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T. Rowe Price
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Semiannual Report
European Stock Fund
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April 30, 1998
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REPORT HIGHLIGHTS
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European Stock Fund
* European stocks soared during the 6- and 12-month periods ended April 30,
even outpacing the ebullient U. S. stock market.
* The principal catalyst for the equity market surge was the approach of
Europe's long- awaited monetary union, featuring the introduction of the
euro on January 1, 1999.
* The fund provided strong returns for both periods but slightly lagged its
benchmark index and peer group average, due in part to differences in
country weightings.
* Holdings in our largest country position, the U.K., benefited from the wave
of mergers and corporate restructurings sweeping Europe.
* We believe Europe's improving fundamentals and economic momentum will
support further progress in the equity markets, although perhaps not at
recent lofty levels.
<PAGE>
Fellow Shareholders
The six-month period ended April 30, 1998, saw Europe's long promise of
monetary union take an important step closer to reality. The change galvanized
investor optimism in a time of reviving economic growth, mild inflation, and
corporate transformation. Europe's stock markets provided ample opportunities
for investment gain, and your fund was able to take advantage.
================================================================================
Performance Comparison
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Periods Ended 4/30/98 6 Months 12 Months
- --------------------------------------------------------------------------------
European Stock Fund 24.63% 37.60%
MSCI Europe Index 29.26 45.93
Lipper European Funds Average 26.03 39.23
================================================================================
Your fund achieved a spectacular 24.6% return in just the past six months
and is up 37.6% for the past 12 months. In the six-month period, only one main
European market returned less than 20% in dollar terms, and several gained more
than 40%. These returns came even though most European currencies lost ground
against the dollar.
Our six-month returns lagged both the MSCI Europe Index and the Lipper peer
group (which was itself behind the benchmark). The shortfall against the
European index is explained by a combination of country exposures and stock
weightings. Our core holdings have in general produced the steady returns and
performance we expected of them, but there have been stronger gains elsewhere in
the markets.
The pace of change throughout Europe has continued to accelerate and, as
predicted in our last report, has provided an ideal backdrop for success in
European stock market investments. The European Monetary Union (EMU) has
remained on course. A sharper corporate attention to profitability and
shareholder interests, as we've discussed in recent shareholder reports, has led
to several major mergers and continued restructurings. Investors have responded
to these changes with enthusiasm.
================================================================================
1999: The Year of the Euro
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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 eq ual 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.
<PAGE>
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.
Country Currency Euro Rate
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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
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
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.
<PAGE>
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.
================================================================================
THIS SUPPLEMENTS THE PROSPECTUS DATED MARCH 1, 1998.
Support for higher equity valuations has been strong across the board.
Those countries participating in the first round of EMU have offered almost
uniform bond yields, and low returns throughout Europe's bond markets have
motivated investors to seek better performance in equities. Additional liquidity
has been provided in those countries pursuing pension reform, which encourages
individuals to save for their own retirement.
The stock markets have been relatively worry-free during this period. With
the exception of the U.K., broad interest rate increases have not occurred
despite signs of accelerating economic growth in several nations, including
Germany and France. A benign inflation outlook has played a key role in
maintaining this stability. Generally high levels of unemployment and the weak
growth rates of the early 1990s have produced inflation-dampening "slack" in
many of Europe's economies. As in the U.S., the corporate drive toward achieving
higher returns through improved efficiency (rather than simply increasing
prices) has also kept inflation in check.
MARKET AND PORTFOLIO REVIEW
The U.K. is not entering EMU initially. It may join at a later date but its
economy will need to converge with EMU standards and other European economic
trends before this would make sense. In contrast to many of Europe's other
central banks, the U.K.'s now-independent Bank of England has had a bouyant
economy to handle and has demonstrated much better economic management than in
the recent past with successive interest rate increases, including two more in
the last six months. The rate rise has led to a stronger currency, which has
helped to slow the economy to a more sustainable pace, but has had a negative
effect on the manufacturing and export sectors, to which the fund has a minimal
exposure. Alternatively, demand in the service sector, where the fund has a
significant stake, has been relatively good.
It is not just the economy in the U.K. that has been ahead of the
Continent. British companies have become especially profitable and successful in
improving shareholder returns. Nor has the U.K. missed out on its share of
corporate activity. Even though the most exciting of potential mergers, that
between the pharmaceutical companies GLAXO WELLCOME and SMITHKLINE BEECHAM, was
not completed, the fund benefited from recent takeovers of T&N and ARGOS.
