumulated other comprehensive income.

⁽²⁾ Includes the reclassification of $1.7 million of stranded income taxes on certain investments resulting from U.S. tax law changes enacted on December 22, 2017, from accumulated other comprehensive income to retained earnings.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – THE COMPANY AND BASIS OF PREPARATION.

T. Rowe Price Group Inc. derives its consolidated revenues and net income primarily from investment advisory services that its subsidiaries provide to individual and institutional investors in the T. Rowe Price U.S. mutual funds (“U.S. mutual funds”), separately managed accounts, subadvised funds, and other T. Rowe Price products. The other T. Rowe Price products include: collective investment trusts, open-ended investment products offered to investors outside the U.S., and products offered through variable annuity life insurance plans in the U.S. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; and trust services.

Investment advisory revenues depend largely on the total value and composition of assets under our management. Accordingly, fluctuations in financial markets and in the composition of assets under management impact our revenues and results of operations.

BASIS OF PRESENTATION.

These unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These principles require the use of estimates and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of our results for the interim periods presented. All such adjustments are of a normal recurring nature. Actual results may vary from our estimates. ~~Certain prior year amounts have been reclassified to conform to the 2019 presentation.~~

The unaudited interim financial information contained in these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in our ~~2018~~2019 Annual Report.

NEW ACCOUNTING GUIDANCE.

We adopted Accounting Standards Update No. 2016-02 — Leases (Topic 842) on January 1, 2019. The update required the recognition of right-of-use lease assets and liabilities on the balance sheet and the disclosure of qualitative and quantitative information about leasing arrangements. We adopted this standard using a modified retrospective approach without restating prior comparative periods. We also elected to use certain practical expedients that allowed us to not perform the following: (1) reassess whether expired or existing non-lease contracts that commenced before January 1, 2019 contained an embedded lease, (2) reevaluate the accounting classification of our existing operating leases, and (3) determine whether initial direct costs related to existing leases should be capitalized under this guidance. On January 1, 2019, we recognized operating lease assets totaling $168.7 million and corresponding operating lease liabilities of $168.7 million related primarily to our real estate leases. At implementation, we also reclassified $27.7 million in deferred rent liabilities related to these leases reducing the recognized operating lease assets to $141.0 million. The adoption did not have a material impact on our results of operations; however, the initial recognition of our operating lease assets and operating lease liabilities on January 1, 2019, represented a noncash investing activity that affected the amount reported in other changes in assets and liabilities our unaudited condensed consolidated statements of cash flows. Our leases accounting policy is included in the ~~Summary of Significant Accounting Policies~~ ~~section below. Additional information on our operating leases is included in Note 6 - Leases.~~

~~NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.~~

~~In August 2018, the FASB issued~~ Accounting Standards Update No. 2018-15 — Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service ~~Contract.~~Contract on January 1, 2020 using the prospective method of adoption. This update ~~provides additional guidance~~required implementation costs incurred in cloud computing arrangements to be deferred and recognized over the term of the hosting arrangement. A hosting arrangement is an agreement that allows customers, like us, to access and use software on an as-needed basis without having possession of the ~~accounting for costs~~software. Beginning on January 1, 2020, we are required to defer such qualifying implementation costs. As of March 31, 2020, we capitalized an immaterial amount of implementation ~~activities performed~~costs incurred in a cloud computing ~~arrangement that is~~arrangement. Accordingly, the adoption of this guidance did not have a service contract. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Though early adoption is permitted, we expect to adopt this update on January 1, 2020. We are currently evaluating thematerial impact ~~this standard will have~~ on our ~~financial position and results~~consolidated balance sheets or our consolidated statements of ~~operations.~~income.

NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our unaudited condensed consolidated statements, including those we have not yet adopted. We do

~~Page 7~~

not believe that any such guidance has or will have a material effect on our financial position or results of operations.

~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.~~U.S. ECONOMIC RELIEF LEGISLATION

~~Leases~~

On March 27, 2020, the U.S. enacted the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The CARES Act provides economic relief to eligible businesses and individuals impacted by the novel coronavirus pandemic. We ~~review new arrangements at inception to evaluate whether we obtain substantially all~~are currently assessing what impact, if any, the ~~economic benefits~~CARES Act’s provisions will have on our financial position and results of and have the right to control the use of an asset. If we determine that an arrangement qualifies as a lease, we recognize a lease liability and a corresponding asset on the lease’s commencement date. The lease liability is initially measured at the present value of the future minimum lease payments over the lease term using the rate implicit in the arrangement or, if not available, our incremental borrowing rate. An operating lease asset is measured initially at the value of the lease liabilityoperations, but ~~excludes any lease incentives and initial direct costs incurred.~~

Our leases qualify as operating leases and consist primarily of real estate leases for corporate offices, data centers, and other facilities. We measure our operating lease liabilities using an estimated incremental borrowing rate as there is no rate implicit in any of our operating lease arrangements. Since we do not have any outstanding borrowings, we estimate our incremental borrowing rate based on our estimated credit rating and available market information. Additionally, certain of our leases contain options to extend or terminatebelieve the ~~lease term that, if exercised, would result in the remeasurement of the operating lease liability.~~

Our operating leases contain both lease and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the use of the lease assets, such as common area maintenance and other management costs. We elected for our real estate operating leases to measure the lease liability by combining the lease and non-lease components as a single lease component. As such, we included the fixed payments and any payments that depend on a rate or index that relate to our lease and non-lease components in the measurement of the operating lease liability.

We recognize lease expense on a straight-line basis over the lease term. Operating lease expense is recognized as part of technology, occupancy, and facility costs in our unaudited condensed consolidated statements of income.

impact will be material.

Page 7

NOTE 2 – INFORMATION ABOUT RECEIVABLES, REVENUES, AND SERVICES.

Revenues earned during the first quarter of ~~2019~~2020 and ~~2018~~2019 under agreements with clients include:


	Three months ended 3/31/2019								Three months ended 3/31/2018								Three months ended 3/31/2020								Three months ended 3/31/2019
			Administrative, distribution, and servicing fees								Administrative, distribution, and servicing fees								Administrative, distribution, and servicing fees								Administrative, distribution, and servicing fees
(in millions)	Investment advisory fees		Administrative fees		Distribution and servicing fees		Net revenues		Investment advisory fees		Administrative fees		Distribution and servicing fees		Net revenues		Investment advisory fees		Administrative fees		Distribution and servicing fees		Net revenues		Investment advisory fees		Administrative fees		Distribution and servicing fees		Net revenues
U.S. mutual funds	$	815.9	$	76.6	$	30.2	$	922.7	$	832.9	$	81.8	$	36.6	$	951.3	$	876.2	$	77.2	$	27.9	$	981.3	$	815.9	$	76.6	$	30.2	$	922.7
Subadvised and separate accounts and other investment products	378.3		—		—		378.3		356.3		—		—		356.3		451.6		—		—		451.6		378.3		—		—		378.3
Other clients	—		26.3		—		26.3		—		20.4		—		20.4		—		29.7		—		29.7		—		26.3		—		26.3
	$	1,194.2	$	102.9	$	30.2	$	1,327.3	$	1,189.2	$	102.2	$	36.6	$	1,328.0	$	1,327.8	$	106.9	$	27.9	$	1,462.6	$	1,194.2	$	102.9	$	30.2	$	1,327.3

Total net revenues earned from our related parties, specifically T. Rowe Price investment products, aggregate ~~$1,093.4~~$1,207.7 million and ~~$1,100.6~~$1,093.4 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. Accounts receivable from these products aggregate to ~~$391.3~~$374.3 million at March 31, ~~2019,~~2020, and ~~$354.8~~$424.8 million at December 31, ~~2018.~~2019.

~~Page 8~~

The following table details the investment advisory fees earned from clients by their underlying asset class.



	Three months ended
(in millions)	3/31/2020		3/31/2019
U.S. mutual funds
Equity and blended assets	$	749.8	$	694.5
Fixed income, including money market	126.4		121.4
	876.2		815.9
Subadvised and separate accounts and other investment products
Equity and blended assets	385.2		318.8
Fixed income, including money market	66.4		59.5
	451.6		378.3
Total	$	1,327.8	$	1,194.2

Three months ended
(in millions) 3/31/2019 3/31/2018
U.S. mutual funds
Equity and blended assets $ 694.5
$ 705.5
Fixed income, including money market 121.4
127.4
815.9
832.9
Subadvised and separate accounts and other investment products
Equity and blended assets 318.8
297.0
Fixed income, including money market 59.5
59.3
378.3
356.3
Total $ 1,194.2
$ 1,189.2

The following table summarizes the assets under management on which we earn investment advisory fees.



	Average during
	three months ended				As of
(in billions)	3/31/2020		3/31/2019		3/31/2020		12/31/2019
U.S. mutual funds
Equity and blended assets	$	525.0	$	487.6	$	443.6	$	552.4
Fixed income, including money market	129.3		122.5		118.7		130.3
	654.3		610.1		562.3		682.7
Subadvised and separate accounts and other investment products
Equity and blended assets	396.3		332.9		340.9		412.1
Fixed income, including money market	112.1		100.5		105.6		112.0
	508.4		433.4		446.5		524.1
Total	$	1,162.7	$	1,043.5	$	1,008.8	$	1,206.8

Average during
Three months ended As of
(in billions) 3/31/2019 3/31/2018 3/31/2019 12/31/2018
U.S. mutual funds
Equity and blended assets $ 487.6
$ 494.6
$ 506.6
$ 441.1
Fixed income, including money market 122.5
127.4
124.1
123.4
610.1
622.0
630.7
564.5
Subadvised and separate accounts and other investment products
Equity and blended assets 332.9
308.2
347.9
299.2
Fixed income, including money market 100.5
95.3
103.1
98.6
433.4
403.5
451.0
397.8
Total $ 1,043.5
$ 1,025.5
$ 1,081.7
$ 962.3

Investors that we serve are primarily domiciled in the U.S.; investment advisory clients outside the U.S. account for ~~6.4%~~7.4% and ~~6.2%~~6.9% of our assets under management at March 31, ~~2019,~~2020, and December 31, ~~2018,~~2019, respectively.

Page 8

NOTE 3 – INVESTMENTS.

The carrying values of our investments that are not part of the consolidated T. Rowe Price investment products are as follows:


(in millions)	3/31/2019		12/31/2018		3/31/2020		12/31/2019
Investments held at fair value
T. Rowe Price investment products	$	1,542.4	$	1,538.4	$	1,088.1	$	1,402.9
T. Rowe Price investment products designated as an economic hedge of supplemental savings plan liability	429.2		381.3		500.0		561.1
Investment partnerships and other investments	99.1		99.6		105.5		99.7
Equity method investments
T. Rowe Price investment products	308.7		276.2		864.5		705.6
26% interest in UTI Asset Management Company Limited (India)	161.3		152.4		166.8		164.5
Investment partnerships and other investments	5.0		4.5		5.4		5.0
U.S. Treasury note	1.0		1.0		1.0		1.0
Total	$	2,546.7	$	2,453.4	$	2,731.3	$	2,939.8

The investment partnerships are carried at fair value using net asset value (“NAV”) per share as a practical expedient. Our interests in these partnerships are generally not redeemable and are subject to significant

~~Page 9~~

restrictions on transferability. The underlying investments of these partnerships have contractual terms through 2029, though we may receive distributions of liquidating assets over a longer term. The investment strategies of these partnerships include growth equity, buyout, venture capital, and real estate.

