Semiannual Report
Foreign Bond Funds
June 30, 1996
T. Rowe Price
Report Highlights
o Bonds reversed last year's gains as yields rose and prices fell,
reflecting an upturn in economic growth and fear of renewed inflation.
o International Bond Fund outperformed its benchmark due to an
overweighting in Italy and Spain, while Emerging Markets Bond Fund
turned in positive results but lagged its own benchmark because of low
exposure to the powerful Brazilian market.
o European bonds outpaced other major markets, while emerging market
credits were the star performers during the past six months.
o International Bond Fund was overweighted in European securities and
maintained a generally low exposure to underperforming Japanese bonds.
o We anticipate relative stability in the currency markets and believe
bonds offer good value in many areas. In our view, emerging markets
should continue their first half strength, spurred by credit upgrades
and fiscal prudence.
Fellow Shareholders
The first half of 1996 contrasted sharply with the final six months of 1995,
when bond prices rose and yields fell, reflecting slow global economic growth
and low inflation. As markets this year focused on an upturn in the economic
cycle and the potential for a pickup in inflation, bond prices declined.
FINANCIAL REVIEW
So far in 1996, bond prices have fallen in many countries in anticipation of
the higher interest rates that would be needed to ward off the inflationary
threat of stronger economic activity. The United States, which is ahead in the
cycle, provided the worst market returns in local currency terms. Emerging
markets continued their strong 1995 performance, shrugging off the negative
impact of other markets and focusing on the ongoing improvement in their
credit ratings.
Currency markets were more stable, as we had anticipated in our last report,
with a bias toward a firmer U.S. dollar, notwithstanding the collapse of
balanced budget negotiations in Washington. Weakness in the Japanese yen
continued, albeit at a slower pace. The German mark was down as Germany sought
to make it more competitive by promoting a weakening of its currency against
major trading partners. The effect of all this was to propel the Italian lira
into second place behind the Australian dollar in currency market performance.
MARKET ENVIRONMENT
Bond markets began the year positively, assisted by the same influences that
aided bond markets during the final period of 1995, namely, soft economic
data. However, February brought a sharp change in sentiment, and interest
rates troughed in many global markets before rising steeply.
The major catalyst for this reversal was a slew of strong economic data in the
U.S., particularly regarding employment, which continued to strengthen in the
second quarter. Of specific concern was a potential firming in wages that gave
rise to worries about inflation.
Most global bond markets fell in sympathy with the U.S., despite their having
little in common with the American situation. In Japan, there is still spare
capacity in the economy, which is only just emerging from recession. A similar
picture can be painted for Europe, although Economic Monetary Union (EMU)
considerations had a significant impact of their own on bonds.
Developed Markets Performance
In Local In U.S.
6 Months ended 6/30/96 Currency Dollars
Australia 1.08% 6.95%
France 4.42 -0.81
Germany 0.97 -5.06
Italy 11.20 15.08
Japan 0.89 -5.11
United Kingdom 1.25 1.33
United States -1.44 -1.44
Source: J.P. Morgan.
The prospect of greater fiscal discipline in Europe helped government bonds
outpace those in other major markets. The best-performing markets in Europe
were the high-yielding countries, which responded well to positive electoral
results, underlining their respective will to further reduce the fiscal
burden.
All three high-yielding markets posted healthy returns in local currencies.
Italy returned 11.2% (15.1% in dollar terms since the lira was among the few
foreign currencies to appreciate against the greenback), Spain 9.1%, and
Sweden 6.6%.
Emerging Markets Performance
In U.S.
6 Months ended 6/30/96 Dollars
Emerging Markets Bond Index Plus 15.47%
Brady Indexes (by issuer): *
Argentina 8.68
Brazil 16.49
Mexico 7.91
Poland 22.89
Venezuela 24.36
* Brady bonds are restructured debt obligations of many emerging market
countries, denominated in U.S. dollars with extended maturities and lower
interest rates, that enable these nations to repay loans while they implement
economic reforms.
Source: J.P. Morgan.
Improving inflation figures facilitated lower interest rates in these
countries, driving bond prices higher along with the currencies of Italy and
Sweden. Italian assets, especially, reaped the benefits of a fortuitous
election as investors gave a hearty thumbs-up to the results.
Japanese bonds again proved disappointing, ending the period barely positive
in local currency terms and distinctly negative when translated into U.S.
dollars. Both the yen and Japanese bonds were the worst performers in major
markets, with Germany running a close second. While inflationary pressures
were largely absent at the end of June, fixed income investors remained
concerned about expansive fiscal measures taken to stimulate strong growth in
Japan during the second quarter. With low nominal yields, a suspect financial
sector, and a deliberate policy to keep the yen weak, investors had good
reason to underweight Japanese bonds.