However, there are companies where returns can still improve. Our largest
holding, NATIONAL WESTMINSTER BANK, is undergoing a dramatic cost-cutting
program to match its profitability to its better-performing peers.
<PAGE>
[Geographic Diversification pie chart shown here with following segments -
United Kingdom 27%; France 14%; Netherlands 14%; Switzerland 8%; Germany 8%;
Italy 7%; Sweden 5%; Other and Reserves 17%.]
We added to our holdings in British global catering company COMPASS GROUP.
Companies across Europe have shown an increasing desire to outsourc e services
of this type, and the effects have been evident in your fund. For example,
NETHERLANDS electronics company PHILIPS ELECTRONICS (which we recently added to
the portfolio) has sought greater efficiency by outsourcing to Compass among
others. Phillips has also been involved in another significant outsourcing trend
- - that of information technology (IT) services. It has purchased and installed
new software manufactured by SAP, which happens to be one of our chief holdings
in GERMANY.
In general, IT spending is increasing rapidly at many companies, partly to
help increase productivity, and partly to head off much-discussed "year 2000"
problems. This is particularly so for the financial industry. The desire to
increase scale to spread out IT costs has been one of the motivations for the
dramatic banking consolidations sweeping across Europe. In Germany, BAYERISCHE
VEREINSBANK, a holding we have added to during the past six months, is merging
with BAYERISCHE HYPOTHEKEN UND WECHSEL BANK, and in SWITZERLAND, UNION BANK OF
SWITZERLAND and SBC (Schweizerischer Bankverein) have merged to form the largest
banking group in Europe. We have found many opportunities to add to our banking
positions; we think lower costs and higher returns will accrue to shareholders
as a result of this trend.
The banking sector led returns in SPAIN and ITALY, Europe's strongest
markets. Consolidation is one reason for this success, but, as important, these
institutions are benefiting from efforts to encourage individuals to save for
their own retirements. As part of this move, investors have also begun to switch
from more conservative fixed income accounts toward equity investments. One such
bank in Italy is CREDITO ITALIANO, which is leading the nation's wave of banking
mergers. In addition, Italian bank IMI recently reported monthly inflows of $3
billion to its mutual funds. After the stock's exceptionally strong performance,
however, we decided to trim our investment.
<PAGE>
================================================================================
Market Performance
Six Months Local Local Currency U.S.
Ended 4/30/98 Currency vs. U.S. Dollars Dollars
- --------------------------------------------------------------------------------
Belgium ........................... 36.12% -4.12% 30.51%
Finland ........................... 50.43 -5.15 42.67
France ............................ 42.66 -4.35 36.45
Germany ........................... 36.45 -4.09 30.87
Italy ............................. 54.01 -4.62 46.90
Netherlands ....................... 25.96 -3.95 20.99
Norway ............................ 5.91 -6.13 -0.59
Spain ............................. 62.48 -4.63 54.96
Sweden ............................ 29.12 -3.29 24.88
Switzerland ....................... 35.37 -6.90 26.03
United Kingdom .................... 23.74 -0.29 23.38
Source: FAMEInformation Services, Inc.; based on MSCI indices.
================================================================================
FRANCE'S corporations have been less interested in restructuring, but it is
still possible to find companies seeking higher returns from their businesses.
For example, French food production company DANONE has set new financial
targets, will dispose of low-return businesses, and even intends to buy back
shares with excess cash. This latter move has been rare outside of the U.K.-
some countries need a change of law to make it possible-but we expect more
European companies to adopt it going forward. In France, we have also added to
our position in SODEXHO ALLIANCE. The firm has recently teamed up with Marriot's
catering business to gain access to the U.S. market, improve economies of scale,
and be able to offer global contracts.
Not all European countries want to join the EMU, but even those wishing to
remain independent have adopted sensible policies to improve their economies and
finances. SWEDEN has managed to eliminate a budget deficit of over 10% of gross
domestic product by moving away from its former policy of full employment and
controlling spending. This has helped the economy maintain steady growth along
with low inflation. Here we have recently added to our position in NORDBANKEN
HOLDING, which is still partially government owned. It has a strong franchise in
personal banking in Sweden, as well as strong management, who spotted the
opportunity to merge with Merita in FINLAND to share complementary skills and to
reduce unit costs.
