10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

Commission File Number: 000-32191

T. ROWE PRICE GROUP, INC.

(Exact name of registrant as specified in its charter)

Maryland	52-2264646
(State of incorporation)	(I.R.S. Employer Identification No.)

100 East Pratt Street, Baltimore, Maryland 21202
(Address including Zip Code of principal executive offices)

(410) 345-2000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

þ  Yes   o  No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

þ  Yes   o  No

The number of shares outstanding of the issuer’s common stock ($.20 par value), as of the latest practicable date, July 25, 2005, is 129,779,571.

The exhibit index is at Item 6 on page 16.

Page 1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

	12/31/2004		06/30/2005
ASSETS
Cash and cash equivalents	$	499,750	$	624,034
Accounts receivable		158,342		164,594
Investments in sponsored mutual funds		215,159		244,581
Debt securities held by savings bank subsidiary		114,075		112,552
Property and equipment		203,807		208,283
Goodwill		665,692		665,692
Other assets		72,000		48,540
Total assets	$	1,928,825	$	2,068,276
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Accounts payable and accrued expenses	$	54,172	$	41,236
Accrued compensation and related costs		37,799		89,846
Income taxes payable		9,327		7,097
Dividends payable		29,800		29,825
Customer deposits at savings bank subsidiary		100,427		99,142
Total liabilities		231,525		267,146
Commitments and contingent liabilities
Stockholders’ equity
Preferred stock, undesignated, $.20 par value — authorized and unissued 20,000,000 shares		—		—
Common stock, $.20 par value — authorized 500,000,000 shares; issued 129,607,697 shares in 2004 and 129,707,258 shares in 2005		25,922		25,942
Additional capital in excess of par value		250,764		217,610
Retained earnings		1,378,948		1,516,217
Accumulated other comprehensive income		41,666		41,361
Total stockholders’ equity		1,697,300		1,801,130
	$	1,928,825	$	2,068,276

See the accompanying notes to the condensed consolidated financial statements.

Page 2

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)

	Three months ended				Six months ended
Revenues	06/30/2004		06/30/2005		06/30/2004		06/30/2005
Investment advisory fees	$	249,002	$	295,531	$	494,011	$	584,534
Administrative fees and other income		60,546		67,881		121,011		135,836
Investment income of savings bank subsidiary		924		1,046		1,926		2,049
Total revenues		310,472		364,458		616,948		722,419
Interest expense on savings bank deposits		800		912		1,625		1,802
Net revenues		309,672		363,546		615,323		720,617
Operating expenses
Compensation and related costs		113,084		130,123		222,864		257,265
Advertising and promotion		16,117		18,823		37,176		42,294
Depreciation and amortization of property and equipment		9,843		10,502		19,971		20,274
Occupancy and facility costs		16,525		18,166		32,183		36,485
Other operating expenses		26,089		30,411		52,254		61,497
		181,658		208,025		364,448		417,815
Net operating income		128,014		155,521		250,875		302,802
Other investment income		939		5,522		2,092		7,577
Credit facility expenses		468		96		800		191
Net non-operating income		471		5,426		1,292		7,386
Income before income taxes		128,485		160,947		252,167		310,188
Provision for income taxes		48,221		58,198		94,564		113,142
Net income	$	80,264	$	102,749	$	157,603	$	197,046
Earnings per share
Basic	$	0.63	$	0.79	$	1.25	$	1.52
Diluted	$	0.60	$	0.76	$	1.18	$	1.45
Dividends declared per share	$	0.19	$	0.23	$	0.38	$	0.46
Weighted average shares
Outstanding		126,976		129,815		126,536		130,039
Assuming dilution		133,513		135,715		133,645		136,226

See the accompanying notes to the condensed consolidated financial statements.

Page 3

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Six months ended
	06/30/2004			06/30/2005
Cash flows from operating activities
Net income	$	157,603		$	197,046
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization of property and equipment		19,971			20,274
Other changes in assets and liabilities		33,278			73,433
Net cash provided by operating activities		210,852			290,753
Cash flows from investing activities
Debt securities held by savings bank subsidiary		4,695			916
Additions to property and equipment		(21,589	)		(24,694	)
Mutual fund and other investment activity		(10,774	)		(29,188	)
Net cash used in investing activities		(27,668	)		(52,966	)
Cash flows from financing activities
Repurchases of common stock		—			(75,853	)
Stock options exercised		28,362			23,387
Dividends paid to stockholders		(47,721	)		(59,752	)
Change in savings bank subsidiary deposits		(5,116	)		(1,285	)
Net cash used in financing activities		(24,475	)		(113,503	)
Cash and cash equivalents
Net increase during period		158,709			124,284
At beginning of year		236,533			499,750
At end of period	$	395,242		$	624,034

See the accompanying notes to the condensed consolidated financial statements.

Page 4

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(dollars in thousands)

				Additional						Accumulated
				capital in						other			Total
	Common			excess of par			Retained			comprehensive			stockholders'
	stock			value			earnings			income			equity
Balance at December 31, 2004, 129,607,697 common shares	$	25,922		$	250,764		$	1,378,948		$	41,666		$	1,697,300
Comprehensive income
Net income								197,046
Change in unrealized security holding gains, net of taxes, including $3,093 in the second quarter											(305	)
Total comprehensive income														196,741
1,399,561 common shares issued under stock-based compensation plans		280			42,439									42,719
1,300,000 common shares repurchased		(260	)		(75,593	)								(75,853	)
Dividends declared								(59,777	)					(59,777	)
Balance at June 30, 2005, 129,707,258 common shares	$	25,942		$	217,610		$	1,516,217		$	41,361		$	1,801,130

See the accompanying notes to the condensed consolidated financial statements.

