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 ~~September 30, 2019~~March 31, 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, Maryland 21202

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

(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. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. ☒ 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 filer	☒	Accelerated filer	☐
Non-accelerated filer (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 ☒ No

The number of shares outstanding of the issuer’s common stock ($.20 par value), as of the latest practicable date, ~~October 22, 2019,~~April 24, 2020, is ~~233,677,334.~~227,548,883.

The exhibit index is at Item 6 on page ~~40.~~36.

PART I – FINANCIAL INFORMATION


Item 1.	Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	9/30/2019			12/31/2018			3/31/2020			12/31/2019
ASSETS
Cash and cash equivalents	$	2,213.2		$	1,425.2		$	1,562.4		$	1,781.8
Accounts receivable and accrued revenue	620.6			549.6			585.3			646.6
Investments	2,605.9			2,453.4			2,731.3			2,939.8
Assets of consolidated T. Rowe Price investment products ($1,983.7 million at September 30, 2019 and $1,392.6 million at December 31, 2018, related to variable interest entities)	2,247.4			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	111.3			—			137.6			110.8
Property and equipment, net	678.8			661.3			675.2			674.4
Goodwill	665.7			665.7			665.7			665.7
Other assets	254.9			253.7			255.1			234.4
Total assets	$	9,397.8		$	7,689.3		$	8,636.9		$	9,330.4

LIABILITIES
Accounts payable and accrued expenses	$	203.3		$	228.5		$	198.5		$	214.5
Liabilities of consolidated T. Rowe Price investment products ($69.8 million at September 30, 2019 and $22.7 million at December 31, 2018, related to variable interest entities)	80.4			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	146.4			—			172.6			146.3
Accrued compensation and related costs	534.0			123.3			215.4			112.1
Supplemental savings plan liability	441.8			380.0			504.2			563.4
Income taxes payable	49.2			54.2			58.3			31.8
Total liabilities	1,455.1			824.7			1,231.9			1,107.3

Commitments and contingent liabilities

Redeemable non-controlling interests	1,102.9			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 234,702,000 shares at September 30, 2019 and 238,069,000 at December 31, 2018	46.9			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	654.6			654.6			654.6			654.6
Retained earnings	6,187.0			5,464.1			5,782.9			6,443.5
Accumulated other comprehensive loss	(48.7		)	(42.0		)	(49.1		)	(43.0		)
Total permanent stockholders’ equity	6,839.8			6,124.3			6,434.0			7,102.1
Total liabilities, redeemable non-controlling interests, and permanent stockholders’ equity	$	9,397.8		$	7,689.3		$	8,636.9		$	9,330.4

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)


	Three months ended						Nine months ended					Three months ended
	9/30/2019			9/30/2018			9/30/2019		9/30/2018			3/31/2020			3/31/2019
Revenues
Investment advisory fees	$	1,303.4		$	1,263.3		$	3,767.8	$	3,666.9		$	1,327.8		$	1,194.2
Administrative, distribution, and servicing fees	123.3			131.3			381.4		400.7			134.8			133.1
Net revenues	1,426.7			1,394.6			4,149.2		4,067.6			1,462.6			1,327.3

Operating expenses
Compensation and related costs	466.3			454.3			1,441.0		1,351.7			440.7			491.5
Distribution and servicing	64.5			71.4			195.3		213.3			65.7			66.4
Advertising and promotion	17.1			20.2			58.5		63.8			24.9			21.6
Product-related costs	38.0			37.9			115.6		117.1			41.6			44.2
Technology, occupancy, and facility costs	106.5			96.5			309.5		283.8			105.4			98.1
General, administrative, and other	75.2			73.7			222.6		218.8			77.1			73.0
Total operating expenses	767.6			754.0			2,342.5		2,248.5			755.4			794.8

Net operating income	659.1			640.6			1,806.7		1,819.1			707.2			532.5

Non-operating income
Net gains on investments	32.1			116.1			194.0		147.9
Net gains on consolidated investment products	11.6			8.7			176.3		28.6
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)	(.7		)	.1			—		(1.4		)	(15.4		)	.8
Total non-operating income	43.0			124.9			370.3		175.1
Total non-operating income (loss)												(500.3		)	202.8

Income before income taxes	702.1			765.5			2,177.0		1,994.2			206.9			735.3
Provision for income taxes	157.0			183.9			522.0		497.5			40.3			181.3
Net income	545.1			581.6			1,655.0		1,496.7			166.6			554.0
Less: net income (loss) attributable to redeemable non-controlling interests	(.8		)	(1.4		)	69.0		11.1			(176.5		)	41.4
Net income attributable to T. Rowe Price Group	$	545.9		$	583.0		$	1,586.0	$	1,485.6		$	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											Earnings per share on common stock of T. Rowe Price Group
Basic	$	2.26		$	2.34		$	6.55	$	5.97		$	1.43		$	2.11
Diluted	$	2.23		$	2.30		$	6.47	$	5.85		$	1.41		$	2.09

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Three months ended						Nine months ended						Three months ended
	9/30/2019			9/30/2018			9/30/2019			9/30/2018			3/31/2020			3/31/2019
Net income	$	545.1		$	581.6		$	1,655.0		$	1,496.7		$	166.6		$	554.0
Other comprehensive income (loss)
Currency translation adjustments
Consolidated T. Rowe Price investment products - variable interest entities	(30.1		)	(5.8		)	(32.2		)	(29.6		)	(25.1		)	(5.8		)
Reclassification gains recognized in non-operating income upon deconsolidation of certain T. Rowe Price investment products	.1			—			(.1		)	(3.6		)	(.1		)	(.1		)
Total currency translation adjustments of consolidated T. Rowe Price investment products - variable interest entities	(30.0		)	(5.8		)	(32.3		)	(33.2		)	(25.2		)	(5.9		)
Equity method investments	(1.0		)	(7.1		)	5.4			(6.6		)	(.1		)	4.9
Other comprehensive income (loss) before income taxes	(31.0		)	(12.9		)	(26.9		)	(39.8		)
Net deferred tax benefits (income taxes)	3.4			2.3			2.5			5.8
Total other comprehensive income (loss)	(27.6		)	(10.6		)	(24.4		)	(34.0		)
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	517.5			571.0			1,630.6			1,462.7			143.3			553.1
Less: comprehensive income (loss) attributable to redeemable non-controlling interests	(18.2		)	(4.7		)	51.3			(5.7		)	(193.7		)	40.1
Total comprehensive income attributable to T. Rowe Price Group	$	535.7		$	575.7		$	1,579.3		$	1,468.4		$	337.0		$	513.0

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Nine months ended						Three months ended
	9/30/2019			9/30/2018			3/31/2020			3/31/2019
Cash flows from operating activities
Net income	$	1,655.0		$	1,496.7		$	166.6		$	554.0
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	131.7			114.9			46.1			41.9
Stock-based compensation expense	136.1			135.3			58.3			43.5
Net gains recognized on investments	(137.3		)	(106.2		)
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	(20.5		)	(14.4		)	(8.9		)	(18.2		)
Net change in securities held by consolidated T. Rowe Price investment products	(688.1		)	(578.3		)	234.6			(184.2		)
Other changes in assets and liabilities	423.8			438.4			123.7			223.7
Net cash provided by operating activities	1,500.7			1,486.4			787.7			578.7

Cash flows from investing activities
Purchases of T. Rowe Price investment products	(35.0		)	(1,118.7		)	(225.1		)	(15.6		)
Dispositions of T. Rowe Price investment products	112.0			343.6			299.1			33.5
Net cash of T. Rowe Price investment products on consolidation (deconsolidation)	(8.3		)	(22.5		)
Net cash of T. Rowe Price investment products on deconsolidation							(.8		)	(3.4		)
Additions to property and equipment	(148.9		)	(121.5		)	(46.0		)	(47.7		)
Other investing activity	3.5			88.7			.4			(.6		)
Net cash used in investing activities	(76.7		)	(830.4		)
Net cash provided by (used in) investing activities							27.6			(33.8		)

Cash flows from financing activities
Repurchases of common stock	(576.0		)	(543.0		)	(891.3		)	(231.0		)
Common share issuances under stock-based compensation plans	116.3			116.0			38.1			43.6
Dividends paid to common stockholders of T. Rowe Price Group	(550.4		)	(522.3		)	(215.2		)	(184.6		)
Net subscriptions received from redeemable non-controlling interest holders	387.1			486.2			76.1			66.0
Net cash used in financing activities	(623.0		)	(463.1		)	(992.3		)	(306.0		)

Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	(2.2		)	(2.4		)	(1.2		)	(.7		)

Net change in cash and cash equivalents during period	798.8			190.5			(178.2		)	238.2
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 $80.9 million at September 30, 2019, and $105.7 million at September 30, 2018, held by consolidated T. Rowe Price investment products	$	2,294.1		$	2,196.3
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

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(shares in thousands; dollars in millions)


	Three months ended 9/30/2019																				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			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 June 30, 2019	235,518		$	47.1		$	654.6		$	5,915.9		$	(38.5	)	$	6,579.1		$	1,012.3
Balances at December 31, 2019																					235,214		$	47.0		$	654.6		$	6,443.5		$	(43.0	)	$	7,102.1		$	1,121.0
Net income	—		—			—			545.9			—			545.9			(.8		)	—		—			—			343.1			—			343.1			(176.5		)
Other comprehensive income (loss), net of tax	—		—			—			—			(10.2		)	(10.2		)	(17.4		)
Dividends declared ($0.76 per share)	—		—			—			(182.7		)	—			(182.7		)	—
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	782		.1			36.4			—			—			36.5			—			1,068		.2			41.1			—			—			41.3			—
Restricted shares issued, net of shares withheld for taxes	—		—			—			—			—			—			—
Net shares issued upon vesting of restricted stock units	18		—			(1.2		)	—			—			(1.2		)	—			37		—			(3.0		)	—			—			(3.0		)	—
Forfeiture of restricted awards	(3	)	—			—			—			—			—			—
Stock-based compensation expense	—		—			45.5			—			—			45.5			—			—		—			58.3			—			—			58.3			—
Restricted stock units issued as dividend equivalents	—		—			—			—			—			—			—			—		—			.1			(.1		)	—			—			—
Common shares repurchased	(1,613	)	(.3		)	(80.7		)	(92.1		)	—			(173.1		)	—			(8,334	)	(1.6		)	(96.5		)	(788.9		)	—			(887.0		)	—
Net subscriptions into T. Rowe Price investment products	—		—			—			—			—			—			181.1			—		—			—			—			—			—			63.8
Net deconsolidations of T. Rowe Price investment products	—		—			—			—			—			—			(72.3		)	—		—			—			—			—			—			(20.1		)
Balances at September 30, 2019	234,702		$	46.9		$	654.6		$	6,187.0		$	(48.7	)	$	6,839.8		$	1,102.9
Balances at March 31, 2020																					227,985		$	45.6		$	654.6		$	5,782.9		$	(49.1	)	$	6,434.0		$	971.0

	Three months ended 9/30/2018																				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 June 30, 2018	243,180		$	48.6		$	654.6		$	5,435.1		$	(23.7	)	$	6,114.6		$	739.2
Balances at December 31, 2018																					238,069		$	47.6		$	654.6		$	5,464.1		$	(42.0	)	$	6,124.3		$	740.3
Net income	—		—			—			583.0			—			583.0			(1.4		)	—		—			—			512.6			—			512.6			41.4
Other comprehensive income (loss), net of tax	—		—			—			—			(7.3		)	(7.3		)	(3.3		)	—		—			—			—			.4			.4			(1.3		)
Dividends declared ($0.70 per share)	—		—			—			(173.7		)	—			(173.7		)	—
Dividends declared ($0.76 per share)																					—		—			—			(183.8		)	—			(183.8		)	—
Shares issued upon option exercises	529		.2			24.9			—			—			25.1			—			830		.2			44.8			—			—			45.0			—
Net shares issued upon vesting of restricted stock units	15		—			(1.2		)	—			—			(1.2		)	—			14		—			(1.2		)	—			—			(1.2		)	—
Forfeiture of restricted awards	(2	)	—			—			—			—			—			—			(5	)	—			—			—			—			—			—
Stock-based compensation expense	—		—			44.5			—			—			44.5			—			—		—			43.5			—			—			43.5			—
Common shares repurchased	(1,123	)	(.3		)	(68.3		)	(55.9		)	—			(124.5		)	—			(2,476	)	(.5		)	(87.2		)	(142.1		)	—			(229.8		)	—
Net subscriptions into T. Rowe Price investment products	—		—			—			—			—			—			145.9			—		—			—			—			—			—			85.9
Net reconsolidations of T. Rowe Price investment products	—		—			—			—			—			—			(19.8		)	—		—			—			—			—			—			20.4
Balances at September 30, 2018	242,599		$	48.5		$	654.5		$	5,788.5		$	(31.0	)	$	6,460.5		$	860.6
Balances at March 31, 2019																					236,432		$	47.3		$	654.5		$	5,650.8		$	(41.6	)	$	6,311.0		$	886.7

⁽¹⁾ Accumulated other comprehensive income.

