What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-11 · 304 added, 298 removed, 634 unchanged (49% of the section changed)

13 unchanged sentences

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 changes in assets under management.

Additionally, approximately 30% of our operating expenses for the years ended December 31, 2021, 2020 and 2019 are impacted by changes in 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.

2 unchanged sentences

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.

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;

and, most importantly, we provide our clients with strong investment management expertise and service.

On December 29, 2021, we completed our acquisition of Oak Hill Advisors, L.P., a leading alternative credit manager, and other entities that had common ownership (collectively, OHA).

We acquired 100% of the equity interests of Oak Hill Advisors, L.P., 100% of the equity interests in entities that make co-investments in certain affiliated private investment funds (the "co-investment entities") and a majority of the equity interests in entities that have interests in general partners of affiliated private investment funds and are entitled to a disproportionate allocation of income (the "carried interest entities").

The acquisition of OHA included $57 billion of capital under management, of which $47 billion of fee-basis assets under management was added to our assets under management as of the date of the acquisition.

The acquisition accelerates our expansion into alternatives

investment markets and complements our existing global platform and ongoing strategic initiatives in our core investments and distribution capabilities.

Alternative credit strategies continue to be in demand from investors across the globe seeking attractive yields and risk-adjusted returns.

MARKET TRENDS.

stocks produced strong returns in 2020.

Shares fell sharply during the first quarter in response to the global spreading of the coronavirus and severe economic weakness following lockdown measures.

Starting in late March, equities rose sharply—and continued climbing throughout the year—in response to massive fiscal and monetary stimulus measures by governments and central banks around the world, as well as some economic re-opening efforts.

Toward the end of the year, investor sentiment was lifted further by reduced political uncertainty following former Vice President Joe Biden’s victory over incumbent President Donald Trump in the November election.

Also, investors were encouraged by the beginning of the distribution of some coronavirus vaccines that demonstrated very high efficacy rates in drug trials.

Even though the coronavirus pandemic continued, major U.S.

stock indexes climbed in 2021, extending the brisk rebound that started in late-March 2020.

Equities advanced as the economy reopened and recovered—facilitated by the rollout of coronavirus vaccines and some federal fiscal relief—and as corporations reported robust earnings growth.

Elevated inflation stemming in part from shortages of some goods and materials amid global supply chain disruptions, the emergence of variants of the coronavirus, and the Federal Reserve’s decision to taper its monthly asset purchases starting in November were among the factors that have weighed on the financial markets.

Stocks in developed non-U.S.

equity markets produced positive returns in U.S.

dollar terms but generally lagged U.S.

Local returns to U.S.

investors were lifted by a weaker dollar against major non-U.S.

In Asia, most major markets rose;

Japanese shares advanced about 15%.

In Europe, most markets also rose, but shares in the UK declined more than 10% due to uncertainty for most of the year about the UK’s post-Brexit trade relationship with the European Union.

Emerging markets stocks outperformed developed non-U.S.

Asia outperformed other emerging regions, thanks to market strength in South Korea, Taiwan, and China.

In emerging Europe, Turkish and Russian shares declined moderately in U.S.

dollar terms amid weak currencies versus the greenback.

Latin American shares were mostly weaker, with regional heavyweight Brazil falling 19% in U.S.

dollar terms as the real plunged more than 22% over the last year.

equity markets rose but lagged U.S.

European stock markets were broadly positive in U.S.

dollar terms.

Several markets produced gains exceeding 20%.

Shares in Spain and Portugal trailed with gains of less than 2%.

Developed Asian markets were mixed in dollar terms.

Hong Kong stocks fell about 4% due in part to the Chinese government’s regulatory crackdown in certain sectors, as well as concerns about some highly indebted firms in the Chinese property market.

Japanese shares gained about 2%.

Stocks in emerging markets generally declined in U.S.

dollar terms, as currency weakness versus the dollar reduced local returns to U.S.

In Asia, stocks in Taiwan and India surged almost 27%, but Chinese shares fell nearly 22% amid the government’s regulatory crackdown and concerns about the property market.

Latin American markets were also mixed, as several countries struggled with political uncertainty, currency weakness, and elevated inflation that prompted central banks to raise short-term interest rates.

Stocks in most emerging European markets appreciated, but Turkish shares and the lira plunged as the central bank reduced short-term interest rates in the final months of the year despite elevated inflation.

Returns of several major equity market indexes for 2021 are as follows:

5 unchanged sentences

(1) Returns exclude dividends

Global bonds produced mostly positive returns, as central banks slashed short-term interest rates and sovereign bond yields in many countries fell sharply.

investment-grade market, corporate bonds did best, as investors sought attractive yields in a low interest rate environment.

Treasury securities also did well as yields dropped across the yield curve.

Global bond returns were mostly negative amid rising bond market interest rates and, as the year progressed, growing expectations for major central banks to curtail their stimulus efforts.

In the U.S., yields rose across the Treasury yield curve—especially in the intermediate-term portion of the curve—amid expectations that the Federal Reserve’s tapering of monthly asset purchases, which began in November, will be a prelude to tighter monetary policy sometime in 2022.

The 10-year U.S.

Treasury note yield decreased from 1.92% to 0.93% over the last year.

Asset- and mortgage-backed securities produced relatively mild gains.

High yield corporate bonds and tax-free municipal bonds rose but trailed the broad taxable investment-grade bond market.

Treasury note yield increased from 0.93% to 1.52% in 2021.

taxable investment-grade universe, Treasury securities performed worst, while corporate, mortgage-backed, and commercial mortgage-backed securities fell to a lesser extent.

Asset-backed securities held up best, albeit with slight losses.

Tax-free municipal securities produced positive returns, as municipal yields rose less than comparable Treasury yields.

High yield bonds strongly outperformed for the year.

Bonds in developed non-U.S.

markets produced strong gains in U.S.

dollar terms, helped by dollar weakness against the euro and, to a lesser extent, the Japanese yen and the British pound.

Bonds in developing markets generally appreciated in U.S.

dollar terms, though local currency weakness in some countries, especially Brazil, Turkey, and Russia, reduced local returns to U.S.

markets declined in U.S.

dollar terms, as a stronger U.S.

dollar versus the yen, the euro, and other currencies reduced local returns to U.S.

Emerging markets bonds also declined, as bond yields increased and many emerging countries raised short-term interest rates in an attempt to stem inflation.

Local currency issues fared worse than dollar-denominated debt, as most emerging markets currencies declined against the dollar.

Returns of several major bond market indexes for 2021 are as follows:

8 unchanged sentences

Assets under management ended 2021 at $1,687.8 billion, an increase of $217.3 billion from the end of 2020.

This increase was driven by market appreciation and income, net of distributions not reinvested, of $256.9 billion and net cash inflows of $5.6 billion for 2020.

In addition, we acquired client contracts from PNC Bank in September 2020 that added $1.2 billion of stable value assets under management.

This increase was primarily driven by market appreciation and income, net of distributions not reinvested, of $198.9 billion.

The acquisition of OHA completed on December 29, 2021 included $57 billion of capital under management (which includes net assets value, portfolio value and/or unfunded capital), of which $46.9 million of fee-basis assets under management are included in the assets under management in the tables below.

These increases were partially offset by net cash outflows of $28.5 billion for 2021.

Clients transferred $23.8 billion in net assets from the U.S.

mutual funds to primarily collective investment trusts and other investment products, of which $8.6 billion transferred into the retirement date trusts.

mutual funds primarily to collective investment trusts, of which $16.2 billion transferred into the retirement date trusts.

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

(in billions) U.S.

mutual funds Subadvised and separate accounts Collective investment trusts and other investment products Total

mutual funds Subadvised and separate accounts Collective investment trusts and other investment products Private investment funds and CLOs Total

Assets under management at December 31, 2018 $ 564.5 $ 250.0 $ 147.8 $ — $ 962.3

13 unchanged sentences

Distributions not reinvested (2.9) — (.2) — (3.1)

Acquired assets under management — — 1.2 — 1.2

Change during the period 111.9 86.3 65.5 — 263.7

6 unchanged sentences

Distributions not reinvested (6.3) — (.2) — (6.5)

Acquired AUM — — 1.2 1.2

Change during the period 76.8 26.1 67.5 — 170.4

Preacquisition assets under management at December 31, 2021 871.4 426.2 343.3 — $ 1,640.9

Acquired fee-basis assets under management — 10.9 — 36.0 46.9

Assets under management at December 31, 2021 $ 871.4 $ 437.1 $ 343.3 $ 36.0 $ 1,687.8

5 unchanged sentences

(in billions) Equity Fixed income, including money market Multi-asset (1)

Alternatives (2)

Assets under management at December 31, 2018 $ 539.9 $ 136.1 $ 286.3 $ — $ 962.3

7 unchanged sentences

196.9 5.5 54.5 — 256.9

Acquired assets under management — 1.2 — — 1.2

Change during the period 196.9 20.8 46.0 — 263.7

3 unchanged sentences

141.5 .6 56.8 — 198.9

Acquired AUM — 1.2 — 1.2

Change during the period 96.9 1.8 71.7 — 170.4

Preacquisition assets under management at December 31, 2021 992.7 170.5 477.7 — $ 1,640.9

Acquired fee-basis assets under management — 5.2 — 41.7 46.9

Assets under management at December 31, 2021 $ 992.7 $ 175.7 $ 477.7 $ 41.7 $ 1,687.8

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

(2) 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, or have absolute return as its investment objective.

