-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XEb3B2jcSeUIQ8kBYC4x43zKqrzJU9Rmk21n8MKKx4GuLFHpHCJ3/slPtzdGJq/Q UeI9EDgD19jCoVgnSsER2g== 0000313212-94-000068.txt : 19940811 0000313212-94-000068.hdr.sgml : 19940811 ACCESSION NUMBER: 0000313212-94-000068 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940810 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: 94542724 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 Fellow Shareholders Market Environment The favourable bond market conditions experienced in 1993 continued into the first month of the new year. In the next five months, however, the trend reversed. Global bond market yields rose sharply and prices declined. The trigger for the sell-off in global bonds was the decision by the U.S. central bank to raise the federal funds rate (a key short-term rate controlled by the Fed) on February 4. The increase from 3.0% to 3.25% was modest, and the real damage to bond markets ensued two weeks later when Federal Reserve Chairman Greenspan testified before Congress that the Fed was concerned over the potential for rising inflation, adding that short-term interest rates might have to rise even further to prevent that from happening. In the face of continued strong U.S. economic growth, the fed funds rate was raised on three additional occasions between March and the end of June. The increases clearly brought to an end the accommodative monetary policy the Federal Reserve had pursued for the past five years. The U.S. bond market continued its sell-off, and most other bond markets followed suit. When the fed funds rate hit 4.25%, it appeared as if the Federal Reserve's desired "neutral" ground had been reached. The effort to preempt a rise in inflation began to have a stabilising effect on world government bond markets during the latter part of the second quarter. Even though central banks in most other countries were cutting short-term interest rates, yields on longer-term bonds rose anywhere from one percentage point (100 basis points) to more than two and one-half percentage points (250 basis points) before settling down toward the end of the second quarter. The Bank of Japan cut a key short-term rate to help boost the economy, but yields on 10-year government bonds rose anyway during the global sell-off. The UK economy began to recover last year but, faced with tighter fiscal policy, the Bank of England cut official interest rates in February. Concern over the prudence of this move to lower interest rates led to an erosion of confidence in the UK Government bond market where yields on bonds with 10-year maturities rose 200 basis points. In the smaller dollar-bloc countries of Australia, Canada and New Zealand, long-term interest rates rose sharply over the the first half of the year in response to events in the U.S. The most positive background for government bonds lay in Continental Europe, where economies just barely coming out of recessions looked forward to the prospect of lower short-term interest rates and subdued inflation. In Germany, for instance, yields on three-month notes fell one and a half percentage points. World Government Bond Market Performance Periods Ended 6/30/94 3 Months 12 Months ___________________ ___________________ In Local In U.S. In Local In U.S. Currency Dollars Currency Dollars ________ _______ ________ _______ Australia -4.88% -0.85% -2.96% 6.58% Belgium -1.64 3.34 2.64 9.59 Canada -4.07 -4.00 -1.69 -8.75 Denmark -3.91 0.90 0.47 5.41 France -3.03 1.28 2.64 7.99 Germany -0.95 3.90 4.92 12.33 Italy -4.11 -2.56 9.83 7.39 Japan -0.83 3.30 5.40 13.74 Netherlands -2.29 2.74 2.88 10.14 Spain -3.83 -0.52 7.10 5.96 Sweden -4.91 -3.27 1.27 1.92 United Kingdom -4.27 -0.47 1.76 5.06 United States -0.97 -0.97 Source: J. P. Morgan Despite the fact that short-term interest rates declined and inflation remained under control, bond yields rose, and European government bond markets performed as badly as their U.S. counterparts. Again using Germany as an example, the yield on a 10-year bond rose by one and a half percentage points. Since a rise in inflation failed to materialise, there was also a significant rise in real bond yields. The worst performers during the period were those markets where leveraged and "hedge" fund positions were most pronounced and where governments were borrowing heavily to finance their budget deficits. In local currency terms, they were Sweden, Australia, the UK, and Italy. At the beginning of the year, the consensus view was for a stronger U.S. dollar in the first half of 1994, and most bond investors had heavy exposure to the dollar. The demand for capital in Europe and the repatriation of assets back to Japan created demand for both the yen and European currencies, particularly the deutschemark. As this demand increased, the dollar weakened. Concern over U.S. monetary policy, certain Administration policies, and a widening trade deficit also contributed to the dollar's decline. During the first half of 1994, the major currencies which gained against the dollar are shown below. Currency Performance Six Months Ended 6/30/94 Currency % Appreciation vs. U.S. $ _____________ _________________________ Japanese Yen 12.8% Belgian Franc 10.1 German Mark 8.9 The Canadian dollar was the only major currency to register a decline against its U.S. counterpart. Portfolio Reviews Short-Term Global Income Fund. We have been disappointed with the Fund's performance both in absolute and relative terms thus far in 1994. The Fund was positioned to take advantage of an