PRICE T ROWE GROUP INC (TROW) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW.

Our revenues and net income are derived primarily from investment advisory services provided to individual and institutional investors in a broad range of investment solutions across equity, fixed income, multi-asset, and alternative capabilities. 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 non-discretionary advisory services.

Investment advisory fees 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.

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

The investment management industry has been evolving and industry participants are facing challenging trends including passive investments taking market share from traditional active strategies; continued downward fee pressure; demand for new investment vehicles to meet client needs; and an ever-changing regulatory landscape. In this regard, we have 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 in order to provide our clients with strong investment management expertise and service.

MARKET TRENDS.

U.S. stocks produced strong gains for the second consecutive year in 2024, and various equity indexes reached new all-time highs during the year. The equity market was buoyed by generally favorable corporate earnings and by continuing interest in companies expected to benefit from AI developments. Although inflation remained above the Federal Reserve’s long-term 2% target, the central bank shifted its focus toward the moderating labor market in the second half of the year and began reducing interest rates starting in September. In the final months of the year, equity investors generally welcomed not only looser monetary policy, but also diminished political uncertainty following U.S. elections in early November. Market volatility increased, however, as investors curtailed their expectations for short-term interest rate cuts in 2025.

Developed non-U.S. equity markets were mostly positive in 2024, helped by looser monetary policies from various central banks around the world. However, returns to U.S. investors were hurt by a stronger dollar versus major non-U.S. currencies. In Europe, equity markets were widely mixed in U.S. dollar terms, whereas developed Asian markets were mostly positive.

Emerging equity markets generally appreciated and outperformed stocks in developed non-U.S. markets in U.S. dollar terms. Emerging Asian markets were mostly positive in dollar terms, though South Korean stocks fell sharply due in large part to late-year political turmoil. Equities in the emerging Europe, Middle East, and Africa (EMEA) region were also mostly positive. In Latin America, stocks in regional heavyweights Brazil and Mexico fell sharply, though some smaller markets produced positive returns.

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Returns of several major equity market indexes for 2024 are as follows:

(1) Returns exclude dividends

Global bond returns were mostly positive in 2024, as many central banks around the world reduced short-term interest rates due to easing inflation pressures. In the U.S., Treasury bill yields declined as the Federal Reserve reduced the federal funds target rate by 100 basis points (1.00%) in three steps starting in mid-September. Intermediate- and long-term U.S. Treasury yields fluctuated throughout the year, but ultimately increased for the year amid expectations for fewer interest rate cuts in 2025 due to inflation remaining above the Federal Reserve’s 2% long-term goal. The 10-year U.S. Treasury note yield was 4.58% at December 31, 2024 compared to 3.88% at December 31, 2023 .

In the U.S. investment-grade universe, sector performance was broadly positive. Non-agency commercial mortgage-backed securities and asset-backed securities produced solid gains. Corporate bonds rose to a lesser degree. Mortgage-backed securities performed in line with the broad investment-grade market. Treasuries lagged with slight positive returns. Tax-free municipal bonds slightly trailed the broad taxable bond market. High yield corporate bonds produced solid gains and strongly outperformed the investment-grade bond market.

Bonds in developed non-U.S. markets produced negative returns in U.S. dollar terms due to weaker currencies versus the dollar and rising bond yields in some countries. Easing inflation pressures enabled central banks in Europe and the UK to reduce interest rates a few times. In Japan, longer-term interest rates rose as the Bank of Japan increased short-term rates in March, ending a multi-year period of negative interest rates. The Bank of Japan also unexpectedly raised rates at the end of July. In the emerging markets fixed income universe, dollar-denominated bonds produced gains in U.S. dollar terms, but local currency bonds produced negative returns, as most developing markets currencies declined versus the dollar.

Returns of several major bond market indexes for 2024 are as follows:

ASSETS UNDER MANAGEMENT.

Assets under management ended 2024 at $1,606.6 billion, an increase of $162.1 billion from the end of 2023. This increase was driven by net market appreciation and income, net of distributions not reinvested, of $205.3 billion, offset by net cash outflows of $43.2 billion.

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The following table details changes in our assets under management by asset class during the last three years:

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

(2) The alternatives asset class includes strategies authorized to invest more than 50% of its holdings in private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed/distressed, non-investment grade CLOs, special situations, business development companies, or that have absolute return as its investment objective. Generally, only those strategies with longer than daily liquidity are included. Unfunded capital commitments of $16.2 billion at December 31, 2024, $11.6 billion at December 31, 2023, and $10.5 billion at December 31, 2022 are not reflected in AUM above.

(3) Reflects net distributions not reinvested of $5.9 billion in 2024, $2.9 billion in 2023, and $3.3 billion in 2022.

Investment advisory clients outside the U.S. accounted for 8.8% of our assets under management at December 31, 2024, 8.6% at December 31, 2023, and 9.1% at December 31, 2022.