<PAGE>
================================================================================
Industry Diversification
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Percent of Net Assets
10/31/97 4/30/98
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Services ................................. 28.3% 27.5%
Finance .................................. 18.4 21.3
Consumer Goods ........................... 22.0 19.6
Energy ................................... 13.9 12.1
Capital Equipment ........................ 7.2 8.6
Materials ................................ 3.4 3.5
Multi-industry ........................... 2.6 2.7
Reserves ................................. 4.2 4.7
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Total 100.0% 100.0%
================================================================================
We continue to pursue investments in Eastern Europe, even though our
results have been mixed. HUNGARY'S market moved up during the period, reflecting
superior economic fundamentals. Here we added privatized telephone operator
MATAV, which performed well. In contrast, RUSSIA'S market fell about 19%,
unsettled by an uncertain political background and weaker commodity prices
(particularly in oil). However, the long-term potential for the economy and
market remains good and market valuations are currently low.
OUTLOOK
Although returns over the past six months have been exceptionally strong,
they have been supported by the economic fundamentals throughout Europe and by
dramatic changes at the corporate level. These trends still have a lot of
momentum. The greatest challenge now is for the region's labor markets to become
more efficient and mobile as companies restructure to meet their ambitious
targets. Nonetheless, we expect slightly stronger economic growth, without major
inflationary impact, to help sustain the markets. Valuations are high but, with
this encouraging background, we believe they can be maintained. Growth in
company earnings should contribute toward positive investment returns, although
perhaps not at the same levels as we saw in the past year.
Respectfully submitted,
/s/
Martin G. Wade
President
May 22, 1998
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
4/30/98
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National Westminster Bank, United Kingdom ....................... 3.4%
Royal Dutch Petroleum, Netherlands .............................. 2.9
SmithKline Beecham, United Kingdom .............................. 2.6
Novartis, Switzerland ........................................... 2.3
Wolters Kluwer, Netherlands ..................................... 2.2
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ING Groep, Netherlands .......................................... 2.2
Diageo, United Kingdom .......................................... 2.1
Glaxo Wellcome, United Kingdom .................................. 1.9
Shell Transport & Trading, United Kingdom ....................... 1.8
Carbone Lorraine, France ........................................ 1.7
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Nestle, Switzerland ............................................. 1.6
Orkla, Norway ................................................... 1.5
Reed International, United Kingdom .............................. 1.5
Pinault Printemps, France ....................................... 1.4
Kingfisher, United Kingdom ...................................... 1.4
- --------------------------------------------------------------------------------
Roche Holdings, Switzerland ..................................... 1.4
Total, France ................................................... 1.3
Telecom Italia Mobile, Italy .................................... 1.3
Astra, Sweden ................................................... 1.3
Eaux Cie Generale, France ....................................... 1.3
- --------------------------------------------------------------------------------
Unilever, Netherlands ........................................... 1.2
Kredietbank, Belgium ............................................ 1.2
Tomkins, United Kingdom ......................................... 1.1
Telecom Italia, Italy ........................................... 1.1
Credito Italiano, Italy ......................................... 1.0
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Total 42.7%
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
================================================================================
Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the fund
over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
[European Stock Fund SEC graph shown here]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
================================================================================
Since Inception
Periods Ended 4/30/98 1 Year 3 Years 5 Years Inception Date
- --------------------------------------------------------------------------------
European Stock Fund 37.60% 25.61% 21.59% 13.42% 2/28/90
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original purchase.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price European Stock Fund
====================================================================================================================================
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year 10 Months++ Year
Ended Ended Ended Ended
4/30/98 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ................... $ 19.84 $ 16.93 $ 14.35 $ 12.72 $ 11.37 $ 9.36 $ 10.09
Investment activities
Net investment income ......... 0.11 0.25 0.25 0.20 0.14 0.12 0.14
Net realized and
unrealized gain (loss) ........ 4.53 3.12 2.79 1.60 1.26 1.89 (0.70)
Total from
investment activities ......... 4.64 3.37 3.04 1.80 1.40 2.01 (0.56)
Distributions
Net investment income ......... (0.25) (0.26) (0.21) (0.12) (0.04) -- (0.17)
Net realized gain ............. (1.01) (0.20) (0.25) (0.05) (0.01) -- --
Total distributions ........... (1.26) (0.46) (0.46) (0.17) (0.05) -- (0.17)
NET ASSET VALUE
End of period ......................... $ 23.22 $ 19.84 $ 16.93 $ 14.35 $ 12.72 $ 11.37 $ 9.36
Ratios/Supplemental Data
Total return .......................... 24.63% 20.30% 21.76% 14.41% 12.35% 21.47% (5.56)%
Ratio of expenses to
average net assets .................... 1.05%+ 1.06% 1.12% 1.20% 1.25% 1.35%+ 1.48%
Ratio of net investment
income to average
net assets ............................ 1.11%+ 1.41% 1.81% 1.75% 1.19% 1.79%+ 1.23%
Portfolio turnover rate ............... 15.1% 17.5% 14.1% 17.2% 24.5% 21.3%+ 52.0%
Average commission
rate paid ............................. $ 0.0422 $ 0.0312 $ 0.0248 $- $- $- $-
Net assets, end of period
(in millions) ......................... $ 1,362 $ 984 $ 705 $ 491 $ 337 $ 266 $ 174
<FN>
+ Annualized.
