Annual Report
Global
Stock Fund
October 31, 1998
T. Rowe Price
Report Highlights
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Global Stock Fund
o Global stocks were strong through July, but problems in Russia led to a
downturn in most stock markets before they rallied near the end of the
period.
o The fund's return was a negative 4.56% for the six months ended October
31 but a positive 12.89% for the 12-month period, ahead of the Lipper
peer group average but behind the MSCI index.
o During the past six months, the fund's superior returns against the
Lipper average were due to positions in quality growth stocks that held
up relatively well during the correction.
o More than 40% of fund assets were invested in the U.S., just under 40%
in Europe, 9% in Japan, and the balance in Latin America, other Asian
markets, and cash reserves.
o We believe the fund's geographical allocation and emphasis on
reasonably priced growth stocks will provide attractive returns over
time.
Fellow Shareholders
The fiscal year ended October 31, 1998, comprised two quite separate parts. In
the first, world stock markets recovered well from the Asian crisis of late
1997, and by July many of them had reached new highs. From this point on,
investor confidence was again challenged by problems in emerging markets, but
this time the culprit was Russia. The collapse of the ruble, together with
Russia's de facto default on its government bonds, precipitated a severe
correction in both established and less developed global markets. Despite these
traumas, investor confidence did not disappear entirely, and recent months
witnessed a good recovery in foreign and U.S. markets.
Performance Comparison
Periods Ended 10/31/98 6 Months 12 Months
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Global Stock Fund -4.56% 12.89%
MSCI World Index -2.85 15.69
Lipper Global Funds Average -9.83 5.31
Fund results for the fiscal year were significantly better than the Lipper
Global Funds Average. During the past 12 months, the fund's return was behind
that of the Morgan Stanley Capital International World Index. This shortfall was
mainly due to the weakness of Latin America where the fund held small positions
that are not part of the index. Stock selection, which was biased toward growth
companies rather than cyclical stocks, was also adverse. For the six months
ended October 31, the fund posted a decline moderately greater than the index
but significantly smaller than the Lipper average, and our bias toward quality
growth shares helped us versus Lipper as these stocks held up relatively well
during last summer's steep correction.
For most of the year, Europe and the U.S. provided the safest markets for the
global investor as their individual economies continued to grow. European
currencies also strengthened against the U.S. dollar, providing a boost for U.S.
investors in those markets. Although equities endured an uncomfortable period in
late summer, the advent of Economic and Monetary Union (EMU) in January 1999 is
an important milestone in the history of European integration and presents
opportunities for both corporations and investors. In contrast, Japan's economy
continued to be disappointing and a recession seems to have widened its grip.
Concern focused on the inability of the authorities to confront the country's
banking crisis, and a stream of disappointing corporate earnings also damaged
sentiment. Elsewhere in Asia, the erstwhile tiger economies turned down
following the financial collapse a year ago, but authorities in Hong Kong were
at least able to fight off the speculators and maintain the currency peg to the
U.S. dollar.
Preparing For The Year 2000
The Year 2000 draws closer every day, and it holds special meaning beyond the
arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all new
systems process and store four-digit years. We plan to complete all
reprogramming efforts for the major application systems, including business
applications required to service our customers and processing infrastructure
necessary to ensure the integrity of customer data and investments, by December
31, 1998, leaving a full 12 months for system testing. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. Our goal is to
identify any noncompliant files so that we can implement alternative solutions.
In addition, we are scheduling tests for critical vendors and companies that
claim Year 2000 compliance to ensure that time-related data and calculations
function properly as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition into
the next millennium. We are assessing all systems providing products or services
to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we are taking steps to modify them where necessary for the
Year 2000. Our plan provides time to develop solutions for all noncompliant
systems and data files from customers or vendors.
The Securities Industry Association (SIA) is coordinating Year 2000 testing to
assure that securities markets, clearing corporations, depositories, and third
party service providers can send, receive, and process files and transactions
accurately. In late July 1998, the SIA completed a beta test of Year 2000
readiness. The test was considered successful in terms of transactions completed
and will serve as the basis for the SIA's industry-wide approach. During October
1998, T. Rowe Price completed its beta test of Year 2000 readiness with the SIA
and is ready for the industry-wide test that is scheduled for March and April
1999.
For a more detailed discussion of our Year 2000 effort, as well as continuing
updates on our progress, please check our Web site (www.troweprice.com).
Market Performance
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Local
Currency
Six Months Local vs. U.S.
Ended 10/31/98 Currency U.S. Dollar Dollars
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France -8.17% 8.29% -0.55%
Germany -8.44 8.35 -0.80
Hong Kong 9.60 -- 9.60
Italy -11.13 8.16 -3.88
Japan -15.99 13.39 -4.74
Mexico -17.98 -15.70 -30.85
Netherlands -15.78 8.18 -8.89
Norway -27.55 1.16 -26.70
Switzerland -10.68 10.76 -1.07
United Kingdom -7.76 0.16 -7.61
United States 0.11 -- 0.11
Source: FAME Information Services, Inc.; based on MSCI indices.
In Latin America, there was optimism during the summer that these economies
would avoid the contagion that started in the Pacific and reemerged with
Russia's financial collapse in July. After all, Latin America had courageously
pursued a path of reform and it appeared as though stock markets there deserved
more sympathetic treatment. However, sympathy is a sentiment in short supply
when fear is in the saddle, and Latin American markets were eventually dragged
into the turmoil. It looks as though Brazil, the key economy in the region, has
so far survived the worst of the crisis, and the recently announced $41 billion
support package sponsored by the International Monetary Fund (IMF) will at least
buy the country more time.
INVESTMENT REVIEW
United States
With its sharp rises and dramatic declines, the U.S. stock market resembled a
roller coaster during the last six months before ending the period pretty much
where it started. The relatively strong domestic economy coupled with low
interest rates led to decent performance during the first three months. Then, in
the middle of July, troubles in the Far East rippled through Russia and over to
Latin America. In August, as Brazil began to teeter and Japan continued to
struggle, the U.S. market crumbled. Finally, Japan began to address some of its
longstanding economic problems, and the IMF announced a support package for
Brazil. Domestic stocks recovered in September and October, and while the U.S.
market was volatile, it nonetheless managed to outperform most other equities
markets over the past six months.
