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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________ 
FORM 10-Q
______________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 000-32191
______________________________________ 
T. ROWE PRICE GROUP, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
52-2264646
(State of incorporation)   (I.R.S. Employer Identification No.)
100 East Pratt Street, Baltimore, Maryland 21202
(Address, including Zip Code, of principal executive offices)
(410) 345-2000
(Registrant’s telephone number, including area code)
________________
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.20 par value per share
TROW
The NASDAQ Stock Market LLC
______________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer 
Non-accelerated filer (do not check if smaller reporting company)
Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No
The number of shares outstanding of the issuer’s common stock ($.20 par value), as of the latest practicable date,
April 26, 2022, is 227,296,619.
The exhibit index is at Item 6 on page 38.



PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
 
3/31/2022 12/31/2021
ASSETS
Cash and cash equivalents $ 1,997.5  $ 1,523.1 
Accounts receivable and accrued revenue 919.5  1,058.3 
Investments 2,879.3  2,975.5 
Assets of consolidated T. Rowe Price investment products ($1,501.0 million at March 31, 2022 and $1,761.5 million at December 31, 2021, related to variable interest entities)
1,658.2  1,962.8 
Operating lease assets 164.5  201.2 
Property, equipment and software, net 736.3  736.2 
Intangible assets, net 886.3  913.4 
Goodwill 2,643.9  2,693.2 
Other assets 462.5  445.3 
Total assets $ 12,348.0  $ 12,509.0 
LIABILITIES
Accounts payable and accrued expenses $ 417.3  $ 431.0 
Liabilities of consolidated T. Rowe Price investment products ($44.2 million at March 31, 2022 and $36.2 million at December 31, 2021, related to variable interest entities)
55.9  51.5 
Operating lease liabilities 211.8  249.2 
Accrued compensation and related costs 293.6  256.8 
Supplemental savings plan liability 826.3  882.6 
Contingent consideration liability 211.5  306.3 
Income taxes payable 214.6  77.9 
Total liabilities 2,231.0  2,255.3 
Commitments and contingent liabilities
Redeemable non-controlling interests 790.4  982.3 
STOCKHOLDERS’ EQUITY
Preferred stock, undesignated, $.20 par value – authorized and unissued 20,000,000 shares
—  — 
Common stock, $.20 par value—authorized 750,000,000; issued 227,283,000 shares at March 31, 2022 and 229,175,000 at December 31, 2021
45.5  45.8 
Additional capital in excess of par value 668.2  919.8 
Retained earnings 8,372.2  8,083.6 
Accumulated other comprehensive loss (31.5) (26.5)
Total stockholders’ equity attributable to T. Rowe Price Group, Inc. 9,054.4  9,022.7 
Non-controlling interests in consolidated entities 272.2  248.7 
Total permanent stockholders’ equity 9,326.6  9,271.4 
Total liabilities, redeemable non-controlling interests, and permanent stockholders’ equity $ 12,348.0  $ 12,509.0 
The accompanying notes are an integral part of these statements.
Page 2


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per-share amounts)
 
  Three months ended
  3/31/2022 3/31/2021
Revenues
Investment advisory fees $ 1,662.1  $ 1,687.8 
Capital allocation-based income 44.4  — 
Administrative, distribution, and servicing fees 156.5  139.0 
Net revenues 1,863.0  1,826.8 
Operating expenses
Compensation and related costs 581.6  583.5 
Distribution and servicing 85.9  85.6 
Advertising and promotion 23.4  18.9 
Product and recordkeeping related costs 80.4  41.0 
Technology, occupancy, and facility costs 133.9  117.3 
General, administrative, and other 80.4  87.3 
Total operating expenses 985.6  933.6 
Net operating income 877.4  893.2 
Non-operating income (loss)
Net gains (losses) on investments (89.9) 68.6 
Net gains (losses) on consolidated investment products (101.4) 37.2 
Other income (loss) (7.2) (3.7)
Total non-operating income (loss) (198.5) 102.1 
Income before income taxes 678.9  995.3 
Provision for income taxes 164.5  230.5 
Net income 514.4  764.8 
Less: net income (loss) attributable to redeemable
non-controlling interests
(53.5) 15.4 
Net income attributable to T. Rowe Price Group $ 567.9  $ 749.4 
Earnings per share on common stock of T. Rowe Price Group
Basic $ 2.43  $ 3.20 
Diluted $ 2.41  $ 3.17 

The accompanying notes are an integral part of these statements.
Page 3


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 
  Three months ended
  3/31/2022 3/31/2021
Net income $ 514.4  $ 764.8 
Other comprehensive income (loss)
Currency translation adjustments
Consolidated T. Rowe Price investment products - variable interest entities (15.5) (18.9)
Reclassification gains recognized in non-operating income upon deconsolidation of certain T. Rowe Price investment products (1.6) (2.6)
Total currency translation adjustments of consolidated T. Rowe Price investment products - variable interest entities
(17.1) (21.5)
Equity method investments
.5  (.8)
Other comprehensive income (loss) before income taxes (16.6) (22.3)
Net deferred tax (expense) benefits 1.8  3.0 
Total other comprehensive income (loss) (14.8) (19.3)
Total comprehensive income 499.6  745.5 
Less: comprehensive income (loss) attributable to redeemable non-controlling interests (63.3) 3.6 
Total comprehensive income attributable to T. Rowe Price Group $ 562.9  $ 741.9 

The accompanying notes are an integral part of these statements.
Page 4


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
 
  Three months ended
  3/31/2022 3/31/2021
Cash flows from operating activities
Net income $ 514.4  $ 764.8 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property, equipment and software 54.5  49.0 
Amortization of acquisition-related assets and retention arrangements 53.9  — 
Fair value remeasurement of contingent consideration liability (45.5) — 
Stock-based compensation expense
63.6  57.5 
Net (gains) losses recognized on investments 38.3  (59.5)
Net redemptions in T. Rowe Price investment products used to economically hedge supplemental savings plan liability 6.1  22.0 
Net change in securities held by consolidated T. Rowe Price investment products
180.1  (120.9)
Other changes 238.0  281.8 
Net cash provided by operating activities 1,103.4  994.7 
Cash flows from investing activities
Purchases of investment products (6.0) (12.5)
Dispositions of investment products 64.9  60.3 
Net cash of T. Rowe Price investment products on deconsolidation (5.9) (27.3)
Additions to property, equipment and software (54.9) (58.8)
Other investing activity 5.7  7.5 
Net cash provided by (used in) investing activities 3.8  (30.8)
Cash flows from financing activities
Repurchases of common stock (320.1) (259.2)
Common share issuances under stock-based compensation plans 5.1  20.9 
Dividends paid to common stockholders of T. Rowe Price (279.2) (252.3)
Net contributions from non-controlling interests in consolidated entities 6.0  — 
Net subscriptions (redemptions) received from redeemable non-controlling interest holders (55.9) 183.1 
Net cash used in financing activities (644.1) (307.5)
Effect of exchange rate changes on cash and cash equivalents of consolidated
T. Rowe Price investment products
(2.7) .9 
Net change in cash and cash equivalents during period 460.4  657.3 
Cash and cash equivalents at beginning of period, including $101.1 million at December 31, 2021, and $104.8 million at December 31, 2020, held by consolidated T. Rowe Price investment products
1,624.2  2,256.5 
Cash and cash equivalents at end of period, including $87.1 million at March 31, 2022, and $83.7 million at March 31, 2021, held by consolidated T. Rowe Price investment products
$ 2,084.6  $ 2,913.8 