Generally, only those strategies with longer than daily liquidity are included.

(2) Reported net of distributions not reinvested.

1 unchanged sentence

account for 9.9% of our assets under management at December 31, 2021 and 9.3% at December 31, 2020.

Our net cash flows in 2020 reflect net positive flows due to inflows into fixed income and international equity.

These inflows were partially offset by cash outflows in domestic equity and our multi-asset franchise resulting from macro-economic headwinds, including the CARES Act, and ongoing pressure from passive.

In terms of equity products, the cash inflows from international equity offset the cash outflows from domestic equity products.

From a geography perspective, EMEA and APAC regions performed well with positive net flows predominantly in equity in both regions.

Net cash flows for 2019, and 2018 were driven by diversified inflows across distribution channels and geographies, the strength of our multi-asset franchise, and positive flows into fixed income and international equity.

The percentage at December 31, 2021 reflects the assets under management from OHA's clients outside the United States.

Our net cash flows in 2021 reflect net outflows from domestic equity as well as domestic fixed income.

These outflows also reflect the redemption of about $2.5 billion from our U.S.

mutual fund investments to fund the cash portion of the OHA acquisition.

These outflows were partially offset by cash inflows in our multi-asset franchise and international fixed income.

From a geography perspective, the Americas and EMEA regions experienced net outflows predominantly in equity in both regions, while APAC had positive net flows.

Net cash flows for 2020 reflect positive flows into fixed income and international equity, while experiencing net outflows in domestic equity and our multi-asset franchise resulting from macroeconomic headwinds and ongoing pressure from passive investments.

Net cash flows for 2019 were driven by diversified inflows across distribution channels and geographies, the strength of our multi-asset franchise, and positive flows into fixed income and international equity.

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.

6 unchanged sentences

$ 391.1 $ 332.2 $ 292.4 $ 11.3 $ (6.5) $ 9.8

The firm also provides strategic investment advice solutions for certain portfolios.

These advice solutions, which the vast majority is overseen by our multi-asset division, may include strategic asset allocation, and in certain portfolios, asset selection and/or tactical asset allocation overlays.

The firm also offers advice solutions through retail separately managed accounts and separately managed accounts model delivery.

As of December 31, 2021, total assets in these solutions were $488 billion, of which $480 billion are included in our reported assets under management in the tables above.

We provide participant accounting and plan administration for defined contribution retirement plans that invest in the firm's U.S.

mutual funds, collective investment trusts and funds outside of the firm's complex.

mutual funds, collective investment trusts and funds managed outside of the firm's complex.

As of December 31, 2021, our assets under administration were $270 billion, of which nearly $163 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 trades in the 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 $2.8 billion at December 31, 2020.

INVESTMENT PERFORMANCE (1) .

Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success.

Beginning in the third quarter of 2020, we expanded our performance disclosures to include specific assets classes, assets under management weighted performance, mutual fund performance against passive peers and composite performance against benchmarks.

The following table presents investment performance for the one-, three-, five-, and 10-years ended December 31, 2021.

40 unchanged sentences

mutual funds (across primary share classes) ended 2021 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 and not of OHA's products.

42 unchanged sentences

The following table and discussion set forth information regarding our consolidated financial results for 2021, 2020 and 2019 on a U.S.

GAAP basis as well as a non-GAAP basis.

GAAP basis and 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.

We completed our acquisition of OHA on December 29, 2021;

however, our results of operations do not include any financial results of OHA for 2021 as the OHA activity between the closing date and December 31, 2021 was deemed to be immaterial.

We currently expect acquisition-related intangibles amortization, fair value adjustments of contingent consideration, acquisition-related retention compensation expense, and other acquisition-related expenses to impact our operating results beginning in 2022.

2021 compared with 2020 2020 compared with 2019

17 unchanged sentences

Average assets under management (3)

$ 1,599.3 $ 1,247.9 $ 1,109.3 $ 351.4 28.2 % $ 138.6 12.5 %

Ending assets under management $ 1,687.8 $ 1,470.5 $ 1,206.8 $ 217.3 14.8 % $ 263.7 21.9 %

2 unchanged sentences

GAAP measures at the end of the Results of Operations section of this Management's Discussion and Analysis.

(3) Average assets under management for 2021 does not include the impact of the acquired fee-basis assets under management related to the OHA acquisition.

Results Overview - 2021 as compared to 2020

6 unchanged sentences

At December 31, 2021, combined net assets of the investment portfolios in which we waived fees in 2021 were $22.0 billion.

We expect to continue to waive fees in 2021, and we currently anticipate that the waivers for the first quarter of 2021 will be at or slightly

above the level of waivers experienced in the fourth quarter of 2020.

We also expect that the fee waivers for the first quarter of 2021 will represent a high-water mark for fee waivers issued.

We anticipate that the waivers in Q1 2022 will be at a slightly lower level than Q4 2021, and we expect to continue to waive fees through at least the first half of 2022.

The average annualized fee rate earned on our assets under management was 44.4 basis points in 2021, compared with 45.6 basis points earned in 2020.

Our effective fee rate has declined largely due to client transfers within the complex to lower fee vehicles or share classes over the last year and the money market fee waivers.

These declines were partially offset by performance-based fees earned in 2020.

Our effective fee rate has declined largely due to the July 2021 fee reductions in our target date products, client transfers within the complex to lower fee vehicles or share classes over

the last year, higher money market fee waivers, and lower performance-based fees.

These were partially offset as higher market valuations led to an asset class shift towards equity strategies.

Operating expenses.

Operating expenses were $3,961.9 million in 2021, an increase of 14.5% over the comparable 2020 period.

The increase in operating expenses was primarily due to a $38.6 million increase in expense related to the supplemental savings plan from higher market returns, higher compensation expenses and our continued strategic investments.

On a non-GAAP basis, our operating expenses in 2020 increased 6.1% to $3,342.7 million compared with 2019.

Our non-GAAP operating expenses do not include the impact of our supplemental savings plan and our consolidated T.

Rowe Price 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 an adaptive and agile firm;

and to become a destination of choice for top talent with a diverse workforce and inclusive culture.

We have increased our 2021 non-GAAP operating expense growth range to 8%-12%, from the 6%-9% provided in October 2020, as sharp market returns in the fourth quarter of 2020 and current AUM levels increased our expectations for AUM-driven expenses.

We could elect to adjust our expense growth should unforeseen circumstances arise, including significant market movements.

On a non-GAAP basis, operating expenses were $3,840.3 million, a 14.9% increase over the comparable 2020 period.

The increase in both GAAP and non-GAAP operating expenses was primarily due to higher compensation expenses, including higher annual bonuses, salaries and benefits, and stock-based compensation expenses as a result of continued investment in hiring for our business as well as higher distribution and servicing costs due to higher average assets under management.

The 2021 period also reflects costs incurred from an expanded relationship with FIS Capital Markets US LLC ("FIS"), which began providing technology development and core operations for our full-service recordkeeping offering in August 2021.

These costs incurred from the FIS arrangement were partially offset by a reduction in compensation expenses as a result of the approximately 800 associates who transitioned to FIS in August 2021.

The firm currently estimates its 2022 non-GAAP operating expenses, including a full-year of OHA's operating expenses, will grow in the range of 12% to 16%.

Without consideration of OHA's operating expenses, the firm's 2022 non-GAAP operating expenses are expected to grow in the range of 4% to 8%.

The firm could elect to adjust its expense growth should unforeseen circumstances arise, including significant market movements.

Operating margin.

Our operating margin in 2021 was 48.4%, compared with 44.2% in 2020.

The increase in our operating margin in 2020 compared with 2019 is primarily driven by higher net revenues, partially offset by higher compensation-related expenses.

The increase in our operating margin in 2021 compared with 2020 is primarily driven by revenue growth outpacing the increase in operating expenses.

Diluted earnings per share.

Diluted earnings per share was $13.12 in 2021 as compared to $9.98 in 2020.

The 14.7% increase in diluted earnings per share in 2020 compared to 2019 was primarily driven by higher operating income, lower weighted average outstanding shares, and a lower effective tax rate.

