1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

For the quarterly period ended: JUNE 30, 2001.

Commission file number: 000-32191.

Exact name of registrant as specified in its charter:
T. ROWE PRICE GROUP, INC.

State of incorporation: MARYLAND.

I.R.S. Employer Identification No.: 52-2264646.

Address and Zip Code of principal executive offices: 100 EAST PRATT STREET,
BALTIMORE, MARYLAND 21202.

Registrant's telephone number, including area code: (410) 345-2000.

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. Yes [X]. No [ ].

Indicate the number of shares outstanding of the issuer's common stock ($.20 par
value), as of the latest practicable date. 123,144,342 SHARES AT JULY 23, 2001.

Exhibit index is at Item 6(a) on pages 14-15.

PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.

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

12/31/00 06/30/01
---------- ----------

ASSETS
Cash and cash equivalents $ 80,526 $ 125,537
Accounts receivable 131,041 115,886
Investments in sponsored mutual funds 190,406 130,019
Other investments 59,801 87,860
Property and equipment 255,660 258,258
Goodwill 694,985 680,224
Other assets 57,040 19,953
---------- ----------
$1,469,459 $1,417,737
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 56,877 $ 40,436
Accrued compensation and related costs 66,356 65,590
Income taxes payable 13,220 16,514
Dividends payable 18,366 18,471
Customer deposits at savings bank subsidiary 10,932 19,458
Debt and accrued interest 312,277 215,107
Minority interests in consolidated subsidiaries 366 --
---------- ----------
Total liabilities 478,394 375,576
---------- ----------

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 122,439,232 shares in
2000 and 123,143,054 shares in 2001 24,488 24,629
Capital in excess of par value 80,855 84,275
Retained earnings 852,775 916,316
Accumulated other comprehensive income 32,947 16,941

---------- ----------
Total stockholders' equity 991,065 1,042,161
---------- ----------
$1,469,459 $1,417,737
========== ==========

See the accompanying notes to the condensed consolidated financial statements.

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

Three months Six months
ended ended
-------------------------- ------------------------
06/30/00 06/30/01 06/30/00 06/30/01
--------- ---------- --------- ---------

Revenues
Investment advisory fees $ 226,373 $ 198,149 $ 460,534 $ 398,976
Administrative fees 57,178 53,575 118,025 115,838
Investment and other income 17,131 10,406 38,454 27,798
--------- --------- --------- ---------
300,682 262,130 617,013 542,612
--------- --------- --------- ---------

Expenses
Compensation and related costs 92,665 96,214 185,632 200,857
Advertising and promotion 21,071 15,595 46,181 37,122
Occupancy and equipment 27,440 30,709 53,346 61,467
International investment
research fees 14,690 -- 30,704 --
Goodwill amortization 187 7,230 373 14,460
Interest expense 61 3,896 122 8,818
Other operating expenses 24,070 21,648 49,366 50,602
--------- --------- --------- ---------
180,184 175,292 365,724 373,326
--------- --------- --------- ---------

Income before income taxes and
minority interests 120,498 86,838 251,289 169,286
Provision for income taxes 45,591 35,682 94,795 69,179
--------- --------- --------- ---------
Income from consolidated companies 74,907 51,156 156,494 100,107
Minority interests in consolidated
subsidiaries 5,568 -- 12,121 (357)
--------- --------- --------- ---------
Net income $ 69,339 $ 51,156 $ 144,373 $ 100,464
========= ========= ========= =========

Basic earnings per share $ .57 $ .42 $ 1.20 $ .82
--------- --------- --------- ---------
Diluted earnings per share $ .54 $ .40 $ 1.12 $ .78
--------- --------- --------- ---------

Dividends declared per share $ .13 $ .15 $ .26 $ .30
========= ========= ========= =========

Weighted average shares outstanding 120,930 123,082 120,674 122,918
========= ========= ========= =========
Weighted average shares outstanding-
assuming dilution 129,335 129,058 128,867 129,266
========= ========= ========= =========

