What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-27 compared with 2023-07-28 · 208 added, 215 removed, 586 unchanged (42% of the section changed)

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MARKET TRENDS.

stock indexes rose in the second quarter of 2023, adding to first-quarter gains.

Large-cap and growth stocks outperformed.

Thanks in part to generally favorable corporate earnings and a resilient economy, equities overcame lingering uncertainty about regional banks’ health;

uncertainty about Congress agreeing to raise the federal debt ceiling—the statutory limit on U.S.

government borrowing—before the U.S.

government ran out of money;

and continued monetary policy tightening due to elevated inflation.

The Federal Reserve raised short-term interest rates in early May but kept rates unchanged when policymakers met in mid-June.

However, Fed officials projected two more rate increases by the end of the year.

stocks declined in the third quarter of 2023.

Although the U.S.

economy remained resilient and second-quarter corporate earnings reports were mostly favorable, the equity market was affected by higher energy costs and U.S.

Treasury yields rising to multi-year highs amid concerns that elevated inflation could force the Federal Reserve to maintain a restrictive monetary policy for some time.

The central bank raised the Fed Funds target rate in late July, but not at its September policy meeting.

However, investors reacted negatively to policymakers’ projections in September that one more interest rate increase is likely before the end of the year, and that there could be fewer rate cuts in 2024 than previously expected.

Developed non-U.S.

equity markets rose but underperformed U.S.

equities in the second quarter, even though the U.S.

dollar weakened versus major European currencies.

In dollar terms, European equity markets were mostly positive, whereas returns in several developed Asian markets were negative.

Japanese shares, however, rose more than 6% in dollar terms, as central bank officials kept interest rates very low and as a weakening Yen supported Japan’s export-oriented businesses.

Emerging equity markets in aggregate rose slightly and underperformed equities in developed markets in U.S.

dollar terms.

In commodity-rich Latin America, many markets rose due in part to hopes that China, a major consumer of commodities, would take measures to help stimulate its economy.

Markets in the emerging Europe, Middle East, and Africa (EMEA) region were mostly positive, though Turkish shares dropped more than 10% in dollar terms.

Markets in emerging Asia were widely mixed, with Chinese shares falling almost 10% amid concerns that China’s economic growth was weakening.

Indian shares climbed 12%.

equity markets fell in U.S.

dollar terms, as the U.S dollar strengthened versus major non-U.S.

In Europe, equity markets were largely negative in dollar terms.

Developed Asian markets declined but generally held up better.

Japanese shares fell slightly in dollar terms but rose slightly in local currency terms, as the yen weakened and central bank officials kept interest rates very low.

Emerging equity markets generally declined, but outperformed equities in developed non-U.S.

markets in dollar terms.

In the emerging Europe, Middle East, and Africa (EMEA) region, market performance was widely mixed.

Turkish stocks led the region, surging as the central bank raised interest rates to fight elevated inflation and took other steps to gradually return to more orthodox policymaking.

Markets in emerging Asia and Latin America were largely negative.

Returns of several major equity market indexes were as follows:

Three months ended Six months ended

Three months ended Nine months ended

Index 9/30/2023 9/30/2023

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(1) Returns exclude dividends

Global bond returns were mixed in U.S.

dollar terms in the second quarter.

In the U.S., Treasury bill yields increased as the Fed lifted the fed funds target rate to the 5.00% to 5.25% range in early May and as investors prepared for possibly two more Fed interest rate increases by the end of the year due to persistent inflation.

Intermediate-term Treasury yields climbed amid hawkish rhetoric from Fed officials and continued economic strength.

Long-term yields rose to a lesser extent.

Global bond returns were mostly negative in U.S.

dollar terms in the third quarter.

In the U.S., Treasury bill yields increased as the Federal Reserve lifted the Fed Funds target rate to the 5.25% to 5.50% range in late July and as investors prepared for possibly one more Fed interest rate increase by the end of the year.

Intermediate- and long-term U.S.

Treasury yields rose more significantly due in part to a U.S.

sovereign credit rating downgrade from Fitch Ratings in August, increased Treasury Department borrowing in the third quarter, and concerns about a possible October 1 federal government shutdown, which was narrowly averted.

The 10-year U.S.

Treasury note yield increased from 3.48% to 3.81% during the quarter.

investment-grade universe, Treasury securities performed worst.

Mortgage-backed and commercial mortgage-backed securities fell to a lesser extent.

Corporate bonds and asset-backed securities edged lower.

Tax-free municipal bonds edged lower but outperformed the broad taxable investment-grade bond market.

High yield corporate bonds, which are less sensitive to interest rate movements, strongly outperformed the high-quality fixed income market.

Treasury note yield increased from 3.81% to 4.59% during the quarter, reaching its highest levels in about 16 years.

investment-grade bond universe, sector performance was mostly negative.

Mortgage-backed securities performed worst.

Corporate bonds and U.S.

Treasury securities also fared poorly.

Asset-backed securities outperformed with a slight positive total return.

Tax-free municipal bonds fared worse than the broad taxable bond market, as municipal yields generally increased more than U.S.

Treasury yields.

High yield corporate bonds produced slight positive total returns and strongly outperformed the investment-grade market.

Bonds in developed non-U.S.

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dollar terms;

In Europe, bond yields pressed higher as several central banks raised short-term interest rates.

However, major European currencies strengthened versus the U.S.

dollar, which reduced local losses in dollar terms.

In Japan, government bond yields remained very low, contained by the continuation of the central bank’s yield curve control policy, but the Yen declined nearly 8% versus the dollar.

Emerging markets bonds appreciated in dollar terms.

Bonds denominated in local currencies fared marginally better than dollar-denominated issues, as some emerging markets currencies appreciated versus the greenback.

The Turkish Lira, however, plunged more than 26%.

returns to U.S.

investors were hurt by rising interest rates in various countries as well as weaker non-U.S.

currencies versus the greenback.

In Europe, government bond yields rose in parallel with U.S.

Treasury yields and were also pressured higher by signs that the rate of inflation, while decreasing, remains elevated.

In Japan, government bond yields remained very low, as the Bank of Japan continued its highly stimulative monetary policy.

However, long-term yields rose to levels unseen in about 10 years as policymakers expressed a willingness to conduct “with greater flexibility” their yield curve control policy.

Emerging markets bonds also depreciated in U.S.

dollar terms.

Bonds denominated in local currencies generally fared worse than dollar-denominated issues, as most emerging markets currencies declined versus the greenback.

Returns for several major bond market indexes were as follows:

Three months ended Six months ended

Three months ended Nine months ended

Index 9/30/2023 9/30/2023

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ASSETS UNDER MANAGEMENT.

Assets under management ended the second quarter of 2023 at $1,399.4 billion, an increase of $57.7 billion from March 31, 2023 and $124.7 million from the end of 2022.