The accompanying notes are an integral part of these statements.
Page 5


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(shares in thousands; dollars in millions)
Three months ended 3/31/2022
Common
shares
outstanding
Common
stock
Additional
capital in
excess of
par value
Retained
earnings
AOCI(1)
Total
stockholders’
equity attributable to T. Rowe Price Group, Inc.
Non-controlling interests in consolidated entities Total permanent stockholders’ equity
Redeemable non-controlling interests
Balances at December 31, 2021 229,175  $ 45.8  $ 919.8  $ 8,083.6  $ (26.5) $ 9,022.7  $ 248.7  $ 9,271.4  $ 982.3 
Net income (loss) —  —  —  567.9  —  567.9  17.5  585.4  (53.5)
Other comprehensive income (loss), net of tax —  —  —  —  (5.0) (5.0) —  (5.0) (9.9)
Dividends declared ($1.20 per share)
—  —  —  (279.2) —  (279.2) —  (279.2) — 
Shares issued upon option exercises 174  —  7.8  —  —  7.8  —  7.8  — 
Net shares issued upon vesting of restricted stock units 41  (3.2) —  —  (3.2) —  (3.2) — 
Stock-based compensation expense —  —  63.5  —  —  63.5  —  63.5  — 
Restricted stock units issued as dividend equivalents —  —  .1  (.1) —  —  —  —  — 
Common shares repurchased (2,107) (.3) (319.8) —  —  (320.1) —  (320.1) — 
Net contributions from non-controlling interests in consolidated entities —  —  —  —  —  —  6.0  6.0  — 
Net redemptions from T. Rowe Price investment products —  —  —  —  —  —  —  —  (65.6)
Net deconsolidations of T. Rowe Price investment products —  —  —  —  —  —  —  —  (62.9)
Balances at March 31, 2022 227,283  $ 45.5  $ 668.2  $ 8,372.2  $ (31.5) $ 9,054.4  $ 272.2  $ 9,326.6  $ 790.4 

Three months ended 3/31/2021
Common
shares
outstanding
Common
stock
Additional
capital in
excess of
par value
Retained
earnings
AOCI(1)
Total permanent
stockholders’
equity
Redeemable non-controlling interests
Balances at December 31, 2020 227,965  $ 45.6  $ 654.6  $ 7,029.8  $ (23.0) $ 7,707.0  $ 1,561.7 
Net income —  —  —  749.4  —  749.4  15.4 
Other comprehensive income (loss), net of tax —  —  —  —  (7.5) (7.5) (11.8)
Dividends declared ($1.08 per share)
—  —  —  (252.3) —  (252.3) — 
Shares issued upon option exercises 572  .1  25.3  —  —  25.4  — 
Net shares issued upon vesting of restricted stock units 41  —  (3.7) —  —  (3.7) — 
Stock-based compensation expense —  —  57.5  —  —  57.5  — 
Restricted stock units issued as dividend equivalents —  —  .1  (.1) —  —  — 
Common shares repurchased (1,630) (.3) (79.2) (188.1) —  (267.6) — 
Net subscriptions into T. Rowe Price investment products —  —  —  —  —  —  187.5 
Net deconsolidations of T. Rowe Price investment products —  —  —  —  —  —  (739.9)
Balances at March 31, 2021 226,948  $ 45.4  $ 654.6  $ 7,338.7  $ (30.5) $ 8,008.2  $ 1,012.9 
(1) Accumulated other comprehensive income
The accompanying notes are an integral part of these statements.
Page 6


NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – THE COMPANY AND BASIS OF PREPARATION.

T. Rowe Price Group Inc. derives its consolidated revenues and net income primarily from investment advisory services that its subsidiaries provide to individual and institutional investors in the T. Rowe Price U.S. mutual funds (“U.S. mutual funds”), subadvised funds, separately managed accounts, collective investment trusts, and other
affiliated products. The other affiliated products include: open-ended investment products offered to investors outside the U.S., products offered through variable annuity life insurance plans in the U.S., affiliated private investment funds or private accounts, and collateralized loan obligations. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; trust services; and non-discretionary advisory services through model delivery. Additionally, we also derive revenue from our interests in general partners of certain affiliated private investment funds that are entitled to a disproportionate allocation of income through capital allocation-based arrangements.

Investment advisory revenues depend largely on the total value and composition of assets under our management. Accordingly, fluctuations in financial markets and in the composition of assets under management impact our revenues and results of operations.

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"). As of March 31, 2022, OHA had $57 billion of capital under management (which includes net assets value, portfolio value and/or unfunded capital). We have reflected the financial position, operating results and cash flows of OHA in these financial statements.

BASIS OF PRESENTATION.

These unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. These principles require the use of estimates and reflect all adjustments that are, in the opinion of management, necessary for a fair statement of our results for the interim periods presented. All such adjustments are of a normal recurring nature. Actual results may vary from our estimates.

The unaudited interim financial information contained in these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in our 2021 Annual Report.

NEWLY ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.

We have considered all newly issued accounting guidance that is applicable to our operations and the preparation of our unaudited condensed consolidated statements, including those we have not yet adopted. We do not believe that any such guidance has or will have a material effect on our financial position or results of operations.



Page 7


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

Revenues earned under agreements with clients include: 
Three months ended 3/31/2022 Three months ended 3/31/2021
Administrative, distribution, and servicing fees
Administrative, distribution, and servicing fees
(in millions)
Investment advisory fees
Administrative fees
Distribution and servicing fees
Capital allocation-based income
Net revenues
Investment advisory fees
Administrative fees
Distribution and servicing fees
Net revenues
U.S. mutual funds $ 976.5  $ 93.1  $ 26.3  $ —  $ 1,095.9  $ 1,050.2  $ 78.7  $ 29.1  $ 1,158.0 
Subadvised funds, separate accounts, collective investment trusts, and other investment products 685.6  —  —  44.4  730.0  637.6  —  —  637.6 
Other clients(1)
—  37.1  —  —  37.1  —  31.2  —  31.2 
$ 1,662.1  $ 130.2  $ 26.3  $ 44.4  $ 1,863.0  $ 1,687.8  $ 109.9  $ 29.1  $ 1,826.8 
(1) Other clients primarily include individuals, defined contribution plans, college savings plans, and institutions related to our non-discretionary advisory services.    

Total net revenues earned from our related parties aggregate $1,536.4 million and $1,482.3 million for the three months ended March 31, 2022 and 2021, respectively. Accounts receivable from these products aggregate to $584.5 million at March 31, 2022 and $577.9 million at December 31, 2021.

The following table details the investment advisory revenues earned from clients by their underlying asset class.
  Three months ended
(in millions) 3/31/2022 3/31/2021
U.S. mutual funds
Equity $ 691.9  $ 729.8 
Fixed income, including money market 64.0  59.0 
Multi-asset 220.6  261.4 
976.5  1,050.2 
Subadvised funds, separate accounts, collective investment trusts, and other investment products
Equity 394.1  424.2 
Fixed income, including money market 42.6  37.5 
Multi-asset 184.0  175.9 
Alternatives 64.9  — 
685.6  637.6 
Total $ 1,662.1  $ 1,687.8 



Page 8


The following table summarizes the assets under management on which we earn investment advisory revenues.
Average during
Three months ended As of
(in billions) 3/31/2022 3/31/2021 3/31/2022 12/31/2021
U.S. mutual funds
Equity $ 491.3  $ 509.6  $ 489.0  $ 553.9 
Fixed income, including money market 86.4  82.3  83.9  85.3 
Multi-asset 220.3  222.6  216.5  232.2 
798.0  814.5  789.4  871.4 
Subadvised funds, separate accounts, collective investment trusts, and other investment products
Equity 395.2  408.4  389.0  438.8 
Fixed income, including money market 91.4  90.7  91.3  90.4 
Multi-asset 233.4  195.2  239.9  245.5 
Alternatives 41.9  —  42.2  41.7 
761.9  694.3  762.4  816.4 
Total $ 1,559.9  $ 1,508.8  $ 1,551.8  $ 1,687.8 

Investors that we serve are primarily domiciled in the U.S.; investment advisory clients outside the U.S. account for 9.7% and 9.9% of our assets under management at March 31, 2022 and December 31, 2021, respectively.

