<PAGE>
<PAGE>
PROSPECTUS
March 1, 1998
revised to
August 12, 1998
International Equity Funds
A choice of international, global, and regional stock funds for investors
seeking capital growth by diversifying beyond U.S. borders.
<PAGE>
FACTS AT A GLANCE
International Equity Funds
Investment Goal
Capital appreciation through investment in foreign companies or, for the Global
Stock Fund, investment in a mix of foreign and U.S. companies.
Strategy
Global Stock Fund Invests primarily in well-established foreign and U.S.
companies.
International Stock Fund/(R)/ Invests worldwide primarily in well-established,
non-U.S. companies.
International Discovery Fund/(R)/ Invests primarily in small and medium-sized,
non-U.S. companies.
Emerging Markets Stock Fund Invests primarily in companies located in less
developed "emerging market" countries.
European Stock Fund Invests primarily in companies domiciled in Europe.
Japan Fund Invests primarily in Japanese companies.
Latin America Fund Invests primarily in companies located in Latin America.
New Asia Fund Invests primarily in companies in Asia and the Pacific Basin,
excluding Japan.
Risk/Reward
Each fund's share price will fluctuate with changes in market, economic, and
foreign currency exchange conditions, as well as with changes in portfolio
company prospects. Generally, funds investing in a single country, single or
multiple emerging markets, or principally in smaller companies represent higher
risk and potential reward than those with greater geographical diversification
and an orientation toward established companies and more mature economies and
markets.
Investor Profile
Those seeking higher appreciation potential over time and greater
diversification for their equity investments who can accept the price declines
associated with investing in stocks as well as the special risks that accompany
international investing.
Fees and Charges
100% no load. Redemption fees on three funds: the International Discovery,
Latin America, and Emerging Markets Stock Funds impose a 2% redemption fee,
payable to the funds, on shares purchased and held less than one year. No sales
charges; free telephone exchange among T. Rowe Price funds; no 12b-1 marketing
fees.
Investment Manager
Rowe Price-Fleming International, Inc. ("Price-Fleming") was founded in 1979 as
a joint venture between T. Rowe Price Associates, Inc. and Robert Fleming
Holdings, Ltd. As of December 31, 1997, Price-Fleming managed $30 billion in
foreign stocks and bonds through its offices in Baltimore, London, Tokyo,
Singapore, Hong Kong, and Buenos Aires.
<PAGE>
T. Rowe Price International Funds, Inc.
Prospectus
March 1, 1998
revised to
August 12, 1998
CONTENTS
1
ABOUT THE FUNDS
Transaction and Fund Expenses 2
Financial Highlights 4
Fund, Market, and Risk Characteristics 9
2
ABOUT YOUR ACCOUNT
Pricing Shares and Receiving Sale Proceeds 17
Distributions and Taxes 19
Transaction Procedures and Special Requirements 22
3
MORE ABOUT THE FUNDS
Organization and Management 25
Understanding Performance Information 29
Investment Policies and Practices 30
4
INVESTING WITH T. ROWE PRICE
Account Requirements and Transaction Information 39
Opening a New Account 39
Purchasing Additional Shares 41
Exchanging and Redeeming 41
Rights Reserved by the Fund 43
Shareholder Services 43
Discount Brokerage 46
Investment Information 46
This prospectus contains information you should know before investing.
Please keep it for future reference. A Statement of Additional
Information about the funds, dated March 1, 1998, has been filed with
the Securities and Exchange Commission and is incorporated by
reference in this prospectus. To obtain a free copy, call 1-800-638-5660.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
ABOUT THE FUNDS
1
TRANSACTION AND FUND EXPENSES
----------------------------------------------------------
. Like all T. Rowe Price funds, these funds are 100% no load.
These tables should help you understand the kinds of expenses you will bear
directly or indirectly as a fund shareholder.
Shareholder Transaction Expenses in Table 1 shows that you pay no sales
charges. All the money you invest in a fund goes to work for you, subject to
the fees explained below. Annual Fund Expenses provides an estimate of how
much it will cost to operate each fund for a year, based on 1997 fiscal year
expenses (and any expense limitations shown in Table 3). These are costs you
pay indirectly, because they are deducted from the funds' total assets before
the daily share price is calculated and before dividends and other
distributions are made. In other words, you will not see these expenses on
your account statement.
The main types of expenses, which all mutual funds may charge against fund
assets, are:
. A management fee The percent of fund assets paid to the fund's investment
manager. Each fund's fee comprises both a group fee, 0.32% as of October 31,
1997, and an individual fund fee, as follows: International Stock and Global
Stock Funds 0.35%; European Stock, Japan, and New Asia Funds 0.50%;
International Discovery, Latin America, and Emerging Markets Stock Funds
0.75%. Because the investment programs of the funds are more costly to
implement and maintain, their management fees are higher than those paid by
most U.S. investment companies.
. "Other" administrative expenses Charges primarily for the servicing of
shareholder accounts, such as providing statements and reports and disbursing
dividends, as well as providing custodial services. For the year ended
October 31, 1997, the funds paid the fees shown in Table 6 to T. Rowe Price
Services, Inc., for transfer and dividend disbursing functions and
shareholder services; to T. Rowe Price Retirement Plan Services, Inc., for
recordkeeping services for certain retirement plans; and to T. Rowe Price for
accounting services.
. Marketing or distribution fees An annual charge ("12b-1") to existing
shareholders to defray the cost of selling shares to new shareholders. T.
Rowe Price funds do not levy 12b-1 fees.
For further details on fund expenses, please see Organization and Management.
. Hypothetical example Assume you invest $1,000, the fund returns 5% annually,
expense ratios remain as listed in Table 1, and you close your account at the
end of the time periods shown. Your expenses would be as shown in Table 2.
<PAGE>
ABOUT THE FUNDS 3
<TABLE>
Table 1
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Emerging European Global InternationalInternational Latin New
Markets Stock Stock Discovery Stock Japan America Asia
Stock
-------------------------------------------------------------------------------
Sales charge "load" None None None None None None None None
on purchases
------------------------------------------------------------------------------------------------------------
Sales charge "load" on None None None None None None None None
reinvested distributions
------------------------------------------------------------------------------------------------------------
Redemption fees 2%/a/ None None 2%/a/ None None 2%/a/ None
------------------------------------------------------------------------------------------------------------
Exchange fees None None None None None None None None
Percentage of Fiscal 1997 Average Net Assets
Annual Fund
Expenses
(After reduction)/bc/ Emerging European Global Inter-nationaInter-national Latin New
Markets Stock Stock Discovery Stock Japan America Asia
Stock
---------------------------------------------------------------------------------
Management fee 1.07% 0.82% 0.01% 1.07% 0.67% 0.82% 1.07% 0.82%
-------------------------------------------------------------------------------------------------------------
Marketing fees (12b-1) None None None None None None None None
-------------------------------------------------------------------------------------------------------------
Total other (shareholder
servicing, custodial, 0.68% 0.24% 1.29% 0.34% 0.18% 0.42% 0.40% 0.28%
auditing, etc.)
-------------------------------------------------------------------------------------------------------------
Total fund expenses 1.75% 1.06% 1.30% 1.41% 0.85% 1.24% 1.47% 1.10%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/
On shares purchased and held for less than one year (details under "Contingent
Redemption Fees" in "Pricing Shares and Receiving Sale Proceeds").
/b/Had Price-Fleming not agreed to waive management fees in accordance with an
expense limitation agreement, the Emerging Markets Stock Fund's management
fee, other expenses, and total expense ratios would have been 1.07%, 0.68%,
and 1.75%, respectively.
/c/Had Price-Fleming not agreed to waive management fees and bear certain
expenses in accordance with an expense limitation agreement, the Global Stock
Fund's management fee, other expenses, and total expense ratios would have
been 0.67%, 1.29%, and 1.96%, respectively.
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").
<TABLE>
Table 2
<CAPTION>
<S> <C> <C> <C> <C> <C>
Hypothetical Fund Expenses
Fund 1 year 3 years 5 years 10 yea
--------------------------------------
Emerging Markets Stock $18 $55 $95 $206
------------------------------------------------------------------
European Stock 11 34 58 129
------------------------------------------------------------------
Global Stock 13 41 71 157
------------------------------------------------------------------
International Discovery 14 45 77 169
------------------------------------------------------------------
International Stock 9 27 47 105
------------------------------------------------------------------
Japan 13 39 68 150
------------------------------------------------------------------
Latin America 15 46 80 176
------------------------------------------------------------------
New Asia 11 35 61 134
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
T. ROWE PRICE 4
. Table 2 is just an example; actual expenses can be higher or lower than
those shown.
Table 3 sets forth expense ratio limitations and the periods for which they
are effective. For each, Price-Fleming has agreed to waive management fees
and bear certain expenses which would cause the funds' ratio of expenses to
average net assets to exceed the indicated percentage limitations. The
expenses borne by Price-Fleming are subject to reimbursement by the funds
through the indicated reimbursement date, but no reimbursement will be made
if it would result in the funds' expense ratio exceeding its specified limit.
Any amounts reimbursed will have the effect of increasing fees otherwise paid
by a fund.
<TABLE>
Table 3
<CAPTION>
<S> <C> <C> <C> <C> <C>
Expense Ratio Limitations
Limitation Period Expense Ratio Reimbursement Date
Limitation
---------------------------------------------------------------
Emerging Markets 11/1/96-10/31/98 1.75% 10/31/00
Stock/a/
---------------------------------------------------------------
Global Stock/b/ 11/1/97-10/31/99 1.20% 10/31/01
- ------------------------------------------------------------------------------------------------------
</TABLE>
/a/
The Emerging Markets Stock Fund previously operated under a 1.75% limitation
that expired October 31, 1996. The reimbursement period for this limitation
extends through October 31, 1998.
/b/The Global Stock Fund previously operated under a 1.30% limitation that
expired October 31, 1997. The reimbursement period for this limitation extends
through October 31, 1999.
FINANCIAL HIGHLIGHTS
----------------------------------------------------------
Table 4, which provides information about each fund's financial history, is
based on a single share outstanding throughout each fiscal year. Each fund's
section of the table is part of the financial statements which are included
in its annual report, and are incorporated by reference into the Statement of
Additional Information (available upon request). The financial statements in
each fund's annual report were audited by the funds' independent accountants.
<PAGE>
ABOUT THE FUNDS 5
<TABLE>
Table 4 Financial Highlights
Footnotes
are on page 8.
<CAPTION>
Income From Investment
Activities
Period Net Asset Net Net Realized
Ended Value, Investment & Unrealized
Beginning Income (Loss) Gain (Loss) on
of Period Investments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International Stock/a/
1988 8.54 0.16 1.36 1.
-----------------------------------------------
1989 8.97 0.16 1.94 2.
-----------------------------------------------
1990 10.24 0.22 (1.13 ) (0.
-----------------------------------------------
1991 8.81 0.15 1.22 1.
-----------------------------------------------
1992 9.54 0.14 (0.47 ) (0.
-----------------------------------------------
1993/n/ 8.89 0.10 2.75 2.
-----------------------------------------------
1994 11.74 0.09 1.30 1.
-----------------------------------------------
1995 12.84 0.18 (0.19 ) (0.
-----------------------------------------------
1996 12.09 0.19 1.57 1.
-----------------------------------------------
13.47 0.19 0.86 1.
International Discovery
1989/b/ $10.00 $ 0.14/ c/ $ 4.03 $ 4.
-----------------------------------------------
1990 13.94 0.14/ c/ (1.91 ) (1.
-----------------------------------------------
1991 11.75 0.13/ c/ 1.24 1.
-----------------------------------------------
1992 12.99 0.13/ c/ (1.31 ) (1.
