PAGE 1
The Combined Proxy Statement and Prospectus for the T. Rowe Price
Global Income Funds, dated September 13, 1996, should be inserted
here.
T. Rowe Price Short-Term Global Income Fund
(a series of the T. Rowe Price International Funds, Inc.)
100 East Pratt Street, Baltimore, Maryland 21202
M. David Testa
Chairman of the Board
September 13, 1996
Dear Shareholder:
On July 31, 1996, the Board of Directors of the T. Rowe Price Short-Term
Global Income Fund (the "Fund") agreed to a Plan of Reorganization, which
involves a transfer of substantially all Fund assets to T. Rowe Price Global
Government Bond Fund (the "Global Government Fund"). Shareholders of the Fund
will receive shares of Global Government Bond Fund in exchange for their Fund
shares.
The Reorganization is conditioned upon several factors, including
approval by Fund shareholders. Accordingly, you are cordially invited to
attend a special meeting of Fund shareholders at the offices of the Fund, 100
East Pratt Street, Baltimore, Maryland, on Wednesday, October 30, 1996 at 9:00
a.m., to vote on the Reorganization. If it is approved, the Reorganization
will take place on or about November 1, 1996.
The Reorganization is considered necessary because, among other reasons,
investor demand has shifted from short-term securities to longer-term bonds in
an effort to achieve greater total returns. As the universe of short-term bond
investors declines, Fund redemptions are expected to increase, eroding the
asset base of the Fund and putting upward pressure on its expense ratio. This
combination of negative factors will make it increasingly difficult for the
Fund manager, Rowe Price-Fleming International, Inc. to invest shareholder
assets effectively at a reasonable cost to Shareholders.
As the accompanying Combined Proxy Statement and Prospectus explain in
detail:
o there are no transaction fees to buy or sell shares of Global Government
Fund;
o you will continue to have free exchange privileges among the wide range
of T. Rowe Price funds;
o it is expected that the Reorganization will be a tax-free exchange of
shares and that Fund shareholders will retain their original cost basis
and holding period; and
o all expenses related to the Reorganization, except for brokerage fees
and extraordinary expenses, will be assumed by Rowe Price-Fleming
International, Inc.
Both the Fund and Global Government Fund have similar investment
objectives and programs. The main difference is that the Fund has a maximum
weighted average maturity of three years while Global Government's target is
seven years. Therefore, Global Government is normally more sensitive to
changes in interest rates, meaning its share price can normally be expected to
fluctuate more. In addition, because the Fund utilizes a more active currency
hedging strategy, Global Government Fund's greater exposure to currency
fluctuations may make it somewhat riskier. However, we believe the potential
is also greater for higher total returns over time.
We encourage you to read the enclosed proxy material, sign the enclosed
proxy card, and return it to us in the postage-paid envelope promptly.
The Board of Directors of your Fund has unanimously approved this
proposal and recommends that you vote FOR approval of the Plan.
Sincerely,
M. David Testa
CUSIP77956H807/FUND063
T. ROWE PRICE SHORT-TERM GLOBAL INCOME FUND
(a series of T. Rowe Price International Funds, Inc.)
Notice of Special Meeting of Shareholders
To be held on October 30, 1996
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of the T. Rowe
Price Short-Term Global Income Fund (the "Fund"), a series of the T. Rowe
Price International Funds, Inc. (the "Company"), will be held on Wednesday,
October 30, 1996, at 9:00 o'clock a.m., Eastern time, at the offices of the
Fund, 100 East Pratt Street, Baltimore, Maryland 21202, for the following
purposes:
1. To consider and act upon a proposal to approve or disapprove an
Agreement and Plan of Reorganization and an amendment to the charter of
T. Rowe Price International Funds, Inc. The Agreement and Plan provides
for the transfer of substantially all of the assets of the Fund to T.
Rowe Price Global Government Bond Fund (the "Global Government Fund"), a
separate series of T. Rowe Price International Funds, Inc., in exchange
solely for shares of the Global Government Fund, and the distribution of
the Global Government Fund shares to the shareholders of the Fund. The
Charter amendment provides for the change and reclassification of the
shares of the Fund into shares of the Global Government Fund.
2. To consider and act upon such other business as may properly come before
the meeting.
M. David Testa
Chairman of the Board
September 13, 1996
100 East Pratt Street
Baltimore, Maryland 21202
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE ENCLOSED
PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. IN ORDER TO AVOID THE
ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING
YOUR PROXY PROMPTLY.
CUSIP77956H807/FUND063
Combined Proxy Statement and Prospectus
Dated September 13, 1996
Acquisition of the Assets of
T. ROWE PRICE SHORT-TERM GLOBAL INCOME FUND
(a series of the T. Rowe Price International Funds, Inc.)
By and In Exchange for Shares of
T. ROWE PRICE GLOBAL GOVERNMENT BOND FUND
(a series of the T. Rowe Price International Funds, Inc.)
This Combined Proxy Statement and Prospectus is furnished in connection
with the solicitation of proxies by the Board of Directors of the T. Rowe
Price International Funds, Inc. (the "Company") for use at a special meeting
of shareholders of the T. Rowe Price Short-Term Global Income Fund (the
"Fund") to be held on Wednesday, October 30, 1996, at which shareholders of
the Fund will be asked to approve or disapprove an Agreement and Plan of
Reorganization dated September 6, 1996 (the "Plan"), between the Company on
behalf of the Fund and the Company on behalf of the T. Rowe Price Global
Government Bond Fund ("Global Government Fund"), a separate series of the
Company. A copy of the Plan is included as Exhibit A to this Combined Proxy
Statement and Prospectus.
The proposed Reorganization and Plan provide for the transfer of
substantially all of the assets of the Fund to the Global Government Fund in
exchange for shares of the Global Government Fund and the distribution of the
Global Government Fund shares received in the exchange to Fund shareholders in
complete liquidation of the Fund. Shareholders of the Fund will receive Global
Government Fund shares having an aggregate net asset value equal to the
aggregate net asset value of their Fund shares on the business date
immediately preceding the closing date of the reorganization. Approval of the
Plan will constitute approval of an amendment to the Charter of the Company
confirming, solely for Maryland corporate law purposes, the change and
reclassification of the shares of the Fund into shares of the Global
Government Fund. The form of the proposed Charter amendment is set forth as
Exhibit B to this Combined Proxy Statement and Prospectus.
The Global Government Fund seeks to provide high current income and,
secondarily, capital appreciation and protection of principal by investing
primarily in high-quality foreign and U.S. government bonds. The investment
objective, policies and restrictions of the Global Government Fund and the
Fund are similar, but differ in certain respects, including the weighted
average maturities. See "Comparison of Investment Objectives, Policies and
Restrictions."
This Combined Proxy Statement and Prospectus sets forth concisely the
information you should know about the Global Government Fund and the Plan
before voting on the Plan and the transactions contemplated thereby. Please
read this Combined Proxy Statement and Prospectus and keep it for future
reference. A Prospectus for the T. Rowe Price International Fixed Income
Funds, which includes the Global Government Fund and the Fund, dated May 1,
1996, is incorporated herein by reference. This prospectus was mailed to all
shareholders of the Fund and Global Government Fund at the time of the annual
May 1, 1996 update and to all purchasers of Fund shares after May 1, 1996.
Therefore, the International Fixed Income Funds' prospectus is not included
with this Combined Proxy Statement and Prospectus. Additional copies of the
International Fixed Income Funds' prospectus are available at no cost by
calling 1-800-225-5132, or by writing T. Rowe Price International Funds, Inc.,
100 East Pratt Street, Baltimore, Maryland 21202. A Statement of Additional
Information dated September 13, 1996, containing further information about the
Global Government Fund and the Plan has been filed with the Securities and
Exchange Commission and is available upon request without charge by writing T.
Rowe Price International Funds, Inc., 100 East Pratt Street, Baltimore,
Maryland 21202, or by calling 1-800-225-5132. The Statement of Additional
Information is incorporated herein by reference. This Combined Proxy Statement
and Prospectus was first mailed to shareholders on or about September 13,
1996.
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 COMBINED PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE
Summary. . . . . . . . . . . . . . . . . . . . . . 5
Reasons For the Reorganization . . . . . . . . . .10
Information About the Reorganization . . . . . . .11
Comparison of Investment Objectives,
Policies and Restrictions. . . . . . . . . . . .15
Information About the Funds. . . . . . . . . . . .21
Voting Information . . . . . . . . . . . . . . . .21
Transfer Agent and Custodian . . . . . . . . . . .23
Legal Matters. . . . . . . . . . . . . . . . . . .23
Financial Statements . . . . . . . . . . . . . . .23
Exhibit A - Agreement and
Plan of Reorganization . . . . . . . . . . . . .24
Exhibit B - Articles of Amendment. . . . . . . . .38
No person has been authorized to give any information or to make any
representations not contained in this Combined Proxy Statement and Prospectus
or in the materials expressly incorporated herein by reference and if given or
made, such other information or representation must not be relied upon as
having been authorized by T. Rowe Price International Funds, Inc.
SUMMARY
The information contained in this summary is qualified by reference to
the more detailed information appearing elsewhere in this Combined Proxy
Statement and Prospectus, in the Plan (Exhibit A hereto), and the Prospectus
of the Global Government Fund and the Fund.
Proposed Transactions
At a meeting held on July 31, 1996, the Board of Directors of the
Company, including all of the directors who are not "interested persons" of
the Company (the "independent directors") as defined in the Investment Company
Act of 1940 (the "Investment Company Act"), approved the Plan. The Plan
provides for the transfer of substantially all the assets of the Fund to the
Global Government Fund in exchange for shares of the Global Government Fund.
Following the transfer, the Global Government Fund shares received in the
exchange will be distributed to shareholders of the Fund in complete
liquidation of the Fund. As a result of the proposed transactions, each Fund
shareholder will cease to be a shareholder of the Fund and instead will become
the owner of shares of the Global Government Fund having an aggregate net
asset value equal to the aggregate net asset value of the shareholder's Fund
shares determined on the business day preceding the closing date of the
reorganization.
For the reasons set forth below under "Reasons for the Reorganization,"
the Board of Directors of the Company, including all of the independent
directors, has concluded that the reorganization is in the best interests of
the shareholders of the Fund and therefore recommends that shareholders vote
for approval of the Plan.
Voting Information
Shareholders of record at the close of business on September 6, 1996,
are entitled to notice of and to vote at the meeting and any adjournments
thereof. The affirmative vote of a majority of the outstanding shares of the
Fund is required for approval of the Plan. Each shareholder will be entitled
to one vote for each Fund share, and a proportionate vote for each fractional
share, held on the record date for the meeting. Any proxy may be revoked at
any time prior to its exercise by filing with the Secretary of the Company a
written notice of revocation, by delivering a duly executed proxy bearing a
later date, or by attending the meeting and voting in person. Executed proxies
that are unmarked will be voted for approval of the Plan. See "Voting
Information." Approval of the Plan by shareholders of Global Government Fund
is not required and the Plan is not being submitted for their approval.
