PAGE 1
Registration Nos. 002-65539/811-2958
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Post-Effective Amendment No. 57 / X /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 / X /
Amendment No. 50 / X /
Fiscal Year Ended October 31, 1994
__________________________________________
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
____________________________________________________
(Exact Name of Registrant as Specified in Charter)
100 East Pratt Street, Baltimore, Maryland 21202
__________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 410-547-2000
____________
Henry H. Hopkins
100 East Pratt Street
Baltimore, Maryland 21202
_______________________________________
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering December 28, 1995
_________________
It is proposed that this filing will become effective (check
appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
PAGE 2
/ / on (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933+
______________________________________________
Pursuant to Section 24f-2 of the Investment Company Act of 1940,
the Registrant has registered an indefinite number of securities
under the Securities Act of 1933 and intends to file a 24f-2
Notice by February 28, 1996.
+Not applicable, as no securities are being registered by this
Post-Effective Amendment No. 57 to the Registration Statement.
PAGE 3
The Registration Statement of the T. Rowe Price
International Funds, Inc. on Form N-1A (File No. 2-65539) is
hereby amended under the Securities Act of 1933 to add a new
series, the T. Rowe Price Global Stock Fund, to the Registrant's
Prospectus and Statement of Additional Information.
This Amendment consists of the following:
Cross Reference Sheet
Part A of Form N-1A, Revised Prospectus
Part B of Form N-1A, Statement of Additional Information
Part C of Form N-1A, Other Information
Accountants' Consent
PAGE 4
T. ROWE PRICE INTERNATIONAL STOCK FUND
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
T. ROWE PRICE EUROPEAN STOCK FUND
T. ROWE PRICE NEW ASIA FUND
T. ROWE PRICE JAPAN FUND
T. ROWE PRICE LATIN AMERICA FUND
T. ROWE PRICE EMERGING MARKETS STOCK FUND
T. ROWE PRICE GLOBAL STOCK FUND
CROSS REFERENCE SHEET
N-1A Item No. Location
_____________ ________
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Transaction and Fund
Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Transaction and
Registrant Fund Expenses; Fund,
Market, and Risk
Characteristics;
Organization and
Management;
Understanding Fund
Performance;
Investment Policies
and Practices
Item 5. Management of the Fund Transaction and Fund
Expenses; Fund,
Market, and Risk
Characteristics;
Organization and
Management
Item 6. Capital Stock and Other Distributions and
Securities Taxes; Organization
and Management
Item 7. Purchase of Securities Being Pricing Shares and
Offered Receiving Sale
Proceeds; Transaction
Procedures and Special
Requirements; Meeting
Requirements for New
Accounts; Shareholder
Services
PAGE 5
Item 8. Redemption or Repurchase Pricing Shares and
Receiving Sale
Proceeds; Transaction
Procedures and Special
Requirements;
Exchanging and
Redeeming Shares;
Shareholder Services
Item 9. Pending Legal Proceedings +
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History +
Item 13. Investment Objectives and Investment Objectives
Policies and Policies; Risk
Factors; Investment
Programs; Portfolio
Management Practices;
Investment
Restrictions;
Investment Performance
Item 14. Management of the Registrant Management of Funds
Item 15. Control Persons and Principal Principal Holders of
Holders of Securities Securities
Item 16. Investment Advisory and Other Investment Management
Services Services; Custodian;
Independent
Accountants, Legal
Counsel
Item 17. Brokerage Allocation Portfolio
Transactions; Code of
Ethics
Item 18. Capital Stock and Other Dividends and
Securities Distributions; Capital
Stock
Item 19. Purchase, Redemption and Redemptions in Kind;
Pricing of Securities Being Pricing of Securities;
Offered Net Asset Value Per
Share; Federal and
State Registration of
Shares
Item 20. Tax Status Tax Status
Item 21. Underwriters Distributor for Funds
Item 22. Calculation of Yield Quotations
of Money Market Funds +
PAGE 6
Item 23. Financial Statements Incorporated by
Reference from Annual
and Semi-Annual
Reports
PART C
Information required to be included in Part C is set forth under
the appropriate item, so numbered, in Part C to this Registration
Statement
___________________________________
+ Not applicable or negative answer
PAGE 7
The printed version of this prospectus appears in a dual
column format.
PAGE 8
Facts at a Glance
Investment Goal
Capital appreciation through investment in foreign companies
or, for the Global Stock Fund, investment in a mix of foreign and
U.S. companies.
Strategy
Global Stock Fund.
Invests primarily in well-established foreign and U.S.
companies.
International Stock Fund.
Invests primarily in well-established, non-U.S. companies.
International Discovery Fund.
Invests primarily in rapidly growing small- and medium-sized,
non-U.S. companies.
European Stock Fund.
Invests primarily in companies domiciled in Europe.
Japan Fund.
Invests primarily in Japanese companies.
New Asia Fund.
Invests primarily in companies in Asia and the Pacific Basin,
excluding Japan.
Emerging Markets Stock Fund.
Invests primarily in companies located in less developed
"emerging market" countries.
Latin America Fund.
Invests primarily in companies located in Latin America.
PAGE 9
Risk/Reward
Each fund's share price will fluctuate with changes in market,
economic, and foreign currency exchange conditions. Generally,
funds investing in a single country, single or multiple emerging
markets, or principally in smaller companies represent higher
risk and potential reward than those with greater geographic
diversification and an orientation toward established companies
and more mature economies and markets.
Investor Profile
Those seeking enhanced appreciation potential over time and
greater diversification for their equity investments who can
accept the volatility associated with investing in stocks as well
as the special risks that accompany international investing.
Fees and Charges
100% no load. Redemption fees on three funds: the International
Discovery, Latin America, and Emerging Markets Stock Funds impose
a 2% redemption fee, payable to the funds, on shares held less
than one year. No sales charges; free telephone exchange; no
12b-1 marketing fees.
Investment Manager
Rowe Price-Fleming International, Inc. (Price-Fleming), was
founded in 1979 a joint venture between T. Rowe Price Associates,
Inc. and Robert Fleming Holdings Ltd. As of June 30, 1995, Price-
Fleming managed over $20 billion in foreign stocks and bonds
through its offices in Baltimore, London, Tokyo, and Hong
Kong.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION, OR
ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
T. Rowe Price
International Funds, Inc.
December 28, 1995
Prospectus
PAGE 10
Contents
About the Funds
Transaction and Fund Expenses
Financial Highlights
Fund, Market, and Risk Characteristics
About Your Account
Pricing Shares and Receiving Sale Proceeds
Distributions and Taxes
Transaction Procedures and Special Requirements
More About the Funds
Organization and Management
Understanding Fund Performance
Investment Policies and Practices
Investing With T. Rowe Price
Account Requirements and Transaction Information
Opening a New Account
Purchasing Additional Shares
Exchanging and Redeeming
Shareholder Services.
This prospectus contains information you should know before
investing. Please keep it for future reference. A Statement of
Additional Information about the funds, dated March 1, 1995
revised to March 30, 1995, and December 28, 1995, has been filed
with the Securities and Exchange Commission and is incorporated
by reference in this prospectus. To obtain a free copy, call 1-
800-638-5660.
PAGE 11
About the Funds
Transaction and Fund Expenses
These tables should help you understand the kinds of expenses you
will bear directly or indirectly as a fund shareholder.
The first part of the table, "Shareholder Transaction
Expenses," shows that you pay no sales charges. All the money you
invest in the fund goes to work for you, subject to the fees
explained below. "Annual Fund Expenses" provides an estimate of
how much it will cost to operate each fund for each year, based
on 1994 fiscal year expenses (and any expense limitations shown
in Table 3). These are costs you pay indirectly, because they are
deducted from the funds' total assets before the daily share
price is calculated and before dividends and other distributions
are made. In other words, you will not see these expenses on your
account statement.
_________________________________________________________________
Fund Expenses
Shareholder Transaction Expenses
International International European
Stock Discovery Stock Japan
_________________________________________________________________
Sales load
"charge" on
purchases None None None None
_________________________________________________________________
Sales load
"charge" on
reinvested
dividends None None None None
_________________________________________________________________
Redemption
fees None 2%a None None
_________________________________________________________________
Exchange
fees None None None None
_________________________________________________________________
PAGE 12
Emerging
New Latin Markets Global
Asia America Stock Stock
_________________________________________________________________
Sales load
"charge" on
purchases None None None None
_________________________________________________________________
Sales load
"charge" on
reinvested
dividends None None None None
_________________________________________________________________
Redemption
fees None 2%a 2%a None
_________________________________________________________________
Exchange
fees None None None None
_________________________________________________________________
Annual Fund Expenses Percentage of Fiscal 1994 Average Net
Assets
Japan
International International European (after
Stock Discovery Stock reduction)b
_________________________________________________________________
Management fee 0.69% 1.09% 0.84% 0.82%b
_________________________________________________________________
Distribution
fee (12b-1) None None None None
_________________________________________________________________
Total other
(Shareholder
servicing,
custodial,
auditing, etc.) 0.27% 0.41% 0.41% 0.68%
_________________________________________________________________
Total fund
expenses 0.96% 1.50% 1.25% 1.50%b
_________________________________________________________________
PAGE 13
Emerging
Markets Global
Stock Stock
New Latin (after (after
Asia America reduction)creduction)d
_________________________________________________________________
Management fee 0.84% 1.09% 0.90%c ____%d
_________________________________________________________________
Distribution
fee (12b-1) None None None None
_________________________________________________________________
Total other
(Shareholder
servicing,
custodial,
auditing, etc.) 0.38% 0.90% 0.85% _____%
_________________________________________________________________
Total fund
expenses 1.22% 1.99% 1.75%c _____%d
_________________________________________________________________
a On shares purchased and held for less than one year (details
under "Contingent Redemption Fees" in "Pricing Shares and
Receiving Sale Proceeds").
b Had Price-Fleming not agreed to waive management fees and
bear certain expenses in accordance with an expense
limitation agreement, the Japan Fund's management fee and
total expense ratio would have been 0.84% and 1.52%.
c Had Price-Fleming not agreed to waive management fees and
bear certain expenses in accordance with an expense
limitation agreement, the Emerging Markets Stock Fund's
management fee and total expense ratio would have been 1.09%
and 1.94%.
d Figures based on projected 1996 fiscal year expenses. Had
Price-Fleming not agreed to waive management fees and bear
certain expenses in accordance with an expense limitation
agreement, the Global Stock Fund's management fee and total
expense ratios would have been _____% and _____%.
Note: The funds charge a $5 fee for wire redemptions under
$5,000, subject to change without notice.
_________________________________________________________________
Table 1
PAGE 14
The main types of expenses, which all mutual funds may charge
against fund assets, are:
o A management fee: the percent of fund assets paid to the
fund's investment manager. Each fund's fee comprises both a
group fee, 0.34% as of June 30, 1995, and an individual fund
fee, as follows: International Stock Fund 0.35%; European
Stock, Japan and New Asia Funds 0.50%; Global Stock 0.__%;
International Discovery, Latin America, and Emerging Markets
Stock Funds 0.75%. Because the investment programs of the
funds are more costly to implement and maintain, their
management fees are higher than those paid by most U.S.
investment companies.
o "Other" administrative expenses: primarily the servicing of
shareholder accounts, such as providing statements, reports,
disbursing dividends, as well as custodial services. For the
year ended October 31, 1994, the funds paid the fees shown
in Table 4 to T. Rowe Price Services, Inc., for transfer and
dividend disbursing functions and shareholder services; T.
Rowe Price Retirement Plan Services, Inc., for
recordkeeping services for certain retirement plans; and to
T. Rowe Price for accounting services.
o Marketing or distribution fees: an annual charge ("12b-1")
to existing shareholders to defray the cost of selling
shares to new shareholders. T. Rowe Price funds do not levy
12b-1 fees.
For further details on fund expenses, please see "Organization
and Management."
o Hypothetical example: Assume you invest $1,000, the fund
returns 5% annually, expense ratios remain as previously
listed, and you close your account at the end of the time
periods shown. Your expenses would be:
The table at right is just an example, and actual expenses can be
higher or lower than those shown.
PAGE 15
_________________________________________________________________
Fund 1 Year 3 Years 5 Years 10 Years
_________________________________________________________________
International
Stock $10 $31 $ 53 $118
_________________________________________________________________
International
Discovery 15 47 82 179
_________________________________________________________________
European Stock 13 40 69 151
_________________________________________________________________
Japan 15 47 82 179
_________________________________________________________________
New Asia 12 39 67 148
_________________________________________________________________
Latin America 20 62 107 232
_________________________________________________________________
Emerging Markets
Stock 18 55 95 206
_________________________________________________________________
Global Stock _____ ____ ____ ____
_________________________________________________________________
Table 2
Table 3 sets forth expense ratio limitations and the periods for
which they are effective. For each, Price-Fleming has agreed to
waive management fees and bear certain expenses which would cause
the fund's ratio of expenses to average net assets to exceed the
indicated percentage limitations. The expenses borne by Price-
Fleming are subject to reimbursement by the fund through the
indicated reimbursement date, but no reimbursement will be made
if it would result in the fund's expense ratio exceeding its
specific limit.
_________________________________________________________________
Expense Ratio Limitations
Limitation Expense Ratio Reimbursement
Period Limitation Date
_________________________________________________________________
International
Discovery January 1, 1993- 1.50% December 31, 1995
December 31, 1993
_________________________________________________________________
Japan(a) January 1, 1994- 1.50% October 31, 1997
October 31, 1995
PAGE 16
_________________________________________________________________
Latin America December 29, 1993- 2.00% October 31, 1997
October 31, 1995
_________________________________________________________________
Emerging Markets
Stock March 30, 1995- 1.75% October 31, 1998
October 31, 1996
_________________________________________________________________
Global Stock ______________, 1995- _.__% _____________, 19__
_____________, 19__
_________________________________________________________________
a The Japan Fund previously operated under a 1.50% limitation
that expired December 31, 1993. The reimbursement period
for this limitation extends through December 31, 1995.
_________________________________________________________________
Table 3
_________________________________________________________________
Service Fees Paid
Transfer Subaccounting Accounting
Agent Services
_________________________________________________________________
International
Stock $2,514,410 $4,002,199 $124,697
_________________________________________________________________
International
Discovery 459,828 300,643 121,668
_________________________________________________________________
European Stock 338,082 210,175 100,000
_________________________________________________________________
Japan 205,814 313,428 100,000
_________________________________________________________________
New Asia 2,053,204 2,171,874 108,333
_________________________________________________________________
Latin America 239,546 348,318 83,333
_________________________________________________________________
Note: Emerging Markets Stock Fund became effective on March 30,
1995, and is expected to pay transfer agent fees of approximately
$17,000 to T. Rowe Price Services, Inc., for the fiscal period
ending October 31, 1995, and fees for recordkeeping services for
retirement plans and accounting of approximately $0 and $53,000,
respectively, for the same period to T. Rowe Price Retirement
Plan Services, Inc. and T. Rowe Price, respectively. Global
Stock Fund became effective on December 28, 1995, and is expected
to pay transfer agent fees of approximately $______ to T. Rowe
Price Services, Inc. for the fiscal period ending October 31,
PAGE 17
1996, and fees for recordkeeping services for retirement plans
and accounting of approximately $___ and $____, respectively, for
the same period to T. Rowe Price Retirement Plan Services, Inc.
and T. Rowe Price, respectively.
_________________________________________________________________
Table 4
Financial Highlights
The following table provides information about each fund's
financial history. It is based on a single share outstanding
throughout each fiscal year, and for the six months ended April
30, 1995. The respective table is part of each fund's financial
statements which are included in each fund's annual and semi-
annual reports, respectively, and are incorporated by reference
into the Statement of Additional Information. This document is
available to shareholders upon request. The financial statements
in the annual report have been audited by the funds' independent
accountants whose respective unqualified reports cover the
periods shown. The financial statements in the semi-annual
report are unaudited.
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
Stocka
1985 $ 6.59 $0.11 $ 2.71 $ 2.82 $(0.15) $(0.22) $(0.37)
1986 9.04 0.11 5.23 5.34 (0.11) (1.38) (1.49)
1987 12.89 0.12 0.74 0.86 (0.23) (4.98) (5.21)
1988 8.54 0.16 1.36 1.52 (0.16) (0.93) (1.09)
1989 8.97 0.16 1.94 2.10 (0.16) (0.67) (0.83)
1990 10.24 0.22 (1.13) (0.91) (0.16) (0.36) (0.52)
1991 8.81 0.15 1.22 1.37 (0.15) (0.49) (0.64)
1992 9.54 0.14 (0.47) (0.33) (0.16) (0.16) (0.32)
1993n 8.89 0.10 2.75 2.85 -- -- --
1994 11.74 0.09 1.30 1.39 (0.09) (0.20) (0.29)
1995o 12.84 0.07 (0.52) (0.45) (0.12) (0.62) (0.74)
_________________________________________________________________
PAGE 18
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
Stocka
1985 $ 9.04 45.3% $ 376,843 1.11% 1.54% 61.9%
1986 12.89 61.3% 790,020 1.10% 0.89% 56.4%
1987 8.54 8.0% 642,463 1.14% 0.93% 76.5%
1988 8.97 17.9% 630,114 1.16% 1.78% 42.4%
1989 10.24 23.7% 970,214 1.10% 1.63% 47.8%
1990 8.81 (8.9%) 1,030,848 1.09% 2.16% 47.1%
1991 9.54 15.9% 1,476,309 1.10% 1.51% 45.0%
1992 8.89 (3.5%) 1,949,631 1.05% 1.49% 37.8%
1993n 11.74 32.1% 3,746,055 1.01%m 1.52%m 29.8%m
1994 12.84 12.0% 6,205,713 0.96% 1.11% 22.9%
1995o 11.65 (3.3)% 6,112,049 0.93%m 1.25%m 18.5%m
_________________________________________________________________
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
Discovery
1989b $10.00 $0.14c $ 4.03 $4.17 $(0.13) $(0.10)$(0.23)
1990 13.94 0.14c (1.91) (1.77) (0.15) (0.27) (0.42)
1991 11.75 0.13c 1.24 1.37 (0.13) -- (0.13)
1992 12.99 0.13c (1.31) (1.18) (0.13) -- (0.13)
1993n 11.68 0.07c 4.41 4.48 -- -- --
1994 16.16 0.04 1.52 1.56 (0.07) (0.02) (0.09)
1995o 17.63 0.02 (2.70) (2.68) (0.06) (0.87) (0.93)
_________________________________________________________________
PAGE 19
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
Discovery
1989b $13.94 41.8%c $ 61,166 1.50%cm 0.76%cm 38.3%m
1990 11.75 (12.8%)c 136,660 1.50%c 1.10%c 44.0%
1991 12.99 11.7%c 166,819 1.50%c 1.03%c 56.3%
1992 11.68 (9.1%)c 166,362 1.50%c 1.07%c 38.0%
1993n 16.16 38.4%c 329,001 1.50%cm 0.81%cm 71.8%m
1994 17.63 9.7% 503,442 1.50% 0.38% 57.4%
1995o 14.02 (15.5)% 376,760 1.50%m 0.15%m 41.6%m
_________________________________________________________________
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
European Stock
1990d $10.00 $0.24e $(0.56) $(0.32) $(0.20) -- $(0.20)
1991 9.48 0.10 0.59 0.69 (0.08) -- (0.08)
1992 10.09 0.14 (0.70) (0.56) (0.17) -- (0.17)
1993n 9.36 0.12 1.89 2.01 -- -- --
1994 11.37 0.14 1.26 1.40 (0.04) $(0.01)(0.05)
1995o 12.72 0.05 0.62 0.67 (0.12) (0.05)(0.17)
_________________________________________________________________
PAGE 20
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
European Stock
1990d $9.48 (3.2%)e $ 99,447 1.75%em 2.30%em 34.9%m
1991 10.09 7.3% 103,977 1.71% 1.04% 57.7%
1992 9.36 (5.6%) 173,798 1.48% 1.23% 52.0%
1993n 11.37 21.5% 265,784 1.35%m 1.79%m 21.3%m
1994 12.72 12.4% 337,498 1.25% 1.19% 24.5%
1995o 13.22 5.4% 435,575 1.24m 1.09%m 17.8%m
_________________________________________________________________
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
Japan
1992f $10.00 $(0.01)g $(1.35) $(1.36) -- -- --
1993n 8.64 (0.05)g 2.99 2.94 -- -- --
1994 11.58 (0.06)g 0.97 0.91 -- $(0.85) $(0.85)
1995o 11.64 (0.02) (0.95) (0.97) -- (0.81) (0.81)
_________________________________________________________________
PAGE 21
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
Japan
1992f $ 8.64 (13.4%)g $ 45,792 1.50%g (0.22)%g 41.6%
1993n 11.58 33.7%g 87,163 1.50%gm (0.58)%gm 61.4%m
1994 11.64 9.3%g 203,303 1.50%g (0.68)%g 61.5%
1995o 9.86 (8.5)% 156,295 1.50%m (0.46)%m 28.3%m
_________________________________________________________________
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
New Asiaj
1990h $5.00 $0.04i $0.04 $0.08 $(0.04) -- $(0.04)
1991 5.04 0.10i 0.87 0.97 (0.10) -- (0.10)
1992 5.91 0.10 0.56 0.66 (0.10) $(0.13) (0.23)
1993n 6.34 0.03 3.51 3.54 -- -- --
1994 9.88 0.06 0.36 0.42 (0.04) (0.19) (0.23)
1995o 10.07 0.04 (1.40) (1.36) (0.07) (0.89) (0.96)
_________________________________________________________________
PAGE 22
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
New Asiaj
1990h $5.04 1.6%i $ 10,986 1.75%im 2.10%im 3.2%m
1991 5.91 19.3%i 102,922 1.75%i 1.75%i 49.0%
1992 6.34 11.2% 314,504 1.51% 1.64% 36.3%
1993n 9.88 55.8% 1,650,450 1.29%m 1.02%m 40.4%m
1994 10.07 4.1% 2,302,841 1.22% 0.85% 63.2%
1995o 7.75 (13.8)% 1,907,663 1.18%m 0.93%m 47.8%m
_________________________________________________________________
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
Latin America
1994k $10.00 $(0.03) $ 0.29l $ 0.26 -- -- --
1995o 10.32 0.02 (3.53) (3.51) -- -- --
_________________________________________________________________
PAGE 23
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
Latin America
1994k $10.32 3.2% $198,435 1.99%m (0.35)%m 12.2%m
1995o 6.84 (33.7)% 157,118 1.96%m 0.50%m 31.1%m
_________________________________________________________________
Investment Activities Distributions
Net Real-
ized and
Net Unreal- Total
Asset Net ized Gain from
Value, Invest- (Loss) Invest- Net Net
Begin- ment on ment Invest- Real- Total
Period ning of Income Invest- Activi- ment lized Distri-
Ended Period (Loss) ments ties Income Gain butions
_________________________________________________________________
Emerging Markets Stock
1995p $10.00 $0.01q $0.45 $0.46 -- -- --
_________________________________________________________________
End of Period
Ratio
of
Ratio Net
of Invest-
Net Total Expenses ment Port-
Asset Return to Income folio
Value, (Includes Net Average to Aver- Turn-
Period End of Reinvested Assets ($ Net age Net over
Ended Period Dividends) Thousands) Assets Assets Rate
_________________________________________________________________
Emerging Markets Stock
1995p $10.46 4.6%q $2,841,233 1.75%mq 0.87%mq 0.0%m
_________________________________________________________________
PAGE 24
a All per-share figures reflect the 2-for-1 stock split
effective August 31, 1987.
b For the period December 30, 1988 (commencement of
operations) to December 31, 1989.
c Excludes expenses in excess of a 1.50% voluntary expense
limitation in effect through December 31, 1993.
d For the period February 28, 1990 (commencement of
operations) to December 31, 1990.
e Excludes expenses in excess of a 1.75% voluntary expense
limitation in effect through December 31, 1991.
f For the period December 30, 1991 (commencement of
operations) to December 31, 1992.
g Excludes expenses in excess of a 1.50% voluntary expense
limitation in effect through October 31, 1995.
h For the period September 28, 1990 (commencement of
operations) to December 31, 1990.
i Excludes expenses in excess of a 1.75% voluntary expense
limitation in effect through December 31, 1992.
j All per share figures reflect the 2-for-1 stock split
effective May 27, 1994.
k For the period December 29, 1993 (commencement of
operations) to October 31, 1994.
l The amount presented is calculated pursuant to a methodology
prescribed by the Securities and Exchange Commission for a
share outstanding throughout the period. This amount is
inconsistent with the fund's aggregate gains and losses
because of the timing of sales and redemptions of fund
shares in relation to fluctuating market values for the
investment portfolio.
m Annualized.
n For the ten months ended October 31, 1993. Fiscal year-end
changed from December 31 to October 31.
o For the six months ended April 30, 1995 (unaudited).
p For the period March 31, 1995 (commencement of operations)
to April 30, 1995 (unaudited).
q Excludes expenses in excess of a 1.75% voluntary expense
limitation in effect through October 31, 1996.
_________________________________________________________________
Table 5
Fund, Market, and Risk Characteristics: What to Expect
To help you decide whether an international or global equity
fund is appropriate for you, this section takes a closer look at
their investment objectives and approach.
PAGE 25
Why invest in an international fund?
There are three main reasons:
o Expanded investment opportunities. More than half of the
world's total stock market capitalization and two-thirds of
global GNP consists of non-U.S. stocks and companies.
o The potential for higher long-term returns. For example,
foreign stocks represented by the Morgan Stanley EAFE Index
(Europe, Australia, Far East) outperformed U.S. stocks
measured by the S&P 500 Stock Index in all but one rolling
10-year period from 1981 through 1994. Of course, during
this time there were shorter periods when U.S. stocks
outperformed.
o Reduced overall volatility in your stock portfolio. Since
foreign stock markets tend to move independently of the U.S.
market and each other, spreading investments across a number
of markets can help smooth out fluctuations in the returns
of your total equity holdings.
Why invest in a global fund?
While essentially providing the three benefits noted above,
global funds generally offer a more conservative way to
participate in international equity markets. By investing a
portion of assets in U.S. stocks, which often move counter to
foreign stocks and are not subject to currency risk, global funds
temper the greater volatility that tends to be associated with a
fund investing exclusively in foreign equity securities.
What are the funds' objectives and investment programs?
Global Stock Fund.
The fund's objective is long-term growth of capital through
investment primarily in common stocks of established companies
throughout the world, including the U.S. The fund will diversify
broadly by investing in a variety of industries in developed,
newly industrialized, and emerging markets. Normally, the fund
will invest in at least five countries, one of which will be the
U.S. While the fund can purchase stocks without regard to a
company's market capitalization, investments will generally be
concentrated in established large- and to a lesser extent,
medium-sized companies.
PAGE 26
International Stock Fund.
The fund's objective is long-term growth of capital through
investments primarily in common stocks of established, non-U.S.
companies.
The fund expects to invest substantially all of its assets
outside the U.S. and to diversify broadly among countries
throughout the world -- developed, newly industrialized, and
emerging.
International Discovery Fund.
Depending on conditions, the International Discovery portfolio
should comprise at least 10 countries and 100 different
companies.
This fund's objective is long-term growth of capital through
investment primarily in common stocks of rapidly growing, small-
to medium-sized non-U.S. companies. Such companies may be found
in both developed and emerging markets. Traditionally, they are
more dynamic and offer greater growth potential than larger
companies, but they are often overlooked or undervalued by
investors. Smaller companies are generally riskier than their
larger counterparts because they may have limited product lines,
capital, and managerial resources. Their securities may trade
less frequently and with greater price swings.
European Stock Fund.
The fund's objective is long-term growth of capital through
investment primarily in common stocks of both large and small
European companies. Current income is a secondary objective. The
fund seeks to take advantage of opportunities arising from such
trends as privatization, the reduction of trade barriers, and the
potential growth of the emerging economies of Eastern Europe.
Normally, at least five countries will be represented in the
portfolio, and investments may be made in any of the countries
listed below, as well as others as their markets develop.
PAGE 27
Primary Emphasis: Others:
France Spain Austria Luxembourg Hungary
Germany Sweden Belgium Norway Poland
Holland Switzerland Denmark Portugal Slovakia
Italy United Kingdom Finland Czech Republic Turkey
Ireland Greece Russia
Israel
Japan Fund.
Japanese stocks represent approximately one-quarter of the
world's stock market capitalization.
This fund's objective is long-term growth of capital through
investment in common stocks of large and small companies
domiciled or with primary operations in Japan. Assets will
normally be invested across a wide range of industries and
companies (both small and large). While a single-country fund may
normally be considered more risky than a multi-country fund,
Japan has a highly developed and diverse economy which accounts
for approximately 17% of the world's output.
Investors should be aware that the U.S. dollar has fallen in
value against the Japanese yen for many years, increasing returns
on Japanese investments for U.S. investors. There is no assurance
this currency trend will continue, and its reversal would
adversely affect the fund.
Note: For special pricing and transaction information about the
Japan fund, please see "Pricing Shares and Receiving Sale
Proceeds."
New Asia Fund.
Investors should keep in mind that recent growth rates among
Southeast Asian economies and fund returns may not be
sustainable.
The fund's objective is long-term growth of capital through
investment in large and small companies domiciled or with primary
operations in Asia, excluding Japan. The fund may also invest in
Pacific Rim countries such as Australia and New Zealand.
Countries in which the fund may invest include those listed below
as well as others in the region, such as China and Pakistan, as
PAGE 28
their markets become more accessible. Investments will represent
a minimum of five countries.
Australia Indonesia Philippines Taiwan
Hong Kong Malaysia Singapore Thailand
India New Zealand South Korea
Economic growth among the Southeast Asia economies has
outstripped that in both Europe and Japan in recent years, and
the region's rising prosperity has been reflected in generally
strong investment returns.
Emerging Markets Stock Fund.
The fund's objective is long-term growth of capital through
investment primarily in common stocks of large and small
companies domiciled, or with primary operations, in emerging
markets. An emerging market includes any country defined as
emerging or developing by the International Bank for
Reconstruction and Development (World Bank), International
Finance Corporation, or the United Nations. The fund's
investments are expected to be diversified geographically across
emerging markets in Latin America, the Far East, Europe, and
Africa.
Countries in which the fund may invest are listed below and
others will be added as opportunities develop:
Far East: Latin America: Europe: Africa: Mid East:
China Argentina Portugal South Africa Jordan
Indonesia Brazil Hungary Nigeria Tunisia
Korea Chile Turkey Zimbabwe Morocco
Malaysia Columbia Poland Botswana Egypt
Thailand Mexico Russia Israel
India Venezuela Czechoslovakia
Philippines Peru Slovakia
Taiwan Belize Greece
Hong Kong Baltic States
Singapore Austria
Sri Lanka
Pakistan
Mauritius
This fund is intended for investors with long-term investment
horizons who are looking for an aggressive approach to
international investing. Most emerging countries are experiencing
PAGE 29
substantial economic and political restructurings, and their
developing financial markets offer the potential for significant
capital appreciation. Many of these countries are moving from
one-party rule to a multi-party democracy; from agrarian to
industrialized economies; and from nationalized to free market,
privatized industries. These transitions are proceeding smoothly
in some markets but not in others. There is no guarantee
favorable trends will continue. Companies in emerging markets
that successfully navigate these changes offer investors the
prospect for earnings growth far more rapid than that typically
generated by companies in more mature, developed markets.
Investors in this fund, however, should be comfortable with the
risks of international investing and be prepared for substantial
share price volatility.
Latin America Fund.
The Latin America Fund is registered as "non-diversified." This
means it may invest a greater portion of assets in a single
company and own more of the company's voting securities than is
permissible for a "diversified" fund.
The fund's objective is long-term growth of capital through
investment primarily in common stocks of companies domiciled, or
with primary operations, in Latin America. Initially the fund
will focus on Mexico, Brazil, Chile, Argentina, Venezuela, and
Columbia, and the portfolio is normally expected to invest in at
least four countries. Other countries will be added as
opportunities arise and conditions permit.
The fund expects to make substantial investments (at times more
than 25% of total assets) in the telephone companies of various
Latin America countries. These utilities play a critical role in
a country's economic development, but their stocks could be
adversely affected if trends favoring development were to be
reversed.
The Latin American countries in general have less developed
economies than other regions in which Price-Fleming invests and
may continue to be subject to the effects of unpredictable
political and economic conditions. A number of countries have
legacies of political instability, hyperinflation, and currency
devaluations versus the dollar (which would adversely affect
returns to U.S. investors).
PAGE 30
What securities can the funds invest in other than common stocks?
Each of the funds expects to invest substantially all of its
assets in common stocks. However, the funds may also invest in a
variety of other equity-related securities, such as preferred
stocks, warrants and convertible securities, as well as corporate
and governmental debt securities, when considered consistent with
the funds' investment objectives and program. The funds may also
engage in a variety of investment management practices, such as
buying and selling futures and options. Under normal market
conditions, the funds' investments in securities other than
common stocks is limited to no more than 35% of total assets.
However, for temporary defensive purposes, the funds may invest
all or a significant portion of their assets in U.S. government
and corporate debt obligations. The funds (other than Global
Stock Fund) will not purchase any debt security which at the time
of purchase is rated below investment grade. The Global Stock
Fund can invest up to 5% of its assets in below investment grade
debt securities. This would not prevent a fund from retaining a
security downgraded to below investment grade after purchase.
What are the major risks associated with international and global
investing and these funds?
Stock prices of foreign and U.S. companies are subject to many
of the same influences such as general economic conditions,
company and industry earnings prospects, and investor psychology.
However, investing in foreign securities also involves additional
risks which can increase the potential for the losses in the
funds. These risks can be significantly magnified for investments
in emerging markets. Global investing seeks to temper the risks
of pure international investing by placing a portion of assets in
U.S. securities, which are not directly subject to currency risk.
Exchange rate movements can be large and can last for extended
periods.
o Currency fluctuations. Transactions in foreign securities
are conducted in local currencies, so dollars must often be
exchanged for another currency when a stock is bought or
sold or a dividend is paid. Likewise, share price quotations
and total return information reflect conversion into
dollars. Fluctuations in foreign exchange rates can
significantly increase or decrease the dollar value of a
foreign investment, boosting or offsetting its local market
return. For example, if a French stock rose 10% in price
during a year, but the U.S. dollar gained 5% against the
french franc during that time, the U.S. investor's return
PAGE 31
would be reduced to 5%. This is because the franc would
"buy" fewer dollars at the end of the year than at the
beginning, or, conversely, a dollar would buy more
francs.
o Costs. It is more expensive for U.S. investors to trade in
foreign markets than in the U.S. Mutual funds offer a very
efficient way for individuals to invest abroad, but the
overall expense ratios of international funds are usually
somewhat higher than those of typical domestic stock funds.
o Political and economic factors. While certain countries have
made progress in economic growth, liberalization, fiscal
discipline, and political and social stability, there is no
assurance these trends will continue.
