Most Noteworthy Event: The appointment of 26-year-old Peter Sellars to head the Kennedy Center's American National Theater Company. Bursting with fresh ideas and innovative programs, Sellars promises to give a whole new look to the Center's theatrical fare. Just how this will sit with the Center's generally conservative constituency is the big question for 1985.

Most Distressing Development: The growing shortage of performing space for the city's smaller theater groups. Most of them -- from Woolly Mammoth to the Studio -- are operating in borrowed or cramped quarters. The pressure to find a permanent home escalated dramatically in 1984 and only promised to get worse in the future.

Best Performance: In Arena's "Accidental Death of an Anarchist," Richard Bauer played a moonstruck fool who inadvertently exposes the political corruption in a Milan police station, and his sweetly malicious shenanigans were pure delight. Also at Arena, the entire cast of "Cloud 9," Caryl Churchill's comedy about sexual confusions, demonstrated dazzling versatility. Some of the men played women, while some of the women played men; Mark Hammer even played a rambunctious tot in a pinafore. The performances were knockouts.

Most Promising Newcomer: The group that for years had called itself Pro Femina changed its name to Horizons and broadened its artistic policies. Instead of relying on scripts generated through improvisations, it turned to fully scripted plays by rising playwrights and seemed to discover, in the process, new purpose and energy.

Biggest Disappointment: For a while, it looked as if the Round House Theatre in Silver Spring was shaping up as an adventurous regional theater in the making. Without firm artistic leadership in 1984, however, standards began to fall and the professional spark went out of the place.