The following table details our assets under management and net flows in our target date retirement products, which are included in the multi-asset column shown above:

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Our net cash outflows in 2024 were driven primarily by growth-oriented equity strategies and a multi-asset sub-advised variable annuity outflow. These outflows were partially offset by net cash inflows in our target date retirement products, fixed income and alternative strategies. Financial intermediaries were the main sources of net outflows in 2024. Geographically, while the EMEA and APAC regions experienced net inflows, these were outweighed by outflows in the Americas. For 2023, net outflows were driven primarily by our growth-oriented equity strategies sourced from Americas financial intermediaries and institutional clients. These outflows were partially offset by net cash inflows in our multi-asset strategies, predominately our target date retirement products, and alternative strategies. From a geography perspective, net outflows were predominantly from U.S. clients invested in equity strategies though all regions experienced net outflows. For 2022, net outflows were driven primarily by our growth-oriented equity strategies sourced from U.S. intermediaries. These outflows were partially offset by net cash inflows in our international fixed income, multi-asset, and alternative strategies. From a geographical perspective, the Americas and EMEA regions experienced net outflows predominantly in equities, while APAC had positive net flows.

We provide strategic investment advice solutions for certain portfolios. These advice solutions, the vast majority of which are overseen by our multi-asset division, may include strategic asset allocation, and in certain portfolios, asset selection and/or tactical asset allocation overlays. We also offer advice solutions through retail separately managed accounts and separately managed accounts model delivery. As of December 31, 2024, total assets in these solutions were $557 billion, of which $542 billion are reported in assets under management in the tables above.

We provide participant accounting and plan administration for defined contribution retirement plans that primarily invest in the firm's U.S. mutual funds, collective investment trusts and funds managed outside of the firm's complex. As of December 31, 2024, our assets under administration were $282 billion, of which $159 billion were assets we manage.

INVESTMENT PERFORMANCE(1).

Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. The following table presents investment performance for the one-, three-, five-, and 10-years ended December 31, 2024. Past performance is no guarantee of future results.

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As of December 31, 2024, 54 of 90 (60.0%) of our 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 rating of 4 or 5 stars(6). In addition, 63.0%(6) of AUM in our rated U.S. mutual funds (across primary share classes) ended 2024 with an overall rating of 4 or 5 stars.

(1) The investment performance reflects that of T. Rowe Price sponsored mutual funds and composites AUM.

(2) Source: © 2025 Morningstar, Inc. All rights reserved. The information contained herein: 1) is proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

(3) Source: Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of 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 Fund AUM included for this analysis includes $322B for 1 year, $318B for 3 years, $317B for 5 years, and $316B for 10 years.

(4) 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 with 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 $306B for 1 year, $302B for 3 years, $262B for 5 years, and $257B for 10 years.

(5)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 $1,423B for 1 year, $1,420B for 3 years, $1,418B for 5 years, and $1,367B for 10 years.

(6) 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 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 set forth information regarding our consolidated financial results for 2024, 2023 and 2022 on a U.S. GAAP basis and a non-GAAP basis. The non-GAAP basis adjusts for the impact of our consolidated investment products, the impact of market movements on the deferred compensation liabilities and related economic hedges, investment income related to certain other investments, acquisition-related amortization and costs, impairment charges, and certain nonrecurring charges and gains, if any.

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(1) The percentage change is not meaningful (n/m).

(2) Performance-based advisory fees were previously included in investment advisory fees. Prior periods were recast to reflect this change.

(3) Capital allocation-based income represents the change in accrued carried interest.

(4) 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 - 2024 compared to 2023

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

Investment advisory fees earned in 2024 increased 12.1% compared to 2023 as average assets under management increased $199.6 billion, or 14.7%, to $1,561.9 billion.

The average annualized effective fee rate, excluding performance-based advisory fees, earned on our assets under management was 41.0 basis points in 2024, compared to 41.9 basis points earned in 2023. Our effective fee rate has declined largely due to a mix shift in assets toward lower fee products and asset classes from client flows and transfers, partially offset by higher market returns. The average annualized fee rate, excluding performance-based fees, was 40.5 basis points for the fourth quarter of 2024.

Operating expenses were $4,760.3 million in 2024, an increase of 6.4% compared to 2023. The increase was primarily driven by higher compensation costs, distribution and servicing costs, and advertising and promotion costs. Additionally, 2023 included a $82.4 million reduction in operating expenses related to the remeasurement of the contingent consideration liability compared to a $13.4 million reduction in 2024.

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On a non-GAAP basis, operating expenses were $4,498.8 million, an increase of 5.6% compared to 2023. The increase in our non-GAAP operating expenses was primarily driven by higher costs across compensation and benefits, distribution and servicing, advertising, professional fees, and a non-recurring recovery of general and administrative costs recognized in 2023. These increases were partially offset by lower external research fees, lower accrued carried interest compensation, and higher capitalized labor. In 2024, the firm changed its approach to paying for external research, consistent with regulations and general industry practice.

We currently estimate our 2025 non-GAAP operating expenses, excluding non-GAAP accrued carried interest compensation, will grow in the range of 4%-6% from the 2024 amount of $4,456.3 million. We could elect to adjust our expense growth should unforeseen circumstances arise, including significant market movements.

Operating margin was 32.9% in 2024 compared to 30.7% in 2023. The increase is primarily driven by net revenue growth outpacing operating expense growth primarily due to higher average assets under management.

Diluted earnings per share was $9.15 in 2024 compared to $7.76 in 2023. The increase in GAAP basis diluted earnings per share was primarily due to higher operating income and a lower effective tax rate.

On a non-GAAP basis, diluted earnings per share was $9.33 in 2024 compared to $7.59 in 2023. The increase was primarily due to higher operating income and a lower effective tax rate.

See our non-GAAP reconciliations later in this Management's Discussion and Analysis section.

Results Overview - 2023 compared to 2022

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 fees 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 fees earned in 2023 decreased 3.7% over the comparable 2022 period as average assets under our management decreased $36.1 billion, or 2.6%, to $1,362.3 billion.