The economies, markets, and political structures of a number of
the countries in which each fund can invest do not compare
favorably with the United States and other mature economies in
terms of wealth and stability. Therefore, investments in these
countries will be riskier and more subject to erratic and abrupt
price movements. This is especially true for emerging markets
such as those found in Latin America, China, and certain Asian
countries, Eastern Europe and Africa.
Some economies are less well developed (for example, Latin
America, Eastern Europe, African and certain Asian countries),
overly reliant on particular industries and more vulnerable to
the ebb and flow of international trade, trade barriers, and
other protectionist or retaliatory measures (for example, Japan,
Southeast Asia, Latin America, Eastern Europe and Africa). This
makes investment in such markets significantly riskier than in
other countries. Some countries, particularly in Latin America
and Africa, are grappling with severe inflation and high levels
of national debt. Investments in countries that have recently
begun moving away from central planning and state-owned
industries toward free markets, such as Eastern Europe, China and
Africa, should be regarded as speculative.
Certain countries have histories of instability and upheaval (for
example, Latin America and Africa) with respect to their internal
politics that could cause their governments to act in a
detrimental or hostile manner toward private enterprise or
foreign investment. Such actions, for example, nationalizing a
company or industry, expropriating assets, or imposing punitive
taxes, could have a severe effect on security prices and impair a
fund's ability to repatriate capital or income. Significant
PAGE 32
external risks, including war, currently affect some countries.
Governments in many emerging market countries participate to some
degree in their economies and securities markets.
For more details on potential risks of foreign investments,
please see "Investment Policies and Practices."
o Legal, regulatory, and operational. Certain countries lack
uniform accounting, auditing, and financial reporting
standards, have less governmental supervision of financial
markets than in the U.S., do not honor legal rights enjoyed
in the U.S., and have settlement practices, such as delays,
which could subject the funds to risks of loss not customary
in the U.S. In addition, securities markets in these
countries have substantially lower trading volumes than U.S.
markets, resulting in less liquidity and more volatility
than experienced in the U.S.
o Pricing. Portfolio securities may be listed on foreign
exchanges that are open on days (such as Saturdays) when the
funds do not compute their prices. As a result, the fund's
net asset value may be significantly affected by trading on
days when shareholders cannot make transactions. (For
specific information on the Tokyo Stock Exchange, please see
"Pricing Shares and Receiving Sale Proceeds.")
What can I expect in terms of price volatility?
Each fund's share price will fluctuate. When you sell your
shares, you may lose money.
Like U.S. stock investments, common stocks of foreign
companies offer investors a way to build capital over time.
Nevertheless, the long-term rise of foreign stock prices as a
group has been punctuated by periodic declines. Share prices of
even the best managed, most profitable corporations, whether U.S.
or foreign, are subject to market risk, which means they can
fluctuate widely.
In less well developed stock markets, such as those in Latin
America, Eastern Europe, Africa, and certain Asian countries,
volatility may be heightened by actions of a few major investors.
For example, substantial increases or decreases in cash flows of
mutual funds investing in these markets could significantly
affect local stock prices and, therefore, fund share prices.
PAGE 33
How does the portfolio manager try to reduce risk?
The principal tools are intensive research and diversification;
currency hedging techniques are used from time to time.
o In addition to conducting on-site research in portfolio
countries and companies, Price-Fleming has close ties with
investment analysts based throughout the world.
o Diversification significantly reduces but does not eliminate
risk. The impact on a fund's share price from a drop in the
price of a particular stock is reduced substantially by
investing in a portfolio with dozens of different
companies. Likewise, the impact of unfavorable developments
in a particular country is reduced in the multi-country
funds because investments are spread among many countries.
Portfolio managers keep close watch in individual investments as
well as on political and economic trends in each country and
region. Holdings are adjusted according to the manager's analysis
and outlook.
o While currency translation does affect the shorter-run
returns provided by foreign stocks, its influence on longer-
term results generally has been outweighed by price trends
on local stock exchanges.
As a result, under normal conditions, the funds do not engage in
extensive hedging programs. However, when foreign exchange rates
are expected to be unfavorable for U.S. investors, fund managers
can hedge the risk through use of currency forwards and options.
In a general sense, these tools allow a manager to exchange
currencies in the future at a rate specified in the present. (For
more details, please see "Foreign Currency Transactions" under
"Investment Policies and Practices.") If the manager's forecast
is wrong, the hedge may cause a loss. Also, it may be difficult
or not practical to hedge currency risk in many emerging
countries.
What are some of the opportunities represented by major overseas
markets?
o Europe: Market deregulation, privatization, and lower trade
barriers have expanded the range of investment
opportunities. The emergence of capitalist economics in
Eastern Europe could, over the long term, open previously
PAGE 34
inaccessible markets and also provide a lower-cost, skilled
labor pool, which may further stimulate European economies.
o Asia: No longer solely dependent on the Japanese "engine"
for growth, the newly industrialized countries of the
Pacific Rim are powered by worldwide exports and
increasingly, by strong inter-regional demand. In addition,
China's move toward a more capitalistic economy has positive
implications for the entire region's future.
o Japan: Although its growth rate has slowed, the longer-term
outlook for Japan's economy is positive. In addition to its
productive labor force, technological expertise, and
commitment to capital investment, Japan's shift to a more
domestic-oriented economy should promote future growth and
create new investment opportunities.
o Latin America: After years of stagnation, some countries
here are experiencing rising growth rates that reflect lower
trade barriers, privatization of industry, progress on
reducing inflation, and restructuring of national debt
burdens.
o Emerging markets: A number of countries in Latin America,
Eastern Europe, Asia and Africa are emerging from economic
periods of stagnation and offer the potential for growth
exceeding that of the United States and other developed
countries. The emerging market countries initiating market-
based economic reforms could benefit from significant
amounts of capital in-flows.
How can I decide which fund is most appropriate for me?
The fund or funds you select should not be relied upon as a
complete investment program, nor be used for short-term trading
purposes.
First, be sure that your investment objective is the same as the
fund's: capital appreciation over time. If you will need the
money you plan to invest in the near future, none of these funds
is suitable.
Second, your decision should take into account whether you have
any other foreign stock investments. If not, you may wish to
invest in the most diversified funds to gain the broadest
exposure to opportunities overseas. If you are supplementing
PAGE 35
existing holdings, you may wish to narrow your focus to a region
or country-specific fund.
Third, consider your risk tolerance and the risk profile of the
various funds.
_________________________________________________________________
International Funds Comparison Chart
Fund Geographic Type of Risk Profile
Emphasis Company (Relative to
Each Other)
_________________________________________________________________
International Worldwide Large, Relatively
Stock (excluding U.S.) well- conservative
established
_________________________________________________________________
International Worldwide Small to Aggressive
Discovery (excluding U.S.) medium-sized
_________________________________________________________________
European Stock Europe (including All sizes Moderate
Eastern Europe)
_________________________________________________________________
New Asia Far East and All sizes Aggressive
Pacific Basin
(excluding Japan)
_________________________________________________________________
Japan Japan All sizes Moderate
_________________________________________________________________
Emerging Markets Currently All sizes Very
Stock Latin America, Aggressive
the Far East,
Europe, Africa,
and the Middle
East.
_________________________________________________________________
Latin America Currently Mexico, All sizes Very
Brazil, Chile, Aggressive
Argentina,
Venezuela,
Columbia
_________________________________________________________________
Global Stock Worldwide Large, Most
(including U.S.) well- Conservative
established
_________________________________________________________________
Table 6
PAGE 36
Is there other information I need to review before making a
decision?
Be sure to review the "Investment Policies and Practices"
Section, which discusses the following: Types of Portfolio
Securities (common and preferred stocks, convertible securities
and warrants, fixed income securities, hybrid instruments,
passive foreign investment companies, and private placements);
and Types of Management Practices (cash position, borrowing money
and transferring assets, foreign currency transactions, futures
and options, lending of portfolio securities, and portfolio
turnover).
About Your Account
Pricing Shares and Receiving Sale Proceeds
Here are some procedures you should know when investing in a
T. Rowe Price international fund.
How and When Shares Are Priced
The various ways you can buy, sell, and exchange shares are
explained at the end of this prospectus and on the New Account
Form. These procedures may differ for institutional and employer-
sponsored retirement accounts.
The share price (also called "net asset value" or NAV per share)
for each fund, except the Japan Fund, is calculated at 4 p.m. ET
each day the New York Stock Exchange is open for business. The
share price for the Japan Fund is calculated at 4 p.m. ET each
day the New York Stock Exchange and the Tokyo Stock Exchange are
both open for business. To calculate the NAV, a fund's assets are
valued and totaled, liabilities are subtracted, and the balance,
called net assets, is divided by the number of shares
outstanding.
The calculation of each fund's net asset value normally will
not take place contemporaneously with the determination of the
value of the fund's portfolio securities. Events affecting the
values of portfolio securities that occur between the time their
prices are determined and the time each fund's net asset value is
calculated will not be reflected in the fund's net asset value
unless Price-Fleming, under the supervision of the fund's Board
of Directors, determines that the particular event should be
taken into account in computing the fund's net asset value.
PAGE 37
How your purchase, sale, or exchange price is determined
When filling out the New Account Form, you may wish to give
yourself the widest range of options for receiving proceeds from
a sale.
If we receive your request in correct form before 4 p.m. ET, your
transaction will be priced at that day's NAV. If we receive it
after 4 p.m., it will be priced at the next business day's NAV.
We cannot accept orders that request a particular day or price
for your transaction or any other special condition.
Note: The time at which transactions are priced and the time
until which orders are accepted may be changed in case of an
emergency or if the New York Stock Exchange closes at a time
other than 4 p.m. ET.
Japan Fund: Pricing and Transactions.
The fund will not process orders on any other day when either the
New York or Tokyo Stock Exchange is closed. Orders received on
such days will be priced on the next day the fund computes its
net asset value. As such, you may experience a delay in
purchasing or redeeming fund shares.
Exchanges.
If you wish to exchange into the Japan Fund on a day the New York
Stock Exchange is open but the Tokyo Stock Exchange is closed,
the exchange out of the other T. Rowe Price fund will be
processed on that day but Japan Fund shares will not be purchased
until the day the Japan Fund reopens. If you wish to exchange out
of the Japan Fund on a day when the New York Stock Exchange is
open but the Tokyo Stock Exchange is closed, the exchange will be
delayed until the Japan Fund reopens.
The Tokyo Stock Exchange is scheduled to be closed on the
following weekdays: In 1995- January 2, 3, 16; March 21; May 3,
4, 5; September 15; October 10; and November 3, 23. In 1996-
January 1, 2, 3, 15; February 12; March 20; April 29; May 3, 6;
September 16, 23; October 10; November 4; and December 23, 31. If
the Tokyo Stock Exchange closes on dates not listed, the fund
will not be priced on those dates.
How you can receive the proceeds from a sale
PAGE 38
If for some reason we cannot accept your request to sell shares,
we will contact you.
If your request is received by 4 p.m. ET in correct form,
proceeds are usually sent on the next business day. Proceeds can
be sent to you by mail, or to your bank account by ACH transfer
or bank wire. Proceeds sent by ACH transfer should be credited
the second day after the sale. ACH (Automated Clearing House) is
an automated method of initiating payments from and receiving
payments in your financial institution account. ACH is a payment
system supported by over 20,000 banks, savings banks, and credit
unions, which electronically exchanges the transactions primarily
through the Federal Reserve Banks. Proceeds sent by bank wire
should be credited to your account the next business day.
Exception:
o Under applicable tax law, the funds may be required to limit
their gains from hedging in foreign currency forwards,
futures and options. Although the funds are expected to
comply with such limits, the extent to which these limits
apply is subject to tax regulations as yet unissued. Hedging
may also result in the application of the mark-to-market and
straddle provisions of the Internal Revenue Code. These
provisions could result in an increase (or decrease) in the
amount of taxable dividends paid by the funds and could
affect whether dividends paid by the funds are classified as
capital gains or ordinary income.
Contingent Redemption Fees (Latin America, International
Discovery, and Emerging Markets Stock Funds).
The funds can experience substantial price fluctuations and are
intended for long-term investors. Short-term "market timers" who
engage in frequent purchases and redemptions can disrupt the
funds' investment programs and create additional transaction
costs that are borne by all shareholders. For these reasons,
these funds each assess a 2% fee on redemptions (including
exchanges) of fund shares held for less than one year. Shares
owned in the International Discovery Fund as of February 27,
1994, are exempt from the fee.
Redemption fees will be paid to the fund to help offset
transaction costs. The fund will use the "first-in, first-out"
(FIFO) method to determine the one-year holding period. Under
this method, the date of the redemption or exchange will be
compared with the earliest purchase date of shares held in the
PAGE 39
account. If this holding period is less than one year, the fee
will be assessed.
In determining "one year" the funds will use the anniversary date
of a transaction. This, shares purchased on March 1, 1995, for
example, will be subject to the fee if they are redeemed prior to
March 1, 1996. If they are redeemed on or after March 1, 1996,
they will not be subject to the fee.
The fee does not apply to any shares purchased through
reinvestment of dividends or to shares held in retirement plans
such as 401(k), 403(b),457, Keogh, profit sharing, and money
purchase pension accounts. The fee does apply to shares held in
IRA and SEP-IRA accounts and to shares purchased through
automatic investment plans (described under "Shareholder
Services").
Useful Information on Distributions and Taxes
Dividends and Other Distributions
All net investment income and realized capital gains are
distributed to shareholders.
Dividend and capital gain distributions are reinvested in
additional fund shares in your account unless you select another
option on your New Account Form. The advantage of reinvesting
distributions arises from compounding, that is, you receive
interest and capital gain distributions on a rising number of
shares.
Distributions not reinvested are paid by check or transmitted
to your bank account via ACH. If the Post Office cannot deliver
your check, or if your check remains uncashed for six months, a
fund reserves the right to reinvest your distribution check in
your account at the then current NAV and to reinvest all
subsequent distribution in shares of the fund.
Income dividends
o The funds declare and pay dividends (if any) annually.
o The dividends of each fund will not be eligible for the 70%
deduction for dividends received by corporations, if, as
expected, none of the funds' income consists of dividends
paid by U.S. corporations.
PAGE 40
Capital gains
o A capital gain or loss is the difference between the
purchase and sale price of a security.
o If the fund has net capital gains for the year (after
subtracting any capital losses), they are usually declared
and paid in December to shareholders of record on a
specified date that month. If a second distribution is
necessary, it is usually declared and paid during the first
quarter of the following year.
Tax Information
You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
o The fund makes a distribution to your account, or
o You sell fund shares, including an exchange from one fund to
another.
Taxes on fund redemptions.
When you sell shares in any fund, you may realize a gain or loss.
An exchange from one fund to another is still a sale for tax
purposes.
In January, you will be sent Form 1099-B, indicating the date
and amount of each sale you made in the fund during the prior
year. This information will also be reported to the IRS. For
accounts opened new or by exchange in 1983 or later we will
provide you the gain or loss of the shares you sold during the
year based on the "average cost" method. This information is not
reported to the IRS, and you do not have to use it. You may
calculate the cost basis using other methods acceptable to the
IRS, such as "specific identification."
To help you maintain accurate records, we send you a confirmation
immediately following each transaction (except for systematic
purchases and redemptions) and a year-end statement detailing all
your transactions in each fund account during the year.
Taxes on fund distributions.
Capital gain distributions are taxable whether reinvested in
additional shares or received in cash.
PAGE 41
The following summary does not apply to retirement accounts, such
as IRAs, which are tax-deferred until you withdraw money from
them.
In January, you will be sent Form 1099-DIV indicating the tax
status of any dividend and capital gain distribution made to you.
This information will also be reported to the IRS. All
distributions made by the fund are taxable to you for the year in
which they were paid. The only exception is that distributions
declared during the last three months of the year and paid in
January are taxed as though they were paid by December 31. You
will be sent any additional information you need to determine
your taxes on fund distributions, such as the portion of your
dividend, if any, that may be exempt from state income taxes.
Short-term capital gains are taxable as ordinary income and long-
term gains are taxable at the applicable long-term gain rate. The
gain is long- or short-term depending on how long the fund held
the securities, not how long you held shares in the fund. If you
realize a loss on the sale or exchange of fund shares held six
months or less, your short-term loss recognized is reclassified
to long-term to the extent of any long-term capital gain
distribution received.
Distributions resulting from the sale of certain foreign
currencies and debt securities, to the extent of foreign exchange
gains, are taxed as ordinary income or loss. If the fund pays
nonrefundable taxes to foreign governments during the year, the
taxes will reduce the fund's dividends, but will still be
included in your taxable income. However, you may be able to
claim an offsetting credit or deduction on your tax return for
your portion of foreign taxes paid by the fund.
Tax effect of buying shares before a capital gain distribution.
If you buy shares shortly before or on the "record date"--the
date that establishes you as the person to receive the upcoming
distribution--you will receive, in the form of a taxable
distribution, a portion of the money you just invested. Therefore
you may also wish to find out a fund's record date(s) before
investing. Of course, a fund's share price may, at any time,
reflect undistributed capital gains or unrealized appreciation,
if any.
PAGE 42
(Note: For information on the tax consequences of passive foreign
investment companies and hedging, please see "Investment Policies
and Practices.")
Transaction Procedures and Special Requirements
Purchase Conditions
Following these procedures helps assure timely and accurate
transactions.
Nonpayment.
If your payment is not received or you pay with a check or ACH
transfer that does not clear, your purchase will be canceled. You
will be responsible for any losses or expenses incurred by the
fund or transfer agent, and the fund can redeem shares you own in
this or another identically registered T. Rowe Price fund as
reimbursement. The fund and its agents have the right to reject
or cancel any purchase, exchange, or redemption due to
nonpayment.
U.S. dollars.
All purchases must be paid for in U.S. dollars; checks must be
drawn on U.S. banks.
Sale (Redemption) Conditions
10-day hold.
If you sell shares that you just purchased and paid by check
or ACH transfer, the fund will process your redemption but will
generally delay sending you the proceeds for up to 10 calendar
days to allow the check or transfer to clear. If your redemption
request was sent by mail or mailgram, proceeds will be mailed no
later than the seventh calendar day following receipt unless the
check or ACH transfer has not cleared. If, during the clearing
period, we receive a check drawn against your bond or money
market account, it will be returned marked "uncollected." (The
10-day hold does not apply to the following: purchases paid for
by bank wire; cashier's, certified, or treasurer's checks; or
automatic purchases through your paycheck.)
PAGE 43
Telephone, Tele*AccessR, and PC*AccessR transactions.
These exchange and redemption services are established
automatically when you sign the New Account Form unless you check
the box which states that you do not want these services. Each
fund uses reasonable procedures (including shareholder identity
verification) to confirm that instructions given by telephone are
genuine and are not liable for acting on these instructions. If
these procedures are not followed, it is the opinion of certain
regulatory agencies that a fund may be liable for any losses that
may result from acting on the instructions given. All
conversations are recorded, and a confirmation is sent promptly
after the telephone transaction.
Redemptions over $250,000.
Large sales can adversely affect a portfolio manager's ability to
implement a fund's investment strategy by causing the premature
sale of securities that would otherwise be held. If in any 90-day
period, you redeem (sell) more than $250,000, or your sale
amounts to more than 1% of the fund's net assets, the fund has
the right to delay sending your proceeds for up to five business
days after receiving your request, or to pay the difference
between the redemption amount and the lesser of the two
previously mentioned figures with securities from the fund.
Excessive Trading
T. Rowe Price may bar excessive traders from purchasing shares.
Frequent trades involving either substantial fund assets, or a
substantial portion of your account or accounts controlled by
you, can disrupt management of the fund and raise its expenses.
We define "excessive trading" as exceeding one purchase and sale
involving the same fund within any 120-day period.
For example, you are in fund A. You can move substantial assets
from fund A to fund B, and, within the next 120 days, sell your
shares in fund B to return to fund A or move to fund C.
If you exceed the number of trades described above, you may be
barred indefinitely from further purchases of T. Rowe Price
funds.
Three types of transactions are exempt from excessive trading
guidelines: 1) trades solely between money market funds; 2)
PAGE 44
redemptions that are not part of exchanges; and 3) systematic
purchases of redemptions (see "Shareholder Services").
Keeping Your Account Open
Due to the relatively high cost to a fund of maintaining small
accounts, we ask you to maintain an account balance of at least
$1,000. If your balance is below $1,000 for three months or
longer, we have the right to close your account after giving you
60 days in which to increase your balance.
Signature Guarantees
A signature guarantee is designed to protect you and the T. Rowe
Price funds from fraud by verifying your signature.
You may need to have your signature guaranteed in certain
situations, such as:
o Written requests 1) to redeem over $50,000 or 2) to wire
redemption proceeds.
o Remitting redemption proceeds to any person, address, or
bank account not on record.
o Transferring redemption proceeds to a T. Rowe Price fund
account with a different registration (name/ownership) from
yours.
o Establishing certain services after the account is opened.
o You can obtain a signature guarantee from most banks,
savings institutions, broker/dealers, and other guarantors
acceptable to T. Rowe Price. We cannot accept guarantees
from notaries public or organizations that do not provide
reimbursement in the case of fraud.
More About the Funds
Organization and Management
How are the funds organized?
Shareholders benefit from T. Rowe Price's 58 years of investment
management experience.
The T. Rowe Price International Funds, Inc. currently consists
of twelve series, each representing a separate class of shares
PAGE 45
and having different objectives and investment policies. The
twelve series and the years in which each was established are as
follows: International Stock Fund, 1979; International Bond Fund,
1986; International Discovery Fund, 1988; European Stock Fund,
New Asia Fund, Global Government Bond Fund, 1990; Japan Fund,
1991; Short-Term Global Income Fund, 1992; Latin America Fund,
1993; Emerging Markets Bond Fund, 1994; Emerging Markets Stock
Fund and Global Stock Fund, 1995. (The Short-Term Global Income,
Global Government Bond, International Bond, and Emerging Markets
Bond Funds are described in a separate prospectus.) The
Corporation's Charter provides that the Board of Directors may
issue additional series of shares and/or additional classes of
shares for each series.
What is meant by "shares"?
As with all mutual funds, investors purchase "shares" when they
invest in a fund. These shares are part of a fund's authorized
capital stock, but share certificates are not issued.
Each share and fractional share entitles the shareholder to:
o Receive a proportional interest in the fund's capital gain
distributions;
o Cast one vote per share on certain fund matters, including
the election of fund directors/trustees, changes in
fundamental policies, or approval of changes in a fund's
management contract.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and do not
intend to do so except when certain matters, such as a change in
a fund's fundamental policies, are to be decided. In addition,
shareholders representing at least 10% of all eligible votes may
call a special meeting if they wish for the purpose of voting on
the removal of any fund director(s)/trustee(s). If a meeting is
held and you cannot attend, you can vote by proxy. Before the
meeting, the fund will send you proxy materials that explain the
issues to be decided and include a voting card for you to mail
back.
Who runs the funds?
All decisions regarding the purchase and sale of fund investments
are made by Price-Fleming--specifically by the funds' portfolio
managers.
PAGE 46
General Oversight.
The funds are governed by a Board of Directors that meets
regularly to review the funds' investments, performance,
expenses, and other business affairs. The Board elects the
funds' officers. The policy of the fund is that a majority of the
Board members will be independent of Price-Fleming.
Investment Manager.
Flemings is a diversified investment organization which
participates in a global network of regional investment offices
in New York, London, Zurich, Geneva, Tokyo, Hong Kong, Manila,
Kuala Lumpur, Seoul, Taipei, Bombay, Jakarta, Singapore, Bangkok,
and Johannesburg.
Price-Fleming is responsible for selection and management of each
fund's portfolio investments. Price-Fleming's U.S. office is
located at 100 East Pratt Street, Baltimore, Maryland 21202.
Price-Fleming has offices in Baltimore, London, Tokyo, and Hong
Kong. Price-Fleming was incorporated in Maryland in 1979 as a
joint venture between T. Rowe Price and Robert Fleming Holdings
Limited (Flemings).
T. Rowe Price, Flemings, and Jardine Fleming are owners of Price-
Fleming. The common stock of Price-Fleming is 50% owned by a
wholly owned subsidiary of T. Rowe Price, 25% by a subsidiary of
Flemings and 25% by Jardine Fleming Group Limited (Jardine
Fleming). (Half of Jardine Fleming is owned by Flemings and half
by Jardine Matheson Holdings Limited.) T. Rowe Price has the
right to elect a majority of the Board of Directors of Price-
Fleming, and Flemings has the right to elect the remaining
directors, one of whom will be nominated by Jardine Fleming.
Portfolio Management.
Each fund has an Investment Advisory Group that has day-to-day
responsibility for managing the portfolio and developing and
executing each fund's investment program. The members of each
advisory group are listed below.
Global Stock Fund.
Martin G. Wade, Christopher D. Alderson, Peter B. Askew, Richard
J. Bruce, Mark J. T. Edwards, John R. Ford, Robert C. Howe, James
PAGE 47
B. M. Seddon, Robert W. Smith, Benedict R. F. Thomas, and David
J. L. Warren.
International Stock and International Discovery Funds.
Martin G. Wade, Christopher D. Alderson, Peter B. Askew, Richard
J. Bruce, Mark J. T. Edwards, John R. Ford, Robert C. Howe, James
B. M. Seddon, Benedict R. F. Thomas, and David J. L. Warren.
European Stock Fund.
Martin G. Wade, Richard J. Bruce, Mark J. T. Edwards, John R.
Ford, and James B. M. Seddon.
Japan Fund.
Martin G. Wade, Christopher D. Alderson, and David J. L. Warren.
New Asia Fund.
Martin G. Wade, Robert C. Howe, Benedict R. F. Thomas, and David
J. L. Warren.
Latin America Fund.
Martin G. Wade, Mark J. T. Edwards, and John R. Ford.
Emerging Markets Stock Fund.
Martin G. Wade and Richard J. Bruce.
Martin Wade joined Price-Fleming in 1979 and has 25 years of
experience with the Fleming Group in research, client service and
investment management. (Fleming Group includes Robert Fleming
and/or Jardine Fleming.) Christopher Alderson joined Price-
Fleming in 1988, and has eight years of experience with the
Fleming Group in research and portfolio management. Peter Askew
joined Price-Fleming in 1988 and has 19 years of experience
managing multi-currency fixed income portfolios. Richard Bruce
joined Price-Fleming in 1991 and has six years of experience in
investment management with the Fleming Group in Tokyo. Mark
Edwards joined Price-Fleming in 1986 and has 13 years of
experience in financial analysis. John Ford joined Price-Fleming
in 1982 and has 14 years of experience with the Fleming Group in
research and portfolio management. Robert Howe joined Price-
Fleming in 1986 and has 13 years of experience in economic
research, company research and portfolio management. James Seddon
PAGE 48
joined Price-Fleming in 1987 and has nine years of experience in
portfolio management. Robert W. Smith joined T. Rowe Price in
1992 and has 8 years of experience in financial analysis.
Benedict Thomas joined Price-Fleming in 1988 and has five years
of portfolio management experience. David Warren joined Price-
Fleming in 1984 and has 14 years of experience in equity
research, fixed income research and portfolio management.
Portfolio Transactions.
Decisions with respect to the purchase and sale of a fund's
portfolio securities on behalf of each fund are made by Price-
Fleming. The funds' Board of Directors has authorized Price-
Fleming to utilize affiliates of Flemings and Jardine Fleming in
the capacity of broker in connection with the execution of a
fund's portfolio transactions if Price-Fleming believes that
doing so would result in an economic advantage (in the form of
lower execution costs or otherwise) being obtained by the fund.
Marketing.
T. Rowe Price Investment Services, Inc., a wholly owned
subsidiary of T. Rowe Price, distributes (sells) shares of these
and all other T. Rowe Price funds.
Shareholder Services.
T. Rowe Price Services, Inc., another wholly owned subsidiary,
acts as the fund's transfer and dividend disbursing agent and
provides shareholder and administrative services. Services for
certain types of retirement plans are provided by T. Rowe Price
Retirement Plan Services, Inc., also a wholly owned subsidiary.
The address for each is 100 East Pratt St., Baltimore, MD 21202.
How are fund expenses determined?
The management agreement spells out the expenses to be paid by
the fund. In addition to the management fee, the fund pays for
the following: shareholder service expenses; custodial,
accounting, legal, and audit fees; costs of preparing and
printing prospectuses and reports sent to shareholders;
registration fees and expenses; proxy and annual meeting expenses
(if any); and director/trustee fees and expenses.
The Management Fee.
This fee has two parts--an " individual fund fee" (discussed
under "Transaction and Fund Expenses") which reflects the fund's
PAGE 49
particular investment management costs, and a "group fee." The
group fee, which is designed to reflect the benefits of the
shared resources of the T. Rowe Price investment management
complex, is calculated daily based on the combined net assets of
all T. Rowe Price funds (except Equity Index and the Spectrum
Funds and any institutional or private label mutual funds). The
group fee schedule (shown below) is graduated, declining as the
asset total rises, so shareholders benefit from the overall
growth in mutual fund assets.
0.480% First $1 billion 0.350% Next $2 billion
0.450% Next $1 billion 0.340% Next $5 billion
0.420% Next $1 billion 0.330% Next $10 billion
0.390% Next $1 billion 0.320% Next $10 billion
0.370% Next $1 billion 0.310% Thereafter
0.360% Next $2 billion
The funds' portion of the group fee is determined by the ratio
of its daily net assets to the daily net assets of all the Price
funds described above. Based on combined Price funds' assets of
approximately $47.8 billion at June 30,1995, the group fee was
0.34%.
Research and Administration.
Certain administrative support is provided by T. Rowe Price which
receives from Price-Fleming a fee of .15% of the market value of
all assets in equity accounts, .15% of the market value of all
assets in active fixed income accounts and .035% of the market
value of all assets in passive fixed income accounts under Price-
Fleming's management. Additional investment research and
administrative support for equity investments is provided to
Price-Fleming Investment Management Limited (FIM) and Jardine
Fleming Investment Holdings Limited (JFIH) for which each
receives from Price-Fleming a fee of .075% of the market value of
all assets in equal accounts under Price-Fleming's management.
FIM and JFIH are wholly owned subsidiaries of Flemings and
Jardine Fleming, respectively. JFIH receives a fee of .075% of
the market value of all assets in active fixed income accounts
and .0175% of such market value in passive fixed income accounts
under Price-Fleming's management.
Understanding Performance Information
This section should help you understand the terms used to
describe fund performance. You will come across them in
shareholder reports you receive from us, in our newsletter,
PAGE 50
Insights, in reports, in T. Rowe Price advertisements, and in the
media.
Total Return
Total return is the most widely used performance measure.
Detailed performance information is included in the annual report
and shareholder reports.
This tells you how much an investment in a fund has changed in
value over a given time period. It reflects any net increase or
decrease in the share price and assumes that all dividends and
capital gains (if any) paid during the period were reinvested in
additional shares. Including reinvested distributions means that
total return numbers include the effect of compounding, i.e., you
receive income and capital gain distributions on a rising number
of shares.
Advertisements for a fund may include cumulative or compound
average annual total return figures, which may be compared with
various indices, other performance measures, or other mutual
funds.
Cumulative Total Return
This is the actual rate of return on an investment for a
specified period. A cumulative return does not indicate how much
the value of the investment may have fluctuated between the
beginning and the end of the period specified.
Average Annual Total Return
This is always hypothetical. Working backward from the actual
cumulative return, it tells you what constant year-by-year return
would have produced the actual, cumulative return. By smoothing
out all the variations in annual performance, it gives you an
idea of the investment's annual contribution to your portfolio
provided you held it for the entire period in question.
Investment Policies and Practices
Fund managers have considerable leeway in choosing investment
strategies and selecting securities they believe will help the
funds achieve their objectives.
This section takes a detailed look at some of the types of
securities the funds may hold in their portfolios and the various
PAGE 51
kinds of investment practices that may be used in day-to-day
portfolio management. The funds' investment program is subject to
further restrictions and risks described in the "Statement of
Additional Information."
Shareholder approval is required to substantively change a
fund's objectives and certain investment restrictions noted in
the following section as "fundamental policies." The managers
also follow certain "operating policies" which can be changed
without shareholder approval. However, significant changes are
discussed with shareholders in fund reports. A fund adheres to
applicable investment restrictions and policies at the time it
makes an investment. A later change in circumstances will not
require the sale of an investment if it was proper at the time it
was made.
The fund's holdings of certain kinds of investments cannot
exceed maximum percentages of total assets, which are set forth
herein. For instance, each fund is not permitted to invest more
than 10% of total assets in hybrid instruments. While these
restrictions provide a useful level of detail about a fund's
investment program, investors should not view them as an accurate
gauge of the potential risk of such investments. For example, in
a given period, a 5% investment in hybrid instruments could have
significantly more than a 5% impact on a fund's share price. The
net effect of a particular investment depends on its volatility
and the size of its overall return in relation to the performance
of all the funds' other investments.
Changes in a fund's holdings, a fund's performance, and the
contribution of various investments are discussed in the
shareholder reports sent to you.
Types of Portfolio Securities
In seeking to meet its investment objective, the funds may invest
in any type of security whose investment characteristics are
consistent with the fund's investment program. These and some of
the other investment techniques the funds may use are described
in the following pages.
Fundamental policy:
With the exception of Latin America Fund, a fund will not
purchase a security if, as a result, with respect to 75% of its
total assets, more than 5% of its total assets would be invested
in securities of a single issuer or more than 10% of the
PAGE 52
outstanding voting securities of the issuer would be held by one
fund.
Nondiversified Status - Latin America Fund.
The fund is registered as a non-diversified mutual fund. This
means that the fund may invest a greater portion of its assets
in, and own a greater amount of the voting securities of, a
single company than a diversified fund which may subject the fund
to greater risk with respect to its portfolio securities.
However, because the fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code, it must
invest so that, at the end of each calendar quarter, with
respect to 50% of its total assets, not more than 5% of its
assets are invested in the securities of a single issuer.
Common and Preferred Stocks.
Stocks represent shares of ownership in a company. Generally,
preferred stock has a specified dividend and ranks after bonds
and before common stocks in its claim on income for dividend
payments and on assets should the company be liquidated. After
other claims are satisfied, common stockholders participate in
company profits on a pro rata basis; profits may be paid out in
dividends or reinvested in the company to help it grow. Increases
and decreases in earnings are usually reflected in a company's
stock price, so common stocks generally have the greatest
appreciation and depreciation potential of all corporate
securities. While most preferred stocks pay a dividend, the
funds may purchase preferred stock where the issuer has omitted,
or is in danger of omitting, payment of its dividend. Such
investments would be primarily for their capital appreciation
potential.
Convertible Securities and Warrants.