These drivers of the increase were partially offset by lower net investment gains recognized in 2020 than in 2019.

On a non-GAAP basis, diluted earnings per share was $12.75 in 2021 as compared to $9.58 for 2020.

The increase in adjusted diluted earnings per share was primarily due to higher operating income, lower weighted average outstanding shares, and a lower effective tax rate.

The impact of these drivers were partially offset by lower net investment gains recognized in 2020 than in 2019.

The increase in both GAAP and non-GAAP diluted earnings per share in 2021 compared to 2020 was primarily driven by higher operating income, lower weighted average outstanding shares, and a lower effective tax rate.

These drivers of the increase were partially offset by lower net investment gains recognized in 2021 than in 2020.

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

Future Operating Results Impact of OHA acquisition

As part of the OHA acquisition, certain assets and liabilities resulting from the purchase price allocation, along with certain retention-related arrangements, will impact our operating results in future periods.

These include the amortization of certain intangibles, fair value adjustments of contingent consideration, amortization of any fair market value basis differences, and compensation expense of retention-related arrangements.

The table below highlights the maximum future impact of these items on our consolidated income statement and expected future recognition period.

See Note 2 to our consolidated financial statements for more information about these acquisition-related items.

Item Maximum Future Impact to Operating Results

(in millions) Description Recognition Period

Contingent Consideration Liability - Earnout (1)

Up to $593.7 Fair market value remeasured each quarter over the performance period with any change recognized in general, administrative, and other expenses;

Portion considered to be compensatory will be recognized as compensation expense over the related service period.

Definite-lived intangible assets (1)

$ 613.9 Non-cash amortization of investment management agreement intangible assets.

For 2022, amount to be recognized is expected to be $109 million.

(weighted average)

Investments in affiliated private investment funds - fair value in excess of carrying value (1)

$ 306.5 Non-cash amortization to be recognized as a reduction in net revenues.

For 2022, amount to be recognized is expected to be $53 million.

(weighted average)

Non-controlling interest - fair value in excess of carrying value (1)

$ (129.1) Non-cash amortization to be recognized as a reduction in compensation expense.

For 2022, amount to be recognized is expected to be $23 million.

(weighted average)

Purchase consideration deemed compensatory (1)

$ 283.2 Non-cash amortization to be recognized as compensation expense.

For 2022, amount to be recognized is expected to be $57 million.

Value creation arrangement Variable - Fair market value at December 31, 2021 was $30 million.

Fair market value remeasured each quarter and recognized over the performance period as compensation expense.

(1) Related operating results impact is anticipated to be a non-GAAP adjustment beginning in 2022.

Results Overview - 2020 as compared to 2019

2 unchanged sentences

The average annualized fee rate earned on our assets under management was 45.6 basis points in 2020, compared with 46.1 basis points earned in 2019.

Our effective fee rate declined in part due to client transfers within the complex to lower fee vehicles or share classes and, to a lesser extent, fee reductions we made to certain mutual funds and other products since 2018.

Further contributing to our lower effective fee rate in 2019 was a greater percentage of our assets under management in lower fee products due to lower equity valuations in the fourth quarter of 2019.

Our effective fee rate declined largely due to client transfers within the complex to lower fee vehicles or share classes and the money market fee waivers.

These declines were partially offset by performance-based fees earned in 2020.

Operating expenses.

For 2020, operating expenses were $3,461.0 million as compared with $3,230.9 million in the 2019 period.

The increase in operating expenses was primarily due to our continued strategic investments and higher bonus and stock-based compensation, which were driven by our 2019 operating results.

The 2018 period also includes the non-recurring $15.2 million reduction in operating expenses related to the conclusion of the Dell appraisal rights matter.

In 2020, our non-GAAP operating expenses increased 6.1% to $3,342.7 million compared with 2019.

2 unchanged sentences

Our operating margin in 2020 was 44.2%, compared with 42.5% in 2019.

The decrease in our operating margin in 2019 compared to 2018 was driven by the higher percentage growth in operating expenses related to our supplemental savings plan as compared with the percentage growth in net revenues during 2019.

The increase in our operating margin in 2020 compared to 2019 was primarily driven by the higher net revenues, partially offset by higher compensation-related expenses.

Diluted earnings per share.

Diluted earnings per share was $9.98 in 2020 as compared with $8.70 in 2019.

The 19.7% increase in diluted earnings per share in 2019 compared to 2018 was primarily driven by higher non-operating income, the benefit realized from increased share buybacks, which lowered the weighted-average shares outstanding, and a lower effective tax rate.

The 14.7% increase in diluted earnings per share in 2020 compared to 2019 as primarily driven by higher operating income, lower weighted average outstanding shares, and a lower effective tax rate.

These drivers of the increase were partially offset by lower net investment gains recognized in 2020 than in 2019.

On a non-GAAP basis, diluted earnings per share were $9.58 in 2020 as compared with $8.07 in 2019.

The 12.9% increase in non-GAAP diluted earnings per share in 2019 compared to 2018 was primarily driven by higher operating income, higher investment income earned on our cash and discretionary investment portfolio, and lower weighted-average shares outstanding.

The increase in non-GAAP diluted earnings per share was primarily due to higher operating income, lower weighted average outstanding shares, and a lower effective tax rate.

The impact of these drivers were partially offset by lower net investment gains recognized in 2020 than in 2019.

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

18 unchanged sentences

In general, strong market returns in 2021 shifted the asset and share class mix among different fee rates and products including those with tiered-fee structures.

Additionally, we have reduced the management fees of certain products over the last few years.

Additionally, we have reduced the management fees of certain products over the last few years, including fee reductions in our target date products in July 2021.

In 2021, the relationship between U.S.

mutual funds' average assets under management and investment advisory fee growth was impacted by the money market fees waivers and client transfers within the complex to lower fee vehicles or share classes.

For the subadvised funds, separate accounts, collective investment trusts, and other investment products, 2020 inflows into our international products, which have a higher fee rate relative to other products, and performance-based fees earned on certain separate accounts drove investment advisory revenues to outpace the increase in average assets under management.

These investment advisory revenues include distribution-related services we provide to the international products and then contract with third-party intermediaries to distribute these products.

mutual funds' average assets under management and investment advisory fee growth was impacted by the July 2021 fee reductions in our target date products and increased money market fees waivers.

For the subadvised funds, separate accounts, collective investment trusts, and other investment products, the July 2021 target date products fee reductions and lower performance fees reduced our effective fee rate, but was partially offset by a mix shift towards equities and inflows into our international products.

These investment advisory revenues include fees earned for distribution-related services that we contract third-party intermediaries to provide.

The costs we incur to pay the third-party intermediaries are recorded as part of distribution and servicing expenses.

In 2019, equity markets outperformed fixed income markets resulting in a shift of the U.S.

mutual fund average asset mix to higher fee equity products over 2018.

Strong market returns in 2019 and U.S.

mutual fund to trust transfers have primarily increased average assets under management for our subadvised funds, separate accounts, collective investment trusts, and other products.

However, lower incremental fee rates on higher average assets and growth in lower fee share classes resulted in slower revenue growth in 2019 over 2018.

In 2020, in general, strong market returns shifted the asset and share class mix among different fee rates and products including those with tiered-fee structures.

Additionally, we have reduced the management fees of certain products over the last few years.

The relationship between average assets under management and investment

advisory fee growth was also impacted by the money market fees waivers and client transfers within the complex to lower fee vehicles or share classes.

Administrative, distribution, and servicing fees.

Administrative, distribution, and servicing fees in 2021 were $573.8 million, an increase of $60.2 million from 2020.

The higher expense was primarily due to increased transfer agent servicing activities provided to our U.S.

The higher fees were primarily due to increased transfer agent servicing activities provided to our U.S.

mutual funds, higher model delivery revenue, as well as higher 12b-1 revenue earned on the Advisor and R share classes of the U.S.

mutual funds as a result of increased assets under management in these share classes.

The increase in 12b-1 revenue is offset entirely by costs paid to third-party intermediaries that source these assets and is reported in distribution and servicing expense.

For 2020, administrative, distribution, and servicing fees were $513.6 million, an increase of $8.2 million from 2019.

The higher fees were primarily due to increased transfer agent servicing activities provided to our U.S.

mutual funds.

This increase was partially offset by lower 12b-1 revenue earned on certain share classes, including the Advisor and R classes, of the U.S.

mutual funds, as compared to 2019, as well as client transfers to lower fee vehicles and share classes have reduced assets under management in these share classes.

The decrease in 12b-1 revenue is offset entirely by a reduction in the costs paid to third-party intermediaries that source these assets and is reported in distribution and servicing expense.

For 2019, administrative, distribution, and servicing fees were $505.4 million, a decrease of $16.6 million from the comparable 2018 period.