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(shares in thousands; dollars in millions)~~

Nine months ended 9/30/2019
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
Net income —
—
—
1,586.0
—
1,586.0
69.0
Other comprehensive income (loss), net of tax —
—
—
—
(6.7 ) (6.7 ) (17.7 )
Dividends declared ($2.28 per share) —
—
—
(549.9 ) —
(549.9 ) —
Shares issued upon option exercises 2,277
.4
118.9
—
—
119.3
—
Restricted shares issued, net of shares withheld for taxes 7
—
(.1 ) —
—
(.1 ) —
Shares issued upon vesting of restricted stock units, net of shares withheld for taxes 51
—
(2.6 ) —
—
(2.6 ) —
Forfeiture of restricted awards (10 ) —
—
—
—
—
—
Stock-based compensation expense —
—
136.2
—
—
136.2
—
Restricted stock units issued as dividend equivalents —
—
.1
(.1 ) —
—
—
Common shares repurchased (5,692 ) (1.1 ) (252.5 ) (313.1 ) —
(566.7 ) —
Net subscriptions into T. Rowe Price investment products —
—
—
—
—
—
392.7
Net deconsolidations of T. Rowe Price investment products —
—
—
—
—
—
(81.4 )
Balances at September 30, 2019 234,702
$ 46.9
$ 654.6
$ 6,187.0
$ (48.7 ) $ 6,839.8
$ 1,102.9

Nine months ended 9/30/2018
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 AOCI guidance⁽²⁾
—
—
—
22.4
(7.9 ) 14.5
—
Reclassification adjustment of stranded tax benefits on currency translation adjustments upon adoption of AOCI guidance —
—
—
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 —
—
—
1,485.6
—
1,485.6
11.1
Other comprehensive income (loss), net of tax —
—
—
—
(17.2 ) (17.2 ) (16.8 )
Dividends declared ($2.10 per share) —
—
—
(522.5 ) —
(522.5 ) —
Shares issued upon option exercises 2,770
.6
116.6
—
—
117.2
—
Restricted shares issued, net of shares withheld for taxes 8
—
(.1 ) —
—
(.1 ) —
Shares issued upon vesting of restricted stock units, net of shares withheld for taxes 71
—
(1.9 ) —
—
(1.9 ) —
Forfeiture of restricted awards (8 ) —
—
—
—
—
—
Stock-based compensation expense —
—
135.3
—
—
135.3
—
Restricted stock units issued as dividend equivalents —
—
.1
(.1 ) —
—
—
Common shares repurchased (5,353 ) (1.1 ) (441.6 ) (132.1 ) —
(574.8 ) —
Net subscriptions into T. Rowe Price investment products —
—
—
—
—
—
468.5
Net deconsolidations of T. Rowe Price investment products —
—
—
—
—
—
(595.0 )
Balances at September 30, 2018 242,599
$ 48.5
$ 654.5
$ 5,788.5
$ (31.0 ) $ 6,460.5
$ 860.6

⁽¹⁾~~Accumulated other comprehensive income.~~

⁽²⁾Includes the reclassification of $1.7 million of stranded income taxes on available-for-sale 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 non-cash investing activity that affected the amount reported in other changes in assets and liabilities in 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. This update provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is 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 will adopt this updateContract on January 1, 2020 using the prospective method of adoption. ~~We expect~~This update 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 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 costs incurred in a cloud computing arrangement. Accordingly, the adoption of this ~~standard will~~guidance did not have a material impact 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 8~~

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 substantially obtain 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 liability less 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. Sinceoperations, but we do not have any outstanding borrowings, we estimate our incremental borrowing rate using an 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 to measure the lease liability of our real estate operating leases by combining the lease and non-lease components into one single lease component. As such, we included the fixed payments and any payments that depend on a rate or index related to our lease and non-lease components in measuring 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 97

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

Revenues earned during the ~~three-~~first quarter of 2020 and ~~nine-month periods ended September 30,~~ 2019 ~~and 2018~~ under agreements with clients include:


	Three months ended 9/30/2019								Three months ended 9/30/2018								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	$	881.0	$	69.0	$	30.1	$	980.1	$	877.3	$	72.3	$	34.6	$	984.2	$	876.2	$	77.2	$	27.9	$	981.3	$	815.9	$	76.6	$	30.2	$	922.7
Subadvised and separate accounts and other investment products	422.4		—		—		422.4		386.0		—		—		386.0		451.6		—		—		451.6		378.3		—		—		378.3
Other clients	—		24.2		—		24.2		—		24.4		—		24.4		—		29.7		—		29.7		—		26.3		—		26.3
	$	1,303.4	$	93.2	$	30.1	$	1,426.7	$	1,263.3	$	96.7	$	34.6	$	1,394.6	$	1,327.8	$	106.9	$	27.9	$	1,462.6	$	1,194.2	$	102.9	$	30.2	$	1,327.3

	Nine months ended 9/30/2019								Nine months ended 9/30/2018
			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
U.S. mutual funds	$	2,557.6	$	215.3	$	90.4	$	2,863.3	$	2,557.1	$	228.5	$	106.7	$	2,892.3
Subadvised and separate accounts and other investment products	1,210.2		—		—		1,210.2		1,109.8		—		—		1,109.8
Other clients	—		75.7		—		75.7		—		65.5		—		65.5
	$	3,767.8	$	291.0	$	90.4	$	4,149.2	$	3,666.9	$	294.0	$	106.7	$	4,067.6

Total net revenues earned from our related parties, specifically T. Rowe Price investment products, aggregate ~~$1,180.9~~$1,207.7 million and ~~$1,151.5~~$1,093.4 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively. Total net revenues earned during the nine months ended September 30, 2019 and 2018 aggregate $3,421.9 million and $3,366.9 million,~~ respectively. Accounts receivable from these products aggregate to ~~$405.3~~$374.3 million at ~~September 30, 2019,~~March 31, 2020, and ~~$354.8~~$424.8 million at December 31, ~~2018.~~2019.

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


	Three months ended				Nine months ended				Three months ended
(in millions)	9/30/2019		9/30/2018		9/30/2019		9/30/2018		3/31/2020		3/31/2019
U.S. mutual funds
Equity and blended assets	$	754.0	$	745.5	$	2,185.3	$	2,169.0	$	749.8	$	694.5
Fixed income, including money market	127.0		131.8		372.3		388.1		126.4		121.4
	881.0		877.3		2,557.6		2,557.1		876.2		815.9
Subadvised and separate accounts and other investment products
Equity and blended assets	355.5		326.0		1,020.4		931.0		385.2		318.8
Fixed income, including money market	66.9		60.0		189.8		178.8		66.4		59.5
	422.4		386.0		1,210.2		1,109.8		451.6		378.3
Total	$	1,303.4	$	1,263.3	$	3,767.8	$	3,666.9	$	1,327.8	$	1,194.2

~~Page 10~~

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


	Average during				Average during								Average during
	Three months ended				Nine months ended				As of				three months ended				As of
(in billions)	9/30/2019		9/30/2018		9/30/2019		9/30/2018		9/30/2019		12/31/2018		3/31/2020		3/31/2019		3/31/2020		12/31/2019
U.S. mutual funds
Equity and blended assets	$	521.3	$	511.6	$	507.5	$	500.8	$	513.0	$	441.1	$	525.0	$	487.6	$	443.6	$	552.4
Fixed income, including money market	129.2		129.9		125.7		128.6		129.6		123.4		129.3		122.5		118.7		130.3
	650.5		641.5		633.2		629.4		642.6		564.5		654.3		610.1		562.3		682.7
Subadvised and separate accounts and other investment products
Equity and blended assets	370.2		331.8		353.3		318.4		373.4		299.2		396.3		332.9		340.9		412.1
Fixed income, including money market	109.5		99.1		105.0		97.2		110.3		98.6		112.1		100.5		105.6		112.0
	479.7		430.9		458.3		415.6		483.7		397.8		508.4		433.4		446.5		524.1
Total	$	1,130.2	$	1,072.4	$	1,091.5	$	1,045.0	$	1,126.3	$	962.3	$	1,162.7	$	1,043.5	$	1,008.8	$	1,206.8

Investors that we serve are primarily domiciled in the U.S.; investment advisory clients outside the U.S. account for ~~6.5%~~7.4% and ~~6.2%~~6.9% of our assets under management at ~~September 30, 2019,~~March 31, 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)	9/30/2019		12/31/2018		3/31/2020		12/31/2019
Investments held at fair value
T. Rowe Price investment products	$	1,568.0	$	1,538.4	$	1,088.1	$	1,402.9
T. Rowe Price investment products designated as an economic hedge of supplemental savings plan liability	443.0		381.3		500.0		561.1
Investment partnerships and other investments	103.2		99.6		105.5		99.7
Equity method investments
T. Rowe Price investment products	320.7		276.2		864.5		705.6
26% interest in UTI Asset Management Company Limited (India)	165.0		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	$	2,605.9	$	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 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- and nine-months~~three months ended ~~September 30, 2019,~~March 31, 2020, net ~~gains~~losses on investments included ~~$4.8 million and $84.2~~$103.6 million of net unrealized ~~gains~~losses related to investments held at fair value that were still held at ~~September 30, 2019.~~March 31, 2020. For the ~~three- and nine-months ended September 30, 2018,~~same period of 2019, the net gains on investments included ~~$11.3~~$50.6 million ~~and $17.4 million, respectively,~~ of net unrealized gains on investments held at fair value that were still held at ~~September 30, 2018.~~March 31, 2019.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ 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 ~~nine~~three months ended ~~September 30,~~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

~~Page 11~~

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						Nine months ended						Three months ended
(in millions)	9/30/2019			9/30/2018			9/30/2019			9/30/2018			3/31/2020			3/31/2019
Net increase (decrease) in assets of consolidated T. Rowe Price investment products	$	(113.5	)	$	(41.1	)	$	(169.6	)	$	(701.5	)	$	(46.2	)	$	12.3
Net increase (decrease) in liabilities of consolidated T. Rowe Price investment products	$	(9.8	)	$	(.6	)	$	(11.0	)	$	17.9
Net decrease in liabilities of consolidated T. Rowe Price investment products													$	(2.4	)	$	(.9	)
Net increase (decrease) in redeemable non-controlling interests	$	(72.3	)	$	(19.8	)	$	(81.4	)	$	(595.0	)	$	(20.1	)	$	20.4

Gains (losses) recognized upon deconsolidation	$	(.1	)	$	—		$	.1		$	3.6
Gains recognized upon deconsolidation													$	.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).

During the third quarter of 2018, we sold our 10% holding in Daiwa SB Investments Ltd. The realized gain was recognized in net gains on investments on our unaudited condensed consolidated statement of income and represents the majority of the reason why non-operating income is lower for the three- and nine-month periods ended September 30, 2019, than the corresponding periods in 2018.

Page 9

VARIABLE INTEREST ENTITIES.

Our investments at ~~September 30, 2019~~March 31, 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)	9/30/2019		12/31/2018		3/31/2020		12/31/2019
Investment carrying values	$	137.7	$	143.3	$	129.4	$	156.0
Unfunded capital commitments	19.3		27.3		15.6		18.1
Uncollected investment advisory and administrative fees	16.8		5.2		7.1		10.5
	$	173.8	$	175.8	$	152.1	$	184.6

The unfunded capital commitments totaling ~~$19.3~~$15.6 million and ~~$27.3~~$18.1 million at ~~September 30, 2019~~March 31, 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


	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. 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.

~~Page 12~~


	9/30/2019				12/31/2018				3/31/2020				12/31/2019
(in millions)	Level 1		Level 2		Level 1		Level 2		Level 1		Level 2		Level 1		Level 2
Cash equivalents held in T. Rowe Price money market funds	$	1,921.2	$	—	$	1,196.0	$	—	$	1,164.9	$	—	$	1,355.6	$	—
T. Rowe Price investment products	1,560.1		7.9		1,519.2		19.2		1,075.7		12.4		1,393.0		9.9
T. Rowe Price investment products designated as economic hedge of supplemental savings plan liability	443.0		—		381.3		—
T. Rowe Price investment products designated as an economic hedge of supplemental savings plan liability									500.0		—		561.1		—
Total	$	3,924.3	$	7.9	$	3,096.5	$	19.2	$	2,740.6	$	12.4	$	3,309.7	$	9.9

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 ~~$103.2~~$105.5 million at ~~September 30, 2019~~March 31, 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.