The funds may invest in debt or preferred equity securities
convertible into or exchangeable for equity securities.
Traditionally, convertible securities have paid dividends or
interest at rates higher than common stocks but lower than non-
convertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which
they are convertible, but to a lesser degree. In recent years,
convertibles have been developed which combine higher or lower
current income with options and other features. Warrants are
options to buy a stated number of shares of common stock at a
PAGE 53
specified price any time during the life of the warrants
(generally, two or more years).
Fixed Income Securities.
The funds may invest in any type of investment-grade security.
The Global Stock Fund may also invest up to 5% of its total
assets in below investment-grade bonds, commonly referred to as
"junk" bonds. Such securities would be purchased in companies
which meet the investment criteria for the fund. The price of a
bond fluctuates with changes in interest rates, rising when
interest rates fall and falling when interest rates rise. Junk
bond prices can be much more volatile and have a greater risk of
default than investment-grade bonds.
Hybrid Instruments.
Hybrids can have volatile prices and limited liquidity and
their use by a fund may not be successful.
These instruments (a type of potentially high risk derivative)
can combine the characteristics of securities, futures and
options. For example, the principal amount, redemption or
conversion terms of a security could be related to the market
price of some commodity, currency or securities index. Such
securities may bear interest or pay dividends at below market (or
even relatively nominal) rates. Under certain conditions, the
redemption value of such an investment should be zero.
Operating policy:
Each fund may invest up to 10% of its total assets in hybrid
instruments.
Passive Foreign Investment Companies.
Each fund may purchase the securities of certain foreign
investment funds or trusts called passive foreign investment
companies. Such trusts have been the only or primary way to
invest in certain countries. In addition to bearing their
proportionate share of the trust's expenses (management fees and
operating expenses) shareholders will also indirectly bear
similar expenses of such trusts. Capital gains on the sale of
such holdings are considered ordinary income regardless of how
long the fund held its investment. In addition, the fund may be
subject to corporate income tax and an interest charge on certain
dividends and capital gains earned from these investments,
PAGE 54
regardless of whether such income and gains are distributed to
shareholders.
In accordance with tax regulations, each Price-Fleming fund
intends to treat these securities as sold on the last day of its
fiscal year and recognize any gains for tax purposes at that
time; losses will not be recognized. Such gains will be
considered ordinary income, which the fund will be required to
distribute even though it has not sold the security.
Private Placements.
These securities are sold directly to a small number of
investors, usually institutions. Unlike public offerings, such
securities are not registered with the SEC. Although certain of
these securities may be readily sold, for example under Rule
144A, others may be illiquid and their sale may involve
substantial delays and additional costs.
Operating policy:
Each fund will not invest more than 15% of its net assets in
illiquid securities, and no more than 5% in certain restricted
securities.
Types of Management Practices
Cash reserves provide flexibility and serve as a short-term
defense during periods of unusual market volatility.
Cash Position.
Each fund will hold a certain portion of its assets in U.S.
and foreign dollar-denominated money market securities, including
repurchase agreements, in the two highest rating categories,
maturing in one year or less. For temporary, defensive purposes,
a fund may invest without limitation in such securities. This
reserve position provides flexibility in meeting redemptions,
expenses, and the timing of new investments, and serves as a
short-term defense during periods of unusual market
volatility.
Borrowing Money and Transferring Assets.
Each fund can borrow money from banks as a temporary measure for
emergency purposes, to facilitate redemption requests, or for
other purposes consistent with the funds' investment objectives
PAGE 55
and program. Such borrowings may be collateralized with fund
assets, subject to restrictions.
Fundamental policy:
Borrowings may not exceed 33 1/3% of a fund's total assets.
Operating policies:
A fund may not transfer as collateral any portfolio securities
except as necessary in connection with permissible borrowings or
investments, and then such transfers may not exceed 33 1/3% of a
fund's total assets. A fund may not purchase additional
securities when borrowings exceed 5% of total assets.
Foreign Currency Transactions.
The funds will normally conduct their foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or
through entering into forward contracts to purchase or sell
foreign currencies. The funds will generally not enter into a
forward contract with a term greater than one year.
The funds will generally enter into forward foreign currency
exchange contracts only under two circumstances. First, when a
fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may desire to
"lock in" the U.S. dollar price of the security. Second, when
Price-Fleming believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against
another currency, it may enter into a forward contract to sell or
buy the former foreign currency (or another currency which acts
as a proxy for that currency) approximating the value of some or
all of the fund's portfolio securities denominated in such
foreign currency. Under certain circumstances, a fund may commit
a substantial portion or the entire value of its portfolio to the
consummation of these contracts. Price-Fleming will consider the
effect such a commitment of its portfolio to forward contracts
would have on the investment program of the fund and the
flexibility of the fund to purchase additional securities.
Although forward contracts will be used primarily to protect the
fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately
predicted and a fund's total return could be adversely affected
as a result.
PAGE 56
There are certain markets where it is not possible to engage in
effective foreign currency hedging. This may be true, for
example, for the currencies of various Latin American countries
and other emerging markets where the foreign exchange markets are
not sufficiently developed to permit hedging activity to take
place.
Futures and Options.
Futures are used to manage risk; options give the investor the
option to buy or sell an asset at a predetermined price in the
future.
Futures (a type of potentially high-risk derivative) are often
used to manage risk, because they enable the investor to buy or
sell an asset in the future at an agreed upon price. Options
(another type of potentially high-risk derivative) give the
investor the right, but not the obligation, to buy or sell an
asset at a predetermined price in the future. The funds may buy
and sell futures and options contracts for a number of reasons
including: to manage exposure to changes in securities prices and
foreign currencies; as an efficient means of adjusting overall
exposure to certain markets; and to protect the value of
portfolio securities. The funds may purchase, sell, or write call
and put options on securities, financial indices, and foreign
currencies.
Futures contracts and options may not always be successful
hedges; their prices can be highly volatile. Using them could
lower a fund's total return, and the potential loss from the use
of futures can exceed the fund's initial investment in such
contracts.
Operating policies:
Futures: Initial margin deposits and premiums on options used for
non-hedging purposes will not equal more than 5% of a fund's net
asset value. Options on securities: The total market value of
securities against which a fund has written call or put options
may not exceed 25% of its total assets. The fund will not commit
more than 5% of its total assets to premiums when purchasing call
or put options.
Tax Consequences of Hedging.
Under applicable tax law, the funds may be required to limit
their gains from hedging in foreign currency forwards, futures
PAGE 57
and options. Although the funds are expected to comply with such
limits, the extent to which these limits apply is subject to tax
regulations as yet unissued. Hedging may also result in the
application of the mark-to-market and straddle provisions of the
Internal Revenue Code. These provisions could result in an
increase (or decrease) in the amount of taxable dividends paid by
the funds and could affect whether dividends paid by the funds
are classified as capital gains or ordinary income.
Lending of Portfolio Securities.
Like other mutual funds, the funds may lend securities to broker-
dealers, other institutions, or other persons to earn additional
income. The principal risk is the potential insolvency of the
broker-dealer or other borrower. In this event, the fund could
experience delays in recovering its securities and possibly
capital losses.
Fundamental policy:
The value of loaned securities may not exceed 33 1/3% of a fund's
total assets.
Portfolio Turnover.
Turnover is an indication of frequency. The funds will not
generally trade in securities for short-term profits, but when
circumstances warrant, securities may be purchased and sold
without regard to the length of time held. The funds' portfolio
turnover rates for the previous three fiscal periods are shown in
Table 7. The portfolio turnover rates for the Emerging Markets
Stock Fund and the Global Stock Fund are not expected to exceed
100% during their first year of operation.
_________________________________________________________________
Portfolio Turnover Rates
1/1-12/31/92 1/1-10/31/93 11/1/93-10/31/94
_________________________________________________________________
International
Stock Fund 37.80% 29.80%* 22.90%
_________________________________________________________________
International
Discovery Fund 38.00% 71.80%* 57.40%
_________________________________________________________________
European Stock
Fund 52.00% 21.30%* 24.50%
PAGE 58
_________________________________________________________________
Japan Fund 41.60% 61.40%* 61.50%
_________________________________________________________________
New Asia Fund 36.30% 40.40%* 63.20%
_________________________________________________________________
Latin America
Fund ** ** 12.20%*
_________________________________________________________________
*Annualized.
**Prior to commencement of fund operations.
_________________________________________________________________
Table 7
European, Japan, New Asia, Latin America and Emerging Markets
Stock Funds
Location of Company.
In determining the domicile or nationality of a company, the
funds would primarily consider the following factors: whether
the company is organized under the laws of a particular country;
or, whether the company derives a significant proportion (at
least 50%) of its revenues or profits from goods produced or
sold, investments made, or services performed in the country or
has at least 50% of its assets situated in that country.
Each of these funds will invest at least 65% of its total assets
in companies located (as defined above) in the respective
countries or regions indicated.
PAGE 59
PAGE 1
4 Investing with T. Rowe Price
Account Requirements and Transaction
Information
________________________
Always verify your
transactions by carefully
reviewing the
confirmation we send
you. Please report any
discrepancies to
Shareholder Services. Tax Identification Number
We must have your correct social security
or corporate tax identification number on a
signed New Account Form or W-9 Form.
Otherwise, federal law requires the funds
to withhold a percentage (currently 31%) of
your dividends, capital gain distributions,
and redemptions, and may subject you to an
IRS fine. If this information is not
received within 60 days after your account
is established, your account may be
redeemed, priced at the NAV on the date of
redemption.
Unless you request otherwise, one
shareholder report will be mailed to
multiple account owners with the same tax
identification number and same zip code and
to shareholders who have requested that
their account be combined with someone
else's for financial reporting.
_________________________
T. Rowe Price Trust
Company
1-800-492-7670
1-410-625-6585 Employer-Sponsored Retirement Plans and
Institutional Accounts
Transaction procedures in the following
sections may not apply to employer-
sponsored retirement plans and
institutional accounts. For procedures
regarding employer-sponsored retirement
plans, please call T. Rowe Price Trust
Company or consult your plan administrator.
For institutional account procedures,
please call your designated account manager
or service representative.
Opening a New Account: $2,500 minimum
initial investment; $1,000 for retirement
PAGE 2
or gifts or transfers to minors (UGMA/UTMA)
accounts
Account Registration
If you own other T. Rowe Price funds, be
sure to register any new account just like
your existing accounts so you can exchange
among them easily. (The name and account
type would have to be identical.)
________________________
Regular Mail
T. Rowe Price
Account Services
P.O. Box 17300
Baltimore, MD
21298-9353
Mailgram, Express,
Registered, or Certified
Mail
T. Rowe Price
Account Services
10090 Red Run Blvd.
Owings Mills, MD 21117 By Mail
Please make your check payable to T. Rowe
Price Funds (otherwise it will be returned)
and send your check together with the New
Account Form to the address at left. We do
not accept third party checks, except for
IRA Rollover checks, to open new accounts.
By Wire
o Call Investor Services for an account
number and give the following wire
address to your bank:
Morgan Guaranty Trust Co. of New York
ABA# 021000238
T. Rowe Price [fund name]
AC-00153938
account name(s), and account number
o Complete a New Account Form and mail it
to one of the appropriate addresses
listed on the previous page.
Note: No services will be established and
IRS penalty withholding may occur until a
signed New Account Form is received.
Also, retirement plans cannot be opened
by wire.
By Exchange
PAGE 3
Call Shareholder Services or use
Tele*Access or PC*Access (see "Automated
Services" under "Shareholder Services").
The new account will have the same
registration as the account from which you
are exchanging. Services for the new
account may be carried over by telephone
request if preauthorized on the existing
account. (See explanation of "Excessive
Trading" under "Transaction Procedures.")
In Person
Drop off your New Account Form at any of
the locations listed on the cover and
obtain a receipt.
Purchasing Additional Shares: $100 minimum
purchase; $50 minimum for retirement plans
and Automatic Asset Builder
By ACH Transfer
Use Tele*Access, PC*Access, or call
Investor Services if you have established
electronic transfers using the ACH network.
By Wire
Call Shareholder Services or use the wire
address in "Opening a New Account."
________________________
Regular Mail
T. Rowe Price Funds
Account Services
P.O. Box 89000
Baltimore, MD
21289-1500
(For Mailgrams,
Express, Registered,
or Certified Mail,
see previous
section.) By Mail
o Provide your account number and the fund
name on your check.
o Make your check payable to T. Rowe Price
Funds (otherwise it may be returned).
o Mail the check to us at the address shown
at left with either a fund reinvestment
slip or a note indicating the fund you
want to buy and your fund account number.
By Automatic Asset Builder
Fill out the Automatic Asset Builder
PAGE 4
section on the New Account or Shareholder
Services Form.
Exchanging and Redeeming Shares
By Phone
Call Shareholder Services. If you find our
phones busy during unusually volatile
markets, please consider placing your order
by Tele*Access, PC*Access (if you have
previously authorized telephone services),
mailgram or by express mail. For exchange
policies, please see "Transaction
Procedures and Special Requirements--
Excessive Trading."
Redemption proceeds can be mailed to your
account address, sent by ACH transfer, or
wired to your bank (provided your bank
information is already on file). For
charges, see "Electronic Transfers--By
Wire" under "Shareholder Services".
_________________________
For Mailgram,
Express, Registered,
or Certified mail,
see addresses under
"Opening a New
Account." By Mail
For each account involved, provide the
account name, number, fund name, and
exchange or redemption amount. For
exchanges, be sure to indicate any fund you
are exchanging out of and the fund or funds
you are exchanging into. Please mail to the
appropriate address below or as indicated
at left. T. Rowe Price requires the
signatures of all owners exactly as
registered, and possibly a signature
guarantee (see "Transaction Procedures and
Special Requirements--Signature
Guarantees").
Regular Mail
For nonretirement For employer-sponsored
and IRA accounts: retirement accounts:
T. Rowe Price T. Rowe Price Trust
Account Services Company
P.O. Box 89000 P.O. Box 89000
Baltimore, MD Baltimore, MD
21289-0220 21289-0300
PAGE 5
Redemptions from employer-sponsored
retirement accounts must be in writing;
please call T. Rowe Price Trust Company or
your plan administrator for instructions.
IRA distributions may be requested in
writing or by telephone; please call
Shareholder Services to obtain an IRA
Distribution Form or an IRA Shareholder
Services Form to authorize the telephone
redemption service.
Rights Reserved By the Fund
The fund and its agents reserve the right
to waive or lower investment minimums; to
accept initial purchases by telephone or
mailgram; to cancel or rescind any purchase
or exchange (for example, if an account has
been restricted due to excessive trading or
fraud) upon notice to the shareholder
within five business days of the trade or
if the written confirmation has not been
received by the shareholder, whichever is
sooner; to freeze any account and suspend
services when notice has been received of a
dispute between the registered or
beneficial account owners or there is
reason to believe a fraudulent transaction
may occur; to otherwise modify the
conditions of purchase and any services at
any time; or to act on instructions
believed to be genuine.
_______________________
Shareholder Services
1-800-225-5132
1-410-625-6500 Shareholder Services
Many services are available to you as a T.
Rowe Price shareholder; some you receive
automatically and others you must authorize
on the New Account Form. By signing up for
services on the New Account Form rather
than later, you avoid having to complete a
separate form and obtain a signature
guarantee. This section reviews some of the
principal services currently offered. Our
Services Guide contains detailed
descriptions of these and other services.
If you are a new T. Rowe Price investor,
you will receive a Services Guide with our
Welcome Kit.
PAGE 6
_________________________
Investor Services
1-800-638-5660
1-410-547-2308 Note: Corporate and other entity accounts
require an original or certified resolution
to establish services and to redeem by
mail. For more information, call Investor
Services.
Retirement Plans
We offer a wide range of plans for
individuals and institutions, including
large and small businesses: IRAs, SEP-IRAs,
Keoghs (profit sharing, money purchase
pension), 401(k), and 403(b)(7). For
information on IRAs, call Investor
Services. For information on all other
retirement plans, please call our Trust
Company at 1-800-492-7670.
Exchange Service
You can move money from one account to an
existing identically registered account, or
open a new identically registered account.
Remember, exchanges are purchases and sales
for tax purposes. (Exchanges into a state
tax-free fund are limited to investors
living in states where the funds are
registered.) Some of the T. Rowe Price
funds may impose a redemption fee of .50%
to 2%, payable to such funds, on shares
held for less than one year, or in some
funds, six months.
Automated Services
_________________________
Tele*Access
1-800-638-2587
1-410-625-7676 Tele*Access. 24-hour service via toll-free
number provides information on fund yields
and prices, dividends, account balances,
and your latest transaction as well as the
ability to request prospectuses, account
and tax forms, duplicate statements,
checks, and to initiate purchase,
redemption and exchange orders in your
accounts (see "Electronic Transfers"
below).
PC*Access. 24-hour service via dial-up
modem provides the same information as
Tele*Access, but on a personal computer.
PAGE 7
Please call Investor Services for an
information guide.
Telephone and Walk-In Services
Buy, sell, or exchange shares by calling
one of our service representatives or by
visiting one of our four investor center
locations whose addresses are listed on the
cover.
Electronic Transfers
By ACH. With no charges to pay, you can
initiate a purchase or redemption for as
little as $100 or as much as $100,000
between your bank account and fund account
using the ACH network. Enter instructions
via Tele*Access, PC*Access or call
Shareholder Services.
By Wire. Electronic transfers can also be
conducted via bank wire. There is currently
a $5 fee for wire redemptions under $5,000,
and your bank may charge for incoming or
outgoing wire transfers regardless of size.
Checkwriting (Not available for equity
funds, or the High Yield fund or Emerging
Markets Bond Fund)
You may write an unlimited number of free
checks on any money market fund, and most
bond funds, with a minimum of $500 per
check. Keep in mind, however that a check
results in a redemption; a check written on
a bond fund will create a taxable event
which you and we must report to the
IRS.
Automatic Investing ($50 minimum)
You can invest automatically in several
different ways, including:
o Automatic Asset Builder. You instruct us
to move $50 or more from your bank
account, or you can instruct your
employer to send all or a portion of your
paycheck to the fund or funds you
designate.
o Automatic Exchange. You can set up
systematic investments from one fund
account into another, such as from a
money fund into a stock fund.
PAGE 8
_________________________
Discount Brokerage is a
division of T. Rowe Price
Investment Services, Inc. Discount Brokerage
You can trade stocks, bonds, options,
precious metals, and other securities at a
savings over regular commission rates. Call
Investor Services for information.
Note: If you buy or sell T. Rowe Price
Funds through anyone other than T. Rowe
Price, such as broker-dealers or banks, you
may be charged transaction or service fees
by those institutions. No such fees are
charged by T. Rowe Price Investment
Services or the fund for transactions
conducted directly with the fund.
PAGE 60
Prospectus
T. Rowe Price International Equity Funds
T. Rowe Price International Funds, Inc.
A choice of international, global, and regional stock funds
for investors seeking to diversify beyond U.S. borders.
Invest With Confidence
To Open an Account
Investor Services
1-800-638-5660
1-410-547-2308
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500
For Yields and Prices
Tele*AccessR
1-800-638-2587
1-410-625-7676
24 hours, 7 days
Investor Centers
101 East Lombard St.
Baltimore, MD 21201
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
PAGE 61
To help up you achieve your financial goals, T. Rowe Price offers
a wide range of stock, bond, and money market investments, as
well as convenient services and timely informative reports.
Invest With Confidence
PAGE 62
STATEMENT OF ADDITIONAL INFORMATION
T. Rowe Price International Funds, Inc.
International Stock Fund
International Discovery Fund
European Stock Fund
Japan Fund
New Asia Fund
Latin America Fund
Emerging Markets Stock Fund
Global Stock Fund
and
Institutional International Funds, Inc.
Foreign Equity Fund
(the "Funds")
This Statement of Additional Information is not a
prospectus but should be read in conjunction with the Funds'
prospectus dated March 1, 1995, (March 30, 1995 for Emerging
Markets Stock Fund and December 28, 1995 for Global Stock Fund)
which may be obtained from T. Rowe Price Investment Services,
Inc., 100 East Pratt Street, Baltimore, Maryland 21202.
The date of this Statement of Additional Information is
March 1, 1995, amended to March 30, 1995 and further amended to
December 28, 1995.
PAGE 63
TABLE OF CONTENTS
Page Page
Call and Put Options . . . Investment Performance . .
Capital Stock . . . . . . . Investment Programs . . .
Custodian . . . . . . . . . Investment Restrictions .
Dealer Options . . . . . . Legal Counsel . . . . . .
Distributor for Funds . . . Lending of Portfolio
Dividends . . . . . . . . . Securities . . . . . . .
Federal and State Management of Funds . . .
Registration of Shares . . Net Asset Value Per
Foreign Currency Share . . . . . . . . . .
Transactions . . . . . . . Portfolio Management
Foreign Futures and Practices . . . . . . . .
Options . . . . . . . . . Portfolio Transactions . .
Futures Contracts . . . . . Pricing of Securities . .
Hybrid Instruments . . . . Principal Holders of
Illiquid or Restricted Securities . . . . . . .
Securities . . . . . . . . Repurchase Agreements . .
Independent Accountants . . Risk Factors of Foreign
Investment Management Investing . . . . . . . .
Services . . . . . . . . . Tax Status . . . . . . . .
Investment Objectives and Taxation of Foreign
Policies . . . . . . . . . Shareholders . . . . . .
Warrants . . . . . . . . .
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of
each Fund's investment objectives and policies discussed in the
prospectus. Unless otherwise specified, the investment program
and restrictions of each Fund are not fundamental policies. The
operating policies of each Fund are subject to change by its
Board of Directors without shareholder approval. However,
shareholders will be notified of a material change in an
operating policy. The fundamental policies of each Fund may not
be changed without the approval of at least a majority of the
outstanding shares of each Fund or, if it is less, 67% of the
shares represented at a meeting of shareholders at which the
holders of 50% or more of the shares are represented.
Throughout this Statement of Additional Information,
"the Fund" is intended to refer to each Fund listed on the cover
page, unless otherwise indicated.
PAGE 64
INVESTMENT PROGRAMS
All Funds
The Funds' investment manager, Rowe Price-Fleming
International, Inc. ("Price-Fleming"), one of America's largest
managers of no-load international mutual fund assets, regularly
analyzes a broad range of international equity and fixed income
markets in order to assess the degree of risk and level of return
that can be expected from each market. Based upon its current
assessment, Price-Fleming believes long-term growth of capital
may be achieved by investing in marketable securities of non-
United States companies which have the potential for growth of
capital. Of course, there can be no assurance that Price-
Fleming's forecasts of expected return will be reflected in the
actual returns achieved by the Funds.
Each Fund's share price will fluctuate with market,
economic and foreign exchange conditions, and your investment may
be worth more or less when redeemed than when purchased. The
Funds should not be relied upon as a complete investment program,
nor used to play short-term swings in the stock or foreign
exchange markets. The Funds are subject to risks unique to
international investing. See discussion under "Risk Factors of
Foreign Investing" beginning on page __. Further, there is no
assurance that the favorable trends discussed below will
continue, and the Funds cannot guarantee they will achieve their
objectives.
International Stock and Global Stock Funds
It is the present intention of Price-Fleming to invest
in companies based in (or governments of or within) the Far East
(for example, Japan, Hong Kong, Singapore, and Malaysia), Europe
(for example, United Kingdom, Germany, Hungary, Poland,
Netherlands, France, Spain, and Switzerland), South Africa,
Australia, Canada, Latin America, and such other areas and
countries as Price-Fleming may determine from time to time. The
Global Stock Fund may also invest in companies based in the
U.S.
In determining the appropriate distribution of
investments among various countries and geographic regions,
Price-Fleming ordinarily considers the following factors:
prospects for relative economic growth between foreign countries;
expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and
PAGE 65
the range of individual investment opportunities available to
international investors.
In analyzing companies for investment, Price-Fleming
ordinarily looks for one or more of the following
characteristics: an above-average earnings growth per share;
high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength;
strong competitive advantages; effective research and product
development and marketing; efficient service; pricing
flexibility; strength of management; and general operating
characteristics which will enable the companies to compete
successfully in their market place. While current dividend
income is not a prerequisite in the selection of portfolio
companies, the companies in which the Fund invests normally will
have a record of paying dividends, and will generally be expected
to increase the amounts of such dividends in future years as
earnings increase.
It is expected that the Fund's investments will
ordinarily be traded on exchanges located at least in the
respective countries in which the various issuers of such
securities are principally based.
International Discovery Fund
It is the present intention of Price-Fleming to invest
primarily in smaller (i.e. small to medium size) companies based
in developed and selected emerging countries located in the
Pacific Basin, Western Europe, Latin America and such other areas
and countries as Price-Fleming may determine from time to time.
Price-Fleming believes that such smaller companies may have the
potential for greater, more dynamic growth than larger firms,
which may have reached a period of maturity and more gradual
growth. It is generally easier for a company to grow from a
smaller base. In addition, smaller companies are often more
flexible and responsive to customers, and to changes in
competitive conditions. Medium size companies also display such
characteristics to a certain extent. However, there are also
special risks associated with investing in smaller companies.
In selecting portfolio investments, Price-Fleming will
consider: a company's growth prospects, including the potential
for superior appreciation due to growth in earnings, relative
valuation of its securities, and any risk associated with
investment; the industry in which the company operates, with a
view to identification of global developments within industries,
PAGE 66
international investment trends, and social, economic or
political movements affecting a particular industry; the country
in which the company is based, as well as historical and
anticipated foreign currency exchange rate fluctuations; and the
feasibility of gaining access to the securities market in a
country and of implementing the necessary custodial arrangements.
The investment program of the Fund has been developed in the
belief that research-based investment in a diversified portfolio
of equity securities of companies in a number of foreign
countries will give shareholders a chance to participate on a
global basis in the opportunities available in the growing
foreign securities markets.
The countries in which the Fund will seek investments
include those listed below. The Fund may not invest in all the
countries listed, and it may invest in other countries as well,
when such investments are consistent with the Fund's investment
objective and policies. Countries designated with a number sign
(#) are emerging, or less developed, countries which for purposes
of this prospectus are defined as countries with a low or middle-
income economy as determined by the World Bank.
Pacific Basin Western Europe Other
Australia Austria Argentina#
Hong Kong Belgium Brazil#
South Korea Denmark Canada
Japan Finland Chile#+
Malaysia# France Hungary#
Philippines# Germany India#+
New Zealand Greece# Mexico#
Singapore# Ireland Turkey#
Taiwan#+ Italy Colombia#+
Thailand# Luxembourg Venezuela#
Indonesia# Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
United Kingdom
_________________________________________________________________
+ Indicates countries in which the Fund effectively may
invest only or primarily through investment funds
subject to the provisions of the Investment Company Act
of 1940 relating to the purchase of securities of
PAGE 67
investment companies. See "Investment Restrictions
Operating Policy No. 3."
The Fund also will seek to invest in leading companies
in other emerging countries as their securities markets and
banking systems develop, including People's Republic of China,
the Czech Republic, Slovakia, Israel, Jordan, Morocco, Nigeria,
Pakistan, Poland, Peru and Vietnam, at such time as investment in
these countries becomes feasible. It may not be feasible for the
Fund currently to invest in all of these countries due to
restricted access to their securities markets or inability to
implement satisfactory custodial arrangements.
European Stock Fund
Market deregulation, privatization, and lowered barriers
to foreign investment have led to greater investment
opportunities in Western Europe and the potential for greater
investment in Eastern Europe. Economic and political reforms in
Eastern Europe may increase the investment and growth
possibilities for all of Europe. The Fund intends to invest in
companies based in any Western or Eastern European country, as
well as Russia and the countries of the former Soviet Union.
European markets for investment include:
Primary Secondary Developing
France Austria Czech Republic
Germany Belgium Greece
Holland Denmark Hungary
Italy Finland Poland
Spain Ireland Russia
Sweden Luxembourg Slovakia
Switzerland Norway Turkey
United Kingdom Portugal
_________________________________________________________________
Other Eastern European markets may become available at
any time.
In seeking its objectives, the Fund will invest
primarily in established European companies participating in
markets and sectors which have superior long-term growth
potential. Individual stocks will be evaluated on various
criteria, including earnings history and prospects, book value,
degree of price leverage, and price/earnings ratio. Both large
and small capitalization companies will be candidates for the
portfolio.
PAGE 68
Japan Fund
The Japan Fund invests primarily in common stocks of
Japanese companies participating in markets and sectors which are
believed to have attractive long-term growth potential. These
may include the export sector, where many Japanese companies are
world leaders in their industries. They may also include the
consumer sector--the fastest-growing segment of Japan's economy--
where companies are working to meet growing domestic demand for
consumer goods and services.
The Fund has the flexibility to invest in both large and
small companies, as deemed appropriate by Price-Fleming. This
allows the Fund to benefit from the proven growth potential of
established companies, as well as the enhanced growth potential
of smaller companies. In making specific stock selections,
Price-Fleming takes into account, among other factors, a
company's size, financial condition, marketing and technical
strengths, and competitive position within its industry. The
Fund's portfolio will normally be broadly diversified across
industries and companies. Such broad diversification should help
reduce volatility.
New Asia Fund
Price-Fleming believes the rapidly growing economies in
Asia and the Pacific Basin, including Australia and New Zealand,
offer attractive opportunities for investment.
In contrast to Japan's more developed economy, the newly
industrialized nations of this region are in an earlier, more
dynamic growth stage of their development. Price-Fleming
believes that the continued growth opportunities exist due to
structural changes taking place throughout the region.
o The relaxation of trade barriers and the freer
movement of capital are increasing the flow of
commerce within the region and fostering economic
independence. At the same time, growing trade with
Japan, the United States and Europe is fueling
rapid economic development.
PAGE 69
o Rising labor costs in more developed countries are
making the large, lower-cost work force of Asia and
the Pacific Basin increasingly attractive,
resulting in the dramatic growth of manufacturing
industries.
o As capital investment increases, many of the Asian
and Pacific Basin countries are developing more
efficient capital markets, for investment.
The Fund may invest in the countries listed below, as
well as other Asian and Pacific Basin countries and regions, such
as China, Sri Lanka, Pakistan and Indochina, as their markets
become more accessible.
Australia Philippines#
Hong Kong Singapore#
India+# South Korea
Indonesia# Taiwan+#
Malaysia# Thailand#
New Zealand
_________________________________________________________________
+ Indicates countries in which the Fund effectively may
invest only or primarily through investment funds
subject to the provisions of the Investment Company Act
of 1940 relating to the purchase of securities of
investment companies. See "Investment Restrictions
Operating Policy No. 3."
# Countries designated with a number sign (#) are emerging
or less developed countries.
Other Asian and Pacific Basin markets may become
available at any time.
Latin America Fund
Price-Fleming believes that the economic revitalization
of the Latin American region will provide attractive investment
opportunities.
After the "lost years" of the 1970's and early 80's when
economic stagnation and hyperinflation became commonplace,
certain of the governments of the region have embarked on a
process of transformation:
PAGE 70
o rolling back the dominance of the state in favor of
the private sector, encouraging privatizations of
state owned companies, removing price controls and
controlling public expenditure; and
o lowering tariff barriers, promoting trade and
encouraging both free trade blocks and investment
by foreigners.
As economies have been stabilized, capital flows into
the region have picked up leading to increased investment and a
revival of growth. Although countries such as Chile, Mexico and
Argentina have made considerable progress, this economic catch-up
is still at an early stage, while in countries such as Brazil and
Peru the process is just beginning.
The Fund may invest in the countries listed below,
together with other countries in the region as their markets
become accessible. The Latin America region includes Mexico,
Central America, South America and the islands of the Caribbean.
Argentina# Mexico#
Brazil# Peru#
Chile+# Venezuela#
Colombia+#
_________________________________________________________________
+ Indicates countries in which the Fund effectively may
invest only or primarily through investment funds
subject to the provisions of the Investment Company Act
of 1940 relating to the purchase of securities of
investment companies. See "Investment Restrictions
Operating Policy No. 3."
# Countries designated with a number sign (#) are emerging
or less developed countries.
Emerging Markets Stock Fund
The fund's objective is long-term growth of capital
through investment primarily in common stocks of large and small
companies domiciled, or with primary operations, in emerging
markets. An emerging market includes any country defined as
emerging or developing by the International Bank for
Reconstruction and Development (World Bank), International
Finance Corporation, or the United Nations. The fund's
investments are expected to be diversified geographically across
PAGE 71
emerging markets in Latin America, the Far East, Europe, and
Africa.
Countries in which the fund may invest are listed below
and others will be added as opportunities develop:
Far East: Latin America: Europe: Africa: Mid East:
China Argentina Portugal South Africa Jordan
Indonesia Brazil Hungary Nigeria Tunisia
Korea Chile Turkey Zimbabwe Morocco
Malaysia Columbia Poland Botswana Egypt
Thailand Mexico Russia Israel
India Venezuela Czechoslovakia
Philippines Peru Slovakia
Taiwan Belize Greece
Hong Kong Baltic States
Singapore Austria
Sri Lanka
Pakistan
Mauritius
This fund is intended for investors with long-term
investment horizons who are looking for an aggressive approach to
international investing. Most emerging countries are experiencing
substantial economic and political restrictions, and their
developing financial markets offer the potential for significant
capital appreciation. Many of these countries are moving from
one-party rule to a multi-party democracy; from agrarian to
industrialized economies; and from nationalized to free market,
privatized industries. These transitions are proceeding smoothly
in some markets but not in others. Obviously, there is no
guarantee favorable trends will continue. Companies in emerging
markets that successfully navigate these changes offer investors
the prospect for earnings growth far more rapid than that
typically generated by companies in more mature, developed
markets. However, investors in this fund should be comfortable
with the risks of international investing and be prepared for
substantial share price volatility.
Foreign Equity Fund
In determining the appropriate distribution of
investments among various countries and geographic regions,
Price-Fleming ordinarily considers the following factors:
prospects for relative economic growth between foreign countries;
expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and
PAGE 72
the range of individual investment opportunities available to
international investors.
In analyzing companies for investment, Price-Fleming
ordinarily looks for one or more of the following
characteristics: an above-average earnings growth per share;
high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength;
strong competitive advantages; effective research and product
development and marketing; efficient service; pricing
flexibility; strength of management; and general operating
characteristics which will enable the companies to compete
successfully in their market place. While current dividend
income is not a prerequisite in the selection of portfolio
companies, the companies in which the Fund invests normally will
have a record of paying dividends, and will generally be expected
to increase the amounts of such dividends in future years as
earnings increase.
It is expected that the Fund's investments will
ordinarily be traded on exchanges located at least in the
respective countries in which the various issuers of such
securities are principally based.
Risk Factors of Foreign Investing
There are special risks in investing in the Funds.
