Fellow Shareholders
Market Environment
The favourable bond market conditions experienced in 1993 continued into the
first month of the new year. In the next five months, however, the trend
reversed. Global bond market yields rose sharply and prices declined.
The trigger for the sell-off in global bonds was the decision by the
U.S. central bank to raise the federal funds rate (a key short-term rate
controlled by the Fed) on February 4. The increase from 3.0% to 3.25% was
modest, and the real damage to bond markets ensued two weeks later when
Federal Reserve Chairman Greenspan testified before Congress that the Fed was
concerned over the potential for rising inflation, adding that short-term
interest rates might have to rise even further to prevent that from happening.
In the face of continued strong U.S. economic growth, the fed funds rate
was raised on three additional occasions between March and the end of June.
The increases clearly brought to an end the accommodative monetary policy the
Federal Reserve had pursued for the past five years. The U.S. bond market
continued its sell-off, and most other bond markets followed suit.
When the fed funds rate hit 4.25%, it appeared as if the Federal
Reserve's desired "neutral" ground had been reached. The effort to preempt a
rise in inflation began to have a stabilising effect on world government bond
markets during the latter part of the second quarter.
Even though central banks in most other countries were cutting
short-term interest rates, yields on longer-term bonds rose anywhere from one
percentage point (100 basis points) to more than two and one-half percentage
points (250 basis points) before settling down toward the end of the second
quarter.
The Bank of Japan cut a key short-term rate to help boost the economy,
but yields on 10-year government bonds rose anyway during the global sell-off.
The UK economy began to recover last year but, faced with tighter fiscal
policy, the Bank of England cut official interest rates in February. Concern
over the prudence of this move to lower interest rates led to an erosion of
confidence in the UK Government bond market where yields on bonds with 10-year
maturities rose 200 basis points.
In the smaller dollar-bloc countries of Australia, Canada and New
Zealand, long-term interest rates rose sharply over the the first half of the
year in response to events in the U.S.
The most positive background for government bonds lay in Continental
Europe, where economies just barely coming out of recessions looked forward to
the prospect of lower short-term interest rates and subdued inflation. In
Germany, for instance, yields on three-month notes fell one and a half
percentage points.
World Government Bond
Market Performance
Periods Ended 6/30/94
3 Months 12 Months
___________________ ___________________
In Local In U.S. In Local In U.S.
Currency Dollars Currency Dollars
________ _______ ________ _______
Australia -4.88% -0.85% -2.96% 6.58%
Belgium -1.64 3.34 2.64 9.59
Canada -4.07 -4.00 -1.69 -8.75
Denmark -3.91 0.90 0.47 5.41
France -3.03 1.28 2.64 7.99
Germany -0.95 3.90 4.92 12.33
Italy -4.11 -2.56 9.83 7.39
Japan -0.83 3.30 5.40 13.74
Netherlands -2.29 2.74 2.88 10.14
Spain -3.83 -0.52 7.10 5.96
Sweden -4.91 -3.27 1.27 1.92
United Kingdom -4.27 -0.47 1.76 5.06
United States -0.97 -0.97
Source: J. P. Morgan
Despite the fact that short-term interest rates declined and inflation
remained under control, bond yields rose, and European government bond markets
performed as badly as their U.S. counterparts. Again using Germany as an
example, the yield on a 10-year bond rose by one and a half percentage points.
Since a rise in inflation failed to materialise, there was also a significant
rise in real bond yields.
The worst performers during the period were those markets where
leveraged and "hedge" fund positions were most pronounced and where
governments were borrowing heavily to finance their budget deficits. In local
currency terms, they were Sweden, Australia, the UK, and Italy.
At the beginning of the year, the consensus view was for a stronger U.S.
dollar in the first half of 1994, and most bond investors had heavy exposure
to the dollar. The demand for capital in Europe and the repatriation of assets
back to Japan created demand for both the yen and European currencies,
particularly the deutschemark. As this demand increased, the dollar weakened.
Concern over U.S. monetary policy, certain Administration policies, and a
widening trade deficit also contributed to the dollar's decline. During the
first half of 1994, the major currencies which gained against the dollar are
shown below.
Currency Performance
Six Months Ended 6/30/94
Currency % Appreciation vs. U.S. $
_____________ _________________________
Japanese Yen 12.8%
Belgian Franc 10.1
German Mark 8.9
The Canadian dollar was the only major currency to register a decline against
its U.S. counterpart.
Portfolio Reviews
Short-Term Global Income Fund. We have been disappointed with the Fund's
performance both in absolute and relative terms thus far in 1994. The Fund was
positioned to take advantage of an overall decline in European interest rates.
But, although short-term interest rates did fall, yields on the longer bonds
held in the portfolio rose and prices declined. All securities but those with
the very shortest maturities performed badly.
Performance Comparison
Periods Ended 6/30/94
3 Months 6 Months
_____________________
Short-Term Global
Income Fund -1.23% -3.32%
Lipper Short World
Multi-Market
Income Funds Average -0.69 -2.82
The fundamentals affecting prospects for global markets also changed
during the most recent quarter. The earlier than expected recovery in the
German economy led investors to believe that rates might be closer to the
bottom than previously projected. This less optimistic sentiment was
reinforced by the continued rise in short rates in the U.S. and by signs of a
recovery in Japan, which could mean the rate declines there are also almost
over.
We became much more defensive in our portfolio management in the second
quarter. The overall weighted average maturity was reduced as were the
high-yielding European positions, particularly in Sweden. In the dollar-bloc
markets, we lowered the Canadian and Australian holdings. To maintain an
attractive yield, we invested in some higher-yielding, short-term U.S.
dollar-denominated bonds.
Global Government Bond Fund. The major change in managing this Fund was
the significant reduction in hedges back to the U.S. dollar. As of June 30,
49% of the Fund's assets were tied to the dollar compared with 74% at the end
of March. As the performance comparison illustrates, the Fund's return,
although slightly negative, benefited from the appreciation of nondollar
currencies. The major increases in currency exposure were to the deutschemark
and yen, each up 10% over the prior quarter-end.
