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October 1, 2000
FUND PROFILE
T. ROWE PRICE
Real Estate Fund
A stock fund seeking capital growth and current income through companies
engaged in the real estate industry.
This profile summarizes key information about the fund that is included in the
fund's prospectus. The fund's prospectus includes additional information about
the fund, including a more detailed description of the risks associated with
investing in the fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the fund at no cost by calling
1-800-638-5660, or by visiting our Web site at www.troweprice.com.
TROWEPRICELOGO
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FUND PROFILE
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What is the fund's objective?
The fund seeks to provide long-term growth through a combination of capital
appreciation and current income.
What is the fund's principal investment strategy?
We normally invest at least 80% of total assets in the equity securities of
real estate companies. Our definition of real estate companies is broad and
includes those that derive at least 50% of revenues or profits from, or
commit at least 50% of assets to, real estate activities. The fund is likely
to maintain a significant portion of assets in real estate investment trusts
(REITs). REITs pool money to invest in properties (equity REITs) or mortgages
(mortgage REITs). The fund generally invests in equity REITs. Other
investments may include real estate operating companies, brokers, developers,
and builders of residential, commercial, and industrial properties; property
management firms; finance, mortgage, and mortgage servicing firms;
construction supply and equipment manufacturing companies; and firms
dependent on real estate holdings for revenues and profits, including
lodging, leisure, timber, mining, and agriculture companies.
The fund will not own real estate directly and will have no restrictions on
the size of companies selected for investment. Up to 20% of fund assets may
be invested in companies deriving a substantial portion of revenues or
profits from servicing real estate firms, as well as in companies unrelated
to the real estate business.
Stock selection is based on fundamental, bottom-up analysis that seeks to
identify high-quality companies with both good appreciation prospects and
income-producing potential. Factors considered by the portfolio manager in
selecting real estate companies include: relative valuation; free cash flow;
undervalued assets; quality and experience of management; type of real estate
owned; and the nature of a company's real estate activities.
While most assets will be invested in U.S. common stocks, other securities
may also be purchased, including foreign stocks, futures, and options, in
keeping with fund objectives.
The fund may sell securities for a variety of reasons, such as to secure
gains, limit losses, or redeploy assets into more promising opportunities.
Further information about the fund's investments, including a review of
market conditions and fund strategies and their impact on performance, is
available in the annual and semiannual shareholder reports. To obtain free
copies of either of these documents, call 1-800-638-5660.
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FUND PROFILE
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What are the main risks of investing in the fund?
As with all equity funds, this fund's share price can fall because of
weakness in the broad market, a particular industry, or specific holdings.
The market as a whole can decline for many reasons, including adverse
political or economic developments here or abroad, changes in investor
psychology, or heavy institutional selling. The prospects for an industry or
company may deteriorate because of a variety of factors, including
disappointing earnings or changes in the competitive environment. In
addition, our assessment of companies held in the fund may prove incorrect,
resulting in losses or poor performance even in a rising market. Finally, the
fund's investment approach could fall out of favor with the investing public,
resulting in lagging performance versus other types of stock funds.
Since the fund is concentrated in the real estate industry, it is less
diversified than stock funds investing in a broad range of industries and,
therefore, could experience significant volatility, although the income
offered by some real estate companies may help moderate this risk. For
example, changes in the tax laws, overbuilding, environmental issues, the
quality of property management in the case of REITs, and other factors could
hurt the fund. Real estate is also affected by general economic conditions.
When growth is slowing, demand for property decreases and prices may decline.
Rising interest rates, which drive up mortgage and financing costs, can
restrain construction and buying and selling activity, and may reduce the
appeal of real estate investments. Also, if the portfolio has substantial
exposure to small companies, it would be subject to the greater volatility of
small-cap stocks.
Foreign stock holdings are subject to the risk that some holdings may lose
value because of declining foreign currencies or adverse political or
economic events overseas. Investments in futures and options, if any, are
subject to additional volatility and potential losses.
As with any mutual fund, there can be no guarantee the fund will achieve its
objective.
. The fund's share price may decline, so when you sell your shares, you may
lose money.
How can I tell if the fund is appropriate for me?
Consider your investment goals, your time horizon for achieving them, and
your tolerance for risk. If you are willing to accept the risks of investing
in a single industry in an effort to achieve long-term capital growth and
income, the fund could be appropriate for you. This fund should not represent
your complete investment program or be used for short-term trading purposes.
The fund can be used in both regular and tax-deferred accounts, such as IRAs.
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FUND PROFILE
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. Equity investors should have a long-term investment horizon and be willing
to wait out bear markets.
How has the fund performed in the past?
The bar chart showing calendar year returns and the average annual total
return table indicate risk by illustrating how much returns can differ from
one year to the next and over time. Fund past performance is no guarantee of
future returns.
The fund can also experience short-term performance swings, as shown by the
best and worst calendar quarter returns during the years depicted in the
chart.
LOGO
<TABLE>
<CAPTION>
Calendar Year Total Returns
"98" "99"
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<S> <C>
14.86 (1.23)
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</TABLE>
Quarter ended Total return
Best quarter 6/30/99 10.91%
Worst quarter 9/30/98 -10.95%
<TABLE>
Table 1 Average Annual Total Returns
<CAPTION>
Periods ended 09/30/2000
Since inception
1 year (10/31/1997)
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<S> <C> <C>
Real Estate Fund 27.68% 4.86%
Wilshire Real Estate Securities Index 25.26 1.42
Lipper Real Estate Funds Average 22.01 0.54
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</TABLE>
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These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any.