-----------------------------------------------
1993/n/ 11.68 0.07/ c/ 4.41 4.
-----------------------------------------------
1994 16.16 0.04 1.52 1.
-----------------------------------------------
1995 17.63 0.10 (2.38 ) (2.
-----------------------------------------------
1996 14.43 0.07 1.59 1.
-----------------------------------------------
15.97 0.02 0.25 0.
European Stock
1990/d/ $10.00 $ 0.24/ e/ $(0.56 ) $(0.
-----------------------------------------------
1991 9.48 0.10 0.59 0.
-----------------------------------------------
1992 10.09 0.14 (0.70 ) (0.
-----------------------------------------------
1993/n/ 9.36 0.12 1.89 2.
-----------------------------------------------
1994 11.37 0.14 1.26 1.
-----------------------------------------------
1995 12.72 0.20 1.60 1.
-----------------------------------------------
1996 14.35 0.25 2.79 3.
-----------------------------------------------
16.93 0.25 3.12 3.
Japan
1992/f/ $10.00 $(0.01 )/g/ $(1.35 ) $(1.
-----------------------------------------------
1993/n/ 8.64 (0.05 )/g/ 2.99 2.
-----------------------------------------------
1994 11.58 (0.06 )/g/ 0.97 0.
-----------------------------------------------
1995 11.64 $(0.04 ) (1.40 ) (1.
-----------------------------------------------
1996 9.39 (0.05 ) (0.32 ) (0.
-----------------------------------------------
9.02 (0.03) (1.02) (1.
- ------------------------------------------------------------------------------------------------------------------------------------
New Asia/j/
1990/h/ $ 5.00 $ 0.04/ i/ $ 0.04 $ 0.
-----------------------------------------------
1991 5.04 0.10/ i/ 0.87 0.
-----------------------------------------------
1992 5.91 0.10 0.56 0.
-----------------------------------------------
1993/n/ 6.34 0.03 3.51 3.
-----------------------------------------------
1994 9.88 0.06 0.36 0.
-----------------------------------------------
1995 10.07 0.08 (1.07 ) (0.
-----------------------------------------------
1996 8.12 0.06 0.55 0.
-----------------------------------------------
8.64 0.09 (2.71) (2.
Latin America
1994/k/ $10.00 $(0.03 ) $ 0.29/ l $ 0.
-----------------------------------------------
1995 10.32 0.05 (3.92 ) (3.
-----------------------------------------------
1996 6.49 0.10 1.60 1.
-----------------------------------------------
8.14 0.13 1.44 1.
Emerging Markets Stock
1995/o/ $10.00 $ 0.02/ p/ $ 0.44/ l $ 0.
-----------------------------------------------
1996 10.48 0.02/ p/ 1.08 1.
-----------------------------------------------
11.59 0.02 (0.23) (0.
Global Stock
1996/q/ $10.00 $ 0.05/ r/ $ 1.30 $ 1.
-----------------------------------------------
11.35 0.06/r/ 1.84 1.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Net Asset Value
Total Redemption Net Asset
Distributions Fees Added to Value, End
Paid-in-Capital of Period
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(1.09 ) -- 8.97
-------------------------------------------------
(0.83 ) -- 10.24
-------------------------------------------------
(0.52 ) -- 8.81
-------------------------------------------------
(0.64 ) -- 9.54
-------------------------------------------------
(0.32 ) -- 8.89
-------------------------------------------------
-- -- 11.74
-------------------------------------------------
(0.29 ) -- 12.84
-------------------------------------------------
(0.74 ) -- 12.09
-------------------------------------------------
(0.38 ) -- 13.47
-------------------------------------------------
(0.38) -- 14.14
$ (0.23 ) -- $13.94
-------------------------------------------------
(0.42 ) -- 11.75
-------------------------------------------------
(0.13 ) -- 12.99
-------------------------------------------------
(0.13 ) -- 11.68
-------------------------------------------------
-- -- 16.16
-------------------------------------------------
(0.09 ) -- 17.63
-------------------------------------------------
(0.93 ) $0.01 14.43
-------------------------------------------------
(0.12 ) -- 15.97
-------------------------------------------------
(0.13) -- 16.11
$ (0.20 ) -- $ 9.48
-------------------------------------------------
(0.08 ) -- 10.09
-------------------------------------------------
(0.17 ) -- 9.36
-------------------------------------------------
-- -- 11.37
-------------------------------------------------
(0.05 ) -- 12.72
-------------------------------------------------
(0.17 ) -- 14.35
-------------------------------------------------
(0.46 ) -- 16.93
-------------------------------------------------
(0.46) -- 19.84
-- -- $ 8.64
-------------------------------------------------
-- -- 11.58
-------------------------------------------------
) -- 11.64
-------------------------------------------------
(0.81 ) -- 9.39
-------------------------------------------------
-- -- 9.02
-------------------------------------------------
-- -- 7.97
- -----------------------------------------------------------------------------------------------------------------
$ (0.04 ) -- $ 5.04
-------------------------------------------------
(0.10 ) -- 5.91
-------------------------------------------------
(0.23 ) -- 6.34
-------------------------------------------------
-- -- 9.88
-------------------------------------------------
(0.23 ) -- 10.07
-------------------------------------------------
(0.96 ) -- 8.12
-------------------------------------------------
(0.09 ) -- 8.64
-------------------------------------------------
(0.07) -- 5.95
-- $0.06 $10.32
-------------------------------------------------
-- 0.04 6.49
-------------------------------------------------
) 0.01 8.14
-------------------------------------------------
(0.14) 0.03 9.60
-- $0.02 $10.48
-------------------------------------------------
) 0.02 11.59
-------------------------------------------------
(0.34) 0.04 11.08
-- -- $11.35
-------------------------------------------------
$ (0.24) -- 13.01
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
T. ROWE PRICE 6
<PAGE>
ABOUT THE FUNDS 7
<PAGE>
T. ROWE PRICE 8
<TABLE>
Table 4 Financial Highlights
Footnotes
are on page 8.
<CAPTION>
Returns, Ratios, and Supplemental Data
Total Return Ratio
Period (Includes Net Assets of
Ended Reinvested ($ Thousands) Expen
Distributions) to
Avera
Net
Asset
<S> <C> <C> <C> <C> <C>
International Stock/a/
1988 17.9 % 630,114 1.16%
---------------- --------------------
1989 23.7 970,214 1.10
---------------- --------------------
1990 (8.9 ) 1,030,848 1.09
---------------- --------------------
1991 15.87 1,476,309 1.10
---------------- --------------------
1992 (3.47 ) 1,949,631 1.05
---------------- --------------------
1993/n/ 32.06 3,746,055 1.01/
---------------- --------------------
1994 12.03 6,205,713 0.96
---------------- --------------------
1995 0.38 6,385,905 0.91
---------------- --------------------
1996 14.87 8,775,736 0.88
---------------- --------------------
1997 7.90 10,005,170 0.85
- ------------------------------------------------------------------------------------------------------------------------------------
International Discovery
1989/b/ 41.8 %/c/ $ 61,166 1.50/
---------------- --------------------
1990 (12.8 )/c/ 136,660 1.50/
---------------- --------------------
1991 11.69 /c/ 166,819 1.50/
---------------- --------------------
1992 (9.08 )/c/ 166,362 1.50/
---------------- --------------------
1993/n/ 38.36 /c/ 329,001 1.50/
---------------- --------------------
1994 9.67 503,442 1.50
---------------- --------------------
1995 (13.06 ) 325,374 1.50
---------------- --------------------
1996 11.60 325,639 1.45
---------------- --------------------
1997 1.69 254,430 1.41
European Stock
1990/d/ (3.2 )%/e/ $ 99,447 1.75%
---------------- --------------------
1991 7.31 103,977 1.71
---------------- --------------------
1992 (5.56 ) 173,798 1.48
---------------- --------------------
1993/n/ 21.47 265,784 1.35/
---------------- --------------------
1994 12.35 337,498 1.25
---------------- --------------------
1995 14.41 490,573 1.20
---------------- --------------------
1996 21.76 704,887 1.12
---------------- --------------------
1997 20.30 984,083 1.06
Japan
1992/f/ (13.40 )%/g/ $ 45,792 1.50%(
---------------- --------------------
1993/n/ 33.72 /g/ 87,163 1.50/(
---------------- --------------------
1994 9.25 /g/ 203,303 1.50/(
---------------- --------------------
1995 (12.87 ) 181,383 1.50 (
---------------- --------------------
1996 (3.94 ) 167,118 1.32 (
---------------- --------------------
1997 (11.64) 170,830 1.24 (
New Asia
1990/h/ 1.6 %/i/ $ 10,986 1.75%
---------------- --------------------
1991 19.32 /i/ 102,922 1.75/
---------------- --------------------
1992 11.24 314,504 1.51
---------------- --------------------
1993/n/ 55.84 1,650,450 1.29/
---------------- --------------------
1994 4.11 2,302,841 1.22
---------------- --------------------
1995 (9.70 ) 1,908,893 1.15
---------------- --------------------
1996 7.58 2,041,396 1.11
---------------- --------------------
1997 (30.61) 876,787 1.10
- ------------------------------------------------------------------------------------------------------------------------------------
Latin America
1994/k/ 3.20 % $ 198,435 1.99%(
---------------- --------------------
1995 (37.11 ) 148,600 1.82
---------------- --------------------
1996 26.52 213,691 1.66
---------------- --------------------
1997 19.94 398,066 1.47
Emerging Markets Stock
1995/o/ 4.80 %/p/ $ 14,399 1.75%
---------------- --------------------
1996 10.69 /p/ 67,896 1.75/
---------------- --------------------
1997 (1.60) 119,285 1.75
Global Stock
1996/q/ 13.50 %/r/ $ 14,916 1.30%
---------------- --------------------
1997 16.98 /r/ 32,020 1.30r
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ABOUT THE FUNDS 9
<PAGE>
T. ROWE PRICE 10
/a/
All per-share figures reflect the 2-for-1 stock split effective August 31,
1987.
/b/
For the period December 30, 1988 (commencement of operations) to December
31, 1989.
/c/Excludes expenses in excess of a 1.50% voluntary expense limitation in
effect through December 31, 1993.
/d/
For the period February 28, 1990 (commencement of operations) to December
31, 1990.
/e/
Excludes expenses in excess of a 1.75% voluntary expense limitation in effect
through December 31, 1991.
/f/
For the period December 30, 1991 (commencement of operations) to December 31,
1992.
/g/
Excludes expenses in excess of a 1.50% voluntary expense limitation in effect
through October 31, 1995.
/h/
For the period September 28, 1990 (commencement of operations) to December 31,
1990.
/i/
Excludes expenses in excess of a 1.75% voluntary expense limitation in effect
through December 31, 1992.
/j/
All per-share figures reflect the 2-for-1 stock split effective May 27, 1994.
/k/
For the period December 29, 1993 (commencement of operations) to October 31,
1994.
/l/
The amount presented is calculated pursuant to a methodology prescribed by the
Securities and Exchange Commission for a share outstanding throughout the
period. This amount is inconsistent with the fund's aggregate gains and losses
because of the timing of sales and redemptions of fund shares in relation to
fluctuating market values for the investment portfolio.
/m/Annualized.
/n/For the 10 months ended October 31, 1993. Fiscal year-end changed from
December 31 to October 31.
/o/For the period March 31, 1995 (commencement of operations) to October 31,
1995.
/p/
Excludes expenses in excess of a 1.75% voluntary expense limitation in effect
through October 31, 1996.
/q/
For the period December 29, 1995 (commencement of operations) to October 31,
1996.
/r/
Excludes expenses in excess of a 1.30% voluntary expense limitation in effect
through October 31, 1997.