NOTE 3 – INVESTMENTS.

The carrying values of our investments that are not part of the consolidated T. Rowe Price investment products are as follows:
(in millions) 3/31/2022 12/31/2021
Investments held at fair value
T. Rowe Price investment products
Discretionary investments $ 502.2  $ 518.7 
Seed capital 224.6  264.8 
Supplemental savings plan liability economic hedges 820.0  881.5 
Investment partnerships and other investments 105.0  108.9 
Investments in affiliated collateralized loan obligations 9.3 10.8
Equity method investments
T. Rowe Price investment products - seed capital 134.0  141.7 
Investments in affiliated private investment funds - carried interest 642.1 609.8
Investments in affiliated private investment funds - seed/co-investment 153.1 151.3
23% Investment in UTI Asset Management Company Limited (India)
170.3  165.4 
Other investment partnerships and investments 2.5  2.5 
Held to maturity
Investments in affiliated collateralized loan obligations 115.2 119.1
 U.S. Treasury note 1.0  1.0 
Total $ 2,879.3  $ 2,975.5 

The investment partnerships are carried at fair value using net asset value (“NAV”) per share as a practical expedient. Our interests in these partnerships are generally not redeemable and are subject to significant transferability restrictions. The underlying investments of these partnerships have contractual terms through 2029, though we may receive distributions of liquidating assets over a longer term. The investment strategies of these partnerships include growth equity, buyout, venture capital, and real estate.


Page 9


During the three months ended March 31, 2022, net losses on investments included $99.9 million of net unrealized losses related to investments held at fair value that were still held at March 31, 2022. For the same period of 2021, net gains on investments included $38.8 million of net unrealized gains related to investments held at fair value that were still held at March 31, 2021.

During the three months ended March 31, 2022 and 2021, certain T. Rowe Price investment products in which we provided initial seed capital at the time of formation were deconsolidated, as we no longer had a controlling interest. Depending on our ownership interest, we are now reporting our residual interests in these T. Rowe Price investment products as either an equity method investment or an investment held at fair value. Additionally, during the three months ended March 31, 2022 and March 31, 2021, certain T. Rowe Price investment products were consolidated, as we regained a controlling interest. The net impact of these changes on our unaudited condensed consolidated balance sheets and statements of income as of the dates the portfolios were deconsolidated or reconsolidated is detailed below.
Three months ended
(in millions) 3/31/2022 3/31/2021
Net increase (decrease) in assets of consolidated T. Rowe Price investment products $ (97.5) $ (928.1)
Net increase (decrease) in liabilities of consolidated T. Rowe Price investment products $ (8.6) $ (15.3)
Net increase (decrease) in redeemable non-controlling interests $ (63.0) $ (739.9)
Gains recognized upon deconsolidation $ 1.6  $ 2.6 

The gains recognized upon deconsolidation were the result of reclassifying currency translation adjustments accumulated on certain T. Rowe Price investment products with non-USD functional currencies from accumulated other comprehensive income to non-operating income.

INVESTMENTS IN AFFILIATED COLLATERALIZED LOAN OBLIGATIONS.

There is debt associated with our long-term investments in affiliated collateralized loan obligations (“CLOs”). As of March 31, 2022 and December 31, 2021, the debt is valued at $108.7 million and $113.5 million, and is reported in accounts payable and accrued expenses in our unaudited condensed consolidated balance sheets. The debt includes outstanding repurchase agreements of €66.7 million (equivalent to $73.8 million at March 31, 2022 and $75.9 million at December 31, 2021 at the respective EUR spot rates) and collateralized by the CLO investments. The debt also includes outstanding note facilities of €32.4 million (equivalent to $34.9 million at March 31, 2022 and $36.9 million at December 31, 2021 at the respective EUR spot rates) and are collateralized by first priority security interests in the assets of the consolidated OHA entity that is party to the notes. The debt bears interest at rates based on EURIBOR plus the initial margin, which equals all-in rates ranging from 1.70% to 1.95% as of March 31, 2022. The debt matures on various dates through 2032 or if the investments are paid back in full or cancelled.

VARIABLE INTEREST ENTITIES.

Our investments at March 31, 2022 and December 31, 2021 include interests in variable interest entities that we do not consolidate as we are not deemed the primary beneficiary. Our maximum risk of loss related to our involvement with these entities is as follows:
(in millions) 3/31/2022 12/31/2021
Investment carrying values $ 951.9  $ 943.3 
Unfunded capital commitments 110.4  94.2 
Accounts receivable 94.2  145.1 
$ 1,156.5  $ 1,182.6 

The unfunded capital commitments totaling $110.4 million at March 31, 2022 and $94.2 million at December 31, 2021 relate primarily to the affiliated private investment funds and the investment partnerships in which we have an existing investment. In addition to such amounts, a percentage of prior distributions may be called under certain circumstances.

Page 10



INVESTMENTS IN AFFILIATED PARTNERS.

During 2021, as part of the OHA acquisition, we acquired 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. These entities are considered variable interest entities and are consolidated as T. Rowe Price was determined to be the primary beneficiary.

The total assets, liabilities and non-controlling interests of these consolidated variable interest entities are as follows:

(in millions) 3/31/2022 12/31/2021
Assets $ 695.4  $ 692.7 
Liabilities $ 1.1  $ 56.4 
Non-controlling interest $ 272.2  $ 248.7 

NOTE 4 – FAIR VALUE MEASUREMENTS.

We determine the fair value of our cash equivalents and investments held at fair value using the following broad levels of inputs as defined by related accounting standards:

Level 1 – quoted prices in active markets for identical securities.
Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar
     securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data
     obtained from independent sources.
Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. The inputs into the determination of fair value require significant management judgment or estimation. Investments in this category generally include investments for which there is not an actively-traded market.

These levels are not necessarily an indication of the risk or liquidity associated with our investments. The following table summarizes our investments and liability that are recognized in our unaudited condensed consolidated balance sheets using fair value measurements determined based on the differing levels of inputs. This table excludes investments held by the consolidated T. Rowe Price investment products which are presented separately on our unaudited condensed consolidated balance sheets and are detailed in Note 5.

3/31/2022 12/31/2021
(in millions)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
T. Rowe Price investment products
Cash equivalents held in money market funds 1,551.1  $ —  $ —  $ 1,183.9  $ —  $ — 
Discretionary investments 502.2  —  —  518.7  —  — 
Seed capital 202.9  21.7  —  241.4  23.4  — 
Supplemental savings plan liability economic hedges 820.0  —  —  881.5  —  — 
Other investments 1.3  .1  —  .7  .1  — 
Investments in affiliated collateralized loan obligations —  9.3  —  —  10.8  — 
Total $ 3,077.5  $ 31.1  $ —  $ 2,826.2  $ 34.3  $ — 
Contingent consideration liability $ —  $ —  $ 211.5  $ —  $ —  $ 306.3 

The fair value hierarchy level table above does not include the investment partnerships and other investments for which fair value is estimated using their NAV per share as a practical expedient. The carrying value of these investments as disclosed in Note 3 were $103.6 million at March 31, 2022, and $108.1 million at December 31, 2021.