The decrease was primarily attributable to lower 12b-1 revenue earned on certain share classes, including the Advisor and R classes, of the U.S.

mutual funds as client transfers to lower fee vehicles and share classes have reduced assets under management in these share classes.

This increase was partially offset by lower 12b-1 revenue earned on the Advisor and R classes of the U.S.

mutual funds as well as client transfers to lower fee vehicles and share classes have reduced assets under management in these share classes.

Net revenues are presented after the elimination of $5.5 million for 2021, $9.9 million for 2020, and $6.8 million for 2019, earned from our consolidated T.

4 unchanged sentences

(in millions) 2021 2020 2019 $ Change % Change $ Change % Change

Compensation and related costs, excluding supplemental savings plan $ 2,300.0 $ 2,070.6 $ 1,896.0 $ 229.4 11.1 % $ 174.6 9.2 %

Supplemental savings plan 83.0 111.8 73.2 (28.8) (25.8) % 38.6 52.7 %

Compensation and related costs $ 2,383.0 $ 2,182.4 $ 1,969.2 200.6 9.2 % 213.2 10.8 %

1 unchanged sentence

Advertising and promotion 100.2 83.7 96.8 16.5 19.7 % (13.1) (13.5) %

Product-related costs 155.5 153.2 157.1 2.3 1.5 % (3.9) (2.5) %

Product and recordkeeping related costs 236.3 155.5 153.2 80.8 52.0 % 2.3 1.5 %

Technology, occupancy, and facility costs 484.9 444.8 427.3 40.1 9.0 % 17.5 4.1 %

General, administrative, and other 383.6 316.1 321.9 67.5 21.4 % (5.8) (1.8) %

Nonrecurring net recoveries related to Dell appraisal rights matter (1)

— — (15.2) — n/m 15.2 n/m

Total operating expenses $ 3,961.9 $ 3,461.0 $ 3,230.9 $ 500.9 14.5 % $ 230.1 7.1 %

(1) The percentage change in nonrecurring net recoveries related to Dell appraisal rights matter is not meaningful (n/m).

Compensation and related costs.

Compensation and related costs increased $213.2 million, or 10.8%, for 2020 as compared with 2019.

The increase in compensation and related costs was primarily due to an $83.0 million increase in salaries, benefits and related employee costs, as our average staff size increased 5.8% from prior year and we made modest increases to base salaries at the beginning of the year.

Strong 2020 operating results led to a $65.5 million increase in our annual variable compensation, primarily bonus compensation, and higher stock-based

compensation expense.

Compensation and related costs, excluding supplemental savings plan.

Compensation and related costs, excluding the supplemental savings plan, increased $229.4 million, or 11.1%, for 2021 as compared with 2020.

This increase was primarily due to our strong operating results which led to an $107.6 million increase in our annual bonus compensation and $28.4 million in higher stock-based compensation expense.

Also contributing to the increase in costs was a $88.5 million increase in salaries, benefits and related employee costs due to modest increases in base salaries at the beginning of the year as well as an increase in our average headcount, excluding the transition of 800 T.

Rowe Price operations and technology associates to FIS on August 1, 2021 and the addition of OHA associate at the end of the year.

These increases in compensation and related costs were offset in part by $11.7 million in higher labor capitalization related to internally developed software in 2021.

For 2020, compensation and related costs, excluding the supplemental savings plan, increased $174.6 million, or 9.2%, as compared with 2019.

This increase was primarily due to an $83.0 million increase in salaries, benefits and related employee costs, as our average staff size increased 5.8% from prior year and we made modest increases to base salaries at the beginning of the year.

Strong 2020 operating results led to a $65.5 million increase in our annual variable compensation, primarily bonus compensation, and higher stock-based compensation expense.

These increases in compensation and related costs were partially offset by $30.4 million in higher labor capitalization related to internally developed software in 2020.

The $38.6 million in higher expense related to our supplemental savings plan from strong market returns is partially offset by the non-operating gains on the investments used to economically hedge the related liability.

For 2019, compensation and related costs increased $160.6 million, or 8.9%, as compared with 2018.

Nearly half of the increase in compensation and related costs is attributable to $78.8 million in higher expense related to our supplemental savings plan given the strong equity market returns experienced in 2019 compared with the sharp equity market declines in late 2018.

The higher expense related to the supplemental savings plan is partially offset by the non-operating gains earned on the investments used to economically hedge the related liability.

We also experienced increases in base salaries, benefits, and related employee costs of $66.0 million, as our average staff size grew 3.1% in 2019 and we modestly increased base salaries at the beginning of 2019.

Our 2019 operating results led to a $28.8 million increase in annual variable compensation, primarily bonus compensation, as well as a $9.5 million increase in non-cash stock-based compensation expense.

These increases in compensation and related costs were offset in part by the absence of the one-time $9.0 million bonus paid to certain associates in the second quarter of 2018 and $10.0 million in higher labor capitalization related to internally developed software in 2019.

Distribution and servicing costs.

Distribution and servicing costs were $373.9 million for 2021, an increase of $95.4 million, or 34.3%, compared to 2020.

The increase was primarily driven by higher AUM-based distribution costs as a result of continued market appreciation and inflows into our international products, including our Japanese ITMs and SICAVs.

Higher costs incurred to distribute certain other products through U.S.

financial intermediaries also contributed to the increase.

Distribution and servicing costs were $278.5 million for 2020, an increase of $16.0 million, or 6.1%, compared with 2019.

The increase was primarily driven by higher distribution costs as a result of continued inflows into our international products, including our Japanese ITMs and SICAVs.

These higher distribution costs were partially offset by client transfers, largely from Advisor and R classes, to vehicles that don't pay distribution and servicing costs.

Distribution and servicing costs were $262.5 million for 2019, a decrease of $18.7 million, or 6.7%, compared with 2018.

The decrease was primarily driven by client transfers, largely from Advisor and R classes, to vehicles that don't pay distribution and servicing costs.

Distribution and servicing costs paid to third-party intermediaries that source the assets of certain share classes of our U.S.

4 unchanged sentences

Advertising and promotion.

Advertising and promotion costs were $83.7 million for 2020, a decrease of $13.1 million, or 13.5%, compared with 2019.

The decrease was primarily driven by lower media costs and fewer conference and promotional events in 2020 as a result of cancellations arising from the coronavirus pandemic in 2020.

Advertising and promotion costs were $100.2 million for 2021, an increase of $16.5 million, or 19.7%, compared with 2020.

The increase was primarily driven by increased media spend during 2021.

For 2020, advertising and promotion costs were $83.7 million, a decrease of $13.1 million, or 13.5%, compared with 2019.

The decrease in advertising and promotion costs for 2019 from 2018 is primarily driven by the absence in 2019 of the creation and launch of a media advertising campaign in 2018.

Product-related costs.

Product-related costs were $155.5 million for 2020, an increase of $2.3 million, or 1.5%, compared with 2019.

The decrease was primarily driven by lower media costs and fewer conference and promotional events in 2020 as a result of cancellations arising from the coronavirus pandemic in 2020.

Product and recordkeeping related costs.

Product and recordkeeping related costs were $236.3 million for 2021, an increase of $80.8 million, or 52.0%, compared with 2020.

More than 85% of the increase in 2021 was driven by the recordkeeping costs incurred as part of our expanded FIS relationship, including certain transition expenses that will not recur in 2022.

While these transition expenses will not recur, we do expect to incur certain technology-related costs as part of this expanded relationship with FIS over the next few years.

These will be reported as technology, occupancy, and facility costs.

Product and recordkeeping related costs were $155.5 million for 2020, an increase of $2.3 million, or 1.5%, compared with 2019.

The increase is primarily due to higher expenses related to servicing retirement plan products, partially offset by lower costs incurred to provide administrative services to the U.S.

mutual funds.

Product-related costs were $153.2 million for 2019, a decrease of $3.9 million, or 2.5%, compared with 2018.

The decrease is primarily due to lower costs incurred to provide administrative services to the U.S.

mutual funds, partially offset by higher operating costs of our collective investment trusts as client transfers have increased the number of trusts and their average net assets over the last year.

Technology, occupancy, and facility costs.

Technology, occupancy, and facility costs were $484.9 million for 2021, $444.8 million for 2020, and $427.3 million for 2019.

The increases over the last two years were due primarily to ongoing investment in our technology capabilities, including related depreciation and hosted solution licenses, as well as office expansion costs.

The increases over the last two years were due primarily to ongoing investment in our technology capabilities, including hosting solution licenses and related depreciation.

The 2019 year included certain non-recurring office facility costs.

1 unchanged sentence

General, administrative, and other costs were $383.6 million for 2021, $316.1 million for 2020, and $321.9 million for 2019.

Higher third-party investment research costs, professional fees,

and other administrative related costs in 2020 were more than offset by lower travel-related expenses.

