Annual Report
International
Growth &
Income Fund
October 31, 2000
T. Rowe Price
REPORT HIGHLIGHTS
--------------------------------------------------------------------------------
International Growth & Income Fund
o International markets posted steep declines during the past six months
and modest losses in the 12-month period as reality set in to New Economy
stocks.
o Your fund reflected this weakness but handily outperformed its benchmarks
for the past six months and delivered a slight positive return over 12
months.
o Value-oriented and steady growth stocks came to the fore during the
correction in technology, telecom, and Internet stocks, and this benefited
the fund.
o Volatility is likely to continue in international markets, but a shift
toward more reasonably valued stocks appears to be under way.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
Fellow Shareholders
International stocks fell sharply during the six months ended October 31, 2000,
and ended your fund's fiscal year modestly in the red. In late 1999 and early
this year, momentum-style growth stocks in the Internet, technology, and
telecommunications sectors surged. But these stocks endured a severe correction
over the past six months, while the cyclical and value stocks favored by your
fund fared relatively better. Overall, international markets struggled during
the past 12 months, and your fund posted only a small gain.
Performance Comparison
--------------------------------------------------------------------------------
Periods Ended 10/31/00 6 Months 12 Months
--------------------------------------------------------------------------------
International Growth
& Income Fund -2.18% 1.43%
MSCI EAFE Index -8.89 -2.66
Lipper International
Funds Average -10.00 2.70
The International Growth & Income Fund fell 2.18% during the past six
months, closing out the fiscal year ended October 31 with a slight gain of
1.43%, as shown in the table. These results nevertheless exceeded those of
the most widely recognized index of foreign stocks, the Morgan Stanley
Capital International EAFE (Europe, Australasia, and Far East) Index, in
both periods. As we wrote in our last report, "The likely end of the easy
money era in Internet stocks, and a broadening of market participation to
include lagging sectors, should ultimately boost _ quality, value-oriented
stocks." Whereas our relative lack of exposure to New Economy stocks
restrained performance in the first six months, our emphasis on valuation
was rewarded in the more recent period and helped the fund make up ground
we had earlier lost to EAFE. The fund's greater exposure to basic
materials, consumer products, financial services, capital goods, and
utilities aided results compared with EAFE. Even within those sectors, our
holdings were somewhat more value oriented than the index components.
Performance was also ahead of the best-known average of competing funds,
the Lipper International Funds Average, for the six months, but trailed
slightly for the year. Your fund has less exposure than the Lipper category
to emerging markets, which were particularly weak over the past six months
but strong early in the year. (EAFE has no exposure to the emerging
markets.)
Can the Euro Also Rise?
--------------------------------------------------------------------------------
Understanding why the euro has been weak helps explain why it should recover.
Several factors have pushed the euro-the common currency for 11 countries in
Continental Europe-down 27% since its launch on January 1, 1999. Chris Rothery,
a portfolio manager at T. Rowe Price International (TRPI), thinks each of these
factors could moderate or reverse in the next year.
Capital flows into the U.S. have risen sharply in recent years as European
companies acquired an unprecedented number of U.S. businesses and as Europeans
invested in U.S. financial assets. Both trends are moderating, however. This
year's weakness in the U.S. stock market has made investment here less
attractive. "The Nasdaq bubble appears to have been pricked, which should also
take some steam out of the dollar," says Rothery.
The persistent strength of the U.S. economy has also hurt the euro, as it makes
the U.S. a more attractive place to invest. But U.S. growth has showed signs of
slowing recently, narrowing the advantage over European growth.
Higher-yielding U.S. government bonds also lured investors. Recently, however,
long-term U.S. rates have declined while those in the euro zone have remained
stable.
Since the euro's launch, oil prices have more than tripled, and Europe's demand
for the dollars needed to pay for oil has surged. But oil prices are stabilizing
and expected to trend lower.
While the Federal Reserve is respected and well established, the European
Central Bank (ECB) has less than two years' experience. ECB officials have
aggravated investors' uncertainty by making confusing remarks. Lately, ECB
officials have become more politically astute and are expected to make more
careful statements.
Though TRPI portfolio managers have been surprised by the extent of the euro's
decline, they point out that markets often overshoot. It would be a mistake for
U.S. investors to shun euro assets, says Rothery.
John Ford, TRPI's chief investment officer, sees Europe at an earlier stage of
the economic cycle than the U.S., with greater room for productivity
improvement. "If we can get into a virtuous cycle, then investors can benefit
from better economic performance, higher returns on capital, and a strong chance
of currency appreciation to boot," Ford says.