Page 5

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — THE COMPANY AND BASIS OF PREPARATION.

T. Rowe Price Group derives its consolidated revenues and net income primarily from investment advisory services that its subsidiaries provide to individual and institutional investors in the sponsored T. Rowe Price mutual funds and other investment portfolios. We also provide our investment advisory clients with related administrative services, including mutual fund transfer agent, accounting and shareholder services; participant recordkeeping and transfer agent services for defined contribution retirement plans; discount brokerage; and trust services. The investors that we serve are primarily domiciled in the United States of America.

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

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

The unaudited interim financial information contained in these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in our 2004 Annual Report.

NOTE 2 — STOCK OPTION-BASED COMPENSATION.

Our stock-based compensation plans are accounted for using the intrinsic value based method. The exercise price of each option granted is equivalent to the market price of our common stock at the date of grant. Accordingly, no compensation expense related to stock option grants has been recognized in the condensed consolidated statements of income.

The following table illustrates the pro forma effect on net income (in thousands) and earnings per share if we had applied the fair value based method to recognize expense associated with our outstanding and not yet vested stock options. Forfeitures of options are recognized as they occur.

	Three months ended						Six months ended
	06/30/2004			06/30/2005			06/30/2004			06/30/2005
Net income, as reported	$	80,264		$	102,749		$	157,603		$	197,046
Additional stock-option based compensation expense using the fair value based method		(10,537	)		(13,294	)		(23,865	)		(27,034	)
Related income tax benefits		3,108			4,173			7,399			8,718
Pro forma net income	$	72,835		$	93,628		$	141,137		$	178,730
Earnings per share
Basic — as reported	$	0.63		$	0.79		$	1.25		$	1.52
Basic — pro forma	$	0.57		$	0.72		$	1.12		$	1.37
Diluted — as reported	$	0.60		$	0.76		$	1.18		$	1.45
Diluted — pro forma	$	0.55		$	0.69		$	1.06		$	1.31

At June 30, 2005, we had 9,642,750 options outstanding that will vest over the period through February 2010. Compensation expense, based on the fair-value estimates made at the grant dates, which is attributable to future periods when these options vest, and the related tax benefits, will be:

Page 6

	Compensation		Income tax
(in thousands)	expense		benefits			Net effect
Third quarter 2005	$	12,334,000	$	(3,737,000	)		8,597,000
Fourth quarter 2005		10,925,000		(3,300,000	)		7,625,000
2006		27,927,000		(8,050,000	)		19,877,000
2007 through 2010		27,541,000		(7,194,000	)		20,347,000
Total	$	78,727,000	$	(22,281,000	)	$	56,446,000

These amounts will change to reflect future option grants, estimated and actual forfeitures, and tax benefits that arise upon the future disqualification of incentive stock option grants. In addition, beginning January 1, 2006, we are required to adopt the provisions of Statement of Financial Accounting Standards No. 123R, Share-Based Payment, and begin recognizing stock option-based compensation expense in our income statement. Our stock option-based compensation expense for periods after December 31, 2005 will be calculated in a manner similar to that used in making the pro forma disclosures above, except that we will also include a reduction for estimated future forfeitures that will be adjusted over time to reflect actual forfeitures. It is important to note that the use of the fair value method to recognize stock-based compensation expense in the income statement does not diminish total stockholders’ equity.

The following table summarizes the activity in our outstanding stock option grants during the six months ended June 30, 2005.

				Weighted-average
	Options			exercise price
Outstanding at December 31, 2004		24,130,402		$	36.65
Granted, including 224,636 reload options		243,136			60.91
Exercised		(1,864,173	)		27.60
Forfeited and cancelled		(246,313	)		44.77
Outstanding at June 30, 2005		22,263,052		$	37.58

NOTE 3 — INFORMATION ABOUT REVENUES AND SERVICES.

Revenues (in thousands) from advisory services provided under agreements with sponsored mutual funds and other investment clients for the interim periods ended June 30 include:

	Three months ended				Six months ended
	06/30/2004		06/30/2005		06/30/2004		06/30/2005
Sponsored mutual funds in the U.S.
Stock	$	146,214	$	179,148	$	288,695	$	352,647
Bond and money market		32,694		34,987		65,721		69,680
		178,908		214,135		354,416		422,327
Other portfolios		70,094		81,396		139,595		162,207
	$	249,002	$	295,531	$	494,011	$	584,534

The following table summarizes the various investment portfolios and assets under management (in billions) on which advisory fees are earned.

Page 7

	Average during				Average during
	the second quarter				the first half
	2004		2005		2004		2005		12/31/2004		06/30/2005
Sponsored mutual funds in the U.S.
Stock	$	96.0	$	118.2	$	94.6	$	116.7	$	114.3	$	122.3
Bond and money market		29.4		31.9		29.5		31.7		31.2		32.2
		125.4		150.1		124.1		148.4		145.5		154.5
Other portfolios		76.6		88.6		75.7		88.3		89.7		90.3
	$	202.0	$	238.7	$	199.8	$	236.7	$	235.2	$	244.8

Fees for advisory-related administrative services provided to our sponsored mutual funds were $90,942,000 and $102,475,000 for the first six months of 2004 and 2005, respectively. Accounts receivable from the mutual funds aggregate $88,659,000 at December 31, 2004 and $89,622,000 at June 30, 2005. We provide all services to the sponsored U.S. mutual funds under contracts that are subject to periodic review and approval by each of the funds’ boards. Investment advisory contracts are also subject to approval by the funds’ shareholders.