Tax Consequences
In the opinion of counsel to the Company, for federal income tax
purposes, no gain or loss will be recognized by the Fund or its shareholders
as a result of the reorganization, the holding period and adjusted basis of
the Global Government Fund shares received by a shareholder will be the same
as the holding period and adjusted basis of the shareholder's shares of the
Fund, and the holding period and adjusted basis of each asset of the Fund in
the hands of the Global Government Fund will be the same as the holding period
and adjusted basis of the asset in the hands of the Fund immediately prior to
the reorganization. See "Information About the Reorganization - Tax
Considerations."
Investment Objectives and Policies
The Fund seeks a high level of current income consistent with modest
share price fluctuation by investing primarily in high-quality fixed income
securities. The 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 investment
policies and restrictions of the Fund and the Global Government Fund are
similar in certain respects; however, the Fund's weighted average maturity may
not exceed three years while the Global Government Fund targets a weighted
average maturity of seven years, and the Fund normally has a more active
currency hedging program than Global Government Fund. Each fund invests
primarily in high quality bonds, although the Global Government Fund must
invest at least 65% of its assets in government bonds while the Fund may
invest in either corporate or government bonds. There are other differences
which Fund shareholders should consider. See "Comparison of Investment
Objectives, Policies and Restrictions."
Management Arrangements
The Fund and the Global Government Fund are advised and managed by Rowe
Price-Fleming International, Inc. ("Price-Fleming"), 100 East Pratt Street,
Baltimore, Maryland 21202, which was incorporated in Maryland in 1979 as a
joint venture between T. Rowe Price Associates, Inc. ("Price Associates") and
Robert Fleming Holdings Limited ("Flemings"). Price Associates was
incorporated in Maryland in 1947 as successor to the investment counseling
firm founded by Mr. Thomas Rowe Price, Jr. in 1937. Flemings was incorporated
in the United Kingdom in 1974 as successor to the business founded by Robert
Fleming in 1873. Price-Fleming serves as investment manager to all of the
international funds of the Company and to a variety of individual and
institutional investors, including limited partnerships and other mutual
funds. As of June 30, 1996, Price-Fleming was providing investment management
services to assets of approximately $26.6 billion for over 600,000 individual
and institutional investor accounts. Price-Fleming is responsible for
selection and management of the Fund's and the Global Government Fund's
portfolio investments. The Board of Directors of the Company is responsible
for the management of the business affairs of the Fund and the Global
Government Fund. Additional information concerning the Fund's and the Global
Government Fund's investment advisory and management arrangements is set forth
under "Management of the Fund" and "Expenses and Management Fee" in the
International Fixed Income Funds' prospectus and in the related Statement of
Additional Information.
Fees and Expenses
Set forth below are the fees and expenses of the funds based on 1995
average net assets and pro forma fees and expenses, assuming the transaction
takes place as scheduled.
Shareholder Transaction Expenses
Short-Term Global Pro
Global Government Forma
Income Bond Combined
_______________________________________________________________
Sales charge "load"
on purchases None None None
_______________________________________________________________
Sales charge "load"
on reinvested dividends None None None
_______________________________________________________________
Redemption fees None None None
_______________________________________________________________
Exchange fees None None None
_______________________________________________________________
_______________________________________________________________
Annual Fund Expenses
Percentage of Fiscal 1995 Average Net Assets
Short-Term Global Pro
Global Government Forma
Income Bond Combined
(after re- (after re- (after re-
duction)ab duction)ab duction)ab
_____________________________________________________________________________
Management fee 0.29% 0.20% 0.60%
_____________________________________________________________________________
Marketing fees (12b-1) None None None
_____________________________________________________________________________
Total other (shareholder
servicing, custodial,
auditing, etc.) 0.71% 1.00% 0.60%
_____________________________________________________________________________
Total fund expenses 1.00% 1.20% 1.20%
_____________________________________________________________________________
a Had Price-Fleming not agreed to waive management fees in accordance with
expense limitation agreements, the Fund's management fee and total
expense ratio would have been 0.59% and 1.30%, respectively; the Global
Government Fund's management fee and total expense ratio would have been
0.69% and 1.69%, respectively; and the Pro Forma combined management fee
and total expense ratio would have been 0.69% and 1.29%, respectively.
b Organization expenses are charged to the fund for a period not to exceed
60 months. The unamortized organization expenses of the Fund will be paid
to the Fund by Price-Fleming prior to the closing of the Reorganization.
Note: A $5 fee is charged for wire redemptions under $5,000, subject to change
without notice, and a $10 fee is charged for small accounts when applicable
(see "Small Account Fee" under "Transaction Procedures and Special
Requirements" in the Prospectus for the Global Government Fund and Fund).
Based on assets of the funds as of June 30, 1996, and actual expenses
incurred from January 1 through June 30, 1996, annualized, the pro forma
combined expense ratio of the Fund and the Global Government Fund, reflecting
the Global Government Fund's expense limitation, is estimated to be 1.20%.
The Global Government Fund and the Fund each pay Price-Fleming an
investment management fee which consists of a group fee and an individual fund
fee. The group fee varies and is based on the combined net assets of all
mutual funds sponsored and managed by Price-Fleming and T. Rowe Price
Associates, Inc. and distributed by T. Rowe Price Investment Services, Inc.,
excluding T. Rowe Price Spectrum Fund, Inc. and any institutional or private
label funds (the "Group Funds"). The Global Government Fund and the Fund each
pay, as its portion of the group fee, an amount equal to the ratio of its
daily net assets to the daily net assets of all the Group Funds. In addition,
the Global Government Fund and the Fund each pay an individual fund fee of
0.35% and 0.25%, respectively, based on each fund's net assets. Based on total
Group Funds' assets of approximately $54.7 billion at June 30, 1996, the total
management fees for the Global Government Fund and the Fund were 0.68% and
0.58%, respectively, of net assets.
For the year ended December 31, 1995, the group fee rate and total
combined management fee rate for the Global Government Fund were 0.34% and
0.69%, respectively, and for the Fund were 0.34% and 0.59%, respectively.
During the year ended December 31, 1995, the Global Government Fund and
the Fund also paid T. Rowe Price Services, Inc., and T. Rowe Price Retirement
Plan Services, Inc., wholly owned subsidiaries of Price Associates, and Price
Associates for certain additional services under separate contracts. These
services included (i) transfer and dividend disbursing agent functions and
shareholder services for all accounts; (ii) sub-accounting and recordkeeping
for shareholder accounts in certain retirement plans (the Fund did not pay any
fees for these services); and (iii) calculation of daily share price and
maintenance of portfolio and general accounting records. For the year ended
December 31, 1995, the Global Government Fund paid fees totaling approximately
$63,000, $2,000, and $100,000, respectively; and the Fund paid fees totaling
approximately $74,000, $0, and $110,000, respectively, for these services.
Purchase, Redemption and Exchange of Shares
Shares of the Fund and the Global Government Fund are sold on a
continuous basis. Shares of the funds are sold at their net asset value
without a sales charge. Each fund requires a minimum initial investment of
$2,500 ($1,000 for retirement plans). These minimums will not apply in
connection with the reorganization. The minimum subsequent investment is
generally $100 ($50 for retirement plans).
Redemption and exchange rights of the funds are identical. Shares of the
funds may be redeemed at their respective net asset values; however,
redemptions in excess of $250,000 or 1% of net assets in any 90-day period may
be subject to certain conditions. Shares of the funds may be exchanged for
shares of other members of the T. Rowe Price family of funds, subject to
certain limitations, as provided in the prospectus of the funds.
Dividends and Distributions
The funds' policies on dividends and distributions are identical. Each
fund has a policy of distributing all of its net investment income and capital
gains to its respective shareholders. Dividends from net investment income for
each fund are declared daily and paid monthly. Distributions from capital
gains, if any, are normally declared and paid in December. Dividends and
capital gain distributions are automatically reinvested in additional shares,
unless and until the shareholder elects to receive them in cash.
Risk Factors
What are the main risks of investing in these funds and how do they differ?
The risks are the usual ones associated with investments in U.S. or
foreign fixed income securities, including:
o Interest rate or market risk: the decline in bond prices that
accompanies a rise in the overall level of interest rates. (Bond
prices and interest rates move in opposite directions.) Because of
its longer weighted average maturity and because prices of
long-term bonds are more sensitive to interest rate changes than
prices of short-term bonds, the Global Government Fund has greater
interest rate risk than the Fund.
o Credit risk: the chance that any of a fund's holdings will have its
credit downgraded or will default, potentially reducing the fund's
share price and income level. Each fund invests primarily in high
quality securities. The Global Government Fund must invest
primarily in government bonds while the Fund may invest in either
government or corporate bonds. Each fund may also invest up to 10%
of its assets in non-investment grade, high risk securities.
o Currency risk: the possibility that a fund's foreign holdings will
be adversely affected by fluctuations in currency markets. Further
information on the funds' currency hedging programs is set forth
below.
How does currency fluctuation affect the performance of a global fund?
Fluctuating currencies can have either a positive or negative impact on
all global funds regardless of the credit quality of their holdings. U.S.
shareholders benefit when foreign currencies appreciate against the dollar and
are injured when foreign currencies lose value against the dollar. For
example, if a French bond 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 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.
Price-Fleming actively manages currency risk in the Fund and may also do
so in the Global Government Fund in an effort to reduce the negative impact of
a strong dollar. The Fund is the more conservative of these two funds because
of its shorter average maturity and more extensive use of hedging back to the
U.S. dollar.
What are some of the other risks of foreign investing?
Foreign investing involves sovereign risk. Sovereign risk includes the
potential for adverse local political or economic developments, potential
nationalization, withholding taxes on income from sources within such
countries and currency blockage (which would prevent cash from being brought
back to the United States). Foreign companies and governments may have less
public or less reliable information available about them and foreign companies
may be subject to less governmental regulation than U.S. companies. Securities
of foreign companies may be less liquid or more volatile than securities of
U.S. companies.
There are additional differences in the investment programs of the funds
which Fund shareholders should consider. See "Risk Factors" and "Comparison of
Investment Objectives, Policies and Restrictions."
REASONS FOR THE REORGANIZATION
Reasons for the Reorganization and Liquidation
The Company's Board of Directors, including all of the independent
directors, has determined that the proposed transaction is in the best
interests of the shareholders of the Fund and the Global Government Fund and
that the interests of shareholders of the Fund and the Global Government Fund
will not be diluted as a result of the proposed transaction.
The Directors of the Fund believe the transaction is in the best
interests of the Fund for the following reasons:
Shrinking assets and asset class. The assets of the Fund have been
shrinking over the last two years and there is no sign this trend will reverse
itself. The Fund's net assets as of December 31, 1994 were $56 million and as
of June 30, 1996, $37 million. The shareholder base has similarly shrunk from
approximately 4,000 to 2,150. This has paralleled a similar trend in the whole
asset class of short-term global funds which has been experiencing net
redemptions for some time.
Impact on investment program. If the described trends continue, the
shrinking assets of the Fund will affect the ability of the Fund's manager,
Price-Fleming, to optimize the Fund's investment program. The Fund needs to be
larger to take full advantage of diversification and yield opportunities in
the market.
