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 ~~June 30, 2020~~March 31, 2021



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

For the transition period from to

Commission File Number: 000-32191

______________________________________

T. ROWE PRICE GROUP, INC.

(Exact name of registrant as specified in its charter)



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

100 East Pratt Street,, Baltimore,, Maryland21202

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

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

(Registrant’s telephone number, including area code)

________________



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

______________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. ☒ 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, ~~July~~

April 27, ~~2020,~~2021, is ~~226,985,631.~~226,855,575.

The exhibit index is at Item 6 on page ~~41.~~

34.

PART I – FINANCIAL INFORMATION


~~Item 1.~~	~~Financial Statements.~~

Item 1. Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)


	3/31/2021		12/31/2020
ASSETS
Cash and cash equivalents	$	2,830.1	$	2,151.7
Accounts receivable and accrued revenue	885.9		863.1
Investments	3,403.6		3,250.8
Assets of consolidated T. Rowe Price investment products ($1,782.9 million at March 31, 2021 and $2,497.4 million at December 31, 2020, related to variable interest entities)	1,946.8		2,695.5
Operating lease assets	110.2		117.6
Property and equipment, net	703.9		695.4
Goodwill	665.7		665.7
Other assets	218.2		219.2
Total assets	$	10,764.4	$	10,659.0

LIABILITIES
Accounts payable and accrued expenses	$	228.9	$	187.7
Liabilities of consolidated T. Rowe Price investment products ($49.0 million at March 31, 2021 and $47.7 million at December 31, 2020, related to variable interest entities)	53.7		57.7
Operating lease liabilities	146.0		154.1
Accrued compensation and related costs	260.8		133.6
Supplemental savings plan liability	769.9		772.2
Income taxes payable	284.0		85.0
Total liabilities	1,743.3		1,390.3

Commitments and contingent liabilities	0		0

Redeemable non-controlling interests	1,012.9		1,561.7

STOCKHOLDERS’ EQUITY
Preferred stock, undesignated, $.20 par value – authorized and unissued 20,000,000 shares	0		0
Common stock, $.20 par value—authorized 750,000,000; issued 226,948,000 shares at March 31, 2021 and 227,965,000 at December 31, 2020	45.4		45.6
Additional capital in excess of par value	654.6		654.6
Retained earnings	7,338.7		7,029.8
Accumulated other comprehensive loss	(30.5)		(23.0)
Total permanent stockholders’ equity	8,008.2		7,707.0
Total liabilities, redeemable non-controlling interests, and permanent stockholders’ equity	$	10,764.4	$	10,659.0

The accompanying notes are an integral part of these statements.

Page 2

6/30/2020 12/31/2019
ASSETS
Cash and cash equivalents $ 2,058.1
$ 1,781.8
Accounts receivable and accrued revenue 655.7
646.6
Investments 2,900.0
2,939.8
Assets of consolidated T. Rowe Price investment products ($2,005.4 million at June 30, 2020 and $1,975.3 million at December 31, 2019, related to variable interest entities) 2,161.5
2,276.9
Operating lease assets 131.5
110.8
Property and equipment, net 685.4
674.4
Goodwill 665.7
665.7
Other assets 219.4
234.4
Total assets $ 9,477.3
$ 9,330.4

LIABILITIES
Accounts payable and accrued expenses $ 194.3
$ 214.5
Liabilities of consolidated T. Rowe Price investment products ($41.6 million at June 30, 2020 and $27.0 million at December 31, 2019, related to variable interest entities) 54.8
39.2
Operating lease liabilities 166.4
146.3
Accrued compensation and related costs 384.7
112.1
Supplemental savings plan liability 577.0
563.4
Income taxes payable 259.3
31.8
Total liabilities 1,636.5
1,107.3

Commitments and contingent liabilities

Redeemable non-controlling interests 1,090.1
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 226,990,000 shares at June 30, 2020 and 235,214,000 at December 31, 2019 45.4
47.0
Additional capital in excess of par value 654.6
654.6
Retained earnings 6,102.9
6,443.5
Accumulated other comprehensive loss (52.2 ) (43.0 )
Total permanent stockholders’ equity 6,750.7
7,102.1
Total liabilities, redeemable non-controlling interests, and permanent stockholders’ equity $ 9,477.3
$ 9,330.4

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per-share amounts)


	Three months ended
	3/31/2021		3/31/2020
Revenues
Investment advisory fees	$	1,687.8	$	1,327.8
Administrative, distribution, and servicing fees	139.0		134.8
Net revenues	1,826.8		1,462.6

Operating expenses
Compensation and related costs	583.5		440.7
Distribution and servicing	85.6		65.7
Advertising and promotion	18.9		24.9
Product-related costs	41.0		41.6
Technology, occupancy, and facility costs	117.3		105.4
General, administrative, and other	87.3		77.1

Total operating expenses	933.6		755.4

Net operating income	893.2		707.2

Non-operating income (loss)
Net gains (losses) on investments	68.6		(154.6)
Net gains (losses) on consolidated investment products	37.2		(330.3)
Other income (loss)	(3.7)		(15.4)
Total non-operating income (loss)	102.1		(500.3)

Income before income taxes	995.3		206.9
Provision for income taxes	230.5		40.3
Net income	764.8		166.6
Less: net income (loss) attributable to redeemable non-controlling interests	15.4		(176.5)
Net income attributable to T. Rowe Price Group	$	749.4	$	343.1

Earnings per share on common stock of T. Rowe Price Group
Basic	$	3.20	$	1.43
Diluted	$	3.17	$	1.41

The accompanying notes are an integral part of these statements.

Page 3

Three months ended Six months ended
6/30/2020 6/30/2019 6/30/2020 6/30/2019
Revenues
Investment advisory fees $ 1,293.8
$ 1,270.2
$ 2,621.6
$ 2,464.4
Administrative, distribution, and servicing fees 121.6
125.0
256.4
258.1
Net revenues 1,415.4
1,395.2
2,878.0
2,722.5

Operating expenses
Compensation and related costs 549.0
483.2
989.7
974.7
Distribution and servicing 62.0
64.4
127.7
130.8
Advertising and promotion 13.4
19.8
38.3
41.4
Product-related costs 39.6
33.4
81.2
77.6
Technology, occupancy, and facility costs 111.3
104.9
216.7
203.0
General, administrative, and other 86.4
74.4
163.5
147.4
Total operating expenses 861.7
780.1
1,617.1
1,574.9

Net operating income 553.7
615.1
1,260.9
1,147.6

Non-operating income (loss)
Net gains on investments 170.6
61.8
16.0
161.9
Net gains (losses) on consolidated investment products 242.5
62.8
(87.8 ) 164.7
Other income (loss) 2.0
(.1 ) (13.4 ) .7
Total non-operating income (loss) 415.1
124.5
(85.2 ) 327.3

Income before income taxes 968.8
739.6
1,175.7
1,474.9
Provision for income taxes 240.3
183.7
280.6
365.0
Net income 728.5
555.9
895.1
1,109.9
Less: net income (loss) attributable to redeemable non-controlling interests 125.5
28.4
(51.0 ) 69.8
Net income attributable to T. Rowe Price Group $ 603.0
$ 527.5
$ 946.1
$ 1,040.1

Earnings per share on common stock of T. Rowe Price Group
Basic $ 2.58
$ 2.18
$ 3.99
$ 4.29
Diluted $ 2.55
$ 2.15
$ 3.95
$ 4.23

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Three months ended
	3/31/2021		3/31/2020
Net income	$	764.8	$	166.6
Other comprehensive income (loss)
Currency translation adjustments
Consolidated T. Rowe Price investment products - variable interest entities	(18.9)		(25.1)
Reclassification gains recognized in non-operating income upon deconsolidation of certain T. Rowe Price investment products	(2.6)		(.1)
Total currency translation adjustments of consolidated T. Rowe Price investment products - variable interest entities	(21.5)		(25.2)
Equity method investments	(.8)		(.1)


Other comprehensive loss before income taxes	(22.3)		(25.3)
Net deferred tax benefits	3.0		2.0
Total other comprehensive loss	(19.3)		(23.3)

Total comprehensive income	745.5		143.3
Less: comprehensive income (loss) attributable to redeemable non-controlling interests	3.6		(193.7)
Total comprehensive income attributable to T. Rowe Price Group	$	741.9	$	337.0

The accompanying notes are an integral part of these statements.

Page 4

Three months ended Six months ended
6/30/2020 6/30/2019 6/30/2020 6/30/2019
Net income $ 728.5
$ 555.9
$ 895.1
$ 1,109.9
Other comprehensive income (loss)
Currency translation adjustments
Consolidated T. Rowe Price investment products - variable interest entities 15.9
3.7
(9.2 ) (2.1 )
Reclassification gains recognized in non-operating income upon deconsolidation of certain T. Rowe Price investment products —
(.1 ) (.1 ) (.2 )
Total currency translation adjustments of consolidated T. Rowe Price investment products - variable interest entities 15.9
3.6
(9.3 ) (2.3 )
Equity method investments (9.4 ) 1.5
(9.5 ) 6.4
Other comprehensive income (loss) before income taxes 6.5
5.1
(18.8 ) 4.1
Net deferred tax benefits .7
(1.0 ) 2.7
(.9 )
Total other comprehensive income (loss) 7.2
4.1
(16.1 ) 3.2

Total comprehensive income 735.7
560.0
879.0
1,113.1
Less: comprehensive income (loss) attributable to redeemable non-controlling interests 135.8
29.4
(57.9 ) 69.5
Total comprehensive income attributable to T. Rowe Price Group $ 599.9
$ 530.6
$ 936.9
$ 1,043.6

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Six months ended							Three months ended
	6/30/2020			6/30/2019				3/31/2021		3/31/2020
Cash flows from operating activities							Cash flows from operating activities
Net income	$	895.1		$	1,109.9		Net income	$	764.8	$	166.6
Adjustments to reconcile net income to net cash provided by operating activities							Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment	94.3			86.0			Depreciation and amortization of property and equipment	49.0		46.1
Stock-based compensation expense	111.6			90.7			Stock-based compensation expense	57.5		58.3
Net (gains) losses recognized on investments	3.4			(124.4		)	Net (gains) losses recognized on investments	(59.5)		167.3
Net investments in T. Rowe Price investment products used to economically hedge supplemental savings plan liability	(10.0		)	(19.3		)
Net change in T. Rowe Price investment products used to economically hedge supplemental savings plan liability							Net change in T. Rowe Price investment products used to economically hedge supplemental savings plan liability	22.0		(8.9)
Net change in securities held by consolidated T. Rowe Price investment products	40.8			(444.0		)	Net change in securities held by consolidated T. Rowe Price investment products	(120.9)		234.6
Other changes in assets and liabilities	505.5			249.9			Other changes in assets and liabilities	281.8		123.7
Net cash provided by operating activities	1,640.7			948.8			Net cash provided by operating activities	994.7		787.7

Cash flows from investing activities							Cash flows from investing activities
Purchases of T. Rowe Price investment products	(237.1		)	(34.9		)	Purchases of T. Rowe Price investment products	(12.5)		(225.1)
Dispositions of T. Rowe Price investment products	347.9			103.8			Dispositions of T. Rowe Price investment products	60.3		299.1
Net cash of T. Rowe Price investment products on deconsolidation	(9.2		)	(5.1		)	Net cash of T. Rowe Price investment products on deconsolidation	(27.3)		(.8)
Additions to property and equipment	(105.3		)	(94.5		)	Additions to property and equipment	(58.8)		(46.0)
Other investing activity	6.1			1.6			Other investing activity	7.5		.4
Net cash provided by (used in) investing activities	2.4			(29.1		)
Net cash (used in) provided by investing activities							Net cash (used in) provided by investing activities	(30.8)		27.6

Cash flows from financing activities							Cash flows from financing activities
Repurchases of common stock	(1,027.1		)	(402.8		)	Repurchases of common stock	(259.2)		(891.3)
Common share issuances under stock-based compensation plans	54.0			78.8			Common share issuances under stock-based compensation plans	20.9		38.1
Dividends paid to common stockholders of T. Rowe Price Group	(425.7		)	(367.8		)	Dividends paid to common stockholders of T. Rowe Price Group	(252.3)		(215.2)
Net subscriptions received from redeemable non-controlling interest holders	87.7			190.3			Net subscriptions received from redeemable non-controlling interest holders	183.1		76.1
Net cash used in financing activities	(1,311.1		)	(501.5		)	Net cash used in financing activities	(307.5)		(992.3)

Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	(7.4		)	(.4		)	Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	.9		(1.2)

Net change in cash and cash equivalents during period	324.6			417.8			Net change in cash and cash equivalents during period	657.3		(178.2)
Cash and cash equivalents at beginning of period, including $76.5 million at December 31, 2019, and $70.1 million at December 31, 2018, held by consolidated T. Rowe Price investment products	1,858.3			1,495.3
Cash and cash equivalents at end of period, including $124.8 million at June 30, 2020, and $110.7 million at June 30, 2019, held by consolidated T. Rowe Price investment products	$	2,182.9		$	1,913.1
Cash and cash equivalents at beginning of period, including $104.8 million at December 31, 2020, and $76.5 million at December 31, 2019, held by consolidated T. Rowe Price investment products							Cash and cash equivalents at beginning of period, including $104.8 million at December 31, 2020, and $76.5 million at December 31, 2019, held by consolidated T. Rowe Price investment products	2,256.5		1,858.3
Cash and cash equivalents at end of period, including $83.7 million at March 31, 2021, and $117.7 million at March 31, 2020, held by consolidated T. Rowe Price investment products							Cash and cash equivalents at end of period, including $83.7 million at March 31, 2021, and $117.7 million at March 31, 2020, held by consolidated T. Rowe Price investment products	$	2,913.8	$	1,680.1

The accompanying notes are an integral part of these statements.

