Annual Report
Foreign
Bond
Funds
December 31, 1997
T. Rowe Price
Report Highlights
Foreign Bond Funds
o Asian turbulence was the major event of 1997, causing a
flight to the safety of major-market government bonds.
However, a strong dollar dampened returns for U.S.
investors.
o Despite the turmoil in Asia, emerging market bonds
outperformed their developed country counterparts over the
year.
o The 12-month return for Global Government Bond Fund was
1.61%, for International Bond Fund -3.17%, and for Emerging
Markets Bond Fund 16.83%-all ahead of their respective
benchmarks.
o Limited exposure to Asia and positive country selection
aided relative performances.
o We believe major market bond prices will continue to rise
in 1998, the dollar's strength will abate, and necessary
economic reforms in Asia will be successfully implemented
over time.
Fellow Shareholders
The major event of 1997 was the turbulence in Asian markets,
where currency and debt crises profoundly affected global fixed
income markets. Despite the strong economy and tight labor
conditions in the U.S., the Federal Reserve's rate hike in March
turned out to be an isolated incident, as concerns about
deflationary fallout from Asia replaced fears of inflation.
MARKET ENVIRONMENT
Prices of major government bonds, which had begun the year on a
weak note, rallied sharply and drove yields lower through
year-end, as investors sought the safety of government issues.
Emerging market debt suffered a poor final quarter, but Emerging
Markets Bond Fund's limited Asian exposure led to another strong
annual return.
Developed Markets Performance
In Local In U.S.
6 Months Ended 12/31/97 Currency Dollars
______________________________________________________________
Australia 6.84% -7.08%
France 3.61 1.11
Germany 2.82 -0.36
Italy 8.91 4.81
Japan 5.00 -7.59
Spain 5.40 1.70
United Kingdom 8.33 7.10
United States 7.03 7.03
Source: J.P. Morgan.
The U.S. dollar rose against all major currencies and posted
huge gains against tumbling Asian currencies. The nearly ideal
economic climate in the U.S., combining above-trend growth with
low inflation, proved to be an excellent tonic for the
greenback, resulting in poor U.S. dollar returns for investors
in the International Bond and Global Government Bond Funds.
Progress toward European Monetary Union (EMU) continued with
aspiring participants making strenuous and ultimately successful
efforts to meet budget deficit targets. A substantial move to
lower European inflation was also conducive to falling bond
yields.
As 1997 got under way, the question appeared to be how much the
Federal Reserve would have to tighten monetary policy in the
face of strong economic growth. However, tame inflation,
augmented by the Asian turmoil later in the year, kept a lid on
short-term rates after the March rate hike and propelled
longer-term yields to their lowest level in decades. The
positive backdrop for bonds was aided by significant declines in
commodity prices and the expectation of slower economic growth
in 1998. Events in Asia caused a flight to the safety of U.S.
Treasuries primarily.
While European bond markets were undoubtedly helped by the same
influences, the path toward EMU provided considerable impetus
for higher prices and lower yields. The need to consolidate
fiscal policy to meet EMU entry criteria again helped EMU
aspirants, particularly Italy, Spain, and Portugal.
Consequently, their currencies stabilized against the German
mark, and inflation fell to the extent that Italy ended 1997
with an annual inflation rate of only 1.5%, which gave its
central bank ample opportunity to cut official interest rates.
Although low inflation is positive for currency stability, lower
interest rates and lower growth prospects caused European
currencies to weaken against the dollar in the second half. In
the U.K., a change of government in May ousted the Conservative
Party after 18 years in office. The incoming New Labour Party
quickly established its credentials by making the Bank of
England an independent decision-making body in charge of
monetary policy. The resultant boost to confidence, coupled with
a more pro-EMU stance, made U.K. government bonds the
best-performing developed bond market in U.S. dollar terms over
the past six months.
Emerging Markets Performance
In U.S.
6 Months Ended 12/31/97 Dollars
Emerging Markets Bond Index Plus 2.49%
Brady Indexes (by issuer): *
Argentina 3.90
Brazil 1.05
Mexico 9.13
Poland 3.12
Venezuela 5.80
* Brady bonds are restructured debt obligations of many
emerging market countries that enable these nations to repay
loans while they implement economic reforms. The bonds are
denominated in U.S. dollars and have extended maturities and
lower interest rates than otherwise comparable bonds.
Source: J. P. Morgan.
The bond markets of Japan and Australia performed creditably in
local terms in the second half but poorly in dollar terms due to
the contagion of falling Asian currencies. The Australian dollar
also suffered from a drop in commodity prices, while the yen was
hit by political resistance to financial reform and the
continued absence of significant domestic consumer demand.
Emerging bond markets suffered because of the Asian fallout.
Concerns that Latin America and Eastern Europe would be the next
victims of market volatility led to a widespread sell-off during
the final quarter. These fears ultimately proved unfounded, and
spreads between the yields of non-Asian emerging market bonds
and those of established markets narrowed from their worst.
Although down from its high point for the year, the J.P. Morgan
Emerging Markets Bond Index Plus still outshone the developed
market indexes for the year.
Global Government Bond Fund
Performance Comparison
Periods Ended 12/31/97 6 Months 12 Months
Global Government
Bond Fund 1.73% 1.61%
J.P. Morgan Global Government
Bond Index (unhedged) 2.52 1.40
Your fund experienced a difficult year as declining foreign
currencies versus the dollar undermined positive bond returns.
The U.S. currency was strong against European currencies in the
first half and also against the yen in the second half. Despite
your fund's overweighting in U.S. dollar-denominated bonds
versus the J.P. Morgan benchmark, which helped offset the
negative impact of nondollar exposure, absolute performance was
disappointing for both the half and full year. Second-half
performance improved but lagged the benchmark, although returns
for the year surpassed the index.
Geographic Diversification
Global Government Bond Fund
United States 42%
Germany 11%
United Kingdom 10%
Italy 5%
Australia 5%
France 5%
Spain 3%
Other and Reserves 19%
Based on net assets as of 12/31/97. Percentages reflect the
currency denomination of the fund's securities. Excludes the
effect of forward currency contracts.
Exposure to emerging markets in the second half was the major
detractor from relative performance. While this allocation had
helped us in the first six months, the magnitude of the Asian
impact on emerging market debt dented overall results even
though we had less than 1% exposure to emerging Asian credits.
Fund allocations to the government securities of Italy, Spain,
and especially the U.K. helped performance. As a result of
increased tension in Asia in the fourth quarter, we increased
duration (a measure of interest rate sensitivity) in U.S. and
German government bonds. The extended duration also reflected
our anticipation of benign global inflation and increased demand
for high-quality, liquid instruments. A substantial
underweighting in the yen contributed positively to results
relative to the benchmark in the second half.
The chart on page 3 shows the geographic diversification of the
fund. For a more detailed breakdown, including the "Other and
Reserves" category in all the funds, see the portfolio listings
following this letter.
International Bond Fund
Performance Comparison
Periods Ended 12/31/97 6 Months 12 Months
_______________________________________________________________
International Bond Fund -0.76% -3.17%
J.P. Morgan Non-U.S. Dollar
Government Bond Index -0.39 -3.78
The International Bond Fund is run similarly to the Global
Government Bond Fund except that it invests in corporate bonds
and does not invest in U.S. securities. (The U.S. bond position
in the accompanying chart reflects the fund's exposure to
emerging market countries whose bonds are denominated in U.S.
dollars.)
Geographic Diversification
International Bond Fund
Germany 19%
United Kingdom 15%
France 10%
Italy 8%
Japan 8%
United States 8%
Spain 5%
Other and Reserves 27%
Based on net assets as of 12/31/97. Percentages reflect the
currency denomination of the fund's securities. Excludes the
effect of forward currency contracts.
Since the allocation to dollar-denominated securities in this
fund is smaller than in the Global Government Bond Fund,
absolute performance was weaker. Otherwise, results slightly
lagged the benchmark in the second half and surpassed it over
the year for the same reasons given above.
Your fund's heaviest exposure was to the major markets of
Europe, especially Germany, the U.K., France, Italy, and Spain,
which benefited overall performance. As in the Global Government
Bond Fund, we increased the portfolio's duration, which also
aided results when interest rates declined due to the flight to
quality in the fourth quarter. Our lower allocation to the yen
benefited results relative to the benchmark, although absolute
performance suffered primarily because of weakening foreign
currencies versus the powerful U.S. dollar.
Emerging Markets Bond Fund
Performance Comparison
Periods Ended 12/31/97 6 Months 12 Months
_______________________________________________________________
Emerging Markets Bond Fund 2.56% 16.83%
J.P. Morgan Emerging Markets
Bond Index Plus 2.49 13.02
Although emerging market bonds were buffeted by the financial
storms in Asia, resulting in a negative final quarter, overall
performance was again impressive compared with other
international bonds. Your fund outpaced the J.P. Morgan Emerging
Markets Bond Index Plus by a slim margin in the second half and
by a comfortable margin for the year as a whole. Asian exposure
was minimal through year-end. Major contributors to the good
performance came from an overweighting in Bulgarian bonds, which
fell in the final months but rose 55% for the year. Our positive
view of Bulgaria was endorsed by Moody's, which upgraded its
credit rating from low B to mid B.