Performance Comparison
Periods Ended 6/30/94
3 Months 6 Months
_____________________
Global Government
Bond Fund -0.34% -3.13%
J.P. Morgan Global
Government Bond Index
(unhedged) 0.27 -0.36
J.P. Morgan Global
Government Bond Index
(fully hedged) -2.00 -1.56
Going forward, we will use the J.P. Morgan Unhedged Index rather than a
combination of the hedged and unhedged as a benchmark comparison for the
Fund's performance.
As yields on bonds rose and prices declined, we reduced the portfolio's
duration, primarily by shortening the maturity on the European holdings, again
with particular emphasis on Sweden.
We expect to lengthen the duration of both the Short-Term Global Income
and the Global Government Bond Funds when a better tone returns to the market.
Outlook
The unwinding of the speculative, leveraged bond positions which were
established in late 1993 have left bond markets at attractive real and nominal
interest rate levels.
The steep rise in bond yields partially discounts future inflationary
concerns as expectations for the course of short rates, as reflected by
futures markets, appear unduly pessimistic. Central banks have not had to
react to inflationary pressures through official interest rate increases as
such pressures have yet to occur in any major economy. The spare capacity in
global economies has not resulted in tightening labour markets and resultant
upward pressure on wages, although increased demand as economies began to
recover has produced a modest rebound in commodity prices.
It is difficult to envisage significant tightening of monetary policy,
which could restrain economic recovery at a time when capital markets will be
demanding more prudent fiscal policies from governments. Governments generally
cannot choose at this point to use fiscal stimulus as a way to escape from
their economic problems. Japan is the major exception. The Bank of Japan has
also assisted the recovery process by reducing cash, or the very shortest-term
interest rates such as those charged on overnight loans. This has provided
liquidity to the Japanese economy at a time when banks were unwilling or
unable to lend.
The U.S. may be reestablishing its credibility by taking action to
contain future inflation, and this proactive stance may have a positive effect
on intermediate and long maturity securities.
The recent strength of the German mark provides room for further easing
of short rates by the Bundesbank, particularly as money growth and inflation
edge downward. European government bond markets with high real
(inflation-adjusted) yields should continue to attract domestic investors.
The worst may be behind bond markets for 1994, but the spectacular
returns of 1993 are also unlikely. A more stable environment is expected, and
markets with the greatest liquidity are likely to provide the best returns.
Most of the dollar's weakness may have occurred already, but
fundamentals such as the trade deficit are hardly supportive of a stronger
dollar. Therefore, capital flows are likely to remain skewed to nondollar
markets.
In summary, with better bond market prospects in Europe, attractive real
yields in a number of markets, and a more stable currency environment, the
outlook for global bond investors should be more favourable in the
second half of 1994.
Respectfully submitted,
Peter Askew
Executive Vice President
July 25, 1994
Statistical Highlights
T. Rowe Price Short-Term Global Income Fund / June 30, 1994
Key Statistics
Dividend Yield* Periods Ended 6/30/94
_________________________ ____________________
7 Days 6.55%
3 Months 6.66
6 Months 6.74
Dividend Per Share
_________________________
3 Months $0.07
6 Months 0.15
Change in Per-Share Value
_________________________
From March 31, 1994 to June 30, 1994
(From $4.64 to $4.51) -2.80%
From December 31, 1993 to June 30, 1994
(From $4.82 to $4.51) -6.43%
_____________________________________________________________________________
Net Assets $82.8 Million
*Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Maturity Diversification
Percent of Net Assets
Range 3/31/94 6/30/94
_______________________ _______ _______
Short-Term
(0 to 1 Year) 16% 21%
Short Intermediate-
Term (1+ to 5 Years) 84 78
Long Intermediate-
Term (5+ to 10 Years) 0 0
Long-Term
(over 10 Years) 0 1
_____________________________________________________________________________
Weighted Average
Maturity (Years) 2.6 2.2
Quality Diversification
Percent of Net Assets
RPFI Quality Rating* 3/31/94 6/30/94
_______________________ _______ _______
1 30% 38%
2 64 49
3 6 4
4 & below 0 9
_____________________________________________________________________________
Weighted Average Quality 1.8 1.8
*On a scale of 1 to 10, with Grade 1 representing highest quality.
Geographical Diversification
Net
Portfolio Holdings - Currency
Country/Currency Local Market Terms Exposure
______________ _________________ ________
United States 20.4% 99.4%
Germany 1.5 5.9
Greece 1.1 1.1
Australia 4.9 0.9
Turkey 0.8 0.8
France 14.1 0.5
Canada 10.6 0.3
Ireland 4.3 (0.2)
Italy 9.7 (0.6)
Sweden 5.6 (0.6)
Denmark 2.6 (0.8)
European Currency Unit 3.8 (1.2)
United Kingdom 4.7 (1.2)
Spain 8.9 (1.4)
Belgium 1.8 (2.1)
Netherlands 5.1 (2.2)
Total 99.9 98.6
Other Assets Less Liabilities 0.1 1.4
_____________________________________________________________________________
Net Assets 100.0% 100.0%
Holdings expressed in local market terms have been adjusted to reflect
currency holdings and the use of currency hedges (forward currency exchange
contracts) to produce the net currency exposure of the portfolio.
Statistical Highlights
T. Rowe Price Global Government Bond Fund / June 30, 1994
Key Statistics
Dividend Yield* Periods Ended 6/30/94
_________________________ ____________________
7 Days 5.52%
3 Months 5.55
6 Months 5.46
Dividend Per Share
_________________________
3 Months $0.13
6 Months 0.26
Change in Per-Share Value
_________________________
From March 31, 1994 to June 30, 1994
(From $9.65 to $9.49) -1.66%
From December 31, 1993 to June 30, 1994
(From $10.08 to $9.49) -5.85%
_____________________________________________________________________________
Net Assets $43.8 Million
*Dividends earned and reinvested for the periods indicated are annualized and
divided by the average daily net asset values per share for the same period.