The average annualized effective fee rate earned on our assets under management was 41.9 basis points in 2023, compared to 42.6 basis points earned in 2022. Our effective fee rate has declined largely due to a mix shift toward lower fee asset classes and vehicles as a result of net equity outflows, partially offset by higher market returns. The average annualized fee rate earned on our assets under management was 41.5 basis points for the fourth quarter of 2023.

Operating expenses were $4,474.3 million in 2023, an increase of 8.7% over the comparable 2022 period. The impact of market movements on the supplemental savings plan liability accounted for about 70% of the increase in U.S. GAAP operating expenses. Non-operating income has a corresponding increase due to our economic hedge of the liability.

On a non-GAAP basis, operating expenses were $4,260.7 million, a 4.2% increase over the comparable 2022 period. The increase in our non-GAAP operating expenses was primarily driven by higher costs across compensation and benefits, accrued carried interest related compensation expense, technology, facility, advertising, and professional fees. These increases were offset in part by higher capitalized labor, lower stock-based compensation, and a non-recurring recovery of general and administrative costs incurred in 2022.

Operating margin was 30.7% in 2023, compared to 36.6% in 2022. The decrease in our operating margin in 2023 compared to 2022 is primarily driven by a decrease in investment advisory fees as a result of lower average assets under management and higher operating expenses.

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Diluted earnings per share. Diluted earnings per share was $7.76 in 2023 compared to $6.70 in 2022. The increase in 2023 GAAP basis diluted earnings per share from 2022 was primarily due to net investment income in 2023 compared to net investment losses in 2022. These increases were partially offset by lower operating income and a higher effective tax rate.

On a non-GAAP basis, diluted earnings per share was $7.59 in 2023 compared to $8.02 in 2022. The decrease in 2023 was primarily due to lower operating income and a higher effective tax rate. These decreases were offset by net investment income earned on our cash and discretionary investment portfolio in 2023 compared to net investment losses in 2022.

See our non-GAAP reconciliations later in this Management's Discussion and Analysis section.

Net revenues

(1) n/m - the percentage change is not meaningful.

(2) Performance-based advisory fees were previously included in investment advisory fees. Prior periods were recast to reflect this change.

Investment advisory fees. The relationship between the change in average assets under management and the change in investment advisory fees for 2024, 2023 and 2022 are presented above.

In 2024, the increase in investment advisory fees was due to higher average AUM as stronger market returns and appreciation were offset by net outflows over the last two years.

In 2023, the decline in overall advisory revenues was driven by lower average AUM and a mix shift toward lower fee asset classes and vehicles. A lower starting AUM and net outflows in 2023 were the primary drivers of a lower average AUM in 2023. These impacts were partially offset by stronger overall market returns in 2023.

Performance-based advisory fees in each period were primarily related to alternative strategies.

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Capital allocation-based income increased net revenues by $46.6 million. The 2024 amount includes an increase of $134.1 million in accrued carried interest from investments in affiliated investment funds, partially offset by $87.5 million of non-cash amortization and impairments related to acquisition-date asset basis differences. Impairments recognized in 2024 were $36.6 million, and should market and performance conditions deteriorate, additional impairments may be recognized in future periods. The firm realized carried interest of $139.6 million compared to $109.8 million in the 2023 period.

For 2023, capital allocation-based income increased net revenues by $161.9 million. This amount includes an increase of $223.2 million in accrued carried interest, partially offset by $61.3 million of non-cash amortization and impairments related to the difference in the acquisition closing date fair value and the carrying value on the date they were acquired.

A portion of the capital allocation-based income is passed through as compensation and recognized in compensation and related costs, with the unpaid amount reported as non-controlling interest on the consolidated balance sheet. In 2024, the compensation expense was $5.4 million, consisting of $42.5 million related to the accrued carried interest offset in part by $37.1 million in amortization and impairment charges. For 2023, we recognized compensation expense of $44.6 million, consisting of $70.0 million in compensation expense related to the accrued carried interest offset in part by $25.4 million in amortization and impairment charges.

Administrative, distribution, and servicing fees in 2024 were $588.0 million, an increase of $37.1 million compared to 2023. The increase was primarily driven by higher average assets on which we earn non-discretionary advisory services revenue and higher transfer agent servicing activities provided to the T. Rowe Price mutual funds.

For 2023, the decrease was primarily driven by lower transfer agent servicing activities provided to the T. Rowe Price mutual funds, and lower 12b-1 revenue earned from the Advisor and R share classes of the U.S. mutual funds as a result of lower average assets under management in these share classes. The decrease in 12b-1 revenue was offset entirely by a decrease in the costs paid to third-party intermediaries that source these assets and is reported in distribution and servicing expense.

Net revenues are presented after the elimination of $3.6 million for 2024, $2.1 million for 2023, and $2.0 million for 2022, earned from our consolidated investment products. The corresponding expenses recognized by these consolidated investment products were also eliminated from operating expenses.

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Operating expenses

(1) 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.

Compensation, benefits and related costs were $2,603.4 million, an increase of $152.7 million, or 6.2%, compared to 2023. The increase was driven by a higher bonus pool on an increase in revenue and higher salaries and related benefits partially offset by higher capitalized labor and lower other employee related costs. The firm employed 8,158 associates at December 31, 2024, an increase of 3.2% from the end of 2023.