Within the dollar bloc, Canadian and Australian bonds in particular outpaced
their U.S. counterparts. Fiscal reform was the main influence in Canada, while
Australia was another beneficiary of a positive election outcome, firmer
commodity prices, and strong overseas demand.
Economic restructuring throughout emerging markets provided the boost for
excellent returns there, making them the best-performing assets during the
first half of 1996 following a strong second half of 1995. After the close of
the review period, Boris Yeltsin's victory provided Russian bond prices with a
substantial boost.
PORTFOLIO REVIEW
International Bond Fund
Your fund turned in a negative performance during the half-year ended June 30
but outperformed its benchmark during both periods shown, largely because of
the fund's lower exposure to Japanese bonds and currency in favor of an
overweighting in Italy and Spain. We were generally overweighted in European
government bonds, which fared better than those in other regions due to
Europe's dull economic climate. In addition, rate cuts in parts of Europe and
positive political news aided relative performance. A modest allocation to
emerging markets also provided a boost.
Performance Comparison
Periods Ended 6/30/96 6 Months 12 Months
International Bond Fund -0.27% 2.73%
J.P. Morgan Non-U.S. Dollar
Government Bond Index -1.00 0.49
We gradually reduced overall interest rate risk later in the period, after
exposure to rising longer-term rates in the first quarter began to have a
negative impact. Also helping performance was greater exposure to dollar-bloc
currencies at the expense of most core European currencies, although we were
more heavily weighted in European securities.
Chart 1 - IBF geographic diversification pie chart
Our bond market allocations reflect the uncertainty of the medium-term
outlook: overall portfolio durations deviate very little from benchmarks,
pending opportunities to increase exposure as sentiment improves. Within
Europe, investments are concentrated among shorter maturities in the noncore
markets most likely to benefit from cuts in money market rates. We remain
underweighted in Japanese bonds. Our small currency overweighting favors the
dollar-bloc and peripheral European sectors, at the expense of the yen and
deutschemark-bloc markets.
PORTFOLIO REVIEW
Emerging Markets Bond Fund
Your fund provided strong returns during both the 6- and 12-month periods
ended June 30. Results were behind those of the benchmark largely because of
our underweighting in Brazil, which did extremely well despite its slow pace
of economic reform.
Emerging markets were easily the best-performing fixed income markets to date
in 1996. The better returns occurred in the second quarter, when the pre-Brady
bond countries of Russia, Panama, and Peru were among the standouts. Russian
bonds generated a total return of 40% in the second quarter. Venezuela and
Poland also registered outstanding returns in excess of 20% during the
six-month period. Your fund had 10% of net assets invested in Russian
securities on June 30, 7% in Venezuela, and 5% in Poland.
Performance Comparison
Periods Ended 6/30/96 6 Months 12 Months
Emerging Markets Bond Fund 10.79% 26.73%
J.P. Morgan Emerging Markets
Bond Index Plus* 15.47 33.84
* Performance will henceforth be measured against this index, which is more
diverse and more appropriate than the one used in earlier reports. Performance
for the previous benchmark, the J.P. Morgan Emerging Markets Bond Index, for
the 6- and 12-month periods ended 6/30/96 was 13.39% and 32.40%, respectively.
Chart 2 - EMBF geographic diversification pie chart
The quality diversification of the portfolio remained relatively high for this
type of fund, with 19% of net assets invested in AAA-rated securities, 12% in
BBB, 40% in BB, and the remaining 29% in B-rated or below. The top four
ratings comprising AAA through BBB are considered investment-grade quality.
After the close of the reporting period, the fund's Board of Directors
authorized an increase in the amount of assets that can be invested in loan
participations and assignments from 10% to 20%. These are large loans to
corporations or governments that can be shared or syndicated among several
large lenders including banks and are a way of participating in many markets
where your fund invests. Since many competing funds invest more than 10% of
their assets in these loans, we believe your fund could operate more
effectively by increasing its range of exposure to various markets.
STRATEGY AND OUTLOOK
At the end of 1995 we cautioned that last year's returns were unlikely to be
repeated as we approached the end of the monetary easing stage of the interest
rate cycle. This has proved to be the case, with interest rates advancing in
many key markets.
Investors have become concerned at the prospect of above-trend global growth.
The sell-off to date in the U.S. has virtually matched that of 1994. Worries
about rekindled inflation are not without foundation but may be overdone.
Speculation has not approached the levels of two years ago, particularly in
the smaller markets most prone to sudden withdrawals of capital. The market
decline this year has preempted monetary tightening, arguably discounting the
worst-case scenarios rather than responding to a policy shock. In anything
other than a major inflationary scenario, bonds continue to offer good value,
in our view.
So far this year, the U.S. economy has caused the most concern in world
markets, and this should continue to be the case in coming months.
