T Rowe Price : 2023 Annual Report

A letter from our CEO and President

Dear Stockholder,

While 2023 was a challenging year for us with substantial net outflows, it also brought progress. Investment performance improved, and we advanced important work to ensure our firm is positioned for future growth.

We are building momentum and are seeing a number of early indicators that support our confidence that better days are ahead.

We have a long and solid track record of putting clients first and pursuing excellence. I am confident that we will build on this tradition-delivering compelling value for our clients, our associates, and our stockholders.

Capital Markets

A year that began with serious doubts about the global economic outlook ended on a brighter note as investors began to anticipate a pivot away from monetary tightening by the U.S. Federal Reserve and other central banks. Hopes rose that the U.S. economy might reach a soft landing-slower growth and easing wage pressures, but without a recession.

Most major global equity markets posted positive returns in 2023, although U.S. gains were concentrated in a handful of mega-cap technology stocks widely known as the

"Magnificent Seven."1 For the year, these

seven stocks returned 75.15% on a capitalization- weighted basis versus a 15.08% gain for the rest of the stocks in the S&P 500 Index and 26.29% for the S&P 500 as a whole. That same relative performance trend boosted the tech-heavy Nasdaq Composite Index to a 43.42% gain

for the year.

The technology rebound also helped growth outperform value in the U.S. large-cap space, with the Russell 1000 Growth Index returning 42.68% while the Russell 1000 Value Index gained 11.46%. Small- and mid-cap stocks struggled through much of 2023 but led the market higher in the final two months

of the year. The Russell 2000 Index returned 16.93%, and the S&P 400 Index-a popular mid-capbenchmark-returned 16.44%.

Non-U.S. equity markets underperformed the U.S. in 2023, reflecting their generally lower exposure to Big Tech. The MSCI All Country World Index ex USA returned 16.21% in U.S. dollar terms, the MSCI Europe Index gained 20.66%, and the MSCI Japan Index rose 20.77%. The MSCI Emerging Markets Index returned 10.27%, held back by negative performance in China and several other emerging Asian equity markets.

Growing expectations that interest rates had peaked triggered powerful rallies in U.S. and non-U.S. fixed income markets in late 2023, erasing losses suffered earlier in the year. The Bloomberg U.S. Aggregate Bond Index returned 5.53%, and the Bloomberg Global Aggregate ex USD Bond Index gained 5.72%.

Falling yields and improving economic sentiment were especially beneficial for global credit sectors. The Bloomberg U.S. Corporate Investment Grade Bond Index returned 8.52%, and the J.P. Morgan Global High Yield Index gained 13.26%. The J.P. Morgan Emerging Markets Bond Index Global returned 10.45%.

Financial Results

Our financial performance in 2023 continued

to be challenged by the lingering impact of 2022's persistent bear market and by net outflows, which were somewhat larger than we had anticipated at the beginning of the year. Although assets under management (AUM) ended the year higher ($1,444.5 billion versus $1,274.7 billion at year- end 2022), that increase largely reflected the strong market rallies seen in the final two months of the year. For 2023 as a whole, average AUM declined slightly, to $1,362.3 billion from $1,398.4 billion in 2022.

It is widely recognized within the investment industry that net flows tend to lag performance. This was especially true for us last year, as the strong absolute and relative returns in several of our flagship U.S. equity strategies did not translate into improving flows. For the firm, net outflows totaled $81.8 billion in 2023, although our Target Date franchise saw inflows of $13.1 billion. While 2024 could remain challenging,

I believe the worst appears to be behind us. Regardless, I remain confident that we will be able to return the firm to organic growth in the years ahead.

Reflecting the difficult operating environment, investment advisory revenues, which typically account for about 90% of the firm's total revenues, fell to $5,747.7 million in 2023,

a 3.7% decline from 2022's $5,969.1 million. Total revenues, on the other hand, fell just 0.4%, to $6,460.5 million from $6,488.4 million in 2022. The difference reflects a gain in capital allocation- based income, which represents the change

in accrued carried interests earned from certain alternative funds.