THE EURO VS. THE U.S. DOLLAR
--------------------------------------------------------------------------------
Px Last
12/31/1998 1.1667
1/1/1999 1.1697
1/4/1999 1.1837
1/5/1999 1.1761
1/6/1999 1.1628
1/7/1999 1.1712
1/8/1999 1.1585
1/11/1999 1.1494
1/12/1999 1.156
1/13/1999 1.1669
1/14/1999 1.169
1/15/1999 1.1555
1/18/1999 1.1613
1/19/1999 1.1595
1/20/1999 1.1565
1/21/1999 1.1602
1/22/1999 1.1588
1/25/1999 1.1535
1/26/1999 1.156
1/27/1999 1.1444
1/28/1999 1.142
1/29/1999 1.1362
2/1/1999 1.1309
2/2/1999 1.1351
2/3/1999 1.1314
2/4/1999 1.134
2/5/1999 1.1266
2/8/1999 1.1323
2/9/1999 1.1315
2/10/1999 1.1326
2/11/1999 1.1223
2/12/1999 1.1308
2/15/1999 1.1223
2/16/1999 1.1209
2/17/1999 1.1248
2/18/1999 1.1195
2/19/1999 1.1069
2/22/1999 1.1021
2/23/1999 1.1007
2/24/1999 1.1007
2/25/1999 1.1034
2/26/1999 1.1028
3/1/1999 1.0892
3/2/1999 1.0941
3/3/1999 1.0875
3/4/1999 1.0799
3/5/1999 1.0823
3/8/1999 1.0888
3/9/1999 1.0881
3/10/1999 1.0943
3/11/1999 1.1042
3/12/1999 1.0905
3/15/1999 1.0932
3/16/1999 1.0996
3/17/1999 1.1002
3/18/1999 1.0972
3/19/1999 1.0896
3/22/1999 1.0907
3/23/1999 1.0892
3/24/1999 1.087
3/25/1999 1.0839
3/26/1999 1.08
3/29/1999 1.0732
3/30/1999 1.0732
3/31/1999 1.0762
4/1/1999 1.0795
4/2/1999 1.0786
4/5/1999 1.0712
4/6/1999 1.083
4/7/1999 1.0775
4/8/1999 1.0742
4/9/1999 1.0797
4/12/1999 1.0804
4/13/1999 1.0782
4/14/1999 1.0802
4/15/1999 1.0713
4/16/1999 1.0705
4/19/1999 1.066
4/20/1999 1.0625
4/21/1999 1.0584
4/22/1999 1.0646
4/23/1999 1.0599
4/26/1999 1.059
4/27/1999 1.0662
4/28/1999 1.062
4/29/1999 1.0608
4/30/1999 1.057
5/3/1999 1.0567
5/4/1999 1.063
5/5/1999 1.0762
5/6/1999 1.0792
5/7/1999 1.0757
5/10/1999 1.0782
5/11/1999 1.0712
5/12/1999 1.0646
5/13/1999 1.0656
5/14/1999 1.0659
5/17/1999 1.0671
5/18/1999 1.0674
5/19/1999 1.0662
5/20/1999 1.0623
5/21/1999 1.0584
5/24/1999 1.0607
5/25/1999 1.0624
5/26/1999 1.0443
5/27/1999 1.0423
5/28/1999 1.0429
5/31/1999 1.042
6/1/1999 1.0448
6/2/1999 1.0359
6/3/1999 1.0324
6/4/1999 1.0377
6/7/1999 1.0328
6/8/1999 1.0466
6/9/1999 1.0466
6/10/1999 1.0482
6/11/1999 1.0519
6/14/1999 1.0423
6/15/1999 1.0426
6/16/1999 1.0308
6/17/1999 1.0343
6/18/1999 1.0397
6/21/1999 1.0347
6/22/1999 1.0325
6/23/1999 1.0337
6/24/1999 1.0412
6/25/1999 1.043
6/28/1999 1.0331
6/29/1999 1.0319
6/30/1999 1.0351
7/1/1999 1.023
7/2/1999 1.0249
7/5/1999 1.0223
7/6/1999 1.0236
7/7/1999 1.0222
7/8/1999 1.0222
7/9/1999 1.0196
7/12/1999 1.0145
7/13/1999 1.017
7/14/1999 1.0136
7/15/1999 1.019
7/16/1999 1.0201
7/19/1999 1.0313
7/20/1999 1.04
7/21/1999 1.05
7/22/1999 1.0508
7/23/1999 1.0504
7/26/1999 1.0647
7/27/1999 1.0632
7/28/1999 1.0662
7/29/1999 1.0725
7/30/1999 1.0711
8/2/1999 1.0691
8/3/1999 1.068
8/4/1999 1.0776
8/5/1999 1.0758
8/6/1999 1.0742
8/9/1999 1.0717
8/10/1999 1.071
8/11/1999 1.0658
8/12/1999 1.0674
8/13/1999 1.0567
8/16/1999 1.0581
8/17/1999 1.0507
8/18/1999 1.052
8/19/1999 1.0644
8/20/1999 1.0672
8/23/1999 1.049
8/24/1999 1.0544
8/25/1999 1.0424
8/26/1999 1.0453
8/27/1999 1.0464
8/30/1999 1.0482
8/31/1999 1.0566
9/1/1999 1.0582
9/2/1999 1.0689
9/3/1999 1.0612
9/6/1999 1.0575
9/7/1999 1.0587
9/8/1999 1.0598
9/9/1999 1.0538
9/10/1999 1.0374
9/13/1999 1.0424
9/14/1999 1.0358
9/15/1999 1.0409
9/16/1999 1.0383
9/17/1999 1.0423
9/20/1999 1.0355
9/21/1999 1.0491
9/22/1999 1.0439
9/23/1999 1.0503
9/24/1999 1.0439
9/27/1999 1.0462
9/28/1999 1.0525
9/29/1999 1.0645
9/30/1999 1.0684
10/1/1999 1.0725
10/4/1999 1.0737
10/5/1999 1.0737
10/6/1999 1.0687
10/7/1999 1.0717
10/8/1999 1.0632
10/11/1999 1.0638
10/12/1999 1.0772
10/13/1999 1.0806
10/14/1999 1.0776
10/15/1999 1.0894
10/18/1999 1.0812
10/19/1999 1.0825
10/20/1999 1.0749
10/21/1999 1.0802
10/22/1999 1.069
10/25/1999 1.0675
10/26/1999 1.0592
10/27/1999 1.0518
10/28/1999 1.0511
10/29/1999 1.0549
11/1/1999 1.0513
11/2/1999 1.0527
11/3/1999 1.0489
11/4/1999 1.0375
11/5/1999 1.0421
11/8/1999 1.0383
11/9/1999 1.0403
11/10/1999 1.0447
11/11/1999 1.0405
11/12/1999 1.0318
11/15/1999 1.0332
11/16/1999 1.0302
11/17/1999 1.0416
11/18/1999 1.0296
11/19/1999 1.03
11/22/1999 1.0321
11/23/1999 1.0279
11/24/1999 1.0185
11/25/1999 1.0179
11/26/1999 1.0171
11/29/1999 1.0103
11/30/1999 1.0093
12/1/1999 1.0086
12/2/1999 1.0013