NOTE 4 — INCOME TAXES.

Our deferred tax accounts included a deferred tax asset and an offsetting valuation allowance of $1.6 million that were recognized in 2002 for an operating loss carryforward originating in an international subsidiary. During the second quarter of 2005, we developed a tax-planning strategy that makes it more likely than not that we would be able to realize a substantial portion of this deferred tax asset. Accordingly, we reversed $1.4 million of the valuation allowance in the second quarter of 2005. The remaining valuation allowance is provided for the estimated costs of implementing the strategy.

Page 8

REVIEW REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have reviewed the accompanying condensed consolidated balance sheet of T. Rowe Price Group, Inc. and subsidiaries as of June 30, 2005, the related condensed consolidated statements of income for the three- and six-month periods ended June 30, 2005 and 2004, the related condensed consolidated statements of cash flows for the six-month periods ended June 30, 2005 and 2004, and the related condensed consolidated statement of stockholders’ equity for the six-month period ended June 30, 2005. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards established by the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of T. Rowe Price Group, Inc. and subsidiaries as of December 31, 2004, and the related consolidated statements of income, cash flows, and stockholders’ equity for the year then ended (not presented herein); and in our report dated February 4, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

Baltimore, Maryland
July 26, 2005

Page 9

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

GENERAL.

Our revenues and net income are derived primarily from investment advisory services provided to U.S. individual and institutional investors in our sponsored mutual funds and other managed investment portfolios. Our investment advisory clients outside the United States have grown since we broadly expanded the availability of our services to them in 2001 and now account for more than 5% of our assets under management at June 30, 2005.

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

Financial market results during the second quarter of 2005 were weak, continuing the first quarter’s disappointing results through to mid-year. Results were mixed among the three major stock indexes, though all finished below their year-end 2004 levels. Investor concerns about the strength of the economy, rising interest rates, and record high oil prices, as well as terrorism and military conflict, continued to weigh on the financial markets. The NASDAQ index, which is heavily weighted with technology companies, finished up 2.9% for the quarter following a loss of 8.1% in the first quarter. Following 2.6% declines in the first quarter, the broad S&P 500 index rose only .9% while the Dow Industrials fell 2.2% during the second quarter. As for fixed income securities, the Federal Reserve increased the federal funds rate twice during the second quarter pushing the target short-term rate to 3.25%. Yields for 10-year U.S. Treasuries declined to 3.92% at June 30, down significantly from the nearly 4.5% level of March 31. Bond prices rose accordingly.

In this financial environment, total assets under our management nonetheless ended the first half of 2005 at a record $244.8 billion, up $8.9 billion during the quarter and $9.6 billion since the beginning of the year. Strong relative investment performance and brand awareness contributed significantly to investors entrusting $8.7 billion of net cash inflows to our management during the first half of 2005, including $3.5 billion in the second quarter. Higher market valuations and income in the second quarter of 2005 reversed the effect of lower financial market valuations in the first quarter, and have increased assets under our management by nearly $.9 billion during the six-month period.

Assets under management at June 30, 2005 include $184.6 billion in equity securities and $60.2 billion in bond and money market holdings. The related investment portfolios consist of $154.5 billion in the T. Rowe Price mutual funds distributed in the United States and $90.3 billion in other investment portfolios that we manage, including separately managed accounts, sub-advised funds, and other sponsored investment funds offered to investors outside the United States and through variable annuity life insurance plans.

RESULTS OF OPERATIONS — Three months ended June 30, 2005 versus 2004.

Net revenues increased nearly $54 million to $363.5 million. Net operating income increased more than 21% to $155.5 million from $128 million. Net income increased $22.5 million to $102.7 million, up 28% from $80.3 million. Diluted earnings per share increased nearly 27% from $.60 to $.76.

Investment advisory revenues were up almost 19%, or $46.5 million, due to increased assets under management. Average mutual fund assets were $150.1 billion, nearly $25 billion higher than the $125.4 billion average of the 2004 second quarter. Average assets in other managed portfolios were $88.6 billion, up $12 billion versus the average of $76.6 billion in the 2004 period. Total average assets under management increased $36.7 billion from the 2004 quarter to $238.7 billion for the second quarter of 2005.

Investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the United States increased $35.2 million. Mutual fund assets ended June 2005 at $154.5 billion, up $6.2 billion during the second quarter of 2005. Net investor inflows added $2.8 billion to mutual fund assets during the 2005 quarter, including $2.6 billion of net cash flows to the U.S. stock funds. Market appreciation and income, net of dividends not reinvested, added

Page 10

$3.4 billion during the same period. The Growth Stock, Capital Appreciation, and Equity Income funds each added more than $500 million of net investor inflows and, together, accounted for nearly $1.9 billion of the funds’ net inflows.

Investment advisory revenues earned on the other investment portfolios that we manage increased $11.3 million to $81.4 million. Ending assets in these portfolios were $90.3 billion, up $2.7 billion from March 31, 2005. Market value appreciation and income increased these assets under management nearly $2 billion and investors made net investments of $750 million into their investment portfolios.