During the three months ended March 31, ~~2019,~~2020, net ~~gains~~losses on investments included ~~$50.6~~$103.6 million of net unrealized ~~gains~~losses related to investments held at fair value that were still held at March 31, ~~2019.~~2020. For the same period of ~~2018,~~2019, the net ~~losses~~gains on investments included ~~$1.9~~$50.6 million of net unrealized ~~losses~~gains on investments held at fair value that were still held at March 31, ~~2018.~~2019.

During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, certain T. Rowe Price investment products in which we provided initial seed capital at the time of formation were deconsolidated, as we no longer had a controlling interest. Depending on our ownership interest, we are now reporting our residual interests in these T. Rowe Price investment products as either an equity method investment or an investment held at fair value. Additionally, during the three months ended March 31, 2019, ~~and 2018,~~ certain T. Rowe Price investment products that were being accounted for as equity method investments were consolidated, as we regained a controlling interest. The net impact of these changes on our unaudited condensed consolidated balance sheets and statements of income as of the dates the portfolios were deconsolidated or reconsolidated is detailed below.


	Three months ended						Three months ended
(in millions)	3/31/2019			3/31/2018			3/31/2020			3/31/2019
Net increase (decrease) in assets of consolidated T. Rowe Price investment products	$	12.3		$	(757.5	)	$	(46.2	)	$	12.3
Net decrease in liabilities of consolidated T. Rowe Price investment products	$	(.9	)	$	(5.2	)	$	(2.4	)	$	(.9	)
Net increase (decrease) in redeemable non-controlling interests	$	20.4		$	(632.9	)	$	(20.1	)	$	20.4

Gains recognized upon deconsolidation	$	.1		$	3.1		$	.1		$	.1

The gains or losses recognized upon deconsolidation were the result of reclassifying currency translation adjustments accumulated on certain T. Rowe Price investment products with non-USD functional currencies from accumulated other comprehensive income to non-operating ~~income.~~income (loss).

VARIABLE INTEREST ENTITIES.

Our investments at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, include interests in variable interest entities that we do not consolidate as we are not deemed the primary beneficiary. Our maximum risk of loss related to our involvement with these entities is as follows:



(in millions)	3/31/2020		12/31/2019
Investment carrying values	$	129.4	$	156.0
Unfunded capital commitments	15.6		18.1
Uncollected investment advisory and administrative fees	7.1		10.5
	$	152.1	$	184.6

(in millions) 3/31/2019 12/31/2018
Investment carrying values $ 141.1
$ 143.3
Unfunded capital commitments 24.0
27.3
Uncollected investment advisory and administrative fees 8.1
5.2
$ 173.2
$ 175.8

The unfunded capital commitments totaling ~~$24.0~~$15.6 million and ~~$27.3~~$18.1 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, relate primarily to the investment partnerships in which we have an existing investment. In addition to such amounts, a percentage of prior distributions may be called under certain circumstances.

NOTE 4 – FAIR VALUE MEASUREMENTS.

We determine the fair value of our cash equivalents and certain investments using the following broad levels of inputs as defined by related accounting standards:

Level 1 – quoted prices in active markets for identical securities.

Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar

obtained from independent sources.

Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. We do not

value any investments using Level 3 inputs.

These levels are not necessarily an indication of the risk or liquidity associated with our investments. The following table summarizes our investments that are recognized in our unaudited condensed consolidated balance sheets using fair value measurements determined based on the differing levels of inputs. This table excludes investments held by the consolidated T. Rowe Price investment products which are presented separately on our unaudited condensed consolidated balance sheets and are detailed in Note 5.

As required by the accounting guidance, the fair value hierarchy levels table above does not include the investment partnerships and other investments ~~that are held at~~for which fair value is estimated using their NAV per share as a practical expedient. The carrying value of these investments as disclosed in Note 3 were ~~$99.1~~$105.5 million at March 31, ~~2019~~2020 and ~~$99.6~~$99.7 million at December 31, ~~2018.~~2019.

NOTE 5 – CONSOLIDATED T. ROWE PRICE INVESTMENT PRODUCTS.

The T. Rowe Price investment products that we consolidate in our unaudited condensed consolidated financial statements are generally those products we provided initial seed capital at the time of their formation and have a controlling interest. Our U.S. mutual funds are considered voting interest entities, while those regulated outside the U.S. are considered variable interest entities.

The following table details the net assets of the consolidated T. Rowe Price investment products:



	3/31/2020						12/31/2019
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Cash and cash equivalents⁽¹⁾	$	23.1	$	94.6	$	117.7	$	9.9	$	66.6	$	76.5
Investments⁽²⁾	197.3		1,641.3		1,838.6		281.1		1,891.3		2,172.4
Other assets	8.1		59.9		68.0		10.6		17.4		28.0
Total assets	228.5		1,795.8		2,024.3		301.6		1,975.3		2,276.9
Liabilities	10.9		72.0		82.9		12.2		27.0		39.2
Net assets	$	217.6	$	1,723.8	$	1,941.4	$	289.4	$	1,948.3	$	2,237.7

Attributable to T. Rowe Price Group	$	155.0	$	815.4	$	970.4	$	199.6	$	917.1	$	1,116.7
Attributable to redeemable non-controlling interests	62.6		908.4		971.0		89.8		1,031.2		1,121.0
	$	217.6	$	1,723.8	$	1,941.4	$	289.4	$	1,948.3	$	2,237.7

3/31/2019 12/31/2018
(in millions) Voting
interest entities Variable interest entities Total Voting
interest entities Variable interest entities Total
Cash and cash equivalents⁽¹⁾
$ 16.3
$ 59.8
$ 76.1
$ 18.5
$ 51.6
$ 70.1
Investments⁽²⁾
289.7
1,509.0
1,798.7
261.3
1,322.7
1,584.0
Other assets 9.7
51.8
61.5
8.0
18.3
26.3
Total assets 315.7
1,620.6
1,936.3
287.8
1,392.6
1,680.4
Liabilities 23.6
41.1
64.7
16.0
22.7
38.7
Net assets $ 292.1
$ 1,579.5
$ 1,871.6
$ 271.8
$ 1,369.9
$ 1,641.7

Attributable to T. Rowe Price Group $ 199.8
$ 785.1
$ 984.9
$ 175.3
$ 726.1
$ 901.4
Attributable to redeemable non-controlling interests 92.3
794.4
886.7
96.5
643.8
740.3
$ 292.1
$ 1,579.5
$ 1,871.6
$ 271.8
$ 1,369.9
$ 1,641.7

⁽¹⁾Cash and cash equivalents includes ~~$15.3~~$22.5 million and ~~$18.5~~$9.1 million at March 31, ~~2019~~2020, and December 31, ~~2018,~~2019, respectively, of T. Rowe Price money market mutual funds.

⁽²⁾Investments includes ~~$42.1~~$35.3 million and ~~$43.8~~$40.2 million at March 31, ~~2019~~2020, and December 31, ~~2018,~~2019, respectively, of T. Rowe Price investment products.

Although we can redeem our net interest in these consolidated T. Rowe Price investment products at any time, we cannot directly access or sell the assets held by these products to obtain cash for general operations. Additionally, the assets of these investment products are not available to our general creditors.

Since third party investors in these investment products have no recourse to our credit, our overall risk related to the net assets of consolidated T. Rowe Price investment products is limited to valuation changes associated with our net interest. We, however, are required to recognize the valuation changes associated with all underlying

investments held by these products in our unaudited condensed consolidated statements of income and disclose the portion attributable to third party investors as net income attributable to redeemable non-controlling interests.

The operating results of the consolidated T. Rowe Price investment products for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019, are reflected in our unaudited condensed consolidated statements of income as follows:



	Three months ended
	3/31/2020									3/31/2019
(in millions)	Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total
Operating expenses reflected in net operating income	$	(.2	)	$	(3.5	)	$	(3.7	)	$	(.3	)	$	(2.8	)	$	(3.1	)
Net investment income (loss) reflected in non-operating income (loss)	(35.2		)	(295.1		)	(330.3		)	8.0			93.9			101.9
Impact on income before taxes	$	(35.4	)	$	(298.6	)	$	(334.0	)	$	7.7		$	91.1		$	98.8

Net income (loss) attributable to T. Rowe Price Group	$	(22.6	)	$	(134.9	)	$	(157.5	)	$	8.7		$	48.7		$	57.4
Net income (loss) attributable to redeemable non-controlling interests	(12.8		)	(163.7		)	(176.5		)	(1.0		)	42.4			41.4
	$	(35.4	)	$	(298.6	)	$	(334.0	)	$	7.7		$	91.1		$	98.8

Three months ended
3/31/2019 3/31/2018
(in millions) Voting interest entities Variable interest entities Total Voting interest entities Variable interest entities Total
Operating expenses reflected in net operating income $ (.3 ) $ (2.8 ) $ (3.1 ) $ (.3 ) $ (2.2 ) $ (2.5 )
Net investment income (loss) reflected in non-operating income 8.0
93.9
101.9
(.8 ) 1.6
.8
Impact on income before taxes $ 7.7
$ 91.1
$ 98.8
$ (1.1 ) $ (.6 ) $ (1.7 )

Net income (loss) attributable to T. Rowe Price Group $ 8.7
$ 48.7
$ 57.4
$ (.7 ) $ (2.8 ) $ (3.5 )
Net income (loss) attributable to redeemable non-controlling interests (1.0 ) 42.4
41.4
(.4 ) 2.2
1.8
$ 7.7
$ 91.1
$ 98.8
$ (1.1 ) $ (.6 ) $ (1.7 )

The operating expenses of the consolidated investment products are reflected in other operating expenses. In preparing our unaudited condensed consolidated financial statements, we eliminated operating expenses of ~~$1.5~~$2.5 million and ~~$1.7~~$1.5 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, against the investment advisory and administrative fees earned from these products. The net investment income (loss) reflected in ~~non-operating~~non-

operating income (loss) includes dividend and interest income and realized and unrealized gains and losses on the underlying securities held by the consolidated T. Rowe Price investment products.

The table below details the impact of these consolidated investment products on the individual lines of our unaudited condensed consolidated statements of cash flows for the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019.



