PRICE T ROWE GROUP INC

T. Rowe Price Group, Inc. is a financial services holding company that provides global investment advisory services through its subsidiaries to investors worldwide. The firm operates as a premier global asset management organization with more than 85 years of experience, offering investment solutions across equity, fixed income, multi-asset, and alternatives capabilities to individuals, advisors, institutions, and retirement plan sponsors. The investment management industry continues to evolve and face challenging trends, including the shift in market share from traditional active strategies to passive products, persistent downward fee pressure, demand for lower cost investment vehicles, and an ever-changing regulatory landscape. Despite these trends, the firm believes there are significant opportunities that align to its core capabilities, supported by ongoing financial strength and discipline that allows it to respond with several strategic, multi-year initiatives designed to strengthen its long-term competitive position.

The firm faces substantial competition in all aspects of its business from a significant number of proprietary and other sponsors’ investment products sold by other investment management firms, broker-dealers, mutual fund companies, banks, and insurance companies. T. Rowe Price competes with brokerage and investment banking firms, insurance companies, banks, traditional and alternatives asset management companies, hedge funds, and other financial institutions and funds in every country in which it offers products and services. Some of these financial institutions have greater resources, may have more developed brand awareness in particular markets, or offer additional services to clients. The firm competes primarily based on the availability and objectives of investment products offered, investment performance, fees and related expenses, and the scope and quality of investment advice and other client services. The firm has and will continue to face significant competition from passive-oriented investment strategies, which have taken market share from active managers.

The firm generates substantially all of its net revenue from investment advisory fees earned pursuant to agreements with its sponsored products and clients. Nearly 55% of investment advisory fees are earned from sponsored U.S. mutual funds, with the remaining fees earned from collective investment trusts, subadvised funds, separately managed accounts, and other sponsored products. Investment advisory fees are generally computed using the value of assets under management at a contracted annual fee rate or an effective fee rate for those products with a tiered-fee rate structure. For the majority of revenue, the value of assets under management used to calculate fees is based on a daily valuation. The firm also earns performance-based investment advisory fees on certain separately managed accounts and affiliated private investment funds, capital allocation-based income from general partner interests in certain affiliated private investment funds, and administrative, distribution, servicing, and other fees from ancillary services including mutual fund transfer agent, fund/product accounting, distribution, shareholder services, recordkeeping for defined contribution retirement plans, brokerage, trust services, and other advisory services.

The firm manages a broad range of investment strategies in equity, growth, core, value, concentrated, integrated, and impact capabilities across U.S. and global/international markets, including all-cap, large-cap, mid-cap, small-cap, sectors, tax efficient, regional, and emerging markets. Fixed income capabilities include cash, low duration, high yield/bank loans, government, securitized, credit, multi-sector, emerging markets, municipal, and impact strategies across U.S. and global/international markets. Multi-asset capabilities include target date, custom target date, target allocation, global allocation, global income, managed volatility, custom solutions, real assets, and retirement income strategies. Alternatives capabilities include private credit, leveraged loans, mezzanine, real assets/CRE, structured products, stressed/distressed, CLOs (non-investment grade), special situations, and MA alternatives. At December 31, 2025, the firm had $1,775.6 billion ¹ in assets under management, an increase of $169.0 billion ² from the end of 2024. The increase was driven by market appreciation, net of distributions not reinvested, of $216.7 billion ³, offset by net cash outflows of $56.9 billion ⁴. Beginning on July 1, 2025, assets under management include managed account - model delivery portfolios assets, which had $9.2 billion ⁵ in assets as of that date. Target date retirement products experienced net cash inflows of $5.2 billion ⁶ in 2025, and assets under management in those products totaled $561.4 billion ⁷ at December 31, 2025, representing 31.6% ⁸ of managed assets at that date, compared to 29.6% ⁹ at the end of 2024. The Capital Appreciation Strategy has been closed to new investors since 2014 and represents about 6% ¹⁰ of total assets under management at December 31, 2025. Investment advisory clients outside the United States account for 8.8% ¹¹ of assets under management at December 31, 2025 and December 31, 2024. The firm services clients in 60 ¹² countries around the world.

In 2025, the firm took several steps to execute on a broad and ongoing plan to further align expense growth with anticipated revenue growth, including targeted role eliminations, outsourcing and expanding some technology capabilities through trusted vendor partnerships, and the decision to exit certain owned buildings with plans to dispose of the properties in 2026. The impact of these actions was recorded as a restructuring charge of $177.3 million ¹³ in the consolidated statements of income, which includes accelerated depreciation and impairment charges related to certain owned real estate of $127.3 million ¹⁴ as well as compensation-related costs, primarily severance. The firm expended $624.6 million ¹⁵ in 2025 to repurchase nearly 6.2 million ¹⁶ shares, or 2.8% ¹⁷, of its outstanding common stock at an average price of $101.15 ¹⁸ per share. Dividends paid were $5.08 ¹⁹ per share in 2025, an increase of 2.4% ²⁰ over the $4.96 ²¹ per share paid in 2024. Since the end of 2022, the firm has returned $4.6 billion ²² to stockholders through stock repurchases and regular quarterly dividends. As of December 31, 2025, the firm employed 7,773 ²³ associates, a decrease of 4.7% ²⁴ from the 8,158 ²⁵ associates employed at the end of 2024.