Impact on expense ratio. The continued decrease in the Fund's assets has
caused the Fund's actual expense ratio to rise. While the Fund's expense cap
has effectively muted any impact on shareholders, there is no requirement for
Price-Fleming to maintain the expense cap indefinitely and little opportunity
for the Fund's expenses to fall below the cap. While the Global Government
Fund's expense ratio is higher, this is due to its higher management fee and
the fact that it is currently a smaller fund. The higher management fee is
justified because of the greater complexity of the Global Government Fund's
investment program. Over time, it is hoped that the assets of the Global
Government Fund will increase leading to a lowering of its expense ratio.
Global Government Fund's investment program. While the investment
program of Global Government Fund differs from that of the Fund, in that the
Global Government Fund has a longer weighted average maturity and a less
active currency hedging program and therefore a somewhat more volatile
risk/return ratio, in the view of Price-Fleming the investment program of
Global Government Fund has been and continues to be a viable one.
Tax-free reorganization. The merger permits Fund shareholders to defer
recognition of gain or loss on their investment.
No dilution. The assets of the Fund will be transferred to Global
Government Fund at their fair market value on the valuation date of the
transaction. Shares of Global Government Fund equal in value to the assets
will be received in exchange. Expenses of the transaction (other than
brokerage, interest, taxes and extraordinary items) will be borne by
Price-Fleming. Therefore, shareholders of the Fund will not be diluted as a
result of the transaction.
The Board of Directors based its decision to approve the Plan on an
inquiry into a number of factors, including the following:
(1) the relative past growth in assets and investment performance and future
prospects of the funds and similar funds;
(2) the expense ratios of each fund and the impact of the proposed
transaction on them;
(3) the tax-free nature of the reorganization to the funds and their
shareholders;
(4) the compatibility of the investment objectives, policies and
restrictions of the funds; and
(5) the comparative investment performance of the funds.
If the Plan is not approved by Fund shareholders, the Company's Board of
Directors may consider other appropriate action, such as the liquidation of
the Fund or a merger or other business combination with an investment company
other than Global Government Fund. Such other actions may require shareholder
approval.
INFORMATION ABOUT THE REORGANIZATION
The following summary of the terms and conditions of the Plan is
qualified by reference to the Plan, which is included as Exhibit A to this
Combined Proxy Statement and Prospectus.
Plan of Reorganization
If the shareholders of the Fund approve the Plan, the reorganization of
the Fund will be consummated on or about November 1, 1996, or such other date
as is agreed to by the Fund and Global Government Fund (the "Closing Date").
The parties may postpone the Closing Date until a later date on which all of
the conditions to the obligations of each of the parties under the Plan are
satisfied, provided that the Plan may be terminated by either party if the
Closing Date does not occur on or before January 31, 1997. See "Conditions to
Closing" below.
On the Closing Date, the Fund will transfer substantially all of its
assets to Global Government Fund in exchange for shares of the Global
Government Fund having an aggregate net asset value equal to the aggregate
value of the assets so transferred as of the close of regular trading on the
New York Stock Exchange on the business day immediately preceding the Closing
Date (the "Valuation Date"). The Global Government Fund will not assume or
otherwise be responsible for any liabilities of the Fund. The number of Global
Government Fund shares issued in the exchange will be determined by dividing
the aggregate value of the assets of the Fund transferred (computed in
accordance with the policies and procedures set forth in the current
Prospectus of the Global Government Fund, subject to review and approval by
the Fund) by the net asset value per share of the Global Government Fund as of
the close of regular trading on the Valuation Date. While it is not possible
to determine the exact exchange ratio until the Valuation Date, due to, among
other matters, market fluctuations and differences in the relative
performances of the Fund and the Global Government Fund, if the Valuation Date
had been June 30, 1996, shareholders of the Fund would have received 0.449
shares of the Global Government Fund for each Fund share held.
As soon as practicable after the Closing Date, the Fund will distribute,
in liquidation of the Fund, pro rata to its shareholders of record as of the
close of business on the Valuation Date, the full and fractional shares of the
Global Government Fund received in the exchange. The Fund will accomplish this
distribution by transferring the Global Government Fund shares then credited
to the account of the Fund on the books of the Global Government Fund to open
accounts on the share records of the Global Government Fund in the names of
the Fund's shareholders, and representing the respective pro rata number of
Global Government Fund shares due such shareholders. All issued and
outstanding shares of the Fund will be simultaneously cancelled on the books
of the Company.
The Fund was closed to investments in new accounts at 4:00 p.m. on July
31, 1996 and will be closed to existing accounts by September 13, 1996.
The stock transfer books of the Company with respect to the Fund will be
permanently closed as of the close of business on the Valuation Date. The Fund
will only accept redemption requests received prior to the close of regular
trading on the New York Stock Exchange on the Valuation Date. Redemption
requests received thereafter will be deemed to be requests for redemption of
the Global Government Fund shares to be distributed to Fund shareholders
pursuant to the Plan.
The Plan provides that after the Closing Date the Company will pay or
make provision for all liabilities of the Fund and distribute all remaining
assets of the Fund, if any, to its former shareholders.
Conditions to Closing
The obligation of the Fund to transfer its assets to the Global
Government Fund pursuant to the Plan is subject to the satisfaction of certain
conditions precedent, including performance by the Global Government Fund in
all material respects of its agreements and undertakings under the Plan,
receipt of certain documents from the Global Government Fund, receipt of an
opinion of counsel to the Global Government Fund and approval of the Plan by
the shareholders of the Fund as described above. The obligation of the Global
Government Fund to consummate the reorganization is subject to the
satisfaction of certain conditions precedent, including performance by the
Fund of its agreements and undertakings under the Plan, receipt of certain
documents and financial statements from the Fund, receipt of an opinion of
counsel to the Fund and receipt of a limited review letter from the auditors
for the Fund as to certain financial and accounting matters.
The consummation of the proposed transaction is subject to a number of
conditions set forth in the Plan, some of which may be waived by the Board of
Directors of the Company. The Plan may be terminated and the proposed
transaction abandoned at any time, before or after approval by the
shareholders of the Fund, prior to the Closing Date. In addition, the Plan may
be amended in any mutually agreeable manner, except that no amendment may be
made subsequent to the meeting of shareholders of the Fund that would
detrimentally affect the value of Global Government Fund's shares to be
distributed.
Expenses of Reorganization
Price-Fleming is responsible for the payment of all expenses of the Fund
incurred in connection with the reorganization (other than taxes, interest,
brokerage or extraordinary items).
Tax Considerations
The reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization under Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), with no gain or loss
recognized as a consequence of the reorganization by the Global Government
Fund, the Fund or its shareholders. The consummation of the transactions
contemplated under the Plan is conditioned upon receipt of an opinion from
Shereff, Friedman, Hoffman & Goodman, LLP, counsel to the Company, to the
effect that, on the basis of certain representations of fact by officers of
the Fund and Global Government Fund, the existing provisions of the Code,
current administrative rules and court decisions, for federal income tax
purposes: (1) no gain or loss will be recognized by the Fund on the transfer
of its assets to the Global Government Fund solely in exchange for shares of
the Global Government Fund and no gain or loss will be recognized by the Fund
on the distribution of shares received pursuant to the Plan to shareholders of
the Fund in complete liquidation of the Fund; (2) no gain or loss will be
recognized by the Global Government Fund on the receipt of the assets of the
Fund solely in exchange for the Global Government Fund shares; (3) the
adjusted basis of each asset of the Fund in the hands of the Global Government
Fund will be the same as the adjusted basis of such asset in the hands of the
Fund immediately prior to the transaction; (4) the holding period of each
asset of the Fund in the hands of the Global Government Fund will include the
holding period of such asset in the hands of the Fund immediately prior to the
transaction; (5) no gain or loss will be recognized by Fund shareholders upon
the receipt of the Global Government Fund shares (including fractional shares)
solely in exchange for shares of the Fund; (6) the adjusted basis of the
Global Government Fund shares received by each Fund shareholder (including
fractional shares) will be the same as the adjusted basis of the Fund shares
surrenderedin exchange therefore; and (7) the holding period of the Global
Government Fund shares (including fractional shares) received by each Fund
shareholder will include the holding period of the Fund shares surrendered in
exchange therefore, provided that such shares were held as a capital asset in
the hands of the Fund shareholder on the date of the exchange.
It is anticipated that at the date of the reorganization, both the Fund
and Global Government Fund will have tax basis net capital losses available to
offset future tax basis net capital gains. Applicable provisions of the
Internal Revenue Code may limit the ability of Global Government Fund to use
such losses to offset future gains, or may extend the period during which such
offset would otherwise have occurred.
Shareholders should recognize that an opinion of counsel is not binding
on the Internal Revenue Service (the "IRS") or on any court. The Company does
not expect to obtain a ruling from the IRS regarding the consequences of the
reorganization. Accordingly, if the IRS sought to challenge the tax treatment
of the reorganization and were successful, neither of which is anticipated,
the reorganization would be treated as a taxable sale of assets of the Fund,
followed by the taxable liquidation of the Fund.
Description of Global Government Fund Shares
Full and fractional shares of the Global Government Fund will be issued
to shareholders of the Fund in accordance with the procedures under the Plan
as described above. Each Global Government Fund share will be fully paid and
nonassessable when issued, will have no preemptive or conversion rights and
will be transferrable on the books of the Company. Ownership of Global
Government Fund shares by former shareholders of the Fund will be recorded
electronically and the Company will issue a confirmation to such shareholders
relating to those shares acquired as a result of the reorganization. After the
reorganization, former shareholders of the Fund who were eligible to
participate in the dividend reinvestment program, the automatic withdrawal
plan or the automatic investment plan will automatically become participants
in the corresponding programs offered in respect of the Global Government
Fund.
The voting rights of the Fund and Global Government Fund are the same.
As shareholders of the Global Government Fund, former shareholders of the Fund
will have the same voting rights with respect to the Global Government Fund
and the Company as they currently have with respect to the Fund and the
Company. The Company does not routinely hold annual meetings of shareholders.
The Fund and Global Government Fund are "series," within the meaning of Rule
18f-2 under the Investment Company Act, of the Company. The Company currently
has twelve such series - the Fund, Global Government Fund, the International
Discovery Fund, the International Stock Fund, the European Stock Fund, the New
Asia Fund, the Japan Fund, the Latin America Fund, the Emerging Markets Stock
Fund, the Global Stock Fund, the International Bond Fund, and the Emerging
Markets Bond Fund. The Board of Directors of the Company may designate
additional classes or series without shareholder approval. As is the case with
the Global Government Fund, shares of the Fund (and of any other class or
series which may be designated by the Board of Directors) have equal voting
rights on matters affecting the Company as a whole. Also like the Global
Government Fund, if a matter affects only the Fund (or any other class or
series), then unless otherwise required by the Investment Company Act, only
shareholders of the Fund (or the other class or series) are entitled to vote
on the matter.
Capitalization
The following table shows the unaudited capitalization of the Fund and
the Global Government Fund as of June 30, 1996, and on a pro forma basis as of
that date giving effect to the proposed acquisition of Fund assets. The actual
net assets of the Fund and the Global Government Fund on the Valuation Date
will differ due to fluctuations in net asset values, subsequent purchases and
redemptions of shares.
