Annual
Report
Media &
Telecommunications
Fund
December 31, 1998
T. Rowe Price
Report Highlights
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Media & Telecommunications Fund
o Stocks staged a powerful late-year rally following a steep summer
correction.
o The fund returned 9.02% and 35.14%, respectively, for the last six and 12
months, which was in line with the S&P 500 in the second half and well
ahead of it for the year.
o Media and telecommunications shares participated in the fall rally after
the Federal Reserve cut short-term rates three times to bolster investor
confidence.
o We raised our exposure to distribution stocks and reduced foreign holdings
to take advantage of promising investment areas.
o We are concerned about high stock valuations and speculation in Internet
stocks but believe in the long-term potential for media and
telecommunications stocks.
Fellow Shareholders
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After a sharp correction in late summer, stocks rebounded during the last few
months of the year, generating strong returns for media and telecommunications
stocks and your fund. For the S&P 500, 1998 was the fourth consecutive year of
returns above 20%. However, thanks to the strength of many stocks in this sector
during the final quarter, your fund posted stronger results than the broad
market over the year.
Performance Comparison
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Periods Ended 12/31/98 6 Months 12 Months
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Media &
Telecommunications Fund 9.02% 35.14%
S&P 500 9.22 28.57
Lipper Science & Technology
Funds Average 25.90 51.02
Your fund produced solid results for the 6- and 12-month periods ended December
31, 1998. For the past six months, the fund's return of 9.02% was in line with
the 9.22% return for the unmanaged Standard & Poor's 500 Stock Index. For the
year, the fund's 35.14% return exceeded the broad index but trailed the
performance of the Lipper Science & Technology Funds Average. Although the
technology sector usually represents a quarter or less of fund assets, this is
the area in which your fund has been placed by Lipper. As a result, fund results
often vary from the Lipper average. This was the case in 1997 when technology
stocks significantly lagged and fund results far surpassed the Lipper average
(28.05% versus 9.63%).
CAPITAL GAIN DISTRIBUTION
Your fund's Board of Directors declared a long-term capital gain distribution of
$0.86 per share for 1998, paid December 17, 1998, to shareholders of record on
December 15. Your check or statement confirming the distribution was mailed in
early January, and Form 1099-DIV, with complete tax information, was mailed
toward month-end.
Preparing For The Year 2000
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The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. All critical systems have been
reprogrammed (including business applications required to service our customers
and processing infrastructure necessary to ensure the integrity of customer data
and investments), and they are currently being tested. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. In addition, we are
scheduling tests for critical vendors and companies that claim Year 2000
compliance to ensure that time-related data and calculations function properly
as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we have modified them where necessary for the Year 2000.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party service providers can send, receive, and process files and transactions
accurately. In late July 1998, the SIA completed a beta test of Year 2000
readiness. The test was considered successful in terms of transactions completed
and will serve as the basis for the SIA's industry-wide approach. During October
1998, T. Rowe Price completed its beta test of Year 2000 readiness with the SIA
and is ready for the industry-wide test that is scheduled for March and April
1999.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (www.troweprice.com).
MARKET ENVIRONMENT
The past year was nothing less than amazing. The Dow Jones Industrial Average
rose 18%, a fourth consecutive year of double-digit gains, while the S&P 500
soared more than 28%, its fourth consecutive year of returns in excess of 20%.
Both streaks were unprecedented. The gains came in spite of such adverse
geopolitical events as the impeachment of the U.S. president, financial default
by the Russian government, and the end of Cal Ripken's consecutive game streak
at 2,632. Although corporate profit growth slowed, U.S. financial markets
remained robust, fueled by a record $1.6 trillion in proposed mergers and
acquisitions and a loosening in monetary policy by the Federal Reserve.
Media and telecommunications stocks experienced the full spectrum of investor
sentiment in the second half of 1998. After crossing the midyear mark on a
positive note, the investment environment turned negative as domestic political
concerns and heightened emerging market instability raised concerns about the
U.S. economy and led to weak global financial markets. Anticipation of a slowing
economy hurt stocks dependent on advertising, and plunging markets cooled a
heated mergers and acquisition (M&A) environment. This period of pessimism
abated mid quarter when Alan Greenspan became the latest Mr. October by cutting
interest rates three times in seven weeks. A powerful rebound led by technology
stocks, turbocharged by Internet mania, soon followed. The reignition of M&A
activity added fuel to the fire and included such gargantuan deals as
Exxon/Mobil and Bell Atlantic/GTE. Media and telecommunications stocks benefited
from a number of factors, including a reversal of fears about advertising
spending and capital investment prospects, especially for technology and
communications equipment suppliers. Without question the most powerful influence
on the sector was the explosion of investment interest in the formation of
advanced communications networks and the prospects for explosive growth in
electronic commerce. The appetite that developed for Internet companies
continually surprised in terms of its strength and seemingly increasing breadth.