12/3/1999 1.0017
12/6/1999 1.0228
12/7/1999 1.0254
12/8/1999 1.0278
12/9/1999 1.0214
12/10/1999 1.0134
12/13/1999 1.0144
12/14/1999 1.0057
12/15/1999 1.0071
12/16/1999 1.017
12/17/1999 1.0087
12/20/1999 1.0133
12/21/1999 1.0085
12/22/1999 1.0093
12/23/1999 1.0156
12/24/1999 1.011
12/27/1999 1.0132
12/28/1999 1.007
12/29/1999 1.0051
12/30/1999 1.0086
12/31/1999 1.0062
1/3/2000 1.0243
1/4/2000 1.0296
1/5/2000 1.0321
1/6/2000 1.0328
1/7/2000 1.0295
1/10/2000 1.0256
1/11/2000 1.0336
1/12/2000 1.0309
1/13/2000 1.0258
1/14/2000 1.0122
1/17/2000 1.0122
1/18/2000 1.0137
1/19/2000 1.0133
1/20/2000 1.0168
1/21/2000 1.0098
1/24/2000 1.0072
1/25/2000 1.0009
1/26/2000 1.0019
1/27/2000 0.9882
1/28/2000 0.9747
1/31/2000 0.9707
2/1/2000 0.9711
2/2/2000 0.9765
2/3/2000 0.9894
2/4/2000 0.9832
2/7/2000 0.9815
2/8/2000 0.9855
2/9/2000 0.9942
2/10/2000 0.9854
2/11/2000 0.9875
2/14/2000 0.9783
2/15/2000 0.9815
2/16/2000 0.9863
2/17/2000 0.9878
2/18/2000 0.9839
2/21/2000 0.9877
2/22/2000 1.0038
2/23/2000 1.0036
2/24/2000 0.992
2/25/2000 0.9749
2/28/2000 0.9709
2/29/2000 0.9642
3/1/2000 0.9727
3/2/2000 0.9656
3/3/2000 0.9586
3/6/2000 0.9586
3/7/2000 0.9584
3/8/2000 0.961
3/9/2000 0.9669
3/10/2000 0.9637
3/13/2000 0.9642
3/14/2000 0.9686
3/15/2000 0.9669
3/16/2000 0.9696
3/17/2000 0.9721
3/20/2000 0.9728
3/21/2000 0.9615
3/22/2000 0.961
3/23/2000 0.9715
3/24/2000 0.9779
3/27/2000 0.9672
3/28/2000 0.9605
3/29/2000 0.9514
3/30/2000 0.9613
3/31/2000 0.9553
4/3/2000 0.9553
4/4/2000 0.9596
4/5/2000 0.9625
4/6/2000 0.9584
4/7/2000 0.9553
4/10/2000 0.9627
4/11/2000 0.9592
4/12/2000 0.959
4/13/2000 0.9524
4/14/2000 0.9622
4/17/2000 0.9527
4/18/2000 0.9453
4/19/2000 0.9402
4/20/2000 0.9374
4/21/2000 0.9385
4/24/2000 0.938
4/25/2000 0.9208
4/26/2000 0.9235
4/27/2000 0.9099
4/28/2000 0.9119
5/1/2000 0.9158
5/2/2000 0.91
5/3/2000 0.8948
5/4/2000 0.8895
5/5/2000 0.897
5/8/2000 0.8977
5/9/2000 0.9075
5/10/2000 0.9068
5/11/2000 0.9016
5/12/2000 0.9197
5/15/2000 0.9112
5/16/2000 0.9003
5/17/2000 0.8959
5/18/2000 0.8946
5/19/2000 0.8975
5/22/2000 0.9031
5/23/2000 0.9071
5/24/2000 0.9044
5/25/2000 0.9115
5/26/2000 0.9309
5/29/2000 0.9266
5/30/2000 0.9301
5/31/2000 0.938
6/1/2000 0.9312
6/2/2000 0.9463
6/5/2000 0.9479
6/6/2000 0.9548
6/7/2000 0.9622
6/8/2000 0.956
6/9/2000 0.9536
6/12/2000 0.9538
6/13/2000 0.9596
6/14/2000 0.9579
6/15/2000 0.9547
6/16/2000 0.965
6/19/2000 0.9567
6/20/2000 0.9548
6/21/2000 0.9442
6/22/2000 0.9355
6/23/2000 0.9359
6/26/2000 0.9369
6/27/2000 0.9459
6/28/2000 0.9401
6/29/2000 0.952
6/30/2000 0.9525
7/3/2000 0.9502
7/4/2000 0.9513
7/5/2000 0.9525
7/6/2000 0.9507
7/7/2000 0.9484
7/10/2000 0.9553
7/11/2000 0.9527
7/12/2000 0.9424
7/13/2000 0.9372
7/14/2000 0.9385
7/17/2000 0.9366
7/18/2000 0.9248
7/19/2000 0.9246
7/20/2000 0.9331
7/21/2000 0.9369
7/24/2000 0.9337
7/25/2000 0.9385
7/26/2000 0.9428
7/27/2000 0.9317
7/28/2000 0.923
7/31/2000 0.9266
8/1/2000 0.9147
8/2/2000 0.9136
8/3/2000 0.9061
8/4/2000 0.9083
8/7/2000 0.9071
8/8/2000 0.9022
8/9/2000 0.9006
8/10/2000 0.9083
8/11/2000 0.9026
8/14/2000 0.9056
8/15/2000 0.9135
8/16/2000 0.9161
8/17/2000 0.9162
8/18/2000 0.9064
8/21/2000 0.9017
8/22/2000 0.8964
8/23/2000 0.9017
8/24/2000 0.9021
8/25/2000 0.9021
8/28/2000 0.9002
8/29/2000 0.8921
8/30/2000 0.894
8/31/2000 0.8878
9/1/2000 0.8997
9/4/2000 0.8978
9/5/2000 0.8903
9/6/2000 0.8702
9/7/2000 0.8713
9/8/2000 0.8672
9/11/2000 0.8577
9/12/2000 0.864
9/13/2000 0.8594
9/14/2000 0.8644
9/15/2000 0.8543
9/18/2000 0.8537
9/19/2000 0.8509
9/20/2000 0.8493
9/21/2000 0.8599
9/22/2000 0.8766
9/25/2000 0.8745
9/26/2000 0.8828
9/27/2000 0.8834
9/28/2000 0.8791
9/29/2000 0.8827
10/2/2000 0.8772
10/3/2000 0.8757
10/4/2000 0.8735
10/5/2000 0.8692
10/6/2000 0.8684
10/9/2000 0.8686
10/10/2000 0.8716
10/11/2000 0.8683
10/12/2000 0.8629
10/13/2000 0.856
10/16/2000 0.8499
10/17/2000 0.8544
10/18/2000 0.8389
10/19/2000 0.8435
10/20/2000 0.842
10/23/2000 0.8354
10/24/2000 0.8359
10/25/2000 0.8272
10/26/2000 0.8303
10/27/2000 0.8405
10/30/2000 0.8411
10/31/2000 0.8489
Chart shows the euro-the common currency of 11 countries in Continental
Europe-has declined steadily in value versus the U.S. dollar since its January
1, 1999, launch.