Global
Government Pro Forma
Fund Fund Combined
_____________________________________________________________________________
Net Assets (000's) $36,639 $27,936 $64,575
Net Asset Value Per Share $4.47 $9.96 $9.96
Shares Outstanding (000's) 8,195 2,804 6,482
Other Matters
To the extent permitted by law, the Plan may be amended without
shareholder approval by the Board of Directors of the Company; and the Company
may waive without shareholder approval any default by the Fund or Global
Government Fund or the failure to satisfy any of the conditions of their
obligations, provided that no such amendment or waiver may be made if it would
adversely affect shareholders of the Fund or the Global Government Fund. The
Plan may be terminated and the reorganization abandoned at any time before or,
to the extent permitted by law, after the approval of shareholders of the Fund
by action of the Board of Directors of the Company. The Company may, at its
election, terminate the Plan in the event that the reorganization has not
closed on or before January 31, 1997.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS
The investment objective, policies and restrictions of the Global
Government Fund are described in greater detail in the International Fixed
Income Funds' prospectus, which is incorporated herein by reference.
Investment Policies
In seeking to achieve their respective investment objectives, the Global
Government Fund and the Fund are guided by similar but different investment
policies and restrictions which should be considered by the shareholders of
the Fund. Unless otherwise specified, the investment policies and restrictions
of the Global Government Fund and the Fund described below may be changed
without shareholder approval. Policies stated to be fundamental policies of a
fund may not be changed without the approval of the holders of (i) a majority
of the outstanding shares of such fund, or (ii) 67% of the shares of such fund
represented at a meeting of shareholders at which the holders of more than 50%
of the outstanding shares of such fund are represented, whichever is less.
o The Fund. The Fund's objective is to provide a high level of current
income consistent with modest share price fluctuation by investing
primarily in high-quality fixed income securities. The Fund will invest
at least 65% of its assets in high-quality securities, but may invest up
to 10% of assets in below-investment-grade, high-risk bonds, including
bonds in default or those with the lowest rating.
To reduce the impact of interest rate changes on the Fund's share price,
the portfolio's dollar-weighted average maturity will not exceed three
years, although the Fund can hold individual securities with longer
maturities.
To reduce the effect of currency fluctuations on share price,
Price-Fleming will actively manage the Fund's foreign currency exposure
either by hedging or by investing in securities with currencies highly
correlated to the U.S. dollar. Due to the high cost of currency hedging,
Price-Fleming will not attempt to eliminate all currency risk, but
rather only the amount thought necessary to minimize price declines
while providing high current income.
o Global Government Fund. Global Government Fund's objective is to provide
high current income and, secondarily, capital appreciation and
protection of principal by investing primarily in high-quality foreign
and U.S. government bonds. Global Government Fund will normally have at
least 65% of its assets in bonds issued or guaranteed by the U.S. or
foreign governments or their agencies and by foreign authorities,
provinces, and municipalities. Global Government Fund may also invest up
to 10% of total assets in below-investment-grade, high-risk bonds
including bonds in default or those with the lowest rating.
To reduce the effect of interest rate changes on Global Government
Fund's share price while seeking higher yields, the weighted average
maturity of the portfolio is likely to average around seven years,
although Global Government Fund may adopt longer or shorter maturities
in anticipation of falling or rising interest rates. Global Government
Fund may also hold individual securities with maturities longer or
shorter than seven years.
Global Government Fund has wide flexibility to engage in hedging
strategies to reduce the impact of currency fluctuations on the share
price.
Each fund is considered "non-diversified" for purposes of the Investment
Company Act.
What other kinds of securities can the funds invest in?
The Fund and Global Government Fund invest primarily in high-quality
securities to reduce credit risk. However, each may also invest a portion of
assets in high-risk securities in an effort to enhance performance. The funds
ordinarily invest in the securities of at least three countries; however, each
may invest in the securities of one country, including the U.S., for temporary
defensive purposes.
How does currency fluctuation affect the performance of the funds?
Fluctuating currencies can have either a positive or negative impact on
all international and global funds regardless of the credit quality of their
holdings. U.S. shareholders benefit when foreign currencies appreciate against
the dollar and are injured when foreign currencies lose value against the
dollar.
Price-Fleming actively manages currency risk in the Fund and may also do
so in the Global Government Fund in an effort to reduce the negative impact of
a strong dollar. The Fund is the more conservative of these two funds because
of its shorter average maturity and more extensive use of hedging back to the
U.S. dollar.
Investment Restrictions
Except as previously discussed, the investment restrictions of the funds
are the same.
Risk Factors
What are the main risks of investing in the funds?
As noted previously, the risks are the usual ones associated with
investments in U.S. or foreign fixed income securities, including:
o Interest rate or market risk: the decline in bond prices that
accompanies a rise in the overall level of interest rates. (Bond prices
and interest rates move in opposite directions.) Because prices of
long-term bonds are more sensitive to interest rate changes than prices
of short-term bonds, Global Government Fund has greater interest rate
risk than the Fund.
o Credit risk: the chance that any of a fund's holdings will have its
credit downgraded or will default, potentially reducing the fund's share
price and income level.
o Currency risk: the possibility that a fund's foreign holdings will be
adversely affected by fluctuations in currency markets.
What are the particular risks associated with global investing and these
funds?
Global investing involves risks in addition to purely domestic investing
which can increase the potential for losses in the funds. These risks can be
significantly magnified for investments in emerging markets. Currency risk
cannot be eliminated entirely and there is no guarantee that hedging will
always work. In addition it may not be possible to effectively hedge the
currencies of certain countries, particularly in emerging markets.
Furthermore, hedging costs can be significant, and they are paid out of a
fund's capital and reflected in the net asset value.
o Currency fluctuations. Transactions in foreign securities are conducted
in local currencies, so dollars must often be exchanged for another
currency when a security 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 bond 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 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 the
funds are usually somewhat higher than those of typical domestic funds.
o Political and economic factors. The economies, markets, and political
structures of a number of the countries in which each fund can invest do
not compare favorably with the U.S. 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.
However, even investments in countries with highly developed economies
are subject to risk.
Some economies are less well developed (for example, those in Latin
America, Eastern Europe, Africa, 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 political instability and upheaval
(for example, Latin America and Africa) that could cause their
governments to act in a detrimental or hostile manner toward private
enterprise or foreign investment. Actions such as 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 external risks,
including war, currently affect some countries. Governments in many
emerging market countries participate to a significant degree in their
economies and securities markets.
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.
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 a fund to risks 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 in the U.S.
o Pricing. Portfolio securities may be listed on foreign exchanges that
are open days (such as Saturdays) when the funds do not compute their
prices. As a result, a fund's net asset value may change significantly
on days when shareholders cannot make transactions.
What kinds of securities can the funds invest in?
Each fund may invest in a wide variety of fixed income securities, Brady
bonds, hybrid instruments, private placements, loan participations and
assignments and high-yield/high-risk securities. Additionally, the funds may
engage in different types of management practices, including: foreign currency
transactions, borrowing money and transferring assets, futures and options,
and lending of portfolio securities.
COMPARISON OF TOTAL RETURNS OF THE FUNDS
Set forth below is total return information for each fund through June
30, 1996. This information is derived from the "Financial Highlights" table of
the International Fixed Income Funds' prospectus and the Global Bond Funds
June 30, 1996 semiannual report.
Fund 1991 1992 1993 1994 1995 1996
_____________________________________________________________________________
Short-Term
Global Income - (0.22)%ab 7.87%b (2.92)%b 8.34%b 3.08%be
Global
Government
Bond 11.31%cd 3.26%d 11.15%d (3.06)%d 18.13%d (0.16)%de
a From June 30, 1992 (commencement of operations) to December 31, 1992.
b Excludes expenses in excess of a 1.00% voluntary expense limitation in
effect through December 31, 1997.
c From December 28, 1990 (commencement of operations) to December 31,
1991.
d Excludes expenses in excess of a 1.20% voluntary expense limitation in
effect through December 31, 1996.
e From January 1, 1996 to June 30, 1996.
_____________________________________________________________________________
COMPARISON OF 1995 PERFORMANCE OF THE FUNDS
1995 Performance of the Fund
The following information is excerpted from the Fund's annual report
dated December 31, 1995. Additional and more recent information about the
Fund's performance is set forth in its semiannual report dated June 30, 1996.
Chart 1 - Performance Comparison for Short-Term Global Income Fund
The Fund benefited early in 1995 from minimal exposure to Latin American
credits in the aftermath of the Mexican peso crisis. As the year progressed,
the Fund extended the weighted average maturity of the portfolio to take
advantage of declining interest rates, which further helped performance.
The Fund concentrated its holdings during the first half of 1995 in core
European markets, including Germany, France, Belgium, and Austria, as the
likelihood of German interest cuts increased. Later, the Fund added positions
in Spain, Italy, Australia, and Canada. During the second half of 1995, the
Fund established small positions in U.S. dollar- denominated Mexican debt and
assumed some currency exposure to Poland and the Czech Republic, which
contributed positively to Fund performance near year-end.
Average Annual Compound Total Return
Periods Ended December 31, 1995
Since Inception
1 Year 6/30/92
________________________________________
8.34% 3.60%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
1995 Performance of Global Government Fund
The following information is excerpted from the Global Government Fund's
annual report dated December 31, 1995. Additional and more recent information
about the Global Government Fund's performance is set forth in its semiannual
report dated June 30, 1996.
The Global Government Fund outperformed its unhedged benchmark over the
second half of 1995 because of its underweighted allocation to Japanese bonds
and currency. This underweighting hindered results to some extent during the
first six months of 1995 when Japanese bonds returned 8% in dollar terms.
Chart 2 - Performance Comparison for Global Government Fund
In addition, the Global Government Fund also underweighted U.S.
Treasuries, which did not do as well as foreign bonds. The Global Government
Fund's preference for the better-performing markets of Europe helped returns.
Extensive exposure to all European bond maturities benefited the Global
Government Fund as rates fell across the yield curve.
The Global Government Fund's small holdings in emerging market debt
aided performance in the second half of 1995 as those markets rebounded
sharply from first quarter losses.
Average Annual Compound Total Return
Periods Ended December 31, 1995
Since Inception
1 Year 5 Years 12/28/90
_________________________________________________________________
18.13% 7.91% 7.91%
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
THE ANNUAL AND SEMI-ANNUAL REPORTS FOR THE FUND AND THE GLOBAL
GOVERNMENT FUND DATED DECEMBER 31, 1995 AND JUNE 30, 1996, RESPECTIVELY, ARE
AVAILABLE AT NO COST BY CALLING 1-800-225-5132.
INFORMATION ABOUT THE FUNDS
Information about the Global Government Fund and the Fund is included in
the current International Fixed Income Funds' prospectus dated May 1, 1996, a
copy of which is incorporated herein by reference. Additional information
about the Global Government Fund and the Fund is included in the Statement of
Additional Information dated the same date as the Prospectus, which has been
filed with the Securities and Exchange Commission and is incorporated herein
by reference. Copies of this Prospectus and Statement of Additional
Information may be obtained without charge by writing T. Rowe Price
International Funds, Inc., 100 East Pratt Street, Baltimore, Maryland 21202,
or by calling 1-800-225-5132.
