- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Semiannual Report
Equity Income Fund
- --------------------------------------------------------------------------------
June 30, 1998
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
Foreign Bond Funds
* Continuing turmoil in Asia and problems in Russia triggered a flight to the
safety of major government bonds.
* Developed economies enjoyed good growth with benign inflation, while
troubles in Asia contributed to a sell-off in emerging market bonds.
* Global Bond and International Bond Funds posted positive returns for the
half year, but Emerging Markets Bond Fund turned in a loss.
* Our relatively long duration in stronger markets helped Global Bond and
International Bond Funds versus their benchmarks, but Emerging Markets Bond
Fund's exposure to Russia caused it to trail its own index.
* Continuing benign inflation should support major market bond prices;
emerging market bonds look attractive outside of Asia, but it will take a
while for confidence to be restored.
<PAGE>
FELLOW SHAREHOLDERS
The major factors affecting global bond markets during the first half were
the absence of inflation and continuing pressures on the currencies, economies,
and financial markets in Asia. These conditions, along with doubts about
Russia's ability to finance its domestic debt, prompted a flight to the quality
of government bonds in the developed markets.
MARKET ENVIRONMENT
Prices of major government bonds continued to rise through the first half
of 1998, driving yields lower. Almost all developed economies posted benign or
lower inflation rates, providing a positive backdrop for bond yields. Due to the
improved fiscal condition of many countries (Japan was a notable exception),
lack of government issuance created a beneficial supply and demand situation.
Japan's need for fiscal stimulus grew increasingly apparent as a succession of
weak economic data highlighted the dire state of its economy, which in turn led
to continued weakness in the yen. Emerging market debt, led by Russia, sold off
sharply in the second quarter, erasing the gains of the first quarter. This
dented the performance of the International and Global Bond Funds, although they
still posted positive returns in the first half.
================================================================================
Developed Markets Performance
- --------------------------------------------------------------------------------
In Local In U.S.
6 Months Ended 6/30/98 Currency Dollars
- --------------------------------------------------------------------------------
Australia ................................... 4.67% -0.52%
France ...................................... 4.96 4.44
Germany ..................................... 4.79 4.39
Italy ....................................... 5.06 4.50
Japan ....................................... 2.59 -3.88
Spain ....................................... 4.94 4.48
United Kingdom .............................. 5.98 7.46
United States ............................... 4.26 4.26
Source: J.P. Morgan
================================================================================
The U.S. dollar was relatively stable against European currencies during
the first half of 1998, closing approximately where it started against the
German mark. However, the U.S. and German currencies continued to appreciate
versus the yen, reflecting the scale of problems facing Japan. Consequently,
positive bond market returns outside the U.S. were not materially affected when
translated into U.S. dollars, except for Japan and Australia; the International
and Global Bond Funds continued to be underweighted there.
<PAGE>
================================================================================
1999: The Year of the Euro
- --------------------------------------------------------------------------------
On the first business day of 1999, several major countries will officially
inaugurate the Economic and Monetary Union (EM U) and adopt the euro as a single
currency backed by the European Central Bank. The event could be one of the most
significant financial developments of the century, creating a vast economic and
currency bloc equal to the U.S. in size and power. Since the EMU has
far-reaching implications for investors and funds with exposure to European
securities, it is important for you to understand what is taking place.
The currencies of the original participating countries will become
fixed-rate units of the euro, much the same as the nickel, dime, quarter, and
half dollar are denominations of the U.S. dollar. The exchange rates for their
currencies versus the euro were also set in May and will officially be
determined by the end of 1998.
Country Currency Euro Rate
- --------------------------------------------------------------------------------
Austria .............................. Schilling 13.91
Belgium .............................. Franc 40.78
Finland .............................. Mark 6.01
France ............................... Franc 6.63
Germany .............................. Mark 1.98
Ireland .............................. Punt 0.80
Italy ................................ Lira 1958.00
Luxembourg ........................... Franc 40.78
Netherlands .......................... Guilder 2.23
Portugal ............................. Escudo 202.70
Spain ................................ Peseta 168.20
SOURCE: THE WALL STREET JOURNAL, MAY 4, 1998
Beginning in January 1999, some European holdings will be redenominated in
euros, particularly government securities. The FACE VALUE of other investments
might remain in the existing national currencies for a time, but they will be
priced, settled, and valued in euros by stock exchanges and other agencies.
Thus, some of the European holdings in your funds will be valued in euros.
THIS WILL NOT AFFECT THE INVESTMENT VALUE OF YOUR FUNDS IN U.S. DOLLAR
TERMS, since the euro will be converted into the dollar in the same way
deutschemarks, francs, lire, and other European currencies are currently
converted at the prevailing exchange rates.
<PAGE>
During the transition period, which lasts from January 1, 1999, until June
30, 2002, other countries that have moved to adopt the economic terms of the
Maastricht Treaty of 1993 will be able to participate in the EMU. The primary
criteria for joining are:
* a sustainable budget deficit less than 3% of GDP;
* public debt less than 60% of GDP;
* low inflation and interest rates; and
* no currency devaluations within two years of application.
Some of the original participants are not totally compliant with these
terms but are expected to embrace them by 2002. Countries joining later may have
to be in strict accord before entering the EMU, or at least be well along the
path to achieving them. So far, the transition seems to be progressing smoothly,
but there has been resistance to some of the more stringent terms. French
Socialists, in particular, would prefer to maintain heavy government subsidies
for social programs. Therefore, the jury is still out on whether complete
economic and monetary convergence will be attained as planned.
Assuming all goes well, the national currencies of participating countries
will cease to exist and all accounting will be in euros following the transition
period. However, regardless of whether or not full convergence is realized on
the date specified, we do not expect pricing in euros to have any special impact
on the value of your investment. Of course, problems could develop that might be
unfavorable for the fund, but we do not anticipate them at this time.
================================================================================
THIS SUPPLEMENTS THE PROSPECTUS DATED MAY 1, 1998.
Economic activity was robust in the U.S. and reasonably strong in Europe
during the early part of the year, before some signs of slowing emerged in the
second quarter. This, combined with an absence of inflationary pressures except
for the high rate of employment in the U.S. and U.K., created an ideal
environment for further appreciation in the bond markets.
In the beginning of May, we learned which European countries would become
starting members of the EMU on January 1, 1999. (See page 2.) The U.K., Denmark,
and Sweden chose not to seek membership at this time, and Greece did not fulfill
the criteria. However, we believe that these four countries will choose to
participate early in the next century.
<PAGE>
================================================================================
Emerging Markets Performance
- --------------------------------------------------------------------------------
In U.S.
6 Months Ended 6/30/98 Dollars
- --------------------------------------------------------------------------------
Emerging Markets Bond Index Plus .............................. -1.08%
Brady Indexes (by issuer): *
Argentina ........................................... 4.06
Brazil .............................................. -0.85
Mexico .............................................. 2.47
Poland .............................................. 6.54
Venezuela ........................................... -5.35
* 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.
================================================================================
At the start of 1998, most experts expected key short-term rates to rise in
the U.S. and what is often referred to as Core Europe (Germany, France, the
Netherlands, and Belgium). These anticipated increases were predicated on fears
of the inflationary impact of a tight labor market and above-trend economic
growth in the U.S., plus a pickup in European economic growth. Higher rates were
viewed as necessary to achieve a smooth path to an EMU convergence rate in
January 1999. However, at the halfway stage in 1998, official rates in both
regions were unchanged. As mentioned, low inflation was a major factor,
supported by weak commodity prices and fear that the Asian crisis would ripple
through to the developed economies. Indeed, inflation in Germany, France, and
Italy, whose combined GDP will make up over 75% of the EMU area, averaged only
1.2% at the half year mark.
While the central banks of the U.S. and Core Europe were content to leave
monetary policy unaltered, the Bank of England was less sanguine about
inflationary prospects because of its tight labor market. As a result, U.K. base
rates were raised a quarter of one percent June 4. Despite this hike, long-term
U.K. government bonds still appreciated, pushing yields lower. All European bond
markets gained over the period, as did those in the U.S. and Canada.
The contraction in the number of European government bond markets because
of EMU has led to the expansion of Europe's nongovernment sector. Although this
development has the potential to add value for investors, increased supply
contrasted with reduced net issuance by governments enabled government bonds to
outperform corporates. While financial developments in Japan were negative for
the yen, they did not hinder bonds in local currency terms. Falling commodity
prices connected to Asia's woes also resulted in weakness in Australian and New
Zealand currencies, which lowered returns to U.S. investors in dollar terms.
<PAGE>
Emerging bond markets suffered from concerns related to Asia and Russia.
Despite a positive first quarter, returns for the half year were swamped by the
negative sentiment emanating largely from Russia, whose fiscal problems
developed into a full-fledged crisis in confidence. Consequently, domestic
interest rates soared despite proposed assistance from the International
Monetary Fund (IMF) and the prospect of additional tax reform. Asian worries
were also important. The catalyst was Japan's failure to address its economic
problems.