<PAGE>
ABOUT THE FUNDS 11
FUND, MARKET, AND RISK CHARACTERISTICS: WHAT TO EXPECT
----------------------------------------------------------
To help you decide whether an international or global equity fund is
appropriate for you, this section takes a closer look at each fund's
investment objective and approach. The funds, which are listed in Table 5,
represent a broad range of potential risks and rewards.
What are some of the potential advantages and disadvantages of investing beyond
U.S. borders?
Since U.S. stocks represent less than half of the world's stock market
capitalization, investing abroad increases the opportunities available to
you. Foreign investments also provide effective diversification for an
all-U.S. portfolio, since historically their returns have not moved in sync
with U.S. stocks over longer periods.
Investing in foreign stocks entails many of the same risks as investing in
U.S. stocks and others as well, such as currency risk. Also, foreign stocks
may not always move counter to U.S. stocks, particularly in the short run.
. Because global funds invest a portion of their assets in U.S. securities,
they represent a more conservative approach to foreign investing than our
international funds, which do not invest in U.S. stocks.
<TABLE>
Table 5
<CAPTION>
<S> <C> <C> <C> <C>
International Funds Comparison Guide
Fund Geographic Emphasis Type of Company
------------------------------------------------
International Stock Worldwide (excluding Large, well
U.S.) established
------------------------------------------------
Global Stock Worldwide (including Large, well
U.S.) established
------------------------------------------------
International Worldwide (excluding Small to medium-sized
Discovery U.S.)
------------------------------------------------
Emerging Markets Stock Worldwide (excluding All sizes
U.S.)
------------------------------------------------
European Stock Europe (including All sizes
Eastern Europe)
------------------------------------------------
Latin America Latin America All sizes
------------------------------------------------
Far East and Pacific All sizes
New Asia Basin
(excluding Japan)
------------------------------------------------
Japan Japan All sizes
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
What are the funds' objectives and investment programs?
Worldwide funds:
Global Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established companies throughout the world,
including the U.S. The fund will diversify broadly by investing in a variety
of
<PAGE>
T. ROWE PRICE 12
industries in developed and emerging markets. Normally, the fund will invest
in at least five countries, one of which will be the U.S. While the fund can
purchase stocks without regard to a company's market capitalization,
investments will generally be concentrated in established large and, to a
lesser extent, medium-sized companies. The percentage of the fund's assets
invested in U.S. and foreign stocks will vary over time in accordance with
the managers' outlook.
International Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of established, non-U.S. companies. The fund
expects to invest substantially all of its assets outside the U.S. and to
diversify broadly among countries throughout the world - developed and
emerging.
International Discovery Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of rapidly growing, small to medium-sized non-U.S.
companies. Such companies may be found in developed and emerging markets.
Traditionally, they are more dynamic and offer greater growth potential than
larger companies, but they are generally riskier because they may have
limited product lines, capital, and managerial resources. Their securities
may trade less frequently and with greater price swings. Depending on
conditions, the fund's portfolio should be composed of at least 10 countries
and 100 different companies. Potential fund investors should pay careful
attention to the risk discussion further on in this section.
Emerging Markets Stock Fund
The fund's objective is long-term growth of capital through investment
primarily in common stocks of large and small companies domiciled, or with
primary operations, in emerging markets. An emerging market includes any
country defined as emerging or developing by the International Bank for
Reconstruction and Development (World Bank), the International Finance
Corporation, or the United Nations. The fund's investments are expected to be
diversified geographically across emerging markets in Latin America, Asia,
Europe, Africa, and the Middle East.
Countries in which the fund may invest are listed below and others will be
added as opportunities develop:
Asia China, Hong Kong, Indonesia, India, Korea, Malaysia, Pakistan,
Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.
Latin America Argentina, Belize, Brazil, Chile, Colombia, Mexico,
Panama, Peru, and Venezuela.
<PAGE>
ABOUT THE FUNDS 13
Europe Austria, Croatia, Czech Republic, Estonia, Greece, Hungary,
Latvia, Lithuania, Poland, Portugal, Romania, Russia, Slovakia, and
Turkey.
Africa and the Middle East Botswana, Egypt, Israel, Jordan,
Mauritius, Morocco, Nigeria, South Africa, Tunisia, and Zimbabwe.
Emerging market investments rank high on the potential risk and reward
spectrum because a developing country, much like an emerging-growth company,
often advances in fits and starts toward developed status, and may or may not
successfully achieve that status. Potential fund investors should pay careful
attention to the risk discussion further on in this section.
Regional or country funds:
European Stock Fund
The fund's objective is long-term growth of capital through investments
primarily in common stocks of both large and small European companies.
Current income is a secondary objective. The fund seeks to take advantage of
opportunities arising from such trends as privatization, the reduction of
trade barriers, and the potential growth of the emerging economies of Eastern
Europe. Normally, at least five countries will be represented in the
portfolio, and investments may be made in any of the countries listed below,
as well as others as their markets develop.
Primary Emphasis France, Germany, Netherlands, Italy, Spain, Sweden,
Switzerland, and United Kingdom.
Others Austria, Belgium, Czech Republic, Denmark, Estonia, Finland,
Greece, Hungary, Ireland, Israel, Latvia, Lithuania, Luxembourg,
Norway, Poland, Portugal, Russia, Slovakia, and Turkey.
Japan Fund
The fund's objective is long-term growth of capital through investments in
common stocks of large and small companies domiciled or with primary
operations in Japan. Assets will normally be invested across a wide range of
industries and companies (both small and large). Investors in a
single-country fund are fully exposed to that country's economic, stock
market, and currency cycles, which could increase both its risks and its
potential rewards compared with a fund invested in several countries or
regions. Potential fund investors should pay careful attention to the risk
discussion further on in this section.
Note: For special pricing and transaction information about the Japan Fund,
please see "Pricing Shares and Receiving Sale Proceeds."
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T. ROWE PRICE 14
Latin America Fund
The fund's objective is long-term growth of capital through investment
primarily in common stocks of companies domiciled, or with primary
operations, in Latin America. The fund expects to invest primarily in Mexico,
Brazil, Chile, Argentina, Venezuela, Peru, and other markets as opportunities
arise and conditions permit, including, but not limited to Belize, Colombia,
Ecuador, and Guatemala. The portfolio is normally expected to invest in at
least four countries.
The fund expects to make substantial investments (at times more than 25% of
total assets) in the telephone companies of various Latin American countries.
These utilities play a critical role in a country's economic development, but
their stocks could be adversely affected if trends favoring development were
to be reversed.
Because Latin America includes many less-developed countries with legacies of
political instability, potential fund investors should pay careful attention
to the risk discussion further on in this section.
. The Latin America Fund is registered as "nondiversified." This means it may
invest a greater portion of assets in a single company and own more of the
company's voting securities than is permissible for a "diversified" fund.
New Asia Fund
The fund's objective is long-term growth of capital through investment in
large and small companies domiciled or with primary operations in Asia,
excluding Japan. The fund may also invest in Pacific Rim countries such as
Australia and New Zealand.
Countries in which the fund may invest include those in the following list as
well as others in the region, such as China, Pakistan, and Vietnam, as their
markets become more accessible. Investments will represent a minimum of five
countries.
Primary Emphasis Hong Kong, Indonesia, India, Malaysia, Philippines,
Singapore, South Korea, Taiwan, Thailand.
Potential investors should pay careful attention to the risk discussion
further on in this section.
What securities can the funds invest in other than common stocks?
Each of the funds expects to invest substantially all of its assets in common
stocks. However, the funds may also invest in a variety of other
equity-related securities, such as preferred stocks, warrants and convertible
securities, as well as corporate and governmental debt securities, when
considered consistent with the funds' investment objectives and programs. The
funds may also engage in a
<PAGE>
ABOUT THE FUNDS 15
variety of investment management practices, such as buying and selling
futures and options. Under normal market conditions, the funds' investments
in securities other than common stocks are limited to no more than 35% of
total assets. However, for temporary defensive purposes, the funds may invest
all or a significant portion of their assets in U.S. government and corporate
debt obligations. The funds (other than Global Stock Fund) will not purchase
any debt security which at the time of purchase is rated below investment
grade. This would not prevent a fund from retaining a security downgraded to
below investment grade after purchase. The Global Stock Fund can invest up to
5% of its assets in below-investment-grade debt securities.
How does the portfolio manager select stocks?
Price-Fleming blends a bottom-up approach to individual stock selection based
on fundamental research with an awareness of the economic overview of the
countries in our opportunity set. Stock selection is the focal point of
decision-making, however. Fund managers weigh a company's prospects for
achieving and sustaining above-average, long-term earnings growth and also
look at valuation factors such as price/earnings, price/cash flow, and
price/book value ratios.
What are the particular risks associated with international and global
investing and these funds?
Stock prices of foreign and U.S. companies are subject to many of the same
influences, such as general economic conditions, company and industry
earnings prospects, and investor psychology. However, investing in foreign
securities also involves additional risks that can increase the potential for
losses in the funds. Normally, these risks are significantly greater for
investments in emerging markets.
. Currency fluctuations Transactions in foreign securities are conducted in
local currencies, so dollars must often be exchanged for another currency
when a stock is bought or sold or a dividend is paid. Likewise, share price
quotations and total return information reflect conversion into dollars.
Fluctuations in foreign exchange rates can significantly increase or decrease
the dollar value of a foreign investment, boosting or offsetting its local
market return. For example, if a French stock rose 10% in price during a
year, but the U.S. dollar gained 5% against the French franc during that
time, the U.S. investor's return 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. Each fund's total return will
be affected by currency fluctuations. The exact amount of the impact depends
on the currencies represented in the portfolio and how each one appreciates
or depreciates in relationship to the U.S. dollar.
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T. ROWE PRICE 16
. Exchange rate movements can be large, unpredictable and last for extended
periods.
. Increased costs It is more expensive for U.S. investors to trade in foreign
markets than in the U.S. Mutual funds offer an efficient way for individuals
to invest abroad, but the overall expense ratios of international funds are
usually higher than those of typical domestic funds.
. 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. However, even investments in countries with highly
developed economies are subject to risk. For example, the Japanese stock
market historically has experienced wide swings in value.
Some economies are less well developed, overly reliant on particular
industries, and more vulnerable to the ebb and flow of international trade,
trade barriers, and other protectionist or retaliatory measures. This makes
investment in such markets significantly riskier than in other countries.
Many countries have legacies and the risk of hyperinflation and currency
devaluations versus the dollar (which adversely affects returns to U.S.
investors), and may be overly dependent on foreign capital (a risk that is
exacerbated by big currency movements). Investments in countries that have
recently begun moving away from central planning and state-owned industries
toward free markets should be regarded as speculative.
. 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.
Certain countries have histories of instability and upheaval with respect to
their internal politics that could cause their governments to act in a
detrimental or hostile manner toward private enterprise or foreign
investment. Actions such as capital controls, 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.
. 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
<PAGE>
to risks not customary in the U.S. In addition, securitie s 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.
. 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, securitie s 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.
. Pricing Portfolio securities may be listed on foreign exchanges that are
open on days (such as Saturdays) when the funds do not compute their prices.
As a result, the fund's net asset value may be significantly affected by
trading on days when shareholders cannot make transactions. (For specific
information on the Tokyo Stock Exchange, please see Pricing Shares and
Receiving Sale Proceeds.)
. For more details on potential risks of foreign investments, please see
Investment Policies and Practices and the Statement of Additional
Information.
What can I expect in terms of price volatility?
Like U.S. stock investments, common stocks of foreign companies offer
investors a way to build capital over time. Nevertheless, the long-term rise
of foreign stock prices as a group has been punctuated by declines. Share
prices of all companies, even the best managed, most profitable, whether U.S.
or foreign, are subject to market risk, which means they can fluctuate
widely.