Certain of these risks are inherent in any international mutual
fund while others relate more to the countries in which the Funds
will invest. Many of the risks are more pronounced for
investments in developing or emerging countries, such as many of
the countries of Southeast Asia, Latin America, Eastern Europe
and the Middle East. Although there is no universally accepted
definition, a developing country is generally considered to be a
country which is in the initial stages of its industrialization
cycle with a per capita gross national product of less than
$8,000.
General. Investors should understand that all
investments have a risk factor. There can be no guarantee
against loss resulting from an investment in the Funds, and there
can be no assurance that the Funds' investment policies will be
successful, or that its investment objectives will be attained.
The Funds are designed for individual and institutional investors
seeking to diversify beyond the United States in actively
researched and managed portfolios, and are intended for long-term
PAGE 73
investors who can accept the risks entailed in investment in
foreign securities.
Political and Economic Factors. Individual foreign
economies of certain countries may differ favorably or
unfavorably from the United States' economy in such respects as
growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments
position. The internal politics of certain foreign countries are
not as stable as in the United States. For example, in 1991, the
existing government in Thailand was overthrown in a military
coup. In 1992, there were two military coup attempts in
Venezuela and in 1992 the President of Brazil was impeached. In
1994-1995, the Mexican peso plunged in value setting off a severe
crisis in the Mexican economy. In addition, significant external
political risks currently affect some foreign countries. Both
Taiwan and China still claim sovereignty of one another and there
is a demilitarized border between North and South Korea.
Governments in certain foreign countries continue to
participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these
governments could have a significant effect on market prices of
securities and payment of dividends. The economies of many
foreign countries are heavily dependent upon international trade
and are accordingly affected by protective trade barriers and
economic conditions of their trading partners. The enactment by
these trading partners of protectionist trade legislation could
have a significant adverse effect upon the securities markets of
such countries.
Currency Fluctuations. The Funds will invest in
securities denominated in various currencies. Accordingly, a
change in the value of any such currency against the U.S. dollar
will result in a corresponding change in the U.S. dollar value of
the Funds' assets denominated in that currency. Such changes
will also affect the Funds' income. Generally, when a given
currency appreciates against the dollar (the dollar weakens) the
value of the Funds' securities denominated in that currency will
rise. When a given currency depreciates against the dollar (the
dollar strengthens) the value of the Funds' securities
denominated in that currency would be expected to decline.
Investment and Repatriation of Restrictions. Foreign
investment in the securities markets of certain foreign countries
is restricted or controlled in varying degrees. These
restrictions may limit and at times preclude investment in
PAGE 74
certain of such countries and may increase the cost and expenses
of the Funds. Investments by foreign investors are subject to a
variety of restrictions in many developing countries. These
restrictions may take the form of prior governmental approval,
limits on the amount or type of securities held by foreigners,
and limits on the types of companies in which foreigners may
invest. Additional or different restrictions may be imposed at
any time by these or other countries in which the Funds invest.
In addition, the repatriation of both investment income and
capital from several foreign countries is restricted and
controlled under certain regulations, including in some cases the
need for certain government consents. For example, capital
invested in Chile normally cannot be repatriated for one year.
Market Characteristics. It is contemplated that most
foreign securities, other than Latin American securities, will be
purchased in over-the-counter markets or on stock exchanges
located in the countries in which the respective principal
offices of the issuers of the various securities are located, if
that is the best available market. Foreign stock markets are
generally not as developed or efficient as, and may be more
volatile than, those in the United States. While growing in
volume, they usually have substantially less volume than U.S.
markets and the Funds' portfolio securities may be less liquid
and subject to more rapid and erratic price movements than
securities of comparable U.S. companies. Equity securities may
trade at price/earnings multiples higher than comparable United
States securities and such levels may not be sustainable. Fixed
commissions on foreign stock exchanges are generally higher than
negotiated commissions on United States exchanges, although the
Funds will endeavor to achieve the most favorable net results on
their portfolio transactions. There is generally less government
supervision and regulation of foreign stock exchanges, brokers
and listed companies than in the United States. Moreover,
settlement practices for transactions in foreign markets may
differ from those in United States markets. Such differences may
include delays beyond periods customary in the United States and
practices, such as delivery of securities prior to receipt of
payment, which increase the likelihood of a "failed settlement."
Failed settlements can result in losses to a Fund.
Investment Funds. The Funds may invest in investment
funds which have been authorized by the governments of certain
countries specifically to permit foreign investment in securities
of companies listed and traded on the stock exchanges in these
respective countries. The Funds' investment in these funds is
subject to the provisions of the 1940 Act discussed on page __.
PAGE 75
If the Funds invest in such investment funds, the Funds'
shareholders will bear not only their proportionate share of the
expenses of the Funds (including operating expenses and the fees
of the investment manager), but also will bear indirectly similar
expenses of the underlying investment funds. In addition, the
securities of these investment funds may trade at a premium over
their net asset value.
Information and Supervision. There is generally less
publicly available information about foreign companies comparable
to reports and ratings that are published about companies in the
United States. Foreign companies are also generally not subject
to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those
applicable to United States companies. It also may be more
difficult to keep currently informed of corporate actions which
affect the prices of portfolio securities.
Taxes. The dividends and interest payable on certain of
the Funds' foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount of income
available for distribution to the Funds' shareholders. A
shareholder otherwise subject to United States federal income
taxes may, subject to certain limitations, be entitled to claim a
credit or deduction for U.S. federal income tax purposes for his
or her proportionate share of such foreign taxes paid by the
Funds. (See "Tax Status," page __.)
Costs. Investors should understand that the expense
ratios of the Funds can be expected to be higher than investment
companies investing in domestic securities since the cost of
maintaining the custody of foreign securities and the rate of
advisory fees paid by the Funds are higher.
Small Companies. Small companies may have less
experienced management and fewer management resources than larger
firms. A smaller company may have greater difficulty obtaining
access to capital markets, and may pay more for the capital it
obtains. In addition, smaller companies are more likely to be
involved in fewer market segments, making them more vulnerable to
any downturn in a given segment. Some of these factors may also
apply, to a lesser extent, to medium size companies. Some of the
smaller companies in which the Funds will invest may be in major
foreign markets; others may be leading companies in emerging
countries outside the major foreign markets. Securities analysts
generally do not follow such securities, which are seldom held
outside of their respective countries and which may have
PAGE 76
prospects for long-term investment returns superior to the
securities of well-established and well-known companies. Direct
investment in such securities may be difficult for United States
investors because, among other things, information relating to
such securities is often not readily available. Of course, there
are also risks associated with such investments, and there is no
assurance that such prospects will be realized.
Other. With respect to certain foreign countries,
especially developing and emerging ones, there is the possibility
of adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Funds, political or
social instability, or diplomatic developments which could affect
investments by U.S. persons in those countries.
International Stock, International Discovery, European Stock,
Emerging Markets Stock, Global Stock, and Foreign Equity
Funds
Eastern Europe and Russia. Changes occurring in Eastern
Europe and Russia today could have long-term potential
consequences. As restrictions fall, this could result in rising
standards of living, lower manufacturing costs, growing consumer
spending, and substantial economic growth. However, investment
in the countries of Eastern Europe and Russia is highly
speculative at this time. Political and economic reforms are too
recent to establish a definite trend away from centrally-planned
economies and state owned industries. In many of the countries
of Eastern Europe and Russia, there is no stock exchange or
formal market for securities. Such countries may also have
government exchange controls, currencies with no recognizable
market value relative to the established currencies of western
market economies, little or no experience in trading in
securities, no financial reporting standards, a lack of a banking
and securities infrastructure to handle such trading, and a legal
tradition which does not recognize rights in private property.
In addition, these countries may have national policies which
restrict investments in companies deemed sensitive to the
country's national interest. Further, the governments in such
countries may require governmental or quasi-governmental
authorities to act as custodian of a Fund's assets invested in
such countries and these authorities may not qualify as a foreign
custodian under the Investment Company Act of 1940 and exemptive
relief from such Act may be required. All of these
considerations are among the factors which could cause
significant risks and uncertainties to investment in Eastern
PAGE 77
Europe and Russia. Each Fund will only invest in a company
located in, or a government of, Eastern Europe and Russia, if it
believes the potential return justifies the risk. To the extent
any securities issued by companies in Eastern Europe and Russia
are considered illiquid, each Fund will be required to include
such securities within its 15% restriction on investing in
illiquid securities.
Japan
The Japan Fund's concentration of its investments in
Japan means the Fund will be more dependent on the investment
considerations discussed above and may be more volatile than a
fund which is broadly diversified geographically. To the extent
any of the other funds also invests in Japan, such investments
will be subject to these same factors. Additional factors
relating to Japan include the following:
Japan has experienced earthquakes and tidal waves of
varying degrees of severity, and the risks of such phenomena, and
damage resulting therefrom, continue to exist. Japan also has
one of the world's highest population densities. A significant
percentage of the total population of Japan is concentrated in
the metropolitan areas of Tokyo, Osaka and Nagoya.
Energy. Japan has historically depended on oil for most
of its energy requirements. Almost all of its oil is imported,
the majority from the Middle East. In the past, oil prices have
had a major impact on the domestic economy, but more recently
Japan has worked to reduce its dependence on oil by encouraging
energy conservation and use of alternative fuels. In addition, a
restructuring of industry, with emphasis shifting from basic
industries to processing and assembly type industries, has
contributed to the reduction of oil consumption. However, there
is no guarantee this favorable trend will continue.
Foreign Trade. Overseas trade is important to Japan's
economy. Japan has few natural resources and must export to pay
for its imports of these basic requirements. Japan's principal
export markets are the U.S., Canada, the United Kingdom, the
Federal Republic of Germany, Australia, Korea, Taiwan, Hong Kong
and the People's Republic of China. The principal sources of its
imports are the U.S., South East Asia and the Middle East.
Because of the concentration of Japanese exports in highly
visible products such as automobiles, machine tools and
semiconductors and the large trade surpluses ensuing therefrom,
Japan has had difficult relations with its trading partners,
PAGE 78
particularly the U.S., where the trade imbalance is the greatest.
It is possible trade sanctions or other protectionist measures
could impact Japan adversely in both the short- and long-term.
Latin America
The Latin America Fund's concentration of its
investments in Latin America means the Fund will be more
dependent on the investment considerations described above and
can be expected to be more volatile than a fund which is more
broadly diversified geographically. To the extent any of the
other funds also invests in Latin America, such investments will
be subject to these same factors. Additional factors relating to
Latin America include the following:
Inflation. Most Latin American countries have
experienced, at one time or another, severe and persistent levels
of inflation, including, in some cases, hyperinflation. This
has, in turn, led to high interest rates, extreme measures by
governments to keep inflation in check and a generally
debilitating effect on economic growth. Although inflation in
many countries has lessened, there is no guarantee it will remain
at lower levels.
Political Instability. The political history of certain
Latin American countries has been characterized by political
uncertainty, intervention by the military in civilian and
economic spheres, and political corruption. Such developments,
if they were to reoccur, could reverse favorable trends toward
market and economic reform, privatization and removal of trade
barriers and result in significant disruption in securities
markets.
Foreign Currency. Certain Latin American countries may
have managed currencies which are maintained at artificial levels
to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive
and negative effect on foreign investors. For example, in late
1994 the value of the Mexican peso lost more than one-third of
its value relative to the dollar. Certain Latin American
countries also may restrict the free conversion of their currency
into foreign currencies, including the U.S. dollar. There is no
significant foreign exchange market for certain currencies and it
would, as a result, be difficult for the Fund to engage in
foreign currency transactions designed to protect the value of
PAGE 79
the Fund's interests in securities denominated in such
currencies.
Sovereign Debt. A number of Latin American countries
are among the largest debtors of developing countries. There
have been moratoria on, and reschedulings of, repayment with
respect to these debts. Such events can restrict the flexibility
of these debtor nations in the international markets and result
in the imposition of onerous conditions on their economies.
In addition to the investments described in the Fund's
prospectus, the Fund may invest in the following:
Types of Securities
Hybrid Instruments
Hybrid Instruments (a type of potentially high risk
derivative) have recently been developed and combine the elements
of futures contracts or options with those of debt, preferred
equity or a depository instrument (hereinafter "Hybrid
Instruments"). Often these Hybrid Instruments are indexed to the
price of a commodity, particular currency, or a domestic or
foreign debt or equity securities index. Hybrid Instruments may
take a variety of forms, including, but not limited to, debt
instruments with interest or principal payments or redemption
terms determined by reference to the value of a currency or
commodity or securities index at a future point in time,
preferred stock with dividend rates determined by reference to
the value of a currency, or convertible securities with the
conversion terms related to a particular commodity.
The risks of investing in Hybrid Instruments reflect a
combination of the risks from investing in securities, options,
futures and currencies, including volatility and lack of
liquidity. Reference is made to the discussion of futures,
options, and forward contracts herein for a discussion of these
risks. Further, the prices of the Hybrid Instrument and the
related commodity or currency may not move in the same direction
or at the same time. Hybrid Instruments may bear interest or pay
preferred dividends at below market (or even relatively nominal)
rates. Alternatively, Hybrid Instruments may bear interest at
above market rates but bear an increased risk of principal loss
(or gain). In addition, because the purchase and sale of Hybrid
Instruments could take place in an over-the-counter market or in
a private transaction between the Fund and the seller of the
Hybrid Instrument, the creditworthiness of the contra party to
PAGE 80
the transaction would be a risk factor which the Fund would have
to consider. Hybrid Instruments also may not be subject to
regulation of the Commodities Futures Trading Commission
("CFTC"), which generally regulates the trading of commodity
futures by U.S. persons, the SEC, which regulates the offer and
sale of securities by and to U.S. persons, or any other
governmental regulatory authority.
Illiquid or Restricted Securities
Restricted securities may be sold only in privately
negotiated transactions or in a public offering with respect to
which a registration statement is in effect under the Securities
Act of 1933 (the "1933 Act"). Where registration is required,
the Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to
sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop,
the Fund might obtain a less favorable price than prevailed when
it decided to sell. Restricted securities will be priced at fair
value as determined in accordance with procedures prescribed by
the Fund's Board of Directors. If through the appreciation of
illiquid securities or the depreciation of liquid securities, the
Fund should be in a position where more than 15% of the value of
its net assets are invested in illiquid assets, including
restricted securities, the Fund will take appropriate steps to
protect liquidity.
Notwithstanding the above, the Fund may purchase
securities which, while privately placed, are eligible for
purchase and sale under Rule 144A under the 1933 Act. This rule
permits certain qualified institutional buyers, such as the Fund,
to trade in privately placed securities even though such
securities are not registered under the 1933 Act. Price-Fleming
under the supervision of the Fund's Board of Directors, will
consider whether securities purchased under Rule 144A are
illiquid and thus subject to the Fund's restriction of investing
no more than 15% of its net assets in illiquid securities. A
determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, Price-Fleming
will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A
security. In addition, Price-Fleming could consider the (1)
frequency of trades and quotes, (2) number of dealers and
potential purchases, (3) dealer undertakings to make a market,
and (4) the nature of the security and of marketplace trades
PAGE 81
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity
of Rule 144A securities would be monitored, and if as a result of
changed conditions it is determined that a Rule 144A security is
no longer liquid, the Fund's holdings of illiquid securities
would be reviewed to determine what, if any, steps are required
to assure that the Fund does not invest more than 15% of its net
assets in illiquid securities. Investing in Rule 144A securities
could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional
buyers are unwilling to purchase such securities.
Warrants
The Fund may invest in warrants. Warrants are pure
speculation in that they have no voting rights, pay no dividends
and have no rights with respect to the assets of the corporation
issuing them. Warrants basically are options to purchase equity
securities at a specific price valid for a specific period of
time. They do not represent ownership of the securities, but
only the right to buy them. Warrants differ from call options in
that warrants are issued by the issuer of the security which may
be purchased on their exercise, whereas call options may be
written or issued by anyone. The prices of warrants do not
necessarily move parallel to the prices of the underlying
securities.
There are, of course, other types of securities that
are, or may become available, which are similar to the foregoing
and the Fund may invest in these securities.
Portfolio Management Practices
All Funds, except Foreign Equity Fund
Lending of Portfolio Securities
Securities loans are made to broker-dealers or
institutional investors or other persons, pursuant to agreements
requiring that the loans be continuously secured by collateral at
least equal at all times to the value of the securities lent
marked to market on a daily basis. The collateral received will
consist of cash, U.S. government securities, letters of credit or
such other collateral as may be permitted under its investment
program. While the securities are being lent, the Fund will
continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities, as well as interest on the
PAGE 82
investment of the collateral or a fee from the borrower. The
Fund has a right to call each loan and obtain the securities on
five business days' notice or, in connection with securities
trading on foreign markets, within such longer period of time
which coincides with the normal settlement period for purchases
and sales of such securities in such foreign markets. The Fund
will not have the right to vote securities while they are being
lent, but it will call a loan in anticipation of any important
vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in
receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should
the borrower fail financially. Loans will only be made to firms
deemed by Price-Fleming to be of good standing and will not be
made unless, in the judgment of Price-Fleming, the consideration
to be earned from such loans would justify the risk.
Other Lending/Borrowing
Subject to approval by the Securities and Exchange
Commission and certain state regulatory agencies, the Fund may
make loans to, or borrow funds from, other mutual funds sponsored
or advised by T. Rowe Price or Price-Fleming (collectively,
"Price Funds"). The Fund has no current intention of engaging in
these practices at this time.
Foreign Equity Fund
InterFund Borrowing
Subject to approval by the Securities and Exchange
Commission, the Fund may borrow funds from other mutual funds
sponsored or advised by Price-Fleming or T. Rowe Price
Associates, Inc. (collectively, "Price Funds"). The Fund has no
current intention of engaging in this practice at this time.
Repurchase Agreements
The Fund may enter into a repurchase agreement through
which an investor (such as the Fund) purchases a security (known
as the "underlying security") from a well-established securities
dealer or a bank that is a member of the Federal Reserve System.
Any such dealer or bank will be on T. Rowe Price's approved list
and have a credit rating with respect to its short-term debt of
at least A1 by Standard & Poor's Corporation, P1 by Moody's
Investors Service, Inc., or the equivalent rating by T. Rowe
Price. At that time, the bank or securities dealer agrees to
PAGE 83
repurchase the underlying security at the same price, plus
specified interest. Repurchase agreements are generally for a
short period of time, often less than a week. Repurchase
agreements which do not provide for payment within seven days
will be treated as illiquid securities. The Fund will only enter
into repurchase agreements where (i) the underlying securities
are of the type (excluding maturity limitations) which the Fund's
investment guidelines would allow it to purchase directly, (ii)
the market value of the underlying security, including interest
accrued, will be at all times equal to or exceed the value of the
repurchase agreement, and (iii) payment for the underlying
security is made only upon physical delivery or evidence of book-
entry transfer to the account of the custodian or a bank acting
as agent. In the event of a bankruptcy or other default of a
seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying security and losses,
including: (a) possible decline in the value of the underlying
security during the period while the Fund seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack
of access to income during this period; and (c) expenses of
enforcing its rights.
Options
Options are a type of potentially high-risk derivative.
Writing Covered Call Options
The Fund may write (sell) American or European style
"covered" call options and purchase options to close out options
previously written by a Fund. In writing covered call options,
the Fund expects to generate additional premium income which
should serve to enhance the Fund's total return and reduce the
effect of any price decline of the security or currency involved
in the option. Covered call options will generally be written on
securities or currencies which, in Price-Fleming's opinion, are
not expected to have any major price increases or moves in the
near future but which, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the "right to
purchase" a security or currency at a specified price (the
exercise price) at expiration of the option (European style) or
at any time until a certain date (the expiration date) (American
style). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring him to
PAGE 84
deliver the underlying security or currency against payment of
the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the
writer effects a closing purchase transaction by repurchasing an
option identical to that previously sold. To secure his
obligation to deliver the underlying security or currency in the
case of a call option, a writer is required to deposit in escrow
the underlying security or currency or other assets in accordance
with the rules of a clearing corporation.
The Fund will write only covered call options. This
means that the Fund will own the security or currency subject to
the option or an option to purchase the same underlying security
or currency, having an exercise price equal to or less than the
exercise price of the "covered" option, or will establish and
maintain with its custodian for the term of the option, an
account consisting of cash, U.S. government securities or other
liquid high-grade debt obligations having a value equal to the
fluctuating market value of the optioned securities or
currencies.
Portfolio securities or currencies on which call options
may be written will be purchased solely on the basis of
investment considerations consistent with the Fund's investment
objective. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk
(in contrast to the writing of naked or uncovered options, which
the Fund will not do), but capable of enhancing the Fund's total
return. When writing a covered call option, a Fund, in return
for the premium, gives up the opportunity for profit from a price
increase in the underlying security or currency above the
exercise price, but conversely retains the risk of loss should
the price of the security or currency decline. Unlike one who
owns securities or currencies not subject to an option, the Fund
has no control over when it may be required to sell the
underlying securities or currencies, since it may be assigned an
exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which the Fund has
written expires, the Fund will realize a gain in the amount of
the premium; however, such gain may be offset by a decline in the
market value of the underlying security or currency during the
option period. If the call option is exercised, the Fund will
realize a gain or loss from the sale of the underlying security
or currency. The Fund does not consider a security or currency
covered by a call to be "pledged" as that term is used in the
Fund's policy which limits the pledging or mortgaging of its
assets.
PAGE 85
The premium received is the market value of an option.
The premium the Fund will receive from writing a call option will
reflect, among other things, the current market price of the
underlying security or currency, the relationship of the exercise
price to such market price, the historical price volatility of
the underlying security or currency, and the length of the option
period. Once the decision to write a call option has been made,
Price-Fleming, in determining whether a particular call option
should be written on a particular security or currency, will
consider the reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will exist for those
options. The premium received by the Fund for writing covered
call options will be recorded as a liability of the Fund. This
liability will be adjusted daily to the option's current market
value, which will be the latest sale price at the time at which
the net asset value per share of the Fund is computed (close of
the New York Stock Exchange), or, in the absence of such sale,
the latest asked price. The option will be terminated upon
expiration of the option, the purchase of an identical option in
a closing transaction, or delivery of the underlying security or
currency upon the exercise of the option.
Closing transactions will be effected in order to
realize a profit on an outstanding call option, to prevent an
underlying security or currency from being called, or, to permit
the sale of the underlying security or currency. Furthermore,
effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with
either a different exercise price or expiration date or both. If
the Fund desires to sell a particular security or currency from
its portfolio on which it has written a call option, or purchased
a put option, it will seek to effect a closing transaction prior
to, or concurrently with, the sale of the security or currency.
There is, of course, no assurance that the Fund will be able to
effect such closing transactions at favorable prices. If the
Fund cannot enter into such a transaction, it may be required to
hold a security or currency that it might otherwise have sold.
When the Fund writes a covered call option, it runs the risk of
not being able to participate in the appreciation of the
underlying securities or currencies above the exercise price, as
well as the risk of being required to hold on to securities or
currencies that are depreciating in value. This could result in
higher transaction costs. The Fund will pay transaction costs in
connection with the writing of options to close out previously
written options. Such transaction costs are normally higher than
those applicable to purchases and sales of portfolio securities.
PAGE 86
Call options written by the Fund will normally have
expiration dates of less than nine months from the date written.
The exercise price of the options may be below, equal to, or
above the current market values of the underlying securities or
currencies at the time the options are written. From time to
time, the Fund may purchase an underlying security or currency
for delivery in accordance with an exercise notice of a call
option assigned to it, rather than delivering such security or
currency from its portfolio. In such cases, additional costs may
be incurred.
The Fund will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or
more than the premium received from the writing of the option.
Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying
security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by
appreciation of the underlying security or currency owned by the
Fund.
In order to comply with the requirements of several
states, the Fund will not write a covered call option if, as a
result, the aggregate market value of all portfolio securities or
currencies covering call or put options exceeds 25% of the market
value of the Fund's net assets. Should these state laws change
or should the Fund obtain a waiver of its application, the Fund
reserves the right to increase this percentage. In calculating
the 25% limit, the Fund will offset, against the value of assets
covering written calls and puts, the value of purchased calls and
puts on identical securities or currencies with identical
maturity dates.
Writing Covered Put Options
The Fund may write American or European style covered
put options and purchase options to close out options previously
written by the Fund. A put option gives the purchaser of the
option the right to sell, and the writer (seller) has the
obligation to buy, the underlying security or currency at the
exercise price during the option period (American style) or at
the expiration of the option (European style). So long as the
obligation of the writer continues, he may be assigned an
exercise notice by the broker-dealer through whom such option was
sold, requiring him to make payment of the exercise price against
delivery of the underlying security or currency. The operation
PAGE 87
of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options.
The Fund would write put options only on a covered
basis, which means that the Fund would maintain in a segregated
account cash, U.S. government securities or other liquid high-
grade debt obligations in an amount not less than the exercise
price or the Fund will own an option to sell the underlying
security or currency subject to the option having an exercise
price equal to or greater than the exercise price of the
"covered" option at all times while the put option is
outstanding. (The rules of a clearing corporation currently
require that such assets be deposited in escrow to secure payment
of the exercise price.) The Fund would generally write covered
put options in circumstances where Price-Fleming wishes to
purchase the underlying security or currency for the Fund's
portfolio at a price lower than the current market price of the
security or currency. In such event the Fund would write a put
option at an exercise price which, reduced by the premium
received on the option, reflects the lower price it is willing to
pay. Since the Fund would also receive interest on debt
securities or currencies maintained to cover the exercise price
of the option, this technique could be used to enhance current
return during periods of market uncertainty. The risk in such a
transaction would be that the market price of the underlying
security or currency would decline below the exercise price less
the premiums received. Such a decline could be substantial and
result in a significant loss to the Fund. In addition, the Fund,
because it does not own the specific securities or currencies
which it may be required to purchase in exercise of the put,
cannot benefit from appreciation, if any, with respect to such
specific securities or currencies. In order to comply with the
requirements of several states, the Fund will not write a covered
put option if, as a result, the aggregate market value of all
portfolio securities or currencies covering put or call options
exceeds 25% of the market value of the Fund's net assets. Should
these state laws change or should the Fund obtain a waiver of its
application, the Fund reserves the right to increase this
percentage. In calculating the 25% limit, the Fund will offset,
against the value of assets covering written puts and calls, the
value of purchased puts and calls on identical securities or
currencies with identical maturity dates.
Purchasing Put Options
The Fund may purchase American or European style put
options. As the holder of a put option, the Fund has the right
PAGE 88
to sell the underlying security or currency at the exercise price
at any time during the option period (American style) or at the
expiration of the option (European style). The Fund may enter
into closing sale transactions with respect to such options,
exercise them or permit them to expire. The Fund may purchase
put options for defensive purposes in order to protect against an
anticipated decline in the value of its securities or currencies.
An example of such use of put options is provided below.
The Fund may purchase a put option on an underlying
security or currency (a "protective put") owned by the Fund as a
defensive technique in order to protect against an anticipated
decline in the value of the security or currency. Such hedge
protection is provided only during the life of the put option
when the Fund, as the holder of the put option, is able to sell
the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market
price or currency's exchange value. For example, a put option
may be purchased in order to protect unrealized appreciation of a
security or currency where Price-Fleming deems it desirable to
continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any
transaction costs would reduce any capital gain otherwise
available for distribution when the security or currency is
eventually sold.
The Fund may also purchase put options at a time when
the Fund does not own the underlying security or currency. By
purchasing put options on a security or currency it does not own,
the Fund seeks to benefit from a decline in the market price of
the underlying security or currency. If the put option is not
sold when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than
the exercise price during the life of the put option, the Fund
will lose its entire investment in the put option. In order for
the purchase of a put option to be profitable, the market price
of the underlying security or currency must decline sufficiently
below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale
transaction.
To the extent required by the laws of certain states,
the Fund may not be permitted to commit more than 5% of its
assets to premiums when purchasing put and call options. Should
these state laws change or should the Fund obtain a waiver of its
application, the Fund may commit more than 5% of its assets to
premiums when purchasing call and put options. The premium paid
PAGE 89
by the Fund when purchasing a put option will be recorded as an
asset of the Fund. This asset will be adjusted daily to the
option's current market value, which will be the latest sale
price at the time at which the net asset value per share of the
Fund is computed (close of New York Stock Exchange), or, in the
absence of such sale, the latest bid price. This asset will be
terminated upon expiration of the option, the selling (writing)
of an identical option in a closing transaction, or the delivery
of the underlying security or currency upon the exercise of the
option.
Purchasing Call Options
The Fund may purchase American or European style call
options. As the holder of a call option, the Fund has the right
to purchase the underlying security or currency at the exercise
price at any time during the option period (American style) or at
the expiration of the option (European style). The Fund may
enter into closing sale transactions with respect to such
options, exercise them or permit them to expire. The Fund may
purchase call options for the purpose of increasing its current
return or avoiding tax consequences which could reduce its
current return. The Fund may also purchase call options in order
to acquire the underlying securities or currencies. Examples of
such uses of call options are provided below.
Call options may be purchased by the Fund for the
purpose of acquiring the underlying securities or currencies for
its portfolio. Utilized in this fashion, the purchase of call
options enables the Fund to acquire the securities or currencies
at the exercise price of the call option plus the premium paid.
At times the net cost of acquiring securities or currencies in
this manner may be less than the cost of acquiring the securities
or currencies directly. This technique may also be useful to the
Fund in purchasing a large block of securities or currencies that
would be more difficult to acquire by direct market purchases.
So long as it holds such a call option rather than the underlying
security or currency itself, the Fund is partially protected from
any unexpected decline in the market price of the underlying
security or currency and in such event could allow the call
option to expire, incurring a loss only to the extent of the
premium paid for the option.
To the extent required by the laws of certain states,
the Fund may not be permitted to commit more than 5% of its
assets to premiums when purchasing call and put options. Should
these state laws change or should the Fund obtain a waiver of its
PAGE 90
application, the Fund may commit more than 5% of its assets to
premiums when purchasing call and put options. The Fund may also
purchase call options on underlying securities or currencies it
owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for
this purpose where tax considerations make it inadvisable to
realize such gains through a closing purchase transaction. Call
options may also be purchased at times to avoid realizing losses.
Dealer (Over-the-Counter) Options
The Fund may engage in transactions involving dealer
options. Certain risks are specific to dealer options. While
the Fund would look to a clearing corporation to exercise
exchange-traded options, if the Fund were to purchase a dealer
option, it would rely on the dealer from whom it purchased the
option to perform if the option were exercised. Failure by the
dealer to do so would result in the loss of the premium paid by
the Fund as well as loss of the expected benefit of the
transaction.
Exchange-traded options generally have a continuous
liquid market while dealer options have none. Consequently, the
Fund will generally be able to realize the value of a dealer
option it has purchased only by exercising it or reselling it to
the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option
prior to its expiration only by entering into a closing purchase
transaction with the dealer to which the Fund originally wrote
the option. While the Fund will seek to enter into dealer
options only with dealers who will agree to and which are
expected to be capable of entering into closing transactions with
the Fund, there can be no assurance that the Fund will be able to
liquidate a dealer option at a favorable price at any time prior
to expiration. Until the Fund, as a covered dealer call option
writer, is able to effect a closing purchase transaction, it will
not be able to liquidate securities (or other assets) or
currencies used as cover until the option expires or is
exercised. In the event of insolvency of the contra party, the
Fund may be unable to liquidate a dealer option. With respect to
options written by the Fund, the inability to enter into a
closing transaction may result in material losses to the Fund.
For example, since the Fund must maintain a secured position with
respect to any call option on a security it writes, the Fund may
not sell the assets which it has segregated to secure the
position while it is obligated under the option. This
requirement may impair a Fund's ability to sell portfolio
PAGE 91
securities or currencies at a time when such sale might be
advantageous.
The Staff of the SEC has taken the position that
purchased dealer options and the assets used to secure the
written dealer options are illiquid securities. The Fund may
treat the cover used for written OTC options as liquid if the
dealer agrees that the Fund may repurchase the OTC option it has
written for a maximum price to be calculated by a predetermined
formula. In such cases, the OTC option would be considered
illiquid only to the extent the maximum repurchase price under
the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the
Fund's limitation on unmarketable securities. If the SEC changes
its position on the liquidity of dealer options, the Fund will
change its treatment of such instrument accordingly.
Futures Contracts
Futures are a type of potentially high-risk
derivative.
Transactions in Futures
The Fund may enter into futures contracts (a type of
potentially high risk derivative), including stock index,
interest rate and currency futures ("futures or futures
contracts").
Stock index futures contracts may be used to provide a
hedge for a portion of the Fund's portfolio, as a cash management
tool, or as an efficient way for Price-Fleming to implement
either an increase or decrease in portfolio market exposure in
response to changing market conditions. The Fund may, purchase
or sell futures contracts with respect to any stock index.
Nevertheless, to hedge the Fund's portfolio successfully, the
Fund must sell futures contacts with respect to indices or
subindices whose movements will have a significant correlation
with movements in the prices of the Fund's portfolio securities.
Interest rate or currency futures contracts may be used
as a hedge against changes in prevailing levels of interest rates
or currency exchange rates in order to establish more definitely
the effective return on securities or currencies held or intended
to be acquired by the Fund. In this regard, the Fund could sell
interest rate or currency futures as an offset against the effect
of expected increases in interest rates or currency exchange
PAGE 92
rates and purchase such futures as an offset against the effect
of expected declines in interest rates or currency exchange
rates.
The Fund will enter into futures contracts which are
traded on national or foreign futures exchanges, and are
standardized as to maturity date and underlying financial
instrument. Futures exchanges and trading in the United States
are regulated under the Commodity Exchange Act by the CFTC.
Futures are traded in London at the London International
Financial Futures Exchange in Paris at the MATIF and in Tokyo at
the Tokyo Stock Exchange. Although techniques other than the
sale and purchase of futures contracts could be used for the
above-referenced purposes, futures contracts offer an effective
and relatively low cost means of implementing the Fund's
objectives in these areas.
Regulatory Limitations
The Fund will engage in futures contracts and options
thereon only for bona fide hedging, yield enhancement, and risk
management purposes, in each case in accordance with rules and
regulations of the CFTC and applicable state law.
The Fund may not purchase or sell futures contracts or
related options if, with respect to positions which do not
qualify as bona fide hedging under applicable CFTC rules, the sum
of the amounts of initial margin deposits and premiums paid on
those portions would exceed 5% of the net asset value of the Fund
after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at
the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. For purposes of this policy
options on futures contracts and foreign currency options traded
on a commodities exchange will be considered "related options".
This policy may be modified by the Board of Directors without a
shareholder vote and does not limit the percentage of the Fund's
assets at risk to 5%.
In accordance with the rules of the State of California,
the Fund will apply the above 5% test without excluding the value
of initial margin and premiums paid for bona fide hedging
positions.