Geographic Diversification
Emerging Markets Bond Fund
Russia 16%
Brazil 15%
Bulgaria 10%
Venezuela 9%
Mexico 7%
Argentina 6%
Ecuador 5%
Other and Reserves 32%
Based on net assets as of 12/31/97. Percentages reflect the
issuing country of the fund's securities. Excludes the effect of
forward currency contracts.
Despite finally completing its debt exchange, Russia did poorly
at year-end amid fears that Asia's financial problems would
spread westerly. Aside from this short-term volatility, we
remain positive about the country's long-term prospects. In
Latin America, Mexico was the best performer among the larger
countries. Your fund's diversified approach paid off when
several holdings enjoyed credit upgrades, including Ivory Coast
issues, which continued to outperform solidly.
We extended your fund's duration during the second half to
reflect a more positive view on global interest rates. Looking
forward, Asia will be an important factor in 1998, and the
attractive valuations of various bonds in the region have put
them in range on our radar screen. We are of the view that the
IMF-led rescue packages will ultimately succeed in providing a
floor to this situation. However, this will not happen
overnight, and we will continue to monitor conditions in the
short term, concentrating on higher quality and more liquid
credits.
OUTLOOK
Investors in North America, the U.K., and to a lesser extent in
Europe have grown accustomed to a pattern of strong growth and
subdued inflation. One consequence of this "new paradigm" is
that the Federal Reserve, while maintaining until recently a
bias toward tightening, has not had to raise the fed funds rate
since last March. Investors now question whether a further
tightening is necessary, and there is some speculation that the
next Fed move could actually be to lower rates. Most forecasters
agree that U.S. growth is likely to be slower in 1998 as exports
to Asia decline, lower corporate profits reduce business
investment, and consumer spending slackens. Over the near term,
we expect further gains for the government bonds of developed
nations.
Over the near term, we expect further gains for the government
Bonds of developed nations.
The countries forming the EMU at the start of 1999 will be
announced in May, and a uniform short-term interest rate
structure for EMU participants will be set. As most of the
convergence in long-term rates among European nations has
already taken place, the level at which short-term rates
converge is critical. We believe that, with subdued inflation
prevalent throughout Continental Europe, short-term rates will
likely converge at a low level, close to that of Germany.
Contraction in Asian demand, combined with a buoyant domestic
consumer sector, will put pressure on the U.S. trade balance and
limit the dollar's potential for further gains, particularly
against European currencies. The British pound has benefited
from relatively high interest rates but will probably lose
ground when EMU inception draws nearer. In our view, the new
European euro will join the dollar as a reserve currency soon
after its introduction in 1999. These factors should be
favorable for U.S. investors in foreign bonds.
The fortunes of the Japanese yen will also be driven by events
in Asia. The scale of Japanese currency depreciation to date
suggests that Japanese external balances will show significant
improvement. However, longer-term prospects depend on the pace
of economic deregulation and the political will to embrace it.
We are optimistic that this can be achieved during 1998, which
would benefit yen-denominated bonds.
Within emerging debt markets, selective Asian credits will be
worthy of inclusion in the portfolios at some stage. However,
given the slow pace of economic reform, we will proceed with
caution. Your funds will continue to overweight credits where
upgrades are anticipated and take advantage of the most
attractive investment opportunities available.
Respectfully submitted,
Peter B. Askew
Executive Vice President
January 20, 1998
T. Rowe Price Foreign Bond Funds
Portfolio Highlights
Key statistics
6/30/97 12/31/97
Global Government Bond Fund
________________________________________________________________
Price Per Share $ 9.99 $ 9.90
Dividends Per Share
For 6 months 0.27 0.22
For 12 months 0.55 0.49
Dividend Yield *
For 6 months 5.58% 5.24%
For 12 months 5.57 5.48
Capital Gain Distribution
Per Share
Long Term 0.11 -
Weighted Average Maturity
(years) 7.7 10.2
Weighted Average Effective
Duration (years) 4.0 6.0
Weighted Average Quality ** AA AA
International Bond Fund
________________________________________________________________
Price Per Share $ 9.91 $ 9.58
Dividends Per Share
For 6 months 0.27 0.19
For 12 months 0.56 0.46
Dividend Yield *
For 6 months 5.61% 5.22%
For 12 months 5.70 5.49
Capital Gain Distribution Per Share
Long Term 0.09 -
Weighted Average Maturity (years) 7.8 8.7
Weighted Average Effective
Duration (years) 4.4 5.5
Weighted Average Quality ** AA AA
(continued on next page)
T. Rowe Price Foreign Bond Funds
Portfolio Highlights
Key statistics
6/30/97 12/31/97
Emerging Markets Bond Fund
_______________________________________________________________
Price Per Share $ 14.21 $ 13.71
Dividends Per Share
For 6 months 0.53 0.62
For 12 months 1.03 1.15
Dividend Yield *
For 6 months 8.10% 8.69%
For 12 months 8.27 8.59
Capital Gain Distributions Per Share
Short Term - 0.10
Long Term - 0.14
Weighted Average Maturity
(years) 17.3 15.2
Weighted Average Effective
Duration (years) 5.8 6.1
Weighted Average Quality ** BB+ BB
* Dividends earned and reinvested for the periods indicated
are annualized and divided by the average daily net asset
values per share for the same period.
** Based on T. Rowe Price research.
T. Rowe Price Foreign Bond Funds
Performance Comparison
These charts show the value of a hypothetical $10,000 investment
in each fund over the past 10 fiscal year periods or since
inception (for funds lacking 10-year records). The result is
compared with a broad-based average or index. The index return
does not reflect expenses, which have been deducted from the
fund's return.
Global Government Bond Fund
As of 12/31/97
J.P. Morgan
Global Government Global Government
Bond Index (unhedged) Bond Fund
12/31/90 $ 10,000 $ 10,000
12/91 11,545 11,131
12/92 12,071 11,493
12/93 13,551 12,775
12/94 13,724 12,384
12/95 16,375 14,630
12/96 17,096 15,595
12/97 17,335 15,846
International Bond Fund
As of 12/31/97
J.P. Morgan
Non-U.S. Dollar International
Government Bond Index Bond Fund
12/87 $ 10,000 $ 10,000
12/88 10,178 9,873
12/89 9,926 9,559
12/90 11,476 11,092
12/91 13,301 13,061
12/92 13,512 13,374
12/93 15,475 16,049
12/94 16,238 15,753
12/95 19,667 18,952
12/96 20,704 20,303
12/97 19,922 19,659
T. Rowe Price Foreign Bond Funds
Performance Comparison
Emerging Markets Bond Fund
As of 12/31/97
J.P. Morgan
Emerging Markets Emerging Markets
Bond Index Plus Bond Fund
12/30/94 $ 10,000 $ 10,000
12/95 12,677 12,581
12/96 17,660 17,207
12/97 19,959 20,103
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.
Periods Ended 12/31/97
SinceInception
1 Year 5 Years 10 YearsInception Date
______________________________________________________________
Global Government
Bond Fund 1.61% 6.63% - 6.80%12/31/90
International
Bond Fund -3.17 8.01 6.99% 8.75 9/10/86
Emerging Markets
Bond Fund 16.83 - - 26.18 12/30/94
Investment return represents past performance and will vary.
Shares of the bond funds may be worth more or less at redemption
than at original purchase.
T. Rowe Price Global Government Bond Fund
For a share outstanding throughout each period
Financial Highlights
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/9412/31/93
NET ASSET VALUE
Beginning of
period $ 10.35 $ 10.26 $ 9.22 $ 10.08 $ 9.85
Investment activities
Net investment
income 0.54* 0.56* 0.59* 0.54* 0.56*
Net realized and
unrealized
gain (loss) (0.39)0.09 1.04 (0.84) 0.51
Total from
investment
activities 0.15 0.65 1.63 (0.30)1.07
Distributions
Net investment
income (0.49) (0.56) (0.59) (0.51) (0.56)
Net realized
gain (0.11) - - (0.02) (0.28)
Tax return of
capital - - - (0.03) -
Total distri-
butions (0.60) (0.56) (0.59) (0.56) (0.84)
NET ASSET VALUE
End of period $ 9.90 $ 10.35 $ 10.26 $ 9.22 $ 10.08
Ratios/Supplemental Data
Total return 1.61%* 6.59%* 18.13%* (3.06)%* 11.15%*
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 5.38%* 5.48%* 6.08%* 5.57%* 5.57%*
Portfolio turnover
rate 153.2% 262.6%! 290.7% 254.1% 134.0%
Net assets, end
of period
(in thousands) $ 44,069$ 55,869 $ 28,207 $ 36,516$
48,758
* Excludes expenses in excess of a 1.20% voluntary expense
limitation in effect through 12/31/97.
! Excludes the effect of the acquisition of the Short-Term
Fund's assets.