Page 10

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


	9/30/2019						12/31/2018						3/31/2020						12/31/2019
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Cash and cash equivalents⁽¹⁾	$	11.5	$	69.4	$	80.9	$	18.5	$	51.6	$	70.1	$	23.1	$	94.6	$	117.7	$	9.9	$	66.6	$	76.5
Investments⁽²⁾	246.1		1,883.8		2,129.9		261.3		1,322.7		1,584.0		197.3		1,641.3		1,838.6		281.1		1,891.3		2,172.4
Other assets	6.1		30.5		36.6		8.0		18.3		26.3		8.1		59.9		68.0		10.6		17.4		28.0
Total assets	263.7		1,983.7		2,247.4		287.8		1,392.6		1,680.4		228.5		1,795.8		2,024.3		301.6		1,975.3		2,276.9
Liabilities	10.6		69.8		80.4		16.0		22.7		38.7		10.9		72.0		82.9		12.2		27.0		39.2
Net assets	$	253.1	$	1,913.9	$	2,167.0	$	271.8	$	1,369.9	$	1,641.7	$	217.6	$	1,723.8	$	1,941.4	$	289.4	$	1,948.3	$	2,237.7

Attributable to T. Rowe Price Group	$	178.3	$	885.8	$	1,064.1	$	175.3	$	726.1	$	901.4	$	155.0	$	815.4	$	970.4	$	199.6	$	917.1	$	1,116.7
Attributable to redeemable non-controlling interests	74.8		1,028.1		1,102.9		96.5		643.8		740.3		62.6		908.4		971.0		89.8		1,031.2		1,121.0
	$	253.1	$	1,913.9	$	2,167.0	$	271.8	$	1,369.9	$	1,641.7	$	217.6	$	1,723.8	$	1,941.4	$	289.4	$	1,948.3	$	2,237.7

⁽¹⁾Cash and cash equivalents includes ~~$10.2~~$22.5 million and ~~$18.5~~$9.1 million at ~~September 30, 2019~~March 31, 2020, and December 31, ~~2018,~~2019, respectively, of T. Rowe Price money market mutual funds.

⁽²⁾Investments includes ~~$38.2~~$35.3 million and ~~$43.8~~$40.2 million at ~~September 30, 2019~~March 31, 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.

~~Page 13~~

The operating results of the consolidated T. Rowe Price investment products for the ~~three-~~three months ended March 31, 2020 and ~~nine-months ended September 30,~~ 2019, ~~and 2018~~ are reflected in our unaudited condensed consolidated statements of income as follows:

Three months ended
9/30/2019 9/30/2018
(in millions) Voting interest entities Variable interest entities Total Voting interest entities Variable interest entities Total
Operating expenses reflected in net operating income $ (.6 ) $ (3.1 ) $ (3.7 ) $ (.6 ) $ (3.0 ) $ (3.6 )
Net investment income reflected in non-operating income 1.5
10.1
11.6
5.0
3.7
8.7
Impact on income before taxes $ .9
$ 7.0
$ 7.9
$ 4.4
$ .7
$ 5.1

Net income attributable to T. Rowe Price Group $ .7
$ 8.0
$ 8.7
$ 2.8
$ 3.7
$ 6.5
Net income (loss) attributable to redeemable non-controlling interests .2
(1.0 ) (.8 ) 1.6
(3.0 ) (1.4 )
$ .9
$ 7.0
$ 7.9
$ 4.4
$ .7
$ 5.1


	Nine months ended																		Three months ended
	9/30/2019									9/30/2018									3/31/2020									3/31/2019
(in millions)	Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total
Operating expenses reflected in net operating income	$	(1.6	)	$	(9.0	)	$	(10.6	)	$	(1.3	)	$	(7.9	)	$	(9.2	)	$	(.2	)	$	(3.5	)	$	(3.7	)	$	(.3	)	$	(2.8	)	$	(3.1	)
Net investment income reflected in non-operating income	20.9			155.4			176.3			4.4			24.2			28.6
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	$	19.3		$	146.4		$	165.7		$	3.1		$	16.3		$	19.4		$	(35.4	)	$	(298.6	)	$	(334.0	)	$	7.7		$	91.1		$	98.8

Net income attributable to T. Rowe Price Group	$	14.6		$	82.1		$	96.7		$	1.5		$	6.8		$	8.3
Net income attributable to redeemable non-controlling interests	4.7			64.3			69.0			1.6			9.5			11.1
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
	$	19.3		$	146.4		$	165.7		$	3.1		$	16.3		$	19.4		$	(35.4	)	$	(298.6	)	$	(334.0	)	$	7.7		$	91.1		$	98.8

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 ~~$2.6~~$2.5 million and $1.5 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, against the investment advisory and administrative fees earned from these products. ~~Operating expenses eliminated for the nine months ended September 30, 2019 and 2018, were $6.3 million and $4.6 million, respectively.~~ The net investment income (loss) reflected in ~~non-operating~~non-

Page 11

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.

~~Page 14~~

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 ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.


	Nine months ended																		Three months ended
	9/30/2019									9/30/2018									3/31/2020									3/31/2019
(in millions)	Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total			Voting interest entities			Variable interest entities			Total
Net cash provided by operating activities	$	(15.1	)	$	(508.4	)	$	(523.5	)	$	(40.7	)	$	(529.7	)	$	(570.4	)	$	11.3		$	(87.0	)	$	(75.7	)	$	(28.7	)	$	(65.0	)	$	(93.7	)
Net cash used in investing activities	(7.4		)	(.9		)	(8.3		)	(.8		)	(21.7		)	(22.5		)
Net cash provided by (used in) investing activities																			(.8		)	—			(.8		)	(5.1		)	1.7			(3.4		)
Net cash used in financing activities	15.5			529.3			544.8			52.3			545.6			597.9			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	—			(2.2		)	(2.2		)	—			(2.4		)	(2.4		)	—			(1.2		)	(1.2		)	—			(.7		)	(.7		)
Net change in cash and cash equivalents during period	(7.0		)	17.8			10.8			10.8			(8.2		)	2.6			13.2			28.0			41.2			(2.2		)	8.2			6.0
Cash and cash equivalents at beginning of year	18.5			51.6			70.1			7.1			96.0			103.1			9.9			66.6			76.5			18.5			51.6			70.1
Cash and cash equivalents at end of period	$	11.5		$	69.4		$	80.9		$	17.9		$	87.8		$	105.7		$	23.1		$	94.6		$	117.7		$	16.3		$	59.8		$	76.1

The net cash provided by financing activities during the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ includes ~~$157.7~~$42.8 million and ~~$111.7~~$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.

These levels are not necessarily an indication of the risk or liquidity associated with these investment holdings. The following table summarizes the investment holdings held by our consolidated T. Rowe Price investment products using fair value measurements determined based on the differing levels of inputs.


	9/30/2019						12/31/2018						3/31/2020						12/31/2019
(in millions)	Level 1			Level 2			Level 1			Level 2			Level 1			Level 2			Level 1			Level 2
Assets
Cash equivalents	$	10.2		$	—		$	19.3		$	—		$	22.5		$	—		$	9.1		$	1.1
Equity securities	168.2			616.0			189.6			483.5			149.9			548.3			162.8			724.5
Fixed income securities	—			1,319.3			—			890.2			—			1,097.9			—			1,248.6
Other investments	1.4			25.0			1.7			19.0			3.3			39.2			2.7			33.8
	$	179.8		$	1,960.3		$	210.6		$	1,392.7		$	175.7		$	1,685.4		$	174.6		$	2,008.0

Liabilities	$	(.7	)	$	(9.2	)	$	(.8	)	$	(12.8	)	$	(2.3	)	$	(31.9	)	$	(.4	)	$	(11.2	)

Page 1512

~~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 September 30, 2019, the weighted-average remaining lease term on our leases is approximately 7.0 years and the weighted-average discount rate used to measure the lease liabilities is 3.5%.

Operating lease expense for the three months ended September 30, 2019 and 2018, was $7.1 million and $6.3 million, respectively. Operating lease expense for the nine months ended September 30, 2019 and 2018, was $22.9 million and $20.9 million, respectively. Charges related to our operating leases that are variable, including variable common area maintenance charges and other management-related costs, and not included in the measurement of the lease liabilities, were $2.2 million for the three months ended September 30, 2019 and $7.4 million for the nine months ended September 30, 2019.

We made lease payments of $22.7 million during the nine months ended September 30, 2019. Our future undiscounted cash flows related to our operating leases and the reconciliation to the operating lease liability as of September 30, 2019, are as follows:

(in millions) 9/30/2019
Fourth quarter 2019 $ 6.8
2020 26.1
2021 25.6
2022 22.8
2023 20.3
Thereafter 63.4
Total future undiscounted cash flows 165.0
Less: imputed interest to be recognized in lease expense (18.6 )
Operating lease liabilities, as reported $ 146.4

NOTE 76 – STOCKHOLDERS’ EQUITY.

Accounts payable and accrued expenses includes liabilities of ~~$9.2~~$7.9 million at March 31, 2020, and $12.2 million at December 31, ~~2018,~~2019, for common stock repurchases that settled during the first week of April 2020 and January ~~2019.~~2020, respectively.

NOTE 87 – STOCK-BASED COMPENSATION.

STOCK OPTIONS.

The following table summarizes the status of, and changes in, our stock options during the ~~nine~~three months ended ~~September 30, 2019.~~ March 31, 2020.

Options
Weighted-
average
exercise
price
Outstanding at December 31, 2018 11,300,393
$ 69.05
Exercised (2,847,972 ) $ 63.58
Forfeited (114,822 ) $ 76.70
Expired (7,839 ) $ 59.03
Outstanding at September 30, 2019 8,329,760
$ 70.83
Exercisable at September 30, 2019 6,410,125
$ 69.12



	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

~~Page 16~~

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 ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.


	Restricted shares		Restricted stock units		Weighted-average fair value		Restricted shares	Restricted stock units		Weighted-average fair value
Nonvested at December 31, 2018	136,964		6,603,920		$	87.07
Nonvested at December 31, 2019							7,404	6,718,261		$	98.75
Time-based grants	7,404		55,872		$	103.45	—	15,184		$	126.33
Dividend equivalents granted to non-employee directors							—	643		$	98.80
Vested	(9,670	)	(83,280	)	$	90.52	—	(62,499	)	$	95.26
Forfeited	(9,619	)	(327,279	)	$	87.79	—	(34,004	)	$	97.30
Nonvested at September 30, 2019	125,079		6,249,233		$	87.15
Nonvested at March 31, 2020							7,404	6,637,585		$	98.85

Nonvested at ~~September 30, 2019~~March 31, 2020, includes ~~2,400~~ ~~performance-based restricted shares and~~ ~~450,727~~403,008 performance-based restricted stock ~~units. These nonvested performance-based restricted shares and~~ units, ~~include 2,400 restricted shares and 289,906~~including 318,768 restricted stock units for which the performance period has expired, and the performance threshold has been met.

FUTURE STOCK-BASED COMPENSATION EXPENSE.

The following table presents the compensation expense to be recognized over the remaining vesting periods of the stock-based awards outstanding at ~~September 30, 2019~~March 31, 2020. Estimated future compensation expense will change to reflect future grants of restricted stock awards and units, future option grants, changes in the probability of performance thresholds being met, and adjustments for actual forfeitures.

(in millions)
Fourth quarter 2019 $ 43.6
2020 100.6
2021 through 2024 80.6
Total $ 224.8



(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

Page 13

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				Nine months ended				Three months ended
(in millions)	9/30/2019		9/30/2018		9/30/2019		9/30/2018		3/31/2020		3/31/2019
Net income attributable to T. Rowe Price Group	$	545.9	$	583.0	$	1,586.0	$	1,485.6	$	343.1	$	512.6
Less: net income allocated to outstanding restricted stock and stock unit holders	13.9		13.7		40.7		34.8		9.4		13.0
Net income allocated to common stockholders	$	532.0	$	569.3	$	1,545.3	$	1,450.8	$	333.7	$	499.6

Weighted-average common shares
Outstanding	234.9		242.8		235.8		243.1		234.1		236.6
Outstanding assuming dilution	238.2		247.5		239.0		248.2		236.8		239.6

~~Page 17~~

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

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

Three months ended Nine months ended
(in millions) 9/30/2019 9/30/2018 9/30/2019 9/30/2018
Net deferred tax benefits on:
Currency translation adjustments $ 3.4
$ 2.3
2.5
4.9
Reclassification adjustment recognized in the provision for income taxes upon deconsolidation of a T. Rowe Price investment product —
—
—
.9
Total deferred tax benefits on currency translation adjustments 3.4
2.3
2.5
5.8

The changes in each component of accumulated other comprehensive loss, including reclassification adjustments for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ are presented in the table below.

Three months ended 9/30/2019 Three months ended 9/30/2018
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 $ (43.8 ) $ 5.3
$ (38.5 ) $ (36.6 ) $ 12.9
$ (23.7 )
Other comprehensive income (loss) before reclassifications and income taxes (1.0 ) (12.6 ) (13.6 ) (7.1 ) (2.5 ) �� (9.6 )
Reclassification adjustments recognized in non-operating income —
.1
.1
—
—
—
(1.0 ) (12.5 ) (13.5 ) (7.1 ) (2.5 ) (9.6 )
Net deferred tax benefits (income taxes) .3
3.1
3.4
1.6
.7
2.3
Other comprehensive income (loss) (.7 ) (9.4 ) (10.1 ) (5.5 ) (1.8 ) (7.3 )
Balances at end of period $ (44.5 ) $ (4.1 ) $ (48.6 ) $ (42.1 ) $ 11.1
$ (31.0 )



	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	)

The other comprehensive income (loss) in the table above excludes $17.2 million and $1.3 million of other comprehensive loss related to redeemable non-controlling interests held in our consolidated products for the three months ended March 31, 2020 and 2019, respectively.