Page 11


As part of the purchase consideration for our acquisition of OHA in December 2021, there was contingent consideration in the amount of up to $900.0 million, payable in cash, that may be due as part of an earnout payment starting in 2025 and ending in 2027 upon satisfying or exceeding certain defined revenue targets. These defined revenue targets will be evaluated on a cumulative basis beginning at the end of 2024, with the ability to extend two additional years if the defined revenue targets are not achieved. About 22% of the earnout is conditioned upon continued service with T. Rowe Price and was excluded from the purchase consideration and deemed compensatory. The fair value of the earnout is remeasured each reporting period and recognized over the related service period. For the three months ended March 31, 2022, $5.1 million was recorded as part of compensation expense in our unaudited condensed consolidated statements of income for the portion of the earnout deemed compensatory.

The change in the contingent consideration liability measured at fair value for which we used Level 3 inputs to determine fair value is as follows:

Contingent Consideration Liability
(in millions) Three Months Ended 3/31/2022
Balance, 12/31/2021 $ 306.3 
  Measurement period adjustment (49.3)
  Unrealized (gains) losses, included in earnings (45.5)
Balance, 3/31/2022 $ 211.5 

The fair value of the contingent consideration is measured using the Monte Carlo simulation methodology of valuation. The most significant assumptions used relate to the discount periods and rates and from changes pertaining to the achievement of the defined financial targets. The unrealized (gains) losses during the quarter are reflected in general, administrative and other expenses in our unaudited condensed consolidated statements of income.
In addition, simultaneously with the OHA acquisition, a Value Creation Agreement was entered into whereby certain employees of OHA will receive incentive payments in the aggregate equal to 10% of the appreciated value of the OHA business, subject to an annualized preferred return to T. Rowe Price, on the fifth anniversary of the acquisition date. This arrangement is treated as a post-combination compensation expense. This arrangement will be remeasured at fair value at each reporting date and recognized over the related service period. As of March 31, 2022, $2.0 million was recognized as part of compensation expense in our unaudited condensed consolidated statements of income.

NOTE 5 – CONSOLIDATED T. ROWE PRICE INVESTMENT PRODUCTS AND OTHER ENTITIES.

The T. Rowe Price investment products that we consolidate in our unaudited condensed consolidated financial statements are generally those products we provided initial seed capital at the time of their formation and have a controlling interest. Our U.S. mutual funds are considered voting interest entities, while those regulated outside the U.S. are considered variable interest entities.



Page 12


The following table details the net assets of the consolidated T. Rowe Price investment products:
3/31/2022 12/31/2021
(in millions)
Voting
interest entities
Variable interest entities
Total
Voting
interest entities
Variable interest entities
Total
Cash and cash equivalents(1)
$ 9.5  $ 77.5  $ 87.0  $ 7.3  $ 93.8  $ 101.1 
Investments(2)
144.4  1,391.5  1,535.9  188.9  1,645.0  1,833.9 
Other assets 3.3  32.0  35.3  5.1  22.7  27.8 
Total assets 157.2  1,501.0  1,658.2  201.3  1,761.5  1,962.8 
Liabilities 11.7  44.2  55.9  15.3  36.2  51.5 
Net assets $ 145.5  $ 1,456.8  $ 1,602.3  $ 186.0  $ 1,725.3  $ 1,911.3 
Attributable to T. Rowe Price $ 99.6  $ 712.3  $ 811.9  $ 125.3  $ 803.7  $ 929.0 
Attributable to redeemable non-controlling interests 45.9  744.5  790.4  60.7  921.6  982.3 
$ 145.5  $ 1,456.8  $ 1,602.3  $ 186.0  $ 1,725.3  $ 1,911.3 
(1) Cash and cash equivalents includes $6.6 million at March 31, 2022, and $6.5 million at December 31, 2021, of T. Rowe Price money market mutual funds.
(2) Investments include $39.3 million at March 31, 2022, and $42.5 million at December 31, 2021 of other T. Rowe Price investment products.

Although we can redeem our net interest in these consolidated T. Rowe Price investment products at any time, we cannot directly access or sell the assets held by these products to obtain cash for general operations. Additionally, the assets of these investment products are not available to our general creditors.

Since third party investors in these investment products have no recourse to our credit, our overall risk related to the net assets of consolidated T. Rowe Price investment products is limited to valuation changes associated with our net interest. We, however, are required to recognize the valuation changes associated with all underlying investments held by these products in our unaudited condensed consolidated statements of income and disclose the portion attributable to third party investors as net income attributable to redeemable non-controlling interests.

The operating results of the consolidated T. Rowe Price investment products for the three months ended March 31, 2022 and 2021, are reflected in our unaudited condensed consolidated statements of income as follows:
Three months ended
3/31/2022 3/31/2021
(in millions)
Voting interest entities Variable interest entities Total Voting interest entities Variable interest entities Total
Operating expenses reflected in net operating income $ (.2) $ (2.3) $ (2.5) $ (.2) $ (3.3) $ (3.5)
Net investment income (loss) reflected in non-operating income (loss) (6.6) (94.8) (101.4) 6.1  31.1  37.2 
Impact on income before taxes $ (6.8) $ (97.1) $ (103.9) $ 5.9  $ 27.8  $ 33.7 
Net income (loss) attributable to T. Rowe Price $ (4.7) $ (45.7) $ (50.4) $ 4.0  $ 14.3  $ 18.3 
Net income (loss) attributable to redeemable non-controlling interests (2.1) (51.4) (53.5) 1.9  13.5  15.4 
$ (6.8) $ (97.1) $ (103.9) $ 5.9  $ 27.8  $ 33.7 

The operating expenses of the consolidated investment products are reflected in general, administrative and other expenses. In preparing our unaudited condensed consolidated financial statements, we eliminated operating expenses of $0.9 million and $1.3 million for the three months ended March 31, 2022 and 2021, respectively, against the investment advisory and administrative fees earned from these products. The net investment income (loss) reflected in non-operating income (loss) includes dividend and interest income as well as realized and

Page 13


unrealized gains and losses on the underlying securities held by the consolidated T. Rowe Price investment products.

The table below details the impact of these consolidated investment products on the individual lines of our unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021.
Three months ended
3/31/2022 3/31/2021
(in millions)
Voting
interest entities
Variable interest entities
Total
Voting
interest entities
Variable interest entities
Total
Net cash provided by (used in) operating activities $ (2.6) $ 88.2  $ 85.6  $ (31.7) $ (112.0) $ (143.7)
Net cash used in investing activities —  (5.9) (5.9) (9.1) (18.2) (27.3)
Net cash provided by (used in) financing activities 4.9  (95.9) (91.0) 36.7  112.3  149.0 
Effect of exchange rate changes on cash and cash equivalents of consolidated
T. Rowe Price investment products
—  (2.7) (2.7) —  .9  .9 
Net change in cash and cash equivalents during period
2.3  (16.3) (14.0) (4.1) (17.0) (21.1)
Cash and cash equivalents at beginning of year
7.3  93.8  101.1  7.1  97.7  104.8 
Cash and cash equivalents at end of period
$ 9.6  $ 77.5  $ 87.1  $ 3.0  $ 80.7  $ 83.7 

The net cash provided by financing activities during the three months ended March 31, 2022 and 2021 includes $35.1 million and $34.1 million, respectively, of net subscriptions we made into the consolidated T. Rowe Price investment products, net of dividends received. These cash flows were eliminated in consolidation.

FAIR VALUE MEASUREMENTS.