We ended 1998 with a mixed investment climate, much like 1997. On the negative
side, valuations are at the high end of historical ranges as the despair of
October turned into the euphoria of the new year. Corporate profit growth is
slowing. Exogenous factors such as the trial of the president, continued unrest
in emerging markets, and the potential for Year 2000-related difficulties remain
real threats to global economic prosperity. Once again, low real interest rates,
an accommodative Federal Reserve, and heated M&A activity are serving as
positive influences on the financial markets.
PERFORMANCE REVIEW
Our investment approach was unchanged. We attempted to identify promising
investment areas and to select individual stocks based on company fundamentals
and share valuations. Three themes we consistently use are:
o The consolidation of the broadcasting and outdoor advertising industries
led by companies such as CBS, Clear Channel Communications, and Chancellor
Media.
o The secular trend toward digital data and wireless communications traffic
that is being exploited by service providers such as MCI WorldCom,
PanAmSat, and AirTouch Communications.
o The growth in networked communications infrastructure that should continue
to drive demand for products from Cisco Systems, Network Associates, and
Dell Computer.
During the second half of 1998, we used the general market volatility to
increase our exposure to companies benefiting from these themes and changed the
fund's sector diversification. The percentage of net assets in the content
sector declined slightly from 29% at the end of June to 27% at the end of
December; distribution stocks increased from 30% to 42%; technology stocks were
unchanged at 18%; international holdings declined from 14% to 9%; and reserves
went from 8% to 4% of assets.
The slight decline in the content weighting was largely due to a reduction in
information-related positions. We eliminated holdings in newspaper publishers AH
Belo, Knight Ridder, and The New York Times due to concerns about slowing
advertising revenues as well as the secular challenges posed by other forms of
media. Holdings in the media and entertainment sector were largely unchanged. We
initiated a position in Fox Entertainment Group, which consists of the U.S.
assets of News Corp. including television stations, the Fox TV network, and
Twentieth Century Fox Studios. We also added to SFX Entertainment, a leading
provider of out-of-home entertainment such as concerts, Off Broadway
theatricals, and motor sports. Major contributors in the sector included Time
Warner, America Online, and E*TRADE.
Sector Diversification
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Distribution Content Technology International Reserves
42 27 18 9 4
Based on net assets as of 12/31/98.
We added substantially to distribution holdings in an attempt to take advantage
of volatility in the broadcasting sector and to increase exposure to the secular
growth in data communications and the deployment of broadband communications
networks. In the broadcast sector we took advantage of financial market
volatility to add to positions in CBS, Outdoor Systems, and Chancellor Media. We
also established positions in Univision, the leading Hispanic television
broadcaster, and in Infinity Broadcasting, the dominant large-market radio
operator. In an effort to lower our exposure to the advertising cycle and to
increase it to the secular growth in communications networks and services, we
initiated positions in a number of companies, including regional bell operating
companies (RBOCs) SBC Communications and GTE, and competitive access providers
Qwest Communications and ICGX Communications. We increased positions in the
wireless communications services sector: AirTouch Communications, Nextel
Communications, Sprint PCS, and Western Wireless. Major contributors to
performance included MCI WorldCom and Comcast. TV broadcasters Sinclair
Broadcasting and Young Broadcasting were the major portfolio laggards in the
second half.
As mentioned, our exposure to technology was unchanged. We attempted to use the
volatility in the sector to upgrade the quality and predictability of our
holdings. We added to positions in Intel, the leading producer of
microprocessors; Network Associates, a major provider of network administration
and security software; and Dell Computer, a large PC manufacturer. We initiated
positions in entertainment software providers Electronic Arts and The Learning
Company and eliminated Qualcomm and Security Dynamics. Major contributors in the
sector included Intel and Network Associates.