Geographic Diversification
Latin Other and
United States Europe Japan Far East America Reserves
43 39 9 3 2 4
Based on net assets as of 10/31/98.
We believe a rebound in corporate earnings could be delayed because a recovery
in the Far East might take longer than anticipated, and we expect both U.S and
European economic growth to slow during the next six months. Nevertheless, large
well-managed growth companies such as GE, Freddie Mac, Merck, and Tyco
International should bear up well during any slowdown. Their strong managements
and systems allow them to adjust quickly as the economic landscape changes.
During the last six months, portfolio results were helped by strong performance
from pharmaceutical giants Biogen and Warner-Lambert, technology stalwarts
Microsoft and EMC, and steady earners Philip Morris and Wal-Mart. On the
negative side of the ledger, earnings shortfalls from Parametric Technology and
HealthSouth, two companies that had never disappointed since they went public,
hurt returns. We added to our Parametric holdings as the shares overreacted to
the news, in our view. Several mid-cap technology stocks also impaired
performance as economic concerns led to declining price/earnings multiples. In
most instances, we added to these holdings as well. We initiated several key
positions during the period, such as Dell Computer and America Online, both of
which performed exceptionally well afterward. Other new purchases included
Coca-Cola, Automatic Data Processing, and Bank of New York, which we added at
what appear to be reasonable valuations.
Europe
In May 1998, a significant event occurred along the road to EMU. This was the
point at which the European Monetary Institute (EMI) would decide which
candidate countries had attained the economic convergence criteria of the
Maastricht Treaty and would adopt the euro as their currency on January 1, 1999.
At the time it was negotiated, the Maastricht Treaty laid down tough benchmarks
for public finance, inflation, and interest rates. Skeptics doubted whether many
countries would achieve these benchmarks, and it was a remarkable accomplishment
that 11 of the 15 members of the European Union made the grade. Only Greece
failed to meet the Maastricht criteria while the U.K., Sweden, and Denmark
decided for different reasons not to join EMU in the first round. The EMI has
now converted itself into the European Central Bank (ECB), which beginning in
January 1999 will have sole responsibility for monetary policy over the 11
countries joining EMU-the so-called Euro Zone. Until the euro appears as a
physical currency in 2002, the new ECB will ensure that all member currencies
trade at fixed exchange rates with one another and with the euro. National notes
and coins will be steadily withdrawn after the euro begins to circulate, and by
mid-2002 it will be the only currency of the Euro Zone.
The advent of a single currency will bring greater transparency to the single
market and real cost savings for business. For some time now there has been much
merger and acquisition activity as corporations positioned themselves for this
change. This was one factor fueling strong markets in Europe, but pension fund
reform and the prospect of converting savers into investors have also helped
sentiment. The arrival of the euro will not by itself have any impact on your
fund's portfolio, but the longer-term benefits of EMU remain compelling and
support a strategy where just over 70% of the fund's assets are in EU member
states and 54% in countries going for full monetary union.
The U.K., where we committed nearly 10% of portfolio assets, has the largest
economy of the four EU member states not adopting the euro in January 1999. At
the time of the original Maastricht negotiations, the U.K. negotiated an opt-out
clause. With the U.K. not joining the rest of Europe, Mr. Blair and his
government are happy to continue with this wait-and-see policy. Hampered by
strong sterling and relatively high interest rates, the U.K. manufacturing
sector has been under pressure for some time, and signs of a slowdown recently
appeared in the service sector too. Not surprisingly, the Bank of England
loosened monetary policy with several interest rate cuts, but because most of
Britain's trade is with Continental Europe, the authorities will want to ensure
that sterling closely shadows the euro.
The U.K. stock market behaved reasonably well during recent turbulence, with
pharmaceutical giants such as Glaxo Wellcome and SmithKline Beecham exhibiting
their defensive qualities. As on the Continent, companies have been positioning
themselves for an ever more integrated Europe. A good example is Kingfisher,
which revealed plans to swap its home improvement business for a stake in
Castorama, the number one do-it-yourself retailer in France. BP surprised the
market with its merger with Amoco in the U.S., and we recently added to
Unilever, the multinational consumer goods company that continues to increase
profits by restructuring, cutting costs, and improving asset utilization.
Turning to the Continent, the most important news was Germany's election of
Gerhard Schroeder as the new Chancellor, marking a political shift to the
center-left. The core Euro Zone economies of Germany, France, and Italy are each
showing similar characteristics of sluggish growth and stubbornly high
unemployment. Their left-of-center governments are putting pressure on the ECB
to adopt more stimulatory policies, but with considerable independence built
into its constitution, the ECB's priority will be controlling inflation. All
Continental markets fell sharply in August and early September, but declines
were softened for U.S. investors by the strength of local currencies against the
dollar. Our core positions such as business publishers Wolters Kluwer and Reed
Elsevier continued to show steady profit growth, and their stocks held up well.
In France the drug company Sanofi and retailer Pinault-Printemps announced
better-than-expected results, as did the pharmaceutical wholesaler and retailer
Gehe, one of our largest positions in Germany.
Although the portfolio is slightly underweighted in the financial sector, many
leading stocks suffered during the recent correction. In the Netherlands, ING
Groep and leading Swiss banks Credit Suisse Group and UBS fell sharply when they
announced higher-than-expected exposure to Russia and other emerging markets.
Far East
Japan's economy moved into recession with the announcement that GDP for the
quarter ended September 30 contracted at a rate of 0.8% compared with the first
fiscal quarter. Policymakers face two major issues. First, since private
consumption is such a large component of GDP, they badly need to stimulate
consumer spending. Traditionally, Japanese corporations have looked after their
employees from cradle to grave, but these cherished values have been challenged
with rising unemployment and widespread discussion on whether Japan can really
provide for its growing number of retirees. Because of such uncertainties,
consumer spending remains depressed despite historically low interest rates.