We determine the fair value of investments held by consolidated T. Rowe Price investment products using the following broad levels of inputs as defined by related accounting standards:

Level 1 – quoted prices in active markets for identical securities.
Level 2 – observable inputs other than Level 1 quoted prices including, but not limited to, quoted prices for similar securities, interest rates, prepayment speeds, and credit risk. These inputs are based on market data obtained from independent sources.
Level 3 – unobservable inputs reflecting our own assumptions based on the best information available. The value of investments using Level 3 inputs is insignificant.

These levels are not necessarily an indication of the risk or liquidity associated with these investment holdings. The following table summarizes the investment holdings held by our consolidated T. Rowe Price investment products using fair value measurements determined based on the differing levels of inputs.
3/31/2022 12/31/2021
(in millions)
Level 1
Level 2
Level 1
Level 2
Assets
  Cash equivalents $ 6.6  $ 2.1  $ 6.5  $ .7 
Equity securities 212.4  239.0  247.8  340.3 
Fixed income securities —  1,024.6  —  1,187.4 
Other investments 8.6  51.3  5.7  52.7 
$ 227.6  $ 1,317.0  $ 260.0  $ 1,581.1 
Liabilities $ (1.9) $ (13.1) $ (.7) $ (9.7)




Page 14


NOTE 6 - GOODWILL AND INTANGIBLE ASSETS.

Goodwill and intangible assets consist of the following:

(in millions) 3/31/2022 12/31/2021
Goodwill $ 2,643.9  $ 2,693.2 
Indefinite-lived intangible assets - trade name 134.7  134.7 
Indefinite-lived intangible assets - investment advisory agreements 164.8  164.8 
Definite-lived intangible assets - investment advisory agreements 586.8  613.9 
Total $ 3,530.2  $ 3,606.6 
Estimated amortization expense for the definite-lived investment advisory agreements intangible assets for the remainder of 2022 is $81.4 million, $108.1 million for 2023, $105.7 million for 2024, $105.0 million for 2025, and $87.7 million for 2026. Amortization expense for the definite-lived investment advisory agreements intangible assets was $27.1 million for the three months ended March 31, 2022.

Goodwill activity during the three months ended March 31, 2022 was as follows:

(in millions) 2022
Balance, 12/31/2021 $ 2,693.2 
Measurement period adjustment (49.3)
Balance, 3/31/2022 $ 2,643.9 

We evaluate the carrying amount of goodwill for possible impairment on an annual basis in the third quarter using a fair value approach or if triggering events occur that require us to evaluate for impairment earlier.


NOTE 7 – STOCK-BASED COMPENSATION.

STOCK OPTIONS.

The following table summarizes the status of, and changes in, our stock options during the three months ended March 31, 2022.
Options
Weighted-
average
exercise
price
Outstanding at December 31, 2021 2,846,579  $ 72.87 
Exercised (214,772) $ 64.58 
Outstanding at March 31, 2022 2,631,807  $ 73.55 
Exercisable at March 31, 2022 2,631,807  $ 73.55 

Page 15



RESTRICTED SHARES AND STOCK UNITS.

The following table summarizes the status of, and changes in, our nonvested restricted shares and restricted stock units during the three months ended March 31, 2022.
Restricted
shares
Restricted
stock
units
Weighted-average
fair value
Nonvested at December 31, 2021 5,720  5,701,865  $ 146.87 
Time-based grants —  8,078  $ 173.08 
Dividend equivalents granted to non-employee directors —  786  $ 153.10 
Vested —  (62,378) $ 98.23 
Forfeited —  (61,216) $ 141.91 
Nonvested at March 31, 2022 5,720  5,587,135  $ 147.50 

Nonvested at March 31, 2022, includes performance-based restricted stock units of 294,518. These nonvested performance-based restricted stock units include 81,123 units for which the performance period has lapsed, and the performance threshold has been met.

FUTURE STOCK-BASED COMPENSATION EXPENSE.

The following table presents the compensation expense to be recognized over the remaining vesting periods of the stock-based awards outstanding at March 31, 2022. Estimated future compensation expense will change to reflect future grants of restricted stock awards and units, future option grants, changes in the probability of performance thresholds being met, and adjustments for actual forfeitures.
 
(in millions)
Second quarter 2022 $ 64.0 
Third quarter 2022 63.1 
Fourth quarter 2022 54.3 
2023 125.5 
2024 through 2026 105.4 
Total $ 412.3 

NOTE 8 – EARNINGS PER SHARE CALCULATIONS.

The following table presents the reconciliation of net income attributable to T. Rowe Price to net income allocated to our common stockholders and the weighted-average shares that are used in calculating the basic and diluted earnings per share on our common stock. Weighted-average common shares outstanding assuming dilution reflects the potential dilution, determined using the treasury stock method, that could occur if outstanding stock options were exercised and non-participating stock awards vested. No outstanding stock options had an anti-dilutive impact on the diluted earnings per common share calculation in the periods presented.
  Three months ended
(in millions) 3/31/2022 3/31/2021
Net income attributable to T. Rowe Price $ 567.9  $ 749.4 
Less: net income allocated to outstanding restricted stock and stock unit holders 13.0  19.9 
Net income allocated to common stockholders $ 554.9  $ 729.5 
Weighted-average common shares
Outstanding 228.2  227.7 
Outstanding assuming dilution 229.8  230.0 


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

The changes in each component of accumulated other comprehensive loss, including reclassification adjustments for the three months ended March 31, 2022 and 2021 are presented in the table below.
Three months ended 3/31/2022 Three months ended 3/31/2021
(in millions) Equity method investments Consolidated T. Rowe Price investment products - variable interest entities
Total currency translation adjustments
Equity method investments Consolidated T. Rowe Price investment products - variable interest entities Total currency translation adjustments
Balances at beginning of period $ (36.7) $ 10.2  $ (26.5) $ (43.6) $ 20.6  $ (23.0)
Other comprehensive income (loss) before reclassifications and income taxes
.5  (5.6) (5.1) (.8) (7.1) (7.9)
Reclassification adjustments recognized in non-operating income
—  (1.6) (1.6) —  (2.6) (2.6)
.5  (7.2) (6.7) (.8) (9.7) (10.5)
Net deferred tax benefits (income taxes)
(.1) 1.9  1.8  .5  2.5  3.0 
Other comprehensive income (loss)
.4  (5.3) (4.9) (.3) (7.2) (7.5)
Balances at end of period $ (36.3) $ 4.9  $ (31.4) $ (43.9) $ 13.4  $ (30.5)
The other comprehensive income (loss) in the table above excludes losses of $9.9 million and income of $11.8 million of other comprehensive income related to redeemable non-controlling interests held in our consolidated products for the three months ended March 31, 2022 and 2021, respectively.

NOTE 10 – COMMITMENTS AND CONTINGENCIES.

COMMITMENTS.

T. Rowe Price has committed $499.1 million to fund OHA products over the next five years.

CONTINGENCIES.

On February 14, 2017, T. Rowe Price Group, Inc., T. Rowe Price Associates, Inc., T. Rowe Price Trust Company, current and former members of the management committee, and trustees of the T. Rowe Price U.S. Retirement Program were named as defendants in a lawsuit filed in the United States District Court for the District of Maryland. The lawsuit alleges breaches of ERISA’s fiduciary duty and prohibited transaction provisions on behalf of a class of all participants and beneficiaries of the T. Rowe Price 401(k) Plan from February 14, 2011, to the time of judgment. The matter has been certified as a class action. The parties reached a settlement agreement, and, on January 18, 2022, the Court provided preliminary approval of the proposed settlement and set a fairness hearing for May 24, 2022. The proposed settlement would not be material to T. Rowe Price Group, Inc.