In less well-developed stock markets, such as those found in Latin America,
Eastern Europe, Africa, and Asia, volatility may be heightened by actions of
a few major investors. For example, substantial increases or decreases in
cash flows of mutual funds investing in these markets could significantly
affect local stock prices and, therefore, fund share prices.
. Each fund's share price will fluctuate; when you sell your shares, you may
lose money.
How does the portfolio manager try to reduce risk?
The principal tools are intensive research and diversification; currency
hedging techniques are used from time to time.
. In addition to conducting on-site research in portfolio countries and
companies, Price-Fleming has close ties with investment analysts based
throughout the world.
. Diversification significantly reduces but does not eliminate risk. The
impact on a fund's share price from a drop in the price of a particular stock
is reduced substantially by investing in a portfolio with dozens of different
companies. Likewise, the impact of unfavorable developments in a particular
country is reduced when investments are spread among many countries.
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T. ROWE PRICE 18
Portfolio managers keep close watch on individual investments as well as on
political and economic trends in each country and region. Holdings are
adjusted according to the manager's analysis and outlook.
. Under normal conditions, the funds do not engage in extensive currency
hedging programs. However, when foreign exchange rates are expected to be
unfavorable for U.S. investors, fund managers can hedge the risk through the
use of currency forwards and options. In a general sense, these tools allow a
manager to exchange currencies in the future at a rate specified in the
present. (For more details, please see Foreign Currency Transactions under
Investment Policies and Practices.) If the manager's forecast is wrong, the
hedge may cause a loss. Also, it may be difficult or not practical to hedge
currency risk in many emerging countries.
How can I decide which fund is most appropriate for me?
First, be sure that your investment objective is the same as the fund's:
capital appreciation over time. If you will need the money you plan to invest
in the near future, none of these funds is suitable.
Second, your decision should take into account whether you have any other
foreign stock investments. If not, you may wish to invest in the most
diversified funds to gain the broadest exposure to opportunities overseas. If
you are supplementing existing holdings, you may wish to narrow your focus to
a regional or single-country fund.
Third, consider your risk tolerance and the risk profile of the various
funds, as described in this section.
. The fund or funds you select should not be relied upon as a complete
investment program nor be used for short-term trading purposes.
Is there other information I need to review before making a decision?
Be sure to read Investment Policies and Practices in Section 3, which
discusses the principal types of portfolio securities that the fund may
purchase as well as the types of management practices that the fund may use.
You should also review the information in section 2, which discusses
contingent redemption fees for the International Discovery, Latin America,
and Emerging Markets Stock Funds.
<PAGE>
ABOUT THE FUNDS 19
ABOUT YOUR ACCOUNT
2
PRICING SHARES AND RECEIVING SALE PROCEEDS
----------------------------------------------------------
Here are some procedures you should know when investing in a T. Rowe Price
international fund.
How and when shares are priced
The share price (also called "net asset value" or NAV per share) for each
fund, except the Japan Fund, is calculated at 4 p.m. ET each day the New York
Stock Exchange is open for business. The share price for the Japan Fund is
calculated at 4 p.m. ET each day the New York Stock Exchange and the Tokyo
Stock Exchange are both open for business. To calculate the NAV, a fund's
assets are valued and totaled, liabilities are subtracted, and the balance,
called net assets, is divided by the number of shares outstanding.
Each fund's portfolio securities usually are valued on the basis of the most
recent closing market prices at 4 p.m. ET when the funds calculate their
NAVs. Most of the securities in which the funds invest, however, are traded
in markets that close before that time. For securities primarily traded in
the Far East, for example, the most recent closing prices may be as much as
15 hours old at 4 p.m. Normally, developments that could affect the values of
portfolio securities that occur between the close of the foreign market and 4
p.m. ET will not be reflected in the funds' NAVs. However, if a fund
determines that such developments are so significant that they will clearly
and materially affect the value of the fund's securities, the fund may adjust
the previous closing prices to reflect fair value or use the next available
opening market prices to value its portfolio securities.
. The various ways you can buy, sell, and exchange shares are explained at
the end of this prospectus and on the New Account Form. These procedures
may differ for institutional and employer-sponsored retirement accounts.
How your purchase, sale, or exchange price is determined
If we receive your request in correct form by 4 p.m. ET, your transaction
will be priced at that day's NAV. If we receive it after 4 p.m., it will be
priced at the next business day's NAV.
We cannot accept orders that request a particular day or price for your
transaction or any other special conditions.
<PAGE>
T. ROWE PRICE 20
Fund shares may be purchased through various third parties, including banks,
brokers, investment advisers, and recordkeepers (intermediaries). Where
authorized by a fund, orders will be priced at the NAV next computed after
receipt by the intermediary. Consult with your intermediary to determine when
your orders will be priced. The intermediary may charge a fee for its
services.
Note: The time at which transactions and shares are priced and the time until
which orders are accepted may be changed in case of an emergency or if the
New York Stock Exchange closes at a time other than 4 p.m. ET.
Japan Fund: Pricing and Transactions
The fund will not process orders on any day when either the New York or Tokyo
Stock Exchange is closed. Orders received on such days will be priced on the
next day the fund computes its net asset value. As such, you may experience a
delay in purchasing or redeeming fund shares. Exchanges: If you wish to
exchange into the Japan Fund on a day the New York Stock Exchange is open but
the Tokyo Stock Exchange is closed, the exchange out of the other T. Rowe
Price fund will be processed on that day, but Japan Fund shares will not be
purchased until the day the Japan Fund reopens. If you wish to exchange out
of the Japan Fund on a day when the New York Stock Exchange is open but the
Tokyo Stock Exchange is closed, the exchange will be delayed until the Japan
Fund reopens.
The Tokyo Stock Exchange is scheduled to be closed on the following weekdays:
In 1998 - January 1, 2, 15; February 11; April 29; May 4, 5; July 20;
September 15, 23; November 3, 23; and December 23, 31. In 1999 - January 1,
15; February 11; March 22; April 29; May 3, 4, 5; July 20; September 15, 23;
October 11; November 3, 23; and December 23. If the Tokyo Stock Exchange
closes on dates not listed, the fund will not be priced on those dates.
How you can receive the proceeds from a sale
. When filling out the New Account Form, you may wish to give yourself the
widest range of options for receiving proceeds from a sale.
If your request is received by 4 p.m. ET in correct form, proceeds are
usually sent on the next business day. Proceeds can be sent to you by mail or
to your bank account by Automated Clearing House (ACH) transfer or bank wire.
Proceeds sent by ACH transfer should be credited the second day after the
sale. ACH is an automated method of initiating payments from, and receiving
payments in, your financial institution account. ACH is a payment system
supported by over 20,000 banks, savings banks, and credit unions, which
electronically exchanges the transactions primarily through the Federal
Reserve Banks. Proceeds sent by bank wire should be credited to your account
the next business day.
<PAGE>
ABOUT YOUR ACCOUNT 21
. Exception: Under certain circumstances and when deemed to be in the fund's
best interests, your proceeds may not be sent for up to five business days
after we receive your sale or exchange request. If you were exchanging into a
bond or money fund, your new investment would not begin to earn dividends
until the sixth business day.
. If for some reason we cannot accept your request to sell shares, we will
contact you.
Contingent Redemption Fee
(Latin America, International Discovery, and Emerging Markets Stock Funds)
These funds can experience substantial price fluctuations and are intended
for long-term investors. Short-term "market timers" who engage in frequent
purchases and redemptions can disrupt the funds' investment program and
create additional transaction costs that are borne by all shareholders. For
these reasons, the funds assess a 2% fee on redemptions (including exchanges)
of fund shares held for less than one year.
Redemption fees are paid to the fund to help offset transaction costs and
protect the funds' long-term shareholders. The fund will use the "first-in,
first-out" (FIFO) method to determine the one year holding period. Under this
method, the date of the redemption or exchange will be compared with the
earliest purchase date of shares held in the account. If this holding period
is less than one year, the fee will be charged.
The fee does not apply to any shares purchased through reinvestment of
dividends or to shares held in retirement plans such as 401(k), 403(b),457,
Keogh, profit sharing, SIMPLE IRA, SEP-IRA, and money purchase pension
accounts. The fee does apply to shares held in IRA accounts and to shares
purchased through automatic investment plans (described under Shareholder
Services). The fee may apply to shares in retirement plans held in broker
omnibus accounts.
In determining "one year" the fund will use the anniversary date of the
transaction. Thus, shares purchased on March 1, 1998, for example, will be
subject to the fee if they are redeemed on or prior to February 28, 1999. If
they are redeemed on or after March 1, 1999, they will not be subject to the
fee.
USEFUL INFORMATION ON DISTRIBUTIONS AND TAXES
----------------------------------------------------------
. All net investment income and realized capital gains are distributed to
shareholders.
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T. ROWE PRICE 22
Dividends and Other Distributions
Dividend and capital gain distributions are reinvested in additional fund
shares in your account unless you select another option on your New Account
Form. The advantage of reinvesting distributions arises from compounding;
that is, you receive income dividends and capital gain distributions on a
rising number of shares.
Distributions not reinvested are paid by check or transmitted to your bank
account via ACH. If the Post Office cannot deliver your check, or if your
check remains uncashed for six months, the fund reserves the right to
reinvest your distribution check in your account at the NAV on the business
day of the reinvestment and to reinvest all subsequent distributions in
shares of the fund. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
Income dividends
. The funds declare and pay dividends (if any) annually.
. The dividends of each fund (other than Global Stock Fund) will not be
eligible for the 70% deduction for dividends received by corporations, if, as
expected, none of the funds' income consists of dividends paid by U.S.
corporations. The dividends of the Global Stock Fund will be eligible for the
70% deduction for dividends received by corporations only to the extent the
fund's income consists of dividends paid by U.S. corporations.
Capital gains
. A capital gain or loss is the difference between the purchase and sale price
of a security.
. If a fund has net capital gains for the year (after subtracting any capital
losses), they are usually declared and paid in December to shareholders of
record on a specified date that month.
Tax Information
. You will be sent timely information for your tax filing needs.
You need to be aware of the possible tax consequences when:
. You sell fund shares, including an exchange from one fund to another.
. The fund makes a distribution to your account.
Taxes on fund redemptions
When you sell shares in any fund, you may realize a gain or loss. An exchange
from one fund to another is still a sale for tax purposes.
<PAGE>
ABOUT YOUR ACCOUNT 23
In January, you will be sent Form 1099-B, indicating the date and amount of
each sale you made in the fund during the prior year. This information will
also be reported to the IRS. For new accounts or those opened by exchange in
1983 or later, we will provide you with the gain or loss of the shares you
sold during the year, based on the "average cost," single category method.
This information is not reported to the IRS, and you do not have to use it.
You may calculate the cost basis using other methods acceptable to the IRS,
such as "specific identification."
To help you maintain accurate records, we send you a confirmation immediately
following each transaction you make (except for systematic purchases and
redemptions) and a year-end statement detailing all your transactions in each
fund account during the year.
Taxes on fund distributions
. The following summary does not apply to retirement accounts, such as IRAs,
which are tax-deferred until you withdraw money from them.
In January, you will be sent Form 1099-DIV, indicating the tax status of any
dividend and capital gain distribution made to you. This information will
also be reported to the IRS. All distributions made by a fund are taxable to
you for the year in which they were paid. The only exception is that
distributions declared during the last three months of a calendar year and
paid in January are taxed as though they were paid by December 31. You will
be sent any additional information you need to determine your taxes on fund
distributions, such as the portion of your dividend, if any, that may be
exempt from state income taxes.