On a generally accepted accounting principles (GAAP) basis, earnings per share rose in 2023, to $7.76 per share from $6.70 in 2022. However, on a non-GAAP basis, per-share earnings declined to $7.59 from $8.02 in 2022. The non- GAAP figures adjust for certain nonoperating investment gains, and acquisition-related amortization and costs, and impairments, among other things. We believe the adjusted results better reflect the performance of our core business.2

Expense management was a critical priority

in 2023, as we sought to offset revenue declines while protecting our ability to invest in our

strategic priorities. We pursued a number

of efforts to manage expenses, drive efficiency, and create a cost structure appropriate for the size and scale of the firm. We slowed the pace of hiring and head count growth by closing select positions and, in July, we eliminated approximately 2% of our existing positions globally. For the year, total head count rose slightly, to 7,906 from 7,868 at the end of 2022, due to targeted hires in key strategic areas.

Slower hiring and a hybrid working environment also made it possible to examine real estate usage. We were able to consolidate associates in reduced space at our Owings Mills, Maryland, and Colorado Springs, Colorado, locations.

On a GAAP basis, operating expenses rose

8.7% in 2023, to $4.474.3 million from $4,114.7 million in 2022, but were up a smaller 4.2% on an adjusted non-GAAP basis, to $4,260.7 million from $4,087.8 million.2

Our balance sheet remained strong at the end

of 2023, with $2.5 billion of cash and discretionary investments-a $300 million increase from year- end 2022. Financial strength allowed us to reward our stockholders. We raised our quarterly dividend to $1.22 per share, marking our 37th consecutive year of dividend increases. We also completed $254 million in share buybacks in 2023, more than offsetting dilution from stock-based compensation and reducing shares outstanding to 223.9 million at year-end. All told, we returned $1.4 billion to stockholders through buybacks and dividends, bringing the three-year total to $6.2 billion and the five-year total to $9.7 billion. Over the three years ended in 2023, we returned 93% of our adjusted net income to stockholders.

Investment Performance

Performance improved in both absolute

and relative terms for the majority of our actively managed strategies in 2023, with particular strength in U.S. growth equities, high yield credit, and our flagship Retirement Funds.

• 64% of the primary share classes for our actively managed U.S. mutual funds outperformed the median within their Morningstar categories last year, while
  37% finished in the top quartile-more than double the 2022 total.3
• Over trailing 3-,5-, and 10-year periods, 52%, 56%, and 71%, respectively, of primary share classes outperformed their Morningstar medians.3
• On an asset-weighted basis, 55%, 57%, 86% of our funds outperformed their Morningstar medians3 over those same periods.

Last year's absolute improvements were due

in large part to market recoveries following their 2022 downturns. But we would attribute our relative strength among active managers to the enduring benefits of our disciplined, long- term investment approach, which seeks to avoid overreacting to temporary setbacks and periods of market volatility.

Our U.S. large-cap growth funds provided perhaps the most striking example of this underlying advantage. After a disappointing 2022, our large growth managers remained consistent in their approach and confident that their strategies were well positioned to deliver compelling long-term performance. The results in 2023 were strongly positive: Our three largest U.S. large-cap growth

funds all finished in the top quartile of Morningstar's large growth category. And while the Magnificent Seven tech stocks dominated the performance of the large growth universe as a whole-contributing over 60% of the return on the Russell 1000 Growth Index-our strategies delivered alpha from a much broader set of active investment decisions. For example, in our Large-Cap Growth Fund, two-thirds of the 2023 outperformance came from stocks not in the Magnificent Seven.

The strength of our global research platform could be seen in the performance of our U.S. Equity Research Fund, where a team of 25 equity analysts contribute to the portfolio in their respective areas

of expertise. In addition to delivering top-quartile performance in its Morningstar category over the past one, three, five, and 10 years, the fund has demonstrated its ability to beat the S&P 500 benchmark over time.

To further leverage our global research capabilities, we have extended the collaborative portfolio concept by combining the best ideas

of our U.S. and non-U.S. equity analysts in a single Global Structured Research Equity Strategy, now offered both as a SICAV and as a separate account mandate. We believe this approach offers good potential for AUM growth going forward and can compete with passive funds.

Our Retirement Funds benefited during the stock market recovery from their higher equity glide paths versus peers. Their strategic design and the strength of our underlying investments and security selection also lifted performance in 2023.

T. Rowe Price has always believed that investment performance should be evaluated over the long term, so we know not to read too much into a single year's results. That said, we are encouraged by the progress our managers made in 2023 and believe they have laid the groundwork for continued success in 2024 and in the years to come.