	Three months ended
	3/31/2020									3/31/2019
(in millions)	Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total
Net cash provided by operating activities	$	11.3		$	(87.0	)	$	(75.7	)	$	(28.7	)	$	(65.0	)	$	(93.7	)
Net cash provided by (used in) investing activities	(.8		)	—			(.8		)	(5.1		)	1.7			(3.4		)
Net cash used in financing activities	2.7			116.2			118.9			31.6			72.2			103.8
Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	—			(1.2		)	(1.2		)	—			(.7		)	(.7		)
Net change in cash and cash equivalents during period	13.2			28.0			41.2			(2.2		)	8.2			6.0
Cash and cash equivalents at beginning of year	9.9			66.6			76.5			18.5			51.6			70.1
Cash and cash equivalents at end of period	$	23.1		$	94.6		$	117.7		$	16.3		$	59.8		$	76.1

Three months ended
3/31/2019 3/31/2018
(in millions) Voting
interest entities Variable interest entities Total Voting
interest entities Variable interest entities Total
Net cash provided by operating activities $ (28.7 ) $ (65.0 ) $ (93.7 ) $ (52.8 ) $ (148.2 ) $ (201.0 )
Net cash used in investing activities (5.1 ) 1.7
(3.4 ) —
(21.5 ) (21.5 )
Net cash used in financing activities 31.6
72.2
103.8
63.4
139.5
202.9
Effect of exchange rate changes on cash and cash equivalents of consolidated
T. Rowe Price investment products —
(.7 ) (.7 ) —
1.3
1.3
Net change in cash and cash equivalents during period (2.2 ) 8.2
6.0
10.6
(28.9 ) (18.3 )
Cash and cash equivalents at beginning of year 18.5
51.6
70.1
7.1
96.0
103.1
Cash and cash equivalents at end of period $ 16.3
$ 59.8
$ 76.1
$ 17.7
$ 67.1
$ 84.8

The net cash provided by financing activities during the three months ended March 31, 2020 and 2019 ~~and 2018~~ includes ~~$37.8~~$42.8 million and ~~$25.1~~$37.8 million, respectively, of net subscriptions we made into the consolidated T. Rowe Price investment products, net of dividends received. These cash flows were eliminated in consolidation.

FAIR VALUE MEASUREMENTS.

We determine the fair value of investments held by consolidated T. Rowe Price investment products using the following broad levels of inputs as defined by related accounting standards:

Level 1 – quoted prices in active markets for identical securities.

Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data obtained from independent sources.

Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. The value of investments using Level 3 inputs is insignificant.



	3/31/2020						12/31/2019
(in millions)	Level 1			Level 2			Level 1			Level 2
Assets
Cash equivalents	$	22.5		$	—		$	9.1		$	1.1
Equity securities	149.9			548.3			162.8			724.5
Fixed income securities	—			1,097.9			—			1,248.6
Other investments	3.3			39.2			2.7			33.8
	$	175.7		$	1,685.4		$	174.6		$	2,008.0

Liabilities	$	(2.3	)	$	(31.9	)	$	(.4	)	$	(11.2	)

3/31/2019 12/31/2018
(in millions) Level 1 Level 2 Level 1 Level 2
Assets
Cash equivalents $ 15.3
$ —
$ 19.3
$ —
Equity securities 239.9
572.6
189.6
483.5
Fixed income securities —
961.6
—
890.2
Other investments 1.5
23.1
1.7
19.0
$ 256.7
$ 1,557.3
$ 210.6
$ 1,392.7

Liabilities $ (1.0 ) $ (9.7 ) $ (.8 ) $ (12.8 )

~~NOTE 6 – LEASES.~~

All of our leases are operating leases and primarily consist of real estate leases for corporate offices, data centers, and other facilities. As of March 31, 2019, the weighted-average remaining lease term on these leases is approximately seven years and the weighted-average discount rate used to measure the lease liabilities is approximately 3.5%.

Our operating lease expense for the three months ended March 31, 2019 and 2018, was $7.3 million and $8.1 million, respectively. Charges related to our operating leases that are variable and therefore not included in the measurement of the lease liabilities were $2.2 million for the three months ended March 31, 2019.

We made lease payments of $9.9 million during the three months ended March 31, 2019. Our future undiscounted cash flows related to our operating leases and the reconciliation to the operating lease liability as of March 31, 2019, are as follows:

(in millions) 3/31/2019
2019 (excluding the first quarter ended March 31, 2019) $ 21.6
2020 29.8
2021 26.7
2022 22.4
2023 19.9
Thereafter 62.9
Total future undiscounted cash flows 183.3
Less: imputed interest to be recognized in lease expense (21.4 )
Operating lease liabilities, as reported $ 161.9

NOTE 76 – STOCKHOLDERS’ EQUITY.

NOTE 87 – STOCK-BASED COMPENSATION.



	Options		Weighted- average exercise price
Outstanding at December 31, 2019	7,388,068		$	71.06
Exercised	(1,540,694	)	$	67.50
Forfeited	(1,428	)	$	76.00
Outstanding at March 31, 2020	5,845,946		$	72.00
Exercisable at March 31, 2020	5,176,419		$	71.50

Options
Weighted-
average
exercise
price
Outstanding at December 31, 2018 11,300,393
$ 69.05
Exercised (972,655 ) $ 60.26
Forfeited (65,534 ) $ 76.57
Expired (7,807 ) $ 59.07
Outstanding at March 31, 2019 10,254,397
$ 69.84
Exercisable at March 31, 2019 8,272,310
$ 68.24

RESTRICTED SHARES AND STOCK UNITS.

The following table summarizes the status of, and changes in, our nonvested restricted shares and restricted stock units during the three months ended March 31, ~~2019.~~2020.



	Restricted shares	Restricted stock units		Weighted-average fair value
Nonvested at December 31, 2019	7,404	6,718,261		$	98.75
Time-based grants	—	15,184		$	126.33
Dividend equivalents granted to non-employee directors	—	643		$	98.80
Vested	—	(62,499	)	$	95.26
Forfeited	—	(34,004	)	$	97.30
Nonvested at March 31, 2020	7,404	6,637,585		$	98.85

Restricted
shares

Restricted
stock
units

Weighted-average
fair value
Nonvested at December 31, 2018 136,964
6,603,920
$ 87.07
Time-based grants —
20,307
$ 92.37
Vested (400 ) (26,129 ) $ 99.36
Forfeited (4,928 ) (212,992 ) $ 87.99
Nonvested at March 31, 2019 131,636
6,385,106
$ 87.01

FUTURE STOCK-BASED COMPENSATION EXPENSE.



(in millions)
Second quarter 2020	$	54.5
Third quarter 2020	53.2
Fourth quarter 2020	46.2
2021	108.1
2022 through 2026	90.0
Total	$	352.0

NOTE 98 – EARNINGS PER SHARE CALCULATIONS.

The following table presents the reconciliation of net income attributable to T. Rowe Price Group to net income allocated to our common stockholders and the weighted-average shares that are used in calculating the basic and diluted earnings per share on our common stock. Weighted-average common shares outstanding assuming dilution reflects the potential dilution, determined using the treasury stock method, that could occur if outstanding stock options were exercised and non-participating stock awards vested. NaN stock options had an anti-dilutive impact on the diluted earnings per common share calculation in the periods presented.



	Three months ended
(in millions)	3/31/2020		3/31/2019
Net income attributable to T. Rowe Price Group	$	343.1	$	512.6
Less: net income allocated to outstanding restricted stock and stock unit holders	9.4		13.0
Net income allocated to common stockholders	$	333.7	$	499.6

Weighted-average common shares
Outstanding	234.1		236.6
Outstanding assuming dilution	236.8		239.6

Three months ended
(in millions) 3/31/2019 3/31/2018
Net income attributable to T. Rowe Price Group $ 512.6
$ 453.7
Less: net income allocated to outstanding restricted stock and stock unit holders 13.0
10.6
Net income allocated to common stockholders $ 499.6
$ 443.1

Weighted-average common shares
Outstanding 236.6
244.3
Outstanding assuming dilution 239.6
249.8

NOTE 109 – OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE ~~INCOME.~~LOSS.

~~The following table presents the impact of the components of other comprehensive income or loss on deferred tax benefits (income taxes).~~

The changes in each component of accumulated other comprehensive ~~income (loss),~~loss, including reclassification adjustments for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 are presented in the table below.

Currency translation adjustments
(in millions) Equity method investments Consolidated T. Rowe Price investment products - variable interest entities Total currency translation adjustments Total
Balances at December 31, 2018 $ (48.8 ) $ 6.8
$ (42.0 ) $ (42.0 )
Other comprehensive income (loss) before reclassifications and income taxes 4.9
(4.5 ) .4
.4
Reclassification adjustments recognized in non-operating income —
(.1 ) (.1 ) (.1 )
4.9
(4.6 ) .3
.3
Net deferred tax benefits (income taxes) (1.1 ) 1.2
.1
.1
Other comprehensive income (loss) 3.8
(3.4 ) .4
.4
Balances at March 31, 2019 $ (45.0 ) $ 3.4
$ (41.6 ) $ (41.6 )

Currency translation adjustments
(in millions) Net unrealized holding gains Equity method investments Consolidated T. Rowe Price investment products - variable interest entities Total currency translation adjustments Total
Balances at December 31, 2017 $ 7.9
$ (30.6 ) $ 19.1
$ (11.5 ) $ (3.6 )
Reclassification of unrealized holding gains to retained earnings upon adoption of new financial instruments guidance⁽¹⁾
(7.9 ) —
—
—
(7.9 )
Reclassification adjustment of stranded tax benefits on currency translation adjustments upon adoption of new accumulated other comprehensive income guidance —
(6.4 ) 4.1
(2.3 ) (2.3 )
Balance at January 1, 2018 —

(37.0 )
23.2

(13.8 )
(13.8 )
Other comprehensive income before reclassifications and income taxes —
3.8
9.2
13.0
13.0
Reclassification adjustments recognized in non-operating income —
—
(3.1 ) (3.1 ) (3.1 )
—
3.8
6.1
9.9
9.9
Net deferred income taxes —
(.8 ) (1.7 ) (2.5 ) (2.5 )
Other comprehensive income (loss) —
3.0
4.4
7.4
7.4
Balances at March 31, 2018 $ —
$ (34.0 ) $ 27.6
$ (6.4 ) $ (6.4 )



	Three months ended 3/31/2020									Three months ended 3/31/2019
	Currency translation adjustments									Currency translation adjustments
(in millions)	Equity method investments			Consolidated T. Rowe Price investment products - variable interest entities			Total currency translation adjustments			Equity method investments			Consolidated T. Rowe Price investment products - variable interest entities			Total currency translation adjustments
Balances at beginning of period	$	(46.9	)	$	3.9		$	(43.0	)	$	(48.8	)	$	6.8		$	(42.0	)
Other comprehensive income (loss) before reclassifications and income taxes	(.1		)	(7.9		)	(8.0		)	4.9			(4.5		)	.4
Reclassification adjustments recognized in non-operating income	—			(.1		)	(.1		)	—			(.1		)	(.1		)
	(.1		)	(8.0		)	(8.1		)	4.9			(4.6		)	.3
Net deferred tax benefits (income taxes)	—			2.0			2.0			(1.1		)	1.2			.1
Other comprehensive income (loss)	(.1		)	(6.0		)	(6.1		)	3.8			(3.4		)	.4
Balances at end of period	$	(47.0	)	$	(2.1	)	$	(49.1	)	$	(45.0	)	$	3.4		$	(41.6	)

⁽¹⁾ ~~Includes the reclassification of $1.7 million of stranded income taxes on certain investments resulting from U.S. tax law changes enacted on December 22, 2017, from accumulated~~

The other comprehensive income (loss) in the table above excludes $17.2 million and $1.3 million of other comprehensive loss related to ~~retained earnings.~~

redeemable non-controlling interests held in our consolidated products for the three months ended March 31, 2020 and 2019, respectively.