The funds file proxy materials, reports and other information with the
Securities and Exchange Commission. These reports can be inspected and copied
at the public reference facilities maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's New York Regional Office, 75 Park Place, New York, New York
10007, and Chicago Regional Office, 500 West Madison Street, Room 1400,
Chicago, Illinois 60606. Copies of these materials can also be obtained from
the Public Reference Branch, Office of Filings, Information and Consumer
Services, Securities and Exchange Commission, Washington, D.C. 20549, at
prescribed rates.
VOTING INFORMATION
If the enclosed proxy is executed properly and returned unmarked in time
to be voted at the meeting, the shares represented will be voted for approval
of the Plan. Any proxy may be revoked at any time prior to its exercise by
filing with the Secretary of the Company a written notice of revocation, by
delivering a duly executed proxy bearing a later date, or by attending the
meeting and voting in person.
The Board of Directors has fixed the close of business on September 6,
1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof. As of such
date, there were approximately 7,250,225.996 outstanding shares of the Fund,
each share being entitled to one vote and a proportionate vote for each
factional share. According to information available to the Company, no person
was the beneficial owner of 5% or more of the outstanding shares of the Fund
on the record date. On such date the directors and officers of the Company as
a group owned less than 1% of the outstanding shares of the Fund. According to
information available to the Global Government Fund, no person was the
beneficial owner of 5% or more the outstanding shares of the Global Government
Fund on such date. On such date, the directors and officers of the Global
Government Fund, as a group, owned less than 1% of the outstanding shares of
the Global Government Fund.
Shareholders are entitled to one vote for each full share, and a
proportionate vote for each fractional share, of the Fund held as of the
record date. Under Maryland law, shares owned by two or more persons (whether
as joint tenants, co-fiduciaries, or otherwise) will be voted as follows,
unless a written instrument or court order providing to the contrary has been
filed with the Fund: (1) if only one votes, that vote will bind all; (2) if
more than one votes, the vote of the majority will bind all; and (3) if more
than one votes and the vote is evenly divided, the vote will be cast
proportionately.
A majority of the shares of the Fund outstanding as of the record date
must be present in person or represented by proxy for the transaction of
business at the meeting. The affirmative vote of a majority of the outstanding
shares of the Fund is required for approval of the Plan. If a quorum is
present at the meeting but sufficient votes for the Plan are not received, the
persons named as proxies may propose one or more adjournments of the meeting
to permit further solicitation of proxies. Any such adjournment will require
the affirmative vote of a majority of those shares present at the meeting or
represented by proxy. The persons named as proxies will vote for such
adjournment those shares which they are entitled to vote for the Plan; they
will vote against such adjournment those shares which they have been
instructed to vote against the Plan.
Abstentions and "broker non-votes" (as defined below) are counted for
purposes of determining whether a quorum is present, but do not represent
votes cast with respect to any Proposal. "Broker non-votes" are shares held by
a broker or nominee for which an executed proxy is received by the Fund, but
are not voted as to one or more Proposals because instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power.
In addition to solicitation by mail, solicitations on behalf of the
Board of Directors may also be made by personal interview, telegram and
telephone. Certain officers and regular agents of the Company, who will
receive no additional compensation for their services, may use their efforts,
by telephone or otherwise, to request the return of proxies. In addition, D.
F. King & Co., Inc., has been retained to perform various proxy advisory and
solicitation services. The cost of preparing, assembling, mailing and
transmitting proxy materials and of soliciting proxies on behalf of the Board
of Directors (including the fees and expenses of D. F. King & Co.) will be
borne by Price-Fleming. Arrangements will be made with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material
to their principals, and Price-Fleming will reimburse them for their expenses
in doing so.
The management of the Company knows of no other business which may come
before the meeting. However, if any additional matters are properly presented
at the meeting, the persons named in the enclosed proxy, or their substitutes,
will vote thereon in accordance with their best judgment in the interests of
the Fund and the Company.
Shareholders of the Fund will not be entitled to any rights of share
appraisal in connection with the reorganization. However, a shareholder has
the right until the Valuation Date of the reorganization to redeem his Fund
shares at their net asset value and thereafter a shareholder may redeem the
Global Government Fund shares received in the reorganization at their net
asset value.
Solicitation of proxies by telephone. In addition to soliciting proxies
by mail, in person or by telephone, the Fund may arrange to have votes
recorded by telephone. The telephone voting procedure is designed to
authenticate shareholders' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions and to confirm
that their instructions have been properly recorded. The Fund has been advised
by counsel that these procedures are consistent with the requirements of
applicable law. If these procedures were subject to a successful legal
challenge, such votes would not be counted at the meeting. The Fund is unaware
of any such challenge at this time. Shareholders would be called at the
telephone number Price Associates has in its records for their accounts, and
would be asked for their social security number or other identifying
information. The shareholders would then be given an opportunity to authorize
proxies to vote their shares at the meeting in accordance with their
instructions. To ensure that the shareholders' instructions have been recorded
correctly, they will also receive a confirmation of their instructions in the
mail. A special toll-free number will be available in case the information
contained in the confirmation is incorrect.
TRANSFER AGENT AND CUSTODIAN
T. Rowe Price Services, Inc., 100 East Pratt Street, Baltimore, Maryland
21202, serves as the transfer agent and dividend disbursing agent for the
funds. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, is the custodian for the funds' domestic
securities and The Chase Manhattan Bank, N.A., London ("Chase"), Woolgate
House, Coleman Street, London, England, EC2P 2HD, is the custodian of the
funds' portfolio securities purchased outside the United States.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Global
Government Fund are being passed upon by Shereff, Friedman, Hoffman & Goodman,
LLP, 919 Third Avenue, New York, New York 10022.
FINANCIAL STATEMENTS
The audited financial statements of the Global Government Fund and the
Fund for the year ended December 31, 1995, incorporated by reference in this
Combined Proxy Statement and Prospectus and in the Prospectus for the Global
Government Fund and the Fund, have been so incorporated in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in accounting and auditing. The unaudited
financial statements of the Global Government Fund and the Fund contained in
the Semiannual Report dated June 30, 1996 are also incorporated by reference
herein.
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made this 6th
day of September, 1996, by and between T. Rowe Price International Funds,
Inc., a corporation organized and existing under the laws of Maryland (the
"Company") on behalf of its separately designated series, the T. Rowe Price
Global Government Bond Fund (the "Fund"), and the Company on behalf of its
separately designated series, the T. Rowe Price Short-Term Global Income Fund
(the "Acquired Fund"). All references in this agreement to the Fund and the
Acquired Fund are, as applicable, to the Company on behalf of each such fund.
W I T N E S S E T H:
The Company is registered under the Investment Company Act of 1940
("1940 Act") as an open-end management investment company, and, through the
Acquired Fund, owns securities which are assets of the character in which the
Fund is permitted to invest. The Company has agreed to combine the Fund and
the Acquired Fund through the transfer of substantially all of the assets of
the Acquired Fund to the Fund in exchange solely for shares of Common Stock,
par value $.01 per share, of the Fund (the "Acquiring Fund Shares") and the
distribution of Acquiring Fund Shares to the shareholders of the Acquired Fund
in liquidation of the Acquired Fund. The Company wishes to enter into a
definitive agreement setting forth the terms and conditions of the foregoing
transactions as a "plan of reorganization" and "liquidation" within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Assets to be Transferred
A. Reorganization. Prior to the close of regular trading on the New
York Stock Exchange (the "Exchange") on the Closing Date (as hereinafter
defined), all the assets of the Acquired Fund, net of appropriate reserves and
those assets described in paragraph 1.C. below, shall be delivered as provided
in paragraph 2.C. to State Street Bank and Trust Company, custodian of the
Fund's U.S. assets (the "Custodian") or, in the case of securities maintained
outside of the United States, The Chase Manhattan Bank, N.A., London (the
"Foreign Custodian"), in exchange for and against delivery by the Fund to the
Acquired Fund on the Closing Date of a number of Acquiring Fund Shares
(including, if applicable, fractional shares) having an aggregate net asset
value equal to the value of the assets of the Acquired Fund so transferred,
assigned and delivered, all determined and adjusted as provided in paragraph
1.B. below. Notwithstanding the foregoing, the assets of the Acquired Fund to
be acquired by the Fund shall constitute at least 90% of the fair market value
of the net assets of the Acquired Fund and at least 70% of the fair market
value of the gross assets of the Acquired Fund.
B. Valuation. The net asset value of shares of the Fund and the value
of the assets of the Acquired Fund to be transferred shall, in each case, be
computed as of the close of regular trading on the Exchange on the Valuation
Date (as hereinafter defined). The net asset value of the Acquiring Fund
Shares shall be computed in the manner set forth in the Fund's current
prospectus and statement of additional information under the Securities Act of
1933 (the "1933 Act"). The value of the assets of the Acquired Fund to be
transferred shall be computed by the Company in accordance with the policies
and procedures of the Fund as described in the Fund's current prospectus and
statement of additional information under the 1933 Act, subject to review and
approval by the Acquired Fund and to such adjustments, if any, agreed to by
the parties.
C. Excludable Assets. If on the Closing Date the assets of the Acquired
Fund include accounts receivable, causes of actions, claims and demands of
whatever nature, contract rights, leases, business records, books of accounts
and shareholder records, the Fund may for reasonable cause refuse either to
accept or to value such assets (other than fully collectible and transferable
dividends, interest and tax refunds). For purposes of this paragraph l.C.,
"reasonable cause" includes the inability to obtain a reliable value, the
likelihood of engaging in protracted collection efforts or the likelihood of
engaging in burdensome administrative responsibilities to receive value. In
addition, there shall be deducted from the assets of the Acquired Fund
described in paragraph I.A. assets not transferred pursuant to paragraph I.A.
and cash in an amount estimated by the Acquired Fund to be sufficient to pay
all the liabilities of the Acquired Fund, including, without limitation, (i)
amounts owed to any shareholders including declared but unpaid dividends and
amounts owed to any former shareholders in respect of redemptions in the
ordinary course of business, (ii) accounts payable and other accrued and
unpaid expenses incurred in the normal operation of its business up to and
including the Closing Date, and (iii) the costs and expenses, if any, incurred
by the Acquired Fund in making and carrying out this Agreement (other than
costs and expenses to be paid for by Rowe Price-Fleming International, Inc.).
2. Definitions
A. Closing and Closing Date. Subject to the terms and conditions
hereof, the closing of the transactions contemplated by this Agreement (the
"Closing") shall be conducted at the offices of the Company in Baltimore,
Maryland beginning at 10:00 a.m., Eastern time, on November 1, 1996, or at
such other place or on such later business day as may be agreed upon by the
parties. In the event that on the Valuation Date (i) the Exchange is closed or
trading thereon is restricted, or (ii) trading or the reporting of trading on
the Exchange or elsewhere is disrupted so that accurate appraisal of the value
of the Acquired Fund assets or the net asset value of the Acquiring Fund
Shares is impractical, the Closing shall be postponed until the first business
day after the first business day when trading on the Exchange or elsewhere
shall have been fully resumed and reporting thereon shall have been restored,
or such other business day as soon thereafter as may be agreed upon by the
parties. The date on which the Closing actually occurs is herein referred to
as the "Closing Date."
B. Valuation Date. The business day next preceding the Closing Date
shall be the "Valuation Date." The stock transfer books of the Acquired Fund
will be permanently closed as of the close of business on the Valuation Date.