Page 5

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(shares in thousands; dollars in millions)

Three months ended 6/30/2020
Common
shares
outstanding Common
stock Additional
capital in
excess of
par value Retained
earnings
AOCI⁽¹⁾
Total
stockholders’
equity Redeemable non-controlling interests
Balances at March 31, 2020 227,985
$ 45.6
$ 654.6
$ 5,782.9
$ (49.1 ) $ 6,434.0
971.0
Net income —
—
—
603.0
—
603.0
125.5
Other comprehensive loss, net of tax —
—
—
—
(3.1 ) (3.1 ) 10.3
Dividends declared ($0.90 per share) —
—
—
(210.3 ) —
(210.3 ) —
Shares issued upon option exercises 296
.1
15.8
—
—
15.9
—
Restricted shares issued, net of shares withheld for taxes 8
—
—
—
—
—
—
Net shares issued upon vesting of restricted stock units 6
—
(.3 ) —
—
(.3 ) —
Stock-based compensation expense —
—
53.3
—
—
53.3
—
Restricted stock units issued as dividend equivalents —
—
.1
(.1 ) —
—
—
Common shares repurchased (1,305 ) (.3 ) (68.9 ) (72.6 ) —
(141.8 ) —
Net subscriptions into T. Rowe Price investment products —
—
—
—
—
—
26.1
Net deconsolidations of T. Rowe Price investment products —
—
—
—
—
—
(42.8 )
Balances at June 30, 2020 226,990
$ 45.4
$ 654.6
$ 6,102.9
$ (52.2 ) $ 6,750.7
$ 1,090.1

Three months ended 6/30/2019
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 March 31, 2019 236,432
$ 47.3
$ 654.5
$ 5,650.8
$ (41.6 ) $ 6,311.0
$ 886.7
Net income —
—
—
527.5
—
527.5
28.4
Other comprehensive income (loss), net of tax —
—
—
—
3.1
3.1
1.0
Dividends declared ($0.76 per share) —
—
—
(183.4 ) —
(183.4 ) —
Shares issued upon option exercises 665
.1
37.7
—
—
37.8
—
Restricted shares issued, net of shares withheld for taxes 7
—
(.1 ) —
—
(.1 ) —
Net shares issued upon vesting of restricted stock units 19
—
(.2 ) —
—
(.2 ) —
Forfeiture of restricted awards (2 ) —
—
—
—
—
—
Stock-based compensation expense —
—
47.2
—
—
47.2
—
Restricted stock units issued as dividend equivalents —
—
.1
(.1 ) —
—
—
Common shares repurchased (1,603 ) (.3 ) (84.6 ) (78.9 ) —
(163.8 ) —
Net subscriptions into T. Rowe Price investment products —
—
—
—
—
—
125.7
Net deconsolidations of T. Rowe Price investment products —
—
—
—
—
—
(29.5 )
Balances at June 30, 2019 235,518
$ 47.1
$ 654.6
$ 5,915.9
$ (38.5 ) $ 6,579.1
$ 1,012.3


	Three months ended 3/31/2021
	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, 2020	227,965	$	45.6	$	654.6	$	7,029.8	$	(23.0)	$	7,707.0	$	1,561.7
Net income	—	—		—		749.4		—		749.4		15.4
Other comprehensive income (loss), net of tax	—	—		—		—		(7.5)		(7.5)		(11.8)
Dividends declared ($1.08 per share)	—	—		—		(252.3)		—		(252.3)		—

Shares issued upon option exercises	572	.1		25.3		—		—		25.4		—

Net shares issued upon vesting of restricted stock units	41	—		(3.7)		—		—		(3.7)		—

Stock-based compensation expense	—	—		57.5		—		—		57.5		—
Restricted stock units issued as dividend equivalents	—	—		.1		(.1)		—		—		—
Common shares repurchased	(1,630)	(.3)		(79.2)		(188.1)		—		(267.6)		—
Net subscriptions into T. Rowe Price investment products	—	—		—		—		—		—		187.5
Net deconsolidations of T. Rowe Price investment products	—	—		—		—		—		—		(739.9)
Balances at March 31, 2021	226,948	$	45.4	$	654.6	$	7,338.7	$	(30.5)	$	8,008.2	$	1,012.9

	Three months ended 3/31/2020
	Common shares outstanding	Common stock		Additional capital in excess of par value		Retained earnings		AOCI(1)		Total stockholders’ equity		Redeemable non-controlling interests
Balances at December 31, 2019	235,214	$	47.0	$	654.6	$	6,443.5	$	(43.0)	$	7,102.1	$	1,121.0



Net income	—	—		—		343.1		—		343.1		(176.5)
Other comprehensive income (loss), net of tax	—	—		—		—		(6.1)		(6.1)		(17.2)
Dividends declared ($0.90 per share)	—	—		—		(214.7)		—		(214.7)		—

Shares issued upon option exercises	1,068	.2		41.1		—		—		41.3		—

Net shares issued upon vesting of restricted stock units	37	—		(3.0)		—		—		(3.0)		—

Stock-based compensation expense	—	—		58.3		—		—		58.3		—
Restricted stock units issued as dividend equivalents	—	—		.1		(.1)		—		0		—
Common shares repurchased	(8,334)	(1.6)		(96.5)		(788.9)		—		(887.0)		—
Net subscriptions into T. Rowe Price investment products	—	—		—		—		—		—		63.8
Net deconsolidations of T. Rowe Price investment products	—	—		—		—		—		—		(20.1)
Balances at March 31, 2020	227,985	$	45.6	$	654.6	$	5,782.9	$	(49.1)	$	6,434.0	$	971.0

(1) Accumulated other comprehensive income.

The accompanying notes are an integral part of these statements.

Page 6

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

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

Six months ended 6/30/2020
Common
shares
outstanding Common
stock Additional
capital in
excess of
par value Retained
earnings
AOCI⁽¹⁾
Total
stockholders’
equity Redeemable non-controlling interests
Balances at December 31, 2019 235,214
$ 47.0
$ 654.6
$ 6,443.5
$ (43.0 ) $ 7,102.1
$ 1,121.0
Net income —
—
—
946.1
—
946.1
(51.0 )
Other comprehensive income (loss), net of tax —
—
—
—
(9.2 ) (9.2 ) (6.9 )
Dividends declared ($1.80 per share) —
—
—
(425.1 ) —
(425.1 ) —
Shares issued upon option exercises 1,364
.3
56.9
—
—
57.2
—
Restricted shares issued, net of shares withheld for taxes 8
—
—
—
—
—
—
Shares issued upon vesting of restricted stock units, net of shares withheld for taxes 43
—
(3.3 ) —
—
(3.3 ) —
Stock-based compensation expense —
—
111.6
—
—
111.6
—
Restricted stock units issued as dividend equivalents —
—
.1
(.1 ) —
—
—
Common shares repurchased (9,639 ) (1.9 ) (165.3 ) (861.5 ) —
(1,028.7 ) —
Net subscriptions into T. Rowe Price investment products —
—
—
—
—
—
89.9
Net deconsolidations of T. Rowe Price investment products —
—
—
—
—
—
(62.9 )
Balances at June 30, 2020 226,990
$ 45.4
$ 654.6
$ 6,102.9
$ (52.2 ) $ 6,750.7
$ 1,090.1

Six months ended 6/30/2019
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 —
—
—
1,040.1
—
1,040.1
69.8
Other comprehensive income (loss), net of tax —
—
—
—
3.5
3.5
(.3 )
Dividends declared ($1.52 per share) —
—
—
(367.2 ) —
(367.2 ) —
Shares issued upon option exercises 1,495
.3
82.5
—
—
82.8
—
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 33
—
(1.4 ) —
—
(1.4 ) —
Forfeiture of restricted awards (7 ) —
—
—
—
—
—
Stock-based compensation expense —
—
90.7
—
—
90.7
—
Restricted stock units issued as dividend equivalents —
—
.1
(.1 ) —
—
—
Common shares repurchased (4,079 ) (.8 ) (171.8 ) (221.0 ) —
(393.6 ) —
Net subscriptions into T. Rowe Price investment products —
—
—
—
—
—
211.6
Net deconsolidations of T. Rowe Price investment products —
—
—
—
—
—
(9.1 )
Balances at June 30, 2019 235,518
$ 47.1
$ 654.6
$ 5,915.9
$ (38.5 ) $ 6,579.1
$ 1,012.3

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

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”), subadvised funds, separately managed accounts, ~~subadvised funds,~~collective investment trusts, and other

T. Rowe Price products. The other T. Rowe Price products ~~include: collective investment trusts,~~include 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; trust services; and ~~trust services.~~non-discretionary advisory services through model delivery.

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 ~~2020~~2021 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 ~~2019~~2020 Annual Report.

~~NEW ACCOUNTING GUIDANCE.~~

We adopted 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 on January 1, 2020 using the prospective method of adoption. 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 June 30, 2020, we capitalized an immaterial amount of implementation costs incurred in a cloud computing arrangement. Accordingly, the adoption of this guidance did not have a material impact on our consolidated balance sheets or our consolidated statements of 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 not believe that any such guidance has or will have a material effect on our financial position or results of operations.

~~U.S. ECONOMIC RELIEF LEGISLATION~~

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. The CARES Act’s provisions will not have a material impact on our financial position and results of operations.

~~Page 8~~

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

Revenues earned ~~during the three- and six-month periods ended June 30, 2020 and 2019~~ under agreements with clients include:


	Three months ended 3/31/2021								Three months ended 3/31/2020
			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	$	1,050.2	$	78.7	$	29.1	$	1,158.0	$	876.2	$	77.2	$	27.9	$	981.3
Subadvised funds, separate accounts, collective investment trusts, and other investment products	637.6		0		0		637.6		451.6		0		0		451.6
Other clients(1)	0		31.2		0		31.2		0		29.7		0		29.7
	$	1,687.8	$	109.9	$	29.1	$	1,826.8	$	1,327.8	$	106.9	$	27.9	$	1,462.6

Three months ended 6/30/2020 Three months ended 6/30/2019
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 $ 823.1
$ 69.4
$ 25.7
$ 918.2
$ 860.7
$ 69.7
$ 30.1
$ 960.5
Subadvised and separate accounts and other investment products 470.7
—
—
470.7
409.5
—
—
409.5
Other clients —
26.5
—
26.5
—
25.2
—
25.2
$ 1,293.8
$ 95.9
$ 25.7
$ 1,415.4
$ 1,270.2
$ 94.9
$ 30.1
$ 1,395.2

Six months ended 6/30/2020 Six months ended 6/30/2019
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 $ 1,699.3
$ 146.6
$ 53.6
$ 1,899.5
$ 1,676.6
$ 146.3
$ 60.3
$ 1,883.2
Subadvised and separate accounts and other investment products 922.3
—
—
922.3
787.8
—
—
787.8
Other clients —
56.2
—
56.2
—
51.5
—
51.5
$ 2,621.6
$ 202.8
$ 53.6
$ 2,878.0
$ 2,464.4
$ 197.8
$ 60.3
$ 2,722.5

(1) Other clients primarily include individuals, defined contribution plans, college savings plans, and institutions related to model delivery.

Total net revenues earned from our related parties, specifically T. Rowe Price investment products, aggregate ~~$1,142.8~~$1,482.3 million and ~~$1,147.6~~$1,207.7 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. Total net revenues earned during the six months ended June 30, 2020 and 2019 aggregate $2,350.5 million and $2,241.0 million,~~ respectively. Accounts

Page 7

receivable from these products aggregate to ~~$410.6~~$540.0 million at ~~June 30, 2020,~~March 31, 2021, and ~~$424.8~~$523.4 million at December 31, ~~2019.~~2020.

~~Following a change to~~In the second quarter of 2020, we changed our fee structure of the target date retirement funds insuch that our investment advisory fee revenue is now earned at the ~~second quarter of 2020,~~target date retirement fund level rather than at the underlying mutual fund level. As a result, we have modified our investment advisory fee and assets under management presentation below to separately breakout the fees earned ~~from clients~~ and ~~related~~ assets under management of our multi-asset portfolios. All prior periods have been recast to conform to this new presentation and to provide comparability.

~~Page 9~~

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


	Three months ended				Six months ended					Three months ended
(in millions)	6/30/2020		6/30/2019		6/30/2020		6/30/2019		(in millions)	3/31/2021		3/31/2020
U.S. mutual funds									U.S. mutual funds
Equity	$	545.9	$	553.8	$	1,114.3	$	1,071.2	Equity	$	729.8	$	568.4
Fixed income, including money market	66.8		69.1		138.5		137.9		Fixed income, including money market	59.0		71.7
Multi-asset	210.4		237.8		446.5		467.5		Multi-asset	261.4		236.1
	823.1		860.7		1,699.3		1,676.6			1,050.2		876.2
Subadvised and separate accounts and other investment products
Subadvised funds, separate accounts, collective investment trusts, and other investment products									Subadvised funds, separate accounts, collective investment trusts, and other investment products
Equity	305.6		255.0		585.1		491.5		Equity	429.8		279.5
Fixed income, including money market	33.9		39.0		71.9		76.3		Fixed income, including money market	31.7		38.0
Multi-asset	131.2		115.5		265.3		220.0		Multi-asset	176.1		134.1
	470.7		409.5		922.3		787.8			637.6		451.6
Total	$	1,293.8	$	1,270.2	$	2,621.6	$	2,464.4	Total	$	1,687.8	$	1,327.8

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


	Average during				Average during									Average during
	Three months ended				Six months ended				As of					Three months ended				As of
(in billions)	6/30/2020		6/30/2019		6/30/2020		6/30/2019		6/30/2020		12/31/2019		(in billions)	3/31/2021		3/31/2020			3/31/2021		12/31/2020
U.S. mutual funds													U.S. mutual funds
Equity	$	374.5	$	375.8	$	381.4	$	365.1	$	407.3	$	407.1	Equity	$	509.6	$	388.3		$	511.7	$	498.6
Fixed income, including money market	74.2		70.8		75.0		70.3		75.3		73.7		Fixed income, including money market	82.3		75.7			82.6		79.4
Multi-asset	179.9		191.9		185.1		189.0		188.2		201.9		Multi-asset	222.6		190.3			222.1		216.6
	628.6		638.5		641.5		624.4		670.8		682.7			814.5		654.3			816.4		794.6
Subadvised and separate accounts and other investment products
Subadvised funds, separate accounts, collective investment trusts, and other investment products													Subadvised funds, separate accounts, collective investment trusts, and other investment products
Equity	293.2		254.1		285.3		245.5		311.6		291.7		Equity	418.9		277.5			405.5		397.2
Fixed income, including money market	77.1		78.6		79.2		77.9		77.7		74.2		Fixed income, including money market	80.2		81.3			90.2		89.3
Multi-asset	141.3		128.6		145.4		124.0		159.9		158.2		Multi-asset	195.2		149.6			205.9		189.4
	511.6		461.3		509.9		447.4		549.2		524.1			694.3		508.4			701.6		675.9
Total	$	1,140.2	$	1,099.8	$	1,151.4	$	1,071.8	$	1,220.0	$	1,206.8	Total	$	1,508.8	$	1,162.7		$	1,518.0	$	1,470.5

Investors that we serve are primarily domiciled in the U.S.; investment advisory clients outside the U.S. account for ~~8.2%~~8.8% and ~~6.9%~~9.3% of our assets under management at ~~June 30, 2020,~~March 31, 2021, and December 31, ~~2019,~~2020, respectively.