The increase in assets under management during the second quarter of 2023 was driven by market appreciation, net of distributions not reinvested, of $77.7 billion, offset by net cash outflows of $20.0 billion.

For the six months ended June 30, 2023, the increase in assets under management was driven by market appreciation, net of distributions not reinvested, of $160.8 billion, offset by net cash outflows of $36.1 billion.

The following tables detail changes in our assets under management, by asset class, during the three- and six-month periods ended June 30, 2023:

Three months ended 6/30/2023 Six months ended 6/30/2023

Assets under management ended the third quarter of 2023 at $1,346.5 billion, a decrease of $52.9 billion from June 30, 2023 and an increase of $71.8 billion from the end of 2022.

The decrease in assets under management during the third quarter of 2023 was driven by market depreciation, net of distributions not reinvested, of $35.5 billion and net cash outflows of $17.4 billion.

For the nine months ended September 30, 2023, the increase in assets under management was driven by market appreciation, net of distributions not reinvested, of $125.3 billion, offset by net cash outflows of $53.5 billion.

The following tables detail changes in our assets under management, by asset class, during the three- and nine-month periods ended September 30, 2023:

Three months ended 9/30/2023

Nine months ended 9/30/2023

(in billions) Equity Fixed income, including money market Multi-asset (2)

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(19.7) 1.0 0.4 0.9 (17.4) (62.7) (0.8) 9.1 0.9 (53.5)

Net market appreciation and gains (5)

Net market appreciation (depreciation) and gains(losses (5)

(22.5) (1.0) (13.1) 1.1 (35.5) 88.5 3.1 31.3 2.4 125.3

Change during the period (42.2) — (12.7) 2.0 (52.9) 25.8 2.3 40.4 3.3 71.8

Assets under management at June 30, 2023 $ 732.2 $ 169.3 $ 453.2 $ 44.7 $ 1,399.4 $ 732.2 $ 169.3 $ 453.2 $ 44.7 $ 1,399.4

Assets under management at September 30, 2023 $ 690.0 $ 169.3 $ 440.5 $ 46.7 $ 1,346.5 $ 690.0 $ 169.3 $ 440.5 $ 46.7 $ 1,346.5

(1) Includes fee basis assets under management.

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

Unfunded capital commitments as of June 30, 2023 were $12.2 billion and are not reflected in fee basis AUM above.

(4) Alternatives net cash flows for the three- and six-month periods ended June 30, 2023 includes $0.4 billion and $0.8 billion, respectively, in outflows that represent investment manager-driven distributions.

(5) Includes net distributions not reinvested for the three- and six-month periods ended June 30, 2023 of $0.2 billion and $0.4 billion, respectively.

Investment advisory clients outside the United States account for 8.9% of our assets under management at June 30, 2023, 8.9% at March 31, 2023, and 9.1% at December 31, 2022.

Our target date retirement products, which are included in the multi-asset totals shown above, continue to be a significant part of our assets under management.

Assets under management in these portfolios, as well as net cash inflows (outflows), by vehicle, were as follows:

Net cash inflows (outflows)

Assets under management Three months ended Six months ended

(in billions) 6/30/2023 3/31/2023 12/31/2022 6/30/2023 6/30/2022 6/30/2023 6/30/2022

mutual funds $ 162.8 $ 156.6 $ 148.8 $ (0.7) $ (1.7) $ (1.0) $ (3.3)

Collective investment trusts 208.1 195.5 177.3 3.0 2.3 10.7 11.1

Subadvised and separately managed accounts 9.1 8.7 8.1 0.1 (0.1) 0.2 —

$ 380.0 $ 360.8 $ 334.2 $ 2.4 $ 0.5 $ 9.9 $ 7.8

Certain accounts were reclassified from subadvised and separately managed accounts to collective investment trusts in Q2 2023 and prior period amounts were adjusted to reflect this change.

Unfunded capital commitments as of September 30, 2023 were $12.3 billion and are not reflected in fee basis AUM above.

(4) Alternatives net cash flows for the three- and nine-month periods ended September 30, 2023 includes $0.8 billion and $1.6 billion, respectively, in outflows that represent investment manager-driven distributions.

(5) Includes net distributions not reinvested for the three- and nine-month periods ended September 30, 2023 of $0.2 billion and $0.6 billion, respectively.

Investment advisory clients outside the United States account for 9.2% of our assets under management at September 30, 2023, 8.9% at June 30, 2023, and 9.1% at December 31, 2022.

Assets under management in our target date retirement products, which are included in the multi-asset totals shown above, were $371.8 billion at September 30, 2023, compared with $380.0 billion at June 30, 2023 and $334.2 billion at December 31, 2022.

Net flows into these portfolios were $2.9 billion and $12.8 billion in the three- and nine-month periods ended September 30, 2023.

We also provide strategic investment advice solutions for certain portfolios.

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We also offer advice solutions through retail separately managed accounts and separately managed accounts model delivery.

As of June 30, 2023, total assets in these

solutions were $465 billion, of which $456 billion are included in our reported assets under management in the tables above.

As of September 30, 2023, total assets in these solutions were $453 billion, of which $444 billion are included in our reported assets under management in the tables above.

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

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

As of June 30, 2023, our assets under administration were $243 billion, of which nearly $147 billion are assets we manage.

As of September 30, 2023, our assets under administration were $234 billion, of which nearly $141 billion are assets we manage.

INVESTMENT PERFORMANCE.

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Our performance disclosures include specific asset classes, assets under management weighted performance, mutual fund performance against passive peers and composite performance against benchmarks.

The following tables present investment performance for the one-, three-, five-, and 10-years ended June 30, 2023.

The following tables present investment performance for the one-, three-, five-, and 10-years ended September 30, 2023.

Past performance is no guarantee of future results.

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All Composites 46% 37% 47% 54%

As of June 30, 2023, 66 of 125 (52.8%) of the firm's rated U.S.

As of September 30, 2023, 74 of 125 (59.2%) of the firm's rated U.S.

mutual funds (across primary share classes) received an overall rating of 4 or 5 stars.

1 unchanged sentence

In addition, 73% (6) of AUM in the firm's rated U.S.

mutual funds (across primary share classes) ended June 30, 2023 with an overall rating of 4 or 5 stars.

mutual funds (across primary share classes) ended September 30, 2023 with an overall rating of 4 or 5 stars.

(1) The investment performance reflects that of T.

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RESULTS OF OPERATIONS.

The following table and discussion sets forth information regarding our consolidated financial results for the three and six months ended June 30, 2023 and 2022 on a U.S.

GAAP basis as well as a non-GAAP basis.

The following table and discussion sets forth information regarding our consolidated financial results for the three- and nine-month periods ended September 30, 2023 and 2022 on a U.S.

GAAP basis and a non-GAAP basis.