For 2023, compensation, benefits and related costs were $2,450.7 million, an increase of $44.9 million, or 1.9%, compared to 2022. The increase was driven by $99.1 million in higher salaries and related benefits as a result of base salary increases in January 2023 and July 2022. These increases were offset by higher capitalized labor, lower non-cash stock-based compensation, and lower other employee-related costs.

Distribution and servicing costs were $354.1 million for 2024, an increase of $64.2 million, or 22.1%, compared to $289.9 million in 2023. The increase was primarily driven by higher average assets under management distributed through intermediaries.

For 2023, distribution and services costs were $289.9 million, a decrease of $11.6 million, or 3.8%, compared to 2022. The decrease was primarily driven by lower average assets under management in certain share classes of the U.S. mutual funds that earn 12b-1 fees and SICAVs. These decreases were partially offset by higher costs incurred to distribute certain products through U.S. intermediaries as the average assets under management in these products were higher.

The costs in this expense category primarily include amounts paid to third-party intermediaries that source the assets of certain share classes of our U.S. mutual funds, ETFs and our international products, such as our Japanese ITMs and SICAVs. These costs were offset entirely by the distribution revenue we earn and report in net revenues: 12b-1 revenue is recognized in administrative, distribution, and servicing fees for the Advisor and R share classes of the U.S. mutual funds and investment advisory fees for our international products.

Advertising and promotion costs were $129.6 million for 2024, an increase of $15.4 million, or 13.5%, compared to 2023. The increase was primarily driven by higher media advertising.

For 2023, advertising and promotion costs were $114.2 million, an increase of $16.9 million, or 17.4%, compared to 2022. The increase was primarily driven by higher media advertising and agency costs in 2023.

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Product and recordkeeping related costs were $297.5 million for 2024, an increase of $6.5 million, or 2.2%, compared to 2023. The increase was primarily driven by higher product related costs to be reimbursed from our sponsored investment products partially offset by lower recordkeeping related costs.

For 2023, product and recordkeeping related costs were $291.0 million for 2023, a decrease of $9.1 million, or 3.0%, compared to 2022. The decrease was driven by lower recordkeeping related costs.

Technology, occupancy, and facility costs were $644.1 million for 2024, an increase of $11.5 million or 1.8%, compared to 2023. The increase was due to ongoing investment in our technology capabilities, primarily hosted solutions, partially offset by lower facility costs as 2023 included the rent cost of two London facilities until we occupied our new building in September 2023.

For 2023, technology, occupancy, and facility costs were $632.6 million, an increase of $72.1 million or 12.9%, compared to 2022. The increase was primarily due to ongoing investment in our technology capabilities, including depreciation and hosting solution licenses, and increased office facility costs, mainly related to rent expense associated with a new London office that we began leasing in the second half of 2022 and occupied in September 2023.

General, administrative, and other costs were $433.8 million for 2024, an increase of $12.5 million or 3.0%, compared to 2023. The increase was primarily due to a cost recovery recognized in 2023 that did not recur in 2024, higher professional fees and travel costs. These increases were partially offset by lower external research fees and other general and administrative costs. In 2024, the firm changed its approach to paying for external research, consistent with regulations and general industry practice.

For 2023, general, administrative, and other costs were $421.3 million, an increase of $9.1 million or 2.2% compared to 2022. The increase was primarily due to higher professional fees and travel costs, partially offset by a $20.8 million recovery of nonrecurring costs that were incurred in 2022.

Change in fair value of contingent consideration. Our contingent consideration consists of an earnout arrangement as part of the 2021 acquisition of OHA in which additional purchase price may be due to the sellers upon satisfying or exceeding certain defined revenue targets. Each reporting period, we record the fair value of the contingent consideration due under this arrangement. Reduced revenue expectations have resulted in a reduction in the fair value of the contingent consideration liability of $13.4 million in 2024, $82.4 million in 2023, and $161.2 million in 2022. The fair value of the contingent consideration liability as of December 31, 2024 is zero.

Acquisition-related amortization and impairment costs primarily relate to the indefinite- and definite-lived intangible assets identified and separately recognized, at fair value, on acquisition date. In 2024, we recognized acquisition-related amortization and impairment costs of $156.7 million, an increase of $22.5 million or 16.8%, compared to 2023. The increase was primarily driven by impairment charges related to the trade name intangible asset.

For 2023, we recognized acquisition-related amortization and impairment costs of $134.2 million, a decrease of $149.3 million, compared to 2022. The decrease was primarily driven by an insignificant amount of impairment charges in 2023 for certain intangibles compared to $175.1 million in 2022.

The impairment charges for both periods were the result of reduced growth expectations for both investment management and incentive fees and higher discount rate compared to when the acquisition closed in 2021.

The remaining weighted average amortization period for our definite-lived intangible assets is 3.7 years. Should conditions that led us to recognize these impairment charges worsen, additional impairments may be recognized in future periods.

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Non-operating income (loss)

Non-operating income was $486.3 million in 2024 compared to $504.1 million in 2023 and a non-operating loss of $425.5 million in 2022. Non-operating activity for the years ended December 31, 2024, 2023 and 2022 are as follows:

(1) 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.

In 2024 and 2023, strong market returns contributed to the increased valuation and gains of our investment portfolio, along with higher cash balances and interest rates increased dividend income. In 2022, our overall investment portfolio valuations were negatively impacted by market declines caused by the continued elevated inflation, supply chain disruptions, and a more aggressive pace of Federal Reserve interest rate increases.

