-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NoriN1o0Mefvlvl5HAL3GRjUecq6yrFtZ3gJDEjIPUuPT13SyY7uHeTilr2/fPcH HQpqlW0NVCsXimGm09znhA== 0000313212-96-000110.txt : 19961216 0000313212-96-000110.hdr.sgml : 19961216 ACCESSION NUMBER: 0000313212-96-000110 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUNDS INC CENTRAL INDEX KEY: 0000313212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521175211 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02958 FILM NUMBER: 96680261 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL TRUST DATE OF NAME CHANGE: 19900301 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUND INC DATE OF NAME CHANGE: 19890914 N-30D 1 Annual Report Global Stock Fund October 31, 1996 T. Rowe Price Report Highlights o Several foreign stock markets were strong during the past 12 months, although few were able to keep pace with the exuberant U.S. market. o The fund performed well relative to its benchmarks, largely because of its exposure to the U.S. and underweighting in Japan. Returns were 4.22% and 13.50%, respectively, for the 6- and 10-month periods ended October 31, 1996. o The fund maintained high weightings in Europe and the U.S. and was diversified throughout the Far East and Latin America. o The effect of currency translation was mixed, with U.S. investors benefiting from the advancing British pound and losing ground because of the flagging Japanese yen. o There are signs that favorable interest rates and corporate earnings progress, which have underpinned the U.S. market, may become positives in Europe and Japan. Fellow Shareholders As your fund completes its first 10 months of operation, we would once again like to welcome shareholders. Over the year, few overseas markets were able to keep pace with an exuberant Wall Street where stock prices benefited from a benign interest rate environment and strong corporate earnings. Overall, foreign stock returns were lackluster for the past six months but respectable for the year ended October 31. Performance Comparison Since Inception Periods Ended 10/31/96 6 Months (12/29/95) __________________________________________________________________________ Global Stock Fund 4.22% 13.50% MSCI World Index 2.82 9.67* Lipper Global Funds Average 1.62 11.35* * From 12/31/95 From inception through October 31, the T. Rowe Price Global Stock Fund performed well against both its index and its peer group. Its return of 13.50% was significantly ahead of the Morgan Stanley Capital International World Index and its results were better than the Lipper Global Funds Average by a smaller margin. During the six months ended October 31, the fund's return was more moderate in absolute terms but was still ahead of both the index and peer group. Performance Review Over the 12-month period, fund performance against the index and the Lipper peer group was helped significantly by an underweighting in Japan and exposure to European and U.S. stock markets. Results were hampered somewhat by our underweighting in the U.S. but helped by stock selection there. Hong Kong contributed positively, but small positions in markets such as Singapore and Thailand were disappointing. In Europe, our stock selection added value. An overweighting in the Netherlands was particularly helpful. Latin America performed well over the 10 months with Brazil making a strong contribution during the second half. Market Performance Six Months Local Local Currency U.S. Ended 10/31/96 Currency vs. U.S. Dollars Dollars __________________________________________________________________________ France 2.15% 1.35% 3.53% Germany 6.65 1.35 8.09 Hong Kong 10.36 0.04 10.40 Italy - 10.35 3.18 - 7.50 Japan - 8.74 - 7.90 -15.95 Mexico 2.26 - 6.96 - 4.86 Netherlands 9.44 1.18 10.74 Norway 0.46 3.25 3.72 Switzerland 2.31 - 1.11 1.17 United Kingdom 5.20 8.52 14.16 United States 9.46 - 9.46 Source: FAME Information Services, Inc., using MSCI indices. In Europe, the Continental economies have been weak, constrained by the tight fiscal policies of governments trying to meet the economic criteria required for Economic Monetary Union (EMU) membership in January 1999. Countering this tight fiscal policy, most central banks kept the monetary reins relatively loose, which in turn helped a number of markets produce double-digit returns. Currency markets were much more subdued. The U.S. dollar improved steadily against the yen for most of the year but rose only a modest amount against leading European currencies such as the franc and deutschemark. Perhaps surprisingly, the British pound and the Italian lira were the strongest European currencies and each has strengthened against the dollar over the last 10 months. On balance, the overseas currency mix slightly hampered the fund. Investment Review United States The U.S. stock market continued its strong advance, up 16.6% over the 10 months ended October 31, 1996, as measured by the Standard & Poor's 500 Stock Index. Stocks benefited from an economy sound enough to permit solid earnings growth, with tame inflation accompanied by relatively low interest rates. Following stronger-than-expected growth in the first quarter, which pushed long-term interest rates above 7%, growth moderated and rates fell back around the 6.5% level. The market continued to favor companies that could generate solid earnings growth in an atmosphere of slow economic