Page 108

NOTE 3 – INVESTMENTS.

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


(in millions)	3/31/2021		12/31/2020

Investments held at fair value
T. Rowe Price investment products
Discretionary investments	$	1,664.3	$	1,647.7
Seed capital	269.5		169.5
Supplemental savings plan liability economic hedges	766.9		768.1
Investment partnerships and other investments	100.6		95.1
Equity method investments
T. Rowe Price investment products
Discretionary investments	245.8		242.9
Seed capital	203.7		178.6

23% investment in UTI Asset Management Company Limited (India)	149.1		145.5
Investment partnerships and other investments	2.7		2.4
U.S. Treasury note	1.0		1.0
Total	$	3,403.6	$	3,250.8

(in millions) 6/30/2020 12/31/2019
Investments held at fair value
T. Rowe Price investment products - discretionary investments $ 992.4
$ 1,221.8
T. Rowe Price investment products - seed capital 132.2
181.1
T. Rowe Price investment products - supplemental savings plan liability economic hedges 529.2
561.1
Investment partnerships and other investments 93.4
99.7
Equity method investments
T. Rowe Price investment products - discretionary investments 809.6
610.0
T. Rowe Price investment products - seed capital 145.3
95.6
T. Rowe Price investment products - supplemental savings plan liability economic hedges 35.3
—
26% interest in UTI Asset Management Company Limited (India) 155.9
164.5
Investment partnerships and other investments 5.7
5.0
U.S. Treasury note 1.0
1.0
Total $ 2,900.0
$ 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.~~transferability restrictions. 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 six-~~three months ended ~~June 30, 2020,~~March 31, 2021, net gains on investments included ~~$125.5~~$38.8 million ~~and $21.9 million, respectively,~~ of net unrealized gains related to investments held at fair value that were still held at ~~June 30, 2020.~~March 31, 2021. For the same period of ~~2019, the~~2020, net ~~gains~~losses on investments included ~~$28.7~~$103.6 million ~~and $79.3 million, respectively,~~ of net unrealized ~~gains on~~losses related to investments held at fair value that were still held at ~~June 30, 2019.~~March 31, 2020.

During the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ certain T. Rowe Price investment products in which we provided initial seed capital at the time of formation were deconsolidated, as we no longer had a controlling interest. Depending on our ownership interest, we are now reporting our residual interests in these T. Rowe Price investment products as either an equity method investment or an investment held at fair value. Additionally, during the ~~six~~three months ended ~~2019,~~March 31, 2020, certain T. Rowe Price investment products that were being accounted for as equity method investments were consolidated, as we regained a controlling interest. The net impact of these changes on our unaudited condensed consolidated balance sheets and statements of income as of the dates the portfolios were deconsolidated or reconsolidated is detailed below.


	Three months ended
(in millions)	3/31/2021		3/31/2020
Net decrease in assets of consolidated T. Rowe Price investment products	$	(928.1)	$	(46.2)
Net decrease in liabilities of consolidated T. Rowe Price investment products	$	(15.3)	$	(2.4)
Net decrease in redeemable non-controlling interests	$	(739.9)	$	(20.1)

Gains recognized upon deconsolidation	$	2.6	$	.1

Three months ended Six months ended
(in millions) 6/30/2020 6/30/2019 6/30/2020 6/30/2019
Net increase (decrease) in assets of consolidated T. Rowe Price investment products $ (100.0 ) $ (68.4 ) $ (146.2 ) $ (56.1 )
Net decrease in liabilities of consolidated T. Rowe Price investment products $ (1.2 ) $ (.3 ) $ (3.6 ) $ (1.2 )
Net increase (decrease) in redeemable non-controlling interests $ (42.8 ) $ (29.5 ) $ (62.9 ) $ (9.1 )

Gains recognized upon deconsolidation $ —
$ .1
$ .1
$ .2

~~Page 11~~

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 (loss).~~income.

Page 9

VARIABLE INTEREST ENTITIES.

Our investments at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, include interests in variable interest entities that we do not consolidate as we are not deemed the primary beneficiary. Our maximum risk of loss related to our involvement with these entities is as follows:


(in millions)	3/31/2021		12/31/2020
Investment carrying values	$	289.6	$	144.7
Unfunded capital commitments	11.3		12.3
Accounts receivable	60.7		13.8
	$	361.6	$	170.8

(in millions) 6/30/2020 12/31/2019
Investment carrying values $ 112.5
$ 156.0
Unfunded capital commitments 14.4
18.1
Uncollected investment advisory and administrative fees 8.1
10.5
$ 135.0
$ 184.6

The unfunded capital commitments totaling ~~$14.4~~$11.3 million at ~~June 30, 2020,~~March 31, 2021 and ~~$18.1~~$12.3 million at December 31, ~~2019,~~2020 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 investments held at fair value 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~~

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.

6/30/2020 12/31/2019
(in millions) Level 1 Level 2 Level 1 Level 2
Cash equivalents held in T. Rowe Price money market funds $ 1,705.1
$ —
$ 1,355.6
$ —
T. Rowe Price investment products - discretionary investments 992.4
—
1,221.8
—
T. Rowe Price investment products - seed capital 122.3
9.9
171.2
9.9
T. Rowe Price investment products - supplemental savings plan liability economic hedges 529.2
—
561.1
—
Other investments .2
2.7
—
—
Total $ 3,349.2
$ 12.6
$ 3,309.7
$ 9.9


	3/31/2021				12/31/2020
(in millions)	Level 1		Level 2		Level 1		Level 2
T. Rowe Price investment products
Cash equivalents held in money market funds	2,487.5		$	—	$	1,931.1	$	—
Discretionary investments	1,664.3		—		1,647.7		—
Seed capital	254.6		14.9		156.6		12.9
Supplemental savings plan liability economic hedges	766.9				768.1		—
Other investments	.2		.7		.5		.6
Total	$	5,173.5	$	15.6	$	4,504.0	$	13.5

~~As required by the accounting guidance, the~~The fair value hierarchy level table above does not include the investment partnerships and other investments 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 ~~$90.5~~$99.7 million at ~~June 30, 2020,~~March 31, 2021, and ~~$99.7~~$94.0 million at December 31, ~~2019.~~2020.

~~Page 12~~

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:

6/30/2020 12/31/2019
(in millions) Voting
interest entities Variable interest entities Total Voting
interest entities Variable interest entities Total
Cash and cash equivalents⁽¹⁾
$ 11.4
$ 113.4
$ 124.8
$ 9.9
$ 66.6
$ 76.5
Investments⁽²⁾
138.0
1,865.8
2,003.8
281.1
1,891.3
2,172.4
Other assets 6.7
26.2
32.9
10.6
17.4
28.0
Total assets 156.1
2,005.4
2,161.5
301.6
1,975.3
2,276.9
Liabilities 13.2
41.6
54.8
12.2
27.0
39.2
Net assets $ 142.9
$ 1,963.8
$ 2,106.7
$ 289.4
$ 1,948.3
$ 2,237.7

Attributable to T. Rowe Price Group $ 111.4
$ 905.2
$ 1,016.6
$ 199.6
$ 917.1
$ 1,116.7
Attributable to redeemable non-controlling interests 31.5
1,058.6
1,090.1
89.8
1,031.2
1,121.0
$ 142.9
$ 1,963.8
$ 2,106.7
$ 289.4
$ 1,948.3
$ 2,237.7


	3/31/2021						12/31/2020
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Cash and cash equivalents(1)	$	3.0	$	80.7	$	83.7	$	7.1	$	97.7	$	104.8
Investments(2)	157.5		1,664.5		1,822.0		188.2		2,372.7		2,560.9
Other assets	3.4		37.7		41.1		2.8		27.0		29.8
Total assets	163.9		1,782.9		1,946.8		198.1		2,497.4		2,695.5
Liabilities	4.7		49.0		53.7		10.0		47.7		57.7
Net assets	$	159.2	$	1,733.9	$	1,893.1	$	188.1	$	2,449.7	$	2,637.8

Attributable to T. Rowe Price Group	$	96.4	$	783.8	$	880.2	$	130.7	$	945.4	$	1,076.1
Attributable to redeemable non-controlling interests	62.8		950.1		1,012.9		57.4		1,504.3		1,561.7
	$	159.2	$	1,733.9	$	1,893.1	$	188.1	$	2,449.7	$	2,637.8

⁽¹⁾Cash and cash equivalents includes ~~$10.5~~$2.8 million at ~~June 30, 2020,~~March 31, 2021, and ~~$9.1~~$7.0 million at December 31, ~~2019,~~2020, of T. Rowe Price money market mutual funds.

⁽²⁾Investments ~~includes $45.9~~include $24.4 million at ~~June 30, 2020,~~March 31, 2021, and ~~$40.2~~$26.9 million at December 31, ~~2019~~2020 of other 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- and six-~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ are reflected in our unaudited condensed consolidated statements of income as follows:


	Three months ended
	3/31/2021						3/31/2020
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Operating expenses reflected in net operating income	$	(.2)	$	(3.3)	$	(3.5)	$	(.2)	$	(3.5)	$	(3.7)
Net investment income (loss) reflected in non-operating income (loss)	6.1		31.1		37.2		(35.2)		(295.1)		(330.3)
Impact on income before taxes	$	5.9	$	27.8	$	33.7	$	(35.4)	$	(298.6)	$	(334.0)

Net income (loss) attributable to T. Rowe Price Group	$	4.0	$	14.3	$	18.3	$	(22.6)	$	(134.9)	$	(157.5)
Net income (loss) attributable to redeemable non-controlling interests	1.9		13.5		15.4		(12.8)		(163.7)		(176.5)
	$	5.9	$	27.8	$	33.7	$	(35.4)	$	(298.6)	$	(334.0)

Three months ended
6/30/2020 6/30/2019
(in millions) Voting interest entities Variable interest entities Total Voting interest entities Variable interest entities Total
Operating expenses reflected in net operating income $ (.3 ) $ (3.3 ) $ (3.6 ) $ (.7 ) $ (3.1 ) $ (3.8 )
Net investment income (loss) reflected in non-operating income (loss) 16.4
226.0
242.4
11.4
51.4
62.8
Impact on income before taxes $ 16.1
$ 222.7
$ 238.8
$ 10.7
$ 48.3
$ 59.0

Net income (loss) attributable to T. Rowe Price Group $ 12.9
$ 100.4
$ 113.3
$ 5.2
$ 25.4
$ 30.6
Net income (loss) attributable to redeemable non-controlling interests 3.2
122.3
125.5
5.5
22.9
28.4
$ 16.1
$ 222.7
$ 238.8
$ 10.7
$ 48.3
$ 59.0

Six months ended
6/30/2020 6/30/2019
(in millions) Voting
interest entities Variable interest entities Total Voting
interest entities Variable interest entities Total
Operating expenses reflected in net operating income $ (.5 ) $ (6.8 ) $ (7.3 ) $ (1.0 ) $ (5.9 ) $ (6.9 )
Net investment income (loss) reflected in non-operating income (18.8 ) (69.1 ) (87.9 ) 19.4
145.3
164.7
Impact on income before taxes $ (19.3 ) $ (75.9 ) $ (95.2 ) $ 18.4
$ 139.4
$ 157.8

Net income (loss) attributable to T. Rowe Price Group $ (9.7 ) $ (34.5 ) $ (44.2 ) $ 13.9
$ 74.1
$ 88.0
Net income (loss) attributable to redeemable non-controlling interests (9.6 ) (41.4 ) (51.0 ) 4.5
65.3
69.8
$ (19.3 ) $ (75.9 ) $ (95.2 ) $ 18.4
$ 139.4
$ 157.8

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 ~~$2.1~~$1.3 million and ~~$2.2~~$2.5 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, against the investment advisory and administrative fees earned from these products. ~~Operating expenses eliminated for the six months ended June 30, 2020 and 2019, were $4.6 million and $3.7 million, respectively.~~ The net investment income (loss) reflected in ~~non-operating~~non-

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

The table below details the impact of these consolidated investment products on the individual lines of our unaudited condensed consolidated statements of cash flows for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.


	Three months ended
	3/31/2021						3/31/2020
(in millions)	Voting interest entities		Variable interest entities		Total		Voting interest entities		Variable interest entities		Total
Net cash provided by (used in) operating activities	$	(31.7)	$	(112.0)	$	(143.7)	$	11.3	$	(87.0)	$	(75.7)
Net cash used in investing activities	(9.1)		(18.2)		(27.3)		(.8)		0		(.8)
Net cash provided by financing activities	36.7		112.3		149.0		2.7		116.2		118.9
Effect of exchange rate changes on cash and cash equivalents of consolidated T. Rowe Price investment products	0		.9		.9		0		(1.2)		(1.2)
Net change in cash and cash equivalents during period	(4.1)		(17.0)		(21.1)		13.2		28.0		41.2
Cash and cash equivalents at beginning of year	7.1		97.7		104.8		9.9		66.6		76.5
Cash and cash equivalents at end of period	$	3.0	$	80.7	$	83.7	$	23.1	$	94.6	$	117.7

Six months ended
6/30/2020 6/30/2019
(in millions) Voting
interest entities Variable interest entities Total Voting
interest entities Variable interest entities Total
Net cash provided by (used in) operating activities $ .8
$ (49.8 ) $ (49.0 ) $ (32.7 ) $ (258.4 ) $ (291.1 )
Net cash used in investing activities (9.2 ) —
(9.2 ) (5.1 ) —
(5.1 )
Net cash provided by in financing activities 9.9
104.0
113.9
34.5
302.7
337.2
Effect of exchange rate changes on cash and cash equivalents of consolidated
T. Rowe Price investment products —
(7.4 ) (7.4 ) —
(.4 ) (.4 )
Net change in cash and cash equivalents during period 1.5
46.8
48.3
(3.3 ) 43.9
40.6
Cash and cash equivalents at beginning of year 9.9
66.6
76.5
18.5
51.6
70.1
Cash and cash equivalents at end of period $ 11.4
$ 113.4
$ 124.8
$ 15.2
$ 95.5
$ 110.7

The net cash provided by financing activities during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ includes ~~$26.2~~$34.1 million and ~~$146.9~~$42.8 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.