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price International Bond Fund
Financial Highlights
For a share outstanding throughout each period
Year
Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
NET ASSET VALUE
Beginning of
period $ 10.46 $ 10.46 $ 9.34 $ 10.34 $ 9.61
Investment activities
Net investment
income 0.54 0.60 0.62 0.60 0.69
Net realized and
unrealized gain
(loss) (0.87) 0.11 1.24 (0.79) 1.18
Total from
investment
activities (0.33) 0.71 1.86 (0.19) 1.87
Distributions
Net investment
income (0.46) (0.60) (0.62) (0.60) (0.69)
Net realized
gain (0.09) (0.11) (0.12) (0.21) (0.45)
Total distri-
butions (0.55) (0.71) (0.74) (0.81) (1.14)
NET ASSET VALUE
End of period $ 9.58 $ 10.46 $ 10.46 $ 9.34 $ 10.34
Ratios/Supplemental Data
Total return (3.17)% 7.13% 20.30% (1.84)% 20.00%
Ratio of
expenses to
average net
assets 0.86% 0.87% 0.90% 0.98% 0.99%
Ratio of net
investment
income to average
net assets 5.38% 5.86% 6.10% 6.07% 6.58%
Portfolio turnover
rate 155.9% 234.0% 237.1% 345.2% 395.7%
Net assets, end
of period (in
millions) $ 826 $ 969 $ 1,016 $ 738 $ 745
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Emerging Markets Bond Fund
For a share outstanding throughout each period
Financial Highlights
Year 12/30/94
Ended to
12/31/97 12/31/9612/31/95
NET ASSET VALUE
Beginning of period $ 12.97 $ 10.67 $ 10.00
Investment activities
Net investment income 1.16* 1.00* 1.03*
Net realized and
unrealized gain (loss) 0.97! 2.72 1.38
Total from
investment activities 2.13 3.72 2.41
Distributions
Net investment income (1.15) (1.01) (1.02)
Net realized gain (0.24) (0.41) (0.72)
Total distributions (1.39) (1.42) (1.74)
NET ASSET VALUE
End of period $ 13.71 $ 12.97 $ 10.67
Ratios/Supplemental Data
Total return 16.83%* 36.77%* 25.81%*
Ratio of expenses to
average net assets 1.25%* 1.25%* 1.25%*
Ratio of net investment
income to average
net assets 8.61%* 8.37%* 10.20%*
Portfolio turnover rate 87.6% 168.7% 273.5%
Net assets, end of period
(in thousands) $113,419 $ 39,862 $ 9,989
* Excludes expenses in excess of a 1.25% voluntary expense
limitation in effect through 12/31/98.
! The amount presented is calculated pursuant to a methodology
prescribed by the Securities and Exchange Commission for a
share outstanding throughout the period. This amount is
inconsistent with the fund's aggregate gains and losses
because of the timing of sales and redemptions of fund shares
in relation to fluctuating market values for the investment
portfolio.
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Global Government Bond Fund
December 31, 1997
Statement of Net Assets!
Par Value
In thousands
AUSTRALIA 4.8%
Government Bonds 4.8%
Commonwealth of Australia
12.00%, 11/15/01 AUD 250 $ 198
10.00%, 10/15/07 520 437
7.50%, 9/15/09 550 400
Federal National Mortgage
Association
6.50%, 7/10/02 520 346
6.375%, 8/15/07 1,100 720
Total Australia (Cost $2,286) 2,101
CANADA 1.9%
Government Bonds 1.9%
Government of Canada,
8.00%, 6/1/23 CAD 570 505
Province of Alberta,
8.00%, 3/1/00 450 332
Total Canada (Cost $839) 837
DENMARK 1.5%
Corporate Bonds 1.5%
Nykredit
7.00%, 10/1/16 DKK 51 8
6.00%, 10/1/26 4,490 636
7.00%, 10/1/29 12 2
Total Denmark (Cost $646) 646
EUROPEAN CURRENCY UNIT 2.0%
Government Bonds 2.0%
European Bank for Reconstruction
and Development
6.00%, 5/6/99 XEU 430 480
United Kingdom Treasury,
4.00%, 1/28/00 380 413
Total European Currency Unit
(Cost $918) 893
FRANCE 4.6%
Government Bonds 4.6%
Bons du Tresor Annuel,
4.50%, 7/12/02 FRF 2,000 329
Obligation Assimilable du Tresor
7.75%, 4/12/00 FRF 2,000 $ 356
5.50%, 4/25/04 1,000 171
5.50%, 10/25/07 6,000 1,009
6.00%, 10/25/25 1,000 169
Total France (Cost $2,059) 2,034
GERMANY 10.9%
Government Bonds 10.3%
Bundesrepublic
7.25%, 10/21/02 DEM 700 429
7.50%, 11/11/04 1,900 1,198
6.875%, 5/12/05 1,800 1,102
6.50%, 7/4/27 800 480
Bundesrepublic, Principal Only
Zero Coupon, 7/4/07 1,600 539
Zero Coupon, 7/4/27 1,500 138
Federal National Mortgage
Association, 5.00%, 2/16/01 1,160 651
4,537
Corporate Bonds 0.6%
Minnesota Mining and
Manufacturing, 5.00%, 10/15/01 500 280
280
Total Germany (Cost $5,031) 4,817
HUNGARY 0.3%
Government Bonds 0.3%
Government of Hungary,
24.00%, 3/21/98 HUF 25,000 123
Total Hungary (Cost $157) 123
ITALY 5.3%
Government Bonds 5.3%
Buoni del Tesoro Poliennali
8.25%, 7/1/01 ITL 2,450,000 1,525
9.50%, 1/1/05 550,000 382
8.75%, 7/1/06 300,000 206
7.25%, 11/1/26 350,000 230
Total Italy (Cost $2,466) 2,343
JAPAN 1.5%
Government Bonds 1.5%
Asian Development Bank,
3.125%, 6/29/05 JPY 55,000 $ 460
Republic of Austria,
5.00%, 1/22/01 25,000 215
Total Japan (Cost $763) 675
NETHERLANDS 1.0%
Government Bonds 1.0%
Government of Netherlands,
7.50%, 11/15/99 NLG 810 422
Total Netherlands (Cost $446) 422
NEW ZEALAND 2.0%
Government Bonds 2.0%
Government of New Zealand,
10.00%, 3/15/02 NZD 750 477
International Bank for
Reconstruction and Development
7.00%, 9/18/00 720 410
Total New Zealand (Cost $988) 887
PHILIPPINES 0.2%
Government Bonds 0.2%
Republic of Philippines,
12.50%, 4/25/01 PHP 4,000 83
Total Philippines (Cost $148) 83
POLAND 0.6%
Government Bonds 0.6%
Republic of Poland Treasury Bill
Zero Coupon, 2/25/98 PLN 1,000 275
Total Poland (Cost $283) 275
PORTUGAL 2.7%
Government Bonds 2.7%
Republic of Portugal, OT
5.375%, 3/23/00 PTE 80,000 440
5.75%, 3/23/02 130,000 725
Total Portugal (Cost $1,195) 1,165
RUSSIA 1.3%
Hybrid Instruments 1.3%
Lehman Brothers Russia Ministry
of Finance
GKO Participation Note, Zero
Coupon, 1/15/98:
Principal repayment value
linked to the performance
of the Russian ruble RUR 1,563,000 $ 259
Lehman Brothers Russia Ministry
of Finance
GKO Participation Note, Zero
Coupon, 4/15/98: Principal
repayment value linked to the
performance of the Russian
ruble 795,000 123
Lehman Brothers Russia Ministry
of Finance
GKO Participation Note, Zero
Coupon, 7/1/98: Principal
repayment value linked to the