growth. We focused on companies with both strong cash flow characteristics and good earnings potential, such as GE, AlliedSignal, Danaher, Columbia/HCA Healthcare, and Freddie Mac, which were among our core U.S. holdings. In addition to these core issues, fund performance was aided by technology stocks such as Intel, Microsoft, and Oracle. Also within this sector, we bought 3Com and Cisco Systems because of their dominant market positions and eliminated BayNetworks and Sybase. Financial stocks were likewise positive contributors to fund performance because of their solid earnings. In the spring, we added Sallie Mae and Travelers Group, which appreciated later when interest rates declined. Chart 1 Geographic Diversification pie chart showing: Europe 35%, United States 32%, Japan 14%, Far East 8%, Latin America 4%, Other and Reserves 7% The most disappointing sector for the portfolio was health care; both United Healthcare and Apria Healthcare were drags on performance. Nevertheless, we believe this sector offers significant growth potential and have maintained an overweighted position in it. We see moderate growth in the U.S. economy in 1997 and expect our core holdings to perform well. We will continue to supplement those holdings with other stocks exhibiting good growth potential. Europe In Europe, the economic picture is one of contrasts. On the Continent, the German locomotive is showing a moderate recovery but there are few signs that this has spread to its neighbors. On the other hand, the U.K. continued a steady growth phase and smaller economies such as Norway and Ireland are performing very strongly. Germany remains at the forefront of the move to Economic Monetary Union and, along with the other founding members, its government must soon meet the Maastricht criteria for debt and budget deficits as a percentage of GDP. The budget for the old West Germany is in surplus but there is a significant deficit in the old East Germany and, therefore, overall fiscal policy remains tight for this point in the cycle. Recognizing this dilemma, the Bundesbank maintained a moderately loose monetary policy and the economy is unlikely to slip into recession. The picture from here should improve as unification tax surcharges phase out and stimulate better consumer sentiment. Also, the weaker deutschemark will help with the export sector. We continued to underweight this market but our bias toward growth companies in the chemical and drug sectors enabled us to add value. The situation in the Netherlands is similar, but the domestic economy is of limited relevance to the Dutch market which is dominated by a small number of multinational companies. A number of our favorite multinationals are among our largest holdings, and Royal Dutch Petroleum, together with media/publishing stocks Wolters Kluwer and Elsevier, all performed strongly. __________________________________________________________________________ IN THE U.K., THE ECONOMY IS CONTINUING A LONG PERIOD OF STEADY GROWTH. . . In the U.K., the economy is continuing a long period of steady growth which has enabled corporate earnings to advance, but inflation and the current account are well under control. It is unlikely that the U.K. will be a founding member of EMU and, therefore, it is less constrained by the Maastricht criteria. Also, with general elections that must be held no later than May 1997, the ruling Conservative Party will be anxious for the "feel good" factor to reappear. Despite all the temptations, the Chancellor has behaved prudently by raising interest rates a notch, and his forthcoming budget will make few concessions on tax. The stock market made good progress for most of the year and was one of Europe's better performers. In recent weeks, it retreated from an all-time high, but, for the U.S. investor, this was more than compensated for by sterling's sharp advance. Our bias toward growth stocks in the service and pharmaceutical sector continued to be a successful strategy in this market. In France, the picture remained bleak with the economy hardly moving and unemployment uncomfortably high. Already this has caused some social unrest, but the government is unable to offer fiscal stimulus given the deficit targets required by EMU. At least the current account was in surplus and the link between the French franc and deutschemark seemed to be holding steady. Despite the poor economic background, we can find many investments that meet our preference for growth at a reasonable price. These have tended to be in the service sector where retailers such as Carrefour and Pinault Printemps performed well. The stock market in Switzerland is another where the multinationals tend to dominate the scene. Surprisingly, the Swiss franc has been a weak currency over the year, but this has focused attention on the exporters where our selections have been rewarding, even in U.S. dollars. Turning to the smaller economies, the Nordic markets were strong, with Sweden benefiting from a steady fall in interest rates as the government tried to hold the strong kroner in line with other European currencies. Norway also did well as the country's oil wealth provided healthy surpluses for both public expenditure and external trade. Spain and Italy have indicated their ambitions to be founding members of EMU but a cold look at the statistics suggests they will be hard pressed