GLOBAL BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 6/30/98 ............................ 6 Months 12 Months
Global Bond Fund * ............................... 3.32% 5.11%
J.P. Morgan Global Government
Bond Index (unhedged) ............................ 3.27 5.87
* As previously reported, we changed the fund's name from Global Government
Bond Fund as of May 1, 1998, to more accurately reflect the composition of
portfolio holdings.
================================================================================
Your fund provided a six-month return of 3.32%, slightly ahead of its
benchmark index. Since the majority of fund holdings were in the U.S. dollar and
European currencies, performance did not suffer from negative currency
translation. Our exposure to the yen was slightly more than 8% of net assets,
significantly less than that of the index.
[Edgar description: Insert Geographic Diversification pie chart showing
U.S. 44%, Germany 12%, United Kingdom 10%, Italy 6%, France 6%, Greece 4%,
Canada 2%, Other and Reserves 16%]
Exposure to emerging markets was a negative contributor to performance and
hampered 12-month returns versus the benchmark, while returns were enhanced by
overweighting the strong European and U.S. bond markets. In addition, your fund
continued its stance of extending duration in these markets, which helped boost
performance when interest rates declined. (Duration is a measure of interest
rate sensitivity. For example, a fund with a duration of six years can be
expected to rise or fall about 6% in price in response to a one-
percentage-point fall or rise in interest rates.) We increased our use of
high-grade corporate and government issues in the U.S. and to a lesser extent in
Europe. The prospect of 11 European countries merging into a single currency
bond market has expanded the opportunity for nongovernment borrowers, and we
have been adding these issues selectively to the portfolio. Nongovernment issues
have had a marginal but positive impact on returns, without compromising the
credit quality of the overall portfolio. Following the Greek drachma's
devaluation in the first quarter and Greece's long-term commitment to join EMU
early next century, we built a position in Greek government bonds, which also
enhanced returns.
<PAGE>
INTERNATIONAL BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 6/30/98 ........................ 6 Months 12 Months
International Bond Fund ...................... 2.77% 1.98%
J.P. Morgan Non-U.S. Dollar
Government Bond Index ........................ 2.66 2.27
================================================================================
The International Bond Fund is run similarly to the Global Bond Fund except
that it 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.)
The slightly higher yen weighting compared with the benchmark, along with
the fund's smaller exposure to dollar-denominated securities, was primarily
responsible for its lower return than that of the Global Bond Fund. Results
slightly surpassed the benchmark in the first half but trailed it over the year
for the same reasons already given.
[edgar description: Insert Geographic Diversification pie chart showing
Germany 21%, United Kingdom 14%, France 11%, United States 10%, Italy 8%, Japan
7%, Greece 5%, Other and Reserves 24%]
As in the Global Bond Fund, your fund also extended duration in the
stronger markets, which helped boost performance when interest rates declined.
We increased our use of high-grade corporate, government, and agency issues
somewhat in Europe. The pending union of 11 European nations in a
euro-denominated bond market has created new opportunities for corporate and
other nongovernment issuers, and we have been adding these bonds selectively to
our holdings. Nongovernment issues had a small but positive impact on returns,
without compromising the fund's overall credit quality.
EMERGING MARKETS BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 6/30/98 6 Months 12 Months
- --------------------------------------------------------------------------------
Emerging Markets Bond Fund -2.45% 0.04%
J.P. Morgan Emerging Markets
Bond Index Plus -1.08 1.39
================================================================================
<PAGE>
Your fund's first half was difficult. Emerging markets began the year on a
positive note but ran into trouble in the second quarter, resulting in a
negative return for the fund over the six months. In addition, the portfolio's
exposure to the Russian market led to its poor performance versus the benchmark
index. Russia suffered from fears that it could not refinance its short-term
debt, although we still believe these problems will subside. The Russian
situation, coupled with ongoing concerns about Asia, was enough to tarnish the
entire asset class.
[edgar description: Insert Geographic Diversification pie chart showing
Russia 19%, Brazil 13%, Bulgaria 5%, Venezuela 6%, Mexico 8%, Argentina 8%,
United States 8%, Other and Reserves 33%]
Latin America outperformed Eastern Europe, largely because of Russia's
negative impact on the region. However, there were isolated bright spots, such
as Nigeria where the death of General Abacha prompted hopes for a transition to
democracy. Nigeria's bond market was up more than 10% in the half year, and our
modest overweighting and security selection there helped offset Russia's impact
to some degree. We increased the portfolio's U.S. Treasury weighting, which also
helped results. Looking forward, valuations in emerging market fixed income
securities look attractive in our view, and we continue to believe that the
Russian situation will be resolved favorably.
OUTLOOK
Official short-term rates in the developed markets are unlikely to be
changed during the next few months, with the possible exception of the U.K.,
which might tighten further. Economic growth could be weakened by the continuing
crisis in Asia, but we believe consumer demand is likely to remain strong.
Inflation should remain low, reflecting weak commodity prices, slowing economic
growth, and plenty of excess capacity, particularly in Europe. Unemployment will
likely ease in Europe and rise marginally in the U.K. and U.S. The U.S. economy
is showing some signs of slowing, largely due to the effects of Asian troubles
on the balance of trade and the reduction of inventories accumulated in early
1998. Any weakness in the U.S. economy should support the bond market.
The Japanese economy could begin to grow once again if appropriate economic
reforms are made. However, we do not believe that a sustained recovery is
possible unless measures are adopted to boost domestic confidence and
consumption. We remain hopeful that the recent election will lead to progress on
this front.
<PAGE>
Emerging market bond valuations outside of Asia look attractive. However,
it will require some time to rebuild confidence in the region. Progress depends,
to some extent, on events unfolding in Russia and in China. We continue to
believe that the longer-term solution for Russia (as well as Japan and China)
does not lie in currency devaluation, but in tax reform and collection. If this
is achieved, the cost of refinancing short-term debt can be reduced with help
from the IMF.
In foreign exchange markets, the yen is key. Further progress on fiscal
policy should give the yen sufficient support and eliminate the need for
continuing currency intervention by major governments. European currencies are
likely to remain stable as we approach EMU convergence next year, while
deterioration in the U.S. trade account should cap the strength of the U.S.
dollar during the foreseeable future.
Inview of our overall outlook for international economies and markets, we
do not envision a major change in investment strategy at this time.
Respectfully submitted,
/s/
Peter B. Askew
Executive Vice President
July 24, 1998
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
KEY STATISTICS
12/31/97 6/30/98
Global Bond Fund
- --------------------------------------------------------------------------------
Price Per Share ...................................... $ 9.90 $ 9.95
Dividends Per Share
For 6 months ................................. 0.22 0.28
For 12 months ................................ 0.49 0.50
Dividend Yield *
For 6 months ................................. 5.24% 5.67%
For 12 months ................................ 5.48 5.53
Weighted Average Maturity (years) .................... 10.2 11.5
Weighted Average Effective Duration (years) .......... 6.0 6.7
Weighted Average Quality ** .......................... AA AA
International Bond Fund
- --------------------------------------------------------------------------------
Price Per Share $ ..................................... 9.58 $9.58
Dividends Per Share
For 6 months .................................. 0.19 0.26
For 12 months ................................. 0.46 0.45
Dividend Yield *
For 6 months .................................. 5.22% 5.60%
For 12 months ................................. 5.49 5.48
Weighted Average Maturity (years) ..................... 8.7 9.9
Weighted Average Effective Duration (years) ........... 5.5 5.9
Weighted Average Quality ** ........................... AA AA
================================================================================
(continued on next page)
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
================================================================================
Portfolio Highlights
- --------------------------------------------------------------------------------
Key statistics
12/31/97 6/30/98
Emerging Markets Bond Fund
Price Per Shar ....................................... $13.71 $12.55
Dividends Per Share
For 6 months ................................. 0.62 0.66
For 12 months ................................ 1.15 1.28
Dividend Yield *
For 6 months ................................. 8.69% 10.14%
For 12 months ................................ 8.59 9.60
Capital Gain Distributions Per Share
Short-Term ................................... 0.10 -
Long-Term .................................... 0.14 0.19
Weighted Average Maturity (years) .................... 15.2 14.6
Weighted Average Effective Duration (years) .......... 6.1 5.3
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
funds return.
[Global Bond Fund SEC graph shown here]
[International Bond Fund SEC graph shown here]
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
[Emerging Markets Bond Fund]
================================================================================
Average Annual Compound Total Return
- --------------------------------------------------------------------------------
This table shows how each fund would have performed if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate
each year.