The tax treatment of a capital gain distribution is determined by how long
the fund held the portfolio securities, not how long you held shares in the
fund. Short-term (one year or less) capital gain distributions are taxable at
the same rate as ordinary income. Recent changes in the tax code revised
capital gain holding periods for long-term gains. Gains on securities held
more than 12 months but not more than 18 months are taxed at a maximum rate
of 28%, and gains on securities held for more than 18 months are taxed at a
maximum rate of 20%. If you realize a loss on the sale or exchange of fund
shares held six months or less, your short-term loss recognized is
reclassified to long term to the extent of any net capital gain distribution
received.
Distributions resulting from the sale of certain foreign currencies and debt
securities, to the extent of foreign exchange gains, are taxed as ordinary
income or loss. If the fund pays nonrefundable taxes to foreign governments
during the year, the taxes will reduce the fund's dividends but will still be
included in your taxable income. However, you may be able to claim an
offsetting credit or deduction on your tax return for your portion of foreign
taxes paid by the fund.
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T. ROWE PRICE 24
. Distributions are taxable whether reinvested in additional shares or
received in cash.
Tax effect of buying shares before a capital gain distribution
If you buy shares shortly before or on the "record date" - the date that
establishes you as the person to receive the upcoming distribution - you will
receive a portion of the money you just invested in the form of a taxable
distribution. Therefore, you may also wish to find out a fund's record date
before investing. Of course, a fund's share price may, at any time, reflect
undistributed capital gains or income and unrealized appreciation. When these
amounts are eventually distributed, they are taxable.
Note: For information on the tax consequences of hedging, please see
Investment Policies and Practices.
TRANSACTION PROCEDURES AND SPECIAL REQUIREMENTS
----------------------------------------------------------
. Following these procedures helps assure timely and accurate transactions.
Purchase Conditions
Nonpayment
If your payment is not received or you pay with a check or ACH transfer that
does not clear, your purchase will be canceled. You will be responsible for
any losses or expenses incurred by the fund or transfer agent, and the fund
can redeem shares you own in this or another identically registered T. Rowe
Price fund as reimbursement. The fund and its agents have the right to reject
or cancel any purchase, exchange, or redemption due to nonpayment.
U.S. dollars
All purchases must be paid for in U.S. dollars; checks must be drawn on U.S.
banks.
Sale (Redemption) Conditions
10-day hold
If you sell shares that you just purchased and paid for by check or ACH
transfer, the fund will process your redemption but will generally delay
sending you the proceeds for up to 10 calendar days to allow the check or
transfer to clear. If your redemption request was sent by mail or mailgram,
proceeds will be mailed no later than the seventh calendar day following
receipt unless the check or ACH transfer has not cleared. (The 10-day hold
does not apply to the following: purchases paid for by bank wire; cashier's,
certified, or treasurer's checks; or automatic purchases through your
paycheck.)
<PAGE>
Telephone, Tele*Access/(R)/, and personal computer transactions
Exchange and redemption services through telephone and Tele*Access are
established automatically when you sign the New Account Form unless you check
the box that states that you do not want these services. Personal computer
transactions must be authorized separately. T. Rowe Price funds use
reasonable procedures (including shareholder identity verification) to
confirm that instructions given by telephone are genuine and are not liable
for acting on these instructions. If these procedures are not followed, it is
the opinion of certain regulatory agencies that the funds may be liable for
any losses that may result from acting on the instructions given. A
confirmation is sent promptly after a transaction. All telephone
conversations are recorded.
Redemptions over $250,000
Large sales can adversely affect a portfolio manager's ability to implement a
fund's investment strategy by causing the premature sale of securities that
would otherwise be held. If, in any 90-day period, you redeem (sell) more
than $250,000, or your sale amounts to more than 1% of fund net assets, the
fund has the right to pay the difference between the redemption amount and
the lesser of the two previously mentioned figures with securities from the
fund.
Excessive Trading
. T. Rowe Price may bar excessive traders from purchasing shares.
Frequent trades, involving either substantial fund assets or a substantial
portion of your account or accounts controlled by you, can disrupt management
of the fund and raise its expenses. We define "excessive trading" as
exceeding one purchase and sale involving the same fund within any 120-day
period.
For example, you are in fund A. You can move substantial assets from fund A
to fund B and, within the next 120 days, sell your shares in fund B to return
to fund A or move to fund C.
If you exceed the number of trades just described, you may be barred
indefinitely from further purchases of T. Rowe Price funds.
Three types of transactions are exempt from excessive trading guidelines: 1)
trades solely between money market funds; 2) redemptions that are not part of
exchanges; and 3) systematic purchases or redemptions (see Shareholder
Services).
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T. ROWE PRICE 26
Keeping Your Account Open
Due to the relatively high cost to a fund of maintaining small accounts, we
ask you to maintain an account balance of at least $1,000. If your balance is
below $1,000 for three months or longer, we have the right to close your
account after giving you 60 days in which to increase your balance.
Small Account Fee
Because of the disproportionately high costs of servicing accounts with low
balances, a $10 fee, paid to T. Rowe Price Services, the fund's transfer
agent, will automatically be deducted from nonretirement accounts with
balances falling below a minimum level. The valuation of accounts and the
deduction are expected to take place during the last five business days of
September. The fee will be deducted from accounts with balances below $2,000,
except for UGMA/ UTMA accounts, for which the limit is $500. The fee will be
waived for any investor whose aggregate T. Rowe Price mutual fund investments
total $25,000 or more. Accounts employing automatic investing (e.g., payroll
deduction, automatic purchase from a bank account, etc.) are also exempt from
the charge. The fee will not apply to IRAs and other retirement plan
accounts. (A separate custodial fee may apply to IRAs and other retirement
plan accounts.)
Signature Guarantees
. A signature guarantee is designed to protect you and the T. Rowe Price
funds from fraud by verifying your signature.
You may need to have your signature guaranteed in certain situations, such
as:
. Written requests 1) to redeem over $100,000, or 2) to wire redemption
proceeds.
. Remitting redemption proceeds to any person, address, or bank account not on
record.
. Transferring redemption proceeds to a T. Rowe Price fund account with a
different registration (name or ownership) from yours.
. Establishing certain services after the account is opened.
You can obtain a signature guarantee from most banks, savings institutions,
broker-dealers, and other guarantors acceptable to T. Rowe Price. We cannot
accept guarantees from notaries public or organizations that do not provide
reimbursement in the case of fraud.
<PAGE>
ABOUT YOUR ACCOUNT 27
MORE ABOUT THE FUNDS
3
ORGANIZATION AND MANAGEMENT
----------------------------------------------------------
How are the funds organized?
T. Rowe Price International Funds, Inc. (the "Corporation"), currently
consists of 11 series, each representing a separate class of shares and
having different objectives and investment policies. The 11 series and the
years in which each was established are as follows: International Stock Fund,
1979; International Bond Fund, 1986; International Discovery Fund, 1988;
European Stock Fund, New Asia Fund, Global Government Bond Fund, 1990; Japan
Fund, 1991; Latin America Fund, 1993; Emerging Markets Bond Fund, 1994;
Emerging Markets Stock Fund and Global Stock Fund, 1995. (The Global
Government Bond, International Bond, and Emerging Markets Bond Funds are
described in a separate prospectus.)
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they put money in a
fund. These shares are part of a fund's authorized capital stock, but share
certificates are not issued.
Each share and fractional share entitles the shareholder to:
. Receive a proportional interest in a fund's income and capital gain
distributions.
. Cast one vote per share on certain fund matters, including the election of
fund directors, changes in fundamental policies, or approval of changes in
the fund's management contract.
Do T. Rowe Price funds have annual shareholder meetings?
The funds are not required to hold annual meetings and, in order to avoid
unnecessary costs to fund shareholders, do not intend to do so except when
certain matters, such as a change in a fund's fundamental policies, are to be
decided. In addition, shareholders representing at least 10% of all eligible
votes may call a special meeting, if they wish, for the purpose of voting on
the removal of any fund director or trustee. If a meeting is held and you
cannot attend, you can vote by proxy. Before the meeting, the fund will send
you proxy materials that explain the issues to be decided and include a
voting card for you to mail back.
<PAGE>
T. ROWE PRICE 28
Who runs the funds?
General Oversight
The Corporation is governed by a Board of Directors that meets regularly to
review the funds' investments, performance, expenses, and other business
affairs. The Board elects the funds' officers. The policy of the funds is
that a majority of the Board members will be independent of Price-Fleming.
. All decisions regarding the purchase and sale of fund investments are made
by Price-Fleming - specifically by each fund's Investment Advisory Group.
Investment Manager
Price-Fleming is responsible for selection and management of each fund's
portfolio investments. Price-Fleming's U.S. office is located at 100 East
Pratt Street, Baltimore, Maryland 21202. Price-Fleming also has offices in
London, Tokyo, Singapore, Hong Kong, and Buenos Aires. Price-Fleming was
incorporated in Maryland in 1979 as a joint venture between T. Rowe Price and
Robert Fleming Holdings Limited (Flemings).
T. Rowe Price, Flemings, and Jardine Fleming are owners of Price-Fleming. The
common stock of Price-Fleming is 50% owned by a wholly owned subsidiary of T.
Rowe Price, 25% by a subsidiary of Flemings, and 25% by a subsidiary of
Jardine Fleming Group Limited (Jardine Fleming). (Half of Jardine Fleming is
owned by Flemings and half by Jardine Matheson Holdings Limited.) T. Rowe
Price has the right to elect a majority of the Board of Directors of
Price-Fleming, and Flemings has the right to elect the remaining directors,
one of whom will be nominated by Jardine Fleming.
. Flemings is a diversified investment organization which participates in a
global network of regional investment offices in New York, London, Zurich,
Geneva, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, Taipei, Bombay,
Jakarta, Singapore, Bangkok, and Johannesburg.
Portfolio Management
Each fund has an Investment Advisory Group that has day-to-day responsibility
for managing the portfolio and developing and executing each fund's
investment program. The members of each advisory group are listed below.
Global Stock Fund Martin G. Wade, John R. Ford, James B. M. Seddon, Mark C.
J. Bickford-Smith, Robert W. Smith, and David J. L. Warren.
International Stock Fund Martin G. Wade, John R. Ford, James B. M. Seddon,
Mark C. J. Bickford-Smith, Robert W. Smith, and David J. L. Warren.
International Discovery Fund Martin G. Wade, Frances Dydasco, Nichola Pease,
Benedict R. F. Thomas, and David J. L. Warren.
<PAGE>
MORE ABOUT THE FUNDS 29
European Stock Fund Martin G. Wade, Nichola Pease, John R. Ford, James B. M.
Seddon, and Robert Revel-Chion.
Japan Fund Martin G. Wade, Ian MacDonald, and David J. L. Warren.
New Asia Fund Martin G. Wade, Frances Dydasco, Mark J. T. Edwards, and David
J. L. Warren.
Latin America Fund Martin G. Wade, John R. Ford, and Benedict R. F. Thomas.
Emerging Markets Stock Fund Martin G. Wade, Frances Dydasco, Christopher D.
Alderson, and Mark C. J. Bickford-Smith.
Martin Wade joined Price-Fleming in 1979 and has 29 years of experience with
the Fleming Group in research, client service, and investment management.
(Fleming Group includes Robert Fleming and/or Jardine Fleming.) Christopher
Alderson joined Price-Fleming in 1988 and has 12 years of experience with the
Fleming Group in research, and portfolio management. Mark Bickford-Smith
joined Price-Fleming in 1995 and has 13 years of experience with the Fleming
Group in research and financial analysis. Frances Dydasco joined
Price-Fleming in 1996 and has nine years of experience in research and
financial analysis. Mark Edwards joined Price-Fleming in 1987 and has 16
years of experience in financial analysis. John Ford joined Price-Fleming in
1982 and has 18 years of experience with the Fleming Group in research and
portfolio management. Nichola Pease joined Price-Fleming in 1996 and has 14
years of experience in research and financial analysis. James Seddon joined
Price-Fleming in 1987 and has 11 years of experience in portfolio management.