to meet the required economic targets in time. Nevertheless, the new Italian government under Mr. Prodi has shown remarkable vigor in tackling deep-seated problems such as public sector wage discipline and fiscal reform. Far East A year ago, the economy in Japan was in trouble as the combination of currency strength and a banking crisis threatened to throw it into a deflationary spiral. Helped by a stimulatory fiscal policy and a successful strategy of currency depreciation, the economy pulled through this difficult period but the recovery is patchy at best. Capital expenditure - traditionally the engine of Japanese growth - picked up strongly and this in turn fed through to better figures for production and shipments. Industry Diversification Percent of Percent of Net Assets Net Assets 4/30/96 10/31/96 __________________________________________________________________________ Services 21.0% 22.7% Consumer Goods 20.1 20.6 Finance 15.7 16.8 Capital Equipment 14.8 15.5 Energy 8.9 8.0 Materials 5.5 6.7 Multi-Industry 2.6 3.0 All Other - 0.1 Reserves 11.4 6.6 __________________________________________________________________________ Total 100.0% 100.0% Significantly, there is evidence that an inventory overhang is now being worked off, which bodes well for the future. Dimming this brighter picture is consumer expenditure - by far the largest component of GDP - which remains very sluggish. Despite this mixed picture, our assumption is that the economy will continue its steady recovery. Monetary policy is supportive and the recent weakness of the yen will be a big help to Japan's export industry. The stock market also struggled to make progress. It still looks expensive compared with other world markets but, against its own history, looks to be better valued. Our strategy in the market avoids the financial sector where bad loans continue to haunt the city banks and valuations remain unacceptably high. We added to sectors such as retailing, pharmaceuticals, and consumer nondurables where we can find growth at a reasonable valuation. Our holdings also focused on a number of Japan's multinational corporations, many of which are world leaders in their fields. These stocks performed well for us recently and we have cut back in a number of them where prices moved ahead of realistic expectations. __________________________________________________________________________ . . . THE CHINESE ECONOMY HAS PROVIDED SUPPORT FOR HONG KONG WHERE . . . THE STOCK MARKET WAS ONE OF THE BEST IN THE REGION. The improved health of the Chinese economy has provided support for Hong Kong where, over the last six months, the stock market was one of the best in the region. With the Hong Kong dollar pegged to the U.S. dollar, a more benign interest rate environment in the U.S. quickly spilled over into Hong Kong, and the Bank of China reduced its interest rates twice in the last few months. Improved business results from the financial sector and a recovery in residential property prices all helped this stock market where we have a moderate overweighting. In contrast, the Singapore market performed poorly over the last six months as a weak trend in exports put a brake on the broad economy. The government has announced measures to dampen speculation in the residential property market, and the recent trend in corporate earnings has been below expectations. Singapore has one of the best managed economies in the world but the stock market is unlikely to perform until the economy picks up again. In contrast, the Malaysian market held up well during the summer months and smaller companies continued to perform well. The worry here is that the economy has been growing too fast, but recent statistics evidence a deceleration, which will in turn moderate the high external deficit. In Thailand, the stock market collapsed over the last six months. Corporate profits came in below expectations, the quality of bank balance sheets was called into question, and a downgrade in the rating of Thai obligations was a blow to foreign confidence. Our portfolio had less than 1% of assets in Thailand and the companies we have chosen should weather this uncomfortable period for the economy. In Australia, the economy is slowing but not sliding into recession. The new Liberal Coalition government has a workable majority and its objectives of labor reform and further integration with Southeast Asia bode well. The stock market itself has been unexciting but, helped by a 7% appreciation of the currency against the U.S. dollar, returns for the U.S. investor were quite reasonable. In New Zealand, the economy is in better shape and the market has shown solid dollar returns helped by a strong contribution from the New Zealand dollar. Latin America The stock markets of Latin America made a strong contribution to the fund's return. Our largest position was in Brazil where the economy regained momentum after a difficult 1995. Industrial production and retail sales were both in positive territory but the government will respond quickly to any signs of a resurgence of inflation or deterioration in the trade position. Many analysts think the currency is overvalued although, provided the government pursues the right policies, international confidence can be maintained. The major stock market theme this year was the privatization and restructuring of the telecommunications