Our Strategic Priorities

Investment excellence is the first of our evergreen strategic priorities, along with delivering world- class client service; being a leader in retirement; and attracting and retaining top, diverse talent.

As I shared in last year's annual report, in addition to these evergreen strategic priorities, we are focusing our efforts on several core areas of strength where we have already invested resources over many years and where we believe we have the greatest opportunity for growth and long-term success, including:

• Bolstering our U.S. intermediary wealth channel and emerging as a top partner for the largest distributors in the U.S.
• Accelerating growth in international markets with a focus on unlocking growth in markets where we have existing businesses that offer the greatest opportunity.
• Improving our individual investor client experience through an improved digital experience and differentiated service offering.

• Expanding our private markets and alternatives capabilities by leveraging our distribution channels and Oak Hill Advisors' (OHA) investment capabilities.

We are also focused on enhancing our operations, data, and technology capabilities to accelerate execution and deliver new solutions that drive AUM growth.

Advancing Our Strategic Priorities

With a shared focus on these priorities, we made important progress in 2023. We advanced efforts to deepen our client partnerships, expanded our investment and operational capabilities, and continued to broaden our global reach.

We made important hires and met some early milestones. I have included a few highlights of our progress below.

First Joint, Co-branded Product With OHA We launched the T. Rowe Price OHA Select Private Credit Fund, or OCREDIT, with over $1.5 billion of investable capital. OHA's 30-year history of delivering strong performance in alternative credit, coupled with our strong existing relationships and resources in the wealth channel, positions us for success. Together, we are building a consistent and repeatable process to deliver alternative investments to the wealth management channel.

Continued Strength in Target Date Franchise We have an industry-leading position in our Target Date franchise-with strong investment performance and net inflows of $13.1 billion in 2023. Product design enhancements were made to extend fixed income diversification and help defend against future market volatility. We continue to innovate and have added new capabilities, like our Retirement Income Funds, and are developing new customized retirement income solutions.

Broadened Range of Products

Clients expect compelling investment strategies offered in a variety of vehicles to meet their needs, and we are delivering. Our Active ETF business gained momentum in 2023 with the launch of five fully transparent equity exchange-traded funds (ETFs) and total ETF AUM exceeding $2.5 billion

at year-end. Our new Capital Appreciation Equity ETF that launched in June has placement with over 20 broker-dealers and scaled to $670 million in AUM by year-end. We also filled out our roster of separately managed accounts (SMAs) with the launch of four municipal and two equity strategies.

Innovative Blue Bond Strategy

We partnered with the International Finance Corporation, part of the World Bank Group, to create the T. Rowe Price Emerging Markets Blue Economy Bond Strategy-a pioneering global blue bond strategy that will increase access to finance for blue projects in emerging markets. With this innovative strategy, we are seeking to provide competitive returns while supporting the health, productivity, and resilience of the world's oceans and water resources.

Expanded Retirement Offering

In March, we acquired Retiree, Inc., to enhance our ability to expand and retain relationships with preretiree and retiree clients by providing tax-aware retirement income and Social Security claiming strategies. This acquisition reflects our commitment to broadening and evolving our already strong retirement capabilities and deepens our position as a retirement leader.

Revitalized Workplaces

Providing associates with a workplace environment that enables productivity, enhances well-being, and supports a flexible and collaborative approach to work is a significant driver of our culture.

In 2023, we completed the renovation of our new London office in Warwick Court, with nearly 1,000 associates relocating to the space in September. In addition, we celebrated several milestones in the construction of our new global headquarters in Baltimore, Maryland, including a ceremonial beam signing to mark the end of exterior construction.

We expect to begin to move associates in the fourth quarter of 2024.

Depth of Leadership Team

The strength and depth of our leadership team was demonstrated in 2023.

• With Robert Higginbotham's retirement, Dee Sawyer was named head of Global Distribution. Dee joined T. Rowe Price in 2011 and previously led our U.S. Intermediaries and Retirement Plan Services business channels.
• Arif Husain was named head of Global Fixed Income, with Andrew (Andy) McCormick's retirement. Arif, who joined the firm in 2013, was formerly the head of International Fixed Income and a portfolio manager.
• Eric Veiel's role expanded to become head of Global Investments. This broader role recognizes his strong leadership as a chief investment officer and the head of Global Equity, as well as his extensive investment experience.