Media, technology, and telecom stocks surged in late 1999 and early 2000 on
investor expectations that their powerful growth rates could be sustained
or that their growth potential was nearly limitless. However, moderating
demand, profit warnings, high investment costs, and abundant new issuance
finally weighed on these sectors and dropped share prices to more realistic
levels. Investors began to focus on established companies whose shares had
been beaten down, including food producers, pharmaceuticals, and banks.
Broader concerns weighing on the equities markets included slowing
economies, high oil prices, and weakness in the euro (see article on page
2). Economic growth eased in Europe, while in Japan the consumer sector
remained weak and rising bankruptcies triggered concerns about
unemployment. Growth in the rest of Asia was strong, although recurring
worries about financial stability plagued some emerging markets.
PORTFOLIO REVIEW
At the end of October, Europe represented 68% of net assets, up from 66% in
April. Our largest single country weighting within Europe was the U.K.,
unchanged from six months ago at about 20%. Exposure to Japan fell to 17%
from 18%. Far East exposure increased modestly to 8% from 6%, while Latin
America held steady at 3%. Value stocks' advantage over growth stocks was
most pronounced in Asia and the U.K., but was quite slim in Continental
Europe.
Market Performance
--------------------------------------------------------------------------------
Six Months Local Local Currency U.S.
Ended 10/31/0 Currency vs. U.S. Dollars Dollars
--------------------------------------------------------------------------------
France 0.66% -6.99% -6.37%
Germany -5.58 -6.98 -12.18
Hong Kong -11.74 -0.13 -11.85
Italy 9.53 -6.98 1.88
Japan -13.51 -1.02 -14.39
Mexico -0.67 -1.87 -2.53
Netherlands 6.37 -6.98 -1.06
Norway 17.46 -3.80 13.00
Sweden -18.52 -10.65 -27.19
Switzerland 7.27 -4.32 2.65
United Kingdom 4.74 -7.20 -2.81
Source: RIMES Online, using MSCI indices.
Europe
Telecom stocks fell in Europe (and indeed, around the world), as investors
worried about the high costs companies are incurring to provide services,
such as third-generation, Internet-compatible wireless phone service, that
will not launch until at least 2002. European governments have been
auctioning off portions of the airwave spectrum that telecom providers need
to offer these services, but the costs of these licenses as well as the
number of licensees (that is, competitors) has been higher than expected.
We have emphasized the dominant national telecom operators such as Deutsche
Telekom, France Telecom, Tele Danmark, and Telefonica (of Spain), but these
stocks were weak during the past six months after healthy runups in the
previous period. Deutsche Telekom was the fund's second-worst contributor
overall. Profits from traditional fixed-line services have declined even as
these companies have had to invest heavily in new areas, such as wireless.
We took advantage of reduced prices to initiate a position in British
Telecom, which we found reasonably valued relative to other telecom service
companies. Despite overall weakness in the technology and telecom sectors,
two of the fund's best contributors during the past six months were in
telecom equipment: France's Alcatel, and Spirent of the U.K., which was our
top contributor.
Industry Diversification
--------------------------------------------------------------------------------
Percent of Net Assets
4/30/00 10/31/00
--------------------------------------------------------------------------------
Finance 21.7% 25.9%
Services 18.7 17.5
Consumer Goods 17.6 16.4
Capital Equipment 17.1 15.0
Energy 9.3 11.0
Materials 8.7 7.8
Multi-industry 2.1 2.0
All Other 0.9 0.8
Reserves 3.9 3.6
Total 100.0% 100.0%
Health care and consumer nondurable stocks performed well. The fund's
second-best contributor overall was U.K. medical device maker Smith &
Nephew. Other significant contributors to performance included drug and
personal-care products maker Altana of Germany and French drugmaker
Aventis, which benefited from healthy sales growth and cost-cutting. Food
stocks like France's Danone gained as investors sought their defensive
characteristics, such as predictable earnings that are not dependent on
strong economic growth. Danone is one of Europe's largest food processors,
and is well known in the U.S. for its Dannon yogurt line.
Financial stocks were also relatively strong in a weak market environment,
especially those with dependable earnings streams. Our third-best
contributor was Vontobel of Switzerland, with extensive interests in
investment management and private banking. Financial companies continued to
restructure and make acquisitions. Finnish/Swedish group Nordic Baltic
Holding, our fifth-best contributor, acquired Norway's Christiania Bank.
The combined company is now Scandinavia's largest bank. Netherlands banking
and insurance conglomerate ING Groep gained as it acquired U.S. insurer
Reliastar and Aetna's financial services businesses, giving it an inside
track in U.S. life and annuity premiums. Swiss Re, Deutsche Bank of
Germany, Svenska Handelsbanken of Sweden, and HSBC Holdings of the U.K.
also performed well. Swiss bank UBS acquired U.S. brokerage firm Paine
Webber for $12 billion. Woolwich, a U.K. savings and loan, was bought by
Barclays.
On the weak side, in addition to national telecom carriers, were technology
stocks. German semiconductor maker Epcos, one of the best performers in the
previous six-month period, was our third-worst this time. Certain
industrial and cyclical stocks also declined sharply, including U.K.
chemical producer Imperial Chemical Industries (ICI) and diversified Swiss
industrial manufacturing and construction giant ABB.
Far East and Other
A similar pattern held in the Far East, with financial stocks generally
strong and technology and telecom stocks weak. One of the few Far East
holdings to contribute significantly in a positive way to performance was
Australia's Santos, an oil and gas producer that benefited from increased
production and higher energy prices. Another was Hang Seng Bank of Hong
Kong. Diversified Hong Kong conglomerate Hutchison Whampoa and its parent
Cheung Kong reported robust earnings.
Geographic Diversification
--------------------------------------------------------------------------------
Europe 68
Japan 17
Far East 8
Latin America 3
Other and Reserves 4
Financial shares were pressured in Japan, however, by bankruptcies among
companies holding large loans. Our overall position in Japan is well below
that represented in the EAFE Index. However, we initiated a position in
Nomura Securities amid the weakness, believing that brokerages will benefit
from increased interest in equity investments as consumers flee
low-yielding postal savings accounts.
