- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Media & Telecommunications
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December 31, 1997
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REPORT HIGHLIGHTS
================================================================================
MEDIA & TELECOMMUNICATIONS FUND
* Media and telecommunications stocks were strong, outperforming the S&P 500
over the second half of 1997.
* The overall investment environment was benign, characterized by low
interest rates, minimal inflation, and good profit growth.
* The fund's returns of 18.69% and 28.05% for the 6- and 12-month periods,
respectively, were ahead of the Lipper Science & Technology Funds Average.
* We raised the portfolio's component of content, distribution, and
international stocks, and lowered exposure to weak technology shares.
* We are cautious about stock returns near term because of high valuations
but believe our selection of companies with sound fundamentals will serve
investors well over time.
FELLOW SHAREHOLDERS
Media and telecommunications stocks posted solid results in the second half
of 1997 and over the year as a whole. The broad market, represented by the
unmanaged Standard & Poor's 500 Stock Index, delivered a less robust return
during the last six months but was particularly strong over the 12-month period.
<PAGE>
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/97 6 Months 12 Months
- --------------------------------------------------------------------------------
Media &
Telecommunications Fund 18.69% 28.05%
S&P 500 10.58 33.36
Lipper Science & Technology
Funds Average 2.11 9.63
================================================================================
Your fund produced an 18.69% gain for the six months ended December 31,
1997, and a 28.05% return for the year. Content and distribution stocks were
especially strong in recent months, while technology stocks in general were
volatile underperformers. This accounted for the fund's favorable returns versus
the Lipper Science & Technology Funds Average, as shown in the table. Fund
returns surpassed the S&P 500 during the second half but trailed it during the
full year.
DIVIDEND DISTRIBUTION
On December 26, 1997, your Board of Directors declared a long-term capital
gain distribution of $2.02 per share, largely the result of asset sales to meet
redemptions when the fund converted to open-end status in July. The distribution
was paid on December 30 to shareholders of record on December 26. You should
already have received your check or statement reflecting this distribution, as
well as Form 1099-DIV summarizing this information for 1997 tax purposes.
MARKET ENVIRONMENT
For the U.S. stock market, 1997 was surprisingly strong in that both the
Dow Jones Industrial Average and S&P 500 posted an unprecedented third
consecutive year of returns in excess of 20%. The investment environment
remained benign with declining interest rates, minimal inflation, and decent
overall corporate profit growth.
As we enter 1998, the investment climate is mixed. On the negative side,
valuations are at the high end of historical ranges, which is not surprising
given the advances of the past three years. While the long-term implications are
difficult to predict, Asia's economic problems seem likely to have some negative
impact on Western economies. On the positive side of the equation, real interest
rates are low, and the Federal Reserve is likely to remain accommodative as long
as inflation is not a threat.
<PAGE>
The performance of media and telecommunications stocks is driven more by
developments specific to the sector than by overall market valuations and
trends. This was evident in the second half of 1997. Distribution stocks
continued to be strong, especially in the cable TV sector where MICROSOFT'S
mid-year $1 billion investment in COMCAST was followed by the first commercial
launches of advanced voice, video, and data services. Distribution and content
stocks also benefited from their heavy dependence on the U.S. economy as
investors sought refuge from Asian economic turmoil.
Merger and acquisition activity remained robust in a number of sectors.
WORLDCOM made the winning bid for MCI by topping offers from British
Telecommunications and GTE in one of the highest- profile deals of the year. The
broadcasting and outdoor advertising sectors continued to consolidate with the
acquisitions of Americ an RADIO SYSTEMS and UNIVERSAL OUTDOOR HOLDINGS by CBS
and Clear Channel Communications, respectively.
The U.S. advertising market remained remarkably strong in the second half,
helping to fuel sound performances in both the content and distribution sectors.
Technology stocks generally underperformed as concern about slowing profit
growth for several leading companies was compounded by uncertainty about the
Asian economic situation.