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The impact of consolidating investment products on the individual lines of our consolidated statements of income for 2024, 2023, and 2022 is as follows:

Provision for income taxes

The following table reconciles the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2024, 2023, and 2022:

(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.

(2)    Net income attributable to redeemable non-controlling interests represents the portion of earnings held in the firm's consolidated investment products, which are not taxable to the firm despite being included in pre-tax income.

Our effective tax rate for 2024 was 24.3%, compared to 26.3% for 2023 and 25.6% for 2022. The decrease in our effective tax rate in 2024 from 2023 was primarily due to lower valuation allowances recognized in 2024. These favorable impacts were slightly offset by higher state taxes.

For 2023, the increase in our effective tax rate from 2022 was primarily due to an increase in the valuation allowances recorded mainly against UK-based deferred tax assets, including net operating losses, and a decrease in discrete tax benefits associated with option exercises and restricted stock vests. These unfavorable impacts were partially offset by a favorable impact of net gains attributable to redeemable non-controlling interests held in our consolidated investment products and state tax liability settlements.

The non-GAAP tax rate primarily adjusts for the impact of the consolidated investment products, including net income attributable to redeemable non-controlling interests. Our non-GAAP effective tax rates were 24.5% for 2024, 27.2% for 2023, and 24.7% for 2022.

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Our effective tax rate will continue to experience volatility in future periods due to, among other things, the impact on the stock-based compensation tax benefits recognized from market fluctuations in our stock price and timing of option exercises, changes in the mix of our earnings among countries with differing tax laws, and changes in the valuation allowance of foreign-based deferred tax assets. As of December 31, 2024, the total valuation allowance recorded was $118.9 million, of which nearly all is related to UK-based deferred tax assets. We intend to continue maintaining a full valuation allowance on these and future deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Our U.S. GAAP effective tax rate is also impacted by changes in the proportion of net income that is attributable to our redeemable non-controlling interests, non-controlling interests reflected in permanent equity and the remeasurement of the contingent consideration liability.

We currently estimate our effective tax rates for the full-year 2025 will be in the range of 23.0% to 27.0% on a GAAP basis, and 23.0% to 26.0% on a non-GAAP basis.

The Organization of Economic Co-operation and Development has issued Pillar Two Model Rules (Pillar Two) introducing a global 15% minimum tax effective January 1, 2024 within certain countries where we operate. For countries that have adopted Pillar Two in 2024, it did not have a material impact on the company's consolidated results of operations, cash flows, and overall financial position. We will continue to monitor and evaluate the impacts of future Pillar Two legislation proposed or enacted in jurisdictions that have not yet adopted the rules.

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.

The following schedules reconcile certain U.S. GAAP financial measures for each of the last three years.

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(1)    These non-GAAP adjustments remove the impact of acquisition-related amortization and costs, including amortization of intangible assets, the recurring fair value remeasurements of the contingent consideration liability, amortization of acquired investment and non-controlling interest basis differences and amortization of compensation-related arrangements. We believe adjusting for these charges helps the reader's ability to understand our core operating results and increases comparability period to period.

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(2)    This non-GAAP adjustment removes acquisition-related transactions costs. We believe adjusting for these charges helps the reader's ability to understand our core operating results and increases comparability period to period.

(3)    This non-GAAP adjustment removes the compensation expense impact from market valuation changes in the deferred compensation liabilities, which include the supplemental savings plan and, beginning in the fourth quarter of 2024, restricted fund units, and the related net gains (losses) on investments designated as economic hedges against the related liabilities. The liabilities are adjusted for appreciation (depreciation) of hypothetical investments chosen by participants. We use investment products to economically hedge the market risk associated with the supplemental savings plan liability and the expected settlement value of unvested restricted fund units. We believe it is useful to offset the non-operating investment income (loss) recognized on the economic hedges against the related compensation expense and remove the net impact to help the reader's ability to understand the firm's core operating results and to increase comparability period to period.

(4)    This non-GAAP adjustment removes the impact the consolidated investment products have on our U.S. GAAP consolidated statements of income. Specifically, we add back the operating expenses and subtract the investment income of the consolidated investment products. The adjustment to operating expenses represents the operating expenses of the consolidated investment products, net of the elimination of related investment advisory and administrative fees. The adjustment to net income attributable to T. Rowe Price Group, Inc. represents the net income of the consolidated investment products, net of redeemable non-controlling interests. We believe adjusting for the impact of the consolidated investment products helps the reader’s ability to understand our core operating results and increases comparability period to period.

(5)    This non-GAAP adjustment represents non-operating income (loss) and the net gains (losses) earned on the firm's investment portfolio that are not designated as economic hedges of the deferred compensation liabilities and that are not part of the cash and discretionary investment portfolio. We retain in our non-GAAP measures the investment gains recognized on the cash and discretionary investments as these assets and related income (loss) are considered part of the firm's core operations. We believe adjusting for the remaining non-operating income (loss) helps the reader’s ability to understand the firm's core operating results and increases comparability period to period. Additionally, we do not emphasize the impact of this portion of non-operating income (loss) when managing and evaluating the firm's performance.

(6)    The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 24.5% for 2024, 27.2% for 2023 and 24.7% for 2022.

(7)    This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to

T. Rowe Price Group and dividing by the weighted-average common shares outstanding assuming dilution. The calculation of net income allocated to common stockholders is as follows:

CAPITAL RESOURCES AND LIQUIDITY.