performance of the Russian
ruble 1,353,513 196
Total Russia (Cost $611) 578
SOUTH AFRICA 1.9%
Government Bonds 1.9%
Republic of South Africa,
12.00%, 2/28/05 ZAR 4,500 854
Total South Africa (Cost $876) 854
SPAIN 3.3%
Government Bonds 3.3%
Bonos del Estado
7.90%, 2/28/02 ESP 85,100 618
8.00%, 5/30/04 55,000 413
10.00%, 2/28/05 50,000 416
Total Spain (Cost $1,463) 1,447
SWEDEN 0.6%
Government Bonds 0.6%
Kingdom of Sweden, 5.50%,
4/12/02 SEK 2,000 251
Total Sweden (Cost $261) 251
UNITED KINGDOM 10.3%
Government Bonds 3.2%
Federal National Mortgage
Association, 6.875%,
6/7/02 GBP 250 411
United Kingdom Treasury
9.00%, 8/6/12 GBP 108 $ 222
8.75%, 8/25/17 380 795
1,428
Corporate Bonds 7.1%
Alliance & Leicester Building
Society, 8.75%, 12/7/06 100 180
Annington Finance, 7.75%,
10/2/11 360 641
Bayerische Landesbank Girozentrale,
8.50%, 2/26/03 175 305
Guaranteed Export Finance,
Zero Coupon, 9/29/00 420 573
Halifax Building Society
8.75%, 7/10/06 150 271
9.375%, 5/15/21 180 365
National Power, 8.375%, 8/2/06 300 528
Swiss Bank Corporation Jersey,
8.75%, 12/18/25 130 253
3,116
Currency Options Purchased 0.0%
German deutschemark Call/ British
sterling Put,
1/5/98 @ 2.8759* 600 0
0
Total United Kingdom (Cost $4,369) 4,544
UNITED STATES 41.5%
Government Bonds 37.9%
Caisse D'Amort Dette Societey,
6.50%, 3/11/02 USD 500 508
Central Bank of Nicaragua,
CENI Participation
Zero Coupon, 5/1/98 100 97
City of Moscow, 9.50%, 5/31/00 50 48
Federative Republic of Brazil
10.125%, 5/15/27 150 141
(Class C), 8.00%, 4/15/14 342 269
EI, FRN, 6.688%, 4/15/06 25 21
IDU, FRN, 6.813%, 1/1/01 137 131
NMB, FRN, 6.75%, 4/15/09 105 85
Ivory Coast, FLIRB, When/If Issued 400 137
Japan Highway Public,
6.75%, 9/17/07 400 412
National Republic of Bulgaria
FLIRB, STEP, 2.25%, 7/28/12 840 510
IAB, FRN, 6.688%, 7/28/11 100 73
Republic of Argentina
11.375%, 1/30/17 USD 175 $ 192
FRB, 6.688%, 3/31/05 120 107
Republic of Kazakhstan,
9.25%, 12/20/99 70 69
Republic of Poland, PDI, STEP,
4.00%, 10/27/14 100 87
Republic of Venezuela
DCB, FRN, 6.813%, 12/18/07 238 214
Par (Series W-A), 6.75%,
3/31/20 (With attached oil
warrants) 250 217
Russia Ministry of Finance,
10.00%, 6/26/07 80 74
U.S. Treasury Bonds
7.125%, 2/15/23 2,790 3,185
6.625%, 2/15/27 150 163
6.375%, 8/15/27 1,150 1,213
U.S. Treasury Notes
5.875%, 8/15/98 800 801
6.75%, 6/30/99 1,295 1,315
6.00%, 8/15/00 840 846
7.50%, 5/15/02 1,100 1,174
7.25%, 8/15/04 1,285 1,389
6.25%, 2/15/07 2,000 2,064
United Mexican States
9.875%, 1/15/07 70 73
Par (Series W-A), 6.25%,
12/31/19 (With attached
value recovery rights) 500 417
Vnesheconombank
IAN, FRN, 6.719%, 12/15/15 275 194
Principal Loans, FRN,
6.719%, 12/15/20 750 464
16,690
Corporate Bonds 2.2%
Banco Nacional de Comercio
Exterior, 7.25%, 2/2/04 80 74
Poland Communications (144a),
9.875%, 11/1/03 180 177
Tele-Communications, 7.25%, 8/1/05 500 515
Tricom, 11.375%, 9/1/04 125 122
TV Azteca, 10.50%, 2/15/07 100 105
993
Money Market Funds 1.4%
Reserve Investment Fund, 5.84%# 621 621
621
Total United States (Cost $17,754) 18,304
Total Investments in Securities
98.2% of Net Assets (Cost
$43,559) $43,279
Forward Currency Exchange Contracts
In thousands
Unrealized
Gain
Counterparty Settlement Receive Deliver
(Loss)
_____________ __________________ ________________
Chase Manhattan 1/8/98 USD 800 DEM 1,422 $ 9
Citibank 1/8/98 DEM 3,023 USD 1,708 (27)
Citibank 1/9/98 USD 247 ZAR 1,205 2
Morgan Stanley 1/9/98 USD 407 ZAR 2,000 (3)
Chase Manhattan 1/20/98 GBP 231 USD 388 (8)
Chase Manhattan 1/20/98 USD 179 GBP 110 (2)
Morgan Guaranty 1/20/98 USD 1,151 GBP 714 (21)
Chase Manhattan 1/23/98 USD 52 DEM 92 1
Morgan Guaranty 1/23/98 JPY50,000 USD 394 (10)
Chase Manhattan 1/26/98 JPY65,000 USD 506 (6)
Chase Manhattan 1/26/98 USD 996 NZD 1,607 65
Morgan Stanley 1/26/98 JPY52,276 USD 400 2
Chase Manhattan 1/27/98 JPY87,622 NZD 1,125 22
Chase Manhattan 1/27/98 NZD 1,260 JPY96,826 (14)
Chase Manhattan 1/27/98 NZD 1,111 USD 693 (49)
Chase Manhattan 1/27/98 USD 1,736 AUD 2,533 85
Citibank 1/27/98 USD 175 AUD 258 7
Morgan Guaranty 1/27/98 USD 300 AUD 441 12
Morgan Stanley 1/27/98 JPY98,038 NZD 1,261 23
Chase Manhattan 1/28/98 USD 381 DKK 2,521 13
Chase Manhattan 1/28/98 USD 260 SEK 1,974 11
Net unrealized gain (loss) on open forward
currency exchange contracts 112
Other Assets Less Liabilities 678
NET ASSETS $44,069
________
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions $ (678)
Net unrealized gain (loss) (188)
Paid-in-capital applicable to
4,452,613 shares of $0.01 par
value capital stock outstanding;
2,000,000,000 shares of the
Corporation authorized 44,935
NET ASSETS $44,069
________
NET ASSET VALUE PER SHARE $ 9.90
________
! Listed by currency denomination
* Non-income producing
# Seven-day yield
144a Security was purchased pursuant to Rule 144a under the
Securities Act of 1933 and may not be resold subject to
that rule except to qualified institutional buyers -
total of such securities at year-end amounts to 0.4% of
net assets.
AUD Australian dollar
CAD Canadian dollar
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
HUF Hungarian florint
ITL Italian lira
JPY Japanese yen
NLG Dutch guilder
NZD New Zealand dollar
PHP Philippine peso
PLN Polish zloty
PTE Portuguese escudo
RUR Russian ruble
SEK Swedish krona
USD U.S. dollar
XEU European currency unit
ZAR South African rand
CENI Negotiable certificates
DCB Debt conversion bond
EI Eligible interest bond
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
GKO Russian treasury obligation
IAB Interest arrears bond
IAN Interest arrears note
IDU Interest due bond
NMB New money bond
OT Portuguese treasury obligation
PDI Past due interest bond
STEP Stepped coupon note for which the interest rate will
adjust on specified future dates
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price International Bond Fund
December 31, 1997
Portfolio of Investments!