Total net revenues were $7,314.8 million ²⁶ in 2025, a 3.1% ²⁷ increase compared to $7,093.6 million ²⁸ in 2024. The increase was driven primarily by higher investment advisory fees on higher average assets under management, as well as higher capital allocation-based income, partially offset by lower performance-based advisory fees. Operating expenses on a U.S. GAAP basis were $5,126.0 million ²⁹ in 2025, an increase of 7.7% ³⁰ compared to $4,760.3 million ³¹ in 2024. On a non-GAAP basis, operating expenses were $4,666.5 million ³², an increase of 3.7% ³³ compared to $4,498.8 million ³⁴ in 2024. Operating margin was 29.9% ³⁵ in 2025 compared to 32.9% ³⁶ in 2024. Net income attributable to T. Rowe Price Group was $2,087.1 million ³⁷ in 2025 compared to $2,100.1 million ³⁸ in 2024. Diluted earnings per share was $9.24 ³⁹ in 2025 compared to $9.15 ⁴⁰ in 2024. On a non-GAAP basis, diluted earnings per share was $9.72 ⁴¹ in 2025 compared to $9.33 ⁴² in 2024. Cash and cash equivalents were $3,378.2 million ⁴³ at December 31, 2025, compared to $2,649.8 million ⁴⁴ at December 31, 2024.

The firm currently estimates its 2026 non-GAAP operating expenses, excluding non-GAAP accrued carried interest compensation, will grow in the range of 3%-6% ⁴⁵ from the 2025 amount of $4,608.0 million ⁴⁶. The firm could elect to adjust expense growth should unforeseen circumstances arise, including significant market movements. The firm currently estimates its effective tax rates for the full-year 2026 will be in the range of 23.0% to 27.0% ⁴⁷ on a GAAP basis, and 24.0% to 27.0% ⁴⁸ on a non-GAAP basis.

The firm is focusing on further global growth in select high-opportunity markets where it has existing business by investing more in resources, products, partnerships, and marketing. The firm is broadening its reach in the private and alternatives market by leveraging its distribution channels, expanding its investment capabilities, and blending its traditional capabilities with alternatives. The firm is also growing and diversifying its business through innovative global partnerships. The firm is strengthening its distribution technology to enhance the digital client experience and client reporting. The firm is nurturing its brand globally and leveraging it effectively across channels and geographies. The firm is also focusing on access to growth of the U.S. wealth management channel through improved vehicle capabilities, technology, specialist sales, and content.

The firm is focusing on delivering exceptional outcomes for clients while sustaining its leadership position in retirement. The firm is enhancing its relationships with clients and renewing its individual investor base by investing in its ability to provide exceptional service and unique solutions. The firm is also attracting and retaining top talent and enabling effective collaboration. The firm has developed a broad and ongoing plan to further align its expense growth with its anticipated revenue growth, which will allow it to realign resources and continue investing in existing and future capabilities. Strategic investments include hiring investment and distribution professionals, adopting new technologies, offering new products, and growing and diversifying the business through innovative global partnerships.

The firm has developed a broad and ongoing plan to further align expense growth with anticipated revenue growth, which will allow it to realign resources and continue investing in existing and future capabilities. In 2025, the firm took several steps to execute on this plan, including targeted role eliminations, outsourcing and expanding some technology capabilities through trusted vendor partnerships, and the decision to exit certain owned buildings with plans to dispose of the properties in 2026. These measures also help offset ongoing inflationary pressures on compensation and contractual spending. The firm currently estimates its 2026 non-GAAP operating expenses, excluding non-GAAP accrued carried interest compensation, will grow in the range of 3%-6% ⁴⁹ from the 2025 amount of $4,608.0 million ⁵⁰.

The firm anticipates property, equipment, software and other capital expenditures, including internal labor capitalization, for the full-year 2026 to be about $270 million ⁵¹, of which more than three-quarters is planned for technology initiatives. The firm expects to fund its anticipated capital expenditures with operating cash flows and other available resources. The firm employed 7,773 ⁵² associates at December 31, 2025, a decrease of 4.7% ⁵³ from the end of 2024, reflecting the workforce action in July 2025 as part of the broad plan to reduce expense growth and realign resources.