================================================================================
Since Inception
Periods Ended 6/30/98 1 Year 5 Years 10 Years Inception Date
Global Bond Fund 5.11% 5.77% - 6.80% 12/31/90
International Bond Fund 1.98 6.38 8.07% 8.62 9/10/86
Emerging Markets Bond Fund 0.04 - - 21.23 12/30/94
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
================================================================================
<PAGE>
<TABLE>
T. Rowe Price Global Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year
Ended Ended
6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
NET ASSET VALUE
<S> <C> <C> <C> <C> <C> <C>
Beginning of period ................. $ 9.90 $ 10.35 $ 10.26 $ 9.22 $ 10.08 $ 9.85
Investment activities
Net investment income ....... 0.28# 0.54* 0.56* 0.59* 0.54* 0.56*
Net realized and
unrealized gain (loss) ...... 0.05 (0.39) 0.09 1.04 (0.84) 0.51
Total from
investment activities ....... 0.33 0.15 0.65 1.63 (0.30) 1.07
Distributions
Net investment income ....... (0.28) (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 distributions ......... (0.28) (0.60) (0.56) (0.59) (0.56) (0.84)
NET ASSET VALUE
End of period ....................... $ 9.95 $ 9.90 $ 10.35 $ 10.26 $ 9.22 $ 10.08
Ratios/Supplemental Data
Total return^ ....................... 3.32%# 1.61%* 6.59%* 18.13%* (3.06)%* 11.15%*
Ratio of expenses to
average net assets .................. 1.00%+# 1.20%* 1.20%* 1.20%* 1.20%* 1.20%*
Ratio of net investment
income to average
net assets .......................... 5.60%+# 5.38%* 5.48%* 6.08%* 5.57%* 5.57%*
Portfolio turnover rate ............. 52.3% 153.2% 262.6% 290.7% 254.1% 134.0%
Net assets, end of period
(in thousands) ...................... $ 41,041 $ 44,069 $ 55,869 $ 28,207 $ 36,516 $ 48,758
<FN>
^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
# Excludes expenses in excess of a 1.00% voluntary expense limitation in effect through 12/31/98.
* Excludes expenses in excess of a 1.20% voluntary expense limitation in effect through 12/31/97.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price International Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
6 Months Year
Ended Ended
6/30/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ......................... $ 9.58 $ 10.46 $ 10.46 $ 9.34 $ 10.34 $ 9.61
Investment activities
Net investment income ............... 0.26 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 ............... 0.26 (0.33) 0.71 1.86 (0.19) 1.87
Distributions
Net investment income ............... (0.26) (0.46) (0.60) (0.62) (0.60) (0.69)
Net realized gain ................... -- (0.09) (0.11) (0.12) (0.21) (0.45)
Total distributions ................. (0.26) (0.55) (0.71) (0.74) (0.81) (1.14)
NET ASSET VALUE
End of period ............................... $ 9.58 $ 9.58 $ 10.46 $ 10.46 $ 9.34 $ 10.34
Ratios/Supplemental Data
Total return^ ............................... 2.77% (3.17)% 7.13% 20.30% (1.84)% 20.00%
Ratio of expenses to
average net assets .......................... 0.88%+ 0.86% 0.87% 0.90% 0.98% 0.99%
Ratio of net investment
income to average
net assets .................................. 5.53%+ 5.38% 5.86% 6.10% 6.07% 6.58%
Portfolio turnover rate ..................... 41.7% 155.9% 234.0% 237.1% 345.2% 395.7%
Net assets, end of period
(in millions) ............................... $ 827 $ 826 $ 969 $ 1,016 $ 738 $ 745
<FN>
^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Emerging Markets Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period
====================================================================================================================================
Financial Highlights
<CAPTION>
6 Months Year 12/30/94
Ended Ended Through
6/30/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period .............................. $ 13.71 $ 12.97 $ 10.67 $ 10.00
Investment activities
Net investment income .................... 0.65* 1.16* 1.00* 1.03*
Net realized and
unrealized gain (loss) ................... (0.96) 0.97# 2.72 1.38
Total from investment activities ......... (0.31) 2.13 3.72 2.41
Distributions
Net investment income .................... (0.66) (1.15) (1.01) (1.02)
Net realized gain ........................ (0.19) (0.24) (0.41) (0.72)
Total distributions ...................... (0.85) (1.39) (1.42) (1.74)
NET ASSET VALUE
End of period .................................... $ 12.55 $ 13.71 $ 12.97 $ 10.67
Ratios/Supplemental Data
Total returns .................................... (2.45)%* 16.83%* 36.77%* 25.81%*
Ratio of expenses to
average net assets ............................... 1.25%+* 1.25%* 1.25%* 1.25%*
Ratio of net investment
income to average
net assets ....................................... 9.99%+* 8.61%* 8.37%* 10.20%*
Portfolio turnover rate .......................... 32.5% 87.6% 168.7% 273.5%
Net assets, end of period
(in thousands) ................................... $ 149,063 $ 113,419 $ 39,862 $ 9,989
<FN>
s Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
* 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.
+ Annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Global Bond Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Portfolio of Investments +
- --------------------------------------------------------------------------------
Par Value
In thousands
AUSTRALIA 1.9%
Government Bonds 1.9%
Federal National Mortgage Association,
6.375%, 8/15/07 AUD ......................... 1,200 $771
Total Australia (Cost $849) ........................ 771
CANADA 2.0%
Government Bonds 2.0%
Government of Canada, 8.00%, 6/1/23 .............. CAD 570 517
Province of Alberta, 8.00%, 3/1/00 ............... 450 318
Total Canada (Cost $834) ........................ 835
DENMARK 1.0%
Corporate Bonds 1.0%
Nykredit, 6.00%, 10/1/29 ......................... DKK 3,000 424
Total Denmark (Cost $425) ....................... 424
EUROPEAN CURRENCY UNIT 0.9%
Government Bonds 0.9%
European Bank for Reconstruction and Development,
6.00%, 5/6/99 ............................ XEU 330 367
Total European Currency Unit (Cost $386) ........ 367
FRANCE 6.0%
Government Bonds 6.0%
Bons du Tresor Annuel, 4.50%, 7/12/02 ............ FRF 2,000 333
Caisse Nationale des Autoroutes, 5.85%, 3/24/13 .. 3,500 613
Hydro Quebec, 5.875%, 3/13/08 .................... 1,000 173
Obligation Assimilable du Tresor
7.75%, 4/12/00 ........................... 2,000 351
5.50%, 4/25/04 ........................... 1,000 174
5.50%, 10/25/07 .......................... 1,200 209
6.00%, 10/25/25 .......................... 2,000 361
Province of British Columbia, 5.875%, 7/15/09 .... 1,000 176
Province of Ontario, 5.875%, 7/21/09 ............. 400 70
Total France (Cost $2,451) ...................... 2,460
<PAGE>
GERMANY 12.1%
Government Bonds 9.6%
Bundesrepublic
7.25%, 10/21/02 DEM ............................... 700 $ 431
7.50%, 11/11/04 ................................... 1,000 642
6.875%, 5/12/05 ................................... 600 376
6.50%, 7/4/27 ..................................... 900 583
5.625%, 1/4/28 .................................... 700 403
Bundesrepublic, Principal Only
7/4/07 ............................................ 600 217
7/4/27 ............................................ 1,500 173