overall decline in European interest rates. But, although short-term interest rates did fall, yields on the longer bonds held in the portfolio rose and prices declined. All securities but those with the very shortest maturities performed badly. Performance Comparison Periods Ended 6/30/94 3 Months 6 Months _____________________ Short-Term Global Income Fund -1.23% -3.32% Lipper Short World Multi-Market Income Funds Average -0.69 -2.82 The fundamentals affecting prospects for global markets also changed during the most recent quarter. The earlier than expected recovery in the German economy led investors to believe that rates might be closer to the bottom than previously projected. This less optimistic sentiment was reinforced by the continued rise in short rates in the U.S. and by signs of a recovery in Japan, which could mean the rate declines there are also almost over. We became much more defensive in our portfolio management in the second quarter. The overall weighted average maturity was reduced as were the high-yielding European positions, particularly in Sweden. In the dollar-bloc markets, we lowered the Canadian and Australian holdings. To maintain an attractive yield, we invested in some higher-yielding, short-term U.S. dollar-denominated bonds. Global Government Bond Fund. The major change in managing this Fund was the significant reduction in hedges back to the U.S. dollar. As of June 30, 49% of the Fund's assets were tied to the dollar compared with 74% at the end of March. As the performance comparison illustrates, the Fund's return, although slightly negative, benefited from the appreciation of nondollar currencies. The major increases in currency exposure were to the deutschemark and yen, each up 10% over the prior quarter-end. Performance Comparison Periods Ended 6/30/94 3 Months 6 Months _____________________ Global Government Bond Fund -0.34% -3.13% J.P. Morgan Global Government Bond Index (unhedged) 0.27 -0.36 J.P. Morgan Global Government Bond Index (fully hedged) -2.00 -1.56 Going forward, we will use the J.P. Morgan Unhedged Index rather than a combination of the hedged and unhedged as a benchmark comparison for the Fund's performance. As yields on bonds rose and prices declined, we reduced the portfolio's duration, primarily by shortening the maturity on the European holdings, again with particular emphasis on Sweden. We expect to lengthen the duration of both the Short-Term Global Income and the Global Government Bond Funds when a better tone returns to the market. Outlook The unwinding of the speculative, leveraged bond positions which were established in late 1993 have left bond markets at attractive real and nominal interest rate levels. The steep rise in bond yields partially discounts future inflationary concerns as expectations for the course of short rates, as reflected by futures markets, appear unduly pessimistic. Central banks have not had to react to inflationary pressures through official interest rate increases as such pressures have yet to occur in any major economy. The spare capacity in global economies has not resulted in tightening labour markets and resultant upward pressure on wages, although increased demand as economies began to recover has produced a modest rebound in commodity prices. It is difficult to envisage significant tightening of monetary policy, which could restrain economic recovery at a time when capital markets will be demanding more prudent fiscal policies from governments. Governments generally cannot choose at this point to use fiscal stimulus as a way to escape from their economic problems. Japan is the major exception. The Bank of Japan has also assisted the recovery process by reducing cash, or the very shortest-term interest rates such as those charged on overnight loans. This has provided liquidity to the Japanese economy at a time when banks were unwilling or unable to lend. The U.S. may be reestablishing its credibility by taking action to contain future inflation, and this proactive stance may have a positive effect on intermediate and long maturity securities. The recent strength of the German mark provides room for further easing of short rates by the Bundesbank, particularly as money growth and inflation edge downward. European government bond markets with high real (inflation-adjusted) yields should continue to attract domestic investors. The worst may be behind bond markets for 1994, but the spectacular returns of 1993 are also unlikely. A more stable environment is expected, and markets with the greatest liquidity are likely to provide the best returns. Most of the dollar's weakness may have occurred already, but fundamentals such as the trade deficit are hardly supportive of a stronger dollar. Therefore, capital flows are likely to remain skewed to nondollar markets. In summary, with better bond market prospects in Europe, attractive real yields in a number of markets, and a more stable currency environment, the outlook for global bond investors should be more favourable in the second half of 1994. Respectfully submitted, Peter Askew Executive Vice President July 25, 1994 Statistical Highlights T. Rowe Price Short-Term Global Income Fund / June 30, 1994 Key Statistics Dividend Yield* Periods Ended 6/30/94 _________________________ ____________________ 7 Days 6.55% 3 Months 6.66 6 Months 6.74 Dividend Per Share _________________________ 3 Months $0.07 6 Months 0.15 Change in Per-Share Value _________________________ From March 31, 1994 to June 30, 1994 (From $4.64 to $4.51) -2.80% From December 31, 1993 to June 30, 1994 (From $4.82 to $4.51) -6.43% _____________________________________________________________________________ Net Assets $82.8 Million *Dividends earned and reinvested for the periods indicated are annualized and divided by the average daily net asset values per share for the same period. Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Maturity Diversification Percent of Net Assets Range 3/31/94 6/30/94 _______________________ _______ _______ Short-Term (0 to 1 Year) 16% 21% Short Intermediate- Term (1+ to 5 Years) 84 78 Long Intermediate- Term (5+ to 10 Years) 0 0 Long-Term (over 10 Years) 0 1 _____________________________________________________________________________ Weighted Average Maturity (Years) 2.6 2.2 Quality Diversification Percent of Net Assets RPFI Quality Rating* 3/31/94 6/30/94 _______________________ _______ _______ 1 30% 38% 2 64 49 3 6 4 4 & below 0 9 _____________________________________________________________________________ Weighted Average Quality 1.8 1.8 *On a scale of 1 to 10, with Grade 1 representing highest quality. Geographical Diversification Net Portfolio Holdings - Currency Country/Currency Local Market Terms Exposure ______________ _________________ ________ United States 20.4% 99.4% Germany 1.5 5.9 Greece 1.1 1.1 Australia 4.9 0.9 Turkey 0.8 0.8 France 14.1 0.5 Canada 10.6 0.3 Ireland 4.3 (0.2) Italy 9.7 (0.6) Sweden 5.6 (0.6) Denmark 2.6 (0.8) European Currency Unit 3.8 (1.2) United Kingdom 4.7 (1.2) Spain 8.9 (1.4) Belgium 1.8 (2.1) Netherlands 5.1 (2.2) Total 99.9 98.6 Other Assets Less Liabilities 0.1 1.4 _____________________________________________________________________________ Net Assets 100.0% 100.0% Holdings expressed in local market terms have been adjusted to reflect currency holdings and the use of currency hedges (forward currency exchange contracts) to produce the net currency exposure of the portfolio. Statistical Highlights T. Rowe Price Global Government Bond Fund / June 30, 1994 Key Statistics Dividend Yield* Periods Ended 6/30/94 _________________________ ____________________ 7 Days 5.52% 3 Months 5.55 6 Months 5.46 Dividend Per Share _________________________ 3 Months $0.13 6 Months 0.26 Change in Per-Share Value _________________________ From March 31, 1994 to June 30, 1994 (From $9.65 to $9.49) -1.66% From December 31, 1993 to June 30, 1994 (From $10.08 to $9.49) -5.85% _____________________________________________________________________________ Net Assets $43.8 Million *Dividends earned and reinvested for the periods indicated are annualized and divided by the average daily net asset values per share for the same period. Income return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Maturity Diversification Percent of Net Assets Range 3/31/94 6/30/94 _______________________ _______ _______ Short-Term (0 to 1 Year) 8% 11% Short Intermediate- Term (1+ to 5 Years) 36 46 Long Intermediate- Term (5+ to 10 Years) 39 28 Long-Term (over 10 Years) 17 15 _____________________________________________________________________________ Weighted Average Maturity (Years) 7.8 7.2 Quality Diversification Percent of Net Assets RPFI Quality Rating* 3/31/94 6/30/94 _______________________ _______ _______ 1 64% 72% 2 36 28 _____________________________________________________________________________ Weighted Average Quality 1.4 1.3 *On a scale of 1 to 10, with grade 1 representing highest quality. Geographical Diversification Net Portfolio Holdings - Currency Country/Currency Local Market Terms Exposure ______________ _________________ ________ United States 22.3% 49.4% Germany 13.9 13.4 Japan 10.3 12.7 France 10.3 5.3 Italy 5.9 3.9 United Kingdom 6.5 3.6 Netherlands 4.0 3.5 Denmark 3.0 2.1 Australia 2.6 1.4 Sweden 2.3 1.0 Canada 6.5 0.9 Spain 5.0 0.8 Belgium 3.0 0.6 Total 95.6 98.6 Other Assets Less Liabilities 4.4 1.4 _____________________________________________________________________________ Net Assets 100.0% 100.0% Holdings expressed in local market terms have been adjusted to reflect currency holdings and the use of currency hedges (forward currency exchange contracts) to produce the net currency exposure of the portfolio. Portfolio of Investments! (Value in thousands) T. Rowe Price Short-Term Global Income Fund / June 30, 1994 (Unaudited) AUSTRALIA - 4.9% Value ______ GOVERNMENT BOND AUD 5,100,000 South Australia Financial Authority, 12.50%, 10/15/96 . . . . . . . . . . . . $ 4,029 BELGIUM - 1.8% GOVERNMENT BONDS BEL 25,000,000 Obligation Lineaire, 10.00%, 4/5/96 . . . . . . . . . . . . . . 812 20,000,000 Obligation Lineaire, 9.25%, 1/2/98. . . . . . . . . . . . . . . 657 Total Belgium 1,469 CANADA - 10.6% GOVERNMENT BONDS CAD 3,050,000 Government of Canada, 6.25%, 9/15/95 . . . . . . . . . . . . . . 2,165 1,700,000 Government of Canada, 4.75%, 3/15/96 . . . . . . . . . . . . . . 1,161 4,000,000 Province of Alberta, 10.625%, 2/14/96 . . . . . . . . . . . . . 2,973 1,500,000 Province of Ontario, 10.25%, 4/4/96 . . . . . . . . . . . . . . 1,108 7,407 SHORT-TERM INVESTMENT 2,000,000 Canadian Treasury Bills, 7.69 - 7.85%, 6/15/95. . . . . . . . . . . 1,345 Total Canada 8,752 DENMARK - 2.6% GOVERNMENT BONDS DKK 4,000,000 Kingdom of Denmark, 9.00%, 11/15/95. . . . . . . . . . . . . . 656 9,000,000 Kingdom of Denmark, 9.00%, 11/15/96. . . . . . . . . . . . . . 1,492 Total Denmark 2,148 EUROPEAN CURRENCY UNIT - 3.8% GOVERNMENT BONDS XEU 1,650,000 European Economic Community, 8.625%, 12/15/97. . . . . . . . 2,050 875,000 United Kingdom Treasury, 8.00%, 1/23/96 . . . . . . . . . . . . . . 