The non-GAAP basis adjusts for the impact of our consolidated sponsored investment products, the impact of market movements on the supplemental savings plan liability and related economic hedges, investment income related to certain other investments, acquisition-related amortization and costs, impairment charges, and certain nonrecurring charges and gains.

Three months ended Q3 2023 vs.

Q2 2022 Six months ended YTD 2023 vs.

Q3 2022 Nine months ended YTD 2023 vs.

(in millions, except per-share data) 9/30/2023 9/30/2022 $ change % change (1)

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

Results Overview - Quarter ended June 30, 2023

Results Overview - Quarter ended September 30, 2023

Net revenues consist of investment advisory revenues;

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Approximately 90% of our net revenues are related to investment advisory fees.

Total net revenues were $1,610.2 million in the second quarter of 2023, a 6.4% increase compared with $1,513.0 million in the second quarter of 2022.

The increase was primarily driven by a $165.0 million increase in accrued carried interest from investments in affiliated investment funds as the change in accrued carried interest was negative in the second quarter of 2022 and reduced net revenues.

The increase in accrued carried interest in 2023 was partially offset by a 4.4% decrease in investment advisory fee revenue as lower overall markets and net outflows reduced average assets under management by 3.5%.

Total net revenues were $1,670.7 million in the third quarter of 2023, a 5.2% increase compared with $1,588.2 million in the third quarter of 2022.

The increase was primarily driven by a $65.0 million increase in accrued carried interest from investments in affiliated investment funds and a 1.5% increase in investment advisory fee revenue as higher overall markets increased average assets under management by 3.4%.

Investment advisory fees are generally earned based on the value and composition of our assets under management, which change based on fluctuations in financial markets and net cash flows.

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Operating expenses on a U.S.

GAAP basis were $1,076.7 million in the second quarter of 2023 compared with $844.4 million in the second quarter of 2022.

GAAP basis were $1,089.4 million in the third quarter of 2023, a 7.5% increase over over the comparable 2022 period.

On a non-GAAP basis, operating expenses were $1,061.3 million, a 3.2% increase over the comparable 2022 period.

In comparison to the second quarter of 2022, more than 50% of the increase in U.S.

GAAP operating expenses is due to the increase in the supplemental savings plan liability in the second quarter of 2023, compared to a decrease in the supplemental savings plan liability in the 2022 period.

Higher accrued carried interest-related compensation and salaries and related benefits along with higher costs associates with ongoing investments in our technology capabilities also contributed to the increase in both U.S.

GAAP operating expense and non-GAAP operating expenses.

These increases were partially offset by lower distribution and servicing costs due to lower average assets under management, and a lower interim bonus accrual.

Accrued carried interest-related compensation reduced operating expenses in the comparable 2022 period.

Operating margin in the second quarter of 2023 was 33.1% on a U.S.

In comparison to the third quarter of 2022, about 50% of the increase in U.S.

GAAP operating expenses is driven by no change in the contingent consideration liability and a smaller decrease in supplemental savings plan liability in the third quarter of 2023, compared to a decrease in the contingent consideration liability and a more significant decline in the supplemental savings plan liability in the 2022 period.

Also contributing to the increase in U.S.

GAAP operating expenses and the primary drivers of non-GAAP operating expenses were higher salaries and related benefits, including severance related to the July work-force action, and an increase in accrued carried interest-related compensation along with higher costs associated with ongoing investments in our technology capabilities.

These increases were partially offset by lower general, administrative and other costs due to a non-recurring recovery of costs that were incurred in Q3 2022.

Operating margin in the third quarter of 2023 was 34.8% on a U.S.

GAAP basis, compared to 36.2% earned in the 2022 quarter.

The decrease in our U.S.

GAAP operating margin for the second quarter of 2023 compared to the 2022 period was primarily driven by the increase in operating expenses, primarily due to the increase in the supplemental savings plan liability, which increased expenses.

For the comparable 2022 period, the supplemental savings plan decreased, which lowered expenses in that period.

This increase was partially offset by an increase in net revenues.

Diluted earnings per share was $2.06 for the second quarter of 2023 as compared to $1.46 for the second quarter of 2022.

The increase was primarily driven by net investment gains recognized in the second quarter of 2023 as compared to net investment losses recognized in the second quarter of 2022, as market returns in the second quarter of 2023 were stronger than those in the 2022 period.

These gains were partially offset by lower operating income.

On a non-GAAP basis, diluted earnings per share was $2.02 for the second quarter of 2023 as compared to $1.79 for the second quarter of 2022.

The increase is largely attributable to net investment gains on our cash investment strategy recognized in the second quarter of 2023 as compared to net investment losses recognized in the second quarter of 2022 as well as higher operating income.

GAAP operating margin for the third quarter of 2023 compared to the 2022 period was primarily driven by operating expense growth outpacing net revenue growth.

The drivers of operating expense growth are further discussed above.

Diluted earnings per share was $1.97 for the third quarter of 2023 as compared to $1.66 for the third quarter of 2022.

The increase was primarily driven by net investment gains recognized in the third quarter of 2023 as compared to net investment losses recognized in the third quarter of 2022, as market returns in the third quarter of 2023 were stronger than those in the 2022 period.

These gains were partially offset by higher tax rate.

On a non-GAAP basis, diluted earnings per share was $2.17 for the third quarter of 2023 as compared to $1.86 for the third quarter of 2022.

The increase is largely attributable to higher adjusted operating income in the third quarter of 2023 as well as net investment gains recognized on our cash investment strategy as compared to net investment losses recognized in the third quarter of 2022.

These increases were partially offset by a higher effective tax rate compared to the 2022 period.

Results Overview - Year-to-Date ended June 30, 2023

Results Overview - Year-to-Date ended September 30, 2023

Net revenues consist of investment advisory revenues;

1 unchanged sentence

and capital allocation-based income.

Approximately 90% of our net revenues for the six months ended June 30, 2023 are related to investment advisory fees.

Total net revenues were $3,147.8 million in the six months ended June 30, 2023, a 6.8% decline compared with $3,376.0 million in the 2022 period.

The decline was primarily driven by a 10.6% decrease in investment advisory fee revenue as average assets under management declined by 9.6%.

Approximately 90% of our net revenues for the nine months ended September 30, 2023 are related to investment advisory fees.

Total net revenues were $4,818.5 million in the nine months ended September 30, 2023, a 2.9% decrease compared with $4,964.2 million in the 2022 period.

The decrease was primarily driven by a 6.8% decline in investment advisory fee revenue as average assets under management declined by 5.5%.

This decrease was partially offset by a $202.5 million increase in accrued carried interest from investments in affiliated investment funds.

The change in accrued carried interest in the six months ended June 30, 2022 reduced net revenues.

Operating expenses were $2,130.1 million in the six months ended June 30, 2023 compared with $1,830.0 million in the 2022 period.

