-----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, PgbirF8HWmoq+XxmFovZ6eH4GBiXstor9PNHk/HOSmbb99aUfVCsdbshVtpRe3xI uNBH1fGu/6X+PyaYO3mxbw== 0000313212-98-000060.txt : 19980806 0000313212-98-000060.hdr.sgml : 19980806 ACCESSION NUMBER: 0000313212-98-000060 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980805 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: SEC FILE NUMBER: 811-02958 FILM NUMBER: 98677322 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 FOREIGN BOND FUND - -------------------------------------------------------------------------------- T. Rowe Price - -------------------------------------------------------------------------------- Semiannual Report Equity Income Fund - -------------------------------------------------------------------------------- June 30, 1998 - -------------------------------------------------------------------------------- REPORT HIGHLIGHTS ================================================================================ Foreign Bond Funds * Continuing turmoil in Asia and problems in Russia triggered a flight to the safety of major government bonds. * Developed economies enjoyed good growth with benign inflation, while troubles in Asia contributed to a sell-off in emerging market bonds. * Global Bond and International Bond Funds posted positive returns for the half year, but Emerging Markets Bond Fund turned in a loss. * Our relatively long duration in stronger markets helped Global Bond and International Bond Funds versus their benchmarks, but Emerging Markets Bond Fund's exposure to Russia caused it to trail its own index. * Continuing benign inflation should support major market bond prices; emerging market bonds look attractive outside of Asia, but it will take a while for confidence to be restored. FELLOW SHAREHOLDERS The major factors affecting global bond markets during the first half were the absence of inflation and continuing pressures on the currencies, economies, and financial markets in Asia. These conditions, along with doubts about Russia's ability to finance its domestic debt, prompted a flight to the quality of government bonds in the developed markets. MARKET ENVIRONMENT Prices of major government bonds continued to rise through the first half of 1998, driving yields lower. Almost all developed economies posted benign or lower inflation rates, providing a positive backdrop for bond yields. Due to the improved fiscal condition of many countries (Japan was a notable exception), lack of government issuance created a beneficial supply and demand situation. Japan's need for fiscal stimulus grew increasingly apparent as a succession of weak economic data highlighted the dire state of its economy, which in turn led to continued weakness in the yen. Emerging market debt, led by Russia, sold off sharply in the second quarter, erasing the gains of the first quarter. This dented the performance of the International and Global Bond Funds, although they still posted positive returns in the first half. ================================================================================ Developed Markets Performance - -------------------------------------------------------------------------------- In Local In U.S. 6 Months Ended 6/30/98 Currency Dollars - -------------------------------------------------------------------------------- Australia ................................... 4.67% -0.52% France ...................................... 4.96 4.44 Germany ..................................... 4.79 4.39 Italy ....................................... 5.06 4.50 Japan ....................................... 2.59 -3.88 Spain ....................................... 4.94 4.48 United Kingdom .............................. 5.98 7.46 United States ............................... 4.26 4.26 Source: J.P. Morgan ================================================================================ The U.S. dollar was relatively stable against European currencies during the first half of 1998, closing approximately where it started against the German mark. However, the U.S. and German currencies continued to appreciate versus the yen, reflecting the scale of problems facing Japan. Consequently, positive bond market returns outside the U.S. were not materially affected when translated into U.S. dollars, except for Japan and Australia; the International and Global Bond Funds continued to be underweighted there. ================================================================================ 1999: The Year of the Euro - -------------------------------------------------------------------------------- On the first business day of 1999, several major countries will officially inaugurate the Economic and Monetary Union (EM U) and adopt the euro as a single currency backed by the European Central Bank. The event could be one of the most significant financial developments of the century, creating a vast economic and currency bloc equal to the U.S. in size and power. Since the EMU has far-reaching implications for investors and funds with exposure to European securities, it is important for you to understand what is taking place. The currencies of the original participating countries will become fixed-rate units of the euro, much the same as the nickel, dime, quarter, and half dollar are denominations of the U.S. dollar. The exchange rates for their currencies versus the euro were also set in May and will officially be determined by the end of 1998. Country Currency Euro Rate - -------------------------------------------------------------------------------- Austria .............................. Schilling 13.91 Belgium .............................. Franc 40.78 Finland .............................. Mark 6.01 France ............................... Franc 6.63 Germany .............................. Mark 1.98 Ireland .............................. Punt 0.80 Italy ................................ Lira 1958.00 Luxembourg ........................... Franc 40.78 Netherlands .......................... Guilder 2.23 Portugal ............................. Escudo 202.70 Spain ................................ Peseta 168.20 SOURCE: THE WALL STREET JOURNAL, MAY 4, 1998 Beginning in January 1999, some European holdings will be redenominated in euros, particularly government securities. The FACE VALUE of other investments might remain in the existing national currencies for a time, but they will be priced, settled, and valued in euros by stock exchanges and other agencies. Thus, some of the European holdings in your funds will be valued in euros. THIS WILL NOT AFFECT THE INVESTMENT VALUE OF YOUR FUNDS IN U.S. DOLLAR TERMS, since the euro will be converted into the dollar in the same way deutschemarks, francs, lire, and other European currencies are currently converted at the prevailing exchange rates. During the transition period, which lasts from January 1, 1999, until June 30, 2002, other countries that have moved to adopt the economic terms of the Maastricht Treaty of 1993 will be able to participate in the EMU. The primary criteria for joining are: * a sustainable budget deficit less than 3% of GDP; * public debt less than 60% of GDP; * low inflation and interest rates; and * no currency devaluations within two years of application. Some of the original participants are not totally compliant with these terms but are expected to embrace them by 2002. Countries joining later may have to be in strict accord before entering the EMU, or at least be well along the path to achieving them. So far, the transition seems to be progressing smoothly, but there has been resistance to some of the more stringent terms. French Socialists, in particular, would prefer to maintain heavy government subsidies for social programs. Therefore, the jury is still out on whether complete economic and monetary convergence will be attained as planned. Assuming all goes well, the national currencies of participating countries will cease to exist and all accounting will be in euros following the transition period. However, regardless of whether or not full convergence is realized on the date specified, we do not expect pricing in euros to have any special impact on the value of your investment. Of course, problems could develop that might be unfavorable for the fund, but we do not anticipate them at this time. ================================================================================ THIS SUPPLEMENTS THE PROSPECTUS DATED MAY 1, 1998. Economic activity was robust in the U.S. and reasonably strong in Europe during the early part of the year, before some signs of slowing emerged in the second quarter. This, combined with an absence of inflationary pressures except for the high rate of employment in the U.S. and U.K., created an ideal environment for further appreciation in the bond markets. In the beginning of May, we learned which European countries would become starting members of the EMU on January 1, 1999. (See page 2.) The U.K., Denmark, and Sweden chose not to seek membership at this time, and Greece did not fulfill the criteria. However, we believe that these four countries will choose to participate early in the next century. ================================================================================ Emerging Markets Performance - -------------------------------------------------------------------------------- In U.S. 6 Months Ended 6/30/98 Dollars - -------------------------------------------------------------------------------- Emerging Markets Bond Index Plus .............................. -1.08% Brady Indexes (by issuer): * Argentina ........................................... 4.06 Brazil .............................................. -0.85 Mexico .............................................. 2.47 Poland .............................................. 6.54 Venezuela ........................................... -5.35 * Brady bonds are restructured debt obligations of many emerging market countries that enable these nations to repay loans while they implement economic reforms. The bonds are denominated in U.S. dollars and have extended maturities and lower interest rates than otherwise comparable bonds. Source: J.P. Morgan. ================================================================================ At the start of 1998, most experts expected key short-term rates to rise in the U.S. and what is often referred to as Core Europe (Germany, France, the Netherlands, and Belgium). These anticipated increases were predicated on fears of the inflationary impact of a tight labor market and above-trend economic growth in the U.S., plus a pickup in European economic growth. Higher rates were viewed as necessary to achieve a smooth path to an EMU convergence rate in January 1999. However, at the halfway stage in 1998, official rates in both regions were unchanged. As mentioned, low inflation was a major factor, supported by weak commodity prices and fear that the Asian crisis would ripple through to the developed economies. Indeed, inflation in Germany, France, and Italy, whose combined GDP will make up over 75% of the EMU area, averaged only 1.2% at the half year mark. While the central banks of the U.S. and Core Europe were content to leave monetary policy unaltered, the Bank of England was less sanguine about inflationary prospects because of its tight labor market. As a result, U.K. base rates were raised a quarter of one percent June 4. Despite this hike, long-term U.K. government bonds still appreciated, pushing yields lower. All European bond markets gained over the period, as did those in the U.S. and Canada. The contraction in the number of European government bond markets because of EMU has led to the expansion of Europe's nongovernment sector. Although this development has the potential to add value for investors, increased supply contrasted with reduced net issuance by governments enabled government bonds to outperform corporates. While financial developments in Japan were negative for the yen, they did not hinder bonds in local currency terms. Falling commodity prices connected to Asia's woes also resulted in weakness in Australian and New Zealand currencies, which lowered returns to U.S. investors in dollar terms. Emerging bond markets suffered from concerns related to Asia and Russia. Despite a positive first quarter, returns for the half year were swamped by the negative sentiment emanating largely from Russia, whose fiscal problems developed into a full-fledged crisis in confidence. Consequently, domestic interest rates soared despite proposed assistance from the International Monetary Fund (IMF) and the prospect of additional tax reform. Asian worries were also important. The catalyst was Japan's failure to address its economic problems. GLOBAL BOND FUND ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 6/30/98 ............................ 6 Months 12 Months Global Bond Fund * ............................... 3.32% 5.11% J.P. Morgan Global Government Bond Index (unhedged) ............................ 