NOTE 6 – STOCKHOLDERS’ EQUITY.

Accounts payable and accrued expenses includes liabilities of ~~$10.6~~$10.9 million at ~~June 30, 2020,~~March 31, 2021, and ~~$12.2~~$2.5 million at December 31, ~~2019,~~2020, for common stock repurchases that settled during the first week of ~~July 2020~~April 2021 and January ~~2020,~~2021, respectively.

NOTE 7 – STOCK-BASED COMPENSATION.

The following table summarizes the status of, and changes in, our stock options during the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

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 ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

Restricted
shares

Restricted
stock
units

Weighted-average
fair value
Nonvested at December 31, 2019 7,404
6,718,261
$ 98.75
Time-based grants 7,412
39,925
$ 116.08
Dividend equivalents granted to non-employee directors —
1,243
$ 110.74
Vested (7,404 ) (87,021 ) $ 97.44
Forfeited —
(67,294 ) $ 96.82
Nonvested at June 30, 2020 7,412
6,605,114
$ 98.91

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 ~~June 30, 2020~~.March 31, 2021. 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)
Third quarter 2020 $ 53.6
Fourth quarter 2020 46.7
2021 108.7
2022 through 2026 90.0
Total $ 299.0

NOTE 8 – 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 outstanding stock options had an anti-dilutive impact on the diluted earnings per common share calculation in the periods presented.

Three months ended Six months ended
(in millions) 6/30/2020 6/30/2019 6/30/2020 6/30/2019
Net income attributable to T. Rowe Price Group $ 603.0
$ 527.5
$ 946.1
$ 1,040.1
Less: net income allocated to outstanding restricted stock and stock unit holders 16.8
13.8
26.2
26.8
Net income allocated to common stockholders $ 586.2
$ 513.7
$ 919.9
$ 1,013.3

Weighted-average common shares
Outstanding 227.4
235.9
230.7
236.2
Outstanding assuming dilution 229.5
239.2
233.1
239.4

NOTE 9 – OTHER COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE LOSS.

The changes in each component of accumulated other comprehensive loss, including reclassification adjustments for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ are presented in the table below.

Three months ended 6/30/2020 Three months ended 6/30/2019
(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 $ (47.0 ) $ (2.1 ) $ (49.1 ) $ (45.0 ) $ 3.4
$ (41.6 )
Other comprehensive income (loss) before reclassifications and income taxes (7.3 ) 5.7
(1.6 ) 1.5
2.7
4.2
Reclassification adjustments recognized in non-operating income —
—
—
—
(.1 ) (.1 )
(7.3 ) 5.7
(1.6 ) 1.5
2.6
4.1
Net deferred tax benefits (income taxes) (.1 ) (1.4 ) (1.5 ) (.3 ) (.7 ) (1.0 )
Other comprehensive income (loss) (7.4 ) 4.3
(3.1 ) 1.2
1.9
3.1
Balances at end of period $ (54.4 ) $ 2.2
$ (52.2 ) $ (43.8 ) $ 5.3
$ (38.5 )


	Three months ended 3/31/2021						Three months ended 3/31/2020

(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	$	(43.6)	$	20.6	$	(23.0)	$	(46.9)	$	3.9	$	(43.0)



Other comprehensive income (loss) before reclassifications and income taxes	(.8)		(7.1)		(7.9)		(.1)		(7.9)		(8.0)
Reclassification adjustments recognized in non-operating income	0		(2.6)		(2.6)		0		(.1)		(.1)
	(.8)		(9.7)		(10.5)		(.1)		(8.0)		(8.1)
Net deferred tax benefits (income taxes)	.5		2.5		3.0		0		2.0		2.0
Other comprehensive income (loss)	(.3)		(7.2)		(7.5)		(.1)		(6.0)		(6.1)
Balances at end of period	$	(43.9)	$	13.4	$	(30.5)	$	(47.0)	$	(2.1)	$	(49.1)

The other comprehensive income (loss) in the table above excludes ~~$10.3~~$11.8 million ~~in the 2020 quarter~~ and ~~$1.0~~$17.2 million ~~in the 2019 quarter~~ of other comprehensive ~~income~~loss related to redeemable non-controlling interests held in our consolidated ~~products.~~products for the three months ended March 31, 2021 and 2020, respectively.

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

~~The other comprehensive income (loss) in the table above excludes $6.9 million for the 2020 period and $.3 million for the 2019 period of other comprehensive losses.~~

NOTE 10 – 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~~The parties each filed motions for summary judgment and, with the exception of one claim, the court has denied the parties’ cross motions for summary judgment. A trial has been scheduled to begin in ~~the expert discovery phase of litigation and we~~September 2021. 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~~matter discussed above, various claims against us arise in the ordinary course of business, including employment-related claims. In the opinion of management, after consultation with counsel, the likelihood of an adverse determination in one or more of these pending ordinary course of business claims that would have a material adverse effect on our financial position or results of operations is remote.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

T. Rowe Price Group, Inc.:

Results of Review of Interim Financial Information

We have reviewed the condensed consolidated balance sheet of T. Rowe Price Group, Inc. and subsidiaries ~~("the Company"~~(the “Company") as of ~~June 30, 2020,~~March 31, 2021, the related condensed consolidated statements of income and comprehensive income, ~~and~~ stockholders’ equity, ~~for the three-month~~ and ~~six-month periods ended June 30, 2020 and 2019, the related condensed consolidated statements of~~ cash flows for the ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2019,~~2020, 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, 2020,~~11, 2021, 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, ~~2019,~~2020, 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.

~~July~~April 29, ~~2020~~2021

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

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, collective investment trusts, and other T. Rowe Price products. The other T. Rowe Price products ~~include: collective investment trusts,~~include 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; trust services; and ~~trust services.~~non-discretionary advisory services through model delivery.

We manage a broad range of U.S., international and global stock, bond, and money market mutual funds and collective investment trusts 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 in key capabilities, including investment professionals, distribution professionals, technologies, and new product ~~offerings; and, most importantly, we~~offerings in order to provide our clients with strong investment management expertise and ~~service both now and in the future.~~service.

U.S. equities ~~surged~~generated strong returns in the first quarter of 2021, a continuation of a remarkably robust stock market given the pandemic and related economic dislocations. Most major U.S. equity indexes hit all-time highs during the ~~second~~ quarter, ~~2020, bouncing back sharply to recover some~~although the market was led by shares of ~~their steep losses in February and March. Massive stimulus efforts from the Federal Reserve and the federal government~~smaller companies as well as value stocks and cyclical businesses that are closely tied to the ~~gradual lifting~~health of ~~lockdowns~~the economy. Technology and other growth stocks trailed.

In general, equities were lifted by the accelerating rollout of coronavirus vaccines, favorable economic data and corporate earnings reports, and expectations for new federal fiscal stimulus measures. Although Congress passed a $1.9 trillion coronavirus relief bill in March and the ~~reopening of economies drove the market’s vigorous gains~~Biden administration prepared to pursue a significant increase in infrastructure spending, some investors were concerned about a sharp increase in longer-term U.S. Treasury yields during the ~~quarter. While most U.S. economic data were dismal, some better-than-expected readings~~quarter and possibly higher inflation later in the quarter boosted investor sentiment. However, as the quarter ended, investors were somewhat concerned about increasing coronavirus cases in a number of states, which prompted some governors to stop or reverse some of their reopening efforts.2021.

Stocks in developed non-U.S. equity markets advanced but underperformed U.S. ~~shares.~~equities; a stronger U.S. dollar versus several key currencies weighed on local returns in U.S. dollar terms. European stock markets were mostly positive despite the reinstatement of lockdown measures in ~~U.S. dollar terms, with German stocks leading the way. All~~some countries. Most developed Asian and Far East markets ~~were positive, with Australia and New Zealand displaying the best returns.~~posted gains; Japanese ~~stocks returned almost 12% in U.S. dollar terms.~~shares rose less than 2%.

Emerging markets stocks ~~outperformed~~also advanced but underperformed developed ~~non-U.S. markets. Asian~~markets, hurt in part by rising U.S. Treasury yields and a stronger U.S. dollar against many currencies. Latin American markets were ~~positive, with Indonesian shares leading the region. Latin American shares were also very strong, led by Argentina and Brazil.~~mostly negative in dollar terms. Asian market returns varied widely. In emerging Europe, ~~Russian~~Turkish shares and the lira tumbled as the Turkish ~~stocks returned about 19%~~president unexpectedly replaced the head of the central bank shortly after an interest rate increase in ~~U.S. dollar terms.~~March.

Returns of several major equity market indexes ~~for the three- and six-month periods ended June 30, 2020,~~ were as follows:

NASDAQ Composite Index⁽¹⁾

NASDAQ Composite Index(1)

⁽¹⁾Returns exclude dividends

Global ~~bonds produced positive returns.~~bond returns were mostly negative in U.S. dollar terms. In the U.S. ~~investment-grade market,~~, high yield securities benefited from favorable corporate ~~bonds fared best as credit spreads narrowed~~earnings and expectations of a stronger economy to post gains. Higher-quality securities with greater interest rate sensitivity were hurt by a sharp increase in ~~part because the~~intermediate- and long-term U.S. Treasury yields. The Federal Reserve announced that it would begin buying a broad portfolio of U.S. corporate bonds. Asset-backed securities rose to a lesser extent, while mortgage-backed securities and Treasuries lagged with modest returns. The Fed kept short-term interest rates near ~~zero percent;~~0%, but the 10-year U.S. Treasury note yield ~~decreased~~increased from ~~.70%~~0.93% to ~~.66%~~1.74%. Longer-term corporate and U.S. Treasury bonds were among the worst performers. Mortgage- and asset-backed securities fell to a lesser extent. Tax-free municipal bonds ~~produced positive returns but narrowly underperformed~~held up relatively well, helped by the ~~broad taxable bond market. High yield bonds easily outperformed the investment-grade market.~~prospect of more federal aid to shore up state and local finances.

Bonds in developed non-U.S. markets ~~produced gains~~declined in U.S. dollar ~~terms. Eurozone bond returns to~~terms, hurt by rising longer-term interest rates in local markets and weaker currencies versus the U.S. ~~investors were helped by dollar weakness against~~dollar. The British pound, however, appreciated about 1% versus the ~~Euro.~~dollar.

Emerging markets bonds ~~displayed strong positive returns. Bonds~~also produced negative returns as longer-term interest rates generally increased and a few countries also raised short-term rates. Local currency issues underperformed bonds denominated in ~~U.S.~~ dollars ~~outperformed local currency issues,~~ as ~~weakness in certain~~many currencies, ~~such as~~especially the Turkish lira and the Brazilian real, ~~and~~weakened versus the ~~Turkish lira, weighed on local bond performance in U.S. dollar terms.~~dollar.

Returns for several major bond market indexes ~~for the three- and six-month periods ended June 30, 2020,~~ were as follows:

Three months ended Six months ended
Index 6/30/2020 6/30/2020
Bloomberg Barclays U.S. Aggregate Bond Index 2.9% 6.1%
JPMorgan Global High Yield Index 10.8% (5.7)%
Bloomberg Barclays Municipal Bond Index 2.7% 2.1%
Bloomberg Barclays Global Aggregate Ex-U.S. Dollar Bond Index 3.4% .6%
JPMorgan Emerging Markets Bond Index Plus 9.1% (.4)%

ASSETS UNDER MANAGEMENT.

Assets under management ended the ~~second~~first quarter of ~~2020~~2021 at ~~$1,220.0~~$1,518.0 billion, an increase of ~~$211.2~~$47.5 billion from ~~March~~December 31, ~~2020~~2020. This increase was driven by market appreciation, net of distributions not reinvested, of $46.3 billion and ~~$13.2 billion from the end of 2019. Net~~net cash inflows ~~were $14.7 billion, including large subscriptions from institutional clients into U.S. equity and multi-asset, and clients~~of $1.2 billion. Clients transferred ~~$4.4~~$5.6 billion in net assets from the U.S. mutual funds to collective investment trusts and other investment products, of which ~~$1.8~~$4.9 billion transferred into the retirement date trusts. ~~Market appreciation and income, net of dividends not reinvested, increased our assets under management by $196.5 billion in the second quarter of 2020.~~

For the six months ended June 30, 2020, net cash inflows were $8.7 billion, and clients transferred $8.8 billion in net assets from the U.S. mutual funds to other investment products, of which $6.1 billion transferred into the retirement date trusts. Market appreciation and income, net of dividends not reinvested, increased our assets under management by $4.5 billion in the six months ended June 30, 2020.