++ The fund's fiscal year-end was changed to 10/31.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
Unaudited April 30, 1998
================================================================================
Portfolio of Investments
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
BELGIUM 2.2%
Common Stocks 2.2%
Dexia ............................................... 14,314 $ 1,961
Generale de Banque .................................. 12,193 7,044
Generale de Banque, VVPR Strip * .................... 723 0
Kredietbank ......................................... 28,870 16,289
UCB ................................................. 999 4,777
Total Belgium (Cost $14,961) ........................ 30,071
CZECH REPUBLIC 0.1%
Common Stocks 0.1%
Cokoladovny ......................................... 760 121
SPT Telecom * ....................................... 5,520 803
Total Czech Republic (Cost $702) .................... 924
DENMARK 0.5%
Common Stocks 0.5%
Den Danske Bank ..................................... 29,130 3,533
Tele Danmark (Class B) .............................. 15,830 1,330
Unidanmark (Class A) ................................ 28,760 2,417
Total Denmark (Cost $4,068) ......................... 7,280
FINLAND 0.7%
Common Stocks 0.7%
Nokia (Class A) ..................................... 144,940 9,713
Total Finland (Cost $3,456) ......................... 9,713
<PAGE>
FRANCE 14.2%
Common Stocks and Warrants 14.2%
AXA ................................................. 57,868 6,797
Accor ............................................... 13,430 3,662
Alcatel Alsthom ..................................... 43,728 8,111
Altran Technologies ................................. 16,632 2,653
CET ................................................. 6,960 332
Canal Plus .......................................... 10,160 1,766
Carbone Lorraine .................................... 56,880 $23,325
Carrefour ........................................... 5,820 3,335
Cie de St. Gobain ................................... 49,689 8,283
Credit Commercial de France ......................... 37,504 2,995
Danone .............................................. 26,475 6,254
Dexia France, Bearer ................................ 10,799 1,308
Dexia France, Registered 1999 ++ .................... 10,510 1,273
Dexia France, Registered 2000 ++ .................... 12,910 1,564
Eaux Cie Generale ................................... 92,864 17,272
Elf Aquitaine ....................................... 55,250 7,252
Europeenne de Casinos ............................... 13,461 1,161
Europeenne de Casinos, Warrants, 4/30/03 * .......... 13,461 103
GTM Entrepose ....................................... 22,460 1,771
LVMH ................................................ 5,178 1,066
Guilbert ............................................ 3,744 671
L'Oreal ............................................. 6,312 3,014
Lafarge ............................................. 17,120 1,618
Lafarge, New * ...................................... 1,426 131
Lapeyre ............................................. 25,770 1,959
Legrand ............................................. 13,100 3,465
Leon de Bruxelles* .................................. 2,708 286
Pathe ............................................... 12,733 2,771
Pinault Printemps ................................... 26,210 19,526
Primagaz ............................................ 1,188 103
Sanofi .............................................. 71,584 8,682
Schneider ........................................... 134,481 10,068
Societe Generale .................................... 26,262 5,470
Sodexho Alliance .................................... 50,318 9,216
Television Francaise ................................ 56,120 7,889
Total (Class B) ..................................... 150,058 17,849
Total France (Cost $129,128) ........................ 193,001
<PAGE>
GERMANY 8.1%
Common Stocks 7.5%
Allianz ............................................. 18,950 5,829
Bayer ............................................... 155,062 6,895
Bayerische Hypotheken und Wechsel Bank .............. 115,764 6,606
Bayerische Vereinsbank .............................. 87,573 $ 6,661
Bilfinger & Berger .................................. 51,360 1,732
Buderus ............................................. 3,100 1,456
Commerzbank ......................................... 57,460 2,216
Deutsche Bank ....................................... 138,445 10,654
Deutsche Telekom .................................... 241,173 6,101
Dresdner Bank ....................................... 122,094 6,606
Eurobike ............................................ 8,188 196
Gehe ................................................ 178,683 9,260
Hoechst ............................................. 65,530 2,644
Mannesmann .......................................... 8,644 6,859
Rhoen Klinikum ...................................... 6,221 650
SAP ................................................. 21,250 10,065
Siemens ............................................. 27,442 1,606
Sixt ................................................ 32,500 4,129
Veba ................................................ 131,733 8,706
Volkswagen .......................................... 4,211 3,353
102,224
Preferred Stocks 0.6%
Fresenius ........................................... 9,590 2,301
Hornbach Holdings ................................... 25,120 2,436
SAP ................................................. 6,100 3,042
7,779
Total Germany (Cost $75,751) ........................ 110,003
GREECE 0.4%
Common Stocks 0.4%
Alpha Credit Bank ................................... 3,390 358
Ergo Bank ........................................... 8,305 779
Hellenic Telecommunication .......................... 84,428 2,417