The second issue is the country's banking crisis, which came to a head a year
ago but has still not been confronted fully by the authorities. Many of Japan's
banks are technically insolvent even though the full extent of their bad debts
has not been fully disclosed. The government should probably close the weak
banks and recapitalize the better ones, but continuing inaction has contributed
to poor sentiment in the stock market. The Tankan survey of business confidence
for September revealed that sentiment was worse than expected. This survey is a
key leading indicator for future growth and capital expenditure, and it is
worrisome that it showed no sign of improvement.
There has been widespread dissatisfaction in Japan with the government's
performance, and the disastrous showing of the ruling Liberal Democratic Party
(LDP) in July's election was no surprise. Following this setback Prime Minister
Hashimoto resigned, but it looked like business as usual when Mr. Obuchi, the
most conservative of the three leading candidates, became LDP leader and Prime
Minister. It remains to be seen whether he will implement the radical policies
Japan needs. Perhaps the biggest surprise came from the currency market when the
yen recovered sharply against the U.S. dollar in October. Many hedge fund
operators had been borrowing yen to buy higher-yielding U.S. Treasuries. As the
yen weakened, this strategy provided a currency gain, but as the yen recovered
traders scrambled to cover their open positions, which accelerated its upward
momentum.
The Japanese market was weak during the past six months, but the strength of the
yen moderated these declines for U.S. investors, as can be seen in the table on
page 3. We biased our holdings toward international companies operating in the
technology,consumer electronics, and business equipment fields such as Sony,
Canon, and Matsushita. These stocks performed relatively well, particularly
during periods when the yen was weak. Recently they have started to look
somewhat overvalued, and since many of them are exporters their prospects will
be hampered if the yen improves further.
Our positions in the rest of Asia were very small and were dominated by the
stock markets of Australia and Hong Kong. The Australian economy has shown
moderate growth, a considerable achievement given the downturn in Asian
countries that are now Australia's major trading partners. In the recent general
election, Mr. Howard's liberal coalition just managed to retain power, which was
well received by the stock market. The economy will benefit from gradual labor
reform and further privatization of government assets. Our positions in
Australia included media conglomerate News Corporation, banking stocks such as
Westpac and National Australian Bank, and several utilities. Given the continued
deflation in world commodity prices, we have avoided the natural resource
sector.
Industry Diversification
Percent of Net Assets
4/30/98 10/31/98
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Services 27.2% 30.8%
Consumer Goods 21.3 21.9
Finance 19.6 18.4
Capital Equipment 13.7 12.9
Energy 8.4 7.4
Materials 3.0 2.4
Multi-industry 2.3 1.7
All Other -- 0.2
Reserves 4.5 4.3
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Total 100.0% 100.0%
In Hong Kong, sentiment was dominated by a fierce battle to maintain the
exchange rate peg between the Hong Kong and U.S. dollars in the face of intense
speculation to break it. As the attack on the Hong Kong currency mounted, the
first tactic was a dramatic increase in interest rates that only served to
provide speculators with an opportunity to sell stocks short in a falling
market. Hong Kong's Financial Secretary broadened his defense by using Hong
Kong's foreign exchange reserves to support the stock market-a courageous
strategy considering the free market principles that have made an important
contribution to Hong Kong's prosperity. Happily the strategy worked, the
speculators retreated, and the currency peg held, but the price paid was
significant damage to the economy itself, particularly the real estate market
that is so sensitive to interest rates. Although we expect the broad economic
picture in Hong Kong to remain difficult, its stock market houses some of the
region's strongest and best-managed companies. Trading, transport, and real
estate conglomerate Hutchison Whampoa remained a core holding and performed well
during the past six months. We also had positions in infrastructure plays such
as HK Telecom and Huaneng Power, which operates in mainland China.
At the end of October, your portfolio had negligible positions in other Pacific
markets where the economies will take some time to recover from the financial
collapse that began a year ago. Having said this, the stock markets in many of
these emerging economies have recently stabilized following their disastrous
falls during the early summer. We are not yet tempted to return to these markets
but continue to monitor the situation carefully.
Latin America
The stock markets of Latin America were weak for most of the year and have
continued to show extreme volatility. The latest crisis was triggered by the
Russian debt default in August that unleashed another wave of selling in
emerging markets throughout the world. Brazil suffered huge outflows of foreign
exchange reserves in both August and September, and the exchange rate of the
real against the U.S. dollar was maintained only by a massive increase in
interest rates. By the middle of September, a vicious circle of higher interest
rates, failing confidence, and increased capital outflows threatened to spiral
into a major market rout, but an indication that there would be a $41 billion
support package sponsored by the IMF helped stabilize the capital markets.
President Cardoso seems to have persuaded the electorate that he has sufficient
experience and skill to deal with the financial crisis and was reelected with a
comfortable majority. However, the major weakness of the Brazilian economy is
the persistently high fiscal deficit. Now that Brazil's financial crisis has
receded and elections are over, the markets will be looking for significant
action on the deficit rather than statements of good intent.
In contrast with brazil, argentina demonstrated its commitment to fiscal
discipline by cutting spending by more than $1.3 billion to achieve the fiscal
deficit target of 1% of GDP agreed to with the IMF.
In contrast with Brazil, Argentina demonstrated its commitment to fiscal
discipline by cutting spending by more than $1.3 billion to achieve the fiscal
deficit target of 1% of GDP agreed to with the IMF. Argentina was one of the
region's better-performing stock markets over the six months, and increasing
evidence of its economic self-discipline was a contributing factor. In Mexico,
the economy held up remarkably well despite rising interest rates and a weak
peso. Its stock market was also battered during the emerging market crisis, but
its closer ties to the U.S. will afford some protection.