In addition to the matter discussed above, various claims against us arise in the ordinary course of business, including employment-related claims. In the opinion of management, after consultation with counsel, the likelihood of an adverse determination in one or more of these pending ordinary course of business claims that would have a material adverse effect on our financial position or results of operations is remote.




Page 17



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
T. Rowe Price Group, Inc.:

Results of Review of Interim Financial Information
We have reviewed the condensed consolidated balance sheet of T. Rowe Price Group, Inc. and subsidiaries (the “Company") as of March 31, 2022, the related condensed consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the three-month periods ended March 31, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 24, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP
Baltimore, Maryland
April 28, 2022
 



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

OVERVIEW.

Our revenues and net income are derived primarily from investment advisory services provided to individual and institutional investors in U.S. mutual funds, subadvised funds, separately managed accounts, collective investment trusts, and other affiliated products. The other affiliated products include: open-ended investment products offered to investors outside the U.S., products offered through variable annuity life insurance plans in the U.S., affiliated private investment funds or private accounts, and collateralized loan obligations. We also provide certain investment advisory clients with related administrative services, including distribution, mutual fund transfer agent, accounting, and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; brokerage; trust services; and non-discretionary advisory services through model delivery. Additionally, we also derive revenue from our interests in general partners of certain affiliated private investment funds that are entitled to a disproportionate allocation of income through capital allocation-based arrangements.

We manage a broad range of U.S., international and global stock, bond, and money market mutual funds and collective investment trusts and other investment products, which meet the varied needs and objectives of individual and institutional investors. Investment advisory revenues depend largely on the total value and composition of assets under our management. Accordingly, fluctuations in financial markets and in the composition of assets under management affect our revenues and results of operations.

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

The general trend to passive investing has been persistent and accelerated in recent years, which has negatively impacted our new client inflows. However, over the long term we expect well-executed active management to play an important role for investors. In this regard, we have ample liquidity and resources that allow us to take advantage of attractive growth opportunities. We are investing in key capabilities, including investment professionals, distribution professionals, technologies, and new product offerings in order to provide our clients with strong investment management expertise and service.

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"). As of March 31, 2022, OHA had $57 billion of capital under management (which includes net assets value, portfolio value and/or unfunded capital).

MARKET TRENDS.

Many global equity markets declined in the first quarter of 2022. In fact, the U.S. stock market experienced its worst quarter since the pandemic began about two years ago. Stocks fell as Russia invaded Ukraine in late February, prompting the U.S. and many other nations, especially in Europe, to respond with broad and damaging economic sanctions targeting a number of key Russian individuals and institutions. Equities were also hurt by elevated inflation—exacerbated by a sharp increase in commodity prices—as well as the onset of Federal Reserve interest rate increases and expectations for the Federal Reserve to pursue an aggressive pace of monetary tightening.

Developed Asian and Far East markets were mostly lower in U.S. dollar terms, but Australian stocks bucked the negative trend with a 7% gain, helped by local currency strength versus the U.S. dollar. In Europe, most markets declined in dollar terms, as local losses were exacerbated by a weak euro and British pound. Equities in energy producer Norway, however, rose more than 10%. Stocks in Portugal and the UK rose about 2%.

In emerging Asia, markets were mixed in U.S. dollar terms, but Chinese shares skidded 14%. Emerging European markets were widely mixed, but Latin American markets produced excellent returns in dollar terms, as the resource-rich region benefited from higher commodity prices. Gulf Cooperation Council markets in the Middle East were buoyed by higher global oil prices.

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Returns of several major equity market indexes were as follows:
Three months ended
Index 3/31/2022
S&P 500 Index (4.6)%
NASDAQ Composite Index(1)
(9.1)%
Russell 2000 Index (7.5)%
MSCI EAFE (Europe, Australasia, and Far East) Index (5.8)%
MSCI Emerging Markets Index (6.9)%
 (1) Returns exclude dividends

Global bonds produced mostly negative returns in U.S. dollar terms, as the U.S. Federal Reserve began to raise short-term interest rates and Treasury yields—especially short- and intermediate-term yields—rose in anticipation of tighter monetary policy in response to elevated inflation. The 10-year U.S. Treasury note yield rose from 1.52% to 2.32%.

In the taxable investment-grade universe, long-term Treasury and corporate bonds fared worst. Mortgage-backed and commercial mortgage-backed securities also declined materially. Asset-backed securities held up best. Tax-free municipal bonds fared slightly worse than the taxable bond market. High yield corporate bonds declined due to risk aversion.

Bonds in developed non-U.S. markets produced negative returns in U.S. dollar terms, as government bond yields in various markets rose amid concerns about inflation and the potential for tighter central bank monetary policies this year. A stronger U.S. dollar reduced overseas bond returns in dollar terms.

Emerging markets bonds slumped as investors shunned riskier investments, but local currency issues held up better than dollar-denominated emerging markets debt. Currencies in several Latin American countries appreciated strongly versus the U.S. dollar, but many other currencies depreciated.

Returns for several major bond market indexes were as follows:
Three months ended
Index 3/31/2022
Bloomberg U.S. Aggregate Bond Index (5.9)%
JPMorgan Global High Yield Index     (4.5)%
Bloomberg Municipal Bond Index (6.2)%
Bloomberg Global Aggregate Ex-U.S. Dollar Bond Index (6.2)%
JPMorgan Emerging Markets Bond Index Plus (16.2)%


Page 20


ASSETS UNDER MANAGEMENT(1).

Assets under management ended the first quarter of 2022 at $1,551.8 billion, a decrease of $136.0 billion from December 31, 2021. The decrease in assets under management was driven by net cash outflows of $5.3 billion and market depreciation, including distributions not reinvested, of $130.7 billion. Clients transferred $4.1 billion in net assets from the U.S. mutual funds primarily to collective investment trusts and other investment products, of which $3.3 billion transferred into the retirement date trusts.

The following tables detail changes in our assets under management, by vehicle and asset class, during the first quarter of 2022:
Three months ended 3/31/2022
(in billions) U.S. mutual funds Subadvised funds and separate accounts Collective investment trusts and other investment products Total
Assets under management at beginning of period $ 871.4  $ 437.1  $ 379.3  $ 1,687.8 
Net cash flows before client transfers (5.7) (4.5) 4.9  (5.3)
Client transfers (4.1) —  4.1  — 
Net cash flows after client transfers (9.8) (4.5) 9.0  (5.3)
Net market depreciation and losses (71.8) (34.6) (23.9) (130.3)
Net distributions not reinvested (.4) —  —  (.4)
Change during the period (82.0) (39.1) (14.9) (136.0)
Assets under management at March 31, 2022 $ 789.4  $ 398.0  $ 364.4  $ 1,551.8 

Three months ended 3/31/2022
(in billions) Equity Fixed income, including money market
Multi-asset(2)
Alternatives(3)
Total
Assets under management at beginning of period $ 992.7  $ 175.7  $ 477.7  $ 41.7  $ 1,687.8 
Net cash flows (18.1) 5.3  6.7  .8  (5.3)
Net market depreciation and losses(4)
(96.6) (5.8) (28.0) (.3) (130.7)
Change during the period (114.7) (.5) (21.3) .5  (136.0)
Assets under management at March 31, 2022 $ 878.0  $ 175.2  $ 456.4  $ 42.2  $ 1,551.8 
(1)     Includes fee basis assets under management.
(2)    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.
(3) 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.
(4)    Includes distributions reinvested and not reinvested.

Investment advisory clients outside the United States account for 9.7% of our assets under management at March 31, 2022 and 9.9% at December 31, 2021.