Intracom ............................................ 20,260 1,263
Total Greece (Cost $3,515) .......................... 4,817
HUNGARY 0.3%
Common Stocks 0.3%
EGIS ................................................ 8,810 459
Fotex * ............................................. 93,270 92
Magyar Olaj Es Gazipari ............................. 28,100 $ 854
Matav * ............................................. 185,805 1,085
Richter Gedeon GDS (USD) * .......................... 19,809 2,110
Total Hungary (Cost $3,128) ......................... 4,600
IRELAND 0.2%
Common Stocks 0.2%
Arnotts ............................................. 110,448 972
Irish Permanent ..................................... 118,340 1,578
Total Ireland (Cost $2,578) ......................... 2,550
<PAGE>
ISRAEL 0.0%
Common Stocks 0.0%
Agis ................................................ 38,892 265
Bank Hapoalim ....................................... 25,260 68
ECI Telecom (USD) ................................... 2,170 66
Koor Industries ..................................... 460 58
Super Sol ........................................... 72,890 229
Total Israel (Cost $811) ............................ 686
ITALY 6.8%
Common Stocks 6.8%
Assicurazioni Generali .............................. 216,880 6,526
Banca Commerciale Italiana .......................... 371,000 1,877
Banca di Roma * ..................................... 2,140,000 3,945
Credito Italiano .................................... 2,662,231 13,992
ENI ................................................. 1,792,376 12,036
Gewiss .............................................. 79,900 1,967
Gucci Group (USD) ................................... 70,044 3,261
IMI ................................................. 283,253 4,637
Industrie Natuzzi ADR (USD) ......................... 20,300 521
Istituto Nazionale delle Assicurazioni .............. 816,000 2,439
Italgas ............................................. 608,943 2,819
Mediolanum .......................................... 102,000 3,058
Rinascente .......................................... 190,000 1,904
Safilo .............................................. 2,718 93
Telecom Italia * .................................... 2,043,080 15,283
Telecom Italia Mobile ............................... 3,122,435 $17,804
Total Italy (Cost $56,103) .......................... 92,162
NETHERLANDS 13.9%
Common Stocks 13.9%
ABN Amro Holdings ................................... 255,832 6,231
Aalberts Industries ................................. 43,150 1,247
Ahold ............................................... 162,013 5,053
Ahrend .............................................. 50,380 1,746
Akzo Nobel .......................................... 16,242 3,304
ASM Lithography * ................................... 10,760 977
Atag ................................................ 4,141 287
Athlon * ............................................ 2,240 315
Baan Company * ...................................... 117,886 5,165
Baan Company (USD) * ................................ 65,020 2,885
CSM ................................................. 138,533 7,495
Draka Holdings ...................................... 2,000 87
Elsevier ............................................ 766,096 11,567
Fortis Amev ......................................... 150,575 8,810
GTI * ............................................... 8,502 318
Getronics ........................................... 19,360 857
ING Groep ........................................... 467,675 30,397
<PAGE>
Koninklijke PTT Nederland ........................... 64,097 3,313
Otra ................................................ 73,500 1,346
Philips Electronics ................................. 29,350 2,586
Polygram ............................................ 185,526 7,659
Royal Dutch Petroleum ............................... 725,266 40,031
Unilever ............................................ 234,710 16,708
Wolters Kluwer * .................................... 234,117 30,608
188,992
Preferred Stocks 0.0%
ING Groep ........................................... 33,857 166
166
Total Netherlands (Cost $113,255) ................... 189,158
NORWAY 2.7%
Common Stocks 2.7%
Bergesen (Class A) .................................. 38,320 833
Merkantildata ....................................... 64,000 $ 807
Norsk Hydro ......................................... 251,335 12,539
Orkla (Class A) ..................................... 172,024 20,394
Saga Petroleum (Class B) ............................ 64,670 1,153
Tomra Systems ....................................... 19,800 637
Total Norway (Cost $24,674) ......................... 36,363
PORTUGAL 0.6%
Common Stocks 0.6%
Jeronimo Martins .................................... 184,020 8,603
Total Portugal (Cost $4,060) ........................ 8,603
RUSSIA 0.3%
Common Stocks 0.3%
AO Mosenergo ADR (USD) .............................. 4,844 174
Irkutskenergo ADR (USD) ............................. 31,018 314
Lukoil (USD) ........................................ 16,966 281
Lukoil ADR (USD) .................................... 26,871 1,834
Rao Gazprom ADS (USD) * ............................. 11,235 207
Surgutneftegaz ADR (USD) ............................ 12,288 92
Tatneft ADS (USD) ................................... 38,905 754
Unified Energy Systems GDR (USD) * .................. 15,808 521
Total Russia (Cost $3,885) .......................... 4,177
SPAIN 4.2%
Common Stocks and Rights 4.2%
Argentaria Banca de Espana .......................... 55,801 4,653
Azkoyen ............................................. 13,750 1,882
Banco Bilbao Vizcaya ................................ 87,880 4,524
Banco Popular Espanol ............................... 63,448 5,208
Banco Santander ..................................... 234,811 12,411