See the accompanying notes to the condensed consolidated financial statements.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Six months ended
-----------------------
06/30/00 06/30/01
-------- --------

Cash flows from operating activities
Net income $ 144,373 $ 100,464
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization of property
and equipment 19,651 25,450
Minority interests in consolidated subsidiaries 12,121 (357)
Amortization of goodwill 373 14,460
Other changes in assets and liabilities (9,874) 38,774
--------- ---------
Net cash provided by operating activities 166,644 178,791
--------- ---------

Cash flows from investing activities
Investments in sponsored mutual funds (4,894) (2,562)
Dispositions of sponsored mutual funds 56,750 52,585
Other investments (6,053) (34,968)
Dispositions of other investments 227 6,694
Additions to property and equipment (40,678) (32,558)
--------- ---------
Net cash provided by (used in) investing activities 5,352 (10,809)
--------- ---------

Cash flows from financing activities
Purchases of stock -- (6,221)
Receipts relating to stock issuances 8,796 6,542
Debt principal repayments -- (95,000)
Dividends paid to stockholders (31,300) (36,818)
Savings bank subsidiary deposits -- 8,526
Other activities (2,072) --
--------- ---------
Net cash used in financing activities (24,576) (122,971)
--------- ---------

Cash and cash equivalents
Net increase during period 147,420 45,011
At beginning of year 358,472 80,526
--------- ---------
At end of period $ 505,892 $ 125,537
========= =========

See the accompanying notes to the condensed consolidated financial statements.

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

Accumu-
Capital lated
Common in other Total
stock excess compre- stock-
- par of par Retained hensive holders'
value value earnings income equity
----------- ----------- ----------- ----------- ----------

Balance at end of 2000,
122,439,232 common shares $ 24,488 $ 80,855 $ 852,775 $ 32,947 $ 991,065
Comprehensive income
Net income 100,464
Change in unrealized
security holding gains (16,006)
Total comprehensive income 84,458
891,322 common shares
issued under stock-based
compensation plans 178 9,604 9,782
187,500 common shares
repurchased (37) (6,184) (6,221)
Dividends declared (36,923) (36,923)
----------- ----------- ----------- ----------- -----------
Balance at June 30, 2001,
123,143,054 common shares $ 24,629 $ 84,275 $ 916,316 $ 16,941 $ 1,042,161
=========== =========== =========== =========== ===========

See the accompanying notes to the condensed consolidated financial statements.

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.

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 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 2000 Annual Report. Certain
2000 amounts have been reclassified to conform to the 2001 presentation.

NOTE 2 - INFORMATION ABOUT REVENUES AND SERVICES.

Our revenues (in thousands) from advisory services provided under agreements
with our sponsored mutual funds and other investment clients for the six months
ended June 30 were:

2000 2001
--------- ---------

Sponsored mutual funds
Stock and blended
Domestic $209,092 $189,588
International 75,696 52,948
Bond and money market 46,390 47,586
-------- --------
331,178 290,122
Other portfolios 129,356 108,854
-------- --------
Total investment advisory fees $460,534 $398,976
======== ========

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

Average during
first 6 months
-------------------
2000 2001 12/31/00 06/30/01
------- -------- -------- --------

Sponsored mutual funds
Stock and blended
Domestic $ 71.7 $ 65.0 $ 68.0 $ 65.2
International 21.0 14.8 16.3 13.2
Bond and money market 21.7 22.5 22.0 22.6
-------- -------- -------- --------
114.4 102.3 106.3 101.0
Other portfolios 64.6 57.3 60.4 57.6
-------- -------- -------- --------
$ 179.0 $ 159.6 $ 166.7 $ 158.6
======== ======== ======== ========

Fees for advisory-related administrative services provided to the funds were
$87,530,000 and $91,032,000 for the first six months of 2000 and 2001,
respectively. Accounts receivable from the funds totaled $70,537,000 at December
31, 2000 and $59,320,000 at June 30, 2001.

NOTE 3 - DEBT.