1,071 Total European Currency Unit 3,121 FRANCE - 14.1% GOVERNMENT BONDS FRF 12,500,000 Bons du Tresor Annuel, 8.00%, 10/12/94. . . . . . . . . . . . . . $ 2,313 7,500,000 Bons du Tresor Annuel, 9.00%, 11/12/95. . . . . . . . . . . . . . 1,428 12,000,000 Bons du Tresor Annuel, 8.50%, 3/12/97 . . . . . . . . . . . . . . 2,308 7,500,000 Bons du Tresor Annuel, 5.75%, 11/12/98. . . . . . . . . . . . . . 1,323 22,500,000 Obligation Assimilable du Tresor, 8.50%, 6/25/97. . . . . . . . . 4,346 Total France 11,718 GERMANY - 1.5% GOVERNMENT BOND DEM 2,000,000 Treuhandanstalt, 6.125%, 6/25/98. . . . . . . . . . . . . . 1,249 GREECE - 1.1% CORPORATE BOND GRD 250,000,000 Abbey National, 15.75%, 5/16/97. . . . . . . . . . . . . . 915 IRELAND - 4.3% GOVERNMENT BOND IEP 2,305,000 Republic of Ireland, 8.75%, 7/27/97 . . . . . . . . . . . . . . 3,576 ITALY - 9.7% GOVERNMENT BONDS ITL 4,350,000,000 Buoni del Tesoro Poliennali, 12.00%, 10/1/95. . . . . . . . . . . . . . 2,809 3,850,000,000 Buoni del Tesoro Poliennali, 12.00%, 1/1/97 . . . . . . . . . . . . . . 2,506 1,750,000,000 Buoni del Tesoro Poliennali, 10.00%, 8/1/98 . . . . . . . . . . . . . . 1,091 2,750,000,000 Buoni del Tesoro Poliennali, 8.50%, 1/1/99. . . . . . . . . . . . . . . 1,622 Total Italy 8,028 NETHERLANDS - 5.1% GOVERNMENT BONDS NLG 1,700,000 Government of Netherlands, 6.50%, 10/1/94 . . . . . . . . . . . . . . $ 959 5,750,000 Government of Netherlands, 6.50%, 7/15/98 . . . . . . . . . . . . . . 3,239 Total Netherlands 4,198 SPAIN - 8.9% GOVERNMENT BONDS ESP 150,000,000 Bonos del Estado, 12.00%, 7/15/94. . . . . . . . . . . . . . 1,143 500,000,000 Bonos del Estado, 11.40%, 7/15/95. . . . . . . . . . . . . . 3,903 250,000,000 Bonos del Estado, 13.45%, 4/15/96. . . . . . . . . . . . . . 2,027 40,000,000 Bonos del Estado, 11.00%, 6/15/97. . . . . . . . . . . . . . 313 Total Spain 7,386 SWEDEN - 5.6% GOVERNMENT BONDS SEK 14,000,000 Kingdom of Sweden, 10.75%, 1/23/97. . . . . . . . . . . . . . 1,890 20,000,000 Statens Bostadsfinansier, 12.50%, 1/23/97. . . . . . . . . . . . . . 2,767 Total Sweden 4,657 TURKEY - 0.8% SHORT-TERM INVESTMENT TRL 24,681,029,572 Bankers Trust, 25.00%, 8/26/94. . . . . . . . . . . . . . 666 UNITED KINGDOM - 4.7% GOVERNMENT BONDS GBP 500,000 European Investment Bank, 10.00%, 2/3/97 . . . . . . . . . . . . . . 810 700,000 United Kingdom Treasury, 8.75%, 9/1/97. . . . . . . . . . . . . . . 1,108 1,918 CORPORATE BOND 1,300,000 Abbey National, 7.75%, 6/23/98 . . . . . . . . . . . . . . 1,958 Total United Kingdom 3,876 UNITED STATES - 20.4% GOVERNMENT BONDS USD 2,000,000 Argentina Bote, 4.625%, 5/31/96. . . . . . . . . . . . . . $ 891 500,000 Mexico Par Bonds, 5.8125%, 3/31/08 . . . . . . . . . . . . . 489 1,000,000 Province of Ontario, 4.6875%, 8/17/99 . . . . . . . . . . . . . 994 2,374 CORPORATE BONDS 1,000,000 IMI Bank International, 4.8125%, 5/24/99 . . . . . . . . . . . . . 997 1,000,000 Industrial Development Bank of India, 5.00%, 7/7/99. . . . . . . . . . 1,000 1,000,000 New Zealand Dairy Board, 4.0625%, 4/5/99. . . . . . . . . . . . . . 999 2,996 HYBRID INSTRUMENTS 500,000 Abbey National, 4.56%, 3/24/95 - principal repayment value inversely indexed to 3-month USD LIBOR; minimum principal repayment equals 97% of par; maximum principal repayment equals 103% of par . . . . . . . . . . . . 492 500,000 GE Capital Corporation, 16.89% 3/10/97 - floating interest rate indexed to Mexican Cetes rate; principal repayment value inversely indexed to Mexican Tesobono exchange rate . . . . . . . . . . 470 500,000 National Australia Bank, 7.0625%, 2/24/95 - principal repayment value indexed to Japanese yen exchange rate; minimum principal repayment equals 90% of par . . . . . . . . . . . . . . . . . . 466 500,000 Swedish Export Credit, 4.33%, 3/15/95 - principal repayment value inversely indexed to 3 month DEM LIBOR; minimum principal repayment equals 90% of par; maximum principal repayment equals 148.7% of par . . . . . . . . . . . . . . . . . . 478 1,906 T. Rowe Price Short-Term Global Income Fund / Portfolio of Investments SHORT-TERM INVESTMENTS USD 1,640,000 Harvard University, Commecial Paper, 4.30%, 7/1/94. . . . . . . . . . . . . . . $ 1,640 3,008,000 Mexico Tesobonos, 5.50 - 6.30%, 7/7/94 - 9/15/94 . . . . . . . . . . . . . 2,991 2,000,000 Preferred Receivables Funding, Commercial Paper, 4.37%, 7/26/94. . . . . . . . . . . 1,993 3,000,000 UBS Finance (Delaware), Commercial Paper, 4.35%, 7/1/94. . . . . . . . . . . . . . . 3,000 9,624 Total United States 16,900 Total Investments in Securities - 99.9% of Net Assets (Cost-$84,111) . . . . . . . . . . . . . . . $82,688 The accompanying notes are an integral part of these financial statements. Portfolio of Investments! (Value in thousands) T. Rowe Price Global Government Bond Fund / June 30, 1994 (Unaudited) AUSTRALIA - 2.6% Value _______ GOVERNMENT BOND AUD 1,750,000 Commonwealth of Australia, 6.25%, 3/15/99 . . . . . . . . . . . . . . $ 1,144 BELGIUM - 3.0% GOVERNMENT BOND BEL 40,000,000 Obligation Lineaire, 9.25%, 1/2/98. . . . . . . . . . . . . . . 1,314 CANADA - 6.5% GOVERNMENT BONDS CAD 400,000 Government of Canada, 6.00%, 2/1/96. . . . . . . . . . . . . . . 280 1,200,000 Government of Canada, 7.25%, 6/1/03. . . . . . . . . . . . . . . 768 1,205,000 Province of British Columbia, 7.75%, 6/16/03 . . . . . . . . . . . . . . 781 1,829 SHORT-TERM INVESTMENT 1,500,000 Canadian Treasury Bills, 7.75 - 7.78%, 6/15/95. . . . . . . . . . . 1,009 Total Canada 2,838 DENMARK - 3.0% GOVERNMENT BONDS DKK 5,500,000 Kingdom of Denmark, 9.00%, 11/15/98. . . . . . . . . . . . . . 