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Maturity Diversification
Percent of Net Assets
Range 3/31/94 6/30/94
_______________________ _______ _______
Short-Term
(0 to 1 Year) 8% 11%
Short Intermediate-
Term (1+ to 5 Years) 36 46
Long Intermediate-
Term (5+ to 10 Years) 39 28
Long-Term
(over 10 Years) 17 15
_____________________________________________________________________________
Weighted Average
Maturity (Years) 7.8 7.2
Quality Diversification
Percent of Net Assets
RPFI Quality Rating* 3/31/94 6/30/94
_______________________ _______ _______
1 64% 72%
2 36 28
_____________________________________________________________________________
Weighted Average Quality 1.4 1.3
*On a scale of 1 to 10, with grade 1 representing highest quality.
Geographical Diversification
Net
Portfolio Holdings - Currency
Country/Currency Local Market Terms Exposure
______________ _________________ ________
United States 22.3% 49.4%
Germany 13.9 13.4
Japan 10.3 12.7
France 10.3 5.3
Italy 5.9 3.9
United Kingdom 6.5 3.6
Netherlands 4.0 3.5
Denmark 3.0 2.1
Australia 2.6 1.4
Sweden 2.3 1.0
Canada 6.5 0.9
Spain 5.0 0.8
Belgium 3.0 0.6
Total 95.6 98.6
Other Assets Less Liabilities 4.4 1.4
_____________________________________________________________________________
Net Assets 100.0% 100.0%
Holdings expressed in local market terms have been adjusted to reflect
currency holdings and the use of currency hedges (forward currency exchange
contracts) to produce the net currency exposure of the portfolio.
Portfolio of Investments! (Value in thousands)
T. Rowe Price Short-Term Global Income Fund / June 30, 1994 (Unaudited)
AUSTRALIA - 4.9%
Value
______
GOVERNMENT BOND
AUD 5,100,000 South Australia
Financial Authority,
12.50%, 10/15/96 . . . . . . . . . . . . $ 4,029
BELGIUM - 1.8%
GOVERNMENT BONDS
BEL 25,000,000 Obligation Lineaire,
10.00%, 4/5/96 . . . . . . . . . . . . . . 812
20,000,000 Obligation Lineaire,
9.25%, 1/2/98. . . . . . . . . . . . . . . 657
Total Belgium 1,469
CANADA - 10.6%
GOVERNMENT BONDS
CAD 3,050,000 Government of Canada,
6.25%, 9/15/95 . . . . . . . . . . . . . . 2,165
1,700,000 Government of Canada,
4.75%, 3/15/96 . . . . . . . . . . . . . . 1,161
4,000,000 Province of Alberta,
10.625%, 2/14/96 . . . . . . . . . . . . . 2,973
1,500,000 Province of Ontario,
10.25%, 4/4/96 . . . . . . . . . . . . . . 1,108
7,407
SHORT-TERM INVESTMENT
2,000,000 Canadian Treasury Bills,
7.69 - 7.85%, 6/15/95. . . . . . . . . . . 1,345
Total Canada 8,752
DENMARK - 2.6%
GOVERNMENT BONDS
DKK 4,000,000 Kingdom of Denmark,
9.00%, 11/15/95. . . . . . . . . . . . . . 656
9,000,000 Kingdom of Denmark,
9.00%, 11/15/96. . . . . . . . . . . . . . 1,492
Total Denmark 2,148
EUROPEAN CURRENCY UNIT - 3.8%
GOVERNMENT BONDS
XEU 1,650,000 European Economic
Community, 8.625%, 12/15/97. . . . . . . . 2,050
875,000 United Kingdom Treasury,
8.00%, 1/23/96 . . . . . . . . . . . . . . 1,071
Total European Currency Unit 3,121
FRANCE - 14.1%
GOVERNMENT BONDS
FRF 12,500,000 Bons du Tresor Annuel,
8.00%, 10/12/94. . . . . . . . . . . . . . $ 2,313
7,500,000 Bons du Tresor Annuel,
9.00%, 11/12/95. . . . . . . . . . . . . . 1,428
12,000,000 Bons du Tresor Annuel,
8.50%, 3/12/97 . . . . . . . . . . . . . . 2,308
7,500,000 Bons du Tresor Annuel,
5.75%, 11/12/98. . . . . . . . . . . . . . 1,323
22,500,000 Obligation Assimilable
du Tresor, 8.50%, 6/25/97. . . . . . . . . 4,346
Total France 11,718
GERMANY - 1.5%
GOVERNMENT BOND
DEM 2,000,000 Treuhandanstalt,
6.125%, 6/25/98. . . . . . . . . . . . . . 1,249
GREECE - 1.1%
CORPORATE BOND
GRD 250,000,000 Abbey National,
15.75%, 5/16/97. . . . . . . . . . . . . . 915
IRELAND - 4.3%
GOVERNMENT BOND
IEP 2,305,000 Republic of Ireland,
8.75%, 7/27/97 . . . . . . . . . . . . . . 3,576
ITALY - 9.7%
GOVERNMENT BONDS
ITL 4,350,000,000 Buoni del Tesoro Poliennali,
12.00%, 10/1/95. . . . . . . . . . . . . . 2,809
3,850,000,000 Buoni del Tesoro Poliennali,
12.00%, 1/1/97 . . . . . . . . . . . . . . 2,506
1,750,000,000 Buoni del Tesoro Poliennali,
10.00%, 8/1/98 . . . . . . . . . . . . . . 1,091
2,750,000,000 Buoni del Tesoro Poliennali,
8.50%, 1/1/99. . . . . . . . . . . . . . . 1,622
Total Italy 8,028
NETHERLANDS - 5.1%
GOVERNMENT BONDS
NLG 1,700,000 Government of Netherlands,
6.50%, 10/1/94 . . . . . . . . . . . . . . $ 959
5,750,000 Government of Netherlands,
6.50%, 7/15/98 . . . . . . . . . . . . . . 3,239
Total Netherlands 4,198
SPAIN - 8.9%
GOVERNMENT BONDS
ESP 150,000,000 Bonos del Estado,
12.00%, 7/15/94. . . . . . . . . . . . . . 1,143
500,000,000 Bonos del Estado,
11.40%, 7/15/95. . . . . . . . . . . . . . 3,903
250,000,000 Bonos del Estado,
13.45%, 4/15/96. . . . . . . . . . . . . . 2,027
40,000,000 Bonos del Estado,
11.00%, 6/15/97. . . . . . . . . . . . . . 313
Total Spain 7,386
SWEDEN - 5.6%
GOVERNMENT BONDS
SEK 14,000,000 Kingdom of Sweden,
10.75%, 1/23/97. . . . . . . . . . . . . . 1,890
20,000,000 Statens Bostadsfinansier,