Robert Smith joined Price-Fleming in 1996, and has been with T. Rowe Price
since 1992, and has 11 years of experience in financial analysis. Benedict
Thomas joined Price-Fleming in 1988 and has nine years of portfolio
management experience. David Warren joined Price-Fleming in 1983 and has 17
years of experience in equity research, fixed income research, and portfolio
management. Ian MacDonald joined Price-Fleming in 1998 and has 13 years of
experience in equity research and portfolio management. Robert Revel-Chion
joined Price-Fleming in 1998 and has nine years of experience in investment
management (four years of which were within the Fleming Group).
Portfolio Transactions
Decisions with respect to the purchase and sale of a fund's portfolio
securities on behalf of each fund are made by Price-Fleming. The
Corporation's Board of Directors has authorized Price-Fleming to utilize
affiliates of Flemings and Jardine Fleming in the capacity of broker in
connection with the execution of a fund's portfolio transactions if
Price-Fleming believes that doing so would result in an economic advantage
(in the form of lower execution costs or otherwise) being obtained by the
fund.
<PAGE>
T. ROWE PRICE 30
Marketing
T. Rowe Price Investment Services, Inc., a wholly owned subsidiary of T. Rowe
Price, distributes (sells) shares of this and all other T. Rowe Price funds.
Shareholder Services
T. Rowe Price Services, Inc., another wholly owned subsidiary, acts as the
fund's transfer and dividend disbursing agent and provides shareholder and
administrative services. Services for certain types of retirement plans are
provided by T. Rowe Price Retirement Plan Services, Inc., also a wholly owned
subsidiary. The address for each is 100 East Pratt St., Baltimore, MD 21202.
How are fund expenses determined?
The management agreement spells out the expenses to be paid by each fund. In
addition to the management fee, the funds pay for the following: shareholder
service expenses; custodial, accounting, legal, and audit fees; costs of
preparing and printing prospectuses and reports sent to shareholders;
registration fees and expenses; proxy and annual meeting expenses (if any);
and director/trustee fees and expenses.
<TABLE>
Table 6 Service Fees Paid to T. Rowe Price Service
Companies
<CAPTION>
<S> <C> <C> <C> <C> <C
Fund Transfer Agent Sub-accountingServices Accounting
-------------------------------------------------------
Emerging Markets Stock $ 282,000 $ 9,000 $ 100,000
-------------------------------------------------------
European Stock 1,046,000 63,000 104,000
-------------------------------------------------------
Global Stock 70,000 -- 100,000
-------------------------------------------------------
International Discovery 513,000 8,000 126,000
-------------------------------------------------------
International Stock 6,465,000 3,411,000 166,000
-------------------------------------------------------
Japan 320,000 3,000 101,000
-------------------------------------------------------
Latin America 739,000 98,000 110,000
-------------------------------------------------------
New Asia 2,745,000 141,000 116,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Management Fee
This fee has two parts - an "individual fund fee" (discussed under
Transaction and Fund Expenses), which reflects a fund's particular investment
management costs, and a "group fee." The group fee, which is designed to
reflect the benefits of the shared resources of the T. Rowe Price investment
management complex, is calculated daily based on the combined net assets of
all T. Rowe Price funds (except the Spectrum Funds, and any institutional,
index, or private label mutual funds). The group fee schedule (shown below)
is graduated, declining as the asset total rises, so shareholders benefit
from the overall growth in mutual fund assets.
<PAGE>
MORE ABOUT THE FUNDS 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
0.480% First $1 billion 0.360% Next $2 billion 0.310% Next $16 billion
--------------------------
0.450% Next $1 billion 0.350% Next $2 billion 0.305% Next $30 billion
----------------------------------------------------
0.420% Next $1 billion 0.340% Next $5 billion 0.300% Thereafter
----------------------------------------------------
0.390% Next $1 billion 0.330% Next $10 billion
------------------------------------------------------------------------------
0.370% Next $1 billion 0.320% Next $10 billion
</TABLE>
The fund's portion of the group fee is determined by the ratio of its daily
net assets to the daily net assets of all the T. Rowe Price funds described
previously. Based on combined T. Rowe Price funds' assets of over $76 billion
at December 31, 1997, the group fee was 0.32%.
Research and Administration
Certain administrative support is provided by T. Rowe Price, which receives
from Price-Fleming a fee of 0.15% of the market value of all assets in equity
accounts, 0.15% of the market value of all assets in active fixed income
accounts, and 0.035% of the market value of all assets in passive fixed
income accounts under Price-Fleming's management. Additional investment
research and administrative support for equity investments is provided to
Price-Fleming by Fleming Investment Management Limited (FIM) and Jardine
Fleming International Holdings Limited (JFIH), for which each receives from
Price-Fleming a fee of .075% of the market value of all assets in equity
accounts under Price-Fleming's management. Fleming International Fixed
Interest Management Limited (FIFIM) and JFIH provide research and
administration support for fixed income accounts for which each receive a fee
of .075% of the market value of all assets in active fixed income accounts
and .0175% of such market value in passive fixed income accounts under
Price-Fleming's management. FIM and FIFIM are wholly owned subsidiaries of
Flemings. JFIH is a wholly owned subsidiary of Jardine Fleming.
UNDERSTANDING PERFORMANCE INFORMATION
----------------------------------------------------------
This section should help you understand the terms used to describe fund
performance. You will come across them in shareholder reports you receive
from us; in our newsletter, The Price Report; in Insights articles; in T.
Rowe Price advertisements; and in the media.
Total Return
This tells you how much an investment in a fund has changed in value over a
given time period. It reflects any net increase or decrease in the share
price and assumes that all dividends and capital gains (if any) paid during
the period were
<PAGE>
T. ROWE PRICE 32
reinvested in additional shares. Reinvested distributions are included, which
means that total return numbers include the effect of compounding, i.e., you
receive income and capital gain distributions on a rising number of shares.
Advertisements for a fund may include cumulative or compound average annual
total return figures, which may be compared with various indices, other
performance measures, or other mutual funds.
. Total return is the most widely used performance measure. Detailed
performance information is included in each fund's annual and semiannual
shareholder reports and in the quarterly Performance Update, which are all
available without charge.
Cumulative Total Return
This is the actual rate of return on an investment for a specified period. A
cumulative return does not indicate how much the value of the investment may
have fluctuated between the beginning and end of the period specified.
Average Annual Total Return
This is always hypothetical. Working backward from the actual cumulative
return, it tells you what constant year-by-year return would have produced
the actual cumulative return. By smoothing out all the variations in annual
performance, it gives you an idea of the investment's annual contribution to
your portfolio, provided you held it for the entire period in question.
INVESTMENT POLICIES AND PRACTICES
----------------------------------------------------------
This section takes a detailed look at some of the types of securities the
funds may hold in their portfolios and the various kinds of investment
practices that may be used in day-to-day portfolio management. The funds'
investment program is subject to further restrictions and risks described in
the Statement of Additional Information.
Shareholder approval is required to substantively change a fund's objectives
and certain investment restrictions noted in the following section as
"fundamental policies." The managers also follow certain "operating
policies," which can be changed without shareholder approval. However,
significant changes are discussed with shareholders in fund reports. A fund
adheres to applicable investment restrictions and policies at the time it
makes an investment. A later change in circumstances does not cause a
violation of the restriction and will not require the sale of an investment
if it was proper at the time it was made.
<PAGE>
MORE ABOUT THE FUNDS 33
The fund's holdings of certain kinds of investments cannot exceed maximum
percentages of total assets, which are set forth herein. For instance, each
fund is not permitted to invest more than 10% of total assets in hybrid
instruments. While these restrictions provide a useful level of detail about
a fund's investment program, investors should not view them as an accurate
gauge of the potential risk of such investments. For example, in a given
period, a 5% investment in hybrid instruments could have significantly more
of an impact on a fund's share price than its weighting in the portfolio. The
net effect of a particular investment depends on its volatility and the size
of its overall return in relation to the performance of all the funds' other
investments.
Changes in a fund's holdings, a fund's performance, and the contribution of
various investments are discussed in the shareholder reports sent to you.
. Fund managers have considerable leeway in choosing investment strategies
and selecting securities they believe will help the funds achieve their
objectives.
Types of Portfolio Securities
In seeking to meet their investment objectives, the funds may invest in any
type of security or instrument (including certain potentially high-risk
derivatives described in this section) whose investment characteristics are
consistent with the funds' investment programs. The following pages describe
the principal types of portfolio securities and investment management
practices of the funds.
Fundamental policy With the exception of Latin America Fund, a fund will not
purchase a security if, as a result, with respect to 75% of its total assets,
more than 5% of the fund's total assets would be invested in securities of a
single issuer or more than 10% of the outstanding voting securities of the
issuer would be held by the fund.
Nondiversified Status--Latin America Fund
The fund is registered as a nondiversified mutual fund. This means that the
fund may invest a greater portion of its assets in, and own a greater amount
of the voting securities of, a single company than a diversified fund which
may subject the fund to greater risk with respect to its portfolio
securities. However, because the fund intends to qualify as a "regulated
investment company" under the Internal Revenue Code, it must invest so that,
at the end of each calendar quarter, with respect to 50% of its total assets,
not more than 5% of its assets are invested in the securities of a single
issuer.
Common and Preferred Stocks
Stocks represent shares of ownership in a company. Generally, preferred stock
has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate
in
<PAGE>
T. ROWE PRICE 34
company profits on a pro-rata basis; profits may be paid out in dividends or
reinvested in the company to help it grow. Increases and decreases in
earnings are usually reflected in a company's stock price, so common stocks
generally have the greatest appreciation and depreciation potential of all
corporate securities. While most preferred stocks pay a dividend, the fund
may purchase preferred stock where the issuer has omitted, or is in danger of
omitting, payment of its dividend. Such investments would be made primarily
for their capital appreciation potential.
Convertible Securities and Warrants
The funds may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. Traditionally, convertible securities
have paid dividends or interest at rates higher than common stocks but lower
than nonconvertible securities. They generally participate in the
appreciation or depreciation of the underlying stock into which they are
convertible, but to a lesser degree. In recent years, convertibles have been
developed which combine higher or lower current income with options and other
features. Warrants are options to buy a stated number of shares of common
stock at a specified price anytime during the life of the warrants
(generally, two or more years).
Fixed Income Securities
The funds may invest in any type of investment-grade security. The Global
Stock Fund may also invest up to 5% of its total assets in
below-investment-grade bonds, commonly referred to as "junk" bonds. Such
securities would be purchased in companies which meet the investment criteria
for the fund. The price of a bond fluctuates with changes in interest rates,
rising when interest rates fall and falling when interest rates rise. Junk
bond prices can be much more volatile and have a greater risk of default than
investment-grade bonds.
Hybrid Instruments
These instruments (a type of potentially high-risk derivative) can combine
the characteristics of securities, futures, and options. For example, the
principal amount, redemption, or conversion terms of a security could be
related to the market price of some commodity, currency, or securities index.
Such securities may bear interest or pay dividends at below market or even
relatively nominal rates. Under certain conditions, the redemption value of
such an investment could be zero.
. Hybrids can have volatile prices and limited liquidity, and their use by
the fund may not be successful.
Operating policy Each fund may invest up to 10% of its total assets in hybrid
instruments.
<PAGE>
MORE ABOUT THE FUNDS 35
Passive Foreign Investment Companies
The fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies. Such trusts have been the
only or primary way to invest in certain countries. In addition to bearing
their proportionate share of the trust's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses
of such trusts. Capital gains on the sale of such holdings are considered
ordinary income regardless of how long the fund held its investment. In
addition, the fund may be subject to corporate income tax and an interest
charge on certain dividends and capital gains earned from these investments,
regardless of whether such income and gains are distributed to shareholders.