and electricity sectors and our holding in blue chip Telecomunicacoes Brasileiras outperformed strongly. Mexico has come a long way since the peso crisis of two years ago although the banking system remains fragile despite a restructuring program. After a savage recession, the economy is now growing again with the export sector benefiting from the weak peso. Reserves are still uncomfortably low and international confidence will depend on further improvement of the trade position. INVESTMENT POLICY AND OUTLOOK Our strategy for the fund going forward is to maintain a relatively heavy weighting in the stock markets of Europe. The United States remains the largest individual country position, with Japan second. We maintain important positions in the smaller markets of Southeast Asia and Latin America. The portfolio remains well diversified in terms of its country distribution and the number of stocks held. A common theme to our stock selection is to find growth at a reasonable valuation, although we have been comfortable holding more cyclical issues in markets such as Japan where we think economic recovery will continue. Stock markets tend to be driven by the direction of interest rates and how corporate business results compare with expectations. For two years now, these two forces have been simultaneously positive for the U.S. market but have been less compelling overseas. There are some signs that this may be about to change. Interest rates in the U.S. are unlikely to fall much further and a long period of strong corporate profit growth may be coming to an end. In contrast, interest rates can fall further in a number of European markets, and the economic recoveries in Europe and Japan may surprise on the upside. The smaller markets of Asia and Latin America have great potential and have their part to play in a diversified international portfolio. The case for international diversification is as valid as ever, the fund remains fully invested, and we are optimistic about its future. Respectfully submitted, Martin G. Wade President November 22, 1996 About Your Investment Manager Since many of you are new investors in the T. Rowe Price international stock funds, we want to tell you briefly about the management team behind them. The funds are managed by Rowe Price-Fleming International, Inc., a joint venture between T. Rowe Price and Robert Fleming Holdings Ltd. of London. Rowe Price-Fleming brings a wealth of experience to international investing. T. Rowe Price was founded in 1937, and Robert Fleming, a British merchant bank and investment firm, was founded in 1873. Since its birth in 1979, Rowe Price-Fleming has grown into the largest U.S. manager of international no-load funds,* with more than $27 billion under its stewardship, including 11 stock and bond mutual funds. While Rowe Price-Fleming's investment team is based in London, portfolio managers are also located in Tokyo, Hong Kong, Singapore, Baltimore, and soon in South America. The company's equity managers are responsible for specific stock selection, but they are supported by more than 100 analysts in 14 financial centers worldwide. Rowe Price-Fleming's investment philosophy is straightforward and consistent: Each equity fund seeks broad diversification among companies that offer above-average growth prospects at reasonable valuations. While diversifying among many different companies and industries, each fund adheres strictly to its prospectus. Portfolio managers combine a macroeconomic view of each market with extensive research on individual companies. Therefore, your portfolios can potentially benefit from positive economic trends as well as from the selection of individual stocks that may perform well regardless of economic conditions. Rowe Price-Fleming believes that its emphasis on faster-growing foreign economies, broad diversification, and strong commitment to fundamental research helps it identify the best opportunities in international stocks. *Strategic Insight Simfund T. Rowe Price Global Stock Fund __________________________________________________________________________ Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 10/31/96 __________________________________________________________________________ Elsevier, Netherlands 1.2% Royal Dutch Petroleum, Netherlands 1.2 Wolters Kluwer, Netherlands 1.1 National Westminster Bank, United Kingdom 1.1 SmithKline Beecham, United Kingdom 1.0 __________________________________________________________________________ Reed International, United Kingdom 0.9 GE, United States 0.8 Columbia/HCA Healthcare, United States 0.8 Telecomunicacoes Brasileiras, Brazil 0.8 Roche Holdings, Switzerland 0.8 __________________________________________________________________________ Eaux Cie Generale, France 0.7 Danaher, United States 0.7 Astra (Class B), Sweden 0.7 Sallie Mae, United States 0.7 ACE Limited, United States 0.7 __________________________________________________________________________ Shell Transport & Trading, United Kingdom 0.7 AlliedSignal, United States 0.7 Gehe, Germany 0.6 Nestle, Switzerland 0.6 Chase Manhattan, United States 0.6 __________________________________________________________________________ Philip Morris, United States 0.6 Abbey National, United Kingdom 0.6 Denso, Japan 0.6 Wal-Mart, United States 0.6 Hubbell (Class B), United States 0.6 __________________________________________________________________________ Total 19.4% T. Rowe Price Global Stock 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 a broad-based average or index. The index return does not reflect expenses, which have been deducted from the fund's return. Chart 2 - SEC Graph: a line chart showing the cumulative growth of $10,000 invested in the Global Stock Fund over the past 10 years (or "from inception" for funds lacking 10-year histories) compared with $10,000 invested in a broad-based index or average over the same period. Average Annual Compound Total Return Since Inception Periods Ended 10/31/96 Inception* Date __________________________________________________________________________ Global Stock Fund 13.50% 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. *Unannualized return; period is less than one year. T. Rowe Price Global Stock Fund __________________________________________________________________________ Financial Highlights For a share outstanding throughout the period 12/29/95 to 10/31/96 NET ASSET VALUE Beginning of period $ 10.00 Investment activities Net investment income 0.05* Net realized and unrealized gain (loss) 1.30 Total from investment activities 1.35 NET ASSET VALUE End of period $ 11.35 Ratios/Supplemental Data Total return 13.50%* Ratio of expenses to average net assets 1.30%*! Ratio of net investment income to average net assets 0.88%*! Portfolio turnover rate 50.0%! Average commission rate paid $ 0.0026 Net assets, end of period (in thousands) $ 14,916 * Excludes expenses in excess of a 1.30% voluntary expense limitation in effect through 10/31/97. ! Annualized. The accompanying notes are an integral part of these financial statements. T. Rowe Price Global Stock Fund __________________________________________________________________________ October 31, 1996 Statement of Net Assets Shares/Par Value __________________________________________________________________________ In thousands ARGENTINA 0.4% Common Stocks 0.4% Banco de Galicia Buenos Aires (Class B) ADR (USD) 409 $ 7 Banco Frances del Rio ADR (USD) 144 4 Naviera Perez (Class B) 1,810 11 Telefonica de Argentina (Class B) ADR (USD) 760 18 YPF Sociedad Anonima (Class D) ADR (USD) 620 14 Total Argentina (Cost $58) 54 AUSTRALIA 1.1% Common Stocks 1.1% Amcor Limited 1,000 6 Australia Gas & Light 3,052 17 Broken Hill Proprietary 1,900 25 Coca Cola Amatil 1,400 19 Howard Smith 2,000 16 Lend Lease 600 10 National Australia Bank 1,037 11 News Corporation 1,804 10 Publishing and Broadcasting 1,400 6 Tabcorp Holdings 2,500 12 TNT * 4,000 8 WMC 1,500 10 Westpac Banking 1,200 7 Woodside Petroleum 1,000 7 164 Preferred Stocks 0.0% Sydney Harbour Casino Holdings * 3,000 4 4 Total Australia (Cost $149) 168 AUSTRIA 0.0% Common Stocks 0.0% EVN Energie Versorgung Nieder 20 3 Flughafen Wien 70 3 Total Austria (Cost $7) 6 BELGIUM 0.7% Common Stocks 0.7% Generale Banque 77 27 Generale Banque, VVPR Strip 7 0 Kredietbank 175 56 UCB 9 20 Total Belgium (Cost $88) 103 BRAZIL 1.6% Common Stocks 0.2% Eletrobras 46,910 15 Pao de Acucar GDR (USD) 190 4 Usiminas ADR (USD) 290 3 22 Preferred Stocks 1.4% Banco Bradesco 2,950,029 25 Brasmotor 23,775 8 Cia Energetica Minas Gerias ADR (144a) (USD) * 150 5 Cia Energetica Minas Gerais ADR, sponsored, non voting (USD) * 392 12 Telecomunicacoes Brasileiras ADR (USD) 1,555 116 Telecomunicacoes de Sao Paulo 108,545 20 Usiminas 13,434,238 14 Usiminas ADS (USD) 1,257 13 213 Total Brazil (Cost $203) 235 CANADA 0.2% Common Stocks 0.2% Alcan Aluminum 730 24 Royal Bank of Canada 290 10 Total Canada (Cost $31) 34 CHILE 0.3% Common Stocks 0.3% Chile Fund (USD) 230 5 Chilectra ADR (144a) (USD) 150 8 Compania Cervecerias Unidas ADS (USD) 200 4 Compania de Telecomunicaciones de Chile ADR (USD) 85 8 Empresa Nacional de Electricidad ADS (USD) 570 11 Enersis ADS (USD) 350 10 Total Chile (Cost $48) 46 CHINA 0.3% Common Stocks 0.3% Huaneng Power International (Class N) ADR (USD) * 2,100 33 Yizheng Chemical Fibre (Class H) (HKD) 40,000 9 Total China (Cost $45) 42 CZECH REPUBLIC 0.0% Common Stocks 0.0% SPT Telecom 40 4 Total Czech Republic (Cost $5) 4 DENMARK 0.2% Common Stocks 0.2% Den Danske Bank 180 13 Tele Danmark (Class B) 80 4 Unidanmark (Class A) 170 8 Total Denmark (Cost $24) 25 FINLAND 0.1% Common Stocks 0.1% Nokia (Class A) 340 16 Total Finland (Cost $13) 16 FRANCE 5.2% Common Stocks 5.2% Accor 136 17 Alcatel Alsthom 100 8 Canal Plus 120 30 Carrefour 144 80 Castorama Dubois 47 8 Chargeurs International 77 3 Cie de St. Gobain 322 43 Eaux Cie Generale 917 110 Elf Aquitaine 322 26 GTM Entrepose 130 6 Guilbert 110 17 L'Oreal 44 15 LVMH 271 62 Lapeyre 114 6 Legrand 50 9 Pathe 77 21 Pinault Printemps 212 80 Primagaz 130 13 Promodes 30 8 Rexel 60 18 Sanofi 140 13 Schneider 400 20 Sodexho 100 48 Television Francaise 523 56 Total (Class B) 653 51 Total France (Cost $689) 768 GERMANY 2.7% Common Stocks 2.6% Allianz Holdings 28 51 Altana 8 7 Bayer 1,460 55 Bilfinger and Berger 300 12 Deutsche Bank 470 22 Gehe 1,400 94 Mannesmann 55 21 Rhoen Klinikum 217 27 Schering 214 17 Siemens 390 20 Veba 908 49 Volkswagen 57 23 398 Preferred Stocks 0.1% Fielmann 120 5 SAP 60 8 13 Total Germany (Cost $386) 411 HONG KONG 2.9% Common Stocks 2.9% Cathay Pacific Airways 12,000 19 Dao Heng Bank Group 4,000 18 First Pacific 28,231 39 Guangdong Investment 18,000 13 Guangzhou Investment 60,000 19 Guoco Group 8,000 42 Hong Kong