On a non-GAAP basis, our operating expenses for the six months ended June 30, 2023 increased 3.1% to $2,048.7 million compared to the 2022 period.

In comparison to the six months ended June 30, 2022, more than two-thirds of the increase in U.S.

GAAP operating expenses is due to the increase in the supplemental savings plan liability in the six months ended June 30, 2023, compared to a decrease in the supplemental savings plan liability in the 2022 period.

Additionally, higher salaries and related benefits along with higher accrued carried interest-related compensation and higher costs related to the ongoing investments in our technology capabilities also contributed to the increase.

These increases were partially offset by lower distribution and servicing costs due to lower average assets under management, a lower interim bonus accrual, lower recordkeeping costs, and lower employee-related costs, including stock-based compensation expense.

Operating margin in the six months ended June 30, 2023 was 32.3%, compared to 45.8% earned in the 2022 period.

The decrease in our operating margin for the six months ended June 30, 2023 compared to the 2022 period was primarily driven by the decrease in investment advisory fee revenue and the higher market-driven compensation expense related to the change in the supplemental savings plan liability.

Diluted earnings per share was $3.89 for the six months ended June 30, 2023 as compared to $3.88 for the six months ended June 30, 2022.

The 0.3% increase was primarily driven by net investment gains recognized in the six months ended June 30, 2023 as compared to net investment losses recognized in the six months ended June 30, 2022, as market returns in the six months ended June 30, 2023 were stronger than those in the 2022 period as well as lower shares outstanding.

These increases were almost entirely offset by lower operating income and a higher effective tax rate.

On a non-GAAP basis, diluted earnings per share was $3.71 for the six months ended June 30, 2023 as compared to $4.42 for the 2022 period.

The decrease is largely attributable to lower operating income and a higher effective tax rate compared to the 2022 period.

These declines were partially offset by net investment gains on our cash investment strategy recognized in the six months ended June 30, 2023 as compared to net investment losses recognized in the six months ended June 30, 2022 as well as lower shares outstanding.

The change in accrued carried interest in the nine months ended September 30, 2023 increased net revenues by $121.7 million compared with an $80.8 million reduction in the 2022 period.

Operating expenses were $3,219.5 million in the nine months ended September 30, 2023 compared with $2,843.6 million in the 2022 period.

On a non-GAAP basis, our operating expenses for the nine months ended September 30, 2023 increased 3.2% to $3,110.0 million compared to the 2022 period.

In comparison to the nine months ended September 30, 2022, about 60% of the increase in U.S.

GAAP operating expenses was due to the increase in the supplemental savings plan liability in the nine months ended September 30, 2023, compared to a significant decrease in the supplemental savings plan liability in the 2022 period.

Also contributing to the increase in U.S GAAP operating expenses and the primary drivers of non-GAAP operating expenses were higher accrued carried interest-related compensation along with higher salaries and related benefits including severance and higher costs related to the ongoing investments in our technology capabilities.

These increases were partially offset by lower distribution and servicing costs due to lower average assets under management, lower employee-related costs, including stock-based compensation expense and lower general, administrative and other costs.

Operating margin in the nine months ended September 30, 2023 was 33.2%, compared to 42.7% earned in the 2022 period.

The decrease in our operating margin for the nine months ended September 30, 2023 compared to the 2022 period was primarily driven by operating expense growth outpacing net revenue growth.

The drivers of operating expense growth are discussed above.

Diluted earnings per share was $5.86 for the nine months ended September 30, 2023 as compared to $5.54 for the nine months ended September 30, 2022.

The 5.8% increase was primarily driven by net investment gains of $244.4 million recognized in the nine months ended September 30, 2023, as compared to net investment losses of $561.2 million recognized in the comparable 2022 period, as market returns in the 2023 year-to-date period were stronger than those in the 2022 period.

Lower average shares outstanding also contributed to the increase.

These increases were partially offset by lower operating income and a higher effective tax rate.

On a non-GAAP basis, adjusted diluted earnings per share was $5.88 for the nine months ended September 30, 2023 as compared to $6.28 for the 2022 period.

The 6.4% decrease was largely attributable to lower adjusted operating income as well as a higher effective tax rate in the nine months ended September 30, 2023.

These decreases were offset slightly by net investment gains recognized on our cash investment strategy compared to net losses in the 2022 period.

Three months ended Q3 2023 vs.

Q2 2022 Six months ended YTD 2023 vs.

Q3 2022 Nine months ended YTD 2023 vs.

(in millions) 9/30/2023 9/30/2022 $ change % change 9/30/2023 9/30/2022 $ change % change

5 unchanged sentences

1,463.9 1,442.0 21.9 1.5 % 4,286.5 4,600.8 (314.3) (6.8) %

Capital allocation-based income 66.1 1.1 65.0 n/m 121.7 (80.8) 202.5 n/m

Administrative, distribution, and servicing fees

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$ 140.7 145.1 (4.4) (3.0) % 410.3 444.2 (33.9) (7.6) %

Capital allocation-based income 38.7 (126.3) 165.0 n/m 55.6 (81.9) 137.5 n/m

Net revenues $ 1,670.7 $ 1,588.2 $ 82.5 5.2 % $ 4,818.5 $ 4,964.2 $ (145.7) (2.9) %

6 unchanged sentences

Average assets under management $ 1,393.6 $ 1,347.5 $ 46.1 3.4 % $ 1,358.2 $ 1,437.1 $ (78.9) (5.5) %

Investment advisory effective fee rate

Investment advisory annualized effective fee rate

(in bps) 41.7 42.5 (0.8) (1.9) % 42.2 42.8 (0.6) (1.4) %

Investment advisory fees

Investment advisory revenues earned in the second quarter of 2023 decreased over the comparable 2022 quarter as average assets under management decreased $49.7 billion or 3.5%, to $1,357.4 million.

For the six months ended June 30, 2023, investment advisory revenues decreased over the comparable 2022 period as average assets under management decreased $142.8 million, or 9.6%, to $1,340.2 million.

In the six months ended June 30, 2022, we voluntarily waived $9.3 million, or less than 1%, of our investment advisory fees.

We did not waive a significant level of money market investment advisory fees in the second quarter of 2022.

We also have not waived money market investment advisory fees in the six months ended June 30, 2023.

The total average annualized effective fee rate earned during the second quarter of 2023 declined compared to the three- and six-month periods ended June 30, 2022 due to a mix shift to lower fee asset classes and products as a result of overall market declines and net outflows over the last twelve months.

Administrative, distribution, and servicing fees in the second quarter of 2023 were $140.7 million, a decrease of $1.9 million, or 1.3%, from the comparable 2022 quarter.

The decrease in the second quarter of 2023 is primarily due to lower 12b-1 fees earned on the Advisor and R share classes of the U.S.

mutual funds.