International holdings declined, as mentioned, as we shifted assets to companies
with more visible growth prospects. We eliminated Central European Media, TV
Azteca, and Alcatel due to fundamental concerns, and added to Imax, the operator
of 3D theaters. Major international contributors in the second half were
cellular providers Vodafone and Cellular Communications International, and
wireless equipment provider Nokia.
INVESTMENT OUTLOOK
We enter 1999 with excitement and caution. The solid performance of the media
and telecommunications sectors in 1998 validated many of our long-held beliefs
about the potential for areas such as electronic commerce, wireless
communications, and the formation of broadband communications networks. We think
developments in 1999 will continue to reinforce many of these investment themes.
At the same time, we are concerned about record valuation levels, the large and
widening performance disparity between large- and small-cap stocks, and most of
all, the speculative euphoria in the Internet and telecommunications areas.
Accordingly, shareholders should be prepared for volatility in 1999.
However, the long-term direction of our sectors remains unquestionably positive,
in our view. Advances in communications and computing technology, combined with
a favorable regulatory environment and robust financial markets, should continue
to influence the way people communicate, educate, and conduct business. Over the
long term, our approach will continue to focus on companies with superior growth
prospects, good business models, strong management, and solid financial
resources.
We appreciate your continuing support and reaffirm our commitment to seizing
long-term investment opportunities on your behalf.
Respectfully submitted,
Brian D. Stansky
Chairman of the Investment Advisory Committee
January 22, 1999
T. Rowe Price Media & Telecommunications Fund
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Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
12/31/98
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America Online 3.4%
MCI WorldCom 3.3
Outdoor Systems 3.2
Chancellor Media 2.9
Network Associates 2.7
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Telecom Liberty Media 2.5
SFX Entertainment 2.3
Synopsys 2.1
Clear Channel Communications 2.1
Time Warner 2.0
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Intel 1.9
Cellular Communications International 1.9
SBC Communications 1.9
Premier Parks 1.8
Brightpoint 1.8
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CBS 1.8
Comcast 1.8
Emmis Broadcasting 1.8
Jacor Communications 1.7
Microsoft 1.7
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Imax 1.6
GTE 1.6
Nokia 1.6
E*TRADE 1.6
Cox Communications 1.5
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Total 52.5%
T. Rowe Price Media & Telecommunications Fund
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Portfolio Highlights
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CONTRIBUTIONS TO THE CHANGE IN NET ASSET VALUE PER SHARE
6 Months Ended 12/31/98
Ten Best Contributors
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America Online 56(cents)
MCI WorldCom 26
Network Associates 21
E*TRADE 17
Intel 16
Cellular Communications International 16
Nokia 15
Time Warner 15
Comcast 14
SFX Entertainment 13
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Total 209(cents)
Ten Worst Contributors
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TV Azteca** -1(cents)
Telebras* 1
PanAmSat 10
Omnipoint ** 11
Young Broadcasting 12
ICG Communications* 13
SportsLine USA 15
Paging Network** 16
Central European Media Enterprises** 16
Sinclair Broadcast Group** 17
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Total -112(cents)
12 Months Ended 12/31/98
Ten Best Contributors
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America Online 86(cents)
Outdoor Systems 40
Nokia 39
Cellular Communications International 35
MCI WorldCom 34
Telecom Liberty Media 32
Network Associates 28
Time Warner 25
Microsoft 24
Comcast 23
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Total 366(cents)
Ten Worst Contributors
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Sinclair Broadcast Group** -11
Analog Devices** 11
Omnipoint** 11
ICG Communications* 13
SportsLine USA* 15
Security Dynamics Technologies** 17
SmarTalk TeleServices** 19
Central European Media Enterprises** 19
Cendant** 20
TV Azteca** 22
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Total -158(cents)
* Position added
** Position eliminated
T. Rowe Price Media & Telecommunications Fund
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Performance Comparison
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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
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Lipper Science Media &
S&P 500 & Technology Telecommunications
Stock Index Funds Average Fund
10/13/93 10,000 10,000 10,000
12/93 10,168 10,081 9,742
12/94 10,302 11,917 9,654
12/95 14,174 16,782 13,833
12/96 17,428 19,845 14,079
12/97 23,243 21,501 18,027
12/98 29,882 32,619 24,362
Average Annual Compound Total Return
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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 11/30/98 1 Year 3 Years 5 Years Inception Date
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Media &
Telecommunications Fund 35.14% 20.76% 20.12% 18.62% 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.