On April 2, 2001, the interest rate on our yen-denominated debt was reduced to
1.09% for the next twelve months.

During the first half of 2001, we reduced our dollar-denominated debt by
$95,000,000. On July 9, 2001, we further reduced this debt by $10,000,000 and
the weighted average interest rate on the balance of $190,000,000 was lowered to
4.18% for the next 60 days.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of
T. Rowe Price Group, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of T.
Rowe Price Group, Inc. and its subsidiaries as of June 30, 2001, and the related
condensed consolidated statements of income for the three-month and six-month
periods ended June 30, 2000 and 2001, the related condensed consolidated
statements of cash flows for the six-month periods ended June 30, 2000 and 2001,
and the related condensed consolidated statement of stockholders' equity for the
six-month period ended June 30, 2001. These financial statements are the
responsibility of the company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, 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 review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2000, 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 January 23, 2001, 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, 2000, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Baltimore, Maryland
July 19, 2001

THE ABOVE REPORT IS NOT A "REPORT" WITHIN THE MEANING OF SECTIONS 7 AND 11 OF
THE SECURITIES ACT OF 1933 AND THE INDEPENDENT ACCOUNTANTS' LIABILITY PROVISIONS
OF SECTION 11 OF THE ACT DO NOT APPLY.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

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 investment portfolios.

We manage a broad range of domestic and international stock, bond, and money
market mutual funds and other investment portfolios that meet the varied needs
and objectives of individual and institutional investors. Investment advisory
revenues depend largely on the total value and composition of assets under
management. Accordingly, fluctuations in financial markets and in the
composition of assets under management impact our revenues and results of
operations. Total assets under our management of $158.6 billion at June 30, 2001
are up $9.9 billion from March 31, 2001, but are down $8.1 billion from the
beginning of 2001. Assets at June 30, 2001 include $91.5 billion in domestic
stock portfolios and $26.7 billion in international stock portfolios.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 VERSUS 2000.

Net income decreased $18.2 million, or 26%, to $51.2 million and diluted
earnings per share fell $.14 to $.40. Total revenues declined 13% from $301
million to $262 million.

Investment advisory revenues earned from the T. Rowe Price mutual funds
decreased $20.6 million as average fund assets under management were $101.2
billion during the 2001 quarter, $12.6 billion less than in the 2000 period.
While lower financial market valuations reduced fund assets from the prior year
period, increases in financial market valuations during the second quarter of
2001 increased fund assets $6.2 billion from March 31, 2001. Net subscriptions
by fund investors added $144 million during the 2001 quarter. Domestic stock
funds had net investor subscriptions of $797 million, including $556 million to
the Blue Chip Growth Fund. Money market and bond fund investors withdrew $390
million and international stock funds had net outflows of $263 million. Mutual
fund assets totaled $101.0 billion at June 30, 2001.

Assets in the other investment portfolios that we manage rose $3.7 billion
during the 2001 quarter due primarily to improving market valuations. However,
assets were still lower than during the prior year's quarter; as a result,
advisory fees were down $5.8 million from the 2000 period. In addition,
performance-related fees were $1.8 million lower than in the 2000 quarter. We
earn performance fees primarily on venture capital investments that we manage
and, though recurring, these fees will vary significantly as market conditions
and investment portfolios change. Assets in the other managed portfolios were
$57.6 billion at June 30, 2001.

Administrative revenues from discount brokerage commissions fell $2.1 million
versus the 2000 period due to lower transaction volume and lower average
commission rates arising from the shift to Internet trading. Revenues from other
services that we provide to the T. Rowe Price funds and their

shareholders declined $1.5 million and were mostly offset by a similar reduction
of the costs that we incur in providing the services.

Investment and other income declined $10.0 million from the 2000 period,
primarily due to higher interest income earned from larger cash positions held
prior to the T. Rowe Price International acquisition in August 2000 and
significant venture capital returns in the 2000 period. Offsetting these
declines were higher gains of $3.3 million in the second quarter of 2001 that we
realized on dispositions of our available-for-sale mutual fund holdings. We
expect that investment income in future periods will generally be lower than
that in comparable 2000 periods.