NOTE 1110 – COMMITMENTS AND CONTINGENCIES.

On February 14, 2017, T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price Trust Company, current and former members of the management committee, and trustees of the T. Rowe Price U.S. Retirement Program were named as defendants in a lawsuit filed in the United States District Court for the District of Maryland. The lawsuit alleges breaches of ERISA’s fiduciary duty and prohibited transaction provisions on behalf of a class of all participants and beneficiaries of the T. Rowe Price 401(k) Plan from February 14, 2011, to the time of judgment. The ~~plaintiffs are seeking certification of the complaint~~matter has been certified as a class action. T. Rowe Price believes the claims are without merit and is vigorously defending the action. This matter is in the ~~early stages~~expert discovery phase of litigation and we cannot predict the eventual outcome, or whether it will have a material negative impact on our financial results, or estimate the possible loss or range of loss that may arise from any negative outcome.

On April 27, 2016, certain shareholders in the T. Rowe Price Blue Chip Growth Fund, T. Rowe Price Capital Appreciation Fund, T. Rowe Price Equity Income Fund, T. Rowe Price Growth Stock Fund, T. Rowe Price International Stock Fund, T. Rowe Price High Yield Fund, T. Rowe Price New Income Fund and T. Rowe Price Small Cap Stock Fund (the “Funds”) filed a Section 36(b) complaint under the caption Zoidis v. T. Rowe Price Assoc., Inc., against T. Rowe Price Associates, Inc. (“T. Rowe Price”) in the United States District Court for the Northern District of California. The complaint alleges that the management fees for the identified funds are excessive because

T. Rowe Price charges lower advisory fees to subadvised clients with funds in the same strategy. The complaint seeks to recover the allegedly excessive advisory fees received by T. Rowe Price in the year preceding the start of the lawsuit, along with investments’ returns and profits. In the alternative, the complaint seeks the rescission of each fund’s investment management agreement and restitution of any allegedly excessive management fees.

T. Rowe Price believes the claims are without merit and is vigorously defending the action. This matter is in the discovery phase of litigation and we cannot predict the eventual outcome, or whether it will have a material negative impact on our financial results, or estimate the possible loss or range of loss that may arise from any negative outcome.

In addition to the matters discussed above, various claims against us arise in the ordinary course of business, including employment-related claims. In the opinion of management, after consultation with counsel, the likelihood of an adverse determination in one or more of these pending ordinary course of business claims that would have a material adverse effect on our financial position or results of operations is remote.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

T. Rowe Price Group, Inc.:

Results of Review of Interim Financial Information

We have reviewed the condensed consolidated balance sheet of T. Rowe Price Group, Inc. and subsidiaries ~~("the Company")~~(the Company) as of March 31, ~~2019,~~2020, the related condensed consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the three-month periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2018,~~2019, and the related consolidated statements of income, comprehensive income, ~~changes in~~ stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 13, ~~2019,~~2020, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2018,~~2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company 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 reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Our revenues and net income are derived primarily from investment advisory services provided to individual and institutional investors in U.S. mutual funds, subadvised funds, separately managed accounts, ~~subadvised funds,~~ and other T. Rowe Price products. The other T. Rowe Price products include: collective investment trusts, open-ended investment products offered to investors outside the U.S., and products offered through variable annuity life insurance plans in the U.S. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; and trust services.

We manage a broad range of U.S., international and global stock, bond, and money market mutual funds and other investment products, which meet the varied needs and objectives of individual and institutional investors. Investment advisory revenues depend largely on the total value and composition of assets under our management. Accordingly, fluctuations in financial markets and in the composition of assets under management affect our revenues and results of operations. Additionally, approximately 30% of our operating expenses are impacted by fluctuations in our assets under management.

We incur significant expenditures to develop new products and services and improve and expand our capabilities and distribution channels in order to attract new investment advisory clients and additional investments from our existing clients. These efforts often involve costs that precede any future revenues that we may recognize from an increase to our assets under management.

The general trend to passive investing has been persistent and accelerated in recent years, which has negatively impacted our new client inflows. However, over the long term we expect well-executed active management to play an important role for investors. In this regard, we remain debt-free with ample liquidity and resources that allow us to take advantage of attractive growth opportunities. We are investing ~~to advance our strategic priorities to sustain and deepen our~~in key capabilities, including investment ~~talent, add investment capabilities both in terms of new strategies~~professionals, technologies, and new product offerings; and, most importantly, we provide our clients with strong investment ~~vehicles, expand capabilities through enhanced technology,~~management expertise and ~~broaden our distribution reach globally.~~

~~We currently expect our 2019 non-GAAP operating expenses to grow~~service both now and in the range of 4% to 7%. This expense growth range factors in continued investments in the business, our cost optimization efforts, and the phased implementation of paying for all third-party investment research. We currently expect all third-party investment research costs to be fully accounted for in our 2020 operating expenses. We could elect to adjust our expense growth should unforeseen circumstances arise, including significant market movements.future.

~~Major~~ U.S. ~~stock indexes surged~~stocks plunged in the later part of the first quarter of 2020. After starting the year on a strong note, equities fell as a coronavirus outbreak that originated in China in late 2019 rapidly spread to other countries and was deemed a global pandemic. The sell-off intensified in March, as the ~~market rebounded from its late-December 2018 lows.~~coronavirus spread rapidly in the U.S., prompting government officials to close schools, nonessential businesses, and public facilities. The Federal Reserve ~~paused its short-term interest rate hikes while central bank officials assess~~took drastic actions to increase financial market liquidity and support the ~~economy~~flow of credit to consumers and businesses. Stocks did pare some losses in the effects of previous rate increases. Equities were also lifted by fourth-quarter corporate earnings reports that were generally better than expected, although earnings growth moderated from the robust pace of earlier in 2018. The endfinal days of the ~~federal government’s partial shutdown in late January also removed~~quarter as the Trump administration and Congress passed into law a ~~major source of uncertainty. In addition, investors were hopeful that the U.S. and China would soon reach a resolution to their year-long trade dispute.~~massive economic stimulus bill.

Stocks in developed non-U.S. equity markets ~~performed well but underperformed~~declined broadly; returns for U.S. ~~shares in~~investors were hurt by a stronger U.S. dollar ~~terms. Japanese~~versus many other currencies. In Asia, Australian shares ~~returned almost 7% for~~fell more than 33%, while equities in Japan and Hong Kong declined roughly 17%. In Europe, equity markets in Spain and Italy, where the ~~quarter. UK shares surged nearly 12%~~coronavirus outbreak has been severe, fell roughly 30% and 29%, ~~despite Brexit-related uncertainty.~~respectively.

Stocks in emerging equity markets ~~performed approximately in line with~~declined slightly more than developed ~~non-U.S.~~ markets. In Asia, Chinese stocks did very well, in part because of Chinese government stimulus efforts, expectations for an imminent U.S.-China trade deal, and MSCI’s plan to increase China’s representation in some of its indexes later this year. In emerging Europe markets, Russian ~~stocks soared over 12%~~shares fell more than 36% amid plunging oil prices following OPEC heavyweight Saudi Arabia’s decision to increase production and offer discounts to global customers. Emerging Asian markets were negative, though Chinese shares held up best with losses of roughly 10%. China’s lockdown efforts started to ease late in ~~U.S. dollar terms amid rising oil prices. In contrast, Turkish shares were extremely volatile and fell almost 3%.~~the first quarter, which helped equities recover partially from earlier losses. In Latin America, ~~most~~all major markets advanced during the quarter. Stocks in regional heavyweight Brazil returned more than 8% amid expectations that the country’s new president would pursue business-friendly policies and pension reform.posted losses of at least 30%.

Returns of several major equity market indexes for the first quarter of ~~2019, are~~2020, were as follows:

NASDAQ Composite Index⁽¹⁾

⁽¹⁾Returns exclude dividends

Global bond ~~performance was positive, and~~returns were largely negative in U.S.~~, bonds produced solid returns. The~~ dollar terms. In the U.S. investment-grade universe, Treasuries surged as the Federal Reserve ~~kept~~slashed short-term interest rates ~~unchanged~~to near 0%, announced massive purchases of U.S. government bonds and ~~indicated that it does not currently see~~other securities, and rolled out a variety of programs and “facilities” intended to boost market liquidity and the ~~need for rate hikes in 2019, which helped send longer-term bond yields sharply lower. During the quarter, the~~flow of credit. The 10-year Treasury note yield ~~fell~~decreased from ~~2.69%~~1.92% at the end of 2019 to ~~2.41%. In~~0.70% at the ~~investment-grade debt universe, long-term~~end of March. Mortgage-backed securities significantly lagged Treasuries ~~and~~amid substantial mortgage refinancing activity. Asset-backed securities posted slightly negative returns, while corporate bonds ~~fared best. Mortgage-backed securities lagged, as falling long-term rates could lead to more mortgage prepayments~~declined in anticipation of weaker corporate profits and ~~refinancing activity.~~a recession. Municipal bonds ~~performed approximately in line with~~underperformed taxable bonds. High yield bonds ~~easily outperformed investment-grade issues amid narrowing credit spreads~~posted significant losses as the yield difference between higher- and ~~increased demand from yield-seeking investors.~~lower-quality bonds widened dramatically.

~~Bond returns~~Bonds in developed non-U.S. ~~markets were positive~~countries produced negative returns in U.S. dollar ~~terms,~~terms. Bond prices climbed as ~~yields~~longer-term interest rates in many countries declined, but most major currencies fell versus the dollar, reducing returns to U.S. investors. Most developed ~~markets decreased due to global growth concerns and a number of major~~market governments unveiled fiscal stimulus measures, while most central banks ~~turning more neutral. However, a stronger U.S. dollar versus some currencies reduced returns in terms of dollars.~~responded with significant monetary easing programs.

Emerging markets ~~bond returns~~bonds were ~~also positive as they benefited from major central banks moving away from monetary tightening. Dollar-denominated~~broadly negative. U.S. dollar-denominated emerging markets ~~debt easily~~bonds slightly outperformed local currency bonds ~~from~~amid broad dollar strength. Most developing ~~countries. The latter lagged as several key~~market currencies ~~depreciated versus~~declined during the ~~dollar.~~quarter.

Returns for several major bond market indexes for the first quarter of ~~2019, are~~2020, were as follows:

ASSETS UNDER MANAGEMENT.