Par Value
In thousands
AUSTRALIA 4.0%
Government Bonds 4.0%
Commonwealth of Australia
12.00%, 11/15/01 AUD 8,000 $ 6,354
10.00%, 10/15/07 10,000 8,401
7.50%, 9/15/09 15,000 10,898
Federal National Mortgage
Association, 6.50%,
7/10/02 11,240 7,490
Total Australia (Cost
$35,403) 33,143
CANADA 2.5%
Government Bonds 2.5%
Government of Canada, 8.00%,
6/1/23 CAD 18,300 16,216
Province of Ontario, 8.25%,
12/1/05 5,000 4,047
Total Canada (Cost $18,299)
20,263
CZECH REPUBLIC 0.3%
Government Bonds 0.3%
European Investment Bank,
11.00%, 10/10/01 CZK 82,000 2,175
Total Czech Republic (Cost $3,060) 2,175
DENMARK 1.6%
Corporate Bonds 1.6%
Nykredit
7.00%, 10/1/16 DKK 1,585 235
6.00%, 10/1/26 88,480 12,535
7.00%, 10/1/29 221 32
Total Denmark (Cost $12,829) 12,802
EUROPEAN CURRENCY UNIT 4.0%
Government Bonds 4.0%
European Bank for Reconstruction
and Development, 6.00%,
5/6/99 XEU 7,800 8,717
Obligation Assimilable du Tresor,
9.50%, 4/25/00 8,800 10,668
United Kingdom Treasury,
4.00%, 1/28/00 12,620 13,709
Total European Currency Unit
(Cost $34,112) 33,094
FRANCE 9.5%
Government Bonds 9.5%
Bons du Tresor Annuel
7.75%, 4/12/00 FRF 103,000 $18,363
4.50%, 7/12/02 69,000 11,348
Obligation Assimilable du Tresor
5.50%, 4/25/04 47,400 8,098
6.50%, 10/25/06 40,000 7,223
5.50%, 10/25/07 129,000 21,694
6.00%, 10/25/25 22,000 3,710
Obligation Assimilable du Tresor
Principal Only, Zero Coupon,
10/25/08 87,200 8,102
Total France (Cost $79,759) 78,538
GERMANY 19.0%
Government Bonds 15.0%
Bundesrepublic
7.25%, 10/21/02 DEM 12,550 7,687
7.50%, 11/11/04 36,500 23,008
6.875%, 5/12/05 59,200 36,245
6.50%, 7/4/27 19,300 11,589
Bundesrepublic, Principal Only
Zero Coupon, 7/4/07 51,000 17,172
Zero Coupon, 7/4/27 53,800 4,973
Federal National Mortgage
Association, 5.00%,
2/16/01 22,000 12,340
Inter-American Development Bank,
7.00%, 6/8/05 18,300 11,197
124,211
Corporate Bonds 4.0%
Bank Nederlandse Gemeenten
6.25%, 8/10/00 6,000 3,470
5.25%, 10/1/01 14,300 8,045
KFW International Finance,
6.75%, 6/20/05 28,000 16,880
Minnesota Mining and
Manufacturing, 5.00%,
10/15/01 8,350 4,672
33,067
Total Germany (Cost $165,354) 157,278
HUNGARY 0.3%
Government Bonds 0.3%
Government of Hungary, 24.00%,
3/21/98 HUF 430,000 $ 2,119
Total Hungary (Cost $2,695) 2,119
ITALY 8.1%
Government Bonds 8.1%
Buoni del Tesoro Poliennali
9.50%, 2/1/01 ITL 40,000,000 25,465
8.25%, 7/1/01 15,000,000 9,334
9.00%, 10/1/03 12,130,000 8,076
9.50%, 1/1/05 12,500,000 8,681
8.75%, 7/1/06 15,600,000 10,693
7.25%, 11/1/26 7,000,000 4,608
Total Italy (Cost $68,824) 66,857
JAPAN 8.0%
Government Bonds 8.0%
Asian Development Bank,
3.125%, 6/29/05 JPY 1,215,000 10,160
Export Import Bank,
4.375%, 10/1/03 2,500,000 22,207
International Bank for
Reconstruction
and Development,
4.75%, 12/20/04 2,100,000 19,430
Republic of Austria
5.00%, 1/22/01 500,000 4,301
4.50%, 9/28/05 1,120,000 10,275
Total Japan (Cost $75,108) 66,373
NETHERLANDS 2.0%
Government Bonds 2.0%
Government of Netherlands
7.50%, 11/15/99 NLG 15,330 7,992
9.00%, 1/15/01 15,000 8,301
Total Netherlands (Cost $18,510)
16,293
NEW ZEALAND 2.9%
Government Bonds 2.9%
Government of New Zealand,
10.00%, 3/15/02 NZD 24,940 $15,865
International Bank for
Reconstruction
and Development,
7.00%, 9/18/00 13,500 7,676
Total New Zealand (Cost $26,645)
23,541
PHILIPPINES 0.2%
Government Bonds 0.2%
Republic of Philippines,
12.50%, 4/25/01 PHP 84,000 1,747
Total Philippines (Cost $3,109)
1,747
POLAND 0.6%
Government Bonds 0.6%
Republic of Poland
Treasury Bill, Zero Coupon,
1/7/98 PLN 10,000 2,825
Treasury Bill, Zero Coupon,
1/21/98 5,000 1,399
Treasury Bill, Zero Coupon,
2/25/98 2,000 549
Total Poland (Cost $4,928) 4,773
PORTUGAL 2.6%
Government Bonds 2.6%
Republic of Portugal, OT
5.375%, 3/23/00 PTE 1,570,000 8,645
5.75%, 3/23/02 2,300,000 12,823
Total Portugal (Cost $22,036)
21,468
RUSSIA 1.3%
Hybrid Instruments 1.3%
Lehman Brothers Russia Ministry
of Finance,
GKO Participation Note, Zero
Coupon, 1/15/98: Principal
repayment value linked to the
performance of the Russian
ruble RUR 23,458,000 3,894
Lehman Brothers Russia Ministry
of Finance,
GKO Participation Note, Zero
Coupon, 4/15/98: Principal
repayment value linked to the
performance of the Russian
ruble RUR 19,077,500 $ 2,941
Lehman Brothers Russia Ministry
of Finance,
GKO Participation Note,
Zero Coupon, 7/1/98:
Principal repayment value
linked to the performance
of the Russian ruble 29,777,284 4,313
Total Russia (Cost $11,822)
11,148
SOUTH AFRICA 1.8%
Government Bonds 1.8%
Republic of South Africa,
12.00%, 2/28/05 ZAR 78,000 14,801
Total South Africa (Cost $15,203) 14,801
SPAIN 4.7%
Government Bonds 4.7%
Bonos del Estado
10.90%, 8/30/03 ESP 2,746,000 22,918
8.00%, 5/30/04 1,040,000 7,811
10.00%, 2/28/05 1,000,000 8,314
Total Spain (Cost $40,650) 39,043
SWEDEN 1.1%
Government Bonds 1.1%
Kingdom of Sweden, 5.50%,
4/12/02 SEK 72,000 9,029
Total Sweden (Cost $9,391) 9,029
UNITED KINGDOM 14.9%
Government Bonds 4.7%
Federal National Mortgage
Association, 6.875%, 6/7/02 GBP 6,400
10,517
Republic of Austria,
9.00%, 7/22/04 4,000 7,299
United Kingdom Treasury,
8.75%, 8/25/17 9,950 20,822
38,638
Corporate Bonds 10.2%
Alliance & Leicester Building
Society, 8.75%, 12/7/06 GBP 8,500 $15,274
Annington Finance, 7.75%, 10/2/11 2,500
4,455
Bank of Scotland, Perpetual
Debenture, FRN, 8.375% 2,700 4,684
Guaranteed Export Finance
Zero Coupon, 9/29/00 6,500 8,872
10.625%, 9/15/01 10,000 18,293
Halifax Building Society
8.75%, 7/10/06 4,000 7,227
9.375%, 5/15/21 4,900 9,936
National Power, 8.375%, 8/2/06 5,000
8,798
Swiss Bank Corporation Jersey,
8.75%, 12/18/25 3,700 7,201
84,740
Currency Options Purchased 0.0%
German deutschemark Call/ British
sterling Put,
1/5/98 @ 2.8759* 11,000 0
0
Total United Kingdom (Cost $115,164) 123,378
UNITED STATES 7.9%
Government Bonds 7.3%
Central Bank of the Dominican Republic
Discount, FRN, 6.875%,
8/30/24 USD 2,000 1,610
Central Bank of Nicaragua, CENI
Participation
Zero Coupon, 5/1/98 1,400 1,353
City of Moscow, 9.50%,
5/31/00 650 622
Federative Republic of Brazil
(Class C), 8.00%, 4/15/14 4,276 3,365
EI, FRN, 6.688%, 4/15/06 368 316
IDU, FRN, 6.813%, 1/1/01 4,376 4,174
NMB, FRN, 6.75%, 4/15/09 1,710 1,381
Ivory Coast
Credit Refinancing Agreement,
Nonperforming* 3,000 1,328
FLIRB, When/ If Issued 1,000 343
National Republic of Bulgaria
FLIRB, STEP, 2.25%, 7/28/12 8,450
5,133
IAB, FRN, 6.688%, 7/28/11 5,575 4,091
Republic of Argentina
11.375%, 1/30/17 USD 1,500 $ 1,645
FRB, 6.688%, 3/31/05 3,360 3,008
Republic of Kazakhstan,
9.25%, 12/20/99 1,080 1,061
Repbulic of Poland, PDI, STEP,
4.00%, 10/27/14 1,500 1,299
Republic of Venezuela
DCB, FRN, 6.813%, 12/18/07 8,095
7,260
Par (Series W-A), 6.75%,
3/31/20 (With
attached oil warrants) 1,700 1,475
Russia Ministry of Finance,
10.00%, 6/26/07 1,320 1,224
United Mexican States
9.875%, 1/15/07 850 887
11.375%, 9/15/16 3,550 4,083
Par (Series A), 6.25%, 12/31/19
(With attached value recovery
rights) 750 626
Par (Series W-A), 6.25%, 12/31/19
(With attached value recovery
rights) 2,750 2,296
Vnesheconombank
IAN, FRN, 6.719%, 12/15/15 7,715
5,444
Principal Loans, FRN, 6.719%,
12/15/20 10,700 6,627
60,651
Corporate Bonds 0.6%
Banco Nacional de Comercio Exterior,
7.25%, 2/2/04 800 740
Poland Communications (144a),
9.875%, 11/1/03 3,930 3,867
4,607
Money Market Funds 0.0%
Reserve Investment Fund, 5.84%# 1 1
1
Total United States (Cost $62,876) 65,259
Total Investments in Securities
97.3% of Net Assets (Cost $825,777) $803,122
Forward Currency Exchange Contracts
In thousands
Unrealized
Gain
Counterparty Settlement Receive Deliver
(Loss)
_____________ __________ ________ ________
________
Citibank 1/7/98 USD 3,546 JPY459,753$ 21
Citibank 1/8/98 DEM 42,949 GBP14,500 79
Citibank 1/9/98 USD 3,857 ZAR18,802 27
Morgan Stanley 1/9/98 DEM 11,647ZAR 32,900
(266)
Citibank 1/23/98 JPY 300,000 USD 2,319 (14)
Chase
Manhattan 1/23/98 USD 2,095 DEM 3,714 27
Morgan
Guaranty 1/23/98 JPY1,900,000 USD14,774 (173)
Chase
Manhattan 1/26/98 CAD 11,937 USD 8,442 (81)
Morgan Stanley 1/26/98 USD 5,000 CAD 7,103 25
Chase Manhattan 1/27/98 CAD 12,327AUD 12,881 234
Chase Manhattan 1/27/98 JPY 2,049,364 NZD26,308 517
Chase Manhattan 1/27/98 NZD 10,250JPY 787,672
(119)
Chase Manhattan 1/27/98 NZD 12,326USD 7,691
(551)
Morgan Stanley 1/27/98 JPY 2,998,571 NZD38,567 714
Morgan Stanley 1/27/98 JPY 1,110,712 USD8,500 40
Net unrealized gain (loss) on open forward
currency exchange contracts 480
Other Assets Less Liabilities 22,229
NET ASSETS $825,831
_________
! Listed by currency denomination
* Non-income producing
# Seven-day yield
144a Security was purchased pursuant to Rule 144a under the
Securities Act of 1933 and may not be resold subject to
that rule except to qualified institutional buyers -
total of such securities at year-end amounts to 0.5% of
net assets.