Key holdings include telecommunications giants Telebras in Brazil and Telmex in
Mexico. Both companies have great potential as rising prosperity increases fixed
line telephone penetration in these highly populated countries and powers the
growth of cellular technology.
INVESTMENT POLICY AND OUTLOOK
The fiscal year under review was frustrating for international investors. It
started well, and by midsummer many markets reached new highs, but the
turbulence of August and early September was very disappointing. Despite the
soundness of the U.S. economy, even Wall Street was caught up in this worldwide
correction.
In europe, the euro will arrive in a few weeks, and 11 countries will make a
major commitment to economic integration when they adopt full monetary union.
Now that stock markets have settled down, it is worth taking a cold hard look at
how world economies might develop from here. We expect economic growth to slow
somewhat in the U.S. during 1999. However, falling interest rates and low
inflation should provide a good backdrop for equities, although we believe
returns will moderate from the sharp gains of recent years. In Europe, the euro
will arrive in a few weeks, and 11 countries will make a major commitment to
economic integration when they adopt full monetary union. This by itself will be
a significant achievement, but the price has been lower economic growth than
would otherwise have been the case. The prize for their endeavors, however, will
be a single currency market where the potential is underpinned by sound public
finance, lower inflation, and a current account surplus. This will provide a
strong platform for future growth and is in sharp contrast to economies of the
Pacific that are still struggling. Also, many observers now feel the euro will
be a strong currency against the dollar, and if more international trade is
denominated in the euro, central banks throughout the world will increasingly
regard it as a key currency for their foreign exchange reserves. Companies in
which we invest are already exploiting the opportunities of closer integration
in Europe, and management increasingly recognizes the importance of shareholder
value. For all these reasons, it makes sense that Europe should play a strong
role in our global portfolio.
It is perhaps more difficult to make a compelling case for other overseas
markets, but there is still plenty of opportunity. Despite continuing problems
in Japan, its stock market is too large to ignore entirely and is showing signs
of stabilizing after a long decline. As we mentioned before, Tokyo remains the
home of world-class corporations, many of which form the heart of our Japanese
portfolio. These holdings have served us well, and it is time to begin
considering some more domestically oriented blue chips. However, although we can
find Japanese companies we like, there is still too much economic uncertainty
for us to make a major push back into this market.
Turning to emerging markets, the economic turmoil that overwhelmed the smaller
Asian economies a year ago has yet to work itself out, and our positions in Asia
outside of Japan remain very low. In contrast with some of the smaller Asian
economies, governments of key Latin American countries are committed to reform
and have shown admirable economic discipline during difficult times. We believe
they are well positioned for the future and any global portfolio, including
ours, should have a commitment to this part of the world.
Thus, the fund's geographical allocation seems appropriate, and our commitment
to growth companies priced at reasonable valuations will be helpful, in our
view, if we encounter a period of slower economic growth. We believe this
strategy makes sense for the current environment.
Respectfully submitted,
Martin G. Wade
President
November 23, 1998
T. Rowe Price Global Stock Fund
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Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
10/31/98
- --------------------------------------------------------------------------------
National Westminster Bank, United Kingdom 1.4%
SmithKline Beecham, United Kingdom 1.3
Wolters Kluwer, Netherlands 1.2
Nestle, Switzerland 1.2
Freddie Mac, United States 1.1
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MCI WorldCom, United States 1.0
Vivendi, France 0.9
Glaxo Wellcome, United Kingdom 0.9
GE, United States 0.9
Novartis, Switzerland 0.9
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Citigroup, United States 0.8
Royal Dutch Petroleum, Netherlands 0.8
Tyco International, United States 0.8
Diageo, United Kingdom 0.8
Kingfisher, United Kingdom 0.8
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Safeway, United Kingdom and United States 0.8
Microsoft, United States 0.7
Norwest, United States 0.7
Mobil, United States 0.7
ING Groep, Netherlands 0.7
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Philip Morris, United States 0.7
Shell Transport & Trading, United Kingdom 0.7
Roche Holdings, Switzerland 0.7
Warner-Lambert, United States 0.6
Danaher, United States 0.6
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Total 21.7%
T. Rowe Price Global Stock Fund
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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.
GLOBAL STOCK FUND
- --------------------------------------------------------------------------------
As of 10/31/98
GLS-area
MSCI World Lipper Global Global Stock
Index Funds Average Fund
12/31/95 10,000 10,000 10,000
10/96 10,967 11,136 11,350
10/97 12,858 13,061 13,277
10/98 14,875 13,703 14,989
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 10/31/98 1 Year Inception Date
- --------------------------------------------------------------------------------
Global Stock Fund 12.89% 15.32% 12/29/95
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
T. Rowe Price Global Stock Fund
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period
- --------------------------------------------------------------------------------
Year 12/29/95
Ended Through
10/31/98 10/31/97 10/31/96
NET ASSET VALUE
Beginning of period 13.01 11.35 10.00
Investment activities
Net investment income 0.09* 0.06* 0.05*
Net realized and
unrealized gain (loss) 1.52 1.84 1.30
Total from
investment activities 1.61 1.90 1.35
Distributions
Net investment income (0.06) (0.06) --
Net realized gain (0.53) (0.18) --
Total distributions (0.59) (0.24) --
NET ASSET VALUE
End of period 14.03 13.01 11.35
----------------------------------
Ratios/Supplemental Data
Total return# 12.89%* 16.98%* 13.50%*
Ratio of expenses to
average net assets 1.20%* 1.30%* 1.30%*!
Ratio of net investment
income to average
net assets 0.76%* 0.68%* 0.88%*!
Portfolio turnover rate 47.1% 41.8% 50.0%!
Net assets, end of period
(in thousands) 44,116 32,020 14,916
# Total return reflects the rate that an investor would have earned on
an investment in the fund during each period, assuming reinvestment of all
distributions.
* Excludes expenses in excess of a 1.30% voluntary expense limitation
in effect through 10/31/97, and a 1.20% voluntatry expense limitation in
effect through 10/31/99.