Page 1814

~~The changes in the currency translation adjustment component of accumulated other comprehensive loss~~⁽¹⁾~~, including reclassification adjustments for nine months ended September 30, 2019 and 2018 are presented in the table below.~~

Nine months ended 9/30/2019 Nine months ended 9/30/2018
(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 $ (48.8 ) $ 6.8
$ (42.0 ) (37.0 ) 23.2
(13.8 )
Other comprehensive income (loss) before reclassifications and income taxes 5.4
(14.4 ) (9.0 ) (6.6 ) (12.8 ) (19.4 )
Reclassification adjustments recognized in non-operating income —
(.1 ) (.1 ) —
(3.6 ) (3.6 )
5.4
(14.5 ) (9.1 ) (6.6 ) (16.4 ) (23.0 )
Net deferred tax income taxes (1.1 ) 3.6
2.5
1.5
4.3
5.8
Other comprehensive income (loss) 4.3
(10.9 ) (6.6 ) (5.1 ) (12.1 ) (17.2 )
Balances at end of period $ (44.5 ) $ (4.1 ) $ (48.6 ) $ (42.1 ) $ 11.1
$ (31.0 )

⁽¹⁾ Accumulated other comprehensive loss as of December 31, 2017, also included $7.9 million of net unrealized holding gains that were reclassified to retained earnings upon adoption of the financial instruments accounting guidance on January 1, 2018. This reclassification also includes the reclassification of $1.7 million of stranded income taxes on available-for-sale investments resulting from U.S. tax law changes enacted on December 22, 2017.

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 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 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.

Page 1915

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) as of ~~September 30, 2019,~~March 31, 2020, the related condensed consolidated statements of income, comprehensive income, ~~and~~ stockholders’ equity, ~~for the three-month~~ and ~~nine-month periods ended September 30, 2019 and 2018, the related condensed consolidated statements of~~ cash flows for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ 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, 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.

/s/ KPMG LLP

Baltimore, Maryland

~~October 24, 2019~~April 28, 2020

Page 2016


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

OVERVIEW.

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 changed our 2019 non-GAAP operating expense growth range guidance from a range of 4% to 7% to a range of 4% to 5% as year-to-date distribution, product-related~~service both now and ~~professional fee expenses, as well as headcount growth, have been lower than planned. This new 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 that our 2020 operating expenses will reflect a full year of all third-party investment research costs.future.

MARKET TRENDS.

U.S. stocks ~~were mixed~~plunged in the later part of the first quarter of 2020. After starting the year on a ~~narrow range, with large-cap shares outperforming mid-~~strong note, equities fell as a coronavirus outbreak that originated in China in late 2019 rapidly spread to other countries and ~~small-caps. Monetary policy expectations were~~was deemed a ~~major driver of market sentiment,~~global pandemic. The sell-off intensified in March, as the coronavirus spread rapidly in the U.S., prompting government officials to close schools, nonessential businesses, and public facilities. The Federal Reserve ~~reduced short-term interest rates twice~~took drastic actions to increase financial market liquidity and support the flow of credit to consumers and businesses. Stocks did pare some losses in the ~~third quarter and other central banks around the world took measures to stimulate economic growth. Continued U.S.-China trade tensions and concerns about escalation~~final days of the ~~trade dispute weighed periodically on world markets, especially in August. However,~~quarter as the ~~quarter ended with optimism that the resumption of trade negotiations in October would lead to some tangible progress toward~~Trump administration and Congress passed into law a ~~trade deal.~~massive economic stimulus bill.

~~Developed~~Stocks in developed non-U.S. equity markets ~~generally declined;~~declined broadly; returns for U.S. investors were hurt by a stronger U.S. dollar versus many other ~~currencies hurt returns~~currencies. In Asia, Australian shares fell more than 33%, while equities in dollar terms. Developed European stock markets were mixed, with German shares falling 4% in dollar terms, as poor manufacturing data suggested that Europe’s largest economy was slipping into recession. UK shares struggled, declining nearly 2.5%, amid continued Brexit uncertainty. Most developed Asian markets fell.Japan and Hong Kong ~~shares were hit particularly hard, plunging 12% as demonstrators continued to demand changes from~~declined roughly 17%. In Europe, equity markets in Spain and Italy, where the government even though the city’s chief executive withdrew a controversial extradition bill in early September. Despite disappointing economic data, Japanese shares rose more than 3% in dollar terms.coronavirus outbreak has been severe, fell roughly 30% and 29%, respectively.

~~Emerging~~Stocks in emerging equity markets ~~fared worse~~declined slightly more than developed markets. ~~Currencies~~In emerging Europe markets, Russian 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 ~~many developing countries weakened versus~~ the ~~U.S. dollar as many emerging~~first quarter, which helped equities recover partially from earlier losses. In Latin America, all major markets ~~central banks cut interest rates in response to slowing economic growth.~~posted losses of at least 30%.

Page 2117

Returns of several major equity market indexes for the ~~three- and nine-month periods ended September 30, 2019,~~first quarter of 2020, were as follows:

Three months ended Nine months ended
Index 9/30/2019 9/30/2019
S&P 500 Index 1.7% 20.6%
NASDAQ Composite Index⁽¹⁾
(.1)% 20.6%
Russell 2000 Index (2.4)% 14.2%
MSCI EAFE (Europe, Australasia, and Far East) Index (1.0)% 13.4%
MSCI Emerging Markets Index (4.1)% 6.2%



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

⁽¹⁾Returns exclude dividends

Global bond returns were ~~mixed. Domestic bonds posted positive returns, but a stronger~~largely negative in U.S. dollar ~~versus~~terms. In the U.S. investment-grade universe, Treasuries surged as the Federal Reserve slashed short-term interest rates to near 0%, announced massive purchases of U.S. government bonds and other ~~currencies reduced overseas bond returns in dollar terms. At~~securities, and rolled out a variety of programs and “facilities” intended to boost market liquidity and the ~~end~~flow of September, the federal funds target rate was in the 1.75% to 2.00% range following the two rate cuts in the quarter. Treasury yields decreased across all maturities, but longer-term rates generally declined more than shorter-term yields.credit. The 10-year Treasury note yield decreased from ~~2.00%~~1.92% at the end of 2019 to ~~1.68%.~~

In0.70% at the ~~investment-grade bond universe, long-term~~end of March. Mortgage-backed securities significantly lagged Treasuries ~~were the best performers, but~~amid substantial mortgage refinancing activity. Asset-backed securities posted slightly negative returns, while corporate bonds ~~also posted solid returns. Mortgage-backed securities lagged with milder gains, as falling long-term rates led to increased refinancing activity~~declined in anticipation of weaker corporate profits and ~~mortgage prepayments.~~a recession. Municipal bonds ~~produced positive returns but~~ underperformed taxable ~~bonds, as municipal bond yields did not decrease as much as Treasury yields.~~bonds. High yield bonds ~~appreciated but trailed investment-grade issues.~~posted significant losses as the yield difference between higher- and lower-quality bonds widened dramatically.

Bonds in developed non-U.S. countries produced ~~modestly~~ negative returns in U.S. dollar terms. ~~Longer-term~~Bond prices climbed as longer-term interest rates in many countries ~~decreased, which lifted bond prices,~~declined, but most major currencies fell versus the dollar, reducing returns ~~in dollar terms.~~ to U.S. investors. Most developed market governments unveiled fiscal stimulus measures, while most central banks responded with significant monetary easing programs.

Emerging markets bonds were ~~mixed, with local-currency~~broadly negative. U.S. dollar-denominated emerging markets bonds ~~under-performing~~slightly outperformed local currency bonds amid broad dollar strength. Most developing market currencies ~~fell~~declined during the quarter.

Returns for several major bond market indexes for the ~~three- and nine-month periods ended September 30, 2019,~~first quarter of 2020, were as follows:

Three months ended Nine months ended
Index 9/30/2019 9/30/2019
Bloomberg Barclays U.S. Aggregate Bond Index 2.3% 8.5%
JPMorgan Global High Yield Index 1.1% 11.3%
Bloomberg Barclays Municipal Bond Index 1.6% 6.8%
Bloomberg Barclays Global Aggregate Ex-U.S. Dollar Bond Index (.6)% 4.4%
JPMorgan Emerging Markets Bond Index Plus (1.7)% 8.9%



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

Page 2218

ASSETS UNDER MANAGEMENT.

Assets under management ended the ~~third~~first quarter of ~~2019~~2020 at ~~$1,126.3~~$1,008.8 billion, ~~an increase~~a decrease of ~~$1.3~~$198.0 billion from ~~June 30, 2019~~December 31, 2019. Net cash outflows were $6.0 billion, and ~~$164.0~~clients transferred $4.4 billion in net assets from the ~~end~~U.S. mutual funds to other investment products, of ~~2018. We had~~which $4.3 billion was transferred to retirement date trusts. Market depreciation and losses, net ~~cash inflows~~ of ~~$2.5~~dividends not reinvested, reduced our assets under management by $192.0 billion in the ~~third~~first quarter of ~~2019 and $10.4 billion for the first nine months of 2019.~~ 2020.

The following ~~table details~~tables detail changes in our assets under management, by vehicle and asset class during the ~~three- and nine-month periods ended September 30, 2019:~~first quarter of 2020:


	Three months ended 9/30/2019											Nine months ended 9/30/2019										Three months ended 3/31/2020
(in billions)	U.S. mutual funds			Subadvised and separate accounts			Other investment products		Total			U.S. mutual funds			Subadvised and separate accounts		Other investment products		Total			U.S. mutual funds			Subadvised and separate accounts			Other investment products			Total
Assets under management at beginning of period	$	648.3		$	292.6		$	184.1	$	1,125.0		$	564.5		$	250.0	$	147.8	$	962.3		$	682.7		$	313.8		$	210.3		$	1,206.8

Net cash flows before client transfers	3.1			(1.0		)	.4		2.5			7.2			.4		2.8		10.4			(7.5		)	(3.5		)	5.0			(6.0		)
Client transfers	(7.5		)	1.3			6.2		—			(19.5		)	.8		18.7		—			(4.4		)	—			4.4			—
Net cash flows after client transfers	(4.4		)	.3			6.6		2.5			(12.3		)	1.2		21.5		10.4			(11.9		)	(3.5		)	9.4			(6.0		)
Net market appreciation (depreciation) and income	(1.1		)	.1			—		(1.0		)	90.5			41.8		21.4		153.7			(108.4		)	(49.2		)	(34.3		)	(191.9		)
Net distributions reinvested (not reinvested)	(.2		)	—			—		(.2		)	(.1		)	—		—		(.1		)	(.1		)	—			—			(.1		)
Change during the period	(5.7		)	.4			6.6		1.3			78.1			43.0		42.9		164.0			(120.4		)	(52.7		)	(24.9		)	(198.0		)

Assets under management at September 30, 2019	$	642.6		$	293.0		$	190.7	$	1,126.3		$	642.6		$	293.0	$	190.7	$	1,126.3
Assets under management at March 31, 2020																						$	562.3		$	261.1		$	185.4		$	1,008.8


	Three months ended 9/30/2019										Nine months ended 9/30/2019									Three months ended 3/31/2020
(in billions)	Equity			Fixed income, including money market		Multi-asset⁽¹⁾		Total			Equity			Fixed income, including money market		Multi-asset⁽¹⁾		Total		Equity			Fixed income, including money market			Multi-asset⁽¹⁾			Total
Assets under management at beginning of period	$	648.4		$	144.1	$	332.5	$	1,125.0		$	539.9		$	136.1	$	286.3	$	962.3	$	698.9		$	147.9		$	360.0		$	1,206.8

Net cash flows	(.6		)	1.3		1.8		2.5			(.2		)	3.6		7.0		10.4		(5.7		)	3.0			(3.3		)	(6.0		)
Net market appreciation (depreciation) and income⁽²⁾	(4.3		)	1.2		1.9		(1.2		)	103.8			6.9		42.9		153.6		(123.9		)	(4.6		)	(63.5		)	(192.0		)
Change during the period	(4.9		)	2.5		3.7		1.3			103.6			10.5		49.9		164.0		(129.6		)	(1.6		)	(66.8		)	(198.0		)
Assets under management at September 30, 2019	$	643.5		$	146.6	$	336.2	$	1,126.3		$	643.5		$	146.6	$	336.2	$	1,126.3
Assets under management at March 31, 2020																				$	569.3		$	146.3		$	293.2		$	1,008.8

⁽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⁾ Includes distributions reinvested and not reinvested.

Investment advisory clients outside the U.S. account for about ~~6.5%~~7.4% of our assets under management at ~~September 30, 2019~~March 31, 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 were as follows:

As of
(in billions) 9/30/2019 6/30/2019 12/31/2018
Target date retirement U.S. mutual funds $ 157.5
$ 157.5
$ 144.8
Target date separately managed retirement accounts 7.7
7.4
5.9
Target date retirement trusts 106.8
103.8
79.7
$ 272.0
$ 268.7
$ 230.4

~~Page 23~~



	As of
(in billions)	3/31/2020		12/31/2019
Target date retirement U.S. mutual funds	$	132.0	$	164.8
Target date separately managed retirement accounts	7.1		8.4
Target date retirement trusts	103.1		119.2
	$	242.2	$	292.4

Net cash inflows into our target date retirement products were ~~$2.0 billion in the third quarter of 2019 and $6.6~~$.7 billion in the first ~~nine months~~quarter of ~~2019.~~2020. A redemption in a risk-managed strategy from a large institutional investor was the primary driver of the multi-asset outflows during the first quarter of 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 ~~September 30, 2019,~~March 31, 2020, were:


	1 year	3 years	5 years	10 years	1 year	3 years	5 years	10 years
Outperformed Morningstar median(2)
All funds	73%	68%	75%	81%	50%	60%	72%	76%
Multi-asset funds	86%	74%	85%	84%	44%	59%	76%	84%

Top Morningstar quartile(2)
All funds	43%	45%	52%	57%	19%	28%	41%	50%
Multi-asset funds	47%	56%	62%	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, ~~84.7%~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ 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.