To avoid such tax and interest, the fund intends to treat these securities as
sold on the last day of its fiscal year and recognize any gains for tax
purposes at that time; deductions for losses are allowable only to the extent
of any gains resulting from these deemed sales for prior taxable years. Such
gains and losses will be treated as ordinary income. The fund will be
required to distribute any resulting income even though it has not sold the
security.
Private Placements
These securities are sold directly to a small number of investors, usually
institutions. Unlike public offerings, such securities are not registered
with the SEC. Although certain of these securities may be readily sold, for
example, under Rule 144A, others may be illiquid, and their sale may involve
substantial delays and additional costs.
Operating policy Each fund will not invest more than 15% of its net assets in
illiquid securities.
Types of Management Practices
Reserve Position
Each fund will hold a certain portion of its assets in cash or cash
equivalents. Each fund's reserve position can consist of shares of a T. Rowe
Price internal money market fund and U.S. and foreign dollar-denominated
money market securities, including repurchase agreements, in the two highest
rating categories, maturing in one year or less. T. Rowe Price internal money
market funds do not receive management fees. For temporary, defensive
purposes, a fund may invest without limitation in such money market funds and
securities. This reserve position provides flexibility in meeting
redemptions, expenses, and the timing of new investments, and serves as a
short-term defense during periods of unusual market volatility.
<PAGE>
T. ROWE PRICE 36
Borrowing Money and Transferring Assets
Each fund can borrow money from banks as a temporary measure for emergency
purposes, to facilitate redemption requests, or for other purposes consistent
with each fund's investment objective and program. Such borrowings may be
collateralized with fund assets, subject to restrictions.
Fundamental policy Borrowings may not exceed 33/1//\\/3/\\% of total fund
assets.
Operating policies A fund may not transfer as collateral any portfolio
securities except as necessary in connection with permissible borrowings or
investments, and then such transfers may not exceed 33/1//\\/3/\\% of a
fund's total assets. A fund may not purchase additional securities when
borrowings exceed 5% of total assets.
Foreign Currency Transactions
The funds will normally conduct their foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into forward contracts
to purchase or sell foreign currencies. The funds will generally not enter
into a forward contract with a term greater than one year.
The funds will generally enter into forward foreign currency exchange
contracts only under two circumstances. First, when a fund enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security.
Second, when Price-Fleming believes that the currency of a particular foreign
country may suffer or enjoy a substantial movement against another currency,
it may enter into a forward contract to sell or buy the former foreign
currency (or another currency which acts as a proxy for that currency)
approximating the value of some or all of the fund's portfolio securities
denominated in such foreign currency. Under certain circumstances, a fund may
commit a substantial portion or the entire value of its portfolio to be
consummation of these contracts. Price-Fleming will consider the effect such
a commitment of its portfolio to forward contracts would have on the
investment program of the fund and the flexibility of the fund to purchase
additional securities. Although forward contracts will be used primarily to
protect the fund from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately predicted and a
fund's total return could be adversely affected as a result.
There are certain markets where it is not possible to engage in effective
foreign currency hedging. This may be true, for example, for the currencies
of various emerging markets where the foreign exchange markets are not
sufficiently developed to permit hedging activity to take place.
<PAGE>
MORE ABOUT THE FUNDS 37
1999: The Year of the Euro Currency
On the first business day of 1999, several major European countries will
officially inaugurate the European Economic and Monetary Union (EMU) and
adopt the euro as a single European currency backed by the European Central
Bank. The event could be one of the most significant financial developments
of the century, creating a vast economic and currency bloc equal to the U.S.
in size and power. Since the EMU has far-reaching implications for investors
and funds with exposure to European securities, it is important for you to
understand what is taking place.
The currencies of the original participating countries will become fixed rate
units of the euro, much the same as the nickel, dime, quarter, and half
dollar are denominations of the U.S. dollar. The exchange rates versus the
euro were set in May and will officially be determined by the end of 1998.
<TABLE>
<CAPTION>
Country Currency Euro Rate
- ------- -------- ---------
<S> <S> <C>
Austria Schilling 13.91
Belgium Franc 40.78
Finland Mark 6.01
France Franc 6.63
Germany Mark 1.98
Ireland Punt 0.80
Italy Lira 1958.00
Luxembourg Franc 40.78
Netherlands Guilder 2.23
Portugal Escudo 202.70
Spain Peseta 168.20
</TABLE>
Source: The Wall Street Journal, May 4, 1998
Beginning in January 1999, some European holdings will be redenominated in
euros, particularly government securities. The face value of other
investments might remain in the existing national currencies for a time, but
they will be priced, settled, and valued in euros by stock exchanges and
other agencies. Thus, some of the European holdings in your funds will be
valued in euros.
This will not affect the investment value of your funds in U.S. dollar terms,
since the euro will be converted into the dollar in the same way
deutschemarks, francs, lire, and other European currencies are currently
converted at the prevailing exchange rates.
During the transition period, which lasts from January 1, 1999, until June
30, 2002, other countries that have moved to adopt the economic terms of the
<PAGE>
T. ROWE PRICE 38
Maastricht Treaty of 1993 will be able to participate in the EMU. The primary
criteria for joining are:
. a sustainable budget deficit less than 3% of GDP;
. public debt less than 60% of GDP;
. low inflation and interest rates; and
. no currency devaluations within two years of application.
Some of the original participants are not totally compliant with these terms
but are expected to embrace them by 2002. Countries joining later may have to
be in strict accord before entering the EMU, or at least be well along the
path to achieving them. So far, the transition seems to be progressing
smoothly, but there has been resistance to some of the more stringent terms.
French Socialists, in particular, would prefer to maintain heavy government
subsidies for social programs. Therefore, the jury is still out on whether
complete economic and monetary convergence will be attained as planned.
Assuming all goes well, the national currencies of participating countries
will cease to exist and all accounting will be in euros following the
transition period. However, regardless of whether or not full convergence is
realized on the date specified, we do not expect pricing in euros to have any
special impact on the value of your investment. Of course, problems could
develop that might be unfavorable for the fund, but we do not anticipate them
at this time.
Futures and Options
Futures (a type of potentially high-risk derivative) are often used to manage
risk, because they enable the investor to buy or sell an asset in the future
at an agreed upon price. Options (another type of potentially high-risk
derivative) give the investor the right, but not the obligation, to buy or
sell an asset at a predetermined price in the future. The funds may buy and
sell futures and options contracts for a number of reasons, including: to
manage their exposure to changes in securities prices and foreign currencies;
as an efficient means of adjusting overall exposure to certain markets; in an
effort to enhance income; and to protect the value of portfolio securities.
The funds may purchase, sell, or write call and put options on securities,
financial indices, and foreign currencies.
Futures contracts and options may not always be successful hedges; their
prices can be highly volatile. Using them could lower a fund's total return,
and the potential loss from the use of futures can exceed a fund's initial
investment in such contracts. In many foreign countries, futures and options
markets do not exist or are not sufficiently developed to be effectively used
by the funds.
<PAGE>
Operating policies Futures: Initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of each fund's net
asset value. Options on securities: The total market value of securities
against which each fund writes call or put options may not exceed 25% of its
total assets. Each fund will not commit more than 5% of its total assets to
premiums when purchasing call or put options.
Operating policies Futures: Initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of each fund's net
asset value. Options on securities: The total market value of securities
against which each fund writes call or put options may not exceed 25% of its
total assets. Each fund will not commit more than 5% of its total assets to
premiums when purchasing call or put options.
Operating policies Futures: Initial margin deposits and premiums on options
used for non-hedging purposes will not equal more than 5% of each fund's net
asset value. Options on securities: The total market value of securities
against which each fund writes call or put options may not exceed 25% of its
total assets. Each fund will not commit more than 5% of its total assets to
premiums when purchasing call or put options.
Tax Consequences of Hedging
Under applicable tax law, the funds may be required to limit their gains from
hedging in foreign currency forwards, futures, and options. Although the
funds are expected to comply with such limits, the extent to which these
limits apply is subject to tax regulations as yet unissued. Hedging may also
result in the application of the mark-to-market and straddle provisions of
the Internal Revenue Code. These provisions could result in an increase (or
decrease) in the amount of taxable dividends paid by the funds and could
affect whether dividends paid by the funds are classified as capital gains or
ordinary income.
Lending of Portfolio Securities
Like other mutual funds, the funds may lend securities to broker-dealers,
other institutions, or other persons to earn additional income. The principal
risk is the potential insolvency of the broker-dealer or other borrower. In
this event, a fund could experience delays in recovering its securities and
possibly capital losses.
Fundamental policy The value of loaned securities may not exceed
33/1//\\/3/\\% of a fund's total assets.
Portfolio Turnover
Turnover is an indication of frequency. The funds will not generally trade in
securities for short-term profits, but when circumstances warrant, securities
may be purchased and sold without regard to the length of time held. The
funds' portfolio turnover rates for the previous three fiscal periods are
shown in Table 7.
<TABLE>
Table 7
<CAPTION>
<S> <S> <C> <C> <C> <S>
Portfolio Turnover Rates
Fund 1995 1996 1997
------------------------------
Emerging Markets Stock 28.8%* 41.7% 84.3%
------------------------------
European Stock 17.2% 14.1% 17.5%
------------------------------
Global Stock ** 50.0%* 41.8%
------------------------------
International Discovery 43.5% 52.0% 72.7%
------------------------------
International Stock 17.8% 11.6% 15.8%
------------------------------
Japan 62.4% 29.8% 32.3%
------------------------------
Latin America 18.9% 22.0% 32.7%
------------------------------
New Asia 63.7% 42.0% 41.8%
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
T. ROWE PRICE 40
European Stock, Japan, New Asia, Latin America, and Emerging Markets Stock
Funds
Location of Company
In determining the domicile or nationality of a company, the funds would
primarily consider the following factors: whether the company is organized
under the laws of a particular country; or, whether the company derives a
significant proportion (at least 50%) of its revenues or profits from goods
produced or sold, investments made, or services performed in the country or
has at least 50% of its assets situated in that country.
Each of these funds will invest at least 65% of its total assets in companies
located (as defined above) in the respective countries or regions indicated.
International Stock, International Discovery, and Global Stock Funds
Each fund will invest at least 65% of its total assets in a manner which
reflects its international or global character, respectively. In the case of
the international funds, this requires that the funds invest in at least
three countries outside of the U.S. For the global fund, this means that the
fund must invest in at least three countries, one of which may include the
U.S.
<PAGE>
MORE ABOUT THE FUNDS 41
INVESTING WITH T. ROWE PRICE
4
ACCOUNT REQUIREMENTS AND TRANSACTION INFORMATION
----------------------------------------------------------
Tax Identification Number
We must have your correct Social Security or corporate tax identification number
on a signed New Account Form or W-9 Form. Otherwise, federal law requires the
funds to withhold a percentage (currently 31%) of your dividends, capital gain
distributions, and redemptions, and may subject you to an IRS fine. If this
information is not received within 60 days after your account is established,
your account may be redeemed, priced at the NAV on the date of redemption.
Always verify your transactions by carefully reviewing the confirmation we send
you. Please report any discrepancies to Shareholder Services promptly.
Employer-Sponsored Retirement Plans and Institutional Accounts T. Rowe Price
Trust Company 1-800-492-7670 1-410-625-6585
Transaction procedures in the following sections may not apply to
employer-sponsored retirement plans and institutional accounts. For procedures
regarding employer-sponsored retirement plans, please call T. Rowe Price Trust
Company or consult your plan administrator. For institutional account
procedures, please call your designated account manager or service
representative.