What fees or expenses will I pay?
The fund is 100% no load. The fund charges a 1.00% redemption fee, payable to
the fund, on shares held less than six months. There are no other fees or
charges to buy or sell fund shares, reinvest dividends, or exchange into
other T. Rowe Price funds. There are no 12b-1 fees.
<TABLE>
Table 2 Fees and Expenses of the Fund
<CAPTION>
Shareholder fees (fees paid directly from your investment)
Redemption fee (for shares held less than six months) 1.00%
Annual fund operating expenses
(expenses that are deducted from fund assets)
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<S> <C>
Management fee 0.62%/a/
Other expenses 1.14%
Total annual fund operating expenses 1.76%/a/
Fee waiver/reimbursement 0.76%
Net expenses 1.00%
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</TABLE>
/a/
To limit the fund's expenses during its initial period of operations, T. Rowe
Price contractually obligated itself to waive its fees and bear any expenses
through December 31, 1999, which would cause the fund's ratio of expenses to
average net assets to exceed 1.00%. Effective January 1, 2000, T. Rowe Price
agreed to extend this expense limitation for a period of two years through
December 31, 2001. Fees waived or expenses paid or assumed under these
agreements are subject to reimbursement to T. Rowe Price by the fund whenever
the fund's expense ratio is below 1.00%; however, no reimbursement will be
made after December 31, 2001 (for the first agreement); or December 31, 2003
(for the second agreement); or if it would result in the expense ratio
exceeding 1.00%. Any amounts reimbursed will have the effect of increasing
fees otherwise paid by the fund.
Example. The following table gives you a rough idea of how expense ratios
may translate into dollars and helps you to compare the cost of investing in
this fund with that of other funds. Although your actual costs may be higher
or lower, the table shows how much you would pay if operating expenses remain
the same, the expense limitation currently in place is not renewed, you
invest $10,000, earn a 5% annual return, and hold the investment for the
following periods:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
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<S> <C> <C> <C>
$102 $402 $807 $1,943
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</TABLE>
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FUND PROFILE
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Who manages the fund?
The fund is managed by T. Rowe Price Associates, Inc. Founded in 1937, T.
Rowe Price and its affiliates manage investments for individual and
institutional accounts. The company offers a comprehensive array of stock,
bond, and money market funds directly to the investing public.
David M. Lee manages the fund day-to-day and has been chairman of its
Investment Advisory Committee since 1997. He joined T. Rowe Price in 1993 and
has been managing investments since 1996.
Note: The following questions and answers about buying and selling shares and
services do not apply to employer-sponsored retirement plans. If you are a
participant in one of these plans, please call your plan's toll-free number for
additional information.
How can I purchase shares?
Fill out the New Account Form and return it with your check in the postpaid
envelope. The minimum initial purchase is $2,500 ($1,000 for IRAs and gifts
or transfers to minors). The minimum subsequent investment is $100 ($50 for
IRAs, gifts or transfers to minors, or Automatic Asset Builder). You can also
open an account by bank wire, by exchanging from another T. Rowe Price fund,
or by transferring assets from another financial institution.
How can I sell shares?
You may redeem or sell any portion of your account on any business day.
Simply write to us or call. You can also access your account at any time via
Tele*Access /(R)/ or our Web site. We offer convenient exchange among our
entire family of domestic and international funds. Restrictions may apply in
special circumstances, and some redemption requests need a signature
guarantee. A $5 fee is charged for wire redemptions under $5,000.
When will I receive income and capital gain distributions?
The fund distributes income quarterly and net capital gains, if any, at
year-end. For regular accounts, income and short-term gains are taxable at
ordinary income rates, and long-term gains are taxable at the capital gains
rate. Distributions are reinvested automatically in additional shares unless
you choose another option, such as receiving a check. Distributions paid to
IRAs and employer-sponsored retirement plans are automatically reinvested.
Distributions from the Real Estate Fund will not be included in your
consolidated 1099-DIV that we send to you in January of each year. The Real
Estate Fund's distributions will be reported on a separate 1099-DIV mailed to
you in February. The reasons for this are:
. A sizable portion of the dividends paid by REITs may represent a return of
capital. Consequently, a portion of the fund's distributions may also repre-
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FUND PROFILE
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sent a return of capital. Return of capital distributions are not taxable to
you, but you must deduct them from the cost basis of your investment in the
fund. Returns of capital are listed as "nontaxable distributions" on Form
1099-DIV.
. REITs typically have not indicated what proportion of their dividends
represent return of capital in time to allow the fund to meet its January 31
deadline for 1099-DIV reporting. Therefore, to ensure accurate and complete
tax information, we will send you a separate 1099-DIV for this fund in
February (subject to approval by the IRS).
What services are available?
A wide range, including but not limited to:
. retirement plans for individuals and large and small businesses;
. automated information and transaction services by telephone or computer;
. electronic transfers between fund and bank accounts;
. automatic investing and automatic exchange;
. brokerage services; and
. asset manager accounts.
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
www.troweprice.com
LOGO
RPS F12-035
T. Rowe Price Investment Services, Inc., Distributor
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