3.27 5.87 * As previously reported, we changed the fund's name from Global Government Bond Fund as of May 1, 1998, to more accurately reflect the composition of portfolio holdings. ================================================================================ Your fund provided a six-month return of 3.32%, slightly ahead of its benchmark index. Since the majority of fund holdings were in the U.S. dollar and European currencies, performance did not suffer from negative currency translation. Our exposure to the yen was slightly more than 8% of net assets, significantly less than that of the index. [Edgar description: Insert Geographic Diversification pie chart showing U.S. 44%, Germany 12%, United Kingdom 10%, Italy 6%, France 6%, Greece 4%, Canada 2%, Other and Reserves 16%] Exposure to emerging markets was a negative contributor to performance and hampered 12-month returns versus the benchmark, while returns were enhanced by overweighting the strong European and U.S. bond markets. In addition, your fund continued its stance of extending duration in these markets, which helped boost performance when interest rates declined. (Duration is a measure of interest rate sensitivity. For example, a fund with a duration of six years can be expected to rise or fall about 6% in price in response to a one- percentage-point fall or rise in interest rates.) We increased our use of high-grade corporate and government issues in the U.S. and to a lesser extent in Europe. The prospect of 11 European countries merging into a single currency bond market has expanded the opportunity for nongovernment borrowers, and we have been adding these issues selectively to the portfolio. Nongovernment issues have had a marginal but positive impact on returns, without compromising the credit quality of the overall portfolio. Following the Greek drachma's devaluation in the first quarter and Greece's long-term commitment to join EMU early next century, we built a position in Greek government bonds, which also enhanced returns. INTERNATIONAL BOND FUND ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 6/30/98 ........................ 6 Months 12 Months International Bond Fund ...................... 2.77% 1.98% J.P. Morgan Non-U.S. Dollar Government Bond Index ........................ 2.66 2.27 ================================================================================ The International Bond Fund is run similarly to the Global Bond Fund except that it does not invest in U.S. securities. (The U.S. bond position in the accompanying chart reflects the fund's exposure to emerging market countries whose bonds are denominated in U.S. dollars.) The slightly higher yen weighting compared with the benchmark, along with the fund's smaller exposure to dollar-denominated securities, was primarily responsible for its lower return than that of the Global Bond Fund. Results slightly surpassed the benchmark in the first half but trailed it over the year for the same reasons already given. [edgar description: Insert Geographic Diversification pie chart showing Germany 21%, United Kingdom 14%, France 11%, United States 10%, Italy 8%, Japan 7%, Greece 5%, Other and Reserves 24%] As in the Global Bond Fund, your fund also extended duration in the stronger markets, which helped boost performance when interest rates declined. We increased our use of high-grade corporate, government, and agency issues somewhat in Europe. The pending union of 11 European nations in a euro-denominated bond market has created new opportunities for corporate and other nongovernment issuers, and we have been adding these bonds selectively to our holdings. Nongovernment issues had a small but positive impact on returns, without compromising the fund's overall credit quality. EMERGING MARKETS BOND FUND ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 6/30/98 6 Months 12 Months - -------------------------------------------------------------------------------- Emerging Markets Bond Fund -2.45% 0.04% J.P. Morgan Emerging Markets Bond Index Plus -1.08 1.39 ================================================================================ Your fund's first half was difficult. Emerging markets began the year on a positive note but ran into trouble in the second quarter, resulting in a negative return for the fund over the six months. In addition, the portfolio's exposure to the Russian market led to its poor performance versus the benchmark index. Russia suffered from fears that it could not refinance its short-term debt, although we still believe these problems will subside. The Russian situation, coupled with ongoing concerns about Asia, was enough to tarnish the entire asset class. [edgar description: Insert Geographic Diversification pie chart showing Russia 19%, Brazil 13%, Bulgaria 5%, Venezuela 6%, Mexico 8%, Argentina 8%, United States 8%, Other and Reserves 33%] Latin America outperformed Eastern Europe, largely because of Russia's negative impact on the region. However, there were isolated bright spots, such as Nigeria where the death of General Abacha prompted hopes for a transition to democracy. Nigeria's bond market was up more than 10% in the half year, and our modest overweighting and security selection there helped offset Russia's impact to some degree. We increased the portfolio's U.S. Treasury weighting, which also helped results. Looking forward, valuations in emerging market fixed income securities look attractive in our view, and we continue to believe that the Russian situation will be resolved favorably. OUTLOOK Official short-term rates in the developed markets are unlikely to be changed during the next few months, with the possible exception of the U.K., which might tighten further. Economic growth could be weakened by the continuing crisis in Asia, but we believe consumer demand is likely to remain strong. Inflation should remain low, reflecting weak commodity prices, slowing economic growth, and plenty of excess capacity, particularly in Europe. Unemployment will likely ease in Europe and rise marginally in the U.K. and U.S. The U.S. economy is showing some signs of slowing, largely due to the effects of Asian troubles on the balance of trade and the reduction of inventories accumulated in early 1998. Any weakness in the U.S. economy should support the bond market. The Japanese economy could begin to grow once again if appropriate economic reforms are made. However, we do not believe that a sustained recovery is possible unless measures are adopted to boost domestic confidence and consumption. We remain hopeful that the recent election will lead to progress on this front. Emerging market bond valuations outside of Asia look attractive. However, it will require some time to rebuild confidence in the region. Progress depends, to some extent, on events unfolding in Russia and in China. We continue to believe that the longer-term solution for Russia (as well as Japan and China) does not lie in currency devaluation, but in tax reform and collection. If this is achieved, the cost of refinancing short-term debt can be reduced with help from the IMF. In foreign exchange markets, the yen is key. Further progress on fiscal policy should give the yen sufficient support and eliminate the need for continuing currency intervention by major governments. European currencies are likely to remain stable as we approach EMU convergence next year, while deterioration in the U.S. trade account should cap the strength of the U.S. dollar during the foreseeable future. Inview of our overall outlook for international economies and markets, we do not envision a major change in investment strategy at this time. Respectfully submitted, /s/ Peter B. Askew Executive Vice President July 24, 1998 T. Rowe Price Foreign Bond Funds - -------------------------------------------------------------------------------- ================================================================================ Portfolio Highlights - -------------------------------------------------------------------------------- KEY STATISTICS 12/31/97 6/30/98 Global Bond Fund - -------------------------------------------------------------------------------- Price Per Share ...................................... $ 9.90 $ 9.95 Dividends Per Share For 6 months ................................. 0.22 0.28 For 12 months ................................ 0.49 0.50 Dividend Yield * For 6 months ................................. 5.24% 5.67% For 12 months ................................ 5.48 5.53 Weighted Average Maturity (years) .................... 10.2 11.5 Weighted Average Effective Duration (years) .......... 6.0 6.7 Weighted Average Quality ** .......................... AA AA International Bond Fund - -------------------------------------------------------------------------------- Price Per Share $ ..................................... 9.58 $9.58 Dividends Per Share For 6 months .................................. 0.19 0.26 For 12 months ................................. 0.46 0.45 Dividend Yield * For 6 months .................................. 5.22% 5.60% For 12 months ................................. 5.49 5.48 Weighted Average Maturity (years) ..................... 8.7 9.9 Weighted Average Effective Duration (years) ........... 5.5 5.9 Weighted Average Quality ** ........................... AA AA ================================================================================ (continued on next page) T. Rowe Price Foreign Bond Funds - -------------------------------------------------------------------------------- ================================================================================ Portfolio Highlights - -------------------------------------------------------------------------------- Key statistics 12/31/97 6/30/98 Emerging Markets Bond Fund Price Per Shar ....................................... $13.71 $12.55 Dividends Per Share For 6 months ................................. 0.62 0.66 For 12 months ................................ 1.15 1.28 Dividend Yield * For 6 months ................................. 8.69% 10.14% For 12 months ................................ 8.59 9.60 Capital Gain Distributions Per Share Short-Term ................................... 0.10 - Long-Term .................................... 0.14 0.19 Weighted Average Maturity (years) .................... 15.2 14.6 Weighted Average Effective Duration (years) .......... 6.1 5.3 Weighted Average Quality ** .......................... BB BB+ * 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. ** Based on T. Rowe Price research. ================================================================================ T. Rowe Price Foreign Bond Funds - -------------------------------------------------------------------------------- ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- These charts show the value of a hypothetical $10,000 investment in each 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 funds return. [Global Bond Fund SEC graph shown here] [International Bond Fund SEC graph shown here] T. Rowe Price Foreign Bond Funds - -------------------------------------------------------------------------------- ================================================================================ Performance Comparison - -------------------------------------------------------------------------------- [Emerging Markets Bond Fund] ================================================================================ Average Annual Compound Total Return - -------------------------------------------------------------------------------- This table shows how each fund would have performed if its actual (or cumulative) returns for the periods shown had been earned at a constant rate each year. ================================================================================ Since Inception Periods Ended 6/30/98 1 Year 5 Years 10 Years Inception Date Global Bond Fund 5.11% 5.77% - 6.80% 12/31/90 International Bond Fund 1.98 6.38 8.07% 8.62 9/10/86 Emerging Markets Bond Fund 0.04 - - 21.23 12/30/94 Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. ================================================================================ T. Rowe Price Global Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited For a share outstanding throughout each period ==================================================================================================================================== Financial Highlights - ------------------------------------------------------------------------------------------------------------------------------------
6 Months Year Ended Ended 6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 NET ASSET VALUE Beginning of period ................. $ 9.90 $ 10.35 $ 10.26 $ 9.22 $ 10.08 $ 9.85 Investment activities Net investment income ....... 0.28# 0.54* 0.56* 0.59* 0.54* 0.56* Net realized and unrealized gain (loss) ...... 0.05 (0.39) 0.09 1.04 (0.84) 0.51 Total from investment activities ....... 0.33 0.15 0.65 1.63 (0.30) 1.07 Distributions Net investment income ....... (0.28) (0.49) (0.56) (0.59) (0.51) (0.56) Net realized gain ........... -- (0.11) -- -- (0.02) (0.28) Tax return of capital ....... -- -- -- -- (0.03) -- Total distributions ......... (0.28) (0.60) (0.56) (0.59) (0.56) (0.84) NET ASSET VALUE End of period ....................... $ 9.95 $ 9.90 $ 10.35 $ 10.26 $ 9.22 $ 10.08 Ratios/Supplemental Data Total return^ ....................... 3.32%# 1.61%* 6.59%* 18.13%* (3.06)%* 11.15%* Ratio of expenses to average net assets .................. 1.00%+# 1.20%* 1.20%* 1.20%* 1.20%* 1.20%* Ratio of net investment income to average net assets .......................... 5.60%+# 5.38%* 5.48%* 6.08%* 5.57%* 5.57%* Portfolio turnover rate ............. 52.3% 153.2% 262.6% 290.7% 254.1% 134.0% Net assets, end of period (in thousands) ...................... $ 41,041 $ 44,069 $ 55,869 $ 28,207 $ 36,516 $ 48,758 ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. # Excludes expenses in excess of a 1.00% voluntary expense limitation in effect through 12/31/98. * Excludes expenses in excess of a 1.20% voluntary expense limitation in effect through 12/31/97. + Annualized.