Administrative fees and other income increased $7.3 million to nearly $68 million. The change in these revenues includes $5.7 million from our transfer agent and defined contribution plan recordkeeping services to mutual funds and their investors based on increases in service activity including shareholder account and transaction volume. Additionally, revenues increased $.9 million from 12b-1 distribution fees received on greater assets under management in the Advisor and R classes of our sponsored mutual fund shares. These changes in administrative fees are generally offset by similar changes in related operating expenses that we incur to provide these services and distribute the Advisor and R classes of mutual fund shares through third party financial intermediaries.

Operating expenses in the 2005 quarter were $26.4 million more than in the 2004 quarter. Our largest expense, compensation and related costs, increased $17.0 million from the second quarter of 2004. The number of our associates, their total compensation, and the costs of their employee benefits have all increased. Our bonus compensation accrual is based on our anticipated 2005 operating results, which reflect our strong relative investment performance, continued growth in assets under management including new investment inflows, and sustained high-quality investor services. Base salaries for our associates were increased modestly on January 1, 2005, and we have added 382 associates since April 1, 2004, primarily to handle increased volume-related activities and growth. At June 30, we employed 4,261 associates.

Advertising and promotion expenditures were up $2.7 million versus the 2004 period as investor activity has increased versus the 2004 period. We vary our level of spending based on market conditions and investor demand as well as our efforts to expand our investor base in the United States and abroad. We expect our advertising and promotion expenditures in the third quarter of 2005 will decline about 15% from the second quarter of this year while our expenditures for the fourth quarter will be 10% to 15% higher than the comparable 2004 period.

Occupancy and facility costs together with depreciation expense increased $2.3 million. Our costs for rented office facilities, including increased space, and related maintenance and operating costs have increased along with our staff size and business needs.

Other operating expenses increased $4.3 million, including $.9 million of distribution expenses recognized on greater assets under management sourced from financial intermediaries who distribute our Advisor and R classes of mutual fund shares. These distribution costs are offset by an equal increase in our administrative revenues recognized from 12b-1 fees as discussed above. The cost of information services increased $2 million from the prior year’s quarter, primarily because of our decision in late 2004 to pay for non-broker-dealer third-party investment research and related services directly. Other operating expenses in 2005 have also risen to meet increased business demands.

Our net non-operating income, which includes the recognition of investment gains and losses as well as interest income and credit facility expenses, increased nearly $5 million to $5.4 million. Larger cash and mutual fund investment balances along with higher interest rates added $2.7 million to our investment income. Other investment gains added $1.9 million, primarily on the disposition of a cost-basis equity investment. Credit facility costs were down $.4 million as we reduced the size and ongoing cost of our credit facility in June 2004.

The 2005 provision for income taxes as a percentage of pretax income is 36.2% reflecting the $1.4 million reversal of the valuation allowance for foreign net operating loss carryforwards discussed in Note 4 to the accompanying interim financial statements.

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RESULTS OF OPERATIONS — Six months ended June 30, 2005 versus 2004.

Net revenues increased more than $105 million to nearly $721 million. Net operating income increased almost 21% to about $303 million from nearly $251 million. Net income increased $39.4 million to $197.0 million, up 25% from $157.6 million. Diluted earnings per share increased 23% from $1.18 to $1.45.

Investment advisory revenues were up 18%, or $90.5 million, due to increased assets under management. Average mutual fund assets were $148.4 billion, up $24.3 billion from the prior year’s first half. Average assets in other managed portfolios were $88.3 billion, up $12.6 billion versus the average of $75.7 billion in the 2004 period. Total average assets under management increased nearly $37 billion to $236.7 billion for the first half of 2005.

Investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the United States increased $67.9 million. Mutual fund assets ended June 2005 at $154.5 billion, up $9 billion from the beginning of the year. Net investor inflows added $8.3 billion to mutual fund assets during the first half of the year. Net cash flows into the U.S. stock funds were $7.2 billion in the first half of 2005. The Growth Stock, Capital Appreciation, Equity Income, Mid-Cap Value, and New Era funds each added more than $500 million of net investor inflows and, together, accounted for $5.7 billion of the funds’ net inflows. The T. Rowe Price international stock, bond, and money market funds also experienced positive inflows. Second quarter market gains and income, net of dividends not reinvested, more than offset the effect of market value declines in the first quarter, and for the 2005 year-to-date period added $.7 billion to fund assets.

Investment advisory revenues earned on the other investment portfolios that we manage increased $22.6 million to $162 million. Ending assets in these portfolios were $90.3 billion, up $.6 billion from the beginning of 2005. Market value changes and income added nearly $.2 billion while investors made net additions of more than $.4 billion to these portfolios.

Administrative fees and other income increased $14.8 million to nearly $136 million. The change in these revenues includes $11.8 million from our transfer agent and defined contribution plan recordkeeping services to mutual funds and their investors. Additionally, revenues increased $2.1 million from 12b-1 distribution fees received on greater assets under management in the Advisor and R classes of our sponsored mutual fund shares.

Operating expenses in the first half of 2005 were $53.4 million more than in the 2004 period. Our largest expense, compensation and related costs, increased $34.4 million from the first half of 2004. The number of our associates, their total compensation, and the costs of their employee benefits have all increased. Advertising and promotion expenditures were up $5.1 million or 14% versus the 2004 period. We expect that our advertising and promotion expenditures for the full year 2005 will be about 15% higher than 2004. Occupancy and facility costs together with depreciation expense increased $4.6 million.