Assets under management ended the first quarter of ~~2019~~2020 at ~~$1,081.7~~$1,008.8 billion, ~~an increase~~a decrease of ~~$119.4~~$198.0 billion from December 31, ~~2018. We had~~2019. Net cash outflows were $6.0 billion, and clients transferred $4.4 billion in net ~~cash inflows~~assets from the U.S. mutual funds to other investment products, of ~~$5.4~~which $4.3 billion was transferred to retirement date trusts. Market depreciation and losses, net of dividends not reinvested, reduced our assets under management by $192.0 billion in the first quarter of ~~2019.~~ 2020.

The following ~~table details~~tables detail changes in our assets under management, by vehicle and asset class during the first quarter of ~~2019:~~

Net market appreciation and income⁽²⁾

Net market appreciation (depreciation) and income⁽²⁾

⁽¹⁾The underlying assets under management of the multi-asset portfolios have been aggregated and presented in this category and not reported in the equity and fixed income columns.

⁽²⁾ ~~Reported net of~~ Includes distributions reinvested and not reinvested.

Investment advisory clients outside the U.S. account for about ~~6.4%~~7.4% of our assets under management at March 31, ~~2019~~2020 and ~~6.2%~~6.9% at December 31, ~~2018.~~2019.

Our target date retirement products, which are included in the multi-asset totals shown above, continue to be a significant part of our assets under management. Assets under management in these portfolios ~~are~~were as follows:

Net cash inflows into our target date retirement products were ~~$3.0~~$.7 billion in the first quarter of ~~2019. For~~2020. A redemption in a risk-managed strategy from a large institutional investor was the ~~year-ended December 31, 2018, our target date retirement products had net inflows~~primary driver of ~~$12.0 billion, as net~~the multi-asset outflows during the first quarter of $14.1 billion from the target date retirement U.S. mutual funds were more than offset by net inflows of $21.4 billion into the retirement trusts and $4.7 billion into separately managed retirement accounts.2020.

Page 19

INVESTMENT PERFORMANCE.⁽¹⁾

Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. The percentage of our U.S. mutual funds⁽²⁾⁽¹⁾ (across primary share classes) that outperformed their comparable Morningstar median on a total return basis and that are in the top Morningstar quartile for the one-, three-, five-, and 10-years ended March 31, ~~2019,~~2020, were:


	1 year	3 years	5 years	10 years	1 year	3 years	5 years	10 years
Outperformed Morningstar median(2)
All funds	65%	68%	79%	82%	50%	60%	72%	76%
Multi-asset funds	86%	79%	88%	84%	44%	59%	76%	84%

Top Morningstar quartile(2)
All funds	26%	39%	51%	54%	19%	28%	41%	50%
Multi-asset funds	3%	53%	59%	79%	8%	24%	50%	68%

⁽¹⁾ Excludes passive and fund categories not ranked by Morningstar.

⁽²⁾Source: © ~~2019~~2020 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

⁽²⁾ ~~Excludes passive and fund categories not ranked by Morningstar.~~

In addition, ~~85.5%~~76% of assets under management in our rated U.S. mutual ~~funds' assets under management~~funds (across primary share classes) ended the quarter with an overall rating of four or five stars from Morningstar. The performance of our institutional strategies against their benchmarks remains competitive, especially over longer time periods.

RESULTS OF OPERATIONS.

The following table and discussion sets forth information regarding our consolidated financial results for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 on a U.S. GAAP basis as well as a non-GAAP basis. The non-GAAP basis adjusts for the impact of our consolidated T. Rowe Price investment products, the impact of market movements on the supplemental savings plan liability and related economic hedges, investment income related to certain other investments, and certain nonrecurring charges and gains. Beginning in the second quarter of 2018, our non-GAAP adjustments no longer include non-operating income related to our cash and discretionary investments not consolidated. We believe the non-GAAP financial measures below provide relevant and meaningful information to investors about our core operating results.

Non-operating income⁽¹⁾

Non-operating income (loss)⁽¹⁾

Adjusted non-GAAP basis⁽²⁾

Non-operating income (loss)⁽¹⁾

⁽¹⁾The percentage change in non-operating income (loss) is not meaningful (n/m).

⁽²⁾See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management’s Discussion and Analysis.

~~Operating expenses.~~ Operating expenses were $794.8 million in the first quarter of 2019 compared with $744.2 million in the first quarter of 2018. The increase in operating expenses for the first quarter of 2019 was primarily due to our continued strategic investments, as well as higher compensation expense related to the supplemental savings plan as markets rebounded strongly in the first quarter of 2019. The higher expense related to the supplemental savings plan is partially offset by the non-operating gains earned on the investments used to hedge the related liability. On a non-GAAP basis, our operating expenses in the first quarter of 2019 increased 2.1% to $756.6 million compared to the 2018 quarter. Our non-GAAP operating expenses excludes the first quarter of 2019 impact of our supplemental savings plan. See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.

Three months ended Q1 2019 vs. Q1 2018
(in millions) 3/31/2019 3/31/2018 $ change % change
Investment advisory fees
U.S. mutual funds $ 815.9
$ 832.9
$ (17.0 ) (2.0 )%
Subadvised and separate accounts and other investment products 378.3
356.3
22.0
6.2 %
1,194.2
1,189.2
5.0
.4 %
Administrative, distribution, and servicing fees

Administrative fees 102.9
102.2
.7
.7 %
Distribution and servicing fees 30.2
36.6
(6.4 ) (17.5 )%
133.1
138.8
(5.7 ) (4.1 )%
Net revenues $ 1,327.3
$ 1,328.0
$ (.7 ) (.1 )%

Investment advisory revenues earned in the first quarter of 2020 increased over the comparable 2019 quarter as average assets under our management increased $119.2 billion, or 11.4%, to $1,162.7 billion. The average annualized effective fee rate earned during the first quarter of 2020 was 45.9 basis points, compared with 46.4 basis points earned during the first quarter of 2019. The decline in our effective fee rate for the first quarter of 2020 compared to the same period in 2019 was primarily due to client transfers within the complex from higher fee vehicles to lower fee vehicles over the last twelve months.

Operating expenses. Operating expenses were $755.4 million in the first quarter of 2020 compared with $794.8 million in the first quarter of 2019. The decrease in operating expenses for the first quarter of 2020 was primarily due to a change in market-related compensation expense of $100.3 million related to the supplemental savings plan. Partially offsetting this decrease were higher salary and benefits, interim bonus accrual, stock-based compensation expense and the continued strategic investments in the first quarter of 2020 compared to the first quarter of 2019. For the first quarter of 2020, the compensation expense related to the supplemental savings plan is more than offset by the non-operating losses incurred on the investments used to economically hedge the related liability.

On a non-GAAP basis, our operating expenses in the first quarter of 2020 increased 8.1% to $817.9 million compared to the first quarter of 2019. Our non-GAAP operating expenses do not include the impact of our supplemental savings plan and consolidated sponsored investment products. See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.

Given the market environment, we updated our 2020 non-GAAP operating expense growth range guidance from a range of 6%-9% to a range of 1%-4%. We expect certain expense categories, such as travel- and AUM-related, to be naturally impacted more than others. Most importantly, we will continue to make investments in our critical strategic initiatives to promote long-term growth in the business. We could elect to further adjust our expense growth should unforeseen circumstances arise, including significant market movements and ongoing disruption resulting from the ~~firm's~~coronavirus pandemic.

On a non-GAAP basis, diluted earnings per share was $1.87 for both the three months ended March 31, 2020 and 2019. For the three months ended March 31, 2020, higher operating income, lower shares outstanding, and a lower effective tax rate were completely offset by non-operating losses. See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.



	Three months ended				Q1 2020 vs. Q1 2019
(in millions)	3/31/2020		3/31/2019		$ change			% change
Investment advisory fees
U.S. mutual funds	$	876.2	$	815.9	$	60.3		7.4	%
Subadvised and separate accounts and other investment products	451.6		378.3		73.3			19.4	%
	1,327.8		1,194.2		133.6			11.2	%
Administrative, distribution, and servicing fees
Administrative fees	106.9		102.9		4.0			3.9	%
Distribution and servicing fees	27.9		30.2		(2.3		)	(7.6	)%
	134.8		133.1		1.7			1.3	%
Net revenues	$	1,462.6	$	1,327.3	$	135.3		10.2	%

Investment advisory fees.

Investment advisory revenues earned in the first quarter of 2020 from our U.S. mutual funds were ~~$815.9~~$876.2 million, ~~a decrease~~an increase of ~~2.0%~~7.4% from the comparable ~~2018~~2019 quarter. Average assets under management in these funds for the first quarter of 2020 increased 7.2% from the 2019 ~~decreased 1.9%~~quarter to ~~$610.1~~$654.3 billion.

Subadvised and separate accounts and other investment products

Investment advisory revenues earned in the first quarter of ~~2019~~2020 from subadvised and separate accounts ~~as well as~~and other investment products were ~~$378.3~~$451.6 million, an increase of ~~6.2%~~19.4% from the comparable ~~2018~~2019 quarter. Average assets under management for these products increased ~~7.4%~~17.3% from the 2019 quarter to ~~$433.4~~$508.4 billion. ~~The~~

Since the first quarter of 2019, the inflows into the Japanese ITMs, which have a higher than average fee rate, have caused investment advisory fees to increase at a rate greater than the increase in average assets under management ~~exceeded the increase in investment advisory~~for our subadvised and separate accounts and other products.

Our first quarter net revenues reflect the elimination of $2.5 million in 2020 and $1.5 million in 2019, ~~and $1.7 million in 2018,~~of revenue earned from our consolidated T. Rowe Price investment products. The corresponding expenses recognized by these products, and consolidated in our financial statements, were eliminated from operating expenses.

Distribution and servicing. Distribution and servicing includes those costs incurred to distribute T. Rowe Price products as well as client and shareholder servicing, recordkeeping, and administrative services. These costs were ~~$66.4~~$65.7 million for the first quarter of ~~2019,~~2020, a decrease of ~~5.5% over~~1.1% from the ~~$70.3~~$66.4 million recognized in the ~~first quarter of 2018.~~2019 quarter. The decrease for the period is primarily driven by ~~client transfers~~lower assets under management in those mutual funds for which we pay distribution and servicing costs as clients transferred assets to lower fee vehicles or share classes over the last twelve ~~months, which resulted~~months. The decreases in ~~lower assets under management in those mutual funds that are distributed~~costs related to these products were partially offset by ~~third-party intermediaries. These~~higher distribution costs ~~include those distribution~~as a result of inflows into our Japanese ITMs since the end of the first quarter of 2019.

Distribution and servicing costs paid to third-party intermediaries that source the assets of certain share classes of our U.S. mutual funds are recognized in this expense line and isare offset entirely by the 12b-1 revenue we earn and report in administrative, distribution, and servicing fees.