Operating expenses declined $4.9 million, or nearly 3%, from last year's second
quarter to $175.3 million; more importantly, expenses were down $22.7 million
from the first quarter of 2001. Greater compensation and related costs, which
were up $3.5 million over the comparable 2000 quarter, were attributable to
increases in our rates of compensation and staff size over the past twelve
months to support our technology and servicing operations. As of June 30, 2001,
we employed just under 3,900 associates, down more than 100 than from the end of
2000. Advertising and promotion expenses decreased $5.5 million from the 2000
second quarter and nearly $5.9 million from the 2001 first quarter to $15.6
million. Financial market declines have made investors more cautious and, as a
result, we have reduced our spending. We expect our advertising and promotion
expenditures for the balance of the year to be lower than last year. Occupancy
and equipment expenses rose 12% from $27.4 million to $30.7 million. These costs
are similar to that of the first quarter in 2001 and reflect our movement to new
and larger facilities internationally and to our new campus in Colorado Springs
late last year.

The build out of our international infrastructure to support operations in seven
foreign countries is substantially complete. The T. Rowe Price International
acquisition in August 2000 has resulted in the realignment of our operating
costs to include greater compensation and facility costs and has added $3.6
million of interest expense on the acquisition indebtedness. However, the
international investment research fees that were $14.7 million in the 2000
period have been eliminated. The 2001 results also include a quarterly charge of
$7 million, or about $.05 per share, for the amortization of goodwill arising
from the acquisition. As a result of the issuance of Statement of Financial
Accounting Standards No. 142 on July 20, 2001, this recurring quarterly charge
will end after this year.

Other operating expenses decreased $2.4 million from the first quarter of 2000
and $7.3 million from the first quarter of 2001. As the international transition
and several technology projects have been brought to a close, we have reduced
the total quarterly operating expenses below the spending level of 2000.

The 2001 provision for income taxes as a percentage of pretax income is higher
due to the amortization of goodwill that is not deductible in determining our
income tax expense.

Minority interests in the net income of T. Rowe Price International were also

eliminated at the time of the acquisition of Robert Fleming's 50% interest.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001 VERSUS 2000.

Net income decreased $43.9 million, or 30%, to $100.5 million and diluted
earnings per share fell from $1.12 to $.78. Total revenues declined 12% from
$617 million to $543 million.

Investment advisory revenues earned from the T. Rowe Price mutual funds
decreased $41.1 million as average fund assets under management were $102.3
billion during the 2001 period, $12.1 billion less than in the 2000 period.
Declines in financial market valuations reduced fund assets $5.7 billion during
the first half of 2001. Net subscriptions by fund investors were $539 million
for the first six months of 2001. Domestic stock funds had net investor
subscriptions of $1.1 billion while money market and bond fund investors added
$132 million. International stock funds had net outflows of $697 million.

Assets in the other investment portfolios that we manage fell $2.8 billion
during the 2001 first half, and our advisory fees thereon were down $13.3
million. In addition, performance-related fees were $7.2 million lower in the
2001 period.

Administrative revenues from discount brokerage commissions fell $6.7 million
due to lower transaction volume and commission rates arising from the shift to
transactions being originated over the Internet. Revenues from other services
that we provide to the T. Rowe Price funds and their shareholders increased $4.5
million and were mostly offset by additional costs to provide these services.

Investment and other income declined $10.6 million to $27.8 million. Larger cash
and bond fund holdings and gains from our venture capital investments in the
prior year period that did not recur in the first half of 2001 resulted in lower
investment income in the 2001 period. Partially offsetting these declines were
$10.2 million of higher gains that we realized on dispositions of our
available-for-sale mutual fund holdings.

Operating expenses rose only 2% from $366 million in last year's first half to
$373 million.

CAPITAL RESOURCES AND LIQUIDITY.