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

For the six months ended June 30, 2023, these fees were $269.6 million, a decrease of $29.5 million, or 9.9%, from the 2022 period.

The decrease in the six months ended June 30, 2023 was primarily due to lower transfer agent servicing activities provided to the T.

Rowe Price mutual funds and lower 12b-1 revenue as a result of lower assets under management.

Investment advisory revenues earned in the third quarter of 2023 increased 1.5% over the comparable 2022 quarter as average assets under management increased $46.1 billion or 3.4%, to $1,393.6 billion.

For the nine months ended September 30, 2023, investment advisory revenues decreased 6.8% over the comparable 2022 period as average assets under management decreased $78.9 billion, or 5.5%, to $1,358.2 billion.

In the nine months ended September 30, 2022, we voluntarily waived $9.3 million, or less than 1%, of our investment advisory fees.

We have not waived money market investment advisory fees since second quarter of 2022.

The decline in our investment advisory average annualized effective fee rate to 41.7 bps in Q3 2023 and 42.2 bps for year-to-date 2023 was primarily driven by a mix shift in assets under management toward lower fee asset classes and vehicles as a result of net equity outflows over the last twelve months.

For Q3 2023, the impact of net equity outflows was offset slightly by higher market returns during the same period.

Administrative, distribution, and servicing fees in the third quarter of 2023 were $140.7 million, a decrease of $4.4 million, or 3.0%, from the comparable 2022 quarter.

The decrease in the third quarter of 2023 is primarily due to lower transfer agent servicing activities provided to the T.

Rowe Price mutual funds.

For the nine months ended September 30, 2023, these fees were $410.3 million, a decrease of $33.9 million, or 7.6%, from the 2022 period.

The decrease in the nine months ended September 30, 2023 was primarily due to lower transfer agent servicing activities provided to the T.

Rowe Price mutual funds and lower 12b-1 revenue as a result of lower assets under management in the related U.S.

mutual fund share classes.

These lower 12b-1 revenues are offset by decreases in the costs incurred with third-party intermediaries who distribute these share classes.

Our net revenues reflect the elimination of advisory and administrative fee revenue earned from our consolidated

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The corresponding expenses recognized by these products, and consolidated in our financial statements, were also eliminated from operating expenses.

For the second quarter, we eliminated net revenue of $0.3 million in 2023 and $0.6 million in 2022.

For the six months ended June 30, we eliminated net revenue of $0.9 million in 2023 and $1.5 million in 2022.

Capital allocation-based income in the second quarter of 2023 increased net revenues by $38.7 million.

The second quarter of 2023 amount represents an increase of $51.0 million in accrued carried interest from investments in affiliated investment funds, partially offset by $12.3 million in non-cash acquisition-related amortization.

Comparatively, capital allocation-based income in the second quarter of 2022 reduced net revenues by $126.3 million, which consists of market-related reductions of accrued carried interest from investments in affiliated investment funds of $113.0 million and $13.3 million in non-cash amortization.

For the six months ended June 30, 2023, capital allocation-based income increased net revenues by $55.6 million.

This amount represents an increase of $80.2 million in accrued carried interest from investments in affiliated investment funds, partially offset by $24.6 million in non-cash acquisition-related amortization.

Comparatively, capital allocation-based income reduced net revenues for the six months ended June 30, 2022 by $81.9 million.

This amount represents $55.4 million in market-related reductions of accrued carried interest from investments in affiliated investment funds and $26.5 million in non-cash acquisition-related amortization.

For the third quarter, we eliminated net revenue of $0.7 million in 2023 and $0.5 million in 2022.

For the nine months ended September 30, we eliminated net revenue of $1.6 million in 2023 and $2.1 million in 2022.

Capital allocation-based income in the third quarter of 2023 increased net revenues by $66.1 million.

The third quarter of 2023 amount represents an increase of $91.9 million in accrued carried interest from investments in affiliated investment funds, partially offset by $25.8 million in non-cash acquisition-related amortization and impairments.

Comparatively, capital allocation-based income in the third quarter of 2022 increased net revenues by $1.1 million, which consists of market-related increases of accrued carried interest from investments in affiliated investment funds of $14.3 million offset by $13.2 million in non-cash amortization.

The increase in accrued carried interest in the 2023 quarter as compared to the 2022 quarter was largely driven by stronger absolute and relative performance.

For the nine months ended September 30, 2023, capital allocation-based income increased net revenues by $121.7 million.

This amount represents an increase of $172.1 million in accrued carried interest from investments in affiliated investment funds, partially offset by $50.4 million in non-cash acquisition-related amortization and impairments.

Comparatively, capital allocation-based income reduced net revenues for the nine months ended September 30, 2022 by $80.8 million.

This amount represents $41.1 million in market-related reductions of accrued carried interest from investments in affiliated investment funds plus $39.7 million in non-cash acquisition-related amortization.

A portion of the capital allocation-based income is passed through to certain associates as compensation and the related expense is recognized in compensation and related costs with the unpaid amount reported as non-controlling interest on the consolidated balance sheet.

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Three months ended Q3 2023 vs.

Q2 2022 Six months ended YTD 2023 vs.

Q3 2022 Nine months ended YTD 2023 vs.

(in millions) 9/30/2023 9/30/2022 $ change % change 9/30/2023 9/30/2022 $ change % change

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(1) The impact of the market on the supplemental savings plan liability drives the expense recognized each period.

Compensation, benefits, and related costs were $591.0 million in the second quarter of 2023, an increase of $1.2 million, or 0.2%, compared to the 2022 quarter.

Higher salaries and related benefits in the second quarter of 2023 were almost entirely offset by a lower interim bonus accrual and other employee-related costs in the second quarter of 2023.

For the six months ended June 30, 2023, these costs were $1,184.3 million, a decrease of $1.4 million, or 0.1%, compared to the 2022 period.

The decrease in the six months ended June 30, 2023 was primarily due to a lower interim bonus accrual and stock-based compensation expense.

These decreases were almost entirely offset by higher salaries and related benefits, primarily due to base salary increases in July 2022 and January 2023, and higher headcount.

The firm employed 7,903 associates at June 30, 2023, an increase of 0.4% from the end of 2022, and an increase of 1.7% from June 30, 2022.

Distribution and servicing costs were $67.8 million for the second quarter of 2023, a decrease of $7.9 million, or 10.4%, from the $75.7 million recognized in the 2022 quarter.

The decrease from 2022 was primarily driven by lower average assets under management in certain SICAV share classes.

For the six months ended June 30, 2023, these costs were $139.3 million, a decrease of $22.3 million, or 13.8%, compared with the 2022 period.

The decrease in the six months ended June 30, 2023 was primarily driven by lower average assets under management in certain share classes of the U.S.

mutual funds that earn 12(b)-1 fees and certain SICAV share classes.