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Global Stock Fund
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October 31, 1998
Statement of Net Assets
Shares/Par Value
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In thousands
ARGENTINA 0.4%
Common Stocks 0.4%
Banco de Galicia Buenos Aires
(Class B) ADR (USD) 774 13
Banco Frances del Rio de la Plata
(Class B) ADR (USD) 675 14
Perez Companc (Class B) 4,934 25
Telefonica de Argentina (Class B)
ADR (USD) 1,380 46
YPF Sociedad Anonima (Class D)
ADR (USD) 2,878 83
Total Argentina (Cost $196) 181
AUSTRALIA 1.4%
Common Stocks 1.3%
AMP Limited * 2,000 24
Australian Gas Light 5,237 38
Brambles Industries 2,000 44
Broken Hill Proprietary 3,474 30
Colonial Limited 9,944 33
Commonwealth Bank of Australia 3,836 48
Fosters Brewing Group 6,000 15
Goodman Fielder 19,000 25
John Fairfax Holdings 12,000 21
Lend Lease 1,633 36
National Australia Bank 2,135 28
News Corporation 7,919 54
Publishing & Broadcasting 4,400 17
Tabcorp Holdings 4,500 30
Telstra, Installment Receipts,
11/17/98 17,375 69
Westpac Bank 6,334 38
Woodside Petroleum 4,000 21
571
Preferred Stocks 0.1%
News Corporation 6,153 37
Star City Holdings 22,000 15
52
Total Australia (Cost $591) 623
BELGIUM 1.0%
Common Stocks 1.0%
Dexia 139 22
Fortis 406 117
KBC Bancassurance Holding 3,250 227
Societe Europeenne des Satellites
(Class A) 100 17
UCB 9 52
Total Belgium (Cost $277) 435
BRAZIL 1.1%
Common Stocks 0.1%
Pao de Acucar ADR (USD) 1,000 16
Unibanco GDR (USD) 693 12
28
Preferred Stocks 1.0%
Banco Bradesco 3,059,426 18
Banco Itau 31,000 15
Brahma 32,654 15
Cia Cimento Portland Itau 28,000 4
Cia Energetica Minas Gerais 613,108 12
Cia Energetica Minas Gerais ADR
(144a) (USD) 183 4
Cia Energetica Minas Gerais ADR
Sponsored, Nonvoting (USD) 479 9
Encorpar 23,000 0
Pao de Acucar GDR (USD) 190 3
Petrol Brasileiros 376,720 47
Telebras ADR (USD) 3,555 270
Telecomunicacoes de Sao Paulo 236,503 40
Telecomunicacoes de Sao Paulo Celular
(Class B) * 225,887 11
Unibanco, Units
(Each unit consists of 1
preferred share and
1 Unibanco Holdings (Class B) share) 351 0
448
Total Brazil (Cost $686) 476
CANADA 0.5%
Common Stocks 0.5%
Alcan Aluminum 1,080 27
Fairfax Financial * 300 90
Royal Bank of Canada 430 20
Royal Bank of Canada (USD) 2,200 101
Total Canada (Cost $228) 238
CHILE 0.0%
Common Stocks 0.0%
Chilectra ADR (144a) (USD) 584 11
Compania Cervecerias Unidas ADR (USD) 200 4
Total Chile (Cost $19) 15
CHINA 0.1%
Common Stocks 0.1%
Huaneng Power International
ADR (USD) * 3,100 43
Total China (Cost $57) 43
CZECH REPUBLIC 0.0%
Common Stocks 0.0%
SPT Telecom 400 6
Total Czech Republic (Cost $5) 6
DENMARK 0.1%
Common Stocks 0.1%
Den Danske Bank 260 35
Tele Danmark 80 9
Unidanmark (Class A) 280 21
Total Denmark (Cost $39) 65
FINLAND 0.3%
Common Stocks 0.3%
Nokia (Class A) 1,550 141
Total Finland (Cost $60) 141
FRANCE 5.6%
Common Stocks 5.6%
AXA 1,503 170
Accor 126 26
Alcatel Alsthom 875 97
Canal Plus 90 22
Carrefour 152 101
Cie de St. Gobain 602 89
Credit Commercial de France 887 62
Danone 350 93
Dexia France, Bearer 110 16
Elf Aquitaine 752 87
GTM Entrepose 210 23
L'Oreal 94 54
Lafarge 357 37
Lapeyre 404 36
Legrand 150 38
Pathe 117 22
Pinault Printemps Redoute 1,355 227
Primagaz 130 12
Sanofi 1,235 193
Schneider 1,705 101
Societe Generale 473 63
Sodexho Alliance 920 179
Television Francaise 533 88
Total (Class B) 2,013 232
Vivendi 1,787 408
Total France (Cost $1,923) 2,476
GERMANY 4.1%
Common Stocks and Warrants 3.8%
Allianz 420 144
Bayer 1,972 80
Bayerische Vereinsbank 2,867 228
Buderus 30 12
Deutsche Bank 1,938 121
Deutsche Telekom 3,486 95
Dresdner Bank 2,827 110
Dresdner Bank, Warrants,
4/30/02 * 1,201 17
Gehe 3,370 253
Hoechst 610 25
Hornbach Baumarkt 120 5
Mannesmann 2,030 200
Rhoen Klinikum 317 32
SAP 370 155
Siemens 703 42
Veba 2,500 140
Volkswagen 610 46
1,705
Preferred Stocks 0.3%
Fielmann 260 12
Fresenius 100 17
Hornbach Holdings 230 17
SAP 161 79
125
Total Germany (Cost $1,636) 1,830
HONG KONG 0.8%
Common Stocks 0.8%
CLP Holdings 8,000 45
Cheung Kong Holdings 2,000 14
Hang Seng Bank 3,000 26
Henderson Land Development 9,000 44
Hong Kong Telecommunications 19,600 39
Hutchison Whampoa 21,000 151
Sun Hung Kai Properties 2,000 14
Total Hong Kong (Cost $310) 333
IRELAND 0.0%
Common Stocks 0.0%
CBT Group ADR (USD) * 844 10
Total Ireland (Cost $38) 10
ITALY 2.8%
Common Stocks 2.8%
Assicurazioni Generali 2,480 89
Banca Commerciale Italiana 5,000 31
Banca di Roma 48,000 84