~~Page 24~~


	Three months ended				Q3 2019 vs. Q3 2018					Nine months ended				YTD 2019 vs. YTD 2018					Three months ended					Q1 2020 vs. Q1 2019
(in millions, except per-share data)	9/30/2019		9/30/2018		$ change			% change		9/30/2019		9/30/2018		$ change			% change		3/31/2020			3/31/2019		$ change			% change
U.S. GAAP basis
Investment advisory fees	$	1,303.4	$	1,263.3	$	40.1		3.2	%	$	3,767.8	$	3,666.9	$	100.9		2.8	%	$	1,327.8		$	1,194.2	$	133.6		11.2	%
Net revenues	$	1,426.7	$	1,394.6	$	32.1		2.3	%	$	4,149.2	$	4,067.6	$	81.6		2.0	%	$	1,462.6		$	1,327.3	$	135.3		10.2	%
Operating expenses	$	767.6	$	754.0	$	13.6		1.8	%	$	2,342.5	$	2,248.5	$	94.0		4.2	%	$	755.4		$	794.8	$	(39.4	)	(5.0	)%
Net operating income	$	659.1	$	640.6	$	18.5		2.9	%	$	1,806.7	$	1,819.1	$	(12.4	)	(.7	)%	$	707.2		$	532.5	$	174.7		32.8	%
Non-operating income⁽¹⁾	$	43.0	$	124.9	$	(81.9	)	n/m		$	370.3	$	175.1	$	195.2		n/m
Non-operating income (loss)⁽¹⁾																			$	(500.3	)	$	202.8	$	(703.1	)	n/m
Net income attributable to T. Rowe Price Group	$	545.9	$	583.0	$	(37.1	)	(6.4	)%	$	1,586.0	$	1,485.6	$	100.4		6.8	%	$	343.1		$	512.6	$	(169.5	)	(33.1	)%
Diluted earnings per common share	$	2.23	$	2.30	$	(.07	)	(3.0	)%	$	6.47	$	5.85	$	.62		10.6	%	$	1.41		$	2.09	$	(.68	)	(32.5	)%
Weighted average common shares outstanding assuming dilution	238.2		247.5		(9.3		)	(3.8	)%	239.0		$	248.2	$	(9.2	)	(3.7	)%	236.8			239.6		(2.8		)	(1.2	)%

Adjusted non-GAAP basis⁽²⁾	Adjusted non-GAAP basis⁽²⁾																		Adjusted non-GAAP basis⁽²⁾
Operating expenses	$	765.1	$	744.5	$	20.6		2.8	%	$	2,286.3	$	2,230.8	$	55.5		2.5	%	$	817.9		$	756.6	$	61.3		8.1	%
Net operating income	$	664.2	$	651.6	$	12.6		1.9	%	$	1,869.2	$	1,841.4	$	27.8		1.5	%	$	647.2		$	572.2	$	75.0		13.1	%
Non-operating income⁽¹⁾	$	18.8	$	17.7	$	1.1		n/m		$	98.8	$	25.7	$	73.1		n/m
Non-operating income (loss)⁽¹⁾																			$	(61.2	)	$	44.2	$	(105.4	)	n/m
Net income attributable to T. Rowe Price Group	$	521.7	$	505.0	$	16.7		3.3	%	$	1,480.4	$	1,423.4	$	57.0		4.0	%	$	454.3		$	460.6	$	(6.3	)	(1.4	)%
Diluted earnings per common share	$	2.13	$	1.99	$	.14		7.0	%	$	6.04	$	5.60	$	.44		7.9	%	$	1.87		$	1.87	$	—		—	%

Assets under management (in billions)	Assets under management (in billions)																		Assets under management (in billions)
Average assets under management	$	1,130.2	$	1,072.4	$	57.8		5.4	%	$	1,091.5	$	1,045.0	$	46.5		4.4	%	$	1,162.7		$	1,043.5	$	119.2		11.4	%
Ending assets under management	$	1,126.3	$	1,083.8	$	42.5		3.9	%	$	1,126.3	$	1,083.8	$	42.5		3.9	%	$	1,008.8		$	1,081.7	$	(72.9	)	(6.7	)%

⁽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.

Page 20

Results Overview

Investment advisory revenues. Investment advisory fees are earned based on the value and composition of our assets under management, which change based on fluctuations in financial markets and net cash flows. As our average assets under management increase or decrease in a given period, the level of our investment advisory fee revenue for that same period generally fluctuates in a similar manner. Our annualized effective fee rates can be impacted by market or cash flow related shifts among asset and share classes, price changes in existing products, and asset level changes in products with tiered-fee structures.

Investment advisory revenues earned in the ~~third~~first quarter of ~~2019~~2020 increased over the comparable ~~2018~~2019 quarter as average assets under our management increased ~~$57.8~~$119.2 billion, or ~~5.4%~~11.4%, to ~~$1,130.2~~$1,162.7 billion. The average annualized effective fee rate earned during the ~~third~~first quarter of ~~2019~~2020 was ~~45.8~~45.9 basis points, compared with ~~46.7~~46.4 basis points earned during the ~~third~~first quarter of ~~2018.~~2019. The decline in our effective fee rate for the ~~third~~first quarter of ~~2019~~2020 compared to the same period in ~~2018~~2019 was primarily due to a market-driven shift of assets under management from higher fee international equity strategies to lower fee strategies. Client transfers to lower fee vehicles or share classes over the last twelve months and, to a lesser extent, fee reductions we have made since the third quarter of 2018 also drove the effective fee rate lower.

Investment advisory revenues earned in the nine months ended September 30, 2019 increased over the comparable 2018 period as average assets under our management increased $46.5 billion, or 4.4%, to $1,091.5 billion. The average annualized effective fee rate earned on our assets under management during the nine months ended September 30, 2019 was 46.2 basis points, compared with 46.9 basis points earned during the same period

~~Page 25~~

~~of 2018. For the nine months ended September 30, 2019 compared to the same period in 2018, the decline in our effective fee rate is largely~~ due to client transfers within the complex from higher fee vehicles to lower fee vehicles ~~or share classes~~ over the last twelve ~~months and, to a lesser extent, fee reductions we made to certain mutual funds and other products since the third quarter of 2018.~~

~~We regularly assess the competitiveness of our investment advisory fees and will continue to make adjustments as deemed appropriate.~~months.

Operating expenses. Operating expenses were ~~$767.6~~$755.4 million in the ~~third~~first quarter of ~~2019~~2020 compared with ~~$754.0~~$794.8 million in the ~~2018 quarter.~~first quarter of 2019. The ~~increase~~decrease in operating expenses for the ~~third~~first quarter of ~~2019~~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 ~~annual~~and benefits, interim bonus accrual, stock-based compensation expense and ~~benefits expenses and our~~the continued strategic ~~investments. Partially offsetting these increases was lower market-related~~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 ~~in the third quarter of 2019 compared to the third quarter of 2018.~~

Operating expenses were $2,342.5 million in the nine months ended September 30, 2019 compared with $2,248.5 million in the 2018 period. The increase in operating expenses was primarily due to higher salary, annual bonus accrual, and benefits expenses; our continued strategic investments; and higher compensation expense related to the supplemental savings plan liability as markets were strong overall in the first nine months of 2019. The higher expense related to the supplemental savings plan in 2019 is ~~partially~~more than offset by the non-operating ~~gains earned~~losses incurred on the investments used to economically hedge the related liability.

On a non-GAAP basis, our operating expenses in the ~~third~~first quarter of ~~2019~~2020 increased ~~2.8%~~8.1% to ~~$765.1~~$817.9 million compared to the ~~2018 quarter. For the nine months ended September 30, 2019, our operating expenses on a non-GAAP basis increased 2.5% to $2,286.3 million compared to the 2018 period.~~first quarter of 2019. Our non-GAAP operating expenses ~~exclude~~do not include the ~~impacts~~impact of our supplemental savings plan ~~investment income related to certain other investments,~~ and ~~our~~ consolidated ~~T. Rowe Price~~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 coronavirus pandemic.

Operating margin. Our operating margin in the ~~third~~first quarter of ~~2019~~2020 was ~~46.2%~~48.4%, compared to ~~45.9%~~40.1% earned in the ~~2018~~2019 quarter. Our operating margin in the nine months ended September 30, 2019 was 43.5%, compared to 44.7% earned in the 2018 period. While our quarterly operating margin was relatively flat when comparing to the third quarter of 2018, the decreaseThe increase in our operating margin for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to the ~~2018~~2019 period is primarily driven by the ~~higher~~lower compensation expense related to our supplemental savings plan as markets in the first ~~nine months~~quarter of ~~2019 outperformed~~2020 underperformed the same period in ~~2018.~~2019.

~~Net revenues~~

Three months ended Q3 2019 vs. Q3 2018 Nine months ended YTD 2019 vs. YTD 2018
(in millions) 9/30/2019 9/30/2018 $ change % change 9/30/2019 9/30/2018 $ change % change
Investment advisory fees
U.S. mutual funds $ 881.0
$ 877.3
$ 3.7
.4 % $ 2,557.6
$ 2,557.1
$ .5
— %
Subadvised and separate accounts and other investment products 422.4
386.0
36.4
9.4 % 1,210.2
1,109.8
100.4
9.0 %
1,303.4
1,263.3
40.1
3.2 % 3,767.8
3,666.9
100.9
2.8 %
Administrative, distribution, and servicing fees
Administrative fees 93.2
96.7
(3.5 ) (3.6 )% 291.0
294.0
(3.0 ) (1.0 )%
Distribution and servicing fees 30.1
34.6
(4.5 ) (13.0 )% 90.4
106.7
(16.3 ) (15.3 )%
123.3
131.3
(8.0 ) (6.1 )% 381.4
400.7
(19.3 ) (4.8 )%
Net revenues $ 1,426.7
$ 1,394.6
$ 32.1
2.3 % $ 4,149.2
$ 4,067.6
$ 81.6
2.0 %
Diluted earnings per share. Diluted earnings per share was $1.41 for the three months ended March 31, 2020 and $2.09 for the three months ended March 31, 2019. The 32.5% decrease was primarily driven by significant losses incurred on our investment portfolio in the three months ended March 31, 2020 as compared to gains generated in the three months ended March 31, 2019. This decrease in diluted earnings per share was partially offset by higher operating income and a lower effective tax rate.

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.

Page 2621

Net revenues



	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.

U.S. mutual funds

Investment advisory revenues earned in the ~~third~~first quarter of ~~2019~~2020 from our U.S. mutual funds were ~~$881.0~~$876.2 million, an increase of ~~0.4%~~7.4% from the comparable ~~2018~~2019 quarter. Average assets under management in these funds for the ~~third~~first quarter of ~~2019~~2020 increased ~~1.4%~~7.2% from the ~~2018~~2019 quarter to ~~$650.5 billion.~~

Investment advisory revenues earned in the nine months ended September 30, 2019 from the firm's U.S. mutual funds were $2,557.6 million, virtually flat in comparison with the 2018 period. Average assets under management in these funds for the nine months ended September 30, 2019 increased .6% from the 2018 period to $633.2$654.3 billion.

Subadvised and separate accounts and other investment products

Investment advisory revenues earned in the ~~third~~first quarter of ~~2019~~2020 from subadvised and separate accounts and other investment products were ~~$422.4~~$451.6 million, an increase of ~~9.4%~~19.4% from the comparable ~~2018~~2019 quarter. Average assets under management for these products increased ~~11.3%~~17.3% from the ~~2018~~2019 quarter to ~~$479.7~~$508.4 billion.

~~Investment~~Since the first quarter of 2019, the inflows into the Japanese ITMs, which have a higher than average fee rate, have caused investment advisory ~~revenues earned~~fees to increase at a rate greater than the increase in ~~the nine months ended September 30, 2019 from~~average assets under management for our subadvised and separate accounts ~~as well as~~and other ~~investment products were $1,210.2 million, an increase of 9.0% from the 2018 period. Average assets under management for these products increased 10.3% from the 2018 period to $458.3 billion.~~products.