The performance of media and telecommunications stocks for the whole of
1997 was largely a reversal of 1996. After spending 1996 in the doghouse, cable
and entertainment stocks were among the best-performing sectors. Numerous
factors drove this turnabout, including the positive psychological boost
provided by Microsoft's Comcast investment, the initial deployment of advanced
services by cable companies, and the number of high-profile merger transactions
such as SBC/Pacific Telesis, Nynex/Bell Atlantic, and the previously mentioned
WorldCom/MCI deal.
PERFORMANCE REVIEW
[Sector Allocation Pie chart showing Content 31%, Distribution 32%,
Technology 16%, International 14%, Other and Reserves 7%, shown here.]
We continue to use secular themes as guides in the investment process but
select securities on an individual, bottom-up basis. The overall media and
telecommunications industry is dynamic, which leads us to continually reassess
our expectations against changes in underlying fundamental factors.
The secular themes we attempt to exploit are largely unchanged and include:
* The increased use of wireless distribution systems for voice, video, and
data transmission, which should be favorable for such fund holdings as
PANAMSAT, LM ERICSSON, and NOKIA.
* The growth in electronic commerce and entertainment, which should benefit
AMERICA ONLINE, E*TRADE, and STERLING COMMERCE.
<PAGE>
* The global demand for quality entertainment, which should drive demand for
products from DISNEY and TIME WARNER.
* The consolidation of the broadcasting and outdoor advertising industries,
which is being led by companies such as CBS, JACOR COMMUNICATIONS, and
OUTDOOR SYSTEMS.
* The increasing pervasiveness of technology in communications and
entertainment, which should benefit ANALOG DEVICES, MAXIM INTEGRATED
PRODUCTS, and XILINX.
* Growth in networked communications infrastructure, which should continue to
drive demand for products from CISCO SYSTEMS, CIENA, and SECURITY DYNAMICS
TECHNOLOGIES.
We adjusted the fund's sector diversification in the second half. The
percentage of assets invested in the content sector increased from 22% at the
end of June to 31% on December 31; distribution stocks rose from 19% to 32%;
technology fell from 17% to 16%; international investments rose from 11% to 14%;
and reserves and other assets decreased from 31% to 7% at the end of the year.
The drop in reserves was consistent with our expectations when the fund became
open-end in July. One of the fund's private investments, CELCORE COMMUNICATIONS,
was acquired in December. No additional private company investments were made in
the second half.
We initiated positions in magazine publishers MEREDITH, CMP MEDIA, and THE
PETERSEN COMPANIES, and eliminated GOLDEN BOOKS FAMILY ENTERTAINMENT and
HOUGHTON MIFFLIN. We modestly increased information-related holdings due to
strong stock performances and initiated a position in E*TRADE, a leader in
on-line financial services. The content sector performed well during the past
six months. Major contributors included CENDANT (the merged entity of CUC
International and HFS), America Online, and TELE-COMM LIBERTY MEDIA. However,
there were laggards in the group as well, including FIRST DATA and Golden Books
Family Entertainment.
Distribution holdings experienced only a minor change in the second half.
We initiated no new positions and sold American Radio Systems, a major radio
station operator, after the company announced its sale to CBS. This sector
contributed significantly to second-half performance. Major holdings included
outdoor advertisers Outdoor Systems, LAMAR ADVERTISING, and Universal Outdoor
Holdings, which agreed to be acquired by Clear Channel Communications. Cable TV
system operators Comcast and COX COMMUNICATIONS were also significant
contributors.
Technology holdings declined as a percentage of assets due to selective
sales and generally weak performance. We initiated positions in NETWORK
ASSOCIATES, a leading provider of antivirus and network management software, and
CIENA, a leading provider of optical telecommunications equipment. Positions
were eliminated in ASCEND COMMUNICATIONS, 3COM, and ORACLE due to weakening
fundamentals.
<PAGE>
On the international front, we established new positions in several stocks,
including Nokia, a major provider of cellular handsets and infrastructure, TV
AZTECA, the second largest television broadcaster in Mexico, and METRONET
COMMUNICATIONS, a competitive Canadian telephone service provider. Major
international contributors in the second half of 1997 were cellular providers
VODAFONE and CELLULAR COMMUNICATIONS INTERNATIONAL. Laggards included FLEXTECH
and Nokia.