915 2,500,000 Kingdom of Denmark, 8.00%, 5/15/03 . . . . . . . . . . . . . . 393 Total Denmark 1,308 FRANCE - 10.3% GOVERNMENT BONDS FRF 14,000,000 Bons du Tresor Annuel, 8.50%, 11/12/97. . . . . . . . . . . . . . 2,710 3,750,000 Bons du Tresor Annuel, 5.75%, 11/12/98. . . . . . . . . . . . . . 661 6,000,000 Obligation Assimilable du Tresor, 8.125%, 5/25/99. . . . . . . . . . . . . . 1,156 Total France 4,527 GERMANY - 13.9% GOVERNMENT BONDS DEM 1,000,000 Bundesobligation, 8.50%, 3/20/95 . . . . . . . . . . . . . . $ 646 3,160,000 Bundesobligation, 8.25%, 7/21/97 . . . . . . . . . . . . . . 2,098 3,550,000 Bundesrepublic, 8.375%, 5/21/01. . . . . . . . . . . . . . 2,393 1,500,000 Treuhandanstalt, 6.125%, 6/25/98. . . . . . . . . . . . . . 937 Total Germany 6,074 ITALY - 5.9% GOVERNMENT BONDS ITL 1,500,000,000 Buoni del Tesoro Poliennali, 12.00%, 1/1/97 . . . . . . . . . . . . . . 976 1,000,000,000 Buoni del Tesoro Poliennali, 12.00%, 9/1/97 . . . . . . . . . . . . . . 652 1,000,000,000 Buoni del Tesoro Poliennali, 10.00%, 8/1/98 . . . . . . . . . . . . . . 624 500,000,000 Buoni del Tesoro Poliennali, 12.00%, 1/1/03 . . . . . . . . . . . . . . 331 Total Italy 2,583 JAPAN - 10.3% GOVERNMENT BONDS JPY 65,000,000 Buoni del Tesoro Poliennali, 3.50%, 6/20/01 . . . . . . . . . . . . . . 617 165,000,000 International Bank for Reconstruction & Development,. . . . . . . 6.75%, 3/15/00 . . . . . . . . . . . . . . 1,885 2,502 CORPORATE BOND 175,000,000 Japan Development Bank, 6.50%, 9/20/01 . . . . . . . . . . . . . . 1,995 Total Japan 4,497 NETHERLANDS - 4.0% GOVERNMENT BOND NLG 3,000,000 Government of Netherlands, 7.50%, 11/15/99. . . . . . . . . . . . . . 1,743 T. Rowe Price Global Government Bond Fund / Portfolio of Investments SPAIN - 5.0% GOVERNMENT BOND ESP 310,000,000 Bonos del Estado, 8.30%, 12/15/98. . . . . . . . . . . . . . $ 2,188 SWEDEN - 2.3% GOVERNMENT BOND SEK 7,500,000 Kingdom of Sweden, 10.75%, 1/23/97. . . . . . . . . . . . . . 1,012 UNITED KINGDOM - 6.5% GOVERNMENT BOND GBP 1,760,000 United Kingdom Treasury, 9.50%, 4/18/05 . . . . . . . . . . . . . . 2,859 UNITED STATES - 22.3% GOVERNMENT BONDS USD 250,000 Argentina Par Bonds, 4.25%, 3/31/23 . . . . . . . . . . . . . . 127 950,000 Buoni del Tesoro Poliennali, 6.875%, 9/27/23. . . . . . . . . . . . . . 775 875,000 Export Development Bank, 8.50%, 8/19/03 . . . . . . . . . . . . . . 907 250,000 Mexico Par Bonds, 6.25%, 12/31/19. . . . . . . . . . . . . . 161 2,580,000 U.S. Treasury Bonds, 7.125%, 2/15/23. . . . . . . . . . . . . . 2,415 450,000 U.S. Treasury Notes, 5.25%, 7/31/98 . . . . . . . . . . . . . . 425 1,700,000 U.S. Treasury Notes, 6.375%, 1/15/99. . . . . . . . . . . . . . 1,666 1,350,000 U.S. Treasury Notes, 5.875%, 3/31/99. . . . . . . . . . . . . . 1,293 690,000 U.S. Treasury Notes, 5.875%, 2/15/04. . . . . . . . . . . . . . 620 8,389 HYBRID INSTRUMENT 500,000 Abbey National, 4.56%, 3/24/95 - principal repayment value inversely indexed to 3 month USD LIBOR; minimum principal repayment equals 97% of par; maximum principal repayment equals 103% of par . . . . . . . . . . . . . . . . . . 493 SHORT-TERM INVESTMENT USD 880,000 Harvard University, Commercial Paper, 4.30%, 7/1/94. . . . . . . . . . . . . . . $ 880 Total United States 9,762 Total Investments in Securities - 95.6% of Net Assets (Cost-$42,020) $41,849 ! Listed by currency denomination (AUD) Australian dollar denominated (BEL) Belgian franc denominated (CAD) Canadian dollar denominated (DEM) German deutschemark denominated (DKK) Danish krone denominated (ESP) Spanish peseta denominated (FRF) French franc denominated (GBP) British sterling denominated (GRD) Greek drachma denominated (IEP) Irish punt denominated (ITL) Italian lira denominated (JPY) Japanese yen denominated (NLG) Dutch guilder denominated (SEK) Swedish krona denominated (TRL) Turkish lira denominated (USD) U.S. dollar denominated (XEU) European currency unit The accompanying notes are an integral part of these financial statements. Statement of Assets and Liabilities T. Rowe Price Global Income Funds / June 30, 1994 (Unaudited) Short-Term Global Global Government Income Fund Bond Fund ___________ __________ Amounts in Thousands ____________________ ASSETS Investments in securities at value (Cost - $84,111 and $42,020). . . . . . . . . . $82,688 $41,849 Interest receivable . . . . . . . . . . . . . . 2,667 1,294 Other assets. . . . . . . . . . . . . . . . . . 2,731 2,787 _______ _______ Total assets. . . . . . . . . . . . . . . . . . 88,086 45,930 LIABILITIES. . . . . . . . . . . . . . . . . . . . 5,282 2,145 _______ _______ Net Assets Consisting of: Accumulated net investment income - net of distributions . . . . . . . . . . . . 179 7 Accumulated realized gains/losses - net of distributions . . . . . . . . . . . . (5,386) (2,088) Net unrealized depreciation of investments . . . . . . . . . . . . . . . (2,700) (254) Paid-in-capital applicable to 18,354,461 and 4,614,556 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized . . . . . . . . . . . . . . . . . 90,711 46,120 _______ _______ NET ASSETS . . . . . . . . . . . . . . . . . . . . $82,804 $43,785 _______ _______ _______ _______ NET ASSET VALUE PER SHARE $4.51 $9.49 _____ _____ _____ _____ The accompanying notes are an integral part of these financial statements. Statement of Operations T. Rowe Price Global Income Funds / Six Months Ended June 30, 1994 (Unaudited) Short-Term Global Global Government Income Fund Bond Fund ___________ ___________ Amounts in Thousands ___________________ INVESTMENT INCOME Interest income. . . . . . . . . . . . . . . . . . . $ 3,554 $ 1,504 ________ _______ Expenses Investment management fees. . . . . . . . . . . . 