Administrative, distribution, and servicing fees. Administrative, distribution, and servicing fees in the ~~third~~first quarter of ~~2019~~2020 were ~~$123.3~~$134.8 million, ~~a decrease~~an increase of ~~$8.0~~$1.7 million, or ~~6.1%~~1.3%, from the comparable ~~2018~~2019 quarter. ~~For the nine months ended September 30, 2019, these fees were $381.4 million, a decrease of $19.3 million, or 4.8%, from the 2018 period.~~ In this line, we recognize fees earned from providing administrative and distribution services to our investment advisory clients, primarily our U.S. mutual funds and their investors. The ~~decline in distribution and servicing fees for both periods~~increase was primarily ~~attributable~~due to increased transfer agent servicing activities and higher recordkeeping fees, partially offset by lower 12b-1 revenue earned on certain share classes, including the Advisor and R classes, of the U.S. mutual ~~funds~~funds. The decline in 12b-1 revenue is attributable primarily to a reduction in assets under management as client ~~transfers~~transferred assets to lower fee vehicles and ~~share classes has reduced assets under management in these~~ share classes. The decline in 12b-1 revenue is offset entirely by a reduction in the costs paid to third-party intermediaries that source these assets and reported in distribution and servicing expense. ~~The decrease in administrative fees for both periods is primarily due to lower transfer agent servicing activities driven by client transfers from the mutual funds to trusts.~~

Our ~~third~~first quarter net revenues reflect the elimination of ~~$2.6~~$2.5 million in ~~2019~~2020 and $1.5 million in ~~2018,~~2019, of revenue earned from our consolidated T. Rowe Price investment products. ~~For the nine months ended September 30, 2019 and 2018 we eliminated $6.3 million in 2019 and $4.6 million in 2018 of net revenue.~~ The corresponding expenses recognized by these products, and consolidated in our financial statements, were eliminated from operating expenses.

Page 22

Operating expenses


	Three months ended				Q3 2019 vs. Q3 2018					Nine months ended				YTD 2019 vs. YTD 2018					Three months ended				Q1 2020 vs. Q1 2019
(in millions)	9/30/2019		9/30/2018		$ change			% change		9/30/2019		9/30/2018		$ change			% change		3/31/2020		3/31/2019		$ change			% change
Compensation and related costs	$	466.3	$	454.3	$	12.0		2.6	%	$	1,441.0	$	1,351.7	$	89.3		6.6	%	$	440.7	$	491.5	$	(50.8	)	(10.3	)%
Distribution and servicing	64.5		71.4		(6.9		)	(9.7	)%	195.3		213.3		(18.0		)	(8.4	)%	65.7		66.4		(.7		)	(1.1	)%
Advertising and promotion	17.1		20.2		(3.1		)	(15.3	)%	58.5		63.8		(5.3		)	(8.3	)%	24.9		21.6		3.3			15.3	%
Product-related costs	38.0		37.9		.1			.3	%	115.6		117.1		(1.5		)	(1.3	)%	41.6		44.2		(2.6		)	(5.9	)%
Technology, occupancy, and facility costs	106.5		96.5		10.0			10.4	%	309.5		283.8		25.7			9.1	%	105.4		98.1		7.3			7.4	%
General, administrative, and other	75.2		73.7		1.5			2.0	%	222.6		218.8		3.8			1.7	%	77.1		73.0		4.1			5.6	%
Total operating expenses	$	767.6	$	754.0	$	13.6		1.8	%	$	2,342.5	$	2,248.5	$	94.0		4.2	%	$	755.4	$	794.8	$	(39.4	)	(5.0	)%

Compensation and related costs. Compensation and related costs were ~~$466.3~~$440.7 million in the ~~third~~first quarter of ~~2019, an increase~~2020, a decrease of ~~$12.0~~$50.8 million, or ~~2.6%~~10.3%, compared to the ~~2018~~2019 quarter. The ~~increase~~decrease was primarily due to a change in market-related expense of $100.3 million related to our supplemental savings plan as falling markets in the first quarter of 2020 reduced the liability and $4.7 million of higher ~~salaries,~~labor capitalization related to internally developed software. These decreases in compensation and related costs were offset in part by increases in base salary, employee benefits and related employee costs of ~~$13.8~~$22.6 million, primarily as a result of a ~~3.3%~~5.3% increase in our average staff size and, to a lesser extent, the modest increases in base salaries at the beginning of ~~2019 and an increase in non-cash~~

~~Page 27~~

~~stock-based compensation expense of $.9 million.~~2020. Our interim accrual for annual variable compensation, primarily bonus compensation, also increased ~~$5.9~~$16.1 million from the ~~2018 quarter.~~2019 quarter and non-cash stock-based compensation expense increased by $14.8 million. We recognize the interim bonus accrual ratably over the year using the ratio of recognized quarterly net revenues to currently forecasted annual net revenues. These increases in compensation and related costs were offset in part by $6.0 million in lower market-related expense related to our supplemental savings plan and $2.4 million of higher labor capitalization related to internally developed software compared to the 2018 quarter.

Compensation and related costs were $1,441.0 million in the nine months ended September 30, 2019, an increase of $89.3 million, or 6.6%, compared to the 2018 period. The increase in compensation and related costs was primarily due to an increase in salaries, benefits and related employee costs, which have increased $46.6 million from the 2018 period and $38.8 million in higher market-related expense related to our supplemental savings plan. An increase of 3.0% in our average staff size and modest increases in base salaries at the beginning of 2019 have contributed to higher associate-related costs. Our interim accrual for annual variable compensation, primarily bonus compensation, also increased $22.9 million in 2019 from the 2018 period. These increases in compensation and related costs were offset in part by the absence in 2019 of the one-time bonus paid to certain associates in the second quarter of 2018 and $8.3 million in higher labor capitalization related to internally developed software in 2019 period.

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 ~~$64.5~~$65.7 million for the ~~third~~first quarter of ~~2019,~~2020, a decrease of ~~9.7%~~1.1% from the ~~$71.4~~$66.4 million recognized in the ~~2018~~2019 quarter. ~~For the nine months ended September 30, 2019, these costs were $195.3 million, a decrease of 8.4% over the $213.3 million recognized in the comparable 2018 period.~~ The decrease for ~~both periods~~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 on which we pay~~costs related to these products were partially offset by higher distribution ~~and servicing costs. These~~ 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. ~~Also contributing to the decrease were lower transfer agent service activities.~~

Advertising and promotion. Advertising and promotion costs were ~~$17.1~~$24.9 million in the ~~third~~first quarter of ~~2019,~~2020, ~~a decrease~~an increase of $~~3.1~~3.3 million, or 15.3%, compared to the ~~$20.2~~$21.6 million recognized in the ~~2018~~2019 quarter. ~~For~~The increase for the ~~nine months ended September 30, 2019, these costs were $58.5 million, a decrease of $5.3 million, or 8.3%, compared to the 2018 period. The decrease for both periods~~period is due primarily to ~~the absence in 2019 of the creation and launch of a~~increased television media advertising ~~campaign in 2018 and a lower level of~~ activity in ~~2019~~2020 as compared to ~~2018.~~2019.

Technology, occupancy, and facility costs. Technology, occupancy, and facility costs consists of depreciation expense, technology equipment and maintenance, software, and costs related to our facilities. These costs were ~~$106.5~~$105.4 million in the ~~third~~first quarter of ~~2019,~~2020, an increase of ~~$10.0~~$7.3 million, or ~~10.4%~~7.4%, compared to the ~~$96.5~~$98.1 million recognized in the ~~2018~~2019 quarter. ~~For the nine months ended September 30, 2019, these costs were $309.5 million, an increase of $25.7 million, or 9.1%, compared to the 2018 period.~~ The increase for ~~both periods~~the period is due primarily to ~~incremental~~the ongoing investment in our technology capabilities, including related depreciation and hosted solution ~~licenses, and maintenance programs, as well as increased office facility costs.~~licenses.

General, administrative, and other. General, administrative, and other expenses were ~~$75.2~~$77.1 million in the ~~third~~first quarter of ~~2019,~~2020, an increase of ~~$1.5~~$4.1 million, or ~~1.4%~~5.6%, compared to the ~~$73.7~~$73.0 million recognized in the ~~2018~~2019 quarter. ~~For the nine months ended September 30, 2019, these costs were $222.6 million, an increase of $3.8 million, or 1.7%, compared to the 2018 period.~~ The increase ~~for nine months ended September 30, 2019~~in the first quarter of 2020 compared with the ~~2018~~2019 period is primarily due to an increase in third-party investment research costs ~~that were~~and higher professional fees, partially offset by lower ~~professional fees.~~travel expenses as global travel restrictions were put in place amid the coronavirus pandemic.

Page 2823

~~Non-operating income~~

Non-operating income (loss)

Non-operating loss in the ~~third~~first quarter of ~~2019~~2020 was ~~$43.0~~$500.3 million, a decrease of ~~$81.9~~$703.1 million from ~~the 2018 quarter. For the nine months ended September 30, 2019,~~ non-operating income ~~increased $195.2 million from~~in the ~~2018 period to $370.3~~first quarter of 2019 of $202.8 million. The following table details the components of non-operating income during both the ~~third~~first quarter of March 31, 2020 and ~~nine months ended September 30, 2019 and 2018.~~2019.


	Three months ended					Nine months ended					Three months ended
(in millions)	9/30/2019			9/30/2018		9/30/2019		9/30/2018			3/31/2020			3/31/2019
Net gains (losses) from non-consolidated T. Rowe Price investment products
Cash and discretionary investments
Dividend income	$	18.1		$	13.8	$	52.2	$	31.0		$	10.4		$	16.2
Market related gains (losses) and equity in earnings	.7			3.9		46.6		(1.0		)	(71.6		)	28.0
Seed capital investments
Dividend income	.2			.6		1.0		2.7			.7			.5
Market related gains (losses) and equity in earnings	2.6			3.2		30.9		(5.5		)	(34.1		)	19.6
Net gain (loss) recognized upon deconsolidation	(.1		)	—		.1		3.6
Net gain recognized upon deconsolidation											.1			.1
Investments used to hedge the supplemental savings plan liability	1.7			6.3		44.8		14.2			(68.5		)	31.0
Total net gains from non-consolidated T. Rowe Price investment products	23.2			27.8		175.6		45.0
Total net gains (losses) from non-consolidated T. Rowe Price investment products											(163.0		)	95.4
Other investment income	8.9			88.3		18.4		102.9			8.4			4.7
Net gains on investments	32.1			116.1		194.0		147.9
Net gains on consolidated sponsored investment portfolios	11.6			8.7		176.3		28.6
Net gains (losses) on investments											(154.6		)	100.1
Net gains (losses) on consolidated sponsored investment portfolios											(330.3		)	101.9
Other income (loss), including foreign currency gains and losses	(.7		)	.1		—		(1.4		)	(15.4		)	.8
Non-operating income	$	43.0		$	124.9	$	370.3	$	175.1
Non-operating income (loss)											$	(500.3	)	$	202.8

During the ~~third~~first quarter of 2018, non-operating income included a realized gain from the sale of our 10% holding in Daiwa SB Investments Ltd. that did not recur in 2019. Non-operating income for the third quarter of 2019 included lower unrealized gains on2020, our investment portfolio ~~due to a more volatile~~incurred steep declines in market value as ~~compared to~~global economies and markets are disrupted by the ~~third quarter of 2018. These lower unrealized gains, however, were more than offset by higher gains on our~~coronavirus pandemic. Our consolidated investment products and supplemental savings plan hedge portfolio comprised about 80% of the net losses recognized during the first quarter of 2020. The cash and discretionary investment portfolio also experienced net investment losses of $61.2 million in the ~~third~~first quarter of ~~2019 as compared to the third quarter of 2018.~~

During the nine months ended September 30, 2019, non-operating income included the impact of sharp market increases earlier in the year, which resulted in significant unrealized gains on our investment portfolio included in our consolidated products compared with modest investment gains recognized during 2018. Partially offsetting the market increases was the absence in 2019 of the realized gain from the sale of our 10% holding in Daiwa SB Investments Ltd. that was recognized in the third quarter of 2018.

~~Page 29~~

2020.