During 2024, stockholders’ equity attributable to T. Rowe Price Group, Inc. increased from $9.5 billion to $10.3 billion, and tangible book value increased to $7.5 billion at December 31, 2024 from $6.5 billion at December 31, 2023.

Sources of Liquidity

We have ample liquidity, including cash and investments in T. Rowe Price products as follows:

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Our discretionary investment portfolio is comprised primarily of short duration fixed income ETFs, which typically yield higher than money market rates. Of our cash and cash equivalents, $653.9 million at December 31, 2024, and $699.0 million at December 31, 2023 were held by our subsidiaries located outside the U.S. Our cash and discretionary investment portfolio experienced market gains of $148.7 million in 2024 and $140.8 million in 2023. 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 consolidated balance sheet is based on how we account for the cash or investment. The following table details how our interests in cash and investments relate to where they are presented in the consolidated balance sheet as of December 31, 2024.

(1)The consolidated investment products are generally those products we provided seed capital at the time of their formation and we have a controlling interest. The $1,037.9 million represents the total value at December 31, 2024 of our interest in the consolidated investment products. The total net assets of the investment products at December 31, 2024 of $1,981.9 million includes assets of $2,044.0 million, less liabilities of $62.1 million as reflected in the consolidated balance sheet in Item 8. Financial Statements of this Form 10-K.

(2)    Includes $160.7 million of non-controlling interests in consolidated entities and represents the portion of these investments, held by third parties, that we cannot sell in order to obtain cash for general operations.

Our consolidated balance sheet reflects the assets and liabilities of those investment products we consolidate, as well as redeemable non-controlling interests for the portion of these investment products that are held by unrelated third-party investors. Although we can redeem our net interest in these 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 investment products are not available to our general creditors. Our interest in these investment products was primarily 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 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.

Uses of Liquidity

We paid $4.96 per share in regular dividends in 2024, an increase of 1.6% over the $4.88 per share paid in 2023. Further, we expended $334.5 million in 2024 to repurchase nearly 3.0 million shares, or 1.3%, of our outstanding common stock at an average price of $112.57 per share. These dividends and repurchases were expended using existing cash balances and cash generated from operations. We generally repurchase our common stock over time to offset the dilution created by our equity-based compensation plans.

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Since the end of 2021, we have returned $4.8 billion to stockholders through stock repurchases and our regular quarterly dividends, as follows:

We anticipate property and equipment expenditures for the full-year 2025 to be about $300 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.

The following tables summarize the cash flows for 2024, 2023 and 2022, that are attributable to T. Rowe Price Group Inc., our consolidated investment products, and the related eliminations required in preparing the consolidated statement of cash flows.

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Operating activities

During 2024, operating activities attributable to T. Rowe Price Group, Inc. provided cash flows of $2,313.9 million, an increase of $255.3 million from $2,058.6 million provided during 2023. The increase was primarily driven by a $311.4 million increase in net income and a $215.6 million increase in the add-back for non-cash items as detailed in the 2024 table above. These increases to operating cash flows were offset in part by a $158.8 million decrease in cash flows related to timing differences associated with the cash settlement of our assets and liabilities. Additionally, in 2024, we made $112.9 million more net investments in sponsored investment products used to economically hedge our deferred compensation liabilities compared to 2023. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.

During 2023, operating activities attributable to T. Rowe Price Group, Inc. provided cash flows of $2,058.6 million, a decrease of $381.7 million from $2,440.3 million provided during 2022. The decrease was primarily driven by a $986.5 million decrease in the add-back for non-cash items as detailed in the 2023 table above. These decreases to operating cash flows were offset in part by a $230.8 million increase in net income and $365.5 million increase in cash flows related to timing differences associated with the cash settlement of our assets and liabilities. Additionally, in 2023, we expended $8.5 million less in net investments in sponsored investment products used to economically hedge our deferred compensation liabilities compared to 2022. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.

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Investing activities

Net cash used in investing activities that are attributable to T. Rowe Price Group Inc. totaled $187.9 million in 2024 compared to $310.2 million in 2023. Net investing activities from our investments in sponsored investment products generated net proceeds of $407.1 million in 2024 compared to $36.1 million in 2023. In 2024, we increased our property and equipment expenditures by $115.5 million and our other investing activity by $133.2 million. We eliminate our capital in those investment products we consolidate in preparing our consolidated statements of cash flows. The remaining change in reported cash flows from investing activities of $41.0 million is related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.

Net cash used in investing activities that are attributable to T. Rowe Price Group totaled $310.2 million in 2023 compared to $179.3 million in 2022. During 2023, net proceeds from the sale of investments of $36.1 million were lower compared to $62.0 million during 2022. In 2023, we increased our property and equipment expenditures by $70.3 million and our other investing activity by $34.7 million. We eliminate our capital in those investment products we consolidate in preparing our consolidated statements of cash flows. The remaining change in reported cash flows from investing activities of $48.1 million is primarily related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.

Financing Activities

Net cash used in financing activities attributable to T. Rowe Price Group totaled $1,542.8 million in 2024 compared to $1,437.4 million in 2023. During 2024, we used $337.2 million to repurchase nearly 3.0 million shares compared to $254.4 million to repurchase 2.4 million shares in 2023. The $13.9 million increase in dividends paid in 2024 was a result of the 1.6% increase in our quarterly dividend per share. In addition, in 2024, net distributions to non-controlling interests in consolidated entities decreased by $6.6 million and cash flow related to common stock issued under stock compensation plans decreased by $15.3 million compared to 2023. The remaining change in reported cash flows from financing activities is attributable to a $247.4 million increase in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2024.