For 2019, the increase in general, administrative, and other costs from 2018 was a result of continued investment in our strategic initiatives, higher third-party investment research costs, and other growing operational and regulatory demands on the business.

Nearly 50% of the increase in 2021 was related to the transaction costs incurred to complete the acquisition of OHA.

Higher information services, legal, and third-party research costs contributed to the remaining increase in 2021 compared with 2020.

Travel-related expenses in 2021 were lower than 2020, and both 2021 and 2020 expenses were lower than travel-related expenses in 2019 due to the impact of the coronavirus pandemic.

For 2020, higher third-party investment research costs, professional fees, and other administrative related costs in 2020 were more than offset by lower travel-related expenses.

Non-operating income

Net non-operating investment income decreased $43.8 million in 2020 compared with 2019 and increased $517.1 million in 2019 compared with 2018.

Net non-operating investment income decreased $211.9 million in 2021 compared with 2020 and decreased $43.8 million in 2020 compared with 2019.

Net non-operating investment activity for the years ended December 31, 2021, 2020 and 2019 comprised the following:

9 unchanged sentences

Dividend income .9 2.2 2.3 (1.3) (.1)

Market related gains (losses) and equity in earnings (losses) 32.2 42.7 (22.5) (10.5) 65.2

Market related gains and equity in earnings 41.6 32.2 42.7 9.4 (10.5)

Net gain recognized upon deconsolidation 2.4 .7 .1 1.7 .6

4 unchanged sentences

Net gains on investments 215.8 246.8 260.4 (31.0) (13.6)

Net gains (losses) on consolidated sponsored investment portfolios 251.7 272.9 (92.9) (21.2) 365.8

Net gains on consolidated sponsored investment portfolios 74.7 251.7 272.9 (177.0) (21.2)

Other income (loss), including foreign currency gains and losses (5.9) (2.0) 7.0 (3.9) (9.0)

Non-operating income $ 284.6 $ 496.5 $ 540.3 $ (211.9) $ (43.8)

Despite the global economies and market disruptions caused by the coronavirus pandemic in the first quarter of 2020, strong markets for the remainder of 2020 reversed net investment losses experienced in the first quarter and generated significant gains by the end of 2020.

Our investment portfolio for 2021 generated lower market gains than our investment portfolio in 2020.

Our consolidated investment products and supplemental savings plan hedge portfolio comprised approximately 55% of the net gains recognized in 2021.

Our cash and discretionary investments generated income of $28.7 million in 2021 as compared to $92.7 million in 2020.

During the first quarter of 2020, the coronavirus pandemic caused global economies and market disruptions, but strong markets for the remainder of 2020 reversed net investment losses experienced in the first quarter and generated significant gains by the end of 2020.

Our consolidated investment products and supplemental savings plan hedge portfolio comprised almost 70% of the net gains recognized in 2020.

Our cash and discretionary investments generated income of $92.7 million in 2020 as compared to $126.0 million in 2019 as the very low interest environment reduced the dividends earned from our money market fund investments.

During 2019, non-operating income reflected the sharp market returns which resulted in significant unrealized gains on our investment portfolio, including our consolidated investment portfolios, compared with losses in 2018.

Partially offsetting the market increases was the absence in 2019 of the realized gain from the sale of our 10% holding in Daiwa SB Investments Ltd.

that was recognized in 2018.

Our cash and discretionary investments generated income of $126.0 million in 2019 as compared to $32.8 million in 2018.

The impact of consolidating certain T.

3 unchanged sentences

Operating expenses reflected in net operating income $ (12.2) $ (16.4) $ (14.7) $ 4.2 $ (1.7)

Net investment income (loss) reflected in non-operating income 251.7 272.9 (92.9) (21.2) 365.8

Net investment income reflected in non-operating income 74.7 251.7 272.9 (177.0) (21.2)

Impact on income before taxes $ 62.5 $ 235.3 $ 258.2 $ (172.8) $ (22.9)

Net income (loss) attributable to our interest in the consolidated T.

Net income attributable to our interest in the consolidated T.

Rowe Price investment products $ 15.6 $ 84.7 $ 140.6 $ (69.1) $ (55.9)

Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors) 150.6 117.6 (68.8) 33.0 186.4

Net income attributable to redeemable non-controlling interests (unrelated third-party investors) 46.9 150.6 117.6 (103.7) 33.0

Impact on income before taxes $ 62.5 $ 235.3 $ 258.2 $ (172.8) $ (22.9)

Provision for income taxes

Our effective tax rate for 2020 was 22.2%, compared with 23.2% for 2019 and 25.8% for 2018.

The decrease in our effective tax rate in 2020 from 2019 was primarily due to a lower effective state tax rate as we continue to see phased-in benefit of the 2018 Maryland state tax legislation and higher discrete tax benefits associated with the settlement of stock-based awards given the rise in our stock price in 2020.

For 2019, the decrease in the effective tax rate from 2018 was primarily due to higher net income attributable to redeemable non-controlling interests related to our consolidated T.

Rowe Price investment products, as these earnings are not taxable to us, as well as a lower state tax rate from the Maryland state legislation in 2018, and the absence in 2019 of the 2018 nonrecurring charges related to the enactment of U.S.

On April 24, 2018, the state of Maryland enacted new state tax legislation.

This new state tax legislation, effective in 2018, adopted a five-year phase-in of the single sales factor method of apportionment for calculating income tax for multi-state companies doing business in Maryland and is expected to result in a net benefit over time.

Accordingly, we recognized a nonrecurring charge of $7.9 million during 2018 for the re-measurement of our deferred tax assets and liabilities to reflect the effect of this Maryland state tax legislation.

Based on information currently available, we expect that the Maryland state tax legislation will reduce our effective state tax rate over the five-year phase-in period to less than 3%.

The following table reconciles the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2021, 2020, and 2019:

2 unchanged sentences

federal income tax rate 21.0 % 21.0 % 21.0 %

Impact of nonrecurring charge relating to U.S.

tax reform — — .8

Impact of nonrecurring charge related to Maryland state tax legislation — — .3

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

Net income attributable to redeemable non-controlling interests (2)

(.1) (1.2) (1.0)

Net excess tax benefits from stock-based compensation plans activity (2.1) (1.9) (1.5)

2 unchanged sentences

(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.

Our effective tax rate will continue to experience volatility in future periods as the tax benefits recognized from stock-based compensation are impacted by market fluctuations in our stock price and timing of option

The rate will also be impacted by changes in 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.

(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 2021 was 22.4%, compared with 22.2% for 2020 and 23.2% for 2019.

The increase in our effective tax rate in 2021 from 2020 was primarily due to a lower net gains attributable to non-controlling interests.

We continue to see benefit from the phased-in implementation of the 2018 Maryland state tax legislation and higher discrete tax benefits associated with the settlement of stock-based awards given the rise in our stock price in 2021.

For 2020, the decrease in our effective tax rate from 2019 was primarily due to the phased-in benefit of the 2018 Maryland state tax legislation has had on our effective state tax rate and higher discrete tax benefits associated with the settlement of stock-based awards given the rise in our stock price in 2020.

We have realized a net benefit from the Maryland legislation, which adopted a five-year phase-in of the single sales factor method of apportionment for calculating income tax for multi-state companies doing business in Maryland, and, in the final year of the phase in, we expect our 2022 effective state tax rate will be reduced to less than 3%.

The rate will also be impacted by changes in the proportion of net income that is attributable to our redeemable non-controlling interests and non-controlling interests reflected in permanent equity.

The non-GAAP tax rate primarily adjusts for the impact of the consolidated investment products, including the net income attributable to the redeemable non-controlling interests.

Our non-GAAP effective tax rates for 2020, 2019, and 2018 were 23.3% for 2020, 24.0% for 2019, 24.1% for 2018.

Similar to our GAAP rate, the decrease in our 2020 non-GAAP effective tax rate from 2019 is due primarily to a lower effective state tax rate and higher discrete tax benefits associated with option exercises.

Our non-GAAP effective tax rates for 2021, 2020 and 2019 were 22.5% , 23.3%, 24.0%, r espectively.

We currently estimate our GAAP effective tax rate for the full-year 2022 will be in the range of 22% to 25% and our non-GAAP effective tax rate for the full-year 2022 will be in the range of 23% to 25%.

16 unchanged sentences

(83.0) 83.0 (83.0) — — —

Other non-operating income (3)

— — (61.0) (16.8) (44.3) (.19)

Adjusted Non-GAAP Basis $ 3,342.7 $ 2,873.9 $ 92.7 $ 689.8 $ 2,276.8 $ 9.58

(in millions) Operating expenses Net operating income Non-operating income Provision (benefit) for income taxes (7)

Net income attributable to T.