INVESTMENT OUTLOOK
The sentiment surrounding media and telecommunications stocks tends to be
more volatile than their underlying fundamentals. Our objective is to ignore
sentiment when assessing a company's prospects and to use it as a guide in the
stock selection process.
Our industries have evolved largely as we had expected over the past year,
while investor sentiment rebounded more than anticipated. As we entered 1998, we
were encouraged by many of the fundamental factors influencing media and
telecommunications companies. After years of fits and starts, advanced voice,
video, and data services are being deployed gradually across the U.S. and in
some international markets. The advertising cycle is aging but remains
remarkably strong. Interest rates are low and financial resources plentiful. The
regulatory environment is generally benign but could become challenging as an
FCC commission assumes power and politicians search for issues in an election
year.
==============================
. . . investor sentiment
rebounded more than
anticipated.
- ------------------------------
As was the case a year ago, the new year begins with promise and
uncertainty. We continue to expect technological advances, especially the
deployment of high-speed, wide-bandwidth networks, to affect the way we
communicate, educate, and conduct business. We expect these changes to be
evolutionary but also profound, and anticipate that investor sentiment will
continue to be more volatile than fundamentals. While investor sentiment toward
media and telecommunications stocks has not reached the speculative excesses of
1993, it is decidedly more positive than 12 months ago, and valuations have
moved to the upper end of historical ranges. This has made us more cautious over
the near term, but our long-term approach of investing in companies with
superior growth prospects, good business models, strong management, and solid
financial resources remains unchanged.
Once again, we would like to thank you for your continuing support and
reaffirm our commitment to seizing long-term wealth-building opportunities on
your behalf.
Respectfully submitted,
/s/
Brian D. Stansky
Chairman of the Investment Advisory Committee
January 20, 1998
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/97
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Outdoor Systems ................................................ 3.6%
Universal Outdoor Holdings ..................................... 3.1
Cox Communications ............................................. 2.8
Cendant ........................................................ 2.8
Sterling Commerce .............................................. 2.6
Tele-Comm Liberty Media ........................................ 2.4
Jacor Communications ........................................... 2.4
Lamar Advertising .............................................. 2.4
Comcast ........................................................ 2.2
BMC Software ................................................... 2.2
SmarTalk TeleServices .......................................... 2.1
Cellular Communications International .......................... 2.1
America Online ................................................. 2.0
Gartner Group .................................................. 2.0
Time Warner .................................................... 1.9
Disney ......................................................... 1.8
Maxim Integrated Products ...................................... 1.8
Analog Devices ................................................. 1.8
New York Times ................................................. 1.7
E*Trade ........................................................ 1.7
Central European Media Enterprises ............................. 1.7
A. H. Belo ..................................................... 1.7
CBS ............................................................ 1.6
Synopsys ....................................................... 1.6
Vodafone ....................................................... 1.6
- --------------------------------------------------------------------------------
Total .......................................................... 53.6%
================================================================================
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 12/31/97
Ten Best Contributors
- --------------------------------------------------------------------------------
Outdoor Systems ........................................................ 24c
Cox Communications ..................................................... 21
Universal Outdoor Holdings ............................................. 20
America Online ......................................................... 18
Tele-Comm Liberty Media 15
Lamar Advertising ...................................................... 15
Jacor Communications ................................................... 14
Pegasus Communications ................................................. 14
Cendant ................................................................ 13
Comcast ................................................................ 13