Net cash used in financing activities attributable to T. Rowe Price Group totaled $1,437.4 million in 2023 compared to $2,028.5 million in 2022. During 2023, we used $254.4 million to repurchase 2.4 million shares compared to $849.8 million to repurchase 6.8 million shares in 2022. The $14.3 million increase in dividends paid in 2023 is a result of the 1.7% increase in our quarterly dividend per share in 2023. In addition, net distributions to non-controlling interests in consolidated entities increased by $8.2 million and cash flow related to common stock issued under stock compensation plans increased by $18.2 million during 2023 compared to 2022. The remaining change in reported cash flows from financing activities is primarily attributable to a $407.2 million increase in net subscriptions from redeemable non-controlling interest holders of our consolidated investment products during 2023.

MATERIAL CASH COMMITMENTS.

Our material cash commitments primarily include our obligations related to our deferred compensation liabilities, facility leases, our headquarters build out, and other contractual amounts that will be due for the purchase of goods or services to be used in our operations. Some of these contractual amounts may be cancellable under certain conditions and may involve termination fees. We expect to fund these cash commitments from future cash flows from operations.

Our obligations under our deferred compensation liabilities are disclosed on our consolidated balance sheet with more information included in Note 12 and Note 17 to the consolidated financial statements. Our lease obligations are disclosed in Note 7 to the consolidated financial statements. Additionally, there are unrecognized tax benefits discussed in Note 10 to our consolidated financial statements. The note references above are in Item 8. of this Form 10-K.

While most of our other material cash commitments consist of goods and services used in our operations, these commitments primarily consist of obligations related to long-term software licensing and maintenance contracts, construction in process, and service contracts.

We also have outstanding commitments to fund additional contributions to investment partnerships totaling $202.5 million. The vast majority of these additional contributions will be made to investment partnerships in which we have

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an existing investment. In addition to such amounts, a percentage of prior distributions may be called under certain circumstances.

As part of the OHA acquisition, T. Rowe Price committed $500 million to fund OHA product launches through 2026. As of December 31, 2024, T. Rowe Price has $360 million remaining to commit to OHA products. T. Rowe Price has also entered into certain earnout and other arrangements as part of that acquisition. For more detail on these arrangements, see Note 5 and Note 16 to our consolidated financial statements in Item 8. of this Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.

The preparation of financial statements often requires the selection of specific accounting methods and policies from among several acceptable alternatives. Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our consolidated balance sheets, the revenues and expenses in our consolidated statements of income, and the information that is contained in our significant accounting policies and notes to the consolidated financial statements. These policies and estimates are considered critical because they had a material impact or are reasonably likely to have a material impact on our consolidated financial statements and because they require management to make significant judgments, assumptions or estimates. Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time. Accordingly, actual amounts or future results can differ materially from those estimates that we currently include in our consolidated financial statements, significant accounting policies, and notes.

We present those significant accounting policies used in the preparation of our consolidated financial statements as an integral part of those statements within this 2024 Annual Report on Form 10-K. In the following discussion, we highlight and explain further certain of those policies and estimates that are most critical to the preparation and understanding of our financial statements.

Consolidation

We consolidate all subsidiaries and sponsored investment products in which we have a controlling financial interest. We are deemed to have a controlling interest when we own the majority of the voting interest of an entity or are deemed to be the primary beneficiary of a variable interest entity ("VIE"). VIEs are entities that lack sufficient equity to finance its activities or the equity holders do not have defined power to direct the activities of the entity normally associated with an equity investment. Our analysis to determine whether an entity is a VIE or a voting interest entity ("VOE") involves judgment and considers several factors, including an entity’s legal organization, capital structure, the rights of the equity investment holders, our ownership interest in the entity, and our contractual involvement with the entity. We continually review and reconsider our VIE or VOE conclusions upon the occurrence of certain events, such as changes to our ownership interest, changes to an entity’s legal structure, or amendments to governing documents. Our VIEs are primarily sponsored investment products and our variable interest consists of our equity ownership in and investment management fees earned from these entities.

We are the primary beneficiary if we have the power to direct the activities of the VIE that most significantly impact its economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the VIE that could potentially be significant. Our SICAV funds and other investment products regulated outside the U.S. are determined to be VIEs. We have interests in certain investment partnerships that are also considered VIEs, including entities that have interests in general partners of affiliated private investment funds, which are also VIEs. We consolidate the entities that hold the interest in the general partners; however, the entities are not the primary beneficiaries of the affiliated private investment funds.

Other-than-temporary impairments of equity method investments

We evaluate our equity method investments for impairment when events or changes in circumstances indicate that the carrying value of the investment exceeds its fair value, and the decline in fair value is other than temporary. For our investments in our affiliated private investment funds, we consider the length of time and the extent to which market value has been less than cost, any specific events that may influence the operations of the funds and our intent and ability to retain the investment for a period of time to allow for any anticipated recovery in market value. We generally believe an assessment period of four consecutive quarters of sustained market losses is a reasonable period to allow for an anticipated market recovery.