T. Rowe Price Media & Telecommunications Fund
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For a share outstanding throughout each period
Financial Highlights
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Year
Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
NET ASSET VALUE
Beginning of period $ 17.40 $ 15.22 $ 17.99 $ 13.44 $ 13.57
Investment activities
Net investment income (0.07) (0.01) (0.11) (0.04) (0.01)
Net realized and
unrealized gain (loss) 6.07 4.22 0.36 5.79 (0.11)
Total from
investment activities 6.00 4.21 0.25 5.75 (0.12)
Distributions
Net investment income -- -- -- (0.07) (0.01)
Net realized gain (0.86) (2.05) (3.09) (1.13) --
Total distributions (0.86) (2.05) (3.09) (1.20) (0.01)
Share repurchases -- 0.02 0.07 -- --
NET ASSET VALUE
End of Period $ 22.54 $ 17.40 $ 15.22 $ 17.99 $ 13.44
----------------------------------------------------
Ratios/Supplemental Data
Total return*! 35.14% 28.05% 1.78% 43.29% (0.90%)
Ratio of expenses to
average net assets 1.03% 1.21% 1.22% 1.25% 1.35%
Ratio of net investment
income to average
net assets (0.38%) (0.06%) (0.55%) (0.25%) (0.15%)
Portfolio turnover rate 48.9% 38.6% 102.9% 118.9% 133.9%
Net assets,
end of period
(in thousands) $246,088 $133,913 $222,556 $268,782 $200,996
* Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
! Based on net asset value for all periods presented, including periods prior
to open-end status conversion on 7/25/97.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Media & Telecommunications Fund
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December 31, 1998
Statement of Net Assets
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Shares Value
In thousands
Common Stocks 95.9%
CONTENT 27.4%
America Online 55,000 $ 8,470
Disney 75,000 2,250
DST Systems * 40,000 2,282
E Trade Group * 82,200 3,845
First Data 75,000 2,377
Fox Entertainment Group * 140,000 3,526
Gartner Group (Class A) * 100,000 2,125
Hasbro 60,000 2,168
IDG Books (Class A) * 47,000 802
Meredith 60,000 2,273
News Corporation ADR 100,000 2,469
Omnicom 55,000 3,190
Premier Parks * 150,000 4,537
SFX Entertainment (Class A) * 105,000 5,765
SportsLine USA * 62,500 979
Sterling Commerce * 80,000 3,600
Telecom Liberty Media
(Series A) * 135,000 6,223
Time Warner 80,000 4,965
Tribune 40,000 2,640
Young & Rubicam * 88,600 2,868
Total Content 67,354
DISTRIBUTION 42.1%
AirTouch Communications * 50,000 3,606
Brightpoint * 325,000 4,438
CBS 135,000 4,421
Chancellor Media * 150,000 7,177
Clear Channel Communications * 93,800 5,112
Comcast (Class A Special) 75,000 4,404
Cox Communications (Class A) * 55,000 3,802
Emmis Broadcasting (Class A) * 100,000 4,337
GTE 60,000 3,900
ICG Communications * 165,000 3,558
Infinity Broadcasting * 138,200 $ 3,783
Jacor Communications * 65,000 4,205
Lamar Advertising * 97,500 3,656
MCI WorldCom * 114,634 8,229
Metro Networks * 71,100 3,026
Nextel Communications * 120,000 2,839
Outdoor Systems * 265,400 7,962
PanAmSat * 90,000 3,502
Pegasus Communications * 100,000 2,503
Qwest Communications
International * 60,000 2,998
SBC Communications 85,000 4,558
Sprint * 125,000 2,891
Univision Communications * 76,000 2,750
Western Wireless * 125,000 2,746
Young Broadcasting (Class A) * 80,000 3,343
Total Distribution 103,746
TECHNOLOGY 17.6%
Adobe Systems 60,000 2,809
BMC Software * 75,000 3,344
Cisco Systems * 37,500 3,482
Dell Computer * 40,000 2,929
Electronic Arts * 65,000 3,644
Intel 40,000 4,741
Maxim Integrated Products * 70,000 3,056
Microsoft * 30,000 4,156
Network Associates * 100,000 6,634
Synopsys * 95,000 5,148
The Learning Company * 130,000 3,372
Total Technology 43,315
INTERNATIONAL 8.8%
Cellular Communications
International * 67,000 4,573
Getty Images * 95,440 1,649
Imax * 125,000 3,961
MetroNet Communications * 91,600 3,069
Nokia ADR 32,000 $ 3,854
Telebras ADR * 40,000 2,907
Vodafone ADR 10,000 1,611
Total International 21,624
Total Common Stocks (Cost $148,474) 236,039
Short-Term Investments 3.5%
Money Market Funds 3.5%
Government Reserve Investment Fund,
4.82% # 8,469,038 8,469
Total Short-Term Investments (Cost $8,469) 8,469
Total Investments in Securities
99.4% of Net Assets (Cost $156,943) $ 244,508
Other Assets Less Liabilities 1,580
NET ASSETS $ 246,088
----------
Net Assets Consist of:
Accumulated net realized gain/loss
- - net of distributions $ 1,789
Net unrealized gain (loss) 87,565
Paid-in-capital applicable to 10,916,301
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized 156,734
NET ASSETS $ 246,088
----------
NET ASSET VALUE PER SHARE $ 22.54
----------
# Seven-day yield
* Non-income producing
ADR American Depository Receipt
T. Rowe Price Media & Telecommunications Fund
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Statement of Operations
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In thousands
Year
Ended
12/31/98
Investment Income
Income
Interest $ 820
Dividend 445
Total income 1,265
Expenses