Rowe Price Group Diluted earnings per share (8)

GAAP Basis $ 3,230.9 $ 2,387.0 $ 540.3 $ 678.4 $ 2,131.3 $ 8.70

Non-GAAP adjustments:

Consolidated T.

investment products (1)

(7.9) 14.7 (272.9) (35.7) (104.9) (.42)

Supplemental savings plan liability (2)

Acquisition-related transaction costs (3)

(31.9) 31.9 — 7.2 24.7 .11

14 unchanged sentences

— — (61.0) (16.8) (44.3) (.19)

Nonrecurring charge related to

enactment of U.S.

tax reform (4)

— — — (20.8) 20.8 .08

Nonrecurring charge related to

enactment of Maryland state tax legislation (5)

— — — (7.9) 7.9 .03

Nonrecurring net charge (recoveries)

related to Dell appraisal rights matter (6)

15.2 (15.2) — (2.7) (12.5) (.05)

Adjusted Non-GAAP Basis $ 3,342.7 $ 2,873.9 $ 92.7 $ 689.8 $ 2,276.8 $ 9.58

11 unchanged sentences

— — (73.5) (18.7) (54.8) (.23)

Nonrecurring charge related to

enactment of U.S.

tax reform (4)

— — — (71.1) 71.1 .28

Nonrecurring net charge (recoveries)

related to Dell appraisal rights matter (6)

50.0 (50.0) — (19.6) (30.4) (.12)

Adjusted Non-GAAP Basis $ 3,149.8 $ 2,474.9 $ 126.0 $ 625.3 $ 1,975.6 $ 8.07

(in millions) Operating expenses Net operating income Non-operating income Provision (benefit) for income taxes (7)

Net income attributable to T.

Rowe Price Group Diluted earnings per share (8)

GAAP Basis $ 2,551.4 $ 1,733.4 $ 227.1 $ 706.5 $ 1,215.0 $ 4.75

Non-GAAP adjustments:

Consolidated T.

investment products (1)

(6.5) 13.0 (121.1) (27.1) (42.0) (.16)

Other non-operating income (3)

— — (106.0) (41.7) (64.3) (.25)

Nonrecurring net charge (recoveries) related to Dell appraisal rights matter (6)

(66.2) 66.2 — 26.0 40.2 .15

Adjusted Non-GAAP Basis $ 2,478.7 $ 1,812.6 $ — $ 663.7 $ 1,148.9 $ 4.49

(1) These non-GAAP adjustments remove the impact that the consolidated T.

5 unchanged sentences

The adjustment to net income attributable to T.

Rowe Price Group represents the net income of the consolidated products, net of redeemable non-controlling interest.

We remove the impact of the

consolidated T.

Rowe Price Group represents the net income of the consolidated products, net of redeemable non-controlling interests.

We remove the impact of the consolidated T.

Rowe Price investment products as we believe they impact the reader’s ability to understand our core operating results.

(2) These non-GAAP adjustments remove the compensation expense 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.

(2) These non-GAAP adjustments remove the compensation expense resulting 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.

1 unchanged sentence

We believe it is useful to offset the non-operating investment income (loss) realized on the hedges against the related compensation expense and remove the net impact to help the reader's ability to understand our core operating results and to increase comparability period to period.

(3) This non-GAAP adjustment represents the other non-operating income (loss) and the net gains (losses) earned on our non-consolidated investment portfolio that are not designated as economic hedges of the supplemental savings plan liability, and, beginning in the second quarter of 2018, non-consolidated seed investments and other investments that are not part of the cash and discretionary investment portfolio.

In the second quarter of 2018, we decided to retain the investment gains recognized on our non-consolidated cash and discretionary investments as these assets and related income (loss) are considered part of our core operations.

The impact on previously reported non-GAAP measures is immaterial.

(3) This non-GAAP adjustment removes the transaction costs incurred related to the acquisition of OHA.

Management believes adjusting for these charges helps the reader's ability to understand the firm's core operating results and to increase comparability period to period.

(4) 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) During the second quarter of 2018, we recognized a nonrecurring charge of $20.8 million for an adjustment made to the charge taken in 2017 related to the enactment of U.S.

We believe it is useful to readers of our consolidated statements of income to adjust for this nonrecurring charge in arriving at net income attributable to

Rowe Price Group and diluted earnings per share.

(5) During the second quarter of 2018, we recognized a nonrecurring charge of $7.9 million for the remeasurement of our deferred tax assets and liabilities to reflect the effect of Maryland state tax legislation enacted on April 24, 2018.

We believe it is useful to readers of our consolidated statements of income to adjust for this nonrecurring charge in arriving at net income attributable to T.

Rowe Price Group and diluted earnings per share.

(6) In 2016, we recognized a nonrecurring charge, net of insurance recoveries, of $66.2 million related to our decision to compensate certain clients in regard to the Dell appraisal rights matter.

In 2017, we recognized additional insurance recoveries of $50 million as a reduction in operating expenses.

During 2018, we recognized an additional reduction in operating expenses of $15.2 million upon recovering a portion of the payments we made to our clients in 2016.

We believe it is useful to our readers of our consolidated statements of income to adjust for these charges and nonrecurring recoveries in arriving at adjusted operating expenses, net operating income, provision for income taxes, net income attributable to T.

Rowe Price Group and diluted earnings per share.

(7) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 23.3% for 2020, 24.0% for 2019, 24.1% for 2018, 34.7% for 2017, and 36.6% for 2016.

(5) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate of 22.5% for 2021 , 23.3% for 2020 and 24.0% for 2019 .

We estimate that our effective tax rate for the full-year 2022 on a non-GAAP basis will be in the range of 23% to 25%.

8 unchanged sentences

CAPITAL RESOURCES AND LIQUIDITY.

During 2020, stockholders’ equity increased from $7.1 billion to $7.7 billion.

Tangible book value increased to $7.0 billion at December 31, 2020.

During 2021, stockholders’ equity attributable to T.

Rowe Price Group, Inc.

increased from $7.7 billion to $9.0 billion.

Tangible book value decreased to $5.7 billion at December 31, 2021.

Sources of Liquidity

We remain debt-free with ample liquidity, including cash and investments in T.

We have ample liquidity, including cash and investments in T.

Rowe Price products as follows:

9 unchanged sentences

Of these cash and discretionary investments, $764.2 million at December 31, 2021, and $675.8 million at December 31, 2020 were held by our subsidiaries located outside the U.S.

Cash and discretionary investment portfolio returned gains of $92.8 million in 2020 as compared to $126.0 million in 2019 as the very low interest rate environment reduced the dividend income earned on our money market investments.

Cash and discretionary investment portfolio returned gains of $28.7 million in 2021 as compared to $92.7 million in 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.

1 unchanged sentence

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 T.

Rowe Price Group’s interests in cash and T.

Rowe Price investment products relate to where they are presented in the consolidated balance sheet as of December 31, 2020.

The following table details how our investments, including those acquired as part of the OHA acquisition, relate to where they are presented in the consolidated balance sheet as of December 31, 2021.

(in millions)

7 unchanged sentences

Rowe Price products attributable to T.

Rowe Price Group 2,151.7 3,006.8 1,076.1 6,234.6

Rowe Price 1,523.1 1,806.7 929.0 4,258.8

Investment in UTI and other investments — 277.8 — 277.8

Investments in affiliated private investment funds (2)

— 761.1 — 761.1

Investments in CLOs (2)

— 129.9 — 129.9

Total cash and investments attributable to T.

Rowe Price Group 2,151.7 3,250.8 1,076.1 6,478.6

Rowe Price 1,523.1 2,975.5 929.0 5,427.6

Redeemable non-controlling interests — — 982.3 982.3

As reported on unaudited condensed consolidated balance sheet at December 31, 2020 $ 2,151.7 $ 3,250.8 $ 2,637.8 $ 8,040.3

As reported on consolidated balance sheet at

December 31, 2021 $ 1,523.1 $ 2,975.5 $ 1,911.3 $ 6,409.9

(1) The consolidated T.

6 unchanged sentences

Rowe Price investment products at December 31, 2021 of $1,911.3 million includes assets of $1,962.8 million less liabilities of $51.4 million as reflected in the consolidated balance sheet in Item 8.

Financial Statements and Supplementary Data of this Form 10-K.

Financial Statements of this Form 10-K.

(2) Amounts relate to investments acquired as part of the OHA acquisition.

See Note 5 to the consolidated financial statements for more information.

Our consolidated balance sheet reflects the cash and cash equivalents, investments, other assets and liabilities of those T.

9 unchanged sentences

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.

Additionally, in October 2020, UTI Asset Management Company Limited (India), one of our equity method investments,held an initial public offering in India.

In October 2020, UTI Asset Management Company Limited (India), one of our equity method investments, held an initial public offering in India.