Making an Impact

What we do matters. Our firm, our leaders, and our associates are making an impact:

• For the 13th consecutive year, we were named one of Fortune magazine's World's Most Admired Companies in 2023.7
• Among the more than 330 asset management firms nominated, we came in a very close second in Institutional Investor's inaugural 2023 ranking of America's Top Asset Management Firms.
• Jen Dardis, our chief financial officer, and Cheryl
  Mickel, our head of U.S. Taxable Low Duration, were named to Barron's Top 100 Most Influential
  Women in U.S. Finance 2023 list. This prestigious

recognition honors women who are helping

to shape the modern financial services industry and leading it confidently into the future.

• We were included in Forbes' annual list
  of America's Best Employers By State. 70,000 U.S. workers were surveyed on several factors, including diversity, compensation, and potential for development.
• Through our charitable giving program, our associates donated $8.8 million to more than 1,900 causes around the world. With our Matching Gift Program, this total rose to $15.6 million.

Looking Forward

Our progress is a result of our associates' commitment to investment excellence, to superb client service, and to driving our corporate strategy forward.

We have a strong foundation-with continued strong Target Date franchise flows, growth in our alternatives platform, and solid equity and fixed income performance. From this position of strength, we are building momentum in our work to deliver new vehicles, new capabilities, and new experiences. I am confident that we have the right team and that, working together with clarity and purpose, we will deliver for our clients, associates, and stockholders.

On behalf of our associates, thank you for your confidence in us.

Sincerely,

Robert W. Sharps

The Board of Directors of T. Rowe Price Group announced in mid-February 2024 that Bill Stromberg, non-executive chair, will retire from the Board at the company's May 2024 Annual Meeting of Stockholders. At that time, Rob Sharps will become chair of the Board, in addition to continuing as CEO and president of the firm.

Bill has had a long and distinguished career with

T. Rowe Price since joining in 1987 as an equity analyst. He went on to serve as a portfolio manager of the US Structured Research Equity and US Dividend Growth Strategies, director of Equity Research, head of U.S. Equity, head of Equity, president and CEO.

He led significant initiatives such as building out the firm's global investment and distribution capabilities

and successfully launching T. Rowe Price Investment Management (TRPIM)*. He has served as chair of the Board since 2019, providing strong leadership for the organization through tumultuous markets and the global pandemic while he continued his commitment to rigorous financial discipline and the buildout of diverse Board leadership. Bill's impact on T. Rowe Price will be felt for years to come, and we thank him for his steadfast leadership and contributions.

As a result of Rob's strong leadership of the firm through a challenging period, the Board felt that combining the chair and CEO roles was the right choice. We are excited about the steps Rob's taken and his vision for the future of the firm, and we look forward to working with him in his role as chair.

Though net outflows continued in 2023, my fellow directors and I are pleased with our leadership team's progress in executing our strategic priorities. We believe these initiatives, coupled with improved investment performance and our associates' unwavering commitment to clients, are setting the stage for renewed growth

and increasing shareholder value.

We had several changes to our Board in 2023.

Mary K. Bush retired after more than 10 years of dedicated service. We deeply appreciated her prudent guidance, integrity, and wisdom over the years and wish her well in her retirement. In addition to Mary's retirement, Richard Verma resigned from the Board to accept President Joe Biden's nomination to serve as the Deputy Secretary of State for Management and Resources. Rich's deep understanding of global perspectives and appreciation for culture made him a valuable contributor to our board. We are grateful for his service.

We also welcomed two new members: Cynthia Smith, senior vice president for MetLife, Inc., who brings

significant product distribution development experience and an understanding of operating in a highly regulated industry, and William Donnelly, who previously served as executive vice president for Mettler Toledo International Inc. and brings significant financial reporting and operational experience.

Our Board is composed of executives with extensive experience leading large and complex organizations. Their expertise and unique perspectives ensure strong governance, and I thank them for their service to

T. Rowe Price.

As I step down as chair of the Board after a 37-year career with T. Rowe Price, I want to underscore my confidence in the firm's leadership team and associates. With dedication and teamwork, they established strong momentum in 2023. They continue to work harder and smarter than ever to deliver great outcomes for the firm's clients across the globe.

It has been an honor to work with this extraordinary organization, and I look forward to watching the firm's success in the years to come.