Credito Italiano 27,825 149
ENI 26,609 158
Gucci Group (USD) 635 24
IMI 7,000 108
Industrie Natuzzi ADR (USD) 1,000 18
Istituto Nazionale delle
Assicurazioni 17,000 47
Italgas 4,600 21
Mediolanum 2,846 71
Rinascente 2,000 19
Telecom Italia 36,440 263
Telecom Italia Mobile 30,000 174
Total Italy (Cost $1,027) 1,256
JAPAN 8.6%
Common Stocks 8.6%
Advantest 300 19
Alps Electric 2,000 28
Amada 5,000 30
Canon 10,000 189
Citizen Watch 4,000 22
DDI 10 29
Daifuku 1,000 4
Daiichi Pharmaceutical 4,000 67
DaiNippon Screen Manufacturing 4,000 9
Daiwa House 5,000 56
Denso 10,000 188
East Japan Railway 19 113
Fanuc 1,200 36
Fujitsu 2,000 21
Hitachi 11,000 56
Honda Motor 1,000 30
Inax 3,000 15
Ito-Yokado 3,000 175
Kao 5,000 101
Kokuyo 3,000 40
Komatsu 5,000 27
Komori 2,000 37
Kuraray 7,000 75
Kyocera 3,000 133
Makita 4,000 42
Marui 7,000 122
Matsushita Electric Industrial 11,000 161
Mitsubishi 7,000 37
Mitsubishi Heavy Industries 32,000 124
Mitsui Fudosan 14,000 93
Murata Manufacturing 3,000 101
NEC 17,000 126
NTT Mobile Communication
Network 1 36
Nippon Telegraph & Telephone 9 70
Nomura Securities 10,000 76
Pioneer Electronic 2,000 33
Sangetsu 1,000 12
Sankyo 8,000 180
Sekisui Chemical 8,000 44
Sekisui House 5,000 50
Seven-Eleven Japan 1,000 76
Shin-Etsu Chemical 6,000 119
Shiseido 3,000 33
Sony 2,600 165
Sumitomo 11,000 53
Sumitomo Electric Industries 15,000 166
Sumitomo Forestry 3,000 20
TDK 2,000 132
Tokio Marine & Fire Insurance 3,000 34
Tokyo Electronics 2,000 65
Tokyo Steel Manufacturing 2,300 10
Toppan Printing 5,000 51
Uny 3,000 49
Total Japan (Cost $4,725) 3,780
MEXICO 0.8%
Common Stocks 0.8%
Cemex, Participating Certificates
(Represents 1 Class A share) 90 0
Cemex (Class B) 3,000 8
Cemex ADS (Represents 2 Participating
Certificates) (USD) 5,000 23
Cifra (Class V) ADR (USD) * 250 3
Femsa UBD (Represents 1 Class B,
2 Series D (Class B) and
2 Series D (Class L) shares) * 8,460 22
Gruma (Class B) 4,906 12
Gruma (Class B) ADS (144a) (USD) * 1,045 10
Grupo Industrial Maseca (Class B) 12,000 10
Grupo Modelo (Class C) 12,000 25
Grupo Televisa GDR (USD) * 723 20
Kimberly-Clark de Mexico (Class A) 7,721 22
Panamerican Beverages
(Class A) (USD) 1,670 34
Telefonos de Mexico
(Class L) ADR (USD) 2,680 142
TV Azteca ADR (USD) 1,100 10
Total Mexico (Cost $381) 341
NETHERLANDS 6.1%
Common Stocks 6.1%
ABN Amro 5,566 104
ASM Lithography 2,640 67
Ahold 5,071 168
Akzo Nobel 520 20
CSM 2,288 113
Elsevier 13,217 186
Fortis Amev 2,760 179
ING Groep 6,560 317
Koninklijke KPN 588 23
Numico 2,110 83
Philips Electronics 1,220 65
Polygram 2,225 131
Royal Dutch Petroleum 7,560 365
STMicroelectronics (FRF) * 730 45
TNT Post Groep 588 16
Unilever 3,434 255
Wolters Kluwer 2,788 540
Total Netherlands (Cost $2,371) 2,677
NEW ZEALAND 0.1%
Common Stocks 0.1%
Telecom Corporation of New Zealand 5,800 24
Telecom Corporation of New Zealand
Installment Receipts, 3/31/99 4,000 8
Total New Zealand (Cost $35) 32
NORWAY 0.8%
Common Stocks 0.8%
Bergesen (Class A) 380 5
Norsk Hydro 3,730 162
Orkla (Class A) 9,332 158
Saga Petroleum 400 5
Total Norway (Cost $371) 330
PANAMA 0.0%
Common Stocks 0.0%
Banco Latinoamericano de
Exportaciones (Class E) (USD) 182 4
Total Panama (Cost $8) 4
PORTUGAL 0.3%
Common Stocks 0.3%
Jeronimo Martins 2,835 123
Total Portugal (Cost $76) 123
RUSSIA 0.0%
Common Stocks 0.0%
Lukoil ADR (USD) 120 2
Rao Gazprom ADS (USD) * 868 8
Total Russia (Cost $25) 10
SINGAPORE 0.1%
Common Stocks 0.1%
Singapore Press 2,333 20
Singapore Telecommunications 10,000 17
Total Singapore (Cost $56) 37
SOUTH KOREA 0.1%
Common Stocks 0.1%
Samsung Electronics 615 25
Total South Korea (Cost $40) 25
SPAIN 1.6%
Common Stocks 1.6%
Argentaria Banca de Espana 2,040 44
Banco Bilbao Vizcaya 2,700 36
Banco Santander 6,324 116
Banco Santander, New * 126 2
Empresa Nacional de Electricidad 3,466 87
Gas Natural 685 59
Iberdrola 4,822 78
Repsol 933 47
Telefonica de Espana 4,795 217
Total Spain (Cost $492) 686
SWEDEN 1.8%
Common Stocks 1.8%
ABB (Class A) 4,330 46
Astra (Class B) 12,200 191
Atlas Copco (Class B) 2,180 51
Electrolux (Class B) 6,850 103
Esselte (Class B) 500 7
Granges 350 5
Hennes and Mauritz (Class B) 2,940 207
Nordbanken Holding 22,053 132
Sandvik (Class A) 560 11
Sandvik (Class B) 2,165 45
Scribona (Class B) 290 1
Sifo Group (Class B) * 440 2
Total Sweden (Cost $681) 801
SWITZERLAND 4.1%
Common Stocks 4.1%
ABB 70 84
Adecco 326 130
Credit Suisse Group 700 107
Nestle 250 531
Novartis 211 380