AUD Australian dollar
CAD Canadian dollar
CZK Czech coruna
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
HUF Hungarian florint
ITL Italian lira
JPY Japanese yen
NLG Dutch guilder
NZD New Zealand dollar
PHP Philippine peso
PLN Polish zloty
PTE Portuguese escudo
RUR Russian ruble
SEK Swedish krona
USD U.S. dollar
XEU European currency unit
ZAR South African rand
CENI Negotiable certificates
DCB Debt conversion bond
EI Eligible interest bond
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
GKO Russian treasury obligation
IAB Interest arrears bond
IAN Interest arrears note
IDU Interest due bond
NMB New money bond
OT Portuguese treasury obligation
PDI Past due interest bond
STEP Stepped coupon note for which the interest rate will
adjust on specified future dates
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price International Bond Fund
December 31, 1997
Statement of Assets and Liabilities
In thousands
Assets
Investments in securities, at
value (cost $825,777) $
803,122
Other assets 55,376
Total assets 858,498
Liabilities
Total liabilities 32,667
NET ASSETS $ 825,831
___________
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions $ (19,468)
Net unrealized gain (loss) (22,697)
Paid-in-capital applicable to
86,169,984 shares of
$0.01 par value capital
stock outstanding;
2,000,000,000 shares
of the Corporation
authorized 867,996
NET ASSETS $ 825,831
___________
NET ASSET VALUE PER SHARE $ 9.58
___________
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Emerging Markets Bond Fund
December 31, 1997
Portfolio of Investments!
Par Value
In thousands
ARGENTINA 5.8%
Government Bonds 5.0%
Republic of Argentina, FRB,
6.688%, 3/31/05 USD 816 $ 731
Republic of Argentina, Par,
FRN, 5.50%, 3/31/23 6,800 4,989
5,720
Corporate Bonds 0.8%
CIA International Telecommunications,
10.375%, 8/1/04 ARS 1,000 850
850
Total Argentina (Cost $6,364) 6,570
BRAZIL 15.1%
Government Bonds 14.7%
Federative Republic of Brazil,
10.125%, 5/15/27 USD 2,070 1,943
Federative Republic of Brazil
(Class C), 8.00%, 4/15/14 9,692 7,627
Federative Republic of Brazil,
DCB, FRN, 6.75%, 4/15/12 1,000 761
Federative Republic of Brazil,
Discount, FRN
6.688%, 4/15/24 2,800 2,298
Federative Republic of Brazil, EI,
FRN, 6.688%, 4/15/06 784 675
Federative Republic of Brazil,
IDU, FRN, 6.813%, 1/1/01 2,630 2,508
Federative Republic of Brazil,
Par, FRN, 5.25%, 4/15/24 1,250 906
16,718
Corporate Bonds 0.4%
Brazil MYDFA Trust Certificates,
FRN, 6.688%, 9/15/07 470 406
406
Total Brazil (Cost $17,298) 17,124
BULGARIA 10.4%
Government Bonds 10.4%
National Republic of Bulgaria,
Discount (Series A), FRN
6.688%, 7/28/24 500 386
National Republic of Bulgaria,
FLIRB, STEP
2.25%, 7/28/12 10,860 6,598
National Republic of Bulgaria, IAB,
FRN
6.688%, 7/28/11 6,550 4,806
Total Bulgaria (Cost $10,705) 11,790
DOMINICAN REPUBLIC 3.6%
Government Bonds 1.6%
Central Bank of the Dominican
Republic, Discount
FRN, 6.875%, 8/30/24 USD 2,250 $ 1,811
1,811
Corporate Bonds 2.0%
Tricom, 11.375%, 9/1/04 2,325 2,278
2,278
Total Dominican Republic (Cost $4,123) 4,089
ECUADOR 4.5%
Government Bonds 4.5%
Republic of Ecuador, Discount, FRN,
6.688%, 2/28/25 1,750 1,328
Republic of Ecuador, Par, STEP,
3.50%, 2/28/25 3,575 1,971
Republic of Ecuador, PDI, FRN,
6.688%, 2/27/15 2,805 1,839
Total Ecuador (Cost $4,876)
5,138
GHANA 0.7%
Convertible Bonds 0.7%
Ashanti Capital, 5.50%, 3/15/03 1,000 747
Total Ghana (Cost $832) 747
IVORY COAST 3.7%
Government Bonds 3.7%
Ivory Coast Credit Refinancing
Agreement, Nonperforming* 6,000 2,655
Ivory Coast Credit Refinancing
Agreement,
Nonperforming* FRF 11,000 900
Ivory Coast, FLIRB, When/If
Issued USD 1,900 651
Total Ivory Coast (Cost $3,462)
4,206
KAZAKHSTAN 0.2%
Government Bonds 0.2%
Republic of Kazakhstan,
8.375%, 10/2/02 250 225
Total Kazakhstan (Cost $250) 225
MEXICO 6.8%
Government Bonds 5.0%
United Mexican States,
9.875%, 1/15/07 USD 1,300 $ 1,357
United Mexican States,
11.375%, 9/15/16 500 575
United Mexican States, Par (Series A)
6.25%, 12/31/19
(With attached value
recovery rights) 2,750 2,296
United Mexican States, Par (Series B)
6.25%, 12/31/19 (With
attached value recovery
rights) 1,500 1,252
United Mexican States, Par (Series W-B)
6.25%, 12/31/19 (With)
attached value recovery
rights) 250 209
5,689
Corporate Bonds 1.8%
Azteca Holdings, 11.00%,
6/15/02 1,000 1,038
Grupo Televisa, STEP, Zero Coupon,
5/15/08 750 566
TV Azteca, 10.50%, 2/15/07 400 418
2,022
Total Mexico (Cost $7,238) 7,711
MOROCCO 1.5%
Government Bonds 1.5%
Kingdom of Morocco Restructured
Loan (Tranche A)
FRN, 6.813%, 1/1/09 2,000 1,735
Total Morocco (Cost $1,725)
1,735
NICARAGUA 1.3%
Government Bonds 1.3%
Central Bank of Nicaragua, CENI
Participation
Zero Coupon, 5/1/98 1,500 1,449
Total Nicaragua (Cost $1,449)
1,449
NIGERIA 3.4%
Government Bonds 3.4%
Central Bank of Nigeria, Par (Series WW)
STEP, 6.25%, 11/15/20 (With
attached payment adjustment
warrants) USD 3,750 $ 2,606
Central Bank of Nigeria, Promissory
Notes
5.092%, 1/5/10 2,500 1,214
Total Nigeria (Cost $3,930)
3,820
PERU 0.5%
Government Bonds 0.5%
Republic of Peru, FLIRB (20 yr.