The following tables detail changes in our assets under management, by vehicle and asset class, during the ~~three- and six-month periods ended June 30, 2020:~~first quarter of 2021:


	Three months ended 3/31/2021
(in billions)	U.S. mutual funds		Subadvised funds and separate accounts		Collective investment trusts and other investment products		Total
Assets under management at beginning of period	$	794.6	$	400.1	$	275.8	$	1,470.5

Net cash flows before client transfers	2.0		(8.2)		7.4		1.2
Client transfers	(5.6)		—		5.6		—
Net cash flows after client transfers	(3.6)		(8.2)		13.0		1.2
Net market appreciation and gains	25.5		11.9		9.0		46.4
Net distributions not reinvested	(.1)		—		—		(.1)

Change during the period	21.8		3.7		22.0		47.5

Assets under management at March 31, 2021	$	816.4	$	403.8	$	297.8	$	1,518.0

Three months ended 6/30/2020 Six months ended 6/30/2020
(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
Assets under management at beginning of period $ 562.3
$ 261.1
$ 185.4
$ 1,008.8
$ 682.7
$ 313.8
$ 210.3
$ 1,206.8

Net cash flows before client transfers 3.4
12.1
(.8 ) 14.7
(4.1 ) 8.4
4.4
8.7
Client transfers (4.4 ) —
4.4
—
(8.8 ) .2
8.6
—
Net cash flows after client transfers (1.0 ) 12.1
3.6
14.7
(12.9 ) 8.6
13.0
8.7
Net market appreciation (depreciation) and income 109.7
54.3
32.7
196.7
1.3
5.1
(1.6 ) 4.8
Net distributions not reinvested (.2 ) —
—
(.2 ) (.3 ) —
—
(.3 )
Change during the period 108.5
66.4
36.3
211.2
(11.9 ) 13.7
11.4
13.2

Assets under management at June 30, 2020 $ 670.8
$ 327.5
$ 221.7
$ 1,220.0
$ 670.8
$ 327.5
$ 221.7
$ 1,220.0


	Three months ended 6/30/2020								Six months ended 6/30/2020											Three months ended 3/31/2021
(in billions)	Equity		Fixed income, including money market		Multi-asset⁽¹⁾		Total		Equity		Fixed income, including money market			Multi-asset⁽¹⁾			Total		(in billions)	Equity		Fixed income, including money market		Multi-asset(1)		Total
Assets under management at beginning of period	$	569.3	$	146.3	$	293.2	$	1,008.8	$	698.9	$	147.9		$	360.0		$	1,206.8	Assets under management at beginning of period	$	895.8	$	168.7	$	406.0	$	1,470.5

Net cash flows	9.8		2.3		2.6		14.7		4.1		5.3			(.7		)	8.7		Net cash flows	(8.9)		5.4		4.7		1.2
Net market appreciation (depreciation) and income⁽²⁾	139.8		4.4		52.3		196.5		15.9		(.2		)	(11.2		)	4.5
Net market appreciation and gains(2)																			Net market appreciation and gains(2)	30.3		(1.3)		17.3		46.3

Change during the period	149.6		6.7		54.9		211.2		20.0		5.1			(11.9		)	13.2		Change during the period	21.4		4.1		22.0		47.5
Assets under management at June 30, 2020	$	718.9	$	153.0	$	348.1	$	1,220.0	$	718.9	$	153.0		$	348.1		$	1,220.0
Assets under management at March 31, 2021																			Assets under management at March 31, 2021	$	917.2	$	172.8	$	428.0	$	1,518.0

⁽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.~~United States account for about ~~8.2%~~8.8% of our assets under management at ~~June 30, 2020~~March 31, 2021 and ~~6.9%~~9.3% at December 31, ~~2019.~~2020.

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, as well as net cash inflows (outflows), by vehicle, were as follows:


	Assets under management				Net cash inflows (outflows) for three months ended
(in billions)	3/31/2021		12/31/2020		3/31/2021		3/31/2020
U.S. mutual funds	$	179.9	$	176.1	$	(3.8)	$	(5.0)
Collective investment trusts	160.3		145.4		8.1		5.6
Separately managed accounts	11.4		10.7		.2		.1
	$	351.6	$	332.2	$	4.5	$	.7

As of
(in billions) 6/30/2020 3/31/2020 12/31/2019
Target date retirement U.S. mutual funds $ 153.0
$ 132.0
$ 164.8
Target date separate accounts 8.5
7.1
8.4
Target date retirement trusts 122.7
103.1
119.2
$ 284.2
$ 242.2
$ 292.4

~~Our target date~~We provide participant accounting and plan administration for defined contribution retirement ~~products experienced net cash outflows of $.2 billion~~plans that invest in the ~~second quarter~~firm's U.S. mutual funds, collective investment trusts and funds outside of ~~2020~~the firm's complex. As of March 31, 2021, our assets under administration were $248 billion, of which nearly $153 billion are assets we manage. In recent years, we began offering non-discretionary advisory services through model delivery, which are managed accounts where portfolio holdings and ~~net cash inflows of $.5 billion~~trades in the ~~first six months of 2020.~~portfolio are provided to sponsor platforms to implement for their clients.

We record the revenue earned on these services in administrative fees. The assets under advisement in these portfolios, predominantly in the United States, is $3 billion at March 31, 2021.

INVESTMENT PERFORMANCE.

Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. Our performance disclosures include specific asset classes, assets under management weighted performance, mutual fund performance against passive peers and composite performance against benchmarks. The ~~percentage of our U.S. mutual funds~~⁽¹⁾ ~~(across primary share classes) that outperformed their comparable Morningstar median on a total return basis and that are in the top Morningstar quartile~~following table presents investment performance for the one-, three-, five-, and 10-years ended ~~June 30, 2020, were:~~

1 year 3 years 5 years 10 years
Outperformed Morningstar median⁽²⁾

    All funds 59% 63% 73% 77%
    Multi-asset funds 58% 74% 88% 89%

Top Morningstar quartile⁽²⁾

    All funds 29% 34% 46% 52%
    Multi-asset funds 33% 40% 59% 74%

⁽¹⁾ ~~Excludes passive and fund categories not ranked by Morningstar.~~March 31, 2021. Past performance is no guarantee of future results.


% of U.S. mutual funds that outperformed Morningstar median(1),(2)
	1 year	3 years	5 years	10 years
Equity	65%	68%	67%	87%
Fixed Income	71%	60%	55%	57%
Multi-Asset	94%	94%	91%	90%

All Funds	75%	73%	70%	78%

% of U.S. mutual funds that outperformed passive peer median(1),(3)
	1 year	3 years	5 years	10 years
Equity	57%	58%	62%	72%
Fixed Income	91%	59%	57%	60%
Multi-Asset	94%	91%	87%	86%

All Funds	78%	68%	68%	72%

% of composites that outperformed benchmarks(4)
	1 year	3 years	5 years	10 years
Equity	55%	60%	73%	78%
Fixed Income	87%	69%	80%	72%


All Composites	68%	63%	76%	76%


AUM Weighted Performance
% of U.S. mutual funds AUM that outperformed Morningstar median(1),(2)
	1 year	3 years	5 years	10 years
Equity	63%	65%	83%	94%
Fixed Income	79%	58%	59%	60%
Multi-Asset	100%	96%	96%	96%

All Funds	73%	72%	84%	92%

% of U.S. mutual funds AUM that outperformed passive peer median(1),(3)
	1 year	3 years	5 years	10 years
Equity	51%	53%	81%	81%
Fixed Income	97%	52%	56%	64%
Multi-Asset	98%	96%	96%	96%

All Funds	66%	63%	83%	84%

% of composites AUM that outperformed benchmarks(4)
	1 year	3 years	5 years	10 years
Equity	51%	65%	72%	79%
Fixed Income	88%	54%	73%	72%


All Composites	57%	64%	73%	79%

As of March 31, 2021, 80 of 123 (65.0%) of the firm's rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar's fund population is given a rate of 4 or 5 stars(5). In addition, 88%(5) of AUM in the firm's rated U.S. mutual funds (across primary share classes) ended March 31, 2021 with an overall rating of 4 or 5 stars.

(1) Source: © ~~2020~~2021 Morningstar, Inc. All rights reserved. The information contained herein: ~~(1)~~1) is proprietary to Morningstar and/or its content providers; ~~(2)~~2) may not be copied or distributed; and ~~(3)~~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.~~

~~In addition, 79% of assets under management in our rated U.S.~~(2)Source: Morningstar. Primary share class only. Excludes money market mutual funds, ~~(across primary share classes) ended the quarter~~funds with an ~~overall rating~~operating history of ~~four or five stars~~less than one year, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the Morningstar category median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $503B for 1 year, $503B for 3 years, $503B for 5 years, and $493B for 10 years.

(3) Passive Peer Median was created by T. Rowe Price using data from Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. This analysis compares T. Rowe Price active funds to the applicable universe of passive/index open-end funds and ETFs of peer firms. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the passive peer universe. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $491B for 1 year, $482B for 3 years, $439B for 5 years, and $416B for 10 years.

(4)Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared to official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that are outperforming their benchmarks. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,392B for 1 year, $1,388B for 3 years, $1,364B for 5 years, and $1,316B for 10 years.

(5) The Morningstar Rating™ for funds is calculated for funds with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Morningstar gives its best ratings of ~~our institutional strategies against their benchmarks remains competitive, especially over longer time periods.~~5 or 4 stars to the top 32.5% of all funds (of the 32.5%,10% get 5 stars and 22.5% get 4 stars). The Overall Morningstar Rating™ is derived from a weighted average of the performance figures associated with a fund’s 3, 5, and 10 year (if applicable) Morningstar Rating™ metrics.

RESULTS OF OPERATIONS.

The following table and discussion sets forth information regarding our consolidated financial results for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ on a U.S. GAAP basis as well as a non-GAAP basis. The non-GAAP basis adjusts for the impact of our consolidated T. Rowe Price investment products, the impact of market movements on the supplemental savings plan liability and related economic hedges, investment income related to certain other investments, and certain nonrecurring charges and ~~gains.~~gains, if any.

Non-operating income (loss)⁽¹⁾

Non-operating income (loss)(1)

Adjusted non-GAAP basis⁽²⁾

Adjusted non-GAAP basis(2)

Non-operating income⁽¹⁾

Non-operating income (loss)(1)

Assets under management (in billions)

⁽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.

Results Overview - Quarter ended ~~June 30, 2020~~March 31, 2021

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 ~~second~~first quarter of ~~2020~~2021 increased over the comparable ~~2019~~2020 quarter as average assets under our management increased ~~$40.4~~$346.1 billion, or ~~3.7%~~29.8%, to ~~$1,140.2~~$1,508.8 billion. In the first quarter of 2021, we voluntarily waived $15.0 million, or less than 1%, of our investment advisory fees in order to continue to maintain a positive yield for investors. At March 31, 2021, combined net assets of the investment portfolios in which we waived fees in the first quarter of 2021 were $29.5 billion. We expect to continue to waive fees for all of 2021 and anticipate that the waivers in each of the next three quarters of 2021 will be at similar levels.

The average annualized effective fee rate earned during the ~~second~~first quarter of ~~2020~~2021 was ~~45.6~~45.4 basis points, compared with ~~46.3~~45.9 basis points earned during the ~~second quarter of 2019.~~

~~Further, beginning in the second~~first quarter of 2020 ~~we voluntarily waived a portion of our money market advisory fees~~ and fund expenses in order to maintain a positive yield for investors. We waived $2.7 million, or less than 1% of total investment advisory fees from certain of our money market mutual funds, trusts and other investment portfolios45.7 basis points during the ~~second~~fourth quarter of 2020. ~~At June 30, 2020, combined net assets of~~In comparison to the ~~funds and trusts in which we waived fees in the second~~first quarter of 2020, ~~were $22.4 billion. We expect to continue to waive fees for at least the remainder of 2020.~~

~~Our~~our annualized effective fee rate declined primarily due to client transfers within the complex to lower fee vehicles or share classes over the last twelve ~~months.~~months and the money market fee waivers. In comparison to the fourth quarter of 2020, our average annualized effective fee rate declined primarily due to lower performance fees earned in 2021.

Operating expenses. Operating expenses were ~~$861.7~~$933.6 million in the ~~second~~first quarter of ~~2020~~2021 compared with ~~$780.1~~$755.4 million in the ~~second~~first quarter of ~~2019. The~~2020. Nearly half of the increase in operating expenses for the ~~second~~first quarter of 2021 compared to the first quarter of 2020 was ~~primarily~~ due to an $85.9 million increase in ~~market-related compensation~~ expense ~~of $60.5 million~~ related to ~~the increase in~~ the supplemental savings plan ~~liability~~from higher market returns. The remaining increase was due primarily to higher compensation expenses as well as distribution and ~~to a lesser extent, higher salaries and the firm’s continued strategic investments.~~servicing costs. For the ~~second~~first quarter of ~~2020,~~2021, the higher ~~compensation~~ expense related to the supplemental savings plan was ~~largely~~almost entirely offset by the non-operating gains earned on the investments used to economically hedge the related liability.

On a non-GAAP basis, our operating expenses in the ~~second~~first quarter of ~~2020~~2021 increased ~~2.8%~~11.2% to ~~$785.8~~$909.2 million compared to the ~~second~~first quarter of ~~2019.~~2020. Our non-GAAP operating expenses do not include the impact of our supplemental savings plan and consolidated sponsored investment products. See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.

In 2021 and beyond, we expect to advance our strategic priorities to maintain our position as a global and diversified asset manager, a global partner for retirement investors and a provider of integrated investment solutions; to embed environmental, social and governance principles across the firm; to maintain effective processes and controls while becoming a more adaptive and agile firm; and to become a destination of choice for top talent with a diverse workforce and inclusive culture. We updated our 2021 non-GAAP operating expense growth guidance from a range of 8% - 12% to a range of 10% - 14% to reflect an increase in our expectations for AUM-related expenses. We can elect to adjust our expense growth in the future should unforeseen circumstances arise, including significant market movements.

Operating margin. Our operating margin in the ~~second~~first quarter of ~~2020~~2021 was ~~39.1%~~48.9%, compared to ~~44.1%~~48.4% earned in the ~~2019~~2020 quarter. The ~~decrease~~increase in our operating margin for the ~~second~~first quarter of ~~2020~~2021 compared to the ~~2019~~2020 period was primarily driven by higher investment advisory fee revenue, partially offset by the higher ~~compensation~~ expense related to our supplemental savings plan, as ~~markets~~market returns in the ~~second~~first quarter of ~~2020~~2021 outperformed the same period in ~~2019.~~2020.

Diluted earnings per share. Diluted earnings per share was ~~$2.55~~$3.17 for the ~~second~~first quarter of ~~2020~~2021 as compared to ~~$2.15~~$1.41 for the ~~second~~first quarter of ~~2019.~~2020. The ~~18.6%~~124.8% increase was primarily driven by the ~~significantly higher~~net investment gains recognized in the ~~second~~first quarter of 2021 as compared to significant investment losses recognized in the first quarter of 2020 ~~as compared to~~following sharp market declines at the ~~second quarter~~end of 2019 as well as a 4.1% decline in weighted average shares outstanding. These drivers of the increase in diluted earnings per share were partially offset by lower operating income in the second quarter ofMarch 2020.

On a non-GAAP basis, diluted earnings per share was ~~$2.29~~$3.01 for the ~~second~~first quarter of ~~2020~~2021 as compared to ~~$2.03~~$1.87 for the ~~second~~first quarter of ~~2019.~~2020. The increase in diluted earnings per share was primarily due to higher ~~investment~~operating income as well as net gains ~~and lower shares outstanding.~~

~~Results Overview - Year-to-Date ended June 30, 2020~~

~~Our annualized effective fee rate declined primarily due to client transfers within the complex to lower fee vehicles or share classes over the last twelve months.~~

~~Operating expenses.~~Operating expenses were $1,617.1 million in the six months ended June 30, 2020 compared with $1,574.9 million in the 2019 period. The increase in operating expenses was primarily due to higher salary and benefits expense, interim bonus accrual, stock-based compensation expense and our continued strategic investments. These increases were partially offset by lower market-related compensation expense of $39.8 million related to the supplemental savings plan.