The accompanying notes are an integral part of these financial statements. T. Rowe Price International Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited For a share outstanding throughout each period ==================================================================================================================================== Financial Highlights - ------------------------------------------------------------------------------------------------------------------------------------
6 Months Year Ended Ended 6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 NET ASSET VALUE Beginning of period ......................... $ 9.58 $ 10.46 $ 10.46 $ 9.34 $ 10.34 $ 9.61 Investment activities Net investment income ............... 0.26 0.54 0.60 0.62 0.60 0.69 Net realized and unrealized gain (loss) .............. -- (0.87) 0.11 1.24 (0.79) 1.18 Total from investment activities ............... 0.26 (0.33) 0.71 1.86 (0.19) 1.87 Distributions Net investment income ............... (0.26) (0.46) (0.60) (0.62) (0.60) (0.69) Net realized gain ................... -- (0.09) (0.11) (0.12) (0.21) (0.45) Total distributions ................. (0.26) (0.55) (0.71) (0.74) (0.81) (1.14) NET ASSET VALUE End of period ............................... $ 9.58 $ 9.58 $ 10.46 $ 10.46 $ 9.34 $ 10.34 Ratios/Supplemental Data Total return^ ............................... 2.77% (3.17)% 7.13% 20.30% (1.84)% 20.00% Ratio of expenses to average net assets .......................... 0.88%+ 0.86% 0.87% 0.90% 0.98% 0.99% Ratio of net investment income to average net assets .................................. 5.53%+ 5.38% 5.86% 6.10% 6.07% 6.58% Portfolio turnover rate ..................... 41.7% 155.9% 234.0% 237.1% 345.2% 395.7% Net assets, end of period (in millions) ............................... $ 827 $ 826 $ 969 $ 1,016 $ 738 $ 745 ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. + Annualized.
The accompanying notes are an integral part of these financial statements. T. Rowe Price Emerging Markets Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ For a share outstanding throughout each period ==================================================================================================================================== Financial Highlights
6 Months Year 12/30/94 Ended Ended Through 6/30/98 12/31/97 12/31/96 12/31/95 NET ASSET VALUE Beginning of period .............................. $ 13.71 $ 12.97 $ 10.67 $ 10.00 Investment activities Net investment income .................... 0.65* 1.16* 1.00* 1.03* Net realized and unrealized gain (loss) ................... (0.96) 0.97# 2.72 1.38 Total from investment activities ......... (0.31) 2.13 3.72 2.41 Distributions Net investment income .................... (0.66) (1.15) (1.01) (1.02) Net realized gain ........................ (0.19) (0.24) (0.41) (0.72) Total distributions ...................... (0.85) (1.39) (1.42) (1.74) NET ASSET VALUE End of period .................................... $ 12.55 $ 13.71 $ 12.97 $ 10.67 Ratios/Supplemental Data Total returns .................................... (2.45)%* 16.83%* 36.77%* 25.81%* Ratio of expenses to average net assets ............................... 1.25%+* 1.25%* 1.25%* 1.25%* Ratio of net investment income to average net assets ....................................... 9.99%+* 8.61%* 8.37%* 10.20%* Portfolio turnover rate .......................... 32.5% 87.6% 168.7% 273.5% Net assets, end of period (in thousands) ................................... $ 149,063 $ 113,419 $ 39,862 $ 9,989 s Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions. * Excludes expenses in excess of a 1.25% voluntary expense limitation in effect through 12/31/98. # The amount presented is calculated pursuant to a methodology prescribed by the Securities and Exchange Commission for a share outstanding throughout the period. This amount is inconsistent with the fund's aggregate gains and losses because of the timing of sales and redemptions of fund shares in relation to fluctuating market values for the investment portfolio. + Annualized.
The accompanying notes are an integral part of these financial statements. T. Rowe Price Global Bond Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Portfolio of Investments + - -------------------------------------------------------------------------------- Par Value In thousands AUSTRALIA 1.9% Government Bonds 1.9% Federal National Mortgage Association, 6.375%, 8/15/07 AUD ......................... 1,200 $771 Total Australia (Cost $849) ........................ 771 CANADA 2.0% Government Bonds 2.0% Government of Canada, 8.00%, 6/1/23 .............. CAD 570 517 Province of Alberta, 8.00%, 3/1/00 ............... 450 318 Total Canada (Cost $834) ........................ 835 DENMARK 1.0% Corporate Bonds 1.0% Nykredit, 6.00%, 10/1/29 ......................... DKK 3,000 424 Total Denmark (Cost $425) ....................... 424 EUROPEAN CURRENCY UNIT 0.9% Government Bonds 0.9% European Bank for Reconstruction and Development, 6.00%, 5/6/99 ............................ XEU 330 367 Total European Currency Unit (Cost $386) ........ 367 FRANCE 6.0% Government Bonds 6.0% Bons du Tresor Annuel, 4.50%, 7/12/02 ............ FRF 2,000 333 Caisse Nationale des Autoroutes, 5.85%, 3/24/13 .. 3,500 613 Hydro Quebec, 5.875%, 3/13/08 .................... 1,000 173 Obligation Assimilable du Tresor 7.75%, 4/12/00 ........................... 2,000 351 5.50%, 4/25/04 ........................... 1,000 174 5.50%, 10/25/07 .......................... 1,200 209 6.00%, 10/25/25 .......................... 2,000 361 Province of British Columbia, 5.875%, 7/15/09 .... 1,000 176 Province of Ontario, 5.875%, 7/21/09 ............. 400 70 Total France (Cost $2,451) ...................... 2,460 GERMANY 12.1% Government Bonds 9.6% Bundesrepublic 7.25%, 10/21/02 DEM ............................... 700 $ 431 7.50%, 11/11/04 ................................... 1,000 642 6.875%, 5/12/05 ................................... 600 376 6.50%, 7/4/27 ..................................... 900 583 5.625%, 1/4/28 .................................... 700 403 Bundesrepublic, Principal Only 7/4/07 ............................................ 600 217 7/4/27 ............................................ 1,500 173 Federal National Mortgage Association, 5.00%, 2/16/01 ..... 1,160 654 Hydro Quebec, 5.375%, 3/19/08 ............................. 400 224 Tennessee Valley Authority, 6.375%, 9/18/06 ............... 400 243 3,946 Corporate Bonds 2.5% Colt Telecom, 8.875%, 11/30/07 ............................. 200 121 Ford Motor Credit, 5.25%, 6/16/08 .......................... 400 221 Minnesota Mining and Manufacturing, 5.00%, 10/15/01 ........ 500 283 SunAmerica Institutional Funding, 5.125%, 4/15/08 .......... 750 415 1,040 Total Germany (Cost $5,079) ............................... 4,986 GREECE 4.0% Government Bonds 4.0% Hellenic Republic 9.20%, 3/21/02 ................... GRD 100,000 327 8.90%, 3/21/04 ................... 285,000 950 8.60%, 3/26/08 ................... 100,000 347 Total Greece (Cost $1,547) .............. 1,624 HUNGARY 0.3% Government Bonds 0.3% Government of Hungary, 16.00%, 2/12/01 ... HUF 25,000 115 Total Hungary (Cost $115) ............... 115 ITALY 6.3% Government Bonds 6.3% Buoni del Tesoro Poliennali 8.25%, 7/1/01 .................. ITL 1,800,000 $1,117 9.00%, 10/1/03 ................. 925,000 622 8.75%, 7/1/06 .................. 300,000 211 7.25%, 11/1/26 ................. 900,000 630 Total Italy (Cost $2,624) ............. 2,580 JAPAN 1.1% Government Bonds 1.1% Asian Development Bank, 3.125%, 6/29/05 ....... JPY 25,000 200 Central Bank of Tunisia, 4.95%, 9/27/11 ....... 20,000 158 European Investment Bank, 3.00%, 9/20/06 ...... 10,000 80 Total Japan (Cost $478) ...................... 438 NETHERLANDS 1.0% Government Bonds 1.0% Government of Netherlands, 7.50%, 11/15/99 .... NLG 810 417 Total Netherlands (Cost $440) ................ 417 PHILIPPINES 0.2% Government Bonds 0.2% Republic of Philippines, 12.50%, 4/25/01 ...... PHP 4,000 83 Total Philippines (Cost $148) ................ 83 POLAND 0.6% Government Bonds 0.6% Republic of Poland, 14.00%, 2/12/00 ........... PLN 1,000 266 Total Poland (Cost $256) ..................... 266 PORTUGAL 0.9% Government Bonds 0.9% European Investment Bank, 5.25%, 3/23/02 ...... PTE 65,000 359 Total Portugal (Cost $355) ................... 359 RUSSIA 1.0% Hybrid Instruments 0.5% Lehman Brothers Russia Ministry of Finance, GKO Participation Note, Zero Coupon, 7/1/98: Principal repayment value linked to the performance of the Russian ruble ...... RUB 1,354 $ 217 217 Short-term Investments 0.5% Government of Russia Treasury Bill, Zero Coupon 11/18/98 ................................ 875 107 3/24/99 ................................. 1,046 107 214 Total Russia (Cost $491) ....................... 431 SOUTH AFRICA 1.3% Government Bonds 1.3% Republic of South Africa, 13.00%, 8/31/10 ....... ZAR 3,550 527 Total South Africa (Cost $688) ................. 527 SPAIN 0.6% Government Bonds 0.6% Bonos del Estado, 10.00%, 2/28/05 ............... ESP 30,000 253 Total Spain (Cost $248) ........................ 253 SWEDEN 1.6% Government Bonds 1.6% Kingdom of Sweden, 5.50%, 4/12/02 ............... SEK 5,000 648 Total Sweden (Cost $661) ....................... 648 UNITED KINGDOM 9.6% Government Bonds 3.4% Federal National Mortgage Association, 6.875%, 6/7/02 GBP 250 418 United Kingdom Treasury, 8.00%, 6/7/21 ............ 440 959 1,377 Corporate Bonds 6.2% Abbey National, 8.00%, 4/2/03 ........................ GBP 175 $ 303 Annington Finance, 7.75%, 10/2/11 .................... 360 679 Guaranteed Export Finance, Zero Coupon, 9/29/00 ...... 240 341 Halifax Building Society, 9.375%, 5/15/21 ............ 180 396 National Power, 8.375%, 8/2/06 ....................... 300 541 Swiss Bank Corporation Jersey, 8.75%, 12/18/25 ....... 130 283 2,543 Total United Kingdom (Cost $3,586) .................. 3,920 UNITED STATES 43.6% Government Bonds 37.9% Caisse D'Amort Dette Societey, 6.50%, 3/11/02 ........ USD 500 510 Central Bank of Tunisia, 7.50%, 9/19/07 .............. 250 237 City of Moscow, 9.50%, 5/31/00 ....................... 50 44 Federal National Mortgage Association, 5.25%, 1/15/03 1,000 983 Federative Republic of Brazil 10.125%, 5/15/27 ............................. 150 130 Class C, 8.00%, 4/15/14 ...................... 348 256 EI, FRN, 6.625%, 4/15/06 ..................... 24 20 IDU, FRN, 6.875%, 1/1/01 ..................... 53 50 NMB, FRN, 6.688%, 4/15/09 .................... 105 80 Instituto de Credito Oficial, 6.00%, 5/19/08 ......... 400 402 Japan Highway Public, 6.75%, 9/17/07 ................. 400 417 National Republic of Bulgaria FLIRB, STEP, 2.25%, 7/28/12 .................. 660 409 Republic of Argentina 11.375%, 1/30/17 ............................. 175 186 FRB, 6.625%, 3/31/05 ......................... 24 21 Par, FRN, 5.75%, 3/31/23 ..................... 275 205 Republic of Ivory Coast FLIRB, STEP, 2.00%, 3/29/18 .. 400 129 Republic of Korea, 8.875%, 4/15/08 ................... 425 389 Republic of Poland, PDI, STEP, 4.00%, 10/27/14 ....... 100 91 Republic of Venezuela, DCB, FRN, 6.625%, 12/18/07 .... 226 184 U.S. Treasury Bonds 7.125%, 2/15/23 .............................. 2,490 2,946 6.375%, 8/15/27 .............................. 1,350 1,482 U.S. Treasury Notes 6.75%, 6/30/99 ............................... USD 445 $450 6.00%, 8/15/00 ............................... 840 848 7.25%, 8/15/04 ............................... 2,705 2,943 6.50%, 8/15/05 ............................... 400 422 6.25%, 2/15/07 ............................... 650 681 United Mexican States 9.875%, 1/15/07 .............................. 70 73 Par (Series W-A), 6.25%, 12/31/19 (With attached value recovery rights) ........ 500 414 Vnesheconombank IAN, FRN, 6.625%, 12/15/15 ................... 323 181 Principal Loans, FRN, 6.625%, 12/15/20 ....... 750 358 15,541 Corporate Bonds 5.6% Banco Nacional de Comercio Exterior, 7.25%, 2/2/04 ......... 80 75 Consumers Energy (144a), 6.375%, 2/1/08 .................... 500 493 Norfolk Southern, 7.35%, 5/15/07 ........................... 500 536 Poland Communications (144a), 9.875%, 11/1/03 .............. 180 176 R & B Falcon, 6.75%, 4/15/05 ............................... 500 499 Union Texas Petroleum, 7.00%, 4/15/08 ...................... 500 523 2,302 Money Market Funds 0.1% Reserve Investment Fund, 5.69%# ...................... 66 66 66 Total United States (Cost $17,588) .................. 17,909 Total Investments in Securities 96.0% of Net Assets (Cost $39,249) .................... $ 39,413 Forward Currency Exchange Contracts In thousands Unrealized Counterparty Settlement Receive Deliver Gain (Loss) ____________ _______ ___________ _____________ ___________ Morgan Stanley 7/2/98 JPY 58,747 NZD 800 $ 9 Chase Manhattan 7/2/98 NZD 800 JPY 56,424 8 Morgan Stanley 7/8/98 DEM 800 GBP 276 (16) Chase Manhattan 7/8/98 DEM 1,000 USD 567 (12) Chase Manhattan 7/13/98 USD 250 SEK 1,974 3 Chase Manhattan 7/23/98 USD 1,437 GBP 860 2 Chase Manhattan 7/24/98 AUD 872 USD 551 (9) Morgan Guaranty 7/24/98 CAD 1,835 AUD 1,967 26 Chase Manhattan 7/24/98 USD 500 CAD 734 0 Chase Manhattan 7/27/98 JPY 373,414 USD 2,685 26 Morgan Guaranty 9/28/98 USD 232 ZAR 1,316 18 Chase Manhattan 9/28/98 USD 307 ZAR 1,800 14 ___________ Net unrealized gain (loss) on open forward currency exchange contracts ........................ $ 69 Other Assets Less Liabilities ...................... 1,559 NET ASSETS ......................................... $ 41,041 + Listed by currency denomination # Seven-day yield 144a Security was purchased pursuant to Rule 144a under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers - total of such securities at period-end amounts to 1.6% of net assets. AUD Australian dollar CAD Canadian dollar DEM German deutschemark DKK Danish krone ESP Spanish peseta FRF French franc GBP British sterling GRD Greek drachma HUF Hungarian florint ITL Italian lira JPY Japanese yen NLG Dutch guilder NZD New Zealand dollar PHP Philippine peso PLN Polish zloty PTE Portuguese escudo RUB Russian Ruble SEK Swedish krona USD U.S. dollar XEU European currency unit ZAR South African rand DCB Debt conversion bond EI Eligible interest bond FLIRB Front loaded interest reduction bond FRB Floating rate bond FRN Floating rate note GKO Russian treasury obligation IAN Interest arrears note IDU Interest due bond NMB New money bond PDI Past due interest STEP Stepped coupon note for which the interest rate will adjust on specified future dates The accompanying notes are an integral part of these financial statements. >>> T. Rowe Price Global Bond Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Statement of Assets and Liabilities - -------------------------------------------------------------------------------- In thousands Assets Investments in securities, at value (cost $39,249) ............... $ 39,413 Other assets ..................................................... 3,638 Total assets ..................................................... 43,051 Liabilities Total liabilities ................................................ 2,010 NET ASSETS ....................................................... $ 41,041 Net Assets Consist of: Accumulated net realized gain/loss - net of distributions ........ $ (887) Net unrealized gain (loss) ....................................... 241 Paid-in-capital applicable to 4,126,368 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized ............... 41,687 NET ASSETS ....................................................... $ 41,041 NET ASSET VALUE PER SHARE ........................................ $ 9.95 The accompanying notes are an integral part of these financial statements. T. Rowe Price International Bond Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Portfolio of Investments + - -------------------------------------------------------------------------------- Par Value In thousands AUSTRALIA 2.1% Government Bonds 2.1% Commonwealth of Australia, 8.75%, 8/15/08 ........... AUD 12,000 $9,252 Federal National Mortgage Association, 6.375%, 8/15/07 12,000 7,710 Total Australia (Cost $18,029) ..................... 16,962 CANADA 3.8% Government Bonds 3.8% Government of Canada 7.00%, 12/1/06 CAD ......................... 9,000 6,790 8.00%, 6/1/23 ............................... 18,300 16,589 8.00%, 6/1/27 ............................... 4,500 4,151 Province of Ontario, 8.25%, 12/1/05 ................. 5,000 3,958 Total Canada (Cost $29,416) ........................ 31,488 DENMARK 1.3% Corporate Bonds 1.3% Nykredit, 6.00%, 10/1/29 ............................ DKK 76,000 10,737 Total Denmark (Cost $10,812) ....................... 10,737 EUROPEAN CURRENCY UNIT 1.4% Government Bonds 1.4% Bons du Tresor Annuel, 4.50%, 7/12/02 ............... XEU 10,177 11,207 Total European Currency Unit (Cost $10,903) ........ 11,207 FRANCE 11.0% Government Bonds 11.0% Bons du Tresor Annuel 7.75%, 4/12/00 .............................. FRF 103,000 18,109 4.50%, 7/12/02 .............................. 69,000 11,478 Caisse Nationale des Autoroutes, 5.85%, 3/24/13 ..... 69,000 12,092 Hydro Quebec, 5.875%, 3/13/08 ....................... 28,000 4,842 Obligation Assimilable du Tresor 5.50%, 4/25/04 .............................. 47,400 8,235 6.50%, 10/25/06 ............................. 40,000 7,411 Obligation Assimilable du Tresor 5.50%, 10/25/07 FRF ......................... 97,000 $ 16,876 6.00%, 10/25/25 ............................. 40,000 7,220 Province of British Columbia, 5.875%, 7/15/09 ....... 19,500 3,430 Province of Ontario, 5.875%, 7/21/09 ................ 7,900 1,387 Total France (Cost $90,597) ........................ 91,080 GERMANY 20.9% Government Bonds 15.0% Bundesrepublic 7.25%, 10/21/02 ............................. DEM 12,550 7,735 7.50%, 11/11/04 ............................. 14,000 8,985 6.875%, 5/12/05 ............................. 23,900 14,964 6.50%, 7/4/27 ............................... 24,400 15,802 5.625%, 1/4/28 .............................. 20,000 11,520 Bundesrepublic, Principal Only 7/4/07 ...................................... 51,000 18,427 7/4/27 ...................................... 53,800 6,193 Federal National Mortgage Association, 5.00%, 2/16/01 22,000 12,410 Hydro Quebec, 5.375%, 3/19/08 ....................... 8,000 4,486 Instituto de Credito Oficial, 5.00%, 12/18/08 ....... 8,250 4,581 Inter-American Development Bank, 7.00%, 6/8/05 ...... 18,300 11,449 Tennessee Valley Authority, 6.375%, 9/18/06 ......... 11,600 7,050 123,602 Corporate Bonds 5.9% Bank Nederlandse Gemeenten 6.25%, 8/10/00 .............................. 6,000 3,457 5.25%, 10/1/01 .............................. 14,300 8,140 Colt Telecom, 8.875%, 11/30/07 ...................... 3,700 2,231 Ford Motor Credit, 5.25%, 6/16/08 ................... 7,900 4,364 KFW International Finance, 6.75%, 6/20/05 ........... 28,000 17,328 Minnesota Mining and Manufacturing, 5.00%, 10/15/01 . 8,350 4,718 SunAmerica Institutional Funding, 5.125%, 4/15/08 ... 15,800 8,750 48,988 Total Germany (Cost $175,894) ...................... 172,590 GREECE 4.5% Government Bonds 4.5% Hellenic Republic 9.20%, 3/21/02 ......................... GRD 2,500,000 $8,172 8.90%, 3/21/04 ......................... 6,750,000 22,499 8.60%, 3/26/08 ......................... 2,000,000 6,939 Total Greece (Cost $35,833) ................... 37,610 HUNGARY 0.2% Government Bonds 0.2% Government of Hungary, 16.00%, 2/12/01 .............. HUF 430,000 1,973 Total Hungary (Cost $1,985) ........................ 1,973 ITALY 8.0% Government Bonds 8.0% Buoni del Tesoro Poliennali 9.50%, 2/1/01 .............. ITL 40,000,000 25,216 8.25%, 7/1/01 .............. 15,000,000 9,312 9.00%, 10/1/03 ............. 12,130,000 8,157 8.75%, 7/1/06 .............. 15,600,000 10,966 7.25%, 11/1/26 ............. 18,000,000 12,594 Total Italy (Cost $67,635) ........ 66,245 JAPAN 7.4% Government Bonds 7.2% Asian Development Bank, 3.125%, 6/29/05 ....... JPY 1,215,000 9,705 Central Bank Of Tunisia, 4.95%, 9/27/11 ....... 