The table above includes the net investment income of 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 and the portion attributable to our interest:


	Three months ended						Nine months ended						Three months ended
(in millions)	9/30/2019			9/30/2018			9/30/2019			9/30/2018			3/31/2020			3/31/2019
Operating expenses reflected in net operating income	$	(3.7	)	$	(3.6	)	$	(10.6	)	$	(9.2	)	$	(3.7	)	$	(3.1	)
Net investment income reflected in non-operating income	11.6			8.7			176.3			28.6
Net investment income (loss) reflected in non-operating income (loss)													(330.3		)	101.9
Impact on income before taxes	$	7.9		$	5.1		$	165.7		$	19.4		$	(334.0	)	$	98.8

Net income attributable to our interest in the consolidated T. Rowe Price investment products	$	8.7		$	6.5		$	96.7		$	8.3
Net income attributable to redeemable non-controlling interests (unrelated third-party investors)	(.8		)	(1.4		)	69.0			11.1
Net income (loss) attributable to our interest in the consolidated T. Rowe Price investment products													$	(157.5	)	$	57.4
Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors)													(176.5		)	41.4
	$	7.9		$	5.1		$	165.7		$	19.4		$	(334.0	)	$	98.8

Page 24

Provision for income taxes

Our effective tax rate for the ~~third~~first quarter of ~~2019~~2020 was ~~22.4%~~19.5%, compared with ~~24.0%~~24.7% in the ~~2018~~2019 quarter. ~~Our~~The lower effective tax rate for the ~~nine months ended September 30,~~first quarter of 2020 as compared to the 2019 ~~was 24.0%, compared~~quarter is primarily due to higher discrete tax benefits associated with ~~24.9%~~option exercises. These benefits were partially offset by net losses attributable to redeemable non-controlling interests held in the ~~2018 period.~~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 ~~income~~higher state effective tax ~~provision for~~rate results primarily from the ~~2018 year-to-date period includes nonrecurring charges totaling $28.7 million~~remeasurement of deferred tax liabilities related to ~~the enactment of U.S. tax reform and new Maryland state tax legislation.~~our investment portfolio. The following table reconciles the statutory federal income tax rate to our effective tax rate for both the ~~three-~~three months ended March 31, 2020 and ~~nine-months ended September 30, 2019 and 2018:~~2019:


	Three months ended				Nine months ended				Three months ended
	9/30/2019		9/30/2018		9/30/2019		9/30/2018		3/31/2020		3/31/2019
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Impact of nonrecurring charge related to U.S. tax reform recognized in the second quarter	—		—		—		1.0
Impact of nonrecurring charge related to new Maryland state tax legislation recognized in the second quarter	—		—		—		.4
State income taxes for current year, net of federal income tax benefits⁽¹⁾	4.4		4.8		4.4		4.6		6.4		4.2
Net income attributable to redeemable non-controlling interests	(.8	)	(.1	)	(.8	)	(.2	)
Net losses (income) attributable to redeemable non-controlling interests									3.1		(.6	)
Net excess tax benefits from stock-based compensation plans activity	(1.2	)	(.8	)	(.9	)	(1.8	)	(8.1	)	(.6	)
Other items	(1.0	)	(.9	)	.3		(.1	)	(2.9	)	.7
Effective income tax rate	22.4	%	24.0	%	24.0	%	24.9	%	19.5	%	24.7	%

⁽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%~~24% to ~~25%~~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 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 ~~third~~first quarter of 2020 and 2019 was 22.5% and ~~2018 was 23.6% and 24.5%~~25.3%, respectively. ~~Our~~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 ~~for~~is primarily due to the ~~nine months ended September 30, 2019 and 2018 was 24.8% and 23.8%, respectively.~~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 23.5% to 25.5%.

~~Page 30~~

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.

Page 25

The following schedules reconcile certain U.S. GAAP financial measures for the three months ended

~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.


	Three months ended 9/30/2019																	Three months ended 3/31/2020
	Operating expenses			Net operating income		Non-operating income			Provision (benefit) for income taxes⁽⁶⁾			Net income attributable to T. Rowe Price Group			Diluted earnings per share⁽⁷⁾			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	$	767.6		$	659.1	$	43.0		$	157.0		$	545.9		$	2.23		$	755.4		$	707.2		$	(500.3	)	$	40.3	$	343.1	$	1.41
Non-GAAP adjustments:
Consolidated T. Rowe Price investment products⁽¹⁾	(1.1		)	3.7		(11.6		)	4.6			(13.3		)	(.05		)	(1.2		)	3.7			330.3			71.1		86.4		.36
Supplemental savings plan liability⁽²⁾	(1.4		)	1.4		(1.7		)	(.6		)	.3			—			63.7			(63.7		)	68.5			2.1		2.7		.01
Other non-operating income⁽³⁾	—			—		(10.9		)	.3			(11.2		)	(.05		)	—			—			40.3			18.2		22.1		.09
Adjusted Non-GAAP Basis	$	765.1		$	664.2	$	18.8		$	161.3		$	521.7		$	2.13		$	817.9		$	647.2		$	(61.2	)	$	131.7	$	454.3	$	1.87

Three months ended 9/30/2018
Operating expenses Net operating income Non-operating income
Provision (benefit) for income taxes⁽⁶⁾
Net income attributable to T. Rowe Price Group
Diluted earnings per share⁽⁷⁾
U.S. GAAP Basis $ 754.0
$ 640.6
$ 124.9
$ 183.9
$ 583.0
$ 2.30
Non-GAAP adjustments:
   Consolidated T. Rowe Price
investment products⁽¹⁾
(2.1 ) 3.6
(8.7 ) (1.2 ) (5.3 ) (.02 )
   Supplemental savings plan liability⁽²⁾
(7.4 ) 7.4
(6.3 ) .4
.7
—
   Other non-operating income⁽³⁾
—
—
(92.2 ) (18.8 ) (73.4 ) (.29 )
Adjusted Non-GAAP Basis $ 744.5
$ 651.6
$ 17.7
$ 164.3
$ 505.0
$ 1.99

~~The following schedules reconcile certain U.S. GAAP financial measures for the nine months ended~~

~~September 30, 2019 and 2018.~~

Nine months ended 9/30/2019
Operating expenses Net operating income Non-operating income
Provision (benefit) for income taxes⁽⁶⁾
Net income attributable to T. Rowe Price Group
Diluted earnings per share⁽⁷⁾
U.S. GAAP Basis $ 2,342.5
$ 1,806.7
$ 370.3
$ 522.0
$ 1,586.0
$ 6.47
Non-GAAP adjustments:
   Consolidated T. Rowe Price
investment products⁽¹⁾
(4.3 ) 10.6
(176.3 ) (23.7 ) (73.0 ) (.30 )
   Supplemental savings plan liability⁽²⁾
(51.9 ) 51.9
(44.8 ) 1.7
5.4
.03
   Other non-operating income⁽³⁾
—
—
(50.4 ) (12.4 ) (38.0 ) (.16 )
Adjusted Non-GAAP Basis $ 2,286.3
$ 1,869.2
$ 98.8
$ 487.6
$ 1,480.4
$ 6.04

~~Page 31~~


	Nine months ended 9/30/2018																	Three months ended 3/31/2019
	Operating expenses			Net operating income		Non-operating income			Provision (benefit) for income taxes⁽⁶⁾			Net income attributable to T. Rowe Price Group			Diluted earnings per share⁽⁷⁾			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	$	2,248.5		$	1,819.1	$	175.1		$	497.5		$	1,485.6		$	5.85		$	794.8		$	532.5	$	202.8		$	181.3		$	512.6		$	2.09
Non-GAAP adjustments:
Consolidated T. Rowe Price investment products⁽¹⁾	(4.6		)	9.2		(28.6		)	(1.8		)	(6.5		)	(.03		)	(1.6		)	3.1		(101.9		)	(18.9		)	(38.5		)	(.16		)
Supplemental savings plan liability⁽²⁾	(13.1		)	13.1		(14.2		)	(.2		)	(.9		)	—			(36.6		)	36.6		(31.0		)	1.8			3.8			.01
Other non-operating income⁽³⁾	—			—		(106.6		)	(23.1		)	(83.5		)	(.33		)	—			—		(25.7		)	(8.4		)	(17.3		)	(.07		)
Nonrecurring charge related to enactment of U.S. tax reform⁽⁴⁾	—			—		—			(20.8		)	20.8			.08
Nonrecurring charge related to enactment of Maryland state tax legislation⁽⁵⁾	—			—		—			(7.9		)	7.9			.03
Adjusted Non-GAAP Basis	$	2,230.8		$	1,841.4	$	25.7		$	443.7		$	1,423.4		$	5.60		$	756.6		$	572.2	$	44.2		$	155.8		$	460.6		$	1.87

⁽¹⁾

These non-GAAP adjustments remove the impact the consolidated T. Rowe Price investment products have on our U.S. GAAP consolidated statements of income. Specifically, we add back the operating expenses and subtract the investment income of the consolidated T. Rowe Price investment products. The adjustment to our operating expenses represents the operating expenses of the consolidated products, net of the elimination of related management and administrative fees. The adjustment to net income attributable to T. Rowe Price Group represents the net income of the consolidated products, net of redeemable non-controlling interest. We remove the impact of the consolidated ~~T. Rowe Price investment products as we believe they impact the reader’s ability to understand our core operating results.~~

T. Rowe Price investment products as we believe they impact the reader’s ability to understand our core operating results.

⁽²⁾

These non-GAAP adjustments remove the compensation expense impact from market valuation changes in the supplemental savings plan liability and the related net gains (losses) 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 participants. We use T. Rowe Price investment products to economically hedge the exposure to these market movements. We believe it is useful to offset the non-operating investment income (loss) realized on the hedges against the related compensation expense and remove the net impact to help the reader's ability to understand our core operating results and to increase comparability period to period.

⁽³⁾

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 ~~beginning in the second quarter of 2018,~~ non-consolidated seed investments and other investments that are not part of the cash and discretionary investment portfolio. We ~~decided to~~ 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. ~~The impact on previously reported non-GAAP measures is immaterial.~~ 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.


⁽⁴⁾ Page 26	During the second quarter of 2018, we recognized a nonrecurring charge of $20.8 million for an adjustment made to the charge taken in 2017 related to the enactment of U.S. tax reform. We believe it is useful to readers of our consolidated statements of income to adjust for this nonrecurring charge in arriving at net income attributable to T. Rowe Price Group and diluted earnings per share.

⁽⁵⁾

During the second quarter of 2018, we recognized a nonrecurring charge of $7.9 million for the remeasurement of our deferred tax assets and liabilities to reflect the effect of Maryland state tax legislation enacted on April 24, 2018. We believe it is useful to readers of our consolidated statements of income to adjust for this nonrecurring charge in arriving at net income attributable to T. Rowe Price Group and diluted earnings per share.

⁽⁶⁾⁽⁴⁾

The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of ~~24.8%~~22.5% for ~~the first nine months of 2019~~2020 and ~~23.8%~~25.3% for ~~the 2018 period. As such, the non-GAAP effective tax rate for the third quarter was 23.6% in 2019 and 24.5% in 2018.~~2019. We estimate that our effective tax rate for the full-year ~~2019~~2020 on a non-GAAP basis will be in the range of 23.5% to 25.5%.

~~Page 32~~


⁽⁷⁾⁽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:



	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

CAPITAL RESOURCES AND LIQUIDITY.

Sources of Liquidity

We remain debt-free with ample liquidity, including cash and investments in T. Rowe Price products, as follows:


(in millions)	9/30/2019		12/31/2018		3/31/2020		12/31/2019
Cash and cash equivalents	$	2,213.2	$	1,425.2	$	1,562.4	$	1,781.8
Discretionary investments	1,695.1		1,597.1		1,841.4		1,899.6
Total cash and discretionary investments	3,908.3		3,022.3		3,403.8		3,681.4
Redeemable seed capital investments	1,257.7		1,118.9		1,081.6		1,325.6
Investments used to hedge the supplemental savings plan liability	443.0		381.3		500.0		561.1
Total cash and investments in T. Rowe Price products	$	5,609.0	$	4,522.5	$	4,985.4	$	5,568.1

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 ~~$535.7~~$684.3 million at ~~September 30, 2019~~March 31, 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.

Page 27

The cash and investment presentation on the unaudited condensed consolidated balance sheet is based on the accounting treatment for the cash equivalent or investment item. The following table details how T. Rowe Price Group’s interests in cash and investments relate to where they are presented on the unaudited condensed consolidated balance sheet as of ~~September 30, 2019.~~March 31, 2020.


(in millions)	Cash and cash equivalents		Investments		Net assets of consolidated T. Rowe Price investment products⁽¹⁾		9/30/2019		Cash and cash equivalents		Investments		Net assets of consolidated T. Rowe Price investment products⁽¹⁾		3/31/2020
Cash and discretionary investments	$	2,213.2	$	1,626.2	$	68.9	$	3,908.3	$	1,562.4	$	1,727.2	$	114.2	$	3,403.8
Seed capital investments	—		262.5		995.2		1,257.7		—		225.4		856.2		1,081.6
Investments used to hedge the supplemental savings plan liability	—		443.0		—		443.0		—		500.0		—		500.0
Total cash and investments in T. Rowe Price products attributable to T. Rowe Price Group	2,213.2		2,331.7		1,064.1		5,609.0		1,562.4		2,452.6		970.4		4,985.4
Investment in UTI and other investments	—		274.2		—		274.2		—		278.7		—		278.7
Total cash and investments attributable to T. Rowe Price Group	2,213.2		2,605.9		1,064.1		5,883.2		1,562.4		2,731.3		970.4		5,264.1
Redeemable non-controlling interests	—		—		1,102.9		1,102.9		—		—		971.0		971.0
As reported on unaudited condensed consolidated balance sheet at September 30, 2019	$	2,213.2	$	2,605.9	$	2,167.0	$	6,986.1
As reported on unaudited condensed consolidated balance sheet at March 31, 2020									$	1,562.4	$	2,731.3	$	1,941.4	$	6,235.1

⁽¹⁾

The T. Rowe Price investment products that we consolidate are generally those products we provided seed capital at the time of their formation and we have a controlling interest. These products generally represent U.S. mutual funds as well as those funds regulated outside the U.S. The net assets of the T. Rowe Price investment products at ~~September 30, 2019~~March 31, 2020 consist of the assets of these products that we consolidate on our unaudited condensed consolidated balance sheets of ~~$2,247.4~~$2,024.3 million, less the liabilities of these products of ~~$80.4~~$82.9 million.