The Acquired Fund shall only accept redemption requests received by it in
proper form prior to the close of regular trading on the Exchange on the
Valuation Date. Redemption requests received thereafter shall be deemed to be
redemption requests for Acquiring Fund shares to be distributed to Acquired
Fund shareholders pursuant to the Plan (assuming that the transactions
contemplated by this Agreement have been consummated)
C. Delivery. Portfolio securities shall be delivered by the Acquired
Fund to the Custodian or the Foreign Custodian, to be held until the Closing
for the account of the Acquired Fund, no later than three (3) business days
preceding the Closing (the "Delivery Date"), duly endorsed in proper form for
transfer in such condition as to constitute a good delivery thereof, in
accordance with the custom of brokers, and shall be accompanied by all
necessary state stock transfer stamps, if any, or a check for the appropriate
purchase price thereof. Cash of the Acquired Fund shall be delivered by the
Acquired Fund on the Closing Date and shall be in the form of currency or wire
transfer in federal funds, payable to the order of the Custodian or the
Foreign Custodian. A confirmation for the Acquiring Fund Shares, credited to
the account of the Acquired Fund and registered in the name of the Acquired
Fund, shall be delivered by the Fund to the Acquired Fund at the Closing.
3. Failure to Deliver Securities. If, on the Delivery Date, the Acquired
Fund is unable to make delivery under paragraph 2.C. to the Custodian or the
Foreign Custodian of any of the portfolio securities of the Acquired Fund, the
Fund may waive the delivery requirements of paragraph 2.C. with respect to
said undelivered securities, if the Acquired Fund has delivered to the
Custodian or the Foreign Custodian by or on the Delivery Date and, with
respect to said undelivered securities, such documents in the form of executed
copies of an agreement of assignment and escrow agreement and due bills and
the like as may be required by the Fund or the Custodian or the Foreign
Custodian, including brokers' confirmation slips.
4. Post-Closing Distribution and Liquidation of the Acquired Fund. As soon
as practicable after the Closing, the Acquired Fund shall pay or make
provisions for all of its debts, taxes and other liabilities and shall
distribute all of the remaining assets thereof to the shareholders of the
Acquired Fund; appropriate articles supplementary or such other filings
amending the Company's charter to eliminate the designation of shares of the
Acquired Fund shall be filed with the Maryland State Department of Assessments
and Taxation; and the Acquired Fund shall no longer be listed on the Company's
Form N-SAR. At, or as soon as may be practicable following the Closing Date,
the Company shall for federal income tax purposes liquidate the Acquired Fund
and distribute the Acquiring Fund Shares received hereunder by instructing the
Fund that the pro rata interest (in full and fractional Acquiring Fund Shares)
of each of the holders of record of shares of the Acquired Fund as of the
close of business on the Valuation Date as certified by the Acquired Fund's
transfer agent (the "Acquired Fund Record Holders") be registered on the books
of the Fund in the names of each of the Acquired Fund Record Holders. The Fund
agrees to comply promptly with said instruction. All issued and outstanding
shares of the Acquired Fund shall thereupon be cancelled on the books of the
Company. The Fund shall have no obligation to inquire as to the validity,
propriety or correctness of any such instruction, but shall, in each case,
assume that such instruction is valid, proper and correct. The Company shall
record on the books of the Fund the ownership of Acquiring Fund Shares by
Acquired Fund Record Holders. No redemption or repurchase of any Fund Shares
credited to Acquired Fund Record Holders in respect of the Acquired Fund
Shares represented by unsurrendered stock certificates shall be permitted
until such certificates have been surrendered to the Custodian for
cancellation. Any transfer taxes payable upon issuance of Acquiring Fund
Shares in a nameother than the name of the Acquired Fund Record Holder on the
books of the Company as of the Closing Date shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
5. Acquired Fund Securities. The Acquired Fund has provided the Fund with a
list of all of the Acquired Fund's portfolio investments as of the date of
execution of this Agreement. The Acquired Fund may sell any of these
investments and will confer with the Fund with respect to investments for the
Acquired Fund. The Fund will, within a reasonable time prior to the Closing
Date, furnish the Acquired Fund with a statement of the Fund's investment
objectives, policies and restrictions and a list of the investments, if any,
on the list referred to in the first sentence of this paragraph 5 that do not
conform to such objectives, policies and restrictions. In the event that the
Acquired Fund holds any investments that the Fund may not hold, the Acquired
Fund will, consistent with the foregoing and its own policies and
restrictions, use its reasonable efforts to dispose of such investments prior
to the Closing Date, provided, however, that in no event will the Acquired
Fund be required to dispose of assets to an extent which would cause less than
50% of the historic business assets of the Acquired Fund to be transferred to
the Fund pursuant to this Agreement or to take any action that is inconsistent
with paragraph 8.M. below. In addition, if it is determined that the
portfolios of the Acquired Fund and the Fund, when aggregated, would contain
any investments exceeding certain percentage limitations applicable to the
Fund with respect to such investments, the Acquired Fund will, if requested by
the Fund, in a manner consistent with the foregoing and its own policies and
restrictions, use its reasonable efforts to dispose of an amount of such
investments sufficient to avoid violating such limitations as of the Closing
Date. On the Delivery Date, the Acquired Fund shall deliver to the Fund a list
setting forth the securities then owned by the Acquired Fund (the "Securities
List"), which shall be prepared in accordance with the requirements of the
Code and the regulations promulgated thereunder for specific identification
tax ot accounting and which shall clearly reflect the bases used for
determination of gain and loss realized on the partial sale of any security
transferred to the Fund. The records from which the Securities List will be
prepared shall be made available by the Acquired Fund prior to the Closing
Date for inspection by the Fund's Treasurer or his designee or the auditors of
the Fund upon reasonable request.
6. Liabilities and Expenses. The Fund shall not assume any of the
liabilities of the Acquired Fund, and the Acquired Fund will use its
reasonable efforts to discharge all its known liabilities, so far as may be
possible, prior to the Closing Date. The Fund shall not be responsible for any
of the Acquired Fund's expenses in connection with the carrying-out of this
Agreement.
7. Legal Opinions.
A. Opinion of Acquired Fund Counsel. At the Closing, the Acquired Fund
shall furnish the Fund with such written opinions (including opinions as to
certain federal income tax matters) of Shereff, Friedman, Hoffman & Goodman,
LLP, and the factual representations supporting such opinions, as shall be, in
form and substance reasonably satisfactory to the Fund.
B. Opinion of Fund Counsel. At the Closing, the Fund shall furnish the
Acquired Fund with a written opinion of Shereff, Friedman, Hoffman & Goodman,
LLP, and the factual representations supporting such opinions as shall be, in
form and substance reasonably satisfactory to the Acquired Fund.
8. Acquired Fund Representations, Warranties, and Covenants. The Acquired
Fund hereby represents and warrants to the Fund, and covenants and agrees with
the Fund:
A. that the audited statement of assets and liabilities, including the
schedule of portfolio investments, and the related statement of operations and
statement of changes in net assets of the Acquired Fund as of December 31,
1995 and for the year then ended heretofore delivered to the Fund were
prepared in accordance with generally accepted accounting principles, reflect
all liabilities of the Acquired Fund, whether accrued or contingent, which are
required to be reflected or reserved against in accordance with generally
accepted accounting principles, and present fairly the financial position and
results of operations of the Acquired Fund as of said date and for the period
covered thereby;
B. that the Acquired Fund will furnish to the Fund an unaudited
statement of assets and liabilities, including the schedule of portfolio
investments, (or a statement of net assets in lieu of a statement of assets
and liabilities and a schedule of portfolio investments) and the related
statement of operations and statement of changes in net assets of the Acquired
Fund for the period commencing on the date following the date specified in
paragraph 8.A. above and ending on June 30, 1996. These financial statements
will be prepared in accordance with generally accepted accounting principles
and will reflect all liabilities of the Acquired Fund, whether accrued or
contingent, which are required to be reflected or reserved against in
accordance with generally accepted accounting principles, will present fairly
the financial position and results of operations of the Acquired Fund as of
the dates of such statements and for the periods covered thereby;
C. that there are no legal, administrative or other proceedings pending
or, to the knowledge of the Acquired Fund, overtly threatened against the
Acquired Fund which would individually or in the aggregate materially affect
the financial condition of the Acquired Fund or the Company's ability to
consummate the transactions contemplated hereby;
D. that the execution and delivery of this Agreement by the Acquired
Fund and the consummation of the transactions contemplated herein have been
authorized by the Board of Directors by vote taken at a meeting of the Board
of Directors of the Company duly called and held on July 31, 1996, and that
the Acquired Fund will (i) take all steps necessary duly to call, give notice
of, convene and hold a meeting of the shareholders of the Acquired Fund as
soon as practicable and in accordance with applicable Maryland and federal
law, for the purpose of approving this Agreement and the transactions
contemplated herein and for such other purposes as may be necessary and
desirable, and (ii) recommend to such shareholders the approval of this
Agreement and the transactions contemplated herein and such other matters as
may be submitted to such shareholders in connection with the transactions
contemplated herein;
E. that from the date of this Agreement through the Closing Date, there
shall not have been:
(1) any material change in the business, results of operations, assets
or financial condition or the manner of conducting the business of the
Acquired Fund (other than changes in the ordinary course of its business or
relating to the transactions contemplated by this Agreement, including,
without limitation, dividends and distributions in the ordinary course,
changes in the net asset value per share, redemptions in the ordinary course
of business, and changes in sales volume), which has had a material adverse
effect on such business, results of operations, assets or financial condition,
except in all instances as set forth in the financial statements of the
Acquired Fund referred to in paragraphs 8.A. and B. above;
(2) any loss (whether or not covered by insurance) suffered by the
Company materially and adversely affecting the assets of the Acquired Fund,
other than depreciation of securities;
(3) issued any option to purchase or other right to acquire stock of
the Acquired Fund of any class granted by the Company to any person (excluding
sales in the ordinary course and a dividend reinvestment program);
(4) any indebtedness incurred by the Company in respect of the Acquired
Fund for borrowed money or any commitment to borrow money entered into by the
Company in respect of the Acquired Fund, except as provided in the current
prospectus and statement of additional information of the Acquired Fund or so
long as it will not prevent the Acquired Fund from complying with paragraph
8.I.;
(5) any amendment to the Articles of Incorporation or By-Laws of the
Company except to effectuate the transactions contemplated hereunder or
otherwise as disclosed in writing to the Fund; or
(6) any grant or imposition of any lien, claim, charge or encumbrance
upon any asset of the Acquired Fund except as provided in the current
prospectus and statement of additional information of the Acquired Fund or so
long as it will not prevent the Acquired Fund from complying with paragraph
8.I.;
F. that there are no material contracts outstanding to which the
Company or Acquired Fund is bound other than as disclosed to the Fund;
G. that the Acquired Fund has filed all federal, state and local tax
returns and reports required by law to have been filed, that all federal,
state and local income, franchise, property, sales, employment or other taxes
payable pursuant to such returns and reports have been paid so far as due, or
provision has been made for the payment thereof, and that, to the knowledge of
the Acquired Fund, no such return is currently under audit and no assessment
has been asserted with respect to any such return other than with respect to
all such matters which are not material individually or in the aggregate;
H. that, as promptly as practicable, but in any case within 60 days
after the Closing Date, the Acquired Fund shall furnish the Fund with a
statement of the earnings and profits of the Acquired Fund for federal income
tax purposes;
I. that on the Closing Date the Acquired Fund will have good and
marketable title to the assets of the Acquired Fund to be conveyed hereunder,
free and clear of all liens, mortgages, pledges, encumbrances, charges, claims
and equities whatsoever, and full right, power and authority to sell, assign,
transfer and deliver such assets and shall deliver such assets to the Fund as
set forth in paragraph 1.A. hereof. Upon delivery of such assets, the Fund
will receive good and marketable title to such assets, free and clear of all
liens, mortgages, pledges, encumbrances, charges, claims and equities, except
as to adverse claims of which the Fund has notice at or prior to the time of
delivery. Except as set forth on the Securities List, none of the securities
comprising the assets of the Acquired Fund will be "restricted securities"
under the 1933 Act or the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder;
J. that the Proxy Statement/Prospectus (hereinafter defined) at the
time of delivery by the Acquired Fund to its shareholders in connection with
the meeting of shareholders to approve this transaction, on the Closing Date
and at the time of the liquidation of the Acquired Fund set forth in paragraph
4. above, as amended or as supplemented if it shall have been amended or
supplemented, will conform in all material respects to the applicable
requirements of the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act") and the 1940 Act and the rules and regulations of the Commission
thereunder, and will not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not materially misleading, except that no representations or
warranties in this section apply to statements or omissions which are based on
written information furnished by the Fund to the Acquired Fund;
K. that the Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of any
provision of the Company's Articles of Incorporation or By-Laws or of any
material agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquired Fund is a party or by which it is bound and
that this Agreement constitutes a valid and legally binding obligation of the
Acquired Fund, enforceable against the Acquired Fund in accordance with its
terms, except as enforceability may be affected by bankruptcy laws, laws
affecting creditors generally and general principles of equity;
L. that the Acquired Fund will take all actions within its control
necessary to cause the exchange of Acquiring Fund Shares for assets of the
Acquired Fund made under this Agreement to qualify, as of and after the
Closing, as a reorganization within the meaning of Section 368(a)(1)(C) of the
Code; and
M. that the Acquired Fund is registered with the Commission under the
1940 Act, classified as a management company and subclassified as an open-end
company.