Investment management 1,301
Shareholder servicing 464
Custody and accounting 89
Prospectus and shareholder reports 61
Registration 33
Legal and audit 13
Directors 6
Miscellaneous 30
Total expenses 1,997
Net investment income (732)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 8,187
Foreign currency transactions (2)
Net realized gain (loss) 8,185
Change in net unrealized gain or loss on securities 44,012
Net realized and unrealized gain (loss) 52,197
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 51,465
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Media & Telecommunications Fund
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Statement of Changes in Net Assets
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In thousands
Year
Ended
12/31/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ (732) $ (104)
Net realized gain (loss) 8,185 25,048
Change in net unrealized gain or loss 44,012 20,649
Increase (decrease) in
net assets from operations 51,465 45,593
Distributions to shareholders
Net realized gain (9,007) (14,928)
Capital share transactions*
Shares sold 143,977 25,052
Distributions reinvested 7,242 9,488
Shares redeemed (81,502) (152,257)
Shares repurchased -- (1,591)
Increase (decrease) in
net assets from capital
share transactions 69,717 (119,308)
Net Assets
Increase (decrease) during period 112,175 (88,643)
Beginning of period 133,913 222,556
End of period $ 246,088 $ 133,913
---------------------------------
*Share information
Shares sold 7,065 1,398
Distributions reinvested 364 554
Shares redeemed (4,209) (8,757)
Shares repurchased -- (126)
Increase (decrease)
in shares outstanding 3,220 (6,931)
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Media & Telecommunications Fund
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December 31, 1998
Notes to Financial Statements
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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.
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.
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.
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 $146,563,000 and $88,101,000, respectively, for the
year ended December 31, 1998.
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, 1998. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
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Undistributed net investment income $ 732,000
Undistributed net realized gain (420,000)
Paid-in-capital (312,000)
At December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$156,943,000. Net unrealized gain aggregated $87,565,000 at period end, of
which $91,713,000 related to appreciated investments and $4,148,000 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 $128,000 was payable at December 31, 1998. 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. At December 31, 1998, and for the year
then ended, the effective annual group fee rate was 0.32%. The fund pays a
pro-rata share of the group fee based on the ratio of its net assets to
those of the group.
In addition, the fund has entered into agreements with the manager and two
wholly owned subsidiaries 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. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $421,000 for the year ended December 31, 1998, of which
$51,000 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, 1998, totaled $804,000 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, which had the effect of increasing the net asset value per
share of the remaining shares outstanding.
T. Rowe Price Media & Telecommunications Fund
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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, 1998, 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, 1998
by correspondence with custodians, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 21, 1999
T. Rowe Price Media & Telecommunications Fund
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
- --------------------------------------------------------------------------------
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.
o The fund's distributions to shareholders included $9,007,000 from long-term
capital gains, subject to the 20% rate gains category.
- --------------------------------------------------------------------------------
T. Rowe Price Shareholder Serivces
- --------------------------------------------------------------------------------
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*Access(registered trademark) and
the T. Rowe Price Web site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
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.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
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 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, Invest with Confidence"
T. Rowe Price Investment Services, Inc., Distributor. F21-050 12/31/98
