Annual Report
Real Estate
Fund
December 31, 1998
T. Rowe Price
Report Highlights
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Real Estate Fund
o The S&P 500 powered ahead for the fourth year in a row, but investor
sentiment remained negative toward real estate stocks.
o Your fund provided returns of -13.08% and -14.86% for the last 6- and
12-month periods. The 12-month return was ahead of the fund's benchmarks.
o Despite the sound fundamentals underpinning the real estate market,
investors focused mainly on a small group of large-cap growth stocks in
1998.
o We added to the shares of several companies with good management teams
throughout various real estate industries.
o We believe a solid foundation is forming beneath companies in our sectors
that will prove rewarding over time.
Fellow Shareholders
For the fourth year in a row, the S&P 500 posted a return of more than 20%. In
doing so it proved resilient to shocks from the turmoil in emerging economies,
the impeachment of the U.S. President, and loan losses at financial
institutions. However, a small group of large-cap growth stocks accounted for
much of the gain, and sentiment remained negative toward the real estate sector
and the stocks in which we invest.
Performance Comparison
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Periods Ended 12/31/98 6 Months 12 Months
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Real Estate Fund -13.08% -14.86%
Wilshire Real Estate
Securities Index -12.80 -17.43
Lipper Real Estate
Funds Average -11.46 -15.46
During the six months ended December 31, 1998, your fund was slightly
behind the Wilshire Real Estate Securities Index and the Lipper Real Estate
Funds Average, after exceeding it during the first half of the year. For
the full year, your fund's -14.86% was ahead of both benchmarks.
Unfortunately, the disconnect between the sound property fundamentals of
our holdings and their price performance continued throughout the year.
Cash rents continue to grow, and because of real estate companies' unique
structure, they channel much of their income to investors in the form of
dividends, which we in turn pass along to you as distributions.
DIVIDEND DISTRIBUTION
On December 28, 1998, your Board of Directors declared a $0.19 per share
distribution, bringing the full year total to $0.44. You should have
already received your check or statement reflecting this activity.
MARKET ENVIRONMENT
Cash earnings continued to rise at a healthy pace: most of our holdings
increased their dividends, and the margin of safety on these payouts
actually increased. However, negative sentiment toward the real estate
sector led to stock price declines that surpassed the amount of the
distributions and, therefore, resulted in negative total returns. Virtually
all types of real estate securities were punished in 1998, including the
real estate investment trusts (REITs), which compose the majority of our
holdings.
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).
The National Association of Real Estate Investment Trusts (NAREIT) has been
publishing statistics on REITs since 1972. Since that time, REITs have
posted negative returns in only five years (including 1998) and
back-to-back losses only once. Coincidentally, this performance record
applies to the S&P 500 as well. Indeed, REITs outperformed the S&P 500 in
most years during this period. Last year's performance of REITs versus the
S&P 500 was more than twice as bad as in any year reported by NAREIT.
What caused this sell-off in real estate stocks? Fears of a potentially
slowing economy, increased building activity, and rising acquisition prices
were among the concerns raised by investors. Ironically, economic fears did
not seem to affect the broad market to the same extent as the real estate
sector, even though we feel that our sector is generally more stable by
virtue of its contractual lease structures. Increased supply and rising
acquisition prices were a result of easier credit, but a subsequent credit
crunch seems to have corrected these trends. Consequently, we have recently
seen a decline in building activity and the pace of acquisitions. It
appears that the marketplace is doing its job of bringing supply and demand
more closely into balance, which prompts us to remain bullish on the future
of our sector.
PORTFOLIO REVIEW
Your fund remained broadly diversified across numerous property sectors and
geographic locations. Weakness in the capital markets allowed us to
selectively concentrate our holdings among our best ideas. We reduced our
number of holdings while maintaining prudent levels in our areas of
investment. We feel strongly about investing with the best managements that
our research uncovers. In general, we were pleased with the way the
managers of portfolio companies performed during this difficult period,
although we were disappointed in a few cases. We believe that superior
managements create the greatest value for our shareholders, and we remain
vigilant in our pursuit of companies with top-quality executives.