As part of the offering, we sold a portion of our 26% interest and received net proceeds of approximately $28.0 million and recorded a net gain on the sale of approximately $2.8 million in the fourth quarter of 2020.

1 unchanged sentence

Uses of Liquidity

On December 29, 2021, we paid approximately $2.5 billion in cash and issued $881.5 million of T.

Rowe Price Group, Inc.

common shares, approximately 4.4 million shares, to complete the acquisition of OHA.

We paid $4.32 per share in regular dividends in 2021, an increase of 20.0% over the $3.60 per share paid in 2020.

Additionally, we expended $1,192.2 million in 2020 to repurchase 10.9 million shares, or 4.6%, of our outstanding common stock at an average price of $109.30 per share.

Additionally, our Board of Directors declared a special cash dividend of $3.00 per share, or $699.8 million, on June 14, 2021, that was paid on July 7, 2021.

Further, we expended $1,136.0 million in 2021 to repurchase 5.9 million shares, or 2.6%, of our outstanding common stock at an average price of $191.20 per share.

These dividends and repurchases were expended using existing cash balances and cash generated from operations.

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

Since the end of 2017, we have returned $5.3 billion to stockholders through stock repurchases and our regular quarterly dividends, as follows:

(in millions) Recurring dividend Stock repurchases Total cash returned to stockholders

Since the end of 2018, we have returned $6.3 billion to stockholders through stock repurchases, our regular quarterly dividends, and a special dividend of $3.00 per share in 2021, as follows:

(in millions) Recurring dividend Special dividend Stock repurchases Total cash returned to stockholders

2019 $ 733.6 $ — $ 708.8 $ 1,442.4

14 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation, amortization and impairments of property and equipment 189.6 — — 189.6

Depreciation, amortization and impairments of property, equipment and software 204.8 — — 204.8

Stock-based compensation expense 274.6 — — 274.6

Net gains recognized on investments (169.4) — 46.9 (122.5)

Net investments in T.

Net change in T.

Rowe Price investment products used to economically hedge supplemental savings plan liability (85.7) — — (85.7)

(142.9) — — (142.9)

Net change in trading securities held by consolidated T.

16 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation, amortization and impairments of property and equipment 190.8 — — 190.8

Depreciation, amortization and impairments of property, equipment and software 189.6 — 189.6

Stock-based compensation expense 246.2 — 246.2

Net gains recognized on investments (274.3) — 84.7 (189.6)

Net investments in T.

Net change in T.

Rowe Price investment products used to economically hedge supplemental savings plan liability (142.9) — (142.9)

(126.0) — — (126.0)

Net change in trading securities held by consolidated T.

16 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation, amortization and impairments of property and equipment 159.5 — — 159.5

Depreciation, amortization and impairments of property, equipment and software 190.8 — — 190.8

Stock-based compensation expense 206.6 — — 206.6

Net gains recognized on investments (316.9) — 140.6 (176.3)

Net investments in T.

Net change in T.

Rowe Price investment products used to economically hedge supplemental savings plan liability (126.0) (126.0)

(129.5) (129.5)

Net change in trading securities held by consolidated T.

13 unchanged sentences

Operating cash flows attributable to T.

Rowe Price Group increased $949.3 million, including a $710.2 million increase in net income, timing differences on the cash settlement of our assets and liabilities of $33.4 million, and $148.5 million of higher non-cash adjustments, including unrealized investment gains/losses, depreciation, and stock-based compensation expense.

The non-cash adjustments were primarily driven by a $104.9 million decrease in net investment gains in 2021 compared to 2020.

Additionally, in 2021, we had net investments of $85.7 million from certain investment products that economically hedge our supplemental savings plan liability, while we had net investments of $142.9 million in 2020.

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.

Operating activities attributable to T.

Rowe Price Group during 2020 provided cash flows of $2,479.0 million as compared to $2,202.3 million during 2019.

Operating cash flows attributable to T.

Rowe Price Group increased $276.7 million, including a $241.4 million in increased net income and a $81.0 million incremental add-back from higher non-cash adjustments, including unrealized investment gains/losses, depreciation, and stock-based compensation expense.

4 unchanged sentences

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.

Operating activities attributable to T.

Rowe Price Group during 2019 provided cash flows of $2,202.3 million as compared to $2,178.1 million during 2018.

Operating cash flows attributable to T.

Rowe Price Group increased $24.2 million, including the $293.8 million increase in net income from 2018, and partially offset by lower non-cash adjustments, which include unrealized investment gains/losses, depreciation, and stock-based compensation expense of $258.9 million and timing differences on the cash settlement of our assets and liabilities of $10.7 million.

The non-cash adjustments were driven by a $303.2 million increase in net investment gains in 2019 compared with 2018.

During 2019, we invested an additional $126.0 million in certain investment products that act as an economic hedge of our supplemental savings plan liability.

This level of investment is comparable to the amount invested in 2018.

The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.

Investing activities

Net cash used in investing activities that are attributable to T.

Rowe Price Group totaled $65.3 million in 2020, a decrease of $424.0 million compared with 2019.

During 2020, we received net proceeds from the sale of certain discretionary investments of $181.7 million compared to net dispositions of $108.3 million during 2019.

Rowe Price Group totaled $1,134.9 million in 2021 compared with $65.3 million of cash used in investing activities in 2020.

During 2021, we used $2,450.8 million

as part of the consideration paid to complete the acquisition of OHA.

In addition, we increased our property and equipment expenditures by $24.5 million and increased the level of seed capital provided by $29.3 million.

1 unchanged sentence

Rowe Price investment products we consolidate in preparing our consolidated statements of cash flows.

The $35.5 million change in reported cash flows

from investing activities is related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.

Decreasing the cash used in investing activities were higher net proceeds from the sale of

certain discretionary investments of $1,578.3 million during 2021 compared to net proceeds of $181.7 million during 2020.

The remaining change in reported cash flows from investing activities of $37.0 million is primarily 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 $489.3 million in 2019, an increase of $456.4 million compared to 2018.

During 2018, we rebalanced our cash and discretionary investments portfolio resulting in the reallocation of cash and cash equivalents of $1.0 billion to certain T.

Rowe Price fixed income funds.

Such rebalancing did not recur in 2019.

Excluding the impact of the reallocation in 2018, there were net purchases of discretionary investment products of $108.3 million during 2019 compared to net proceeds of $228.4 million.

Also contributing to the decrease in 2019 reported cash flows used in investing activities were higher property and equipment expenditures of $36.1 million, an $89.2 million increase in the level of seed capital provided, and the absence of the proceeds from the sale of our 10% interest in Daiwa SB Investments Ltd.

received in 2018 and included in other investing activity.

Since we consolidate the seed capital in T.

Rowe Price investment products, our seed capital was eliminated in preparing our consolidated statement of cash flows.

Rowe Price Group totaled $65.3 million in 2020, a decrease of $424.0 million compared to 2019.

During 2020, we received net proceeds from the sale of certain discretionary investments of $181.7 million compared to net dispositions of $108.3 million during 2019.

In addition, we increased our property and equipment expenditures by $10.0 million and increased the level of seed capital provided by $100.3 million.

We eliminate our seed capital in those T.

Rowe Price investment products we consolidate in preparing our consolidated statements of cash flows.

The $35.5 million change in reported cash flows from investing activities is related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.

Financing Activities

1 unchanged sentence

Rowe Price Group were $2,922.0 million in 2021 compared with $2,043.8 million in 2020.

During 2021, there was a $856.1 million increase in dividends paid in 2021 as a result of an 20.0% increase in our quarterly dividend per share and a special cash dividend paid in July 2021.

During 2021 we used $1.1 billion to repurchase 5.9 million shares compared to $1.2 billion to repurchase 10.9 million shares in 2020.

The remaining change in reported cash flows from financing activities is primarily attributable to a $624.3 million decrease in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products and a $85.5 million decrease in cash flow related to common stock issued under stock compensation plans during 2021 compared to 2020.

Net cash used in financing activities attributable to T.

Rowe Price Group totaled $2,043.8 million in 2020, an increase of $687.4 million compared with $1,356.4 million in 2019.

During 2020, there was a $496.1 million increase in cash paid for common stock repurchases as we repurchased 3.9 million more shares of common stock in 2020 than in 2019.

1 unchanged sentence

The remaining change in reported cash flows from financing activities is primarily attributable to a $79.4 million decrease in cash flow related to common stock issued under stock compensation plans and a $33.8 million decrease in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during 2020 compared to 2019.

Net cash used in financing activities attributable to T.

Rowe Price Group totaled $1,356.4 million in 2019, a decrease of $353.3 million compared with $1,709.9 million in 2018.

The decrease in cash used in financing activities was primarily driven by a $384.6 million decrease in the number of common stock repurchases we made in 2019 due to the stronger equity markets.