During the first half of 2001, we generated positive cash flows from operating
activities of $179 million. We used this cash to reduce outstanding borrowings
by $95 million during the first half of 2001, and by an additional $10 million
in July 2001. We expect that available cash resources and those generated from
operating activities later this year will be used to further reduce borrowings
before year end. During the 2001 first half, we used $37 million to pay
dividends on our common stock and $11 million on net investing activities.

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 on Form 10-Q, may contain
certain "forward-looking information," including information relating to
anticipated growth in our revenues or earnings, anticipated changes in the
amount and composition of assets under management, our anticipated 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 as a result 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 will fluctuate due to many factors, including: the total
value and composition of assets under our management; cash inflows and outflows
in the T. Rowe Price mutual funds and other managed investment portfolios;
fluctuations in worldwide financial markets, including those in emerging
countries, resulting in appreciation or depreciation of assets under our
management; the relative investment performance of the Price mutual funds and
other managed investment portfolios as compared to competing offerings and
market indices; the extent to which we earn performance-based investment
advisory fees; the expense ratios of the Price mutual funds; investor sentiment
and investor confidence; 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; our introduction
of new mutual funds and investment portfolios; our ability to contract with the
Price mutual funds for payment for investment advisory-related administrative
services provided to the funds and their shareholders; the continuation of
trends in the retirement plan marketplace favoring defined contribution plans
and participant-directed investments; the amount and timing of income recognized
on our venture capital and other investments; and our success in implementing
our strategy to significantly expand our international 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 determined to terminate or significantly alter the terms of the
investment management or related administrative services agreements.

Our future operating results are also dependent upon the level of our operating
expenses, which are subject to fluctuation for the following or other reasons:
changes in the level of advertising expenses in response to market conditions,
expansion of marketing efforts both within the U.S. and internationally, or
other factors; variations in the level of compensation expense due to, among
other things, performance-based bonuses, changes in our employee count and mix,
and competitive factors; changes in our operating expenses resulting from our
acquisition of the minority interests in T. Rowe Price International, including
goodwill charges, interest expense, and other
13

costs of providing our international investment advisory services; 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, including Internet
capabilities; 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 communications, power, and the mutual
fund transfer agent system.

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.

Since December 31, 2000, there has been no material change in the information
provided in Item 7A of the 2000 Form 10-K Annual Report.

PART II. OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

On July 6, 1998, T. Rowe Price International (formerly Rowe Price-Fleming
International), the T. Rowe Price International Stock Fund and the fund's five
directors were named as defendants in Migdal v. Rowe Price-Fleming
International, Inc., et al., filed in the United States District Court for the
District of Maryland. The Complaint sought to invalidate the advisory agreement
between Rowe Price-Fleming and the International Stock Fund, and sought recovery
of an unspecified amount of advisory fees paid by the International Stock Fund
to Rowe Price-Fleming. Plaintiffs alleged that the International Stock Fund does
not have a sufficient number of independent directors, as required by the
Investment Company Act of 1940, as amended, because its independent directors
serve on multiple boards of directors within the T. Rowe Price mutual fund
complex and receive substantial compensation in the form of director fees. On
October 12, 1998, the plaintiffs filed an Amended Complaint adding as a
plaintiff Linda B. Rohrbaugh, a shareholder in the T. Rowe Price Growth Stock
Fund. The Amended Complaint also added as defendants the T. Rowe Price Growth
Stock Fund, T. Rowe Price Associates and certain of its subsidiaries which
provide services to the funds, as well as five directors of the T. Rowe Price
Growth Stock Fund. On January 21, 1999, the Amended Complaint was dismissed with
leave for plaintiffs to re-file. On February 16, 1999, the plaintiffs filed a
Second Amended Complaint, but the fund directors were excluded as defendants.
The Second Amended Complaint alleged a claim under Section 36(b) of the
Investment Company Act of 1940. The Complaint sought to invalidate the advisory
and service agreements negotiated between the corporate defendants and certain
T. Rowe Price funds based on a claim that (i) the fees paid to
14

the corporate defendants were excessive and (ii) the advisory agreements were
not negotiated at arm's length because each of the boards of directors of the
Price funds is not independent as required under the Investment Company Act of
1940. On March 19, 1999, we and the other defendants filed a Motion to Dismiss
the Second Amended Complaint. In an order dated March 20, 2000, our motion was
granted and the case dismissed with prejudice. On April 6, 2000, the plaintiffs
filed a Notice of Appeal of the Dismissal of the case. On May 1, 2001, the
United States Court of Appeals (Fourth Circuit) affirmed the District Court's
judgment.