Federal National Mortgage Association, 5.00%, 2/16/01 ..... 1,160 654
Hydro Quebec, 5.375%, 3/19/08 ............................. 400 224
Tennessee Valley Authority, 6.375%, 9/18/06 ............... 400 243
3,946
Corporate Bonds 2.5%
Colt Telecom, 8.875%, 11/30/07 ............................. 200 121
Ford Motor Credit, 5.25%, 6/16/08 .......................... 400 221
Minnesota Mining and Manufacturing, 5.00%, 10/15/01 ........ 500 283
SunAmerica Institutional Funding, 5.125%, 4/15/08 .......... 750 415
1,040
Total Germany (Cost $5,079) ............................... 4,986
GREECE 4.0%
Government Bonds 4.0%
Hellenic Republic
9.20%, 3/21/02 ................... GRD 100,000 327
8.90%, 3/21/04 ................... 285,000 950
8.60%, 3/26/08 ................... 100,000 347
Total Greece (Cost $1,547) .............. 1,624
HUNGARY 0.3%
Government Bonds 0.3%
Government of Hungary, 16.00%, 2/12/01 ... HUF 25,000 115
Total Hungary (Cost $115) ............... 115
ITALY 6.3%
Government Bonds 6.3%
Buoni del Tesoro Poliennali
8.25%, 7/1/01 .................. ITL 1,800,000 $1,117
9.00%, 10/1/03 ................. 925,000 622
8.75%, 7/1/06 .................. 300,000 211
7.25%, 11/1/26 ................. 900,000 630
Total Italy (Cost $2,624) ............. 2,580
<PAGE>
JAPAN 1.1%
Government Bonds 1.1%
Asian Development Bank, 3.125%, 6/29/05 ....... JPY 25,000 200
Central Bank of Tunisia, 4.95%, 9/27/11 ....... 20,000 158
European Investment Bank, 3.00%, 9/20/06 ...... 10,000 80
Total Japan (Cost $478) ...................... 438
NETHERLANDS 1.0%
Government Bonds 1.0%
Government of Netherlands, 7.50%, 11/15/99 .... NLG 810 417
Total Netherlands (Cost $440) ................ 417
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, 14.00%, 2/12/00 ........... PLN 1,000 266
Total Poland (Cost $256) ..................... 266
PORTUGAL 0.9%
Government Bonds 0.9%
European Investment Bank, 5.25%, 3/23/02 ...... PTE 65,000 359
Total Portugal (Cost $355) ................... 359
RUSSIA 1.0%
Hybrid Instruments 0.5%
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 ...... RUB 1,354 $ 217
217
Short-term Investments 0.5%
Government of Russia Treasury Bill, Zero Coupon
11/18/98 ................................ 875 107
3/24/99 ................................. 1,046 107
214
Total Russia (Cost $491) ....................... 431
SOUTH AFRICA 1.3%
Government Bonds 1.3%
Republic of South Africa, 13.00%, 8/31/10 ....... ZAR 3,550 527
Total South Africa (Cost $688) ................. 527
SPAIN 0.6%
Government Bonds 0.6%
Bonos del Estado, 10.00%, 2/28/05 ............... ESP 30,000 253
Total Spain (Cost $248) ........................ 253
<PAGE>
SWEDEN 1.6%
Government Bonds 1.6%
Kingdom of Sweden, 5.50%, 4/12/02 ............... SEK 5,000 648
Total Sweden (Cost $661) ....................... 648
UNITED KINGDOM 9.6%
Government Bonds 3.4%
Federal National Mortgage Association, 6.875%, 6/7/02 GBP 250 418
United Kingdom Treasury, 8.00%, 6/7/21 ............ 440 959
1,377
Corporate Bonds 6.2%
Abbey National, 8.00%, 4/2/03 ........................ GBP 175 $ 303
Annington Finance, 7.75%, 10/2/11 .................... 360 679
Guaranteed Export Finance, Zero Coupon, 9/29/00 ...... 240 341
Halifax Building Society, 9.375%, 5/15/21 ............ 180 396
National Power, 8.375%, 8/2/06 ....................... 300 541
Swiss Bank Corporation Jersey, 8.75%, 12/18/25 ....... 130 283
2,543
Total United Kingdom (Cost $3,586) .................. 3,920
UNITED STATES 43.6%
Government Bonds 37.9%
Caisse D'Amort Dette Societey, 6.50%, 3/11/02 ........ USD 500 510
Central Bank of Tunisia, 7.50%, 9/19/07 .............. 250 237
City of Moscow, 9.50%, 5/31/00 ....................... 50 44
Federal National Mortgage Association, 5.25%, 1/15/03 1,000 983
Federative Republic of Brazil
10.125%, 5/15/27 ............................. 150 130
Class C, 8.00%, 4/15/14 ...................... 348 256
EI, FRN, 6.625%, 4/15/06 ..................... 24 20
IDU, FRN, 6.875%, 1/1/01 ..................... 53 50
NMB, FRN, 6.688%, 4/15/09 .................... 105 80
Instituto de Credito Oficial, 6.00%, 5/19/08 ......... 400 402
Japan Highway Public, 6.75%, 9/17/07 ................. 400 417
National Republic of Bulgaria
FLIRB, STEP, 2.25%, 7/28/12 .................. 660 409
Republic of Argentina
11.375%, 1/30/17 ............................. 175 186
FRB, 6.625%, 3/31/05 ......................... 24 21
Par, FRN, 5.75%, 3/31/23 ..................... 275 205
Republic of Ivory Coast FLIRB, STEP, 2.00%, 3/29/18 .. 400 129
Republic of Korea, 8.875%, 4/15/08 ................... 425 389
Republic of Poland, PDI, STEP, 4.00%, 10/27/14 ....... 100 91
Republic of Venezuela, DCB, FRN, 6.625%, 12/18/07 .... 226 184
U.S. Treasury Bonds
7.125%, 2/15/23 .............................. 2,490 2,946
6.375%, 8/15/27 .............................. 1,350 1,482
<PAGE>
U.S. Treasury Notes
6.75%, 6/30/99 ............................... USD 445 $450
6.00%, 8/15/00 ............................... 840 848
7.25%, 8/15/04 ............................... 2,705 2,943
6.50%, 8/15/05 ............................... 400 422
6.25%, 2/15/07 ............................... 650 681
United Mexican States
9.875%, 1/15/07 .............................. 70 73
Par (Series W-A), 6.25%, 12/31/19
(With attached value recovery rights) ........ 500 414
Vnesheconombank
IAN, FRN, 6.625%, 12/15/15 ................... 323 181
Principal Loans, FRN, 6.625%, 12/15/20 ....... 750 358
15,541
Corporate Bonds 5.6%
Banco Nacional de Comercio Exterior, 7.25%, 2/2/04 ......... 80 75
Consumers Energy (144a), 6.375%, 2/1/08 .................... 500 493
Norfolk Southern, 7.35%, 5/15/07 ........................... 500 536
Poland Communications (144a), 9.875%, 11/1/03 .............. 180 176
R & B Falcon, 6.75%, 4/15/05 ............................... 500 499
Union Texas Petroleum, 7.00%, 4/15/08 ...................... 500 523
2,302
Money Market Funds 0.1%
Reserve Investment Fund, 5.69%# ...................... 66 66
66
Total United States (Cost $17,588) .................. 17,909
Total Investments in Securities
96.0% of Net Assets (Cost $39,249) .................... $ 39,413
Forward Currency Exchange Contracts
In thousands
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
____________ _______ ___________ _____________ ___________
Morgan Stanley 7/2/98 JPY 58,747 NZD 800 $ 9
Chase Manhattan 7/2/98 NZD 800 JPY 56,424 8
Morgan Stanley 7/8/98 DEM 800 GBP 276 (16)
Chase Manhattan 7/8/98 DEM 1,000 USD 567 (12)
Chase Manhattan 7/13/98 USD 250 SEK 1,974 3
Chase Manhattan 7/23/98 USD 1,437 GBP 860 2
Chase Manhattan 7/24/98 AUD 872 USD 551 (9)
Morgan Guaranty 7/24/98 CAD 1,835 AUD 1,967 26
Chase Manhattan 7/24/98 USD 500 CAD 734 0
Chase Manhattan 7/27/98 JPY 373,414 USD 2,685 26
Morgan Guaranty 9/28/98 USD 232 ZAR 1,316 18
Chase Manhattan 9/28/98 USD 307 ZAR 1,800 14
___________
<PAGE>
Net unrealized gain (loss) on open forward
currency exchange contracts ........................ $ 69
Other Assets Less Liabilities ...................... 1,559
NET ASSETS ......................................... $ 41,041
+ Listed by currency denomination
# 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 period-end amounts to
1.6% of net assets.