12.50%, 1/23/97. . . . . . . . . . . . . . 2,767
Total Sweden 4,657
TURKEY - 0.8%
SHORT-TERM INVESTMENT
TRL 24,681,029,572 Bankers Trust,
25.00%, 8/26/94. . . . . . . . . . . . . . 666
UNITED KINGDOM - 4.7%
GOVERNMENT BONDS
GBP 500,000 European Investment Bank,
10.00%, 2/3/97 . . . . . . . . . . . . . . 810
700,000 United Kingdom Treasury,
8.75%, 9/1/97. . . . . . . . . . . . . . . 1,108
1,918
CORPORATE BOND
1,300,000 Abbey National,
7.75%, 6/23/98 . . . . . . . . . . . . . . 1,958
Total United Kingdom 3,876
UNITED STATES - 20.4%
GOVERNMENT BONDS
USD 2,000,000 Argentina Bote,
4.625%, 5/31/96. . . . . . . . . . . . . . $ 891
500,000 Mexico Par Bonds,
5.8125%, 3/31/08 . . . . . . . . . . . . . 489
1,000,000 Province of Ontario,
4.6875%, 8/17/99 . . . . . . . . . . . . . 994
2,374
CORPORATE BONDS
1,000,000 IMI Bank International,
4.8125%, 5/24/99 . . . . . . . . . . . . . 997
1,000,000 Industrial Development Bank
of India, 5.00%, 7/7/99. . . . . . . . . . 1,000
1,000,000 New Zealand Dairy Board,
4.0625%, 4/5/99. . . . . . . . . . . . . . 999
2,996
HYBRID INSTRUMENTS
500,000 Abbey National, 4.56%, 3/24/95 -
principal repayment value
inversely indexed to 3-month
USD LIBOR; minimum principal
repayment equals 97% of par;
maximum principal repayment
equals 103% of par . . . . . . . . . . . . 492
500,000 GE Capital Corporation, 16.89%
3/10/97 - floating interest rate
indexed to Mexican Cetes rate;
principal repayment value
inversely indexed to Mexican
Tesobono exchange rate . . . . . . . . . . 470
500,000 National Australia Bank,
7.0625%, 2/24/95 - principal
repayment value indexed
to Japanese yen exchange
rate; minimum principal
repayment equals 90%
of par . . . . . . . . . . . . . . . . . . 466
500,000 Swedish Export Credit,
4.33%, 3/15/95 - principal
repayment value inversely
indexed to 3 month DEM
LIBOR; minimum principal
repayment equals 90% of
par; maximum principal
repayment equals 148.7%
of par . . . . . . . . . . . . . . . . . . 478
1,906
T. Rowe Price Short-Term Global Income Fund / Portfolio of Investments
SHORT-TERM INVESTMENTS
USD 1,640,000 Harvard University,
Commecial Paper,
4.30%, 7/1/94. . . . . . . . . . . . . . . $ 1,640
3,008,000 Mexico Tesobonos,
5.50 - 6.30%,
7/7/94 - 9/15/94 . . . . . . . . . . . . . 2,991
2,000,000 Preferred Receivables
Funding, Commercial
Paper, 4.37%, 7/26/94. . . . . . . . . . . 1,993
3,000,000 UBS Finance (Delaware),
Commercial Paper,
4.35%, 7/1/94. . . . . . . . . . . . . . . 3,000
9,624
Total United States 16,900
Total Investments in Securities -
99.9% of Net Assets (Cost-$84,111) . . . . . . . . . . . . . . . $82,688
The accompanying notes are an integral part of these financial statements.
Portfolio of Investments! (Value in thousands)
T. Rowe Price Global Government Bond Fund / June 30, 1994 (Unaudited)
AUSTRALIA - 2.6%
Value
_______
GOVERNMENT BOND
AUD 1,750,000 Commonwealth of Australia,
6.25%, 3/15/99 . . . . . . . . . . . . . . $ 1,144
BELGIUM - 3.0%
GOVERNMENT BOND
BEL 40,000,000 Obligation Lineaire,
9.25%, 1/2/98. . . . . . . . . . . . . . . 1,314
CANADA - 6.5%
GOVERNMENT BONDS
CAD 400,000 Government of Canada,
6.00%, 2/1/96. . . . . . . . . . . . . . . 280
1,200,000 Government of Canada,
7.25%, 6/1/03. . . . . . . . . . . . . . . 768
1,205,000 Province of British Columbia,
7.75%, 6/16/03 . . . . . . . . . . . . . . 781
1,829
SHORT-TERM INVESTMENT
1,500,000 Canadian Treasury Bills,
7.75 - 7.78%, 6/15/95. . . . . . . . . . . 1,009
Total Canada 2,838
DENMARK - 3.0%
GOVERNMENT BONDS
DKK 5,500,000 Kingdom of Denmark,
9.00%, 11/15/98. . . . . . . . . . . . . . 915
2,500,000 Kingdom of Denmark,
8.00%, 5/15/03 . . . . . . . . . . . . . . 393
Total Denmark 1,308
FRANCE - 10.3%
GOVERNMENT BONDS
FRF 14,000,000 Bons du Tresor Annuel,
8.50%, 11/12/97. . . . . . . . . . . . . . 2,710
3,750,000 Bons du Tresor Annuel,
5.75%, 11/12/98. . . . . . . . . . . . . . 661
6,000,000 Obligation Assimilable du Tresor,
8.125%, 5/25/99. . . . . . . . . . . . . . 1,156
Total France 4,527
GERMANY - 13.9%
GOVERNMENT BONDS
DEM 1,000,000 Bundesobligation,
8.50%, 3/20/95 . . . . . . . . . . . . . . $ 646
3,160,000 Bundesobligation,
8.25%, 7/21/97 . . . . . . . . . . . . . . 2,098
3,550,000 Bundesrepublic,
8.375%, 5/21/01. . . . . . . . . . . . . . 2,393
1,500,000 Treuhandanstalt,
6.125%, 6/25/98. . . . . . . . . . . . . . 937
Total Germany 6,074
ITALY - 5.9%
GOVERNMENT BONDS
ITL 1,500,000,000 Buoni del Tesoro Poliennali,
12.00%, 1/1/97 . . . . . . . . . . . . . . 976
1,000,000,000 Buoni del Tesoro Poliennali,
12.00%, 9/1/97 . . . . . . . . . . . . . . 652
1,000,000,000 Buoni del Tesoro Poliennali,
10.00%, 8/1/98 . . . . . . . . . . . . . . 624
500,000,000 Buoni del Tesoro Poliennali,
12.00%, 1/1/03 . . . . . . . . . . . . . . 331
Total Italy 2,583
JAPAN - 10.3%
GOVERNMENT BONDS
JPY 65,000,000 Buoni del Tesoro Poliennali,
3.50%, 6/20/01 . . . . . . . . . . . . . . 617
165,000,000 International Bank for
Reconstruction & Development,. . . . . . .
