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T. Rowe Price
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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 International
Bond Fund (registered trademark).
T. Rowe Price
International Bond
Fund
December 31, 1994
IBF
Fellow Shareholders
Highlights
In contrast to the excellent returns of the previous year, 1994 was
disappointing for global bond markets. The U.S. Federal Reserve put upward
pressure on short-term interest rates starting in February 1994, but few
anticipated that its first tightening in this economic cycle would trigger a
sell-off in global bond markets across all maturities.
Most major bond markets posted negative returns measured in local
currencies. If there was any bright side to the picture, it rested in the
decreasing value of the U.S. dollar against most major currencies, with the
notable exception of the Canadian dollar. The Belgian franc was strongest of
all versus the dollar, appreciating more than 11% over the year. The dollar's
decline allowed dollar-based investors in foreign markets to offset, to some
extent, poor bond market returns with local currency appreciation.
Although your Fund underperformed its benchmark during the year, our
focus on liquidity and high credit quality enabled us to avoid the steeper
declines suffered by some investors who were forced to unwind leveraged
positions. Returns for both the three- and 12-month periods are shown below.
Performance Comparison
Periods Ended 12/31/94
3 Months 12 Months
__________________________
International Bond Fund -0.43% -1.84%
J.P. Morgan Non-U.S.
Dollar Government
Bond Index 0.65 4.93
Market Environment
The global downturn in bond prices began in early February when the Federal
Reserve first adopted a tighter monetary policy, initiating a series of six
increases in the fed funds rate during the year. Investors responded worldwide
by liquidating bond holdings, forcing yields in all markets to rise. The
tightening was undertaken because of strong U.S. economic growth and a
corresponding fear of a rekindling of inflation, which has so far failed to
materialize. Elsewhere in North America, the renewed threat of Quebec's
separation from the rest of Canada caused a good deal of bond market
volatility. Benign inflation figures and high real yields helped stem the
losses over 12 months to -4.49% measured in the weak Canadian dollar, but a
staggering -9.85% in U.S. dollars.
The initial sell-off in the U.S. triggered the sale of long-term bond
positions by many highly leveraged investors, particularly in Europe. Negative
returns during the first quarter proved to be a setback from which most bond
markets failed to recover. German bonds returned -2.62% for the year in local
currency, but were up 9.10% in U.S. dollars. Political concerns in France were
largely responsible for a -5.50% local-currency return in 1994. Countries
further along the path of economic resurgence performed worst of all. Strong
growth in Australia led to a rise of 2.5 percentage points in short-term
interest rates during the year. Despite the Bank of England's own preemptive
move against inflation in the first quarter, the UK bond market suffered most
during the first half. Australia and the UK generated 12-month returns in
local currencies of -7.04% and -7.03%, respectively.
Emerging markets also suffered badly, joining in the bear market
tailspin during the first half, then selling off again at the end of the year
with the collapse of the Mexican peso and securities markets. It was ironic
that the U.S. bond market registered a loss for the year of only 2.90%,
relatively less painful than many other markets, considering that higher U.S.
interest rates triggered much of the selling to begin with.
Bond Market Performance
Total Returns
Periods Ended 12/31/94
3 Months 12 Months
_________________________________________
In Local In U.S. In Local In U.S.
Currency Dollars Currency Dollars
________ ________ ________ ________
Australia 2.21% 7.14% -7.04% 6.23%
Belgium 2.88 3.17 -2.12 11.17
Canada 0.29 -4.09 -4.49 -9.85
Denmark 1.89 1.90 -4.32 6.83
France 0.96 0.15 -5.50 4.56
Germany 1.54 1.64 -2.62 9.10
Ireland 2.87 1.96 -4.30 4.87
Italy 1.15 -2.73 -3.21 2.14
Japan 1.32 0.50 -3.02 8.49
The Netherlands 1.03 1.18 -5.33 5.96
Spain 0.82 -1.52 -3.66 4.61
Sweden 4.09 4.74 -4.59 6.97
United Kingdom 2.72 1.91 -7.03 -1.69
United States 0.21 0.21 -2.90 -2.90
Source: J. P. Morgan
Portfolio Review
Your Fund had a disappointing year, both in relative and absolute terms,
primarily due to its fairly long duration prior to the interest rate
increases. Duration measures sensitivity to interest rate changes; a fund with
a long duration declines more in value than one with a shorter duration when
interest rates rise.
We believed at the beginning of the year that short-term European rates
would decline further, and we failed to fully anticipate the extent of the
increase in long-term bond yields. We reduced our exposure to the U.S. dollar
at the end of the first quarter, a move that benefited your Fund when the
dollar depreciated later in the year. We also shortened duration to further
protect net asset value. Fortunately, we avoided most of the weakness in the
Canadian market by keeping our investments there low. Likewise, we had minimal
exposure to the carnage in emerging markets, another strategic maneuver that
helped your Fund.