Other operating expenses increased $9.2 million, including $2.1 million of distribution expenses recognized on greater assets under management sourced from financial intermediaries who distribute our Advisor and R classes of mutual fund shares. The cost of information services increased $3.2 million from the first half of 2004, primarily because of our decision late last year to pay for non-broker-dealer third-party investment research and related services directly. Other operating expenses in 2005 have also risen to meet increased business demands.

Our net non-operating income, which includes the recognition of investment gains and losses as well as interest income and credit facility expenses, increased $6.1 million to almost $7.4 million. Larger cash and mutual fund investment balances along with higher interest rates added $4.2 million to our investment income. Other net investment gains added $1.3 million, primarily on the disposition of a cost-basis equity investment. Credit facility costs were down $.6 million as we reduced the size and ongoing cost of our credit facility in June 2004.

The 2005 provision for income taxes as a percentage of pretax income is 36.5% reflecting the $1.4 million reversal of the valuation allowance for foreign net operating loss carryforwards discussed in Note 4 to the accompanying interim financial statements. We currently expect that our effective tax rate for the full year 2005 will be approximately 36.7%.

Page 12

CAPITAL RESOURCES AND LIQUIDITY.

Available net liquid assets, including our mutual fund investments in which there are no unrealized losses, were $700 million at June 30, 2005. A $300 million undrawn, committed credit facility expiring in June 2007 is also available to the company.

Operating activities provided cash flows of $291 million in the first half of 2005, up $80 million versus the 2004 period. Net income accounted for nearly $40 million of the increase while timing differences in the cash settlements of our assets and liabilities added $40 million. Net cash used in investing activities totaled $53 million, up more than $25 million from the 2004 period. We added $29 million to our longer-term investment portfolio in the first half of 2005, up more than $18 million versus the 2004 period. Net cash used in financing activities totaled $113.5 million in the first half of 2005, up $89 million from the 2004 period. We expended nearly $76 million to repurchase 1.3 million shares of our common stock in the first half of 2005. We did not repurchase any shares in the first half of 2004. We also distributed $12 million more to our stockholders in the 2005 period based on our larger per-share quarterly dividend.

PENDING CHANGE IN ACCOUNTING FOR STOCK OPTION-BASED COMPENSATION.

As of April 21, 2005, the Securities and Exchange Commission delayed the required implementation date of Statement of Financial Accounting Standards No. 123R, Share-Based Payment, which will require us to recognize stock option-based compensation expense in our income statement. Accordingly, we intend to implement Statement 123R on January 1, 2006, the date required for registrants with a calendar year end. See Note 2 beginning on page 6 of this Form 10-Q report for more information.

FORWARD-LOOKING INFORMATION.

From time to time, information or statements provided by or on behalf of T. Rowe Price, including those within this quarterly report, may contain certain forward-looking information, including information or anticipated information relating to changes in our revenues and net income, changes in the amount and composition of our assets under management, our expense levels, and our expectations regarding financial markets and other 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. 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 T. Rowe Price mutual funds and other managed investment portfolios; fluctuations in the financial markets around the world that result in appreciation or depreciation of the assets under our management; our introduction of new mutual funds and investment portfolios; and changes in retirement savings trends favoring participant-directed investments and defined contribution plans. The ability to attract and retain investors’ assets under our management is dependent on investor sentiment and confidence; the relative investment performance of the Price mutual funds and other managed investment portfolios as compared to competing offerings and market indexes; the ability to maintain our investment management and administrative fees at appropriate levels; competitive conditions in the mutual fund, asset management, and broader financial services sectors; and our level of success in implementing our strategy to expand our business. Our revenues are substantially dependent on fees earned under contracts with the Price funds and could be adversely affected if the independent directors of one or more of the Price funds terminated or significantly altered the terms of the investment management or related administrative services agreements.

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 expenses in response to market conditions, including our efforts to expand our investment advisory business to investors outside the United States and to further penetrate our distribution channels within the United States; variations in the level of total compensation expense

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due to, among other things, bonuses, changes in our employee count and mix, and competitive factors; any goodwill 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; 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 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 mutual funds and investing in general, or in particular classes of mutual funds or other investments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There has been no material change in the information provided in Item 7A of the 2004 Form 10-K Annual Report.

Item 4. Controls and Procedures.

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2005. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, including this Form 10-Q quarterly report, is appropriately recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures as of June 30, 2005 are effective at the reasonable assurance level.

Our management, including our principal executive and principal financial officers, has evaluated any change in our internal control over financial reporting that occurred during the second quarter of 2005, and has concluded that there was no change during the second quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On September 16, 2003, a purported class action (T.K. Parthasarathy,et al., including Woodbury, v. T. Rowe Price International Funds, Inc., et al.) was filed in the Circuit Court, Third Judicial Circuit, Madison County, Illinois, against T. Rowe Price International and the T. Rowe Price International Funds with respect to the T. Rowe Price International Stock Fund. The basic allegations in the case were that the T. Rowe Price defendants did not make appropriate value adjustments to the foreign securities of the T. Rowe Price International Stock Fund prior to calculating the Fund’s daily share prices, thereby allegedly enabling market timing traders to trade the Fund’s shares in such a way as to disadvantage long-term investors. The plaintiffs sought monetary damages.

The case was moved on April 22, 2005 to the U.S. District Court for the Southern District of Illinois, which dismissed the case on May 27, 2005. The plaintiff’s motion to alter and/or amend the order of dismissal was denied on July 7, 2005.