The Fund's use of futures contracts will not result in
leverage. Therefore, to the extent necessary, in instances
PAGE 93
involving the purchase of futures contracts or the writing of
call or put options thereon by the Fund, an amount of cash, U.S.
government securities or other liquid, high-grade debt
obligations, equal to the market value of the futures contracts
and options thereon (less any related margin deposits), will be
identified in an account with the Fund's custodian to cover (such
as owning an offsetting position) the position, or alternative
cover will be employed. Assets used as cover or held in an
identified account cannot be sold while the position in the
corresponding option or future is open, unless they are replaced
with similar assets. As a result, the commitment of a large
portion of a Fund's assets to cover or identified accounts could
impede portfolio management or the Fund's ability to meet
redemption requests or over current obligations.
If the CFTC or other regulatory authorities adopt
different (including less stringent) or additional restrictions,
the Fund would comply with such new restrictions.
Trading in Futures Contracts
A futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a
specific financial instrument (e.g., units of a stock index) for
a specified price, date, time and place designated at the time
the contract is made. Brokerage fees are incurred when a futures
contract is bought or sold and margin deposits must be
maintained. Entering into a contract to buy is commonly referred
to as buying or purchasing a contract or holding a long position.
Entering into a contract to sell is commonly referred to as
selling a contract or holding a short position.
Unlike when the Fund purchases or sells a security, no
price would be paid or received by the Fund upon the purchase or
sale of a futures contract. Upon entering into a futures
contract, and to maintain the Fund's open positions in futures
contracts, the Fund would be required to deposit with its
custodian in a segregated account in the name of the futures
broker an amount of cash, U.S. government securities, suitable
money market instruments, or liquid, high-grade debt securities,
known as "initial margin." The margin required for a particular
futures contract is set by the exchange on which the contract is
traded, and may be significantly modified from time to time by
the exchange during the term of the contract. Futures contracts
are customarily purchased and sold on margins that may range
upward from less than 5% of the value of the contract being
traded.
PAGE 94
If the price of an open futures contract changes (by
increase in the case of a sale or by decrease in the case of a
purchase) so that the loss on the futures contract reaches a
point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin.
However, if the value of a position increases because of
favorable price changes in the futures contract so that the
margin deposit exceeds the required margin, the broker will pay
the excess to the Fund.
These subsequent payments, called "variation margin," to
and from the futures broker, are made on a daily basis as the
price of the underlying assets fluctuate making the long and
short positions in the futures contract more or less valuable, a
process known as "marking to the market." The Fund expects to
earn interest income on its margin deposits.
Although certain futures contracts, by their terms,
require actual future delivery of and payment for the underlying
instruments, in practice most futures contracts are usually
closed out before the delivery date. Closing out an open futures
contract purchase or sale is effected by entering into an
offsetting futures contract sale or purchase, respectively, for
the same aggregate amount of the identical securities and the
same delivery date. If the offsetting purchase price is less
than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting
sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. The
transaction costs must also be included in these calculations.
There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the futures
contract.
For example, one contract in the Financial Times Stock
Exchange 100 Index future is a contract to buy 25 pounds sterling
multiplied by the level of the UK Financial Times 100 Share Index
on a given future date. Settlement of a stock index futures
contract may or may not be in the underlying security. If not in
the underlying security, then settlement will be made in cash,
equivalent over time to the difference between the contract price
and the actual price of the underlying asset at the time the
stock index futures contract expires.
PAGE 95
Special Risks of Transactions in Futures Contracts
Volatility and Leverage. The prices of futures
contracts are volatile and are influenced, among other things, by
actual and anticipated changes in the market and interest rates,
which in turn are affected by fiscal and monetary policies and
national and international political and economic events.
Most United States futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that
the price of a futures contract may vary either up or down from
the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular
type of futures contract, no trades may be made on that day at a
price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices
have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting
some futures traders to substantial losses.
Because of the low margin deposits required, futures
trading involves an extremely high degree of leverage. As a
result, a relatively small price movement in a futures contract
may result in immediate and substantial loss, as well as gain, to
the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract
would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then
closed out. A 15% decrease would result in a loss equal to 150%
of the original margin deposit, if the contract were closed out.
Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in
the underlying financial instrument and sold it after the
decline. Furthermore, in the case of a futures contract
purchase, in order to be certain that the Fund has sufficient
assets to satisfy its obligations under a futures contract, the
Fund earmarks to the futures contract money market instruments
equal in value to the current value of the underlying instrument
less the margin deposit.
PAGE 96
Liquidity. The Fund may elect to close some or all of
its futures positions at any time prior to their expiration. The
Fund would do so to reduce exposure represented by long futures
positions or short futures positions. The Fund may close its
positions by taking opposite positions which would operate to
terminate the Fund's position in the futures contracts. Final
determinations of variation margin would then be made, additional
cash would be required to be paid by or released to the Fund, and
the Fund would realize a loss or a gain.
Futures contracts may be closed out only on the exchange
or board of trade where the contracts were initially traded.
Although the Fund intends to purchase or sell futures contracts
only on exchanges or boards of trade where there appears to be an
active market, there is no assurance that a liquid market on an
exchange or board of trade will exist for any particular contract
at any particular time. In such event, it might not be possible
to close a futures contract, and in the event of adverse price
movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures
contracts have been used to hedge the underlying instruments, the
Fund would continue to hold the underlying instruments subject to
the hedge until the futures contracts could be terminated. In
such circumstances, an increase in the price of underlying
instruments, if any, might partially or completely offset losses
on the futures contract. However, as described below, there is
no guarantee that the price of the underlying instruments will,
in fact, correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures
contract.
Hedging Risk. A decision of whether, when, and how to
hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected
market behavior, market or interest rate trends. There are
several risks in connection with the use by the Fund of futures
contracts as a hedging device. One risk arises because of the
imperfect correlation between movements in the prices of the
futures contracts and movements in the prices of the underlying
instruments which are the subject of the hedge. Price-Fleming
will, however, attempt to reduce this risk by entering into
futures contracts whose movements, in its judgment, will have a
significant correlation with movements in the prices of the
Fund's underlying instruments sought to be hedged.
PAGE 97
Successful use of futures contracts by the Fund for
hedging purposes is also subject to Price-Fleming's ability to
correctly predict movements in the direction of the market. It
is possible that, when the Fund has sold futures to hedge its
portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the
underlying instruments held in the Fund's portfolio might
decline. If this were to occur, the Fund would lose money on the
futures and also would experience a decline in value in its
underlying instruments. However, while this might occur to a
certain degree, Price-Fleming believes that over time the value
of the Fund's portfolio will tend to move in the same direction
as the market indices used to hedge the portfolio. It is also
possible that if the Fund were to hedge against the possibility
of a decline in the market (adversely affecting the underlying
instruments held in its portfolio) and prices instead increased,
the Fund would lose part or all of the benefit of increased value
of those underlying instruments that it has hedged, because it
would have offsetting losses in its futures positions. In
addition, in such situations, if the Fund had insufficient cash,
it might have to sell underlying instruments to meet daily
variation margin requirements. Such sales of underlying
instruments might be, but would not necessarily be, at increased
prices (which would reflect the rising market). The Fund might
have to sell underlying instruments at a time when it would be
disadvantageous to do so.
In addition to the possibility that there might be an
imperfect correlation, or no correlation at all, between price
movements in the futures contracts and the portion of the
portfolio being hedged, the price movements of futures contracts
might not correlate perfectly with price movements in the
underlying instruments due to certain market distortions. First,
all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors might close
futures contracts through offsetting transactions, which could
distort the normal relationship between the underlying
instruments and futures markets. Second, the margin requirements
in the futures market are less onerous than margin requirements
in the securities markets, and as a result the futures market
might attract more speculators than the securities markets do.
Increased participation by speculators in the futures market
might also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and also
because of the imperfect correlation between price movements in
the underlying instruments and movements in the prices of futures
PAGE 98
contracts, even a correct forecast of general market trends by
Price-Fleming might not result in a successful hedging
transaction over a very short time period.
Options on Futures Contracts
The Fund may purchase and sell options on the same types
of futures in which it may invest.
Options on futures are similar to options on underlying
instruments except that options on futures give the purchaser the
right, in return for the premium paid, to assume a position in a
futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase
or sell the futures contract, at a specified exercise price at
any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the
option to the holder of the option will be accompanied by the
delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds (in the case
of a call) or is less than (in the case of a put) the exercise
price of the option on the futures contract. Purchasers of
options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
As an alternative to writing or purchasing call and put
options on stock index futures, the Fund may write or purchase
call and put options on stock indices. Such options would be
used in a manner similar to the use of options on futures
contracts. From time to time, a single order to purchase or sell
futures contracts (or options thereon) may be made on behalf of
the Fund and other T. Rowe Price Funds. Such aggregated orders
would be allocated among the Funds and the other T. Rowe Price
Funds in a fair and non-discriminatory manner.
Special Risks of Transactions in Options on Futures Contracts
The risks described under "Special Risks of Transactions
on Futures Contracts" are substantially the same as the risks of
using options on futures. In addition, where the Fund seeks to
close out an option position by writing or buying an offsetting
option covering the same index, underlying instrument or contract
and having the same exercise price and expiration date, its
ability to establish and close out positions on such options will
be subject to the maintenance of a liquid secondary market.
Reasons for the absence of a liquid secondary market on an
PAGE 99
exchange include the following: (i) there may be insufficient
trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing
transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or
series of options, or underlying instruments; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
exchange (or in the class or series of options) would cease to
exist, although outstanding options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms. There is no assurance that higher than anticipated
trading activity or other unforeseen events might not, at times,
render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by
an exchange of special procedures which may interfere with the
timely execution of customers' orders.
Additional Futures and Options Contracts
Although the Fund has no current intention of engaging
in futures or options transactions other than those described
above, it reserves the right to do so. Such futures and options
trading might involve risks which differ from those involved in
the futures and options described above.
Foreign Futures and Options
Participation in foreign futures and foreign options
transactions involves the execution and clearing of trades on or
subject to the rules of a foreign board of trade. Neither the
National Futures Association nor any domestic exchange regulates
activities of any foreign boards of trade, including the
execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of
trade or any applicable foreign law. This is true even if the
exchange is formally linked to a domestic market so that a
position taken on the market may be liquidated by a transaction
on another market. Moreover, such laws or regulations will vary
depending on the foreign country in which the foreign futures or
foreign options transaction occurs. For these reasons, customers
PAGE 100
who trade foreign futures or foreign options contracts, it may
not be afforded certain of the protective measures provided by
the Commodity Exchange Act, the CFTC's regulations and the rules
of the National Futures Association and any domestic exchange,
including the right to use reparations proceedings before the
Commission and arbitration proceedings provided by the National
Futures Association or any domestic futures exchange. In
particular, funds received from the Fund for foreign futures or
foreign options transactions may not be provided the same
protections as funds received in respect of transactions on
United States futures exchanges. In addition, the price of any
foreign futures or foreign options contract and, therefore, the
potential profit and loss thereon may be affected by any variance
in the foreign exchange rate between the time the Fund's order is
placed and the time it is liquidated, offset or exercised.
Foreign Currency Transactions
A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are principally traded in the
interbank market conducted directly between currency traders
(usually large, commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions
are charged at any stage for trades.
The Fund may enter into forward contracts for a variety
of purposes in connection with the management of the foreign
securities portion of its portfolio. The Fund's use of such
contracts would include, but not be limited to, the following:
First, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency,
it may desire to "lock in" the U.S. dollar price of the security.
By entering into a forward contract for the purchase or sale, for
a fixed amount of dollars, of the amount of foreign currency
involved in the underlying security transactions, the Fund will
be able to protect itself against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date
the security is purchased or sold and the date on which payment
is made or received.
Second, when Price-Fleming believes that one currency
may experience a substantial movement against another currency,
PAGE 101
including the U.S. dollar, it may enter into a forward contract
to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency. Alternatively,
where appropriate, the Fund may hedge all or part of its foreign
currency exposure through the use of a basket of currencies or a
proxy currency where such currency or currencies act as an
effective proxy for other currencies. In such a case, the Fund
may enter into a forward contract where the amount of the foreign
currency to be sold exceeds the value of the securities
denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into
separate forward contracts for each currency held in the Fund.
The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible
since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered
into and the date it matures. The projection of short-term
currency market movement is extremely difficult, and the
successful execution of a short-term hedging strategy is highly
uncertain. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the
longer term investment decisions made with regard to overall
diversification strategies. However, Price-Fleming believes that
it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of
the Fund will be served.
The Fund may enter into forward contacts for any other
purpose consistent with the Fund's investment objective and
program. However, the Fund will not enter into a forward
contract, or maintain exposure to any such contract(s), if the
amount of foreign currency required to be delivered thereunder
would exceed the Fund's holdings of liquid, high-grade debt
securities and currency available for cover of the forward
contract(s). In determining the amount to be delivered under a
contract, the Fund may net offsetting positions.
At the maturity of a forward contract, the Fund may sell
the portfolio security and make delivery of the foreign currency,
or it may retain the security and either extend the maturity of
the forward contract (by "rolling" that contract forward) or may
initiate a new forward contract.
If the Fund retains the portfolio security and engages
in an offsetting transaction, the Fund will incur a gain or a
PAGE 102
loss (as described below) to the extent that there has been
movement in forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward
prices decline during the period between the Fund's entering into
a forward contract for the sale of a foreign currency and the
date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent
the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to purchase. Should forward prices
increase, the Fund will suffer a loss to the extent of the price
of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange
contracts will generally be limited to the transactions described
above. However, the Fund reserves the right to enter into
forward foreign currency contracts for different purposes and
under different circumstances. Of course, the Fund is not
required to enter into forward contracts with regard to its
foreign currency-denominated securities and will not do so unless
deemed appropriate by Price-Fleming. It also should be realized
that this method of hedging against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange at a
future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time, they tend to limit any
potential gain which might result from an increase in the value
of that currency.
Although the Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will
do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Fund at one
rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
PAGE 103
Federal Tax Treatment of Options, Futures Contracts and Forward
Foreign Exchange Contracts
The Fund may enter into certain option, futures, and
forward foreign exchange contracts, including options and futures
on currencies, which may be treated as Section 1256 contracts or
straddles.
Transactions which are considered Section 1256 contracts
will be considered to have been closed at the end of the Fund's
fiscal year and any gains or losses will be recognized for tax
purposes at that time. Such gains or losses from the normal
closing or settlement of such transactions will be characterized
as 60% long-term capital gain or loss and 40% short-term capital
gain or loss regardless of the holding period of the instrument.
The Fund will be required to distribute net gains on such
transactions to shareholders even though it may not have closed
the transaction and received cash to pay such distributions.
Options, futures and forward foreign exchange contracts,
including options and futures on currencies, which offset a
foreign dollar denominated bond or currency position may be
considered straddles for tax purposes, in which case a loss on
any position in a straddle will be subject to deferral to the
extent of unrealized gain in an offsetting position. The holding
period of the securities or currencies comprising the straddle
will be deemed not to begin until the straddle is terminated.
For securities offsetting a purchased put, this adjustment of the
holding period may increase the gain from sales of securities
held less than three months. The holding period of the security
offsetting an "in-the-money qualified covered call" option on an
equity security will not include the period of time the option is
outstanding.
Losses on written covered calls and purchased puts on
securities, excluding certain "qualified covered call" options on
equity securities, may be long-term capital loss, if the security
covering the option was held for more than twelve months prior to
the writing of the option.
In order for the Fund to continue to qualify for federal
income tax treatment as a regulated investment company, at least
90% of its gross income for a taxable year must be derived from
qualifying income; i.e., dividends, interest, income derived from
loans of securities, and gains from the sale of securities or
currencies. Pending tax regulations could limit the extent that
net gain realized from option, futures or foreign forward
PAGE 104
exchange contracts on currencies is qualifying income for
purposes of the 90% requirement. In addition, gains realized on
the sale or other disposition of securities, including option,
futures or foreign forward exchange contracts on securities or
securities indexes and, in some cases, currencies, held for less
than three months, must be limited to less than 30% of the Fund's
annual gross income. In order to avoid realizing excessive gains
on securities or currencies held less than three months, the Fund
may be required to defer the closing out of option, futures or
foreign forward exchange contracts beyond the time when it would
otherwise be advantageous to do so. It is anticipated that
unrealized gains on Section 1256 option, futures and foreign
forward exchange contracts, which have been open for less than
three months as of the end of the Fund's fiscal year and which
are recognized for tax purposes, will not be considered gains on
securities or currencies held less than three months for purposes
of the 30% test.
INVESTMENT RESTRICTIONS
Fundamental policies of each Fund may not be changed
without the approval of the lesser of (1) 67% of a Fund's shares
present at a meeting of shareholders if the holders of more than
50% of the outstanding shares are present in person or by proxy
or (2) more than 50% of a Fund's outstanding shares. Other
restrictions, in the form of operating policies, are subject to
change by the Funds' Board of Directors without shareholder
approval. Any investment restriction which involves a maximum
percentage of securities or assets shall not be considered to be
violated unless an excess over the percentage occurs immediately
after, and is caused by, an acquisition of securities or assets
of, or borrowings by, the Fund.
Fundamental Policies
As a matter of fundamental policy, the Fund may not:
(1) Borrowing. Borrow money except that the Fund may
(i) borrow for non-leveraging, temporary or
emergency purposes and (ii) engage in reverse
repurchase agreements and make other investments or
engage in other transactions, which may involve a
borrowing, in a manner consistent with the Fund's
investment objective and program, provided that the
combination of (i) and (ii) shall not exceed 33
1/3% of the value of the Fund's total assets
PAGE 105
(including the amount borrowed) less liabilities
(other than borrowings) or such other percentage
permitted by law. Any borrowings which come to
exceed this amount will be reduced in accordance
with applicable law. The Fund may borrow from
banks, other Price Funds or other persons to the
extent permitted by applicable law.
(2) Commodities. Purchase or sell physical
commodities; except that it may enter into futures
contracts and options thereon;
(3) Industry Concentration. Purchase the securities of
any issuer if, as a result, more than 25% of the
value of the Fund's total assets would be invested
in the securities of issuers having their principal
business activities in the same industry;
(4) Loans. Make loans, although the Fund may (i) lend
portfolio securities and participate in an
interfund lending program with other Price Funds
provided that no such loan may be made if, as a
result, the aggregate of such loans would exceed 33
1/3% of the value of the Fund's total assets;
(ii) purchase money market securities and enter
into repurchase agreements; and (iii) acquire
publicly-distributed or privately-placed debt
securities and purchase debt;
Foreign Equity Fund
Loans. Make loans, although the Fund may (i)
participate in an interfund lending program with
other Price Funds provided that no such loan may be
made if, as a result, the aggregate of such loans
would exceed 33 1/3% of the value of the Fund's
total assets; (ii) purchase money market securities
and enter into repurchase agreements; and (iii)
acquire publicly- distributed or privately-placed
debt securities and purchase debt;
All Funds
(5) Real Estate. Purchase or sell real estate unless
acquired as a result of ownership of securities or
other instruments (but this shall not prevent the
Fund from investing in securities or other
PAGE 106
instruments backed by real estate or securities of
companies engaged in the real estate business);
(6) Senior Securities. Issue senior securities except
in compliance with the Investment Company Act of
1940; or
(7) Underwriting. Underwrite securities issued by
other persons, except to the extent that the Fund
may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection
with the purchase and sale of its portfolio
securities in the ordinary course of pursuing its
investment program.
For All Funds, Except Latin America Fund
(8) Percent Limit on Assets Invested in Any One Issuer.
Purchase a security if, as a result, with respect
to 75% of the value of a Fund's total assets, more
than 5% of the value of its total assets would be
invested in the securities of any one issuer (other
than obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities); and
(9) Percent Limit on Share Ownership of Any One Issuer.
Purchase a security if, as a result, with respect
to 75% of the value of a Fund's total assets, more
than 10% of the outstanding voting securities of
any issuer would be held by the Fund (other than
obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities).
NOTES
The following notes should be read in connection
with the above-described fundamental policies. The
notes are not fundamental policies.
With respect to investment restrictions (1) and
(4), the Fund will not borrow from or lend to any
other T. Rowe Price Fund (defined as any other
mutual fund managed be for which T. Rowe Price acts
as adviser) unless each Fund applies for and
receives an exemptive order from the SEC or the SEC
issues rules permitting such transactions. The
Fund has no current intention of engaging in any
PAGE 107
such activity and there is no assurance the SEC
would grant any order requested by the Fund or
promulgate any rules allowing the transactions.
With respect to investment restriction (2), the
Fund does not consider currency contracts or hybrid
investments to be commodities.
For purposes of investment restriction (3), U.S.,
state or local governments, or related agencies or
instrumentalities, are not considered an industry.
Industries are determined by reference to the
classifications of industries set forth in the
Fund's semi-annual and annual reports.
For purposes of investment restriction (4), the
Fund will consider the acquisition of a debt
security to include the execution of a note or
other evidence of an extension of credit with a
term of more than nine months.
Operating Policies
As a matter of operating policy, the Fund may not:
(1) Borrowing. The Fund will not purchase additional
securities when money borrowed exceeds 5% of its
total assets;
(2) Control of Portfolio Companies. Invest in
companies for the purpose of exercising management
or control;
(3) Futures Contracts. Purchase a futures contract or
an option thereon if, with respect to positions in
futures or options on futures which do not
represent bona fide hedging, the aggregate initial
margin and premiums on such positions would exceed
5% of the Fund's net asset value.
(4) Illiquid Securities. Purchase illiquid securities
and securities of unseasoned issuers if, as a
result, more than 15% of its net assets would be
invested in such securities, provided that the
Fund will not invest more than 5% of its total
assets in restricted securities and not more than
5% in securities of unseasoned issuers.
PAGE 108
Securities eligible for resale under Rule 144A of
the Securities Act of 1933 are not included in the
5% limitation but are subject to the 15%
limitation;
(5) Investment Companies. Purchase securities of
open-end or closed-end investment companies except
in compliance with the Investment Company Act of
1940 and applicable state law. Duplicate fees may
result from such purchases;
(6) Margin. Purchase securities on margin, except (i)
for use of short-term credit necessary for
clearance of purchases of portfolio securities and
(ii) it may make margin deposits in connection
with futures contracts or other permissible
investments;
(7) Mortgaging. Mortgage, pledge, hypothecate or, in
any manner, transfer any security owned by the
Fund as security for indebtedness except as may be
necessary in connection with permissible
borrowings or investments and then such
mortgaging, pledging or hypothecating may not
exceed 33 1/3% of the Fund's total assets at the
time of borrowing or investment;
(8) Oil and Gas Programs. Purchase participations or
other direct interests or enter into leases with
respect to, oil, gas, or other mineral exploration
or development programs;
(9) Options, Etc. Invest in puts, calls, straddles,
spreads, or any combination thereof, except to the
extent permitted by the prospectus and Statement
of Additional Information;
(10) Ownership of Portfolio Securities by Officers and
Directors. Purchase or retain the securities of
any issuer if, those officers and directors of the
Fund, and of its investment manager, who each own
beneficially more than .5% of the outstanding
securities of such issuer, together own
beneficially more than 5% of such securities;
(11) Short Sales. Effect short sales of securities;
PAGE 109
(12) Unseasoned Issuers. Purchase a security (other
than obligations issued or guaranteed by the U.S.,
any state or local government, or any foreign
government, their agencies or instrumentalities)
if, as a result, more than 5% of the value of the
Fund's total assets would be invested in the
securities issuers which at the time of purchase
had been in operation for less than three years
(for this purpose, the period of operation of any
issuer shall include the period of operation of
any predecessor or unconditional guarantor of such
issuer). This restriction does not apply to
securities of pooled investment vehicles or
mortgage or asset-backed securities; or
(13) Warrants. Invest in warrants if, as a result
thereof, more than 2% of the value of the net
assets of the Fund would be invested in warrants
which are not listed on the New York Stock
Exchange, the American Stock Exchange, or a
recognized foreign exchange, or more than 5% of
the value of the net assets of the Fund would be
invested in warrants whether or not so listed.
For purposes of these percentage limitations, the
warrants will be valued at the lower of cost or
market and warrants acquired by the Funds in units
or attached to securities may be deemed to be
without value.
In addition to the restrictions described above, some
foreign countries limit, or prohibit, all direct foreign
investment in the securities of their companies. However, the
governments of some countries have authorized the organization of
investment funds to permit indirect foreign investment in such
securities. For tax purposes these funds may be known as Passive
Foreign Investment Companies. Each Fund is subject to certain
percentage limitations under the 1940 Act and certain states
relating to the purchase of securities of investment companies,
and may be subject to the limitation that no more than 10% of the
value of the Fund's total assets may be invested in such
securities.
PAGE 110
INVESTMENT PERFORMANCE
Total Return Performance
Each Fund's calculation of total return performance
includes the reinvestment of all capital gain distributions and
income dividends for the period or periods indicated, without
regard to tax consequences to a shareholder in each Fund. Total
return is calculated as the percentage change between the
beginning value of a static account in each Fund and the ending
value of that account measured by the then current net asset
value, including all shares acquired through reinvestment of
income and capital gains dividends. The results shown are
historical and should not be considered indicative of the future
performance of each Fund. Each average annual compound rate of
return is derived from the cumulative performance of each Fund
over the time period specified. The annual compound rate of
return for each Fund over any other period of time will vary from
the average.
Cumulative Performance Percentage Change
1 Yr. 5 Yrs. 10 Yrs. Since
Ended Ended Ended Inception-
12/31/94 12/31/94 12/31/94 12/31/94
International Stock Fund
T. Rowe Price International
Stock Fund -0.76% 41.69% 423.20% 672.93%
(5/9/80)++
S&P 500 1.32 51.74 281.99 603.09+++
Dow Jones Industrial
Average 4.98 63.03 349.26 704.86+++
Lipper International Funds
Average -0.71 31.13 328.06 482.54
EAFE Index 8.06 9.42 418.72 648.22+++
CPI 2.95 19.03 42.55 81.50
Financial Times Actuaries
World Index++++ 5.83 22.17 N/A N/A
PAGE 111
International Discovery Fund
T. Rowe Price International
Discovery Fund -7.63% 22.51% 73.65%
(12/30/88)
S&P 500 1.32 51.74 99.82+++
Dow Jones Industrial
Average 4.98 63.03 115.46+++
Lipper International Small
Co. Funds Average -4.09 N/A N/A
EAFE Index 8.06 9.42 21.23+++
CPI 2.95 19.03 24.56+++
European Stock Fund
T. Rowe Price European
Stock Fund 4.06% 29.93%
(2/28/90)
S&P 500 1.32 60.59
Dow Jones Industrial
Average 4.98 69.73
Lipper European Region
Funds Average 1.22 20.59
EAFE Index 8.06 22.12
CPI 2.95 17.27
Japan Fund
T. Rowe Price Japan Fund 15.09% 20.22%
(12/30/91)
Morgan Stanley Pacific
Basin Index 13.03 25.72+++
Morgan Stanley Capital
International World
Index 5.58 23.94+++
EAFE Index 8.06 26.64+++
S&P 500 1.32 20.03+++
Topix Index 21.26 13.91+++
Nikkei Average 26.67 7.48+++
Morgan Stanley Japan
Index 21.62 20.32+++
Lipper Japanese Funds
Average 15.39 13.01+++
PAGE 112
Latin America Fund
T. Rowe Price Latin
America Fund -15.92% -15.50%
(12/29/93)
S&P 500 1.32 1.32+++
New Asia Fund
T. Rowe Price New Asia
Fund -19.15% 94.88%
(9/28/90)
S&P 500 1.32 70.64+++
Dow Jones Industrial
Average 4.99 77.78+++
Lipper Pacific Region
Funds Average -12.45 77.00+++
EAFE Index 8.06 57.61+++
CPI 2.95 13.11+++
Foreign Equity Fund
Foreign Equity Fund -0.88% 42.30% 51.71%
(9/7/89)
S&P 500 1.32 51.74 54.24+++
Dow Jones Industrial
Average 4.98 63.03 66.07+++
Lipper International Funds
Average -0.71 31.13 42.60+++
EAFE Index 8.06 9.42 19.68+++
CPI 2.95 19.03 20.47+++
Financial Times Actuaries
Euro-Pacific Index 9.29 7.44 18.27+++
Average Annual Compound Rates of Return
1 Yr. 5 Yrs. 10 Yrs. Since
Ended Ended Ended Inception-
12/31/94 12/31/94 12/31/94 12/31/94
International Stock Fund
T. Rowe Price International
Stock Fund -0.76% 7.22% 18.00% 14.98%
(5/9/80)
PAGE 113
S&P 500 1.32 8.70 14.34 14.39+++
Dow Jones Industrial
Average 4.98 10.27 16.21 15.46+++
Lipper International Funds
Average -0.71 5.35 15.24 12.60+++
EAFE Index 8.06 1.82 17.89 14.88+++
CPI 2.95 3.55 3.61 4.20+++
Financial Times Actuaries
World Index++++ 5.83 4.09 N/A N/A
International Discovery Fund
T. Rowe Price International
Discovery Fund -7.63% 4.14% 9.63%
(12/30/88)
S&P 500 1.32 8.70 12.23+++
Dow Jones Industrial
Average 4.98 10.27 13.65+++
Lipper International Small
Co. Funds Average -4.09 N/A N/A
EAFE Index 8.06 1.82 3.26+++
CPI 2.95 3.55 3.73+++
Morgan Stanley Capital
International World Index 5.58 4.24 6.30+++
European Stock Fund
T. Rowe Price European
Stock Fund 4.06% 5.56%
(2/28/90)
S&P 500 1.32 10.29
Dow Jones Industrial
Average 4.98 11.55
Lipper European Region
Funds Average 1.22 3.77
EAFE Index 8.06 4.22
CPI 2.95 3.35
Morgan Stanley Capital
International Europe
Index 2.66 7.80
Japan Fund
T. Rowe Price Japan Fund 15.09% 6.31%
(12/20/91)
Morgan Stanley Pacific
Basin Index 13.03 7.93+++
PAGE 114
Morgan Stanley Capital
International World
Index 5.58 7.42+++
EAFE Index 8.06 8.19+++
S&P 500 1.32 6.28+++
Topix Index 21.26 4.44+++
Nikkei Average 26.67 2.43+++
Morgan Stanley Japan
Index 21.62 6.35+++
Lipper Japanese Funds
Average 15.39 4.15+++
Latin America Fund
T. Rowe Price Latin
America Fund -15.92% -15.42%
(12/29/93)
S&P 500 1.32 1.32+++
New Asia Fund
T. Rowe Price New Asia
Fund -19.15% 16.97%
(9/28/90)
S&P 500 1.32 13.39+++
Dow Jones Industrial
Average 4.98 14.49+++
Lipper Pacific Region
Funds Average -12.45 14.12+++
EAFE Index 8.06 11.29+++
CPI 2.95 2.94+++
Financial Times
Actuaries Pacific
Excluding Japan -14.67 21.66+++
Foreign Equity Fund
Foreign Equity Fund -0.88% 7.31% 8.16%
(9/7/89)
S&P 500 1.32 8.70 8.46+++
Dow Jones Industrial
Average 4.98 10.27 9.98+++
Lipper International Funds
Average -0.71 5.35 6.64+++
EAFE Index 8.06 1.82 3.44+++
CPI 2.95 3.55 3.55+++
PAGE 115
Financial Times Actuaries
Euro-Pacific Index 9.29 1.45 3.20+++
Japan Fund
One reason investors may find the Japanese market
attractive is the proven competitiveness of Japanese companies
within their industries. Due to a commitment to capital
investment, technological expertise, and a highly productive
workforce, Japanese companies dominate many of the world's key
industries. Shown below are the number of Japanese companies
within the top ten largest companies of the world+ for the
industries indicated:
--- 9 of the top 10 banks
--- 7 of the top 10 appliance/household durable
companies
--- 8 of the top 10 financial service companies
--- 7 of the top 10 steel companies
--- 4 of the top 10 automobile companies
+ Based on total market capitalization in U.S. dollars.
Source: Morgan Stanley Capital International
Growth of Real GNP in the OECD area
Annual Percentage Change
Average
1976-85 1986 1987 1988 1989 1990 1991 1992 1993
_______ ____ ____ ____ ____ ____ ____ ____ ____
United States 2.9 2.9 3.1 3.9 2.5 1.2 -0.6 2.3 3.1
Japan 4.2 2.6 4.1 6.2 4.7 4.8 4.3 1.1 0.1
Source: World Economic Outlook, IMF, October 1994
New Asia Fund
Price-Fleming believes that foreign economies have
performed well, and emerging economies are significantly better
than the world average, as shown in the chart below.
PAGE 116
GDP Growth Rates
________________
Average
1976-85 1986 1987 1988 1989 1990 1991 1992 1993
_______ ____ ____ ____ ____ ____ ____ ____ ____
World 3.4 3.6 4.0 4.7 3.4 2.2 0.9 1.7 2.3
Industrialized 2.8 2.9 3.2 4.4 3.3 2.4 0.8 1.5 1.3
Developing (Asia)6.4 6.7 8.0 9.2 5.7 5.8 6.2 8.2 8.5
Source: World Economic Outlook, IMF, October 1994
The EAFE Index (Capital International Europe, Australia,
Far East Index) is a generally accepted benchmark for performance
of major overseas markets.