Empresa Nacional de Electricidad .................... 227,436 5,525
<PAGE>
Gas Natural ......................................... 39,921 2,558
Iberdrola ........................................... 395,395 6,361
Prosegur Seguridad .................................. 111,664 1,393
Repsol .............................................. 82,199 4,507
Telefonica de Espana ................................ 203,768 $ 8,509
Telefonica de Espana, Rights, 5/7/98 * .............. 200,128 158
Total Spain (Cost $29,553) .......................... 57,689
SWEDEN 5.2%
Common Stocks 5.2%
ABB (Class A) ....................................... 352,380 5,712
Assa-Abloy (Class B) ................................ 32,172 1,122
Astra (Class B) ..................................... 885,243 17,609
Atlas Copco (Class B) ............................... 206,550 6,083
Atle ................................................ 26,928 504
Electrolux (Class B) ................................ 103,560 9,631
Esselte (Class B) ................................... 49,536 1,133
Granges ............................................. 30,544 556
Hennes and Mauritz .................................. 234,420 12,202
Nordbanken Holding .................................. 1,130,125 8,321
Sandvik (Class B) ................................... 194,990 5,617
Scribona (Class B) .................................. 47,624 609
Securitas (Class B) ................................. 33,041 1,216
Total Sweden (Cost $40,916) ......................... 70,315
SWITZERLAND 8.4%
Common Stocks 8.4%
ABB ................................................. 3,905 6,402
Adecco .............................................. 22,614 9,871
Credit Suisse Group ................................. 31,495 6,927
Disetronic Holdings ................................. 384 1,083
Nestle .............................................. 11,405 22,118
Novartis ............................................ 19,258 31,829
Roche Holdings * .................................... 1,838 18,625
SMH Neuenburg ....................................... 325 212
Schweizerischer Bankverein .......................... 24,720 8,583
Swisslog Holding .................................... 3,991 426
Union Bank of Switzerland ........................... 4,876 7,851
Valora Holdings ..................................... 1,070 280
Total Switzerland (Cost $73,400) .................... 114,207
UNITED KINGDOM 26.5%
Common Stocks 26.5%
Abbey National ...................................... 636,080 $11,948
Asda Group .......................................... 1,954,430 6,547
Ashtead Group ....................................... 714,994 3,229
BG .................................................. 436,176 2,335
Bodycote International .............................. 20,760 414
British Petroleum ................................... 457,000 7,224
<PAGE>
CRT Group ........................................... 244,171 1,785
Cable & Wireless .................................... 1,185,110 13,579
Cadbury Schweppes ................................... 899,753 13,146
Caradon ............................................. 819,223 2,672
Centrica * .......................................... 757,600 1,315
Chamberlain Phipps * ................................ 99,000 0
Compass Group ....................................... 507,000 8,756
Corporate Services Group ............................ 645,471 2,570
David S. Smith ...................................... 470,416 1,770
Devro International ................................. 251,250 2,282
Diageo .............................................. 2,438,997 29,190
Electrocomponents ................................... 479,000 4,671
Freepages Group * ................................... 318,120 192
GKN ................................................. 122,000 3,526
Glaxo Wellcome ...................................... 938,540 26,531
Hozelock Group ...................................... 69,569 370
JBA Holdings ........................................ 96,340 870
John Laing (Class A) ................................ 302,152 1,809
Kingfisher .......................................... 1,041,731 18,932
Ladbroke Group ...................................... 918,250 5,038
Mayflower ........................................... 119,000 482
National Westminster Bank ........................... 2,301,410 46,041
Northern Leisure .................................... 124,003 1,135
Pentos * ............................................ 358,333 0
Powerscreen International ........................... 117,600 364
Rank Group .......................................... 997,625 6,458
Reed International .................................. 2,270,880 20,265
Rio Tinto ........................................... 478,060 6,877
Rolls Royce ......................................... 469,761 2,192
Safeway ............................................. 1,071,000 $ 6,387
Select Appointment .................................. 52,600 737
Serco Group ......................................... 117,500 2,323
Shell Transport & Trading ........................... 3,203,000 23,882
SmithKline Beecham .................................. 2,927,200 34,935
Tesco ............................................... 906,500 8,537
Tomkins ............................................. 2,605,770 15,342
United News & Media ................................. 1,021,390 13,856
360,514
Preferred Stocks 0.0%
Regal Hotel Group, Cv. Loan Stock, 8.00%, 6/30/01 ... 166,676 304
304
Total United Kingdom (Cost $245,872) ................ 360,818
<PAGE>
SHORT TERM INVESTMENTS 3.8%
Money Market Funds 3.8%
Reserve Investment Fund, 5.65% ...................... 52,338,024 52,338
Total Short Term Investments (Cost $52,338) ......... 52,338
Total Investments in Securities