211 89 Shareholder servicing fees & expenses . . . . . . 110 61 Custodian and accounting fees & expenses. . . . . 88 73 Registration fees & expenses. . . . . . . . . . . 31 23 Legal & auditing fees . . . . . . . . . . . . . . 11 13 Prospectus & shareholder reports. . . . . . . . . 8 7 Directors' fees & expenses. . . . . . . . . . . . 4 3 Proxy & annual meeting expenses . . . . . . . . . 1 1 Miscellaneous expenses. . . . . . . . . . . . . . 2 4 _______ _______ Total expenses. . . . . . . . . . . . . . . . . . 466 274 _______ _______ Net investment income. . . . . . . . . . . . . . . . 3,088 1,230 _______ _______ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss Securities. . . . . . . . . . . . . . . . . . . . (698) (740) Foreign currency transactions . . . . . . . . . . (5,012) (1,300) _______ _______ Net realized loss. . . . . . . . . . . . . . . . . . (5,710) (2,040) _______ _______ Change in net unrealized appreciation or depreciation Securities. . . . . . . . . . . . . . . . . . . . 1,200 (499) Other assets and liabilities denominated in foreign currencies . . . . . . . . . . . . . . . (1,774) (151) _______ _______ Change in net unrealized appreciation or depreciation. . . . . . . . . . . . . . . . . . . (574) (650) _______ _______ Net loss on investments. . . . . . . . . . . . . . . (6,284) (2,690) _______ _______ DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . . $(3,196) $(1,460) _______ _______ _______ _______ The accompanying notes are an integral part of these financial statements. Statement of Changes in Net Assets T. Rowe Price Global Income Funds (Unaudited)
Short-Term Global Income Fund Global Government Bond Fund _____________________________ ___________________________ Six Months Year Ended Six Months Year Ended Ended December 31, Ended December 31, June 30, 1994 1993 June 30, 1994 1993 ____________ ____________ ____________ ____________ Amounts in Thousands Amounts in Thousands ____________________ _____________________ INCREASE (DECREASE) IN NET ASSETS Operations Net investment income . . . . . . . . . . . $ 3,088 $ 5,076 $ 1,230 $ 2,932 Net realized gain (loss) on investments . . . . . . . . . . . . . . . (5,710) 1,748 (2,040) 1,553 Change in net unrealized appreciation or depreciation of investments . . . . . . . (574) (1,111) (650) 998 _______ _______ _______ _______ Increase (decrease) in net assets from operations . . . . . . . . . . . . . (3,196) 5,713 (1,460) 5,483 _______ _______ _______ _______ Distributions to shareholders Net investment income . . . . . . . . . . . (3,088) (5,076) (1,230) (2,932) Net realized gain on investments. . . . . . - - (96) (1,327) _______ _______ _______ _______ Decrease in net assets from distributions to shareholders . . . . . . (3,088) (5,076) (1,326) (4,259) _______ _______ _______ _______ Capital share transactions Sold . . . . . . . . . . . . . . . . . . . 46,138 72,691 12,345 22,506 Distributions reinvested . . . . . . . . . 2,581 4,294 979 3,535 Redeemed . . . . . . . . . . . . . . . . . (56,749) (46,801) (15,511) (32,053) _______ _______ _______ _______ Increase (decrease) in net assets from capital share transactions. . . . . . . . (8,030) 30,184 (2,187) (6,012) _______ _______ _______ _______ Total increase (decrease). . . . . . . . . . . (14,314) 30,821 (4,973) (4,788) NET ASSETS Beginning of period . . . . . . . . . . . . 97,118 66,297 48,758 53,546 _______ _______ _______ _______ End of period . . . . . . . . . . . . . . . $82,804 $97,118 $43,785 $48,758 _______ _______ _______ _______ _______ _______ _______ _______ Share transactions Sold. . . . . . . . . . . . . . . . . . . . 9,755 shs. 15,118 shs. 1,268 shs. 2,190 shs. Distributions reinvested. . . . . . . . . . 556 893 101 346 Redeemed. . . . . . . . . . . . . . . . . . (12,112) (9,735) (1,592) (3,132) _______ _______ _______ _______ Net increase (decrease) in shares outstanding . . . . . . . . . . . . . . . . (1,801) 6,276 (223) (596)
The accompanying notes are an integral part of these financial statements. Notes to Financial Statements T. Rowe Price Global Income Funds / June 30, 1994 (Unaudited) Note 1 - Significant Accounting Policies T. Rowe Price International Funds, Inc. (the Corporation) is registered under the Investment Company Act of 1940. The Short-Term Global Income Fund (the Short-Term Fund) and the Global Government Bond Fund (the Government Fund), non-diversified, open-end management investment companies, are two of the portfolios established by the Corporation. A) Valuation - Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. For purposes of determining each Fund's net asset value per share, all assets and liabilities initially expressed in foreign currencies are converted into U.S. dollars at 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 each Fund, as authorized by the Board of Directors. B) Currency translation - Foreign currency amounts are translated into U.S. dollars at prevailing exchange rates as follows: assets and liabilities at the rate of exchange at the end of the respective period, purchases and sales of securities and income and expenses at the rate of exchange prevailing on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. C) Discounts and Premiums - Discounts and premiums on debt securities are amortized for both financial and tax reporting purposes. D) 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 an identified cost basis. Distributions to shareholders are recorded by each Fund on the ex-dividend date. Income and capital gain distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. Note 2 - Financial Instruments As a part of its investment program, each Fund engages in the following activities, the nature and risk of which are set forth more fully in each Fund's Prospectus and Statement of Additional Information. A) Forward Currency Exchange Contracts - At June 30, 1994, each Fund was a party to various forward currency exchange contracts under which it is obligated to exchange currencies at specified future dates. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movements in currency values. Outstanding contracts at June 30, 1994, are as follows: Short-Term Fund ____________________________________________________________________________ Unrealized Contract to Apprec. Value _______________________ (Deprec.) Date Receive Deliver in USD Counterparty _____ _______ ______ ________ ___________ Amounts in Thousands _______________________________________ 7/94 DEM 5,785 USD 3,517 134 Chase Manhattan Bank 7/94 USD 4,797 GBP 3,162 (97) Union Bank of Switzerland 7/94 USD 5,843 NLG 10,774 (224) Chase Manhattan Bank 7/94 USD 6,370 BEL 215,624 (238) Chase Manhattan Bank 7/94 BEL 108,510 USD 3,324 2 Chase Manhattan Bank 7/94 USD 10,933 FRF 61,401 (359) Chase Manhattan Bank 7/94 USD 5,014 SEK 39,637 (161) Chase Manhattan Bank 7/94 USD 2,713 DKK 17,473 (88) Chase Manhattan Bank 7/94 USD 8,389 ITL 13,441,970 (105) Chase Manhattan Bank 7/94 USD 8,242 ESP 1,118,184 (259) Chase Manhattan Bank 7/94 USD 4,122 XEU 3,426 - Union Bank of Switzerland 7/94 USD 3,758 IEP 2,472 (11) Union Bank of Switzerland 7/94 USD 7,427 CAD 10,312 (26) Merrill Lynch 7/94 USD 1,340 CAD 1,858 (3) Chase Manhattan Bank 7/94 USD 3,342 AUD 4,504 56 Union Bank of Switzerland Government Fund ____________________________________________________________________________ Unrealized Contract to Apprec. Value ___________________ (Deprec.) Date Receive Deliver in USD Counterparty _____ _______ ______ ________ ____________ Amounts in Thousands _____________________________ 7/94 DEM 239 USD 150 1 Chase Manhattan Bank 7/94 USD 1,018 BEL 34,498 (39) Union Bank of Switzerland 7/94 USD 2,130 FRF 11,947 (67) Citibank 7/94 USD 190 NLG 351 (7) Union Bank of Switzerland 7/94 USD 580 SEK 4,446 (3) Chase Manhattan Bank 7/94 USD 1,773 ESP 240,611 (56) Chase Manhattan Bank 7/94 USD 857 ITL 1,358,764 (2) Chase Manhattan Bank 7/94 GBP 270 DEM 663 (1) Chase Manhattan Bank 7/94 USD 1,252 GBP 825 (19) Union Bank of Switzerland 7/94 USD 415 GBP 269 (6) Chase Manhattan Bank 7/94 AUD 277 USD 200 2 Chase Manhattan Bank 7/94 USD 729 AUD 983 12 Union Bank of Switzerland 7/94 USD 1,763 CAD 2,445 (3) Citibank 7/94 USD 1,008 CAD 1,395 (2) Chase Manhattan Bank 8/94 USD 395 DKK 2,477 (2) Chase Manhattan Bank Net unrealized appreciation (depreciation) related to these contracts, included in the accompanying financial statements, was as follows: Short-Term Government Fund Fund ___________ ___________ Appreciated Contracts $ 192,000 $ 15,000 Depreciated Contracts (1,571,000) (207,000) __________ _________ Net Unrealized Depreciation $(1,379,000) $(192,000) __________ _________ __________ _________ B) Other - Purchases and sales of portfolio securities for the Short-Term Fund, other than short-term and U.S. Government securities, aggregated $41,655,000 and $55,583,000. Sales of U.S. Government securities aggregated $4,694,000 for the six months ended June 30, 1994. Purchases and sales of portfolio securities for the Government Fund, other than short-term and U.S. Government securities, aggregated $26,675,000 and $23,045,000. Purchases and sales of U.S. Government securities aggregated $9,615,000 and $12,307,000, respectively, for the six months ended June 30, 1994. Note 3 - Federal Income Taxes No provision for federal income taxes is required since each Fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. The Short-Term Fund has unused realized capital loss carryforwards for federal income tax purposes of $149,000 at December 31, 1993, which expire through 2001. At June 30, 1994, the aggregate cost of investments for the Short-Term and Government Funds for federal income tax and financial reporting purposes was $84,111,000 and $42,020,000, respectively. Net unrealized appreciation (depreciation) related to these investments was as follows: Short-Term Government Fund Fund __________ __________ Appreciated Investments $ 798,000 $1,110,000 Depreciated Investments (2,221,000) (1,281,000) __________ _________ Net Unrealized Depreciation $(1,423,000) $ (171,000) __________ _________ __________ _________ Note 4 - Related Party Transactions Each Fund is managed by Rowe Price-Fleming International, Inc. (Price-Fleming) 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 each Fund and Price-Fleming (the Manager) provides for an annual investment management fee, computed daily and paid monthly, consisting of an Individual Fund Fee equal to 0.25% of average net assets for the Short-Term Fund and 0.35% of average net assets for the Government Fund, 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 0.31% for assets in excess of $34 billion. The effective annual Group Fee rate at June 30, 1994 and for the six Notes to Financial Statements (Cont'd) months then ended was 0.34%. Each Fund pays a pro rata portion of the Group Fee based on the ratio of the Fund's net assets to those of the Group. Under the terms of the investment management agreement, the