400,000 3,164 European Investment Bank, 3.00%, 9/20/06 ...... 250,000 2,013 Export Import Bank, 4.375%, 10/1/03 ........... 2,500,000 20,908 International Bank for Reconstruction and Development, 4.75%, 12/20/04 ...... 2,100,000 18,376 Republic of Austria, 4.50%, 9/28/05 ........... 600,000 5,237 59,403 Corporate Bonds 0.2% Korea Industrial Leasing, 2.20%, 8/7/02 ....... JPY 330,000 $ 1,987 1,987 Total Japan (Cost $72,020) ................... 61,390 NETHERLANDS 1.0% Government Bonds 1.0% Government of Netherlands, 9.00%, 1/15/01 ..... NLG 15,000 8,217 Total Netherlands (Cost $9,949) .............. 8,217 PHILIPPINES 0.2% Government Bonds 0.2% Republic of Philippines, 12.50%, 4/25/01 ...... PHP 84,000 1,748 Total Philippines (Cost $3,116) .............. 1,748 POLAND 0.5% Government Bonds 0.5% Republic of Poland, 14.00%, 2/12/00 ........... PLN 14,000 3,720 Total Poland (Cost $3,597) ................... 3,720 PORTUGAL 0.5% Government Bonds 0.5% European Investment Bank, 5.25%, 3/23/02 ...... PTE 700,000 3,863 Total Portugal (Cost $3,827) ................. 3,863 RUSSIA 1.2% Hybrid Instruments 0.6% Lehman Brothers Russia Ministry of Finance, GKO Participation Note, Zero Coupon, 7/1/98: Principal repayment value linked to the performance of the Russian ruble ....... RUB 29,777 4,780 4,780 Short-term Investments 0.6% Government of Russia Treasury Bill, Zero Coupon 11/18/98 ....................................... 25,106 2,553 Government of Russia Treasury Bill, Zero Coupon 3/24/99 ........................................ 21,250 $2,599 5,152 Total Russia (Cost $11,351) ........................... 9,932 SOUTH AFRICA 1.5% Government Bonds 1.5% Republic of South Africa, 13.00%, 8/31/10 ..... ZAR 85,000 12,617 Total South Africa (Cost $16,464) ............ 12,617 SPAIN 3.4% Government Bonds 3.4% Bonos del Estado 10.90%, 8/30/03 ................ ESP 2,746,000 22,962 10.00%, 2/28/05 ................ 586,000 4,938 Total Spain (Cost $29,043) ............ 27,900 SWEDEN 1.5% Government Bonds 1.5% Kingdom of Sweden, 5.50%, 4/12/02 .......... SEK 95,000 12,313 Total Sweden (Cost $12,549) ............... 12,313 UNITED KINGDOM 14.2% Government Bonds 4.7% Federal National Mortgage Association, 6.875%, 6/7/02 GBP 6,400 10,706 Republic of Austria, 9.00%, 7/22/04 .................. 4,000 7,459 United Kingdom Treasury, 8.00%, 6/7/21 ............... 9,370 20,422 38,587 Corporate Bonds 9.5% Alliance & Leicester Building Society, 8.75%, 12/7/06 .... 8,500 15,763 Annington Finance, 7.75%, 10/2/11 ........................ 2,500 4,716 Bank of Scotland, Perpetual Debenture, FRN, 8.375% ..................................... 2,700 4,812 Guaranteed Export Finance, 10.625%, 9/15/01 .............. 10,000 18,270 Halifax Building Society 8.75%, 7/10/06 ................................... 4,000 7,471 9.375%, 5/15/21 .................................. 4,900 10,767 National Power, 8.375%, 8/2/06 GBP ...................... 5,000 $ 9,022 Swiss Bank Corporation Jersey, 8.75%, 12/18/25 ........... 3,700 8,046 78,867 Total United Kingdom (Cost $104,311) .................... 117,454 UNITED STATES 10.0% Government Bonds 7.4% City of Moscow, 9.50%, 5/31/00 ....................... USD 650 566 Federative Republic of Brazil Class C, 8.00%, 4/15/14 ...................... 8,644 6,369 EI, FRN, 6.625%, 4/15/06 ..................... 364 299 IDU, FRN, 6.875%, 1/1/01 ..................... 2,852 2,710 NMB, FRN, 6.688%, 4/15/09 .................... 1,710 1,304 National Republic of Bulgaria FLIRB, STEP, 2.25%, 7/28/12 .................. 6,630 4,110 IAB, FRN, 6.563%, 7/28/11 .................... 5,675 4,065 Republic of Argentina 11.375%, 1/30/17 ............................. 1,500 1,596 FRB, 6.625%, 3/31/05 ......................... 2,518 2,223 Par, FRN, 5.75%, 3/31/23 ..................... 3,250 2,419 Republic of Ivory Coast FLIRB, STEP, 2.00%, 3/29/18 .................. 4,857 1,566 PDI, STEP, 2.00%, 3/29/18 .................... 964 357 Republic of Korea, 8.875%, 4/15/08 ................... 4,650 4,258 Republic of Poland, PDI, STEP, 4.00%, 10/27/14 ....... 1,500 1,357 Republic of Venezuela, DCB, FRN, 6.625%, 12/18/07 .... 7,690 6,268 Russia Ministry of Finance, 10.00%, 6/26/07 .......... 495 379 United Mexican States 9.875%, 1/15/07 .............................. 850 885 11.375%, 9/15/16 ............................. 6,650 7,407 Par (Series A), 6.25%, 12/31/19 .............. 750 621 Par (Series W-A), 6.25%, 12/31/19 (With attached value recovery rights) ........ 2,750 2,277 Vnesheconombank IAN, FRN, 6.625%, 12/15/15 ................... 8,540 4,782 Principal Loans, FRN, 6.625%, 12/15/20 ....... 10,700 5,116 60,934 Corporate Bonds 0.7% Banco Nacional de Comercio Exterior, 7.25%, 2/2/04 ... USD 800 $ 749 Poland Communications (144a), 9.875%, 11/1/03 ........ 3,930 3,832 Samsung Electronics (144a), 9.75%, 5/1/03 ............ 1,500 1,384 5,965 Money Market Funds 1.9% Reserve Investment Fund, 5.69%# ...................... 15,827 15,827 15,827 Total United States (Cost $86,226) .................. 82,726 Total Investments in Securities 94.6% of Net Assets (Cost $793,557) .................. $ 781,772 Forward Currency Exchange Contracts In thousands Unrealized Counterparty Settlement Receive Deliver Gain (Loss) _______________ __________ ________________ _______________ ___________ Morgan Stanley 7/2/98 JPY 1,064,793 NZD 14,500 $ 159 Chase Manhattan 7/2/98 NZD 14,500 JPY 1,022,685 146 Morgan Stanley 7/8/98 CAD 10,183 DEM 12,500 (13) Citibank 7/8/98 DEM 6,000 GBP 2,064 (116) Morgan Stanley 7/8/98 DEM 39,787 GBP 13,632 (679) Chase Manhattan 7/8/98 GBP 3,500 DEM 10,085 246 Chase Manhattan 7/9/98 DEM 12,762 AUD 11,983 (359) Morgan Stanley 7/23/98 CAD 5,306 GBP 2,166 (4) Chase Manhattan 7/23/98 USD 4,570 CAD 6,718 2 Chase Manhattan 7/23/98 USD 10,732 GBP 6,442 (10) Morgan Guaranty 7/24/98 CAD 12,452 AUD 13,353 175 Morgan Stanley 7/27/98 JPY 1,619,367 GBP 6,980 121 Chase Manhattan 7/27/98 JPY 6,814,078 USD 49,005 476 Morgan Stanley 9/28/98 CAD 11,036 ZAR 42,500 611 Morgan Guaranty 9/28/98 USD 4,639 ZAR 26,313 366 __________ Net unrealized gain (loss) on open forward currency exchange contracts ........................... 1,121 Other Assets Less Liabilities ......................... $ 43,847 NET ASSETS ............................................ $ 826,740 + Listed by currency denomination # Seven-day yield 144a Security was purchased pursuant to Rule 144a under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers - total of such securities at period-end amounts to 0.7% of net assets. AUD Australian dollar CAD Canadian dollar DEM German deutschemark DKK Danish krone ESP Spanish peseta FRF French franc GBP British sterling GRD Greek drachma HUF Hungarian florint ITL Italian lira JPY Japanese yen NLG Dutch guilder NZD New Zealand dollar PHP Philippine peso PLN Polish zloty PTE Portuguese escudo RUB Russian ruble SEK Swedish krona USD U.S. dollar XEU European currency unit ZAR South African rand DCB Debt conversion bond EI Eligible interest bond FLIRB Front loaded interest reduction bond FRB Floating rate bond FRN Floating rate note GKO Russian treasury obligation IAB Interest arrears bond IAN Interest arrears note IDU Interest due bond NMB New money bond PDI Past due interest STEP Stepped coupon note for which the interest rate will adjust on specified future dates The accompanying notes are an integral part of these financial statements. >>> T. Rowe Price International Bond Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Statement of Assets and Liabilities - -------------------------------------------------------------------------------- In thousands Assets Investments in securities, at value (cost $793,557) ............. $ 781,772 Securities lending collateral pool .............................. 62,046 Other assets .................................................... 48,917 Total assets .................................................... 892,735 Liabilities Securities lending collateral ................................... 62,046 Other liabilities ............................................... 3,949 Total liabilities ............................................... 65,995 NET ASSETS ...................................................... $ 826,740 Net Assets Consist of: Accumulated net realized gain/loss - net of distributions ....... $ (31,452) Net unrealized gain (loss) ...................................... (10,653) Paid-in-capital applicable to 86,285,251 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized .............. 868,845 NET ASSETS ...................................................... $ 826,740 NET ASSET VALUE PER SHARE ....................................... $ 9.58 The accompanying notes are an integral part of these financial statements. T. Rowe Price Emerging Markets Bond Fund - -------------------------------------------------------------------------------- Unaudited June 30, 1998 ================================================================================ Statement of Net Assets + - -------------------------------------------------------------------------------- Par Value In thousands ARGENTINA 7.8% Government Bonds 6.7% Republic of Argentina FRB, 6.625%, 3/31/05 ................ USD 1,924 $1,699 Par, FRN, 5.75%, 3/31/23 ............ 11,100 8,263 9,962 Corporate Bonds 1.1% CEI Citicorp, 11.25%, 2/14/07 ......................... ARS 1,000 840 CIA International Telecommunications, 10.375%, 8/1/04 . 1,000 830 1,670 Total Argentina (Cost $11,589) ....................... 11,632 BRAZIL 12.5% Government Bonds 12.5% Federative Republic of Brazil 10.125%, 5/15/27 .................... USD 2,495 2,155 Class C, 8.00%, 4/15/14 ............. 13,691 10,088 DCB, FRN, 6.688%, 4/15/12 ........... 1,160 808 EI, FRN, 6.625%, 4/15/06 ............ 776 639 IDU, FRN, 6.875%, 1/1/01 ............ 945 897 NMB, FRN, 6.688%, 4/15/09 ........... 550 419 Par, FRN, 5.50%, 4/15/24 ............ 5,100 3,599 Total Brazil (Cost $20,454) ................ 