Industry Diversification
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Percent of Net Assets
6/30/98 12/31/98
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Apartment/Residential 13% 17%
Diversified 17 16
Office 13 15
Office and Industrial 9 10
Shopping Center 8 9
Industrial 8 7
Lodging and Leisure 8 6
Regional Mall 6 5
Manufactured Housing 4 4
Services 5 3
Other Real Estate 3 3
Reserves 3 3
Self-Storage 2 2
Miscellaneous 1 --
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Total 100% 100%
We are excited about the prospects for LaSalle Partners. LaSalle is a
respected and growing name in the real estate services category. Recently,
LaSalle announced plans to merge with Jones Lang Wootton, a company with
extraordinary international reach. We believe that this merger creates a
promising global force in real estate services. Apartment Management &
Invest-ment is another company that has grown dramatically through mergers
and acquisitions. We recently toured some of their properties and were
impressed with management and its pursuit of excellence. Cousins Properties
continues a long track record of sterling operations. The firm is a
diversified developer of properties whose ability to fund its activities
without frequent issuance of new shares is impressive.
In our first annual report, we discussed our concerns about the real estate
lodging sector. While we were appropriately underweighted in this area, we
were nonetheless hurt by our investments in some companies, including our
large position in Starwood Hotels & Resorts. Patriot American Hospitality
was particularly disappointing when its solid property results were
overwhelmed by ineffective financial tactics. We were disheartened to see
the cancellation of Crescent Real Estate Equities' proposed acquisition of
Station Casinos. Despite this, the company increased its dividend a
remarkable 45% during the year.
OUTLOOK
The past year in real estate reminds us of a similar situation in the broad
stock market during the middle of this decade. At the time, investors
feared a slowing economy, lower earnings growth, and overextended stock
valuations. Skepticism abounded about the outlook for a so-called "soft
landing" for the economy-slowing growth that would rein in inflationary
influences without leading to a recession. However, a soft landing did
indeed occur, and the stock market rewarded investors with unprecedented
returns over the past four years.
We see similarities in the concerns investors have about real estate, and
we currently foresee a foundation being laid for a soft landing in this
area because of increased scrutiny by investors, the elimination of
tax-induced building, and the memory of the sins created by loose lenders.
In the favorable real estate environment that we envision throughout the
rest of the year, we remain committed to providing a sound portfolio of
quality investments to take advantage of opportunities in this sector.
Respectfully submitted,
David M. Lee
Chairman of the Investment Advisory Committee
January 22, 1999
T. Rowe Price Real Estate 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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Starwood Hotels & Resorts 3.9%
Equity Office Properties 3.7
Kilroy Realty 3.4
Crescent Real Estate Equities 3.2
Trizec Hahn 3.0
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Simon DeBartolo Group 2.9
Archstone Communities Trust 2.8
Reckson Associates Realty 2.8
Vornado Realty Trust 2.8
CarrAmerica Realty 2.7
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Avalonbay Communities 2.5
Camden Property Trust 2.4
Gables Residential Trust 2.4
Arden Realty 2.4
Security Capital U.S. Realty 2.4
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Weeks 2.4
Apartment Investment & Management 2.4
JP Realty 2.3
Equity Residential Properties Trust 2.3
Kimco Realty 2.2
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Post Properties 2.1
Manufactured Home Communities 2.1
Koger Equity 2.1
Duke Realty Investments 2.0
Sun Communities 2.0
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Total 65.2%
Portfolio Highlights
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MAJOR PORTFOLIO CHANGES
Listed in descending order of size
6 Months Ended 12/31/98
Ten Largest Purchases
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Gables Residential Trust
Prime Retail *
Starwood Hotels & Resorts
Homestead Village
Trammell Crow
Kilroy Realty
Patriot American Hospitality
Security Capital Group
LaSalle Partners
Public Storage
Ten Largest Sales
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Trammell Crow **
Weingarten Realty Investors **
Storage USA **
Crescent Real Estate Equities
AMB Property
Macerich Company **
Philips International Realty **
CBL & Associates Properties
Insignia/ESG Holdings **
EastGroup Properties
* Position added
** Position eliminated
T. Rowe Price Real Estate Fund
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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.
