Price expects `solid' year

`No major clouds on horizon,' president tells annual meeting

Mutual funds

April 16, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

T. Rowe Price Associates Inc.'s top executive told shareholders yesterday that the company should have a "solid" first quarter, and a strong year provided the economy continues to grow.

"This year looks good so far," said George A. Roche, chairman and president of the Baltimore mutual fund company, after the annual meeting yesterday at the Renaissance Harborplace Hotel.

Roche expects T. Rowe Price's assets to grow this year, "but perhaps not at the rate we've seen in the remarkable decade now coming to a close. Much depends on future trends in the economy and markets."

The company sees "no major clouds on the horizon," but that there are reasons to be cautious, Roche said.

One concern is whether computer systems at companies around the world will work properly in the new year.

"Everybody is concerned about the smooth transition with the Year 2000," he said. "I'd have to say it looks good. Even the government is making progress."

T. Rowe Price has had a remarkable run in the stock market boom. Assets it manages have more than doubled in the past five years -- from $57.8 billion in 1994, to $147.8 billion last year. Revenue has more than doubled over the same period, from $382 million in 1994 to $886 million last year. And net income has nearly tripled -- from $61 million in 1994 to $174 million in 1998.

Likewise, T. Rowe Price stock is up more than fourfold from a split-adjusted $7.1875 per share in 1994 to $31, where it closed yesterday down $1.4687.

But not everyone at the annual meeting was pleased with the performance. A shareholder asked Roche why more new money has been flowing into competing funds at the Vanguard Group in Valley Forge, Pa., and Janus in Denver.

Last year, net cash inflows into T. Rowe Price funds totaled $3.7 billion, down from inflows of $8.5 billion in 1997.

"You seem to be a little stagnant in that area," the shareholder said. "Janus is beating your brains out, Vanguard is beating your brains out when it comes to new money."

James S. Riepe, T. Rowe Price vice chairman, said investors currently like Janus' more aggressive investing style and Vanguard's popular index funds.

"We are not overly concerned that we have moved into some valley floor that is going to stay stagnant," Riepe said.

He said that it is a "difficult period" for Price's low-risk investing style when the most popular stocks are trading at such high valuations to their earnings.

Henry McVey, an analyst at Morgan Stanley Dean Witter in New York, said Price has a strong brand name, but it must find ways to broaden the distribution of its funds. Some companies sell their funds through banks, insurance companies or brokerage firms.

"The longer term issue is retail. Investors are consolidating their assets with fewer and fewer firms," he said. "T. Rowe may have to do more to get shelf-space with distribution companies."

McVey, however, said that Price has performed well over the years.

"This has been a company that has made a lot of money for shareholders and investors," he said. "It is a solid company."

Pub Date: 4/16/99

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