Series), STEP
3.25%, 3/7/17 900 535
Total Peru (Cost $525) 535
PHILIPPINES 0.5%
Government Bonds 0.5%
Republic of Philippines,
12.50%, 4/25/01 PHP 4,000 83
Republic of Philippines, FLIRB
(Series B), STEP
6.00%, 6/1/08 USD 500 453
Total Philippines (Cost $622)
y536
POLAND 3.7%
Government Bonds 2.4%
Republic of Poland, Par, STEP,
3.00%, 10/27/24 750 462
Republic of Poland, PDI, STEP,
4.00%, 10/27/14 1,350 1,170
Republic of Poland Treasury Bill,
Zero Coupon, 1/7/98 PLN 2,000 565
Republic of Poland Treasury
Bill, Zero Coupon, 2/25/98 2,000 549
2,746
Corporate Bonds 1.3%
Poland Communications (144a),
9.875%, 11/1/03 USD 1,500 1,476
1,476
Total Poland (Cost $4,285) 4,222
RUSSIA 15.7%
Government Bonds 13.1%
City of Moscow, 9.50%,
5/31/00 USD 700 $ 670
Russia Ministry of Finance,
10.00%, 6/26/07 2,300 2,132
Vnesheconombank, IAN, FRN,
6.719%, 12/15/15 6,082 4,292
Vnesheconombank, Principal Loans, FRN,
6.719%, 12/15/20 12,600 7,804
14,898
Corporate Bonds 0.7%
Rossiyskiy Kredit Bank,
10.25%, 9/29/00 1,000 800
800
Hybrid Instruments 1.9%
Lehman Brothers Russia Ministry
of Finance
GKO Participation Note, Zero
Coupon, 1/15/98: Principal
repayment value linked to the
performance of the Russian
ruble RUR 3,128,000 519
Lehman Brothers Russia Ministry
of Finance
GKO Participation Note, Zero
Coupon, 4/15/98: Principal
repayment value linked to the
performance of the Russian
ruble 8,108,000 1,250
Lehman Brothers Russia Ministry
of Finance
GKO Participation Note, Zero
Coupon, 7/1/98: Principal
repayment value linked to the
performance of the Russian
ruble 2,707,026 392
2,161
Total Russia (Cost $18,101)
17,859
SOUTH AFRICA 2.8%
Government Bonds 2.8%
Republic of South Africa,
12.00%, 2/28/05 ZAR 17,000 3,226
Total South Africa (Cost $3,300)
3,226
TURKEY 2.1%
Government Bonds 2.1%
Republic of Turkey, 10.00%,
9/19/07 USD 1,000 1,013
Republic of Turkey Treasury
Bill, Zero Coupon,
3/4/98 TRL 200,000,000 809
Republic of Turkey Treasury
Bill, Zero Coupon,
9/16/98 TRL 200,000,000 $ 522
Total Turkey (Cost $2,728) 2,344
UKRAINE 1.3%
Hybrid Instruments 1.3%
ING Barings Ukranian Treasury
Bill Pass Through Note
Zero Coupon, 1/23/98:
Principal repayment value
linked to the performance of
the Ukranian hryvna UAH 2,912 1,491
Total Ukraine (Cost $1,516)
1,491
VENEZUELA 8.7%
Government Bonds 8.7%
Republic of Venezuela,
9.25%, 9/15/27 USD 2,100 1,887
Republic of Venezuela, DCB,
FRN, 6.813%, 12/18/07 4,286 3,844
Republic of Venezuela, Par,
(Series W-A)
6.75%, 3/31/20 (With
attached oil warrants) 4,000 3,470
Republic of Venezuela, Par
(Series W-B)
6.75%, 3/31/20 (With
attached oil warrants) 750 651
Total Venezuela (Cost $9,735) 9,852
UNITED STATES 1.0%
Government Bonds 0.5%
United States Treasury Bond,
Principal Only,
Zero Coupon, 8/15/26 3,000 550
550
Money Market Funds 0.5%
Reserve Investment Fund, 5.84%# 586 586
586
Total United States (Cost $1,100) 1,136
Total Investments in Securities
93.3% of Net Assets (Cost $104,164) $ 105,805
Forward Currency Exchange Contracts
In thousands
Unrealized
Gain
Counterparty Settlement Receive Deliver
(Loss)
_____________ ____________________ ________ ________
Chase Manhattan 1/8/98 USD 844 FRF 5,000 12
Morgan Guaranty 1/9/98 USD 1,782 ZAR 8,750 (12)
Chase Manhattan 3/4/98 USD 300 DEM 537 1
Net unrealized gain (loss) on open forward
currency exchange contracts 1
Other Assets Less Liabilities 7,613
NET ASSETS $113,419
_________
! Listed by country of issuance
* Non-income producing
# Seven-day yield
144a Security was purchased pursuant to Rule 144a under the
Securities Act of 1933 and may not be resold subject to
that rule except to qualified institutional buyers -
total of such securities at year-end amounts to 1.3% of
net assets.
ARS Argentinean peso
DEM German deutschemark
FRF French franc
PHP Philippine peso
PLN Polish zloty
RUR Russian ruble
TRL Turkish lira
UAH Ukranian hryvna
USD U.S. dollar
ZAR South African rand
CENI Negotiable certificates
DCB Debt conversion bond
EI Eligible interest bond
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
GKO Russian treasury obligation
IAB Interest arrears bond
IDU Interest due bond
MYDFA Multi-year deposit facility
PDI Past due interest bond
STEP Stepped coupon note for which the interest
rate will adjust on specified future dates
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Emerging Markets Bond Fund
December 31, 1997
Statement of Assets and Liabilities
In thousands
Assets
Investments in securities, at
value (cost $104,164) $105,805
Other assets 11,287
Total assets 117,092
Liabilities
Total liabilities 3,673
NET ASSETS $113,419
_________
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 180
Accumulated net realized gain/loss -
net of distributions 2,002
Net unrealized gain (loss)
1,600
Paid-in-capital applicable to
8,274,442 shares of $0.01 par
value capital stock outstanding;
2,000,000,000 shares of the
Corporation authorized 109,637
NET ASSETS $113,419
_________
NET ASSET VALUE PER SHARE $ 13.71
_________
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Foreign Bond Funds
Statement of Operations
In thousands
Global Emerging
GovernmentInternational Markets
Bond Fund Bond Fund Bond Fund
Year
Ended
12/31/97 12/31/97 12/31/97
Investment Income
Income
Interest $ 3,234 $ 55,800 $ 7,478
Dividend - - 2
Total income 3,234 55,800 7,480
Expenses
Investment
management 265 6,039 458
Custody and
accounting 137 392 144
Shareholder
servicing 118 1,067 219
Registration 33 32 65
Legal and audit 17 20 17
Prospectus and
shareholder
reports 9 121 27
Directors 6 8 6
Miscellaneous 5 11 12
Total expenses 590 7,690 948
Net investment income 2,644 48,110 6,532
Realized and Unrealized
Gain (Loss)
Net realized gain (loss)
Securities (2,024) (41,930) 3,572
Foreign currency
transactions 455 (3,344) 102
Net realized gain
(loss) (1,569) (45,274) 3,674
Change in net unrealized
gain or loss
Securities (740) (37,983) (2,537)
Other assets and
liabilities denominated
in foreign
currencies 317 5,167 (21)
Change in net unrealized
gain or loss (423) (32,816) (2,558)
Net realized and unrealized
gain (loss) (1,992) (78,090) 1,116
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 652 $(29,980) $ 7,648
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Global Government Bond Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
12/31/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,644 $ 1,816
Net realized gain
(loss) (1,569) 1,519
Change in net unrealized
gain or loss (423) (1,049)
Increase (decrease) in net assets
from operations 652 2,286
Distributions to shareholders
Net investment income (2,419) (1,816)
Net realized gain (579) -
Decrease in net assets from
distributions (2,998) (1,816)
Capital share transactions*
Shares sold 8,703 7,679
Shares issued in connection
with fund acquisition - 28,697
Distributions reinvested 2,408 1,470
Shares redeemed (20,565) (10,654)
Increase (decrease) in net assets
from capital share
transactions (9,454) 27,192
Net Assets
Increase (decrease) during period (11,800) 27,662
Beginning of period 55,869 28,207
End of period $ 44,069 $ 55,869
_________________________
*Share information
Shares sold 875 760
Shares issued in connection
with fund acquisition - 2,794
Distributions reinvested 243 145
Shares redeemed (2,065) (1,048)
Increase (decrease) in shares
outstanding (947) 2,651
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price International Bond Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
12/31/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 48,110 $ 58,658
Net realized gain
(loss) (45,274) 38,616
Change in net unrealized gain
or loss (32,816) (30,516)
Increase (decrease) in net assets
from operations (29,980) 66,758
Distributions to shareholders
Net investment income (41,706) (58,657)
Net realized gain (7,944) (10,093)
Decrease in net assets from
distributions (49,650) (68,750)
Capital share transactions*
Shares sold 299,191 267,050
Distributions
reinvested 42,881 55,861
Shares redeemed (406,065) (367,131)
Increase (decrease) in net
assets from capital
share transactions (63,993) (44,220)
Net Assets
Increase (decrease) during period (143,623) (46,212)
Beginning of period 969,454 1,015,666
End of period $825,831 $ 969,454
________________________
*Share information
Shares sold 30,500 25,930
Distributions
reinvested 4,385 5,422
Shares redeemed (41,420) (35,746)
Increase (decrease) in
shares outstanding (6,535) (4,394)
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Emerging Markets Bond Fund
Statement of Changes in Net Assets
In thousands
Year
Ended
12/31/97 12/31/96
Increase (Decrease) in Net Assets
Operations
Net investment income $ 6,532 $ 1,780
Net realized gain
(loss) 3,674 1,463
Change in net unrealized
gain or loss (2,558) 3,649
Increase (decrease) in
net assets from operations 7,648 6,892
Distributions to shareholders
Net investment income (6,379) (1,780)
Net realized gain (1,937) (1,196)
Decrease in net assets
from distributions (8,316) (2,976)
Capital share transactions*
Shares sold 133,428 48,715
Distributions
reinvested 7,223 2,374
Shares redeemed (66,426) (25,132)
Increase (decrease) in
net assets from capital
share transactions 74,225 25,957
Net Assets
Increase (decrease) during period 73,557 29,873
Beginning of period 39,862 9,989
End of period $113,419 $ 39,862
________________________
*Share information
Shares sold 9,516 4,030
Distributions
reinvested 522 191
Shares redeemed (4,837) (2,084)
Increase (decrease) in shares
outstanding 5,201 2,137
The accompanying notes are an integral part of these financial
statements.