- --------------------------------------------------------------------------------
Total .................................................................. 167c
Ten Worst Contributors
- --------------------------------------------------------------------------------
First Data ............................................................. -13c
3Com ** ................................................................ 8
Ascend Communications ** ............................................... 7
Xilinx ................................................................. 5
CMP Media * ............................................................ 5
FlexTech ............................................................... 4
Nokia * ................................................................ 3
Corning ** ............................................................. 3
Golden Books Financing ** .............................................. 3
Paging Network ......................................................... 2
- --------------------------------------------------------------------------------
Total .................................................................. -53c
<PAGE>
12 Months Ended 12/31/97
Ten Best Contributors
- --------------------------------------------------------------------------------
Outdoor Systems ........................................................ 36c
America Online ......................................................... 35
Universal Outdoor Holdings ............................................. 28
Jacor Communications ................................................... 24
Tele-Comm Liberty Media 21
Cox Communications ..................................................... 21
Lamar Advertising ...................................................... 16
Cendant ................................................................ 16
Time Warner ............................................................ 16
Cellular Communications International .................................. 16
Total .................................................................. 229c
Ten Worst Contributors
- --------------------------------------------------------------------------------
3Com ** ................................................................ -27c
FORE Systems ** ........................................................ 14
Scholastic ** .......................................................... 14
Shiva ** ............................................................... 12
Ascend Communications ** ............................................... 12
Cascade Communications ** .............................................. 11
Reader's Digest ** ..................................................... 9
Omnipoint ** ........................................................... 9
Macromedia ** .......................................................... 8
First Data ............................................................. 7
- --------------------------------------------------------------------------------
Total .................................................................. -123c
* Position added
** Position eliminated
================================================================================
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[Media & Telecommunications Fund SEC graph shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Since Inception
Periods Ended 12/31/97 1 Year 3 Year Inception Date
- --------------------------------------------------------------------------------
Media & Telecommunications Fund 28.05% 23.14% 15.00% 10/13/93
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/25/97 and operates under a different expense structure.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year 10/13/93
Ended Through
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ........................... $ 15.22 $ 17.99 $ 13.44 $ 13.57 $ 13.93
Investment activities
Net investment income ................. (0.01) (0.11) (0.04) (0.01) 0.01
Net realized and unrealized gain (loss) 4.22 0.36 5.79 (0.11) (0.37)
Total from investment activities ...... 4.21 0.25 5.75 (0.12) (0.36)
Distributions
Net investment income ................. -- -- (0.07) (0.01) --
Net realized gain ..................... (2.05) (3.09) (1.13) -- --
Total distributions ................... (2.05) (3.09) (1.20) (0.01) --
Share repurchases ............................. 0.02 0.07 -- -- --
NET ASSET VALUE
End of Period ................................ $ 17.40 $ 15.22 $ 17.99 $ 13.44 $ 13.57
Ratios/Supplemental Data
Total return ~ ................................ 28.05% 1.78% 43.29% (0.90)% (2.58)%
Ratio of expenses to average net assets ....... 1.21% 1.22% 1.25% 1.35% 1.30%+
Ratio of net investment income to
average net assets ............................ (0.06)% (0.55)% (0.25)% (0.15)% 0.24%+
Portfolio turnover rate ....................... 38.6% 102.9% 118.9% 133.9% 58.7%+
Average commission rate paid .................. $ 0.0417 $ 0.0487 -- -- --
Net assets, end of period (in thousands) ...... $ 133,913 $ 222,556 $ 268,782 $ 200,996 $ 202,911
====================================================================================================================================
<FN>
+ Annualized.