The firm expended $624.6 million ⁵⁴ in 2025 to repurchase nearly 6.2 million ⁵⁵ shares, or 2.8% ⁵⁶, of its outstanding common stock at an average price of $101.15 ⁵⁷ per share. Dividends paid were $5.08 ⁵⁸ per share in 2025, an increase of 2.4% ⁵⁹ over the $4.96 ⁶⁰ per share paid in 2024. While opportunistic in its approach to stock buybacks, the firm will generally repurchase its common stock over time to offset the dilution created by its equity-based compensation plans. As of December 31, 2025, the Board of Directors had an outstanding publicly announced authorization of 12,201,846 ⁶¹ shares that may yet be purchased under the program. The firm anticipates property, equipment, software and other capital expenditures for the full-year 2026 to be about $270 million ⁶², of which more than three-quarters is planned for technology initiatives.

The investment management industry continues to face challenging trends, including the shift in market share from traditional active strategies to passive products, persistent downward fee pressure, demand for lower cost investment vehicles, and an ever-changing regulatory landscape. The firm's net cash outflows in 2025 were $56.9 billion ⁶³, driven primarily by growth-oriented equity strategies, partially offset by net cash inflows in fixed income, target date retirement products, and alternatives strategies. Financial intermediaries and institutional clients were the main sources of net outflows in 2025. From a geography perspective, net outflows were predominantly from U.S. clients invested in equity strategies, though all regions experienced net outflows. The firm's annualized effective fee rate without performance-based fees declined to 39.4 ⁶⁴ basis points in 2025 from 41.0 ⁶⁵ basis points in 2024, primarily due to client flows and transfers shifting assets under management toward lower-fee strategies and products, partially offset by market appreciation.

The firm faces substantial competition from passive-oriented investment strategies, which have taken market share from active managers. The firm cannot predict how much market share passive competitors will continue to gain. The firm is subject to extensive federal, state, and foreign laws and regulations that continue to change over time, resulting in uncertainty for the business as it must adapt to new laws and regulatory regimes, which could significantly increase reporting, disclosure and compliance obligations, including for cybersecurity and climate-related disclosures. The firm's international operations require compliance with complex legal and regulatory requirements of various foreign jurisdictions that at times may be contradictory and expose the firm to political environments and risks that can compare less favorably than those in the United States.

The firm's revenues are substantially dependent on the total value and composition of assets under management, which are subject to substantial fluctuation due to factors outside its control, including investment performance relative to competitors and benchmarks, general financial market declines, investor mobility with the ability to withdraw funds at any time with little to no penalty, and changes in investing trends particularly the shift toward passive products. A majority of revenues are based on contracts with commingled vehicles that can be terminated without cause and on short notice, and the Board of each T. Rowe Price U.S. mutual fund and ETF must annually approve the terms of the investment management and service agreements. The firm operates in an intensely competitive industry where competitive pressures may result in loss of clients or compel fee reductions, and the firm has selectively reduced fees in the past. The firm's alternatives products include investments in private credit, real estate, infrastructure and private companies, which expose the firm to risks related to potential illiquidity, valuation, concentration, use of leverage, and credit risks including interest-rate movements and an issuer's ability to make principal and interest payments. The firm recognized impairment charges on intangible assets in 2025 of $3.3 million ⁶⁶ on the indefinite-lived investment advisory agreements intangible asset, and the maximum future impairment of indefinite-lived intangible assets that could be incurred is $148.3 million ⁶⁷ as of December 31, 2025, while the maximum future impairment of goodwill is $2.6 billion ⁶⁸ as of December 31, 2025.

Management's message emphasizes the firm's strong corporate culture focused on delivering superior long-term investment performance and world-class service to clients. The firm maintains ample liquidity and resources that allow it to take advantage of attractive growth opportunities and deliver new capabilities that meet the evolving needs of clients globally. Management has developed a broad and ongoing plan to further align expense growth with anticipated revenue growth, which will allow the firm to realign resources and continue investing in existing and future capabilities. The firm currently estimates its 2026 non-GAAP operating expenses, excluding non-GAAP accrued carried interest compensation, will grow in the range of 3%-6% ⁶⁹ from the 2025 amount of $4,608.0 million ⁷⁰. The firm currently estimates its effective tax rates for the full-year 2026 will be in the range of 23.0% to 27.0% ⁷¹ on a GAAP basis, and 24.0% to 27.0% ⁷² on a non-GAAP basis. The strategic priorities emphasized for the period ahead include delivering exceptional outcomes for clients while sustaining leadership in retirement, focusing on further global growth in select high-opportunity markets, broadening reach in the private and alternatives market, growing and diversifying the business through innovative global partnerships, enhancing relationships with clients and renewing the individual investor base, strengthening distribution technology, attracting and retaining top talent, nurturing the brand globally, and delivering strong financial results and balance sheet strength for stockholders over the long term.