AUD Australian dollar
CAD Canadian dollar
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
GRD Greek drachma
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
RUB Russian Ruble
SEK Swedish krona
USD U.S. dollar
XEU European currency unit
ZAR South African rand
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
IAN Interest arrears note
IDU Interest due bond
NMB New money bond
PDI Past due interest
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. >>>
<PAGE>
T. Rowe Price Global Bond Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $39,249) ............... $ 39,413
Other assets ..................................................... 3,638
Total assets ..................................................... 43,051
Liabilities
Total liabilities ................................................ 2,010
NET ASSETS ....................................................... $ 41,041
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions ........ $ (887)
Net unrealized gain (loss) ....................................... 241
Paid-in-capital applicable to 4,126,368 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized ............... 41,687
NET ASSETS ....................................................... $ 41,041
NET ASSET VALUE PER SHARE ........................................ $ 9.95
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Portfolio of Investments +
- --------------------------------------------------------------------------------
Par Value
In thousands
AUSTRALIA 2.1%
Government Bonds 2.1%
Commonwealth of Australia, 8.75%, 8/15/08 ........... AUD 12,000 $9,252
Federal National Mortgage Association, 6.375%, 8/15/07 12,000 7,710
Total Australia (Cost $18,029) ..................... 16,962
CANADA 3.8%
Government Bonds 3.8%
Government of Canada
7.00%, 12/1/06 CAD ......................... 9,000 6,790
8.00%, 6/1/23 ............................... 18,300 16,589
8.00%, 6/1/27 ............................... 4,500 4,151
Province of Ontario, 8.25%, 12/1/05 ................. 5,000 3,958
Total Canada (Cost $29,416) ........................ 31,488
DENMARK 1.3%
Corporate Bonds 1.3%
Nykredit, 6.00%, 10/1/29 ............................ DKK 76,000 10,737
Total Denmark (Cost $10,812) ....................... 10,737
EUROPEAN CURRENCY UNIT 1.4%
Government Bonds 1.4%
Bons du Tresor Annuel, 4.50%, 7/12/02 ............... XEU 10,177 11,207
Total European Currency Unit (Cost $10,903) ........ 11,207
FRANCE 11.0%
Government Bonds 11.0%
Bons du Tresor Annuel
7.75%, 4/12/00 .............................. FRF 103,000 18,109
4.50%, 7/12/02 .............................. 69,000 11,478
Caisse Nationale des Autoroutes, 5.85%, 3/24/13 ..... 69,000 12,092
Hydro Quebec, 5.875%, 3/13/08 ....................... 28,000 4,842
Obligation Assimilable du Tresor
5.50%, 4/25/04 .............................. 47,400 8,235
6.50%, 10/25/06 ............................. 40,000 7,411
Obligation Assimilable du Tresor
5.50%, 10/25/07 FRF ......................... 97,000 $ 16,876
6.00%, 10/25/25 ............................. 40,000 7,220
Province of British Columbia, 5.875%, 7/15/09 ....... 19,500 3,430
Province of Ontario, 5.875%, 7/21/09 ................ 7,900 1,387
Total France (Cost $90,597) ........................ 91,080
<PAGE>
GERMANY 20.9%
Government Bonds 15.0%
Bundesrepublic
7.25%, 10/21/02 ............................. DEM 12,550 7,735
7.50%, 11/11/04 ............................. 14,000 8,985
6.875%, 5/12/05 ............................. 23,900 14,964
6.50%, 7/4/27 ............................... 24,400 15,802
5.625%, 1/4/28 .............................. 20,000 11,520
Bundesrepublic, Principal Only
7/4/07 ...................................... 51,000 18,427
7/4/27 ...................................... 53,800 6,193
Federal National Mortgage Association, 5.00%, 2/16/01 22,000 12,410
Hydro Quebec, 5.375%, 3/19/08 ....................... 8,000 4,486
Instituto de Credito Oficial, 5.00%, 12/18/08 ....... 8,250 4,581
Inter-American Development Bank, 7.00%, 6/8/05 ...... 18,300 11,449
Tennessee Valley Authority, 6.375%, 9/18/06 ......... 11,600 7,050
123,602
Corporate Bonds 5.9%
Bank Nederlandse Gemeenten
6.25%, 8/10/00 .............................. 6,000 3,457
5.25%, 10/1/01 .............................. 14,300 8,140
Colt Telecom, 8.875%, 11/30/07 ...................... 3,700 2,231
Ford Motor Credit, 5.25%, 6/16/08 ................... 7,900 4,364
KFW International Finance, 6.75%, 6/20/05 ........... 28,000 17,328
Minnesota Mining and Manufacturing, 5.00%, 10/15/01 . 8,350 4,718
SunAmerica Institutional Funding, 5.125%, 4/15/08 ... 15,800 8,750
48,988
Total Germany (Cost $175,894) ...................... 172,590
GREECE 4.5%
Government Bonds 4.5%
Hellenic Republic
9.20%, 3/21/02 ......................... GRD 2,500,000 $8,172
8.90%, 3/21/04 ......................... 6,750,000 22,499
8.60%, 3/26/08 ......................... 2,000,000 6,939
Total Greece (Cost $35,833) ................... 37,610
HUNGARY 0.2%
Government Bonds 0.2%
Government of Hungary, 16.00%, 2/12/01 .............. HUF 430,000 1,973
Total Hungary (Cost $1,985) ........................ 1,973
ITALY 8.0%
Government Bonds 8.0%
Buoni del Tesoro Poliennali
9.50%, 2/1/01 .............. ITL 40,000,000 25,216
8.25%, 7/1/01 .............. 15,000,000 9,312
9.00%, 10/1/03 ............. 12,130,000 8,157
8.75%, 7/1/06 .............. 15,600,000 10,966
7.25%, 11/1/26 ............. 18,000,000 12,594
Total Italy (Cost $67,635) ........ 66,245
<PAGE>
JAPAN 7.4%
Government Bonds 7.2%
Asian Development Bank, 3.125%, 6/29/05 ....... JPY 1,215,000 9,705
Central Bank Of Tunisia, 4.95%, 9/27/11 ....... 400,000 3,164
European Investment Bank, 3.00%, 9/20/06 ...... 250,000 2,013
Export Import Bank, 4.375%, 10/1/03 ........... 2,500,000 20,908
International Bank for Reconstruction
and Development, 4.75%, 12/20/04 ...... 2,100,000 18,376
Republic of Austria, 4.50%, 9/28/05 ........... 600,000 5,237
59,403
Corporate Bonds 0.2%
Korea Industrial Leasing, 2.20%, 8/7/02 ....... JPY 330,000 $ 1,987
1,987
Total Japan (Cost $72,020) ................... 61,390
NETHERLANDS 1.0%
Government Bonds 1.0%
Government of Netherlands, 9.00%, 1/15/01 ..... NLG 15,000 8,217
Total Netherlands (Cost $9,949) .............. 8,217
PHILIPPINES 0.2%
Government Bonds 0.2%
Republic of Philippines, 12.50%, 4/25/01 ...... PHP 84,000 1,748
Total Philippines (Cost $3,116) .............. 1,748
POLAND 0.5%
Government Bonds 0.5%
Republic of Poland, 14.00%, 2/12/00 ........... PLN 14,000 3,720
Total Poland (Cost $3,597) ................... 3,720
PORTUGAL 0.5%
Government Bonds 0.5%
European Investment Bank, 5.25%, 3/23/02 ...... PTE 700,000 3,863
Total Portugal (Cost $3,827) ................. 3,863
RUSSIA 1.2%
Hybrid Instruments 0.6%
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 ....... RUB 29,777 4,780
4,780
Short-term Investments 0.6%
Government of Russia Treasury Bill, Zero Coupon
11/18/98 ....................................... 25,106 2,553
Government of Russia Treasury Bill, Zero Coupon
3/24/99 ........................................ 21,250 $2,599
5,152
Total Russia (Cost $11,351) ........................... 9,932
<PAGE>
SOUTH AFRICA 1.5%
Government Bonds 1.5%
Republic of South Africa, 13.00%, 8/31/10 ..... ZAR 85,000 12,617
Total South Africa (Cost $16,464) ............ 12,617
SPAIN 3.4%
Government Bonds 3.4%
Bonos del Estado
10.90%, 8/30/03 ................ ESP 2,746,000 22,962
10.00%, 2/28/05 ................ 586,000 4,938
Total Spain (Cost $29,043) ............ 27,900
SWEDEN 1.5%
Government Bonds 1.5%
Kingdom of Sweden, 5.50%, 4/12/02 .......... SEK 95,000 12,313
Total Sweden (Cost $12,549) ............... 12,313
UNITED KINGDOM 14.2%
Government Bonds 4.7%
Federal National Mortgage Association, 6.875%, 6/7/02 GBP 6,400 10,706