6.75%, 3/15/00 . . . . . . . . . . . . . . 1,885
2,502
CORPORATE BOND
175,000,000 Japan Development Bank,
6.50%, 9/20/01 . . . . . . . . . . . . . . 1,995
Total Japan 4,497
NETHERLANDS - 4.0%
GOVERNMENT BOND
NLG 3,000,000 Government of Netherlands,
7.50%, 11/15/99. . . . . . . . . . . . . . 1,743
T. Rowe Price Global Government Bond Fund / Portfolio of Investments
SPAIN - 5.0%
GOVERNMENT BOND
ESP 310,000,000 Bonos del Estado,
8.30%, 12/15/98. . . . . . . . . . . . . . $ 2,188
SWEDEN - 2.3%
GOVERNMENT BOND
SEK 7,500,000 Kingdom of Sweden,
10.75%, 1/23/97. . . . . . . . . . . . . . 1,012
UNITED KINGDOM - 6.5%
GOVERNMENT BOND
GBP 1,760,000 United Kingdom Treasury,
9.50%, 4/18/05 . . . . . . . . . . . . . . 2,859
UNITED STATES - 22.3%
GOVERNMENT BONDS
USD 250,000 Argentina Par Bonds,
4.25%, 3/31/23 . . . . . . . . . . . . . . 127
950,000 Buoni del Tesoro Poliennali,
6.875%, 9/27/23. . . . . . . . . . . . . . 775
875,000 Export Development Bank,
8.50%, 8/19/03 . . . . . . . . . . . . . . 907
250,000 Mexico Par Bonds,
6.25%, 12/31/19. . . . . . . . . . . . . . 161
2,580,000 U.S. Treasury Bonds,
7.125%, 2/15/23. . . . . . . . . . . . . . 2,415
450,000 U.S. Treasury Notes,
5.25%, 7/31/98 . . . . . . . . . . . . . . 425
1,700,000 U.S. Treasury Notes,
6.375%, 1/15/99. . . . . . . . . . . . . . 1,666
1,350,000 U.S. Treasury Notes,
5.875%, 3/31/99. . . . . . . . . . . . . . 1,293
690,000 U.S. Treasury Notes,
5.875%, 2/15/04. . . . . . . . . . . . . . 620
8,389
HYBRID INSTRUMENT
500,000 Abbey National,
4.56%, 3/24/95 - principal
repayment value inversely
indexed to 3 month USD
LIBOR; minimum principal
repayment equals 97% of
par; maximum principal
repayment equals 103%
of par . . . . . . . . . . . . . . . . . . 493
SHORT-TERM INVESTMENT
USD 880,000 Harvard University,
Commercial Paper,
4.30%, 7/1/94. . . . . . . . . . . . . . . $ 880
Total United States 9,762
Total Investments in Securities -
95.6% of Net Assets (Cost-$42,020) $41,849
! Listed by currency denomination
(AUD) Australian dollar denominated
(BEL) Belgian franc denominated
(CAD) Canadian dollar denominated
(DEM) German deutschemark denominated
(DKK) Danish krone denominated
(ESP) Spanish peseta denominated
(FRF) French franc denominated
(GBP) British sterling denominated
(GRD) Greek drachma denominated
(IEP) Irish punt denominated
(ITL) Italian lira denominated
(JPY) Japanese yen denominated
(NLG) Dutch guilder denominated
(SEK) Swedish krona denominated
(TRL) Turkish lira denominated
(USD) U.S. dollar denominated
(XEU) European currency unit
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
T. Rowe Price Global Income Funds / June 30, 1994 (Unaudited)
Short-Term Global
Global Government
Income Fund Bond Fund
___________ __________
Amounts in Thousands
____________________
ASSETS
Investments in securities at value
(Cost - $84,111 and $42,020). . . . . . . . . . $82,688 $41,849
Interest receivable . . . . . . . . . . . . . . 2,667 1,294
Other assets. . . . . . . . . . . . . . . . . . 2,731 2,787
_______ _______
Total assets. . . . . . . . . . . . . . . . . . 88,086 45,930
LIABILITIES. . . . . . . . . . . . . . . . . . . . 5,282 2,145
_______ _______
Net Assets Consisting of:
Accumulated net investment income -
net of distributions . . . . . . . . . . . . 179 7
Accumulated realized gains/losses -
net of distributions . . . . . . . . . . . . (5,386) (2,088)
Net unrealized depreciation
of investments . . . . . . . . . . . . . . . (2,700) (254)
Paid-in-capital applicable to 18,354,461
and 4,614,556 shares of $0.01 par
value capital stock outstanding;
2,000,000,000 shares of the Corporation
authorized . . . . . . . . . . . . . . . . . 90,711 46,120
_______ _______
NET ASSETS . . . . . . . . . . . . . . . . . . . . $82,804 $43,785
_______ _______
_______ _______
NET ASSET VALUE PER SHARE $4.51 $9.49
_____ _____
_____ _____
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price Global Income Funds / Six Months Ended June 30, 1994 (Unaudited)
Short-Term Global
Global Government
Income Fund Bond Fund
___________ ___________
Amounts in Thousands
___________________
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . . . . . $ 3,554 $ 1,504
________ _______
Expenses
Investment management fees. . . . . . . . . . . . 211 89
Shareholder servicing fees & expenses . . . . . . 110 61
Custodian and accounting fees & expenses. . . . . 88 73
Registration fees & expenses. . . . . . . . . . . 31 23
Legal & auditing fees . . . . . . . . . . . . . . 11 13
Prospectus & shareholder reports. . . . . . . . . 8 7
Directors' fees & expenses. . . . . . . . . . . . 4 3
Proxy & annual meeting expenses . . . . . . . . . 1 1
Miscellaneous expenses. . . . . . . . . . . . . . 2 4
_______ _______
Total expenses. . . . . . . . . . . . . . . . . . 466 274