~ Based on net asset value, for periods prior and subsequent to conversion to open-end status on 7/25/97.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
December 31, 1997
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
Common Stocks 93.3%
CONTENT 31.6%
A. H. Belo (Class A) .................................. 40,000 $ 2,245
America Online * ...................................... 30,000 2,676
Cendant * ............................................. 110,000 3,781
CMP Media * ........................................... 66,700 1,151
Disney ................................................ 25,000 2,477
DST Systems * ......................................... 40,000 1,707
E*TRADE * ............................................. 100,000 2,303
First Data ............................................ 60,000 1,755
Gartner Group (Class A) * ............................. 70,000 2,612
Knight-Ridder ......................................... 25,000 1,300
Meredith .............................................. 60,000 2,141
New York Times (Class A) .............................. 35,000 2,314
Omnicom ............................................... 50,000 2,119
Sterling Commerce * ................................... 90,000 3,459
Tele-Comm Liberty Media (Series A) * .................. 90,000 3,271
The Petersen Companies (Class A) * .................... 50,000 1,150
Time Warner ........................................... 40,000 2,480
Tribune ............................................... 25,000 1,556
Valassis Communications * ............................. 50,000 1,850
Total Content ......................................... 42,347
DISTRIBUTION 31.7%
BHC Communications (Class A) .......................... 10,000 1,303
CBS ................................................... 75,000 2,208
Comcast (Class A Special) ............................. 95,000 2,996
Cox Communications (Class A) * ........................ 95,000 3,806
Jacor Communications * ................................ 60,000 3,191
Lamar Advertising * ................................... 80,000 3,190
MCI ................................................... 15,000 643
Metro Networks * ...................................... 65,000 2,169
Outdoor Systems * ..................................... 125,000 4,797
Paging Network * ...................................... 200,000 2,156
PanAmSat * ............................................ 45,382 1,960
Pegasus Communications * .............................. 95,000 1,953
Sinclair Broadcast Group (Class A) .................... 40,000 1,853
SmarTalk TeleServices * ............................... 125,000 2,855
Universal Outdoor Holdings * .......................... 80,000 4,170
WorldCom .............................................. 40,000 1,211
Young Broadcasting (Class A) * ........................ 50,000 1,959
Total Distribution .................................... 42,420
<PAGE>
TECHNOLOGY 15.7%
Analog Devices * ...................................... 85,000 $ 2,354
BMC Software * ........................................ 45,000 2,950
Ciena * ............................................... 20,000 1,225
Cisco Systems * ....................................... 37,500 2,093
Intel ................................................. 20,000 1,404
Maxim Integrated Products * ........................... 70,000 2,419
Microsoft * ........................................... 15,000 1,938
Network Associates * .................................. 30,000 1,584
Security Dynamics Technologies * ...................... 50,000 1,791
Synopsys * ............................................ 61,200 2,184
Xilinx * .............................................. 30,000 1,050
Total Technology ...................................... 20,992
INTERNATIONAL 14.3%
Cellular Communications International * ............... 60,000 2,805
Central European Media Enterprises (Class A) * ........ 90,000 2,272
FlexTech (GBP) * ...................................... 125,000 1,072
Getty Communications ADR * ............................ 125,000 1,867
Grupo Iusacell (Series D) ADR * ....................... 140,000 2,135
LM Ericsson (Class B) ADR ............................. 37,700 1,408
MetroNet Communications * ............................. 75,000 1,273
Nokia ADR ............................................. 30,000 2,100
Scandinavian Broadcasting Systems * ................... 50,000 1,212
TV Azteca ADR * ....................................... 40,000 903
Vodafone ADR .......................................... 30,000 2,175
Total International ................................... 19,222
Total Common Stocks (Cost $80,803) ................... 124,981
Preferred Stocks 0.5%
Crystal Dynamics (Series D) * ......................... 166,667 625
Total Preferred Stocks (Cost $1,250) ................. 625
Short-Term Investments 6.6%
Money Market Funds 6.6%
Government Reserve Investment Fund, 5.55% # ........... 8,804,982 8,805
Total Short-Term Investments (Cost $8,805) ........... 8,805
Total Investments in Securities
100.4% of Net Assets (Cost $90,858) ................... $ 134,411
Other Assets Less Liabilities ......................... (498)
NET ASSETS ............................................ $ 133,913
<PAGE>
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions .................................. 3,031
Net unrealized gain (loss) ............................ 43,553
Paid-in-capital applicable to 7,696,080
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized .......... 87,329
NET ASSETS ............................................ $ 133,913
NET ASSET VALUE PER SHARE ............................. $ 17.40
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
GBP British sterling
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
12/31/97
Investment Income
Income
Interest ................................................... $ 1,615
Dividend ................................................... 514
Total income ............................................... 2,129
Expenses
Investment management ...................................... 1,783
Shareholder servicing ...................................... 130
Custody and accounting ..................................... 106