Republic of Austria, 9.00%, 7/22/04 .................. 4,000 7,459
United Kingdom Treasury, 8.00%, 6/7/21 ............... 9,370 20,422
38,587
Corporate Bonds 9.5%
Alliance & Leicester Building Society, 8.75%, 12/7/06 .... 8,500 15,763
Annington Finance, 7.75%, 10/2/11 ........................ 2,500 4,716
Bank of Scotland, Perpetual Debenture,
FRN, 8.375% ..................................... 2,700 4,812
Guaranteed Export Finance, 10.625%, 9/15/01 .............. 10,000 18,270
Halifax Building Society
8.75%, 7/10/06 ................................... 4,000 7,471
9.375%, 5/15/21 .................................. 4,900 10,767
National Power, 8.375%, 8/2/06 GBP ...................... 5,000 $ 9,022
Swiss Bank Corporation Jersey, 8.75%, 12/18/25 ........... 3,700 8,046
78,867
Total United Kingdom (Cost $104,311) .................... 117,454
UNITED STATES 10.0%
Government Bonds 7.4%
City of Moscow, 9.50%, 5/31/00 ....................... USD 650 566
Federative Republic of Brazil
Class C, 8.00%, 4/15/14 ...................... 8,644 6,369
EI, FRN, 6.625%, 4/15/06 ..................... 364 299
IDU, FRN, 6.875%, 1/1/01 ..................... 2,852 2,710
NMB, FRN, 6.688%, 4/15/09 .................... 1,710 1,304
National Republic of Bulgaria
FLIRB, STEP, 2.25%, 7/28/12 .................. 6,630 4,110
IAB, FRN, 6.563%, 7/28/11 .................... 5,675 4,065
Republic of Argentina
11.375%, 1/30/17 ............................. 1,500 1,596
FRB, 6.625%, 3/31/05 ......................... 2,518 2,223
Par, FRN, 5.75%, 3/31/23 ..................... 3,250 2,419
<PAGE>
Republic of Ivory Coast
FLIRB, STEP, 2.00%, 3/29/18 .................. 4,857 1,566
PDI, STEP, 2.00%, 3/29/18 .................... 964 357
Republic of Korea, 8.875%, 4/15/08 ................... 4,650 4,258
Republic of Poland, PDI, STEP, 4.00%, 10/27/14 ....... 1,500 1,357
Republic of Venezuela, DCB, FRN, 6.625%, 12/18/07 .... 7,690 6,268
Russia Ministry of Finance, 10.00%, 6/26/07 .......... 495 379
United Mexican States
9.875%, 1/15/07 .............................. 850 885
11.375%, 9/15/16 ............................. 6,650 7,407
Par (Series A), 6.25%, 12/31/19 .............. 750 621
Par (Series W-A), 6.25%, 12/31/19
(With attached value recovery rights) ........ 2,750 2,277
Vnesheconombank
IAN, FRN, 6.625%, 12/15/15 ................... 8,540 4,782
Principal Loans, FRN, 6.625%, 12/15/20 ....... 10,700 5,116
60,934
Corporate Bonds 0.7%
Banco Nacional de Comercio Exterior, 7.25%, 2/2/04 ... USD 800 $ 749
Poland Communications (144a), 9.875%, 11/1/03 ........ 3,930 3,832
Samsung Electronics (144a), 9.75%, 5/1/03 ............ 1,500 1,384
5,965
Money Market Funds 1.9%
Reserve Investment Fund, 5.69%# ...................... 15,827 15,827
15,827
Total United States (Cost $86,226) .................. 82,726
Total Investments in Securities
94.6% of Net Assets (Cost $793,557) .................. $ 781,772
Forward Currency Exchange Contracts
In thousands
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
_______________ __________ ________________ _______________ ___________
Morgan Stanley 7/2/98 JPY 1,064,793 NZD 14,500 $ 159
Chase Manhattan 7/2/98 NZD 14,500 JPY 1,022,685 146
Morgan Stanley 7/8/98 CAD 10,183 DEM 12,500 (13)
Citibank 7/8/98 DEM 6,000 GBP 2,064 (116)
Morgan Stanley 7/8/98 DEM 39,787 GBP 13,632 (679)
Chase Manhattan 7/8/98 GBP 3,500 DEM 10,085 246
Chase Manhattan 7/9/98 DEM 12,762 AUD 11,983 (359)
Morgan Stanley 7/23/98 CAD 5,306 GBP 2,166 (4)
Chase Manhattan 7/23/98 USD 4,570 CAD 6,718 2
Chase Manhattan 7/23/98 USD 10,732 GBP 6,442 (10)
Morgan Guaranty 7/24/98 CAD 12,452 AUD 13,353 175
Morgan Stanley 7/27/98 JPY 1,619,367 GBP 6,980 121
Chase Manhattan 7/27/98 JPY 6,814,078 USD 49,005 476
Morgan Stanley 9/28/98 CAD 11,036 ZAR 42,500 611
Morgan Guaranty 9/28/98 USD 4,639 ZAR 26,313 366
__________
<PAGE>
Net unrealized gain (loss) on open forward
currency exchange contracts ........................... 1,121
Other Assets Less Liabilities ......................... $ 43,847
NET ASSETS ............................................ $ 826,740
+ Listed by currency denomination
# 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 period-end amounts to
0.7% of net assets.
AUD Australian dollar
CAD Canadian dollar
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
GRD Greek drachma
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
RUB Russian ruble
SEK Swedish krona
USD U.S. dollar
XEU European currency unit
ZAR South African rand
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
PDI Past due interest
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. >>>
<PAGE>
T. Rowe Price International Bond Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $793,557) ............. $ 781,772
Securities lending collateral pool .............................. 62,046
Other assets .................................................... 48,917
Total assets .................................................... 892,735
Liabilities
Securities lending collateral ................................... 62,046
Other liabilities ............................................... 3,949
Total liabilities ............................................... 65,995
NET ASSETS ...................................................... $ 826,740
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions ....... $ (31,452)
Net unrealized gain (loss) ...................................... (10,653)
Paid-in-capital applicable to 86,285,251 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized .............. 868,845
NET ASSETS ...................................................... $ 826,740
NET ASSET VALUE PER SHARE ....................................... $ 9.58
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Emerging Markets Bond Fund
- --------------------------------------------------------------------------------
Unaudited June 30, 1998
================================================================================
Statement of Net Assets +
- --------------------------------------------------------------------------------
Par Value
In thousands
ARGENTINA 7.8%
Government Bonds 6.7%
Republic of Argentina
FRB, 6.625%, 3/31/05 ................ USD 1,924 $1,699
Par, FRN, 5.75%, 3/31/23 ............ 11,100 8,263
9,962
Corporate Bonds 1.1%
CEI Citicorp, 11.25%, 2/14/07 ......................... ARS 1,000 840
CIA International Telecommunications, 10.375%, 8/1/04 . 1,000 830
1,670
Total Argentina (Cost $11,589) ....................... 11,632
BRAZIL 12.5%
Government Bonds 12.5%
Federative Republic of Brazil
10.125%, 5/15/27 .................... USD 2,495 2,155
Class C, 8.00%, 4/15/14 ............. 13,691 10,088
DCB, FRN, 6.688%, 4/15/12 ........... 1,160 808
EI, FRN, 6.625%, 4/15/06 ............ 776 639
IDU, FRN, 6.875%, 1/1/01 ............ 945 897
NMB, FRN, 6.688%, 4/15/09 ........... 550 419
Par, FRN, 5.50%, 4/15/24 ............ 5,100 3,599
Total Brazil (Cost $20,454) ................ 18,605
BULGARIA 4.9%
Government Bonds 4.9%
National Republic of Bulgaria
Discount (Series A), FRN, 6.563%, 7/28/24 ........ 500 384
FLIRB, STEP, 2.25%, 7/28/12 ...................... 8,020 4,972
IAB, FRN, 6.563%, 7/28/11 ........................ 2,800 2,006
Total Bulgaria (Cost $7,549) ............................ 7,362
ECUADOR 4.9%
Government Bonds 4.9%
Republic of Ecuador
Discount, FRN, 6.625%, 2/28/25 ....... 4,250 2,959
Republic of Ecuador
Par, STEP, 3.50%, 2/28/25 ............ USD 5,975 $3,223
PDI, FRN, 6.625%, 2/27/15 ............ 1,864 1,073
Total Ecuador (Cost $7,256) ................. 7,255
<PAGE>
GABON 1.8%
Government Bonds 1.8%
Republic of Gabon, Loan Participation, FRN
6.688%, 1/4/04 ................................ 3,296 2,621
Total Gabon (Cost $2,858) ............................. 2,621
GHANA 0.5%
Convertible Bonds 0.5%