18,605 BULGARIA 4.9% Government Bonds 4.9% National Republic of Bulgaria Discount (Series A), FRN, 6.563%, 7/28/24 ........ 500 384 FLIRB, STEP, 2.25%, 7/28/12 ...................... 8,020 4,972 IAB, FRN, 6.563%, 7/28/11 ........................ 2,800 2,006 Total Bulgaria (Cost $7,549) ............................ 7,362 ECUADOR 4.9% Government Bonds 4.9% Republic of Ecuador Discount, FRN, 6.625%, 2/28/25 ....... 4,250 2,959 Republic of Ecuador Par, STEP, 3.50%, 2/28/25 ............ USD 5,975 $3,223 PDI, FRN, 6.625%, 2/27/15 ............ 1,864 1,073 Total Ecuador (Cost $7,256) ................. 7,255 GABON 1.8% Government Bonds 1.8% Republic of Gabon, Loan Participation, FRN 6.688%, 1/4/04 ................................ 3,296 2,621 Total Gabon (Cost $2,858) ............................. 2,621 GHANA 0.5% Convertible Bonds 0.5% Ashanti Capital, 5.50%, 3/15/03 .................... 1,000 785 Total Ghana (Cost $845) ........................... 785 INDONESIA 1.1% Corporate Bonds 0.6% Indah Kiat, 11.875%, 6/15/02 ...................... 1,000 820 820 Convertible Bonds 0.5% APP Finance (VII) Mauritius (144a), 3.50%, 4/30/03 .. 1,000 800 800 Total Indonesia (Cost $1,611) ..................... 1,620 IVORY COAST 4.1% Government Bonds 4.1% Republic of Ivory Coast FLIRB, STEP, 2.00%, 3/29/18 ............ FRF 18,595 927 FLIRB, STEP, 2.00%, 3/29/18 ............ USD 12,944 4,174 PDI, STEP, 1.90%, 3/29/18 .............. FRF 2,365 137 PDI, STEP, 2.00%, 3/29/18 .............. USD 2,367 876 Total Ivory Coast (Cost $7,149) ............... 6,114 JAMAICA 1.4% Government Bonds 1.4% Government of Jamaica, 10.875%, 6/10/05 USD ........... 2,000 $2,018 Total Jamaica (Cost $1,999) .......................... 2,018 JORDAN 1.1% Government Bonds 1.1% Kingdom of Jordan, FRN, 6.563%, 12/23/23 ............. 2,000 1,618 Total Jordan (Cost $1,591) .......................... 1,618 KAZAKHSTAN 0.1% Government Bonds 0.1% Republic of Kazakhstan, 8.375%, 10/2/02 ................ 250 226 Total Kazakhstan (Cost $249) .......................... 226 MEXICO 7.5% Government Bonds 5.8% United Mexican States 11.375%, 9/15/16 ............................... 2,400 2,673 11.50%, 5/15/26 ................................ 2,850 3,238 Par (Series B), 6.25%, 12/31/19 ................ 1,500 1,242 Par (Series W-A), 6.25%, 12/31/19 (With attached value recovery rights) .......... 350 290 Par (Series W-B), 6.25%, 12/31/19 (With attached value recovery rights) .......... 1,525 1,263 8,706 Corporate Bonds 1.7% Grupo Minero Mexico, 8.25%, 4/1/08 ................ 2,000 1,925 Grupo Televisa, STEP, 0.00%, 5/15/08 .............. 750 613 2,538 Total Mexico (Cost $11,531) ...................... 11,244 MOROCCO 2.3% Government Bonds 2.3% Kingdom of Morocco Restructured Loan (Tranche A), FRN, 6.563%, 1/1/09 .............................. 4,000 3,422 Total Morocco (Cost $3,540) ............................. 3,422 NIGERIA 3.6% Government Bonds 3.6% Central Bank of Nigeria Par (Series WW), STEP, 6.25%, 11/15/20 (With attached value recovery warrants) USD ....... 5,750 $4,147 Promissory Notes, 3.586%, 1/5/10 .................. 2,500 1,230 Total Nigeria (Cost $5,334) .............................. 5,377 PANAMA 1.3% Government Bonds 1.3% Republic of Panama 8.875%, 9/30/27 ............................ 1,000 940 IRB, STEP, 3.75%, 7/17/14 .................. 1,250 931 Total Panama (Cost $1,982) ........................ 1,871 PERU 1.3% Government Bonds 1.3% Republic of Peru IRB (US Series), STEP, 3.25%, 3/7/17 ............. 2,500 1,393 IRB (20 yr. Series), STEP, 3.25%, 3/7/17 ......... 900 502 Total Peru (Cost $2,079) ................................ 1,895 PHILIPPINES 1.5% Government Bonds 1.5% Republic of Philippines 12.50%, 4/25/01 PHP ........................ 4,000 83 FLIRB (Series B), STEP, 6.00%, 6/1/08 ...... USD 500 440 Par (Series B), 6.50%, 12/1/17 ............. 2,000 1,775 Total Philippines (Cost $2,343) ................... 2,298 POLAND 1.7% Government Bonds 0.7% Republic of Poland 14.00%, 2/12/00 PLN .................. 2,000 531 Par, STEP, 3.00%, 10/27/24 ........... USD 750 498 1,029 Corporate Bonds 1.0% Poland Communications (144a), 9.875%, 11/1/03 ...... USD 1,500 $1,463 1,463 Total Poland (Cost $2,472) ........................ 2,492 RUSSIA 18.8% Government Bonds 14.1% City of Moscow, 9.50%, 5/31/00 ......................... 700 609 Russia Ministry of Finance 11.75%, 6/10/03 ................................ 1,000 888 10.00%, 6/26/07 ................................ 2,300 1,759 Series IV, 3.00%, 5/14/03 ...................... 2,000 1,160 Vnesheconombank IAN, FRN, 6.625%, 12/15/15 ..................... 11,048 6,187 Principal Loans, FRN, 6.625%, 12/15/20 ......... 21,850 10,447 21,050 Corporate Bonds 0.4% Rossiyskiy Kredit Bank, 10.25%, 9/29/00 ................ 1,000 590 590 Convertible Bonds 0.6% Lukinter Finance, 3.50%, 5/6/02 ........................ 1,000 900 900 Hybrid Instruments 0.3% Lehman Brothers Russia Ministry of Finance, GKO Participation Note, Zero Coupon, 7/1/98: Principal repayment value linked to the performance of the Russian ruble ............... RUB 2,707 434 434 Short-term Investments 3.4% Government of Russia Treasury Bill, Zero Coupon 11/11/98 ........................................ 8,197 1,065 11/18/98 ........................................ 23,800 2,911 3/24/99 ......................................... 10,671 1,085 5,061 Total Russia (Cost $34,250) ............................ 28,035 SOUTH AFRICA 1.3% Government Bonds 1.3% Republic of South Africa, 13.00%, 8/31/10 ...... ZAR 13,500 $2,004 Total South Africa (Cost $2,613) .............. 2,004 SOUTH KOREA 3.8% Government Bonds 2.0% Republic of Korea, 8.875%, 4/15/08 .............. USD 3,225 2,953 2,953 Corporate Bonds 1.8% Pohang Iron & Steel, 7.125%, 11/1/06 ................... 2,000 1,540 Samsung Electronics (144a), 9.75%, 5/1/03 .............. 1,250 1,153 2,693 Total South Korea (Cost $6,155) ....................... 5,646 THAILAND 0.6% Corporate Bonds 0.6% NSM Steel, Units (144a) (Each unit consists of $1,000 par, 12.25%, 2/1/08, and 1 warrant, 3/12/99) ................ 1 865 Total Thailand (Cost $946) ..................................... 865 TURKEY 1.3% Short-term Investments 1.3% Republic of Turkey Treasury Bill, Zero Coupon 9/2/98 TRL .................................. 400,000,000 1,346 9/16/98 ...................................... 200,000,000 645 Total Turkey (Cost $2,376) .......................... 1,991 VENEZUELA 5.8% Government Bonds 5.8% Republic of Venezuela 9.25%, 9/15/27 USD ............................... 2,300 1,777 DCB, FRN, 6.625%, 12/18/07 ........................ 6,107 4,977 Par (Series W-A), 6.75%, 3/31/20 (With attached oil obligation warrants) ........... 1,250 1,004 Republic of Venezuela Par (Series W-B), 6.75%, 3/31/20 (With attached oil obligation warrants) USD ....... 750 $ 603 Par (Series X-A), 6.75%, 3/31/20 .................. 450 362 Total Venezuela (Cost $9,726) ............................ 8,723 UNITED STATES 8.3% Government Bonds 1.0% U.S. Treasury Bonds, Principal Only, 8/15/26 .............. 7,000 1,439 1,439 Money Market Funds 7.3% Reserve Investment Fund, 5.69%# .................. 10,898 10,898 10,898 Total United States (Cost $12,170) .............. 12,337 Total Investments in Securities 99.3% of Net Assets (Cost $160,667) ............... $ 148,056 Forward Currency Exchange Contracts In thousands Unrealized Counterparty Settlement Receive Deliver Gain (Loss) _______________ __________ ______________ ______________ ___________ Chase Manhattan 7/8/98 USD 1,395 DEM 2,460 $ 31 Chase Manhattan 7/8/98 USD 1,268 FRF 7,500 27 Morgan Guaranty 9/28/98 USD 696 ZAR 3,947 55 Chase Manhattan 9/28/98 USD 1,192 ZAR 7,002 55 Morgan Stanley 2/24/99 KRW 910,250 USD 500 91 Morgan Stanley 2/24/99 USD 552 KRW 910,250 (39) _________ Net unrealized gain (loss) on open forward currency exchange contracts ................................ 220 Other Assets Less Liabilities .............................. 787 NET ASSETS ................................................. $ 149,063 Net Assets Consist of: Accumulated net investment income - net of distributions ... $ 180 Accumulated net realized gain/loss - net of distributions... 3,046 Net unrealized gain (loss) ................................. (12,469) Paid-in-capital applicable to 11,877,003 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized .............................. 158,306 NET ASSETS ................................................. $ 149,063 NET ASSET VALUE PER SHARE .................................. $ 12.55 + Listed by country of issuance # Seven-day yield 144a Security was purchased pursuant to Rule 144a under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers - total of such securities at period-end amounts to 2.9% of net assets. ARS Argentinean peso DEM German deutschemark FRF French franc KRW South Korean won PHP Philippine peso PLN Polish zloty RUB Russian ruble TRL Turkish lira USD U.S. dollar ZAR South African rand DCB Debt conversion bond EI Eligible interest bond FLIRB Front loaded interest reduction bond FRB Floating rate bond FRN Floating rate note GKO Russian treasury obligation IAB Interest arrears bond IAN Interest arrears note IDU Interest due bond IRB Interest reduction bond NMB New money bond PDI Past due interest STEP Stepped coupon note for which the interest rate will adjust on specified future dates The accompanying notes are an integral part of these financial statements. >>> T. Rowe Price Foreign Bond Funds - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited ==================================================================================================================================== Statement of Operations - ------------------------------------------------------------------------------------------------------------------------------------