Non-operating income (loss)

Non-operating loss in the first quarter of ~~2018.~~

~~Non-operating income~~

~~Non-operating~~2020 was $500.3 million, a decrease of $703.1 million from non-operating income in the first quarter of 2019 ~~was~~of $202.8 ~~million, an increase of $186.7 million from the 2018 quarter.~~million. The following table details the components of non-operating income during both the first quarter of ~~2018~~March 31, 2020 and ~~2019 and the related dollar change.~~2019.

During the first quarter of ~~2019, non-operating income included the impact of sharp market increases, which resulted in significant unrealized gains on~~2020, our investment portfolio ~~compared with modest gains~~incurred steep declines in market value as global economies and markets are disrupted by the coronavirus pandemic. Our consolidated investment products and supplemental savings plan hedge portfolio comprised about 80% of the net losses recognized during ~~2018.~~the first quarter of 2020. The cash and discretionary investment portfolio also experienced net investment losses of $61.2 million in the first quarter of 2020.

The ~~impact~~table above includes the net investment income of ~~consolidating certain~~the underlying portfolios included in the consolidated T. Rowe Price investment products and not just the net investment income related to our interest. The table below shows the impact that the consolidated T. Rowe Price investment products have on the individual lines of our unaudited condensed consolidated statements of income ~~is as follows:~~and the portion attributable to our interest:

Provision for income taxes

Our effective tax rate for the first quarter of ~~2019~~2020 was ~~24.7%~~19.5%, compared with ~~24.1%~~24.7% in the ~~2018~~2019 quarter. The lower effective tax rate for the first quarter of 2020 as compared to the 2019 quarter is primarily due to higher discrete tax benefits associated with option exercises. These benefits were partially offset by net losses attributable to redeemable non-controlling interests held in the firm’s consolidated investment products, which are not taxable to us despite being included in pre-tax income, and a higher state effective tax rate. The higher state effective tax rate results primarily from the remeasurement of deferred tax liabilities related to our investment portfolio. The following table reconciles the statutory federal income tax rate to our effective tax rate for both the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:

State income taxes for current year, net of federal income tax benefits⁽¹⁾

⁽¹⁾State income tax benefits are reflected in the total benefits for net income attributable to redeemable non-controlling interests and stock-based compensation plans activity.

We currently estimate our effective tax rate for the full-year ~~2019~~2020 will be in the range of ~~23.5%~~24% to ~~26.5%~~27%. Our effective tax rate will continue to experience volatility in future periods as the discrete tax benefits recognized from ~~stock-based compensation~~option exercises are impacted by market fluctuations in our stock price and timing of option exercises. The rate will also be impacted by ~~changes in~~net investment income recognized on our consolidated investment products that are driven by market fluctuations and changes in the proportion of their net income that is attributable to non-controlling interests.

Our non-GAAP effective tax rate for the ~~three months ended March 31,~~first quarter of 2020 and 2019 was 22.5% and ~~2018 is~~ 25.3% ~~and 24.3%~~, respectively. The non-GAAP tax rate primarily adjusts for the impact of the consolidated investment products, including the significant net losses attributable to the redeemable non-controlling interests. The decrease in the non-GAAP effective tax rate is primarily due to the higher tax benefits associated with option exercises. We currently estimate our non-GAAP effective tax rate for the full-year ~~2019~~2020 will be in the range of ~~24%~~23.5% to ~~26%~~25.5%.

NON-GAAP INFORMATION AND RECONCILIATION.

We believe the non-GAAP financial measures below provide relevant and meaningful information to investors about our core operating results. These measures have been established in order to increase transparency for the purpose of evaluating our core business, for comparing current results with prior period results, and to enable more appropriate comparison with industry peers. However, non-GAAP financial measures should not be considered a substitute for financial measures calculated in accordance with U.S. GAAP and may be calculated differently by other companies.

March 31, 2020 and ~~2018.~~2019.

Three months ended
(in millions, except per-share amounts) 3/31/2019 3/31/2018
Operating expenses, GAAP basis $ 794.8
$ 744.2
Non-GAAP adjustments:
Expenses of consolidated T. Rowe Price investment products, net of elimination of its related management and administrative fees⁽¹⁾
(1.6 ) (.8 )
Compensation expense related to market valuation changes in the supplemental savings plan liability⁽²⁾
(36.6 ) (2.4 )
Adjusted operating expenses $ 756.6
$ 741.0

Net income attributable to T. Rowe Price Group, GAAP basis $ 512.6
$ 453.7
Non-GAAP adjustments:
Net income of consolidated T. Rowe Price investment products, net of redeemable non-controlling interests⁽¹⁾
(57.4 ) 3.5
Non-operating income of investments designated as an economic hedge of the supplemental savings plan liability less related compensation expense⁽²⁾
5.6
(.5 )
Other non-operating income⁽³⁾
(25.7 ) (12.4 )
Income tax impacts of non-GAAP adjustments⁽⁴⁾
25.5
1.3
Adjusted net income attributable to T. Rowe Price Group $ 460.6
$ 445.6

Diluted earnings per common share, GAAP basis $ 2.09
$ 1.77
Non-GAAP adjustments:
Consolidated T. Rowe Price investment products⁽¹⁾
(.16 ) .01
Non-operating income of investments designated as an economic hedge of the supplemental savings plan liability less related compensation expense⁽²⁾
.01
—
Other non-operating income⁽³⁾
(.07 ) (.04 )
Adjusted diluted earnings per common share⁽⁵⁾
$ 1.87
$ 1.74



	Three months ended 3/31/2020
	Operating expenses			Net operating income			Non-operating income (loss)			Provision (benefit) for income taxes⁽⁴⁾		Net income attributable to T. Rowe Price Group		Diluted earnings per share⁽⁵⁾
U.S. GAAP Basis	$	755.4		$	707.2		$	(500.3	)	$	40.3	$	343.1	$	1.41
Non-GAAP adjustments:
Consolidated T. Rowe Price investment products⁽¹⁾	(1.2		)	3.7			330.3			71.1		86.4		.36
Supplemental savings plan liability⁽²⁾	63.7			(63.7		)	68.5			2.1		2.7		.01
Other non-operating income⁽³⁾	—			—			40.3			18.2		22.1		.09
Adjusted Non-GAAP Basis	$	817.9		$	647.2		$	(61.2	)	$	131.7	$	454.3	$	1.87

⁽¹⁾ ~~These non-GAAP adjustments back out~~



	Three months ended 3/31/2019
	Operating expenses			Net operating income		Non-operating income (loss)			Provision (benefit) for income taxes⁽⁴⁾			Net income attributable to T. Rowe Price Group			Diluted earnings per share⁽⁵⁾
U.S. GAAP Basis	$	794.8		$	532.5	$	202.8		$	181.3		$	512.6		$	2.09
Non-GAAP adjustments:
Consolidated T. Rowe Price investment products⁽¹⁾	(1.6		)	3.1		(101.9		)	(18.9		)	(38.5		)	(.16		)
Supplemental savings plan liability⁽²⁾	(36.6		)	36.6		(31.0		)	1.8			3.8			.01
Other non-operating income⁽³⁾	—			—		(25.7		)	(8.4		)	(17.3		)	(.07		)
Adjusted Non-GAAP Basis	$	756.6		$	572.2	$	44.2		$	155.8		$	460.6		$	1.87

T. Rowe Price investment products ~~have on our U.S. GAAP consolidated statements of income. We~~as we believe ~~the consolidated T. Rowe Price investment products may~~they impact the ~~reader's~~reader’s ability to understand our core operating results. ~~The following tables detail the impact the consolidated products have on operating expenses and net income attributable to T. Rowe Price Group.~~

This non-GAAP adjustment represents the other non-operating income (loss) and the net gains (losses) earned on our non-consolidated investment portfolio that are not designated as economic hedges of the supplemental savings plan liability, and non-consolidated seed investments and other investments that are not part of the cash and discretionary investment portfolio.We retain the investment gains recognized on our non-consolidated cash and discretionary investments as these assets and related income (loss) are considered part of our core operations. We believe adjusting for these non-operating income (loss) items helps the reader’s ability to understand our core operating results and increases comparability to prior years. Additionally, we do not emphasize the impact of the portion of non-operating income (loss) removed when managing and evaluating our core performance.

~~The following table details the calculation of operating expenses of consolidated T. Rowe Price investment products, net of elimination of its related management and administrative fees.~~

Three months ended
3/31/2019 3/31/2018
Operating expenses before eliminations $ 3.1
$ 2.5
Operating expenses eliminated in consolidation (1.5 ) (1.7 )
Total operating expenses, net of eliminations $ 1.6
$ .8

~~The following table details the calculation of net income of consolidated T. Rowe Price investment products, net of redeemable non-controlling interests:~~

Three months ended
3/31/2019 3/31/2018
Net investment gains $ 101.9
$ .8
Operating expenses (3.1 ) (2.5 )
Net income 98.8
(1.7 )
Less: net income attributable to redeemable non-controlling interests 41.4
1.8
T. Rowe Price Group's portion of net income $ 57.4
$ (3.5 )



	Three months ended
	3/31/2020		3/31/2019
Adjusted net income attributable to T. Rowe Price Group	$	454.3	$	460.6
Less: adjusted net income allocated to outstanding restricted stock and stock unit holders	12.4		11.6
Adjusted net income allocated to common stockholders	$	441.9	$	449.0

⁽²⁾This non-GAAP adjustment removes the compensation expense from market valuation changes in the supplemental savings plan and the related net gains on investments designated as an economic hedge against the related liability. Amounts deferred under the supplemental savings plan are adjusted for appreciation (depreciation) of hypothetical investments chosen by the employees. Since we economically hedge the exposure to these market movements, we believe it is useful to offset the non-operating investment income earned on the hedges against the related compensation expense and remove the net impact to increase comparability period to period. The following table details the supplemental savings plan related items:

Three months ended
3/31/2019 3/31/2018
Net gains on investments designated as an economic hedge of supplemental savings plan liability $ 31.0
$ 2.9
Compensation expense from market valuation changes in supplemental savings plan liability (36.6 ) (2.4 )
Non-operating income (loss) of investments designated as an economic hedge of supplemental savings plan liability less compensation expense $ (5.6 ) $ .5

⁽³⁾This non-GAAP adjustment represents the other non-operating income and the net gains (losses) earned on our non-consolidated investment portfolio that are not designated as economic hedges of the supplemental savings plan liability, and beginning in the second quarter of 2018, those non-consolidated investments that are not part of the cash and discretionary investment portfolio. We modified the non-GAAP adjustment to exclude the investment gains recognized on our non-consolidated cash and discretionary investments, as the income earned on these assets are considered part of our core operations. The impact on previously reported non-GAAP measures is immaterial. We believe adjusting for these non-operating income items helps the reader's ability to understand our core operating results and increases comparability to prior years. Additionally, we do not emphasize the impact of the portion of non-operating income removed when managing and evaluating our performance.