Land Holdings (USD) 28,575 64 Hopewell Holdings 42,000 28 Hutchison Whampoa 8,000 56 New World Development 10,042 58 Swire Pacific (Class A) 3,000 26 Wharf Holdings 14,000 58 Total Hong Kong (Cost $413) 440 ITALY 1.3% Common Stocks and Warrants 1.3% Assicurazioni Generali 2,200 42 Banca Fideuram 10,000 21 ENI 2,000 9 IMI 2,000 16 Italgas 2,600 10 Rinascente 1,000 6 Rinascente, warrants, exp. 11/30/99 * 50 0 Stet 8,000 28 Stet, savings shares 4,000 11 Telecom Italia 8,000 18 Telecom Italia Mobile 14,000 29 Total Italy (Cost $180) 190 JAPAN 13.5% Common Stocks 13.5% Alps Electric 2,000 25 Amada 3,000 26 Canon 4,000 77 Citizen Watch 2,000 15 DDI 3 23 Daifuku 1,000 12 Daiichi Pharmaceutical 3,000 43 DaiNippon Screen Manufacturing 3,000 24 Daiwa House 4,000 55 Denso 4,000 83 East Japan Railway 10 46 Fanuc 1,000 32 Hitachi 5,000 44 Hitachi Zosen 4,000 20 Ito-Yokado 1,000 50 Kokuyo 2,000 50 Komatsu 3,000 25 Komori 1,000 22 Kumagai Gumi 3,000 9 Kuraray 4,000 39 Kyocera 1,000 66 Makita 2,000 27 Marui 3,000 56 Matsushita Electric Industrial 4,000 64 Mitsubishi 1,000 11 Mitsubishi Heavy Industries 10,000 77 Mitsubishi Paper Mills 2,000 10 Mitsui Fudosan 5,000 62 Murata Manufacturing 1,000 32 NEC 6,000 65 National House Industrial 1,000 14 Nippon Hodo 1,000 14 Nippon Steel 18,000 52 Nippon Telephone & Telecom 4 28 Nomura Securities 3,000 50 Pioneer Electronic 2,000 39 Sankyo 3,000 74 Sega Enterprises 1,000 40 Sekisui Chemical 4,000 45 Sekisui House 3,000 32 Sharp 4,000 61 Shin-Etsu Chemical 2,000 34 Sony 800 48 Sumitomo 5,000 40 Sumitomo Electric 6,000 79 Sumitomo Forestry 2,000 28 TDK 1,000 59 Teijin 6,000 28 Tokio Marine & Fire Insurance 1,000 11 Tokyo Electronics 1,000 26 Toppan Printing 2,000 24 Total Japan (Cost $2,194) 2,016 MALAYSIA 1.8% Common Stocks and Warrants 1.8% Affin Holdings 22,200 57 Berjaya Sports Toto 5,000 19 Commerce Asset Holdings 3,000 20 MBF Capital 14,000 19 Multi-Purpose Holdings 18,000 31 Renong 12,000 19 Renong, warrants, exp. 11/21/00 * 375 0 Tanjong 7,000 27 Technology Resources Industries * 12,000 29 United Engineers 6,000 47 268 Preferred Stocks 0.0% Renong, cv. loan stock, 4.00%, 5/21/01 600 0 0 Total Malaysia (Cost $264) 268 MEXICO 1.2% Common Stocks and Rights 1.2% Cemex ADS (USD) 4,000 28 Cifra ADR (USD) 12,090 15 Fomentos Economico Mexicano (Class B) 3,230 10 Gruma (Class B) * 2,700 13 Gruma (Class B), rights * 71 0 Grupo Financiero Banamex (Class B) 4,490 10 Grupo Industrial Maseca (Class B) 8,000 10 Grupo Modelo (Class C) 2,000 10 Grupo Televisa GDR (USD) 323 8 Kimberly-Clark Mexico (Class A) 190 4 Panamerican Beverages (Class A) ADR (USD) 335 15 Telefonos de Mexico (Class L) ADS (USD) 1,680 51 Total Mexico (Cost $182) 174 NETHERLANDS 6.4% Common Stocks 6.4% ABN Amro Holdings 770 44 Ahold 608 35 Akzo Nobel 430 54 CSM 1,088 57 Elsevier 11,180 186 Fortis Amev 610 18 Gucci Group (USD) 400 28 ING Groep 2,350 73 Koninklijke PTT Nederland 158 6 Nutricia 100 14 Polygram 1,145 54 Royal Dutch Petroleum 1,060 175 Unilever 361 55 Wolters Kluwer 1,260 162 Total Netherlands (Cost $875) 961 NEW ZEALAND 0.4% Common Stocks 0.4% Carter Holt Harvey 3,300 7 Fernz 2,400 8 Fletcher Challenge Building 250 1 Fletcher Challenge Energy 250 1 Fletcher Challenge Forests Division 7,000 12 Fletcher Challenge Paper 500 1 Telecom Corporation of New Zealand 4,800 25 Total New Zealand (Cost $47) 55 NORWAY 0.9% Common Stocks 0.9% Norsk Hydro 1,540 71 Orkla (Class A) 983 63 Saga Petroleum (Class B) 400 6 Total Norway (Cost $119) 140 PHILIPPINES 0.1% Common Stocks 0.1% Philippine National Bank 1,000 12 Total Philippines (Cost $12) 12 PORTUGAL 0.3% Common Stocks 0.3% Jeronimo Martins 464 42 Total Portugal (Cost $30) 42 SINGAPORE 1.1% Common Stocks 1.1% DBS Land 4,500 14 Development Bank of Singapore 1,000 12 Far East Levingston Shipbuilding 2,000 10 Fraser & Neave 1,000 10 Keppel 1,000 7 Overseas Union Bank 5,000 34 Singapore Land 4,000 22 Singapore Press 600 10 United Industrial 8,000 7 United Overseas Bank 4,000 39 Total Singapore (Cost $184) 165 SOUTH KOREA 0.3% Common Stocks 0.3% Hanil Bank 1,000 9 Hanil Securities 400 4 Korea Electric Power 700 21 Seoul Bank 700 4 Total South Korea (Cost $47) 38 SPAIN 1.6% Common Stocks 1.6% Argentaria Banca de Espana 320 12 Banco Popular Espanol 167 32 Banco Santander 560 29 Centros Comerciales Pryca 460 11 Empresa Nacional de Electricidad 1,030 63 Fomento de Construcciones y Contra 60 5 Gas Natural 167 29 Iberdrola 2,352 25 Repsol 1,200 39 Total Spain (Cost $245) 245 SWEDEN 1.7% Common Stocks 1.7% ABB (Class A) 180 20 Astra (Class B) 2,280 104 Atlas Copco (Class B) 800 16 Electrolux (Class B) 700 39 Hennes & Mauritz (Class B) 290 38 Sandvik (Class B) 1,415 33 Stora Kopparbergs (Class B) 760 10 Total Sweden (Cost $217) 260 SWITZERLAND 3.1% Common Stocks 3.1% ABB 50 62 Adecco 156 44 CS Holding 190 19 Ciba-Geigy 39 48 Nestle 80 87 Roche Holdings 15 113 Sandoz 50 58 Schweizerischer Bankverein 160 31 Total Switzerland (Cost $433) 462 THAILAND 0.3% Common Stocks and Warrants 0.3% Advanced Information Service 300 4 Bangkok Bank 2,300 25 Bank of Ayudhya 1,500 4 Siam Cement 100 3 Siam Commercial Bank 800 7 Thai Farmers Bank 1,000 8 Thai Farmers Bank, warrants, exp. 9/15/02 * 125 0 Total Thailand (Cost $75) 51 UNITED KINGDOM 11.2% Common Stocks 11.2% Abbey National 8,000 83 Argos 4,480 56 Asda Group 19,000 37 BAA 1,000 8 British Gas 4,000 12 British Petroleum 3,000 32 Cable & Wireless 7,000 56 Cadbury Schweppes 5,000 42 Caradon 10,000 39 Coats Viyella 3,000 7 Compass Group 3,000 30 David S. Smith 5,000 25 East Midlands Electricity 2,000 18 Electrocomponents 2,000 13 GKN 1,000 19 Glaxo Wellcome 5,000 78 Grand Metropolitan 8,000 60 Guinness 7,100 51 Heywood Williams Group 1,000 4 Hillsdown Holdings 3,000 9 John Laing (Class A) 3,000 13 Kingfisher 7,400 79 Ladbroke Group 5,000 16 London Electricity 2,650 26 National Grid Group 4,000 12 National Westminster Bank 14,000 160 RTZ 3,000 48 Rank Group 6,000 40 Reed International 7,000 130 Rolls Royce 3,000 12 Safeway 6,000 36 Sears 3,000 4 Shell Transport & Trading 6,000 98 SmithKline Beecham 12,000 148 T & N 6,000 12 Tesco 5,000 27 Tomkins 14,000 59 United Newspapers 6,400 70 Total United Kingdom (Cost $1,525) 1,669 UNITED STATES 32.5% Common Stocks 32.5% 3Com * 900 61 ACE Limited 1,800 99 ADT * 2,100 41 Adobe Systems 600 21 Alco Standard 1,100 51 AlliedSignal 1,500 98 American Home Products 400 25 Apria Healthcare * 2,600 50 Atlantic Richfield 400 53 AutoZone * 900 23 BJ Services * 800 36 BMC Software * 500 41 Bank of Boston 700 45 BellSouth 1,900 77 Biogen * 200 15 Boston Scientific * 400 22 Brinker * 4,100 70 Bristol-Myers Squibb 400 42 CUC International * 1,850 45 Cellular Communications International * 1,500 47 Ceridian * 1,500 74 Chase Manhattan 1,000 86 Cisco Systems * 800 49 Coltec Industries * 700 12 Columbia/HCA Healthcare 3,300 118 Cooper Cameron * 700 45 Corning 2,000 77 Danaher 2,600 106 Disney 1,100 72 Electronic Data Systems 800 36 First Data 700 56 Fleet Financial Group 800 40 Freddie Mac 800 81 Fruit of the Loom (Class A) * 600 22 GE 1,300 126 Gargoyles * 600 8 Gaylord Entertainment 1,575 31 General Nutrition * 1,300 24 Glenayre Technologies * 400 10 Great Lakes Chemical 900 47 H&R Block 1,400 35 Harleysville Group 1,700 48 Harrah's Entertainment * 600 10 Hewlett-Packard 900 40 Hubbell (Class B) 2,000 82 Informix * 2,000 44 Intel 600 66 Intuit * 1,600 43 Johnson & Johnson 1,100 54 Jones Apparel Group * 1,700 53 Kimberly-Clark 600 56 La Quinta Inns 2,100 42 Landstar Systems * 1,500 35 MCI 900 23 Maxim Integrated Products * 1,000 35 Medic Computer Systems * 1,200 34 Medtronic 700 45 Microsoft * 300 41 Mid Ocean Limited 700 33 Mobil 400 47 Nabisco 800 30 Newell 2,000 57 Nextel Communications * 500 8 Norwest 1,800 79 Nucor 700 33 Oracle * 1,200 51 PacifiCare Health Systems (Class B) *1,000 70 Partnerre * 1,500 43 Patriot American Hospitality 1,500 53 PepsiCo 1,600 47 Pfizer 600 50 Pharmacia & Upjohn 1,100 40 Philip Morris 900 83 Procter & Gamble 500 49 Quiksilver * 600 13 Quorum Health Group * 2,600 70 Revco * 1,900 57 Sallie Mae 1,200 99 Sara Lee 2,100 75 Starwood Lodging, REIT 500 23 Teleflex 900 43 Telephone and Data Systems 1,100 38 The Gap 700 20 Toys "R" Us * 1,000 34 Travelers Group 800 43 Travelers/Aetna Property Casualty (Class A) 2,100 63 TriMas 700 16 Tupperware 1,400 72 Tyco International 1,300 65 UNUM 1,000 63 USX-Marathon 3,300 72 V. F. 400 26 Vencor * 2,100 62 Wal-Mart 3,100 83 Warnaco Group 2,300 57 Western Atlas * 700 49 WestPoint Stevens 2,100 56 Total United States (Cost $4,430) 4,840 SHORT-TERM INVESTMENTS 5.8% Commercial Paper 5.8% New Center Asset Trust, 5.37%, 11/05/96 $ 100,000 100 Investments in Commercial Paper through a joint account, 5.56 - 5.63%, 11/01/96 760,225 760 Total Short-Term Investments (Cost $860) 860 Total Investments in Securities 99.2% of Net Assets (Cost $14,078) $ 14,800 Other Assets Less Liabilities 116 NET ASSETS $ 14,916 Net Assets Consist of: Accumulated net investment income - net of distributions $ 76 Accumulated net realized gain/loss - net of distributions 246 Net unrealized gain (loss) 722 Paid-in-capital applicable to 1,313,840 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the corporation authorized 13,872 NET ASSETS $ 14,916 NET ASSET VALUE PER SHARE $ 11.35 * Non-income producing 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 year-end amounts to 0.05% of net assets. REIT Real Estate Investment Trust HKD Hong Kong dollar 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 12/29/95 to 10/31/96 Investment Income Income Dividend (net of foreign taxes of $ 17) $ 139 Interest 35 Total income 174 Expenses Custody and accounting 104 Shareholder servicing 74 Legal and audit 12 Registration 8 Directors 5 Prospectus and shareholder reports 4 Miscellaneous 8 Reimbursed by Manager (111) Total expenses 104 Net investment income 70 Realized and Unrealized Gain (Loss) Net realized gain (loss) on Securities 269 Written options 5 Foreign currency transactions (28) Net realized gain (loss) 246 Change in net unrealized gain or loss on securities 722 Net realized and unrealized gain (loss) 968 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 1,038 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 12/29/95 to 10/31/96 Increase (Decrease) in Net Assets Operations Net investment income $ 70 Net realized gain (loss) 246 Change in net unrealized gain or loss 722 Increase (decrease) in net assets from operations 1,038 Capital share transactions* Shares sold 16,948 Shares redeemed (3,070) Increase (decrease) in net assets from capital share transactions 13,878 Net Assets Increase (decrease) during period 14,916 Beginning of period - End of period $ 14,916 *Share information Shares sold 1,596 Shares redeemed (282) Increase (decrease) in shares outstanding 1,314 The