Real Estate Fund
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As of 12/31/98
Wilshire Lipper Real
Real Estate Real Estate Estate
Securities Index Funds Average Fund
10/31/97 10,000 10,000 10,000
12/97 10,428 10,390 10,782
12/98 8,594 8,735 9,180
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 12/31/98 1 Year Inception Date
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Real Estate Fund -14.86% -7.07% 10/31/97
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
Financial Highlights For a share outstanding throughout each period
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Year 10/31/97
Ended Through
12/31/98 12/31/97
NET ASSET VALUE
Beginning of period $ 10.69 $ 10.00
Investment activities
Net investment income 0.38* 0.08*
Net realized and
unrealized gain (loss) (1.97) 0.70
Total from investment activities (1.59) 0.78
Distributions
Net investment income (0.40) (0.09)
Return of capital (0.04) --
Total distributions (0.44) (0.09)
Redemption fees
added to paid-in-capital 0.02 --
NET ASSET VALUE
End of period $ 8.68 $ 10.69
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Ratios/Supplemental Data
Total return# (14.86%)* 7.82%*
Ratio of expenses to
average net assets 1.00%* 1.00%*!
Ratio of net investment income to
average net assets 4.07%* 6.07%*!
Portfolio turnover rate 56.8% 8.4%
Net assets,
end of period (in thousands) $ 27,599 $ 7,259
# 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 and payment of no redemption or account fees.
* Excludes expenses in excess of a 1.00% voluntary expense limitation in
effect through 12/31/99.
! Annualized
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Real Estate Fund
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December 31, 1998
Statement of Net Assets
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Shares Value
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In thousands
Common Stocks 96.7%
REAL ESTATE 93.0%
Apartment/Residential 16.3%
Apartment Investment
& Management, REIT 13,000 $ 483
Archstone Communities Trust, REIT 38,500 780
Avalonbay Communities, REIT 20,000 685
Camden Property Trust, REIT 26,000 676
Equity Residential
Properties Trust, REIT 15,500 627
Gables Residential Trust, REIT 29,000 672
Post Properties, REIT 15,000 577
4,500
Diversified 16.4%
AMB Property 18,000 396
Colonial Properties Trust, REIT 18,500 493
Cousins Properties, REIT 16,000 516
Crescent Real Estate
Equities, REIT 38,000 874
Security Capital U.S. Realty * 67,600 669
Trizec Hahn 40,000 820
Vornado Realty Trust, REIT 22,500 759
4,527
Industrial 7.1%
EastGroup Properties, REIT 18,600 343
Meridian Industrial Trust, REIT 22,600 531
Prologis Trust, REIT 20,000 415
Weeks, REIT 23,500 663
1,952
Lodging & Leisure 5.8%
Homestead Village * 67,600 304
Patriot American
Hospitality, REIT 37,000 222
Starwood Hotels
& Resorts, REIT 47,500 1,078
1,604
Manufactured Housing 4.1%
Manufactured Home
Communities, REIT 23,000 576
Sun Communities, REIT 16,000 557
1,133
Office 14.6%
Arden Realty, REIT 29,000 $ 672
Boston Properties, REIT 16,000 488
CarrAmerica Realty, REIT 31,200 749
Equity Office
Properties, REIT 43,000 1,032
Koger Equity, REIT 33,400 574
Mack-Cali Realty, REIT 17,000 525
4,040
Office & Industrial 10.2%
Duke Realty Investments, REIT 24,000 558
Kilroy Realty, REIT 41,000 943
Reckson Associates Realty, REIT 34,900 775
Spieker Properties, REIT 15,600 540
2,816
Other Real Estate 2.6%
Catellus Development * 33,500 480
St. Joe 10,000 234
714
Regional Mall 4.8%
CBL & Associates Properties, REIT 20,000 516
Simon DeBartolo Group, REIT 28,000 798
1,314
Self Storage 1.8%
Public Storage, REIT 18,600 503
503
Shopping Center 9.3%
Developers Diversified
Realty, REIT 29,000 515
Federal Realty
Investment Trust, REIT 23,000 543
JP Realty, REIT 32,900 646
Kimco Realty, REIT 15,000 595
Prime Retail 27,600 271
2,570
Total Real Estate 25,673
SERVICES 3.0%
Services 3.0%