NTT (Nippon Telegraph & Telephone) declined as it experienced regulatory
pressure on its rates and as the government continued sales of its stake in
the company, now down to 46%. Other weak stocks in Japan included
technology leaders Sony, Kyocera, Toshiba, and NEC. Hardware component
manufacturers were hurt by concerns about demand for PCs, semiconductors,
and wireless-telecom related parts. Even though Kyocera, Toshiba, and NEC
announced better-than-expected results and raised their forecasts, their
shares fell on concern about future growth. Sony disappointed investors by
announcing that the eagerly awaited U.S. launch of its new games console,
PlayStation 2, would be cut in half due to component shortages. Consumer
electronics giant Matsushita Electric Industrial, known for its Panasonic
brand, bucked the trend and performed strongly.
Bridgestone, of course, became infamous in the U.S. during this summer's
scandal-plagued recall of its Firestone brand tires used on the popular
Ford Explorer sport-utility vehicle. The stock detracted significantly from
performance. We exited the position as it appeared the tire problem and
associated public distrust would take time to be addressed.
Latin America
Closer to home, Mexico's Grupo Financiero Banamex was a solid contributor,
as Mexican financial stocks did well. Telecom operators such as Telefonos
de Mexico and Telebras of Brazil felt the pain of the global telecom
downturn but held up better than most other telecom stocks around the
world.
OUTLOOK
In Europe, continuing restructuring, increased management focus on returns,
and tax and social security reforms could assist earnings growth. The
possibility of peaking interest rates and oil prices, along with an
undervalued euro, could provide a positive backdrop for stocks. In Japan
the economic environment is more challenging, but valuations are moving
toward the bottom of their recent ranges, offering more attractive
opportunities. Although it is difficult to see a short-term catalyst for
the stock market, the downside appears limited. In the rest of Asia,
further market liberalization, structural reforms, and more shareholder
friendly corporate management remain essential to achieve superior
long-term economic growth. The recent period of political stability and
economic health bode well for Latin America.
Internationally, economies have been slowing, but we expect them to improve
by the second half of 2001. Slower growth in general is not good news for
value-oriented shares, many of which tend to be economically sensitive.
However, despite this year's sobering correction in high-growth stocks,
valuations in that sector are still very high, as growth stocks have
outpaced value stocks by a wide margin for more than five years. Investors
are now discovering that technology stocks can be cyclical, too. So from a
standpoint of relative valuation and investor expectation, the outlook for
our value-conscious approach over the next several years seems very
positive.
Due to the short-term uncertainty about economic growth, oil prices,
technology trends, and the direction of the euro, international markets
could continue to struggle a bit. However, we expect these factors to
mitigate in coming months and we remain optimistic about the fund's
prospects in the year ahead.
Respectfully submitted,
John R. Ford
President, T. Rowe Price International Funds, Inc.
November 20, 2000
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
Portfolio Highlights
--------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
10/31/00
--------------------------------------------------------------------------------
Shell Transport & Trading, United Kingdom 1.5%
Vontobel Holdings, Switzerland 1.4
Aventis, France 1.3
Glaxo Wellcome, United Kingdom 1.3
Spirent, United Kingdom 1.2
--------------------------------------------------------------------------------
Sony, Japan 1.1
TotalFinaElf, France 1.1
Hutchison Whampoa, Hong Kong 1.1
British Telecom, United Kingdom 1.1
ABB, Switzerland 1.0
--------------------------------------------------------------------------------
Telefonica, Spain 1.0
NEC, Japan 0.9
Alcatel, France 0.9
AstraZeneca Group, United Kingdom 0.9
Hitachi, Japan 0.9
--------------------------------------------------------------------------------
Swiss Re, Switzerland 0.9
Matsushita Electric Industrial, Japan 0.9
Toshiba, Japan 0.8
Sumitomo Bank, Japan 0.8
Terumo, Japan 0.8
--------------------------------------------------------------------------------
Svenska Handelsbanken, Sweden 0.8
Mizuho Holdings, Japan 0.8
Reed International, United Kingdom 0.8
ING Groep, Netherlands 0.8
Tesco, United Kingdom 0.8
--------------------------------------------------------------------------------
Total 24.9%
Note: Table excludes reserves.
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
Performance Comparison
--------------------------------------------------------------------------------
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 benchmarks, which may include
a broad-based market index and a peer group average or index. Market
indexes do not include expenses, which are deducted from fund returns as
well as mutual fund averages and indexes.
INTERNATIONAL GROWTH & INCOME FUND
--------------------------------------------------------------------------------
MSCI EAFE IGI line IGI area
12/21/98 10000 10000 10000
10/31/99 11285 11000 11000
10/31/00 10984 11157 11157
*From 12/31/98
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 10/31/00 1 Year Inception Date
--------------------------------------------------------------------------------
International Growth & Income Fund 1.43% 6.06% 12/21/98
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 International Growth & Income Fund
--------------------------------------------------------------------------------
Financial Highlights For a share outstanding throughout each period
--------------------------------------------------------------------------------
Year 12/21/98
Ended Through
10/31/00 10/31/99
NET ASSET VALUE
Beginning of period $ 11.00 $ 10.00
Investment activities
Net investment income (loss) 0.14* 0.16*
Net realized and unrealized gain (loss) 0.03** 0.84
Total from investment activities 0.17 1.00
Distributions
Net investment income (0.19) --
Net realized gain (0.23) --
Total distributions (0.42) --
NET ASSET VALUE
End of period $10.75 $11.00
Ratios/Supplemental Data
Total return(diamond) 1.43%* 10.00%*
Ratio of total expenses
to average net assets 1.25%* 1.25%!*
Ratio of net investment income
(loss) to average net assets 1.24%* 1.87%!*
Portfolio turnover rate 32.2% 35.8%!
Net assets, end of period (in thousands) $10,118 $9,776
(diamond) 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.
! Annualized
* Excludes expenses in excess of a 1.25% voluntary expense limitation
in effect through 10/31/00.