In thousands Emerging Global International Markets Bond Fund Bond Fund Bond Fund Six Months Ended June 30, 1998 Investment Income Interest Income ...................................................... $ 1,392 $ 26,354 $ 7,223 Expenses Custody and accounting ....................................... 66 191 78 Shareholder servicing ........................................ 60 606 187 Investment management ........................................ 53 2,760 466 Registration ................................................. 15 18 29 Legal and audit .............................................. 7 9 11 Prospectus and shareholder reports ........................... 5 40 14 Directors .................................................... 3 3 3 Miscellaneous ................................................ 2 4 16 Total expenses ............................................... 211 3,631 804 Net investment income ................................................ 1,181 22,723 6,419 Realized and Unrealized Gain(Loss) Net realized gain (loss) Securities ................................................... (173) (9,958) 2,584 Foreign currency transactions ................................ (36) (2,026) 66 Net realized gain (loss) ..................................... (209) (11,984) 2,650 Change in net unrealized gain or loss Securities ................................................... 445 10,870 (14,252) Other assets and liabilities denominated in foreign currencies ............................ (16) 1,174 184 Change in net unrealized gain or loss ........................ 429 12,044 (14,068) Net realized and unrealized gain (loss) .............................. 220 60 (11,418) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............................................... $ 1,401 $ 22,783 $ (4,999)
The accompanying notes are an integral part of these financial statements. T. Rowe Price Global Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited ==================================================================================================================================== Statement of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------------------------
In thousands 6 Months Year Ended Ended 6/30/98 12/31/97 Increase (Decrease) in Net Assets Operations Net investment income ........................................................ $ 1,181 $ 2,644 Net realized gain (loss) ..................................................... (209) (1,569) Change in net unrealized gain or loss ........................................ 429 (423) Increase (decrease) in net assets from operations ............................ 1,401 652 Distributions to shareholders Net investment income ........................................................ (1,181) (2,419) Net realized gain ............................................................ -- (579) Decrease in net assets from distributions .................................... (1,181) (2,998) Capital share transactions * Shares sold .................................................................. 3,001 8,703 Distributions reinvested ..................................................... 909 2,408 Shares redeemed .............................................................. (7,158) (20,565) Increase (decrease) in net assets from capital share transactions ........................................................... (3,248) (9,454) Net Assets Increase (decrease) during period .................................................... (3,028) (11,800) Beginning of period .................................................................. 44,069 55,869 End of period ........................................................................ $ 41,041 $ 44,069 *Share information Shares sold .................................................................. 300 875 Distributions reinvested ..................................................... 91 243 Shares redeemed .............................................................. (717) (2,065) Increase (decrease) in shares outstanding .................................... (326) (947)
The accompanying notes are an integral part of these financial statements. T. Rowe Price International Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited ==================================================================================================================================== Statement of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------------------------
In thousands 6 Months Year Ended Ended 6/30/98 12/31/97 Increase (Decrease) in Net Assets Operations Net investment income ........................................................ $ 22,723 $ 48,110 Net realized gain (loss) ..................................................... (11,984) (45,274) Change in net unrealized gain or loss ........................................ 12,044 (32,816) Increase (decrease) in net assets from operations ............................ 22,783 (29,980) Distributions to shareholders Net investment income ........................................................ (22,723) (41,706) Net realized gain ............................................................ -- (7,944) Decrease in net assets from distributions .................................... (22,723) (49,650) Capital share transactions * Shares sold .................................................................. 115,275 299,191 Distributions reinvested ..................................................... 19,572 42,881 Shares redeemed .............................................................. (133,998) (406,065) Increase (decrease) in net assets from capital share transactions ........................................................... 849 (63,993) Net Assets Increase (decrease) during period .................................................... 909 (143,623) Beginning of period .................................................................. 825,831 969,454 End of period ........................................................................ $ 826,740 $ 825,831 *Share information Shares sold .................................................................. 11,927 30,500 Distributions reinvested ..................................................... 2,026 4,385 Shares redeemed .............................................................. (13,838) (41,420) Increase (decrease) in shares outstanding .................................... 115 (6,535)
The accompanying notes are an integral part of these financial statements. T. Rowe Price Emerging Markets Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Unaudited ==================================================================================================================================== Statement of Changes in Net Assets - ------------------------------------------------------------------------------------------------------------------------------------
In thousands 6 Months Year Ended Ended 6/30/98 12/31/97 Increase (Decrease) in Net Assets Operations Net investment income ........................................................ $ 6,419 $ 6,532 Net realized gain (loss) ..................................................... 2,650 3,674 Change in net unrealized gain or loss ........................................ (14,068) (2,558) Increase (decrease) in net assets from operations ............................ (4,999) 7,648 Distributions to shareholders Net investment income ........................................................ (6,419) (6,379) Net realized gain ............................................................ (1,606) (1,937) Decrease in net assets from distributions .................................... (8,025) (8,316) Capital share transactions * Shares sold .................................................................. 68,935 133,428 Distributions reinvested ..................................................... 7,161 7,223 Shares redeemed .............................................................. (27,428) (66,426) Increase (decrease) in net assets from capital share transactions ........................................................... 48,668 74,225 Net Assets Increase (decrease) during period .................................................... 35,644 73,557 Beginning of period .................................................................. 113,419 39,862 End of period ........................................................................ $ 149,063 $ 113,419 *Share information Shares sold .................................................................. 5,095 9,516 Distributions reinvested ..................................................... 539 522 Shares redeemed .............................................................. (2,031) (4,837) Increase (decrease) in shares outstanding .................................... 3,603 5,201
