T. ROWE PRICE
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INTERNATIONAL FUNDS, INC.
Short-Term Global Income Fund
Supplement to prospectus dated May 1, 1996
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On July 31, 1996, the Board of Directors of the Short-Term
Global Income Fund (the "Fund") approved an Agreement and Plan of
Reorganization between the Fund and the T. Rowe Price Global
Government Bond Fund ("Global Government Fund") pursuant to which
the Fund would transfer substantially all of its assets to Global
Government Fund in exchange for newly issued shares of Global
Government Fund. These shares would be issued to shareholders of
the Fund in exchange for their Fund shares. Thereafter, the Fund
would cease to be an investment company (the "Reorganization").
The Fund will not accept new accounts after 4:00 p.m. on July 31,
1996. It is anticipated that the Fund will be closed to all
shareholders on a date prior to the special shareholder meeting
which will be held to vote on the Reorganization.
The Reorganization is conditioned upon, among other things:
(i) approval by the Fund's shareholders of the Reorganization,
and (ii) the receipt of a favorable tax opinion from the Fund's
tax counsel concerning the tax consequences of the
Reorganization. A special meeting of shareholders of the Fund
will be called to consider and act upon a proposal to approve the
Reorganization. Proxy materials will be distributed to Fund
shareholders describing, among other things, the reasons for the
Reorganization. It is currently anticipated the special meeting
will take place in the fourth quarter of 1996. If all of the
requisite approvals are obtained, it is currently anticipated
that the Reorganization will take place in the fourth quarter of
1996. The costs of the Reorganization (other than brokerage,
taxes, and extraordinary items) will be borne by the Fund's
manager, Rowe Price-Fleming International, Inc.
The Fund and Global Government Fund are open-end management
investment companies with similar, though not identical,
investment objectives and programs. The Fund seeks a high level
of current income consistent with modest share price fluctuation
by investing primarily in high-quality fixed income securities.
Global Government Fund seeks high current income and,
secondarily, capital appreciation and protection of principal by
investing primarily in high-quality foreign and U.S. government
bonds. The principal difference between the funds is that the
Fund has a maximum weighted average maturity of three years while
the Global Government Fund targets a weighted average maturity of
seven years, although it may adopt a shorter or longer maturity
in anticipation of falling or rising interest rates. This
difference means that the Global Government Fund is normally more
sensitive to interest rate changes than the Fund, and can
normally be expected to have greater gains or losses than the
Fund. The funds also differ in their currency hedging
strategies, with the Fund normally having a more active currency
hedging strategy than the Global Government Fund.
The Reorganization is deemed necessary, among other reasons,
because global investor demand has shifted from short-term
securities to longer-term bonds in an effort to achieve greater
total returns. As investors leave the short-term market, Fund
redemptions are expected to increase, eroding the asset base of
the Fund and putting upward pressure on expense ratios. This
combination of negative factors will make it increasingly
difficult for the Fund manager to invest shareholder assets
effectively at a reasonable cost.
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The date of this supplement is August 1, 1996.
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