** The amount presented is calculated pursuant to a methodology
prescribed by the Securities and Exchange Commission for a
share outstanding throughout the period. This amount is inconsistent
with the fund's aggregate gains and losses because of the timing of
sales and redemptions of fund shares in relation to fluctuating market
values for the investment portfolio.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
October 31, 2000
Statement of Net Assets
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
In thousands
ARGENTINA 0.3%
Common Stocks 0.3%
Grupo Financiero Galicia ADR (USD) * 924 $ 13
Telecom Argentina ADR (USD) 800 14
Total Argentina (Cost $37) 27
AUSTRALIA 2.8%
Common Stocks 2.8%
Australia & New Zealand Banking Group 5,900 44
Coles Myer 7,500 27
Lion Nathan (NZD) 6,400 12
Normandy Mining 39,000 19
Nufarm (NZD) 10,000 16
Pacific Dunlop 16,600 13
Publishing & Broadcasting 5,800 40
Rio Tinto 2,000 27
Santos 11,400 36
Westfield Trust 13,700 22
Westpac Banking 3,800 26
Total Australia (Cost $335) 282
AUSTRIA 0.3%
Common Stocks 0.3%
Brau-Union (EUR) 600 21
EVN (EUR) 600 15
Total Austria (Cost $61) 36
BELGIUM 1.1%
Common Stocks 1.1%
Dexia (EUR) 300 45
Electrabel (EUR) 130 28
Solvay (EUR) 700 36
Total Belgium (Cost $147) 109
BRAZIL 0.5%
Common Stocks 0.5%
Companhia Vale do Rio Doce ADR (USD) 1,300 $ 30
Tele Norte Leste Participacoes ADR (USD) 35 1
Telebras ADR (USD) 300 22
Total Brazil (Cost $43) 53
CHILE 0.1%
Common Stocks 0.1%
Compania de Telecomunicaciones
de Chile (Class A) ADR (USD) * 400 6
Enersis ADR (USD) * 302 5
Total Chile (Cost $16) 11
DENMARK 0.6%
Common Stocks 0.6%
Danisco 840 33
Tele Danmark 600 29
Total Denmark (Cost $77) 62
FINLAND 0.7%
Common Stocks 0.7%
Kesko (EUR) 3,550 30
Stora Enso (SEK) 4,000 41
Total Finland (Cost $117) 71
FRANCE 12.0%
Common Stocks 12.0%
Accor (EUR) 1,000 40
Alcatel (EUR) 1,500 91
Assurances Generales de France (EUR) 940 51
Aventis (EUR) 1,380 100
Aventis (DAX Exchange) (EUR) 412 30
Axa ADR (USD) 1,000 66
BNP Paribas (EUR) 400 34
Compagnie de Saint Gobain (EUR) 310 41
France Telecom ADR (USD) 500 $ 54
Fromageries (EUR) 40 16
Groupe Danone (EUR) 400 56
LVMH (EUR) 400 29
Pechiney (EUR) 800 30
Pernod Ricard (EUR) 800 37
Pinault Printemps Redoute (EUR) 240 43
Renault (EUR) 1,000 50
Schneider Electric (EUR) 700 46
Societe Generale (EUR) 1,200 68
Suez Lyonnaise des Eaux (EUR) 400 61
Technip (EUR) 460 59
TotalFinaElf (Class B) (EUR) 399 57
TotalFinaElf ADR (USD) 800 57
Valeo (EUR) 600 26
Vivendi (EUR) 1,000 72
Total France (Cost $1,168) ` 1,214
GERMANY 8.8%
Common Stocks 8.8%
Altana (EUR) 560 67
AMB Aachener & Muenchener Beteiligungs (EUR) 400 36
AXA Colonia Konzern (EUR) 420 44
B.U.S. Berzelius Umwelt-Service (EUR) 2,000 16
BASF (EUR) 1,010 40
Bayer (EUR) 1,300 56
Bayerische Hypo-und Vereinsbank (EUR) 500 27
Celanese (EUR) 55 1
DaimlerChrysler (USD) 900 41
Deutsche Bank (EUR) 910 75
Deutsche Telekom ADR (USD) 1,300 50
Dresdner Bank (EUR) 1,140 47
E.On (EUR) 1,400 71
Epcos (EUR) * 500 38
Heidelberger Zement (EUR) 600 29
HEW-Hamburgische Electricitaets- Werke (EUR) 2,100 46
Linde (EUR) 900 39
Lufthansa (EUR) 1,210 $ 24
Man (EUR) 1,600 42
RWE (EUR) 1,200 48
Siemens (EUR) 400 51
Total Germany (Cost $940) 888
HONG KONG 3.1%
Common Stocks 3.1%
Cheung Kong Holdings 6,000 67
Hang Seng Bank 4,000 47
Hong Kong Electric Holdings 21,000 69
Hutchison Whampoa 8,800 110
Yue Yuen Industrial 13,000 24
Total Hong Kong (Cost $223) 317
ITALY 4.2%
Common Stocks 4.2%
Assicurazioni Generali (EUR) 2,000 66
Banca Commerciale Italiana (EUR) 5,900 35
Benetton Group (EUR) 26,200 48
ENI SPA ADR (USD) 700 38
Istituto Nazionale delle Assicurazioni (EUR) 18,015 44
Parmalat Finanziaria (EUR) 39,000 56
San Paolo IMI (EUR) 306 5
San Paolo IMI ADR (USD) 1,400 45
Telecom Italia (EUR) 4,100 47
Toro Assicurazioni (EUR) 2,700 36
Total Italy (Cost $423) 420
JAPAN 16.8%
Common Stocks 16.8%
Dai Nippon Printing 4,000 63
Denso 2,000 46
Hitachi ADR (USD) 800 89
Honda Motor ADR (USD) 1,100 76
JUSCO 3,000 56
Kao 1,000 $ 30
Kuraray 4,000 38
Kyocera 600 78
Makita 4,000 29
Marui 3,000 44
Matsushita Electric Industrial 3,000 87
Mitsui 5,000 33
Mizuho Holdings * 11 85
NEC 5,000 95
Nippon Express 10,000 60
Nippon Telegraph & Telephone ADR (USD) 1,200 55
Nomura Securities 3,000 64
Sekisui House 6,000 63
Sony ADR (USD) 1,400 116
Sumitomo Bank 7,000 85
Sumitomo Chemicals 8,000 39
Sumitomo Marine & Fire Insurance 11,000 67
Takeda Chemical Industries 1,000 66
TDK ADR (USD) 500 51
Terumo 3,000 85
Toshiba 12,000 86
Wacoal 1,000 9
Total Japan (Cost $1,726) 1,695
MEXICO 1.6%
Common Stocks 1.6%
Cemex Participating Certificates