Although European bonds performed poorly early in 1994, we remained
convinced that economic conditions on the Continent favored both bond and
currency markets, which did indeed recover during the second half of the year.
Our heaviest allocation of assets was in Europe, particularly in Germany and
France, away from countries with structural and political problems such as
Italy, Spain, and Sweden.
We want to let you know that your Fund's directors have approved an
increase in our maximum allocation to below-investment-grade bonds from 10% to
20% of total assets. This should give us increased flexibility to take
advantage of attractive opportunities as we find them.
Outlook
With economic growth in the U.S. continuing at a strong pace, the Federal
Reserve will likely raise the fed funds rate further in 1995. Unemployment is
at an extremely low level while capacity utilization is high, conjuring the
specter of inflation if U.S. GDP growth is not slowed soon to its historical
trend around 2.5%. As discussed, U.S. monetary policy had a significant impact
on world markets in 1994.
The Japanese economy was recovering with low inflation prior to the
devastating earthquake in January, after our reporting period ended. It
remains to be seen what long-term effects this natural disaster will have on
Japanese fixed-income markets.
In Europe, Germany, the Netherlands, France, and Belgium are unlikely to
raise short-term interest rates in the near term, which would act as a drag on
economic recovery. We believe that long-term bonds will find support from the
Bundesbank's cautious monetary policy; inflation remains subdued and real bond
yields are already at historically high levels. We expect the same influences
to underpin bond prices in the UK, despite its more mature expansion.
Uncertainty over political events, such as the forthcoming French presidential
election, could cause some temporary volatility. The biggest question marks in
this arena are Italy, Spain, and Sweden, all of whom need to address urgent
political concerns to restore investor confidence.
Emerging bond markets are certainly capable of rebounding, with Mexico
possibly lagging more stable markets in Latin America and Eastern Europe, for
example, where the prospects are better for sustainable growth with low
inflation.
Regarding the U.S. dollar, it is difficult to make a case for a reversal
in its long-term downtrend against other major currencies. Capital is likely
to keep flowing into nondollar markets while, at the same time, the U.S. trade
deficit continues to weigh on the dollar. Possible trade agreements with Japan
would help somewhat, but European currency prospects appear better at this
juncture.
Diversification throughout global fixed-income markets remains the key
to performance, in our view. The largest rises in long bond yields could well
be behind us, leaving real yields at high levels and inflation still subdued
in most major economies. We believe bond valuations are attractive in many of
the primary fixed-income markets.
Respectfully submitted,
Peter B. Askew
Executive Vice President
January 20, 1995
Key Statistics
Dividend Yield* Periods Ended 12/31/94
_________________________ ________________________
3 Months 5.65%
12 Months 6.25
Dividend Per Share
_________________________
3 Months $0.14
12 Months 0.60
Change in Price Per Share!
_________________________
3 Months (From $9.73 to $9.34) -0.39
12 Months (From $10.34 to $9.34) -1.00
Capital Gain
_________________________
12 Months 0.21
__________________________________________________________________________
Total Net Assets $738.1 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.
!Includes reduction in NAV per share due to capital gain
distribution.
Maturity Diversification
Percent of Net Assets
Range 12/31/94 9/30/94 12/31/93
_____________________ ________ ________ ________
Short-Term
(0 to 1 Year) 21% 11% 12%
Short Intermediate-
Term (1+ to 5 Years) 15 30 34
Long Intermediate-
Term (5+ to 10 Years) 46 53 36
Long-Term
(over 10 Years) 18 6 18
__________________________________________________________________________
Weighted Average
Maturity 7.7 yrs. 7.2 yrs. 8.2 yrs.
Quality Diversification
Percent of Net Assets
RPFI Quality Rating* 12/31/94 9/30/94 12/31/93
_______________________ ________ ________ ________
1 48% 65% 26%
2 40 26 60
3 6 3 5
4 1 1 5
5 & below 5 5 4
__________________________________________________________________________
Weighted Average Quality 1.7 1.4 2.0
*On a scale of 1 to 10, with Grade 1 representing highest quality.
Currency Diversification
Investments by Net
Currency Currency
Denomination* Position**
______________ __________
Japan 30.9% 20.7%
Germany 14.0 20.6
United Kingdom 13.1 13.5
France 11.1 11.4
Italy 6.6 6.9
Canada 1.8 5.0
Belgium 4.6 4.8
Netherlands 4.6 4.7
United States 9.6 3.9
European Currency Unit 1.7 1.7
New Zealand 1.7 1.7
Mexico 0.5 1.4
Czech Republic 0.0 1.1
Denmark 1.0 1.0
Portugal 0.9 0.9
Poland 0.0 0.4
Sweden 0.6 0.2
Australia 1.3 0.1
Total 104.0 100.0
Other Assets Less Liabilities -4.0
__________________________________________________________________________
Total Net Assets 100.0% 100.0%
*Represents securities by currency denomination, as presented in the Portfolio
of Investments.