Compensation, benefits, and related costs were $617.0 million in the third quarter of 2023, an increase of $21.4 million, or 3.6%, compared to the 2022 quarter.

The increase was primarily due to higher salaries and related benefits, including severance related to the July work-force action in the third quarter of 2023.

These increases were partially offset by higher labor capitalization and lower stock-based compensation in the third quarter of 2023.

For the nine months ended September 30, 2023, these costs were $1,801.3 million, an increase of $20.0 million, or 1.1%, compared to the 2022 period.

The increase in the nine months ended September 30, 2023 was primarily due to higher salaries and related benefits, resulting from base salary increases in July 2022 and January 2023, and severance related to the July work-force actions.

These increases were offset by lower stock-based compensation expense, lower temporary personnel, and higher labor capitalization.

The firm employed 7,842 associates at September 30, 2023, a decrease of 0.3% from the end of 2022, and a decrease of 1.9% from September 30, 2022.

Distribution and servicing costs were $74.9 million for the third quarter of 2023, an increase of $5.0 million, or 7.2%, from the $69.9 million recognized in the 2022 quarter.

The increase from 2022 was primarily driven by higher costs incurred to distribute certain products through certain U.S.

intermediaries.

For the nine months ended September 30, 2023, these costs were $214.2 million, a decrease of $17.3 million, or 7.5%, compared with the 2022 period.

The decrease in the nine months ended September 30, 2023 was primarily driven by lower average assets under management in certain U.S.

mutual fund and SICAV share classes.

The costs in this expense category primarily include amounts paid to third-party intermediaries that source the assets of certain share classes of our U.S.

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mutual funds and investment advisory fee revenue for our international products.

Advertising and promotion costs were $22.9 million in the second quarter of 2023, an increase of $1.5 million, or 7.0%, compared to the $21.4 million recognized in the 2022 quarter.

For the six months ended June 30, 2023, these costs were $48.7 million, an increase of $3.9 million, or 8.7%, compared with the 2022 period.

The increase in both periods was driven primarily by an increase in promotional and digital advertising costs.

Product and recordkeeping related costs were $77.7 million in the second quarter of 2023, an increase of $1.4 million, or 1.8%, compared to the $76.3 million in the 2022 quarter.

The increase is primarily due to the timing of certain printing and mailing services.

For the six months ended June 30, 2023, these costs were $149.8 million, a decrease of $6.9 million, or 4.4%, compared with the 2022 period.

The decrease in the six months ended June 30, 2023 was driven primarily due to lower recordkeeping related costs.

Technology, occupancy, and facility costs were $154.7 million in the second quarter of 2023, an increase of $20.4 million, or 15.2%, compared to the $134.3 million recognized in the 2022 quarter.

For the six months ended June 30, 2023, these costs were $301.3 million, an increase of $33.1 million, or 12.3%, compared with the 2022 period.

The increase in both periods was primarily due to increased office facility costs, mainly related to rent expense associated with a new UK facility we expect to occupy later this year, and higher costs from the firm's ongoing investment in its technology capabilities, including hosted solution licenses and depreciation.

General, administrative, and other expenses were $100.0 million in the second quarter of 2023, an increase of $3.6 million, or 3.7%, compared to the $96.4 million recognized in the 2022 quarter.

Higher professional fees and external research costs were partially offset by certain nonrecurring costs that were incurred during the 2022 quarter.

For the six months ended June 30, 2023, these costs were $207.5 million, an increase of $12.3 million, or 6.3%, compared with the 2022 period.

The increase was primarily related to higher travel, professional and legal fees, and information services expenses.

These increases were partially offset by lower external research costs and certain nonrecurring costs that were incurred during the 2022 period.

Advertising and promotion costs were $21.1 million in the third quarter of 2023, a decrease of $3.2 million, or 13.2%, compared to the $24.3 million recognized in the 2022 quarter.

For the nine months ended September 30, 2023, these costs were $69.8 million, an increase of $0.7 million, or 1.0%, compared with the 2022 period.

Product and recordkeeping related costs were $73.1 million in the third quarter of 2023, a decrease of $2.5 million, or 3.3%, compared to the $75.6 million in the 2022 quarter.

For the nine months ended September 30, 2023, these costs were $222.9 million, a decrease of $9.4 million, or 4.0%, compared with the 2022 period.

The decrease in both periods were primarily due to lower recordkeeping related costs.

Technology, occupancy, and facility costs were $159.7 million in the third quarter of 2023, an increase of $16.1 million, or 11.2%, compared to the $143.6 million recognized in the 2022 quarter.

For the nine months ended September 30, 2023, these costs were $461.0 million, an increase of $49.2 million, or 11.9%, compared with the 2022 period.

The increase for both periods was primarily related to higher costs from the firm's ongoing investment in its technology capabilities, including hosted solution licenses and depreciation.

The nine months ended was also impacted by increased office facility costs, mainly related to rent expense associated with a new London office that has been recognizing throughout the year, and that we began occupying in late September.

General, administrative, and other expenses were $85.7 million in the third quarter of 2023, a decrease of $29.2 million, or 25.4%, compared to the $114.9 million recognized in the 2022 quarter.

For the nine months ended September 30, 2023, these costs were $293.2 million, a decrease of $16.9 million, or 5.4%, compared with the 2022 period.

The decrease in both periods were primarily due to a non-recurring recovery of costs that were incurred in Q3 2022 that more than offset increases in professional fees and information services.

Change in fair value of contingent consideration.

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Every reporting period, we record the potential amount due under this arrangement at fair value.

During the second quarter of 2023 and 2022, we recognized reductions in the fair value of the contingent consideration liability of $23.2 million and $50.3 million, respectively.

During the six months ended June 30, 2023 and 2022, we recognized reductions in the fair value of the contingent consideration liability of $72.8 million and $95.8 million, respectively.

Challenging market conditions in all periods have reduced revenue expectations used in the fair value determinations.

For the three months ended, there was no change in the fair value of the contingent consideration liability at September 30, 2023, while in 2022 the liability was reduced by $29.9 million.

During the nine months ended September 30, 2023 and 2022, we recognized reductions in the fair value of the contingent consideration liability of $72.8 million and $125.7 million, respectively.

Challenging market conditions have reduced revenue expectations used in the fair value determinations.

Acquisition-related amortization and impairment costs.

As part of the purchase accounting for our acquisitions, we identified and separately recognized at fair value certain intangible assets.

During the second quarter of 2023 and 2022, we recognized $28.6 million and $27.2 million, respectively, in amortization related to the definite-lived intangible assets.

During the six months ended June 30, 2023 and 2022, we recognized $54.6 million and $54.3 million, respectively, in amortization.

No impairment costs were recognized during any period presented.

However, should conditions deteriorate, impairments may be recognized in future periods.

During the third quarter of 2023 and 2022, we recognized $38.5 million and $27.1 million, respectively, in amortization related to the definite-lived intangible assets.