(Represents 2 Series A and 1 Series B shares) 6,279 26
Femsa UBD Units (Represents 1 Series B and 4 Series D 8,000 31
Grupo Financiero Banamex * 39,000 61
Kimberly-Clark de Mexico (Class A) 7,000 18
Telefonos de Mexico (Telmex) (Class L) ADR (USD) 600 32
Total Mexico (Cost $121) 168
NETHERLANDS 6.2%
Common Stocks 6.2%
ABN Amro Holdings ADR (USD) 2,900 68
Akzo Nobel (EUR) 1,700 $ 77
CSM (EUR) 2,200 50
DSM (EUR) 1,200 35
Fortis (EUR) 1,700 52
Hagemeyer (EUR) 1,600 38
ING Groep (EUR) 1,200 82
OCE (EUR) 1,300 19
Philips Electronics ADR (USD) 1,964 78
Royal Dutch Petroleum (USD) 800 48
Telegraaf Holdings (EUR) 3,000 60
Vendex KBB (EUR) 2,000 25
Total Netherlands (Cost $724) 632
NEW ZEALAND 0.1%
Common Stocks 0.1%
Telecom Corporation of New Zealand ADR (USD) 500 9
Total New Zealand (Cost $18) 9
NORWAY 1.4%
Common Stocks 1.4%
Norsk Hydro 1,200 48
Orkla (Class A) 3,085 56
Storebrand ASA 4,900 34
Total Norway (Cost $122) 138
SINGAPORE 2.0%
Common Stocks 2.0%
DSB Group Holdings 5,815 69
Singapore Airlines 5,000 50
Singapore Land 16,000 33
United Overseas Bank 6,336 47
Total Singapore (Cost $154) 199
SPAIN 3.8%
Common Stocks 3.8%
Banco Bilbao Vizcaya Argentaria (EUR) 2,500 $ 33
Banco Santander Central Hispanos ADR (USD) 4,000 41
Endesa ADR (USD) 3,900 65
Grupo Dragados (EUR) 5,100 49
Iberdrola (EUR) 3,000 37
Repsol ADR (USD) 2,500 40
St. Gobain Cristaleria (EUR) 740 20
Telefonica ADR (USD) * 1,703 99
Total Spain (Cost $439) 384
SWEDEN 2.4%
Common Stocks 2.4%
Autoliv 1,500 33
Electrolux (Class B) 4,000 50
Nordic Baltic Holding (DKK) * 10,163 77
Svenska Handelsbanken (Class A) 5,400 85
Total Sweden (Cost $264) 245
SWITZERLAND 6.8%
Common Stocks 6.8%
ABB 1,134 101
Clariant 125 38
Credit Suisse Group 250 47
Hero 300 32
Holderbank Financiere Glarus 70 73
Schindler Holdings 40 61
Swiss Re 45 89
UBS 320 44
Vontobel Holdings 50 140
Zurich Financial Services * 139 67
Total Switzerland (Cost $691) 692
UNITED KINGDOM 20.2%
Common Stocks 20.2%
Abbey National 3,100 $ 43
Associated British Foods 8,008 45
AstraZeneca Group 908 43
AstraZeneca Group ADR (USD) 1,000 48
Bank of Scotland Group 3,800 36
Barclays 1,092 31
Bass 4,200 41
BG Group 6,044 24
Blue Circle Industries 9,900 61
BP Amoco ADR (USD) 1,500 76
British Aerospace 10,000 57
British Telecom ADR (USD) 900 107
Cadbury Schweppes ADR (USD) 2,100 53
Diageo ADR (USD) 1,500 56
FKI 20,000 52
GKN 3,700 43
Glaxo Wellcome ADR (USD) 2,200 128
Halifax Group 3,700 29
Hilton Group 8,000 22
HSBC Holdings 4,800 68
Imperial Chemical Industries ADR (USD) 2,500 62
Kingfisher 8,000 48
Lattice Group * 6,044 13
Pearson 2,500 67
Powergen 6,400 50
Railtrack Group 2,500 39
Reed International 9,000 83
Rentokil Initial 15,000 35
Rolls Royce 18,000 47
Royal & Sun Alliance 6,181 44
Shell Transport & Trading ADR (USD) 3,000 148
Slough Estates 9,000 48
Spirent 13,500 125
Tesco 21,000 80
Tomkins ADR (USD) 3,500 33
United Utilities 5,700 58
Total United Kingdom (Cost $2,152) 2,043
UNITED STATES 0.6%
Common Stocks 0.6%
Pharmacia 1,190 $ 65
Total United States (Cost $58) 65
SHORT-TERM INVESTMENTS 2.2%
Money Market Funds 2.2%
Reserve Investment Fund, 6.68% # 219,820 220
Total Short-Term Investments (Cost $220) 220
Total Investments in Securities
98.6% of Net Assets (Cost $10,276) $ 9,980
Other Assets Less Liabilities 138
NET ASSETS $10,118
----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $120
Accumulated net realized gain/loss - net of distributions 602
Net unrealized gain (loss) (296)
Paid-in-capital applicable to 941,200 shares of $0.01 par
value capital stock outstanding; 2,000,000,000 shares
of the Corporation authorized 9,692
NET ASSETS $10,118
----------
NET ASSET VALUE PER SHARE $10.75
----------
* Non-income producing
# Seven-day yield
ADR American depository receipt
DKK Danish krone
EUR Euro
NZD New Zealand dollar
SEK Swedish krona
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
In thousands
Year
Ended
10/31/00
Investment Income (Loss)
Income
Dividend (net of foreign taxes of $30) $ 237
Interest 25
Securities lending 1
Total income 263
Expenses
Custody and accounting 137
Shareholder servicing 46
Legal and audit 25
Registration 23
Prospectus and shareholder reports 13
Directors 8
Miscellaneous 5
Reimbursed by manager (125)
Total expenses 132
Net investment income (loss) 131
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 759
Foreign currency transactions (30)
Net realized gain (loss) 729
Change in net unrealized gain or loss on securities (739)
Net realized and unrealized gain (loss) (10)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $121
The accompanying notes are an integral part of these financial statements.