99.1% of Net Assets (Cost $882,154) ................. $1,349,475
Other Assets Less Liabilities ....................... 12,519
NET ASSETS .......................................... $1,361,994
* Non-income producing
++ Securities contain some restrictions as to public resale-total of such
securities at year-end amounts to 0.2% of net assets.
ADR American depository receipt
ADS American depository share
GDR Global depository receipt
GDS Global depository share
USD U.S. dollar
VVPR Entitles holders to a reduced rate of foreign withholding tax.
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
Unaudited April 30, 1998
================================================================================
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $882,154) ............. $1,349,475
Securities lending collateral pool .............................. 216,988
Other assets .................................................... 56,263
Total assets .................................................... 1,622,726
Liabilities
Securities lending collateral ................................... 216,988
Other liabilities ............................................... 43,744
Total liabilities ............................................... 260,732
NET ASSETS ...................................................... $1,361,994
Net Assets Consist of:
Accumulated net investment income - net of distributions ........ $ 6,123
Accumulated net realized gain/loss - net of distributions ....... 52,968
Net unrealized gain (loss) ...................................... 467,302
Paid-in-capital applicable to 58,652,440 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the corporation authorized .............. 835,601
NET ASSETS ...................................................... $1,361,994
NET ASSET VALUE PER SHARE ....................................... $ 23.22
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
Unaudited
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
4/30/98
Investment Income
Income
Dividend (net of foreign taxes of $ 1,517) ............... $ 10,198
Interest ................................................. 1,803
Total income ............................................. 12,001
Expenses
Investment management .................................... 4,575
Shareholder servicing .................................... 883
Custody and accounting ................................... 219
Prospectus and shareholder reports ....................... 74
Registration ............................................. 72
Legal and audit .......................................... 10
Directors ................................................ 4
Miscellaneous ............................................ 2
Total expenses ........................................... 5,839
Net investment income ........................................ 6,162
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ............................................... 58,540
Foreign currency transactions ............................ (1,227)
Net realized gain (loss) ................................. 57,313
Change in net unrealized gain or loss
Securities ............................................... 184,311
Other assets and liabilities
denominated in foreign currencies ........................ (56)
Change in net unrealized gain or loss .................... 184,255
Net realized and unrealized gain (loss) ...................... 241,568
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ....................................... $ 247,730
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
Unaudited
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
4/30/98 10/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income ........................... $ 6,162 $ 12,470
Net realized gain (loss) ........................ 57,313 47,603
Change in net unrealized gain or loss ........... 184,255 96,093
Increase (decrease) in net assets from operations 247,730 156,166
Distributions to shareholders
Net investment income ........................... (12,319) (10,997)
Net realized gain ............................... (49,758) (8,458)
Decrease in net assets from distributions ....... (62,077) (19,455)
Capital share transactions *
Shares sold ..................................... 389,014 538,663
Distributions reinvested ........................ 59,319 18,533
Shares redeemed ................................. (256,075) (414,711)
Increase (decrease) in net assets from capital
share transactions .............................. 192,258 142,485
Net Assets
Increase (decrease) during period ................... 377,911 279,196
Beginning of period ................................. 984,083 704,887
End of period ....................................... $ 1,361,994 $ 984,083
*Share information
Shares sold ..................................... 18,224 28,889
Distributions reinvested ........................ 3,056 1,070
Shares redeemed ................................. (12,225) (21,997)
Increase (decrease) in shares outstanding ....... 9,055 7,962
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price European Stock Fund
================================================================================
Unaudited April 30, 1998
Notes to Financial Statements
T. Rowe Price International Funds, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The European Stock Fund (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the corporation and commenced operations on February 28, 1990.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
VALUATION Equity securities are valued at the last quoted sales price at
the time the valuations are made. A security which is listed or traded on more
than one exchange is valued at the quotation on the exchange determined to be
the primary market for such security.