Page 21


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
(in billions) 3/31/2022 12/31/2021 3/31/2022 3/31/2021
U.S. mutual funds $ 174.4  $ 187.1  $ (1.6) $ (3.8)
Collective investment trusts 188.6  191.1  8.8  8.1 
Subadvised and separately managed accounts 12.2  12.9  .1  .2 
$ 375.2  $ 391.1  $ 7.3  $ 4.5 

We also provide 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. We also offer advice solutions through retail separately managed accounts and separately managed accounts model delivery. As of March 31, 2022, total assets in these solutions were $466 billion, of which $459 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. As of March 31, 2022, our assets under administration were $256 billion, of which nearly $153 billion are assets we manage.

INVESTMENT PERFORMANCE(1).

Strong investment performance and brand awareness is a key driver to attracting and retaining assets—and to our long-term success. 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 March 31, 2022. Past performance is no guarantee of future results.

% of U.S. mutual funds that outperformed Morningstar median(2),(3)
1 year 3 years 5 years 10 years
Equity 41% 60% 64% 85%
Fixed Income 63% 71% 62% 63%
Multi-Asset 37% 81% 79% 90%
All Funds 47% 69% 68% 79%
% of U.S. mutual funds that outperformed passive peer median(2),(4)
1 year 3 years 5 years 10 years
Equity 38% 52% 55% 67%
Fixed Income 53% 69% 55% 50%
Multi-Asset 31% 76% 68% 69%
All Funds 40% 64% 59% 63%
% of composites that outperformed benchmarks(5)
1 year 3 years 5 years 10 years
Equity 34% 49% 59% 72%
Fixed Income 58% 73% 77% 79%
All Composites 44% 59% 66% 74%


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AUM Weighted Performance
% of U.S. mutual funds AUM that outperformed Morningstar median(2),(3)
1 year 3 years 5 years 10 years
Equity 46% 47% 76% 92%
Fixed Income 75% 81% 68% 80%
Multi-Asset 37% 95% 96% 97%
All Funds 46% 63% 81% 92%
% of U.S. mutual funds AUM that outperformed passive peer median(2),(4)
1 year 3 years 5 years 10 years
Equity 43% 46% 57% 59%
Fixed Income 69% 71% 63% 48%
Multi-Asset 27% 96% 95% 92%
All Funds 40% 61% 67% 67%
% of composites AUM that outperformed benchmarks(5)
1 year 3 years 5 years 10 years
Equity 38% 38% 61% 76%
Fixed Income 63% 80% 75% 74%
All Composites 42% 45% 63% 76%
As of March 31, 2022, 69 of 124 (55.6%) of the firm's rated U.S. mutual funds (across primary share classes) received an overall rating of 4 or 5 stars. By comparison, 32.5% of Morningstar's fund population is given a rating of 4 or 5 stars(5). In addition, 67%(5) of AUM in the firm's rated U.S. mutual funds (across primary share classes) ended March 31, 2022 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.
(2) Source: © 2022 Morningstar, Inc. All rights reserved. The information contained herein: 1) is proprietary to Morningstar and/or its content providers; 2) may not be copied or distributed; and 3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
(3) Source: Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the Morningstar category median. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $394B for 1 year, $393B for 3 years, $393B for 5 years, and $386B for 10 years.
(4) Passive Peer Median was created by T. Rowe Price using data from Morningstar. Primary share class only. Excludes money market mutual funds, funds with an operating history of less than one year, funds with fewer than three peers, T. Rowe Price passive funds, and T. Rowe Price funds that are clones of other funds. This analysis compares T. Rowe Price active funds to the applicable universe of passive/index open-end funds and ETFs of peer firms. The top chart reflects the percentage of T. Rowe Price funds with 1 year, 3 year, 5 year, and 10 year track record that are outperforming the passive peer universe. The bottom chart reflects the percentage of T. Rowe Price funds AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $372B for 1 year, $370B for 3 years, $368B for 5 years, and $353B for 10 years.
(5)Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared to official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1 year, 3 year, 5 year, and 10 year track record that are outperforming their benchmarks. The bottom chart reflects the percentage of T. Rowe Price composite AUM that has outperformed for the time periods indicated. Total AUM included for this analysis includes $1,392B for 1 year, $1,390B for 3 years, $1,376B for 5 years, and $1,337B for 10 years.
(6) The Morningstar Rating™ for funds is calculated for funds with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. Morningstar gives its best ratings of 5 or 4 stars to the top 32.5% of all funds (of the 32.5%,10% get 5 stars and 22.5% get 4 stars). The Overall Morningstar Rating™ is derived from a weighted average of the performance figures associated with a fund’s 3, 5, and 10 year (if applicable) Morningstar Rating™ metrics.


RESULTS OF OPERATIONS.

The following table and discussion sets forth information regarding our consolidated financial results for the three months ended March 31, 2022 and 2021 on a U.S. GAAP basis as well as a non-GAAP basis. The first quarter of 2022 reflects the operating results of OHA which was acquired at the end of 2021. 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, including acquisition-related amortization and costs.

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Three months ended Q1 2022 vs. Q1 2021
(in millions, except per-share data) 3/31/2022 3/31/2021 $ change % change
U.S. GAAP basis
Investment advisory fees $ 1,662.1  $ 1,687.8  $ (25.7) (1.5) %
Net revenues $ 1,863.0  $ 1,826.8  $ 36.2  2.0  %
Operating expenses $ 985.6  $ 933.6  $ 52.0  5.6  %
Net operating income $ 877.4  $ 893.2  $ (15.8) (1.8) %
Non-operating income (loss)(1)
$ (198.5) $ 102.1  $ (300.6) n/m
Net income attributable to
T. Rowe Price
$ 567.9  $ 749.4  $ (181.5) (24.2) %
Diluted earnings per common share $ 2.41  $ 3.17  $ (.76) (24.0) %
Weighted average common shares outstanding assuming dilution 229.8  230.0  $ (.2) (.1) %
Adjusted non-GAAP basis(2)
Operating expenses $ 1,039.1  $ 909.2  $ 129.9  14.3  %
Net operating income $ 838.0  $ 918.9  $ (80.9) (8.8) %
Non-operating income (loss)(1)
$ (23.8) $ 13.7  $ (37.5) n/m
Net income attributable to T. Rowe Price $ 616.9  $ 712.0  $ (95.1) (13.4) %
Diluted earnings per common share $ 2.62  $ 3.01  $ (.39) (13.0) %
Assets under management (in billions)
Average assets under management
$ 1,559.9  $ 1,508.8  $ 51.1  3.4  %
Ending assets under management $ 1,551.8  $ 1,518.0  $ 33.8  2.2  %
(1) The percentage change in non-operating income (loss) is not meaningful (n/m).
(2) See the reconciliation to the comparable U.S. GAAP measures at the end of the Results of Operations section of this Management’s Discussion and Analysis.

Results Overview - Quarter ended March 31, 2022

Net revenues. Total net revenues consist of investment advisory revenues; administrative, distribution, and servicing fees, and capital allocation-based income. Total net revenues were $1,863.0 million in the first quarter of 2022 compared with $1,826.8 million in the first quarter of 2021. Approximately 90% of our total net revenues are earned from investment advisory revenues.

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. As our average assets under management increase or decrease in a given period, the level of our investment advisory fee revenue for that same period generally fluctuates in a similar manner. Our annualized effective fee rates can be impacted by market or cash flow related shifts among asset and share classes, price changes in existing products, and asset level changes in products with tiered-fee structures.

Operating expenses. Operating expenses on a GAAP basis were $985.6 million in the first quarter of 2022 compared with $933.6 million in the first quarter of 2021. On a non-GAAP basis, operating expenses were $1,039.1 million, a 14.3% increase over the comparable 2021 period.

About half of the increase in our non-GAAP operating expenses from the first quarter of 2021 is due to the inclusion of OHA’s operating expenses in the first quarter of 2022 following the acquisition at the end of 2021. OHA's operating expenses primarily impact compensation expense; technology, occupancy, and facility costs; and general, administrative and other costs. The remaining increase is primarily attributable to higher costs for technology development and core operations provided by FIS since August 2021 for the firm's full-service recordkeeping offering and higher costs related to the ongoing investment in the firm's technology capabilities. The 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.

Our non-GAAP operating expenses exclude the impact of the supplemental savings plan, consolidated sponsored products, the remeasurement of the contingent consideration liability, amortization of certain acquisition-related assets, and other acquisition-related costs. See our non-GAAP reconciliations later in this Management’s Discussion and Analysis section.

Page 24



We updated our forecasted 2022 non-GAAP operating expenses, including a full-year of OHA’s operating expenses, from a range of 12% to 16% to a range of 10% to 14% to reflect lower market-related expenses and a slower pace of net hiring experienced in the quarter. We could elect to further adjust our expense growth should unforeseen circumstances arise, including significant market movements.

Operating margin. Our operating margin in the first quarter of 2022 was 47.1%, compared to 48.9% earned in the 2021 quarter. The decrease in our operating margin for the first quarter of 2022 compared to the 2021 period was primarily driven by expense growth outpacing the increase in net revenues in the first quarter of 2022.

Diluted earnings per share. Our 2022 diluted earnings per share reflects the net income of OHA that was acquired at the end of 2021.

Diluted earnings per share was $2.41 for the first quarter of 2022 as compared to $3.17 for the first quarter of 2021. The 24.0% decrease was primarily driven by lower operating income and net investment losses recognized in the first quarter of 2022 as compared to net investment gains in the first quarter of 2021, as the strong market returns in 2021 outpaced the market performance in the first quarter of 2022.

On a non-GAAP basis, diluted earnings per share was $2.62 for the first quarter of 2022 as compared to $3.01 for the first quarter of 2021. Similar to our GAAP diluted earnings, the decrease is largely attributable to lower operating income compared to 2021 period and net investment losses on our seed and discretionary portfolio recognized in the first quarter of 2022 as compared to net investment gains in the first quarter of 2021.

Net revenues
Three months ended Q1 2022 vs. Q1 2021
(in millions) 3/31/2022 3/31/2021 $ change % change
Investment advisory fees
U.S. mutual funds $ 976.5  $ 1,050.2  $ (73.7) (7.0) %
Subadvised funds, separate accounts, collective investment trusts, and other investment products 685.6  637.6  48.0  7.5  %
1,662.1  1,687.8  (25.7) (1.5) %
Administrative, distribution, and servicing fees
Administrative fees 130.2  109.9  20.3  18.5  %
Distribution and servicing fees 26.3  29.1  (2.8) (9.6) %
156.5  139.0  17.5  12.6  %
Capital allocation-based income(1)
44.4  —  44.4  n/m
Net revenues $ 1,863.0  $ 1,826.8  $ 36.2  2.0  %
(1) The percentage change for capital allocation-based income is not meaningful (n/m).

Investment advisory fees.
Investment advisory revenues earned in the first quarter of 2022 decreased over the comparable 2021 quarter despite an increase in average assets under our management of $51.1 billion, or 3.4%, to $1,559.9 billion. In the first quarter of 2022, we voluntarily waived $9.2 million, or less than 1%, of our investment advisory fees in order to continue to maintain a positive yield for investors. At March 31, 2022, combined net assets of the investment portfolios in which we waived fees in the first quarter of 2022 were $22.8 billion. We anticipate that the waivers will decline in the second quarter of 2022 and are expected to cease by the end of the second quarter of 2022.

The total average annualized effective fee rate earned during the first quarter of 2022 was 43.2 basis points, compared with 45.4 basis points earned during the first quarter of 2021 and 43.4 basis points earned during the fourth quarter of 2021. In comparison to the first quarter of 2021, our annualized effective fee rate declined primarily due to the July 2021 fee reductions in our target-date products and an asset mix shift to lower fee vehicles and asset classes within the complex over the last twelve months. These fee pressures were partially offset by the higher than average fee rate earned on our alternative asset class.

U.S. mutual funds
Investment advisory revenues earned in the first quarter of 2022 from our U.S. mutual funds were $976.5 million, a decrease of 7.0% from the comparable 2021 quarter. Average assets under management in these funds for the first

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quarter of 2022 decreased 2.0% from the 2021 quarter to $798.0 billion. The annualized effective fee rate of 49.6 basis points for the first quarter of 2022 decreased from 52.3 basis points in the first quarter of 2021 primarily due to the July 2021 fee reductions in our target-date products and an asset mix shift to lower fee vehicles and asset classes within the complex over the last twelve months.

Subadvised funds, separate accounts, collective investment trusts and other investment products (other portfolios)
Investment advisory revenues earned in the first quarter of 2022 from these other portfolios were $685.6 million, an increase of 7.5% from the comparable 2021 quarter. Average assets under management for these products increased 9.7% from the 2021 quarter to $761.9 billion. A portion of the increase in these advisory revenues and related average assets under management is due to the acquisition of OHA at the end of 2021. The annualized effective fee rate of 36.5 basis points for the first quarter of 2022 decreased from 37.2 basis points in the first quarter of 2021. The decrease is primarily due to the July 2021 fee reductions in our target-date products and an asset mix shift to lower fee vehicles and asset classes within the complex over the last twelve months. These fee pressures were partially offset by the higher than average fee rate earned on our alternative asset class.

Administrative, distribution, and servicing fees. Administrative, distribution, and servicing fees in the first quarter of 2022 were $156.5 million, an increase of $17.5 million, or 12.6%, from the comparable 2021 quarter. The increase was primarily due to higher transfer agent servicing activities provided to the T. Rowe Price mutual funds, higher model delivery revenue, and higher trustee services revenue. These increases were partially offset by lower 12b-1 revenue earned on the Advisor and R share classes of the U.S. mutual funds as a result of lower assets under management in these share classes. 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.

Capital allocation-based income. Capital allocation-based income in the first quarter of 2022 was $44.4 million. This represents $57.6 million of the carried interest we earn from investments in affiliated private investment funds, partially offset by $13.2 million in non-cash amortization associated with the difference in the closing date fair value and carrying value of investments acquired as part of the OHA acquisition.

Our net revenues reflect the elimination of advisory and administrative fee revenue earned from our consolidated
T. Rowe Price investment products. The corresponding expenses recognized by these products, and consolidated in our financial statements, were also eliminated from operating expenses. For the first quarter, we eliminated net revenue of $.9 million in 2022 and $1.3 million in 2021.

Operating expenses

Three months ended Q1 2022 vs. Q1 2021
(in millions) 3/31/2022 3/31/2021 $ change % change
Compensation and related costs, excluding supplemental savings plan $ 632.6  $ 561.3  $ 71.3  12.7  %
Supplemental savings plan(1)
(51.0) 22.2  (73.2) n/m
  Total compensation and related costs 581.6  583.5  (1.9) (.3) %
Distribution and servicing 85.9  85.6  .3  .4  %
Advertising and promotion 23.4  18.9  4.5  23.8  %
Product and recordkeeping related costs 80.4  41.0  39.4  96.1  %
Technology, occupancy, and facility costs 133.9  117.3  16.6  14.2  %
General, administrative, and other