Legal and audit ............................................ 63
Prospectus and shareholder reports ......................... 47
Proxy and annual meeting ................................... 42
Directors .................................................. 11
Registration ............................................... 4
Miscellaneous .............................................. 47
Total expenses ............................................. 2,233
Net investment income .......................................... (104)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ................................................. 19,129
Futures .................................................... 5,938
Foreign currency transactions .............................. (19)
Net realized gain (loss) ................................... 25,048
Change in net unrealized gain or loss on securities ............ 20,649
Net realized and unrealized gain (loss) ........................ 45,697
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ......................................... $ 45,593
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Media & Telecommunications Fund
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Year
Ended
12/31/97 12/31/96
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................................ $ (104) $ (1,535)
Net realized gain (loss) ..................................................... 25,048 31,863
Change in net unrealized gain or loss ........................................ 20,649 (26,626)
Increase (decrease) in net assets from operations ............................ 45,593 3,702
Distributions to shareholders
Net realized gain ............................................................ (14,928) (45,196)
Capital share transactions *
Shares sold .................................................................. 25,052 --
Distributions reinvested ..................................................... 9,488 --
Shares redeemed .............................................................. (152,257) --
Shares repurchased ........................................................... (1,591) (4,732)
Increase (decrease) in net assets from capital
share transactions ........................................................... (119,308) (4,732)
Net Assets
Increase (decrease) during period .................................................... (88,643) (46,226)
Beginning of period .................................................................. 222,556 268,782
End of period ........................................................................ $ 133,913 $ 222,556
*Share information
Shares sold .................................................................. 1,398 --
Distributions reinvested ..................................................... 554 --
Shares redeemed .............................................................. (8,757) --
Shares repurchased ........................................................... (126) (310)
Increase (decrease) in shares outstanding .................................... (6,931) (310)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
December 31, 1997
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Media & Telecommunications Fund, Inc. (the fund) is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company and commenced operations on October 13, 1993.
Prior to July 25, 1997, the name of the fund was New Age Media Fund, Inc.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Equity securities listed or regularly traded on a securities
exchange are valued at the last quoted sales price on the day the valuations are
made. A security which is listed or traded on more than one exchange is valued
at the quotation on the exchange determined to be the primary market for such
security. Listed securities not traded on a particular day and securities
regularly traded in the over-the-counter market are valued at the mean of the
latest bid and asked prices. Other equity securities are valued at a price
within the limits of the latest bid and asked prices deemed by the Board of
Directors, or by persons delegated by the Board, best to reflect fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
CURRENCY TRANSLATION Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
<PAGE>
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $59,863,000 and $193,914,000, respectively, for the year
ended December 31, 1997.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
In order for the fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1997. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
================================================================================
Undistributed net investment income $ 104,000
Undistributed net realized gain (3,665,000)
Paid-in-capital 3,561,000
- --------------------------------------------------------------------------------
At December 31, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $90,858,000, and net unrealized gain
aggregated $43,553,000, of which $45,087,000 related to appreciated investments
and $1,534,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The investment management agreement between the fund and T. Rowe Price
Associates, Inc. (the manager) provides for an annual investment management fee,
of which $77,000 was payable at December 31, 1997. The fee is computed daily and
paid monthly, and consists of an individual fund fee equal to 0.35% of average
daily net assets and a group fee. The group fee is based on the combined assets
of certain mutual funds sponsored by the manager or Rowe Price-Fleming
International, Inc. (the group). The group fee rate ranges from 0.48% for the
first $1 billion of assets to 0.30% for assets in excess of $80 billion. The
effective annual group fee rate was 0.32% at December 31, 1997, and 0.33% for
the year then ended. The fund pays a pro-rata share of the group fee based on
the ratio of its net assets to those of the group. Prior to the fund's
conversion to open-end status, its management fee was computed weekly and paid
monthly at an annual rate of 1.10% of the fund's weekly net assets.