From time to time, various claims against us arise in the ordinary course of business, including employment-related claims. In the opinion of management, after consultation with counsel, it is unlikely that there will be any adverse determination in one or more pending claims that would have a material adverse effect on our financial position or results of operations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c) The following table summarizes activity during the second quarter of 2005 under the 2003 Board of Director’s repurchase authorization.

					Total Number		Maximum
					of Shares		Number of
					Purchased as		Shares that
	Total				Part of		May Yet Be
	Number of		Average Price		Publicly		Purchased
	Shares		Paid per		Announced		Under the
Period	Purchased		Share		Programs		Programs
April 2005		179,000	$	54.86		179,000		4,667,010
May 2005		521,000	$	56.29		521,000		4,146,010
June 2005		—		—		—		4,146,010
Total		700,000	$	55.93		700,000

Item 4. Submission of Matters to a Vote of Security Holders.

The annual meeting of our stockholders was held on April 26, 2005. The proxy statement and solicitation pertaining to this meeting were previously filed with the Commission. Shares eligible to vote were 130,282,871 at the record date of February 25, 2005.

The eleven nominees for the Board of Directors were elected to serve until the next annual meeting of directors or until their respective successors are elected and qualify. The tabulation of votes was:

Nominee	For		Withheld
Edward C. Bernard		108,784,511		8,014,762
James T. Brady		109,141,743		7,657,530
J. Alfred Broaddus, Jr.		111,299,647		5,499,626
Donald B. Hebb, Jr.		108,362,277		8,436,996
James A.C. Kennedy		109,039,374		7,759,899
James S. Riepe		111,071,397		5,727,876
George A. Roche		111,017,842		5,781,431
Brian C. Rogers		111,110,520		5,688,753
Dr. Alfred Sommer		111,320,806		5,478,467
Dwight S. Taylor		111,323,282		5,475,991
Anne Marie Whittemore		111,332,354		5,466,919

The appointment of KPMG LLP as the company’s independent registered public accounting firm for 2005 was approved by a vote of 113,874,670 for; 2,294,751 against; and 629,852 abstentions.

Item 5. Other Information.

On July 27, 2005, we issued a press release reporting our results of operations for the second quarter and first half of 2005. A copy of this press release is furnished herewith as exhibit 99. The information in this Item 5 and in Exhibit 99 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

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Item 6. Exhibits.

The following exhibits required by Item 601 of Regulation S-K are furnished herewith.

3(i)	Amended and Restated Charter of T. Rowe Price Group, Inc. as of March 9, 2001. (Incorporated by reference from Form 10-K for 2000; Accession No. 0001113169-01-000003.)
3(ii)	Amended and Restated By-Laws of T. Rowe Price Group, Inc. as of December 12, 2002. (Incorporated by reference from Form 10-K for 2002; Accession No. 0000950133-03-000699.)
15	Letter from KPMG LLP, independent registered public accounting firm, re unaudited interim financial information.
31(i).1	Rule 13a-14(a) Certification of Principal Executive Officer.
31(i).2	Rule 13a-14(a) Certification of Principal Financial Officer.
32	Section 1350 Certifications.
99	Press release issued July 27, 2005 reporting our results of operations for the second quarter and first half of 2005.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on July 27, 2005.

T. Rowe Price Group, Inc.

/s/ Kenneth V. Moreland
     Vice President and Chief Financial Officer

Page 16

EX-15

Exhibit 15 Letter from KPMG LLP, independent registered public accounting firm,
re unaudited interim financial information

T. Rowe Price Group, Inc.
100 East Pratt Street
Baltimore, Maryland 21202

Re: Registration Statements on Form S-8: No. 33-7012, No. 33-37573, No. 33-72568, No. 33-58749, No. 333-20333, No. 333-90967, No. 333-59714, No. 333-120882 and No. 333-120883

With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 26, 2005 related to our review of interim financial information.

Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of sections 7 and 11 of the Act.

/s/ KPMG LLP

Baltimore, Maryland
July 26, 2005

EX-31.(I).1

Exhibit 31(i).1 Rule 13a-14(a) Certification of Principal Executive Officer

I, George A. Roche, certify that:

1. I have reviewed this Form 10-Q Quarterly Report for the quarterly period ended June 30, 2005 of T. Rowe Price Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 26, 2005

/s/ George A. Roche
      President and Chief Executive Officer

EX-31.(I).2

Exhibit 31(i).2 Rule 13a-14(a) Certification of Principal Financial Officer

I, Kenneth V. Moreland, certify that:

1. I have reviewed this Form 10-Q Quarterly Report for the quarterly period ended June 30, 2005 of T. Rowe Price Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 26, 2005

/s/ Kenneth V. Moreland
      Vice President and Chief Financial Officer

EX-32

Exhibit 32 Section 1350 Certifications

We certify, to the best of our knowledge, based upon a review of the Form 10-Q Quarterly Report for the quarterly period ended June 30, 2005 of T. Rowe Price Group, Inc., that:

(1) The Form 10-Q Quarterly Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Form 10-Q Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of T. Rowe Price Group, Inc.

July 26, 2005

/s/ George A. Roche, Principal Executive Officer

/s/ Kenneth V. Moreland, Principal Financial Officer

A signed original of this written statement has been provided to T. Rowe Price Group, Inc. and will be retained by T. Rowe Price Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99

Exhibit 99

T. ROWE PRICE GROUP REPORTS RECORD QUARTERLY RESULTS

Assets Under Management Reach Nearly $245 Billion

BALTIMORE (July 27, 2005) — T. Rowe Price Group, Inc. (Nasdaq: TROW) today reported record quarterly results for its second quarter 2005 that include net revenues of $363.5 million, net income of $102.7 million, and diluted earnings per share of $.76, an increase of almost 27% from the $.60 per share reported for the second quarter of 2004 and a 7% increase over the prior record of $.71 per share achieved in the fourth quarter of 2004. Comparable net revenues in the second quarter of 2004 were $309.7 million, and net income was $80.3 million.