Other Sources of Information
From time to time, in reports and promotional
literature: (1) each Fund's total return performance or P/E ratio
may be compared to any one or combination of the following: (i)
the Standard & Poor's 500 Stock Index and Dow Jones Industrial
Average so that you may compare the Fund's results with those of
a group of unmanaged securities widely regarded by investors as
representative of the U.S. stock market in general; (ii) other
groups of mutual funds, including T. Rowe Price Funds, tracked
by: (A) Lipper Analytical Services, Inc., a widely used
independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets which includes the
Lipper Pacific Region Average which tracks the average
performance of funds which concentrate investments in equity
securities whose primary trading markets or operations are in the
Western Pacific basin region, or a single country within this
region; (B) Morningstar, Inc., another widely used independent
research firm which rates mutual funds by overall performance,
investment objective, and assets; or (C) other financial or
business publications, such as Business Week, Money Magazine,
Forbes and Barron's, which provide similar information; (iii) The
Financial Times (a London based international financial
newspaper)-Actuaries World Indices, including Europe and sub
indices comprising this Index (a wide range of comprehensive
measures of stock price performance for the major stock markets
as well as for regional areas, broad economic sectors and
industry groups); (iv) Morgan Stanley Capital International
Indices, including the EAFE Index, Pacific Basin Index, Japan
Index, U.K. index and Pacific Ex Japan Index which is a widely-
PAGE 117
recognized series of indices in international market performance;
(v) Hoarve Govette Small Cap Index and Datastream, as sources for
United Kingdom Small Cap Stocks; (vi) the International Finance
Corporation (an affiliate of the World Bank established to
encourage economic development in less developed countries),
World Bank, OECD (Organization for Economic Co-Operation and
Development) and IMF (International Monetary Fund) as a source of
economic statistics; (vii) the Nikkei Average, a generally
accepted benchmark for performance of the Japanese stock market;
(viii) indices of stocks comparable to those in which each Fund
invests including the Topix Index, which reflects the performance
of the First Section of the Tokyo Stock Exchange and the Japan
Small-Tokyo Stock Exchange Section 2; (ix) the Wilshire Small
Growth Index, as a source for U.S. small company average annual
returns; (x) IFCI Composite 100, IFCI Latin America 100, IFCI
Asia 100, and the IFCI Europe/Mideast 100 may each be used as a
source to represent total return on an investment of $100 in each
index at various points in time; and (xi) the performance of U.S.
government and corporate bonds, notes and bills. (The purpose of
these comparisons would be to illustrate historical trends in
different market sectors so as to allow potential investors to
compare different investment strategies.); (2) the Consumer Price
Index (measure for inflation) may be used to assess the real rate
of return from an investment in each Fund; (3) other U.S. or
foreign government statistics such as GNP, and net import and
export figures derived from governmental publications, e.g. The
Survey of Current Business, may be used to illustrate investment
attributes of the Fund or the general economic, business,
investment, or financial environment in which the Fund operates;
(4) the effect of tax-deferred compounding on each Fund's
investment returns, or on returns in general, may be illustrated
by graphs, charts, etc. where such graphs or charts would
compare, at various points in time, the return from an investment
in each Fund (or returns in general) on a tax-deferred basis
(assuming reinvestment of capital gains and dividends and
assuming one or more tax rates) with the return on a taxable
basis; and (5) the sectors or industries in which each Fund
invests may be compared to relevant indices or surveys (e.g. S&P
Industry Surveys) in order to evaluate each Fund's historical
performance or current or potential value with respect to the
particular industry or sector. In connection with (4) above,
information derived from the following chart may be used:
IRA Versus Taxable Return
Assuming 9% annual rate of return, $2,000 annual
contribution and 28% tax bracket.
PAGE 118
Year Taxable Tax Deferred
____ _______ ____________
10 $ 28,700 $ 33,100
15 51,400 64,000
20 82,500 111,500
25 125,100 184,600
30 183,300 297,200
IRAs
An IRA is a long-term investment whose objective is to
accumulate personal savings for retirement. Due to the long-term
nature of the investment, even slight differences in performance
will result in significantly different assets at retirement.
Mutual funds, with their diversity of choice, can be used for IRA
investments. Generally, individuals may need to adjust their
underlying IRA investments as their time to retirement and
tolerance for risk changes.
Other Features and Benefits
Each Fund is a member of the T. Rowe Price Family of
Funds and may help investors achieve various long-term investment
goals, such as investing money for retirement, saving for a down
payment on a home, or paying college costs. To explain how the
Fund could be used to assist investors in planning for these
goals and to illustrate basic principles of investing, various
worksheets and guides prepared by T. Rowe Price Associates, Inc.
("T. Rowe Price") and/or T. Rowe Price Investment Services, Inc.
may be made available. These currently include: the Asset Mix
Worksheet which is designed to show shareholders how to reduce
their investment risk by developing a diversified investment
plan: the College Planning Guide which discusses various aspects
of financial planning to meet college expenses and assists
parents in projecting the costs of a college education for their
children; the Retirement Planning Kit (also available in a PC
version) which includes a detailed workbook to determine how much
money you may need for retirement and suggests how you might
invest to reach your goal; the Retirees Financial Guide which
includes a detailed workbook to determine how much money you can
afford to spend and still preserve your purchasing power and
suggest how you might invest to reach your goal; and Tax
Considerations for Investors discusses the tax advantages of
annuities and municipal bonds and now to access whether they are
suitable for your portfolio, reviews pros and cons of placing
PAGE 119
assets in a gift to minors account and summarizes the benefits
and types of tax-deferred retirement plans currently available;
and the Personal Strategy Planner simplifies investment decision
making by helping investors define personal financial goals,
establish length of time the investor intends to invest,
determine risk "comfort zone" and select diversified investment
risk. From time to time, other worksheets and guides may be made
available as well. Of course, an investment in the Fund cannot
guarantee that such goals will be met.
To assist investors in understanding the different
returns and risk characteristics of various investments, the
aforementioned guides will include presentation of historical
returns of various investments using published indices. An
example of this is shown on the next page.
Historical Returns for Different Investments
Annualized returns for periods ended 12/31/94
50 years 20 years 10 years 5 years
Small-Company Stocks 14.4% 20.3% 11.1% 11.8%
Large-Company Stocks 11.9 14.6 14.4 8.7
Foreign Stocks N/A 16.3 17.9 1.8
Long-Term Corporate Bonds 5.3 10.0 11.6 8.4
Intermediate-Term U.S.
Gov't. Bonds 5.6 9.3 9.4 7.5
Treasury Bills 4.7 7.3 5.8 4.7
U.S. Inflation 4.5 5.5 3.6 3.5
Sources: Ibbotson Associates, Morgan Stanley. Foreign stocks
reflect performance of The Morgan Stanley Capital International
EAFE Index, which includes some 1,000 companies representing the
stock markets of Europe, Australia, New Zealand, and the Far
East. This chart is for illustrative purposes only and should
not be considered as performance for, or the annualized return
of, any T. Rowe Price Fund. Past performance does not guarantee
future results.
PAGE 120
Also included will be various portfolios demonstrating how
these historical indices would have performed in various
combinations over a specified time period in terms of return. An
example of this is shown on the next page.
Performance of Retirement Portfolios*
Asset Mix Average Annualized Value
Returns 20 Years of
Ended 12/31/94 $10,000
Investment
After Period
________________ __________________ ____________
Nominal Real Best Worst
Portfolio Growth Income Safety Return Return** Year Year
I. Low
Risk 40% 40% 20% 12.4% 6.9% 24.9% 0.1%$ 92,515
II. Moderate
Risk 60% 30% 10% 13.5% 8.1% 29.1% -1.8%$118,217
III. High
Risk 80% 20% 0% 14.5% 9.1% 33.4% -5.2%$149,200
Source: T. Rowe Price Associates; data supplied by Lehman
Brothers, Wilshire Associates, and Ibbotson Associates.
* Based on actual performance for the 20 years ended 1993 of
stocks (85% Wilshire 5000 and 15% Europe, Australia, Far East
[EAFE] Index), bonds (Lehman Brothers Aggregate Bond Index
from 1976-94 and Lehman Brothers Government/Corporate Bond
Index from 1975), and 30-day Treasury bills from January 1975
through December 1994. Past performance does not guarantee
future results. Figures include changes in principal value
and reinvested dividends and assume the same asset mix is
maintained each year. This exhibit is for illustrative
purposes only and is not representative of the performance of
any T. Rowe Price fund.
** Based on inflation rate of 5.5% for the 20-year period ended
12/31/94.
Insights
From time to time, Insights, a T. Rowe Price publication of
reports on specific investment topics and strategies, may be
PAGE 121
included in the Fund's fulfillment kit. Such reports may include
information concerning: calculating taxable gains and losses on
mutual fund transactions, coping with stock market volatility,
benefiting from dollar cost averaging, understanding
international markets, investing in high-yield "junk" bonds,
growth stock investing, conservative stock investing, value
investing, investing in small companies, tax-free investing,
fixed income investing, investing in mortgage-backed securities,
as well as other topics and strategies.
Other Publications
From time to time, in newsletters and other publications
issued by T. Rowe Price Investment Services, Inc., reference may
be made to economic, financial and political developments in the
U.S. and abroad and their effect on securities prices. Such
discussions may take the form of commentary on these developments
by T. Rowe Price mutual fund portfolio managers and their views
and analysis on how such developments could affect investments in
mutual funds.
Redemptions in Kind
In the unlikely event a shareholder in any of the
International Funds were to receive an in kind redemption of
portfolio securities of a Fund, brokerage fees could be incurred
by the shareholder in subsequent sale of such securities.
Issuance of Fund Shares for Securities
Transactions involving issuance of a Fund's shares for
securities or assets other than cash will be limited to (1) bona
fide reorganizations; (2) statutory mergers; or (3) other
acquisitions of portfolio securities that: (a) meet the
investment objectives and policies of the Fund; (b) are acquired
for investment and not for resale except in accordance with
applicable law; (c) have a value that is readily ascertainable
via listing on or trading in a recognized United States or
international exchange or market; and (d) are not illiquid.
MANAGEMENT OF FUNDS
The officers and directors of the Funds are listed below.
Unless otherwise noted, the address of each is 100 East Pratt
Street, Baltimore, Maryland 21202. Except as indicated, each has
been an employee of T. Rowe Price for more than five years. In
PAGE 122
the list below, the Funds' directors who are considered
"interested persons" of T. Rowe Price or the Fund as defined
under Section 2(a)(19) of the Investment Company Act of 1940 are
noted with an asterisk (*). These directors are referred to as
inside directors by virtue of their officership, directorship,
and/or employment with T. Rowe Price.
LEO C. BAILEY, Director--Retired; Address: 3396 South Placita
Fabula, Green Valley, Arizona 85614
ANTHONY W. DEERING, Director--Director, President and Chief
Executive Officer, The Rouse Company, real estate developers,
Columbia, Maryland; Advisory Director, Kleinwort, Benson (North
America) Corporation, a registered broker-dealer; Address: 10275
Little Patuxent Parkway, Columbia, Maryland 21044
DONALD W. DICK, JR., Director--Principal, Overseas Partners,
Inc., a financial investment firm; formerly (6/65-3/89) Director
and Vice President-Consumer Products Division, McCormick &
Company, Inc., international food processors; Director, Waverly,
Inc., Baltimore, Maryland; Address: P.O. Box 491, Chilmark,
Massachusetts 02535-0491
ADDISON LANIER, Director--Financial management; President and
Director, Thomas Emery's Sons, Inc., and Emery Group, Inc.;
Director, Scinet Development and Holdings, Inc.; Address: 441
Vine Street, #2310, Cincinnati, Ohio 45202-2913
*M. DAVID TESTA, Chairman of the Board--Chairman of the Board,
Price-Fleming; Managing Director, T. Rowe Price; Vice President
and Director, T. Rowe Price Trust Company; Chartered Financial
Analyst; Chartered Investment Counselor
*MARTIN G. WADE, President and Director--President, Price-
Fleming; Director, Robert Fleming Holdings Limited; Address: 25
Copthall Avenue, London, EC2R 7DR, England
CHRISTOPHER D. ALDERSON, Vice President--Vice President, Price-
Fleming
(a)PETER B. ASKEW, Executive Vice President--Executive Vice
President, Price-Fleming
(a)RICHARD J. BRUCE, Vice President--Vice President of Price-
Fleming; formerly (1985-1990) Investment Manager, Jardine Fleming
Investment Advisers, Tokyo
(a)ROBERT P. CAMPBELL, Vice President--Vice President, T. Rowe
Price and Price-Fleming; formerly (4/80-5/90) Vice President and
Director, Private Finance, New York Life Insurance Company, New
York, New York
(a)MARK J. T. EDWARDS, Vice President--Vice President, Price-
Fleming
JOHN R. FORD, Vice President--Vice President, Price-Fleming
PAGE 123
HENRY H. HOPKINS, Vice President--Vice President, Price-Fleming
and T. Rowe Price Retirement Plan Services, Inc.; Managing
Director, T. Rowe Price; Vice President and Director, T. Rowe
Price Investment Services, Inc., T. Rowe Price Services, Inc. and
T. Rowe Price Trust Company
ROBERT C. HOWE, Vice President--Vice President, Price-Fleming and
T. Rowe Price
(a)STEPHEN ILOTT, Vice President--Vice President, Price-Fleming;
formerly (1988-1991) portfolio management, Fixed Income
Portfolios Group, Robert Fleming Holdings Limited, London
GEORGE A. MURNAGHAN, Vice President--Vice President, Price-
Fleming, T. Rowe Price, T. Rowe Price Trust Company, and T. Rowe
Price Investment Services, Inc.
JAMES S. RIEPE, Vice President--Managing Director, T. Rowe Price;
Chairman of the Board, T. Rowe Price Services, Inc., T. Rowe
Price Retirement Plan Services, Inc. and T. Rowe Price Trust
Company; President and Director, T. Rowe Price Investment
Services, Inc.; Director, Rhone-Poulenc Rorer, Inc.
(a)CHRISTOPHER ROTHERY, Vice President--Employee, Price-Fleming;
formerly (1987-1989) employee of Robert Fleming Holdings Limited,
London
(b)R. TODD RUPPERT, Vice President--Vice President, T. Rowe
Price, T. Rowe Price Trust Company and T. Rowe Price Retirement
Plan Services, Inc.
JAMES B. M. SEDDON, Vice President--Vice President, Price-Fleming
(a)CHARLES P. SMITH, Vice President--Managing Director, T. Rowe
Price; Vice President, Price-Fleming
(a)BENEDICT R. F. THOMAS, Vice President--Vice President, Price-
Fleming
(a)PETER VAN DYKE, Vice President--Managing Director, T. Rowe
Price; Vice President, Price-Fleming
DAVID J. L. WARREN, Vice President--Vice President, Price-Fleming
WILLIAM F. WENDLER, II, Vice President--Vice President, Price-
Fleming, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
(a)(b)EDWARD A. WIESE, Vice President--Vice President, T. Rowe
Price, Price-Fleming and T. Rowe Price Trust Company
LENORA V. HORNUNG, Secretary--Vice President, T. Rowe Price
PATRICIA S. BUTCHER, Assistant Secretary--Assistant Vice
President, T. Rowe Price and T. Rowe Price Investment Services,
Inc.
CARMEN F. DEYESU, Treasurer--Vice President, T. Rowe Price, T.
Rowe Price Services, Inc., and T. Rowe Price Trust Company
DAVID S. MIDDLETON, Controller--Vice President, T. Rowe Price, T.
Rowe Price Services, Inc., and T. Rowe Price Trust Company
(a)ANN B. CRANMER, Assistant Vice President--Assistant Vice
President, Price-Fleming
PAGE 124
ROGER L. FIERY, III, Assistant Vice President--Vice President,
Price-Fleming and T. Rowe Price
(a)LEAH P. HOLMES, Assistant Vice President--Vice President,
Price-Fleming and Assistant Vice President T. Rowe Price
EDWARD T. SCHNEIDER, Assistant Vice President--Vice President, T.
Rowe Price Services, Inc.
INGRID I. VORDEMBERGE, Assistant Vice President--Employee, T.
Rowe Price
(a) Mr. Askew is a Executive Vice President of the
International Funds only. Messrs. Bruce, Campbell,
Edwards, Ilott, Rothery, Smith, Thomas, VanDyke, and Wiese
are Vice Presidents of the International Funds only.
Mmes. Cranmer and Holmes are Assistant Vice Presidents of
the International Funds only.
(b) Mr. Wiese is a Executive Vice President, and Mr. Ruppert
is a Vice President of the Foreign Equity Fund.
COMPENSATION TABLE
_________________________________________________________________
Pension or Total Compensation
Retirement from Fund and
Name of Aggregate Benefits Fund Complex
Person, Compensation Accrued as Paid to
Position from Fund(a)Part of Fund(b) Directors(c)
_________________________________________________________________
International Stock
Leo C. Bailey, $11,299 N/A $64,583
Director
Anthony W. Deering, 11,299 N/A 66,333
Director
Donald W. Dick, 11,299 N/A 64,833
Director
Addison Lanier, 11,299 N/A 64,583
Director
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
_________________________________________________________________
PAGE 125
International Discovery
Leo C. Bailey, $3,475 N/A $64,583
Director
Anthony W. Deering, 3,475 N/A 66,333
Director
Donald W. Dick, 3,475 N/A 64,833
Director
Addison Lanier, 3,475 N/A 64,583
Director
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
_________________________________________________________________
European Stock
Leo C. Bailey, $2,689 N/A $64,583
Director
Anthony W. Deering, 2,689 N/A 66,333
Director
Donald W. Dick, 2,689 N/A 64,833
Director
Addison Lanier, 2,689 N/A 64,583
Director
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
_________________________________________________________________
Japan
Leo C. Bailey, $1,994 N/A $64,583
Director
Anthony W. Deering, 1,994 N/A 66,333
Director
PAGE 126
Donald W. Dick, 1,994 N/A 64,833
Director
Addison Lanier, 1,994 N/A 64,583
Director
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
_________________________________________________________________
New Asia
Leo C. Bailey, $10,075 N/A $64,583
Director
Anthony W. Deering, 10,075 N/A 66,333
Director
Donald W. Dick, 10,075 N/A 64,833
Director
Addison Lanier, 10,075 N/A 64,583
Director
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
_________________________________________________________________
Latin America
Leo C. Bailey, $1,725 N/A $64,583
Director
Anthony W. Deering, 1,725 N/A 66,333
Director
Donald W. Dick, 1,725 N/A 64,833
Director
Addison Lanier, 1,725 N/A 64,583
Director
PAGE 127
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
_________________________________________________________________
Foreign Equity
Leo C. Bailey, $4,533 N/A $64,583
Director
Anthony W. Deering, 4,533 N/A 66,333
Director
Donald W. Dick, 4,533 N/A 64,833
Director
Addison Lanier, 4,533 N/A 64,583
Director
M. David Testa, 0 N/A 0
Chairman of the Board(d)
Martin G. Wade, 0 N/A 0
Director(d)
(a) Amounts in this Column are for the period June 1, 1993
through May 31, 1994.
(b) Not applicable. The Fund does not pay pension or retirement
benefits to officers or directors/trustees of the Fund.
(c) Amounts in this column are for calendar year 1994.
(d) Any director/trustee of the Fund who is an officer or
employee of T. Rowe Price receives no renumeration from the
Fund.
The Funds' Executive Committee, comprised of Messrs. Testa and
Wade, have been authorized by the Board of Directors to exercise
all of the powers of the Board to manage the Funds in the
intervals between meetings of the Board, except the powers
prohibited by statute from being delegated.
PRINCIPAL HOLDERS OF SECURITIES
As of the date of the prospectus, the officers and
directors of the Funds, as a group, owned less than 1% of the
outstanding shares of each Fund.
PAGE 128
As of September 30, 1995, the following shareholder
beneficially owned more than 5% of the outstanding shares of the
International Stock, New Asia, Japan and European Stock Funds,
respectively: Charles Schwab & Co. Inc., Reinvestment Account,
Attn.: Mutual Fund Dept., 101 West Montgomery Street, San
Francisco, California 94104-4122. Each of the following
shareholders beneficially owned more than 5% of the outstanding
shares of the Foreign Equity Fund: Continental Bank N.A., c/o
Robert Kramer, 231 S. Lasalle Street, Chicago, Illinois 60604-
1407.
INVESTMENT MANAGEMENT SERVICES
Services
Under the Management Agreement, Price-Fleming provides
each Fund with discretionary investment services. Specifically,
Price-Fleming is responsible for supervising and directing the
investments of each Fund in accordance with the Fund's investment
objective, program, and restrictions as provided in its
prospectus and this Statement of Additional Information. Price-
Fleming is also responsible for effecting all security
transactions on behalf of each Fund, including the negotiation of
commissions and the allocation of principal business and
portfolio brokerage. In addition to these services, Price-
Fleming provides the Funds with certain corporate administrative
services, including: maintaining the Funds' corporate existence,
corporate records, and registering and qualifying Fund shares
under federal and state laws; monitoring the financial,
accounting, and administrative functions of each Fund;
maintaining liaison with the agents employed by each Fund such as
the Fund's custodian and transfer agent; assisting each Fund in
the coordination of such agents' activities; and permitting
Price-Fleming's employees to serve as officers, directors, and
committee members of each Fund without cost to the Fund.
The Management Agreement also provides that Price-
Fleming, its directors, officers, employees, and certain other
persons performing specific functions for each Fund will only be
liable to the Fund for losses resulting from willful misfeasance,
bad faith, gross negligence, or reckless disregard of duty.
Under the Management Agreement, Price-Fleming is
permitted to utilize the services or facilities of others to
provide it or the Funds with statistical and other factual
information, advice regarding economic factors and trends, advice
PAGE 129
as to occasional transactions in specific securities, and such
other information, advice or assistance as Price-Fleming may deem
necessary, appropriate, or convenient for the discharge of its
obligations under the Management Agreement or otherwise helpful
to the Funds.
Certain administrative support is provided by T. Rowe
Price which receives from Price-Fleming a fee of .15% of the
market value of all assets in equity accounts, .15% of the market
value of all assets in active fixed income accounts and .035% of
the market value of all assets in passive fixed income accounts
under Price-Fleming's management.
Price-Fleming has entered into separate letters of
agreement with Fleming Investment Management Limited ("FIM") and
Jardine Fleming Investment Holdings Limited ("JFIH"), wherein FIM
and JFIH have agreed to render investment research and
administrative support to Price-Fleming. FIM is a wholly-owned
subsidiary of Robert Fleming Asset Management Limited which is a
wholly-owned subsidiary of Robert Fleming Holdings Limited
("Robert Fleming Holdings"). JFIH is an indirect wholly-owned
subsidiary of Jardine Fleming Group Limited. Under the letters
of agreement, these companies will provide Price-Fleming with
research material containing statistical and other factual
information, advice regarding economic factors and trends, advice
on the allocation of investments among countries and as between
debt and equity classes of securities, and research and
occasional advice with respect to specific companies. For these
services, FIM and JFIH each receives a fee of .075% of the market
value of all assets in equity accounts under Price-Fleming's
management. JFIH receives a fee of .075% of the market value of
all assets in active fixed income accounts and .0175% of such
market value in passive fixed income accounts under Price-
Fleming's management.
Robert Fleming personnel have extensive research
resources throughout the world. A strong emphasis is placed on
direct contact with companies in the research universe. Robert
Fleming personnel, who frequently speak the local language, have
access to the full range of research products available in the
market place and are encouraged to produce independent work
dedicated solely to portfolio investment management, which adds
value to that generally available.
PAGE 130
All Funds, except Foreign Equity Fund
Management Fee
Each Fund pays Price-Fleming a fee ("Fee") which
consists of two components: a Group Management Fee ("Group Fee")
and an Individual Fund Fee ("Fund Fee"). The Fee is paid monthly
to Price-Fleming on the first business day of the next succeeding
calendar month and is calculated as described below.
The monthly Group Fee ("Monthly Group Fee") is the sum
of the daily Group Fee accruals ("Daily Group Fee Accruals") for
each month. The Daily Group Fee Accrual for any particular day
is computed by multiplying the Price Funds' group fee accrual as
determined below ("Daily Price Funds' Group Fee Accrual") by the
ratio of each Fund's net assets for that day to the sum of the
aggregate net assets of the Price Funds for that day. The Daily
Price Funds' Group Fee Accrual for any particular day is
calculated by multiplying the fraction of one (1) over the number
of calendar days in the year by the annualized Daily Price Funds'
Group Fee Accrual for that day as determined in accordance with
the following schedule:
Price Funds'
Annual Group Base Fee
Rate for Each Level of Assets
_________________________________
0.480% First $1 billion
0.450% Next $1 billion
0.420% Next $1 billion
0.390% Next $1 billion
0.370% Next $1 billion
0.360% Next $2 billion
0.350% Next $2 billion
0.340% Next $5 billion
0.330% Next $10 billion
0.320% Next $10 billion
0.310% Thereafter
For the purpose of calculating the Group Fee, the Price
Funds include all the mutual funds distributed by T. Rowe Price
Investment Services, Inc. (excluding T. Rowe Price Spectrum Fund,
Inc. and any institutional or private label mutual funds). For
the purpose of calculating the Daily Price Funds' Group Fee
Accrual for any particular day, the net assets of each Price Fund
are determined in accordance with the Funds' prospectus as of the
PAGE 131
close of business on the previous business day on which the Fund
was open for business.
The monthly Fund Fee ("Monthly Fund Fee") is the sum of
the daily Fund Fee accruals ("Daily Fund Fee Accruals") for each
month. The Daily Fund Fee Accrual for any particular day is
computed by multiplying the fraction of one (1) over the number
of calendar days in the year by the Fund Fee Rate of ____% for
Global Stock Fund, 0.35% for the International Stock Fund, 0.50%
each for the European Stock, Japan and New Asia Funds, 0.75% each
for the International Discovery, Latin America, and Emerging
Markets Stock Funds, and multiplying this product by the net
assets of the Fund for that day, as determined in accordance with
the Funds' prospectus as of the close of business on the previous
business day on which the Fund was open for business.
The following chart sets forth the total management fees
if any, paid to Price-Fleming by the Funds, during the last three
years:
International Stock International DiscoveryJapan
1994 $35,176,000 1994 $5,142,000 1994 $1,289,000
1993 $14,955,000 1993 $1,983,000 1993 $ 458,000
1992 $12,522,000 1992 $1,798,000 1992 $ 19,000
European Stock New Asia Latin America
1994 $2,710,000 1994 $17,320,000 1994 $1,195,000
1993 $1,422,000 1993 $ 4,937,000 1993 *
1992 $1,198,000 1992 $ 1,954,000 1992 *
*Prior to commencement of Fund operations.
Limitation on Fund Expenses
The Management Agreement between each Fund and Price-
Fleming provides that each Fund will bear all expenses of its
operations not specifically assumed by Price-Fleming. However,
in compliance with certain state regulations, Price-Fleming will
reimburse each Fund for certain expenses which in any year exceed
the limits prescribed by any state in which the Fund's shares are
qualified for sale. Presently, the most restrictive expense
ratio limitation imposed by any state is 2.5% of the first $30
million of a Fund's average daily net assets, 2% of the next $70
million of the average daily net assets, and 1.5% of net assets
in excess of $100 million. For the purpose of determining
PAGE 132
whether a Fund is entitled to reimbursement, the expenses of each
Fund are calculated on a monthly basis. If the Fund is entitled
to reimbursement, that month's management fee will be reduced or
postponed, with any adjustment made after the end of the year.
International Discovery Fund
Effective January 1, 1993 Price-Fleming agreed to extend
the 1.50% expense limitation through December 31, 1993. Expenses
paid or assumed by Price-Fleming under the agreement, are subject
to reimbursement to Price-Fleming by the Fund whenever the Fund's
expense ratio is below 1.50%; however, no reimbursement will be
made after December 31, 1995, or if it would result in the
expense ratio exceeding 1.50%. The Management Agreement also
provides that one or more additional expense limitation periods
may be implemented in the future, and that with respect to any
additional limitation period, the Fund may reimburse Price-
Fleming, provided the reimbursement does not result in the Fund's
aggregate expenses exceeding the additional expense limitation or
any applicable state expense limitation.
Pursuant to the Fund's past expense limitations,
$159,000 of unaccrued 1991-1992 management fees were repaid
during the year ended October 31, 1994, and $386,000 remains
subject to reimbursement through December 31, 1994.
Additionally, $85,000 of unaccrued management fees for the ten
months ended October 31, 1993 are subject to reimbursement
through December 31, 1995.
Japan Fund
In the interest of limiting the expenses of the Fund
during its initial period of operations, Price-Fleming agreed to
bear any expenses through December 31, 1993, which would cause
the Fund's ratio of expenses to average net assets to exceed
1.50%. Effective January 1, 1994 Price-Fleming agreed to extend
the 1.50% expense limitation through October 31, 1995. Expenses
paid or assumed by Price-Fleming under each agreement are subject
to reimbursement to Price-Fleming by the Fund whenever the Fund's
expense ratio is below 1.50%; however, no reimbursement will be
made after December 31, 1995 (for the initial agreement), October
31, 1997 (for the second agreement), or if it would result in the
expense ratio exceeding 1.50%. The Management Agreement also
provides that one or more additional expense limitation periods
(of the same or different time periods) may be implemented after
the expiration of the one on October 31, 1995, and that with
respect to any such additional limitation period, the Fund may
PAGE 133
reimburse Price-Fleming, provided the reimbursement does not
result in the Fund's aggregate expenses exceeding the additional
expense limitation.
Pursuant to the Fund's past expense limitation,
management fees aggregating $100,000 and $211,000 were not
accrued for the ten-month fiscal period ended October 31, 1993
and the fiscal period ended December 31, 1992, respectively.
These unaccrued fees are subject to reimbursement through
December 31, 1995. Additionally, $30,000 of unaccrued management
fees for the fiscal year ended October 31, 1994 are subject to
reimbursement through October 31, 1997.
Latin America Fund
In the interest of limiting the expenses of the Fund
during its initial period of operations, Price-Fleming agreed to
bear any expenses through October 31, 1995, which would cause the
Fund's ratio of expenses to average net assets to exceed 2.00%.
Expenses paid or assumed under this agreement are subject to
reimbursement to Price-Fleming by the Fund whenever the Fund's
expense ratio is below 2.00%; however, no reimbursement will be
made after October 31, 1997, or if it would result in the expense
ratio exceeding 2.00%. The Management Agreement also provides
that one or more additional expense limitation periods (of the
same or different time periods) may be implemented after the
expiration of the current one on October 31, 1995, and that with
respect to any such additional limitation period, the Fund's may
reimburse Price-Fleming, provided the reimbursement does not
result in the Fund's aggregate expenses exceeding the additional
expense limitation or any applicable state expense limitation.
Emerging Markets Stock Fund
In the interest of limiting the expenses of the Fund
during its initial period of operations, Price-Fleming agreed to
bear any expenses through October 31, 1996, which would cause the
Fund's ratio of expenses to average net assets to exceed 1.75%.
Expenses paid or assumed under this agreement are subject to
reimbursement to Price-Fleming by the Fund whenever the Fund's
expense ratio is below 1.75%; however, no reimbursement will be
made after October 31, 1998, or if it would result in the expense
ratio exceeding 1.75%. The Management Agreement also provides
that one or more additional expense limitation periods (of the
same or different time periods) may be implemented after the
expiration of the current one on October 31, 1996, and that with
respect to any such additional limitation period, the Fund's may
PAGE 134
reimburse Price-Fleming, provided the reimbursement does not
result in the Fund's aggregate expenses exceeding the additional
expense limitation or any applicable state expense limitation.
Global Stock Fund
In the interest of limiting the expenses of the Fund
during its initial period of operations, Price-Fleming agreed to
bear any expenses through ______________, 19__, which would cause
the Fund's ratio of expenses to average net assets to exceed
____%. Expenses paid or assumed under this agreement are subject
to reimbursement to Price-Fleming by the Fund whenever the Fund's
expense ratio is below ____%; however, no reimbursement will be
made after ______________, 19__, or if it would result in the
expense ratio exceeding ____%. The Management Agreement also
provides that one or more additional expense limitation periods
(of the same or different time periods) may be implemented after
the expiration of the current one on _______________, 19__, and
that with respect to any such additional limitation period, the
Fund's may reimburse Price-Fleming, provided the reimbursement
does not result in the Fund's aggregate expenses exceeding the
additional expense limitation or any applicable state expense
limitation.
T. Rowe Price Spectrum Fund, Inc. (International Stock Fund)
The Fund is a party to a Special Servicing Agreement
("Agreement") between and among T. Rowe Price Spectrum Fund, Inc.
("Spectrum Fund"), T. Rowe Price, T. Rowe Price Services, Inc.
and various other T. Rowe Price funds which, along with the Fund,
are funds in which Spectrum Fund invests (collectively all such
funds "Underlying Price Funds").
The Agreement provides that, if the Board of Directors
of any Underlying Price Fund determines that such Underlying
Fund's share of the aggregate expenses of Spectrum Fund is less
than the estimated savings to the Underlying Price Fund from the
operation of Spectrum Fund, the Underlying Price Fund will bear
those expenses in proportion to the average daily value of its
shares owned by Spectrum Fund, provided further that no
Underlying Price Fund will bear such expenses in excess of the
estimated savings to it. Such savings are expected to result
primarily from the elimination of numerous separate shareholder
accounts which are or would have been invested directly in the
Underlying Price Funds and the resulting reduction in shareholder
servicing costs. Although such cost savings are not certain, the
estimated savings to the Underlying Price Funds generated by the
PAGE 135
operation of Spectrum Fund are expected to be sufficient to
offset most, if not all, of the expenses incurred by Spectrum
Fund.
Foreign Equity Fund
Limitation on Fund Expenses
The Management Agreement provides that one or more
expense limitation periods may be implemented after the
expiration of the one on February 29, 1992, and that with respect
to any additional limitation period, the Fund may reimburse
Price-Fleming for a period of up to two years, provided the
reimbursement does not result in the Fund's aggregate expenses
exceeding the additional expense limitation (or any
applicable state expense limitation). Although Price-Fleming may
at any time voluntarily extend an expense limitation without
shareholder approval, this provision permits Price-Fleming to
adopt an expense limitation from time to time and be reimbursed
for any amount it assumed or waived under such an expense
limitation.
For its services to the Fund under the Management
Agreement, Price-Fleming is paid an annual fee, in monthly
installments, based on the Fund's average daily net assets at the
rate of .70%. For the years 1994, 1993, and 1992, Price-Fleming
received from the Fund management fees totaling $5,137,000,
$2,064,000, and $1,437,000, respectively.
DISTRIBUTOR FOR FUNDS
T. Rowe Price Investment Services, Inc. ("Investment
Services"), a Maryland corporation formed in 1980 as a wholly-
owned subsidiary of T. Rowe Price, serves as the Funds'
distributor. Investment Services is registered as a broker-
dealer under the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc. The
offering of each Fund's shares is continuous.
Investment Services is located at the same address as
the Funds and T. Rowe Price -- 100 East Pratt Street, Baltimore,
Maryland 21202.
Investment Services serves as distributor to the Funds
pursuant to an Underwriting Agreement ("Underwriting Agreement"),
which provides that each Fund will pay all fees and expenses in
PAGE 136
connection with: registering and qualifying its shares under the
various state "blue sky" laws; preparing, setting in type,
printing, and mailing its prospectuses and reports to
shareholders; and issuing its shares, including expenses of
confirming purchase orders.
The Underwriting Agreement provides that Investment
Services will pay all fees and expenses in connection with:
printing and distributing prospectuses and reports for use in
offering and selling Fund shares; preparing, setting in type,
printing, and mailing all sales literature and advertising;
Investment Services' federal and state registrations as a
broker-dealer; and offering and selling Fund shares, except for
those fees and expenses specifically assumed by each Fund.
Investment Services' expenses are paid by T. Rowe Price.
Investment Services acts as the agent of each Fund in
connection with the sale of its shares in all states in which the
shares are qualified and in which Investment Services is
qualified as a broker-dealer. Under the Underwriting Agreement,
Investment Services accepts orders for Fund shares at net asset
value. No sales charges are paid by investors or the Funds.
CUSTODIAN
State Street Bank and Trust Company (the "Bank") is the
custodian for certain of the Funds' U.S. securities and cash, but
it does not participate in the Funds' investment decisions.