**Represents all assets and liabilities based on the currency from which their
value is derived.
Chart 1 - Fiscal-Year Performance Comparison
Fiscal-Year Performance
Periods ended December 31, 1994
1 Year 5 YearsSince Inception 9/10/86*
_______ _______________________________
-1.84% 64.81% 9.14%
*Average Annual Compound Total Return
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
Investment Record
T. Rowe Price International Bond Fund
The table below shows the investment record of one share of the T. Rowe Price
International Bond Fund, purchased at the initial offering price of $10.00,
for the period 9/10/86 through 12/31/94. Over this time, interest rates have
been volatile. The results shown should not be considered as a representation
of the dividend income or capital gain or loss which may be realized from an
investment made in the Fund today.
Per-Share Data
Capital With With Dividends
Year Net Asset Income Gain Dividendsand Capital Gains
Ended Value DividendsDistributions**Reinvested Reinvested
___________________________________________________________________
12/31/86*$10.01 - - $10.30 $10.30
1987 11.60 $1.01 $0.05 13.14 13.14
1988 10.25 0.91 0.26 12.67 12.97
1989 9.15 0.75 - 12.26 12.56
1990 9.53 0.83 0.17 13.98 14.57
1991 10.35 0.77 - 16.46 17.16
1992 9.61 0.83 0.15 16.60 17.57
1993 10.34 0.69 0.45 19.08 21.08
1994 9.34 0.60 0.21 18.31 20.69
__________________________________________________________________________
Total $6.39 $1.29
* From inception 9/10/86 - 12/31/86.
**Includes short-term capital gains of $0.05 in 1987, $0.19 in 1988, $0.17 in
1990, $0.15 in 1992, $0.42 in 1993, and $0.21 in 1994.
Portfolio of Investments! (Value in thousands)
T. Rowe Price International Bond Fund / December 31, 1994
AUSTRALIA - 1.3%
Value
______
GOVERNMENT BOND
AUD 13,000,000 Commonwealth of Australia,
9.50%, 8/15/03. . . . . . . . $ 9,763
BELGIUM - 4.6%
GOVERNMENT BONDS
BEL300,000,000 Obligation Lineaire,
10.00%, 8/2/00. . . . . . . . 10,248
800,000,000 Obligation Lineaire,
7.75%, 10/15/04 . . . . . . . 24,043
Total Belgium 34,291
CANADA - 1.8%
GOVERNMENT BOND
CAD 9,950,000 Government of Canada,
7.25%, 6/1/03 . . . . . . . . 6,336
SHORT-TERM INVESTMENT
10,000,000 Union Bank of Switzerland,
Fixed Deposit,
5.6875%, 1/9/95 . . . . . . . 7,129
Total Canada 13,465
DENMARK - 1.0%
GOVERNMENT BOND
DKK 50,300,000 Kingdom of Denmark,
7.00%, 12/15/04 . . . . . . . 7,162
EUROPEAN CURRENCY UNIT - 1.7%
GOVERNMENT BONDS
XEU 5,300,000 Bons du Tresor Annuel,
5.00%, 3/16/99. . . . . . . . 5,744
10,000,000 Credit Local De France,
Zero Coupon, 10/16/01 . . . . 6,798
Total European Currency Unit 12,542
FRANCE - 11.1%
GOVERNMENT BONDS
FRF180,000,000 Obligation Assimilable
du Tresor, 7.50%, 4/25/05 . . 31,986
75,000,000 Obligation Assimilable
du Tresor, 8.50%, 4/25/23. . 13,901
15,000,000 United Mexican States,
6.63%, 12/31/19 . . . . . . . 1,334
47,221
SHORT-TERM INVESTMENT
FRF184,280,404 Union Bank of Switzerland,
Fixed Deposit,
5.25%, 1/6/95 . . . . . . . . $ 34,503
Total France 81,724
GERMANY - 14.0%
GOVERNMENT BONDS
DEM 26,250,000 Republic of Germany,
6.00%, 6/20/16. . . . . . . . 13,568
30,000,000 Republic of Germany,
6.25%, 1/4/24 . . . . . . . . 15,696
10,000,000 Republic of Portugal, FRN,
5.00%, 7/15/99. . . . . . . . 6,447
80,000,000 Treuhandanstalt,
6.875%, 6/11/03 . . . . . . . 49,099
9,500,000 United Mexican States,
5.01%, 12/31/19 . . . . . . . 2,575
87,385
CORPORATE BOND
25,000,000 Union Bank of Finland,
FRMTN, 5.275%, 9/22/97. . . . 16,108
Total Germany 103,493
ITALY - 6.6%
GOVERNMENT BONDS
ITL15,000,000,000 Buoni del Tesoro Poliennali,
12.00%, 1/1/98. . . . . . . . 9,294
37,000,000,000 Buoni del Tesoro Poliennali,