Manager is required to bear any expenses through December 31, 1995 for the Short -Term Fund or through December 31, 1994 for the Government Fund, which would cause each Fund's ratio of expenses to average net assets to exceed 1.00% and 1.20%, respectively. Thereafter, the Short-Term and Government Funds are required to reimburse the Manager for these expenses, provided average net assets have grown or expenses have declined sufficiently so as not to cause the Fund's ratio of expenses to average net assets to exceed 1.00% and 1.20%, respectively, in any month, and that no such reimbursement shall be made to the Manager after December 31, 1997 for the Short-Term Fund, or after December 31, 1996 for the Government Fund. Pursuant to this agreement, $66,000 and $70,000 of management fees were not accrued by the Short-Term and Government Fund, respectively, for the six months ended June 30, 1994. Pursuant to a previous agreement, $295,000 of unaccrued fees and other expenses borne by the Manager in the Short-Term Fund are subject to reimbursement through December 31, 1995. Pursuant to a previous agreement, $388,000 of unaccrued fees and other expenses borne by the Manager in the Government Fund are subject to reimbursement through December 31, 1994. Additionally, $98,000 of unaccrued fees from 1993 in the Government Fund are subject to reimbursement through December 31, 1996. T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc. (RPS) are wholly owned subsidiaries of Price Associates. TRPS provides transfer and dividend disbursing agent functions and shareholder services for all accounts. RPS provides subaccounting and recordkeeping services for certain retirement accounts invested in each Fund. Price Associates, under a separate agreement, calculates the daily share price and maintains the financial records of each Fund. For the six months ended June 30, 1994, the Short-Term and Government Fund incurred fees totalling approximately $139,000 and $100,000, respectively, for these services provided by related parties. At June 30, 1994, these investment management and service fees payable were $61,000 and $35,000, respectively. Financial Highlights T. Rowe Price Short-Term Global Income Fund (Unaudited) For a share outstanding throughout each period ______________________________________________ June 30, 1992 Six Months Year (Commencement of Ended Ended Operations) to June 30, December 31, December 31, 1994 1993 1992 __________ __________ ____________ NET ASSET VALUE, BEGINNING OF PERIOD . . $ 4.82 $ 4.78 $ 5.00 _____ _____ _____ Investment Activities Net investment income . . . . . . . . . 0.15* 0.32* 0.20* Net realized and unrealized gain (loss) . . . . . . . . . . . . . (0.31) 0.04 (0.21) _____ _____ _____ Total from Investment Activities . . . . (0.16) 0.36 (0.01) _____ _____ _____ Distributions Net investment income . . . . . . . . . (0.15) (0.32) (0.20) Net realized gain . . . . . . . . . . . - - (0.01) _____ _____ _____ Total Distributions. . . . . . . . . . . (0.15) (0.32) (0.21) _____ _____ _____ NET ASSET VALUE, END OF PERIOD . . . . . $ 4.51 $ 4.82 $ 4.78 _____ _____ _____ _____ _____ _____ RATIOS/SUPPLEMENTAL DATA Total Return . . . . . . . . . . . . . . (3.32)% 7.87% (0.22)% Ratio of Expenses to Average Net Assets. . . . . . . . . . . . . . . 1.00%*! 1.00%* 1.00%*! Ratio of Net Investment Income to Average Net Assets. . . . . . . . . . . 6.63%! 6.74% 7.92%! Portfolio Turnover Rate. . . . . . . . . 116.5%! 92.9% 334.1%! Net Assets, End of Period (in thousands). . . . . . . . . . . . .$82,804 $97,118 $66,297 ! Annualized * Excludes expenses in excess of a 1.00% voluntary expense limitation in effect through December 31, 1995. Financial Highlights T. Rowe Price Global Government Bond Fund (Unaudited)
For a share outstanding throughout each period ___________________________________________________________ Six Months Year Ended December 28, 1990 Ended December 31, (Commencement June 30, _________________________ of Operations) to 1994 1993 1992 December 31, 1991 __________ __________ _________ _________________ NET ASSET VALUE, BEGINNING OF PERIOD . . . . $10.08 $ 9.85 $10.30 $10.00 ______ ______ ______ ______ Investment Activities Net investment income . . . . . . . . . . . 0.26* 0.56* 0.76* 0.77* Net realized and unrealized gain (loss) . . . . . . . . . . . . . . . . . (0.57) 0.51 (0.44) 0.30 ______ ______ ______ ______ Total from Investment Activities . . . . . . (0.31) 1.07 0.32 1.07 ______ ______ ______ ______ Distributions Net investment income . . . . . . . . . . . (0.26) (0.56) (0.76) (0.77) Net realized gain . . . . . . . . . . . . . (0.02) (0.28) (0.01) - ______ ______ ______ ______ Total Distributions. . . . . . . . . . . . . (0.28) (0.84) (0.77) (0.77) ______ ______ ______ ______ NET ASSET VALUE, END OF PERIOD . . . . . . . $ 9.49 $10.08 $ 9.85 $10.30 ______ ______ ______ ______ ______ ______ ______ ______ RATIOS/SUPPLEMENTAL DATA Total Return . . . . . . . . . . . . . . . . (3.13)% 11.15% 3.26% 11.31% Ratio of Expenses to Average Net Assets. . . . . . . . . . . . . . . . . 1.20%!* 1.20%* 1.20%* 1.20%* Ratio of Net Investment Income to Average Net Assets. . . . . . . . . . . . . 5.35%! 5.57% 7.51% 8.07% Portfolio Turnover Rate. . . . . . . . . . . 165.1%! 134.0% 236.6% 93.6% Net Assets, End of Period (in thousands). . . . . . . . . . . . . . . $43,785 $48,758 $53,546 $39,775 ! Annualized * Excludes expenses in excess of a 1.20% voluntary expense limitation in effect through December 31, 1994.
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