Three months ended
3/31/2019 3/31/2018
Net gains on investments $ 100.1
$ 14.4
Less: net gains on investments designated as an economic hedge of supplemental savings plan liability 31.0
2.9
Less: net gains earned on cash and discretionary investments 44.2
—
Net gains on remaining non-consolidated investment portfolio $ 24.9
$ 11.5
Other income .8
.9
Total other non-operating income $ 25.7
$ 12.4

⁽⁴⁾The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 25.3% for 2019 and 24.3% for 2018. We estimate that our effective tax rate for the full-year 2019 on a non-GAAP basis will be in the range of 24% to 26%

⁽⁸⁾This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T. Rowe Price Group divided by the weighted-average common shares outstanding assuming dilution.

CAPITAL RESOURCES AND LIQUIDITY.

Sources of Liquidity

Our discretionary investment portfolio is comprised primarily of short duration bond funds, which typically yield higher than money market rates, and asset allocation products. Cash and discretionary investments incurred losses of $61.2 million in the three months ended March 31, 2020, as compared to generating income of $44.2 million in the prior quarter. Cash and discretionary investments in T. Rowe Price products held by our subsidiaries outside the U.S. were ~~$442.0~~$684.3 million at March 31, ~~2019~~2020 and ~~$425.3~~$665.8 million at December 31, ~~2018.~~2019. Given the availability of our financial resources and cash expected to be generated through future operations, we do not maintain an available external source of additional liquidity.

Our seed capital investments are redeemable, although we generally expect to be invested for several years for the products to build an investment performance history and until unrelated third-party investors substantially reduce our relative ownership percentage.

The cash and investment presentation on the unaudited condensed consolidated balance sheet is based on ~~how we account~~the accounting treatment for the cash equivalent or ~~investment.~~investment item. The following table details how T. Rowe Price Group’s interests in cash and investments relate to where they are presented inon the unaudited condensed consolidated balance sheet as of March 31, ~~2019.~~2020.

Net assets of consolidated T. Rowe Price investment products⁽¹⁾

Our unaudited condensed consolidated balance sheet reflects the cash and cash equivalents, investments, other assets and liabilities of those T. Rowe Price investment products we consolidate, as well as redeemable non-controlling interests for the portion of these T. Rowe Price investment products that are held by unrelated third-party investors. Although we can redeem our net interest in these T. Rowe Price investment products at any time, we cannot directly access or sell the assets held by the products to obtain cash for general operations. Additionally, the assets of these T. Rowe Price investment products are not available to our general creditors. Our interest in these

T. Rowe Price investment products was used as initial seed capital and is recategorized as discretionary when it is determined by management that the seed capital is no longer needed. We assess the discretionary investment products and, when we decide to liquidate our interest, we seek to do so in a way as to not impact the product and, ultimately, the unrelated third-party investors.

We increased our quarterly recurring dividend per common share in February ~~2019~~2020 by ~~8.6%~~18.4% to ~~$.76~~$.90 per common share from ~~$.70~~$.76 per common share. Additionally, we expended ~~$229.8~~$887.0 million in the first quarter of ~~2019~~2020 to repurchase ~~2.5~~8.3 million shares, or ~~1.0%~~3.5%, of our outstanding common stock at an average price of ~~$92.83~~$106.43 per share. These dividends and repurchases were expended using existing cash balances and cash generated from

operations. We will generally repurchase our common stock over time to offset the dilution created by our equity-based compensation plans.

Since the end of ~~2016,~~2017, we have returned ~~$3.2~~$4.3 billion to stockholders through stock repurchases and our regular quarterly dividends, as follows:

We anticipate property and equipment expenditures for the full-year ~~2019~~2020 to be about ~~$200~~$230 million, of which about ~~two-thirds~~three-quarters is planned for technology initiatives. We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.

The following table summarizes the cash flows for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, that are attributable to T. Rowe Price Group, our consolidated T. Rowe Price investment products, and the related eliminations required in preparing the statement.

Operating Activities

Operating activities attributable to T. Rowe Price Group during the first quarter of ~~2019~~2020 provided cash flows of ~~$673.4~~$864.0 million ~~a decrease of $49.5 million from the 2018 period. Although net income increased $58.9~~as compared to $673.4 million during the first quarter of ~~2019, adjustments made to net income to arrive at~~2019. Operating cash flows ~~from operating activities~~attributable to T. Rowe Price Group increased $190.6 million as $492.5 million in higher non-cash adjustments, including unrealized investment gains/losses, depreciation, and stock-based compensation expense, more than offset the ~~increase~~$169.5 million decline in net ~~income.~~income from the first quarter of 2019. The ~~most significant adjustment related to~~non-cash adjustments were driven by a ~~$140.3~~$464.2 million change in net investment ~~gains, which was driven by stronger equity markets~~gains/losses as we recognized investment losses in ~~2019~~the first quarter of 2020 compared with ~~2018.~~gains in the first quarter of 2019. The investment losses in 2020, which are added back to net income, were a result of the market disruption caused by the coronavirus pandemic. The majority of the remaining adjustments related to timing differences on the cash settlement of our assets and liabilities, which ~~increased~~decreased cash flows by ~~$34.3~~$132.4 million. Our interim operating cash flows do not include the cash impact of variable compensation that is accrued throughout the year before being substantially paid out in December. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.

Investing Activities

Net cash used in investing activities that are attributable to T. Rowe Price Group totaled ~~$69.2~~$15.0 million in the first quarter of ~~2019~~2020 compared with ~~$524.3~~$69.2 million in the ~~2018~~2019 period. During ~~the first quarter of 2018,~~2020, we ~~rebalanced~~received net proceeds from our ~~cash and~~ discretionary investments ~~portfolio resulting in the reallocation~~ of ~~cash and cash equivalents~~$74.0 million compared to net proceeds of ~~$500.0~~$17.9 million ~~to certain T. Rowe Price funds. During 2019,~~during 2019. In addition, we ~~increased~~decreased our property and equipment expenditures by ~~$11.0~~$1.7 million and ~~increased~~decreased the level of seed capital provided by ~~$12.8~~$4.6 million. Since we consolidate the seed capital in T. Rowe Price investment products, our seed capital was eliminated in preparing our unaudited condensed consolidated statement of cash flows. The ~~remaining $18.7~~remaining$2.6 million change in reported cash ~~used in~~flows from investing activities ~~attributable to T. Rowe Price Group stems from a decrease in net proceeds received in 2019 as compared to 2018~~is related to the ~~purchases and sales of other T. Rowe Price products. The~~ net cash removed from our balance sheet from consolidating and deconsolidating investment ~~products during the first quarter of 2019 compared with 2018 period accounts for the remaining $18.1 million change in reported cash flows from investing activities.~~products.

Financing Activities

Net cash used in financing activities attributable to T. Rowe Price Group were ~~$372.0~~$1,068.4 million in the first quarter of ~~2019~~2020 compared with ~~$419.9~~$372.0 million in the ~~2018~~2019 period. During ~~2019,~~2020, there was a $660.3 million increase in cash paid for common stock repurchases as we repurchased ~~fewer shares of our~~5.8 million more common stock ~~which resulted~~ in the first quarter of 2020 as compared to the first quarter of 2019. Additionally, there was a ~~$60.3~~$30.6 million ~~decrease~~increase in ~~cash used. This decrease~~dividends paid in ~~cash used was offset by~~2020 as a result of an ~~8.6%~~18.4% increase in our quarterly dividend per ~~share, which resulted in paying $9.8 million more in dividends in 2019.~~share. The remaining change in reported cash flows from financing activities is primarily attributable to a ~~$111.8~~$10.1 million increase in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during the first quarter of ~~2019~~2020 compared to the ~~2018~~2019 period.

CRITICAL ACCOUNTING POLICIES.

The preparation of financial statements often requires the selection of specific accounting methods and policies from among several acceptable alternatives. Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our unaudited condensed consolidated balance sheets, the revenues and expenses in our unaudited condensed consolidated statements of income, and the information that is contained in our significant accounting policies and notes to unaudited condensed consolidated financial statements. Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time. Accordingly, actual amounts or future results can differ materially from those estimates that we include currently in our unaudited condensed consolidated financial statements, significant accounting policies, and notes.

There have been no material changes in the critical accounting policies previously identified in our ~~2018~~2019 Annual Report on Form 10-K.

NEWLY-ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.

FORWARD-LOOKING INFORMATION.

From time to time, information or statements provided by or on behalf of T. Rowe Price, including those within this report, may contain certain forward-looking information, including information or anticipated information relating to: our revenues, net income, and earnings per share on common stock; changes in the amount and composition of our assets under management; our expense levels; our tax rate; and our expectations regarding financial markets, future transactions, dividends, stock repurchases, investments, new products and services, capital expenditures, ~~the timing of the assumption of all third party research payments,~~ changes in our effective fee rate, the impact of the coronavirus pandemic, and other market conditions. Readers are cautioned that any forward-looking information provided by or on behalf of T. Rowe Price is not a guarantee of future performance. Actual results may differ materially from those in forward-looking information because of various factors including, but not limited to, those discussed below and in Item 1A, Risk Factors, of this Form 10-Q and our Form 10-K Annual Report for ~~2018.~~2019. Further, forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events.

Our future revenues and results of operations will fluctuate primarily due to changes in the total value and composition of assets under our management. Such changes result from many factors, including, among other things: cash inflows and outflows in the U.S. mutual funds and subadvised and separately managed funds and other investment products, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new mutual funds and investment products, ~~and~~ changes in retirement savings trends relative to participant-directed investments and defined contribution ~~plans.~~plans, and the impact of the recent coronavirus outbreak. The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence; the relative investment performance of the U.S. mutual funds and other managed investment products as compared with competing offerings and market indexes; the ability to maintain our investment management and administrative fees at appropriate levels; competitive conditions in the mutual fund, asset management, and broader financial services sectors; and our level of success in implementing our strategy to expand our business. Our revenues are substantially dependent on fees earned under contracts with the T. Rowe Price funds and could be adversely affected if the independent directors of one or more of the T. Rowe Price funds terminated or significantly altered the terms of the investment management or related administrative services agreements. Non-operating investment income will also fluctuate primarily due to the size of our investments, changes in their market valuations, and any other-than-temporary impairments that may arise or, in the case of our equity method investments, our proportionate share of the investees' net income.

Our future results are also dependent upon the level of our expenses, which are subject to fluctuation for the following or other reasons: changes in the level of our advertising and promotion expenses in response to market conditions, including our efforts to expand our investment advisory business to investors outside the U.S. and to further penetrate our distribution channels within the U.S.; the pace and level of spending to support key strategic priorities; variations in the level of total compensation expense due to, among other things, bonuses, restricted stock units and other equity grants, other incentive awards, our supplemental savings plan, changes in our employee count and mix, and competitive factors; any goodwill or other asset impairment that may arise; fluctuation in foreign currency exchange rates applicable to the costs of our international operations; expenses and capital costs, such as technology assets, depreciation, amortization, and research and development, incurred to maintain and enhance our administrative and operating services infrastructure; the timing of the assumption of all third party research payments, unanticipated costs that may be incurred to protect investor accounts and the goodwill of our clients; and disruptions of services, including those provided by third parties, such as fund and product recordkeeping, facilities, communications, power, and the mutual fund transfer agent and accounting systems.