9. Fund Representations, Warranties and Covenants. The Fund hereby
represents and warrants to the Acquired Fund, and covenants and agrees with
the Acquired Fund:
A. that the audited statement of assets and liabilities, including the
schedule of portfolio investments, and the related statement of operations and
statement of changes in net assets of the Fund as of December 31, 1995 and for
the year then ended heretofore delivered to the Acquired Fund were prepared in
accordance with generally accepted accounting principles, reflect all
liabilities of the Fund, whether accrued or contingent, which are required to
be reflected or reserved against in accordance with generally accepted
accounting principles, and present fairly the financial position and results
of operations of the Fund as of said date and for the period covered thereby;
B. that the Fund shall furnish to the Acquired Fund unaudited schedules
of portfolio investments and unaudited statements of assets and liabilities
(or a statement of net assets in lieu of a statement of assets and liabilities
and a schedule of portfolio investments) and the related statements of
operation and statements of changes in net assets of the Fund for the
semiannual period of the Fund occurring between the date following the date
specified in paragraph 9.A. above and June 30, 1996. These financial
statements will be prepared in accordance with generally accepted accounting
principles, will reflect all liabilities of the Fund, whether accrued or
contingent, which are required to be reflected or reserved against in
accordance with generally accepted accounting principles, will present fairly
the financial position and results of operations of the Fund as of the dates
of such statements and for the periods covered thereby;
C. that there are no legal, administrative or other proceedings pending
or, to its knowledge, overtly threatened against the Fund which would
individually or in the aggregate materially affect the financial condition of
the Fund or the Company's ability to consummate the transactions contemplated
hereby;
D. that the execution and delivery of this Agreement by the Fund and
the consummation of the transactions contemplated herein have been authorized
by the Board of Directors of the Company by vote taken at a meeting of the
Board of Directors of the Company duly called and held on July 31, 1996, and
that approval by the Fund's shareholders of this Agreement or the consummation
of the transactions contemplated herein is not required under applicable
Maryland and federal law;
E. that from the date of this Agreement through the Closing Date, there
shall not have been any material change in the business, results of
operations, assets or financial condition or the manner of conducting the
business of the Fund (other than changes in the ordinary course of its
business, including, without limitation, dividends and distributions in the
ordinary course, changes in the net asset value per share, redemptions in the
ordinary course of business and changes in sales volume), which has had an
adverse material effect on such business, results of operations, assets or
financial condition, except in all instances as set forth in the financial
statements of the Fund referred to in paragraph 9.A. and B. above;
F. that the Fund is registered with the Commission under the 1940 Act,
classified as a management company and subclassified as an open-end
non-diversified company;
G. that the shares of the Fund to be issued pursuant to paragraph I.A.
will be duly registered under the 1933 Act by the Registration Statement
(hereinafter defined) in effect on the Closing Date and at the time of the
liquidation of the Acquired Fund set forth in paragraph 4. above;
H. that the Acquiring Fund Shares are duly authorized and validly
issued and are fully paid, nonassessable and free of any preemptive rights and
conform in all material respects to the description thereof contained in the
Proxy Statement/Prospectus as in effect on the Closing Date and at the time of
the liquidation of the Acquired Fund set forth in paragraph 4. above;
I. that the Fund is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of any provision of
the Company's Articles of Incorporation or By-Laws or of any material
agreement, indenture, instrument, contract, lease or other undertaking to
which the Fund is a party or by which it is bound, and that this Agreement
constitutes a valid and legally binding obligation of the Fund, enforceable
against the Fund in accordance with its terms, except as enforceability may be
affected by bankruptcy laws, laws affecting creditors generally and general
principles of equity;
J. that the Fund will take all actions within its control necessary to
cause the exchange of Acquiring Fund Shares for assets of the Acquired Fund
made under this Agreement to qualify, as of and after the Closing, as a
reorganization within the meaning of Section 368(a)(1)(C) of the Code;
K. that the Fund has filed all federal, state and local tax returns and
reports required by law to have been filed, that all federal, state and local
income, franchise, property, sales, employment or other taxes payable pursuant
to such returns and reports have been paid so far as due, or provision has
been made for the payment thereof, and that, to the knowledge of the Fund, no
such return is currently under audit and no assessment has been asserted with
respect to any such return, other than with respect to all such matters those
which are not material individually or in the aggregate;
L. that the Proxy Statement/Prospectus at the time of delivery by the
Acquired Fund to its shareholders in connection with the meeting of
shareholders to approve this transaction, on the Closing Date and at the
liquidation of the Acquired Fund set forth in paragraph 4. above, as amended
or as supplemented if it shall have been amended or supplemented, and the
Registration Statement on the effective date thereof, on the Closing Date and
at the liquidation of the Acquired Fund set forth in paragraph 4. above, will
conform in all material respects to the applicable requirements of the 1933
Act, the 1934 Act and the 1940 Act and the rules and regulations of the
Commission thereunder, and will not include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading, except that no
representations or warranties in this section apply to statements or omissions
which are based on written information furnished by the Acquired Fund to the
Fund; and
M. the current prospectus and statement of additional information of
the Fund (copies of which have been delivered to the Acquired Fund) conform in
all material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission thereunder and do not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading.
10. Certain Conditions.
Unless waived by the parties in writing in their sole discretion, all
obligations of the parties hereunder are subject to the fulfillment, prior to
or at the Closing, of each of the following conditions:
A. Registration Statement and Proxy Statement/Prospectus. The Fund will
file a registration statement on Form N-14 with the Commission under the 1933
Act in order to register the Acquiring Fund Shares to be issued hereunder.
Such registration statement in the form in which it shall become effective
and, in the event any post-effective amendment thereto becomes effective prior
to the Closing Date, such registration statement as amended, is referred to
herein as the "Registration Statement." The Acquired Fund will file
preliminary proxy materials with the Commission under the 1940 Act and the
1934 Act, relating to the meeting of the shareholders of the Acquired Fund at
which this Agreement and the transactions herein contemplated will be
considered and voted upon, in the form of a combined proxy statement and
prospectus and related statement of additional information included in the
Registration Statement. The combined proxy statement and prospectus and
related statement of additional information that is first filed pursuant to
Rule 497(b) under the 1933 Act is referred to herein as the "Proxy
Statement/Prospectus." The Fund and the Acquired Fund each will exert
reasonable efforts to cause the Registration Statement to become effective
under the 1933 Act as soon as practical and agree to cooperate in such
efforts. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act. Upon effectiveness of the
Registration Statement, the Acquired Fund will cause the Proxy
Statement/Prospectus to be delivered to the shareholders of the Acquired Fund
entitled to vote on the transactions contemplated by this Agreement at least
20 days prior to the date of the meeting of shareholders called to act upon
such transactions.
B. Shareholder Vote. The obligations of the Acquired Fund under this
Agreement shall be subject to the shareholders of the Acquired Fund duly
approving the execution and delivery of this Agreement and the transactions
contemplated herein, including the Amendment to the Charter of the Company in
substantially the form attached as Exhibit B.
C. Pending or Threatened Proceedings. On the Closing Date, no action,
suit or other proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with, this Agreement or the transactions
contemplated herein.
D. Appropriate Articles. The Company shall execute and file with the
Maryland State Department of Assessments and Taxation, Articles of Amendment,
confirming solely for purposes of Maryland General Corporate laws, the change
and reclassification of the shares of the Acquired Fund into the shares of the
Acquiring Fund and shall file articles supplementary or other documents, as
necessary to eliminate designation of the Acquired Fund as a separate series
of the Company.
E. Declaration of Dividend. The Acquired Fund shall have declared a
dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to the Acquired Fund shareholders all of the
investment company taxable income and realized capital gain for all taxable
periods of the Acquired Fund which are required to be distributed to avoid
federal income or excise tax applicable to regulated investment companies.
F. Comfort Letter. The Fund shall receive from the Acquired Fund on the
Closing Date a comfort letter from independent auditors reasonably acceptable
to the Fund, dated as of the Closing Date, to the effect that they have
performed a limited review in accordance with Statement of Auditing Standards
No. 71 of the AICPA that included a reading of the minute books of the
Acquired Fund, inquiries of officials of the Acquired Fund responsible for
financial accounting matters, and such other inquiries and procedures as they
may have considered necessary, and on the basis of such limited review nothing
came to their attention that caused them to believe that the computations
required to perform the exchange and valuation referred to in paragraphs 1 (A)
and (B) of this Agreement as of the date of such exchange and valuation were
not in conformance with this Agreement.
G. State Securities Laws. The parties shall have received all permits
and other authorizations necessary under state securities laws to consummate
the transactions contemplated herein.
H. Performance of Covenants. Each party shall have performed and
complied in all material respects with each of its agreements and covenants
required by this Agreement to be performed or complied with by it prior to or
at the Valuation Date and the Closing Date.
I. Representations and Warranties. The representations and warranties
of each party set forth in this Agreement will be true and correct on the
Closing Date, and each party shall deliver to the other a certificate of a
duly authorized officer of such party to that effect.