From time to time, claims arise in the ordinary course of our business,
including employment-related claims. After consulting with counsel, we believe
it unlikely that any adverse determination in one or more pending claims would
have a material adverse effect on our financial condition or results of
operations.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following exhibits required to be filed by Item 601 of Regulation S-K
are filed herewith and incorporated by reference herein. Exhibits 10.06
through 10.12 are compensatory plan arrangements.

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) By-Laws of T. Rowe Price Group, Inc. as of June 30, 2000.
(Incorporated by reference from Form 424B3; Accession No.
0001113169-00-000003.)

4.01 $500,000,000 Five-Year Credit Agreement among T. Rowe Price
Associates, Inc., the several lenders, and The Chase
Manhattan Bank, as administrative agent. (Incorporated by
reference from Form 10-Q Report for the quarterly period
ended June 30, 2000; Accession No. 0000080255-00-000425.)

10.01 Representative Investment Management Agreement with each of
the T. Rowe Price mutual funds. (Incorporated by reference
from Form N-1A/A; Accession No. 0001046404-97-000008.)

10.02 Transfer Agency and Service Agreement dated as of January
1,2001 between T. Rowe Price Services, Inc. and each of the
T. Rowe Price Funds. (Incorporated by reference from Form
485BPOS; Accession No. 0000775688-01-500030.)

10.03 Agreement dated January 1, 2001 between T. Rowe Price
Retirement Plan Services, Inc. and certain of the T. Rowe
Price Funds. (Incorporated by reference from Form 485BPOS;
Accession No. 0000775688-01-500030.)

10.04 Representative Underwriting Agreement between each of the T.
Rowe Price mutual funds and T. Rowe Price Investment

Services, Inc. (Incorporated by reference from Form 485APOS;
Accession No. 0000775688-00-000003.)

10.05 Amended, Restated, and Consolidated Office Lease dated as of
May 22, 1997 between 100 East Pratt Street Limited
Partnership and T. Rowe Price Associates, Inc. (Incorporated
by reference from Form 10-K for 1997; Accession No.
0000080255-98-000358.)

10.06 1995 Director Stock Option Plan. (Incorporated by reference
from Form DEF 14A; Accession No. 0000933259-95-000009.)

10.07 1998 Director Stock Option Plan. (Incorporated by reference
from Form DEF 14A; Accession No. 0000080255-98-000355.)

10.08 1990 Stock Incentive Plan. (Incorporated by reference from
Form S-8 Registration Statement [File No. 33-37573].)

10.09 1993 Stock Incentive Plan. (Incorporated by reference from
Form S-8 Registration Statement [File No. 33-72568].)

10.10 1996 Stock Incentive Plan. (Incorporated by reference from
Form DEF 14A; Accession No. 0001006199-96-000031.)

10.11 2001 Stock Incentive Plan. (Incorporated by reference from
Form DEF 14A; Accession No. 0001113169-01-000002.)

10.12 Executive Incentive Compensation Plan. (Incorporated by
reference from Form DEF 14A; Accession No.
0000933259-95-000009.)

15 Letter from PricewaterhouseCoopers LLP, independent
accountants, re unaudited interim financial information.

(b) Reports on Form 8-K: None during the second quarter of 2001.

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 25, 2001.

T. Rowe Price Group, Inc.

/s/ Cristina Wasiak
Managing Director and Chief Financial Officer

/s/ Joseph P. Croteau, CPA
Vice President and Treasurer (Principal Accounting Officer)