Roche Holdings,
Participating Certificates 25 291
Swisscom * 112 38
UBS * 936 257
Total Switzerland (Cost $1,558) 1,818
UNITED KINGDOM 10.4%
Common Stocks 10.4%
Abbey National 7,000 136
Asda Group 29,000 77
BG 7,058 46
British Petroleum 7,000 104
Cable & Wireless 19,000 214
Cadbury Schweppes 11,000 168
Caradon 17,700 37
Centrica * 4,000 8
Compass Group 10,000 101
David S. Smith 9,000 19
Diageo 32,326 352
Electrocomponents 5,000 33
GKN 2,000 24
Glaxo Wellcome 13,000 403
Heywood Williams Group 1,000 3
John Laing (Class A) 4,000 20
Kingfisher 39,800 352
Ladbroke Group 12,000 44
National Westminster Bank 38,000 639
Rank Group 6,000 25
Reed International 30,000 254
Rio Tinto 8,000 97
Rolls Royce 5,000 18
Safeway 14,000 70
Shell Transport & Trading 51,000 308
SmithKline Beecham 46,200 575
Tesco 46,000 126
Tomkins 37,000 171
Unilever 2,000 20
United News & Media 12,400 137
Total United Kingdom (Cost $3,917) 4,581
UNITED STATES 42.7%
Common Stocks 42.7%
ACE Limited 7,000 237
AirTouch Communications * 4,100 230
AlliedSignal 6,700 261
America Online 1,300 165
American Home Products 2,800 137
Atlantic Richfield 3,000 207
Automatic Data Processing 1,900 148
BMC Software * 4,000 192
Bank of New York 6,200 196
BankAmerica * 3,537 203
Biogen * 3,200 222
Bristol-Myers Squibb 2,400 265
CBS 7,700 215
CVS 3,684 168
Carnival (Class A) 4,200 136
Cellular Communications
International * 3,950 246
Centocor * 2,800 125
Chase Manhattan 1,400 80
Cisco Systems * 3,125 197
Citigroup 7,899 372
Coca-Cola 1,500 101
Colgate-Palmolive 2,000 177
Costco Companies * 3,000 170
Crescent Real Estate
Equities, REIT 6,700 168
Danaher 7,000 280
Dayton Hudson 4,500 191
Dell Computer * 2,200 144
Disney 3,100 84
EMC * 2,500 161
Eli Lilly 3,100 251
Emerson Electric 2,700 178
Fannie Mae 3,600 255
First Data 2,300 61
First Union 3,800 220
Fred Meyer * 3,400 181
Freddie Mac 8,300 477
GE 4,600 403
GTE 4,200 247
Galileo International 4,500 171
Gartner Group (Class A) * 5,200 103
Gillette 1,300 58
Guidant 1,500 115
HBO 2,000 53
Halliburton 5,100 183
Hasbro 3,800 133
HealthSouth * 7,300 89
Hewlett-Packard 2,200 132
Hilton 4,000 80
Hubbell (Class B) 4,700 187
Intel 2,600 232
Jacor Communications * 2,500 138
Johnson & Johnson 2,900 236
Kimberly-Clark 4,000 193
MCI WorldCom * 7,834 433
Maxim Integrated Products * 6,900 246
McDonald's 1,800 120
Mellon Bank 700 42
Merck 1,800 243
Meredith 1,800 67
Microsoft * 3,100 328
Mirage Resorts * 7,400 125
Mobil 4,300 325
Morgan Stanley Dean Witter 1,600 104
Network Associates * 6,450 274
Newell 3,000 132
Newmont Mining 3,400 72
Norwest 8,800 327
Omnicom 4,500 223
Oracle * 1,800 53
Parametric Technology * 11,000 183
Partnerre 5,100 203
PepsiCo 6,300 213
Pfizer 2,100 225
Philip Morris 6,100 312
PLATINUM Technology * 5,000 82
Procter & Gamble 1,000 89
Quorum Health Group * 1,500 22
Raytheon (Class B) 1,400 81
Rite Aid 5,300 210
SBC Communications 5,500 255
Safeway * 5,600 268
Saks * 5,600 127
Sara Lee 2,600 155
Schering-Plough 1,200 123
ServiceMaster 7,800 165
Starwood Hotels & Resorts, REIT 5,797 164
Sterling Commerce * 3,000 106
Teleflex 4,600 178
Tellabs * 1,000 55
Tenet Healthcare * 2,000 56
Texas Instruments 1,800 115
Time Warner 2,500 232
Total Renal Care Holdings * 1,700 42
Travelers Property Casualty
(Class A) 3,900 120
Tribune 2,000 115
Tyco International 5,832 361
UNUM 4,300 191
USX-Marathon 5,200 170
United HealthCare 5,500 240
Wal-Mart 3,700 255
Warnaco Group (Class A) 9,200 235
Warner-Lambert 3,600 282
Waste Management 5,400 244
Total United States (Cost $15,802) 18,842
SHORT-TERM INVESTMENTS 4.0%
Money Market Funds 4.0%
Reserve Investment Fund,
5.41% # 1,771,315 1,771
Total Short-term Investments (Cost $1,771) 1,771
Total Investments in Securities
99.7% of Net Assets (Cost $39,401) 43,986
Other Assets Less Liabilities 130
NET ASSETS 44,116
------
Net Assets Consist of:
Accumulated net investment income -
net of distributions 330
Accumulated net realized gain/loss -
net of distributions 1,287
Net unrealized gain (loss) 4,590
Paid-in-capital applicable to 3,143,534 shares
of $0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 37,909
NET ASSETS 44,116
------
NET ASSET VALUE PER SHARE 14.03
-----
* Non-income producing
# Seven-day yield
144a Security was purchased pursuant to Rule 144a under the Securities
Act of 1933 and may not be resold subject to that rule except to qualified
institutional buyers-total of such securities at period-end amounts to
0.06% of net assets.