Ashanti Capital, 5.50%, 3/15/03 .................... 1,000 785
Total Ghana (Cost $845) ........................... 785
INDONESIA 1.1%
Corporate Bonds 0.6%
Indah Kiat, 11.875%, 6/15/02 ...................... 1,000 820
820
Convertible Bonds 0.5%
APP Finance (VII) Mauritius (144a), 3.50%, 4/30/03 .. 1,000 800
800
Total Indonesia (Cost $1,611) ..................... 1,620
IVORY COAST 4.1%
Government Bonds 4.1%
Republic of Ivory Coast
FLIRB, STEP, 2.00%, 3/29/18 ............ FRF 18,595 927
FLIRB, STEP, 2.00%, 3/29/18 ............ USD 12,944 4,174
PDI, STEP, 1.90%, 3/29/18 .............. FRF 2,365 137
PDI, STEP, 2.00%, 3/29/18 .............. USD 2,367 876
Total Ivory Coast (Cost $7,149) ............... 6,114
JAMAICA 1.4%
Government Bonds 1.4%
Government of Jamaica, 10.875%, 6/10/05 USD ........... 2,000 $2,018
Total Jamaica (Cost $1,999) .......................... 2,018
JORDAN 1.1%
Government Bonds 1.1%
Kingdom of Jordan, FRN, 6.563%, 12/23/23 ............. 2,000 1,618
Total Jordan (Cost $1,591) .......................... 1,618
KAZAKHSTAN 0.1%
Government Bonds 0.1%
Republic of Kazakhstan, 8.375%, 10/2/02 ................ 250 226
Total Kazakhstan (Cost $249) .......................... 226
<PAGE>
MEXICO 7.5%
Government Bonds 5.8%
United Mexican States
11.375%, 9/15/16 ............................... 2,400 2,673
11.50%, 5/15/26 ................................ 2,850 3,238
Par (Series B), 6.25%, 12/31/19 ................ 1,500 1,242
Par (Series W-A), 6.25%, 12/31/19
(With attached value recovery rights) .......... 350 290
Par (Series W-B), 6.25%, 12/31/19
(With attached value recovery rights) .......... 1,525 1,263
8,706
Corporate Bonds 1.7%
Grupo Minero Mexico, 8.25%, 4/1/08 ................ 2,000 1,925
Grupo Televisa, STEP, 0.00%, 5/15/08 .............. 750 613
2,538
Total Mexico (Cost $11,531) ...................... 11,244
MOROCCO 2.3%
Government Bonds 2.3%
Kingdom of Morocco Restructured Loan (Tranche A),
FRN, 6.563%, 1/1/09 .............................. 4,000 3,422
Total Morocco (Cost $3,540) ............................. 3,422
NIGERIA 3.6%
Government Bonds 3.6%
Central Bank of Nigeria
Par (Series WW), STEP, 6.25%, 11/15/20
(With attached value recovery warrants) USD ....... 5,750 $4,147
Promissory Notes, 3.586%, 1/5/10 .................. 2,500 1,230
Total Nigeria (Cost $5,334) .............................. 5,377
PANAMA 1.3%
Government Bonds 1.3%
Republic of Panama
8.875%, 9/30/27 ............................ 1,000 940
IRB, STEP, 3.75%, 7/17/14 .................. 1,250 931
Total Panama (Cost $1,982) ........................ 1,871
PERU 1.3%
Government Bonds 1.3%
Republic of Peru
IRB (US Series), STEP, 3.25%, 3/7/17 ............. 2,500 1,393
IRB (20 yr. Series), STEP, 3.25%, 3/7/17 ......... 900 502
Total Peru (Cost $2,079) ................................ 1,895
PHILIPPINES 1.5%
Government Bonds 1.5%
Republic of Philippines
12.50%, 4/25/01 PHP ........................ 4,000 83
FLIRB (Series B), STEP, 6.00%, 6/1/08 ...... USD 500 440
Par (Series B), 6.50%, 12/1/17 ............. 2,000 1,775
Total Philippines (Cost $2,343) ................... 2,298
<PAGE>
POLAND 1.7%
Government Bonds 0.7%
Republic of Poland
14.00%, 2/12/00 PLN .................. 2,000 531
Par, STEP, 3.00%, 10/27/24 ........... USD 750 498
1,029
Corporate Bonds 1.0%
Poland Communications (144a), 9.875%, 11/1/03 ...... USD 1,500 $1,463
1,463
Total Poland (Cost $2,472) ........................ 2,492
RUSSIA 18.8%
Government Bonds 14.1%
City of Moscow, 9.50%, 5/31/00 ......................... 700 609
Russia Ministry of Finance
11.75%, 6/10/03 ................................ 1,000 888
10.00%, 6/26/07 ................................ 2,300 1,759
Series IV, 3.00%, 5/14/03 ...................... 2,000 1,160
Vnesheconombank
IAN, FRN, 6.625%, 12/15/15 ..................... 11,048 6,187
Principal Loans, FRN, 6.625%, 12/15/20 ......... 21,850 10,447
21,050
Corporate Bonds 0.4%
Rossiyskiy Kredit Bank, 10.25%, 9/29/00 ................ 1,000 590
590
Convertible Bonds 0.6%
Lukinter Finance, 3.50%, 5/6/02 ........................ 1,000 900
900
Hybrid Instruments 0.3%
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 ............... RUB 2,707 434
434
Short-term Investments 3.4%
Government of Russia Treasury Bill, Zero Coupon
11/11/98 ........................................ 8,197 1,065
11/18/98 ........................................ 23,800 2,911
3/24/99 ......................................... 10,671 1,085
5,061
Total Russia (Cost $34,250) ............................ 28,035
SOUTH AFRICA 1.3%
Government Bonds 1.3%
Republic of South Africa, 13.00%, 8/31/10 ...... ZAR 13,500 $2,004
Total South Africa (Cost $2,613) .............. 2,004
<PAGE>
SOUTH KOREA 3.8%
Government Bonds 2.0%
Republic of Korea, 8.875%, 4/15/08 .............. USD 3,225 2,953
2,953
Corporate Bonds 1.8%
Pohang Iron & Steel, 7.125%, 11/1/06 ................... 2,000 1,540
Samsung Electronics (144a), 9.75%, 5/1/03 .............. 1,250 1,153
2,693
Total South Korea (Cost $6,155) ....................... 5,646
THAILAND 0.6%
Corporate Bonds 0.6%
NSM Steel, Units (144a) (Each unit consists of $1,000 par,
12.25%, 2/1/08, and 1 warrant, 3/12/99) ................ 1 865
Total Thailand (Cost $946) ..................................... 865
TURKEY 1.3%
Short-term Investments 1.3%
Republic of Turkey Treasury Bill, Zero Coupon
9/2/98 TRL .................................. 400,000,000 1,346
9/16/98 ...................................... 200,000,000 645
Total Turkey (Cost $2,376) .......................... 1,991
VENEZUELA 5.8%
Government Bonds 5.8%
Republic of Venezuela
9.25%, 9/15/27 USD ............................... 2,300 1,777
DCB, FRN, 6.625%, 12/18/07 ........................ 6,107 4,977
Par (Series W-A), 6.75%, 3/31/20
(With attached oil obligation warrants) ........... 1,250 1,004
Republic of Venezuela
Par (Series W-B), 6.75%, 3/31/20
(With attached oil obligation warrants) USD ....... 750 $ 603
Par (Series X-A), 6.75%, 3/31/20 .................. 450 362
Total Venezuela (Cost $9,726) ............................ 8,723
UNITED STATES 8.3%
Government Bonds 1.0%
U.S. Treasury Bonds, Principal Only, 8/15/26 .............. 7,000 1,439
1,439
Money Market Funds 7.3%
Reserve Investment Fund, 5.69%# .................. 10,898 10,898
10,898
Total United States (Cost $12,170) .............. 12,337
Total Investments in Securities
99.3% of Net Assets (Cost $160,667) ............... $ 148,056
<PAGE>
Forward Currency Exchange Contracts
In thousands
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
_______________ __________ ______________ ______________ ___________
Chase Manhattan 7/8/98 USD 1,395 DEM 2,460 $ 31
Chase Manhattan 7/8/98 USD 1,268 FRF 7,500 27
Morgan Guaranty 9/28/98 USD 696 ZAR 3,947 55
Chase Manhattan 9/28/98 USD 1,192 ZAR 7,002 55
Morgan Stanley 2/24/99 KRW 910,250 USD 500 91
Morgan Stanley 2/24/99 USD 552 KRW 910,250 (39)
_________
Net unrealized gain (loss) on open forward
currency exchange contracts ................................ 220
Other Assets Less Liabilities .............................. 787
NET ASSETS ................................................. $ 149,063
Net Assets Consist of:
Accumulated net investment income - net of distributions ... $ 180
Accumulated net realized gain/loss - net of distributions... 3,046
Net unrealized gain (loss) ................................. (12,469)
Paid-in-capital applicable to 11,877,003 shares of $0.01 par
value capital stock outstanding; 2,000,000,000 shares
of the Corporation authorized .............................. 158,306
NET ASSETS ................................................. $ 149,063
NET ASSET VALUE PER SHARE .................................. $ 12.55
+ Listed by country of issuance
# 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 period-end amounts to
2.9% of net assets.