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.

~~Page 33~~

Uses of Liquidity

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 ~~$566.7~~$887.0 million in the first ~~nine months~~quarter of ~~2019~~2020 to repurchase ~~5.7~~8.3 million shares, or ~~2.4%~~3.5%, of our outstanding common stock at an average price of ~~$99.57~~$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.

Page 28

Since the end of ~~2016,~~2017, we have returned ~~$3.9~~$4.3 billion to stockholders through stock repurchases and our regular quarterly dividends, 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
Nine months ended 9/30/2019	549.9		566.7		1,116.6
2019							733.6		708.8		1,442.4
Three months ended 3/31/2020							214.7		887.0		1,101.7
Total	$	1,807.2	$	2,124.4	$	3,931.6	$	1,643.0	$	2,695.4	$	4,338.4

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.

Page 3429

Cash Flows

The following table summarizes the cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ that are attributable to T. Rowe Price Group, our consolidated T. Rowe Price investment products, and the related eliminations required in preparing the statement.


	Nine months ended																								Three months ended
	9/30/2019												9/30/2018												3/31/2020												3/31/2019
(in millions)	Cash flow attributable to T. Rowe Price Group			Cash flow attributable to consolidated T. Rowe Price investment products			Elims			As reported			Cash flow attributable to T. Rowe Price Group			Cash flow attributable to consolidated T. Rowe Price investment products			Elims			As reported			Cash flow attributable to T. Rowe Price Group			Cash flow attributable to consolidated T. Rowe Price investment products			Elims			As reported			Cash flow attributable to T. Rowe Price Group			Cash flow attributable to consolidated T. Rowe Price investment products			Elims			As reported
Cash flows from operating activities
Net income	$	1,586.0		$	165.7		$	(96.7	)	$	1,655.0		$	1,485.6		$	19.4		$	(8.3	)	$	1,496.7		$	343.1		$	(334.0	)	$	157.5		$	166.6		$	512.6		$	98.8		$	(57.4	)	$	554.0
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	131.7			—			—			131.7			114.9			—			—			114.9			46.1			—			—			46.1			41.9			—			—			41.9
Stock-based compensation expense	136.1			—			—			136.1			135.3			—			—			135.3			58.3			—			—			58.3			43.5			—			—			43.5
Net gains recognized on investments	(234.0		)	—			96.7			(137.3		)	(114.5		)	—			8.3			(106.2		)
Net (gains) losses recognized on investments																									324.8			—			(157.5		)	167.3			(139.4		)	—			57.4			(82.0		)
Net investments in T. Rowe Price investment products used to economically hedge supplemental savings plan liability	(20.5		)	—			—			(20.5		)	(14.4		)	—			—			(14.4		)	(8.9		)	—			—			(8.9		)	(18.2		)	—			—			(18.2		)
Net change in trading securities held by consolidated T. Rowe Price investment products	—			(688.1		)	—			(688.1		)	—			(578.3		)	—			(578.3		)	—			234.6			—			234.6			—			(184.2		)	—			(184.2		)
Other changes in assets and liabilities	428.8			(1.1		)	(3.9		)	423.8			454.0			(11.5		)	(4.1		)	438.4			100.6			23.7			(.6		)	123.7			233.0			(8.3		)	(1.0		)	223.7
Net cash provided by (used in) operating activities	2,028.1			(523.5		)	(3.9		)	1,500.7			2,060.9			(570.4		)	(4.1		)	1,486.4			864.0			(75.7		)	(.6		)	787.7			673.4			(93.7		)	(1.0		)	578.7
Net cash provided by (used in) investing activities	(230.0		)	(8.3		)	161.6			(76.7		)	(923.7		)	(22.5		)	115.8			(830.4		)	(15.0		)	(.8		)	43.4			27.6			(69.2		)	(3.4		)	38.8			(33.8		)
Net cash provided by (used in) financing activities	(1,010.1		)	544.8			(157.7		)	(623.0		)	(949.3		)	597.9			(111.7		)	(463.1		)	(1,068.4		)	118.9			(42.8		)	(992.3		)	(372.0		)	103.8			(37.8		)	(306.0		)
Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	—			(2.2		)	—			(2.2		)	—			(2.4		)	—			(2.4		)	—			(1.2		)	—			(1.2		)	—			(.7		)	—			(.7		)
Net change in cash and cash equivalents during period	788.0			10.8			—			798.8			187.9			2.6			—			190.5			(219.4		)	41.2			—			(178.2		)	232.2			6.0			—			238.2
Cash and cash equivalents at beginning of year	1,425.2			70.1			—			1,495.3			1,902.7			103.1			—			2,005.8			1,781.8			76.5			—			1,858.3			1,425.2			70.1			—			1,495.3
Cash and cash equivalents at end of period	$	2,213.2		$	80.9		$	—		$	2,294.1		$	2,090.6		$	105.7		$	—		$	2,196.3		$	1,562.4		$	117.7		$	—		$	1,680.1		$	1,657.4		$	76.1		$	—		$	1,733.5

Page 3530

Operating Activities

Operating activities attributable to T. Rowe Price Group during the first ~~nine months~~quarter of ~~2019~~2020 provided cash flows of ~~$2,028.1~~$864.0 million ~~a decrease~~as compared to $673.4 million during the first quarter of ~~$32.8 million from the 2018 period. Higher adjustments made to 2019 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 ~~$100.4~~$169.5 million ~~increase~~decline in ~~2019~~ net ~~income.~~income from the first quarter of 2019. The ~~most significant adjustment related to~~non-cash adjustments were driven by a ~~$119.5~~$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 gains in the ~~2018 period.~~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 decreased cash flows by ~~$25.2~~$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 ~~$230.0~~$15.0 million in the first ~~nine months~~quarter of ~~2019~~2020 compared with ~~$923.7~~$69.2 million in the ~~2018~~2019 period. During ~~the first nine months 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 ~~$945.0~~$17.9 million ~~to certain T. Rowe Price fixed income funds. Such rebalancing did not recur in~~during 2019. ~~During 2019,~~In addition, we ~~increased~~decreased our property and equipment expenditures by ~~$27.4~~$1.7 million and decreased the level of seed capital provided by ~~$45.8~~$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 $178.1~~remaining$2.6 million change in reported cash ~~used in~~flows from investing activities ~~attributable to T. Rowe Price Group primarily 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 nine months of 2019 compared with the 2018 period accounts for the remaining $14.2 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 ~~$1,010.1~~$1,068.4 million in the first ~~nine months~~quarter of ~~2019~~2020 compared with ~~$949.3~~$372.0 million in the ~~2018~~2019 period. During ~~2019,~~2020, there was a ~~$33.0~~$660.3 million increase in cash paid for common stock repurchases ~~and~~as we repurchased 5.8 million more common stock in the first quarter of 2020 as compared to the first quarter of 2019. Additionally, there was a ~~$28.1~~$30.6 million increase in dividends paid in ~~2019~~2020 as a result of an ~~8.6%~~18.4% increase in our quarterly dividend per share. The remaining change in reported cash flows from financing activities is primarily attributable to a ~~$99.1~~$10.1 million ~~decrease~~increase in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during the first ~~nine months~~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.

See Note 1 - The Company and Basis of Preparation note within Item 1. Financial Statements for a discussion of newly issued but not yet adopted accounting guidance.

Page 3631

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 ~~U.S. mutual~~T. Rowe Price funds and could be adversely affected if the independent directors of one or more of the ~~U.S. mutual~~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.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

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

During the ~~total potential loss information provided in Item 7A~~first quarter of 2020, the impact of the ~~Form 10-K Annual Report for 2018.~~

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

Page 3732

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	%

Any losses arising from the change in fair value of investments in T. Rowe Price products would result in a corresponding decrease, net of tax, in our net income attributable to T. Rowe Price Group. The direct investment in consolidated T. Rowe Price investment products represents our portion of the net assets of the product. Upon consolidation of these products, our direct investment is eliminated, and the net assets of the products are combined in our consolidated balance sheet, together with redeemable non-controlling interests, which represents the portion of the products that is owned by unrelated third-party investors. Any losses arising from the change in fair value of our direct investments in consolidated T. Rowe Price investment products would also result in a corresponding decrease, net of tax, in our net income attributable to T. Rowe Price Group. Further, we have investments in our portfolio that are used to economically hedge the change in our supplemental savings plan liability. Any gains or losses that would impact our net income attributable to T. Rowe Price Group result from any ineffectiveness of this economic hedge to the change in the supplemental savings plan liability.


Item 4.	Controls and Procedures.

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2019~~March 31, 2020. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures as of ~~September 30, 2019~~March 31, 2020, are effective at the reasonable assurance level to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, including this Form 10-Q quarterly report, is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our

Page 33

principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our principal executive and principal financial officers, has evaluated any change in our internal control over financial reporting that occurred during the ~~third~~first quarter of ~~2019~~2020, and has concluded that there was no change during the ~~third~~first quarter of ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

Item 1A. Risk Factors.

~~There~~Information regarding our risk factors appears in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 13, 2020. The following risk factor has occurred since previously reporting our risk factors in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Our business, financial condition, and results of operation may be adversely affected by the recent coronavirus outbreak.

Beginning in early 2020, global financial markets have been ~~no material~~monitoring and reacting to the novel coronavirus pandemic. The spread of the coronavirus has created significant volatility, uncertainty and economic disruption to the global economy and may impact our business, financial condition and results of operations. In particular global financial markets have seen increased volatility and significant changes in the ~~information provided in Item 1A~~value of investments. If the value of our ~~Form 10-K Annual Report for 2018.~~

assets under our management decreases, our revenue and operating results could be materially impacted. Furthermore, while we have in place robust and well-established business continuity plans that address the potential impact to our associates and our facilities, and a comprehensive suite of technologies which enable our associates to work remotely and conduct business, no assurance can be given that the steps we have taken

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will continue to be effective or appropriate. In the event that our associates become incapacitated by the coronavirus, our business operations may be impacted, which could lead to reputational and financial harm. Since our revenue is based on the market value and composition of the assets under our management, the ultimate impact on global financial markets and our clients’ decisions related to this event could adversely affect the Company’s revenue and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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
July 120,939
$ 114.11
73,427
20,195,409
August 1,569,190
$ 106.96
1,519,469
18,675,940
September 157,665
$ 116.17
20,300
18,655,640
Total 1,847,794
$ 108.21
1,613,196



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
January	264,939	$	129.26	51,645	17,323,402
February	1,325,194	$	125.41	1,190,000	16,133,402
March	7,100,681	$	103.33	7,092,342	24,041,060
Total	8,690,814	$	107.49	8,333,987

Shares repurchased by us in a quarter may include repurchases conducted pursuant to publicly announced board authorization, outstanding shares surrendered to the company to pay the exercise price in connection with swap exercises of employee stock options, and shares withheld to cover the minimum tax withholding obligation associated with the vesting of restricted stock awards. Of the total number of shares purchased during the ~~third~~first quarter of ~~2019~~2020, ~~234,281~~356,827 were related to shares surrendered in connection with employee stock option exercises and ~~317~~no shares were ~~related to shares~~ withheld to cover tax withholdings associated with the vesting of restricted stock awards.

The following table details the changes in and status of the Board of Directors’ outstanding publicly announced board authorizations.


Authorization dates	6/30/2019	Total Number of Shares Purchased		Maximum Number of Shares that May Yet Be Purchased at 9/30/2019
December 2016	268,836	(268,836	)	—
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	(1,344,360	)	8,655,640	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
	20,268,836	(1,613,196	)	18,655,640	17,375,047	15,000,000	(8,333,987	)	24,041,060

Item 4. Mine Safety Disclosures.

Not applicable.

~~Item 5. Other Information.~~


Item 5.	Other Information.

On ~~October 24, 2019~~April 28, 2020, we issued an earnings release reporting our results of operations for the ~~third~~first quarter of ~~2019~~2020 ~~and the first nine months of 2019.~~. A copy of that earnings release is furnished herewith as Exhibit ~~99.1~~99.1. This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

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Item 6. Exhibits.

The following exhibits required by Item 601 of Regulation S-K are furnished herewith.



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 ~~October 24, 2019,~~April 28, 2020, reporting our results of operations for the ~~third~~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		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		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

101.DEF		XBRL Taxonomy Definition Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on ~~October 24, 2019~~April 28, 2020.

T. Rowe Price Group, Inc.

By: /s/ Céline S. Dufétel

Vice President, Chief Financial Officer and Treasurer

Page 4137



(in millions)	9/30/2019
Fourth quarter 2019	$	6.8
2020	26.1
2021	25.6
2022	22.8
2023	20.3
Thereafter	63.4
Total future undiscounted cash flows	165.0
Less: imputed interest to be recognized in lease expense	(18.6		)
Operating lease liabilities, as reported	$	146.4



	Options		Weighted- average exercise price
Outstanding at December 31, 2018	11,300,393		$	69.05
Exercised	(2,847,972	)	$	63.58
Forfeited	(114,822	)	$	76.70
Expired	(7,839	)	$	59.03
Outstanding at September 30, 2019	8,329,760		$	70.83
Exercisable at September 30, 2019	6,410,125		$	69.12