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Intangible assets

Indefinite-lived intangible assets are tested for impairment annually, in the fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the intangible asset is impaired. Management must first determine the level at which indefinite-lived intangible assets are tested for impairment (i.e., unit of account). We have concluded that the trade name and investment advisory agreement indefinite-lived intangible assets will be considered their own separate unit of account. Once the unit of account is determined, management has the option to first assess indefinite-lived intangible assets for qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If a quantitative impairment test is required, the impairment test consists of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If required, fair value is generally determined using a discounted cash flow analysis where estimated future cash flows are discounted to arrive at a single present value amount. This approach includes inputs that require significant management judgment, the most relevant of which include revenue growth, discount rates, and effective tax rates. Changes in these inputs could produce different fair value amounts and therefore different impairment conclusions. During 2024, we recognized $31.1 million of non-cash impairment charges on the trade name intangible asset. The maximum future impairment of indefinite-lived intangible assets that we could incur is the amount recognized in our consolidated balance sheets within intangible assets, $151.6 million as of December 31, 2024.

Definite-lived intangible assets are reviewed for impairment whenever events or circumstances indicate that the asset group's carrying amount may not be recoverable (i.e., the carrying amount is more than the undiscounted estimated future cash flows). Management must first determine the level at which definite-lived intangible assets are tested for impairment (i.e., asset group). The determination of the asset group is judgmental and the intangible assets can be grouped based on the lowest level for which identifiable cash flows are largely independent of identifiable cash flows for other groups of assets. Since each affiliated private investment fund has identifiable cash flows separate from other funds, we determined that the asset group for testing is each individual affiliated private investment fund. Once the asset group is identified, we next determine whether there are any triggering events that would cause us to believe that the carrying value would not be recoverable. If there is a triggering event, then we would perform a test of recoverability. Based on that test, if the carrying value is not recoverable, then a fair value measurement is required of the asset group to determine if the fair value is less than the asset group's carrying amount. If required, fair value would be determined using a discounted cash flow analysis where estimated future cash flows are discounted to arrive at a single present value amount. This approach includes inputs that require significant management judgment, the most relevant of which include revenue growth, discount rates, and effective tax rates. Any impairment loss would be the difference between the fair value of the asset group and its carrying amount. During 2024, we recognized immaterial non-cash impairment charges on these intangible assets.

Goodwill

We internally conduct, manage, and report our operations as one reportable business segment - investment advisory business. This reflects how the chief operating decision maker allocates resources and assesses performance. Accordingly, we have one reporting unit - our investment advisory business, consistent with our single operating segment, to which all goodwill has been assigned.

We evaluate the carrying amount of goodwill in our consolidated balance sheets for possible impairment on an annual basis in the fourth quarter of each year using a fair value approach. Goodwill would be considered impaired whenever its carrying amount exceeds the fair value of our investment advisory business. Our annual testing has demonstrated that the fair value of our investment advisory business (our market capitalization) exceeds our carrying amount (our stockholders’ equity) and, therefore, no impairment exists. Should we reach a different conclusion in the future, additional work would be performed to ascertain the amount of the noncash impairment charge to be recognized. We must also perform impairment testing at other times if an event or circumstance occurs indicating that it is more likely than not that an impairment has been incurred. The maximum future impairment of goodwill that we could incur is the amount recognized in our consolidated balance sheets, $2.6 billion as of December 31, 2024.

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Provision for income taxes

After compensation and related costs, our provision for income taxes on our earnings is our largest annual expense. We operate in numerous states and countries through our various subsidiaries and must allocate our income, expenses, and earnings under the various laws and regulations of each of these taxing jurisdictions. Accordingly, our provision for income taxes represents our total estimate of the liability that we have incurred in doing business each year in all of our locations. Annually, we file tax returns that represent our filing positions with each jurisdiction and settle our return liabilities. Each jurisdiction has the right to audit those returns and may take different positions with respect to income and expense allocations and taxable earnings determinations. From time to time, we may also provide for estimated liabilities associated with uncertain tax return filing positions that are subject to, or in the process of, being audited by various tax authorities. Because the determination of our annual provision is subject to judgments and estimates, it is likely that actual results will vary from those recognized in our financial statements. As a result, we recognize additions to, or reductions of, income tax expense during a reporting period that pertain to prior period provisions as our estimated liabilities are revised and actual tax returns and tax audits are settled. We recognize any such prior period adjustment in the discrete quarterly period in which it is determined.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including

future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.

See Note 1 - Basis of Preparation and Summary of Significant Accounting Policies within Item 8. Financial Statements for a discussion of newly issued but not yet adopted accounting guidance.

FORWARD-LOOKING INFORMATION.

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

Our future revenues and results of operations will fluctuate primarily due to changes in the total value and composition of assets under our management. Such changes result from many factors, including, among other things: client-related cash inflows and outflows in our products, performance fees, capital allocation-based income, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new investment products, and changes in retirement savings trends relative to participant-directed investments and defined contribution plans.

The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence; the relative investment performance of the T. Rowe Price mutual funds and other managed investment products compared to competing offerings and market indexes; the ability to maintain our investment management and administrative fees at appropriate levels; the impact of changes in interest rates and inflation; competitive conditions in the mutual fund, asset management, and broader financial services sectors; our level of success in implementing our strategy to expand our business; and our ability to attract and retain key personnel. Our revenues are substantially dependent on fees earned under contracts with the T. Rowe Price funds and could be adversely affected if the independent directors of one or more of the T. Rowe Price funds terminated or significantly altered the

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terms of the investment management or related administrative services agreements. Non-operating investment income will also fluctuate primarily due to the size of our investments, changes in their market valuations, and any other-than-temporary impairments that may arise or, in the case of our equity method investments, our proportionate share of the investees’ net income.

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

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