ARS Argentinean peso
DEM German deutschemark
FRF French franc
KRW South Korean won
PHP Philippine peso
PLN Polish zloty
RUB Russian ruble
TRL Turkish lira
USD U.S. dollar
<PAGE>
ZAR South African rand
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
IRB Interest reduction bond
NMB New money bond
PDI Past due interest
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. >>>
<PAGE>
<TABLE>
T. Rowe Price Foreign Bond Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
====================================================================================================================================
Statement of Operations
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
In thousands Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
Six Months Ended June 30, 1998
<S> <C> <C> <C>
Investment Income
Interest Income ...................................................... $ 1,392 $ 26,354 $ 7,223
Expenses
Custody and accounting ....................................... 66 191 78
Shareholder servicing ........................................ 60 606 187
Investment management ........................................ 53 2,760 466
Registration ................................................. 15 18 29
Legal and audit .............................................. 7 9 11
Prospectus and shareholder reports ........................... 5 40 14
Directors .................................................... 3 3 3
Miscellaneous ................................................ 2 4 16
Total expenses ............................................... 211 3,631 804
Net investment income ................................................ 1,181 22,723 6,419
Realized and Unrealized Gain(Loss)
Net realized gain (loss)
Securities ................................................... (173) (9,958) 2,584
Foreign currency transactions ................................ (36) (2,026) 66
Net realized gain (loss) ..................................... (209) (11,984) 2,650
Change in net unrealized gain or loss
Securities ................................................... 445 10,870 (14,252)
Other assets and liabilities
denominated in foreign currencies ............................ (16) 1,174 184
Change in net unrealized gain or loss ........................ 429 12,044 (14,068)
Net realized and unrealized gain (loss) .............................. 220 60 (11,418)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ............................................... $ 1,401 $ 22,783 $ (4,999)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Global Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
In thousands
6 Months Year
Ended Ended
6/30/98 12/31/97
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................................ $ 1,181 $ 2,644
Net realized gain (loss) ..................................................... (209) (1,569)
Change in net unrealized gain or loss ........................................ 429 (423)
Increase (decrease) in net assets from operations ............................ 1,401 652
Distributions to shareholders
Net investment income ........................................................ (1,181) (2,419)
Net realized gain ............................................................ -- (579)
Decrease in net assets from distributions .................................... (1,181) (2,998)
Capital share transactions *
Shares sold .................................................................. 3,001 8,703
Distributions reinvested ..................................................... 909 2,408
Shares redeemed .............................................................. (7,158) (20,565)
Increase (decrease) in net assets from capital
share transactions ........................................................... (3,248) (9,454)
Net Assets
Increase (decrease) during period .................................................... (3,028) (11,800)
Beginning of period .................................................................. 44,069 55,869
End of period ........................................................................ $ 41,041 $ 44,069
*Share information
Shares sold .................................................................. 300 875
Distributions reinvested ..................................................... 91 243
Shares redeemed .............................................................. (717) (2,065)
Increase (decrease) in shares outstanding .................................... (326) (947)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price International Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
In thousands
6 Months Year
Ended Ended
6/30/98 12/31/97
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................................ $ 22,723 $ 48,110
Net realized gain (loss) ..................................................... (11,984) (45,274)
Change in net unrealized gain or loss ........................................ 12,044 (32,816)
Increase (decrease) in net assets from operations ............................ 22,783 (29,980)
Distributions to shareholders
Net investment income ........................................................ (22,723) (41,706)
Net realized gain ............................................................ -- (7,944)
Decrease in net assets from distributions .................................... (22,723) (49,650)
Capital share transactions *
Shares sold .................................................................. 115,275 299,191
Distributions reinvested ..................................................... 19,572 42,881
Shares redeemed .............................................................. (133,998) (406,065)
Increase (decrease) in net assets from capital
share transactions ........................................................... 849 (63,993)
Net Assets
Increase (decrease) during period .................................................... 909 (143,623)
Beginning of period .................................................................. 825,831 969,454
End of period ........................................................................ $ 826,740 $ 825,831
*Share information
Shares sold .................................................................. 11,927 30,500
Distributions reinvested ..................................................... 2,026 4,385
Shares redeemed .............................................................. (13,838) (41,420)
Increase (decrease) in shares outstanding .................................... 115 (6,535)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price Emerging Markets Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
In thousands
6 Months Year
Ended Ended
6/30/98 12/31/97
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................................ $ 6,419 $ 6,532
Net realized gain (loss) ..................................................... 2,650 3,674
Change in net unrealized gain or loss ........................................ (14,068) (2,558)
Increase (decrease) in net assets from operations ............................ (4,999) 7,648
Distributions to shareholders
Net investment income ........................................................ (6,419) (6,379)
Net realized gain ............................................................ (1,606) (1,937)
Decrease in net assets from distributions .................................... (8,025) (8,316)
Capital share transactions *
Shares sold .................................................................. 68,935 133,428
Distributions reinvested ..................................................... 7,161 7,223
Shares redeemed .............................................................. (27,428) (66,426)
Increase (decrease) in net assets from capital
share transactions ........................................................... 48,668 74,225
Net Assets
Increase (decrease) during period .................................................... 35,644 73,557
Beginning of period .................................................................. 113,419 39,862
End of period ........................................................................ $ 149,063 $ 113,419
*Share information
Shares sold .................................................................. 5,095 9,516
Distributions reinvested ..................................................... 539 522
Shares redeemed .............................................................. (2,031) (4,837)
Increase (decrease) in shares outstanding .................................... 3,603 5,201
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price Foreign Bond Funds
================================================================================
Unaudited June 30, 1998
================================================================================
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 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. Prior to May 1, 1998, the name of the
Global Fund was the T. Rowe Price Global Government Bond Fund.
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 open-end mutual funds are valued at the closing net asset
value per share of the mutual fund on the day of valuation.
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 the
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.
<PAGE>
OTHER Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles. Unrealized gains and losses on forward currency exchange
contracts are included, in Other assets and Other liabilities, respectively, and
in Change in net unrealized gain or loss in the accompanying financial
statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with their investment objectives, the funds engage in the
following practices to manage exposure to certain risks or enhance performance.
The investment objective, policies, program, and risk factors of each fund are
described more fully in each fund's prospectus and Statement of Additional
Information.
EMERGING MARKETS At June 30, 1998, each fund held investments in
securities of companies located in emerging markets or issued by governments of
emerging market countries. Future economic or political developments could
adversely affect the liquidity or value, or both, of such securities.
NONINVESTMENT-GRADE DEBT SECURITIES At June 30, 1998, each fund held
investments in noninvestment-grade debt securities, commonly referred to as
"high-yield" or "junk" bonds. A real or perceived economic downturn or higher
interest rates could adversely affect the liquidity or value, or both, of such
securities because such events could lessen the ability of issuers to make
principal and interest payments.
FORWARD CURRENCY EXCHANGE CONTRACTS At June 30, 1998, 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.
SECURITIES LENDING The Global Fund and the International Fund lend their
securities to approved brokers to earn additional income and receive cash and
U.S. Treasury securities as collateral against the loans. Cash collateral
received is invested in a money market pooled account by the fund's lending
agent. Collateral is maintained over the life of the loan in an amount not less
than 100% of the value of loaned securities. Although risk is mitigated by the
collateral, the fund could experience a delay in recovering its securities and a
possible loss of income or value if the borrower fails to return them. At June
30, 1998, the value of the Global Fund's loaned securities was $1,182,000;
aggregate collateral consisted of $1,253,000 in the securities lending
collateral pool. The value of the International Fund's loaned securities was
$57,445,000; aggregate collateral consisted of $62,046,000 in the securities
lending collateral pool.
<PAGE>
OTHER Purchases and sales of portfolio securities, other than short-term
securities, for the six months ended June 30, 1998, were as follows:
================================================================================
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
U.S. government securities
Purchases ................. $ 3,870,000 $ -- $ 732,000
Sales ..................... 6,442,000 -- --
Other securities
Purchases ................. 17,275,000 325,201,000 76,699,000
Sales ..................... 17,931,000 357,425,000 38,325,000
- --------------------------------------------------------------------------------
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.
At June 30, 1998, the aggregate costs of investments for the Global,
International, and Emerging Markets Funds for federal income tax and financial
reporting purposes were $39,249,000, $793,557,000, and $160,667,000,
respectively. Net unrealized gain (loss) on investments was as follows:
================================================================================
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
Appreciated investments ......... $ 1,235,000 $ 23,936,000 $ 1,065,000
Depreciated investments ......... (1,071,000) (35,721,000) (13,676,000)
Net unrealized gain (loss) ...... $ 164,000 $(11,785,000) $(12,611,000)
================================================================================
NOTE 4 - RELATED PARTY TRANSACTIONS
Each fund is managed by Rowe Price-Fleming International, Inc. (the
manager), which is owned by T. Rowe Price Associates, Inc. (Price Associates),
Robert Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a
joint venture agreement.
<PAGE>
The investment management agreement between each fund and the manager
provides for an annual investment management fee, of which $23,000, $453,000 and
$95,000 were payable at June 30, 1998 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. At June 30, 1998, and for the six months then ended, the
effective annual group fee rate was 0.32%. 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, 1998, for the Global Fund and
Emerging Markets Fund which would cause each fund's ratio of expenses to average
net assets to exceed 1.00% and 1.25%, respectively. Thereafter 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, $88,000 of management fees were not accrued for
the six months ended June 30, 1998; another $330,000 remains subject to
reimbursement through December 21, 2000. Pursuant to the Emerging Markets Fund's
agreement, $30,000 of management fees were not accrued for the six months ended
June 30, 1998. In addition, $485,000 of unaccrued management fees and other
expenses from prior years remains subject to reimbursement through December 31,
2000.
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 $101,000, $389,000 and $144,000, respectively,
for the six months ended June 30, 1998, of which $20,000, $86,000, and $28,000,
respectively, were payable at period-end.
<PAGE>
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 and
Spectrum International Fund held approximately 23.2% of the outstanding shares
of the International Fund and 48.9% of the outstanding shares of the Emerging
Markets Fund at June 30, 1998. For the six months then ended, the International
Fund was allocated $198,000 of Spectrum expenses, $57,000 of which was payable
at period-end; and the Emerging Markets Fund was allocated $65,000 of Spectrum
expenses, none 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 six months ended June 30, 1998, totaled $15,000, $293,000 and
$148,000, respectively, and are reflected as interest income in the accompanying
Statement of Operations.
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
1-800-638-2587 toll free
FOR ASSISTANCE
WITH YOUR EXISTING
FUND ACCOUNT, CALL:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
TO OPEN A DISCOUNT BROKERAGE
ACCOUNT OR OBTAIN INFORMATION,
CALL: 1-800-638-5660 toll free
INTERNET ADDRESS:
www.troweprice.com
<PAGE>
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
T. Rowe Price Investment Services, Inc., Distributor. C15-051 6/30/98