ADR American depository receipt
ADS American depository share
FRF French franc
GDR Global depository receipt
GDS Global depository share
REIT Real Estate Investment Trust
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Global Stock Fund
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
10/31/98
Investment Income
Income
Dividend (net of foreign taxes of $ 66) 654
Interest 120
Total income 774
Expenses
Shareholder servicing 145
Custody and accounting 133
Investment management 81
Registration 39
Prospectus and shareholder reports 28
Legal and audit 17
Directors 6
Miscellaneous 26
Total expenses 475
Net investment income 299
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 1,374
Foreign currency transactions (39)
Net realized gain (loss) 1,335
Change in net unrealized gain or loss
Securities 2,524
Other assets and liabilities
denominated in foreign currencies 2
Change in net unrealized gain or loss 2,526
Net realized and unrealized gain (loss) 3,861
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 4,160
---------
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Global Stock Fund
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year
Ended
10/31/98 10/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income 299 164
Net realized gain (loss) 1,335 1,315
Change in net unrealized gain or loss 2,526 1,342
Increase (decrease) in
net assets from operations 4,160 2,821
Distributions to shareholders
Net investment income (153) (85)
Net realized gain (1,355) (254)
Decrease in net assets
from distributions (1,508) (339)
Capital share transactions*
Shares sold 28,193 23,635
Distributions reinvested 1,466 329
Shares redeemed (20,215) (9,342)
Increase (decrease) in net assets
from capital
share transactions 9,444 14,622
Net Assets
Increase (decrease) during period 12,096 17,104
Beginning of period 32,020 14,916
End of period 44,116 32,020
--------------------------
*Share information
Shares sold 2,017 1,846
Distributions reinvested 117 28
Shares redeemed (1,452) (726)
Increase (decrease) in shares outstanding 682 1,148
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Global Stock Fund
- --------------------------------------------------------------------------------
October 31, 1998
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Global Stock Fund
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Funds, Inc. (the corporation) is registered under
the Investment Company Act of 1940. The Global Stock Fund (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the corporation and commenced operations on December 29, 1995.
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. Investments in 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 Translationo 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.
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 October 31, 1998, the value of loaned
securities was $301,000; aggregate collateral consisted of $305,000 in the
securities lending collateral pool.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $25,669,000 and $17,588,000, respectively, for the year
ended October 31, 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.
In order for the fund's capital accounts and distributions to shareholders to
reflect the tax character of certain transactions, the following
reclassifications were made during the year ended October 31, 1998. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $ 22,000
Paid-in-capital (22,000)
At October 31, 1998, the cost of investments for federal income tax purposes was
substantially the same as for financial reporting and totaled $39,401,000. Net
unrealized gain aggregated $4,585,000 at period end, of which $7,353,000 related
to appreciated investments and $2,768,000 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.
The investment management agreement between the fund and the manager provides
for an annual investment management fee, of which $15,000 was payable at October
31, 1998. The fee is computed daily and paid monthly, and consists of an
individual fund fee equal to 0.35% 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 October 31, 1998, and for the year ended 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.
Under the terms of the investment management agreement, the manager is required
to bear any expenses through October 31, 1999, which would cause the fund's
ratio of expenses to average net assets to exceed 1.20%. Thereafter, through
October 31, 2001, the fund is required to reimburse the manager for these
expenses, provided that average net assets have grown or expenses have declined
sufficiently to allow reimbursement without causing the fund's ratio of expenses
to average net assets to exceed 1.20%. Pursuant to this agreement, $185,000 of
management fees were not accrued by the fund for the year ended October 31,
1998. Additionally, $212,000 of unaccrued management fees and $111,000 of other
expenses borne by the manager related to a previous expense limitation are
subject to reimbursement through October 31, 1999.
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 $213,000 for
the year ended October 31, 1998, of which $21,000 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 and
Government 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 year ended October 31,
1998, totaled $116,000 and are reflected as interest income in the accompanying
Statement of Operations.
During the year ended October 31, 1998, the fund, in the ordinary course of
business, placed security purchase and sale orders aggregating $521,000 with
certain affiliates of the manager and paid commissions of $1,000 related
thereto.
T. Rowe Price Global Stock Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors of T. Rowe Price International Funds, Inc. and
Shareholders of Global Stock Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Global Stock Fund (one of the portfolios constituting T. Rowe Price
International Funds, Inc., hereafter referred to as the "Fund") at October 31,
1998, and the results of its operations, the changes in its net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 18, 1998
Tax Information (Unaudited) for the Tax Year Ended 10/31/98
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue Code. The
amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The fund's distributions to shareholders included:
- -- $1,004,000 from short-term capital gains,
- -- $351,000 from long-term capital gains; of which $208,000 was subject to
the 20% rate gains category and $143,000 to the 28% rate gains
category.
For corporate shareholders, $154,000 of the fund's distributed income and
short-term capital gains qualified for the dividends-received deduction.
The fund will pass through foreign source income of $282,000 and foreign taxes
paid of $63,000.
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(registered trademark):
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 Global 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
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor. F04-050 10/31/98