Portfolio securities purchased in the U.S. are maintained in the
custody of the Bank and may be entered into the Federal Reserve
Book Entry System, or the security depository system of the
Depository Trust Corporation. State Street Bank's main office is
at 225 Franklin Street, Boston, Massachusetts 02110. The Funds
have entered into a Custodian Agreement with The Chase Manhattan
Bank, N.A., London, pursuant to which portfolio securities are
maintained in the custody of various foreign branches of The
Chase Manhattan Bank and such other custodians, including foreign
banks and foreign securities depositories in accordance with
regulations under the Investment Company Act of 1940. The
address for The Chase Manhattan Bank, N.A., London is Woolgate
House, Coleman Street, London, EC2P 2HD, England.
PAGE 137
CODE OF ETHICS
The Funds' investment adviser (Price-Fleming) has a
written Code of Ethics which requires all employees to obtain
prior clearance before engaging in any personal securities
transactions. In addition, all employees must report their
personal securities transactions within ten days of their
execution. Employees will not be permitted to effect
transactions in a security: If there are pending client orders in
the security; the security has been purchased or sold by a client
within seven calendar days; the security is being considered for
purchase for a client; the security is subject to internal
trading restrictions. In addition, employees are prohibited from
engaging in short-term trading (e.g., purchases and sales
involving the same security within 60 days. Any material
violation of the Code of Ethics is reported to the Board of the
Fund. The Board also reviews the administration of the Code of
Ethics on an annual basis.
PORTFOLIO TRANSACTIONS
Investment or Brokerage Discretion
Decisions with respect to the purchase and sale of
portfolio securities on behalf of the Funds are made by Price-
Fleming. Price-Fleming is also responsible for implementing
these decisions, including the allocation of portfolio brokerage
and principal business and the negotiation of commissions.
How Brokers and Dealers are Selected
Equity Securities
In purchasing and selling each Fund's portfolio
securities, it is Price-Fleming's policy to obtain quality
execution at the most favorable prices through responsible
broker-dealers and, in the case of agency transactions, at
competitive commission rates where such rates are negotiable.
However, under certain conditions, a Fund may pay higher
brokerage commissions in return for brokerage and research
services. In selecting broker-dealers to execute a Fund's
portfolio transactions, consideration is given to such factors as
the price of the security, the rate of the commission, the size
and difficulty of the order, the reliability, integrity,
financial condition, general execution and operational
capabilities of competing brokers and dealers, their expertise in
PAGE 138
particular markets and the brokerage and research services they
provide to Price-Fleming or the Funds. It is not the policy of
Price-Fleming to seek the lowest available commission rate where
it is believed that a broker or dealer charging a higher
commission rate would offer greater reliability or provide better
price or execution.
Transactions on stock exchanges involve the payment of
brokerage commissions. In transactions on stock exchanges in the
United States, these commissions are negotiated. Traditionally,
commission rates have generally not been negotiated on stock
markets outside the United States. In recent years, however, an
increasing number of overseas stock markets have adopted a system
of negotiated rates, although a number of markets continue to be
subject to an established schedule of minimum commission rates.
It is expected that equity securities will ordinarily be
purchased in the primary markets, whether over-the-counter or
listed, and that listed securities may be purchased in the
over-the-counter market if such market is deemed the primary
market. In the case of securities traded on the over-the-counter
markets, there is generally no stated commission, but the price
usually includes an undisclosed commission or markup. In
underwritten offerings, the price includes a disclosed, fixed
commission or discount.
Fixed Income Securities
For fixed income securities, it is expected that
purchases and sales will ordinarily be transacted with the
issuer, the issuer's underwriter, or with a primary market maker
acting as principal on a net basis, with no brokerage commission
being paid by the Fund. However, the price of the securities
generally includes compensation which is not disclosed
separately. Transactions placed though dealers who are serving
as primary market makers reflect the spread between the bid and
asked prices.
With respect to equity and fixed income securities,
Price-Fleming may effect principal transactions on behalf of the
Funds with a broker or dealer who furnishes brokerage and/or
research services, designate any such broker or dealer to receive
selling concessions, discounts or other allowances or otherwise
deal with any such broker or dealer in connection with the
acquisition of securities in underwritings. The prices the Fund
pays to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter. Price-Fleming
PAGE 139
may receive research services in connection with brokerage
transactions, including designations in fixed price offerings.
Price-Fleming may cause a Fund to pay a broker-dealer
who furnishes brokerage and/or research services a commission for
executing a transaction that is in excess of the commission
another broker-dealer would have received for executing the
transaction if it is determined that such commission is
reasonable in relation to the value of the brokerage and/or
research services which have been provided. In some cases,
research services are generated by third parties but are provided
to Price-Fleming by or through broker-dealers.
Descriptions of Research Services Received from Brokers and
Dealers
Price-Fleming receives a wide range of research services
from brokers and dealers covering investment opportunities
throughout the world, including information on the economies,
industries, groups of securities, individual companies,
statistics, political developments, technical market action,
pricing and appraisal services, and performance analyses of all
the countries in which a Fund's portfolio is likely to be
invested. Price-Fleming cannot readily determine the extent to
which commissions charged by brokers reflect the value of their
research services, but brokers occasionally suggest a level of
business they would like to receive in return for the brokerage
and research services they provide. To the extent that research
services of value are provided by brokers, Price-Fleming may be
relieved of expenses which it might otherwise bear. In some
cases, research services are generated by third parties but are
provided to Price-Fleming by or through brokers.
Commissions to Brokers who Furnish Research Services
Certain broker-dealers which provide quality execution
services also furnish research services to Price-Fleming. Price-
Fleming has adopted a brokerage allocation policy embodying the
concepts of Section 28(e) of the Securities Exchange Act of 1934,
which permits an investment adviser to cause its clients to pay a
broker which furnishes brokerage or research services a higher
commission than that which might be charged by another broker
which does not furnish brokerage or research services, or which
furnishes brokerage or research services deemed to be of lesser
value, if such commission is deemed reasonable in relation to the
brokerage and research services provided by the broker, viewed in
terms of either that particular transaction or the overall
PAGE 140
responsibilities of the adviser with respect to the accounts as
to which it exercises investment discretion. Accordingly, Price-
Fleming may assess the reasonableness of commissions in light of
the total brokerage and research services provided by each
particular broker.
Miscellaneous
Research services furnished by brokers through which
Price-Fleming effects securities transactions may be used in
servicing all accounts managed by Price-Fleming. Conversely,
research services received from brokers which execute
transactions for a particular Fund will not necessarily be used
by Price-Fleming exclusively in connection with the management of
that Fund.
Some of Price-Fleming's other clients have investment
objectives and programs similar to those of the Funds. Price-
Fleming may occasionally make recommendations to other clients
which result in their purchasing or selling securities
simultaneously with the Funds. As a result, the demand for
securities being purchased or the supply of securities being sold
may increase, and this could have an adverse effect on the price
of those securities. It is Price-Fleming's policy not to favor
one client over another in making recommendations or in placing
orders. Price-Fleming frequently follows the practice of
grouping orders of various clients for execution which generally
results in lower commission rates being attained. In certain
cases, where the aggregate order is executed in a series of
transactions at various prices on a given day, each participating
client's proportionate share of such order reflects the average
price paid or received with respect to the total order. Price-
Fleming has established a general investment policy that it will
ordinarily not make additional purchases of a common stock of a
company for its clients (including the T. Rowe Price Funds) if,
as a result of such purchases, 10% or more of the outstanding
common stock of such company would be held by its clients in the
aggregate.
None of the Funds allocates business to any broker-
dealer on the basis of its sales of the Fund's shares. However,
this does not mean that broker-dealers who purchase Fund shares
for their clients will not receive business from the Fund.
PAGE 141
Transactions with Related Brokers and Dealers
As provided in the Investment Management Agreement
between each Fund and Price-Fleming, Price-Fleming is responsible
not only for making decisions with respect to the purchase and
sale of the Fund's portfolio securities, but also for
implementing these decisions, including the negotiation of
commissions and the allocation of portfolio brokerage and
principal business. It is expected that Price-Fleming will often
place orders for a Fund's portfolio transactions with broker-
dealers through the trading desks of certain affiliates of Robert
Fleming Holdings Limited ("Robert Fleming"), an affiliate of
Price-Fleming. Robert Fleming, through Copthall Overseas
Limited, a wholly-owned subsidiary, owns 25% of the common stock
of Price-Fleming. Fifty percent of the common stock of Price-
Fleming is owned by TRP Finance, Inc., a wholly-owned subsidiary
of T. Rowe Price, and the remaining 25% is owned by Jardine
Fleming Holdings Limited, a subsidiary of Jardine Fleming Group
Limited ("JFG"). JFG is 50% owned by Robert Fleming and 50%
owned by Jardine Matheson Holdings Limited. The affiliates
through whose trading desks such orders may be placed include
Fleming Investment Management Limited ("FIM"), and Robert Fleming
& Co. Limited ("RF&Co."). FIM and RF&Co. are wholly-owned
subsidiaries of Robert Fleming. These trading desks will operate
under strict instructions from the Fund's portfolio manager with
respect to the terms of such transactions. Neither Robert
Fleming, JFG, nor their affiliates will receive any commission,
fee, or other remuneration for the use of their trading desks,
although orders for a Fund's portfolio transactions may be placed
with affiliates of Robert Fleming and JFG who may receive a
commission.
The Board of Directors of the Funds has authorized
Price-Fleming to utilize certain affiliates of Robert Fleming and
JFG in the capacity of broker in connection with the execution of
each Fund's portfolio transactions, provided that Price-Fleming
believes that doing so will result in an economic advantage (in
the form of lower execution costs or otherwise) being obtained
for each Fund. These affiliates include Jardine Fleming
Securities Limited ("JFS"), a wholly-owned subsidiary of JFG,
RF&Co., Jardine Fleming Australia Securities Limited, and Robert
Fleming, Inc. (a New York brokerage firm).
The above-referenced authorization was made in
accordance with Section 17(e) of the Investment Company Act of
1940 (the "1940 Act") and Rule 17e-1 thereunder which require the
Funds' independent directors to approve the procedures under
PAGE 142
which brokerage allocation to affiliates is to be made and to
monitor such allocations on a continuing basis. Except with
respect to tender offers, it is not expected that any portion of
the commissions, fees, brokerage, or similar payments received by
the affiliates of Robert Fleming in such transactions will be
recaptured by the Funds. The directors have reviewed and from
time to time may continue to review whether other recapture
opportunities are legally permissible and available and, if they
appear to be, determine whether it would be advisable for a Fund
to seek to take advantage of them.
During the year 1994, the International Stock,
International Discovery, New Asia, Japan, Latin America, and
Foreign Equity Funds paid $1,608,031, $365,658, $3,067,341,
$462,690, $1,254, and $289,368, respectively, in total brokerage
commissions in connection with their portfolio transactions. The
brokerage commissions paid to JFS represented 9%, 15%, 20%, 36%,
0.28%, and 8%, respectively, of the Funds' aggregate brokerage
commissions paid during 1994. The aggregate dollar amount of
transactions effected through JFS, involving the payment of
commissions represented 5%, 15%, 21%, 33%, 0%, and 5%,
respectively, of the aggregate dollar amount of all transactions
involving the payment of commissions during 1994. International
Stock, European Stock, International Discovery, and Foreign
Equity Funds paid to RF&Co., $145,770, $5,160, $7,109, and
$57,122, respectively, in total brokerage commissions in
connection with their portfolio transactions. The brokerage
commissions paid to RF&Co. represented 2%, 2%, 0.35%, and 3%,
respectively, of the Funds' aggregate brokerage commissions paid
during 1994. The aggregate dollar amount of transactions
effected through RF&Co., involving the payment of commissions
represented 1%, 2%, 0.50%, and 4%, respectively, of the aggregate
dollar amount of all transactions involving the payment of
commissions during 1994. International Stock, International
Discovery, New Asia, and Foreign Equity Funds paid to Ord
Minnett, $552,490, $54,618, $450,748, and $84,723, respectively,
in total brokerage commissions in connection with their portfolio
transactions. The brokerage commissions paid to Ord Minnett,
represented 6%, 3%, 3%, and 4%, respectively, of the Funds'
aggregate brokerage commissions paid during 1994. The aggregate
dollar amount of transactions effected through Ord Minnett,
involving the payment of commissions represented 3%, 3%, 4%, and
3%, respectively, of the aggregate dollar amount of all
transactions involving the payment of commissions during 1994.
In accordance with the written procedures adopted pursuant to
Rule 17e-1, the independent directors of each Fund reviewed the
1994 transactions with affiliated brokers and determined that
PAGE 143
such transactions resulted in an economic advantage to the Funds
either in the form of lower execution costs or otherwise.
Other
For the years 1994, 1993, and 1992, the total brokerage
commissions paid by International Stock Fund, including the
discounts received by securities dealers in connection with
underwritings, were $9,684,485, $5,419,000, and $4,052,000,
respectively. Of these commissions, approximately 83%, 76%, and
85%, respectively, were paid to firms which provided research,
statistical, or other services to Price-Fleming in connection
with the management of the Fund or, in some cases, to the Fund.
The portfolio turnover rate of the International Stock
Fund for each of the last three years has been as follows: 1994--
22.9%, 1993--29.8% (annualized), and 1992--37.8%.
For the years 1994, 1993, and 1992, the total brokerage
commissions paid by the International Discovery Fund, including
the discounts received by securities dealers in connection with
underwritings, were $2,042,917, $1,277,000, and $458,000,
respectively. Of these commissions, approximately 82%, 81%, and
81%, respectively, were paid to firms which provided research,
statistical, or other services to Price-Fleming in connection
with the management of the Fund or, in some cases, to the Fund.
The portfolio turnover rate of the International
Discovery Fund for each of the last three years has been as
follows: 1994--57.4%, 1993--71.8% (annualized), and 1992--
38.0%.
For the years 1994, 1993, and 1992, the total brokerage
commissions paid by the European Stock Fund, including the
discounts received by securities dealers in connection with
underwritings, were $219,614, $182,000, and $328,000,
respectively. Of these commissions, approximately 98% was paid
for 1994 and 99% was paid for 1993 and 1992, all commissions were
paid to firms which provided research, statistical, or other
services to Price-Fleming in connection with the management of
the Fund or, in some cases, to the Fund.
The portfolio turnover rate of the European Stock Fund
for each of the last three years has been as follows: 1994--
24.5%, 1993--21.3% (annualized), and 1992--52.0%.
PAGE 144
For the years 1994, 1993, and 1992, the total brokerage
commissions paid by the Japan Fund, including the discounts
received by securities dealers in connection with underwritings,
were $1,284,041, $412,000, and $277,000, respectively. Of these
commissions, approximately 64%, 73%, and 91% were paid to firms
which provided research, statistical, or other services to Price-
Fleming in connection with the management of the Fund or, in some
cases, to the Fund.
The portfolio turnover rate of the Japan Fund for each
of the last three years has been as follows: 1994--61.5%, 1993--
61.4% (annualized), and 1992--41.6%.
For the years 1994, 1993, and 1992, the total brokerage
commissions paid by the New Asia Fund, including the discounts
received by securities dealers in connection with underwritings,
were $13,086,017, $6,642,000, and $1,757,000, respectively. Of
these commissions, approximately 77%, 72%, and 64%, respectively,
were paid to firms which provided research, statistical, or other
services to Price-Fleming in connection with the management of
the Fund or, in some cases, to the Fund.
The portfolio turnover rate of the New Asia Fund for
each of the last three years has been as follows: 1994--63.2%,
1993-40.4% (annualized), and 1992--36.3%.
For the years 1994, 1993, and 1992, the total brokerage
commissions paid by the Foreign Equity Fund, including the
discounts received by securities dealers in connection with
underwritings, were $1,913,957, $853,000, and $563,000,
respectively. Of these commissions, approximately 85%, 79%, and
87%, respectively, were paid to firms which provided research,
statistical, or other services to Price-Fleming in connection
with the management of the Fund or, in some cases, to the Fund.
The portfolio turnover rate of the Foreign Equity Fund
for each of the last three years has been as follows: 1994--
22.0%, 1993--27.4% (annualized), and 1992--35.1%.
For the year 1994 the total brokerage commissions paid
by the Latin America Fund, including the discounts received by
securities dealers in connection with underwritings, were
$447,402. Of these commissions, approximately 99% were paid to
firms which provided research, statistical, or other services to
Price-Fleming in connection with the management of the Fund or,
in some cases, to the Fund.
PAGE 145
The portfolio turnover rate of the Latin America Fund
for the year 1994 was 12.2% (annualized).
PRICING OF SECURITIES
Equity securities listed or regularly traded on a
securities exchange (including NASDAQ) are valued at the last
quoted sales price at the time 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. Other equity securities and
those listed securities that are not traded on a particular day
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.
Debt securities are generally traded in the over-the-
counter market and are valued at a price deemed best to reflect
fair value as quoted by dealers who make markets in these
securities or by an independent pricing service. Short-term debt
securities are valued at their cost in local currency which, when
combined with accrued interest, approximates fair value.
For purposes of determining each 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 Funds, as authorized
by the Board of Directors.
Trading in the portfolio securities of each Fund may
take place in various foreign markets on certain days (such as
Saturday) when the Funds are not open for business and do not
calculate their net asset values. In addition, trading in a
Fund's portfolio securities may not occur on days when the Fund
is open. The calculation of each Fund's net asset value normally
will not take place contemporaneously with the determination of
the value of the Fund's portfolio securities. Events affecting
the values of portfolio securities that occur between the time
their prices are determined and the time each Fund's net asset
value is calculated will not be reflected in the Fund's net asset
PAGE 146
value unless Price-Fleming, under the supervision of the Fund's
Board of Directors, determines that the particular event should
be taken into account in computing the Fund's net asset value.
NET ASSET VALUE PER SHARE
The purchase and redemption price of each Fund's shares
is equal to that Fund's net asset value per share or share price.
Each Fund determines its net asset value per share by subtracting
its liabilities (including accrued expenses and dividends
payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including
income accrued but not yet received) and dividing the result by
the total number of shares outstanding. The net asset value per
share of each Fund, other than the Japan Fund, is calculated as
of the close of trading on the New York Stock Exchange ("NYSE")
every day the NYSE is open for trading. The net asset value per
share of the Japan Fund is calculated as of the close of trading
on the NYSE each day the NYSE and the Tokyo Stock Exchange
("TSE") are both open. The NYSE is closed on the following days:
New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The TSE is scheduled to be closed on the following week days in
1995: January 2, 3, 16; March 21; May 3, 4, 5; September 15;
October 10; and November 3, 23, as well as the following weeks
days in 1996: January 1, 2, 3, 15; February 12; March 20; April
29; May 3, 6; September 16, 23; October 10; November 4; and
December 23, 31. If the TSE closes on any additional or
different dates, the Japan Fund will be closed on such dates.
Determination of net asset value (and the offering,
sale, redemption and repurchase of shares) for a Fund may be
suspended at times (a) during which the NYSE is closed, other
than customary weekend and holiday closings, or in the case of
the Japan Fund, either the NYSE or TSE is closed, (b) during
which trading on any of such Exchanges is restricted (c) during
which an emergency exists as a result of which disposal by a Fund
of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Fund fairly to determine the
value of its net assets, or (d) during which a governmental body
having jurisdiction over the Fund may by order permit such a
suspension for the protection of the Fund's shareholders;
provided that applicable rules and regulations of the Securities
and Exchange Commission (or any succeeding governmental
authority) shall govern as to whether the conditions prescribed
in (b), (c) or (d) exist.
PAGE 147
DIVIDENDS
Unless you elect otherwise, dividends and capital gain
distributions will be reinvested on the reinvestment date using
the NAV per share of that date. The reinvestment date normally
precedes the payment date by about 10 days although the exact
timing is subject to change.
TAX STATUS
Each Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986,
as amended ("Code").
Dividends and distributions paid by the Funds are not
eligible for the dividends-received deduction for corporate
shareholders, if as expected, none of the Fund's income consists
of dividends paid by United States corporations. Capital gain
distributions paid from these Funds are never eligible for this
deduction. For tax purposes, it does not make any difference
whether dividends and capital gain distributions are paid in cash
or in additional shares. Each Fund must declare dividends by
December 31 of each year equal to at least 98% of ordinary income
(as of December 31) and capital gains (as of October 31) in order
to avoid a federal excise tax and distribute within 12 months
100% of ordinary income and capital gains as of December 31 to
avoid federal income tax.
Foreign currency gains and losses, including the portion
of gain or loss on the sale of debt securities attributable to
foreign exchange rate fluctuations are taxable as ordinary
income. If the net effect of these transactions is a gain, the
ordinary income dividend paid by the fund will be increased; if
the result is a loss, a portion of its ordinary income dividend
may be classified as a return of capital. Adjustments, to
reflect these gains and losses will be made at the end of each
Fund's taxable year.
At the time of your purchase, each Fund's net asset
value may reflect undistributed income, capital gains or net
unrealized appreciation or depreciation of securities held by
each Fund. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be
taxable either as dividends or capital gain distributions. For
PAGE 148
federal income tax purposes, each Fund is permitted to carry
forward its net realized capital losses, if any, for eight years,
and realize net capital gains up to the amount of such losses
without being required to pay taxes on, or distribute such gains.
On October 31, 1994, the books of each Fund indicated that each
Fund's aggregate net assets included undistributed net income,
net realized capital gains or losses, and unrealized appreciation
or depreciation which are listed below.
Net Realized
Undistributed Capital Unrealized
Fund Net Income Gains (Losses) Appreciation
International Stock $54,550,000 $297,258,000 $806,617,000
International Discovery1,537,000 22,517,000 45,862,000
European Stock 3,579,000 642,000 42,827,000
Japan 0 12,586,000 8,461,000
New Asia 15,701,000 198,053,000 197,828,000
Foreign Equity 9,429,000 39,249,000 114,861,000
Net Realized
Undistributed Capital Unrealized
Fund Net Income Gains (Losses) Depreciation
Latin America $0 ($2,386,000) $76,000
Income received by each Fund from sources within various
foreign countries may be subject to foreign income taxes withheld
at the source. Under the Code, if more than 50% of the value of
a Fund's total assets at the close of its taxable year comprise
securities issued by foreign corporations or governments, the
Fund may file an election with the Internal Revenue Service to
"pass through" to the Fund's shareholders the amount of any
foreign income taxes paid by the Fund. Pursuant to this
election, shareholders will be required to: (i) include in gross
income, even though not actually received, their respective pro
rata share of foreign taxes paid by the Fund; (ii) treat their
pro rata share of foreign taxes as paid by them; and (iii) either
deduct their pro rata share of foreign taxes in computing their
taxable income, or use it as a foreign tax credit against U.S.
income taxes (but not both). No deduction for foreign taxes may
be claimed by a shareholder who does not itemize deductions.
Each Fund intends to meet the requirements of the Code
to "pass through" to its shareholders foreign income taxes paid,
but there can be no assurance that a Fund will be able to do so.
Each shareholder will be notified within 60 days after the close
PAGE 149
of each taxable year of a Fund, if that Fund will "pass through"
foreign taxes paid for that year, and, if so, the amount of each
shareholder's pro rata share (by country) of (i) the foreign
taxes paid, and (ii) the Fund's gross income from foreign
sources. Of course, shareholders who are not liable for federal
income taxes, such as retirement plans qualified under Section
401 of the Code, will not be affected by any such "pass through"
of foreign tax credits.
If, in any taxable year, a Fund should not qualify as a
regulated investment company under the Code: (i) the Fund would
be taxed at normal corporate rates on the entire amount of its
taxable income without deduction for dividends or other
distributions to shareholders; (ii) the Fund's distributions to
the extent made out of the Fund's current or accumulated earnings
and profits would be taxable to shareholders as ordinary
dividends (regardless of whether they would otherwise have been
considered capital gain dividends), and the Funds may qualify for
the 70% deduction for dividends received by corporations; and
(iii) foreign tax credits would not "pass through" to
shareholders.
Taxation of Foreign Shareholders
The Code provides that dividends from net income (which
are deemed to include for this purpose each shareholder's pro
rata share of foreign taxes paid by each Fund - see discussion of
"pass through" of the foreign tax credit to U.S. shareholders),
will be subject to U.S. tax. For shareholders who are not
engaged in a business in the U.S., this tax would be imposed at
the rate of 30% upon the gross amount of the dividend in the
absence of a Tax Treaty providing for a reduced rate or exemption
from U.S. taxation. Distributions of net long-term capital gains
realized by each Fund are not subject to tax unless the foreign
shareholder is a nonresident alien individual who was physically
present in the U.S. during the tax year for more than 182 days.
CAPITAL STOCK
The T. Rowe Price International Funds, Inc. (the
"International Corporation") was organized in 1979, as a Maryland
corporation under the name T. Rowe Price International Fund, Inc.
("the Old Corporation"). Pursuant to the Annual Meeting of
Shareholders held on April 22, 1986, an Agreement and Plan of
Reorganization and Liquidation was adopted in order to convert
the Old Corporation from a Maryland corporation to a
PAGE 150
Massachusetts Business Trust, named the T. Rowe Price
International Trust ("the Trust"). This conversion became
effective on May 1, 1986. Pursuant to the Annual Meeting of
Shareholders held on April 19, 1990, an Agreement and Plan of
Reorganization and Liquidation was adopted in order to convert
the Trust from a Massachusetts Business Trust to a Maryland
corporation. This conversion become effective May 1, 1990. The
Institutional International Funds, Inc. (the "Institutional
Corporation") was organized in 1989, as a Maryland corporation.
Each Corporation is registered with the Securities and Exchange
Commission under the 1940 Act as a diversified, open-end
investment company, commonly known as a "mutual fund."
Currently, the International Corporation consists of
twelve series, each of which represents a separate class of the
Corporation's shares and has different objectives and investment
policies. The International Bond Fund was added as a separate
series of the Trust in 1986, and the designation of the existing
series of the Trust was, at that time, changed to the
International Stock Fund. In 1988 and 1990, respectively, the
International Discovery and European Stock Funds were added as
separate series of the Trust. Effective May 1, 1990, all series
of the Trust became series of the Corporation. In the same year,
after the May 1, 1990 reorganization, the New Asia and Global
Government Bond Funds were added as separate series of the
Corporation. The Japan, Short-Term Global Income, Latin America,
Emerging Markets Bond Funds, were added as separate series of the
Corporation in 1991, 1992, 1993, and 1994, respectively. The
Emerging Markets Stock, and Global Stock Funds were both added as
separate series of the Corporation in 1995. The Short-Term
Global Income, Global Government Bond, International Bond, and
Emerging Markets Bond Funds are described in a separate Statement
of Additional Information. Currently, the Institutional
Corporation consists of one series, which was added in 1990 to
the Corporation. Each Charter also provides that the Board of
Directors may issue additional series of shares.
Each Funds' Charter authorizes the Board of Directors to
classify and reclassify any and all shares which are then
unissued, including unissued shares of capital stock into any
number of classes or series, each class or series consisting of
such number of shares and having such designations, such powers,
preferences, rights, qualifications, limitations, and
restrictions, as shall be determined by the Board subject to the
Investment Company Act and other applicable law. The shares of
any such additional classes or series might therefore differ from
the shares of the present class and series of capital stock and
PAGE 151
from each other as to preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption, subject to
applicable law, and might thus be superior or inferior to the
capital stock or to other classes or series in various
characteristics. The Board of Directors may increase or decrease
the aggregate number of shares of stock or the number of shares
of stock of any class or series that each Fund has authorized to
issue without shareholder approval.
Each share of each series has equal voting rights with
every other share of every other series, and all shares of all
series vote as a single group except where a separate vote of any
class or series is required by the 1940 Act, the laws of the
State of Maryland, the Corporation's Articles of Incorporation,
the By-Laws of the Corporation, or as the Board of Directors may
determine in its sole discretion. Where a separate vote is
required with respect to one or more classes or series, then the
shares of all other classes or series vote as a single class or
series, provided that, as to any matter which does not affect the
interest of a particular class or series, only the holders of
shares of the one or more affected classes or series is entitled
to vote. The preferences, rights, and other characteristics
attaching to any series of shares, including the present series
of capital stock, might be altered or eliminated, or the series
might be combined with another series, by action approved by the
vote of the holders of a majority of all the shares of all series
entitled to be voted on the proposal, without any additional
right to vote as a series by the holders of the capital stock or
of another affected series.
Shareholders are entitled to one vote for each full
share held (and fractional votes for fractional shares held) and
will vote in the election of or removal of directors (to the
extent hereinafter provided) and on other matters submitted to
the vote of shareholders. There will normally be no meetings of
shareholders for the purpose of electing directors unless and
until such time as less than a majority of the directors holding
office have been elected by shareholders, at which time the
directors then in office will call a shareholders' meeting for
the election of directors. Except as set forth above, the
directors shall continue to hold office and may appoint successor
directors. Voting rights are not cumulative, so that the holders
of more than 50% of the shares voting in the election of
directors can, if they choose to do so, elect all the directors
of the Fund, in which event the holders of the remaining shares
will be unable to elect any person as a director. As set forth
PAGE 152
in the By-Laws of the Corporation, a special meeting of
shareholders of the Corporation shall be called by the Secretary
of the Corporation on the written request of shareholders
entitled to cast at least 10% of all the votes of the
Corporation, entitled to be cast at such meeting. Shareholders
requesting such a meeting must pay to the Corporation the
reasonably estimated costs of preparing and mailing the notice of
the meeting. The Corporation, however, will otherwise assist the
shareholders seeking to hold the special meeting in communicating
to the other shareholders of the Corporation to the extent
required by Section 16(c) of the 1940 Act.
FEDERAL AND STATE REGISTRATION OF SHARES
Each Fund's shares are registered for sale under the
Securities Act of 1933, and the Funds or their shares are
registered under the laws of all states which require
registration, as well as the District of Columbia and Puerto
Rico.
LEGAL COUNSEL
Shereff, Friedman, Hoffman, & Goodman LLP, whose address
is 919 Third Avenue, New York, New York 10022, is legal counsel
to the Funds.
INDEPENDENT ACCOUNTANTS
Global Stock Fund
_________________________, Baltimore, Maryland 21202 are
independent accountants to the Fund.
International Stock, International Discovery, European Stock,
Japan, Latin America, and Emerging Markets Stock Funds
Price Waterhouse LLP, 7 St. Paul Street, Suite 1700,
Baltimore, Maryland 21202, are independent accountants to each
Fund.
The financial statements of the International Stock,
International Discovery, European Stock, Japan, and Latin America
Funds for the year ended October 31, 1994, and the report of
independent accountants are included in each Fund's Annual Report
PAGE 153
for the year ended October 31, 1994. A copy of each Annual and
Semi-Annual Report accompanies this Statement of Additional
Information. The following financial statements and the report
of independent accountants appearing in each Annual Report for
the year ended October 31, 1994, and each Fund's unaudited Semi-
Annual Report for the six months ended April 30, 1995, are
incorporated into this Statement of Additional Information by
reference:
ANNUAL REPORT REFERENCES:
INTERNATIONAL
STOCK FUND
______________
Report of Independent Accountants 19
Statement of Net Assets, October 31, 1994 8-14
Statement of Operations, year ended
October 31, 1994 14
Statement of Changes in Net Assets, year ended
October 31, 1994, ten months ended October 31,
1993, and year ended December 31, 1992 15
Notes to Financial Statements
October 31, 1994 16-18
Financial Highlights 18
INTERNATIONAL
DISCOVERY FUND
_________________
Report of Independent Accountants 23
Portfolio of Investments, October 31, 1994 7-16
Statement of Assets and Liabilities,
October 31, 1994 17
Statement of Operations, year ended
October 31, 1994 18
Statement of Changes in Net Assets, year ended
October 31, 1994, ten months ended October 31,
1993, and year ended December 31, 1992 19
Notes to Financial Statements
October 31, 1994 20-21
Financial Highlights 22
PAGE 154
EUROPEAN
STOCK FUND
_____________
Report of Independent Accountants 17
Statement of Net Assets, October 31, 1994 6-11
Statement of Operations, year ended
October 31, 1994 12
Statement of Changes in Net Assets, year ended
October 31, 1994, ten months ended October 31, 1993,
and year ended December 31, 1992 13
Notes to Financial Statements, October 31, 1994 14-15
Financial Highlights 16
JAPAN FUND
_____________
Report of Independent Accountants 12
Statement of Net Assets, October 31, 1994 5-6
Statement of Operations, year ended October 31, 1994 7
Statement of Changes in Net Assets, year ended
October 31, 1994, ten months ended October 31, 1993
and December 30, 1991 (Commencement of Operations)
to December 31, 1992 8
Notes to Financial Statements, October 31, 1994 9-10
Financial Highlights 11
LATIN AMERICA
FUND
_______________
Report of Independent Accountants 14
Statement of Net Assets, October 31, 1994 6-8
Statement of Operations, December 29, 1993
(Commencement of Operations) to October 31, 1994 9
Statement of Changes in Net Assets, December 29, 1993
(Commencement of Operations) to October 31, 1994 10
Notes to Financial Statements, October 31, 1994 11-12
Financial Highlights 13
PAGE 155
SEMI-ANNUAL REPORT REFERENCES:
INTERNATIONAL
STOCK FUND
______________
Statement of Net Assets, April 30, 1995 (unaudited) 5-11
Statement of Operations, six months ended
April 30, 1995 (unaudited) 12
Statement of Changes in Net Assets, six months
ended April 30, 1995 (unaudited), and year ended
October 31, 1994 13
Notes to Financial Statements,
April 30, 1995 (unaudited) 13-15
Financial Highlights (unaudited) 15
INTERNATIONAL
DISCOVERY FUND
_________________
Statement of Net Assets, April 30, 1995 (unaudited) 5-14
Statement of Operations, six months ended
April 30, 1995 (unaudited) 15
Statement of Changes in Net Assets, six months
ended April 30, 1995 (unaudited), and year ended
October 31, 1994 16
Notes to Financial Statements,
April 30, 1995 (unaudited) 17-18
Financial Highlights (unaudited) 19
EUROPEAN
STOCK FUND
_____________
Statement of Net Assets, April 30, 1995 (unaudited) 4-9
Statement of Operations, six months ended
April 30, 1995 (unaudited) 10
Statement of Changes in Net Assets, six months
ended April 30, 1995 (unaudited), and year ended
October 31, 1994 11
Notes to Financial Statements,
April 30, 1995 (unaudited) 12-13
Financial Highlights (unaudited) 14
PAGE 156
JAPAN FUND
_____________
Statement of Net Assets, April 30, 1995 (unaudited) 4-5
Statement of Operations, six months ended
April 30, 1995 (unaudited) 6
Statement of Changes in Net Assets, six months
ended April 30, 1995 (unaudited), and year ended
October 31, 1994 7
Notes to Financial Statements,
April 30, 1995 (unaudited) 8-9
Financial Highlights (unaudited) 10
LATIN AMERICA
FUND
_______________
Statement of Net Assets, April 30, 1995 (unaudited) 4-6
Statement of Operations, six months ended
April 30, 1995 (unaudited) 7
Statement of Changes in Net Assets, six months ended
April 30, 1995, and December 29, 1993 (Commencement
of Operations) to October 31, 1994 8
Notes to Financial Statements,
April 30, 1995 (unaudited) 9-10
Financial Highlights (unaudited) 11
EMERGING MARKETS
STOCK FUND
_________________
Portfolio of Investments, April 30, 1995 (unaudited) 4-5
Statement of Assets and Liabilities,
April 30, 1995 (unaudited) 6
Statement of Operations, March 31, 1995 (Commencement
of Operations) to April 30, 1995 (unaudited) 7
Statement of Changes in Net Assets, March 31, 1995
(Commencement of Operations) to
April 30, 1995 (unaudited) 8
Notes to Financial Statements,
April 30, 1995 (unaudited) 9-10
Financial Highlights (unaudited) 11
PAGE 157
Foreign Equity and New Asia Funds
Coopers & Lybrand L.L.P., 217 East Redwood Street, Baltimore,
Maryland 21202, are independent accountants to each Fund. The
financial statements of the New Asia and Foreign Equity Funds for
the year ended October 31, 1994, and the report of independent
accountants are included in each Fund's Annual Report accompanies
this Statement of Additional Information. A copy of the Semi-
Annual Report for New Asia also accompanies this Statement of
Additional Information. The following financial statements and
the report of independent accountants appearing in each Annual
Report for the year ended October 31, 1994, and the New Asia
Fund's unaudited Semi-Annual Report for the six months ended
April 30, 1995, are incorporated into this Statement of
Additional Information by reference:
Effective November 1, 1995, Price Waterhouse LLP became the
independent accountants to the Foreign Equity and New Asia
Funds.