T. Rowe Price Foreign Bond Funds
December 31, 1997
Notes to Financial Statements
Note 1 - Significant Accounting Policies
T. Rowe Price International Funds, Inc. (the corporation) is
registered under the Investment Company Act of 1940. The Global
Government Bond Fund (the Global Fund), the International Bond
Fund (the International Fund), and the Emerging Markets Bond
Fund (the Emerging Markets Fund), nondiversified, open-end
management investment companies, are three of the portfolios
established by the corporation and commenced operations on
December 31, 1990, September 10, 1986, and December 30, 1994,
respectively.
The accompanying financial statements are prepared in accordance
with generally accepted accounting principles for the investment
company industry; these principles may require the use of
estimates by fund management.
Valuation Debt securities are generally traded in the
over-the-counter market and are valued at a price deemed best to
reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service.
Investments in mutual funds are valued at the closing net asset
value per share of the mutual fund on the day of valuation.
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.
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. Dividend income and 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 December 31, 1997, 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 December 31, 1997, 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 December 31, 1997, 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.
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 International
Fund's accompanying Portfolio of Investments, and the Global
Fund's accompanying Statement of Net Assets, at market value.
Other Purchases and sales of portfolio securities, other than
short-term securities, for the year ended December 31, 1997,
were as follows:
Global Emerging
GovernmentInternational Markets
Bond Fund Bond Fund Bond Fund
U.S. government securities
Purchases $ 9,464,000$31,373,000 $ 514,000
Sales 10,905,000 31,517,000 -
Other securities
Purchases 61,229,0001,282,763,000 117,593,000
Sales 68,778,0001,361,952,000 58,240,000
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. Capital loss
carryforwards utilized by the Global Fund in 1997 amounted to
$322,000. 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, 1997. The results of operations and
net assets were not affected by the increases/(decreases) to
these accounts.
Global Emerging
GovernmentInternational Markets
Bond Fund Bond Fund Bond Fund
Undistributed net
investment income $ (276,000) $(11,466,000) $ 7,000
Undistributed net
realized gain 1,251,000 23,783,000-
Paid-in-capital (975,000) (12,317,000) (7,000)
At December 31, 1997, the aggregate costs of investments for the
Global, International, and Emerging Markets Funds for federal
income tax and financial reporting purposes were $43,559,000,
$825,777,000, and $104,164,000, respectively. Net unrealized
gain (loss) on investments was as follows:
Global Emerging
GovernmentInternational Markets
Bond Fund Bond Fund Bond Fund
Appreciated
investments $ 878,000 $15,007,000 $ 4,130,000
Depreciated
investments (1,158,000)( 37,662,000) (2,489,000)
Net unrealized
gain (loss) $ (280,000) $(22,655,000) $ 1,641,000
Note 4 - acquisition
On November 1, 1996, the Global Fund acquired substantially all
of the assets of T. Rowe Price Short-Term Global Income Fund
(the Short-Term Fund) pursuant to the Agreement and Plan of
Reorganization dated September 6, 1996, and approved by
Short-Term Fund shareholders on October 30, 1996. The
acquisition was accomplished by a tax-free exchange of 2,794,000
shares of the Global Fund, having a value of $28,697,000, for
the 6,420,000 shares of the Short-Term Fund outstanding at the
merger date. The Short-Term Fund's net assets at that date,
which included $57,000 of unrealized appreciation, were combined
with those of the Global Fund, resulting in aggregate net assets
of $57,482,000.
Note 5 - 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 $22,000, $486,000 and $65,000 were payable at December 31,
1997 by the Global, International and Emerging Markets Funds,
respectively. The fee is computed daily and paid monthly, and
consists of an individual fund fee equal to 0.35% of average
daily net assets for the Global Fund, 0.35% of average daily net
assets for the International Fund, and 0.45% of average daily
net assets for the Emerging Markets Fund, and a group fee. The
group fee is based on the combined assets of certain mutual
funds sponsored by the manager or Price Associates (the group).
The group fee rate ranges from 0.48% for the first $1 billion of
assets to 0.30% for assets in excess of $80 billion. The
effective annual group fee rate was 0.32% at December 31, 1997,
and 0.33% for the year then ended. 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 of the Global Fund and
Emerging Markets Fund, which would cause the funds' ratio of
expenses to average net assets to exceed: for the Global Fund,
1.20% through December 31, 1997, and 1.00% thereafter through
December 31, 1998, and for the Emerging Markets Fund, 1.25%
through December 31, 1998. Through December 31, 2000, each fund
is required to reimburse the manager for these expenses,
provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing
each fund's ratio of expenses to average net assets to exceed
1.00% and 1.25%, respectively. Pursuant to the Global Fund's
agreement, $68,000 of management fees were not accrued for the
year ended December 31, 1997; another $262,000 remains subject
to reimbursement through December 31, 1998. Pursuant to the
Emerging Markets Fund's agreement, $128,000 of management fees
were not accrued for the year ended December 31, 1997. In
addition, $357,000 of unaccrued management fees and other
expenses from prior years remains 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. The Global,
International and Emerging Markets Funds incurred expenses
pursuant to these related party agreements totaling
approximately $195,000, $728,000 and $242,000, respectively, for
the year ended December 31, 1997, of which $15,000, $70,000 and
$25,000, respectively, were payable at period-end.
Additionally, each fund is one of several T. Rowe
Price-sponsored mutual funds (underlying funds) in which the T.
Rowe Price Spectrum Funds (Spectrum) may invest. Spectrum does
not invest in the underlying funds for the purpose of exercising
management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of
estimated savings to it and in proportion to the average daily
value of its shares owned by Spectrum, pursuant to special
servicing agreements between and among Spectrum, the underlying
funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Income
Fund held approximately 16.7% of the outstanding shares of the
International Fund and 35.9% of the outstanding shares of the
Emerging Markets Fund at December 31, 1997. Spectrum
International Fund held approximately 0.3% of the outstanding
shares of the International Fund and 2.4% of the outstanding
shares of the Emerging Markets Fund at December 31, 1997. For
the year then ended, the International Fund was allocated
$302,000 of Spectrum expenses, $51,000 of which was payable at
period-end; and the Emerging Markets Fund was allocated $33,000
of Spectrum expenses, $2,000 of which was payable at period-end.
The funds may invest in the Reserve Investment Fund and
Government Reserve Investment Fund (collectively, the Reserve
Funds), open-end management investment companies managed by T.
Rowe Price Associates, Inc. The Reserve Funds are offered as
cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not
available to the public. The Reserve Funds pay no investment
management fees. Distributions from the Reserve Funds to the
Global Fund, International Fund, and the Emerging Markets Fund
for the year ended December 31, 1997, totaled $10,000, $81,000
and $119,000, respectively, and are reflected as interest income
in the accompanying Statement of Operations.
T. Rowe Price Foreign Bond Funds
Report of Independent Accountants
To the Board of Directors of T. Rowe Price International Funds,
Inc. and Shareholders of T. Rowe Price Global Government Bond
Fund
We have audited the accompanying statement of net assets of T.
Rowe Price Global Government Bond Fund (one of the portfolios
comprising T. Rowe Price International Funds, Inc.) as of
December 31, 1997, 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 for each of the five years in the period then ended.
These financial statements and financial highlights are the
responsibility of the Fund's 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, 1997, 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 Global
Government Bond Fund as of December 31, 1997, the results of its
operations, the changes in its 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 21, 1998
T. Rowe Price Foreign Bond Funds
Report of Independent Accountants
To the Board of Directors of T. Rowe Price International Funds,
Inc.
and Shareholders of International Bond Fund and
Emerging Markets Bond Fund
In our opinion, the accompanying statements of assets and
liabilities, including the portfolios of investments, and the
related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material
respects, the financial position of International Bond Fund and
Emerging Markets Bond Fund (two of the portfolios constituting
T. Rowe Price International Funds, Inc., hereafter referred to
as the "Funds") at December 31, 1997, and the results of each of
their operations, the changes in each of their net assets and
the financial highlights for each of the fiscal periods
presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December
31, 1997 by correspondence with custodians and brokers and,
where appropriate, the application of alternative auditing
procedures for unsettled security transactions, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
January 21, 1998
T. Rowe Price Foreign Bond Funds
Tax Information (Unaudited) for the Tax Year Ended 12/31/97
We are providing this information as required by the Internal
Revenue Code. The amounts shown may differ from those elsewhere
in this report because of differences between tax and financial
reporting requirements.
The funds' distributions included capital gain amounts as
follows; the long-term gains were subject to the federal
rate-gains tax categories shown below.
______________________________________________________________
Global Emerging
GovernmentInternational Markets
Bond Fund Bond Fund Bond Fund
___________________________________________
Amount Amount Amount
______________________________________________________________________
Short-term gains $ - $ - $ 807,000
Total long-term gains 579,000 7,944,000 1,130,000
20% category 51,000 1,026,000 463,000
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call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Foreign Bond Funds.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor.
C15-050 12/31/97
