Oct. 23, 2009 (PR Newswire) --

BALTIMORE, Oct. 23 /PRNewswire-FirstCall/ -- T. Rowe Price Group, Inc. (Nasdaq: TROW) today reported third quarter 2009 results, including net revenues of $498.1 million, net income of $132.9 million, and diluted earnings per common share of $.50. Net revenues in the 2008 third quarter were $554.8 million when net income was $152.8 million and diluted earnings per common share was $.56.

Investment advisory revenues decreased 10.4%, or $48.4 million from the comparable 2008 quarter. Assets under management increased from $315.6 billion at June 30, 2009, to $366.2 billion at September 30, including $218.4 billion in the T. Rowe Price mutual funds distributed in the United States and $147.8 billion in other managed investment portfolios. Net cash inflows in the third quarter 2009 totaled $7.4 billion. Higher market valuations and income added $43.2 billion to assets under management in the 2009 quarter.

Results for the first nine months of 2009 include net revenues of more than $1.3 billion, net income of $281.1 million, and diluted earnings per share of $1.07, down 37.4% from $1.71 per share in the comparable 2008 period. Assets under management have increased 32.5% from the beginning of 2009. Net cash inflows from investors totaled $15.4 billion, and market appreciation and net income added $74.5 billion during the year-to-date period.

Financial Highlights

Investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the United States decreased 11.5%, or $37.5 million, to $289.4 million in the third quarter of 2009. Average mutual fund assets under management were $204.3 billion in the 2009 quarter, a decrease of 9.7% from the average for the 2008 quarter. Mutual fund assets at September 30, 2009 were $218.4 billion, an increase of 15.6% or $29.4 billion from the end of June 2009, and 6.9% or $14.1 billion higher than the third quarter 2009 average.

Net inflows to the mutual funds were $2.6 billion during the third quarter of 2009. Net inflows included $3.5 billion to our bond funds that were offset by $.9 billion of net outflows from our money market funds. The Short Term Bond, New Income and International Bond funds together added $2.0 billion of net inflows. Cash flows into our stock funds were neutral after a $.5 billion transfer to our other managed investment portfolios at the end of the quarter. Higher market valuations and income increased our mutual fund assets under management by $26.8 billion during the third quarter of 2009.

Investment advisory revenues earned on the other investment portfolios that the firm manages decreased $10.9 million from the third quarter of 2008, or 7.9%, to $127.9 million. Average assets in these portfolios were $136.9 billion during the third quarter of 2009, down $12.9 billion, or 8.6%, from the 2008 quarter. Net inflows of $4.8 billion include the $.5 billion transferred from the mutual funds at the end of the 2009 quarter. Higher market valuations and income during the third quarter of 2009 added $16.4 billion. Investors outside the United States now account for 11% of the firm's assets under management.

The target-date retirement investment portfolios continue to be a significant source of assets under management. During the 2009 quarter, net inflows of $1.3 billion originated in these portfolios. Assets in the target-date retirement portfolios were $39.7 billion at September 30, 2009, accounting for nearly 11% of the firm's assets under management and 17.5% of its mutual fund assets.

Operating expenses were $290.8 million in the third quarter of 2009, down $25.2 million from the 2008 quarter. Compensation and related costs decreased $14.6 million, or 6.9%, from the comparable 2008 quarter, primarily due to reductions in our average headcount, employee benefits costs and other employment expenses. At September 30, 2009, the firm employed 4,762 associates, down 11.6% from the end of 2008.

Advertising and promotion expenditures were down 22.2%, or $3.7 million, compared to the third quarter of 2008. The firm currently estimates that advertising and promotion expenditures for the fourth quarter will increase about $12 million from the 2009 third quarter. The firm varies its level of spending based on market conditions and investor demand as well as its efforts to expand the investor base.

Other operating expenses decreased $8.3 million, or 17.5% from the comparable 2008 quarter, as cost control efforts have reduced most types of expenses, including professional fees and travel and related costs.

The third quarter 2009 provision for income taxes as a percentage of pretax income is 37.5% in order for the firm's provision for the first nine months to be 37.4%.

Management Commentary

James A.C. Kennedy, the company's chief executive officer and president, commented: "The firm's investment advisory results relative to our peers remain strong, with 87% of the T. Rowe Price funds across their share classes surpassing their comparable Lipper averages on a total return basis for the 5-year period ended September 30, 2009, 83% outperforming for the three-year period, and at least 79% outperforming for the one- and 10-year periods. In addition, T.