During the nine months ended September 30, 2023 and 2022, we recognized $93.1 million and $81.4 million, respectively, in amortization.

Immaterial impairment costs were recognized during Q3 2023.

Should conditions that led us to recognize the impairment charges deteriorate, additional impairments may be recognized in future periods.

Non-operating income (loss)

Non-operating income for the second quarter of 2023 was $106.2 million as compared to non-operating loss of $279.9 million in the 2022 quarter.

The following table details the components of non-operating income (loss) for both the second quarter and six months ended June 30, 2023 and 2022.

Three months ended Six months ended

Non-operating income for the third quarter of 2023 was $2.8 million as compared to non-operating loss of $82.8 million in the 2022 quarter.

The following table details the components of non-operating income (loss) for both the three- and nine-month periods ended September 30, 2023 and 2022.

Three months ended Nine months ended

(in millions) 9/30/2023 9/30/2022 9/30/2023 9/30/2022

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Rowe Price investment products 9.3 (43.9) 180.6 (306.2)

Other investment income (losses) 8.9 (7.7) 11.7 2.5

Other investment income 21.4 2.4 33.1 4.9

Net gains (losses) on investments 30.7 (41.5) 213.7 (301.3)

Net gains (losses) on consolidated sponsored investment portfolios (24.4) (41.7) 45.4 (247.7)

Other losses, including foreign currency losses (7.3) (5.4) (11.2) (12.6)

Other income (losses), including foreign currency losses (3.5) 0.4 (14.7) (12.2)

Non-operating income (loss) $ 2.8 $ (82.8) $ 244.4 $ (561.2)

Our investment portfolio recognized gains during the second quarter and six months ended June 30, 2023 primarily due to market activity that resulted in higher valuations at the end of the second quarter of 2023 and higher dividends earned on our cash equivalents.

Our investment portfolio recognized losses in the second quarter of 2022 as the fear of inflation, the continued Russian invasion of Ukraine, and Federal Reserve interest rate increases weighed on the global economy and markets resulting in lower valuations at the end of the second quarter of 2022.

Our investment portfolio recognized gains during the three- and nine-month periods ended September 30, 2023 primarily due to market activity that resulted in higher valuations at the end of the third quarter of 2023 and higher dividends earned on our cash equivalents.

Our investment portfolio recognized losses in the third quarter of 2022 as the fear of inflation, the continued Russian invasion of Ukraine, and Federal Reserve interest rate increases weighed on the global economy and markets resulting in lower valuations at the end of the third quarter of 2022.

The table above includes the net investment income of the underlying portfolios included in the consolidated

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The table below shows the impact that the consolidated sponsored investment products had on the individual lines of our unaudited condensed consolidated statements of income and the portion attributable to our interest:

Three months ended Six months ended

Three months ended Nine months ended

(in millions) 9/30/2023 9/30/2022 9/30/2023 9/30/2022

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The following table reconciles the statutory federal income tax rate to our effective tax rate on a U.S.

GAAP basis for both the three- and six- months ended June 30, 2023 and 2022:

Three months ended Six months ended

GAAP basis for both the three- and nine-months ended September 30, 2023 and 2022:

Three months ended Nine months ended

9/30/2023 9/30/2022 9/30/2023 9/30/2022

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The non-GAAP effective 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 rate was 25.8% in the second quarter of 2023 compared with 23.9% in second quarter of 2022.

For the six months ended June 30, 2023, our non-GAAP effective tax rate was 27.9%, compared with 24.1% in the 2022 period.

Our non-GAAP effective tax rate was 24.8% in the third quarter of 2023 compared with 24.4% in third quarter of 2022.

For the nine months ended September 30, 2023, our non-GAAP effective tax rate was 26.8%, compared with 24.2% in the 2022 period.

Our 2023 U.S.

GAAP and non-GAAP effective tax rates were unfavorably impacted by losses in certain foreign jurisdictions in which no associated tax benefit was recognized in the income tax provision.

The effective tax rate for the six months ended June 30, 2023 was also unfavorably impacted by increases in valuation allowances recognized against certain foreign-based deferred tax assets, as it was determined in the first quarter of 2023 that these deferred tax assets were more likely to not be realized.

The effective tax rate for the nine months ended September 30, 2023 was also unfavorably impacted by increases in valuation allowances recognized against certain foreign-based deferred tax assets, as it was determined in the first quarter of 2023 that these deferred tax assets were more likely not to be realized.

We currently estimate that our effective tax rate for the full year 2023, on a U.S.

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GAAP financial measures for the three months ended

June 30, 2023 and 2022.

September 30, 2023 and 2022.

Three months ended 9/30/2023

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(13.7) 13.7 — 4.2 9.5 0.04

Contingent consideration (1)

23.2 (23.2) — 2.5 (25.7) (0.11)

Intangible assets amortization and impairments (1)

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The following schedules reconcile certain U.S.

GAAP financial measures for the six months ended June 30, 2023 and 2022.

Six months ended 6/30/2023

GAAP financial measures for the nine months ended September 30, 2023 and 2022.

Nine months ended 9/30/2023

Operating expenses Net operating income Non-operating income (loss) Provision (benefit) for income taxes (6)

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Adjusted Non-GAAP Basis $ 3,110.0 $ 1,760.5 $ 91.3 $ 496.4 $ 1,355.4 $ 5.88

Six months ended 6/30/2022

Nine months ended 9/30/2022

Operating expenses Net operating income Non-operating income (loss) Provision (benefit) for income taxes (6)

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Additionally, management does not emphasize the impact of the portion of non-operating income (loss) removed when managing and evaluating our performance.

(6) The income tax impacts were calculated in order to achieve an overall year-to-date non-GAAP effective tax rate of 27.9% and 24.1%, respectively.

As such, the non-GAAP effective tax rate for the three months ended June 30, 2023 and 2022 was 25.8% and 23.9%, respectively.

(6) The income tax impacts were calculated in order to achieve an overall year-to-date non-GAAP effective tax rate of 26.8% in 2023 and 24.2% in 2022.

As such, the non-GAAP effective tax rate for the three months ended September 30, 2023 and 2022 was 24.8% and 24.4%, respectively.

We estimate that our effective tax rate for the full-year 2023 on a non-GAAP basis will be in the range of 26.5% to 29.5%.

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The calculation of adjusted net income allocated to common stockholders is as follows:

Three months ended Six months ended

Three months ended Nine months ended

9/30/2023 9/30/2022 9/30/2023 9/30/2022

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Rowe Price products $ 5,016.3 $ 4,086.3

Our discretionary investment portfolio is comprised of short duration bond funds, which typically yield higher than money market rates, and asset allocation products.