Operating expenses for the 2005 quarter were up $26 million or 15% to $208 million. Net operating income was $155.5 million, up $27.5 million or 21.5% compared to the 2004 period. Net non-operating income also increased to $5.4 million from $.5 million in the prior year’s quarter.

Assets under management increased to a record $244.8 billion at June 30, 2005, up $9.6 billion from the end of 2004, and $8.9 billion from March 31, 2005.

For the first half of 2005, year-to-date results include net revenues of $721 million, net income of $197 million and diluted earnings per share of $1.45, an increase of 23% from the $1.18 per share reported for the first half of 2004.

Financial Highlights
Investment advisory revenues were up nearly 19%, or $46.5 million versus the 2004 quarter. Record average assets under management were $238.7 billion, more than $36 billion higher than the average of the 2004 quarter.

Investment advisory revenues earned from the T. Rowe Price mutual funds distributed in the United States increased $35 million. Mutual fund assets ended June 2005 at $154.5 billion, up

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$6.2 billion during the 2005 quarter. Investors added net inflows of $2.8 billion to the mutual funds during the quarter while market appreciation and income added another $3.4 billion. Net cash inflows were concentrated in the U.S. stock funds which accounted for 95% of the net inflows. The Growth Stock, Capital Appreciation, and Equity Income funds each added more than $500 million of net investor inflows and, together, accounted for $1.9 billion of the funds’ net inflows. In addition, our series of target date Retirement Funds, which are designed to provide shareholders with single, diversified portfolios that invest in underlying T. Rowe Price funds and automatically shift asset allocations between funds as the investor ages, have continued to see strong asset growth with net inflows of more than $750 million during the second quarter. Total assets in the Retirement Funds reached $5.4 billion at June 30, 2005.

Investment advisory revenues earned from other managed investment portfolios, consisting of institutional separate accounts, sub-advised funds, sponsored mutual funds which are offered to non-U.S. investors, and variable insurance portfolios, increased $11 million to more than $81 million. Ending assets in these portfolios were $90.3 billion, up $2.7 billion from March 31, 2005. Market value appreciation added nearly $2 billion to these portfolios during the quarter and investors, primarily in US equities, made net investments of $750 million.

Operating expenses in the 2005 quarter were $26 million more than in the 2004 quarter. Our largest expense, compensation and related costs, increased $17 million from the second quarter of 2004. The number of our associates, their total compensation costs, and the costs of their employee benefits have all increased. The firm has increased its staff size by about 3% since the beginning of 2005 and, at June 30, employed 4,261 associates across the globe.

Advertising and promotion expenditures were up $2.7 million versus the 2004 period. The firm varies its level of spending based on market conditions and investor demand. For the third quarter of 2005, the firm expects that these costs will decline about 15% from the second quarter of this year, while expenditures for the full year 2005 will be about 15% higher than in 2004.

Net non-operating income in the 2005 quarter increased nearly $5 million over the 2004 period. Larger cash and investment balances and higher interest rates contributed $2.7 million of the increase with the remaining gain primarily resulting from the disposition of a cost-basis equity investment.

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The second quarter 2005 provision for income taxes as a percentage of pretax income decreased from 36.8% in the first quarter to 36.2%. This lower rate reflects the reversal of a valuation allowance for tax benefits arising from a 2002 foreign net operating loss carryforward. The effective rate for the year-to-date period was 36.5%, and the firm estimates that its effective tax rate for the full year 2005 will rise to about 36.7%.

Chairman Commentary
George A. Roche, the company’s chairman and president, commented: “The firm’s investment advisory results relative to our peers remain strong, with 81% of the T. Rowe Price funds across their share classes surpassing their respective Lipper averages on a total return basis for the three-year period ended June 30, 2005, and more than 72% outperforming the average for the one-, five-, and 10-year periods. In addition, 60% of the firm’s funds and their share classes that are rated by Morningstar ended the quarter with an overall rating of four or five stars. This compares with 32.5% for the overall industry.

“While the financial markets overall had lackluster performance in the first half of the year, we remain encouraged by continued strong net cash inflows into our funds and the relative performance of our managed investment portfolios. The broad diversification of our assets under management and our distribution channels, along with strong investment management results, underpins the company’s solid performance.

“Our corporate earnings and cash flows remain very strong and give us substantial financial flexibility,” Mr. Roche added. “We have been able to invest in our business and our people, and have repurchased 1.3 million shares of our common stock this year. We remain debt free and have cash and net liquid investments of $700 million at June 30, 2005.

“While we share the concerns of many investors about higher energy costs and the potential for further increases in interest rates, our outlook for the financial markets remains positive since we believe that equity valuations in general are reasonable relative to the current level of interest rates and inflation. We expect corporate earnings to slow from the rapid growth rate experienced in recent years, but results should still be very favorable this year. In addition, the economy remains on solid footing and inflation does not appear to be threatening at this time. Overall, we

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feel the economic environment should be supportive for investors. While we expect the Federal Reserve to continue to raise the federal funds rate, we do not anticipate substantial increases in longer term rates that would seriously undermine stock and bond prices.”