_______ _______
Net investment income. . . . . . . . . . . . . . . . 3,088 1,230
_______ _______
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss
Securities. . . . . . . . . . . . . . . . . . . . (698) (740)
Foreign currency transactions . . . . . . . . . . (5,012) (1,300)
_______ _______
Net realized loss. . . . . . . . . . . . . . . . . . (5,710) (2,040)
_______ _______
Change in net unrealized appreciation or depreciation
Securities. . . . . . . . . . . . . . . . . . . . 1,200 (499)
Other assets and liabilities denominated in
foreign currencies . . . . . . . . . . . . . . . (1,774) (151)
_______ _______
Change in net unrealized appreciation or
depreciation. . . . . . . . . . . . . . . . . . . (574) (650)
_______ _______
Net loss on investments. . . . . . . . . . . . . . . (6,284) (2,690)
_______ _______
DECREASE IN NET ASSETS FROM OPERATIONS . . . . . . . $(3,196) $(1,460)
_______ _______
_______ _______
The accompanying notes are an integral part of these financial statements.
<TABLE>
Statement of Changes in Net Assets
T. Rowe Price Global Income Funds (Unaudited)
<CAPTION>
Short-Term Global Income Fund Global Government Bond Fund
_____________________________ ___________________________
Six Months Year Ended Six Months Year Ended
Ended December 31, Ended December 31,
June 30, 1994 1993 June 30, 1994 1993
____________ ____________ ____________ ____________
Amounts in Thousands Amounts in Thousands
____________________ _____________________
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income . . . . . . . . . . . $ 3,088 $ 5,076 $ 1,230 $ 2,932
Net realized gain (loss) on
investments . . . . . . . . . . . . . . . (5,710) 1,748 (2,040) 1,553
Change in net unrealized appreciation or
depreciation of investments . . . . . . . (574) (1,111) (650) 998
_______ _______ _______ _______
Increase (decrease) in net assets
from operations . . . . . . . . . . . . . (3,196) 5,713 (1,460) 5,483
_______ _______ _______ _______
Distributions to shareholders
Net investment income . . . . . . . . . . . (3,088) (5,076) (1,230) (2,932)
Net realized gain on investments. . . . . . - - (96) (1,327)
_______ _______ _______ _______
Decrease in net assets from
distributions to shareholders . . . . . . (3,088) (5,076) (1,326) (4,259)
_______ _______ _______ _______
Capital share transactions
Sold . . . . . . . . . . . . . . . . . . . 46,138 72,691 12,345 22,506
Distributions reinvested . . . . . . . . . 2,581 4,294 979 3,535
Redeemed . . . . . . . . . . . . . . . . . (56,749) (46,801) (15,511) (32,053)
_______ _______ _______ _______
Increase (decrease) in net assets from
capital share transactions. . . . . . . . (8,030) 30,184 (2,187) (6,012)
_______ _______ _______ _______
Total increase (decrease). . . . . . . . . . . (14,314) 30,821 (4,973) (4,788)
NET ASSETS
Beginning of period . . . . . . . . . . . . 97,118 66,297 48,758 53,546
_______ _______ _______ _______
End of period . . . . . . . . . . . . . . . $82,804 $97,118 $43,785 $48,758
_______ _______ _______ _______
_______ _______ _______ _______
Share transactions
Sold. . . . . . . . . . . . . . . . . . . . 9,755 shs. 15,118 shs. 1,268 shs. 2,190 shs.
Distributions reinvested. . . . . . . . . . 556 893 101 346
Redeemed. . . . . . . . . . . . . . . . . . (12,112) (9,735) (1,592) (3,132)
_______ _______ _______ _______
Net increase (decrease) in shares
outstanding . . . . . . . . . . . . . . . . (1,801) 6,276 (223) (596)
</TABLE>
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price Global Income Funds / June 30, 1994 (Unaudited)
Note 1 - Significant Accounting Policies
T. Rowe Price International Funds, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The Short-Term Global Income Fund (the
Short-Term Fund) and the Global Government Bond Fund (the Government Fund),
non-diversified, open-end management investment companies, are two of the
portfolios established by the Corporation.
A) Valuation - Debt securities are generally traded in the over-the-counter
market and are valued at a price deemed best to reflect fair value as quoted
by dealers who make markets in these securities or by an independent pricing
service.
For purposes of determining each Fund's net asset value per share, all
assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at the mean of the bid and offer prices of such currencies
against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of
each Fund, as authorized by the Board of Directors.
B) Currency translation - Foreign currency amounts are translated into U.S.
dollars at prevailing exchange rates as follows: assets and liabilities at
the rate of exchange at the end of the respective period, purchases and sales
of securities and income and expenses at the rate of exchange prevailing on
the dates of such transactions. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses.
C) Discounts and Premiums - Discounts and premiums on debt securities are
amortized for both financial and tax reporting purposes.
D) Other - Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on an identified cost basis. Distributions to shareholders are
recorded by each Fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
Note 2 - Financial Instruments
As a part of its investment program, each Fund engages in the following
activities, the nature and risk of which are set forth more fully in each
Fund's Prospectus and Statement of Additional Information.
A) Forward Currency Exchange Contracts - At June 30, 1994, each Fund was a
party to various forward currency exchange contracts under which it is
obligated to exchange currencies at specified future dates. Risks arise from
the possible inability of counterparties to meet the terms of their contracts
and from movements in currency values. Outstanding contracts at June 30, 1994,
are as follows:
Short-Term Fund
____________________________________________________________________________
Unrealized
Contract to Apprec.
Value _______________________ (Deprec.)
Date Receive Deliver in USD Counterparty
_____ _______ ______ ________ ___________
Amounts in Thousands
_______________________________________
7/94 DEM 5,785 USD 3,517 134 Chase Manhattan Bank
7/94 USD 4,797 GBP 3,162 (97) Union Bank of Switzerland
7/94 USD 5,843 NLG 10,774 (224) Chase Manhattan Bank
7/94 USD 6,370 BEL 215,624 (238) Chase Manhattan Bank
7/94 BEL 108,510 USD 3,324 2 Chase Manhattan Bank
7/94 USD 10,933 FRF 61,401 (359) Chase Manhattan Bank
7/94 USD 5,014 SEK 39,637 (161) Chase Manhattan Bank
7/94 USD 2,713 DKK 17,473 (88) Chase Manhattan Bank
7/94 USD 8,389 ITL 13,441,970 (105) Chase Manhattan Bank
7/94 USD 8,242 ESP 1,118,184 (259) Chase Manhattan Bank
7/94 USD 4,122 XEU 3,426 - Union Bank of Switzerland
7/94 USD 3,758 IEP 2,472 (11) Union Bank of Switzerland
7/94 USD 7,427 CAD 10,312 (26) Merrill Lynch
7/94 USD 1,340 CAD 1,858 (3) Chase Manhattan Bank
7/94 USD 3,342 AUD 4,504 56 Union Bank of Switzerland
Government Fund
____________________________________________________________________________
Unrealized
Contract to Apprec.
Value ___________________ (Deprec.)
Date Receive Deliver in USD Counterparty
_____ _______ ______ ________ ____________
Amounts in Thousands
_____________________________
7/94 DEM 239 USD 150 1 Chase Manhattan Bank
7/94 USD 1,018 BEL 34,498 (39) Union Bank of Switzerland
7/94 USD 2,130 FRF 11,947 (67) Citibank
7/94 USD 190 NLG 351 (7) Union Bank of Switzerland
7/94 USD 580 SEK 4,446 (3) Chase Manhattan Bank
7/94 USD 1,773 ESP 240,611 (56) Chase Manhattan Bank
7/94 USD 857 ITL 1,358,764 (2) Chase Manhattan Bank
7/94 GBP 270 DEM 663 (1) Chase Manhattan Bank
7/94 USD 1,252 GBP 825 (19) Union Bank of Switzerland
7/94 USD 415 GBP 269 (6) Chase Manhattan Bank
7/94 AUD 277 USD 200 2 Chase Manhattan Bank
7/94 USD 729 AUD 983 12 Union Bank of Switzerland
7/94 USD 1,763 CAD 2,445 (3) Citibank
7/94 USD 1,008 CAD 1,395 (2) Chase Manhattan Bank
8/94 USD 395 DKK 2,477 (2) Chase Manhattan Bank
Net unrealized appreciation (depreciation) related to these contracts,
included in the accompanying financial statements, was as follows:
Short-Term Government
Fund Fund
___________ ___________
Appreciated Contracts $ 192,000 $ 15,000
Depreciated Contracts (1,571,000) (207,000)
__________ _________
Net Unrealized
Depreciation $(1,379,000) $(192,000)
__________ _________
__________ _________
B) Other - Purchases and sales of portfolio securities for the Short-Term
Fund, other than short-term and U.S. Government securities, aggregated
$41,655,000 and $55,583,000. Sales of U.S. Government securities aggregated
$4,694,000 for the six months ended June 30, 1994. Purchases and sales of
portfolio securities for the Government Fund, other than short-term and U.S.
Government securities, aggregated $26,675,000 and $23,045,000. Purchases and
sales of U.S. Government securities aggregated $9,615,000 and $12,307,000,
respectively, for the six months ended June 30, 1994.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since each Fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income. The Short-Term Fund has unused realized capital loss
carryforwards for federal income tax purposes of $149,000 at December 31,
1993, which expire through 2001.
At June 30, 1994, the aggregate cost of investments for the Short-Term
and Government Funds for federal income tax and financial reporting purposes
was $84,111,000 and $42,020,000, respectively. Net unrealized appreciation
(depreciation) related to these investments was as follows:
Short-Term Government
Fund Fund
__________ __________
Appreciated Investments $ 798,000 $1,110,000
Depreciated Investments (2,221,000) (1,281,000)
__________ _________
Net Unrealized
Depreciation $(1,423,000) $ (171,000)
__________ _________
__________ _________
Note 4 - Related Party Transactions
Each Fund is managed by Rowe Price-Fleming International, Inc. (Price-Fleming)
which is owned by T. Rowe Price Associates, Inc. (Price Associates), Robert
Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a joint
venture agreement.
The investment management agreement between each Fund and Price-Fleming
(the Manager) provides for an annual investment management fee, computed daily
and paid monthly, consisting of an Individual Fund Fee equal to 0.25% of
average net assets for the Short-Term Fund and 0.35% of average net assets for
the Government Fund, and a Group Fee. The Group Fee is based on the combined
assets of certain mutual funds sponsored by the Manager or Price Associates
(the Group). The Group Fee rate ranges from 0.48% for the first $1 billion of
assets to 0.31% for assets in excess of $34 billion. The effective annual
Group Fee rate at June 30, 1994 and for the six
Notes to Financial Statements (Cont'd)
months then ended was 0.34%. Each Fund pays a pro rata portion of the Group
Fee based on the ratio of the Fund's net assets to those of the Group.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through December 31, 1995 for the Short -Term
Fund or through December 31, 1994 for the Government Fund, which would cause
each Fund's ratio of expenses to average net assets to exceed 1.00% and 1.20%,
respectively. Thereafter, the Short-Term and Government Funds are required to
reimburse the Manager for these expenses, provided average net assets have
grown or expenses have declined sufficiently so as not to cause the Fund's
ratio of expenses to average net assets to exceed 1.00% and 1.20%,
respectively, in any month, and that no such reimbursement shall be made to
the Manager after December 31, 1997 for the Short-Term Fund, or after December
31, 1996 for the Government Fund. Pursuant to this agreement, $66,000 and
$70,000 of management fees were not accrued by the Short-Term and Government
Fund, respectively, for the six months ended June 30, 1994. Pursuant to a
previous agreement, $295,000 of unaccrued fees and other expenses borne by the
Manager in the Short-Term Fund are subject to reimbursement through December
31, 1995. Pursuant to a previous agreement, $388,000 of unaccrued fees and
other expenses borne by the Manager in the Government Fund are subject to
reimbursement through December 31, 1994. Additionally, $98,000 of unaccrued
fees from 1993 in the Government Fund are subject to reimbursement through
December 31, 1996.
T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc.
(RPS) are wholly owned subsidiaries of Price Associates. TRPS provides
transfer and dividend disbursing agent functions and shareholder services for
all accounts. RPS provides subaccounting and recordkeeping services for
certain retirement accounts invested in each Fund. Price Associates, under a
separate agreement, calculates the daily share price and maintains the
financial records of each Fund. For the six months ended June 30, 1994, the
Short-Term and Government Fund incurred fees totalling approximately $139,000
and $100,000, respectively, for these services provided by related parties. At
June 30, 1994, these investment management and service fees payable were
$61,000 and $35,000, respectively.
Financial Highlights
T. Rowe Price Short-Term Global Income Fund (Unaudited)
For a share outstanding throughout each period
______________________________________________
June 30, 1992
Six Months Year (Commencement of
Ended Ended Operations) to
June 30, December 31, December 31,
1994 1993 1992
__________ __________ ____________
NET ASSET VALUE, BEGINNING OF PERIOD . . $ 4.82 $ 4.78 $ 5.00
_____ _____ _____
Investment Activities
Net investment income . . . . . . . . . 0.15* 0.32* 0.20*
Net realized and unrealized
gain (loss) . . . . . . . . . . . . . (0.31) 0.04 (0.21)
_____ _____ _____
Total from Investment Activities . . . . (0.16) 0.36 (0.01)
_____ _____ _____
Distributions
Net investment income . . . . . . . . . (0.15) (0.32) (0.20)
Net realized gain . . . . . . . . . . . - - (0.01)
_____ _____ _____
Total Distributions. . . . . . . . . . . (0.15) (0.32) (0.21)
_____ _____ _____
NET ASSET VALUE, END OF PERIOD . . . . . $ 4.51 $ 4.82 $ 4.78
_____ _____ _____
_____ _____ _____
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . (3.32)% 7.87% (0.22)%
Ratio of Expenses to Average
Net Assets. . . . . . . . . . . . . . . 1.00%*! 1.00%* 1.00%*!
Ratio of Net Investment Income to
Average Net Assets. . . . . . . . . . . 6.63%! 6.74% 7.92%!
Portfolio Turnover Rate. . . . . . . . . 116.5%! 92.9% 334.1%!
Net Assets, End of Period
(in thousands). . . . . . . . . . . . .$82,804 $97,118 $66,297
! Annualized
* Excludes expenses in excess of a 1.00% voluntary expense limitation in
effect through December 31, 1995.
<TABLE>
Financial Highlights
T. Rowe Price Global Government Bond Fund (Unaudited)
<CAPTION>
For a share outstanding throughout each period
___________________________________________________________
Six Months Year Ended December 28, 1990
Ended December 31, (Commencement
June 30, _________________________ of Operations) to
1994 1993 1992 December 31, 1991
__________ __________ _________ _________________
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . $10.08 $ 9.85 $10.30 $10.00
______ ______ ______ ______
Investment Activities
Net investment income . . . . . . . . . . . 0.26* 0.56* 0.76* 0.77*
Net realized and unrealized gain
(loss) . . . . . . . . . . . . . . . . . (0.57) 0.51 (0.44) 0.30
______ ______ ______ ______
Total from Investment Activities . . . . . . (0.31) 1.07 0.32 1.07
______ ______ ______ ______
Distributions
Net investment income . . . . . . . . . . . (0.26) (0.56) (0.76) (0.77)
Net realized gain . . . . . . . . . . . . . (0.02) (0.28) (0.01) -
______ ______ ______ ______
Total Distributions. . . . . . . . . . . . . (0.28) (0.84) (0.77) (0.77)
______ ______ ______ ______
NET ASSET VALUE, END OF PERIOD . . . . . . . $ 9.49 $10.08 $ 9.85 $10.30
______ ______ ______ ______
______ ______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total Return . . . . . . . . . . . . . . . . (3.13)% 11.15% 3.26% 11.31%
Ratio of Expenses to Average
Net Assets. . . . . . . . . . . . . . . . . 1.20%!* 1.20%* 1.20%* 1.20%*
Ratio of Net Investment Income to
Average Net Assets. . . . . . . . . . . . . 5.35%! 5.57% 7.51% 8.07%
Portfolio Turnover Rate. . . . . . . . . . . 165.1%! 134.0% 236.6% 93.6%
Net Assets, End of Period
(in thousands). . . . . . . . . . . . . . . $43,785 $48,758 $53,546 $39,775
<FN>
! Annualized
* Excludes expenses in excess of a 1.20% voluntary expense limitation in effect through December 31, 1994.
</FN>
</TABLE>