The accompanying notes are an integral part of these financial statements. T. Rowe Price Foreign Bond Funds ================================================================================ Unaudited June 30, 1998 ================================================================================ 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 Bond Fund (the Global Fund), the International Bond Fund (the International Fund), and the Emerging Markets Bond Fund (the Emerging Markets Fund), nondiversified, open-end management investment companies, are three of the portfolios established by the corporation and commenced operations on December 31, 1990, September 10, 1986, and December 30, 1994, respectively. Prior to May 1, 1998, the name of the Global Fund was the T. Rowe Price Global Government Bond Fund. The accompanying financial statements are prepared in accordance with generally accepted accounting principles for the investment company industry; these principles may require the use of estimates by fund management. VALUATION Debt securities are generally traded in the over-the-counter market and are valued at a price deemed best to reflect fair value as quoted by dealers who make markets in these securities or by an independent pricing service. Investments in open-end mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. For purposes of determining each fund's net asset value per share, the U.S. dollar value of all assets and liabilities initially expressed in foreign currencies is determined by using the mean of the bid and offer prices of such currencies against U.S. dollars quoted by a major bank. Assets and liabilities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by or under the supervision of the officers of the fund, as authorized by the Board of Directors. CURRENCY TRANSLATION Assets and liabilities are translated into U.S. dollars at the prevailing exchange rate at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing exchange rate on the dates of such transactions. The effect of changes in foreign exchange rates on realized and unrealized security gains and losses is reflected as a component of such gains and losses. PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are amortized for both financial reporting and tax purposes. 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. 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 and may differ from those determined in accordance with generally accepted accounting principles. Unrealized gains and losses on forward currency exchange contracts are included, in Other assets and Other liabilities, respectively, and in Change in net unrealized gain or loss in the accompanying financial statements. NOTE 2 - INVESTMENT TRANSACTIONS Consistent with their investment objectives, the funds engage in the following practices to manage exposure to certain risks or enhance performance. The investment objective, policies, program, and risk factors of each fund are described more fully in each fund's prospectus and Statement of Additional Information. EMERGING MARKETS At June 30, 1998, each fund held investments in securities of companies located in emerging markets or issued by governments of emerging market countries. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. NONINVESTMENT-GRADE DEBT SECURITIES At June 30, 1998, each fund held investments in noninvestment-grade debt securities, commonly referred to as "high-yield" or "junk" bonds. A real or perceived economic downturn or higher interest rates could adversely affect the liquidity or value, or both, of such securities because such events could lessen the ability of issuers to make principal and interest payments. FORWARD CURRENCY EXCHANGE CONTRACTS At June 30, 1998, each fund was a party to forward currency exchange contracts under which it is obligated to exchange currencies at specified future dates and exchange rates. Risks arise from the possible inability of counterparties to meet the terms of their agreements and from movements in currency values. SECURITIES LENDING The Global Fund and the International Fund lend their securities to approved brokers to earn additional income and receive cash and U.S. Treasury securities as collateral against the loans. Cash collateral received is invested in a money market pooled account by the fund's lending agent. Collateral is maintained over the life of the loan in an amount not less than 100% of the value of loaned securities. Although risk is mitigated by the collateral, the fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return them. At June 30, 1998, the value of the Global Fund's loaned securities was $1,182,000; aggregate collateral consisted of $1,253,000 in the securities lending collateral pool. The value of the International Fund's loaned securities was $57,445,000; aggregate collateral consisted of $62,046,000 in the securities lending collateral pool. OTHER Purchases and sales of portfolio securities, other than short-term securities, for the six months ended June 30, 1998, were as follows: ================================================================================ Emerging Global International Markets Bond Fund Bond Fund Bond Fund U.S. government securities Purchases ................. $ 3,870,000 $ -- $ 732,000 Sales ..................... 6,442,000 -- -- Other securities Purchases ................. 17,275,000 325,201,000 76,699,000 Sales ..................... 17,931,000 357,425,000 38,325,000 - -------------------------------------------------------------------------------- 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. At June 30, 1998, the aggregate costs of investments for the Global, International, and Emerging Markets Funds for federal income tax and financial reporting purposes were $39,249,000, $793,557,000, and $160,667,000, respectively. Net unrealized gain (loss) on investments was as follows: ================================================================================ Emerging Global International Markets Bond Fund Bond Fund Bond Fund Appreciated investments ......... $ 1,235,000 $ 23,936,000 $ 1,065,000 Depreciated investments ......... (1,071,000) (35,721,000) (13,676,000) Net unrealized gain (loss) ...... $ 164,000 $(11,785,000) $(12,611,000) ================================================================================ NOTE 4 - RELATED PARTY TRANSACTIONS Each 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 each fund and the manager provides for an annual investment management fee, of which $23,000, $453,000 and $95,000 were payable at June 30, 1998 by the Global, International and Emerging Markets Funds, respectively. The fee is computed daily and paid monthly, and consists of an individual fund fee equal to 0.35% of average daily net assets for the Global Fund, 0.35% of average daily net assets for the International Fund, and 0.45% of average daily net assets for the Emerging Markets 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 0.30% for assets in excess of $80 billion. At June 30, 1998, and for the six months then ended, the effective annual group fee rate was 0.32%. Each 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 December 31, 1998, for the Global Fund and Emerging Markets Fund which would cause each fund's ratio of expenses to average net assets to exceed 1.00% and 1.25%, respectively. Thereafter through December 31, 2000, each 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 each fund's ratio of expenses to average net assets to exceed 1.00% and 1.25%, respectively. Pursuant to the Global Fund's agreement, $88,000 of management fees were not accrued for the six months ended June 30, 1998; another $330,000 remains subject to reimbursement through December 21, 2000. Pursuant to the Emerging Markets Fund's agreement, $30,000 of management fees were not accrued for the six months ended June 30, 1998. In addition, $485,000 of unaccrued management fees and other expenses from prior years remains subject to reimbursement through December 31, 2000. In addition, each fund has entered into agreements with Price Associates and two wholly owned subsidiaries of Price Associates, pursuant to which each fund receives certain other services. Price Associates computes the daily share price and maintains the financial records of each fund. T. Rowe Price Services, Inc. (TRPS) is each fund's transfer and dividend disbursing agent and provides shareholder and administrative services to the funds. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in each fund. The Global, International and Emerging Markets Funds incurred expenses pursuant to these related party agreements totaling approximately $101,000, $389,000 and $144,000, respectively, for the six months ended June 30, 1998, of which $20,000, $86,000, and $28,000, respectively, were payable at period-end. Additionally, each fund is one of several T. Rowe Price-sponsored mutual funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may invest. Spectrum does not invest in the underlying funds for the purpose of exercising management or control. Expenses associated with the operation of Spectrum are borne by each underlying fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by Spectrum, pursuant to special servicing agreements between and among Spectrum, the underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum International, Rowe Price-Fleming International. Spectrum Income Fund and Spectrum International Fund held approximately 23.2% of the outstanding shares of the International Fund and 48.9% of the outstanding shares of the Emerging Markets Fund at June 30, 1998. For the six months then ended, the International Fund was allocated $198,000 of Spectrum expenses, $57,000 of which was payable at period-end; and the Emerging Markets Fund was allocated $65,000 of Spectrum expenses, none of which was payable at period-end. The funds may invest in the Reserve Investment Fund and Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds are offered as cash management options only to mutual funds and other accounts managed by T. Rowe Price and its affiliates and are not available to the public. The Reserve Funds pay no investment management fees. Distributions from the Reserve Funds to the Global Fund, International Fund and the Emerging Markets Fund for the six months ended June 30, 1998, totaled $15,000, $293,000 and $148,000, respectively, and are reflected as interest income in the accompanying Statement of Operations. FOR YIELD, PRICE, LAST TRANSACTION, CURRENT BALANCE, OR TO CONDUCT TRANSACTIONS, 24 HOURS, 7 DAYS A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]: 1-800-638-2587 toll free FOR ASSISTANCE WITH YOUR EXISTING FUND ACCOUNT, CALL: Shareholder Service Center 1-800-225-5132 toll free 410-625-6500 Baltimore area TO OPEN A DISCOUNT BROKERAGE ACCOUNT OR OBTAIN INFORMATION, CALL: 1-800-638-5660 toll free INTERNET ADDRESS: www.troweprice.com T. Rowe Price Associates 100 East Pratt Street Baltimore, Maryland 21202 This report is authorized for distribution only to shareholders and to others who have received a copy of the prospectus of the T. Rowe Price Foreign Bond Funds. 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. C15-051 6/30/98 -----END PRIVACY-ENHANCED MESSAGE-----