On a non-GAAP basis, our operating expenses for the six months ended June 30, 2020 increased 5.4% to $1,603.7 million compared to the 2019 period. Our non-GAAP operating expenses do not include the impact of our supplemental savings plan and consolidated sponsored investment products. See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.

While we anticipate that the coronavirus pandemic will continue to reduce certain expense categories, such as travel, we have changed our expected full-year 2020 non-GAAP operating expense growth to 3%-6%, from the 1%-4% provided in April 2020 as the sharp market recovery in the second quarter of 2020 has increased our AUM-related expenses. This range includes investments in our critical strategic initiatives to promote long-term growth of 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.

to the 2019 period was primarily driven by the lower compensation expense related to our supplemental savings plan as markets in the first half of 2020 underperformed the same period in 2019 as global markets were disrupted by the coronavirus pandemic during 2020.

Diluted earnings per share on a non-GAAP basis was $4.15 for the six months ended June 30, 2020 as compared to $3.90 for the six months ended June 30, 2019. The increase in adjusted diluted earnings per share was primarily due to higher operating income, lower shares outstanding, and a lower effective tax rate. The impact of these drivers were partially offset by investment losses recognized in the 2020 period. ~~See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.~~

Three months ended Q2 2020 vs. Q2 2019 Six months ended YTD 2020 vs. YTD 2019
(in millions) 6/30/2020 6/30/2019 $ change % change 6/30/2020 6/30/2019 $ change % change
Investment advisory fees
U.S. mutual funds $ 823.1
$ 860.7
$ (37.6 ) (4.4 )% $ 1,699.3
$ 1,676.6
$ 22.7
1.4 %
Subadvised and separate accounts and other investment products 470.7
409.5
61.2
14.9 % 922.3
787.8
134.5
17.1 %
1,293.8
1,270.2
23.6
1.9 % 2,621.6
2,464.4
157.2
6.4 %
Administrative, distribution, and servicing fees
Administrative fees 95.9
94.9
1.0
1.1 % 202.8
197.8
5.0
2.5 %
Distribution and servicing fees 25.7
30.1
(4.4 ) (14.6 )% 53.6
60.3
(6.7 ) (11.1 )%
121.6
125.0
(3.4 ) (2.7 )% 256.4
258.1
(1.7 ) (.7 )%
Net revenues $ 1,415.4
$ 1,395.2
$ 20.2
1.4 % $ 2,878.0
$ 2,722.5
$ 155.5
5.7 %

Investment advisory fees.

Investment advisory revenues earned in the ~~second~~first quarter of ~~2020~~2021 from our U.S. mutual funds were ~~$823.1~~$1,050.2 million, ~~a decrease~~an increase of ~~4.4%~~19.9% from the comparable ~~2019~~2020 quarter. Average assets under management in these funds for the ~~second~~first quarter of ~~2020 decreased 1.6%~~2021 increased 24.5% from the ~~2019~~2020 quarter to ~~$628.6~~$814.5 billion.

For the first quarter of 2021, the relationship between U.S. mutual funds’ average assets under management and investment advisory fee growth was impacted primarily by the money market fee waivers. In addition, strong market returns led to a decrease in the fee earned as the asset levels of certain tiered-fee funds crossed a new tier.

Subadvised funds, separate accounts, collective investment trusts and other investment products (other portfolios)

Investment advisory revenues earned in the ~~six months ended June 30, 2020~~first quarter of 2021 from ~~the firm's U.S. mutual funds~~these other portfolios were ~~$1,699.3~~$637.6 million, an increase of ~~1.4%~~41.2% from the comparable ~~2019 period. Average assets under management in these funds for the six months ended June 30,~~ 2020 ~~increased 2.7% from the 2019 period to $641.5 billion.~~

The difference in the percentage of change in revenue compared with assets under management for both the 2020 quarter and year-to-date periods from the 2019 period is primarily due to client transfers within the complex to lower fee vehicles or shares classes during the last twelve months.

~~Subadvised and separate accounts and other investment products~~

~~Investment advisory revenues earned in the second quarter of 2020 from subadvised and separate accounts and other investment products were $470.7 million, an increase of 14.9% from the comparable 2019~~ quarter. Average assets under management for these products increased ~~10.9%~~36.6% from the ~~2019~~2020 quarter to ~~$511.6~~$694.3 billion.

~~Investment advisory revenues earned in~~For the ~~six months ended June 30, 2020 from subadvised and separate accounts as well as~~ other ~~investment~~portfolios, inflows into our international products, ~~were $922.3 million, an increase of 17.1% from the 2019 period. Average assets under management for these products increased 14.0% from the 2019 period to $509.9 billion.~~

~~Inflows into the Japanese ITMs,~~ which have a higher ~~than average~~ fee rate ~~have caused~~relative to other products, and performance-based fees earned on certain separate accounts drove investment advisory ~~fees in these portfolios~~revenues to ~~increase at a rate greater than~~outpace the increase in ~~their~~ average assets under management. ~~The fee rate earned on~~

These investment advisory revenues include distribution-related services we provide to the ~~Japanese ITMs is substantially offset by the costs incurred~~international products and then contract with third-party intermediaries to distribute these products. ~~Those~~The costs we incur to pay the third-party intermediaries are recorded as part of distribution and servicing expenses.

Administrative, distribution, and servicing fees. Administrative, distribution, and servicing fees in the ~~second~~first quarter of ~~2020~~2021 were ~~$121.6~~$139.0 million, ~~a decrease~~an increase of ~~$3.4~~$4.2 million, or ~~2.7%~~3.1%, from the comparable ~~2019~~2020 quarter. For the six months ended June 30, 2020, these fees were $256.4 million, a decrease of $1.7 million, or .7%, from the 2019 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 ~~decrease for both periods~~increase was primarily due to ~~lower~~higher transfer agent servicing activities provided to the U.S. mutual funds, higher model delivery revenue, as well as higher 12b-1 revenue earned on ~~certain~~the R share ~~classes, including the Advisor and R classes,~~class of the U.S. mutual funds as ~~lower markets in 2020 as well as client transfers to lower fee vehicles and share classes over the last twelve months have reduced~~a result of increased assets under management in ~~these~~this share ~~classes.~~class. The ~~decline~~increase in 12b-1 revenue is offset entirely by ~~a reduction~~an increase in the costs paid to third-party intermediaries that source these assets and reported in distribution and servicing expense. For the six months ended June 30, 2020 compared to the same period of 2019, the lower 12b-1 revenue was partially offset by increased retail transfer agent servicing activities and higher administrative services provided to fund shareholders.

Our ~~second quarter~~ net revenues reflect the elimination of ~~$2.1 million in 2020~~advisory and ~~$2.2 million in 2019, of~~administrative fee revenue earned from our consolidated

T. Rowe Price investment products. ~~For the six months ended June 30, 2020 and 2019, we eliminated $4.6 million in 2020 and $3.7 million in 2019 of net revenue.~~ The corresponding expenses recognized by these products, and consolidated in our financial statements, were also eliminated from operating expenses. For the first quarter, we eliminated net revenue of $1.3 million in 2021 and $2.5 million in 2020.

Supplemental savings plan(1)

Three months ended Q2 2020 vs. Q2 2019 Six months ended YTD 2020 vs. YTD 2019
(in millions) 6/30/2020 6/30/2019 $ change % change 6/30/2020 6/30/2019 $ change % change
Compensation and related costs $ 549.0
$ 483.2
$ 65.8
13.6 % $ 989.7
$ 974.7
$ 15.0
1.5 %
Distribution and servicing 62.0
64.4
(2.4 ) (3.7 )% 127.7
130.8
(3.1 ) (2.4 )%
Advertising and promotion 13.4
19.8
(6.4 ) (32.3 )% 38.3
41.4
(3.1 ) (7.5 )%
Product-related costs 39.6
33.4
6.2
18.6 % 81.2
77.6
3.6
4.6 %
Technology, occupancy, and facility costs 111.3
104.9
6.4
6.1 % 216.7
203.0
13.7
6.7 %
General, administrative, and other 86.4
74.4
12.0
16.1 % 163.5
147.4
16.1
10.9 %
Total operating expenses $ 861.7
$ 780.1
$ 81.6
10.5 % $ 1,617.1
$ 1,574.9
$ 42.2
2.7 %
(1) The impact of the market on the supplemental savings plan liability drives the expense recognized each period.

Compensation and related ~~costs.~~costs, excluding supplemental savings plan. Compensation and related costs, excluding supplemental savings plan, were ~~$549.0~~$561.3 million in the ~~second~~first quarter of ~~2020,~~2021, an increase of ~~$65.8~~$56.9 million, or ~~13.6%~~11.3%, compared to the ~~2019~~2020 quarter. The increase from the 2020 quarter was primarily due to anstrong operating results in the first quarter of 2021 that led to a $36.3 million increase in ~~market-related expense of $60.5 million related~~our interim accrual for annual variable compensation, primarily bonus compensation. Also contributing to ~~our supplemental savings plan as~~ the ~~sharp market recovery~~increase in 2021 costs compared to the ~~second~~first quarter of 2020 ~~increased the liability. Additionally, increases~~was a $22.6 million increase in ~~base~~ salaries and ~~related employee costs,~~benefits due to a ~~5.1%~~3.4% increase in our average staff size and ~~to a lesser extent, the~~ modest increases in base salaries at the beginning of ~~2020, and higher non-cash stock-based compensation expense contributed to~~ the ~~increase in compensation and related costs in the 2020 period.~~year. These increases in compensation and related costs were offset in part by higher labor capitalization related to internally developed software and a lower interim accrual for annual variable compensation, primarily bonus compensation, from the 2019 quarter. We recognize the interim bonus accrual ratably over the year using the ratio of recognized quarterly net revenues to currently forecasted annual net revenues.software.

period. An increase of 5.4% in our average staff size and modest increases in base salaries at the beginning of 2020 have contributed to higher associate-related costs. Our interim accrual for annual variable compensation, primarily bonus compensation, also increased $10.8 million in 2020 from the 2019 period. These increases in compensation and related costs were offset in part by $39.8 million in lower market-related expense related to our supplemental savings plan and $13.0 million in higher labor capitalization related to internally developed software in 2020 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 ~~$62.0~~$85.6 million for the ~~second~~first quarter of ~~2020, a decrease~~2021, an increase of ~~3.7%~~30.3% from the ~~$64.4~~$65.7 million recognized in the ~~2019~~2020 quarter. ~~For the six months ended June 30, 2020, these costs were $127.7 million, a decrease of 2.4% over the $130.8 million recognized in the comparable 2019 period.~~ The ~~decrease for both periods~~increase is primarily driven by lower assets under management in those mutual funds for which we pay distribution and servicing costs as lower markets and client transfers to lower fee vehicles or share classes over the last twelve months reduced assets under management for these share classes. The decreases in costs related to these products were partially offset by higher distribution costs as a result of continued inflows ~~into~~and market appreciation in our international products, including our Japanese ~~ITMs.~~Investment Trusts (ITMs) and SICAVs.

Distribution and servicing costs paid to third-party intermediaries that source the assets of certain share classes of our U.S. mutual funds and our international products, such as our Japanese ITMs and SICAVs, are recognized in this ~~expense line and~~expense. Both of these costs are offset entirely by the ~~12b-1~~ revenue we earn and report in net revenues: 12b-1 revenue recognized in administrative, distribution, and servicing ~~fees.~~fees for the U.S. mutual funds and investment advisory fee revenue for our international products.

Advertising and promotion. Advertising and promotion costs were ~~$13.4~~$18.9 million in the ~~second~~first quarter of ~~2020,~~ 2021, a decrease of ~~$6.4~~$6.0 million,, or ~~32.3%~~24.1%, compared to the ~~$19.8~~$24.9 million recognized in the ~~2019~~2020 quarter. ~~For~~The decrease is driven primarily by the ~~six months ended June 30,~~timing of media-related spend as well as fewer conference and promotional events since the later part of the first quarter of 2020 ~~these costs were $38.3 million, a decrease of $3.1 million, or 7.5%, compared~~due to the ~~2019 period. The decrease for both periods is due primarily to lower media activity and fewer conference events in 2020 as compared to 2019.~~coronavirus pandemic.

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 ~~$111.3~~$117.3 million in the ~~second~~first quarter of ~~2020,~~2021, an increase of ~~$6.4~~$11.9 million, or ~~6.1%~~11.3%, compared to the ~~$104.9~~$105.4 million recognized in the ~~2019~~2020 quarter. ~~For the six months ended June 30, 2020, these costs were $216.7 million, an increase of $13.7 million, or 6.7%, compared to the 2019 period.~~ The increase ~~for both periods~~ is due primarily to the ongoing investment in our technology capabilities, including ~~related~~hosted solution licenses and depreciation, and ~~hosted solution licenses.~~higher office lease costs.

General, administrative, and other. General, administrative, and other expenses were ~~$86.4~~$87.3 million in the ~~second~~first quarter of ~~2020, an increase~~2021, a decrease of ~~$12.0~~$10.2 million, or ~~16.1%~~13.2%, compared to the ~~$74.4~~$77.1 million recognized in the ~~2019~~2020 quarter. ~~For the six months ended June 30, 2020, these~~The timing of when certain general and administrative costs were ~~$163.5 million, an increase~~incurred in the first quarter of ~~$16.1 million, or 10.9%,~~2021 compared to the ~~2019 period. The increase for both periods is primarily due~~2020 period contributed to ~~certain nonrecurring~~the higher costs. Lower travel-related expenses nearly offset increases in other general and administrative ~~expenses, along with higher third-party investment research costs and higher professional fees. These increases were partially offset by lower travel expenses in the second quarter of 2020.~~costs.

