New Age Media Fund
Quarterly Report
March 31, 1994
Fellow Shareholders
The March quarter was a difficult period for New Age Media stocks. All of the
primary investment areas within the Fund, including content providers,
distribution companies, technology enablers, and foreign telecommunications
service providers, experienced corrections of varying magnitudes. For the
March quarter, the Fund suffered a loss of 9%, bringing its net asset value
down to $12.36 per share. The general market, represented by the unmanaged
Standard & Poor's 500 Stock Index, was down 4% on a total return basis during
the same period. As the sector corrected and the broad market weakened, the
discount between the Fund's net asset value and the price of the New Age Media
Fund as quoted on the NYSE widened from 1% on December 31 to 12%. On March
31, 1994, the stock closed at $10.875.
Performance Comparison
Periods Ended March 31, 1994
3 Months Since Inception
------------ -----------------
New Age Media -8.9% -11.3%
S&P 500 -3.8 -2.1
Market Environment
Rising interest rates, concern over the Whitewater situation, foreign unrest,
and reduced cash flows into domestic equity mutual funds weighed heavily on
stock prices toward the end of the March quarter. During the period, New Age
Media stocks came under significant pressure, operating under a cloud of
unfortunate and untimely events:
o Bell Atlantic aborted its merger with TCI;
o Time Warner announced a technological delay in its Full Service Network
trial;
o the FCC again reduced cable television rates; and
o the Personal Communications Service auction was postponed to the end of
1994.
As a result, the sector experienced rolling corrections during the early part
of the period, even before the overall market corrected. Content companies
sold off in January, followed by international telecommunications service
providers in February and by technology enablers in March. Such a process
created a continuous drag on New Age Media stocks throughout the quarter.
Furthermore, as the market sold off, investors shifted their preference from
concept stories to stocks of companies with measurable earnings growth, free
cash flow, and valuation support. Given the speculation surrounding the
information superhighway and the substantial appreciation New Age Media-type
stocks generated during 1993, investors redirected their assets into
alternative investment areas.
The events of the March quarter do not alter our belief that the worlds
of computing, communications, and entertainment are converging, nor do these
negative events constrain our enthusiasm with respect to the longer-term
opportunity within the New Age Media industry. However, we do believe the
pace of activity - mergers and acquisitions, corporate alliances, trials and
deployment, etc. - will slow. In many respects, the merger between Bell
Atlantic and TCI was the accelerating force behind the development of the
industry. Without this alliance, the competitive requirement for computer,
communications, and entertainment companies to adapt their businesses to the
world of New Age Media remains, but the time frame over which such a
metamorphosis must occur has been lengthened.
Portfolio Review
The Fund's structure continues to reflect our belief that the two greatest
beneficiaries of the New Age Media trends are the content providers and the
technology enablers. Accordingly, at the end of the March quarter, content
providers and technology enablers comprised 38% and 21% of Fund assets,
respectively. In addition, we continued to emphasize lower volatility and
higher market capitalization stocks across all segments of the Fund's
universe, while reserve balances at 11% remained above our longer-term target.
We still expect to adopt a more aggressive profile as 1994 progresses,
becoming more fully invested in a wider array of rapidly growing,
smaller-capitalization companies.
During the March quarter, the Fund's performance benefited from its
holdings in the technology enablers and international segments of New Age
Media, which represented eight of the 10 best performing holdings during the
quarter, including Italian telco SIP, financial services provider Reuters
Holdings, and Motorola, a leading provider of wireless infrastructure
equipment. The Fund's worst performers during the period were emerging
entertainment companies, SPI Holdings, Enquirer/Star Group, and Playboy
Enterprises.
As we will do in every period of market stress, we used the most recent
correction as an opportunity to consolidate our positions and enhance the
quality of the portfolio. Accordingly, at the end of the period, the Fund's
top 10 holdings represented approximately 40% of assets.
Outlook
With interest rates rising, political uncertainty increasing, and investors
becoming more cautious, the broad market is at a critical threshold. New Age
Media stocks should continue to ride the wave of favorable longer-term
industry dynamics but are unlikely to escape the vagaries of the overall
market in the very near term. While the events of the March quarter have
probably reduced the pace of market convergence, the evolutionary development
of the New Age Media industry will present investors with significant wealth
building opportunities. We remain committed to seizing these opportunities on
behalf of our shareholders.
Respectfully submitted,
John D. Gillespie
President and Chairman of the
Investment Advisory Committee
April 26, 1994
Portfolio Highlights
Since Inception Ended March 31, 1994
Key Statistics
Change in N.A.V. ($13.93 to $12.36) ($1.57)
Change in NYSE ($15.00 to $10.875) ($4.13)
Total Net Assets (Millions) $184.9 Million
Security Classification
March 31, 1994
Percent of Value
Net Assets (000)
_________ ________
Common Stocks 88.2% $163,152
Convertibles 1.1 2,091
Short-Term 17.1 31,682
_____ ________
Total Investments 106.5 196,925
Other Assets Less Liabilities (6.5) (12,018)
Net Assets 100.0% $184,906
Ten Largest Holdings
March 31, 1994
Percent of
Net Assets
__________
First Financial Management 5.1%
King World Productions 5.0
Telefonos de Mexico 4.9
Enquirer/Star Group 4.8
Pacific Telesis 4.3
Mobile Telecom Tech 3.5
CUC International 3.4
US West 3.3
Time Warner 2.8
United Intl Holdings 2.7
Total 39.8%
Sector Diversification
March 31, 1994
Percent of
Net Assets
__________
Content 38.1%
Technology 21.2
Distribution 11.9
International 17.1
Convertibles 1.1
Reserves 10.6
Total 100.0%
New Age Media Fund
Officers and Directors
James S. Riepe, Chairman of the Board
Jeffrey H. Donahue, Director
A. MacDonough Plant, Director
John D. Gillespie, President
Denise S. Jevne, Executive Vice President
Lise J. Buyer, Vice President
Henry H. Hopkins, Vice President
Charles A. Morris, Executive Vice President
Lenora V. Hornung, Secretary
Carmen F. Deyesu, Treasurer
David S. Middleton, Controller
Roger L. Fiery, Assistant Vice President
Edward T. Schneider, Assistant Vice President
Manager:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland
Telephone 410-547-2000
Custodian, Transfer and Dividend-Paying Agent, and Registrar:
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
For Information on the Fund, including the NAV, please call toll free
1-800-231-8432