10.00%, 8/1/98. . . . . . . . 21,785
20,000,000,000 Buoni del Tesoro Poliennali,
8.50%, 1/1/99 . . . . . . . . 11,042
42,121
SHORT-TERM INVESTMENT
11,029,860,324 Swiss Bank Corporation,
Fixed Deposit,
7.9375%, 1/5/95 . . . . . . . 6,800
Total Italy 48,921
JAPAN - 30.9%
GOVERNMENT BONDS
JPY3,000,000,000 Buoni del Tesoro Poliennali,
3.50%, 6/20/01. . . . . . . . 28,184
2,750,000,000 Government of Japan,
6.30%, 9/20/01. . . . . . . . 30,560
2,100,000,000 Government of Japan,
5.00%, 9/20/02. . . . . . . . 21,765
T. Rowe Price International Bond Fund / Portfolio of Investments
JAPAN (cont'd)
JPY1,400,000,000 Government of Japan,
4.10%, 12/22/03 . . . . . . . $ 13,631
1,675,000,000 Government of Japan,
4.70%, 12/20/04 . . . . . . . 16,987
2,000,000,000 International Bank for
Reconstruction &
Development,
5.25%, 3/20/02. . . . . . . . 20,995
1,000,000,000 International Bank for
Reconstruction &
Development,
4.50%, 3/20/03. . . . . . . . 10,012
142,134
CORPORATE BOND
1,000,000,000 Japan Development Bank,
5.00%, 10/1/99. . . . . . . . 10,439
SHORT-TERM INVESTMENT
7,504,427,633 Chase Manhattan Bank,
Fixed Deposit,
2.1875%, 1/10/95. . . . . . . 75,384
Total Japan 227,957
MEXICO - 0.5%
SHORT-TERM INVESTMENT
MXN 16,503,550 Tesobonos, Zero Coupon,
1/5/95. . . . . . . . . . . . 3,310
NETHERLANDS - 4.6%
GOVERNMENT BONDS
NLG 15,000,000 Government of Netherlands,
7.25%, 10/1/04. . . . . . . . 8,340
26,600,000 Government of Netherlands,
8.25%, 9/15/07. . . . . . . . 15,776
10,000,000 Government of Netherlands,
7.50%, 1/15/23. . . . . . . . 5,418
29,534
SHORT-TERM INVESTMENT
7,839,268 Union Bank of Switzerland,
Fixed Deposit,
5.125%, 1/6/95. . . . . . . . 4,516
Total Netherlands 34,050
NEW ZEALAND - 1.7%
GOVERNMENT BOND
NZD 10,000,000 Government of New Zealand,
10.00%, 7/15/97 . . . . . . . 6,498
SHORT-TERM INVESTMENT
NZD 10,000,000 New Zealand Treasury Bills,
Zero Coupon, 7/5/95 . . . . . $ 6,108
Total New Zealand 12,606
PORTUGAL - 0.9%
GOVERNMENT BONDS
PTE300,000,000 Eurofima, 13.875%, 6/20/96. . 1,935
100,000,000 European Coal & Steel
Community,
11.125%, 4/22/97. . . . . . . 620
150,000,000 European Investment Bank,
13.00%, 7/24/96 . . . . . . . 953
100,000,000 European Investment Bank,
12.50%, 2/24/98 . . . . . . . 639
100,000,000 European Investment Bank,
8.875%, 12/15/98. . . . . . . 568
200,000,000 European Investment Bank,
10.40%, 5/26/99 . . . . . . . 1,194
100,000,000 International Bank for
Reconstruction &
Development,
11.50%, 2/28/97 . . . . . . . 626
Total Portugal 6,535
SWEDEN - 0.6%
CORPORATE BOND
SEK 35,000,000 Swedish Telecom,
14.50%, 1/17/95 . . . . . . . 4,719
UNITED KINGDOM - 13.1%
GOVERNMENT BONDS
GBP 4,000,000 Credit Local De France,
8.375%, 6/16/04 . . . . . . . 5,894
1,500,000 Petroleos Mexicanos,
9.00%, 10/27/03 . . . . . . . 2,033
4,000,000 Republic of Austria,
9.00%, 7/22/04. . . . . . . . 6,193
10,000,000 United Kingdom Treasury,
9.75%, 8/27/02. . . . . . . . 16,393
5,872,000 United Kingdom Treasury,
10.00%, 9/8/03. . . . . . . . 9,816
6,265,000 United Kingdom Treasury,
8.50%, 12/7/05. . . . . . . . 9,673
50,002
CORPORATE BONDS
10,000,000 Abbey National,
8.00%, 4/2/03 . . . . . . . . 14,340
5,000,000 Cheltenham & Gloucester,
FRN, 6.08438%, 1/22/99. . . . 7,822
GBP 10,000,000 Guaranteed Export Finance
Corporation,
10.625%, 9/15/01. . . . . . . $ 16,652
5,000,000 Royal Bank of Scotland Group,
FRN, 6.0625%, 5/15/05 . . . . 7,568
46,382
Total United Kingdom 96,384
UNITED STATES - 9.6%
GOVERNMENT BONDS
USD 7,350,000 Brazil IDU, FRN,
6.0625%, 1/1/01 . . . . . . . 6,151
3,000,000 Mexico Aztec, FRN,
7.3125%, 3/31/08. . . . . . . 2,736
7,100,000 Republic of Argentina, FRN,
6.50%, 3/31/05. . . . . . . . 4,544
7,250,000 Republic of Poland, FRN,
6.8125%, 10/27/24 . . . . . . 5,220
18,651
CORPORATE BOND
2,500,000 Central Bank of the
Philippines New Money
Bond, FRN,
6.0625%, 1/5/05 . . . . . . . 2,287
HYBRID INSTRUMENTS
3,000,000 Bankers Trust Polish Zloty
Linked Note, 27.25%,
5/5/95: Interest rate and
principal repayment value
indexed to the movement
of the Polish zloty
exchange rate . . . . . . . . 2,800
8,100,000 * Bankers Trust Czech Crown
Linked Note, Zero Coupon,
1/27/95: Principal repayment
value linked to the perfor-
mance of the Czech crown
exchange rate and the
German deutschemark
exchange rate . . . . . . . . 8,022
2,900,000 General Electric Capital
Corporation, 14.55%,
10/29/96: Floating interest
rate indexed to Mexican
Cetes rate; principal
repayment value inversely
indexed to Mexican Teso-
bono exchange rate. . . . . . 1,756
USD 7,500,000 General Electric Capital
Corporation, 14.78%,
3/10/97: Floating interest
rate indexed to Mexican
Cetes rate; principal
repayment value inversely
indexed to Mexican Teso-
bono exchange rate. . . . . . $ 4,664
2,500,000 National Australia Bank,
7.0625%, 2/24/95: Principal
repayment value indexed
to Japanese yen exchange
rate; minimum principal
repayment equals 90%
of par. . . . . . . . . . . . 2,258
7,500,000 * Stripped Argentine Par
Spread Note, Zero Coupon,
10/4/95: Principal repayment
value inversely indexed to
spread between yield to
maturity of Argentine Par,
4.25%, 3/31/23 and yield to
maturity of U.S. Treasury
Note, 5.875%, 2/15/04;
minimum principal
repayment value
equals 90% of par . . . . . . 6,630
26,130
OPTIONS PURCHASED
65,000 * JP Morgan Commodity Index
Call, exp. 10/20/95 . . . . . 616
5,000,000 * Republic of Argentina Call,
FRB, 6.50%, 3/31/05,
exp. 5/18/95 . . . . . . . . 22
25,000,000 * U.S. dollar Call / Japanese
yen Put, exp. 2/3/95 . . . . 296
25,000,000 * U.S. dollar Call / German
deutschemark Put,
exp. 2/3/95 . . . . . . . . . 218
1,152
SHORT-TERM INVESTMENTS-
COMMERCIAL PAPER
2,500,000 Export Development,
6.00%, 1/6/95 . . . . . . . . 2,497
111,000 President & Fellows Harvard
College, 6.00%, 1/3/95. . . . 111
20,100,000 UBS Finance (Delaware),
6.00%, 1/3/95 . . . . . . . . 20,090
22,698
Total United States 70,918
T. Rowe Price International Bond Fund / Portfolio of Investments
Total Investments in Securities
- 104.0% of Net Assets (cost $786,909). . . . . $767,840
Forward Currency Exchange Contracts
Amounts in Thousands
________________________________
Unrealized
Counterparty Settlement Deliver Receive Gain (Loss)
___________________________________ ________________________
UBS 1/17/95 SEK30,000 JPY399,015 $ (18)
Citibank 1/24/95 CAD10,510 USD 7,666 174
UBS 1/24/95 USD27,062 CAD 37,115 (604)
Morgan Guaranty1/24/95 AUD 7,781 DEM 9,153 (115)
UBS 3/21/95 AUD 5,000 CAD 5,385 (26)
______
Net unrealized loss on open forward
currency exchange contracts . . . . . . . . . . (589)
Other assets less liabilities. . . . . . . . . . . . (29,148)
_________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . $738,103
_________
_________
! - Listed by currency denomination
* - Non-income producing
(AUD) - Australian dollar
(BEL) - Belgian franc
(CAD) - Canadian dollar
(DEM) - German deutschemark
(DKK) - Danish krone
(FRF) - French franc
(FRMTN) - Floating rate medium term note
(FRN) - Floating rate note
(GBP) - British sterling
(ITL) - Italian lira
(JPY) - Japanese yen
(MXN) - Mexican peso
(NLG) - Dutch guilder
(NZD) - New Zealand dollar
(PTE) - Portuguese escudo
(SEK) - Swedish krona
(USD) - U.S. dollar
(XEU) - European currency unit
The accompanying notes are an integral part of these financial statements.
Statement of Assets and Liabilities
T. Rowe Price International Bond Fund / December 31, 1994
(Amounts in thousands)
ASSETS
Investments in securities,
at value (cost $786,909) . . . . . . . $ 767,840
Foreign currency in interest bearing accounts . . 38,159
Other assets . . . . . . . . . . . . . . . . 28,361
________
Total assets . . . . . . . . . . . . . . . . 834,360
________
LIABILITIES
Payable for investment securities purchased. 85,779
Other liabilities. . . . . . . . . . . . . . 10,478
________
Total liabilities. . . . . . . . . . . . . . 96,257
________
NET ASSETS . . . . . . . . . . . . . . . . . $ 738,103
________
________
Net Assets Consisting of:
Accumulated net investment income -
net of distributions. . . . . . . . . . $ 5062
Accumulated realized gains/losses -
net of distributions. . . . . . . . . . (49,697)
Net unrealized loss . . . . . . . . . . . . (17,962)
Paid-in-capital applicable to 79,017,288
shares of $0.01 par value capital
stock outstanding, 2,000,000,000
shares of the Corporation authorized. . 800,700
________
NET ASSETS . . . . . . . . . . . . . . . . . $ 738,103
________
________
NET ASSET VALUE PER SHARE. . . . . . . . . . $9.34
_____
_____
The accompanying notes are an integral part of these financial statements.
Statement of Operations
T. Rowe Price International Bond Fund / Year Ended December 31, 1994
(Amounts in thousands)
INVESTMENT INCOME
Interest income. . . . . . . . . . . . . . . $52,876
________
Expenses
Investment management . . . . . . . . . 5,206
Shareholder servicing . . . . . . . . . 1,217
Custody and accounting. . . . . . . . . 583
Prospectus and shareholder reports. . . 139
Registrations . . . . . . . . . . . . . 65
Proxy and annual meeting. . . . . . . . 38
Legal and auditing. . . . . . . . . . . 37
Directors . . . . . . . . . . . . . . . 21
Miscellaneous . . . . . . . . . . . . . 18
________
Total expenses. . . . . . . . . . . . . 7,324
________
Net investment income . . . . . . . . . . . 45,552
________
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on:
Securities. . . . . . . . . . . . . . . (22,486)
Options . . . . . . . . . . . . . . . . (3,180)
Foreign currency transactions . . . . . (9,580)
________
Net realized loss . . . . . . . . . . . (35,246)
________
Change in net unrealized gain or loss on:
Securities. . . . . . . . . . . . . . . (24,657)
Options . . . . . . . . . . . . . . . . (1,765)
Other assets and liabilities
denominated in foreign
currencies . . . . . . . . . . . . 1,880
________
Change in net unrealized gain or loss . (24,542)
________
Net realized and unrealized loss . . . . . . (59,788)
________
DECREASE IN NET ASSETS FROM OPERATIONS . . . $ (14,236)
________
________
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Net Assets
T. Rowe Price International Bond Fund
Year Ended December 31,
______________________________
1994 1993
__________ __________
(Amounts in thousands)
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income . . . . . $45,552 $41,110
Net realized gain (loss)
on investments . . . . . . . (35,246) 43,843
Change in net unrealized
gain or loss . . . . . . . . (24,542) 22,707
________ ________
Increase (decrease) in net
assets from operations . . . (14,236) 107,660
________ ________
Distributions to shareholders
Net investment income . . . . . (45,550) (41,110)
Net realized gain . . . . . . . (16,210) (31,252)
________ ________
Decrease in net assets
from distributions . . . . . (61,760) (72,362)
________ ________
Capital share transactions1
Shares sold . . . . . . . . . . 376,286 366,342
Distributions reinvested. . . . 52,742 60,424
Shares redeemed . . . . . . . . (360,173) (230,747)
________ ________
Increase in net assets
from capital share
transactions . . . . . . . . 68,855 196,019
________ ________
Increase (decrease) in net assets. (7,141) 231,317
NET ASSETS
Beginning of year . . . . . . . . 745,244 513,927
________ ________
End of year . . . . . . . . . . . $738,103 $745,244
________ ________
________ ________
1Capital share transactions (number of shares)
Shares sold . . . . . . . . . . 37,991 35,266
Distributions reinvested. . . . 5,463 5,832
Shares redeemed . . . . . . . . (36,546) (22,458)
________ ________
Increase in capital shares
outstanding. . . . . . . . . 6,908 18,640
________ ________
________ ________
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
T. Rowe Price International Bond Fund / December 31, 1994
Note 1 - Significant Accounting Policies
T. Rowe Price International Funds, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The International Bond Fund (the Fund), a
non-diversified, open-end management investment company, is one 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. Purchased options are valued at the latest bid price.
Notes to Financial Statements (Cont'd)
For purposes of determining the Fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
Fund, as authorized by the Board of Directors.
B) Currency translation - Assets and liabilities are converted 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 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 the Fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles. Unrealized gains and losses on forward contracts are
included in Other assets and Other liabilities, respectively, and Change in
net unrealized gain or loss in the accompanying financial statements.
Note 2 - Investment Transactions
Consistent with its investment objective, the Fund engages in the following
practices to manage exposure to certain risks and enhance performance. The
investment objective, policies, program, risk factors and following practices
of the Fund are described more fully in the Fund's Prospectus and Statement of
Additional Information.
A) Emerging Markets - The Fund has investments in securities issued by
governments of emerging market countries as well as securities denominated in
or linked to the currencies of emerging market countries. Future economic or
political developments could adversely affect the liquidity or value, or both,
of such securities.
B) Forward Currency Exchange Contracts - At December 31, 1994, the 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.
C) Options - Call and put options on securities and currencies give the holder
the right to purchase or sell, respectively, a security or currency at a
specified price on or until a certain date. Index call or put options give the
holder the right to receive cash, based on market movement, equal to the
difference between the exercise settlement value of the index and the exercise
price of the option. Risks arise from possible illiquidity of the options
market and from movements in security, currency and underlying index values.
Options are reflected in the accompanying Portfolio of Investments at market
value. Transactions in options written and related premiums received during
the year ended December 31, 1994, were as follows:
Face Amount
Subject to Options Premiums
__________________ ___________
Options Outstanding,
December 31, 1993 $ - $ -
Options Written 229,565,000 1,800,000
Options Exercised (53,897,000) (402,000)
Options Expired (175,668,000) (1,398,000)
____________ __________
Options Outstanding,
December 31, 1994 $ - $ -
____________ __________
____________ __________
D) Other - Purchases and sales of portfolio securities, other than short-term
and U.S. Government securities, aggregated $2,294,266,000 and $2,350,836,000,
respectively, for the year ended December 31, 1994.
Note 3 - Federal Income Taxes
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all of
its taxable income. The Fund has unused realized capital loss carryforwards
for federal income tax purposes of $31,400,000 which expire in 2002. The Fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
In order for the Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $1,000 of
undistributed net investment income was reclassified as a decrease to
paid-in-capital during the year ended December 31, 1994. The results of
operations and net assets were not affected by the reclassification.
At December 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $786,909,000 and net
unrealized loss aggregated $19,069,000, of which $4,300,000 related to
appreciated investments and $23,369,000 to depreciated investments.
Note 4 - Related Party Transactions
The 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 the Fund and Price-Fleming
(the Manager) provides for an annual investment management fee, of which
$438,000 was payable at December 31, 1994. The fee is computed daily and paid
monthly, and consists of an Individual Fund Fee equal to 0.35% of average
daily net assets and a Group Fee. The Group Fee is based on the combined
assets of certain mutual funds sponsored by the Manager or Price Associates
(the Group). The Group Fee rate ranges from 0.48% for the first $1 billion of
assets to 0.31% for assets in excess of $34 billion. At December 31, 1994, and
for the year then ended, the effective annual Group Fee rate was 0.34%. The
Fund pays a pro rata share of the Group Fee based on the ratio of its net
assets to those of the Group.
In addition, the Fund has entered into agreements with Price Associates
and two wholly-owned subsidiaries of Price Associates, pursuant to which the
Fund receives certain other services. Price Associates computes the daily
share price and maintains the financial records of the Fund. T. Rowe Price
Services, Inc. (TRPS) is the Fund's transfer and dividend disbursing agent and
provides shareholder and administrative services to the Fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the Fund. Additionally,
the Fund is one of several T. Rowe Price mutual funds (the Underlying Funds)
in which the T. Rowe Price Spectrum Income Fund (Spectrum) invests. In
accordance with an Agreement between Spectrum, the Underlying Funds, Price
Associates and TRPS, expenses from the operation of Spectrum are borne by the
Underlying Funds based on each Underlying Fund's proportionate share of assets
owned by Spectrum. The Fund incurred expenses pursuant to these related party
agreements totaling approximately $1,155,000 for the year ended December 31,
1994, of which $98,000 was payable at year end.
Financial Highlights
T. Rowe Price International Bond Fund
For a share outstanding throughout each year ended
_____________________________________________________
December 31,
1994 1993 1992 1991 1990
_____________________________________________________
NET ASSET VALUE,
BEGINNING OF
YEAR. . . . . . $ 10.34 $ 9.61 $ 10.35 $ 9.53 $9.15
______ ______ ______ ______ ______
Investment Activities
Net investment
income. . . . 0.60 0.69 0.87 0.77 0.83
Net realized
and unrealized
gain
(loss). . . . (0.79) 1.18 (0.63) 0.82 0.55
______ ______ ______ ______ ______
Total from Investment
Activities. . . (0.19) 1.87 0.24 1.59 1.38
______ ______ ______ ______ ______
Distributions
Net investment
income. . . . (0.60) (0.69) (0.83) (0.77) (0.83)
Net realized
gain. . . . . (0.21) (0.45) (0.15) - (0.17)
______ ______ ______ ______ ______
Total Distributions. . (0.81) (1.14) (0.98) (0.77) (1.00)
______ ______ ______ ______ ______
NET ASSET VALUE,
END OF YEAR . . $9.34 $ 10.34 $ 9.61 $10.35 $9.53
______ ______ ______ ______ ______
______ ______ ______ ______ ______
RATIOS/SUPPLEMENTAL DATA
Total Return . . . (1.84)% 20.00% 2.39% 17.75% 16.05%
Ratio of
Expenses to
Average Net
Assets. . . . 0.98% 0.99% 1.08% 1.24% 1.15%
Ratio of Net Investment
Income to Average
Net Assets. . . 6.07% 6.58% 8.66% 8.11% 9.04%
Portfolio Turnover
Rate. . . . . . 345.2% 395.7% 357.7% 295.6% 211.4%
Net Assets, End of
Year(in
thousands). .$738,103 $745,244$513,927$413,985$430,386
Report of Independent Accountants
To the Board of Directors of
T. Rowe Price International Funds, Inc. and
Shareholders of the International Bond Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the selected per share data and
information (which appears under the heading "Financial Highlights") present
fairly, in all material respects, the financial position of the International
Bond Fund (one of the portfolios constituting T. Rowe Price International
Funds, Inc.) at December 31, 1994, and the results of its operations for the
year then ended, the changes in its net assets for each of the two years in
the period then ended and the selected per share data and information for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles. These financial statements and selected per
share data and information (hereafter referred to as "financial statements")
are the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1994 by correspondence with custodians and brokers
and, where appropriate, the application of alternative auditing procedures for
unsettled security transactions, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 19, 1995
Shareholder Services
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety
of information and services-at no extra cost.
Knowledgeable Service Representatives
By Phone-Shareholder Service Representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m E.T. Call
1-800-225-5132 to speak directly with a representative who will be able to
assist you with your accounts.
In Person-Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access (registered trademark) (1-800-638-2587) provides information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Additionally, you have the
ability to request prospectuses, statements, account and tax forms, reorder
checks, and initiate purchase, redemption, and exchange orders for identically
registered accounts.
PC*Access (registered trademark) provides the same information as
Tele*Access, but on a personal computer via dial-up modem.
Account Services
Checking-Write checks for $500 or more on any money market and most bond
fund accounts.
Automatic Investing-Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal-If you need money from your fund account on a regular
basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options-Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
Investment Information
Combined Statement-A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type-stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports-Portfolio managers review the performance of
the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report-A quarterly newsletter with relevant articles on
market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights-A library of information that includes reports on mutual fund tax
issues, investment strategies, and financial markets.
Detailed Investment Guides-Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
Discount Brokerage
You can trade stocks, bonds, options, precious metals, and other securities at
a substantial savings over regular commission rates. Call a shareholder
service representative for more information.
T. Rowe Price No-Load Mutual Funds
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money
Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate
U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate
Tax-Free
Maryland Short-Term
Tax-Free Bond
Summit Municipal
Intermediate
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
Emerging Markets Bond
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE
GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
Capital Opportunity
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
Chart 1 - Fiscal-Year Performance Comparison line graph for International Bond
Fund annual report (Dec. 31, 1994)
Shows $10,000 investments in International Bond Fund and J.P. Morgan Non-U.S.
Dollar Gov't. Bond Hedged Index from 9/86 to 12/94 growing to $20,695, and
$22,659, respectively.