LaSalle Partners * 12,500 368
Security Capital Group
(Class B) * 34,000 461
Total Services 829
Miscellaneous Common Stocks 0.7% $ 181
Total Common Stocks (Cost $32,164) 26,683
Convertible Preferred Stocks 0.6%
Apartment Investment
& Management, REIT 4,500 166
Total Convertible Preferred Stocks (Cost $216) 166
Short-Term Investments 1.1%
Money Market Funds 1.1%
Reserve Investment Fund, 5.42%# 301,586 302
Total Short-Term Investments (Cost $302) 302
Total Investments in Securities
98.4% of Net Assets (Cost $32,682) $ 27,151
Other Assets Less Liabilities 448
NET ASSETS $ 27,599
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Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions (746)
Net unrealized gain (loss) (5,531)
Paid-in-capital applicable to 3,181,107
shares of $0.0001 par value capital stock
outstanding; 1,000,000,000 shares authorized 33,876
NET ASSETS $ 27,599
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NET ASSET VALUE PER SHARE $ 8.68
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# Seven-day yield
* Non-income producing
REIT Real Estate Investment Trust
The accompanying notes are an integral part of these financial statements.
Statement of Operations
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In thousands
Year
Ended
12/31/98
Investment Income
Income
Dividend $ 1,487
Interest 52
Total income 1,539
Expenses
Shareholder servicing 154
Custody and accounting 101
Organizational 45
Prospectus and shareholder reports 30
Registration 29
Legal and audit 10
Directors 6
Miscellaneous 2
Reimbursed by manager (74)
Total expenses 303
Net investment income 1,236
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on securities (746)
Change in net unrealized gain
or loss on securities (5,829)
Net realized and unrealized gain (loss) (6,575)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (5,339)
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The accompanying notes are an integral part of these financial statements.
T. Rowe Price Real Estate Fund
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Statement of Changes in Net Assets
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In thousands
Year 10/31/97
Ended Through
12/31/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,236 $ 47
Net realized gain (loss) (746) 28
Change in net unrealized gain or loss (5,829) 298
Increase (decrease) in net
assets from operations (5,339) 373
Distributions to shareholders
Net investment income (1,306) (52)
Return of capital (136) --
Decrease in net assets
from distributions (1,442) (52)
Capital share transactions*
Shares sold 43,879 6,845
Distributions reinvested 1,345 50
Shares redeemed (18,163) (57)
Redemption fees received 60 --
Increase (decrease) in net
assets from capital
share transactions 27,121 6,838
Net Assets
Increase (decrease) during period 20,340 7,159
Beginning of period 7,259 100
End of period $ 27,599 $ 7,259
---------------------------------
*Share information
Shares sold 4,242 670
Distributions reinvested 146 5
Shares redeemed (1,886) (6)
Increase (decrease) in shares outstanding 2,502 669
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Real Estate Fund
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December 31, 1998
Notes to Financial Statements
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price Real Estate 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 31, 1997.
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.
Valuationo 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.
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 $43,373,000 and $16,335,000, 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. As of December 31, 1998, the fund had capital loss
carryforwards for federal income tax purposes of $224,000, all of which
expires in 2006. The fund intends to retain gains realized in future
periods that may be offset by available capital loss carryforwards.