OPENING A NEW ACCOUNT
----------------------------------------------------------
$2,500 minimum initial investment; $1,000 for retirement plans or gifts or
transfers to minors (UGMA/UTMA) accounts
Account Registration
If you own other T. Rowe Price funds, be sure to register any new account just
like your existing accounts so you can exchange among them easily. (The name and
account type would have to be identical.)
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T. ROWE PRICE 42
By Mail
Please make your check payable to T. Rowe Price Funds (otherwise it will be
returned) and send your check, together with the New Account Form, to the
address on the next page. We do not accept third party checks to open new
accounts, except for IRA Rollover checks that are properly endorsed.
Regular Mail
T. Rowe Price Account Services P.O. Box 17300 Baltimore, MD 21298-9353
Mailgram, Express, Registered, or Certified Mail
T. Rowe Price Account Services 10090 Red Run Blvd. Owings Mills, MD 21117
By Wire
Call Investor Services for an account number and give the following wire
information to your bank:
PNC Bank, N.A. (Pittsburgh) ABA# 043000096 T. Rowe Price [fund name] Account#
1004397951 name of owner(s) and account number
Complete a New Account Form and mail it to one of the appropriate addresses
listed above.
Note: No services will be established and IRS penalty withholding may occur
until a signed New Account Form is received. Also, retirement plans cannot be
opened by wire.
By Exchange
Call Shareholder Services or use Tele*Access or your personal computer (see
Automated Services under Shareholder Services). The new account will have the
same registration as the account from which you are exchanging. Services for the
new account may be carried over by telephone request if preauthorized on the
existing account. For limitations on exchanging, see explanation of Excessive
Trading under Transaction Procedures and Special Requirements.
In Person
Drop off your New Account Form at any location listed on the cover and obtain a
receipt.
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INVESTING WITH T. ROWE PRICE 43
PURCHASING ADDITIONAL SHARES
----------------------------------------------------------
$100 minimum purchase; $50 minimum for retirement plans, Automatic Asset
Builder, and gifts or transfers to minors (UGMA/UTMA) accounts,
By ACH Transfer
Use Tele*Access or your personal computer or call Investor Services if you have
established electronic transfers using the ACH network.
By Wire
Call Shareholder Services or use the wire address in Opening a New Account.
By Mail
1. Make your check payable to T. Rowe Price Funds (otherwise it may be
returned).
2. Mail the check to us at the address shown below with either a fund
reinvestment slip or a note indicating the fund you want to buy and your fund
account number.
3. Remember to provide your account number and the fund name on the memo line of
your check.
Regular Mail
T. Rowe Price Funds Account Services P.O. Box 89000 Baltimore, MD 21289-1500
/(For mailgrams, express, registered, or certified mail, see previous /
/section.)/
By Automatic Asset Builder
Fill out the Automatic Asset Builder section on the New Account or Shareholder
Services Form.
EXCHANGING AND REDEEMING SHARES
----------------------------------------------------------
By Phone
Call Shareholder Services
If you find our phones busy during unusually volatile markets, please consider
placing your order by your personal computer, Tele*Access (if you have
previously authorized telephone services), mailgram, or express mail. For
exchange policies, please see Transaction Procedures and Special Requirements -
Excessive Trading.
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T. ROWE PRICE 44
Redemption proceeds can be mailed to your account address, sent by ACH transfer,
or wired to your bank (provided your bank information is already on file). For
charges, see Electronic Transfers - By Wire under Shareholder Services.
By Mail
For each account involved, provide the account name, number, fund name, and
exchange or redemption amount. For exchanges, be sure to indicate any fund you
are exchanging out of and the fund or funds you are exchanging into. Please mail
to the appropriate address below. T. Rowe Price requires the signatures of all
owners exactly as registered, and possibly a signature guarantee (see
Transaction Procedures and Special Requirements - Signature Guarantees).
Regular Mail
For nonretirement and IRA accounts
T. Rowe Price Account Services P.O. Box 89000 Baltimore, MD 21289-0220
For employer-sponsored retirement accounts
T. Rowe Price Trust Company P.O. Box 89000 Baltimore, MD 21289-0300
/(//For mailgrams, express, registered, or certified mail, see// //Opening a /
/New Account.)/
Redemptions from employer-sponsored retirement accounts must be in writing;
please call T. Rowe Price Trust Company or your plan administrator for
instructions. IRA distributions may be requested in writing or by telephone;
please call Shareholder Services to obtain an IRA Distribution Form or an IRA
Shareholder Services Form to authorize the telephone redemption service.
<PAGE>
RIGHTS RESERVED BY THE FUND
----------------------------------------------------------
The fund and its agents reserve the right to waive or lower investment minimums;
to accept initial purchases by telephone or mailgram; to refuse any purchase
order; to cancel or rescind any purchase or exchange (for example, for excessive
trading or fraud) upon notice to the shareholder within five business days of
the trade or if the written confirmation has not been received by the
shareholder, whichever is sooner; to freeze any account and suspend account
services when notice has been received of a dispute between the registered or
beneficial account owners or there is reason to believe a fraudulent transaction
may occur; to otherwise modify the conditions of purchase and any services at
any time; or to act on instructions believed to be genuine.
SHAREHOLDER SERVICES
----------------------------------------------------------
Shareholder Services 1-800-225-5132 1-410-625-6500 Investor Services
1-800-638-5660 1-410-547-2308
Many services are available to you as a T. Rowe Price shareholder; some you
receive automatically, and others you must authorize on the New Account Form. By
signing up for services on the New Account Form rather than later on, you avoid
having to complete a separate form and obtain a signature guarantee. This
section reviews some of the principal services currently offered. Our Services
Guide contains detailed descriptions of these and other services.
If you are a new T. Rowe Price investor, you will receive a Services Guide with
our Welcome Kit.
Note: Corporate and other institutional accounts require an original or
certified resolution to establish services and to redeem by mail. For more
information, call Investor Services.
Retirement Plans
We offer a wide range of plans for individuals, institutions, and large and
small businesses: IRAs, SIMPLE IRAs, SEP-IRAs, Keoghs (profit sharing, money
purchase pension), 401(k), and 403(b)(7). For information on IRAs, call Investor
Services. For information
<PAGE>
T. ROWE PRICE 46
on all other retirement plans, including our no-load variable annuity, please
call our Trust Company at 1-800-492-7670.
Exchange Service
You can move money from one account to an existing identically registered
account or open a new identically registered account. Remember, exchanges are
purchases and sales for tax purposes. (Exchanges into a state tax-free fund are
limited to investors living in states where the fund is registered.) Some of the
T. Rowe Price funds may impose a redemption fee of 0.5% to 2% on shares held for
less than six months or one year, as specified in the prospectus. The fee is
paid to the fund.
Automated Services Tele*Access 1-800-638-2587 24 hours, 7 days
Tele*Access
24-hour service via toll-free number enables you to (1) access information on
fund yields, prices, distributions, account balances, and your latest
transaction; (2) request checks, prospectuses, services forms, duplicate
statements, and tax forms; and (3) initiate purchase, redemption, and exchange
transactions in your accounts (see Electronic Transfers below).
T. Rowe Price OnLine
24-hour service via dial-up modem provides the same services as Tele*Access but
on a personal computer. Please call Investor Services for an information guide.
After obtaining proper authorization, account transactions may also be conducted
on the Internet.
Plan Account Line 1-800-401-3279
Plan Account Line
This 24-hour service is similar to Tele*Access but is designed specifically to
meet the needs of retirement plan investors.
Telephone and Walk-In Services
Buy, sell, or exchange shares by calling one of our service representatives or
by visiting one of our investor center locations whose addresses are listed on
the cover.
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INVESTING WITH T. ROWE PRICE 47
Electronic Transfers
By ACH
With no charges to pay, you can initiate a purchase or redemption for as little
as $100 or as much as $100,000 between your bank account and fund account using
the ACH network. Enter instructions via Tele*Access or your personal computer,
or call Shareholder Services.
By Wire
Electronic transfers can be conducted via bank wire. There is currently a $5 fee
for wire redemptions under $5,000, and your bank may charge for incoming or
outgoing wire transfers regardless of size.
Checkwriting
(Not available for equity funds, or the High Yield or Emerging Markets Bond
Funds) You may write an unlimited number of free checks on any money market
fund, and most bond funds, with a minimum of $500 per check. Keep in mind,
however, that a check results in a redemption; a check written on a bond fund
will create a taxable event which you and we must report to the IRS.
Automatic Investing
($50 minimum) You can invest automatically in several different ways, including:
Automatic Asset Builder
You instruct us to move $50 or more from your bank account, or you can instruct
your employer to send all or a portion of your paycheck to the fund or funds you
designate.
Automatic Exchange
You can set up systematic investments from one fund account into another, such
as from a money fund into a stock fund.
<PAGE>
DISCOUNT BROKERAGE
----------------------------------------------------------
To open an account 1-800-638-5660 For existing discount brokerage investors
1-800-225-7720
This additional service gives you the opportunity to easily consolidate all of
your investments with one company. Through our discount brokerage, you can buy
and sell individual securities - stocks, bonds, options, and others--at
commission savings over full-service brokers. We also provide a wide range
of services, including:
<PAGE>
INVESTING WITH T. ROWE PRICE 49
Automated telephone and on-line services
You can enter trades, access quotes, and review account information 24 hours a
day, seven days a week. Any trades executed through these programs save you an
additional 10% on commissions.
Note: Discount applies to our current commission schedule, subject to our $35
minimum commission.
Investor information
A variety of informative reports, such as our Brokerage Insights series, S&P
Market Month newsletter, and select stock reports can help you better evaluate
economic trends and investment opportunities.
Dividend Reinvestment Service
Virtually all stocks held in customer accounts are eligible for this service -
free of charge.
/Discount Brokerage is a division of //T. Rowe Price// Investment / /Services,
Inc., Member NASD/SIPC./
INVESTMENT INFORMATION
----------------------------------------------------------
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information in addition to account statements.
Shareholder Reports
Fund managers' reviews of their strategies and results. If several members of a
household own the same fund, only one fund report is mailed to that address. To
receive additional copies, please call Shareholder Services or write to us at
100 East Pratt Street, Baltimore, Maryland 21202.
The T. Rowe Price Report
A quarterly investment newsletter discussing markets and financial strategies.
Performance Update
A quarterly review of all T. Rowe Price fund results.
<PAGE>
T. ROWE PRICE 50
Insights
Educational reports on investment strategies and financial markets.
Investment Guides
Asset Mix Worksheet, College Planning Kit, Diversifying Overseas: A T. Rowe
Price Guide to International Investing, How to Choose a Bond Fund, Personal
Strategy Planner, Retirees Financial Guide, Retirement Planning Kit, and Tax
Considerations for Investors.
<PAGE>
INVESTING WITH T. ROWE PRICE 51
To help you achieve your financial goals, T. Rowe Price offers a wide range of
stock, bond, and money market investments, as well as convenient services and
timely, informative reports.
<PAGE>
T. ROWE PRICE 52
To Open a Mutual Fund Account
Investor Services
1-800-638-5660
1-410-547-2308
For Existing Accounts
Shareholder Services
1-800-225-5132
1-410-625-6500
For Yields, Prices, Account Information, or to Conduct Transactions
Tele*Access/(R)/
1-800-638-2587 24 hours, 7 days
To Open a Discount Brokerage Account
1-800-638-5660
Plan Account Line
1-800-401-3279
For retirement plan
investors
<PAGE>
INVESTING WITH T. ROWE PRICE 53
Investor Centers
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Internet Address
www.troweprice.com
<PAGE>
T. ROWE PRICE 54
C01-040 8/12/98