Stronger-than-expected first half growth, characterized by a tightening labor
market, has raised the specter of wage inflation and the likelihood of a more
restrictive monetary policy. However, with the consumer likely to be a less
dynamic force, and with industry's capital investment programs constrained,
economic growth could well tail off in the second half of the year. Moderation
in the pace of U.S. growth, with or without a precautionary interest rate hike
by the Federal Reserve, would be encouraging for fixed income investors.
We expect foreign currency markets to continue trading in narrow ranges with
relatively low volatility. With none of the major currencies at extreme
valuations, and with economic growth in Japan and Europe catching up with that
in the U.S., the dollar's advance from current levels should be subdued.
Emerging credits look set to do well again, spurred by continued credit
improvement as governments in these regions pursue a path toward prudent
economic management.
Respectfully submitted,
Peter B. Askew
Executive Vice President
July 19, 1996
T. Rowe Price Foreign Bond Funds
Portfolio Highlights
Key Statistics
12/31/95 6/30/96
International Bond Fund
Price Per Share $ 10.46 $ 10.12
Dividends Per Share
For 6 months 0.33 0.31
For 12 months 0.62 0.64
Dividend Yield *
For 6 months 6.40% 6.20%
For 12 months 6.28 6.43
Weighted Average Maturity (years) 7.8 6.3
Weighted Average Effective Duration (years) 5.0 4.4
Weighted Average Quality ** AA AA
Emerging Markets Bond Fund
Price Per Share $ 10.67 $ 11.28
Dividends Per Share
For 6 months 0.54 0.51
For 12 months 1.02 1.05
Dividend Yield *
For 6 months 10.24% 9.70%
For 12 months 10.56 10.27
Weighted Average Maturity (years) 16.8 12.1
Weighted Average Effective Duration (years) 4.0 2.2
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 Rowe Price-Fleming 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
fund's return.
Chart 3 - IBF SEC
Chart 4 - EMBF SEC
Average Annual Compound Total Return
This table shows how each fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 6/30/96 1 Year 5 Years Inception Date
International Bond Fund 2.73% 11.87% 9.72% 9/10/86
Emerging Markets Bond Fund 26.73 - 24.83 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 International Bond Fund
Unaudited
Financial Highlights For a share outstanding throughout each period
6 Months Year
Ended Ended
6/30/96 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
NET ASSET VALUE
Beginning of
period $ 10.46 $ 9.34 $ 10.34 $ 9.61 $ 10.35 $ 9.53
Investment activities
Net
investment
income 0.31 0.62 0.60 0.69 0.87 0.77
Net realized
and unrealized
gain (loss) (0.34) 1.24 (0.79) 1.18 (0.63) 0.82
Total from
investment
activities (0.03) 1.86 (0.19) 1.87 0.24 1.59
Distributions
Net
investment
income (0.31) (0.62) (0.60) (0.69) (0.83) (0.77)
Net realized
gain - (0.12) (0.21) (0.45) (0.15) -
Total
distributions (0.31) (0.74) (0.81) (1.14) (0.98) (0.77)
NET ASSET VALUE
End of period $ 10.12 $ 10.46 $ 9.34 $ 10.34 $ 9.61 $ 10.35
Ratios/Supplemental Data
Total return (0.27)% 20.30% (1.84)% 20.00% 2.39% 17.75%
Ratio of expenses
to average
net assets 0.88%! 0.90% 0.98% 0.99% 1.08% 1.24%
Ratio of net
investment in-
come to average
net assets 6.14%! 6.10% 6.07% 6.58% 8.66% 8.11%
Portfolio
turnover rate 211.3%! 237.1% 345.2% 395.7% 357.7% 295.6%
Net assets,
end of period
(in millions) $ 986 $ 1,016 $ 738 $ 745 $ 514 $ 414
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Emerging Markets Bond Fund
Unaudited
Financial Highlights For a share outstanding throughout each period
6 Months 12/30/94
Ended to
6/30/96 12/31/95
NET ASSET VALUE
Beginning of period $ 10.67 $ 10.00
Investment activities
Net investment income 0.51* 1.03*
Net realized and
unrealized gain (loss) 0.61 1.38
Total from
investment activities 1.12 2.41
Distributions
Net investment income (0.51) (1.02)
Net realized gain - (0.72)
Total distributions (0.51) (1.74)
NET ASSET VALUE
End of period $ 11.28 $ 10.67
Ratios/Supplemental Data
Total return 10.79%* 25.81%*
Ratio of expenses to
average net assets 1.25%!* 1.25%*
Ratio of net investment
income to average
net assets 9.51%!* 10.20%*
Portfolio turnover rate 251.7%! 273.5%
Net assets, end of period
(in thousands) $ 17,174 $ 9,989
* Excludes expenses in excess of a 1.25% voluntary expense limitation in
effect through 12/31/96.
! Annualized.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price International Bond Fund
Unaudited June 30, 1996
Portfolio of Investments! Par Value
In thousands
AUSTRALIA 4.1%
Government Bonds 2.9%
Commonwealth of Australia,
6.25%, 3/15/99 AUD 10,225 $ 7,644
Commonwealth of Australia,
6.75%, 11/15/06 12,500 8,429
New South Wales Treasury, 6.50%, 5/01/06 19,000 12,395
28,468
Short-Term Investments 1.2%
J.P. Morgan, fixed deposit, 7.25%, 7/02/96 15,796 12,413
12,413
Total Australia (Cost $40,898) 40,881
CANADA 4.9%
Government Bonds 2.9%
Government of Canada, 7.50%, 3/01/01 CAD 13,150 9,832
Government of Canada, 7.00%, 12/01/06 16,025 11,156
Province of Ontario, 8.25%, 12/01/05 5,000 3,770
Province of Quebec, 7.75%, 3/30/06 5,000 3,588
28,346
Short-Term Investments 2.0%
Chase Manhattan Bank, fixed deposit,
4.625%, 7/03/96 26,891 19,696
19,696
Total Canada (Cost $47,805) 48,042
DENMARK 7.7%
Government Bonds 7.7%
Kingdom of Denmark, 9.00%, 11/15/00 DKK 100,000 18,918
Kingdom of Denmark, 7.00%, 12/15/04 48,000 8,125
Kingdom of Denmark, 8.00%, 3/15/06 272,400 48,389
Total Denmark (Cost $76,442) 75,432
FRANCE 3.1%
Government Bonds 3.1%
Obligation Assimilable du Tresor,
7.75%, 4/12/00 FRF 95,000 19,993
Obligation Assimilable du Tresor,
Zero Coupon, 10/25/05 95,000 10,115
Total France (Cost $30,112) 30,108
GERMANY 17.6%
Government Bonds 14.3%
Bundesobligation, 5.75%, 8/22/00 DEM 30,500 $ 20,414
Bundesobligation, 7.25%, 10/21/02 41,750 29,257
Federal National Mortgage Assn., 5.00%, 2/16/01 23,000 14,756
Province of Ontario, 6.25%, 1/13/04 30,000 19,395
Treuhandanstalt, 7.00%, 11/25/99 36,950 25,856
Treuhandanstalt, 6.875%, 6/11/03 30,000 20,484
Treuhandanstalt, 7.50%, 9/09/04 15,300 10,758
140,920
Corporate Bonds 3.3%
Frankfurt Hypothekenbank, 5.75%, 3/05/03 14,500 9,314
Sudwestdeutsche, 6.25%, 10/21/03 36,000 23,456
32,770
Total Germany (Cost $180,469) 173,690
IRELAND 4.2%
Government Bonds 4.2%
Republic of Ireland, 8.00%, 10/18/00 IEP 24,650 41,083
Total Ireland (Cost $40,054) 41,083
ITALY 16.3%
Government Bonds 13.9%
Buoni del Tesoro Poliennali,
9.50%, 12/01/97 ITL 35,250,000 23,314
Buoni del Tesoro Poliennali,
9.50%, 12/01/99 92,200,000 61,889
Buoni del Tesoro Poliennali,
9.50%, 2/01/01 52,200,000 35,208
Buoni del Tesoro Poliennali,
9.00%, 10/01/03 16,000,000 10,503
European Investment Bank,
7.45%, 2/04/99 10,000,000 6,454
137,368
Short-Term Investments 2.4%
Chase Manhattan Bank, fixed deposit,
8.938%, 7/05/96 35,049,963 22,890
22,890
Total Italy (Cost $155,037) 160,258
JAPAN 11.6%
Government Bonds 7.1%
Government of Japan, 3.20%, 3/20/06 JPY 3,750,000 34,124
International Bank for Reconstruction
and Development, 5.25%, 3/20/02 700,000 $ 7,309
International Bank for Reconstruction
and Development, 4.75%, 12/20/04 1,000,000 10,296
Republic of Austria, 5.00%, 1/22/01 1,830,000 18,695
70,424
Corporate Bonds 4.5%
Asian Development Bank, 3.125%, 6/29/05 750,000 6,832
Export Import Bank, 4.375%, 10/01/03 2,870,000 28,571
Export Import Bank, 2.875%, 7/28/05 1,000,000 8,915
44,318
Total Japan (Cost $122,638) 114,742
NETHERLANDS 5.6%
Government Bonds 5.6%
Government of Netherlands, 7.75%, 1/15/00 NLG 15,000 9,563
Government of Netherlands, 9.00%, 1/15/01 39,000 26,110
Government of Netherlands, 8.25%, 9/15/07 30,000 19,847
Total Netherlands (Cost $57,098) 55,520
SPAIN 8.2%
Government Bonds 8.2%
Bonos del Estado, 10.10%, 2/28/01 ESP 2,160,000 18,169
Bonos del Estado, 8.40%, 4/30/01 5,375,000 42,491
Bonos del Estado, 10.90%, 8/30/03 2,300,000 20,138
Total Spain (Cost $79,234) 80,798
SWEDEN 4.4%
Government Bonds 4.4%
Kingdom of Sweden, 10.25%, 5/05/00 SEK 180,900 30,201
Kingdom of Sweden, 10.25%, 5/05/03 80,000 13,599
Total Sweden (Cost $42,692) 43,800
UNITED KINGDOM 10.5%
Government Bonds 5.6%
City of Kobe, 9.50%, 10/20/04 GBP 4,000 6,686
Republic of Austria, 9.00%, 7/22/04 4,000 $ 6,551
United Kingdom Treasury, 6.00%, 8/10/99 6,220 9,427
United Kingdom Treasury, 7.00%, 11/06/01 6,500 9,931
United Kingdom Treasury, 9.75%, 8/27/02 7,000 12,043
United Kingdom Treasury, 7.50%, 12/07/06 7,000 10,569
55,207
Corporate Bonds 4.9%
Abbey National, 8.00%, 4/02/03 10,000 15,577
Deutsche Siedlungs Bank, 7.50%, 12/27/00 6,500 10,150
Guaranteed Export Finance, 10.625%, 9/15/01 10,000 17,433
Swiss Bank Corporation Jersey, 8.75%, 6/20/05 3,500 5,537
48,697
Total United Kingdom (Cost $99,388) 103,904
UNITED STATES 5.2%
Government Bonds 4.7%
Central Bank of Philippines FLIRB, FRN,
5.00%, 6/01/08 USD 4,200 3,780
Government of Poland Discount, FRN,
6.438%, 10/27/24 6,000 5,603
Republic of Argentina, FRB, 6.313%, 3/31/05 7,871 6,144
Republic of Argentina BOCON PRE 2,
FRN, 5.422%, 4/01/01 7,470 8,538
Republic of Argentina Par, FRN, 5.25%, 3/31/23 5,000 2,744
Republic of Brazil (Class C), 8.00%, 4/15/14 7,685 4,755
Republic of Brazil IDU, FRN, 6.375%, 1/01/01 3,720 3,492
Republic of Bulgaria IAB, FRN, 6.25%, 7/28/11 2,625 1,240
Republic of Panama, FRN, 6.629%, 5/10/02 5,077 4,734
Republic of Venezuela DCB, FRN,
6.625%, 12/18/07 4,500 3,184
Russia Loan Participation, Zero Coupon 5,700 2,765
46,979
Corporate Bonds 0.2%
Ce Casecnan Water & Energy, 11.95%, 11/15/10 1,625 1,645
1,645
Short-Term Investments 0.3%
Investments in Commercial Paper
through a joint account,
5.49 - 5.60%, 7/01/96 2,632 2,632
2,632
Total United States (Cost $48,391) 51,256
Total Investments in Securities
103.4% of Net Assets (Cost $1,020,258) $1,019,514
Forward Currency Exchange Contracts
In thousands
_____________________________________________________________________________
Unrealized
Counterparty Settlement Deliver Receive Gain (Loss)
Citibank 7/08/96 GBP 3,497 DEM 8,193 $ (38)
UBS
Phillips & Drew 7/08/96 GBP 6,500 DEM 15,245 (62)
Citibank 7/12/96 SEK 146,800 USD 21,942 (229)
J.P. Morgan 7/12/96 SEK 71,452 USD 10,562 (229)
Citibank 7/17/96 ESP 4,411,973 USD 33,986 (444)
Citibank 7/19/96 GBP 15,379 USD 23,792 (88)
UBS
Phillips & Drew 7/24/96 USD 118,033 JPY 12,885,656 233
UBS
Phillips & Drew 7/24/96 NLG 36,165 JPY 2,303,737 (101)
UBS
Phillips & Drew 7/29/96 NLG 14,869 AUD 11,014 (98)
_____________________________________________________________________________
Net unrealized gain (loss) on open forward
currency exchange contracts (1,056)
Other Assets Less Liabilities (32,093)
NET ASSETS $ 986,365
NET ASSET VALUE PER SHARE $ 10.12
! Based on currency denomination
AUD Australian dollar
CAD Canadian dollar
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
IEP Irish punt
ITL Italian lira
JPY Japanese yen
NLG Dutch guilder
SEK Swedish krona
USD U.S. dollar
DCB Debt conversion bond
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
IAB Interest arrears bond
IDU Interest due bond
The accompanying notes are an integral part of these financial statements.
T. Rowe Price International Bond Fund
Unaudited June 30, 1996
Statement of Assets and Liabilities
In thousands
Assets
Investments in securities, at value (cost $1,020,258) $ 1,019,514
Other assets 76,572
Total assets 1,096,086
Liabilities
Payable for investment securities purchased 92,495
Other liabilities 17,226
Total liabilities 109,721
NET ASSETS $ 986,365
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 5,057
Accumulated net realized gain/loss - net of distributions (11,394)
Net unrealized gain (loss) (782)
Paid-in-capital applicable to 97,499,177 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 993,484
NET ASSETS $ 986,365
NET ASSET VALUE PER SHARE $ 10.12
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Emerging Markets Bond Fund
Unaudited June 30, 1996
Portfolio of Investments! Par Value
In thousands
ARGENTINA 14.4%
Government Bonds 14.4%
Republic of Argentina, FRB,
6.313%, 3/31/05 USD 2,302 $ 1,797
Republic of Argentina Par, FRN,
5.25%, 3/31/23 1,250 686
Total Argentina (Cost $2,451) 2,483
BRAZIL 18.3%
Government Bonds 18.3%
Republic of Brazil (Class C), 8.00%, 4/15/14 1,515 937
Republic of Brazil DCB, FRN, 6.563%, 4/15/12 950 646
Republic of Brazil Discount, FRN,
6.50%, 4/15/24 1,100 777
Republic of Brazil EI, FRN, 6.50%, 4/15/06 750 601
Republic of Brazil IDU, FRN, 6.375%, 1/01/01 5 5
Republic of Brazil NMB, FRN, 6.563%, 4/15/09 250 183
Total Brazil (Cost $2,897) 3,149
BULGARIA 3.9%
Government Bonds 3.9%
Republic of Bulgaria Discount (Class A),
FRN, 6.25%, 7/28/24 500 260
Republic of Bulgaria IAB, FRN, 6.25%, 7/28/11 875 413
Total Bulgaria (Cost $684) 673
COLOMBIA 2.7%
Government Bonds 2.7%
Republic of Colombia, 7.25%, 2/23/04 500 463
Total Colombia (Cost $452) 463
ECUADOR 4.5%
Government Bonds 4.5%
Republic of Ecuador Discount,
FRN, 6.063%, 2/28/25 500 285
Republic of Ecuador PDI, FRN, 6.063%, 2/27/15 1,093 489
Total Ecuador (Cost $749) 774
MEXICO 8.9%
Government Bonds 4.5%
United Mexican States, 11.50%, 5/15/26 850 $ 778
778
Corporate Bonds 4.4%
Corporacion Andinad de Fomento,
7.375%, 7/21/00 750 744
744
Total Mexico (Cost $1,514) 1,522
PANAMA 3.8%
Government Bonds 3.8%
Republic of Panama, FRN, 6.629%, 5/10/02 369 345
Republic of Panama PDI (When/If Issue),
6.75%, 7/17/16 500 306
Total Panama (Cost $549) 651
PHILIPPINES 2.7%
Government Bonds 1.9%
Republic of Philippines FLIRB, FRN,
5.00%, 6/01/08 350 315
315
Corporate Bonds 0.8%
Ce Casecnan Water & Energy, 11.95%, 11/15/10 140 142
142
Total Philippines (Cost $440) 457
POLAND 4.5%
Government Bonds 4.5%
Government of Poland PDI, Step-Up,
3.75%, 10/27/14 1,000 770
Total Poland (Cost $767) 770
RUSSIA 9.9%
Government Bonds 9.9%
Russia Loan Participation, Zero Coupon 3,500 1,697
Total Russia (Cost $1,459) 1,697
VENEZUELA 7.2%
Government Bonds 7.2%
Republic of Venezuela DCB, FRN,
6.625%, 12/18/07 1,750 $ 1,238
Total Venezuela (Cost $1,141) 1,238
UNITED STATES 5.3%
Short-Term Investments 5.3%
Investments in Commercial Paper through a
joint account 5.49 - 5.60%, 7/01/96 918 918
Total United States (Cost $918) 918
Total Investments in Securities
86.1% of Net Assets (Cost $14,021) $ 14,795
Other Assets Less Liabilities 2,379
NET ASSETS $ 17,174
NET ASSET VALUE PER SHARE $ 11.28
! Based on the country of issuance
USD U.S. dollar
DCB Debt conversion bond
EI Eligible interest
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
IAB Interest arrears bond
IDU Interest due bond
NMB New money bond
PDI Past due interest
T. Rowe Price Emerging Markets Bond Fund
Unaudited June 30, 1996
Statement of Assets and Liabilities
In thousands
Assets
Investments in securities, at value (cost $14,021) $ 14,795
Receivable for investment securities sold 4,450
Other assets 591
Total assets 19,836
Liabilities
Payable for investment securities purchased 2,353
Other liabilities 309
Total liabilities 2,662
NET ASSETS $ 17,174
Net Assets Consist of:
Accumulated net investment income- net of distributions $ 13
Accumulated net realized gain/loss - net of distributions 448
Net unrealized gain (loss) 764
Paid-in-capital applicable to 1,522,002 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 15,949
NET ASSETS $ 17,174
NET ASSET VALUE PER SHARE $ 11.28
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Foreign Bond Funds
Unaudited
Statement of Operations
In thousands
Emerging
International Markets
Bond Fund Bond Fund
6 Months 6 Months
Ended Ended
6/30/96 6/30/96
Investment Income
Interest income $ 35,588 $ 749
Expenses
Investment management 3,466 -
Shareholder servicing 620 28
Custody and accounting 262 61
Registration 34 18
Prospectus and shareholder reports 30 1
Legal and audit 16 12
Directors 5 3
Miscellaneous 8 5
Reimbursed by Manager - (41)
Total expenses 4,441 87
Net investment income 31,147 662
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 13,688 453
Foreign currency transactions (6,941) (3)
Net realized gain (loss) 6,747 450
Change in net unrealized gain or loss
Securities (43,549) 264
Other assets and liabilities
denominated in foreign currencies 2,132 (9)
Change in net unrealized gain or loss (41,417) 255
Net realized and unrealized gain (loss) (34,670) 705
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (3,523) $ 1,367
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Foreign Bond Funds
Unaudited
Statement of Changes in Net Assets
In thousands
Emerging
International Markets
Bond Fund Bond Fund
6 Months Year 6 Months 12/30/94
Ended Ended Ended to
6/30/96 12/31/95 6/30/96 12/31/95
Increase (Decrease) in Net Assets
Operations
Net investment income $ 31,147 $ 54,918 $ 662 $ 606
Net realized gain (loss) 6,747 42,586 450 613
Change in net unrealized
gain or loss (41,417) 58,597 255 509
Increase (decrease) in
net assets from operations (3,523) 156,101 1,367 1,728
Distributions to shareholders
Net investment income (31,151) (54,919) (662) (598)
Net realized gain - (11,472) - (617)
Decrease in net assets
from distributions (31,151) (66,391) (662) (1,215)
Capital share transactions*
Shares sold 162,275 392,525 12,532 16,608
Distributions reinvested 25,275 57,578 433 983
Shares redeemed (182,177) (262,250) (6,485) (8,115)
Increase (decrease) in
net assets from capital
share transactions 5,373 187,853 6,480 9,476
Net Assets
Increase (decrease)
during period (29,301) 277,563 7,185 9,989
Beginning of period 1,015,666 738,103 9,989 -
End of period $ 986,365 $1,015,666 $ 17,174 $ 9,989
*Share information
Shares sold 15,840 38,100 1,145 1,620
Distributions reinvested 2,486 5,565 40 93
Shares redeemed (17,927) (25,582) (599) (777)
Increase (decrease)
in shares outstanding 399 18,083 586 936
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Foreign Bond Funds
Unaudited June 30, 1996
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price International Funds, Inc. (the corporation) is registered under
the Investment Company Act of 1940. The International Bond Fund and the
Emerging Markets Bond Fund, nondiversified, open-end management investment
companies, are two of the portfolios established by the corporation and
commenced operations on September 10, 1986 and December 30, 1994,
respectively.
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, 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
each 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, 1996, 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, 1996, 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, 1996, the International Bond
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.
Commercial Paper Joint Account Each fund, and other affiliated funds, may
transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy each fund's criteria as to
quality, yield, and liquidity.
Other Purchases and sales of portfolio securities, other than short-term and
U.S. government securities, for the six months ended June 30, 1996, were as
follows:
Emerging
International Markets
Bond Fund Bond Fund
Purchases $ 1,057,931,000 $ 20,435,000
Sales 1,039,330,000 16,127,000
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. The International Bond Fund has unused realized capital
loss carryforwards for federal income tax purposes of $11,233,000 which expire
in 2002. The fund intends to retain gains realized in future periods that may
be offset by available capital loss carryforwards.
At June 30, 1996, the aggregate cost of investments for the International Bond
and Emerging Markets Bond funds for federal income tax and financial reporting
purposes was $1,020,258,000 and $14,021,000, respectively. Net unrealized gain
(loss) on investments was as follows:
Emerging
International Markets
Bond Fund Bond Fund
Appreciated investments $ 17,152,000 $ 815,000
Depreciated investments (17,896,000) (41,000)
Net unrealized gain (loss) $ (744,000) $ 774,000
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 $553,000 was payable at June
30, 1996 by the International Bond Fund. 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 International Bond Fund and 0.45% of average daily
net assets for the Emerging Markets Bond 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 0.305% for assets in excess of $50
billion. At June 30, 1996, and for the six months then ended, the effective
annual group fee rate was 0.33% and 0.34%, respectively. 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, 1996, which would cause the
Emerging Markets Bond Fund's ratio of expenses to average net assets to exceed
1.25%. Thereafter, through December 31, 1998, the Emerging Markets Bond Fund
is required to reimburse the manager for these expenses, provided that average
net assets have grown or expenses have declined sufficiently to allow
reimbursement without causing the fund's ratio of expenses to average net
assets to exceed 1.25%. Pursuant to this agreement, $54,000 of management fees
were not accrued by the Emerging Markets Bond Fund for the six months ended
June 30, 1996, and $41,000 of other expenses were borne by the manager.
Additionally, $182,000 of unaccrued fees and expenses from 1995 are subject to
reimbursement through December 31, 1998.
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. Additionally,
the International Bond Fund is one of several T. Rowe Price mutual funds (the
underlying funds) in which the T. Rowe Price Spectrum Income Fund invests. In
accordance with an agreement among 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 International Bond and Emerging Markets Bond funds
incurred expenses pursuant to these related party agreements totaling
approximately $591,000 and $71,000, respectively, for the six months ended
June 30, 1996, of which $97,000 and $12,000, respectively, were payable at
period-end.
T. Rowe Price 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 Monday through
Friday from 8 a.m. to 10 p.m. ET and weekends from 8:30 a.m. to 5 p.m. ET.
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. You can also
drop off applications or obtain prospectuses and other literature.
Automated 24-Hour Services
Tele*Access(registered trademark) Call 1-800-638-2587 to obtain information
such as account balance, date and amount of your last transaction, latest
dividend payment, and fund prices and yields. Additionally, you can request
prospectuses, statements, new account and tax forms; reorder checks; and
initiate purchase, redemption, and exchange orders for identically registered
accounts.
T. Rowe Price OnLine Through a personal computer via dial-up modem, you can
replicate all the services available on Tele*Access.
Account Services
Checking Write checks for $500 or more on any money market and most bond fund
accounts (except the High Yield and Emerging Markets Bond Funds).
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 move investments systematically from one
fund account to another, such
as from a money fund to 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.
Discount Brokerage*
Investments Available You can trade stocks, bonds, options, precious metals,
and other securities at a savings over regular commission rates.
To Open an Account Call a shareholder service representative at
1-800-225-5132.
Investment Information
Combined Statement A comprehensive overview of your T. Rowe Price accounts is
provided. The summary page gives you 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.
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 This is a quarterly newsletter with relevant
articles on market trends, personal financial planning, and T. Rowe Price's
economic perspective.
Performance Update This quarterly report reviews recent market developments
and provides comprehensive performance information for each T. Rowe Price
fund.
Insights This library of information includes reports on mutual fund tax
issues, investment strategies, and financial markets.
Detailed Investment Guides Our widely acclaimed Asset Mix Worksheet, College
Planning Kit, Personal Strategy Planner, Retirees Financial Guide, and
Retirement Planning Kit (also available on disk for PC use) help you determine
and reach your investment goals.
* T. Rowe Price Discount Brokerage is a division of T. Rowe Price Investment
Services, Inc. Member NASD/SIPC.
T. Rowe Price Mutual Funds
Stock Funds
Domestic
Balanced
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Dividend Growth
Equity Income
Equity Index
Growth & Income
Growth Stock
Health Sciences
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
OTC
Science & Technology
Small-Cap Value*
Spectrum Growth
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Bond Funds
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Emerging Markets Bond
Global Government Bond
International Bond
Short-Term Global Income
Money Market
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
Blended Asset
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
T. Rowe Price No-Load Variable Annuity
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
* Closed to new investors.
For yield, price, last transaction, and current balance, 24 hours, 7 days a
week, call: 1-800-638-2587 toll free
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
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.
T. Rowe Price Investment Services, Inc., Distributor RPRTFBF 6/30/96
CHART 1 - IBF geographic diversification pie chart showing Germany 18%, Italy
16%, Japan 12%, U.K. 11%, Spain 8%, Denmark 8%, Netherlands 6%, Other and
Reserves 21%
CHART 2 - EMBF geographic diversification pie chart showing Brazil 18%,
Argentina 14%, Russia 10%, Mexico 9%, Venezuela 7%, Ecuador 5%, Poland 5%,
Other and Reserves 32%
CHART 3 - IBF SEC - line chart showing the cumulative growth of $10,000
invested in the fund from inception (9/10/86) compared with $10,000 invested
in a broad-based index over the same period.
CHART 4 - EMBF SEC - line chart showing the cumulative growth of $10,000
invested in the fund from inception (12/30/94) compared with $10,000 invested
in a broad-based index over the same period.