Non-operating income (loss)

Non-operating income for the ~~second~~first quarter of ~~2020~~2021 was ~~$415.1~~$102.1 million, an increase of ~~$290.6~~$602.4 million from non-operating ~~income~~loss of $500.3 million in the ~~second quarter of 2019 of $124.5 million. Non-operating loss for the six months ended June 30,~~ 2020 ~~was $85.2 million, a decrease of $412.5 million from non-operating income in the comparable 2019 period of $327.3 million.~~quarter. The following table details the components of non-operating income (loss) for both the first quarter of March 31, 2021 and ~~year-to-date periods.~~


	Three months ended						Six months ended						Three months ended
(in millions)	6/30/2020			6/30/2019			6/30/2020			6/30/2019		(in millions)	3/31/2021		3/31/2020
Net gains (losses) from non-consolidated T. Rowe Price investment products												Net gains (losses) from non-consolidated T. Rowe Price investment products
Cash and discretionary investments												Cash and discretionary investments
Dividend income	$	5.0		$	17.9		$	15.4		$	34.1	Dividend income	$	5.1	$	10.4
Market related gains and equity in earnings	80.8			17.9			9.2			45.9
Market related gains (losses) and equity in earnings (losses)												Market related gains (losses) and equity in earnings (losses)	8.6		(71.6)
Total cash and discretionary investments												Total cash and discretionary investments	13.7		(61.2)
Seed capital investments												Seed capital investments
Dividend income	.5			.3			1.2			.8		Dividend income	.1		.7
Market related gains (losses) and equity in earnings (losses)	28.1			8.7			(6.0		)	28.3		Market related gains (losses) and equity in earnings (losses)	11.9		(34.1)
Net gain recognized upon deconsolidation	—			.1			.1			.2		Net gain recognized upon deconsolidation	2.6		.1
Investments used to hedge the supplemental savings plan liability	64.4			12.1			(4.1		)	43.1		Investments used to hedge the supplemental savings plan liability	22.1		(68.5)
Total net gains from non-consolidated T. Rowe Price investment products	178.8			57.0			15.8			152.4
Other investment income (loss)	(8.2		)	4.8			.2			9.5
Total net gains (losses) from non-consolidated T. Rowe Price investment products												Total net gains (losses) from non-consolidated T. Rowe Price investment products	50.4		(163.0)
Other investment income												Other investment income	18.2		8.4
Net gains (losses) on investments	170.6			61.8			16.0			161.9		Net gains (losses) on investments	68.6		(154.6)
Net gains (losses) on consolidated sponsored investment portfolios	242.4			62.8			(87.9		)	164.7		Net gains (losses) on consolidated sponsored investment portfolios	37.2		(330.3)
Other income (loss), including foreign currency gains and losses	2.1			(.1		)	(13.3		)	.7		Other income (loss), including foreign currency gains and losses	(3.7)		(15.4)
Non-operating income (loss)	$	415.1		$	124.5		$	(85.2	)	$	327.3	Non-operating income (loss)	$	102.1	$	(500.3)

~~Our~~The impact of strong market returns on our investment portfolio ~~recognized significant gains in the second quarter of 2020 as the markets rebounded sharply from the market losses experienced~~ in the first quarter of ~~2020.~~2021 compared with significant market losses in the first quarter of 2020 drove the increase in non-operating income. Our consolidated investment products and supplemental savings plan hedge portfolio comprised ~~about 75%~~more than half of the net gains recognized during the ~~second~~first quarter of ~~2020. The~~2021. Our cash and discretionary investment portfolio also experienced net investment gains of ~~$85.8~~$13.7 million ~~in the second quarter of 2020.~~

Despite the sharp market recovery in the second quarter of 2020, our investment portfolio for the six months ended June 30, 2020 has experienced net losses due to the global economies and markets disruption caused by the coronavirus pandemic in the first quarter of 2020. Our consolidated investment products and supplemental savings plan hedge portfolio comprised most of the net losses recognized during the six months ended June 30, 2020. The cash and discretionary investment portfolio partially offset these losses with net investment gains of $24.6 million in the six months ended June 30, 2020.2021.

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 had on the individual lines of our unaudited condensed consolidated statements of income and the portion attributable to our interest:

Three months ended Six months ended
(in millions) 6/30/2020 6/30/2019 6/30/2020 6/30/2019
Operating expenses reflected in net operating income $ (3.6 ) $ (3.8 ) $ (7.3 ) $ (6.9 )
Net investment income (loss) reflected in non-operating income (loss) 242.4
62.8
(87.9 ) 164.7
Impact on income before taxes $ 238.8
$ 59.0
$ (95.2 ) $ 157.8

Net income (loss) attributable to our interest in the consolidated T. Rowe Price investment products $ 113.3
$ 30.6
$ (44.2 ) $ 88.0
Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors) 125.5
28.4
(51.0 ) 69.8
$ 238.8
$ 59.0
$ (95.2 ) $ 157.8


	Three months ended
(in millions)	3/31/2021		3/31/2020
Operating expenses reflected in net operating income	$	(3.5)	$	(3.7)
Net investment income (loss) reflected in non-operating income	37.2		(330.3)
Impact on income before taxes	$	33.7	$	(334.0)

Net income (loss) attributable to our interest in the consolidated T. Rowe Price investment products	$	18.3	$	(157.5)
Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors)	15.4		(176.5)
	$	33.7	$	(334.0)

Provision for income taxes

Our effective tax rate for the ~~second~~first quarter of 2021 was 23.2%, compared with 19.5% in the 2020 ~~and 2019 was 24.8%.~~quarter. The increase in our effective tax rate for the ~~second~~first quarter of 2021 as compared to the first quarter of 2020 ~~was impacted by a~~is primarily due to lower ~~state effective~~discrete tax ~~rate, resulting primarily from~~benefits associated with option exercises as well as the ~~remeasurement~~impact of ~~deferred tax liabilities related~~these benefits relative to the ~~firm's investment portfolio,~~higher pre-tax income in the first quarter of 2021 as compared to the comparable 2020 quarter. These benefits were partially offset by higher net gains attributable to redeemable non-controlling interests held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income, and a lower ~~discrete tax benefits associated with option exercises.~~

~~Our~~state effective tax rate. The state effective rate ~~for~~in the ~~six months ended June 30,~~first quarter of 2020 was ~~23.9%, compared with 24.7% in~~unfavorably impacted by the ~~2019 period. The year-to-date 2020 effective~~remeasurement of deferred state tax ~~rate was lower than the 2019 period primarily due~~assets and liabilities related to ~~higher discrete tax benefits associated with option exercises in the 2020 period.~~our investment portfolio.

The following table reconciles the statutory federal income tax rate to our effective tax rate for both the ~~three- and six-~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

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

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

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

~~We currently estimate our effective tax rate for the full-year 2020 will be in the range of 23% to 26%.~~ Our effective tax rate will continue to experience volatility in future periods as the discrete tax benefits recognized from 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 second quarter of 2020 and 2019 was 24.8% and 25.5%, respectively. Our non-GAAP effective tax rate for the six months ended June 30, 2020 and 2019 was 23.8% and 25.4%, respectively. The non-GAAP tax rate primarily adjusts for the impact of the consolidated investment products, including the ~~significant~~ net ~~losses~~income attributable to the redeemable non-controlling interests. ~~The decrease in the~~Our non-GAAP effective tax rate isincreased to 23.7% in the first quarter of 2021 compared with 22.5% in first quarter of 2020, primarily due to ~~the lower state effective rate, slightly offset by~~ lower discrete tax benefits associated with option ~~exercises.~~ exercises in the first quarter of 2021 as well as the impact of these benefits relative to the higher pre-tax income in the first quarter of 2021 as compared to the comparable 2020 quarter and a lower effective state tax rate. The firm continues to see the phased-in benefit of the 2018 Maryland state tax legislation in which we expect to reduce our effective state rate over the five-year phase-in period to less than 3% by the end of 2022.

We currently estimate that our ~~non-GAAP~~ effective tax rate for the ~~full-year 2020~~full year 2021, on a GAAP basis, will be in the range of 22% to 25%. On a non-GAAP basis, the range is 23% to 25%.

NON-GAAP INFORMATION AND RECONCILIATION.

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

March 31, 2021 and 2020.


	Three months ended 3/31/2021
	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	$	933.6	$	893.2	$	102.1	$	230.5	$	749.4	$	3.17
Non-GAAP adjustments:
Consolidated T. Rowe Price investment products(1)	(2.2)		3.5		(37.2)		(3.8)		(14.5)		(.06)
Supplemental savings plan liability(2)	(22.2)		22.2		(22.1)		—		.1		—
Other non-operating income(3)	—		—		(29.1)		(6.1)		(23.0)		(.10)


Adjusted Non-GAAP Basis	$	909.2	$	918.9	$	13.7	$	220.6	$	712.0	$	3.01

~~June 30, 2020 and 2019.~~

Three months ended 6/30/2020
Operating expenses Net operating income Non-operating income (loss)
Provision (benefit) for income taxes⁽⁴⁾
Net income attributable to T. Rowe Price Group
Diluted earnings per share⁽⁵⁾
U.S. GAAP Basis $ 861.7
$ 553.7
$ 415.1
$ 240.3
$ 603.0
$ 2.55
Non-GAAP adjustments:
   Consolidated T. Rowe Price
investment products⁽¹⁾
(1.5 ) 3.6
(242.4 ) (54.4 ) (58.9 ) (.25 )
   Supplemental savings plan liability⁽²⁾
(74.4 ) 74.4
(64.4 ) 3.4
6.6
.03
   Other non-operating income⁽³⁾
—
—
(22.5 ) (11.4 ) (11.1 ) (.04 )
Adjusted Non-GAAP Basis $ 785.8
$ 631.7
$ 85.8
$ 177.9
$ 539.6
$ 2.29

Three months ended 6/30/2019
Operating expenses Net operating income Non-operating income (loss)
Provision (benefit) for income taxes⁽⁴⁾
Net income attributable to T. Rowe Price Group
Diluted earnings per share⁽⁵⁾
U.S. GAAP Basis $ 780.1
$ 615.1
$ 124.5
$ 183.7
$ 527.5
$ 2.15
Non-GAAP adjustments:
   Consolidated T. Rowe Price
investment products⁽¹⁾
(1.6 ) 3.8
(62.8 ) (9.5 ) (21.1 ) (.09 )
   Supplemental savings plan liability⁽²⁾
(13.9 ) 13.9
(12.1 ) .5
1.3
.01
   Other non-operating income⁽³⁾
—
—
(13.8 ) (4.2 ) (9.6 ) (.04 )
Adjusted Non-GAAP Basis $ 764.6
$ 632.8
$ 35.8
$ 170.5
$ 498.1
$ 2.03

~~The following schedules reconcile certain U.S. GAAP financial measures for the six months ended June 30, 2020 and 2019.~~

Six months ended 6/30/2020
Operating expenses Net operating income Non-operating income (loss)
Provision (benefit) for income taxes⁽⁴⁾
Net income attributable to T. Rowe Price Group
Diluted earnings per share⁽⁵⁾
U.S. GAAP Basis $ 1,617.1
$ 1,260.9
$ (85.2 ) $ 280.6
$ 946.1
$ 3.95
Non-GAAP adjustments:
   Consolidated T. Rowe Price
investment products⁽¹⁾
(2.7 ) 7.3
87.9
16.7
27.5
.11
   Supplemental savings plan liability⁽²⁾
(10.7 ) 10.7
4.1
5.6
9.2
.04
   Other non-operating income⁽³⁾
—
—
17.8
6.7
11.1
.05
Adjusted Non-GAAP Basis $ 1,603.7
$ 1,278.9
$ 24.6
$ 309.6
$ 993.9
$ 4.15


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



Adjusted Non-GAAP Basis	$	817.9	$	647.2	$	(61.2)	$	131.7	$	454.3	$	1.87

Six months ended 6/30/2019
Operating expenses Net operating income Non-operating income (loss)
Provision (benefit) for income taxes⁽⁴⁾
Net income attributable to T. Rowe Price Group
Diluted earnings per share⁽⁵⁾
U.S. GAAP Basis $ 1,574.9
$ 1,147.6
$ 327.3
$ 365.0
$ 1,040.1
$ 4.23
Non-GAAP adjustments:
   Consolidated T. Rowe Price
investment products⁽¹⁾
(3.2 ) 6.9
(164.7 ) (28.4 ) (59.6 ) (.24 )
   Supplemental savings plan liability⁽²⁾
(50.5 ) 50.5
(43.1 ) 2.4
5.0
.02
   Other non-operating income⁽³⁾
—
—
(39.5 ) (12.7 ) (26.8 ) (.11 )
Adjusted Non-GAAP Basis $ 1,521.2
$ 1,205.0
$ 80.0
$ 326.3
$ 958.7
$ 3.90

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

(4) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 23.7% for 2021 and 22.5% for 2020. We estimate that our effective tax rate for the full-year 2021 on a non-GAAP basis will be in the range of 23% to 25%.

(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
	3/31/2021		3/31/2020
Adjusted net income attributable to T. Rowe Price Group	$	712.0	$	454.3
Less: adjusted net income allocated to outstanding restricted stock and stock unit holders	18.9		12.4
Adjusted net income allocated to common stockholders	$	693.1	$	441.9

Three months ended Six months ended
6/30/2020 6/30/2019 6/30/2020
6/30/2019
Adjusted net income attributable to T. Rowe Price Group $ 539.6
$ 498.1
$ 993.9
$ 958.7
Less: adjusted net income allocated to outstanding restricted stock and stock unit holders 15.0
12.8
27.4
24.4
Adjusted net income allocated to common stockholders $ 524.6
$ 485.3
$ 966.5
$ 934.3

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)	3/31/2021		12/31/2020
Cash and cash equivalents	$	2,830.1	$	2,151.7
Discretionary investments	2,019.2		2,095.7
Total cash and discretionary investments	4,849.3		4,247.4
Redeemable seed capital investments	1,244.3		1,219.1
Investments used to hedge the supplemental savings plan liability	766.9		768.1
Total cash and investments in T. Rowe Price products	$	6,860.5	$	6,234.6

(in millions) 6/30/2020 12/31/2019
Cash and cash equivalents $ 2,058.1
$ 1,781.8
Discretionary investments 2,021.9
1,899.6
Total cash and discretionary investments 4,080.0
3,681.4
Redeemable seed capital investments 1,074.2
1,325.6
Investments used to hedge the supplemental savings plan liability 564.5
561.1
Total cash and investments in T. Rowe Price products $ 5,718.7
$ 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 returned gains of ~~$85.8 million and $24.6~~$13.7 million in the ~~three- and six-~~three months ended ~~June 30, 2020, respectively,~~March 31, 2021, as compared to ~~generating income~~investment losses of ~~$35.8 million and $80.0~~$61.2 million in the ~~three- and six-~~three months ended ~~June 30, 2019.~~March 31, 2020. Cash and discretionary investments in T. Rowe Price products held by our subsidiaries outside the ~~U.S.~~United States were ~~$720.5~~$754.4 million at ~~June 30, 2020~~March 31, 2021 and ~~$665.8~~$675.8 million at December 31, ~~2019.~~2020. Given the availability of our financial resources and cash expected to be generated through future operations, we do not maintain an available external source of additional liquidity.