11. Notices. All notices, requests, instructions and demands in the course
of the transactions herein contemplated shall be in writing addressed to the
respective parties as follows and shall be deemed given: (i) on the next day
if sent by prepaid overnight courier and (ii) on the same day if given by hand
delivery or telecopy.
If to the Fund or Acquired Fund:
Henry H. Hopkins, Esquire
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Fax Number (410) 345-6575
with a copy to:
Joel H. Goldberg, Esquire
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Fax Number (212) 758-9526
or to such other address as the parties from time to time may designate by
written notice to all other parties hereto.
12. Termination.
A. This Agreement may be terminated by the Fund or the Acquired Fund
upon the giving of written notice to the other, if the conditions specified in
paragraphs 8., 9. and 10. have not been performed or do not exist on or before
January 31, 1997.
B. In the event of termination of this Agreement pursuant to paragraph
12.A. of this Agreement, neither party (nor its officers or directors) shall
have any liability to the other.
13. Exhibits. All Exhibits shall be considered as part of this Agreement.
14. Miscellaneous. This Agreement shall bind and inure to the benefit of the
parties and their respective successors and assigns. It shall be governed by,
construed and enforced in accordance with the laws of the State of Maryland.
The Acquired Fund and the Fund represent and warrant to each other that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein. The Acquired Fund and the Fund agree
that no party has made any representation, warranty or covenant not set forth
herein and that this Agreement constitutes the entire agreement between the
parties as to the subject matter hereof. The representations, warranties and
covenants contained in this Agreement or in any document delivered pursuant
hereto or in connection herewith shall survive the consummation of the
transactions contemplated hereunder for a period of three years thereafter.
The paragraph headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. This Agreement shall be executed in any number of counterparts,
each of which shall be deemed an original. Nothing herein expressed or implied
is intended or shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement. Whenever
used herein, the use of any gender shall include all genders.
15. Amendments. The Acquired Fund and the Fund by mutual consent of their
Board of Directors or authorized committees or officers may amend this
Agreement in such manner as may be agreed upon, whether before or after the
meeting of stockholders of the Acquired Fund at which action upon the
transactions contemplated hereby is to be taken; provided, however, that after
the requisite approval of the stockholders of the Acquired Fund has been
obtained, this Agreement shall not be amended or modified so as to change the
provisions with respect to the transactions herein contemplated in any manner
which would materially and adversely affect the rights of such stockholders
without their further approval.
16. Waiver. The failure of any party hereto to enforce at any time any of
the provisions of this Agreement shall in no way be construed to be a waiver
of any such provision, nor in any way to affect the validity of this Agreement
or any part hereof or the right of any party thereafter to enforce each and
every such provision. No waiver of any breach of this Agreement shall be held
to be a waiver of any other or subsequent breach.
17. Liability.
A. The Company and the Fund acknowledge and agree that all obligations
of the Acquired Fund under this Agreement are binding only with respect to the
Acquired Fund; that any liability of the Acquired Fund under this Agreement or
in connection with the transactions contemplated herein shall be discharged
only out of the assets of the Acquired Fund; and that no other portfolio of
the Company shall be liable with respect to this Agreement or in connection
with the transactions contemplated herein.
B. The Company and the Acquired Fund acknowledge and agree that all
obligations of the Fund under this Agreement are binding only with respect to
the Fund; that any liability of the Fund under this Agreement or in connection
with the transactions contemplated herein shall be discharged only out of the
assets of the Fund; and that no other portfolio of the Company shall be liable
with respect to this Agreement or in connection with the transactions
contemplated herein.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and by their officers thereunto duly authorized, as of the day
and year first above written.
WITNESS: T. ROWE PRICE INTERNATIONAL FUNDS, INC.,
on behalf of the T. Rowe Price Global
Government Bond Fund
_____________________ By _______________________________(SEAL)
Title: Vice President
WITNESS: T. ROWE PRICE INTERNATIONAL FUNDS, INC.,
on behalf of the T. Rowe Price Short-Term
Global Income Fund
______________________ By _______________________________(SEAL)
Title: Vice President
Exhibit B
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
ARTICLES OF AMENDMENT
T. Rowe Price International Funds, Inc., a Maryland corporation, having
its principal office in Baltimore City, Maryland (which is hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The charter of the Corporation is hereby amended by:
Changing and reclassifying each share of the T. Rowe Price Short-Term
Global Income Fund (the "Short-Term Fund") series of Common Stock (par value
$.01 per share) of the Corporation, which is issued at the close of business
on the effective date of this amendment, into a number of shares of the T.
Rowe Price Global Government Bond Fund (the "Global Fund") series of Common
Stock (par value $.01 per share) of the Corporation determined in accordance
with the following formula and as further described in the Agreement and Plan
of Reorganization dated September 6, 1996 (the "Reorganization Agreement") and
filed as an exhibit to the Corporation's Combined Proxy Statement and
Prospectus; the holder of each share of the Short-Term Fund so change and
reclassified shall also be entitled to receive his or her pro rata interest in
any remaining shares formally attributable to the Short-Term Fund, as
contemplated by the Reorganization Agreement. Such formula is as follows: (A)
the quotient of: (x) the aggregate net assets (determined as of the effective
date in accordance with the Reorganization Agreement) of the Short-Term Fund
(as of the effective date) divided by (y) the net asset value per share of the
Global Fund (as of the effective date) shall be divided by (B) the number of
issued and outstanding shares of the Short-Term Fund (as of the effective
date). Following this reclassification, the authorized but unissued shares of
the Short-Term Fund series shall be reclassified into undesignated shares of
common stock of the Corporation and the Corporation shall file Articles
Supplementary confirming such change.
SECOND: This amendment does not change the aggregate number of shares
of authorized common stock of the Corporation.
THIRD: The foregoing amendments have been declared advisable by the
Board of Directors of the Corporation and approved by the shareholders of the
Corporation entitled to vote thereon.
FOURTH: The foregoing amendments shall be effective as of 5:00 p.m.
on October 31, 1996.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf of its President and witnessed by its
Assistant Secretary on this 31st day of October, 1996.
T. ROWE PRICE INTERNATIONAL FUNDS, INC.
By: ______________________________________
Vice President
ATTEST:
____________________________________
Assistant Secretary
THE UNDERSIGNED, the Vice President of T. ROWE PRICE INTERNATIONAL
FUNDS, INC. who executed on behalf of the Corporation the foregoing Articles
of Amendment of which this certificate is made a part, hereby acknowledges in
the name and on behalf of the Corporation the foregoing Articles of Amendment
to be the corporate act of the Corporation and hereby certifies to the best of
his knowledge, information and belief 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.
______________________________________
Vice President
T. ROWE PRICE PROXY
INSTRUCTIONS:
1. Cast your vote by checking the appropriate box on the reverse side. If
you do not check a box, your vote will be cast FOR that proposal.
2. Sign and date the card below.
3. Please return the signed card promptly using the enclosed postage paid
envelope, even if you will be attending the meeting.
4. Please do not enclose checks or any other correspondence.
Please fold and detach card at perforation before mailing.
T. ROWE PRICE SHORT-TERM SPECIAL MEETING: 9:00 A.M.
GLOBAL INCOME FUND EASTERN TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints M. David Testa and Martin G. Wade, as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all shares of stock of the Fund,
which the undersigned is entitled to vote at the Special Meeting of
Shareholders to be held on Wednesday, October 30, 1996, at the time indicated
above, at the offices of the Fund, 100 East Pratt Street, Baltimore, Maryland,
and at any and all adjournments thereof, with respect to the matters set forth
below and described in the Notice of Special Meeting and Proxy Statement dated
September 13, 1996, receipt of which is hereby acknowledged.
Dated: ____________________, 1996
Please sign exactly as name appears.
Only authorized officers should sign for
corporations. For information as to the
voting of stock registered in more than
one name, see page 22 of the Notice of
Special Meeting and Proxy Statement.
_________________________________
_________________________________
Signature(s)
T. Rowe Price We Need Your Proxy Vote Before October 30, 1996
Please refer to the Proxy Statement discussion of this matter.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL.
Please fold and detach card at perforation before mailing.
_____________________________________________________________________________
Please vote by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil. Do not use red ink. (Example of darkened box appears
here.)
1. To approve or disapprove an Agreement and Plan of Reorganization and an
Amendment to the Charter of the T. Rowe Price International Funds, Inc.
The Agreement and Plan provides for the transfer of substantially all of
the assets of the T. Rowe Price Short-Term Global Income Fund ("Fund")
to T. Rowe Price Global Government Bond Fund (the "Global Government
Fund"), a separate series of T. Rowe Price International Funds, Inc., in
exchange solely for shares of the Global Government Fund, and the
distribution of the Global Government Fund shares to the shareholders of
the Fund. The Charter amendment provides for the change and
reclassification of the shares of the Fund into the shares of the Global
Government Fund.
FOR _____ AGAINST _____ ABSTAIN _____
2. To consider and act upon such other business as may properly come before
the meeting.
CUSIP77956H807/FUND063
Chart 1 - Performance Comparison description: a line graph showing the
cumulative growth of $10,000 invested in the Short-Term Global Income Fund
from inception (6/30/92) compared with $10,000 invested in a broad-based index
over the same period.
Chart 2 - Performance Comparison description: a line graph showing the
cumulative growth of $10,000 invested in the Global Government Bond Fund over
from inception (12/28/90) compared with $10,000 invested in a broad-based
index over the same period.
PAGE 2
STATEMENT OF ADDITIONAL INFORMATION FOR
T. ROWE PRICE INTERNATIONAL FUNDS, INC. ON BEHALF OF
T. ROWE PRICE GLOBAL GOVERNMENT BOND FUND
_________________________________________
Acquisition of the assets of
T. ROWE PRICE INTERNATIONAL FUNDS, INC. ON BEHALF OF
T. ROWE PRICE SHORT-TERM GLOBAL INCOME FUND (the Fund)
By and in exchange for shares of
T. ROWE PRICE INTERNATIONAL FUNDS, INC. ON BEHALF OF
T. ROWE PRICE GLOBAL GOVERNMENT BOND FUND (Global Government
Fund)
This Statement of Additional Information relates
specifically to the proposed acquisition of substantially all of
the assets of the Fund by the Global Government Fund in exchange
for shares of the Global Government Fund.
This Statement of Additional Information consists of this
Cover Page, the Statement of Additional Information of the Global
Government Fund and the Fund, and the semiannual and annual
reports of the Global Government Fund and the Fund. Each of
these documents described below is attached hereto and
incorporated by reference herein.
(1) Statement of Additional Information, dated May 1, 1996
for T. Rowe Price International Fixed Income Funds
including the Global Government Fund and the Fund;
(2) the annual report, dated, December 31, 1995, for the
Global Government Fund and the Fund; and
(3) the semiannual report, dated June 30, 1996 for the
Global Government Fund and the Fund.
This Statement of Additional Information is not a
prospectus; a Proxy Statement/Prospectus dated September 13,
1996, relating to the above-reference transaction may be obtained
from T. Rowe Price Associates, Inc. This Statement of Additional
Information should be read in conjunction with such Proxy
Statement/Prospectus. The date of this Statement of Additional
Information is September 13, 1996.