<PAGE>
In addition, the fund has entered into agreements with the manager and a
wholly owned subsidiary of the manager, pursuant to which the fund receives
certain other services. The manager computes the daily share price and maintains
the financial records of the fund. T. Rowe Price Services, Inc., is the fund's
transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. The fund incurred expenses pursuant to
these related party agreements totaling approximately $150,000 for the year
ended December 31, 1997, of which $26,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the year ended December 31, 1997, totaled $250,000
and are reflected as interest income in the accompanying Statement of
Operations.
NOTE 5 - FUND CONVERSION TO OPEN-END STATUS
Pursuant to shareholder approval, the fund converted to an open-end
management investment company effective July 25, 1997. The primary effect of the
conversion is that fund shares are now redeemable, and are offered for sale, by
the fund on a continuous basis at per-share net asset value. Prior to the
conversion, the fund made repurchases of its shares in the open market at a
discount from the net asset value, which had the effect of increasing the net
asset value per share of the remaining shares outstanding.
<PAGE>
T. Rowe Price Media & Telecommunications Fund
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
T. ROWE PRICE MEDIA & TELECOMMUNICATIONS FUND, INC.
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
T. Rowe Price Media & Telecommunications Fund, Inc. (the "Fund") at December 31,
1997, and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with custodians and, where appropriate, the application of
alternative auditing procedures for unsettled security transactions, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 21, 1998
T. Rowe Price Media & Telecommunications Fund
================================================================================
Tax Information (Unaudited) for the Tax Year Ended 12/31/97
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
* $356,000 from short-term capital gains, and
* $18,257,000 from long-term capital gains; of which $5,290,000 was subject
to the 20% rate gains category.
For corporate shareholders, 74% of the fund's distributed short-term capital
gains qualified for the dividends-received deduction.
- --------------------------------------------------------------------------------
<PAGE>
T. Rowe Price Shareholder Services
================================================================================
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE 1-800-225-5132 Available Monday through Friday from 8 a.m. to
10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
IN PERSON Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
CHECKING Available on most fixed income funds ($500 minimum).
AUTOMATIC INVESTING From your bank account or paycheck.
AUTOMATIC WITHDRAWAL Scheduled, automatic redemptions.
DISTRIBUTION OPTIONS Reinvest all, some, or none of your
distributions.
AUTOMATED 24-HOUR SERVICES Including Tele*AccessRegistration Mark and
T. Rowe Price OnLine.
DISCOUNT BROKERAGE*
INDIVIDUAL INVESTMENTS Stocks, bonds, options, precious metals, and
other securities at a savings over regular commission rates.
INVESTMENT INFORMATION
COMBINED STATEMENT Overview of your T. Rowe Price accounts.
SHAREHOLDER REPORTS Fund managers' reviews of their strategies and
results.
T. ROWE PRICE REPORT Quarterly investment newsletter discussing
markets and financial strategies.
PERFORMANCE UPDATE Quarterly review of all T. Rowe Price fund results.
INSIGHTS Educational reports on investment strategies and financial
markets.
INVESTMENT GUIDES Asset Mix Worksheet, College Planning Kit,
Diversifying Overseas: A Guide to International Investing, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning
Kit.
* A division of T. Rowe Price Investment Services, Inc. Member NASD/SIPC.
<PAGE>
T. Rowe Price Mutual Funds
================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------
DOMESTIC
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications*
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons**
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value**
Spectrum Growth
Total Equity Market Index
Value
INTERNATIONAL/GLOBAL
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Spectrum International
<PAGE>
BOND FUNDS
- --------------------------------------------------------------------------------
DOMESTIC TAXABLE
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
DOMESTIC TAX-FREE
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
INTERNATIONAL/GLOBAL
Emerging Markets Bond
Global Government Bond
International Bond
MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
TAXABLE
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
<PAGE>
TAX-FREE
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
BLENDED ASSET FUNDS
- --------------------------------------------------------------------------------
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
- --------------------------------------------------------------------------------
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Formerly the closed-end New Age Media Fund. Converted to open-end status on
7/28/97.
** Closed to new investors.
Please call for a prospectus. Read it carefully before you invest or send money.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolios' investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Media & Telecommunications Fund.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. F21-050 12/31/97