Our business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on our operations and results, including, but not limited to, effects on costs that we incur and effects on investor interest in T. Rowe Price investment products and investing in general or in particular classes of mutual funds or other investments.

~~There has been no material~~EQUITY PRICE RISK.

During the first quarter of 2020, the impact of the global coronavirus pandemic began to rapidly spread throughout the world and caused increasing disruption to populations, economic activity, and the global financial markets. Since our investments in T. Rowe Price investment products are carried at fair value, these investments are subject

to market risk. The following table presents the equity price risk from our investments in T. Rowe Price investment products. Investments in these products generally moderate market risk as they are diversified and invest in a number of different financial instruments. T. Rowe Price manages its cash and discretionary investments exposure to market risk by diversifying its investments among equity and fixed income portfolios. In addition, investment holdings may be altered from time to time in response to changes in market risks and other factors, as management deems appropriate. We do not actively manage the market risk related to our our seed capital investments.

In order to quantify the sensitivity of our investments to changes in market valuations, we have chosen to use a variant of each product's net asset value to quantify the equity price risk, as we believe the volatility in each product's net asset value best reflects the underlying risk potential as well as the market trends surrounding each of its investment objectives. The potential future loss of value, before any income tax benefits, of these investments at March 31, 2020 was determined by using the lower of each product’s lowest net asset value per share during the first quarter of 2020 or its net asset value per share at March 31, 2020, reduced by 10%. In considering this presentation, it is important to note that: not all products experienced their lowest net asset value per share on the same day; it is likely that the composition of the investment portfolio would be changed if adverse market conditions persisted; and we could experience future losses in excess of those presented below.



(in millions)	Fair value 3/31/2020		Potential lower value		Potential loss
Investments in T. Rowe Price products
Discretionary investments	$	961.9	$	865.6	$	96.3	10	%
Seed capital not consolidated	126.2		112.8		13.4		11	%
Investments designated as an economic hedge of supplemental savings plan liability	500.0		441.6		58.4		12	%
Total	$	1,588.1	$	1,420.0	$	168.1	11	%
Direct investment in consolidated T. Rowe Price investment products
Discretionary investments	$	114.2	$	100.5	$	13.7	12	%
Seed capital	856.2		768.2		88.0		10	%
Total	$	970.4	$	868.7	$	101.7	10	%
Investment partnerships and other investments held at fair value	$	105.5	$	91.7	$	13.8	13	%



(in millions)
Second quarter 2019	$	49.0
Third quarter 2019	48.9
Fourth quarter 2019	43.8
2020	104.6
2021 through 2024	83.2
Total	$	329.5



		Three months ended
Index		3/31/~~2019~~2020
S&P 500 Index		~~13.7%~~(19.6)%
NASDAQ Composite Index⁽¹⁾		~~16.5%~~(14.2)%
Russell 2000 Index		~~14.6%~~(30.6)%
MSCI EAFE (Europe, Australasia, and Far East) Index		~~10.1%~~(22.7)%
MSCI Emerging Markets Index		~~10.0%~~(23.6)%



		Three months ended
Index		3/31/~~2019~~2020
Bloomberg Barclays U.S. Aggregate Bond Index		~~2.9%~~3.2%
JPMorgan Global High Yield Index		~~7.1%~~(14.9)%
Bloomberg Barclays Municipal Bond Index		~~2.9%~~(.6)%
Bloomberg Barclays Global Aggregate Ex-U.S. Dollar Bond Index		~~1.5%~~(2.7)%
JPMorgan Emerging Markets Bond Index Plus		~~6.2%~~(8.7)%


	securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data



(in millions)	3/31/2019
2019 (excluding the first quarter ended March 31, 2019)	$	21.6
2020	29.8
2021	26.7
2022	22.4
2023	19.9
Thereafter	62.9
Total future undiscounted cash flows	183.3
Less: imputed interest to be recognized in lease expense	(21.4		)
Operating lease liabilities, as reported	$	161.9



	Options		Weighted- average exercise price
Outstanding at December 31, 2018	11,300,393		$	69.05
Exercised	(972,655	)	$	60.26
Forfeited	(65,534	)	$	76.57
Expired	(7,807	)	$	59.07
Outstanding at March 31, 2019	10,254,397		$	69.84
Exercisable at March 31, 2019	8,272,310		$	68.24


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.


	Three months ended				Q1 2019 vs. Q1 2018					Three months ended					Q1 2020 vs. Q1 2019
(in millions, except per-share data)	3/31/2019		3/31/2018		$ change			% change		3/31/2020			3/31/2019		$ change			% change
U.S. GAAP basis
Investment advisory fees	$	1,194.2	$	1,189.2	$	5.0		.4	%	$	1,327.8		$	1,194.2	$	133.6		11.2	%
Net revenues	$	1,327.3	$	1,328.0	$	(.7	)	(.1	)%	$	1,462.6		$	1,327.3	$	135.3		10.2	%
Operating expenses	$	794.8	$	744.2	$	50.6		6.8	%	$	755.4		$	794.8	$	(39.4	)	(5.0	)%
Net operating income	$	532.5	$	583.8	$	(51.3	)	(8.8	)%	$	707.2		$	532.5	$	174.7		32.8	%
Non-operating income⁽¹⁾	$	202.8	$	16.1	$	186.7		n/m
Non-operating income (loss)⁽¹⁾										$	(500.3	)	$	202.8	$	(703.1	)	n/m
Net income attributable to T. Rowe Price Group	$	512.6	$	453.7	$	58.9		13.0	%	$	343.1		$	512.6	$	(169.5	)	(33.1	)%
Diluted earnings per common share	$	2.09	$	1.77	$	.32		18.1	%	$	1.41		$	2.09	$	(.68	)	(32.5	)%
Weighted average common shares outstanding assuming dilution	239.6		249.8		(10.2		)	(4.1	)%	236.8			239.6		(2.8		)	(1.2	)%

Adjusted non-GAAP basis⁽²⁾										Adjusted non-GAAP basis⁽²⁾
Operating expenses	$	756.6	$	741.0	$	15.6		2.1	%	$	817.9		$	756.6	$	61.3		8.1	%
Net operating income										$	647.2		$	572.2	$	75.0		13.1	%
Non-operating income (loss)⁽¹⁾										$	(61.2	)	$	44.2	$	(105.4	)	n/m
Net income attributable to T. Rowe Price Group	$	460.6	$	445.6	$	15.0		3.4	%	$	454.3		$	460.6	$	(6.3	)	(1.4	)%
Diluted earnings per common share	$	1.87	$	1.74	$	.13		7.5	%	$	1.87		$	1.87	$	—		—	%

Assets under management (in billions)										Assets under management (in billions)
Average assets under management	$	1,043.5	$	1,025.5	$	18.0		1.8	%	$	1,162.7		$	1,043.5	$	119.2		11.4	%
Ending assets under management	$	1,081.7	$	1,014.2	$	67.5		6.7	%	$	1,008.8		$	1,081.7	$	(72.9	)	(6.7	)%


⁽⁴⁾	The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 22.5% for 2020 and 25.3% for 2019. We estimate that our effective tax rate for the full-year 2020 on a non-GAAP basis will be in the range of 23.5% to 25.5%.


⁽⁵⁾	This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T. Rowe Price Group divided by the weighted-average common shares outstanding assuming dilution. The calculation of adjusted net income allocated to common stockholders is as follows:


(in millions)	Recurring dividend		Stock repurchases		Total cash returned to stockholders		Recurring dividend		Stock repurchases		Total cash returned to stockholders
2017	$	562.6	$	458.1	$	1,020.7
2018	694.7		1,099.6		1,794.3		$	694.7	$	1,099.6	$	1,794.3
Three months ended 3/31/2019	183.8		229.8		413.6
2019							733.6		708.8		1,442.4
Three months ended 3/31/2020							214.7		887.0		1,101.7
Total	$	1,441.1	$	1,787.5	$	3,228.6	$	1,643.0	$	2,695.4	$	4,338.4


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.


Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program
January	1,683,579	$	91.28	1,651,544	12,696,262	264,939	$	129.26	51,645	17,323,402
February	383,634	$	93.56	322,406	22,373,856	1,325,194	$	125.41	1,190,000	16,133,402
March	520,703	$	97.98	501,958	21,871,898	7,100,681	$	103.33	7,092,342	24,041,060
Total	2,587,916	$	92.96	2,475,908		8,690,814	$	107.49	8,333,987


Authorization dates	1/1/2019	Additional shares authorized	Total Number of Shares Purchased		Maximum Number of Shares that May Yet Be Purchased at 3/31/2019
December 2016	4,347,806	—	(2,475,908	)	1,871,898
Authorization Dates						1/1/2020	Additional Shares Authorized	Total Number of Shares Purchased		Maximum Number of Shares that May Yet Be Purchased at 3/31/2020
April 2018	10,000,000	—	—		10,000,000	7,375,047	—	(7,375,047	)	—
February 2019	—	10,000,000	—		10,000,000	10,000,000	—	(958,940	)	9,041,060
March 2020						—	15,000,000	—		15,000,000
	14,347,806	10,000,000	(2,475,908	)	21,871,898	17,375,047	15,000,000	(8,333,987	)	24,041,060



3(i)		Charter of T. Rowe Price Group, Inc., as reflected by Articles of Restatement dated June 20, 2018. (Incorporated by reference from Form 10-Q Quarterly Report filed on July 25, 2018.)

3(ii)		Amended and Restated By-Laws of T. Rowe Price Group, Inc. as of February 12, 2019. (Incorporated by reference from Form 8-K Current Report filed on February 13, 2019.)

15		Letter from KPMG LLP, independent registered public accounting firm, re unaudited interim financial information.

31(i).1		Rule 13a-14(a) Certification of Principal Executive Officer.

31(i).2		Rule 13a-14(a) Certification of Principal Financial Officer.

32		Section 1350 Certifications.

99.1		Earnings release issued April ~~24, 2019,~~28, 2020, reporting our results of operations for the first quarter of ~~2019.~~2020.

101		The following series of unaudited XBRL-formatted documents are collectively included herewith as Exhibit 101. The financial information is extracted from T. Rowe Price Group’s unaudited condensed consolidated interim financial statements and notes that are included in this Form 10-Q Report.

101.INS		~~101.INS~~ XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		~~101.SCH~~ XBRL Taxonomy Extension Schema Document

101.CAL		~~101.CAL~~ XBRL Taxonomy Calculation Linkbase Document

101.LAB		~~101.LAB~~ XBRL Taxonomy Label Linkbase Document

101.PRE		~~101.PRE~~ XBRL Taxonomy Presentation Linkbase Document

101.DEF		~~101.DEF~~ XBRL Taxonomy Definition Linkbase Document