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

The cash and investment presentation on the unaudited condensed consolidated balance sheet is based on 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 ~~June 30, 2020.~~March 31, 2021.


(in millions)	Cash and cash equivalents		Investments		Net assets of consolidated T. Rowe Price investment products(1)		3/31/2021
Cash and discretionary investments	$	2,830.1	$	1,910.1	$	109.1	$	4,849.3
Seed capital investments	—		473.2		771.1		1,244.3
Investments used to hedge the supplemental savings plan liability	—		766.9		—		766.9
Total cash and investments in T. Rowe Price products attributable to T. Rowe Price Group	2,830.1		3,150.2		880.2		6,860.5
Investment in UTI and other investments	—		253.4		—		253.4
Total cash and investments attributable to T. Rowe Price Group	2,830.1		3,403.6		880.2		7,113.9
Redeemable non-controlling interests	—		—		1,012.9		1,012.9
As reported on unaudited condensed consolidated balance sheet at March 31, 2021	$	2,830.1	$	3,403.6	$	1,893.1	$	8,126.8

(in millions) Cash and cash equivalents Investments
Net assets of consolidated T. Rowe Price investment products⁽¹⁾
6/30/2020
Cash and discretionary investments $ 2,058.1
$ 1,802.0
$ 219.9
$ 4,080.0
Seed capital investments —
277.5
796.7
1,074.2
Investments used to hedge the supplemental savings plan liability —
564.5
—
564.5
Total cash and investments in T. Rowe Price products attributable to T. Rowe Price Group 2,058.1
2,644.0
1,016.6
5,718.7
Investment in UTI and other investments —
256.0
—
256.0
Total cash and investments attributable to T. Rowe Price Group 2,058.1
2,900.0
1,016.6
5,974.7
Redeemable non-controlling interests —
—
1,090.1
1,090.1
As reported on unaudited condensed consolidated balance sheet at June 30, 2020 $ 2,058.1
$ 2,900.0
$ 2,106.7
$ 7,064.8
(1) The consolidated T. Rowe Price investment products 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 $109.1 million and the $771.1 million represent the total value at March 31, 2021 of our interest in the consolidated T. Rowe Price investment products. The total net assets of the T. Rowe Price investment products at March 31, 2021 of $1,893.1 million includes assets of $1,946.8 million, less liabilities of $53.7 million as reflected in our unaudited condensed consolidated balance sheets.

Our unaudited condensed consolidated balance sheet reflects the cash and cash equivalents, investments, other assets and liabilities of those T. Rowe Price investment products we consolidate, as well as redeemable non-controlling interests for the portion of these T. Rowe Price investment products that are held by unrelated third-party investors. Although we can redeem our net interest in these T. Rowe Price investment products at any time, we

cannot directly access or sell the assets held by the products to obtain cash for general operations. Additionally, the assets of these T. Rowe Price investment products are not available to our general creditors. Our interest in these

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

We increased our quarterly recurring dividend per common share in February ~~2020~~2021 by ~~18.4%~~20.0% to ~~$.90~~$1.08 per common share from ~~$.76~~$.90 per common share. Additionally, we expended ~~$1,028.7 million~~$.3 billion in the first ~~half~~quarter of ~~2020~~2021 to repurchase ~~9.6~~1.6 million shares, or ~~4.1%~~0.7%, of our outstanding common stock at an average price of ~~$106.43~~$164.22 per share. These dividends and repurchases were expended using existing cash balances and cash generated from operations. While opportunistic in our approach to stock buybacks, we will generally repurchase our common stock over time to offset the dilution created by our equity-based compensation plans.

Since the end of ~~2017,~~2018, we have returned ~~$4.7~~$4.0 billion to stockholders through stock repurchases and our regular quarterly dividends, as follows:


(in millions)	Recurring dividend		Stock repurchases		Total cash returned to stockholders
2019	$	733.6	$	708.8	$	1,442.4
2020	846.0		1,192.2		2,038.2
Three months ended 3/31/2021	252.3		267.6		519.9
Total	$	1,831.9	$	2,168.6	$	4,000.5

(in millions) Recurring dividend Stock repurchases Total cash returned to stockholders
2018 $ 694.7
$ 1,099.6
$ 1,794.3
2019 733.6
708.8
1,442.4
Six months ended 6/30/2020 425.1
1,028.8
1,453.9
Total $ 1,853.4
$ 2,837.2
$ 4,690.6

We anticipate property, equipment and ~~equipment~~other capital expenditures, including internal labor capitalization, for the full-year ~~2020~~2021 to be about ~~$225~~$265 million, of which more than three-quarters is planned for technology initiatives. We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.



	Options		Weighted- average exercise price
Outstanding at December 31, 2019	7,388,068		$	71.06
Exercised	(1,944,942	)	$	68.29
Forfeited	(5,457	)	$	74.09
Outstanding at June 30, 2020	5,437,669		$	72.05
Exercisable at June 30, 2020	4,772,891		$	71.52


	Options	Weighted- average exercise price
Outstanding at December 31, 2020	4,329,056	$	72.52



Exercised	(748,203)	$	72.28


Outstanding at March 31, 2021	3,580,853	$	72.57
Exercisable at March 31, 2021	3,580,853	$	72.57


	Restricted shares	Restricted stock units	Weighted-average fair value
Nonvested at December 31, 2020	7,412	6,367,059	$	116.51
Time-based grants	0	3,397	$	154.03

Dividend equivalents granted to non-employee directors	0	550	$	172.22
Vested	0	(64,942)	$	97.37
Forfeited	0	(19,489)	$	114.66
Nonvested at March 31, 2021	7,412	6,286,575	$	116.73


(in millions)

Second quarter 2021	$	56.9
Third quarter 2021	56.7
Fourth quarter 2021	50.2
2022	117.4
2023 through 2026	97.2
Total	$	378.4



	Three months ended	Six months ended
Index	6/30/2020	6/30/2020
S&P 500 Index	20.5%	(3.1)%
NASDAQ Composite Index⁽¹⁾	30.6%	12.1%
Russell 2000 Index	25.4%	(13.0)%
MSCI EAFE (Europe, Australasia, and Far East) Index	15.1%	(11.1)%
MSCI Emerging Markets Index	18.2%	(9.7)%



	Three months ended 6/30/2020								Three months ended 6/30/2019
			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	$	823.1	$	69.4	$	25.7	$	918.2	$	860.7	$	69.7	$	30.1	$	960.5
Subadvised and separate accounts and other investment products	470.7		—		—		470.7		409.5		—		—		409.5
Other clients	—		26.5		—		26.5		—		25.2		—		25.2
	$	1,293.8	$	95.9	$	25.7	$	1,415.4	$	1,270.2	$	94.9	$	30.1	$	1,395.2

	Six months ended 6/30/2020								Six months ended 6/30/2019
			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	$	1,699.3	$	146.6	$	53.6	$	1,899.5	$	1,676.6	$	146.3	$	60.3	$	1,883.2
Subadvised and separate accounts and other investment products	922.3		—		—		922.3		787.8		—		—		787.8
Other clients	—		56.2		—		56.2		—		51.5		—		51.5
	$	2,621.6	$	202.8	$	53.6	$	2,878.0	$	2,464.4	$	197.8	$	60.3	$	2,722.5



(in millions)
Third quarter 2020	$	53.6
Fourth quarter 2020	46.7
2021	108.7
2022 through 2026	90.0
Total	$	299.0


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


	Three months ended				Q2 2020 vs. Q2 2019					Six months ended					YTD 2020 vs. YTD 2019						Three months ended				Q1 2021 vs. Q1 2020
(in millions, except per-share data)	6/30/2020		6/30/2019		$ change			% change		6/30/2020			6/30/2019		$ change			% change		(in millions, except per-share data)	3/31/2021		3/31/2020		$ change		% change
U.S. GAAP basis																				U.S. GAAP basis
Investment advisory fees	$	1,293.8	$	1,270.2	$	23.6		1.9	%	$	2,621.6		$	2,464.4	$	157.2		6.4	%	Investment advisory fees	$	1,687.8	$	1,327.8	$	360.0	27.1	%
Net revenues	$	1,415.4	$	1,395.2	$	20.2		1.4	%	$	2,878.0		$	2,722.5	$	155.5		5.7	%	Net revenues	$	1,826.8	$	1,462.6	$	364.2	24.9	%
Operating expenses	$	861.7	$	780.1	$	81.6		10.5	%	$	1,617.1		$	1,574.9	$	42.2		2.7	%	Operating expenses	$	933.6	$	755.4	$	178.2	23.6	%
Net operating income	$	553.7	$	615.1	$	(61.4	)	(10.0	)%	$	1,260.9		$	1,147.6	$	113.3		9.9	%	Net operating income	$	893.2	$	707.2	$	186.0	26.3	%
Non-operating income (loss)⁽¹⁾	$	415.1	$	124.5	$	290.6		n/m		$	(85.2	)	$	327.3	$	(412.5	)	n/m		Non-operating income (loss)(1)	$	102.1	$	(500.3)	$	602.4	n/m
Net income attributable to T. Rowe Price Group	$	603.0	$	527.5	$	75.5		14.3	%	$	946.1		$	1,040.1	$	(94.0	)	(9.0	)%	Net income attributable to T. Rowe Price Group	$	749.4	$	343.1	$	406.3	118.4	%
Diluted earnings per common share	$	2.55	$	2.15	$	.40		18.6	%	$	3.95		$	4.23	$	(.28	)	(6.6	)%	Diluted earnings per common share	$	3.17	$	1.41	$	1.76	124.8	%
Weighted average common shares outstanding assuming dilution	229.5		239.2		(9.7		)	(4.1	)%	233.1			239.4		(6.3		)	(2.6	)%	Weighted average common shares outstanding assuming dilution	230.0		236.8		(6.8)		(2.9)	%

Adjusted non-GAAP basis⁽²⁾	Adjusted non-GAAP basis⁽²⁾																			Adjusted non-GAAP basis(2)
Operating expenses	$	785.8	$	764.6	$	21.2		2.8	%	$	1,603.7		$	1,521.2	$	82.5		5.4	%	Operating expenses	$	909.2	$	817.9	$	91.3	11.2	%
Net operating income	$	631.7	$	632.8	$	(1.1	)	(.2	)%	$	1,278.9		$	1,205.0	$	73.9		6.1	%	Net operating income	$	918.9	$	647.2	$	271.7	42.0	%
Non-operating income⁽¹⁾	$	85.8	$	35.8	$	50.0		n/m		$	24.6		$	80.0	$	(55.4	)	n/m
Non-operating income (loss)(1)																				Non-operating income (loss)(1)	$	13.7	$	(61.2)	$	74.9	n/m
Net income attributable to T. Rowe Price Group	$	539.6	$	498.1	$	41.5		8.3	%	$	993.9		$	958.7	$	35.2		3.7	%	Net income attributable to T. Rowe Price Group	$	712.0	$	454.3	$	257.7	56.7	%
Diluted earnings per common share	$	2.29	$	2.03	$	.26		12.8	%	$	4.15		$	3.90	$	.25		6.4	%	Diluted earnings per common share	$	3.01	$	1.87	$	1.14	61.0	%

Assets under management (in billions)	Assets under management (in billions)																			Assets under management (in billions)
Average assets under management	$	1,140.2	$	1,099.8	$	40.4		3.7	%	$	1,151.4		$	1,071.8	$	79.6		7.4	%	Average assets under management	$	1,508.8	$	1,162.7	$	346.1	29.8	%
Ending assets under management	$	1,220.0	$	1,125.0	$	95.0		8.4	%	$	1,220.0		$	1,125.0	$	95.0		8.4	%	Ending assets under management	$	1,518.0	$	1,008.8	$	509.2	50.5	%


⁽⁴⁾	The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 23.8% for the first half of 2020 and 25.4% for the first half of 2019. As such, the non-GAAP effective tax rate for the second quarter was 24.8% for 2020 and 25.5% for 2019. We estimate that our effective tax rate for the full-year 2020 on a non-GAAP basis will be in the range of 23% to 25%.


⁽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:


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk.~~



(in millions)	Fair value 6/30/2020		Potential lower value		Potential loss
Investments in T. Rowe Price products
Discretionary investments	$	992.4	$	892.9	$	99.5	10	%
Seed capital not consolidated	132.2		55.5		76.7		58	%
Investments designated as an economic hedge of supplemental savings plan liability held at fair value	529.2		410.2		119.0		22	%
Total	$	1,653.8	$	1,358.6	$	295.2	18	%
Direct investment in consolidated T. Rowe Price investment products
Discretionary investments	$	219.9	$	169.0	$	50.9	23	%
Seed capital	796.7		669.8		126.9		16	%
Total	$	1,016.6	$	838.8	$	177.8	17	%
Investment partnerships and other investments held at fair value	$	93.4	$	82.5	$	10.9	12	%



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
April	455,998	$	96.22	439,158	23,601,902
May	422,044	$	109.57	386,324	23,215,578
June	512,617	$	120.74	479,414	22,736,164
Total	1,390,659	$	109.31	1,304,896


Authorization Dates	1/1/2021	Total Number of Shares Purchased	Maximum Number of Shares that May Yet Be Purchased at 3/31/2021


February 2019	6,467,311	(1,629,464)	4,837,847
March 2020	15,000,000	—	15,000,000
	21,467,311	(1,629,464)	19,837,847



Authorization Dates	4/1/2020	Total Number of Shares Purchased		Maximum Number of Shares that May Yet Be Purchased at 6/30/2020
February 2019	9,041,060	(1,304,896	)	7,736,164
March 2020	15,000,000	—		15,000,000
	24,041,060	(1,304,896	)	22,736,164



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.~~9 , 20 21 . (Incorporated by reference from Form ~~8-K Current~~10 -K Annual Report filed on February ~~13, 2019.~~11 , 20 21 .)

~~10.1~~15		~~2020 Long-Term Incentive Plan (Incorporated by reference from Registration Statement on Form S-8 filed on May 15, 2020).~~

15	Report 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~~Earnin gs release issued ~~July~~April 29, ~~2020,~~202 1 , reporting our results of operations for the ~~second~~first quarter of ~~2020.~~202 1 .

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