Debt securities are generally traded in the over-the-counter market and
are valued at a price deemed best to reflect fair value as quoted by dealers who
make markets in these securities or by an independent pricing service.
Investments in open-end mutual funds are valued at the closing net asset
value per share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
CURRENCY TRANSLATION Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
<PAGE>
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the
following practices to manage exposure to certain risks or enhance performance.
The investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
SECURITIES LENDING The fund lends its securities to approved brokers to
earn additional income and receives cash and U.S. Treasury securities as
collateral against the loans. Cash collateral received is invested in a money
market pooled account by the fund's lending agent. Collateral is maintained over
the life of the loan in an amount not less than 100% of the value of loaned
securities. Although risk is mitigated by the collateral, the fund could
experience a delay in recovering its securities and a possible loss of income or
value if the borrower fails to return them. At April 30, 1998, the value of
loaned securities was $223,142,000; aggregate collateral consisted of
$216,988,000 in the securities lending collateral pool and U.S. Treasury
securities valued at $13,905,000.
OTHER Purchases and sales of portfolio securities, other than short-term
securities, aggregated $271,742,000 and $162,521,000, respectively, for the six
months ended April 30, 1998.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends
to continue to qualify as a regulated investment company and distribute all of
its taxable income.
At April 30, 1998, the aggregate cost of investments for federal income
tax and financial reporting purposes was $882,154,000, and net unrealized gain
aggregated $467,321,000, of which $474,245,000 related to appreciated
investments and $6,924,000 to depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the
manager), which is owned by T. Rowe Price Associates, Inc. (Price Associates),
Robert Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a
joint venture agreement.
<PAGE>
The investment management agreement between the fund and the manager
provides for an annual investment management fee, of which $908,000 was payable
at April 30, 1998. The fee is computed daily and paid monthly, and consists of
an individual fund fee equal to 0.50% of average daily net assets and a group
fee. The group fee is based on the combined assets of certain mutual funds
sponsored by the manager or Price Associates (the group). The group fee rate
ranges from 0.48% for the first $1 billion of assets to 0.30% for assets in
excess of $80 billion. At April 30, 1998, and for the six months then ended, the
effective annual group fee rate was 0.32%. The fund pays a pro-rata share of the
group fee based on the ratio of its net assets to those of the group.
In addition, the fund has entered into agreements with Price Associates
and two wholly owned subsidiaries of Price Associates, pursuant to which the
fund receives certain other services. Price Associates computes the daily share
price and maintains the financial records of the fund. T. Rowe Price Services,
Inc. (TRPS) is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price Retirement
Plan Services, Inc., provides subaccounting and recordkeeping services for
certain retirement accounts invested in the fund. The fund incurred expenses
pursuant to these related party agreements totaling approximately $712,000 for
the six months ended April 30, 1998, of which $127,000 was payable at
period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual
funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum)
may invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum International Fund
held approximately 1.0% of the outstanding shares of the European Stock Fund at
April 30, 1998. For the six months then ended, the fund was allocated $44,000 of
Spectrum expenses, $8,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended April 30, 1998, totaled
$1,503,000 and are reflected as interest income in the accompanying Statement of
Operations.
During the six months ended April 30, 1998, the fund, in the ordinary
course of business, placed security purchase and sale orders aggregating
$29,421,000 with certain affiliates of the manager and paid commissions of
$61,000 related thereto.
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service
Center 1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price European Stock Fund.
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
T. Rowe Price Investment Services, Inc., Distributor. F79-051 4/30/98