Cash and discretionary investments experienced market gains of $31.8 million and $62.6 million in the three- and six- months ended June 30, 2023 compared to market losses of $30.6 million and $54.4 million in the three- and six- months ended June 30, 2022.

Our subsidiaries outside the United States held cash and discretionary investments of $795.8 million at June 30, 2023 and $809.1 million at December 31, 2022.

Our discretionary investment portfolio is comprised of short duration bond funds, which typically yield higher than money market rates.

Our subsidiaries outside the United States held cash and discretionary investments of $789.3 million at September 30, 2023 and $809.1 million at December 31, 2022.

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.

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The following table details how T.

Rowe Price’s interests in cash and investments relate to where they are presented on the unaudited condensed consolidated balance sheet as of June 30, 2023.

Rowe Price’s interests in cash and investments relate to where they are presented on the unaudited condensed consolidated balance sheet as of September 30, 2023.

(in millions) Cash and cash equivalents Investments Net assets of consolidated T.

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Redeemable non-controlling interests — — 560.2 560.2

As reported on unaudited condensed consolidated balance sheet at June 30, 2023 $ 2,249.7 $ 2,718.4 $ 1,874.4 $ 6,842.5

As reported on unaudited condensed consolidated balance sheet at September 30, 2023 $ 2,578.7 $ 2,503.6 $ 1,694.5 $ 6,776.8

(1) The consolidated T.

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mutual funds as well as those funds regulated outside the U.S.

The $27.7 million and the $861.5 million represent the total value at June 30, 2023 of our interest in the consolidated T.

The $1,134.3 million represents the total value at September 30, 2023 of our interest in the consolidated T.

Rowe Price investment products.

The total net assets of the T.

Rowe Price investment products at June 30, 2023 of $1,874.4 million includes assets of $1,946.1 million, less liabilities of $71.7 million as reflected in our unaudited condensed consolidated balance sheets.

Rowe Price investment products at September 30, 2023 of $1,694.5 million includes assets of $1,778.3 million, less liabilities of $83.8 million as reflected in our unaudited condensed consolidated balance sheets.

(2) Includes $221.5 million of non-controlling interests in consolidated entities and represents the portion of these investments, held by third parties, that we cannot sell in order to obtain cash for general operations.

Our unaudited condensed consolidated balance sheet reflects the cash and cash equivalents, investments, other assets and liabilities of those sponsored investment products we consolidate, as well as redeemable non-controlling interests for the portion of these sponsored investment products that are held by unrelated third-party investors.

interests for the portion of these sponsored investment products that are held by unrelated third-party investors.

Although we can redeem our net interest in these sponsored investment products at any time, we cannot directly access or sell the assets held by the products to obtain cash for general operations.

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We increased our quarterly recurring dividend per common share in February 2023 by 1.7% to $1.22 per common share from $1.20 per common share.

Further, we expended $45.2 million in the first half of 2023 to repurchase

420 thousand shares of our outstanding common stock, at an average price of $107.22 per share.

Further, we expended $151.4 million in the first nine months of 2023 to repurchase 1,398 thousand shares of our outstanding common stock, at an average price of $107.78 per share.

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

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2022 1,108.8 — 855.3 1,964.1

Six months ended 6/30/2023 561.2 — 45.0 606.2

Nine months ended 9/30/2023

841.1 — 150.6 991.7

Total $ 2,953.6 $ 699.8 $ 2,141.9 $ 5,795.3

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We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.

The following table summarizes the cash flows for the six months ended June 30, 2023 and 2022, that are attributable to T.

The following table summarizes the cash flows for the nine months ended September 30, 2023 and 2022, that are attributable to T.

Rowe Price, our consolidated sponsored investment products, and the related eliminations required in preparing the statement.

Six months ended

Nine months ended

9/30/2023 9/30/2022

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Operating activities attributable to T.

Rowe Price during the first half of 2023 provided cash flows of $1,261.0 million, a decrease of $398.8 million from the $1,659.8 million provided during the comparable 2022 period.

Rowe Price during the first nine months of 2023 provided cash flows of $2,117.3 million, a decrease of $335.5 million from the $2,452.8 million provided during the comparable 2022 period.

The decrease is primarily attributable to lower non-cash adjustments as the 2023 period included net investment gains of $326.0 million compared with net investment losses of $506.6 million in the 2022 period.

1 unchanged sentence

Additionally, in 2023, we had net proceeds of $101.3 million from certain investment products that economically hedge our supplemental savings plan liability compared to net proceeds of $33.8 million in the same period of 2022.

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

Our interim operating cash flows do not include the cash impact of variable compensation that is accrued throughout the year before being substantially paid out in December.

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

Rowe Price totaled $163.5 million in the first half of 2023 compared with $1.6 million of cash used in investing activities in the 2022 period.

During 2023, net proceeds from the sale of certain of our discretionary investments of $46.5 million were lower compared to $110.2 million during 2022.

We also increased the level of seed capital provided to the T.

Rowe Price consolidated investment products by $56.0 million.

We eliminate our seed capital in those T.

Rowe Price investment products we consolidate in preparing our unaudited condensed consolidated statement of cash flows.

Rowe Price totaled $333.3 million in the first nine months of 2023, an increase of $278.6 million from the the 2022 period.

During the 2023 period, we reinvested the majority of $370.7 million in net proceeds from the sale of certain of our discretionary investments along with additional operating cash to make $442.8 million into new investments in order to rebalance the asset allocation of our discretionary investment portfolio.

This resulted in net new investment activity in the 2023 period of $72.1 million compared with $119.2 million in proceeds from net dispositions in the comparable 2022 period.

The majority of the net new investments were seed capital provided to sponsored investment products that we consolidate.

We eliminate our our investments in those sponsored investment products we consolidate in preparing our unaudited condensed consolidated statements of cash flows.

In addition, we increased our property, equipment and software expenditures by $48.8 million and had higher other investing activities of $38.5 million.

2 unchanged sentences

Net cash used in financing activities attributable to T.

Rowe Price were $603.4 million in the first half of 2023 compared with $1,065.3 million in the 2022 period.

During the first half of 2023, we repurchased 420 thousand shares for $45.2 million compared to 3.8 million shares for $519.6 million in the first half of 2022.

The remaining decrease in reported cash flows used from financing activities is primarily attributable to $283.4 million in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during the first half of 2023 as compared to $65.7 million in net redemptions during the first half of 2022.

Rowe Price were $960.9 million in the first nine months of 2023 compared with $1,554.9 million in the 2022 period.

During the first nine months of 2023, we repurchased 1.4 million shares for $151.4 million compared to 5.7 million shares for $744.0 million in the comparable 2022 period.

The remaining decrease in reported cash flows used from financing activities is primarily attributable to $343.7 million in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during the first nine months of 2023 as compared to $61.8 million in net redemptions in the comparable 2022 period.

CRITICAL ACCOUNTING POLICIES.

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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.

2 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis