<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
FOR YIELD, PRICE, LAST TRANSACTION,
AND CURRENT BALANCE, 24 HOURS,
7 DAYS A WEEK, CALL:
1-800-638-2587 toll free
625-7676 Baltimore area
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
Global Income Funds.
[T.ROWE PRICE LOGO]
STG/GGB
-------------------------------------------------------------------
[T.ROWE PRICE LOGO]
GLOBAL INCOME
FUNDS
DECEMBER 31, 1995
<PAGE> 2
- --------------------------------------------------------------------------------
Fellow Shareholders
The second half of 1995 saw a continuation of the trends of earlier in the year.
Slow economic growth and low inflation were the catalysts behind rising bond
prices and falling yields. Forecasts for both economic growth and inflation were
lowered in most regions during the last six months. Stability filtered back into
the emerging markets, allowing them to participate fully in the international
bond rally.
Currency markets were more stable in the second half, although the dollar
rallied on a trade-weighted basis. However, this relative stability masked
Japanese yen volatility. Having risen 17% against the U.S. dollar in the first
half, the yen fell 20% in the second half in response to concerted efforts to
rekindle the Japanese economy. The Mexican peso was again weaker, but this time
without adversely affecting other emerging markets. Despite the fall in the
Japanese currency, global bonds generated strong overall returns in the second
half of 1995.
MARKET ENVIRONMENT
A succession of weak economic data in many major markets provided the backdrop
for interest rate cuts. Interest rate-sensitive areas such as automobile sales,
consumer durables, and housing starts indicated sluggish activity. Unemployment
remained relatively stable in the U.S. but rose in Europe and Japan.
In contrast to the first half, European bonds outperformed their U.S. and
Japanese counterparts in local currency and dollar terms over the last six
months. A downward revision in German inflation in September further assisted
the rally.
Much of the discussion in Europe centered on the timetable for Economic
Monetary Union (EMU). Whether or not the required number of countries will
qualify for EMU in 1999 is open to question. However, in order to participate,
European countries will be forced to reduce high budget deficits and outstanding
government debt.
Implementing this fiscal tightening at a time of sluggish growth demands a
loosening of monetary policy -- lower interest rates. Investor perceptions that
this shift was required propelled European bonds higher at the end of the year.
Japanese bonds posted double-digit returns in the first half but struggled
to stay positive in the second half. Low nominal yields were not a problem for
investors as inflation was running near zero. However, there was a major change
in government policy around midyear as Japan sought to extract its economy from
a deflationary environment. In addition to more public spending, the Japanese
government in conjunction with the U.S. pursued a weaker yen policy. These
measures caused Japanese bonds to underperform. Japan was the only major market
to provide a negative return in the second half.
- ------------------------------------------------------
Bond Market Performance
<TABLE>
<CAPTION>
Total Returns
6 Months Ended 12/31/95
-------------------------------------
In Local Currency In U.S. Dollars
----------------- ----------------
<S> <C> <C>
Australia 8.66% 14.03%
- ------------------------------------------------------
Belgium 8.30 4.72
Canada 8.04 8.83
- ------------------------------------------------------
Denmark 11.47 8.63
France 9.11 8.15
- ------------------------------------------------------
Germany 8.72 5.13
Ireland 11.54 9.21
- ------------------------------------------------------
Italy 12.06 15.63
Japan 1.05 -16.84
- ------------------------------------------------------
The Netherlands 9.49 5.89
Spain 12.97 12.76
- ------------------------------------------------------
Sweden 15.10 26.46
United Kingdom 10.28 7.63
- ------------------------------------------------------
United States 6.04 6.04
</TABLE>
- ------------------------------------------------------
Source: J.P. Morgan.
<PAGE> 3
In the currency arena, the yen, the Australian dollar, and British pound
were the only major currencies to weaken against the U.S. dollar. Most European
currencies gained between 8% and 12% over the year, except for the Italian lira,
which was up 2%. The best currency performance came from the Swedish krona, up
12% for the year and 10% in the second half. Thus, the big currency story of the
second half was yen weakness rather than dollar strength.
The U.S. was the ninth best-performing market over the year and the
thirteenth best during the second half of 1995. Short-term rates were cut twice
amid concerns about the slowing U.S. economy. Although some weakness emerged
because of the budget impasse, U.S. Treasuries still performed strongly in the
final quarter.
Canadian bonds outperformed their U.S. counterparts throughout the year and
during the second half, although they suffered from an increase in volatility
caused by the Quebec referendum on secession from the rest of Canada. However,
the market grew calmer when the secession measure was narrowly defeated and
investors focused again on the prevailing weakness of the Canadian economy.
PORTFOLIO REVIEWS
SHORT-TERM GLOBAL INCOME FUND
Your fund provided positive returns over the year, outperforming its benchmark
during the 6- and 12-month periods ended December 31, 1995. The economic
background during the last six months proved constructive for the short-term
instruments in which the fund invests.
- ------------------------------------------------------
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 12/31/95
6 Months 12 Months
--------- ----------
<S> <C> <C>
Short-Term Global Income Fund 4.96% 8.34%
Lipper Short World Multi-Market
Income Funds Average 4.73 7.80
</TABLE>
- ------------------------------------------------------
The fund benefited earlier in the year from minimal exposure to Latin
American credits in the aftermath of the Mexican peso crisis. As the year
progressed, we extended the weighted average maturity of the portfolio to take
advantage of declining interest rates, which further helped performance.
We concentrated our holdings during the first half in core European markets,
including Germany, France, Belgium, and Austria, as the likelihood of German
interest cuts increased. Later, we added positions in Spain, Italy, Australia,
and Canada. During the second half of the year, we established small positions
in U.S. dollar- denominated Mexican debt and assumed some currency exposure to
Poland and the Czech Republic, which contributed positively to fund performance
near year- end.
EDGAR DESCRIPTION: GEOGRAPHICAL PIE CHART SHOWING EUROPE 61%, CANADA 14%,
AUSTRALIA 2%, U.S. 20%, OTHER AND RESERVES 3%.
GEOGRAPHICAL DIVERSIFICATION*
<TABLE>
<CAPTION>
Short-Term Global Income Fund Based on Net-Assets as of 12/31/95.
<S> <C>
Europe 61%
Canada 14%
Australia 2%
U.S. 20%
Other and Reserves 3%
</TABLE>
- --------------------------------------
* Based on currency denomination of the fund's securities.
Does not include the effects of forward currency contracts and
currency exposure from hybrid instruments.
GLOBAL GOVERNMENT BOND FUND
Your fund turned in a strong performance in the second half of 1995 and over the
year as a whole, largely because of the continued appreciation of global bonds.
Second half returns were good, even though the U.S. dollar was fairly stable
during the last six months while foreign currency appreciation helped boost the
earlier returns.
2
<PAGE> 4
- ------------------------------------------------------
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended
12/31/95
6 Months 12 Months
-------- ---------
<S> <C> <C>
Global Government Bond
Fund 5.10% 18.13%
J.P. Morgan Global
Government Bond
Index (unhedged) 3.24 19.31
J.P. Morgan Global
Government Bond
Index (fully hedged) 7.36 17.90
</TABLE>
- ------------------------------------------------------
Your fund outperformed its unhedged benchmark over the second half because
of its underweighted allocation to Japanese bonds and currency. This
underweighting hindered results to some extent during the first six months when
Japanese bonds returned 8% in dollar terms.
In addition, we also underweighted U.S. Treasuries, which did not do as well
as foreign bonds. Our preference for the better-performing markets of Europe
helped returns. Extensive exposure to all European bond maturities benefited the
fund as rates fell across the yield curve.
Your fund's small holdings in emerging market debt aided performance in the
second half as those markets rebounded sharply from first quarter losses.
OUTLOOK
The strong performance of international bonds in 1995 justified the optimistic
view we expressed in our last annual report.
Our outlook for the first six months of 1996 remains positive. Continued
efforts to reduce government spending in Europe should be rewarded with lower
interest rates, especially as European economies are still growing sluggishly.
Real yields (bond yields less inflation) are still attractive in Europe and not
stretched as they were in late 1993.
EDGAR DESCRIPTION: GEOGRAPHICAL DIVERSIFICATION PIE CHART SHOWING EUROPE 62%,
U.S. 26%, JAPAN 5%, CANADA 4%, AUSTRALIA 3%.
GEOGRAPHICAL DIVERSIFICATION*
<TABLE>
<CAPTION>
Global Government Bond Based on Net Assets as of 12/31/95.
<S> <C>
Europe 62%
U.S. 26%
Japan 5%
Canada 5%
Australia 3%
</TABLE>
- --------------------------------------
* Based on currency denomination of the fund's securities.
Does not include the effects of forward currency contracts and
exposure from hybrid instruments.
However, we are nearing the end of this stage of the interest rate cycle,
and the rallies in the U.S. and Japan may be cresting. Still, there is little
reason to fear the kind of price reversal witnessed in the first part of 1994,
since inflation is not a threat at present. Wage costs should remain under
control for at least a while longer. One potential concern is the recent rise in
commodity prices, but current levels of economic activity suggest that this
should be only a short-term phenomenon.
Recent currency market stability may continue, with perhaps some bonus given
to the U.S. dollar if there is a positive outcome on the budget.
Respectfully submitted,
/s/ PETER B. ASKEW
------------------
Peter B. Askew
Executive Vice President
January 19, 1996
3
<PAGE> 5
- --------------------------------------------------------------------------------
Portfolio Highlights
T. Rowe Price Short-Term Global Income Fund / December 31, 1995
- ------------------------------------------------------
Key Statistics
<TABLE>
<CAPTION>
Dividend Yield* Periods Ended 12/31/95
- ---------------------------- ----------------------
<S> <C>
6 Months 6.15%
- ---------------------------------------------------
12 Months 6.43
Dividend Per Share
- ----------------------------
6 Months $0.13
- ---------------------------------------------------
12 Months** 0.27
Change in Price Per Share
- ----------------------------
6 Months (From $4.38 to
$4.46) 0.08
- ---------------------------------------------------
12 Months (From $4.38 to
$4.46) 0.08
- ---------------------------------------------------
</TABLE>
- ------------------------------------------------------
* 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.
** Includes $0.17 return of capital, which is a nontaxable distribution. The
total amount of the fund's 1995 nontaxable distribution is reported in column
1d of Form 1099-DIV mailed in January; you should reduce the cost basis of
your investment by this amount. Losses on foreign currency contracts offset a
portion of the fund's taxable income.
- ------------------------------------------------------
Maturity Diversification
<TABLE>
<CAPTION>
Percent of Net Assets
<S> <C> <C> <C>
Range 12/31/95 6/30/95 12/31/94
- -------------------------- -------- ------- --------
Short-Term
(0 to 1 year) 15% 28% 47%
- ------------------------------------------------------
Short Intermediate-
Term (1+ to 5 years) 84 60 48
Long Intermediate-
Term (5+ to 10 years) 1 12 5
- ------------------------------------------------------
Long-Term
(over 10 years) -- -- --
- ------------------------------------------------------
Weighted Average
Maturity (years) 2.8 2.8 1.8
- ------------------------------------------------------
</TABLE>
- ------------------------------------------------------
Quality Diversification
<TABLE>
<CAPTION>
Percent of Net Assets
<S> <C> <C> <C>
RPFI Quality Rating* 12/31/95 6/30/95 12/31/94
- -------------------------- -------- ------- --------
1 28% 29% 32%
- ------------------------------------------------------
2 48 39 42
3 16 28 14
- ------------------------------------------------------
4 -- 1 6
5 and below 8 3 6
- ------------------------------------------------------
Weighted Average Quality 2.0 2.1 2.1
- ------------------------------------------------------
</TABLE>
* On a scale of 1 to 10, with Grade 1 representing highest quality.
Performance Comparison as of 12/31/95
<TABLE>
<CAPTION>
Salomon Brothers
Short-Term Global 1-3 Year
Income Fund Treasury Index
<S> <C> <C>
6/1/92 $ 10,000 $ 10,000
Dec-92 9,978 10,300
Dec-93 10,763 10,855
Dec-94 10,449 10,913
Dec-95 11,321 12,084
</TABLE>
Note: The Index return does not reflect expenses, which have been deducted
from the fund's return.
- ------------------------------------------------------
Average Annual Compound Total Return
Periods Ended December 31, 1995
<TABLE>
<CAPTION>
Since Inception
1 Year 6/30/92
- --------- ------------------
<S> <C>
8.34% 3.60%
</TABLE>
- ------------------------------------------------------
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
4
<PAGE> 6
- --------------------------------------------------------------------------------
Portfolio Highlights
T. Rowe Price Global Government Bond Fund / December 31, 1995
- ------------------------------------------------------
Key Statistics
<TABLE>
<CAPTION>
Dividend Yield* Periods Ended 12/31/95
- ---------------------------- ----------------------
<S> <C>
6 Months 6.10%
- ---------------------------------------------------
12 Months 6.22
Dividend Per Share
- ----------------------------
6 Months $0.30
- ---------------------------------------------------
12 Months 0.59
Change in Price Per Share
- ----------------------------
6 Months
(From $10.06 to $10.26) 0.20
- ---------------------------------------------------
12 Months (From $9.22 to
$10.26) 1.04
</TABLE>
- ------------------------------------------------------
* 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.
- ------------------------------------------------------
Maturity Diversification
<TABLE>
<CAPTION>
Percent of Net Assets
<S> <C> <C> <C>
Range 12/31/95 6/30/95 12/31/94
- -------------------------- -------- ------- --------
Short-Term
(0 to 1 year) 7% 19% 17%
- ------------------------------------------------------
Short Intermediate-
Term (1+ to 5 years) 43 20 25
Long Intermediate-
Term (5+ to 10 years) 33 51 43
- ------------------------------------------------------
Long-Term
(over 10 years) 17 10 15
- ------------------------------------------------------
Weighted Average
Maturity (years) 7.9 7.7 7.7
- ------------------------------------------------------
</TABLE>
- ------------------------------------------------------
Quality Diversification
<TABLE>
<CAPTION>
Percent of Net Assets
<S> <C> <C> <C>
RPFI Quality Rating* 12/31/95 6/30/95 12/31/94
- -------------------------- -------- ------- --------
1 55% 59% 53%
- ------------------------------------------------------
2 32 35 24
3 9 4 8
- ------------------------------------------------------
4 -- -- 8
5 and below 4 2 7
- ------------------------------------------------------
Weighted Average Quality 1.7 1.5 1.9
- ------------------------------------------------------
</TABLE>
* On a scale of 1 to 10, with Grade 1 representing highest quality.
Performance Comparison
as of 12/31/95
<TABLE>
<CAPTION>
T. Rowe Price J.P. Morgan
Global Government Global Government
Bond Fund Bond Hedged Index
<S> <C> <C>
12/28/90 $ 10,000 $ 10,000
Dec-91 11,131 11,308
Dec-92 11,493 12,061
Dec-93 12,775 13,528
Dec-94 12,384 12,980
Dec-95 14,630 15,303
</TABLE>
Note: The index return does not reflect expenses, which have been deducted
from the fund's return.
- ------------------------------------------------------
Average Annual Compound Total Return
Periods Ended December 31, 1995
<TABLE>
<CAPTION>
Since Inception
1 Year 5 Years 12/28/90
- --------- ----------- ------------------
<S> <C> <C>
18.13% 7.91% 7.91%
</TABLE>
- ------------------------------------------------------
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
5
<PAGE> 7
- --------------------------------------------------------------------------------
Investment Records
Per Share Data
The following tables show the investment records of one share purchased at the
original offering prices of $5.00 for the T. Rowe Price Short-Term Global Income
Fund and $10.00 for the T. Rowe Price Global Government Bond Fund. Over the time
periods covered in each table, interest rates have been volatile. The results
shown should not be considered a representation of the dividend income or
capital gain or loss which may be realized from an investment made in the funds
today.
- --------------------------------------------------------------------------------
T. Rowe Price Short-Term Global Income Fund
<TABLE>
<CAPTION>
Year Capital With With Dividends
Ended Net Asset Income Gain Dividends and Capital Gains
12/31 Value Dividends(2) Distributions(3) Reinvested Reinvested
- ------ --------- ---------- ------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
1992(1) $4.78 $ 0.20 $0.0137 $ 4.97 $4.99
- ------------------------------------------------------------------------------------------
1993 4.82 0.32 -- 5.37 5.38
1994 4.38 0.30 -- 5.21 5.22
- ------------------------------------------------------------------------------------------
1995 4.46 0.27 -- 5.64 5.66
- ------------------------------------------------------------------------------------------
Total $ 1.09 $0.0137
- ------------------------------------------------------------------------------------------
</TABLE>
(1) From inception 6/30/92 to 12/31/92.
(2) Includes $0.24 return of capital in 1994 and $0.17 in 1995.
(3) Includes short-term capital gain of $0.0137 in 1992.
- --------------------------------------------------------------------------------
T. Rowe Price Global Government Bond Fund
<TABLE>
<CAPTION>
Year Capital With With Dividends
Ended Net Asset Income Gain Dividends and Capital Gains
12/31 Value Dividends(2) Distributions(3) Reinvested Reinvested
- ------ --------- ---------- ------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
1991(1) $ 10.30 $ 0.77 -- $11.13 $ 11.13
- ------------------------------------------------------------------------------------------
1992 9.85 0.76 $0.01 11.48 11.49
1993 10.08 0.56 0.28 12.42 12.77
- ------------------------------------------------------------------------------------------
1994 9.22 0.54 0.02 12.02 12.38
1995 10.26 0.59 -- 14.20 14.63
- ------------------------------------------------------------------------------------------
Total $ 3.22 $0.31
- ------------------------------------------------------------------------------------------
</TABLE>
(1) From inception 12/28/90 to 12/31/91.
(2) Includes $0.03 return of capital in 1994.
(3) Includes short-term capital gains of $0.07 in 1993.
6
<PAGE> 8
- --------------------------------------------------------------------------------
Portfolio of Investments+
T. Rowe Price Short-Term Global Income Fund / December 31, 1995
(values in thousands)
<TABLE>
<CAPTION>
Value
--------
<S> <C>
- ------------------------------------------------------
AUSTRALIA -- 1.8%
GOVERNMENT BOND
AUD 1,000,000 Commonwealth of Australia,
7.00%, 4/15/00.......... $ 726
- ------------------------------------------------------
BELGIUM -- 4.0%
GOVERNMENT BONDS
BEL 20,000,000 Obligation Lineaire,
7.00%, 4/29/99.......... 723
24,000,000 Obligation Lineaire,
7.75%, 12/22/00......... 892
TOTAL BELGIUM 1,615
- ------------------------------------------------------
CANADA -- 14.5%
GOVERNMENT BONDS
CAD 2,500,000 Government of Canada,
8.00%, 3/15/97.......... 1,879
1,000,000 Government of Canada,
6.25%, 2/1/98........... 737
2,750,000 Government of Canada,
7.75%, 9/1/99........... 2,106
1,500,000 Province of Alberta,
10.625%, 2/14/96........ 1,105
TOTAL CANADA 5,827
- ------------------------------------------------------
CZECH REPUBLIC -- 1.6%
SHORT-TERM INVESTMENT
CZK 16,900,000 Internationale Nederlanden
Groep, Zero Coupon,
1/30/96................. 628
- ------------------------------------------------------
DENMARK -- 6.7%
GOVERNMENT BONDS
DKK 9,000,000 Kingdom of Denmark, 9.00%,
11/15/98................ 1,767
5,000,000 Kingdom of Denmark, 6.00%,
12/10/99................ 909
TOTAL DENMARK 2,676
- ------------------------------------------------------
EUROPEAN CURRENCY UNIT -- 3.4%
GOVERNMENT BONDS
XEU 650,000 European Economic
Community, 8.625%,
12/15/97................ $ 882
375,000 United Kingdom Treasury,
8.00%, 1/23/96.......... 480
TOTAL EUROPEAN CURRENCY UNIT 1,362
- ------------------------------------------------------
FRANCE -- 15.7%
GOVERNMENT BONDS
FRF 5,000,000 Bons du Tresor Annuel,
7.25%, 8/12/97.......... 1,055
24,500,000 Bons du Tresor Annuel,
7.00%, 10/12/00......... 5,231
TOTAL FRANCE 6,286
- ------------------------------------------------------
GERMANY -- 3.9%
GOVERNMENT BOND
DEM 2,050,000 Treuhandanstalt, 7.00%,
11/25/99................ 1,551
- ------------------------------------------------------
IRELAND -- 4.2%
GOVERNMENT BOND
IEP 1,000,000 Republic of Ireland,
8.00%, 10/18/00......... 1,683
- ------------------------------------------------------
ITALY -- 5.4%
GOVERNMENT BONDS
ITL 1,000,000,000 Buoni del Tesoro
Poliennali, 8.313%,
12/1/97................. 623
1,750,000,000 Buoni del Tesoro
Poliennali, 8.313%,
12/1/99................. 1,078
750,000,000 Buoni del Tesoro
Poliennali, 9.188%,
4/1/00.................. 476
TOTAL ITALY 2,177
</TABLE>
7
<PAGE> 9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
--------
<S> <C>
- ------------------------------------------------------
SPAIN -- 7.8%
GOVERNMENT BONDS
ESP 162,500,000 Bonos del Estado, 11.00%,
6/15/97................. $ 1,373
40,000,000 Bonos del Estado, 8.30%,
12/15/98................ 323
130,000,000 Bonos del Estado, 12.25%,
3/25/00................. 1,177
30,000,000 Bonos del Estado, 10.10%,
2/28/01................. 251
TOTAL SPAIN 3,124
- ------------------------------------------------------
UNITED KINGDOM -- 8.0%
GOVERNMENT BOND
GBP 500,000 United Kingdom Treasury,
6.00%, 8/10/99.......... 760
CORPORATE BONDS
800,000 Abbey National, 7.75%,
6/23/98................. 1,271
750,000 Alliance & Leicester, FRN,
6.813%, 1/19/98......... 1,164
2,435
TOTAL UNITED KINGDOM 3,195
- ------------------------------------------------------
UNITED STATES -- 25.9%
GOVERNMENT BONDS
USD 285,714 Banco Central de Brazil,
FRN, 6.75%, 10/15/99.... 264
1,000,000 Province of Nova Scotia,
FRN, 6.063%, 5/12/99.... 999
2,880,000 Republic of Argentina Bote
1, FRN, 5.891%,
5/31/96................. 286
500,000 United Mexican States,
FRN, 11.188%, 7/21/97... 509
300,000 United States Treasury
Notes, 6.50%, 9/30/96... 303
725,000 United States Treasury
Notes, 5.875%,
8/15/98................. 736
3,097
CORPORATE BONDS
500,000 Commerzbank Overseas
Finance, FRN, 5.75%,
11/30/98................ 499
417,000 Banco Nacional Desernvolv,
6.00%, 9/15/96.......... 413
USD 1,000,000 Indover Bank, FRN, 6.738%,
10/26/97................ $ 1,001
1,000,000 Landesbank Rheinland-
Pfalz, FRN, 5.813%,
3/25/98................. 1,001
500,000 New Zealand Dairy Board,
FRN, 6.063%, 4/5/99..... 501
3,415
HYBRID INSTRUMENTS
500,000 Bank of Scotland Treasury
Services Singapore
Dollar Linked Note, Zero
Coupon, 5/3/96:
Principal repayment
value linked to the
performance of the
Singapore dollar........ 486
547,805 Morgan Guaranty Trust
Polish Zloty Linked
Note, 23.52%, 1/12/96:
Principal repayment
value linked to the
performance of the
Polish zloty............ 541
500,000 United Mexican States,
FRN, 5.625%, 11/27/96:
Redemption value
(principal and interest)
is based on the greater
of a Mexican Cetes
option or a U.S. LIBOR
option. The Cetes option
is indexed to the Cetes
rate and the Mexican
peso exchange rate. The
U.S. LIBOR option is
indexed to the 12 month
U.S. LIBOR, with the
principal repayment
value equal to par...... 509
1,536
COMMERCIAL PAPER
1,000,000 Vermont American, 5.70%,
1/29/96................. 995
1,324,038 Investments in Commercial
Paper through a joint
account, 5.90 - 6.05%,
1/2/96.................. 1,324
2,319
TOTAL UNITED STATES 10,367
- ------------------------------------------------------
</TABLE>
8
<PAGE> 10
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C>
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 102.9% OF NET ASSETS (COST $40,473) $ 41,217
- -----------------------------------------------------------------------------------------------------------
FORWARD CURRENCY EXCHANGE CONTRACTS
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Counterparty Settlement Deliver Receive Gain (Loss)
- ---------------- ---------- ------------------ ------------------ -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Chase Manhattan 1/8/96 ATS 6,839 FRF 3,350 $ 5
Chase Manhattan 1/8/96 ATS 9,747 USD 983 16
Chase Manhattan 1/8/96 BEL 12,335 DEM 600 (1)
Chase Manhattan 1/8/96 BEL 20,822 USD 720 12
Chase Manhattan 1/8/96 DEM 3,730 USD 2,641 39
Citibank 1/8/96 FRF 25,472 USD 5,199 (4)
Chase Manhattan 1/8/96 NLG 1,061 USD 673 11
Chase Manhattan 1/8/96 USD 1,641 ATS 16,586 6
Chase Manhattan 1/8/96 USD 659 NLG 1,061 2
Chase Manhattan 1/16/96 ESP 143,277 USD 1,163 (16)
Citibank 1/16/96 ESP 29,533 USD 239 (4)
Chase Manhattan 1/22/96 GBP 2,049 USD 3,189 9
Chase Manhattan 1/22/96 IEP 1,028 USD 1,653 7
Chase Manhattan 1/22/96 XEU 1,098 USD 1,431 27
Chase Manhattan 1/24/96 AUD 983 USD 735 6
UBS Phillips &
Drew 1/24/96 CAD 7,552 USD 5,564 34
Chase Manhattan 1/26/96 JPY 8,656 USD 86 2
Citibank 1/30/96 DEM 576 USD 412 10
Chase Manhattan 2/12/96 DKK 20,022 USD 3,584 (26)
Chase Manhattan 2/16/96 ESP 176,871 USD 1,432 (19)
Chase Manhattan 2/16/96 ITL 3,562,613 USD 2,211 (18)
---
</TABLE>
<TABLE>
<S> <C>
Net unrealized gain (loss) on open forward currency exchange contracts..... 98
OTHER ASSETS LESS LIABILITIES.............................................. (1,254)
-----------
NET ASSETS................................................................. $ 40,061
========
NET ASSET VALUE PER SHARE.................................................. $4.46
=====
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 11
- --------------------------------------------------------------------------------
Portfolio of Investments+
T. Rowe Price Global Government Bond Fund / December 31, 1995
(values in thousands)
<TABLE>
<CAPTION>
Value
--------
<S> <C>
- ------------------------------------------------------
AUSTRALIA -- 3.1%
GOVERNMENT BONDS
AUD 275,000 Commonwealth of Australia,
7.00%, 4/15/00.......... $ 200
950,000 Commonwealth of Australia,
7.50%, 7/15/05.......... 675
TOTAL AUSTRALIA 875
- ------------------------------------------------------
BELGIUM -- 6.6%
GOVERNMENT BOND
BEL 50,500,000 Obligation Lineaire,
7.75%, 12/22/00......... 1,878
- ------------------------------------------------------
CANADA -- 4.7%
GOVERNMENT BONDS
CAD 500,000 Government of Canada,
7.75%, 9/1/99........... 383
1,150,000 Government of Canada,
8.75%, 12/1/05.......... 942
TOTAL CANADA 1,325
- ------------------------------------------------------
CZECH REPUBLIC -- 0.9%
SHORT-TERM INVESTMENT
CZK 6,500,000 Internationale Nederlanden
Groep, Zero Coupon,
1/30/96................. 242
- ------------------------------------------------------
DENMARK -- 5.6%
GOVERNMENT BONDS
DKK 2,500,000 Kingdom of Denmark, 9.00%,
11/15/98................ 491
3,000,000 Kingdom of Denmark, 9.00%,
11/15/00................ 601
2,500,000 Kingdom of Denmark, 8.00%,
3/15/06................. 475
TOTAL DENMARK 1,567
- ------------------------------------------------------
FRANCE -- 10.3%
GOVERNMENT BONDS
FRF 9,000,000 Bons du Tresor Annuel,
7.00%, 10/12/00......... $ 1,921
2,000,000 Obligation Assimilable du
Tresor, 7.50%,
4/25/05................. 433
2,000,000 Obligation Assimilable du
Tresor, Zero Coupon,
10/25/05................ 213
1,500,000 Obligation Assimilable du
Tresor, 8.50%,
4/25/23................. 347
TOTAL FRANCE 2,914
- ------------------------------------------------------
GERMANY -- 15.6%
GOVERNMENT BONDS
DEM 1,810,000 Bundesrepublic, 6.50%,
7/15/03................. 1,314
1,000,000 Bundesobligation, 6.25%,
1/4/24.................. 651
400,000 Treuhandanstalt, 7.00%,
11/25/99................ 303
400,000 Treuhandanstalt, 6.875%,
6/11/03................. 296
1,400,000 Treuhandanstalt, 7.50%,
9/9/04.................. 1,072
3,636
SHORT-TERM INVESTMENT
1,086,284 Union Bank of Switzerland,
Fixed Deposit, 3.90%,
1/4/96.................. 757
TOTAL GERMANY 4,393
- ------------------------------------------------------
IRELAND -- 2.1%
GOVERNMENT BOND
IEP 350,000 Republic of Ireland,
8.00%, 10/18/00......... 589
- ------------------------------------------------------
ITALY -- 7.4%
GOVERNMENT BONDS
ITL 1,150,000,000 Buoni del Tesoro
Poliennali, 8.313%,
12/1/99................. 708
</TABLE>
10
<PAGE> 12
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
--------
<S> <C>
ITL 1,600,000,000 Buoni del Tesoro
Poliennali, 9.188%,
4/1/00.................. $ 1,016
600,000,000 Buoni del Tesoro
Poliennali, 8.313%,
1/1/05.................. 355
TOTAL ITALY 2,079
- ------------------------------------------------------
JAPAN -- 5.2%
GOVERNMENT BONDS
JPY 30,000,000 Government of Japan,
5.50%, 3/20/02.......... 338
75,000,000 Government of Japan,
4.60%, 9/20/04.......... 808
1,146
CORPORATE BOND
30,000,000 Export Import Bank,
4.375%, 10/1/03......... 319
TOTAL JAPAN 1,465
- ------------------------------------------------------
NETHERLANDS -- 2.0%
GOVERNMENT BOND
NLG 765,000 Government of Netherlands,
8.25%, 2/15/07.......... 553
- ------------------------------------------------------
SOUTH AFRICA -- 0.5%
GOVERNMENT BOND
ZAR 550,000 Republic of South Africa,
12.00%, 2/28/05......... 134
- ------------------------------------------------------
SPAIN -- 7.8%
GOVERNMENT BONDS
ESP 70,000,000 Bonos del Estado, 8.30%,
12/15/98................ 565
110,000,000 Bonos del Estado, 12.25%,
3/25/00................. 996
20,000,000 Bonos del Estado, 10.10%,
2/28/01................. 167
40,000,000 Bonos del Estado, 10.90%,
8/30/03................. 351
15,000,000 Bonos del Estado, 10.00%,
2/28/05................. 125
TOTAL SPAIN 2,204
- ------------------------------------------------------
UNITED KINGDOM -- 3.8%
GOVERNMENT BOND
GBP 600,000 United Kingdom Treasury,
7.50%, 12/7/06.......... $ 936
SHORT-TERM INVESTMENT
95,808 J.P. Morgan, Fixed
Deposit, 6.00-6.75%,
1/3/96.................. 149
TOTAL UNITED KINGDOM 1,085
- ------------------------------------------------------
UNITED STATES -- 26.1%
GOVERNMENT BONDS
USD 250,000 Government of Poland
Discount, FRN, 6.875%,
10/27/24................ 189
100,000 Republic of Argentina
Bocon Pro 2, FRN,
5.994%, 4/1/07.......... 77
112,000 Republic of Argentina Bote
10, FRN, 5.688%,
4/1/00.................. 67
250,000 Republic of Argentina Par,
FRN, 5.00%, 3/31/23..... 143
265,302 Republic of Brazil (Class
C), 8.00%,
4/15/14................. 152
332,500 Republic of Brazil, IDU,
FRN, 6.688%, 1/1/01..... 287
150,000 Republic of Panama, FRN,
6.75%, 5/10/02.......... 128
880,000 United States Treasury
Bonds, 7.125%,
2/15/23................. 1,006
80,000 United States Treasury
Bonds, 6.25%, 8/15/23... 82
500,000 United States Treasury
Notes, 6.875%,
2/28/97................. 509
500,000 United States Treasury
Notes, 5.875%,
8/15/98................. 508
1,365,000 United States Treasury
Notes, 6.75%, 6/30/99... 1,427
500,000 United States Treasury
Notes, 7.50%, 5/15/02... 555
830,000 United States Treasury
Notes, 7.25%, 8/15/04... 923
6,053
</TABLE>
11
<PAGE> 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
--------
<S> <C> <C>
HYBRID INSTRUMENTS
USD 350,000 Bank of Scotland Treasury
Services Singapore
Dollar Linked Note, Zero
Coupon, 5/3/96:
Principal repayment
value linked to the
performance of the
Singapore dollar........ $ 341
390,244 Morgan Guaranty Trust
Polish Zloty Linked
Note, 23.52%, 1/12/96:
Principal repayment
value linked to the
performance of the
Polish zloty............ 385
726
OPTION PURCHASED
USD 1,000,000 *U.S. dollar Call/Japanese
yen Put, expires
5/31/96................. $ 155
COMMERCIAL PAPER
436,832 Investments in Commercial
Paper through a joint
account, 5.90 - 6.05%,
1/2/96.................. 437
TOTAL UNITED STATES 7,371
- ------------------------------------------------------
</TABLE>
12
<PAGE> 14
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
-----------
<S> <C>
- --------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES -- 101.7% OF NET ASSETS (COST $27,426) $ 28,674
- --------------------------------------------------------------------------------------------------------
FORWARD CURRENCY EXCHANGE CONTRACTS
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Counterparty Settlement Deliver Receive Gain (Loss)
- ---------------- ---------- ------------------ ---------------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Chase Manhattan 1/5/96 JPY 12,184 USD 120 $ 2
J.P. Morgan 1/5/96 USD 1,882 JPY 190,104 (39)
Chase Manhattan 1/8/96 ATS 4,482 USD 440 (5)
Chase Manhattan 1/8/96 BEL 23,653 USD 806 2
J.P. Morgan 1/8/96 DEM 698 USD 486 (1)
Chase Manhattan 1/8/96 DEM 1,976 USD 1,393 15
Citibank 1/8/96 FRF 5,888 USD 1,186 (17)
Chase Manhattan 1/8/96 NLG 388 USD 246 4
Chase Manhattan 1/8/96 USD 445 ATS 4,482 --
Chase Manhattan 1/8/96 USD 151 FRF 752 2
Chase Manhattan 1/8/96 USD 598 NLG 958 (1)
Citibank 1/16/96 ESP 19,688 USD 159 (3)
Chase Manhattan 1/16/96 ESP 107,672 USD 872 (14)
Chase Manhattan 1/16/96 ITL 510,379 GBP 208 2
Chase Manhattan 1/16/96 USD 196 ESP 24,000 2
Chase Manhattan 1/22/96 BEL 10,000 USD 347 7
Chase Manhattan 1/22/96 IEP 205 USD 330 1
Chase Manhattan 1/24/96 AUD 536 USD 401 3
Chase Manhattan 1/24/96 CAD 818 USD 602 3
Citibank 1/24/96 ITL 1,118,498 JPY 70,599 (15)
Chase Manhattan 1/24/96 JPY 10,931 ITL 175,000 3
Citibank 1/30/96 DEM 221 USD 158 4
J.P. Morgan 1/31/96 ZAR 502 USD 135 (1)
---
</TABLE>
<TABLE>
<S> <C>
Net unrealized gain (loss) on open forward currency exchange contracts... (46)
OTHER ASSETS LESS LIABILITIES............................................ (421)
-----------
NET ASSETS............................................................... $ 28,207
========
NET ASSET VALUE PER SHARE................................................ $10.26
========
- --------------------------------------------------------------------------------------------------------
</TABLE>
+ Listed by currency
denomination
* Non-income producing
ATS Austrian schilling
AUD Australian dollar
BEL Belgian franc
CAD Canadian dollar
CZK Czech Republic coruna
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
USD U.S. dollar
XEU European currency unit
ZAR South African rand
FRN Floating rate note
IDU Interest due bond
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 15
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
T. Rowe Price Global Income Funds / December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Short-Term Global Global Government
Income Fund Bond Fund
----------------- -----------------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost $40,473 and
$27,426)...................................................... $41,217 $28,674
Receivable for investment securities sold....................... -- 1,362
Interest receivable............................................. 900 649
Other assets.................................................... 403 825
------------- -------------
Total assets.................................................... 42,520 31,510
------------- -------------
LIABILITIES
Payable for investment securities purchased..................... 1,957 3,001
Other liabilities............................................... 502 302
------------- -------------
Total liabilities............................................... 2,459 3,303
------------- -------------
NET ASSETS...................................................... $40,061 $28,207
============= =============
NET ASSETS CONSIST OF:
Accumulated net investment income -- net of distributions....... $ (218) $ 37
Accumulated net realized gain/loss -- net of distributions...... (1,212) (769)
Net unrealized gain (loss)...................................... 816 1,227
Paid-in-capital applicable to 8,986,961 and 2,749,530 shares
of $0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized............ 40,675 27,712
------------- -------------
NET ASSETS...................................................... $40,061 $28,207
============= =============
NET ASSET VALUE PER SHARE....................................... $ 4.46 $ 10.26
============= =============
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 16
- --------------------------------------------------------------------------------
Statement of Operations
T. Rowe Price Global Income Funds / Year Ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Short-Term Global Global Government
Income Fund Bond Fund
----------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
Interest income................................................. $ 3,348 $ 2,246
------- -------
Expenses
Custody and accounting........................................ 145 131
Investment management......................................... 134 60
Shareholder servicing......................................... 91 80
Registration.................................................. 34 33
Legal and audit............................................... 22 25
Prospectus and shareholder reports............................ 9 27
Directors..................................................... 7 6
Miscellaneous................................................. 13 8
------- -------
Total expenses................................................ 455 370
------- -------
Net investment income........................................... 2,893 1,876
------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities.................................................... (1,763) 726
Futures....................................................... -- 8
Options....................................................... -- 6
Foreign currency transactions................................. (371) 382
------- -------
Net realized gain (loss)...................................... (2,134) 1,122
------- -------
Change in net unrealized gain or loss on:
Securities.................................................... 2,636 2,173
Options....................................................... -- 121
Other assets and liabilities denominated in foreign
currencies.................................................. 142 5
------- -------
Change in net unrealized gain or loss......................... 2,778 2,299
------- -------
Net realized and unrealized gain (loss)......................... 644 3,421
------- -------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............... $ 3,537 $ 5,297
======= =======
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 17
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
T. Rowe Price Global Income Funds
(in thousands)
<TABLE>
<CAPTION>
Short-Term Global Income Fund Global Government Bond Fund
Year Ended December 31, Year Ended December 31,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income............... $ 2,893 $ 5,365 $ 1,876 $ 2,440
Net realized gain (loss)............ (2,134) (8,334) 1,122 (2,353)
Change in net unrealized gain or
loss.............................. 2,778 164 2,299 (1,468)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
from operations................... 3,537 (2,805) 5,297 (1,381)
------------ ------------ ------------ ------------
Distributions to shareholders
Net investment income............... (1,006) (1,030) (1,866) (2,291)
Net realized gain................... -- -- -- (96)
Tax return of capital............... (1,851) (4,335) -- (149)
------------ ------------ ------------ ------------
Decrease in net assets from
distributions..................... (2,857) (5,365) (1,866) (2,536)
------------ ------------ ------------ ------------
Capital share transactions*
Shares sold......................... 5,521 58,079 5,061 16,507
Distributions reinvested............ 2,035 4,367 1,369 1,804
Shares redeemed..................... (24,549) (95,020) (18,170) (26,636)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
from capital share transactions... (16,993) (32,574) (11,740) (8,325)
------------ ------------ ------------ ------------
Increase (decrease) in net assets..... (16,313) (40,744) (8,309) (12,242)
NET ASSETS
Beginning of period................... 56,374 97,118 36,516 48,758
------------ ------------ ------------ ------------
End of period......................... $ 40,061 $ 56,374 $ 28,207 $ 36,516
============ ============ ============ ============
- -------------------------------------------------------------------------------------------------------------
* Share information
Shares sold......................... 1,258 12,427 512 1,708
Distributions reinvested............ 463 955 139 188
Shares redeemed..................... (5,597) (20,674) (1,862) (2,773)
------------ ------------ ------------ ------------
Increase (decrease) in shares
outstanding....................... (3,876) (7,292) (1,211) (877)
============ ============ ============ ============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 18
- --------------------------------------------------------------------------------
Notes to Financial Statements
T. Rowe Price Global Income Funds / December 31, 1995
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),
nondiversified, 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. Purchased options are valued at the latest bid price.
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.
B) 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.
C) Premiums and Discounts - Premiums and discounts on debt securities are
amortized for both financial reporting and tax 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 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.
A) Emerging Markets - At December 31, 1995, each fund held investments in
securities issued by governments of emerging market countries and securities
whose value is 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, 1995, each fund was a
party to forward currency exchange contracts under which it is obligated to
exchange currencies at specified future dates and exchange rates. Risks arise
from the possible inability of counterparties to meet the terms of their
agreements and from movements in currency values.
17
<PAGE> 19
- --------------------------------------------------------------------------------
C) Options - Call and put options give the holder the right to purchase or sell,
respectively, a security or currency at a specified price on a certain date.
Risks arise from possible illiquidity of the options market and from movements
in security or currency values. Options are reflected in the Government Fund's
accompanying Portfolio of Investments at market value.
D) 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.
E) Other - Purchases and sales of U.S government securities and other portfolio
securities, excluding short-term securities, for the year ended December 31,
1995, were as follows:
<TABLE>
<CAPTION>
Short-Term Government
Fund Fund
----------- -----------
<S> <C> <C>
U.S. Government Securities
Purchases $ 8,786,000 $8,848,000
Sales 10,112,000 10,412,000
Other Securities
Purchases 53,800,000 70,294,000
Sales 55,151,000 75,595,000
</TABLE>
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 $1,089,000, of which $56,000
expire in 2000, $93,000 in 2001, and $940,000 thereafter through 2003. The
Government Fund has unused realized capital loss carryforwards for federal
income tax purposes of $583,000, all of which expire in 2002. Capital loss
carryforwards utilized in 1995 amounted to $425,000. Each fund intends to retain
gains realized in future periods that may be offset by available capital loss
carryforwards.
In order for each fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1995. The results
of operations and net assets were not affected by the reclassifications.
<TABLE>
<CAPTION>
Short-Term Government
Fund Fund
----------- ----------
<S> <C> <C>
Undistributed Net
Investment Income $(1,836,000) $(142,000)
Undistributed Net
Realized Gain 1,834,000 516,000
Paid-in-Capital 2,000 (374,000)
</TABLE>
At December 31, 1995, the aggregate cost of investments for the Short-Term
and Government funds for federal income tax and financial reporting purposes was
$40,473,000 and $27,426,000, respectively. Net unrealized gain (loss) on
investments was as follows:
<TABLE>
<CAPTION>
Short-Term Government
Fund Fund
----------- -----------
<S> <C> <C>
Appreciated
Investments $ 842,000 $1,323,000
Depreciated
Investments (98,000) (75,000)
----------- -----------
Net Unrealized Gain
(Loss) $ 744,000 $1,248,000
============ ==========
</TABLE>
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 $10,000 and $7,000
was payable at December 31, 1995 by the Short-Term Fund and Government Fund,
respectively. The fee is computed daily and paid monthly, and
18
<PAGE> 20
- --------------------------------------------------------------------------------
consists of an Individual Fund Fee equal to 0.25% of average daily net assets
for the Short-Term Fund and 0.35% of average daily 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. At December 31, 1995, and for the year then
ended, the effective annual Group Fee rate was 0.34%. 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, 1995 for the Short-Term Fund
and through December 31, 1996 for the Government Fund that would cause each
fund's ratio of expenses to average net assets to exceed 1.00% and 1.20%,
respectively. Thereafter through December 31, 1997 for the Short-Term Fund and
December 31, 1998 for the Government Fund, each fund is required to reimburse
the Manager for these expenses, provided that average net assets have grown or
expenses have declined sufficiently to allow reimbursement without causing each
fund's ratio of expenses to average net assets to exceed 1.00% and 1.20%,
respectively. Pursuant to these agreements, $134,000 and $153,000 of management
fees were not accrued by the Short-Term and Government funds for the year ended
December 31, 1995. Pursuant to the above agreement, $125,000 of unaccrued 1994
Short-Term Fund fees remain subject to reimbursement through December 31, 1997.
Additionally, $295,000 of unaccrued 1992-1993 Short-Term Fund fees and expenses
were permanently waived at December 31, 1995. Pursuant to a previous agreement,
$242,000 of unaccrued 1993-1994 Government Fund fees remain subject to
reimbursement through December 31, 1996.
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.,
is each fund's transfer and dividend disbursing agent and provides shareholder
and administrative services to the funds. T. Rowe Price Retirement Plan
Services, Inc., provides subaccounting and recordkeeping services for certain
retirement accounts invested in each fund. The Short-Term and Government funds
incurred expenses pursuant to these related party agreements totaling
approximately $184,000 and $165,000, respectively, for the year ended December
31, 1995, of which $17,000 and $16,000, respectively, were payable at period-
end.
19
<PAGE> 21
- --------------------------------------------------------------------------------
Financial Highlights
T. Rowe Price Short-Term Global Income Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
------------------------------------------------------
Year Ended December 31, June 30, 1992++
------------------------------- to
1995 1994 1993 December 31, 1992
------------------------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $4.38 $4.82 $4.78 $5.00
----- ----- ----- -----------
Investment activities
Net investment income........................... 0.27* 0.30* 0.32* 0.20*
Net realized and unrealized gain (loss)......... 0.08 (0.44) 0.04 (0.21)
----- ----- ----- -----------
Total from investment activities................ 0.35 (0.14) 0.36 (0.01)
----- ----- ----- -----------
Distributions
Net investment income........................... (0.10) (0.06) (0.32) (0.20)
Net realized gain............................... -- -- -- (0.01)
Tax return of capital........................... (0.17) (0.24) -- --
----- ----- ----- -----------
Total distributions............................. (0.27) (0.30) (0.32) (0.21)
----- ----- ----- -----------
NET ASSET VALUE, END OF PERIOD.................... $4.46 $4.38 $4.82 $4.78
===== ===== ===== ===========
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return...................................... 8.34%* (2.92)%* 7.87%* (0.22)%*
Ratio of expenses to average net assets........... 1.00%* 1.00%* 1.00%* 1.00%+*
Ratio of net investment income to average net
assets.......................................... 6.36%* 6.59%* 6.74%* 7.92%+*
Portfolio turnover rate........................... 167.4% 120.2% 92.9% 334.1%+
Net assets, end of period (in thousands).......... $40,061 $56,374 $97,118 $66,297
- ----------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* Excludes expenses in excess of a 1.00% voluntary expense limitation in effect
through December 31, 1995.
++ Commencement of operations.
20
<PAGE> 22
- --------------------------------------------------------------------------------
Financial Highlights
T. Rowe Price Global Government Bond Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
-----------------------------------------------------------------
From
Year Ended December 31, December 28, 1990++
------------------------------------------- to
1995 1994 1993 1992 December 31,1991
------------------------------------------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 9.22 $10.08 $ 9.85 $10.30 $10.00
------ ------ ------ ------ ------------
Investment activities
Net investment income................. 0.59* 0.54* 0.56* 0.76* 0.77*
Net realized and unrealized gain
(loss).............................. 1.04 (0.84) 0.51 (0.44) 0.30
------ ------ ------ ------ ------------
Total from investment activities...... 1.63 (0.30) 1.07 0.32 1.07
------ ------ ------ ------ ------------
Distributions
Net investment income................. (0.59) (0.51) (0.56) (0.76) (0.77)
Net realized gain..................... -- (0.02) (0.28) (0.01) --
Tax return of capital................. -- (0.03) -- -- --
------ ------ ------ ------ ------------
Total distributions................... (0.59) (0.56) (0.84) (0.77) (0.77)
------ ------ ------ ------ ------------
NET ASSET VALUE, END OF PERIOD.......... $10.26 $ 9.22 $10.08 $ 9.85 $10.30
====== ====== ====== ====== ============
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total return............................ 18.13%* (3.06)%* 11.15%* 3.26%* 11.31%*
Ratio of expenses to average net
assets................................ 1.20%* 1.20%* 1.20%* 1.20%* 1.20%*
Ratio of net investment income to
average net assets.................... 6.08%* 5.57%* 5.57%* 7.51%* 8.07%*
Portfolio turnover rate................. 290.7% 254.1% 134.0% 236.6% 93.6%
Net assets, end of period (in
thousands)............................ $28,207 $36,516 $48,758 $53,546 $39,775
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Excludes expenses in excess of a 1.20% voluntary expense limitation in effect
through December 31, 1996.
++ Commencement of operations.
21
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Report of Independent Accountants
To the Board of Directors of T. Rowe Price
International Funds, Inc. and the
Shareholders of T. Rowe Price Short-Term Global Income Fund
and T. Rowe Price Global Government Bond Fund
We have audited the accompanying statement of assets and liabilities of T. Rowe
Price Short-Term Global Income Fund and T. Rowe Price Global Government Bond
Fund, including the portfolio of investments, (two of the portfolios comprising
the T. Rowe Price International Funds, Inc.) as of December 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights of the Short-Term Global Income Fund for each of the
three years in the period then ended and for the period June 30, 1992
(commencement of operations) to December 31, 1992 and the Global Government Bond
Fund for each of the four years in the period then ended and for the period
December 28, 1990 (commencement of operations) to December 31, 1991. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights, referred
to above, present fairly, in all material respects, the financial position of T.
Rowe Price Short-Term Global Income Fund and T. Rowe Price Global Government
Bond Fund as of December 31, 1995, the results of their operations, the changes
in their net assets and financial highlights for each of the respective periods
stated in the first paragraph in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
January 18, 1996
22
<PAGE> 24
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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 a.m. to 10
p.m. Monday - Friday, 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. While there,
you can drop off applications or obtain prospectuses and other literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access(R) (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(R) 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 (except the High Yield Fund and Emerging Markets Bond Fund).
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
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INVESTMENT INFORMATION
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
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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--A quarterly newsletter with relevant
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economic perspective.
Performance Update--A quarterly report reviewing recent market
developments and providing comprehensive performance information for every T.
Rowe Price fund.
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.
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service representative for more information.
23