NEW ASIA
FUND ANNUAL
REPORT PAGE
___________
Report of Independent Accountants 15
Portfolio of Investments 6-9
Statement of Assets and Liabilities,
October 31, 1994 9
Statement of Operations, year ended
October 31, 1994 10
Statement of Changes in Net Assets, year
ended October 31, 1994, ten months ended
October 31, 1993 and year ended
December 31, 1992 11
Notes to Financial Statements,
October 31, 1994 12-13
Financial Highlights 14
PAGE 158
NEW ASIA
FUND SEMI-ANNUAL
REPORT PAGE
___________
Portfolio of Investments, April 30, 1995 (unaudited) 5-8
Statement of Assets and Liabilities,
April 30, 1995 (unaudited) 8
Statement of Operations, six months ended
April 30, 1995 (unaudited) 9
Statement of Changes in Net Assets, six months
ended April 30, 1995 (unaudited), and year ended
October 31, 1994 10
Notes to Financial Statements,
April 30, 1995 (unaudited) 11-12
Financial Highlights (unaudited) 13
FOREIGN EQUITY
FUND ANNUAL
REPORT PAGE
_______________
Report of Independent Accountants 23
Statement of Net Assets, October 31, 1994 8-17
Statement of Operations, year ended
October 31, 1994 18
Statement of Changes in Net Assets, year
ended October 31, 1994, ten months ended
October 31, 1993 and year ended
December 31, 1992 19
Notes to Financial Statements,
October 31, 1994 20-21
Financial Highlights 22
PAGE 159
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements.
International Stock, International Discovery, European
Stock, New Asia, Japan, Latin America, and Emerging Markets
Stock Funds
Condensed Financial Information (Financial Highlights) for
the Funds is included in Part A of the Registration
Statement.
Statement of Net Assets, Statement of Operations, and
Statement of Changes in Net Assets of the International
Stock, International Discovery, European Stock, New Asia,
Japan, and Latin America Funds are included in each Fund's
Annual Report to Shareholders, and in the Semi-Annual Report
for the Emerging Markets Stock Fund, the pertinent portions
of which are incorporated by reference in Part B of the
Registration Statement.
Global Stock Fund:
Inapplicable.
(b) Exhibits.
(1)(a) Articles of Amendment and Restatement of T. Rowe
Price International Funds, Inc., dated February 16,
1990 (electronically filed with Amendment No. 42
dated February 28, 1994)
(1)(b) Articles Supplementary of T. Rowe Price
International Funds, Inc., dated March 4, 1991
(1)(c) Articles of Amendment of T. Rowe Price International
Funds, Inc., dated May 1, 1991
(1)(d) Articles Supplementary of T. Rowe Price
International Funds, Inc., dated October 18, 1991
PAGE 160
(1)(e) Articles Supplementary of T. Rowe Price
International Funds, Inc., dated May 4, 1992
(electronically filed with Amendment No. 44 dated
December 22, 1994)
(1)(f) Articles Supplementary of T. Rowe Price
International Funds, Inc., dated November 4, 1993
(electronically filed with Amendment No. 41 dated
December 16, 1993)
(1)(g) Articles Supplementary of T. Rowe Price
International Funds, Inc. dated February 18, 1994
(electronically filed with Amendment No. 42 dated
February 28, 1994)
(1)(h) Articles Supplementary of T. Rowe Price
International Funds, Inc. dated November 2, 1994
(electronically filed with Amendment No. 44 dated
December 22, 1994)
(1)(i) Articles Supplementary of T. Rowe Price
International Funds, Inc. dated January 25, 1995
(electronically filed with Amendment No. 49 dated
March 22, 1995)
(1)(j) Articles Supplementary of T. Rowe Price
International Funds, Inc. dated October 11, 1995
(2) By-Laws of Registrant, as amended to May 1, 1991 and
September 30, 1993 (electronically filed with
Amendment No. 41 dated December 16, 1993)
(3) Inapplicable
(4)(a) Specimen Stock Certificate for International Bond
Fund (filed with Amendment No. 10)
(4)(b) Specimen Stock Certificate for International Stock
Fund (filed with Amendment No. 10)
(4)(c) Specimen Stock Certificate for International
Discovery Fund (filed with Amendment No. 14)
(4)(d) Specimen Stock Certificate for European Stock Fund
(filed with Amendment No. 18)
PAGE 161
(4)(e) Specimen Stock Certificate for New Asia Fund (filed
with Amendment No. 21)
(4)(f) Specimen Stock Certificate for Global Government
Bond Fund (filed with Amendment No. 24)
(4)(g) T. Rowe Price Japan Fund and T. Rowe Price Short-
Term Global Income Fund. See Article FIFTH, Capital
Stock, Paragraphs (A)-(E) of the Articles of
Amendment and Restatement electronically filed with
Amendment No. 19, Article II, Shareholders, Sections
2.01-2.11 and Article VIII, Capital Stock, Sections
8.01-8.06 of the Bylaws (filed with Amendment No.
19)
(5)(a) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price International Bond Fund,
dated May 1, 1990 (electronically filed with
Amendment No. 42 dated February 28, 1994)
(5)(b) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price International Stock Fund,
dated May 1, 1990 (electronically filed with
Amendment No. 42 dated February 28, 1994)
(5)(c) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price International Discovery
Fund, dated May 1, 1991 (electronically filed with
Amendment No. 42 dated February 28, 1994)
(5)(d) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price European Stock Fund, dated
May 1, 1990 (electronically filed with Amendment No.
42 dated February 28, 1994)
(5)(e) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price New Asia Fund, dated May 1,
1991 (electronically filed with Amendment No. 42
dated February 28, 1994)
PAGE 162
(5)(f) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Global Government Bond Fund,
dated November 7, 1990 (electronically filed with
Amendment No. 42 dated February 28, 1994)
(5)(g) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Japan Fund, dated November
6, 1991 (electronically filed with Amendment No. 42
dated February 28, 1994)
(5)(h) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Short-Term Global Income
Fund, dated April 23, 1992 (electronically filed
with Amendment No. 42 dated February 28, 1994)
(5)(i) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Latin America Fund, dated
November 3, 1993 (electronically filed with
Amendment No. 41 dated December 16, 1993)
(5)(j) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Emerging Markets Bond Fund,
dated November 2, 1994 (electronically filed with
Amendment No. 44 dated December 22, 1994)
(5)(k) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Emerging Markets Stock Fund,
dated January 25, 1995 (electronically filed with
Amendment No. 49 dated March 22, 1995)
(5)(l) Investment Management Agreement between Registrant
and Rowe Price-Fleming International, Inc., on
behalf of T. Rowe Price Global Stock Fund, dated
November 1, 1995 (to be filed by Amendment)
(6) Underwriting Agreement between Registrant and T.
Rowe Price Investment Services, Inc., dated May 1,
1990 (electronically filed with Amendment No. 42
dated February 28, 1994)
(7) Inapplicable
PAGE 163
(8)(a) Custodian Agreement between T. Rowe Price Funds and
State Street Bank and Trust Company dated September
28, 1987, as amended June 24, 1988, October 19,
1988, February 22, 1989, July 19, 1989, September
15, 1989, December 15, 1989, December 20, 1989,
January 25, 1990, February 21, 1990, June 12, 1990,
July 18, 1990, October 15, 1990, February 13, 1991,
March 6, 1991, September 12, 1991, November 6, 1991,
April 23, 1992, September 2, 1992, November 3, 1992,
December 16, 1992, December 21, 1992, January 28,
1993, April 22, 1993, September 16, 1993, November
3, 1993, March 1, 1994, April 21, 1994, July 27,
1994, September 21, 1994, November 1, 1994, November
2, 1994, and January 25, 1995 (to be filed by
Amendment)
(8)(b) Global Custody Agreement between The Chase Manhattan
Bank, N.A. and T. Rowe Price Funds, dated January 3,
1994, as amended April 18, 1994, August 15, 1994,
and November 28, 1994 (to be filed by Amendment)
(9)(a) Transfer Agency and Service Agreement between T.
Rowe Price Services, Inc. and T. Rowe Price Funds,
dated January 1, 1995, as amended January 25, 1995
(to be filed by Amendment)
(9)(b) Agreement between T. Rowe Price Associates, Inc. and
T. Rowe Price Funds for Fund Accounting Services,
dated January 1, 1995, as amended January 25, 1995
(to be filed by Amendment)
(9)(c) Agreement between T. Rowe Price Retirement Plan
Services, Inc. and the Taxable Funds, dated January
1, 1995, as amended January 25, 1995 (to be filed by
Amendment)
(10) Inapplicable
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
PAGE 164
(15) Inapplicable
(16)(a) Total Return Performance Methodology
(16)(b) T. Rowe Price Global Government Bond Fund; T. Rowe
Price International Bond Fund; and T. Rowe Price
Short-Term Global Income Fund. The Registrant
hereby incorporates by reference the methodology
used in calculating the performance information
included in Post-Effective Amendment No. 34 and
Amendment No. 12 of the T. Rowe Price New Income
Fund, Inc. (SEC. File Nos. 2-48848 and 811-2396)
dated April 27, 1988.
(17) Financial Data Schedule for T. Rowe Price
International Discovery Fund, T. Rowe Price
International Stock Fund, T. Rowe Price European
Stock Fund, T. Rowe Price New Asia Fund, T. Rowe
Price Japan Fund, and T. Rowe Price Latin America
Fund and Emerging Markets Stock Fund as of April 30,
1995.
Item 25. Persons Controlled by or Under Common Control With
Registrant.
None.
Item 26. Number of Holders of Securities
As of September 30, 1995, there were 262,058 shareholders in
the T. Rowe Price International Stock Fund.
As of September 30, 1995, there were 33,262 shareholders in
the T. Rowe Price International Discovery Fund.
As of September 30, 1995, there were 37,041 shareholders in
the T. Rowe Price European Stock Fund.
As of September 30, 1995, there were 169,157 shareholders in
the T. Rowe Price New Asia Fund.
As of September 30, 1995, there were 2,203 shareholders in
the T. Rowe Price Global Government Bond Fund.
As of September 30, 1995, there were 28,060 shareholders in
the T. Rowe Price International Bond Fund.
PAGE 165
As of September 30, 1995, there were 2,556 shareholders in
the T. Rowe Price Short-Term Global Income Fund.
As of September 30, 1995, there were 17,709 shareholders in
the T. Rowe Price Japan Fund.
As of September 30, 1995, there were 26,185 shareholders in
the T. Rowe Price Latin America Fund.
As of September 30, 1995, there were 561 shareholders in the
T. Rowe Price Emerging Markets Bond Fund.
As of September 30, 1995, there were 1,888 shareholders in
the T. Rowe Price Emerging Markets Stock Fund.
As of October 12, 1995, there were zero shareholders in the
T. Rowe Price Global Stock Fund.
Item 27. Indemnification
The Registrant maintains comprehensive Errors and Omissions
and Officers and Directors insurance policies written by the
Evanston Insurance Company, The Chubb Group and ICI Mutual.
These policies provide coverage for the named insureds, which
include T. Rowe Price Associates, Inc. ("Price Associates"), Rowe
Price-Fleming International, Inc., T. Rowe Price Investment
Services, Inc., T. Rowe Price Services, Inc., T. Rowe Price Trust
Company, T. Rowe Price Stable Asset Management, Inc., RPF
International Bond Fund and thirty-nine other investment
companies, namely, T. Rowe Price Growth Stock Fund, Inc., T. Rowe
Price New Horizons Fund, Inc., T. Rowe Price New Era Fund, Inc.,
T. Rowe Price New Income Fund, Inc., T. Rowe Price Prime Reserve
Fund, Inc., T. Rowe Price Tax-Free Income Fund, Inc., T. Rowe
Price Tax-Exempt Money Fund, Inc., T. Rowe Price Growth & Income
Fund, Inc., T. Rowe Price Tax-Free Short-Intermediate Fund, Inc.,
T. Rowe Price Short-Term Bond Fund, Inc., T. Rowe Price High
Yield Fund, Inc., T. Rowe Price Tax-Free High Yield Fund, Inc.,
T. Rowe Price New America Growth Fund, T. Rowe Price Equity
Income Fund, T. Rowe Price GNMA Fund, T. Rowe Price Capital
Appreciation Fund, T. Rowe Price State Tax-Free Income Trust, T.
Rowe Price California Tax-Free Income Trust, T. Rowe Price
Science & Technology Fund, Inc., T. Rowe Price Small-Cap Value
Fund, Inc., Institutional International Funds, Inc., T. Rowe
Price U.S. Treasury Funds, Inc., T. Rowe Price Index Trust, Inc.,
T. Rowe Price Spectrum Fund, Inc., T. Rowe Price Balanced Fund,
Inc., T. Rowe Price Adjustable Rate U.S. Government Fund, Inc.,
T. Rowe Price Mid-Cap Growth Fund, Inc., T. Rowe Price OTC Fund,
PAGE 166
Inc., T. Rowe Price Tax-Free Insured Intermediate Bond Fund,
Inc., T. Rowe Price Dividend Growth Fund, Inc., T. Rowe Price
Blue Chip Growth Fund, Inc., T. Rowe Price Summit Funds, Inc., T.
Rowe Price Summit Municipal Funds, Inc., T. Rowe Price Equity
Series, Inc., T. Rowe Price International Series, Inc., T. Rowe
Price Fixed Income Series, Inc., T. Rowe Price Personal Strategy
Funds, Inc., T. Rowe Price Value Fund, Inc., and T. Rowe Price
Capital Opportunity Fund, Inc. The Registrant and the thirty-
nine investment companies listed above with the exception of
Institutional International Funds, Inc., will be collectively
referred to as the Price Funds. The investment manager for the
Price Funds, except for T. Rowe Price International Funds, Inc.
and T. Rowe Price International Series, Inc., is the Manager.
Price-Fleming is the manager to T. Rowe Price International
Funds, Inc., T. Rowe Price International Series, Inc. and
Institutional International Funds, Inc. and is 50% owned by TRP
Finance, Inc., a wholly-owned subsidiary of the Manager, 25%
owned by Copthall Overseas Limited, a wholly-owned subsidiary of
Robert Fleming Holdings Limited, and 25% owned by Jardine Fleming
Holdings Limited. In addition to the corporate insureds, the
policies also cover the officers, directors, and employees of
each of the named insureds. The premium is allocated among the
named corporate insureds in accordance with the provisions of
Rule 17d-1(d)(7) under the Investment Company Act of 1940.
Article X, Section 10.01 of the Registrant's By-Laws
provides as follows:
Section 10.01. Indemnification and Payment of Expenses
in Advance: The Corporation shall indemnify any individual
("Indemnitee") who is a present or former director, officer,
employee, or agent of the Corporation, or who is or has been
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, who,
by reason of his position was, is, or is threatened to be
made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter collectively
referred to as a "Proceeding") against any judgments,
penalties, fines, settlements, and reasonable expenses
(including attorneys' fees) incurred by such Indemnitee in
connection with any Proceeding, to the fullest extent that
such indemnification may be lawful under Maryland law. The
Corporation shall pay any reasonable expenses so incurred by
such Indemnitee in defending a Proceeding in advance of the
final disposition thereof to the fullest extent that such
PAGE 167
advance payment may be lawful under Maryland law. Subject
to any applicable limitations and requirements set forth in
the Corporation's Articles of Incorporation and in these By-
Laws, any payment of indemnification or advance of expenses
shall be made in accordance with the procedures set forth in
Maryland law.
Notwithstanding the foregoing, nothing herein shall
protect or purport to protect any Indemnitee against any
liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of
his office ("Disabling Conduct").
Anything in this Article X to the contrary
notwithstanding, no indemnification shall be made by the
Corporation to any Indemnitee unless:
(a) there is a final decision on the merits by a court
or other body before whom the Proceeding was
brought that the Indemnitee was not liable by
reason of Disabling Conduct; or
(b) in the absence of such a decision, there is a
reasonable determination, based upon a review of
the facts, that the Indemnitee was not liable by
reason of Disabling Conduct, which determination
shall be made by:
(i) the vote of a majority of a quorum of
directors who are neither "interested
persons" of the Corporation as defined in
Section 2(a)(19) of the Investment Company
Act of 1940, nor parties to the Proceeding;
or
(ii) an independent legal counsel in a written
opinion.
Anything in this Article X to the contrary
notwithstanding, any advance of expenses by the Corporation
to any Indemnitee shall be made only upon the undertaking by
such Indemnitee to repay the advance unless it is ultimately
determined that such Indemnitee is entitled to
indemnification as above provided, and only if one of the
following conditions is met:
PAGE 168
(a) the Indemnitee provides a security for his
undertaking; or
(b) the Corporation shall be insured against losses
arising by reason of any lawful advances; or
(c) there is a determination, based on a review of
readily available facts, that there is reason to
believe that the Indemnitee will ultimately be
found entitled to indemnification, which
determination shall be made by:
(i) a majority of a quorum of directors who are
neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of
the Investment Company Act, nor parties to
the Proceeding; or
(ii) an independent legal counsel in a written
opinion.
Section 10.02 of the Registrant's By-Laws provides as
follows:
Section 10.02. Insurance of Officers, Directors,
Employees and Agents: To the fullest extent permitted by
applicable Maryland law and by Section 17(h) of the
Investment Company Act, as from time to time amended, the
Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee, or
agent of the Corporation, or who is or was serving at the
request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against any liability asserted
against him and incurred by him in or arising out of his
position, whether or not the Corporation would have the
power to indemnify him against such liability.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
PAGE 169
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Manager.
M. David Testa, who is Chairman of the Board of the Manager, is
presently a Director and Managing Director of Price Associates
and a Director of T. Rowe Price Trust Company.
George J. Collins, a Director of the Manager, is Chief Executive
Officer, President, and a Managing Director of Price Associates.
D. William J. Garrett, a Director of the Manager, is Chairman of
Robert Fleming Securities Limited, a Director of Robert Fleming
Holdings Limited ("Robert Fleming Holdings"), a parent of the
Manager which is a United Kingdom holding company duly organized
and existing under the laws of the United Kingdom, Robert Fleming
Management Services Limited, Robert Fleming Management Services
Limited, Robert Fleming & Co. Limited, and Fleming Investments
Limited. Mr. Garrett also serves as Director and/or officer of
other companies related to or affiliated with the above listed
companies.
P. John Manser, a Director of the Manager, is Chief Executive of
Robert Fleming Holdings, Chairman of Robert Fleming & Co.
Limited, Director of Jardine Fleming Group Limited, Robert
Fleming Management Services Limited, Fleming Investment
Management Limited, Robert Fleming Asset Management Limited,
Jardine Fleming Holdings Limited, and Robert Fleming Asset
Management Limited and also serves as a director of the U.K.
Securities and Investments Board. Mr. Manser also serves as
Director and/or officer of other companies related to or
affiliated with the above listed companies.
James S. Riepe, a Director of T. Rowe Price; Chairman of the
Board, T. Rowe Price Services, Inc., T. Rowe Price Retirement
Plan Services, Inc. and T. Rowe Price Trust Company; President
PAGE 170
and Director, T. Rowe Price Investment Services, Inc.; Director,
Rhone-Poulenc Rorer, Inc.
George A. Roche, a Vice President and a Director of the Manager,
is Chief Financial Officer and a Managing Director of Price
Associates.
Alan H. Smith, a Director of the Manager, is Managing Director of
Jardine Fleming Group Limited and Jardine Fleming Holdings
Limited, Chairman of Jardine Fleming Investment Management
Limited, Jardine Fleming & Company Limited and Jardine Fleming
Securities Limited and a Director of Robert Fleming Holdings.
Mr. Smith also serves as Director and/or officer of other
companies related to or affiliated with the above listed
companies.
Henry C. T. Strutt, a Director of the Manager, is Managing
Director and General Manager of Jardine Fleming Holdings Ltd. and
Director of Robert Fleming Holdings Ltd.
Alvin M. Younger, Jr., the Secretary and Treasurer of the
Manager, is a Managing Director and the Secretary and Treasurer
of Price Associates.
Martin G. Wade, President, Price-Fleming; Director, Robert
Fleming Holdings Limited.
With the exception of Christopher D. Alderson, Peter B. Askew,
Richard J. Bruce, Ann B. Cranmer, Mark J. T. Edwards, John R.
Ford, Christopher Rothery, James B. M. Seddon, Benedict R. F.
Thomas, David J. L. Warren, and Martin G. Wade, all officers of
the Manager are officers and/or employees of Price Associates and
may also be officers and/or directors of one or more subsidiaries
of Price Associates and/or one or more of the registered
investment companies which Price Associates or the Manager serves
as investment adviser. Mr. Ilott is an employee of Fleming
Investment Management Limited, an investment adviser registered
under the Investment Advisers Act of 1940. Ms. Cranmer is an
employee of Fleming Investment Management Limited. Mr. Wade, who
is President of the Manager, is also a Non-Executive Director of
Robert Fleming Holdings.
RPFI International Partners, Limited Partnership, is a Delaware
limited partnership organized in 1985 for the purpose of
investing in a diversified group of small and medium-sized non-
U.S. companies. The Manager is the general partner of this
PAGE 171
partnership, and certain institutional investors, including
advisory clients of the Manager are its limited partners.
See also "Management of Fund," in the Registrant's Statement of
Additional Information.
Item 29. Principal Underwriters.
(a) The principal underwriter for the Registrant is
Investment Services. Investment Services acts as the principal
underwriter for the other sixty-nine Price Funds. Investment
Services is a wholly-owned subsidiary of the Manager, is
registered as a broker-dealer under the Securities Exchange Act
of 1934 and is a member of the National Association of Securities
Dealers, Inc. Investment Services has been formed for the
limited purpose of distributing the shares of the Price Funds and
will not engage in the general securities business. Since the
Price Funds are sold on a no-load basis, Investment Services will
not receive any commissions or other compensation for acting as
principal underwriter.
(b) The address of each of the directors and officers of
Investment Services listed below is 100 East Pratt Street,
Baltimore, Maryland 21202.
Positions and
Name and Principal Positions and Offices Offices With
Business Address With Underwriter Registrant
__________________ ______________________ ______________
James Sellers Riepe President and Director Vice President
Henry Holt Hopkins Vice President and Vice President
Director
Charles E. Vieth Vice President and None
Director
Mark E. Rayford Director None
Patricia M. Archer Vice President None
Edward C. Bernard Vice President None
Joseph C. Bonasorte Vice President None
Meredith C. Callanan Vice President None
Laura H. Chasney Vice President None
Victoria C. Collins Vice President None
Christopher W. Dyer Vice President None
Forrest R. Foss Vice President None
Patricia O'Neil Goodyear Vice President None
James W. Graves Vice President None
Andrea G. Griffin Vice President None
PAGE 172
David J. Healy Vice President None
Joseph P. Healy Vice President None
Walter J. Helmlinger Vice President None
Eric G. Knauss Vice President None
Douglas G. Kremer Vice President None
Sharon Renae Krieger Vice President None
Keith Wayne Lewis Vice President None
David L. Lyons Vice President None
Sarah McCafferty Vice President None
Maurice Albert Minerbi Vice President None
Nancy M. Morris Vice President None
George A. Murnaghan Vice President None
Steven Ellis Norwitz Vice President None
Kathleen M. O'Brien Vice President None
Pamela D. Preston Vice President None
Lucy Beth Robins Vice President None
John Richard Rockwell Vice President None
Monica R. Tucker Vice President None
William F. Wendler, II Vice President None
Terri L. Westren Vice President None
Jane F. White Vice President None
Thomas R. Woolley Vice President None
Alvin M. Younger, Jr. Secretary and None
Treasurer
Mark S. Finn Controller None
Richard J. Barna Assistant Vice President None
Catherine L. Berkenkemper Assistant Vice President None
Ronae M. Brock Assistant Vice President None
Brenda E. Buhler Assistant Vice President None
Patricia S. Butcher Assistant Vice President Assistant
Secretary
John A. Galateria Assistant Vice President None
Janelyn A. Healey Assistant Vice President None
Keith J. Langrehr Assistant Vice President None
C. Lillian Matthews Assistant Vice President None
Janice D. McCrory Assistant Vice President None
Sandra J. McHenry Assistant Vice President None
JeanneMarie B. Patella Assistant Vice President None
Kristin E. Seeberger Assistant Vice President None
Arthur J. Silber Assistant Vice President None
Nolan L. North Assistant Treasurer None
Barbara A. VanHorn Assistant Secretary None
(c) Not applicable. Investment Services will not receive
any compensation with respect to its activities as underwriter
for the Price Funds since the Price Funds are sold on a no-load
basis.
PAGE 173
Item 30. Location of Accounts and Records.
All accounts, books, and other documents required to be
maintained by T. Rowe Price International Funds, Inc. under
Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder will be maintained by T. Rowe Price International
Funds, Inc. at its offices at 100 East Pratt Street, Baltimore,
Maryland 21202. Transfer, dividend disbursing, and shareholder
service activities are performed by T. Rowe Price Services, Inc.,
at 100 East Pratt Street, Baltimore, Maryland 21202. Custodian
activities for T. Rowe Price International Funds, Inc. are
performed at State Street Bank and Trust Company's Service Center
(State Street South), 1776 Heritage Drive, Quincy, Massachusetts
02171. Custody of Fund portfolio securities which are purchased
outside the United States is maintained by The Chase Manhattan
Bank, N.A., London in its foreign branches or with other U.S.
banks. The Chase Manhattan Bank, N.A., London is located at
Woolgate House, Coleman Street, London EC2P 2HD, England.
Item 31. Management Services.
Registrant is not a party to any management related service
contract, other than as set forth in the Prospectus.
Item 32. Undertakings.
(a) Inapplicable.
(b) The Global Stock Fund will file, within four to six
months from the effective date of its registration
statement, a post-effective amendment using financial
statements which need not be certified.
(c) If requested to do so by the holders of at least 10% of
all votes entitled to be cast, the Registrant will call
a meeting of shareholders for the purpose of voting on
the question of removal of a director or directors and
will assist in communications with other shareholders
to the extent required by Section 16(c).
(d) Each series of the Registrant agrees to furnish, upon
request and without charge, a copy of its latest Annual
Report to each person to whom its prospectus is
delivered.
PAGE 174
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baltimore, State of Maryland, this
12th day of October, 1995.
T. ROWE PRICE INTERNATIONAL FUNDS,
INC.
/s/M. David Testa
By: M. David Testa,
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated:
SIGNATURE TITLE DATE
_________ ______ _____
/s/M. David Testa Chairman of the Board October 12, 1995
M. David Testa (Chief Executive Officer)
/s/Carmen F. Deyesu Treasurer October 12, 1995
Carmen F. Deyesu (Chief Financial Officer)
/s/Martin G. Wade President and Director October 12, 1995
Martin G. Wade
* Director October 12, 1995
Leo C. Bailey
* Director October 12, 1995
Anthony W. Deering
* Director October 12, 1995
Donald W. Dick, Jr.
* Director October 12, 1995
Addison Lanier
*/s/Henry H. Hopkins, Attorney-In-Fact
Henry H. Hopkins, Attorney-In-Fact
PAGE 1
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
ARTICLES SUPPLEMENTARY
T. Rowe Price International Funds, Inc., a Maryland
corporation, having its principal office in Baltimore City,
Maryland (hereinafter called the "Corporation"), hereby certifies
to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority expressly vested in the
Board of Directors of the Corporation by Article Fifth of the
Charter of the Corporation, the Board of Directors has duly
classified a number of shares of its unissued common stock
(determined in connection with the SECOND paragraph below) into a
new series of common stock to be designated the T. Rowe Price
Global Stock Fund.
SECOND: After giving effect to the foregoing
classification, the Board of Directors has heretofore duly
divided and classified an aggregate of 2,000,000,000 shares of
the unissued Common Stock of the Corporation into the following
series on the dates indicated in the parentheses following the
names of the respective series: International Stock Fund
(January 17, 1990), International Bond Fund (January 17, 1990),
International Discovery Fund (January 17, 1990), European Stock
Fund (January 17, 1990), New Asia Fund (July 18, 1990), Global
Government Bond Fund (October 15, 1990), Japan Fund (October 18,
1991), Short-Term Global Income (May 4, 1992), Latin America Fund
(November 4, 1993), Emerging Markets Bond Fund (November 2,
1994), Emerging Markets Stock Fund (January 25, 1995), and Global
Stock Fund (October 11, 1995). Each such series shall consist,
until further changed, of the lesser of (x) 2,000,000,000 shares
or (y) the number of shares that could be issued by issuing all
of the shares of any series currently or hereafter classified
less the total number of shares then issued and outstanding in
all of such series. All shares of each series have the powers,
preferences, other special rights, qualifications, restrictions,
and limitations set forth in the Charter. The Board of Directors
also has provided for the issuance of the shares of each such
series.
PAGE 2
THIRD: The stock has been classified by the Board of
Directors under authority contained in the Charter.
IN WITNESS WHEREOF, T. Rowe Price International Funds,
Inc. has caused these Articles to be signed in its name and on
its behalf by its Vice President and witnessed by its Assistant
Secretary on October 11, 1995.
WITNESS: T. ROWE PRICE INTERNATIONAL
FUNDS, INC.
/s/Lenora V. Hornung /s/Henry H. Hopkins
____________________________ By:___________________________
Lenora V. Hornung Henry H. Hopkins
Secretary Vice President
THE UNDERSIGNED, Vice President of T. Rowe Price
International Funds, Inc., who executed on behalf of the
Corporation Articles Supplementary of which this Certificate is
made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the
corporate act of said Corporation and hereby certifies that the
matters and facts set forth herein with respect to the
authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/Henry H. Hopkins
______________________________
Henry H. Hopkins
Vice President
PAGE 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 57 to the Registration
Statement on Form N-1A (the "Registration Statement") of our
report dated November 17, 1994, relating to the financial
statements and selected per share data and ratios appearing in
the October 31, 1994 Annual Report to Shareholders of the
International Discovery Fund, (one of the portfolios constituting
T. Rowe Price International Funds, Inc.). We also consent to the
references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 57 to the Registration
Statement on Form N-1A (the "Registration Statement") of our
report dated November 17, 1994, relating to the financial
statements and selected per share data and ratios appearing in
the October 31, 1994 Annual Report to Shareholders of the
International Stock Fund, (one of the portfolios constituting T.
Rowe Price International Funds, Inc.). We also consent to the
references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 57 to the Registration
Statement on Form N-1A (the "Registration Statement") of our
report dated November 17, 1994, relating to the financial
statements and selected per share data and ratios appearing in
the October 31, 1994 Annual Report to Shareholders of the
European Stock Fund, (one of the portfolios constituting T. Rowe
Price International Funds, Inc.). We also consent to the
references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the
Statement of Additional Information.
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 57 to the Registration
Statement on Form N-1A (the "Registration Statement") of our
report dated November 17, 1994, relating to the financial
statements and selected per share data and ratios appearing in
the October 31, 1994 Annual Report to Shareholders of the Japan
Fund, (one of the portfolios constituting T. Rowe Price
International Funds, Inc.). We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and
under the heading "Independent Accountants" in the Statement of
Additional Information.
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 57 to the Registration
Statement on Form N-1A (the "Registration Statement") of our
report dated November 17, 1994, relating to the financial
statements and selected per share data and ratios appearing in
the October 31, 1994 Annual Report to Shareholders of the Latin
America Fund, (one of the portfolios constituting T. Rowe Price
International Funds, Inc.). We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and
under the heading "Independent Accountants" in the Statement of
Additional Information.
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading
"Independent Accountants" in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No. 57 to the Registration Statement on Form N-1A of the New Asia
Fund (one of the portfolios constituting T. Rowe Price
International Funds, Inc.).
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading
"Independent Accountants" in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No. 57 to the Registration Statement on Form N-1A of the Emerging
Markets Stock Fund (one of the portfolios constituting T. Rowe
Price International Funds, Inc.).
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the reference to us under the heading
"Independent Accountants" in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No. 57 to the Registration Statement on Form N-1A of the Foreign
Equity Fund (constituting Institutional International Funds,
Inc.).
/s/PRICE WATERHOUSE LLP
Price Waterhouse LLP
Baltimore, Maryland
October 11, 1995
PAGE 9
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
T. Rowe Price International Funds, Inc. and
Shareholders T. Rowe Price New Asia Fund
We consent to the incorporation by reference in Post-
Effective Amendment No. 57 to the Registration Statement of the
T. Rowe Price International Funds, Inc. on Form N-1A (File No.
002-65539) of our report dated November 25, 1994, relating to the
financial statements and financial highlights of T. Rowe Price
New Asia Fund (the "Fund") appearing in the Fund's October 31,
1994 Annual Report to the Shareholders, which is incorporated by
reference in the Registration Statement. We also consent to the
reference to our Firm under the captions "Financial Highlights"
in the Prospectus and "Independent Accountants" in the Statement
of Additional Information.
/s/COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Baltimore, Maryland
October 11, 1995
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