In closing, Mr. Roche said: “We believe the outlook for our company remains strong as we continue to take steps to strengthen our competitive position. We believe the combination of investment management excellence, world-class service and guidance, and a diversified business model has positioned us for good growth in the months and years ahead.”

Other Matters
The financial results presented in this release are unaudited. The company expects that it will file its Form 10-Q Report for the second quarter of 2005 with the SEC later today. The Form 10-Q will include more complete information on the company’s recent financial results.

Certain statements in this press release may represent “forward-looking information,” including information relating to anticipated growth in revenues, net income and earnings per share, anticipated changes in the amount and composition of assets under management, anticipated expense levels, and expectations regarding financial and other market conditions. For a discussion concerning risks and other factors that could affect future results, see “Forward-Looking Information” in Item 2 of the company’s Form 10-Q Report for the quarterly period ended March 31, 2005.

Founded in 1937, Baltimore-based T. Rowe Price is a global investment management organization that provides a broad array of mutual funds, subadvisory services, and separate account management for individual and institutional investors, retirement plans, and financial intermediaries. The organization also offers a variety of sophisticated investment planning and guidance tools. T. Rowe Price’s disciplined, risk-aware investment approach focuses on diversification, style consistency, and fundamental research. More information is available at www.troweprice.com.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per-share amounts)

	Three months ended				Six months ended
Revenues	06/30/2005		06/30/2004		06/30/2005		06/30/2004
Investment advisory fees	$	295,531	$	249,002	$	584,534	$	494,011
Administrative fees and other income		67,881		60,546		135,836		121,011
Investment income of savings bank subsidiary		1,046		924		2,049		1,926
Total revenues		364,458		310,472		722,419		616,948
Interest expense on savings bank deposits		912		800		1,802		1,625
Net revenues		363,546		309,672		720,617		615,323
Operating expenses
Compensation and related costs		130,123		113,084		257,265		222,864
Advertising and promotion		18,823		16,117		42,294		37,176
Depreciation and amortization of property and equipment		10,502		9,843		20,274		19,971
Occupancy and facility costs		18,166		16,525		36,485		32,183
Other operating expenses		30,411		26,089		61,497		52,254
		208,025		181,658		417,815		364,448
Net operating income		155,521		128,014		302,802		250,875
Other investment income		5,522		939		7,577		2,092
Credit facility expenses		96		468		191		800
Net non-operating income		5,426		471		7,386		1,292
Income before income taxes		160,947		128,485		310,188		252,167
Provision for income taxes		58,198		48,221		113,142		94,564
Net income	$	102,749	$	80,264	$	197,046	$	157,603
Earnings per share
Basic	$	0.79	$	0.63	$	1.52	$	1.25
Diluted	$	0.76	$	0.60	$	1.45	$	1.18
Dividends declared per share	$	0.23	$	0.19	$	0.46	$	0.38
Weighted average shares
Outstanding		129,815		126,976		130,039		126,536
Assuming dilution		135,715		133,513		136,226		133,645

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	Three months ended				Six months ended
	06/30/2005		06/30/2004		06/30/2005		06/30/2004
Investment Advisory Revenues (in thousands)
Sponsored mutual funds in the U.S.
Stock	$	179,148	$	146,214	$	352,647	$	288,695
Bond and money market		34,987		32,694		69,680		65,721
		214,135		178,908		422,327		354,416
Other portfolios		81,396		70,094		162,207		139,595
	$	295,531	$	249,002	$	584,534	$	494,011
Average Assets Under Management (in billions)
Sponsored mutual funds
Stock	$	118.2	$	96.0	$	116.7	$	94.6
Bond and money market		31.9		29.4		31.7		29.5
Total		150.1		125.4		148.4		124.1
Other portfolios		88.6		76.6		88.3		75.7
	$	238.7	$	202.0	$	236.7	$	199.8

	06/30/2005		12/31/2004
Assets Under Management (in billions)
Sponsored mutual funds
Stock	$	122.3	$	114.3
Bond and money market		32.2		31.2
Total		154.5		145.5
Other portfolios		90.3		89.7
	$	244.8	$	235.2
Equity securities	$	184.6	$	175.9
Debt securities		60.2		59.3
	$	244.8	$	235.2
Condensed Consolidated Balance Sheet Information (in thousands)
Cash and cash equivalents	$	624,034	$	499,750
Accounts receivable		164,594		158,342
Investments in sponsored mutual funds		244,581		215,159
Debt securities held by savings bank subsidiary		112,552		114,075
Property and equipment		208,283		203,807
Goodwill		665,692		665,692
Other assets		48,540		72,000
Total assets		2,068,276		1,928,825
Total liabilities, including savings bank deposits of $99,142 in 2005		267,146		231,525
Stockholders’ equity, 129,707,258 common shares outstanding in 2005, including net unrealized holding gains of $41,361 in 2005	$	1,801,130	$	1,697,300

	Six months ended
	06/30/2005			06/30/2004
Condensed Consolidated Cash Flows Information (in thousands)
Cash provided by operating activities	$	290,753		$	210,852
Cash used in investing activities, including $24,694 for additions to property and equipment in 2005		(52,966	)		(27,668	)
Cash used in financing activities, including $75,853 for repurchases of common stock, dividends paid of $59,752 and receipts of $23,387 from stock option exercises in 2005		(113,503	)		(24,475	)
Net increase in cash during the period	$	124,284		$	158,709

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