04/22/96 THE UNFLAPPABLE T. ROWE PRICE

THE UNFLAPPABLE T. ROWE PRICE
Yachtsman Collins' departure won't rock the boat
For nearly 12 years as president and chief executive officer of T. Rowe Price Associates Inc., George J. Collins did all he could to protect the big mutual-fund group's stockholders from surprises. But at the Apr. 12 annual meeting, Collins plans to deliver a big one. The 55-year-old fund executive and avid sailor will announce both his retirement and his successor--George A. Roche, 54, the firm's chief financial officer. Collins will leave by next April to captain a 64-foot yacht in the grueling nine-month Whitbread Round the World Yacht Race. ``It is one of those life-defining acts,'' he says of his planned adventure. ``We're going to be playing iceberg tag.''
Collins knows a few things about dodging dangerous giants, having successfully piloted his firm around behemoths such as Fidelity, Vanguard, and Merrill Lynch. Over the past decade, Baltimore-based T. Rowe Price has evolved from a stodgy investment-counseling firm to one of the industry's strongest and best-run fund companies: Assets under management have swelled from $19 billion to $81 billion, two-thirds of which are in mutual funds; the number of funds has grown from 23 to 68; and fund shareholder accounts have risen from 1 million to 4 million. Since the firm's 1986 initial public offering, the stock is up nearly tenfold, more than four times the gain of the Standard & Poor's 500-stock index during the period.
Those figures are a direct result of the top-notch investment returns that Price's mutual funds have been racking up. According to the latest ratings from mutual-fund data company Morningstar Inc., 29 of the 44 T. Rowe Price stock and bond funds earned either four or five stars, the two highest ratings for risk-adjusted performance.
TAKEOVER BAIT? Collins' departure probably won't lead to radical changes. There's not much need, and Roche has been part of a team of executives, including Collins and managing directors James S. Riepe, 52, and M. David Testa, 51, that have run the firm since the early 1980s. Roche says team management will remain. ``A lot of companies have a single individual make the decision,'' he says. ``We don't.''
When Collins and his cohorts took over, T. Rowe Price and its funds were hardly standout performers. But they took critical steps that, for the firm, broke the mold. They revamped research, broadening the role of analysts and recruiting fresh talent. They also ended the heavy dependence on growth stocks (firm founder T. Rowe Price pioneered growth-stock investing) and introduced more conservative equity funds and expanded the bond fund offerings.
Top-performing fund managers today can earn big bucks. Veteran fund manager John H. Laporte, who piloted the New Horizons Fund to a 55.4% return last year, earned $250,000 and a $1.3 million bonus. And in taking the firm public--only a handful of mutual-fund companies are--management can use stock as currency to retain talent. About 30% of the stock is held by employees, spread through the ranks.
Perhaps the most important strategic decision that the Collins crowd made was an early charge into the 401(k) business, which produces a steady, reliable stream of money for its funds to invest. ``Back then, it looked like an administrative hassle,'' said Riepe. But T. Rowe Price, which was already known for good customer service, plied its talents to service a multitude of plan sponsors and thousands of employees with customized payroll deductions and personalized quarterly reports. Price's 401(k) business now has $20 billion in assets and 800,000 participants, giving the firm a strong foothold in a business in which many competitors are still trying to climb to the first rung.
With the industry consolidating, a potential threat to Price these days is a takeover. T. Rowe Price is the largest publicly-held fund company after Franklin Resources Inc., and has long been at the top of every suitor's list, though nobody has made a bid. ``I suspect there's a takeover premium already built into the stock price,'' says analyst David B. Hilder at Morgan Stanley & Co. Management has long dismissed that talk. ``We're just not interested,'' says Roche.
Barring a takeover, the main challenge confronting Collins--and now Roche--is to continue doing what they have already proved masters in executing: getting around those icebergs.
By Roy Furchgott in Baltimore