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 $70,000
Undistributed net realized gain (24,000)
Paid-in-capital (46,000)
At December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$32,682,000. Net unrealized loss aggregated $5,531,000 at period-end, of
which $273,000 related to appreciated investments and $5,804,000 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. The fee is computed daily and paid monthly, and consists of an
individual fund fee equal to 0.30% 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.
Under the terms of the investment management agreement, the manager is
required to bear any expenses through December 31, 1999, which would cause
the fund's ratio of expenses to average net assets to exceed 1.00%.
Thereafter, through December 31, 2001, the fund is required to reimburse
the manager for these expenses, provided that average net assets have grown
or expenses have declined sufficiently to allow reimbursement without
causing the fund's ratio of expenses to average net assets to exceed 1.00%.
Pursuant to this agreement, $188,000 of management fees were not accrued by
the fund for the year ended December 31, 1998, and $74,000 of other
expenses were borne by the manager. Additionally, $23,000 of unaccrued 1997
fees and expenses remain subject to reimbursement through December 31,
2001.
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 $189,000 for the year ended December 31, 1998, of which
$20,000 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 $52,000 and are reflected as interest income in
the accompanying Statement of Operations.
T. Rowe Price Real Estate Fund
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Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Real Estate 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 Real Estate Fund, Inc. (the "Fund") at December 31, 1998,
the results of its operations, and 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
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
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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.
For corporate shareholders, $22,000 of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
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T. Rowe Price Shareholder Services
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Investment Services And Information
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone Shareholder service representatives are available from 8 a.m. to
10 p.m. ET Monday through Friday and from 8:30 a.m. to 5 p.m. ET on
weekends. Call 1-800-225-5132 to speak directly with a representative who
will be able to assist you with your accounts.
In Person Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. You can
also drop off applications or obtain prospectuses and other literature at
these centers.
AUTOMATED 24-HOUR SERVICES
Tele*Access(registered trademark) Call 1-800-638-2587 to obtain information
such as account balance, date and amount of your last transaction, latest
dividend payment, fund prices, and yields. Additionally, you have the
ability to request prospectuses, statements, and account and tax forms; to
reorder checks; and to initiate purchase, redemption, and exchange orders
for identically registered accounts.
Internet. T. Rowe Price Web site: www.troweprice.com All the information
and services available on Tele*Access are available on our Web site,
including transactions in your fund and brokerage accounts (with
preauthorized access).
ACCOUNT SERVICES
Checking Write checks for $500 or more on any money market and most bond
fund accounts (except the High Yield and Emerging Markets Bond Funds).
Automatic Investing Build your account over time by investing directly from
your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one
fund account into another, such as from a money fund into a stock fund. A
$50 minimum makes it easy to get started.
Automatic Withdrawal If you need money from your fund account on a regular
basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
BROKERAGE SERVICES*
Investments Available You can trade stocks, bonds, options, precious
metals, and other securities at a savings over full-service commission
rates.
To Open an Account Call a shareholder service representative for more
information.
INVESTMENT INFORMATION
Combined Statement A comprehensive overview of your T. Rowe Price accounts
is provided. The summary page gives you earnings by tax category, provides
total portfolio value, and lists your investments by type. Detail pages
itemize account transactions.
Shareholder Reports Portfolio managers review the performance of the funds
in plain language and discuss T. Rowe Price's economic outlook.
T. Rowe Price Report This is a quarterly newsletter with relevant articles
on market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Performance Update This quarterly report reviews recent market developments
and provides comprehensive performance information for every T. Rowe Price
fund.
Insights This library of information includes reports on mutual fund tax
issues, investment strategies, and financial markets.
Detailed Investment Guides Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Diversifying Overseas: A Guide to International
Investing, Retirees Financial Guide, and Retirement Planning Kit (also
available on disk or CD-ROM for PC use) can help you determine and reach
your investment goals.
* T. Rowe Price Brokerage is 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 Real Estate 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 (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F12-050
12/31/98