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
In thousands
Year 12/21/98
Ended Through
10/31/00 10/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 131 $ 138
Net realized gain (loss) 729 199
Change in net unrealized gain or loss (739) 443
Increase (decrease) in net assets from operations 121 780
Distributions to shareholders
Net investment income (170) --
Net realized gain (206) --
Decrease in net assets from distributions (376) --
Capital share transactions *
Shares sold 10,074 13,689
Distributions reinvested 354 --
Shares redeemed (9,831) (4,693)
Increase (decrease) in net assets from capital
share transactions 597 8,996
Net Assets
Increase (decrease) during period 342 9,776
Beginning of period 9,776 -
End of period $10,118 $9,776
----------------------
*Share information
Shares sold 901 1,331
Distributions reinvested 32 --
Shares redeemed (881) (442)
Increase (decrease) in shares outstanding 52 889
The accompanying notes are an integral part of these financial statements.
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
October 31, 2000
Notes to Financial Statements
--------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Funds, Inc. (the corporation) is registered
under the Investment Company Act of 1940. The International Growth & Income
Fund (the fund), a diversified, open-end management investment company, is
one of the portfolios established by the corporation and commenced
operations on December 21, 1998. The fund seeks long-term growth of capital
and reasonable income through investments primarily in the common stocks of
well-established, dividend-paying non-U.S. companies.
The accompanying financial statements were prepared in accordance with
generally accepted accounting principles, which require the use of
estimates made by fund management.
Valuation Equity securities are valued at the last quoted sales price at
the time the valuations are made. A security that 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.
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 denominated in foreign
currencies are translated into U.S. dollar values each day at the
prevailing exchange rate, using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank. 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 net investment
income and realized gains determined in accordance with generally accepted
accounting principles. Credits earned on daily uninvested cash balances at
the custodian are used to reduce the fund's custody charges.
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. government 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, 2000, the value of loaned securities was $116,000; aggregate
collateral consisted of $118,000 in the securities lending collateral pool.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $3,232,000 and $2,997,000, respectively, for the
year ended October 31, 2000.
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, 2000. The
results of operations and net assets were not affected by the
increases/(decreases) to these accounts.
--------------------------------------------------------------------------------
Undistributed net investment income $(13,000)
Undistributed net realized gain (120,000)
Paid-in-capital 133,000
At October 31, 2000, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$10,276,000. Net unrealized loss aggregated $296,000 at period-end, of
which $1,081,000 related to appreciated investments and $1,377,000 to
depreciated investments.
NOTE 4 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in
which it invests. Foreign income taxes are accrued by the fund as a
reduction of dividend and interest income.
NOTE 5 - RELATED PARTY TRANSACTIONS
The fund is managed by T. Rowe Price International, Inc. (the manager), a
wholly owned subsidiary of T. Rowe Price Associates, Inc. (Price
Associates). The investment management agreement between the fund and the
manager provides for an annual investment management fee. 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 0.295% for assets in excess of
$120 billion. At October 31, 2000, and for the year 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, 2000, which would cause
the fund's ratio of total expenses to average net assets to exceed 1.25%.
Thereafter, through October 31, 2002, 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 total expenses to average net assets to exceed 1.25%.
Pursuant to this agreement, $70,000 of management fees were not accrued by
the fund for the year ended October 31, 2000, and $125,000 of other
expenses were borne by the manager. Additionally, $166,000 from a prior
period remains subject to reimbursement through October 31, 2002.
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. 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 $141,000 for the year ended October 31, 2000, of which
$16,000 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 Price Associates. The Reserve Funds are
offered as cash management options only to mutual funds and other accounts
managed by Price Associates or T. Rowe Price International, 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, 2000, totaled $23,000 and are reflected as interest income in
the accompanying Statement of Operations.
T. Rowe Price International Growth & Income Fund
--------------------------------------------------------------------------------
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Board of Directors of T. Rowe Price International Funds, Inc. and
Shareholders of International Growth & Income 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 International Growth & Income Fund (one of the portfolios comprising T.
Rowe Price International Funds, Inc., hereafter referred to as the "Fund")
at October 31, 2000, 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 accounting principles generally accepted in
the United States of America. 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 auditing
standards generally accepted in the United States of America, 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, 2000
by correspondence with the custodian, provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 17, 2000
T. Rowe Price International Growth & Income Fund
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Tax Information (Unaudited) for the Tax Year Ended 10/31/00
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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:
o $274,000 from short-term capital gains,
o $52,000 from long-term capital gains, subject to the 20% rate gains
category.
The fund will pass through foreign source income of $237,000 and foreign taxes
paid of $29,000.
T. Rowe Price International Growth & Income Fund
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Annual Meeting Results
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The T. Rowe Price International Growth & Income Fund held an annual meeting on
October 25, 2000, to approve a new investment management agreement, to elect the
directors listed below, and to ratify the Board of Directors' selection of
PricewaterhouseCoopers LLP as the fund's independent accountants.
The results of voting were as follows (by number of shares):
To approve a new investment management agreement:
Affirmative: 711,327.351
Against: 5,720.176
Abstain: 11,321.533
Total : 728,369.060
To elect the directors listed below:
M. David Testa
Affirmative: 722,090.716
Withhold: 6,278.344
Total: 728,369.060
Paul M. Wythes
Affirmative: 722,090.716
Withhold: 6,278.344
Total: 728,369.060
Martin G. Wade
Affirmative: 722,090.716
Withhold: 6,278.344
Total: 728,369.060
Anthony W. Deering
Affirmative: 722,090.716
Withhold: 6,278.344
Total: 728,369.060
Donald W. Dick, Jr.
Affirmative: 722,090.716
Withhold: 6,278.344
Total: 728,369.060
To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants:
Affirmative: 714,992.951
Against: 4,333.602
Abstain: 9,042.507
Total: 728,369.060
For fund and account information
or to conduct transactions,
24 hours, 7 days a week
By touch-tone telephone
Tele*Access 1-800-638-2587
By Account Access on the Internet
www.troweprice.com/access
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account
or obtain information, call:
1-800-638-5660
For the hearing impaired, call:
1-800-367-0763
Internet address:
www.troweprice.com
Plan Account Lines for retirement
plan participants:
The appropriate 800 number appears
on your retirement account statement.
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
appropriate to the fund or funds covered
in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site.
Baltimore Area
Downtown - new address
105 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
2260 Briargate Parkway
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
San Francisco Area
1990 North California Boulevard
Suite 100
Walnut Creek
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
T. Rowe Price, Invest With Confidence (registered trademark)
T. Rowe Price Investment Services, Inc., Distributor. F127-050 10/31/00