accompanying notes are an integral part of these financial statements. T. Rowe Price Global Stock Fund __________________________________________________________________________ October 31, 1996 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 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. Valuation Equity securities listed or regularly traded on a securities exchange (including Nasdaq) 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. Other equity securities and those listed securities that are not traded on a particular day are valued at a price within the limits of the latest bid and asked prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Short-term debt securities are valued at amortized cost which approximates fair value. For purposes of determining the fund's net asset value per share, the U.S. dollar value of all assets and liabilities initially expressed in foreign currencies is determined by using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. Currency Translation Assets and liabilities are translated into U.S. dollars at the prevailing exchange rate at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing exchange rate on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains and losses is reflected as a component of such gains and losses. 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. Commercial Paper Joint Account The fund, and other affiliated funds, may transfer uninvested cash into a commercial paper joint account, the daily aggregate balance of which is invested in high-grade commercial paper. All securities purchased by the joint account satisfy the fund's criteria as to quality, yield, and liquidity. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $16,601,000 and $3,650,000, respectively, for the period ended October 31, 1996. NOTE 3 - FEDERAL INCOME TAXES No provision for federal income taxes is required since the fund intends 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 period ended October 31, 1996. The results of operations and net assets were not affected by the reclassifications. __________________________________________________________________________ Undistributed net investment income $ 6,000 Paid-in-capital (6,000) At October 31, 1996, the aggregate cost of investments for federal income tax and financial reporting purposes was $14,078,000, and net unrealized gain aggregated $722,000, of which $1,183,000 related to appreciated investments and $461,000 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. 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 0.305% for assets in excess of $50 billion. At October 31, 1996, and for the period then ended, the effective annual group fee rate was 0.33%. 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, 1997 which would cause the fund's ratio of expenses to average net assets to exceed 1.30%. Thereafter, through October 31, 1999, 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 1.30%. Pursuant to this agreement, $54,000 of management fees were not accrued by the fund for the period ended October 31, 1996, and $111,000 of other expenses were borne by the manager. 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 period ended October 31, 1996, of which $19,000 was payable at period-end. During the period ended October 31, 1996, the fund, in the ordinary course of business, paid commissions of $1,000 to, and placed security purchase and sale orders aggregating $512,000 with, certain affiliates of the manager in connection with the execution of various portfolio transactions. Report of Independent Accountants __________________________________________________________________________ To the Board of Directors and Shareholders of T. Rowe Price 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 T. Rowe Price Global Stock Fund (one of the portfolios constituting T. Rowe Price International Funds, Inc., hereafter referred to as the "Fund") at October 31, 1996, and the results of its operations, the changes in its net assets and the financial highlights for the period December 29, 1995 (commencement of operations) through October 31, 1996, 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 audit. We conducted our audit 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 audit, which included confirmation of securities at October 31, 1996 by correspondence with custodians and brokers and, where appropriate, the application of alternative auditing procedures for unsettled security transactions, provides a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Baltimore, Maryland November 19, 1996 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 625-6500 Baltimore area To open a Discount Brokerage account or obtain information, call: 1-800-638-5660 toll free Internet address: http://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 T. Rowe Price Investment Services, Inc., Distributor RPRTGLS 10/31/96 APPENDIX Chart 1 - Geographic Diversification pie chart showing: Europe 35%, United States 32%, Japan 14%, Far East 8%, Latin America 4%, Other and Reserves 7% Chart 2 - a line chart showing the cumulative growth of $10,000 invested in the Global Stock Fund over the past 10 years (or from inception for funds lacking 10-year histories) compared with $10,000 invested in a broad-based index or average over the same period. -----END PRIVACY-ENHANCED MESSAGE-----