The decrease was partially offset by a $39.6 million increase in dividends paid in 2019 as a result of an 8.6% increase in our quarterly dividend per share from 2018.

The remaining change in reported cash flows from financing activities was primarily attributable to a $53.3 million increase in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during 2019 compared to 2018.

CONTRACTUAL OBLIGATIONS.

The following table presents a summary of our future obligations under the terms of our supplemental savings plan, existing operating leases, and other contractual cash purchase commitments at December 31, 2020.

The information presented does not include operating expenses or capital expenditures that will be committed in the normal course of operations in 2021 and future years.

The information also excludes the $26.7 million of unrecognized tax benefits discussed in Note 9 to our consolidated financial statements because it is not possible to estimate the time period in which a payment might be made to the tax authorities.

Total 2021 2022-2023 2024-2025 Thereafter

(in millions)

Supplemental savings plan liability (1)

$ 772 $ 29 $ 103 $ 151 $ 489

Noncancelable operating leases 168 35 63 58 12

Other purchase commitments (2)

316 223 72 21 —

Total $ 1,256 $ 287 $ 238 $ 230 $ 501

(1) These obligations represent the amount of future expected funding requirements related to our supplemental savings plan.

Payment periods are based on deferral elections made by participants.

If no deferral election has been made, the obligation has been included in the "Thereafter" column as the timing of distributions will be determined upon termination of employment.

We economically hedge this liability and the related market exposure with investments in certain T.

Rowe Price products.

The carrying value of these investments at December 31, 2020 was $768.1 million and was reported within the Investments line on our consolidated balance sheet.

Either these investments or future cash flows from operations are expected to be used to fund the future liability payments.

(2) Other purchase commitments include contractual amounts that will be due for the purchase of goods or services to be used in our operations and may be cancelable at earlier times than those indicated, under certain conditions that may involve termination fees.

Because these obligations are generally of a normal recurring nature, we expect that we will fund them from future cash flows from operations.

We also have outstanding commitments to fund additional contributions to investment partnerships totaling $12.3 million at December 31, 2020.

MATERIAL CASH COMMITMENTS.

Our material cash commitments primarily include our obligations under the supplemental savings plan, our lease obligations, 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 cancelable under certain conditions and may involve termination fees.

We expect to fund these cash commitments from future cash flows from operations.

Our obligations under the supplemental savings plan are disclosed on our consolidated balance sheet with more information included in Note 17 to the consolidated financial statements.

Our lease obligations are disclosed in Note 8 to the consolidated financial statements.

Additionally, there are unrecognized tax benefits discussed in Note 11 to our consolidated financial statements.

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.

We also have outstanding commitments to fund additional contributions to investment partnerships totaling $8.0 million.

The vast majority of these additional contributions will be made to 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.

As part of the OHA acquisition, T.

Rowe Price has committed $500 million to fund OHA products over the next five years and entered into certain earnout and other arrangements that we discuss in more detail in Note 2 to our consolidated financial statements.

CRITICAL ACCOUNTING POLICIES.

6 unchanged sentences

Consolidation

We consolidate all subsidiaries and T.

Rowe Price investment products in which we have a controlling interest.

We consolidate all subsidiaries and sponsored investment products in which we have a controlling 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").

2 unchanged sentences

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 T.

Rowe Price investment products and our variable interest consists of our equity ownership in and investment management fees earned from these entities.

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.

2 unchanged sentences

are determined to be VIEs.

In addition, in connection with the OHA acquisition, we acquired certain carried interest entities, which are considered VIEs.

These carried interest entities hold interests in general partners of affiliated private investment funds that are also VIEs;

however, the carried interest entities are not the primary beneficiaries to these investment funds.

At December 31, 2021, we consolidated VIEs with net assets of $2.1 billion.

2 unchanged sentences

Rowe Price investment products, 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.

We internally conduct, manage, and report our operations as one investment advisory business.

Business Combinations

We account for business combinations under the acquisition method of accounting, whereby we recognize assets acquired and liabilities assumed, including separately identified intangible assets, contingent liabilities, and non-controlling interests, based on the fair value estimates as of the date of the acquisition.

Any excess purchase consideration over the fair value of the identified net assets acquired is recognized as goodwill.

The accounting for business combinations requires us to make significant estimates and assumptions, especially with respect to intangible assets and the fair value of contingent payment obligations.

During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded in earnings.

As a result, if the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges which could be material.

Intangible assets acquired in business combinations consist primarily of investment advisory agreements and trade names.

We also acquired certain carried interest entities that primarily hold interests in general partners of affiliated private investment funds with capital allocation-based income arrangements.

The fair values of the acquired advisory agreements and the investments with the capital allocation-based income arrangements are based on the net present value of estimated future cash flows attributable to the agreements, which include significant assumptions about revenue growth rate, discount rate and effective tax rate.

Our estimates are based on assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, may differ from actual results.

In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate amortization expense.

If our estimates of the economic lives change, amortization expense could be accelerated or decelerated.

We record contingent consideration resulting from a business combination at its fair value on the acquisition date.

We generally determine the fair value of the contingent consideration using the Monte Carlo simulation methodology of valuation.

Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value as an adjustment to operating expenses within the consolidated statements of income.

Changes in the fair value of the contingent consideration can result from changes in assumed discount periods and rates, and from changes pertaining to the achievement of the defined financial targets.

Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.

Accordingly, future business and economic conditions, as well as changes in any of the assumptions described above, can materially impact the amount of contingent consideration expense we record in any given period.

We internally conduct, manage, and report our operations as one reportable business segment - investment advisory business.

We do not have distinct operating segments or components that separately constitute a business.

Accordingly, we attribute goodwill to a single reportable business segment and reporting unit - our investment advisory business.

With the completion of the acquisition of OHA in December 2021, we are currently evaluating the impact that OHA will have on our business reporting and goodwill impairment analysis.

We evaluate the carrying amount of goodwill in our consolidated balance sheets for possible impairment on an annual basis in the third quarter of each year using a fair value approach.

Goodwill would be considered impaired whenever our historical 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.

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, $665.7 million as of December 31, 2020.

The maximum future impairment of goodwill that we could incur is the amount recognized in our consolidated balance sheets, $2,693.2 million as of December 31, 2021, including $2,027.5 million of goodwill generated from the OHA acquisition.

Given that the OHA acquisition closed on December 29, 2021, no impairment testing was performed on the related goodwill.

Provision for income taxes

9 unchanged sentences

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 and Supplementary Data for a discussion of 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.

5 unchanged sentences

our tax rate;

and our expectations regarding financial markets, future transactions, dividends, stock repurchases, investments, new products and services, capital expenditures, changes in our effective fee rate, the impact of the coronavirus pandemic, and other market conditions.

the timing and expense related to the integration of OHA with and into our business,;

Readers are cautioned that any forward-looking information provided by or on behalf of T.

5 unchanged sentences

cash inflows and outflows in the U.S.

mutual funds, subadvised funds, separately managed accounts, collective investment trusts, and other investment products, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new mutual funds and investment products, changes in retirement savings trends relative to participant-directed investments and defined contribution plans, and the impact of the coronavirus outbreak.

mutual funds, subadvised funds, separately managed accounts, collective investment trusts, and other investment 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 mutual funds and investment products, changes in retirement savings trends relative to participant-directed investments and defined contribution plans, and the impact of the coronavirus outbreak.

The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence;

3 unchanged sentences

competitive conditions in the mutual fund, asset management, and broader financial services sectors;

and our level of success in implementing our strategy to expand our business, including our recently announced plan to establish T.

our level of success in implementing our strategy to expand our business, including our announced plan to establish T.

Rowe Price Investment Management as a separate registered investment adviser;

and our ability to attract and retain key personnel.

Our revenues are substantially dependent on fees earned under contracts with the T.

1 unchanged sentence

Rowe Price funds terminated or significantly altered the terms of the investment management or related administrative services agreements.

Non-operating investment income will also

fluctuate primarily due to the size of our investments, changes in their market valuations, and any other-than-temporary impairments that may arise or, in the case of our equity method investments, our proportionate share of the investees' net income.

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:

1 unchanged sentence

and to further penetrate our distribution channels within the U.S.;

the pace and level of spending to support key strategic priorities;

the pace and level of spending to support key strategic priorities, including the integration of OHA with and into our business;

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;

4 unchanged sentences

and disruptions of services, including those provided by third parties, such as fund and product recordkeeping, facilities, communications, power, and the mutual fund transfer agent and accounting systems.

Our business is also subject to substantial governmental regulation, and changes in legal, regulatory, accounting, tax, and compliance requirements may have a substantial effect on our operations and results, including, but not limited to, effects on costs that we incur and effects on investor interest in T.

limited to, effects on costs that we incur and effects on investor interest in T.

Rowe Price investment products and investing in general or in particular classes of mutual funds or other investments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis