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 sponsored products. The other sponsored 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, 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 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 also known as carried interest.

We manage a broad mix of equity, fixed income, multi-asset, alternative and money market asset classes and solutions that 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 April 20, 2023, we completed our acquisition of Retiree, Inc., a fintech firm that offers innovative retirement income planning software. The terms of the transaction are not material.

MARKET TRENDS.

Major U.S. stock indexes rose in the first quarter of 2023. Large-cap shares surpassed their smaller-cap peers, and growth stocks outperformed value stocks across all market classes. After a strong January, the market surrendered some of its gains in February due to concerns that the Federal Reserve—which raised short-term interest rates on February 1—would continue ramping up rates to combat elevated inflation. Equities fell sharply in the first half of March, as two of the largest bank failures in U.S. history raised concerns about the stability of the U.S. banking industry. Although financial regulators acted quickly to protect all Silicon Valley Bank and Signature Bank depositors from losses and to restore confidence in other banks, investors had lingering concerns—following a year of aggressive interest rate increases—that other regional banks could be toppled by losses from their bond holdings or a flight of depositors’ capital. As investors’ concerns diminished in the second half of March, however, equities rebounded strongly.

Developed non-U.S. equity markets outperformed U.S. equities, as a weaker dollar versus some currencies enhanced returns to U.S. investors. In Europe, equity markets were mostly positive in dollar terms, though financials sector concerns centered on Switzerland’s Credit Suisse, which was acquired by UBS Group in a government-brokered deal, rocked the markets in March. Developed Asian market returns were mostly positive but lagged European markets.

Stocks in emerging markets underperformed equities in developed non-U.S. markets in dollar terms. Markets in the major emerging regions were widely mixed. In Latin America, for example, Mexican shares surged more than 20%,

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while Colombian shares slumped 13%. In Asia, stocks in Taiwan and South Korea outperformed with gains of about 15% and 10%, respectively, while Indian shares fell more than 6%. In emerging Europe, Turkish shares slipped 9%, as the country recovered from a massive early-February earthquake and continued to struggle with elevated inflation, while Greek shares jumped about 16%.

Returns of several major equity market indexes were as follows:

						Three months ended
Index						3/31/2023
S&P 500 Index						7.5%
NASDAQ Composite Index(1)						16.8%
Russell 2000 Index						2.7%
MSCI EAFE (Europe, Australasia, and Far East) Index						8.6%
MSCI Emerging Markets Index						4.0%

(1) Returns exclude dividends

Global bonds produced mostly positive returns in dollar terms in the first quarter. In the U.S., three- and six-month U.S. Treasury bill yields rose as the Federal Reserve raised the fed funds target rate by 25 basis points in February and in March. The fed funds target rate range at the end of the quarter was 4.75% to 5.00%. However, U.S. Treasury note and bond yields declined roughly 30 to 40 basis points for the quarter, as regional bank distress resulted in a flight to safety in mid-March and raised expectations that the Fed would temper future interest rate increases. The 10-year U.S. Treasury note yield fell from 3.88% to 3.48% during the quarter.

In the U.S. investment-grade universe, corporate bonds and Treasuries performed best. Mortgage-backed securities also did well, but asset-backed and commercial mortgage-backed securities trailed with milder gains. Tax-free municipal bonds rose but slightly lagged the taxable investment-grade bond market. High yield issues outperformed higher-quality fixed income securities.

Bonds in developed non-U.S. markets appreciated in dollar terms, thanks to strength in March amid falling yields in various countries. Returns to U.S. investors were lifted by stronger European currencies versus the dollar. The Japanese yen, however, fell close to 1% versus the dollar, as Japanese monetary authorities kept monetary policy very stimulative. Emerging markets bonds produced positive returns in dollar terms, as various central banks continued raising short-term rates to fight inflation. Bonds denominated in local currencies fared better than dollar-denominated issues, as the U.S. dollar retreated versus many emerging markets currencies.

Returns for several major bond market indexes were as follows:

						Three months ended
Index						3/31/2023
Bloomberg U.S. Aggregate Bond Index						3.0%
JPMorgan Global High Yield Index						3.5%
Bloomberg Municipal Bond Index						2.8%
Bloomberg Global Aggregate Ex-U.S. Dollar Bond Index						3.1%
JPMorgan Emerging Markets Bond Index Plus						1.9%
ICE Bank of America U.S. High Yield Index						3.7%
Credit Suisse Leveraged Loan Index						3.1%

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ASSETS UNDER MANAGEMENT.****(1)

Assets under management ended the first quarter of 2023 at $1,341.7 billion, an increase of $67.0 billion from December 31, 2022. The increase in assets under management during the first quarter of 2023 was driven by market appreciation, including net distributions not reinvested, of $83.1 billion, offset by net cash outflows of $16.1 billion.

The following tables detail changes in our assets under management, by asset class, during the first quarter of 2023:

			Three months ended 3/31/2023
(in billions)			Equity						Fixed income, including money market						Multi-asset**(2)**						Alternatives**(3)**						Total
Assets under management at beginning of period			$	664.2					$	167.0					$	400.1					$	43.4					$	1,274.7
Net cash flows(4)			(23.5)						.1						7.1						.2						(16.1)
Net market appreciation and gains(5)			54.4						3.3						24.7						.7						83.1
Change during the period			30.9						3.4						31.8						.9						67.0
Assets under management at March 31, 2023			$	695.1					$	170.4					$	431.9					$	44.3					$	1,341.7

(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. Unfunded capital commitments as of March 31, 2023 were $11.8 billion and are not reflected in fee basis AUM above.

(4) Alternatives net cash flows includes $0.4 billion in outflows that represent investment manager-driven distributions.

(5) Includes net distributions not reinvested of $0.2 billion.

Investment advisory clients outside the United States account for 8.9% of our assets under management 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
(in billions)			3/31/2023						12/31/2022															3/31/2023						3/31/2022
U.S. mutual funds			$	156.6					$	148.8														$	(.4)					$	(1.6)
Collective investment trusts			192.7						174.7															7.7						8.8
Subadvised and separately managed accounts			11.5						10.7															.2						.1
			$	360.8					$	334.2														$	7.5					$	7.3

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, 2023, total assets in these solutions were $443 billion, of which $435 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, 2023, our assets under administration were $229 billion, of which nearly $140 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

Page 21

benchmarks. The following tables present investment performance for the one-, three-, five-, and 10-years ended March 31, 2023. 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						57%						50%						62%						80%
Fixed Income						42%						68%						63%						66%
Multi-Asset						22%						67%						75%						85%
All Funds						40%						61%						66%						76%
% of U.S. mutual funds that outperformed passive peer median**(2),(4)**
						1 year						3 years						5 years						10 years
Equity						56%						39%						53%						66%
Fixed Income						38%						72%						52%						48%
Multi-Asset						29%						74%						45%						90%
All Funds						41%						59%						50%						64%
% of composites that outperformed benchmarks**(5)**
						1 year						3 years						5 years						10 years
Equity						45%						34%						49%						69%
Fixed Income						12%						73%						50%						75%
All Composites						31%						51%						50%						71%

AUM Weighted Performance
% of U.S. mutual funds AUM that outperformed Morningstar median**(2),(3)**
						1 year						3 years						5 years						10 years
Equity						47%						48%						50%						84%
Fixed Income						45%						80%						76%						79%
Multi-Asset						3%						91%						94%						97%
All Funds						35%						63%						64%						87%
% of U.S. mutual funds AUM that outperformed passive peer median**(2),(4)**
						1 year						3 years						5 years						10 years
Equity						47%						30%						43%						59%
Fixed Income						40%						84%						61%						66%
Multi-Asset						3%						95%						89%						97%
All Funds						34%						54%						59%						70%
% of composites AUM that outperformed benchmarks**(5)**
						1 year						3 years						5 years						10 years
Equity						42%						37%						40%						54%
Fixed Income						7%						76%						37%						70%
All Composites						35%						44%						40%						56%

As of March 31, 2023, 61 of 125 (48.8%) 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, 65%(5) of AUM in the firm's rated U.S. mutual funds (across primary share classes) ended March 31, 2023 with an overall rating of 4 or 5 stars.

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(1) The investment performance reflects that of T. Rowe Price sponsored mutual funds and composites AUM and not of OHA’s products.

(2) Source: © 2023 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-, 3-, 5-, 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 $310B for 1 year, $310B for 3 years, $310B for 5 years, and $305B 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-, 3-, 5-, 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 $295B for 1 year, $262B for 3 years, $261B for 5 years, and $244B for 10 years.

*(5)*Composite net returns are calculated using the highest applicable separate account fee schedule. Excludes money market composites. All composites compared with the official GIPS composite primary benchmark. The top chart reflects the percentage of T. Rowe Price composites with 1-, 3-, 5-, 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 $1,186B for 1 year, $1,181B for 3 years, $1,172B for 5 years, and $1,133B 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, 2023 and 2022 on a U.S. GAAP basis as well as 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												Q1 2023 vs. Q1 2022
(in millions, except per-share data)			3/31/2023						3/31/2022						$ change						% change
U.S. GAAP basis
Investment advisory fees			$	1,391.8					$	1,662.1					$	(270.3)					(16.3)		%
Capital allocation-based income			$	16.9					$	44.4					$	(27.5)					(61.9)		%
Net revenues			$	1,537.6					$	1,863.0					$	(325.4)					(17.5)		%
Operating expenses			$	1,053.4					$	985.6					$	67.8					6.9		%
Net operating income			$	484.2					$	877.4					$	(393.2)					(44.8)		%
Non-operating income (loss)(1)			$	135.4					$	(198.5)					$	333.9					n/m
Net income attributable to T. Rowe Price			$	421.5					$	567.9					$	(146.4)					(25.8)		%
Diluted earnings per common share			$	1.83					$	2.41					$	(.58)					(24.1)		%
Weighted average common shares outstanding assuming dilution			225.2						229.8						$	(4.6)					(2.0)		%
Adjusted non-GAAP basis**(2)**
Operating expenses			$	1,022.5					$	1,039.1					$	(16.6)					(1.6)		%
Net operating income			$	528.0					$	838.0					$	(310.0)					(37.0)		%
Non-operating income (loss)(1)			$	30.8					$	(23.8)					$	54.6					n/m
Net income attributable to T. Rowe Price			$	389.4					$	616.9					$	(227.5)					(36.9)		%
Diluted earnings per common share			$	1.69					$	2.62					$	(.93)					(35.5)		%
Assets under management (in billions)
Average assets under management			$	1,322.9					$	1,559.9					$	(237.0)					(15.2)		%
Ending assets under management			$	1,341.7					$	1,551.8					$	(210.1)					(13.5)		%

(1) The percentage change 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.

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Results Overview - Quarter ended March 31, 2023

Net revenues consist of investment advisory revenues; administrative, distribution, and servicing fees; and capital allocation-based income. More than 90% of our net revenues are related to investment advisory fees. Total net revenues were $1,537.6 million in the first quarter of 2023, a 17.5% decline compared with $1,863.0 million in the first quarter of 2022. The decline was primarily due to a 16.3% decrease in investment advisory fee revenue as average assets under management declined 15.2%.

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.

Capital allocation income will fluctuate quarter-to-quarter to reflect the adjustment to accrued carried interest for the change in value of the affiliated funds assuming the funds’ underlying investments were realized as of March 31, 2023, regardless of whether the funds’ underlying investments have been realized.

Operating expenses on a U.S. GAAP basis were $1,053.4 million in the first quarter of 2023 compared with $985.6 million in the first quarter of 2022. On a non-GAAP basis, operating expenses were $1,022.5 million, a 1.6% decrease over the comparable 2022 period.

In comparison to the first quarter of 2022, higher salaries and related benefits, along with higher costs related to the ongoing investments in our technology capabilities, were more than offset by lower distribution and servicing costs due to lower average assets under management, a lower interim bonus accrual, and lower stock-based compensation expense.

Operating margin in the first quarter of 2023 was 31.5% on a U.S. GAAP basis, compared to 47.1% earned in the 2022 quarter. The decrease in our U.S. GAAP operating margin for the first quarter of 2023 compared to the 2022 period was primarily driven by the decrease in investment advisory fee revenue and the increase in operating expenses, primarily due to the increase in the supplemental savings plan liability, which increased expenses.

Diluted earnings per share was $1.83 for the first quarter of 2023 as compared to $2.41 for the first quarter of 2022. The decrease was primarily driven by lower operating income and a higher effective tax rate, partially offset by net investment gains recognized in the first quarter of 2023 as compared to net investment losses recognized in the first quarter of 2022, as market returns in the first quarter of 2023 were stronger than those in 2022.

On a non-GAAP basis, diluted earnings per share was $1.69 for the first quarter of 2023 as compared to $2.62 for the first quarter of 2022. Similar to our U.S. GAAP diluted earnings per share, the decrease is largely attributable to lower operating income and a higher effective tax rate compared to the 2022 period.

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Net revenues

			Three months ended												Q1 2023 vs. Q1 2022
(in millions)			3/31/2023						3/31/2022						$ change						% change
Investment advisory fees
Equity			$	833.9					$	1,086.0					$	(252.1)					(23.2)		%
Fixed income			102.4						106.6						(4.2)						(3.9)		%
Multi-asset			386.0						404.6						(18.6)						(4.6)		%
Alternatives			69.5						64.9						4.6						7.1		%
			1,391.8						1,662.1						(270.3)						(16.3)		%
Administrative, distribution, and servicing fees
Administrative fees			108.4						130.2						(21.8)						(16.7)		%
Distribution and servicing fees			20.5						26.3						(5.8)						(22.1)		%
			128.9						156.5						(27.6)						(17.6)		%
Capital allocation-based income			16.9						44.4						(27.5)						(61.9)		%
Net revenues			$	1,537.6					$	1,863.0					$	(325.4)					(17.5)		%
Average assets under management (in billions)
Equity			$	687.0					$	886.5					$	(199.5)					(22.5)		%
Fixed income			169.6						177.8						(8.2)						(4.6)		%
Multi-asset			422.2						453.7						(31.5)						(6.9)		%
Alternatives			44.1						41.9						2.2						5.3		%
Average assets under management			$	1,322.9					$	1,559.9					(237.0)						(15.2)		%

Investment advisory fees

Investment advisory revenues earned in the first quarter of 2023 decreased over the comparable 2022 quarter as average assets under management decreased $237.0 billion or 15.2%, to $1,322.9 billion. In the first quarter of 2022, we voluntarily waived $9.2 million, or less than 1%, of our investment advisory fees. We did not waive money market investment advisory fees in the first quarter of 2023.

The total average annualized effective fee rate earned during the first quarter of 2023 was 42.7 basis points, compared with 43.2 basis points earned during the first quarter of 2022 and 42.3 basis points earned during the fourth quarter of 2022. In comparison to the first quarter of 2022, the annualized effective fee rate was impacted by a mix shift to lower fee asset classes and vehicles as a result of overall market declines and net outflows over the last twelve months.

Administrative, distribution, and servicing fees in the first quarter of 2023 were $128.9 million, a decrease of $27.6 million, or 17.6%, from the comparable 2022 quarter. The decrease was primarily due to lower transfer agent servicing activities provided to the T. Rowe Price mutual funds and lower 12b-1 revenue earned primarily 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 in the first quarter of 2023 increased net revenues by $16.9 million. The first quarter of 2023 amount represents an increase of $29.2 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 first quarter of 2022 increased net revenues by $44.4 million, which consists of an increase of $57.6 million in accrued carried interest, partially offset by $13.2 million in non-cash 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.

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

sponsored 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 $.6 million in 2023 and $.9 million in 2022.

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Operating expenses

			Three months ended												Q1 2023 vs. Q1 2022
(in millions)			3/31/2023						3/31/2022						$ change						% change
Compensation, benefits and related costs			$	593.3					$	595.9					$	(2.6)					(.4)		%
Acquisition-related retention agreements			14.2						19.2						(5.0)						(26.0)		%
Capital allocation-based income compensation			3.5						17.5						(14.0)						(80.0)		%
Supplemental savings plan(1)			42.5						(51.0)						93.5						n/m
Total compensation and related costs			653.5						581.6						71.9						12.4		%
Distribution and servicing			71.5						85.9						(14.4)						(16.8)		%
Advertising and promotion			25.8						23.4						2.4						10.3		%
Product and recordkeeping related costs			72.1						80.4						(8.3)						(10.3)		%
Technology, occupancy, and facility costs			146.6						133.9						12.7						9.5		%
General, administrative, and other			107.5						98.8						8.7						8.8		%
Change in fair value of contingent consideration			(49.6)						(45.5)						(4.1)						9.0		%
Acquisition-related amortization			26.0						27.1						(1.1)						(4.1)		%
Total operating expenses			$	1,053.4					$	985.6					$	67.8					6.9		%

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

Compensation, benefits, and related costs were $593.3 million in the first quarter of 2023, a decrease of $2.6 million, or .4%, compared to the 2022 quarter, as a lower interim bonus accrual and stock-based compensation expense were partially offset by $28.0 million in higher salaries and related benefits, primarily due to base salary increases in January 2023, and higher headcount. The firm employed 7,837 associates at March 31, 2023, a decrease of .4% from the end of 2022 and an increase of 3.5% from March 31, 2022.

Distribution and servicing costs were $71.5 million for the first quarter of 2023, a decrease of $14.4 million, or 16.8%, from the $85.9 million recognized in the 2022 quarter. The decrease 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. Additionally, lower AUM in our international products, including our Japanese Investment Trusts (ITMs), and certain SICAV share classes, contributed to lower distribution costs.

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

Advertising and promotion costs were $25.8 million in the first quarter of 2023, an increase of $2.4 million, or 10.3%, compared to the $23.4 million recognized in the 2022 quarter. The increase was driven primarily by an increase in digital advertising costs.

Product and recordkeeping related costs were $72.1 million in the first quarter of 2023, a decrease of $8.3 million, or 10.3%, compared to the $80.4 million in the 2022 quarter. The decrease was driven primarily due to lower recordkeeping related costs.

Technology, occupancy, and facility costs were $146.6 million in the first quarter of 2023, an increase of $12.7 million, or 9.5%, compared to the $133.9 million recognized in the 2022 quarter. The increase was primarily due to higher depreciation from our ongoing investment in our technology capabilities, including hosted solution licenses, and increased office facility costs, mainly related to higher rent expense associated with a new UK facility we expect to occupy later this year.

General, administrative, and other expenses were $107.5 million in the first quarter of 2023, an increase of $8.7 million, or 8.8%, compared to the $98.8 million recognized in the 2022 quarter. The increase was primarily related to higher travel and information services expenses as well as certain nonrecurring costs that were incurred during the 2022 quarter. These increases were partially offset by lower external research costs.

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Change in fair value of contingent consideration. Our contingent consideration consists of an earnout arrangement as part of our acquisition of OHA in December 2021 in which additional purchase price may be due to certain employees of OHA upon satisfying or exceeding certain defined revenue targets. Every reporting period, we record the potential amount due under this arrangement at fair value. During the first quarter of 2023 and 2022, we recognized reductions in the fair value of the contingent consideration liability of $49.6 million and $45.5 million, respectively, as the 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 the acquisition of OHA in December 2021, we identified and separately recognized at fair value certain intangible assets. During the first quarter of 2023 and 2022, we recognized $26.0 million and $27.1 million, respectively, in amortization related to the definite-lived intangible assets. No impairment costs were recognized during either period. However, should conditions deteriorate, impairments may be recognized in future periods.

Non-operating income (loss)

Non-operating income for the first quarter of 2023 was $135.4 million as compared to non-operating loss of $198.5 million in the 2022 quarter. The following table details the components of non-operating income (loss) for the three months ended March 31, 2023 and 2022.

			Three months ended
(in millions)			3/31/2023						3/31/2022
Net gains (losses) from non-consolidated T. Rowe Price investment products
Cash and discretionary investments
Dividend income			$	20.2					$	.8
Market-related gains (losses) and equity in earnings (losses)			10.6						(24.6)
Total cash and discretionary investments			30.8						(23.8)
Seed capital investments
Dividend income			.5						.2
Market-related gains (losses) and equity in earnings (losses)			15.1						(22.8)
Net gains recognized upon deconsolidation			—						1.6
Investments used to hedge the supplemental savings plan liability			44.7						(55.3)
Total net gains (losses) from non-consolidated T. Rowe Price investment products			91.1						(100.1)
Other investment income			2.8						10.2
Net gains (losses) on investments			93.9						(89.9)
Net gains (losses) on consolidated sponsored investment portfolios			45.4						(101.4)
Other losses, including foreign currency losses			(3.9)						(7.2)
Non-operating income (loss)			$	135.4					$	(198.5)

Our investment portfolio recognized gains during the first quarter of 2023 primarily due to market activity that resulted in higher valuations at the end of the first quarter of 2023 and higher dividends earned on our cash equivalents. Our investment portfolio recognized losses in the first quarter of 2022 as the Russian invasion of Ukraine, inflation fears, and Federal Reserve interest rate increases weighed on the global economy and markets resulting in lower valuations at the end of the first quarter of 2022.

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

T. Rowe Price investment products and not just the net investment income related to our ownership interest in the products. 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
(in millions)			3/31/2023						3/31/2022
Operating expenses reflected in net operating income			$	(4.0)					$	(2.5)
Net investment income (loss) reflected in non-operating income			45.8						(101.4)
Impact on income before taxes			$	41.8					$	(103.9)
Net income (loss) attributable to our interest in the consolidated T. Rowe Price investment products			$	21.6					$	(50.4)
Net income (loss) attributable to redeemable non-controlling interests (unrelated third-party investors)			20.2						(53.5)
			$	41.8					$	(103.9)

Provision for income taxes

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 months ended March 31, 2023 and 2022:

			Three months ended
			3/31/2023						3/31/2022
Statutory U.S. federal income tax rate			21.0		%				21.0		%
State income taxes for current year, net of federal income tax benefits(1)			3.0						3.3
Net (income) losses attributable to redeemable non-controlling interests			(.4)						.3
Net excess tax benefits from stock-based compensation plans activity			(.4)						(.6)
Other items, including valuation allowances			5.5						.2
Effective income tax rate			28.7		%				24.2		%

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

Our U.S. GAAP effective tax rate for the first quarter of 2023 was 28.7%, compared with 24.2% in the 2022 quarter. The effective tax rate for the first quarter of 2023 was unfavorably impacted by increases in valuation allowances recognized against foreign-based deferred tax assets, primarily net operating losses, as it was determined that, as of the first quarter of 2023, it was not more-likely-than not to be realized. This unfavorable impact was partially offset by a lower state effective tax rate as a result of favorable state tax liability settlements and net gains attributable to redeemable non-controlling interests held in our consolidated investment products.

The non-GAAP tax rate primarily adjusts for the impact of the consolidated investment products, including the net income attributable to the redeemable non-controlling interests. Our non-GAAP effective tax rate was 30.3% in the first quarter of 2023 compared with 24.2% in first quarter of 2022. The increase in the non-GAAP effective tax rates for the first quarter of 2023, like our GAAP effective tax rate, was also unfavorably impacted by the increases in the valuation allowances. This unfavorable impact was partially offset by a lower state effective tax rate as a result of favorable state tax liability settlements.

Our effective tax rate will continue to experience volatility in future periods as the tax benefits recognized from stock-based compensation are impacted by market fluctuations in our stock price, the timing of option exercises, the remeasurement of the contingent consideration liability, as well as changes in deferred tax asset valuation allowances, primarily in foreign jurisdictions, based on the sufficiency of taxable income in future periods. Our U.S. GAAP rate will also be impacted by changes in the proportion of net income that is attributable to our redeemable non-controlling interests and non-controlling interests reflected in permanent equity.

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We currently estimate that our effective tax rate for the full year 2023, on a U.S. GAAP basis, will be in the range of 26% to 30%. On a non-GAAP basis, the range is 26.5% to 29.5%.

NON-GAAP INFORMATION AND RECONCILIATION.

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

The following schedules reconcile certain U.S. GAAP financial measures for the three months ended

March 31, 2023 and 2022.

			Three months ended 3/31/2023
			Operating expenses						Net operating income						Non-operating income (loss)						Provision (benefit) for income taxes**(6)**						Net income attributable to T. Rowe Price						Diluted earnings per share**(7)**
U.S. GAAP Basis (FS line item)			$	1,053.4					$	484.2					$	135.4					$	177.9					$	421.5					$	1.83
Non-GAAP adjustments:
Acquisition-related non-GAAP adjustments:
Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs)			5.1						7.2						—						1.5						5.7						.02
Acquisition-related retention arrangements(1) (Compensation and related costs)			(14.2)						14.2						—						3.1						11.1						.05
Contingent consideration(1)			49.6						(49.6)						—						(10.5)						(39.1)						(.17)
Intangible assets amortization and impairments(1)			(26.0)						26.0						—						5.6						20.4						.09
Total acquisition-related non-GAAP adjustments			14.5						(2.2)						—						(.3)						(1.9)						(.01)
Supplemental savings plan liability(3) (Compensation and related costs)			(42.5)						42.5						(44.7)						(.5)						(1.7)						(.01)
Consolidated T. Rowe Price investment products(4)			(2.9)						3.5						(45.4)						(4.6)						(17.1)						(.07)
Other non-operating income(5)			—						—						(14.5)						(3.1)						(11.4)						(.05)
Adjusted Non-GAAP Basis			$	1,022.5					$	528.0					$	30.8					$	169.4					$	389.4					$	1.69

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			Three months ended 3/31/2022
			Operating expenses						Net operating income						Non-operating income (loss)						Provision (benefit) for income taxes**(6)**						Net income attributable to T. Rowe Price						Diluted earnings per share**(7)**
U.S. GAAP Basis (FS line item)			$	985.6					$	877.4					$	(198.5)					$	164.5					$	567.9					$	2.41
Non-GAAP adjustments:
Acquisition-related non-GAAP adjustments:
Investment and NCI amortization and impairments(1) (Capital allocation-based income and Compensation and related costs)			5.6						7.6						—						5.3						2.3						.03
Acquisition-related retention arrangements(1) (Compensation and related costs)			(19.2)						19.2						—						5.4						13.8						.04
Contingent consideration(1)			45.5						(45.5)						—						(18.2)						(27.3)						(.12)
Intangible assets amortization and impairments(1)			(27.1)						27.1						—						10.8						16.3						.07
Transaction costs(2) (General, admin and other)			(.7)						.7						—						.3						.4						—
Total acquisition-related non-GAAP adjustments			4.1						9.1						—						3.6						5.5						.02
Supplemental savings plan liability(3) (Compensation and related costs)			51.0						(51.0)						55.3						1.7						2.7						.01
Consolidated T. Rowe Price investment products(4)			(1.6)						2.5						101.4						20.3						30.0						.13
Other non-operating income(5)			—						—						18.0						7.2						10.8						.05
Adjusted Non-GAAP Basis			$	1,039.1					$	838.0					$	(23.8)					$	197.3					$	616.9					$	2.62

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

(2) This non-GAAP adjustment removes the transactions costs incurred related to the acquisition of OHA. Management believes adjusting for these charges helps the reader's ability to understand our core operating results and to increase comparability period to period.

(3) This non-GAAP adjustment removes the compensation expense impact from market valuation changes in the supplemental savings plan liability and the related net gains (losses) on investments designated as an economic hedge against the related liability. Amounts deferred under the supplemental savings plan are adjusted for appreciation (depreciation) of hypothetical investments chosen by participants. We use T. Rowe Price investment products to economically hedge the exposure to these market movements. Management believes it is useful to offset the non-operating investment income (loss) realized on the economic hedges against the related compensation expense and remove the net impact to help the reader's ability to understand our core operating results and to increase comparability period to period.

(4) These non-GAAP adjustments remove the impact that the consolidated T. Rowe Price investment products have on our U.S. GAAP consolidated statements of income. Specifically, we add back the operating expenses and subtracts the investment income of the consolidated T. Rowe Price investment products. The adjustment to operating expenses represents the operating expenses of the consolidated products, net of the elimination of related management and administrative fees. The adjustment to net income attributable to T. Rowe Price represents the net income of the consolidated products, net of redeemable non-controlling interests. Management believes the consolidated T. Rowe Price investment products may impact the reader’s ability to understand our core operating results.

(5) This non-GAAP adjustment represents the other non-operating income (loss) and the net gains (losses) earned on our non-consolidated investment portfolio that are not designated as economic hedges of the supplemental savings plan liability, and that are not part of the cash and discretionary investment portfolio. Management retains the investment gains recognized on the non-consolidated cash and discretionary investments as these assets and related income (loss) are considered part of our core operations. Management believes adjusting for these non-operating income (loss) items helps the reader’s ability to understand our core operating results and increases comparability to prior years. Additionally, management does not emphasize the impact of the portion of non-operating income (loss) removed when managing and evaluating our performance.

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(6) The income tax impacts were calculated in order to achieve an overall non-GAAP effective tax rate for three months ended March 31, 2023 and 2022 was 30.3% and 24.2%, 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%.

(7) This non-GAAP measure was calculated by applying the two-class method to adjusted net income attributable to T. Rowe Price divided by the weighted-average common shares outstanding assuming dilution. The calculation of adjusted net income allocated to common stockholders is as follows:

						Three months ended
						3/31/2023			3/31/2022
Adjusted net income attributable to T. Rowe Price						$	389.4		$	616.9
Less: adjusted net income allocated to outstanding restricted stock and stock unit holders						9.6			14.1
Adjusted net income allocated to common stockholders						$	379.8		$	602.8

CAPITAL RESOURCES AND LIQUIDITY.

Sources of Liquidity

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

(in millions)						3/31/2023						12/31/2022
Cash and cash equivalents						$	2,094.1					$	1,755.6
Discretionary investments						464.3						449.7
Total cash and discretionary investments						2,558.4						2,205.3
Redeemable seed capital investments						1,146.8						1,120.3
Investments used to hedge the supplemental savings plan liability						786.7						760.7
Total cash and investments in T. Rowe Price products						$	4,491.9					$	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 $30.8 million in the three months ended March 31, 2023 compared to market losses of $23.8 million in the three months ended March 31, 2022. Our subsidiaries outside the United States held cash and discretionary investments of $792.4 million at March 31, 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.

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

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The cash and investment presentation on the unaudited condensed consolidated balance sheet is based on the accounting treatment for the cash equivalent or investment item. The following table details how T. Rowe Price’s interests in cash and investments relate to where they are presented on the unaudited condensed consolidated balance sheet as of March 31, 2023.

(in millions)						Cash and cash equivalents						Investments						Net assets of consolidated T. Rowe Price investment products**(1)**						Total
Cash and discretionary investments						$	2,094.1					$	452.2					$	12.1					$	2,558.4
Seed capital investments						—						334.3						812.5						1,146.8
Investments used to hedge the supplemental savings plan liability						—						786.7						—						786.7
Total cash and investments in T. Rowe Price products attributable to T. Rowe Price						2,094.1						1,573.2						824.6						4,491.9
Investments in affiliated private investment funds(2)						—						663.2						50.8						714.0
Investments in CLOs						—						115.5						—						115.5
Investment in UTI and other investments						—						254.3						—						254.3
Total cash and investments attributable to T. Rowe Price						2,094.1						2,606.2						875.4						5,575.7
Redeemable non-controlling interests						—						—						834.1						834.1
As reported on unaudited condensed consolidated balance sheet at March 31, 2023						$	2,094.1					$	2,606.2					$	1,709.5					$	6,409.8

(1) The consolidated T. Rowe Price investment products are generally those products we provided seed capital at the time of their formation and we have a controlling interest. These products generally represent U.S. mutual funds as well as those funds regulated outside the U.S. The $12.1 million and the $812.5 million represent the total value at March 31, 2023 of our interest in the consolidated T. Rowe Price investment products. The total net assets of the T. Rowe Price investment products at March 31, 2023 of $1,709.5 million includes assets of $1,820.9 million, less liabilities of $111.4 million as reflected in our unaudited condensed consolidated balance sheets.

(2) Includes $194.4 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. 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. Additionally, the assets of these sponsored investment products are not available to our general creditors. Our interest in these sponsored investment products was used as initial seed capital and is recategorized as discretionary when it is determined by management that the seed capital is no longer needed. We assess the discretionary investment products and, when we decide to liquidate our interest, we seek to do so in a way as to not impact the product and, ultimately, the unrelated third-party investors.

Uses of Liquidity

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 $2.7 million in the first quarter of 2023 to repurchase

25 thousand shares of our outstanding common stock, at an average price of $109.83 per share. These dividends and repurchases were expended using existing cash balances and cash generated from operations. While opportunistic in our approach to stock buybacks, we will generally repurchase our common stock over time to offset the dilution created by our equity-based compensation plans.

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Since the end of 2020, we have returned nearly $5.1 billion to stockholders through stock repurchases, regular quarterly dividends, and a special dividend, as follows:

(in millions)			Recurring dividend						Special dividend						Stock repurchases						Total cash returned to stockholders
2021			$	1,003.7					$	699.8					$	1,136.0					$	2,839.5
2022			1,108.8						—						855.3						1,964.1
Three months ended 3/31/2023			280.7						—						2.7						283.4
Total			$	2,393.2					$	699.8					$	1,994.0					$	5,087.0

We anticipate property, equipment, software and other capital expenditures, including internal labor capitalization, for the full-year 2023 to be about $370 million, of which approximately two-thirds is planned for technology initiatives. We expect to fund our anticipated capital expenditures with operating cash flows and other available resources.

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Cash Flows

The following table summarizes the cash flows for the three months ended March 31, 2023 and 2022, that are attributable to T. Rowe Price, our consolidated sponsored investment products, and the related eliminations required in preparing the statement.

			Three months ended
			3/31/2023																								3/31/2022
(in millions)			Cash flow attributable to T. Rowe Price						Cash flow attributable to consolidated sponsored investment products						Elims						As reported						Cash flow attributable to T. Rowe Price						Cash flow attributable to consolidated sponsored investment products						Elims						As reported
Cash flows from operating activities
Net income (loss)			$	421.5					$	41.8					$	(21.6)					$	441.7					$	567.9					$	(103.9)					$	50.4					$	514.4
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation, amortization and impairments of property, equipment and software			58.8						—						—						58.8						54.5						—						—						54.5
Amortization and impairment of acquisition-related assets and retention agreements			48.2						—						—						48.2						53.9						—						—						53.9
Fair value remeasurement of contingent liability			(49.6)						—						—						(49.6)						(45.5)						—						—						(45.5)
Stock-based compensation expense			58.8						—						—						58.8						63.6						—						—						63.6
Net (gains) losses recognized on investments			(123.9)						—						21.6						(102.3)						88.7						—						(50.4)						38.3
Net redemptions in sponsored investment products used to economically hedge supplemental savings plan liability			18.4						—						—						18.4						6.1						—						—						6.1
Net change in trading securities held by consolidated sponsored investment products			—						(200.7)						—						(200.7)						—						180.1						—						180.1
Other changes			240.5						(.7)						(1.4)						238.4						229.0						9.4						(.4)						238.0
Net cash provided by (used in) operating activities			672.7						(159.6)						(1.4)						511.7						1,018.2						85.6						(.4)						1,103.4
Net cash provided by (used in) investing activities			(52.0)						(2.5)						(3.0)						(57.5)						44.4						(5.9)						(34.7)						3.8
Net cash provided by (used in) financing activities			(282.2)						133.6						4.4						(144.2)						(588.2)						(91.0)						35.1						(644.1)
Effect of exchange rate changes on cash and cash equivalents of consolidated sponsored investment products			—						1.5						—						1.5						—						(2.7)						—						(2.7)
Net change in cash and cash equivalents during period			338.5						(27.0)						—						311.5						474.4						(14.0)						—						460.4
Cash and cash equivalents at beginning of year			1,755.6						119.1						—						1,874.7						1,523.1						101.1						—						1,624.2
Cash and cash equivalents at end of period			$	2,094.1					$	92.1					$	—					$	2,186.2					$	1,997.5					$	87.1					$	—					$	2,084.6

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Operating Activities

Operating activities attributable to T. Rowe Price during the first quarter of 2023 provided cash flows of $672.7 million as compared to $1,018.2 million during the first quarter of 2022. Operating cash flows attributable to T. Rowe Price decreased $345.5 million, including a $146.4 million decrease in net income from the first quarter of 2022 and a lower add back of $222.9 million in non-cash adjustments, including unrealized investment gains/losses, depreciation, amortization of acquisition-related assets and retention arrangements, the fair value remeasurement of the contingent consideration liability, stock-based compensation expense, and other noncash items. These decreases were partially offset by an increase in timing differences primarily on the cash settlement of our assets and liabilities of $11.5 million. The non-cash adjustments were primarily driven by $123.9 million in net investment gains in the first quarter of 2023 compared with $88.7 million in net investment losses in the first quarter of 2022. Additionally, in 2023, we had net proceeds of $18.4 million from certain investment products that economically hedge our supplemental savings plan liability compared to net proceeds of $6.1 million in the same period of 2022. 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. The remaining change in reported cash flows from operating activities was attributable to the net change in trading securities held in our consolidated investment products’ underlying portfolios.

Investing Activities

Net cash used in investing activities that are attributable to T. Rowe Price totaled $52.0 million in the first quarter of 2023 compared with $44.4 million of cash provided by investing activities in the 2022 period. During 2023, net proceeds from the sale of certain of our discretionary investments of $6.3 million were lower compared to $58.9 million during 2022. We also increased the level of seed capital provided to the T. Rowe Price consolidated investment products by $31.7 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. In addition, we increased our property, equipment and software expenditures by $5.8 million. The remaining $3.4 million change in reported cash flows from investing activities is related to the net cash removed from our balance sheet from consolidating and deconsolidating investment products.

Financing Activities

Net cash used in financing activities attributable to T. Rowe Price were $282.2 million in the first quarter of 2023 compared with $588.2 million in the 2022 period. During the first quarter of 2023, we repurchased 25 thousand shares ($2.7 million) compared to 2.1 million shares ($320.1 million) in the first quarter of 2022. The remaining decrease in reported cash flows used from financing activities is primarily attributable to $138.0 million in net subscriptions received from redeemable non-controlling interest holders of our consolidated investment products during the first quarter of 2023 as compared to $55.9 million in net redemptions from redeemable non-controlling interest holders of our consolidated investment products during the first quarter of 2022.

CRITICAL ACCOUNTING POLICIES.

The preparation of financial statements often requires the selection of specific accounting methods and policies from among several acceptable alternatives. Further, significant estimates and judgments may be required in selecting and applying those methods and policies in the recognition of the assets and liabilities in our unaudited condensed consolidated balance sheets, the revenues and expenses in our unaudited condensed consolidated statements of income, and the information that is contained in our significant accounting policies and notes to unaudited condensed consolidated financial statements. Making these estimates and judgments requires the analysis of information concerning events that may not yet be complete and of facts and circumstances that may change over time. Accordingly, actual amounts or future results can differ materially from those estimates that we include currently in our unaudited condensed consolidated financial statements, significant accounting policies, and notes.

There have been no material changes in the critical accounting policies previously identified in our 2022 Annual Report on Form 10-K.

NEWLY-ISSUED BUT NOT YET ADOPTED ACCOUNTING GUIDANCE.

See Note 1 - The Company and Basis of Preparation note within Item 1. Financial Statements for a discussion of newly issued but not yet adopted accounting guidance.

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FORWARD-LOOKING INFORMATION.

From time to time, information or statements provided by or on behalf of T. Rowe Price, including those within this report, may contain certain forward-looking information, including information or anticipated information relating to: our operations, revenues, net income, and earnings per share of common stock; changes in the amount and composition of our assets under management; our expense levels; our tax rate; the timing and expense related to the integration of OHA with and into our business; legal or regulatory developments; geopolitical instability; interest rates and currency fluctuations; and our expectations regarding financial markets, future transactions, dividends, stock repurchases, investments, new products and services, capital expenditures, changes in our effective fee rate, and other industry or market conditions. Readers are cautioned that any forward-looking information provided by or on behalf of T. Rowe Price is not a guarantee of future performance. Actual results may differ materially from those in forward-looking information because of various factors including, but not limited to, those discussed below and in Item 1A, Risk Factors, included in our Form 10-K Annual Report for 2022. Further, forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events.

Our future revenues and results of operations will fluctuate primarily due to changes in the total value and composition of assets under our management. Such changes result from many factors, including, among other things: cash inflows and outflows in the U.S. mutual funds, subadvised funds, separately managed accounts, collective investment trusts, and other investment products, performance fees, capital allocation-based income, fluctuations in global financial markets that result in appreciation or depreciation of the assets under our management, our introduction of new mutual funds and investment products, changes in retirement savings trends relative to participant-directed investments and defined contribution plans, and the impact of the coronavirus outbreak. The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence; the relative investment performance of the T. Rowe Price mutual funds and other managed investment products as compared with competing offerings and market indexes; the ability to maintain our investment management and administrative fees at appropriate levels; the impact of changes in interest rates and inflation; competitive conditions in the mutual fund, asset management, and broader financial services sectors; our level of success in implementing our strategy to expand our business, including our establishment of T. Rowe Price Investment Management as a separate registered investment adviser; and our ability to attract and retain key personnel. Our revenues are substantially dependent on fees earned under contracts with the T. Rowe Price funds and could be adversely affected if the independent directors of one or more of the T. Rowe Price funds terminated or significantly altered the terms of the investment management or related administrative services agreements. Non-operating investment income will also fluctuate primarily due to the size of our investments, changes in their market valuations, and any other-than-temporary impairments that may arise or, in the case of our equity method investments, our proportionate share of the investees' net income.

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

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

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